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What If Stocks, Bonds and Housing All Go Down Together?

Tyler Durden's picture




 

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

About the claim that central banks will never let asset bubbles pop ever again--their track record of permanently inflating asset bubbles leaves much to be desired.

 
The problem with trying to solve all our structural problems by injecting "free money" liquidity into financial Elites is that all the money sloshing around seeks a high-yield home, and in doing so it inflates bubbles that inevitably pop with devastating consequences.
 
As noted yesterday, the Grand Narrative of the U.S. economy is a global empire that has substituted financialization for sustainable economic expansion. In shorthand, those people with access to near-zero-cost central bank-issued credit can take advantage of the many asset bubbles financialization inflates.
 
Those people who do not have capital or access to credit become poorer. That is the harsh reality of neofeudal, neocolonial financialization. Neofeudalism and the Neocolonial-Financialization Model (May 24, 2012).
 
Injecting liquidity by creating credit and central bank cash out of thin air is not a helicopter drop of money into the economy--it is a flood of money delivered to the banks and financial elites. The elites at the top of the neofeudal financialization machine already have immense wealth, and so they have no purpose for all the credit gifted to them by the central banks except to speculate with it, chasing yields, carry trades and nascent bubbles (get in early and dump near the top).
Life is good for the kleptocratic financial Aristocracy: for debt-serfs, not so good.
 
 
No wonder the art market and super-luxury auto sales have both exploded higher. Thanks to the central banks' liquidity largesse, the supremely wealthy literally have so much money and credit they don't know what to do with it all.
 
If you want to borrow money to attend college, the government-controlled interest rate is 9%. If you want to speculate in the yen carry trade or buy 10,000 houses, the rate is near-zero or at worst, the rate of inflation (around 2% to 3%). If you want to borrow money for anything other than a socialized mortgage to buy a single-family home, tough luck, you don't qualify. But if you want to speculate with $10 billion--here's the cash, please please please take it off our soft central-banker hands.
 
If your speculations end badly, then no problem, we transfer the toxic trash heap of debt and phantom assets onto the balance sheet of the central bank or onto the public (government) ledger.
 
Given this reality, it was inevitable that the stock, bond and housing markets would all be inflated into bubbles by this monumental flood of free money. Please consider these three charts:
 

 
 
Verdict: bubble.
 
 
Verdict: bubble.
 
 
 
Verdict: bubble popping.
 
It is widely accepted as self-evident that all these bubbles will not pop because the central banks won't let them pop. That's nice, but if this were the case, then why did stocks crater in 2000-2001 and 2008-2009, and why did the housing bubble implode in 2008-2011? Did they change their minds for some reason?
 
No; they assured us right up to the moment of implosion that everything was fine, there was no bubble, etc. The only logical conclusion is that bubbles pop even though central banks resist the popping with all their might.
 
In the past, central banks were pleased to inflate one bubble at a time, enabling money both smart and dumb to flee one smoking ruin and get busy inflating the next bubble-ready asset class.
 
But now, thanks to essentially unlimited liquidity and credit, the central banks have inflated three bubbles at the same time: stocks, bonds and housing. That raises an interesting question: what if all these bubbles pop in unison? Will the central banks be able to place a bid under all three markets simultaneously? If so, where will all that freed-up cash go next?
 
One possibility is gold, another is commodities such as grain and oil. The latter is especially interesting, because central banks and governments hate energy speculators with special intensity because the "Brent vigilantes" have the power to boost inflation where it matters, i.e. energy.
 
Once energy takes off in a speculative bubble, the rising cost of energy sucker-punches the already-anemic global recovery, and the responsibility eventually lands on the laps of the central banks who created all the bubbles. Their quantitative easing policies discredited, the central banks will have to restrain their liquidity hand-outs, and that will undermine what's left of the various speculative bubbles they've blown.
 
Those who argue bubbles won't be allowed to pop ever again should look at history from 1999 to the present again.
 

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Fri, 05/24/2013 - 13:33 | 3596338 Headbanger
Headbanger's picture

Then put your head between your legs and kiss..... you know the rest.

Fri, 05/24/2013 - 13:43 | 3596365 insanelysane
insanelysane's picture

I don't know about the rest of you but I feel wealthier just knowing that Ben and the Banksta buddies are getting wealthier.

Fri, 05/24/2013 - 13:50 | 3596387 The Thunder Child
The Thunder Child's picture
What If Stocks, Bonds and Housing All Go Down Together?

Then it would be the currency that connects them going down and not the individual items.

Fri, 05/24/2013 - 14:00 | 3596414 CrashisOptimistic
CrashisOptimistic's picture

Not particularly.  That's a narrative pushed by the gold nazis.

The concept of medium of exchange is definitely in play, but in a civilization based on transportation via oil, pretty much only oil matters.

All those parameters of equities and bonds and houses will have to price in BTUs.  Only BTUs have value.

Mon, 05/27/2013 - 12:23 | 3601262 MeelionDollerBogus
MeelionDollerBogus's picture

don't forget LNG vehicles. They exist. They work well.

Also don't forget we need to trade non-energy things for energy since energy is merely the leverage upon which the rest of the economy operates. Without energy we obvious don't go very far & don't make many things but we do things, make things, other than energy storage & acquisition. All these things have needed value.

Fri, 05/24/2013 - 14:16 | 3596473 Panafrican Funk...
Panafrican Funktron Robot's picture

"What If Stocks, Bonds and Housing All Go Down Together?"

Given that the Fed has pumped all three, it would make sense that they would go down together based on Fed actions.  That's the problem with not allowing any major asset class to be an effective short; there's subsequently no effective price floor.

Fri, 05/24/2013 - 15:34 | 3596752 daveO
daveO's picture

Exactly. The FED is buying 70% of Treasuries, on their way to 100%. Their Banking buddies are buying stocks. Their Hedgie stoolies are now buying housing. This ends with a few rich 'controllers' and a nation full of peasants. We have witnessed the death of Free Markets under Ben Shalom (or is it Lenin) Bernanke. 

Fri, 05/24/2013 - 17:40 | 3597110 whotookmyalias
whotookmyalias's picture

f*ck this market

Fri, 05/24/2013 - 14:13 | 3596466 j0nx
j0nx's picture

I'm doing my part for those who are doing God's work. It's a win win for everyone involved.

Fri, 05/24/2013 - 13:59 | 3596408 caconhma
caconhma's picture

What If Stocks, Bonds and Housing All Go Down Together? Well, this is exactly our inevitable bright tomorrow with military trying to control our towns and cities..

So, be ready!

 

Fri, 05/24/2013 - 13:34 | 3596340 TheEdelman
TheEdelman's picture

I dont think anyone is arguing they "wont be allowed" to pop.  Its more like they are arguing they "cant be allowed" to pop.  

Fri, 05/24/2013 - 14:19 | 3596477 Jekyll_n_Hyde_Island
Jekyll_n_Hyde_Island's picture

The answer is clear, and the question is relevant.  https://en.wikipedia.org/wiki/Dialectical_materialism

 

  Tapering and quantitative easement, sequestration and the such are all complex labellings for how the government 'fixes' the market.  Double entendre there.

 

  There will be no popping this time around.  Sorry fellow ZH'ers.  It will be a controlled dialectical materialism inspired wind down.

Fri, 05/24/2013 - 14:44 | 3596588 viahj
viahj's picture

even "the best laid plans of mice and men"...

-Robert Burns

Fri, 05/24/2013 - 17:00 | 3597010 thisandthat
thisandthat's picture

Plan: the guaranteed way things won't happen.

-me

Fri, 05/24/2013 - 15:37 | 3596760 daveO
daveO's picture

Tea Party in Congress is the only hope, short of a bloody revolution. They did manage to trim the deficit, this year. That's the same as capping Bernanke's theft, since money and debt are the same. 

Fri, 05/24/2013 - 13:35 | 3596345 maskone909
maskone909's picture

no offense but the title of this article is called

What If Stocks, Bonds and Housing All Go Down Together?

this article goes on to describe what the authors definition is of the current financial bubbles but doesnt even attempt to back up the question poised in the title of the paper.

this is more of an attempt to plug gold.  which is fine by me i own the shit.  but please, next time, title the article to meet the description of its contents more appropriately. 

Fri, 05/24/2013 - 14:08 | 3596442 spinone
spinone's picture

what if stocks bonds and housing go down together?  I think thats called deflation.

Fri, 05/24/2013 - 14:22 | 3596497 Go Tribe
Go Tribe's picture

If they only go down in pricing in dollars, then there may be inflation of other assets.

Fri, 05/24/2013 - 13:35 | 3596346 fonzannoon
fonzannoon's picture

What if they don't? Non pomo day and we are about to go green.

Fri, 05/24/2013 - 13:53 | 3596393 Dr. Engali
Dr. Engali's picture

They have to put a lot of lipstick on this pig going into a long weekend. Japan will have to trade with the U.S market closed Monday. It should be interesting.

Fri, 05/24/2013 - 14:05 | 3596429 fonzannoon
fonzannoon's picture

Doc something tells me the fed has a call into every major institution worldwide already reminding them that anything other than a well bid market is essentially the same thing as global market suicide. I have a feeling you and I and a lot of other people should just enjoy the weekend because more of the same bullshit is on the way.

 

Fri, 05/24/2013 - 14:14 | 3596470 Dr. Engali
Dr. Engali's picture

Yeah I agree they will be on the horn all weekend long, and if they don't cooperate then they will be the first experimental take down under Dodd-Frank.

Fri, 05/24/2013 - 14:33 | 3596542 RSloane
RSloane's picture

Hi Fonz and Doc. The lipstick has been liberally applied to the pig and we are green. A lot of phone calls are going to be made between now and Tuesday morning, I agree. No doubt they will be deciding what is 'best for us'.

Fri, 05/24/2013 - 14:40 | 3596568 Dr. Engali
Dr. Engali's picture

Hi Sloan. It should be an interesting weekend. I'm pretty sure I know what they would like to do with us, but there is still a little meat on the carcass they need to pick off before they are finished.

Fri, 05/24/2013 - 14:41 | 3596575 fonzannoon
fonzannoon's picture

Hi RSloane,

Did taking that long break from ZH change your perspective about anything? This site is fantastic but it creates the constant sense that something is juuust about to break. Then it does not. Having taken that break, do you feel more strongly one way or the other that something may or may not happen soon?

Fri, 05/24/2013 - 15:55 | 3596819 americanspirit
americanspirit's picture

Hi Fonz - love your posts. And you're right, there is an underlying current on ZH that things are just about to break. But it's worth keeping in mind that 5-10 years on a historical line is only an instant, although day to day it seems like a long time. So, on a historical timeline, things are indeed just about to break.

Fri, 05/24/2013 - 21:50 | 3597624 fonzannoon
fonzannoon's picture

Thank you for that.

Fri, 05/24/2013 - 14:26 | 3596509 Panafrican Funk...
Panafrican Funktron Robot's picture

$10 billion in POMO left to work through on a short week, including a $5 billion day on Friday.  2% on the 10 year seems to be a point of major defense.  Based on the action in REM since the start of May, and game theory-ing this out a bit, I think MBS is going to be the casualty (relatively speaking).  There just isn't a lot of inventory left for the Fed to buy, and the better conduit for flow is USTs anyways.  I think a June or Sept. tightening is actually pretty likely, but I see it as follows:

1.  Drop the MBS side either entirely, or very limited ($5-$10 bln, excuse "housing appears to be recovering strongly"); there is some major froth developing in residential RE and they may have an interest in capping this off a bit/getting some lower bid prices for their continued real asset grabs.

2.  Increase the UST side (excuse "there appears to be softness in the economy"/"continued concerns about the slow rate of GDP growth"/"significantly missing inflation targets", pick your poison really, but they actually HAVE to up the pace of UST buying to maintain general solvency).

Fri, 05/24/2013 - 14:48 | 3596600 viahj
viahj's picture

exactly, when backed fully into the corner, MBS won't mean shit. 

Fri, 05/24/2013 - 13:36 | 3596350 realtick
realtick's picture

what do you mean, if?

Markets Crash When Credit Creation Contracts

Fri, 05/24/2013 - 13:46 | 3596375 fonzannoon
fonzannoon's picture

What contraction in credit creation? QE Tapering? It's bullshit until proven otherwise. It's a mindfuck to make you think that they could ever do it. That the possibility exists. It does not exist. Can they slowdown for a month or so? Maybe. The market seems to finally have caught on that they can't stop.

Fri, 05/24/2013 - 14:52 | 3596613 realtick
realtick's picture

you are confusing public credit creation with private

QE is an attempt to offset private credit contraction with public credit expansion

the problem is $2.5 trillion in QE is a drop in the bucket compared to the over $56 trillion in private debt out there

Fri, 05/24/2013 - 14:56 | 3596626 fonzannoon
fonzannoon's picture

I thought you were talking about this QE taper bullshit. You mean public deleveraging....

I hear you. when does the rubber hit the road?

Fri, 05/24/2013 - 15:01 | 3596642 realtick
realtick's picture

i mean private, non-federal credit

the rubber hits the road when the orange line in the second chart hits the top of the wedge and reverses lower

Fri, 05/24/2013 - 13:38 | 3596354 Cursive
Cursive's picture

While I think this is what is going to happen, I find it hard to imagine how people will adjust after this big Fed-induced bubble popping.

Fri, 05/24/2013 - 13:39 | 3596356 IridiumRebel
IridiumRebel's picture

Everything will go down once the central banks stop going down on the market. Ben needs some mouthwash and a cig.

Fri, 05/24/2013 - 13:40 | 3596359 Dr. Richard Head
Dr. Richard Head's picture

But this time is different and all it takes is fifteen minutes now.  *rolls over in bed and hits the snooze button*

Fri, 05/24/2013 - 14:09 | 3596360 the Absurd
the Absurd's picture

the Grand Narrative of the U.S. economy is a global empire that has substituted financialization for sustainable economic expansion

There's no such thing as "sustainable economic expansion" in a world that is not infinite.  Nothing grows forever.

Fri, 05/24/2013 - 13:45 | 3596366 Oligarch
Oligarch's picture

You could show the prices of JGB instead of the yields. The yields are just beginning to go up.

Fri, 05/24/2013 - 13:44 | 3596369 Major Major Major
Major Major Major's picture

What If Stocks, Bonds and Housing All Go Down Together?

 

It would be good to have some cash.

Fri, 05/24/2013 - 13:46 | 3596372 Zen Bernanke
Zen Bernanke's picture

Further to this point, why after so many failed attempts at price stability using monetary policy do people still place faith in the federal reserve bank.  it's obvious they do not know what they're doing, in fact, it could be easily argued what they've done has consistantly made things even worse, every single time. 

Fri, 05/24/2013 - 14:08 | 3596441 Philo Beddo
Philo Beddo's picture

it's obvious they do not know what they're doing

 

Zen...are you sure?  Depending on your perspective, one can make a case they know exactly what they are doing.

 

consistantly made things even worse, every single time.

 

Again, this depends on your perspective.   My thought is these bubbles are intentionally created with the inevitable intention of creating an insolvent Fed, ECB, BOJ, etc.  all of which will get the finger pointed directly at them for all of these bubbles, theft, drug cartels, war funding, etc....Then what could you possibly do with all of them now that they are insolvent and unethical???  Oh, I know...you create one global central bank since all those other "regional" banks don't know how to really handle themselves...

Create a problem, provide the solution.   On a large scale.

Fri, 05/24/2013 - 15:10 | 3596680 IamtheREALmario
IamtheREALmario's picture

Uhu ... and we leap into the arms of the global banking empire that has promised to save us.

http://www.youtube.com/watch?v=V1FFVWEQnSM

Fri, 05/24/2013 - 15:48 | 3596796 daveO
daveO's picture

It's a centralization of economic power to New York City. Artificially low interest rates transfer ownership to the few 'connected' Bankers and Hedgies in NYC. Just think of it as 'Moscow on the Hudson', and it all makes sense. Pay off your debt and move your money into real assets, not FED notes or banks. That's your only defense. 

Fri, 05/24/2013 - 13:45 | 3596373 NipponMarketBlog
NipponMarketBlog's picture

 

 

So what you're arguing here is that some form of central bank accountability will eventually materialise?

I'll believe it when I see it....

 

http://nipponmarketblog.wordpress.com/

Fri, 05/24/2013 - 13:47 | 3596374 Tinky
Tinky's picture

If they all go down at once, I will top off a fine Chinese meal with colLapsang souchong tea.

Fri, 05/24/2013 - 14:28 | 3596519 Panafrican Funk...
Panafrican Funktron Robot's picture

Love that stuff.  Feels like I'm drinking an excellent cigar.

Fri, 05/24/2013 - 13:46 | 3596378 Dr. Engali
Dr. Engali's picture

Bubbles only exsist in areas where everybody has their money on the same side of the boat, and that is in the "safety" (chuckle) of the bond market

Fri, 05/24/2013 - 13:48 | 3596382 Dr. Richard Head
Dr. Richard Head's picture

I agree.  The bond market is as safe as a conterfit Chinese-made condom.

On a related note, someone should have given Bernanke's dad a vasectomy years ago because it's seems like we have been paying banker child-support for years now.

Fri, 05/24/2013 - 13:49 | 3596384 IridiumRebel
IridiumRebel's picture

3 day weekend mofos! I wonder what fucked up market changing news will be released at 5:00PM?

Fri, 05/24/2013 - 13:49 | 3596385 PAWNMAN
PAWNMAN's picture

The best news is that when this bad boy finally blows, interest rates will already be at zero. Along with QE infinity, all the Fed bazookas have been fired. Perhaps this time we may have a genuine recovery. One can only hope....

Fri, 05/24/2013 - 14:32 | 3596537 Panafrican Funk...
Panafrican Funktron Robot's picture

"Along with QE infinity, all the Fed bazookas have been fired."

I don't know that you fully comprehend "infinity".  You realize they can bid the entire UST curve at will, right?  However, if we're talking "real" terms, the "bad boy blows" event has already occured, we're in the midst of a managed collapse.

Fri, 05/24/2013 - 15:40 | 3596765 PAWNMAN
PAWNMAN's picture

It was an attempt at being optomistic. I have 2 young boys that will have to wade through this cesspool.

Fri, 05/24/2013 - 15:52 | 3596806 daveO
daveO's picture

Killing Gadafi, and threatening Iran, are also aspects of the managed collapse. End the Petro- Dollar and they loss control. All the inflation they have created comes crashing back on shore.

Fri, 05/24/2013 - 13:50 | 3596388 dolph9
dolph9's picture

Nothing goes to infinity, and lots of things can go to zero.  Fiat money can go to zero if mismanaged, and capital can go to zero if abandoned/destroyed.

As such, life, and the world economy, is an eternal struggle against zero, and infinity is never achievable and should be abandoned as a goal.

Fri, 05/24/2013 - 13:57 | 3596399 sbenard
sbenard's picture

This is EXACTLY what I expect to happen! THe Fed has painted us into a corner, and when interest rates begin to rise, even modestly, stocks, bonds, and real estate will ALL tank simultaneously.

Billy Joel said it best in Goodnight Saigon: "We will ALL go down together..."!

Fri, 05/24/2013 - 15:03 | 3596652 Sofa King Confused
Sofa King Confused's picture

Only The Good Die Young

Fri, 05/24/2013 - 13:57 | 3596400 Quinvarius
Quinvarius's picture

I don't know if the bubbles will pop or everything else will just adjust around them.  One thing is clear.  Their existance sucks capital out of the real economy and causes great damage to it.  The fools at the Fed don't get it.  The banks are not the economy.  Putting money into the stock market is not investing to build the economy.  Making loans to new companies is investing in the economy.  Putting money in the stock market to chase prices around creates nothing.  So in the end, the US economy must continue to fail as it is strangled.  Buy gold.  The Fed and the Treasury are morons.  The fact they hate gold is just proof that they did something really stupid with it and are trying to cover it up.  No one with common sense do anything but let gold rise until it stabilized the system.  What they do only makes sense in a world where they lost all their gold and have gold debt instead of gold assets. 

Fri, 05/24/2013 - 14:13 | 3596468 spinone
spinone's picture

The fools at the fed get it, but all they care about are the banks.

Fri, 05/24/2013 - 14:33 | 3596544 Dr. Engali
Dr. Engali's picture

It's not the fed that doesn't get it. It's people who believes the fed is doing this for the benefit of the economy when they are not. All they are doing is buying time while the connected get out and buy real things, and the police state gears itself up. There is no way out of this boax and they know it.

Fri, 05/24/2013 - 13:56 | 3596402 astoriajoe
astoriajoe's picture

It would be fun to try and deposit monopoly money at a bank and just see if they get it.

Fri, 05/24/2013 - 14:02 | 3596422 Seasmoke
Seasmoke's picture

3 bubbles.

3 scandals.

3 is a magic number.

Fri, 05/24/2013 - 14:10 | 3596447 Major Major Major
Fri, 05/24/2013 - 14:08 | 3596440 Rick Blaine
Rick Blaine's picture

And we would all go down together.

We said we'd all go down together.

Yes, we would all go down together.

Fri, 05/24/2013 - 14:13 | 3596449 Money 4 Nothing
Money 4 Nothing's picture

Zero Hedge should be reporting this story.

 

IMF boss Christine Lagarde to be formally charged TODAY after 'abusing position with £270million fraud and embezzlement scam'

http://www.dailymail.co.uk/news/article-2329449/French-minister-says-IMF...

Fri, 05/24/2013 - 14:24 | 3596503 Go Tribe
Go Tribe's picture

Nice catch.

And why do all these female central bankers - Lagarde, Yellen, etc. - all look like men? Are they shadow bankers in sex as well?

Fri, 05/24/2013 - 15:38 | 3596756 Money 4 Nothing
Money 4 Nothing's picture

You would shit if you found out who Angela Merkel father was. You just reminded me of a woman that looks like a man.

Well, I always wondered why she had such a striking resemblance to Adolph Hitler? Mystery solved.

Fri, 05/24/2013 - 14:11 | 3596451 Lordflin
Lordflin's picture

There are many traits that define decadent culture... I read an article today suggesting that all the great love stories were written about homosexual lovers... To oppose such behavior is the epitomy of an unelightened mind... Well, I never claimed to be enlightend, nor would I reject a fellow human soul based on their practice of such aberrant behavior... But I am well familiar with the fact that societies 'rediscover' said enlightened joys of such behavior midst a free fall to the bottom.

Chief among the traits defining a culture in the heyday of it's decline is hubris... And while this is the only age I have lived in and so I cannot write with certainty, from my limited vantage point we must be about the most air headed lot of arrogant fools to have ever graced this planet.

God help us as we rediscover all the ways in which human society can not work the outcomes of which can only be bad...

Fri, 05/24/2013 - 14:11 | 3596454 disabledvet
disabledvet's picture

"here we go again. Same old pooh again. Walkin' down the avenue. You all know what we've been through." I mean without reference to the war effort and the trillions of "forever money" allocated to that "forever war" then we...nay YOU "of Two Minds"...are not talking anything even remotely approaching reality. Of course I do agree "markets do go up. Markets do down." Wow. Sounds like you're ready for CNBC with that one.

Fri, 05/24/2013 - 14:36 | 3596552 Panafrican Funk...
Panafrican Funktron Robot's picture

For some reason, the following song came into my head reading this:

http://www.youtube.com/watch?v=w-NshzYK9y0

 

Fri, 05/24/2013 - 14:16 | 3596475 orangegeek
orangegeek's picture

NASDAQ100 Hourly is just a 60 degree line up for over a month.

 

http://bullandbearmash.com/chart/nasdaq100-hourly-broke-channel-week-cha...

 

Not sure what the fallout does for us, but nonetheless, thanks Ben and Barry.

Fri, 05/24/2013 - 14:17 | 3596483 bugs_
bugs_'s picture

and gold too.

Fri, 05/24/2013 - 14:20 | 3596492 nomorebuyins
nomorebuyins's picture

What time is that 3:30 ramp? Psst 2:09.

Fri, 05/24/2013 - 14:30 | 3596528 Yancey Ward
Yancey Ward's picture

All asset classes falling together should be quite bullish for all asset classes.

Fri, 05/24/2013 - 14:43 | 3596577 Mark_BC
Mark_BC's picture

Come on Tyler, you know very well that "sustainable economic expansion" is an oxymoron. Grade 10 math teaches us about exponential functions. There is a limited amount of natural resources available to power economic activity, and the world has been at Peak Oil for 8 years now (Peak natural Gas should arrive within a couple decades, and Peak Coal after that). The only way economic activity can "expand" while resource supply remains flat or decreases is if efficiency improves by a corresponding inverse amount. That isn't happening, unfortunately, because of some laws you may have heard about thermodynamics.

 

Edit: Oh, I see this was from Charles Hugh Smith, so that explains it. Despite being a contributor to Chris Martenson's blog for a few years now, he still doesn't seem to grasp the concept of Peak Oil or have any clue about how the financial system interacts with the world of real resources. Imaginary thought experiments are much easier to develop.

Fri, 05/24/2013 - 15:58 | 3596829 daveO
daveO's picture

Peak Credit trumps that. Peak Oil is smokescreen to cover the FED's debasement.   

Fri, 05/24/2013 - 19:23 | 3597327 MeelionDollerBogus
MeelionDollerBogus's picture

No, peak oil is solid science. However that doesn’t mean we can’t get more clever about reduction of energy use for the same work output value, and increases in bio-solar electrical harvesting (photosynthesis)

Fri, 05/24/2013 - 14:42 | 3596584 Downtoolong
Downtoolong's picture

What If Stocks, Bonds and Housing All Go Down Together?

Then the uber-wealthy ruling class who run the roller coaster will make three times as much money off the dump, just like they did off the pump, and then reload the roller coaster for the next trip. Surely you don’t think they will shut down an attraction this profitable after just one ride.

 

Fri, 05/24/2013 - 19:22 | 3597322 MeelionDollerBogus
MeelionDollerBogus's picture

Of course. The real question is: what if everything moves really big, up or down, and it’s not insider trading by the criminal owners of the many nations of Earth? That would be like unicorns shitting skittles. Everything as per normal is traded on the inside & you see nothing until it’s too late to get in on the trade or even protect yourself from adverse externalities.

Fri, 05/24/2013 - 15:06 | 3596660 RaymondKHessel
RaymondKHessel's picture

The one constant since 1999 - GOLD. Up exponentially.

Stocks and housing both crashed in 2008-9. That was a double.

Bonds are stuck... The dollar will become a bubble as Japan and Europe sink.

Housing has just started. Those few new homes that created this average of 350k or so means little.

I see a GM scenario where bondholders of all types get hosed big-time with a strategic default of all participating countries. This will erase the deficit from my guess 28T to 2.8T sometime in the 2020's. Lots of other stuff will happen too.

High-end housing, Gold, and the usual will prosper. I see Gold being priced to upwards of $20,000 USD per oz. Right now, the dollar is gaining due to others failures which brings Gold in $$$ down but really means nothing....

Too bad I have no gold... left it in the last house I sold in the basement behind the brick walls where the wolfpack stole them.

Fri, 05/24/2013 - 15:06 | 3596666 Lord Peter Pipsqueak
Lord Peter Pipsqueak's picture

Q.what if x goes down? A Print money.

Q.What if y goes down? A,Print money.

Q.What if z goes down? A. Print money.

Q.What if x,y and z go down? A Print money - who would a thunk it?

Thanks for that article,noone on ZH could have worked it out otherwise.

Fri, 05/24/2013 - 16:20 | 3596901 Dr_Lucid
Dr_Lucid's picture

Nice POMO buffers through the week to offest the "panic" selling. I love how we've finally seen some days with nice POMO and the markets are not up over +100 points.  I got the sense that a few headlines noting the FIRST down week since what seems like the stone ages is akin to seeing a Unicorn in an apple orchard.  Might rare indeed!

But wait....its a THREE day weekend.  Like that guy noted earlier, Ben and buddies grabbed straws to see who could get out some bad news at 5PM. 

There is a whole tribe of them with shoes (and flip-flops) to drop, so pay attention to who gets to drop first.

Fri, 05/24/2013 - 19:17 | 3597311 LooseLee
LooseLee's picture

Fortunately these 'elites' will die a horrible violent death from the very poor they sought to destroy. Long live the poor & downtrodden!

Fri, 05/24/2013 - 19:59 | 3597403 q99x2
q99x2's picture

Where are those straight jackets? Central banksters are on the loose.

Sat, 05/25/2013 - 01:29 | 3597956 WallowaMountainMan
WallowaMountainMan's picture

"What If Stocks, Bonds and Housing All Go Down Together? "

they push something else up.

but i don't know what.

but i'll guess its inflationary.

 

 

Sat, 05/25/2013 - 01:31 | 3597960 WallowaMountainMan
WallowaMountainMan's picture

yeah.

the imaginary has to be taken out on the 'real'.

no choice.

reality matters.

 

Sat, 05/25/2013 - 08:08 | 3598126 PT
PT's picture

Please pardon my ignorance:
What if those who can borrow at zero percent just keep borrowing, buying and selling to each other?  Can the Ponzi go on forever then?  Milk for 2 bucks, wages at ten grand per year, but PEs at a million and real estate at a million per square metre?  If the average mortgage per week already = the average wage per week ( and then there is upkeep, utitlities, food etc ), why can't it get higher?  Just a couple of rich blokes selling ever expensive stocks and RE to each other at inflated prices, using overpriced sales to "pay down debt" while taking on more debt.  If Madoff could borrow at zero percent, couldn't he have kept on going forever, even with a constant sized customer base?  

Okay,  here is my real question.  If I am right and TPTB can go forever like this, what will be the trigger that makes it all fall over?

Sat, 05/25/2013 - 08:13 | 3598131 PT
PT's picture

And while I'm still here, another question.  What is the trigger that makes wages go up in a hyper-inflationary environment?  Bosses don't just give payrises because they have more money, especially if there are plenty of other starving slaves out there working for nothing.  But if the slaves don't have enough money, then only the food manufacturers will survive.

Sat, 05/25/2013 - 08:31 | 3598148 Bearwagon
Bearwagon's picture

Hint: If they keep buying and selling to each other - from where shall interest be ripped off? That's why they can't do that. They hope to rip-off you and me - not themselves. Fiat is their merchandise. Who did ever make a profit by keeping all the merchandise for himself? So they won't.

Tue, 05/28/2013 - 17:16 | 3605151 PT
PT's picture

So sooner or later TPTB give poor people pay rises so that we can cover their interest costs?  Have we any way of figuring out what will trigger that to happen?  (I call it the "Flood Up" effect.  Much more effective than the "Trickle Down" effect.  Or maybe I'm going off-topic.)

Sat, 05/25/2013 - 09:13 | 3598179 Ban KKiller
Ban KKiller's picture

Is wealth a certain car or home or piece of jewelry? Or is wealth the creation of interest by using fiat? Ask the formally wealthy. Finance  is a sham today as we all can see.if you don't hold "wealth" it is meaningless when TSHTF. MEANWHILE...my chickens lay eggs and their eggs are wealth...especially when I am hungry. Yeah, still stacking too.

Wed, 05/29/2013 - 17:27 | 3608600 PT
PT's picture

I like the definition of wealth being "the amount of days you can do whatever the hell you like before you have to go back to doing something you don't want to do."  While money is definitely involved, it really comes down to a measure of time.  ( Okay, I'll be accurate:  WEALTH = TIME X MONEY ).  Naturally, the figures are different for different people, but it looks like a good measure to me.

Sat, 05/25/2013 - 11:06 | 3598296 screw face
screw face's picture

Bully, Bully........neobitchez

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