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Central Banks Have Bankrupted the Financial System
For six years, the world has operated under a complete delusion that Central Banks somehow fixed the 2008 Crisis.
All of the arguments claiming this defied common sense. A 5th grader would tell you that you cannot solve a debt problem by issuing more debt. Similarly, anyone with a functioning brain could tell you that a bunch of academics with no real-world experience, none of whom have ever started a business or created a single job can’t “save” the economy.
However, there is an AWFUL lot of money at stake in believing these lies. So the media and the banks and the politicians were happy to promote them. Indeed, one could very easily argue that nearly all of the wealth and power held by those at the top of the economy stem from this fiction. So it’s little surprise that no one would admit the facts: that the Fed and other Central Banks not only don’t have a clue how to fix the problem, but that they actually have almost no incentive to do so.
So here are the facts:
1) The REAL problem for the financial system is the bond bubble. In 2008 when the crisis hit it was $80 trillion. It has since grown to over $100 trillion.
2) The derivatives market that uses this bond bubble as collateral is over $555 trillion in size.
3) Many of the large multinational corporations, sovereign governments, and even municipalities have used derivatives to fake earnings and hide debt. NO ONE knows to what degree this has been the case, but given that 20% of corporate CFOs have admitted to faking earnings in the past, it’s likely a significant amount.
4) Corporations today are more leveraged than they were in 2007. As Stanley Druckenmiller noted recently, in 2007 corporate bonds were $3.5 trillion… today they are $7 trillion: an amount equal tot nearly 50% of US GDP.
5) The Central Banks are now all leveraged at levels greater than or equal to Lehman Brothers was when it imploded. The Fed is leveraged at 78 to 1. The ECB is leveraged at over 26 to 1. Lehman Brothers was leveraged at 30 to 1.
6) The Central Banks have no idea how to exit their strategies. Fed minutes released from 2009 show Janet Yellen was worried about how to exit when the Fed’s balance sheet was $1.3 trillion. Today it’s over $4.5 trillion.
We are heading for a crisis that will be exponentially worse than 2008. The global Central Banks have literally bet the financial system that their theories will work. They haven’t. All they’ve done is set the stage for an even worse crisis in which entire countries will go bankrupt.
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Best Regards
Phoenix Capital Research
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Central Bank leveraging is not a problem. The "assets" (bonds, etc.) that they took in exchange for the currency they created can be written off at very low cost. The only cost will be the loss of income from them - the CBs do not expect to see the capital amount the "assets" represent. CB Balance Sheets are mere public relations exercises, not subject to audit and as phony as a $3 Bill.
Nor is the Central Banks' lack of an exit strategy a problem for the Central Banks. They do not need an exit strategy from QE since QE costs them nothing, but allows their cronies to get rich. The Central Bank apparichniks expect to join their cronies in their gated communities if SHTF.
Countries will suffer if QE is cut off. QE fills the budget holes caused by governments spending more than their incomes.
QE forever is a coping mechanism against demographics of ageing populations and insufficient numbers of workers.
The real concern is that countries have no exit strategy from QE. Few countries have healthy economies. Most are horrendously in debt and paying far too much in interest on debt even though interest rates are incredibly low. Most countries' governments have been spending far beyond their means, making up the difference in added debt and QE "funny money". Welfare rolls are huge. Social programs are unfunded and expensive, an overhang of immense proportions waiting to fall. Currencies are seriously debased. Investment markets are manipulated and riddled with fraud. The World economy is failing.
Small-to-Medium Enterprises and workers are the ones getting crushed in continuous QE, although the squeeze is long and slow, and the MSM keeps preaching that it is not happening. Pensions and savings are disappearing. Wages cannot keep up with living expenses. The Middle Class is now moving to rented accommodations and trailer parks, if they are lucky enough not to be living in tent cities.
War is now perpetually being waged by the USA and NATO, as they try to cement their control of resources and their hegemony as sole Superpower. But perpetual war is not saving the US economy or the World economy. The only remedy some see is to up the ante - foment WW3. In a nuclear-armed world, that is clearly insanity.
All of the arguments claiming this defied common sense. A 5th grader would tell you that you cannot solve a debt problem by issuing more debt. Similarly, anyone with a functioning brain could tell you that a bunch of academics with no real-world experience, none of whom have ever started a business or created a single job can’t “save” the economy."
The Fed isn't trying to save the economy; it's the banking system that matters to them.
The fact is, too many have learned to play the easy money game, and are actually helping stave off disaster.
Think about it.
If you were able to purchase a shack in the last several years on little or no money down, and at a relatively low rate...would you care about the larger economy around you as long as the value of your "asset" continued to increase?
No, you wouldn't.
If you are a day or HF trader making bank on microsecond trades, would you give a damn about the real value of any of the companies you traded? Would you care about their successful prospects for the future or (God forbid) the opportunities for labor to gain larger paychecks with which to participate in a consumption-based society?
Nope; you got yours either way.
If you are a corporation, with ONLY shareholder value on your mind, why would you care what labor (former middle class workers) had in their pockets, as long as non-productive strategies (buybacks) kept the Wall Street racket happy?
You wouldn't, and...they don't.
Phoenix, this thing is going to have to be broken with a stick on purpose to stop it. It is not going to just happen; there are too many players at all levels with an interest in keeping it going. It could not still be alive otherwise.
The foreshock of 2008 has morphed into a warped gain grab (any way it can be gotten) for a relative few, at the expense of many.
It will not collapse on its own. Increasingly, it really looks like it will have to be terminated manually.
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I have been morbidly waiting for the panicked newscasts like they were in 08' about the markets and banks...I know I shouldn't look forward to it, but it really is like a train wreck...You know its a tradgedy, but just can't look away.
Not one expert has any opinion on this?
This is all another major shearing of the flock as was the Great Depression...
Hmmmm, think i will take out a 7year car loan and invest in Stocks, all fixed.
Debt, shmet. Why worry (Alfred E Newman), just print moar.
"Lew to Congress: US hits debt limit on March 16, needs to be raised ASAP"
http://www.cnbc.com/id/102459024
Impeach all 535 + I CiC for fraud, treason
The system is doomed.
All actions have been rear guard actions as the economy tries to retreat suffering the least amount of damage possible.
I seriously doubt that the Fed really thought it could fix things....but maybe they really are not that bright.
Exceptional entitlement...
You can buy it by the pound at Goldman Sucks....
...And by the ton at the Whitehouse...Especially if you are a muslim.
Many countries, companies, and human beans are ALREADY bankrupt.
Being Bankrupt is simply owing more than you can ever pay back.
The exercise you go thru in the courts to officially recognize this fact, and then have your debts forgiven would actually be an improvement--- A HUGE ONE----over the current state of things.
Bring it on! Bankruptcy ----offcially recognized as Chapter 7---- is a godsend to everyone who owes more than they can pay.
I can't be broke. I still have all these checks.
cap'n obvious
This is not a news item. It will be in the back with the classifieds. Thank you for submitting it.
Hint: submitting a graph of $USD purchasing power since 1913 and total debt on the same page would be good for our more visual learners.
Nothing to see here, move along......
This is their plan from day one. Forget about all their talk. It is the actions they have actually taken that matter.
How does the world rid itself of their poison?
How does the world rid itself of their poison?
Coordinated strike on the Fed in DC and other offices, BIS in Basel Switzerland, City of London, IMF in DC, and Wall Street would probably be a good start.
They've been preparing for that for decades.
Yes interesting system we have. People borrow money that the citzens are on the hook to pay back and use it to directly enrich themselves.
How does the world rid itself of their poison?
Not easily. Individually I suppose you could refuse to use fiat and participate in the whole rigged game.
It's a tough road to hoe, still have to pay property taxes with whatever they say. I'd like to go into county tax office with some nice vegge and some pickled fish and see if they'll take it in trade :-) But step 1 - own property 2. Be able to defend it 3. Have a water supply (lake stream well etc..) 4. Pray a good bit (should probably be step 1) 5. A chicken coup, garden and milk cow are good ideas 6. Deer / Elk running about is a bonus
yep. Basically have to go off the grid and fend for yourself, or organize a small community of folks that are good at different things. Wonder if they'd take gold in payment of real estate taxes. Probably not since it's not legal tender anymore, eh, its only in the constution.