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Eric Sprott: The Financial System’s Death Knell?

Tyler Durden's picture


From Eric Sprott And David Baker  (previously more on the topic from Zero Hedge: Europe's "Monetary Twilight Zone" Neutron Bomb: NIRP)


NIRP: The Financial System’s Death Knell?

On July 18th, 2012, the German government sold US$5.13 billion worth of 2-year bonds at an average yield of -0.06%. Please note the negative symbol in front of that yield number. What this means is that the German government was able to borrow money for less than nothing. When those specific bonds expire in two years’ time, the German government will pay back the original $5.13 billion minus 0.06%. Expressed another way, investors knowingly and willingly bid the German government $5.13 billion in exchange for bonds that will pay no interest and are guaranteed to lose them money on expiration.1 Welcome to the new status quo.

Germany is not alone. Over the past six months, the countries of Netherlands, Switzerland and France have also issued short-term government debt at negative yields. Like Germany, they’ve been able to do this because European bond investors are so shell shocked that they’d rather park money in a bond that’s guaranteed to only lose a miniscule amount rather than risk losing more in a PIIGS bond that actually pays some interest. In addition, many investors view German, French and Dutch bonds to be cheap options on the break-up of the Eurozone. If the EU currency union collapses, euro-denominated bonds issued by those specific countries may be paid back in re-issued deutschmarks, francs or guilders, which will be far more valuable than the euros that were spent to buy the bonds in the first place… or at least that’s the idea. As a result of this thinking, the bond market auctions for these select countries have seen overwhelming demand, making NIRP (Negative Interest Rate Policy) the new ZIRP (Zero Interest Rate Policy).

The NIRP acronym is misleading, however, because unlike ZIRP, NIRP isn’t actually an official “policy” per se, but rather a symptom of a broken financial system increasingly starved for good ‘collateral’. Aside from those speculating on a Eurozone currency collapse, a large portion of the bond investors participating in NIRP bond auctions are the banks. As the euro crisis has dragged on, banks in perceived “strong” countries like Germany and Switzerland have seen record inflows of deposits from banks in peripheral EU countries, like Spain. As most of these “strong country” banks have been hesitant to lend those deposits out (for obvious reasons), they are forced to park them in short-term government bonds. Moreover, new rules imposed by various regulators such as Basel III have forced all banks to hold a larger percentage of their balance sheet in government bonds, regardless of their country of domicile. The result has been a mad dash into the bond auctions of select “safe” countries just as the pool of available AAA-bonds has been drastically reduced. Banks are piling into NIRP bond auctions today because they have nowhere else to go. This is why nobody seems to be alarmed by the recent ubiquity of NIRP bond auctions – they are merely thought to be a short term phenomenon that will pass in time… just like zero-percent interest rates were supposed to be when they were widely introduced four years ago (sigh).

NIRP is different than ZIRP, however. NIRP causes outright financial destruction. Economies can hardly survive extended periods of ZIRP rates, let alone survive a long-term NIRP environment. It just doesn’t work. Institutional investors like pension plans and life insurance companies cannot earn enough “spread” to function properly. And many aren’t allowed to buy different asset classes that might produce a better “spread”, even if they wanted to. They are stuck holding the AAA government debt issuers – positive-yield, or not.

Negative rates also punish the individual investor. Try going online and using one of the banks’ retirement savings simulators and plugging in a negative expected return – you’ll break the program. The same also goes for the investment advisory business. When so-called safe-haven bonds start to consistently produce a negative return, try charging advisory fees to clients while recommending a 50% allocation to negative-yielding government debt. Advisors can try it for a while, but investors won’t put up with it for long.

The recent emergence of NIRP auctions are a signal that the relationship between governments, banks and investors has broken down. While the market still presumes that NIRP is a short-term phenomenon confined primarily to Europe, the dearth of AAA-assets coupled with banks’ captive bond purchasing suggests it may be structurally enforced for a long time to come. There’s even the potential for NIRP to emerge in the US bond market. As Bloomberg reports, the gap between US bank deposits and loans hit a record $1.77 trillion at the end of July 2012, representing an expansion of 15% since May.2 “Banks have already bought $136.4 billion in Treasury and government agency debt this year, more than double the $62.6 billion purchased in all of 2011, pushing their holdings to an all-time high of $1.84 trillion.”3 The current 2-year US Treasury bill is yielding a paltry 0.29%. If something exciting happens in Europe, what’s to stop the bond market’s typical knee-jerk move into US Treasuries from pushing that yield down past zero? Not much. We could be there before the end of the year, especially if the banks continue to gorge on ongoing US Treasury auctions in the meantime.

The question now is how well the financial system can cope in a relentless low-to-no yield environment for bonds. The last four years of low rates have already wreaked much damage to ‘spread’-dependent industries. One need only look at the insurers: In its latest Q2 report, after reporting an 88% drop in Q2 year-over-year earnings, Sun Life Financial stated that if current interest rates persist its profits for the period from 2013 to 2015 could be hurt by up to CAD$500 million.4 Manulife recently reported a Q2 loss of CAD$300 million, which was mainly attributed to a CAD$677 million charge it took to revalue long-term investment assumptions to account for falling bond yields.5

The pension plans are also deteriorating: According to recent reports from BNY Mellon and Mercer, the funded status of US corporate pension plans hit a record low in July 2012. Benefits Canada writes, “The average funded status dropped 2.9 percentage points to 68.7%… while the latest figures from Mercer show that the aggregate deficit in pension plans sponsored by S&P 1500 companies grew US$146 billion during July, to a record high of US$689 billion.”6 That’s a one-month increase of 27%.7 In the pension business, lower yields on long-term AAA bonds results in higher plan liabilities, plain and simple. As Reuters reporter Jim Saft writes, “To give an idea of exactly how powerful the effect of falling rates is on pension liabilities, consider that, according to Mercer, though US shares rose 1.4 percent in July, the 30-55 basis point fall in discount rates drove an increase in liability of between 3 and 11 percent. In a single month.”8

It’s even worse for the public pensions. According to the Washington Post, new pension accounting rules imposed by bond-rating firm Moody’s are expected to “triple the gap between what states and municipalities report they have in their funds and what they have promised to pay out retirees.”9 If implemented, that new public pension gap will balloon to $2.2 trillion. Michael Fletcher from the Washington Post writes, “Among other things, the new accounting rules from Moody’s and the Governmental Accounting Standards Board (GASB) limit the rate of return on future investments that pension funds can assume for accounting purposes. Most government pension funds assume a 7 percent to 8 percent return, which critics say overstates future investment income.”10 With the US 10-year bond now paying less than 2% a year, assuming a 7-8% return isn’t an overstatement, it’s a fantasy. Chart 1 shows how the last four years of low-to-no rates has impacted the average Canadian pension plan. Extend that trend another four years and we might as well redefine the entire purpose of pensions altogether.


a. Solvency position is equal to assets divided by liabilities.
Source: Mercer (Canada) Limited. Last observation: May 2012.

Banks are also suffering from NIRP and ZIRP, as evidenced by the performance of Wall Street’s five biggest banks thus far in 2012. Bloomberg writes, “JPMorgan Chase & Co. (JPM), Bank of America Corp., Citigroup Inc., Goldman Sachs Group Inc. and Morgan Stanley had combined first-half revenue of $161 billion, down 4.5 percent from 2011 and the lowest since $135 billion in 2008. The firms blamed the decline on low interest rates and a drop in trading and deal-making.”11 (Emphasis ours.) Banks make money on the spread between the interest they charge on loans and the interest they pay on our deposits (this is called the net-interest margin). Chart 2 shows the impact low rates have had on the net-interest margin for the Big 6 Canadian banks, and how tightly correlated their profits are to bond yields themselves. The average net-interest margin for the Big 6 was 2.55% in fiscal Q2 2012, while the average yield on the Canadian 5-year Treasury bond was 1.54%. According to our calculations, for every 100 basis point decline in the 5-year Treasury yield, the Banks’ net-interest margin will fall roughly 20 basis points. All else equal, a 1% drop in 5-year bond yields will result in a -15.6% impact on the banks’ net income. Like the insurers, the persistence of low bond yields hurts their profit margins… and the more deposits the banks take on, the more they are inadvertently forced to participate in short-term bond auctions – thereby supporting the very market causing the margin compression in the first place. It’s a vicious catch-22.


Source: Bloomberg, Big 6 Canadian Banks’ Financial Reports.

From a government perspective – especially governments like Germany who currently issue short-term debt for less than nothing, the current abundance of NIRP and ZIRP bond auctions represent a sweet irony. Here we are, on the interminable verge of collapse in Europe, and at a time when Western governments have never been more indebted, and bond investors are lining up to pay for the pleasure of owning their bond paper! It’s actually quite ridiculous. But no matter how much pain the current low-to-no yield environment causes the rest of the financial industry, governments will not do anything to change their current set-up. No government is incentivized to proactively raise their bond auction yields for the sake of savers, and barring the surprise emergence of major inflation, no central bank would ever raise interest rates and risk curtailing their expensive efforts to foster growth through money-printing. The banks’ continuing need for safe “collateral” means they’ll buy government bonds at virtually any price, leaving the governments with a “captive” buyer for their bonds. It’s almost perfect for the governments… and as it now stands, unless the banking system diversifies into different forms of AAA-collateral (like gold), or until we experience a default or major inflation – both clearly negative events, investors will be forced to survive with a AAA-bond market that pays absolutely nothing, just like Japanese investors have suffered through for the past twenty years.

Under widespread NIRP, pensions, annuities, insurers, banks and ultimately all savers will suffer a slow but steady decline in real wealth over time. Just as ZIRP has stuck around since the early 2000’s, NIRP may be here to stay for many years to come. Looking back at how much widespread damage ZIRP has caused since its introduction back in 2002, it’s hard not to expect that negative interest rates will cause even more harm, and at a faster clip. In our view, NIRP represents the death knell for the financial system as we know it today. There are simply too many working parts of the financial industry that are directly impacted by negative rates, and as long as NIRP persists, they will be helplessly stuck suffering from its ill-effects.

Although it’s been a quiet summer for “hard assets” like gold and silver, this low-to-no rate environment should prove to be beneficial for them over time. The tide is definitely turning in their favour. Various bond commentators have recently come out in support of hard assets, including PIMCO’s Bill Gross, who opined in his August month-end letter that, “Unfair as it may be, an investor should continue to expect an attempted inflationary solution in almost all developed economies over the next few years and even decades.”12 NIRP and ZIRP are critical components of that solution, and are here to stay until something unpredictable disrupts the current relationship between the banks and government bond auctions. In our view, the factors that have led to the emergence of NIRP bond auctions are the same factors that will drive demand for physical gold in the coming months: savers have nowhere to go for a “safe” return. It’s only a matter of time before they realize they’ve overlooked a unique financial asset that would perfectly suit their needs. When they do, we would strongly advise them to take delivery.

a. Solvency position is equal to assets divided by liabilities.
Source: Mercer (Canada) Limited. Last observation: May 2012. 

1 Bartha, Emese and Chaturvedi, Neelabh (July 18, 2012) “Negative Yield on German 2-Year Note”. Wall Street Journal. Retrieved on August 8, 2012 from:
2 Eddings, Cordell and Kruger, Daniel (August 20, 2012) “Banks Use $1.77 Trillion to Double Treasury Purchases”. Bloomberg. Retrieved on August 20, 2012 from:
4 Perkins, Tara (August 8, 2012) “Sun Life hammered by markets, low rates”. The Globe and Mail. Retrieved on August 10, 2012 from:
5 Reuters (August 10, 2012) “Manulife takes loss, to revisit profit target”. Reuters. Retrieved on August 12, 2012 from:
6 Benefits Canada (August 3, 2012) “U.S. pensions hit all-time funding low”. Benefits Canada. Retrieved August 5, 2012 from:
7 Mercer (August 3, 2012) “US Corporate Pension Plans’ Funding Deficit Reaches All-Time High”. Mercer. Retrieved on August 21, 2012 from:
8 Saft, Jim (August 14, 2012) “Negative rates and pension pain”. Reuters. Retrieved August 14, 2012 from:
9 Fletcher, Michael (August 16, 2012) “New rules expose bigger funding gaps for public pensions”. The Washington Post. Retrieved on August 16, 2012 from:
10 Ibid.
11 Eddings, Cordell and Kruger, Daniel (August 20, 2012) “Banks Use $1.77 Trillion to Double Treasury Purchases”. Bloomberg. Retrieved on August 20, 2012 from:

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Wed, 08/22/2012 - 17:51 | 2728820 spinone
spinone's picture

As long as OPEC only takes dollars for oil, no worries.

Wed, 08/22/2012 - 17:54 | 2728828 Careless Whisper
Careless Whisper's picture

The Careless Whisper News Update & Threadjacking


HIDDEN IN PLAIN VIEW: Senior ATF'er Who Oversaw Fast 'N Furious Gun Running Op Was On JPMorgan Payroll While At ATF

No One Is Defaulting On Their Car Loans,0,4649735.story




Wed, 08/22/2012 - 18:01 | 2728848 markar
markar's picture

Jesus, is there any fraud, theft, or scandal that doesn't have JPM's fingerprints on it?

Wed, 08/22/2012 - 18:14 | 2728869 Bay of Pigs
Bay of Pigs's picture

No, they are the biggest crooks to ever walk the Earth.

JPM's derivatives book dwarfs everything else in the market. It's a fucking Clown Show.

Wed, 08/22/2012 - 19:01 | 2728905 Al Gorerhythm
Al Gorerhythm's picture

The mutual funds, superannuation accounts, segregated customer accounts and other retirement and savings funds held at banks, are being used to  backdoor your savings to the government and their partners in crime, under the guise of "investing" the money in "Investment Grade Bonds". 

This is as weird as it gets; investment managers knowingly booking a loss for their usually captured clients. They're not even taking the risk in speculation! They are knowingly taking a loss and they are knowingly making bets with client funds for the purpose of transfering the funds "legitimately"  as a loss.This was a known outcome and it is just incredulousness that keeps people from admitting to the utter pevasiveness of the scam.

EDIT: And here's how your money is spent

Wed, 08/22/2012 - 19:13 | 2728969 TruthInSunshine
TruthInSunshine's picture

The more The Bernank robs savings, the more aggregate demand is destroyed.

The Bernank will be amenable to report economic expansion as a result of inflation rather than increasing productivity, activity or demand/consumption (i.e. purchasing).


If real private sector consumption falls by 10% over the next 5 years but real inflation runs at 20% during the same period, The Bernank's okay with that.

It's all a numbers racket.

Wed, 08/22/2012 - 22:35 | 2729283 DoChenRollingBearing
DoChenRollingBearing's picture

Antal Fekete has written on what would likely happen if gold goes into backwardation.


Would NIRP be the equivalent of money going into backwardation?  Or the opposite?  Real question...

Wed, 08/22/2012 - 23:29 | 2729363 The Big Ching-aso
The Big Ching-aso's picture



Hate 2 break it 2 Sprott but this knell has been dead 4 quite awhile now.  Think A Weekend at Bennie's.

Thu, 08/23/2012 - 00:46 | 2729443 A L I E N
A L I E N's picture

Speaking of silver man Sprott, are the rumors true that london has defaulted on two large silver deliveries?

Thu, 08/23/2012 - 01:02 | 2729460 CrazyCooter
CrazyCooter's picture

DCR, I have been thinking for a while that an actual NIRP policy, if it is established directly by banks (not indirectly through inflation) would simply blow the system up. As soon as this happens, people will just pull their cash, stuff it in a safe deposit box, and enforce the asymptope of ZERO on interest rates. This would collapse the banking system in short order.

I do not think NIRP can be an official policy, at least in out right monthly bank statements. It is happening in Europe because of capital looking for a house to stay in that doesn't have a pimp running it ... different situation entirely ...

I will now RTFA ...



Thu, 08/23/2012 - 06:29 | 2729571 new game
new game's picture


neg int rate option

not a policy

but an option chosen by situation.

whether prudent or not, these fuckin tools do it because, well they are tools...

just don't look good no matter how  much you smoke.

wish think hopium, then disgust/rebellion, then outright hate/death.

logical disorder to come...

Thu, 08/23/2012 - 12:29 | 2730690 Debt-Is-Not-Money
Debt-Is-Not-Money's picture

NIRO fiddled while the world burns!

Thu, 08/23/2012 - 06:46 | 2729576 Element
Element's picture

However ... MMT/Keynesianism says bond market auctions are irrelevant and out-moded, as the local sovereign big-banana and printer-in-chief can issue and buy any bonds, any time, at any rates, for any reason, or none at all, and roll it again - with zero constraints.

wot? ... no! .... no, they really believe this is how it'll work, long-term!

eh? ... sectioned? ... well maybe ... but you'll need a lot of wards, as Washington and the US Federal Reserve is full of them.

Thu, 08/23/2012 - 08:25 | 2729741 _underscore
_underscore's picture

Yes, that funny thought occured to me too. Since you're getting less fiat back, than the 'spot' price (i.e. the same amount denominally, although less ambient inflation) expected then, it would seem that you're giving up any 'gain' for the certainty of getting most of (whatever the NIRP element is)  your capital back. That's quite a sobering thought - you're paying for the safe-keeping of fiat, rather than looking to get a return.

In a normal world, the usual contango would be expected (like when I used to deposit fiat & a get a real-ish return, even accounting for inflation) - all this seems to me to be incredibly bullish for PMs, because it can't be debased or at risk (as the above might imply) of counterparty default.


Thu, 08/23/2012 - 11:51 | 2730497 blunderdog
blunderdog's picture

Technically, "money" is (and has ALWAYS been) in backwardation.  A dollar today has always been worth more thana dollar tomorrow.


Wed, 08/22/2012 - 20:02 | 2729019 BigJim
BigJim's picture

 ...EDIT: And here's how your money is spent

Ah, monarchy... such a dignified expression of humanitys' 'need' to be governed

Wed, 08/22/2012 - 20:37 | 2729101 TheSilverJournal
TheSilverJournal's picture

Why get we just become uber successful by continuing to encourage consumptions and discourage productions to the max? These leaders just don't get it, the more we demand, the more that will magically appear.


Wed, 08/22/2012 - 20:36 | 2729100 SwingForce
SwingForce's picture

The FDIC has 0.0000003% available, get in line early like you did for your iphone at best buy.


Wed, 08/22/2012 - 22:37 | 2729286 DoChenRollingBearing
DoChenRollingBearing's picture

Driving home this evening I found that my bank's ATM was not working...  Now every time that happens I wonder..., has it started?

Wed, 08/22/2012 - 23:31 | 2729366 Crisismode
Crisismode's picture






Thu, 08/23/2012 - 00:45 | 2729442 LMAOLORI
LMAOLORI's picture



But they have the full faith and credit of the U.S. Government ROFLMAO



"Per the Q4 2011 FDIC Chief Financial Officer's report to the Board, published on March 30, 2012, the FDIC's Deposit Insurance Fund had a balance of $11.8 billion dollars"


Bank deposits in the United States at the same time are estimated to be between $8 TRILLION and $10 TRILLION. Let's be conservative and say the number is $8TTT.

11,800,000,000 divided by 8,000,000,000,000 equals 0.001475, which I will round UP to 0.0015.

That is read as "fifteen hundredths of one percent". It isn't one percent, it is fifteen hundredths of one percent. That is how much the FDIC is carrying to back all of those little signs on the teller windows that say "Each Depositor insured to at least $250,000. Backed by the full faith and credit of the United States government."

But hey! It could be worse! Back in 2009 the FDIC was completely insolvent - IN THE HOLE. So what they did was to force all of the banks to pay three years worth of premiums upfront in one year, in order to replenish the fund.

Now, let's review some other statistics as of June 30, 2011:

JP Morgan: 
Total Assets $1.8 TTT 
Total Derivatives Exposure: $78 TTT

Total Assets: $1.2 TTT 
Total Derivatives Exposure: $56 TTT

Bank of America: 
Total Assets: $1.4 TTT 
Total Derivatives Exposure: $53 TTT

Top 25 commercial banks: 
Total Assets: $8.3 TTT 
Total Derivatives exposure: $249 TTT

in full


Low Interest Rates Have Impoverished Savers While Enriching Large Corporations

How Safe is My FDIC-Insured Bank Account?


Wed, 08/22/2012 - 21:38 | 2729195 smlbizman
smlbizman's picture

silver thru 30...

Wed, 08/22/2012 - 22:07 | 2729241 Imminent Crucible
Imminent Crucible's picture

Silve thru 30, yes. And the point & figure chart plots "bullish price objective $58."

$58 silver might be an indicator that things are getting out of hand. Ben Bernanke: "Trust us. We do know what we're doing."

Wed, 08/22/2012 - 22:44 | 2729295 Ray1968
Ray1968's picture

Woot... Time for a CME margin hike!

Thu, 08/23/2012 - 00:44 | 2729440 pashley1411
pashley1411's picture

Well, I went back and checked closely, and I see no mention of JPM at the crucifixtion.

Oops, where did the 30 silver coins come from?

Thu, 08/23/2012 - 01:46 | 2729494 LMAOLORI
LMAOLORI's picture




"pashley1411 Oops, where did the 30 silver coins come from?"  (hahahaha priceless)


Answer - The Fed


Did Fed telegraph QE3 at last meeting?

Thu, 08/23/2012 - 01:10 | 2729463 Angus McHugepenis
Angus McHugepenis's picture

It's almost to the point where you would welcome their finger prints all over you, instead of the giant mastadon cock up your (our) asses.

Thu, 08/23/2012 - 04:56 | 2729553 bentaxle
bentaxle's picture

Yep, which is the odd one out? CIA, FBI, JPM, NSA?

Thu, 08/23/2012 - 05:03 | 2729555 NoClueSneaker
NoClueSneaker's picture

Jupp, those with GoldmanSux fingerprints on ....

Wed, 08/22/2012 - 18:17 | 2728875 greyghost
greyghost's picture

careless......welcome to the new home of the present...your car! nuff said

Wed, 08/22/2012 - 17:57 | 2728836 bigdumbnugly
bigdumbnugly's picture

that looks like it might be changing soon.

Wed, 08/22/2012 - 18:30 | 2728903 nope-1004
nope-1004's picture

Anyone know what news caused PM's to spike in the after market?


Wed, 08/22/2012 - 19:03 | 2728951 Al Gorerhythm
Al Gorerhythm's picture

Greece is going to be saved, I (dis)believe

Wed, 08/22/2012 - 20:46 | 2729117 SwingForce
SwingForce's picture

I don't agree or disagree with the word "saved". I disagree with who you are calling Greece. Not its citizens, certainly, none are being consulted as how to rebuild their economy. "Greece" means Bankster LEECHES empowered by treasonous politicians, who have sold the Country to the Devil 2 years ago. There's no trickle down to the citizens or the economy- it ALL goes to the BONDHOLDERZ ( aka the crooks who hold the debt that will never be defaulted on by the OTHER banksterz).

The old version of Greece has long ago sold the naming rights to their country to Goldman, and that's who's doing the old left pocket pays the right pocket scheme of "bailouts". Ha. 

Wed, 08/22/2012 - 22:37 | 2729287 Al Gorerhythm
Al Gorerhythm's picture

Good fix.

Thu, 08/23/2012 - 01:12 | 2729466 guidoamm
guidoamm's picture


It is true the people are not consulted because it is true that it is not the people that are meant to be saved.

Nonetheless, as evidenced by any news story you care to read reporting interviews with people on the ground living through this economic disaster, even if they were asked, Greeks, like Italians, Spaniards or Portuguese or any other people, are still asking for the government to provide jobs.

This of course, is the result of decades of deliberate manipulation of the academic curriculum whereby government presents itself as the protector and the solution to crisis thus ensuring its own expansion at the expense of society. Hence the depletion of savings on the promise that government has your back in healthcare and retirement.

Most people are conditioned to believe that government is the solution to improve their life. Even if asked, people would require government appropriate funds to "create" jobs.



Wed, 08/22/2012 - 20:02 | 2729041 BigJim
BigJim's picture

Drop in USDX, I reckon... pure inverse dollar thang, baby

Wed, 08/22/2012 - 18:08 | 2728861 spinone
spinone's picture

OPEC will accept Chinese protection and ditch the US? Bullshit.

Wed, 08/22/2012 - 18:15 | 2728873 rich_wicks
rich_wicks's picture

Why would OPEC want to allign themselves with the United States?

So the US can drop bombs on them, and stab their former allies in the back?

The US has overthrown the Iranian Democracy, it helped start the 8 year war between Iran and Iraq, it keeps funding Israel a nation of visciously racist nuclear armed lunatics, and the only thing the US government gives them for all this trouble is a bunch of money based on a debt that is soon going to be 16 trillion dollars when the US government makes less than 2.56 trillion dollars a year to support that entire debt.

Wed, 08/22/2012 - 19:48 | 2729024 BigJim
BigJim's picture

The Arab OPEC countries' people may have no love for 'King Dollar' - but that is why we, the US, support their unpopular governments. In fact, the more unpopular (within reason) they are, the better for us; that way they need us more.

It's a mutual benefit thing - they keep the oil flowing for dollars, and we keep their elites in power.

Wed, 08/22/2012 - 20:49 | 2729124 rich_wicks
rich_wicks's picture

A good part of the reason their governments are so unpopular is that they have aligned themselves with the United States and Israel.

You did identify mutual benefit and what is going on.

What you fail to see is that OPEC countries can very easily keep the oil flowing and get something other than dollars for doing it.

Thu, 08/23/2012 - 09:09 | 2729883 Almost Solvent
Almost Solvent's picture

OPEC countries can very easily keep the oil flowing and get something other than dollars for doing it.

And find out very quickly that those US military bases are all over there for a reason. Regime change will come very quickly for those OPEC countries that stop accepting $$$ for oil.

Thu, 08/23/2012 - 03:58 | 2729537 Harbanger
Harbanger's picture
US Oil Imports by Country

Most of the imported US oil comes from Canada and Mexico.  I expect that trend to continue.

Wed, 08/22/2012 - 18:35 | 2728913 dick cheneys ghost
dick cheneys ghost's picture

Who nose?


The Saudi's probably love exchanging their oil for paper

Wed, 08/22/2012 - 19:20 | 2728981 oddjob
oddjob's picture

Sucks being the last to know. Get over it.

Thu, 08/23/2012 - 02:53 | 2729514 cranky-old-geezer
cranky-old-geezer's picture



They have much better understanding of what's about to happen to USD than you do.

Wed, 08/22/2012 - 19:58 | 2729036 BigJim
BigJim's picture

 "Operation ‘Easter Egg’: 200 Arab Billionaires Conspire To “Kill” The Dollar"

Here's my problem with that thesis - who is best placed to keep the (unpopular) Arab elites in power - the US, which with NATO essentially owns the Med, or China and Russia?

The US is still so far ahead of everyone else, militarily, that I can't see our OPEC satraps switching sides for quite a while. Upping their purchases of gold to protect them from dollar devaluation? Sure. Chatting with China and Russia and arranging currency swaps? Sure.

But planning to abandon the dollar in a year or even two? Very unlikely.

Jim Willie's jumped the shark with this one.

If the US attacks Iran and Iran manages to sink a few US aircraft carriers, and the US gets bogged down in another cat and mouse land war, well... maybe. But the end of the empire is a ways off yet (sadly)

Wed, 08/22/2012 - 21:16 | 2729165 Tijuana Donkey Show
Tijuana Donkey Show's picture

The USA is not that set. Remember that all this military/govt tech is hacked to the moon and back. The Iranians will turn off the US power grid, or something similar. Wait until Russia or China blocks the GPS system one day. Drones are just RC planes with fancy cell phones attached, watch how fast all the tech toys fail before it's done. Hell, the Iranians even hijacked one of our stealth drones, and sold the info to Russia and China. 

Wed, 08/22/2012 - 23:34 | 2729371 HardAssets
HardAssets's picture

Well, let's see . . . what happend to the other 'Evil Empire' , the Soviet Union . . . and how unexpectedly and quickly did that fall take place ?

Thu, 08/23/2012 - 01:22 | 2729469 akak
akak's picture

And who was predicting the collapse and dissolution of the USSR even five years prior to the event? 

Anyone making such a prediction in 1986 would have been laughed at --- anyone making the same prediction in 1981 would have been considered insane.

History, like politics, is the art of the possible.  NEVER say "never".


Thu, 08/23/2012 - 06:40 | 2729574 4horse
4horse's picture

certainly not anything like a beginning  --here beginning in the caribbean, and new world of cane, plantations and slaves; there, czarist russia, an old redoubt of steppes, resources and serfs--  but, nevertheless, nobody could have ever seen this coming . . .

1974. USSR: “This was the beginning of a thirty-year fight against the national security apparatus in which the [neoconservatives] mastered the art of manipulating intelligence in order to implement hard-line, militaristic policies.”

protoPNAC, TEAM B : getting it wrong being inimical to getting their way, incommensurate with how might makes right, and how these Lies and their insufferable LIARS  --wohlstetter. strauss. perle. pipes. wolfowitz etc-- have been with us such a long time, each time proving themselves right: All of it was fantasy.…  If you go through most of Team B’s specific allegations about weapons systems, and you just examine them one by one, they were all wrong.” The CIA lambasts Team B’s report as “complete fiction.”

CIA director George H. W. Bush says that B’s approach “lends itself to manipulation for purposes other than estimative accuracy.” His successor, Admiral Stansfield Turner, will come to the same conclusion, saying, “Team B was composed of outsiders with a right-wing ideological bent. The intention was to promote competition by polarizing the teams . . . When B felt frustrated over its inability to prevail, one of its members leaked much of the secret material of the proceedings to the press.”  Former CIA deputy director Ray Cline says Team B had subverted the National Intelligence Estimate on the USSR by employing “a kangaroo court of outside critics all picked from one point of view.”

1POV : The “incestuous closeness” of the members, as Cahn later calls it, ensures that the entire group is focused on the same goals as Wohlstetter and Pipes, with no dissension or counterarguments.
Although the entire “Team B” intelligence analysis experiment is supposed to be classified and secret, the team’s neoconservatives launch what author Craig Unger will call “a massive campaign to inflame fears of the red menace in both the general population and throughout the [foreign] policy community—thanks to strategically placed leaks to the Boston Globe and later to the New York Times.”

“Finally,” Unger will write, “a band of Cold Warriors and neocon ideologues had successfully insinuated themselves in the nation’s multibillion-dollar intelligence apparatus and had managed to politicize intelligence in an effort to implement new foreign policy.”
Former senior CIA official Richard Lehman later says that Team B members “were leaking all over the place… putting together this inflammatory document.” Author and university professor Gordon R. Mitchell will write that B’s practice of “strategically leaking incendiary bits of intelligence to journalists, before final judgments were reached in the competitive intelligence exercise,” was another method for Team B members to promulgate their arguments without actually proving any of their points. Instead of participating in the debate, they abandoned the strictures of the exercise and leaked their unsubstantiated findings to the press to “win” the argument.


1winner. winning, the spoils system : Scoblic describes the opposition to Warnke at his Senate confirmation hearings as “vicious” . . . .  Anthony Lewis later writes of “a peculiar, almost venomous intensity in some of the opposition to Paul Warnke; it is as if the opponents have made him a symbol of something they dislike so much that they want to destroy him.… It signals a policy disagreement so fundamental that any imaginable arms limitation agreement with the Soviet Union will face powerful resistance. And it signals the rise of a new militant coalition on national security issues.”

deja vuvu. all over again. and again. and again . . . anywhere/everywhere such groundhogs emerge from their dirt

The “Team B” intelligence analysis exercise of 1975, which so disastrously overestimated the Soviet threat, returns in the form of the “Rumsfeld Commission” . . .  a second “Team B”-style competitive intelligence analysis ever since the fall of the Berlin Wall  .  .  .  The “Commission to Assess the Ballistic Missile Threat to the United States” (see July 15, 1998), led by former Defense Secretary Donald Rumsfeld, is packed with conservative and neoconservative hardliners much as the original Team B cadre was; it includes some former Team B members such as former Pentagon official Paul Wolfowitz. Like the original Team B, the Rumsfeld Commission challenges CIA estimates of foreign military threats; like the original Team B, the Rumsfeld Commission wildly overestimates the impending threat from countries such as Iran and North Korea, both of which it judges will be capable of striking the US with nuclear weapons in five years or perhaps less. The original Team B findings impelled thirty years of full-bore military spending by the US to counter a Soviet threat that was fading, not growing . . .
. . . the second “Team B” exercise shows “that by 1998, Rumsfeld and Wolfowitz had honed the art of intelligence manipulation through use of competitive intelligence analysis. Retrospective assessments revealing serious flaws in the Team B work products came long after political officials had already converted the alarmist reports into political support for favored military policies.”

.  .  .
.  .  .
.  .  .

Wed, 08/22/2012 - 18:20 | 2728883 vast-dom
vast-dom's picture

reading all of this makes me sick. a ponzi propped up by gov and corp is much worse than a ponzi. it's a PANPONZICON

Wed, 08/22/2012 - 21:35 | 2729190 1C3-N1N3
1C3-N1N3's picture

Coming soon: The Necroponzicon, or Book of Dead Ponzis

Wed, 08/22/2012 - 22:35 | 2729285 e_goldstein
e_goldstein's picture

One day I hope that is my "special prize" in my pack of solent green.

Thu, 08/23/2012 - 01:27 | 2729473 akak
akak's picture

I'm waiting for the publication of the "Malleus Ponzificarum" myself.

Wed, 08/22/2012 - 19:06 | 2728957 Zap Powerz
Zap Powerz's picture

And when (not if) that ends?

Wed, 08/22/2012 - 19:12 | 2728965 DCFusor
DCFusor's picture

So, if you buy this article - the governments ARE prosecuting the living shit out of the bankers, just not in court for a tiny (to them) fine, but really giving them a huge screwing.

Couldn't happen to a more-deserving bunch.


Wed, 08/22/2012 - 19:52 | 2729030 Terminus C
Terminus C's picture

Shit flows down hill, dude. The banks pass those losses onto the muppets.

Bailouts... From your savings and future revenue.

Wed, 08/22/2012 - 22:21 | 2729260 DCFusor
DCFusor's picture

Already retired, money not in the banks...almost self sufficient on 50 acres.  Let them try to bring it.

No kids for them to rape either.

Wed, 08/22/2012 - 22:53 | 2729299 Terminus C
Terminus C's picture

Well, good for you (no snark or sarc) but... They have one weapon that can reach you, property tax... oh and your farm is not a licensed facility, ergo you must be a terrorist, especially since you don't use Monsanto seed.

Thu, 08/23/2012 - 06:24 | 2729569 samcontrol
samcontrol's picture

easy to fix, i,m in the same situation as he is but i don,t live in the US. Patagonia, come get me bitchez.

Thu, 08/23/2012 - 06:24 | 2729570 samcontrol
samcontrol's picture

easy to fix, i,m in the same situation as he is but i don,t live in the US. Patagonia, come get me bitchez.

Thu, 08/23/2012 - 01:53 | 2729497 LMAOLORI
LMAOLORI's picture




Those fines are passed on to the customers 

Wed, 08/22/2012 - 17:55 | 2728830 roadsnbridges
roadsnbridges's picture

Don't tell Bennie it's broke - he might try'n fix it.

Wed, 08/22/2012 - 17:55 | 2728831 Atlantis Consigliore
Atlantis Consigliore's picture

Print Trillions more Benny baby, trillions, gold take delivery hide it. silver too,  diamonds, platinum, fire everyone, put on 1099,


it will be a pawn shops  black mkt ECONOMY here we come.

Wed, 08/22/2012 - 17:56 | 2728833 Silver Shield
Silver Shield's picture

This battle is not one of money, ounces, banks or politicians.

It is in the consciousness of all of humanity.

If we continue to actively or passively support the debt and death paradigm, we will repeat this cycle again when the dollar collapses.

Or we can choose to get out of this paradigm with our assets and form a opposite consciousness way of life.

Check out the Silver Bullet and the Silver Shield Documentary on YouTube.

Wed, 08/22/2012 - 17:58 | 2728841 roadsnbridges
roadsnbridges's picture

Fuk humanity:  they caused this.

( I ain't human, according to the Wif.)

Wed, 08/22/2012 - 18:41 | 2728887 Bay of Pigs
Bay of Pigs's picture

Chris Duane. Love your work. Well done. You've helped thousands of people.

Peace and Aloha bro...

Wed, 08/22/2012 - 19:26 | 2728996 CH1
CH1's picture

So long as people believe it is their god-given duty to obey known thieves and liars, they are rightly and truly screwed.

The other choice is to drop out of the slave system and get started building a better world apart from them.

Thu, 08/23/2012 - 00:26 | 2729417 grid-b-gone
grid-b-gone's picture

This is a good, but long, summary. I hope he covers confiscation at some point because that historical precedent puts a large hole in his plan.

I do think pensions and annuities, every future promise traded for real lifeforce today, is in jeopardy. After this plays out, Wimpy, as it was in 1932 after the crash, will again have a hard time getting anything simply based on a future promise.

The reversion to the mean on the worldwide economic stage would be staggering if this plays out. Those who live on $1 today would see their dire relative wealth gaps contract greatly if industrialized fiat, real estate, stocks, pensions, etc. contract as this video predicts.

I also think before the pitchforks appear and a complete societal meltdown occurs, there would be a liquidity drain and probably an official dollar devaluation. This would cause the dollar to stabilize. Deflation would follow, and it would freeze the economy to the point that even politicians would start using the "D" word, but would avert a total meltdown.

It makes no sense that those holding the power strings (formerly reins) would let the whole thing deteriorate to the point of extinction. At some point, they mark-to-market, reset, take the hit on their own (hedged) assets, but preserve the fiat and fiat-supporting structure that allows them to rinse and repeat.

They've read the same historical accounts of greedy times we all have. If they can manage to check their hubris and greed before the point of no return this time, they end up with vast wealth that can still be enjoyed, rather than defended like an animal with a fresh kill in the dead of winter.

Wed, 08/22/2012 - 17:57 | 2728838 magpie
magpie's picture

So its NIRP instead of QE 3 ? Or QE3 after NIRP, you know to keep everything levitated ?

Wed, 08/22/2012 - 17:57 | 2728839 hugovanderbubble
hugovanderbubble's picture


Wed, 08/22/2012 - 17:58 | 2728842 hugovanderbubble
hugovanderbubble's picture


Wed, 08/22/2012 - 18:02 | 2728851 Heroic Couplet
Heroic Couplet's picture

When Cayman Island accounts get liquidated by their owners and not by the US IRS, then we'll know the collapse is official. Sorta like what I've said all along: total the damage done by Phil Gramm and deregulation and lay the dollar amount damage at Phil Gramm's feet.

Wed, 08/22/2012 - 18:06 | 2728858 fonzannoon
fonzannoon's picture

"Under widespread NIRP, pensions, annuities, insurers, banks and ultimately all savers will suffer a slow but steady decline in real wealth over time."

This is a tremendous understatement. These insurers are already choking on these obligations and are massively involved in interest rate derivitaves to try to hedge. But I am sure it's all good.

Wed, 08/22/2012 - 18:25 | 2728892 Whiner
Whiner's picture

My individual pension remains quite solvent. No 2% projected returns for me. PMs at the bottom of Lake Sinclair somewhere. Past and projected 10 year returns: 10% per annum. Holding/mgmt costs=one set of scuba diver's gear.

Wed, 08/22/2012 - 20:12 | 2729052 Roandavid
Roandavid's picture

Hope you painted an X on the bottom of the boat.

Wed, 08/22/2012 - 22:56 | 2729302 Fail2Deliver
Fail2Deliver's picture

+1 That is really funny for those that pause to grasp the joke

Wed, 08/22/2012 - 18:07 | 2728859 sunaJ
sunaJ's picture

We have a long way to go.  After ZIRP and NIRP, we have Derp!, which many people think we have now, but just wait...

Wed, 08/22/2012 - 18:34 | 2728906 kito
kito's picture

then will come BURP..............that is when the toxic gas from all of the debt and rotten credit derivatives gets released from the digestive tracts of the worlds bloated, fattened fed/ecb dependent banks......................

Wed, 08/22/2012 - 18:36 | 2728919 fonzannoon
fonzannoon's picture

I thought I smelled that on the 2 and the 3 last week

Wed, 08/22/2012 - 19:19 | 2728975 buzzsaw99
buzzsaw99's picture

[Jack Slater realizes that a nerve gas bomb is hidden in Leo "the Fart's" body]
Jack Slater: Leo "the Fart" is gonna pass gas one more time.[/last action hero]

Wed, 08/22/2012 - 22:34 | 2729279 BlackholeDivestment
BlackholeDivestment's picture

...after the BURP comes the black hole, if you recall they poked the dead bloated bodies of those morons that drank ''that'' Chairsatanic NWO Guyana Punch. 

...yuh see the New Secular Debt Note (g)od in which ''they'' say ''We Trust'' means death. Mwuh ha ha ha.

Wed, 08/22/2012 - 18:07 | 2728860 roadsnbridges
roadsnbridges's picture


The lesser Antilles split off a major feeder band to Issac.  No real effect on Issac, but that band may become TD11.  Check it out.

Wed, 08/22/2012 - 19:17 | 2728973 erg
erg's picture

Tropical systems don't calve new ones. It's dry air entrainment and it's probably a little sheared.

Ya know, like sheep.

Wed, 08/22/2012 - 18:09 | 2728863 Rainman
Rainman's picture

Think I counted about 4 black swans in this article. that's very good.

Wed, 08/22/2012 - 18:12 | 2728866 hugovanderbubble
hugovanderbubble's picture


Wed, 08/22/2012 - 18:19 | 2728881 New_Meat
New_Meat's picture

Why, that would be a 13 standard-deviation move, mon ami. - Ned

Wed, 08/22/2012 - 18:29 | 2728899 Winston Churchill
Winston Churchill's picture

Only four ?

I can think of six.No mention of the effect on the insurers 'life funds'.also

negative UST's are primary tier one capital,so they are deflationary by the mulitple of

reserve /loan ratio.

The game is over,the players will soon be scrabbling for chairs.

PM's  and cash outside the banks.

Wed, 08/22/2012 - 18:10 | 2728864 rich_wicks
rich_wicks's picture

So, the question is, who would buy bonds like this, instead of just keeping cash?

The answer is absolutely nobody that wanted to keep their money.

It appears that the only people loaning money to the government, are loaning money that either doesn't belong to them, or money that they don't actually have  There's no other explanation, is there?

Seems like a great way to raid a pension fund.

Wed, 08/22/2012 - 20:25 | 2729073 Clever Name
Clever Name's picture

Finally, an explanation that makes sense! I couldnt wrap my puny little head around the idea that anyone would buy a bond paying a negative interest rate.


I forgot about theft!

Wed, 08/22/2012 - 20:53 | 2729133 Angus McHugepenis
Angus McHugepenis's picture

Paraphrasing... "A wise businessman once told me, never use your own money to work a deal".

Kill the Irishman Movie -

Thu, 08/23/2012 - 01:36 | 2729484 Bringin It
Bringin It's picture

Corzine at the helm in NJ in the Summer '08,

gave Lehman all the state pension moolah they could take


Lymric King where are you?

Wed, 08/22/2012 - 18:14 | 2728870 marco1324
marco1324's picture

The EZ is bound to fail..Hail the bond holders I suppose.

But on a more important note dear 'westerners'...How the fuck are we going to get our act together and kickstart some kind of future?

Wed, 08/22/2012 - 21:13 | 2729160 Iam_Silverman
Iam_Silverman's picture

"But on a more important note dear 'westerners'...How the fuck are we going to get our act together and kickstart some kind of future?"


Excellent question, and the only answer I can come up with is that our current system has to fail, and spectacularly at that.  Once our fiat backed scrip is no longer accepted by those who create things, I guess that we'll just have to dust off our old equipment and make it ourselves - juts like we did before.

Other than the scenario I just posited - I have no clue how we will survive what is in store.....

Thu, 08/23/2012 - 01:40 | 2729491 Bringin It
Bringin It's picture

Silverman nice post. 

We can drop material growth in favor of spiritual growth, good music, food and companionship.

OK by me.

Wed, 08/22/2012 - 18:23 | 2728889 Plymster
Plymster's picture

NIRP and ZIRP are just inflation with a different name.  By flooding the world with cash, the central banks have made assets overvalued to the point that hard fiat cash is more valuable than government debt (even though they are technically the same thing). 

There is no real difference between a world where granny earns 10% interest with 12% inflation and a world where granny earns 0% interest with 2% inflation.

Wed, 08/22/2012 - 19:20 | 2728979 chubbar
chubbar's picture

except for the fact that most pensions have an assumption of 8% gains in order to pay out their promised payments, along with gov't pensions as well. You know, little details like that.

Wed, 08/22/2012 - 20:16 | 2729056 tenpanhandle
tenpanhandle's picture

what about the real world where granny earns 2% interest with 12% inflation?

Thu, 08/23/2012 - 01:32 | 2729481 akak
akak's picture

Granny is nothing but a useless eater in the eyes of a sociopathic statist (but I repeat myself).

Thu, 08/23/2012 - 03:12 | 2729525 cranky-old-geezer
cranky-old-geezer's picture



There is no real difference between a world where granny earns 10% interest with 12% inflation and a world where granny earns 0% interest with 2% inflation.

Actually it's 0% interest with 15% inflation.

You're losing 15% / yr.

Demand for bonds remains high because a lot of funds are required to invest in bonds and similar "safe securities".

Plus there's no way Fed is gonna let demand for treasuries drop (and yields rise).  All bailout recipients are being told keep buying treasuries or no more bailouts.  

So we really do have QE3 already, just via proxies.


Wed, 08/22/2012 - 18:26 | 2728895 YesWeKahn
YesWeKahn's picture

All Bernanke and dove FED pigs care is the stock market, as long as AAPL trades at record high, all the FED day trader employees are happy.

Wed, 08/22/2012 - 19:36 | 2729010 JR
JR's picture

The injustice in America’s new economic system is taking its toll not only on incomes but on faith in the American System. Today’s Pew Research Center study shows fewer respondents in a group it defines as “middle class” now believe that hard work will allow them to get ahead in life.

And of this group (with household incomes ranging from $39,000 to $118,000), most were more likely to say their children’s economic future will be the same or worse than their own.

According to the AP, “The report describes this mid-tier group as suffering its ‘worst decade in modern history,' having fallen backward in income for the first time since the end of World War II.

“In all, 85 percent of middle class Americans say it is more difficult now than a decade ago to maintain their standard of living. Some 62 percent say a lot of the blame lies with Congress. A slight majority say a lot lies with banks and other financial institutions.”

Read more:

Wed, 08/22/2012 - 18:31 | 2728896 boiltherich
boiltherich's picture

The article only glancingly referred to insurance, most people think insurance companies charge premiums to clients and those premiums cover losses plus a little profit, in a good year more profit and in a bad year perhaps no profits at all.

Insurance does not work that way. They actually have billions, even hundreds of billions in a huge kitty, all invested in very "safe" steady income producing portfolios which are the main source of payouts to the indemnified. There is a pretty steady source of income from premiums and usually an equally steady flow out in claims. The higher interest rates are the more return they get on investment portfolios, the lower they can keep your premiums.

NIRP means higher premiums on your auto, life, home, health, any insurance you buy, and the reason you have not yet seen shocking premium increases yet is that the portfolios are usually in laddered long-term bonds. Increases in premiums only really get going when the older higher rate bonds mature and get rolled over to new lower interest ZIRP and NIRP bonds. I had a 10% increase with my last bill at State Farm on both car and renters insurance in spite of turning 54 and having a perfect driving record. But, that is only the start of the increases, as time passes they will get larger and larger because without the former huge income on all those invested billions your premiums will jiggle around depending on claims and payouts because they and not bond interest will be the only real income for insurers.

I also suspect that many insurers will simply fold up and drop out of the market. We will be left with a few very large behemoths of insurance companies, and they will no longer have competitive rates as a high priority.

I expect auto insurance premiums to more than double in the next 5-8 years.

P.S.  If the private auto goes the way of the dodo bird this will be the reason and not peak oil pricing for fuels.  If you can't insure yourself you will not drive and most people would not.

Wed, 08/22/2012 - 18:33 | 2728907 fonzannoon
fonzannoon's picture

These insurers have massive derivitive bets in the interest rate markets to try to hedge their losses. I think that is the only thing keeping them going right now. A spike in volality or interest rates could be very interesting.

PS: these insurers will get bailed out IMO. No way a life insurer defaults on these annuities without it having a chain reaction bigger than AIG going down.

Wed, 08/22/2012 - 18:33 | 2728910 roadsnbridges
roadsnbridges's picture

In regards to private health insurance dissolving,  Obamacare was designed that way.

To the rest of your anti-insurance rant, you are mostly incorrect.  When I was an actuary, rates were set with a built-in 5% profit to cover growth.  All portfolio income was counted in the calculation.  The State required mass info for any rate increase to occur.  Then fraud grew rampant.

Wed, 08/22/2012 - 18:35 | 2728916 fonzannoon
fonzannoon's picture

Who gives a shit about your auto insurer when your life insurer tells you that your 750k 401k rollover you moved into a variable annuity with some income guarantee benefit just got corzined.

Wed, 08/22/2012 - 18:44 | 2728920 roadsnbridges
roadsnbridges's picture

Lawyers are frauds, too.

Frauds on society.

Well, dip me in shit; Corzine wasn't smart enough to be a scumbag lawyer.

Thu, 08/23/2012 - 02:29 | 2729511 boiltherich
boiltherich's picture

Lawyers are no better or worse than the laws. In a real society of fair minded people there would be little use for attorneys and I believe that is what our founders had in mind. Law would be simple. You would not need a lawyer to defend your rights because the Bill of Rights already did that for you. But they also trusted that this new republic of fair minded people would be a union of persons who knew what it meant to fight a tyrannical king and unjust system, a fight that hit every one of them in the heart from loss of property and loved ones and neighbors in which they knew that losing would mean being hung in shame, and winning meant that they would have to come to peace with those that lost. It is easy to think of them as hotheads and misguided idealists, the arguments against revolution and independence were very well articulated, put forth by the loyalists at the time. And the founders had so much on their plates just to end British rule that they did have to leave some justice for later, like slavery, or dealing with native Americans. They could not have it all and they knew it, but they had to stop what they could not tolerate.

Frauds on society you say. I hate lawyers as much as anybody, my rights and my person have been violated as bad as anyone still alive, harassed, physically abused, denied justice, subjected to ridicule by cops who are the very people paid to protect me, my mother killed by a system designed to protect corporations not life, not one lawyer would protect me till I won the lottery. But the reality is that lawyers would be unneeded if our laws were simple. And they could be as simple as a reflex if it were not for greed.

Greed is the root of all the bitching and complaining at ZH, there is not a single thing that has ever been complained about here that did not have greed at the root. Politics more than anything. You know technically I would make a better president than either Obama or Romney. I would simply evaluate every issue before me in light of the constitution and greed. I would just flat out make it a crime for any politician to accept any money from any source that was not a citizen, and even that would be capped at $500. Would our way of life die? No, it would thrive. Our way of life is dying because of corporate cash.

The idea that a citizen is his own sovereign, a citizen king, in charge of his own life, beholden to nobody, that TPTB answer to him instead of the other way around, it is romantic and lovely and I would bring that back. But that does not mean I would allow unfettered capitalism in which every man is allowed to shit on his neighbors and run out on liability for that because it is good business. In my America the government would own no land other than real marvels of geology and nature, or what it paid for like you and I would for military bases and such.

Give me this nation to run and you will again be king, in your house, in your life, grow pot in your basement because that is your right. Brew your own beer or fuck who you like, hell marry who you like as long as they are not children. Enter any contracts you choose to enter for that matter, it just is not up to the government to monitor contracts, but, you may not harm others in your contracting, and that is where government comes in. You can't dump sodium or other pollution into streams, without government NOBODY is going to stop that kind of thing. Use the roads, but if users of the roads have to pay for the roads they can't afford to use them. Government comes in handy there too right?

Anyone here remember when 15,000 New Yorkers died of cholera one summer around the turn of the century? No? Well there was no government sewage systems and even in Manhattan people drank from wells right next to septic systems.

Anybody here remember when Japan bombed Pearl Harbor? If you try to justify their behavior you are a total asshole. Guess what asshole, your justification of their acts just justified our raids on Iran!

I agree it is time to end a bad situation, but the right wants to end individual freedom in the process and that I do not go for. They are neocon bullshitters. With the support of racist religious power hungry assholes. I say it is time to end fascism and religion both. The world just cannot afford you.

Wed, 08/22/2012 - 22:51 | 2729298 PlausibleDenial
PlausibleDenial's picture

So, you bought a tax deferred heavily loaded  VA with funds that were already tax deferred in a 401K?  VA's are one the most expensive investments one can make. 

Wed, 08/22/2012 - 21:42 | 2729200 Eally Ucked
Eally Ucked's picture

Only 5% to cover growth? Wow, if all industries cover their growth the same way it's guarantied 5% inflation, what about other costs?

Thu, 08/23/2012 - 01:26 | 2729472 boiltherich
boiltherich's picture

Anti insurance rant? How do you figure R's&B's? It was actually a really good business model, good for the insurers and good for the consumers. We could have a hurricane Katrina with 32 billion in payouts without any one insurer going out of business, and they had enough in the pot that statistically they could collect level premiums for many years without raising rates, keeping premiums lower. In fact it is the ultimate model for capitalism, it is how capitalism started with the Venetians at the end of the dark ages, shared risk for shared profits.

I am not anti insurance at all, I am so pro insurance that I think it is the best way to do all business and live life. But, insurance means banking a large enough sum that no matter what happens the damages will be covered, even if they are so large the whole process has to be started over when rebuilding has begun.

And, insurance has been the largest force behind capitalism in the history of the world till central bankers decided they knew a better way about 40 years ago. Remember, those huge kitties were INVESTED, that money was lent for productive purposes. It employed people. Many millions of them.

What I am anti is ZIRP and NIRP. Now the billions in bonds the insurers held for the purpose of making our lives work better while they make some money no longer functions. And it is not all bad, they bought those bonds when the price was low and interest rates were high, now they will sell when rates are low and price is high, those huge sums are bigger. And if they are honest and respectable they will use that price windfall to help offset premium increases, but in the modern world of greed for greed's sake do you really think they can hold out?

I actually applaud the insurance industry for it's refusal to gouge us because they could if they had been like oil or government, or grocery stores. Insurance has been remarkable for it's steadiness. It has gone up, but not at the rate of medicine or education. All I am saying is that sadly they will be going up like those others because of the Fed's desperate policy of printing and ZIRP/NIRP. When they do I will not blame them but the fat stupid poor Americans that vote against their own interests out of racist fucktardness because the GOP if elected will remove all barriers and even encourage more rape of the lower 99%. But as long as gay marriage and contraception and abortion and other bedroom activates are out there you can bet your last fucking dollar some shit for brains right winger will exploit the poor white trash to defeat reason and light. Left = flawed... Right = Satan choose for yourself.

Wed, 08/22/2012 - 18:51 | 2728943 Jumbotron
Jumbotron's picture

Geez....never really thought of that.  Have seen my auto go up recently as well for no reason.  HHHMMmmmm.

Wed, 08/22/2012 - 19:02 | 2728948 JR
JR's picture

I agree...

ZIRP is wrecking havoc in the economy.. It's like a landslipe; it keeps adding earth and structures as it slides. One of its greatest victims has been confidence of people in the justice of an economic system. When you take money from people who have earned it through hard work and faith in themselves and their business and their government and you take that money and not only waste it on politicians and bankers, the end recipients are people who then use it against you in the market place. Here's more supportive evidence from Russ Winter of WSE:

The lack of income has kept older people in the labor market longer at the expense of  younger people. For households this is not a zero sum game, it is a negative sum game.  WSJ reports insurers are offsetting income lose with higher premiums.
Wall Street Examiner (

In 2011, life insurers invested 40% of their capital in corporate and foreign bonds,. “High quality corporations financing at 2% yields is clearly not helpful to insurance companies struggling to meet investment targets,” said Thomas Mercein, global head of debt capital markets at Credit Suisse. Property and casualty insurers have moved to protect profits hit by lower yields on their investments by charging their customers more, said Michael Siegel, head of insurer asset management at Goldman Sachs Asset Management. The cost of home and renters insurance rose 3.2% in June over the previous year compared to a 1.5% increase in 2011, according to the Bureau of Labor Statistics.
Wall Street Examiner (

Wed, 08/22/2012 - 21:19 | 2729171 Iam_Silverman
Iam_Silverman's picture

I think that the use of GIC and Synthetic GIC has just about reached its nexus.  What other types of investment offerings can be launched by the major insurers and their reinsurance vendors?


Oh, and as for:

"If you can't insure yourself you will not drive and most people would not."

You obviously don't live anywhere near Texas.  I would say that at any one time the 10% of drivers on our roads that are illegals do not carry insurance of any form, whatsoever.  In response, I see some states adopting full no-fault insurance.  If you want to have your property repaired or otherwise be made whole after a collision, you better have insurance on yourself.  Otherwise, you are S.O.L.

Wed, 08/22/2012 - 22:42 | 2729292 bobert
bobert's picture

Is your 401k's "Stable Fund" invested in GIC's like mine?

Traditional and Synthetic Contracts?

You sound concerned like I am about the stability of these.

Wed, 08/22/2012 - 21:20 | 2729173 Kali
Kali's picture

There go foreclosures through the roof too.  Think of all the struggling homeowners barely hanging on, then the home insurance to keep their mortgage goes through the roof.  Most mortgages require it.  PMI too.

Wed, 08/22/2012 - 21:47 | 2729206 TonyCoitus
TonyCoitus's picture

Good stuff! Thanks for splaining that.

Wed, 08/22/2012 - 18:41 | 2728918 bob_dabolina
bob_dabolina's picture

The NIRP acronym is misleading, however, because unlike ZIRP, NIRP isn’t actually an official “policy” per se, but rather a symptom of a broken financial system increasingly starved for good ‘collateral’.

The system isn't starved of "good collateral" the system is starved of productivity. The reason the system is starved of productivity is because of the current political regime (domestically and globally). The reason AAPL is is doing so well is because it is a company that creates products people want to buy and it does so in a way that maximizes profits. I also don't hear consumers complaining about their products. I've never seen Tyler Durden post on the % difference between owning gold 10 years ago vs. owning aapl.

Tyler recently did a post on the government confiscating gold: In that time period citizens still had a semblance of trust in the government and willingly handed over their gold (not everyone) However, the mood is diametrically contrasted towards the modern day perspective which is "from my cold dead hands after reigning down a hail of stockpiled ammo will the government get my gold!" The fact is, is that people don't buy gold because it is productive, that is simply not the case. The citizens and investors buy gold when they have lost faith in their government and when there is no other government they feel safe investing in, or in other words trusting.

The conversation shouldn't be that people are buying gold, but WHY are people buying gold? WHY don't people have faith in the very people they have themselves elected? WHY are there few alternatives other than a piece of metal that does nothing other than sit in a safe or buried under a tree?

Wed, 08/22/2012 - 19:29 | 2729002 DCFusor
DCFusor's picture

The reason ONLY Apple is doing well is they sue anyone else who innovates and takes their market share, while using slave labor to build their bling at the highest profit margin in any industry.

While in fact they refuse to pay for things other people innovated.  Do you really think they invented 99% of the stuff in the ibling?  Did stevie write BSD they took private from open source (legally, but not morally).  Did they invent the processor, the display, the touch screen, the shape?  Hell no.

They and other tech giants bought the best laws money can buy - they can simply cross license their IP at zero or small net - but you try to invent something, and your one dinky little patent (that needs a bunch of other stuff to become marketable/practical) they just sue you out of existance.  Seen it.

If you can't innovate, litigate.  New business model.  Kill the laywers first.

Wed, 08/22/2012 - 20:07 | 2729040 bob_dabolina
bob_dabolina's picture

I'm not disagreeing with you. However, you can't disagree with me that AAPL produces *shit* that people want to buy.

Yes, it is true they use slave labor. Yes, it's true they have good lawyers. Isn't it also true that there are cheaper alternatives to AAPL products that perform, for all intents and purposes, the same? Let's use the iphone for example. When you're in the market to buy a cell phone do you not have the CHOICE to buy whatever brand you want? Is there really a difference between an LG Lucid and an iphone? I compared them side-by-side and to be honest they performed the same and were even the same dimensions. If you think they have a monopoly on a market that's a different issue (which is an idea I don't subscribe to)

The regulatory climate in the US is far more important. It's not as easy to create a company like AAPL out your garage like Steve Jobs did. Shit, you can't even pass out free water in 112 degree heat without a permit So if you can't hand out free water how are you supposed to build a company to compete with AAPL?

Try to build a hot dog cart in San Diego (legally). I dare you.

Thu, 08/23/2012 - 00:04 | 2729397 jomama
jomama's picture

there isn't a viable alternative to the nano. the only apple product i have ever owned.  (sans an apple IIe)

i'm on my fourth one.  they are pieces of shit that can be repaired only once with a short half life on the repair job, because the craftsmanship is so fucking shoddy.  phone as music players are too big, and all other small music players (can anyone name one?) on the market flat out suck in comparison.

Wed, 08/22/2012 - 20:04 | 2729045 Conax
Conax's picture

That reminds me of the old riddle-

You're locked in a room with a rapist, a murderer, and their attorney.

You have a revolver with 2 bullets in it.  What should you do?


Wed, 08/22/2012 - 20:16 | 2729054 bob_dabolina
bob_dabolina's picture

false dilemma. You have the gun and the bullets which makes you the murderer if you have to use the bullets to get out of the room.

Wed, 08/22/2012 - 20:21 | 2729067 tenpanhandle
tenpanhandle's picture

point gun at rapest and make him rape attorney. point gun at murderer and make him murder attorney.  shoot rapist and murderer.

Wed, 08/22/2012 - 20:34 | 2729090 bob_dabolina
bob_dabolina's picture

Makes you the murderer.

Wed, 08/22/2012 - 20:39 | 2729103 tenpanhandle
tenpanhandle's picture

self defense

Wed, 08/22/2012 - 21:22 | 2729129 bob_dabolina
bob_dabolina's picture

point gun at murderer and make him murder attorney.

Self defense? Even so, what if he doesn't murder the attorney?

You have to put the onus on the murderer to kill himself.

Wed, 08/22/2012 - 21:38 | 2729194 nmewn
nmewn's picture

Everyone knows you kill the murderer & the rapist with the two bullets and then beat the lawyer to a pulp with the empty gun until he signs a confession stating he killed them...and you walk out a pillar of the community.

Thats life and justice, sans cameras ;-)

Wed, 08/22/2012 - 22:09 | 2729228 bob_dabolina
bob_dabolina's picture

But what if he doesn't sign a confession?

And isn't there a law against beating someone to a pulp until they sign a confession?

And that still makes you the murderer which means you are now trapped in the room by yourself with no options to get out.

I would make the rapist feel guilty and convince him to kill himself, hand him the gun, and that leaves me with the murderer and the attorney...

I would then convince the attorney to kill the murderer with the other bullet. Then I would wait for the attorney to attack me. I could then defend myself and kill him out of self defense.

Riddle solved.

Wed, 08/22/2012 - 20:42 | 2729110 Disenchanted
Disenchanted's picture



Shoot the attorney twice...just to make sure.

Wed, 08/22/2012 - 23:10 | 2729323 Conax
Conax's picture


'Shoot the lawyer twice' wins the cookie!

Good job

Wed, 08/22/2012 - 20:44 | 2729115 Angus McHugepenis
Angus McHugepenis's picture

Make them re-enact Prince Hairy's from-behind photo in Vegas. When all 3 are lined up doggy style, call security and make sure photos are taken. No need to use a gun. You'll never hear from them again... except Hairy. Damn Royals!

Wed, 08/22/2012 - 20:24 | 2729072 tenpanhandle
tenpanhandle's picture

they didn't make that.

Wed, 08/22/2012 - 20:31 | 2729086 Angus McHugepenis
Angus McHugepenis's picture

Nice comment Mr. Dabolina. Up arrows are not working so I can't +1. Dare I say, that is one of the longest comments you've written since I've been here for a mere 39 weeks. You usually limit yourself to one sentence. Do I detect a shift change in you?

Thu, 08/23/2012 - 04:18 | 2729545 boiltherich
boiltherich's picture

Technically NIRP is not possible. From a financial point of view there is no such thing as NIRP. NIRP = Negative Interest Rate Policy, in other words paying more for a bond than it is worth.

Interest on borrowing/lending is the amount... the price you pay to borrow, and on the other side of the deal interest is the amount your lender expects earn for trusting you to repay. If NIRP were possible it would mean that both parties agree that there will be deflation and they are just betting how large that deflation will be.

In the debt/bond world interest is always positive because interest rates are inverse to original price. The higher the interest rate the lower the price of the bonds. ZIRP could be possible because the price equals 100, but it is unlikely, nobody wants to lend at zero interest. To pay more than that is to say here is my money, please bill me in 5 or 10 or 30 years for the negative interest rate that you want.

NIRP cannot be possible because you would have to pay more for the bond than it can possibly ever be be worth.

The lowest possible price you can pay on any bond is zero, interest is then infinite. But I could offer the government one penny for a bond they say is worth a hundred trillion dollars in 2042. That would be a pretty smart return yes? I will not bother to calculate that interest but it is how Weimar Germany, Greece, and California schools got into so much trouble.

The highest possible price on any bond is infinity and we will not go there because nobody has infinity to pay for a bond and no reason to pay it anyway, infinity can't thus be done.

One cannot really pay more than a single dollar for a single dollar bond which would be ZIRP, a dollar for a dollar bond would be zero interest no matter the maturity date. It would mean you lent a dollar to be repaid as a dollar in xyz years, your only yield, your profit would have to come from the fact that prices in future are lower than now.

Try to imagine if you even could, that you pay more than a dollar for a dollar bond return down the road someday. Mr. Tyler Durden, I will gladly buy your bond for 100 bucks today so you can invest in restoration of the spellchecker to Zero Hedge, if you would kindly repay my with 40 dollars 10 years from now. You will pay one hundreds bucks today to get repaid 40 some years in the future?

Well, yes you would, if you were betting that 40 bucks some years in the future would buy you more than 100 bucks today.

But for that to happen you would need deflation in a really big way, not a big way, a historic way, it would have to be so historic that most people or firms you lend to would simply cease to exist. And in the event of such huge deflation you would actually make a profit by your bet on that bond purchase, that bond purchase where you seem to lose so much in reality becomes a huge win, but only if you think there will be deflation larger than your bet on the market AND the borrower repays. In that event and only in that event the real interest rate is still positive. In that event as impossible as it sounds your real after inflation/deflation returns are greater than the sum you invested in today's terms. ZIRP and NIRP are both bets on deflation and the difference between the two is the degree of that deflation.

Is there a way that the central banks can fool you with ZIRP or NIRP? Yes, they can sell bonds at a lower price and thus higher interest any day they want to, you buddy, I got a bond for you, backed by the fed and federal government and only 97 bucks today. They can raise interest rates (and they will no matter what unemployment is) simply by lowering the price of bonds. Granted that would shut down the economy, but what happens when the economy shuts down? Shit gets sold for pennies on the dollar, more people are out of work. The wealth of the wealthy is worth that much more. The ability of the masses to make life better becomes impossible and we are already there.

How to fix it? Dump the debts, corporate, consumer, government, just pick a day and on that day all such debt is void. Needs to be a close day though because if people know September 1 of 2015 is debt dump day nobody will borrow/lend or pay bills till that day.

Nothing short of that is going to make things better. And even then you have to have a powerful law and law enforcement to make sure it does not simply restart.



Wed, 08/22/2012 - 18:38 | 2728922 JR
JR's picture

Dan Amerman, on Market Oracle, lists the five interrelated motivations the United States government has for destroying the value of the dollar and then relates the personal implications from the Fed’s push to make sure that a dollar does not remain worth a dollar.

Says Amerman: “If you have savings, if you rely on a pension, if you are a retiree or Boomer with retirement accounts - any one of these five fundamental motivations is by itself a grave peril to your future standard of living.  However, it is only when we put all five together and see how the motivations reinforce each other that we can understand what the government has been and intends to continue doing, and then begin the search for personal solutions.”….


The Personal Implications

The implications of the five powerful motivations all coming together are that we have multiple overwhelming reasons to believe that the value of the US dollar (and many other currencies) will be mostly or near entirely destroyed in coming years. Now, when paper wealth is wiped out for much of the population, and real wealth (goods and services) for a nation has taken a blow – but is not wiped out – then what we necessarily have is a massive redistribution of wealth. And there is very good reason to believe that the largest redistribution of wealth that has been seen in modern times is likely to be occurring over the coming years.

Inherently, the older that you are – the more likely that wealth will be redistributed away from you instead of towards you. A giant "Reset Button" will likely be pressed for the dollar, and with it the value of your savings and investments will likely evaporate – that is, if you have been following the conventional wisdom for retirement investing. You may not have that many working years left to recover from the damage, and jobs may be difficult to come by even if you want to work.

 So you are competing against younger workers not just for jobs, but for goods and services, where they have the current income in inflation-adjusted terms to buy these desirable goods – and you don't.  Thus, the older citizens become impoverished relative to the younger citizens.  This is a history that has been repeated time and again across nations and across the centuries – it is the pensioners that get nailed when the currency reset button gets pressed. 

Making it even more difficult is that the hidden savings tax acts as a giant anchor, making it near impossible for fixed income savers to break even on an inflation-adjusted basis, let alone compound their wealth like all the financial planning models promised.  Simultaneously, the likely reduced economic growth rate associated with a heavily indebted and aging nation will likely slash further stock returns, or even turn them negative in after-inflation and after-tax terms.  …

Wed, 08/22/2012 - 18:46 | 2728932 economicmorphine
economicmorphine's picture

One way to fix the unemployment problem, as well as traffic, spot food shortages etc. is to simply kill anyone the government deems to be non-productive.  I never thought I'd live to see the day.  Now I will be surprised if I don't.

Wed, 08/22/2012 - 19:24 | 2728991 Overfed
Overfed's picture

The way those retards think, they'll kill off all of the productive people first.

Wed, 08/22/2012 - 21:26 | 2729180 Kali
Kali's picture

Already happening.

Wed, 08/22/2012 - 18:50 | 2728937 reader2010
reader2010's picture

As long as Joe Six-packs are busy watching youporn/fuckbook while munching snacks bought by using free EBT cards. Why worry?

Wed, 08/22/2012 - 19:14 | 2728971 Zap Powerz
Zap Powerz's picture

This is going to be one helluva zombie army when the power goes out and the EBT cards dont work anymore.

Im just hoping that all the physical exercise required of the zombies to feed will be too much for them and they'll just lay down and die.  At the very least, I know I can out run those fat, lazy, junk food eating fuckers.

Wed, 08/22/2012 - 20:23 | 2729069 Dagny Taggart
Dagny Taggart's picture

But see, they aren't going to just shut off the EBT gravy train, they're going to manage it with cuts dictated by sponsors of the Farm Bill lobby. It's the old boil the frogs slowly technique.

Wed, 08/22/2012 - 20:30 | 2729084 tenpanhandle
tenpanhandle's picture

joe sixpack is a redneck worker and and not an EBTer.  Maybe you have  mixed him up with jose sixpack or would that be jose cuervo?

Alright, bring it on all you PCers!

Wed, 08/22/2012 - 18:49 | 2728938 analyzer_66
analyzer_66's picture

yep, like in the movie "Logan's Run"

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