"Lulled To Sleep"

Tyler Durden's picture

Yesterday, Jens Weidmann called it a "drug addiction"; for the past 4 years we have called it sheer insanity (and other less polite words). Whatever one calls it, it is obvious that using monetary policy to delay the need for real (not theatrical) fiscal policy involvement that sees to restore debt credibility (i.e., deleverage) does nothing to fix the underlying problems, and merely provides an ever briefer respite from the symptoms of insolvency without ever addressing the underlying cause. Today, even Bank of America has realized this fundamental Catch 22 that is now the paradox at the heart of what remains of capital markets: more easing serves to appease politicians, who see no need to change any of their broken policies, in the process requiring even more QE in the future, and so on, until this always ending in tears game of extend and pretend comes to a sudden and violent end.

From Bank of America

The markets are in a strong “risk on” mode. The European crisis seems to be fading and, while tensions around Iran are rising, most experts argue that a military strike is unlikely before the US presidential election. The “fiscal cliff” is not high on the corporate worry list—it is a distant third, behind general concerns about the economy and the European crisis. The VIX measure of stock market volatility is at a five-year low. Perhaps the consensus and markets are right and the economy will hang glide over the fiscal cliff and other concerns.



However, we remain very concerned about the outlook. In our view, the markets have been lulled to sleep by a temporary remission in negative macro news. We believe the Euro zone crisis is far from over. At this stage the policy pattern for Europe is well established: (1) A funding problem in one of the peripheral countries arises; (2) policy makers engage in brinkmanship with the core demanding austerity and the periphery demanding bailout; (3) the markets start to melt down; (4) policy makers do just enough to satisfy the markets, but not cure the underlying problem. What’s more, the worst of the US fiscal crisis also lies ahead. Note that in the uncertainty shock literature,   the impact of the shock grows exponentially as the day of reckoning approaches. The cliff is slowly working its way into corporate thinking. The real test will come in the fourth quarter.


Of course, none of this is new, and the most recent, and far better graphic summary of all of the above, only now needing an extension to all groupings of "serious men", not just those in Europe, came from David Einhorn.

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GetZeeGold's picture



Wow...I had this really bad dream.


Quinvarius's picture

It is never going to end.  We are talking about a corrupt underwater banking system not printing money for itself.

d edwards's picture

Looks like the definition of a "Cluster f*ck".

kridkrid's picture

Everything ends. Timing and what comes next?

krispkritter's picture

I say we help them start an 'Abrupt Underwater Bankster System'. One that involves a lot of bankers, the ocean, and no scuba gear...

BobPaulson's picture

Even when they have a big round of pitchforks and torches every century or so, the mob tends to lynch the wrong people. This is a theme in Balzac writing on post revolutionary France.

As for the article, the main error is in saying we have been kicking the can for 4 years. I think they left a zero off that number.

ZeroAvatar's picture

Oh, they WILL print.  And print.  Did I mention print? 


Got Physical, Bitchez?

francis_sawyer's picture

So basically everything that everyone on ZH already knows, but put into a cheesy powerpoint slide using a Windows 3.1 system... Musta stayed up all night preparing that one...

Oh regional Indian's picture

Seriously Francis. I was a Powerpoint-tard once, being paid a fat salary for the degrees.

What a mindless existence. 

It's almost like SWOT analysis (shudder!!!) or worse yet, the 4 Quadrants.

If you had 4 Quadrants to explain your model, it was always applauded. 


francis_sawyer's picture



I'm not even a computer geek or anything... I just use them... Back in 1993, I had ZILCH computer experience, but at some point I ended up working for this guy who was an advertising agent (mainly because I was 'friends' with his wife ~ better friends than he knew about ~ lol)... It's a convoluted story, but somehow he landed an account with John Deere that was worth like 9 million dollars... I think he got it sort of under the table because of his relation with one of the VP's who handled that area...

Anyway, a higher up muckety muck looks at the deal here and wants a meeting set up so that he can see if the guy I was working for was LEGIT (which he was, BARELY)... Anyway, the other John Deere guy gets nervous because he thinks he's gonna get canned if we don't put on a good show... So he 'schools' us on how to set up a good presentation... I've NEVER worked with Microsoft ANYTHING at the time, so I go out to the store & buy a Powerpoint floppy & the EXCEL program... I had 2 weeks to prepare a whole presentation on our operation...

Anyway, it was typical crappy arrows & slides, just to waste time (which actually said NOTHING)... I got about 5 slides into the presentation & the BIG CHEESE was ready to storm out of there & cancel the contract on the spot, but I saved the day with some rather genius EXCEL computational spreadsheets which melded together a lot of complicated ad revenue, source, & expenditure data into an easy flow system... We kept the contract...

So my MATH was genius, but the POWERPOINT was about as much as a disaster as the one in this thread...


grid-b-gone's picture

I was an Excel jockey with similar experiences. Spent many personal hours in excess of office hours preparing honest assessments and future, workable plans only to have the spin master at the next level order changes based on what they felt comfortable presenting. 

Paulson's three-pages is now the gold standard of presentations, as if everyone now realizes the former 70-slide presentations with back-up data at the ready was just a headcount reduction being delayed. 

Oh regional Indian's picture

It's all really quite simple. 

It's called a vicious cycle, aka death spiral, and we're innit!


GetZeeGold's picture



We're innit......to win'nnit!


Orly's picture


Watch the Euro cycle down here to ~1.2366 before a ramp to 1.3.

Interestingly, I have found the charts telling me when the news is going to come instead of the news actually affecting the chart.  It doesn't matter what the news is because their timing is impeccable.



caimen garou's picture

the vix is at a five year low, fire the button pushing monkeys and see where the vix and the markets go!

Dead Canary's picture

STEP 1) Collect the underpants.

STEP 2) .......

STEP 3) Profit.


ChubbNut's picture

Rob Schneider derp de derp!

apberusdisvet's picture

The Eurozone, the first phase of the NWO, will not be allowed to fail.  After all is said and done, they will print to serve the banking Gods.  Get ready for $10 gas and $10 bread.  The only good news is that a silver round will get you an all nighter with the escort service's hottest chick.

newworldorder's picture

Its all very simple;

- Politicians want to let sleeping dogs, sleep.

- ZH contributors cant get large numbers of people to wake quickly enough.

-  Majority want to sleep and dream happy thoughts.

-  Unemployed, cant get a job, facing major illness or economic ruin - They want the nightmares to end.

AynRandFan's picture

Monetization does accomplish something.  It redistributes the wealth of those with money to those with debt.

sessinpo's picture

Monetization is only a temporary or transitory phase to delay deleveraging. Nothing of substance is truly accomplished until a fiat currency ends (and the average lifespan is ~27 years).

AynRandFan's picture

Debt that has been monetized disappears.  If the Fed buys worthless mortgage-backed securities, or takes them as collateral, that debt becomes nothing but a loss on the Fed balance sheet.  But, since the Fed can simply ignore losses, the debt disappears.  The loss eventually is borne by a devaluation of currency because the Fed created currency in order to buy the debt, or issued currency in exchange for worthless collateral.

I would agree that in the current circumstance of a over-indebted economy that monetization cannot absorb enough debt to stop deleveraging while also maintaining the credibility of the currency.

Inthemix96's picture

When this gig finally is up,

I am gonna find me a politician and kick his balls into his throat, while poking his fucking eyes out.

Then I'm off for a pint, any takers?

Freegolder's picture

The ECB isn't going to just print unconditionally though.

EU Govts will (already are) have to mend their ways. Look at Spain's efforts, guaranteeing a depression, but it has to be done.

Unlike America, the Uk and Japan, where printing is just a measure to fund the govts ad infinitum.

One day (one hopes) ZH writers will see the very obvious difference.

One day.

Karlus's picture

Why would they? Their goal and while they are shy about it now, they wont be later, is to tack on a couple zeros to everything. In their mind that erases debt, adds value to assets, and most importantly keeps the populace happy and re-electing them.

There is absolutely zero incentive to try and fix the problem as it will not work politically.

The larger problem is that we are not making the pie larger with any type of innovation. We are still pushing money towards Apples iPhone 9 and seeing Toy Store 14. Until the paradyme shift caused by innovation, we will circle the drain.

TheInfoman's picture

Real Question: If policy makers had seen the Lehman moment ahead as they do the EuroZone problem, would we have forestalled that problem via smoke and mirrors.  And at what point would the charade have ended?

Orly's picture

Your supposition accepts the idea that They didn't see it coming.  I submit that this has been laid out like a deck of cards, thus making your question moot.


TheInfoman's picture

Thanks Orly.  I didn't see your answer coming either.  Good point!  :)

AynRandFan's picture

Well, TheInfoman has a good point.  There is no shock value in the Eurozone crisis.  It seems more probable than not that a Grexit will be met with a yawn by the bond-trading community.

Whoa Dammit's picture

 The economy will never recover unless everyone is allowed to participate to the best of their ability. For some reason our current crop of "genius" economists can see the interconnected links between banks, but nothing else. In fact, everything and everyone in an economy is connected. Imagine a Monopoly game with 10 particpants where 9 get $1 and 1 gets the rest of the money in the bank. It would be much of a game would it? Thats what is happening now in our economy, where most of the particpants are effectively crowded out by the money grab of the top 1%, 

AynRandFan's picture

If the top 1% buy 90% of all municipal bonds, how does that affect you?  You can still buy those bonds, though perhaps they yield less because of demand from the 1%, and your municipal taxes are lower.

It escapes me why the rich are demonized in blanket terms.  It makes me think that the writer favors a way of redistributing the wealth of those who have accumulated it, by the power of government.

Whoa Dammit's picture

Truthfully, I could care less if the top 1% are stupid enough to by 90%, or even 100% of all municipal bonds. But you seem to have put the cart before the horse in your argument. You are forgetting perhaps that first people need to make enough disposable income to have the ability to buy bonds.  That being said, I am not sure how you formed the concept that issuance of munis lowers munipal taxes--debt doesn't lower the final cost of a good or service, it increases it.

Secondly, please remember that a free market does not shield, though "the power of government", the wealthy from investment losses they have righftully incurred.  In fact, what  is happening now in our economy, and what is causing the current  malappropriation in the concentration of wealth, is that money from taxes is being redistributed to the wealthy. And no, I do not blindly adore the wealthy enough to get behind this travesty at my expense.

I suggest that you study up on laissez faire and on your Rand a little more.


Juan Wild's picture

Just be 100% sure of one thing. Even a collapse is scripted....think..who will benefit? People, of all nations, lose if the system continues and we lose when it all comes down as well. Who wins? Who would benefit from the subsequent WORLD CHAOS? Well, its the same family that is winning now.

But even though this will occur it will at least awaken us earthlings from our normalcy bias and unite us once and for all in the defeat of our common enemy which has been lording over all of us through the invisible hand of fractionalreserve banking...usury...interest and unending debt.

"Interest is the invention of Satan" Thomas Edison

I always wished we would be invaded by aliens so that the nations of the world would put aside their petty differences and finally understand that we are NOT enemies, but brothers and sisters.
I did not have enough information then, but now I understand that the enemy will not come from outer space. The enemy has been here on earth all along.

"Independence Day" (1996)

President's Address to the U.S. Fighter


The President: Good morning. In less than

an hour, aircraft from here will join

others from around the world. And you will

be launching the largest aerial battle in

this history of mankind.

Mankind -- that word should have new

meaning for all of us today.

We can't be consumed by our petty

differences anymore.

We will be united in our common interests.

Perhaps its fate that today is the 4th of

July, and you will once again be fighting

for our freedom, not from tyranny,

oppression, or persecution -- but from


We're fighting for our right to live, to


And should we win the day, the 4th of July

will no longer be known as an American

holiday, but as the day when the world

declared in one voice:

"We will not go quietly into the night!

We will not vanish without a fight!

We're going to live on!

We're going to survive!"

Today, we celebrate our Independence Day!

Meesohaawnee's picture

looks like the margin hiker in chief got on the bat phone to ben and was like.. now we cant have any of that now. how the fuck do you go from + 1.20 in crude to a - 1.20??

newworldorder's picture

Easily done when you control the futures market. - Change the rumour  of the day.

grid-b-gone's picture

We often forget there are over 6,000 healthy banks operating in the U.S.

The six big ones that define the banking insolvency problem are not even needed to support daily commerce for individuals and businesses.

The big insolvents exist and effectively resist being fixed (liquidated) only because of their political contributions, lobbying, and their incestuous relation to the Federal Reserve.

DUNTHAT's picture


All this shit for a measley 6 banks.

Cthonic's picture

Most of whom are primary dealers.  Can't continue the reserve fiat ponzi without them; that is the underlying justification.


Bank of Nova Scotia, New York Agency
BMO Capital Markets Corp.
BNP Paribas Securities Corp.
Barclays Capital Inc.
Cantor Fitzgerald & Co.
*Citigroup Global Markets Inc. (Citigroup Inc.)
Credit Suisse Securities (USA) LLC
Daiwa Capital Markets America Inc.
Deutsche Bank Securities Inc.
Goldman, Sachs & Co.
HSBC Securities (USA) Inc.
Jefferies & Company, Inc.
*J.P. Morgan Securities LLC (J.P. Morgan Chase & Co.)
*Merrill Lynch, Pierce, Fenner & Smith Incorporated (Bank of America Corporation)
Mizuho Securities USA Inc.
*Morgan Stanley & Co. LLC (Morgan Stanley)
Nomura Securities International, Inc.
RBC Capital Markets, LLC
RBS Securities Inc.
SG Americas Securities, LLC
UBS Securities LLC.


* do you bank here? is your 401k or pension handled by them? does your broker operate through them? then you're swimming in the deep end of the financial matrix.

orangegeek's picture

And the rise of the SP500 since March 2009, moreso, April 2010, has been driven by low volume and govenments dumping TRILLIONS to keep things afloat.




Like feeding a rhummy more drink to make them feel better.

MFLTucson's picture


Didn't the corrupt Jewish banking cartel do the same thing in Weimar Germany?  Of course they did!!  So hold on because after they do their very best to hoodwink the public with the re-election of an incomeptent Prez that will protect them with police paid for with taxpayer money, they will then move forward to collapse the US economy.  It’s anyone’s guess if the sheep will finally wake up, perhaps too late?

Go see Obama 2016, its a must!


Dareconomics's picture

Former heavyweight champion Mike Tyson once said, "Everyone has a plan until they get punched in the face." Iron Mike was talking about boxing, but he could easily have been discussing the markets. The plan is to keep buying stocks, because the Fed will jump in to save the market from falling. Sooner or later, this plan will meet reality just like the face of a challenger meets Tyson's fist. 

One of the issues with these central bank interventions is that they reduce the vigilance of investors. The interventions or talk of the interventions do their job. After central bank action or jawboning, markets generally calm themselves and rise.

The fact that they work is the problem. Whenever the markets begin falling, the central banks quickly step in to offer more cheap credit or talk thereof. Markets rise, and people begin to think that the central banks have everything under control.

The existence of the Bernanke/Draghi put encourages investors to remain exuberant and take increasingly larger risks. Eventually, something will happen that is not part of the plan. It could be a bank failure in another part of the world, a market-shaking fraud revealing itself or many other surprise contingencies. The central banks will not be able to control the resultant panic, and we will have a much more horrible crash as thwarted selling pressure return with a vengeance. 


YouAreBliss's picture

GOP plan to balance the budget:

1) Ignore the Defense cuts in the Sequester.

2) Make the Bush tax cuts permanent.

3) Pass new tax cuts for the rich banksters.

4) Increase defense spending, while espousing "free" trade with our sworn enemy China - the reason we need the increase in defense spending

5) Launch two new wars with Iran and Syria.

6) Increase the law enforcement and prison budget to fund the conservative "Social Revolution".  IE, Money to arrest and prosecute the new SR crimes (which are legal now) like; abortion, pornography, medical pot, atheism, homosexual marriage and sex, alcohol consumption, coffee and tea consumption, cursing jar fines, non-magic pants wearing, etc...

And absolutely no new taxes of any kind.

Seems to add up to me - we'll just make it up in growth (well not the growth of the income of the wealthy and major corporations - their income is not taxed at all in off-shore shelters).

The budget almost seems balanced already!!  No need to print anymore - where's that gold dealer located may need to pay a visit???

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