This page has been archived and commenting is disabled.

Things That Make You Go Hmmm... Like Being Completely Out Of Touch With Reality

Tyler Durden's picture


On January 29, 1845, the New York Evening Mirror published a poem that would go on to be one of the most celebrated narrative poems ever penned. It depicted a tragic romantic's desperate descent into madness over the loss of his love; and it made its author, Edgar Allan Poe, one of the most feted poets of his time.

The poem was entitled "The Raven," and its star was an ominous black bird that visits an unnamed narrator who is lamenting the loss of his true love...

So, with the vision firmly planted in your mind's eye of a man completely out of touch with reality, seeking wisdom from a mysterious talking bird — knowing that there is only one response, no matter the question — Dear Reader, allow me to present to you a chart. It is one I have used before, but its importance is enormous, and it will form the foundation of this week's discussion (alongside a few others that break it down into its constituent parts).

Ladies and gentlemen, I give you (drumroll please) total outstanding credit versus GDP in the United States from 1929 to 2012:

This one chart shows exactly WHY we are where we are, folks.

From the moment Richard Nixon toppled the US dollar from its golden foundation and ushered in the era of pure fiat money (oxymoron though that may be) on August 15, 1971, there has been a ubiquitous and dangerous synonym for "growth": credit.

The world embarked upon a multi-decade credit-fueled binge and claimed the results as growth.


Floated ever higher on a cushion of credit that has expanded exponentially, as you can see. (The expansion of true growth would have been largely linear — though one can only speculate as to the trajectory of that GDP line had so much credit NOT been extended.) The world has congratulated itself on its "outperformance," when the truth is that bills have been run up relentlessly, with only the occasional hiccup along the way (each of which has manifested itself as a violent reaction to the over-extension of cheap money).



Folks, rates WILL have to go up again. They cannot stay at zero forever. We all know that. When they DO, because of all the additional debt that has been ladled atop the existing pile, the whole thing will come tumbling down.

All of it.

There is simply no way out, I am afraid. But that is clearly a problem for another day. Right now, everything is fine, so we can all go on pretending it will continue that way.


So now, if you'll indulge me in a little poetic license (not to mention there being not one but four mysterious strangers in my offering), I give you, "The Maven" (abridged version):

Once upon a midnight dreary, while I pondered, weak and weary,
Over many a quaint and curious volume of financial lore
While I nodded, nearly napping, suddenly there came a tapping,
As of some one gently rapping, rapping at my chamber door.
"'Tis some visiter," I muttered, "tapping at my chamber door
Only this and nothing more."

Ah, distinctly I remember it was in the bleak December;
And each separate dying ember wrought its ghost upon the floor.
Eagerly I wished the morrow; — for the world had sought to borrow
From both friend and foe and neighbour — borrow, borrow, borrow more
For the cheap and easy money which the bankers forth did pour
Shall be paid back nevermore.

Deep into that darkness peering, long I stood there wondering, fearing,
Doubting, dreaming dreams no mortal ever dared to dream before;
But the silence was unbroken, and the stillness gave no token,
And the only word there spoken was the whispered words, "Some More?"
This I whispered, and an echo murmured back the words, "Some More"
Merely this and nothing more.

Open here I flung the shutter, when, with many a flirt and flutter,
In there stepped four stately Mavens from the Central Banks of yore;
Not the least obeisance made they; not a minute stopped or stayed they;
But, with air of lord or lady, stood inside my chamber door —
Standing by a mug from Dallas just inside my chamber door —
Stood, and stared, and nothing more.

Then these tired-looking men beguiling my sad fancy into smiling,
By the grave and stern decorum of the countenance they wore,
"Though thy faces look unshaven, thou," I said, "art sure enslaven'd,
Ghastly grim and ancient Mavens wandering from the Nightly shore —
To free money ever after lest the markets pitch and yaw."
Quoth the Mavens, "Evermore."

While I marvelled this ungainly bearded man explained so plainly,
Though his answer little meaning — little relevancy bore;
For he cannot help a-printing, brand new currency a-minting
Ever yet was blessed with seeing nothing wrong in doing more
Mortgage bonds upon his balance sheet he'll place, then markets jaw
With the promise "Evermore."

"You there" said I, "standing muted — what is there to do aboot it?"
In a heavy accent quoth he — that by God he was quite sure
That more money being printed and, new measures being hinted
At would quell all fear of meltdown and the markets all would soar
Would this mean the printing presses would forever roar?
Quoth the Maven, "Evermore."

Lastly to the fore there strode a small and bookish man, Kuroda,
Who with glint of eye did warn that he was happy to explore
Measures once thought so outrageous as to never mark the pages
In the history of finance — but those times were days of yore
Drastic printing was required, this was tantamount to war
Quoth the Maven, "Evermore."

And the Mavens, never blinking, only sitting, only thinking
By the Cowboys mug from Dallas just inside my chamber door;
Really do believe their action has created decent traction,
And that freshly printed money can spew forth for evermore;
But the truth about the ending shall be seen when markets, bending
Shall be lifted — nevermore!

The full must-read Grant Williams letter is below:



- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Tue, 12/17/2013 - 21:07 | Link to Comment lemonobrien
lemonobrien's picture

if there is no simple way out; then we take the hard way; which i fully expected.

Wed, 12/18/2013 - 01:47 | Link to Comment goatmug
goatmug's picture

Rates do not have to go up, just ask Japan.  While everyone continues to tell me that rates must go up....they don't.

Wed, 12/18/2013 - 03:00 | Link to Comment lewy14
lewy14's picture

What we know as "inflation" will only occur if wages go up with prices.

They do not, now. Why?

Because the oligarchs have cornered the market on labor.

Labor has no pricing power. Increasingly, it has no economic use! The "professions" are harnessed. The "workers" have been dominated. Income levels are set - by planning. And by planning I mean collusion.*

So there will be no "wage price spiral".

Commodity price increases - even large resets - do not constitute "inflation". 

Rates will only rise when the powers that be are good and ready for a liquidation. And not before.


*[Even "entrepreneurs", once an actual species in the wild, have been largely corralled and farmed - think "incubators" like Y-combinator and TechStars - but that's a subject for another time...]

Wed, 12/18/2013 - 04:06 | Link to Comment EasterBunny
EasterBunny's picture

Hyperinflation is not necessarily dependent on wage inflation. It is also dependent on the desire, or lack thereof to hold a currency. Faith in the fiat.

Wed, 12/18/2013 - 06:29 | Link to Comment lewy14
lewy14's picture

Absolutely true. I totally get that.

But there also doesn't seem to be any place to run to.

Faith in fiat is relative. Relative to what? Euro, Yen? Yuan? (I'm talking a major reserve currency here - something that can absorb trillions in a disorderly route).

Too many of the ruling class have their hands on the levers of the big portfolios which would need to flow out of dollars in any cascade. I don't think any such thing is possible anymore.

As for ordinary people, they will continue to owe taxes in dollars, and will thus be compelled to earn them, hold them, deal in them. And while dollars can be made appropriately plentiful for some (those who want to short them and buy assets), dollars can be made appropriately scarce for the rest of us. Is this not an accurate description of our current situation?

In the game theory of global major fiat currencies, "cooperate" has become a Hobson's choice.

Wed, 12/18/2013 - 06:43 | Link to Comment Oracle of Kypseli
Oracle of Kypseli's picture


Wed, 12/18/2013 - 08:29 | Link to Comment Sudden Debt
Sudden Debt's picture

There's still the negative interest rates to boost liquidity and increase inflation.

And for 90% of the population it will look like a party at the beginning.

Tue, 12/17/2013 - 21:07 | Link to Comment buzzsaw99
buzzsaw99's picture

Quoth the raven EVER MOAR

Wed, 12/18/2013 - 07:17 | Link to Comment negative rates
negative rates's picture

Dazed and confused, they found your stash again.

Tue, 12/17/2013 - 21:13 | Link to Comment OwnSilverPlayMusic
OwnSilverPlayMusic's picture

I'll quote my favorite American poet "It's a hard rain's gonna fall" Bob Dylan

Tue, 12/17/2013 - 21:15 | Link to Comment Hughing
Hughing's picture

It will only fail if someone a) stops printing or b) raises rates. Who will do either? Find that person and bet accordingly.

Tue, 12/17/2013 - 21:33 | Link to Comment WTFUD
WTFUD's picture

Hughing Spewing. Alas mein host too late was the 'hugh& cry'. In scotland if your name is Hugh they call you Shug and in this case Shug the Mug. Adios, farewell.

Tue, 12/17/2013 - 21:16 | Link to Comment Its_the_economy...
Its_the_economy_stupid's picture


Tue, 12/17/2013 - 21:17 | Link to Comment WTFUD
WTFUD's picture

For you'll tak the high road an i'll tak the low road an' i'll be up shit creek afore ye. . .

Tue, 12/17/2013 - 21:16 | Link to Comment Thurifer
Thurifer's picture

If we are lucky it will only be Poe, unfortunately my feeling is that what is coming is more Lovecraftian

Tue, 12/17/2013 - 22:24 | Link to Comment GeezerGeek
GeezerGeek's picture

The economy is prostrate in a pit, and the pendulum comes closer and closer with each swing to and fro.

Wed, 12/18/2013 - 00:34 | Link to Comment StychoKiller
Wed, 12/18/2013 - 05:18 | Link to Comment Diogenes
Diogenes's picture

"If we are lucky it will only be Poe,"

We are all headed for the Poe house.

Tue, 12/17/2013 - 21:19 | Link to Comment Uber Vandal
Uber Vandal's picture

In regards to "Folks, rates WILL have to go up again. They cannot stay at zero forever", Kindly direct your attention to the chart below of Japan, starting around 1995.

(Hint, rates have not yet, since about mid 1995, been above 1/2 of 1% in nearly 19 YEARS)

Tue, 12/17/2013 - 21:31 | Link to Comment ChaosEquilibrium
ChaosEquilibrium's picture

Japan is NOT the model:  export technological deflation, carry trade carried Japan into relevance....had growth(albeit debt) in other regional economies!

Tue, 12/17/2013 - 21:20 | Link to Comment Ms. Erable
Ms. Erable's picture

Duh Fed stop printing? Why stop stealing if it's legalized?

Raise rates? Only when duh Fed wants to forcelose and steal collateral.

Tue, 12/17/2013 - 21:25 | Link to Comment TheRideNeverEnds
TheRideNeverEnds's picture

But that is wrong, theoretically we can keep interest rate at zero and print money till the end of time; there is no hard limit.  


Remeber, past performance is no idication of future results. 

Tue, 12/17/2013 - 21:49 | Link to Comment max2205
max2205's picture

Who's running this show?

Tue, 12/17/2013 - 21:55 | Link to Comment nickels
nickels's picture

Extra points for getting around "bust of Pallas"--

Wed, 12/18/2013 - 02:47 | Link to Comment I Write Code
I Write Code's picture

Really?  "Cowboys mug from Dallas", really?


Tue, 12/17/2013 - 22:12 | Link to Comment starman
starman's picture

poem  my ass, hear this ; hickory dickory duck my dick has more value the any stock! 

Tue, 12/17/2013 - 22:12 | Link to Comment dick cheneys ghost
dick cheneys ghost's picture

speaking of nixon........

Things I learned enroute to looking up other things (RIP Sydney Harris)

''In his 1992 biography of Henry Kissinger, Walter Isaacson records that on 6 October 1973, during the 1973 Arab Israeli War, Kissinger urged President Richard Nixon's Chief of Staff General Alexander Haig to keep Nixon in Florida in order to avoid "any hysterical moves" and to "keep any Walter Mitty tendencies under control".[5]'' 


What Really Happened in the “Yom Kippur” War?

''describes the 1973 October War as a collusive enterprise between US, Egyptian and Israeli leaders, orchestrated by Henry Kissinger'' 

thus the petro-dollar was born..........just a few short yrs after nixon closed the gold window.......all orchestrated by that prick Henry Kissinger


Tue, 12/17/2013 - 22:32 | Link to Comment Exponere Mendaces
Exponere Mendaces's picture

"Quoth the ticker - QE, MOAR!"

Those fucking fucks won't let up on the gas pedal, not even with the idiot light glowing red on the dash and the smell of burnt piston rings wafting through the A/C vents.


Tue, 12/17/2013 - 22:37 | Link to Comment michael_engineer
michael_engineer's picture

"Folks, rates WILL have to go up again. They cannot stay at zero forever. We all know that. When they DO, because of all the additional debt that has been ladled atop the existing pile, the whole thing will come tumbling down."

Since you put it that way, and since your conclusion is that the whole thing will come tumbling down if that happens, then I suggest that if it does come tumbling down, it will be in a different way then through the fait accompli you presuppose.  Some other avenue will be tried that at least has some chance of working and where there is more hope.

Tue, 12/17/2013 - 22:46 | Link to Comment Cannon Fodder
Cannon Fodder's picture

So if it's all going to explode and end badly... is there a currency that would be better to hold other than the dollar?

Or is it better to just spend every bit of fiat curency you have on metals, land, beans and bullets?

Tue, 12/17/2013 - 22:57 | Link to Comment Constitutional ...
Constitutional Republic's picture

An excellent piece which reminds me why I like reading ZH.

For your amusement: 'Why is a raven like a writing desk,' asked the Mad Hatter in Alice in Wonderland.

The answer: there is no answer.

The question exposes the sometimes nonsensical behavior of adults who ask questions without any intention of knowing the answer or the outcome, much like the Fed's experiments. They just do it because the can, for their own entertainment at the head of the table,  and no one can stop them - yet.

Tue, 12/17/2013 - 23:17 | Link to Comment Trampy
Trampy's picture

It's easy enough to "monetize" this idea.  Sell 3-yr out Eurodollar futures on rallies.

Tue, 12/17/2013 - 23:39 | Link to Comment Vint Slugs
Vint Slugs's picture

This one chart shows exactly WHY we are where we are, folks.


Ho hum.  The chart "explains" one man's WHY.  BFD (not to be confused with BTFD).

Wed, 12/18/2013 - 04:55 | Link to Comment ebworthen
ebworthen's picture

Hmmm...another chart that shows rampant stupidity after the dollar was disconnected from tangible Gold (and Silver).

Wed, 12/18/2013 - 05:06 | Link to Comment goldenbuddha454
goldenbuddha454's picture

Let me guess what this means; This is going to end badly, right?

Wed, 12/18/2013 - 08:21 | Link to Comment Mi Naem
Mi Naem's picture

One thing that makes me go Hmmm is that this is the exact same newsletter that was posted on 12/10 by ZH at

As always, from Grant Williams, it was another good one.  But, was ZH really going for a 2-fer here? 

Wed, 12/18/2013 - 15:32 | Link to Comment Mi Naem
Mi Naem's picture

Well, looks like they fixed it.  Thanks.

Do NOT follow this link or you will be banned from the site!