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Deflation Warning: The Next Wave

Tyler Durden's picture




 

Submitted by Chris Martenson via PeakProsperity.com,

The signs of deflation are now flashing all over the globe. In our estimation, the possibility of an associated financial crisis is now dangerously high over the next few months.

As we’ve been saying for a while, our preferred model for how things are going to unfold follows the Ka-Poom! Theory as put out by Erik Janszen of iTulip.com.

That theory states that this epic debt bubble will ultimately burst first by deflation (the "Ka!") before then exploding (the "Poom!") in hyperinflation due to additional massive money printing efforts by frightened global central bankers acting in unison.

First an inwards collapse, then an outwards explosion. Ka-Poom!

We’ve been tracking the deflationary impulse for a while, and declared deflation the winner back in July of this year.

A Failed Strategy

What exactly do we mean by deflation?  Back in 2008 the central banks of the developed world, as well as China, had a choice:

  1. admit that prior policies geared towards encouraging borrowing at a faster rate than income growth were a horrible idea, or
  2. double down and push those failed policies even harder

As we all know, they chose option #2. And so here we are, just 8 years later, with nearly $60 trillion in new debt piled on top of the prior mountain -- while GDP grew by only $12 trillion over the same time period:

(Source)

[Note:  Global nominal GDP is projected to be $68.6 trillion in 2015, virtually unchanged from 2013]

In other words, instead of saying to ourselves: Hmmm.... it was probably a terrible idea to pile up debt at 2x the rate of income growth, what the world did instead was to double down on that terrible idea and pile on more debt at 5x the rate(!) of nominal GDP growth.

Talk about not learning from your past mistakes....

At any rate, what all of that money printing, lower interest rates and new debt creation did was force capital over the globe to look for some place to go. Absent any really good and creative ideas, that money primarily chased yield. It piled into risk assets like stocks and junk bonds, often in bubble-like fashion (meaning, in haste), and without proper due diligence.

The only way the central bank “strategy” (and we use that word very loosely) could have worked was if very rapid economic growth emerged to justify the accumulated levels of debt, comprised of both old and new borrowing. Central banks were indeed hoping such growth would materialize and lesson the burden of servicing the interest on all that debt.

But that growth, quite predictably (as forecasted by us among many others), did not emerge.

Perhaps Japan’s experience should have tipped the central bankers off as to why not.  For several decades now, Japan has served as a warning: too much debt is the malady, not the cure.

So here we are.  What are we to make of it all?  It's our view that the financial markets are important to monitor because they will signal to us when sentiment has shifted, and let us know in advance that events will unfold at a faster pace.

Judging from the market action over the past month, we think that shift has happened. And we're increasingly concerned that this next ‘correction’ could be pretty rough for a lot of folks.

Bright Red Warning Lights

The global economy is downshifting fast, and there are lots of flashing red warning lights indicating as much.

Doug Noland has captured the emerging market pain caused by the hot money that is now flooding out of those territories, as well as provided a great explanation of the bubble dynamics in play:

The Federal Reserve is flailing and global currency markets are in disarray. Notably, the Brazilian real dropped more than 10% in five sessions, before Thursday’s sharp recovery reversed much of the week’s loss. This week the Colombian peso dropped 3.0%, and the Chilean peso fell 3.1%. The Mexican peso dropped 1.9%.

 

The Malaysian ringgit sank 4.5% for the week, with the South Korean won down 2.7% and the Indonesia rupiah losing 2.2%. The Singapore dollar fell 1.8%. The South African rand sank 4.4% and the Turkish lira fell 1.4%.

 

Notably, market dislocation was not limited to EM. The Norwegian krone was hit for 4.4%, and the Swedish krona lost 2.0%. The British pound declined 2.3%. The Australian dollar also lost 2.3%.

 

The global Bubble is bursting – hence financial conditions are tightening. Bubbles never provide a convenient time to tighten monetary policy. Best practices would require central bankers to tighten early before Bubble Dynamics take firm hold. Central bankers instead nurture and accommodate Bubble excess. It ensures a policy dead end.

 

As the unfolding EM crisis gathered further momentum this week, the transmission mechanism to the U.S. has begun to clearly show itself. While “full retreat” may be a little too strong at this point, the global leveraged speculating community is backpedaling. Biotech stocks suffered double-digit losses this week, as a significant Bubble deflates in earnest. It’s also worth noting that the broader market underperformed.

(Source)

What does it mean when we see currencies in retreat across the globe?  It means that the hot, speculator money is rushing out of weaker economies and back towards the stronger center.  This is consistent with a liquidity crisis, one where all the borrowed money used to spark all those heady asset gains and falling yields on the way out do the exact opposite on the way back.

And Doug is exactly right – there’s never a good time to pop a bubble.  So the central bankers just sit, paralyzed, afraid to even raise rates by a token amount for fear that the daisy-chain of global bubbles will burst as a result. They needn’t fear: the bubbles will burst no matter what the Fed, et al., does.

A credit default swap (CDS) is a bit of insurance you can buy if you own a bond and are worried that the issuer may default on it.  In a stable climate, the cost of that insurance (measured in percentage points above the stated yield on that debt) is pretty flat. It's usually close to the yield of the bond in question.

So you might have to pay 1% to 2% (i.e. 100 to 200 basis points) above the yield on, say a Brazilian ten year bond, to insure it against a default.  As things begin to break down and become less certain, that cost will rise.

Now take a look at this chart of recent emerging market CDS 'spreads':

(Source)

See those CDS ‘spreads’ blowing out to the upside? That’s the sort of thing I was tracking in 2008 that gave me a clear, early warning that things were about to fall apart.  While these levels are not (yet) flashing the same level of danger that we are seeing in the CDS paper for Glencore (which is almost certain to go bankrupt now), or for US shale drillers (tons of bankruptcies coming there, too), these are pretty serious warning signs to see in sovereign debt.

Why would the sovereign debt of Russia, Turkey, Brazil, and Malaysia be spiking right now?  Because the hot money is flooding out of those countries. There's now an elevated risk that they may default on their bonds in the future.

These emerging market countries are being squeezed from every direction. But the worst pain is being experience by those that borrowed heavily in dollars (or other stable currencies).  From the WSJ (Sept 29), we see the magnitude of the predicament for companies located in EM nations:

Developing-country firms quadrupled their borrowing from around $4 trillion in 2004 to well over $18 trillion last year, with China accounting for a major share.

Now, prospects in industrializing economies are weakening fast even as the U.S. Federal Reserve is getting set to raise interest rates for the first time in nearly a decade, a move that will raise borrowing costs around the world.

 

The burden of 26% larger average corporate debt ratios and higher interest rates come as commodity prices plummet, a staple export for many emerging-market economies.

 

Compounding problems, many firms borrowed heavily in dollars. As the greenback surges against the value of local currency revenues, it makes repaying those loans increasingly difficult.

(Source)

So the afflicted countries are going to see vastly weaker exports, plunging currencies, and their local corporations unable to pay off dollar-denominated loans -- on borrowing that ballooned from $4 trillion in 2004 to over $18 trillion just 11 years later.  It’s an amazing statistic, one of many fostered by a cluster of central banks that know everything about blowing bubbles but nothing about ending them.

The punch line from the above article is this: That massive debt build-up means it is “vital” for authorities to be increasingly vigilant, especially to threats to systemically important companies and the firms they have links to, including banks and other financial firms, the IMF said.”

Decoded, that means that $18 trillion is a big number. If even a small portion of that goes into default, it could easily drag down whole swaths of the developed world’s financial corporate structure.  A systemic crisis that would begin on the edge but rapidly spread to the center.

Well, based on the DDBAX ETF which holds bonds priced in local currencies, we can get a sense of the pain those EM companies are feeling which have dollar denominated loans, but conduct business in their local currency:

Ouch!  Based on the above chart, the past year has been painful indeed for those emerging market corporations and governments. No sign of a bottom yet either.

Not So Fast There….

One so-called ‘bright spot’ in the world economy is the US, which supposedly is doing better than everyone else.  As you know, I consider US GDP statistics to be nearly useless because of all the statistical tricks and gimmicks that are now deployed (such as now counting ‘intangibles’ to go along with Owner Occupied Rent which records the price value of people not paying themselves rent, etc.,) to make things look better than they are.

So I’m having trouble believing that the US economy is doing well when our major trading partner to the south is struggling so much due to a huge drop drop in exports:

Mexico factory exports slump by most in over 6-1/2 years in Aug

Sept 25, 2015

 

(Reuters) - Mexico's factory-made exports slumped in August by the most in more than 6-1/2 years after uneven growth in the first half of 2015, data showed on Friday, while consumer imports rose.

 

Manufactured exports sank 7.2 percent in August compared with July, falling back after two months of gains, the national statistics agency said in a statement. It was the biggest month-on-month drop since December 2008, data showed.

 

Mexico exports mostly manufactured goods like cars and televisions and about three-quarters are sent to the United States.

(Source)

It’s hard to imagine that the US economy is doing fine when a major trading partner who exports 75% of its finished product to the US is experiencing a deep export slump.

But it’s not just Mexico that's seeing a big decline in export activity:

For the first seven months of 2015, U.S. exports dropped 5.6% to $895.7 billion. The value of South Korean exports shrank a revised 14.9% in August from a year earlier, the sharpest fall in six years, as shipments to China dropped. Chinese imports in August fell 13.8% in dollar terms from a year earlier, after an 8.1% decrease in July.

(Source – WSJ)

If this keeps up, 2015 will see the worst global trade performance since…wait for it…2008.  For the US, 2015 will be the first year that exports have declined since the financial crisis.  Ditto for a number of other countries.

Beyond exports, the surveys of US manufacturing and service sector activity are also flashing recession warning signs.  In fact, the manufacturing survey has only been this low in the past during prior recessions. Maybe this time is different?

(Source)

On the plus side for the US: reasonably robust housing activity, low initial claims for unemployment, and growing income and expenditures. But the data for some of these is suspect (nearly 100 million working-age adults are not counted in the workforce), and in other areas, not robust enough to hang too many hopes on.

Add it all up, and there are a number of signs that not only is the US economy is far from robust, it may even be teetering on the verge of a recession. But the global economic landscape is decidedly tilted towards contraction, not expansion.

Why is all this important?  Because seeing these signs early enough gives us a better chance to mentally, financially, and physically prepare for the next shock.  The press does a very good job of constantly painting everything in a rosy light, and that’s fine, but it’s not very helpful if it also misleads.

Lots of people are woefully unprepared for what’s coming next. For many it will be a shock.  Not because they couldn’t see it coming years in advance and made their own mental and financial adjustments on their own terms, but because they wouldn’t.  Preferring to avoid an unpleasant truth they put it out of sight and out of mind, hoping that somehow things would work out in their favor.

In Part 2: From Deflation To Hyperinflation, we detail out the likeliest progression of the unfolding deflationary rout and the inevitable tsunami of money printing that the central banks will respond with, unleashing the final hyperinflationary chapter.

Click here to read Part 2 of this report (free executive summary, enrollment required for full access)

 

 

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Thu, 10/01/2015 - 17:36 | 6617959 LawsofPhysics
LawsofPhysics's picture

Bullshit.  Defaltion in plastic toys and financial "products" of mass destruction, sure.  Deflation in the cost (relative to wages) of anything required for a decent standard of living, NO!

Forget the "flation" horseshit.  We are going to be dealing with the death of ALL fiat.

GLOBAL WEIMAR!!!

Hedge accordingly...

Thu, 10/01/2015 - 17:46 | 6618000 LawsofPhysics
LawsofPhysics's picture

All stimulus is in fact fungible.  Much more than a quadrillion paper claims are out there.  They are starting to seek out real assets.

In short.  Fuck you, pay me!!! 

and with something fucking real!

https://www.youtube.com/watch?v=Rqa7Ml_us00

 

 

Thu, 10/01/2015 - 18:18 | 6618143 hobopants
hobopants's picture

Hyperinflation is more of a psychological event than a monetary one. I think he has a point, it won't be a gradual creep in the cost of living that creates a loss of confidence in fiat (people are currently paying for negative rate bonds for christ sakes!). It will be overly accommodative central bank action in response to a collapse in paper asset prices.

Thu, 10/01/2015 - 18:21 | 6618168 nuubee
nuubee's picture

Meh, I like ZH because it does make you consider the risky downside that you never see anywhere else. But trying to predict exactly what and exactly when it will happen is a little like playing roulette in Vegas. You'll waste time, money, and self-respect doing it, so why?

 

Just be solvent in real-money ways as best you can, and try to switch over your income streams to something real. Then get yourself situated so that you can live away from a major population center and preferably someplace where the notion of becoming an international refugee is literally unthinkable, and wait it out. That's all you can do.

Thu, 10/01/2015 - 18:30 | 6618202 cougar_w
cougar_w's picture

There will be no place to hide. The "refugees" will be arriving from the next county over, not across a border or ocean, and they will look just like you and know exactly what you have been up to, including your preps. They will want all the same things you want -- exactly the same -- and most will have recent memories of living very nicely just like you do. The hills will be swarming with armed criminals -- maybe former cops -- looking for bunkers to raid and knowing exactly where the rich recluse move to. As things break or are destroyed in the panic even more people are forced into desperate tactics and the mob swells in size daily, women and children and everyone who can run is on the run, going anywhere or nowhere but on the run.

We are sleep walking into an event horizon. Beyond here there be monsters. 

Thu, 10/01/2015 - 18:37 | 6618245 nuubee
nuubee's picture

You can always live on the ocean. The only refugees you'll deal with in the middle of the pacific are probably going to be whales. If the whole world is at war on land, don't live on land.

Yes, I'm serious.

Thu, 10/01/2015 - 19:38 | 6618482 cougar_w
cougar_w's picture

I am writing a novel. One of the story lines is that there was long ago a floating city created for just that reason near the end of the 12th age of men. It's name was Attalea and the conflict that terminated the 12th age (making room for our own) so was horrific the city was eventually abandoned anyway, giving rise to the myth of the lost city of Altantis. All the people of a later age would ever remember of an entire prior age of human enterprise.

Was a nice place though, Attalea. In its time.

Thu, 10/01/2015 - 21:05 | 6618821 roccman
roccman's picture

And that ain't the half of it.

Lol

Fri, 10/02/2015 - 05:56 | 6619609 CC Lemon
CC Lemon's picture

Imagine life a year or so after such a collapse. The only dudes still alive will be the absolute most ruthless humans.

 

And the elites hiding behind their walls.

 

I'd hide in an underground bunker living off canned beans and crapping in a hole for years just to watch that go down.

Thu, 10/01/2015 - 18:33 | 6618221 random999
random999's picture

ehm... of course its impossible to forsee the future. But when you look around and see the birds dropping dead one by one somehow you can tell the end is nigh.

Id say when there is 90+% chance for recession like it defenitly is now and we already got NIRP/ZIRP around the globe its a good time to start crying wolf.

Thu, 10/01/2015 - 17:52 | 6618034 negative rates
negative rates's picture

I guess it's time to bust out my default watch.

Thu, 10/01/2015 - 17:55 | 6618048 Tallest Skil
Tallest Skil's picture

You wouldn't happen to have a timeframe on this, would you? Even just the start (we're in it right now!), because I'm at the end of my rope right now and a good collapse can't come fast enough. I can't hold on like this much longer.

Just a range; no one can know the exact date.

Thu, 10/01/2015 - 17:58 | 6618059 kaiserhoff
kaiserhoff's picture

Welcome to the club,

  but I'm hoping to see Barry and Ole Yeller at the end of some ropes.

Thu, 10/01/2015 - 19:26 | 6618432 Stormtrooper
Stormtrooper's picture

Me too.  I've still got the video of Saddam dropping thru the platform.  Can't wait to sync videos of Barry and Yeller falling side-by-side with Saddam.

Thu, 10/01/2015 - 18:03 | 6618083 LawsofPhysics
LawsofPhysics's picture

We are now within a year of some major "adjustments".  By that I mean that the dollar could be "adjusted" overnight to 50% of its purchasing power from just 24 hours earlier.

This has happened before with numerous currencies, the major question always is the same; specifically, will the producers of essential commodites and services accept the new exchange rate/value?

If they don't, people will starve by the tens of millions and we get WWIII in earnest.

This is really nothing "unexpected".

Thu, 10/01/2015 - 18:52 | 6618312 A Nanny Moose
A Nanny Moose's picture

Why not nudge it along? Go Galt.

Thu, 10/01/2015 - 19:40 | 6618494 jcdenton
jcdenton's picture

I can give you this. Do what you want with it ..

https://app.box.com/s/hfgvcqg7gqh7i27at6sv53ywu87lwarp

Start with the Wanta discussion 11 minute teaser. Count down 180 days from either 3/24/15 or 4/1/15. In all estimates, give yourself 3% margin of error. If we count from 4/1, then we are t-minus ~6 days ..

Understand, about 1 month ago, Jim Sinclair told Greg Hunter we do not get through Sept. without the Great Reset. Those are Sinclair's sources since at least 1974. And Sinclair states that his sources have never been wrong to date. And he trusts them implicitly ..

Thu, 10/01/2015 - 20:47 | 6618755 MASTER OF UNIVERSE
MASTER OF UNIVERSE's picture

We are hours away from complete implosion, and nuclear World War Three. There is nothing to prepare for except ZOMBIE EMPIRE & nuclear winter. Shit will hit the fan so fast that it will literally make George W. Bush's head spin like Linda Blair in the Exorcist.

 

Make sure to stock up on smokes n' reefers before hand.

Thu, 10/01/2015 - 21:12 | 6618855 roccman
roccman's picture

Major roadway projects in Arizona have another year or two until completion.

We all know roads are for the military.

Thu, 10/01/2015 - 18:04 | 6618085 dimwitted economist
dimwitted economist's picture

oh, come on! Doom and Gloom.. ALL The Fucking Time! you KNOW the smart people are Buying stock Right NOW!

 

QE 4 Begins SOON Bitches!!!!! 

Thu, 10/01/2015 - 18:20 | 6618160 cougar_w
cougar_w's picture

They can't do enough QE4 to make a difference, and they know it. The amount of fiat money set to evaporate is probably north of $20T in the emerging markets alone. Add $20T for US private and municiple debt, and another $20T for EU debts.

The size of the hole needing fill over the next 36 months is staggering. I suspect the entire human world is shortly going to simply fall into that hole and never be seen again. 

Thu, 10/01/2015 - 18:33 | 6618218 dimwitted economist
dimwitted economist's picture

i Hope people are smart enough to Realize my above posting was SARCASM!

 

 

Thu, 10/01/2015 - 19:37 | 6618478 negative rates
negative rates's picture

They all go to church, but can't properly interpret the bible.

Thu, 10/01/2015 - 18:05 | 6618091 Fester
Fester's picture

Ka BOOM not Ka Poom

 

Ka Poom is weak little gay fart that's barely audible.

Thu, 10/01/2015 - 18:40 | 6618262 Lurk Skywatcher
Lurk Skywatcher's picture

Did you hear what happened to the gay magician?

He disappeared with a poof.

 

Thu, 10/01/2015 - 17:39 | 6617980 CHoward
CHoward's picture

I don't see how any thing is going to continue at this rate.  It can't - it's mathematically impossible.  A huge - really really huge - massive reset is definitely in the future.

Thu, 10/01/2015 - 17:46 | 6618014 kaiserhoff
kaiserhoff's picture

The third world really is imploding.  Just fired some tech support from India.  They were arrogant, insolent, and overpriced for what they actually delivered.  Here's the kicker.  What finally did them in, is their delivery times went tea totally to hell.  From talking to a few friends, the basic problem seems to be, they can't keep the power on!

Try running a tech service with no juice. 

Thu, 10/01/2015 - 18:06 | 6618094 kaiserhoff
kaiserhoff's picture

Some confirmation from the Lame Stream Media...

http://www.economist.com/node/21559977

 

Thu, 10/01/2015 - 18:12 | 6618126 Bemused Observer
Bemused Observer's picture

Probably due to "efficiencies" at the power company. Unfortunately it won't be easy to upgrade when the roads start deteriorating due to "efficiences" at the highway dept.

The trappings of the high-tech life are totally dependent on the humble structures everyone is neglecting...Current tech had the good fortune to come after the largest structural build-up in human history. Their ideas could be implemented because everything else was already there just waiting for use.

But all that shit requires maintenance, updating, and THAT has been neglected. Once the infrastructure starts going, the supply-chains start getting cut off. And there is no 'app' for that.

Thu, 10/01/2015 - 17:41 | 6617989 Jackagain
Jackagain's picture

I somehow get the feeling that 401K's and various portfolios are going to be deflated sometime soon...

Thu, 10/01/2015 - 17:48 | 6618019 LawsofPhysics
LawsofPhysics's picture

They already have been, silly muppets, they will continue to deflate.

Thu, 10/01/2015 - 18:14 | 6618135 cougar_w
cougar_w's picture

401K will be Corzined in the middle of the night. No trace left, only an IOU left to draw against some mythical bond in 20 years.

Thu, 10/01/2015 - 18:21 | 6618166 kaiserhoff
kaiserhoff's picture

Well it will be digital.  You won't get a certificate, or paid in real money, or any hope that the first grab is the last...

   yeah, fairy tales.

Thu, 10/01/2015 - 19:40 | 6618493 negative rates
negative rates's picture

Yeah fairy gold bars, here one minute, gone the next.

Thu, 10/01/2015 - 20:22 | 6618642 Jackagain
Jackagain's picture

An 001K.....

Thu, 10/01/2015 - 23:02 | 6619184 tarabel
tarabel's picture

 

 

401Ks will be nationalized. Everyone wil get a monthly check based on the presumed yield out of their stolen money-- but the vanished principal will be taken out of their hands forever. It's simply the largest pot of money left on the planet that hasn't been glommed onto by some government.

Ergo, it will be glommed as a last resort. Unless war comes first.

Fri, 10/02/2015 - 02:10 | 6619458 StychoKiller
StychoKiller's picture

401Ks are MONEY, or are they Munny?  Good luck getting someone to trade food/gas for worthless FRN koopuns!

Thu, 10/01/2015 - 17:44 | 6617994 Gilnut
Gilnut's picture

Fuk 'em all.  Become as self sufficient as you can.  If you can't grow basic veggies and hunt/fish basic foods, buy a fukin book at least, then go shopping.  Having basic tools like shovels, hoe's (not the breathing kind...LOL), fishing equipment, handgun and shotgun, isn't that expensive.  You don't have to become a "prepper" but you damn well better have the tools to survive and know how to use 'em.  For the next decade (maybe longer) you're gonna have to take care of yourself!

Thu, 10/01/2015 - 17:58 | 6618061 djsmps
djsmps's picture

You left out owning gold. You didn't use the phrase "fiat currency".  And no mention of where Gartman stands today.

Thu, 10/01/2015 - 18:05 | 6618086 Gilnut
Gilnut's picture

LOL.  I sense the /s there.   I own some PM's but I don't obsess over 'em.  PM's are a commodity but you can't eat 'em.  I'll place my bets on beans/bullets/knowledge that's what'll get you through.  I personally think this is going to be a "major reset", and all through history the only currency left after a major reset was food.  

Thu, 10/01/2015 - 17:56 | 6618050 hairball48
hairball48's picture

There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.” – Ludwig von Mises

 

I believe there will be deflation first and then high inflation, but not necessarily "hyerinflation". Hyperinflation is a "political" phenomena. I believe Chris is right to this extent. Whatever liquidity exists post deflation will in fact be chasing hard assets, real goods. And so their price(s) will go up. How much?

Who the fuck knows?

 

hairball

Thu, 10/01/2015 - 17:56 | 6618052 djsmps
djsmps's picture

I would celebrate for weeks if there was a little deflation in food prices.

Thu, 10/01/2015 - 18:00 | 6618075 thesheet
thesheet's picture

After watching "the forecaster",  I have this image of armstrong's total collapse date of 2032.x

It suggests they can kick the can down the road 16 more years.

but it appears the die is cast so to speak

what can save us?  artificial intelligence, fusion power,  robotics? 

who knows....   by the time it becomes apparent that you have to save yourself, it will be too late.

it might be that a trip down survivalist lane might be in order someday

 

 

 

 

Thu, 10/01/2015 - 18:05 | 6618093 GeezerGeek
GeezerGeek's picture

There is at least one thing Mexico remains able to export in increasing numbers: people! Maybe if the US wasn't so busy being generous to all the illegal invaders and invited refugees we'd have some money to spend on what Mexico produces, as differentiated from reproduces.

Perhaps they can export wall-building supplies when Trump becomes POTUS.

Thu, 10/01/2015 - 18:23 | 6618176 kaiserhoff
kaiserhoff's picture

Have you been to Orlando recently?

Puerto Rico has to be empty.

Thu, 10/01/2015 - 18:08 | 6618107 Fahque Imuhnutjahb
Fahque Imuhnutjahb's picture

 

 

A 3-D shitshow!!  Deleveraging, Dis-inflation, Demographic headwinds, Default.  Well, that's actually 4-D, now I've

got to locate my special glasses and buy some popcorn, which ironically has increased in price during our "deflation".

Thu, 10/01/2015 - 18:16 | 6618149 Jackagain
Jackagain's picture

A 3D Cinemax meltdown....I can see that....

https://www.youtube.com/watch?v=liX5J4ftTgk

Thu, 10/01/2015 - 18:12 | 6618121 cougar_w
cougar_w's picture

Ka.

No Poom.

We are sleep walking into an event horizon. Our entire human world will be unmade.

Thu, 10/01/2015 - 19:06 | 6618364 Amish Hacker
Amish Hacker's picture

Wouldn't a no-Poom scenario mean that our currency maintains its value/public confidence? The Ka part seems all but certain, given the years of malinvestment, overcapacity and collapsing demand.

I just don't have any idea what might happen after that.

Thu, 10/01/2015 - 19:31 | 6618455 cougar_w
cougar_w's picture

There won't be anything to buy in a collapse. Currency will not be "worthless" it will be "meaningless".

We are conditioned to be consumers. Nobody considers the possibility of there being almost nothing around to consume.

Thu, 10/01/2015 - 21:33 | 6618933 roccman
roccman's picture

Oh there will be plenty to consume. Most spend no time thinking about what that exactly is. It does exist. Ancients have written about it. Hint... It is what makes you dream at night. It is the source of inspiration. And while it can't be taken... Defenses can be pined away to a point where it is essentially given away. Fear and hopelessness are the great caustic agents.

Thu, 10/01/2015 - 19:31 | 6618451 DontWorry
DontWorry's picture

Hope you didn't put much money on that bet, Dawg. These fuckers are going to print hard enough to wake the dead. They'll print like mo'fos, print like mad men, print like fly pimps. Print until their eyes bleed.

They will print via the swaps, via bank bailouts and mergers, via fixed Treasury yields, via real honest-to-God negative interest rates, via loans to banks on no collateral, via payroll tax reductions, and in the end via actual fiat paper instruments which they might very well drop in bails from actual mutherfucking helicopters.

They will not give two figs what anyone thinks.

Here is why.

Because this is the Goddamned end of it my friend. There is no accounting beyond this point. There will be no history of it. No one to take notes of rates of exchange, or of the graft and violence, nobody to worry about the deficit or the GDP or the national debt of any nation large or small under the blazing Goddamned sun.

End. Of. It. Does anyone bitch about how Rome totally debased their coinage at the end? Hell no. But whoever did it had enough to hand and grabbed some land with a nice vineyard and sat back and waited for the Middle Ages to start 700 years further on.

And that's what a singularity is about. Anything that passes through is striped of all meaning. Nothing we think is important now will remain so beyond the event horizon. Nobody will remember, nobody will write about it, nobody will be held to any standard. Ever for evar.

So yeah, they'll print like the mad crazed terrorists they are. Because they have nothing to lose, and maybe something to gain. Maybe a dollar. Maybe a day. Maybe a slim chance to escape with some of the loot. Whatever the fuck advantage they see in it, for themselves and their elite crap wanking buddies, they will full-on-full-time-fucking do it to advantage.

Watch for it, Dawg. It's totally on this time, on like Donkey Kong. And when the dust is settled in a generation hence it's going to have become  another unbelievable episode among the ages of men.

*Greatest ZH post ever - by Cougar W.  Now back to your secheduled DontWorry programming

Thu, 10/01/2015 - 20:17 | 6618658 cougar_w
cougar_w's picture

That was four years ago. It was never a matter of if, only when.

Thu, 10/01/2015 - 18:12 | 6618129 Jackagain
Jackagain's picture

Huge recent layoffs at Caterpillar, HP, Chesapeake Energy, etc. point to deflation even more than those charts.

Thu, 10/01/2015 - 18:17 | 6618154 CheapBastard
CheapBastard's picture

We've seen very serious deflation already in some sectors and there's lots more pain to come. However, in some cities [like Houston] commercial construction costs are up 44% for school buildings! Another sector that's not experiencing deflation is health care where premiums are set to rise substantially this year.

Thu, 10/01/2015 - 18:22 | 6618169 cougar_w
cougar_w's picture

Sector math like that is an illusion. The center cannot hold. Even the Titanic sank in sections for awhile.

Thu, 10/01/2015 - 19:26 | 6618425 yogibear
yogibear's picture

That's why the Federal will set negative rates and print with title-waves of printing.

QE and debt to infinity until something breaks.

Debt caused these problems and now more debt.

The dollar is what breaks. 

The Fed minions will have to choose between a saving the currency or the stock market.

There is a price to pay for the Fed's recklessness.   

Japan will be the canary in the coal mine.  

Thu, 10/01/2015 - 19:45 | 6618520 negative rates
negative rates's picture

Except the fed can't break the dollar, and the mkts can break the fed, now if the mkts can back the dollar, the other currencys are truely fucked over any and every porn star willing to take them for the ride of their life.

Thu, 10/01/2015 - 20:54 | 6618781 Burticus
Burticus's picture

"I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around the banks will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered." – Thomas Jefferson

...but the (not really) Federal (with no) Reserve couldn't see this coming.

Thu, 10/01/2015 - 21:02 | 6618808 moneybots
moneybots's picture

"this epic debt bubble will ultimately burst first by deflation (the "Ka!") before then exploding (the "Poom!") in hyperinflation due to additional massive money printing efforts by frightened global central bankers acting in unison. First an inwards collapse, then an outwards explosion."

 

The collapse is the reset.  Then the next cycle begins.  The U.S. did not hyerinflate in 1933.

Fri, 10/02/2015 - 06:41 | 6619646 Raoul_Luke
Raoul_Luke's picture

True, but there weren't $100 trillion in entitlement liabilities due in 1933.  That can't be funded through either borrowing or taxing.  So it will be funded by Fed "helicoper money."  The reason we didn't get hyperinflation with all the QE to date is the lack of a transmission mechanism to get it into the general economy.  It stayed in the banking sector so the inlation occurred only in financial assets, high end real estate, and collectables  (investments).  Once they start by-passing the banks and doing QE "for the people" hyperinflation will be the result.

Thu, 10/01/2015 - 21:06 | 6618827 moneybots
moneybots's picture

"Lots of people are woefully unprepared for what’s coming next. For many it will be a shock.  Not because they couldn’t see it coming years in advance and made their own mental and financial adjustments on their own terms, but because they wouldn’t."

 

There is no preparing for this. 

25% are paying half or more of their income in rent.  We have been in a depression since 2008.

Thu, 10/01/2015 - 21:44 | 6618968 stock market loser
stock market loser's picture

Cougar makes bill holter look like an optimist. 

Fri, 10/02/2015 - 09:37 | 6620269 Zero-Hegemon
Zero-Hegemon's picture

"First an inwards collapse, then an outwards explosion. Ka-Poom!"

That's what you call an "implosion". Bullish!

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