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Guest Post: The Emperor Is Naked

Tyler Durden's picture


Submitted by Karen Roche and JT Long of The Gold Report  (5/4/12),

A "paralyzed" Federal Reserve Bank, in its "final days," held hostage by Wall Street "robots" trading in markets that are "artificially medicated" are just a few of the bleak observations shared by David Stockman, former Republican U.S. Congressman and director of the Office of Management and Budget. He is also a founding partner of Heartland Industrial Partners and the author of The Triumph of Politics: Why Reagan's Revolution Failed and the soon-to-be released The Great Deformation: How Crony Capitalism Corrupts Free Markets and Democracy. The Gold Report caught up with Stockman for this exclusive interview at the recent Recovery Reality Check conference.

The Gold Report: David, you have talked and written about the effect of government-funded, debt-fueled spending on the stock market. What will be the real impact of quantitative easing?

David Stockman: We are in the last innings of a very bad ball game. We are coping with the crash of a 30-year–long debt super-cycle and the aftermath of an unsustainable bubble.

Quantitative easing is making it worse by facilitating more public-sector borrowing and preventing debt liquidation in the private sector—both erroneous steps in my view. The federal government is not getting its financial house in order. We are on the edge of a crisis in the bond markets. It has already happened in Europe and will be coming to our neighborhood soon.

TGR: What should the role of the Federal Reserve be?

DS: To get out of the way and not act like it is the central monetary planner of a $15 trillion economy. It cannot and should not be done.

The Fed is destroying the capital market by pegging and manipulating the price of money and debt capital. Interest rates signal nothing anymore because they are zero. The yield curve signals nothing anymore because it is totally manipulated by the Fed. The very idea of "Operation Twist" is an abomination.

Capital markets are at the heart of capitalism and they are not working. Savers are being crushed when we desperately need savings. The federal government is borrowing when it is broke. Wall Street is arbitraging the Fed's monetary policy by borrowing overnight money at 10 basis points and investing it in 10-year treasuries at a yield of 200 basis points, capturing the profit and laughing all the way to the bank. The Fed has become a captive of the traders and robots on Wall Street.

TGR: If we are in the final innings of a debt super-cycle, what is the catalyst that will end the game?

DS: I think the likely catalyst is a breakdown of the U.S. government bond market. It is the heart of the fixed income market and, therefore, the world's financial market.

Because of Fed management and interest-rate pegging, the market is artificially medicated. All of the rates and spreads are unreal. The yield curve is not market driven. Supply and demand for savings and investment, future inflation risk discounts by investors—none of these free market forces matter. The price of money is dictated by the Fed, and Wall Street merely attempts to front-run its next move.

As long as the hedge fund traders and fast-money boys believe the Fed can keep everything pegged, we may limp along. The minute they lose confidence, they will unwind their trades.

On the margin, nobody owns the Treasury bond; you rent it. Trillions of treasury paper is funded on repo: You buy $100 million (M) in Treasuries and immediately put them up as collateral for overnight borrowings of $98M. Traders can capture the spread as long as the price of the bond is stable or rising, as it has been for the last year or two. If the bond drops 2%, the spread has been wiped out.

If that happens, the massive repo structures—that is, debt owned by still more debt—will start to unwind and create a panic in the Treasury market. People will realize the emperor is naked.

TGR: Is that what happened in 2008?

DS: In 2008 it was the repo market for mortgage-back securities, credit default obligations and such. In 2008 we had a dry run of what happens when a class of assets owned on overnight money goes into a tailspin. There is a thunderous collapse.

Since then, the repo trade has remained in the Treasury and other high-grade markets because subprime and low-quality mortgage-backed securities are dead.

TGR: Walk us through a hypothetical. What happens when the fast-money traders lose confidence in the Fed's ability to keep the spread?

DS: They are forced to start selling in order to liquidate their carry trades because repo lenders get nervous and want their cash back. However, when the crisis comes, there will be insufficient private bids—the market will gap down hard unless the central banks buy on an emergency basis: the Fed, the European Central Bank (ECB), the people's printing press of China and all the rest of them.

The question is: Will the central banks be able to do that now, given that they have already expanded their balance sheets? The Fed balance sheet was $900 billion (B) when Lehman crashed in September 2008. It took 93 years to build it to that level from when the Fed opened for business in November 1914. Bernanke then added another $900B in seven weeks and then he took it to $2.4 trillion in an orgy of money printing during the initial 13 weeks after Lehman. Today it is nearly $3 trillion. Can it triple again? I do not think so. Worldwide it's the same story: the top eight central banks had $5 trillion of footings shortly before the crisis; they have $15 trillion today. Overwhelmingly, this fantastic expansion of central bank footings has been used to buy or discount sovereign debt. This was the mother of all monetizations.

TGR: Following that path, what happens if there are no buyers? Do the governments go into default?

DS: The U.S. Treasury needs to be in the market for $20B in new issuances every week. When the day comes when there are all offers and no bids, the music will stop. Instead of being able to easily pawn off more borrowing on the markets—say 90 basis points for a 5-year note as at present—they may have to pay hundreds of basis points more. All of a sudden the politicians will run around with their hair on fire, asking, what happened to all the free money?

TGR: What do the politicians have to do next?

DS: They are going to have to eat 30 years worth of lies and by the time they are done eating, there will be a lot of mayhem.

TGR: Will the mayhem stretch into the private sector?

DS: It will be everywhere. Once the bond market starts unraveling, all the other risk assets will start selling off like mad, too.

TGR: Does every sector collapse?

DS: If the bond market goes into a dislocation, it will spread like a contagion to all of the other asset markets. There will be a massive selloff.

I think everything in the world is overvalued—stocks, bonds, commodities, currencies. Too much money printing and debt expansion drove the prices of all asset classes to artificial, non-economic levels. The danger to the world is not classic inflation or deflation of goods and services; it's a drastic downward re-pricing of inflated financial assets.

TGR: Is there any way to unravel this without this massive dislocation?

DS: I do not think so. When you are so far out on the end of a limb, how do you walk it back?

The Fed is now at the end of a $3 trillion limb. It has been taken hostage by the markets the Federal Open Market Committee was trying to placate. People in the trading desks and hedge funds have been trained to front run the Fed. If they think the Fed's next buy will be in the belly of the curve, they buy the belly of the curve. But how does the Fed ever unwind its current lunatic balance sheet? If the smart traders conclude the Fed's next move will be to sell mortgage-backed securities, they will sell like mad in advance; soon there would be mayhem as all the boys and girls on Wall Street piled on. So the Fed is frozen; it is petrified by fear that if it begins contracting its balance sheet it will unleash the demons.

TGR: Was there some type of tipping that allowed certain banks to front run the Fed?

DS: There are two kinds of front-running. First is market-based front-running. You try to figure out what the Fed is doing by reading its smoke signals and looking at how it slices and dices its meeting statements. People invest or speculate against the Fed's next incremental move.

Second, there is illicit front-running, where you have a friend who works for the Federal Reserve Board who tells you what happened in its meetings. This is obviously illegal.

But frankly, there is also just plain crony capitalism that is not that different in character and it's what Wall Street does every day. Bill Dudley, who runs the New York Fed, was formerly chief economist for Goldman Sachs and he pretends to solicit an opinion about financial conditions from the current Goldman economist, who then pretends to opine as to what the economy and Fed might do next for the benefit of Goldman's traders, and possibly its clients. So then it links in the ECB, Bank of Canada, etc. Is there any monetary post in the world not run by Goldman Sachs?

The point is, this is not the free market at work. This is central bank money printers and their Wall Street cronies perverting what used to be a capitalist market.

TGR: Does this unwinding of the Fed and the bond markets put the banking system back in peril, like in 2008?

DS: Not necessarily. That is one of the great myths that I address in my book. The banking system, especially the mainstream banking system, was not in peril at all. The toxic securitized mortgage assets were not in the Main Street banks and savings and loans; these institutions owned mostly prime quality whole loans and could have bled down the modest bad debt they did have over time from enhanced loan loss reserves. So the run on money was not at the retail teller window; it was in the canyons of Wall Street. The run was on wholesale money—that is, on repo and on unsecured commercial paper that had been issued in the hundreds of billions by financial institutions loaded down with securitized toxic garbage, including a lot of in-process inventory, on the asset side of their balance sheets.

The run was on investment banks that were really hedge funds in financial drag. The Goldmans and Morgan Stanleys did not really need trillion-dollar balance sheets to do mergers and acquisitions. Mergers and acquisitions do not require capital; they require a good Rolodex. They also did not need all that capital for the other part of investment banking—the underwriting business. Regulated stocks and bonds get underwritten through rigged cartels—they almost never under-price and really don't need much capital. Their trillion dollar balance sheets, therefore, were just massive trading operations—whether they called it customer accommodation or proprietary is a distinction without a difference—which were funded on 30 to 1 leverage. Much of the debt was unstable hot money from the wholesale and repo market and that was the rub—the source of the panic.

Bernanke thought this was a retail run à la the 1930s. It was not; it was a wholesale money run in the canyons of Wall Street and it should have been allowed to burn out.

TGR: Let's get back to our ballgame. What is to keep the U.S. population from saying, please Fed save us again?

DS: This time, I think the people will blame the Fed for lying. When the next crisis comes, I can see torches and pitch forks moving in the direction of the Eccles building where the Fed has its offices.

TGR: Let's talk about timing. On Dec. 31, the tax cuts expire, defense cuts go into place and we hit the debt ceiling.

DS: That will be a clarifying moment; never before have three such powerful vectors come together at the same time— fiscal triple witching.

First, the debt ceiling will expire around election time, so the government will face another shutdown and it will be politically brutal to assemble a majority in a lame duck session to raise it by the trillions that will be needed. Second, the whole set of tax cuts and credits that have been enacted over the last 10 years total up to $400–500B annually will expire on Dec. 31, so they will hit the economy like a ton of bricks if not extended. Third, you have the sequester on defense spending that was put in last summer as a fallback, which cannot be changed without a majority vote in Congress.

It is a push-pull situation: If you defer the sequester, you need more debt ceiling. If you extend the tax expirations, you need a debt ceiling increase of $100B a month.

TGR: What will Congress do?

DS: Congress will extend the whole thing for 60 or 90 days to give the new president, if he hasn't demanded a recount yet, an opportunity to come up with a plan.

To get the votes to extend the debt ceiling, the Democrats will insist on keeping the income and payroll tax cuts for the 99% and the Republicans will want to keep the capital gains rate at 15% so the Wall Street speculators will not be inconvenienced. It is utter madness.

TGR: It is like chasing your tail. How does it stop?

DS: I do not know how a functioning democracy in the ordinary course can deal with this. Maybe someone from Goldman Sachs can come and put in a fix, just like in Greece and Italy. The situation is really that pathetic.

TGR: Greece has come up with some creative ways to bring down its sovereign debt without actually defaulting.

DS: The Greek debt restructuring was a farce. More than $100B was held by the European bailout fund, the ECB or the International Monetary Fund. They got 100 cents on the dollar simply by issuing more debt to Greece. For private debt, I believe the net write-down was $30B after all the gimmicks, including the front-end payment. The rest was simply refinanced. The Greeks are still debt slaves, and will be until they tell Brussels to take a hike.

TGR: Going back to the triple-witching hour at year-end, if the debt ceiling is raised again, when do we start to see government layoffs and limitations on services?

DS: Defense purchases and non-defense purchases will be hit with brutal force by the sequester. As we go into 2013, there will be a shocking hit to the reported GDP numbers as discretionary government spending shrinks. People keep forgetting that most government spending is transfer payments, but it is only purchases of labor and goods that go directly into the GDP calculations, and it is these accounts that will get smacked by the sequester of discretionary defense and non-defense budgets.

TGR: I would think to unemployment numbers as well.

DS: They will go up.

Just take one example. According to the Bureau of Labor Statistics monthly report, there are 650,000 or so jobs in the U.S. Postal Service alone. That is 650,000 people who pretend to work at jobs that have more or less been made obsolete and redundant by the Internet and who are paid through borrowings from Uncle Sam because the post office is broke. Yet, the courageous ladies and gentlemen on Capitol Hill cannot even bring themselves to vote to discontinue Saturday mail delivery; they voted to study it! That is a measure of the loss of capacity to rationally cognate about our fiscal circumstance.

TGR: In the midst of this volatility, how can normal people preserve, much less expand their wealth?

DS: The only thing you can do is to stay out of harm's way and try to preserve what you can in cash. All of the markets are rigged or impaired. A 4% yield on blue chip stocks is not worth it, because when the thing falls apart, your 4% will be gone in an hour.

TGR: But if the government keeps printing money, cash will not be worth as much, either, right?

DS: No, I do not think we will have hyperinflation. I think the financial system will break down before it can even get started. Then the economy will go into paralysis until we find the courage, focus and resolution to do something about it. Instead of hyperinflation or deflation there will be a major financial dislocation, which means painful re-pricing of financial assets.

How painful will the re-pricing be? I think the public already knows that it will be really terrible. A poll I saw the other day indicated that 25% of people on the verge of retirement think they are in such bad financial shape that they will have to work until age 80. Now, the average life expectancy is 78. People's financial circumstances are so bad that they think they will be working two years after they are dead!

TGR: Finally, what is your investment model?

DS: My investing model is ABCD: Anything Bernanke Cannot Destroy: flashlight batteries, canned beans, bottled water, gold, a cabin in the mountains.

TGR: Thank you very much.

[Stockman was the keynote speaker at last weekend's Casey Research Recovery Reality Check Summit. This event featured legendary contrarian investor Doug Casey, high-end natural resource broker Rick Rule, New York Times bestselling author John Mauldin and 28 other financial luminaries. Over the three-day summit, they provided investors with asset-protection action plans and actionable investment advice. And even if you were unable to attend, you can still hear every recorded presentation in the Summit Audio Collection. Learn more here.]

David Stockman is a former U.S. politician and businessman, serving as a Republican U.S. Representative from the state of Michigan 1977–1981 and as the director of the Office of Management and Budget under President Ronald Reagan 1981–1985. He is the author of The Triumph of Politics: Why Reagan's Revolution Failed and the soon-to-be released The Great Deformation: How Crony Capitalism Corrupts Free Markets and Democracy.

[Stockman was the keynote speaker at last weekend's Casey Research Recovery Reality Check Summit. This event featured legendary contrarian investor Doug Casey, high-end natural resource broker Rick Rule, New York Times bestselling author John Mauldin and 28 other financial luminaries. Over the three-day summit, they provided investors with asset-protection action plans and actionable investment advice. And even if you were unable to attend, you can still hear every recorded presentation in the Summit Audio Collection. Learn more here.]

Want to read more exclusive Gold Report interviews like this? Sign up for our free e-newsletter, and you'll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Exclusive Interviews page.


From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles on the site, may have a long or short position in securities mentioned and may make purchases and/or sales of those securities in the open market or otherwise.


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Tue, 05/08/2012 - 18:21 | 2408399 midtowng
midtowng's picture

It's OK. I heard on CNBC that the Fed and the politicians have it all under control.

Stop worrying and buy an iPad.

Tue, 05/08/2012 - 18:22 | 2408400 veyron
veyron's picture

I'm told that fondling an iPad is more empowering than fondling gold ...

Tue, 05/08/2012 - 18:28 | 2408414 Manthong
Manthong's picture

..and a source of essential vitamins and minerals.

Tue, 05/08/2012 - 18:33 | 2408420 nope-1004
nope-1004's picture

One word to explain this new economic experiment:  Benocide.


Tue, 05/08/2012 - 19:12 | 2408498 resurger
resurger's picture

Dear Muppet,

We at Goldman Sachs now accept Gold as collateral in the Reverse Repo market

The contract Conditions

1- Goldman pays you Cash

2- You supply Goldman with Physical Gold as collateral

3- Margin (Bold Hair Cut): 0%

4- You pay Interest LIBOR + US Treasury CDS Credit Spread (Current Status AAA)

5- If the price of Gold exceeds the fix price, we have no margin call.

6- If the price of Gold drops, you have no margin call.

Note: GS does not Repo gold


Kindly Sign Here,

Tue, 05/08/2012 - 19:16 | 2408507 knukles
knukles's picture

Or buy a politician and enter the 1% with no risk.

Ah, the nefarious Virginia PAC's of yore.

Tue, 05/08/2012 - 19:24 | 2408524 resurger
resurger's picture

Hello Sir,

Our representative Max Fischer will contact you shortly.


Sincere Regards,

GS High Networth Muppets Division

"We are dedicated to Fuck you 24/7"


Tue, 05/08/2012 - 19:47 | 2408555 ratso
ratso's picture

Roche and Long have written a ridiculous article based on a failure to understand the Fed's mandate.

Wed, 05/09/2012 - 08:02 | 2409464 StychoKiller
StychoKiller's picture

[quote] DS: My investing model is ABCD: Anything Bernanke Cannot Destroy: flashlight batteries, canned beans, bottled water, gold, a cabin in the mountains. [/quote]

Hmm, where have I heard this before? :>D

Tue, 05/08/2012 - 18:32 | 2408422 Hobbleknee
Hobbleknee's picture

Yes, there are more important things to discuss, like gay marriage and lesbians for president.

Tue, 05/08/2012 - 19:18 | 2408513 knukles
knukles's picture

And uncivilized gay Muslims sewing gold into their baggy clothes.

And who the fuck gave Hobbleknee the ding?
Deserves to be mistakenly held for interrogation by teh DEA on a piss only diet. 

Tue, 05/08/2012 - 19:46 | 2408553 nmewn
nmewn's picture

And sterno heated Mormon dog fillets with soy sauce (still kinda tough) balanced on the hood of a 100k Fisker "green people car" (a little crunchy) being dragged to Georgetown U by a diesel belching tow truck as a mascot to preposterous female preppy's everywhere who wouldn't be caught dead at Walmart!

I was the number five green on him ;-)

Tue, 05/08/2012 - 19:51 | 2408566 ChrisFromMorningside
ChrisFromMorningside's picture

You're giving the sheep too much credit. A discussion about gay marriage might actually result in some brain activity.

The discussion topics of the day in "mainstream" America are more like ... Kim Kardashian is banging Kanye West, who the newest "Real Housewive" is feuding with, the Octomom's upcoming porn movie, etc.

Go to and weep for what once was Western Civilization.

And, just remember that there are probably twice as many people in America that follow Kim Kardashian's every movement than there are people who even know what the "Federal Reserve" is.

Tue, 05/08/2012 - 20:56 | 2408667 AldousHuxley
AldousHuxley's picture

don't shake any hands @ the Bohemian Grove

where your presidents come from, and California politicians go to participate in gay orgy and public urination


Goolgle "Bohemian Grove Mandaly Camp" and  you will find out why they close schools while spending 50% of your taxes on military industrial complex waste.


Bechtel bitches.



Wed, 05/09/2012 - 01:24 | 2409146 Treason Season
Treason Season's picture

Say a Hail Mary for recommending "Goolge" and for confession start using

Tue, 05/08/2012 - 18:39 | 2408440 stocktivity
stocktivity's picture

Canadian market now down for the year. That leaves our rigged market about the last one standing up for the year.

Tue, 05/08/2012 - 19:15 | 2408510 mendigo
mendigo's picture

They are reporting that the exit of Greece will prove bullish

Tue, 05/08/2012 - 20:44 | 2408646 jus_lite_reading
jus_lite_reading's picture

Gentlemen, THIS is what the ULTIMATE PONZI looks like... the Federal Reserve of United Ponzi

If anyone thinks that this will end well, please let me know what intense illegal narcotic you are smoking so I can enjoy that short bliss as well...

The countdown to the end has already begun... clock set at T-42 days before the European shit hits the fan, T-101 days before the global cancer spreads to MENA, T- 130 days before the shit hits Asia and T-226 days before the shit hits the fan in the US.... all in my opinion

Tue, 05/08/2012 - 18:28 | 2408402 ebworthen
ebworthen's picture

ABCD = Anything Bernanke Cannot Destroy

Perhaps he forgets about FDR confiscating gold and the Supine Court and Robo-signing confisating property?

At this point I'm feeling there is nothing TPTB cannot destroy in their quest of oppression.

If they are willing to bailout any and every bank and corporation while allowing Corzining, debauchement of the currency, $16 Trillion deficit, market manipulation, etc., where will they stop and who will stop them?

Tue, 05/08/2012 - 20:43 | 2408640 macholatte
macholatte's picture


.....where will they stop and who will stop them?


I've come to the conclusion that they're just a bunch of fuck-ups.  Unfortunately, they are fools with power who will not stop until they have come to the end of the road. It is then that they will look around to blame someone else for taking the wrong turn.


“There is a theory which states that if ever anyone discovers exactly what the Universe is for and why it is here, it will instantly disappear and be replaced by something even more bizarre and inexplicable. There is another theory which states that this has already happened.”
-- Douglas Adams
Tue, 05/08/2012 - 22:31 | 2408825 PersonalRespons...
PersonalResponsibility's picture

I'm agnostic but reading what you wrote, an "amen" popped into my brain.

Tue, 05/08/2012 - 18:25 | 2408404 endicott glacier
endicott glacier's picture

Read Ben's latest book "The art of whispering sweet nothing F*&K yous in taxpayer ears and be rewarded for it"

Tue, 05/08/2012 - 18:25 | 2408407 fonzannoon
fonzannoon's picture cash is the answer...?

Fk me

Tue, 05/08/2012 - 22:03 | 2408776 Yes_Questions
Yes_Questions's picture



I think he meant stacking what could be traded for cash.

Should it still be around?




Yeah, I'm not sure either.



Tue, 05/08/2012 - 23:56 | 2409028 Nobody For President
Nobody For President's picture

Yep, the answer is Cash: 


The question, however, is unknown.


Tue, 05/08/2012 - 18:30 | 2408418 Rathmullan
Rathmullan's picture

And he or she have massive boils, brown stuff running down the back of the legs, leprosy and syphilis as well.

Tue, 05/08/2012 - 19:48 | 2408558 azzhatter
azzhatter's picture

Sounds like Geithner after a session with Ben

Tue, 05/08/2012 - 22:05 | 2408779 Yes_Questions
Yes_Questions's picture




Tue, 05/08/2012 - 18:32 | 2408424 Widowmaker
Widowmaker's picture

The Fed is THE institute of incorporated monetary fraud.

They don't regulate it, they assure it.

Give me sound money!

Tue, 05/08/2012 - 21:25 | 2408727 Chicken_Little
Chicken_Little's picture

Among all the gloom and doom, someone sent me a link that gave me a little hope that there are good people still left. If any of you are Nam vets, this will mean alot. I met one USAF PJ (Blue Beret) in Alabama and he was one hell of a great guy.  Enjoy:

Chicken out.

Tue, 05/08/2012 - 18:35 | 2408426 fonzannoon
fonzannoon's picture

I like how the gold report interviewed a guy who said when the shtf he wants cash....

Tue, 05/08/2012 - 18:35 | 2408430 NotApplicable
NotApplicable's picture

This interview was interesting up until the point where Stockton starts in about the Fed being unable to further expand its balance sheet.

What he doesn't realize is that he's looking backwards, and his conventional wisdom isn't true any longer. Why? Because it's the EXACT same conventional wisdom that denied the possibility of the 2008 expansion. It was true up until the second it wasn't.

As long as CBs exist, they will print and buy up everything necessary to keep the game going for another instant. Hell, Stockton's own prediction of how the cascading defaults will occur guarantee it. Things are certainly going to break, but it's an easy bet that the criminals will lay the loss on anyone except themselves.

Tue, 05/08/2012 - 18:55 | 2408465 PivotalTrades
PivotalTrades's picture

So what you are saying is that they can pull it off. They have found the Fountain Of Prosperity...expand the balance sheet to infinity

Tue, 05/08/2012 - 20:06 | 2408590 CrashisOptimistic
CrashisOptimistic's picture

They CAN pull it off.

The thing that stops them is something out of their control.  Oil.

But beyond that, do not think they cannot do whatever they must.  If there is massive selling of Treasuries and the selling is straining their buys, then they will have the sellers killed.

They Will Do Anything To Keep The Ball Rolling And Civilization From Mass Deaths.

And so would you.

Tue, 05/08/2012 - 20:39 | 2408635 Kayman
Kayman's picture


So... will they resurrect Hank ?  "Give me $700 billion or I plug the kid ?"

Or... Will Ben buy the entire world with FRN's ?

I fully agree that TPTB will continue the circle-jerk because that is all they know, but sooner and not later, the real economy will not function at all.

Pattycake does not generate real wealth.

Wed, 05/09/2012 - 00:32 | 2409090 BooMushroom
BooMushroom's picture


Or... Will Ben buy the entire world with FRN's ?

It's been working pretty well so far, and will continue to work until people stop trading tangible goods for ANY AMOUNT of FRNs.

"I'll give you a million USD for that cheeseburger."
"Fuck no. Come back with something of value."

Until that seems reasonable, the "buying the entire world with FRNs" will continue apace.

Tue, 05/08/2012 - 18:36 | 2408431 Arnold Ziffel
Arnold Ziffel's picture

DS: My investing model is ABCD: Anything Bernanke Cannot Destroy: flashlight batteries, canned beans, bottled water, gold, a cabin in the mountains.


He sounds pretty pessimistic.

Tue, 05/08/2012 - 22:20 | 2408796 Yes_Questions
Yes_Questions's picture



and rational

Tue, 05/08/2012 - 18:36 | 2408433 Pairadimes
Pairadimes's picture

Not only is the emperor naked, but he is starting to look like one of those dudes in the 'Bodies' exhibits that were all the rage at museums back in the days when people were actually spending money on things other than gas, precious metals, ammo and and igadgets.

Tue, 05/08/2012 - 18:37 | 2408434 TNTARG
TNTARG's picture

Indeed. So much for the balloon to be inflated before it explodes.

Absolutely agree with his investment model. If you don't know what to do, take a vacation. You may not be able to travel again any time soon after the recon.

Tue, 05/08/2012 - 18:43 | 2408449 zerotohero
zerotohero's picture

can never go wrong with a vacay - except to Greece.........

Tue, 05/08/2012 - 18:39 | 2408442 zerotohero
zerotohero's picture

bit a dis bit a dat - cash, gold, silver, food, essentials - be prepared for a shit storm should it happen - get on with life and don't make a hobby out of being Chicken Little.

Tue, 05/08/2012 - 18:41 | 2408444 Joebloinvestor
Joebloinvestor's picture

I think the plan is to crash the precious metal market first.

Those in charge of the Fed have the same attiude as those at the EPA as far as I am concerned.

Tue, 05/08/2012 - 18:42 | 2408448 zerotohero
zerotohero's picture

I would not be surprised in the least.

Tue, 05/08/2012 - 18:43 | 2408450 NotApplicable
NotApplicable's picture

Rape, Pillage and Burn, FTMFW!

Tue, 05/08/2012 - 19:08 | 2408491 EclecticParrot
EclecticParrot's picture

'A cage went in search of a bird.'

Tue, 05/08/2012 - 23:05 | 2408883 Ranger4564
Ranger4564's picture

When the asswipes come out to decry Gold / Silver, that it's a relic, no sane person would rely on G / S, that it's worthless hunks of metal, so on... they're not trying to convince you and me, they could not care less about us... they're signalling to the rest of the barbaric world that the most greatest Civilized States of United America would never consider accepting such crap for any payments that may be due, in the potential future, if there was in fact a remote bat's chance in Hell of a trade surplus. And if they were as sophisticated as they pretend, as sophisticated as us, they would not want that crap either.

What they're trying to do is make the barbarians believe that paper printed in the best country on Earth in all of history, is worth a hell of a lot more than any archaic hunk of metal you could find anywhere.  Just think of the tons of other metals that would rain down on you if you don't believe the hype.

It's unfortunately (for them, not me) no longer working on the Chinese, Iranians, Indians, Russians, Brazilians, Greeks, Italians, Swiss, etc, etc, etc.  It is however working on most of the bestest Americans.  Somehow, the rest of the world wants Gold, only American's seem to want Dollars. No surprise really.

What a joke it is.  Just about everyone is ready to start aiming their barrels towards the US to stop the printing / threats / attacks, to force feed us some of their metals as it is stated in politest of companies, while we think we have the upper hand and quicker draw. One of these days, some kid will bring his weapons to the school and cause mayhem to stop the bully.  Come High Noon, we'll see.  195 countries against a single nation.  OK, I know, England will be right beside us, pulling the strings.  "I said go Right!"

Wed, 05/09/2012 - 08:54 | 2409566 Chief KnocAHoma
Chief KnocAHoma's picture

You're knda sorta right... they are also signaling...

"No you really don't want our gold for that oil.... here have some good green paper."

Wed, 05/09/2012 - 20:58 | 2411851 Ranger4564
Ranger4564's picture

Right, I realized afterwards that part is not clearly stated in my comment... i meant that as well... I think that's much of what's happening.  By having these buffoons come out and tell everyone, including the american populace, they sound more legitimate when they speak to other nations.

Tue, 05/08/2012 - 19:16 | 2408458 Uchtdorf
Uchtdorf's picture

DS: The only thing you can do is to stay out of harm's way and try to preserve what you can in cash. All of the markets are rigged or impaired. A 4% yield on blue chip stocks is not worth it, because when the thing falls apart, your 4% will be gone in an hour.

TGR: But if the government keeps printing money, cash will not be worth as much, either, right?

DS: No, I do not think we will have hyperinflation. I think the financial system will break down before it can even get started. Then the economy will go into paralysis until we find the courage, focus and resolution to do something about it. Instead of hyperinflation or deflation there will be a major financial dislocation, which means painful re-pricing of financial assets.

OK, we won't have hyperinflation or deflation. Instead, we will have "painful re-pricing of financial assets."

Hmmm, let's see...if a gallon of gas goes to $100, that would be painful. Or, if an ounce of my yellow physical stuff goes to $100, that would be painful too. I think I have provided, one each, examples of hyperinflation and deflation. Why does he call these examples something other than how those well-defined scenarios are normally named?

Tue, 05/08/2012 - 20:02 | 2408583 Central Bankster
Central Bankster's picture

Because its like saying "I don't know" without being held accountable or sounding stupid.

Tue, 05/08/2012 - 20:27 | 2408621 Judge Arrow
Judge Arrow's picture

I think he means that (and says elsewhere) there will be a paralysis - this happened in the 30's - people just stopped buying and held on to cash - things were expensive and cheap all at once - it will be topsy turvy - some things still pricey, but no one buying, other things dirt cheap - and no one buying, as now, California real estate - no one buying, prices stable and rising..

Tue, 05/08/2012 - 21:49 | 2408757 Vlad Tepid
Vlad Tepid's picture

I think he's of the mind (I've heard it bantered about here on ZH a few times) that what's coming won't be a true inflation, where everything goes up, or a true deflation where everything goes down...some will go way up, some will go way down.  Gas vs housing may be a harbinger of things to come.  Me, I'm betting on all-round hyperinflation but Stockman's way is even scarier...there's no way to tell what's around the bend.

Tue, 05/08/2012 - 23:15 | 2408963 Ranger4564
Ranger4564's picture

I got the impression that he's referring to the falsity of the values of all assets as presently valued.  He states we'll experience re-pricing... think devaluation... what used to be 1 Billion dollars will again return to 1 Million or 100,000.  No longer over inflated values.  What that does to pricing of goods is hard to say... technically, everything should become cheap, but when we're in the midst of the revaluation, the currency we hold may be equally revalued if it's honored at all. 

Some people who believe they are worth 40 Billion dollars will find out they are not.  Others will find out they're not worth 400 dollars. 

Me personally, i think we're already seeing hints of hyperinflation. 


Tue, 05/08/2012 - 18:51 | 2408462 I am Jobe
I am Jobe's picture

Next Stimulus- Vaseline for all USSA Citizens.

Tue, 05/08/2012 - 19:02 | 2408477 JR
JR's picture

As E. Michael Jones says in John Law and Paper Money, a chapter in his forthcoming book on a history of capitalism, “If credit does not make contact with human labor, the value of the credit disappears. Credit is time; credit is opportunity, but it cannot become money (which is necessary for trade) unless labor first turns it into wealth.”

Does this not fit in with the massive misallocation of government debt and its lack of wealth generation as it relates to America’s burgeoning unemployment and dropping GDP as explained below by Richard Benson? In short, socialism doesn't work.

"Suppressing Unemployment to Win The Election" |Benson’s Economic & Market Trends | 01/19/2012 (edited down)

A sitting President running for a second term has never lost an election when unemployment was low and the economy was good.  On the other hand, he's never won an election when unemployment was high or the economy was ravaged by inflation.  This means the unemployment rate can be used as political psychological warfare on the electorate.  If the unemployment rate is pushed down, the consensus is that there must be jobs and the President can't be blamed for the failure to find work.  Therefore, to win this election, the current administration has found ways to make people vanish from the labor force to keep the unemployment rate lower than it really is.   Let me explain how they have done this. 

If the labor force participation rate had not been reduced 4 percent over the past four years, the unemployment rate would be more like 11.5 percent today, not the reported 8.5 percent.   

Push those nearing retirement into filing for Social Security Disability ("SSI" Benefits):  Firms specializing in coaching people on how to be accepted by SSI are now available to anyone over 50 with debilitating aches and pains from serious medical conditions such as a bad back, diabetes, failing joints, arthritis, high blood pressure, failing heart, etc.  Plus, anyone over 50 can claim chronic clinical depression if they're unemployed and without hope, so eligibility for SSI is legitimate... I think we can expect the Obama Administration to turn a blind eye to eligibility and ramp it up in 2012. Do we hear 9.5 million plus on SSI by Election Day? 

Get people to start collecting Social Security early at age 62:  As of November 2011, a staggering 60,671,000 are collecting social security and/or SSI disability benefits, and the number keeps rising.  If you're collecting, you're out of the labor force. 

Give out generous government loans and send people back to school:  If you're a young high school grad without any job prospects and not especially gung ho about going to Afghanistan to look for roadside bombs by stepping on them, what can you do?  Well, borrowing from Uncle Sam to go to a four-year college, two-year community college or trade school, looks pretty darn good.  Indeed, a life of books, late night parties, and cute co-eds, is a pretty nice way to live…

This back-to-school trend has surprisingly picked up for those in their 30's and 40's " if you are too young for disability, and still young enough to hope, going back to school is the new rage. Most importantly, it keeps you out of the labor force! … Since America decided to destroy our factories and move millions of jobs to Asia, good jobs are so scarce that the labor force has turned into "the labor farce". There are four job seekers for every job opening.  And, to make matters worse, over 11 million people can't move to where the jobs are because they're trapped in an underwater house.   

Today, 20.5 million people are in college either full or part-time…

Keep inmates in jail.   America has 2.3 million people in jail… The annual cost to keep one inmate in jail can easily exceed $30,000 year.  Much of the cost is used to pay for the legions of prison guards, and create valuable jobs like the TSA airport body searchers.   In other words, a police-state economy lowers unemployment as it creates jobs for the INS, DEA, TSA and Wall Street snitches…

So, at the end of the day, the real joke is on the American taxpayer who thinks the election is bought by big political donors giving hundreds of millions of dollars for advertising on social issues.  In reality, though, the PACs, and Super PACs are spending peanuts compared to the cost of labor force suppression. Who says the Presidency can't be bought!

Tue, 05/08/2012 - 19:14 | 2408505 Uchtdorf
Uchtdorf's picture

Excellent post.

We're toast.

Tue, 05/08/2012 - 19:30 | 2408530 nmewn
nmewn's picture

Nailed it...

“If credit does not make contact with human labor, the value of the credit disappears. Credit is time; credit is opportunity, but it cannot become money (which is necessary for trade) unless labor first turns it into wealth.”

The statists and Ivy Leaguer's never get this far...they're always cheating off someone elses paper who wrote down an answer to a test given for

Its friggin amazing.

Tue, 05/08/2012 - 20:06 | 2408591 Peter Pan
Peter Pan's picture


Great line but the truth is that it does so in a twisted way, by causing inflation which in turn steals the value fom labour's reward, secondly by giving it to labour so as to become a debt slave and finally by causing asset inflation .

In other words the credit is used to steal from the worker even though in its origin it is useless.

Tue, 05/08/2012 - 21:06 | 2408692 nmewn
nmewn's picture

I think we're saying the same thing in different ways...there can be no credit without labor savings first...anything else is counterfeit currency devaluing everyones labors, that is, ones earnings in the common medium of exchange that is being counterfeited from anything other than labor.

Now, one can get around this debasement of labor in any number of ways...the most popular is with real money.

Tue, 05/08/2012 - 23:16 | 2408975 Hulk
Hulk's picture

I'm wearing a credit condom, film at eleven...

Tue, 05/08/2012 - 19:55 | 2408550 razorthin
razorthin's picture

“If credit does not make contact with human labor, the value of the credit disappears. Credit is time; credit is opportunity, but it cannot become money (which is necessary for trade) unless labor first turns it into wealth.”


What good is credit when there are only inflated assets and goods (and labor) to buy?  A valid question whether you are asking it of a consumer or a business.  Even if that were the only flaw of monetary intervention, it would rendor a "free market" null and void.  And it does.

Tue, 05/08/2012 - 20:21 | 2408612 ChrisFromMorningside
ChrisFromMorningside's picture

Jones is right. The financiers consumed the physical economy in order to build up the FIRE economy of the past 3 decades. But FIRE isn't productive. It doesn't produce real growth. The FIRE economy is now in the process of cannibalizing itself and bringing the First World down with it.

Wealth is physical. Wealth is physical commodities ... homes, clothing, food, medicine, etc. Wealth is not pixels on a computer screen in New York. Yet those who hold political power in our society seem to believe that as long as we keep adding more zeroes to the government and Fed balance sheet we are creating "wealth" ... even if simultaneously factories are closing, assets are being moved overseas, agricultural land is going fallow, schools are closing, etc. It's completely psychotic. It's practically a kind of "magical thinking" ... as long as we appease the false god that is the Big Board, everyone will be prosperous and happy. Yay!

We need real economic growth. But real economic growth can't be legislated or demanded by political fiat. Francois Hollande in France is pushing for an agreement on "growth" in the EU fiscal pact. What does that mean? It means shoveling more debt into financial sinkholes. Growth is a productive of human creativity, problem solving and hard labor ... not debt algorithms. If you're shoveling dirt into a bottomless sinkhole, you won't ever fill it up. Hollande and the other oh-so compassionate social democrats see that we have shoveled $10+ trillion into the FIRE sinkhole, not one cent reached the physical economy, and now their solution is to up-the-ante and shovel another $10 trillion in.

It is a terminally broken system and the only remedy is a total restructuring, not piecemeal reform. Yes, it will be painful. That can't be avoided, not after 30+ years of out-of-control capital misallocation and debt feasting. The sooner it happens, the less painful it will be. If we had let the financial sector "crash" in 2008, it wouldn't be as painful today. And it WILL keep snowballing. Remember Cash for Clunkers? Remember the politicians who were actually so stupid and naive to think that would have any effect on the international-in-scope, $30 trillion+ global debt fiasco? It seems quaint. The outrages of today will seem quaint in three years too if this doesn't stop.

The thing is, these financiers and politicians have the biggest, most narcissistic, most power-hungry egos on the planet and it's pretty clear that they would rather drive us all into a 1984 authoritarian police-state than admit that they were wrong. Witness Dave Cameron saying that results in Greece don't matter, democracy doesn't matter, sorry, but you're going to pay off Goldman's debts whether you like it or not! Why? Cause I said so!

We're in a lot of trouble, my friends.

Wed, 05/09/2012 - 08:48 | 2409552 Chief KnocAHoma
Chief KnocAHoma's picture

This game has been played before and the managers of the "Temple" don't like it when some carpenter comes along and disrupts their profit mechanism.

They'll hang you on a cross for that.


Tue, 05/08/2012 - 20:51 | 2408662 Kayman
Kayman's picture


The first thing Obie the Dillitante needs to do to win, is to get people to close their lying eyes.  Once he has done that he is a shoe in.

Tue, 05/08/2012 - 22:16 | 2408791 JR
JR's picture

After the financial media’s’ said 97 times that the recovery is moving slower than expected, people might begin to figure out that this is not a recovery.

As one cartoonist put it, depicting Obama attempting to ride the economy, a snail: The saddle keeps sliding off.

BTW, excellent edifying comments here substantiating Jones’ statement that credit does not magically “become money."

Wed, 05/09/2012 - 08:21 | 2409496 eddiebe
eddiebe's picture

Why not just buy it by programming the voting machines? A lot simpler and totally fail safe.

Tue, 05/08/2012 - 19:05 | 2408485 rzero
rzero's picture

Commodities are a financial asset? And he implies the dollar isn't a financial asset? I invert these in my financial model. Other than that great interview.

Tue, 05/08/2012 - 19:06 | 2408489 kill switch
kill switch's picture


Some thoughts...

After about two and a half years during which the danger of war between the United States and Iran was at a relatively low level, this threat is now rapidly increasing. A pattern of political and diplomatic events, military deployments, and media chatter now indicates that Anglo-American ruling circles, acting through the troubled Obama administration, are currently gearing up for a campaign of bombing against Iran, combined with special forces incursions designed to stir up rebellions among the non-Persian nationalities of the Islamic Republic. Naturally, the probability of a new fake Gulf of Tonkin incident or false flag terror attack staged by the Anglo-American war party and attributed to Iran or its proxies is also growing rapidly.

The moment in the recent past when the US came closest to attacking Iran was August-September 2007, at about the time of the major Israeli bombing raid on Syria.1 This was the phase during which the Cheney faction in effect hijacked a fully loaded B-52 bomber equipped with six nuclear-armed cruise missiles, and attempted to take it to the Middle East outside of the command and control of the Pentagon, presumably to be used in a colossal provocation designed by the private rogue network for which Cheney was the visible face. A few days before the B-52 escaped control of legally constituted US authorities, a group of antiwar activists issued The Kennebunkport Warning of August 24-25, 2007, which had been drafted by the present writer.2 It was very significant that US institutional forces acted at that time to prevent the rogue B-52 from proceeding on its way towards the Middle East. The refusal to let the rogue B-52 take off reflected a growing consensus in the US military-intelligence community and the ruling elite in general that the Bush-Cheney-neocon policy of direct military aggression towards all comers had become counterproductive and very dangerous, running the risk of a terminal case of imperial overstretch.

A prominent spokesman for the growing disaffection with the neocons was Zbigniew Brzezinski, who had been a national security director in the Carter administration. Brzezinski argued that no more direct military attacks by the United States should be made for the time being, and that US policy should rather focus on playing off other states against each other, while the US remained somewhat aloof. Brzezinski’s model was always his own successful playing of the Soviet Union against Afghanistan in 1979, leading to the collapse of the Soviet empire a decade later. A centerpiece of Brzezinski’s argument was evidently the claim that color revolutions on the model of Ukraine 2004 were much a better tool than the costly and dangerous US bombing and US invasion always championed by the monomaniacal neocons. There was clearly an implication that Brzezinski could deliver a color revolution in Iran, as he had done in Ukraine.

Brzezinski’s Nightmare of 2007 Is Back

Brzezinski formulated his critique of the neocon methods of aggression and imperialistic geopolitics in his testimony before the Senate Foreign Relations Committee in February 2007, going so far as to point out the likely scenario of a false flag event or Gulf of Tonkin incident designed to embroil the United States in direct military hostilities with Iran. The heart of Brzezinski’s analysis was this: ‘If the United States continues to be bogged down in a protracted bloody involvement in Iraq, the final destination on this downhill track is likely to be a head-on conflict with Iran and with much of the world of Islam at large. A plausible scenario for a military collision with Iran involves Iraqi failure to meet the benchmarks; followed by accusations of Iranian responsibility for the failure; then by some provocation in Iraq or a terrorist act in the U.S. blamed on Iran; culminating in a “defensive” U.S. military action against Iran that plunges a lonely America into a spreading and deepening quagmire eventually ranging across Iraq, Iran, Afghanistan, and Pakistan.’ 3 Today we could add Lebanon and Syria to that list, plus perhaps Yemen, Somalia, Sudan, and some others in central Asia.

The factors contributing to the current increased danger level include three major trends:

The CIA’s Green Movement in Iran Has Fizzled

The US sponsored Green Movement in Iran has now demonstrably failed in its project of overthrowing the Achmadinejad government. Back in 2006-2007, the Brzezinski-Nye-Trilateral “soft power” or “smart power” group attacked the stupidity of the neocon plan for a direct US military attack on Iran by pointing out the opportunities for staging a color revolution in Iran, just as the Brzezinski faction had successfully staged the Orange Revolution to install NATO puppets in Ukraine. Why attack Iran directly, argued Brzezinski and his friends, when a US puppet regime in Teheran could be used against Russia and China in much the same way these same people had played Afghanistan against the Soviet Union, with catastrophic results of the latter. The apex of these subversion efforts came in June 2009, with the so-called Twitter Revolution, which was celebrated with hysterical gloating in the Anglo-American media. The Mousavi-Rafsanjani faction left no doubt about its CIA and MI-6 parentage with its signature chant of “Death to Russia, Death to China.” The illusion of an easy coup in Iran has died hard in Washington and London. But by June 2010, the impotence of the Green forces in Iran had become evident. Hillary Clinton is even complaining that Achmadinejad now represents a military-backed government which has marginalized the mullahs, whom the US has demonized in public but privately relied on to prevent the economic modernization of Iran. This gives rise to the tendency to fall back on the previous neocon plan for some combination of direct military attack by Israel and the United States, combined with escalated subversion efforts among the Baluchis, Azeris, Arabs, Turkmen, and Kurds of Iran.

Russian Policy Now Uncertain

During the time that the neocons were attempting to launch aggression against Iran, that task was rendered much more difficult by pervasive uncertainty about the possible reaction of Russia. One of the targets of any bombing campaign against Iran would necessarily be the Bushehr nuclear reactor, being built by Russian technicians. Neocon war planners had to worry about events like the visit to Tehran of Russian President Vladimir Putin on October 16, 2007. During the Putin era, Russian media and figures like General Leonid Ivashov took the lead in calling attention to suddenly increases in US-UK war preparations, as in the case of Operation Byte, the attack on Iran proposed for Good Friday, April 6, 2007.4 While it was thought very unlikely that Russia would risk general war as a result of an attack on Iran, there remained nevertheless the question as to what Russia actually would do. This dangerous uncertainty was a very serious obstacle for the pro-war agitation by the neocons.

In this way, Putin was able to make a decisive contribution to the maintenance of world peace during the years after 9/11. As of mid-2010, it would appear that the foreign policy of Russian President Medvedev is momentarily evolving away from the fierce independence and Russian nationalism championed by Putin, and is placing more value on projects of cooperation with the NATO countries, sometimes obtained by unilateral concessions to the US. Part of this can be ascribed to the increasing influence of the free market ideologue Anatoly Chubais, the architect of the nomenklatura privatization of Soviet state property during the 1990s, whose concept of the modernization of the Russian economy depends very heavily on information technology, in which he portrays the United States as being in the lead. Newsweek has reported the approval of a new foreign policy outline drafted by the Russian foreign ministry which has allegedly gained provisional approval by President Medvedev. This document is entitled “Program for the Effective Exploitation on A Systemic Basis of Foreign Policy Factors for the Purposes of the Long-Term Development of the Russian Federation.” 5 The main immediate effect of the reported new Russian policy is the apparent willingness of the Kremlin to make important foreign policy concessions to the United States with very minimal returns. This in turn means that key unknowns surrounding a US attack on Iran have become less of a concern for the resurgent neocon war faction in Washington. This adds up to a situation in which an attack on Iran is now more likely.

The US-UK Hedge Fund Blitzkrieg Against the Euro Falters

It is a grave error to imagine that normal relations with the Anglo-American financiers can be obtained in the current world depression through conciliatory behavior. The US-UK are experiencing cataclysmic instability in the form of a financial breakdown crisis, and this crisis impels these powers towards irrational, adventuristic, and aggressive behavior. A key lesson of the 1930s is that, when imperialist financier elites are faced by a disintegration of their fictitious speculative bubbles, they often respond with strategic flights forward of the most lunatic sort. In the wake of the 2007-2008 disintegration of the Anglo-American banking system, the New York and London elites have shown signs of going collectively bonkers, although these clinical tendencies have been primarily expressed in the area of their reactionary domestic socioeconomic policies. The specific form assumed by this tendency after the second half of 2008 involves the severe weakening of the US dollar as the world reserve currency by the creation of a $24 trillion credit line by the Federal Reserve, US Treasury, and FDIC for the purpose of bailing out the Wall Street zombie banks. This tidal wave of dollars led to a severe weakening of the US greenback on international markets during most of the second half of 2009. In late 2009 and early 2010 a group of Anglo-American hedge funds around Soros, Paulson, David Einhorn, and others launched a speculative attack against the government bonds of Greece, Spain, and Portugal, with the goal of using a crisis in the southern tier of the euro to bring on a panic flight of hot money out of the euro, thus collapsing that currency to Third World levels. Partly because of the countermeasures instituted by the German government, including the banning of naked credit default swaps on Euroland bonds and naked shorts of German stocks, and partly thanks to direct support from China, the planned Anglo-American blitzkrieg against the euro has now bogged down after eight months of effort, with the euro currently oscillating at a price of about $1.25 – $1.30. This means that, unless the city of London and Wall Street can come up with a new plan, the forces of world economic depression represented by $1.5 quadrillion of bankrupt and kited derivatives may now find a new victim, most likely in the form of either the British pound or the US dollar.

The immediate threat of a pound or dollar currency collapse is leading the ruling financier factions to reconsider a very dangerous flight forward in the form of an attack on Iran, precisely because such an aggression would likely lead to a blocking of the Straits of Hormuz or in any case to a serious disruption of one third of the world’s tanker traffic. Following the tested model of the Kippur war/oil boycott of October 1973, the US-UK financiers would bid up the price of oil to $500 or $1000 per barrel, thus creating enough demand for dollars to soak up much of the dollar overhang and prop up the greenback, at least for a time.

An Astronomical Oil Price As Salvation for The US Dollar

As Jean-Michel Vernochet of the Réseau Voltaire has pointed out, the likely Iranian retaliation for the looming attack in terms of interdicting Hormuz and the Gulf is actually built into the US-UK war plan as a positive contribution towards saving the dollar by massively driving up the price of oil, which is of course still quoted mainly in dollars.6 Energy and Capital editor Christian A. DeHaemer, an oil market analyst, commented: “The last oil price shock in the Middle East was in 1990 when the United States invaded Iraq for invading Kuwait. The price per barrel of oil went from $21 to $28 on August 6… to $46 by mid-October. The looming Iran War is not priced in,” he warned in his newsletter. Iran has the third-highest oil reserves in the world and is second only to Saudi Arabia in production. If any action prevents the flow of Iranian oil, the price of “black gold” would soar, he added.’ (

Playing The Arabs Against The Iranians

One important prerequisite for US aggression grows out of the Trilateral group’s strategy, starting from the Baker-Hamilton Iraq Study Group of 2006, of forming a block of the Sunni Arab nations against the Persian-speaking Iranian Shiites and their allies in the Lebanese Hezbollah and the Palestinian Hamas, as well as Syria. The Anglo-American hope for this tactic of divide and conquer is that hostility between Arabs and Persians will eclipse the more recent enmity between Jews and Arabs. “The Jews and Arabs have been fighting for one hundred years. The Arabs and the Persians have been going at (it) for a thousand,” wrote Jeffrey Goldberg on The Atlantic’s website.8

With many reports that the United Arab Emirates and Saudi Arabia are ready to support the US aggression, great importance must be attached to the current struggle over the future shape of the government of Iraq. Here The secular Shiite Allawi is a US puppet, while his rival Maliki prefers Iran. Sadr and his Mahdi army, closely linked to Iran, represent a key stumbling block for US intentions. The US requires an Iraqi puppet state which will pursue at least a pro-US neutrality in case of war, and above all prevent Iranian special forces or guerrillas from cutting the long US supply line alone Route Tampa from Kuwait City. This is why the question of the Iraqi government was so important that Vice President Biden had to make a special trip to Iraq in the vain hope of quickly setting up a suitable puppet regime there. If the Iraq army turns against US, the situation of US forces could become extraordinarily critical.

War Warnings, Calls For War

Over recent days, warnings about imminent war and direct calls for war have been proliferating in the world media. The veteran Cuban leader Fidel Castro gave his most detailed media interview since the beginning of his illness several years ago, apparently for the express purpose of issuing a warning about US aggressive plans for Iran, and also for North Korea (DPRK). According to a wire dispatch of July 12, ‘the 83-year-old former president talked about how tension between the United States and both North Korea and Iran could ultimately trigger a global nuclear war …. Castro warned that an attack on Iran would be catastrophic for America. “The worst (for America) is the resistance they will face there, which they didn’t face in Iraq,” he said.’

On July 11, the former Malaysian Prime Minister Mahathir Mohamad stated that ‘the US compelled the UN Security Council to impose sanctions against Iran in order to weaken the country and lay the ground for a military attack. The former Malaysian premier added, “It is a matter of time before the war criminals in Israel and the United States launch another war of aggression, once Iran has been weakened by sanctions.”’ 10

Around the same time, former Senator Chuck Robb and former NATO deputy commander General Charles Wald issued an editorial call for the US to begin preparing an attack. Their argument was that the fourth round of economic sanctions extorted by the United States from UN Security Council on June 9 would never be effective, and that military action had to be geared up in parallel to these sanctions. They also warned that the Cold War doctrine of deterrence would not work in regard to Iran: ‘Absent a broader and more robust strategy, however, sanctions alone will prove inadequate to halt Iran’s pursuit of nuclear weapons…current trends suggest that Iran could achieve nuclear weapons capability before the end of this year, posing a strategically untenable threat to the United States. Contrary to a growing number of voices in Washington, we do not believe a nuclear weapons-capable Iran could be contained…. We cannot afford to wait indefinitely to determine the effectiveness of diplomacy and sanctions. Sanctions can be effective only if coupled with open preparation for the military option as a last resort. Indeed, publicly playing down potential military options has weakened our leverage with Tehran, making a peaceful resolution less likely. Instead, the administration needs to expand its approach and make clear to the Iranian regime and the American people: If diplomatic and economic pressures do not compel Iran to terminate its nuclear program, the U.S. military has the capability and is prepared to launch an effective, targeted strike on Tehran’s nuclear and supporting military facilities…. The stakes are too high to rely on sanctions and diplomacy without credibly preparing for a potential military strike as well.’ 11
The Neocons Promise A Cakewalk — Again!

One of the most blatant calls for war with Iran comes from the former CIA agent and neocon ideologue Reuel Marc Gerecht. The Weekly Standard, the central organ of the neocon warmonger party, devotes the cover story of its current issue to urging the Israelis to put an end to Obama’s dithering by mounting the attacks themselves, thus presenting the feckless tenant of the White House with a fait accompli.12

In the inimitable style of neocon Kenneth Adelman, who notoriously promised a cakewalk in Iraq the last time we went down this road, Gerecht impatiently dismisses a series of arguments against such a fateful act of incalculable folly, and does not miss the opportunity to settle accounts with Brzezinski, whose alternative model of imperialist management is now losing support within the ruling elite. Gerecht writes: ‘… concerns about an Israeli bombing are no more persuasive. Hezbollah would undoubtedly unleash its missiles on Israel after a preventive strike…. Hundreds of Israelis could die from Hezbollah’s new and improved store of missiles. Israel might have to invade Lebanon again, which would cost more lives and certainly upset the “international community.”…. The Obama administration might fume, but it is hard to imagine the president, given what he has said about the unacceptability of Iranian nukes, scolding Jerusalem long. He might personally agree with his one-time counsel, Jimmy Carter’s national security adviser Zbigniew Brzezinski, that Israel has become a pariah state, but politically this won’t fly.’ 13 Three years ago, Brzezinski had the upper hand and the neocons were in disarray, but now the tables have been turned to a significant extent.

There is nothing to worry about, Gerecht assures us, since the Iranians are a paper tiger and the results will be a cakewalk: ‘American fear of Iranian capabilities in Iraq and Afghanistan has been exaggerated. The Americans are leaving Iraq; within a year, most of our troops are due to be gone….’ 14 Back in 2002-2003, the neocon line was that Saddam Hussein was so powerful that he had to be attacked. This time around, their field is reversed, and the main argument is that the Iranians need to be attacked because they are a pushover: ‘If the Iranians tried their mightiest, they could give us only a small headache compared with the migraine we’ve already got courtesy of the Pakistanis, who are intimately tied to Afghanistan’s Taliban. And the Israelis know the U.S. Navy has no fear of Tehran’s closing the Strait of Hormuz. If Khamenei has a death-wish, he’ll let the Revolutionary Guards mine the strait, the entrance to the Persian Gulf: It might be the only thing that would push President Obama to strike Iran militarily. Such an escalation could quickly leave Khamenei with no navy, air force, and army. The Israelis have to be praying that the supreme leader will be this addle-headed.’ 15 The tried and true ‘cakewalk’ argument is neither the first nor the last notorious neocon trick which is being brought back these days.

But what about the awesome threat of Iranian state-sponsored terrorism, the danger which these same neocons have been incessantly harping on for the past decade? No problem, says Gerecht. All we would need to do at that point is to issue a bloodcurdling thermonuclear ultimatum to Iran about incinerating that country with nuclear missiles, perhaps killing tens of millions of Iranians. As a matter of fact, Gerecht suggests, the US had better start issuing this sort of threat right now, without any further dithering: ‘It is entirely possible that Khamenei would use terrorism against the United States after an Israeli strike. That is one of the supreme leader’s preferred methods of state action, which is why he should not be permitted a nuclear weapon. The correct response for the United States is to credibly threaten vengeance. President Obama might be obliged to make such a threat immediately after an Israeli surprise attack; whether the Iranians would believe it, given America’s record, is more difficult to assess.’ 16 Note carefully that these statements amounts to the public advocacy of aggressive war, a behavior which may run afoul of the Nuremberg precedents of 1945.

The Iranians are crazy, says Gerecht, so the old-fashioned nuclear deterrence of Mutually Assured Destruction will never work. There is no point in wasting time any longer, and it is time for the Israeli missiles and bombers to fly: ‘‘It is possible the Israelis have waited too long to strike. Military action should make a strategic difference….If we’re not at the end of the road, then the Israelis probably should waste no more time. Khamenei is still weak. He’s more paranoid than he’s ever been. The odds of his making uncorrectable mistakes are much better than before. Any Israeli raid that could knock out a sizable part of Iran’s nuclear program would change the dynamic inside Iran and throughout the Middle East…..Unless Jerusalem bombs, the Israelis will soon be confronting a situation without historical parallel…. In the best case scenario, if things were just “normal” in Tehran, Israel would likely be confronting Cuban Missile Crisis-style brinkmanship on a routine basis.

De Borchgrave: Obama Wants Three Wars And Both Houses Of Congress

The veteran columnist Arnaud de Borchgrave offers the following estimate, which gives considerable attention to the US military opposition against the coming strike, as well as to Iranian capabilities for retaliation in the region: ‘A former Arab leader, in close touch with current leaders, speaking privately not for attribution, told this reporter July 6, “All the Middle Eastern and Gulf leaders now want Iran taken out of the nuclear arms business and they all know sanctions won’t work.” The temptation for Obama to double down on Iran will grow rapidly as he concludes that Afghanistan will remain a festering sore as far as anyone can peer into a murky future, hardly a recipe for success at the polls in November. With a war in Afghanistan that is bound to get worse and a military theater in Iraq replete with sectarian violence, the bombing of Iran may give Obama a three-front war — and a chance to retain both houses of Congress. Adm. Mike Mullen, chairman of the Joint Chiefs of Staff, also expressed reservations from time to time. The Joint Chiefs and former CENTCOM commanders know better than most experts that Iran has formidable asymmetrical retaliatory capabilities. For example, all of these are vulnerable to Iranian sabotage or hundreds of Iranian missiles on the eastern side of the Gulf: from the narrow Straits of Hormuz, which still handles 25 percent of the world’s oil traffic; to Bahrain, the U.S. Fifth Fleet’s headquarters where the population is two-thirds Shiite and the royal family is Sunni; to Dubai, where about 400,000 Iranians live, including many who are “sleeper agents” or favorable to Tehran; to Qatar, now the world’s richest country with per-capita income at $78,000, which supplies the United States with the world’s longest runway and sub-headquarters for CENTCOM, and whose LNG facilities are within short missile range of Iran’s coastal batteries; to Saudi Arabia’s Ras Tanura, the world’s largest oil terminal, and Abqaiq, nerve center of Saudi’s eastern oil fields.

On The Eve Of A New False Flag Provocation?

Naturally, the traditional Anglo-American method for neutralizing any possible opposition from military leaders or members of Congress, to say nothing of the increasingly atomized US public, has been to stage a provocation along the lines of the Gulf of Tonkin in August 1964, or an event like 9/11, quickly followed by the appropriate congressional resolution which can be used in lieu of an actual declaration of war, as needed. Vernochet finds that these ingredients are really the only ones missing in the current constellation of forces to get military operations going in grand style.58 Vernochet estimates that the only possibility for stopping this war would be the creation of a large block of states led by Russia and China, and that this possibility seems very remote at the present time. But instead of seeing the denizens of Manhattan and the city of London as power crazed, it would be more accurate to regard them as living in mortal fear of their own imminent financial bankruptcy, and desperately seeking some way to convince the world that their empire of derivatives, zombie banks, and hedge funds actually represents the economic future of humanity.59 In the meantime, one thing which antiwar activists can unquestionably do is to begin inoculating public opinion to regard any terrorist act or military clash attributed by the mass media to Iran as a provocation deliberately staged by the US-UK war party.

US And Israeli Warships Mobilized

The US has recently deployed a second aircraft carrier battle group to waters near Iran. A large number of US warships, by some accounts 11 vessels, passed through the Suez Canal heading east towards the Gulf at the end of June. This was evidently the expanded battle group around the attack carrier USS Truman. An Israeli report says: ‘International agreements require Egypt to keep the Suez open even for warships, but the armada, led by the USS Truman with 5,000 sailors and marines, was the largest in years. Egypt closed the canal to fishing and other boats as the armada moved through the strategic passageway that connects the Red and Mediterranean Seas.’ 60 Some reports stated that an Israeli ship was part of the armada.

There are also reports that the Israeli Navy is expanding its operations into the Gulf: ‘Several defense websites have reported that Israel is deploying one to three German-made nuclear submarines in the Persian Gulf as a defensive measure against the possibility of a missile attacks from Lebanon and Syria, as well as Iran. “The submarines of Flotilla 7 — Dolphin, Tekuma and Leviathan — have visited the Gulf before,” DeHaemer wrote, “but the decision has now been taken to ensure a permanent presence of at least one of the vessels.”61 These submarines fire nuclear missiles, and could destroy Iranian cities. They cannot defend anything, but they can launch a nuclear first strike.

US Troops In Eleven Countries Encircle Iran

US forces currently operate in at least 11 countries within striking distance of Iran. These are Iraq, Afghanistan, Turkey, Pakistan, Kuwait, Azerbaijan, Armenia, Turkmenistan, Saudi Arabia, UAE, and Kyrgyzstan. While Manas Air Force base in Kyrgyzstan might be available for operations against Iran, there are currently no US bases in Uzbekistan, so far as is known. But the US is trying to re-open its Uzbek base, which was closed in 2005.62 Thus, US military forces are now present in virtually all of Iran’s neighbors, except Syria. Many of these are places which the US peace movement, to the extent that it has survived the coming of Obama, has never heard of. This includes more than 50,000 GIs in Iraq (where the US is now alone, after the departure of all coalition contingents) and Afghanistan, where there are some 100,000 US forces. There are US forces in various disguises in Pakistan. There are NATO bases, including the formidable Incirlik air base, in Turkey. Whether Turkey will allow its territory to be abused for aggression is another question.

Tue, 05/08/2012 - 19:08 | 2408494 zerotohero
zerotohero's picture


Tue, 05/08/2012 - 20:06 | 2408585 Dr. Engali
Dr. Engali's picture

Dude use a link.

Tue, 05/08/2012 - 20:09 | 2408592 Peter Pan
Peter Pan's picture

My scroll button just broke down,

Tue, 05/08/2012 - 20:16 | 2408606 buzzsaw99
buzzsaw99's picture

I will give you the benefit of the doubt this one time. A short blurb and a [in this case infowars] link is the preferred method of sharing large amounts of data. Nothing more than a paragraph will be read by most in the comments as it merely annoys people.

Tue, 05/08/2012 - 21:01 | 2408679 Kayman
Kayman's picture

Uhh... I read it.  It needs some red pencil revisions.

Tue, 05/08/2012 - 21:40 | 2408747 my puppy for prez
my puppy for prez's picture

Dude:  Brzesinski is NOT your friend....he's one side of the DIALECTIC!

Repeat after me:  Uncle Zbiggy is not my friend....Uncle Zbiggy is not my friend....Uncle Z.......

Tue, 05/08/2012 - 19:07 | 2408490 jimmyjames
jimmyjames's picture

Instead of hyperinflation or deflation there will be a major financial dislocation, which means painful re-pricing of financial assets.


If financial assets are repriced lower-that would be deflation as the value of net worth is decreased-

Tue, 05/08/2012 - 19:47 | 2408552 Clint Liquor
Clint Liquor's picture

So, if the USD becomes worthless, that will be deflation?


Deflation of Financial Assets translates into inflation for hard assets.

Tue, 05/08/2012 - 21:40 | 2408745 jimmyjames
jimmyjames's picture

Deflation of Financial Assets translates into inflation for hard assets.



You'll have to explain that one-I've never heard of such a thing-

Tue, 05/08/2012 - 21:05 | 2408686 Kayman
Kayman's picture


So... if a bank has $100 billion in "assets", that were valueless at the date of booking, when you write them to zero (which they were from the beginning), is this deflationary ?

Tue, 05/08/2012 - 21:37 | 2408743 jimmyjames
jimmyjames's picture

So... if a bank has $100 billion in "assets", that were valueless at the date of booking, when you write them to zero (which they were from the beginning), is this deflationary ?


You obviously don't get it-

Those assets were "marked" at value on "someones" balance sheet-be it in a pension or mmmf or wherever-

When the collateral that underpinned the then value of that asset collapsed-so did "someones" money supply decrease = deflation


Tue, 05/08/2012 - 19:11 | 2408500 CryingBear
CryingBear's picture


Tue, 05/08/2012 - 19:14 | 2408502 Pete15
Pete15's picture

The end game is when the dollar is shit, so why would I want cash then??

Tue, 05/08/2012 - 19:23 | 2408521 blindman
blindman's picture

Minister Farrakhan Blasts Media & Reporters During Radio Interview Commercial!

Minister Louis Farrakhan smashes on media reporters during a commercial break on a local Chicago radio station. I remember Farrakhan as that scary? black man when i was young! Now at age 52 i am humbled to realize that it was never him that was scary! It is the Truth in his words that strikes fear! my hat is off to Mr farrakhan for having the courage to speak Truth to power that so many of us lack!

People say the minister is this or that, but say what you will, the minister ALWAYS comes? correct and has never bitten his tongue or choked on his words. That's the type of free man I wanna be.
"...our enemy has not been about color, creed, nation of birth but the age old battle of good vs evil...Those who wish to use their influence and wealth to enslave people of all colors with financial and physical shackles. Humans being have strived to be free to live their lives and keep what they earn and produce since the beginning and those with might have long attempted to take by use of force be it physical or governmental. That is why America was? formed."
Ron Paul

Tue, 05/08/2012 - 19:27 | 2408526 SuperCycleBear
SuperCycleBear's picture

Finally someone else who shares my view of the incredible survival of the bond market despite the stark reality that it is totally dysfunctional and insolvent. The issue to contemplate now is just how far its resolution will impact other spheres - like politics, environmental policy, diplomacy, tolerance and religious freedom. Seems clear to me there are many upon whom this reality is yet to dawn and truly consider.

Tue, 05/08/2012 - 19:27 | 2408527 yawara
yawara's picture

quit all the sniveling and buck up... those who know don't say, those who say don't know.

Tue, 05/08/2012 - 19:30 | 2408531 YesWeKahn
YesWeKahn's picture

"Interest rates signal nothing anymore because they are zero. "

Right, nothing works because all basic algorithms failed on Div#0 (divided by zero) error.

Tue, 05/08/2012 - 19:32 | 2408536 robertocarlos
robertocarlos's picture

It was only the bottom of the first a short time ago. Can't see things unravelling fast.

Tue, 05/08/2012 - 19:37 | 2408541 max2205
max2205's picture

I'd go see that movie.

Really. How long have the doomers been clenched on this scenario ?

Tue, 05/08/2012 - 20:14 | 2408600 Peter Pan
Peter Pan's picture

The only reason we have not crashed yet is because they are digging themselves in even deeper which is extending the fall and the resultant pain.

Tue, 05/08/2012 - 20:37 | 2408633 robertocarlos
robertocarlos's picture

Agreed, but they must have about 12 more tricks up their sleeves. No gold though.

Tue, 05/08/2012 - 19:40 | 2408545 NERVEAGENTVX

@kill switch

Dude, can you please keep your comments a little shorter, or use links.


Tue, 05/08/2012 - 19:51 | 2408568 sschu
sschu's picture

Stockman is an impressive guy, Washington and Wall Street insider with clear understanding of issues and financial markets.  At least as far as I can tell as I am neither.

So he is either a complete BSer or right on, no middle ground here.  I tend to believe he knows his stuff.

It seems they can hold this thing together for a lot longer than we give them credit.  At the same time, there really is no end game, there is no way for the Fed to unwind their positions and shrink their balance sheet.  Where will the FRNs come from?  

So some sort of black swan or one of the US's enemies deciding to take us down is what lies between us and financial catastrophe.  

Not an especially comforting thought.


Tue, 05/08/2012 - 20:32 | 2408627 stocktivity
stocktivity's picture

You are correct...Stockman has been on the inside and out....he's no dummy. I'm impressed and find myself agreeing with the guy.

Tue, 05/08/2012 - 20:02 | 2408579 The Alarmist
The Alarmist's picture

Come on, now ... What's a little mal-investment among friends? Especially since we are doing it for our children's children's children.

Tue, 05/08/2012 - 20:05 | 2408584 Racer
Racer's picture

You   put any money in a bank and you are paying them to hold it... I would rather put it under the mattress! Or better still buy some more star made metal

Tue, 05/08/2012 - 20:20 | 2408607 Smokey1
Smokey1's picture

The world is coming to an end. Global financial catastrophe. Eat your neighbor. The markets are doomed. Too much debt, yadda, yadda, yadda.

People have been saying that shit for 30 years, and guess the fuck what. We're still here.

Uncle Sam is super rich. Take the fucking blinders off and look at the assets.  The buildings alone in Washington DC---Dept of Justice, Dept of Commerce, Dept of Energy, Dept of Labor, Dept of Agriculture, Dept of Interior, Smithsonian Institutes, the US Capitol, the White House,SCOTUS, FBI, CIA, Andrews AFB, Washington National Airport, Burea of Engraving, Dulles Airfield, Bolling AFB, National Institues of Health, Lincoln Memorial, Washington Monument, Walter Reed Army Medical Center, Bethesda Naval Hospital, Dept of Treasury, the Pentagon. Look at all the fucking national forests---how much is that shit worth, you fucking retards? How about across the country all the fucking bridges, the museums, the libraries, all the fucking interstates, all the fucking airports, all the fucking school systems, all the fucking land. Look at all the fucking military bases, here and abroad. Look at the dams. You think that shit doesn't add up? Look at all the fucking capital equipment owned by the government---autos, trucks, machinery.

The US is super rich----the $100+ trillion in off balance sheet liabilities are off balance sheet for a reason, they won't be paid, so you may as well deduct it now----which shows that the balance sheet of the Fed is AAA +.

Precious metals EAT SHIT. They are a fool's errand. Don't be deceived into gambling on gold or silver. There is a REASON that Buffet, Munger, and Gates are three of the richest people in the world. They know their shit lights out.

I can see why someone might buy silver, but only if it was $25 per ounce cheaper. Silver at least has a few industrial applications.

But gold ? JFC, what is gold good for other than to make jewelry for whores and to cap the teeth of the bastard offspring of unwed hood rats ? The INTRINSIC value of an ounce of gold bullion is on a par with a cracked bottle of piss.

Tue, 05/08/2012 - 20:41 | 2408637 The Alarmist
The Alarmist's picture

I guess I'll see you at the town market trying to pawn off the Washington Monument for food some day ... I'd offer you a gold coin for it, but I prefer my wealth to be transportable and survivable into the next form of civilisation.

Tue, 05/08/2012 - 21:30 | 2408730 TNTARG
TNTARG's picture

Ah ah! Indeed! Better to be near some place good for fishing, hunting or so!

Tue, 05/08/2012 - 21:06 | 2408687 lunaticfringe
lunaticfringe's picture

Every once in awhile, I meet somebody that is so utterly unconscious and stupid, that it defies description. I can't even bring myself to ask just who in the fuck Smokey thinks is going to buy all of those national treasures and what they will use for currency. Maybe he is going to sell our crumbling highways to the Chinese.

All debt is paid either by the debtor or by the lender Smokey- now you think about that. Wow. Dude, maybe if you didn't drink so much before you write...

Tue, 05/08/2012 - 21:17 | 2408707 Kayman
Kayman's picture

Yer ass is smokin, Smokey.

Look at the pyramids, that Egypt must be worth hundreds of trillions.  And France has the Mona Lisa, shit man, that ought ta pay off their national debt.

Suck on the ol" crack pipe agin.  Yer man, the Donald has already done yer job fer ya.  No need ta have any assets when Ben can jist print trillions.

Fuck man, we gots it made.

Tue, 05/08/2012 - 21:17 | 2408708 Joe The Plumber
Joe The Plumber's picture

Yup a whole lot of stranded misallocated assets.

The french had the same idea aftwr the revolution. They backed assignats with church property which had been seized.

Tue, 05/08/2012 - 21:54 | 2408762 ChrisFromMorningside
ChrisFromMorningside's picture

So everything is A-OK alright because we have the bureaucrat factories in DC that are non-productive assets and that consume trillions of dollars in taxpayer dollars yearly on an ever-increasing scale?

And the U.S. financial sector is about to default on liabilities that are greater than global GDP but that won't affect our credit standing whatsoever?

LOL. Good trolling. Please stick around ... MDB has really fallen off as of late so we need a new one.


Tue, 05/08/2012 - 23:11 | 2408946 hangemhigh
hangemhigh's picture


Uncle Sam is super rich. Take the fucking blinders off and look at the assets.  The buildings alone in Washington DC---Dept of Justice, Dept of Commerce, Dept of Energy, Dept of Labor, Dept of Agriculture, Dept of Interior, Smithsonian Institutes, the US Capitol, the White House,SCOTUS, FBI, CIA, Andrews AFB, Washington National Airport, Burea of Engraving, Dulles Airfield, Bolling AFB, National Institues of Health, Lincoln Memorial, Washington Monument, Walter Reed Army Medical Center, Bethesda Naval Hospital, Dept of Treasury, the Pentagon. Look at all the fucking national forests---how much is that shit worth, you fucking retards?

dude, that's a way old movie you're pimping there  they made 33 years ago.  it's called 'americathon'

Tue, 05/08/2012 - 20:20 | 2408613 midgetrannyporn
midgetrannyporn's picture

I can't believe the scam has lasted as long as it has. Unfortunately we are in the "steal everything that isn't nailed down" phase, which is kind of sucky.

Tue, 05/08/2012 - 20:42 | 2408643 Squid Vicious
Squid Vicious's picture

Off Topic headline: "Insider Who Thwarted Underwear Bomb Plot Was Supposed to Carry It Out" ... uhh.. WTF?? I can't even dissemble the mis-information anymore. Maybe that's the whole point?

Tue, 05/08/2012 - 21:12 | 2408703 my puppy for prez
my puppy for prez's picture

It's called a "new and improved underwear bomb" FASLE FLAG ATTACK!!!

Tue, 05/08/2012 - 20:48 | 2408656 frenzic
frenzic's picture

My 1920x1440 trinitron (that's a REAL monitor greenhorns) had me enjoying kill switch going the extra mile. Scroll schmoll. 2536x1902@75 no problem so post whatever you feel you need to. US super rich, ha in paper dollars maybe. When that charade is over the hordes will own it all for free.

Tue, 05/08/2012 - 21:07 | 2408695 blueridgeviews
blueridgeviews's picture

No buyers of debt?

When the whole thing collapses????

Come on , the Fed will be the buyer.

Tue, 05/08/2012 - 21:20 | 2408715 Kayman
Kayman's picture

Yeah, Central Banks buying up unsaleable government debt.  It works really well... until it doesn't.

Tue, 05/08/2012 - 21:22 | 2408717 Joe The Plumber
Joe The Plumber's picture


Then what happens? Deflationary collapse or crack up boom take yer pick.

Most choose crack up boom who study history. Seems to be less painful.

Tue, 05/08/2012 - 21:21 | 2408714 colonial
colonial's picture

Hey Tyler:  Sorry I haven't been online of late...I read every ZH post, just didn't realize I had not logged in. 

I was at the hearing I've been to hundreds before.  I was struck by a few moments of what will become an American tragedy, (we already have a Greek tragedy.) 

First.  Hill staff, (I was once in their number,) do not know how to brief their bosses on complex financial issues.  Its sad how little staffers understand markets and the industry. 

Second.  The format used at these hearings has to be relaxed.  More real exchanges, and even arguments between Members and witnesses should be allowed.  The Chairman should suspend the time limits during particularly important exchanges. 

Third.  Why do we just hear from economists and not market people?  Just once I'd like to see someone who has put capital at risk testify in these situations.  And NOT on another panel.  When any witness makes an incredibly stupid statement, someone needs to call them out on it.  For instance, Alice Rivlin said the Fed could easily unwind its complex balance sheet.  Even as people wondered aloud about its actual size not one person pressed Rivlin as to how this unwind would be accomplished.  I was shocked.  Who is she kidding?  They have no clue.  To his credit Taylor, mentioned several times that no one in the room really understood how the Fed will allow markets to again set rates and values based on true market forces.  Again, no one blinked at this assertion.  Either Taylor was right or Rivlin was right. 

Fourth. The under-current of the hearing was the Fed might be reformed.  One of the key elements of reform has to do with whether the Fed should be managing a dual mandate.  There has been talk around DC that the Fed should get out of the business of seeking full employment.  Considering that the US may never again have full employment, why wouldn't the Fed love to get out of the employment business?  Then all they'd have to do is lie about one issue not two. 

Fifth.  The Fed is now more powerful than ever.  There were not enough questions regarding the fact that the Fed is now supporting global finance, not just the US capital markets.  And that in light of the credit crisis and Dodd/Frank, the Fed is now the primary regulator for Wall Street; more powerful than the SEC, FDIC and CFTC put together.   

I like the fact that Ron Paul is willing to criticize the Fed, but he lacks the knowledge, tenacity and perspective to take on such a powerful foe.  Its unfortunate that smarter Members and Senators are clearly supports of the Fed's supremacy.  Too bad they're all wrong.  But at least Taylor made a few good points. 

Tue, 05/08/2012 - 21:25 | 2408722 Joe The Plumber
Joe The Plumber's picture

We cant rewind we've gone too far.

Tue, 05/08/2012 - 21:24 | 2408724 BalanceOrBust
BalanceOrBust's picture

You can be as rich as you want as long as people are willing to accept the paper you print for crappy walmart products.  The issue is what happens when people don't accept your sh*t.


I'll bet some guys in togas wrote stuff like you are writing now in Athens two thousand years ago, and in Rome in the fourth century.  And guess what?  The Greeks aren't doing much better than when the Parthenon started to decay.  And the Romans are about to face civil strife unseen since gladiators fought in an intact stadium.


All that Washington real estate?  Priceless.

Tue, 05/08/2012 - 21:24 | 2408725 BalanceOrBust
BalanceOrBust's picture

You can be as rich as you want as long as people are willing to accept the paper you print for crappy walmart products.  The issue is what happens when people don't accept your sh*t.


I'll bet some guys in togas wrote stuff like you are writing now in Athens two thousand years ago, and in Rome in the fourth century.  And guess what?  The Greeks aren't doing much better than when the Parthenon started to decay.  And the Romans are about to face civil strife unseen since gladiators fought in an intact stadium.


All that Washington real estate?  Priceless.

Tue, 05/08/2012 - 22:28 | 2408802 The Alarmist
The Alarmist's picture

So much material, so little time or interest to deal with it all. A few highlights:

"Its sad how little staffers understand markets and the industry."

And yet they manage to make millions on onsider trading and "friends and family" type deals. A little dissonance here?

"Why do we just hear from economists and not market people?"

That's easy: Market people are busy earning or stealing money, both of which take real actions, while economists have the luxury of postulating a living based on their tenure and government grants which are rewards for their slavish devotion to their political-contributing faculty unions, leaving them free to testify all day to these sorts of things.

"The Chairman should suspend time limits during particularly important exchanges."

First, what if anything, is important about any of these hearings? If we let these people bloviate at will, when would it ever end? That might seem like a good thing, but that leaves the Staffers more free time to draft even more legislation ... better to keep the staff occupied arranging dates and soirees for their bosses rather than leaving them free to do real damage.

"I like the fact that Ron Paul is willing to criticize the Fed, but he lacks the knowledge, tenacity and perspective to take on such a powerful foe."

Rubbish! Paul is intellectually and morally up to the task, but he was too honest to hire the media consultant who would have kept him on the pithy talking points that would have made him come across as a wise elder statesman rather than letting him ramble on and look like a crazy uncle.

Tue, 05/08/2012 - 23:07 | 2408932 JR
JR's picture

I like the fact that Ron Paul is willing to criticize the Fed, but he lacks the knowledge, tenacity and perspective to take on such a powerful foe.  It’s unfortunate that smarter Members and Senators are clearly supports of the Fed's supremacy. – colonial

Only an enthusiastic supporter of the Federal Reserve and its wealth transference policies could analyze the abilities of Dr. Ron Paul in this way. For anyone who is fair minded and who has listened to and read the material Ron Paul presents concerning the complexities of the Federal Reserve and its dangers to American citizens and this nation could not possibly rank him below any member of Congress in this area.

The comment above is insulting to anyone who is familiar with Ron Paul’s positions, but more than that, it is designed to be deliberately hostile to the truth.

Tue, 05/08/2012 - 21:41 | 2408748 Yes_Questions
Yes_Questions's picture



Bernanke thought this was a retail run à la the 1930s. It was not; it was a wholesale money run in the canyons of Wall Street and it should have been allowed to burn out.

Given the opacity of the FED, I wonder just how true this is.


Tue, 05/08/2012 - 22:40 | 2408855 Lord Drek
Lord Drek's picture

Chaos and calamity will descend upon America hard and fast. Those who thought the .gov would always be there to care for them will find themselves competing with millions of others when the grocery stores are empty and the toilets stop flushing. And I've read that when the thin veneer of civilization melts away, people are 3-4 days away from eating the family dog and a month away from eating each other. 


"And in this maelstrom of decay, ordinary men were battered and smashed."

Tue, 05/08/2012 - 23:05 | 2408927 The Alarmist
The Alarmist's picture

But given the obesity epidemic, that will be living high on the hog.

Wed, 05/09/2012 - 01:06 | 2409128 The Alarmist
The Alarmist's picture


Wed, 05/09/2012 - 08:30 | 2409511 The worst trader
The worst trader's picture

Buy the dip!

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