Leaving Ponzi In The Dust

Tyler Durden's picture

From Mark Grant, author of Out of the Box

Leaving Ponzi In The Dust

“Ideas are indeed the most dangerous weapons in the world.”
                                          -Justice William O. Douglas

I am about to walk into a highly speculative and somewhat dangerous place. I make the journey though because when all the options for explanation are exhausted whatever is left; must be the truth.  There have been a lot comments about Europe indicating various Ponzi schemes and Ponzi bonds but it is now evident to me that we have not looked hard enough; long enough. Our range has been diminished by the sheer size of Europe’s undertaking and we have not dared to regard all of the facts as one all-encompassing plan in the fear of what we might find by doing so. So today I square up and look into the maw of the Beast and describe what I think is staring back at me.
The European Central Bank prints money and hands it to the banks in undiminished size and at an interest rate which compels massive carry trades. The European banks buy sovereign debt that helps to lower the price of the sovereign’s funding costs, the banks use some of the money to increase their own capital and lend some of the money to individuals and corporations in the nations where they are domiciled. The money gets used and eventually dries up and a some of the capital is used to come into compliance with Basel III. The yields of the periphery nations fall but then begin to rise again. Germany, using Target-2, keeps lending money to the other central banks which use part of the money to support their currency, the Euro. The circle is then completed and the equity markets, notably in America, trade off of the strength of the Euro and some days at almost a point by point movement. Never before in the history of the world has such a grand scheme been implemented and in such an all-encompassing fashion. The unlimited amount of money that is available, because they can print all the money they want, has allowed Europe to game the world’s financial system while no one looked or caught on to the scheme. The world’s fiscal system has been rigged by Europe.
In the past, when countries such as Peru or Argentina hit the wall and defaulted; they did not have enough capital to overcome the rest of the players in the financial markets and so this Ponzi manipulation could not be done. Now with Europe utilizing all of the assets of a Continent; the pipedream of absolute control can be exercised by the State with the only dangers being the United States, China, an accurate IMF, investors opting out of buying Europe’s debt and the ratings agencies. This is why then that Europe is so vicious when it comes to the ratings agencies; because they are out of their control and one element that could sink the ship. Europe has minimized America and China by the natural fears of nation-states realizing the potential wreckage that could be done to their national economies from Europe’s duress. Europe has minimized the IMF by one of their own in charge and by supplying manufactured numbers that leads to each and every projection done by the IMF for Europe to be far past wildly optimistic as Europe manipulates their own data. The Great Game has now been rigged past any attempt ever made before but real numbers eventually catch up with falsified numbers I can assure you. It may take some time ,the falsification may not be readily apparent, but the truth eventually rears it grizzled head. There will be a point when so many institutions will no longer buy European debt and when the balance sheet at the ECB terrifies everyone and the demands of austerity drive nation after nation into throwing out their governments and replacing them with politicians who want to protect their own country and not fantasize about any European visions or, in the darker case, the people revolt against their government in some kind of violent manner that the construct sinks under its own mountain of debt. To continually pay off old debt with larger and larger amounts of new debt eventually has serious consequences. In the case of the recent LTRO, to get the same results, you would have to double the size with $1.2 trillion paying off the old debt and $1.2 trillion being used for the same purposes of the original monetary easing so that the balance sheet at the ECB would balloon to $5.2 trillion.

“Logical consequences are the scarecrows of fools and the beacons of wise men.”
                                                                              -Thomas Huxley

There are a number of logical reasons why the central banks in Europe buoy the Euro and the first and foremost is that Oil/Energy trades in Dollars so at 1.32 euros to the Dollar Europe has a 32% discount when buying Oil/Energy. This method also allow Europe to buy American goods at a 32% discount so that their imports are cheap while they trade with themselves and Asia at the rate of the Euro and then finance themselves through the ECB and Target-2. They have, in fact, created a closed system that they try to maintain at ANY cost. No government in the history of the planet has been able to close off the financial circle in such a fashion but without growth or Inflation the paradigm cannot go on indefinitely as the ratings agencies and then investors opine upon the scheme.
The construct which supports the European Union is also coming under fire. It is not, I assure you, that there is no mechanism for a country to leave the Eurozone that stops any nation from departing. This is similar to Chancellor Merkel’s nonsensical comment last Friday that the new EU fiscal pact cannot be renegotiated. Of course the fiscal pact can be changed and changed anytime enough governments want to change it. A country can leave the EU anytime they wish to leave. The reasons that nations do not leave can be found in both the carrot and the stick of the manner that the European Union is structured. The carrot is open borders, open trade, financing by the ECB and Germany and available capital if a country has fiscal difficulties. The stick is a loss of trading partners, isolation from the rest of Europe and a lack of financing by the core nations. However, and I point to Greece specifically, when you have borrowed all you can borrow and your begging falls on deaf ears then it is your benefit to depart because you have gotten all you are going to get and then the ECB, the EIB and the IMF are stuck with the consequences of Greece’s sizeable debts that will finally have to be recognized with quite dire consequences for those institutions.
In the short term the greatest pain will most likely be felt in Spain. There is no way out for this country any longer. They are experiencing a deep recession, unemployment that may lead to social unrest and any further attempts at austerity will only lead to even worse economic conditions. Here is one more example of a funding country that is about to be a funded country and the size of the bailout will strain Europe in a manner that cannot yet be accurately contemplated.
I suspect the biggest surprise though will come in Germany. Berlin has done all that it can do exempt itself from the recession that is sweeping across Europe but they have just about run out of tools to exempt themselves. All of the austerity measures and all of the fiscal restraints that they have imposed upon the rest of Europe undoubtedly result in one specific consequence and this is a severe lessening in Demand. Providing financing for that which is not sought is irrelevant in the end and as Demand for goods and services dries up across the Continent then Germany will begin to feel the pain as well and join the rest of its neighbors in recession. With no growth it will come down to a choice between declining economics or Inflation and if there is one country that is allergic to Inflation it is Germany and so the choice will come late, will be agonizing and will lead to a massive political re-structuring where I suspect it will come to “Germany for the Germans” and a rise in political parties that represent that vision.
When it comes to the European debt to GDP ratios or the financial projections that are never, ever accurate or the ascertations made by the politicians that each and every country in Europe is on sound footing never forget the basis for German logic. It is grounded in what they have learned during the last one hundred years and as the “wink, blink and nod” mentality in Sothern Europe has not changed; neither has the German manner of thinking either.

"Propaganda must not investigate the truth objectively and, in so far as it is favorable to the other side, present it according to the theoretical rules of justice; yet it must present only that aspect of the truth which is favorable to its own side…The receptive powers of the masses are very restricted, and their understanding is feeble. On the other hand, they quickly forget. Such being the case, all effective propaganda must be confined to a few bare essentials and those must be expressed as far as possible in stereotyped formulas. These slogans should be persistently repeated until the very last individual has come to grasp the idea that has been put forward…Every change that is made in the subject of a propagandist message must always emphasize the same conclusion. The leading slogan must of course be illustrated in many ways and from several angles, but in the end one must always return to the assertion of the same formula."
                                                      -He that MUST not be Named

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cossack55's picture

Jim Willie is nominating France for "King of the PIIGS".  I'll second.

Silver Bug's picture

We will never be able to fully escape ponzi schemes.



CH1's picture

All you have to do is walk away from it.

Then, build better things.

Oh regional Indian's picture

Why should anything Compel a carry trade? That sounds like specious banker logic. But it was there.

For the taking that is. It's like the fraud post above. Blow-off top on all things ponzi, which is really all things.....period...Population Explosion Ponzi? oil Ponzi?

And walking away is hard to do, BUT, there are 50 ways to leave your lover....all ties are voluntary. All.



AldousHuxley's picture

IT is EU ponzi vs. US ponzi at this point.



steve from virginia's picture


Agreed, a nonsense post.

Now, to find a good spot to watch the fireworks ...

Eireann go Brach's picture

Obama....aaaahhhhh I approve this message!

Marco's picture

Meanwhile ...


Yeah sure, it's the EU running a scam ...

The Eurozone is kicking the can on internal restructuring through financial games, but it's not really scamming the world by doing it ... in fact the US profits more, by allowing it to sustain a deficit a little longer while they are out of the lime light.

Dick Darlington's picture

Forbes article:

Eurozone: There Might Not Actually Be a Solution To The Euro Crisis


GMadScientist's picture

Stock ain't flow and this ain't Chicago.


Manthong's picture

It’s gotta be a real power rush when you know you can make people think that surveillance, government intervention and repression enhances security, liberty and promotes the general welfare.

Just make sure the bread and circuses continue.

CH1's picture

Pathetic... but true. :(

SAT 800's picture

Judging by the Euro Citizens rush into Gold and Silver on several noteworthy occasions, I think a lot of them know the currency is not being handled respectfully by the Dear Leaders. The nine dollar a gallon gas is kind of a big clue, too.

JohnKozac's picture

"...unlimited..." is the key work here.

Peter Pan's picture

Every single trading bloc is engaging in some form of ponzi scheme and nobody is willing to pull the plug on a neighbouring ponzi scheme or to blow the whilstle, because it will expose their own ponzi scheme and bring the whole show crashing down.

Some event will however trigger an exit to the door and then you will see the camel trying to get through the eye of a needle.

Bam_Man's picture

The global fiat Ponzi (and the multitude of other Ponzis that have sprung up around it) will end the moment that a major oil-producing nation announces that it will no longer accept paper/electronic dollars as payment.

That moment is coming in the not-too-distant future.

Sandmann's picture

Funniest thing is that there are 10 million legal weapons in Germany held by Citizens....there are 60 separate gun registers. They now have passed legislation to build ONE National Database of LEGALLY held weapons....funny timing !

UK has only 1.8 million then again handguns are illegal - ALL handguns.



The strict gun control laws that we associate with Britain today really began with the red scares of World War I and were implemented thereafter, with handguns finally banned in 1997.

Carrying a pistol in Edwardian times was a right, and chasing down a criminal was a civic duty. Doing the same these days carries a long prison sentence. The modern German gun owner may well use an illegal pistol to defend himself against a murderer -- after all, arrest is better than death.

BidnessMan's picture

Better to be judged by 12 than to be carried by 6.

malek's picture

 10 million legal weapons in Germany

Another one spouting nonsense here, just like that bank guy in brussels... 

What comprises legal weapons in Germany - are paint ball guns and stronger "Luftgewehre" included?
And how many owners of real weapons are there in Germany?

Finally how difficult is it for an adult well past his youth -let's say 30 and above- who never had a conviction, to obtain the license and a gun of a serious make, for example a Glock 17, and the fitting ammunition?

Seorse Gorog from that Quantum Entanglement Fund. alright_.-'s picture

-Hitler that MUST not be Named

nolla's picture

What the..?

"There are a number of logical reasons why the central banks in Europe buoy the Euro and the first and foremost is that Oil/Energy trades in Dollars so at 1.32 euros to the Dollar Europe has a 32% discount when buying Oil/Energy. This method also allow Europe to buy American goods at a 32% discount so that their imports are cheap while they trade with themselves"

Oh my god Tyler, these kind of guest posts really lowers ZH level..

Has the author ever heard of PPP? Or thought about what the nominal exchange rate really means? With this rationale (32% discount) how can the author explain competitiveness of Chinese companies? Since they have to pay 6,4 times MORE for their Oil/Energy than the U.S. Oh, come on...

postafoa02's picture

I'm baak! Currently locked in an asylum for trying to speak the facts. What a world..

Anyways, i have my samsung sgs2 and lots of time, and i promised to tell you fine folks how this thing really is, so here we go. Excuse any typos i miss i'm doing this mostly with swype.

I've been following this farce since the Blogspot days of zerohedge, all the vids and audio interviews, everything under my belt, and i will attempt to explain how this is really a psychological game (con) of numbers, and how the human brain deals with them.

First a simple example: Say you go to the grocery one day and buy one banana which costs one money.

The next day you go to the grocery and one banana costs 1,2 money. What has happened? There are 3 possibilities:

A: the price of bananas have risen 20%.

B: the purchasing power of money has fallen 20%.

C: some combination of A and B.

The point here is you can't know what has changed in the current system, because everything is measured in arbitrary NUMBERS which have no meaning at all, nobody can currently define what one money is.

The only way to measure value is by WEIGHT. Be it the weight of a sack of apples, the weight of a cow, or the most stable, least corruptable form of weight, gold.

You may express the weight in numbers but you may never express VALUE in numbers directly.

Ofcourse this also means that ALL the charts and figures presented everywhere, including here on ZH all these years are utterly useless, they all attempt to express value in arbitrary, meaningless numbers.

When you put a hundred dollar bill next to a gold coin on the table and show it to a western mind, the western brain will automatically ask how many dollar bills the coin is worth today.

This is the result of all encompassing, decades long brainwashing by powerful government[al]s and bankers. The roots of it all can be found in the dark ages and the celtic druids, who learned how to use words and symbols as black magic to rule the people.

The correct question, ofcourse, is how many gold coins is the hundred dollar bill worth today. To put it simply, it's the stupid fact that the numbers printed on the bills we use don't change from day to day that has almost everyone fooled.

The reality is so vain and sick that nobody dares to even think about it. Nobody dares to admit it's the most basic thing, the numbers where the problem lies.

Thank you for even reading this. Yours, Nemesis Nomos.

____ Who can free himself from achievement, and from fame, descend and be lost, amid the masses of men? He will flow like Tao, unseen, he will go about like Life itself with no name and no home. Simple he is,without distinction. To all appearances he is a fool. His steps leave no trace. He has no power. He achieves nothing, has no reputation. Since he judges no one, no one judges him. Such is the perfect man: His boat is empty - Chuang Tzu

Bag Of Meat's picture

The problem is that in a world where you depend on others,and everyone believes in lies, in order to survive you must either compromise with those lies, or change the world.

Goldtoothchimp09's picture


It's completely unconstitutional - to have a privately owned banking cartel (FED) own the nations currency... all men created equal -- not when they literally own the nation’s currency -- the FED created a privileged class of citizen...the kind that can create unlimited amounts of money for themselves out of thin air with no responsibility to the citizenry or to any elected officials.


Money only gets created from loans from the FED in our debt-based system... therefore, the FED unilaterally decides who gets money, in what amounts, and under what terms.

Ben's money dispensing helicopter hasn't dropped any money to me ... you ??

No ... we only get taxed thru the debasement of our money (inflation tax). Only the bankers get the money. The economy only gets what might 'trickle down' from the bankers and the corporations and the wealthy that the FED funds.  Literally ‘trickle down economics’ on the grandest scale.

It is THE ISSUE of the times - yet the FED has been successful in keeping people in the dark thru obfuscation.

A 'contribution to the IMF' should be called what it is -- money bailout for the bankers.
'Quantitative Easing' should be called what it is -- money bailout for bankers.
'Zero interest rates' should be called what it is -- funding bailout for bankers.

 I can't wait until people wake up to the scam!hat it is -- money bailout for the bankers.

'QuanItitative Easing' should be called what it is -- money bailout for bankers.
'Zero interest rates' should be called what it is -- funding bailout for bankers.


I am on to you's picture

We are nice people us Europooohs.

1.We used "Spread" us all over the planet,the masterplan.Mr.C Colombo,just went lost.

2.Then we used Spread them(all others)all over their lands,in small pieces!,Yes i am European.

3.Then Spread their welth amongst US.

4.Now ,its only our bad smell,that is Spread.

5.Congratulation.With the wrong Spread.

6.Now its spread the dust in the wind.


GreetingsFromGermany's picture

20 - 25 Percent here know it well and for sure agree to this article - long since they say "Good Bye" to each never-come-back-bailout fund Euro.

But the majority of the people are apolitical or efficient rigged by the huge number of "ink-knigths" of the Merkel-court-press.  "Ink-knights" - that's how the "He that must not be Named-Author" called it in the same book....

radicall's picture

Good start of the article, but you lost me here

"There are a number of logical reasons why the central banks in Europe buoy the Euro and the first and foremost is that Oil/Energy trades in Dollars so at 1.32 euros to the Dollar Europe has a 32% discount when buying Oil/Energy. This method also allow Europe to buy American goods at a 32% discount so that their imports are cheap while they trade with themselves and Asia at the rate of the Euro and then finance themselves through the ECB and Target-2."


Weak dollar is a result not cause of oil prices. Oil exporters have to diversify away from exclusively holding dollars, is why they buy euros. Besides, Germany would love a Euro at parity. Italy has some decent exports too.

Peter K's picture

One more aspect that needs to be mentioned here is that the EU could not keep the Euro exchange rate at a 30% premium to the USD without a little help from some other players, i.e. the Chinese, the Russians, the Arab States, and maybe even the Fed itself. As for the first three, the reason that they are the only bids in the EUR/USD pair of late is due to their revulsion of what can be termed as USD hegemony. Since they can't manage to create a secondary reserve currency, they have thrown their lot in with the EURO. As far as the FED is concerned (and here I'm referring to the swap lines into the ECB) this is nothing more than an attempt to help the Obamadisaster in his reelection campaign. If my hunch is correct, we will be hearing a lot about the American Wirschatswunder that was created during the Messiah's reign. But for the manufacturing sector to be viable, the USD needs to be weak. And this is where the FED and Helicopter Ben have been so effective. "Balance Sheets Tools" anyone? :)