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Shadow Rehypothecation, Infinite Leverage, And Why Breaking The Tyranny Of Ignorance Is The Only Solution

Tyler Durden's picture


In the aftermath of the "rehypothecation" analysis exposing the quantum differences between the US and the UK, where the former at least tries to put some breaks on "fractional reserve" synthetic liquidity creation by Prime Brokers (which these days would be virtually anyone) while the latter believes that virtually boundless risk is a welcome thing, there has been a barrage of inquiries seeking further clarification of the nuances of shadow banking, a topic Zero Hedge has covered since July of 2010 (for much more see here) and which we will update on tomorrow for the latest Flow of Funds report (spoiler alert: in Q3 US shadow banking declined by at least $300 billion, a trend started at the credit bubble peak, over $6 trillion higher).

In order to bring some clarity to the matter we present two of the seminal pieces on the topic: first, fro the IMF: "The (sizable) Role of Rehypothecation in the Shadow Banking System" and then from one of the best scholars of shadow banking, Gary Gorton, "Haircuts." We will let readers digest the wealth of information contained in these two pieces on their own, however, we will point out the two key messages: on one hand we get a definitive explanation of why not NY but London is true hub of financial engineering and infinite leverage (recall that the UK is in fact the most levered nation on a GDP basis in the world when one takes into account all outstanding debt, not just sovereign - a fact well known to S&P and explaining why the UK will be the last to be downgraded as this would bring attention to the last domino in the chain) as follows: "Mathematically, the cumulative ‘collateral creation’ can be infinite in the United Kingdom" - that's from the IMF basically telling everyone that courtesy of no rehypothecation haircuts one can achieve infinite shadow leverage. And the other one comes from Gorton who explains why haircuts are the functional equivalent of information arbitrage: "Increases in repo haircuts are withdrawals from securitized banks—that is, a bank run. When all investors act in the run and the haircuts become high enough, the securitized banking system cannot finance itself and is forced to sell assets, driving down asset prices. The assets become information-sensitive; liquidity dries up. As with the panics of the nineteenth and early twentieth centuries, the system is insolvent."

And the punchline: "Liquidity requires symmetric information, which is easiest to achieve when everyone is ignorant. This determines the design of many securities, including the design of debt and securitization." Reread the last statement as it explains perhaps better than anything, the true functioning of modern capital markets and why they are terminally broken: in order to preserve the system, the banking cartel need to make everything of virtually infinite complexity so that no one has a clear understanding of what is going on! Which is where sites like Zero Hedge step in - to expose "shadowy" places where things are best left unseen.

Incidentally one of the catalysts of the market collapse in the Lehman aftermath was not some market scalar metric being breached, or a bunk shutting down physically, but the seminal report by Citi's Matt King "Are The Brokers Broken" from September 2008 which explained all of the above (and below) in clear and concise detail, in effect bringing the proverbial Eureka moment to every market participant, of why everything was terminally broken. Since we are now again at the same stage, we will shortly repost the same report from King to stop "everyone from being ignorant" and comprehend just how broken both the traditional and shadow banking systems are

... But first:

"The (sizable) Role of Rehypothecation in the Shadow Banking System

and "Haircuts"


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Sat, 12/10/2011 - 14:15 | 1966252 Jim in MN
Jim in MN's picture

Look at it this way: Extend and pretend made a certain amount of sense in that time, time alone, allowed some derivatives to simply expire harmlessly--the 'weapons of financial mass destruction' (Buffet) have timers.  But if the banks start piling back in, then even the modest upside of can-kicking is lost.  And all the vast downside remains.

Looks like we're right back to square one, but with trillions already down the rathole.

Sat, 12/10/2011 - 14:30 | 1966300 FreedomGuy
FreedomGuy's picture

With only a fuzzy understanding of much of this stuff, this to me seems to be a great argument against central banks. In a sense a Fed or central bank puts you in the middle of the mess. In fact, it grows and multiplies it. Banks and financial houses left to themselves can invent any crap they want but the results are fairly limited to their own money and not backed by the public.

Imagine, like the early days of our country (the USA), mulitple private currencies, no central bank and limited leverage. Add to that no way for the government to TARP or stimulus or bail out. No one thing could take "the system" down as there would be no one system and plenty of escapes for those caught in financial stupidity.

Am I wrong?

Sat, 12/10/2011 - 14:53 | 1966314 Nobody special
Nobody special's picture

I see more. We now have an explination for why matching serial numbers of 'hard currency gold' showed up, though no duplicate bars were ever found. There are multiple first party claims on the same serial numbered asset. The bars were not duplicates; the same bar was moving into inventory multiple times. It proves that the shadow wealth is just that. It really emphasizes the importance of taking personal possession of your assets.

With rehypothecation, your serial number does not matter. Your evidence that the wealth is yours is no better than anothers, and likely no more legitimate. Those who hold paper are about to experience the ultimate fleecing.  In the past, when multilple parties held equally legitimate claims, courts usually ruled in favor of the party in possession.  So, who's in possession?

If you own but do not hold, you've already lost your gold.  Better trade out your paper fast to take delivery. Your gold as been taken from you, and your GLD will soon be unconvertable. Move to safety before it is too late.

Sat, 12/10/2011 - 15:43 | 1966409 jekyll island
jekyll island's picture

So we have a fractional reserve banking system that is backed by nothing.  On top of that we have a fractional reserve equity market, which always appear to be backed by someone else's assets when TSHTF.  On top of that there is a shadow banking system which is funded by someone else's assets from the prime brokers in the equity market which come from clients who take their funds from the fractional reserve banking system, which is backed by nothing.  On top of that there is a shadow derivatives market, where shadow banks write contracts to each other to hedge against loss, all of which is apparently backed by nothing.   The shadow banks and prime brokers can rehypothecate their collateral to increase their liquidity, which is backed by nothing, by as much as $2-4 trillion in the US alone, unable to calculate in the UK because there are no limits to churning.  Did I miss anything?   No wonder Germany said Fuck You when they were asked to pledge their gold to backstop the ECB bailout.  I am going to go give my gold a hug.  Uhhh, if I had any, that is.  

Sat, 12/10/2011 - 16:04 | 1966477 Ahmeexnal
Ahmeexnal's picture

Switzerland about to jettison the euro-peg. Preparations for euro-collapse under way.

Sat, 12/10/2011 - 16:16 | 1966500 WmMcK
WmMcK's picture

“We are naturally (preparing) for possible alternatives” - Widmer Schlumpf

Naturally, we should be too.

Sat, 12/10/2011 - 16:32 | 1966524 trav7777
trav7777's picture

The Rothschild BOE is the epicenter of a nearly 400 year ponzi of creditmoney.  In fact, this bank is a charter member of the FRBNY.  For centuries, London was the world hub of trade in real bills, the largest exchanges were there, and the Sterling Bill radiated power all across the world.

Like I said, all those Rothschild palaces did not build themselves.

Sat, 12/10/2011 - 16:45 | 1966546 pods
pods's picture

Exactly.  Even though it seems like all these banks are US, Italy,or Germany based, most of the leverage, and the control, is right in the City of London, where the Rothschilds have made their living since Nathan Mayer usurped control over the BOE.


Sat, 12/10/2011 - 17:04 | 1966573 Manthong
Manthong's picture

-----  SPX   > 1200 on 17Dec11

-----  SPX   < 1200 on 17Dec11

Not what you want.. what you think,


Sat, 12/10/2011 - 17:04 | 1966577 The Big Ching-aso
The Big Ching-aso's picture



Once upon a time ignorance was truly bliss.    Now everyone knows each other's pretending to be ignorant it's fake bliss.

Sat, 12/10/2011 - 17:46 | 1966648 Michael
Michael's picture

And we would of gotten away with it too if it wasn't for them dam bloggers.

Senator Rockefeller even said the Internet should have never been invented. I wonder why he said that? 

Sat, 12/10/2011 - 23:22 | 1967101 Pitchman
Pitchman's picture

Sun, 02/05/2012 - 16:24 | 2129181 JW n FL
JW n FL's picture



Repo markets are a potential channel for liquidity risks, given their systemic importance, inherent leverage, and short tenor. For individual financial institutions that rely on repos as a source of leverage, loss of access to repo financing can both directly undermine funding liquidity and create negative market perceptions about the institution’s financial condition. Repo market disruptions, manifested in increased haircuts, aversion towards certain forms of assets as collateral, or elevated concerns about counterparty risk, can pose broader risks to asset pricing and the functioning of the financial system.


As illustrated in a hypothetical example (see “Repo Haircut Increases: Forced Selling?” chart), increases in haircuts can compel forced selling of the underlying repo collateral. In this example, a corporate bond portfolio requiring a 5% haircut for repo financing would enable an institution to take on a $1,050 exposure backed by $50 in equity, equivalent to leverage of 21 to 1.


Mon, 02/06/2012 - 16:12 | 2131596 JW n FL
JW n FL's picture



Federal Reserve Earnings verse Federal Reserve Loans to the United States of America


1. How much does the Federal Reserve Bank Earn in Interest Payments? From anyone other than the United States of America.

Federal Reserve $15 Trillion Dollars in Loans Bloomberg

Loans from 3 / 9 / 2008 to 3 / 9 / 2009 totaling $15,760,004,161,955.00

Getting Bigger

Instead, the Fed and its secret financing helped America’s biggest financial firms get bigger and go on to pay employees as much as they did at the height of the housing bubble.

Total ** assets ** held by the six biggest U.S. banks increased 39 percent to $9.5 trillion on Sept. 30, 2011, from $6.8 trillion on the same day in 2006, according to Fed data

** **

The Fed’s Secret Liquidity Lifelines




2. Who are those Monies Participated Out too? That the Federal Reserve Bank Collected?

Who owns the Federal Reserve?

The Federal Reserve System fulfills its public mission as an independent entity within government. It is not "owned" by anyone and is not a private, profit-making institution.

As the nation's central bank, the Federal Reserve derives its authority from the Congress of the United States. It is considered an independent central bank because its monetary policy decisions do not have to be approved by the President or anyone else in the executive or legislative branches of government, it does not receive funding appropriated by the Congress, and the terms of the members of the Board of Governors span multiple presidential and congressional terms.

However, the Federal Reserve is subject to oversight by the Congress, which often reviews the Federal Reserve's activities and can alter its responsibilities by statute. Therefore, the Federal Reserve can be more accurately described as "independent within the government" rather than "independent of government."

The 12 regional Federal Reserve Banks, which were established by the Congress as the operating arms of the nation's central banking system, are organized similarly to private corporations--possibly leading to some confusion about "ownership." For example, the Reserve Banks issue shares of stock to member banks. However, owning Reserve Bank stock is quite different from owning stock in a private company. The Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the System. The stock may not be sold, traded, or pledged as security for a loan; dividends are, by law, 6 percent per year.


So! The question stands.. if the Federal Reserve is collecting .25% interest on $100 Trillion Dollars a Month (minimum).. Where Does ALL!! That Money Go?!?!?!?!?!

6% here.. 6% there.. Participated Out to the Shareholders.. into their Federal Reserve Bank Accounts.


So if the Federal Reserve is Collecting 6 times more a MONTH in Interest payments than is due by the United States of America (for our National Debt of $15 Trillion).. Why are the American People having too carry that debt? When the Federal Reserve is making AT LEAST 6 Times More than the Payment Due by ALL! of us?


Henry Ford-

"It is well enough that people of the nation do not understand
our banking and monetary system, for if they did,
I believe there would be a revolution before tomorrow morning."


If the Shareholders of the Federal Reserve are collecting their 6% of the $100 Trillion (minimum) Dollars a month in Interest payments..


Then why in the FUCK! Do We the People of the United States need to be taxed to death to pay for the Bank Bailouts?

How fucking hard is this for anyone to understand?

How can I dumb it down more for you?

How many people do you think you could explain this very simple FACT too?


When do you think would be a good time to let people know this?

Never mind Baby Boomers! I know you are just trying to sneak out without having to pick up this for shit bar tab the rest of us are saddled with!

But you younger people that will have to live this fucking nightmare going forward for a good long while should take a GREAT! Amount of interest in the facts that have been dumbed down and sourced and sited for even the most simplistic of mentalities to be able to grasp, easily.



Clip and Paste!

And then send it to everyone you know in your email box.. it is like you have to click the mouse 5 or 10 times total to educate everyone you know.. and feel free to let the dumbasses that you are sending this to as well know how simple it is to educate everyone they know..

And maybe..

Just fucking maybe!

We will be able to stop getting RAPED by the Federal Reserve and Washington DC via the Wall Street Lobby!


Thanks for Playing Along!

Add your name here! _____________________



Sat, 12/10/2011 - 16:44 | 1966545 Global Hunter
Global Hunter's picture

At least it sounds really cool when I read it out loud in my hollywood German accent.  I don't know to say this in German, French, Italian or Romansh, please hurry up so I can see what life looks like after this great collapse and I can begin the next phase of life, survival.  

Sat, 12/10/2011 - 23:36 | 1967038 Al Gorerhythm
Al Gorerhythm's picture

A survival note.

The dollar that you have "saved" in a bank (using the international CB accepted fractional reserve hypotication ratio) has been rehypothicated 9 times over. Do you really own that dollar or does someone else have a claim to it? It now all depends on where you stand in the line, before your savings and loan or credit union or TBTF bullion bank goes bankrupt. You'll notice that the MF Global customers are now sitting in the cold, outside of the shearing shed, after they've been sheared. Released back to pasture. Bleating.

Don't join the herd.

Sun, 12/11/2011 - 09:15 | 1967367 jeff montanye
jeff montanye's picture

flock them.

Sun, 12/11/2011 - 12:28 | 1967510 s2man
s2man's picture

Yup.  Because of fractional reserve, he who runs on the bank first, runs best.

Mon, 12/12/2011 - 07:40 | 1969439 merizobeach
merizobeach's picture

sheeple vs. zheeple


Unlike it's domesticated cousin, the independent zheep is both somewhat literate and contemplative; it is also a much better 'sprinter' during bank-sponsored 'runs'.

Sat, 12/10/2011 - 16:55 | 1966565 yabyum
yabyum's picture

Why they pegged to the doomed Euro will always be a huge question for all of us.

Sat, 12/10/2011 - 16:55 | 1966566 SWRichmond
SWRichmond's picture

Not surprised here.  I still hold all of my CHF, I'm not as stupid as SNB must think.

Sat, 12/10/2011 - 22:41 | 1967055 Freebird
Freebird's picture

Does that come in English - did not see a language option..(?)

Sun, 12/11/2011 - 00:30 | 1967170 homme
homme's picture

Sometimes it has a problem with nuance and context but Google's translation usually works well enough:

Sat, 12/10/2011 - 23:03 | 1967077 Pitchman
Pitchman's picture

Jekyll isl. I think you have it.

Yet again we are exposed, the hard way, to the extent of manipulation the financial sector has gone to rig the game.  This City of London derived scheme has nothing to do with promoting organic growth and everything to do with extracting rents and transferring wealth.  What could be more blatant than putting your clients assets at risk for your personal gain.  It gives a new meaning to fiduciary responsibility.  And like all fascist manipulations; when things go wrong the people pay.  As for Corzine, this loophole will likely protect him in this case.

RE-HYPOTHECATION: Are Your Brokerage Accounts, Muni Bonds, Futures Contracts, Corporate Bonds... Safe?




Money Power And The Central Bank: Life Is But A MEME


”To the wicked, everything serves as pretext.” -Voltaire

 Trillions of CDS with nothing to back it

Europe's Voluntary Haircuts?, CDS Market Sham & B of A: Less Than Zero

MF Global is a fractal in a frying pan.

Sat, 12/10/2011 - 15:43 | 1966443 GiantVampireSqu...
GiantVampireSquid vs OWS UFC 2012's picture

Fuck me drunk.  These cunts have created a complicated way to take your money.  At the same time, by creating inflation, they force you to give them your hard earned money, which gives them the ability to steal it.  Buy fucking tangible assets, GTFO of paper.

Sat, 12/10/2011 - 15:54 | 1966457 Teamtc321
Teamtc321's picture

It does not look like it is just gld or slv, it is appearing like most brokerage account's use hypothecation. This some scary shit for all trader's to put it bluntly imo. Many have been checking there perspectus and saying there account's have verbing of hypothecation.   

Sat, 12/10/2011 - 16:15 | 1966499 Vint Slugs
Vint Slugs's picture

"It does not look like it is just gld or slv, it is appearing like most brokerage account's use hypothecation."

Correct.  The first thing to do if you have securities accounts with domestic US brokerage companies is to make sure that you instruct the broker that he may not loan your securities.   The second thing, assuming you're not in-and-out trading, is to take delivery of you stock certificates which you then put in a privately-owned vault -- keep no securities in "street name."

Sun, 12/11/2011 - 01:26 | 1967217 Mauibrad
Mauibrad's picture

@Vint Slugs re: "take delivery of you stock certificates which you then put in a privately-owned vault" 

Most brokerages now tell their customers that they don't offer delivery of stock certificates.  What you say?

Sat, 12/10/2011 - 17:27 | 1966618 DosZap
DosZap's picture


It does not look like it is just gld or slv, it is appearing like most brokerage account's use hypothecation.

Well, lets see just how many Intelligent traders,GLD/SLV participants there are after getting a whiff of the real truth.

If nothing changes,you got yer answer...........................

If these morons just PULLED out their fiat,these bitches would just collapse,until the point the OTB that run them, declared  BR, and hypothecated their Phyizzzzzzzzzzzzzzz.

Wonder how this would/could work, with GoldMoney, or PSLV/PHYS?.

Sat, 12/10/2011 - 17:51 | 1966661 ouchtouch
ouchtouch's picture

I think it would be more accurate to say that ALL margin brokerage accounts use re-hypothecation.  I have not seen any NON-margin account customer agreement that allows hypothecation, and there is no reason why they would.  I have confirmed with Vanguard that my non-margin accounts can't be re-hypothecated.

Sat, 12/10/2011 - 16:02 | 1966472 Ropingdown
Ropingdown's picture

And people laughed as if Kyle Bass was paranoid when he took physical delivery of gold.  So much glib talk is spouted in the financial tv/print press.  So many comments made by finance committee politicians have been revealed to be lies.  If Bass didn't take delivery, I'd consider him incompetent. 

Sun, 12/11/2011 - 01:19 | 1967212 Mauibrad
Mauibrad's picture

@Nobody special  With all this re-hypothecation and gold talk, it makes all the more sense why that supposedly "stupid Communist" Chavez recently realized Venezuela needed to take possession of it's gold, at least some of it.  Better take possession of the rest of it, or he'll never see it. 

Sat, 12/10/2011 - 14:52 | 1966356 Rossalgondamer
Rossalgondamer's picture

Good analysis -

but maybe add to your eulogy: a population that was still knowledgeable on the farm, in the wood, and at the forge.

Break fiat and the carrots for wagon wheel repair trade ends much of our clear and present danger. While at it - please unshackle me from FDIC type assurances given by a false daddy. Life's tough - but tougher with parasites.








Sat, 12/10/2011 - 16:16 | 1966357 Rossalgondamer
Rossalgondamer's picture









Sat, 12/10/2011 - 15:04 | 1966371 anonnn
anonnn's picture

My surprise, verb  hypothecate is in 1994 Webster's New World, in all its financial glory.

 Appears after hypothec, noun form,  "security or right given to a creditor over debtor's property w/o transfer of possession or title".

So re-hypothecate is appears to be typical use of financial clever strokes to move the boundaries and enable profitable chaos.


Sat, 12/10/2011 - 15:13 | 1966384 CIABS
CIABS's picture

tyler, if you can, please provide a downloadable (not scribd) pdf of "Are the Brokers Broken?".  thanks.

Sat, 12/10/2011 - 15:21 | 1966399 Manthong
Manthong's picture

It only takes a minute to set up a free Scribd account to download the .pdf.

Sat, 12/10/2011 - 16:04 | 1966478 Harbourcity
Harbourcity's picture

I checked into that and no luck.

Sat, 12/10/2011 - 17:08 | 1966586 Manthong
Manthong's picture

..maybe they changed. I set one up last year.

Sat, 12/10/2011 - 15:14 | 1966386 Jonathan E
Jonathan E's picture

Hipoteca == Mortgage (Spanish).

Sat, 12/10/2011 - 16:07 | 1966482 WmMcK
WmMcK's picture

The "inversa' (reverse) versions are often predatory instruments used to steal lifetime savings.  Unfortunately many of the brokers of these contracts are trusted because the have the same heritage as the clients. Of course this happens in many (minority?) subsectors of our (failing) economy.

Sat, 12/10/2011 - 16:10 | 1966486 MissCellany
MissCellany's picture


Like I just said...sounds like MERS...

Sat, 12/10/2011 - 17:46 | 1966652 FatFingered
FatFingered's picture

Whoa!  The missing 'notes' were not missing, they were re-re-re-re-hypothecated!  Scandalous!

Sat, 12/10/2011 - 16:09 | 1966485 MissCellany
MissCellany's picture

Sounds like MERS.

Sat, 12/10/2011 - 15:31 | 1966421 el Gallinazo
el Gallinazo's picture

Am I wrong?


Well it might require a little more study.  The earliest days of the Republic did in fact have a central bank.  In those days corporations had a limited life span dictated in their charters.  Andrew Jackson finally killed the central bank by preventing the renewal of its corporate charter, although it almost killed him first.  He was only saved by a double misfire of two flintlock pistols shoved in his belly.  If we had sixguns in the 1830's financial history would read differently.  In belated revenge, the Federal Reserve put his face on the $20 bill to remind his shade of their ultimate victory.  A fairly painless way to aquaint yourself with the role of central banking in the USA is Bill Still's The Money Masters downloaded for free from Google video.  All the central banks in the USA were puppets of the Bank of England.  J.P. Morgan was also a puppet of the Bank of England which wasn't really documented until his death when his will was made public.

Sat, 12/10/2011 - 15:56 | 1966458 Newsboy
Newsboy's picture

Nice historical context, El G.

(I sure miss getting to post on Automatic Earth...)

Sat, 12/10/2011 - 19:31 | 1966817 el Gallinazo
el Gallinazo's picture

Patience, Grasshopper.

Sat, 12/10/2011 - 15:40 | 1966441 Right-on Left-off
Right-on Left-off's picture

Am I wrong?

Nope!  Anytime there is centralization and a hierarchy to handle that situation .... you are talking a grand scheme for control and domination on a very broad scale.

You are also talking fertile ground for shadow systems and synthetic ignorance if you will (lies and obfuscation about the truth).

Sat, 12/10/2011 - 16:06 | 1966480 OttoMBMP
OttoMBMP's picture

But right in the intro abstract of Gorton/Metrick you can read:

"... which they maintain is a manifestationof an age-old problem with private money creation: banking panics."

Well, they are sponsored by a central bank....


Sun, 12/11/2011 - 07:09 | 1967323 Ghordius
Ghordius's picture

There are many arguments agaist Central Banking
IF you are not a bank, a government or a nation in deficit/overspending mode

Without the FED, it would be inpossible for the USA to spend half of the military expenses of this world, just so as a reminder...

So now the anti-EUR campaign is reaching the zenith while the "UK is the ugly butt of USUK" campaign begins. I expect a lot of articles about the way Soros attacked the Pound, the UnAmericanness of The City (vs blameless Wall Street), how the UK is a banker Island without other economy, etc. etc.

No idea yet how long the cycle would be, perhaps if Mr. King can induce more inflation Krugman will take him as a role model? Then we have the debate about how much which CB has really printed?

Sat, 12/10/2011 - 14:31 | 1966308 bernorange
bernorange's picture

TBTF game plan:  Hear no evil, speak no evil, do massive evil.

Sat, 12/10/2011 - 15:29 | 1966417 Manthong
Manthong's picture

I did not have a deep understanding of how the French Revolution could produce such extreme behavior until fairly recently.

Sat, 12/10/2011 - 16:08 | 1966483 Incubus
Incubus's picture

and yet, people will still think peaceful revolution is a possibility.


How much longer is it going to take before people understand 'why' things like the french revolution happen?   I'll probably end up in prison for being a political dissident long before anything like that happens.

Sat, 12/10/2011 - 18:52 | 1966756 FatFingered
FatFingered's picture

Tulips also seemed so maniacal untill you suddenly find yourself in the midst of the biggest maina in history, the Electronically Storaged Zeros and Ones World Mania of the 2000's.

Sat, 12/10/2011 - 14:45 | 1966343 Future Tense
Future Tense's picture

Everything just feels like it is about to culminate into a deflationary collapse and people like Elliott Wave are going to have their moment.  Especially hearing that the shadow banking system contracted another $600 billion.  It appears the private debt contraction is overwhelming the public debt expansion, not a good sign for all assets including gold and silver in the short term.  The ECB better step up or this will be over very soon.  Good video from Prechter this week on Yahoo Finance:


Sat, 12/10/2011 - 16:22 | 1966512 Vint Slugs
Vint Slugs's picture

First we get the credit deflation, probably relatively imminent as you suggest. Then, because the financial institutions such as the Fed will still be standing, we get the monetary (hyper)inflation.

Sat, 12/10/2011 - 16:41 | 1966534 trav7777
trav7777's picture

the problem with this thesis is that those who attempt to trade it by holding paper or eDollars are really trying to grab wallets dropped in a nightclub fire stampede from inside the nightclub while the inferno is building.

Sure, you MIGHT get rich that way, but the downside risk is immense simply because you can't guarantee a way out unless you are fucking batman.

A deflationary collapse like that will remove the moneyness of what we think of as money because underlying all of the FRNs in existence (save a small few) are unpayable debts.

In fact, what WILL happen in such a situation is that there WON'T be fire sales of assets.  Look at the mortgage market if you don't believe me.  People just STOPPED PAYING.  And in the case of corporations, everyone will run off with all the physical assets.  There won't be anything left; it'll all be looted from the CEO's desk chair down to the bathroom fixtures.

If you're in a company in collapse, steal all the pens and free sticky notes you want.  This is in fact exactly what happens to foreclosed homes.  They get stripped.

After a deflationary collapse, in EVERY CASE, you find a worthlessness of the notes of the bankrupt State, and a permanent reset higher in the aggregate price level.  This is because the law of positive ROI remains. 

Sat, 12/10/2011 - 16:14 | 1966475 anonnn
anonnn's picture

"...not NY, but London is true hub of financial engineering and infinite leverage..."

 Recall the financial engineering that produced buccaneer, whereby the UK created legalized piracy on the high seas to acquire gold/silver from the Spanish traesure ships enroute from the New World.

The buccaneers operated by Queen's agreement to divy the takings between the Crown and the merchants. This funded the construction of the British fleet that later destroyed the Spanish Armada.

A financial engineering classic.

Speaking of antisocial cleverstrokes of antisocial clever-strokes...

Does anyone here still believe Tony Blair was GWBush' lap-dog?


Sat, 12/10/2011 - 16:43 | 1966541 trav7777
trav7777's picture

really, it matters not anymore...the financial powers that be are cousins who jet across the Atlantic back and forth from these two centers.

Each has its place.

Sat, 12/10/2011 - 17:33 | 1966627 High Plains Drifter
High Plains Drifter's picture

yes , "england"  unleashed the pirates on the spaniards.    who was it that told a certain group of people to de ass the area in 1492?   what goes around comes around, correct?  

Sat, 12/10/2011 - 16:18 | 1966503 Tulli
Tulli's picture


  Thank you for sharing this. Very eye opening and disturbing.

  Many, many things explained by the consequences of this.

  The system is broken, it broke in 2008, and it will collapse, inevitably.

  What a fantastic thought for a weekend.

  Got gold?

Sun, 12/11/2011 - 10:21 | 1967420 GCT
GCT's picture

Yes Tyler thank you very much for sharing this.  I helps me to understand what is happening and what to avoid.  Tulli your correct I do have gold! 

This stuff is better then what an author of a good fiction book could write.  This is scary to me and when I talk to friends they think I am the crazy one. 

Sat, 12/10/2011 - 14:19 | 1966266 GeneMarchbanks
GeneMarchbanks's picture

"Financial engineering" is like "aerial flight" or "jumbo shrimp". There is no business model, the whole banking cartel now deals in obscurantism or worse, outright fraud.


Sat, 12/10/2011 - 15:32 | 1966424 grid-b-gone
grid-b-gone's picture

It always seemed strange that banks would accept accounts receivable as loan collateral, but not inventory. Now it makes sense - inventory is too real.

That which is real can be stolen, wither, rot, age, depreciate, fall out of favor, or die. Convert into a journal or book entry, and its value becomes more opinion than fact.

Add levereage and securitize to preference.

Sat, 12/10/2011 - 16:12 | 1966490 Tuffmug
Tuffmug's picture

I would sooner believe that SANTA CLAUS or the TOOTH FAIRY exist  than believe the balance sheet of a bank or the promises of a politician. Fraud is now the accepted and expected norm of behavior and the basis upon which the world is built.

Sat, 12/10/2011 - 18:48 | 1966753 Socratic Dog
Socratic Dog's picture

Umm, how about god?

Sat, 12/10/2011 - 17:22 | 1966609 11b40
11b40's picture

For about 50 years I have used the guideline I heard from my father.  "If you can explain it, I can understand it.  If you can't expalin it, I'm not interested."  That works well on the micro level, but too bad we don't have the ability to escape macro manufactured complexity.

Sat, 12/10/2011 - 14:20 | 1966273 Cruzan Stomp Revival
Cruzan Stomp Revival's picture

And Exter's Pyramid is looking more and more top heavy...

Sat, 12/10/2011 - 14:34 | 1966312 wandstrasse
wandstrasse's picture

And Kondratief winter draws closer and closer..

Sat, 12/10/2011 - 14:22 | 1966280 Flammonde
Flammonde's picture


To walk in money through the night crowd, protected by money, lulled by money, dulled by money, the crowd itself a money, the breath money, no least single object anywhere that is not money, money, money everywhere and still not enough, and then no money or a little money or less money or more money, but money, always money, and if you have money or you don't have money it is the money that counts and money makes money, but what makes money make money?

  • Tropic of Capricorn (1939)

Sat, 12/10/2011 - 14:37 | 1966321 GeneMarchbanks
GeneMarchbanks's picture

+1 for Henry Miller. A great spirit.

'I see America spreading disaster. I see America as a black curse upon the world. I see a long night settling in and that mushroom which has poisoned the world withering at the roots.'
Henry Miller

Sat, 12/10/2011 - 14:43 | 1966334 VyseLegendaire
VyseLegendaire's picture

Hear ye, hear ye!

Sat, 12/10/2011 - 15:10 | 1966378 Husk-Erzulie
Husk-Erzulie's picture

+++ For Miller!

Sat, 12/10/2011 - 16:04 | 1966479 Teamtc321
Teamtc321's picture

Hear ye, hear ye! ?????


You might want to go back and read from the start. This hypothecation IS a UK child, correct me if I am wrong here...............U.S. has a 10-1 rule and UK is unlimited is what I am understanding. 

Sat, 12/10/2011 - 14:26 | 1966284 Gully Foyle
Gully Foyle's picture

Anyone familiar with this?

On Monday, October 10th something strange happened in the world of high finance: Goldman Sachs lost its crown. The news, despite trumpeting a major new player in the world of HFT, or high-frequency trading, got no coverage at all from popular media outlets, save for a mention on Matt Taibbi’s blog at Yet for anyone with an interest in our fragile economy, the development would have been noteworthy: a new, unheard of company listed as Latour Trading LLC had surpassed Goldman Sachs as the most active trader on the New York Stock Exchange. I googled “Latour Trading” as soon as I read the news. Besides Taibbi’s post and his original citation (hat tip to Zero Hedge), there wasn’t a single article about this new titan of Wall Street—just a few job postings for salaried positions starting at $175,000 (not including bonuses), a YouTube clip of its staff ringing NYSE’s opening bell a few weeks earlier, and up top a link to its homepage, When I clicked on the homepage, my browser window went white. I tried reloading it—still nothing. It’s a strange feeling, loading a blank web page; it doesn’t happen very often. So I checked the source code of the site. In its entirety it read:


What does it mean to be the most active trader on Wall Street nowadays? Like infinity, the breadth of high-volume trading is hard to grasp. Before computers came along, or more to the point “algorithm processors,” trading frequency had a natural limit based on two factors: the number of shares that individual traders were willing to buy or sell, and the number of trades those folks could actually book in a given day. As investor money flowed into the US economy, and the number of traders on Wall Street increased, so too did overall trading frequency. But as with so many other things in modern life, computers, to put it mildly, changed the game.


So Latour Trading LLC is now one of the largest traders by volume on NYSE. I called them multiple times for comment about this piece, and never heard back (“the person you are trying to reach is not available now…”). After some digging around, I realized I’d missed something: their YouTube clip had some of its caption obscured, and those lines named a CEO, David Faucon. The only webpage in which he undoubtedly appears regards the first criminal conviction in the theft of HFT computer code. Coincidentally, an old friend of my father’s represented the defendant, who used to work with Faucon at Tower Research Capital. (Faucon was never implicated in the crime.) I called Ivan Fisher, my dad’s old friend, and asked, “What can you tell me about David Faucon?” He didn’t remember Faucon at all, but the conversation soon swelled with suspicions about Tower Research and its founder, Mark Gorton. From Tower’s homepage: “Founded in 1998, Tower develops proprietary trading algorithms by using rigorous statistical methodology to identify non-random patterns in the behavior of markets. Exploiting these inefficiencies allows the firm to earn exceptional returns while mitigating risk.”

It turns out that Tower isn’t just the former employer of Faucon. Latour Trading, LLC appears to be affiliated with Tower in some way. They share a telephone number, and both companies are listed at the same address, two floors apart. Fisher tells me this would be “not necessarily inconsistent with [Gorton’s] approach to have people spin off and form companies.” Mark Gorton is more well known as the founder of Lime Group, which owns Lime Brokerage LLC, a brokerage house, LimeWire, the formerly popular file-sharing app, LimeMedical LLC, a medical software company, and Tower Research Capital LLC. Almost immediately Fisher warned me, “I have enormous suspicions about Tower.”



Sat, 12/10/2011 - 14:41 | 1966331 Big Corked Boots
Big Corked Boots's picture

well, it is still a blank white page, which apparently is a big Fuck You from Latour to the rest of the world.

Somehow I think a blank black page would be more appropriate.

Sat, 12/10/2011 - 15:19 | 1966395 StrangerThanFiction
StrangerThanFiction's picture

bash-4.1$ whois

   Tower Research Capital
   377 Broadway
   Fl. 11
   New York, New York 10013
   United States

Sat, 12/10/2011 - 16:37 | 1966529 MissCellany
MissCellany's picture

La Tour = the tower, in French.

Wonder if they mean the Tarot card by that name. It usually depicts a dark tower, on fire from a lightning strike, with one or two figures jumping or falling out of it, and "is considered an ill omen."

And check this one out...[cue Twilight Zone theme...]

Centered amidst a black sky, lightning strikes a stone tower. Flames erupt from the top of the tower and from out of the building's windows. There are two men falling out of the tower. Both are falling headfirst, one diving forward, the other falling backwards, neither in control. The tower itself is on a craggy cliff and the men appear to be falling even further past the foundation of the building. Atop the edifice, a giant gold crown has been dislodged by the thunderbolt and is being lifted up and off the top of the tower. Billowing clouds of gray smoke are everywhere.

Neither of the men in the illustration have done anything to cause the destruction and chaos in which they have become enveloped. All measures were taken to be isolated from war, pestilence and disease by building a remote tower. And yet calamity still struck. The men are in different positions to indicate that the effects of the radical change that is happening will not be equally distributed. Some will barely survive while others will thrive.


Sat, 12/10/2011 - 15:36 | 1966433 Benjamin Glutton
Benjamin Glutton's picture

“Founded in 1998, Tower develops proprietary trading algorithms by using rigorous statistical methodology to identify non-random patterns in the behavior of markets. Exploiting these inefficiencies allows the firm to earn exceptional returns while mitigating risk.”


seems they have developed a program that can accurately predict Securities pricing based on real time analysis of bid processing patterns of exchange software. No doubt each transaction is fully modeled in advance to 90+% over the short time spans in which they occur.


"rigorous statistical methodology to identify non-random patterns in the behavior of markets" = our software knows what your software is going to do based its non random processing habits and our hardware is fast enough to exploit those low security(non random)patterns.

Sun, 12/11/2011 - 00:29 | 1967169 Jim in MN
Jim in MN's picture

I'm sure the Tylers are compiling a file.  As usual ZH was there firstest with the mostest.

I bet the SEC staff got a lot of porn using LimeWire, so is that a form of influence? 

Tue, 12/13/2011 - 10:09 | 1973502 Archduke
Archduke's picture

this already appeard in zh.

Sat, 12/10/2011 - 14:27 | 1966288 lolmao500
lolmao500's picture

The head of the snake, London, is the most bankrupt of it all... SHOCKER! NOT!

Sat, 12/10/2011 - 17:18 | 1966599 Manthong
Manthong's picture

Check this old article out.. JPM move that ties Lehman, AIG and London.

Well, at least we know where about $1B of TARP went.

Sat, 12/10/2011 - 14:28 | 1966292 fonzanoon
fonzanoon's picture

This is great analysis and all but whats the catalyst that lights the fuse that blows up trillions of dollars in bad bets? What is to say that the game can't go on for a long long time? Burning a lot of the sky is falling shorts (like me) in the process? They lent 7.7 trillion to the banks 3 years ago that we are just finding out about now. Maybe they just lent another 20 trillion last week that we will read about 5 years from now. No one will care as long as the fdic says they don't need to worry.

Sat, 12/10/2011 - 14:29 | 1966296 dcb
dcb's picture

Gillain tett did a nice article on this in the ft a while back. I was writing her and attempting to find out how the market was going up and up and up when money was being taken out. I think that was the 'answer I got" it really says somethging about how fucked up the markets are when money can be pulled, but they cabn still go up. this is one reasons, another of course are the algo's tyhat can ramp up instead of trading a block.

Sat, 12/10/2011 - 14:29 | 1966297 Gully Foyle
Gully Foyle's picture

And this

SEC warns LightSquared figure of potential fraud probe

If the name Philip Falcone sounds familiar, it should be — considering that I wrote about his LightSquared firm this morning.  This probe is separate from the issues surrounding LightSquared, however, but it involves more than just the $50 million Falcone apparently allowed Goldman Sachs to withdraw while preventing other investors from cashing out of Harbinger.  They have already begun probing a loan Falcone took from the Harbinger fund, as well as “market manipulation,” but it’s apparently the Goldman Sachs withdrawal that has the SEC most exercised at the moment.

Sat, 12/10/2011 - 14:30 | 1966299 jm
jm's picture

I think one of the best ways to end the tyranny of ignorance is to ignore what economists say about the issue.  In the main, they are devoted to theory and are unconnected to the praxis, which always spells trouble.  And quite often they will say nearly anything in pursuit of revisionist history that serves their academic careers. 

Speaking of which, Gary Gorton has a very special place in the troubled history of AIG.

Sat, 12/10/2011 - 14:37 | 1966320 JW n FL
JW n FL's picture



Yes! we should ignore numerical facts and follow our Guts!

Just like Rush Limbaugh!

Sat, 12/10/2011 - 14:51 | 1966353 jm
jm's picture

I haven't forgetten your threat against my family.  One day I'm going to find out who you are and press charges.    

Sat, 12/10/2011 - 17:49 | 1966657 JW n FL
JW n FL's picture



My Names is James Edward Workman!

and I didnt threaten your ignorant spawn(s).

I said that the World would be a better place without you and your ignorant kind..

so! other than you are a Liar, Coward and Stupiddddddddddddddddddddd as the day is long.. I dont know what you have to offer?

more Lies?

More Stupidity, like your post above?

what? drivel will you spew next?

Sat, 12/10/2011 - 22:05 | 1967006 mick_richfield
mick_richfield's picture

And Zero Hedge would be a better place without this kind of post.


Sun, 12/11/2011 - 08:44 | 1967350 jm
jm's picture

James Edward Workman, here's hoping that you get a visit that ensures you have very bad week.  People take talk of rape seriously.  Especially when you put it in writing.

Sun, 02/05/2012 - 16:28 | 2128441 JW n FL
JW n FL's picture



You are a Liar and a Coward...



Repo markets are a potential channel for liquidity risks, given their systemic importance, inherent leverage, and short tenor. For individual financial institutions that rely on repos as a source of leverage, loss of access to repo financing can both directly undermine funding liquidity and create negative market perceptions about the institution’s financial condition. Repo market disruptions, manifested in increased haircuts, aversion towards certain forms of assets as collateral, or elevated concerns about counterparty risk, can pose broader risks to asset pricing and the functioning of the financial system.


As illustrated in a hypothetical example (see “Repo Haircut Increases: Forced Selling?” chart), increases in haircuts can compel forced selling of the underlying repo collateral. In this example, a corporate bond portfolio requiring a 5% haircut for repo financing would enable an institution to take on a $1,050 exposure backed by $50 in equity, equivalent to leverage of 21 to 1.


Sat, 12/10/2011 - 15:05 | 1966373 Al Gorerhythm
Al Gorerhythm's picture

Like from the BLS?

Sat, 12/10/2011 - 17:32 | 1966607 jm
jm's picture

The issue isn't the data.  There will always be data quality issues and you have to make do.

The issue is that past theories are often used to explain current events, because many of these guys have a professional and financial vested interest in their reputation, and by extension their past views.  So square pegs get pushed into round holes. 

If one takes the time to try and figure things out, these guys are not the first place to start.  Good journalists with connections to traders in the middle of the situation and no vested interest in any theory are a place to start.  Or look to desk reports with a good track record and clear understanding. Joseph Abate's note are good.

Rehypothecation of collateral is a real and serious issue.  That's not my point.

Sat, 12/10/2011 - 14:31 | 1966301 lunaticfringe
lunaticfringe's picture

I am not a banker or economist. However, having force fed myself a diet of this type of reading in an effort to educate myself-I have learned a few things.

I try diligently to explain to people why the worldwide fiat currency system- debt system- is irretrievably broken. Mostly, that is a useless exercise. There is no soultion to it other than collapse. Look at the behavior of the nutso markets to any news viewed as "postive" emanating from the eurozone. There is no positive news. No amount of extend and pretend will solve this crisis. Only collapse. The pain of the collpasing eurozine will come to the U.S. in a giant way. Not if, just when.






Sat, 12/10/2011 - 14:47 | 1966347 VyseLegendaire
VyseLegendaire's picture

I echo your sentiments exactly.  After decent familiarity with the subject, one analogy I use is that 'repairing' the financial system would be like trying to rebuild the twin towers right after they were hit by the planes.  That's insane, right? First, you wait for the buildings to collapse, clear the rubble, and get to work on something else later on. 

Sat, 12/10/2011 - 22:09 | 1967012 mick_richfield
mick_richfield's picture

Except we shouldn't rebuild it.  We should build something entirely different. -- which means that we could start now, without waiting for this rotten mess to collapse.

Objective money is freedom.  Fiat money is slavery.  We have been enslaved, and our masters care not who make our laws.

Sat, 12/10/2011 - 15:56 | 1966459 grid-b-gone
grid-b-gone's picture

It used to torque me that federal workers average >$100K while average household income is about half that. I used to think that taxes would be raised to keep those commitments. Now I realize they are working for promises that will not be kept. Printing will continue until euros and dollars become a meaningless promise.

The collapse becomes the fix that can't be negotiated by elected officials who can't see past either 2, 4, or 6 years out. 

A bird in the hand is an old expression that will become common again.

The D.H. Lawrence quotes are great. Electric bills, water, and three squares are sooo democratic. Yes or no, yea or nay, they either are or they are not.

Sat, 12/10/2011 - 14:31 | 1966303 jeff314
jeff314's picture

Debt ceiling will be over the max soon enough in the

Sat, 12/10/2011 - 14:31 | 1966306 hivekiller
hivekiller's picture

Although they lived in style, they felt always an anxiety in the house. There was never enough money. The mother had a small income, and the father had a small income, but not nearly enough for the social position which they had to keep up. The father went into town to some office. But though he had good prospects, these prospects never materialised. There was always the grinding sense of the shortage of money, though the style was always kept up.


At last the mother said: "I will see if I can't make something." But she did not know where to begin. She racked her brains, and tried this thing and the other, but could not find anything successful. The failure made deep lines come into her face. Her children were growing up, they would have to go to school. There must be more money, there must be more money. The father, who was always very handsome and expensive in his tastes, seemed as if he never would be able to do anything worth doing. And the mother, who had a great belief in herself, did not succeed any better, and her tastes were just as expensive.



And so the house came to be haunted by the unspoken phrase: There must be more money! There must be more money! The children could hear it all the time though nobody said it aloud. They heard it at Christmas, when the expensive and splendid toys filled the nursery. Behind the shining modern rocking-horse, behind the smart doll's house, a voice would start whispering: "There must be more money! There must be more money!" And the children would stop playing, to listen for a moment. They would look into each other's eyes, to see if they had all heard. And each one saw in the eyes of the other two that they too had heard. "There must be more money! There must be more money!"


It came whispering from the springs of the still-swaying rocking-horse, and even the horse, bending his wooden, champing head, heard it. The big doll, sitting so pink and smirking in her new pram, could hear it quite plainly, and seemed to be smirking all the more self-consciously because of it. The foolish puppy, too, that took the place of the teddy-bear, he was looking so extraordinarily foolish for no other reason but that he heard the secret whisper all over the house: "There must be more money!"      


The Rocking Horse Winner

by D.H. Lawrence 

Sat, 12/10/2011 - 14:46 | 1966345 GeneMarchbanks
GeneMarchbanks's picture

+1 for D.H Lawrence. You saw Henry Miller above, admit it...

'The more I see of democracy the more I dislike it. It just brings everything down to the mere vulgar level of wages and prices, electric light and water closets, and nothing else.'
David Herbert Lawrence

Sat, 12/10/2011 - 15:44 | 1966446 Gully Foyle
Gully Foyle's picture

Fuck dat booshie shit!

Johnny Guitar Watson - Ain't That A Bitch 1976.

I’m working forty hours Six long days And I’m highly embarrassed Every time I get my pay

And they working everybody Lord, they working poor folks to death And when you pay your rent and your car notes You ain’t got a damn thing left

Ain’t that a bitch, yes it is Somebody doing something slick, there they are It's got me wondering which is which Mighty as well go out of town and dig a ditch

Ain’t that a bitch, yes it is Now ain't that a bitch

Lemme tell you about my qualifications

I program computers I know accounting and psychology I took a course in business And I can speak a little Japanese, fox on

Gotta work two years To get one week off with pay And when I’m on my job I better watch every word I say

Ain’t that a bitch, oh boy Somebody doing something slick, downtown It's got me wondering which is which Mighty well, go out of town and dig a ditch

Ain’t that a bitch, it's way, way to cold Ain’t that a bitch

Make me wanna holler, Lord, Lord Lord, have mercy to see Won't somebody please help me to see land, Lord I want to play the guitar, come here guitar

Somebody doing something silly

Now listen to this

Stop at the supermarket To get myself something to eat And when I look at the prices They knock me off of my feet

I was in the baloney section And I had to take myself a close look Now Abdul Jabar couldn't have made these prices with a sky hook

Ain’t that a bitch, yes, it is Somebody doing something slick, here they are It's got me wondering which is which Mighty well go out of town and dig a ditch

Ain't that a bitch, ain't that a bitch

Surely there’s something slick going on Surely there’s something slick Surely there’s something slick going on Surely there’s something slick, ain't that a

Surely there’s something slick going on Surely there’s something slick Surely there’s something slick going on Somebody's show slick, ain't that a

Surely there’s something slick going on Surely there’s something slick Surely there’s something slick going on Somebody's showing slick

Surely there’s something slick going on Surely there’s something slick Surely there’s something slick going on Surely there’s something slick

Sat, 12/10/2011 - 22:15 | 1967018 mick_richfield
mick_richfield's picture

But I like wages and prices, and electric lights and water closets.

I don't like writers who string together clever phrases while attacking the culture that made their typewriters.  Our problem is not democracy.  Our problem is that we have been conquered by a foreign power, and not one man in a thousand in this country knows or cares.  Including the man who wrote those words.

So you can hold the Miller.  I'll stick with Heinlein.

Sun, 12/11/2011 - 09:55 | 1967395 GeneMarchbanks
GeneMarchbanks's picture

That's because you're a pussy ;)

Typewriters supplanted hand written text and scribes. Big deal. Any real writer can do without them. Any great artist can do, often does do, precisely because they stay away from innovation and technical gadgets.

Heinlein blows.

Sun, 12/11/2011 - 13:41 | 1967685 hivekiller
hivekiller's picture

Yeah but I like Lawrence a whole lot more than Miller. Miller was vulgar.

Sat, 12/10/2011 - 19:55 | 1966837 rufusbird
rufusbird's picture

re: The Rocking Horse Winner by D.H. Lawrence...

It is amazing, I was thinking about this story yesterday morning as I read ZH.

The best sentence in the story at the, from it may not be exact..."Perhaps his is best off gone from a world where he must ride his Rocking Horse to pick a winner."

Sat, 12/10/2011 - 14:38 | 1966313 JW n FL
JW n FL's picture



Consensus Building.. is the Path to True Democracy

The one eye'd man in the Valley of the Blind.. is King!


If the Masses are Stupid (not to be confused with ignorant) and the very few have a clue.. it doesn’t help anything.

I honestly think that the Purge that is coming will allow for Natural Selection to take over, thusly cleansing the Nation / World of the trash that Clogs and Pollutes Freeways with their stupidity.

You, nor I can fix STUPID! And STUPID has the Votes, the Majority!

Letting the Stupid Kill Off the Stupid and being able to prolong the life cycle of Lite Sweet Crude to boot! Is growing on me more and more each day.


Stupidity runs rampant.. WAIT! I should say that Stupidity blocks progress, by sitting very still in a pool of ignorance.

America is Robbed Blind.. no one moves.. or flinches.. just the Communists (occupy wall street) or Hill Billy evangelical Bible Thumpers (Tea Baggers).. who are all Terrorists (Per the Father Land Security) like Al Qaeda! (so says the Bobbies in London!).


It is all a joke, the printing presses keep running over time! And the Fraudulent / Guilty are raised up and celebrated for their accomplishments!

The baby Boomers who got us here! Don’t give a fuck! And are off on a Cruise Ship Gambling, ignoring the last 40 years that have come home to roost!


I dreamed of educating enough people.. to be able to participate in Taking America BACK from these scumbags.. instead now I watch the different kinds of ignorance that consume / entertain even the brightest.. and thusly have resigned myself to being able to laugh at myself for my efforts in pushing egotistical truths!

Euro crisis-On the Edge with Max Keiser-12-09-2011

Uploaded by PressTVGlobalNews on Dec 10, 2011

In this edition of the show Max interviews Greg Hunter from .

He talks about the concerted efforts by ECB and FED to solve the Euro crisis.

Greg is the producer and creator of Greg Hunter's The site's slogan is "analyzing the news to give you a clear picture of what's really going on." The site will keep an eye on the government, your financial interests and cut through the media spin.

Enjoy Ya'll!


Sat, 12/10/2011 - 14:42 | 1966332 topcallingtroll
topcallingtroll's picture

You used to defend the masses.
Whats up?

In a depressive phase?

Its winter. It happens.

Sat, 12/10/2011 - 14:48 | 1966349 JW n FL
JW n FL's picture




I would like to get this show on the road already..

the sooner it starts..

the sooner it ends..

the sooner we can clean up the mess and get on with a better life for all.

all this sitting around makes my dick itch!

Sat, 12/10/2011 - 15:48 | 1966451 Gully Foyle
Gully Foyle's picture


"I honestly think that the Purge that is coming will allow for Natural Selection to take over, thusly cleansing the Nation / World of the trash that Clogs and Pollutes Freeways with their stupidity.

My lad you have never read C.M.Kornbluth's classic work The Marching Morons.

I also believe you have misread the situation because they have won.

I also find it rather annoying that you wish to insert yourself amongst your betters, because as I see it you are right in the middle of that pack on the highway of stupidity.

Sat, 12/10/2011 - 17:52 | 1966662 JW n FL
JW n FL's picture



You and JM can have a circle jerk and have tee shirts made about how evil I am for being pissed off about the stupidity that I am surrounded by.. enjoy!

Sat, 12/10/2011 - 14:36 | 1966318 tony bonn
tony bonn's picture

i am afraid these central banker fucktards are too clever by half....can egg on the face be whipped into souffle? only your bankster knows....

Sat, 12/10/2011 - 14:46 | 1966346 JW n FL
JW n FL's picture



The Bankers ='s Wall Street.

Wall Street Owns the Lobby!

The Lobby Owns Washington DC.

The Police Forces (including the Army, who was NEVER supposed to stand against the American People) work for the Duly Elected Lobby Whores.

But no one cares.. enough to stand and fight.. they would rather enjoy the fruits of their participation in the Grande’ Scale Fraud or! sit home and eat Food Stamps and do NOTHING!

and those of us who don’t fall into either one of those categories are Terrorists!

Because We Love the Constitution!

We Love God!

and We believe Property Rights / Free Speech and the Like!

Terrorist! that’s what I am!

I am a Threat to the LIES!

I am a THREAT to Rich Robbing “We the People” Blind!

I am a Threat to the Food Stamp Crowd having to get a fucking Job!


It really is all, a fucking shame.


Sat, 12/10/2011 - 16:37 | 1966531 Teamtc321
Teamtc321's picture

Americans are clearly worse off than they were just since this past spring, according to a new Federal Reserve report.

The average U.S. household lost $21,261 of net worth over the summer months, according to the latest quarterly report by the Fed, which was released Thursday, reports the New York Post.

Read more on Fed: Average Household Lost $21K in 3rd Quarter

Sat, 12/10/2011 - 17:57 | 1966669 JW n FL
JW n FL's picture



Lets not forget the tidal wave of inflation that is coming.. not if? but when.

$15,051,160,989,938.23 as of today (per the FED)

at some point the money flood gate that was opened will begin to saturate the system.. at which point that $20k will look more like $3K (and I am being kind with the $3k number, too kind really.. to the point of $3K is a LIE!)


Sat, 12/10/2011 - 14:38 | 1966327 topcallingtroll
topcallingtroll's picture

The wonks and quants among us love this stuff.

Thanks Tyler. This gave me a woody.

Sat, 12/10/2011 - 14:40 | 1966329 Atomizer
Atomizer's picture

I'm quite sure many of you saw this story of basic concept pass throughtout the Internet last month. If not, here you go.


It is a slow day in a little Greek Village.
The rain is beating down and the streets are deserted.
Times are tough, everybody is in debt, and everybody lives on credit.

On this particular day, a rich German tourist is driving through the village, stops at the local hotel and lays a €100 note on the desk, telling the hotel owner he wants to inspect the rooms upstairs in order to pick one to spend the night.

The owner gives him some keys and, as soon as the visitor has walked upstairs, the hotelier grabs the €100 note and runs next door to pay his debt to the butcher.
The butcher takes the €100 note and runs down the street to repay his debt to the pig farmer.
The pig farmer takes the €100 note and heads off to pay his bill at the supplier of feed and fuel.
The guy at the Farmers' Co-op takes the €100 note and runs to pay his drinks bill at the taverna.
The publican slips the money along to the local prostitute drinking at the bar, who has also been facing hard times and has had to offer him "services" on credit.
The hooker then rushes to the hotel and pays off her room bill to the hotel owner with the €100 note.
The hotel proprietor then places the €100 note back on the counter so the rich traveller will not suspect anything.
At that moment the traveller comes down the stairs, picks up the €100 note, states that the rooms are not satisfactory, pockets the money, and leaves town.

No one produced anything.
No one earned anything.
However, the whole village is now out of debt and looking to the future with a lot more optimism.

And that, Ladies and Gentlemen, is how the bailout package works

Q: How many credit cards will be issued to the EU before they cannot afford to pay the interest owed?

A: Zero sum game is well on its way, no credit extention can bail out debt saturation.

Sat, 12/10/2011 - 14:47 | 1966348 topcallingtroll
topcallingtroll's picture

I think this shows how a bill of credit would work instead of or in association with fiat.

It is self extinguishing unlike our current system.

Sat, 12/10/2011 - 14:54 | 1966360 topcallingtroll
topcallingtroll's picture

If you think about it the prostitute and hotel ownern this system is the most important persons in this system. One creates the credit that the other extinguishes. This is a private financial system, and really if you think about it credit and liability are intrinsic to the individual. A parasitic banking system is not needed, but virtue in the individual creating the credit is necessary or it breaks down.

This is Fekeetes real bills theory I believe, but he is wrong in saying such a system requires gold or any backing for that matter.

Sat, 12/10/2011 - 15:16 | 1966391 Atomizer
Atomizer's picture

Taking your thought process to another level.. Enjoy.


How to tax serfs by pretending to expand a society, yet managing the status quo.


The Collapse of complex Civilisations



Sat, 12/10/2011 - 16:42 | 1966537 Vint Slugs
Vint Slugs's picture

The Real Bills doctrine originated with Adam Smith but Antal Fekete has further developed its theory.  You are incorrect when you state that the bills do not require "gold or any backing for that matter".  The bill cannot function as money unless it has a stable store of value.  That's where gold comes in -- it provides the stable store of value.

Sat, 12/10/2011 - 15:07 | 1966375 fonzanoon
fonzanoon's picture

It seems like everyone is all square...what am I missing here? sarc off

Sat, 12/10/2011 - 15:50 | 1966453 Stuck on Zero
Stuck on Zero's picture

I could believe every part of that story but the bit about the rain beating down in Greece. 

Sat, 12/10/2011 - 16:03 | 1966474 the grateful un...
the grateful unemployed's picture

no one is gaining anything in the transaction except the hotel owner who bought the meat. everyone else receives the 100e note as payment for their cost of production. the moral of the story is that direct bailouts only work for their target business, just as TARP only helped the bankers (who play the hotelier in this fable) who then refuse to lend money out. the banks pull a fast one, everyone else forgives the bank debts, and the whole process can begin anew., the hotelier gets a free dinner, and the rest get zero economic benefit.

Sat, 12/10/2011 - 17:45 | 1966553 Waterfallsparkles
Waterfallsparkles's picture

Not sure I agree as the butcher got drinks, the pig farmer got grain, the Hotel Owner has to pay for the property and someone using the rooms just compensates for that expense.  The only one that got services was the Bar Owner.  And the Prostitute has a depreciating Ass et.

Sat, 12/10/2011 - 20:22 | 1966881 the grateful un...
the grateful unemployed's picture

yes but the hotelier used the 100 twice, the second time to clear his accounts receivable, a liability, off his books

Sun, 12/11/2011 - 08:55 | 1967356 Waterfallsparkles
Waterfallsparkles's picture

The Hotelier did not in my opinion use it twice.  He may have been able to clear his accounts receivable, a liability off his books but his liablility to pay for his property is still there.  So, he was not better off.

You seem to think like a lot of people.  Everyone thinks that a Landlord (whether a Hotelier or not) has no cost for the Property they Rent.  That Landlords are independently wealthy and their Ownership of the Property comes from think air with no expense.


Sat, 12/10/2011 - 17:04 | 1966575 OttoMBMP
OttoMBMP's picture

Nobody in this system has any net debt.
So this has nothing to do with reality.

Sat, 12/10/2011 - 17:08 | 1966585 Waterfallsparkles
Waterfallsparkles's picture

What is really funny about this is that our Family being in Business would do the same thing and laugh about it all the time.  As it was so ironic that 100 dollars could go thru the hands of all the family members and end up in the same place it came from.

I would owe my Son $100. for work in the Office.  He would then pay my Daughter back for money she loaned him.  She would then pay my Husband for the advance on her car insurance and my Husband would then pay me the money for his Companies Office Supplies.


Sat, 12/10/2011 - 18:21 | 1966709 sudzee
sudzee's picture

You see, everybody is happy but only because the Gov't and bankers didn't take a percentage of each individual transaction.


Sun, 12/11/2011 - 08:58 | 1967359 Waterfallsparkles
Waterfallsparkles's picture

Good point but if each transaction was taxed at 25% by the time it got back to the Hotel Owner there would be nothing left.

Sun, 12/11/2011 - 12:34 | 1967529 hooligan2009
hooligan2009's picture

This story has been passing through peoples hands since fiat was invented! The answer is that the net worth of everyone in the circle was double O, triple O fuck all blank to start with since everybody was owed 100 by someone and owed 100 to somebody else. When the German got his money back everyone was still worth precisely, you guessed it, ZERO!

In this case "economic activity" had occurred prior to the arrival of a short term loan by the German. Central banks think that they can make the pig farmer transact with the whore by leaving the 100 euro lying around for long enough! 

Sat, 12/10/2011 - 14:44 | 1966339 anonnn
anonnn's picture

OT ...speaking of ignorance...





a heads-up re: Fukushima

1. Per   , excellant blog abt Fukushima, along with A.Gunderson's  ] a tweet..."

by a Lower House Councilman Hiroshi Kawauchi (DPJ) says the Nuclear and Industrial Safety Agency now admits in its report that the Reactor Pressure Vessel may have been broken by the EARTHQUAKE, not tsunami. No info about which reactor."

2.Also, that Le Monde will shortly release a gov't [sic, unspecified which] report [that] "is going to say it is the earthquake, not tsunami ...that caused the damage that led to the accident."



Sat, 12/10/2011 - 14:46 | 1966344 Rainman
Rainman's picture

These papers are proof that the finacial system must live the lie and continue the lie, til death do they part.

Btw, it appears AIG's Cassanno was bunkered in London for a very good reason.

Sat, 12/10/2011 - 15:00 | 1966366 GMadScientist
GMadScientist's picture

He definitely makes the short list of "assholes against the wall come the revolution".


Sat, 12/10/2011 - 14:58 | 1966365 GMadScientist
GMadScientist's picture

I tell you this casino (where you bet to see who you can really redeem from, at the end of the day and/or era of capitalism), bears a marked resemblance to puck-apu (Chinese Keno), and is approximately as interesting as a result.


Sat, 12/10/2011 - 15:01 | 1966369 PulauHantu29
PulauHantu29's picture

The Massive London RE Bubble is due to the massive profits due to massive rksy leverage from my understanding of the Daily Reckoning articles. While 99.9% of the hoi poli have wage stagnation in the UK, the Square Mile of Bankers are rewarding themselves with large Bonuses based on this paper/risky leveraging.

just say'n

Sat, 12/10/2011 - 15:37 | 1966380 jekyll island
jekyll island's picture

It makes me laugh when quants roll out their equations trying to pretend that economics is a hard science.  They will never derive a variable for greed that can be plugged into the formula, and that is what always makes them blow up.  

Sat, 12/10/2011 - 15:15 | 1966387 InconvenientCou...
InconvenientCounterParty's picture

Confidence as a byproduct of cultivated ignorance and willful fraud should not be an acceptable business model. It's not a free market, it's not capitalistic and it's not stable.

Knowledge is a precious commodity and a powerful weapon in this fight to recover rational markets and sound money. Thank you ZeroHedge.  Please donate what you can to supply the fighters on this front.

Recovering rule of law will be much harder. Obama would claim the ideal but there is no indication he would fulfill that and it could blow up in his face. IMO, this is the single biggest opportunity for Ron Paul to make the case to voters that he is the best alternative for POTUS.

Sat, 12/10/2011 - 15:15 | 1966390 slewie the pi-rat
slewie the pi-rat's picture

"...and your third wish, after infinite wealth and infinite power, master?"

infinite leverage, BiCheZ!!!

Sat, 12/10/2011 - 15:22 | 1966402 TooRichtoCare
TooRichtoCare's picture your example of the German tourist driving thru the Greek village, and the 100Euro note circualting around, with all debts being paid off in the end...the only problem is that the Hotel Proprietor is still out of pocket. The prostitute owed him 100euros for her hotel room, and yet he didn't get to keep the 100euros she put on the counter because the German tourist takes it back. So, the whole village may be technically out of debt but there has actually been wealth destruction to the tune of  

So the Hotel owner still has to cover that debt (his accounts show that a certain number of rooms have been booked, and so he should have X amount of cash, and yet the till is short), and so he goes and borrows it...and the vicious cycle starts again.

Sat, 12/10/2011 - 16:01 | 1966467 Atomizer
Atomizer's picture

Read my last post above.. I rest my case.

The European Commission has today presented a package of measures to boost research, innovation and competitiveness in Europe. Commissioner Máire Geoghegan-Quinn has announced Horizon 2020, an €80 billion programme for investment in research and innovation. Commissioner Androulla Vassiliou has put forward a Strategic Innovation Agenda for the European Institute of Innovation and Technology (EIT), which will receive €2.8 billion of funding under Horizon 2020. In parallel, Vice-President Antonio Tajani has announced a complementary new programme to boost competitiveness and innovation in SMEs, with an additional budget of €2.5 billion. The funding programmes run from 2014 to 2020.

Period of consultation 23.11.2011 to 08.01.2012 Objective of the consultation

The Commission has adopted a Green Paper on Stability Bonds which launches a public consultation on the feasibility of common issuance of sovereign bonds among the Member States of the euro area. The Green Paper contains five chapters: rationale and preconditions for stability bonds, options for the issuance, fiscal framework for Stability Bonds boards, Implementation issues, conclusions and way forward. The objective of the Green Paper is to have a broad debate on the issues raised. It allows all interested parties to see which areas the Commission has identified as relevant for the common issuance of sovereign bonds. It is also an opportunity for everybody to express their views on the questions raised, and to provide any relevant material. Finally, the Green Paper allows to flag items the Commission has not considered so far. In parallel, the Commission will seek the views of Member States in the appropriate bodies of the European Union. During this process, the Commission will in particular seek the advice of the European Parliament.

Implementing the Europe 2020 Strategy: Key Next Steps - WEP

Who pays to solve a crisis? Imagine your answer is the Government. Who is the Government? How does the Government receive monies to operate and/or expand programs?

Sun, 12/11/2011 - 13:34 | 1967669 ebworthen
ebworthen's picture

Committees and green papers to solve a crisis of morality?  You must be joking.

Sat, 12/10/2011 - 15:22 | 1966404 Georgesblog
Georgesblog's picture

The tyranny of ignorance is supported by the depth and reach of the lie that is fiat currency and it's process of fractional banking. It creates a mentality that accepts that the financial system is morally and contractually committed to support for this system of false weights and measures. That belief assumes that the system will never fail. The entire history of Economics says that the system will fail.

Sat, 12/10/2011 - 15:26 | 1966411 buzlightening
buzlightening's picture

The systems broken.  You cannot drink from a cesspool and expect not to be infected, even unto death; any more than you can place your funds in these mofo globalls bankstering gangstering hands and expect not to die  financially.  Run from the collapsing monetary system as the plaque, if you haven't already

Sat, 12/10/2011 - 15:27 | 1966414 Piranhanoia
Piranhanoia's picture

In RE and securities based loosely on same,  the bag got opened in 2009.  None of the trusts could provide any proof they had a trust in any way.  The trustees didn't answer legal requests, and the smart folks realized that it was all and always, a fiction to keep the investor and homebuyer ignorant.  The parties required to be identified on deeds or mortgages or notes are not the ones that had any skin in the game,  so those deeds, morts and notes are garbage.

 That is why the idea of trust is so foreign to anyone that has been neck deep in the shit.  There is no trust, no faith or truth regarding what the banks and their holding companies do. I laugh and cry every day on ZH seeing people playing with money that doesn't exist and actually expecting it to work for them in a rigged casino.

After the S&L convictions, the banks split up into the holding companies and started hiding every company they owned behind a firewall to try to protect them from contamination.  One of the large banks merged numerous near criminal operations into their own to create the company face they present today. Funny thing about creating a corporation for fraudulent means,  it means it was always a fraud, and everything it did was a fraud, thus void, fa eva.  So they spent their considerable resources on both bribery and extortion of those they purchased.  They bought Fannie and Freddie and Ginnie and every other D and R, who were cheap whores to start, put them on the payroll and decided, hey,  if we can fuck with every single property in the country, why can't we fuck the whole damn world?

enjoy the results. When someone says trust,  use George Carlin's guide for the 3 kinds of people there are and you can't go wrong.



Sat, 12/10/2011 - 16:02 | 1966415 ebworthen
ebworthen's picture




To break the tyrranny of ignorance - CASH OUT NOW.

To expose the Naked Emperor - REDEEM YOUR INVESTMENTS.

To end the oppression of "We The People" by central banks, bankers, and corrupt politicians - REDEMPTION.

Sat, 12/10/2011 - 16:14 | 1966498 slewie the pi-rat
slewie the pi-rat's picture

forget the chemist or the druggist, eb!

just stop by the re-apothecary and get your ass-reaming meds re-hypothecated!

Do NOT follow this link or you will be banned from the site!