Guest Post: Waking Dreams End Unpleasantly

Tyler Durden's picture

Submitted by Brandon Smith of Alt-Market.com,

Whenever I endeavor to explain America’s current economic situation to a person who likely receives most of his information from skewed mainstream news sources, I try to use two comparisons; the Great Depression, and Weimar Germany, because what we are experiencing is actually a combination of elements from both events.  Some people, unfortunately, have little understanding of the Weimar hyperinflationary crisis, but at the very least, the imagery of the Great Depression is present in the minds of most Americans, if only through television and film. 

When the depression is mentioned, they begin to grasp the gravity of our fiscal disaster, or at least what I am trying to convey.  However, those slow on the draw almost always sneer at the validity of the threat.  After all, during the Great Depression, there were bank runs, endless soup kitchen lines, roving masses of dirty homeless drifters looking for employment, shanty towns, and desperation everywhere.  We’ve all seen the old stock black and white photos, and the America of today looks nothing similar… 

We have shopping malls and imported fineries.  We have sports cars and HDTV and video games and iPads and Disneyland and pharmaceuticals in every color of the rainbow!  We have tract homes and gated communities and condos and beach houses and summer vacations and first-class flights and texting and nightclubs and lattes and credit cards!  When we turn on cable news, what do we see?  Progress!  Glorious progress!  All is in “recovery”.  All is as it was yesterday.  All is well…

For the average unaware citizen, as long as the commercials and the fast food continue, there is nothing to be concerned about.  What they have overlooked is that in this country we have had for at least the past decade the illusion of prosperity, and nothing more.  Our modern citizenry looks back at the Great Depression and sees a deteriorating exterior that matched the true state of the interior crisis.  They look at today, and see a fresh, glimmering, glossy exterior that cleverly hides the rotting financial sinew underneath.

They do not grasp how today’s implosion could be worse than that of any crisis yet seen in our history while still maintaining a visual facade of working order. 

In recent articles I discussed the black magic of the stock market, and summarized a position I have held for a very long time: 

That the Federal Reserve has been injecting a very large percentage of its QE, or fiat stimulus, into the Dow in order to keep the market propped and seemingly prosperous.  That this has been done by fueling international banks with capital and then allowing the institutions to flood stocks with purchase orders as well as direct interventions by the Fed itself. 

What seemed obvious to those of us in independent economic analysis has been called “conspiracy theory” for the past few years.  Finally, the cat has been let out of the bag by former Fed Chairman Alan Greenspan (the same man who admitted that the Federal Reserve is an independent entity that answers to no one, not even Congress, ending decades of misinformation).  In the following interview, Greenspan states quite nonchalantly that “only the stock market matters”, meaning, that the market is no longer a reflector of legitimate economic health or decrepitude, rather, it has become a primary psychological driver.  For Greenspan and the Fed, fundamental indicators like true supply and demand are of no importance.  The market must be kept inflated at all costs, because its success, no matter how artificial, is the only thing keeping our system from breaking apart:

http://video.cnbc.com/gallery/?video=3000148510&play=1

Richard Fisher of the Dallas Federal Reserve, clearly in response to Greenspan’s comments, openly admitted in a recent interview that the central bank has “artificially sustained markets”:

http://www.zerohedge.com/news/2013-02-21/least-they-are-finally-honest

This is, of course, dangerously backwards.  Strong data and legitimate profits are supposed to drive market psychology, which in turn is supposed to increase stock performance.  Instead, the market is being manipulated in order to maintain a false sense of economic optimism and keep ignorant investors and consumers spending in the hopes that tomorrow will bring better tidings! 

Interestingly, the latest minutes from the Fed indicate a “push for tapering” on bond market purchases, and a diminishment of QE, which is currently pumping over $85 billion per month into our fiscal structure.  Part of this effort has been led by Fisher, who owns over $1 million in personal gold holdings (meaning it is doubtful the banker believes that the Fed will actually stop printing, or that the dollar is going to hold its value for much longer).  I believe this is a bit of theater designed to remind the country how addicted to fiat we now are, as well as set the stage for the government alone (instead of the government in collusion with central bankers) to be blamed as the scapegoat for an inevitable collapse. 

Both Greenspan and Fisher in their latest interviews subtly introduce the meme that government indecision and “partisan bickering” are the ultimate culprits behind the continuing dysfunction of the economy.  Both parties do indeed play a role in the crisis, but not in the manner that central bankers assert.  The government’s greatest crime was allowing the private Federal Reserve to operate with impunity and create the mortgage and derivatives bubble in the first place, while aiding it in policies of inflation and manipulation.  The government is a danger to our fiscal system not because of “indecision”, but because it takes its marching orders from the Federal Reserve and colludes in now openly admitted market manipulation.   

Will the Fed cut off the flow of stimulus?  Possibly.

It is important to note that talk of a QE reduction has surfaced right as the Federal Government is set to make a decision on spending cuts and the raising of the national debt ceiling.  The first cuts, now called the “sequester” (a nicer word for “austerity”), will be administered in early March, and will apparently affect everything from school teaching positions to employment at the Department of Defense.  The White House claims that such cuts will damage the U.S. “recovery” and send the nation hurtling back into recession. 

Obama is, in a sense, correct.  However, I would point out that the federal cuts alone will not be the catalyst for collapse.  The Federal Reserve’s move to reduce QE in conjunction with cuts would be the true trigger of fiscal calamity…a controlled calamity with a purpose…

America’s financial and social systems only function today because of one thing – government spending.  The government is “officially” indebted in the amount of $16 trillion.  Unofficially, the number is closer to $120 trillion.  These massive liabilities have been accrued mainly through entitlement programs and state welfare.  Foreign investment in U.S. Treasury bonds does not produce anywhere near the capital needed to maintain such programs, which is why the Federal Reserve is now the world largest holder of U.S. debt (surpassing even China).  Without the Fed’s endless printing and bond buying schemes, the government cannot continue entitlement programs, and, it cannot feed money to dependent states.  These programs are the only thing keeping the illusion of a normal economy alive.

To give you a sense of what I mean (keep in mind that real numbers are likely much worse than reported statistics)…

Despite talk of recovery, U.S. poverty levels have hit all time highs.  Over 50 million Americans are below the official poverty line:

http://washington.cbslocal.com/2012/11/15/census-u-s-poverty-rate-spikes-nearly-50-million-americans-affected/

In 2009, food stamp enrollment stood at around 32 million Americans.  Today that number has grown to around 48 million; a 50% increase in only 5 years:

http://www.nypost.com/p/news/business/more_americans_on_food_stamps_QfLsaSyEHbnWxAZ0z7MMEP

The number of citizens on federal disability is at record highs, climbing to almost 9 million people, and has expanded every month for the past 192 months:

http://cnsnews.com/news/article/8830026-americans-disability-hits-new-record-192nd-straight-month

Requests for emergency food assistance are on the rise in most cities across the country, and homeless numbers continue to climb:

http://www.reuters.com/article/2012/12/20/us-usa-economy-hunger-idUSBRE8BJ14I20121220

Now ask yourself this:  How many people in this country rely on government money for most if not all of their survival needs? 

Without government funding, and without the fiat printing press at the Federal Reserve to feed that funding, the veil of financial recovery fades away, not just in the stock market, but everywhere.  All the poverty that has remained hidden for the past five years will suddenly be visible on our streets and doorsteps.  Welfare programs to individuals and to states ARE the modern day soup lines.  When they go, those reliant on them have nowhere to turn. 

Already, homeless shelters in numerous states are suffering from funding shortfalls and many are closing their doors:

http://www.christianpost.com/news/las-largest-emergency-homeless-shelter-seeks-funds-to-survive-77494/

http://bangordailynews.com/2012/12/10/news/midcoast/midcoasts-only-homeless-shelter-abruptly-closes-no-reason-given/

http://www.wbaltv.com/news/maryland/baltimore-city/Tough-times-lead-to-homeless-shelter-s-closure/-/10131532/17589782/-/122ke1n/-/index.html?absolute=true

http://www.khou.com/news/Woman-seeks-help-as-her-southwest-Houston-homeless-shelter-faces-closure--177795891.html

Food Banks are stricken with heavy demand and a dwindling supply.  Interestingly, government cuts to food bank spending are being blamed on high food prices due to the latest “drought”.  No mention of inflation caused by dollar devaluation, of course:

http://www.reuters.com/article/2012/11/21/us-usa-hunger-holiday-idUSBRE8AK08Q20121121

The lesson here is that no one, not even the government, has the ability to “spend their way out of debt”.  And no one, including central bankers, has the ability to cure economic collapse by printing money out of thin air.  But the bankers already know this… 

The Fed is discussing QE reductions in the face of a “burgeoning recovery”, but they know as well as you and I that the fundamentals show no economic improvement whatsoever.  Why else would they manipulate the stock market with fiat stimulus?  Why else would they manipulate bond markets with fiat stimulus?  Why else would they keep interest rates at near zero and throw essentially free money at international banks?  Because this is their only means of hiding the reality they know to be true.   

Why would they suddenly decide to reduce QE when they KNOW that the result will be the fast moving exposure of true instability with the U.S.? 

There are two reasons that I would make such a move if I were them…

First, they have done this song and dance before; allowing markets to dive in the face of a prospective end to stimulus, and then jumping in to save the day with even larger fiat injections.  The Fed’s decision to spread the rumor of QE cuts just before the government is to decide on austerity measures and the debt ceiling is no accident.  The combination of Fed cuts and government cuts may be a deliberate effort to create a shock event that leads to the next stage of U.S. implosion.  Government cuts and “party conflict” (fake party conflict) will provide cover for the real cause of destabilization; the Fed’s shut down of the fiat life support machine.  The masses blame the lack of government “compromise”, and the Fed moves back in later with even more overwhelming QE measures, slowing the crisis slightly.

Second, the Fed and the globalists at the seat of our government may very well be preparing the populace for a default scenario.  Central banks around the world have been purchasing record amounts of gold, and establishing bilateral trade agreements that remove the dollar as the world reserve currency.  They are undoubtedly getting ready for extreme devaluation in the U.S. dollar.   

If QE is cut, or restricted to the point where debt obligations cannot be maintained, then this is exactly what will happen.  Again, government indecision and partisan debate will be blamed for the disaster while the Fed remains the “innocent bystander” who “tried to warn us all of what would happen…”   

The propaganda message sent to the public is: 

Government decentralization is going to destroy you.  Politics must be centralized and streamlined and checks and balances must be removed if you are to survive.  Politicians are unqualified to handle economic policy because they care too much about the opinions of citizens, who are too stupid to understand economic policy.  All fiscal decisions should be handled by the banking elite without interference so that they can remain “objective”.  The American economy is in need of a complete overhaul, and the American people need to hand over their economic sovereignty if they wish to continue any semblance of a comfortable living standard.

In the end, the madness of debt spending is going to annihilate this country anyway.  Fiat printing and infinite QE will eventually result in the dumping of our currency as the world reserve, causing devaluation and hyperstagflation.  Stimulus and the monetization of government liabilities are crippling us.  The problem is, this nation is irrevocably dependent on such measures.  Cuts will result in almost similar catastrophe, but on a faster time frame and perhaps a slightly shorter duration (depending on who runs the show in the aftermath).  I’ve been saying it since 2008 – there is no easy way out of this situation.  There is no silver bullet solution.  There will be struggle, and there will be consequence.  It is unavoidable.  All we have to decide now is how we will respond when the inevitable disaster comes.

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CH1's picture

We need to be acting NOW.

"Later" gets progressively redefined and never comes for most people.

Talk is cheap, action precious.

Either we ACT or we fail.

CPL's picture

What are you going to do?  Shoot an idea of currency?  Line it up on the wall and start the revolution?

Really?  I'll ask the question left out of the article.

 

What would you change/build first to stop a full on collapse?

CH1's picture

What would you change/build first to stop a full on collapse?

Nothing. I can't do that and I wouldn't if I could.

What to do: Drop out of the slave system and start building a better world.

I could give you pointers, but I won't: You're capable, so figure it out for yourself! Start building a better world. DON'T look for a Big Man or a Big Plan - those are the essential problems.

Get out there and start doing things.

Crash Overide's picture

Start DOing and BEing. OPPT?

MrSteve's picture

Google

Classic manuals online

and scope out a galaxy of how-to manuals

IBelieveInMagic's picture

There is one major difference. The OECD countries have a lock on critical resources that are ostensibly in soil of other countries -- Middle East is an example. Oil flows on dollar terms. Hence, we should include the GDP of those countries in GDP of OECD countries and their surplus will reduce our debt/GDP ratio -- then the picture is not as dire as you make out. Put in another way, the OECD countries are providing tradeable oil and other key natural resources for the global trade. As long as there is no country or group of countries that is willing to wrest this resource control from OECD countries, this game of endless fiat can go on without breaking the system. 

And if there is an attempt to wrest the control, it will devolve into total war. So, chill out and enjoy the ride till then...

CompassionateFascist's picture

When the Straits of Hormuz close, the dollar goes. The ZOG knows it, and so do the Iranians. Won't be long now.  

economics9698's picture

Wait until the fiat dies, then steal the bankers’ assets.  The best way to get even with thieves is to steal from them everything they own.

MrSteve's picture

Learn to fix small engines, rewind/repair electric motors, research windmills while you still have a functioning internet account.

Buy a used bike, fix it and give it away. Now you are a broker! repeat weekly until you find a paying customer

Plant a garden for the oldest neighbor on your block, this will change the neighborhood and make great things happen, just when you need it.

Plant soybeans, corn and wheat in the wasted lawnspace by your driveway. Crops will get people asking questions, like when is the corn roast?

Show up, look alive, start a growing operation, start small amd keep going. Be your own boy scout and be prepared, an action verb and state of mind.

CH1's picture

Plant a garden for the oldest neighbor on your block, this will change the neighborhood and make great things happen

+100 for this line Steve. Thanks.

BLOTTO's picture

Its quite sad actually...im extremely bothered on wtf is going on and how it really didnt have to be this way.

.

Which then makes me think, something extraordinary must be happening behind the scenes for those really 'in the know' and not for us 'peasants' and 'commoners' to understand...or in fact, not privileged to know.

.

Like really - can the the best of the best of the world - really have us in this bad of a shape because of mismanagement? I think its on purpose.

 

CompassionateFascist's picture

Reality = Chaos + Conspiracy, in varying proportions. Cf. Agenda 21. 

CH1's picture

Like really - can the the best of the best of the world - really have us in this bad of a shape because of mismanagement? I think its on purpose.

FYI: The "best of the best" are NOT the best of the best.

The smartest guys are pushed out of the way. The most ethical guys are hated (Jesus was killed).

The people who stand in the lofty positions are NOT better than you.

IBelieveInMagic's picture

Similar to the 'paradox of thrift', is good from a single individual's POV but will be viewed as harmful to society if greater numbers attempt this lifestyle. Our system is now based on specialization and if large swathe of society attempts to regress to independent lifestyle, will result in breakdown of system. What you are proposing is regression to fragmented land ownership, grow your own food, etc. TPTB will not allow this to happen without a fight. Please note, this is just an observation, before you down arrow.

 

Bad Attitude's picture

The issue of growing food for your own consumption made it to the Supreme Court in the 1942 case of Wickard v. Filburn (http://en.m.wikipedia.org/wiki/Wickard_v._Filburn). The farmer lost, and TPTB won.

joego1's picture

I agree learn to live locally and many of the worlds problems will go away in time as long as you can lay low while the shit hits the fan. I hate the Global economy it sucks.

Dollar Bill Hiccup's picture

A victory garden !

People have to stop being defeatist in the face of global industrialized life.

CPL's picture

Then by your answer, is this a question of other's taking the initiative to declare a revolution and do 'something'.

What is this something of action?  

  • Maybe something quaint like a Mass knitting circle.  
  • Or terribly un-necessary like thongs on large men.  
  • Perhaps a touch of the esoteric by launching a spork manufacturing unit with a goal of world domination.
  • Extreme lawn darts, you get a blocker, each dart of injustice is a strike to the heart of the evil empire.
  • Praying and picking boogers for Jesus in a pulpit.

I believe that this is all happening somewhere on this planet as we speak.  I did stuff today myself, with things, while doing stuff.  With some guy, that was also doing things.  Shit was so cash while we did things.

CH1's picture

That was a complete evasion.

You are capable of doing better, but apparently you won't.

CPL's picture

My plan is to roll with the punches.  That's as far as anyone should plan if the circumstance (were)(when?) ever allowed to happen.  

CompassionateFascist's picture

Do it with an M1a in hand, urban wiseass.  Otherwise the Golden Horde is going to roast you over a slow fire. 

Raymond K Hessel's picture

We're on our way toward another dark age.  

Europe and Asia had America.

Who does America have to save it?

No one.  Nessuno.  Nada fucking motherfucker.

TBT or not TBT's picture

The demographics are better here than in Asia or Europe.   Also our strategic situation is way better.    It will be better to be in the north part of North America in the next 50 years than just about anywhere else.    Also, being an armed society things here cannot go full retard tyrannical like they almost certainly will in Europe and swaths of Asia.

TBT or not TBT's picture

First, a debt and property tax jubilee, starting with the houses on my street.

Dungeness's picture

Yes, agreed.

Don't fight the existing system. Create something new.

 

runningman18's picture

What would YOU do, CPL?  Why are you so worried about what other people are doing?  You only need to concern yourself with yourself.

CPL's picture

I've made my position clear enough on many occassions.

 

I'm sitting in a deck chair and watching it burn.  When it's finished burning.  Get up and do it all over again.

runningman18's picture

Great, CPL!  You've got it all figured out.  So stop worrying about what other people are doing.

TimmyM's picture

What is a full on collapse? It is just the end of money as we know it. There is plenty of food and water and shelter in this country.
So we default in one way or another on all our debt. After some initial turmoil we figure out how to get by. Many will learn to like it better. Only the idiots who cling to faith in fiat and refuse to stoop to labor will suffer. What good were they anyway?
Do you really need an SUV a McMansion and a daily latte? Really? Why do you fear the reset? It will be the highlight of my life.

CPL's picture

I have none of those fineries of life, but I really enjoy flush toliets.  Call me chicken shit if you wish, but the idea of out houses and digging a latrine for 40 years more doesn't sound appealing.

 

It's not faith I'm clinging to, it's plumbing.

TimmyM's picture

I enjoy going outside. It makes you feel like you own the Earth.

MeBizarro's picture

I feel really sorry for you that you apparently find so little value in society and your own individual life that you actively want a collapse of society and all of the disasterous things that would come with that. 

CPL's picture

A riot is apparently easier than planning or working up the energy to do something constructive.  They are simply cowards that want the world to reflect their souls and they are too stupid to think of anything better but destroy.

When they understand that they are acting just as badly as the dipshits running the show, then maybe they'll smarten up.  Maybe.  Best case most of them will die of starvation or some minor health concern that was treatable in a society that still had cohesion.

Scale is the issue, not bullets.  However I have no interest in joining them.  I'll wait for both sides of the same corruption that rots society to burn itself out.  Then I'll rebuild.  Not for them, I'll rebuild for my family and community and I'll teach as a Senior Engineer on how to do it.  I swore an oath on my profession that I would cause no harm by my profession and I'll stand by that, I've never made a weapon and I never will.  Because believe me, if people want to see the power and responsibility Engineers wield they only need to flick a light switch, turn on a faucet, enjoy not being killed by their modes of transport, even enjoy the expansive selection of food floated in from all corners of the globe.

These people are nihilists, to chicken shit to blow their own brains out as fully grown men that haven't got the capacity to engage the world.  However shooting someone else is their idea of a good idea, complete insanity.

CH1's picture

It's not faith I'm clinging to, it's plumbing.

If you really think escape from serfdom means going without plumbing, I rescind my previous comment - you are not capable.

Otherwise, you're championing a Neutered Existence.

CPL's picture

Thank christ you've voluenteered yourself to be captain of the shit show.

 

Lead on targon warrior.

MeBizarro's picture

Nothing in the last 100-150 or so years has been more responsible for the huge increase in human lifespan as ready access to clean food and water to almost everyone. 

Freddie's picture

Look at Rome.  Rome was built on clean water and sanitation - moving waste out of the city and clean water in.  They were 400 years ahead of everyone if not more.

imbrbing's picture

"It's not faith I'm clinging to, it's plumbing."

 

I almost expected to see "and Iphones" the way that sentence was going

MeBizarro's picture

Ugh.  Yeah a huge and uncontrollable surge in violence would be great and it's pretty clear you know jack about even the most basics regarding our water treatment systems and agricultural production and distribution system.   

Dugald's picture

 

Stooping to labour....but at Chinese wage levels....??

orez65's picture

"Collapse" has been happening in Latin American for ever.

Not the end of the world.

Just get out of dollar denominated assets.

For example, bonds are a no no!

dtwn's picture

Iceland.  Will still be a collapse, but not as bad as what's coming.

Diogenes's picture

It's too late to stop a full on collapse.

Dungeness's picture

Or, instead of collapse, could the system just translate into a totalitarian system? Of course, there would be planned bumps along the way.

sunaJ's picture

Welcome to the real world.

 

Any thoughts, RedPill?

max2205's picture

Cash out of banks and into the back yard

fortune114's picture

Sorry, devalutation and hyperinflation commentaries must also include a timeline.

Raymond K Hessel's picture

What's devalutation and is it contagious?

kridkrid's picture

the supercyle is decades in the making... and central banks are making shit up as they go... and you are demanding a timeline?  Such a cowardly statement.