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Morgan Stanley: The Central-Bank-Inspired "Omnishambles" Is Closer Than Most Think

Tyler Durden's picture




 

It seems more likely to Morgan Stanley's Gerard Minack that central bankers may win the battle: sustaining recovery in developed economies with extraordinarily loose monetary policy. For a while this would go hand-in-hand with better equity performance. The battle is against a crisis caused by too loose monetary policy, elevated debt and mis-priced risk. Ironically, he notes, central bankers may overcome these problems by running even looser monetary policy, encouraging a new round of levering up, and fresh mis-pricing of risk. However, winning the battle isn't winning the war. If central bankers do win this round, the next downturn could be, in Minack's view, an omnishambles.

It has not been clear to me that central bankers could single-handedly sustain recovery. Fiscal stimulus helped recovery, but its withdrawal contributed to renewed recession in Europe and the UK. Markets now assume that fiscal tightening in the US will not end the same way that it did elsewhere. My economic colleagues also see better times ahead. In short, it may be that extraordinarily loose money policy will work.

This, on a medium-term view, worries me:

First, monetary policy will have succeeded, in part, by driving interest rates to all-time lows. It is not just policy rates at extreme lows: more importantly, the average effective rate paid on debt is exceptionally low. Exhibit 1 shows the average effective interest paid on the entire stock of (public and private) debt in the US.

 

 

Second, one measure of policy ‘success’ seems to be rising leverage. It is important to have a functioning credit system. But it’s not clear to me that it’s a good thing to have leverage rise. That is now happening in the US: aggregate non-financial debt/GDP increased in the December quarter, the first rise in four years. The US had been an exception for having seen any decline in leverage in this cycle. Aggregate (non-financial) leverage in the major developed economies is already at all-time highs (Exhibit 2).

 

 

 

Third, there are growing signs that risk is (again) being mis-priced. For example, high yield credit yields are now at all-time lows (Exhibit 3). If the central banks win the battle I suspect the mis-pricing of risk will become more widespread.

 

 

In short, it seems more likely that central bankers may add another leg to the credit super-cycle. The super-cycle was 30 years where total leverage ratcheted higher and interest rates ratcheted lower. There were shorter cycles in interest rates, but it was a sequence of lower lows and lower highs through the past 30 years. Exhibit 4 shows US Federal funds target rate.

The trend decline in policy rates led to a trend decline in sovereign borrowing costs (Exhibit 5 shows G7 long-end yields in real and nominal terms). The decline in risk-free rates has over time reduced the effective rate paid by other borrowers. Hence the decline in the average effective interest rate paid by all borrowers, shown in Exhibit 1 (which is for US debt).

 

The super-cycle will end when policy-makers exhaust their ability to provide cash-flow relief to under-pressure borrowers, ending the trend to rising leverage. I had thought that the crisis of 2008-09 would do this. I now think I may have been wrong. An important test in my view is that ability of the US to cope with fiscal tightening. If low rates and rising leverage offset fiscal tightening, then it seems a new credit leg will have started.

The downside is that in the next downturn – whenever it comes – central banks will find it even more difficult to provide cash-flow relief to borrowers. Borrowers, at that stage, will likely be even more leveraged than now (or in 2008 – financials probably will be exceptions) but paying an effective average interest rate significantly below the average in 2008.

The key question for investors in this scenario is when (and how) this cycle may end. In many respects, this would be a repeat of the TMT bubble aftermath. The question would be whether we are now 2003, with 3-4 good years to go, or 2006, with the cycle end not imminent but not that far over the horizon. I’m not sure: history tends to rhyme, not repeat (Exhibit 6). My hunch, however, is that this cycle is already closer to 2006 than 2003. I’ll explain in another note what I’m looking to as warning that another 2008 is possible.

 

Source: Morgan Stanley

 

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Thu, 03/14/2013 - 11:57 | 3329667 Prison Justice
Prison Justice's picture

New highs!  New highs!  That's all you need to know.

Thu, 03/14/2013 - 12:05 | 3329684 madbraz
madbraz's picture

Last chart is purposedly wrong to justify the claim that it's either 2003 or 2006. We are in the last stage, we are in late 2007.

The chart should show current stage SPX at 1560, not 1200.

Thu, 03/14/2013 - 12:24 | 3329751 derek_vineyard
derek_vineyard's picture

forecasting the future has little to do with the past---i can prove any outcome with historical charts

Thu, 03/14/2013 - 13:28 | 3329973 kaiserhoff
kaiserhoff's picture

This is a great companion piece to Bass's article yesterday.

He was cagey about exactly what he is doing, and I don't trade forex, but the gist is, he was buying in $5 billion chunks, 1 year, well out of the money options on the JPY (yen) for ONE BASIS POINT.

Manhattan Island will never tip over from holding too many smart bankers.

Thu, 03/14/2013 - 13:45 | 3330030 NotApplicable
NotApplicable's picture

Omnishambles = Muddle through = the best outcome they can hope for.

Thu, 03/14/2013 - 14:14 | 3330140 dmger14
dmger14's picture

I read an article by Mish or someone else stating that, though Bass may be absolutely right on his bet, there is no way in hell he will actually get paid the $500 billion if he is. 

Thu, 03/14/2013 - 14:49 | 3330275 outamyeffinway
outamyeffinway's picture

So who was it criticizing QB Asset mgmt earlier?

Thu, 03/14/2013 - 16:07 | 3330547 kaiserhoff
kaiserhoff's picture

Quite possible.

When you break the bank, you are only one of many unsecured creditors.

But if you have the largest claim, you are well positioned to pick up whatever tasty bits you might find on the table.

In any case, wouldn't it be nice...?

Thu, 03/14/2013 - 12:29 | 3329769 MillionDollarBonus_
MillionDollarBonus_'s picture

The fact that everybody thinks that stocks are about to collapse means that that stocks are definitely NOT in a bubble. The S&P is still way below my first price target of 2000.

Thu, 03/14/2013 - 13:22 | 3329953 Vooter
Vooter's picture

Why is your screen name "MillionDollarBonus," and why is your avatar a dollar sign? Are you trying to tell people something? Do you have self-esteem problems?

Thu, 03/14/2013 - 16:11 | 3330559 Ghordius
Ghordius's picture

hey! that's monetist! care to pick up a fight with a currency of your size?

Thu, 03/14/2013 - 13:25 | 3329961 Law97
Law97's picture

Everybody here does. 

 

But turn on CNBC, Bloomberg, WSJ, or any other MSM source, and everybody thinks it's full steam ahead to 1600, 1700, and beyond due to the rip-roaring economic recovery. 

 

I wish ZH represented the mainstream....

Thu, 03/14/2013 - 13:45 | 3330029 duo
duo's picture

When publicly traded corporations can borrow at <2% and use that money to buy their own stock back (enriching the top 0.1%), why would they invest in expanding their product lines, increaseing productivity, or  heaven forbid, R&D?

Thu, 03/14/2013 - 14:13 | 3330136 youngman
youngman's picture

It looks like a lot of the insiders are selling their stock too...

Thu, 03/14/2013 - 14:27 | 3330180 Panafrican Funk...
Panafrican Funktron Robot's picture

Insiders have been selling all the way up from 2009 lows.  I tend to think a lot of this is due to insiders being primarily compensated on a long term capital gains basis for tax purposes.  The counter is usually "why would they sell if they thought the stock was going to go up", but there is one really good reasons why they sell pretty much as soon as they are able:

They spend to the point where they are debt slaves too.

The people who have actual money/wealth are largely tied up in what I collectively call "rights".  Ie., supply restricted licenses, copyright/patent, resource claims, commercial real estate financing, basically, royalty check shit.  They rent their money, and they're not stupid enough to rent their money to shares of common stock.   

Thu, 03/14/2013 - 13:56 | 3330076 SilverIsKing
SilverIsKing's picture

Stocks are not in a bubble in the traditional sense.  Rather, they are supported by the FED.  What the FED is attempting to do is create a bubble in stocks but so far, they are the only ones with lungs strong enough to inflate it.

Thu, 03/14/2013 - 14:15 | 3330143 Panafrican Funk...
Panafrican Funktron Robot's picture

You should totally read the chart labels. 

The other thing I'm noting here is that the Fed raised rates in order to generate crashes.  Anyone here think the Fed is actually going to raise rates now or any time in the future?

Thu, 03/14/2013 - 12:23 | 3329743 johngaltfla
johngaltfla's picture

I will only sell when the E*Trade infant tells me to do so.

Thu, 03/14/2013 - 12:27 | 3329764 FL_Conservative
FL_Conservative's picture

Fucking zombie market.  It defies all belief.

Thu, 03/14/2013 - 12:45 | 3329811 Jack Burton
Jack Burton's picture

Believe this market! Believe unlimited money printing can elevate equity share prices. Print and print and print. 82 billion a month flooded into markets. It can jack this market up and up.

Is this real wealth creation? No. But the question is, and this is THE question, "How long can they print before they destroy the currency?"

So far, I must answer, "A hell of a lot longer than I thought."

I'll admit right here on ZH that the money printers at the Fed have made a fucking fool out of me! They have made a fool out of my portfolio designed to protect me in the 2008 crash. Many have made fortunes betting on the Fed, they were right, at least for now. Who was it who said "Don't fight the Fed?"

Thu, 03/14/2013 - 14:16 | 3330144 youngman
youngman's picture

They are also putting a big wedge in our country..the RICH are getting richer..and the POOR are getting nothing out of this printing inflation....misallocation of capital.....that is what will become the big problem in our future....the have nots will get angry at the haves....

Thu, 03/14/2013 - 14:20 | 3330157 Gamma735
Gamma735's picture

Already countries are signing trade aggreements where they will no longer settle accounts in US dollars.  China stopped buying our debt two years ago.  The world is beginning to dump the dollar.  The beginning of the end of the US dollar is here. 

Thu, 03/14/2013 - 14:28 | 3330182 Kirk2NCC1701
Kirk2NCC1701's picture

"THE question, "How long can they print before they destroy the currency?"

If the USD were a currency like any other on the planet, things would look differently.  As long as it has the GRC (Global Reserve Currency) status, its behavior (strength) will be unlike any other fiat currency that goes into the usual Weimar/Zimbabwe mode.  It can absorb a lot more than any of these.  They can -- and have -- extended its longevity by having the Fed force/bully the other fiat-based CB's into similar QE games.  Thus keeping the relative differences close to the same. 

And any 'recovery' is a shell game, as the recovery affects only the employed.  Even there, its effects are totally non-linear and asymmetric.  Depending on where you are on the income scale, you may have an increasingly harder time keeping up with real inflation, or you may be "making like a bandit".

Sooner or later, when the house-of-fiat-card does cave, chances are that these fiat bandits will fall prey to new Robin Hoods.  Unless we go to war (WW3).  Until D-day, the transfer-of-wealth (Trickle Up) game will continue in all countries with fiat CB's.

Guys like Krugman think that this Trickle Up can continue indefinitely (for decades).  History and human nature will likely prove their hubris wrong.

Thu, 03/14/2013 - 14:31 | 3330193 Panafrican Funk...
Panafrican Funktron Robot's picture

Here's POMO for the rest of the week:

Thursday, March 14, 2013 Friday, March 15, 2013 Outright Treasury Coupon Purchases 05/15/2020 - 02/15/2023 $2.75 - $3.50 billion Friday, March 15, 2013 Monday, March 18, 2013 Outright Treasury Coupon Purchases 12/31/2017 - 11/30/2018

$4.75 - $5.75 billion

Gee, I super feel like shorting this shit, right?

<--- fellow dude that lost a lot of money under the apparently bullshit assumption that micro or macro fundamentals matter anymore

Thu, 03/14/2013 - 16:14 | 3330571 OpenThePodBayDoorHAL
OpenThePodBayDoorHAL's picture

As The Dude would say, some new shit has come to light. This is the first time everybody is debasing at the very same time across the board so the party can continue for a lot longer than people think. Jackie Treehorn will not get his money back from Bunny for a while yet

Thu, 03/14/2013 - 12:47 | 3329826 thisandthat
Thu, 03/14/2013 - 11:58 | 3329669 fonzannoon
fonzannoon's picture

 

"I’ll explain in another note what I’m looking to as warning that another 2008 is possible."

No need to

"The AIG of the world is back - I have 27 year old kids selling me one-year jump risk on Japan for less than 1bp - $5bn at a time.

 

You know why? Because it's outside of a 95% VaR, its less than one-year to maturity, so guess what the regulatory capital hit is for the bank... I'll give you a clue - it rhymes with HERO...

 

If the bell tolls at the end of the year, the 27-year-old kid gets a bonus... and if he blows the bank to smithereens, ugh, he got a paycheck all year.

 

We are right back there! The brevity of financial memory is about two years.

 

I wouldn't sell nuclear holocaust risk in Dallas for 1bp - you should be fired for thinking about selling something for less than 50bps.. and yet - this is happening again..."

Thu, 03/14/2013 - 12:49 | 3329834 Jack Burton
Jack Burton's picture

fonzannoon, Indeed the 27 year old sharks are back and selling the same old shit for giant bonuses. Can you believe it!? As if 2008 never happened. Fucking amazing! The Money Printers have restored the bubble and the insanity. A kid who knows jack shit just out of college can sit at a desk and be a "Master of the Universe". This is proof positive that this whole financial recovery is a money printing HOAX!

The next crash will be epic!

Thu, 03/14/2013 - 12:55 | 3329848 NoDebt
NoDebt's picture

The kid behind the desk isn't calling the shots.  He's just working the phones.  Look a little higher in the organization.

Thu, 03/14/2013 - 15:11 | 3330344 Kirk2NCC1701
Kirk2NCC1701's picture

And how does this contradict the claims that 1. "Figures lie and liars do a lot of figuring" and 2. "There's a sucker born every minute"?  Snake Oil school 101, Lesson 1.

Thu, 03/14/2013 - 15:40 | 3330452 ebworthen
ebworthen's picture

And 5 or 6 years ago those 27 year olds were in some Ivy League Business or MBA program being taught that consumption is all there is in life, and leverage, deriviatives, and securitization create liquidity which creates productivity and trickles down to the "little people" so it's all good.

Thu, 03/14/2013 - 11:58 | 3329671 RichardENixon
RichardENixon's picture

In other news, the sun came up today.

Thu, 03/14/2013 - 12:19 | 3329733 Hippocratic Oaf
Hippocratic Oaf's picture

It's a flight to anything with yield with a short maturity junk corporates.

Stocks WILL POP at some point soon.

What else is left when PM's are munipulated by the JPM crooks?

Thu, 03/14/2013 - 12:30 | 3329773 Tsar Pointless
Tsar Pointless's picture

And, quite likely, the sun will come out tomorrow. Bet your bottom dollar, that.

Thu, 03/14/2013 - 14:19 | 3330151 youngman
youngman's picture

Actually scientists watching the SUN are saying it is doing some very wierd stuff.....giant solar flares is just one of the wierd things...

Thu, 03/14/2013 - 12:00 | 3329673 uno
uno's picture

watch it Morgan,JPM will do a 'Lehman' on you

Thu, 03/14/2013 - 12:00 | 3329674 EscapeKey
EscapeKey's picture

Right, so every successive problem can be solved by more of the same.

Thereby solving the problem, once and for all.

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

Thu, 03/14/2013 - 13:37 | 3330001 AynRandFan
AynRandFan's picture

It's the "Bubble To End All Bubbles".

Thu, 03/14/2013 - 12:00 | 3329675 gjp
gjp's picture

'may add another leg to the super-cycle'?  Hasn't that ship already sailed?  Please tell me we are closer to the end of this 'leg' than the beginning, I don't think I can take another four years ...

Thu, 03/14/2013 - 12:51 | 3329839 NoDebt
NoDebt's picture

Man up.  You can take it.  Not like you'll be given a choice.

Where it ENDS is when there is a significant downturn WHILE the Fed is still sitting on ZIRP and printing $85B/mo. (or $185B/mo. for all I care).  When they have nothing left to lean into that headwind but the wind keeps blowing.... then it's over.  Not before.  They will ride their monetary horse until it dies underneath them.  But until then, they are still riding.

Thu, 03/14/2013 - 15:32 | 3330432 Panafrican Funk...
Panafrican Funktron Robot's picture

"Where it ENDS is when there is a significant downturn WHILE the Fed is still sitting on ZIRP"

I see this as less plausible than the following:

1.  World war (already in motion)

2.  A ZIM market, where it continually makes new highs, but only in nominal terms.  

Thu, 03/14/2013 - 12:01 | 3329677 Cognitive Dissonance
Cognitive Dissonance's picture

"Don't look a gift fiat horse in the mouth." - Uncle Ben

Thu, 03/14/2013 - 13:33 | 3329986 cougar_w
cougar_w's picture

Any time they run something from Morgan Stanley I link to this:

http://madscienceunlimited.com/fiction/uncomfortableWithTheTruth.html

"Morgan was in her 30s and slightly overweight, with unkempt straight brown hair and overlarge glasses. Stanley was younger by a few years with thinning hair, walked with a stoop, and sported a pronounced paunch that if he were a woman would make him look four months pregnant."

Feckless losers FTW.

Thu, 03/14/2013 - 12:06 | 3329689 SheepDog-One
SheepDog-One's picture

The only 'problem' ever is when an insurance policy can't cover the bank loss....then we get 'fear and panic' and threats of tanks in the streets unless another blank checkbook is turned over.

Who knows when the next 'problem' happens, next month or next year, but at all-time-highs the stage is set.

Thu, 03/14/2013 - 12:13 | 3329718 Winston Churchill
Winston Churchill's picture

The stage is set,the fat lady has finished warming up.

The show is Salome.Watch your head.

Thu, 03/14/2013 - 12:21 | 3329707 Shell Game
Shell Game's picture

Yep, the dominoes are lining up..  

John Williams, "I have been warning of a hyperinflation for at least seven years, but those warnings have been about a hyperinflation that was sometime in the future, generally in 2018 or 2014 timeframes mentioned above.  Now, however, along with the passage of time, circumstances have evolved and are aligned for the hyperinflation to develop in the near future, specifically, within the next two years or so, by the end of 2014.

...written in June 2012 (http://www.shadowstats.com/article/no-445-special-commentary-review-of-economic-systemic-solvency-inflation-us-dollar-and-gold-circumstances).

CNBS will be shocked, SHOCKED!

Thu, 03/14/2013 - 12:12 | 3329714 hannah
hannah's picture

why print these idiots ramblings...the banks are fucked. there isnt a 'fix' they are dead and will collapse to nada....!

Thu, 03/14/2013 - 13:35 | 3329993 cougar_w
cougar_w's picture

They will not collapse to nada. That's the problem.

This is going to go on and on for a very long time. If fact I don't see any way it can ever end, except that the entire global economy implodes and leaves the banks with no toys to play with and no hosts to bleed.

Thu, 03/14/2013 - 13:46 | 3330031 kaiserhoff
kaiserhoff's picture

That's my greatest fear as well, Cougar, that there may be just enough gas left in this old buggy, literally and figuratively, to keep the crimes and the ponzi going for a very long time.

Thu, 03/14/2013 - 13:58 | 3330086 cougar_w
cougar_w's picture

Parasites eat slowly but continuously.

Thu, 03/14/2013 - 14:29 | 3330186 Hohum
Hohum's picture

Kaiserhoff,

"Gas" indeed.  It's the price of petroleum that will end this nonsense.  Might not happen for a while, though.

Thu, 03/14/2013 - 14:36 | 3330210 hannah
hannah's picture

cougar_w - i have news for ya...it will end.

Thu, 03/14/2013 - 12:13 | 3329716 eclectic syncretist
eclectic syncretist's picture

Bernanke you dumbass little bitch, I told you that we put on the HL position yesterday and won't be accumulating for a few more days yet, and you're still pounding PMs???!!!  I know we need a total dimwit fuckhead idiot (with credentials of course) who doesn't fully understand what's really going on to run our counterfeiting operation, but you are about the stupidest motherfucker we've ever gotten to man the presses, you pathetic little weasle bitch.

Thu, 03/14/2013 - 14:09 | 3330118 de3de8
de3de8's picture

I take it you don't like the BerSpank?

Thu, 03/14/2013 - 14:51 | 3330281 August
August's picture

"Bernanke you dumbass little bitch..."

 

Sounds like you're thinking of Krugman.

Thu, 03/14/2013 - 12:23 | 3329730 Sach Mahoney
Sach Mahoney's picture

There is no way out of this.  The national debt service alone will expose our crooked, lying, stealing and cheating politicians.  They mock the public.  The nation generates record tax receipts during a recession and the greedy politicians have the balls to say we don't have spending problem.  China housing bubble is ready to pop. Pop goes our funding.  The black swan flies.  

I agree with madbraz, we are late in the cycle and '13/'14 shit is going to hit the fan.    

Thu, 03/14/2013 - 12:20 | 3329732 khakuda
khakuda's picture

Bernanke must be giddy that he has been able to create another bubble!  In his mind, there is nothing better than asset price increases that outstrip fundamental gains year after year.

Thu, 03/14/2013 - 12:30 | 3329771 Sach Mahoney
Sach Mahoney's picture

Bernanke is a fool.  He claims he has a way out of this mess, but then leaks FED thoughts on their proposed unwind only to hear nobody agrees with him.  "Hey, we might just Let it all mature in say 17 years" ....umm mark to market your portfolio..lets see how long you can live with the losses. FED will be long 4.5Trillion (that we know of) on the books end of year. Congrats FED...taking tax payer dollars and getting long the long-end of the curve with manipulated and historically lowest yields.  Tax payer gets Fucked again. Seriously....we get it coming and going

Thu, 03/14/2013 - 12:24 | 3329745 SDRII
SDRII's picture

Corollary war effort is key to force feeding the dollar down producers' throats (commodities, manufactured ,etc) otherwise known as expropriating. The game ends with defection. Maybe GBP is thinking along these lines with the PBOC swaps, LME sale and EUI defiance on Syria. Bernanke better hope drone diplomacy has legs.....

Thu, 03/14/2013 - 12:27 | 3329758 observer007
observer007's picture

World Gold Council (WGC) projects continuing gold purchases by central banks 

 

http://homment.com/wgc-gold-purchase-central-banks


Thu, 03/14/2013 - 12:29 | 3329767 zapdude
zapdude's picture

Meanwhile, gold is still on sale...and don't forget to purchase a protective collection of lead for your shiny stuff.

Thu, 03/14/2013 - 14:21 | 3330158 Dan Conway
Dan Conway's picture

Buy the lead while you can!

Thu, 03/14/2013 - 12:32 | 3329778 km4
km4's picture

Obama: 'There is no debt crisis'

http://rt.com/usa/obama-there-is-no-debt-crisis-265/

delusion !

Thu, 03/14/2013 - 13:34 | 3329992 AynRandFan
AynRandFan's picture

I thought Hannity was making it up when I heard it on the radio last night.  Unbelievable.

Thu, 03/14/2013 - 12:36 | 3329784 adr
adr's picture

If things were looking up, like 2003, I should be seeing increased business activity. I'm not though. I'm seeing muddle through at best.

My grandmother told me her dad never lost his job during the Depression, but he was woried about losing it every day. The company he worked for crawled along the bottom and he took only what he needed to pay his bills, trying to help keep others employed. Many others did as well.

He never believed in the stock market, so unlike others he didn't lose all his savings in the crash. Hated FDR. Didn't believe in banks either, kept a couple thousand silver dolars in a safe. Silver that was left to his children when he died.

The point is, the more I hear about life during the Depression, the more our current situation looks just like it. My Grandmother said they never went hungry, but they didn't eat as well. They still went out to social clubs, just not as much. Great Grandpa sold his car and took the trolley.

We are in a depression, and just like the 1930s the filthry rich are doing better than ever, the poor are getting handouts, the government is spending money like a drunken sailor, and the stock market is soaring. Life is actually pretty good for the majority of the people, the bottom 50% are making out just fine on welfare and the top 10% would take 2009-2013 over any other four years in their life. It's that 40% that actually want to work for a living that are finding each day harder to live than the last.

Thu, 03/14/2013 - 12:39 | 3329795 Tsar Pointless
Tsar Pointless's picture

I don't WANT to work for a living. I HAVE to.

My hours were cut back from full-time to part-time two weeks ago. I've been forced to go back on UC, at least partial benefits.

This sucks. I have no health insurance, and can't afford any, not with a mortgage and auto loan. I should stop paying both, but with my luck, I wouldn't get away with it like the thousands of others who have.

Some of us are born lucky, some of us are born good. I'd have much preferred lucky.

Thu, 03/14/2013 - 12:46 | 3329825 Bay of Pigs
Bay of Pigs's picture

My Dad lived through the Depression (hes 91 now) and I can tell you he said it was truly awful. His father lost his business overnight, had a nervous breakdown (he had 4 kids and a wife to support) and spent the next two years in bed recovering from it. They all had to go live with relatives during that time. Very tough times.

I don't think we're seeing much of that yet, but when we do, the wheels fly off and country will literally fall to pieces.

Thu, 03/14/2013 - 13:25 | 3329962 AynRandFan
AynRandFan's picture

Yup, the big difference between then and now is that everyone has left the farms and moved to the dependent culture of urban life.  People in the country know how to DO things, while people in the city know how to call someone.

Thu, 03/14/2013 - 13:41 | 3330015 cougar_w
cougar_w's picture

At the fringes of our media there are a lot of writers and bloggers telling people to tighten up, hunker down, build community, and get ready to live sustainably on what your immediate surroundings can provide.

Suburbanization is therefor going to turn out to have been a bargain with the devil. We'll have our own ghost cities just like China. And our wandering masses yearning to be fed.

Thu, 03/14/2013 - 23:46 | 3331613 Vooter
Vooter's picture

Yeah, that's right--everyone in the country is Daniel fucking Boone, and everyone in the city is Felix Unger. Christ...generalize much? Get out much?

Thu, 03/14/2013 - 13:59 | 3330089 eclectic syncretist
eclectic syncretist's picture

I'm gonna have a nervous breakdown if that Pizza Hut Delivering, Post-Hole Digging, Pussy Hating Dickhead Ben Bernanke doesn't get his shit unfucked right now!  Why do I always have to go into an obscenity laced rant on his sorry ass, when it's a hopeless case?  He's truly the worst counterfeiter in chief ever to oversee the printing operation for the Federal Reserve.  I just want to go Thomas Jefferson on the stupid fucker and get it over with.  Of course they'd probably just put Krugman in and add a few more printers, but damn, how much criminal lunacy can a country endure before it goes back to the first principles??????

Thu, 03/14/2013 - 14:11 | 3330126 cougar_w
cougar_w's picture

"how much criminal lunacy can a country endure"

As we are finding out, it's a lot.

Thu, 03/14/2013 - 14:11 | 3330124 _ConanTheLibert...
_ConanTheLibertarian_'s picture

So the take away is: if you're in the middle class move up if you can or move down.

Thu, 03/14/2013 - 14:13 | 3330135 de3de8
de3de8's picture

adr,
And the 40 will by default join the 50 over time, at some point it's over and ugly.

Thu, 03/14/2013 - 12:38 | 3329789 rogeliokh
rogeliokh's picture

DOLLAR dropping like a rock in the last 10 minutes, Any NEWS?

Bernank doing something there?

 

Thu, 03/14/2013 - 12:40 | 3329799 adr
adr's picture

Nat Gas is up 20% in three weeks as winter is ending. Makes sense?

If you're looking for a rational reason why any market is doing anything, you aren't going to find it.

Bernanke and the algos have no reason or accountability. Remember they auctioned of the pre monetized debt today.

Can Bernanke buy the same debt twice? Don't see why not. Corporations were selling the same debt thousands of times.

Thu, 03/14/2013 - 12:42 | 3329803 realtick
Thu, 03/14/2013 - 12:42 | 3329804 fuu
fuu's picture

Intercourse you Morgan Stanley.

Thu, 03/14/2013 - 12:53 | 3329843 NoDebt
NoDebt's picture

You can say fuck.  This is Fight Club, after all.

Thu, 03/14/2013 - 13:18 | 3329860 fuu
fuu's picture

I read recently that swearing on ZH makes you a child molester being paid by the hofjesuitten in an effort to tear the place down. I also have to denounce "Fight Club" because it is a Hollywood movie.

Thu, 03/14/2013 - 13:43 | 3330019 cougar_w
cougar_w's picture

So --- fuck Fight Club?

Thu, 03/14/2013 - 12:59 | 3329861 fonzannoon
fonzannoon's picture

I thought we determined last night that we had to play nice?

Thu, 03/14/2013 - 12:43 | 3329805 rubearish10
rubearish10's picture

All this said, the missing que is Goldman's "Oil Spike" call! Perhsaps another asset this time?

Thu, 03/14/2013 - 12:44 | 3329810 zdk45
zdk45's picture

Any data, remotely concrete, isolating what triggered the collapse in 08? Looked into volume depletion. Not crystal clear. Maybe the election. Shut down the presses in 2015. 2015-2020=198Forward-like living.

Until then, stawks, cnbs, buy buy buy, nobel laureate gems, new highs in every market sans the usual...etc. 

Interesting to see zh potential 08 trigger is. Go stawks.

Thu, 03/14/2013 - 12:47 | 3329830 Oldwood
Oldwood's picture

The imminent doom and disaster we all see coming at us provides us an indeterminate warning, but little of real use. The resultant fear and chaos that it produces is of great value to the very ones creating it however. They are using the noises we make as a indication of our ignorance, biases and anything else that could be used to impugn our very character, while also using it as a threat that they feel obliged to respond to. The chaos in the markets leads to ever more malinvestment that can only lead to disaster as well. I cannot help but feel that things are going exactly as desired even if the path is not totally obvious or rational. While I am convinced things are going to end badly, I still have no idea how to best protect myself beyond trying to stay alert or falling into some mental trap created by the very perpetrators of this disaster. I can't deal with the thought that I am complicit in this yet I know that somehow I must be.

Thu, 03/14/2013 - 12:55 | 3329849 Inthemix96
Inthemix96's picture

Oldwood,

I feel as you do.

Do not worry too much friend.  3 years here at ZH has given me hope that yes indeed we may be screwed, but there are some genuine decent folk out there that will help their fellow man.  You are not alone.  We can all try as best we are able to, but be aware of the decency that is still to be found out there.  We will help each other mate.

Not all is lost.  Best of wishes mate from Up North England.  :-)

Thu, 03/14/2013 - 13:00 | 3329863 fonzannoon
fonzannoon's picture

The great irony is we all value our anonymity on here. But when the time comes I want to know all your real names and info so I know where the few sane people will be located.

Thu, 03/14/2013 - 13:07 | 3329887 Inthemix96
Inthemix96's picture

Click on my name Fonzannoon and send me your E-Mail address,

You seem a genuinely nice bloke and I would like nothing more than to meet like minded decent people.

I mean it mate.  At some point, every one of us may need help.

Take care.  Inthemix.

Thu, 03/14/2013 - 13:12 | 3329912 fonzannoon
fonzannoon's picture

same to you my friend. I sent you a contact request. I think that is how this works.

Thu, 03/14/2013 - 13:22 | 3329954 Inthemix96
Inthemix96's picture

I have to go to work mate, only for an hour or so.

I will give you a reply Asap.

Its nearly time mate.  We should make the most of it.

Thu, 03/14/2013 - 15:34 | 3330436 Inthemix96
Inthemix96's picture

Done fonz,

I dont know how this works on here, but give me a reply through the account thing.

Bear with me, I didnt grow up with computers, and I dont have a great knowledge around them friend.

Lets get this done mate, lets start a ball rolling.

In regards. Inthemix.

Thu, 03/14/2013 - 14:08 | 3330115 reload
reload's picture

itm96

I was up your way a couple of weeks ago (Newcastle) just for 24 hours. Friendly helpful people compared to the average misserable / eyes on the floor southerner. I had a good time and met some great people, by arrangement and in passing.

BUT: The city seemed (at a glance anyway) to be over dependant on the `student ecconomy` and just as hollowed out as everywhere else in blighty.

Thu, 03/14/2013 - 15:01 | 3330321 Inthemix96
Inthemix96's picture

It is mate.

Take my word on this though Reload.  We have a strong sense of togetherness up here.  We have seen and lived real hardship, the mines should tell you this.  When the time comes to stand together, we do, period.  Its long past time for likeminded people to come together for the common good.  I am reaching out for others, world wide if necessary to show there is a way, our community will pull through, I want every one I know and those I dont to feel the same passion for us stupid marks who have unwittingly been had to know we are all in the same boat.

If ZH can do this through its forum, and give like-minded decent folk a chance at reconciliation at the absurdity of it all no matter where we are, the very least we can say is we tried.  I can do well here and live amongst my own kith and kin but why should I?  We are all fundamental in this game, all of us.  We deserve better.

I have met here some genuine decent folk who speak from the heart, and I cannot let my concience down by striking that out.  If I can help I will.  Click on my name and send your E-mail address as I asked Fonz.

I mean it.  Not evryone is blessed with the love of green.  This is time for a global effort.  Lets fucking do it.  Fuck the talk, fuck the typing, its now.  Or its not.

Only we can change this thing, dont you think we should try?  To all of you, whoever you are, lets get this done.

Thu, 03/14/2013 - 13:06 | 3329882 Peter Pan
Peter Pan's picture

Every stunt by the central banks leaves them with another record and seeming success, but the truth is that whilst they survive another death defying stunt, they are nevertheless accumulating more and more broken bones.

So while the broken body of the economic system continues to survive, the truth is that its quality of life is going the other way.

The question on most people's minds is whether to cash in their chips before the casino goes broke and makes their chips useless.

Thu, 03/14/2013 - 13:20 | 3329946 AynRandFan
AynRandFan's picture

The only inexorable pitfall I can see is that interest rates will eventually rise on all that crappy long term debt the Fed is buying.  When that happens, does it make any difference if the Fed shows huge losses?  I'm still waiting for somebody to explain that one.

Thu, 03/14/2013 - 14:00 | 3330069 cougar_w
cougar_w's picture

Here's my best guess:

The Fed will default and uncharter. All Fed monetary policy will revert to Congress, and Congress will take all outstanding Fed debt and create a "bad bank" with a 100 year charter to dispose of it properly. A new US currency will be created and all greenbacks purchased back at 10 cents on the dollar, all at once hitting the US household with the accumulated inflation that has been held back for now by global interest rate manipulations. Gold will be given a set price by law and bought by Congress at $500 an ounce, but only in the new currency. So the gold bugs will probably make out slightly better than those holding cash or savings. Congress will have by then (or will immediately after) declare war on some feckless weaker but resource rich nation and use the resulting hoopla and patriotic fervor to distract people from the realization that they have just been forced into permanent poverty by the top 1% of the wealthy.

I write fiction, as if you couldn't tell. But I think I'm not too far from the mark here.

Thu, 03/14/2013 - 14:32 | 3330197 fonzannoon
fonzannoon's picture

Cougar you may be right but sinnce no one will turn their gold in for that price and the rest of the people won't trust the new currency that new currency will probably fail pretty quickly. It will be black markets everywhere.

Thu, 03/14/2013 - 14:55 | 3330295 cougar_w
cougar_w's picture

You could well be correct, but I think there is enough emotional and real investiment in the current economic model for it to go forward a ways more. Under the most likely scenarios (and if my guesses about the Fed are anywhere near accurate) anyone holding gold will have also lost their cash and other assets to inflation, so might need to convert gold to new forms of cash before the fixed price erodes further.

What I am reall predicting is the end of free market speculation and the application of capital controls. We are already seeing some of this at work, especially in PM price manipulations. In that environment assets purchased on speculation of price moves will become fix-priced stores of value only, and if purchased at the peak would represent an actual liability. Holding gold as a store of long-term value would still make sense but once the price is fixed or speculation is made illegal one will have to wait for a complete breakdown in market cartels before the value of the underlying asset could be realized in a free and open market, and by then who knows what the price will be? Might be 20 to 200 years before that happens, lots of things would have changed. Most holders will have long since sold assets to pay bills or passed their holdings on to heirs, who will likely liquidate for cash.

I just don't see how this goes forward without vast and compulsory controls on prices, and a new currency. How people react to those events is anyone's guess.

Thu, 03/14/2013 - 14:41 | 3330234 Ghordius
Ghordius's picture

coguar, a cb does not need to default, ever, particularly if it's providing the global reserve currency - if the government does not shut it down

see the Reserve Bank of Zimbabwe (RBZ)- still there, now handling USD, EUR, Yuan, Rands, etc. instead of the ZIM Dollar that now is worth...

anyway, those beasts are very hard to kill

Thu, 03/14/2013 - 15:05 | 3330335 cougar_w
cougar_w's picture

I'm not sure the RBoZ is the best example. They don't exist on the world economic stage in any substantial way. A lot of their playing with money was a joke on their own people, I'm guessing that actual creditors out in the real world got paid.

The original question was; how does the Fed service their debt when interest rates go up? I suggested they might default and repudiate the debt, but that's only one solution. Yes they could hold it on the books forever but that's another kind of lingering death. My sense is that since the US has nuclear weapons, a modern army and a bellicose attitude (witness the US government's willingness to go to war, and the apparent preparations for civil war) the easiest solution is to simply not pay, and then unwind the debt with a massive dose of inflation delivered via a currency reset, the latter having the knock on effect of further centralizing monetary power within the elites. They'll likely do the same with Social Security; simply not pay it in full, and if you don't like it then go to prison.

Thu, 03/14/2013 - 23:36 | 3331598 Vooter
Vooter's picture

"A new US currency will be created and all greenbacks purchased back at 10 cents on the dollar, all at once hitting the US household with the accumulated inflation that has been held back for now by global interest rate manipulations."

LOL! Yeah, and as soon as that happens, millions and millions of people will get back the other 90 cents on each of their dollars BY FORCE. There won't be a retail establishment or million-dollar home left standing in this country. Go ahead--try it...

Thu, 03/14/2013 - 13:06 | 3329883 Shizzmoney
Shizzmoney's picture

2015 is the date for the "SuperCrash".  Goes right in tow with my "End of Presidental Term" market crash theory, which has been proven since Nixon.

We have about 1.5-2 more years of this shit.

 

Thu, 03/14/2013 - 13:21 | 3329948 Peter Pan
Peter Pan's picture

We have all been calling for a mega crash for the last five years and yet Evel Knievel Bernanke seems to survive one more stunt.

Don't bet against them. Just be patient and prepared.

Thu, 03/14/2013 - 13:38 | 3330007 IridiumRebel
IridiumRebel's picture

With so much to prepare for the RESET, just know that there are better ways to spend your time than watching a "market" defy all gravity. I have money in and it is doing well, but hard assets are my aim.

Thu, 03/14/2013 - 14:17 | 3330117 cougar_w
cougar_w's picture

There might not ever be a "crash" that anyone will be able to point to. Like an old car this economy might limp along from one break-down to another wtihout ever actually blowing up. Leaking, gasping, belching smoke and slowing falling apart even as it rolls along. People will give up on it long before it actually seizes up, and when they do it will park itself along side the road in a ditch and rust away into a compost pile of forgotten dreams.

Nobody will any longer care. Nobody will notice. The economy will have already been replaced by whatever had to come next and historians will wonder when actually did that old economy die.

Thu, 03/14/2013 - 14:48 | 3330269 YHC-FTSE
YHC-FTSE's picture

I think that's where we are at the moment.  It's certainly possible that it could go on creaking into oblivion, but human behaviour and history tell me that it could be a massive sudden crunch. We always tell ourselves it's different this time, but I am sorry to say that we've never really evolved out of being stupid.

Thu, 03/14/2013 - 14:40 | 3330229 YHC-FTSE
YHC-FTSE's picture

+1

Yep. Although we've all been predicting the inevitable outcome: A massive systemic collapse of financial services and the reserve currency creating a global domino effect, I think it will still come as a lightening fast shock even to those prepared. Events that used to take days and weeks in the markets now happen in seconds, sometimes too fast to humanly follow. Consequentially, a catastrophic event will probably not be different.

War may only prolong the agony longer, leading to even more brutal regimes (if that's possible) in the so called pax Americana. That's not a world I would want to be alive in.

Personally, I'm watching the IMF for signs that one of the 4 currencies that make up the SDR will get dropped to start the domino and for me to leave the city. Because it is these 4 countries that are at the core of the crisis trying to export their problems to everyone else ( The YEN, USD, EURO, GBP). There might not even be a warning, but it seems plausible that a panic would start with them killing/abandoning one of their own, probably Japan first.

 

Thu, 03/14/2013 - 14:22 | 3330163 zapdude
zapdude's picture

There is a total solar eclipse on 3/20/2015, which takes place on the Jewish New Year which is 1st of Nissan of the Jewish Calendar, 6000 years. 

The symbolism and timing is very significant in Messianic Jewish groups.

Some think that is the Apocolypse.

Thu, 03/14/2013 - 15:14 | 3330372 Kirk2NCC1701
Kirk2NCC1701's picture

So we should not have traded on our Nissan?

Thu, 03/14/2013 - 13:09 | 3329893 Lewshine
Lewshine's picture

Anyone notice how you don't hear people popping off about going short this higher and higher move??

 

That's gotta mean something...Probably even higher highs.

Thu, 03/14/2013 - 13:14 | 3329925 Vooter
Vooter's picture

"That's gotta mean something..."

Yeah, it means that nobody's in the market...

Thu, 03/14/2013 - 13:18 | 3329936 AynRandFan
AynRandFan's picture

Haven't been able to short this market for a long time.  What's unreal is the straight line path the indexes follow.  At some point, you'd think we hit the euphoria of a hyperbolic move.

Thu, 03/14/2013 - 13:36 | 3329999 IridiumRebel
IridiumRebel's picture

MARKETS ONLY GO UP. KNOW THIS.

Thu, 03/14/2013 - 14:05 | 3330064 WhiteNight123129
WhiteNight123129's picture

WRONG AGAIN

When credit is the engine of expansion, overheating and rise in price based on credit expanding too fast it is self defeating because margins and profits shrink and make the credit harder to repay. So in fixed monetary regime, the overheating of credit is actually the cause of its demise, pushing it into deflation.

However when the engine of expansion is money, and inflation comes from base money moving, higher inflation does not hurt the engine of the expansion (that is base money starting to move), on the contrary base money moves even faster when the curve steepens and inflation expectations rise.

Expansion on money need Fed inflicted recessions to stop the base money from movin in all at once (hyperinflation). This is the ~Go-stop-Go like in the 70s~ that soros refers to in his latest Davos interview. When expansions have credit as their engine, they do not need managed interest rates to go into recession (XIX century is the proof) credit would contract on its own as some point.

The problem that we had with Greenspan is not to let the credit contraction go deep enough and clean enough bad credit, so the Fed tried to stop the clean up of bad debt too early and encouraged leverage (with lower rates) before the system had enough time to get rid of the bad credit. The result is a continuous increase in leverage for 25 years.

This expansion is not based on credit but on money, so the reasoning applying to expansion based on credit do not work.

 

THE ONLY THINGS THAT CAN STOP THIS EXPANSION ARE

1. External shocks

2. People trying to repay their debt (bastards, you better wait for the base money to inflate it away). Keep your debts flat for now, no increase no decrease, wait for base money which increased massively to move in teh real economy to inflate it away.

3. Government cutting spending too much

THE THINGS WHICH CAN ACCELERATE THE EXPANSION

1. Steeper curve

2. Inflation expectation continuing to rise.

 

And remember that whatever debt is on the central banks balance sheet is not debt. To be debt it would have to be repaid, if it is permanently rolled-over it is equivalent to sending to governement free boxes of Green dollar pieces of paper to the Gov so they plug the economic gap from commercial activity and at the same time push up prices. So first plug the gap in GDP, and second force prices up which make the debt softer. All of that is free for the Gov because the money is printed with not repayment in sight ever for the bonds on the Fed[s balance sheet. Kill two birds with one stone.

 

 

Thu, 03/14/2013 - 14:38 | 3330221 cougar_w
cougar_w's picture

That's an interesting take.

Thu, 03/14/2013 - 14:56 | 3330302 WhiteNight123129
WhiteNight123129's picture

Thank you/

Actually it is a view shared by Dalio, I say shared, because when you listen to Ray Dalio and read banking school you feel like they talk the same language. With all its defects Karl Marx borrowed from bankers his monetary views. Marx used Fullarton, Tooke as its monetary basis. The banking school was made of bankers, but the good ones, because in a XIX century Gold standard, being a banker was tough, you could be very wealthy but you had to be careful or you would be wiped off, also there was an unlimited liability to your personal asset as a banker in case the bank failed. We are not talking about teh clowns of today. Actually the best banker who was as responsible for the British victory over Napoleon as Wellington was a very pious man, he spent a lot of money to stop slavery and he also stopped the madness of paper money debasement back in 1810. His name was Henry Thornton. His main book was prefaced in a not too distant past by Hayek. He explained the liquidity preference and multiplier so much more brilliantly than anyone. Keynes copied him on the liquidity preference and took credit for it, which is a shame.

This disctinction between money and credit is coming from the banking school. It is bizarre how those guys where so brilliant and are ignored today. They said about expansion of inconvertible paper money (fiat) would have the same effect as a very large Gold mine discovery on a pure mettalic standard monetary system. THey said back in 1844 that it would in this order.

1. Push down the interest rates

2. Push up land prices

3. Push up the price of all securities bearing interest (they meant stocks)

4. And finally commodities (because at some point the money would shift into real economy and spending).

In my view it is exactly what is happening 169 years later. We are getting close to stage 4.

 

 

Thu, 03/14/2013 - 15:20 | 3330387 cougar_w
cougar_w's picture

Fascinating. And again thank you for reminding us of the real importance of history.

Thu, 03/14/2013 - 16:41 | 3330658 OpenThePodBayDoorHAL
OpenThePodBayDoorHAL's picture

A few distinctions that I had missed (and my portfolio has suffered):

1. Distinction between credit expansion/contraction effects, and money expansion/contraction effects. With debt-based money it's easy to confuse the two.

2. All-in group debasement versus individual debasement. When one country debases it causes an effect relative to its neighbors who don't. Or relative to nice shiny stuff like gold & silver. But when everybody, the whole system debases at the same time, it's a conjuring trick that can work for quite a while. They've financialized gold & silver so the signal they send has become unreliable.

And yes history is instructive, but as Taleb points out not axiomatically a good predictor. We've always had criminal bankers supporting criminal politicians, waging wars and repressing the people since everyone was running around in togas. But I'm not sure we've ever had simultaneous fully coordinated global financial repression like we have today. The Rothschilds paid Wellington to show up at Waterloo because they were mad Napoleon paid off  his debts to the Banque de France, I get that. But we have no Napoleons today, men of power who understand and can oppose banker mega-crime and control. Apart from Beppe Grillo, Chavez, Correa of Ecuador and a few others, every politician in the world is utterly and completely bought & paid for.

Thu, 03/14/2013 - 16:59 | 3330713 cougar_w
cougar_w's picture

"But we have no Napoleons today, men of power who understand and can oppose banker mega-crime and control ...  every politician in the world is utterly and completely bought & paid for."

Chilling -- if you allow yourself to think about it. When the world had internal edges you could look to the horizon with hope, or failing hope you could get on a boat or join a caravan and follow that horizon to a fate you chose for yourself. But now there are no horizons, there are only checkpoints between one dispairing disaster and the next. And what you can expect at the end of a journey is to meet people exactly like yourself suffering the same legalized pillage as you sought to escape.

In fact you are likely to meet them coming into your land as you leave it to enter their own. How depressing is that?

Functional limitations. Resource limitations. Energy limitations.

Nowhere to escape and nowhere to hide.

Thu, 03/14/2013 - 14:31 | 3330196 q99x2
q99x2's picture

Morgan Stanley is financially unstable from what I've heard. They are likely to say anything. At least someone is getting paid to write that stuff.

Thu, 03/14/2013 - 15:48 | 3330475 Kirk2NCC1701
Kirk2NCC1701's picture

What the Currency War guy did not tell you, but should have:

A. They can re-inflate because the dollar is "different" from all other currencies.  The size is merely a function of the monetary ecosystem, which is akin to a balloon:  You can inflate until it pops.  Whereas the size of everybody else's 'balloon' is fixed to their country's GDP, the effective size of the US balloon is the size of the US ballon (GDP) plus a fraction of the size of everybody else's balloon (GDP).

B. As long as PM's and oil are priced in USD's, the Fed can inflate more, as foreign GDP's and FX accounts must absorb and use the USD.  The way to keep the USD Ponzi going, is to keep forcing others to use the USD.  That may include use of Currency Wars, destroying an alternative to the USD -- like the Euro -- or attacking an oil-rich country that threatens to sell in other currencies (or gold).

C. This game will NOT change, the QE inflation will not cease -- until global limits (not just US limits) are reached, and 2 events cause the USD-balloon to pop:

1.  Enough countries stop using the USD for oil, and 2. Countries base their currency on a basket of PM's.  One or the other alone will not do the trick, I believe.  Both events must happen, and in fairly quick succession.

I am 100% certain that Rickards & friends and the DOD covered this in their simulated Currency War Games.  As a result of this (confirmation of gut-level convictions)...

The Fed/US will do 2 things to keep up the perceived strength or safety of the USD:

1. The Fed will keep inflating.  Currency crises in other countries or the EU only strengthen the USD position, as a "safe haven" currency.

2. The US is hellbent on keeping its petro-dollar, by using its military as the Muscle guy.  They will keep and add bases wherever there is oil & gas:  Middle East, Central Asia, Africa, Americas.  Besides, w/o these, planes won't fly, ships won't sail, and tanks won't move.  Oil+DOD are perfect co-dependents:  One cannot survive w/o the other.

And One Currency in darkness binds them!

Thu, 03/14/2013 - 16:14 | 3330563 cougar_w
cougar_w's picture

Interesting synthesis, and conclusions from that. We are indeeding seeing this all play out in real-time.

Notice that the scenario you propose leads to a true global US imperial state akin to Spain in the 1700's. Not too tough for a US citizen of tomorrow, if that turns out to happen. Though one wonders how the US empire will fair with so many nuclear weapons to hand, and so little cheap oil left. What might the Aztecs have done to the Spanish if they'd had access to modern weapons?

Thu, 03/14/2013 - 15:58 | 3330504 polo007
polo007's picture

http://blogs.wsj.com/marketbeat/2013/03/14/dows-winning-streak-has-that-roulette-feel-to-it/?mod=MarketsMain

What goes up must go down at some point, right?

The Dow Jones Industrial Average has risen every day this month, and judging by today’s early action, the streak may stay intact.

The nine-day winning streak is the longest for the Dow since November 1996. The Dow was up more than 50 points this morning, showing more conviction after wobbling to a combined eight-point gain over the previous two trading sessions.

There is historical precedence for such a move. Since 1948, there have been 24 prior occurrences of nine up days in a row for the Dow, according to the technicians at Instinent, an electronic-market operator. Thirteen times the streak ended at nine. Four of them stretched to 10, two stopped at 11 and one hit 12. The record is 13 up days in a row, which came in 1987.

Thu, 03/14/2013 - 16:09 | 3330557 jldpc
jldpc's picture

When  I was a young man, summer of 1st year in college, I went to work as a plumber's helper. Soon I was in the basement of a 1920's apartment building on the near north side of chicago knee deep in fresh sewer filth, as we cut and installed new iron sewer stacks. Old ones had cracked after 35 years. Not a nice job. But glad to get it - learned a lot about real men doing real work. They took real pride in what they did. No whining. Today unemployment of 18-25 year old's is the highest since the Great Depression.  And they are without a political voice - despite their interconnected cell phones and social everything. Our financial system has no hope unless the 20 year old's find work - soon, very soon. They are the support for the endless stream of retirees now and to come. They owe $1T plus on non-dischargeable student loans. So unless the Feds relent, they are doomed. How do they ever make enough to pay cell phone bill, internet connection bill, student loan bill, car payment bill, gasoline bill, car insurance bill, etc., etc. Answer: They don't.  Now look at the politicians on TV - mostly old decrepit lying shit heads. Makes you want to vomit. All they do is spent more and more borrowed money.

So you want to know when the fat lady will sing on all of this mess - when the young people elect younger politicians that relate to their problems. Times change. But the cycles of life go on and on. Face it - the shit heads are bought and paid for and unless someone kills them, they will go right on borrrowing more money and spending it to stay in power. The rea lquestion you need to ask is when do the younger ones wake up and what do they do about it. arethe yas braindead as they appear? Or will they get smart and do something to change this mess. Remember most all history lessons say they do not. Almost all western civilizations were destroyed by outsiders while the insiders both young and old look on in amazement. Humans are not very bright in large numbers.

Fri, 03/15/2013 - 03:00 | 3331763 Youri Carma
Youri Carma's picture

"In short, it may be that extraordinarily loose money policy will work."

That leaves a few questions open in my opnion.

- If so why it took so many years of QE to finaly 'work'?

- Why ever leave such a policy if it works?

I think that loose money policy could work if you put the money in the right place that's to say not in bankters and their toxics.

You should put it to work in the real economy to create work and not exuberantly bankster bonusses.

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