There Is No Solution To The Crisis

Tyler Durden's picture

Via Darren Krett,

A long ,long time ago...

it was the 16 September 1992, Black Wednesday, when the British Government was forced to withdraw the pound sterling from the European Exchange Rate Mechanism(ERM) after it was unable to keep the pound above its agreed lower limit in the ERM.  A certain Mr.Soros, made over £1 billion profit by short selling sterling while costing the Treasury £27billion of foreign currency reserves trying to prop up the Pound and a tidy £3.4 billion loss.

Fast forward to now and one of the upshots of the 2008 crisis was that central banks eunuchized the commercial banks through Dodd Frank and other such regulations, for such embarrassing situations could never be repeated for a central bank. So they took full control without impunity.

Now initially I believe that it was with good intent. Too big to fail was something unacceptable. That governments should not have to foot the bill for the ineptitude of banks and hedge funds who invested in other  funds because they had a good "name" (a nice name with words in them like "enhanced" or "high", not because they were of reputable background),without the faintest idea of what they were investing in was indeed a joke.

And it could be argued that the Fed and ECB were correct in hiding all the problems from the general population. The idea being that the economy is entirely built on sentiment.

Tell people every day that things are OK, fudge economic numbers and plaster over the cracks in the hope that eventually it will all rectify itself, then people will actually start believing ,spending and therefore improving the economy and that the debt can be repaid via tax receipts. This coinciding with a technology boom where there is a serious lack of talent and available staff and it would be tempting to think that this may have possibly worked. That the central banks have saved us from a perilous depression....however, as it has been said...with great power comes great responsibility.

As is the case with many movies...our hero  always faces a tipping point, where the area between good and bad becomes very grey and the choice is which path to choose...the light or dark.....unfortunately it would seem that our heroes at the Fed and the ECB have most certainly chosen the path of the dark side...and they know it too....
Something, something dark side....

Recently the ECB began their own QE program. These purchases will be paid for “with the printing press,” or more technically, an expansion of the monetary base. This comes on top of the Bank of Japan’s own stepped-up money-printing scheme.

It has not been very well appreciated that the Fed’s own QE program, was largely offset by a similar size contraction in the ECB’s base money supply during the same time period. This was caused primarily by the runoff of the ECB’s “long-term refinancing operation” direct bank lending.

The US annual deficit should total $468 billion for the 2015 fiscal year however the  improving deficit numbers are temporary. Budget deficits are projected to begin going up again in 2018, and to nearly double by 2024 as retiring baby boomers strain the health and retirement systems, the economy grows more slowly and interest on the nation’s outstanding debt rises.

The federal government is expected to spend $277 billion on interest on the debt in the current fiscal year. That’s projected to soar to $827 billion by 2025. As a percentage of the economy, it would more than double from 1.3 percent in 2015 to 3 percent in 2025.

Simply put, it will cost the government more to borrow in coming years to pay bills already incurred. Consequently, the $13.4 trillion in debt held by the public projected for 2015, which would be akin to 74 percent of the overall economy, is projected to swell to $21.6 trillion by 2025, when it would total 79 percent of the economy. As recently as 2007, before the Great Recession (this term has been used a lot lately, as if it was something of our past not our present, which is in itself laughable), it was equal to about 35 percent of the economy.

It’s as if for every $100 you earn, you have outstanding debts equal to almost $80.

The end result of Fed policy appears to be to keep us in perpetual economic malaise, to keep us all confused. They keep interest rates low masking the huge structural issues of huge federal budget deficits and whenever the economy appears to be picking up a bit, they threaten to take away the government props of QE and low interest rates faster thereby slapping down the economy. All this happening while the ticking time bomb of huge Federal Debt accumulates more potency.

But if they know this ???

With all this information at their fingertips are they unable to do anything about it or is there something darker afoot...

So lets see what they are doing to help us...

More than a fifth of property sales in Central London are now being secured by wealthy foreign buyers. Houses and apartments are increasingly being sold to Russian, Italian, French and Middle Eastern owners.

Since  2008, around 30% of condo sales in large-scale Manhattan developments have been by buyers with overseas addresses or through secretive LLCs.

Gold and other physical assets are being repatriated more and more every day. 

At Cheyenne Mountain the Pentagon is beefing up its communications setup inside a hollowed-out section of Colorado’s Rocky Mountains less than a decade after it had largely abandoned the site.

The chess pieces are being moved around the board in preparation for what may come,it is as if they have already given up....

So the reason this time it WILL be different us that all the world's economies are so closely intertwined. Previously with such events as the South Sea Bubble, the Dutch Tulip bubble and even the great depression, to a certain extent, we were not  as "global" as we are now.

So how will it end then spoiler-boy?

There are alternate endings.....

1. There will be massive defaults at all levels of society including individuals, corporations, municipalities, states and finally the Federal government itself. They all have too much debt to pay back and it will be defaulted on.


2. They can default by not paying the loans back and we get a sharp and painful, but not endless period of deflationary debt collapse where all the bad decisions of the past Fed induced business cycles are finally accounted for. It is easy to forget that Germany’s government, like the governments of the U.S. and Britain, printed money to fund World War I for five years, 1914-1919, and suffered no particular adversity as a result. It worked great! Until it didnt!


3.  World War scaremongering as this may sound there are many historical precedents for this and we are not exactly in the most stable geopolitical arena.

The Oligarchy will not do what is best for the people. This is still about trying to retain power as is and protecting their own.

I will leave you with a quote from president Lincoln;

“The money powers prey upon the nation in times of peace and conspire against it in times of adversity. It is more despotic than a monarchy, more insolent than autocracy, and more selfish than bureaucracy. It denounces as public enemies, all who question its methods or throw light upon its crimes. I have two great enemies, the Southern Army in front of me and the Bankers in the rear. Of the two, the one at my rear is my greatest foe.”

Lincoln then prophetically added:

“I see in the near future a crisis approaching that unnerves me and causes me to tremble for the safety of my Country. Corporations have been enthroned, an era of corruption in high places will follow, and the money power of the Country will endeavor to prolong its reign by working upon the prejudices of the People, until the wealth is aggregated in a few hands, and the Republic is destroyed.”

There is no solution to the crisis, merely a choice of which roads to choose, a deflationary debt collapse, or a hyperinflationary dollar collapse or World War III. Pick your poison...

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Dre4dwolf's picture

Fractional Reserve Banking creates the following problems.

-people spend more every month than they earn.

-people need to spend more every month in order for prices to rise , so wages rise, so that more money is printed through transactions so that they can get more money to pay off the short-fall every month

Its  a vicious circle.


People always say deflation is bad.

This isn't true.

Deflation is bad for people who aren't willing to work for a living, like bankers and people who expect to be handed everything for free (politicians who live unicorn land)


Deflation is the way the economy purges itself of the useless eaters that steal the labor of the productive class.


 Fractional reserve banking fraud can't exist or operate in a deflationary state, it quite litterally begins to fall apart unless massive injections of counterfeit money enter the banks balance sheets (hence bailouts).


So you are stuck with a system where people who work for banks eat off your back while providing no value to you.


Finance provides a very mininal value to consumers of financial products, while the costs are very high to society in general.




runningman18's picture

There are no solutions for the short term, but there are definitely solutions for the long term.  Solution #1 - hang the bankers responsible, after a fair trial, of course...

kaiserhoff's picture

There is no plan B, and there is no exit strategy.

remain calm's picture

I chose door #4. What ever Dennis Gartman does.

Oh regional Indian's picture

I thought the bad guys took contol WITh impunity ;-)

At any rate, there is always an inherent solution to any crisis. Every crisis comes with it's solution in tow. 

If excess liquidity is a problem, why is choking the liquidity spigot not the solution?

That there is a Q...

This here is what I think is a very important tell, about language, such the basis of our existance, do take a listen....


bigkahuna's picture

Yeah, the back up plan is to get out of the way of the shit as it flies down-range from the fan.

SWRichmond's picture

Reading Lincoln quotes where he bemoans the future of "his" country and the future of the republic is the most repugnant experience I have had today.

Herodotus's picture

Lincoln is to blame for the current trouble in Baltimore.

americanreality's picture

Calm down lady.  Should Lincoln refer to it as your country?   You lost.  Get over it and move forward.  Carrying that anger will eat you up inside. 

SixIsNinE's picture

....uh...I thought we were all IN against whatever Gartman does?

sessinpo's picture

Then there is their solution which has been used for hundreds of years.

Get rid of serfs like you or me and replace them with new serfs. A serf is a worth a dime a dozen.

RafterManFMJ's picture

Or, instead of new serfs, robots!

Soon, my friends, soon.

When such robots are ~90% perfected, look for a series of deadly plauges to sweep the planet.

Perhaps 500 million will survive ...

Oh regional Indian's picture

This IS the time to launch the Butlerian jihad...

SafelyGraze's picture

"There is no solution to the crisis"

first off, there is no "crisis" -- this is a time of peace and prosperity and technological advance leading to a quality of life beyond the wildest dreams of previous generations

second, the article identifies 3 very good solutions to any such "crisis" that may one day develop.

but there are all sorts of other good solutions, including the Special Drawing Rights as reserve currency. 

and, of course, DigitCoin and its many knock-offs (LoveCoin, FreeCoin, FreedomCoin, etc).

the brightest people in the room have prudently navigated the turbulent waters of financial markets that sometimes require a steady hand at the tiller

jimRickards 'n' Krugs


Dre4dwolf's picture

The crisis is that the bankers demand fresh injections of FRNS or they will burn the world down.

The crisis is that banks are terrorists organizations holding everyone in the world hostage with make believe paper.

sessinpo's picture

Actually man has been in a constant state of crisis since it has been recorded. The state of piece is the minority of time.

kaiserhoff's picture

True, but we all need a "piece" now and then;)


SixIsNinE's picture

here, here, a Toast Mr. Safely Graze, indeed to the all knowing omni-wise KrugsHerder of the Sheople, we all shall be safely ashore soon, rest assured, as the Mighty Kruggy guides to safe harbor... No Crisis, indeed - Bottoms up !

Cynicles's picture

As history teaches; The solution is either we eat cake...

crisrose's picture

Deflation is bad because the true *original* definition is a reduction in the amount of debt money in the system (no new loans, previous loans paid off).  Inflation is an increase in debt money (new loans, previous loans serviced instead of paid off).

Just as with any other pyramid scam, no new money = collapse.

Definitions were changed from the amount of debt money to pricing so that they could be hedonically adjusted.

sgt_doom's picture

I believe most of us now know that it is a leveraged buyout of Amerika and there is only one outcome in the pump and dump scheme.

j reuter's picture
j reuter (not verified) Dre4dwolf May 3, 2015 4:41 PM

I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do...

Marco's picture

Of course, historically fascism is how society purges itself from deflation.

Cloud9.5's picture

We may get all three: deflation, inflation and war.

ThroxxOfVron's picture

"We may get all three: deflation, inflation and war. "

Not may: we are and we will continue to experience surges of deflation, inflation and war..


...oh....and don't forget the defaults, crashes, confiscations and bail-in/outs...

Radical Marijuana's picture

Yes, those were also my first thoughts when I read the article above ...

For those who are still relatively nearer the SOURCES of the "money" being made out of nothing as debts, in order to continue to "pay" for strip-mining the planet, then things may well appear to be better than ever ...


the more one knows, the worse it gets:

Silent Weapons for Quiet Wars

Energy is recognized as the key to all activity on earth. Natural science is the study of the sources and control of natural energy, and social science, theoretically expressed as economics, is the study of the sources and control of social energy. Both are bookkeeping systems: mathematics. Therefore, mathematics is the primary energy science. And the bookkeeper can be king if the public can be kept ignorant of the methodology of the bookkeeping. ... In this structure, credit, presented as a pure element called "currency," has the appearance of capital, but is in effect negative capital. Hence, it has the appearance of service, but is in fact, indebtedness or debt. ... if balanced in no other way, will be balanced by the negation of population (war, genocide)... They must eventually resort to war to balance the account, because war ultimately is merely the act of destroying the creditor ... War is therefore the balancing of the system by killing the true creditors (the public ...)

Jack Ryan_00's picture

Yeah Yeah ‘Off with their Heads’. Be careful what you wish for. The pain and suffering from a global banking collapse is probably just what we need because it will expose the futility of a Socialist/Marxist government. But the question is what do we get next… Chaos to start, looking forward to that? Who wants to see their family facing that?  But they will, probably later this year. However Fractional / Relational banking is not the problem…. Given an accurate P&L, investors can evaluate risk based on the overall leverage and if they start leaving, the leverage would have to be reined in or the bank goes bust, a new bank takes over and the SHAREHOLDERS lose.  Transactional banking is the problem. When the bankers sell mortgages to whoever and profit is in how many fees they can generate on Transactions. In the current cesspool of Gubment the only skin in the game is the taxpayers and the numbers are all lies. The Fractional / Relational banking business model profit is from managing a LOCAL pool of assets i.e. mortgages and the interest they generate. The shareholders have to keep a tight reign on leverage or they can lose it all.


Viva la Libertad

Klemens's picture
Klemens (not verified) May 3, 2015 2:29 PM
TTIP: Final Phase of Secret High Treason Sale of Europe to Bankster Corporation Dictatorship

they try to play there game until the very END!

buzzsaw99's picture

for every problem there is a tender nirple solution

AIIB's picture
AIIB (not verified) buzzsaw99 May 3, 2015 2:41 PM

ruby boobies bitchez!

MrSteve's picture

The real solution is simple: 40 acres and a mule. Real wealth will survive the deflated / inflated devaluation of the dollar whichever comes first or second. If no mule available or desired, better have a community tractor and fuel. the community is the key part, they'll help support the real wealth like education and libraries and art and music and gold.

crisrose's picture

Precisely why this collapse will be so much worse than previous ones.  People used to grow their own food.  Not now - those people will starve.  Look to Ferguson/Baltimore to how worthless sheep react.  

Collapse is inevitable.  It's built into the system and there's no way to stop it.  So that the same system can be set up on the other side of the collapse, a scapegoat will be deployed to take the blame and to wipe out the billions who are no longer needed (everything was fine until that nuke went off).

There is no solution.  The end result is complete and utter collapse drenched in the blood of bodies who are no longer needed to keep the debt pyramid afloat.  So stop whining about what those in charge have or haven't done.  They're the only reason we didn't collapse into dust in 2008 and have given those with any shred of intelligence 7 more years to prepare.



Cannon Fodder's picture

You mean like 7 years of feast followed by 7 years of famine?

spinone's picture

The problem is this time we've squandered our easily extractable hydrocarbons, without making it to the next technology (fusion, or whatever). After this crash we will be on the permanent downslope.

Cannon Fodder's picture

Of 40 acres and a mule.... nice solution until they outlaw mules and tax away your land.....

sessinpo's picture

WWIII would occur in either a deflationary or hyperinflationary environment.

Too bad author Darren Krett does not realize this. World wars occur as a response to irresponsible government and banking policies. Both deflationary ad hyperinflationary are examples. You have no ultimate choice because both lead to economic crashes that bring on WWIII.

will ling's picture
will ling (not verified) sessinpo May 3, 2015 3:04 PM

well, after this (kind of ) next WW there won't be anyone left to have problems. so........?

it aint paranoia if they really are out too harm you's picture

"I know not with what weapons World War III will be fought, but World War IV will be fought with sticks and stones." - Albert Einstein

texas economist's picture

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The end result of the Feds policy is running out of wealth and income to transfer. There is something seriously wrong with people who  insist there is some potential benefit to the whole country. This is the carrying out of a political agenda. It will stop when the political iniiative no longer has any utility to the folks who keeping it in operation.


James Quillian, Common Sense Economics,

Make_Mine_A_Double's picture

I don't have any illusions about these people, but Bernanke pimping himself out to Citadel and PIMCO is really beyond the pale.

Have we lost any sense of propriety when this 'institution' (yes, using the term loosely) that has provided untold windfall profits on one way bets (that the Fed implicitly covers for) and than you go rattle the tin cup for the equivalent of a men's room attendent job or Clinton speech for a few million?

Sort of confirms every suspicion you ever had about the Fed just being a KinKo's print shop for the banks and hedgies.

davidalan1's picture

OMG, its all soooo simple, just raise minimum wages by 70%..... all fixed.

kowalli's picture

you will get more jobless people by raising minimum wages -that all

davidalan1's picture

its was supposed to be funny...oh well

kowalli's picture

just raise minimum wages by 7000% -all fixed.

this is funny xD

Cannon Fodder's picture

you forgot your /sarc tag....

NoWayJose's picture

While I can easily see a number of defaults, and I can see some deflationary pressure when those default, it is hard for me to envision a government default in the US - which can print its own money in unlimited quantities (just like the Weimar Republic). The EU may be able to have a default (Greece) since each country cannot print its own currency. The same thing will hold with entitlements in the US and Japan - they will be paid by printing more dollars. The Central Banks will continue QE in order to keep rates low. This will last until all confidence is list in the currency - then you get hyper inflation or war.

The only time we really had any deflation risk was the Great Depression - but back then the country actually tried to balance it's debt. That is no longer true.

sessinpo's picture

Hate to inform you, but the US has gone through several deflationary phases before which include the Great Depression.

You need to do some more homework to clear your limited vision.