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Guest Post: Enter The Swan
Submitted by John Aziz of Azizonomics
Enter The Swan
Charles Hugh Smith (along with many, many, many others) thinks there may be a great decoupling as the world sinks deeper into the mire, and that the dollar could be set to benefit:
This “safe haven” status can be discerned in the strengthening U.S. dollar. Despite a central bank (The Federal Reserve) with an avowed goal of weakening the nation’s currency (the U.S. dollar), the USD has been in an long-term uptrend for a year–a trend I have noted many times here, starting in April 2011.
That means a bet in the U.S. bond or stock market is a double bet, as these markets are denominated in U.S. dollars. Even if they go nowhere, the capital invested in them will gain purchasing power as the dollar strengthens.
All this suggests a “decoupling” of the U.S. bond and stock markets from the rest of the globe’s markets. Put yourself in the shoes of someone responsible for safekeeping $100 billion and keeping much of it liquid in treacherous times, and ask yourself: where can you park this money where it won’t blow up the market just from its size? What are the safest, most liquid markets out there?
The answer will very likely point the future direction of global markets.
Smith is going along with one of the most conventional pieces of conventional wisdom: that in risky and troubled times investors will seek out the dollar as a haven. That’s what happened in 2008. That’s what is happening now as rates on treasuries sink to all-time-lows. And that’s what has happened throughout the era of petrodollar hegemony.
But the problem with conventions is that they are there to be broken, the problem with conventional wisdom is that it is there to be killed, roasted and served on a silver platter.
The era of petrodollar hegemony is slowly dying, and the assumptions and conventions of that era are dying with it. For now, the shadow of that old world is still flailing on like Wile E. Coyote, hovering in midair.
How did the dollar die? First it died slowly — then all at once.
The shift away from the dollar has quickly manifested itself in bilateral and multilateral agreements between nations to ditch the dollar for bilateral and multilateral trade, beginning with the chief antagonists China and Russia, and continuing through Iran, India, Japan, Brazil, and Saudi Arabia.
So the ground seems to have fallen out from beneath the petrodollar world order.
Enter the Swan:
We know the U.S. is a big and liquid (though not really very transparent) market. We know that the rest of the world — led by Europe’s myriad issues, and China’s bursting housing bubble — is teetering on the edge of a precipice, and without a miracle will fall (perhaps sooner, rather than later).
But we also know that America is inextricably interconnected to this mess. If Europe (or China or both) disintegrates, triggering (another) global default cascade, America will be stung by its European banking exposures, its exposures to global energy markets and global trade flows. Simply, there cannot be financial decoupling, not in this hyper-connected, hyper-leveraged world.
And would funds surge into US Treasuries even in such an instance? Maybe initially — fund managers have been conditioned by years of convention to do so. But how long can fund managers accept negative real rates of return? Or — much more importantly — how long will the Fed accept such a surge? The answer is not very long at all. Bernanke’s economic strategy has been focussed on turning treasuries into a losing investment, on the face of it to “encourage risk-taking” (or — much more significantly — keep the Treasury’s borrowing costs cheap).
All of this suggests a global crash or proto-crash will be followed by a huge global money printing operation, probably spearheaded by the Fed. Don’t let the Europeans fool anyone, either — Germany will not let the Euro crumble for fear of money printing. When push comes to shove they will print and fiscally consolidate to save their pet project (though perhaps demanding gold as collateral, and perhaps kicking out some delinquents). China will spew trillions of stimulus money into more and deeper malinvestment (why have ten ghost cities when you can have fifty? Good news for aggregate demand!).
So Paul Krugman will likely get something much closer to what he claims to want. Problem solved?
Nope. You can’t solve deep-rooted structural problems — malinvestment, social change, deindustrialisation, global trade imbalances, systemic fragility, financialisation, imperial decline, cultural stupefaction (etc, etc, etc) — by throwing money at problems. All throwing more money can do is buy a little more time (and undermine the currency). The problem with that is that a superficial recovery fools policy-makers, investors and citizens into believing that problems are fixed when they are not. Eventually — perhaps slowly, or perhaps quickly — unless the non-monetary problems are truly dealt with (very unlikely), they will boil over again.
As the devaluation heats up things will likely become a huge global game of beggar thy neighbour. A global devaluation will likely increase the growing tensions between the creditor and debtor nations to breaking point. Our current system of huge trade imbalances guarantees that someone (the West) is getting a free lunch , and that someone else (the Rest) is getting screwed. Such a system is fundamentally fragile, and fundamentally unstable. Currency wars will likely give way to economic wars, which may well give way to subterfuge and proxy wars as creditors seek their pound of flesh, and debtors seek to cast off their chains. Good news, then, for weapons contractors and the security state.
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Great post. It's said that lottery winners go broke finding out their problem wasn't money, either.
my buddy's sister makes $68/hr on the internet. Just go to the site and setup a free account. www.LazyCash9.Com
if you buddy's sister was paid by the junk she'd make a thousand an hour
Dear me, the sky is falling again. I just can't get enough of these doomsday senarios. There's a new one almost every day - same crap different day.
DOOMSDAY - BOOOOO!
New one? No, not really. It's just the same ole, same ole being played out as slowly as possible (a.k.a. "managed collapse").
But tell me, in just what kind of a non-doomsday market environment do negative interest rates exist?
Great post TD.. flight to safety is a LIE.. may be happening somewhat,as posted, but gut reaction.. but its very temporary at best...
And my best take is timmay / the bernank.. are actively ensuring creative destruction.... purpose driven... ahh.. to be a fly on the wall in Chantilly this weekend! I just see all this as wealth consolidation.. for easy 1,2,3 insta-destruction.. and real consolidation into the hands of the few... just like a central bank has always done...
politics is just the lie.. the rhetoric.. to drive to centralization... and end game? monopolization
It's not a black swan. A black swan is something unexpected. It is playing out more or less as most of us expected it to.
Swans are subjective.
To the herd — especially certain fund managers — this will be a swan.
Good piece Aziz. You essentially put the Race to Debase in context.
Now as all good students of physics know, gravity is unforgiving and acts equally on one and all, without regard to size. But that is in freefall. We are clearly not in the free-fall stage yet, but in managed collapse as someone said above.
I'm seeing a very very interesting aspect of this managed collapse here in India.
One just needs to take a look at INR/USD to see how a totally FUBAR nation (India), totally dependent on Deficit financing and export, is killing it's currency (and thus it's people), to keep a few fraudulent industries afloat.
After decades of making India's "natural" agriculture totally dependent on the Oil and oil derivatives chain, now suddenly, weak rupee means cost of food skyrockets.
It's a sad game, very few winners, too many losers.
Some of us have answers, perhaps coming to fruition only when the Rubicon is passed.
As a possible artice, look at INR/USD and world Silver prices, especially since July 2011. The whole story is nested in that little debasology.
ori
the-great-machinery-death-cult-wake-up
Looks like someone hasn't paid much attention in economics class, oh wait someone has, and that seems to be the problem...
You'd think people would learn from earlier crises but it's always different this time isn't it?
"same crap every day" and he keeps coming back reading it every day...I don't think his elevator goes to the top floor.
Thanks for the lucid refutal of the article.
Hopefully the way you so eloquently wove your facts into such a strong argument with obviously unassailable logic will cause the author, and indeed all of us Zero Hedge readers to rethink our respective economic worldviews.
Thanks again for sharing your thoughts with us.
You must have been born after 2008...
Where Minsc goes, evil stands aside!
<heavy potion drinking ensues fighting trolls>
http://www.youtube.com/watch?v=mMryiPe9vj8
Regards,
Cooter
Pretty pricey for a bedroom webcam.
You should see the size of her toys!
i hope she uses protection.
She can make more than that giving us blowjobs.
I think he would have gotten more upvotes if he said she made $69 per hour.
pods
Listen up Mendoza...
You got no fucking buddies and you know it.
Now fuck off.
Wow. -118. I think that is a ZH record. Well, my personal anecdotal opinion. But, you probably don't speak English. Or have a productive business. Or a productive skill set.
Gads! The trolls are adapting. They are starting MLM businesses! It is like, a new weapon, if it wasn't so god damn tired already. It is like sea water on igneous rocks ... congrats on your 1:10000 attempts to convince a molecule to give up something to the salt water. Genius! Pure genius! Or not.
Regards,
Cooter
Globalization: the best thing since sliced bread. It worked 'til it didn't.
The dollar and USTreasuries will prove to be only brief pitstops on moneys' voyage into gold and silver. However, that is not to say that they won't be one hell of a set of pitstops/drivebys that shouldn't be taken full advantage of, only that one should be ready to move from there to gold at a moments notice, unless Bernanke, Geithner, Obamney, Dimon, Corzine, ect. have your complete confidence and trust when they say they are trying to help YOU.
Short stocks down, ride silver up, or something analogous to that, but don't overleverage as volatility will sweep many greedy players away on this next big trip, I fear. OMHO
People talking books?
Deflation first, then inflation. Dollars now. Gold later. PM's are acting like other asset classes (HYG, ES, IG) right now. Dollars and treasuries (as strange as it may be given the policies that are happening) are the only diversification left.
Too much debt means too few assets. You can't settle your debts with gold (arguably unfortunatly) but that's the fact right now. When the bills come due, assets have to get sold. Any assets. Once the deflation really bites (a 10%, 15%, 20% correction in the S&P does not qualify), the Fed will respond like everyone here is waiting for, but the time has not yet come.
So the dollar will reign supreme , huh? And the rest of the world will be brought to our knees?.....Starting to make me wonder if this whole world collapse scenario was dreamed up on a dateless Sat. night in Skull and Bones.
Nobody had to dream and/or scheme. The euro socialists did it to themselves. Many of us have been expecting this for decades. Just wondering when the well would run dry.
to paraphrase Niccolo Machiavelli,
What you get through luck is easily gained and easily lost.
What you get through hard work is difficult to get, but easier to keep.
This will kill the swan, long live the swan
Having identitfied the Swan, it longer is one. Black Swans are unpredictable. The scenario may play out just as described. But since it is an article here at zhZH, it is no longer an unforseen event.
No black swans. Just endless deep brown muck for as far as the eye can see...
Black swans are not that rare. They can be had for $300. Brown muck sounds like the wine sauce was not stirred adequately while heating.
Personally, I prefer fresh cockerels and cream with potato crepes.
Aziz sure is turning out quite a bit of good stuff for such a young turk.
oh la-la!
tres bien!
and a can of Red Bull to wash it down?
Back behind the spoon there.
lol
http://www.saltworks.us/la-baleine-fine-shakers.html
Ha.
good stuff, use the brand myself.
+platters of yummy goodness and the ones you love!
double delete.
I do have to say HH, you get my vote for FEMA camp cook!
I second that Aziz does post some fine analyses.
pods
That just means it isn't OUR black swan. As Taleb states in his book, slaughter day is a black swan event for turkeys who were expecting it to be just like any other day, but for the farmer, it was well known all along.
Yeah, you're sort of preaching to the choir on this one.
Tomorrow and tomorrow and tomorrow creeps on its petty pace........
Or,
When will it be done! ?
This reminds me. Defence stocks.
Defence stockpiles, too.
The personal kind
always money in murder it seems. why not buy big pharma as well. drugging humanity into submission, but who cares if you get a return. /sarc off.
yes. Hitler's favorite industries: arms, steel, and pharmas making Zyklon gas. Slave labor from conquered nations to cut the cost
Margin compression in pharma is reaching critical mass. Would stay away from that for anything longer that a day trade.
pods
No more blood will be donated to a patient diagnosed as terminally ill.
But they will sell him some, with the right collateral.
Yes, it's always the same:
Step 1: Print more money
Step 2: Release the Krakken
LOL! "The Krakken" would be a great name for Ben's new print-o-matic machine...
... which is - of course - the new and improved version of the old Toxic Waste Sludge-o-Matic machine that the evil tentacles have been using to quench their insatiable thirst for enslavement of all humanity and world domination so far.....
+1
I was going to say something about the end road of monetization being war but I like yours better.
The Fed is sure talking a good game to the sheeple;
From Yahoo finance;
"As long as the U.S. economy continues to grow sufficiently fast to cut into the nation's unused economic resources at a meaningful pace, I think benefits of further action are unlikely to exceed the costs," William Dudley, the influential dovish head of the New York Federal Reserve, told reporters in New York.
Meanwhile in San Antonio, Dallas Fed President Richard Fisher -- a self-described inflation hawk -- reiterated his longstanding view that the best way to boost jobs is for Congress to provide more clarity on tax policy and government spending plans.
"My argument has been that we have done enough, in fact, we've done too much," Fisher said of the Fed's monetary policy easing. "I don't see what we would accomplish with further accommodation."
http://finance.yahoo.com/news/two-top-fed-officials-cool-195423640.html;...
For the bankers like Jamie D. to get more easy money from the Fed (QE 3 or whatever they want to call it) the first thing they are going to need is for the reported employment situation to decline significantly on this Friday's fantasy jobs report. This will help give the fed the employment excuse for further easing as per their "man-date".
I'm betting they can do that, and it's going to be look out below on the way to SPY 3 year trendline support at around 120 before we might get a significant bounce.
And the treasury bubble is quite alive and well with room to run.
Unused economic resources, WTF does That mean? Talk about a bunch of BS! And that's just it, they'll talk and talk some more, always hoping that they'll talk us into voluntarily taking austerity so that THEY can continue their lavish ways of fucking us...
And, all will be magically fixed if Congress CLARIFIES? Again, more fucking talk, talk, talk...
CLOWNS, ALL OF THEM!
Do people demand a really just system? Well, we'll arrange it so that they'll be satisfied with one that's a little less unjust ... They want a revolution, and we'll give them reforms -- lots of reforms; we'll drown them in reforms. Or rather, we'll drown them in promises of reforms, because we'll never give them real ones either!!
- DARIO FO, Accidental Death of an Anarchist
Safe haven of ponzi capitalism; Aziz of Aziz, you are a spokesman of lucidity; but you forget the essential, this scenario will lead to the demise of Pax Americana. A nation that has built the current paradigm will lose its key levers in the end. Painful but inevitable. All others must adapt to this new reality. Awesome tipping times in the making.
Surrogates first and then the core will melt. But beyond is the societal change of post hyperconsumer model, as peak RM will constrain the current trend. Nobody even talks about that, as all are programmed to think in terms of fiat pumped power, feeding the consumerist model. Watch the fiat world burn and take with it the hyperconsumer model. Your swan is a symbol of a paradigm that is already dead or dying.
Properly realigned America will be fine. Plenty of land, plenty of raw materials and plenty of educated people. The adjustment will be painful, the outcome could be quite good.
The same could have been said of Eastern Europe right before the Bolshevik revolution.
We're doomed if we don't shake this whole majority tyranny nonsense
oh well, all you humans were doomed from birth anyway.
Did you know that the first Matrix was designed to be a perfect human world? Where none suffered, where everyone would be happy. It was a disaster. No one would accept the program. Entire crops were lost. Some believed we lacked the programming language to describe your perfect world. But I believe that, as a species, human beings define their reality through suffering and misery. The perfect world was a dream that your primitive cerebrum kept trying to wake up from. Which is why the Matrix was redesigned to this: the peak of your civilization.
If we all live that long.
Plenty? Based on what? (the very nature of growth MEANS that that which is relied upon will be exhausted at some point, exhausted in that the paradigm leading up to that point will NOT be able to continue)
"The adjustment will be painful, the outcome could be quite good."
Ha ha... Outcome? Based on what? I suspect that you're basing this on no more than hopium.
I guarantee you that YOU and all others who think this way are expecting to step back and take another run at perpetual growth on a finite planet. Since this WILL fail, and since capitalism and all other modern systems operate as though perpetual growth is the goal, it's a certainty that anything that actually survives will NOT be anything that you can likely relate to (maybe the Amish could, but even they are dependent on the outside world).
Well if we could ever shake the age old banker model of fractional reserve debt issuance with interest attached, we would do fine.
Shit, we might even rediscover what leisure time is, instead of trying to cram in a year of "relaxation" into a measly 10-20 days off the hamster wheel.
pods
Pods, I agree that it would go a LONG way to eliminate fractional reserve debt issuance AND interest. We would, however, need to UNDERSTAND WHY so that we could never fall back into the trap. My fear is that, what, with all the propaganda out there, many folks would be told that those who are against perpetuating these absurd practices are doomers and are condemning everyone to a life of drudgery (gee, like this is new propaganda?). People believe the most inane things (such as the existence of infinite resources on a finite planet); I think that it's their way ignoring their personal greed.
But, this "time off," what is this that you speak of? Nearly all the time I have is spent on improving my land; it's a labor of love, it's my life (in the future my life will depend on my current work), and I've got a LOT to do and not a lot of time to do it (I'm getting old).
Plenty of educated people? Never been to a high school football game? A Walmart? A movie theater on Friday night? A company picnic? A megachurch?? Yahoo! comment threads? You must be living in an alternate reality from me.
Nigeria and Burma have plenty of land and raw materials...they won't be fine and whether or not America will ever again become "properly realigned" is an issue in serious doubt.
fight club rules.
I wish the Keynesians would just admit that stimulating demand by money printing is just magic and nothing more. C'mon Keynesians, you believe in magic and you want us to stake everything on that belief. Admit it now or forever be damned!
Modern Keynesians believe in printing money and putting it in the hands of consumers to stimulate demand via government spending (only when at the zero-lower bound - not the way Reagan and W. Bush did it). Printing money and putting it in the banks via Fed operations is pure Milton Friedman and it is a failure because higher M is offset by lower v. The problem here is, you folks don't understand Keynes and Krugman.
Arent bankers consumers? They have received record bonuses? Isn't lowering the 30 year to 3% putting money in the hands of consumers? Isn't saving GM and its labor unions putting money in the hands of consumers? Isnt cash for clunkers putting money in the hands of consumers? Isnt HARP giving money to consumers?Isnt record food stamp usage putting money into the hands of consumers? Isnt employing 100k plus military putting money in the hands of consumers? Isnt record deficit money getting into the hands of consumers? If not where in the hell is that money going? It is going to pay people who are consumers.
You dont understand basic logic. "Consumers" is a made up concept that you create to divide people into groups. Every person in this country is a consumer. Every person in this country that has gotten a chunk of trillion dollars deficits is a consumer.
Would it make you happy if I said putting money into the hands of people with a higher propensity to spend their income? Consumers is shorthand for the middle class. Believe it or not, goverment spending including state/local is down in the last few years. Deficits created by lower tax receipts due to lower GDP are not Keynesian.
$5trillion spent in the US alone and they lost jobs. At the outset there was only $12trillion of residential mortgage debt in the US, so they could have paid off half of everyone's first mortgage.
Seems almost impossible.
But the good thing is epic fail liberal socialism really isn't on gross display worldwide,
the once most prosperous places on the planet aren't mostly broke $2whores and it isn't from the hundreds of trillions of social obligations that is the mountain of debt being shuffled around like a moronic neo marxist running around the ivy leagues.
the world just needs to raise income taxes to 150% or cut military spending by 10,000%.
Even with your clarification it still doesn't work, for one simple reason. Creating fiat is not the same thing as creating wealth. What it is instead, is a tool to deplete wealth via unsustainable consumption.
Honestly, this concept isn't that difficult. All Keynesian doctrine can do is to pull demand forward, sucking all of the wealth out of the system as it does. Any increase in consumption only furthers the imbalance.
You completely miss the point. The point is to create jobs and if that comes with a nice 4% inflation clip to lower the debt burden, all the better. But you won't get your coveted inflation disaster with all that money sitting in bank vaults.
That 4% inflation will be the tax to pay for the created jobs, and that will be extracted from everyone holding the currency.
Won't work. Never has, never will.
I do agree that printing from the top will never work. I just also agree that printing from the bottom won't work either.
A debt problem cannot be solved with more debt.
pods
No, that 4% inflation tax would be taken from the lenders and would provide relief to the borrowers (in the form of lower debt burden). As Krugman says, economics is not a morality play.
And a debt problem can be solved with more debt if you transfer the debt from somebody who can't pay the debt (an unemployed mortgage holder who is given a job via government stimulus) to somebody who can pay the debt (holders of US Treasuries).
Lets quit playing games here and talk about what the REAL underlying forces are.
Inflation and interest relies on GROWTH. 2% growth means a doubling time of 35 years: everything around you, all things being equal, will double in just 35 years- do the math on China! Oh, and then in ANOTHER 35 years? Keep doing it to infinity. THAT'S what we're talking about here. It ALL has to do with creating "growth," and, as has been noted by others here, that "growth" is really only being pulled from the future, meaning, when the future comes you're going to have to do MORE of what you're currently doing, and, well, good luck with That if you're having to force feed everything now (in the future you'd end up having to literally jam shit down people's throats!).
BOTTOM LINE: We had hyper-growth and now it's no longer possible to maintain that which we built using hyper-growth. No, there is NO super-duper hyper-growth, or other "magic" pills.
And, if you're still thinking that this can be done... 2/3 of the world's population (that's over 6 BILLION!) live on $3/day or less. How long do you think that you can hold off the increasing "hordes?" I think that it should become pretty clear why all the "aid" to Africa (setting them up for a big population burst so that the 1/3 can suck their resources- that Bill Gates guy [and such] is quite the humanitarian!).
Oh for the love of!
"The point is to create job"
Jobs for what? So that people can consume? (look up the phrase "push on a string" - people are totally in debt, in debt to the future, a future that cannot exist [due to a lack of a sufficient enough supply of exploitable physical resources) Yeah, perpetual growth on a finite planet. FUCKING FAIL!
When I run across posts like this I sense that humans are really nihilistic; that or REALLY stupid, or, perhaps, both.
"But you won't get your coveted inflation disaster with all that money sitting in bank vaults."
You have no real reason to feel smug. Inflation is about HYPER-inflation, and it has EVERYTHING to do with a lack of confidence in the underlying currency. More and more people are seeing the currencies are the domain of the banksters and that it's all tainted fruit (worse- it's a PICTURE of tainted fruit!).
Oh we understand them. I understand perfectly that 99% of economist operate under the delusion that you can calculate human nature with a mathmatical formula.
Question - is the fiscal world symmetrical or linear -- the Keynesian's thesis seems to believe it's flat [?], as do their enablers - the 'central planners', aka. central banks. However, the laws of monetary-liquidity, flow, where resistance is least and gravity fed. Thus the mass of liquidity is dependent upon a 'time-multiplier' for stimulus to function, be it easing or tightening. Unfortunately, the monetary universe is symmetrical - a non-linear 3D entity that cycles in parallel with the laws of relativity in a periodical sequence of definitive events. Relativity, being fiscal cyclicality, created by change.
Manipulation or central planning is but a two-dimensional quasi-tool of pseudo, visceral hubris! Where time becomes irrelevant not knowing the defined boundaries. This is a known, such that, as most Keynesian's theorist have no baseline for this illegitimate reckless endearment. Thus - tis but a fool's errand to proliferate! jmo
great post :-))
Maybe I need a brush up on my economics but there are Keynesians and Monetarists. Keynesians would lower taxes and increase government spending to stimulate the economy, Monetarists would increase the money supply. I suppose both are one and the same at this juncture. By the way, what ever happened to the IS/LM curves? What do they look like right now?
Just like in Star Wars...Star Destroyers weren't enough, so they built Super Star Destroyers...Super Star Destroyers weren't enough so they built the Death Star! All financed on the backs of all those creatures who drank in that cantina!
and one proton torpedo brought the whole damn thing down!
Don't forget the fatal orifice's role. Actual Death Star designers would probably not have spec'ed that on the feature list. George Lucas designed it for dramatic purposes, and I hate to mention, well maybe I actually enjoy mentioning it: Freudian ones. Ahem.
Real world "death star" equivalents would often prove harder to take out. Or at least it would often take more than 10 minutes for plucky "rebel" engineers to find the unique weakness and tune an existing weapon platform to be used on it.
Yeah a $15 billion super carrier cant be sunk by a $1 million cruise torpedo.
Or a $1000 non- magnetic mine.
Actually much easier - think computer virus, courtesy of your friends of the Mossad.
Why kick the door down when you have a key?
Better yet wait for the Empire to go the way of Rome. Eventually the Frutirium, debased coinage, and iPad based hedonism will blow the death star up even better than a virus could.
Yes, Freudian "slip" there from George.
The Bismarck was disabled with a single torpedo. It was a huge super ship with 1 ton shells that destroyed the HMS Hood in one shot. The weakness wasn't found by looking at blueprints; a bunch of planes dropped torpedos and one hit in a place that disabled the steering gear, causing the boat to limp in circles.
The More You Know. Knowledge is Power!
Not only that but it was a bunch of obselete open cockpit bi-planes doing the torp. runs.
Fairey Swordfish. The aircraft, not the gay bar.
If the thinking NOW is that throwing money at the problem won't fix things, why would people believe this would work as the collapse is happening? What I find amusing time and again is that these doomsday scenarios, where all is well and orderly as the world goes to shit, forget what will trigger the collapse in the first place - a dash for the exits. Show me where any monetary intervention stops a chaotic grab for anything of value and I will believe these orderly scenarios. AIN'T GONNA HAPPEN.
When people realize money isn't worth dick and try to corner goods that have value the shit hits the blades. And when countries want to extract value for the loans given to other countries and the only thing of value tangible, well, crank up the war machines.
The problem isn't money, it's wanting shit for free and borrowing into oblivion. There will be no orderly collapse of the system unless viewed from space.
I've been thinking the similar thought.. The real "printing" machines are the manufactures.. I see China winning the debasement game.
That's just the thing though, Band. People don't get it. Even supposedly stuffisticated and decidedly educated people including and maybe especially fund managers in charge of immense flows of money don't understand how badly they are being duped by the banksters. They see FRN's as money and government IOU's as stores of value, negative real interest rates be damned.
We are most of us avant guarde here. Very possibly way too much so. My portfolio valuation ( in FRN's ) sure tells me I am.
Don't think I'm defending bloodsucking fund managers but what you mention is precisely the problem. With such massive flows of money, if they did move into a real store of value or an actual safe-haven commodity, they would collapse the market overnight with their weight. I think at least some, thought surely not all, know just how jacked up everything is but by moving money into very feathery and ephemeral investments like government IOUs they can preserve "the game" and their own skins that much longer, collectively. In a way it's an amazing (and undoubtedly shortlived) example of a negation of the "Tragedy of the Commons." The poster above is correct though - someday soon there will be a rush for the exits. Then it's lights out.
Right. WHICH ONE???
Wrong. If ECB prints Germany will abandon them and go their own way.
And no one in Europe will resent Germany one bit for doing this.
Of course not. The Greek would understand that Germany doesn't want to continue paying for their life-long holidays. The French would understand that they couldn't shave the German sheep to get the wool for their social hammock. Italy will find the money for chicks and coke somewhere else and with Berlusconi gone the expenses are dropping rapidly anyway.
Why should we care? We are ze only one here that still got industry - and some Russian friends.
I assume that you, as does everyone else, operate based on continuing growth? If so, WHO are you going to sell all that your industry produces, and do so in increasing amounts (to match growth targets) next year, the year after and the year after and....? Keep in mind that your industries were also pumped up in order to meet the demands of the now broke nations. And, further, think real hard about the REAL value of that produced, whether it's really going to be viable in the NEW WORLD [DISORDER].
They will when they join the BRICS nations
Germany is going to save the Euro at all costs? Don't think so.
Just like the anti-austerity politicians are winning at the polls in France, the tide will further turn in Germany and it will be pro-Germany, anti-peripherary, and anti-Euro.
Germans will not go to the ballot box and vote pro-print.
My long-shot prediction: watch for Germany to leave the Euro and look due East for a new alliance.
Or west, we have lots of natural gas too.
I think Germany battens down the hatches. Think of the measures they will need to prevent people from flowing into the country.
yep, Russia to the rescue. The CIA is already on this one. Nothing from SUSRIS yet though.
East? There's Scandinavia to the north, The Netherlands to the right. Just those countries together would make a pretty solid economic union. It's what is popularly referred to as 'the neuro zone'. You could throw in Poland as well, which is East of Germany, but probably not the same East you were referring to. Still lots of growth possible there, it's just that Germany and Poland historically haven't exactly been the best allies.
All the countries your mention would no doubt revolve around a Ruso-German axis just as they currently revolve around the current Franco-German version.
Your long shot prediction is a theory/rumor already floating in cyberspace, and for some part of it since the late 90'ies. As in, this was the plan with the Euro from the beginning in an attempt to create an alternative to the world reserve currency. If true, you can add Sino and Megu to your axis.
Only that they will not leave the Euro. They will keep it, and shake the withering leaves with twig-stubs off the tree. Those twigs 'n leaves would/could then allegedly be placed in a nice big nusery bucket in the gentle climate of Southern France, where a team of dedicated gardeners would apply ample amounts of liquidity and fertilizer to said twigs with withering leaves. If the plant sets new roots, recovers and start to flourish from the intensive care and once again grows strong - who is to say that the plant branch and the tree cannot be subject to grafting at some point in the future.
Who knows? Much has happened since the first information on this emerged. Maybe this plan died with the current trouble and change in the political power balance. And Sino may have decided to skip a beat and head straight for a Renminbi upgrade. You may be proven correct about an full blown exit still.
You're right. If the Germans look east, they get to be the financiers, marketeers, and industrialists in a partnership with a resource rich giant and probably get preferable access to China. If they look West they have to compete with the likes of France, USA, UK et al as they circle the drain and scamble for oil. Plus Germany will get to play the role of Buffer Zone between Russia and the West yet again and something tells me they may have learned their lesson this time. Better to be a prince among kings than an alderman among peasants. <--That didn't come out as witty as it sounded in my head.
"Plus Germany will get to play the role of Buffer Zone between Russia and the West yet again and something tells me they may have learned their lesson this time. "
I believe that this is the ONLY way out for Germany*. I believe that Germany is best off writing off all the debts and dumping the others.
* Though I believe this to be the BEST "solution," it is but a momentary save: when those to the east start to over-consume, which they will, then Germany will once against be staring down the hole: there will be less exporting of natural resources as the current resource "rich" countries start cutting back on exports to meet internal needs.
Kicking out France who forced the curse of a common currency on Europe would be an interesting idea; it would make it worth dropping a few more billion € on this fermenting barrel of of pig droppings in the hope of getting some bio gas in return...
Biodegradation is not fermenting. And you do not kick the french out of anything, mister man.
USA = Best looking horse in the glue factory....
ROFL
couldn't agree more, aziz...
but it looks like the dollar will indeed continue its rally in the near-term; there will be an asset fire-sale; and it's true that there will be a massive flight to safety...i am, however, firmly convinced that the dollar's current strength is merely a function of the immense surge in deleveraging now underway...by which i mean to say it's ephemeral, evanescent -- transitory, bitchez!
smart money is fully befuddled right now; which is to say, there is no such thing as 'smart' money, only fear...and it WILL precipitate PANIC. and financial panic like the world has never seen.
and since EVERYTHING will depreciate in real terms (fuck nominals), people will seek a metric that actually accords to something real -- gold, bitchez. people are right now preaching risk-on because it's reasonable -- that may be so, but we collectively waved bye-bye to reason long ago...don't blame us, tbtf, you built this towering and tinselated edifice and then you set to hollow out its foundations and rip the fixtures out of the wall.
go ahead, tbtf, try to sell your clients on equities...try to sell them on anything, you craven cunts! you've gone so far that the Truth itself won't even save you.
you've sown the wind; now prepare to reap the wirlwind.
janus
@janus: standing ovation.
many thanks, my friend.
i really have missed the hell out of y'all.
seems like it's been a coon's age since i...well, nevermind all that, the cocktail hour has arrived! and what a day for a sell-sider like me (for now) to tip back a cold one!
cheers to ZH, the bestest shit ever to hit the interwebs!
God bless us, everyone.
janus
The Fed doesn't print money - Turbo Timmy does. Come on guys, this is Econ 101 stuff...
The Fed "creates" money, which is significantly different from printing money, which is the sole responsibility of the Treasury. The Fed askes the Treasury to Print money and has to buy the printed money with created money at cost, not face value. See how simple that is?
I read somewhere the Treasury charges the FED $0.08 per bill for printing and it doesn't matter if it's a $100 or a $1. Anyone know if that is true?
To repay the balance they just bid on Treasuries. Convenient
inquiring minds need to know, but not enough to google it.
I googled the shit out of it with no luck. It's not something they post on the FED's website.
FYI... 9.6 cents to produce!
Ha! Well I read somewhere that the treasury charges everyone $0.08 per $ every time someone prints, draws, thinks about or even dreams of a $ sign. Guess I owe them about $0.72. Pricks
Not when the Fed simply marks up the account balance of a primary dealer via a computer. That money got created from nothing and deposited into an account. Most money "created" these days is electronic, either when the Fed marks up an account, or when a bank engages in fictional-reserve lending.
If you want to make pedantic distinctions about how physical bills are only printed by the Treasury, fine, but don't be so obtuse as to pretend that money is only "printed" when it comes off of a mechanical press. Many trillions of dollars, conjured from nothing, are electronically distributed by central banks from their excel sheets. That's "printing" too.
Housing market will boom again when all those foreign nationals with dough move to the US, according to tomorrow's headline on CNBC. You don't believe the shit? Ask those pimps at Pimco yourselves.
News flash: they've already done that. NYC ultra-high end has been booming for 4 years.
Your mistresses of those high-end Chinese Party bosses?
The Black Swan will be some small to medium size disaster that becomes the last straw for the overleveraged global economy and its unhappy participants. 15 years ago the problems would have been (and were) fixed, but now the "system" has become too fragile to self repair. Tempers are shorter, information is confusing or lacking, even sheeple are discovering alternative news sources. The farther we go down the road of self deception, the more unbalanced we become, and the easier it is to become unstabilized.
i agree with everything...almost:
i don't think the black swan will fly in from without, i think she's currently brooding over her malevolent flock at the vortex of our global markets, her nest. in other words, the market IS the black swan.
how's that for stretchin a metaphor?
janus
Stretching is good for the mind. I'll have to think about that one for a while.
I've posted here that religions are the refuge/illusion of last resort, and that is where the biggest bad black swan is hiding. I don't think that will be the first crack in the matrix, but it might be the worst.
i have much to say on organized religion...but i don't feel like cracking the subject right now -- as my ideas on the subject are complex and at the same time simple.
for now, I'll quote THE MAN's words on the subject (these are all directed at the religious rulers of his day, the pharasies and saducies...sp?): "you are as your father, the devil"...and again, "you are as whitewashed tombstones"...and if that weren't enough, "you are but a brood of vipers."
i guess Our Lord wrapped that up in a nice little package...done and done.
janus
JPM will produce the event you speak of, much more than their derivative trade will be discovered - something like they are no longer solvent and the books are completely cooked. They've been living off of Fed liquidity injections and stealing customer funds to finance operations - all other money is going to the big bets - the Fed knows this of course as many of the positions are actually those of the fed.
Enough will leak out to create a panic that will be at least partially fueled by what we are yet to find about the banks in Europe (including germany and France). The rest of the fuel is already here in the form of MF Global, Lehman, Facebook, the Banks, Housing, College Tuition, Credit Cards, Government Perpetual and Increasing Lies, Wars we shouldn't be in, the list goes on and on.
All that said, I do think JP Morgan will provide the spark needed by requiring a bailout because of their insolvency but when the Fed/Obama indicates the bailout will be more of the same I think people start to wake up and fight back. Ala Iceland.
Speaking of Iceland. All the senior level bankers fled to England or elsewhere with their money but many kept homes in Iceland. It turns out the addresses were publisized and now the homes are being painted RED over and over and over - apparently the police just can't find the people doing it (wink, wink). In Iceland, the whole country got behind the effort to change things and they have. Iceland is being sued by England for having to cover the losses by an Icelandic bank (it wasn't actually) for their own citizen deposits that disappeared. Iceland of course covered its own citizens (not sure how).
But I digress. The Banksters will cause the next collapse, probably the last one for the current financial and monetary systems, what will rise frmo the ashes? Hopefully not another Federal Reserve (Central Bank) organized system! If it all crashes before August maybe Ron Paul will be forced into candicacy :)
The US could just be lucky - with RP reviving the libertarian roots! ; - )
"I think people start to wake up and fight back. Ala Iceland."
Iceland doesn't have FEMA.
Sounds like it is a process of years... This will be a very old swan indeed...
It has already been 4 years, a decade when you consider the propped up economy, being rated without job growth as strong. It's a house of cards and they only have to decide "when."
http://www.youtube.com/watch?feature=player_embedded&v=VebOTc-7shU
Alex Jones may not be credible to you but there are plenty of indviduals in this documentary who have established reputations as being forthright and video clips of clear admission or attempt at recusing themselves. Ethics has brought us here.
Do not be calm. Have a racing heart, a cold sweat from fear. Don't ignore what is resulting in the extraction of wealth from a soverign nation. Americans will face a brick wall and it will have a firing squad which will lead to shortened lifespans due to the new struggle required just to survive a day. Rich, poor, all colors of Americans will see them looked at as the lost tribe after the currency collapse. Price gouging will be the salt in the wound. Shoddy workmanship, scams, long waits in long lines. It's no time to be calm.
shop.stores.yahoo.net/faofreprofba.html#order
Fall Of The Republic documents how an offshore corporate cartel is bankrupting the US economy by design. Leaders are now declaring that world government has arrived and that the dollar will be replaced by a new global currency.
President Obama has brazenly violated Article 1 Section 9 of the US Constitution by seating himself at the head of United Nations' Security Council, thus becoming the first US president to chair the world body.
A scientific dictatorship is in its final stages of completion, and laws protecting basic human rights are being abolished worldwide; an iron curtain of high-tech tyranny is now descending over the planet.
A worldwide regime controlled by an unelected corporate elite is implementing a planetary carbon tax system that will dominate all human activity and establish a system of neo-feudal slavery.
The image makers have carefully packaged Obama as the world's savior; he is the Trojan Horse manufactured to pacify the people just long enough for the globalists to complete their master plan.
This film reveals the architecture of the New World Order and what the power elite have in store for humanity. More importantly it communicates how We The People can retake control of our government, turn the criminal tide and bring the tyrants to justice.
A film by Alex jones
Alex Jones has been right about more than almost anyone with a mike in front of his face.
Also, once I saw a US government sight that explained how to spot propaganda. The 1st site mentioned was Alex Jones' Infowars/Prison Planet.com.
Of course I immediately knew the site had to be run by a true patriot if the US government fascist traitors were singling it out!
Fine, but I want to do the remake with Kiefer Sutherland reprising the role of Jack Bauer and saving us from these bastards.
@bunnyswanson:
Thanks for the reminder.
I saw this a couple of years ago and then thought it was a bit dramatic, but now it doesn't seem that far-fetched at all.
If Romney took Rand Pal as VP would the RP crowd on here vote for Mitt?
No, I'm done with the GOP and their bullshit.
Fuck Romney and the Rhinos he rode in on.
Ron Paul supporters are voting for Gary Johnson.
I will write in Ron Paul. My vote is a vote against the establishment. I hope come November, "Other" gets about 20-30% of the vote.
I'll be voting for Obama to ensure that America fails. Then, PROFIT!
(No. I have no conscience. Why do you ask?)
HELL FUCKING NO!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
Peking Swan?
Wild Turkey?
Titanic the safest ship ever built?
Honk, Gobble-Gobble, Blub-Blub.
From article:
"All of this suggests a global crash or proto-crash will be followed by a huge global money printing operation, probably spearheaded by the Fed."
This falls right in line with the scenario of a deflation period followed by probable hyper inflation.
There is a currency war going on. the ECB will be fighting the FRB, competing with tryingt to prop up their failing economies. They will destroy each other and it will be the civilians that are the casualties.
Now for you PM holders, of which I am one, the hard part will be to hold on to your PM during the deflationary period. The majority will be cash strapped and selling assets at fire sale prices. That will also include many PM holders who will liquidate their PM to cover debts denominated in fiat cash. I know, that is counter intuitive to the reason the person bought PM in the first place, but it will happen. Good luck as we continue this world game.
Sell my PMs to pay my debts? I have no intention of paying off my debts under a deflationary scenario. I'll simply default. And then I'll go with the possession is 9/10ths of the law and shoot anyone trying to take what I deem my property.
Ding! Ding! Ding! We finally have a winner for what is really going to happen. When the Ponzi finally becomes too obvious to ignore, the police and courts will grind to a halt like they did the day after Katrina. You will stay in the chair you were sitting in when the music stopped. Just like Russia in 1990. Better to be in a nice defensible chair.
In any case, with a bit of prep, 90% of the population will be ahead of you in the foreclosure line, and the jubilee will be declared before they get to you. The political class will not stand idly by while most of their constituents get evicted. They will be compelled to "do something". And they will. Trampling over evil bankers will be new, but they will.
Just need to be the guy with track shoes who doesn't have to outrun the bear. Just have to outrun the sheeple, which won't be hard to do.