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Crossing The Event Horizon On 50 Years Of A Financially-Engineered Black Hole

Tyler Durden's picture




 

Submitted by James Kunstler via Kunstler.com,

History might not rhyme, exactly, but it’s not bad for free verse. Greece is this century’s Serbia — a tiny, picturesque backwater nation blundering haplessly into the center stage of geopolitics. And the European Union is, whaddaya know, Germany in drag, on financial steroids.

Nobody knows what will happen next in the struggle to wring some kind of debt repayment promises out of poor Greece. Without “restructuring” — a virtual national bankruptcy proceeding — there can be no plausible promises of repayment. Both sides seem to have exhausted their abilities to juke their way out. The European Union and its wing-men at the European Central Bank (ECB) and the International Monetary Fund (IMF) can only pretend to kick that fabled can down the road because it has turned into a cement-filled 50-gallon drum. The Greek government can only pretend to further dismantle its civil service and pension systems lest angry citizens toss it out and replace it with a new government, perhaps an ugly and pugnacious one made up of Golden Dawn party Nazis.

In the background, Spain, Portugal, Ireland, and perhaps even France wait without peeping to see if Greece is allowed to restructure, because you can be sure they will demand the same privilege to debt relief. But that’s hardly possible because the ECB has been engineering a shift of debt-holding away from the big corporate banks  — which made all the stupid loans — to the taxpayers of their member states, especially Germany, which stands to be the biggest bag-holder when a contagion of serial default seeps across the continent.

This implies, of course, that along the way to that outcome something sickening happens to the price of all the bonds that the debt is embodied in. Namely, its value craters for the simple reason that the threat of non-payment makes interest rates shoot up to reflect the actualization of risk. That would certainly set off the booby-trap of derivative interest rate swaps and credit default swaps that have been laid into history’s greatest financial minefield. Thus, the big banks that were supposedly shielded by the ECB shell game of Hide the Debt Pea Somewhere Else, will blow up in a daisy-chain of unpayable obligations.

The net effect of all that will be the disappearance of nominal wealth — it crosses an event horizon into a black hole never to be seen again. The continent discovers it is a lot poorer than it thought. Fifty years of financial engineering comes to the grief it deserves for promoting the idea that it’s possible to get something for nothing.

The same thing more or less awaits the USA, China, and Japan. For the USA in particular the signs of bankruptcy have been starkly visible for a long time outside the bubble regions of New York, Washington, and San Francisco. You see it in the amazing decrepitude of the built environment — the cities and towns left for dead, the struggling suburban strip malls tenanted if at all by wig shops and check-cashing operations, the rusted bridges, pot-holed highways, the Third World style train service. Most sickeningly you see it in a population of formerly earnest, hard-working, basically-educated people with hopes and dreams transformed into a hopeless moiling underclass of tattooed savages dressed in baby clothes devoting their leisure hours (i.e. all their time) to drug-seeking and the erasure of sexual boundaries.

That shocking social and political bankruptcy has, so far, acted as the sinkhole for all America’s financial degeneracy and the entropy it generates. The financial class (the 1 percent who own 40-plus percent of the financialized economy) must think it’s immune to the consequences of its activities, namely racketeering of one kind or another — criminal misconduct and accounting fraud in the service of money-grubbing. They must truly believe that risk has been offloaded into the ring-fenced concentration camps of capital: the derivatives pools. But risk, like rust, never sleeps and can’t be so easily contained. The obstreperous claims of debt only die down with the acknowledged disappearance of wealth, as when a bottom-feeding collection agency attempts to collect a few cents on the dollar of a car loan gone bad.

The US Federal Reserve, like the European Central Bank, sits atop a vault of bonds representing a colossal aggregate promise to repay debt that can never be repaid. Their loss of value will come to be seen for what it is: the disappearance of national wealth. We’ll have our moment, too, when the 50-gallon can full of cement can’t be kicked down the road another inch. It might come when Europe sets the example for a loss of faith in system run to crime and rot.

 

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Mon, 06/22/2015 - 09:59 | 6221616 winflation
winflation's picture

This guy writes absolute drivel

Mon, 06/22/2015 - 10:05 | 6221627 Headbanger
Headbanger's picture

Go back to your comic books.

Mon, 06/22/2015 - 10:10 | 6221649 usednabused
usednabused's picture

It may be drivel, but it makes sense.

Mon, 06/22/2015 - 10:34 | 6221734 BLOTTO
BLOTTO's picture

Our whole Life is engineered  - a manufactured reality.

.

One

Giant

Cosmic

Lie

Mon, 06/22/2015 - 11:08 | 6221864 KnuckleDragger-X
KnuckleDragger-X's picture

It HAS to be manufactured because the real thing makes Yellen look like a beauty queen......

Mon, 06/22/2015 - 10:51 | 6221796 armageddon addahere
armageddon addahere's picture

He writes drivel because the economy is drivel and the government is drivel. Our whole system is based on the idea that work is for suckers  and all you need is the slick trick, the quick fix and the gimmick.

Mon, 06/22/2015 - 10:07 | 6221636 macfly
macfly's picture

Really does, so annoying to waste time on such morose and stupid opinions.

Mon, 06/22/2015 - 11:13 | 6221878 A Nanny Moose
A Nanny Moose's picture

Argument Ad Hominem. What exactly is it, with which you disagree?

Mon, 06/22/2015 - 11:58 | 6222015 tarsubil
tarsubil's picture

Admitting the truth is boring and no fun.

Mon, 06/22/2015 - 14:50 | 6222731 Tall Tom
Tall Tom's picture

The trolls are out and about today, aren't they?

 

They must attempt to control the dialouge.

 

The Government knows that we are on the precipice of a major meltdown and the truth of the matter does not fit the desired perception.

 

Collapse this fraudulent system. Stop spending. Divest out of the Stock Markets. Opt out of fraudulent and corrupted systems. The entire economy is based upon fraud and deception. The foundation of corruption cannot be maintained as the cracks are growing as I write.

 

It wil crumble before your very eyes so you must prepare yourself for that eventuality.

 

The collapse of Fraud and deception will be a glorious day, one in which to celebrate. The destruction of the system will usher in a new paradigm upon which we can lay the foundation for a true recovery, that which the forces of Satan does not want.

 

The truth shall prevail over the forces of evil and no matter how ugly the truth may be is is more beautiful tan a perpetrated lie designed to ensnare the unwary and consume anything decent.

Mon, 06/22/2015 - 10:09 | 6221645 BruntFCA
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Winflation writes absolute drivel....

See what I did there?

Mon, 06/22/2015 - 10:26 | 6221697 damicol
damicol's picture

Yes, that was realy good.

You called him a fucking lying sycophantic shit for brains who sucks fucking monkey cocks and is the arsehole of choice for money grubbing neocons to fuck when they please and this cunt loves it.

Is that close ?

Mon, 06/22/2015 - 10:46 | 6221775 indygo55
indygo55's picture

Yeah but who has ever used the word obstreperous in quite that way?

Mon, 06/22/2015 - 10:17 | 6221664 rejected
rejected's picture

Care to explain.

Mon, 06/22/2015 - 10:17 | 6221665 slaughterer
slaughterer's picture

Drivel?  This is anthropological poetry: " a hopeless moiling underclass of tattooed savages dressed in baby clothes devoting their leisure hours (i.e. all their time) to drug-seeking and the erasure of sexual boundaries."

Mon, 06/22/2015 - 11:10 | 6221872 KnuckleDragger-X
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That sounds like the description of certain west coast cities don't it.....

Mon, 06/22/2015 - 11:41 | 6221966 Lyman54
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That quote is what I took away from his article.  It actually sums things up rather well I thought

Mon, 06/22/2015 - 13:59 | 6222517 JetsettingWelfareMom
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He didn't mention how fat they are (or very very thin, depending on the drug)....Good description though...

Mon, 06/22/2015 - 10:52 | 6221801 DavidC
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winflation Biography;

-Pothead Econ. graduate
-I like to ride bicyles.

Hmmm.

DavidC

Mon, 06/22/2015 - 12:00 | 6222019 tarsubil
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Sounds like a cool guy until he writes something.

Mon, 06/22/2015 - 18:53 | 6221829 GeorgeHayduke
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Actually, this guy writes well above your level of comprehension.

Mon, 06/22/2015 - 10:04 | 6221620 JustObserving
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When fraud has been the operating principle for 50 years, the answer can only be more fraud until the eventual collapse.

US debt and unfunded liabilities of over $1,400,000 per taxpayer have sealed its bankruptcy and its future.

 “I told them the real (2014) deficit was $5 trillion, not the $500 billion or $300 billion or whatever it was announced to be this year. Almost all the liabilities of the government are being kept off the books by bogus accounting. . . . The government is 58% underfinanced . . . . Social Security is 33% underfinanced . . . . So, the entire government enterprise is in worse fiscal shape than Social Security is, but they are both in terrible shape.”  So, how much is America on the hook for in the future?  Kotlikoff contends, “If you take all the expenditures that the government is expected to make, as projected by the Congressional Budget Office (CBO), all the spending on defense, repairing the roads, paying for the Supreme Court Justices’ salaries, Social Security, Medicare, Medicaid, welfare, everything and take all those expenditures into the future . . . and compare that to all the taxes that are projected to come in, and the difference is $210 trillion.  That’s the fiscal gap.  That’s our true debt.”

http://usawatchdog.com/financial-system-will-collapse-just-a-matter-of-w...

Mon, 06/22/2015 - 12:28 | 6222123 bluskyes
bluskyes's picture

Perhaps I need to hire a federal book-keeper as an accountant.

Is the USG subject to any financial oversight mechanisms?

Mon, 06/22/2015 - 10:06 | 6221629 CHX
CHX's picture

50-gallon can? Make that 10k (and counting) mt of aurum fisicalum in the hands of China.

Mon, 06/22/2015 - 10:07 | 6221635 Dexter Morgan
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I don't know about you but I've erased all my sexual boundaries.

Mon, 06/22/2015 - 10:20 | 6221672 GMadScientist
GMadScientist's picture

So now you're hung like a Ken doll?

Mon, 06/22/2015 - 10:31 | 6221721 damicol
damicol's picture

So whats on your agenda toninght.

An S&M threesome with a goat and an 8 month old baby boy before you eat them both.

 

Mon, 06/22/2015 - 13:55 | 6222504 JetsettingWelfareMom
JetsettingWelfareMom's picture

Well that's thinking like our leaders...

Mon, 06/22/2015 - 10:09 | 6221643 readyforit
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The Fed will tip that cement filled drum on its side and roll it.

 

Mon, 06/22/2015 - 10:15 | 6221661 XAU XAG
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The problem with "Kicking the can" is it can pick up speed with momentum..............and then there is little to stop it

Mon, 06/22/2015 - 14:09 | 6222563 PTR
PTR's picture

...and we're connected to the drum.

 

https://www.youtube.com/watch?v=k65oxOc7FIo

Mon, 06/22/2015 - 10:19 | 6221667 LawsofPhysics
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You retard, the Fed and IMF (and their owners) know that debt will never be repaid, this is about ownership youy dumb fuck.  They want to OWN everything, and have power over it, including you.

 

same as it ever was...

Mon, 06/22/2015 - 11:25 | 6221901 ZH Snob
ZH Snob's picture

it's so true.  this idea of fixing anythng implies that it would work if not for this one little problem, when the real problem is the whole damn thing, from beginning to end.  a thing devised to slowly (at first) get its hooks into every aspect of finance, then, by extension, the lives of the people dependent on it.  separate them from truth and REALITY, substitute it all for a paltry imitation that will accept lies and fakery until they've forgotten everything and anything of real value and substance.  pornography and fiat currency are two of the fake substitutes that immediately come to mind.

Mon, 06/22/2015 - 14:55 | 6222753 TheReplacement
TheReplacement's picture

Fake stuff:  Aunt Jemima syrup, pink slime, soy burgers, silicone boobs, liposuction butts, botox brows, jap lap pillows, and my interest in  moronic customers who we end up having to chase for payment anyway.

Mon, 06/22/2015 - 10:25 | 6221687 Peter Pan
Peter Pan's picture

The big boys just need some patience. Within the next one to two generations, memories and records will be wiped clear by death, propaganda and destruction of internet archives. By then, ownership will be an exception rather than the rule for anything from homes to cars to phones.

The higher values of life will give in to bread or circuses because by then the provision of both will not be possible.

Only the unexpected can veer us away from the sickening trajectories that have been set for us.

Mon, 06/22/2015 - 12:59 | 6221696 falak pema
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Getting something for nothing...

That value judgement is a moralist's view of American Exceptionalism gone corrupt.

But it does not tell us the MAIN reason that corruption has occurred.

The MAIN reason is cast in concrete since the demise of the Soviet Union in the mindset of the Ruling elites who spawned the NWO mantra : "The US towers like a colossus" ... and what that implies for the Neo-cons who coined it is that AMERICAN EXCEPTIONALISM that they personify is based on ONE CARDINAL principle :

MASSIVE MILITARY SUPREMACY. Period. The market mechanisms and the petrodollar construct and all that makes the world go round is based on that ONE PREMISE ( as established in Huntington's clash of civilizations and in Zbi's grand chessboard great game for deep Asia, both blue prints for the neo-con New American century think tank) :

America's role as lead hegemon and the USD CANNOT FAIL as they are tied to America's BIG MILITARY STICK.

So...in the winter of our financial discontent, what will America do if the world rejects its Greenback hegemony?

Ask Napoleon or Charles V...When the world challenges a hegemonial order; we know the answer and its what Pericles said to his Delian League members : For us or againt us! (The coming song of Nato).

To understand the future, maybe the Americans should read how that Delian League formed to fight the Persians (think Soviet Union in today's world) finished in acrimonious civil war which destroyed Athens ! 

https://en.wikipedia.org/wiki/Delian_League

And Puleese, Money is not an end in itself (except for the deluded) but a means to an end which is and was HEGEMONY (monopoly control of world resources).

Mon, 06/22/2015 - 10:34 | 6221729 csmith
csmith's picture

"Crossing the event horizon..."

Really? Please spare us the pseudo-statistical, quasi-scientific BS.

Mon, 06/22/2015 - 10:49 | 6221768 Kirk2NCC1701
Kirk2NCC1701's picture

I predict that this Show will go on for almost as long as the Austrian Economics porn charts we see here -- knowing that the latter will go on longer.

Is it 7 pm on the 22nd yet, and is there some other hocus-pocus alignment or religious calendar event coming up, that will accurately predict 'The End Is Here' this time?

In the long run... Bears and Doomers will be right.  In the meantime, the Bulls are getting "richer than you are".  Smart and Adaptive is as smart and adaptive does, and dumb & stubborn is as dumb & stubborn does.

Mon, 06/22/2015 - 11:16 | 6221883 El Vaquero
El Vaquero's picture

The problem is that most of the bulls aren't going to get out before the bears come in and start killing bulls.  A few probably know what is up and can time things.  Most are going to get bitchslapped by a grizzly.  Most are going to be smart today, and dead tomorrow. 

Mon, 06/22/2015 - 12:37 | 6222163 yrad
yrad's picture

As long as it hangs on long enough for my 401k to survive and a quick land grab in Brazil. Beaches and Martini's. Just 10 more years...

Mon, 06/22/2015 - 14:59 | 6222774 TheReplacement
TheReplacement's picture

Let us say now, before everything stops working, you have our condolences on losing your 401K to Myra.  Brazil would have been so nice this time of year a decade from now.

Mon, 06/22/2015 - 10:45 | 6221774 HopefulCynical
HopefulCynical's picture

The only incorrect thing about this type of assessment is that far too many people believe that the Great Kersplat is right around the corner. It's not.

The way to know when it is actually upon us is when folks like Kunstler have thrown up their hands, thrown in the towel, and basically said "well, it SHOULD have collapsed by now, so who knows what the hell is going to happen." THAT will be the signal to GTFOD.

Mon, 06/22/2015 - 10:58 | 6221827 shovelhead
shovelhead's picture

Most sickeningly you see it in a population of formerly earnest, hard-working, basically-educated people with hopes and dreams transformed into a hopeless moiling underclass of tattooed savages dressed in baby clothes devoting their leisure hours (i.e. all their time) to drug-seeking and the erasure of sexual boundaries.

Grandma's tramp stamp.

I wish we could blame it all on those 'no good' chilluns but it seems that it well not be the case when empty nesters fill the waiting rooms of strip mall tattoo artists.

The 'why' always points to some neurotic pathology of one sort or another to indelibly mark a mid life crisis upon ones body.

Mon, 06/22/2015 - 10:58 | 6221830 Lordflin
Lordflin's picture

Not much new here... mostly agree. However, society has not been reduced to degeneracy as a result of looming bankruptcy, but rather as a consequence of all of the years of cheap money that led up to it.

My daughter brought a friend home over the weekend... Nigerean... educated here in the computer sciences... wants to return home to fight corruption... and she asked me... how can this degenerate process be arrested. My answer... it can't.

We passed the event horizon years ago.

Mon, 06/22/2015 - 12:20 | 6222068 MrPalladium
MrPalladium's picture

But his prime objective was to get into your daughter's pants first and then leave.

Mon, 06/22/2015 - 12:25 | 6222107 bluskyes
bluskyes's picture

she

Mon, 06/22/2015 - 13:38 | 6222437 Lordflin
Lordflin's picture

My daughter's friend was female you imbecile...or was your purpose to model degeneracy?

Mon, 06/22/2015 - 11:06 | 6221859 runswithscissors
runswithscissors's picture

blurble blurble black hole

 

Mon, 06/22/2015 - 14:47 | 6222719 liquid150
liquid150's picture

Sounds like somebody is jealous that young chicks won't touch his pee-pee.

Mon, 06/22/2015 - 14:47 | 6222720 liquid150
liquid150's picture

Sounds like somebody is jealous that young chicks won't touch his pee-pee.

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