Guest Post: The Global Status Quo Strategy: Do More Of What Has Failed Spectacularly

Tyler Durden's picture

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

The global Status Quo--the U.S., the E.U., China, Japan, Cyprus, Greece, Italy, Spain, et al.--has only one choice: do more of what has failed spectacularly.

A key goal of propaganda is to mystify and obscure the Power Elites' real quandary and agenda. For example: we're just trying to help you out here, folks, by inflating another "wealth effect" bubble that will make you feel more prosperous. You're gonna love the warm fuzzy feeling of a return to the good times, even if you own zip-zero-nada in the way of productive assets.

Or: we're raising your taxes and expropriating your money via inflation to stabilize the system that benefits you. (And yes, you may kneel and kiss Janet Yellen's ring.)

The current level of mystification is truly extraordinary. But fortunately, owns a demystification device that scrubs out the mystification, leaving only stark, unforgiving reality:

1. The global Power Elites know reform is necessary, but the risks of reform are unacceptably high. Why are they unacceptably high? The Status Quo players might lose power and perquisites, and that is unacceptable. These include crony capitalists, cartels, quasi-monopolies, public unions, state fiefdoms, the banking sector and assorted other predators and parasites.

In other words, real reform is impossible because that would implode the Status Quo.

2. Doing nothing will also bring down the Status Quo. Now that the global Status Quo is entirely dependent on rising debt to fund state deficits and marginal growth of investment and consumption, the Status Quo has been backed into a corner: expand debt or die.

Since households and companies can decide not to borrow more money even if they qualify to borrow more, it falls on the central states to borrow and blow money to keep their economies from imploding. This stupendous borrowing then falls on the central banks, which must monetize most of the state debt to keep interest rates low and force investors to chase risky assets and savers to squander their precious capital on gew-gaws and trifles, otherwise known as "aggregate demand" to the Keynesian Cargo Cultists dancing around Krugman's campfire.

3. Since the only endgames to ballooning debts and declining household incomes are runaway inflation or renunciation of debt, the Status Quo has only one choice left to preserve its neofeudal arrangement: do more of what has failed spectacularly, i.e. inflate more asset bubbles as a way to mask the system's phantom collateral for a few more months or perhaps years.

Unfortunately for central banks and their politico cronies, serial asset bubbles face the headwinds of diminishing returns. All the Fed and Federal agencies had to do to launch the first housing bubble was lower interest rates and encourage subprime mortgages.

Now it takes the Fed buying trillions of dollars in impaired mortgages, lowering interest rates to zero, guaranteeing FHA loans to anyone with a pulse and a paycheck, etc. just to keep housing from flatlining. See that little blip up that trillions of dollars in subsidies and intervention bought the Status Quo?

The other serial bubble in progress is of course stocks, which recently scored nominal new highs even as the adjusted-for-inflation (consumer price index) market notched a classic diminishing-return lower high:

4. The only metrics that count are debt and the ability to service that debt. Households have this tiny little problem known as declining income that makes it impossible to service more debt unless interest rates fall to near-zero. Presto-magico, real interest rates (adjusted for inflation) are near-zero, and can't fall any lower.

(Note that this is median income, and since only the top 5% have seen an increase in income, the lower 95% have actually experienced a steeper decline than shown here.)

That means the Fed has run out of room to lower rates. From here on, households will only be able to service more debt if their income rises. Alas, with full-time employment (the only measure that counts--sorry, Federal bean-counters, political lackeys and media toadies, 12-hour a week minimum-wage barista jobs and self-employed people with net earnings of $154 a year don't count) back to 1980 levels, that is not even a remote possibility.

That leaves the global Status Quo--the U.S., the E.U., China, Japan, Cyprus, Greece, Italy, Spain, et al.--only one choice: do more of what has failed spectacularly. Yes, it will fail spectacularly again, but until then, the mystification machine is running full tilt.

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Mercury's picture

And while you were looking that way....


Bloomberg has worked himself into a suspended state of sexual arousal at the prospect of expanding executive police powers:


If the terrorists take away your freedoms, they win. If the terrorists give the government an excuse to take away your freedoms, we win. Got that?

AlaricBalth's picture

."Insanity: doing the same thing over and over again and expecting different results." - Albert Einstein

Mercury's picture

It's more like...

The Founders: The state still will find the urge to go into business for itself irresistible.

rajat_bhatia's picture

Dude, 'the founders' are a relic! You're impeding progress by bringing their name in everything! 

toys for tits's picture

Created by genuises, run by idiots.

Beam Me Up Scotty's picture

Created by genuises, destroyed by idiots.

Fixed it for ya.

AlaricBalth's picture

Our current financial system has been constructed to produce the outcomes we are getting. It is by design. The designers are the ones who are reaping the benefits. Different results require a completely different composition of our economic model.

A good start would be eliminating corporate "personhood", and bringing back some form of the Tillman Act, which would disallow corporate contributions to political campaigns. I know its a long shot...

outamyeffinway's picture

But realize that "terrorism" is like one big circle jerk.


"You terrorize us and we'll pass punitive laws against our citizens strengthening Gov and we'll do the same for you!"


Realize that and your analysis changes.

Fish Gone Bad's picture

Created by geniuses, destroyed by apathy is actually more apropos.

smlbizman's picture

bloomy is is so much easier to get probable cause if they search us first...the other way takes soooo much time...

Mercury's picture

But men like Bloomberg are much, much older.

gwar5's picture

Marx is a relic. He was a racist along with your other heroes Che, Castro, Woodrow Wilson, and Hitler. You're a relic! May you all rust in peace.

adr's picture

Insanity is doing the same thing over and over again knowing you will fail.

If you keep doing the same thing without understanding that it failed before, you're just fucking stupid.

Mercury's picture

Failure? The people who control the state and central planning are more powerful than ever.

mayhem_korner's picture



Yes, but that's "transitory".

Colonel Klink's picture

Haven't you figured it out?  It's failure by design, with no penalty clause for the policy makers other than losing a job.  Only to gain a better paying one once they do.

lead salad's picture

Quick, look behind you....Anthony Weiner has a new Twitter account...speaking of failures:

toys for tits's picture

Thank goodness, I have been running low on dick pics.

BlueStreet's picture

The 'Power Elites' don't give a fuck about the people as a whole, that's understood.  But most of them have children, and possibly grandchildren, and they are basically saying they don't give a fuck about them either. 

Beam Me Up Scotty's picture

Their children and grandchildren will be just fine.  Its OUR children and grandchildren that will be fucked at the expense of THEIR children and grandchildren.

Sudden Debt's picture

Yeah... but look at the bigger picture... we saved banks... for now...

adr's picture

You know, I keep trying to accidentally nail my wife in the ass. I keep failing. The straight approach will never work.

I guess I need to try more quantitative easing.

Sudden Debt's picture

2 bottles of red wine usually do the trick...

Isotope's picture

My favorite pickup line, "Does this rag smell like chloroform to you?"

Sudden Debt's picture

My favorite pickup line: "HERE'S 20 EURO FOR A CAB! YOU'LL NEED IT TO GET HOME WHEN I'M DONE!"

Beam Me Up Scotty's picture

@adr, LOL!!  Honey, you are so TIGHT tonight!!

Shevva's picture

If you hadn't come to an agreement before you got married you ain't going to start now.

Try your local corner with the world economy going the way it is you can bet your arse someones selling it cheap.

mayhem_korner's picture



Indeed.  The "market top" is always in right before you walk to the altar.

Chupacabra-322's picture

The Federal Reserve Charter expires on December 31, 2013 at 11:59 P.M.


After that, the Illusion and deception can continue.  It must be voted on by Congress.  Will they re cerifiy the Charter?

Well, they passed it the first time before a Christmas Holiday.

Will this be a TBTF Bank Holiday or Fasle Flag Re Certification Federal Reserve Charter to continue the Illusion?


“The illusion of freedom will continue as long as it's profitable to continue the illusion. At the point where the illusion becomes too expensive to maintain, they will just take down the scenery, they will pull back the curtains, they will move the tables and chairs out of the way and you will see the brick wall at the back of the theater.”
? Frank Zappa




Dr. Engali's picture

The federal reserve does not have a charter that ends. In 1927 congress passed the Pepper McFadden Bill which extended the charter to in perpetuity.  It can only be revoked by congress or the franchise is forfeited if they violated the law....since they own congress and write the laws I don't see that happening.

Chupacabra-322's picture

@ Dr. Engali,

Do you have a limk for:

"In 1927 congress passed the Pepper McFadden Bill which extended the charter to in perpetuity. "

adr's picture

You think the Fed believes they even need the Charter anymore?

90% of the tards in Congress don't even know what's in the Constitution. Do you think they even know what the definition of a Charter is?

Maxine Waters will probably think Ben Bernanke's holiday vacation package was cancelled.


Dr. Engali's picture

Just when you think this thing is teetering on the brink of collapse TPTB pull something out of their ass and kick the can another few months. Their ability to keep this up has been astounding to me.

adr's picture

I'd love to say they pulled something out of their ass, but that actually says something of substance exists.

This was TPTB eating egg salad for lunch and clearing out the room.

The can is kicked only because nobody can actually brave the stench long enough to affect anything.

espirit's picture

Keep stocking and stacking, it's the only way keep one's sanity.

Of course, there is the bluepill.

mayhem_korner's picture

Just when you think this thing is teetering on the brink of collapse TPTB pull something out of their ass and kick the can another few months. Their ability to keep this up has been astounding to me.


So who will be more surprised when the laws of mathematics finally overcome the scheme - you, or them?

They cannot keep it up long enough for it not to matter to me and my kids.

smacker's picture


The question always on my mind is exactly how much repair work do they actually have to carry out to prevent the whole house of cards from collapsing?

There are plenty of people who think that a few rolls of duct tape is sufficient to keep the fantasy show on the road for another generation. This could go on for another 10 years without any serious resolution.

Skin666's picture

"This first stage of the inflationary process may last for many years. While it lasts, the prices of many goods and services are not yet adjusted to the altered money relation. There are still people in the country who have not yet become aware of the fact that they are confronted with a price revolution which will finally result in a considerable rise of all prices, although the extent of this rise will not be the same in the various commodities and services. These people still believe that prices one day will drop. Waiting for this day, they restrict their purchases and concomitantly increase their cash holdings. As long as such ideas are still held by public opinion, it is not yet too late for the government to abandon its inflationary policy.

But then, finally, the masses wake up. They become suddenly aware of the fact that inflation is a deliberate policy and will go on endlessly. A breakdown occurs. The crack-up boom appears. Everybody is anxious to swap his money against 'real' goods, no matter whether he needs them or not, no matter how much money he has to pay for them. Within a very short time, within a few weeks or even days, the things which were used as money are no longer used as media of exchange. They become scrap paper. Nobody wants to give away anything against them.

It was this that happened with the Continental currency in America in 1781, with the French mandats territoriaux in 1796, and with the German mark in 1923. It will happen again whenever the same conditions appear. If a thing has to be used as a medium of exchange, public opinion must not believe that the quantity of this thing will increase beyond all bounds. Inflation is a policy that cannot last."

Ludwig Von Mises on the crack-up boom.

The Dancer's picture

Yes, the masses don't have a clue what's going down...but do we the presumed informed many truly grasp the scope and dept of this global takeover that is unfolding right in front of our eyes...this is not petty politics or merely just kicking the can down the road....JMHO, it seems bigger than that to's so controlled and a giant steamroller leveling all opposition(ie...shorts and anyone not playing their brand of ball). This is for all the marbles...control of the planet---both public and would-be private---It appear to me that the paradigm may have changed "this time" in the sense of it's scope and power that the Internationalist Elite weild at this time in all the markets.  Would like to hear comments...and I've got my hard hat on!

Antifederalist's picture

Agree.  This is for all of the marbles.  Gold market shows that.  WAR by other means.

observer007's picture

off topic:


Interview Mother of Tamerlan and Dzhokhar Tsarnaev: My Sons Not guilty

Mother: "My kids would never do anything like that. I know my kids. They never would do this."

Full Interview, just releassed:

gwar5's picture

We may never really know what the fuck happened in Boston, but what happened in Boston happens every single day somewhere around the world by fanatic muslim perps. It's a global problem and it's been going on for centuries.


Would be easy to see how/why the CIA would be tempted to manipulate terrorist events to be the excuse for Martial Law instead of the coming economic meltdown.  All they have to do is let the perps slip through and do their thing. Al-Qaeda would not oppose that either.

It's already been 20 years since the first WTC bombing and here we still are. Caliphate ain't just a dismal economic future for the Golden State. 

buzzsaw99's picture

it hasn't failed FOR THEM

gwar5's picture

Instead of liquidating the banks and starting over they're liquidating the middle class to start over. Banker fascism means never having to say you're sorry. Real crises is fascism vs self government.

O/T Sinclair reports a large holder of gold just went to a major Swiss bank to remove his allocated gold and was denied. Also, Switzerland just revived a 1934 bank law that allows them to confiscate depositor money. Confiscations on the way.

GreatUncle's picture

Remove the middle class and you get left with just two classes...


poor fella's picture

Bong yields are not co-operating with the Magical Levitation Tour drug overdose affecting the markets.  

This fucker's so broken, it can never be fixed...  think about it.  That's why there has to be a blow off top of destruction. Nobody trusts this steaming pile of manipulated garbage.  "It's ART - no, it's SHIT"

mayhem_korner's picture

Do More Of What Has Failed Spectacularly


I was sure there was going to be a pic of Rex Ryan for this post.

The Dancer's picture

gwar, YES! I do mean for all the marbles/gold! War can not be far off in some real sense...

MarsInScorpio's picture

When people diss ZH it is almost always because they cannot grasp the time it takes for a global financial system to implode - especially when the Status Quo can print unlimited amounts of fiat to "paper over" their scam.


The truth is that anyone who fails to read - and heed - the confluence of thought found in ZH, is a fool.


orangegeek's picture

Euro markets keep climbing - up between 1.5% and 2.5%.


And the gong show continues.