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10 Reasons Why Sharknado Is Coming To The Global Economy

Tyler Durden's picture


Submitted by Michael Snyder of The Economic Collapse blog,

Have you ever seen a disaster movie that is so bad that it is actually good?  Well, that is exactly what Syfy's new television movie entitled "Sharknado" is.  In the movie, wild weather patterns actually cause man-eating sharks to come flying out of the sky.  It sounds absolutely ridiculous, and it is.  You can view the trailer for the movie right hereUnfortunately, we are witnessing something just as ridiculous in the real world right now. 

In the United States, the mainstream media is breathlessly proclaiming that the U.S. economy is in great shape because job growth is "accelerating" (even though we actually lost 240,000 full-time jobs last month) and because the U.S. stock market set new all-time highs this week.  The mainstream media seems to be absolutely oblivious to all of the financial storm clouds that are gathering on the horizon.  The conditions for a "perfect storm" are rapidly developing, and by the time this is all over we may be wishing that flying sharks were all that we had to deal with.  

The following are 10 reasons why the global economy is about to experience its own version of "Sharknado"...

#1 The financial situation in Portugal continues to deteriorate thanks to an emerging political crisis.  It all began last week when Portuguese finance minister Vitor Gaspar resigned...

"Mr. Gaspar's resignation on July 1 has opened a Pandora's box," says Nicholas Spiro, managing director of Spiro Sovereign Strategy. "Portuguese politicians from the President down are treating the exit of Mr. Gaspar, the architect of the fiscal and structural reforms demanded by the troika, as a green light for a public debate about the bail-out programme. Yet the manner in which this debate is taking place, with the President undermining the prime minister and the opposition leader seeking to renegotiate the terms of the programme, is spooking markets."

The general population is becoming increasingly restless as the nation plunges down the exact same path that Greece has gone.  Nobody seems to have any solutions as the economic problems continue to escalate.  According to Reuters, the president of Portugal has added fuel to the fire by calling for early elections next year...

Portugal's president threw the bailed-out euro zone country into disarray on Thursday after rejecting a plan to heal a government rift, igniting what critics called a "time bomb" by calling for early elections next year.

Due to all of this instability in Portugal, the yield on Portuguese bonds shot up to 7.51% this week.  That is a very bad sign.

#2 The economic depression in Greece continues to deepen, and it is being reported that Greece will not even come close to hitting the austerity targets that it was supposed to hit this year...

A leaked report from the European Commission confirms that Greece will miss its austerity targets yet again by a wide margin. It alleges that Greece lacks the “willingness and capacity” to collect taxes. In fact, Athens is missing targets because the economy is still in freefall and that is because of austerity overkill. The Greek think-tank IOBE expects GDP to fall 5pc this year. It has told journalists privately that the final figure may be -7pc.

Another 7 percent contraction for the Greek economy?

It has already been contracting steadily for years.

At this point, it would be hard to overstate how bad economic conditions inside Greece are.  The following is from a recent article by Simon Black...

My friend Illias took a drag of his cigarette as he contemplated my question.


"Our government tells us that this will be a better year. No one really believes them. But all we can do is be optimistic. Too many people are committing suicide."


His statement probably best sums up the situation in Greece right now. It's as if the hopelessness has gone stale, and the only thing they have to replace it with is desperate, misguided, faux-optimism. And anger.


There are roughly 11 million people in this country. 3.4 million of them are employed, of which roughly one third work for the government.


1.34 million people are 'officially' unemployed. To put this in context, it would be as if there were 36 million officially unemployed in the US.


More startling, if you add the number of 'inactive' workers (i.e. those who gave up looking), the total number of unemployed is roughly 57% of the entire Greek work force.

#3 The economic crisis in the third largest country in the eurozone, Italy, has taken another turn for the worse.  The unemployment rate in Italy is up to 12.2 percent, which is the highest in 35 years.  An average of 134 retail outlets are shutting down in Italy every single day, and the debt of the country has been downgraded again to just above junk status...

Italy’s slow crisis is again flaring up. Its debt trajectory has punched through the danger line over the past two years. The country’s €2.1 trillion (£1.8 trillion) debt – 129pc of GDP – may already be beyond the point of no return for a country without its own currency.


Standard & Poor’s did not say this outright when it downgraded the country to near-junk BBB on Tuesday. But if you read between the lines, it is close to saying the game is up for Italy.

#4 There are rumors that some of the biggest banks in the world are in very serious trouble.  For example, Jim Willie (a financial writer who usually puts out really solid information) is insisting that Deutsche Bank is on the verge of collapse...

The best information coming to my desk indicates that three major Western banks are under constant threat of failure overnight, every night, forcing extraordinary measures to avoid failure.


They are Deutsche Bank in Germany, Barclays in London, and Citibank in New York. Judging from the ongoing defense from prosecution and cooperation (flipped) with Interpol and distraction of resources, the most likely bank to die next is Deutsche Bank. They are caught with accounting fraud and outright financial fraud over collateral shell games, pertaining to USTreasury Bonds, other sovereign bonds in Southern Europe, and OTC derivatives linked to FOREX currency contracts. D-Bank is a dead man walking.

Time will tell if he is right.  But without a doubt the global financial system is extremely vulnerable right now.

Most Americans assume that the problems that caused the financial crash of 2008 were fixed, but that is most definitely NOT the case.  In fact, our financial system is far more shaky today than it was just before the last financial crisis.  When one major bank goes down, we could start to see others fall like dominoes.

#5 Just before the financial crisis of 2008, the price of oil spiked dramatically.  Well, it is starting to happen again.  The price of oil hit $106 a barrel on Friday.  If the price of oil continues to rise at this pace, it is going to mean big trouble for economies all over the planet.

And as I wrote about recently, every time the average price of a gallon of gasoline in the United States has risen above $3.80 during the past three years, a stock market decline has always followed.

The average price of a gallon of gasoline in the United States reached $3.55 on Friday.  This is a number to keep a close eye on.

#6 Mortgage rates are absolutely skyrocketing right now...

The average U.S. rate on the 30-year fixed mortgage rose this week to 4.51%, a two-year high. Rates have been rising on expectations that the Federal Reserve will slow its bond purchases this year.


Mortgage buyer Freddie Mac said Thursday that the average on the 30-year loan jumped from 4.29% the previous week. Just two months ago, it was 3.35% — barely above the record low of 3.31%.

This threatens to throw the U.S. real estate market into a slowdown worse than anything we have seen since the last recession.

#7 This upcoming corporate earnings season is shaping up to be an extremely disappointing one.  In fact, the percentage of companies issuing negative earnings guidance for this quarter is at a level that we have never seen before.

So is this a sign that economic activity is starting to slow down significantly?

#8 U.S. stocks are massively overextended right now.  In fact, according to Graham Summers, this is the most overextended stocks have been in the past 20 years...

Today, the S&P 500 is sitting a full 30% above its 200-weekly moving average. We have NEVER been this overextended above this line at any point in the last 20 years.

#9 Rapidly rising interest rates are causing the bond market to begin to come apart at the seams.  There is concern that the 30 year bull market for bonds is now over and investors are starting to pull their money out of the market at a staggering rate.  In fact, 80 billion dollars was pulled out of bond funds during June alone.

#10 Rapidly rising interest rates could cause an implosion of the derivatives market at any moment.  As I am so fond of reminding everyone, there are approximately 441 trillion dollars worth of interest rate derivatives out there.

If interest rates continue to soar, we could potentially see a financial disaster that is absolutely unprecedented, and the too big to fail banks would be the most vulnerable.

As USA Today recently reported, there are just five major banks that absolutely dominate derivatives trading in the United States...

Five of the biggest U.S. banks — JPMorgan, Goldman Sachs Group Inc., Bank of America Corp., Citigroup Inc. and Morgan Stanley — account for more than 90% of derivatives contracts. Regulators estimate that nearly half of derivatives are traded outside the United States.

Could you imagine the financial devastation that we would see if several of those banks started to collapse at the same time?

When you hear the mainstream media begin to talk about a "derivatives crisis" involving major banks, that will be a sign that disaster is upon us.

Most Americans don't realize that Wall Street has been transformed into the largest casino in the history of the world.  Most Americans don't realize that the major banks are literally walking a financial tightrope each and every day.

All it is going to take is one false step and we will be looking at a financial crisis even worse than what happened back in 2008.

So enjoy this little bubble of false prosperity while you can.

It is not going to last for too much longer.


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Sat, 07/13/2013 - 18:03 | 3749222 BandGap
BandGap's picture

Sharknado - no one is safe bitchez!

Sat, 07/13/2013 - 18:46 | 3749309 jbvtme
jbvtme's picture

man is the only species on the planet who pays rent.  what happens when he can't or won't?

Sat, 07/13/2013 - 19:06 | 3749344 Poor Grogman
Poor Grogman's picture

Zombies and now sharks, sheesh.

Sat, 07/13/2013 - 19:30 | 3749376 Skateboarder
Skateboarder's picture

Holy moly! Did anyone actually watch that trailer?

"There's too many of 'em, we're gonna need a bigger chopper."

Sat, 07/13/2013 - 20:29 | 3749485 Non Passaran
Non Passaran's picture

"Chairman, losses are just too great, we're gonna need a bigger bailout!"

Sat, 07/13/2013 - 22:24 | 3749761 dark pools of soros
dark pools of soros's picture

wait till the zombie sharks attack!

Sun, 07/14/2013 - 20:40 | 3752858 Keyser
Keyser's picture

We're ok until the zombie sharks have laser beams on their heads. Oh wait!


Sat, 07/13/2013 - 19:27 | 3749372 CoonT
CoonT's picture

my laying hens may disagree..

Sat, 07/13/2013 - 20:38 | 3749507 CPL
CPL's picture

I laughed, I cried, it was better than Cats.  This generation's On the Golden Pond.  Film score was riveting.  Editing was flawless.  

I give Sharknado 8 bongs out of 10.  <sniff sniff>  I smell acedemy material...<gun fingers>  wholuvsya?

Sat, 07/13/2013 - 21:02 | 3749553 Skateboarder
Skateboarder's picture

"8 bongs out of 10"... LMAO!

I hope we may share a righteous smoke one day my friend. Remember the codephrase, "8 bongs out of 10?" ;)

Sat, 07/13/2013 - 21:25 | 3749610 CrimsonAvenger
CrimsonAvenger's picture

Better than Cats? In fairness, a kick to the goodies is better than Cats. A truly awful show.

Sun, 07/14/2013 - 11:53 | 3751351 Uchtdorf
Uchtdorf's picture

I saw it, on Broadway. I fell asleep part way through, but my brain hurt for days as I recalled the lousiness of the scenes I saw.

Sun, 07/14/2013 - 00:12 | 3750199 Go Tribe
Go Tribe's picture

Best scene was the guy fileting that 20 foot flying shark with a chain saw. And I KNEW that show was going to get real when the lady did the one-handed shotgun pump. Good stuff for summer.

Sat, 07/13/2013 - 18:06 | 3749224 Things that go bump
Things that go bump's picture

The job of the media is to keep the sheep pacified and reassured until they are driven into the shoot for slaughter. Mutton - its whats for dinner.

Sat, 07/13/2013 - 19:00 | 3749335 TeamDepends
TeamDepends's picture

Yeah, but a shark tornado would be pretty bad....

Sat, 07/13/2013 - 19:35 | 3749388 LetThemEatRand
LetThemEatRand's picture

The tornado sharks hate us for our freedoms.

Sat, 07/13/2013 - 19:43 | 3749403 Skateboarder
Skateboarder's picture

Quick, let's get rid of em all before they can take em away!

So we have established that sharks are terriss. Are meteors, asteroids, etc. terriss as well? The big asteroids, boy, they must really hate us for our freedoms.

Sat, 07/13/2013 - 20:47 | 3749491 Winston Smith 2009
Winston Smith 2009's picture

"Yeah, but a shark tornado would be pretty bad...." he said matter of factly.

That really made me laugh.  And your user name is funny, too.

Sat, 07/13/2013 - 18:06 | 3749225 B2u
B2u's picture

Don't worry, be happy!

Sat, 07/13/2013 - 18:50 | 3749316 salimmk
salimmk's picture

This can't be overstated. I still have PTSD from the 2008 crisis.

Sat, 07/13/2013 - 18:08 | 3749232 blindman
blindman's picture

@ "..have you ever .." yes !
check the movie
The Lost Skeleton of Cadavra - The Atmospherium Trailer

Sat, 07/13/2013 - 18:09 | 3749237 francis_sawyer
francis_sawyer's picture

@blindman... EXCELLENT!!!... One of my all time favorite movies...

Sat, 07/13/2013 - 18:20 | 3749266 blindman
blindman's picture

the movie is so good , so funny,
I cannot ....
jesus, just see it if you haven't.

Sat, 07/13/2013 - 19:42 | 3749401 knukles
knukles's picture

Damn, the leads look faintly like Bill and Hillary.

Sun, 07/14/2013 - 09:34 | 3750995 eaglerock
eaglerock's picture

The spaceman looks like Rand Paul. 

Sat, 07/13/2013 - 18:08 | 3749233 francis_sawyer
francis_sawyer's picture

Has anyone ever seen a TOP 10 list is so bad that it is actually good?

Sat, 07/13/2013 - 18:17 | 3749257 IndicaTive
IndicaTive's picture

Top ten reasons my ex-wife is a Fuck up = Top ten reasons I cleaned up in the divorce.

Sat, 07/13/2013 - 18:58 | 3749329 jbvtme
jbvtme's picture

top 10....movies?

Sat, 07/13/2013 - 18:09 | 3749236 I am Jobe
I am Jobe's picture

USA USA USA Numebr 1 whoo hoo. Sheeples are way too happy , watching Amerikan Idol and hugging their IPHONES. What could possibly go wrong?

Sat, 07/13/2013 - 18:10 | 3749239 involuntarilybirthed
involuntarilybirthed's picture

32 hours will be the new full time.

Sat, 07/13/2013 - 18:13 | 3749246 localsavage
localsavage's picture

You forgot to add that Ben wants to retire before all ofthis is pinned on him.

Sat, 07/13/2013 - 18:15 | 3749252 Crash Overide
Crash Overide's picture

I don't know why people think the whole game collapsing and the big banks failing would be a bad thing. Get rid of the shit and start over.


Sat, 07/13/2013 - 18:19 | 3749253 Kirk2NCC1701
Kirk2NCC1701's picture

When all else fails, go to Plan B*!

Plan B:  1.  Lie!.  2. Shock & Awe.  3. Repeat till desired results achieved. 

Prepare accordingly.


* Plan B is similar to Plan A, but its Part 2 (Shock & Awe) is more 'thermal and kinetic'.

Sat, 07/13/2013 - 18:17 | 3749256 Seasmoke
Seasmoke's picture

Tara Reid will be on CNBS on Monday with her top stock picks.

Sat, 07/13/2013 - 19:29 | 3749375 GeezerGeek
GeezerGeek's picture

I can't believe that at least two others besides myself caught that Syfy movie. Like the US economy, Tara appeared to be past her prime.

Sat, 07/13/2013 - 18:20 | 3749265 debtor of last ...
debtor of last resort's picture

One human, two reverands, three .gov workers and four dollars.


Sat, 07/13/2013 - 18:26 | 3749274 putbuyer
putbuyer's picture

Did you say 6 banks or only 5? Well punk! do you feel lucky?

Sat, 07/13/2013 - 19:02 | 3749339 samsara
samsara's picture

where ya been PB?

Sat, 07/13/2013 - 18:32 | 3749286 q99x2
q99x2's picture

As soon as the TBTF are disolved and their CEOs are imprisoned the faster the return to prosperity. I say bring it on Bitchez.

Sat, 07/13/2013 - 18:34 | 3749289 JJ McApe
JJ McApe's picture

it's only moneez, why u heff to be mad?

Sat, 07/13/2013 - 18:35 | 3749291 BanksterSlayer
BanksterSlayer's picture

Maybe SyFy channel should do a movie about the London Whale next.

And thank you, Michael Snyder, for throwing a little love in the direction of Jim Willie.


Sat, 07/13/2013 - 19:32 | 3749380 GeezerGeek
GeezerGeek's picture

Yes, they could do an updated version of Melville's classic, Moby Dick. After all, it was about Jackson (Ahab) and the Second Bank (the whale), wasn't it. 

Sat, 07/13/2013 - 18:44 | 3749304 Peter Pan
Peter Pan's picture

We have had many lists like this over the last five years and it amazes me that the whole rotten structure has not collapsed. Clearly the termites are holding hands.

The economy is showing the defiance of a human body which can go through the loss of a spleen, then a kidney, then a limb or two, then a gall bladder, then a lung, both eyes, part of the pancreas and liver and still survive.

Heaven help us when it goes down because even hell will weep for us.

Sat, 07/13/2013 - 18:46 | 3749307 Uncle Remus
Uncle Remus's picture

. "Clearly the termites are holding hands."

More like fellating...

Sat, 07/13/2013 - 22:16 | 3749722 Poor Grogman
Poor Grogman's picture

Price discovery would equal collapse, that's why the banksters are holding hands and refusing to put trillions of toxic crap on the open market.

None of them will break this embrace of doom, the whole shit show goes on until it totally collapses, there is no third way...

Sat, 07/13/2013 - 18:47 | 3749312 world_debt_slave
world_debt_slave's picture

Those dark clouds gathering on the horizon are war clouds, the only recourse left for the bankrupt countries.

Sat, 07/13/2013 - 18:49 | 3749313 Dead Canary
Dead Canary's picture

Best (funniest) lines from:

"P L A N  9   F R O M   O U T E R   S P A C E ! ! !"

Sat, 07/13/2013 - 18:51 | 3749320 BanksterSlayer
BanksterSlayer's picture

@rmarcham tweeted:

If there ever was a reason for a full #MST3K reunion, it's #Sharknado.

Sat, 07/13/2013 - 21:00 | 3749548 NoDebt
NoDebt's picture

That's actually a great idea.  I haven't thought about MST3K in a long time.  Now that I have, I realize how much I miss it.

Sat, 07/13/2013 - 21:12 | 3749580 plane jain
plane jain's picture

Hand of Manos

Initiation into our little geek squad.

Sat, 07/13/2013 - 21:28 | 3749617 CrimsonAvenger
CrimsonAvenger's picture

Let me geek out a bit by noting that the title is technically "Manos: Hands of Fate." The truly funny part is that Manos actually means hands, so the title is really "Hands: Hands of Fate."

Sat, 07/13/2013 - 19:36 | 3749389 GeezerGeek
GeezerGeek's picture

Their plan didn't work any better than Ben's has. 

Sat, 07/13/2013 - 18:53 | 3749325 StarTedStackin'
StarTedStackin&#039;'s picture

Mainstream media = Propagandists for the Obowel Movement

Sat, 07/13/2013 - 19:42 | 3749382 samsara
samsara's picture

Again you are directing it to a particular person at this moment. They have the same marching orders regardless the person at the moment

Sat, 07/13/2013 - 18:59 | 3749334 Abi Normal
Abi Normal's picture

Oh the humanity of it all...soylent green is PEOPLE I tell you!

Sat, 07/13/2013 - 19:37 | 3749387 Newager23
Newager23's picture

There sure were a lot of pumpers on Bloomberg TV this week, but that has been the norm all year as the DOW has risen higher. But so many of these analysts are living in a dream world that it is astounding. 

Once the US markets tank along with the US economy, Bloomberg - and all of these analysts - will act as if they didn't have a clue a crash was coming. They continue to give these pumpers free reign to talk their book, and they never ask their guests if they get paid more if the market goes higher.

The had the chief analyst for CITI on this week, and he did not hint at any of the issues above as being problematic. In fact, he turned some of them to his advantage. Earnings are terrible, but that is a GOOD thing, because there are low expectations. It will be easy now for companies to hit the low number. His argument was that since the bad news is already out, all we can do is go up. 

Another major analyst said his prediction for 1900 S&P this year was conservative (it is currently about 1650). Why? Because the US is more competitive and we are in a recovery. Exactly, which recovery I am not sure.

Now one wants to talk about the issues in this post. In fact, all we seem to get is an optimistic plethora of opinions. But how can you be optimistic with all of the fundamentals and signals that point to disaster?

I agree we have enter the era of the Sharknado. Everything has become bizaare.

Got Gold?


Sat, 07/13/2013 - 19:38 | 3749394 GeezerGeek
GeezerGeek's picture

Don't worry.

Be happy!

Ben and Barack have everything under control.

Sat, 07/13/2013 - 19:46 | 3749406 knukles
knukles's picture

"Dammit Obiewon, We'll swap our way out of it."

Sat, 07/13/2013 - 19:09 | 3749347 remain calm
remain calm's picture

You forgot to mention the two biggest living abortions amongst world economies which are about to have their coming to Lehman moments. Japan and China. The world just whistles through these graveyards like everything is just fine.

Sat, 07/13/2013 - 19:22 | 3749361 g'kar
g&#039;kar's picture

S&P @ 1700 by Friday?

Sat, 07/13/2013 - 19:25 | 3749367 ndotken
ndotken's picture

Sharknado has to be the biggest bunch of total fucking bullshit I've ever heard of. Surely the human race is upon its last days ... what other possible explanation could there be for such stupidity.

Sat, 07/13/2013 - 19:42 | 3749399 GeezerGeek
GeezerGeek's picture

Syfy is in the midst of a competition to see who can create the worst monster movie. Every week they have something that surpasses the stupidity of prior weeks. It rather makes one yearn for The Blob or Godzilla - but not Gamera or Mothra.

Sat, 07/13/2013 - 21:19 | 3749590 plane jain
plane jain's picture

Did you watch Sharknado?  We did this afternoon.  Fantastically awful...ridiculous premise, terrible acting, cheesy CGI, and the script? Ha!  If I were guesssing I would say it was written by a 12 year old and produced by pornographers...terrible production, gratuitous T&A, and the storm was "relentlessy pounding" LA.  Reminded me of watching Elvira, or MST3K.  Definitely a drinking movie.

Sat, 07/13/2013 - 22:57 | 3749910 Nom de Guerre
Nom de Guerre's picture

SyFy had some great stuff in the late 90s and early 2000s (Farscape and BSG come to mind).  Now?  Yeesh.  Makes me wonder if the execs are deliberately trying to pinch off the channel into the latrine.

Sat, 07/13/2013 - 19:29 | 3749374 pauhana
pauhana's picture

Would someone just PLEASE hit the reset button?  NOW!

Sat, 07/13/2013 - 19:32 | 3749379 WTFUD
WTFUD's picture

Ever seen a blindman detonate himself in a mosque! Some clever bastard no doubt slipped a mickey finn in his satchel.

Sat, 07/13/2013 - 19:34 | 3749385 WTFUD
WTFUD's picture

My favourite word this month is 'peacekeeper' followed by liberator.

Sat, 07/13/2013 - 19:36 | 3749391 WTFUD
WTFUD's picture

Talibans favourite song! If i knew you were coming i'da baked a semtex cake. Scoundrels

Sat, 07/13/2013 - 19:40 | 3749396 starman
starman's picture

baah baah baah.....................

Sat, 07/13/2013 - 19:42 | 3749398 starman
starman's picture

oh sorry gotta heard my sheep 

Sat, 07/13/2013 - 20:03 | 3749439 infinity8
infinity8's picture

I refuse to find out what sharknado even is.

Sat, 07/13/2013 - 20:16 | 3749464 Jack Burton
Jack Burton's picture

What would Larry Kudlow say to all this doom and gloom?

Sat, 07/13/2013 - 20:35 | 3749500 Smegley Wanxalot
Smegley Wanxalot's picture

I live far enough inland that the Sharknados can't touch me.

Global economic collapse, however, may bite my ass a bit.

Sat, 07/13/2013 - 20:35 | 3749501 Winston Smith 2009
Winston Smith 2009's picture

"Sharknado" aka Land Shark.  If they do that just right, it should be hilariously stupid.  Otherwise, just stupid.

Sat, 07/13/2013 - 20:35 | 3749505 Divine Wind
Divine Wind's picture




Squidnado !

In the movie, global financial conditions are critically balanced on lies, fiat printing is the singular sustaining factor, fraud and corruption run unchecked, gubermant officials are bought and paid for many times over, despite it's weight, gold from throughout the entire Western world is mysteriously filling valuts in China and many of the world's most powerful financial institutions and central banks are run by alumni moving through a revolving door of one major firm; Goldman Sachs.  It sounds absolutely ridiculous, and it is, but it is real. No need to view the trailer. You ARE the trailer.



Sat, 07/13/2013 - 21:14 | 3749585 ejhickey
ejhickey's picture

i liked Sharktopus a lot more than Sharknado

Sat, 07/13/2013 - 21:36 | 3749633 Tombstone
Tombstone's picture

Any sharknado will be harpooned by Benny.  The markets are hitting new highs and everyone is super bullish.  Despite all the negatives, which are increasing every day, the expectations are for a Communist craptopia where everything is just peachy keen.  Gold is not acting like it should if there was any trouble on the horizon.  We have heard this all before about how the system could implode at any time.  Ok, if it does, there isn't a darn thing anybody can do about it.  There isn't anything that could be done to prevent it.  So, why worry about it?

Sat, 07/13/2013 - 22:02 | 3749664 toadold
toadold's picture

"Local drug dealer assosication is getting worried, the life span of a Heroin addict is about 7 years on average but Meth heads are diying at faster rate. The search is on for a cheap addicting buzz that doesn't mess up health and sanity as bad as meth. Local gangbangers report they are having to cut back on gun deals and make do with what they have. Pot heads are not real profitable since they lack the incentive to steal or work for money. Bring back Reganomics says one local drug lord."

Sat, 07/13/2013 - 22:03 | 3749665 polo007
polo007's picture

The predicament the Fed is in is that it is in the process of "losing the bond market," and it is trapped. It can't even hint about reducing its buying by a measly $20 billion (which used to be a big number but is a rounding error nowadays, when it comes to monetization) because of how bonds -- and, at some point, stocks -- misbehave whenever the subject comes up.

As far as the eye can print

The takeaways of what our Fed chairman had to say were that "highly accommodative monetary policy" would be needed for the foreseeable future, and that he finally made a point that I think many of us could agree with, which is that the unemployment rate of 7.6% might "overstate the health of the labor market." Bernanke also made it clear that the Fed would not raise rates for some time, even after we hit 6.5% unemployment.

In short, Bernanke corroborated all of the points that have been espoused by those of us who have felt that we understood the DNA of the Federal Open Market Committee doves. They really don't want to stop printing unless the employment gains are very strong. Which means fretting over taper talk is silly, for two reasons:

  • The economy will not be strong enough, I don't think.
  • And even if it is, the kind of tapering Fed officials are talking about is really quite small.

However, I don't want to lose sight of the fact that while Bernanke (and many others) thinks the bond market is declining because the Fed appeared to talk tough, some of us believe that the bond market is actually in the early stages of taking away the printing press from the Fed. If market participants finally get it through their heads that tapering, let alone any sort of tighter money conditions, is off the table and bonds can't make a substantial rally back near the old highs, then we will probably be able to conclude that the Fed has "lost" that market. (If bond holders begin to discipline the Fed, we will be on our way to the funding crisis I have long warned of.)

It's his way or the high-yield way

This is all very subjective, and we will have to see how it plays out. But what Bernanke made clear is that if the Treasury market doesn't cooperate with him (or the stock market, for that matter) he will respond.

This is the Bernanke quote that I think really got people's attention: "And I guess the final thing I would say in terms of risks of course is that we have seen some tightening of financial conditions, and that if, as I've said and as I said in my press conference and other places, that if financial conditions were to tighten to the extent that they jeopardize the achievement of our inflation and employment objectives, then we would have to push back against that."

So there you have it. The Fed is essentially trapped. If the financial markets don't continue to go higher, or if the bond market doesn't stay where the Fed wants it, it will fight that. Therefore, down the road, if interest rates move higher and the Fed thinks they shouldn't, it will take action (i.e., "push back against that"), which will only reinforce the idea that the Fed has indeed lost control of the bond market, and the ramifications of that will be quite ugly. Said differently, the Fed will conclude that any rate rise against its wishes is unwarranted and resist that, which will make matters worse.

To be sure, taking action premised on that outcome is not today's business. For now, markets are joyous and, at this point, stocks have really set themselves up for disappointment as we go through earnings season. Of course, now that Bernanke has promised stock bulls that he has their back again, the response to negative news will be that much more informative.

The two points I think we want to take away are that the Fed can't even talk about tapering, and the question of at what interest rate will the bond market really fail.

Sat, 07/13/2013 - 22:04 | 3749666 polo007
polo007's picture

According to CIBC World Markets:

The world remains a place where enormous amounts of debt just keep stacking up. Paying this debt back is constantly believed to be less of an issue given the crucial assumption that economic growth rates in the order of 3% to 5% will return AND will be sustainable. Even if it does, it must be noted that “total payback” of the debt could be unlikely to ever be achieved. At some US$18 trillion of total debt in the U.S., it would take 14,400 million ounces of gold or some 160 years’ worth of annual global gold mined supply (at the current price of some US$1,240/oz. and at current global output of some 2,800 tonnes per annum) to pay this down. At the same time, gold production is about to take an almighty knock and we won’t be surprised to see as much as 25% less gold output in the next five years.

Still, much of this precarious (let’s just stop the debt load from growing) position is critically dependant on very low interest rates being maintained – once rates start moving higher, debt repayment schedules quickly blow out, while the value of bonds, in particular government bonds, starts to decline. The current dramatic decline in the value of government bonds will already see banks’ balance sheets shrinking again, with possible resultant liquidity squeezes across the globe. Euro sovereign debt costs are already up dramatically and Italy is seemingly also sitting with an apparent +30 billion euro loss in the derivatives market…

This could very quickly turn out to be a very bad scenario, but the point, as far as we are concerned, is really that it does not even need to get to this for the markets to start realizing that currencies will have to depreciate much further – we believe this to be a crucial mechanism for delivering lower sovereign debt levels long term. Gold will be the currency that continues to benefit in the longer term. So, making a positive case for the gold price is not too difficult – particularly if inflation becomes a problem much sooner than everybody currently expects.

The real problem, unfortunately, is that all of this argument is dependant on data that will only become apparent much later down the line. Right now, nobody is willing to go against the Fed. That simply means bonds and gold are both getting the “chop” because the Fed is signaling a return to stronger economic growth – leading to a stronger U.S. dollar.

Sun, 07/14/2013 - 00:57 | 3750364 0b1knob
0b1knob's picture

By sharknado do you mean sh!t storm?

Sun, 07/14/2013 - 01:12 | 3750411 dreadnaught
dreadnaught's picture

better than "2 headed shark" and "mega mouse vs  octosaurus"......SyFy hang your heads in shame

Sun, 07/14/2013 - 02:28 | 3750581 polo007
polo007's picture

NEW YORK (Reuters) - Next week marks the first big week of second-quarter earnings, and it is sure to bring both joy and misery to Wall Street.

Investors will concentrate on market fundamentals after weeks when Federal Reserve policies have dominated the market. If they see companies are still struggling, stocks could take a fall.

Even after Fed Chairman Ben Bernanke scared markets in June by telling investors the Fed is likely to reduce monetary stimulus in coming months, stocks have recovered, with both the Dow and S&P 500 climbing to all-time highs. In an appearance earlier this week, the Fed chairman said monetary policy was likely to be accommodative for some time.

"We're in the terminal stages of a Bernanke-driven bubble," said Walter Zimmerman, technical analyst at United-ICAP in Jersey City, New Jersey. "While a lot of damage has been done to the bear case, eventually bad news like weak earnings growth will start to bear fruit."

To be sure, the Fed, which has shown a much friendlier face to investors lately, will not be out of the picture. Bernanke will appear before congressional committees on Wednesday and Thursday to deliver the semiannual testimony about monetary policy. However, few surprises are expected.

Sun, 07/14/2013 - 08:56 | 3750928 joak
joak's picture

It seems silver imports in June has risen again, while gold collapsed :

When connecting the dots, India would have imported from 1000 to 1500 tons of silver in June 2013. 

Sun, 07/14/2013 - 09:01 | 3750933 shovelhead
shovelhead's picture


Go take a look at FT or the Economist for articles about the 'Great Recovery' and then tell me about how silly Sharknado is.

By comparison, Sharknado looks absolutly plausible.

Doesn't England have laws against fellating banksters in public?

Sun, 07/14/2013 - 09:24 | 3750972 FeralSerf
FeralSerf's picture

They have laws against buggering unless the buggerer is a banker.

Sun, 07/14/2013 - 09:42 | 3751009 eaglerock
eaglerock's picture

What we need is a hot B list actress to fight the global ponzi.  We need Tara Reid, we get Elizabeth Warren. 

Sun, 07/14/2013 - 12:14 | 3751392 roadhazard
roadhazard's picture

Warren would look less like a librarian if she did something with her hair and traded the glasses for contacts.

 Elizabeth Warren for President.

I loved watching her destroy Joe Kernan on CNBS Thursday morning.

Sun, 07/14/2013 - 11:01 | 3751179 dizzyfingers
dizzyfingers's picture

"The general population is becoming increasingly restless as the nation plunges down the exact same path that Greece has gone.  Nobody seems to have any solutions as the economic problems continue to escalate."

Yes, when those elected to power are realized to be as intelligent and useful as used plastic bags, what else should happen other than hand-wringing and happy-news in the press and on tv? Insanity is doing the same insane things we see them doing over and over. More voting will not solve the problems nor get economies moving again.  Is this really news? Must we continue to  these same warmed-over ideas at zh?

Sun, 07/14/2013 - 11:23 | 3751264 escargot
escargot's picture


Sun, 07/14/2013 - 22:49 | 3753108 Uncle Remus
Uncle Remus's picture


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