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Manipulation = Fragility
Submitted by Charles Hugh-Smith of OfTwoMinds blog,
In markets distorted by permanent manipulation the most powerful incentive is to borrow as much money as you can and leverage it as much as you can to maximize your gains in risk-on asset bubbles.
A core dynamic is laying waste to global financial markets: the greater the level of central bank/government manipulation, the greater the systemic fragility.
One key characteristic of this fragility is that it invisibly accumulates beneath the surface stability until some minor disturbance cracks the thinning layer of apparent stability. At that point, the system destabilizes, as it has been hollowed out by ceaseless manipulation, a.k.a. intervention.
There are a number of moving parts to this dynamic of steadily increasing fragility.
One is that any system quickly habituates to the manipulation, that is, the system soon adds the manipulation to its essential inputs.
For example: if you lower interest rates to near-zero, the system soon needs near-zero interest rates to remain stable. Raising rates even a mere percentage point threatens to fatally disrupt the entire system.
Another is that permanent intervention (i.e. manipulation, or to use a less threatening word, management) strips the system of resilience. When participants are rescued from risk by central bank/central state authorities, they take bigger and bigger gambles, knowing that if the bet goes south, the central bank/state will rush to their rescue.
One of the core sources of resilience is a healthy fear of losses. If you're going to face the consequences of your actions and choices, prudence forces you to either hedge your bets or diversify very broadly, so if bets in one sector go south you won't be wiped out.
Thanks to the permanent manipulation of central banks and states, trillions of dollars have concentrated in high-risk, high-yield carry trades that are now blowing up.
A third source of fragility in manipulated financial systems is the perverse incentives generated by cheap credit and assets bubbles. In markets distorted by permanent manipulation--near-zero interest rates, central bank asset purchases, quantitative easing, etc.--the most powerful incentive is to borrow as much money as you can and leverage it as much as you can to maximize your gains in risk-on asset bubbles.
Why this increases system fragility is obvious: when the bubbles pop, the debt has to be paid back. But once the assets drop enough, selling won't raise enough money to pay back the debt.
At that point, the borrowers are bankrupt, and the dominoes of debt topple the entire financial system.
Dave of X22Report and I discuss these dynamics in Central Banks Have Manipulated The Markets Which Will Ultimately Crash: (42:48)
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Global growth is like a three legged stool increasingly missing all three legs. Population increases are declining, GDP growth declining, and private credit growth declining. In the absence of these, the final source of "growth" is government debt and deceit (deficit spending plus monetization whose principal is never intended to be repaid, interest costs never remotely borne) being substituted to prop up declining demand.
http://econimica.blogspot.com/2015/08/global-growth-3-legged-stool.html
Bold claims Ham-Bone.
The DHS, FEMA and NWO are here to protect us.
I would add some things to this:
1. Manipulation is going on globally, maybe coordinated, maybe haphazard, maybe at cross purposes (or all of the above). Does not matter really, it is going on globally.
2. Systems are interconnected and yet more centralized than they ever have been before. This means interdependence in terms of each part having an effect on the other. Each manipulation has a potential for a greater reach in terns of effect.
3. Going through micro, messo, and macro levels of "the manipulated systems" you are going to observe a fractilian effect. Structure changes at each level will ripple out and effect the other levels. Not just dominoes (that is too one dimensional). These effects seem to hide beneath the surface when in fact they are there but they have not reached a critical mass great enough to tip the shift to collapse into the next structure that will manifest.
I guess what I am trying to say is that we are fucked on N-dimensions and his analysis works okay for me, but it is too shallow and does not go far enough describing just how fragile the system really is.
Yep, but humans are limited creatures, though certain people think they can halt the tides anyway.......
At that point, the borrowers are bankrupt, and the dominoes of debt topple the entire financial system...
This is incorrect. The whole eCONoME could up and die but the "financial system" as you call it would be preserved (for the sake of the children, lulz).
/es down 26. no reason, just because.
All dynamic systems by their nature tend not to be stable and when you screw with them, you make them unstable in unpredictable ways. What's worse is screwing with things to protect one certain part like stocks, but they can't seem to at least do it in a coherent manner and chaos will take over in the areas they aren't paying attention to......
"At this point, what difference does it make?"
Hey that's what I've been saying for years. The banks intention is to buy up all the corporations and the world with fiat. I liked this presentation. It is made up of the Q99X2 Report of comments over the years.
But they really miss the point. Central banks which probably means a small number of private owners, are buying up the world with fiat for themselves and not to put back into the markets. They simply want ownership of all assets. That's where these guys miss the point. They think there are some benevolent people over thar at the central bank. Dudes wake up we're talking banksters here. They've killed over 2,000,000 Muslims, assinated heads of nation states. Murderd over a half million children and they sure as hell don't value anyone's life except their own. They all need to be locked up and their financial system returned to the people of the world so we can survive into the future.
not enough people with the power to something are hungry yet. last disturbance worth mentioning was egypt where the people got heard-outcome not any better though. and that is my real fear-the outcome...guns could be the game changer! change with lethal results...
but
A market distorted by permanent manipulation is not a market. It's a carny game.
I include in 'permanent manipulation' the old fashioned kind of manipulation all of us geezers were suckled on: the manipulation of Goldman Sachs, JP Morgan, Smith Barney, Merrill Lynch, etc., and several biggies, no longer with us who got caught with their pants down.
Sorry, but there is no path back…none. If the central bankers just pull out, the markets would collapse to their “real” value in a few weeks. And Dow 7k cannot be allowed. It would lead to the cities burning. Talk about a fragile society, people are now just shooting each other because they feel like it.
Do those millions of immigrants brought in for cheap labor and to create new borrowers and consumers, give a shit about the country, or its history? Does anyone?
Christian values created the USA, and now Islam wants to take it over. It will get ugly. People are losing hope, and if they lose ‘faith in Fed’ which replaced faith in God, it is all over. Do ninety-five million “investors” really believe the Fed bankers are omnipotent? Maybe they do…but they’re not, not even close. They meet at Davos and Jackson Hole and convince themselves they are truly masters of the universe…good luck with that. ZHer’s seem to get it, but the masses are ignorant and easily led to their doom, over and over.
The ‘New Normal’ is here to stay and they will add more debt, until they can’t, then it will all collapse. I will be very exciting to watch…from a safe distance
in this kind of environment the people who are penalized the most are those who refuse to take massive (roulette style) leverage risks with capital that does not belong to them.
I believe the concept was once known in American business circles as "having honesty and integrity".
the thought was that Bankruptcy resulting from deliberate gambling in the stock market and real estate should not be rewarded.
It's all ,after all,
just a big game of Ponzi Musical Chairs.