Guest Post: Dueling Economic Banjos Offer No Deliverance

Tyler Durden's picture

Submitted by Brandon Smith from Alt-Market

Dueling Economic Banjos Offer No Deliverance

Americans have been listening to the mainstream financial media’s song and dance for around four years now.  Every year, the song tells a comforting tale of good ol’ fashioned down home economic recovery with biscuits and gravy.  And, every year, more people are left to wonder where this fantastic smorgasbord turnaround is taking place?  Two blocks down?  The next city over?  Or perhaps only the neighborhoods surrounding the offices of CNN, MSNBC, and FOX?  Certainly, it’s not spreading like wildfire in our own neck of the woods…

Many in the general public are at the very least asking “where is the root of the recovery?”  However, what they should really be asking is “where is the trigger for collapse?”  Since 2007/2008, I and many other independent economic analysts have outlined numerous possible fiscal weaknesses and warning signs that could bring disaster if allowed to fully develop.  What we find to our dismay here in 2012, however, is not one or two of these triggers coming to fruition, but nearly EVERY SINGLE conceivable Achilles’ heel within the foundation of our system raw and ready to snap at a moment’s notice.  We are trapped on a river rapid leading to multiple economic disasters, and the only thing left for any sincere analyst to do is to carefully anticipate where the first hits will come from.    

Four years seems like a long time for global banks and government entities to subdue or postpone a financial breakdown, and an overly optimistic person might suggest that there may never be a sharp downturn in the markets.  Couldn’t we simply roll with the tide forever, buoyed by intermittent fiat injections, treasury swaps, and policy shifts?

The answer……is no.

No economy has ever endured the circumstances that ours endures now without reaching a point of maximum tension; that inevitable moment when the structure can no longer hold under the weight of the cold hard fundamentals.  Regardless how hard we try to paddle backwards, in the end, the boat WILL eventually tip over the waterfall, and the results will not be pretty.

What we are witnessing so far this spring is a world on edge, cloaked by a series of seesaw events that confuse the citizenry and obscure the truth of our circumstances.  When confronted with people who embrace the recovery lie, or allow the sweet talking mainstream dialogue to hypnotize them, I sometimes find myself reminded of the naïve canoe vacationers of the infamous film ‘Deliverance’.  Their happy-go-lucky attitude at the beginning of their adventure, heightened by a friendly battle of strings with the locals before departure, leaves them oblivious to the impending danger.  To the other side of existence.  A lethal and carnivorous force inherent not only in man, but in nature, in matter, in everything.  And, of course, we all know how they end up paying the price for their ignorance…

Dueling banjos and squealing piggies aside, there is an economic lesson to be learned here.  Today, we are at the very onset of our own journey into the heart of darkness.  The music is still playing, though growing fainter, and the sway of “normalcy” has begun to tilt in a perverse sort of way.  The key is to see the financial pendulum for what it really is; an epic distraction away from the end game.  Here are just a few apparent fiscal oppositions that give the impression of balance and semi-stability to the masses but which ultimately will lead to the same brand of calamity:              

Debt Vs. Inflation

I remember when the debate over the need for the banker bailouts was still raging, before “quantitative easing” became the go-to stop-gap for U.S. markets.  The primary argument used by deflationists and Keynesians was the assertion that with so much debt generated by the government and the derivatives bubble, inflation or hyperinflation was a “near impossibility”.  The basis for this claim was not rooted in historical fact, but mere theory.  No country that chooses to debase its own currency in the process of monetizing its own debt and the debt of its faulty business sector ever escapes from considerable inflation.  Debt does not erase fiat creation, and it does not halt currency devaluation.  Where this delusion first sprang from, I have no idea.

Prices in the U.S. continue to rise, or have risen and refuse to return to levels common four years ago, while the debt vacuum grows relentlessly.  More Americans are slated to face foreclosure in 2012 than in 2010 at the so called “apex” of the mortgage crisis:

Fannie and Freddie continue to lose billions to the housing bubble and continue to request bailouts quarter after quarter (apparently, no one told the government backed mortgage giants that we are in a “housing recovery”):

U.S. debt obligations have exploded, with the “official” national debt standing at 100% of GDP.  Leading to the least reported and probably most important news of the year so far; the second downgrade of America’s credit rating by Egan-Jones:

Some might argue that Egan-Jones is one of the smaller ratings agencies and so not as relevant to market psychology, but it was Egan-Jones that downgraded U.S. credit first back in 2011, heralding the later downgrade by S&P.  Is the small company ahead of the game, warning us of major credit troubles yet to come?  Again, what has past experience shown us…?

The bottom line?  Fiat easing has changed nothing.  Debt is still on the rise, the housing markets continue to dissolve, and the only result has been high prices on goods across the board.  There is NO battle between debt and inflation.  These two consequences are working in tandem within our economic system in the form of stagflation, generating the worst possible environment for financial survival.

Supply Vs. Demand

The two most concrete indicators of economic destabilization are supply and demand.  The problem is, with so many indexes and markets easily manipulated by the shifting of capital by major banks, it is extremely difficult to find honest data anywhere.  When I wrote about the collapse of the Baltic Dry Index to record lows back in January, I pointed out that it is one of the few indicators of supply and demand that is not open to outside speculation, and that 6-8 months after almost every major drop (sometimes a little longer), the markets invariably follow.  The mainstream media’s response to the BDI issue was to shrug it off, claiming that “too many new ships” were the cause of its decline to 25 year lows.  This was the same debate point they tried to use when the BDI plummeted back in 2008, just before the derivatives bubble burst.

Those who cling like fleas to the “too many cargo ships” delusion are beginning to see that the BDI was, in fact, showing a decline in global demand.  Even the MSM is now forced to admit this development (while still promoting the shipping oversupply theory), as cargo companies around the world are attempting to file Chapter 11 Bankruptcy in the U.S. due to, among other things, a lack of demand, especially in long range shipments from Eastern to Western markets:

Durable goods orders in the U.S. show distinct weakness, and the Commerce Department, which issues the stats monthly, has been forced to “revise” previous month’s numbers downwards on several occasions; a strategy used often by the Labor Department to soften the effects of negative data:

For those who look to Asia or the developing economies for signs of recovery, China has reported the largest decline in manufacturing in the past three years, while Japanese production has also turned sour:

Manufacturing in the EU continues to fall while unemployment has hit the highest levels since 1997:

It’s undeniable.  Demand for goods and raw materials is dropping just as the BDI predicted, and we are only seeing the very beginning of this trend.  With supply, or production, waning, the message is clear; consumers from America to Europe to Asia do not have the purchasing power to halt a downturn, let alone fuel a recovery.  Both supply side and demand side numbers signal serious concerns in the near future.

China Vs. China

China has been the most important litmus test for the progress of the collapse since 2008, which is probably why the mainstream media has spent most of their time focused completely in the opposite direction on Greece.  However, admittedly, China’s economic reality is so difficult to decipher, full-on brain implosion is not out of the question, and it is of no surprise that most analysis on the country is superficial at best.

There are, in truth, actually two Chinas.  The frustration is in figuring out which is which.  The fantasy China we see in the media (Chinese and American), and the real China that seeps through the cracks in unguarded moments.  The establishment version of China is tied forever to the U.S. dollar, and the U.S. consumer.  It has no ambitions to move beyond its traditional status as a major export hub and a cheap labor market.  Its currency will remain weak, just weak enough to boost exports and feed Americans with cheap goods, but not so weak that the U.S. government seeks extraneous trade restrictions.  We are led to believe that this China will never change, and that its role will remain ingrained in the skeleton of the global economy.

By the way, this is the part in our story where the hapless vacationers make a fateful stop on the river bank, unaware psychotic hillbillies are laying in wait…

The true China has been preparing to break from the U.S. and the greenback for years.  Slowly but surely, they have circulated Yuan denominated bonds in hundreds of countries, made bilateral trade agreements with BRIC and ASEAN nations cutting out the dollar altogether, and, are likely to begin dumping U.S. Treasuries when QE3 is announced (and it will probably be announced before the year is out).  The timetable for a Chinese break from U.S. markets may already be set, as Japan, China, and South Korea meet to finalize a trilateral free-trade zone at a summit scheduled for May:

This project for market integration was originally shelved, but has suddenly been reintroduced right after the ASEAN meeting at the beginning of this month.  The three countries represent 20% of global trade, and have discussed extensively the need to remove the dollar as the world reserve currency.  China’s struggle with rising inflation has exacerbated the country’s need to allow a major valuation in the Yuan, to increase the buying power of its citizens and counter high prices.  Such a move would have been impossible four years ago with the Asian nation’s extreme dependency on exports to the West.  But this has changed with the advent of trade agreements which have formed the framework for what is obviously slated to become the Asian Union.  China is essentially ready to drop the dollar right now.  While Chinese and American politicians speak often of cooperation and diplomacy, the real nature of the relationship is not so harmonious.  Chinese foreign policy insider Wang Jisi recently revealed that Chinese leadership sees the U.S. as a “declining power” which should be “discounted”.  He states:

“It is now a question of how many years, rather than how many decades, before China replaces the United States as the largest economy in the world…”

Given, Wang is a Brookings Institute inductee and little good ever comes out of that monstrosity, but, this attitude of Chinese distance from the U.S. is becoming more prevalent in numerous circles.  To hear it stated so blatantly by a Chinese government insider is not a positive sign.

America Vs. Europe

So much has been written on the dichotomy between the U.S. and Europe I’m finding the repetition of it makes my eyeballs twitch.  To be brief, both the EU and the U.S. are in dire straights.  Though our currency rises as theirs falls, and though our markets retreat at every news brief from Greece, and though we are told in recent weeks that Europe has “stabilized”, there is really only two things you need to remember; debt, and employment.  Are half of the EU’s member nations still in debt far beyond what is restricted by its own membership guidelines?  Yes.  Is Europe’s employment situation still dismal?  Yes.  Do the same problems exist to an even greater degree in America?  Yes.

Neither region is in a position to support a global economic turnaround.  Period.    

When The Music Stops, The Machine Breaks

Financial news is often like the back and forth of rambling dual guitars.  It can be entertaining to listen and catch the frenetic melody, but in the end, the music must eventually go silent, and the fun is replaced with dread of what rests just beyond the curve of the stream.  All the debate, all the counterpoints and contrariness, all the “brilliant” insights from self proclaimed “experts”; it amounts to little more than gasps for air in a barren atmosphere.  No one is legitimately confident of much.  The only certainty is that the system as it exists today is not sustainable.  In my view, the evidence suggests that it was meant to fail all along, and be replaced with yet another even more suffocating economic construct.  The facts further suggest that this change is to take a vast step forward this year.

We can get caught up in the momentary prattle of theories and rationalizations, or, we can get serious about our own survival.  Analysis serves men little if it distracts us from purpose and action.  For those in the Liberty Movement who are awake to the approaching dynamo, this means furious efforts to educate those around us, build alternative economic options, prepare ourselves and our families, and in some cases even put our reputations and our lives on the line.  The work ahead requires endurance and dedication.  A promise and a pledge.  There is literally no more time to shed in the name of academics, and what we do right now could change everything.

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MillionDollarBonus_'s picture

The single biggest issue for presidential candidates this year is going to be the ECONOMY. Candidates need to convince Americans that they will create jobs, build communities, invest in education and subsidise forward-thinking green technologies like wind farms and biofuels. In addition, they are going to have to reassure Americans that there will be absolutely NO CUTS from essential programs like social security and Medicare. All of these factors will need to be taken into account when pitching a savvy political campaign to potential voters. The pressure is on, and I don't envy politicians one bit, as they are going to have to work hard to gain America's trust.

Colombian Gringo's picture

Tell you what Million Dollar Bonus... since you like to subsidize green technologies, especially those operated by Obama's political insiders, why don't you lead by example and send ALL of your money to the Feds, and leave the rest of us alone.

As for politicians gaining our trust, when they stop lying, cheating, enriching insiders and forcing regulations upon the unconnected to benefit their money masters, then some of us may actually begin to trust them.

Then again, I still remember that beautiful innocent female working in Las Vegas who told me that I was really the only one, and the others did not count.  Perhaps your ultimate boss Obama is a little bit like that.





SheepDog-One's picture

LOL, anyone who would still believe any of their lies from these puppets is a damn idiot.

mtomato2's picture

That was a strangely inoffensive post. Who are you, and what have you done with our beloved MDB?

ButIfNot's picture

Maybe, instead of a presidential debate, we can get Obama and Romney to hold hands while singing "Ebony and Ivory."  Ben Bernanke can drop green confetti from the catwalks as a crowd full of TBTF bank executives cheer them on.  Members of congress could be dispersed throughout the crowd with dazed and confused looks at the sight of their symbolic figureheads engaged in a PUBLIC display of peace and unity.  They'll top it off by bringing out Ron Paul to speak and pretend it is a stand-up comedy routine.

Vince Clortho's picture

Especially when the POTUS choices are Puppet1A and Puppet1B.

Another Red Pill's picture

MDB - I disagree with most of your posts, I'm therefore glad that you are on the site. This is not the place for group think, it is the place for individual thought.

mikesswimn's picture

I agree with you completely.  Candidates will have to convince Americans that they can perform utterly impossible and positively absurd feats of policy this world has never seen.  They obviously will fail miserably, but you're absolutely right.  If they do manage to convince a majority of American voters that they're magic skittle-shitting unicorns, that'll win them the election.

Problem Is's picture

US Political Class as Kulaks: Parasites on Amerikan Citizens

The US political class are Useful Idiot front men for the ruling financial elite... They are not in place to fix anything. They are there to allow the elites to bleed us more...

Obama-Romney et al are part of the problem...

Not part of the solution, there MillionDollar Einstein...

NewAmericaNow's picture


The Economy will be the single biggest issue, however, anyone that says politicians create jobs or that green technologies pointed out by the governmnet will turn things around, or that there will be no cuts anywhere will be lying of course. America will change more in the next year than it has in it's entire history and like it or not there will be much pain.

PayneNita's picture

my classmate's sister makes $62 hourly on the laptop. She has been unemployed for 5 months but last month her pay check was $13843 just working on the laptop for a few hours. Read more on this web site ....

rotagen's picture

Yeah, let's all discuss what the lies the lying meaningless puppets with a gun to their heads must regurgitate to the beige IPOD masses to get elected, when they all serve the same Organized Crime Bosses....that's a usefull human endeavor....swell.  Meet me at the malt shop wally.

MeelionDollerBogus's picture

Wow ... upvote. Not a sarcastic up-vote either. That was pretty good vs the usual implied /sarc. Sure, subsidies have problems & risks but so do investments & all sorts of stuff. Not a worry for this reply...

Sudden Debt's picture

Now that was a funny movie :)


Gully Foyle's picture

"What we are witnessing so far this spring is a world on edge, cloaked by a series of seesaw events that confuse the citizenry and obscure the truth of our circumstances."

That is funny. The Genpop doesn't really give a shit about the big picture and normally stumble around with convoluted priortes anyway.


HarryM's picture

Interesting article to read as I'm watching the DOW on it's way to recovering yesterday's loss

GeneMarchbanks's picture

Indeflation, debtflation, disinflation etc etc. <-- These terms will catch on soon.

SheepDog-One's picture

Bernank! Squeel like a pig, boy!

francis_sawyer's picture

Fuck! I knew it was a mistake asking Drew to hold all my gold & silver that weekend!

Sudden Debt's picture



Sandmann's picture

Four years seems like a long time for global banks and government entities to subdue or postpone a financial breakdown,

First World War = 4 years 

Second World War = 6 years

Soviet-Afghan War = 9 years

US-Vietnam War = 20 years

US/UK Afghanistan War = 11 years plus 


Somehow everything seems to be taking longer and never reaching a conclusion. Is that because things are more complex or because some people and groups do really nicely out of the delays and simply won't give up being obstructive ?  The Banks have NO pain and ALL gain. It is a NEW WORLD ORDER

SheepDog-One's picture

They just wanted to make sure we were really, really totaly destroyed before they pull the one was trying to 'rescue' anything, it was all planned in the first place.

Vince Clortho's picture

What it means is they are getting better at what they do best.

Koffieshop's picture

Everything can be fixed by suppression, criminalisation, internationalisation, assassination, invasion or money printing except one thing;
The living standard of the average man.
This is why all of us are sinking into shit, slowly.

LawsofPhysics's picture

My god, what a waste of time.  Look, it is really simple, prosecute the fucking fraud already, restore the rule of law and contracts, and execute the fuckers who profitted from the fraud.

Once it is very clear that poor choices and decisions have real consequences (for everyone, not just the poor slob who steals an apple to eat from a local quicky-mart::hello where is john corzine?) then and only then can we begin a recovery based on trust, period.  We continue to reward poor choices and corrupt leadership and we continue to punish smart choices and honest intellengent leadership.  Until this is reversed, nothing changes and an "unexpected" crisis is only insured.  Go ahead GOP, continue to marginalize Ron Paul, go ahead, I dare you.  Might as well insure Obama's second term.  Bloody morons.

Boxed Merlot's picture

I would add, for any that would vountarily admit to their criminal conduct prior to the administration of legal procedings and court costs, certain mercies may be available.  But don't count on it.

Restitution to the agrieved parties must occur.

And whether christian attitutdes that any breach of law is a breach of law, we must be able to educate people that there are indeed varying degrees of culpability.

Leaders must be held to much higher standards as they themselves have become creators of law rather than the guardians they were elected to be.

Therefore, the Corzines among us bear far more degree of punishment than their backroom enablers.

And for the christian reference to this principle consider the first JC's teaching that for the person that causes the least to stumble, it would be better that they have a millstone around their neck and cast into the sea.

I have little hope of this ever happening however as those that would adjudicate any of these cases are themselves products of the same system.

Consider Blago's judge.  Author of a book describing the theft of 100m from the fed.  His current wife is touted as being the best tv investigative reporter in Chicago.  C'mon, this stuff is so rancid our hope is in it's eventual demise so a new generation can rise from the ashes.

Time to forget reformation, we're at the point of restoration.



Vince Clortho's picture

It is painful to watch this circus and the political clowns.  I have not given up hope that the American people will begin to wake up, but the embedded propaganda runs deep.

Until tshtf, it is like watching re-runs of the Ship of Fools 24/7.

Another Red Pill's picture

I'm an outsider, but I really hope the citizens of the US Empire wake up and take control of their country back.

20-20 Hindsight's picture

The "double banjo / Deliverance" analogy is bang on, as the banksters of the world keep shafting us up the rear end..  The worst part is that most people are not even aware of it.  The masses have been so brainwashed that now they simply go buy another jar of Vaseline and bend over for the next session of sodomization:"Here, help yourselves again, ye masters!"   

MachoMan's picture

It's a great analogy for retail investors...  HEY, LETS GO ON A REALLY NICE FLOAT TRIP! (invest in the market)...  *crew shoes up on hillbilly doorstep prior to embarking*  (investment/financial advisors/brokers)...  *crew has dueling banjos with hillbillies and laughs and has a great time* (courtship)....  *hillbillies (brokers/advisors) ass fuck crew (retail)*

You wonder why retail won't come back in, but would you go on another float trip after getting ass raped?

imbrbing's picture

We are liable to be kept bent over the log sqealing like a pig from here on out, they never letting us past that scene. Only to get

penetrated deaper and deaper until death do we part.

blueridgeviews's picture

That about sums up reality on April 11, 2012. Now back to the TV diversions that keeps everybody entertained and unaware of what's to come. One thing is for certain, the media will play up politics.

On another note, has anyone pondered the 2008 Presidential campaign slogan "hope and Change"? What a cruel hoax.

Gully Foyle's picture


"has anyone pondered the 2008 Presidential campaign slogan "hope and Change"? What a cruel hoax."

Cruel hoax? Brilliant I say.

Everyone has hope, to glam on to that vaguery was magnificent.

Life is all about change, second to second things change.

Once again to use those two words together in a slogan, is like using Jumbo Shrimp or claiming Organic food is tastier and more nutricious.

genius marketing.

Mercury's picture

Competitive Devaluation:  The Final Round

New season begins this June...

Flakmeister's picture

Bens sure gotta purty mouf....

PoliticalRefugeefromCalif.'s picture

The name of the game is obfuscation- when the only game they know is built on leverage how can the final outcome be any other than utter capitualtion?- want to see what the US would look like with another Obama term- look no further than California or Illinois.

LongSoupLine's picture



We are all currently getting it like Ned Beatty...

disabledvet's picture

The point of my "dueling banjo's" analogy it was in the movie I might not to point out "the futility of it all" but simply to show "competition need not be a solely destructive thing." the word "competition" doesn't even appear in this article of course...which gives lie to the whole premise of "we're not going anywhere" to begin with. We at Zero Hedge can become irrelevant if we follow that logic! The point that "there's a lot of bad that happens along the way" is well taken of course. Are we talking 40 million dead this time?

HAhyperion's picture

Tyler, et al

I am aware of the issues, the debt upon debt combined with historic unemployment is well the makings of disaster.  But short of adequate cash reserves kept in better more well capitalized banks, really what other preparations can one make? In a sense there really is no where to run, no where to hide, unless I am mmissing something????

Another Red Pill's picture

Nope, you've got the point alright.

Survival of the biggest bastards - check far enough back in your own family tree and you will find unpleasant characters.

Plenty of places to look for preparations to do. I'm in the UK, you have many more realistic options in North America.

HAhyperion's picture

yes I have been looking at property far out in the country: growing one's own food, solar/wind power, rain water catch basins, and a shot gun.  The only answer appears to lie in complete self sufficiency.  

daxtonbrown's picture

Gloomy article but it seems accurate as far as my crystal ball goes. To get around the Ministry of Disinformation's "Green Shoots" numbers I've been searching for numbers that are unadulterated by pro-Obama reelection bullshit. I've posted some here, and I see I next need to add the Baltic Dry Index.

I mean, who believes the unemployment or inflation numbers anymore? I think the only way out for the middle class guy not on food stamps is to get off the rollercoater by essentially Going Galt. That doesn't mean you can completely drop out of society or stop paying taxes, but you can sure offload a good chunk of your micro economy from the grid. It may not be a question of whether you want to do it, but that you have to do it. Zerohedgers already know about gold, but you should be watching Forex, lowering taxes, slashing housing, even growing food. Who knows what is at the other side of this economic abyss?

rosiescenario's picture

The author dismisses out of hand that the drop in BDI has nothing to do with too many ships. Well the BDI reflects too many ships AND too little cargo for that number of ships...hence a lower shipping rate. The BDI is supply and demand.


I am still waiting for someone to figure out an adjustment for the BDI which takes into account new ships added less old ones scrapped.


How much of the lower BDI is due to less demand to ship stuff? Anyone have an answer?

Boxed Merlot's picture

I am still waiting for someone to figure out an adjustment for the BDI which takes into account new ships added less old ones scrapped...


Sure, that's easy, plug in the US BLS algo. 

However, rest assured, that information is as secret as Corzines location being held by Teneo.