We Have Just Witnessed The Last Gasp Of The Global Economy

Tyler Durden's picture

Submitted by Brandon Smith via Alt-Market blog,

 

It is difficult to find the motivation to write about the state of the global economy these days, if only because there is not much left to say. I feel like I am composing multiple obituaries for the same long dead corpse. Most of the Liberty Movement and I suspect a small portion of the mainstream market understand that there is no tangible or legitimate recovery, let alone a stable fiscal ladder to rest our feet upon. There is literally nothing left to the financial system but rigged statistics, false promises, and ever expanding debt. In fact, the concept of debt creation is the only thing holding our facade of an economy together.

You and I probably find this rather strange. We come from a long forgotten school of economics, in which demand, supply, and savings actually mean something in terms of our fiscal health. I have come across many mainstream economic acolytes and cultists in recent months who disregard ALL logic and reason, forsaking the realities of demand based trade and immersing themselves in a grand delusion in which central bank generated debt and inflation are the real source of “prosperity”. I feel sorry for them in a way, because the truth is right in front of their faces, and yet, they will never see it, not until they are buried alive in it.

Nothing makes this problem more apparent than the behavior of equities in the past month.

Stocks are, of course, a sham of the highest magnitude, but they do still say something about the greater truth behind our financial condition. The fact that many market traders clearly KNOW that it's all a farce, and are actually banking and betting on the scam, tells me exactly how close we are to the end of the line. The recent near 10% drop in the Dow at the beginning of Fall must have certainly been a shock for the day trading community as well as mainstream pundits. The assumption for the past few years has been that central bank stimulus guarantees a constantly growing bull market, and to experience a considerable decline in equities even while QE was still in action was at least a noticeable wake up call.

I suspect that this decline in markets was not necessarily planned by the central banks, and was a stumble in their scheme to keep stocks elevated until after the QE taper had settled. It was also a stumble I expected a little earlier, around the end of Summer to be exact. Since the drop, central banks and the mainstream media have reacted forcefully to manipulate public perception as well as investor optimism, but this cannot go on for much longer.

In almost every instance of market decline, financial news group Reuters has injected false rumors of more stimulus from the European Central Bank. This was also the case in October as markets began to crash. These rumors were later dashed by the Financial Times, but not before the mere mention of more fiat stimulus from any central bank sent stocks soaring yet again.

This also occurred when middle management Federal Reserve member John Williams hinted in interviews of the possibility of “QE4” if the economy began to show signs of regression. Williams, of course, has no say in the decision to reintroduce QE, but this did not matter to investors, who immediately latched onto the meaningless news like anxious children, and threw their money back into stocks again.

And, most recently, Japan's central bank announced a sudden and surprising re-ignition of stimulus measures to the tune of 80 Trillion Yen a year. This announcement, once again, sent global stocks skyrocketing, even though it was a stark admission by Japan's financial elite that all their inflationary printing efforts for the past several years have failed miserably.  As I have warned in the past, when bad news becomes good news because bad news promises more central bank intervention, the economy is truly on the verge of a reckoning.

Hopefully, we can all see the trend taking place here. With the end of the Federal Reserve taper now complete, and questions circling as to when interest rates will be raised, a market volatility not seen since 2008-2009 is returning. The ONLY measure that has slowed the crash is the use of false news stories hinting at further stimulus, as well as futile efforts by other central banks to pick up where the Federal Reserve left off. This shows that the investment world is so thoroughly addicted to QE that even the mere hint of another small fix of their favorite drug is enough to get them out of bed and excited. They know that the entire system is rigged by central banks, and they don't care. In fact, they revel in it. The only goal of your average day trader now is to profit on the scam for as long as humanly possible, even though the ultimate conclusion of the scam will mean the utter destruction of their profits and the end of their way of life.

I hate to use a cinema analogy for a very real threat, but investors today remind me of Joe Pantoliano's character in 'The Matrix'; the guy who is fully aware that the Matrix is an illusion, but wants to experience the pleasure of the illusion all the same. So much so that he doesn't mind being exploited like a slave by the system, and is willing to sacrifice all measure of truth and even the future just to get a taste of the fantasy again.

But what is the reality that the central banks are trying to hide, and why? This I have written about in detail on literally hundreds of occasions, so I will only cover the very latest news briefly here, and why I think the overall dynamic is about to change for the worse.

Global exports, and thus consumer demand, are plunging. Germany, the only pillar left to prop up the failing European Union, has experienced a severe decline in exports not seen since 2009.

 

China, the largest exporter and importer in the world, and Chinese companies, have been caught in a number of instances using fraudulent invoices to artificially inflate their own export numbers, in some cases reporting 50% more exported goods than had actually existed.

 

China's manufacturing has also declined for the past five months, exposing the nature of its inflated export stats and indicating a global slowdown.

 

The Baltic Dry Index, a measure of global shipping rates for raw goods, and thus a measure of demand for shipping, continues to drag along near historic lows.

 

The U.S. consumer (the only economic asset the U.S. has besides the dollar's world reserve status), has seen declines in spending as well as wages.

 

In the meantime, long term jobless Americans continue to fall off welfare rolls by the millions, making unemployment numbers look good, but the overall future picture look terrible as participation rates dissolve into the ether of government statistics.

 

How is such poverty being hidden? Foodstamps. Plain and simple. Nearly 50 million Americans now subsist on food stamp programs today, and this number shows no signs of dropping. In states like Illinois, two people sign up for food assistance for every citizen that happens to find a job.

But this is all rudimentary. Most analysts in the Liberty Movement agree that our fiscal structure is on the edge of collapse; what they tend to bicker about is HOW and WHEN the structure will collapse.

Guessing market declines has been extremely difficult in the midst of a fiat soaked fiscal environment.  Nothing is ever quite what it seems.  My predictions of a 10% drop by the end of Summer were off by three weeks. Because of the nature of QE stimulus manipulation of the Dow, our only real guide has been the timeline of the Fed taper, and the fact that major banks have been relying on fed fiat to continually cycle capital into equities through the use of low interest loans to corporations and the stock buyback scam. Company buybacks have given steady boosts to the markets at least since 2008, and many corporations are using up to 50% of their “profits” just to continue buying their own stocks.

This strategy, however, is reaching a point of diminishing returns as many companies are issuing too much debt in the process. IBM is a perfect example of a company that has hit the ceiling on stock buybacks.  This odd coordinated attempt by corporations and central banks to keep markets propped up even as companies sacrifice whatever debt stability they had left indicates a state of collusion between such institutions that goes far beyond the mere idea of "mutually assured greed".  Since at least 2008, there has indeed been a "conspiracy" amongst banks and international companies to generate a massive stock bubble designed to keep the masses calm and placated.  However, these groups understand, better than many give them credit for, that such measures will have to end, or be revealed.

With the taper finished and QE money drying up, it is important to ask a few questions. For example, how are companies going to continue to accumulate capital to dump into their own stocks if fed money is becoming scarce and consumer spending is in decline? And, if they can't continue stock buybacks because of a lack of funds or an overburden of debt, how are equities markets going to stay afloat?

And what about government debt? As it stands now, foreign interest in U.S. treasury bonds is waning. The vast majority of new bonds sold are short term. Until now, the Fed has been the primary buyer of long term debt, snapping up 10 year bonds from the market while other investors lose confidence in America's ability to pay off liabilities in the future. Now that QE is over, who is going to buy the ever expanding U.S. government debt? I aimed this question recently at a Fed cultist and his response was “Well...obviously somebody will buy it...”, though he couldn't specify.

The spike in short term debt purchases after the end of QE3 was also predictable, but it can only be sustained IF stocks begin to fall considerably yet again.  Think about it; interest in U.S. debt has been on the decline for years, not just because foreign banks are shifting away from the dollar, but also because stocks have been a much more attractive investment with greater returns guaranteed by Fed QE.  The taper announces a violent change in circumstances.  The only way for interest in U.S. debt to be energized, even for a short time, is for stocks to crash, leaving bonds as the only safe haven left.  I discussed this development in detail in my article 'The Final Swindle Of Private American Wealth Has Begun' at the beginning of this year.  All other investment avenues seem to be in decline, from foreign markets and forex, to commodities like oil.  Even gold and silver have taken a hit.  For the average investor, if a route in stocks occurs, they will immediately jump into bonds.  This plays into my theory on the coming financial end game, which I will be discussing in my next article.

Investor's are counting on an eventual QE4, but I think this might also be wishful thinking.

At the end of 2013, I predicted the Fed would indeed follow through with the taper of QE3, and that they would drastically reduce stimulus measures. I believe this is in preparation for a major implosion of U.S. markets in particular. The whole point of the taper is to support the illusion that the U.S. economy has recovered, and that the Fed has “accomplished its mission”. When a crash does take place, I think it will be ALLOWED to move freely and that new QE intervention will not be taken.  I have no doubt this crash will be blamed on an outside force or act of fate (the ebola outbreak, which is doubling in cases every three weeks, is a perfect possible catalyst), and that banks will be absolved of all blame in the mainstream.

A coming crash is not only my personal view.  It is important to note that behind the background noise of the recovery party, international bankers are sending a very different message about economic health.

On the same day as the Federal Reserve announced the end of QE3, former chairman Alan Greenspan gave a speech to the Council On Foreign Relations in which he lamented that the QE unwind would be painful, that stimulus measures had not achieved their goals in the past, and that gold might be a good investment today.

The International Monetary Fund and the ECB also released statements warning that “accommodative stimulus policies” could contribute to economic volatility. That is to say, stimulus might be setting the stage for fiscal instability. The IMF claims that “bold action” is required to “reset” the global system.

And, the ever present overlords at the Bank Of International Settlements have posted a stark warning about our financial future, predicting a “violent reversal” in markets. The last time the BIS made such a prediction was in the summer of 2007, just before the derivatives crash. But this is the M.O. of the central banks, to warn of coming calamity just before the event, but not long enough before the event to make any difference. They present themselves as prognosticators of economic future, but in reality, they are the instigators of every disaster they predict.

I do not know how the markets will react to the likely landslide "victory" by Republicans in mid-term elections (can one ever be "victorious" in a rigged contest?), but what I do know is that a Republican majority offers an even greater opportunity for further collapse.  Negative movements in markets that have been obstructed through manipulation can now be unleashed and then blamed on "government gridlock", or the inability of conservatives to "compromise" fiscally.  A Republican shift in government only offers more cover for a collapse that is slated to occur regardless.

I believe that the admissions of financial danger by internationalists, the sharp drop in stocks at the beginning of fall, the reversal of the political theater, and the fact that mainstream investors now recognize the illegitimacy of the markets yet continue with the scam anyway, signals the last gasp of the global economy. I expect increasing market instability from this point on, as well as numerous geopolitical distractions which will be blamed for the fiscal chaos. I have left out my explanation of the final end game so that I can cover it more fully in my next article. Needless to say, the coming storm is a deliberately engineered one, meant to achieve very specific goals, including a fearful and panicked populace, easy to manipulate as the system goes off the rails for the last time.

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JustObserving's picture

There is literally nothing left to the financial system but rigged statistics, false promises, and ever expanding debt.

You forgot manipulated markets.  Who has been dumping billions in gold at 3 am every night? Who has been levitating US stock markets?

junction's picture

For the 0.01%, things are just great.  Big City real estate values are going through the roof, paid off mayors are rubberstamping 90 story buildings, environmental impact statements and impending power shortages be damned.  Complain, as Occupy Wall Street did, and Obama and his FBI, working in concert with mayors all across the country, will sic the police on you, arrest you, molest you and, in a few cases, kill you.  You are in a dictatorship run by New World Order members who consider outsiders as "residue," wastes of humanity good only to drink fluoridated water, eat GMO food and aspartame and work til you die.  Happy Guy Fawkes Day!

SoilMyselfRotten's picture

Damn, a long read but well worth the time. Sounds like the wheels could come off at any time. My question, when this money flows into bonds, what happens in the gold market.

lasvegaspersona's picture

The paper gold market must die. Physical gold will have a new important role to play in the wealth of nations and of the individual. Buy physical and short GLD. As your gold becomes 'worthless' at least your dollars will increase as GLD tanks. Those who think the system that allows  gold to be naked shorted and at the same time believe that these funds will be forced to give up their physical  (or cash you out at the new high price) have just not thought things through.

El Oregonian's picture

You put real gold through a fire and it gets refined. You put GLD paper through a fire and it turns to ash...

IrritableBowels's picture

*cough* but silver is totally different *cough*

golddigga's picture

likely nothing happens to gold, you people expecting gold to go back to 1200/1500/2000/50000 ounce overnight? think again, it'll likely get surpressed even more. Go ahead down vote away. 

lasvegaspersona's picture

A revaluation IS the likely way to a new higher gold level. When it happens people will say...why didn't they do that before?

They can't now though while the dollar still functions.

 

btw even $5,000 per ounce is too low to function properly. If the dollar is dead the dollar price of gols is meaningless but fofoa suggests the purchasing power could be roughly 40 times the value of its dollar value in 2009 (might buy a nice car). Gold did 'reset' between 1971 and 1980 by a factor of 24X so it is not just a wild crazy idea. Gold will be used and it's price, even if set by the market, needs to be high.

OldPhart's picture

You can't shoot an arrow without drawing back the string.

Bingo Hammer's picture

My question is when all markets are broken and international relations, at virtually every level, are in disarray, what mechanism would there be left for price discovery (a market?) that will determine value for PM's etc?

For instance, the collapse has happened, markets are broken and no one has a clue other than a dollar bill is worth less than toilet paper (if not already), and you might have 10 ounces of gold, how would you determine a just value in order to acquire something you need?

Will a loaf of bread or gallon of water be equal to an ounce of gold? or will an ounce of gold buy you a house???  

COSMOS's picture

That will be sorted out ratehr quickly by exactly how hungry you or anyone else in your city is.  A loaf of bread may go for a few grams in some places and for a couple of ounces in other cities.  Just depends how close people are to dying of hunger.

gswifty's picture

So that's how a free market works. Interesting.

Incubus's picture

Hunger has a strange way of overturning societies.

 

You can have the most powerful and wisest men at the helm, and if they do not dutifully respect the power of the stomach--of that of hunger--they will find themselves at the end of their lives.

The mind can lay out plans and we can talk to the point of meaninglessless, but push a man to survive and all you're doing is preparing your own noose.

In the end, the stomach rules even the greatest men.  They are at the mercy of the masses.  As long as you can keep them fed, you can do what you will.

 

But, silly men tend to lose perspective and think that the docile plebes can be pushed around.  Their wants are simple, but TPTB always fuck up in the long run.  They can paint it any way they want to, but the simplest and most powerful force in civilization is that manifestation of will when men are forced to survive, and provide for their family.

 

Then again, these PTB are pretty smart, if you think of it.  They destroyed the family structure in this country.  Men aren't afforded that instinct/role of the protector.

DaddyO's picture

<-fiat soaked fiscal environment->

Keynesian Wet Brain!

DaddyO

edit: Go study 'The Corps of Discovery' and see how hunger and survival shaped their decisions.

H. Perowne's picture

Well said. Deus impeditio esuritori nullus.

all-priced-in's picture

Considering that 99% of the hungry "folks" will have no gold you can be certain that it will be violence -  not ounces of gold that will be "buying" the bread.

 

I just noticed that my Remington Versa Max shotgun is on the UPS truck - status "out for delivery".

I always wanted a semi auto 12 gauge - 22" barrel and 8+1 - should be a sweet shooter -

 

If you down arrow me please let me know if it is my comment or choice of shotgun -

 

I planned on buying a Benelli M2 with the 21" barrel - but they are almost $2.5K - the Versa Max was only $1K so I bought a GEN4 G26 & G21 and still have $ left over for ammo.

 

 

 

LoneCapitalist's picture

How will gold be valued? By supply and demand. Just think what the demand for gold will be when fiat collapses. Exters pyramid?

FreeNewEnergy's picture

This will sound overly simplistic, but if price discovery is your aim, look no further than ebay (for national and/or global pricing) and Craigslist for regional and local.

The PM market on ebay is very robust and eminently trackable. Premiums on silver have settled down a bit but are still around 20%. Want to price furniture, cars, local produce, Craigslist is your boy.

It's not rocket science, but ebay and CL are actually robust markets for consumer, business and industrial goods that are not manipulated. Best examples of free markets we have going, and, the best part, they're for real things, not paper promises.

TSTM's picture

I've given that some thought and what I've told my son is that in 1964 three dimes (90% silver) would buy a gallon of gas. Over the previous ten years the yearly average price had varied no more than a penny. I told him not to think of the value of silver or gold in terms of dollars, but to use this as a reference point comparing the gallon of gas to other things of value. At this point in time those three 90% silver dimes will buy more than a gallon, so I wouldn't make that trade right now as silver is most likely under valued. I also told him to think of 30 to 1 as a base ratio of gold to silver. I'm a little less certain about this one, but you have to start somewhere. I've also taught him to be aware of the price suppression in order to maintain confidence in the current banking regime. Bottom line is I want him to establish a way to value his inheritance with a measuring stick based in reality.

Tall Tom's picture

likely nothing happens to gold, you people expecting gold to go back to 1200/1500/2000/50000 ounce overnight? think again, it'll likely get surpressed even more. Go ahead down vote away. 

 

 

It will decline to ZERO.

 

I will be laughing my ass off while trying to find sellers of Physical Metal who will sell into decreasing paper prices.

 

The value of a non performing contract, after all, is ZERO.

 

The reported price of Gold is the a one hundreth of the price of a contract that promises delivery.

 

So no I will not give you a downarrow.

 

If ever reported to be $5000 overnight there will be no sellers. That means that a hyperinflation took off. Now that will be a nightmare for me...and maybe the actual death by famine with a subsequential starvation for you.

 

May the Good Lord forbid that but, unfortunately, that is what is doubtful.

 

I welcome price declines.

zhandax's picture

Tom, speaking of non performing contracts, I don't have a feel whether the ideal positioning will be on CDS on the sucker writing equity hedges or the flip side of the hedges themselves.  Wonder which side has the stronger hand?  I know which way the gut says, but....

MsCreant's picture

For me, counter party risk is all there is to think about. If I can "default" I get the final say. You could sue for your claim, but if you do it at a time when everyone is suing for their claim, get in line. If it's really on, I bet everyone gets wiped out in the Tsunami of unwinding margin calls and bets gone bad.

For me, the ideal position would be to not rely on a CDS. But if I am in the swap, be the counterparty risk. If you are big enough, shrug your shoulders and say it all "vaporized."

Spigot's picture

It was interesting to watch the derivates game changes after 2007-9 where US legislation was passed to put derivative parties (those buying the contract) first in line as claimants against the counterparties (the issuer), including bond holders and secured debt holders, let alone equities shares or account holders in the institution. THEN BoA moved all its derivatives contracts from its shell (used to isolate liabilities to the main BoA corp) to an arm under the BoA corp, creating direct exposure to claims. No news if Goldman or Morgan had to do this, or if it was already so ordered, and BoA was just being told to to the 'right' thing. Unsure.

What I AM sure of is that when this pig blows there will be nothing at all left. Account holders will simply be told to go fook off. Same all the way up the ladder, until the parties are saticfied. Which means never. In a relatively orderly work out the top 4 could very well become wholly owned subsidiaries of European, Chinese and Japanese corps.

Welcome to the new masters, same as the old masters, 'cept the foreign interests will indeed drain the corpse of the USA of every last drop of blood that remains.

cnmcdee's picture

Sure like Silver - Price is record lows but the dealing windows have no inventory.

This is like Future Shop telling you they have a wicked deal on a high end laptop for $199 but sorry there are none in stock.

Phys is Not Paper!!!!

Phys prices are truly 30-40% higher. Ask your bank for the cost of a piece of certificate paper representing an ounce of gold and then turn around and ask for physical delivery and how much.

frankly scarlet's picture

No, War and Peace is a long read so this was nothing.

luckylongshot's picture

What happens to the gold market?...It will no longer be priced in worthlesss paper currencies. The point here is that the USD is only going to be good for use as wallpaper, while gold will continue to be gold.

MsCreant's picture

If you have the capital, no worries about return OF the capital.

I have not seen it yet so I will say it:

GOLD BITCHEZ!

If you don't need the cash now, sit tight. The ride will be turbulent.

Muddy1's picture

"It is difficult to find the motivation to write about the state of the global economy these days, if only because there is not much left to say. I feel like I am composing multiple obituaries for the same long dead corpse."

 

Then do us all a favor Brandon and quit writing and go away.

runningman18's picture

No one is forcing you to read his articles.  Stop acting like such a chump. 

Titus's picture

He's paid to act like a chump.

Tall Tom's picture

Then you do us all a favor and go back to reading your MSM propaganda about how terrific it is.

 

If you cannot handle the reality of the meltdown then you do not belong here.

 

Your fantasy is coming to an end soon, very soon.

 

Unfortunately it will be a very rude awakening...for you.

bid the soldiers shoot's picture

 

It's NOT the global economy, stupid.

It's the proven global reserve of oil, stupid. 

runningman18's picture

That would probably fall under the category of "expanding debt", since it is the central banks that are doing most of the manipulating through fiat creation (debt creation).

lasvegaspersona's picture

When the Fed buys MBS they are not creating new money. They are selectively saving debt that likely would have gone bad. This helps the banks but also preserves the savings of the individuals whose pension plan held those MBS.

The are essentially creating new money when they buy treasuries, but again they are buying debt and holding that debt as though it would eventually be repaid in good money.

Only a bit of this directly benefits the 'evil bankers' most keeps some peoples savings intact.

Yes it is irregular but these are desperate times.

runningman18's picture

No, it is money creation.  Whenever the Fed buys anything in quantity from the market, it creates new fiat, because the Fed does not have its own capital in the traditional sense.  You could argue that it's just numbers in a computer, but someone somewhere is expecting those debts to be paid, and eventually, cash will have to be "created" to service those debts.  There is very little difference between what the Fed is doing and what Weimar Germany did.  The Fed uses numbers in a computer, and just hasn't reached the point at which our currency is no longer accepted as payment.  That day is probably coming soon, and the only benefits go to the "evil bankers", being that they are the first ones to recieve the new money, and the first ones to spend it before it is devalued.  Desperate times do not call for more fraud. 

lasvegaspersona's picture

Yes new money is created...my intended point was that it was not 'from nothing', it was to replace a bad debt.If debt fails it removes 'money from the system, credit money...the Fed replaces credit money with base money...gotta do that to get the wheelbarrows full of cash...

runningman18's picture

Bad debt doesn't remove money from the system, the money is still in cirulation, just not paid to the rightful creditor.  The Fed's money creation does not erase the debt anymore than debt erases money.  It is simply a transference of debt from one entity to another.  In this case, it is the transference of debt from the banks to the American taxpayer.   

chubbyjjfong's picture

Or put another way, almost every dollar printed by the Fed is a dollar transferred from the working class to the banks. It is a fucking crime against humanity and virtually nobody has the slightest idea that it is occurring.  In fact, people get very irate when you suggest it to them.  Its so fucked up beyond belief I truly believe that I am going fucking insane. Iv just about shit my tits.

chubbyjjfong's picture

I have, I'v fucking lost it!  I'm dribbling all over my keyboard, I'm sweaty, I'm having a real heavy period, my nipples are rashed, I'v poked myself in the eye, I'v soiled my 'Depend' man diapers, I'v turned my back on the sea whilst running with scissors, I'v let off firecrackers in my pocket.. on purpose, all while updating my fucking shitty life status on Facefuck. I am fucked!!!!!!!!!!!!!!!!!!!!!!!!!!!

LULZBank's picture

HELLO! Are you still there?? Anybody???

new game's picture

any nailguns in the house??? i hope not? this shit can drive one to a place of depression. but ask yourself? why would i take serious something i cant change...plus you can fuckem by not playin the game. opt the fuck out where possible and prepare for different world in the not to distant future. stay in the "sane zone", with some laugh. fuckem, don't give a shit, haha, lol to offset the reality of their crimes against humanity...

gswifty's picture

Don't worry chubby, it'll pass. It's just birth-pains.

 

https://www.youtube.com/watch?v=Z8eKxVCFoUk

cnmcdee's picture

Shit my tits!! ha!!! Totally hilarious.!

tumblemore's picture

Exactly. They are transferring the banks' bad debts to the public. If/when they feel the banks are safe they'll hit the reset button on interest rates and the public will take the massive losses.

 

new game's picture

allows them to sell cars, homes and keep a faux credit stressed economy flowing with risk born to taxpayers, instead of banks, totally fuckered u; FASCISM DEFINED, hence sign and drive just like sign and move in. sign and learn, ha, lol ....

sign your fucking life to debt servatude; how stupid can people really be??? sign em into the insane asylum.