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Guest Post: Waiting For Lehman

Tyler Durden's picture




 

Submitted by Gonzalo Lira

Waiting For Lehman

In Samuel Beckett’s play Waiting for Godot, the four main characters wait in vain—Godot never arrives.

In the financial markets, the same thing is happening now—we are all waiting for Lehman: That sudden bankruptcy-crisis-calamity which sets off a whole series of credit events, which in turn causes massive sell-offs, plunging markets, collapsing confidence, and ultimately—just like the bankruptcy of Lehman Brothers did back in 2008—shoves the entire global financial edifice right up to the very edge of the cliff.

To the edge—and perhaps this time over it.

We have good reason to be waiting for Lehman—our current situation is simple and stark: Sovereign nations and individual citizens are over-indebted—to the point where they cannot pay back what they owe. We all know that this overindebtedness at the sovereign and individual level is going to end, and end badly: Worse than 2008.

So along with everyone else, I’ve been waiting for Lehman—and fruitlessly trying to guess which will be the Lehman-like event this time around. Will it be the bankruptcy of Dexia? BofA? UniCredit or SocGen or one of the Spanish banks? Will it be a war in the Middle East? Bad producer index numbers from China? A fart by a day-trader in Uzbekistan?

When will Lehman arrive!?!?

But lately, my thinking has changed: Like the characters in Godot, I think that we’re waiting in vain. The Lehman-like event will never arrive because it won’t be allowed to arrive. So this miserable slog we are going through will continue—indefinitely. (Yeah, I know: Sucks to be us.)

My thinking is based on two assumptions: One, that the central banks and government financial authorities and regulators around the globe are absolutely terrified of a repeat of a Lehman-type bankruptcy or trigger event. And two, that those self-same central banksters and government drones will do absolutely anything to prevent another Lehman-like credit event from setting off another cascade of consequences.

And when I say “absolutely anything”, I’m not using hyperbole: Fuck principles, fuck the law, fuck legal constraints, fuck even basic long-term economic and fiscal health—or sanity. The clowns running the circus were so freaked out by the effects of the 2008 Lehman bankruptcy and the domino-effect that it triggered, that they will not let it happen again—ever. Come what may.

Hence, this endless Waiting for Lehman: This endless slog of ad hoc solutions and fiscal half-measures that brings us only tension and misery—and erodes our economy even further.

But this certainty that the bureaucrats in Washington and the eurocrats in Brussels and Frankfurt will do absolutely anything to avoid a Lehman-like event adds something key to the equation:

Predictability.

Since we know how the central banks and economic leadership will react—that is, if we start from the assumption that the political/economic leadership will do absolutely anything to prevent a major credit event from taking place—then we can predict what they will do in the three main areas of weakness:

  • Sovereign debt and the possibility of default.
  • Financial sector weakness and the possibility of insolvency.
  • Geopolitical crisis and the possibility of another Oil Shock.

What follows is a discussion of those three areas of weakness—and what the central banks and economic leadership will do about each of them.

A Sovereign Debt Default

We all know the score, insofar as sovereign debt is concerned:

National governments—as well as local ones—went on a spending spree during the good times before 2008. They over-promised entitlements and services, while at the same time cutting taxes—thus placating the electorate with the promise of something for nothing. They financed the inevitable shortfall with cheap sovereign debt. Hence the massive fiscal deficits during boom years.

Now, of course, we’re dealing with the hangover.

Because of the recession and the concomitant high unemployment, tax receipts have dropped—drastically. Hence the hole of the governments’ balance sheets—which was big to begin with—becomes massive during these bad times, requiring even more money—

—thus pushing sovereign nations closer to default and bankruptcy.

The nations most in debt, and therefore most likely to default, are well-known—Greece, Portugal, Spain, Italy. But there is also the issue of local government over-indebtedness and default in the United States, China, the various “strong” European nations, etc. No nation is exempt from this problem—which will come due.

Or will it?

If we assume that the central banks and government regulators will do absolutely anything to prevent a Lehman-like event—in this case a sovereign debt default—then their course of action becomes abundantly clear: They will do for the big economies what the Europeans have been doing for Greece. They will hand out more loans, backed by assets that are less and less trustworthy, in exchange for more promises of austerity and fiscal responsibility that everyone knows will not be kept.

Greece is the poster-child for this pernicious approach: Ever since April of 2010, when the Greek issue first reared its anencephalic head, the European Commission, the IMF and the European Central Bank—the so-called “Troika”—have been struggling to “fix” the Greek situation by giving Greece more debt with which to tide the country over until their situation “turns around”.

But the problem, of course, is that the Greek economy is not getting any better.

And every fix has failed, because the Greeks fail to live up to their side of the bargain: They fail to implement the austerity measures they promise, they fail to raise the taxes that they say they will (tax avoidance in Greece is on a par with Argentina, or Delaware-based corporations)—

—yet the Troika still tries to fix Greece with more loans! Every time! Even now, this past week, Angela Merkel and Nicolas Sarkozy say they are close to “fixing” Greece. The very epitome of Einstein’s dictum that insanity is doing the same thing over and over, yet expecting a different result—the Troika’s living it in the flesh!

So: Is the Troika crazy, under Einstein’s definition?

No: Because the Troika’s aim is not to fix the Greek situation—the Troika’s aim is to prevent Greece from becoming the Lehman-like event.

This is exactly what the Federal Reserve, the European Central Bank, and the assorted financial bureaucrats will do with every other major sovereign debt that is out there: They will keep on lending it money, so long as it prevents a default.

So what’s the upshot for us small fry?

Here comes the boring money-grubbing stuff, where I discuss what the above policy approach will mean for small investors—which I have thoughtfully edited out for you Gentle Readers uninterested in such mundane affairs. For you Godless materialists, you can read the full version here.

A Major Bank Bankruptcy

The major European and American banks are all exposed to the bad European sovereign debts—the European banks directly by way of actually owning this crap, the American banks indirectly via their sale of credit default swaps on the bad European sovereign debts.

The weak banks seem to be Dexia, Bank of America, UniCredit, Société Générale, BNP Paribas—though nobody really knows.

Why doesn’t anybody know for certain how weak these guys actually are? Because following the 2008 Global Financial Crisis, the financial authorities made the banks’ balance sheets more opaque—that is, less transparent.

In the United States, the suspension of FASB 157—which essentially allowed American banks to mark to make-believe—was just one of the policies implemented to, quote, “shore up the financial sector”. A similar process took place in Europe.

The Orwellian/Absurdist rationale was, “If nobody can see how weak a big bank really is, then it is no longer weak—therefore, it is strong”. (Beckett would have been so proud.)

Hence Bank of America: It is impossible for anyone outside the bank to really say for sure how weak BofA really is—but there are some mighty powerful clues. In the last two months, Warren Buffett lent them $5 billion, at usurious terms—then BofA sold its very lucrative stake in China Construction Bank for $8.3 billion—then BofA announced the lay-off of 30,000 employees, representing a yearly savings of some $5 billion.

All told, Bank of America raised north of $18 billion. Does anybody ever raise that kind of cash just because they feel like it?

No they do not. Likely as not—though this I cannot prove—someone must have told BofA to raise that kind of capital. (Methinks it was Tiny Timmy Geithner, but again, I have no proof, merely a speculative mind.)

On the European front, the Belgians and the French have just finished nationalizing Dexia. They didn’t call it “nationalization”—I would characterize it as “cannibalism”: The French, Belgian and Luxembourger governments essentially bought the local (profitable) pieces of Dexia for a song, and left all the crap in “Dexia”, de facto creating a bad bank carrying all the euro-trash. The bullet-points of the deal are here.

Q.: Was there a Dexia credit event?

A.: No. There was no Dexia bankruptcy—hence no Dexia default—hence no Dexia credit event.

Hence no crisis. The Dexia nationalization/cannibalism wasn’t big on the radar of the American commentariat, but it was important: One of the biggest banks of Europe was broken up over a weekend, with nary a ripple in the global credit markets. Significant? Very. Now that the strong parts of Dexia have been stripped away, and the bad parts are locked into the much small “Bad Dexia”, the unwinding and ultime bankruptcy will not wreak havoc on the French, Belgian or Luxembourger economies. There will be no triggering of American-written credit default swaps.

In short, there will be a big yawn, when “Bad Dexia” finally goes under in a year or two—which is precisely what everyone wants.

Thus these are the twin models of how other teetering banks will be managed: In Europe, their profitable units will be stripped off the cancerous skeleton of the bank, and then grafted onto existing (and State-controlled) local banks, leaving behind the “bad bank” with the name of the failed institution—like Dexia.

In America, the bank will be recapitalised, even as it is shrunk. Insofar as Bank of America is concerned, apart from all the cash they’ve raised through these deals, there is a lot of talk that the Merrill Lynch investment banking unit—which BofA bought at the height of the 2008 crisis—will be spun off and/or sold. My bet is Merrill will indeed be spun off—and right soon.

So once again: What’s the upshot for us small fry?

Once again: Boring stuff about money and contrarian bets. For you rubberneckers, you can go here to read what I wrote about where the money’s at. For everyone else: Move along, nothing to see here folks.

A Geopolitical Crisis

At this time, the most obvious potential crisis is the Middle East—specifically, a possible war with Iran.

At SPG, we already discussed in detail the financial effects of such a war. So I won’t bother going over it again here.

Needless to say, the conclusions were not pretty.

Is there the real possibility of such a war? Well, considering all the noise and trial balloons coming out of Israel, war with Iran seemed at one point inevitable—

—but lately, the tide has most definitely turned. Any notion of “all options on the table” insofar as Iran is concerned is starting to go over like a lead zeppelin.

Take this latest “Iranian plot”—the supposed attempt to assassinate the Saudi ambassador to the U.S. (huh? I mean really, why bother): Some people behind the curve are still growling about attacking Iran, and using this “plot” as an excuse to beat the War-with-Iran drum.

But this latest “Iranian plot” has been met by the American government and Capitol Hill with calls for sanctions and more diplomatic isolation—but not with calls to bomb Tehran. The more plugged in of the American nomenklatura aren’t taking seriously any talk about war with Iran.

Why? Because an American (or Israeli) war with Iran would break Europe. The U.S. doesn’t import Iranian oil, much less depend on it—but Europe does, especially Italy. Recall the oil consumption figures of the SPG Scenario. And anyway, a cut in Iranian oil supply would hit global oil prices equally—disastrously.

An Oil Shock brought about by a war with Iran would hit Europe—which would hit American banks, due to their exposure to Europe. An Oil Shock—as the name implies—would drive up oil prices, further eroding the global economy. An Oil Shock that hits Europe would likely kill the euro, as inflation would skyrocket.

In fact, any hiccough in the Middle East which hits oil prices would be disastrous for the global financial sector, as well as the global economy.

And the Western central banksters and assorted bureaucrats and eurocrats know this.

Therefore (and of course, barring any unforeseen calamity), there will be no war with Iran any time soon. The financial leadership will make sure to quell any such notion of war with Iran.

In fact, now that Gaddafi is dead, not only will there be no war between the West and Iran—the United States and/or Europe will actively help wipe out any Middle Eastern protests that threaten oil production. In other words, the West will try its utmost to end the Arab Spring.

Increasingly—especially as the Libyan rebels show themselves to be less pro-Western than people have fooled themselves into believing—there will be the notion of “better the Devil you know than the Devil you don’t”. And if this approach means siding with bloody dictators and betraying quaint notions of democracy, human rights, etc., in order to shore up the availability of oil, well . . . too bad: The global economy and the banksters’ bonuses are more important than the lives of a few million ragheads.

So once again, and for the third and final time: What’s the upshot for us small fry?

Once again—and for the third and final time—I won’t bore you with the details. It’s just a tedious discussion of oil prices, and where they will likely go in the near-term future. But if you want to bore yourselves silly, read the full post here.

Conclusions

The situation we find ourselves in reminds me of the First World War: The European diplomatic situation back then was tied up among all the nations of the continent by way of a series of pacts, alliances and coalitions of mutual assistance. They were wrapped up so tightly that, when a relatively minor event happened—the assassination of Archduke Franz Ferdinand—it set off a chain reaction of obligations and consequences that eventually led to the whole continent going up in flames.

The same thing is going on today, with regards the global financial markets: Everyone is obligated to everyone else, by way of credit instruments. Therefore, if one of these obligations is broken—that is, a default by one of the European countries, or a cash hole in one of the banks, or a spike in oil prices that creates a hole in someone’s balance sheet—the entire rickety structure is going to go up in flames.

The central banks and the government authorities and regulators have made it clear that they will do absolutely anything to prevent this outcome: They will prevent a Lehman-like event from taking place, no matter what.

In other words, they have made things predictable for us all.

Insofar as these three areas I have outlined above—sovereign debt, weak banks, geopolitical crisis—there are tremendous opportunities, bought and paid for by way of this predictability.

The fact that the markets will be waiting for Lehman allows people like us—who realize that Lehman will in all likelihood never arrive—to make some bets which could pay off big. The investment strategies I outlined above for each of those cases make it clear how lucrative it could potentially be.

So long, of course, as Lehman never arrives. But caveat emptor: If Lehman does arrive, all bets are off.

 

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Tue, 10/25/2011 - 12:47 | 1808782 Taint Boil
Taint Boil's picture

I got a feeling the "deer in the head lights" pic is coming soon

Tue, 10/25/2011 - 12:51 | 1808812 slaughterer
slaughterer's picture

The author is forgetting how tremendously profitable the "Lehmann event 2008" was for some in the market.  When IB and HF trading desks need a boost (as in now), the market will produce its next Lehmann.

Tue, 10/25/2011 - 12:56 | 1808843 spiral_eyes
spiral_eyes's picture

Yawn.

The coming "Lehman" event will be a loss of confidence in US Treasury debt causing the biggest bubble in history to end in the biggest crash in history. I don't know what events will lead up to this, but I know its coming.

http://azizonomics.com/2011/10/23/gold-in-2012-the-coming-bond-crash/

Tue, 10/25/2011 - 13:07 | 1808927 Ahmeexnal
Ahmeexnal's picture

Wrong.

The biggest bubble is the population bubble.

 

http://www.marketwatch.com/story/an-apocalyptic-end-to-worlds-biggest-bu...

Tue, 10/25/2011 - 13:25 | 1808972 spiral_eyes
spiral_eyes's picture

Oh yes — of course — and we need a global government to carry out mass forced sterilizations, forcibly reduce the population, keep the lower classes servile (some guy with a tinfoil hat said fluoride helps), and clear savage humans out of vast swathes of the planet (re-wilding).

Sound familiar? 

Don't spew that Al Gore, Maurice Strong, George Monbiot bullshit please. The world can support vastly more people with the right infrastructure (food, energy, water, manufacturing). If we get a massive population crash, I blame bad central planning and resource/capital misallocation (war spending, crony capitalism, etc)

Tue, 10/25/2011 - 13:52 | 1809129 Fate
Fate's picture

Your grandchildren will appreciate your sentiments as they sit down to their 1,000th meal of tree bark soup.

Tue, 10/25/2011 - 14:03 | 1809189 spiral_eyes
spiral_eyes's picture

Malthusianism (via Ehrlich) has made precisely how many correct predictions about human history? Zero. 

Whereas those who have believed human ingenuity can win out have been consistently right.

Obviously humans are drastically changing our environment. What most environmentalists forget is that humanity is not separate from nature, but a product of nature, of billions of years of evolution. Earth has been through giant extinctions before, and if humanity is nature's change agent then so-be-it. But 'til I see real hard evidence of a coming population crash — not just the warblings of peak oil devotees — I will believe that humanity will continue to successfully bend Earth to its desires. 

Tue, 10/25/2011 - 14:10 | 1809220 malikai
malikai's picture

On a long enough timeframe...

Tue, 10/25/2011 - 14:41 | 1809361 Fate
Fate's picture

Human ingenuity has so far failed the bulk of the current human population.  Ask, say, India.  Populations crashes have occurred since the beginning of civilization.  Ever heard of Easter Island?  The Maya?   

So "humanity is not separate from nature," yet "humanity will continue to successfully bend Earth to its desires."  This is called magical thinking -- in your case, tinged with Western uber-optimism and Judeo-Christian man-vs-nature traditionalism. 

Time to venture outside the box.

 

Tue, 10/25/2011 - 15:44 | 1809634 spiral_eyes
spiral_eyes's picture

Human ingenuity is the reason why the bulk of the current human population today is alive. Antibiotics, the germ theory of disease, the green/oil revolution, etc.

Humanity is a part of nature. One part of an organism (Gaia, as Lovelock thought it) can domineer the other parts. That should be completely obvious. 

The biggest "box" is the box that says resources on Earth necessarily set an upper-bound to population close to current population. Malthus did the exact same thing when the population is less than a tenth of what it is today. 

Populationists need to consider that their "THE POPULATION IS TOO HIGH" response/delusion may in fact be an evolutionary impulse. Humans may naturally want to reduce global population to open the ecosystem for their own descendants carrying their genetic material. 

Wed, 10/26/2011 - 08:22 | 1811750 BigJim
BigJim's picture

I have noticed that people calling for a reduction in the numbers of humanity rarely offer up their own families for culling.

Tue, 10/25/2011 - 21:39 | 1810748 vic and blood
vic and blood's picture

Well said, Fate.

Tue, 10/25/2011 - 15:18 | 1809494 centerline
centerline's picture

You already answered your own question in a way.  It is social complexity.  Maximum social complexity that is, based on our current ability to exist together in our current, collective state of instinct / intellect.

Happened before on smaller scales and with lesser complexity.

Tue, 10/25/2011 - 18:16 | 1810194 steve from virginia
steve from virginia's picture

 

Malthus only has to be right once ...

Tue, 10/25/2011 - 21:59 | 1810737 Element
Element's picture

Steve, you're smarter than that (usually). The fossil record shows very clearly that you don't need to be a Malthusian to know that ALL animals go extinct, at some point.

Just like on a long enough timeline ... we all kark.

For every birth there is a corresponding death, that's what life does, and life apparently likes it when organisms over bred and go extinct.

At these population levels, we are all along for the ride.

The very suggestion that we can change the outcome is delusional at this point. Malthusian sentiment shits me mostly because they always wag their finger, and say, "Time is running out", as if we could change the trajectory much.

Sorry, all that green policy options crap is a drop in the ocean.

We are along for the ride, always have been, so making the most of the oportunities seems the most sensible approach, rather than ideologically retarding what our biology is set to do, to breed and develop this world to our NET benefit. The tamed and domesticated agricultural English landscape looks pretty good to me, and it seems to me they managed that transition pretty well.

That is what we are doing to the rest of the planet, and it will continue, and millions of obscure critters, that no one knows or cares about, will go extinct. Some people need to come to terms with that totally natural process. The self-appointed eco-warriors and dip-shit University experts are ever inclined to treat us as an ignorant and dangerous introduced pest, rather than the dominant planetary predatory omnivore that we clearly are, and which the environment itself created, as the greatest part of its natural process.

 

I'm not going to act all sorry for being here, or for doing what humans do.

Tue, 10/25/2011 - 22:06 | 1810688 Element
Element's picture

What most environmentalists forget is that humanity is not separate from nature, but a product of nature, of billions of years of evolution.

 

Totally agree, humans and our tech culture development is 100% natural. We use natural materials, brain power and intellect, and observed physical properties, and lever natural forces/energy to survive and thrive.

We're damned good at it, way ahead of every other organism, and millions of people worked hard for millenia to win this state of ease.

We are the greatest anything this planet ever produced.

We need conserving ... those smarmy greenie turds tried for years to make us all feel 'artificial' and 'foreign' on our very own world! ... to alienate us, and make us feel like we must be locked out of the natural world, via making state(ist) parks that you needed a permit to enter, because a dirty human might degrade its pristine Giah sacredness.

Well fuck all that.

This is my home. Humans are optimised to live on THIS planet and nowhere else, because we actually belong here.

We in fact earned the right to exist and breed and thrive. And I don't know about you, but the manicured English meadow and a Tropical fruit orchard in Australia looks a whole lot more inviting to me than anything 'green' and 'eco-ish' that existed there prior.

Show me an ecologically crucial fruit bat that can put a Hubble telescope in space and observe a gravitational lens, then maybe I'll take seriously the idea that they should be conserved at all costs.

And if we breed-up and mismanage we will pay for it, and adjust, ... and so will everything else because this is our place, and we aren't going away. And if the other parts can't adjust then they have not earned the right to exist.

C'est la vie ... we don't make the rules ... the greenies can go to Mars and freeze and starve and hypoxiate, if they feel so strongly about humans not being100% a vital and natural part of this 'environment', and this 'ecology'. 

They can play in that intellectual swamp of ecology all they want, and brey like phoney-asses, because the basic facts of what we are, and where we belong, and the basic trajectory we are on, won't alter.

Tue, 10/25/2011 - 13:19 | 1808973 redpill
redpill's picture

Wrong.

The biggest bubble is the bubble in bubbles!

Eventually everything will be a bubble, you see.  When that happens we have a bubble bubble, and when THAT bubble pops....  Oh mama!

Tue, 10/25/2011 - 13:54 | 1809134 gwar5
gwar5's picture

I read that piece, interesting article. Population is something to think about, but the author (Farrel) is a lefty establishment shill, and he gives credit for his inspiration for that article from another confirmed NWO type shill.

Rather than admit socialism has failed and once again been thoroughly discredited, they hide behind Neo-Malthusianism. What they are really saying (absurdly) is that Socialism would still work if they could just find a way to get rid of all those bread-eating poor people so they don't have to share.

 

 

 

 

 

 


 

 

Tue, 10/25/2011 - 14:04 | 1809195 Hot Apple Pie
Hot Apple Pie's picture

would still work if they could just find a way to get rid of all those bread-eating poor people so they don't have to share.

I thought that was the official platform of the Libertarian Party?

Tue, 10/25/2011 - 13:22 | 1808996 gwar5
gwar5's picture

That's the mother of all bubbles and agree with you. USD WRC goes down, sooner than later. As the smaller bubbles pop along the road to perdition they will be monetized into the Greek-like giant UST bond bubble. Will just take a little Bernanke prick to pop it. No pun intended.

Beware bankers using fear and uncerainty around elections to do mischief like last time.

 

Tue, 10/25/2011 - 12:56 | 1808845 LongSoupLine
LongSoupLine's picture

I got a feeling the "deer in the head lights" pic is coming soon

 

and/or Donkey Kong...

Tue, 10/25/2011 - 13:34 | 1809011 redpill
redpill's picture

 

Gonzolo is thinking too small, too financial.

The next Lehman event is something much more fundamental.  It is going to be something truly disruptive and paralyze everyone.

In my opinion that event is going to be the fall of a major western government, probably in Europe.  And I don't mean voted out of office, I mean complete revolution.  It will spawn chaos the likes of which has not been seen the modern political era.  Sympathetic movements will spring up around the western world, and liberty will hang in the balance, a gun to her head.  The free world, for the first time in many generations, will stop and fundamentally question her way.  Suddenly "free democratic" governments will be more concerned about suppressing internal violence than stabilizing banks or global financial markets, and things will get very ugly.

Prepare accordingly.

 

Tue, 10/25/2011 - 13:58 | 1809163 3x2
3x2's picture

More to the point, the above piece would be classed as optomism. That alone should set off alarms everywhere.

 

The only problem I have with it [the piece] is that it doesn't examine the possibility that there comes a point where we run out of "carbon rods" and the reaction gets out of control.

Tue, 10/25/2011 - 14:05 | 1809197 spiral_eyes
spiral_eyes's picture

Gonzalo's pieces shows an uncharacteristic optimism that central planning can realise its goals. In this instance (and most instances) it just begets a load of unintended consequences.

They'll keep bailing out everything 'til they hit a black swan, and the system will quickly degenerate into "too fucked to bail".

Tue, 10/25/2011 - 14:36 | 1809337 3x2
3x2's picture

Central planning - well it worked so well in the USSR didn't it?  The problem I see is that, post running out of carbon rods, we won't see a new era of market driven "capitalism" we will see a new era of 5 year plans and your loot being taken by the collective. Watch for the UN jumping in with their "we have the answer to your nightmare" speech. At that point your wealth is gone - ya just haven't seen it yet.

 

Tue, 10/25/2011 - 14:44 | 1809369 Nothing To See Here
Nothing To See Here's picture

Perhaps it's too "optimistic" of him to believe that the central planners can realize their goals, but he may have a point in the idea that they can make it last longer than we think or can afford. The USSR lasted 80 years, and I am in no mood to live 80 years of this Merkozy show.

Tue, 10/25/2011 - 15:28 | 1809537 3x2
3x2's picture

The assumption tends to be that someone, somewhere, knowns what they are doing. That they have a plan that doesn't involve running around like headless chickens until the blood runs out.

 

Tue, 10/25/2011 - 14:45 | 1809373 duo
duo's picture

The WWI analogy was spot on.  How does he think a crisis can be contained when all the kings and prime ministers of Europe couldn't stop the mobilizations and declarations of war in July/August 1914.  The alliances of 1914 are the CDOs and derivatives of today.  An orderly unwind is impossible.

Tue, 10/25/2011 - 18:30 | 1810234 steve from virginia
steve from virginia's picture

 

The governments in Europe in the summer of 1914 didn't want to stop war. They all wanted war, they all thought they would win before Christmas, because they had better technology (they thought) than the other countries.

Each European country believed it had the answer or rather, its own particular answer. Britain had its dreadnaughts, France had its 'elan', Germany had its artillery and the Russians, their rapid mobilization. It turned out that all the countries had the exact same advantages but nobody could figure this out for themselves in advance.

WWI had very little strategy involved, it was the first machine v. human war,  and the clear winner was the machine. All the pre-machine institutions were thrown over as failures. The consequences we are all living with now, supremacy of the machines.

Sir Edward Grey remarked before the hostilities began: ""The lights are going out all over Europe: we shall not see them lit again in our lifetime." He was wrong, the lights have never been lit we are monsters groping along in the darkness ...

Tue, 10/25/2011 - 13:59 | 1809166 buyingsterling
buyingsterling's picture

If he's right about them doing anything to forestall a crash, they'll start passing out freshly printed cash to the population before they allow a real revolution.

Tue, 10/25/2011 - 14:07 | 1809203 redpill
redpill's picture

That's been tried before.  Doesn't end well.

Tue, 10/25/2011 - 14:12 | 1809233 3x2
3x2's picture

Ahh ... I just love the smell of freshly minted cash in the morning. The only answer on the financial battlefield. Of course each new munition devalues the rest.

 

Tue, 10/25/2011 - 14:14 | 1809236 3x2
3x2's picture

Ahhrrg ... double click

Tue, 10/25/2011 - 14:25 | 1809290 mind_imminst
mind_imminst's picture

BINGO! You nailed it. The longer this goes on the more they (central bankers) will print. They WILL hand out money to people on the street before they allow any defaults or systemic economic tremors.

Tue, 10/25/2011 - 16:59 | 1809972 3x2
3x2's picture

Dangerous game printing excess money. The debts disappear quickly enough but pot noodles are $150 a pop and nobody trusts you next time around.

 

Tue, 10/25/2011 - 15:24 | 1809514 Bwahaha WAGFDSMB
Bwahaha WAGFDSMB's picture

Food stamps for everyone.

Tue, 10/25/2011 - 14:46 | 1809365 FinHits
FinHits's picture

Japan-style zombies slugging along in a deflationary world. Goverment policies being QE-money printing and 0.25% interest rate along the whole curve. The competitive edge is supposed to be stagflating slow-motion FX-race to the infinite bottom.

Sounds like a water torture or an over-ambitious French art house movie.

Tue, 10/25/2011 - 12:59 | 1808860 zeroman
zeroman's picture

Tyler;

 

This has been my point for some time.  When the rules of the game can be continually changed to assure that one never loses (but also never wins), the charade can never end. FASB 157 was the biggest. Now, we have mortgages that are underwater to tremendous degree which will be able to refi. Next, will be who knows what.  

Europe will cause great dips for buying opportunities along the way.  One thing is certain. Assets and commodiites will rise in price over time as well as physical assets like land and yes houses too. We are seeing prices actually rise in south florida.

A lehman event has to be unfornseen for it to become a lehman event.  No one would have expected that allowing lehman to fail would have caused the chain of events that did occur; at least those in charge believed it wouldn't.  So, the same will be true in the future. There will have to be a miscalculation of some kind.  With paranoia running at high levels, nothing will be taken for granted for a while.

Tue, 10/25/2011 - 13:14 | 1808953 NEOSERF
NEOSERF's picture

And mine as well, it has been clear for some time that there are now no rules for any country...the Paulson sky is falling meeting set a new standard in allowing leaders to circumvent the law in the name of saving humanity.  They will not allow any bankruptcy (ala Dexia) without immediately jumping in with statements about backstops being in place.  This all works until the German people (yes them again) rise up and rebel against the fact that their hard earned taxdollars are going to go endlessly into worthless and non-collateral backed enterprises in the name of saving profligage cousins...this is where it ends I think..with the people.  I would also say that if Europe falters in being able to backstop, that like WWII, the US eventually jumps in and backstops for them and then sells it to us once again as "saving the world"...it will end up being a forestalling event because the credit rating agencies will quickly mark everyone down and ongoing austerity will kill any growth and we will find ourselves in the same spot 6 months later...the event will be unforseen and will seem like all the other headlines until traders grasp that they FINALLY will be seeing losses, and the avalanche will begin..

Tue, 10/25/2011 - 12:59 | 1808867 AbelCatalyst
AbelCatalyst's picture

I have not heard much about the Swiss currency peg / buying boatloads of Euro's.  I wonder how long they can continue to peg their currency by buying EUOs?  If Germany was to return to the Mark (which is reasonably possible) then the Swiss will crash and burn.  Can you imagine how many Euro's they've stockpiled to hold the EUO at this level? My guess is fairly soon either the Swiss or the Germans will throw in the towel and all hell will break loose...  I can't imagine it would take too much longer, but I've been amazed it has gone on this long!  

Tue, 10/25/2011 - 13:57 | 1809126 Ghordius
Ghordius's picture

there is a lot of wishful thinking about a breakout of the EUR

ok, let's discuss this incredibly unlikely event - what would happen?

the way the peoples of the EuroZone understand it, every bloody 100 Euro note/account/liability consists in x% of x currency at the rate at begin of the currency union - like every EUR has a bit of every currency in it - nothing that banks could not handle, thanks to the mighty computer system they have

now, I understand there are many countries where this scenario would get mother screaming fits - but again, we are discussing the EuroZone, which seems for many here to be further away than the moon

the Swiss seem that after a couple of hundred billions EUR more convinced everybody that the CHF is not "to be used as a safe haven by too much money" - and I have talked with some Swiss entrepreneurs who tell me that their accounting systems and reporting is anyway now on both CHF and EUR basis, and in most cases they are fully hedged

you are amazed how long this EuroCabaret is going on? they want to drag it to 2013!

now, what would you think if the governor of California or the PM of Scotland would now in earnest talk about having a separate currency? So that they can have a comparative advantage and handle their debt better?

Tue, 10/25/2011 - 13:07 | 1808926 doomz78
doomz78's picture

So to sum up the article.:  They will not let banks fail, they will print money to bail them out which is bad for the average 99% but good for some of us who invest in Gold, Silver, Oil, Agriculture. 

Tue, 10/25/2011 - 12:47 | 1808783 thetruth
thetruth's picture

I vote fart

Tue, 10/25/2011 - 12:54 | 1808827 idea_hamster
idea_hamster's picture

That'd be o'siriq in Uzbek -- just so you know when you hear it.

Tue, 10/25/2011 - 12:47 | 1808786 rocker
rocker's picture

So Many Options

Tue, 10/25/2011 - 12:48 | 1808791 Libertarians fo...
Libertarians for Prosperity's picture

 

 

I've said it repeatedly.  It never happens when everyone is waiting for it. 

 

Tue, 10/25/2011 - 13:04 | 1808903 HD
HD's picture

You know nothing - the McRib has returned!

Tue, 10/25/2011 - 13:09 | 1808936 jdelano
jdelano's picture

Just had one.   mmm.  McRib.

Tue, 10/25/2011 - 15:44 | 1809630 TheMerryPrankster
TheMerryPrankster's picture

McRib is to barbeque, as cardboard is to wood.

Tue, 10/25/2011 - 13:23 | 1808987 Libertarians fo...
Libertarians for Prosperity's picture

 

 

*LOL*

I've also said repeatedly that the McRib has a quantum quality to it.  It exists. It ceases to exist.  Then, spontaneously, it exists again with no linear, logical pattern or path.  Using the Uncertainty Principle and the canonical commutation relation, I did some work on this at Berkeley and was able to predict the next McRib showing within 1/10000th of a second.

http://kleincast.com/maps/mcrib.php

 

 

 

 

 

 

Tue, 10/25/2011 - 14:29 | 1809312 RichardENixon
RichardENixon's picture

1/10000th of a second is about the time it should take a McRib to get through your digestive tract.

Tue, 10/25/2011 - 13:07 | 1808928 Which is worse ...
Which is worse - bankers or terrorists's picture

Bear? Lehman? That was known to be coming. 

Tue, 10/25/2011 - 13:21 | 1808994 fuu
fuu's picture

Was that as LFP or RNR?

Tue, 10/25/2011 - 13:28 | 1809025 Henry Chinaski
Henry Chinaski's picture

Corollary: It's not the one you see that gets you. 

Tue, 10/25/2011 - 12:50 | 1808797 hedgeless_horseman
hedgeless_horseman's picture

 

 

The funny thing is, now that I am both informed and prepared, I am starting to think that we will just muddle along for a few hundred more years.

I hated reading this play.

Tue, 10/25/2011 - 13:03 | 1808895 GeneMarchbanks
GeneMarchbanks's picture

We all hated this article. I, for one, am going to use it as a contrarian indicator along with the price action in Au.

Tue, 10/25/2011 - 13:10 | 1808914 hedgeless_horseman
hedgeless_horseman's picture

 

 

I miss-communicated.  To clarify, I liked this article by Lira, but hated the play by Beckett.

Lira is right, I think, as indicated by all of the future tense language flowing from the mouths of our government puppets.

 

Tue, 10/25/2011 - 13:16 | 1808966 GeneMarchbanks
GeneMarchbanks's picture

I see. That play is pure theater material if you ask me.

Anyhow, I suppose something that is anxiously awaited by most not happening is also a Black Swan according to Taleb. The next event, I believe, won't be about an institution bankruptcy/failure or a sovereign, it'll be an act of violence.

Tue, 10/25/2011 - 13:25 | 1809008 AbelCatalyst
AbelCatalyst's picture

Agreed!  The government needs a scapegoat - something violent leads to financial system implosion, which leads to, "I can't believe this happened - this [fill in violent event] wrecked everything just as the economy was coming back!"  

My guess is the whole Iran conspiracy was the government trying to stir the pot and get people fighting!  The "capture" seemed so contrived to me...  distractions, distractions...  It's all about the slight of hand...  don't look over here - the real action is over there.  So disturbing on so many levels!! 

Tue, 10/25/2011 - 15:56 | 1809681 Abitdodgie
Abitdodgie's picture

I know a way of stopping the electricity to 60% of America by hitting two specific sub stations , that should be a tipping point if someone was to do it , just saying

Tue, 10/25/2011 - 12:50 | 1808800 TruthInSunshine
TruthInSunshine's picture

The Revolution (whether financial or otherwise) may or may not be televised, but people will find out about it (and react accordingly, which will lead to a very bad outcome), and most will learn of it in real time, one way or another.

Tue, 10/25/2011 - 12:49 | 1808801 HelluvaEngineer
HelluvaEngineer's picture

Yes.  Our great central planners are omnipotent and never make mistakes.  They can keep the plates spinning forever.

Tue, 10/25/2011 - 12:49 | 1808802 Corn1945
Corn1945's picture

Isn't this the same guy who called for hyperinflation like ten dozen times?

Tue, 10/25/2011 - 13:21 | 1808881 GeneMarchbanks
GeneMarchbanks's picture

Sure is. He called for it to be here... well... about now on Puplava in March/April.

Tue, 10/25/2011 - 13:35 | 1809052 njdoo7
njdoo7's picture

Are you someone that has visited the future? How do you know it's not yet to come?

Tue, 10/25/2011 - 16:21 | 1809804 Bring the Gold
Bring the Gold's picture

First off yes he did and he will eventually be proven right on that original view though wrong on timing.

Secondly, I think the whole point of this article is he is throwing in the towel on anything but stagflation and muddling along. I think this is a good sign for those who disagree with him. The more folks throw in the towel on a Lehman like event, the more likely it becomes. Increasingly the markets are about fortitude and really setting your position and not going mad watching it all the time.

Tue, 10/25/2011 - 12:50 | 1808810 Fips_OnTheSpot
Fips_OnTheSpot's picture

Yawn

Tue, 10/25/2011 - 12:55 | 1808836 YesWeKahn
YesWeKahn's picture

This will never happen as long as Bernanke is still alive.

Tue, 10/25/2011 - 12:56 | 1808847 4 wheel drift
4 wheel drift's picture

ok i will add a third option when it comes to resolving issues with debt.....

 

1.- pay it off.

2.- default.

3.- waiting for godot...................................................

 

zzzzzzzzzzzzzzzzzzzzzzzzz

Tue, 10/25/2011 - 14:00 | 1809172 prodigious_idea
prodigious_idea's picture

Villaneuve fan?

Tue, 10/25/2011 - 12:58 | 1808854 Scisco
Scisco's picture

I think we found who is buying the Greek Debt!

Tue, 10/25/2011 - 12:58 | 1808855 Caviar Emptor
Caviar Emptor's picture

The Godot moment is the realization that you can't count on economic miracles. We're in trouble because we never prepared. We presumed things would never be different and the music would play on forever

Tue, 10/25/2011 - 22:56 | 1811037 mccoyspace
mccoyspace's picture

i think he is saying that waiting for the crash is also a kind of (negative) economic miracle. you can't count on it.

Tue, 10/25/2011 - 12:58 | 1808856 orca
orca's picture

We are seeing Lehman unfold live in PM. So who cares if another bank blows up, or if Italy implodes. The endgame is not only about implosions, but also about (price) explosions.

Tue, 10/25/2011 - 12:58 | 1808857 qussl3
qussl3's picture

Greece is bear, ECB or EFSF will be  lehmann.

Tue, 10/25/2011 - 12:59 | 1808861 Gully Foyle
Gully Foyle's picture

Fuck you people! You still don't get it.

The crackdown/collapse comes AFTER inauguration day 2013. Give it a minimum of six months but no later than a year and a half.

It will be sold as "doing what's best for the country". Citizens, where the rioting and looting are happening, will be grateful for the troops prowling the streets.

The mechanism is already in place for secret courts, death strikes on US citizens without a trial, and Martial Law.

The collapse has been factored in including "collateral damage".

But the real beauty is it takes a single generation for this to be considered "normal".

The plan isn't for what you assholes accept but what your kids or grandkids do.

 

Tue, 10/25/2011 - 13:05 | 1808919 Kelly
Kelly's picture

Ha!  I'll bet they never figured on a bunch of hippies having a sit-in. 

Tue, 10/25/2011 - 13:09 | 1808938 Gully Foyle
Gully Foyle's picture

Kelly

Every conceivable scenario has been planned for decades. Whole fucking departments are paid for just that. Everything from Aliens to Zombie plagues have been factored in.

Because the Hippies are still there you may assume they are a useful tool for now. Or so insignificant they don't matter.

When they get driven out by force is when you know they hit  a nerve.


Tue, 10/25/2011 - 17:00 | 1809977 Bring the Gold
Bring the Gold's picture

The best laid plans of mice and men...

Sure they (the elite and secret society types) have tons of contingency plans, but ultimately these men are men and not omniscient nor omnipotent. They are not running the show, the universe is. I have long suspected the moment of their fall will be moments after they are certain that victory is at hand. This doesn't mean things between now and then or after will be pleasant but rather that nobody knows the future and nobody can plan for everything and finally nobody is in charge. Nobody. These problems won't be solved at the same level of conciousness they were created. A transcendence of the egoic state of conciousness is the only solution that will be successful. It's already happening.

Tue, 10/25/2011 - 12:59 | 1808864 pendragon
pendragon's picture

is the author THE most irritatingly smug bloke on the planet?

Tue, 10/25/2011 - 13:15 | 1808957 XitSam
XitSam's picture

No, that would be Krugman, or Summers, or Geithner, or ...

Tue, 10/25/2011 - 15:12 | 1809473 LFMayor
LFMayor's picture

sorry, wrong on all.  Simon Black.  "As I was just tucking into a delightful repast of the local Kamchatcan broiled prawns, I heard via didgeridoo that there was a gold camp in Canfuckistan that was offering freshly minted maples at 2% over spot..."

Tue, 10/25/2011 - 18:19 | 1810200 moriarty
moriarty's picture

Choice

Tue, 10/25/2011 - 23:02 | 1811066 mccoyspace
mccoyspace's picture

"...and did you know that through an obscure local government program you can get a passport, and start a business which gives you tax free income forever. You really should consider joining me on my global sojourn through the ass-crack back waters of the world. By never sleeping in the same bed twice I've been able to keep my personal demons and bugaboos at bay for over a decade!"

Tue, 10/25/2011 - 13:16 | 1808964 MsCreant
MsCreant's picture

Have you read any of Reggie Middleton's work? This is not a dis, just sayin'.

Tue, 10/25/2011 - 14:03 | 1809191 pendragon
pendragon's picture

you're not selling it too well

Tue, 10/25/2011 - 15:51 | 1809588 Catch-22
Catch-22's picture

Although I don't agree with him on this one, he has submitted some good stuff in the past... and he tells a story pretty well. He understands the expected entertainment factor.

Hey, if anything, kudos for sticking his neck out once in a while (under his real name).

Tue, 10/25/2011 - 12:59 | 1808866 ssp2s
ssp2s's picture

The Central Bankers will never make a mistake.  They can levitate forever.  Don't fight the Fed.

Sounds like 2007 to me.

Tue, 10/25/2011 - 12:59 | 1808868 malikai
malikai's picture

Nice contrarian work. Good read.

Tue, 10/25/2011 - 13:00 | 1808870 lemosbrasil
lemosbrasil's picture

In the beginning 2008, Dow Jones was in sell mode to MACD at monthly chart and it was between 11.700 and 13.100 (1.400 points) about 4 months. After , it entered a freefall.......Now, it seeems to me the same scenario. Dow Jones between 10.400/10.600 and 11.800/11.900 for a 2-3 months.........MACD is already in a sell mode at a monthly chart.....so .......just patience....the market is going to a freefall later or sooner.......

See here that scenario: http://pracompraroupravender.blogspot.com/2011/10/o-bla-bla-bla-e-o-grafico.html

Tue, 10/25/2011 - 13:00 | 1808872 0cz
0cz's picture

The price of doing what they are doing to stop a 'Lehman Event' will be a 'French Revolution Event'. 

The only problem is they have better weapons than us this time.  Then again, 100 Terran Battle Cruisers are still no match for 10,000 Hydralisks. 

Tue, 10/25/2011 - 13:37 | 1809065 IAmNotMark
IAmNotMark's picture

Thumbs up for using an StarCraft reference!

Tue, 10/25/2011 - 13:00 | 1808873 Reptil
Reptil's picture

One thing is certain IMO; they're going to print, print, print.

Tue, 10/25/2011 - 13:01 | 1808879 runthenumbers
runthenumbers's picture

The law of unintended consequences will eventually catch up to the "central planners" and that will be the Lehman Event.

Tue, 10/25/2011 - 13:35 | 1809053 Henry Chinaski
Henry Chinaski's picture

No need for quotation marks - the term central planners is universally understood even outside of zerohedge.

Tue, 10/25/2011 - 13:03 | 1808889 ZeroPoint
ZeroPoint's picture

I concede that intervention will continue, but ultimately, there will be collapse.

 

Politicians have no incentives to change the unsustainable paths they have led their countries on. With continued deficit spending and continued money dilution, hyperinflation WILL happen.

They might stretch it out another 20 years, but eventually, citizens won't be able to afford goods & services. If gas was to go above 10 dollars a gallon, you would see some serious, serious breakdown.

Hyperinflation will happen unless we go back to sound money and limiting government activities.

Tue, 10/25/2011 - 15:36 | 1809569 CompassionateFascist
CompassionateFascist's picture

"They" aren't going to be able to "stretch it out" for another 20 months. Mid-to-late 2012 you have a U.S. Perfect Storm convergence of domestic political crisis, precipitous economic crash, and the Iran War. "They" thought they had it all "under control" c. 1913, c. 1928, c. 1938 as well. Look what happened. And those storms were minor compared to what's coming. This is going to be a disjunction, the collapse of an entire, terminally corrupt civilization. By contrast, Sharia Law: no Jew usery, no drugs, no alcohol; men act like men, and women act like women.  Might be the future.  

Tue, 10/25/2011 - 16:02 | 1809709 TheMerryPrankster
TheMerryPrankster's picture

It's not that complicated. The system is rigged, but the system is also unsustainable and unstable.

It collapsed too early, hence the pump and dump, they managed to shock the patient back to life, but the vital signs are unstable, the dead cannot walk forever. Now the nations and banks are playing hot potato, whoever collapses last wins.

My idea of a long term investment is a canned ham with a 2 year expiration date.

Tue, 10/25/2011 - 13:03 | 1808893 gwar5
gwar5's picture

Worse and worser. We were in worse shape in 2008 than in 1929 when we still had industry and a much better balance sheet. Now we're in worse shape than 2008 and there's lots of news, but no good news on the forseeable horizon. All bad. Getting impossible to say which snowflake in this blizzard is going to set off the avalanche.

 

 

 

 

 

Tue, 10/25/2011 - 13:03 | 1808899 Lets Eat Grandma
Lets Eat Grandma's picture

Gonzalo Lira officially lost me when he started having mutual ass-grabbing sessions with Lars Larson. 

Tue, 10/25/2011 - 13:04 | 1808901 zebrasquid
zebrasquid's picture

Everyone was waiting for Steve Jobs to die, and he did.

Things that are fatally diseased eventually die, in spite of all attempts at avoidance and denial.

There is not enough bail-out money around to bail out the entire world or reassure millions and millions of investors and bond holder that will sooner or later

hit the exits due to exhaustion and stress.  

 

I was in a boat once that started taking on water when a bilge pump failed.  We had Clorox bottles to bail and bail.

We finailly made it back to the marina, because we were not that far away when the problem happened.

If we had been, we would have gone down.

Anyone think we are still close to the shore?

Tue, 10/25/2011 - 13:28 | 1809023 oceanview76
oceanview76's picture

What if that was the H.M.S. Status Quo, and what if all the governments banned together to build a longer dock to save that boat?  

Tue, 10/25/2011 - 13:40 | 1809074 IAmNotMark
IAmNotMark's picture

We may be close to shore.  But a lot of the people in the boat are bailing into the boat and seem oblivious that we are close to sinking.

Tue, 10/25/2011 - 19:28 | 1810408 samsara
samsara's picture

People always use the "Boy that Cried Wolf"  cliche to calm and chide you for being a chicken little.

Ironically,  usually without mentioning that eventually the Wolf came and had a very big meal.

Tue, 10/25/2011 - 13:04 | 1808904 williambanzai7
williambanzai7's picture

g

I've been waiting for Godot to arrive over a year.

Tue, 10/25/2011 - 13:08 | 1808931 Ralph Spoilsport
Ralph Spoilsport's picture

Breaking: Rosencrantz and Guildenstern are still dead.

Tue, 10/25/2011 - 13:16 | 1808965 machineh
machineh's picture

Is that a typo in the title?

Most of us are waiting for ZEROES!

Tue, 10/25/2011 - 14:02 | 1808969 nonclaim
nonclaim's picture

While waiting watch "Waiting for Elmo", a Sesame Street production (3 min):

http://www.youtube.com/watch?v=ksL_7WrhWOc

Tue, 10/25/2011 - 22:34 | 1810958 Element
Element's picture

Didn't you order that the same day Dubai defaulted ? ... then pretended they didn't ... when was that? ... about mid Nov 2009? ... ...

Slow Train Comin' - Bob Dylan

Sometimes I feel so low-down and disgusted
Can't help but wonder what's happening to my companions
Are they lost or are they found, have they counted the cost it'll take to bring down
All their earthly principles they're gonna have to abandon?
There's slow, slow train coming up around the bend.

I had a woman down in Alabama
She was a backwoods girl, but she sure was realistic
She said, Boy, without a doubt, have to quit your mess and straighten out
You could die down here, be just another accident statistic
There's slow, slow train coming up around the bend.

All that foreign oil controlling American soil
Look around you, it's just bound to make you embarrassed
Sheiks walking around like kings, wearing fancy jewels and nose rings
Deciding America's future from Amsterdam and to Paris
And there's slow, slow train coming up around the bend.

Man's ego is inflated, his laws are outdated, they don't apply no more
You can't rely no more to be standing around waiting
In the home of the brave, Jefferson turning over in his grave
Fools glorifying themselves, trying to manipulate Satan
And there's slow, slow train coming up around the bend.

Big-time negotiators, false healers and woman haters
Masters of the bluff and masters of the proposition
But the enemy I see wears a cloak of decency
All non-believers and men stealers talking in the name of religion
And there's slow, there's slow train coming up around the bend.

People starving and thirsting, grain elevators are bursting
Oh, you know it costs more to store the food than it do to give it
They say loose your inhibitions, follow your own ambitions
They talk about a life of brotherly love, show me someone who knows how to live it
There's slow, slow train coming up around the bend.

Well, my baby went to Illinois with some bad-talking boy she could destroy
A real suicide case, but there was nothing I could do to stop it
I don't care about economy, I don't care about astronomy
But it's sure do bother me to see my loved ones turning into puppets
There's slow, slow train coming up around the bend.

Tue, 10/25/2011 - 13:04 | 1808910 The Ram
The Ram's picture

I have felt the same way as far as this "recession" dragging on for decades, but the one variable that they cannot control is the purchasing power of the US dollar.  They need to create massive fiat to keep the party going, but as much as we would like to believe in the invincibility of the FED and PTB, they don't totaly control exchange rates.

The key question to ask (and observe in everyday life), when the does the puchasing power of the dollar no longer provide life support for for the "middle class," i.e. the barista at Starbucks, the server at McDonalds, etc.  When people start to become famished en masse, then you will have the Lehman event....but as a by-product of a bloody revolution that the FED and the PTB cannot control.

Yes, but when?  Keep watching the everyday people around you.  They will provide more clues than the Wall Street Journal or Bloomberg, and maybe better than even Zero Hedge!

 

 

Tue, 10/25/2011 - 13:04 | 1808912 Syrin
Syrin's picture

This article sums up everything I've been thinking for the better part of a year.   Well done!

Tue, 10/25/2011 - 13:04 | 1808913 Christoph830
Christoph830's picture

"So long, of course, as Lehman never arrives. But caveat emptor: If Lehman does arrive, all bets are off."

Read:  All of the above means absolutely nothing.

Can I have the past 5 minutes back, please? 

Tue, 10/25/2011 - 13:12 | 1808946 jdelano
jdelano's picture

thank you.  completely idiotic.  Could have been written by Robo. 

Tue, 10/25/2011 - 13:04 | 1808916 LynRobison
LynRobison's picture

I too have been amazed at how good the cabal has been at steadying the house of cards every time something giggles the table. But no house of cards stands forever. When he whole thing collapses, and it inevitably will, it’s gonna be epic. 

Tue, 10/25/2011 - 13:05 | 1808918 Money 4 Nothing
Tue, 10/25/2011 - 14:08 | 1809212 mjk0259
mjk0259's picture

Not seeing much mobilization in Europe. Even UK disarming to practically nothing.

Tue, 10/25/2011 - 13:05 | 1808920 mynhair
mynhair's picture

2-yr paper sold .281%

Let's rally!

Tue, 10/25/2011 - 13:22 | 1808934 Mercury
Mercury's picture

Sure the bureaucrats in Washington and the Eurocrats in Brussels and Frankfurt will do absolutely anything to avoid a Lehman-like event.

The problem is - the set of "anything" includes such things as hyperinflation, private wealth destruction/confiscation and totalitarian powers exercised by governments over private citizens.

You can't just "fix" bad debt by moving it onto a "bad bank" ice sheet and pushing it out to sea.  Someone has to take it in the ass.  And as Warren Buffett likes to say about poker: if you've been at the table a while and haven't figured out who the sucker is...that's a bad sign.

So go ahead, place your well calculated, predictable outcome bets.

Tue, 10/25/2011 - 14:31 | 1809318 kaiserhoff
kaiserhoff's picture

The unexpected always happens.

                           Conrad

Tue, 10/25/2011 - 13:08 | 1808935 machineh
machineh's picture

In the US, 'Lehman' meant more and more official lending to AIG, Fannie and Freddie, which are still bleeding.

In Europe, the ECB has lent tens of billions to Greek banks which are experiencing a run on deposits, and cannot possibly repay or even service this debt.

Now the ECB has [unrecognized] negative net worth. But since its currency is irredeemable, the ECB's creditors cannot force it into bankruptcy.

Nevertheless, when Greece exits the euro, Greek banks REALLY WILL tip over, and the ECB will have to recognize its non-marked-to-market losses.

This is what the eurocrats are scrambling to stave off. Because admitting that the ECB is bankrupt would trigger a German exit from the eurozone.

Tue, 10/25/2011 - 13:09 | 1808937 semperfi
semperfi's picture

The bailouts will continue until morale improves, or the shooting starts - whichever occurs first.

Tue, 10/25/2011 - 16:10 | 1809749 TheMerryPrankster
TheMerryPrankster's picture

The POTUS is having a get out of Iraq clearance sale that is over at the end of the year, at which point he will have a lot more troops to deploy in American cities should the drones awaken from their slumbers in front of their tv's.

Tue, 10/25/2011 - 13:16 | 1808939 lolmao500
lolmao500's picture

There will be a war in the middle-east. Titor predicted it. One false-flag away from it.

What could be nice is a big earthquake hitting Wall Street. Like a 9.0.

Or Cascadia could go off, wiping out most of the US west coast.

Or San Andreas could go off...

Or a big one could hit Tokyo (which has been predicted by seismologists).

Or Taiwan-China could go off. (following the elections of nationalists in January in Taiwan)  I would put my money on this one.

Or Palestine vote at the UN on November 11 could start a big shitstorm.

Or Georgia doing something stupid against Abhkazia and South Ossetia again.

Or Azerbaijan-Armenia... which would create a big shitstorm with Turkey-Russia-US against each other.

Or Turkey vs Israel-Cyprus.

Or Hezbollah against Israel.

Or Iraq back into civil war as Sunnis and Shia fight for power.

Or a coup d'etat in Pakistan.

Or Venezuela-Colombia going at it.

 

A lot of shit can happen.

Tue, 10/25/2011 - 13:23 | 1808999 Ralph Spoilsport
Ralph Spoilsport's picture

I'm still waiting for Titor to come get my IBM 5100.

Tue, 10/25/2011 - 13:10 | 1808941 dick cheneys ghost
dick cheneys ghost's picture

Lenin said that "Imperialism is the highest stage of Capitalism"........if he were alive today he would say that indebtness and insolvency are the highest stages of capitalism..........

 

 

Tue, 10/25/2011 - 13:27 | 1809017 Ralph Spoilsport
Ralph Spoilsport's picture

If Lenin were alive today, he'd have Bernanke's job.

Tue, 10/25/2011 - 16:17 | 1809776 TheMerryPrankster
TheMerryPrankster's picture

If Lenin were alive today, Bernanke would have Lenin's job.

Tue, 10/25/2011 - 13:14 | 1808952 rlouis
rlouis's picture

Most plays are fiction, or a limited perception of reality.  In some strict cultures, fiction is another form of lying.  Yes, the powers that be have foresaken any legitimacy, and sacrificed every principle, and the lies are increasingly desperate and grotesque.  Just because it is taking longer than expected doesn't mean it isn't coming. 

Tue, 10/25/2011 - 13:15 | 1808960 loveyajimbo
loveyajimbo's picture

Speaking of farts, has Blankfein gone to his Fuhrerbunker yet?

Tue, 10/25/2011 - 13:26 | 1809016 Money 4 Nothing
Money 4 Nothing's picture

No, he can't get in the entrance, or anyone for that matter.

http://pesn.com/2011/09/18/9501916_Evidence_Denver_and_DC_Quakes_Caused_by_Nukes/

Tue, 10/25/2011 - 13:19 | 1808977 LookingWithAmazement
LookingWithAmazement's picture

Gonzalo Lira must have read my "boring world" comments :)

quote:
"In short, there will be a big yawn, when “Bad Dexia” finally goes under in a year or two—which is precisely what everyone wants."

Exactly: boring events. Some goes for any other bankrupt bank or country. All priced in now or then. Kyle Bass must be panicking when he starts to realise it all. His bucket full of CDS turns out to be worthless! Welcome zombie-Japanlike-economy. Bye bye crisis. Boring world we live in.

Tue, 10/25/2011 - 18:10 | 1810173 Smartie37
Smartie37's picture

Is an impending currency collapse really boring ???  So exciting and interesting must then be total armageddon ?!?

The only boring aspect of the world is the 5,000 year history of intrinsic value for precious metals.................

Unpredictable world we live in (except for PMs boring value).

Tue, 10/25/2011 - 19:13 | 1810369 LookingWithAmazement
LookingWithAmazement's picture

Currency collapse? After Wednesday, there will be a massive run to the euro. Either because it is saved (my guess), or because it is not saved, a banking crisis occurs and all the bankers run for cash. PMs, commodities, stocks and all plunge, in a rush for money. So, no currency collapse.

Tue, 10/25/2011 - 13:20 | 1808981 spastic_colon
spastic_colon's picture

the author is correct........the one thing that counts is consumer conditioning, the endless printing and financial engineering will be relentless.  By the time the economy actaully does begin to recover (supporting all of the current assumptions and math) consumers will be conditioned to higher prices, gas below $3 will look cheap, bread below $3 loaf will look inexpensive etc etc.........bottom line is that in order to consume at these prices eventually people will have to work harder and longer (capitalism wins)....it is not difficult to figure out, our children will see these prices, wages, etc as normal....it may take some time, but it will become embedded.

Tue, 10/25/2011 - 13:27 | 1809010 lookma
lookma's picture

As Gonzalo doesn't understand economics, this is predictable.

So long, of course, as Lehman never arrives. But caveat emptor: If Lehman does arrive, all bets are off.

No their not - the engame is the same either same either way, the dollar reserve system is ending. 

Please stop giving a voice to this loon, he offers no meaningful insight and instead is a just a mark that makes it easier for the mainstream to dismiss chatter about HI or currency collapse by going OMG LOL at those HI stupid folks like Gonzalo, therby deflecting attention from a real understanding of the issues at hand.

 

 

 

Tue, 10/25/2011 - 13:54 | 1809137 The Swedish Chef
The Swedish Chef's picture

Thats an ugly fucking avatar. Hala Madrid!

Tue, 10/25/2011 - 18:31 | 1810237 MsCreant
MsCreant's picture

Is your avatar a sock puppet? I see the hand going up inside it...

Very Escheresque.

Tue, 10/25/2011 - 13:26 | 1809014 Ruffcut
Ruffcut's picture

Not so sure. These leechfucks are looking to feast on each other. Survival of the bad ass, is the rule. Even amongst these criminals that think they are of the top .1%, there are too many mouths to feed.

Let the collapse continue.

Tue, 10/25/2011 - 13:33 | 1809048 KickIce
KickIce's picture

imo, it will take a food shortage to bring down the ponzi.  The sheep are much to brainwashed re PMs so I think that is somewhat unlikey as well.  The way they compare fiat vs fiat instead of to gold there is always some currency that has "strength" as compared th the others which is another strike against PMs.

Tue, 10/25/2011 - 13:36 | 1809063 Dr. Engali
Dr. Engali's picture

There are times when I tend to think this way. But I know as more and more people throw in the towel like this the Lehman moment will eventually arrive.

Tue, 10/25/2011 - 13:43 | 1809090 VyseLegendaire
VyseLegendaire's picture

Please go away Gonazalo Lira.

Tue, 10/25/2011 - 13:44 | 1809092 prodigious_idea
prodigious_idea's picture

The writer cites opacity at BoA.  Maybe not so much in one area:  residential real estate.  I know their SEC filings talk about loss sharing on MBS's but it's difficult to quantify.  So consider this:  ReconTrust is the wholly-owned subsidiary that moves BoA mortgages to and thru foreclosure.  In just Oregon alone, from just Sept 2 thru Oct 21, 2011, the number of homes pre-foreclosure on ReconTrust's website declined from 5,416 to 3,974.  Using a WAG average mortgage of $240k that represents $346M in foreclosures over six weeks in a TINY state.  Not chump change when you consider that Oregon is a tiny part of the national real estate crisis (even if our stats show us near the bottom).  The problem is that these properties aren't hitting the market as listings.  Generally, the properties aren't being sold at auction and don't appear as REO on their site.  Could it be that BoA is reclassing these non-performing loans to straight assets on their books, taking the write-down in the process that in effect shrinks their balance sheet?  I don't understand capital calc's, but perhaps the shrinking balance sheet and reclassification reduces (postpones?) their capital requirements.  If I'm correct, their strategy isn't sustainable at this level.  Even if these mortgages became MBS's (which I know many/most were, based on research that shows Wells Fargo purchased units in the BoA MBS offerings).  Would be very interested in other's assessment of BoA in this regard.

Otherwise I'm going with the fart theory.

Tue, 10/25/2011 - 13:46 | 1809104 Dr. Gonzo
Dr. Gonzo's picture

If the prediction in this article becomes true then the entire world will have gone full Airstrip One. I suppose it's possible but highly unlikely. Shit just has a way of hitting the fan.

Tue, 10/25/2011 - 13:47 | 1809108 TradingJoe
TradingJoe's picture

Godot(Lehman II) will arrive when Gonzo gets his subscriptions!

Tue, 10/25/2011 - 13:52 | 1809116 The Swedish Chef
The Swedish Chef's picture

Tyler, how much are you getting paid for posting adds like this and Gramham Summers? Plenty I hope...

Tue, 10/25/2011 - 13:57 | 1809149 Odin
Odin's picture

That's article is a nice thought experiment, but that's all. The author forgets that it's REAL people who have their money invested in stock market, even if its is manipulated and inflated by money printing. If and when the eurozone starts to break apart, and the TBTF banks begin to get knocked over as a result , it will be IMPOSSIBLE for the government to prevent a market collapse because the REAL people who have their money invested in the market will freak out and remove it... Bank runs, market crashes... Only AFTER that will the printing press begin again... Let's not forget its the sheep who have been driving this market up over the past few weeks, NOT the smart money. Sheep get sheered, end of story...

Tue, 10/25/2011 - 14:13 | 1809239 mjk0259
mjk0259's picture

I don't know about that. People have been indoctrinated to keep their money in the stock market no matter what. People who got out during the last collapse ended up being worse off then if they just left it there. Now they are probably back in due to ZIRP. They won't be quick to get out again. Plus most of them have a lot less to take out.

 

Tue, 10/25/2011 - 14:28 | 1809306 Odin
Odin's picture

Well obviously somebody has their money back in the market, we wouldn't be right back to pre collapse levels if they didn't... It's interesting, if you look at a 5 year chart of the DJIA, we are literally right at the same level before shit really went south (and the recent rally looks just like the one that took place before the collapse)... I just feel like we cannot underestimate the systemic risk involved if the Greece and Italy and the banks funding their ridiculous debt begin to tank...

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