Currency Collapse

Survey: Fate of Countries in Collapse – Results: Currency Collapse

survey-says-2gc2smOff the keyboard of RE

Follow us on Twitter @doomstead666
Friend us on Facebook

Published on the Doomstead Diner on September 22, 2015

toast2

Discuss the Results at the Survey Table inside the Diner

TAKE THE FATE OF COUNTRIES SURVEY HERE

One of the longest running arguments on the Diner is how various different countries will fare as collapse progresses forward.

http://www.philipcaruso-story.com/wp-content/uploads/2015/02/Where-To-Live.jpgMost often, this pits the FSoA against China, and the Diner has some China Bulls and some China Bears.  I am a notorious China Bear gong back to my days on the Peak Oil Forum, where at the time because China was such a hot investment opportunity with double-digit growth rates it was common wisdom the Chinese would out-compete the FSoA Empire to lead the world in the second half of the 21st Century.  It was there I first added my Tag Line to analysis posts on China, "The Chinese are TOAST". 😀

Now in reality here, as time goes by EVERY industrialized nation is toast, in the sense every one is dependent on the systems that are driven by copious quantities of fossil fuel energy.  Once that energy can no longer be accessed or afforded, life as we know it now wll come to a halt.

However, this is unlikely to happen all at once, and it is unlikely to play itself out exactly the same way in different countries, different regions and even from town to town.

In this survey we look at the large nation states individually and regionally for the smaller ones, to find out the opinions of the Kollapsniks TM on which ones are the best positioned as collapse gathers speed, and which ones will fare the worst.

Besides China and the FSoA, the other one of the "Big Three" countries often discussed in comparing on this topic is Russia.  Russia is often cited as more resilient by virtue of the fact they already went through one collapse when the USSR collapsed, plus the fact they have a decent amount of fossil fuel energy still left in the ground.  However, they have numerous problems as well, wars ongoing to their south, the Ukrainian situation and enormous financial and currency turbulence.

Take the survey, and let us know who you think will do best and which ones worst as collapse gets fully underway.

TAKE THE FATE OF COUNTRIES SURVEY HERE

Results: Currency Collapse & Debt Implosion Survey

http://joeforamerica.wpengine.netdna-cdn.com/wp-content/uploads/2013/04/survey-says.jpgOK, now onto the results from last week's Collapse Survey TM, Currency Collapse & Debt Implosion.

First question to look at is which of the current major currencies is likely to collapse first, and which has the potential to hold up the longest.

This is obviously important if you want to try to "preserve wealth", you certainly don't want to be holding the currency that collapses first! Duh. Roll Eyes

On the other hand, you have the problem of the utility of a currency in your neighborhood.

For instance, say the Norwegian Krone holds its value while the FSoA Dollar crashes.  Even if you have some Krone stashed in a Norwegian or Swiss Bank account, or even actually have some of their Notes in your basement safe along with your stash of Gold Coins, is Walmart going to take your Krone for a purchase of a bag of rice in Peoria, IL?  Not very likely.  You might stand a better chance in Europe, particularly Scandinavian countries if you have Krone, but here in the FSoA they are unlikely to do you a whole lot of good.  Only if you want to do currency trading during the spin down is this worthwhile to consider, and first off you need to be pretty flush to do that kind of trading, and second it's a fool's game these days with manipulated markets.  Even back in the day when I messed with currency trading it was nuts.  You have to leverage to beat the band to make any money this way.  You can get SWAMPED in a big move overnight.  Then the margin calls hit, and your next trip is out the window of the 49th floor.

Leaving aside the question of whether holding foreign currencies might benefit you personally, on the nation state level it's important to consider because he whose Currency crashes first, Collapses first.  So who is it gonna be?

I found the results of this particular question to be absolutely astounding.  Here's the results:

  1 2 3 4 5 6 7 8 Standard Deviation Responses Weighted Average
Chinese Renminby/Yuan 10
(9.8%)
23
(22.55%)
8
(7.84%)
17
(16.67%)
10
(9.8%)
8
(7.84%)
8
(7.84%)
1
(0.98%)
5.92 102 4.81 / 12
European Euro 9
(8.82%)
13
(12.75%)
15
(14.71%)
19
(18.63%)
10
(9.8%)
11
(10.78%)
5
(4.9%)
5
(4.9%)
5.24 102 4.88 / 12
Japanese Yen 15
(14.71%)
8
(7.84%)
13
(12.75%)
12
(11.76%)
11
(10.78%)
10
(9.8%)
8
(7.84%)
15
(14.71%)
4.92 102 4.98 / 12
Russian Ruble 7
(6.86%)
16
(15.69%)
21
(20.59%)
13
(12.75%)
8
(7.84%)
13
(12.75%)
2
(1.96%)
2
(1.96%)
5.91 102 4.99 / 12
Brasil Real 29
(28.43%)
14
(13.73%)
6
(5.88%)
3
(2.94%)
7
(6.86%)
5
(4.9%)
3
(2.94%)
4
(3.92%)
7.53 102 5.29 / 12
British Sterling/Pound 0
(0%)
3
(2.94%)
7
(6.86%)
10
(9.8%)
21
(20.59%)
6
(5.88%)
11
(10.78%)
16
(15.69%)
5.74 102 6.78 / 12
US Dollar 27
(26.47%)
7
(6.86%)
5
(4.9%)
1
(0.98%)
1
(0.98%)
3
(2.94%)
1
(0.98%)
2
(1.96%)
10.02 102 7.1 / 12
India Rupee 3
(2.94%)
13
(12.75%)
10
(9.8%)
4
(3.92%)
6
(5.88%)
8
(7.84%)
7
(6.86%)
6
(5.88%)
4.59 102 7.29 / 12
Canadian Loonie 0
(0%)
3
(2.94%)
4
(3.92%)
9
(8.82%)
2
(1.96%)
9
(8.82%)
16
(15.69%)
14
(13.73%)
6.69 102 7.66 / 12
Australian Dollar 1
(0.98%)
0
(0%)
5
(4.9%)
7
(6.86%)
8
(7.84%)
7
(6.86%)
11
(10.78%)
11
(10.78%)
7.49 102 7.84 / 12
Norwegian Krone 0
(0%)
2
(1.96%)
6
(5.88%)
2
(1.96%)
8
(7.84%)
5
(4.9%)
22
(21.57%)
17
(16.67%)
6.17 102 7.93 / 12
Swiss Franc 1
(0.98%)
0
(0%)
2
(1.96%)
5
(4.9%)
10
(9.8%)
17
(16.67%)
8
(7.84%)
9
(8.82%)
6.63 102 8.43 / 12

IMHO, this ordering is INSANE.  Apparently Kollapsniks TM think that the Chinese Renminby will collapse BEFORE the Euro and Yen!  WTF?  Not only that, the Indian Rupee will outlast the FSoA Dollar! hahahahahahahaha.

Which currency outlasts them ALL (according to Kollapsniks)?  The Swissie!  A currency issued by a tiny nation of 8M people with a GDP of $685B (2013 data) is going to outlast the Dollar and Renminby?  WTF?  There are more people living in NY Shity than all of Switzerland!

When the Euro goes down, the Swissie goes with it.  The SNB has HUGE exposure to Euro denominated debt, they have been buying it up to keep the exchange rate from going through the roof.  It's simply nuts to think this currency can outlast those of the Big 3.

My order for currency collapse?

Brasil Real
India Rupee
Russian Ruble
Japanese Yen
European Euro
British Sterling/Pound
Norwegian Krone
Swiss Franc
Australian Dollar
Canadian Loonie
Chinese Renminby/Yuan
US Dollar

Brasil is already on the serious ropes, and so is India.  Weak economies and too much poverty.  Russia should be strong, but they are a target for the Western Illuminati Banksters, so they will be under constant currency attack.  Yen & Euro go next, and then subsidiary currencies like Sterling, the Swissie and Krone go after them.  The Oz Dollar and Hoser Loonie keep value because of how closely they are connected to the FSoA Dollar.

One caveat to this is that once the cascade begins, it may be impossible to tell which one collapsed first.  Once a major like say the Japanese Yen collapses, this will cause so much havoc in the Interbank lending market that everything else will lock up in pico-seconds.

IMHO, the Final Battle for All the Currency Marbles is between the Chinese Renminby and the FSoA Dollar.  I think the Dollar wins this battle, because so much debt is denominated in dollars. Too many .01%ers have their wealth wrapped up in Dollars or Dollar denominated assets to let that one collapse.  We'll see on that one.

OK, now onto Q2, which is whether Gold & Silver will replace Fiat Currencies once they collapse?

Survey-Gold

  Yes No Standard Deviation Responses
All Data 34
(33.01%)
69
(66.99%)
17.5 103

Overwhelmingly by a 2/3rds majority, most Kollapsniks TM do not think Gold and Silver will replace Fiat once it crashes.

I tend to agree with that one, the PMs are too centralized and too few people have access to them for them to be workable as a currency medium.  There also is no clear idea on how these could be distributed out, or how letters of credit would be issued or anything else.  They might function as a Barter item, but as a currency that many use, it seems unlikely.

If Gold & Silver are NOT likely, what is likely once this Currency Regime fails? icon_scratch That was the subject for Q3.  Here's the results for that one:

  1 2 3 4 5 Standard Deviation Responses Weighted Average
TPTB will institute a New World Currency, the SDR or something similar 37
(39.36%)
11
(11.7%)
19
(20.21%)
13
(13.83%)
14
(14.89%)
9.47 94 2.53 / 5
LETS (Local Exchange Trading System) Money will be issued in many locales 23
(24.47%)
21
(22.34%)
19
(20.21%)
26
(27.66%)
5
(5.32%)
7.28 94 2.67 / 5
Paper Money will be issued based on Gold and Silver held in a Central Bank 11
(11.7%)
19
(20.21%)
29
(30.85%)
22
(23.4%)
13
(13.83%)
6.46 94 3.07 / 5
Gold & Silver Coins will be used as Currency 7
(7.45%)
32
(34.04%)
18
(19.15%)
20
(21.28%)
17
(18.09%)
7.98 94 3.09 / 5
No money will work and Trade will be all Barter 16
(17.02%)
11
(11.7%)
9
(9.57%)
13
(13.83%)
45
(47.87%)
13.3 94 3.64 / 5

A large plurality (almost 40%) of Kollapsniks TM think that TPTB will be able to institute a new centralized currency regime from the BIS (Bank for International Settlements, Basel, Switzerland, Central Bank of Central Banks, Home Base for the Illuminati). This is a particularly favored idea by Conspiracy Theorists, but it is not one I hold as most likely.  The likely candidate are SDRs, aka Special Drawing Rights, a concoction the BIS already has in place for internal use based on some potpourri of currencies and commodities and who knows what else they threw in that basket..

I am not in that camp.  Perhaps they will try this, but to get every country in the world to cede their monetary sovereignty over to the BIS would be near impossible IMHO.  It's like the Euro on Steroids.  It really does nothing other than re-denominate debt, and it sure doesn't put any new resource back in the ground.   To me, this is a non-starter.  Not to say it won't be attempted though.  It's a last gasp effort for the Illuminati to maintain hegemony over the economic system.

LETS systems of Local Currencies come in at #2, and this I feel is most likely to occur.  Regional breakup of the One to the Many TM will at least at the beginning require each region to develop their own local currency.  Potlatch at this stage of the spin down seems unlikely.

Far as Centrally held Gold being a basis for a currency, to me this is also a non-starter.  If you have a Central Bank holding gold in the Basement Safe, after a crisis of banking confidence like this, who would not go to the bank and DEMAND their "Gold Backed Note" to actually be redeemable in said Gold?  Once the gold is redeemed, what does the Bank have as an Asset?  At this point, the Gold you redeem for the note the Bank printed on it is just a barter item.

Will all trade eventually go all Barter?  It's already on its way there in some places, but that will take some time in the core countries I imagine.   Cannot be sure on this though, a rapid collapse could make barter the only functioning economic system in your neighborhood for a while.  Good idea to have barterable goods in your preps. Alcohol and Cigarettes are traditional barter items, I suggest also Tampons, Pampers, Condoms, Ammo, & Shoes as good choices of barter goods that last a long time.  Shoes in particular, have you noticed how many of the pictures of refugees show them to be barefoot?  Once trade with China halts, shoes are going to be hard to come by.  Right now though, you can buy a nice pair of sneakers at Wally World for $15 on sale.

Finally in this survey, how long before the Dollar finally dies completely and you can't use it to buy food at the major food retailers?  This could be either because the Dollar has hyperinflated to worthlessness or the shelves are empty.  Here's the results for this one:

  2016 2018 2020 2025 2030 The Dollar will keep working for the forseeable future Standard Deviation Responses
All Data 10
(9.71%)
16
(15.53%)
16
(15.53%)
22
(21.36%)
14
(13.59%)
25
(24.27%)
4.98 103

You have a pretty nice Bell Curve here, except for the 25% or so of people who thnk the Dollar will keep working past 2030.  The 2025 date seems about right to me, although again a major banking crisis and lockup could change that in an instant.

All in all, this was one of our most interesting surveys to date.

 

Pandora’s Box

logopodcastOff the microphone of RE

Follow us on Twitter @doomstead666
Friend us on Facebook

Aired on the Doomstead Diner on January 28, 2015

pandora

Discuss this Rant at the Podcast Table inside the Diner



Snippet:

…Well, the Worst Nightmare for the Clowns & Jokers in Brussel Sprouts has come to pass, as Alex Tspiras and the Greek Syriza Party won a BLOWOUT victory in the latest round of Greek Elections. They are so far out in front of everyone else on the Popular Front over there that not even election rigging could fix that one.

Alex has promised to go to the WALL against the Troika Austerity that has been hammering down on Greece for the last 6 years, since the initial financial crash in 2008. Bascially Syriza has opened up the window and shouted to the world, “We’re Mad as HELL, and we’re not gonna take it anymore!”

This basically amounts to opening Pandora’s Box here, because the Brussel Sprouts are now between the Rock and Hard place. If they cut the Greeks loose, the Euro collapses even faster than it already is collapsing. If they capitulate and forgive Greek Debt, every other PIIGS Nation will pul the same stunt, beginning with the Spaniards, but quickly moving through the Portuguese, Italians and Frogs too. Soon as one of these major debtor nations has debt written down, they ALL will want their debt written down…

For the rest, LISTEN TO THE RANT!!!

Merry Doomy Christmas

Off the keyboard of RE

Follow us on Twitter @doomstead666
Friend us on Facebook

Published on the Doomstead Diner on December 25, 2014

Discuss this article at the Economics Table inside the Diner

http://wearethepractitioners.com/images/david%27s-collection/lump-of-coal.jpgDoom may not seem very Christmas-y as a concept, but in the spirit of Gifting, as I often like to say, Doom is the Gift that Keeps on Giving.

The old saw has it that if you were Naughty, Santa would leave you a lump of coal in your stocking instead of an Iphone.  As we move along the Collapse Highway though, we turn more of the coal into Iphones, leaving fewer lumps of coal for stockings, and more Iphones.  At a certain point, only the Nice children will see a lump of coal in their stocking at Christmas.  At least you can use a lump of Coal to burn in the fireplace and stay warm on a chilly winter night, the Iphone will not do you much good when the electrical grid goes down.

Most people don’t ever think that will come to pass, and most of the small minority of people who think it might come to pass think this outcome is still far into the future.  How far away is it, how much time do we have here left to live in the comfort of brightly lit McMansions, driving the Cars to Walmart and stopping at Starbucks for a cup of overpriced Coffee?

For the most part, this all remains dependent on the continuing functionality of the Global Monetary System, which as we close out 2014 and move into 2015 shows ever increasing signs of extreme distress.  The most clear signs are in the FOREX, or foreign exchange trading markets, where numerous countries have seen the value of the money they use in their location drop by anywhere from 20-50% in the last few months.

Most prevalent in the newz on this subject of late has been the Russian Ruble, which has collapsed in value along with the price of Oil.  However the Japanese Yen has also been collapsing in value,  same with the Brazilian Real, the Indian Rupee, and even to a lesser extent the multi-national Euro, and the Chinese Yuan also.  What are all these currencies losing value in relation to on the FOREX market?  The Dollar of course, still the World Reserve Toilet Paper and the currency in which the vast preponderance of international loans and interbank finance is denominated.

Damaged 100 yuan banknotes are seen on a table at a branch of China Bank in Foshan

As should be obvious, in any currency pair trading, if one currency is Inflating, the other is Deflating.  The people holding the currency that is inflating, say the Ruble, want to trade it as fast as they can for the deflating currency, in this case the Dollar.  This leads to a shortage of Dollars in the local market that can be purchased with Rubles, which exacerbates the problem and makes the street value for the Ruble even less than the official exchange rate, which is the panic stage and is what drives an inflationary event into a Hyperinflationary one.  So far that does not appear to have occurred in Russia itself, but does already appear to be occuring in one of the satellite countries of the former Soviet Union, Belarus.

To try to put a lid on a problem like this, the local Goobermints try all sorts of things, Capital Controls, large penalties for currency exchanges and so forth, but once the confidence has been lost in the local currency, there is very little that can be done to fix the problem, until and unless you get some folks from the Western Banking Cartel who step in to take control of the local money and start issuing out some new money with some arbitrary peg against the dollar.  This has occurred repeatedly over the years in Brasil, which used Cruzeiros when I lived there in the 60s, switched to Cruzados by lopping off some zeros from Hyperinflating Cruzeiros, and today uses Reals, which are no more REAL than Cruzeiros or Cruzados, but did manage to last a bit longer as a viable currency there.

http://i.cbc.ca/1.2831230.1415722704!/fileImage/httpImage/image.jpg_gen/derivatives/16x9_620/russian-ruble.jpg

To the resident of the FSoA watching as the Federal Deficit skyrockets now to $18T, it’s kind of hard to imagine why Dollars hold more value than Rubles, but there are many reasons for this in play, some psychological, some financial and some physical.

The psychological one begins with the fact that coming out of WWII, the FSoA was the last country standing in a world of ruin, both in Asia and Europe.  The Dollar became World Reserve Currency, and the entire rebuild done in the aftermath of that was done with Dollars loaned out by the FSoA, through the Marshall Plan.  While Deutchmarks bought just about nothing in Germany directly after WWII, if you had a few Dollars, you could buy ANYTHING, and cheap too.  Who had access to borrow said Dollars?  The same people who had access to credit before, the Rothschilds, the Warburgs, the Kuhns, et al.  They build a new and bigger edifice based on debt once again here, and now they have the all the Oil under the ground in MENA to issue that debt on.  So since then, not one but really several generations have all grown up with the BELIEF in the Dollar as a valid currency, and since it has generally worked to buy the stuff you need to live with only a few periods of relatively minor disruption, the belief is quite powerful that it will last in perpetuity.  The strong belief in the Dollar is the reason it is always the preferred currency that other smaller nations and their populations run to when they have a local currency crisis.  In Argentina during the currency crisis in 2001-2, as Ferfal chronicled, if you had Dollars in an overseas account you could access, you could do OK, although it was still a wicked dangerous place even if you did have some.

The Financial reasons become ever more obvious when you watch the manipulation and how easy it is for the Westerm Banksters to put the Thumbscrews down on a country even as large and well gifted with resources as Mother Russia is.  Since Oil is priced in Dollars, most International trade is done in Dollars and the Western Banking Cartel has control over all the computer systems which handle global trade, anytime they wanna cut you off from access to international credit they can, no matter how big you are or how much Oil you have left in the ground.

The physical reason should be obvious, the Dollar maintains some value because ineffectual as it is, the Big Ass Military still holds the threat of bombing your country back to the Stone Age if you don’t buy in Dollars.

Taken altogether, this makes the Dollar look like the best Dogshit in the Pound out there, it still buys stuff at the supermarket and so when your local currency gets hit, this is the preferred “safe haven” to run to. Despite all the jawboning about bilateral tade agreements, currency swaps and a Sino-Russian Yuan-Ruble currency regime taking over from the collapsing Dollar, at least so far the opposite appears true, which is that the Dollar appears to be collapsing Yuan and Ruble.  Not so fast with the Yuan, but the signs in China aren’t too good these days for the big Growth numbers they need and the exploding internal demand from middle class Chinese

In any event, either way whether the Dollar or or Yuable ends up as the last one standing, everybody has run to the winner, THEN WHAT?  It’s really only at this point you get to see what paper claims denominated in the Winning currency actually represent any real value and which do not.  Mostly, they are quite worthless.

http://siliconangle.com/files/2012/12/jolly_santa_saying_ho_ho_ho_0521-1012-0313-4538_SMU-300x264.jpgThe other possibility here is that as soon as one of the 1st Tier currencies like Sterling, Yen or the Euro starts Hyperinflating, there will be a terminal liquidity lockup and then everyone goes down together simultaneously, rather than a cascade of weaker currencies over time.  If that occurs, things will spin out of control REALLY fast.

Either way, 2015 looks to be a Watershed year for us Kollapsniks, as many of the issues we have discussed finally become obvious to all as the Tide Runs Out here.  I can only hope the Internet is still up next Christmas so we can look at all the Doom Gifts in Santa’s Bag for 2015.

HO, HO, HO.

Santa RE

Doomstead Diner #5 Comic Strip

Off the keyboard RE and the Art Pen of Flapjax

Follow us on Twitter @doomstead666
Friend us on Facebook

Published on Peak Oil Way Back When in 2009

ddsinglepanel

Discuss this Comic Strip at the Economics Table inside the Diner

No time this week to get my latest project on flowcharting the Industrial Economy done.  So I dig into the Archives of some Old Stuff I never got round to dropping on here on the Diner.  Given the current insanity in the FOREX Market, this Comic Strip I did with Flapjax seems mighty prescient right now.

doomsteaddiner5

 

Something Stirs

Off the keyboard of Jason Heppenstall

Follow us on Twitter @doomstead666
Friend us on Facebook

Published on 22 Billion Energy Slaves on January 31, 2014

Last-Tree

Discuss this article at the Economics Table inside the Diner

Do you remember this poster that idealistic people used to have on their walls in the 1970s? The native American wisdom it quotes stresses that we can’t actually eat money, which to my young self seemed pretty self-evident.

These days of course, people don’t put posters like that up on their physical walls, they put them all over their virtual social media walls so that like minded people can ‘like’ them and un-like minded people can unlike you and whisper about you having ‘gone weird’.

Anyway, money, or what passes for it these days, has been getting a whole lot more exciting over the last week. I blame Ben Bernanke, the soon-to-be ex-chairman of the US Federal Reserve. During his tenure he has overseen a massive bond-buying programme, the likes which the world has never seen. Now, as he steps down to hand over the reins of power, he is tapering off the amount of – let’s be honest – money printing. And this is having a pretty dramatic effect on things, to say the least.

Although he is being hailed as a fiscal hero in most quarters, the legacy he leaves behind is massive debt and broken economies. And it is only now becoming clear that the effect of flooding the too-big-to-fail banks with money has been to make them even bigger, and to launch a series of crises around the world as ’emerging economies’ (I hate that condescending nomenclature, so have to put it in quotes) suddenly find themselves with currency crises. Any number of them are having to hoik interest rates to protect their currencies, and in doing so are chucking many of their citizens under the proverbial bus.

India, Turkey, South Africa, Russia, Ukraine, plus a baker’s dozen other ’emerging nations’ are in full panic mode as they exhaust their supplies of hard currency trying to keep their own rands, rupees and florins from devaluing. Each one is a different case, with some in better positions than others, but the upshot of it is that all of them will be going through some challenging contractions. Some excitable people are talking about currency wars being a prelude to real bullets and bombs wars. Better get a flak jacket and dig a shelter, if that’s the case.

And it’s not just the ’emerging economies’. Combined, they make up almost half of the world’s trade. A couple of decades ago this would not have been the case, but now, by crashing their economies, the US is effectively shooting itself in the foot – albeit a foot that is wearing the steel toe-capped boots of a reserve currency status. For now.

Turmoil ensues. Stocks are dropping like stones. Money is flooding into safe havens, such as gold, the Swiss franc and, of course, the US dollar. The volatility index has gone through the roof and the mainstream media, for all of its talk about recovery, is still trying its best to ignore it.

And so it becomes clear that all of this QE business boiled down to one thing: most of the world’s weaker economies were sacrificed on the alter of keeping the bigger western economies from melting down. Simple as that, really. Let them have an emerging middle class of consumers, and just when their expectations have been raised, pull the rug out from under their feet and send them all back to the shanty towns. That’s life in the hardball world of dog-eat-dog capitalism.

And still, it may all be for nothing. Does anyone feel safe with their money in a bank account? If so, why? Putting your money in a bank is akin to lending it to a crystal meth addict with a black credit record. Incidentally, once you put your money in the bank it ceases to be yours. Almost every western nation is now talking in terms of bail-ins. A bail-in is where YOU get to bail out the failing bank with YOUR money because the world’s central banks are running out of fire blankets and ammunition to contain the problem of over-leverage. It happened in Cyprus. It may well happen in the UK next, where some banks are insisting that if you want to withdraw money from your own account you must submit to intimate questioning, have documented proof of what you are spending it on, and present a signed note from your mum for good measure.

What’s more, we are heading into a period of deflation. People hear the word deflation and think that it’ll be great because things will be cheaper. They may well be cheaper, but they’ll have correspondingly less money to spend on them, so they’ll still be poorer. Europe has already entered into deflation. I found myself in a Poundland store (where everything costs a pound) this morning on a trip to Truro, the regional capital (a throbbing metropolis of 19,000 people). I must admit to being a bit sniffy about this kind of place in the past. Not any more. I picked up four fruit bushes, some toilet paper, a roll of silver kitchen paper, two home-grow mushroom kits, a CD, two litres of milk and some potting compost – all for ten quid. The same stuff in other stores would cost four times the price.

Perhaps that’s why everyone all of a sudden seems to be shopping at these places and why supermarkets such as Lidl are popping up everywhere. Of course, not everyone can even afford to shop at Poundland or Lidl – these are the people that find themselves lining up at food banks. There are plenty of these too. Some recovery! Still, better get used to going hungry some reports suggest that global food prices will triple in the next two decades.

Poundland: cheap and cheerful

On the way back home I listened to a BBC programme on the radio in which people in Liverpool were questioned about whether they could ‘feel the recovery yet’. Only one person said he had become better off in the last five years and he was selling donuts on the street (‘Because people can’t afford a proper meal any more so they buy donuts.’). Everyone else seemed to have tales of deprivation and downright misery. The only person who could see any green shoots at all was the leader of the city council, who was defending his decision to spend £50 million on a shiny new prestige library that has won some kind of architectural award. The city borrowed the money to build it. But even he said it was ‘challenging’ when the receipts from local taxes only covered about half of what the city spends annually. But he figured everything would be okay in the end because the city has a great vibe and ‘people are resilient’.

Yet, despite all this gloom, there remains a patina of richness and wealth about the country. People cruise around in their shiny new BMWs and Audis and luxury supermarkets are also on the rise. Property prices are rising dramatically, and the government would have us believe that Britain is the rising star of the European economies. Sometimes I have to pinch my arm and remind myself that most wealth is virtual, that 99% of ‘money’ in the global economy is just static electricity on computer chips being buzzed around via satellites and cables from one continent to another seeking ‘yield’.

A newspaper front page last week

So it seems that the propaganda machine is in overdrive to convince us that we are enjoying boom times again. Could it be that this is timed to coincide with the inevitable capital flight from the ’emerging nations’ as QE programmes are wound down? Is the British government’s policy to try and look like the proverbial prettiest horse in the glue factory to skittish investors? Does anyone realise we are just one sharp pin away from a big bubble going pop?

Prediction time. Over the next few weeks and months there will be a massive deleveraging of unsalvageable debt. The stock market will go down a lot. The weaker currencies will devalue mightily as traders act like pack wolves to bring them down one by one. China will wrestle with its out of control shadow banking system, with unpredictable results. People will willingly sign up to have their pensions evaporated. Financial Crisis 2:0 will be hailed and politicians everywhere will blame the ’emerging markets’ for the chaos. Within a year the fracking bubble will have burst (big oil companies are already pulling out as fast as they can), deflation will take hold and a lot of people will suddenly find they are a lot poorer. Life will go on, for most. The investor classes will look around for a new bubble to inflate.

And no, when the last tree has been cut down, the last river poisoned  and the last fish caught, we will find that we can’t eat static electricity either. What strange times we live in.

Submerging Markets

Off the keyboard of RE

Follow us on Twitter @doomstead666
Friend us on Facebook

Published on the Doomstead Diner on September 15, 2013

Discuss this article at the Economics Table inside the Diner

I remember a time not so long ago, call it 2010 or so, where the ever present meme in the Econ Blogosphere was the RISING STAR of the BRIC nations juxtaposed against the PLUMMETING STAR of the “Developed” countries.

http://eclecticcamel.files.wordpress.com/2013/03/superman-the-movie.jpg?w=594China had no where to go but up, Up, UP and AWAY as all the “productive” enterprise of factories were transplanted there from the fading Rust Belt of the FSoA.  Pundits far and wide bemoaned the loss of those “well paid factory jobs”, the Backbone of the Middle Class in the FSoA in the post-WWII period from 1945 to 1970 or so.  The loss of said well paid factory jobs being ascribed generally to those Nasty Unions who GOT the decent pay, and the deferred Promises to Pay of Pensions to live out your post “productive” life on the Golf Courses of Florida and in the Casinos of Las Vegas.

http://www.baltimoresun.com/media/photo/2012-07/70936889.jpg

If only those workers hadn’t asked for so much MONEY!  We would still have those Factory Jobs!  Of course, living on the Pay Scale of the typical Chinese Factory Worker, J6P here in the FSoA would have had a mighty hard time buying the Carz he was producing or the McMansions popping up like Buboes all over suburbia.

http://3.bp.blogspot.com/-5SdNFBGmH8U/T0lhBQjCwLI/AAAAAAAAE3U/BekUJPYdXU8/s400/dollar_toilet_paper.jpgBesides the shift of Factories to places like China & India as rationale for the Bright Future for the Emerging Economies, the other Leading Indicator for the China Bulls was the ongoing debasement of the Dollar as World Reserve Currency.  The repeated rounds of QE, the ever ballooning Federal Deficit and the vast array of unfunded liabilities like Social Security and Medicaire led many Pundits to declare the BRICs would abandon the Dollar, create their OWN Reserve Currency (backed by Gold in the popular meme of the Gold Bug crowd), and once the status of WRC was lost by the Dollar, the FSoA would rapidly get its comeuppance and sink quickly into 3rd World living standards.

Meanwhile, the Chinese would all move into the Brand Spanking New Cities being built all over the country, travelling to and fro by High Speed Rail powered by Thorium Nuclear Reactors.  The massive problems in Wealth Distribution in Brasil and India would magically disappear, as the impoverished in the Favelas would rise quickly into the emerging Middle Class of these countries.

Fast forward to 2013, and what do you read NOW all over the pages of Zero Hedge?  It’s not the Dollar that is Hyperinflating, it’s the Real and the Rupee!  The Hot Money that flowed into India and Brasil chasing Yield while the “Developed” countries were in the Doldrums of recession is heading for the Fire Exits.  If your Portfolio has a Factory in India on it, you are looking to Unload said factory while you can still find a Sucker to buy it from you at somewhere near the price you paid for it.

How did all these “Emerging Economies” start emerging anyhow?  Where did the MONEY come from to take a country like Brasil, basically completely non-industrial prior to WWII and Electrify it, build Tourist Resorts on Ipanema and Copacabana beach and get an Oil Production industry going drilling deep offshore wells?  It didn’t come from Selling Bananas or Coffee Beans to the rest of the world, bet your Coffee Beans on that one.

http://m.wsj.net/video/20130514/051413asiatodaywork/051413asiatodaywork_512x288.jpgThe money of course came from Loan after Loan to build up this infrastructure, which generally has never paid itself off and is just repeatedly covered up by still more loans, rolling over the old debt.  There have been periodic crises of confidence in this Ponzi of course, my father was involved in the early rounds of loans which literally “went south” in the 1970s down there, and in reality made the banks that made those loans insolvent.  The folks who made those loans didn’t give up though, they just swept that under the rug to Double Down on Industrialization through the 1980s and 1990s.

Heady times these were for the Investors in the Bubble of “Emerging Economies”.  Cheap Labor and Corrupt Goobermints provided fertile ground for exorbitant Profits as ever more money was Borrowed by one Entity and then Loaned to another to further develop said economies along Industrial lines.  For the average J6P living in these places, the Illusion existed for a time that they TOO would soon live the Konsumer Paradise Happy Motoring life of the the Amerikan Mall Shopper.

Somehow though, there as here, MOST people missed out on the Pot of Gold that hitching a ride on the Industrial Bandwagon brought to a few, and while a case can be made that longer life spans and improved Sanitation were improvements for the population at large, neither is it clear that the substitution of Wage and Debt Slavery for Explicit Slavery was a vast improvement for most people, while at the same time the overall degradation of the environment to achieve the “improvements” has been enormous.

Also increasingly clear to anyone really looking at the problem is that the improvements we did muster up here through the Age of Oil were entirely dependent on copious and cheap energy which came a bubblin’ up from Jed Clampett’s farm and the Desert Sands of Saudi Arabia for the first part of this ride up Hubbert’s Curve and soon Down the Seneca Cliff on the Roller Coaster ride of Industrial Civilization.  It most certainly will not continue on in its present form much longer, and the Emerging Economies most recently added to this ride are the first ones being triaged off of it.

On the good side of this for them is they don’t have that far to fall here.  In India for instance, many places never even GOT electricity to begin with, and even those that did have dealt with intermittent power disruptions for years.  They aren’t 100% DEPENDENT on it, though certainly their biggest Shities like Delhi and Calcutta are to continue to operate in their present form with present populations.

The endless Loans to continue to extract the resources of the Earth for further “development” are rapidly disappearing, because the resources these loans are based on also are rapidly disappearing.  If you cannot continue to extract ever more all the time and “grow” this sort of economy, in an organic sense the loans can never pay off.  The folks in control of the credit creation bizness know this better than anyone, so they are loathe to hand out still MORE loans to places like Greece and Spain, India and Brasil to further develop their economies along these lines.  No Loans handed out, no MONEY circulates in the economy, and “Development” of all sorts comes to a halt.

http://s3.amazonaws.com/data.tumblr.com/tumblr_l811ndWhLw1qbwvhpo1_1280.jpg?AWSAccessKeyId=AKIAI6WLSGT7Y3ET7ADQ&Expires=1379299166&Signature=Q9phUFjeOy0fBEg5ahoechSNsOU%3D#_=_Besides this, without the further issuance of more Credit, the PROMISES made during the expansionary period also inevitably will be broken, and already are being broken in the peripheral countries, and in the marginal municipalities rendered Bankrupt from the Industrial meme like Detroit.  Detroit is hardly an anomaly though, it just is the Canary in the Coal Mine, harbinger of things to come to municipalities like Tokyo and Hong Kong, Singapore and Beijing, Berlin and Paris, Wall Street and the City of London too.  As the Center of Credit Creation, these places will likely be the last to walk down the Road to Ruin already well underway in Detroit, but it will get there too over time, and likely remarkably quickly once the cascade really gets underway here.  The Bottom Line is that without copious and cheap energy to run the systems these places depend on, they cannot and will not be sustained in their present form.

For those of us who observe the ongoing collapse of Industrial Civilization, the debates continue as to whether the Collapse will be Fast & Contagious, or Slow & Catabolic in nature.  Will the decline in living standards occur rapidly for many people, or will it creep slowly through the population, with some continuing to live a fun Happy Motoring Lifestyle while others go Homeless and Jobless in the society?  Certainly for the people living in MENA collapse is not Slow & Catabolic these days, the descent into Civil War and the fight for Survival is a rapid and ongoing problem there for them.  It seems so Far Away to people living here in the FSoA, and the progress as the Failed State outcome jumps from country to country in the peripheral economies seems slow enough to people HERE that from this perspective, it can be seen as a Slow Catabolic Collapse.  It is of course Relative to your Reference Frame though.  I doubt Collapse seems Slow & Catabolic to the average Egyptian or Syrian these days.

http://img.ibtimes.com/www/data/images/full/2012/08/04/293457-syria-civil-war.jpg

 

http://images.alarabiya.net/88/8b/640x392_59492_254453.jpg

All sorts of interesting Anecdotal information is coming in as far as how preparations are being made for currency collapse of the Euro is concerned.  Fellow Blogger Jason Heppenstall has been puttering around Europe collecting various family Possession distributed out around the continent to ship back to his new Doomstead on the West Coast of Jolly Old England.  Recently wandering the aisles of a Big Box Store in France, he noted that some items were being priced in FRANCS as well as EUROS.  In Spain, ever since the Euro was introduced prices have been labelled in PESETAS as well as Euros, despite the fact no Pesetas are circulating in that economy.

http://cambiomoneda.cl/files/2011/05/moneda_lira_italiana.jpg

From the Psychological POV, this is conditioning the population to re-accept one of these Legacy Currencies WHEN (not IF) the Euro Collapses, with the likely idea being to Peg in the mind of the currency user what it’s Value is supposed to be in buying the stuff on the shelves of the Big Box Store.  But WILL IT when the time comes, and for HOW LONG will it?  What do France and Spain have to Export to generate an International Trading Value for their own currencies?  Whatever it is they do export in the end has to be exchanged for OIL they have to IMPORT to produce just about anything they might EXPORT.

The whole idea behind developing an Export based economy in the Industrial Era was to take the Energy from Oil and use it to create “Value Added” products other people would buy.  The country that did this with the cheapest labor and best automation did the best at it, read that the Chinese in recent years, but every one of them was always dependent on mis-priced CHEAP energy they imported with CREDIT issued by the extractors of the Oil resource.  If the mercantilist economy can’t get hold of cheap energy on credit to make Stuff, it has little to nothing to export at all, and moreover there is nobody “out there” with enough money to BUY whatever it is they are hawking, from Carz to Refrigerators to Iphones.

What is occurring here through Currency Devaluation is a triaging of the weakest nations furthest from the center of Credit Creation off the Credit Bandwagon.  Forget the problem of Interest Rates Rising for some of these places, they won’t be able to access Credit at ANY PRICE.  The only folks who COULD issue them credit would be the Central Banks, but this only further diminishes the credibility of the CBs as they issue credit on what is increasingly utterly WORTHLESS collateral you don’t even want to Repo if the debtor goes BK!  Forget having a bunch of McMansions nobody can or will buy on your books, WTF wants a GHOST CITY in China on their books in a Repo?

http://fm.cnbc.com/applications/cnbc.com/resources/img/editorial/2013/03/07/100532685-114302931.600x400.jpg?v=1362666958

As Steve from Virginia has mentioned on Economic Undertow, any fuel SAVED by triaging one economy off of credit to buy oil leaves said Oil to be WASTED by another economy elsewhere.  So if Happy Motoristas in Spain and Italy can’t afford to Gas Up their Carz, that leaves Gas to be burned by Happy Motoristas in the FSoA and China, for a while.  It remains unclear how much reduction of this sort can take place before economies of scale break down and it is no longer economic to run refineries to supply ever shrinking numbers of Happy Motorists world wide.  Not to mention of course the Political dislocations already taking place in many places as their economies collapse, leading to Civil War after Civil War in many places as groups of people scramble to get whatever is leftover from a collapsed economy in their country and hopefully start over again at some point with a more locally based economy.

It is the great DIFFICULTY of rebooting a Local Economy that presents the greatest challenge once you have already been triaged OFF the Global Economy that creates so much political problem in every neighborhood already facing this.  You don’t reboot a local economy on a dime, you don’t turn factory workers, accountants and lawyers into farmers at the drop of a hat either without a lot of nasty blowback from that one.  Just ask Pol Pot, who tried taking Cambodian City Folks out to the Farm for new jobs there.

http://jmidizon.edublogs.org/files/2011/11/cambodia-genocide-x8rxqd.jpg

Overall, the folks who NEVER got the “Bennies” of Industrialization have the least distance to fall here and likely are the ones to best adapt as well.  So though India and Brasil appear to be collapsing first and fastest as the Hot Money tries to evacuate, the dirt poor Indians in towns that never even GOT electricity won’t miss it when it is gone.  One suspects the Retirees walking the Strip in Vegas will miss it a good deal more.

http://www.larknews.com/wp-content/uploads/2011/10/Casino-church-lights-up-Vegas-Strip.jpg

Trying to Stay Sane in an Insane World: Part 2

Off the keyboard of Jim Quinn

Cuckoos_NestPublished on The Burning Platform on August 4, 2013

Discuss this article at the Epicurean Delights Smorgasbord inside the Diner

In Part 1 of this article I detailed the insane solutions proposed and executed since 2008 by our owners as they attempt to retain and further expand their ill-gotten wealth, acquired through fraud, deceit, swindles, and the brilliant manipulation and exploitation of the masses through Bernaysian propaganda techniques. Madness has engulfed the entire world, with a concentration of power in the hands of a few psychopathic financial elite wielding an inordinate and dangerous expanse of power over the lives of the common man. They are a modern day version of Al Capone, except their weapons of choice aren’t machine guns, but a printing press, peddling debt, creating derivatives of mass destruction, and peddling heaping doses of disinformation. The contemporary criminal class wears Hermes suits, Rolex watches and diamond studded pinky rings, drops $500 to dine at Masa in NYC, travels by chauffeured limo, lives in $10 million NYC penthouse suites, occupies luxurious corner offices in hundred story glass towers, and spends weekends hobnobbing with the other financial elite at their villas in the Hamptons. They have nothing but utter contempt for the lowly peasants who depend upon a weekly paycheck to make ends meet. Why work when you can steal $1 or $2 billion from farmers with no consequences?

  

The willfully ignorant masses are kept at bay by the selling them a false dichotomy of Republicans versus Democrats, conservatives versus liberals, and capitalism versus socialism. The ruling class distracts the public with fake wars on poverty, drugs and terror, while using these storylines to further enrich themselves and keep the public alarmed and frightened. We’ve been “fighting” the wars on poverty and drugs for over four decades and poverty is at record levels, while drugs are easier to obtain than candy in a candy store. The war on terror is nothing more than a corporate arms dealer welfare plan. The end of the Cold War put a real crimp in the bottom lines of Lockheed Martin and the rest of the peddlers of death. 9/11 and the subsequent undeclared wars in Iraq, Afghanistan, Libya and now Syria, with Iran on the horizon, have been a godsend to the bottom lines of the corporations Eisenhower warned about in 1961. In reality, the politicians are interchangeable and bought off by corporate and special interests. The people are sold a fable, and controlled opposition is the fairy tale. They perpetuate the welfare/warfare state that enriches Wall Street, the military industrial complex, the healthcare service complex, politically connected mega-corporations and the corporate media propaganda complex. The American people are given the illusion of choice by their keepers. The system is rigged. The real decisions are made by unelected secretive men who operate in the shadows and use their wealth to direct the decision making of the politicians, government bureaucrats, and corporate entities that benefit from those decisions. Edward Bernays described a society that existed in the 19th Century, 20th Century, and has now grown to immense proportions in the 21st Century:

“Political campaigns today are all sideshows…A presidential candidate may be ‘drafted’ in response to ‘overwhelming popular demand,’ but it is well known that his name may be decided upon by half a dozen men sitting around a table in a hotel room…The conscious manipulation of the masses is an important element in democratic society. Those who manipulate this unseen mechanism of society constitute an invisible government which is the true ruling power of our country.”Edward Bernays 

The manipulation of the masses has been perfected by the ruling class through decades of corporate mass media messaging the purposeful dumbing down of the populace through government public school education that teaches children how to feel rather than how to think. The conscious manipulation of the masses has been designed to produce obedient non-thinking consumers of corporate products, educated to believe the accumulation of material goods with debt constitutes wealth, to fear whatever the government tells them to fear, and never look up from their iGadgets long enough to actually think for themselves. We are bombarded with Orwellian memes designed to keep us sedated and pliant, as the ruling class pillages the national wealth and expands their power and control over our lives.

Conform; Stay Asleep; Do Not Question Authority; Obey; Consume; Reproduce; Submit; Watch TV; Buy; Follow; Doubt Humanity; No New Ideas; Feel, Don’t Think; Fear; Accumulate; Honor Apathy; Believe Experts; Surrender; Spend; No Independent Thought; Win; Want More; Hate; Succumb To Desire; Yield To Power; Choose Safety Over Liberty; Choose Security Over Freedom   

This insane world was created through decades of bad decisions, believing in false prophets, choosing current consumption over sustainable long-term savings based growth, electing corruptible men who promised voters entitlements that were mathematically impossible to deliver, the disintegration of a sense of civic and community obligation and a gradual degradation of the national intelligence and character.

Are You Sane?

“A sane person to an insane society must appear insane.” – Kurt Vonnegut – Welcome to the Monkey House

Vonnegut and Huxley’s social commentary reveals a basic truth that societies and human beings have been prone to bouts of madness over the course of decades and centuries. Humans are a weak species, susceptible to the vagaries of greed, lust, gluttony, wrath, sloth, envy and pride. The seven deadly sins are in full bloom today, as the American empire descends through Dante’s inferno of reality TV, celebrity worship, religious zealotry, adulation of wealthy titans, military conquest and worship of false idols. Over the centuries humans have gone mad over tulips, farm land, stocks, and real estate. The easily duped American populace has been victimized by multiple bubbles bursting since the creation of the Federal Reserve in 1913. The contention that a central bank run by private banking interests would promote a safer financial system and a stable currency is laughable. The Federal Reserve and the bankers who control it have created three stock bubbles, the largest housing bubble in history, a bond bubble and the mother of all debt bubbles, while destroying 95% of the dollar’s purchasing power in the last 100 years.

There is a common denominator in all the bubbles created over the last century – Wall Street bankers and their puppets at the Federal Reserve. Fractional reserve banking, control of a fiat currency by a privately owned central bank, and an economy dependent upon ever increasing levels of debt are nothing more than ingredients of a Ponzi scheme that will ultimately implode and destroy the worldwide financial system. Since 1913 we have been enduring the largest fraud and embezzlement scheme in world history, but the law of diminishing returns is revealing the plot and illuminating the culprits. Bernanke and his cronies have proven themselves to be highly educated one trick pony protectors of the status quo.

Greenspan’s easy money policies, manufacturing of negative real short term interest rates, regulatory malfeasance and unspoken promise to bail out Wall Street whenever their excessive risk taking threatened to burn down the financial system, led to 50% stock market crash in 2000/2001, a 40% plunge in national home prices, and another 55% stock market crash in 2008/2009. While Ivy Leaguers Bernanke, Paulson, Hubbard, Krugman, and Bush were too obtuse or too blinded by their ideology to recognize the fraudulent housing and stock market bubbles, honest clear thinking men like Robert Shiller, John Hussman, and Ron Paul recognized the bubbles well in advance and understood the consequences to the average American.

“Like all artificially-created bubbles, the boom in housing prices cannot last forever. When housing prices fall, homeowners will experience difficulty as their equity is wiped out. Furthermore, the holders of the mortgage debt will also have a loss.” – Ron Paul – 2003

What Ron didn’t realize was the peddlers and packagers of fraudulent mortgage debt on Wall Street would walk away unscathed when the bubble they created popped. Trillions of net worth was vaporized due to the policies, solutions, and programs designed and implemented by Bernanke and his Wall Street co-conspirators. The losses should have been borne by those who made the loans. Instead they were borne by the American taxpayer and future unborn generations. David Stockman, in his no holds barred book about the Wall Street and K Street crony capitalist criminals, rails against the Federal Reserve led rescue of the profligate destroyers of capital markets:

“At the end of the day, this trillion-dollar infusion of capital and liquidity from the public till had a single overarching effect: it nullified in its entirety the impact of Mr. Market’s withdrawal of a similar magnitude of funding from the wholesale money market. So the very monetary distortion – the availability of cheap overnight funding in massive quantities – upon which the Wall Street financial bubble had been built had now been recreated at the lending windows of the Fed, FDIC, and the US Treasury.

The opposite path of liquidating the Wall Street bubble was eschewed, of course, not only because it would have meant massive losses to speculators in the stock and bonds of Goldman Sachs, Morgan Stanley, JP Morgan, and the remaining phalanx of the walking wounded. Crony capitalism also triumphed because in muscling the system during the white heat of crisis, Wall Street had plenty of intellectual cover. The fact is, mainstream economists of both parties were trapped in a Keynesian dead end, proclaiming that the solution to the crushing national debt load which had actually triggered the financial crisis was to pile on more of the same.

Accordingly, banks which were “too big to fail” couldn’t be busted up, since they were allegedly needed to shovel more credit onto already debt saturated household and business balance sheets. Likewise, speculators who should have suffered epochal losses during the meltdown were resuscitated by Fed-engineered zero interest rates in the money market, thereby quickly reviving the same massively leveraged “carry trades” in commodities, currencies, equities, derivatives, and other risk assets which had brought on the crisis in the first place.” David Stockman – The Great Deformation – The Corruption of Capitalism in America

The working middle class was forced at gunpoint to bail out billionaire bankers who had been fraudulently inducing feeble minded dupes and trailer trash to purchase $500,000 McMansions with negative amortization no doc subprime mortgages, while bullying appraisers into inflating appraisals, buying off the rating agencies, selling the toxic derivatives to their clients, and then shorting the very same derivatives. They subsequently committed foreclosure fraud by robo-signing legal documents. Describing these modern day Shylocks as heartless, cruel, lecherous, avaricious demons understates the vileness and contemptibility of their nature. Ben Bernanke and Hank Paulson blatantly lied to the depraved, gutless members of Congress and to the easily hoodwinked fearful American public about the threat of our financial system collapsing unless the Wall Street banks were saved. This false storyline is still peddled today and believed by millions of willfully ignorant crony capitalist devotees. The financial system wasn’t going to collapse. The stock prices of JP Morgan, Goldman Sachs, Citigroup, Bank of America, AIG, Morgan Stanley, GE, and Wells Fargo were collapsing. The wealth of the financial elites that run the country was in peril. The depositors in these banks wouldn’t have lost a penny, but the shareholders and bond holders would have been wiped out. The personal wealth of Dimon, Mack, Lewis, Prince, Immelt, Blankfein and the other titans of finance took precedence over the rule of law and the negative consequences of excessive risk taking and control fraud.

True free market capitalism embraces the concept of creative destruction. Poorly run companies fail and are replaced by well-run companies. Bankruptcy law worked perfectly during the liquidation of Washington Mutual. The orderly liquidation of the Too Big to Trust Wall Street banks would have resulted in billions of bad debt being discharged, with the losses being borne by the executives who mismanaged the banks and the investors who were foolish enough to fund the disastrous schemes perpetrated by those executives. The FDIC would have kept depositors whole. The privatization of illicit bank profits from 2002 through 2007 and the socialization of the 2008 through 2010 bank losses are proof that we are experiencing a warped, immoral, crony capitalism that enriches the well-connected and impoverishes the working middle class. Our political, economic and financial systems have been captured by corporate and special interests. This corruption will prove fatal, as the vested interests destroy the system through their myopic greed. We’ve allowed a small cadre of malevolent men to gamble away the nation’s future with impunity from all laws, regulations and any sense of morality, under the guise of capitalism. These men and the nation will pay a high price for these transgressions. The punishment will fit the crimes.

“People of privilege will always risk their complete destruction rather than surrender any material part of their advantage.”John Kenneth Galbraith – The Age of Uncertainty

The chart below reveals the criminal plan as implemented by Bernanke, the Obama administration and the Wall Street banks. Instead of allowing insolvent financial institutions to fail, $700 billion of taxpayer funds were syphoned from the economy and handed to them. Bernanke has since stuffed their coffers with another $2.4 trillion he printed out of thin air. The purpose of this insane transfer of national wealth from the people to the parasites was not to help Main Street. Forcing the FASB to allow these criminal bankers to mark to unicorn rather than mark to market, buying their toxic mortgages, and providing billions in free money was done to cover-up the fact they are insolvent. Their balance sheets and the Federal Reserve balance sheet are choking on bad debt. The ongoing foreclosure/rent to own scam was designed to drive up home prices and allow the bankers to exit their toxic mortgages with a profit. The criminally insane bankers have used the trillions in excess funds to syphon off billions in stock market gains, with assurances from Ben that QE to infinity will always be there. They know if their gambling leads to losses, Ben will come to the rescue.

The purpose of banks was supposed to be to lend money to businesses and consumers so they could make long-term investments that helped expand the economy. These Wall Street cretins didn’t loan money to people and businesses in the real world. It was much easier to generate risk free returns and program their HFT supercomputers to buy, buy, buy. By driving real interest rates below zero for the last four years, Bernanke has stolen $400 billion per year from senior citizens living on the edge and transferred it to bloodsucking bankers. Anyone with money in a bank account is losing money. This was designed to force muppets back into the stock market where they will be fleeced for the third time in the last thirteen years.

inflation and t-bill

Bernanke’s rescue measures have been a smashing success for the .1%. Wall Street is generating record levels of profits and paying out record levels of bonuses to themselves for a job well done. The stock market is at an all-time high, while the middle class is eviscerated by relentless inflation in energy, food, healthcare, clothing, tuition, rent and taxes. Reality does not match the propaganda touted by the financial elite. Ask the 47.7 million people on food stamps.

food stamps

The economic recovery narrative propagated by Wall Street paid economists, Wall Street controlled media pundits, and Wall Street bought off politicians is nothing but unmitigated bullshit. True unemployment, that doesn’t falsely exclude the unemployed who have thrown in the towel, is north of 20%, with youth unemployment exceeding 40%. The “solutions” implemented by our owners have led to a 10% collapse in the median household income since 2008. If the middle class is seeing their real incomes decline, while their living expenses are rising by 5% per year, how can the economy be recovering? It can’t. Bernanke’s banker welfare program and Obama’s $1 trillion deficits, along with accounting fraud and under-reporting of inflation, have produced the illusion of recovery.

economix-28income-blog480

Dimitri Orlov summarizes our modern financial system and sets the table for the coming collapse:

“The main tools of modern finance are mystification, obfuscation and hypnosis. What is different now is that all the governments have already shot all of their magic bailout bullets. The guilty parties are still at large, richer than they were before this crisis and probably thinking that the next crisis will make them even richer.” – Dimitri Orlov – The Five Stages of Collapse

The questions that must be answered are: How did we allow this to happen? Are we blameless? Can our course be reversed?

Time to Look in the Mirror

“The America of my time line is a laboratory example of what can happen to democracies, what has eventually happened to all perfect democracies throughout all histories.  A perfect democracy, a ‘warm body’ democracy in which every adult may vote and all votes count equally, has no internal feedback for self-correction.  It depends solely on the wisdom and self-restraint of citizens… which is opposed by the folly and lack of self-restraint of other citizens.  What is supposed to happen in a democracy is that each sovereign citizen will always vote in the public interest for the safety and welfare of all.  But what does happen is that he votes his own self-interest as he sees it… which for the majority translates as ‘Bread and Circuses.’

‘Bread and Circuses’ is the cancer of democracy, the fatal disease for which there is no cure.  Democracy often works beautifully at first.  But once a state extends the franchise to every warm body, be he producer or parasite, that day marks the beginning of the end of the state.  For when the plebs discover that they can vote themselves bread and circuses without limit and that the productive members of the body politic cannot stop them, they will do so, until the state bleeds to death, or in its weakened condition the state succumbs to an invader—the barbarians enter Rome.” –  Robert A. Heinlein

Robert Heinlein has been dead for twenty five years. He wrote these words decades ago. His vision of a state bleeding to death is being played out as we speak. Ben Franklin had an inkling the Republic we were given would not be sustained. The success of our nation hinged upon the wisdom, self-restraint, morality, and civic mindedness of its citizens. Our form of governance was never perfect. Nothing is perfect. Adam Smith’s free market capitalism was based upon true competition, but with an underlying moral code. The rule of law meant something. Those who stole, cheated or broke the law were punished. Bankers and their usurious machinations were frowned upon. They were tolerated as a necessary evil, but they certainly weren’t admired and celebrated. When their greedy schemes to loot the populace went too far, a courageous leader would step forth and rout out the vipers and thieves:

“You are a den of vipers and thieves. I intend to rout you out, and by the eternal God, I will rout you out.”Andrew Jackson

Bankers gained more power after the Civil War as oil was discovered, the country grew rapidly, and the robber barons built their fortunes on debt and the backs of the poor. But still, there were leaders like Teddy Roosevelt who stood up to the banking and corporate interests. The die was finally cast in 1913 with the introduction of the income tax, the creation of the Federal Reserve and allowing the people to directly elect their Senators. A century of central banking has led to: a century of war; a century of currency debasement; a transformation from a hard-working, saving, producing society into an irresponsible, debt based spending, consuming society; and the degradation of our society into a mob of egotistical techno-narcissists, who have chosen bread and circuses over freedom, liberty and self-reliance. At first it happened gradually, but accelerated rapidly once Nixon removed the last vestiges of control over greedy bankers, corrupt politicians, and gluttonous voters. The transformation from an industrious nation of savers into a slothful nation of consumers has reached its zenith. Financialization Nation has been built on a pyramid of debt. The youth of today have been left with an un-payable debt burden and as Bill Bonner points out, the endgame will likely be violent and bloody:

“That’s a heavy burden. It is especially disagreeable when someone else ran up the debt. Then you are a debt slave. That is the situation of young people today. They must face their parents’ debt. Even serfs in the Dark Ages had it better. They had to work only one day out of 10 for their lords and masters. As it stands, young people in the U.S., Europe and Japan are expected to work their whole lives to pay for things their parents and grandparents consumed decades earlier.

Let’s see. Deny a young person work and you deny him a career. Deny him a career and you deny him a way to support a family. Deny him a family life and who knows what happens? Will today’s young people accept their lot… and remain in docile debt servitude their whole lives? Or will they rise up and burn T-bonds in public spaces… rampage down Wall Street… and perhaps hang Ben Bernanke in front of the New York Federal Reserve?” – Bill Bonner

The pyramid of debt was built brick by brick over the last century, as an unelected, secretive, unaccountable cabal of private banker pharaohs has controlled the currency of the nation and worked on behalf of the vested corporate and banking interests that control the country. Shortly after its devious creation in 1913, they enabled Woodrow Wilson to wage a war he promised to keep the nation out of. The central bank’s easy money policies during the 1920s led to an unsustainable credit driven boom in stocks, bonds and real estate. As usual, their belated monetary tightening was too late to avoid the 1929 Crash. Federal Reserve and government intervention after the crash prolonged the Depression for over a decade. The Crash of 1929 proved once again that bankers could not be trusted. Their insatiable greed and reckless thirst for more and more riches required checks on their ability to destroy our economic system. The 38 page 1933 Glass-Steagall Act made sure commercial banking was kept separate from investment banking (gambling), keeping the productive activity of helping businesses grow isolated from the parasitic activity of speculation. This clear, concise, understandable law kept bankers from destroying the lives of millions for 66 years, until a bipartisan screw job repealed the law and unleashed the kraken upon the unsuspecting public. Bernanke’s QE to infinity driven stock market gains over the last few years are reminiscent of another historic time, and this story also hasn’t reached its ultimate climax.

“A major boom in real stock prices in the U.S. after ‘Black Tuesday’ brought them halfway back to 1929 levels by 1930. This was followed by a second crash, another boom from 1932 to 1937, and a third crash. Speculative bubbles do not end like a short story, novel, or play. There is no final denouement that brings all the strands of a narrative into an impressive final conclusion. In the real world, we never know when the story is over.”Robert Shiller

The destruction of Europe, Russia and Japan during World War II and the Bretton Woods system that made the USD supreme across the world kept the economic peace for the next quarter century. A confluence of events in the late 1960s and early 1970s set the stage for the ultimate collapse of our faith based monetary system. LBJ’s Great Society welfare programs and our disastrous foray into Southeast Asia began the insane welfare/warfare dynamic that has required more and more debt to sustain. Nixon realized the debt expansion needed to pay for an ever expanding state could never be achieved with the Bretton Woods/gold pegged currency system.  In 1971 Nixon unilaterally canceled the direct convertibility of the USD to gold. It ushered in the era of freely floating currencies, relentless inflation, financial bubbles, debt accumulation, consumerism, and the rise of the corporate/fascist propaganda state. Using government supplied CPI statistics, the dollar had lost 75% of its purchasing power between 1913 and 1971. Since 1971 it has lost 83% of its remaining purchasing power. And Ben Bernanke has the guts to publicly state his worries about the ravages of deflation.

The years 1913 and 1971 will be seen by future historians as infamous dates when marking the decline of the great American empire.  Prior to 1971, the New York Stock Exchange barred the public listing of investment banks. After the exchange repealed this ban, the large investment banks (Lehman Brothers, Morgan Stanley, Merrill Lynch, Goldman Sachs, Bear Stearns) converted from partnerships, where the senior employees owned the company and were responsible for all of its liabilities, profits and losses, into publicly owned corporations, where executives’ incentives become aligned with outside shareholders, who demanded short-term profits and higher stock prices at the expense of long term sustainability. The partnership structure provided a mechanism of restraint, self-control, fiscal responsibility and cautiousness. If the bank failed, the partners’ net worth would be wiped out. Their incentives were for the long-term sustainability of the business and they were discouraged from taking undue risks that might produce huge short term profits, but might also destroy the firm. Shame and a sense of responsibility to fellow partners was a strong deterrent to obscene risk taking. The unholy combination of allowing investment banks to go public and repealing Glass Steagall in 1999, created a greed driven uncontrollable Too Big To Control brutish monstrosity consuming the world in its desire for more. It will only be stopped when it chokes to death while gorging on what’s left of the middle class.

The citizens, formerly known as the hard working American middle class, must accept their share of responsibility for the desperate circumstances we face. Some are guiltier than others, but we only need look in the mirror to find the culprits in allowing the bankers, politicians, military industrial complex, mass media and vested corporate interests to gain control over our country. The introduction of the credit card by Wall Street bankers as a must have for every citizen in the early 1970s coincided with the inflationary demons unleashed from Pandora’s Box by Nixon and the Federal Reserve, along with the peak of cheap U.S. oil production. Thus began four decades of real wages declining and consumer debt soaring. A nation of people that believed in saving before purchasing were given the freedom to spend money they didn’t have. The statistics paint a picture of a society gone mad:

  • Credit card debt grew from $5 billion in 1971 to $856 billion today, a 17,000% increase in forty-two years. GDP rose from $1.2 trillion to $16.6 trillion, a mere 1,400% increase. Real GDP only grew by 300%. Wages have grown from $600 billion to $7 trillion, a 1,200% increase. Real disposable personal income per capita grew from $17,200 to $36,800, a 200% increase.
  • Non-revolving debt (auto, student loan) grew from $127 billion in 1971 to $1.98 trillion today, a 1,600% increase.
  • There are over 600 million credit cards in circulation within the U.S. and Americans charged over $2.1 trillion last year.
  • Over 40% of Americans carry a balance on their credit card from month to month, with an average balance of $8,200 and an average interest rate of 13%.
  • 40% of all low and middle income households must rely on their credit cards to pay basic living expenses like rent, mortgage, utilities, groceries, real estate taxes, income taxes, along with their “needed” iPhones, HDTVs, bling, stainless steel appliances, and tattoo artwork.
  • Wall Street banks have written off over $300 billion in credit card debt since 2008 (and passing the bill to taxpayers), while bilking their customers out of $60 billion per year in late fees and overdraft fees.

Despite the storyline of austerity, consumer credit outstanding has reached an all-time high of $2.84 trillion because Bernanke and his Wall Street puppeteers require perpetual debt expansion to keep their Ponzi scheme alive. Federal government dispensation of loans to subprime student borrowers has helped mask the true unemployment rate and Federal government doling out of subprime auto loans through Ally Financial and their crony Wall Street partners has created a fake auto recovery. The Blackrock/Wall Street “rent to own” faux housing recovery was designed by our owners to lure clueless math challenged dupes back into the housing market. Our entire economy is nothing but a confidence game at this point.

The four decade long orgy of debt couldn’t have ensued if our currency had remained linked to the barbaric relic – gold. The apologists and lackeys for the vested interests scorn and ridicule the notion of our economic system being burdened with any checks or balances. This is where the interests of those in power and those being ruled have coincided, as a fiat based monetary system allowed unlimited spending to keep the welfare/warfare state growing, enriching the crony capitalists, deepening the power of the state, and providing the masses with foreign made trinkets, baubles, corporate logoed clothing, techno-gadgets, and pimped out financed wheels. The concepts of self-restraint, discipline, saving for a rainy day, prudence, discretion, and deferred gratification are rarely displayed in modern day America. In a case of mass delusion, Americans have convinced themselves to live for today, recklessly ignore their futures, irresponsibly spend money they don’t have on things they don’t need, neglect their civic duty towards future generations, choose ignorance over knowledge, and vote for spineless politicians who promise them entitlements that are mathematically impossible to honor. The public’s foolish attitude towards debt accumulation matches the arrogance of our gutless intellectually dishonest leaders.

“When people pile up debts they will find difficult and perhaps even impossible to repay, they are saying several things at once. They are obviously saying that they want more than they can immediately afford. They are saying, less obviously, that their present wants are so important that, to satisfy them, it is worth some future difficulty. But in making that bargain they are implying that when the future difficulty arrives, they’ll figure it out. They don’t always do that.” Michael Lewis – Boomerang

The manner in which our leaders are governing the country and citizens are living their lives can only be considered normal in relation to residing in a profoundly abnormal society. The American Dream of having the opportunity for upward mobility through educating yourself, working hard, accumulating wealth methodically by spending less than you earn, and reaching your full potential as a caring loving human being has been replaced by a perverted nightmare where we run on a hamster wheel for our entire lives trying to achieve the new American dream of accumulating throw away material goods, working to make the payments for McMansions, SUVs, stainless steel appliances, and iGadgets you rent from bankers, while driving yourself into an early grave by consuming mass quantities of processed poison and the stress created by trying to achieve the lifestyle sold to us by Madison Ave. maggots, Wall Street shysters and the mainstream media propagandists. The corporate fascists tell you what to believe, which “enemy” to fear, how you should look, what to eat, what drug to take for the illnesses caused by the food they lured you to eat, the kind of house you need to impress your friends and family, and the car you need to drive to impress your neighbors. As George Carlin aptly pronounced: “It’s called the American Dream because you’d have to be asleep to believe it.” – either asleep or insane.

“Normal is getting dressed in clothes that you buy for work and driving through traffic in a car that you are still paying for – in order to get to the job you need to pay for the clothes and the car, and the house you leave vacant all day so you can afford to live in it.”  – Ellen Goodman

Our profoundly abnormal society of materialistic zombies, who mindlessly obey the commands and marketing messages of the financial elite, has staked their futures and the future of the country on the wisdom and brilliance of an Ivy League academic who never worked a day in the real world, didn’t spot the largest fraudulent housing bubble in world history, and whose unlawful acts as Federal Reserve chairman have enriched the banking whores who destroyed the country and impoverished what remains of the dying middle class. It’s the height of insanity for the American people to trust these crooked high priests of finance to cure a disease they spread with their immoral, traitorous policies over the last century. Bernanke and his lackeys, in a desperate last gasp gamble to prolong their fiat currency pillaging of the peasants, have rolled the dice with QE to infinity, accounting fraud, and further enrichment of their corporate masters.

“Viewed as a religious cult, modern finance revolves around the miracle of the spontaneous generation of money in a set of rituals performed by the high priests of central banking. People hang on the high priests’ every word, attempting to divine the secret meaning behind their cryptic utterances. Their interventions before the unknowable deity of global finance assure them of economic recovery and continued prosperity, just as a shaman’s rain dance guarantees rain or ritual sacrifice atop a Mayan pyramid once promised a bountiful harvest of maize.” – Dimitri Orlov – The Five Stages of Collapse

Bernanke will eventually roll craps. When he does, the collapse will be epic and 2008 will seem like a walk in the park. In Part 3 of this article I will speculate on the timing, scope and consequences of the coming collapse. It’s not going to be a happy ending, especially for the existing social order.

The Running Game

Off the Keyboard of Steve from Virginia

Published originally on Economic Undertow on September 6th, 2012

 

– Unknown cinematographer ‘Titanic Scene’ (Paramount/20th Century Fox)

 

The ‘question du jour’ is — and has been for awhile — ‘when’?

‘When’ is the dam going to burst? ‘When’ will the coyote hanging in mid-air fall? ‘When’ is the decrepit status quo going to collapse?

‘When’ is so … yesterday! Coyotes have been dropping for five years. The process has been satisfactorily papered over to a large extent. Managers have learned a lot about crisis management since 1929 and 1973 and 1987. When there are difficulties the managers know to run out the shills. The public — and markets — are credulous. They want to believe. Nobody wants a Greater Depression and will do whatever is possible to avoid one.

There was no television in 1929. There was no Internet in 1973 or ’87. With modern media there are unlimited distractions that can be offered at near zero-cost. In order to divine reality one has to look for irretrievable actions on the part of managers themselves: you have to follow the running feet.

Here is some distraction right here:

 

Building the Next China

Stephen S. Roach (Caixin)

Concerns about the country’s economic situation are overblown and ignore a significant fact: urbanization will be the next engine of growth.

But the hype of the pessimists overlooks one of the most important drivers of China’s modernization: the greatest urbanization story the world has ever seen. In 2011, the urban share of the Chinese population surpassed 50 percent for the first time, reaching 51.3 percent, compared to less than 20 percent in 1980. Moreover, according to projections by the Organization for Economic Cooperation and Development, China’s already burgeoning urban population should expand by more than 300 million by 2030 – an increment almost equal to the current population of the United States. With rural-to-urban migration averaging 15 to 20 million people per year, today’s so-called ghost cities quickly become tomorrow’s thriving metropolitan areas.

Shanghai Pudong is the classic example of how an “empty” urban construction project in the late 1990′s quickly became a fully occupied urban center, with a population today of roughly 5.5 million. A study by international management consulting firm McKinsey & Co. estimates that by 2025 China will have more than 220 cities with populations in excess of one million, versus 125 in 2010, and that 23 mega cities will have a population of at least five million.

China cannot afford to wait and build its new cities until after newly migrated citizens have arrived. Instead, investment and construction must be aligned with the future influx of urban dwellers. The “ghost city” critique misses this point entirely.

 

See? Everything is going to be fine! Why? Because Roach says so! He’s a high-powered financier shill with fingers on the pulse. He makes the, “They aren’t making any more land,” argument. With more people and the limited amounts of build-able land certainly demand/prices/economies have nowhere to go but up, right?

Problem is nobody is making more people with money. The money trend is going in the wrong direction: the reality direction as James Howard Kunstler would put it. More people are going broke faster. What remains of money vanishes from circulation, lines of credit are cut off, putative apartment buyers are denied mortgages because they simply don’t earn enough to make the payments. The tens of millions of empty apartments that Steve Roach celebrates are mostly owned by a modest group of Chinese speculators with access to no-questions-asked, low-cost credit. These speculators are stranded, waiting for the horde of Chinese consumers who are never going to arrive. As in the West, the cost of credit … has become too high for individual buyers to afford.

The speculators are victims of their own greed. In order to sell and capture gains they must find buyers who are more successfully greedy than they are (or the government has to bail them out).

The 300 millions that Roach and the Chinese speculators are counting on are near-penniless rural peasants and sweatshop workers. Already these workers complain that urban housing is unaffordable. This worker-demand never really mattered, instead it was the supply of credit from overseas looking for yield. China has been at the end of a massive capital pipeline from the US and elsewhere. The Chinese narrative of perpetual real estate growth and ever-increasing prices is the same as the free-money narrative in America, UK, Dubai, Spain, Ireland and elsewhere. Credit flowed into real estate in all these countries at the same time. Meanwhile, economies were cutting workers’ earnings: something has to give.

There is more to economies than assuming can openers, they are sub-components of culture. What economies manage are cultural goods, not ‘things’ but surrogates for things. What makes China China are the cultural fetishes that represent Chinese ‘modernity’ with an accompanying narrative of American-style material progress.

What American commercial artists, television producers and advertising managers devise, the unimaginative Chinese instantly covet. Their defining idea of America is post-Dean Martin-Joey Bishop-Liberace-Bugsy Siegel Las Vegas: the entire country is turned into a cheesy version of The Strip. The ‘Old China’ that passed the test of centuries is swept away as rapidly and completely as possible. It is replaced with forests of vacant, brutalist 60 story concrete towers, freeways, rail networks, shipping terminals, shopping centers, airports and the rest of Sprawl-America automobile detritus. All of this rests uneasily alongside gigantic, Earth-destroying/polluting industrial complexes … collateral needed to propel the whole mess forward.

The China narrative has been offered as the improbable Horatio Alger communist-rags to riches story: gritty (fanatically xenophobic) workers compete with the rest of the world to make its shoes, pants, salad shooters, lawn furniture, oil tankers, catalytic crackers, CNC machines, automobiles, nuclear reactors, poison dog food and other consumer ‘durables’. According to the narrative, Chinese are ambitious, hard-working, enduring, risk-taking hyper-capitalists. The Chinese planned economy is well-managed. The Chinese don’t make foolish policy errors as do Americans or Europeans, they aren’t lily-livered softies, they crush anyone and anything who stands in the way of progress. They do whatever is necessary to become rich as fast as possible.

This is the establishment’s narrative, one of non-stop ‘sustainable growth’ … Despite hiccups, growth is assured to begin … tomorrow!

Tomorrow: if you have to ask how much it costs you cannot afford it, (BBC):

 

China city party chief ‘fled with money’

A Chinese report says billions of dollars have been stolen by corrupt officials in recent years

A former top official of a city in northeast China has fled the country – reportedly with millions of dollars, Chinese reports say.

Wang Guoqiang, who was party secretary of Fengcheng city in Liaoning province, left for the United States in April with his wife, the People’s Daily said.

Local officials said Mr Wang, who was being investigated for corruption, had been removed from his post, it said.

Several reports cited 200m yuan ($31.5m; £20m) as the amount taken.

The local officials did not elaborate on allegations that he had embezzled and transferred the funds to the US, where his family is believed to be.

A report released by China’s central bank last year said more than $120bn (£74bn) had been stolen by corrupt officials who fled overseas, mainly to the US.

Between 16,000 and 18,000 officials and employees of state-owned companies left China with the funds from the mid-1990s up until 2008, the report said.

 

Officials and other prominents taking wads of cash and going to another country is irreversible. Rather than happy multitudes goose-stepping toward prosperity and their very own high-rise apartments, the rats are fleeing from the sinking Chinese ship as fast they can.

Bruce Krasting asks:

 

If the Treasurer for the city of Las Vegas (Pop. 580,000) stole $30Mn of tax payer money and fled to Canada or Australia, the US FBI would have the Aussies and Canucks hunt them down and have them extradited back home. Why aren’t the Chinese doing the same thing? 

The authorities enacted a ban immediately to report on the case, and blocked Wang’s name in search engines. However, in blogs, the news spread faster than censors could delete it.

 

What matters is the sanctity of the narrative, who cares about the money? Under everyone’s noses, China is morphing from a capitalist paragon into (another) nose-diving coyote.

It’s not just the thievery and corruption, it is the business ‘slowdown’. Steel makers, ship builders, property developers, banks and finance guarantee companies and manufacturers are corpses floating down the river. It really is different this time: none of these enterprises are ‘coming back’.

China + modernity = business collapse is not the dynamic the bosses had in mind when the made the jump to the America Way. As such, the Chinese arrived at the party just as the last line of cocaine was being snorted: the US narrative has fallen apart, so has the hyper-snobbish stiff-little-finger bourgeois narratives of Americanized Europe and Japan. Perhaps the Chinese should have examined the old whore’s fake boobs and pustulent genitalia more carefully before deciding to jump in bed with her.

America:

 

Join Up!

James Howard Kunstler

Meet the new third party in national politics: Reality.

Reality is the only party with an agenda consistent with what is actually happening in the world.

 

Heh heh … reality IS what’s happening in the world.

 

Reality doesn’t need to drum up dollar donations from anyone. Reality doesn’t have to pander to any interest group or subscribe to any inane belief system. Reality doesn’t even need your vote. Reality will be the winner of the 2012 election no matter what the ballot returns appear to say about the bids of Barack Obama and Mitt Romney to lead the executive branch of the government. In the vicious vacuum that national party politics has become, the Republicans and Democrats are already dead. They choked to death on the toxic fumes of their own excreta. They are empty, hollow institutions animated only by the parasites that feed on and squirm over the residue of decomposing tissue within the dissolving membranes of their legitimacy. Think of the fabled Koch brothers as botfly larvae and the Securities Industry and Financial Markets Association PAC (SIFMA PAC) as a mass of writhing maggots.

 

The Reality Party is something that can be gotten behind here at Economic Undertow. Where does one go with all this? Managers race out the door with whatever loot than can be stuffed into suitcases. Here is the Euro-style reality, by way of Mark Grant:

 

The central bank of Spain just released the net capital outflow numbers and they are disastrous. During the month of June alone $70.90 billion left the Spanish banks and in July it was worse at $92.88 billion which is 4.7% of total bank deposits in Spain. For the first seven months of the year the outflow adds up to $368.80 billion or 17.7% of the total bank deposits of Spain and the trajectory of the outflow is increasing dramatically. Reality is reality and Spain is experiencing a full-fledged run on its banks whether anyone in Europe wants to admit it or not.

 

Just like China only more so …

 

Between December of 2011 and the end of March 2012 the Spanish banks bought $109 billion of the Spanish sovereign debt. Much of this was facilitated by the ECB who lowered and lowered again the collateral rules and handed the money to the Spanish banks in such a size that bad things, very bad things will result if Spain hits the wall and defaults. Then since March, as forced by their own inadequate capital positions, the trend has reversed and the Spanish banks have sold $21.3 billion of Spanish sovereign debt with $11.7 billion in July alone as capital flees from the Spanish banks and the actuality of the balance sheets overcomes the “dynamic provisioning” that helped to cause the fantasy. The friendly “suggestions” by national governments in Europe are also getting a push back from European buyers. BNP recently imposed a $12.5 billion debt limit by country and many other banks in Europe are following suit. BNP has reduced their sovereign debt holdings by 35% since June 2011. In July, the aggregate of sovereign debt reduction for all of the French banks was $8.7 billion as they took advantage of the ECB speculation to lower their holdings.

 

When the central bank is insolvent because it makes leveraged/unsecured loans or appears to do so — there is no lender of last resort. No lender of last resort and there is no guarantor for deposits. If all institutions are insolvent the currency which represents these things is worthless.

Capital flow is from bank account => account at another bank => account in another country => account in another currency => out of currency into durable good/asset. Unsurprisingly, the gold price is increasing during a period of credit deflation.

 

 

Figure 1: Keep in mind there are also bank runs out of Greece, Italy, Portugal and Ireland. funds flow from Europe into Switzerland, the flow itself jeopardizes the viability of the Swiss franc as it becomes a proxy for the increasingly worthless euro … the reason to prop up the euro at some stable rate of exchange is to facilitate removing funds from one country to another.

 

Spanish Bank Runs and Struggling Deutsche Bank:

There is a fully fledge bank run ongoing in Spain that is not being adequately reported in the mainstream news media. In June $70 billion dollars left their system. In July it was $92 billion which is 4.7% of total banking deposits. This means that from January to July of this year $368 billion or 17.7% of total banking deposits has fled Spanish institutions. Previously this money was heading for Switzerland and Germany but with the truth filtering out concerning the weakness of German and Swiss banks alternative destinations are now being chosen. The emerging weakness of Deutsche Bank is a particular worry for the ECB and the situation is being exacerbated by a sharply contracting German economy. As reported in Spiegel today:

“Euro Crisis Starts to Bite. German Export Orders Fell Sharply in August.

Exports are a major pillar of the German economy, but now the sector is starting to feel the impact of the euro crisis and the global economic slowdown. German export orders fell in August by the highest rate in more than three years, the Markit financial information company announced Monday after conducting a survey of 500 industrial firms.

“Survey respondents commented on a general slowdown in global demand and particular weakness in new business inflows from Southern Europe,” the institute said. The firms hardest hit by declines are manufacturers of machinery and other investment goods as well as producers of intermediate goods such as chemicals.

In the first half of 2012, German exports had still grown thanks to demand from Japan, the United States and Russia. But it was already evident then that exports to crisis-hit countries were falling sharply, and that trend is now continuing.

Markit economist Tim Moore said the German industrial sector is going through its worst quarter — the three months to the end of September — in more than three years.

“The new orders figures are especially disappointing, with export work dropping at the fastest pace since April 2009 amid an ongoing deterioration in global demand,” he said in a statement.”

 

ECB Boss Mario Draghi is trapped. He needs to keep propping that euro even as doing so is fatal. Direct bond-buying by the bank will accelerate bank runs and there will be nothing to be done to stop them.

Building/not building more concrete towers in China is fatal. Germany selling/not selling more automobiles in Europe is fatal. Adding more carbon/not adding carbon to the atmosphere is fatal. As for the Americans, the running game has been underway since the crisis began. The smart money is long gone from speculative markets, all that remains is the dumb money milling around waiting for tomorrow to arrive.

Comes that happy day, there are runs out of currencies. The Chinese thieves, the Spanish depositors and the rest are voting with their feet. The game is over and they are taking their balls home. All of them. It’s every man for himself and devil take the hindmost.

 

Knarf plays the Doomer Blues

https://image.freepik.com/free-icon/musical-notes-symbols_318-29778.jpg

Support the Diner

Search the Diner

Surveys & Podcasts

NEW SURVEY

Renewable Energy

VISIT AND FOLLOW US ON DINER SOUNDCLOUD

" As a daily reader of all of the doomsday blogs, e.g. the Diner, Nature Bats Last, Zerohedge, Scribbler, etc… I must say that I most look forward to your “off the microphone” rants. Your analysis, insights, and conclusions are always logical, well supported, and clearly articulated – a trifecta not frequently achieved."- Joe D

Archives

Global Diners

View Full Diner Stats

Global Population Stats

Enter a Country Name for full Population & Demographic Statistics

Lake Mead Watch

http://si.wsj.net/public/resources/images/NA-BX686_LakeMe_G_20130816175615.jpg

loading

Inside the Diner

Quote from: John of Wallan on Today at 10:16:54 PM Could never figure out why you yanks cant make good beer Obviously you have not had a Deschuttes Porter, Alaskan Amber or Boston Lager.RE

Shorter of breath and one day closer to death.https://www.youtube.com/watch?v=KPSz7Lv_B_cFosters is shit, that's why we export it. Mind you warm cats piss filtered through a footballers used sock...

If they were bred to live long they probably would.  I don't see a mystery.  Selective breeding by humans is going to favor a fast turnover of generations and any organism with easy food likely has the same pressure to favor quick breeding and short li...

Quote from: John of Wallan on Today at 06:34:13 PMMy time will come. Every year I try and prepare a little bit more. Every year the conditions get worse and I get a bit older and slower. Every year the local population ...

Recent Facebook Posts

Evacuation orders lifted after Palisades Fire leaves 2 injured and burns at least 40 acres in Los Angeles

The Los Angeles Fire Department ordered mandatory evacuations Monday as a fire ripped across a hillside in the affluent Pacific Palisades area,..

3 weeks ago

US troops pelted with rotten fruit and stones as they leave Syria – video

People have thrown rotten fruit and stones at US troops as they left Syria in armed vehicles, with one man appearing to shout: ‘You liars!’..

3 weeks ago

Corporate America's Second War With the Rule of Law

Corporate America’s Second War With the Rule of Law- Uber, Facebook, and Google are increasingly behaving like the law-flouting financial empires..

3 weeks ago

Photos from Rafael Nadal's Spanish wedding show a reception fit for tennis royalty

From Business Insider:

3 weeks ago

The best toothpaste for kids

From Business Insider:

3 weeks ago

Diner Twitter feed

Knarf’s Knewz

Greenland's main airport is set to end civili [...]

230 Chileans blinded in protests as police fire pe [...]

According to Israeli Prime Minister Benjamin Netan [...]

Over 100 students staged a walkout during Israeli [...]

Diner Newz Feeds

  • Surly
  • Agelbert
  • Knarf
  • Golden Oxen
  • Frostbite Falls

[img]https://scontent.forf1-2.fna.fbcdn.net/v/t1.0 [...]

Doomstead Diner Daily November 17The Diner Daily i [...]

Doomstead Diner Daily November 16The Diner Daily i [...]

Doomstead Diner Daily November 15The Diner Daily i [...]

Quote from: K-Dog on November 14, 2019, 07:45:28 A [...]

Quote from: UnhingedBecauseLucid on March 18, 2019 [...]

CleanTechnicaSupport CleanTechnica’s work via dona [...]

QuoteThe FACT that the current incredibly STUPID e [...]

Greenland's main airport is set to end civili [...]

230 Chileans blinded in protests as police fire pe [...]

According to Israeli Prime Minister Benjamin Netan [...]

Over 100 students staged a walkout during Israeli [...]

Scientists have unlocked the power of gold atoms b [...]

Quote from: azozeo on August 14, 2019, 10:41:33 AM [...]

Wisconsin Bill Would Remove Barrier to Using Gold, [...]

Under extreme conditions, gold rearranges its atom [...]

The cost of gold futures on the Comex exchange inc [...]

Kicking off with the death of the Marlboro Man.RE[ [...]

Now UP on Global Economic Intersection!http://econ [...]

Alternate Perspectives

  • Two Ice Floes
  • Jumping Jack Flash
  • From Filmers to Farmers

Politicians’ Privilege By Cognitive Dissonance     Imagine for a moment you work for a small or medi [...]

Shaking the August Stick By Cognitive Dissonance     Sometime towards the end of the third or fourth [...]

Empire in Decline - Propaganda and the American Myth By Cognitive Dissonance     “Oh, what a tangled [...]

Meanderings By Cognitive Dissonance     Tis the Season Silly season is upon us. And I, for one, welc [...]

The Brainwashing of a Nation by Daniel Greenfield via Sultan Knish blog Image by ElisaRiva from Pixa [...]

Event Update For 2019-11-15http://jumpingjackflashhypothesis.blogspot.com/2012/02/jumping-jack-flash-hypothesis-its-gas.html Th [...]

Event Update For 2019-11-14http://jumpingjackflashhypothesis.blogspot.com/2012/02/jumping-jack-flash-hypothesis-its-gas.html Th [...]

Event Update For 2019-11-13http://jumpingjackflashhypothesis.blogspot.com/2012/02/jumping-jack-flash-hypothesis-its-gas.html Th [...]

Event Update For 2019-11-12http://jumpingjackflashhypothesis.blogspot.com/2012/02/jumping-jack-flash-hypothesis-its-gas.html Th [...]

Event Update For 2019-11-11http://jumpingjackflashhypothesis.blogspot.com/2012/02/jumping-jack-flash-hypothesis-its-gas.html Th [...]

With fusion energy perpetually 20 years away we now also perpetually have [fill in the blank] years [...]

My mea culpa for having inadvertently neglected FF2F for so long, and an update on the upcoming post [...]

NYC plans to undertake the swindle of the civilisation by suing the companies that have enabled it t [...]

MbS, the personification of the age-old pre-revolutionary scenario in which an expiring regime attem [...]

Daily Doom Photo

man-watching-tv

Sustainability

  • Peak Surfer
  • SUN
  • Transition Voice

Waterboarding Flounder"Serious oxygen loss between 100 and 600-meter depths is expected to cover 59–80% of the ocean [...]

Of Warnings and their Ripple Effects"We need wooden ships, char-crete buildings, bamboo bicycles, moringa furniture, and hemp cloth [...]

"Restoring normal whale activity to the oceans would capture the CO2 equivalent of 2 billion tr [...]

Ukrainian Rhapsody"Our future will be more about artificial intelligence, cybersecurity, and non-state actors tha [...]

LeBron’s Chinese Troll Mobs"In the 36 hours after James’ delete, a troll mob with bot support sent a flame tsunami at the [...]

The folks at Windward have been doing great work at living sustainably for many years now.  Part of [...]

 The Daily SUN☼ Building a Better Tomorrow by Sustaining Universal Needs April 3, 2017 Powering Down [...]

Off the keyboard of Bob Montgomery Follow us on Twitter @doomstead666 Friend us on Facebook Publishe [...]

Visit SUN on Facebook Here [...]

What extinction crisis? Believe it or not, there are still climate science deniers out there. And th [...]

My new book, Abolish Oil Now, will talk about why the climate movement has failed and what we can do [...]

A new climate protest movement out of the UK has taken Europe by storm and made governments sit down [...]

The success of Apollo 11 flipped the American public from skeptics to fans. The climate movement nee [...]

Today's movement to abolish fossil fuels can learn from two different paths that the British an [...]

Top Commentariats

  • Our Finite World
  • Economic Undertow

Peer Review I’m certain Gail isn’t concerned with peer review considering most of her peers can’t un [...]

Agreed! This is what helps the rich nations to keep stealing from the poorer nations, like Venezuela [...]

Water vapor is actually well known and avoided H2O https://m.youtube.com/watch?v=frAOwAQcSyI CO2 htt [...]

Here's an article: https://www.reuters.com/article/us-imo-shipping-factbox/factbox-imo-2020-a-m [...]

What is the shift away from bunker fuels? [...]

Yeah, when the water heater goes out the day after you just put new tires on one of the cars, etc... [...]

I join the chorus in welcoming you back. Any thoughts on how the shift away from bunker fuel on Janu [...]

@Front Range Mike "Most everyone I know is trying to figure out how to cut back and sell their [...]

RE Economics

Going Cashless

Off the keyboard of RE Follow us on Twitter @doomstead666...

Simplifying the Final Countdown

Off the keyboard of RE Follow us on Twitter @doomstead666...

Bond Market Collapse and the Banning of Cash

Off the microphone of RE Follow us on Twitter @doomstead666...

Do Central Bankers Recognize there is NO GROWTH?

Discuss this article @ the ECONOMICS TABLE inside the...

Singularity of the Dollar

Off the Keyboard of RE Follow us on Twitter @doomstead666...

Kurrency Kollapse: To Print or Not To Print?

Off the microphone of RE Follow us on Twitter @doomstead666...

SWISSIE CAPITULATION!

Off the microphone of RE Follow us on Twitter @doomstead666...

Of Heat Sinks & Debt Sinks: A Thermodynamic View of Money

Off the keyboard of RE Follow us on Twitter @doomstead666...

Merry Doomy Christmas

Off the keyboard of RE Follow us on Twitter @doomstead666...

Peak Customers: The Final Liquidation Sale

Off the keyboard of RE Follow us on Twitter @doomstead666...

Collapse Fiction

Useful Links

Technical Journals

The effect of urbanization on microclimatic conditions is known as “urban heat islands”. [...]

Forecasting extreme precipitations is one of the main priorities of hydrology in Latin America and t [...]

The objective of this work is the development of an automated and objective identification scheme of [...]