What I mean is that every political and financial system, every bureaucracy, public or private is originally set up to do a necessary job. And the duty of those who work in it is to make sure the system doe that job. But when the challenges facing the system change so that the system begins to no longer be able to do its job, those in it have two choices: they can work for the greater good and help change the old system into a new one better fit to the new challenges, or they can ignore the problems, and forget the reason they and the system were created in the first place and instead seek merely to get as much as they can from the failing system before it implodes.
It seems obvious to me that is where we are today, both politically and financially. We are living in the End Times not because some angry supernatural being is coming to punish us, but because we are living in a system, a machine, which we built and therfore can change, but we have forgotten this. Some time in the recent past we crawled inside our machine, closed the last hatch to the outside behind us, and then forget there was an outside. Our leaders are the worst of us. They are the lords of the machine and they are sure outside there is only chaos. We must all save the machine. Their power and wealth demands it.
And yet they do not know how.
“Something Happened” but “Noting appears to be breaking”
So said JPM’s chief economist Bruce Kasman. He was refering to the recent extreme ‘turbulence’ on the stock markets and the continuing drop in global market values. All I can say is that only a person who lives resolutely in a linear world, despite it being over a 100 years since we discovered that our world in not linear but non-linear, could say such a thing. In a linear world effects tend to follow their causes quickly and clearly. When things are non-linear, however, effects can surface long after and far away from their cause.
Mr Kasman, I suspect, held his breath, waited for everything to fall down and after a couple of days, when they didn’t he concluded nothing had broken after all. He looked at the on-going trend in events and saw they were much as before the inexplicable ‘turbulence’ and concluded that all was as before and the ‘turbulence’ was just ‘one of those things’.
He could be right. But I doubt it. Ours is a non-linear world and we should remember that. Think back to August 9th 2007. That was the day when PNB Paribas suddenly closed three large sub-Prime mortgage finds. The world at large had not even heard of sub-prime. To little fanfare the ECB pumped €95 billion in to the markets to steady nerves. It was not enough. The next day, August 10th The ECB pumped in another €156 billion, the FED injected $43 Billion and the BoJ a trillion Yen.
Five days later Countrywide Financial haemorrhaged 13% of it value. 16 days later Ameriquest the largest specialist sub-prime lender in the US collapsed and on September 14th there was a bank run on Norther Rock. It was a turbulent time.
And then do you know what happened? Nothing. Something had happened but nothing appeared to be broken. The linear pundits went about their crooked business. Six whole months later Bear Stearns collapsed. Its a non-linear world.
And I think we are going to be reminded … again.
ETF’s
ETF’s – have grown to the point where any prolonged large scale exit will exceed the funds available to those who control the funds and make the markets. I think they know this and some time ago those market makers and fund controllers began to boost the credit they could draw upon. Problem is the very banks they are agreeing larger credit lines with, are drawn from the same group of financial companies who make the ETF markets.
I have written about this before – ETFs – A warning which contains links to the posts in which I explain how ETFs work and why they are The Next Accident Waiting to Happen. In short the liquidity choke built in to the ETF market is that the ETF market depends very heavily on a very few financial firms who run the funds and make the markets.
We have already seen in the recent ‘turbulence’ that the ETF market is not so much liquid as fragile. When there is a scare people want out. They withdraw their money which quickly leads to zero liquidity, which leads on to forced selling and as we have already seen prices will dump to far below what the assets in the underlying market are nominally worth. Leading to an even greater pressure to get out.
The ETF market with its promise of easy withdrawal means when there is an event which spooks people and they want out it happens in seconds not days or even hours,
What it means is that this time around I think it very likely the Central Banks will have even less time than they had back in 07-09, to act before the bomb goes off. Which means in turn I expect no creative thought, only a knee-jerk reaction to do again the only things they know how to do despite the fact they have not worked.
Today it is not a bank run that will amplify some large local event in to a global wave, but a fund run.
Where might that trigger be?
The world in which and for which our old system was built is now changing around it in fundamental ways.
China is now making the move to position the Yuan as a rival reserve currency. To become a, or the, new reserve currency the Yuan needs first to be the clearing currency in much more of the world, in many more of the vital markets and be central to any relationship any country wants to have with China. So it seems important to me that Russia has now eclipsed Saudi as the number one oil exporter to China and is now settling its oil exports to China in Yuan. Gazprom is also settling some of its contracts with China in Yuan.
Saudi is now only the number three supplier to China. Angola is number two. ANd it is very clear if Saudi wants to regain its position it will have to accept settlement in Yuan. Will Saudi risk alienating the US? Well China is a larger market for its oil than the US. And other in the region, less tied to the US are already forging close relations with China. Just a few months ago Qatar opened the first Yuan clearing hub in the region. Its central bank and CHina’s now work together and Qatar is poised to make itself the new Mid East financial centre for trading with China. At the moment all the local currencies are still pegged to the dollar because oil and gas are traded in dollars. But as more gas and oil deals are cleared and done in Yuan it would be less important for them to be pegged to the dollar.
Oil and gas is moving away from the dollar. China is the largest customer. They have clout. They also have in Hong Kong and Shanghai the financial centres able to house the trade. Shanghai in particular is looking aggressively to capture oil futures which would cement the Yuan’s position. Things, as they say, are a changing.
Apart from the fairly seismic changes this would herald in this massive market it would have even larger potential effects. The end game for the dollar is when it is no longer the sole or preponderant reserve currency. At the moment the US can carry a mind boggling amount of debt and find buyers for more. But once countries no longer need dollars for buying oil and gas then something will happen to the world’s appetite for US debt and the world’s opinion of how much debt the US can sustain.
Why is China pushing the Yuan more aggressively now? In my opinion, China now needs, not just wants, but needs the Yuan to become a major settlement and then reserve currency. To my mind this is one part of how China might salve if not solve its out of control bad debt problem. China has a mountain range of bad debts in the financial vehicles created by its regional governments.
This we have all known for several years. Less well known is that China’s insurance industry is now up to its neck in these bad debts. When the CHinese central authorities tried to reign in bank lending the shadow financial sector ignored them and found ways around the limits. As the FT reported,
Egged on by provincial leaders desperate to keep the wheels of GDP growth rolling forward and cash-strapped property developers, other institutions have jumped into the fray. And one of the biggest are Chinese insurance companies.
By the end of January 2015, alternative investments surged 66.4 per cent year-over-year to Rmb 2.3tn, accounting for a whopping 24 per cent of total insurance investments.
I have ‘Fourth Turning Fatigue’.
Every faucet of life is now so upside down, and fucked up, and corrupted, and lying, and cheating, and a racket, and rigged, and manipulated, and spun, and outrageous, and illogical that nothing surprises me.
That should be facet 🙂
@Dutchman…..Freudian slip.
What happens when it’s 10 years from now, and the stock market is at 150,000 and the national debt is at 20 quadrillion? Will the experts still say that it’s all about to come down any second?
Maybe Cheney was telling the truth when he said “deficits don’t matter”. The money is make-believe. The rules are made up. Nothing is really real, everything we see and hear seems to turn out to be a lie. It seems to be messed up, but not to the players. They are making untold amounts of money and living like Emperors. And it’s their game. They created it and play it. The rest of us schmucks just react to what happens as a result of the game, but we aren’t involved in influencing it.
If every player in the world is playing the same game and every player realizes it’s all make-believe, then it’s a self reinforcing loop. For the players, that is. For the rest of us it’s hell, but we don’t matter.
This could go on forever.
I think it works either way 🙂
@Lysander: ” The rules are made up. Nothing is really real, everything we see and hear seems to turn out to be a lie”
We have 60,000 Somali’s in Minneapolis. Half of them work. They stink. They can’t drive. They don’t know how to use indoor plumbing. Now we have to spend more money to have programs that prevent the Somali youths from going jihad. The libs here in Minneapolis love to kiss their asses.
Now what? Will we get Syrians ?
Somebody is making a lot of money with this ‘invasion’ shit. Spic’s, Somali’s, Hmong, Sand Niggers. The only group that’s been left out are the Martians.
Once we give all our country away, there will nothing more to give.
Lysander- I have waited for years to hear someone utter the words/thoughts you just shared. You are awakening , very exciting for some of us to see this happen. Most here (TBP) think they are awake, not even close my friend.
You are wrong in that you say we can have no involvement or influence. Dutchman seems to be ready to take a real look at the game we live in, very exciting indeed.
I spent the cool afternoon in my kitchen, doing what I love to do… cook. I needed eggs for the meatloaf I was making for dinner, so I grabbed a pint of Apple Pie in a Jar and headed over to my neighbor’s house, who has 80 something hens laying eggs and about a dozen roosters that need killing and canning soon. After chatting with his wife, who has almost fully recovered from her stroke except for her paralysis on one side, for a few minutes, I left with a dozen eggs. Now, he has something to put on their pancakes in the morning that is homemade, healthy and pretty darned good if I do say so myself.
Nick and I played around with stocks and funds for a short time in the early 90s. What we learned from that experience contributed greatly to our willingness to forego the possibility of getting rich investing in our savings and simply paying cash for what we thought would get us through to where we needed to be. Now that we’ve arrived, we’ve discovered that these hills are full of people with similar backgrounds and goals to ours. A former Navy Seal who claims to have helped capture Noriega during the Panama (that was no war, it was just a really long day) invasion cut and baled our hay. A former rancher from Northern California raises grass-fed Angus just north of us and will sell us a half at market price when we are ready. A salesman and his family have built a creative inground home about a mile away beside a pond that is big enough to be called a lake, hidden from the road but unfortunately not from Google Maps… and they have industrious children ready to work for us when they are not being homeschooled.
As I was on my way home from the “neighbor’s”, who has lived here all his life and has been a wonderful help to me over the two years I was here supervising construction with my husband still in Oklahoma, I realized that I finally felt like I was HOME. He had asked me if I’d heard about the latest shooting of a sheriff’s deputy in Kentucky and told me the details. Then, he filled me in on a stabbing that had happened over on 51 last weekend, but since no one was killed, he guessed they weren’t gonna press charges. He told me that if we ever had someone try to break in, to shoot off a few rounds and he and his son would be there as soon as they could. I told him that we lock up pretty good, but I’d let Nick know.
I realized that I didn’t give a shit about what happened out in that “other” place where I have to travel to once in a while to get a few things I don’t have stored here or I can’t barter for locally. I turned my quadrunner into our driveway, closed and locked the gate and drove up to the log home and finished the meatloaf for my husband.
As far as I’m concerned, the crash has already happened. I’m kind of just waiting for the power to go off… then we’ll have to figure out what we can run on solar and what we can’t.
The best advice we ever got was to get ourselves prepared for three days. And then, once we were prepared for those three days, try three weeks. It became so empowering that we decided we just flat out wanted to be prepared… and it turns out, it is the happiest we’ve ever been.
I spent a year carpooling with my buddy John. Since he also ran a side business repairing garage doors, I had the opportunity to see what folks do with that area. Some old folks had very neat garages. Some had a mancave. The personality of each place was always very different. Some folks had a very austere approach, others crammed every bit of detritus into the garage. One or two had a retirement project; a car, waiting to be rebuilt.
One guy said he used the garage to hide from his wife, on the pretext that he was working on his home business.
I have tiled almost every room of my house.
The beautiful blonde was complaining that workmen at her house were so messy. I said it isn’t their job to leave things to her taste since the truth is she should not be there, hovering and butting in if I know her, and I do. I said that when I tile a room, it takes me a bit of time to get psyched up for the job and then I go ahead and take everything out, rip out the carpet and baseboards without mercy and then when everything is down to gray tacks, the place looks neat, swept and orderly. When every hidden concrete nail and every rough bump is out, then I can start to tile the room, measuring, laying out a few tiles to ascertain the squareness of the layout.
1. Nobody will do anything to revamp this country if he is not willing first to destroy the old system with extreme prejudice.
2. A pack rat like the beautiful blonde cannot begin to renovate, she must be thrown out in the meanwhile because she will only be in the way fretting about the changes every step of the way.
Lysander, “This could go on forever”. You had me cheering everything you wrote up to that. It’s already crumbling. Greece couldn’t go on spending forever and even their already pitiful condition will worsen. The beginning of the end came about 1965 with so much unfunded welfare&warfare that Nixon had to end the US Gold Standard and TPTB took over “our” currency production. They then bought everything but the Kingdom of God and shipped our manufacturing overseas (the Giant Sucking sound we were warned about by Ross Perot). The inevitable end comes when foreigners all over the globe begin to look on their piles of dollars as so much practically worthless pieces of green toilet paper (just as the new Americans did at the Continental and Rebels at the Confederate Money). When they refuse to accept the usual stacks of dollars for their finished goods, fuel and food but want gold and silver, we will see that TPTB robbed US blind. How precious it was to have had the World Reserve Currency. The rule of thumb is that when the currency supply doubles, the prices double. Hussein has more than quadrupled the supply of dollars in 6 years (and fortunately other countries have also been profligate) and I expect to soon see some foreign flight to US “safety” that ignites inflation here (like Weimar Germany) and then some typical stupid Obama or NYC blunder that starts the Financial End Times “bank run and hyperinflation”. Bet me a steak dinner or Captain’s Platter if you think a dollar will buy a cup of coffee at McDonald’s on election night.
Well I am constantly amazed that this grand juggling act of TPTB has gone on for as long as it has without any real political opposition or scrutiny. It is entirely feasible that just before a collapse occurs, the rules are changed or a Weapon of Mass Distraction set off, and the juggling begins anew – and no-one really notices how close to the edge we actually got (except people like us; those few individuals that simply know too much for their own good and thus are constantly unable to make money out of it because we always seem to either jump in too soon or out too early and forgot to take into consideration the ponderous lagging momentum of the crowd). We live in interesting times 😉