Perfect Storm!?

Tyler Durden's picture




 

Submitted by John Rubino via DollarCollapse.com,

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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Thu, 01/07/2016 - 14:57 | 7012843 TurnwiseWiddershins
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"then I guess I'll have to use bitcoin."

Many of us will choose to use our guns instead.

Thu, 01/07/2016 - 14:29 | 7012644 silverer
silverer's picture

Are we at that point?

https://en.wikipedia.org/wiki/Joseph_Tainter

If not, we are surely on its edge.

 

Thu, 01/07/2016 - 14:29 | 7012647 Bastiat
Bastiat's picture

Somebody on zh yesterday or the day before was saying:  Dow +400 on Thursday . . .  looks like they got the sign wrong. Divination is some tricky stuff.

Thu, 01/07/2016 - 14:34 | 7012681 Soul Glow
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It was Hitlery.  He said +400 everyday this week.  I think he has tourettes.

Thu, 01/07/2016 - 15:32 | 7012842 Bastiat
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The PPT will be doing an impressive job if they can fend off a 200pt waterfall into the close.

Waterfall protection team.

Thu, 01/07/2016 - 14:59 | 7012862 Winston Churchill
Winston Churchill's picture

He would make more sense if he did.

Thu, 01/07/2016 - 15:25 | 7013024 Implied Violins
Implied Violins's picture

Fuckin' A.

Thu, 01/07/2016 - 14:50 | 7012800 Automatic Choke
Automatic Choke's picture

crystal balls ain't what they used to be.   (and it is hard to get the right batteries for them)

Thu, 01/07/2016 - 14:33 | 7012655 Sinnedi
Sinnedi's picture

There is mass propaganda on all social media to divide and conquer all types of citizens

I feel like we are in 39 of the ww2 era.

Everyone be safe this has been planned for a long long time.

Take care of those who fall and rise up when the need arises fight against the corruption of the govt and the esoteric elite.

Let all secrets be known

All people will be under one order after this.

"The Third World War must be fomented by taking advantage of the differences caused by the "agentur" of the "Illuminati" between the political Zionists and the leaders of Islamic World. The war must be conducted in such a way that Islam (the Moslem Arabic World) and political Zionism (the State of Israel) mutually destroy each other. Meanwhile the other nations, once more divided on this issue will be constrained to fight to the point of complete physical, moral, spiritual and economical exhaustion…We shall unleash the Nihilists and the atheists, and we shall provoke a formidable social cataclysm which in all its horror will show clearly to the nations the effect of absolute atheism, origin of savagery and of the most bloody turmoil. Then everywhere, the citizens, obliged to defend themselves against the world minority of revolutionaries, will exterminate those destroyers of civilization, and the multitude, disillusioned with Christianity, whose deistic spirits will from that moment be without compass or direction, anxious for an ideal, but without knowing where to render its adoration, will receive the true light through the universal manifestation of the pure doctrine of Lucifer, brought finally out in the public view. This manifestation will result from the general reactionary movement which will follow the destruction of Christianity and atheism, both conquered and exterminated at the same time." 4

 

http://www.manlyphall.org/text/the-lost-keys-of-freemasonry/chapter-iv-t...

The lost key to their grade is the mastery of emotion, which places the energy of the universe at their disposal. Man can only expect to be entrusted with great power by proving his ability to use it constructively and selflessly. When the Mason learns that the key to the warrior on the block is the proper application of the dynamo of living power, he has learned the mystery of his Craft. The seething energies of Lucifer are in his hands and before he may step onward and upward, he must prove his ability to properly apply energy.

Thu, 01/07/2016 - 14:31 | 7012656 E.F. Mutton
E.F. Mutton's picture

Yahoo Biz says this is a foreign problem, and everything here is just ducky.  They couldn't print it were it not true, right?

Thu, 01/07/2016 - 14:37 | 7012702 RiverRoad
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Recent Fed rate hike was gamed to make China go first so we could blame it all on them.  BTW the Fed's been "printing" a lot of stuff that ain't true.

Thu, 01/07/2016 - 14:32 | 7012661 Seasmoke
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What would Hank Paulson do ???

Thu, 01/07/2016 - 14:40 | 7012722 chunga
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His buddy Hank Greenberg just threw 10 million at Jeb Bush. Strange huh?

Hank Greenberg Gives $10 Million to Super PAC Backing Jeb Bush

http://www.wsj.com/articles/hank-greenberg-gives-10-million-to-super-pac...

Thu, 01/07/2016 - 14:59 | 7012859 wee-weed up
wee-weed up's picture

Ha! He just might as well have flushed that $10 million down the toilet.

Thu, 01/07/2016 - 15:28 | 7013041 Demdere
Demdere's picture

Do you think that a person becomes a $Baire with a mind that impuslively donates $10M to a political candidate?

I don't think any group of people is particularly special, so we can expect $Bs to have the usual range of mental disorders, but it doesn't including signiing checks without considerable thought and discussion with their crowd.

Assume, instead, it is sane.  Rethink, what could that mean about Jeb's real prospects?  and then the others?

Thu, 01/07/2016 - 14:40 | 7012726 stocktivity
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punt

Thu, 01/07/2016 - 14:34 | 7012673 sheikurbootie
sheikurbootie's picture

The economy sucks ass!  Why do the talking heads and MSM still keep insisting all is well?  I have many, many business friends that have lost their jobs forever.   The faux retail bullshit has got to stop.  The stock market is 50-80% overpriced.  Has the government stopped printing 33% more money than it earns?  Why the fuck is this collapse a mystery?

Thu, 01/07/2016 - 14:35 | 7012680 e_goldstein
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No, the collapse of 2008 and the fact that they never cleared out the fraud is the catalyst for the shit storm that is going on now.

Thu, 01/07/2016 - 14:34 | 7012685 nooneshome
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Darn no ASE proofs from uncle sam this year... crap.  Of course they are out os silver anyway.

Thu, 01/07/2016 - 14:35 | 7012686 Bastiat
Bastiat's picture

I get the image of Yellen like an upturned beetle, limbs flailing.

Thu, 01/07/2016 - 14:40 | 7012727 RiverRoad
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Kafkaesque fer sure.

Thu, 01/07/2016 - 19:06 | 7014287 SgtShaftoe
SgtShaftoe's picture

Only if she turns into the beetle.  That would be precious.

Thu, 01/07/2016 - 15:35 | 7013096 Demdere
Demdere's picture

Why?  You think she is failing?  Why?

If we have seen this coming for the last 30 years, do you not think they did also?  I doubt they can do timing any better than anyone else, but look at the sequence : study after study saying it was time to raise rates, despite massive contrary evidence.  So they raise rates a bit, and China continues to crash and how it hits this country.

And what next?

Again, 9/11 is the context and the fact so many of our leaders will hang if they lose power.  They haven't forgotten that.  Yellen is aware.

Rethink.  They aren't omnicient, but they are no dumber than we are at the highest levels, and what appears to be stupidity can be a different plan.  E.g. the ME war has done nothing right, but it kept expanding the war, obviously the Israeli's Greater Israel strategy.

I don't see what the plan is, but there are many, and all the financial news is more propaganda covering those.

Yellen is NOT FAILING, tho I don't see what the measure of success might be.  Unless the crisis can be used to consolidate Israeli-Neocon political power further.

Thu, 01/07/2016 - 16:02 | 7013224 Bastiat
Bastiat's picture

Sometimes I see it your way: it's all a big plot and they know just what they are doing.  Sometimes I think they are self-decieved arrogant and deluded like the Nobel prize winners behind LTCM.   Maybe both are true--the deep plotters know what they are doing and anyone we see is in the second group?  I don't pretend to know.

Thu, 01/07/2016 - 23:23 | 7014888 Demdere
Demdere's picture

Yes, it is multiple conspiracies going on simultaneously.  Conspiracy is how everything in human affairs happens, from 2 members of a family discussing how to convice a thrid to two people over lunch discussing how to convince their boss.

And 9/11 was long in the planning, and there was a setback when the Israeli company didn't get the security contract, it took another 10 years.

And LTCM is probably several layers deep also.  I bet some of those guys made major fortunes, even with the crash.

But the FED surely can't believe the Keynesian nonsense, I don't care how deep the BS is, Yellen can't believe it, it doesn't fit reality.  It is a convenient political fiction, people in academia may believe it, and people like nakedcapitalism.com, but nobody off Wall Street.  Politicians don't count, of course.

Not to say that Wall Street or anyone else is omnicient, but we know they play games, so certainly should inspect all of the 'news' from as many angles as possible, and cross-check with as many solid facts as possible.

So they can't control everything, and not long-run, but they have a lot of control of timing of big events, and now with the various market control committees much more than that day-to-day.  Kleptocracy layered over everything, skimming every transaction, the result of farming government, patient investment in the political system over many years.  With the result that AIPAC and other oligarchs own Congress and major bureaucracies.

In general, the news is not just news, it is framed and filtered to put some understanding into the reader/viewer's mind, and thinking about what that is and what it means is necessary to get at the hidden connections that are likely not to be in citizen's interests, otherwise they wouldn't need to be hidden, to get past the lies, ditto or they wouldn't need to lie.

Added later : And of course, the oligarchy and gov is not monolithic, and different groups are partially in opposition and partially cooperative.  Just watching Sibel Edmonds and Corbett, all of the various groups and their relationships, very complex.  OTOH, $100B in heroin trade is a unifying factor, an organizing factor.

Thu, 01/07/2016 - 14:35 | 7012687 RSDallas
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What do you mean you can't trace this back to anything? ??  This is simply what was bound to happen at some point when you try to centrally plan the business cycle with an attempt to protect the losses from the criminal irresponsible banking cartel.  PERIOD!  

Thu, 01/07/2016 - 14:36 | 7012690 Two Theives and...
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Popcorn ready for the 3:30 EST ramp attempt....today would be some really heavy lifting!!

Thu, 01/07/2016 - 15:47 | 7013151 Shleprock
Shleprock's picture

Ramping Hard... no problems here!!

Thu, 01/07/2016 - 14:36 | 7012693 bruinfan
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Um, there was a single catalyst. The China stock market crash that started in June 2015.

Thu, 01/07/2016 - 15:48 | 7013155 Amish Hacker
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Or maybe the meeting on Jekyll Island, Georgia, in Novemeber 1910, where seven people plotted the course that the global economy would take for the next century.

Thu, 01/07/2016 - 14:37 | 7012705 Librarian
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We have yet to see a full demonstration of the collective operation of the dozen or so significant central bank currency swap lines that have been set up since 2008.  This will be Bernanke's legacy in the history books, whether or not they can actually prevent the solvency crisis from happening.

There's not much to do at this point but to sit back and watch.

Thu, 01/07/2016 - 14:37 | 7012707 Lost in translation
Lost in translation's picture

Rockin' comments in here.  Bad as the world SitRep looks, you guys always encourage me.  Many thanks...

Thu, 01/07/2016 - 14:40 | 7012721 Spungo
Spungo's picture

Fuck gold. I'm long TeslaCoins.

Thu, 01/07/2016 - 14:45 | 7012761 Jacksons Ghost
Jacksons Ghost's picture

They will attempt to print their way out, and for longer than we can guess it will work. The Dollar will be the nicest turd in the bowl for a long time.

All they are trying to do is outlast evry other currency.

Sadly they are winning.

Thu, 01/07/2016 - 14:45 | 7012764 youngman
youngman's picture

I think the money is just sitting and watching...no one is in the casino right now....even the HFTS are not playing.....everyone is scared to play...

Thu, 01/07/2016 - 14:54 | 7012825 Automatic Choke
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don't be so sure....it will be 2008 all over again, since quite a bit of the recent loose money was tied up in collateralized notes which have unfortunately come back into fashion.  if your memory stretches back a few years, the real panic was that once the CDOs started looking thin, nobody knew what anybody else had.  lots of cash out there, but all tied up in cross-investments, and no clean way to unwind.  vapor-money, taken out of available liquidity.

 

Thu, 01/07/2016 - 14:45 | 7012766 A Lunatic
A Lunatic's picture

It's the economy stupid......

Thu, 01/07/2016 - 14:48 | 7012778 sheikurbootie
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Headlines on Yahoo Finance

The stock selloff is happening in a parallel universe It has almost nothing to do with the U.S. economy, which is doing pretty well.

 

Stupid fucks

Thu, 01/07/2016 - 14:53 | 7012814 lasvegaspersona
lasvegaspersona's picture

Yep, that's what I hear on the radio too...every thing is doing well. Real estate is improving. The economy is getting better. Heard that just this morning...ffs...people still believe the government, even some of my favorite right wingish talkers. They just won't look beyond the headlines.

Thu, 01/07/2016 - 15:50 | 7013168 YouThePeople
YouThePeople's picture

Yahoo's idea of sound financial news and advice is 'Business Insider'.

 

Stooopid fucks

Thu, 01/07/2016 - 14:48 | 7012780 lasvegaspersona
lasvegaspersona's picture

The underlying problem is in the dollar itself. It is failing as a universal medium of exchange. Few can understand how this is even possible but a great lesson is about to be learned and new insights into the very essense of money are about to come into view.

The medium of exchange and the store of value function do not HAVE to be housed in the same unit. This is the way we have operated for hundreds of years and this way is so well established that few even think about it. Some great monetary thinkers have done this thinking however. The result will be the continuation of fiat currencies but this time there will be a real and effective counter to the limitless printing of fiat...gold.

In the gold standards of the past, governments would decree the currency value of gold and effectively freeze gold's price so that it failed to function as an indicator of the currency's value. By using gold on the central bank balance sheet and allowing the market to determine the price of gold, the market also determines the gold price of the currency. The ECB already uses this approach.

The beauty and power of this method is so great that it must come into being. It is not worth campaigning for, it does not require signatures and elections. It will happen when this current system fails. Those who can understand this will position themselves for a one time windfall. After that I believe we will finally have a solid stable monetary system. The transition will be brutal however. Hold on. Buy physical gold.

Thu, 01/07/2016 - 14:48 | 7012781 CosmicDebris
CosmicDebris's picture

Hmmm...yeah...I'm gonna go ahead and say 2008 and the eternal can kicking is gonna go ahead and be the reason, plus free money spigot drying up.

Thu, 01/07/2016 - 14:49 | 7012783 Be_Optimistic
Be_Optimistic's picture

I think the problem will be that a gold sell off will occur because people need cash.

Thu, 01/07/2016 - 17:53 | 7013938 kiwimail
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B_O  I would agree but for my concern for bank failures.  Bank shares are a large part of the market and as prices fall there will be increasing concern for their stability.  I think once people start to worry about the banking system PMs will explode upward.

Thu, 01/07/2016 - 14:50 | 7012785 jakesdad
jakesdad's picture

'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'

I've been wondering about this - how much are etf(s), index funds & other abstraction vehicles preventing panic from really setting in?  in my copious free time (ha, ha) I've been meaning to play w/modeling what I'd expect to happen as more & more $ is plowed into aggregates relative to people directly trading in the underlying referenced securities.  haven't worked the math out to my satisfaction yet but my intuitive guess is I'd expect it to somewhat resemble the old mbs/cdo rationalization:  "sure, THIS brick may be brittle/defective/worthless but if we stack four BILLION of them into an eight story building the whole building can't collapse!"

 

guess I know what I'll be doing this evening...


Thu, 01/07/2016 - 15:08 | 7012914 Winston Churchill
Winston Churchill's picture

You think the underlying ETF assets haven't been rehypothecated like the mortgages were ?

I have a nice tower for sale in Paris, you might be interested in .

Leopards don't change their spots.

Thu, 01/07/2016 - 14:49 | 7012787 Vuke
Vuke's picture

A personal anecdote.  I happened to land in Fiji for a vacation just as the Fijan currency collapsed.  Nobody knew the price of anything, no one was paying (except me for awhile) the posted hotel rates.

In fact, I could have bought that beautiful building with a small bag of gold coins! True story and since that experience I've been long gold and silver.

Thu, 01/07/2016 - 14:49 | 7012788 Vuke
Vuke's picture

A personal anecdote.  I happened to land in Fiji for a vacation just as the Fijan currency collapsed.  Nobody knew the price of anything, no one was paying (except me for awhile) the posted hotel rates.

In fact, I could have bought that beautiful building with a small bag of gold coins! True story and since that experience I've been long gold and silver.

Thu, 01/07/2016 - 14:53 | 7012813 Bastiat
Bastiat's picture

In Weimar, near the end, you could have bought a city block with that small bag.

Thu, 01/07/2016 - 16:24 | 7013381 Vuke
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Thanks Bastiat, but I have too much property already, The bag is a reserve for the trials of age.

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