Deutsche Bank: "We Fully Understand Why The Authorities Wouldn't Want Free Markets To Operate Today"

Tyler Durden's picture

A brief stroke of brilliance from Deutsche Bank's Jim Reid:

Our opinion is that the BoJ is the latest runner with this demand baton which may in turn actually force others into the race (ECB in the future?), or encourage others to carry on QE for longer (the Fed?) thus reinforcing this artificial demand for fixed income. While such technicals remain in place its hard for defaults to rise significantly in the foreseeable future even with what is weak growth, average fundamentals, credit deterioration and a rise in more risky deals. However is it healthy that the default/insolvency cycle is being sedated in so many large economies? Surely the financial system and life in general has prospered through history on the basis of creative destruction. Indeed all the good looking and intelligent readers of this note are products of survival of the fittest. Economic growth over time is helped by a regular cleansing. So are low defaults helping to lock in low growth for years to come across many large economies? Clearly there are other factors at work here but we think that what's great for credit investors isn't necessarily good for the global economy. A bit of a paradox. We would stress that we fully understand why the authorities wouldn't want free markets to operate today as the risk of a huge global default and unemployment cycle would still be very high. However their intervention has a cost in our opinion. Socially this might be worth paying but we do think it exists.

Is it worth paying? Or is it just because the 64% youth unemployment in countries like Greece hasn't manifsted itself in social revolt yet, that economists believe that the current course of action, which anyone with half an ounce of common sense realizes is destructive, is sustainable? But at least day after day we get record high after record high. In that case perhaps the correct word is not "socially", but "marketly" (sic).

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Pinto Currency's picture


DBank, one of the key bullion banks involved in the central bank gold leasing scam, should "fully understand".

cynicalskeptic's picture

Gold is the least of their problems.  Guess who has the lsrgest exposure to derivatives - more than even JPMorgan?

Talk about the potential for 'Creative Destruction'................

101 years and counting's picture

at least they admit the CB's have killed capitalism and ushered in an era of communism.  everything the US hated 20 years ago has come full circle to our shores.

Badabing's picture

Deutsche Bank: "We Fully Understand Why The Authorities Wouldn't Want Free Markets To Operate Today"

Do they take us for idiots?

The banks are the authorities!

Ghordius's picture

to put it in context, what Jim Reid is also ranting obliquely against is the increasingly "anti-megabank" attitude of eurozone authorities

time for an ad-hom: notice how German Jim Reid is, pontificating as "Global Strategist" of this "German" monstrosity that Deutsche Bank is

of course from his office in... London, having previously worked for... Barkley, after his studies in... Warwick

Terminus C's picture

But but, Anglo/Judeo mega banks good... European/Judeo megabanks bad...

Sometimes I wonder why people have trouble with this simple understanding, geeze.

Basically the elites have run out of muppets to slay, at least to slake their appetite, so they are beginning to cannibalize.

Ghordius's picture

imho all megabanks are bad. it would be interesting to see if we really can talk about "European/Judeo" banks, then after all the eurozone had a little... thing with Jews involving gas, ovens and lots and lots of refugees that never came back

but I presume you mean "moneylenders" - to which I have to note that generally speaking nobody forces someone to take up debt - this happens through cultural forces, like "you need to go to university" or "you need to be a homeowner"

basically I wonder about this quite new meme "the elites this and that" then after all history is just the recordings of squabbles between elites - and most ZH commentators are part of "the global elites" - even if they don't realize it, then the entry ticket to them is an income over 100k

having said that, yes, the megabanks and the sovereigns are both looking for muppets to fleece, generally speaking

walküre's picture

generally speaking nobody forces someone to take up debt

Tell that to the Kings, Queens, Chancellors, Members of Parliament and so on who were told to take the debt or else.

Banks always finance both sides of the trade to hedge their exposure. Even when that trade meant outright war.

Who had the money and the corrupt brains to figure out how to run this business?

Jack Napier's picture

They have to understand Austrian economics. If they were stupid the Keynesian model would have fallen apart on its own years ago. The corrupt and usurious banking model is at least as old as Jesus, flipping over the tables in the temple, but probably much older. The love of money is the root of all evil afterall. There is nothing new under the sun, and a lot of forgetful memories.

Skateboarder's picture

It aint the love of money that's so bad as compared to the "I want all the money. Ever. And no one else gets to have anything. Ever." train of thinking that should be disallowed from reaching the highest points of control.

I was talking to the dude sitting next to me at the bar last night, he works in the construction business, on the managerial level of making deals and sending out technicians to fix shit in the middle of the night, etc. He was telling me how much trust has gone down over the last 20 years. Says he used to make deals with a handshake all the time, and people used to follow through; nowadays he shakes somebody's hand and calls the next day to find some secretary or whoever telling him they aint interested.

The fundamental erosion is that of trust, at all levels.

Jack Napier's picture

It isn't even that some want all the money. When you can buy everything in the world 10 times over money has lost all utility beyond the first time over. After that you need power.

They want everyone else not to have any, as you said, to enforce dependency and subserviency through the love of money.

Anusocracy's picture

A symptom of devolution bringing about a decivilized society.

Terminus C's picture

Don't get me wrong, I am not calling for the extermination of anyone. As for the gassing to which you refer one needs to only ask cui bono and one gets some... interesting... Possibilities as to who was behind this event. Speculation aside, there are elites and then there are elites.

Yes, we are among the elite of the world but that doesn't mean we want the current kleptocracy to thrive. Most of us want a return to rewarding the productive rather than the thieves.

P.s. thieves come from all groups of society... And they need to be punished, not rewarded, regardless of their... heritage...

Skateboarder's picture

100k/yr lets you barely live in the Silicon Valley (with a family of four).

Bay of Pigs's picture

"A brief stroke of brilliance from Deutsche Bank's Jim Reid"

Sorry, but there is nothing brilliant coming from this asshole or his firm.

Kirk2NCC1701's picture

Will you settle for Faux Honesty?

SheepDog-One's picture

Yep it seems it was all just blustering, all the 'We hate them commies!' Red Dawn rah rah....absolute communism swept the nation overnite and the people grovel at it's feet.

Kirk2NCC1701's picture

Ah, the "I was For the war, before I was Against it" routine.

Should be good for a promotion. -- it worked for (Hara) Kerry.

MillionDollarBonus_'s picture

Austrian economists will often use sophisticated terms like  "the division of labor" and the "socialist calculation problem" to give a false air of credibility. What they don't tell you however, is that Austrian economics is not supported by any reputable economists or leading economics institutions.

Dangertime's picture

It sure isn't supported by those economists or leading "economic institutions".


The only thing supported by those economists and leading "economic institutions" are unemployment, socialism, alien invasions, wobbly sotck markets, bond prices, and claims that only people with doctorates in economics can make such statements as you are making right now.


Now, let's all go break some windows and improve the economy.  Leading economists and their institutions say this is the solution......who are we to argue with our non leading-institution logic?

Ghordius's picture

agreed... let's buy stocks of industries producing whalebone corsets and horse-drawn carriages, then creative destruction does not exist, and so they have a reason to be financed forever (/s, just in case someone does not get it)

eclectic syncretist's picture

Kiss my big black ass Bernanke, you stupid motherfucker!  You are undoubtedly destined to go down in history as the most inept economist ever, whose grand experiment in counterfeiting only served to prove his dissertation thesis and entire life philosophy the delusional ravings of a madman.

Same goes for you too Krugman, you asshole!

Terminus C's picture

I think you need to tell us how you really feel...  Subtlety is not our strong point around here...

Oh, and be careful offering your ass to teh Bernanke, he may not use it in the way you intended...

auric1234's picture

What they don't tell you however, is that Austrian economics is not supported by any reputable economists or leading economics institutions.

Which, given the sad state the world is in, speaks volumes in favour of Austrian economics don't you think?


SunRise's picture

True; after all, if there are no reputable economists it's pretty tough for the zero-set to support anything.

Temporalist's picture

+1 MDB for brevity but I think you should use the word "disreputable" in the future as it connotates hucksterism, quackery and deceit. 

solgundy's picture

Homer wrote about the US in the Odyssey,,,,from Book IX


"I was driven thence by foul winds for a space of nine days upon the

sea, but on the tenth day we reached the land of the Lotus-eater,

who live on a food that comes from a kind of flower. Here we landed to

take in fresh water, and our crews got their mid-day meal on the shore

near the ships. When they had eaten and drunk I sent two of my company

to see what manner of men the people of the place might be, and they

had a third man under them. They started at once, and went about among

the Lotus-eaters, who did them no hurt, but gave them to eat of the

lotus, which was so delicious that those who ate of it left off caring

about home, and did not even want to go back and say what had happened

to them, but were for staying and munching lotus with the

Lotus-eater without thinking further of their return; nevertheless,

though they wept bitterly I forced them back to the ships and made

them fast under the benches. Then I told the rest to go on board at

once, lest any of them should taste of the lotus and leave off wanting

to get home, so they took their places and smote the grey sea with their oars.

cynicalskeptic's picture

"at least they admit the CB's have killed capitalism and ushered in an era of communism.  everything the US hated 20 years ago has come full circle to our shores."


Do not confuse crony capitalism where corporations use government to limit competition and enrich their coffers, offloading losses on taxpayers while bribing the masses with (in comparison, quite ) minor giveaways.  This is not a free market it is a manipulated one, controlled to benefit the large and wealthy at the expense of the many.  

It IS 'Communism" only in the sense that "Communism" as implemented exploited the mass of workers for the benefit of the few in the Nomenklatura (not at all different than other systems).  The problem was that they did so while claiming to work FOR the workers.  Such hypocrisy eventually leads to riots and revolution as many found out.  

The Communists eventually realized that "Capitalism" was FAR more profitable and held less risk.  Workers under Capitalism expected to be treated badly and were happy things had been 'better' than Marx predicted (at least for a time).  Workers under Communism were promised much and got less than their Capitalist counterparts - they felt betrayed.  Such people reach a boiling point and take real action.  Ceausescu could have been wealthier and still alive had he made he transition that others made.   

Altavoz-de-Verdad's picture

You are confusing late stage capitalism (full control of the means of producition, governance, et al by the monopolist class) with communism.  The two couldn't be more different.

markettime's picture

Does anyone have an upadated list of derivative exposure by the top banks in the world? 

kliguy38's picture opposed to simple math wifes brother is a perfect analogy.....if he can lay his hands on credit he will find a way to burn it ho' instead of bankrupting this POS ....we now create more credit for him to "invest" in cars..blow...and ho's......  maybe its good for hookers and coke dealers but its called MALINVESTMENT for our childern's future.......

pepperspray's picture

My wife's brother is the same way- add to it he's a civil servant by day and MMA fighter by night. Guy's living his own fantasy life at 36.

walküre's picture

The banks love him! That is the kind of client they want! They don't want prudent customers who are able to manage their finances well and get in and out of debt and create wealth for themselves in the process.

The banks want debt addicts.

Ghordius's picture

+1 now who is to blame? The pusher? The addict? Both? Or the assumption that life is not worthwhile without a degree and a house?

DaveyJones's picture

a blow ho sure does take a whale of credit

Skin666's picture
Schumpeter and capitalism's demise [edit]

Schumpeter's most popular book in English is probably Capitalism, Socialism and Democracy. This book opens with a treatment of Karl Marx. While he is sympathetic to Marx's theory that capitalism will collapse and will be replaced by socialism, Schumpeter concludes that this will not come about in the way Marx predicted. To describe it he borrowed the phrase "creative destruction", and made it famous by using it to describe a process in which the old ways of doing things are endogenously destroyed and replaced by new ways.

Schumpeter's theory is that the success of capitalism will lead to a form of corporatism and a fostering of values hostile to capitalism, especially among intellectuals. The intellectual and social climate needed to allow entrepreneurship to thrive will not exist in advanced capitalism; it will be replaced by socialism in some form. There will not be a revolution, but merely a trend in parliaments to elect social democratic parties of one stripe or another. He argued that capitalism's collapse from within will come about as democratic majorities vote for restrictions upon entrepreneurship that will burden and destroy the capitalist structure, but also emphasizes non-political, evolutionary processes in society where "liberal capitalism" was evolving into democratic socialism because of the growth of workers' self-management, industrial democracy and regulatory institutions.[17]

Schumpeter emphasizes throughout this book that he is analyzing trends, not engaging in political advocacy. In his vision, the intellectual class will play an important role in capitalism's demise. The term "intellectuals" denotes a class of persons in a position to develop critiques of societal matters for which they are not directly responsible and able to stand up for the interests of strata to which they themselves do not belong. One of the great advantages of capitalism, he argues, is that as compared with pre-capitalist periods, when education was a privilege of the few, more and more people acquire (higher) education. The availability of fulfilling work is, however, limited, and this lack, coupled with the experience of unemployment, produces discontent. The intellectual class is then able to organize protest and develop critical ideas.

The man knew his onions...

Bit sketchy on praxeology and all round economics though...

shovelhead's picture

Joey was a clever rascal insofar as he understood the 'intellectuals' would persuade voters they needed to 'protect' themselves and erect barriers to capitalism.

They needed protection from cronyism, not capitalism.

Kirk2NCC1701's picture

Cronyism became the official national religion, when the system's Checks & Balances were removed piece by piece in the 80's and 90s.

The Neocon propaganda machine gave this process the noble sounding name of "Deregulation". Something they concocted, and used a perfect Useful Tool to promote it: Ronny Raygun.

Ronny was the puppet, Bush was the puppet-master, pulling the strings from the Shadows of Power.

Since then this runaway Crony Island train has only picked up speed.

Acet's picture

It is the nature of the greediest men to be corruptible and it's the nature of the corruptible to seek positions where they can maximize their take.

So in a Capitalist system, the more capital you have, the more enforcers you can convince to turn a blind eye on your activities, the more legal power you can pay for and the more rules and regulations you can buy to help you protect and extend your wealth.

A couple of iterations of this and there is nothing left of Free Markets. Instead there is a thick web of rules and regulations that protect the established capital and hinder new creators of capital, a system where success does not come from flawless delivery, ruthless competitivity or superior efficiency, but instead comes from Legal and Legislative support and protection: Socialism for the Rich.

Add to this the buying of the masses with Welfare at the other end of the spectrum and what you end up with is what we see all around us: a thoroughly corrupt system where the middle classes are squeezed to support the elites and the welfare-dependent.

Capitalism, if it ever existed, has long been perverted into something else, even if an immense propaganda machine and modern marketting (with it's base in psychology and mass manipulation techniques) has kept the sheeple believing otherwise.

Ricky Bobby's picture

Fantastic Book! Schumpeter was a wise and thoughtful scholar. I have read it twice and could read it again.

Thisson's picture

Wow, that is quite excellent.  It describes almost exactly the political situation what we have now, except that it omits the crony capitalists/fascists.

Kirk2NCC1701's picture

IMO, the term "Austrian" economics is no longer useful.  Originally it was attached to the 'school of thought', as formulated by a couple of Austrians.  But, if you really think about it, "Austria" is a political entity, not an economic entity. 

It would be better and more accurate to either name it after its two leaders -- and call it Hayek-Mises economics (HME?) -- or, as I prefer to call it "Natural Economics"

alangreedspank's picture

Bankers and Wall Street stock flippers aren't the same. Bankers have to understand fundamentals better than Wall Street muppets, hence why you'll find bankers with a somewhat more Austrian view of economics.

Lets_Eat_Ben's picture

" Or is it just because the 64% youth unemployment in countries like Greece hasn't manifsted itself in social revolt yet..."


DaveyJones's picture

Caught that too. Do you ever get the feeling that these guys say this stuff just to be on record when they finally come - see guys, I was always on your side.... 

W T F II's picture

exponential function is comin' up on the outside...!! EXP will win the Belmont...