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On Artificial Interest Rates And The Forfeiture Of Growth For Dividends

Tyler Durden's picture


Diapason Commodities' Sean Corrigan provides an insightful introduction to the critical importance of a market-set rate of interest and central banks' manipulated effect on the factors of production.

"Fixated with using their illusory ‘wealth effect’ to avoid a full realization of the losses we have all suffered in a boom very much of those same central bankers’ creation - or else cynically trying to achieve the same denial of reality by driving the income-poor into accepting utterly inappropriate levels of financial risk - they are destroying both the integrity and the signalling ability of those same capital markets which are the sine qua non of a free society."

As Ron Paul also confirms in the clip below "with artificial interest rates, we get an artificial economy driven by mal-investment leading to the inevitable bubbles" and while central banks hope for this 'created credit/money' to flow into productive means (Capex), instead it has (in today's case where QE is no longer working) created an investor-class demand for yield - implicitly driving management to forfeit growth-and-investment for buybacks-and-dividends.


Ron Paul's interview with Laisses Faire outlines the impact an artificial interest rate has on the economy...

and Sean Corrigan of Diapason Commodities provides a more in-depth look at the process by which a manipulated interest rate impacts the factors-of-production (or the risks and rewards of the real business cycle)...

What is not to be overlooked is that the applicable rate of interest is not some abstract entity, utterly variable according to the whim of the banking system, but rather is one of the fundamental ratios prevailing in the vast, interconnected topology of exchange - in this case, between the value put on goods available at once and on those only accessible at some future date...


Take the act of deciding upon the launch of a new or expanded line of business. Obviously the entrepreneur will make his best guess as to the stream of revenues he may gather and will set these off against his estimates of what it will cost him to achieve them. Thus it is, of course, that a lowering of the rate of generally accepted rate of interest makes his challenge seem a less daunting one: our man will not only have less to pay out on any hired capital he requires, but the possibility of earning a greater return in some other fashion...Yet - whether he recognises this or no - his reckoning is intimately bound up with the information which the interest rate is conveying with regard to the likely relative abundance of his inputs and the relative demand for his outputs over the entire investment horizon of his project...


It should be all too apparent by now that if we are to enjoy conditions which are favourable to both the greatest degree of co-ordination between the market’s multitude of actors; if we are to remove all impediments to the early recognition of such lapses from that co-ordination as must inevitably occur in a shifting world of imperfect knowledge and changing tastes, then any interference with the spontaneous, holistic formation of prices is not to be countenanced, much less embraced as a tool of dirigisme.


Rather, it is vital that the myriad interactions between buyer and seller, producer and consumer, saver and spender, employer and employee should be allowed to make its due contribution to the universal field of prices thence to reveal how best to marshal our limited resources in order to deliver more of what appears to be the more urgently required and to expend fewer efforts on the less. This is not true only in the here and now, but also over time.

Clearly, we have no gold standard to impose discipline on either the ruling elite or the bankers who are their political symbionts... granted, we have a wider range of  non?bank and other credit instruments to confuse the issue; but none of them alter the fact that investment is best undertaken when both the money and the means corresponding to that money have been voluntarily set aside to finance it, or that, conversely, investment is worst entered upon when it is launched on a soon cresting wave of counterfeit capital, conjured up by the banks or the government printing press.

12-11-20 TA - As a Matter of Interest


which leads to the current remarkably non-traditional text-book situation that Citi describes - where equities are now the yield-providing asset as management is punished for spending capital on growth or investment and is praised for buybacks and dividends as the Fed's artificial premise in which we live has created a monster...

Policy-makers have adopted aggressive methods to push interest rates and bond yields down to unprecedented levels. It is hoped that these low rates will trigger a stronger recovery in corporate capex and jobs. Evidence of this remains sketchy...


We think that QE may be having the opposite impact to that intended. Instead of encouraging capex and job creation, ultra low interest rates are bringing yield-starved capital into the global equity market. These investors are more interested in dividends and share buybacks than corporate expansion. Those CEOs who give them what they want should be rewarded by share price outperformance. Those who do not may find themselves replaced.


Citi Equity Yield


If we are to salvage any residue of our liberty, restore any semblance of our prosperity, and again secure to ourselves the right to enjoy our property, this [manipulation] must be ended before it consumes our capital...

If all this means that we have fewer projects underway at any one time, so be it: we will waste far less of what we hold scarce and end up holding fewer things as scarce as we do now.

The Garden of Eden may well be denied us, but that does not mean the only remaining choices are the debtor’s gaol or the soft totalitarianism of de Tocqueville’s worst imaginings... is saving that makes us rich, not spending, and it is only by saving – not through authoritarian fiat ? that a naturally lowered interest rate confers a lasting aid to capital formation.

If policymakers hope that listed companies can help drive down current high levels of unemployment then it could be a long wait. Corporate expansion plans are likely to remain constrained by uncertainties about the global economy and a shareholder base that is more interested in share buybacks and dividends than capex and job creation.

Source: Citi, Diapason Commodities


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Sun, 11/25/2012 - 20:52 | 3010490 tango
tango's picture

How does an economy operating under artificial Fed mandated rates differ from a Soviet-type system where prices are set arbitrarily?   Both deny the reality (or power) of markets and choice.   Ron was clear about this  - both in 08 and 12.   The forced artificial interest rates create an economy based on false premises - and it is destined to fail.

Sun, 11/25/2012 - 21:18 | 3010533 sumo
sumo's picture

Bernanke's "economics"  = Lysenko's "genetics"

Sun, 11/25/2012 - 22:49 | 3010630 Monedas
Monedas's picture

Remember that Louisiana congressman who had $90K cold cash in his freezer .... he was trying to alter the genetics of the currency .... a la Lysenko !  A mind is a terrible thing to waste !

Sun, 11/25/2012 - 23:21 | 3010657 markmotive
markmotive's picture

The government messed with interest rates after WWII and prices during the seventies. Weimar Republic messed with interest rates in the 1920s.

This is not new.


Next Time Perhaps We Should Let The Market Set Interest Rates
Mon, 11/26/2012 - 03:31 | 3010709 cranky-old-geezer
cranky-old-geezer's picture



As I stated yesterday, there's nothing meaningful left to report about this farce of a financial system, so ZH is left with analyzing the farce from every possible angle as the last FOUR articles do, and, like everyone else, fearing to call it what it really is, and damn LOOTING SPREE, the final end-game looting of America and its people by Wall Street and the government.

Yes, it IS the end game for America.  It will destroy the US dollar's value.  It won't be reserve currency much longer, and when it stops being reserve currency, that's it, game over for America.

No financial blog worth a damn will keep analyzing an obvious blatant problem six ways to sunday without saying what the true outcome will be.  


Ben Bernanke is the BIGGEST THREAT to America's national security now.  He's destroying the US dollar, and when it happens he destroys America too. 

When other nations holding US dollars and US govt debt as reserves wake up one morning and see it's all worthless, they'll turn on America with a vengeance this world has never seen. 

Our military scattered all over the damn planet will be sitting ducks.  Their dollars won't be worth shit anymore, they won't be able to buy supplies, they won't be able to buy fuel, they'll be stranded where they are in openly hostile nations wanting revenge on America for destroying the value of reserves they hold.

What kind of government would stand by watching a central bank destroy the nation's currency, putting the nation in grave danger of unlimited vengeance from a multitude of pissed-off nations, and do nothing about it?  

Simple.  A government involved in the looting, benefiting from the looting, benefiting from that currency destruction.

Yes, America's government is openly putting America in danger, openly committing treason against America.

Wana go after terrorists Obama?  The biggest terrorist of all is right there at 33 Liberty.  Bernanke, the currency terrorist, blowing up the nation's currency.

And yes, "unlimited vengeance" means thermonuclear.  Like I said, vengeance this world has never seen.

Mon, 11/26/2012 - 04:05 | 3010771 infinity8
infinity8's picture

Nice new avatar, Cranky. And I'm in total agreement except, hating the Berstank as much as the next guy, I can't hate him as much as the government that is allowing him to do what he does. I just don't believe he's "the decider" convincing the DC assholes to go along. Another puppet but who's, exactly.


Mon, 11/26/2012 - 10:04 | 3010980 cranky-old-geezer
cranky-old-geezer's picture



The banksters' puppet of course.  Banksters who own all the Fed stock and have prominent seats on the FOMC.  The banksters looting America via bailout after bailout after bailout till so much currency has been created it loses all value.

Yes I know the government is borrowing twice as much as banks get in bailouts.  About 2 to 1 ratio now.  $150 billion a month to the government, $80 billion a month to banks.   It's hush money they have to give to the govt so the govt will keep playing along. 

That's $230 billion a month being printed now, 2/3 of it going right into the circulating money supply. 

A trillion dollars printed every 4 months now.  $3 trillion a year added to a $10 trillion money supply.  30% expansion a year, when GDP is shrinking.  That's hyperinflation.  

So how come prices don't climb 30% a year?  Simple, they're killing demand, plunging the economy into deep depression and keeping it there so demand drops off.  That's how Bernanke gets away saying inflation is only 2%.  Of course that number is bullshit, it's more like 15%. 

Only reason it's not 30% is they're keeping the economy in depression and keeping demand low, along with choking off credit.   Yea, the govt gets to borrow at 1%, but we pay 10% - 30%, if banks will even loan money at all.

They have to do that.  They have to choke off lending to the economy so the govt can borrow it all.  If they didn't, we'd have 30% inflation, 40% inflation, who knows.



Mon, 11/26/2012 - 08:07 | 3010834 Freewheelin Franklin
Freewheelin Franklin's picture

It is very simple. If the politicians and central bankers do not address these issues, the markets eventually will.


Right now, the government has the luxury of being able to borrow at 1.6% on a 10-year. If and when that changes, we are in for a shitload of hurt.


But I'm not telling you anything you don't already know.

Mon, 11/26/2012 - 13:34 | 3011692 cranky-old-geezer
cranky-old-geezer's picture



Yep, markets will address it alright, forex will pummel USD down to nothing.  EURUSD will fucking $500, $1,000, whatever.

...assuming ECB doesn't print Euros to oblivion, which they might.  Ditto for Japan, BOJ might print Yen to oblivion too. 

We're approaching a time where all major currencies are gonna be printed to oblivion to keep the massively growing sovereign debt bubble going ...and keep bailing out banks of course, keeping the looting spree going till there's nothing left to loot.

Mon, 11/26/2012 - 08:08 | 3010836 Tango in the Blight
Tango in the Blight's picture

The military abroad will still have weapons. They'll simply take what they need. And then come home as there won't be any point in staying.

Mon, 11/26/2012 - 13:26 | 3011660 cranky-old-geezer
cranky-old-geezer's picture



The military abroad will still have weapons. They'll simply take what they need.

Good luck with that. I suspect host nations like Germany will have other ideas.

And the few who do get home will be coming back to a nation in chaos anarchy and civil war caused by a worthless currency which the Fed destroyed.  Sure, people will still get paychecks but the dollars in those paychecks won't be worth anything and won't buy anything.  Sure, the military will still get paid, but the dollars in their paychecks won't be worth anything and won't buy anything.

If I was an American soldier stationed in Germany when the dollar goes bust, I would seriously consider defecting and just staying there.  Life would be much better in Germany than coming back to America in chaos and anarchy with its worthless currency.

Mon, 11/26/2012 - 01:23 | 3010717 DoChenRollingBearing
DoChenRollingBearing's picture

Carmen Reinhart, Kenneth Rogoff and Jim Chanos all have great minds, and those minds were put to work in the new edition of Barron's out this weekend.

Review of Barron's -- Dated 26 November 2012

Mon, 11/26/2012 - 05:54 | 3010794 Offthebeach
Offthebeach's picture

1. Ours is called The Federal Reserve. The Soviet mobsters called theirs, Gosbank( ? ).

2. It's not central planning/rigging when we do it.

Were fascist, not Communist.

Mon, 11/26/2012 - 07:32 | 3010817 Go Tribe
Sun, 11/25/2012 - 20:57 | 3010494 Caviar Emptor
Caviar Emptor's picture

The vultures are feasting off the carcass of the post-bubble US economy. And Vulching has become the only ez money game left in town, most everything else is diminishing returns. We look more and more like Japan every day as ZIRP and QE push all other economic endeavors to the margins. 

Sun, 11/25/2012 - 21:06 | 3010504 Yen Cross
Yen Cross's picture

 That has to be one of your best / Thoughts / EVER!   Screen shot on my "hard Drive" GOOD!

Sun, 11/25/2012 - 21:20 | 3010534 Caviar Emptor
Caviar Emptor's picture

Hat tip, O Yen Cross

Sun, 11/25/2012 - 22:14 | 3010547 rhinoblitzing
rhinoblitzing's picture

Ahhh.. get with the program and... Open A Bank!

Sun, 11/25/2012 - 23:43 | 3010674 prains
prains's picture

vulching sounds like the corporate form of felching

Sun, 11/25/2012 - 21:04 | 3010502 ebworthen
ebworthen's picture

Wait...this makes too much sense...must be subversive propaganda from wild-eyed gold hoarding libertarian terrorists.

Sun, 11/25/2012 - 21:15 | 3010525 sumo
sumo's picture

Don't forget those silver hoarders. They're just as bad.

Sun, 11/25/2012 - 21:12 | 3010508 THE DORK OF CORK
THE DORK OF CORK's picture

These guys are rentiers..........


They do not hold Gold as a wealth asset but to loan it out at interest in the goverements unit of account.

They may be acceptable with private bank money.............


But Fiat goverment (taxable) money is the commons....or at least should be.

Its much like Extracting money from your local village , destroying the medium of exchange function of money and thus money tokens utiltiy and therefore soon after the villages complex life support systems.


True goverments should just issue the note and not the bond...........this will restart the flow stopped since 2007.


The CBs efforts at financial repression is to preserve the private issuance of money credit.

As the value of the banks assets is not important  , whats important to them is the legal right to farm the fiat.

Sun, 11/25/2012 - 21:16 | 3010529 MethodMan
MethodMan's picture

Succinctly put.

Sun, 11/25/2012 - 21:38 | 3010549 THE DORK OF CORK
THE DORK OF CORK's picture

They clearly want to create a bigger deflation.........

But this wastes far more real physical capital then a inflation of the money supply............


Talking of villages here is a good example of village breakdown caused by a deflation of the money supply in France.




For example
In this part of very rural southern France they closed a railcar line in July
Well the replacement bus route is now suspended…………..,573775.php


People must now burn more real resourses using their cars.

Deflation appears to work for the few winners (who hold the commons money claims) that can afford a car but in the long run it will not work out as their village slowly dies.


I keep thinking of ancient Rome now and its decay.
When the physical systems could not grow anymore due to the technological limitations of the time I imagine the people who held money claims charged a rent on it to sustain the lifestyle they had grown accustomed to.
But money as a token is not a private good.
It is the very heart of the commons , the state.

What is striking about ancient pompeii is that most free people did not have much kitchen facilities
The money supply was available for them to eat out in Tacco bars……..when the money supply became constrained in other cities during 200s & 300s I imagine city life became impossible destroying the Efficiency of the city as people spent more time & energy cooking in their tiny apartments.

See 14.40 – 17.00
& 39.00 “fast food joints is the commonest feature of the Pompeii urban landscape”
I.e. the + money supply made the place work…
A negative or static money supply can never work.

This same monetary phenomenon is happening throughout the eurozone today which is forcing people to consume more real resources so as to preserve these money claims.

Village & market town life in France and Indeed Ireland – once the backbone of these countries real wealth base is being destroyed to achieve this goal.


Sun, 11/25/2012 - 23:10 | 3010648 sangell
sangell's picture

May have been true when Darwin ruled the earth ( and he did in Roman times) but it is simply not the case when, in order to sustain a 250lbs negress and her hoodlum children, the state sucks wealth from the those who produce it in order to allow the economic supernumeraries to survive.

Mon, 11/26/2012 - 07:57 | 3010825 THE DORK OF CORK
THE DORK OF CORK's picture


You can keep your house and land and even your slave back in Roman times but the medium of exchange needs to dilute in value so as to preserve precious real physical capital.

And if you produce pure Greenbacks the banking system will not be able to waste capital through credit provision so it might not even devalue much.

Sun, 11/25/2012 - 21:27 | 3010540 disabledvet
disabledvet's picture

this is SO spot on i don't even know where to begin. the argument above makes sense if you consider that it was the BONDHOLDERS who got bailed out ("too big to fail" especially Fannie Mae and Freedie Mac) and thus didn't stick it to EQUITY holders as presumed here and elsewhere but the holders of ALL wealth via taxation and confiscation. "throw in a few Government overthrows for fun and call it an election." of course the idea that "one gets growth through dividends" is pretty hilarious...not as funny as raising taxes on said dividends of course. from whence the consumption? you know..."the thing that pays for everything"? about investment PERIOD! Marxism is nice...if you engage in it. But in the USA you have OUTSOURCING. You think Corporate USA is going to pay taxes? they're all preening about thinking they will be the next recipient of the fed's "phantom largesse" with cash hoardes as big as Washington DC's deficits. it's so preposterous it's hard to imagine this shit even sells. "but sell it does...and sell well" i would argue. Sorry but as stupid as Wall Street can be the Rockefellers are not. "you pay for my oil" is about as simple as it comes. and yes..."you will pay for that oil." the government will nationalize you say? really? at the same time allowing GM to reclaim Ally financial? i mean is anyone in charge of finances here? ANYONE? "not until the check bounces"? and when it does "it will be quite spectacular"? gotta say i have an urge to fill up the fuel tank every night now. this is some crazy shit that's being sold. the idea behind responsible budgeting is so we don't have to pay even MORE for oil "due to catastrophic situations" yes, yes? as in SANDY, yes, yes?

Sun, 11/25/2012 - 21:49 | 3010561 klockwerks
klockwerks's picture

disabledvet, good idea about the fill up. I fill up both cars when we have driven 100 miles plus keep 50 gallons in storage. You always have aout100 gallons between cars and storage. Folks on the east coast wish now they would have done it. Plus, when it all comes down I will have prepared for whatever.

Mon, 11/26/2012 - 06:14 | 3010802 Offthebeach
Offthebeach's picture

Fiat farmers.

Back in the gold, PM days, their used to be Tax Farmers, chartered individuals that would collect taxes for a percentage. I don't know if they bought the rights and kept what the could get.

Anyway, I don't see the government reducing its self, ever. At each hit, it expands the FSA for popular votes/capture.

Personally I consider tax, permit license, etc cheating, lying, to be a patriotic commandment.
However, they just print, so PM are a strike at the root.

Sun, 11/25/2012 - 21:11 | 3010517 sumo
sumo's picture

"Policy-makers have adopted aggressive methods to push interest rates and bond yields down to unprecedented levels. It is hoped that these low rates will trigger a stronger recovery in corporate capex and jobs."

I like Ann Barnhardt's definition of money - a fungible proxy for human labor and creativity. Her take is that interest rates imply a price on time spent on labor, and that ZIRP steals the value of that labor by mispricing it.

ZIRP is the grand theft, the crime of the century: stealing from the "little people" to pay for the elite's gambling losses.

And why don't the Fed econotards understand this? Upton Sinclair can assist:

"It is difficult to get a man to understand something, when his salary depends upon his not understanding it!"

Sun, 11/25/2012 - 22:07 | 3010580 FeralSerf
FeralSerf's picture

The "Fed econotards" do understand this.  Grand theft is their job.  They just don't like calling it by its correct name.

Sun, 11/25/2012 - 21:12 | 3010519 buzzsaw99
buzzsaw99's picture

and what product does Diapason Commodities produce (other than fancy blather)?

Mon, 11/26/2012 - 12:28 | 3011426 Mary Wilbur
Mary Wilbur's picture

I don't agree that it was "blather," but it was definitely "fancy." Reading it was like wading through mud.

Sun, 11/25/2012 - 21:24 | 3010535 Cognitive Dissonance
Cognitive Dissonance's picture

"If we are to salvage any residue of our liberty, restore any semblance of our prosperity, and again secure to ourselves the right to enjoy our property, this [manipulation] must be ended before it consumes our capital..."

This sounds like a cry for help from a fool. Alas, a fool and his money are soon parted. Nobody makes you waste your capital as long as you can voluntarily direct where it is invested. If your choices are poor either you do nothing or you remove the source of your irritation. No one "makes" you do anything you don't want to do.

While in my bank one day I heard a clearly distraught man pleading with the customer service rep to fix his problem. As I walked past the desk I heard him say "Make me stop writing bad checks."

Poor fool.

Sun, 11/25/2012 - 21:32 | 3010546 formadesika3
formadesika3's picture

*As I walked past the desk I heard him say "Make me stop writing bad checks."*

All part of the infantilization of the public.

Sun, 11/25/2012 - 21:57 | 3010572 disabledvet
disabledvet's picture

the fact that the Government itself could be provoking disorder does not make the oil worth less but worth MORE. the only difference is between the CONSUMER and PRODUCER of said wealth. (with emphasis on the latter as the winner.) "if i pay for everything" that includes public safety does it not? i would argue "yes indeed." i still believe we're careening towards what the Japanese called "Shocku" that's right the early 90's the 5 biggest banks in the world by assets were Japanese. in the 1980's Nomura was easily the biggest securities firm in the world. but that fiat ponzi collapsed in 1990. and where is that Nikkei today? 80% lower than it was then. not a problem if you were a bond holder. here is what became the world's largest bank in terms of deposits as a consequence: that's right, the Japanese Postal Service. how long can "the bond ponzi" last? a LONG time in world where equity is of no consequence. that was true in the USA until after WWII btw. but because of massive federal programs like the interstate highway system, public education, medicare, medicaid, the Cold War itself, etc...etc...massive amounts of equity in form of "sweat equity" or "housing stock" and "infrastructure" was built up in the USA. nothing soaring prices for everything can't solve, right? at least until prices fall. "then what"? is a good question. "a whole new bunch of Federal Programs" then...TALF, TARP..etc, etc. Most of which have been wound down actually. Now what? BLURF? BARF?

Sun, 11/25/2012 - 22:20 | 3010593 honestann
honestann's picture

Amazingly, that customer is easy to satisfy.  Just throw away his paper-checkbook and have him write checks with his plastic-checkbook (his debit card).  Then when he tries to write a bad check, the transaction is simply refused.

Problem solved.

If only we could solve the predators-DBA-central-banks and predators-DBA-goverment as easily.

Mon, 11/26/2012 - 08:22 | 3010857 StychoKiller
StychoKiller's picture

[quote] Nobody makes you waste your capital as long as you can voluntarily direct where it is invested. [/quote]

Hmm, perhaps you've forgotten how the Govt takes your capital (and calls it taxation)

[quote] No one "makes" you do anything you don't want to do. [/quote]

Prove it - stop paying your taxes!

Sun, 11/25/2012 - 21:34 | 3010550 Never One Roach
Never One Roach's picture

My neighbor just bought 2 more houses for almost zero down. "Why not?" he says, "if it doesn't work out I'll just walk away."


Until accountability is restored from the top down this reckless behavior at all levels will continue.

Sun, 11/25/2012 - 21:44 | 3010557 flacon
flacon's picture

Maybe the government will make a law that anyone who "just walks away" MUST spend a weekend at a FEMA camp. Just a weekend. 

Sun, 11/25/2012 - 21:58 | 3010574 sumo
sumo's picture

Nah, the govt recruits them for "regulatory" agencies like SEC and CFTC.

"Hey bud, how would you like a job where you don't have to walk away, you just have to look away? With free porn and donuts. Wanna know more?"

Sun, 11/25/2012 - 22:42 | 3010606 CunnyFunt
CunnyFunt's picture

There's a job for everyone in the panopticon.

Sun, 11/25/2012 - 22:47 | 3010627 Yen Cross
Yen Cross's picture

In a mirror it spells " FUNNY CUNT"!

  learn to spell ya troglodyte
Sun, 11/25/2012 - 23:04 | 3010640 CunnyFunt
CunnyFunt's picture

Aye, you're a right clever one.

How's the trade going tonight? A bit rough, no?

Sun, 11/25/2012 - 23:14 | 3010650 Yen Cross
Yen Cross's picture

If you layed of the whiskey/payed attention, I went flat/took profit last Thursday. I'm on my way to Asia for several weeks before cyclone season, (Queensland property), and to meet with some private equity friends of mine. 

The year end is pretty much over/ cashed in...  I'm tired of sniffing jet fuel CunnyFunt     You are a true financial "literate"... Good luck, and get over the [thin skin syndrome].

Sun, 11/25/2012 - 23:19 | 3010656 CunnyFunt
CunnyFunt's picture

Wonderful! Tell my mates in Mackay that they are all tossers. Enjoy your penis party with the PE friends.

Sun, 11/25/2012 - 23:25 | 3010662 Yen Cross
Yen Cross's picture

 So now ya have a problem with the Aussies? If you used 1/2 of that hostility to make a 'quid' you would own the world!

  You are undoubtedly are a smart person.

Sun, 11/25/2012 - 23:27 | 3010667 CunnyFunt
CunnyFunt's picture

No! I have Aussie cousins and a Kiwi half-brother.

Sun, 11/25/2012 - 23:32 | 3010670 Yen Cross
Yen Cross's picture

 Only been over to New Zealand once, was a great experience. North island.

  I don't wan't to spend the rest of my natural life fighting with you... Let's get it sorted, and move ahead.

Sun, 11/25/2012 - 23:39 | 3010672 CunnyFunt
CunnyFunt's picture

That's fine. Just understand that I'm from fighting stock and enjoy the challenge.

I hope you enjoy your trip and profit from the experience in terms of happiness.

Moving ahead ...

Sun, 11/25/2012 - 23:58 | 3010684 Yen Cross
Yen Cross's picture

 You certainly are of fighting stock. I will never down vote you for personal reasons. 

Believe me! I have wanted to, but realized you had good ideas and thoughts. ;-}  This trip is standard protocol. I wish it was more of a vacation.

  Thanks for your understanding " CunnyFunt".

Sun, 11/25/2012 - 21:54 | 3010568 unununium
unununium's picture

The powerhouse that is AZO just won't stop.  Negative and declining book value, buybacks greater than earnings every single quarter.

What a fine example of modern wealth generation.  What in tarnation is this article talking about?


Sun, 11/25/2012 - 21:55 | 3010569 Spitzer
Spitzer's picture

China to build the tallest building in the world in 90 days.... Holy fuck

Sun, 11/25/2012 - 21:58 | 3010570 Yen Cross
Yen Cross's picture

 Back to the Sea we Go Gents!  Romans and ,

 Genghis Khan/!

    I'm joking with you, sort of?

Sun, 11/25/2012 - 22:00 | 3010575 ekm
ekm's picture

How many times do we have to say this:

Anything possible is done to lure muppets, including 0% int rate. It always worked until now that the muppets are retiring. Instead of putting money into stocks, they are simply cashing everything.

Hence, since the Pyramid Scheme always and at any time requires muppets, one or more primary dealers will have to become muppets, like you know, big fish eats small fish, something like JPM eats Bear Stearns, Barclays eats Lehman, JPM east MFG.

Who would be the small fish?

Sun, 11/25/2012 - 22:19 | 3010591 Yen Cross
Yen Cross's picture

 Cold climates, breed smart minds! ;-)

Sun, 11/25/2012 - 22:19 | 3010594 ekm
ekm's picture

I'm so bored by this Grey Cup (canadian superbowl).

Sun, 11/25/2012 - 22:26 | 3010598 Yen Cross
Yen Cross's picture

 NFL, NBA, MLB , NHL, are all jokes!  At least the Canadians take hockey seriously. 

  21st Century gladiator sports.  ( in the parking lot)...

Sun, 11/25/2012 - 22:20 | 3010595 Caviar Emptor
Caviar Emptor's picture

The Pyramid Scheme lacks muppets. Hence the Fed has to step in endlessly with more easy money. Lending at zero and repaying at par, expanding balance sheet, QE etc.. Ultimately when the pyramid collapses the new victims will yes be banks and hedge funds. We go higher up the food chain as the game of musical chairs has fewer and fewer players. 

Sun, 11/25/2012 - 22:36 | 3010610 Vendetta
Vendetta's picture

The American taxpayers are the muppets now

Mon, 11/26/2012 - 01:41 | 3010731 ekm
ekm's picture

In that case securities are being transferred to the Gov + Fed + Primary dealers. Not much would be left to trade.

Wall Street would dissapear.

Sun, 11/25/2012 - 22:10 | 3010587 q99x2
q99x2's picture

From the experts at CNBC:

Forecasts for 2013 that are now landing thick and fast show Federal Reserve Chairman Ben Bernanke is not alone in believing it could be a very good year for America

Futures say otherwise.

Sun, 11/25/2012 - 22:19 | 3010592 ekm
ekm's picture

I haven't a had TV since 2001. I can't be brainwashed.

Sun, 11/25/2012 - 22:38 | 3010614 logicalman
logicalman's picture

Got rid of mine in the previous century.

One of my better decisions.

Sun, 11/25/2012 - 23:52 | 3010678 Incubus
Incubus's picture

I don't watch tv as a pastime.


It's there to serve the function of an entertainment medium when notable films are released.  Otherwise, it stays off. 


Zero Hedge is one of my pastimes, though.  You guys don't make me as stupid.

Mon, 11/26/2012 - 02:24 | 3010740 cranky-old-geezer
cranky-old-geezer's picture



Rotate that avatar 90 deg clockwise.

Thanks in advance :)

Sun, 11/25/2012 - 22:20 | 3010596 Yen Cross
Yen Cross's picture

 You have been doing some good work lately/ +1

Sun, 11/25/2012 - 22:33 | 3010608 fonzannoon
fonzannoon's picture

ekm if the fed is just sitting there eating dorito's and digitally adding bennybucks to all the banks accounts why would the ponzi ever have to collapse?

Sun, 11/25/2012 - 22:43 | 3010620 rhinoblitzing
rhinoblitzing's picture

The Fed does not eat Dorito's... Trust me on This One - they don't call it "The Fed" by accident...

Sun, 11/25/2012 - 22:43 | 3010621 Yen Cross
Yen Cross's picture

 Hey Fonz, we are just getting ready to board. It only  seats 16 (G-5)...  Thank you very much for the updates. \

EKM is on your page. ;-}


Sun, 11/25/2012 - 22:54 | 3010636 fonzannoon
fonzannoon's picture

have a good trip man

Sun, 11/25/2012 - 23:37 | 3010671 Yen Cross
Yen Cross's picture

 Thanks Fonz. Good on you, and your family...  I'll be checking in soon.

Mon, 11/26/2012 - 00:32 | 3010700 Incubus
Incubus's picture

That might as well be the catch.

We're all salivating over some collapse, but the Fed is accountable to who?

The game is control, and they can always send their bought debt into oblivion if it means maintaining the game.  They make the money, they buy the debt.


Want to test their resilience?  They're already holding up the world better than that big bitch Atlas. 

Mon, 11/26/2012 - 01:39 | 3010730 ekm
ekm's picture

The more the Fed buys, the more wall street dissapears.

Mon, 11/26/2012 - 01:38 | 3010720 ekm
ekm's picture

Because the only way to create money is by buying something.

By Congress+ WH orders, Fed+ Primary Dealers are buying, until nothing would be left to buy. Theoretically they can own all factories and all companies which slowly is becoming what is practically happening.


In theory, it can never collapse if americans decide that the gov should own everything like in Cuba. You'll be all equally poor. If gov owns everything, nobody cares to work. Neither NYSE nor Nasdaq nor HFT need to exist. No need for brokers and investment firms since they nothing would be available in market to be owned and traded.


Conclusion: The more Gov + Fed + Primary Dealers buy (it's just one entity), the more Wall Street dissapears.

Mon, 11/26/2012 - 02:50 | 3010749 OneTinSoldier66
OneTinSoldier66's picture

I agree with this theory as possibility, with people seemingly now believing that money, rights, freedoms, etc... comes from Government. But this would be killing the Goose that laid the Golden Egg. It is hard for me to understand the purpose of that. Those that are getting wealthy off the ponzi will also get poorer. The circle of wealthy and/or elite will get smaller. I believe you could say this has already been happening for quite some time now. Just so hard for me to understand the reasoning behind it. Guess it's a Hitler complex thing.


Every-body wants to rule the world... except Ron Paul and a few others.

Sun, 11/25/2012 - 22:29 | 3010602 blindman
blindman's picture


Posted on November 25, 2012 by jischinger

Sun, 11/25/2012 - 22:41 | 3010617 centerline
centerline's picture

growth, growth, growth... say it with me folks...

Mon, 11/26/2012 - 04:42 | 3010780 MsCreant
MsCreant's picture

cancer, cancer, cancer...

Sun, 11/25/2012 - 22:43 | 3010622 Northeaster
Northeaster's picture

What happened while on the other two (2) crashes while on the "gold standard"?

Mon, 11/26/2012 - 02:53 | 3010750 OneTinSoldier66
OneTinSoldier66's picture

Please take the time to read Ron Paul's "The Case for Gold". I firmly believe that you will find it anything but a waste of time, and your question will be satisfactorily answered.

Sun, 11/25/2012 - 23:20 | 3010658 duckhook
duckhook's picture

The lower the interest rate the more an individual  needs to save to reach a goal such as college ,retirement .This will force people to spend less money and result in a weaker economy.The goal of the Fed and the government as a whole is to make as many people completely dependent on the government for their existence .I guess that within 5 years,as almost all  people in retirement deplete the balance of their savings,as all mortages will be backed by the Feds,as all student loans will be baked by the Feds,as all debt will be bought by the FED,This goal will be achieved.

Mon, 11/26/2012 - 02:18 | 3010738 Nick Jihad
Nick Jihad's picture

+100!  Well said.


Sun, 11/25/2012 - 23:24 | 3010664 wisefool
wisefool's picture

I am going to lose my internet access soon. Thank you IRS! but I was smart enough to set up alerts for WB7 posts.

The cayman islands is the financial services industry (tax avoidance) version of the MICs camp david (war wearyness avoidance)

We need a 40,000 page tax code or a 2e^24 pages tax code. the rest is waiting for beauty.

Mon, 11/26/2012 - 02:26 | 3010739 ekm
ekm's picture

Does anybody know where to find the total dollar value of Dow Jones or S$P500?

Is it 1 trillion? 3 trillion dollars?


Without doing that math myself, do you know any website which does it?

Mon, 11/26/2012 - 04:05 | 3010772 MsCreant
MsCreant's picture

OT, but not. I just went through processing what I need to in order to deal with a student who I caught plagiarizing. I have had a bunch this semester, like never before. Turns out I am going to be on trial, even though the plagiarism is so obvious as to be absurd. Here is the kicker I would like to contribute to the discussion. 

It is so much trouble to prosecute anyone for anything any more, it really almost isn't worth it. I have other students I have proof on as well. I have their cases racked up ready to go. But when I pull the trigger, my life becomes even more hellacious. I can't tell you how much this sucks. Part of me wishes I had never started these prosecutions (I need to mention the procedure just got a whole lot more complex as of this semester).

Follow my bouncing ball some more please...

All of us at a faculty meeting got lectured about failing too many people in our classes about 2 months ago. My mind was blown, I pushed away from the table, mouth agape, and said "Oh my God." The administrative minion quickly said "I don't mean to tell you to dumb down your course..." But of course, they did.

Earlier, different faculty meeting, we are being told about a special program to help with retaining failing students. This administrator tells us that some of these students come in unable to read or write, so they need some extra help. I ask "So why are we admitting them?" She nods her head and rolls her eyes with everyone else at the table, shrugs her shoulders, and moves on with her talk.

Oh, did I mention we are under pressure from the Governor of our state to graduate more people from college?

Mon, 11/26/2012 - 04:27 | 3010778 Orly
Orly's picture

It's a copy and paste, iPad society that has become accustomed to having things their way and having them right now.  There are no losers when everyone gets a trophy.

Serious discussion needs to take place that says the need for everyone to go to college in order to pay into that machine should stop.  As a society, we should choose to better educate- or I should say- more appropriately educate our youth.  Not everyone is cracked up to be a doctor, just like all doctors are not cracked up to be mechanics and certainly not everyone is cut out to be a teacher.

It should start with greater parity amongst pay scales such that not all the sheister lawyahs make the millions and everyone wants their kid to go to medical school so they can live the dream after 26 years of school.  We should make it a function of our society to try to fix this disparity, while recognising that people are more designed for certain things rather than everything.

In my town, we can't get enough people to drive the school buses because it doesn't pay anything.  But all the kids are wearing the latest and greatest with their brand-new iPads and iPhones, with which their surfing the internet because they have a paper due in fifth period.

I can completely relate to your troubles, Ms. Creant, only because it reflects the complete meltdown of common sense in our culture, replacing it with political correctness and income disparity.  Unfortunately, the governor of your state doens't understand that he needs to graduate more welders and pipefitters and school bus drivers than to force people to get an over-priced college education that they may not need or use in the end anyway.

Best of luck with this dilemma.


Mon, 11/26/2012 - 04:49 | 3010781 MsCreant
MsCreant's picture

Thanks for taking the time to answer. Everything you said is true, even if I needed to lose my job, some integrity in the system would be well worth it. I need to find a solid place to stand in all this and not feel like a Ponzi scammer myself. The truth is I am. On the other hand there are small isolated moments where things happen the way they are supposed to, a great discussion in class, a student with a break through, a break through of my own about them or about teaching, it can really be neat.

My cynicism is making it so that it isn't as fun as I'd like it to be. That might be a reason to take a blue pill. It is very easy for me in this moment to see why macro-scale prosecutions are not happening. It's just the way it is, it costs too much, it is too much trouble, it will eat up my life when I want to do other things...

Hope you and your family are doing well.

Mon, 11/26/2012 - 05:01 | 3010783 infinity8
infinity8's picture

The truth is we all have to be a little "Ponzi scammer" if we want to eat. It truly is having to sift thru more and more rubbish and cherish the occasional "pearl". One of the oldest parts of the new normal is making it really difficult to stand up for what's right - instant patsy, fuck you in your face. Stay strong and do what you know is right MsCreant, it's the only hope we have (and it's gonna hurt, a lot).

Mon, 11/26/2012 - 05:02 | 3010785 infinity8
infinity8's picture

p.s. - why the fuck else are we up blogging at 3 am?

Mon, 11/26/2012 - 13:32 | 3011683 falak pema
falak pema's picture

can't be the game on the teevee at three in the morning! 

Mon, 11/26/2012 - 05:10 | 3010786 Orly
Orly's picture

We are doing well, thanks.  Many happy wishes for the holidays to you and yours, as well.

I can definitely see your frustration in this situation because we are not living in a thirty minute sitcom or a John Wayne movie that has it simple and decidedly American to stand up on principle, retire the town bully and ride off into the sunset with the girl in our saddle.  Real life is much different than that.

The real problem is systemic and needs to be trimmed at the root.  I understand that there are some English 101 classes at U of Texas with like 550 people in the class.  That's just insane.  Obviously because many of them shouldn't be in 101 but remedial but mostly because not everyone needs to go to University in the first place.  It's a giant scam that might be called the Educational Industrial Complex.

Sky-rocketing tuition at private and public universities only underscores the real reason that so many people, worthy and non-worthy, apt and non-apt, are cowed into going to college: student loans.  It has become a giant problem in this country.  There is a man on Yahoo! front-page right now who has student loans in excess of $100,000 and still doesn't have a job!  Here are nine student loan horror stories from Business Insider via Yahoo!

All they are doing is creating more debt slaves to further their agenda of getting as many people in financial bondage as possible.  Same as they did with the cars and houses, now with education.  It is a shame.

Until we as a society recognise that we aren't doing anyone any favours by getting them bogged down in a lifetime of debt by the time they are twenty years old, who graduate without usable skills and no real guidance on how they are supposed to pay off that debt, then the machine will carry on.  There should be outrage at this but very few are saying anything.

What you should understand is that it is not your fault; that you didn't create this mess and that it is much bigger than you are because there are some major, major players in the student loan cartels.  You should be able to make a stand, though, when it is so obvious as you say.  In that case, it may behoove you to mention these points about the Education Industrial Complex (if you agree with that, of course...), if for nothing more than to get your point on the record and to ease your conscience about what is happening in your world.



Mon, 11/26/2012 - 05:55 | 3010796 Kickaha
Kickaha's picture

You have a basic misunderstanding as to what your function is in the current system.

You are to babysit a hoard of young people attending your institution via student loans.  The university that can attract and retain the most "students" becomes a success.  The university which maintains high academic standards and requires students to actually learn becomes an abject failure over time as enrollment declines.

The admins at a successful university know that their job is to make sure that every student remains enrolled, no matter what there personal shortcomings.  Overzealous teachers need to be slapped down regularly lest they jeopardize the chances of keeping the maximum number of student loan debtors enrolled.

Your post is not really OT.  It highlights maybe the most stupendous misallocation of resources in the history of the human race, one made possible only by neverending printing of debt money.

Mon, 11/26/2012 - 07:29 | 3010816 Optimusprime
Optimusprime's picture

Sympathize--been there, done that.  The administration just wants money flow and no blows to "reputation".  Finally quit in disgust when administration demanded I change a failing grade to passing grade (student had threatened lawsuit against institution).


The failing grade had been honestly earned--non-performance plus failing performance equals failure, or the word "failure" has no meaning.


The teacher who fails a student or catches one plagiarizing is the troublemaker, these days.

Mon, 11/26/2012 - 06:14 | 3010779 Radical Marijuana
Radical Marijuana's picture

This article, and most of the comments, appears to be just more of the endless conflict between impossible ideals vs. reality, which always results in reality prevailing. Reality is ALWAYS based on organized lies, operating organized robbery. There are no fundamental dichotomies, and all views based upon some fundamental dichotomies are inherently false. All idealized explanations based on false fundamental dichotomies are always wrong.

Central banks were ALWAYS the result of the best organized gang of criminals covertly taking control of governments, and thereby getting into a runaway vicious spiral of bigger lies, backed by more violence. However, the notions that there are any possible solutions outside of those realities are non-starters, since human reality is that we always operate as gangs of robbers in our environment. There is never anything happening other than different organized crime gangs, more or less in conflict with each other. That SHOULD be the basis for any discussions of how to change the current dynamic equilibria of human ecology and political economy into something else.

Human societies are amplifying the innate contradictions between relative progress in science and technologies, everywhere except in political science, and all other social and human sciences! Economics is the preeminent example of that runaway aggravation of the contradictions whereby FRAUDS dominate so totally, and therefore, it is impossible within any of those alleged "economic" frames of reference to make economics consistent with ecology, or any other physical or biological science.

Central banks are the primary example of human civilization being almost totally dominated by huge lies, where the history that made War King then morphed to make Fraud King. The same processes that created states through the history of militarism then enabled the best organized of criminals to take covert control of governments, in order to legalize their crimes, namely to legalize privatized counterfeiting of "money," which then became a runaway feedback that made the groups of people doing that, and benefiting from being able to do that, the most wealthy and powerful people. Our entire civilization is now almost completely controlled by the triumph of those Fraud Kings.

Of course, every adequate analysis of those realities demonstrates that that is screwed up, and getting more screwed up! However, almost all of the "solutions" are proposed on the basis of impossible ideals about unscrewing those, in ways that fall back on the same old false fundamental dichotomies, that were originally advanced to justify the runaway frauds in the first place!

The only scientific alternatives depend on a series of paradigm shifts:  All knowledge is based on relative subtractions, and those subtractions of parts from the Whole are always relative illusions, or lies. All power follows from that original subtraction. Money operates within that context as the symbolic expression of robbery backed by murder. It is NOT possible for money to ever be anything else. There are no genuine solutions which do not deal with the original situation. Namely, the central banks are able to do what they do because they covertly were the best at the death controls, which enabled them to take over the debt controls. Any genuine solutions to those problems require changing the death controls. Any changes to the money system MUST be based on changes to the murder system.

Since "we" generally refuse to admit or understand that, but rather, have the runaway triumph of established frauds, opposed by the same old bullshit impossible ideals, as were first advanced by those fraudulent frames of reference, to advance themselves, the ONLY realistic solutions are for the established systems to continue to operate their combined money/murder systems, death/debt controls, through more and more unrealistic and insane, deceptive, and self-deceiving, methods.

We ARE going to get drastic paradigm shifts in the REAL money/murder systems, by having those runaway frauds, unchecked by enough sane opposition, drive through the required transformations, or corrections, to their growing disequilibria, by psychotic breakdowns of the social systems based so totally upon triumphant frauds, that it is impossible for more radical truth to emerge.

Mon, 11/26/2012 - 07:43 | 3010820 Seer
Seer's picture

"Since "we" generally refuse to admit or understand that, but rather, have the runaway triumph of established frauds, opposed by the same old bullshit impossible ideals, as were first advanced by those fraudulent frames of reference, to advance themselves, the ONLY realistic solutions are for the established systems to continue to operate their combined money/murder systems, death/debt controls, through more and more unrealistic and insane, deceptive, and self-deceiving, methods."

"However, almost all of the "solutions" are proposed on the basis of impossible ideals"

You're getting warm...

When nothing seems to make sense one needs to step back and question the underlying premise.  The "premise" is the basis for all else to operate from.  If things don't seem to be operating correctly it need not necessarily be because of poor execution, of poor actions or deceit*.

* Investigate what nature does and you'll see that there's a whole lotta deception going on.  Deception is about survival.  Noble it may be to die for morality sakes, but such is really only an ideological suicide.  We HAVE to accept that we are deceptive by nature and then go from there: we need to allow for a more level playing field, one that doesn't accept others as having any more moral (or other) authority over anyone else; everyone's right to bear arms is one leveler.

In addition to acknowledging that humans practice in the art of deception I offer these two fundamental points for grapsing reality:

- Perpetual growth on a finite planet ISN'T possible;

- ALL wars are over/about resources.

Everything that we are operating upon assumes the opposite of what I mention!'

We have two sets of "fundamentals" at odds.

Lyrics from Dire Straits' "Industrial Disease:"

"Two men say they are Jesus one of them must be wrong"

If your Jesus is drowning (not walking on water) then perhaps he's the wrong one?

When (offensive) war itself is a crime then it shouldn't be any surprise to find that those engaged in it are criminals.  When everything around us is controlled by fraud then we need ask ourselves if it's not because the system itself is a fraud.  I claim that fraud could ONLY be cleared IF the underlying premise could be proven clear/clean; I'm not thinking that this is possible.

Since I believe that we're operating on a patently false premise I see all who would attempt to clean it up as practicing in deception, that the deception is an attempt to rush in and obtain "more" (or to "take back")  as the tables get cleared.  New management steps in and the tables are once again open, for the same game, no matter if the parlor looks different, no matter if the chips look different.  It's another spin on the Ponzi Wheel, it'll all be good until those rollers who start to lose once again speak out for new management...

Mon, 11/26/2012 - 07:58 | 3010829 Seer
Seer's picture

Feed the growth monster!  Yeah, that's the ticket!

And just WTF is it going to be fed with?  Everyone's BROKE!

It's all code for: Let's deplete our resources more quickly!

Face it, the ONLY way to produce real "wealth" is via extracting resources from the planet.  All "intellectual" capital does is value-add- without the actual PHYSICAL resources with which to work with it's no more than a "thought."

Yes, let's do MORE.  Let's do it MORE quickly.  That's the exponential function at work.  If one cannot grasp the SIZE then one surely can recognize the SPEED component.  Chris Martenson's Crash Course ( does an excellent job of showing how things have speeded up.

There is NO answer because we're asking the WRONG question! (BAD premise!)

Mon, 11/26/2012 - 09:15 | 3010908 blindman
blindman's picture

A Collection of Diagrams
12/2000 William Beaty BSEE
While a coil can store energy in the magnetic field outside its windings, and while a
capacitor can store energy as an electric field in the insulating layer between the metal
plates, an electric circuit handles energy a bit differently. As a whole, an electric
circuit does both at once: it's both a coil and a capacitor. It's a capacitor because an
e-field exists between the two halves of a simple circuit at different potentials. And
it's a coil because a magnetic field surrounds each current-bearing wire. The shape of
these fields will demonstrate that the EM energy which flows across a circuit is not
stuck to individual electrons, nor is it moving along with the slow electrons within the
interior of the metal wires. Instead the EM energy flows rapidly through the space
surrounding the metal parts of the circuit. " ....
comment: i can't help but notice an analogical
relationship between a "simple circuit" and the
socio-economics. the metal of our system is being
eroded and correspondingly the fields of potential
transmission are failing. maybe the entire circuit
is being destroyed and scrapped? maybe the power
source was stolen and is being relocated?

Mon, 11/26/2012 - 09:30 | 3010928 NidStyles
NidStyles's picture

This is what Mathematical Economics brings you.

Do NOT follow this link or you will be banned from the site!