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Guest Post: The Interconnective Web of Global Debt

Tyler Durden's picture




 

Via John Aziz of Azizonomics blog,

It’s very big:

Andrew Haldane:

Interconnected networks exhibit a knife-edge, or tipping point, property. Within a certain range, connections serve as a shock-absorber. The system acts as a mutual insurance device with disturbances dispersed and dissipated. But beyond a certain range, the system can tip the wrong side of the knife-edge. Interconnections serve as shock-ampli ers, not dampeners, as losses cascade. The system acts not as a mutual insurance device but as a mutual incendiary device.

A mutual incendiary device sounds about right.

 

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Fri, 12/21/2012 - 12:02 | 3086960 moskov
moskov's picture

are those Ben Benanke's pubic hairs?

Fri, 12/21/2012 - 12:03 | 3086968 AlaricBalth
AlaricBalth's picture

I am Joe's clogged arteries.

Fri, 12/21/2012 - 12:12 | 3087002 hedgeless_horseman
hedgeless_horseman's picture

 

 

I have completed the meta-analysis of the graphic: Shit flows downhill and payday is on Friday.

Fri, 12/21/2012 - 12:19 | 3087048 ParkAveFlasher
ParkAveFlasher's picture

To properly continue the metaphor, this graph should be rolled top to bottom into a cylinder with the specific rule that the top now needs to be larger (growth) however the bottom must keep matching the colored widths (interest). 

And that my friends is the shell of the snail, the golden ratio, the ever-swelling mobius strip, Operation Twist, etc.

Fri, 12/21/2012 - 12:22 | 3087054 francis_sawyer
francis_sawyer's picture

I thought muppets were hand puppets...

Fri, 12/21/2012 - 12:22 | 3087055 duo
duo's picture

If the money the US lends to itself is shown, it would cover up all the rest of the lines.

Fri, 12/21/2012 - 15:08 | 3087783 LMAOLORI
LMAOLORI's picture

 

 

This is a global ponzi scheme

Look at China (keeping in mind they buy our debt)

122% of Total Economy Debt

http://www.investmentcontrarians.com/recession/the-shocking-secret-behind-chinas-economy/1152/

Are Chinese Banks Hiding “The Mother of All Debt Bombs”?

http://thediplomat.com/2012/09/10/are-chinese-banks-hiding-the-mother-of-all-debt-bombs/

The Social Security Trust Fund btw is the largest holder of U.S. debt although the Fed is really trying hard to catch up or has caught up this year by monetizing all obama's spending after promising Congress they wouldn't. Japan and the other countries percentages are also in this article.

The TRUTH About Who Really Owns All Of America's Debt

http://www.businessinsider.com/who-owns-us-debt-2011-7?op=1#ixzz2Fi9EOwwN

Fri, 12/21/2012 - 12:21 | 3087052 AldousHuxley
AldousHuxley's picture

Reason why incest is outlawed is that narrow gene pool makes the population susceptible to being wiped out when new diseases are introduced.

Interconnected system increases efficiency but is more risky. Black swans can bring the whole system down.

Nature knows this
Sun you knew this
Only arrogant economists will ignore this

Fri, 12/21/2012 - 12:18 | 3087041 SheepleLOVEched...
SheepleLOVEcheddarbaybiscuits's picture

What a tangled web they have weaved.....

Fri, 12/21/2012 - 12:14 | 3087026 imbrbing
imbrbing's picture

They look skittle colored

Fri, 12/21/2012 - 15:18 | 3087822 Jena
Jena's picture

Those are taps for pour paints used by Paul Jenkins (he was the guy they used for the art in "An Unmarried Woman" with Jill Clayburgh and Burt Reynolds.  Alan Bates played him in the film).  Big huge canvases, 8' high X 10' long.

 

https://www.google.com/search?q=paul+jenkins&hl=en&biw=1600&bih=764&um=1...

Fri, 12/21/2012 - 12:27 | 3087079 WhyDoesItHurtWh...
WhyDoesItHurtWhen iPee's picture

Genetic code for skittle pooping Unicorns.

Fri, 12/21/2012 - 13:20 | 3087298 glenlloyd
glenlloyd's picture

check kiting writ large

Fri, 12/21/2012 - 15:40 | 3087913 rotagen
rotagen's picture

Title should be "twice removed from reality"  .. the wizard's boogieman.... not just nationwide, Im bad, I'm global, I'm the scapegoat.

Fri, 12/21/2012 - 12:07 | 3086962 vast-dom
vast-dom's picture

i hope we're not alluding to the pure gibberish of the "antifragile" taleb nonsense?

Sat, 12/22/2012 - 00:40 | 3086964 prains
prains's picture

phase one complete, bwahahahahahahahahahahahahahahah  (evil laugh followed with pinky finger to corner of mouth)

Fri, 12/21/2012 - 13:51 | 3087441 metastar
metastar's picture

The more you pay in taxes, the more you earn (or steal in the case of banking). So, you would be happier.

And the Fukushima radiation tan would look oh so sexy on Ann Coulter.

Fri, 12/21/2012 - 12:04 | 3086973 gjp
gjp's picture

Look at that great big sucking pig on the bottom right.  But it's Europe that's broke, right?

Fri, 12/21/2012 - 12:26 | 3087068 Toolshed
Toolshed's picture

C'mon now, we're not fat...........we are just big boned.

Fri, 12/21/2012 - 12:07 | 3086986 NoDebt
NoDebt's picture

Vampire squid, indeed.  Lots more than 8 testicles.  I mean tentacles.  Well, probably a lot more of them, too.

Fri, 12/21/2012 - 12:09 | 3086991 Dr. Engali
Dr. Engali's picture

 

The more they overthink the plumbing, the easier it is to stop up the drain.

 

~Montgomery Scott~

 

For all you non-Star Trek geeks he is the engineer on the U.S.S Enterprise NCC 1701

Fri, 12/21/2012 - 12:11 | 3087010 vast-dom
Fri, 12/21/2012 - 12:10 | 3086994 geno-econ
geno-econ's picture

Yes, but we can all sleep at night because $600 Billion + in Derivatives diversifies all that  risk. That is what Greenspan has told us and he has always been right,  Right?  Pass me a sleeping pill.

Fri, 12/21/2012 - 12:46 | 3087157 Tom_333
Tom_333's picture

Very radical measures will have to be enacted to change any of this.Very radical....Until then Ponzi as usual.

Fri, 12/21/2012 - 12:11 | 3087006 Seasmoke
Seasmoke's picture

Is it cut the red , or is cut the blue ?

3....2....1

Fri, 12/21/2012 - 12:14 | 3087018 TheFourthStooge-ing
TheFourthStooge-ing's picture

Which end do I light?

Fri, 12/21/2012 - 12:11 | 3087011 buzzsaw99
buzzsaw99's picture

i say god damn god damn the pusher man

Fri, 12/21/2012 - 12:11 | 3087012 TrumpXVI
TrumpXVI's picture

I just LOVE those kinds of graphs.

They really allow one to quickly and succinctly digest ALL the information.

Fri, 12/21/2012 - 12:29 | 3087084 francis_sawyer
francis_sawyer's picture

Lucy in the Sky With Diamonds...

Fri, 12/21/2012 - 12:13 | 3087016 Ralph Spoilsport
Ralph Spoilsport's picture

Hieronymus Bosch meets John Maynard Keynes.

Fri, 12/21/2012 - 12:17 | 3087036 Inthemix96
Inthemix96's picture

If you look real close, you can see a brightly coloured unicorn behind the UK's slot.

And if I am not mistaken, its having a shit all over the blue spaghetti.

Fri, 12/21/2012 - 12:19 | 3087047 OMG
OMG's picture

Head of NRA is giving em hell! 

 

Disclosure not a memeber of any organization supporting anything at all.

Supporting & protecting  myself is my agenda.

 

 

Fri, 12/21/2012 - 12:22 | 3087057 Downtoolong
Downtoolong's picture

But, surely Wall Street can distill this all into one summary index and then write another trillion or two in OTC derivatives to hedge it all away. There's got to be some schmuck at AIG who will hold the bag for a bonus of a measly million or two.

Fri, 12/21/2012 - 12:23 | 3087058 OneTinSoldier66
OneTinSoldier66's picture

Global Trade: Good

 

Global One World Government with piece of paper promise from a politician(debt) as it's currency: Bad

Fri, 12/21/2012 - 12:23 | 3087060 Titus Flavius C...
Titus Flavius Caesar Vespasianus Augustus's picture

Apologize for posting off-thread here, gents but I want to take this opportunity to say:

 

I really, really, really fucking hate and despise the legions of ballwashers on Krugman's blog.  These people seem to think that there is no higher calling in life than being assimilated by the Progressive Borg.

 

Whatever one might argue about the merits of deficit spending, shouldn't it be obvious to these folks that we've had super massive spending increases over the past decade, and that our inept Congress, left to its own devices, would happily engage in a Cal Ripken-like streak of budget deficits without addressing debt, or prosecuting the fucktards of finance?

 

What is the answer if there's another, more serious global downturn in 5 years - is the answer always and only printing and spending? 

 

What's especially maddening is these people seem to set up a paradigm wherein they can never be proven wrong and no evidence will be seen as contraindicating their debt-based prescriptions.

 

In sum - Krugman and his state-loving, ballwashing blog followers are, as John Stewart once said to Tucker Carlson - ruining this country.  

 

It's not cute, and they must be fucking stopped.

 

Rantus terminum.

Fri, 12/21/2012 - 12:24 | 3087061 BlueStreet
BlueStreet's picture

Not too late to add rice and beans to the x-mas list. 

Fri, 12/21/2012 - 12:26 | 3087071 Oquities
Oquities's picture

NRA director Wayne LaPierre is knocking it out of the park right now.

Fri, 12/21/2012 - 12:27 | 3087075 sbenard
sbenard's picture

It's only logical that it is impossible to have independence and interconnectedness simultaneously. How could we have been so foolish?

Fri, 12/21/2012 - 12:29 | 3087082 ATM
ATM's picture

The unwinding of this mess is what the Mayans were talking about when they ended their calendar. The Age of Debt is now over. Long live the Age of Equity (after the required world war, destruction, famine, pestilence and death).

After that everything ends up OK.

Fri, 12/21/2012 - 12:29 | 3087085 AndrewJackson
AndrewJackson's picture

There goes zerohedge again. Don't you guys know that after netting all contracts the actual outstanding risk is $.02. This business of claiming trillions and quadrillions of derivative exposure is all nonsense. /endsarc

Fri, 12/21/2012 - 12:59 | 3087206 nonclaim
nonclaim's picture

You joke but $.02 as recovery rate sounds about right.

Fri, 12/21/2012 - 12:31 | 3087087 pragmatic hobo
pragmatic hobo's picture

... with such complex network of interconnection, is it possible that some emergent behaviour similar to intelligence arise from the network? Do you think perhaps the reason we, ok many of us, are debt slaves is not because of our own behaviour but due to the debt-network working to enslave us? Perhaps our very own existence is in fact a simulation driven by the debt-network, aka the matrix? now, ... where did I put that red pill.

Fri, 12/21/2012 - 12:45 | 3087098 Quinvarius
Quinvarius's picture

That is why I never order a large spaghetti.  The chances of all those complexly interwoven noodles becoming self aware and eating me instead grow exponentially with size.

Fri, 12/21/2012 - 12:40 | 3087123 americanspirit
americanspirit's picture

So, how much of that money being lent is generated by the creation of goods and services and how much is simply notational - being printed electronically and manually. Also, this chart displays money flowing through "legitimate' channels. It would be interesting to see a comparable chart showing money flows from drugs, weapons, and sex. The difference of course is that somebody actually has to produce drugs, weapons and sex to create money - nobody has to produce anything to produce notational money. Then there is a third chart - the shadow economy flows around the world. For the most part shadow economies deal in real transactions - goods and services for cash - but what does that flow of cash actually look like?

The real danger lies in the chart as depicted - these flows are to a great extent not based on real productivity but on government fiat. In other words, they exist only as promises to pay, with promises piled upon promises piled upon more promises. Plus secret agreements never to ask to be paid in anything but more promises. Let one major promising party default, and ask to actually be paid or, worse yet, demand gold or silver in payment, and the shock will cause the system to begin unraveling. Now THAT would be an interesting graphic.

Fri, 12/21/2012 - 12:41 | 3087132 yogibear
yogibear's picture

Ever see what happens when a backhoe meets network connections?

Fri, 12/21/2012 - 12:54 | 3087189 forwardho
forwardho's picture

Unfortunately yes, broke through an unmarked fiber-optic trunk line. Two seconds of pull, 28.000 lost service. Thank God for insurance, the bill was astounding.

Fri, 12/21/2012 - 13:16 | 3087287 CPL
CPL's picture

Cool presentation though.

Fri, 12/21/2012 - 12:49 | 3087145 kevinearick
kevinearick's picture

(Ooops, there goes the market again; they never learn.)

Equal Rights & Inclusion, Under the Law

That my friend is the face of a tyrant, above the law. What’s truly funny is that the majority has normalized itself to think its behavior is, at some point in time, going to be acceptable, by hook or by crook, to the minority creating all the economic profit to offset the majority’s losses. 

The majority has its servants kidnap the minority’s kids for the purpose of extorting a 90% tax, spends a few million per on the mistake, and then records it as G, leveraging the result with monetary expansion to destroy its tax base, and, finally, is appalled to find its economy collapsing and all the recorded wealth in its pension plans evaporated. Stupid f-ing lizards.

So, I had this habit in elementary school of solving all the problems in the math book within a few weeks, and turned them into the teacher, just to see the expression on her face, to know what I was dealing with. Anyway, my fourth grade teacher is ready and waiting for me. She rips up my handwritten homework and tells me that I will follow along with the class and only do the problems prescribed, as prescribed, by her decree.

For each chapter, I turned in a copy of the original, with all problems solved, the rest of the year, which revealed all the ‘errors’ in the publisher’s text, which she followed, running the entire class errant. I was in the principal’s office pretty much every day, until he excused me from class all together. In other words, F-U, which, ironically, was the academic and conduct grade I received for the subjective parts of the class, but, under the then version of no child left behind policy, she had no choice but to advance me. The next year, I got an advanced copy and had it ready on the first day of class.

With the institution of early childhood education, you only have about two years to get your children geared up, when the majority will realize that your kid is going to be a whole lot more intelligent than their kids, but that is still plenty of time if you are prepared. They are not just coming after your guns…which, with a decent education, are unnecessary.

In case anyone is interested, in due process, what you want to do is publish your free speech moderation algorithm and compare it to your evolving objectives, modifying the former accordingly, and do the same with your objectives and your goal, jumping out randomly as necessary, which will give you the event horizon. You will ultimately have a distribution, an event horizon of event horizons. But what does a racist, sexist, whatever-ist laborer know about enterprise architecture? There was a time when I helped all comers in my physical life, but I am here, am I not? There is no law that can force me to tell you what is coming, or its underlying algorithm. Once we go full AC, there will be no escape for DC, until the next modernization.

Sun, 12/23/2012 - 20:40 | 3091992 Sparkey
Sparkey's picture

Congratulations Kevin I've Often pondered this subject never realizing exactly what it was, that is until I read rour post, thanks to you, I think I finally understand! Are you teaching at a University? With a few teachers like you perhaps I could graduated!

Fri, 12/21/2012 - 12:45 | 3087153 bookwurm
bookwurm's picture

Tuftie's proteges handiwork...

http://www.edwardtufte.com/tufte/books_vdqi

Fri, 12/21/2012 - 12:50 | 3087171 Quinvarius
Quinvarius's picture

And when you crap on gold, you crap on the ultimate collateral for all that debt.  Something heads of global banking organizations should think about the next time they are trying to decide whether they like solvency and the ability to take loans from the market at a decent interest rate without buying their own crap.  Someday these bankers are going to understand what gold is, and use is correctly.  But, until nature is allowed to take its course and gold runs to where it belongs, their every action to interfere in economics will damage the real economy.

Fri, 12/21/2012 - 13:19 | 3087295 waterwitch
waterwitch's picture

This can only end badly.

Fri, 12/21/2012 - 13:30 | 3087359 debtor of last ...
debtor of last resort's picture

Pull the last string on the left upper side and you will see a small puppet with a beard hanging on it. Funny, wonder who that is?

Fri, 12/21/2012 - 16:28 | 3088076 auric1234
auric1234's picture

Where's Iceland in this graphic?

 

Fri, 12/21/2012 - 23:12 | 3089213 vachon
vachon's picture

Wow.  Beautiful.  I'd love a framed poster of that.

 

Sat, 12/22/2012 - 02:20 | 3089362 Radical Marijuana
Radical Marijuana's picture

"... beyond a certain range ... Interconnections serve as shock-ampli ers, not dampeners, as losses cascade. The system acts not as a mutual insurance device but as a mutual incendiary device ..."

Since the system as a whole IS global electronic fiat money frauds, backed up by weapons of mass destruction, the same things could be said about the weapons of mass destruction, as about the financial systems. There can come a point where those weapons start to get used, rather than remain as deterrents, and then, they become shock-amplifiers and mutual incendiary devices.

The whole system has been based on transferring risks to larger and larger groups, which eventually means that the total risk could finally collapse onto the largest possible populations. Every step of the psychotic extrapolation of "national security" takes us another step closer to that knife-edged, tipping point. For example, the decision not to prosecute HSBC for blatantly ignoring banking laws, due to reasons analogous to "national security," have emphasized how the entire system is on the same tragic tragectory in BOTH the money/murder systems.

http://www.youtube.com/watch?v=JDdVNRs2PNo

After Laundering $800 Million in Drug Money,

How Did HSBC Executives Avoid Jail

Psychotic "national security" concepts blatantly applied to banks. The government can not afford to go against the biggest banks for "national security" reasons, that the system could collapse? WELCOME TO THE BIZARRO MIRROR WORLD! Every step towards "stability" actually takes us closer to reaching the tipping points toward collapse into chaos. Final failure from too much "success!" Derivatives that were supposed to hedge risks have generated a collective quadrillion units of extremely leveraged risk. Since the entire system IS based on FRAUD, BACKED BY FORCE, everything that is insane in the money system was backed by matching insanities in the murder systems.

What is generally true about all systems applies to BOTH the monetary and the military systems. The problem is that we are on exponential growth curves towards those transformations. The HFT only gets more HFT, and so, the inherent instability gets gamed more and more, as the FRAUD BACKED BY FORCE ACCELERATES! Both are being controlled in ways that maximize their short-term benefits, while simultaneously maximizing their longer-term costs. It is only a question of time until the short-term blends through the middle-term, into the long-term. Our collective insanity, due to being controlled by huge lies, is leading us towards flash crashes in the overall size of the human population. As Zero Hedge points out, "On a long enough timeline, the survival rate for everyone drops to zero."

Sat, 12/22/2012 - 14:52 | 3089823 kevinearick
kevinearick's picture

:)

Sat, 12/22/2012 - 16:23 | 3089926 falak pema
falak pema's picture

being inter-connected isn't that awesome? !  

The rest is fodder for the sheep, cattle and horses; being mundane unknowns in the Universe. 

Bieng interconnected is like being NEil Armstrong on the Moon; talking to the stars in galactic language : 'one small step for man, one giant step for humanity!'

And they gobbled it, like they had gobbled Hiroshima and Patton before!

Like Alexander, Caesar and Napoleon of ancient Lore! 

That's what dreams are for! Greek, ROman and all that succeeded them.

"We the rulers of humanity...towering over the world like a colossus!....Ah, the wake up call!

TO realise after all, we are nothing but convoluted humanity, not the elite of Abraham's breed : the chosen few...oh the fall, my brothers, we all fell down, from Metaphyiscal world of unique  God and Man in His image, to Socrates's world : just humanity, with its ass full of shit and its time line limited!  Oh the fall that that reality represented! 

And now, we are lost in transalation : between Caesar's hubris, Abraham's false modesty in name of bearded Male order, and humanity's need for Both secular reasoning without DIRE genocidal drama and Ordained predetermined creationist shit; inevitable Mayan/Born again evangelical Christian/ Mahdi Moslem... end of civilisation. To make that preordained drama have a Hecule POirot ending! Oh the Drama!

God, do I love omelettes made of normal eggs, not of the Easter, eternal variety! 

Merry Xmas anyways! We never know with God, to whom we rest eternally INDEBTED! 

Or so they say! ....

SO debts are the ignominious hole of humanity that only a Caesar can truly vanquish!

Where wise men tread to go... Caesar crosses the Rubicon and all that ensued. 

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