Fall Of The House Of Money: Artemis Capital On How €entral Banking Took Over Capital Markets... And The World

Tyler Durden's picture

One of the long-term recurring themes both here and in other more objective media, has been the encroaching domination of the central planning regime, or monetary authorities, read central banks, in the domain of capital markets and overall broad sovereignty, to the point where there is neither technical nor fundamental analysis left, but merely the question of where is the next batch of excess liquidity going to come from. Welcome to the death throes of the fiat system. Artemis Capital has released an extended must read presentation that summarizes just how global changes in trade, currency exchange, global monetary excess liquidity in recent decades, and especially in the coming future, will increasingly determine and define risk, and more troubling, the centuries old anarchism of state sovereignty. Anarchism, because as Europe has demonstrated so very well, in the current world the only real actors are the central banks. And with each passing day they become ever more powerful players in the global capital markets arena, as confirmed by correlations that rise every higher, approaching 1.000 across all asset classes. Anyone wondering why the only fulcrum variable for the future of risk will be FX exchange rates, and why any and all wars in the future will be primarily in binary "currency" format, we urge a careful reading of the attached slideshow by Artemis Capital titled "Fall of the House Of Money: Changes in Global Trade and Currency Exchange."

None of this will come as a surprise to regular readers, but some of the concepts bear repeating.

Artemis' Chris Cole starts with the premise of "World War €urrency"

Countries are artificially devaluing their currencies to generate competitive trade advantages or to finance deficits

United States

  • Ultra-loose monetary policy (ZIRP & Quantitative Easing)
  • Massive government deficits and high debt levels
  • Unsustainable fiscal spending and entitlements


  • ZIRP and debt-GDP-ratios above 200%+
  • Japanese government intervened in foreign exchange markets for the 4th time in over a year (selling yen and buying dollars & euros)


  • Yuan is pegged to the dollar and estimated to be as much as 40% undervalued against the US dollar
  • China keeps buying dollars and “printing” Yuan to maintain this peg


  • Swiss Franc was a popular safe haven appreciating +28% against the Euro and +50% against the dollar since 2003
  • SNB devalued Franc in September pegging it at 1.20x to the Euro


  • Central bank cuts interest rates twice in the last quarter despite highest inflation in six years

At its core, the primary source of tension, volatility and margina price influence is the relationship between the developed (debtor) and emerging (Creditor) nation.

What this underlying dynamic results in is a world in which asset prices are driven not by economic fundamentals but by the "Carry Trade" - i.e. who has the most and cheapest capital/liquidity.

The liquidity generated by the debtor nations, and which drives the above Risk ___ dynamics, has had another ominous side-effect: sending all correlations to all time record highs.

Doubt the carry trade is the stock market? Don't.

Naturally, the next point of debat is an observation of the biggest transgressor of all: the United States, and its central bank, whose sole purpose for its existence, has been to slowly devalue the dollar thus creating stealth inflation, and inflating the debt which not only in America, but across the entire developed world is now at an all time high. Alas, with ZIRP in place, and negative rates impossible, the only other option is to print ever more.

Nothing new there.

Yet the question remains: can currency devaluation be the basis of economic growth? The answer: it can create the illusion of economic growth... and that's it.

Even more stark is the following chart: it shows the S&P adjusted for the dollar's value destruction: seen this way the S&P is comparable to levels seen back in 1997! But because nobody considers the fact that all stock profits are paid out in dollars, and the dollar has lost so much purchasing power ever since the great moderation, instead gauging everything in nominal values, it is obvious that the Fed's plan continues to work.

So what is the conclusion:

  1. Global currency regime will face significant changes in the ensuing decade
  2. Self-reinforcing cycle between Debtor-Developed and Emerging-Creditor nations likely to unravel – perhaps violently
  3. European crisis may tip us into a second global recession
  4. Global policy makers are out of stimulus options
  5. Dollar hegemony may be challenged in the future

And some advice from Artemis:

  1. Prepare your business for the potential of a second global recession
  2. USD is historically strong when the economy is weak – watch for reversal
  3. Evaluate portfolio returns against a global basket of currencies and commodities
  4. Diversify exposure during periods of dollar strength and deleveraging :
    1. Nations with healthy finances and commodity driven economies (e.g. Canadian Dollar, Norwegian Krone, Australian Dollar)
    2. Tangible assets like real estate and metals (but not on leverage)
    3. Alternative asset classes (e.g. volatility and managed futures)

Full presentation:


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docmac324's picture

Which country has more guns?  I'll go with them.  Donkey Kong, on..

tmosley's picture

I'd be more concerned with which country produces more bullets...

gangland's picture

see that's the thing everybody's looking at the wrong line, it ain't about maginot, you could and they did outflank it, it's more like the durand line, 4gw, coin military or economic, full spectrum clusterfcuk, fed shok&awe aint cutting, it either way we're fcuked. you can't fight and organic system with a synthetic monetarist inherently limited counter syste, it's fcuking the height of arrogance. socio-psychopathic jerk-ff ala bateman.

and what country?

try what n waziristan village, they have mute no hand dudes in caves making guns from scratch, 12 year olds making bullets duude. hahahahaa to eternity....

the gun markets of pakistan


no amount of raymond davises will make them stop , all their nukes are belong to them at the end of the day.


"he came up with the idea"

"what idea?"

"of heroin"

"he was laughed"

"people in this area believe in many guns and lots of sons, this is the philosophy of the Dara peoples"

MillionDollarBonus_'s picture

Don't you people know our Federal Reserve's dual mandate!? Are you completely retarded!? QUOTE from the Federal Reserve's OFFICIAL site:

"The Congress established two key objectives for monetary policy--maximum employment and stable prices".

Only a MORON wouln't want stable prices and maximum employment! If the doomers had their way, the global recovery would be dead by now.

knukles's picture

I have a nephew with Tourettes of whom you remind me.  All of a sudden will blurt out some useless inappropriate shit at the most unexpected moment.

prains's picture

SHIT     DORK    SCHNAUBEL    for example

Dr. Richard Head's picture


Inflation is pumping along at over 9% already if one uses the methods of CPI calculation of the 80's.  As well, unemployment is over 15% using the same metrics of then. 

Food stamp usage has nearly doubled since 2007.  Price swings in the equity markets are as volatile as ever.  Housing prices pumped up at ridiculous levels and are now plummeting.  Commodity prices are far from stable whether it be corn, copper, oil, gold, silver, wheat.  The volatility of these markets have been uncharacteristically UNstable.  The global recovery is but for the few and you sir are pissing me off with your nonsense.  Go back to your column writing for the NY Times or something.

Would someone please tell Tyler to bring the captchas back to keep these fucking morons out?  Who knows though?  Perhaps this guy is here just to be the village idiot to ferret out sound arguments against his/her horseshit.  I couldn’t imagine anyone would believe a word of this distorted fuckers typing.   

gangland's picture

46 mill food stamps (but i have i swear seen families getting into an escalade, and you know what i say fcuk loyd and jaymee ), plus 60 million unemployed basically.. fuck the miiic



my thing is PATIENCE i swear i knoiw it suks but that is what is takes if ur alive in this time fuking patience thge trend is clear

gangland's picture

is this satire?

A New York contractor working on a Brooklyn affordable housing project hired goons to pour acid and beat workers who blew the whistle on a kickback scheme, where a city official was indicted court papers show.




fraud is pervasive thru the fuking system because the doohsbag on ht est reet is not dumb


y shuld al th arseholes in dc and lower east side get the caish?

feel me



seruisly its fuking 89 cents


doggings's picture

i think bring back the Capchas too

Dr. Richard Head's picture

My patience wears thin for those toeing the establishment line.  The sad part is there are many out there that still believe the establishment line or don't want to be bothered.  I have stopped talking to those around me about the dangers of this paper money game, as it went over their heads.  Fuck em. 

css1971's picture

Oh good lord. MDB's funny. Should be on stage.


Crab Cake's picture

Fuck the Fed, its "mandate", and Congress too.

It is time for a national reset. It is time for a constitutional convention, jubilee, and a monetary system based on real money that is by and for the people.

Our forefathers, and prescient US leaders throughout our history warned of the folly that has befallen us. We did not listen, and did not follow their guidance, but all is not lost.

We must reclaim our representation and our republic. We must stand, right now, and say no more. We have the RIGHT as a people to fire our government, and enact one that is by and for the people. If there are those who would stand in the way of this right of self determination peaceably demanded then it is also the Peoples' right to use force.

I will repeat. We have the right to demand self determination, and a truly representative government. If the vote be corrupted, and peaceable cries go unheard, it is our right as free peoples to declare war on tyrrany and tyrants be their name King George or Ben Bernanke.

The time is coming for each of us to decide... What are you willing to do, to sacrifice, to ensure the freedom of your children, your family, and your country. Choose wisely.

DeeDeeTwo's picture

People name-checking Weimar, Zimbabwe, Chile are retarded. It's economics reduced to school yard name calling. Self-parodists are the last to know, baby.

merizobeach's picture

"Fuck the Fed,/ It is time/ It is time/ by and for the people./ Our forefathers,/ We did not listen,/ We must reclaim/ We must stand,/ and say no more./ We have the RIGHT/ by and for the people./ the Peoples' right/ I will repeat./ We have the right./ vote be corrupted,/ it is our right/ tyrants be their name./ time is coming/ to sacrifice/ the freedom of your children, your family,/ and your country."


There!  Now it's like a poem or a rap song for you!  And it hasn't lost any of its self-aggrandizing hollowness.

You're freedom is gone, and you vote in support of your wars with 25% of every tax dollar.  If you want a better world, stop funding your government and your wars.  If you want a better life, move to a better country.  Talk is cheap.

donsluck's picture

Doomers don't generate doom, they simply observe it. Doom was generated by moral hazard, which becomes immoral certainty.

James's picture

MDB - When you first started posting you got me w/your bullshit a couple of times.

Then for awhile it was humorous watching others fall into your trap.

Now you bore me to death.

You're not funny.

You're trolling and ruin threads w/your nonsense.

Fuck Off!.

Since you won't stop on your own I'll take it upon myself to reply to your posts immediately after you post warning people of your juvenile games so threadfs don't wind up all about you.

What an ass.

AldousHuxley's picture

prices are not stable an unemployment is historically high.



Chuck Walla's picture

Just a bad attempt at irony, I'm starting to get this guy. He doesn't mean it, just his idea of a goof.

SilverRhino's picture

Be more concerned about the country with the most ICBMs and ABM systems.

The Peak Oil Poet's picture

nah that's passe


i'd go with the country that has the most graduating computer scientists who can write the hacking code to control the drones that have the guns that fire the bullets and drop the bombs and fire the guided missiles


soon there will be millions of micro drones flying all over the world killing anyone who writes anything negati 

gangland's picture

im not a china basher, in fact in a chin-phile but they supposedly graduate 250,000 engineers every year. ok lets say that bullsiht which it is, lets cut it to they graduate 2500 engineers per year that's still dwarfs us .


id be surprised if we grad 10% of that 25000 here phd s. maybe carengeie-mellon mit and cal-tech  cornell fermi maybe hopkins and staford.


i thingk the miic is sucking up unproductive phd brain power along wiht hft financial physics....you can have a team of 6 indian super smart phds at 40k a year maing models for you ....arbitrage

john yoo did it

Sofa King's picture

Yea, they put out as many engineers per year as we put out buisness majors.  Guess what, the quality of their engineers is right up there with the quality of our buisness majors.  They both blow.

DrunkenPleb's picture

New business major graduate doesn't know what they're doing, someone loses some money on a bad trade. New engineering graduate doesn't know what they're doing, things start falling to pieces.  Don't put your money on a country with a entire generation of sub-par engineers.

css1971's picture

The winners are the energy producers.


Smiddywesson's picture

soon there will be millions of micro drones flying all over the world killing anyone who writes anything negati

Yes, big terminator robots are passe, the future involves some poor slob peering out of a foxhole and seeing fifty coffee can sized bots swarming towards his position.

prains's picture

What about the country that has the most bullet catchers?

Tsar Pointless's picture

I love charts!

Thanks, ZH & Artemis Frog - er, Capital!

lynnybee's picture

i love charts, too !     especially long-term historical charts .     a chart is worth a thousand words.

UP Forester's picture

I like beer.  Improves the sight of pretty colored charts and graphics, and makes 'em easier to understand.

Pitchman's picture

Take a look at the graphics here:  Can you say counter party risk? 

See how money, created out of thin air has exploded the worlds financial sector and, it can disappear as if it never existed:

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


THE FED’S DEBT SLAVERY ECONOMIC MODEL is the genesis of funding for the elite money power.  Such power concentrated in the hands of so few is the most pernicious corrupting force, for which all others follow.


Check out the fascinating interview on the evolution of corruption with Ms. Fitts.  And, If you're interested in the depth of the Rabbit Hole and the psychopaths within, see the "Dillon Reed and Company: And the Aristocracy of Stock Profits" link at the bottom of: The Looting of America: Happy Labor Day


Inflection Point

GeneMarchbanks's picture

'Yet the question remains: can currency devaluation be the basis of economic growth? The answer: it can create the illusion of economic growth... and that's it.'

That's really all that matters now. Too bad the broken banking system can only keep the show going for those who are near source of digiflow. None of that funny money is trickling down anymore.

Deglobalization is a bitch.

topcallingtroll's picture

In a world divided into mercantilist and consumer economies devaluation is necessary to keep the system going in a single fiat currency regime. Triffin's dilemma is key here. Trade deficits can continue forever and be a source of liquidity for world growth as long as the mercantilists are willing to accept and hold gradually devaluing paper assets. And they will accept this imbalanced unfair growth as a tax for the privilege of selling to usa consumers. It is easier to take a little bit of pain every day rather than a whole lot of pain at once( by floating the currency of a trade surplus or mercantilist country)

So I believe the answer is yes.

Raging Debate's picture

TopCalling Troll - The answer is YES? What was the question? Triffin's Dilema requires a mathematical solution to solve not just a guess based on 1930's economists and models. Triffins Dilema is a 5d problem. In the 5th dimension time itself loops in on itself. Having the Fed be controller and issuer of its product which is a 3d model means the Bankers are attempting to solve this problem with 3d tools. Think I'll go hunting for hungry lions with a .22.

The code structure for the solution would look something like this 4444-5555 to reflect our current operational paradigm. 6667 is the Triffin Dilema. Who or whom has built the Quantum Computer yet? Math tells me this will be ready in 2015 or prior. Don't kill one another in between and maybe the world has a prayer. If not, the initiators of this failure will also not survive according to math. I prefer 100% of us make it. Why? Because I can be honest and state clearly I knew my politicians were lying when their lips were moving, same as the Central Bankers that now own the political system. But I paid them both to lie for me, because I knew 35% of me was an asshole but I wanted someone to tell me I was Jesus. The other reality is that the pyramid shaped government of 6x6x6 in diameter and the decisions made were made in 1913 when the political systems sold itself off. The majority of us weren't even alive then.

But the Founding Father's model of 4x4x4x4 box outperformed every other model on earth.  Bankers hate running things. Bankers are priests that lie to us and we pay them! Republics must be restored to four branches of government and I would say we could and should now have five which includes the liquidity branch and mirrors our operational evolutionary reality. But the A group must now become advisors, the branding is useless and the CB model will now evolve into this paradigm one way or the other. I prefer loss mitigation and organic growth to the mass murder of all nations families. Not one family will be spared despite the delusions the super wealthy believe that they can and will build a moon or submarine base to escape reality. It is a very small world indeed now. The grid was created long before man got here, we have just evolved to mirror it using science...     

catacl1sm's picture

I really don't get the 6x6x6 and 4x4x4x4 stuff.

Raging Debate's picture

Cata - These numbers reflect geometric shapes like a triangle, a box, a circle. They are used in system engineering to denote a model.

Man builds physical and paper pyramids and builds other tools out of these shapes to run affairs. Governments fit into a model. If you draw out a box shape you are also reflecting a four dimensional government model. Last, these geometric shapes are show our evolution.

By leadership purposely choosing a pyramid formation, a triangle it means some chose to purposely devolve the four branch model of government. Now there are also physics to analize economic models/shapes.

Henry Chinaski's picture

By God, I will have whatever Raging Debate is drinking!  Wow! 

The best I could come up with is this...

It is an interesting coincidence that federal income taxes and the Federal Reserve were instituted together in 1913.  Deductions for interest payments encourage borrowing.  Deductible retirement plans pour unsupervised capital into the stock market.  Enormous profits are generated for Wall Street.  Federal loan guarantees transfer the underlying risk to taxpayers.  This is the baseline racket, apart from frauds like the mortgage crisis and TBTF bailouts.  The basic racket wasn't good enough, the arrogant bastards have blown it and now the system has been destabilized.

wisefool's picture

Rot Row says scooby doo.

I absoultely love this website. But Tim Geither can not file his taxes properly, Tim Geither has permission to turn on the printing press anytime he wants, as fed govenor or SEC-TRES. The Worlds bank/IMF owes him money (in the old ways)

Timmay ran fight club. It is seriously time for children of mem memes here or TPTB will laugh at our 1040s in perpetuity.

Seriously Tyler, what kinda song do you need to refresh the avatars? Pull WB7's finger.

Raging Debate's picture

Henry, don't drink that much these days. We are indeed saying the same thing. Why build a government model of a pyramid (3d) which man used for 12,000 years (at least) when man has already proven a four dimensional tool works better? The US government was a box shape model. It is a tool no different than a weapon or utility. These two government tools can be reflected in geometric numbers like 6 x 6 x 6 for a pyramid or 4 x 4 x 4 x 4 for a box. Using topography and physics, one can observe man's evolutionary progress. Man is operating between the fourth and fifth dimension and the tools/models that you see today reflect such.

Black hole generator tools? Between 4th and 5th dimension. Now lets all of us devolve and build a super pyramid! How about 999? The numbers variations reflect depth which also translate into realities but too much info for mere commentary. I have a thesis to finish before I publish more of my work to describe the interelations of math, models, tools and reflective destiny materials. I hope this was helpful. You could simply use an old saying to describe the solution set currently being run and that is 'You can't fit a triangle into a circle.'

Bicycle Repairman's picture

"The answer: it can create the illusion of economic growth... and that's it.'"

Who can't get through the day without a great big fat rationalization?  Reality is a bitch.  Pass that bottle, m'f'er.

chump666's picture

every trader in the world should be watching the iron ore spot price...and its not looking to good

the printing presses won't be able to offset a china crash

but i would hedge on an oil price, we may have a war coming, say china and india at somepoint

Bicycle Repairman's picture

The printing presses can offset anything in a nominal sense.  If you take the right color pill, it's all good.  And if you take the wrong color pill, then you're just a g-d griper!!!

topcallingtroll's picture

The nice thing about this for the usa is that as long as the Remnimbi is merely a derivative of the dollar (thanks to China's fixed exchange rate) then we can continue to steal their surplus wealth (which would have otherwise accrued to chinese workers).

Gradual dollar devaluation is paradoxically the key that keeps this system stable. They produce. We consume. We pay them in a gradually depreciating currency and are the source of liquidity for world trade.

centerline's picture

As long as China can keep it's people under it's thumb. As the transfer continues and the dollar approaches zero, the inflationary pressures in China will continue to mount. This suggests there is a practical limit... a point of dimishing returns. I would wager we have crossed that point some time ago. Organic (real) GDP was the fuel that ran out. Now, only synthetic GDP (the "illusion") remains and side affects are masked only temporarily by accounting gimmicks and leverage.