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Guest Post: The Real Contagion Risk
Submitted by Chris Martenson
The Real Contagion Risk
Around here we like to track things from the outside in, as the initial movements at the periphery tend to give us an early warning of when things might go wrong at the center. It is always the marginal country, weakest stock in a sector, or fringe population that gives us the early warning that trouble is afoot. For example, rising food stamp utilization and poverty levels in the US indicate that economic hardship is progressing from the lower socioeconomic levels up towards the center -- that is, from the outside in.
That exact pattern is now playing out in Europe, although arguably the earliest trouble was detected with the severe weakness seen in the eastern European countries nearly two years ago.
Because of this tendency for trouble to begin at the periphery before spreading to the center, here at ChrisMartenson.com headquarters we spend a disproportionate amount of our time watching junk bonds instead of Treasurys, looking at weak sectors instead of strong ones, and generally spending our time at the edges trying to scout out where there are early signs of trouble that can give us a sense of what's coming next. In this report, we explore the idea that Europe is the canary in the coal mine that tells us it is time to begin preparing for how the world might change if the contagion spreads all the way to US Treasurys (which is mathematically inevitable, in our view).
Why the US Should Care About Europe
At the very core of the global nuclear money reactor are US Treasurys and the dollar. If the dollar's role as the world's reserve currency wanes or even collapses, then the scope and pace of the likely disruptions will be enormous. Of course, we'll be glad to have as much forewarning as possible.
Accordingly, it is my belief that if the contagion spreads from Greece to Portugal (or Italy or Spain), and then to the big banks of France and Germany in such a way that they fail, then rather than strengthening the dollar's role (as nearly everyone expects), we should reserve some concern for the idea that the contagion will instead jump the pond and chew its way through the US financial superstructure.
While I am expecting an initial strengthening of the dollar in response to a euro decline, I believe this will only be a temporary condition.
The predicament is that the fiscal condition of the US is just as bad as anywhere, and we'd do well to ignore the idea, widely promulgated in the popular press, that the US is in relatively better shape than some other countries. 'Relatively' is a funny word. In this case, it's kind of meaningless, as all the contestants in this horse race are likely destined for the glue factory, no matter how well they place.
While there are certain to be a lot of false starts and unpredictable twists and turns along the way, eventually the precarious fiscal situation of the US will reach a critical mass of recognition. Before that date, the US will be perceived as a bastion of financial safety, and afterwards everyone will wonder how anyone could have really held that view.
A good recent example of how swiftly sovereign fortunes can change: One day, everything was fine in Greece, which enjoyed paying interest rates on its national debt that were a few skinny basis points (hundredths of a percent) above Germany’s. A few short months later, Greece was paying over 150% interest on its one-year paper.
What I am asking is this: What happens when the same sweep of recognition visits the US Treasury markets? Is such a turn of events even possible or thinkable? Here's one scenario.
How Contagion Will Spread to the US
My belief is that someday, perhaps within a matter of months but more likely in a year or two, the US Treasury market will fall apart as certainly and as magnificently as did Greece’s. Here’s how that might happen:
Step 1: As the global growth story frays, global trade decelerates, and the sovereign and total debt burdens of various countries drag at economic growth, fewer and fewer dollars will be accumulated and stored by various foreign central banks. The typical way dollars are stored is in the form of Treasury holdings. Because of this, several years of record-breaking Treasury accumulation by these foreign banks will grind to a halt and foreign Treasury holdings will begin to decline.
Step 2: The US government, thinking that foreign lending had somehow become a permanent feature of life and having consequently ramped up spending and borrowing to record levels, will find itself unable to adjust quickly, especially with an election year in sight. Federal borrowing continues amidst a sea of squabbling over meaningless, barely symbolic cuts to spending, even as official foreign demand for Treasurys wanes.
Step 3: After it is recognized that the central banks are taking a breather from more Treasury accumulation, private participation in Treasury auctions begin to wane, with the bid-to-cover declining and eventually approaching dangerously thin levels. In parallel, Treasurys traded on the open market begin to creep up in yield, indicating that more sellers than buyers exist.
Step 4: The Federal Reserve, having publicly committed itself to maintaining a zero Fed Funds interest rate through 2013 and therefore finding itself in the awkward position of having to save face, will be forced to funnel more money into the Treasury market. But because it is already committed to selling short-maturity paper in favor of long-dated paper, it does this by announcing another round of quantitative easing (QE) in some other asset class held by the sorts of financial institutions that will have no choice but to immediately park that thin-air money into Treasurys. The holdings of money market funds come to mind.
Step 5: The rest of the developing world, especially China, takes an increasingly dim view of the US reserving for itself the right to print money to buy government debt while admonishing other countries for doing the same. First, there are just verbal protests, but then more and more Treasury selling begins to hit the market. Wall Street, happy enough to make a few bucks by flipping Treasurys at the Fed’s bequest, now sees that there’s a lot more money to be made by selling Treasurys and even more to be lost by holding them. Selling of Treasurys, pushed by a shift in foreign perception of safety (and utility), begins to pick up.
Step 6: As the selling picks up, the rate of interest that the US government has to offer in order to attract sufficient buyers to new Treasury auctions continues to increase. Forced by this circumstance, the Fed has to raise rates in order to appear as if they are in control of the process, when, in fact, they are (once again) merely following the markets.
Step 7: As interest rates spiral higher, the amount of money that the US government (as well as state and local governments) must borrow in order to service rising interest costs creeps higher and higher. In other words, the more money the US government has to borrow, the higher the rate of interest they have to pay, which serves to force more borrowing, which makes the rate of interest go higher...and higher...and higher...each feeding the other in a classic debt spiral. This is the same dynamic that Greece is currently suffering through.
Step 8: The interest rate spiral creates a fiscal emergency for the US government, where the only choices are between slashing spending enormously (which would serve to crush the economy, perhaps by 10%-20%, and driving tax receipts down, sharply creating its own dynamic of pain), or running out of money and defaulting on its bills, or printing money and accepting a steep fall in the international value of the dollar. Because slashing spending is a delicate and politically painful process, by default it almost certainly will not happen in time to prevent the interest rate spiral from occurring. As to the idea of running out of money, that is deemed an unthinkable option, which leaves money printing as the most likely option.
Step 9: While it is the politically easier solution, money printing leads to the abandonment of the US dollar as the main reserve currency of the world. This does not happen very quickly, but neither is it a linear process. It proceeds in fits and starts, but the end result is that the US can no longer export dollars in exchange for things, and this alone changes everything. Long accustomed to being able to export dollars and import things, the US grew to view this historical oddity as an entitlement. But instead, it was a relic of circumstances, first of the relative position of the US after WWII, and second due to the temporary requirement that all oil purchases must be made in dollars. This ‘petro-dollar’ feature meant that any country wishing to buy oil first had to accumulate a dollar surplus. In short, this meant having to run a trade surplus, if not with the US, then with a country that had one itself. This allowed the US to export dollars while other countries had to export real things.
The Importance of Exercising Vigilance
Keeping a close eye on the data is the key to determining whether or not this projected progression is underway or even likely. Of growing interest (and concern) to me is that we are indeed beginning to see several of the earlier indicators predicted above – notably, a decline in US Treasuries held by foreigners and growing signals that more government borrowing/money printing is on the way soon.
In Part II: The Flashing Market Indicators To Watch For, we look into the meaning of these early-warning signs and go on to detail the list of specific indices to monitor for an indication of when a full-blown US Treasury market breakdown is imminent. We also explain why we counter-intuitively expect risk assets (e.g., the stock market) to take a nasty turn downwards in advance of such a collapse.
Click here to access Part II of this report (free executive summary; enrollment required for full access).
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The real contagion risk is anything that reveals (for the mainstream) the US Treasury for the debased sham that it is.
I suspect a mass Chinese dumping of treasuries to raise money for them to bail out their real estate market.
That's the real bubble.
http://azizonomics.com/2011/10/23/gold-in-2012-the-coming-bond-crash/
the debtmoney system is the contagion.
World society can't seem to recognize that this parasite has been living inside it for centuries and only now when the organism can't grow further to provide new real estate for the infection that the infection is starting to cannibalize the host.
Actually the real contagion is geo-political now. Finance is now in a firm back-seat to War Inc.
Libya marked a turning point. For the worse of course. So while everyone is watching Europe, perhaps the US is planning a Pakistan Fall.
In the first light of that attack (for which troops are a-massing), perhaps we'll see the next shock to the world of finance.
Terrible times.
ORI
Torodial Vortices Etc.
Agreed on the geo-political comment however I saw no 'war' in Libya. Mass murder, yes, war not so much.
The future belongs to the mob. A mobocracy if you will. The mob and whoever can finance them and supply the artillery. Simple enough.
True Gene, it's mob, thug and Goonocracy now.
ORI
Africa has resources, the west and China need them. Expect more UN-backed "rebels" to appear.
First, Identify the resourses you want.
Next, declare the region that holds the resouse "at risk"
Follow with a staged polictical uprising with your sponsored goons
Ask if the Sponsored goon needs help obtaining "freedom"
Voila. Resourses for the taking.
'Voila', is easier said than done. Now they have the premises of a Caliphate in Libya. That is typical of 'outside manipulation of plebes'; you find out subsequently they have their own agenda...tuff shit for empire builders all through the ages.
And who do you think is behind the Caliphate? Once again, it is about centralised power ... not independent nation states or, god forbid, individual families / tribes / communities minding their own business and going about their own lives in peace!
The Arabs would never have accepted a direct European takeover of Libya, so the central planners simply supported a European-manipulated "Muslim Brotherhood" to install the necessary puppet regime. The same happened in Egypt and Tunisia, and will happen in Syria next.
The Caliphate is just another manifestation of a European Union, North American Union, Eurasian Union...part of the same NWO.
Ori, well is it geopolitical or 33rd parallel ordained, or a bit of both? supranatural or man made to put it prosaicly?
The masks are coming off.
The vatican is now voicing support for what many of us have been trying to warn about for ages: one world government.
http://www.catholicherald.co.uk/multimedia/2011/10/24/vatican-proposes-a...
http://www.radiovaticana.org/EN1/Articolo.asp?c=531752
Ratzinger has openly submitted a blueprint for one world government. Yes, many of us knew the vatican is the one pulling the strings. Time for a OCCUPY THE VATICAN movement.
Tyler, this certainly merits a full comentary on ZH.
Exactamundo.
"Through the account of the Tower of Babel (Genesis 11:1-9), the Bible warns us how the “diversity” of peoples can turn into a vehicle for selfishness and an instrument of division. In humanity there is a real risk that peoples will end up not understanding each other and that cultural diversities will lead to irremediable oppositions. The image of the Tower of Babel also warns us that we must avoid a “unity” that is only apparent, where selfishness and divisions endure because the foundations of the society are not stable. In both cases, Babel is the image of what peoples and individuals can become when they do not recognize their intrinsic transcendent dignity and brotherhood.
The spirit of Babel is the antithesis of the Spirit of Pentecost (Acts 2:1-12), of God’s design for the whole of humanity: that is, unity in truth. Only a spirit of concord that rises above divisions and conflicts will allow humanity to be authentically one family and to conceive of a new world with the creation of a world public Authority at the service of the common good."
Time to revive the Dulcinian movement.
Ah, who have we here ? Flieger Josef Ratzinger, of the Luftwaffe.
One world banking apparatus...one world government...one world order...indeed, the young 88 battery crewman learned much during the war years.
http://4.bp.blogspot.com/_uuEaCUoipUg/Sgs4uhe4tkI/AAAAAAAABOA/6cHN2kXKAP...
What's the Bible? Who is God? I do not understand your arcane quotes. Please submit in logical plain English.
I am not THE God, but I am a God. Not sure if that helps you or not.
My spidey signal went red for a second then nothing. Hey, remember that thing about birthing pains? As a wise doomer told me a couple years ago, "First, get right with God."
You have to consider the possibility that God does not like you. He never wanted you. In all probability, he hates you. This is not the worst thing that can happen.
Indeed, once again, who is God?
Right now, this guy:
http://espn.go.com/mlb/player/_/id/4574/albert-pujols
(if you're a Cards fan)
There is also the distinct possibility that there is no god and conversely there may be many gods and you may be courting favor with the wrong one.
Placing your faith in god(s) would seem to require you to also place faith in his messengers and their apparatus. Why would a diety of infinite power require worship and churches?
Or maybe I was just quoting Fight Club.
[quote] Why would a diety of infinite power require worship and churches? [/quote]
Short answer: The squeaky wheel gets the grease.
Vatican calls for global authority on economy, raps “idolatry of the market”
http://www.reuters.com/article/2011/10/24/idUS264245887020111024
Reuters and Drudge picked up.
Love Italian style ? Wedding announcements to all !
Just enough time between now and Wednesday...to make the "big announcement"...saved ! Winning !!
But, joking aside, who would you rather look up to ?
A free and voluntary market...not some imaginary friend in the sky being channeled by a luciferian in the Vatican!
Somehow I don't think the Swiss National Guard would be as patient as the NYPD/CIA/ FBI/NSA troops who've been handling #OWS et al.
Better start learning Latin, Bitchez!
The Catholic Church ruled the old european order with an iron fist officially for a millennium. The Vatican is still a powerful entity but they're not the only ones that want a slice of the pie. They're part of a cabal of international sovereigns but not the whole of it. The Vatican is one of many multinational corporations
Damn those Vatican Jews!
Is nothing sacred?!
Indeed. I also think that it is an interesting coincidence that a resurgent and increasingly nationalist Germany is setting the course of the EU/Zone and a German pope in the Vatican. The significance of this can understood by reading Ratzinger's homilies or earlier writings.
Tyler says, HELL NO! You think he wants Nato or the U.S. providing 'Air space' protection like Libya over his house!?
THE BIOLOGICAL (parasitical) JEW
Hitler said the same thing. Wow, you are an original.
I guess it was a Jew who gave you that small thing you call a dick. Putz!
And the Vatican was the one pulling the strings on the austrian puppet.
Guess who is now calling for a one world government: the nazi boy pope Ratzinger.
I'm not sure I buy into this Vatican conspiracy.. I will say though, there is a Catholic Church in EVERY town and village of the US.. I find it hard to beleive they are lacking in money and control these days..
Please read the following and then tell me they're not the ones pulling the strings:
http://www.radiovaticana.org/EN1/Articolo.asp?c=531752
"TOWARDS REFORMING
THE INTERNATIONAL FINANCIAL AND MONETARY SYSTEMS
IN THE CONTEXT OF GLOBAL PUBLIC AUTHORITY"
They have no more authority than you or me or anybody else. They are just parasites enslaving and sucking the life out of the honest people of the world.
Think again. They now control nearly every position of power in DC: the TOTUS, Congress, SCOTUS and Administration. Particularly in the state security divisions: CIA, DHS, TSA, FBI. . . .
Catholics?? WTF? how many catholic presidents have there been?
Yeah... like the fucking PRESIDENT is in charge. Holy shit.
One. and they shot him. :(
6 out of the 9 SC Justices are "Roman Catholics" (the other 3 are "jews" - either Sabbatean or orthodox). At least 3 of those "Catholics" are Jesuits.
Only 4 out of 26 congressional leaders are Protestants, while at least 9 are Jesuits and 8 more are Roman Catholics; 5 are "jews" (either Sabbateans or orthodox).
The Republican presidential nominees include: 2 Mormons, 1 Knight of Malta, 1 Roman Catholic, 1 Bilderberger, 1 former FRB chairman, 1 religious nut who spent time on a kibbutz, and 2 protestants who can't win.
The Democrat TOTUS is a CIA Manchurian candidate (unlike previous presidents, who were merely controlled and/or manipulated by CIA Directors). Nearly all former Directors of the CIA have been Knights of Malta (the Jesuits' foot soldiers). David Petraeus, the current CIA Director and rumoured potential dictator, is a Jesuit but apparently not yet a Knight of Malta.
At least 10 of the Administration's Cabinet Secretaries are either Jesuits or Roman Catholics, 1 other (Geithner) is a "jew" (Sabbatean or orthodox?) and 1 is a protestant married to a Knight of Malta! I don't know what Eric 'Place' Holder is, but I don't think he's on "our" side.
I repeat: Washington has already been captured. SECEDE NOW!!
Let us not forget who helped get Nazi's out of a crumbling Germany and into South America which just happens to be a hotbed for Catholicism.
To quote Stalin, regarding the Pope: "How many divisions does He have?"
http://www.gutenberg.org/files/1232/1232-h/1232-h.htm#2HCH0011
Hitler only got into power because of his Jewish bankers. Moron.
Jews = scapegoats in many more ways than one... Moron.
Voluntary blindness and simple minded "realities". A parasite, which the author goes at great length to define, cannot be of the same species as the host. Taking a human, re-defining him as a "parasite" does not change his humanity. Hopelessly flawed logic and a complete lack of compassion. Get help.
Don't like parasite? How about Prick, or @sshole?
"A rose by any other name..."
Just as one swallow doesn't make a summer so one scenario does not make a fact pattern.
OMG another version of THE SKY IS FALLING. I'm going to buy a helmet to help the economy.
Exactly! Who cares that the swiss franc is pegged now? It is just one example. No pattern to discern. Hey, time for Monday Night Football! Have some budlight and eat some refined starch wafers bathed in partially hydrogenated soybean oil. It's good for you!
It really is that simple. Sometimes I wonder, as I explain it to people who either don't care or don't understand, if perhaps I am actually crazy. There is no "solution" to a system that requires additional aggregate debt in order to survive. It does all crumble, it's merely a matter of timing and what diversions are thrown in our faces to hide the truth (i.e. war).
Too many dykes, not enough fingers.
Too many dykes, not enough flannel shirts.
Step 1: 2000-2006
Step 2: 2007-2009
Step 3: 2010-2011
Step 4 and Step 5: 2012
Step 6 and Step 7: 2013
Step 8: 2013-2014
History in the making
http://journey-to-alpha.blogspot.com/2011/10/how-is-inflation-created.html
well duh! "If the dollar's role as the world's reserve currency wanes or even collapses, then the scope and pace of the likely disruptions will be enormous."
can you say "I, my, me" an more in one blurb?
so an MBA student writes a piece. time to go get some real experience, sonny.
well, the US pre-civil rights was a very trusted economy and trusted agent. It's the reason that Wermacht troops staged actual breakout rallies to move westward in order to surrender to us. It was considered a better ROI to nut up and fight and even suffer losses to escape soviet encirclement in order to flee to the allied lines to surrender than to surrender in place (correctly).
The postwar period was one of trust, diligence, respect. That all changed very rapidly in the 1960s. We transitioned to a society of entitlement without merit and found our footing in perpetual war. We pretty much had no choice but to use the military once domestic peak oil hit and we were forced to close the gold window.
Now, there is no way out for everyone. When the dollar collapses as an international trade mechanism, which may take far longer than anyone is willing to believe, good luck to nations interested in trade.
Hardly Trav, hardly. That was hardly the case.
It was a bunch of victors distributing/raping their spoils of war. Again.
Trust? Respect? You've got to be kidding me. It was just a minor lull before the cold war, korea, vietnam..... you know the rest of the story.
ORI
what the fuck did we rape? We raped neither Germany NOR Japan. We are the most benevolent conquerer in history. In fact, the white man in general has singlehandedly UPLIFTED nearly every nation he's ever conquered, dragging people out of the stone ages and giving them the oppression of the written word, refrigeration, electric power, and flush toilets.
We even gave your godforsaken shithole education and technology. All your bleating about western imperialism springs from your jealousy that you were not the one who brought the quantum leap in the human condition.
excellently stated.
All the Gold you see in western treasury was stolen from Far East (India and china). you talking about upliftment ?
oh now you claim wring system also ? what a moron.
British/Dutch East India company brought the eastern loot to England & Europe and then transferred some to USA. yeah you gave all those western diseases like drugs, your shitty rock&roll also, slutty life, children out of wedlock, communism, socialism...etc also to all of us. The only great western contribution is western classical music.
Couldn't have said it better myself fiddler. And there is so much more. What America has done to Japan.... beyond shame-ful.
Trav is just a bigot for the most part and a white supremecist type who like to talk all nigga.
ORI
not to get into an east/west pissing contest, but refrigeration is pretty mind blowing, it has allowed us to eat more diversely and live comfortably in very hot climates.
Computers are also amazing devices, I'd have to say western medicine and science contributed many things that have improved our lives, hence the fact that more people are alive today than any time ever in history or prehistory.
but fuck it, its not a contest or a dichotomy, we all do what we can and we all benefit when anyone comes up with a good idea and we all suffer when bad ideas are implemented well, like the Federal Reserve for instance.
Bullshit. Soldiers used to get some of the loot themselves which is pretty obvious when you see them running out of houses with silver forks falling out their pockets. That doesn't happen anymore and the spoils of war are divided up amongst whoever the politicians take orders from. You don't uplift people by enslaving them to debt and it's the same looting that has always gone on just cosmetically different. Don't believe me? You have the same mindset of an ancient Roman that civilized them barbarians. You talk about the human condition but the human condition has always been the same and there's nothing benevolent about conquering. At least that ancient Roman got some loot for his efforts you don't get shit for being a shill.
TRAV7777 - Your theory is interesting - can you elaborate a little? Thanks.
90 percent of the two million prisoners of war that had to march to prisons in the soviet union died before repatriation. The germans knew what the russians would do if they were captured by the russians. Russia was not a signatory to the geneva convention.
The usa just about completely demibilized after the first world war. True patriots and real americans have never wanted a standing army, but the red scare played into the hands of the military industrial complex that eisenhower warned us about.
The average american does not support empire but was duped into it. We dont know anything about other countries and cultures cuz we dont care. The average american has no interest in the rest of the world, much less empire.
The average american does not support empire but was duped into it. We dont know anything about other countries and cultures cuz we dont care. The average american has no interest in the rest of the world, much less empire.
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Made me laugh.
Such a trouble at self perception.
US citizens worship their military. Ah, being a veteran, what a great status!
Not supporting their empire when they enlist on free will.
And the US citizens have no interest in the rest of the world just like the extorter has no interests in the extorted, that is paranoia over preventing the extorted from fleeing the extorter's clutches.
I think our interest in the rest of the world is severely distorted and is almost directly related to our interests. Our intelligentsia and economists (obviously not one in the same), power and financial elite are very much interested in the rest of the world. Their interest runs from academic (mostly why I'm interested these days) to exploitative, but the interest is definitely there. Boil this down to the average-wage earning average mid-size suburb living American and they kind of don't care. They don't have an understanding of what it means to live in a country that isn't tightly controlled by police and/or military. Your "average" American can't fathom living in a world that lacks the rigid "organization" that the US has. They don't entirely understand "advanced" foreign countries either as their system of living is somewhat alien. This mismatch is what leads many to firmly believe that the US is the only country that is doing well and everyone else is in varying degrees "behind us." I see this worldview all the time, and in my own extended family.
That being said, at 17 I joined the military for 2 big reasons and both of them were entirely selfish. I wanted to see more, do more, experience more than what my poor South St. Louis upbringing afforded me. I also saw it as the only means to propel myself from lower-lower class to lower middle class. I was fairly successful in both counts. I did my 6 years (in Air Force Intelligence no less), learned a ton, took the college benefits and ran. No regrets there. However, I was always uncomfortable when I heard people say things like "thank you for your service" knowing full well that I wasn't serving anyone but myself. When my interests were no longer aligned with the military, I left. I'm not saying you're painting with a wide brush and everyone in the volunteer military has been co-opted by the US Government agenda, I'm just saying that there is a symbiotic relationship (in some degrees).
To be clear, the German soldiers knew what they would face in Soviet hands because they knew of their own brutal crimes on the Eastern Front.
I'm not sure about the average American and Empire. People certainly don't like to call it that, but Bush was pretty successful for a while at selling war to protect our "interests." Expanding export markets has long been a driver of American foreign policy, and I'd guess that most workers and farmers hae some inkling of where their money is coming from. If the Iraq War had actually brought lower gas prices instead of record oil company profits, I think many "average americans" would still be on board.
The reason they need to create false flag terror attacks in order to get into a war (eg. Spanish-American War, WWI, WW2, Vietnam, Afghanistan, Iraq) is because the public is overwhelmingly against war. Even after these "incidents", the public is still against it, so the media propaganda is ramped up until the opinion polls show that they have just enough support to get away with it.
Since those tactics wouldn't have worked with Libya, O'bomber just went ahead without even asking!
And now Uganda et al.
Agreed, propaganda and manipulation have been crucial to building support for (imperial) wars. But propaganda works best when it resonates with the interests and/or ideals of the audience. The Republican presidential candidates "lambasting" the announced withdraw from Iraq shows that there is still some expectation of appealing to a large segment of the Republican primary electorate by vociferously opposing imperial retreat.
Not that anyone should take Santorum too seriously but he's quite clear here:
And SOS Clinton counters with assurances that it isn't a real retreat:
sure, let me know what you need elaboration on
Thats right, while everyone thinks Bernank's central bank actions have been to 'help', theyre actually designed to cut off all escape routes, chain and lock all the doors.
We transitioned to a society of entitlement without merit and found our footing in perpetual war.
///////////////////////////////////////////////////////////////////
Unlikely there is any merit for a strong to beat up a weak. But best is the story of perpertual war since the US is a story of wars...
so are most other countries. We were just more successful at it.
"We" were not forced to close the gold window. Logic dictates that when one makes a choice (as in the Vietnam war), all consequent decisions, including the closing of the gold window to finance that war, are choices.
TRAV,
Correct, most people do not know a LOT of German POW's were brought to America during the war.
Housed ,fed, and used for infrastucture projects as labor.
Nearly ALL did not want to return to Germany after the War, and wanted to stay here, and become /became American citizens.(hell they had a gravy train).
Very realistic.
Reality is terrible.
Illiteracy is happiness.
Love is hate.
War is peace.
im beginning to think that the world has its head buried not in sand, but in a concrete block. the more europe puts off this fiasco, the higher the markets churn........
All the full retard markets know is global economic collapse has been postponed another day....so time to PARTAY!!
Umm...why da pic look like a military strategy map????
What step would you say we're in?
Transitioning from step 2 to step 3.
I was thinking we were more like step 4 or 5, so maybe it is not perfectly sequential and multiple steps are occuring at once.
Agreed, different elements of various steps coming into play.
.
contagion will spread to the u.s. because we will give money directly to the efsf or the eu or imf and be sucked in right along with everyone else
This could end up being one of the diversions. Had America simply stayed out Europe's affairs, we would have been fine. No debt trouble here, it's their fault.
The problem of course is that there is no "America." Our nation is like all the others and simply a puppet for the global banking cartel. We'll continue to prop up other nation's because that's what our puppet masters demand. It's many banks with one to rule them all.
Let me control the money, I care not who makes the laws. I agree.
No biggie. The eagles will fly in at the last minute and save us.
Philadelphia?
You know, I had a thought about that the other day. If the IMF has to fund any of the efsf bailout money where would the US get the money to send to the IMF for their part of the funding. I believe the US is on the hook for about 17% of IMF funding. Obamas Jobs Plan??????
We can just give money we obtain through monetization. They need it but it was free to produce. Dollars circulate more widely. We own the 21st century too.
After all the dollar has Gresham's law on its side.
Btw, can anyone tell me what the average interest rate the treasury is paying on its debt for 2011??? And based on bernankes shift in purchases, what it can expect to pay in pct interest for 2012?
This post rings true. From my perspective, it makes sense to calculate that we are mere months away from calamity. One or two years away? There are already signs of severe systemic weakness (http://www.leap2020.eu). The mainstream media is corrupt and a bastion of deception and lies. They will echo the establishment's propaganda, and governments are notoriously unconscionable liars, willing to say whatever it takes to appease market insiders (Japan's crisis management is the latest glaring example). The risks outlined here are only too real, yet many diehard believers in American exceptionalism prefer to live in pathological denial, mirroring the psychopaths that rule the world.
Jim Sinclair has said that Treasury securities are the last pillar to fall before Gold takes off. He said this 10 years ago. Nothing has changed.
Vatican Calls for 'Central World Bank' to Be Set Up
http://www.cnbc.com/id/45013499
we're getting close
End run.
Might be OK...what other options are there besides CHAOS ?
dp
Another curtain is being built as we speak. As soon as this one goes down another will be quickly pulled up only allowing a quick glimpse at who is really behind it. Otherwise it's blood on the streets everywhere and no sane person wants it. Don't like it or want it but the perpetual ponzi is all that works. Greed usurps honesty all day long, this will never change. The only thing changing is the name we call it. Occupy what you want, it needs to be occupied but all that is built from it will be greed in another disguise. Human nature always wins.
What if the Government Controlled You?
http://video.foxbusiness.com/v/1231453465001/what-if-the-government-cont...
The brilliant Fed may let interest rates rise to 20% collapsing the price of gold. They can then print tons of money and buy the gold at bargain basement prices. Soon, everyone will discover what's happening. The Fed will then issue a new gold-backed currency: the Aureo.
Myself, I would prefer that they issue the "Aureole".
The portraits on the notes would be most ...... titillating.
Uhh.. I call bullshit.
It is not mathematically inevitable that the contagion spreads to the dollar and treasurys.
Psychology is a difficult thing to predict, but it is quite plausible to see the dollar and treasurys benefit from euro troubles. An overvalued currency is no benefit.
Except for the petro-dollar reference, this article is completely wrong/incorrect.
As long as the US government continues to borrow money in increasing amounts there will always be a market for US debt and extremely low (interest) cost. If the Europeans sell their Treasuries there will be no shortage of others -- Brazilians, Russians, Indians, Saudis -- to buy them along with Treasury traders and primary dealers.
This is the fundamental nature of ANY government borrowing in its own currency: there is no limit to the amount of debt it can create and sell and no end to borrowers/buyers. With 7 billions in this world there will always be people willing to accept free money!
When the Greeks default -- and the rest of the Eurodeadbeats follow -- the banks will fail due to overleverage. If the economy crashes the banks will demand bailouts. The public will have a cow: this dialog will be the issue, not inflation.
The problem is capital: we ain't got no steenkin' capital! We've burned it up. Now what?
If the banks fail and the economy doesn't crash the banks are dead. Everybody hates them and are waiting for a chance to kill them (and confiscate their profits). The banks will do what they can to make the economy crash. Simply going on strike would accomplish this: no workee ATM cards. Instant panic and US peeps rush out to top of their gas tanks and strip grocery store shelves.
America: any crisis is an excuse to go shopping ...
Yes! Be prepared, get some of that 'useless' cash and keep it so you can ... go shopping.
Too practical and not enough conspirational to be fairly appreciated on here...
Stockton, California is preparing for their bankruptcy...it will be a rush for the exits very soon...and the first bankrupt will get the best deals.
In 6 months the US landscape may be pockmarked and looking like a Swiss Cheese.
Aureo? You gotta be kidding: see AUREO: Association of University Real Estate Officials. Just what USA needs to cure housing problem.
Edit: in response to http://www.zerohedge.com/news/guest-post-real-contagion-risk#comment-180...
The doomsday scenarios fail to account for tactics such as minting a multi-trillion dollar coin, confiscating gold and repricing it, raising property taxes, a new president/fed, etc. All of those are more likely than what is outlined above. I'm a bear, but just saying, bears' doomsday scenarios will never come true because there's always an accounting trick and human ingenuity. Look how long it took Rome to fall...I'm sure they had bears predicting the end 100 years into that empire.
Vatican end run...(not ENRON)...maybe they have been planning for 2 millenia to get the ball back in their court ?
One day to implement the new Vatican Order before Wednesday deadline.
Italy just dodged an arrow ?
Haha. Maybe.
I can't believe someone thumbed down my comment. Why? I said I am a bear for God's sake.
The fact is people have been forecasting the end for decades, and it never happens. So, tell me why it will happen this time. That's all I'm asking. It's a valid question. Doomsday scenarios do not account for the fact it's possible to "kick the can" for hundreds of years. What seems more likely to me is that the middle class and working poor pay for the bailout of the rich and other countries. Between kicking the can and propaganda, the charade can continue for many more decades. I know it feels like the end is near, and it should be, but fact is it's not, and I think ZH should write articles that point out accounting shenanigans and class-warfare that will keep this thing going. It'll educate and enrage people. As it stands, ZH writes articles that preach to the choir. I read the articles and think, "Yep, that should happen, but it won't..."
When does the end look like? How far off is it? What triggers it? Why is there no other outcome?
When does the end look like? How far off is it? What triggers it? Why is there no other outcome?
"When does the end look like?" Probably, you meant "what" and not "when" here. The end is neo-feudal society. 0.5 -1 billion people left (2 billion optimistic), 80% employed in "agriculture" producing food to feed themselves and "biodiesel" for mining equipment, some military and luxury vehicles. Pockets of industrial economy around rivers (hydro power).
"How far off is it?" About 30 years maybe 40, to reach the picture above reasonably close. Through wars for resources, exterminations, etc.
"What triggers it?" Practically anything at that stage, then major financial crisis, then major war (WWIII actual), then hell knows. The more important is what drives the change: deficit of "easy" energy and desire to have the precious little that left to themselves.
"Why is there no other outcome?" We have not discovered "new oil" yet, and there is no time left ("we" squandered all of it from 1980 onwards). If successful fusion power plant is given us by aliens tomorrow, how long would it take to re-industrialize world economy to use that source of energy with the same energy output capacity (i.e., we replace at least 80% of power plants, but it must be considerably more if we want electric cars / trucks)? It will takes 20 years at least. However, we do not have power-plant designs or a fuel nearly as versatile as oil to extract from somewhere. At best, we have 10 to 20 years more after that it is the point of no return since economy at that time will not be able to under take such complex project.
minting a multi-trillion dollar coin, confiscating gold and repricing it, raising property taxes, a new president/fed
"minting minting a multi-trillion dollar coin" = printing money. If Treasury mints coin, treasury prints money. If Federal Reserve monetize the debt, Federal Reserve prints money. Either way hyper-inflation.
"confiscating gold and repricing it". First of all, there is little to confiscate in US. USA need to invade India and confiscate there (there are over 10,00 metric tons in private hands). If US reprices dollar to the alleged 8000 metric tons it has, ounce of gold should cost around $40,000 to match M2. Right after that anybody who has something of value to sale will demand either gold or its equivalent price in $, so oil will be $2,000 - $2,500 /barrel. After that its either rationing with hyperinflation in black market or simply hyperinflation.
The rest of your points are pretty much irrelevant.
One platinum coin with a declared value of 10 trillion dollars is not the same as printing paper money and circulating it, though. The former has no velocity and high demand (i.e. short supply), so it is not the same. As we know, the government repriced gold in 1933, so it's not a wild idea to declare a price, and the government has the authority to mint platinum coins in any denomination. I'd just like ZH to address this and tell me why I am wrong...why it's not a possible outcome. If there's a reason I'm overlooking, great, I'll be more educated, and can come one step closer to believing this time the end will actually occur.
I'm a biologist and computer scientist by trade, so go easy on me if I'm not in the same economic realm as some here.
I'm a biologist and computer scientist by trade, so go easy on me if I'm not in the same economic realm as some here.
Same here sans computer science.
One platinum coin with a declared value of 10 trillion dollars is not the same as printing paper money and circulating it, though. The former has no velocity and high demand (i.e. short supply), so it is not the same.
It will have the same effect eventually. If you pay down federal debt with such coin. Somebody must deposit it with Federal Reserve and get "change", i.e., regular dollars. After that it is in the money supply. It may not go to the real economy immediately, but eventually it will. Pension funds hold treasuries and other fund too. At some point there will be redemptions (demography for pensions) anything else for other types of funds, so these money will flow into real economy and will bid up prices of goods. Besides, current budget deficit gets needs to be paid and if it paid with funny coins, money supply rises immediately since government buys lot of stuff directly and indirectly, cruise missile through defense spending and food through food stamps. More and more inflation. Nasty stuff.
see my reply on re-valuation. Doubling gold price would not do, it needs to be increased at least 25 times.
Thanks for your thoughts on the matter. Gives me more knowledge and more to think about.
Zero Hedge, if you read the comments, in the future can you present arguments as to why other outcomes (to your hypothesis in any given article) are impossible and/or unlikely? Sometimes you guys do this, but many times you don't. I think it would make for greater debate, insight, and knowledge rather than flippant quips and trolling in the comment area.
ps. Appreciate the blog, it looks like a lot of hard work.
Lucky this "contagion" is not the lethal swine flu which does not discriminate between rich banker and poor Hoi Poloi.
Very equitable contagion....
OK...so short term Euro weakness, but then the big move is a collapse in the dollar. So.....does that mean that the end-game here is actually bullish for any non-dollar currency (take your pick)? According to this article, the suggestion is we're meant to buy into the upcoming Euro selloff and then wait for the contagion to rip into the US, which subsequently allows us to profit as the dollar plummets & the Euro snaps back up? Or, if the Euro is also doomed then..what...do we buy the Yen, or Sterling?
Is there any endgame here that doesn't involve an all-out rejection of ALL fiat currencies, where the only winner is Gold?
If the concept of fiat currencies is to remain intact, and yet the Euro and the Dollar are both doomed, then where the heck do we put all our money? I can't imagine Sterling being the beneficiary of a Euro & Dollar collapse as they're pretty much just as bankrupt, and will get dragged down into the same depression...not to mention they've got the same debasement/ QE thing going there too. And the Yen...? Really? The country that has 2 or 3 new prime ministers per year, and has had two decades worth of stagnation, and demographics that spell total fiscal doom as a smaller and smaller tax-paying population pays for an ever-increasing old-geezer population?
It's all good & well to predict all these doom & gloom scenarios, but it's no good being right and yet still losing all your wealth along with the people who didn't see it coming!
Each step laid out has a shorter half-life than the one before it. I think we're in the middle stages of step 3 (we'd be in the late stages if not for the Euro-cluster). Step 4 is Q1 2013. Once step 5 is a go (China turn-back), all bets are off and the slope steepens through step 9. Fifteen months tops from definitive statements out of China to the complete demise of the buck.
My two cents.
Amazingly high quality from these comments today.
Plenty of fresh thoughts as well.
/hvy sarc
<<the contagion will instead jump the pond and chew its way through the US financial superstructure.>>
Sounds like that vicious deadly organism from Andromeda Strain.