The Money World Is Losing Faith In The Illusion Of Control

Tyler Durden's picture


Submitted by Howard Kunstler via,

The rot moves from the margins to the center, but the disease moves from the center to the margins. That is what has happened in the realm of money in recent weeks due to the sustained mispricing of the cost of credit by central banks, led by the US Federal Reserve. Along the way, that outfit has managed to misprice just about everything else  — stocks, houses, exotic securities, food commodities, precious metals, fine art. Oil is mispriced as well, on the low side, since oil production only gets more expensive and complex these days while it depends more on mispriced borrowed money. That situation will be corrected by scarcity, as oil companies discover that real capital is unavailable. And then the oil will become scarce. The “capital” circulating around the globe now is a squishy, gelatinous substance called “liquidity.” All it does is gum up markets. But eventually things do get unstuck.

Meanwhile, the rot of epic mispricing expresses itself in collapsing currencies and the economies they are supposed to represent: India, Turkey, Argentina, Hungary so far. Italy, Spain, and Greece would be in that club if they had currencies of their own. For now, they just do without driving their cars and burn furniture to stay warm this winter. Automobile use in Italy is back to 1970s levels of annual miles-driven. That’s quite a drop.

Before too long, the people will be out in the streets engaging with the riot police, as in Ukraine. This is long overdue, of course, and probably cannot be explained rationally since extreme changes in public sentiment are subject to murmurations, the same unseen forces that direct flocks of birds and schools of fish that all at once suddenly turn in a new direction without any detectable communication.

Who can otherwise explain the amazing placidity of the sore beset American public, beyond the standard trope about bread, circuses, and superbowls? Last night they were insulted with TV commercials hawking Maserati cars. Behold, you miserable nation of overfed SNAP card swipers, the fruits of wealth and celebrity! Savor your unworthiness while you await the imminent spectacles of the Sochi Olympics and Oscar Night! Things at the margins may yet interrupt the trance at the center. My guess is that true wickedness brews unseen in the hidden, unregulated markets of currency and interest rate swaps.

The big banks are so deep in this derivative ca-ca that eyeballs are turning brown in the upper level executive suites. Notable bankers are even jumping out of windows, hanging themselves in back rooms, and blowing their brains out in roadside ditches. Is it not strange that there are no reports on the contents of their suicide notes, if they troubled to leave one? (And is it not unlikely that they would all exit the scene without a word of explanation?) One of these, William Broeksmit, a risk manager for Deutsche Bank, was reportedly engaged in “unwinding positions” for that that outfit, which holds over $70 trillion in swap paper. For scale, compare that number with Germany’s gross domestic product of about $3.4 trillion and you could get a glimmer of the mischief in motion out there. Did poor Mr. Broeksmit despair of his task?

Physicist Stephen Hawking declared last week that black holes are not exactly what people thought they were. Stuff does leak back out of them. This will soon be proven in the unwinding derivatives trades when most of the putative wealth associated with swaps and such disappears across the event horizon of bad faith, and little dribbles of their prior existence leak back out in bankruptcy proceedings and political upheaval.

The event horizon of bad faith is the exact point where the credulous folk of this modern age, from high to low, discover that their central banks only pretend to be regulating agencies, that they ride a juggernaut of which nobody is really in control. The illusion of control has been the governing myth since the Lehman moment in 2008. We needed desperately to believe that the authorities had our backs. They don’t even have their own fronts.

Is the money world at that threshold right now? One thing seems clear: nobody is able to turn back the plummeting currencies. They go where they will and their failures must be infectious as the greater engine of world trade seizes up. Who will write the letters of credit that make international commerce possible? Who will trust whom? When do people seriously start to starve and reach for the pitchforks? When does the action move from Kiev to London, New York, Frankfurt, and Paris?

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Mon, 02/03/2014 - 12:17 | 4395891 superflex
superflex's picture

+1 for the use of ca-ca.

Mon, 02/03/2014 - 13:00 | 4396048 Gankfest
Gankfest's picture

How about that recovery! :P

Mon, 02/03/2014 - 13:34 | 4396166 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

I am preaching to the choir here on ZH, but you can't paper over the world's debt problems. The economic miracle is just a mirage these days.

Mon, 02/03/2014 - 16:34 | 4397037 foodstampbarry
foodstampbarry's picture

Shhhh! It's the weather.

Mon, 02/03/2014 - 18:57 | 4397703 Cattender
Cattender's picture

the recovery is in doubt...

Mon, 02/03/2014 - 13:06 | 4396072 SoberOne
SoberOne's picture

May be old news but interesting none the less.


Press Used to Print Millions of Counterfeit US Banknotes Seized


Mon, 02/03/2014 - 15:03 | 4396551 Disenchanted
Disenchanted's picture

Authorities believe this man to be the ringleader of the counterfeiters and is known on the street as 'Helicopter Ben'. 

Known accomplices, Hank 'The Hammer' Paulson, Timothy 'Turbo' Geithner, Jack 'Citiboy' Lew, Jamie 'The Cufflink' Dimon, and Lloyd 'The Squid' Blankfein.


If you see them say something!

Tue, 02/04/2014 - 04:26 | 4399372 olenumbersix
olenumbersix's picture

If you see them say something !    OK..... OPEN FIRE !

Mon, 02/03/2014 - 17:05 | 4397195 scrappy
scrappy's picture

Eric "Rick" Masters (Money Making Sequence) 1985


Mon, 02/03/2014 - 13:33 | 4396169 Mad Mohel
Mad Mohel's picture

I prefer "street chocolate". Makes it sound much more palatable.

Mon, 02/03/2014 - 12:16 | 4395894 VD
VD's picture

correct on everything but oil -- James go learn about some oil tech pls.

Mon, 02/03/2014 - 12:24 | 4395913 Headbanger
Headbanger's picture

Yeah he's a bit much on that topic but he made his name with the "peak oil" crowd so he's got to stay on that theme.

And does he really think the world is going to go back to making things by hand when there's probably millions of CNC and ao many other automated manufacturing systems in the world?

But the whole energy mess would be solved if some efficient means of storing huge amounts of electrical energy was developed.

Mon, 02/03/2014 - 12:35 | 4395950 VD
VD's picture

it's fukn annoying yappin bout peak oil yet not knowing shit bout the underlying tech/#'s/etc. -- cheapenz his other pointz makes him look like hysterical neo-malthusian that he ultimately is...

Mon, 02/03/2014 - 12:38 | 4395961 Cangaroo.TNT
Cangaroo.TNT's picture

Where does massage oil fall in all of this?

Mon, 02/03/2014 - 12:42 | 4395973 VD
VD's picture

itz drizzling out of Kuntzlerz ass...

Mon, 02/03/2014 - 12:47 | 4395986 Cangaroo.TNT
Cangaroo.TNT's picture

That's gross and you've totally ruined my fantasy.

Mon, 02/03/2014 - 12:58 | 4396033 VD
VD's picture

i aim to please ma'am....

Mon, 02/03/2014 - 12:48 | 4395988 Headbanger
Headbanger's picture

And what about "pig fat gun oil" too??

Mon, 02/03/2014 - 13:27 | 4395991 FredFlintstone
FredFlintstone's picture

Or stripper oil (glitter infused).

Mon, 02/03/2014 - 13:08 | 4396057 SelfGov
SelfGov's picture

He is right about oil too.

What is this new oil tech you're referring to?

Is it the "amazing" new technology being used in the Bakken or Eagle Ford where one $10,000,000.00 oil well produces 10 seconds worth of oil over 45 years?

Mon, 02/03/2014 - 12:20 | 4395896 Landotfree
Landotfree's picture

"Is the money world at that threshold right now?"

The money world is always at a threshold.  Expand exponentially or die.  Unfortunately or fortunately humans have no ability to supply and demand exponentially long-term let alone forever.   

Billions of walking unfunded liabilities are eventually going to have to go, if they use the big weapons... extinction is not out of the question.    Use the equation and the equation eventually uses you.


Mon, 02/03/2014 - 12:55 | 4396016 yogibear
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Unfortunately demographics. Demand is receeding, excess supply.

Mon, 02/03/2014 - 13:43 | 4396206 TheGardener
TheGardener's picture

EM countries currencies going down does not mean they have
economic problems that are being uncovered as all this crisis talk would imply. Large capital outflows alone
are not making currencies drop, as liquidity for the local currency could be created by local central banks.

What we are looking at is a repeat of the various convertability issues we had in Asia and Russia before :

Loss of confidence in the local currency because of certain bank-run like capital outflows make central banks losing
their cool and throwing good money after bad, draining reserves for no reason than trying to maintain textbook
conversion rates. They panic and make the initial drop a
self fulfilling prophecy. The Soroses can no longer play that game in Europe, but any ones currency is fair game.

But my point is, after getting burned badly in this game
in two decades ; it is not a liquidity thing, hot money
parting good riddance, it is a self induced squeeze on staying convertible, the suspension of which would have little consequences for the local stake holders.

Mon, 02/03/2014 - 12:20 | 4395901 BandGap
BandGap's picture

I like event horizons, like falling into a Black Hole. Nothing escapes except x-rays.

Mon, 02/03/2014 - 12:25 | 4395918 Headbanger
Headbanger's picture

Neutrinos dude.

Mon, 02/03/2014 - 12:54 | 4396017 pndr4495
pndr4495's picture

HFT engineers want to use neutrinos to cut the distance and thus the time to all exchange matching engines.


Mon, 02/03/2014 - 13:19 | 4396109 pods
pods's picture

They are working on a wormhole glory hole where they get into a different muppet each time they try it.


Mon, 02/03/2014 - 13:54 | 4396241 TheGoldMyth
TheGoldMyth's picture

I knew that pndr4495....and they are also looking into the use of quantum computers that opperate at light speed.

Mon, 02/03/2014 - 13:01 | 4396053 TuPhat
TuPhat's picture

I think you're right, headbanger, but it's really hard to tell what neutrinos do isn't it?

Mon, 02/03/2014 - 14:26 | 4396351 Headbanger
Headbanger's picture

Yeah I noticed that about the little buggers. I'm beginning to think they're actually quarks or gluons.

Mon, 02/03/2014 - 13:17 | 4396100 dontgoforit
dontgoforit's picture

And the devil.  He goes where he will.  Can you see him stacking this all up so it will fall like a house of cards on everyone, everyone.  Poor and rich alike.  It will probably be worse on the rich - they can't deal with hardship.

Mon, 02/03/2014 - 13:19 | 4396116 pods
pods's picture

And Chuck Norris. He went to a black hole for vacation once.


Mon, 02/03/2014 - 12:57 | 4396030 adr
adr's picture

Hawking came out and said there is no such thing as an event horizon. Maybe Bernanke got to him.

Mon, 02/03/2014 - 14:33 | 4396364 Headbanger
Headbanger's picture

I think Hawkings should go find out by launching himself into a black hole and see if he comes out somewhere else in space-time.

Like pre-Big Bang so he can also see if his "you only need gravity to make the universe" shit is true.

But then how would he ever publish unless he waits about 14 billion years or so??  Oh well, such is science.

Mon, 02/03/2014 - 13:31 | 4396158 scattergun
scattergun's picture

Gamma burst?

Mon, 02/03/2014 - 12:22 | 4395905 tmosley
tmosley's picture

No shit.  We've got the fourth banker "suicide" in a week now.  Something is happening, and it is nasty, one way or another.

Mon, 02/03/2014 - 12:31 | 4395938 Cangaroo.TNT
Cangaroo.TNT's picture

From RT article (


  • He was previously an assistant vice president and research economist at the Federal Reserve Bank of St. Louis....
Mon, 02/03/2014 - 12:58 | 4396029 superflex
superflex's picture

His name was Mike Dueker, his name was Mike Dueker, his name was Mike Dueker.

RIP fucktard.

Mon, 02/03/2014 - 12:59 | 4396041 Oldwood
Oldwood's picture

Its all just a coincidence.....

Its the end of the World....

Mon, 02/03/2014 - 13:02 | 4396059 MsCreant
MsCreant's picture

Can I pick both please?

Mon, 02/03/2014 - 13:28 | 4396140 Oldwood
Oldwood's picture

You are right of course. It IS a coincidence that the world is ending! I had nothing to do with it.

Tue, 02/04/2014 - 01:04 | 4399046 TheReplacement
TheReplacement's picture

Most useful idiots are now being liquidated.  Everyone who lives is either a true believer or powerless.

Mon, 02/03/2014 - 12:35 | 4395951 Stuck on Zero
Stuck on Zero's picture

Are they suicides or were they suicided?


Mon, 02/03/2014 - 13:00 | 4396045 tmosley
tmosley's picture

Either case speaks to increasing desperation on the parts of the financial "elites".

Mon, 02/03/2014 - 14:43 | 4396390 TheGoldMyth
TheGoldMyth's picture

tmosley: Yes i observe increasing desperation is often overlooked that crime is a cycle that includes ever increasing circles to operate, and is extremely inefficient and unreliable when it is ongoing. Nature abhors a vacuum, but it will also not tolerate inbreeding and concentration of power at all in the long term either.

It is not long before they do not trust each other, and thus the process of decay ensues and gains pace.

Very sick people by now indeed.

Karen Hudes does a very good interview the other day on an Australian show
"Karen worked in the legal department of the World Bank from 1986-2007. During this time she began to blow the whistle on the endemic corruption she witnessed. This honourable action led to her termination and mistreatment.

Posted on youtube and Fairnikum radio 3 days ago. "Institutional Corruption - Karen Hudes "Karen worked in the legal department of the World Bank from 1986-2007. During this time she began to blow the whistle on the endemic corruption she witnessed. This honourable action led to her termination and mistreatment."

Mon, 02/03/2014 - 13:09 | 4396082 nightshiftsucks
nightshiftsucks's picture

Awesome,it's raining bankers,I hope it fucking pours.

Mon, 02/03/2014 - 13:51 | 4396163 TheGoldMyth
TheGoldMyth's picture
   tmosley Thanks for bringing this to my attention

The underlying problem in this highly stressed sector is a shortage of specialist economic climate psychiatrists. I have tried to draw attention to the fact that i am the only one of this specialist medical science so far albeit as an amateur/hobbyist, but it has fallen thus far on deaf ears.
If there are any bankers at ZH, i would only be too happy to perform my first consultation so we can get on with effecting a cure.

I also have an interest in the practice of forensic economic psychiatry, and with a background in understanding the money creation and destruction process, and being multi skilled, i could help train new apprentices in this exciting new field in medicine

Mon, 02/03/2014 - 16:50 | 4397124 e_goldstein
e_goldstein's picture

Are you going to use ball-peen hammers?

If so, count me in.

Mon, 02/03/2014 - 12:23 | 4395906 fijisailor
fijisailor's picture

"extreme changes in public sentiment are subject to murmurations, the same unseen forces that direct flocks of birds and schools of fish that all at once suddenly turn in a new direction without any detectable communication."

Go ahead FED.  See if you can control this.

Mon, 02/03/2014 - 12:54 | 4396019 DeadFred
DeadFred's picture

They're trying. Each plunge today has been stopped by a surge of buys but after the surge ends no one steps in to continue the buying. It's a bad day for BTFD. Maybe they're waiting for tomorrow. It's a flash crashy sort of day. Weeklys are still cheap 20% down.

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