Putting It All Into Perspective

Tyler Durden's picture


While it is amusing, almost laughable, to watch the market's every schizoid reaction to any given utterance out of the central planners (recall that back in mid-2009 we said that fundamental and technical analysis, is now dead, and the only thing that matters it he Fed's H.4.1 statement - we hope you are enjoying said central planning ladies and gents), we have decided to save our readers some pain and cut straight to the end credits by presenting "the big picture." Last summer, we shared an extended report from the Boston Consulting Group, which in a rather verbose format, explained everything that is wrong with the status quo. Unfortunately, that was also the report's biggest weakness, in this day and age in which everyone expects everything on a silver platter, prechewed if possible. So here it is again, clean, simple, precise, and so easy it can be printed out and pinned to one's wall - the chart below from Citi's Matt King puts everything in its proper perspective (if in a slightly optimistic light). The first two columns show the "impact" of Lehman and the Greek PSI - i.e., the amount of debt that was eliminated. These two tiny bars are what nearly caused the end of Western civilization (per Hank Paulson), and led Europe on a two year voyage to preemptively offload Greek exposure to European (and American) taxpayers. That's the good news. The bad news is is the column on the far right. This is the amount of debt that in Citi's estimate, has to be "reduced" across the four major developed markets for the world to return to a sustainable debt level. That's right: $30,000,000,000,000. By 2016. And after that it just gets even more parabolic.

This is not a discretionary cut. This is what has to be "reduce" for the world to have some chance of avoiding daisy-chained global sovereign defaults, up to and including the $707 trillion in global OTC (read unregulated) derivatives. Which means there are two actual definitions of 'reduced' - inflated or paid off (since a global default would "complicated" for existing equity stakeholders, read the 1%, to preserve their wealth). Furthermore, we are convinced that Citi is being generous: BCG estimated that the global debt overhang as of 2009 to get to a "sustainable" global debt/GDP of 180% is about $21 trillion. That number is easily $5-6 trillion more as of right now. Finally, with assets already at record lower cash flow generation as has been repeated here over and over, the only option is nominally inflating them away. Which means, you guess it, nominal devaluation of monetary intermediates. Translated: printing, printing, and more printing.

Still think the Fed, ECB, BOJ and BOE won't print, print, print?

Think again.


And for those who missed it the first time around, here is the full BCG analysis, which looks at not only the cuases of the global policy dead end, but provides some suggestions on how to deal with the issues. Needless to say, these are neither palatable nor favorable for risk assets.


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Tue, 04/03/2012 - 15:57 | 2314340 Mercury
Mercury's picture

 And with assets already at record lower cash flow generation as has been repeated here over and over, the only option is nominally inflating them away.


Well, there's wholesale and arbitrary private asset seizure too :)

Tue, 04/03/2012 - 16:00 | 2314372 narapoiddyslexia
narapoiddyslexia's picture

Jim Rickards has a relevant discussion here -


It implies that, if Bennie is right, an effective way to crash the system is for enough people to stop spending money.

That leads to bankruptcy for the 'ol federal gubmint.

Tue, 04/03/2012 - 16:03 | 2314401 PaperBear
PaperBear's picture

All my disposal income is going into physical silver - that doesn't count as spending money does it ?

Tue, 04/03/2012 - 16:05 | 2314415 Chief KnocAHoma
Chief KnocAHoma's picture

The smartest man in the room, as long as no one else is in there.


Tue, 04/03/2012 - 16:10 | 2314427 flacon
flacon's picture

these are neither palatable nor favorable for risk assets.


Is gold and silver a "risk asset"?


(obviously it's not, but some days it is, or behaves like it is, or is promoted by the media as being so). 

Tue, 04/03/2012 - 16:31 | 2314511 Hugh_Jorgan
Hugh_Jorgan's picture

Whew... I almost had a case of optimism today. Good thing I read ZeroHedge at lunch time.

Tue, 04/03/2012 - 17:03 | 2314586 Dr. Engali
Dr. Engali's picture

Glad you fixed that.

Tue, 04/03/2012 - 17:13 | 2314617 boogerbently
boogerbently's picture

If bailouts have been repaid, as we've been told, why do we still owe that money???

If Trillion$$$$ were lost, who MADE them??? It didn't disappear.

Tue, 04/03/2012 - 19:03 | 2314904 donsluck
donsluck's picture

The trillions that disappeared were only estimates. The assets (especially housing) had an estimated value one day, then some days later, their estimated value decreased, except for the assets bought by the Fed, which were bought at their estimated, or face, value.

So, trillions weren't actually lost, just their estimated values were reduced.

Tue, 04/03/2012 - 19:10 | 2314919 The Alarmist
The Alarmist's picture

"If Trillion$$$$ were lost, who MADE them??? It didn't disappear."

Jon Corzine, but then he unfortunately vaporized them before he could allocate them to the proper accounts outside his own.

Tue, 04/03/2012 - 20:08 | 2315062 JeffB
JeffB's picture

Just what I was thinking. If Jon Corzine crafted our recovery plan, why couldn't he just vaporize that debt?

Tue, 04/03/2012 - 16:07 | 2314419 LawsofPhysics
LawsofPhysics's picture

Depends who you are buying it from.  One might also ask "if I used some physical silver to pay a local plumber to do some work, did a transaction really occur?"

Tue, 04/03/2012 - 16:55 | 2314569 ParkAveFlasher
ParkAveFlasher's picture

Do these bears sh!t in those woods?

Tue, 04/03/2012 - 16:24 | 2314482 toothpicker
toothpicker's picture


1. Silver

2. A boat

Tue, 04/03/2012 - 17:02 | 2314585 gaoptimize
gaoptimize's picture

3.  Load boat with silver (, gold, and firearms), followed by regrettable accident.

Tue, 04/03/2012 - 19:10 | 2314929 malikai
malikai's picture

ZeroHedge: Home of the worst boaters in the world.

Tue, 04/03/2012 - 17:56 | 2314717 The Navigator
The Navigator's picture

3. big barking dog, so you can sleep at night without 1 eye open.

Tue, 04/03/2012 - 19:09 | 2314926 prains
prains's picture

4. and load with an 18 yr old Nicole Kidman from the movie "Dead Calm", spankilicious

Wed, 04/04/2012 - 04:16 | 2315613 SHRAGS
SHRAGS's picture

If your after a young Kidman, check her out in BMX bandit.

Wed, 04/04/2012 - 04:30 | 2315619 malikai
malikai's picture

Wow. Horrible 80's movies are bringing back memories I'd prefer to have left forgotten.

Tue, 04/03/2012 - 17:03 | 2314590 Dr. Engali
Dr. Engali's picture

That's a currency exchange.

Tue, 04/03/2012 - 17:48 | 2314696 SilverDoctors
SilverDoctors's picture

Nope, that's saving money.  And speaking of putting things into perspective, on Feb 29th, the cartel dumped 225 million ounces of paper on the market in order to smash silver by $4.  With the release of the fed minutes today, starting at 2pm EST today, over 637 million ounces of silver were dumped on the market over a SINGLE HOUR...resulting in a massive silver smash of..... $0.65.  Can you say law of diminishing returns, and EPIC FAIL!?!


Tue, 04/03/2012 - 19:13 | 2314941 malikai
malikai's picture

I wonder what the ratio of bankers/weak hands that was. I'm sure lots of silver newbies were counting on QE3 today.

Tue, 04/03/2012 - 16:07 | 2314420 SheepDog-One
SheepDog-One's picture

Yea DUH hey people stop supporting the borrow at interest spending and consuming shit if you actually dislike slavery!

Problem is, seems most people LOVE it, because every time you turn around theres some new techie gadget thats selling billions so I dont want to hear them whine about slavery!

Tue, 04/03/2012 - 16:10 | 2314434 narapoiddyslexia
narapoiddyslexia's picture

'Fraid so. Maybe if they knew they could crash the gubmint if they just stopped spending for a few months, it might provide some inducement.

Would they make urging people to boycott the US economy a terrist crime? How long would it take?

Tue, 04/03/2012 - 17:29 | 2314650 Seer
Seer's picture

So, deciding to kill grandma are you?

That's how it'll be framed.  Withholding life support.  Meanwhile the glorious continue to bomb brown people all over the globe...

Tue, 04/03/2012 - 18:14 | 2314774 Q.E.easy
Q.E.easy's picture

I would find it suprising if it WASN'T already a crime.

Tue, 04/03/2012 - 19:07 | 2314915 donsluck
donsluck's picture

Unless the Supreme Court strikes it down, you are required by law to buy health insurance, the ONLY thing (so far) that the goverment requires you buy. Don't go on about car insurance, etc, since you don't HAVE to buy a car or house or whatever.

Tue, 04/03/2012 - 20:15 | 2315072 JeffB
JeffB's picture

Unless you count forcing us to give them tax money so that they can buy bombs and missiles and detentions centers and ...

Tue, 04/03/2012 - 22:46 | 2315313 o2sd
o2sd's picture

Unless you count forcing us to give them tax money

FORTUNATELY, taxation is by PROPORTION. The easiest way to kill tax revenues is to earn less, and subsequently (of necessity) spend less. Imagine, if you will, living a quiet simple life, outside a major city, on a small but sustainable income. Your income is small, your needs are small, your consumption is small. A 100% effective way to topple the Government without a single shot being fired.

If you have a mortgage, default. You don't need a credit rating if you no longer need credit. If you have 3 monster SUVs on credit, default. Reduce, reduce, reduce. Future generations will remember you as heroes.

If the government, in it's desperation, turns the entire country into a gulag, know that this too will end. Perhaps you can hatch an escape plan before that happens. The world needs people who can do stuff. If you are willing to change your lifestyle, there are many places in the world that are great to live, even on very little.



Tue, 04/03/2012 - 16:41 | 2314538 vast-dom
vast-dom's picture

So I guess there won't be a crash until around 2016 ;)

Tue, 04/03/2012 - 16:43 | 2314543 SheepDog-One
SheepDog-One's picture

Right, obviously all is well until 2016 or so....yeaaaaa.

Tue, 04/03/2012 - 17:26 | 2314640 Uber Vandal
Uber Vandal's picture

Martin Armstrong has mentioned 2015 quite a bit.

Also, 2015 is the date in some of the German and US Military studies about peak oil will create shortages in the oil markets.

And, "Rich Dad/Poor Dad" in his book Rich Dad's Prophecy, published 2004, mentioned 2016 a lot as well.

I guess we will know for sure in about 4 years....Or less.


Tue, 04/03/2012 - 19:09 | 2314923 CH1
CH1's picture

Yes... or less.

Tue, 04/03/2012 - 17:49 | 2314698 Offtheradar
Offtheradar's picture

I've been @ 2017 for some time now.  Best guess, never certain.

Tue, 04/03/2012 - 18:05 | 2314756 francis_sawyer
francis_sawyer's picture

before or after the bell?

Tue, 04/03/2012 - 19:14 | 2314942 The Alarmist
The Alarmist's picture

2017 will be the year we know for sure whether or not we will continue to sing the praises of our Maximum Leader Big O.

Tue, 04/03/2012 - 15:54 | 2314341 Zola
Zola's picture

A lot of talk but no action.

Tue, 04/03/2012 - 15:58 | 2314363 SheepDog-One
SheepDog-One's picture

Yeah a lot of talk about how theyre going to print this and print that, I'll believe it when I see it. 

their cries of 'Where is 'retail' and why arent they buying our bubble stocks and bonds!' tells the real story.

Tue, 04/03/2012 - 16:22 | 2314473 Unprepared
Unprepared's picture

I think they given up on the retail suckers and are bypassing them.


Like algos locked in a bidding war, Monetary and Fiscal can play this game for quite a while just among themselves, without the need for consumers. Ask Solyndra/

Tue, 04/03/2012 - 16:44 | 2314545 SheepDog-One
SheepDog-One's picture

No point in it if they cant pass off the pump.

Tue, 04/03/2012 - 15:54 | 2314343 vato poco
vato poco's picture

Yeah, this'll end well.

Tue, 04/03/2012 - 15:55 | 2314346 kentfinance
kentfinance's picture

but they said they wouldn't

Tue, 04/03/2012 - 15:55 | 2314348 maxmad
maxmad's picture

I think an even better chart would be Bernanke on the lie detector...

Tue, 04/03/2012 - 16:00 | 2314384 NotApplicable
NotApplicable's picture

Nah, that'd just be a flatline.

Tue, 04/03/2012 - 17:37 | 2314668 TheFourthStooge-ing
TheFourthStooge-ing's picture


Nah, that'd just be a flatline.

I suppose it would depend on the questions asked by the operator of the lie detector.



Tue, 04/03/2012 - 16:00 | 2314386 holdbuysell
holdbuysell's picture

Simulation of Bernanke on a lie detector test in 3...2...1...


Tue, 04/03/2012 - 16:11 | 2314440 Careless Whisper
Careless Whisper's picture

why bother

Tue, 04/03/2012 - 16:39 | 2314532 Zero Govt
Zero Govt's picture

if we're going to plot Benny up to his tricks let's graph the actual mark-to-market value of his 'assets' against what he's cooking (to fantasy) on his books

what are the toxic MBS's and property really worth he took off WS (because they couldn't sell them)?

what are the US Govts Long Bonds, 10-30 year, really worth when nobody else will buy them?

Benny really has got himself in an awful twist, maybe that's why he called it Operation Twist!

Tue, 04/03/2012 - 15:56 | 2314350 zonetraders
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