On Liquidity And The False Recovery

Tyler Durden's picture

David McWilliams (of Punk Economics) is back (previous discussions here and here) and this time he takes on the the flood of liquidity and the false recovery that has been created. Starting with a discussion of gas prices and the central banks' recklessness behind it, he swiftly shifts to the 'shambles in Greece' where more debt is supposed to solve the problem of too much debt yet again. From extreme highs in Greek rates to extreme lows in rates among the major developed economies he juggles with the conundrum of injecting liquidity to reflate a bubble in order to avoid the consequences of the bursting of a bubble - brilliant (as those Guinness chaps would say) - as this merely pushes the next crash out a few more years but making it bigger and more devastating. Global Central banks have pumped $8.7tn into the banking system to 'save the world'. Saving the banks has cost more money than it cost to fight WWII, the first Gulf War, put a man on the moon, clean up after last year's Japanese Tsunami, and the entire African aid budget for the last 20 years all put together. Context is key - is it any wonder asset prices have risen since there has been so much cash looking for a new home - why hold something that is printed everyday (cash) when you can hold something that is actually running out like oil or gold. The punchline is what goes in must come out - and that means inflation - as the 'trip' of excess liquidity comes home to roost. Must watch.



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whatsinaname's picture

Not related directly to the topic but the Fed's liquidity has not helped Nat Gas prices and wondering how these Nat Gas suppliers are able to sustain themselves at these ultra low prices ? Lately coal companies getting hammered too !! Anybody hear of bankruptcies in that arena ??

Oracle of Kypseli's picture

Just bought January 2013 Nat gas call options. Someone said that natural gas "rises".

Doña K's picture

Be careful, the profit vapor-rizes.

derek_vineyard's picture

IMO nat gas will bottom at 1.75 or so

CrazyCooter's picture

I have said for a long time now that shale gas will absolutely blow up. Big boys will come in and scoop up leases from bankrupt companies where the economics work. Equity holders will be shown the door (and the wood shed).

I would rant, but this is probably a much better rant than I would provide ...


Folks, shale gas production rates require DEBT. Without constant inflows of capital, the rates of production spike and fall rapidly.

I also read that companies which hold gas reserves as part of their asset base have to mark these assets down as prices decline or remove from their assets entirely if the price is too low for the reserves to be profitable. For the savy who do their homework, some companies who hold real natural gas assets will have share prices beated down with the low nat gas prices ... creating select buy opportunities when the eventual implosion and return of sustainable gas prices occurs.

Do your homework. Do your math. Nat gas prices go up, but only after the orgy of debt fueld shale implodes.



P.S. The oil drum had a really solid primer on how nat gas fracking works, its about two years old I think. I couldn't find it in a quick search, so check back in a bit.

UPDATE: a lot of search results over at TOD are coming up neutered or not found, so there may be some technical difficulties at their site.

TruthInSunshine's picture

Here's an outstanding Bloomberg article that Zero Hedge should front page, that should scare the shit out of anyone who is wondering how long the debt disaster that The Federal Reserve & The Federal Government have now already created can be ignored before it inevitably rears its quite ugly head (hint: not long, and there are compelling specifics as to the "when" moment arrives).

Here's a teaser excerpt:

Four Numbers Add Up to an American Debt Disaster

Consider the following numbers: 2.2, 62.8, 454, 5.9. Drawing a blank? Not to worry. They don’t mean much on their own.

Now consider them in context:

1) 2.2 percent is the average interest rate on the U.S. Treasury’s marketable and non-marketable debt (February data).

2) 62.8 months is the average maturity of the Treasury’s marketable debt (fourth quarter 2011).

3) $454 billion is the interest expense on publicly held debt in fiscal 2011, which ended Sept. 30.

4) $5.9 trillion is the amount of debt coming due in the next five years.

---And here's the link to the full article:

Four Numbers Add Up to an American Debt Disaster
Oh regional Indian's picture

In the end though TIS, those are just NUMBers. The other side of this whole argument is, let the false, debt money shit-show just fall apart. We might be surprised at how everyone dusts themselves off and suddenly feel lighter. 

The role of debt-money in our lives has been thrust, advertised, evangalized, teased into it's current, god-esque place.


I say let the house of cards collapse. there is no "need" for forward hedging in a natural society. There is no place for Speculation in a natural society.

Savers vs. speculators, let the games begin.

Oh and nat gas? All eyes on the north sea.



Ratscam's picture

Look at the 5 year UNG chart, a complete disaster.
It may be too early to jump on the nat gas trade since many people are expecting a pull back in stock indices. Commodities would follow the same path for a while.

maxcody's picture

Only because the Big Brother in the White House will not

support Nat Gas.  If he is reelected I will be very short.

Dr. Engali's picture

I just bought some junk silver and some gold. You know I can buy a gallon of gas with a couple silver dimes from the 60s ? Still ... ! Can you believe that? And the thing is ... In the 60s gas cost a couple of dimes!

anti Oligarchy's picture

Ya know, there is some hard lesson in real currency in your statement here.  Something about true value and what that value can aquire.  I'm sure that there are smarter people here that can verbalize this better, but to me this seems almost profound as an example of the true value of hard assets.  That the same 2 dimes could by the same amount of fuel 40 years later (after fiat was removed from being tied to said hard asset) seems fitting

Melin's picture

There's an oft-repeated teaching that an ounce of gold bought a fine toga with all the fine accoutrement for a Roman dandy just as it will buy a sharp suit for an uptown gentleman today.

dark pools of soros's picture

and a couple lines of coke gets ya laid

uno's picture

I assumed it was one line, guess inflation hit cocaine addicts

Schmuck Raker's picture

No, congressmen are just that much more in demand.

trembo slice's picture

well, you can never do just one.

TeresaE's picture

You'd be wrong.

The "war" on drugs increased the price of pot in the '80s, but you can still get the same gram of coke for a hundred dollar bill.*

Same as in the '70s.

The difference is in REAL terms, the coke was VERY expensive before the "war" and has become much cheaper as we have printed and off shored.

And the only pot that see inflation now is sold in legal "drug" stores in the few states that have decriminalized it for medical use.  That pot is seeing massive inflation, street stuff not so much.

Gotta keep the masses sedated, cheap coke and snap cards for all!

*good friends that are cops, bikers and drug counselors

We traded freedom to chose for bigger courts, higher local taxes but have had NO effect on drug use or deaths. The American way.

macholatte's picture


 junk silver = oxymoron


TWSceptic's picture

worthless paper = oxymoron

i-dog's picture

Worthless paper = pleonasm (redundant word)

dannyboy's picture

Tyler, that video is removed. Here is the up to date one.


KennyG09's picture

Man, I see in fight club the strongest and smartest men who've ever lived. I see all this potential, and I see squandering. God damn it, an entire generation pumping gas, waiting tables; slaves with white collars. Advertising has us chasing cars and clothes, working jobs we hate so we can buy shit we don't need. We're the middle children of history, man. No purpose or place. We have no Great War [false]. No Great Depression [false]. Our Great War's a spiritual war [true]... our Great Depression is our lives [true]. We've all been raised on television to believe that one day we'd all be millionaires, and movie gods, and rock stars. But we won't. And we're slowly learning that fact. And we're very, very pissed off. 

-Tyler Durden

Michael's picture

I've been articulating what's in this article for years, now looking for the depression to be 3 times worse than if DR Ron Paul had been elected in 2008.

Suffer now Bitches!

Pemaquid's picture

Gave you a +1, Tyler, but I for one am not pissed off. Well not much, anyway.

Michael's picture

On the T Martin shooting;

Someone should just shoot that half breed hispanic latino wetback so we don't have to read about it on Drudge or see it on the race baiting channel MSNBC anymore.

Michael's picture

Perhaps we should have affirmative action for whites so we can turn the mostly black NBA and NFL to mostly white again?

Michael's picture

Just an observation;

The so called Democrats and Liberals articulate their feelings from only one side.

I and my kind articulate mostly from our logical side.

Although I do feel great remorse when my dog dies, or my parents die, or a good friend dies.

OK? I use my feelings, but not to wright legislation, I want hard facts about it. All that wins and all that looses.

We can't come together left and right untill we both speek a languave we can both understand.

Michael's picture

You're just going to have to accept it; The Federal Reserve is the root of all evil, not each other.

Michael's picture

President Obama should just declare the NDAA law unconstitutional and he will not enforce it, and seek to have it repealed.

Obama Wins!


GeezerGeek's picture

I'm okay with his saying he will not enforce it and seed to have it repealed. Having him declare it unconstitutional is not good. It's bad enough that he acts like king and usurps the role of Congress. Now you want him to act as the SCOTUS too?

Next thing will be to have him declare via Executive Order that all prior Executive Orders are null and void. That he could probably do, but won't.

AnAnonymous's picture

Interesting point.

So it means that US citizen negroes living in the US of A have the power to discriminate in the NBA, NFL?

What conduit does this discrimination process use?

That would be a piece of knowledge, for sure.

Until that point, well, that is just US citizen propaganda showing again the eternal US citizen nature.

GeezerGeek's picture

The NBA and the NFL, among other sports, discriminate against those less physically capable. In many other occupations the qualifications are adjusted to account for racial group - it's called affirmative action - and the adjustments are base on goals, which in effect become quotas. That also happens in areas such as college admissions.

If the same rules applied to sports as apply to other occupations, the teams would have to have a racial makeup that approximately reflected the racial makup of the city or region in which they play. Fortunately, sports still is a meritocracy - the best athletes get to play, people like me get to watch.

non_anon's picture

I'm still amazed how stupified the masses are after talking to one today

A Nanny Moose's picture

Let me guess....eeeeviiiil speculators?

rocker's picture

No, Just Market Manipulation.  They, (even the refineries are doing it now), are buying tankers and holding it off shore.

Almost something like the conspiracy of JP Morgan and it's silver manipulation to pull prices down.

Don't fret. Got Silver?  JP Morgan just took a few ounces:


disabledvet's picture

the only banker conspiracy there has even been and ever will be is to BUY LOW AND SELL HIGH. Quite frankly "they suck at it" btw. grow a garden, tend to your food people.

GeezerGeek's picture

You forgot the flip side: SELL HIGH and later BUY LOW.

non_anon's picture

a foreigner (newly minted green card), guv worker, back from a vacation in the Carribieans

Schmuck Raker's picture

Oh......you mean a doctor, fresh from Med School.

tarsubil's picture

 ‎"Most people prefer to believe that their leaders are just and fair, even in the face of evidence to the contrary, because once a citizen acknowledges that the government under which he lives is lying and corrupt, the citizen has to choose what he or she will do about it. To take action in the face of corrupt government entails risks of harm to life and loved ones. To choose to do nothing is to surrender one's self-image of standing for principles. Most people do not have the courage to face that choice. Hence, most propaganda is not designed to fool the critical thinker but only to give moral cowards an excuse not to think at all."
~ Michael Rivero

People simply do not want to question anything. They don't want to think. They don't want to have to make the difficult choice between risking anything by standing up or admitting cowardice. I'm literally killing my brother in law by constantly telling him the truth. Today he had nothing. He couldn't joke. He couldn't come back with any propaganda bullshit. He just coughed. It is like he has consumption. Just fucking think! Take the red pill! That's all you have to do.

macholatte's picture


Now that I look back, I realize that a life predicated on being obedient and taking orders is a very comfortable life indeed. Living in such a way reduces to a minimum one's need to think.
Adolf Eichmann

cowpieflapjack's picture

So, you're doing what exactly? Standing up to your brother-in-law?

kookaburralaugh's picture

Hey - what happened to "the Red Pill" anyway? He was here once, wasn't he?

TeresaE's picture

Don't feel too bad.

My hub's head nearly explodes.

I've been ordered to keep it to myself.

The truth is not to be spoken unless they have a three minute segment on CNBC or the Today Show.

Unprepared's picture

Wow, you talked to one mass? Congratulations

Sutton's picture

CNBC's website says "Stocks hit a wall,may need Bernanke".  Unbelievable  

Dave Thomas's picture

They just don't get it.

And remember that tiny little sliver that was equities in that balance sheet chart we saw the other day!


Dr. Engali's picture

Yes they do. But it's their job to pump the market. They're nothing but stock brokers with access to a camera and an audience. Kind of like one big seminar except they don't have to shell out for the dinner.