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Who Gets Thrown Under The Bus In The Next Financial Crisis?

Tyler Durden's picture


Submitted by Charles Hugh-Smith of OfTwoMinds blog,

The speculative excesses and political power of Wall Street pose a strategic threat to the Deep State, and as a result a showdown between the Deep State and the surface machinery of governance that has been captured by Wall Street is looming.

The basic idea of the Deep State is that the visible machinery of governance--electoral politics and the Federal Reserve--doesn't set strategic policy, it ratifies and implements decisions made behind closed doors. In Mike Lofgren's definition, the Deep State is "effectively able to govern the United States without reference to the consent of the governed as expressed through the formal political process."

In my analysis, the Deep State is the National Security State which enables a vast Imperial structure that incorporates hard and soft power--military, diplomatic, intelligence, finance, commercial, energy, media, higher education--in a system of global domination and influence.

The Dollar and the Deep State (February 24, 2014)

Ukraine: A Deep State Analysis (February 27, 2014)

Like any other bureaucracy, the Deep State is prone to group-think, the tendency to join the prevailing "herd" in accepting a dominant paradigm and narrative that identifies key dynamics and sets priorities.

Group-think responds to both success and failure. In the case of the Deep State, key elements of the neo-conservative paradigm have been discredited. The Rise and Fall of the Failed-State Paradigm: Requiem for a Decade of Distraction (Foreign Affairs)

(Anyone seeking a public reflection of the current thinking within the Deep State would do well to read Foreign Affairs, with an emphasis on reading between the lines.)

For the sake of argument, let's assume the leaders of the U.S. Deep State are not complete morons. Granted, that is quite a stretch, given that these are the people who gambled the lives of thousands of American troops and trillions of dollars in treasure on discretionary wars in Iraq and Afghanistan.

But it is also reasonable to assume that the neo-conservatives who naively assumed that residents of Baghdad would not only welcome their foreign liberators with baskets of flowers but would magically reconstruct the social institutions that had been systemically destroyed by Saddam over the previous 30 years--yes, those neo-con nincompoops-- have been quietly put to pasture on their mini-estates in Northern Virginia.

In other words, it is reasonable to assume that the Deep State has accepted that "mistakes were made" and flushed those responsible for the previous decade's disasters.

The Deep State undoubtedly has its own niceties and protocols, but it is by necessity ruthlessly Darwinian: failure is not only always an option, it is inevitable as a systems-level consequence of tightly connected, interactive complex systems; such failures are known as "normal accidents," catastrophes resulting from seemingly small miscalculations and miscues that cascade into systemic crises.

As a result, incompetence cannot be rewarded lest the Deep State itself suffer the consequences.

The Deep State's prime directive is to preserve the Deep State itself and the nation it depends on for its survival. My analysis starts by identifying the vectors of dependency. (To the best of my knowledge, I am the first to use this term in this context.) The Deep State depends on the survival of the U.S. nation-state, but the nation-state does not depend on the Deep State for its survival, despite the certainty within the Deep State that "we are the only thing keeping this thing together."

Strategy is one thing, responding to crisis is another. The surface government (elected officials, regulatory agencies, the Federal Reserve, etc.) responds to crisis in two basic ways: it chooses whatever short-term politically expedient fix reduces the immediate political pain (also known as "kicking the can down the road") and it sacrifices the interests of politically weak groups to protect its cronies and fiefdoms.

This crisis-response triage requires that somebody gets thrown under the bus. In the 2008 financial crisis, the Fed threw savers and the bottom 95% under the bus to funnel hundreds of billions of dollars--what was previously paid in interest--to the banks to rebuild their broken balance sheets. The Fed also provided limitless liquidity to bank trading desks and financiers to skim billions from carry trades, effectively channeling the nation's financial resources to enrich its cronies, the top 1/10th of 1%.

The Deep State must take a longer view, and make strategic triage decisions. All sorts of people, groups and policies are routinely tossed under the bus--foreign leaders, resistance groups, civil liberties, etc.--as the Deep State adjusts to long-term developments and crises with strategic consequences.

Many Deep State decisions and policies are barely noticed, even though they are completely public. For example, the U.S. Deep State recognized that the dissolution of the Soviet Union opened an extremely dangerous door to nuclear weapons falling into non-state hands. So the U.S. spent tens of billions of dollars helping secure the thousands of Soviet nuclear weapons left in limbo after the breakup.

Though the Deep State's institutional bias is to focus on conventional national security issues, it must also monitor potential strategic threats created by issues such as climate change, immigration and Peak Cheap Oil. The financial crisis was apparently an unexpected and unwelcome distraction from the geopolitical Great Game, and the response of the Deep State was muted.
while the surface policies of the Federal Reserve and Federal government appear to serve the interests of the financial Elites, I am beginning to discern the possibility of a strategic Deep State response to the next (and inevitable) financial crisis.

This crisis is simple to summarize: the paper claims on wealth so far exceed actual wealth that something's gotta give. These claims include trillions of dollars in shadow-banking bets (derivatives and other leveraged claims all teetering on a tiny base of real collateral) and trillions of dollars in debt-based claims on future income.

Simply put, the vast majority of these claims will have to be zeroed out, i.e. these phantom-claim "assets" will be voided and declared worthless. This leads to the key question: who will the Deep State throw under the bus to preserve itself and the nation-state?

Once again, identifying the vectors of dependency clarifies the strategic priorities. As I pointed out in The Dollar and the Deep State, the pre-eminence of both the Deep State and the U.S. nation-state depend on the U.S. dollar remaining the key reserve currency in the global economy.

The collapse of the U.S. dollar would destroy the foundation of both the Deep State and the U.S. nation-state, hence my conclusion that the Deep State will not enable that collapse.

As for all the financial claims on real wealth that will have to go to zero value, let's identify the operative vector of dependency with a question: which scenario most threatens the Deep State: 50 million hungry Americans taking to the streets shouting, "we're mad as hell and we're not going to take it any more!" or 10,000 financiers losing a couple trillion dollars in phantom wealth?

In other words, the phantom financier claims of Wall Street now pose a strategic threat to the integrity of the U.S. and its Deep State.

The Deep State needs a functioning U.S. nation-state, and a mass uprising arising from the collapse of the state cannot be suppressed with a few whiffs of grapeshot. The collapse of global pre-eminence and state financing of food stamps and other social welfare programs directly threaten the Deep State.

The collapse of financier fortunes? While that would hurt some Yalie cronies, the Deep State is not Wall Street; it attracts those who prefer power to wealth and strategy to trading. I have no doubt whatsoever that the leadership of the Deep State would have no qualms about throwing bankers and financiers under the bus once they pose a strategic threat to the U.S. dollar and other financial interests vital to the Deep State, for example, keeping 300 million Americans distracted, placated and docile.

It's certainly not lost on the Deep State that a palpable hatred of bankers, financiers and the Federal Reserve is taking root across the land. I know this is outside the mainstream, but I think it is increasingly likely that the financial system's skimmers and swindlers are being recognized as potential strategic threats to the Deep State.

What is essential to the Deep State's survival and supremacy and what is not essential? Are 10,000 obscenely wealthy financiers essential? No. Between saving the U.S. dollar and making whole the $100 trillion in nominal-value bets made by financiers in offshore shadow-banking accounts--there's no contest.

Conventional wisdom has it that Wall Street dominates the state and the Fed. To the degree that these formal surface institutions can be influenced by lobbying, campaign contributions and plum positions, this is true. But these surface institutions only ratify and implement Deep State directives.

I know this sounds "impossible" within conventional narratives, but I am increasingly confident that the financiers' phantom claims on real wealth will be thrown under the bus in the next global financial crisis. Look at it this way: there's essentially nothing left to stripmine from the bottom 80%; most have been reduced to neofeudal debt-serfdom. Since the survival of the nation-state depends on the 80% remaining either passive or productive, the Deep State has a vital strategic interest in both the U.S. dollar and in maintaining the social welfare programs that enable the bottom 80%'s survival.

The Three-and-a-Half Class Society (October 22, 2012)

The Deep State also needs the top 20% to remain productive to maintain U.S. soft and hard power. Transferring trillions of dollars in real wealth to make good the claims of the financier class would require the stripmining of the whatever assets the top 20% still hold. This transfer would directly threaten both the nation-state and the Deep State.

The dominance of Wall Street over the formal, visible machinery of governance has persuaded many that Wall Street is the Deep State. I believe this is a serious misread of the real Deep State. As I noted in The Dollar and the Deep State, to even discern the outlines of the Deep State requires a senior military position or national-security civilian equivalent.

Those writing knowledgeably about Wall Street and finance typically show near-zero knowledge of high-echelon U.S. military and national-security assets, policies and networks, so this blind spot is understandable.

It's widely assumed that Wall Street rules the roost in both the mainstream financial media and in the alternative financial blogosphere. In my view, the speculative excesses and political power of Wall Street pose a strategic threat to the Deep State, and as a result a showdown between the Deep State and the surface machinery of governance that has been captured by Wall Street is looming.

Though everyone who is convinced the U.S. dollar will go to zero is confident that Wall Street will emerge victorious from the next financial crisis, I am convinced of the opposite: the Deep State will do whatever it takes to eliminate strategic threats to the integrity of the Deep State and the nation it depends on for its power and survival. In a financial crisis that threatens the dollar and the Deep State, the phantom claims of Wall Street's financier skimmers, scammers and swindlers will be tossed under the bus with few qualms. The triage might even be performed with a certain relish.

Put another way: we've reached Peak Wall Street and it's all downhill from here.


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Mon, 03/03/2014 - 13:49 | 4502286 LawsofPhysics
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Please, who has been thrown under the bus in every other financial crisis?  The taxpayer and American people!!!!!


Roll the motherfucking guillotines, nothing changes otherwise.

Mon, 03/03/2014 - 13:51 | 4502295 Divided States ...
Divided States of America's picture

Yup, the only thing that has changed is the person DRIVING the bus, it was Alan Greedspan in 2000, then Benny B in 2008 and now its Old Yellen in 2014.

Mon, 03/03/2014 - 13:54 | 4502306 TeamDepends
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Actually, it's Stevie Wonder because, well you know......

Mon, 03/03/2014 - 14:04 | 4502349 Dark_Horse
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Well, I can count on one hand the number of people that went to jail for the last financial crisis.

and if your looking for the incentives to do the right/wrong thing in the future...

the CEO's were paid handsomely while the crimes were perpetrated and then paid even more for leaving the scene of the crime.


Mon, 03/03/2014 - 14:04 | 4502360 TeamDepends
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Free Dick Fuld!

Mon, 03/03/2014 - 15:39 | 4502891 Tom_333
Tom_333's picture

Free Jon Corzine!

Mon, 03/03/2014 - 15:49 | 4502955 waterhorse
waterhorse's picture

Free Agent Orange (Angelo Mozilo)

Mon, 03/03/2014 - 16:24 | 4503201 Flakmeister
Flakmeister's picture

Free John Thain....

Mon, 03/03/2014 - 16:46 | 4503295 Jumbotron
Jumbotron's picture

Free Beer.....

Mon, 03/03/2014 - 16:47 | 4503297 Jumbotron
Jumbotron's picture

Free Software....


Mon, 03/03/2014 - 16:47 | 4503298 Jumbotron
Jumbotron's picture

Free Liberty !!

Mon, 03/03/2014 - 17:17 | 4503475 Straw Dog
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Free shit army

Mon, 03/03/2014 - 17:36 | 4503557 Jumbotron
Jumbotron's picture

Kiss Army

Mon, 03/03/2014 - 17:36 | 4503561 Jumbotron
Jumbotron's picture

Salvation Army

Mon, 03/03/2014 - 20:06 | 4504288 WmMcK
WmMcK's picture

Free Nelson Mandela -- oops, a little late on that one.

Mon, 03/03/2014 - 14:57 | 4502676 Panafrican Funk...
Panafrican Funktron Robot's picture

"Those who have the gold, make the rules."

Now think about where gold has been migrating the last 15 years.  Then think about how much gold is left here in the U.S.  This should tell you everything you need to know about where the TPTB/"Deep State" is physically residing, where their present loyalties lie, and what their viewpoints are regarding the US.  

Mon, 03/03/2014 - 18:02 | 4502835 Dick Buttkiss
Dick Buttkiss's picture

"The collapse of the U.S. dollar would destroy the foundation of both the Deep State and the U.S. nation-state, hence my conclusion that the Deep State will not enable that collapse."

"Enable" it? Like it's a choice they have?

How the hell are they gonna stop it?

Answer: no how.

Mon, 03/03/2014 - 15:28 | 4502836 SF beatnik
SF beatnik's picture

Guns trump gold. Those who have the guns can take the gold anytime they want. 


The ruling milieu is not yet ready to abandon the US. Banksters beware. The CHS article is fuckin 'A right.



Mon, 03/03/2014 - 21:01 | 4504114 zhandax
zhandax's picture

CHS should have elaborated more on just how trillions of shadow banking claims can be 'zeroed out' without taking the dollar down in their wake.

Tue, 03/04/2014 - 00:28 | 4505245 Exponere Mendaces
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Actually you should think about why they let gold still be traded/bought by the unwashed masses. Its because they have zero fear of it, contrary to the "stacker" manifesto. You can't bring down anything with it, and if they want it, they'll just use their new powers of zero-warrant-searches to find it.

Do you really think they'd let something that could threaten the existing power structure be utilized by the "commoners"? Not unless they have all of their defenses ready, including price manipulation, confiscation and the rest.

But keep telling yourself you're prepared.

Mon, 03/03/2014 - 14:03 | 4502354 Thought Processor
Thought Processor's picture


This one is easy.   

The Constitution of the United Stated of America and the Bill of Rights.

They will both answer overtly to another power after this (instead of covertly as it stands now).


Operation 'Takedown US' is in motion.

Mon, 03/03/2014 - 14:07 | 4502368 TeamDepends
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Any law repugnant to the Constitution is null and void.

Mon, 03/03/2014 - 14:09 | 4502379 Thought Processor
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As are debts incurred via. treason.  Null and Void.

(forefathers who wrote the Constitution = not stupid)


Chew on that one for a while.

Mon, 03/03/2014 - 14:17 | 4502418 logicalman
logicalman's picture

Research 'odious debt' it will help you chew.

Unconscionable contract is worth a look too.

Mon, 03/03/2014 - 17:06 | 4502940 New World Chaos
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There is a Deep Deep State that controls Wall St. AND the Deep State.  They have wanted a world government and world central bank for centuries.  This will be much better than depending on nation states for loot.  There will be nowhere to run to, no country to show the world what it's like to live without THEM, no foreign competition with favored cartels, no worries about nation states that looted too much being taken out by those that looted less.  The Deep Deep State could have a neo-feudal prison planet forever.

Destroying America is a key objective on the path to this goal.  Perhaps more importantly, the very idea of America must be destroyed.  They will ensure that we are mind controlled, tyrannical, hypocritical, hated, unproductive, stupid, and overrun with bludgers and sociopaths.  America is to become a cruel mockery of what it once was.  Half of Americans will be too dumbed down to even notice, much less care.  It is already happening.  It will keep getting worse unless America can still muster up 30 million people who remember what freedom was and how to get it back.

As for who to throw under the bus, that's obvious:  They intend to eat the last of the productive middle class.  "All your account are belong to us.  You will sell the fruits of your labor to the FSA at price-controlled prices or be a slave in the camps, making Halliburton-brand soylent green until your time comes".  You will get no help from the Deep State.  Only traitors will be rewarded.  The puppetmasters will finish America off with an EMP when the loot runs out or if the slaves get uppity.

Mon, 03/03/2014 - 15:08 | 4502734 Polonius
Polonius's picture

Suggest you read the article before commenting.  The Fed may visibly sit in the driver's seat but the bus is remotely controlled.

Mon, 03/03/2014 - 13:54 | 4502307 Seasmoke
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You've said that a few times now. I don't think it means what you think it means.

Mon, 03/03/2014 - 13:57 | 4502319 LawsofPhysics
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See knockout's post below.  you'll figure it out.

Mon, 03/03/2014 - 13:55 | 4502315 SWRichmond
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the Deep State is "effectively able to govern the United States without reference to the consent of the governed as expressed through the formal political process."

Consent of the governed is manufactured.  The MSM is the opiate of the masses, religion having proven unable to continue in that role.  The two party American system is an obvious farce, and most Americans get that now.  So SOMEONE must be calling the shots, and it sure ain't anyone anybody ever "voted" for.  The "public" cannot afford to get any candidate who supports their interests far enough along to actually be able to "vote" for them.

Mon, 03/03/2014 - 14:21 | 4502439 Renewable Life
Renewable Life's picture

Speaking of Candidate's, some schmuck Senator just said lets freeze all the assets in the Russian banks, etc etc!!!

I love how these motherfuckers think America is the only Country on the planet that has fucking banks!! I'm sure the Russians can do the god damn same thing to USD denominated assets too, not to mention turn off the fucking gas to Europe, and strangle Eastern Europe's economy in 2.5 seconds!!! You think those clowns in the EU are producing anything even close to there wasteful demand??? And then let's talk fucking China, maybe they might slap some travel bans on Americans and freeze some non essential assets, like starting with those iphone factories!!

Oh I know Wall Street delusionaries, America is just too god damn important to EVER do that!!! Ok but remember this, the Russian and Chinese people have a proven track record of surviving and overcoming massive adversity over the last 150 years, massive starvation, wars, struggle the average American Joe and housewife, can't even comprehend!! So if your betting on who can weather hardship longer and better, you better "hopey" the Russians and Chinese are bluffing on this one, or the jig might be up!

Mon, 03/03/2014 - 15:05 | 4502715 Jack Burton
Jack Burton's picture

Up vote for that one!

Mon, 03/03/2014 - 14:32 | 4502530 Quinvarius
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Religion actually works against them these days because what they do is mostly considered sin in about any religion.

Mon, 03/03/2014 - 15:09 | 4502576 NOTaREALmerican
NOTaREALmerican's picture

Re:  considered sin

Sin is negotable.    Highly skilled sociopaths can create bullshit for the dumbasses about what should be a sin:

1) fornicating-harlots?  Yes
2) improper placement of the genitals?  Yes
3) blowing up the sand people?   No
4) greed?  DEFINITELY NO (You goddamn hippies who hate Merica!)

Mon, 03/03/2014 - 14:37 | 4502556 NOTaREALmerican
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Re:  and most Americans get that now.

If they did, they wouldn't be so patriotic.   There's still LOTS of enthusiasm for the Red and Blue Teams, if for no other reason than defeating the other Team.   After all:  think of  [the trrrsss | the children | the Supreme Court picks | "those people" taking all your hard-earned tax money ].   

It's so easy, even a (sociopathic) cave-man could do it.

Mon, 03/03/2014 - 15:50 | 4502961 Hongcha
Hongcha's picture

"The two party American system is an obvious farce, and most Americans get that now."

Good post SWRichmond but I have to disagree with the italicized portion. We have a generation to go before disillusion roots itself in America.

Mon, 03/03/2014 - 17:08 | 4503427 Zadig
Zadig's picture

Going by the number of people who are registered and vote red/blue every election, 40%-60% of the population definitely don't get it.

And anyone who does "get it" is promptly replaced by the brainwashed hordes coming out of the government schools.  I'm hopeful that the 'Ron Paul' generation and impending death of the school system will break the idiot assembly line.

Mon, 03/03/2014 - 13:55 | 4502316 BandGap
BandGap's picture

I agree, but that isn't going to be enough this time around.

I think some of the heavy players also get thrown under the bus, most of which have been warned. The sweet thing about trying to control (or, in this case, dole out) chaos is that it is what it is - chaos. But even the mighty taxyer/citizens can't handle all of this.

For the first time I am convinced this will end in war. Right now the EU is handwaving ad Russia is acting like nothing is going on.

Who fire the first shot? Even money it's one of the two ships still loyal to Ukraine, sitting there in the harbor off of the Crimean peninsula.

Mon, 03/03/2014 - 14:59 | 4502685 11b40
11b40's picture

Won't happen. If it did, it would be over in the blink of an eye. Neither US nor EU willing to roll dice w/big boys, especially w/nukes.

Mon, 03/03/2014 - 14:01 | 4502335 Buckaroo Banzai
Buckaroo Banzai's picture

They will continue to go after SAVERS (soon to be known as "hoarders").

Reduce interest rate paid on savings deposits to 0%? DONE

Effectively eliminate offshore banking for anyone who can't afford or understand offshore trusts? DONE

Bail-ins instead of bail-outs? TESTED AND READY FOR ROLLOUT

Seize 401ks and IRAs? TBD

Charge interest for keeping money in checking accounts? TBD

Mon, 03/03/2014 - 14:20 | 4502434 Duke of Earl
Duke of Earl's picture

"Please, who has been thrown under the bus in every other financial crisis?  The taxpayer and American people!!!!!"

More specifically the American Taxpayer.  Many Americans will not be bothered at all and will continue to collect handouts.

Mon, 03/03/2014 - 14:27 | 4502482 seek
seek's picture

Yes, LawsofPhysics nails it out of the gate.

The money won't be coming from 10,000 financiers. No, they'll drain checking, savings, and cash-holding IRA accounts of any American that has money to steal. It's in Dodd-Frank, for chrissakes, in black and white giving them bail-in authority. In addition to this it will be printing as usual -- the seizures will be window dressing compared to that.

So, anyone with savings gets screwed twice, with the government taking significant value now, and then devaluing what they leave you with.

But you're reading this on ZH, so you already know the escape plan for this event.

Mon, 03/03/2014 - 14:40 | 4502554 Flakmeister
Flakmeister's picture

Hey LOP....

They rolled the guillotines out once, what crawled out to replace those reduced to a headless state were fundamenally no different...

But, it is a nice thought nonetheless...

Mon, 03/03/2014 - 15:11 | 4502748 Chuck Knoblauch
Chuck Knoblauch's picture

Find a scapegoat, or become the sacrifice. :)

Mon, 03/03/2014 - 15:47 | 4502934 LawsofPhysics
LawsofPhysics's picture

Perspective is important.

Some people will live, and some will die. Cry me a fucking river...

same as it ever was...

At the end of the day the laws of Nature and physics really don't give a shit.

Mon, 03/03/2014 - 15:11 | 4502751 Midnight Rider
Midnight Rider's picture

Very true. Too big to fail has pretty much been carved in granite at this point. And that granite is on Wall Street.

Mon, 03/03/2014 - 15:22 | 4502810 Maverick Ninefingers
Maverick Ninefingers's picture

Specifically, I think Old People will get thrown under the bus by the Young.  Social Security and Medicare won't pay out anymore, or won't pay enough and the people who were told they could rely on it will get screwed.

Mon, 03/03/2014 - 16:01 | 4503055 daveO
daveO's picture

Exactly. Hasn't the author heard about all the hollow point bullets(1.6 billion, last I read) the Feds are buying. While, at the same time forcing out the last lead smelter via the EPA. If they aren't stopped, there is going to be blood bath, to protect the Debt Plantation Owners.

Mon, 03/03/2014 - 18:45 | 4503917 caShOnlY
caShOnlY's picture

wow.... the state will really rape the elites to save itself? WOW this guy is writing way too many articles and needs a vacation to get his head straight.

Mon, 03/03/2014 - 13:49 | 4502288 buzzsaw99
buzzsaw99's picture

Prefer Debbie Does Dallas over Deep State.

Mon, 03/03/2014 - 13:49 | 4502292 onewayticket2
onewayticket2's picture

no doubt it will ooze moral hazard.

Mon, 03/03/2014 - 13:50 | 4502293 icanhasbailout
icanhasbailout's picture

If you can't spot the sucker at the table, it's you.

Mon, 03/03/2014 - 15:08 | 4502733 Jack Burton
Jack Burton's picture

If only Americans ever figure that out. They think they are players at the table everytime they vote team red, or team blue, or wave a fucking flag on the 4th of July. Hardly players, 2008 proved they all were the suckers. Nothing has changed,

Mon, 03/03/2014 - 13:51 | 4502294 I_KNOCKOUT_U
I_KNOCKOUT_U's picture


Mon, 03/03/2014 - 13:57 | 4502320 epicurious
epicurious's picture

Wouldn't that be sweet!

Mon, 03/03/2014 - 13:57 | 4502324 AnAnonymous
AnAnonymous's picture

'Americans' are experts at throwing people under the bus. This makes it a tough question.

Because 'americans' are running out of people to throw under the bus. They've been too good at it.

Mon, 03/03/2014 - 13:58 | 4502327 MuleRider
MuleRider's picture

" Look at it this way: there's essentially nothing left to stripmine from the bottom 80%..."

Have to say I disagree with this statement....they can always be stripmined for MOAR debt. 

Mon, 03/03/2014 - 14:01 | 4502345 LawsofPhysics
LawsofPhysics's picture

Yes, and their blood.

Same as it ever was.

Mon, 03/03/2014 - 14:01 | 4502343 lordylord
lordylord's picture

Duh.  The destruction of the middle class is the number one priority in the US and the rest of the developed world.

Mon, 03/03/2014 - 14:02 | 4502350 centerline
centerline's picture

Good article CHS.  I tend to agree.

Plus, a take down of the TBTF would have the masses cheering.  But, the problems will not be solved.  This will not "zero" the bets.  The chain of counterparty exposure is global and is far too complex.  My guess is some sort of nationalization process that occurs here and in at least London in a similar timeframe.  The "can" will get kicked again.

Mon, 03/03/2014 - 14:03 | 4502353 halfawake
halfawake's picture

What evidence is there that this "deep state" has any allegiance to the US, and that it can never change?

Mon, 03/03/2014 - 14:04 | 4502361 Lord Koos
Lord Koos's picture

Silly quesion... every average citizen who is not well-connected to the elite will be under the Greyhound...

Mon, 03/03/2014 - 14:05 | 4502364 Dr. Engali
Dr. Engali's picture

An interesting article Charles, however I disagree with the fact that throwing Wall street under the bus will preserve the state by preventing people from taking to the street. I believe that is inevitable no matter what the state does.

Mon, 03/03/2014 - 14:37 | 4502552 centerline
centerline's picture

Agreed.  It is just another act in the play.

Mon, 03/03/2014 - 14:05 | 4502365 NOTaREALmerican
NOTaREALmerican's picture

Well,  as our society is a survival-of-the-fittest society, it's safe to assuming that the next group of losers in line to get eaten by the most-fit are the top 30-20 percent range of people.

The bottom 70% has been looted,  so the next in line with remaining loot should take the fall.

Eventually the peasants will figure things out...

Mon, 03/03/2014 - 14:09 | 4502376 shovelhead
shovelhead's picture

CHS makes a good point here.

Everyone wants the drunk bombshell falling out of her dress at the bar but when she threatens to get you involved in a barfight for your life, you'll quickly find another place to be that requires your attention.

It always boils down to self preservation.

Live to screw another day.

Mon, 03/03/2014 - 14:10 | 4502381 thefirstabomb
thefirstabomb's picture

Very interesting.  Reminds me of House of Cards, when Spacey says that he despises those who trade power for money.  I agree that the deep state would throw Wall Street under the bus to save the dollar and prevent an uprising, but there is one key fault with this analysis.  Will they be successful?  There is clear operational risk and who is to say that they will succeed with their plan?  What if Big Wall Street and Big Government lackeys turn on them, drunk on their own sense of self-importance?  It will be interesting and also terrifying to watch this.

Mon, 03/03/2014 - 14:16 | 4502413 NOTaREALmerican
NOTaREALmerican's picture

Yeah,  and who's to say that "deep state" isn't what we call "wall street".  

People like to talk about the top 1%, but - in reality - the top 1% can't exist without the top 10% running things.   3 million people (1%) might be setting the direction, but 30 million people (10%) are happily "driving the bus".   

And, (I think), most REAL Mericans would agree that there are winners and losers in life and the losers are just low-life-scum who shouldn't complain about losing because if they do they're nothing but lazy whiners who hate Merica, and the troops.

Mon, 03/03/2014 - 14:26 | 4502474 El Vaquero
El Vaquero's picture

1) Who has the actual guns?  Jamie Daimon has a control of a lot of wealth, but a bullet to his head has the exact same effect as a bullet to the lowliest bum's head.


2) What happens to the flow of oil?  If that gets squeezed, we all lose, rich or poor, government or private. 

Mon, 03/03/2014 - 14:44 | 4502580 Chuck Knoblauch
Chuck Knoblauch's picture

The security around JD is pretty tight.

Mon, 03/03/2014 - 15:19 | 4502786 Tall Tom
Tall Tom's picture

So you have cased him as a target??? Or is this an assumption?


Is the security surrounding the ends of the regional airport runways?


Planes can be shot down upon approach and departure when someone targets the engines.


Are they thinking about that?


If there is a will then there is a way. Someone can target his children and relatives...

Mon, 03/03/2014 - 15:32 | 4502853 El Vaquero
El Vaquero's picture

I have no idea what the security around him is, but if he wants to remain reasonably secure in the event that somebody actually is trying to kill him, he would have to remain a prisoner in his own world. 

Mon, 03/03/2014 - 15:25 | 4502821 Tall Tom
Tall Tom's picture

What happens to the flow of oil?  If that gets squeezed, we all lose, rich or poor, government or private. 


Refineries are the chokepoint. There is no use for Crude Oil until it is refined. If someone decides to destroy the refineries then there will be no Gas or Diesel for transportation. Destruction of Oil Pipelines will serve to deplete adequate supplies but the destruction of refineries will cause it to stop flowing altogether.


The food will rot in the fields with no way to transport it into the cities. Famine and starvation, along with subsequent civil unrest, will be the result.


Civil War is hell.

Mon, 03/03/2014 - 15:38 | 4502880 El Vaquero
El Vaquero's picture

Just cutting off foreign oil would be enough to bring the US to its knees and start massive civil unrest.  You could leave the refineries in tact.  Hell, a (sudden) 25% reduction in oil would likely send us over the brink with the way our economy works now.  Prices of everything would skyrocket, people wouldn't be able to afford basic necessities and supply chains would break.  Local farmers would either become rich or dead.


If you are talking about a foreign power trying to take out the US, hitting refineries makes sense.  If you are talking about a civil war, it doesn't make sense.  That's not to say that it couldn't happen, as war and rationality are most certainly not the same thing, but it would be sensible for both sides to assume that, no matter who wins, those refineries would be needed. 

Mon, 03/03/2014 - 20:06 | 4504283 Tall Tom
Tall Tom's picture

Total war means total destruction, whether foreign forces are the enemy combatant or the domestic combatants are the aggressors.


Hedge accordingly. That is the reality whether you see it as rational or not.


In case of Civil War those will be my primary targets. The enemy cannot engage in combat without adequate fuel supplies.


It will bring about peace very quickly.

Mon, 03/03/2014 - 14:20 | 4502390 bsdetector
bsdetector's picture

Ukrainian issues are nothing to America but the appearance of impotency and/or the intentional failure to support the EU could be the appearance of a dirty swan. Maybe the EU is going under the bus next. 

Mon, 03/03/2014 - 14:13 | 4502392 BadDog
BadDog's picture

I believe in theological circles this Deep State has another name.  It is called the kingdom of Satan.

Mon, 03/03/2014 - 14:20 | 4502430 NOTaREALmerican
NOTaREALmerican's picture

Re:  I believe in theological circles this Deep State has another name.

Which is just more theological bullshit to hide the fact that the "Deep State" is the winners of society.  And the guy in the mirror has been supporting the winners of the society because he thought we was actually one of the winners.  

Surprise!   It doen't take the intelligence of Satan to manipulate the average dumbasses.   Any highly skilled sociopath can do it.

Mon, 03/03/2014 - 14:54 | 4502666 Flakmeister
Flakmeister's picture


That pretty well sums it up....

The sociopaths won in the end as they always have...

Mon, 03/03/2014 - 14:19 | 4502422 Kirk2NCC1701
Kirk2NCC1701's picture

Was looking above for what seems like the correct answer:

Not the 1%, and no chance of the 0.01% getting screwed.  / Why, it'd be against National Interests and National Security. /sarc

Mon, 03/03/2014 - 14:26 | 4502473 NOTaREALmerican
NOTaREALmerican's picture

Re:  /sarc

Unfortunately, for a huge number of people,  that's a true statement.

Afterall,  if you want to [take the top 1%'s loot | regulate the job creators | question the purpose of the centralized state ] you are [  a goddamn hippy | crazy Libertarian | hate the troops ] .

The smothering-mommy and kick-ass daddy people are the majority of all societies and the smart-n-savvy people manipulate them will simple bullshit.

Mon, 03/03/2014 - 14:20 | 4502432 Mrmojorisin515
Mrmojorisin515's picture

i wonder if the recent spat of banker deaths has anything to do with the deep state?

Mon, 03/03/2014 - 14:24 | 4502464 fortune114
fortune114's picture

Please note, the neo-cons are *not* gone; in fact, there are more of them than ever in this Administration/State Dept.  This is easy to see once you understand "neo-con" is all about the govenment-military complex, not conservatism.  

Mon, 03/03/2014 - 14:27 | 4502491 NOTaREALmerican
NOTaREALmerican's picture

Re:  not conservatism.  

You must be one of them hippies who hates Merica, and the troops!

Mon, 03/03/2014 - 14:27 | 4502493 gatorengineer
gatorengineer's picture

G Bush.....

Mon, 03/03/2014 - 14:38 | 4502563 Chuck Knoblauch
Chuck Knoblauch's picture

US taxpayers and their pensions and insurance.




Mon, 03/03/2014 - 14:43 | 4502594 Georgia_Boy
Georgia_Boy's picture

What about the next financial crisis will make clear anything that wasn't clear after the last one? By early 2009 it was abundantly clear that bankers leveraging the TBTF banks up 40 to 1 to buy their AAA-rated CDOs and MBSes were a threat to the nation state. Yet Dodd-Frank ended up a typical thousands-page, watered-down mess, bank proprietary trading desks continue to this day, and there are fewer and more powerful banks than ever controlling the markets. What is the deep state waiting for? Or maybe things aren't as this post says.

Mon, 03/03/2014 - 14:53 | 4502632 Chuck Knoblauch
Chuck Knoblauch's picture

These banks have become independent countries operating their own intelligence divisions and hit squads. They had snipers on rooftops during OWS protests in TX and NY. Those are two I can confirm.

Mon, 03/03/2014 - 14:48 | 4502629 Roanman
Roanman's picture

From your keyboard to God's ears.

Mon, 03/03/2014 - 14:50 | 4502645 Blood Spattered...
Blood Spattered Banner's picture

There's plenty more to bilk from the middle class 401k's out there.  Privatizing the American retirement has an end game, and we're not there yet.

But yes, I also believe in this Deep State.  Clinton said as much when he said "there is a government within the government"

A rare moment of truth from a statist fuckwad. 

Mon, 03/03/2014 - 14:51 | 4502649 Jack Burton
Jack Burton's picture

I was wondering how long it would take for the real deep powers in America to recognize that the Wall-Street game is now ruining the national economy, and thus the source of all the real wealth flowing to the very highest elites. We know wall-street can generate profits at an extreme level, but today's street doesn't do that by funding productive enterprise. It is more a skimming scheme than anything else, and our elites have been up to their lips in it. But all they need do is take a cross country drive outside their rich enclaves and see an America that is nothing short of a disaster zone. I see it everywhere. The wealth that funds real economic growth is going to the street's profits, not to enterpirse, It took this long for deep power to figure this out??????????

Mon, 03/03/2014 - 14:58 | 4502681 Flakmeister
Flakmeister's picture

You don't understand, these Wall Street guys are seen as the winners to emulate by ignorant Congress critters, and the ones on to their games are simply bought off....

The piddlling few that have not been bought off and are calling out for reform are slandered by being called  "Socialists" or "Marxists"....

Mon, 03/03/2014 - 15:02 | 4502695 Chuck Knoblauch
Chuck Knoblauch's picture


Mon, 03/03/2014 - 15:04 | 4502710 Flakmeister
Flakmeister's picture

Food stamps would be just as effective while not as threatening the 10% required by the plutocrats to run the country...

Mon, 03/03/2014 - 15:02 | 4502696 Chuck Knoblauch
Chuck Knoblauch's picture

Do you really want to see real deep power in America? Turn the power off. Give the masses idle time to become a mob. A mob with guns.

Mon, 03/03/2014 - 14:58 | 4502672 esum
esum's picture

there is NO DEEP STATE.... it's a FREE FOR ALL


Mon, 03/03/2014 - 15:03 | 4502702 ebworthen
ebworthen's picture

I'm not convinced they're that smart at all - last Farm Bill cut Food Stamp (EBT) payments.

I wouldn't be surprised to see the "deep state" miscalculate their hold on the populace and have it blow up in their faces.

Tue, 03/04/2014 - 13:35 | 4507549 thefirstabomb
thefirstabomb's picture

exactly my point earlier.  They clearly have mismanaged things up to this point, who is to say they will be effective in dispatching Wall St.  They are Dr. Frankenstein and have lost control of their monster imo

Mon, 03/03/2014 - 15:07 | 4502718 Tall Tom
Tall Tom's picture

Well after reading this I do not believe that there is much hope for the Deep State retaining control.


The article states, and this is the major weakness as these are assumptions...


For the sake of argument, let's assume the leaders of the U.S. Deep State are not complete morons. Granted, that is quite a stretch, given that these are the people who gambled the lives of thousands of American troops and trillions of dollars in treasure on discretionary wars in Iraq and Afghanistan.

But it is also reasonable to assume that the neo-conservatives who naively assumed that residents of Baghdad would not only welcome their foreign liberators with baskets of flowers but would magically reconstruct the social institutions that had been systemically destroyed by Saddam over the previous 30 years--yes, those neo-con nincompoops-- have been quietly put to pasture on their mini-estates in Northern Virginia.


I disagree that these assumptions are reasonable. In fact with the continuation of destructive policies over the past FIVE YEARS it has been demonstrated that the morons are still in charge of the Deep State.


If the Military and Intelligence communities have lost control over their low level operatives (Snowden and Manning) leaking information then how do they expect to control an entire World Economy? (I am not writing that what Snowden or Manning did was evil. To the contrary it was admiriable and honorable.)


Furthermore they seem to have lost direction. The neocons attempted to start a war in Syria...and succeeded by proxy...and are seeking to attack Iran. They are still in power. They have not "...been put out to pasture..." in Northern Virginia."


The article makes some poor assumptions as premises for the argument which invalidates the conclusions.

Mon, 03/03/2014 - 22:13 | 4504727 RMolineaux
RMolineaux's picture

I agree with Tall Tom's criticism of some of CHS's assumptions regarding the neocons.  They continue to have considerable power for two reasons:  Obama's willingness, until now, to leave them in place in his attempt to maintain a "big tent" for policy and protect himself from political sniping.  He was not aware of the relentless drive of the neocons to bend policy to favor their sponsors when he made his initial appointments.  He is apparently still not willing to fire Nuland, notwithstanding her ineptitude.  The second reason is the ability of the neocons to meld themselves into the fabric of the long-standing tendency of the US toward imperialism.  Even though the US was born in rebellion from empire, from its earliest days it was not free from the temptations of international power projection.  The latter being an accepted phrase in pentagon discourse currently.  The United Nations Charter and other tenets of international law forbid the interference in the internal affairs of sovereign, independent states.   But the CIA and past embodiments of the imperial urge pay absolutely no attention and do the opposite -  to the destruction of the true long-term interests of the United States.

Mon, 03/03/2014 - 15:12 | 4502761 thethirdcoast
thethirdcoast's picture

What a total fail of a column.

Wall Street is a cornerstone of the Deep State that CHS is prattling on about. If he can't see that he is beyond help.

Mon, 03/03/2014 - 15:18 | 4502795 Maverick Ninefingers
Maverick Ninefingers's picture

Could you please define the term 'Deep State'?

Mon, 03/03/2014 - 15:38 | 4502884 WTFx10
WTFx10's picture

In the 2nd and thrid paragraph.

In Mike Lofgren's definition, the Deep State is "effectively able to govern the United States without reference to the consent of the governed as expressed through the formal political process."

In my analysis, the Deep State is the National Security State which enables a vast Imperial structure that incorporates hard and soft power--military, diplomatic, intelligence, finance, commercial, energy, media, higher education--in a system of global domination and influence.

If your too lazy to read it again


Mon, 03/03/2014 - 15:42 | 4502905 explosivo
explosivo's picture

I've concluded that it isn't productive to try and discern all of the intricate relationships and fiefdoms that comprise the state. Deep State? You could define that in many ways. You can draw lines around groups of people all you want but it doesn't really help matters. In the end there are voluntary and involuntary relationships. Try your best to limit your exposure to the involuntary ones. Even if you could identify all of the players and relationships, would you be better off? I don't think so. We get new masters frequently and nothing changes because people don't change their minds. 

Mon, 03/03/2014 - 15:48 | 4502933 devo
devo's picture

There is validity to the thesis. But it's more simply that the taxpayer is broke and wall st has some cash, so they might grab it. The people will obviously support that. It's either the unborn paying for it via inflation or wall st. I'll bet on the unborn, but the thesis isn't bad.

Mon, 03/03/2014 - 15:49 | 4502936 lewietheparrot
lewietheparrot's picture

Thanks, Charles,

Except for the bomb, the US has been irrelevant since its invasion of Afghanistan.

The rest of the nations of this planet, except for a handfull, could care less about the US.

We are a 'source of funds' and nothing more.

Doesn't anyone here understand this

The US of A doesn't count and has just shot itself in the foot again.

Sorry, Charles----nice try at piggy-backing a small look behind the curtain into controversy

You may be right about the buck----it is still the only common currency large enough for seven billion

Still, what are seven billion clicks on a site worth?

I don't know, but they have to be worth something

Mon, 03/03/2014 - 15:54 | 4503009 Disenchanted
Disenchanted's picture

Who gets thrown under the bus?

Anyone not in 'the club.'

Mon, 03/03/2014 - 15:55 | 4503011 Sick
Sick's picture

I can see some logic in the article however do not see how the nation can get around the 17+ trillion current debt and 200 trillion in unfunded liabilities.  We would have to see a major deflation in the cost of living to reduce the 200 trillion so that the masses could live a reasonable existence by the reduced costs (as a result of deflation)medicare, medicade, Social Security, etc.

Mon, 03/03/2014 - 16:43 | 4503286 smacker
smacker's picture

If you like the term "Deep State", you can keep the term "Deep State".

But so far as the UK is concened, what is really being described is the army of unelected members of The Establishment.

These nameless, faceless people are collectivists of either the communist or fascist variety. They all went to the right schools, all went to the right universaties, all met the right people and all made the right contacts to get into the right careers in the Foreign Office, Treasury, Bank of England, Home office and other important Ministries of State where power resides. For them, having to be democratically elected and accountable is unacceptable. Democracy is only for the political types who enjoy being in the spotlight.

Nevertheless, these people see elected politicos come and go with indecent haste. They create multiple versions of policy for the elected politicos to choose from. Once a policy is adopted, the policos become the public face of it, even though he had little to do with its formulation.

Mon, 03/03/2014 - 16:58 | 4503365 Dr.Engineer
Dr.Engineer's picture

Ok, I agree.  There are two breeds of psychopaths:  those who love power and those who love money.  They are not the same. 

Those who love power are in government.  The question is are they also in the Fed.

If the Fed is made up of people who love money then the scenario above may not happen.  But if they are lovers of power (if you have power you can take other people's money) then the above scenario will play out.

Mon, 03/03/2014 - 17:31 | 4503535 sink critically
sink critically's picture

I know who the ptb will attempt to throw under the bus, you and me. Will they succeed? That all depends on you and me. I think we're going to need a bigger bus...

Mon, 03/03/2014 - 17:40 | 4503544 Antifederalist
Antifederalist's picture


This is a very interesting analysis.

Agree that throwing financiers under the bus makes sense versus revolution.  You are vague on the HOW, and you suggest that the dollar will remain sound.

I see it differently.  The issue is who is the DEEP STATE and what do they want.  I think there is a titanic struggle between the military and the financiers.  The military has won.  The plan is hyperinflation, disclosure of no gold in Fort Knox.  Rubin goes to jail or the guillotine.  We have a new dollar based on the gold standard.  All bond holders get fucked.  The Chinese get fucked.  We reboot the system.  Most people are broke anyway so they do not feel the pain of all paper assets disolving.  Of course, the military and politicians use the collapse as a way to gain power and control.  The corruption does not necessarily end, but the rich are no longer rich.  Probably a special tax on gold owners and gold stocks.  This scenario at least keeps people working and fed.  It possibly keeps the Government bureaucrats alive because they have the favors to give out.    The anger associated with the collapse gets associated with the FED and the rich who led us here.  You would not want to be Greenspan, Buffet or Bernanke.  

The new world actually does not look too bad because by flushing the financial system the politicians will also get flushed.  There will be enough pain to re boot government too.  Finance reform, term limits, etc.

Perhaps I am too optimistic, but it is not impossible.  It could also be very messy.

The MIC would no doubt love to see us get into a shooting war in the Crimea.  That is how we got to where we are today.

One thing that works in our favor is that Ron Paul got more military donations than any other canidadate.  Some people in the military "get it, and have honor".  Not all, but some. If these people prevail we will be in good shape.  If the careerists prevail may God help us.


Mon, 03/03/2014 - 18:50 | 4503953 easypoint
easypoint's picture

Sounds like wishful thinking to me. WTSHTF if you are in the breeze you're gonna get some on you and the "deep state" will not care who is downwind. What is the real difference between a carefully managed devaluation of the dollar and a collapse of the dollar? If the devaluation is carefully managed and does not ever reach a panic stage as Wall Street and the state (deep and shallow) desire, there is time for proper positioning, the rich continue to get richer, and no paradigm shift occurs. The real losses are all shared pro-rata by the productive class and the non-productive classes barely notice the change. What losses the 1% incur are also shared pro-rata.

If the dollar collapses things will get ugly. You are right about the paper claims against real assets being impossible to satisfy at current pricing, but Wall Street, the "deep state," and the political class all know this. Anyone who gives it the slightest bit of thought knows this. You don't accumulate that amount of USDs to go out and buy stuff — you do it to control people.

Mon, 03/03/2014 - 18:53 | 4503973 hound dog vigilante
hound dog vigilante's picture



Q: who will the Deep State throw under the bus to preserve itself and the nation-state?


A: public sector unions & retirees.  all these teachers, cops, firemen, bus drivers, etc. who think they have a retirement/savings are kidding themselves - the state(s) are going to default and those deals/pensions/promises are going to evaporate... those folks will get nothing.


Mon, 03/03/2014 - 18:54 | 4503984 pacboot
pacboot's picture

If you live within 30 miles of any town with a population greater than 100k you are already screwed.  Buy a small house and farm plot in the midwest, start making appearences at the lions club meetings, etc.  Donate, be a pal to all, so you can live there, cuz when it does go, they will blow the bridges and the cities will become zombie central and they will eat you.  Patagonia looks pretty good to me right now though.

Mon, 03/03/2014 - 19:00 | 4504012 kurt
kurt's picture

Deep State of Hypnosis

Mon, 03/03/2014 - 19:38 | 4504182 Roanman
Roanman's picture

From your keyboard to God's ears.

Mon, 03/03/2014 - 21:41 | 4504577 RMolineaux
RMolineaux's picture

This is a very perceptive narrative that contains some very broad speculation.  In such speculation, very often assumptions are made about the planning abilities and motivations of the powerful.  It is assumed that the true power holders have a clear agenda that most members adhere to.  In real life this is usually not the case.  The author assumes that high level pentagon people have the necessary vision to ensure the survival of both the deep state and the visible government.  This is doubtful.  Most high level pentagon people are quite similar to the Wall Street skimmers in that their purely personal ambitions are the prime movers in their overall activity.  They have, or plan to have, immense wealth and the political power it provides.  This is not a formula for responsible citizenship in a constittional democracy.  What is more, as some commentators have pointed out, the Wall Street skimmers and the deep state operatives are very often the same people.


Mon, 03/03/2014 - 23:29 | 4505059 Youri Carma
Youri Carma's picture

Wrong place on the right time ;)

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