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Guest Post: The Global Endgame in Fourteen Points

Tyler Durden's picture





 

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

An over-indebted, overcapacity economy cannot generate real expansion. It can only generate speculative asset bubbles that will implode, destroying the latest round of phantom collateral.

I have endeavored to lay out the global endgame in four recent entries:

Is This the Terminal Phase of Global Capitalism 1.0? (February 8, 2013)

Note to Fed: Giving the Banks Free Money Won't Make Us Hire More Workers (February 11, 2013)

Cheap, Abundant Credit Creates a Low-Return, Bubble-Prone World (February 12, 2013)

Europe Is Not "Fixed": Two Charts (February 13, 2013)

For those seeking a summary, here is the global endgame in fourteen points:

1. In the initial "boost phase" of credit expansion, credit-based capital ( i.e. debt-money) pours into expanding production and increasing productivity: new production facilities are built, new machine and software tools are purchased, etc. These investments greatly boost production of goods and services and are thus initially highly profitable.

2. As credit continues to expand, competitors can easily borrow the capital needed to push into every profitable sector. Expanding production leads to overcapacity, falling profit margins and stagnant wages across the entire economy.

Resources (oil, copper, etc.) may command higher prices, raising the input costs of production and the price the consumer pays. These higher prices are negative in that they reduce disposable income while creating no added value.

3. As investing in material production yields diminishing returns, capital flows into financial speculation, i.e. financialization, which generates profits from rapidly expanding credit and leverage that is backed by either phantom collateral or claims against risky counterparties or future productivity.

In other words, financialization is untethered from the real economy of producing goods and services.

4. Initially, financialization generates enormous profits as credit and leverage are extended first to the creditworthy borrowers and then to marginal borrowers.

5. The rapid expansion of credit and leverage far outpace the expansion of productive assets. Fast-expanding debt-money (i.e. borrowed money) must chase a limited pool of productive assets/income streams, inflating asset bubbles.

6. These asset bubbles create phantom collateral which is then leveraged into even greater credit expansion. The housing bubble and home-equity extraction are prime examples of theis dynamic.

7. The speculative credit-based bubble implodes, revealing the collateral as phantom and removing the foundation of future borrowing. Borrowers' assets vanish but their debt remains to be paid.

8. Since financialization extended credit to marginal borrowers (households, enterprises, governments), much of the outstanding debt is impaired: it cannot and will not be paid back. That leaves the lenders and their enabling Central Banks/States three choices:

A. The debt must be paid with vastly depreciated currency to preserve the appearance that it has been paid back.

B. The debt must be refinanced to preserve the illusion that it can and will be paid back at some later date.

C. The debt must be renounced, written down or written off and any remaining collateral liquidated.

9. Since wages have long been stagnant and the bubble-era debt must still be serviced, there is little non-speculative surplus income to drive more consumption.

10. In a desperate attempt to rekindle another cycle of credit/collateral expansion, Central Banks lower the yield on cash capital (savings) to near-zero and unleash wave after wave of essentially "free money" credit into the banking sector.

11. Since wages remain stagnant and creditworthy borrowers are scarce, banks have few places to make safe loans. The lower-risk strategy is to use the central bank funds to speculate in "risk-on" assets such as stocks, corporate bonds and real estate.

12. In a low-growth economy burdened with overcapacity in virtually every sector, all this debt-money is once again chasing a limited pool of productive assets/income streams.

13. This drives returns to near-zero while at the same time increasing the risk that the resulting asset bubbles will once again implode.

14. As a result, total credit owed remain high even as wages remain stagnant, along with the rest of the real economy. Credit growth falls, along with the velocity of money, as the central bank-issued credit (and the gains from the latest central-bank inflated asset bubbles) pools up in investment banks, hedge funds and corporations.

The net result: an over-indebted, overcapacity economy cannot generate real expansion. It can only generate speculative asset bubbles that will implode, destroying the latest round of phantom collateral.

Here are three charts that illustrate #14:

Eurozone credit since the inception of the euro. This is roughly equivalent to TCMDO (Total Credit Market Debt Owed) in the U.S.

Eurozone credit growth:

Money velocity in the U.S.:

That is the endgame in three charts. Checkmate, game over.

 


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Fri, 02/15/2013 - 11:52 | Link to Comment LawsofPhysics
Fri, 02/15/2013 - 11:56 | Link to Comment Fleecer
Fleecer's picture

...

Fri, 02/15/2013 - 12:11 | Link to Comment Dr. Richard Head
Dr. Richard Head's picture

So what happens when money velocity reverts to the mean, even at 1.7?  Shit meets the fan for costs of goods?  Coming soon me thinks.

Fri, 02/15/2013 - 12:59 | Link to Comment Bicycle Repairman
Bicycle Repairman's picture

Time for a little alternative truthiness:

"Is This the Terminal Phase of Global Capitalism 1.0?"

Yes, but it is Global Capitalism 2.0, Capitalism 1.0 died in 1914.  Consult your history books for the next chapter in history.  Meanwhile, socialism has been implemented.  Feel free to mourn the death of markets.  They don't care.  Socialism doesn't work?  Maybe not in the long run.  You won't live to see the collapse, if any.

"Note to Fed: Giving the Banks Free Money Won't Make Us Hire More Workers"

Note to small business:  The Fed is handing out EBTs, Obama-phones, etc.  Keep your pathetic low-paying, no benefit jobs.  Why don't you suck on Obama-care and die already.

"Cheap, Abundant Credit Creates a Low-Return, Bubble-Prone World"

Fed response?  It's our dollar, but it's your problem.

""Europe Is Not "Fixed": Two Charts"

Why not 8 or 10 charts?  "Fixed" depends on your reference point.  To the banks, it's fixed.  EOS.

Fri, 02/15/2013 - 14:06 | Link to Comment SamAdams
SamAdams's picture

fair enough, here is a quote worth pondering:

"You can be sure that one of the side effects of the eventuality of the US dollar losing its status as the world's premier reserve currency is that the US government is going to squeeze its citizens as much as they can, and in as many ways as possible.

This is the very nature of political risk and is by no means unique to the US government – desperate governments will implement desperate measures, to the detriment of the wealth and wellbeing of its citizens."

This is an accurate statement that is already in full swing. 

Fri, 02/15/2013 - 17:15 | Link to Comment Bicycle Repairman
Bicycle Repairman's picture

I agree the people are being squeezed.  There is a war on, and the people are paying for it.  If the US wins, the $ is going nowhere.  If they lose, then there will be some compromise, and the people will be devalued in some fashion.

Fri, 02/15/2013 - 16:10 | Link to Comment Totentänzerlied
Totentänzerlied's picture

Actually this is more like Capitalism 5.0.

Fri, 02/15/2013 - 12:55 | Link to Comment hedgeless_horseman
hedgeless_horseman's picture

 

 

Regarding Eurozone credit growth, the ECB can just lower reserve requirements, again, from 1% to something like 0.1% and all is hunky dory.

Because...

"...the system of reserve requirements is not needed to the same extent as under normal circumstances to steer money market conditions."

 

http://www.ecb.int/press/pr/date/2011/html/pr111208_1.en.html

...trust me.

 

When would Europeans ever want to get more than 1% of their money out of the bank?  Are reserves more likely to be needed under normal circumstances, or abnormal circumstances?

 

Historical changes reserve ratios:

Country                   1968    1978    1988    1998
United Kingdom         20.5     15.9     5.0      3.1
Turkey                     58.3     62.7     30.8    18.0
Germany                  19.0     19.3      17.2   11.9
United States            12.3     10.1       8.5   10.3
India                           3         6       10     10-11

                                                                           2011    2012

Europe (ECB)                                                           2         1

 

Draghian philosophy states:

There can be no more bank runs;

Thus, there will be no more bank runs.

Party on, Wayne! 

Party on, Garth!

Fri, 02/15/2013 - 14:11 | Link to Comment SamAdams
SamAdams's picture

Might as well lower reserve requirments to zero since that is essentially what they have on reserve, nothing of real value.  Of course, this will solve nothing as the scam eats itself in an accelerating manner as interest is loaned to pay interest.  Great fun there! 

Fri, 02/15/2013 - 11:54 | Link to Comment btb2010
btb2010's picture

3,2,1,......................!

Fri, 02/15/2013 - 12:00 | Link to Comment SheepDog-One
SheepDog-One's picture

ALL they can do is add more debt! Shoveling the peasants faster into the boiler to keep the shit ship afloat a bit longer, that's all they can do.

Fri, 02/15/2013 - 12:21 | Link to Comment Zap Powerz
Zap Powerz's picture

So, buy gold and silver?

Fri, 02/15/2013 - 13:48 | Link to Comment flattrader
flattrader's picture

Because it feeds your sick and twisted psycho-sexual fantasy about having stacks of gold and silver eagles and how many women you can buy since you are the only one who will have food etc...?

Me, I've got scrap gold and silver because I know there is just about now way anyone will make change for all those gold and silver eagles and it just makes you a "target."

Fri, 02/15/2013 - 15:00 | Link to Comment ATM
ATM's picture

What will you have of any value when the next financial system comes into being?

Gold isn't for trading for food during the coming tumult. It is so that you have saved something of value for after.

I'd like to carry some wealth with me and not start with nothing. Gold is one of the things that will have value then just as it fdoes now. Paper assets, not so much. Real Estate can be taken by government fiat or taxed and stolen.

Gold is high density wealth.

Fri, 02/15/2013 - 18:11 | Link to Comment flattrader
flattrader's picture

I'll have my gold and silver scrap and won't have a big-assed target painted on my back because I'm trying to spend Eagles should the SHTF in the interrim.

If Gold isn't for trading for food during the coming tumult, what is?  Will they take your shitty fiat currency for food, medicine etc.???

I wouldn't.

Fri, 02/15/2013 - 12:02 | Link to Comment Bryan
Bryan's picture

Excellent summary, IMO.  I especially like this part:

8. Since financialization extended credit to marginal borrowers (households, enterprises, governments), much of the outstanding debt is impaired: it cannot and will not be paid back. That leaves the lenders and their enabling Central Banks/States three choices:

A. The debt must be paid with vastly depreciated currency to preserve the appearance that it has been paid back.

B. The debt must be refinanced to preserve the illusion that it can and will be paid back at some later date.

C. The debt must be renounced, written down or written off and any remaining collateral liquidated.

Which one or more of the three choices do you think was made?  Who made the decision and why?  Which would be the "right" choice?

Fri, 02/15/2013 - 15:02 | Link to Comment ATM
ATM's picture

They choose B first and then almost always A. Very few will ever choose the right answer - C.

Fri, 02/15/2013 - 12:02 | Link to Comment Theta_Burn
Theta_Burn's picture

Only 1-2 riots over there worth mentioning in the past mth. really quite considering past 'riod flare ups, and you have to go and fuck our day up with this..

I guess Japan got the wink to attention whore this week.

Good luck all...

Fri, 02/15/2013 - 12:07 | Link to Comment LongSoupLine
LongSoupLine's picture

I'll fucking shorten it...

 

1) the fucking Fed and Treasury - Rubin, greenspan, Bernanke and their fucking TBTF bank fiat stuffing ponzi

2) CONgress - and their fucking greed, cronyism and no fucking adherence to the constitution or any fucking loyalty to their fucking voters.

3) Voters - fucking full retard lemmings whom believe any and all fucking lies pumped out like hot virus liquid shit by the MSM.  fucking welfare, non english speaking,writing or reading retards who fucking step on each others fucking heads to get a $4 fucking toaster one day a year, or riot when their fucking choice for fucking American Idol gets voted off, but in the same fucking day re-elect Pelosi, Reid, Obama and fucking Maxine Waters.  assholes.

Fri, 02/15/2013 - 12:21 | Link to Comment Timmay
Timmay's picture

So much free time to defraud and be defrauded, really makes you want to curse the opposing thumb huh?

Fri, 02/15/2013 - 13:18 | Link to Comment Liberty2012
Liberty2012's picture

LOL- Exactly ;)

It's long past crying time - Life is beautiful - Truth is good

I choose

Truth => Individual => Responsibility => Freedom

Fri, 02/15/2013 - 17:24 | Link to Comment abettertomorrow
abettertomorrow's picture

you are fucking right!

Fri, 02/15/2013 - 12:04 | Link to Comment adr
adr's picture

But equity valuations tell me that every shoe will be a Nike, every product will be sold only by Amazon, all restaurants will be Chipotle, and every movie and TV show will only be watched through Netflix on a fruit logo phone.

The stock market can't be wrong, CNBC told me so.

Fri, 02/15/2013 - 12:25 | Link to Comment centerline
centerline's picture

"every restaraunt is taco bell now"

Fri, 02/15/2013 - 12:04 | Link to Comment nobusiness
nobusiness's picture

This is all true, But never before have governments been so stupid as to indebt there citizens while transfering bad paper from bankers to government.  fanny and Freddie have taken massive losses which chould have been the banks and trillions of debt are now on gov books worldwide.  Until people say enough and rebel Japan shows it can continue for a long time (20+ years)

Fri, 02/15/2013 - 12:56 | Link to Comment viahj
viahj's picture

you speak of government as if it is some sort of sentient being.  it's not and those who are being so "stupid" by allowing the transfer of bad debts from banks to government (taxpayers), will flee with their ill gotten gains when it all collapses.  thieves and cowards, but not stupid.  (qualifying statement: yes, some are stupid but they are not the ones leading this fleecing)

Fri, 02/15/2013 - 13:51 | Link to Comment nobusiness
nobusiness's picture

You are correct.  The taxpayers have allowed the fox to guard the hen house

Fri, 02/15/2013 - 12:05 | Link to Comment virgilcaine
virgilcaine's picture

LOTS of Faith in Paper/Fed promises... no?  what could possibly go wrong?

Fri, 02/15/2013 - 12:06 | Link to Comment Bill Blackstone
Bill Blackstone's picture

I'm sick and tired of waiting around for this vaunted "endgame" to happen.  Every system has pressure points, where the application of a little bit of force sets off massive reactions.  Where are the "pressure points" of our $y$tem?  Can ordinary people push them?  If so, how?

Fri, 02/15/2013 - 12:14 | Link to Comment john39
john39's picture

stop paying taxes...   if afraid of prosecution.... stop earning money, therefore no taxes to pay.   stop supporting the banking/consumer system however you can.    no, not easy... but no one said it would be.

Fri, 02/15/2013 - 12:19 | Link to Comment Bill Blackstone
Bill Blackstone's picture

Cash rules everything around me -- C.R.E.A.M., get the (sound) money, silver silver coin y'all

Sat, 02/16/2013 - 02:19 | Link to Comment aphlaque_duck
aphlaque_duck's picture

Collect all the entitlements you can. Get back what they took.

Fri, 02/15/2013 - 12:18 | Link to Comment Spastica Rex
Spastica Rex's picture

If 50% of the people stopped buying 50% of all the crap that they want, but don't need, I bet things would freeze up pretty fast.

To what end?

Fri, 02/15/2013 - 13:17 | Link to Comment Bill Blackstone
Bill Blackstone's picture

> To what end?

The world is stuck in a holding pattern, choked and immobilized by its old paradigms.  The current system has to burn to the ground before change can happen, for better or worse.  Even a change for the worse would be preferable to the current pattern; there can be no adaptation without change.

Fri, 02/15/2013 - 13:28 | Link to Comment Spastica Rex
Spastica Rex's picture

I hear you.

Be careful what you wish for.

Fri, 02/15/2013 - 14:17 | Link to Comment flattrader
flattrader's picture

Amen, Brother.

No more consumer item type purchases from retail stores unless it is a charity resale shop...with no sales tax.

Buying tools and related items from Craigslist at deep discount, flea markets, yard sales etc...with no sales tax.

Buying new or refurbished items on line with free delivery...and no sales tax.

Buying as much food seasonally from local farmers directly...and with no sales tax.

F my local government that wants to give TIF to a Big Box Chinese Vending Machine.

Me and others starving the beast from within...while saving lots of $$$.

Fri, 02/15/2013 - 12:24 | Link to Comment Zap Powerz
Zap Powerz's picture

Bill Blackstone,

Well, you could build an EMP and detonate it.  Im sure that would fuck something up pretty bad.

Fri, 02/15/2013 - 12:27 | Link to Comment Peterus
Peterus's picture

As long as the debtor keeps getting "one last" lone he seems alright and can persist like this for extended period of time. I guess his credibility is his weakest spot.

Though this is one huge $y$tem. They have a lot of hidden valves to push the building pressure on more and more segments, putting the eventual blow up further away. I'd say that ordinary people's effort will only have some minor effect as long as it does not hit precisely into credibilty. There are already legions of people that were productive once, but now suck the resources from this monster, yet it still stands. There is growing minority of vocal opponents - but it just goes on. Majority still takes the banknotes for their work and there is still a pretense that this future productivity could maybe, some day, somehow pay all of this down.

Fri, 02/15/2013 - 12:28 | Link to Comment imbrbing
imbrbing's picture

Never ever ever EVER borrow zeros and ones or pieces of paper on plastic or bank loans EVER AGAIN! Frikin Mcmansion society wants everything now ( I was gullty ) and borrow to get it.

The fast food i have to have it now mentality beaten into our noggins has created a monster.

"But I need that new TV, My car has 100,000+ miles on it, my wife want's that new couch, and we need it NOW" blah blah blah.

STOP IT!

Fri, 02/15/2013 - 14:03 | Link to Comment scottch
scottch's picture

Remove all but absolutely necessary assets from banking system.  Get out of fiat currency and buy physical assets.  Payoff ALL loans.  Prepare for SHTF scenario

Fri, 02/15/2013 - 12:07 | Link to Comment Haus-Targaryen
Haus-Targaryen's picture

*Waits for Steve to blame world's problem on us having cars.* 

Fri, 02/15/2013 - 12:08 | Link to Comment flacorps
flacorps's picture

Overlooked in this discussion is the bright spot: technological renewal.

Inevitably major recessions and depressions usher in new technologies while putting old ones to bed. Horses and carriages give way to automobiles. Coal gives way to fuel oil, natural gas and nuclear.

This time we may see automotive fossil fuels replaced by batteries and fuel cells ... or we may see nuclear and fuel oil give way to natural gas and solar/wind power. The relative efficiencies of the various technologies may be wildly debated by partisans using suspect figures, but real-world results will drive the actual changes.

Inefficiencies tolerable during a bubble become intolerable after its bursting. Investment will find its way to real value creation rather than frippery.

And then expansion--real, beneficial expansion--can begin again.

Fri, 02/15/2013 - 12:20 | Link to Comment LawsofPhysics
LawsofPhysics's picture

"Inevitably major recessions and depressions usher in new technologies while putting old ones to bed."

-----------------------

Only if the capital and resources are availabe to do so.  If they are not, you get easter island and then after a major depopulation in whatever was causing the resource mis-allocation and mal-investment, then you might get back to growth.

Place you bets...

Fri, 02/15/2013 - 12:24 | Link to Comment flacorps
flacorps's picture

Realistically, the Easter Island scenario on a global scale is Malthusian nonsense. Not because it could never happen, but because the globalists (Chatham House/CFR, Trilateral Commission, Club of Rome, Bilderbergers, etc.) are not going to let it happen. For all their evils, there is a silver lining to their machinations.

Fri, 02/15/2013 - 12:30 | Link to Comment LawsofPhysics
LawsofPhysics's picture

LMFAO!!!  Several thousand years later and folks still believe that gods walk the earth and disbelieve that for every action there is an equal and opposite reaction.  My money is on the laws of nature and physics.  Fucking halarious.  Go ahead, "outlaw" gravity or poverty, there is no fixing stupid my friend.  Don't know who is junking you for such "insight".

Fri, 02/15/2013 - 12:50 | Link to Comment flacorps
flacorps's picture

The technology and the will are there, and the restraining morality is not. This is what they plan to do: http://freedom-articles.toolsforfreedom.com/brzezinski-easier-to-kill-th...

There is a question in my mind whether they will leave a proportionally greater population than survived on Easter Island. But there is no question in my mind that they will avoid Easter Island's final atavistic frenzy. They will do things as methodically as the Nazis did.

Fri, 02/15/2013 - 15:13 | Link to Comment centerline
centerline's picture

I would not necessarily use the term "Malthusian nonsense" when the shoe fits one way or another.

The rub here is that various groups that have a "plan" don't all agree.  East versus west, religious groups, industrialists (or should be call them post-industrialists), etc.  There is quite a bit that can go wrong.

 

Sat, 02/16/2013 - 16:12 | Link to Comment kentmills
kentmills's picture

Right. Everybody has a plan. Sort of like a weird, huge Adam Smith - like invisible hand where monster interests seek to take care of themselves and inadvertently balance themselves out - somewhat. Without free markets though, it won't balance and will send the world teetering like an unbalanced washing machine.

Fri, 02/15/2013 - 16:40 | Link to Comment michael_engineer
michael_engineer's picture

Regarding growth, that might have to wait another 20 million years for the next batch of carbohydrates to cook into hydrocarbons. Some have already been folded down to near cooking depth so maybe it won't take an extremely long time.

Fri, 02/15/2013 - 13:03 | Link to Comment ElvisDog
ElvisDog's picture

The problem is that technology and energy are not the same thing. Oil was the greatest energy source ever. You don't have to manufacture it, just pump it up from the ground. It has a high energy density. It can be stored and transported at room temperature in vast quantities. It doesn't explode. Oil is strongly net energy positive, meaning that you get a lot more energy out of it then it takes to produce (more true in yesteryear than now).

So, we're going to switch to batteries and fuel cells, eh? What is the energy return on those batteries compared to the energy and resources required to build? Can we produce and replace batteries to power 200 million cars in the U.S? How much lithium or other rare-earth metals will that require? Same is true for solar and wind power. How long does it take after you build the panels/turbines, install them, and build the storage and transmission infrastructure does it take for solar/wind to be net energy positive? No amount of techology will overcome the laws of thermodynamics.

Fri, 02/15/2013 - 13:34 | Link to Comment Jack Burton
Jack Burton's picture

ElvisDog and LawsofPhysics, Both have very good posts. Somehow a certain type of person can not grasp the concepts that the laws of physics impose on us here on earth. There is no substitute for oil, all it's replacements impose huge costs on energy produced. Our present modern world and it's enormus prosperity is down to oil, oil and now natural gas.

The laws of physics already are catching up with us. I don't want to list the ways, but any thinking person can see that the limits are being felt.

Politicians and people with particular political and religious views and dogmas believe that their belief systems trump the laws of physcis. Even worse, economists are clueless as to how the laws of physics affect economies and every economic system.

The coming 25 years are going to bring to our attention some of what the laws of physics are going to impose on the present modern world and the economic systems we function under at present.

And indeed. Anyone wanting to understand energy in our future MUST study up on the laws of thermodynamics. They do not indicate that all these new supposedly world changing technologies for energy are going to be of any consequence compared to the "one off" explosion of economic power that the oil age brought us. We are sinking economically in no small part due to the rising cost of oil extraction. Fracking can get oil, how much more does it cost than the old Texas Oil fields pumping black gold for pennies on the barrel?

Fri, 02/15/2013 - 15:17 | Link to Comment centerline
centerline's picture

EROEI.

Fri, 02/15/2013 - 15:13 | Link to Comment Radical Marijuana
Radical Marijuana's picture

Yeah, even IF there were miraculous breakthroughs via "zero point energy" or something like that, there are still no miracles available to prevent the problem of waste heat then becoming exponentially greater.

Furthermore, since the laws of thermodynamics extrapolate through information theory, no amount of technology can overcome the BIGGEST PROBLEM, that society ends up being controlled by those who were the best at deceits. THAT is basically a manifestation of the laws of thermodynamics, which no technology can overcome!

This entire article above is about that trajectory towards tragedy! Fraud becomes increasingly triumphant, but the consequences of controlling civilization by HUGE LEGALIZED LIES then accumulate to the point where there must be psychotic breakdowns of those systems.

The problem with the runaway triumph of finanical fraud checkmating itself is that, under stress, the Frauds will attempt to continue to back themselves up with Force. Thus, the end game is not so much the collapse of the economic system which was built on the basis of triumphant frauds, as it is the breakdowns into genocidal wars, along with democidal martial law, going out of control thereafter.

I believe that there are plenty of creative alternatives with respect to energy. However, there are NO alternatives to the paradoxical problems that society ends up controlled by those who are the best at deceits. That is the central way that the laws of thermodynamics control civilization, and that is why we are headed towards checkmating ourselves, into insane end game scenarios!

Of course, the laws of nature do not stop working. Rather, those laws work themselves through, by enabling some human beings to control others through triumphant frauds, until too much of that "success" annihilates itself. Of course, there is no final end game for the flow of energy itself. However, those flows through human systems get tangled up into a hyper-complex knot of triumphant frauds, which then become their own worst enemy.

I do NOT believe that the descendants of the people who originally made and maintained those systems still control them. They simply have social habits and abilities to continue to pile more frauds on top of previous frauds ... whereby each "solution" makes the overall problems worse!

These things appear to me to be like social storms brewing on the horizon of history, while getting closer and closer to breaking out. They remind me of the phenomena of solar flares on the Sun. The magnetic fields get more and more tangled up, and stressed, until that tightly ravelled system finally snaps, to untangle itself somewhat.

Since everything is interconnected, I tend to believe that there are strong correlations between civilization going crazy, while nature goes nuts.

Sat, 02/16/2013 - 04:51 | Link to Comment Liberty2012
Liberty2012's picture

Nice description. You're assuming triumphant frauds will always work. As more and more people become aware of the fraud, they then have the option to chose integrity. The scale of the triumphant fraud distorts reality. Most people are honest and would prefer to enjoy living productively. That they have been conned for so long is the distortion, not the nature of reality. Otherwise we would have become extinct long ago.

Fri, 02/15/2013 - 14:08 | Link to Comment scottch
scottch's picture

Central bankers prefer world wars to shake of the cobwebs of global depressions.  It gives them a chance to grab more land and other physical assets and allows them to ascend to their rightful place on the food chain. 

Even Henri, over at BI, is singing the death-knell of battery cars.  Solar and wind only survive when substantial govt subsidies are available.  Please do some critical thinking about alternative energy before posting.

Fri, 02/15/2013 - 14:41 | Link to Comment Clowns on Acid
Clowns on Acid's picture

Yeh and usually these "new technologies" get discovered / developed during wars / conflicts.
Why was the Internet initially developed by the US?

"Inefficiencies tolerable during a bubble become intolerable after its bursting. Investment will find its way to real value creation rather than frippery. "
Yes...a valid yet general, long term statement. This process you speak of could have happened efficiently if Ben Bernanke and pack of smirking hyenas had allowed the process to work. Instead they hoisted QE on the US,then the world. This was done to preserve their wealth, not necessarily to make more money, and certainly NOT to help any so called "middle class".
Now that they have pretty much accomplished that on the back of the US taxpayer, I think that they are ready to let your process work. But the damage they have done to the process means that the coming "finding the bottom" event is going to be very ugly. Of course they will be relatively protected and middle to lower classes will be used as cannon fodder.
Thanks Ben....you feckin' (LongSoupLine insert here..Thks!)

Fri, 02/15/2013 - 17:00 | Link to Comment TJ00
TJ00's picture

Yes, the technologies created by the war that is the missing number 15 on the list, of course this time, when people start chucking nukes around, there won't be anyone left to make any technology, that's check mate for all of us.

Fri, 02/15/2013 - 18:29 | Link to Comment CJHames
CJHames's picture

Personally, I'm betting on that fantastic new drone technology to usher in a new era of slavery.

 

 

Fri, 02/15/2013 - 12:15 | Link to Comment Nothing To See Here
Nothing To See Here's picture

As a thinker, you meet your global endgame when you suggest that we are living in a capitalist system.

Fri, 02/15/2013 - 12:17 | Link to Comment Zen Bernanke
Zen Bernanke's picture

the hard choice is to stop the printing, default or declare bankruptcy if neccesary and let the market economy sytems work like they should.   one can only dream.      

Fri, 02/15/2013 - 12:21 | Link to Comment Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Gold is getting slammed ahead of the G-20 for a few reasons.  There is the "All is well!" reason, then there is the "Hey!  Rest of world!  If you go along with our crazy assed plan we will keep gold cheap!".

There will be talk of currency "manipulation" when there should be talk of currency "devaluation".  Why this part is left out beats me.  It is common knowledge among economists of the highest pedegree that the way to "increase exports" is to devalue the currency.  Maybe the little people of the world just wouldn't understand the PhD speak.

So they slam gold, "All is well!"

Then they debate currency "manipulation" (never devaluation) and the media prints it like the daily mail prints stories on Kim Kardasion.

Then next week there will be a manhunt for the serial killer de jour, Obama will go golfing and the GOP will block out Dubya's chronic vacations, Bill CLinton will reveal he has cancer, women everywhere will cry for him, dudes will be glued to the boob tube to watch tall men slam a ball into a hole, and women will discuss the best dressed on the red carpet.

Wash, rinse, repeat....

And as far as our tight knit community goes, we can buy all the food and guns we can; preparing for the worst is not ever a bad idea.  Yet having an offense is of the utmost importance if we want to free ourselves from this global cabal of bankers. 

If we take back the physical money supply by buying gold and silver bullion we can have the money, and if you know anything about this cabal, their numero uno mantra is to "Have control of the money supply" for they care not else what we do.

So buy silver and tell your friends.  Buy gold and tell your friends.

Fri, 02/15/2013 - 13:48 | Link to Comment Wave-Tech
Wave-Tech's picture

One of the best defenses is indeed a good offense.  In this spirit - do not forget about directing/storing as large a percentage of (cash) FRN's outside of the official banking and financial system as reasonably possible.

Fri, 02/15/2013 - 12:26 | Link to Comment Falconsixone
Falconsixone's picture

If you have credit, a loan, debt or near zero wages  ...........

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.....................You didn't build that!

Fri, 02/15/2013 - 12:26 | Link to Comment Atomizer
Fri, 02/15/2013 - 12:28 | Link to Comment Falconsixone
Falconsixone's picture

http://www.equinenow.com/donkey.htm   Get your donkey here!

Fri, 02/15/2013 - 12:30 | Link to Comment cardis
cardis's picture

zorba (greek donkey) ready to fly to dc to explain...

Fri, 02/15/2013 - 12:31 | Link to Comment Alfred
Alfred's picture

Here's a chart I'd like to see...

How many fucking times Zero Hedge as displayed the phrase 'END GAME'

give me a break already.

Fri, 02/15/2013 - 13:04 | Link to Comment viahj
viahj's picture

why are you worried?

Fri, 02/15/2013 - 12:33 | Link to Comment Seasmoke
Seasmoke's picture

I bought my gold , my silver , my wise foods storage and even cases of makers mark. I do not know what else I can do.

Fri, 02/15/2013 - 18:25 | Link to Comment CJHames
CJHames's picture

I like where your head is at, smoke.  And your money.

Fri, 02/15/2013 - 12:42 | Link to Comment Lordflin
Lordflin's picture

Mention HFTs and their artificially created arbitrage sucking what little life there is left out of the system, and gold and silver suppression to maintain the illusion of normalcy, and we may be onto something here...

Fri, 02/15/2013 - 12:48 | Link to Comment virgilcaine
virgilcaine's picture

What is next stage following beggar they neighbor and currency devalation? Default and Wars..

Fri, 02/15/2013 - 12:59 | Link to Comment Theosebes Goodfellow
Theosebes Goodfellow's picture

So what does the fifteenth point look like?

Fri, 02/15/2013 - 13:13 | Link to Comment icanhasbailout
icanhasbailout's picture

I recall learning about another endgame that famously had 14 points. Some crazy dude ended up making a political career out of it, and next thing you know they're claiming the Sudatenland.

Fri, 02/15/2013 - 13:19 | Link to Comment dscott8186
dscott8186's picture

2. As credit continues to expand, competitors can easily borrow the capital needed to push into every profitable sector. Expanding production leads to overcapacity, falling profit margins and stagnant wages across the entire economy.

 

If expanding production leads to overcapacity then diversification of production leads to a balanced production capacity.   Which means we need to find something new to invest in that will turn a profit and give customers what they want or need.   Meaning there is plenty of money to diversify IF investors are willing to risk funding the next up and coming product.  A product that saves the customer money which in turn allows them to spend it on other things or save it.

Let's see what saves the customer money that we can invest in... domestic oil and gas drilling via fracking.  Conversion of domestic coal to diesel for local consumption.  Here's a business opportunity: conversion of all those oil heaters in the Northeast to propane.  

Of course Drones are also an up and coming market.

Fri, 02/15/2013 - 15:14 | Link to Comment IamtheREALmario
IamtheREALmario's picture

So, I wonder if the government's interference by preventing the creation new industry competition is a cause or a consequence. We get increasingly large monopolies  and more regulation and false barriers which prevent competition. Little guys and innovation are squuezed out, purchased or falsely prosecuted thanks to the corruption and those who create money at no cost.

Fraud and criminality is protected within. Honesty and competition are discriminated against and prosecuted.

Fri, 02/15/2013 - 17:00 | Link to Comment Kirk2NCC1701
Kirk2NCC1701's picture

If there is no ROI for your bank savings or any investment paper assets (anything <1% isn't worth the risk), then you're better off to keep the bulk of the paper assets (money) in your vault than someone else's.  When there is no return ON investment, I worry about Return OF Investment.  Be it PM or paper-money in the bank.  To elaborate and to turn the table on the Buffe(t)-nator:

"Warren, if gold is such a barbarous relic that does not 'work' for you, then the same is true for fiat money which also is not 'working' for me.  Holding cash @ home_vault at least assures me of (a) full return of money, and (b) denies the banks the FRB Ponzi with my money.  What's worse, whereas PM's are in limited supply and have intrinsic value, paper money is at low-cost supply and in almost endless supply.  And it has no intrinsic value beyond its potential as a very expensive fire-starter, wall-paper or toilet paper.  Warren, like you, I'm better off buying up things of real & tangible value, i.e. swap most of my Tertiary/fiat assets for Primary and Secondary wealth assets."

Folks, although I cannot afford to drop billions and borrow money like Warren Buffe(t) by getting additional billions in fiat credit from Chase and WF for the leveraged purchase of real assets at Heinz Co... I was able to do the next best thing this morning.  I swapped some paper assets for real, hard and fungible assets.  I swapped FRN's for Pb assets, in 0.40 and 0.223 denominations.  "Limit of 3 boxes per customer", alas.  Just as you'd expect in the USSA:  Rations! 

While I do not (yet) own 'delivery systems' for these hard-asset denominations, I'm sure they will come in handy in a future, more free market.  In Stages 14 & 15.  As a tax-exempt "exchange in kind", in a more Quid pro Quo (this for that, or value for value) world.

Fri, 02/15/2013 - 19:11 | Link to Comment Smuckers
Smuckers's picture

May all bankers choke on their next squid and come back reincarnated as putrid, diseased and ineffective sacs of donkey balls.

 

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