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The Complete And Annotated Guide To The European Bank Run (Or The Final Phase Of Goldman's World Domination Plan)

Tyler Durden's picture


"Nervous investors around the globe are accelerating their exit from the debt of European governments and banks, increasing the risk of a credit squeeze that could set off a downward spiral. Financial institutions are dumping their vast holdings of European government debt and spurning new bond issues by countries like Spain and Italy. And many have decided not to renew short-term loans to European banks, which are needed to finance day-to-day operations. " So begins an article not in some hyperventilating fringe blog, but a cover article in the venerable New York Times titled "Europe Fears a Credit Squeeze as Investors Sell Bond Holdings." Said otherwise, Europe's continental bank run in which virtually, but not quite, all banks are dumping any peripheral exposure with reckless abandon is now on. Granted, considering the epic collapse in bond prices of Italian, French, Austrian, Hungarian, Spanish and Belgian bonds which all hit record wide yields and spreads in the past week, and furthermore following last week's "Sold To You": European Banks Quietly Dumping €300 Billion In Italian Debt" which predicted precisely this outcome, the news is not much of a surprise. However, learning that everyone (with two exceptions) has given up on Europe's financial system should send a shudder through the back of everyone who still is capable of independent thought - because said otherwise, the world's largest economic block is becoming unglued, and its entire financial system is on the edge of a complete meltdown. And just to make sure that various fringe bloggers who warned this would happen over a year ago no longer lead to the hyperventilation of the venerable NYT, below, with the help of Goldman's Jernej Omahan, we bring to our readers the complete annotated and abbreviated beginner's guide to the pan-European bank run.

But first some more details from the NYT:

The flight from European sovereign debt and banks has spanned the globe. European institutions like the Royal Bank of Scotland and pension funds in the Netherlands have been heavy sellers in recent days. And earlier this month, Kokusai Asset Management in Japan unloaded nearly $1 billion in Italian debt.


At the same time, American institutions are pulling back on loans to even the sturdiest banks in Europe. When a $300 million certificate of deposit held by Vanguard’s $114 billion Prime Money Market Fund from Rabobank in the Netherlands came due on Nov. 9, Vanguard decided to let the loan expire and move the money out of Europe. Rabobank enjoys a AAA-credit rating and is considered one of the strongest banks in the world.


American money market funds, long a key supplier of dollars to European banks through short-term loans, have also become nervous. Fund managers have cut their holdings of notes issued by euro zone banks by $261 billion from around its peak in May, a 54 percent drop, according to JPMorgan Chase research.

Is this setting familiar to anyone? It should be: "Experts say the cycle of anxiety, forced selling and surging borrowing costs is reminiscent of the months before the collapse of Lehman Brothers in 2008, when worries about subprime mortgages in the United States metastasized into a global market crisis." 

Ah, but there is one major difference: last time around, the banks were not all in on the wrong side of the world's worst poker hand (as described by Kyle Bass earlier). Now they are. And should Europe's banks begin a domino-like spiral of collapse, there will be nobody to bail out first Europe, then Japan, then China, then the US and finally the world.

But lest someone suggest this is merely the deranged ramblings of yet another blogger, here is Goldman Sachs with a far more cool, calm and collected explanation for why we should all panic (which comes at the sublime moment: just as Goldman takes over all the key political locus points of the European continent: more on that in the conclusion...)

Core’ banks cut GIIPS debt by €42 bn (-31%) in 3Q; a manifestation of PSI side-effects? 


In 3Q2011, banks from the ‘core’ cut their net GIIPS sovereign debt holdings by €42 bn (or by one-third), mostly Italian (€26 bn), Spanish (€7 bn) and Greek (markdown of €7 bn). French and Benelux banks cut their exposures most, by €21 bn and €9 bn, respectively. GIIPS portfolios remained unchanged with periphery banks.


Greek PSI sets a risky precedent, in our view, as the prospect of ‘voluntary’ haircuts becoming a template for GIIPS crisis resolution could drive exposure reduction. Core banks now have €88 bn of GIIPS sovereign bonds remaining. We expect this to decline. Problematically, we observe that GIIPS bond reductions are not resulting in ‘core’ bond purchases but in a rise in deposits at the ECB.

  • The disposal of GIIPS sovereign debt accelerated during 3Q2011, and we highlight the following.
  • Banks cut net GIIPS sovereign exposure by €43 bn. The largest reductions relate to Italian (€26 bn), Spanish (€7 bn) and Greek (€7 bn) net sovereign debt positions.
  • Almost all of the reduction (€42 bn) came from banks in the European ‘core’, where the GIIPS bond positions therefore fell by just over one-third (31%). At the same time the banks from the ‘periphery’ kept their exposures unchanged.
  • French (€21 bn) and Benelux (€9 bn) banks reduced their exposure most.
  • Individually BNP (€12 bn), KBC (€4.4 bn), SG (€4.1 bn), BARC (€3.5 bn) and ING (€3.5 bn) cut the net sovereign exposures most, in absolute terms.


We expect this trend to extend into 4Q and to ultimately lead to a long-term reduction GIIPS bond holdings by core banks.


Greek PSI – and the ‘voluntary’ 50% haircut – has changed the risk perception of GIIPS bonds. We believe it has allowed for an assumption that PSI will be used as a template in helping other GIIPS sovereigns improve their public finances. Such intention is denied by policy makers. Banks, on the other hand, express their view of the likelihood of such an event through the changes in their net positions.


It is important to emphasizes that a bank’s decision to hold sovereign debt is not an expression of an investment preference. Rather, it is a decision related to liquidity management. As such banks seek ‘risk free’ assets that can be used to access liquidity at any time, particularly at the time of crisis. Regulators continue to treat sovereign debt as highest-quality and risk free (0% risk-weight) collateral. With no RWA constraint and full refinancing eligibility, banks are encouraged to hold sovereign debt; its (selective) transition from a ‘risk free’ to a ‘risk’ asset is therefore unexpected and highly damaging.

Earlier we said all but two entities have been dumping PIIGS (or GIIPS as Goldman prefers to call them). Sure enough, one of the unlucky two tasked with buying everything sold in the secondary market is of course the ECB: the same bank that everyone is accusing of not doing more to help.

Funding: Increasingly reliant on the ECB


The use of ECB facilities rose again in October, driven by Spanish (€7 bn) and Italian (€6 bn) banks. For 4Q, we expect a sharp increase in use by Italian banks, driven by: (1) LCH’s increased margin requirements on Italian REPOs, which now make market REPOs comparatively more expensive than those at the ECB; and (2) a steady fading of the ECB funding ‘stigma’. It is possible that the majority of the €300 bn of interbank funding and market REPOs could end up on ECB’s balance sheet. That alone would have the capacity to lift current ECB use from €579 bn to just below €900 bn. This level of use would compare with previous crisis peak levels (2009) of €870-897 bn.


We have long argued that the ECB has capacity to back-stop bank funding requirements – and there is no change to this view. That said, a gradual closing of the last functioning wholesale funding market – short-term REPOs, backed by government bonds – is certainly not an encouraging sign. The re-opening of the long-term funding markets has been pushed further out, in our view.


LCH triggers increased margin requirements on Italian REPOs


On November 9, 2011, LCH.Clearnet (LCH) announced its decision to increase ‘deposit factors’ applied to Italian debt repo transactions (e.g. haircut on collateral) by 3.5% to 5% depending on the duration of the collateral. The move was not a surprise as LCH’s Risk Management Framework states that it “would generally consider a spread of 450bp over the 10-year AAA benchmark to be indicative of additional sovereign risk”, which may cause it to “materially increase the margin required for positions in that issuer”. Previously, ECB interventions kept the spreads below the key trigger level of 450bp.


Italian banks likely to switch to the ECB


Owing to increased margin requirement, market REPOs have become more expensive. In our view, the banks are therefore likely to look for alternative sources of funding, especially with the ECB.


Typically, the cost a bank faces to fund a sovereign bond portfolio through a tri-party repo transaction consists of: (i) the funding rate (‘repo rate’) for the duration of the repo and applied to the market value of the bonds; and (ii) additional funding costs, mostly in the form of the haircut/margin required by the Central Clearing House as collateral. The higher the haircut/margin level and the marginal funding cost, the higher the cost of the borrowing, which becomes ineffective when it exceeds the cost of the ECB repo facility (1.5% repo rate + haircut funding cost).


The Italian banks’ funding currently includes €155 bn of customer repos and €193 bn of interbank funding exposure to non resident MFIs. The large portion of the latter takes the form of secured funding (repos). In addition, the Italian banks currently draw on €111 bn of ECB funding.


It is possible that the majority of the €300 bn of interbank funding and market REPOs could end up on the ECB’s balance sheet. That alone would have the capacity to lift current ECB use from €579 bn to just below €900 bn. This level of use would compare with previous crisis peak levels (2009) of €870-897 bn.

So just why again is it that anyone accuses the ECB of doing nothing? When all is said and done under the current regime, the ECB balance sheet will be just under €2 trillion, and that is without any incremental printing, courtesy of the farce that is "sterilization" with banks which exist only due to the ECB, thereby making said sterilization about the most idiotic thing ever conceived. Yet that is what spin is for...

In the meantime, the European shadow banking system is on the verge of a complete shutdown, with repos of all shapes and sizes about go dark.

And summarizing all of the above visually, here come the charts:

And while we already discussed that one half of Europe's dumb money is the ECB by necessity, to get the answer for who is the other half we go back to our post from last Friday:

Completing the picture is the answer of who the dumb money is:

Italian bonds still have one support bloc. Domestic banks appear to be holding on to their much larger holdings. As of last December, EBA stress tests showed Intesa Sanpaolo held €60bn of Italian debt. UniCredit and Banca Monte dei Paschi di Siena held €49bn and €32bn respectively. Recent results indicate that those holdings have changed little.


“We will keep investing the largest part of our liquidity in Italian government bonds,” said Corrado Passera, chief executive officer at Intesa Sanpaolo, in a call with analysts this week. “We believe they provide the right yields vis-à-vis the cost. So no policy change on our side.”


Still, according to the investment banker advising firms on their Italian holdings, the domestic banks’ decisions to hold on could have more to do with their inability to offload such large amounts quickly and without deep losses. Indeed, some Italian bankers seem resigned to the situation.


Capital concerns are also preventing them from selling. “The key issue is on solvency and I think they made a mistake in requiring us to hold more capital,” said the chief executive of a mid-sized Italian bank. “To meet these levels we cannot sell too much of our sovereign debt.”

So instead of selling, Italian banks are doing all they can to dodecatuple down!?

To summarize: everyone is dumping European paper, except for the ECB and Italian banks, which have no choice and instead have to double down and buy more. In the meantime, the market is going increasingly bidless as liquidity evaporates, confidence has disappeared and virtually everyone now expects a repeat of Lehman brothers. Of course, this means that when the bottom finally out from the market, the implosion of the Italian banking system, and thus economy, will be instantaneous. And when Italy goes, so goes its $2 trillion+ in sovereign debt, and at that point we will see just how effectively hedged and offloaded the rest of the world is, as contagion shifts from Italy and slowly but surely engulfs the entire world.

Incidentally, is it really that surprising that Goldman is now doing its best to precipitate a bank run of Europe's major financial institutions by "suddenly" exposing the truth that was there all along? During the great financial crisis of 2008, the one biggest winner from the collapse of Bear and Lehman was none other than the squid. This time around, Goldman has set its sights on Europe and has already made sure that its tentacles will be in firmly in control at all the right places when the collapse comes, as the Independent shows.

And when banks are falling over like houses of cards in the middle of a tornado cluster, and the financial power vacuum is in desperate need to be filled, who will step in once again but... Goldman Sachs.


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Sat, 11/19/2011 - 20:41 | 1894884 Hulk
Hulk's picture

The Market is speaking as the ISDA gave it voice...

Sat, 11/19/2011 - 21:02 | 1894910 knukles
knukles's picture

New-fucking-York Terr-ist-times!
How dare they begin a run on the European Banking System and Sovriegn Debt Markets? 
Do They Not Know Their Place in the Structure of Tomorrow?
Of the New World? 
Are they Not Responsible (nice double entendre, Knukles!) for Providing IFactual Information and News as Enshrined in Their Very Own By Line...
"All the News That Fits?"
Who Do They Think They Are? 
Superior All Knowledgable Intelligencia With Supra-Nromal Insights as the the Very Condition of All Mankind, Not Just The Profligate Insensitive Upper Crust Banking Local Few?
Bring on The Krugmans, The Dowds, The Freidmans. 
Have Them the All Knowledgable Who Until Now Have Poo-pooed, SHunned and Dismissed these Faults, Come Hither, Straghten Out, Defease, Eradicate This Curse Upon Humanity.
This Sin of False Perception!
There Is No Problem That    That   uh   That The Powers   That  uh got us here..    might             not       
  can not

yes we can

uh    hmmm



Where's Krugman When We Need Him?

Sat, 11/19/2011 - 21:10 | 1894928 WonderDawg
WonderDawg's picture

Nobody could have seen this coming.

Sat, 11/19/2011 - 21:13 | 1894939 Not For Reuse
Not For Reuse's picture

I stand by my advice to be solid with the 1%, if at all possible.

99% of the 99% do not give a flying fuck about any notion of "constitutional justice."

I repeat, NO one gives a flying fuck.

All anyone really wants to do is "get money," fly back to their hometown, butterfly out of an airport limo, and pop off a load in that fat slut with 3 kids who turned them down for their senior prom.

Any talk of change or revolution is purely academic at this point

Sat, 11/19/2011 - 21:33 | 1894973 Michael
Michael's picture

The only solution now is;

"The Universal Bankruptcy Act Of 2012."

A golden jubilee for a new golden age. All non-secured debt will be discharged and all sovereign debt will be defaulted on and discharged in one fell swoop. 


Sat, 11/19/2011 - 21:40 | 1894991 Manthong
Manthong's picture

GIIPS might be a more appropriate way to spell the acronym if pronounced like "gyp".

Sat, 11/19/2011 - 22:14 | 1895046 XitSam
XitSam's picture

How did PIIGS get turned into GIIPS that I've been seeing the last couple days? Did the europeans just figure out what PIG means?

Oh, and "venerable" New York Times?!

Sat, 11/19/2011 - 22:32 | 1895070 Oh regional Indian
Oh regional Indian's picture

As of last December, EBA stress tests showed Intesa Sanpaolo held €60bn of Italian debt

At least now we know why the Inesta guy is in the gobbermint. Protection racket.

I think it is in the order of things. Greece/Ireland/Italy/Poro/Spain.

It looks like they are saving the rain from spain for the end. i have a feeling the swing of the pendulum of sovereign crises is going to start swinging wildly and unpredictably now. 

Because the truth is that everyone is naked. 



Sun, 11/20/2011 - 01:22 | 1895280 spiral_eyes
Sun, 11/20/2011 - 01:38 | 1895296 AldousHuxley
AldousHuxley's picture

Final Phase of Goldman's World Domination Plan


World must be pretty stupid to be dominated by a bankrupted institution with same credit rating as McDonald's and run by Master BullShitting Assholes who can't operate a mathematically-guranteed-profit casino without a bailout from Uncle Buffett and Uncle Sam who call themselves Goldman Sachs while having no traceable amount of gold.

Sun, 11/20/2011 - 01:39 | 1895301 Chris Jusset
Chris Jusset's picture

Aw crap!  This is worse than the Lehman meltdown.

Sun, 11/20/2011 - 03:47 | 1895373 macholatte
macholatte's picture



“The euro is burning, the EU is falling apart and yet here they are: highly-paid, highly-pensioned officials worrying about the obvious qualities of water and trying to deny us the right to say what is patently true.

“If ever there were an episode which demonstrates the folly of the great European project then this is it.”

EU bans claim that water can prevent dehydration

Sun, 11/20/2011 - 05:47 | 1895411 Aengrod
Aengrod's picture

Epic! .... stupidity. Seriously let someone bomb Brussel and Strasbourg that would be filled with those Euro-fascist, but spare Farage.

Sun, 11/20/2011 - 10:17 | 1895543 Harlequin001
Harlequin001's picture

Obviously the only way Goldman can survive this is is someone bails out their defaulted hedges just like AIG, but this time MUCH, MUCH BIGGER...

Sun, 11/20/2011 - 06:02 | 1895419 Ghordius
Ghordius's picture

Another water nitwit

Sun, 11/20/2011 - 04:27 | 1895379 TruthInSunshine
TruthInSunshine's picture

The New York Times version of events makes Goldman seem so benign that it's literally sickening - Andrew Ross-Sorkin has his grimey little finger/claw print all over this New York Slimes expose.

It's very quite simple as to how this will play out (and why).

Either you do or don't believe some or all of the following:

1)   The European Union is inevitably destined for failure (and the odds, for reasons to be reference below, of a fast & furious implosion have grown exponentionally higher over the last 6 months) as it's simply not possibly to have a central bank (the ECB) usurp the ability of the very disparate political, social and economic allegedly sovereign nations of what is now the EU to print their own money, given the radically divergent political social and economic stability/instability the peoples of these nations find themselves facing (e.g. Greeks vs Germans; e.g. Belgians vs. Italians), and given that those nations (few as they may be) that are solvent don't want to face the consequences to their own health of what would be bailing out the many nations that are not solvent (by many, I mean the predominant majority, and not insolvent by any small % of their annual GDP, either, with demographic ticking time-bombs on their balance sheets in the form of entitlements, also).

2)   If there is any chance to hold the EU together, whether for another couple of years or maybe 5 or 6 years (before the reality of math slaps the unicorns & rainbows delusion of a common European Union in the face again like a bucket of Icelandic Sea Water poured on the face of Spaniard sleeping in a hammock in Santander on a warm and sunny day), it means that the solvent few must give their consent (via the body politik, who definitely rarely have the best interests of their consituents in mind, but will only do what is best if they feel sufficient rage and the very real theat of untoward consequences for selling out) to the ECB to go ahead and fire up the CERN-esque Printing Press at the ECB.

3)    Such consent to print Euros at faster than the speed of light pace will toss all of Europe into an inflationary environment that will make any time since post WWI or circa-WWII look positively tame, and in fact, the inflation resulting from what would have to be a massive devaluation in the Euro, which is not a reserve currency (despite claims of such de facto status or 'waiting in the wings' status to the contrary), will far exceed anything that respective European Nations that form the EU saw back in the late 1970s, prior to turning the legal process of the hows and whys and how much and other such question pertaining to the printing of their own currency over to the ECB. It would not be hyperbole to claim that real average per annum inflation of 10% to 20% a year for a lengthy period of 5 to 10 years could be not only possible, but likely (that would result in a 50% to 200% increase in the cost of living over a 5 to 10 year period, for Europeans, depending on how long the ECB monetization had to endure, for those of you keeping score at home, and that assumes that the process will yield the desired results, and put things back together again - a big assumption). Again, even with this monetization, loose ECB policy and absolute policy goal (stated or not) of inflating away EU Zone debts enacted, it has the possibility of not only not resolving the disease that is causing the EU crisis, but of exacerbating it (especially given that solvent members of the EU will be dragged down and drowned, inevitably, with their far more numerous, non-solvent EU brethren, which carries with it a special set of political and social risks as the process gets to the flailing-clutching-gasping for air stage).

4)   If the solvent members, mainly Germany, declare nein!, then the winding up of the European Union turns into an outright implosion, Icelandic style, but on an obviously monentous scale, with debts purged and investment losses accelerating into a process that clears the pipeline in maybe  a year or two, but giving the ability of the former EU members (and what could be a new set of non-core former EU members) to get back to a lifestyle consistent with their means, and taking their own monetary and economic policy back from the EU, with no one imposing austerity upon them, with the corresponding element that they need to have the cash to do what they want to do before they decide to do it (e.g. maybe not so generous pensions, transfer payments and huge public sector employment, etc. etc.?). Conversely, the solvent members, whether still forming a core-EU alliance, or parting ways completely, are not threatened with a perverse sinking of their living standards, as they no longer have to subsidize the former hopelessly and helplessly insolvent member states.

5)   If the implosion caused by a decision to not authorize the ECB to devalue the EUR is taken, then the brunt of the losses spurned by the non-repayment of debts falls far more on the shoulders of investors (whether individual or institutional buyers of equities or bonds [sovereign and otherwise], and CDS/CDO), rather than the taxpayer hammering that would result from trying to keep the EU intact.

6)   There can be no question that this train wreck could have been seen, and was in fact seen coming, for years now, and that there have been the sleaziest type of manuevering (see rest of this section as to the why of the 'sleazy') by the likes of the Goldman Sachs & JPM and their filthy ilk, to seize upon this latest crisis, who have now ramped up efforts to do everything they can to accelerate the crisis, and who are assuredly betting on positions that will reward them many, many times over, while knowing full well that a) they literally have a voice in the governments of key EU Member States and the ECB itself through former (and even present) agents of their firms as to how to influence the decisions that will be made, and b) if things go wrong for them despite 'a', they will simply fall back on their "we're too big too fail because if we did, it would only assure and hasten a global economic collapse, and therefore give us our taxpayer backstop; here's the blank check Mr. President, Mr. Treasury Secretary & our very dear friends (and colleagues) at the ECB & Federal Reserve (and in select EU governments), so go give your scary speeches to the public now about 'martial law' and 'tanks in the streets' and we'll fill in the number on the check."


So, my friends and fellow takers of the red pill, we all can clearly see that Old Man Rothschild -  you know, the Great Red Shield House of Financial Empire - which just so coincidentally established its roots in Germany back in the 1600s, and then successfully gained control, through devious and brilliant chessmanship, of the global fiat supply (would you plebes like some inflation or some deflation to separate you from your homes, property, other inherent valuable and even your food?) - is back at the SSDD playbook, with all the right pieces (and lackeys) in place, whether political actors or banking and banker proxies - and is set to reap yet another Great & Bountiful HARVEST for the Money Masters.

It's a Big Club, and 99.9999% of us ain't in it, so remember that if you haven't taken the proper precations, quit playing a rigged game on their terms, as they beat you over the head with the Big Club (as they pepper spray your sister in the face, kick your family out of your house, take your farms, turn the riot police or military loose on the citiizens they always told you were there to protect you, fire live ammunition at you, or even design and implement plans to overthrow your government if you are just so unfortunate enough to be living in an alleged sovereign nation that has rich resources - or anything that can be leveraged to extract blood from you for that matter, such as being able to buy up the rainwater and aquifiers to charge you for the privilege of drinking the water - and especially so if your government has no fractional reserve central bank bearing the Red Shield Mark of Approval, ala Federal Reserve 'Bank' or Central 'Bank' of England style).

All you blue pill takers, disregard this, because it's - you know - the talk of conspiracy theorists and such.

For those with a strong enough CONSTITUTION to have already swallowed the red pill, or who think they can and would like to try, The  Money Masters, bitchez! 

The Money Masters
Sun, 11/20/2011 - 05:18 | 1895398 Dabale arroz a ...
Dabale arroz a la zorra el abad's picture


My wealth is so minuscule I don't own anything with gold (well, this laptop surely has some micrograms), but I have some cash just in case there is an actual bank run. Though it is just a short term remedy for what would come next.

Sun, 11/20/2011 - 10:07 | 1895538 XitSam
XitSam's picture

So buy a couple silver eagles, nearly as liquid as the ATM. Or some junk silver.

Sun, 11/20/2011 - 06:05 | 1895421 Ghordius
Ghordius's picture

"...Goldman seem so benign..."
Yeah, trust the benign Holy Squid

Sun, 11/20/2011 - 14:21 | 1895954 Randall Cabot
Randall Cabot's picture

Granddaddy Rothschild wasn't born until 1744 so I think you mean the 1700s.

Sun, 11/20/2011 - 15:38 | 1896158 TruthInSunshine
TruthInSunshine's picture

February 23, 1744.

You're correct.

Time flies when the Rothschild Lampreys are having fun.


Wed, 04/04/2012 - 07:29 | 2315721 jaffa
jaffa's picture

The business of banking is in many English common law countries not defined by statute but by common law, the definition above. In other English common law jurisdictions there are statutory definitions of the business of banking or banking business. Thanks.
cell phone directory

Tue, 03/27/2012 - 03:33 | 2293616 jaffa
jaffa's picture

The European Central Bank is the institution of the European Union that administers the monetary policy of the seventeen EU Eurozone member states. It is thus one of the world's most important central banks. The bank was established by the Treaty of Amsterdam, and is headquartered in Frankfurt, Germany. The current President of the ECB is Mario Draghi, former governor of the Bank of Italy. Thanks.
trade show displays

Sun, 11/20/2011 - 11:59 | 1895687 BandGap
BandGap's picture

The wobble will intesify as each variable in this alphabet soup makes it's contribution.  From failed mortgages in Hungary to banks in South America, the inevitable tipping will involve one and all. Even those seeking to stabilize the oscillations will only magnify the problem.  The ultimate push will come from human nature itself, as people realize how they have been played by Gold Man-sacks.


Sun, 11/20/2011 - 00:22 | 1895213 Ropingdown
Ropingdown's picture

The New York Times is venerable, simply meaning that they were reporting way back in the day, 1930, when Goldman Sachs sunk a big chunk of investor money raised in 1928 not into new investments, but into an attempt to prop up stocks it already owned.  It didn't work.  They became insolvent, went into a reorganization, and came back to life.  All reported by the Gray Lady, meaning the one with bags under her eyes.

Sun, 11/20/2011 - 01:02 | 1895258 Prometheus418
Prometheus418's picture

Maybe it should be GIPSIs- I hear they like it when you pay with silver.

Sun, 11/20/2011 - 01:15 | 1895269 flacon
flacon's picture

Dont-ch-know it's not polite to call someone or some nations "PIIGS" even if they are? We are to be respectful to all mankind and call them GIIPS. LOL!

Sun, 11/20/2011 - 05:54 | 1895415 aleph0
aleph0's picture


How ?


Sun, 11/20/2011 - 00:04 | 1895192 savagegoose
savagegoose's picture

gotta be room for an M in there somewhere

Sun, 11/20/2011 - 12:39 | 1895752 CharlieSDT
CharlieSDT's picture

Malta? Montenegro?  Mexico's spreads are rising too but it's best if we find a Eurozone M.

Sun, 11/20/2011 - 03:00 | 1895354 natty light
natty light's picture


Sun, 11/20/2011 - 13:01 | 1895784 Pitchman
Pitchman's picture



Fibonacci Numbers - The Fingerprint of God & God Within

How Two Banksters Led Europe To Ruin -- AND REVOLUTION 

Evaporation of Wealth on a Vast Scale: How $Millions - Trillions Can Disappear 

Graphic: Financial World Dominated By A Few Deep Pockets 


The Looting of America: Happy Labor Day

The Disappearance of Chivalry - George Santayana & Murder By Joystick

"There are no parasites as vile, insidious and cold as the Bankers. They are the original Satanist. Stop the bankers and you stop the wars, you stop the poverty, you stop the inequality. You stop every evil financed by them and they are considerable.... It's a wonderful irony that those who have spent a lifetime putting others into debt are now going to find themselves very very deeply in debt."

The Forces of the Last Gasp, on Meat Street. & Operation Blackout

Sat, 11/19/2011 - 21:44 | 1894999 Not For Reuse
Not For Reuse's picture

WTF kind of a solution is that??

If you truly want to start fellating the facetwitter crowd, you need to wait at least 15-20 yrs. Today's demographics would prefer that you take a long walk off a short bridge

Sat, 11/19/2011 - 22:33 | 1895073 kito
kito's picture

no way!!! the piigs have new leaders!!! they have solved their problems!!! soon to be elected rajoy will restore confidence to the markets for spain. he says spain wants to stay in the eu. he promises austerity, lower taxes, jobs for everyone!!!! it will work, believe him!!!!! invest in spains bonds!!!!!

Sat, 11/19/2011 - 23:07 | 1895125 redpill
redpill's picture

I don't know how any rational person could have money in these institutions at this point

Sat, 11/19/2011 - 23:14 | 1895135 Not For Reuse
Not For Reuse's picture


The same logic underlying most marriages, most domestic violence cases, and most rages against the machine

Sat, 11/19/2011 - 23:44 | 1895166 redpill
redpill's picture

How about the inertia of bureaucrats so obtuse that they will deny that water prevents dehydration?

Sun, 11/20/2011 - 00:10 | 1895199 Not For Reuse
Not For Reuse's picture

The Euro is God.

Because it "floats" gold on its balance sheet.

Water will adapt to whatever metric FOA dictates.

I will personally convert water into wine because I am Jesus.

Suck my water, bitchez

Sun, 11/20/2011 - 01:18 | 1895276 flacon
flacon's picture

"EU bans claim that water can prevent dehydration"


Only a dehydrated "government body" can make such a claim. Hydration is only possible through central bank money printing. 

Sun, 11/20/2011 - 01:29 | 1895289 Not For Reuse
Not For Reuse's picture

you are not a unique & beautiful flacon de neige. Va te faire foutre.

Mille millions de mille de sabords de tonnerre de tonnerre de brest

Fuck off & die :)

Sun, 11/20/2011 - 00:11 | 1895200 CompassionateFascist
CompassionateFascist's picture

So don't drink the stuff. Vampire squid needs the H2o to SwimIn.

Sun, 11/20/2011 - 05:29 | 1895403 koperniuk666
koperniuk666's picture

the eu are right on this one.

its hypohydration not dehydration and is caused by a loss of homeostasis of hydration - essentially an EXCESS of water over electrolytes. The body, simplistically (for you) at this stage requires more electrolyte AND more water.  the addition (by terry fuckwit) of more water (further excess) from his PET bottle of African spring water will cause body electrolyte to migrate into the  new water. body will then eliminate the excess water immediately. 

its pointless , like so much of terry fuckwits life.

but he's the cretin who voted in the lunatics responsible for pissing away his savings, home value and pension.

what do i care if he gets a headache?

war next



Sun, 11/20/2011 - 12:02 | 1895693 BandGap
BandGap's picture

The more water you drink the more it drains your body of salts. Please, use layman's terms.

Sun, 11/20/2011 - 00:30 | 1895223 Bansters-in-my-...
Bansters-in-my- feces's picture


Sun, 11/20/2011 - 00:24 | 1895217 Ropingdown
Ropingdown's picture

Does it bug anyone else that this is the second time in 80 years that a new conservative Spanish leader has called for German assistance? 

Sun, 11/20/2011 - 01:58 | 1895268 Ahmeexnal
Ahmeexnal's picture

Angela Merkel, generalissima por la gracia y mandato de dios??

Sat, 11/19/2011 - 23:56 | 1895182 augmister
augmister's picture

Tell that to the squid, MICHAEL ... here's hoping that you have a dynamic IP address as you are no long safe.

Sun, 11/20/2011 - 09:17 | 1895501 ZeroPoint
ZeroPoint's picture

So I should max out my credit cards now buying gold & silver?

Sun, 11/20/2011 - 09:31 | 1895510 ToNYC
ToNYC's picture

Michael, your wish for debt forgiveness will be granted as soon as they finish getting paid selling you the debt that You will Jubilee on yourself.


Sun, 11/20/2011 - 11:04 | 1895573 El Viejo
El Viejo's picture

I predict the same solution as the one proposed by a Caesar many years ago: A 50-50 split between creditors and debtors. (Just before the creditors murdered him).

The split will be instituted through printing and specific bailouts to the masses through tax cuts. Stagflation baby!

Sun, 11/20/2011 - 11:22 | 1895606 darkpool2
darkpool2's picture

Maybe.....but the sweeping response doesnt set out the ultimate real costs to most people in terms of reduced resouces ( call it standard of living if you like )..... Ah, you counter.....but i didnt tell you about Part 2 ........2 or 4 billion less people on the planet would eventually flush the problem. Indeed Sir; " volunteers" please.

Sun, 11/20/2011 - 09:30 | 1895508 CPL
CPL's picture

So give up is your solution?

If you hadn 't noticed we are in the drivers seat now. This isn't a test and the gallows will be built. Not just for the men and women responisble, but also for their families and friends. Enjoy the amenities while you can. Someone will be by to collect the souls of the wicked soon enough.

Since god or gods aren 't listening looks like the humans with have to perform the task.

Enjoy your borrowed time.

Sun, 11/20/2011 - 17:46 | 1896484 Use of Weapons
Use of Weapons's picture

"Let the monkeys sort it out".

There's an interesting claim made in The Adjustment Bureau that there has to be behind the scenes alteration of the world to prevent genocide & disorder,1 but that real humanity (authentic) can make a positive change.

Well, ask and you shall receive. All I'm seeing at the moment is a desperate attempt to enforce stasis, with strong demands towards positive movement, but I'm afraid nature doesn't allow that. Equilibrium in ecosystems is a total myth, and only poorly educated system theorists from the 50/60's believe in it. Oh... how cruel life would be if the economists the TPTB listen to were in that camp.


Oh, and they're listening CPL, they're just being put on hold. Up, indeed.



  • 1. And yes, I'm aware we're dealing with a fantasy film here, but like all things, it has dual uses
Sat, 11/19/2011 - 21:15 | 1894941 knukles
knukles's picture

The fact or my comment?
(Hi Dawg!  How be thee?)

Sat, 11/19/2011 - 21:20 | 1894948 WonderDawg
WonderDawg's picture

Hiya, Knuks. The fact, of course. Your comments are not that predictable ;-) I'm doing well, thanks. Chilling tonight, golf in the morning. Decompressing and looking forward to having next week off. Hopefully I'll get some things done rather than sitting mesmerized in front of my computer watching the markets and reading blogs. I do that enough when I'm working.

Sat, 11/19/2011 - 21:32 | 1894971 knukles
knukles's picture

Good on ya'. 
Have a superb week's holiday. 
Connect well... in golf, too :)


Sat, 11/19/2011 - 22:00 | 1895026 WonderDawg
WonderDawg's picture

Thanks, my friend. I'll be around, I'm sure, but in case we don't cross paths, have a happy Thansgiving and enjoy some reflection that as bad as things are, and are likely to get, there are still some things to be grateful about.

Sat, 11/19/2011 - 23:10 | 1895128 redpill
redpill's picture

Well rest assured, you CAN eat turkey (but not Turkey).

Sat, 11/19/2011 - 23:32 | 1895151's picture

But what if I'm really Hungary?

Sat, 11/19/2011 - 23:41 | 1895160 redpill
redpill's picture

Then eat some French fries, but make sure they don't have too much Greece.

Sun, 11/20/2011 - 05:55 | 1895417 Incubus
Incubus's picture

eh... where do I fit in the coleslav in this thing that you have going here?

Mon, 11/21/2011 - 03:34 | 1897772 saulysw
saulysw's picture

When you need to go to the toilet, you are Rush'n.

When you go to the toilet, your-a-pee'in.

When you are done, you are Finnish'd.

Sat, 11/19/2011 - 23:53 | 1895176 knukles
knukles's picture

Ah Dawg, so many thanks. 
And there's that one ever special moment of gratitude where we are swept away with that feeling, that breeze of good on each and every cheek down to the very cellular level, that all is as it should be, that incredible moment where we understand the word serenity, and truly know peace.
May that peace be upon you, my friend.

Sat, 11/19/2011 - 21:20 | 1894949 Hulk
Hulk's picture

Definitely the comment, man can you turn a paragraph!

Sat, 11/19/2011 - 21:30 | 1894969 Careless Whisper
Careless Whisper's picture

Things are so bad in Italy that the Polizia are driving new Lamorghini Gallardos. Guess they had to cancel the Bugattis.


Sat, 11/19/2011 - 21:38 | 1894987 Hulk
Hulk's picture

Holy shit! Well, if you are going to collapse from debt, might as well go in style!

Sat, 11/19/2011 - 21:41 | 1894994 Michael
Michael's picture

A complete and total worldwide bond market collapse is starting to happen right now. I love the smell of worldwide bond market collapses in the morning.

Sat, 11/19/2011 - 23:17 | 1895014 WonderDawg
WonderDawg's picture

I'll go out on a limb and say things are the most interesting they've ever been in modern financial history.

edit: interesting in that Chinese curse kind of way.

Sat, 11/19/2011 - 21:56 | 1895022 Careless Whisper
Careless Whisper's picture

and soon you'll be smelling worldwide panic gold buying in the morning...  noon, and night.

Sat, 11/19/2011 - 22:04 | 1895032 Michael
Michael's picture

This is tame compared to what it'll really look like;

"Gold Just Went Over $2000, By Tonight That'll Cheap" Rollover-1981

Sun, 11/20/2011 - 00:24 | 1895218 bigkahuna
bigkahuna's picture

That is some uncanny stuff you posted. Lindsay Williams has said that the puppet masters have to tell us what they will do before they do it. This looks spot on.

Sat, 11/19/2011 - 22:55 | 1895102 disabledvet
disabledvet's picture

bond markets don't "collapse" my friend. they demand...and get "recompense." the fact of the matter is Greece is GREAT news not bad. "that's my liquidity." wait 'till they get invaded! then they'll really know how sublime it feels to be a "bond trader" as "the people cease to exist."

Sat, 11/19/2011 - 23:11 | 1895132 Michael
Michael's picture

I don't see why we have to go to war over it? It's only money.

Sat, 11/19/2011 - 23:40 | 1895159 Not For Reuse
Not For Reuse's picture

Money = making someone else your bitch.

Easy for me to see the war aspect.

Other than that, you are absolutely right.

Americans should "invest" in whatever makes them happy right now. There is no better time than RIGHT NOW.

Eventually, a lot of people will be surprised by how little their "money" is really worth

Sat, 11/19/2011 - 23:54 | 1895181 merizobeach
merizobeach's picture

Bro, you didn't start the war; the war was started by your enemy and against you, regardless of your level of realization.  You're the target; now, your choice is evade, fight back, or capitulate.

Sun, 11/20/2011 - 10:47 | 1895558 disabledvet
disabledvet's picture

"MY money." i always forget that part.
this is what the end looks like actually.

Sun, 11/20/2011 - 08:39 | 1895484 plantigrade
plantigrade's picture

smells in the afternoon too

Sat, 11/19/2011 - 23:02 | 1895118 Mentaliusanything
Mentaliusanything's picture

OK .. A Question - who is buying that which is offloaded ?

Not a credit freeze just yet. Print it and invest in Pigs shit.

Who has the deep pockets to buy such rubbish with gay abandon .. Think

WHO is buying and with what are they buying it with.

just a logical question knowing two sides to any trade

Sun, 11/20/2011 - 00:03 | 1895191 knukles
knukles's picture

Now that, young fellow, is the exact same question which has come to mind upon the reading.
Pre-NYT-escapade, I'd of thought that there'd be buyers at the margin.
Smart money has already abandoned anything in Europe; Euro, sovereigns (with the possible exception of Germany... and that's starting to become debatable.. not concluded, but debatable) banks fer sure (dude), figured there is No Such Thing As Decoupled in this Globalist Age, wary of derivative exposures what after ISDA and Greece and MFG and CME Clearing Corp inactivity...
This is hold on real tight.
I been saying for months, there is no longer an answer to the question "Are we there yet?" with anything other than "We're there already."
Things seem to take so long to happen and then when they do they overwhelm one in a single moment.
We're staring at that moment, right now, dammit.

So I guess it no longer matters who the fuck the buyer at the margin is, anymore.  It doesn't matter.... just as long as somebody, somewhere, ain't putting any of that shit into one of my accounts, depository institution, etc.

Sun, 11/20/2011 - 00:13 | 1895205 CompassionateFascist
CompassionateFascist's picture

The Vampire Squid will be FED.

Sun, 11/20/2011 - 00:34 | 1895230 i-dog
i-dog's picture

Will you please STOP posting everything in bold italics!?! You're not that funny, and it's fucking annoying.

Sun, 11/20/2011 - 00:52 | 1895248 CompassionateFascist
CompassionateFascist's picture

It isn't meant to be. All that debt is going to settle soon. In your immediate neighborhood. The F-E-D-E-R-A-L  R-E-S-E-R-V-E is bailing Europe/GS. Right now. and I like annoying idiots.

Sun, 11/20/2011 - 00:11 | 1895202 DeadFred
DeadFred's picture

Yes the numbers don't add up. A lot more bonds are being sold than are ending up with the ECB. Who has  them now?

Sun, 11/20/2011 - 00:18 | 1895211 CompassionateFascist
CompassionateFascist's picture

You do, sucker. too...Again, the Vampire Squid will be FED.

Sat, 11/19/2011 - 22:48 | 1895091 Jack Burton
Jack Burton's picture

Indeed "Nobody could have seen this coming"!  At least nobody with a Harvard MBA!!

Sat, 11/19/2011 - 23:42 | 1895161 Problem Is
Problem Is's picture

Bonzo Chimp Bush Goes to Harvard

A third generation Yale legacy admit with all "Gentleman" C's (Because you can't flunk a legacy admit...) got into the Harvard MBA program...

So tell me how gifted and elite the graduates of this program are?

Sun, 11/20/2011 - 09:16 | 1895500 MFL8240
MFL8240's picture

Didnt he leave office 3 years ago before the black muslim was elected who added 41% of the total debt in 3 years?

Sun, 11/20/2011 - 10:59 | 1895572 Landrew
Landrew's picture

Go away, you're taking up space. Your bullshit adds nothing of value. No one here likes O'Bummer! We all know that, add real content or read.

Sat, 11/19/2011 - 22:56 | 1895104 masterinchancery
masterinchancery's picture

Thank you Joe!

Sat, 11/19/2011 - 23:39 | 1895158 Problem Is
Problem Is's picture

"New-fucking-York Terr-ist-times!"

"Who Do They Think They Are? "

The Toilet Paper of Record
G. Celente

Sun, 11/20/2011 - 00:48 | 1895243 candyman
candyman's picture

So who is buying this shit?

Sun, 11/20/2011 - 01:08 | 1895264 LetThemEatRand
LetThemEatRand's picture


Sun, 11/20/2011 - 08:21 | 1895471 spankfish
spankfish's picture

Ah... the NY Times, the Gray Lady speaks.  The home of Walter Duranty and other such useful idiots.

Sat, 11/19/2011 - 20:57 | 1894912 kaiserhoff
kaiserhoff's picture

About damn time.  Spin those plates Timmy!

Faster, Faster, Pussycat, Kill, Kill

Sun, 11/20/2011 - 08:25 | 1895476 spankfish
spankfish's picture

How many here even remember Faster Pussycat?

Sat, 11/19/2011 - 21:06 | 1894920 Nobody special
Nobody special's picture

The cards fell when Greek default was determined to be a 'voluntary' credit event.  None of the larger players will risk another 50% haircut, as it too would be 'voluntary.'  Their 'generosity' would force recognition they are bankrupt.  The stampede from PIIGS debt was baked into the Greek CDS decision.

In an attempt to keep the system whole by preventing CDS from triggering... they pulled an even greater trigger.  There is little left to do but watch the dumping run its course.  Soon the bankruptcy of these catalyst nations will affect the rest of the funding system.  Credit is siezing up fast.

I see two possible outcomes.  These giants need a safe outlet for their wealth.  Either there must be an asset without counterparty risk (gold, silver, etc) or there must be a currency that's not subject to destruction (SDR?).

All doors lead to the one world currency.  The play is at hand.

Sat, 11/19/2011 - 21:12 | 1894935 Ahmeexnal
Ahmeexnal's picture

They are all lined up at Mulligan's Bank.

Sat, 11/19/2011 - 21:13 | 1894938 Hulk
Hulk's picture

As the CB's have accelerated their Au purchasing, I expect the big boys to do the same as there needs to be a wealth bridge to whatever our financial future holds...

Sat, 11/19/2011 - 21:57 | 1895023 Michael
Michael's picture

I bet a nicely placed BLU-82 Daisy Cutter bunker buster bomb on Rothschilds gold vaults would do the trick to take back the stolen US gold reserves.

BLU-82 Daisy Cutter

The Rothschilds Control of World Gold Market

Sat, 11/19/2011 - 22:19 | 1895049 LeBalance
LeBalance's picture

since the (rothschilds/elite soldiers) created the bomb, the fascination with it, and the present society, do you not wish to rise above that? or is playing with their broken toys ok? I am trying to look past bullet using (ejaculation facsimile) objects. This would include nearly all present day weaponry: bombs, missiles, etc.  I am also leaning away from mushroom adoration (single letter bombs A,H,etc). Are we trying to see beyond the veil into ourselves or play with the penis landscape of the matrix?

Sat, 11/19/2011 - 23:04 | 1895121 Michael
Michael's picture

I would never have guessed with that avatar. My policy under current conditions is fight fire with fire.

Even this if necessary, full on nuclear exchange. That way nobody gets anything, if the way the world oligarchs want it is not acceptable to the sovereign people of America.

Tsar Bomba - King of the Bombs - 57,000,000 Tonnes of TNT


Sun, 11/20/2011 - 03:40 | 1895370 MsCreant
MsCreant's picture

We need to stop taking this shit personally. That is our undoing. I am not even talking compassion. I am not talking (like you might be) about rising above their state of mind. I mean really, profoundly, stop taking this shit personally. Where would that leave us?

Hint: It does not mean roll over and take it.

Sat, 11/19/2011 - 22:53 | 1895097 americanspirit
americanspirit's picture

I do love the smell of new-mown daisies.

Sun, 11/20/2011 - 03:29 | 1895367 AE911Truth
AE911Truth's picture

Dear Michael, ref: " take back the stolen US gold reserves"

Have to get that money re-distributed and moving through the system again to fix the economy. Can't have it all sitting in some rich guy's safe now can we. :)

Sun, 11/20/2011 - 08:03 | 1895462 I only kill chi...
I only kill chickens and wheat's picture

Damn, why did I watch the blu-182 vid, now I'm going to be watching this stuff half the day. The Anti-everthing gun also nice.

Sat, 11/19/2011 - 21:18 | 1894945 dcb
dcb's picture

agree, better to have the cds event, if yiou can hedge or had owned a cds contract before now it's worthless and you are down on the sovreign bond. not smart. my guess it happened because someone very big had written too much (an AIG?) and they got the polico's to buy into it.  the other is just the alterantive and stupid pride.

Sat, 11/19/2011 - 21:32 | 1894972 Nobody special
Nobody special's picture

Precisely.  Those with government debt are correcting their portfolios to match their new environment.  Without CDS contracts to offset risk, the ideal book of business looks quite different.

What a boon this was for those guaranteeing the risk.  Sell a CDS that's uncollectable.  Of course, that one payday was also a heavy hit to their future market.

Sun, 11/20/2011 - 11:28 | 1895621 DaveyJones
DaveyJones's picture

"the dumping will run its course," the toilet will get clogged, and the flood will ruin everything 

Sat, 11/19/2011 - 21:11 | 1894931 Duuude
Duuude's picture


The Goldman Sachs Project


World domination



Sat, 11/19/2011 - 21:50 | 1895008 Manthong
Manthong's picture


First three steps in fixing the US and global financial system:

1. End the Fed

2. Gut Goldman

3. Yank the Euro

Sat, 11/19/2011 - 22:29 | 1895062 Troll Magnet
Troll Magnet's picture

1. Register as a Republican
2. Vote for Ron Paul in the primary
3. Encourage others to do the same

Sat, 11/19/2011 - 22:49 | 1895093 XitSam
XitSam's picture

Isn't #2 unnecessary after #1 happens?

Sun, 11/20/2011 - 01:39 | 1895297 Manthong
Manthong's picture

Maybe, but all partners should be disembowled anyway.

Sun, 11/20/2011 - 10:24 | 1895547 XitSam
XitSam's picture

Agreed. It's the only way to be really sure.

Sun, 11/20/2011 - 09:42 | 1895521 flattrader
flattrader's picture

Excellent link.  Worth reading.  Thanks.

Sat, 11/19/2011 - 21:17 | 1894944 Unprepared
Unprepared's picture

I remember in 2008 just before the big plunge - while CNBC permabulls still in denial - the IMF, the BIS and other organizations started publishing some explosive and uncensored reports. We haven't waited long after that.

Sun, 11/20/2011 - 03:12 | 1895364 Mactheknife
Mactheknife's picture

And there you have it.  Now you know why GS is the only bank on record that has not only not laid anyone off but has been on a hiring Tyler has previously noted. Potential new "clients" would do well to keep that old adage about "jumping from the fire into the frying pan" in mind.

Sun, 11/20/2011 - 11:31 | 1895629 DaveyJones
DaveyJones's picture

I wonder what a world revolution looks like

Sun, 11/20/2011 - 06:06 | 1895422 tooktheredpill
tooktheredpill's picture

Maybe the squid and maybe someone else as well. Half way down this article is an interesting perspective on how this has been engineered. It seems to be falling into place so far. Check out when it was written.

Sun, 11/20/2011 - 07:19 | 1895447 richard in norway
richard in norway's picture

sorry to  butt in here, but hasnt this whole thing been stolen from reggie. i mean hes been talking about the pan european bank ran for two years now and some of these chart look very simlar to his


is this plagerim or outright theft

Sun, 11/20/2011 - 10:46 | 1895557 PulauHantu29
PulauHantu29's picture

Flight of Capital to where?

Where are these trillions moving to?

Sun, 11/20/2011 - 12:12 | 1895710 Eally Ucked
Eally Ucked's picture

Fucken trolls taking hold of this site, "i'm first" and stupid remarks are unbelieveable, just to take space.and be first.

Sat, 04/07/2012 - 07:57 | 2324276 jaffa
jaffa's picture

Although the ECB is governed by European law directly and thus not by corporate law applying to private law companies, its set up resembles that of a corporation in the sense that the ECB has shareholders and stock capital. Thanks.
Chandler Real Estate

Sat, 11/19/2011 - 20:42 | 1894886 Cultural Capital
Cultural Capital's picture

If governments can manipulate the fiat, what makes you think they won't manipulate a gold backed currency? 

Sat, 11/19/2011 - 20:57 | 1894901 Black Forest
Black Forest's picture

It doesn't make sense to depress the price of gold under a gold-backed currency, provided there is a "price of gold".

Sat, 11/19/2011 - 20:55 | 1894908 traderjoe
traderjoe's picture

Can they manipulate the physical?

Sat, 11/19/2011 - 21:06 | 1894917 Cultural Capital
Cultural Capital's picture

Can you pump petrol with an ingot?  I'd image that even under a hypotheical gold-backed currency paper money or debt cards would still be the intermedaries of exchange. no? And if this is the case, you can bet there will also be manulupation.  

Sat, 11/19/2011 - 21:06 | 1894921 jomama
jomama's picture

yes. you can jam it in between the trigger and handle and get to wiping your windshield.  i wouldn't take my eyes off that ingot, though.

Sat, 11/19/2011 - 22:37 | 1895080 Troll Magnet
Troll Magnet's picture

why go to a gold-backed paper currency? phys gold and silver should be currency. paper - certificates that can be redeemed for gold or silver when accumulated to a certain point - should be used as change.

Sun, 11/20/2011 - 00:32 | 1895225 Cultural Capital
Cultural Capital's picture

Alright so i'm at the shop and the bill is 137.24 how to I pay the teenybopper in physical bullion? 

Sun, 11/20/2011 - 01:25 | 1895283 Prometheus418
Prometheus418's picture

You enter the amount required into an app on your cell phone.  It checks the spot price, and tells you to tender 4 ASEs, one pre-'64 quarter, and one mercury dime.  He or she enters the coin tendered into the touch-screen on the till that checks the spot price, sets the coins on a little scale to check the weight, and hands you two contemporary quarters and a contemporary dime in change.  If you don't have those denominations, the till displays the amount of change he/she owes you based on what is generally in the drawer, whether that is silver or standard coinage.  You may end up with a bunch of dollar coins, but that happens sometimes when you pay with a paper hundred, and get a big wad of twenty and ones back now.

That was easy enough, now- wasn't it?  Probably would take a month or two for everyone to accept it as normal practice, and after that, they'd probably use the scale about as often as they use those anti-counterfeit pens (rarely, in my experience.)

Sun, 11/20/2011 - 04:43 | 1895389 css1971
css1971's picture


Think credit card but with gold backing. Leveraged a thousand to one of course.

Sat, 11/19/2011 - 21:08 | 1894922 Cultural Capital
Cultural Capital's picture

Can you pump petrol with an ingot?  I'd image that even under a hypothetical gold-backed currency paper money or debt cards would still be the intermediaries of exchange. no? And if this is the case, you can bet there will also be manipulation.     

Sat, 11/19/2011 - 22:58 | 1895109 masterinchancery
masterinchancery's picture

Nothing hypothetical about it, the world economy functioned under gold and gold notes for more than a century.

Sun, 11/20/2011 - 00:49 | 1895245 Cultural Capital
Cultural Capital's picture

Maybe so, but how would it work on ebay?  

You still get back to some type of ETF, with the fraud and counter-party risk.  Why recreate the wheel? 

Sun, 11/20/2011 - 01:32 | 1895291 Prometheus418
Prometheus418's picture

You deposit physical bullion at your local credit union, and it appears as a dollar amount in your account based on the Oz:spot price ratio.  Electronic transfer occurs via Paypal, and Paypal transmits payment to the seller's local credit union, where they can either pick up the bullion from reserve, or use as electronic payment.

Severe penalties for any credit union who is found to have less bullion than it's record of deposits.  Periodic random audits for enforcement, and periodic bullion transfers via armored car to correct imbalances.

Sun, 11/20/2011 - 04:39 | 1895387 css1971
css1971's picture

Aaaaaannnnnnndd we're back to 1970.

When was the last time anyone bothered to pick up the physical? Fractional reserve banking works just fine with gold backing. It was invented for it.


Sun, 11/20/2011 - 01:43 | 1895305 James T. Kirk
James T. Kirk's picture

"How would it work on E-bay?"

Talk about your basic misplaced priorities. I don't believe in evolution, but most definitely natural selection, and you, my friend, are in the high risk category. Bugs Bunny has more common sense than you. Is there a genetic birth defect that makes people trust fiat money systems? You are arguing to perpetuate the very system that is being used to control us. 1971-2011. No fiat system has lasted more than 40 years. We are in uncharted waters. Nice shopping with ya.

Sun, 11/20/2011 - 02:34 | 1895339 Cultural Capital
Cultural Capital's picture

Hey bro, don't hate me because my children have a future.  Jim Rogers moved to Singapore so his children could have a good life.  Imagine that bogun.  Now I’m glad you have a pile of Au, I'm glad you feel safe at night.  But not everyone wants to have the same material wealth as the Amish.  Things like how it would work on e-bay is a serious question. 

If you don't want the future to be Mad Max you better start thinking realistically about how a gold-system could/would function in the real world, if you are ever going to sell such an idea the the general public.  A lot has changed since 1971, everyday is uncharted waters. 

Rome will not be built in a day.  People don't like change.  Hell people walk out of a McDonalds if it takes a whole 5 minutes to get a happy meal, you think people will fuck-around with scales and waiting for live-steam exchange-spot prices?

It's a good things dreams are free because I'll tell you what at the end of the day your concerns don't really matter, say hi to Sitting Bull on the reservation. 

Sun, 11/20/2011 - 03:05 | 1895358 Prometheus418
Prometheus418's picture

It's interesting that you compare my scenario to the Amish, when you evidently don't even have a smart phone.

It takes less than 15 seconds for me to check spot price on PMs, in a town with 3000 people.  It's even faster with a hardwired connection.

People don't like change, that's true enough- but the thing that will change that is pain, and what is coming will be painful for most.  I don't know if the future is gold and silver, but the fact of the matter is that what we have now is fundimentally broken, and will change- whether people like it or not.

We haven't had Federal Reserve Notes forever- The US has had Colonial Scrip, Bullion, Greenbacks, Trade dollars, Barter, and Silver Certificates, just to name a few.  All of this has happened before, and it's going to happen again.  Hell, there was a time when Roman soldiers were paid in salt.  

You can pick whatever horse you like- but the odds aren't looking great for today's FRNs.  Neither will PMs be the final currency for all mankind for all time- it's just an interim step that allows a full accounting before creating a new placeholder system.  When confidence is lost because excessive unbacked printing has occured, the only option is to revalue everything in reference to a physical yardstick, and that yardstick has traditionally been gold.  It has all the characteristics of money, and cannot be counterfeited easily.

So maybe the time when physical gold and silver are transacted is relatively short- that is neither here nor there.  It could be a matter of a few weeks or months before computer systems are reconfigured to a new standard- after which, I suspect it will be right back to plastic swipe-cards or chips.  The difference may only be that price tags change from $ to Oz in the stores, in practice.

But even if the change is that simple, it still allows currency to reset to fair value by pricing assets in terms of gold.  That needs to happen, even if all you want is another 40 years of the same.

Then again, perhaps I'm way off base, and in that case, I'll give Sitting Bull your regards before he and I eat some peyote and go on a spirit walk.  But just in case, you may want to reconsider your position.  I have kids too, and my positions are in place to protect them as best I can- and that does not mean placing my trust in men who have repeatedly raped and abused society without as much as a hint of remorse.  Lots of people get away with bad shit for a while- until they don't, and right now, there are a lot of very angry people who are scared and beginning to get violent.  Something has to give, and it will.

Sun, 11/20/2011 - 05:23 | 1895377 Cultural Capital
Cultural Capital's picture

Cheers homie, I have no beef with you.  But lets just say for the shake of argument that: 

Confidence is lost (which it is) because excessive unbacked printing has occurred 
Now, how are people who are very skeptical in the first place going to have faith in the government or politicians, or corporations for that matter if the majority of people don't believe the government tells the truth first place? Fort Knox anyone? Look at the states right now, like a junky they can't stop spending A gold standard won't hold because there will be too much pressure to spend, spend what governments don't have, and lie about it if need be. Enron baby. 

 If people have no faith right now, will they magically have faith when one day Obama goes on tv and says we are back on the Gold standard? Haha, or do people just want to make a quick buck just like all the banking speculatiors people here at ZH love to hate which the spot price gets revalued?

Instead of 'in god we trust' we get 'in gold(we say we have) we trust' and now all our problems are solved?

I wish you well. Take care. 

Sun, 11/20/2011 - 13:53 | 1895895 Prometheus418
Prometheus418's picture

I really don't have a beef with you either, it's just an interesting problem to discuss.  In reality, I could care less if we are backing the currency with metals, moon rocks or exotic fish- just so long as the supply of specie and price remain relatively stable.

I don't even have gold, to be honest- it's all silver, and that is a hedge position.  The simple reality right now is that if you want to buy something today in the US, you have to have USD, so there's no way for you or I do simply abandon it at this time- I do trade a few things directly with silver, but they are specific and limited situations where the payment is accepted directly by the owner of the enterprise- firearms, firewood and my dentist accept silver, but I suspect that the clerk at my local grocery store would look at me like I had three eyes if I tried to pay for a pound of beef with a single mercury dime.

My three case studies for what is happening now are Weimar Germany, Argentina and Zimbabwe.  For the most part, I've discarded Zimbabwe as a real reference, as Africa simply does not behave like Western economies- and I'm beginning to believe that we are not going to be seeing a Weimar scenario anytime soon as well.  But Argentina is an interesting and recent case of currency destruction- so that is my main benchmark.

One of the standout things in Argentina is that those who lived there report trading currency outside of the stores, then entering and paying in Pesos.  While this is less than ideal, and probably dangerous, people nonetheless were standing in alleys trading USD or Precious metals into Argentine Pesos right before entering retail establishments.  Similarly in Zimbabwe and Weimar, people survived and continued to engage in commerce by using foreign currency or metals- though metals almost always flee in short order, either hidden away or moved out of the country.

What is different here- not in concept, but in scope, is that the USD is the world reserve currency.  For now, we've been pumping FRNs into the accounts of our trading partners in huge quantities, and causing destructive inflation around the globe- and in large part, we've been getting away with it because the rest of the world is no better.  But there will come a point where other countries can no longer absorb our excess currency, and they will begin to sell USD in favor of other assets, like precious metals.  When enough countries reject the dollar, all those stagnant USD pools around the world will flush back into our system, and we will see massive inflation.  Prices will rise faster, while wages remain stagnant, and eventually people will lose all confidence, and begin to engage in massive hyperinflationary behavior, spending cash as fast as they can to avoid the loss of it's purchasing power.  The problem we have is that there isn't a readily available secondary reserve currency to use when the dollar devalues- coinage and PMs are about all there is, unless you want to go back to simple barter.

In Weimar, this was ended quickly and neatly by the ending of the old currency and the issue of a new currency.  The old notes were left in circulation, and the new ones were issued in limited quantities.  That was enough to restore confidence to a degree that allowed the hyperinflationary behavior to end, and they could begin to recover.

There are other interesting backing systems that could be used for currency- I am intriged by the infrastructure bank idea, and I'm still a fan of coinage.  It may be the case that Gold and Silver are too scarce to be used as transactional currency when all is said and done, but that does not eliminate other metals such as nickel, copper, titanium or even alloys such as stainless steel from consideration for transactional coinage.  This would require massive and real reform in the enforcement of monetary policy in the US, including prision time for engaging in certain practices such as fractional reserve banking and debasement of specie.  But in reality, all roads must lead to a system that enforces the rule of law for anything to work.  The value of existing precious metal reserves is that they can be used as a measuring stick, and a tool of restoring confidence.  Marking the FRN to $42/oz against physical gold is a declaration that the currency is debased, unless you can buy an oz of gold for $42.  Revaluing the currency to gold, and allowing it to be exchanged for bullion at any bank would be an excellent way to restore confidence for a time.  As long as the currency remains easily convertable by anyone, and the banks maintain adequate reserves to meet demands for specie, the confidence in the paper currency (and by extension, the electronic currency) will remain intact.  Some people will always take advantage of any system there is, but they are criminals, and should be treated as such when they are caught engaging in fraud.


Sun, 11/20/2011 - 07:24 | 1895453 Goldenballs
Goldenballs's picture

Gold and Silver coins could be issued which were largely debased,ie .100,.125 or .250,etc.The old days of .925 or Sterling,.900,.750 or .500 Silver or Gold might be to much for every day use and with the scarcity of real bullion (I am sure real bullion will turn out to be scarcer than everyone thinks).To use the system verified bullion would be deposited in an institution somewhere.To make the system work the verification system would have to be watertight or there would be no confidence.Confidence is the key,the system would survive not on bank confidence but public confidence.That is the one fly in the ointment for GS if there is no public confidence in the system it will collapse.

Sun, 11/20/2011 - 14:10 | 1895935 Prometheus418
Prometheus418's picture

I think we have the technology for that, and it doesn't seem unreasonable that retail establishments might pay $100 for a small unit that accurately weighs and measures the diameter of coins to accept bullion- it could even have a couple of contact points to test electrical conductivity.  It's not as though we'd be going back to the days of biting a gold coin, and then tossing it on a scale with a balance beam, or shaving a hunk o' gold off a nugget with a pocket knife.

The big trick is retaining confidence in electronic transactions, which I do believe is necessary.  For that to happen, it's crucial that the numbers in any bank account can be exchanged for specie at any time- having specie in common circulation makes that possible.  We already do something similar with bank cards and paper cash- if your account says you have $500 on a screen, you can go to a bank and get five $100 bills.  As long as the banks have bullion, it should work the same way- if you have 6.24 oz of Silver in your account, you should be able to go the the bank and recieve a combination of bullion and lesser coinage in exchange for your electronic digits.

It's really not as difficult as people make it out to be.  All it would take is a couple of lines of code to report the options in triplicate on a monitor- so that when you check your balance, it says (for example) $1764 / 1 oz Au / 51 Oz Ag, and it's up to you what flavor of cash you want that day.  ATMs would be harder, but nowhere near impossible- I use pop machines all the time, and they accept and dispense coins just fine.


Sat, 11/19/2011 - 21:09 | 1894925 catch edge ghost
catch edge ghost's picture

Because buy gold. You'll die if you don't. It's going to be BAD. Guns.

Sat, 11/19/2011 - 21:19 | 1894947 Unprepared
Unprepared's picture

They can. It will just be a little bit harder.

Sat, 11/19/2011 - 23:00 | 1895117 disabledvet
disabledvet's picture

they've got to create the gold backed currency first numb-nuts. hardy har har! did you the one about the French Poodle and the German bureuacrat?

Sat, 11/19/2011 - 20:43 | 1894888 Ahmeexnal
Ahmeexnal's picture

USA for Africa in 1985.

Earth for Europe in 2011?
Not gonna happen.

Sat, 11/19/2011 - 22:01 | 1895027 lotsoffun
lotsoffun's picture

jews for jesus.  muslims for moses.


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