Maintaining The Illusion Of Stability Now Requires Ever-Greater Extremes

Tyler Durden's picture

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

This much-needed re-set to an economy that serves the many rather than the few is what the Powers That Be are so fearful of.

On the surface, everything still looks remarkably stable in the core industrial economies. The stock markets in Japan, Germany and the U.S. are only a few percentage points off their highs, and we're constantly assured that inflation no longer exists and official unemployment is low.

In other words, other than the spot of bother in Greece, life is good. Anyone who signs on the dotted line for easy credit can go to college, buy a car or house or get another credit card.

With more credit, everything becomes possible. With unlimited credit, the sky's the limit, and it shows.

Europe is awash with tourists from the U.S., China and elsewhere, and restaurants are jammed in San Francisco and New York City, where small flats now routinely fetch well over $1 million.

In politics, the American public is being offered a choice of two calcified, dysfunctional aristocracies in 2016: brittleness is being passed off as stability, not just in politics but in the economy and the cultural zeitgeist.

But surface stability is all the status quo can manage at this point, because the machine is shaking itself to pieces just maintaining the brittle illusion of prosperity and order.

Consider what happened in Greece beneath the surface theatrics.

1. Goldman Sachs conspired with Greece's corrupt kleptocracy to conjure up an illusion of solvency and fiscal prudence so Greece could join the Eurozone.

2. Vested interests and insiders gorged on the credit being offered by German and French banks, enriching themselves to the tune of tens of billions of euros, which were transferred to private accounts in Switzerland at the first whiff of trouble. When informed of this, Greek authorities took no action; after all, why track down your cronies and force them to pay taxes when tax evasion is the status quo for financial elites?

3. If Greece had defaulted in 2010 when its debt was around 110 billion euros, the losses would have fallen on the banks that had foolishly lent the money without proper due diligence or risk management. This is what should have happened in a market economy: those who foolishly lent extraordinary sums to poor credit risks take the resulting (and entirely predictable) losses.

4. But since the big European banks that were on the hook for the 110 billion in bad debt were highly leveraged (estimates are 30 to 1), then a mere 5% loss in their capital would render them insolvent--a Lehman Moment of cascading defaults that the European leadership could not allow, as not only would their cronies lose fortunes but they would lose power when the fragile house of cards they'd constructed collapsed.

Here is the debt in 2009--mostly owed to private banks and bondholders:

5. The status quo's solution: transfer all the private bank debt to the taxpayers of the Eurozone members and loan Greece another 200+ billion euros in exchange for the illusion of reform and a squeezing of average Greek households to pay the interest due on the ballooning debt.

Here is the debt in 2015--almost all was shifted onto the backs of Eurozone taxpayers:

6. Five years later, the debt has exploded to 340 billion euros, triple the debt that should have been written off in 2010 when it became clear Greece could not pay the debt down or even service the interest payments.

7. Five years of austerity and suffering by the Greek people have all been for naught, as the entire euro system is untenable, the debt cannot be paid and the simulacra reforms did nothing to change the power structure or the corrupt, dysfunctional status quo in the country.

8. To maintain the surface illusion of stability for five years, the Powers That Be tripled the debt, vastly increased the risk of default and the damage a default would unleash, and caused undue suffering above and beyond the costs of default and a return to a national currency--a re-set that, if undertaken when it became clear there was no way the debt could be paid in 2010, would already be over and done.

This re-set, while painful in the short-term, is the only mechanism available to force reforms on a self-serving kleptocracy and rid the economy of a dependence on unsustainable credit expansion.

This much-needed re-set to an economy that serves the many rather than the few is what the Powers That Be are so fearful of, for it is the few who garner most of the gains of a corrupt, fully financialized neofeudal system and it is these few who fund the election campaigns of the politicos who are so desperate to maintain the perquisites of the Financial Nobility.

Austerity is meted out to debt-serfs while those at the top transfer tens of billions to their private accounts.

There are variations of this basic flow of income from serfs to the nobility, of course; stock market bubbles are inflated by authorities, insiders sell, sell, sell as credulous banana merchants and wage-earners buy, and then when the bubble bursts, these same authorities ban selling by the small-fry bagholders.

But this is not real stability; it is a brittle simulacrum of stability, an illusion that has required the status quo to pursue extremes of policy and debt that are intrinsically incapable of yielding stability.

In effect, the status quo has greatly increased the system's vulnerability, fragility and brittleness--the necessary conditions for catastrophic collapse--all in the name of maintaining a completely bogus facade of stability for a few more years.

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lolmao500's picture

All that shitty debt needs to be declared void. Those who engineered the greek bailout put in prison. Those in government who bought the greek bonds from the banks to put them on the government balance sheet, death penalty.

‘US debt is a serious problem for world economy’ –


y3maxx's picture

Double black flag, archduke ferdinand moment assasinations coming?

.... Hitlary & Jeb

Manthong's picture

Sue GS for the entire Greek Debt.

If that does not work, send a few hundred special operators to visit them.

EscapeKey's picture

Ubiquity - why catastrophes happen. Read it! Very, very good, and deals with this topic specifically.


When you stamp out forest fires, you will eventually end up with an all-consuming one.

maskone909's picture

charles is spot on with his thesis here. ive been observing the same symptoms
that looks like a good book btw . its lke that guy who said its akin to a coin oscillating faster and faster before it falls to the floor... gotta be a math formula that models this

VinceFostersGhost's picture




Dr. Hunter S. Thompson is noted for saying, "It never got weird enough for me"


Then one did.

DanDaley's picture

When the going gets weird, the weird turn pro.  Hunter S. Thompson



RiverRoad's picture

Only in China my friend, only in China....

JustObserving's picture

US debt and unfunded liabilities are at least $1,400,000 per taxpayer. Kotlikoff has them at $1,720,000 per taxpayer.

You can thank $20 aspirin tablets each and $1 bags of saline water billed at $800 in US hospitals for most of that.

Greek debt is $65,000 per taxpayer.  


Financial System Will Collapse Just a Matter of When-Laurence Kotlikoff

“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.”

sudzee's picture

Maintaining the illusion requires a constant beatdown of gold. 

BlindMonkey's picture

Thank God for that too.  I backup the truck at every descent commision check.

VinceFostersGhost's picture



It's the only government program that's ever worked for me.


Kinda sucks....cause China is gonna end up owning all the real money. Oh well.

Uchtdorf's picture

Ni hau? (How are you?, in Mandarin) Not too late to start learning.

artless's picture

The only thing the Chinese have going for them is the gold purchases. But then Putin's been piling it on as well. Problem is China has a demographic problem. They cannot feed themselves. They cannot find enough bullshit for the displaced rurals to do. I do not put it past them to just exterminate as many as they see fit as their history shows they seem to accept as normal, but they could have all the gold they want and all the stupid trickets falling out of their factories but without the resources they are fuct. That is why you see them going abroad in Africa. That is why they are also expanding their military. Same shit different culture. Bunch a meglomaniac sociopaths who want to rule the world-who think they are intelligent enough to rule the world-who will make the very same mistakes that every other bunch of totalitarians have made in the past.

Kinda like here in the USSA. Except we can feed ourselves and have enough enerhy to outlast everyone.

Oh and China will be stuck holding the bag when we defailt on the 1.3 trillion or so in treasurioes they hold.

It's time for us to take all our toys and go home. But we won't. Because TPTB here are just as fucking stupid as there.

BlindMonkey's picture

Poor stupid bastard.  Don't attribute to stupidity on ZH to what can be blamed on Jews.  

aliki's picture

cramer, NYT ... all-in on central planning this morning. touting china: if they can look the other way on margin calls, stock prices can & will stay up. debt outpacing & now galloping past growth doesn't matter appearantly. keynsians in full-swing.

oh, and theres no inflation anywhere as a result. unless you want to eat, rent a place to live, go to college, get healthcare coverage, stay in a hotel, get on a plane, go to a ballgame, have to pay utility bill .....

remember, its not a lie - if you believe it.

dimwitted economist's picture

It's All Good.. (Bitches) Just up your Dosage if you feel sad..

Oldwood's picture

I think this is as most things that suffer under the law of diminishing returns. Drugs can be effective at one does and lethal at another. That point varies by instance, but when reached is pretty obvious.

dimwitted economist's picture

And don't forget Obama has our backs... 

molecool's picture

Democracy vs. Banksters: 0:10

Tinky's picture

Excellent post. And this is a very good metaphor:

"...the machine is shaking itself to pieces just maintaining the brittle illusion of prosperity and order."

BlindMonkey's picture

The Chinese investors have that "Dinner with Kim" look on their faces right now.  


Poor bastards.  Chinese muppets are treated worse than Western muppets.

buzzsaw99's picture

the u.s. is down at the bottom and by god that's where it better stay

fuck the eu - exactly

yogibear's picture

As long as the rest of the world keeps accepting the US dollar it's not a problem.

The Federal Reserve will just keep printing and piling on the debt.

madcows's picture

the rest of the world has already begun to move away from the dollar.  see the new trade agreements between russia and china that has been adopted by several european nations.  the dollar's reserve status is done.

Brazen Heist's picture

The shitshow gets ever more ridiculous.

Expect more dead cat bounces, market manipulation, and markets creaming their pants at the slightest indication of optimism.

RiverRoad's picture

Bring back to Greece the Greek $$ secreted in Swiss banks and TAX IT!!!

Occasional's picture

'The Chains of Habit are too light to be felt until they are too heavy to be broken'

- Samuel Johnson

Peter Pan's picture

Many years ago I was told by my father of a Lebanese builder  who was building two blocks of apartments side by side. He had laid the steel for the ground floor on one block and the council inspector came and approved for the concrete pour the next day. After he left my father witnessed the builder removing steel from that site and placing it on the adjacent block that was also to be built.

My father asked him what he was up to and he replied that the inspector had said that there was too much steel. Years later both blocks showed serious cracking etc.

In much the same way, the rich have been stealing bricks and concrete from the foundations to build higher and higher edifices to themsleves. Little do they know that such edifices do not allow them to eat more, sleep better or live longer.

Babel No 2 is approaching its use by date and I can hear the cracks in the foundations.


In the meantime, governments and bankers will continue to confuse liquidity with solvency. 

Oldwood's picture

There are thieves in all economic brackets so it becomes a matter of success.

The system fails when there is no respect for the rules, of which our government itself is the single largest destroyer. No system or society is sustainable if it is not voluntary and has the respect of a significant majority. Tyranny is the popular and more "efficient" substitute and if they have enough power they can keep it up for a while, but the fuel of productivity eventually dries up.

The Bell Rang's picture

This is The Greece Show, all theatre. It will be curtain call next week, see who shows up.

Nimby's picture

Nature abhors a vacuum, and will always move towards equillibrum.  When you try to force an economy or a society out of equillibrum, it takes greater and greater force of time to maintain the status quo (much less "progressiving" away from equillibrum), until the necessary amount of force is no longer available and everything comes crashing down.


silverer's picture

Correct.  And after all, my common sense tells me their Holy Grail is just paper.  And it is.

Seasmoke's picture

When you begin a Ponzi. 1913. Time is on your side. Everyone is happy. No one is any wiser. Time on this Ponzi is just about up. Actually time was up a few times, but you have to give TPTB credit, unlike Madoff , they didn't just give up. 

TheRideNeverEnds's picture

meh, they are about to open the e-minis above where they opened them last Sunday so net net everything is fixed; everyone back in the pool.


I just pulled all my bids, something is up, the system is glitchy something is wrong.

RiverRoad's picture

"maintaining a completely bogus facade of stability for a few more years".....How about ad infinitum or until doomsday, whichever occurs first.

The Count's picture

The puppet masters are having increasingly more trouble keeping all those strings from tangling. Their solution: more strings! This is of course a recipe for disaster. However, when the time comes the puppet masters just cut the strings...too bad for the puppets!

The so called 'markets', a clever invention by banksters, is nothing more than a huge sponge to mop up the bogus billions they and the central bankers pull of of their arses. Plus all the drug billions (a good part of which a few select governments actually control) need a good home too. Just like the political correctnes muzzle everybody seems to like wearing, you never hear anybody on the MSM call out the markets for what they really are. 

My very short list of most dispicable TV channels/shows:

Network Evening 'News' (more like a dramatized, TMZ version of something they call news)

Good Morning America (one ball-less male that needs like 5 female co-hosts)

CNBC (don't even get me started)

Bloomberg (just as shallow as CNBC but like to appear oh so sophisticaed)



Ban KKiller's picture

"Ministry of Truth" will step in, don't worry. 

fromthinair's picture
fromthinair (not verified) Jul 10, 2015 8:46 AM

nice article!

BoPeople's picture
BoPeople (not verified) Jul 10, 2015 8:49 AM

There may come a time after the banks cut the legs out from underneath the economy and people will have a choice of what to do. They can be victims or they can go after those who have controlled the situation.

It is my assumption that the banks and their master want chaos in the world and for there to be great suffering and death to make the remaining people pliable and easy to conquer with a global system ... after a period of time of chaos.

However, it is also possible that during the period of chaos those controlling the world will not be able to hide well enough or deep enough and the angry masses will root the power structure out and destroy it... or possibly the controllers will fall upon themselves or succumb to another enemy.

Then what? (I am sure they believe that this latter scenario is not possible ... or that they have taken sufficient preparations to ensure it will not happen.)

Uchtdorf's picture

You can always count on the wicked turning on themselves. It's never enough for them to be, say, the 100th richest person in the world. They must be #47, or #12, or #1. They simply must be.

Clowns on Acid's picture

Jusr ermember good folks ... that the Euro came into existence just a few years after te repeal of Glass Stegal. Without the repeal the Euro, as it was structured would never had been contemplated. 

QQQBall's picture

So I just grabbed some stuff off the net - not all the same year, but just cocktail napkin scratching. CHS has $340B in det, not $320B.

Greece has a similar population to LA County… Less than 11MM. Greece has 320B EU in debt or $350B USD, so near $300,000 USD per capita. The thing is, LA “area” has GRP of $800B; Greece has less than $250B EU and that was before the SHTF. They will supposedly cut pensions and raise taxes, which will lower GDP. Appx 4MM people are employed in Greece, but 1 in 3 is a gubbermint mule, so call it 2.75MM private sector employees. You have $350B in debt and 2.75MM workers. Each private sector worker owes over $1.25MM USD. If you guess 3MM households, then it is about the same as per worker - like $1.2MM USD?

If this is anywhere near correcdt, the creditors are insane. 


q99x2's picture

That's the axis of evil right there boy: The US, England and Germany.

jmc8888's picture

Don't forget Saudi Arabia

Fun Facts's picture

The "markets" today are rooms full of computers running central bank HFT algorithms designed to make the markets do whatever they're programmed to do.

We have covert price controls along with artificial asset valuations and price relationships.

All designed to keep them in control and you a debt slave.