Monday, April 1, 2013

It Happens Two Ways: Gradually, Then Suddenly

  Ernest Hemingway on how you go bankrupt from "The Sun Also Rises"

The common delusion held by most people with whom I chat about this country's economic and fiscal problems is that "it can't happen here."  I've been trying to decide if this view is borne from childish naivete, motivated denial or intentional ignorance.  Quite frankly, it actually depends on the particular circumstances of each individual but the common denominator is "the Fed/Govt will take care of us."

Those are famous last words.  For those of you who like to see at least a possible explanation for what's really happening behind the curtain that's been collusively pulled over our system by DC and Wall Street, you would be served well to watch the less than 7 minute video below which compares the U.S. now with the German Wiemar period of the early 1920's.

While you watch this, keep in mind that China - in a ground-breaking trading agreement - has agreed to conduct all-out trade with Australia using full yuan/Aussie Dollar convertibility, outright bypassing use of the $US completely:  LINK  China has been methodically signing limited-scale agreements with several of its larger trade partners to conduct trade without using the $US.  This one with Australia would be the first 100% direct currency agreement.  The reserve status of the $US is being eliminated, slowly then suddenly.  That's the event that will lead to severe hyperinflation here:


  1. The pschological condition of "cognitive dissonance" is running rampet within the Fed. I know that with events like the Aussies and China using a bilateral currency agreement and the U.A.E. and Russia ready to also accept alternitive payment for energy,the Dollars days are numbered. Strange thing tho,so does the Fed.

  2. Obama’s Financial Crimes Enforcement Network Protects Bank Fraud and Insider Trading
    Obama's New SEC 'Sheriff.' No Conflict of Interest When it Comes to Shielding Wall Street's Pin Striped Mafia

    One indelible sign of state capture by pirate corporations and the financial jackals holding sway on Wall Street and the City of London is the ease with which former “regulators” slip into plum positions with the firms whom they supposedly “regulated” as “public servants.”

    While the drone kill-crazy Obama regime has done yeoman’s work cementing in place extra-constitutional policies first enacted by the Bush gang–only to exceed Bushist depredations by a whole order of magnitude–kool-aid sipping “progressives” and troglodytic “conservatives” have given the president a free pass when it comes to policing the financial criminals who blew up the world economy.

    But when it comes to US spy agencies probing and sweeping up your financial information, well, the sky’s the limit!

    Under the proposal, FinCen data will be linked “with a computer network used by US defense and law enforcement agencies to share classified information called the Joint Worldwide Intelligence Communications System,” according to Reuters.

    And since requirements for filing SARs are “so strict,” banks often “over-report,” this “raises the possibility that the financial details of ordinary citizens could wind up in the hands of spy agencies,” where it will live in perpetuity, “criminal evidence, ready for use in a trial,” as Cryptohippie famously warned.

    Got that? While Wall Street drug banks are handled with care because of the “collateral consequences” that might result from a criminal referral for laundering billions of narco-dollars, the average citizen’s financial data will be fair game.

    Which brings us back to Obama’s anemic regulatory regime and the “sheriffs” eager to do the bankster’s bidding.

  3. The Treason of the Intellectuals

    The power elite, especially the liberal elite, has always been willing to sacrifice integrity and truth for power, personal advancement, foundation grants, awards, tenured professorships, columns, book contracts, television appearances, generous lecture fees and social status. They know what they need to say. They know which ideology they have to serve. They know what lies must be told—the biggest being that they take moral stances on issues that aren’t safe and anodyne. They have been at this game a long time. And they will, should their careers require it, happily sell us out again.

  4. I bet they're thinking "we better find a reason to pre-empt China while we can still finance our military." Or "We need to create a new world enemy" so non-aggressor nations buy our police power through acceptance of the dollar as the primary global reserve/trade currency. Perhaps the exhaulted leader of N Korea does us favors... but it looks like its too late.

    Did Germans own gold?

  5. "Don't worry, baby, I'll pull out in time."
    "The check is in the mail."
    "The government will take care of us."

    Sure, I buy into the first two lines, so why shouldn't I buy into the third?

  6. Good news--there's only 147 of the scheming kleptocrats & control freaks.
    Or is that really all?
    Can 147 people perpetuate economic injustice – and make it even worse? Can they subvert the workings of democracy, both abroad and here in the United States? Can 147 people hijack the global economy, plunder the environment, build a world for themselves that serves the few and deprives the many?

    Anthropologist Robin Dunbar tried to find out how many people the typical person “really knows.” He compared primate brains to social groups and published his findings in papers with titles like “Neocortex size as a constraint on group size in primates.”

    Dunbar concluded that the optimum number for a network of human acquaintances was 147.5, a figure which was then rounded up to 150 and became known as “Dunbar’s Number.” He found groups of 150-200 in all sorts of places: Hutterite settlements. Roman army units. Academic sub-specialties. Dunbar concluded that “there is a cognitive limit to the number of individuals with whom any one person can maintain stable relationships.”

  7. Paul Craig Roberts Transcript; Part 1-- The Biggest Economic Disaster in History, Globalism, the Undoings of the West

    Paul Craig Roberts: It can't happen for the reason I said, that right now it serves the interest for the power, so they're not going to overturn it. Now, when it becomes apparent that we've destroyed ourselves, you can't get the power back. You think the Chinese are going let you all of a sudden let you overcome this? No. They'll hold the upper hand. They're not going to say "OK, let's now destroy ourselves the way the Americans destroyed themselves." I think it's all over with for the West. I don't think they can come back, and so what we're going to be in is a period of transition in which the West becomes no longer the ruler of the universe. It will be slowly declining. In fact, the collapse could be sudden. We don't know what -

    Rob Kall: Now you've written about that. You've written about how at some point the dollar is going to burst, and you've talked in some interviews and your writing about how, in these different bubbles -- are we in the middle of a dollar bubble right now, a money bubble?

    Paul Craig Roberts: Yes. The dollar is one of the biggest bubbles in history. The Federal Reserve is creating over a trillion new dollars annually, but the demand for dollars is not rising by a trillion annually. And so, sooner or later, this has to affect the price of the dollar, that is, the exchange value. And we already see the important nations moving to decouple from the dollar.

    We have the BriCs: this is China, Russia, Brazil, India, South Africa. Altogether now, that's probably about half the world's population. And it's probably half of the traded goods (laughs). And so they're setting up a system in which they settle their trade with one another in their own currencies. The dollar is no longer used as a reserve currency. They're setting up their own version of an IMF. They're just going to bypass all the Western institutions. We see in China and Asia the rise of an Asian currency bloc, which is being organized around the Chinese currency. We see deals with Japan and China to settle their trade with one another in their own currencies.

    So the demand and use for the dollar is about to rapidly constrict. We'll have a situation where the Feds are not only creating a trillion new dollars more than the demand is growing, but the demand will be shrinking! And so the thing will blow up. And when the dollar bubble pops, so does the bond market bubble, the stock market bubble. We will have the biggest economic catastrophe in the history of the world, and there is no solution. The United States will go from being a so-called superpower to a nothing!
    It could happen at any time. It's a perfect storm that the idiot policy makers have created because they don't serve the public interest, they serve a few rich bankers. The whole thing has been keyed toward protecting the banks that our deregulation policy allowed to get to big to fail. Not only that, but the public officials, the Secretary of the Treasury, the FED, the financial regulatory agency heads, they're all the former bankers themselves, all their proteges. You have a situation where the class that caused the crisis is running the solution, and the solution is to keep the banks from having any pain; what it does to the rest of us is not their concern.

  8. Dave - The one point seven trillion dollar question(s) applying to those who have stacked gold and silver...considering we have this hyperinflation hit us (U.S) dead on...

    What do we do to best survive, even benefit , for ourselves, our loved ones and whom ever else we can/might help with what we are able to do ?

    Will real estate be too risky to purchase w/ PM's at that stage due to clouded titles,insane property taxes and other zany government $$ controls pertaining to property ownership?

    Will it be too difficult to gauge what the true value of what one holds in gold and silver be, as it comes in many shapes and sizes ?

    What will be a good source to go to, to find out what the true price would be for that given moment ?

    Who will you be able to trust in transacting PM's for goods and services without getting knocked over the head in return ?

    The questions above directly apply to circumstances on the subject covered here. Answers and ideas would be greatly appreciated as this is a subject that is on this bloggers mind as well as I'm sure others. It will become dire to have some real and helpful answers ahead of any disaster that should occur...Thank You.

  9. Danger in bank accounts

    That solution, as we saw clumsily applied in Cyprus, is for central banks to use creditors’ funds to rescue banks in difficulty, which includes uninsured deposits, instead of taxpayers’ money. What this means is that if you have deposits greater than the level guaranteed by your government, the unguaranteed portion (in the eurozone, over €100,000) is free to be used to recapitalise the bank.

    This is a major departure from past assumptions, that central banks would do their utmost to rescue banks without raiding any deposits. As many ordinary savers in Cyprus found to their cost, this is no longer true. The new approach has been agreed at the highest levels, at the Bank for International Settlements, the central bankers’ central bank. It has been a topic under consideration since the publication by the Financial Stability Board (a BIS committee) of a paper, Key Attributes of Effective Resolution Regimes for Financial Institutions in October 2011, which was endorsed at the Cannes G20 summit the following month. This was followed by a consultative document in November 2012, Recovery and Resolution Planning: Making the Key Attributes Requirements Operational. In this latter document it is stated in the introduction that “Reforms are now underway in many jurisdictions to align national resolution frameworks more closely with the Key Attributes (i.e. the October 2011 paper). In other words any changes to law have been or are being made.

    This confirms that G20 members are ensuring that they can legally override the rights of creditors, including uninsured depositors. This outcome is not difficult to achieve when the alternative in almost all cases of bank failure is for uninsured deposits to be wiped out completely.

    Depositors are learning that governments, acting in the name of the tax-payer, will do anything for their own survival, debasing savings to cover state spending and now raiding deposits to maintain the status quo.

  10. Meet Mary Schapiro's New "Revolving Door" Employer

    So who is Promontory? Nothing short of an "expert network" of all former government workers who having moved on, are willing to spill the beans about all the secrets of government operations... for a fee of between $1000 and $10,000 per hour. The chart below shows a sampling of all current and former employees of Promontory, explaining why it is a perfect fit for anyone intent on justifying the allegations of those who claim all the SEC does is provide a revolving door opportunity for ex-government workers.

  11. Debt = Serfdom

    4. Financialization requires a corruptible, highly centralized State that enables the extreme concentration of financial assets and power. Recall that debt is the banks' primary asset; every loan a debt-serf takes adds to the banks' wealth and power:

    5. This creates a feedback loop: the more concentrated the financial wealth and power, the more readily it can corrupt/influence the Central State to grant it quasi-monopolies and the privileges needed to gather even more concentrated power. This additional power makes it even easier to buy control of the State machinery. Democracy is reduced to a PR facade.

    6. The Financial Powers need the Central State to encourage debt, which is the lifeblood of financialization. Without the State enabling and pushing debt (student loans, subsidized mortgages, mortgage interest deductions, Federal deficit spending funded by Treasury debt, etc.), the Financial Powers (i.e. the Dark Side) would be unable to continue concentrating wealth and power via metastasizing financialization, i.e. the dependence on ever-greater debt and leverage to generate profits, growth and taxes.

  12. Regulators Let Big Banks Look Safer Than They Are

    The recent Senate report on the J.P. Morgan Chase JPM +1.07% "London Whale" trading debacle revealed emails, telephone conversations and other evidence of how Chase managers manipulated their internal risk models to boost the bank's regulatory capital ratios. Risk models are common and certainly not illegal. Nevertheless, their use in bolstering a bank's capital ratios can give the public a false sense of security about the stability of the nation's largest financial institutions.

    The ease with which models can be manipulated results in wildly divergent risk-weightings among banks with similar portfolios. Ironically, the government permits a bank to use its own internal models to help determine the riskiness of assets, such as securities and derivatives, which are held for trading—but not to determine the riskiness of good old-fashioned loans. The risk weights of loans are determined by regulation and generally subject to tougher capital treatment. As a result, financial institutions with large trading books can have less capital and still report higher capital ratios than traditional banks whose portfolios consist primarily of loans.

    In the U.S. and most other countries, banks can also load up on their own country's government-backed debt and treat it as having zero risk. Many banks in distressed European nations have aggressively purchased their country's government debt to enhance their risk-based capital ratios.

    In addition, if a bank buys the debt of another bank, it only needs to include 20% of the accounting value of those holdings for determining its capital requirements—but it must include 100% of the value of bonds of a commercial issuer. The rules governing capital ratios treat Citibank's debt as having one-fifth the risk of IBM IBM +0.92% 's. In a financial system that is already far too interconnected, it defies reason that regulators give banks such strong capital incentives to invest in each other.

  13. Hi Dave, I have been reading your blog for many months now. I do not have a back ground in economics or finance, just a simple observer from Australia. The desperate devaluing of the $US has been festering on the Aussie economy for sometime now. The high $AUD has been the subject of frequent discussion amongst the media and politicians, but rarely is the wholesale printing of US dollars mentioned. It is mostly blamed on the mining sector, the only thing really keeping our heads above water.
    Your low dollar has been like a magnet for our retail dollars, siphoned off through online shopping. Like many other counties I'm sure, Australia feels like the collateral damage in this currency war. One other thing of note I feel, is the rapid drive for energy self-sufficiency, particularly through CSG. I suppose the goal is to prevent being in a position of not being able to afford the world's oil and gas.
    My government has recently legislated to increase superannuation contributions from 9% to 12% . I guess as the money is poured into the bottomless pit that is the stock market I can kiss it good bye.

    Kind regards from down under.
    Craig Armstrong.

    1. Interesting comment Craig. Makes the fact that China and Australia are forging an agreement to conduct trade 100% in their respective currencies and avoid the dollar altogether. That type of set up will offset the damage being done by U.S. money printing to your economy.

  14. I recently wrote about this - tried to come at it from a humorous perspective, listing what I THOUGHT I would need, compared to what I really WOULD need:)