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Guest Post: Worse Than 2008
Submitted by ChrisMartenson.com
Worse Than 2008
There are clear signs of a liquidity crunch in the asset markets right now, and the question I keep hearing is, Is this 2008 all over again?
No, it’s worse. Much worse.
In 2008 there was a lot more faith and optimism upon which to draw. But both have been squandered to significant degrees by feckless regulators and authorities who failed to properly address any of the root causes of the first crisis even as they slathered layer after layer of thin-air money over many of the symptoms.
Anyone who has paid attention knows that those "magic potions" proved to be anything but. Not only are the root causes still with us (too much debt, vast regional financial imbalances, and high energy prices), but they have actually grown worse the entire time.
As always, we have no idea exactly what is going to happen and when, but we can track the various stresses and strains, noting that more and wider fingers of instability increase the risk of a major event. Heading into 2012, there's enough data to warrant maintaining an extremely cautious stance regarding holding onto one's wealth and increasing one's preparations towards resilience.
Here’s the evidence:
- Oil prices higher now than in 2009
- Derivatives up more than $100 trillion since 2009
- Government debts exploding
- Weak GDP growth
- Europe in trouble
- Small investors leaving the market
- China hitting a wall
One of the most important things we need to track is simply untrackable, and that is market perception. When faith in a faith-based money system vanishes, the game is pretty much over.
If you have been reading my work (or anyone else's) with a decent macro view, you likely lost your faith in the system a while ago and marvel that it can continue along for another moment, let alone all the years it has been creaking towards its eventual date with reality. But along it creaks, day after day, week after week, and month after month, threatening to wear down the observant and vigilant before finally letting go.
2012 promises to be an interesting year, with more than $10 trillion in funding and rollover financing required to keep the developed world floating along. But where will that funding come from? The lesson from defunct economies is “not internally!” And if China’s recent slowdowns and projections of an even more lackluster 2012 come true, then we might also scratch a few external sources off the list as well.
Oil Prices
As Gregor recently penned so eloquently for us, high oil prices are like sand in the gearbox of the economy -- they represent the most serious form of friction there is. Rather astutely, Jim Puplava has called oil prices 'the new Fed Funds rate,' meaning that the traditional role of the Federal Reserve in regulating the economy via the price of money has been usurped by oil.
As oil prices go up, the economy slows down, and vice versa.
The simple fact is that oil prices remain quite elevated by historical standards, and since the correction in 2008, they have been ratcheting steadily higher each year. They are now at their highest average rate in three years. In round dollar terms, oil is $30/bbl higher than in 2009 and $10/bbl than in 2010.
I won't rehash the data here, but the best explanation for this steady increase is that supplies of cheap oil are dwindling and flow rates of the desired blends are having a hard time keeping up with demand.
The twin deficits to the export market are falling production from existing fields and rising internal demand in the producing countries. The way all that gets balanced is in the usual fashion -- through prices.
All of this would be fine, except for the idea that the world is in a far more fragile condition today than back in 2008 when it suffered the first insults levied by high oil prices.
As the Bank of England's Paul Fisher recently put it:
Financial markets in greater danger than 2008-BoE's Fisher
Dec 19, 2011
Dec 19 (Reuters) - Financial markets are facing a more dangerous situation now than during the financial crisis of 2008, Bank of England policymaker Paul Fisher was quoted as saying on Monday.
Fisher, who is the central bank's executive director of markets and sits on the Monetary Policy Committee, also said governments had fewer options to deal with the current crisis because of their stretched public finances.
Fisher was quoted as saying that in 2008, governments had more leeway and cash available to stimulate their economies and bail out banks. Today that "sovereign backstop is less clear", Fisher said.
"The policy out is going to be more difficult than it was in 2009, given the current position of the sovereigns."
(Source)
We'll explore these ideas in greater depth below, but I think the bolded parts illuminate why high oil prices are potentially more corrosive now than in 2008. The bottom line is that economic growth is central to nearly every story of recovery, and there are appallingly few analyses coming out of the OECD countries that address how the various debt rescue plans will fare if said economic growth does not materialize. Most just note that 'it will not be good' and leave it at that.
Debt
Let's begin with debt. This crisis was rooted in too much debt. Even without the headwinds caused by structurally rising energy prices (we'll get to those in a minute), the credit bubble was destined to someday pop all on its own. After all, there's no way for debt to continually expand faster than income, which is what was happening across the entire OECD, thanks to the ultra-accommodative policies of the world's central banks.
(Source)
Note that GDP is virtually unchanged since 2008, meaning those $5 trillion did not buy us any incremental GDP; it only managed to bring us back to about even:
(Source)
That means we have about the same-sized economy to support an additional $5 trillion in federal debt, or roughly a third more than when the crisis started.
It is also true that GDP growth in the US is weaker this year than last year, a trend that does not bode well for the US deficit situation:
(Source)
It should be noted here that this weak growth is happening even though the US federal deficit for FY 2011 was $1.3 trillion, or more than 10% of GDP. If that's how anemic the economy is with that level of deficit spending, where would it be with less?
Europe in Trouble
The bad news out of Europe continues unabated, including debt and ratings downgrades, sliding economic growth, and exploding red ink.
Much of the hope in Europe rests upon carefully crafted bailouts that rest upon assumed rates of economic recovery and growth in order to pencil out. Without the assumed rates of growth, the plans fall apart, and more rescue funds -- or outright defaults -- lie in the future.
Ireland is an instructive case because it entered its difficulties earlier, and it has already received a bailout and implemented the austerity measures that were meant to balance the equation.
Ireland
Unfortunately, the plan is now in tatters with the recent revelation that the Irish economy is slumping more than expected under the twin weights of reduced lending and imposed austerity
Ireland's debt rating under threat as economy contracts
Dec 16, 2011
Rating agency Fitch tonight warned it may downgrade Ireland and five other euro zone countries in the absence of a comprehensive solution to the region's debt crisis which it concluded may now be "technically and politically beyond reach".
The agency placed the ratings of Belgium, Spain, Slovenia, Italy, Ireland and Cyprus in credit watch “negative”, which means a downgrade is possible within three months.
The move comes on back of unexpectedly poor economic data for Ireland which showed economy weakened considerably in the third quarter, shrinking at the fastest rate in more than two years.
(Source)
Here's the data:
(Source)
GNP is a better measure than GDP in this case because GNP removes repatriated corporate profits that have left the shores. Many companies use Ireland as a tax haven, so the monies that cycle briefly into and then right back out of the Irish system really should not be counted towards their economic progress.
With economic contraction, the Irish fiscal deficits will once again breach agreed-upon levels, and repaying debts also becomes that much harder. It is a negative spiral that can be quite destructive and difficult to stop.
The bottom line here, which should surprise exactly nobody, is that austerity shrinks an economy and that economic shrinkage and crushing debt loads are incompatible. Ireland has not been fixed, and it seems that the can is once again right in front of the ECB, ready for another good kick down the road.
Ireland's debt yields are instructive here. While it is true that Ireland's debt yields are down quite a lot from their maximum levels (which were over 23% for 2-year paper and 15.5% for their 9-year debt), the current yields of 7.9% and 8.6%, respectively, are utterly unsustainable for an economy that is shrinking. It is only a matter of time before those rates crush the finances of the Irish government.
Do you know why the generally agreed-upon limit for persistent government deficits is 3%? That's because it's the basic rate of GDP growth that history has shown to be sustainable. As long as deficits are growing at the same rate as the economy, then the debt-to-GDP ratio stays constant and everybody is happy. If (or when, I should say) the economy grows more slowly than the rate of interest that is demanded from a government, it is a mathematical certainty that either the deficits will swell or austerity and/or tax hikes must be imposed. There is no other way to balance the books.
On this basis, Ireland is still mired in a math problem.
Spain
One theme of the financial crisis is governments loading up on debt in order to get by for a little longer, with the plan seeming to be to face the music later and/or keep one's fingers crossed that the economy will have somehow sorted itself out by then.
Spain, suffering from a truly crushing housing bust that is still playing out (and will for a long time), very high unemployment, and a stalled economy, has also compounded the issues by piling up an astounding amount of new debt over the past year:
Spain regional debt up 22 percent to $176 billion
Dec 16, 2011
MADRID (AP) -- Debt levels for Spain's cash-strapped 17 semiautonomous regions have soared 22 percent over the past year, the country's central bank said Friday.
A near two-year recession after a real estate bubble collapse has left Spain with swollen regional and national deficits, a stalled economy and 21.5 percent unemployment.
Many regions are facing severe cash-flow problems and are having to delay payments to suppliers.
An example of the cutbacks came Thursday, when Spain's Woman's Institute said nearly 100 centers for the victims of domestic violence face closure next year in the central Castilla-la-Mancha region. Centers for drug addicts in Madrid are facing a similar fate.
(Source)
The good news out of Spain is that its bond yields have fallen considerably since the end of October, when they breached the 6% barrier and seemed ready to launch into truly dangerous, irrecoverable territory.
Most recently, Spain's 10-year bond yields were 5.13%, down from 6.7% on October 31 but still about 1.5% higher than pre-crisis levels. It's important to note that the current yield may not be indicative of the true market perception of Spanish risk because the ECB has been heavily involved in buying Spanish debt. The true yield should undoubtedly be a lot higher given the grim state of finances there.
Still, Spain's yield levels are in the best shape out of all the PIIGS. Speaking of which...
Portugal
Portugal is still in trouble, and the government has, quite worryingly for the precedent it sets, raided private pension funds to help balance the books.
Portugal deficit falls, helped by one-off measure
Dec 16, 2011
LISBON, Portugal (AP) -- Portugal's finance minister says his debt-stressed country's budget deficit will likely fall to below 5 percent this year from 9.8 percent in 2010.
But Vitor Gaspar says the sharp drop is largely due to the transfer to the Treasury of euro6 billion ($7.8 billion) in private banks' pension funds.
(Source)
I am not sure of all the back story and intrigue that must accompany this move, but it seems loaded with implications ranging from the door it opens to other governments seeking relief, to the fact that we know that Portugal is being leaned on heavily by the international banking community and has decided to raid the pensions of...wait for it...four of the largest private banks in Portugal. Maybe there's a bit of spite built into that move?
Portuguese bond yields are down from their crisis highs of 20.4% (2-year) and 14.1% (10-year), but again not enough to count, as they are sitting at 15.6% (2-year) and 13.1% (10-year), levels well above the current rate of GDP growth.
Greece
Our poster child for the entire Eurozone mess is, of course, Greece. And quite understandably, a trickle of bank withdrawals has turned into a flood:
Greeks fearing collapse of eurozone bailout pulled record sums from bank
Dec 16, 2011
An unprecedented exodus of capital from Greece – peaking in a record number of withdrawals from banks in recent months – has exacerbated the liquidity crisis now wracking the recession-hit country.
The latest figures released by the Bank of Greece reveal that in September and October alone investors pulled €12.3bn (£10.3bn) from domestic banks, spurred by fears of political uncertainty and economic collapse.
Overall, outflows have reached a record 25% since September 2009 – when household and corporate deposits stood at a peak of €237.5bn, the data showed.
Theodore Pelagidis, an economics professor at the University of Piraeus, said: "This is part of the death spiral of the recession as a result of austerity measures. People realize that contagion has come to banks and they are very afraid of losing their deposits. On average around €4bn-€5bn in capital flees the banking system every month."
The extraordinary figures back up anecdotal evidence that it is not just the super-rich behind the flight of funds.
(Source)
This data, released by the Bank of Greece, is over a month old, and we'd be especially interested to see what November and December add to the story. At any rate, it is now "game over" for Greece. The market is still pricing in a nearly 100% chance of default even as the bankers and Eurocrats squabble over the prospect of raising the haircut on Greek debt from 20% to 50%.
Where the Greek crisis highs for debt yields were 151.9% (2-year) and 35.1% (10-year), they are now sitting at 146.6% (2-year) and 34.6% (10-year), which are essentially unchanged.
The Pattern
I keep mentioning that the ECB is interfering heavily in the bond markets of various countries in their attempts to keep things going. Apparently they've tossed in the towel on Greece, as evidenced by the Greek yields above.
However, when we note the ways in which the Spanish, Irish, and Italian debts have come down off their highs, can we make sense of why the ECB focused their efforts there? Sure, that's easy, and the BBC has put together an extraordinarily helpful interactive chart to make it all crystal clear.
The interactive chart can be found here, but I've taken a number of screen shots so that you can more easily follow the story.
To begin with, what the chart is showing by the width of the arrows is how much money is owed to banks of other countries -- the wider the arrow, the greater the amount.
Here's the country that was let go:
Now let's compare that to Ireland, which was rescued (for now):
And here's Portugal, which is apparently in the process of being tossed under the bus, at least judging by how its interest rates are still punishingly (and ruinously) high:
See the pattern? Now let's look at Spain and Italy, both of which have recently enjoyed a nice decline in their yields
Now are the actions and focus of the ECB coming clear? It's not a surprising insight, but these charts help bring things into focus for me, and inform us that falling bond yields are probably more indicative of ECB actions than an improving debt crisis.
Just for kicks, and to complete the story, here are the charts for the UK and the US, which hopefully make clear why these two countries could never be allowed to fail, for surely the whole world would fail to spin on its axis
The other takeaway from these charts is that everybody owes everybody, a point I've made before, but not as nicely as these charts manage to do. Kudos to whomever thought these up.
Where Things Are Headed
In Part II: Get Ready for Worldwide Currency Devaluation, we detail the remaining risks posed by the massive amount of outstanding derivatives, small investors fleeing the markets, and China's increasingly visible slowdown. At this point, it's quite clear that there simply won't be enough economic growth to rescue the global economy from the hole it's in. So, how does this end?
It will most likely end in a concerted devaluation of the world's currencies, in an attempt to inflate away the worst of our debt burden. And if that happens, there's one asset in particular that you will want to be holding.
Click here to access Part II of this report (free executive summary, enrollment required for full access).
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Balls: I factored Bernank fuckery and global insanity into my calcs believe you me! I am intimately familiar with general insanity and was exposed to it directly during said calcs but this motherfucker is beyond fucked up! Let's hope the purge is as profound as the diseased causes!
There is no liquidity crisis. And the more people demand that a solvency crisis is a liquidity crisis the more stupid shorting they are going to be doing. And the more ass beatings they are going to take. It is not possible to have a liquidity crisis when banks can get all the free money they want at near 0%. Money is created at the origination of the loan. Default means hyperinflation because that money is no longer needed to pay the debt.
People shouted deflation in Weimar the whole time too because they had a massive debt. Listen. Your dollar is garbage. If you are looking at currency market action for some clue, you will be clueless. Exchange rates are set by central banks.
"There is no liquidity crisis. And the more people demand that a solvency crisis is a liquidity crisis the more stupid shorting they are going to be doing."
Absolutely correct. But when your only tool is a hammer, everything looks like a nail (or you have to pretended for public consumption that everything is a nail). Central banks can only provide liquidity, they can't provide solvency. And the PhD Keynesians in control aren't about to admit that their economic equations are seriously and fundamentally flawed (http://en.wikipedia.org/wiki/Hyman_Minsky) and, as a result, their entire careers have resulted in nothing less than a catastrophe. Thus, we continue to hear, over and over again, "experts" spouting a "solution" to the wrong problem.
Yep. When bankers lose, they are paying someone else all that money. Bankers become insolvent. That money still exists.
"Default means hyperinflation because that money is no needed to pay the debt." The process of clearing a defaulted debt is called "writing off". The "money" that was created is un-created; it's astonishing to see someone who can get around by themselves and turn on their computer write something this fucked up.
>>>The "money" that was created is un-created;<<<
Hmmm...I have thought this (the above) is a very realistic alternate scenario...
Would they turn off the digital printing presses if default was immiment or underway?
Under what circumstances?
Certainly not if there's war brewing?
This is the problem...too many scenarios.
You will likely get an avalanche of replies all making counter-assertions from induction... so, I'll save that for them.
But, I think there is a different, more modern world this time around... Can the monetary authority decide to kill the currency with the press of a button when everyone is made privy to the action in advance? Does the political will exist to do this? Does the monetary naivety exist to do this?
Just remember to ask all of the historians whether or not the last time this happened was the same world as this one. I don't profess to know the answer... I'm more concerned about the present biflationary environment... but I'd like to actually see the deductive model drawn out... (I suspect it will not eliminate the possibility of a deflationary crash and burn... not that anyone should make a decision based upon the possibility).
>>>The "money" that was created is un-created;<<<
Money is debt, "uncreating" it is not possible without destroying someone elses asset.
“Ultimately, every penny of every debt must be paid — if not by the borrower, then by the lender.” C.V. Myers
Hat tip to FOFOA: Deflation or Hyperinflation?
Your thinking is exactly backwards.
The money is only "uncreated" when it is paid back to the issuing institution. If I take out $10,000 on a credit card and use it to buy a bunch of consumer junk, then default, the card issuer doesn't claw back the money from the merchants. That money has entered circulation, and won't disappear unless it is used to pay down the interest on some other created money loan.
+1
& furthermore, the debt money in the system (the $10,000 you borrowed), is rehypothecated, then levered & recycled...
Then in the end when somebody can't make the monthly nut because the books don't balance, they print more free money to cover it up...
it's too complicated to even figure out how much of it is "uncreated"... My guess is... VERY LITTLE (since we have reached the very end game where losses are socialized (at interest)...
Hungary to default before Greece?
Forint is plunging like a rock vs EUR and Swiss Franc.
your avatar looks like "cult of treason". Delilah !
alizee. http://www.youtube.com/watch?v=ceSxEjwXHcM
Don't you know your french pop stars? C'mon man.
Also, if you're a rich european old pedo then you might have a shot with her.
nice, the real is better than avatar. Yes I know of her. No, I don't follow her videos. She is 27 so legal. She don't need no old meat to turn on her mojo. But thanks for the utube.
This guys blog should be a featured Zerhedge article... http://www.thereformedbroker.com/2011/12/20/dear-jamie-dimon/ a fairly satsifying deconstruction of the latest attempts by Jamie Dimon and other elites whining about being beaten up on by the 99%
Let's cut to the chase. Its called a monetary crisis.
It's time for city dwellers to realize what a thin thread their population centers are hanging on by. For Christmas, think beans, bullets and an urban survival manual. Or, as Richard Crenna said in "First Blood".... "a good supply of body bags..."
I love the hubris of those who live out a ways.
They assume they are safe.
Guess again.
There's hardly any inhabited places in the US that aren't within 25 mi. of a road.
An easy one day hike for some of us with training and experience.
So that's your big plan? Hike out to someones farm, kill them and then what? Sit around eating whatever food they have put up, killing whomever comes around to visit them? Then what after the food runs out? Go over to the next farm or cabin and see what you can kill for, that they may have stored? This is your big plan for the rest of your life, until you are shot trespassing or something? You going to get a lot of satisfaction sitting around some strangers fireplace, burning wood he chopped, eating chow he grew and watching his dead corpse rot out in the field? This is the best plan you can come up with? Any asshole that comes up with this as their go to plan has got to be one of the biggest losers around, hopefully this isn't your idea of how to adapt to the collapse.
That's his stock answer to everything: Rape, pillage, and move on. I think you've outlined his strategy quite well. It's the SAME MIND SET as the banksters, only on a lower social scale. There isn't much difference in the thinking nor sentiment of either type.
Great plan, you must be the only one with training, combat experience, barbwire, dogs, intrusion alarms or perhaps you are Rambo, either way you may wish to extend that plan to its logical conclusion; death..
.gov treats you better than that. They have half a million plastic coffins stacked in a field in Georgia.
The last chart - showing the USA's debt position - makes one's jaw drop by the staggering size of the arrows. But even then - I see China is not mentioned. Aren't they owed a lot also?
It will most likely end in a concerted devaluation of the world's currencies, in an attempt to inflate away the worst of our debt burden. And if that happens, there's one asset in particular that you will want to be holding.
What asset might you be referring to?
Plumber's tape, of course. Don't you know anything.?
"As always, we have no idea exactly what is going to happen and when, but we can track the various stresses and strains, noting that more and wider fingers of instability increase the risk of a major event."
And when that financial fault line breaks....here come the BIG ONE.....
1:33 into video Wall Street Collapses......priceless.
http://www.youtube.com/watch?v=dc2JpTQEIxI&feature=related
US economy recovers.
-15% NAR 4 yr adjusted home sales
recover from that, bitch!
Wow this is all fanciful logic. Here is my indicator.
Have you ever seen an average China man who has been through the cultural revolution cook a meal? He does not miss one grain of rice in cooking or eating the meal.
Have you ever seen an average American cook a meal?
Wake me when they're starving.
Unless that American was raised, like me, with a mom who'd say, "Finish your plate. There are children starving in (insert 3rd world country name here)."
2008 aside. Anyone taking bets on a Gartman/Schiff wedding in 2012? Hell Dennis, I thought you proxied (xau) via the EURO?
Gartman is just plain full of crap. Who in the Hell is paying that guy for advice? I can look at a ticker, see which way it went for the last day, and then declare I was a either long or short based on that move after the fact as well as the next guy. Watching him try to give advice on gold, something he never gets right, is like watching Charlie Brown try to kick the football. He should just STFU if he doesn't understand the subject matter. But he has to have an opinion on EVERYTHING because he is Dennis Gartman. He should stop trying to be what he isn't and just defer all gold commentary to Schiff.
Of course, it's worse than 2008. Today, there is more debt, and liquidity is disappearing back into thin air, where it came from. Now, we see constant pressure to print more debt, as the solution. Since the bailouts in 2008 were grossly understated, and turned out to be over $16 Trillion, are they going to go for broke, this time? If the central banks are eventually going to take the plunge, why don't they just print $160 Trillion in new debt? It can only come out 10 times as bad as the present situation, but we'll have euphoria until it's time to start paying.
http://georgesblogforum.wordpress.com/2011/11/02/the-daily-climb-2/
Don't worry China will save everything. With their new built empty cities and their slumping merchantile system they will rescue Europe and the US. The biggest joke around. Say it over and over again, "I believe in Skittle pooping unicorns".
Is this what exponential doom looks like?
http://www.youtube.com/watch?v=n6oZTq_KsXc&feature=fvst
Yeah... because it's a T-Mobile ad
the constant criticism of inept leaders who paper over real problems entirely misses the point....there are no decision makers in the usa who even give a fuck to fix the problems....they have not been fixed because the rockefeller-mic-yale-cia cabal do not want them fixed....it has nothing to do with incompetence or ordinary greed....
many of the so-called responsible parties are under orders to do nothing or to do the wrong thing....they are required to shovel money to the banksters and said cabal....it's that simple...
cheney told the air force to stand down on 9/11 - not because he is a bumbling fucktard but because is a viciously evil "person." same is true with the cabal.....
ps. oil is high not because of supplies but because the banksters who trade it for no reason other than greed.....
Last March, in an article here on ZH, according to Martenson, we were there, finally at the brink. The economic holocaust had begun.
Well guess the fuck what. Nine months later, no holocaust and we're still at the brink.
Newsflash---two years from now we'll still be at the brink.
Twenty paragraphs and a dozen charts to say what everybody already knows---that an involuntary and very painful global deleveraging is imminent within the next few years.
Well guess the fuck what. Nine months later, no holocaust and we're still at the brink.
Newsflash---two years from now we'll still be at the brink.
---
Some may look around and admit that we are, in fact, in the middle of it... WTF do you want? Explosions, gamma rays & other special effects???
Others, (like Guggenheim in 'Titanic') want top put on a top hat and sip some brandy... Hey, that's fine too, but the last time I checked, the Titanic was still at the bottom of the Atlantic...
dupe
Guess what dickwad? For millions of unemployed Americans, economic holocaust has already occurred. So they kicked the can a bit to allow the vultures to continue plundering and stealing and kept the stock market even for a year - things are not better -much worse. The collapse will be much worse, unless we just gradually slide into ruination and the inevtitable much larger war. People like you make me want to vomit -on your face.
How fucked would it be if this thing crashed in Dec 2012? Manipulation much?
The "Hopium" effect has worn off. The hangover clearly resembled in POTUS sliding popularity. It's not his fault. He's a convenient scape goat for the inconvenient truth.
Most here I would expect to have had their awakening either prior to 2008 or at least by 2008. Some probably misunderstood the Fed action and missed out a trading opportunity. It doesn't matter now. We're going downhill from 2010.
Whilst I respect Chris I don't understand why he advocates that a return to "growth" is the answer to this mathematically inevitable outcome. First year Maths teaches you about exponentials. What's so difficult to understand about the finite lifetime of the exponential growth of anything on a finite planet?
I'm disappointed in Chris's preponderance on such a basic flaw.
You're a bright fella. Growth, as we have come to know it, means loose credit. Which is how we got here. Real growth, working and making stuff and having some left over profit which is held in a form with no counter-party risk, seems a vision from the past. A nice find on your part.
Where in the Hell is Dr. Doom?
Kick a can too long, and it becomes less of a can and more of a deformed piece of metal that used to be a can, and is now good for at best recycling, and at worst, leaving in a ditch to rust.
This is more like a Kardashian can... It never ends...
Real economic growth has inherent limits, any system with finte inputs does.
Debt, and our current version of fiat money, do not. The check to too much debt/credit ought to be an interest rate that goes up (to discourage credit expansion), however, when top-down mangaged, politically unaccountable, central banks manipulate what ought to be something that maintains a market-based equilibrium, the interest rate becomes nothing but a tool to central planning uses to encourage MORE credit expansion. They are trying to counteract the natural balance of things and will lose. "Don't fight forces, use them" says Bucky, and we should listen.
There is a disconnect between the fundamental natures of debt, fiat, and economic growth. Until the growth of debt comes in-line with economic growth, nothing will be be resolved.
Look at who owns what; it is the old enemies that own each others debt. The UK and Japan own the most US paper. The US owns the most UK paper. The UK owns the most IRE paper. The most ITL debt is owned by France.
Debt war.
Forget Ownership - noone OWNS - you are merely seeing the pass-thru. The UK is an offshore tax haven for US transactions to pass-thru before those transactions head back to the US or elsewhere. It is not OWNERSHIP that is a solid fact any more, it is ROUTING. If we knew who actually OWNED stuff Re-Hypothecation would not be an issue nor would Derivatives nor would CMOs or CDOs or SLABs
JUBILEE!
They have tried almost everything except giving a bailout to each and every household.
A debt jubilee, forgiveness of all debt, is the next step.
The politicians and bankers and money-grubbers will likely, however, push the world to collapse and war over their lust for mammon by stealing more from the mouths of babes and the elderly and infirm instead.
How can you do a "concerted currency devaluation"? They are all valued in relation to each other. That's called a currency war and it's not concerted. Gold still wins, though.
How can you do a "concerted currency devaluation"? They are all valued in relation to each other. That's called a currency war and it's not concerted. Gold still wins, though.
Try worse than the Great Depression. Never before has the entire world been run entirely on fiat. Whoever thought that the price of money is 0% is nuts. Society is backing all new mortgages and society is backing all deposits. This will not end well.
TheSilverJournal.com
Exactly, a liquidity crisis where they are giving money away.
During The 1930s Depression not one single bank in The British Empire went belly up
ok. Print away. Like a silly game, give every bank the money they need for everything...RE, derivatives, bond losses...everything. New situation is that all debts are satisfied. Then what? Why, with all that cash they triple-re-hypothecate ourselves in the next debt situation. Nothing changes.
There is a big hole in the boat. What does the govt do? Listen to experts talk about handle strength of bigger buckets and watch power points about 'Efficient Bailing Mechanics of getting all the water out in a timely manner, 3-D math models everywhere, entire industries circle the problem yet nothing is ultimately done about it. Oh, along the way, our boat experienced other mishaps like its slammed into the rocks, the engines, mast and sails have all been taken down.
mr. stock market is clearly having trouble believing this story.
Tyranny of the Manufactured Majority
What you want to do is turn (spin) the electron (string) into the proton (string), and turn the proton into the electron, to extend the string (relativity circuit). Electron and proton are words, perspectives.
So, the Hippies became the Corporate Tyrants. Surprise, surprise. If you want to see the process in the shortest period of time, go to Mendocino County, where black market pot growing controls the economy. Because the individual may not lawfully grow, a drug culture/economy develops which attracts other drug cultures (AMA), and everyone is controlled by drug addiction, which is simply an ignorant frame of reference. Stupid is as stupid does.
The Hippies seek freedom from the Corporate Tyrants, and the Corporate Tyrants seek freedom from planetary control. All seek to avoid healthy, symbiotic planetary adaptation, which they view as control even though there are a relatively infinite number of ways to adapt. In net, they all desperately seek to avoid change, digging their own graves day by day. If any of them truly believed in freedom, they would protect the freedom of others around them. All they do all day is fight for their spot at the trough, to which they believe they are entitled, collecting knowledge, which is a piss-poor foundation for an economy.
Santa Barbara is another good example. It received millions and millions of dollars for the homeless, which the homeless never received (HPRP, homeless prevention rapid re-housing, to name one program), but it has money for a $6M skating rink. Government is, and always has been, a bait and switch embezzling scheme, where the participants embezzle from themselves, which is why it must behave as a viral ponzi scheme. That is History. Christmas is just more of the same bullsh**, a means to ensure that all the participants stay on track, which does not mean that you cannot enjoy it anyway.
What is wealth if its currency has no value? If its property has no value? If you choose to think, the solution is pretty damn simple. They will always hunt you with your own technology, because they give themselves no other choice. At some threshold, the cost of learning exceeds the majority, but to survive it must have the resulting technology. Provide technology accordingly, depending upon the amount of gravity required.
Their enterprise system is crashing because they made the enterprise architects non-persons. Gravity always repeats History. It’s the nature of the system. Tinkering with its laws now only accelerates time to detonation because it has reached ponzi demographic collapse. Physics is physics; everything else is misdirection, the interesting but unnecessary façade – busy work for gravity.
Why must traffic have a roadway? Why must a vehicle weigh so much? Why must there be so many parts? What is the economic implication? Tesla was a bright guy, but he was out of time. Don’t get side-tracked. Creating time is the point of the system, the Tip of the Spear. To avoid planetary control, get off the planet, and don’t expect critters to be anything other than critters, human or otherwise.
The universe is the boss. If you don’t like it, commit suicide, which is exactly what governments do. Just give them enough rope to get out of their way when they tumble. The “God” particle; crack me up. What is a photon? If you want to believe in the devil, good and evil, the devil is avoiding the unknown (work), in detail.
Why is the rest of the world sending millions of dollars to Santa Barbara for the homeless? Keep laying that pipeline, and paving that road, at all cost.
“States across the country are seeing growing backlogs of work, as shrinking staffs struggle to meet rising demand for some services. From public housing to crime labs, restaurant inspections to court systems, four years of layoffs, furloughs and hiring freezes are beginning to take a toll.”
Hmmm...... Are you implying { OVER regulation}?
That oil price chart sure looks like a rounding top. If so, and oil prices start to decline, what does that imply? Published unemployment rate of 20 percent, SGS rate of 30 percent, BDI is for FREE, slashed government spending leads to GDP shrinkage worldwide. Some smart money is betting on governments and central banks to print to infinity, but I don't know.. maybe we have reached the limits to growth and are nosing over into terminal decline.
BTD! Go long tree huggers! M/T ( medium term), 10-2012. In all honesty, we can't grow our way out of this one.
Bring in the [ Bull Dozers], and recycle the " Political Douche Bags".
Mass graves?
It turns out Bernanke’s Zero Interest Rate Policy was more than providing banks nearly free money to either pocket or loan out, whatever their choice. Now another major reason is revealed… spelled out in today’s Bloomberg headline: “Bernanke Prods Savers to Become Consumers.”
It wasn’t enough to swamp savings with inflation to keep the DOW from falling. The Fed owners now have the economy in such crisis that they need the savers to throw in what’s left of the money they earned over a lifetime to save the bankers from the risk that they created.
And what is Bloomberg but the leading voice of the internationalist banker tyrants? And isn’t it like the Stalinists and the Maos to finally rise to the point where they are confident enough, while viewing their victims, to mock them?
He lives.
!! Merry Christmas! Yen.
Bernanke is near the top of the list of a lot of people who should be shot - for treason. Waterboard them with diarheaa first - over and over and over. These vampires deserve no mercy. They are evil.
It's not all doom and gloom. The writer fails to mention that when the banks collapse the cost of second hand Mazzeratis and Ferraris will be much more affordable.
I'm shorting Yachts -when people figure out they will soon be able to get used yacht's for pennies on the dollar -no one will be buying new ones-in anticipation of some incredible deals.
"The simple fact is that oil prices remain quite elevated by historical standards"
That sentence is quite ridiculous, on a level with a Bernank statement.
What does elevated mean exactly? Compared against what, over what history range?
In inflation-adjusted dollars, oil remains cheap if your comparison history stretches back more than a few years. Measured in average wage hours, the picture might look a little less nice, but still not dramatic.
Bob Pisani, reminds me of the " File Clerk", in ' Beetle juice". Some one give that guy a " reality check"!
Long Live SANTELLI! Sue Herera has a clue to!
When I see my neighbors killing and eating one another I will know the collapse is imminent.
nobody has said,... what i believe to be a wonderfully written, and knowledgeable, 'great', programmed reiteration/interpretation of where were headed - thanks CM
'figures don't lie, except for gold bitches?'
We are so screwed. We could be at the dawn the biggest neo-dark-age the planet will ever see. Massive reset on global scale.
what us as zerohedge should also try to grasp is how many smart sucessful people who are working are still completely unaware of what is hapening. they still contribute to their 401K with blind confindence in the system and still greatly outnumber us. This explains a lot of the shock and disbelief that we all share as to why the markets are still where they are and physical is still so cheap.
That means we have about the same-sized economy to support an additional $5 trillion in federal debt, or roughly a third more than when the crisis started.
This might be the most significant statement of the article.
National GDPs simply aren't keeping up with national debt growth. National tax revenues are shrinking to the point where they can't keep the government operating and service the growing debt.
Greece and other PIIGS nations are good examples. Greece's economy is collapsing while national debt is growing rapidly. They have to borrow larger amounts of money, and it starts snowballing.
Same thing is happening in America. Economy shrinking (in real terms) during Obama's term, while national debt has grown 50%, requiring borrowing larger amounts of money to maintain the status quo, around $150 billion a month now, nearly $2 trillion a year.
So the situation is already snowballing in America. By the end of Obama's term it'll be nearly $200 billion a month, approaching $2.5 trillion a year.
The only way to keep it going is Bernanke running the printing presses, debasing the dollar in the process. QE3 is already happening. It has to, in order for the government to keep borrowing $150 billion a month.
Shrinking economies and shrinking tax revenue while national debt keeps growing is going to lead to a massive sovereign debt crash sooner or later.
As Mr. Andrews said after Titanic hit the iceberg "Titanic will founder (sink). It's a mathematical certainty".
And politicians respond the way Bruce Ismay did. "This ship can't sink!!"
Mr. Ismay was proven wrong of course.
Isn't it comforting to know....there will always be a Monedas.....if not in the flesh.....someone will take up my torch and illuminate future generations ! Sigh ! Whatever your "belief system" (religion ?)....The end of the year is a good time to show everyone how well it is working for you and what a generous sport you are ! Merry Christmas and Happy Whatever to the other Klingons out there ! The Monedas 2011 Comedy Jihad Never Explain Your Magic To The Unwashed....They Need You Just As You Are !
Those circle charts are a thing of beauty.
Everyone owes everyone money. Why not just pass a euro around and call it zero and start over.
What was that old story? A man comes to town with a 100 dollar bill...
Fuck me. I've been trolling around on ZH for the past few months not quite sure of what to make of everything. Consider this sheep sheered for the last time. This is absolutly astonishing that it has all come to this.
Out of curiosity...viable places/locations to relocate to in order to hedge against the worst of the worst (if any such locale will exist).
Financial Crisis 2012 European Banking System Bailout by the Federal Reserve