Deutsche Bank: "We've Created A Global Debt Monster"

Tyler Durden's picture

Two observations on the latest thoughts by Jim Reid (DB's best strategist by orders of magnitude):

  1. He is far more concerned by what is going on in China than any of the other noise around the world. And rightfully so. As we first showed a few months ago, the money creation in China puts what all the other global central banks do to shame. Any slowdown in this credit creation and the wheels have no choice but to fall off, which also explains why even the tiniest default in this $9 trillion economy will be bailed out as it would risk an outright "flow" collapse.

  2. The Fed came, saw, and after realizing the mess it created with tapering - which can never be priced in now that the market is terminally addicted to the Fed's liquidity injections - will soon do what we have said since the May 2013 "taper tantrum" would happen - untaper, and resume bailing out everyone.

Full note from Reid:

From all the stories that broke while I was away the most fascinating surely revolves around the Chinese Trust product that in the end wasn't allowed to be at the mercy of market forces. For me it’s a microcosm of the fragility still present in global financial markets that a $9.0 trillion dollar economy - that will be the biggest in the world within the time frame of most of our careers - struggles to allow a $500 million investment product to default without there being market fears of it igniting panic in financial markets. This has now been a theme for the best part of 10-15 years in global financial markets particularly in the developed world but more recently the EM world since the GFC. We've created a global debt monster that's now so big and so crucial to the workings of the financial system and economy that defaults have been increasingly minimised by uber aggressive policy responses. It’s arguably too late to change course now without huge consequences. This cycle perhaps started with very easy policy after the 97/98 EM crises thus kick starting the exponential rise in leverage across the globe. Since then we saw big corporates saved in the early 00s, financials towards the end of the decade and most recently Sovereigns bailed out. It’s been many, many years since free markets decided the fate of debt markets and bail-outs have generally had to get bigger and bigger.


This sounds negative but the reality is that for us it means that central banks have little option but to keep high levels of support for markets for as far as the eye can see and defaults will stay artificially low. As such we remain bullish for 2014. However it’s largely because we think the authorities are trapped for now rather than because the global financial system is healing rapidly. So as well as EM being very important for 2014, we continue to think the Fed taper pace is also very important. If the US economy was the only one in the world then maybe they could slowly taper without major consequences. However the world is fixated with US monetary policy and huge flows have traded off the back of QE and ZIRP so it does matter. We have suspicions that the Fed may have to be appreciative of the global beast they've helped create as the year progresses.

In other words: bullish... because the system will continue to collapse and need more bailouts. The Bizarro world Bernanke created truly is an exciting place.

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Dr. Engali's picture

We've created a Created a global debt monster"


No freaking shit captain obvious. This coming from one of the worst offenders.

ArkansasAngie's picture

Hold on.  WE?  I did not such thing.  I believe it be you.  And on YOUR head be it.

TeamDepends's picture

We're on an express elevator to Hell, goin' down!

Oracle of Kypseli's picture

The subliminal message is buy stocks and stay with stocks. Sorry, I need insurance. Preserving what you have is better than trying to time the market. 

Stackers's picture

The system was designed from the start with this ending being known. Keynes famous quote of "we all die someday" was his retort to this paradox of a debt-money system that charges interest on money created out of thin air.

Landotfree's picture

Stackers, 100% correct, the outcome has always been known.   However, all credit is created out of thin air, if not where is it stored?   The medium of exchange does not lead to the eventually collapse but attaching interest to it gives it a normal shelf life of 60-80 years or so.

Attaching interest to your medium of exchange, in this case on "credit", eventually the system is unable to supply or demand the exponential growth which leads to collapse and liquidation of the walking unfunded liabilities.


kridkrid's picture

I forget your previous handle, but your "unfunded liabilities" is a dead giveaway. Thanks.

HoofHearted's picture

This is the deflationary pulse. This is your chance. Buy anything that isn't nailed down that will be useful on the other side. For me it is my farmland, a tractor, animals first. I've also bought firearms for absolutely nothing, and I've been slurping up gold and silver as I can find any at a reasonable premium to spot. This is your chance to make generational wealth. For those of you who really have a stack of cash, buy a useful business or some income-producing properties. Because once the untaper and all the inflation starts, Katie bar the door. Those fiatskis I'd been saving in the pages of those old books will no longer be worth the amount they are now. 

For ZHers it is obvious. Buy buy buy things of tangible value. 

Landotfree's picture

The helicopters are coming crowd is going to be surprised when the tanks start rolling.   There are no helicopter... there is only Death when the equation reaches it's final conclusion.

cognus's picture

Except....  buy later.  Postpone, as real assets will only get cheaper.  Cheaper tomorrow versus today.... until the process stops and reverses.  So, procrastinate, procrastinate, procrastinate.


the "stock" market [that is the market for algo digits] has about had enough of all this selling, so if you have cash, buy this dip!

SPY may have a little more downroom - to about 172, then every large FED bank will be buy, buy, buy with both fists

SoberOne's picture

<----- Crunch all you want, we'll make more. Leno

<----- Deficit spend all you want,we'll print more. Fedheadl

G.O.O.D's picture

Timing the market? There is no timing the market, or fundamentals or anything other than trying to guess what the controllers are going to do next. The market is a total crap shoot controlled by the ppt and hft machines. If you play in this game you might as well put it all on red or black in Vegas as your chances there are a hellova lot better.

NoDebt's picture

Back when I was a mere pup, I was perplexed at corporate M&A.  Put 'em together, break them apart- it all seemed so random, and rarely were the promises of "increasing shareholder value" met.

So I asked my father: why?  His answer was simple:  NoDebt, how are they going to make money breaking those companies up if they don't put them together in the first place?

Listening to Jim or anyone, really, from the banking world talk about this "new problem" that just popped up and needs to be addressed makes my blood boil.  It's an an entire self-contained ecosystem that exists to make money by creating problems so that they can make more money fixing them again.  

Credit problems in China are NEWS to anyone in the financial world?  That's been on the radar for YEARS.  It wasn't a problem for all those years, it was a "good thing" for a "rapidly growing economy."  Now all of a sudden it's an existential threat, according to those who allowed (made) it happen? 

Something about rolling the fucking guillotines becomes more attractive every day.

WillyGroper's picture

@LOP got me hooked on RTFG too.

Must be the cadence. 

janus's picture


outstanding work on those sites...i just bookmarked a couple of them, and will be visiting them regularly.  seems to me you're one of the few taking this shit seriously; and serious shit it most certainly is.  people will not accept the fact that we've been hijacked by godless nihilists, perverts, sadists...the vilest and most evil swill imaginable has effectively seized the functions of state.  the republican/democrat -- conservative/liberal bullshit is not part of the ruse; it is the God damned ruse.

i hope that the better part of the patriot community begins to realize how important a component is propaganda.  sure, you'll attract the sympathies of a substantial portion with Truth (about 10%); but the remaining 90% or so of any given population will be swayed by cues they respond to for reasons that have little to do with honor, liberty, justice, etc...they instead want to associate with something they can identify with; or should i say, something they 'want' to identify with.  a cliched way of saying it is: cool kids rule the school.

and we have before us the choicest of opportunities.  the message shapers, working on behalf of the nihilists, perverts, sadists, etc. are so out of tune, so rigidly transfixed with messianic zeal, so tightly orchestrated that they've lost touch with the cool factor, sacrificing it on the alter of their new religion.  all of everything they offer is pathetic -- i am, right now, far more entertained watching the snow fall than by anything i could imagine searching out on netflix or anywhere else.  all entertainment is now moralizing drivel.

which leads me to the most important point.  within the human animal there are a host of competing tensions; one of said dynamics is the pressure to conform pitted against its complementary pressure, rebellion.  once these pressures find themselves at peak disequilibrium, a reversal ensues such that stasis is sought and then pushed past until another point of opposing disequilibrium is found -- and the whole process begins again.  we are nearing a major reversal in the collective psyche, insofar as the pressure to conform is so very pronounced and pervasive as to be ubiquitous.  and what makes power's position so very tenuous is that they've predicated their every authority on the notion of popularity -- and they ain't cool anymore.  

these communists spawn of eastern european ghettos are anathema...nobody likes them, no one has ever liked them and no one will ever like them; again, they ain't cool.  but they so badly want to be liked, and they toil ceaselsessly for a world where they'll majically be the hip and desirable thing (ain't gonna happen).  and even in a society where the people are given no choice, the people choose nothing instead.

there is a deep and abiding crave to both rebel from the constraints of this soft-slavery-society gone absolutely mad coupled with a longing for a more meaningful attachment to something firmly and deeply rooted (the vapidity of the new religion will prove to be its very undoing).  we have before us the unique opportunity to present honor, decency, dignity, virtue and tradition as the viable and cool mode of rebellion.  i think TPTB are aware of this; and i suspect they're shitting their drawers over it.    

their authority is arbitrary.  their power is tinsel.  their ethos is meaninglessness.  their time is at an end.  God damn them to hell.

and, patriot community, what's the best way to be 'cool'?  is it to manufacture, market, promote and contrive 'coolness'? heavens no!  that's the enemy's methods, and they're about to crash in flames according to them.  cool is simply searching out that thing what finds favor with the people, and then associating one's message and very self to it.  'it' being a difficult thing to define; but 'it' always and inevitably asserts itself.  cool is made by God, and is never contrived of man.

if chris christie thought those boos were something...just wait till all of em start gettin rotten eggs in their faces...then run outta town on the rails...then, well, Heaven only knows (mmmmwaaahahahahahah!)

i'll meet you on God's Golden Shore,


Winston Churchill's picture

"We are all in this together". When they fuck up.

"You are on your own". When you fuck up.

yogibear's picture

"We are all in this together".

The west funded China's growth and lost production and jobs to China.

Ghordius's picture

yes, but who are "they"? Tyler has some praise for some, like "Jim Reid (DB's best strategist by orders of magnitude)"

now I don't know personally Jim Reid, and he might be a gentlemen and a good citizen and all that. but I am pissed off at the group he represents

then he is an American banker working at the City of London HQ of that monster that is DB, a megabank that is theoretically a continental european one, yet it needs two CEOs, one German and one Indian (who is of course Jim Reid's boss)

and then I get reminded how Tatcher's "Big Bang" transformed the City banks from a Cavalier bunch of skin-in-the-game Merchant Bankers cove to a Full-Pirate setup

and then I get reminded how British HR companies had to find lots of "talent", and they found out that they have to make tests for attitude, and took in psychopaths as the "best suited to the business of banking" (sadly true, check yourself)

and then I get reminded that of course British Universities were producing too little "talent", and then started to shop at American Universities for that

and then I get reminded that American Ivy League Universities stopped catering for the rich and powerful only and opened their gates to the Super-IQs like Loyd Blankfein. (Yes, a Jew. Lots of Jewish families have a generation-long tradition of marrying IQ instead of beauty, and the guy is a good example for that)

and then I get reminded that the Super-IQ are often psychopaths. nothing wrong with that, the poor fellows are born this way. they just need a sound environment to adapt and monitor. though put too many in a bunch and they reach critical mass - when the moral compass is not just lost, it's thrown overboard

and then I get reminded that of course Uncle Sam had to take off all brakes and barriers from banking, and deregulate all sensible things we painfully added over the years of experience, starting with the abolition of Glass-Steagall

and so many out of Jim Reid's bunch have those characteristics:

American, Ivy League, Super-IQ, possibly borderline to full psychopath because recruited this way, outside of their ancestral environments which could give them a handy moral compass, working for a megabank in London full of similar profiles

we have not created monsters, we have carefully constructed (and recruited) monster outfits. new-age pirates

just think about that when you hear of some of them suiciding. Banking should be boring. Stodgy. Careful. Not the environment for a critical mass of Super-IQs, and not the environment for the deadly mix between American business attitudes, Psychopathy, British tolerance for certain behaviours, and lots of hyperleveraged credit lines


P.S. if any of the usual bunch of antisemites and psychopath-bashers think this is an encouragement to continue with inane rants... go blow off your heads

john39's picture

empathy for the psychopaths?  no thanks.  better put them where they belong.  a prison cell.  that is the only way, short of a bullet to the head, to stop them from harming the rest of us.

Ghordius's picture

john39, if you don't feel empathy... then you are yourself a psychopath. and so I can only urge you to be careful and search for company with a moral compass. then stupid or lost psychopaths end up in prison or dead

you know what happens if you take one of those fishes who form big shoals and zap a certain part of their brain? they become instant leaders. 'cause they don't feel the urge to conform anymore. they swim, the others follow them. for a while, that is

if you are religious in any way, I urge you to feel empathy for those who have to learn it the hard way, i.e. thinking about. keeping psychopaths inside the boundaries of the community is one of the things religions are best at, btw. you could even think it's one of their USPs

john39's picture

putting a psychopath in prison is empathy.  shooting them, not so much.

Ghordius's picture

yet psychopathy is not a crime, and most crimes are done by non-psychopaths. in a sane environment, psychopaths see the logic in following the rules, even if they don't naturally feel it. if they are smart enough, they can calculate the consequences. most people have empathy, and it's a powerful navigational tool in social matters, which often leads them to neglect the consequences of their actions

a lot of social behaviour has situational ethics. shoot the allied soldier, get shot. shoot the enemy soldier, get a medal. psychopaths just need peers with empathy. that's why recruiting and bunching them together is a bad idea

Toxicosis's picture

You do NOT need to be religious to feel or to develop the emotive skill of empathy.  And feeling empathy for abusers makes you an enabler.  These people and anyone else who manipulates, abuses, and morally or ethically destroys another human being for the sake of selfish NOT self-preservatory motives has earned no such empathy nor respect.  Narcissistic, sociopathic and psychopathic behaviours are character traits in the vast majority of the population, not some genetic or bred aspect of the human being.  If we are talking fetal alcohol than you have a point.  We make choices and we either care about how we affect and treat other people or we do not.  Please stop making excuses for selfish, greedy pricks, who love to get to drunk on money and the perceived power it brings them.

Ghordius's picture

strike the religious part, then. yet there are people who simply can't feel empathy. nada, nothing. you can't develop on nothing. this is different from slightly narcisisstic, sociopathic or psychopathic character traits in the vast majority of the population

Smegley Wanxalot's picture

Correct.  WE didn't do shit.  They did.


And on top of a Debt monster, they've created a Doubt monster, in that the uncertainty generated by their incessant bullshit is generally causing the consumer they tried to dupe to do the exact opposite of what they expected.

It's fucking beautiful, man.

HoofHearted's picture

And all the sheeple are right now trying to save up so that they can pay off all the Christmas bills. What they need to understand is that now is the time to buy anything not nailed down. Hell, take as much credit card debt as you can. Mortgage the wife and kids. And buy all kinds of tangible stuff during this deflationary pulse. For when the likes of Ol' Yellen see the specter of deflation, the Ghost of Bernanke past will come through to tell her to stimulate. And that will bring even yet more QE4eva. And my Zimbabwe 10trils and 50trils that I hand out to people won't make them chuckle so much.

Why am I reminded of the Chris Rock bit:

Neighbor: "I heard you got robbed."

Rock: "You didn't hear shit because you was doing shit."

XAU XAG's picture

The Debt will take years before it gets to "Escape Velocity" if ever!

RaceToTheBottom's picture

"In order to help guide commercial banks to develop RMB-quoted gold derivatives trading, working with SGE’s price quoting system infrastructure, work to allow commercial banks that are developing RMB-denominated gold derivatives to be able to hedge on-shore gold trading margin with off-shore position without actual gold import-export business operations. "

I know some derivatives might be necisary but waging the tail .....

National Blessing's picture

Those Nazis won't be happy until they've enslaved all of Europe.  Then they'll try to convince the rest of us that the peons got what they deserved.  Bastards.

HungryPorkChop's picture

Release The Kraken..  It's time for the mortals to pay!

madbraz's picture

For one Deutsche Bank is dead on water should things get out of control.  They better pray central bankers can continue the juggling game when everyday there is another ball being added (leverage).

Bearwagon's picture

In shadow banking, no one can hear you scream.

Colonel Klink's picture

Except these aliens are legal and hold dual alliances.

Sudden Debt's picture

I'm pretty sure the Chinese are masters in rigging their market enough to prevent a meltdown

paint it red call it hell's picture

The only thing I am sure of is that the public will take it anyway 'They' want to give it since the bailout bend over.

BandGap's picture

But they need others to play along with the game.

This is the 3rd or 4th switch-a-roo between the US and China in regards to who has who by the balls. I suspect both countries have one hand on the other's throat and the other hand with a firm hold on the other's testicles. Who blinks first?

The Merovingian's picture

I just assumed they killed anyone who has a meltdown (i.e. awakening) ... kind of like North Korea ..

Juvenal laughs's picture

My oh my. While we'll speed up - eventually unavoidable - more and more obstacles will fall into place that all have to be circumvented to prevent a complete crash.

Seasmoke's picture

Savers of the World, unite and takeover.....

kridkrid's picture

But last night the plans for a future war
was all I saw on channel four.

Element's picture

yeah, debt face-suckers are cool but I preferred the bit where it punches out of the central bankster's narrow sunken chest, and all the noodles and cigarettes went flying ... Winston should have got a major award for that scene alone.

Cursive's picture

Jim Reid diagnoses the problem and then asserts that we should continue to believe that the pseudo-cure will work for yet another year, although 1.3M people were just expunged from the EUB rolls and we are seeing retail carnage?  Forget taking a bearish stance, am I alone in wondering what it would take for "analysts" like Jim Reid to switch to neutral?

ArkansasAngie's picture

That's part of the trouble.  There is no neutral.  It's all or nothing.  Either the 1%'ers get to keep playing like their insolvency is a liquidity problem or they are bankrupt.

You want income redistribution?  Let's go with liquidating their assets to pay their debts

Mudduckk's picture

Fastest way to liquidate them is for a united debt serf move into phys gold with the proceeds they should be paying on their notes. All750+FICO'S go Long gold short the mortgage payment. 


That would fix it. And the FICO's can cure their mortgage short once gold hits a reasonable value in USD terms.


Alas the pleebs are still too scared and too compliant.

Spanky's picture

And this is really interesting...

CaptainSpaulding's picture

" You have created a monster and it will destroy you"

      - Dr Waldman- Frankenstein, 1931