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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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 :)

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.

PaperBear's picture

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

Chief KnocAHoma's picture

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


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). 

Hugh_Jorgan's picture

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

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.

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.

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.

JeffB's picture

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

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?"

ParkAveFlasher's picture

Do these bears sh!t in those woods?

gaoptimize's picture

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

malikai's picture

ZeroHedge: Home of the worst boaters in the world.

The Navigator's picture

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

prains's picture

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

SHRAGS's picture

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

malikai's picture

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

Dr. Engali's picture

That's a currency exchange.

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!?!


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.

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!

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?

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...

Q.E.easy's picture

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

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.

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 ...

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.



vast-dom's picture

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

SheepDog-One's picture

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

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.


Offtheradar's picture

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

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.

Zola's picture

A lot of talk but no action.

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.

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/

SheepDog-One's picture

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

vato poco's picture

Yeah, this'll end well.

kentfinance's picture

but they said they wouldn't

maxmad's picture

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

NotApplicable's picture

Nah, that'd just be a flatline.

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.



holdbuysell's picture

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


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!