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:

 

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4 wheel drift's picture

FTS fuck this (your post) shit......

this mentality is what leads to increase the membership of the free shit army.......  (freeloaders)

indeed, given all the cheating, lying and all the rest of the crap continues, (which chances are that it will) since the so called 'middle class' has no spine, hence these regulators you speak of, will have their way....

well....   i suppose i shall become a bum....  who cares.....

 

amazing how ayn rand had it so correct as described in atlas shrugged.

AchtungAffen's picture

That's a very paternalistic oppinion. I'm not so sure the financial system of the future will be like that. Specially because "collapse" means a decrease in complexity. Without enough complexity, central decision taking becomes harder.

My hope is that the new system will be more based on reality. A moral despise of worthless papers. Probably not for fiat money, but yes for financial papers like derivatives. Probably a new understanding and loathe about debt. People will avoid going into debt, as the generation from the Great Depression was.

And I really hope the economy becomes more like village style. Local, functional (no superfluous stuff), less advertising, less marketing, radically less growth (I really hope for a 0% growth economy) - an end to Bernais style of PPRR, like clothing "to reflect your interior being" and smokey mirrors like that; we might go back to dressing similar to each other as it used to be 70 years ago). And mostly, based on trust. Because money was born out of mistrust. In the village people don't trade for money, they only do that when there is no trust. I hope for an end to unproductive economic activies (or should I say "counterproductive") like paper trading and speculation. Probably a moral repulsion on the idea of unlimited capital accumulation.

And what would be best of all, specially is the crisis is big enough to destroy really old institutions, an end to the stupid christian idea of mankind being beyond nature. A final acceptance that humans are animals, no different from the rest. At last humans being put into their place. Probably a new animist pseudo-religious thought where divinization would take the form of nature.

That would be a Utopia. I doubt it's possible with 7 billion people and 10 times (or more) notional value in worthless paper than the world's GDP. But well, give a crisis big enough and both those variables would be reduced badly. Not that I think a big die-off is cool. But well, it's time to pay the bills, to be accountable. Humans escaped natural selection and natural enemies through technology. But humanity wasn't responsible enough with that acquired power, and fucked like rabbits. It's payback time.

razorthin's picture

Well done.  This is one of the few times the satire shines through.  Many here believe you are all satire, all the time.  But I think you at least half believe most of the sh!t you post.

XitSam's picture

I am hereby ignoring MDB_ threads.  There is no time left to spend on either drivel or satire.

Chaos_Theory's picture

Progressives (and their "opposition" on the right) prove there is nothing new under the Sun. 

IMO, at the core of their "progress" is nothing more than the original Utopia, Plato's Kallipolis from "The Republic" from ~360 B.C.  The elite view themselves as bred and trained to be the Guardians and even the Philosopher-Kings of Books V through VII.  The vast majority of the citizens are nothing more than the "producers" who must produce, pay the taxation that supports the auxiliaries and the guardians, and obey.  The auxiliaries provide the city's protection and must be bred and trained to be patriotic via the "just" lie of the Myth of the Metals.  The Jacobins, Marx-Lenins, Maos, and modern watered-down Western Socialism just added tech, scale and the mask of modernity to the original dialogues (and drop that quaint Plato idea that the Guardians can't pursue personal wealth) . 

Sad thing is they may actually believe to their very soul that they are just and their enemies are evil right-wing Sophists of Book I and II, who believe morality a myth and all that matters is their own advantage (although the banksters certainly seem to fit that mark).  The truth is both wings of the Utopians are perfectly content to fight over who gets to place their foot on everyone else's throat under the cloak of "the greater good."

Apologies to any Indian, Persian, Chinese, Sumarian, or other Bronze Age o Neolithic societies that may have had their own concepts of Utopia long before the young Hellenes came of age. 

Seer's picture

No effort required on the "raiding" part, as people are "voluntarily" pulling money in order to keep from falling off a cliff.

But, really, it's all been one huge anomaly.  The "wealth" was never really there (yes, some early participants in the Ponzi managed to "get theirs" [older generations]), it was all fictitious.  Should be no surprise to see the house of cards fall down.

Western's picture

Indeed. We should just give up, obey laws. That's what laws were meant for, right? Obedience?

Zola's picture

The wife bit : "why did you not make more money ?" is the perfect illustration of why there are so little women in the liberty movement. Women JUST DONT CARE, they just want a provider to give them security and comfort. For that, they are more willing to compromise with the evils of the system that to fight it like men would do. Junk me all you want but i think this is a fundamental feature of what is happening in front of our very eyes. Men and Women ARE DIFFERENT. Anyone arguing the opposite does not live in reality 

reader2010's picture

All women are Basically Whores, as Marc Faber used to say.

magpie's picture

No, they are all socially responsible lesbians with an IQ of 150.

Dr. Sandi's picture

Damn, the quality of the users on this site constantly amazes me.

In the way a huge steaming pile of dog shit on the sidewalk amazes me.

Sudden Debt's picture

everybody has his say here bro. everybody.
and don't judge him on one comment, that's superficial.
and I'm a woman lover :)
Woman with kids go for security. that's the most beautifull thing in the world as they protect the family just like a man must do. there's actually not enough of it in this world.

DogSlime's picture

He just judged an entire gender and basically said they're all the same and stated that anyone who disagreed doesn't live in reality.  He's entitled to his say for sure, but surely fight club means that those who disagree are equally entitled to have theirs, yes?

Nothing wrong with responding to a highly superficial statement with a superficial reply.

akak's picture

Stop hyperventilating, MA'AM, and being such a fool.

Anyone with any sense can clearly see that Zola merely made a generalization --- a generalization which is factually correct, incidentally.  It is disingenuous and idiotic to even suggest that he was stating, or even implying, that EVERY woman fits his categorization.  But to argue that there are NOT differences, overall, in how men approach politics, and governmental power, as opposed to women is simply absurd.

sablya's picture

A guy sits next to a woman on an airplane.  He looks very wealthy and talks to the woman for a while.  Then, he asks her is she would sleep with him for $1 million.  She says, yeah!  Then, he asks her if she would sleep with him for $50.  She gets offended and says, "what kind of woman do you think I am????"  He replies, "I believe we've already established that madam, now we're just haggling over the price."

 

Shizzmoney's picture

Woman with kids go for security. that's the most beautifull thing in the world as they protect the family just like a man must do. there's actually not enough of it in this world.

Funny, along with attraction, "security" used to mean "can ward off animals and gather food" back in human's prehistoric beginnings.

Then, "security" became little green pieces of paper.  It didn't matter if the guy even hit a woman; she would just sue him.  +EV ROI!

The irony? Now because of the Bankers' action, we may go back to a world where a woman's idea of security isn't what hedge funds he runs, but what gun he holds.

El Tuco's picture

Gezzuss dude, why would you call your own mother a whore? WTF is a matter with you?

Diogenes's picture

He knows his family better than you do.

i-dog's picture

You owe me a new keyboard! Seriously funny shit every day on here....

Hive Raid's picture

Your mom refused the pink pill.

Now you refuse the red pill.

Hopefully your dad refuses the diamond blue pill.

DeltaDawn's picture

Hey, now. I am female and a liberty lover. I cannot convince any of my male or female friends to take a serious look at our situation. The
normalcy bias infects 95%.

Bobportlandor's picture

Always exceptions to the rule. I before E except after C.

Females are just WEIRD that way.

i-dog's picture

Some of the most awake commenters on here are females [waves to CA, MsC and the others]...as were some of the most effective resistance fighters of the American Revolution and the WWII French Resistance. Certainly, the [mentally] toughest and most resourceful members of my family, and those of most close friends, have been the females.

They'll survive long after the 'smart' males have flung the last handfull of poo at each other.....

 

[edit] Upon reflection, I can't think of one female troll or collaborator who comments on here.

Ignatius's picture

"Here I must make a note. While I was desultorily attending graduate school, I met in the coffee shop one day a miss Myrna Minkoff, a young undergraduate, a loud, offensive maiden from the Bronx. This expert from the universe of the Grand Concourse was attracted to the table at which I was holding court by the singularity and magnetism of my being."

-- Ignatius, The Journal of a Working Boy

i-dog's picture

Sorry, dude. The females in my family and acquaintance are ladies in about the 0.3% ... and largely responsible for why their husbands arrived/stay in that bracket!

I've never heard an expletive uttered from a single one of them. That's not what makes one tough.

"One has to be tough ... not act tough" -- i-dog

Chaos_Theory's picture

I didn't see the poster attach any values on the level of female intelligence, just motives. 

Hell, one could make the argument in a world where women have historically been physically at the mercy of stronger men, especially in terms of violence during wars and other chaotic events, security would be a damn smart motivation.  Add in the genetic need to protect offspring, and it doesn't make a bad argument for security being a prime motivator.  The solution for the liberty side is to convince as many women as possible to become expert marksmen (oops, how about sharpshooters?) at the gun range.  Once the most liberal woman in the world knows her MOA is less that a few inches, she'll be empowered to know her security and that of her potential children can reside in her trigger-finger, and not the Motherland.  Then concepts of liberty will take hold.

As for ladies posting here, my guess is if they come here in the first place they're not exactly part of the herd.  Minus political partisans of course.

Kyron95131's picture

hey now, im a male liberty lover. I can't convince of of my pier's, friends, or even family to do the same.

The more successful they are the deeper thier head is buried in the ground, and i have been trying now for over a decade... easily...

but on the bright side I've picked out some nice theme music to play after i have given my soap box speeches while the vilification ensues!

http://www.youtube.com/watch?v=x8W4DEMUSeM 

lol's 

11b40's picture

Maybe you have wasted too much time trying to explain things to your piers. ;-)

akak's picture

I wonder if he was wearing Docker's while trying to explain things to his pier's?  After displaying such a slip, one might almost accuse him of harboring a grudge against them.

Dr. Sandi's picture

This is also the primary reason men don't marry other men.

The Disappointed's picture

No Dr. Sandi,
The reason so many men in the USSA are forbidden from marrying other men is that a bunch of Rome based child rapists own crooked US elections.
Ingorance may be bliss for mythical 'heterosexuals', but gay men watch each others' backs.

Prometheus418's picture

Don't be an idiot.  I'm no cheerleader for Catholicism, but the whole child-rapist thing is an obvious and ham-fisted smear job.

Somebody owns our elections, but it isn't the Vatican.

Kali's picture

Wrong!  Tells me more about you and the women you choose to be with.  Men think with their dicks.  Given the opportunity between a freedom loving REAL woman and one that is stupid, superficial but looks like a $5000 a night whore, guess which one YOU picked?  Idiot.

unrulian's picture

let me guess...you're american and by real you mean fat....i'll go with 5k whore...lot's of them

akak's picture

You are correct, Zola.

It may be a generalization, but nevertheless very true: woman are undeniably as a group MUCH less concerned about freedom, and philosophical matters, and the "big picture" than are men. It is much more the soccer moms, and women in general, who are those most easily whipped into a fear-driven state of frenzy about "terrorists" and "security" and "For the Children!" propaganda than are men.  Compromise and cowardice seem to be in their nature.

Dr. Sandi's picture

Somebody has to keep the family and the community going while the assholes march off to battle each other.

cowdiddly's picture

I got a little experiment to discount your hypothesis. Go up to the next twinkle toes gay guy and spit in his face. He will merely ask what you did that for and call you an asshole.  Now go try the same thing on my wife and spit in her face. Buddy you are fixing to lose your eyesight as she scratches your eyeballs out.

From my vantage point at least, it is not the women in this country who need to grow a pair. It is the so called MEN.

akak's picture

I never said anything denying the existence of PMS and raging bitches.

;-)

Au Shucks's picture

yes, you're absolutely right... as is Zola.  Doesn't mean women do not provide humanity with an equal (or more) amount of value than men, just means what it means and is empiracally true in the lives of near all who read this post.

DogSlime's picture

@Zola

I live in reality.  From my observations there are as many men as women who have their heads buried in the sand.  My sister is preparing for a complete collapse of society - she bought 40 kilos of flour a couple of weeks ago and regularly takes inventory of her stock of water purifying tablets and dried supplies.  My girfriend is also braced for a worst-case scenario.  Both are utterly enraged by the misery that the financial elite and the corrupt/cowed governments are causing to ordinary people.  Both are prepared for the worst.  Few of my male associates take any notice of what is happening.

Your gender generalisation suggests to me that it might be you who is living in a distorted reality.  You seem to have so much faith in your cock that you're using it in place of your brain.

akak's picture

Both innumerable polls and well documented voting patterns demonstrate again and again that women consistently place more value on "security" (so-called, as provided by the state) and an expansive role for government than on individual rights and freedom of choice (except in the womb!) as compared to men, and in general value security more than they do liberty.

This is not to say that a significant number of men in modern Western societies do not share these feelings and concerns (socially and politically self-destructive and misguided as they are), but the "liberty gender gap" cannot logically or factually be denied.

lasvegaspersona's picture

The 'security' provided by the State works well for a while. Then it gets kind of off kilter and the price women pay is to suck on the Commissar of Safety's special safety apparatus.

For men it is bit more uncomfortable. 

Cathartes Aura's picture

ahhh, damn, I was going to pass this red flag up, but oh well, here goes. . .

if indeed voting patterns & "polls" (those stats no one trusts when reported in the media but often get trotted out whenever "women" are the topic) show that "women consistently place more value on "security" - PERHAPS the fact that one in three women suffer rape and/or sexual abuse at some point in their lives - which means if it isn't YOU, you most likely know a friend or relative who has - MAY just tip the scales to desiring more "security" from the "liberty" of abusive men.

http://search.zonealarm.com/search?q=one+in+three+women+rape%3F&lan=en&t...

choose your source.

as to the "liberty gap" - MAYBE women are put off by the compromises the chaps allow in personal body sovereignty issues, making guns & pot a priority for "liberty" and not the right to make decisions about her own body vs. the State making laws to remover her choice.

here's one of my favourite "woman prepper" blogs:

http://farmwars.info/?cat=869

the rest of you trolling for lulz - the females of the world thank you for your loyalty to yer bros.  trust me.

Jena's picture

That's a really interesting blog, CA, thanks.