There Is No Solution To The Crisis

Tyler Durden's Photo
by Tyler Durden
Sunday, May 03, 2015 - 15:15

Via Darren Krett,

A long ,long time ago...

it was the 16 September 1992, Black Wednesday, when the British Government was forced to withdraw the pound sterling from the European Exchange Rate Mechanism(ERM) after it was unable to keep the pound above its agreed lower limit in the ERM.  A certain Mr.Soros, made over £1 billion profit by short selling sterling while costing the Treasury £27billion of foreign currency reserves trying to prop up the Pound and a tidy £3.4 billion loss.

Fast forward to now and one of the upshots of the 2008 crisis was that central banks eunuchized the commercial banks through Dodd Frank and other such regulations, for such embarrassing situations could never be repeated for a central bank. So they took full control without impunity.

Now initially I believe that it was with good intent. Too big to fail was something unacceptable. That governments should not have to foot the bill for the ineptitude of banks and hedge funds who invested in other  funds because they had a good "name" (a nice name with words in them like "enhanced" or "high", not because they were of reputable background),without the faintest idea of what they were investing in was indeed a joke.

And it could be argued that the Fed and ECB were correct in hiding all the problems from the general population. The idea being that the economy is entirely built on sentiment.

Tell people every day that things are OK, fudge economic numbers and plaster over the cracks in the hope that eventually it will all rectify itself, then people will actually start believing ,spending and therefore improving the economy and that the debt can be repaid via tax receipts. This coinciding with a technology boom where there is a serious lack of talent and available staff and it would be tempting to think that this may have possibly worked. That the central banks have saved us from a perilous depression....however, as it has been said...with great power comes great responsibility.

As is the case with many movies...our hero  always faces a tipping point, where the area between good and bad becomes very grey and the choice is which path to choose...the light or dark.....unfortunately it would seem that our heroes at the Fed and the ECB have most certainly chosen the path of the dark side...and they know it too....
Something, something dark side....

Recently the ECB began their own QE program. These purchases will be paid for “with the printing press,” or more technically, an expansion of the monetary base. This comes on top of the Bank of Japan’s own stepped-up money-printing scheme.

It has not been very well appreciated that the Fed’s own QE program, was largely offset by a similar size contraction in the ECB’s base money supply during the same time period. This was caused primarily by the runoff of the ECB’s “long-term refinancing operation” direct bank lending.

The US annual deficit should total $468 billion for the 2015 fiscal year however the  improving deficit numbers are temporary. Budget deficits are projected to begin going up again in 2018, and to nearly double by 2024 as retiring baby boomers strain the health and retirement systems, the economy grows more slowly and interest on the nation’s outstanding debt rises.

The federal government is expected to spend $277 billion on interest on the debt in the current fiscal year. That’s projected to soar to $827 billion by 2025. As a percentage of the economy, it would more than double from 1.3 percent in 2015 to 3 percent in 2025.

Simply put, it will cost the government more to borrow in coming years to pay bills already incurred. Consequently, the $13.4 trillion in debt held by the public projected for 2015, which would be akin to 74 percent of the overall economy, is projected to swell to $21.6 trillion by 2025, when it would total 79 percent of the economy. As recently as 2007, before the Great Recession (this term has been used a lot lately, as if it was something of our past not our present, which is in itself laughable), it was equal to about 35 percent of the economy.

It’s as if for every $100 you earn, you have outstanding debts equal to almost $80.

The end result of Fed policy appears to be to keep us in perpetual economic malaise, to keep us all confused. They keep interest rates low masking the huge structural issues of huge federal budget deficits and whenever the economy appears to be picking up a bit, they threaten to take away the government props of QE and low interest rates faster thereby slapping down the economy. All this happening while the ticking time bomb of huge Federal Debt accumulates more potency.

But if they know this ???

With all this information at their fingertips are they unable to do anything about it or is there something darker afoot...

So lets see what they are doing to help us...

More than a fifth of property sales in Central London are now being secured by wealthy foreign buyers. Houses and apartments are increasingly being sold to Russian, Italian, French and Middle Eastern owners.

Since  2008, around 30% of condo sales in large-scale Manhattan developments have been by buyers with overseas addresses or through secretive LLCs.

Gold and other physical assets are being repatriated more and more every day. 

At Cheyenne Mountain the Pentagon is beefing up its communications setup inside a hollowed-out section of Colorado’s Rocky Mountains less than a decade after it had largely abandoned the site.

The chess pieces are being moved around the board in preparation for what may come,it is as if they have already given up....

So the reason this time it WILL be different us that all the world's economies are so closely intertwined. Previously with such events as the South Sea Bubble, the Dutch Tulip bubble and even the great depression, to a certain extent, we were not  as "global" as we are now.

So how will it end then spoiler-boy?

There are alternate endings.....

1. There will be massive defaults at all levels of society including individuals, corporations, municipalities, states and finally the Federal government itself. They all have too much debt to pay back and it will be defaulted on.


2. They can default by not paying the loans back and we get a sharp and painful, but not endless period of deflationary debt collapse where all the bad decisions of the past Fed induced business cycles are finally accounted for. It is easy to forget that Germany’s government, like the governments of the U.S. and Britain, printed money to fund World War I for five years, 1914-1919, and suffered no particular adversity as a result. It worked great! Until it didnt!


3.  World War scaremongering as this may sound there are many historical precedents for this and we are not exactly in the most stable geopolitical arena.

The Oligarchy will not do what is best for the people. This is still about trying to retain power as is and protecting their own.

I will leave you with a quote from president Lincoln;

“The money powers prey upon the nation in times of peace and conspire against it in times of adversity. It is more despotic than a monarchy, more insolent than autocracy, and more selfish than bureaucracy. It denounces as public enemies, all who question its methods or throw light upon its crimes. I have two great enemies, the Southern Army in front of me and the Bankers in the rear. Of the two, the one at my rear is my greatest foe.”

Lincoln then prophetically added:

“I see in the near future a crisis approaching that unnerves me and causes me to tremble for the safety of my Country. Corporations have been enthroned, an era of corruption in high places will follow, and the money power of the Country will endeavor to prolong its reign by working upon the prejudices of the People, until the wealth is aggregated in a few hands, and the Republic is destroyed.”

There is no solution to the crisis, merely a choice of which roads to choose, a deflationary debt collapse, or a hyperinflationary dollar collapse or World War III. Pick your poison...