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.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
LawsofPhysics's picture

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.

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.

TeamDepends's picture

Actually, it's Stevie Wonder because, well you know......

Dark_Horse's picture


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.


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.  

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.

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.



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.

Exponere Mendaces's picture

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.

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.

TeamDepends's picture

Any law repugnant to the Constitution is null and void.

Thought Processor's picture


As are debts incurred via. treason.  Null and Void.

(forefathers who wrote the Constitution = not stupid)


Chew on that one for a while.

logicalman's picture

Research 'odious debt' it will help you chew.

Unconscionable contract is worth a look too.

New World Chaos's picture

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.

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.

Seasmoke's picture

You've said that a few times now. I don't think it means what you think it means.

LawsofPhysics's picture

See knockout's post below.  you'll figure it out.

SWRichmond's picture

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.

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!

Quinvarius's picture

Religion actually works against them these days because what they do is mostly considered sin in about any religion.

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!)

NOTaREALmerican's picture

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.

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.

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.

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.

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.

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

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.

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.

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...

Chuck Knoblauch's picture

Find a scapegoat, or become the sacrifice. :)

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.

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.

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.

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.

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.

buzzsaw99's picture

Prefer Debbie Does Dallas over Deep State.

onewayticket2's picture

no doubt it will ooze moral hazard.