Stockman: "At Last The Tyranny Of The Global Financial Elite Has Been Slammed"

Tyler Durden's picture

Submitted by David Stockman of ContraCorner

Bravo Brexit!

At long last the tyranny of the global financial elite has been slammed good and hard. You can count on them to attempt another central bank based shock and awe campaign to halt and reverse the current sell-off, but it won’t be credible, sustainable or maybe even possible.

The central bankers and their compatriots at the EU, IMF, White House/Treasury, OECD, G-7 and the rest of the Bubble Finance apparatus have well and truly over-played their hand. They have created a tissue of financial lies; an affront to the very laws of markets, sound money and capitalist prosperity.

After all, what predicate of sober economics could possibly justify $10 trillion of sovereign debt trading at negative yields?

Or a stock market trading at 24X reported earnings in the face of a faltering global economy and a tepid domestic US business cycle expansion which at 84 months is already long in the tooth and showing signs of recession everywhere?

And that’s to say nothing of the endless ranks of insanely over-valued “story” stocks like Valeant was and the megalomaniacal visions of Elon Musk still are.

So there will be payback, clawback and traumatic deflation of the bubbles. Plenty of it, as far as the eye can see.

On the immediate matter of Brexit, the British people have rejected the arrogant rule of the EU superstate and the tyranny of its unelected courts, commissions and bureaucratic overlords.

As Donald Trump was quick to point out, they have taken back their country. He urges that Americans do the same, and he might just persuade them.

But whether Trumpism captures the White House or not, it is virtually certain that Brexit is a contagious political disease. In response to today’s history-shaking event, determined campaigns for Frexit, Spexit, NExit, Grexit, Italxit, Hungexit and more centrifugal political emissions will next follow.

Smaller government—–at least in geography—–is being given another chance. And that’s a very good thing because more localized democracy everywhere and always is inimical to the rule of centralized financial elites.

The combustible material for more referendums and defections from the EU is certainly available in surging populist parties of both the left and the right throughout the continent. In fact, the next hammer blow to the Brussels/German dictatorship will surely happen in Spain’s general election do-over on Sunday (the December elections resulted in paralysis and no government).

When the polls close, the repudiation of the corrupt, hypocritical lapdog government of Prime Minister Rajoy will surely be complete. And properly so; he was just another statist in conservative garb who reformed nothing, left the Spanish economy buried in debt and gave false witness to the notion that the Brussels bureaucrats are the saviors of Europe.

So the common people of Europe may be doubly blessed this week with the exit of both David Cameron and Mariano Rajoy. Good riddance to both.

Spain's Mariano Rajoy and Britain's David Cameron in September 2015

At the same time, the anti-Brussels parties of both the left (Podemos) and the right (Ciudadanos) are certain to make further gains. But even then, Spanish politics will remain splintered and paralyzed. There will emerge no government strong enough or willing enough to execute Brussels’s inevitable dictates in the event that drastically over-valued Spanish bond market goes into a tailspin and requires another EU intervention.

And that’s the next leg of the Brexit storm. To wit, sovereign bond prices throughout Europe have been lifted artificially skyward by the financial snake-charmers of Brussels and the ECB. The massive rally in Spain’s 10-year bond after Draghi’s “whatever it takes” ukase was not due to Spain becoming more credit worthy or the fact that its unemployment rate has dropped from 26% to a mere 20%.

The whole plunge of yields from 7% to a low of 1% about a year ago was due to a front-runners’ stampede. That is, the fast money crowd was buying on repo what the ECB promised to take off their hands at ever higher prices in due course. They were shooting the proverbial ducks in a barrel.

But as global “risk-off” gathers worldwide momentum, look-out below. There will be no incremental bid from Frankfurt for a flood of carry trade unwinds. That’s because the ECB will soon be embroiled in an existential crisis as the centrifugal forces unleashed by Brexit tear apart the fragile consensus on which Draghi’s lunatic monetary experiments depended.

In particular, the populist political insurgencies throughout Europe are as much anti-German as they are anti-immigrant. It is only a matter of time before German acquiesce in the ECB’s massive bond buying campaign—–which essentially bails out the rest of Europe—–will be abruptly ended by an internal revolt against Merkelite accommodation.

Spain Government Bond 10Y

Moreover, Spain is by no means unique. Italy’s Five-Star movement, which just came from winning 9 out of 10 mayoral contests including Rome, will surely now be energized mightily. Its Northern League ally has already called for a referendum on exiting the euro.

Needless to say, Italy’s fiscal circumstance is far more dire than even Spain’s. The likelihood that its 10-year bonds are money good at last week’s 135 basis points of yield are between slim and none. Either the threat of an exit or a 5-Star/populist coalition government would send the front-runners who scarfed up Italy’s bonds running for the hills.

Since Italy owes upward of $2 trillion on it government accounts alone, its bond market is an explosion waiting to happen. And that means its bedraggled banks are, too.

That’s because one feature of the Draghi Ponzi was that national banks in the peripheral nations started buying up their own country’s rapidly appreciating sovereign debt  hand-over-fist. Italy’s banks own upwards of $400 billion of Italian government debt.

That’s the one and same Italian government that cannot possibly cope with its existing 135% debt to GDP ratio. And that’s also before the populists take power and are forced to bailout the country’s already insolvent banking system. The latter will suffer from a shock of capital and depositor flight after the current government falls(soon), and Prime Minister Renzi joins Cameron and Rajoy at some establishment rehab center for the deposed.

Italy Government Bond 10Y

During the last financial crisis our elite rulers cried financial “contagion”. That scary story generated panic among the politicians and acquiescence in their crooked regime of massive bailouts and relentless money pumping.

The effect of was to bailout the gamblers from the Greenspan/Bernanke housing and credit bubble, and then to shower unspeakable windfalls on the 1% as the central banks reflated an even more monumental bubble during the regime of QE, ZIRP and NIRP.

But now the world’s financial rulers are going to be on the receiving end of an even more virulent and far-reaching political contagion. That is, a tidal wave of voter demands to emulate the British people and take back their countries and their governments from the financial elites and politicians like Cameron who are their bagmen.

This time populist and insurgent politicians are not going to roll-over for the rule of unelected central bankers and the international financial apparatchiks of the IMF and related institutions.

In that context, it can be confidently said that the Eurozone and ECB are finished. That’s because the monstrously inflated euro-bond market that Draghi created will implode if the front-running speculators lose confidence in the scheme.

At length, it will become evident that Draghi’s “whatever it takes” gambit was the single most foolish act in the history of central banking. It assumed that the rule of the financial elite was limitless and endless.

Brexit proves that both assumptions are wrong. Now every nook and cranny of the world’s bloated and radically mispriced financial casinos will face the same shock to confidence.

Central bankers everywhere will be on the run. Just in the nick of time.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Money Boo Boo's picture

Print or Die!! Print and Die!! Those are our two choices, Thanks Ben!

Duc888's picture



If Yellen tries more QE that will be the last dying gasp of the dollar.  It will spike, and go poof.  Pretty much the rest of the world is on to this bullshit game the Fed has been doing since 2008.

bamawatson's picture

so a disheveled former government wonk announces the 'financial elite' has been slammed

wow, we can rest easy now

peddling-fiction's picture

This is disinfo. Brexit was sought and allowed by TPTB.

Fasten your seat belts if they let this implode.

deflator's picture

 Yep, my readings between the lines leads me to believe that Brexit will be the, "financial crisis" that leads to, "the need" for full on federalization of Europe.


 Anybody who still thinks voting changes anything is disinformed. Probably financial elites in UK negotiating for a bigger seat at the federal level table.

Squid-puppets a-go-go's picture

i agree - its certainly an interesting coincidence that kuroda and a bunch of othe rcentral banker heads were in switzerland as the vote was being tallied

santafe's picture

DREAM ON, Stockman. The agenda keeps trucking.

CheapBastard's picture

My banker is now upset he may not be able to refurbish his Yacht.

Keyser's picture

Some alt pundits concur with the above, that the City of London has played their hand by allowing BRexit... The logic is that the CoL has already raped the EU for all they can and are now throwing them under the bus while running off with the spoils... If this is the case, then the entire system unwinds as Stockman has been saying for years... Hedge accordingly... 

Implied Violins's picture

Brandon Smith just wrote a new article talking about how the elite planned the Brexit to further their globalist aims:

Thee elite will cause the crash and blame it on 'nationalism' and 'central bank failures', while saying we need a central system to prevent this stuff from ever happening again: the NWO.

peddling-fiction's picture

Yep, its genius. Blame Brexit (and the coming global crisis) on the commoners. <chuckle>

Saddam Miser's picture

IMHO, whether planned or not, the elites WILL use the disintegration of the EU to create something far worse. Everyone will look back at 2008/2016 with fond memories. A simpler time if you will.

ebworthen's picture

You clearly don't read Stockman on a regular basis.

Do your homework, one month, 12 page essay.

Central Banks, M.I.C., Casino.

RiverRoad's picture

This global financial mess wrought by the Central Banksters could never right itself until the
Global financial elitist Fat Lady sang.

  And she's singing her lungs out now. LA....LA....LA!   Brava!

Duc888's picture



I think he's a little premature in his assesment.  The Banksterz, Tri-Commission and all the other shitbags are just starting to hunker down.  Stay tuned for some errant missiles flying here and there to stir shit up.

eatthebanksters's picture

Wel, the CB's have few tools left in their toolkit to avoid a major iincident if something out of the ordinary happens as a result of the Brexit...i'm actually starting to think that some of the bullshit will start to unwind...then the peasants will have a real reason to hunt don their least favorite politicians and have a 'chat' with them.

Seasmoke's picture

I call first chat, with Chuck Schumer. 

thinkmoretalkless's picture

Maybe the peasants should sit this one out and let the elitists get their hands dirty.

Big Whoop's picture

If the next phase involves making money by shorting government bonds, the elites will do that. The peasants aren't allowed to short government bonds.

RiverRoad's picture

Especially eating their own cooking sans silverware.

Allen_H's picture

Good read. Guess we need to see how long till the cookie crumbles.

km4's picture

After all, what predicate of sober economics could possibly justify $10 trillion of sovereign debt trading at negative yields? And that’s to say nothing of the endless ranks of insanely over-valued “story” stocks like Valeant was and the megalomaniacal visions of Elon Musk still are.

Nail meet hammer ;-)

Squid-puppets a-go-go's picture

it bears repeating because practically no-one in the MSM gets it, negative interest rates are nothing less than the direct destruction of capital.

it the average neg yield was 0.5%, thats $50 billion a year of capital vaporised - plus however many billion/trillion at zero or effectively zero, unable to offset that destruction of capital

Sudden Debt's picture

Belgium has an 400 billion economy. Government "service" accounts for about 100 billion and spending on all kinds of social benefits account for another 150 billion. Production and retail account for about 35% of the entire economy. and yet our debt to GDP is about 350% all in but over 1000% if you put it against the real economy.

Now that the derivative play in Europe is in danger, countries like Europe will have a fucking hard time to justify the math on their accounting gimmicks because European countries have bought dervatives and booked them at full value as an asset to neutralise their debt.  But if you but a derivative that somebody say stands against 100 euro's and you pay a euro for it, there's risk involved.

I wonder how the derivatives will be fixed this time, and not just for Belgium but all the European countries because that's where the real stress is now.


WTFUD's picture

What Belgium needs is another one of their inspired missions like the successful Hutu/Tutsi Genocide's in Rwanda. Congo's ripe for another distraction also.

tarabel's picture



You make some very interesting points with regards to what happens to the Emerald City of Brussels when the empire it rules evaporates.

Might be a great place to pick up some slightly-used Mercedes limos and gold-rimmed wine glasses at auction.

But it might also require a large force of mercenaries to get the goods out of the country in safety.

Flankspeed60's picture

Might be a great place to pick up some slightly-used Mercedes. 

Yup, so long as you don't mind the blood-stained upholstery. Go long detailing businesses.

peddling-fiction's picture

Hold on to your hand and/or head; lots of Sharia law upholding city-states to go through.

illuminatus's picture

Bullshit Mr. Stockman! As long as people are willing to work for fiat, the game goes on.

Flankspeed60's picture

Hmmmm. Actually, the game goes on only so long as producers are willing to ACCEPT fiat.

RawPawg's picture

so...after reading(and rereading)countless ZH articles today,i have finally come to the conclusion that i can't wait for the day when all this finally does HIT THE FAN

I will not miss reading all this build-up,and i won't waste my time with all the after the fact arm chair analyst(if that is even possible in a 3rd world scenario)

i will be happy and content toiling on my patch of ground growing some beans,and tater's,and playing card games with the little lady by candle light at night

happy days will be here....again

stay safe,y'all


joego1's picture

Keep your head down while you are picking, the natives will be on the warpath.

WTFUD's picture

Give her one for me , Raw!

Billy the Poet's picture

"I was determined to know beans."  -- Thoreau

indygo55's picture

YUP. There is a smell of war in the air. War brought on by a cadre of desperate central bankers and their ediface of sicophants who know nothing but the teet from which they suck. War to distract and to blame and to hide. War to destroy the record of their crimes. War to end the momentum that is building towards the lynching they truely deserve. 

thinkmoretalkless's picture

About the only group the elites have created animosity towards in the "common" folk is Islam. The neocons want to stir up anti Putin rhetoric but the peasants aren't buying it. An attitude of live and let live and get the f_ck out of my face seems to be growing. Trump made the point that during the primary campaign he wouldn't fire the first shot at his critics, but he would fire the last, and that turned out to be accurate. The fact that so many establishment elites in both Dem and Rep uniforms hate him, makes him irresistible .

RiverRoad's picture

War.  And all because Hillary's emails were hacked.

Grimaldus's picture

I love the smell of progressive criminal usurper elite heads exploding in the morning. Smells like-------Victory.








WTFUD's picture

. . . 'bout fracking time EU citizens ran with the successfully implemented, often brutal Neocon world chaos theory.

When the Financiers of War go out of business only then will the Peasants have freed themselves.

GRDguy's picture

So, agents of The Great Red Dragon have been smacked once.  

We shall see how they respond.

WTFUD's picture

Should Amurika citizens accept diebold's version of November's Election Result in favour of poisoned dwarf Clintcunt then the ROTW should cut them off by building a wall along its Atlantic Borders.

Trumps message should be ' love me or not, if the very least i do is break up this corrupt Dual-Party System , paving the way for a New Dawn, then my job will be done, M'F'ers.'

VW Nerd's picture

The ridiculously low bond yields in Europe and Japan are where they are at the behest of the US as a strategy to garner relative value to the worthless UST (trading at a HUGE premium at 1.5%). If the bond market was priced based on global economics, Italy and Spain would be at 50%, Greece would be at 80%, Japan would be at 20% and UST 10yr would be at 19%. Gold would be at 5K+. If the global debt market were priced correctly, the corrupt global economic framework would melt down. Default would become a necessity, deflation would ensue and debt holders would be bankrupt. Anything missing?

VW Nerd's picture

Duplicate post.  Computer troubles.  Sorry.

sw7m's picture

Merkel lite accomodation???


Cheap new housing for icelandic immigrants financed by Soros??

itstippy's picture

Any country that is a member of the Euro Zone will find it impossible to exit the European Union, with the possible exceptions of Germany and France.  That's how Brussels set it up.  Ask Greece how it works.

The Euro Zone members have been running on deficit spending for many years.  It's what's enabled them to live a European Socialist lifestyle.  They've accumulated mountains of debt in the form of government bonds denominated in Euros.  The debt must be serviced in Euros.  If they exit the Euro and print their own currency the market for their government bonds will evaporate, meaning their ability to continue running on deficit spending will end overnight.  All Hell would break loose.  All of the pensions, socialized medicine, and myriad of other social safety nets would go "poof".  

The House Of Brussels and the Troika will continue to dictate policy to the European Union members.  As long as you live under their roof you have to follow their rules.  The Euro Zone members can't afford to move out, so they'd best just swallow their pride and get home by curfew.

squid's picture

Agree....with caveats.

1. The Euro is just the Duetsche Mark is drag,

2. All deficit spends depends on the purchasing power of the printed currency...

So fundamentally, the deficit spending will end because it must.


The lies will come into the light slowly at first and then very quickly.


Squid's picture

Dead right Stock(andbonds)man

All Janets dicky little .25 does, either way, is move the y intercept up or down a tad. As steve keen has been saying for years its the rate of change of debt which makes the difference and at these numbers or negative there is NO WAY that rate of change can be significant .so the best THEY can hope for is to tread water a bit longer, or tread air in the wiley coyote moment. The best I can hope for is that the whole pack of crap self combusts betting against a crash within 8 months.

radbug's picture

I can't believe it!!! The English are a bunch of absolute wusses!!! As soon as Boris the hirstutely challenged becomes Prime Minister he should issue a personal invitation to Vladimir to visit. GET A GRIP!!! Russia is the richest piece of real estate on the planet, and in this Washington Neo-Con inspired community of sanctions, a whole new world is opening up. He who embraces Russia first, embraces Russia best! Mrs Sturgeon ... wha' a dill! She is intent on leading Scotland into a community whose shortcomings created Brexit in the first place!!  I wonder how she'll feel when the first inhabitants of the Calais "jungle" arrive in Edinburgh!!

WTFUD's picture

It's a brave refugee who weathers the elements of Escosia's brass monkey winter-hinter-lands. Me Maself could'ny han'll the frostbite to the old 'toy dolls' and fled South tae think again.