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Guest Post: Calling All Crash Test Dummies: Big Crash Ahead

Tyler Durden's picture




 

Submitted by Charles Hugh Smith from Of Two Minds

Calling All Crash Test Dummies: Big Crash Ahead

If the stock market can never crash again due to the Bernanke Put, then why have all the crash test dummies been ordered up?

I know, I know: the stock market will never go down because Ben Bernanke and the other central bankers won't let it. It's funny how the "Bernanke/European Central Bank Put" is ranked alongside gravity as a rule of Nature until markets roll over; then talk shifts from purring adulation of central bankers' godlike powers to panicky calls for another flood of liquidity/free money to "save" the market from the harsh reality of global recession.

The crash test dummies know better: they've been called up for a humongous crash.

The basic mechanism that is being overlooked is Liquidity Resistance. This is akin to insulin resistance, where insulin becomes less effective at lowering blood sugars. The amount of insulin required to maintain normal blood sugar levels increases as resistance rises until even massive doses of insulin no longer have the desired effect and the system crashes.

Liquidity has the same dynamic. Back in the good old days of 2008-09, a $1 trillion tsunami of liquidity was enough to save the global debt machine from implosion and spark an enduring global stock market rally.

The current rally since late December required (by some estimates) over $3 trillion in global liquidity injections from central banks. In four years, the market's resistance has skyrocketed: where $1 trillion launched a multi-year global rally (goosed along with QE2 and Operation Twist when it began to falter), now $3 trillion yielded a 100-day rally that is already coming apart at the seams.

You see where this is going. To maintain the veneer of normalcy, i.e. a continuing Bull market, the next liquidity injection will have to be $5 trillion, and it will spawn a rally of perhaps 50 days. That $5 trillion will probably break the global market; if it doesn't, then the next tidal wave of $7 trillion (or whatever the market needs to trigger another high) most certainly will.

At some point, the liquidity injection will fail to boost the market at all, and that will trigger a panicky rush for the exits.

None of this is new or surprising. One technical tool of interest is the Coppock curve; this chart is courtesy of frequent contributor B.C.:

Those who argue that "this time it's different," i.e. that markets can inflate essentially forever on the "juice" of liquidity, are conveniently overlooking Liquidity Resistance. The crash test dummies have been ordered up, and not because "this time it's different:" they've been ordered up because central bank manipulation is not a law of Nature, it is an artifice of increasingly marginal effectiveness.

Planning your spring garden? Longtime oftwominds.com supporter Everlasting Seeds has a deal for you. At my request, Everlasting Seeds prepared a variety pack of non-hybrid seeds just for small gardeners like myself. If you've never planted a garden but always wanted to give it a try, this is the perfect opportunity to get started. Longtime gardeners will enjoy trying a different mix of veggies.

 

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Tue, 04/10/2012 - 11:39 | 2331326 JW n FL
JW n FL's picture

 

 

we dont need a correction to realize QE - 3!

Tue, 04/10/2012 - 11:46 | 2331354 SheepRevolution
SheepRevolution's picture

Oh what a lovely picture of Jamie Dimon and Lloyd Blankfein!

Tue, 04/10/2012 - 11:57 | 2331392 johnu1978
johnu1978's picture

We should use all the banksters as crash test dummies!!!

 

-John
Self-sufficiency Classes - Wild Edible Tours
http://www.heartrootnatureconnection.com

Tue, 04/10/2012 - 12:36 | 2331534 flacon
flacon's picture

Other than being in precious metals, how else can we protect ourselves? Short the S&P? (http://www.google.com/finance?q=sh)

Be long cash (paper money)?

 

Tue, 04/10/2012 - 14:33 | 2332040 BlandJoe24
BlandJoe24's picture

I've asked similar questions on ZH, with no answer so far. 

For general recommendations, check out the "How to Build a Lifeboat" section on The Automatic Earth:

 

http://theautomaticearth.org/Lifeboat/how-to-build-a-lifeboat.html

 

Good luck! :-)

Tue, 04/10/2012 - 15:19 | 2332252 Stares straight...
Stares straight ahead's picture

I gave up on this link after the first three recommendations because they are all wrong.

Hold no debt?  Bullshit!  The fed is making your debt cheaper everyday. 

Hold cash?  Bullshit!  Your cash in the bank is losing purchase power every day.  Unless you want to buy bargains after a stock market crash (use your own judgement, here).

Owning precious metals has been the only strategy for protecting oneself during Stagflationary times.  That is why it is the only thing offered here.

If you want more options, buy everything now that you might want later.

Thats it.  No rocket science.  Don't fight the Fed.  And I ain't saying the Fed is fair.

Tue, 04/10/2012 - 16:39 | 2332726 Jake88
Jake88's picture

they're predicting deflation

Tue, 04/10/2012 - 17:30 | 2332887 Stares straight...
Stares straight ahead's picture

The fed will not permit it.

Tue, 04/10/2012 - 19:01 | 2333069 rotagen
rotagen's picture

What are you "staring straight" into....an alternate reality?

Thu, 04/12/2012 - 12:18 | 2338327 Stares straight...
Stares straight ahead's picture

You've been listening to too much Dave Ramsey, I see.

Tue, 04/10/2012 - 20:40 | 2333273 hmmtellmemore
hmmtellmemore's picture

Won't repaying debt be harder to do in leantimes, which will cause many mortgage "owners" to have their homes repossesed?

Tue, 04/10/2012 - 16:13 | 2332599 MeelionDollerBogus
MeelionDollerBogus's picture

see my comment on strangle, options, fas, vxx.

Tue, 04/10/2012 - 15:01 | 2332188 hmmtellmemore
hmmtellmemore's picture

The biggest pain will come from the dilution of your share of Social Security and Medicare, and I don't think there is much you can do about that.  I wonder if there are Western nations with no Social Security or Medicare type mandates.  Anyone know?

One piece of easy advice is to roll over (or liquidate and eat the penalty) your 401k and put it into a bullion IRA.

Tue, 04/10/2012 - 16:12 | 2332589 MeelionDollerBogus
MeelionDollerBogus's picture

options > 90 days time remaining

stangle so you are insured in case of magical PPT upside

FAS, VXX

these are great multipliers vs SPY that is linear-proportional to s&p500

this ought to get you some profits > 20% each in that time-frame

if you're more daring for a lower cost you can get FAS put & vxx call BUT... if you bias yourself ONLY to that direction of the market don't be surprised if the Bernana King rips you off.

Tue, 04/10/2012 - 22:58 | 2333476 Essential Nexus
Essential Nexus's picture

You probably should use a double or triple short, though they can be capricious sometimes.

Tue, 04/10/2012 - 11:58 | 2331396 HD
HD's picture

Indeed. Note the absence of both brains and balls.

Tue, 04/10/2012 - 16:21 | 2332648 ElvisDog
ElvisDog's picture

Completely tangential question: why do they have female crash dummies with breasts? Along the same lines, why doe Batman's armor have nipples when Robin's does not?

Tue, 04/10/2012 - 17:13 | 2332844 smiler03
smiler03's picture

And why do you never see an obese crash test dummy. Is it because obese people either bounce or burst?

Tue, 04/10/2012 - 12:07 | 2331435 WhyDoesItHurtWh...
WhyDoesItHurtWhen iPee's picture

jamie demond and lloyd blankenstein

Tue, 04/10/2012 - 13:15 | 2331729 Carl Spackler
Carl Spackler's picture

"Oh what a lovely picture of Jamie Dimon and Lloyd Blankfein!"

 

I beg to differ. 

The likes of Dimon and Blankfein are far more likely to be the engineers driving the crash test dummies (a/k/a Muppets) into the wall, than they are to be the crash test dummies.

More likely, Geither and Bernanke are the real engineers testing how things behave when everyone hits the wall at speed !

Obama willbe the face and mouth saying that there is no wall, the speed is Bush's fault, and the crash test dummies had it coming to them for 200 years of believing in capitalism. 

 

 

Tue, 04/10/2012 - 11:50 | 2331355 MillionDollarBonus_
MillionDollarBonus_'s picture

... Meanwhile the VIX is calmly trading below 20, in line with the global economic recovery. I am truly saddened by the inability of doomer rednecks to see the green shoots in the global economy. Almost every economic indicator is pointing towards increased growth and a solid recovery, but doomer libertarians are too blind to see this.

Tue, 04/10/2012 - 11:51 | 2331365 Stoploss
Stoploss's picture

Look no further than the euro area right now which is down a combined 10% between three indexes.

You fucking hairless retard.

Tue, 04/10/2012 - 12:34 | 2331530 vast-dom
vast-dom's picture

Yes, "....because central bank manipulation is not a law of Nature, it is an artifice of increasingly marginal effectiveness." 

Tue, 04/10/2012 - 11:54 | 2331377 Cast Iron Skillet
Cast Iron Skillet's picture

HaHaHaHaHaHaHa!!! ... comic relief - thanks, I needed that!

Tue, 04/10/2012 - 18:34 | 2333027 JW n FL
JW n FL's picture

 

 

he is fantastic!

Tue, 04/10/2012 - 11:59 | 2331404 krispkritter
krispkritter's picture

You never owned a helmet as a child, did you?

Tue, 04/10/2012 - 12:47 | 2331582 SilverFish
SilverFish's picture

I dont get it.

 

Why would he need a helmet to eat paint chips off his momma's window sill?

Tue, 04/10/2012 - 12:07 | 2331437 Howdan
Howdan's picture

"...Calmly trading below 20"  What drugs are you on MDB?! Are you RobotTrader's evil twin brother or something? Vix is up more than 25% from 15.5 to over 20 and you're saying "everything's fine" ??

Wed, 04/11/2012 - 12:51 | 2332549 MeelionDollerBogus
MeelionDollerBogus's picture

SPY drop to 126, vxx rise to 35 or 40, vix will be near that level too.

Tue, 04/10/2012 - 12:47 | 2331586 shutupnsing
shutupnsing's picture

"I am truly saddened by the inability of doomer rednecks to see the green shoots in the global economy"...Hear that boys? The Million Dollar Genius and Pleasant Valley Prognosticator has predicted the end of Big Ben's Miracle Grow!! I am Green with Envy MDB! Comrade Obama will make you the Garden Czar fer sure!

Tue, 04/10/2012 - 12:47 | 2331588 lasvegaspersona
lasvegaspersona's picture

MDB we know the MSM line, we come here to get the truth. If I got my interpretation of financial data from CNBC I'd make the same kinds of statements you do. With a bit of 'further analysis' however we see that the employment data is actually FAR worse than what we are told to believe. The same can be said for most of the economy. Only if one can see through the outright lies being fed to a trusting public can one hope to save themselves from the coming economic collapse. For me that is the purpose of hours of reading daily, not to come here and read your unexamined repeat of government propaganda. Save yourself, consider 'critical thinking'.

Tue, 04/10/2012 - 12:50 | 2331599 jomama
jomama's picture

in line with the global economic recovery.

 

oh yeah? where's those fucking jobs, numbnuts? any why are my groceries so gotdamned expensive?

thanks for teh lulz.

Tue, 04/10/2012 - 13:36 | 2331820 SheepDog-One
SheepDog-One's picture

Id rather be a 'doomer redneck' than any of these bigwig PHD fuktard shitnecks!

Tue, 04/10/2012 - 15:23 | 2332302 MeelionDollerBogus
MeelionDollerBogus's picture

At this point if you don't have a vxx Call with more than 90 days on it ... you're blind & an idiot.

By all means, get yourself a vxx Put or SPY call as well but the market's topped, you're just getting some insurance at this point.

dow price prediction based on ivars chart on zerohedge and tfmetals

Tue, 04/10/2012 - 16:45 | 2332746 Jake88
Jake88's picture

Calmly trading below 20?  The VXX is treating me well. And I expect much better to come.

Tue, 04/10/2012 - 11:51 | 2331367 ruffian
ruffian's picture

Statemet or Question ? seems like a statement, but I ASK THE QUESTION, Do We Need An Equity Selloff As Political Cover For QE3? replies appreciated....

Tue, 04/10/2012 - 12:14 | 2331468 dow2000
dow2000's picture

Time to sharpen the pitchforks!

Tue, 04/10/2012 - 11:40 | 2331331 Jim in MN
Jim in MN's picture

Psst

http://www3.nhk.or.jp/daily/english/20120410_25.html

NHK News Japan:: US aegis destroyer seen off southwestern island

 

Two days ahead of North Korea's announced window for a rocket launch, countries are deploying vessels and planes to address the situation.

An NHK helicopter on Tuesday spotted a US aegis cruiser near a southwestern island in Okinawa Prefecture.

The USS Shiloh was stationary at about 80 kilometers northeast of Miyako Island. The area is near the projected flight path of what the North calls "a satellite", a de facto missile.

Aegis vessels are equipped with interceptor missiles and radars capable of tracking ballistic missiles.

The USS Shiloh belongs to the US Navy 7th Fleet, based in Yokosuka near Tokyo. But the naval command has declined to comment to NHK on the vessel.

The USS Shiloh was also on duty at sea the last time North Korea launched a rocket in 2009.

Japan's Self-Defense Forces have deployed 3 aegis destroyers -- 2 near Okinawan islands and 1 in the Sea of Japan. Japan says it will intercept any debris from the missile if it falls into its territory.

Tuesday, April 10, 2012 19:04 +0900 (JST)

Tue, 04/10/2012 - 11:44 | 2331339 rufusbird
rufusbird's picture

Nice chart. Rings true. Made with Sine waves, good stuff, they are the best.

Tue, 04/10/2012 - 12:03 | 2331420 Aquiloaster
Aquiloaster's picture

The markets mirror available liquidity better than they reflect actual value. . . .until everyone realizes that exact thing. Then we get closer to actual values.

Tue, 04/10/2012 - 13:42 | 2331846 Coldsun
Coldsun's picture

Pffft. You mean Cosine... n00b.

But seriously, sine/cosine patterns represent the cyclical nature and diminishing effects of the stimulant. Looks like we are starting to detox from the hopium. The Bernank is hitting Ctrl + P while Obama is bribing the wastelands of USSA to get another term. After all, he needs time to learn how to play the fiddle. Can’t blame him, he’s been too busy working on his golf swing and raping the productive.

Tue, 04/10/2012 - 15:04 | 2332200 hmmtellmemore
hmmtellmemore's picture

Sine waves are the gold-standard of the chart world.  Cosines are poor man's waves.

Tue, 04/10/2012 - 11:44 | 2331340 q99x2
q99x2's picture

Tired of Bernank now. I'm looking for a religious experience. A sublime one. Like the one they had a ways back in Dresden.

Tue, 04/10/2012 - 12:07 | 2331436 Aquiloaster
Aquiloaster's picture

I think the chemical process was more like burning plasma than sublimation.

Tue, 04/10/2012 - 15:04 | 2332203 hmmtellmemore
hmmtellmemore's picture

Do you mean the WW2 religious experience of Dresden?

Tue, 04/10/2012 - 11:43 | 2331341 El Oregonian
El Oregonian's picture
Money swore an oath that nobody who did not love it should ever have it. Irish Proverb
Tue, 04/10/2012 - 11:46 | 2331352 l1b3rty
l1b3rty's picture

sounds like a good time to buy physical silver...while there is still physical silver..

 

http://silvervigilante.com

Tue, 04/10/2012 - 11:54 | 2331379 Dr. Engali
Dr. Engali's picture

I agree with buying silver but ,my best performing asset right now is ammo.

Tue, 04/10/2012 - 11:48 | 2331358 Cursive
Cursive's picture

I've already planted my Spring garden. Planted 10 fruit trees this Winter, too. I've also got a supply of FAZ and plan to add to that stash.

Tue, 04/10/2012 - 13:03 | 2331684 Metalredneck
Metalredneck's picture

Planting this weekend.  Going long on tubers & root veggies for the cellar, checking the chokecherry tree blossoms for wine-making season.  Rhubarb is up & looking good.

Thu, 04/12/2012 - 04:48 | 2337038 MeelionDollerBogus
MeelionDollerBogus's picture

in the event SPY goes south I'd say FAZ won't do nearly as well as VXX. RSW isn't too bad either.  FAZ, FAS seem to slip more than RSW,rsu. VXX on the other hand will make a 4x swing up for every swing 1x down on S&P500 / spy. It's so wild that getting a VXX strangle only costs a little more while still sitting comfortably within range of profits on expected swings up or down with SPY.

Tue, 04/10/2012 - 11:49 | 2331360 williambanzai7
williambanzai7's picture

JOHNNY CRASH

Tue, 04/10/2012 - 16:39 | 2332723 SecondAdamWon
SecondAdamWon's picture

Lets get up a picture of the Bernak with the quote "An artifice of increasingly marginal effectiveness!"

Tue, 04/10/2012 - 11:48 | 2331361 darteaus
darteaus's picture

Why isn't a curve from the Gread Depression on the chart?

Tue, 04/10/2012 - 12:25 | 2331505 El Oregonian
El Oregonian's picture

"Why isn't a curve from the Gread Depression on the chart?"

'Cause, it's just TOO damn depressing... But look on the bright side, after this giant plunge, looking back on it, we'll actually know what the bottom really looks like.

Tue, 04/10/2012 - 11:50 | 2331363 Straying from t...
Straying from the flock's picture

I love that the more people talk about  the economy, the more I hear them talk about growing their own food.  This illusion cannot last.

Tue, 04/10/2012 - 11:51 | 2331366 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

And throught, the dollar maintains hedgemony, because there is nothing in the world as precious as fiat - that which lasts forever, maintaining its value until the end of time.

KING DOLLAR!

Tue, 04/10/2012 - 12:40 | 2331556 El Oregonian
El Oregonian's picture
Money is of no value; it cannot spend itself. All depends on the skill of the spender. -Emerson
Tue, 04/10/2012 - 11:53 | 2331370 Charlie
Charlie's picture

Imho now may be a good time to buy puts on some cyclical names.

Tue, 04/10/2012 - 11:52 | 2331371 Anne Ominous
Anne Ominous's picture

Have fizz but still don't like the article, something stinks of bullshit bitchez

Tue, 04/10/2012 - 11:53 | 2331372 Eric L. Prentis
Eric L. Prentis's picture

The Federal Reserve, with QE1, makes the credit crisis twice as bad by postponing the economic crash. With QE2, the problem becomes four times worse. With Operation Twist, our credit crisis is now eight times as bad.

 

IT IS IMPOSSIBLE !!!!!!!!!!!! for the Fed to unwind their electronic printing without the US economy experiencing the economic crash we should have had in 2008, but now, eight times worse.

 

If the Fed delays the crash again, with QE3, the eventual economic crash will be 16 times as bad. The Fed is killing us by monetizing the debt, which Bernanke told Congress he would NOT do. This is why we have laws that prevent monetizing the debt, which the Fed and politicians ignored. Now we are all screwed.

Tue, 04/10/2012 - 12:18 | 2331478 Bay of Pigs
Bay of Pigs's picture

GOLD and SILVER bitchez...

Tue, 04/10/2012 - 11:53 | 2331375 Decay is Constant
Decay is Constant's picture

Now I'm not in finance or an economist, but that curve looks very similar to the physiology of ovulation.  The time from ovulation to menses is pretty much a fixed time period.  It's the time from menses to ovulation that has resulted in many "accidents".  The time of the first half of the cycle is nearly always 22 months.  The second half of the cycle is pretty variable.

If the curve is right, and the timing is right, it's time to go to the mini mart and stock up on "supplies".  There's about to be a real change in the mood.

Tue, 04/10/2012 - 17:16 | 2332853 Cathartes Aura
Cathartes Aura's picture

22 months eh.

best leave the counting to the bodies that actually have the cycles.

http://www.fwhc.org/health/moon.htm

Tue, 04/10/2012 - 11:57 | 2331395 SimpleandConfused
SimpleandConfused's picture

"I know, I know: the stock market will never go down because Ben Bernanke and the other central bankers won't let it."

An incorrect premise will always allow the writer to be correct.

Properly stated, the stock market will ONLY go down because Ben Bernanke and the other central bankers ALLOW IT TO HAPPEN.

These guys have their reasons just as Tyler has pointed out so well over the years.  Today, the article describing the market as a central planned abortion is spot on.  It is no longer a vehicle of discovery, rather a tool of central planners to meet whatever objective they might have.  It just is what it is.  But it will only fall or rise on the whim of the central bank until such time their currency loses its grip on the system.

Tue, 04/10/2012 - 12:28 | 2331511 razorthin
razorthin's picture

Sure.  It's just routine, manufactured back and fill.  Must plant what are perceived to be "buying opportunities" to push this pig higher.

Tue, 04/10/2012 - 11:59 | 2331407 aerojet
aerojet's picture

Not much hard evidence of the claim in the article.  Seems more like wishful thinking than anything else.

Tue, 04/10/2012 - 12:00 | 2331409 Sutton
Sutton's picture

ALL Bernanke

ALL the Time

Memory of life without him grows dim.

Tue, 04/10/2012 - 12:02 | 2331412 Shizzmoney
Shizzmoney's picture

This is why we have laws that prevent monetizing the debt, which the Fed and politicians ignored. Now we are all screwed.

If they print again........there will be international backlash.

US doing well, compared to rest of the world.......but the rest of the world ain't gonna keep complying with this bullshit. 

What's funny is that today, the Brazilian PM is in Washington complaining to Obama about the monetary policy.  Which is hilarious, because well, he doesn't CONTROL THE MONETARY POLICY. 

Tue, 04/10/2012 - 12:03 | 2331419 Cyclerider
Cyclerider's picture

Maya Rand explains the cost The Bernank's methods when she visits the Velvet Peter's show in this animated video.  "Why work? You can't keep up with all the printing."

http://www.youtube.com/watch?v=OHtYQ9adWg0

 

Tue, 04/10/2012 - 12:06 | 2331433 Normalcy Bias
Normalcy Bias's picture

Everlasting Seeds is owned by AIG. The fucking irony...

Tue, 04/10/2012 - 12:34 | 2331527 pods
pods's picture

I pick up my OP seeds from Baker Creek.  Just reading the catalog is joy.  Lots of TJ quotes!

pods

Tue, 04/10/2012 - 12:35 | 2331535 Miffed Microbio...
Miffed Microbiologist's picture

Well I guess that's better than being owned by Monsatan. Hard to find seeds these days that aren't.

Miffed :-)

Tue, 04/10/2012 - 13:10 | 2331710 Calmyourself
Calmyourself's picture

link?

Tue, 04/10/2012 - 14:38 | 2332069 Normalcy Bias
Normalcy Bias's picture

http://www.everlastingseeds.com/

Scroll to the bottom of the page. They're not trying to hide it...

Tue, 04/10/2012 - 17:25 | 2332874 Cathartes Aura
Cathartes Aura's picture

well spotted, NB - always do a bit of research before purchasing seeds (or anything) - if you think about it, how do YOU know what seeds you're getting and where they've been sourced?  if it's funded or connected to corporate monies, why would you trust them??

Hold it right there, Nellie. Did I see that right? Seeds of Change, one of the world’s largest producers and marketers of 100% organic seed is a division of Mars? WTF??? You know, Mars!!! That pillar of corporate hypocrisy that is also leading the fight alongside the USDA and IBM to spread GM cocoa around, starting in Africa. What’s IBM got to do with it? Hell, I don’t know. What did IBM have to do with the holocaust?

http://farmwars.info/?p=7503

know that they all hide behind "green" or "natural" labeling designed to attract the peoples, packaging doesn't mean shit - I mean, look at the labels amrka uses to describe itself . . . "truth, justice, and the amrkn way" my arse.

Tue, 04/10/2012 - 14:01 | 2331454 steve from virginia
steve from virginia's picture

 

Too bad it's not real ... the liquidity, that is.

If you put yr dirty car through the car was what comes out the business end of the car wash isn't a new car, it's the same old doggy with the dirt scrubbed off.

Impaired assets are swapped for 'new' assets, the swapped assets are buried on the central banks' balance sheets. The impairment has been shifted from one account to another, not eliminated. Meanwhile, more finance assets become impaired. The expansion of the central bankers' balance sheets accompanies the shrinkage of private versions elsewhere.

The reason for the problem is slowdown in the expansion of private credit, much of which is unsecured. What is called a 'boom' is just an expansion of credit sans- collateral (credit cards, student loans, loans secured against phantom/re-hypothecated collateral, etc.) Right now, there is no business activity that provides a return except ponzi schemes, collateral worth is shrinking across the board. Central banks can do nothing to alter this ... except to rush more assets through the car wash over and over.

Central banks are capital constrained, that is the nature of central banking. A bank making unsecured loans cannot be the central bank. Otherwise, collateral would be of undeterminable worth which would mean all banking would eventually cease because there would be no worthwhile collateral.

The purpose of the central bank is to defend the worth of collateral. It runs assets through the washer and hopes for the best.

The real problem is that industrial enterprise does not earn a return, it does not pay for itself. When inputs are repriced, as they are now due to supply and demand, the gap between what an enterprise 'earns' (zero) and what it must pay for inputs becomes unaffordable. That is, the cost of credit needed to make these enterprises 'profitable' is too high.

Since industrial enterprises cannot pay their own way there is no relevance to central banks' strategy. All industrial collateral is worthless!

This is why most analysis is wrong and frustratingly so. Central banks don't 'print money'. They provide credit against impaired collateral. Their efforts fail because the collateral grows more worthless with the passage of time.

Central banks don't print money: only increase (irrelevant) currency along with governments' treasuries. The callable collateral for all currencies is government debt. Governments can issue currency (print money) unfortunately, they choose not to otherwise the debt overhand could be swiftly reduced along with any increase in currency.

The central bankers are trying to bail out the Titanic with buckets. They are failing.

Tue, 04/10/2012 - 12:14 | 2331460 BlackholeDivestment
BlackholeDivestment's picture

...unholy cow, a Suicide Vampire Squid ate my Longboard Fin and I'm never escaping this green room.

http://www.youtube.com/watch?v=p13yZAjhU0M&feature=related

Thu, 04/12/2012 - 04:16 | 2337030 MeelionDollerBogus
MeelionDollerBogus's picture

this room is green

I want to go back to the blue room

... nice pick of tunage

Tue, 04/10/2012 - 12:14 | 2331462 Quinvarius
Quinvarius's picture

So.  After all the work that was done to prop up the banks, they are just going to be allowed to fail now?  What is going on is Bernanke deeply regretting the Fed's recent messages on possibly not easing.  The only people that need that easing are bankers.  And now they are getting crushed.  Get ready for the Fed to go on a global sovereign debt buying spree, AKA reach around, to help the bankers out of assrape the Fed personally administered.

QE won't stop until the banks are solvent.  They never will be solvent without reform.  Therefore, QE will not stop.  Any hint of stopping immediately causes the market to discount banks as all dead.

Tue, 04/10/2012 - 12:25 | 2331501 Monkeyfister
Monkeyfister's picture

DOW 9,000, here we come!

 

Tue, 04/10/2012 - 15:25 | 2331540 cristo
cristo's picture

kill the banks

http://www.killthebank.net/node/16

“I killed the bank.”
- Written on the grave of Andrew Jackson (1767-1845)

“The bank hath benefit of interest on all monies that it creates out of nothing.”
- William Paterson (1658-1719), International Banker, in 1694 obtained the charter over the Bank of England and the money system fell into private hands.

"Permit me to issue and control the money of a nation, and I care not who makes its laws!“
- Mayer Amschel Rothschild (1744-1812)

"History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling money and it's issuance“
- President James Madison (1809-1817)

“I believe that banking institutions are more dangerous to our liberties than standing armies”
- Thomas Jefferson

“The refusal of King George III to allow the colonies to operate an honest money system, which freed the ordinary man from the clutches of the money manipulators, was probably the prime cause of the Revolution.”
- Benjamin Franklin (Founding Father of the United States)

“The Congress shall have power to… coin money [and] regulate the value thereof.”
- Section 8, U.S. Constitution, 1783.  It is unconstitutional to delegate this power to monopoly like the Fed (Pastor Eli James) 

“If the American people ever allow the banks to control the issuance of their currency (instead of Congress), first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children will wake up homeless on the continent their fathers occupied. The issuing power of money should be taken from the banks and restored to Congress and the people to whom it belongs.”
-Thomas Jefferson, letter to then Secretary of the Treasury, Albert Gallatin, 1802

“The eyes of our citizens are not sufficiently open to the true cause of our distress. They ascribe them to everything but their true cause, the banking system”
– Thomas Jefferson

“All the perplexities, confusion and distress in America arise not from defects in our Constitution; not from want of honour or virtue, so much as from downright ignorance of the nature of coin, credit and circulation.”
- President John Adams, 2nd U.S. President

"The few who understand the system will either be so interested in its profits or so dependent on its favours that there will be no opposition from that class, while on the other hand, the great body of the people mentally incapable of comprehending the tremendous advantage that capital derives from the system will bear its burdens without complaint and perhaps without even suspecting that the system is inimical to their interests."
- John Sherman letter sent to New York bankers, Morton, and Gould, in support of the then proposed National Banking Act, 1863

“Whoever controls the volume of money in any country is absolute master of all industry and commerce.”
- President James A. Garfield, assassinated 1881

“People who will not turn a shovel of dirt on the project, nor contribute a pound of material, will collect more money, from the United States, than will the people, who supply all the material and do all the work. This is the terrible thing about interest… But here is the point: If the nation can issue a dollar bond, it can also issue a dollar bill. The element that makes the bond good, makes the bill good, also. The difference, between the bond and the bill, is that the bond lets the money-broker collect twice the amount of the bond, and an additional 20%. Whereas the currency, the honest sort, provided by the Constitution, pays nobody, but those, who contribute in some useful way. It is absurd, to say that our country can issue bonds, and cannot issue currency. Both are promises to pay, but one fattens the usurer and the other helps the people.”
– Thomas Edison, on the absurdity of allowing the Federal Reserve Bank the monopoly privilege of lending us our own money. 

“The Morgan interests took advantage… to precipitate the panic [of 1907], guiding it shrewdly as it progressed.”
- Life Magazine, 1907, explaining the events that led to the creation of the Federal Reserve Bank.

"Let me control a peoples currency and I care not who makes their laws."
- Meyer Nathaniel Rothschild in a speech to a gathering of world bankers February 12, 1912, a requote of his ancestor Mayer Amschel.

"This [Federal Reserve Act] establishes the most gigantic trust on earth. When the President Wilson signs this bill, the invisible government of the monetary power will be legalized....the worst legislative crime of the ages is perpetrated by this banking and currency bill. From now on, depressions will be scientifically created."
- Charles A. Lindbergh, Sr., 1913

“I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is now controlled by its system of credit… We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the world - no longer a Government of free opinion, no longer a Government by conviction and vote of the majority, but a Government by the opinion and duress of small groups of dominant men.”
- Woodrow Wilson, 1919

"The financial system has been turned over to the Federal Reserve Board. That Board administers the finance system by authority of a purely profiteering group. The system is Private, conducted for the sole purpose of obtaining the greatest possible profits from the use of other people's money”
- Charles A. Lindbergh, Sr., 1923

“I am afraid that the ordinary citizen will not like to be told that the banks can and do CREATE money, and they who control the credit of the nation direct the policies of governments and hold in their hands the destiny of the people.”
- Reginald McKenna (1863-1943), President of the Midlands Bank of England, UK Chancellor 1915-16, January 1924

"When the Federal Reserve Act was passed, the people of these United States did not perceive that a world banking system was being set up here. A super-state controlled by international bankers and international industrialists acting together to enslave the world for their own pleasure. Every effort has been made by the Fed (Reserve) to conceal its powers but the truth is — the Fed has usurped the government!" 
Congressman Louis McFadden, Chairman of House Commitee on Banking and Currency from 1920 to 1931

“Mr. Chairman, we have in this country one of the most corrupt institutions the world has ever known. I refer to the Federal Reserve Board and the Federal Reserve Banks, hereinafter called the Fed. The Fed has cheated the government of these United States and the people of the United States out of enough money to pay the Nation's debt. The depredations and iniquities of the Fed has cost this country enough money to pay the National debt several times over. These twelve private credit monopolies were deceitfully and disloyally foisted upon this country by the bankers who came here from Europe and repaid us our hospitality by undermining our American institutions. Those bankers took money out of this country to finance Japan in a war against Russia. They created a reign of terror in Russia with our money in order to help that war along. They instigated the separate peace between Germany and Russia and thus drove a wedge between the Allies in the World
War."

- Congressman Louis T. McFadden, Chairman of House Banking Committee 1921 through 1931 — in a speech made before the House in 1934

“[The Depression] was a carefully contrived occurrence. International bankers sought to bring about a condition of despair, so that they might emerge the rulers of us all.”
- Louis T McFadden

"The depression was the calculated 'shearing' of the public by the World Money powers, triggered by the planned sudden shortage of supply of call money in the New York money market....The One World Government leaders and their ever close bankers have now acquired full control of the money and credit machinery of the U.S. via the creation of the privately owned Federal Reserve Bank."
- Curtis Dall, FDR's son-in-law as quoted in his book, My Exploited Father-in-Law

“The real truth of the matter is that a financial element in the large centers has owned the government since the days of Andrew Jackson.”
- President FD Roosevelt (1933-1945)

“Banking was conceived in iniquity and was born in sin. The Bankers own the earth. Take it away from them, but leave them the power to create deposits, and with the flick of the pen they will create enough deposits to buy it back again. However, take it away from them, and all the great fortunes like mine will disappear, and they ought to disappear, for this would be a happier and better world to live in. But, if you wish to remain the slaves of Bankers and pay the cost of your own slavery, let them continue to create deposits.”
- Sir Josiah Stamp (1880-1941), President of the Bank of England in the 1920's, the second richest man in Britain

“The Federal Reserve is one of the most corrupt institutions the world has ever seen. There is not a man within the sound of my voice who does not know that this Nation is run by the international bankers.” 
-  Congressman Louis T. McFadden, Chairman of the House Banking and Currency Committee, June 20, 1932

"Some people think the Federal Reserve Banks are United States Government Institution. They are private credit monopolies which prey upon the people of the United States for the benefit of themselves and their foreign customers."
- Congressman Louis T. McFadden, Chairman of the House Banking and Currency Committee, June 20, 1932

"Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency... By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and while the process impoverishes many, it actually enriches some... The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”
- John Maynard Keynes

“The increase in the assets of the Federal Reserve banks from 143 million dollars in 1913 to 45 billion dollars in 1949 went directly to the private stockholders of the [federal reserve] banks."
- Eustace Mullins In Secrets of the Federal Reserve (1952)

“Here are the simple facts of the great betrayal. Wilson and House knew that they were doing something momentous. One cannot fathom men's motive's and this pair probably believed in what they were up to. What they did not believe in was representative government. They believed in government by an uncontrolled oligarchy whose acts would only become apparent after an interval so long that the electorate would be forever incapable of doing anything efficient to remedy depredations."
- Ezra Pound in the intro to Secrets of the Federal Reserve (1952)

"The powers of financial capitalism had another far reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements, arrived at in frequent private meetings and conferences. The apex of the system was the Bank for International Settlements in Basle, Switzerland, a private bank owned and controlled by the worlds' central banks which were themselves private corporations. The growth of financial capitalism made possible a centralization of world economic control and use of this power for the direct benefit of financiers and the indirect injury of all other economic groups."
- Professor Carroll Quigley, 1966

“The people must be helped to think naturally about money. They must be told what it is, and what makes it money, and what are the possible tricks of the present which put nations and peoples under the control of the few. If the American people knew the corruption in our money system there would revolution before morning!” 
- Henry Ford, Sr (1863-1947)

“We have gold because we cannot trust Governments.”
- President Herbert Hoover (1929-1933)

“In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves. This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.”
- Alan Greenspan, in 1966, before becoming Chairman of the Federal Reserve Board, 1987-2006.

“This is a staggering thought. We are completely dependent on the commercial Banks. Someone has to borrow every dollar we have in circulation, cash or credit. If the Banks create ample synthetic money we are prosperous; if not, we starve. We are absolutely without a permanent money system. When one gets a complete grasp of the picture, the tragic absurdity of our hopeless position is almost incredible, but there it is. It is the most important subject intelligent persons can investigate and reflect upon. It is so important that our present civilization may collapse unless it becomes widely understood and the defects remedied very soon.” 
- Robert H. Hemphill (Credit Manager of Federal Reserve Bank, Atlanta, Ga.)

“I cannot morally blame all Americans for allowing, for instance, the birth of the Federal Reserve System and the money destruction that has followed. They are simply ignorant about it and don’t know what happened or what is happening. They think that prices go up rather than that dollars go down.”
- Robert R. Prechter, Jr, economist born 1949

"When you or I write a check there must be sufficient funds in out account to cover the check, but when the Federal Reserve writes a check there is no bank deposit on which that check is drawn. When the Federal Reserve writes a check, it is creating money."
- Boston Federal Reserve Bank

"Every Congressman, every Senator knows precisely what causes inflation...but can't support the drastic reforms to stop it because it could cost him his job.“
- Robert A. Heinlein, Expanded Universe, 1980 

Tue, 04/10/2012 - 15:32 | 2332359 Stares straight...
Stares straight ahead's picture

Nice work!

Tue, 04/10/2012 - 12:42 | 2331567 slewie the pi-rat
slewie the pi-rat's picture

i went to the wiki link and found no reference to "killer waves" and that this coppock thing is not used to generate sell signals, only buy signals

chs makes it sound like this is giving a sell signal, you know, b/c of the "crash dummies"

 

Tue, 04/10/2012 - 13:38 | 2331833 lasvegaspersona
lasvegaspersona's picture

Stew

what do 'buy' and 'sell' signals mean in a manipulated market? If the Fed says 'buy' you buy. (If they back it up and it is not just verbal manipulation).

I'm amused by all the doomers who know what is happening and describe the coming collapse in detail and then make predictions and buy/sell recommendations.

Tue, 04/10/2012 - 12:49 | 2331594 Centurion9.41
Centurion9.41's picture

Re Liquidity Resistance, Wiemar printing & CB Cabal

An essential difference regarding velocity and liquidity actions has to do with the very nature of money today vs the early 1900s.

In the early 1900s, printing was literally printing.  Cleaning up an economic over printing made cleaning the street after a NYC canyon of heros parade look like vacation.  Germany's CB literally had to go out and get the paper off the streets.

Today, the digital nature of money makes the clean up, by nature, a different process.

Can the CB cabal really hit the back space button and take in the liquidity?

Yes, IF the currency resides in the computers of those who are members of the cabal or extended kingdom.

However, IF the currency leaks into the accounts of the masses, where the Fed's backspace/delete button cant reach?

Where might such a place be?

Europe?

The US repeatedly "wastes" money in operations focused on saving other countries/cultures.  Think of the amount of $ that disappeared through direct support of foreign entities during war.

Now consider the path the Fed embarked when it stepped in to support their brothers in the European CB cabal.

Do you really think the Fed's backspace/delete key will reach across into the back offices of European banks and politics?  Expand that same reality to the BRICs, etc.

This is the delusion that is the Black Swan not priced.

Tue, 04/10/2012 - 12:56 | 2331630 northman
northman's picture

I am constantly amazed at the amount of people that take MDB at his word. Every single post he makes is satirical, however in this case he is right on the money. The global economic recovery is taking hold slowly but surely - IE. I feel great every time I take a hit. That's recovery right?

Tue, 04/10/2012 - 13:44 | 2331852 Calmyourself
Calmyourself's picture

Amazing isn't it.. These are the best and the brightest..

Thu, 04/12/2012 - 03:52 | 2337024 MeelionDollerBogus
MeelionDollerBogus's picture

OH ya, hit me with that recovery one more time...

inject that QE

cause it makes me feel like a man

when I put a spike into my vein

Tue, 04/10/2012 - 12:58 | 2331650 Spaceman Spiff
Spaceman Spiff's picture

In honor of the crash test dummy title:

Ron Paul wasn't a Keynes' man
He'd just come along and scoop gold under his arm
Like that, quick as a cat in the jungle
But Ben B, now there was a real gent
He would not be caught without fiat around in no
Junglescape, dumb as an ape doing nothing

"Ben B. printed all the money
For saving the world from BOA and CITI
And sometimes I despair the world ever saw
A man like him"

Tue, 04/10/2012 - 13:09 | 2331706 ShankyS
ShankyS's picture

Liquidity Resistance? WTF is this the twilight zone? 

Tue, 04/10/2012 - 13:41 | 2331842 PalladiumJockey
PalladiumJockey's picture

It certainly makes sense.

Tue, 04/10/2012 - 13:35 | 2331815 SheepDog-One
SheepDog-One's picture

'Killer waves'? Looks more like a SHITNAMI!

Tue, 04/10/2012 - 13:48 | 2331865 yogibear
yogibear's picture

LOL it's what happens when you try to prop up trash. Japan tried it. Benanke is at the point where he's trying to save the world, in the mean time the US dig's it's debt hole deeper and deeper. The debt ceiling bell is ringing again!

Tue, 04/10/2012 - 14:08 | 2331931 jack stephan
jack stephan's picture

Narrator: So when the snooty cat, and the courageous dog, with the celebrity voices meet for the first time in reel three, that's when you'll catch a flash of Tyler's contribution to the film.
[the audience is watching the film, the pornography flashes for a split second]
Narrator: Nobody knows that they saw it, but they did...
Tyler Durden: A nice, big cock...
[several audience members look rattled, a little girl is crying]
Narrator: Even a hummingbird couldn't catch Tyler at work.

Why is it suddenly I'm noticing little by little, mainstream guys are taking from zh, either small ideas, comment thoughts, etc. or something almost unnoticeable, maybe its me.  Hell maybe its good.  take care zh

Tue, 04/10/2012 - 14:11 | 2331950 dwayne elizando
dwayne elizando's picture

Please tell me BofA is gonna kick the bucket on this crash!

Thu, 04/12/2012 - 03:44 | 2337023 MeelionDollerBogus
MeelionDollerBogus's picture

Oh, for sure.

The wabbit kicked the bucket

the bucket kicked the wabbit

the wabbit kicked the wabbit

 

Tue, 04/10/2012 - 14:30 | 2332028 John_Coltrane
John_Coltrane's picture

Note to author:  Learn the importance of actually labeling the axis of any graphs you use. 

Absence of evidence is not evidence of absence.  Correlation isn't causation. 

Wed, 04/11/2012 - 23:50 | 2336817 MeelionDollerBogus
MeelionDollerBogus's picture

Lazy, much?

http://en.wikipedia.org/wiki/Coppock_curve

% on y-axis, months on x-axis as NOTED in the picture.

Tue, 04/10/2012 - 16:24 | 2332655 flyingpigg
flyingpigg's picture

Maybe the PPT can engineer a rally from here to give us a nice short entry from a lower top?

Tue, 04/10/2012 - 16:36 | 2332710 The Disappointed
The Disappointed's picture

Charles Hugh Smith,

Thanks for the idea for my Halloween costume this year (assuming we live thru October).

The thought of being a zombie or a sheep again this year wasn't doing anything for me.

The Other Dave in SF (where all of the swans are pink).

Do NOT follow this link or you will be banned from the site!