Perfect Storm!?

Tyler Durden's picture

Submitted by John Rubino via,

One of the (many) fascinating things about this latest global financial crisis is that there’s no single catalyst. Unlike 2008 when the carnage could be traced back to US subprime housing, or 2000 when tech stocks crashed and pulled down everything else, this time around a whole bunch of seemingly-unrelated things are unraveling all at once.

China’s mal-investment binge is crashing global commodities, an overvalued dollar is crushing emerging markets (most recently forcing China to devalue), the pan-Islamic war has suddenly gone from simmer to boil, grossly-overvalued equities pretty much everywhere are getting a long-overdue correction, developed-world political systems are being upended as voters lose faith in mainstream parties to deal with inequality, corporate power, entitlements, immigration, really pretty much everything. For one amusing/amazing example of the latter problem, consider Germany’s response to the mobs of men that suddenly materialized and began molesting women: Cologne mayor slammed after telling German women to keep would-be rapists at arm’s length.

Why do causes matter at times like this? Because where previous crises were “solved” with a relatively simple dose of hyper-easy money, it’s not clear that today’s diverse array of emerging threats can be addressed in the same way. Interest rates, for instance, were high by current standards at the beginning of past crises, which gave central banks plenty of leeway to comfort the afflicted with big rate cut announcements. Today rates are near zero in most places and negative in many. Cutting from here would be an experiment to put it mildly, with myriad possible unintended consequences including a flight to cash that empties banks of deposits and a destabilizing spike in wealth inequality as negative interest rates support asset prices for the already-rich while driving down incomes for savers and retirees.

And with debt now $57 trillion higher worldwide than in 2008, it’s not at all clear that another borrowing binge will be greeted with enthusiasm by the world’s bond markets, currency traders or entrepreneurs. Here’s that now-famous chart from McKinsey:

Global debt McKinsey

Easier money will have no effect on the supply/demand imbalance in the oil market, which is still growing. The likely result: Sharply lower prices in the year ahead, leading to a wave of defaults for trillions of dollars of energy-related junk bonds and derivatives.

As for stock prices, in the previous two crises equities plunged almost overnight to levels that made buying reasonable for the remaining smart money. Today, virtually every major equity index remains high by historical standards, so the necessary crash is still to come — and will add to global turmoil as it unfolds.

The upshot? It really is different this time, in a very bad way. And this fact is just now dawning on millions of leveraged speculators, mutual fund and pension fund managers, individual investors and central bank managers. Right this minute virtually all of them are staring at screens, scrolling over to the sell button, hesitating, pulling up Bloomberg screens showing how much they’ve lost in the past few days, calling analysts who last year convinced them to load up on Apple and Facebook, getting no answer, going back to Bloomberg and then fondling the sell button some more. Think of it as financial collapse OCD.

What happens next? At some point — today or next week or next month, but probably pretty soon — the dam will break. Everyone will hit “sell” at the same time and find out that those liquid markets they’d come to see as normal have disappeared and yesterday’s prices are meaningless fantasy. The exits will slam shut and — as in China last night where the markets closed a quarter-hour into the trading session — the whole world will be stuck with the positions they created back when markets were liquid and central banks were omnipotent and government bonds were risk-free and Amazon was going to $2,000.

And one thought will appear in all those minds: Why didn’t I load up on gold when I had the chance?

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LawsofPhysics's picture

Dump those treasuries China!  let's see who really has the greater "mal-investment".

I triple dog dare you!!!

Flatchestynerdette's picture

Bloomberg reported some selling of Treasuries but that didn't last long before T's found buyers.

El Vaquero's picture



Is it time to break out the "DOW 10,000" hats yet?

stocktivity's picture

Wouldn't surprise me to see the PPT turn this green by days end.

undertow1141's picture

I am betting on fresh lows for the day, PPT push eaten quickely by sellers looking for the doors at any price.

undertow1141's picture

Didn't get my fresh lows, but that bumpy ass 3:30 ramp shows you the law of diminishing returns is in full effect.

Newsboy's picture

Why didn't I pay off the Visa card when I had the chance?

Oh, yeah...

markpower49's picture

Western women support big daddy govt and deserve to be raped by a Muslim or black.

wanderer9641's picture

That is a horrible comment - Nobody deserves to be truly raped. - they may deserve to be penniless because they sucked off the government tit until it went dry but that is about it.

Optimusprime's picture

You are wrong.  But thanks for at least acknowledging, unlike the cowardly opportunist Rubino, that the rapists and attackers were indeed nonwhite "refugees" (I prefer "invaders").

Boris Badenov's picture

They will dump treasurys when they are done devaluing, so they can get the max amount of renminbis. 

LawsofPhysics's picture

yes, but like the Fed, it won't matter at that point as no one will be accepting any fiat...

Several chances to properely revalue, clear bad debt, and prosecute the fucking fraud, for numerous governments, have come and gone.

Boris Badenov's picture

India and Russia said they would. The renminbi anyway.

ThroxxOfVron's picture

"Dump those treasuries China!  "


They are. 

At the present redemption/sale rate China will liquidate half of present reserves in 15 months...

LawsofPhysics's picture

15 months will give the Fed, the primary dealers, and their political puppets in D.C. plenty of time.

Their holdings will easily be more than covered by the new myIRA bond that 401k sheep will be mandated to buy/own.

The fireworks for 'merica start after the next "election" cycle for a variety of reasons.

Bastiat's picture

  Why didn’t I load up on gold when I had the chance?


There's always a chance: load up, baby.

Soul Glow's picture

There is always a chance and it is called silver.

silverer's picture

Yeah.  That, too.  Don't forget toilet paper.

The Longest Call's picture

That's what the excess liquidity is for

El Vaquero's picture

In my experience, when there is excess liquidity, you use less toilet paper.

TheDanimal's picture

If you've got the balls, and ability, I bet weed prices will go through the roof as things deteriorate. Saving my good seeds :)

Bastiat's picture

Who wants the munchies when there's nothing to eat?

WillyGroper's picture

Maybe their fescue needs mowing.

Good warm up for what's to come.

Vlad the Inhaler's picture

Save money, wipe with hand.

Consuelo's picture

Uncle Jim Willie's interviews with Will Lehr are the best ---

WillyGroper's picture

his interview today said the tbtf banks are absorbing the treasury dump.

what happened to belgium?

LawsofPhysics's picture

Fuck that. Get physical (and productive) assets of all kinds and a dependable tribe of like-minded family/employees and get on with your life.

As an attorney you already know that even in good times possession is the majority of the law.

When FRAUD is the status quo (like now), possession is the only thing that matters.

Herd Redirection Committee's picture

I've heard some sheep baah "Why now?  Whats happened?"

I told them "Crisis 7 years ago WAS NOT RESOLVED.  It was just delayed.  The old kicking the can down the road.  A handful of people (central bankers) have inordinate amount of power, and because they were the ones who delayed the crisis, it gives them the power to stop delaying it further as well.  I.E. they can cause the crisis to re-emerge at the time of their choosing."

And that, my friends, is what we are currently experiencing. (comment was already posted in 'China Matters' thread)

Bastiat's picture

I shut up about this until the last 6 months but I've been saying it loud, clear and wide, since then.  I noticed by the reactions, people know at a gut level and it's getting conscious.

Herd Redirection Committee's picture

Yeah, I admit I thought the crash was coming back in September, but then again, thats when the Fed SAID they would hike rates.  They postponed the rate hike, and the crash right along with it.

And in Wall St, being early is being wrong.  But if you remember all that 'Shemitah' talk, it looks like the big boys were worried TOO MANY people were ready for it, so they had to do another round of fleecing/building complacency.  Here we are 3 months later.

WillyGroper's picture

can't tell you how many people have jumped down my throat & accused me of crying wolf.

i can hear it is the broken clock analogy.

after they pick up their cd scattered brains, i imagine the phone will ring off the hook.

that is, until i take it off the hook.

don't relish witnessing folks hair on fire.

. . . _ _ _ . . .'s picture

It looks like the US congress have chosen sanctions against China for N. Korea's nuclear grand-standing.

I don't think that will help matters.

Kayman's picture

 "there’s no single catalyst."

Then he goes on to cite the Central Bankers.  In the short run Central Bankers can move prices on debt, stocks and commodities, but they cannot print the conditions that create well-paying private sector jobs. And that is the fatal error.  More social division- the filthy wealthy are filthier and the middle class (the ones that matter-the private sector) are long ago dead.

Thanks Fed. 

Consuelo's picture

Watch how fast these 'crashing global commodities' reverse when it becomes apparent in a flash of mental clarity, that there is no choice for the Fed but to 'inflate or Die' and the rapid chase for anything of tangible value ensues.

Kayman's picture


Is the Fed going to buy all the excess capacity in China ?  Are they going to start storing stuff in warehouses ?  Or are they just going to help jack up costs for producers that can't sell their products.

Unless they go Weimar, the Fed's last 7 years is not going to be repeated. 

Consuelo's picture



Is the (now proven) politically-motivated Federal Reserve going to sit idly by (during a presidential election cycle, no less) and watch social unrest ensue as a result of not doing whatever it takes to boost (or keep levitated) key asset prices that are proxy for economic 'health' - i.e., housing, and/or whatever else...?


Demdere's picture

Ask the Israeli-Neocons.

Everyone wants to separate 9/11 FF from other things and just get on with it. But our ruling elites have several problems facing them, and the economy is the least of those.  Do you think they didn't see this coming?  Middle America and pension funds are being wiped out, but not anyone with any brains on Wall Street.

Keeping their heads attached to their bodies I think is a much larger concern for everyone in power.  If peace, they will be tried and executed.

They have a problem holding on to power as everyone understands 9/11 FF and all the implications.  The country is clearly building up to overthrowing AIPAC and Neocons and restoring rule of law.

Israeli-Neocons do not care D vs R, all of the candiates except for possibly Sanders and more definitely Rand are firmly in their camp and they own the bureaucracies and military.  Trump also, from the evidence, and words.

Everyone underestimates how much control of political opinion they have, all the while ignoring the fact that 9/11 FF is not a political issue 14 years after the event that changed history and stamped Israeli-Neocons as the new owners of America.  Netanyahu's 27 standing ovations were another rather strong indications, I thought.

So how do they play this for Israeli-Neocon advantage?  At min, it is a convenient distraction while they finish disassembling all social and political structures in the ME and overwhelm Europe's systems with refugees and FF terrorism.

Not the standard frame.

SgtShaftoe's picture

Reading your post made me daydream of a bunch of guys in suits going up to a congressman in the halls of congress: "Sir, you are under arrest for conspiracy to commit murder, sedition and acting as a foreign agent for Israel, etc. etc.  Come with us please." repeated over and over and over, until you could hear a worm fart in DC. 

People have to have dreams right?

KnuckleDragger-X's picture

The next round of QE will actually have a negative effect, which of course means they'll make it a big one. It can't go on, but it can't be stopped. We are sooo fucked........

wmbz's picture

Well, I just heard a "news repeating" Bimbo on the radio say that "the water cooler talk" on w street was that this was just some maket jitters.

Due to some talk of regime change in China.

So, nothing to worry about...carry on!  BTFD!

XRAYD's picture

Yes .. many things are going wrong, but there is ONE cause - The FED!

KnuckleDragger-X's picture

Not just the Fed, but all CB's. The problem now is China is breaking the paradigm in order not to wind up with a revolution on their hands.....

TurnwiseWiddershins's picture

200,000,000+ sexually frustrated males, most breaking their backs only to live in or near poverty. 

China will have their turmoil one way or the other.

Implied Violins's picture

No, this is all part of the plan. Add the Yuan to the SDR; show how fucked up it is to rely on the dollar; dump securities to cover your losses and to weaken the dollar; depeg from the dollar; announce to the world that you're sitting on at least 30,000 tons of gold; back the Yuan with it; say good-bye to the dollar as a reserve currency. Pure globalist script.

__Usury__'s picture
__Usury__ (not verified) Jan 7, 2016 2:28 PM

''As long as you guys continue to use compounding interest you will get a balloon payment at the end, last one cost 100+ million lives this one will well north of a billion or two.

Why let this one collapse when the function of the system is to expanded as far as you can?  The markets will work and liquidate the unfunded liabilities, no need to worry there. 

The whole system is a fraud and has been since the beginning, now as it is starting to collapse you see the fraud, what do the stupid humans want to do .... well start a new system just like the old system.''


DetectiveStern's picture

Cashless society and negative interest rates. What a lovely fucking situation were going to find ourselves in if the world carries on as it is. I'm not a massive fan of bitcoin but if I'm forced to keep cash in a bank and motherfuckers want to take part of money from me every month FOR NO GOOD FUCKING REASON then I guess I'll have to use bitcoin.