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The Spacious Sound Of Nothing

Tyler Durden's picture





 

Via Mark J. Grant, author of Out of the Box,

Liquidity
 
The world is awash in it. If you listen closely you can hear the giant slurping sound of it rushing the shores at home and continents away. The Fed is providing it and the ECB is providing it while China doesn’t need it but it is sloshing around anyway. The world’s problems, the financial mess in Europe, the global slowdown that is resplendent from sea to not-so-shining sea is all being addressed with liquidity.
 
There is nothing of substance to deal with the structural issues that is forthcoming from the American Congress and there will not be until after the elections are completed. Then it will be right or left, more social programs or a rather serious cut-back in governmental spending but for now; the spacious sound of nothing.
 
In Europe it is even worse. The ECB may well be the only functioning institution on the Continent and they promise and they bray and they talk of an unlimited response that is firmly tied to the political part of the equation, the European Union, making up its mind and deciding and approving and blessing the enterprise but with the lack of this divination; the spacious sound of nothing.
 
China, the growth engine of the world for so many years and the bringer of manna and other bread leavened and unleavened, faces the shutting down of its almost mystical ovens. The end was due to come, the manufacture of cities and the cheap labor that built them would inevitably halt. It was always when and how and by how much and I believe we are witnessing the drawing of the curtain on a fabled age. Perhaps it was complicated by the change of guard in China or perhaps it is as simple as nothing else left to do; but steel and raw materials and an almost 20% decline in exports to Europe also echo with the spacious sound of nothing.
 
A very macro view of the world leads me to suggest that it is not one nation or another or even one continent or another but the totality of them all together that is leading the globe into what may be quite a serious slowdown. It is nice to think that the Central Banks will solve all of the world problems just as it is nice to think that ever increasing debt paying off old debt will right the ship before it falters in the storm but the very acts of the Central Banks are part of the problem if not the cause of the problem as the accompanying structural reforms that should be taking place do not and so liquidity is provided but it is not the solution for the problem and hence we find an answer but it is not the correct response to the question.
 
Liquidity, it must be said, has casual effects such as inflation, ratings downgrades, decreasing valuations and, ultimately, a lesser value of goods and services as ever more capital is necessary to purchase what is desired to be bought. This Central Bank liquidity also produces ever higher and higher levels of debt and, aside from the interest rate, the principal must be paid back by economies such as America that are flat-lining or by economies in Europe that are in distinct decline. You may applaud at the opening act but the second act may produce quite different results. The $2.2 trillion balance sheet now at the Fed is going higher and there is not even a cap or a limit in place. Perhaps it is the “it worked for the ECB and maybe it will work for us” play but it is rife with danger. The ECB pledge of ad infinitum funds is clearly bound by the conditions of the pledge and those that must approve may never approve given the political infighting between the haves and have-nots that is currently taking place in Europe.
 
Europe and America face fiscal cliffs of their own making and what anyone can afford is generally the needle that breaks both a camel’s and a union’s back. The firewall in Europe, heralded by the IMF and every institution in Europe, has been revealed to be a wall of translucence as Spain is settling into the frying pan and dredging itself with oil for the fire. The firewall notion was ill conceived and poorly orchestrated and as demonstrated by reality, a firewall does nothing for those that live inside it except defend it from outside enemies when the enemies were always within.
 

Finally, liquidity does accomplish one other major factor; it provides a tremendous amount of leverage. Liquidity provided must be paid back and if the banks and nations that receive it do not provide structural changes, reduce their deficits, decrease their borrowings then, ultimately, the gods of chaos are unleashed. At this point it is no longer the interest that is paid but the return of capital that must be paid that becomes the number one issue. Liquidity has its price and I submit to you today that the time is fast approaching when a world awash in liquidity overwhelms the barriers and the dike is breached. The applause of today may become the tears of tomorrow if the current course continues.

 


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Tue, 09/18/2012 - 08:17 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

I held it to my ear.......I heard nothing.

 

Am I doing it wrong?

 

Tue, 09/18/2012 - 08:20 | Link to Comment JPM Hater001
JPM Hater001's picture

Try the other end.

Tue, 09/18/2012 - 08:25 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

That's better.

 

Tue, 09/18/2012 - 08:17 | Link to Comment Neethgie
Neethgie's picture

In the uk we have come up with a plan to use naked photo's of our royal family as collateral.

Tue, 09/18/2012 - 08:24 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

Kids are always flashing their boobs these days.....the Queen would never do that.

 

Prove me wrong and show me the pictures.

 

 

Tue, 09/18/2012 - 08:33 | Link to Comment ShorTed
ShorTed's picture

Sry for the -1 but it's early here and the Queen's boobs...ugh!

Tue, 09/18/2012 - 08:38 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

Oh really.....like you've seen the Queen's boobs.

 

Calling horseshit right here.

 

Tue, 09/18/2012 - 09:21 | Link to Comment agent default
agent default's picture

The Queen doesn't have boobs. She's royalty.

Tue, 09/18/2012 - 09:44 | Link to Comment This just in
This just in's picture

Always demand real boobs in your physical posession, not paper promises of boobs.

Tue, 09/18/2012 - 10:07 | Link to Comment Metalredneck
Metalredneck's picture

"A boob in the hand..."

Tue, 09/18/2012 - 11:26 | Link to Comment tabasco71
tabasco71's picture

Given the state of her daughter-in-law's at less than half her age, I seriously doubt you'd want a view at those skinbags...

Tue, 09/18/2012 - 08:20 | Link to Comment JPM Hater001
JPM Hater001's picture

With all the liquid sloshing around it looks like I picked the wrong day to quit drinking.

Thanks Mark, a solid summary.

Tue, 09/18/2012 - 08:20 | Link to Comment Doode
Doode's picture

The number of posts that say the exact same thing with slightly and I mean slightly different words about the FED in the recent days is mesmerizing. It is almost like tuning to a local pop radio station where every song is a form of "I love you" or "boy meets girl/ girl meets boy". The market has moved on - perhaps so can all the posters?

Cheers

Tue, 09/18/2012 - 08:22 | Link to Comment JPM Hater001
JPM Hater001's picture

Can you every really see enough boobs, drink enough wine or play enough golf?

Keep it coming boys.

Tue, 09/18/2012 - 08:23 | Link to Comment Fix It Again Timmy
Fix It Again Timmy's picture

Sorry. but I would not waste the energy and time to enter the keystrokes to see nude pictures of Kate...

Tue, 09/18/2012 - 08:26 | Link to Comment the not so migh...
the not so mighty maximiza's picture

Kate is a slutty whore with small boobs

Tue, 09/18/2012 - 08:29 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

In her defense.....not that small.

 

.....and when did being friendly make make someone a slut?

 

 

Tue, 09/18/2012 - 11:32 | Link to Comment tabasco71
tabasco71's picture

For supporting something you can't eat (as your moniker suggests) I'm with you.

For defending any part of an instituition as corrupt as any bank -1

Tue, 09/18/2012 - 10:08 | Link to Comment Metalredneck
Metalredneck's picture

I saw the pictures.  I no longer protest paying for her wardrobe.  Keep them fried eggs covered.

Tue, 09/18/2012 - 08:26 | Link to Comment Cdad
Cdad's picture

The firewall notion was ill conceived and poorly orchestrated and as demonstrated by reality, a firewall does nothing for those that live inside it except defend it from outside enemies when the enemies were always within.

Perfectly said.  Now...will ANY of the crumbling PIIGS nations figure this out?  That is the only question left.

Tue, 09/18/2012 - 08:28 | Link to Comment LongSoupLine
LongSoupLine's picture

The CB's, I'm afraid, are just getting warmed up.  The people are fucking stupid sheep and will continue to allow it until it's far too late.  Only when dancing with the stars is taken away will there be true revolution.  Otherwise, all we can hope for is a rouge meteor landing on Fed headquarters.

 

Buy fucking silver, gold, MRE's, guns, farm land with water rights.

Fuck you Bernanke, Congress, SEC, CFTC, Wall Street!! 

Tue, 09/18/2012 - 09:04 | Link to Comment Vince Clortho
Vince Clortho's picture

"... all we can hope for is a rouge meteor landing on Fed headquarters."

So you're saying there is a chance?

Tue, 09/18/2012 - 08:30 | Link to Comment Money By Trading
Money By Trading's picture

A few thoughts and charts on gold:  

http://wp.me/p2CT0a-5O

Tue, 09/18/2012 - 08:31 | Link to Comment Oh regional Indian
Oh regional Indian's picture

"Liquidity, it must be said, has casual effects "

Surely you/he meant Causal?

Nothing casual about all them thar effects...

ori

Tue, 09/18/2012 - 08:35 | Link to Comment Dr. Engali
Dr. Engali's picture

The world is falling apart,everybody is pissed off,earnings suck, and the stock market is heading to new highs. Does Ben really think he is fooling anybody?

Tue, 09/18/2012 - 08:41 | Link to Comment RSloane
RSloane's picture

He's fooling a lot of people who are absolutely convinced that QEi is going to magically create wage inflation and presto, wages are going to increase! These people also talk to unicorns and ride My Little Pony to work - that is, those of them that work.

Tue, 09/18/2012 - 08:43 | Link to Comment fonzannoon
fonzannoon's picture

I don't even think people are fooled anymore. They just flat out don't give a shit. This whole subject is like a gnat to them. Eventually it will go away...so they think.

Tue, 09/18/2012 - 08:49 | Link to Comment Dr. Engali
Dr. Engali's picture

I think you're right. They either don't want to think about it or don't have the capacity to think about it. What gets me is how people don't even care about the in your face fraud. Every time it comes up they shrug their shoulders and say "oh well what can you do"?

Tue, 09/18/2012 - 08:52 | Link to Comment fonzannoon
fonzannoon's picture

I found this interesting. I did not doubt the fraudulent accounting practices taking place but I did not know we were on the hook for the public pensions as well...

http://www.bloomberg.com/news/2012-09-17/don-t-stick-taxpayers-with-underfunded-corporate-pensions.html

Tue, 09/18/2012 - 09:00 | Link to Comment Dr. Engali
Dr. Engali's picture

They never cease to amaze me. They do anything they can to skim where they can and then throw the burden on us when it falls apart.

Tue, 09/18/2012 - 09:05 | Link to Comment JPM Hater001
JPM Hater001's picture

Pensions are the central banks achilles heel.  With 6 7 and 8% return assumptions the only reality there is gravity.

Tue, 09/18/2012 - 09:34 | Link to Comment Sheeple Shepard
Sheeple Shepard's picture

Tyranny is the symptom

Apathy the disease

Awareness the cure

 

-someone smarter than me 

Tue, 09/18/2012 - 08:41 | Link to Comment fonzannoon
fonzannoon's picture

I wonder how Ron Paul's wife handles waking up everyday saying "I know I know you were right again"....

Tue, 09/18/2012 - 08:40 | Link to Comment Sweet Chicken
Sweet Chicken's picture

This reminds me of what my father used to say to me.

"Why don't you get out of the bathroom and give someonelse a chance?!"

Tue, 09/18/2012 - 08:41 | Link to Comment buzzsaw99
buzzsaw99's picture

zirp 4evah, qe to infinity. that is all. (for now)

 

What diabolical plan had seized Frank's crazed imagination? [/rocky horror picture show]

 

 

Tue, 09/18/2012 - 08:49 | Link to Comment falak pema
falak pema's picture

kate has nice boobs but the french have banned their general ogling in public. Berlu is not pleased. The queen appeased.

Apples to apples and boobs to bonny princes in the nude. 

The soft sound of queen-to-be apples falling into empty plebian hands is now fench media pipedream.

Next please, there is no lack of those green apples.

Tue, 09/18/2012 - 08:49 | Link to Comment buzzsaw99
buzzsaw99's picture

the royals all look better with their clothes on imo.

Tue, 09/18/2012 - 08:49 | Link to Comment Overflow-admin
Overflow-admin's picture

"If liquidity was tangible, QE would be a tsunami"

 

WTF I tought it was only playin with zeros, like corpo-banksto-monopolists do? I'm shocked. Absolutely SHOCKED.

Tue, 09/18/2012 - 08:52 | Link to Comment SmoothCoolSmoke
SmoothCoolSmoke's picture

Am I the only one who grows tired of the "financial disaster that is sure to come" rhetoric?  Can we just HAVE a disaster for a change?

Tue, 09/18/2012 - 09:08 | Link to Comment JPM Hater001
JPM Hater001's picture

Much like a sailboat the crash happens slowly, without much sound before you hit and is ultimately unexpected.

By that I mean the crash is happening.  What you want is the sound and fury part.

Bang a pan with a spoon for the time being.

Tue, 09/18/2012 - 09:10 | Link to Comment JPM Hater001
JPM Hater001's picture

Believe me I know, I hit a small island (well, the shoal just off it) 2 years ago on a night-sail...total silence then Seagulls screaming.

Autopilot was on and I was doomed from the moment I left Fish Creek.

Tue, 09/18/2012 - 09:32 | Link to Comment sunaJ
sunaJ's picture

Pity that you had decided to bring along your gold, guns and ammo on that fateful voyage, I'm sure. 

 

The world has gone insane, which is what happens when real problems are not addressed.  Instead of the Chinese being permitted to gather and protest corruption and graft in their system, or Arabs and Americans the same, what you get is overreaction to things that are rather absurd but permitted, like a few rocks in the sea, a poorly made movie in America, or Romney v. Obama.  These are not issues that threaten the power structure, and in most cases they are allowed by the systems because they reinforce it.  Too bad people are not better at keeping their eyes on the ball.

Tue, 09/18/2012 - 09:11 | Link to Comment Sweet Chicken
Sweet Chicken's picture

Bang a pan with a spoon for the time being.

 

lulz

Tue, 09/18/2012 - 09:27 | Link to Comment ejmoosa
ejmoosa's picture

The money is out there.  Now it's time for the socialist regimes to get their redistribution programs in full gear.

Tue, 09/18/2012 - 10:11 | Link to Comment Papasmurf
Papasmurf's picture

They've already moved most of it to the top.  There's little more they can do.

Tue, 09/18/2012 - 11:41 | Link to Comment tabasco71
tabasco71's picture

LOL +1

They've already moved it back to the top.  There's little more they will do.

Tue, 09/18/2012 - 10:45 | Link to Comment Element
Element's picture

.

Tue, 09/18/2012 - 12:03 | Link to Comment CDSMonkey
CDSMonkey's picture

I'm bearish, but being very careful not to underestimate the power of that liquidity.  For the moment it may be priced in (I hope it is), but it scares me.

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