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"The End Game: 2012 And 2013 Will Usher In The End" - The Scariest Presentation Ever?

Tyler Durden's picture


If Raoul Pal was some doomsday spouting windbag, writing in all caps, arbitrarily pasting together disparate charts to create 200 page slideshows, it would be easy to ignore him. He isn't. The founder of Global Macro Investor "previously co-managed the GLG Global Macro Fund in London for GLG Partners, one of the largest hedge fund groups in the world. Raoul came to GLG from Goldman Sachs where he co-managed the hedge fund sales business in Equities and Equity Derivatives in Europe... Raoul Pal retired from managing client money in 2004 at the age of 36 and now lives on the Valencian coast of Spain, from where he writes." It is his writing we are concerned about, and specifically his latest presentation, which is, for lack of a better word, the most disturbing and scary forecast of the future of the world we have ever seen....

And we see a lot of those.

Consider this:

  • We are here...

  • We don’t know exactly what is to come, but we can all join the very few dots from where we are now, to the collapse of the first major bank…
  • With very limited room for government bailouts, we can very easily join the next dots from the first bank closure to the collapse of the whole European banking system, and then to the bankruptcy of the governments themselves.
  • There are almost no brakes in the system to stop this, and almost no one realises the seriousness of the situation.
  • The problem is not Government debt per se. The real problem is that the $70 trillion in G10 debt is the collateral for $700 trillion in derivatives…
  • Yes, that equates to 1200% of Global GDP and it rests on very, very weak foundations
  • From an EU crisis, we only have to join one dot for a UK crisis of equal magnitude.
  • And then do you think Japan and China would not be next?
  • And then do you think the US would survive unscathed?
  • That is the end of the fractional reserve banking system and of fiat money.
  • It is the big RESET.

It continues:

  • Bonds will be stuck at 1% in the US, Germany, UK and Japan (for this phase).
  • The whole bond market will be dead.
  • Short selling on bonds - banned
  • Short selling stocks – banned
  • CDS – banned
  • Short futures – banned
  • Put options – banned
  • All that is left is the Dollar and Gold

It only gets better. We use the term loosely:

  • We have around 6 months left of trading in Western markets to protect ourselves or make enough money to offset future losses.
  • Spend your time looking at the risks of custody, safekeeping, counterparty etc. Assume that no one and nothing is safe.
  • After that…we put on our tin helmets and hide until the new system emerges

And the punchline

From a timing perspective, I think 2012 and 2013 will usher in the end.




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Sat, 06/02/2012 - 04:55 | 2486972 coltek
coltek's picture

It couldn't get better if you actually planned it this way.....


......Oh, wait a minute!

Sat, 06/02/2012 - 07:11 | 2487008 Cosimo de Medici
Cosimo de Medici's picture

First, RISK is usually something that gets passed around until it finally ends up in the laps of those least able to afford it.

That being said, perhaps we might take a look at just a sliver of this massive derivative structure, where some admittedly are merely placing bets, but others are trying to lock in a cost and revenue structure so that they can make medium to long term business plans from which everyone from shareholders to employees benefits.

Here's a simple example.  Let's assume someone named Blythe, and let's put her in charge of a major bank's Commodity Desk.  Her bank makes loans to fund production of resources, transport them, buy the means of transportation...even help people lock in their cost and revenue structures.

Blythe gets a call from a miner that we'll call BHP.  They mine, among other things, silver.  They have a pretty good idea of the ppm in the land they excavate, and a pretty good handle on all of their production costs.  They expect to produce XXXX ounces of silver this year, and at current prices they could lock in a profit if they could sell their production here and now.  The pace with which they produce varies, and though they have some idea what production will be, they are not 100% certain.  They are a little puzzled how they could lock in the current silver price, so Blythe offers to buy their entire production, whatever it turns out to be, at a set price.  Delighted that all their uncertainty is gone, they let Blythe perform this service for them.  She takes the risk that BHP's production is less than anticipated, but since she has confidence in her handling of a dynamic hedge, she doesn't worry.  Blythe is now effectively long a lot of silver, since BHP is a big company.  Owing to a low cost of funds---her bank is a major bank after all---she can lock in a spread by hedging her silver long via some other market.  She decides to use COMEX (though in some cases she would merely find a silver user who wanted to lock in his own purchase price).  She sells futures against her contractual production purchases she has effected with BHP.

Blythe has another customer who is a major owner of silver bars.  Silver has moved up a lot recently, and this bar owner would like to lock in those gains.  They might choose to do some business with Blythe, who might combine a custom hedge with some other business such as a loan for another purpose.  This bullion holder is happy to do one-stop shopping.  By effectively purchasing the bullion holder's silver at current market---at least guaranteeing the price---Blythe needs to find some way to hedge her risk.  Again she decides to use COMEX where she shorts silver futures contracts.

Blythe is both working a spread---her bank's competitive advantage---and also using her hedging prowess to earn other business (loans, advisory) from her customer base.  Everybody is happy.  BHP, with its profits locked in, can continue to do business, pay it employees, buy new diggers and trucks, etc.  The bullion holder has made a gain and locked it in.  He is willing to forego additional increases in exchange for a guarantee on what the market has already handed him.

Well, actually, not everyone is happy.  Somebody, who has absolutely no idea what private contracts and agreements Blythe may have done with BHP or some bullion holder, only sees that Blythe has a very large short position on COMEX.  He looks at the COT Report believing that it covers every single commercial in the entire world, and that no producer would ever contract hedging via private means.  He might even believe that producers would never hedge, since they know the price is going to the moon and they want every last measure of it.  (Of course he forgets that bullion dealers, both online and with shops in most major cities, also know silver is going to the moon but they are happy to sell it for just a small premium over spot.)  This somebody cries foul and devises a plan for "wiping Blythe out" by forcing her to cover.  He enlists the support of lots of other people who, like him, haven't a clue about the totality of Blythe's transactions in the market.  Blythe is not particularly worried, because she knows both sides of her position, and feels no obligation to tell SOMEBODY that her shorts on COMEX aren't meaningful.  Let him and his troops think whatever they want.

The notional value of these "derivatives" may be rather massive, since Blythe's bank is quite large and is the major bank in the commodity business.  The risks, however, are nowhere near the size of the notional position.  Perhaps BHP will not, in the end, produce to the degree that they thought, and Blythe will have to adjust her COMEX hedge.  The bullion holder might not cancel his hedge with Blythe over a futures expiration, and it is possible that if Blythe did not roll over her COMEX side of this derivative, a problem could arise, though that would be more legal (against the bullion holder if he had previously agreed to a specific term).  Her position rollover could even cause backwardation if liquidity was insufficient to cover the size of what she needed to roll.

What is wrong, however, is that Blythe could be squeezed by that fellow who is blind to her total position, and who thinks all she has is a massive short.  Imagine this fellow's surprise if BHP actually did just hand over their production to Blythe, and she just delivered it against expiring futures contracts.  OI tumbles with no panic short covering.  What happened?

Of course, all this is just a hypothetical example, because nobody could ever make the mistake of believing he had the absolute, complete, total picture when in fact they only had one half of it.

Sat, 06/02/2012 - 08:07 | 2487029 BandGap
BandGap's picture

I couldn't agree more. But let's take it one step further.  Let's say Blythe is adverse to wearing undergarments because she feels her corpulence is not attarctive to the opposite sex., And besides, the breezy feeling in her nether regions leaves her with a just brushed feeling during those long hours at the office spent sitting and pondering the wonders of the financial universe and her place in the scheme of things.  Let's also assume, for the sake of this thought experiment, that one of her co-workers - Smithers - secretly harbors a need to relieve his sexual tension in the company bathroom while thinking about sharing the same workspace with Blythe. Do you think Blythe could leverage her disdain for cotton undergarments with Smithers in an effort to move up the corporate ladder, perhaps gaining a better parking space and possibly a key to the executive bathroom?

Just a thought, but one I think deserves careful consideration in these trying times.


Sat, 06/02/2012 - 08:40 | 2487043 Element
Element's picture

You're just a wee bit beyond merely empathic here ... this seems to speak of first-hand experience.


Blythe ... is that you?

Sat, 06/02/2012 - 08:46 | 2487050 BandGap
BandGap's picture

Blythe's character probably does contain elements of my repressed female leanings. As with most males, I was brought up to present a tough, sophisticated facade geared towards protecting my softer psychological underpinnings, these being most closely associated with feminine frailties. It is through my writings that some of these feelings can surface, can indeed be nurtured, without fully exposing myself to the brutish diatribes from what is aptly described as "manly men".

I will warn you howver, that the opposite can be true, as well.  The character, Blythe, can be as brutal and cunning as any male in the room. In some of my writings, she does loudly flatulate in public, and in front of female peers. She further projects this vile persona by explaining to her friends and relatives that she produces tremendous gases subsequent to "benders and late night burrito romps" and "too many sugarless candies and bitter men".

Sat, 06/02/2012 - 11:24 | 2487187 Element
Element's picture

Delta E bitches!

Sat, 06/02/2012 - 11:07 | 2487166 Cosimo de Medici
Cosimo de Medici's picture

I do believe I might have run across you some years ago in a bathroom at a Truck Stop 76 on I-80.  I thought because the door was unlocked the stall was empty.  My mistake.  Again, I apologize for any inconvenience or embarrassment that might have caused you.  Next time I just won't feel guilty using the handicapped stall, and I won't interrupt whatever it was you were doing, which may or may not be against the law in that particular state.  I wouldn't turn you in anyway.  So long as what a man does doesn't hurt anyone other than himself, it's not my business, I say.

Just kidding.

Sat, 06/02/2012 - 08:11 | 2487031 pig no 3
pig no 3's picture

This thrid Pig can follow the sheets, but doensn't understand why the dollar would survive (next to the shiny metal) in these sheets.

Anybody could help me out on this one ?


Sat, 06/02/2012 - 08:18 | 2487038 BandGap
BandGap's picture

I believe I can lend a hand here.  The porcine that is the focus of your interrogative is actaully the piggy that ran all the way home. In doing so, said pig really never did "follow" anything. Rather, this ingenious animal took matters into it's own hands (or hoofs, as the case may be) and vacated the area. Unfortunately, he ended up in a house made of straw.  But that story takes on a life of it's own in subsequent chapters of my new book "The Audacity of Toke", soon to hit in the late summer.

Thank you.

Sat, 06/02/2012 - 08:27 | 2487041 Element
Element's picture

LOL ... ... LOL again ....

Sat, 06/02/2012 - 09:12 | 2487072 BandGap
BandGap's picture

I should add that this is the "little piggy" that ran "all the way home". Some people miss the inference, and it is essential as it lends the proper context to this story.

- ed note.

Sat, 06/02/2012 - 11:26 | 2487185 Element
Element's picture


"And this little piggy ran, wee, wee, weeee, all the way home."



(urinary tract infection I'd say)

Sat, 06/02/2012 - 11:31 | 2487195 pig no 3
pig no 3's picture

Being pig no 3, I already asumed the dollar is a  straw shack, as al other paper.

So why does the writer of this article thinks it's a brick one ?

THe army protecting the straw shack ? as it to be a brick one ?

Sat, 06/02/2012 - 08:39 | 2487046 Pampalona
Pampalona's picture

There's a great solution to this mess... It's called 'haircuts for the bankers'. The barbers pole can be the symbol of the movement. We need a Sweeney Todd for wall st.

Sat, 06/02/2012 - 08:48 | 2487052 BandGap
BandGap's picture

I often use poles as a symbol of my movements. I try to be at "half staff" - at least - when relieving myself (most notably when going "#2"). I'm very happy to hear that others follow this protocol.

Sat, 06/02/2012 - 09:11 | 2487070 BandGap
BandGap's picture

There is so much beautiful symmetry on this place we call home, earth. Think about it.

Sweeney Todd = Leaning Rod. Wow, that just makes the day so much brighter, and our struggles so much easier to face. And really, that's what we all need, right?

Sat, 06/02/2012 - 08:55 | 2487059 SonOfSoros
SonOfSoros's picture

I disagree with his make enough money til that time comes. When it comes, laws will not be upheld, do you really think money will be respected? The world will be in utter chaos and panic.

So? invest in firearms.

It will be absolute chaos everywhere and the best form of protection will be the ability to kill quick/easy.  

Sat, 06/02/2012 - 09:04 | 2487066 BandGap
BandGap's picture

I've said as much to family, friends and the people at the checkout line at Lowe's, all the while tilting one eyebrow and toasting to their health with a cooled malt beverage. Amen to that.

But I will add this, killing is never easy. Whether it's the last PBR in the case you got on sale at Kroger's, 14.99 for a 30 pack (can you believe that?), after a long night sitting in the garage talking with friends about who we would "off" first, to the mouae you hit with the mower who still struggles to hold on to God's most precious gift.  No killing is never easy, it stays with you brother. And the kills add up in your heart like lead split shot sinkers you have to add to your fishing line if you set the trolling motor at a higher speed.

But I feel you, man.

Sat, 06/02/2012 - 22:52 | 2488281 CitizenPete
CitizenPete's picture

Bullshit.  "nobody will be able to be armed, we will take ALL weapons."  Quote from the police cheif in New Orleans in the aftermath of Katrina.  Both the Military and your freinds at "Z" went door-to-door interigating and rousting up all the weapons.  Constitution be damned.   Without an organized body of intelligent sane strong willed citizens, willing to stand up en mass with firearms in hand, the Military and DHS will roll down the street and stop people at the road blocks and strip you clean.

Sat, 06/02/2012 - 09:22 | 2487077 The PolyCapitalist
The PolyCapitalist's picture

"There are almost no brakes in the system to stop this"


Wrong. My rebuttal here:

Sat, 06/02/2012 - 09:33 | 2487082 BandGap
BandGap's picture

Those really are not what could be described as "brakes". Rather, what you present in this lengthy, somewhat tedious, article would be best be referred to as a "steering wheel". The concept I think you mean to convey in your blog is not one which things are stopped, rather one where the present actions are guided in another direction.  Hence, the "sterring wheel" analogy best describes your boring litany. I took shop in high school, trust me here.

Gnerally thinking, to stop - as in one's heart - signifies death. In this case the death of the system. What I think you truly mean is that the entire financial strcuture does not need to be demolished, rather, it needs to be pointed in a direction more benevolent to working, and caring, individuals such as yourself.

Who are all the old dudes in the pictures, BTW?


Sat, 06/02/2012 - 10:13 | 2487103 gwar5
gwar5's picture

We are burnt toast. The final sign of the Apacolypse has now transitted the Sun and is upon us.


JPM to return $600 Million of MF Global funds?

Sat, 06/02/2012 - 10:43 | 2487138 benslawyer
benslawyer's picture

At over 96,000 reads, I wonder if this is the record for a zerohedge article; it's currently around #80 in the top 100 average daily readership of all U. S. newspapers. 

Sat, 06/02/2012 - 11:43 | 2487209 Mark123
Mark123's picture

Why is this article getting such royal treatment....I found it rather shallow.


Still, reading the comments is entertaining!!

Sat, 06/02/2012 - 11:43 | 2487211 RSloane
RSloane's picture

Of all the apocalyptic forecasts I've read this particular article is clearly not the most shocking and certainly not the most scary.

Sat, 06/02/2012 - 11:47 | 2487216 Kina
Kina's picture

There will be one more massive printing spree across the cosmos, then the giant suck.  Opportunity to sell remaining assets on the next big wave up.

Sat, 06/02/2012 - 12:04 | 2487224 prodigious_idea
prodigious_idea's picture

To Tyler:

I only "awakened" recently and am a newbie to ZH so I don't know how to check on which posts get the most reads.  I see this post has almost 100k reads.  That is decidedly a lot of readers.  Can you - or someone - tell me how that compares to other posts on this topic?

Thanks in advance for the response.

Sat, 06/02/2012 - 23:19 | 2488380 Jena
Jena's picture

On the ZH home page, the list of articles - newest or busiest first, below each article you see the number of Comments, New Comments and a total READ numbers.

100,000 is a lot of people reading.  Having the page refreshed may count, too; I don't know.

You can also tell when an article is hot by the number of pages of comments.  Around here, the comments may be as illuminating as the articles.  

Sat, 06/02/2012 - 12:43 | 2487281 deflator
deflator's picture

 "The problem is not Government debt per se. The real problem is that the $70 trillion in G10 debt is the collateral for $700 trillion in derivatives…"

 I think the real problem IS ever expanding government debt money creation that cannot forever out of thin air make claims on future resources.

 If the definition of an apocalypse is a disclosure of something hidden from the majority of mankind in an era dominated by falsehood and misconception, then we are certainly headed towards a, "lifting of the veil".

 The primary falsehood and misconception is the idea that future or even present resources are infinite. The majority of mankind has come to believe that debt can be infinitely extrapolated into the future against future resources because it has been so for the past 150 years. The past 150 years of persistent global economic growth is an anomoly in contrast to the rest of human civilization.

 I believe that the past 150 years of persistent economic growth is over as 7 billion humans are competing for what has become hard limits to what resources can be produced, refined and distributed on a daily basis. The heart of our financial dysfunction is that every government in the world is steadily printing out of thin air claims against future resources well above and beyond what can possibly be produced.

 Confidence that future resources can always be claimed with paper is the only thing that sustains the idea of debt as money. Once confidence disappears in the ability to redeem paper for resources at any price then governments will be forced to lay claims to resources by force. "The great reset" can only mean one thing--fewer claims against resources to bring equillibrium between claims and actual resources.

Sat, 06/02/2012 - 20:30 | 2488026 Element
Element's picture

Nicely stated.

To fill that out bit, there are still some places where there is social confidence that the claims can still be made good, and the failed-states where it's obvious they aren't good for it, and probably won't become good for it.  So countries fail, they add to the growing list the places where their promises can't be made good via resources and trade ... (gold remains their only backstop).

The places where the promises can still be made 'good', are going to need to speak softly, but carry a really big (visible and credible) stick.  So we're going to increasingly see military parades and readiness exercises where countries bare-their-teeth for others to see what they have, as wolves do to each other in order that each wolf understands that the other wolf is not going down without a fight, quite possibly to the death, and do you really want to risk that (so as to avoid the need to fight it out ... deterrence ... as well as dominence). 

So 'sabre-rattling' will be coming back in a big way.

Given the western-backed insurgency tactics in Libya and support of uncompromising radical factions, that has been occurring in the M.E., particularly in Syria now, this is not going to be a happy and peaceful situation (especially with the farcical one-eyed psycho-kooks, like Hillary Clinton, hypercritically gobbing-off brainlessly at other strategically capable and very resource-rich countries, like Russia, and Iran).

Sat, 06/02/2012 - 20:58 | 2488068 deflator
deflator's picture

 I think the sabre-rattling is overwith. When you are hungry you go in not giving a fuck and fully prepared to take out anyone who gets in the way of you're needs. I went hungry for 2 weeks when I was 18 years old. I went into a convenience store knowing full well that my life could be on the line should the clerk be armed and dangerous. Even then I was confident in my close quarters hand to hand. A gun is useless in close quarters against a serious hand to hand combatant. I took a loaf of bread, a pound of bacon and a couple of tomatoes. The clerks eyes were big when I walked out but he didn't move. I came back a couple weeks later and paid but they told me not to do it again or I wouldn't be welcome there anymore lol.

Sat, 06/02/2012 - 21:36 | 2488141 deflator
deflator's picture

nah, it doesn't matter, it is still debt based everywhere. You are right, as resources become more scarce, stronger countries and stronger alliances will squeeze weaker countries and weaker alliances of their share. The current alliances are not sustainable. The current alliance between the U.S. and China against the rest of the world is like the worst dysfunctional marriage ever concieved in the history of the planet. They are both whoring around on each other to their mutual exclusion, how sustainable is that?

Sat, 06/02/2012 - 15:25 | 2487571 Uncle Remus
Uncle Remus's picture

What do we want?


When do we want it?


[Excellent. Driver bring my car around...]

Sat, 06/02/2012 - 20:36 | 2488038 deflator
deflator's picture

 Been a long time has it not UR? heh heh, miss seeing your sockpuppets at CFN. That place sure has changed. How many sockpuppets do you have here?

Sat, 06/02/2012 - 22:22 | 2488243 Ookspay
Ookspay's picture

What God wants God gets God help us all
What God wants God gets
The kid in the corner looked at the priest
And fingered his pale blue Japanese guitar
The priest said
God wants goodness
God wants light
God wants mayhem
God wants a clean fight
What God wants God gets
Don't look so surprised
It's only dogma
The alien prophet cried
The beetle and the springbok
Took the Bible from its hook
The monkey in the corner
Wrote the lesson in his book
What God wants God gets God help us all
God wants peace
God wants war
God wants famine
God wants chain stores
What God wants God gets
God wants sedition
God wants sex
God wants freedom
God wants semtex
What God wants God gets
Don't look so surprised
I'm only joking
The alien comic cried
The jackass and hyena
Took the feather from its hook
The monkey in the corner
Wrote the joke down in his book
What God wants God gets
God wants boarders
God wants crack
God wants rainfall
God wants wetbacks
What God wants God gets
God wants voodoo
God wants shrines
God wants law
God wants organized crime
God wants crusade
God wants jihad
God wants good
God wants bad
What God wants God gets

Roger Watters

Thu, 06/07/2012 - 22:04 | 2505980 LongOfTooth
LongOfTooth's picture

God feeds on pain, pleasure and emotion.


Sat, 06/02/2012 - 23:13 | 2488366 deflator
deflator's picture

here ya go ur for old times sake

Sat, 06/02/2012 - 22:23 | 2488237 CitizenPete
CitizenPete's picture

Washington DC Government and the real world at the main street level have absolutely nothing to do with each other -- might as well exist on separate planets.  Everytime I hear some politician or Keynesian spout off about "what government can do to CREATE jobs", etc...  it just makes me want to puke and join the sheeple and take up watching organized sports (opium of the masses)  and drinking some sugary soft drink and amonia laden burger from McD.  Obamney won't make a bit of difference.


The FED will bail out the banks behind the scenes and the Treasury will cover it all up, as the Commerce Department re-writes the laws again with the SEC and CFTC in tow.  It is all 100% fraud and plutocracy down into to the marrow.


revolution comes without warning 



Sat, 09/22/2012 - 12:31 | 2820351 Dina Strange
Dina Strange's picture

Sorry, but i do not believe this prediction.

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