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This Time Around, Entire Countries Will be Going Bust
For six years, the world has operated under a complete delusion that Central Banks somehow fixed the 2008 Crisis.
All of the arguments claiming this defied common sense. A 5th grader would tell you that you cannot solve a debt problem by issuing more debt. Similarly, anyone with a functioning brain could tell you that a bunch of academics with no real-world experience, none of whom have ever started a business or created a single job can’t “save” the economy.
However, there is an AWFUL lot of money at stake in believing these lies. So the media and the banks and the politicians were happy to promote them. Indeed, one could very easily argue that nearly all of the wealth and power held by those at the top of the economy stem from this fiction.
So it’s little surprise that no one would admit the facts: that the Fed and other Central Banks not only don’t have a clue how to fix the problem, but that they actually have almost no incentive to do so.
So here are the facts:
1) The REAL problem for the financial system is the bond bubble. In 2008 when the crisis hit it was $80 trillion. It has since grown to over $100 trillion.
2) The derivatives market that uses this bond bubble as collateral is over $555 trillion in size.
3) Many of the large multinational corporations, sovereign governments, and even municipalities have used derivatives to fake earnings and hide debt. NO ONE knows to what degree this has been the case, but given that 20% of corporate CFOs have admitted to faking earnings in the past, it’s likely a significant amount.
4) Corporations today are more leveraged than they were in 2007. As Stanley Druckenmiller noted recently, in 2007 corporate bonds were $3.5 trillion… today they are $7 trillion: an amount equal tot nearly 50% of US GDP.
5) The Central Banks are now all leveraged at levels greater than or equal to Lehman Brothers was when it imploded. The Fed is leveraged at 78 to 1. The ECB is leveraged at over 26 to 1. Lehman Brothers was leveraged at 30 to 1.
6) The Central Banks have no idea how to exit their strategies. Fed minutes released from 2009 show Janet Yellen was worried about how to exit when the Fed’s balance sheet was $1.3 trillion. Today it’s over $4.5 trillion.
Today, Central Bankers are now actively punishing depositors and bond holders with negative interest rates. Globally, over $5 trillion in debt currently have negative yields in nominal terms, meaning the bond literally has a negative yield when it trades. In the simplest of terms this means that investors are PAYING to own these bonds.
Bonds are not unique in this regard. Switzerland, Denmark and other countries are now charging deposits at their banks. In France and Italy, you are not allowed to make cash transactions above €1,000. So if get fed up with the banks and want to pull your money out, you cannot.
The lies will continue until something breaks. When it does break, there will be no warning and it will be too late to get your money out.
Consider the timeline for the Cyprus “bail-in”
First off, the Cyprus bank “bail-in” or March 2013 did not come out of nowhere. The country first asked for a bail-OUT in JUNE 2012. Here’s the timeline.
· June 25, 2012: Cyprus formally requests a bailout from the EU.
· November 24, 2012: Cyprus announces it has reached an agreement with the EU the bailout process once Cyprus banks are examined by EU officials (ballpark estimate of capital needed is €17.5 billion).
During the period of late June 2012 until November 2012, Cyprus’s problems were allegedly being assessed and nothing more. Throughout this period, NO ONE in a position of significant political or financial power suggested to Cypriots or anyone else who had money in the Cyprus banks that their money would be STOLEN.
Instead, numerous bureaucrats came out to assure the public that this situation was under control and that the risks to the Cyprus banks would be carefully assessed. All fo them were lying.
Then, in the span of a single week, a bank holiday was declared, bank accounts were frozen, and deposits were stolen.
Here’s the specific sequence of events:
· March 16 2013: Cyprus announces the terms of its bail-in: a 6.75% confiscation of accounts under €100,000 and 9.9% for accounts larger than €100,000… a bank holiday is announced.
· March 17 2013: emergency session of Parliament to vote on bailout/bail-in is postponed.
· March 18 2013: Bank holiday extended until March 21 2013.
· March 19 2013: Cyprus parliament rejects bail-in bill.
· March 20 2013: Bank holiday extended until March 26 2013.
· March 24 2013: Cash limits of €100 in withdrawals begin for largest banks in Cyprus.
· March 25 2013: Bail-in deal agreed upon. Those depositors with over €100,000 either lose 40% of their money (Bank of Cyprus) or lose 60% (Laiki).
So… everyone who knew anything about the situation was either completely incompetent or lying. Regardless, those whose money was at stake (depositors) were the ones who got screwed.
All of the above tell us that another Crisis is brewing. You do not start confiscating deposits at banks until the government itself is bankrupt and cannot foot the bill for a bailout.
We’ve now reached that point for several countries in Europe. But this issue will be spreading throughout the world and even to the US in the coming months.
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"their money would be STOLEN."
It stops being your money if you put it in a bank.
My local bank keeps sending me letters saying I can borrow $25,000 with monthly payments of as low as $99. Its not a typo, it says $99 dollars a month. Haha. If I had to live long enough to pay it all off I'd probably have to live to 150 or older.
99 US$/month means 1188 a year or 4%. Without repauing the principal? You banker is a crook.
All of the arguments claiming this defied common sense. A 5th grader would tell you that you cannot solve a debt problem by issuing more debt. Similarly, anyone with a functioning brain could tell you that a bunch of academics with no real-world experience, none of whom have ever started a business or created a single job can’t “save” the economy.
This sounds a lot like Obama who just gave Kenya a Billion of our tax dollars we dont have to give. Im sure the poor folks in Kenya will be dividing it all up. LOL
Currency reset in progress; please hold (physical) for the next available...
Why have more than one country or government? It's only one planet.
Because I don't want to associate with dumbasses. I especially don't want my money taken to kill people and subsidize others' bad habits.
I'm not a Banker - the leveraging rations quoted, are they referring to debt owed to assets ?
They represent the ratio of outstanding debt versus "Tier-1" capital ( i.e. "sound" and "liquid" assets like treasuries - and that's the culprit : who says treasuries and the like are still "sound" assets ?? Gold is, silver is, but governmental debt ??? Look at Greece ....)
"2) The derivatives market that uses this bond bubble as collateral is over $555 trillion in size."
Nicely worded, Phoenix. Too bad people can't visualize Trillions and Billions, although ZH does try regulary with infographics.
Perhaps this will help:
A thousand seconds is about 16 minutes; a million seconds is about 11 days; a billion seconds is about 32 years; a trillion seconds is about 32,000 years.
That's a scary comparison.
Cyprus was a political decision, the ECB could have printed it all.
I have one silly question: Why would the CBs not just create some zillions more if the bonv bubble nursts?
THEY have not done Heli droppings yet, at least I have not found a single note so far.
Many of the large multinational corporations, sovereign governments, and even municipalities have used derivatives to fake earnings and hide debt. NO ONE knows to what degree this has been the case, but given that 20% of corporate CFOs have admitted to faking earnings in the past, it’s likely a significant amount
__
Amen. And that is why we are where we are today, on the edge of a cliff, looking down.
Moral hazard is a real motherfucker. Just wait until everyone starts using "mark to fantasy" accounting...
Not me.
I couldn't care less.
It is nations. Countries are the people and the land they inhabit. Nations are the government.
Nations do not go bust, they just become more integrated into Zion, or bombed into submission.
See Greece, Cyprus, Iraq, Libya, etc. for background.
Liberty is a demand. Tyranny is submission..
"Relax, " said the night man,
"We are programmed to receive.
You can check-out any time you like,
But you can never leave!"
No...
the 'real problem' is that all those bonds are someones wealth...there will be hell to pay if that goes to zero.
Expect every force on the planet to struggle to keep up appearances because when the bond bubble pops, and it must, the wailing and tears will overwhelm. No politician or bankers will permit it to happen if it is within their power. So far it has been. Hyperinflation will probably be the final blow but a collapse of the gold market could do it too. If gold shoots up it reveal the fraud of fiat. (It will likely maifiest as a paper/ physical spread but a withdrawl of banks from the paper market ie closing GLD could do it too.) The precipitating event will be irrelevant, just like Lehman in 2008 or Creditanstalt in 1931.
Hold on, get some gold.
If bonds are wealth, then someone has had a problem from the beginning.
A bond is just the other side of a loan...nothing wrong with that...been going on since Ugh borrowed Muhm's rams horn.
What is a concernm now is that there is so much debt and most wealth is now valued in debt. To keep the money supply up as debts fail, central banks have been buying bad debt and in the process screwing up the capital system. As Kyle Bass said: Capitalism without bankruptcy is like Christianity without hell. People sense it is unfair and dangerous.
But we should not be surprised. People have always had to forgive debt when too much debt became a threat to societal structure. This time, like before, debt will be forgiven as the currency fails. The collapse of the dollar will essentially forgive all loans as it wipes out all paper wealth.
It is good to have some wealth that is not tied to the bond system.
Respectfully, I wish you were right.
Unfortunately, we are a much bigger, more complex world then during any debt "jubilee" (I think it's called). The kind of compromise and sacrifice required would never be seen as fair across the board. Of course, a global economic collapse certainly won't be better, but...
I mean, just look how intransigent Shauble's Germany is over any Greek haircut--and even one of their troika number is urging them to accept one.
No, we're going over the edge alright, just aren't certain when.
No matter what's cooked up, it can't fuel consumption without western jobs and income growth.
THAT'S the lubricant, and sparks are flying from the friction already...
m
Growth in consuption cannot continue forever in finite world with finite resources. What asshat ever thought it could?
So, same as it ever was. Let's hope the financial fucks "taste like chicken" anway.
Same fucking story over and over rehashed and getting beyond ols. Just hurry up and let this shit storm hit. There is no way this can be fixed it is what it is. Withought more debt there is no growth and its only paper. I would never sell my precious metal for this scam paper they call money. I just dont understand why they just dont give out more and more shit paper and shut these stories up. DRAMA HEADLINES
hmmm, are you suggesting, yet again, and again, and again, ... that the ONLY safe haven will be gold ?
The Marxists bailed out the banks and starve mainstreet
Now for 8 years we have 23% unemployment in America but no extended unemployment program. Because they LIE
Now we have H-1B Indian workers being imported in staggaring numbers - 265,000 every year, while there are no jobs
Our electoral system is completely compromised as the ron paul fiasco - seizing six states and still having to throw his nomination papers to the floor of the convention - has shown.
All that is left, is blood in the streets. Maybe a trump can fix it if he isn't too stupid. So far he just talks immigration, nothing against the banks or H-1B
Meanwhile americans are utterly exhausted. broken, ready to die.
goal is too eliminate/change the culture of independence of americans. Who better than a bunch of pacifist indians?
Dot or feather?
Marxists? When Marxists win, bankers get executed , put in jail or forced into exile. Where did this happen recently in our world? What happened was not Marxist; it was state capitalism (best remembered as Nazi Germany economics), during which the Old Money Elite and the government make a pact to both get rich at the expense of the state, and to steal as much money from the public as possible and to create a police state that protects them against insurrection.
You need a new filter for your mind. The Marxist kaleidoscope is not working. Time to give it up.
Socialism for the Rich is not Marxism, it is old fashioned Fascism. Welcome back to the 1930s.
Correct, and such "let the majority eat cake" monetary and fiscal experiments have been tried before. They always end the same way.
You know FA about Marx and nor does Obomber, nor any other clown in Washington since the 1950s McCarthy era.
No I am not a "Marxist" (nor was he) but I do know what he wrote, including the famous, "Capitalism contains within itself the seeds of its own destruction."
Marx saw this in social/class terms and he was right, because a tiny elite - say 0.01% - control the World via the Rothschild Dynasty, central banks, the BIS, IMF, World Bank, etc..
None of the elite believe in another famous quote from Marx, "From each according to his abilities, to each according to his needs." On the contray, they are all motivated by self-interest and do not give a stuff about you. I, nor anyone outside their own tiny circle ... not even that really, when things get bad they stab each other in the back. Why else do you think Lehman Bros got shafted?
Come to think, if anyhing the elite are Malthusians who know that the game is up, want population and will grab anything remaining ... Obomber and all politicians are just puppets.
Where Marx went wrong was him imagining that materialism/the Industrial Revolution would benefit the masses eventually.
Wrong!! An excuse is that neither Marx, nor anyone else much except for Malthus, realized that we live on a finite Planet which cannot support everyone on it obtaining a way of life most evident in the US.
Current wars are mainly about stealing remaining resources and have NOTHING to do with "Marxism", "democracy", or whatever slogan is in use by the elite-controlled MSM.
I Seriously hate it when people quote Cypress bailins as if it wasn't unique situation. These banks were giving over 8% interest on deposits! So you have to wonder as a depositor why/how this was possible! So now that we know this, a 6-10% "bail in" should be expected.. IMO these depositors were high risk/high yeild un-secured creditors. They are lucky they got anything back.
Normal banks provide no interest and even negative interest once you factor in all the fees. As a result any haircuts/bail in's would be theft.
During the S&L crisis I saw S&L's that were on the brink offering over 30% interest on time deposits in their final months of life... Cypress is a good example , just on a different level.
It was Gordon Brown that saved the world in 2008. Said it so himself.