Guest Post: Get Ready For The Next Great Stock Market Exodus

Tyler Durden's picture

Submitted by Brandon Smith via,

In the years 2006 and 2007, the underlying stability of the global economy and the U.S. credit base in particular was experiencing intense scrutiny by alternative economic analysts. The mortgage-driven Xanadu that was the late 1990s and early 2000s seemed just too good to be true. Many of us pointed out that such a system, based on dubious debt instruments animated by the central banking voodoo of arbitrary fractional reserve lending and fiat cash creation, could not possibly survive for very long. A crash was coming, it was coming soon, and most of our society was either too stupid to recognize the problem or too frightened to accept the reality they knew was just over the horizon.

The Federal Reserve had cheated America out of an economic reset that was desperately needed. The 1980s had brought us utter destruction disguised as “globalization.” Our industrial center, the very heart of the American middle class that generated enormous wealth and decades of opportunity, had been dismantled and shipped overseas to the lowest bidder. It was then that the U.S. economy actually died; we just couldn’t see it. From that point forward, Americans were fully dependent on the charity of central bank money creation and international bank lending standards. The collapse that should have occurred in the 80s was delayed and thus made more volatile as the Fed artificially lowered interest rates and allowed trillions upon trillions of dollars in dubious loans to be generated. Free money abounded, and average citizens were suckered royally. Their greed was used against them, as they collateralized homes they could not afford to buy more crap they didn’t need. Of course, you know the rest of the story...

Today, credit markets remain frozen. Lending is nowhere near the levels reached in 2006. The housing market is showing signs of life; but that’s only because most home purchases are being made by banks, not regular people, for pennies on the dollar, as bankrupt properties are then reissued on the market for rent rather than for sale. If you are lucky, maybe one day you’ll get to borrow the keys to the house you used to own. And, millions of higher-paying full-time jobs have been lost and then replaced with lower-paying part-time-wage slavery positions. The image of American prosperity carries on, but it is nothing but  a cruel farce; and anyone with any sense should question how long this false image can be given life before the truth dawns.

The novice will question why it is necessary to re-examine all of this information. Is it not widely known? Am I not simply preaching to the choir a message heard over and over again since the crash of 2008? Maybe - or maybe it is time for us to finally apply some foresight given our knowledge of the recent past.

Why did 2008 creep up on so many people? Weren’t there plenty of economists out there “preaching to the choir” at that time? Weren’t there plenty of signals? Weren’t there plenty of practical conclusions being made about the future? And yet, the world was left stunned.

The truth is, human beings have a nasty habit of ignoring the cold hard facts of the present in the hopes of using apathy as a magical elixir for future prosperity. They want to believe that disaster is a mindset, that it is a boogeyman under their bed that can be defeated through blind optimism. They refuse to accept that disaster is a tangible inevitability of life that pays no heed to our naïve, happy-go-lucky attitudes. The American people allowed themselves to be caught off guard in 2008, just as they are setting themselves up to be caught off guard again today.

Again, the reality is clear; the Federal Reserve has propped up equities and bonds using money created out of thin air — so much so that both markets have become totally reliant and disturbingly addicted to fiat injections. The distribution of this fiat threatens the continued dominance of the dollar as the world reserve currency and will invariably lead to currency collapse and hyperstagflation. This process is much more likely to climax in the near term given the accelerated rate of quantitiative easing within our system to date and the accelerated rate at which our primary lenders (namely China) are dumping the dollar in bilateral trade with each other. The endgame is obvious, but I still fear millions of people within this country and around the world will be shell-shocked once again by a renewed crash.

The argument is always the same: “Yeah, things might get dicey, but it won’t be as bad as all the doom-mongers claim, and probably not for many years.”

Similar statements were made by naysayers before the Great Depression and before the 2008 crash. So why are the skeptics wrong again this time around?

The Stimulus Fantasy

Let’s put this in the simplest terms possible: Stimulus is now the lifeblood of our economy. There is nothing else sustaining our nation. Period. Stimulus in the form of bailouts and QE are keeping the stock market and bonds afloat.  This means that the continued existence of equities, and the continued existence of healthy treasuries, and thus the foundation of our currency, our general economy, and a functioning (or barely functioning) government, is completely dependent on the Fed continuing to print.

In recent weeks, the Fed hinted at possible intentions reduce or remove stimulus measures, which would effectively shut down the life-support machine and let the patient drown in his own fluids.

Day traders and common investors are not very bright, but they do understand well that no stimulus means no stock market and no bond market. In response, indexes have become erratic, shifting on the slightest rumor that the central bank might continue QE for a little longer. Pathetically, the Dow Jones now rallies upward whenever bad financial news hits the wire, as insane investment groups pour in money in the hopes that dismal economic developments might cause the Fed to extend the bailout bonanza.

In our modern nightmare era of hyper-centralized economy, one word or rumor from Ben Bernanke now determines whether stocks dramatically rise or fall.  This is NOT the behavior of a healthy and vibrant fiscal system.

The anatomy of American finance and trade has been horribly mutilated; and clearly, such a monstrous creation cannot last. Stocks are supposed to perform based on the true profitability of individual businesses as well as the political and social health of the overall culture. The wild printing of paper money by private banking magnates is not a catalyst for a successful economy. Whether the Fed actually ends QE is ultimately irrelevant. No fiscal structure can survive when it abandons fundamentals for fantasy. Either QE continues, becoming less and less effective in staving off negative results in equities, inspiring a flight from the dollar leading to a crash, or QE ends, exposing the inevitability of negative results in equities, leading to a crash.  If the Fed ends stimulus, the process of collapse will merely take place slightly faster than if stimulus remains.

But every historic economic crisis has a defining moment, a moment in which the tide turned overwhelmingly sour for a majority of the public. The question now becomes what, exactly, will trigger the avalanche?

Precious Metals Signal Secret Shift To Asia

As I have discussed in numerous articles over the years, China's shift away from the U.S. consumer and the U.S. dollar is well under way.  Over half of the world's major economies now have bilateral trade agreements in place which remove the dollar as the world reserve currency in trade with China and the ASEAN economic bloc.  China is issuing trillions in Yuan and Yuan denominated bonds around the globe, setting the stage for a higher Yuan valuation and allowing Chinese consumer markets to replace American consumer markets as the number one driver of manufacturing in export countries.  At the same time, China has increased its purchases of precious metals exponentially to the point that the nation is now set to become the largest holder of gold and silver in the world in the next two years.  This is clearly in preparation for a currency crisis event...

The buying spree in Asia seems to directly contradict the "paper market" value of metals in recent weeks.  Demand for gold and silver has only increased throughout most of the world, even in light of Federal Reserve suggestions that QE might end.  Manipulations within metals markets by the CME and JP Morgan explain half the story, but there may be another issue at work.

It is very possible that the COMEX is now essentially broken, and that gold and silver ETF's (paper gold and silver) are decoupling from the street value of physical metals during the last gasp of a failing system.  In the near term, I believe that premiums on physical coins and bars will skyrocket, even as the official market prices of those metals is held down.  At the same time, China, Russia, and other countries heavily invested in gold may break from Western COMEX valuations completely using their own metals markets to establish their own prices.

As the dollar loses its world reserve status, the countries holding the most physical gold in their coffers stand to weather the storm most effectively, and because U.S. gold stores have never been officially audited, we have no idea if America has any reserve whatsoever.

Crushing Energy Prices Coming Soon?

While China continues a careful strategy of decoupling from the dollar and the U.S. consumer through bilateral agreements and trading blocks, another issue is arising: the issue of energy. I would like to note that despite globally diminishing oil demand caused by the 2008 credit collapse, gas prices have experienced little to no deflation.  I would also like to note that after the Federal Reserve hinted at shutting down QE, oil was one of the few commodities that continued to rise.

This has not been caused by a lack of supply, as many American-based companies ramp up production. (I am aware of all the arguments behind peak oil. As soon as a peak oil proponent can show me an example of oil demand not being met because of a legitimate lack of supply, then I’ll be happy to consider that peak oil is the main cause of price increases.)

The fact is current regressive global demand and ample supply should have led to lower gas prices, not higher. If speculation was the cause, then price shifts within the oil market should have been far more volatile, with increases lasting weeks or perhaps months, but certainly not years.  The only plausible explanation for this kind of commodity activity is a weakening of the currency it is directly tied to.  The petrodollar is slowly but surely coming to an end.
I believe the next market exodus may be triggered by the weakening effects of stimulus (or the removal of stimulus altogether) along with extreme energy prices cause by steady inflation and a global political crisis in the near future.

China, being strangely and consistently prophetic when it comes to economic calamity, has recently established an astonishing oil trade deal with Russia, which plans to supply China with an alternative petroleum source for the next 25 years. (This news went almost completely unnoticed by the mainstream media.)

Now, keep in mind that in 2010, China and Russia signed an agreement completely removing the U.S. dollar in bilateral trade. The dollar has been the world reserve and the only currency used to purchase petroleum for decades. The Russia/China oil deal changes everything. It sets a trend toward the removal of the petrodollar function of the Greenback which ultimately destroys any credibility the currency has left. This news flies in the face of dollar proponents who consistently claim that the dollar's ties to oil make it invincible. Apparently, there are some weaknesses in the armor.
Ongoing social unrest in Egypt has also made oil markets jumpy, being that the Suez Canal oversees the transfer of a significant portion of the world’s oil shipping.  Clearly, there are two opposing factions within the country vying for power, and regardless of who is best suited to U.S. interests, the Egyptian people overall have no love for the West.  There is a distinct chance of a shooting war, similar to Syria, in the coming months in Egypt.

Meanwhile, the engineered conflict in Syria continues to go exactly as I predicted in my article 'The Terrible Future Of The Syrian War'.

Syria remains an explosive trigger point for regional war which will, in the end, draw in Iran and result in the closure of the Strait of Hormuz, which annually handles the shipping of about 20 percent of the world’s oil. All trends point toward higher gas prices over the horizon, and the U.S. economy is barely able to survive on the cost of energy we have today.

So Close They Can’t See It

Reduced stimulus combined with adversely high oils prices may very well be the tumbling boulders that bring down the mountain. We are close now. Beyond the undeniable economic factors, the very fabric of American government is crumbling. Corruption is openly rampant. Scandals are exposed daily. The establishment leadership is unapologetic and grows even more despotic with each truth that escapes into the open air. They are becoming MORE bold, not less bold, and those of us who seek transparency in all things, from politics, to economics, to surveillance, are being attacked as the source of the problem rather than the solution.

Collapse, from a historical perspective, seems to occur when the searchlights of the individual mind are dimmest, when the threat is the greatest, and when we are most comfortable in our ignorance. In 2008, the U.S. public was mostly oblivious to the danger, and they were painfully stung. Today, I hope that the liberty movement, the alternative media, and alternative economic analysts have created a window of opportunity by which millions of people can this time see the writing on the wall and prepare accordingly. At this point, there is no question that Americans have been warned. Whether or not they pay heed, is out of our hands.

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Chupacabra-322's picture

Off topic, my appologies for spaming.  Lets light these District of Criminals phone lines up and stop contributing to your own debt bondage and enslavement to the Criminal TBTFBanksters.  WithDraw you money OUT of them!

Credit unions promote the economic well-being of their members, especially those of modest means, through a system that is member-owned, volunteer-directed and not-for-profit.  As a credit union member, I know firsthand that my credit union offers financial products that provide better returns on savings, reduced rates on loans and lower or no fees on services.

Unfortunately, the big banks and some in Congress want to raise taxes and impose new fees on millions of credit union members, who together represent 40% of all Americans. And, they want to do this despite the fact that credit unions are not-for-profit.

Please don’t raise taxes on 96 million credit union members. Don’t tax my credit union!

MisterMousePotato's picture

Yeah, I'm gonna spam, too. Why not? It's Friday afternoon.

Anyway, I just saw this, and it's just too good not to share to brighten everyone's mood going into the weekend. I was gonna save it for one of those "Just How Stupid Americans/Whorespondents/Voters/Etc. Are," but why wait?

In a perfect world, someone would reassure me that this is just parody or humor or something.

Not Too Important's picture

They may have a hard time when they try to fuck with the military credit unions.

Just a guess.

ACP's picture

Not really. Obama will just Article 32 any military member who objects. It's the "Chicago Way."

orez65's picture

Fuck your credit union.

Like a "not for profit" business is some kind silver bullet to save the economy.

You fractional reserve banking just like any other bank.

Which means that you commit fiat money fraud just like any other bank.

Go fuck yourself.

notquantumdum's picture

Credit unions aren't better than banks because they are non-profit.  They are better because they are member-owned by the people who keep accounts with the credit unions.  The credit unions' best interests are aligned with their account-holders, not other share-holders.

Fiat / fractional-reserve or not is a good debate to have; but given our current fractional-reserve system, I favor using a credit union due to the less expensive cost of doing so.  That doesn't mean that I don't support ending fractional-reserve banking (or not).

Jack Napier's picture

The only real reason to use a credit union is to stop supporting the derivatives empire, but since they get free Fed punch bowl money they don't even need customers anymore.

If your motivation is a cheaper loan then you're a debt slave anyway. If everybody lived within their means and only bought what they had the money to afford up front these sock monkeys wouldn't be here in the first place.

notquantumdum's picture

They often seem to be more affordable for most all banking services:  loans, checking accounts, savings accounts, or other such services (if one is willing to have such a terrible thing, as a "bank" account).  But, shop around, of course, for the best deal you can find.

I'll be the first to sign up for an account with a mega-bank if they ever gave me a better offer, but they never seem to do so.  Imagine that.

(Oh, wait, I forgot.  I have a mortgage with a mega-bank.  And, I really can't complain about them so far.  I hope that's not evil.)

dark pools of soros's picture

you can do p2p lending too... lending club, etc

quikwit's picture

When I give my money to a regular bank, I am an unsecured creditor.  When, as a "member" of a credit union, I give it to my credit union, I am an equity holder.  Even lower than unsecured creditor on the bankruptcy scale.  Right?

Tortuga's picture

I gave you a alt + 18 because I belong to a credit union also and they haven't got crazy yet but they are gonna tax them, hell, they tax taxes.

CrashisOptimistic's picture

"(I am aware of all the arguments behind peak oil. As soon as a peak oil proponent can show me an example of oil demand not being met because of a legitimate lack of supply, then I’ll be happy to consider that peak oil is the main cause of price increases.)"

No, you aren't. 

You don't understand joules scarcity.

Two paragraphs later you declare the rise in price is tied to the currency.  Note that 2008's $147/barrel spike was before QE was in the lexicon.  Note also that the currency didn't suddenly get stronger since then, which in your world would explain the decline from 147.

Now you'll retreat to the sanctuary of handwaving about . . . well it's currency driven when it goes up, but it's something else driven when it goes down.

The price is $106.  It was $147 in 2008.  A lot more dollars have been printed since 2008.  If your world held sway, the price via those diluted dollars would be $547/barrel.

You're wrong.  You don't understand oil.  Say nothing more about it.

Tortuga's picture

I understand oil. Without oil, we collapse.

runningman18's picture

Another Peak Oil cultist denying reality.  You never answered Smith's question - If peak oil is really the cause of rising gas prices, then where is the scarcity?  Where is demand not being met?  The spike in 2008 was market manipulation designed to prepare the public psychologically for inflation.  The current longstanding price increases are an extension of that inflation.  The only reason we aren't seeing $15 a gallon gas now is because oil is traded in dollars, but as Smith points out, that is changing. 

So, answer the question:  Where is this scarcity caused by peak oil?  Where is demand not being met?


Oracle of Kypseli's picture

There is a case to be made for most of the oil scenarios argued here. I believe that it is very possible that you are all right, and that these scenarios play interchangeably which sometimes proves and/or disproves each theory.

Just think about being Saudi Arabia and knowing that your wells are being depleated, but you do not tell. You still want to get top dollar for your oil without having to admit peak oil. At the same time, you do not want to show too much of it and have the price plunge. Therefore, you use the yoyo misinformation effect.

The seven sisters (now eight) have been at this game forever and besides being good at it, they control gov's, they control media and they control production.

Fill in the rest. Best revenge: Be less dependent on oil. Invest a bit of money in oil companies enough to hedge gas price hikes, stack PM's, make love to your spouces and hug your kids.




Hohum's picture


There are only two questions worth asking: (1) what is the marginal cost of the most expensive to get oil? and (2) what price can the economy tolerate and still grow?

AgLand's picture

There is no 'peak oil', there is only 'peak cheap oil'.

We will never run out of oil, but the EROEI to get it may one day be so high it will not be worth in in most cases.

Look at the cost of drilling a conventional well in,say, West Texas v. The cost, complications, and possible end results of drilling a well like the BP one that blew out in the Gulf.

Or how about the 'return' on a shale oil/gas well, which peter out far sooner than a conventional one.

It's not about how much oil is left, it is about ease and costs of 'mining' it. A few years ago the costs of a bbl of tar sands oil stood at $75/bbl. no idea what it is now but it is higher, no doubt.

The 'peak cheap oil' question is really one of how an energy dependent US will fare with oil consistently climbing higher while the avge man on the street sees his purchasing power shrink. And what are the global implications in trade of such.

The US miles driven is back down at rates where we were 10 years ago, yet oils prices are more than double. How does this occur when our energy usage is shrinking? Simple, usage by others is growing at the same time.

And... quality and quantity are much harder and costlier to attain.

But it's not just oil, you see this trend in all raw commodities mined from the earth. Ore grades for gold,copper, zinc, you name it -- all declining as we go thru 'peak cheap everything'.

You have been warned, Mr. Smith.

Imminent Crucible's picture

Oil went from $70 to $147 to $35 to $106, all in the space of a few years, and you're going to explain that insane volatility with "joules scarcity"? ROFL!!

You're wrong. You don't have a clue about futures markets, dark pools, Goldman Sachs, Vitol or I.C.E.

CrashisOptimistic's picture


I am not required to explain price volatility.  I didn't make the claim.  The article did.  That's the hypothesis.  I showed its failure.

And you might want to keep in mind refineries don't have to pay NYMEX prices for product.  They need not care about trading.

But that's what puts food on your grocery store shelf -- what they buy at the price they and the producer, not NYMEX, agrees on.

Trading is relevant for things not consumed or things replaced.  Things like copper, which when "consumed" really isn't.  It's still in the pipes behind your walls.  Or corn, which can be grown again.

Only oil and natgas disappears.  Only oil and natgas are really consumed.

Hohum's picture

70 to 147 production up a little

147 to 35 production down more than a little

35 to 106 production up--Bakken producing about 130 barrels per day per wells not as good as a short while back.

observer007's picture

Watch Your Data Traveling Through The Internet


(and how it is collected by the NSA):

Sid James's picture

So the only relatively safe place to visit is Youporn? Result!

I am Jobe's picture

Forget about NSA, BH and Verint are the real stalkers. Remember the govt does not have competent folks to do this kind of stuff hence contractors.

Shell Game's picture

"The truth is, human beings have a nasty habit of ignoring the cold hard facts of the present in the hopes of using apathy as a magical elixir for future prosperity."


Spot on. The hardest part of taking the Red Pill is dealing with these hard-headed dolts...

eatthebanksters's picture

I kept telling myself up until 2007 that the real estate market was overvalued and to be very careful.  Then, after 6 years of saying this (since 2001) I said that maybe i was wrong and that what we were living was the new normal.  I took on a bit more debt and a year later paid for my complacency in a big and painful way.  As I read ZH I sometimes wonder if the bearish, sky is falling attitude is real, since nothing ever seems to go really wrong.  Then I think back to 2007 and I am eternally grateful for the one place on the internet that delivers the truth.  Thank you ZH...I don't know when the shit is going down, but it is going down.  We just need Bawney Fwank to say everything is fine and then wait 3 months.

Citxmech's picture

Where I shit-the-bed on the RE market was, while knowing RE was over-valued - I anticiapted a long pleateau rather than a collapse.  Didn't want to be priced out of the market so we dove-in the shallow-end.  

Luckily we were cautious, chose well, and actually still have some equity inspite of purchasing near the top (it helped that wifey and I are are handy and bought a POS that needed major fixing). 

Arrowflinger's picture

Hit it damn near perfect with CRE and timberland.

HOWEVER, the cash has not turned out to be 'safe' has it?

Fortunately I got hard and ready, not necessarily in that order.

jmcadg's picture

I hear you. At that time I was not aware of the up and coming shit. I had still not connected the dots in 2008-9 other than not being able to sell in a depressed market. The scales fell off for me in 2010.

It's been bloody hard to deleverage and get straight. Still not fully there, but slashed my debt burden by 80% in three years - mostly by selling up before going underwater.

Hands up got caught up in the property bubble, so now don't own, but still here and have a chance when the real crash happens.

In 2010 I found hard assets and then ZH. My world is totally different now.

Prior I was oblivious - I think the fraud is much more blatant now, but maybe it is still possible to live unaware. 

I'm not fully ready yet. As much as I know Ben's policy is totally wrong, I for one am glad I got the chance to start preparing. If the shit had fallen in 2008, I would have been screwed.

Would like to add my thanks to Tyler and all the great posters here for truth and great discussion (mostly).


q99x2's picture

Dude the FEDs hold most of the stocks today and they ain't selling anytime soon. Much different than in 2008. Bonds that's different but still even that is subsidized.

Folks, its different this time.

ATG's picture

The Fed will sell when more people have precious than $USD...Then comes DHS door to door with metal detectors and weapons of war on US citizens...At that time Americans recover their spirit of Independence and self-reliance...

NOTaREALmerican's picture

Hope springs eternal.  

Not Too Important's picture

Now you can see why the Chinese are volunteering to be the first one to collapse, as they massively stock up on the 'Barbaric Relic':

“Whenever government sets out to manipulate the money supply, regardless of the intelligence or good intentions of those who attempt to direct the process, the result is inflation, economic chaos, and political upheaval. By contrast, whenever government is limited in its monetary power to only the maintenance of those weights and measure of precious metals, the result is price stability, economic prosperity, and political tranquility…”

 “As we shall see…, the centuries of monetary upheaval that followed that early period (of monetary stability due to a PM standard - nti) contain NO EVIDENCE that this law has been repealed by modern man.”

 ‘The Creature From Jekyll Island’, pp. 152-153

The Chinese are following the wisdom of history. This isn't rocket science.


The first one to reset wins.

kito's picture

Collapse, from a historical perspective, seems to occur when the searchlights of the individual mind are dimmest, when the threat is the greatest, and when we are most comfortable in our ignorance


absolutely. the more complacent america becomes, the more delusional our govt becomes, the more ripe the crisis moment becomes. a crisis isnt a crisis when everybody is vigilent and waiting for a crisis. it rears its ugly head when the masses and the govt are lulled and dulled into their comfort zone. and it seems, by the looks of things, america is not too far away from the next leg down in the terminal decline of america into third world status.

Tortuga's picture

I have never, ever been comfortable with my ignorance, even when I hypothocate it to the 4th party.

kito's picture

One isn't comfortable with ignorance, one is comfortable in ignorance.

fonzannoon's picture

I can't even remember how I got "here" anymore. I can't remember being ignorant, and I can't remember a shift happening that got me "here".


Serenity Now's picture

I can't say that I remember being ignorant (although I'm sure I was and still am), but I do remember my shift:

I had the thought that true freedom meant not owing anybody any money, and it all took off from there. 

kito's picture

Perhaps peter Schiff sparked you?

fonzannoon's picture

Schiff may have sparked the currency/gold aspect.

But Schiff is too busy feeding the Zimmerman beast to understand that he is helping deflect his own disciples from the true issues that need to be dealt with.

On one hand that makes him a better man than Rogers/Faber to me because he is staying put and trying to fight the good fight. But he is clueless on another level.

kito's picture

I'm not following you.

fonzannoon's picture

This may explain it better. Schiff and Ron Paul agree on the currency thing. Ron Paul tends to stay on topic more when it comes to our rights being taken away. To me anyway. Maybe Schiff does too. He spends a lot of time on this Zimmerman thing, which to me is the biggest distraction in history, and schiff took the bait. bigtime.

I think he does it because his heart is in the right place, and he sees this country going to shit, and is trying to educate people.

I don't blame u for not following me. I'm not following me.

kito's picture

Why is Schiff opining on a sensationalistic trial instead of keeping his eye on the economic ball?

jmcadg's picture

I think he's fed up that no one listens to his truthiness and is probably after Alex Jones' ratings too!