Thunder Road Report On The Death March: Approaching A New Financial System

Tyler Durden's picture

From Paul Mylchreest's latest Thunder Road Report

Death march: approaching a new financial system

If you are reading this, you are probably a member of what the sociologists would term middle class (albeit at the upper end). This is precisely the segment of society which is poised to come off worst from what is coming. Here is a very disturbing idea. As this crisis develops, if you are an equity portfolio manager and you want to outperform the market, you are going to have to position your portfolio so that it benefits most from your own wealth destruction and that  of your family, friends and colleagues. Almost everybody is going to lose and there aren’t many places to hide. This is deeply unpleasant but you can blame the central planners. I’ve written about my own investing, e.g. gold and silver, equities in terms of Maslow’s Hierarchy of Needs, etc. In this Thunder Road Report (below) and going forward, I will discuss this middle class theme and highlight positions I have in individual stocks, etc. The only good thing that can  come out of this is a rise in awareness. It’s just awful.

In government bonds, the natural inflow of funds is approaching the end of the road – although there is probably one more short-lived and “wrong-footing” move downwards in the yield on the 10-year US Treasury. Increasingly, the flow of funds into government bonds is merely a direct reflection of newly created liabilities (debt) on the balance sheets of central banks like the Fed, ECB and Bank of England. Long-term US Treasury bonds are in their highest ever supply and at their highest ever price/lowest ever yield. Just another example of our “upside down” world.

Brief aside: besides (or maybe in conjunction with) inflation/currency devaluation, there is one other way the US could extinguish the Federal debt (US$15.8 trillion dollars when I just checked the real time national debt clock) just like that…gone! Used in isolation, almost nobody would suffer! And some people (probably less than 1%) would gain…and boy would they GAIN! Do you know what I’m talking about? Got any? Don’t know if it’ll happen, but at least it would cheer my wife up. She is still trying to work out how I could have forecast the Great Financial Crisis and made so little money out of it?

“You knew Fannie Mae was bust, you should have made millions.”

At least she didn’t add “you idiot”. She’s nice like that.

Meanwhile the price of the only financial asset with zero counterparty risk in the biggest global debt crisis in history has been “locked down” for months. There is a reason. It must move in volume to where there is an insufficient quantity prior to the denouement of the current financial system. A new system is coming with a bigger role for gold. You see “the man” isn’t stupid, even if some of his acolytes are. He has a plan. But there’s one “person” who could make things difficult for “the man”, so he had to be brought “onside” first.

Dr Kurt Richebacher was the publisher of “The Richebacher Letter” until his death in 2007. Paul Volcker commented that:

“Sometimes I think that the job of central bankers is to prove Kurt Richebächer wrong.”

Ain’t going to happen. Richebacher himself sagely remarked that:

“The only cure for a bubble is to prevent it from developing.”

Well it’s far too late for this financial system. Ten years ago, before the debt bubble became catastrophic, the free market could have resolved this issue. But Greenspan, the “Great Architect”, had to create yet another bubble in real estate and the “point of no return” was left far behind.

Then the helicopter-flying monetary psychopath took over and he is creating the bubble to end all bubbles in MONEY itself.

Cue a great comment from Damon Vrabel in “Harvard Lobotomies And The Disgrace Of The Economics Profession”:

“The truth is that economics has been designed to completely hide the monetary system that hovers above the economy. Economics assumes money is just a medium of exchange floating through the economy to facilitate a free market and generate wealth. At times that has been true, but today it’s probably the biggest lie of modern history.”

Let’s take most people’s current favourite “safe haven”, the mighty United (Socialist) States of America. This is the chart of the debt in the economy (total Credit Market Debt Outstanding) since the current Kondratieff cycle began.

 

There She Goes - debt in the US economy (US$bn)

 

Imagine telling people that you’d set up a Ponzi scheme and asked them to invest in it. They’d be very offended that you could take them for being so stupid. But you only need to look out of the window, or in the mirror. Salaries, pensions, mortgages, savings, etc. are all paid in…MONEY. And nearly everybody is “all-in.”

The Euro, or its purchasing power anyway, is clearly finished if they try to keep the system together, but what about the dollar?

The songwriter, Noel Gallagher, formerly of Oasis and now with his High Flying Birds, commented
that:
“There’s only one boy in this country who scares me and that’s Lee Mavers.”

Raoul Pal, of the Global Macro Investor, said in May 2012 that:

“All that is left (to buy) is the Dollar and Gold”

I f-----‘ love reading Raoul Pal’s stuff when I can get hold of it, which is incredibly difficult. He grew up (at least for a few years) near where I did and not far from Lee Mavers. I can’t recommend his work highly enough. I don’t disagree with him on much, but I do disagree with his view on the dollar (although he might be bullish on the dollar just from a trading perspective and he’s been right since May).

The two remaining “sacred cows” preserving the US dollar as the world’s reserve currency are:

  1. The belief that the Chinese will continue to buy US Treasuries; and
  2. The US dollar will maintain its monopoly on world trade.

Regarding number one, the Chinese have been sellers since the end of July 2011 (note the date). With regard to number two, have you noticed how China has set up currency swaps with nearly all of its trading partners? Have you noticed how Iran has been excluded from the SWIFT system and has begun selling oil to some countries in currencies other than dollars?

China has been preparing for dollar devaluation for nearly a year now, but hardly anybody has noticed. While everybody frets about the Euro, the dismantling of the US dollar’s reserve currency status is occurring within plain sight. I think a deal was done between the US and China in late Summer or early Autumn of last year. Have you also noticed how Ben Bernanke has used just about every unconventional method of monetary policy he’d discussed in his earlier writings on preventing deflation…bar one big one? Dollar devaluation. Let me repeat that, dollar devaluation.

We are heading into a truly mega-financial crisis. This is (another) classic “I hope I’m wrong, but…” report. I think the crisis is going to result in the transition to a new financial system as the current one implodes. Best guess is that it will be either happening, or perfectly obvious that it’s going to happen, within 6-12 months, i.e. within our investing time horizon.

This report connects a lot of dots and analyses each one of them. The dots include:

Dot - Loss of US AAA credit rating in August 2011
Dot - China lashes out at US “addiction to debt”
Dot - Peak in Chinese holdings of US Treasuries
Dot - China starts selling US Treasuries
Dot - Surge in the gold price in August 2011 followed by steep decline
Dot - Lock down of the gold price (using “paper gold”) ever since
Dot - Movement of large quantities of physical gold from London to Asia (notably China)
Dot - Collapse of MF Global
Dot - Radio silence on China being a currency manipulator
Dot - Exter’s Pyramid playing out in front of our eyes
Dot - Iran excluded from SWIFT system
Dot - BRICS countries signed the Master Agreement on Extending Credit Facility in Local Currency and the Multilateral Letter of Credit Confirmation Facility Agreement
Dot – US granted China a 6-month extension on sanctions for buying Iranian oil (India already had one)
Dot - Revisiting Bernanke’s old speeches on deflation
Dot - Operation Twist
Dot - Comments by World Bank President, Robert Zoellick
Dot – BIS proposal to upgrade gold to a zero risk weighted asset in line with sovereign debt as part of Basel III
Dot - Comments by Robert Rubin (“consigliere” to the elite)
Dot - Recent meeting between Kissinger and Wen Jiabao
Dot - Why debt deflation now would paradoxically precipitate hyper-inflation
Dot – Demise of the middle class (theme)
Dot - Putting all of the above in the context of the fourth (and ongoing) price upwave of the last 1,000 years
Dot - How each of the three earlier price upwaves came to an end.

 

Full report below:

 

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
nope-1004's picture

Banks are criminal.  Leaving your money with them is sheer stupidity.  What's next?  IRA and pension raiding.  Then banning PM's, on and on.  They will make and change laws as this intensifies, so there really is no place to hide, it's just a matter of choosing the least painful method.

 

LawsofPhysics's picture

Correct. all economies are becoming more local by the minute.  This is why likeminded neighbors and local resources are so important.  Don't think you like/trust you neighbors, time to move.

What's that saying in realestate again, something about location?

Colombian Gringo's picture

Globalization is a scam designed to destroy every one elses wealth in favor of a very small group of banksters..

DoChenRollingBearing's picture

LIBOR is not just Barclay's, RBS and UBS.  It is the whole CARTEL of the 16 banks.  I write up everything I have been able to find about the LIBOR scandal, and a NEW nice scandal in the PIIGS countries:

http://tinyurl.com/clafwu6

DoChenRollingBearing's picture

And tomorrow is Friday...

Are they going to save the best to release just before the weekend?

Muppet Pimp's picture

The continuing scandals regarding the crooked financial institutions that run the world (aka TBTF or in some cases SIFI's) cement the importance of breaking up the monopolistic banks.  The libor scandal is simply another wedge that provides a real chance for TPTB to go after them and dismantle them (RICO enforcement actions notwithstanding).  No, I am certain that with an upcoming presidential campaign to be funded by these crooks that not a peep will be heard of such talk by our bought and paid for politicians.  My point is that the time is here to dismantle these behemoths, and their is sufficient dirt to make it happen if TPTB were so inclined.  Fingers remain crossed that some statesmen will step up around the globe now that there is additional substantial proof of collusion to defraud (in this case) the entire world who rely on the integrity of those posting the basis for trillions of dollars in financial products.  Diamonds testimony and the email communication that has surfaced clearly indicates to anyone who cares to pay attention that these 'for profit' centers of power have the best interest of themselves alone, screw the honest hardworking people of the planet, they have bonuses to steal for one another.  (Steps down from soapbox)

 

Here is an excellent video from Steve Keen I wanted to share:

http://www.debtdeflation.com/blogs/2012/04/16/inet-presentation-minskian...

He nails it IMO.  His conclusion (Jubliee of some sort) is certainly a debatable topic, but short of that, Steve is on point big time.

The social "science" of economics is going to change, period.

Element's picture

This is bullish for US equities right?

MillionDollarBonus_'s picture

The new financial system will be a compassionate one. One where consumers are simply not able to make bad choices, because they will be illegal. One where derivatives like options, futures and swaps are a thing of the past, and speculators are tried for their crimes against humanity. A committee of compassionate, caring and selfless regulators will be delegated the responsibility of looking after us, and they will be given the right to 

1. Punish us if we make the wrong choice

2. Reward us for making the right choices

It's essentially a CBT approach. Positive reinforcement for good behaviour, like supporting green technologies, and negative consequences for making choices that contradict the preferences of the regulators. One of the major issues with adult life today is that there are no parents or teachers to guide us and tell us right from wrong. Children have caregivers, but who do adults have? I would argue that the role of the government is to BE OUR PARENTS as adults. This is the ultimate purpose of the progressive revolution.

NumNutt's picture

Fuck your "progressive revolution"!

I think I need to buy a gun's picture

"we need a system that works for everyone" rev al sharpton

economics9698's picture

OMG MDB that was fucking awesome!!!  This dude is brilliant.

BigDuke6's picture

I'm a big fan of MDB too. But its all going too far.

His posts now are followed by a parade of post-orgasmic ZH'ers smoking a cigarette and saying 'Wow - how was it for you?'

And thats just what the evil snake eyed genius wants....

Element's picture

There are worse trolls out there BD6.

I spoke to a tragically pervert, corrupt and moronic woman today, who said she worked for a, "Not for profit resource-management company".

She had started the conversation by asking me if major mining project 'X' was having a negative effect on the cost of living in the area? I thought that a rather odd question and I said no, it was not having such an effect on the community, it was buffer by all the other supporting and corroborating economic activity and was leading to a general surge in economic spin-offs and a rise in the number of people benefiting from it.  Which is when I asked about her profession.

So when she told me, I was immediately thinking "wtf did she just say?".  So realising there's something was very wrong with this verbal description of who she worked for, I started to quiz her like; how can a resource company also be a not-for-profit company? 

She immediately says. "oh, our resources are the natural-resources",

I see ... so who do you do this 'work' for?

"Oh, mostly we work with Govts, we do some other fun stuff with the public, but mostly with govts."

Ok, so what does that entail?

"Well, we try to find new ways to influence the public perceptions."

So in about one second I've seen the bigger picture; AH-HA! ...a Govt-sponsored parasitic radical Greenie propagandist, is getting paid the money from my own pocket, to make Govt political propaganda, to try and get me, the parasitised one, to perceive things the way she would prefer, on behalf of the Govt ... and in my public best-interests, mind you.

So she starts spieling of this class-A-crap, and sums it up with the term, "Sustainable Futures".

So I seem a bit cynical and unimpressed by this and say, "oh, so that's the catch-cry huh? ... you know, people are kind of getting tired of all that sort of talk, as they've had this stuff thrown at them for about 20 years now, and they're really getting turned-off by it all at this point".

So she says, "oh that's the old catch-cry, we're about to start using the new one - 'Resilience'."

I kid you not, watch for this word BD.

So at that point I've really had all I'm going to take from this fucking idiot, but I want to keep it cool, so I make a pained sound and wince a bit and go; "Oh no! There not going to destroy another word are they? .. don't they realise that all these sorts of words have a shelf-life of about 2-months?

Now she's finally suspecting that, just maybe, I may not be all-aboard her train to crap-fest land, and starts dissembling about how her job's made "complicated" by this fact, and that; "Yes, this is now our challenge, how do we come up with new ways to affect people's perceptions, and how do we get them to respond positively to that message, that is one of our challenges".  

So her "not-for-profit" Govt-funded 'job', as a natural "resource management company", turns out to actually be just one of the people and companies who come-up with new ways to get us, the tax-payers, to gullibly stupidly believe (and to make a long story, short), that mining and development are bad, and must be stopped, and that ultra-left greenie idealism is a real political policy alternative (which explains her initial loaded-question to me, about the impacts of mining development on the community ...).

I kid you not.

As I remember BD, you're an Aussie too right?

Well, that's your tax dollars, hard-at-not-working mate!

Frankly, the MBDs and other wee trolls in zh have nothing on this level of automated centralised perversity and profound intellectual corruption, plus the pursuit of pre-meditated derailment of the public's economic interests ... and all being done at great public expense.

And if you're really good, they'll give you a small tax-refund this year (so that you feel you're #winning).

These are the ideological maggots our own Govt is showering with the money from our best productive efforts, simply in order to mind-fuck us all the more with their idiotic psychobabble and harmful degenerating prescripts.

And there are dozens of courses at our universities producing parasitic brainwashed cretins like her by the hundreds, every year. 

The system must be crashed, smashed and rebuilt, and all the useless perverse gibbering cretins like her ... "re-educated".

The more I come across people like that, the more I realise we're going to have an incredible clash and radicalisation occurring over coming years because ordinary working people are going to wake up to snakes in the grass like that, and will totally reject the entire current political class as the financial shit-storm finally hits the fan.

marathonman's picture

You mean she's a community organizer?  Wasn't that our current President's starting job?  It's just too awesome to not laugh at the folly.

sablya's picture

Yeah, the great financial system to come, will be a kinder, gentler financial system.

 

no one can buy or sell unless he has the mark,

that is, the name of the beast or the number of its name.

(Rev 13:17)

 

Oh yeah, no doubt about it, MDB.  The financial system will be so nice.  

 

those who would not worship the image of the beast to be slain

(Rev 13:15)

 

Mmm, yeah, sounds so nice.

rocker's picture

Aren't we already told that the "U.S. Financial System is the Best in the World".

Jamie Diamon said he works for America. CNBC: "We have the best shirt of all."

LMAO  What problem do you speak of ???

LongBalls's picture

You can't make a run if you can't get your money! Celebrate what this means about truth. Do not fear.

StychoKiller's picture

"We need a system where EVERYONE works!" -- StychoKiller

I think I need to buy a gun's picture

"we need a system that works for everyone" rev al sharpton

Mike in GA's picture

and what would Al know about 'work'?

 

 

sickofthepunx's picture

all revolutions are progressive.  never heard a revolutionary say "let's torch this bitch and go back to the way things were"

marathonman's picture

Sure you have.  There have been plenty of coup de tat.  One general replaces another general.  Usually in the banana republics, but not necessarily.

BKbroiler's picture

Fine work MDB, one of your best.

BandGap's picture

I don't often comment on your post but - I laughed, I cried, I wet myself.

The beauty of your effort is that I have very liberal friends that would nod and smile at these words. Then I would laugh, then cry, then shit myself. Good day to you sir.

TheCanadianAustrian's picture

I swear, reading your posts while imagining them as a speech delivered by Leslie Nielsen in Naked Gun is better than sex.

CPL's picture

That's exactly how I read them as well...

 

Dead pan, straight faced while twenty impossible things happening in the periphery...weird.

Will To Live's picture

The ultimate Oedipus complex.

mick_richfield's picture

It's hard for me to read his stuff, but you know why, Hapsburg?  It's because the truth hurts.

Oh sure, maybe not as much as jumping on a bike with the seat missing, but it hurts!

 

ihedgemyhedges's picture

What is this "sex" you talk about?

Signed: Married man (18 years in the system)

cbxer55's picture

Things that make you go hmmmmm!

Left hand, or right?   ;-)

Fleshlight, better than the real thing!

Tortuga's picture

Uh, are you open to a re-evaluation? I mean, I'll read it again but; there's no way.

Dr. Sandi's picture

 

I would argue that the role of the government is to BE OUR PARENTS as adults. This is the ultimate purpose of the progressive revolution.

But my father never loved me and my mother didn't know how. I want NEW PARENTS.

lasvegaspersona's picture

MDB

cuz some folks is so much smarter than uz?

Al Huxley's picture

Well done MDB, your best, most biting post ever.  I love the whole 'government role is to be our parents' thing.  One comment - the take is always the 'benificent government out to look after us', but I'd really like to see some explanations as to how the TBTFs also have our best interests at heart and they and their fearless executives are working long hours to protect us from ourselves and make this a better place for everyone.  Would love to see your take on that, give it some thought...

SWCroaker's picture

I hope you don't have children.  Punish them if you judge them wrong; reward them if they choose your option.   Sounds very Pavlovian.  Maybe you wish to have your offspring grow up to be good doggies?

A tin-foil hat wearing Libertarian (okay, I forget the exact phrase; you omitted it in this post for some reason), might instead choose to gradually encourage self determination in children as they age.  Sort of ease them into the habit of making their own reasoned choices.

Frightening thought, I know.

 

MDB, to your success, you do what you do so well that even when I know that you pose, I despise you for pulling it off so convincingly...   May the caricature that you are burn in hell for eternity, and the jester behind the caricature be well satisfied in a job well done indeed.

nmewn's picture

"MDB, to your success, you do what you do so well that even when I know that you pose, I despise you for pulling it off so convincingly...   May the caricature that you are burn in hell for eternity, and the jester behind the caricature be well satisfied in a job well done indeed."

Couldn't have said it better myself...but I still junk his ass.

Just sayin, widely known truth first, then satire.

TraitorsHang's picture

Your username might as well have been "Dominique Francon".

lincolnsteffens's picture

Holy shit!!! Who is this idiot. Maybe he is the guy developing  propaganda programs to re-educate the American people in the FEMA camps. This is a test run to see what can be used effectively on people who would prefer to follow their own decisions when they wake up in the morning in stead of Uncle Samie giving you a wake up call at the proper time on your phone and tell you what to do next. It is obvious we can not be trusted to decide if we should comb our hair first or pee first. 

This drivel is too idiotic to be genuine. Someone is getting his rocks off driving ZH readers crazy.

i-dog's picture

Dude ... if you can't see through the satire then you probably can't be saved anyway! I'll explain:

He usually includes at least one clue to trigger the cognitive dissonance that should alert any drowsy reader to wake up and see it for what it is. The more savvy ZH regulars automatically get a chuckle...while red-blue-team pom-pom wavers throw the vilest insults at him (that's how they roll!).

Overall, his posts very cleverly highlight the need to read any opinion -- whether from a collaborator or an assumed patriot -- with a critical eye and brain engaged!

To educate newbies, it would be better to point out the clue - or the self-contradictory statements - than to resort to childish name-calling.

I have only ever junked him when he has failed to include a clue...and very early on awarded him the 'Golden Zero' for sucking in the highest number of junks and vitriolic knee-jerk responses ever seen on ZH.

Join the awake!

Bananamerican's picture

i dream of a day when MDB posts show all green on ZH....

Michael's picture

Then ZH could merge with and change its name to Huffington Post.

WhiteNight123129's picture

MDB this latest comment of yours, is absolutely surreal. My hat is off to you... from Judas

http://4.bp.blogspot.com/-KUQHsBLKfVM/T-NsAiPVVMI/AAAAAAAADss/HpKolerFNK...

 

Short Memories's picture

LOL
Sounds like 1984's "Ministry of Love" :)

Glasnost's picture

The government is my parents.

 

The government wants me to shoot myself.

That is the 'right' choice.

The consequence of making the wrong choice is being shot.

The 'wrong' choice is to not shoot myself.

Therefore if I make the wrong choice, I will be shot.

 

You neglected to accurately mention how exactly your...brilliant(ly idiotic) idea will work.

MillionDollarBogus_'s picture

Me thinks your mother severly dominated you, well into adulthood.....and you enjoyed it.

 

 

Will To Live's picture

Again: The ultimate Oedepus complex.

Element's picture

I suspect the point is we should not be talking about this worthy blog post, let's talk about MDB comedy BS instead.