The Global Liquidity Squeeze Has Begun

Tyler Durden's picture

Submitted by Michael Snyder via The Economic Collapse blog,

Get ready for another major worldwide credit crunch.  Today, the entire global financial system resembles a colossal spiral of debt.  Just about all economic activity involves the flow of credit in some way, and so the only way to have “economic growth” is to introduce even more debt into the system.  When the system started to fail back in 2008, global authorities responded by pumping this debt spiral back up and getting it to spin even faster than ever.  If you can believe it, the total amount of global debt has risen by $35 trillion since the last crisis.  Unfortunately, any system based on debt is going to break down eventually, and there are signs that it is starting to happen once again.

For example, just a few days ago the IMF warned regulators to prepare for a global “liquidity shock“.  And on Friday, Chinese authorities announced a ban on certain types of financing for margin trades on over-the-counter stocks, and we learned that preparations are being made behind the scenes in Europe for a Greek debt default and a Greek exit from the eurozone.  On top of everything else, we just witnessed the biggest spike in credit application rejections ever recorded in the United States.  All of these are signs that credit conditions are tightening, and once a “liquidity squeeze” begins, it can create a lot of fear.

Over the past six months, the Chinese stock market has exploded upward even as the overall Chinese economy has started to slow down.  Investors have been using something called “umbrella trusts” to finance a lot of these stock purchases, and these umbrella trusts have given them the ability to have much more leverage than normal brokerage financing would allow.  This works great as long as stocks go up.  Once they start going down, the losses can be absolutely staggering.

That is why Chinese authorities are stepping in before this bubble gets even worse.  Here is more about what has been going on in China from Bloomberg

China’s trusts boosted their investments in equities by 28 percent to 552 billion yuan ($89.1 billion) in the fourth quarter. The higher leverage allowed by the products exposes individuals to larger losses in the event of stock-market drops, which can be exaggerated as investors scramble to repay debt during a selloff.


In umbrella trusts, private investors take up the junior tranche, while cash from trusts and banks’ wealth-management products form the senior tranches. The latter receive fixed returns while the former take the rest, so private investors are effectively borrowing from trusts and banks.


Margin debt on the Shanghai Stock Exchange climbed to a record 1.16 trillion yuan on Thursday. In a margin trade, investors use their own money for just a portion of their stock purchase, borrowing the rest. The loans are backed by the investors’ equity holdings, meaning that they may be compelled to sell when prices fall to repay their debt.

Overall, China has seen more debt growth than any other major industrialized nation since the last recession.  This debt growth has been so dramatic that it has gotten the attention of authorities all over the planet

Wolfgang Schaeuble, Germany’s finance minister says that “debt levels in the global economy continue to give cause for concern.”


Singling out China in particular, Schaeuble noted that “debt has nearly quadrupled since 2007″, adding that it’s “growth appears to be built on debt, driven by a real estate boom and shadow banks.”


According to McKinsey’s research, total outstanding debt in China increased from $US7.4 trillion in 2007 to $US28.2 trillion in 2014. That figure, expressed as a percentage of GDP, equates to 282% of total output, higher than the likes of other G20 nations such as the US, Canada, Germany, South Korea and Australia.

This credit boom in China has been one of the primary engines for “global growth” in recent years, but now conditions are changing.  Eventually, the impact of what is going on in China right now is going to be felt all over the planet.

Over in Europe, the Greek debt crisis is finally coming to a breaking point.  For years, authorities have continued to kick the can down the road and have continued to lend Greece even more money.

But now it appears that patience with Greece has run out.

For instance, the head of the IMF says that no delay will be allowed on the repayment of IMF loans that are due next month…

IMF Managing Director Christine Lagarde roiled currency and bond markets on Thursday as reports came out of her opening press conference saying that she had denied any payment delay to Greece on IMF loans falling due next month.

Unless Greece concludes its negotiations for a further round of bailout money from the European Union, however, it is not likely to have the money to repay the IMF.

And we are getting reports that things are happening behind the scenes in Europe to prepare for the inevitable moment when Greece will finally leave the euro and go back to their own currency.

For example, consider what Art Cashin told CNBC on Friday

First, “there were reports in the media [saying] that the ECB and/or banking authorities suggested to banks to get rid of any sovereign Greek debt they had, which suggests that maybe the next step will be Greece exiting,” Cashin told CNBC.

Also, one of Greece’s largest newspapers is reporting that neighboring countries are forcing subsidiaries of Greek banks that operate inside their borders to reduce their risk to a Greek debt default to zero

According to a report from Kathimerini, one of Greece’s largest newspapers, central banks in Albania, Bulgaria, Cyprus, Romania, Serbia, Turkey and the Former Yugoslav Republic of Macedonia have all forced the subsidiaries of Greek banks operating in those countries to bring their exposure to Greek risk — including bonds, treasury bills, deposits to Greek banks, and loans — down to zero.

Once Greece leaves the euro, that is going to create a tremendous credit crunch in Europe as fear begins to spread like wildfire.  Everyone will be wondering which nation will be “the next Greece”, and investors will want to pull their money out of perceived danger zones before they get hammered.

In the past, other European nations have been willing to bend over backwards to accommodate Greece and avoid this kind of mess, but those days appear to be finished.  In fact, the finance minister of France openly admits that the French “are not sympathetic to Greece”

Greece isn’t winning much sympathy from its debt-wracked European counterparts as the country draws closer to default for failing to make bailout repayments.

“We are not sympathetic to Greece,” French Finance Minister Michael Sapin said in an interview at the International Monetary Fund-World Bank spring meetings here.

“We are demanding because Greece must comply with the European (rules) that apply to all countries,” Sapin said.

Yes, it is possible that another short-term deal could be reached which could kick the can down the road for a few more months.

But either way, things in Europe are going to continue to get worse.

Meanwhile, very disappointing earnings reports in the U.S. are starting to really rattle investors.

For example, we just learned that GE lost 13.6 billion dollars in the first quarter…

One week following the announcement that it would dismantle most of its GE Capital financing operations to instead focus on its industrial roots, General Electric reported a first quarter loss of $13.6 billion.


The results were impacted by charges relating to the conglomerate’s strategic shift. A year ago GE reported a first quarter profit of $3 billion.

That is a lot of money.

How in the world does a company lose 13.6 billion dollars in a single quarter during an “economic recovery”?

Other big firms are reporting disappointing earnings numbers too

In earnings news, American Express Co. late Thursday said its results were hurt by the strong U.S. dollar, which reduced revenue booked in other countries. Chief Executive Kenneth Chenault reiterated the company’s forecast that 2015 earnings will be flat to modestly down year over year. Shares fell 4.6%.


Advanced Micro Devices Inc. said its first-quarter loss widened as revenue slumped. The company said it was exiting its dense server systems business, effective immediately. Revenue and the loss excluding items missed expectations, pushing shares down 13%.

And just like we saw just before the financial crisis of 2008, Americans are increasingly having difficulty meeting their financial obligations.

For instance, the delinquency rate on student loans has reached a very frightening level

More borrowers are failing to make payments on their student loans five years after leaving college, painting a grim picture for borrowers, according to the Federal Reserve Bank of New York.


Student debt continues to increase, especially for people who took out loans years ago. Those who left school in the Great Recession, which ended in 2009, had particular difficulty with repayment, with many defaulting, becoming seriously delinquent or not being able to reduce their balances, the New York Fed said today.


Only 37 percent of borrowers are current on their loans and are actively paying them down, and 17 percent are in default or in delinquency.

At this point, the American consumer is pretty well tapped out.  If you can believe it, 56 percent of all Americans have subprime credit today, and as I mentioned above, we just witnessed the biggest spike in credit application rejections ever recorded.

We have reached a point of debt saturation, and the credit crunch that is going to follow is going to be extremely painful.

Of course the biggest provider of global liquidity in recent years has been the Federal Reserve.  But with the Fed pulling back on QE, this is creating some tremendous challenges all over the globe.  The following is an excerpt from a recent article in the Telegraph

The big worry is what will happen to Russia, Brazil and developing economies in Asia that borrowed most heavily in dollars when the Fed was still flooding the world with cheap liquidity. Emerging markets account to roughly half of the $9 trillion of offshore dollar debt outside US jurisdiction.


The IMF warned that a big chunk of the debt owed by companies is in the non-tradeable sector. These firms lack “natural revenue hedges” that can shield them against a double blow from rising borrowing costs and a further surge in the dollar.

So what is the bottom line to all of this?

The bottom line is that we are starting to see the early phases of a liquidity squeeze.

The flow of credit is going to begin to get tighter, and that means that global economic activity is going to slow down.

This happened during the last financial crisis, and during this next financial crisis the credit crunch is going to be even worse.

This is why it is so important to have an emergency fund.  During this type of crisis, you may have to be the source of your own liquidity.  At a time when it seems like nobody has any cash, those that do have some will be way ahead of the game.

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knukles's picture

Better yet, h/t Jesse, the demand for US Treasury paper is skyrocketing a la in the form of "borrowings" from the Fed.  The only reason for which is likely that somebody is getting more margin/collateral calls what with the derivative positions in oil, Greek paper, etc takin' the old skinny.
Now that's stress on the system, kids!

Winston Churchill's picture

Here come the back eyewall of the 2008 hurricane,

From personal experience, being in the  storm eye several times,

its always worse than the leading one.

Hope everyone here got fully battened down while they had the chance, its hard

to put up shutters in 100 mph winds.


SWRichmond's picture


+1.  I also now wonder if TARP was more about creating collateral for liquidity than it was about the cash for banks.

I also cant help but notice what an awesome idea it is to borrow money to buy the equity tranche of a stock derivative.  WHO THINKS THAT WILL TURN OUT WELL?

MonetaryApostate's picture

@ knukles  Thanks for the link, I updatd my blog post to include this article & the linked article you provided, great share!

chilli sauce's picture
chilli sauce (not verified) knukles Apr 19, 2015 3:57 AM

I freelance over th? internet and earn about 80-85$ an hour. I was without a job for 7 months but last month my paycheck with big fat bonus was $15000 just working on my computer from my home for 5-6 hours. Here's what i have been doing...

spinone's picture

Stockpile essentials and cash.  Rotate your stock, because no one can know when.

Yen Cross's picture

 The Sunday open is going to be a " Barrel'O'Laughs"... I can't wait to see the continued $usd carnage next week.

  I fully expect the 10 year bund to go negative. It's only 5 basis points, and I have faith in the Buzzard/Vulture traders.

 hey! Is my post GRamaticallY corRecT?

db51's picture

Everything is Fucking Awesome, and Getting Awesomer with every passing day.   The past 8 years is PROOF that the Titanic will NEVER GO DOWN.....not in my lifetime....and probably not in the lifetime of my Grandkids....all my grandkids will remember of their PaPa is what a Doom Porn Dude he was....they'll be laughing about it at Thanksgivings to eternity.

Not_FieldingMellish's picture
Not_FieldingMellish (not verified) db51 Apr 18, 2015 6:19 PM

The end is always nigh.

MonetaryApostate's picture

I don't know about the end, but there are some serious changes coming about soon...

Its_the_economy_stupid's picture

Greece going into the reset debt free! (er, maybe, kinda)

Stoploss's picture

Was that Greece's or Wolfies balls in the pic??

CarpetShag's picture

Predictions are cheap as dirt, and you have to pay me to read Armstrong's.

ebworthen's picture

The markets will "break" or declare "self-help" and the retirees and 401K/I.R.A. crowd will be the last ones to shuffle their money or get it out.

All by design.  Then:  bail-in's, stability levies, NIRP on bank deposits, and other forms of theft.

tired1's picture

I dont think 'anything' is going to happen until Russia can be in a position where war can be 'declared' or some massive military action can be played int the media. The US has another real hot war and emergency measures can be declared to 'stableize the economy. Kinda a replay of Lincoln, Wilson or FDR but with a more desparate tone.

daveO's picture

Run by relative amateurs. Putin didn't take the bait on MH17. So, 300 US troops to Ukraine.

We can, probably, expect another 9/11 by 2017. I still think it will hit at the FED gold vault, to hide the theft. 

q99x2's picture

This was written before Putin came to the rescue and having cash didn't help the Ukrainians.

Bitcoin Last Price: $224.24

cowdiddly's picture

 Between the Greek bond thing, oil and god knows what else, somebody and not just one, is getting squeezed bigtime. If you look at this chart you can see its already worse than the the big squeeze that brought this puppy down in 2008 aka Lehman brothers days. I think we are in for a nasty week after last Friday's fiasco and they better get to duct taping hard come Monday or this might get ugly quick..

This is the reverse repo rate-meaning someone, usually the Fed or central banks, are selling instruments with a prearrangement to buy them back at a latter date. I.E. pumping money into the system to prevent a liquidty lockup. As you can see they are pumping their ass off.

Is this what has all the billionaries bugging? I think yes.

Winston Churchill's picture

They all started bugging out around new year.At least my client ones.

Now I can see why.

ThirteenthFloor's picture

Yes UST "love notes" makes some sense at this point. FRB balance sheet (the real one) must be pretty nasty.

spanish inquisition's picture

I wonder who is buying the debt that everyone is being told to dump..

to get rid of any sovereign Greek debt they had, which suggests that maybe the next step will be Greece exiting,” Cashin told CNBC.

According to a report from Kathimerini, one of Greece’s largest newspapers, central banks in Albania, Bulgaria, Cyprus, Romania, Serbia, Turkey and the Former Yugoslav Republic of Macedonia have all forced the subsidiaries of Greek banks operating in those countries to bring their exposure to Greek risk — including bonds, treasury bills, deposits to Greek banks, and loans — down to zero.

Fahque Imuhnutjahb's picture

TPTB should encourage Portugal, Ireland, Italy and Spain to buy the dump, then they could create a virtual set of Russian nesting dolls comprised of shite.

spanish inquisition's picture

Very nice.

I was thinking that Goldman was advising peripherals to sell. Dump them all as soon as possible at a big discount to.............. (drumroll please..)...............Goldman!

kchrisc's picture

"Get ready for another major worldwide credit crunch.  Today, the entire global financial system resembles a colossal spiral of debt...Unfortunately, any system based on debt is going to break down eventually, and there are signs that it is starting to happen once again."

"In the conduct of business, reflections concerning the secular trend of prices do not play any role whatever. Entrepreneurs and investors do not bother about secular trends. What guides their actions is their opinion about the movement of prices in the coming weeks, months, or at most years. They do not heed the general movement of all prices. What matters for them is the existence of discrepancies between the prices of the complementary factors of production and the anticipated prices of the products. No businessman embarks upon a definite production project because he believes that the prices, i.e., the prices of all goods and services, will rise. He engages himself if he believes that he can profit from a difference between the prices of goods of various orders. In a world with a secular tendency toward falling prices, such opportunities for earning profit will appear in the same way in which they appear in a world with a secular trend toward rising prices. The expectation of a general progressive upward movement of all prices does not bring about intensified production and improvement in well-being. It results in the “flight to real values,” in the crack-up boom and the complete breakdown of the monetary system." - von Mises, from "Human Action"

Did you hear a "crack?" Or was it a "boom?"

The banksters need to repay us.

T-NUTZ's picture

Cash in the bank of serta.

daveO's picture

Metal is better. They may well change the paper out and leave cash holders with little recourse.

monad's picture

Half in metals. Plus I have the machines to weaponize them, and the skill, kids.

My name is not Vanderbilt.

Tall Tom's picture

Make certain to stock up on chemicals as well...


Soak Paper or cotton into a solution of Nitric and Sulfuric Acid. Lord Cavendish did that at the end of the eighteenth century by avoid a beating from his wife as he was playing chemist in HER KITCHEN.. 


That creates Nitrated cellulose, commonly known as Gun Cotton or smokeless Powder, the applications of which are both necessary and valuable when considering manufacture of weaponry.

monad's picture

Yep I aced 2 yrs of chem. Its fundamental to physics. i'm a moral engineer.

Radical Marijuana's picture

It is too euphemistical to state the problem as merely being "any system based on debt is going to break down eventually."

The established systems are based on ENFORCED FRAUDS. In order to understand the word "debt," one should take this perspective:

"If history shows anything, it is that there’s no better way to justify relations founded on violence, to make such relations seem moral, than by reframing them in the language of debt — above all, because it immediately makes it seem that it’s the victim who’s doing something wrong."

-- David Graeber

Or, as A Lunatic pointed out in a Zero Hedge reply: "... it's always the same; your money or your life. How civilized it is to have a monetary system that
ultimately relies on death threats as collateral ..."

I recently repeated the same points in my comments under this article: Modern-Day Monetary Cranks and the Fed's "Inflation" Target

The problems are way worse the more one engages in a deeper analysis of those problems. Money is measurement backed by murder. The debt controls depend upon the death controls. The MAD Money As Debt systems are NOT based on the superficial notions of what "debts" are! Rather, that MADNESS is the runaway criminal insanities of governments becoming the biggest form of organized crime, controlled by the best organized gangs of criminals, who are currently the banksters.

Anyone who does not address the deeper issues regarding how and why there is being driven a crazy collapse into economic chaos is grossly underestimating those problems, and then, typically tends to match that with grossly overstated notions regarding how to prepare for those events, or what the theoretical resolutions for those too superficially understood problems could be.

After one faces the basic facts that money is measurement backed by murder, because the debt controls were backed by the death controls, then it follows that the runaway debt insanities are headed towards provoking death insanities. Furthermore, if one continues through with that deeper analysis to propose realistic solutions that are consistent with that analysis, then it becomes clear that there are no genuine solutions which are not actually based upon backing up better debt controls with better death controls.

The existing problems are due to the ways that civilizations have been controlled by the principles and methods of organized crime. In particular, those have become the established systems of enforced frauds manifested in the MAD Money As Debt systems, which exists due to the international banksters applying the methods of organized crime to the political processes.

There are NO genuine resolutions to these problems which could actually exist that fail to address the deeper issues that money is necessarily measurement backed by murder. Of course, since the established systems are almost nothing but organized crime, surrounded by controlled opposition groups, all of which operate within the same basic bullshit frames of reference, that are able to get away with deliberately ignoring all of the basic facts, because they were originally able to get away with being able to make the public "money" supply out of nothing, as debts, or have adapted to living inside of those triumphantly enforced frauds, for generation after generation, it is practically impossible to have any rational public discussions about the political economy, since that is based on systems of enforced frauds in ways where almost everyone operating inside those systems are somehow able to deliberately ignore those basic facts, either by being utterly unaware of those, or else, by being able to propose bogus "solutions" that are based on supposing that those facts could be made to not exist.

The real situation is that the political economy is based on enforced frauds, and must necessarily be based upon enforced frauds.

That is why the problems regarding that "the entire global financial system resembles a colossal spiral of debt AND any system based on debt is going to break down eventually" are far worse than almost any article on Zero Hedge ever directly addresses. Only some of the comments tend to adequately address the basic nature of the fundamental foundation of enforced frauds, while practically none of those comments also go on through accepting how and why that must necessarily continue to be the case.

Thousands of years of human beings building a civilization on the basis of successfully backing up lies with violence have created a civilization that is way more criminally insane than almost anyone living inside of that system, and taking it for granted, can comprehend! It is not possible to exaggerate the degree to which human beings have developed cultural systems of artificial selection, that have resolved some of the chronic political problems inherent in the nature of life, through means which were most socially successful when done through the maximum possible deceits and frauds.

The established monetary systems, based on enforced frauds, have actually become runaway criminal insanities, which paradoxically become even more criminally insane the more socially successful they continue to be based on their enforced frauds. The bigger picture that surrounds the day to day little ways that debt slavery generates numbers which become debt insanities is that human beings have been resolving their problems through developing the maximum possible degrees of being able to lie to themselves about what they were really doing.

The established systems are almost totally dominated by the best professional liars and immaculate hypocrites. Everyone who have been making "money" inside of the established monetary systems have been participating in systems of enforced frauds, while most of them have been deliberately ignoring and denying that. The longer term consequences of having successfully developed social systems based on being able to back up legalized lies with legalized violence are only barely beginning to become more fully manifested.

Human civilization appears to only be in the first phases of becoming dominated by runaway criminal insanities. We have barely seen anything yet, compared to what is probably going to happen. Going insane, in the ways that we collectively have, at average overall exponential rate, was relatively better at the beginning. However, that was a package deal, where the good parts delivered nearer the beginning are followed by more of the bad parts nearer the ending.

The MAD Money As Debt system exists as the triumph of enforced frauds, due to the ability to back up lies with violence. That those lies never stop being false, no matter how much violence is applied to back them up, has only barely begun to be manifested as the longer term consequence from all of the shorter-term benefits derived by some from being able to get away with enforcing frauds.

A civilization developing runaway debt insanities is much, much MADDER than the vast majority of people who were born into that system are able to yet perceive. That MADNESS is also reflected in the ways that people deliberately refuse to face the facts regarding what the only possible theoretical solutions would be. Since human cultural systems of artificial selection operate within the context of natural selection, through the maximum possible deceits and frauds about themselves, developing better systems of artificial selection, that respected the relatively objective facts about natural selection pressures, is politically impossible!

That money is necessarily measurement backed by murder MEANS that the only genuine resolutions to the problems are to have better measurements backed by better murders. At the present time, we are living inside of the runaway paradoxes of successful warfare based on deceits, enabling successful finance based on frauds. Human beings live as entropic pumps of energy flows, which deliberately misunderstand the concept of entropy in the most backward ways possible.

That has so thoroughly become the de facto social situation, that the overwhelming vast majority of people do not have the slightest clue to begin to recognize how clueless they are about that. We are facing the existing social situation where there is almost nothing but organized crime, surrounded by controlled opposition groups, all of which based everything they are doing upon operating through the maximum possible deceits and frauds, so that every sociopolitical institution is dominated by the best available professional liars and immaculate hypocrites.

Human beings necessarily live as systems of organized lies operating robberies. To the degree that they deliberately ignore and deny that is the degree to which they are deliberately ignoring and denying how they are actually living as energy systems within their environment of energy systems. Since the dominant, globalized human civilization is based on its history of being able to back up lies with violence, that system has matching bookends of being as evil and ignorant as it can possibly be.

There have developed globalized systems of electronic monkey money frauds, backed by the threat of force from apes with atomic bombs, manifesting as the MAD Money As Debt systems, backed by the MAD Mutual Assured Destruction systems. Those ways of resolving the chronic political problems, inherent in the nature of life, were due to the ways that natural selection pressures have driven the history of successful warfare based on deceits to morph into successful finance based on frauds.

Those problems have been amplified to astronomical sizes. Since almost nobody is able and willing to face the magnitude of those problems, there are no good reasons to expect that those problems could be resolved in any better ways. Rather, we watch as the runway criminal insanities, due to controlling civilization with enforced frauds, continue to automatically get worse, faster. Those who do not fully appreciate those problems neither see their overall magnitude, nor what it would theoretically take to resolve those problems better. Since those groups include pretty well everyone, there are no good grounds to expect that those problems will be resolved in any better ways.

Behind "the global liquidity squeeze" is the problem of the exponentially accelerating strip-mining of the planet's natural resources running into real limits of diminishing returns, which will manifest first and foremost in its effects upon the fundamentally fraudulent financial accounting systems, which were based on being able to enforce frauds in ways which could get away with deliberately ignoring and denying the basic laws of nature. Therefore, Neolithic, social pyramid, civilizations were able, temporarily, to develop systems of artificial selection which were driven in paradoxical ways by natural selection pressures to increase their relative social successes by maximizing the degree to which they could lie to themselves and everyone else, to the maximum possible degrees which were enabled by being able to back up those lies with violence.

So far, few of the relatively objective facts have intruded much upon the runway criminally insane systems of enforced frauds that have been controlling our political economy. The magnitudes of the possible "corrections" coming are way outside of the box of the established markets, because the established markets that exist within the fundamentally fraudulent financial accounting systems were already almost totally rigged, in order to be able to get away with maximizing the advantages flowing from being able to enforce frauds.

At the present time, the only apparently possible "corrections" have to come from factors beyond human control, because everything under human control is being almost totally dominated by enforcing frauds, through the core systems of organized crime, surrounded by controlled opposition groups. With sublime irony, natural selection has driven the development of artificial selection systems based upon the maximum possible deceits and frauds, to the degree that there is virtually nothing within those systems left that can correct their own astronomically amplified errors. Hence, we are headed for the human systems based on the maximum possible arrogant dishonesty to be eventually corrected by forces beyond our control. That means that our problems are way worse than anyone who still thinks that our problems are anything less than runaway systems of enforced frauds, based on the social successes of being able to back up lies with violence, creating a civilization locked into vicious spirals of MAD CRIMINAL INSANITIES!

aleph0's picture

+1000 ... well written despite being sometimes a little repetitive.
OTOH , one can't stress this enough IMO .

In short ... Debt Money is the source of all evil in this world .. and the planet is currently trapped in this MATRIX.

ZombieHuntclub's picture

So someone with a blog called the Economic Collapse blog is predicting an economic collapse? I am shocked, shocked I tell you! 

Milestones's picture

R.M. One of your more intreguing rants. I think you hit every rail on the table. Good show.              Milestones

Radical Marijuana's picture

Thanks, Milestones! Perhaps each rant is merely polishing the same stones, but they do get somewhat smoother every time I do that.

Element's picture



The 137th Global Liquidity Squeeze Has Begun

fixed it

Free Wary's picture

Mike Maloney said it best. He said something like: If you could see the world's financial system it would look like a bunch of guys in a room writing IOU's on paper as fast as they could and passing them back and forth to each other..

Wild Theories's picture

but it generates plenty of "economic" activity, no?

GreatUncle's picture

Now if one or more of them lost their arms watch the economic collapse or more apt possibly ...

Quantum timeslicing of passing so many IOU's is not physically possible because they would have to occupy the same time now even with all the HFT algortihms ... simple terms run out of time to trade the vast quantity of IOU's.

Interesting thought that because these IOU's the vast population who have idle hands cannot play through affordability whilst those playing the game created so many IOU's they can't keep up.

hibou-Owl's picture

Off loading Greek bonds notes etc, to who?

Mums & Dads who don't know what's happening or Greek pension funds!

Maybe sliced & diced, mixed in with some good spice, then peddled with some nice commissions.

Warning to Investers, the sharks are out and there's not enough food.

GreatUncle's picture

Honest opinion now ...

In 2008 the credit shock reduced the demand for work.

In 2015 looking into the economy if anything I see less work and alot of bits and pieces that may put food on the table just a pity it will not pay for the roof over your head.

In 2020 ... hmmm going to be worse than now for sure because we have not even turned the corner on resolving any situation as Greece and Japan clearly show.

Batman11's picture

The bankers only product, debt (loans/mortgages).

A world drowning in debt.

What else would you expect after a banking boom?

The bankers product, debt, let's you borrow your own money from the future to spend today.

The loan is spent immediately and the repayments come in the future with interest.

Eventually the debt repayments overwhelm the system.

The power of finance is just taking money from the future to spend today.

Boom today and debt servitude tomorrow, it is the nature of finance.



Batman11's picture

The liquidity squeeze = shortage of bigger fools.

When you are experiencing a lack of liquidity trying to sell into the market it means the biggest fool might be you.


geno-econ's picture

Problem is there is no such thing as being in "cash".  Paper money can devalue quickly via inflation, money market funds are vulnerable to credit freeze and no longer tied to $1 dollar value, bonds are a bubble, stockmarket vulnerable, gold and commodities dependant on supply and demand unless tied to a non fiat currency.  So what exactly is " staying in cash and which cash that has not already been leveraged to the sky by bankers and politicos ? " 

RiverRoad's picture

When the Fat China Lady sings it will finally be over.