Guest Post: The Final Con

Tyler Durden's picture

Originally posted at Monty Pelerin's World blog,

The stock market has now been up for ten straight days. Many on Wall Street are singing “Happy Days Are Here Again.” For them, that is probably the case. They finally have something to sell that will bring the rubes back into the markets. We are not in Kansas anymore.

Fear is ebbing and greed is coming back. Those on the outside looking in are rounding up cash so that they don’t get left behind. The shills assist them with their pictures of economic recovery, new era crap and whatever other nonsense they can peddle successfully. So the cycle goes, as it has since the New York Stock Exchange came into existence. We are in another game of musical chairs where the music is playing joyfully. As in all such events, there are too few chairs to accommodate the participants when the music stops. And it always does!

There is no economic justification for the level of these markets, at least in the sense of improvements to the real economy. The economy is in worse shape than it was several years ago, made so via massive government interventions. Debt has been piled onto governments, corporations and individuals. It is not serviceable, certainly not at market-determined interest rates. Artificially low interest rates prolong the game, but do so by further corrupting economic decisions and the economy.

Michael Pento explains why markets have done so well recently:

When central bankers dedicate their existence to re-inflating asset bubbles, it shouldn’t at all be a surprise to investors that they eventually achieve success. Ben Bernanke has aggressively attempted to prop up the real estate and equity markets since 2008. His efforts to increase the broader money supply and create inflation have finally supported home prices, sent the Dow Jones Industrial average to a record nominal high and propelled the bond bubble to dizzying heights. The same nonsense that got us into the mess — bubble-blowing — is the strategy for getting us out of the mess.

That is all the Fed knows and it is all that is left for the government. This is not an economic strategy. No economist worth his salt would propose such a “solution.” This is a classic political solution — buy some time by making the problem appear to go away. Kicking the can is what politicians do best. Move the problem down the road and we’ll worry about it then (preferably after the next election). Never mind that the problem is made worse by doing so. Live for the now. Worry about tomorrow when tomorrow comes and then it will be today and repeat the same political fix.

Will this fix work? Of course not, at least on any basis but the short-term. The laws of economics cannot be repealed. Arrogant politicians may believe they can suppress them and they are correct, but only in the short-run. How will this turn out? Not well, according to Mr. Pento:

The ramifications for investors and the economy will be profound. Not only will the economy move gradually toward a pronounced condition of stagflation, but, more importantly, the bubbles being created by the Fed will be far greater and more devastating than any other in history. Equity and real estate prices are already stretched far beyond what their underlying fundamentals can support. But they are nothing compared with the distorted valuations being applied to U.S. sovereign debt. The bursting of the bond bubble will be exponential worse than the deflation brought on by the NASDAQ and real estate debacles. It is sad to conclude that the middle class is set up to get slaughtered even worse than they did when the previous two bubbles burst.


The economy is heading for unprecedented volatility between rampant inflation and deflation courtesy of Ben Bernanke’s sponsorship of the $7 trillion increase in new Federal debt since 2008. Investors need to plan now while they still have time before the economic chaos begins.

Better prepare! The tragedy that lies ahead is apt to make the Great Depression look like a walk in the park.

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francis_sawyer's picture

PLACE... I said "PLACE" it [on the DOW]...

Fuh Querada's picture

400 thousand USD to win on - was it wrecking crew?

akak's picture

OK, now even I will say it: Fuck you Bernanke!

The Limerick King's picture



Ben has a plan to deceive

He's hoping the world is naive

Delaying our troubles

By blowing new bubbles

Is all that he has up his sleeve

Key-Rick's picture

Limericks!  Now that's an idea I can get behind.

There once was a man named Bernanke

His fiscal policies were stanky

He cranked up the presses

making horrible messes

But greatly enriching the banky.

Peachfuzz's picture

How about that JP Morgan,

Told Congress to blow on his Organ,

It's the People's fault,

They shoul've gone Galt,

Now the war pig's forever gorgin'


Rusty Diggins's picture

Me an the crew love poetry.  Three +'s

slyhill's picture

I've got an uneasy feeling

like from a bad dream i am reeling

i should really have borrowed

said fuck-it to tomorrow

instead i stacked AG to the ceiling


falak pema's picture

Never cross the populist Rubicon..unless its Friday humour.

The Axe's picture

with people at the Fed,and JPM marking their investments to whatever makes their boss could be years before a black swan events make them show their CARDS.....years and years.....

ziggy59's picture

Rachel, from Kiddie Traders, and Porn article before, should read, uh, have this article explained to her... Like, you know, [pop] , as soon as she makes another trade.

buzzsaw99's picture

Pension funds never tire of snipe hunting. AhOOGA!!

machineh's picture

Hey ... stop chopping down our Magic Money Tree!

It's almost touching the sky already.

A golden statue of Buddha Ben, hands held in prayer pose, watches over my garden.

ziggy59's picture

I guess the world is great..with 11 year old rachel trading..but here...
US to deploy more ground-based missile interceptors as North Korea steps up threats
NK fired missiles into sea of Japan

Shit is getting real..

machineh's picture

Doubtful ... otherwise the Dow would be UP today.

McMolotov's picture

Krugman probably whacks it to pictures of Kim Jong Un, imagining the possibility of all those broken windows.

aerojet's picture

You do understand that NK has done this same  crap ove rand over again for the past 25 years or more?  They just extort supplies from the west and then go away.  And if this time is different and they really do want a war, well great, we can wipe them off the map, which would also be fine.  If China doesn't get into it, the surviving citizen-hostages of North Korea could finally be freed.

toys for tits's picture

That's true, but I think Un is the youngest NK leader to threaten, and you know how 19-year-olds think they know everything. 'My dad was a pussy, I'll show them.'

Diesel Seven's picture

Why do most articles only refer to the Fed, while leaving out the actions of the ECB, BOJ and BOE? All four working in concert have and may continue to prolong the unsustainable. . . until the day when countries outside the club decide their currency should be the reserve currency. If we fail, they fail. Imagine a gold-backed eastern currency--China isn't buying gold to meet the bling-bling demands of up-and-coming Chinese rap artists. Until then, its all happy-happy, joy-joy time for capital markets.

michigan independant's picture

Ben Saved Calpers and Pelosi and Shumer and the rest of the Reds.

michigan independant's picture

Ben Saved Calpers and Pelosi and Shumer and the rest of the Reds.

Cognitive Dissonance's picture

When all you know how to do is blow hammer everything looks like a bubble nail.

cifo's picture

Or, when all you know how to do is to blow, everything looks like a job.

Cognitive Dissonance's picture

"Do you take one job or two?" - Ben "Big Blow" Bernanke

Spastica Rex's picture

Musical Chairs Solution

What if someone isn't exactly playing, but surreptitiously pulling some players from the game with a long shepherd's crook? A burlap sack is then put over those players' heads and they're removed to an alley and clubbed to death.

Eventually, the game is stopped, the winners are declared, and there are exactly the same number of chairs left as remaining participants.

"Everybody" wins, see?

adr's picture

So when do we start seeing thousands of cows floating down the Mississippi?

I did get to buy beef for $1.99lb last week. I don't think that will be allowed to happen again.

My father in law has gone all-in, believing the economy has made the turn and the next leg of the bull market will be another 20-30% run. He says he's going to buy a new C7 Corvette Stingray with the money later this year. He DVRs Mad Money every day.

I don't really like him very much, I just replied with "BBBAAAAA". He said, "What", and I replied with "Look it up, best stock tip I can give you."

Bam_Man's picture

Yeah, "70 is the new 40" and "the Corvette is the new Buick".

s2man's picture

Love that reply.

I'll be picking up $1.68/lb sausage and canning it, this weekend.  Last week it was canning cheese and butter.  Week before, dehydrating veggies.  Love those loss-leaders.



TheGardener's picture

"I did get to buy beef for $1.99lb last week. I don't think that will be allowed to happen again."

You got me jealous, I pay 1.50lb but the organic meat producing cooperative I have to drive to sells me all those cuttings as dog meat. Never mind I insisted on not getting any fatty asides because the dogs won`t eat those either but
I love to steal from my dog food all the prime beef cuts that no longer looked good on display on the farms own shop...

probably not be allowed to happen again either

Put through the grinder this is $3 for prime beef without
the usually health hazards that could prove any mid term vegetarian right : no hormones no antibiotics.

That was the theory and I`m sickly feasting on all that wild game meat, gone are the days of an Argentinian Steak...

toys for tits's picture

Thanks for pointing us to where the BLS is getting their bullshit food comps.

Miss Expectations's picture

I've seen the old farts with their Corvettes at car shows.  Sad. 

Dollar Bill Hiccup's picture

Scary is that it certainly could go another 20%. Why not?

The word "rigged" is not a metaphor. It's actual. The game is rigged.

FED prints, monetizes debt, Treasury borrows, receives interest back from FED hence borrows for free. Rates are nothing. The govie pays 75 billion a year just for food stamps. Where's that trillion dollar deficit going? Staples, Discretionary, Healthcare, etc. The government is supporting record corporate profits, and the FED is supporting the government. 

Inflation ? It has to arrive at some point but Europe is in such straights it will remain a giant deflationary force, as is all the world's abundant slave labor, especially when married to automation and robotics. Those reserves sitting at the FED are only used at the margins, allowing for more leverage for banks to pump up volumeless markets. There's the inflation. But until wage inflation kicks in, greed is going to reign supreme. There's your 20-30% in a blink of an eye. Your father in law will be driving the vet.

At some point, inflation will kick in. And then he may wind up having to live in the car.

And so castles made of sand, melt into the sea, eventually.


jumbo maverick's picture

DVR Mad Money- that's just to funny to even think about

TheGardener's picture

"So the cycle goes, as it has since the New York Stock Exchange came into existence. We are in another game of musical chairs where the music is playing joyfully. As in all such events, there are too few chairs to accommodate the participants when the music stops. And it always does!"

What stock market, what stocks ? Big corporations and their monopoly rents being hailed is way beyond markets. Have them broken up and dissolved and a few thousand laws repealed that served as regulatory burdens to SME and
see how we go . Small and medium sized enterprises are the backbone of our world wide system making up for all the employment and takes DESPITE some dinosaur listed PUBLIC companies.

optimator's picture

Those in first class will do O.K., but us in steerage have to be careful.

WhiteNight123129's picture


This bubble is not re-inflated by credit but by money. That means the only way for the equities and bonds and cash to never fall in relation to soft commodities is to never left their financial asset form. As soon as cash is spent in the real economy, that makes the real economy go higher and the long bond fall and kick start the printed money so far locked in financial assets nad balance sheets to self destruct finanical assets through chronic inflation for hte next decades.


NidStyles's picture

Money, what money? Everything is credit dipshit. The USD is credit.

notadouche's picture

If you haven't been in it would be beyond stupid to get in now.   

Wash, Rinse, Repeat.

dexter_morgan's picture

Why/ Greenspan says they are way under priced? In Greenspan we trust.

Winston Churchill's picture

The only thing answered when Greenspan talks if whether the drool hits the

table or the floor first.

jimmytorpedo's picture

Yeah but if the drool hits the table, it's bullish for the euro.

SKY85hawk's picture

I met a magic genie today, and he said he would grant me one wish.


"I want to live forever," I said.


"Sorry," said the genie, "I'm not allowed to grant wishes like that!"


"Fine," I said, "then I want to die right after Congress gets their heads out of their asses!"


"You crafty bastard," said the genie.


Kirk2NCC1701's picture

As long as people fall for the First Con, there will always be a "final con":  the "There's a sucker born every day" principle.

1st Con:  "Sin" 

2nd Con:  Sin --> Eternal Debt & Death.  Unless...

3rd Con:  I can't help you with the Death part, but I can act as your intermediary to alleviate your Eternal Debt.  Note how thus I become a perpetual service provider?

"Sorry, I can't help you with Death" is blatantly True, as that would be too easy to put to the test and bust my biz model. 

Con X:  Any con that involves Debt and a master/slave debt holder and debt server relationship.  This is like a fish swimming in water and taking water for granted.  Until...

dadichris's picture

there's a "Con" in all levels of Confidence!

JenniferS's picture

On an individual level, no matter where we reside, we can seek to protect our wealth in a number of ways. Quite obviously, all of us here are aware that gold and silver will preserve our wealth and cash in advance on the day goes to debtor's prison. But there are other tangible assets also and if possible, i believe it wise to diversify. That leads us to what can be done acting collectively. It is the question least being asked. Is that because so few have thought to ask it, or because there have not been good answers? My sense of what can and should be done is to speed up the slow motion demise of the entire system. It not only should be done so as that there is less time for the upward transfer of wealth to take place, but i think it is well past high time that some of the culprits face criminal charges.