Posted on 11/25/2011 4:26:50 AM PST by blam
The Game Is About Done
Karl Denninger
November 23, 2011
It's pretty-much over at this point....
This morning Germany had a failed Bund auction. That's not particularly noteworthy; it happens from time to time.
But what's noteworthy is what happened to bond yields everywhere through Europe in response: They blew out.
The Greek and Italian "problem" is no longer about Greece and Italy. It has been creeping into Spain and more-recently France, but this morning jumped into Germany and everywhere else "all at once."
Capital has said "no more" to the lies in Europe. While this does not mean an instant implosion it does mean one important thing: The willingness of capital holders to continue to permit deficit spending is coming to an end, and with it the false "GDP" that this lie has "supported" will also come to an end.
Our lawmakers, for their part, continue to sing a happy song about how we'll get it done -- but not today, since the supercommittee was an abject failure. Covering up the failure was the fact that there were departments that had 10, 20 even 30% increases in the funding found in the appropriateions bills that were passed in the House even while the "committee" was trying to find a way to "cut" spending.
Folks, this political game of lie, lie and lie some more cannot go on forever. Eventually the waiter appears with the check and you either pay it, wash dishes, or get arrested for theft. In the political world that "arrest" comes in the form of capital holders saying that they no longer believe you will ever pay and borrowing costs go up -- way up.
The Fed cannot "print" out of this and neither can the ECB. If either try that they will engender an all-on revolt, never mind that as purchasing power falls the fixed costs of staying alive go up relative to incomes and the war is lost anyway.
Reality must eventually be faced. That day is here for Europe and it will soon be here in the US. We have permitted the lies and stealing -- both indirectly and now, as we've seen, it appears directly through MF Global -- to go on for too long.
To those Seniors (and soon-to-be-Seniors) and others who say "but we were promised!" and "I vote damnit - you better give me what you said I'd get" respond: The till is empty and your check is going to bounce.
Occupy Wall Street? Well sure, but while you're at it, why aren't the Seniors encircling the Capitol and refusing to leave? Why isn't the underlying truth being discussed and why aren't the jackals that led to this happening being forced from office and run out of town on a rail?
I'll tell you why: Because everyone thinks that they can manage to somehow "get theirs" while "someone else" will take the hit.
I'm sorry to tell ou that it isn't going to work out like that.
There's no point in continuing to play this game. MF Global showed us -- you're right, you hedge or you place your bet, you still lose your money! How many farmers, airlines, industrial producers and other legitimate entities using the market for risk management got screwed by that little game and why is it that Corzine is not in handcuffs? FINRA? What's that -- it appears Corzine didn't have a valid (and required) securities license. Self-regulation not only failed so has any resemblance of actual law enforcement.
The same game was run over in Europe with sovereign CDS. You hedge, you bet right, the ISDA declares that you were "voluntarily" exchanging your bonds and the hedges you bought were worthless. Your "exchange" was as voluntary as is handing over your wallet when there's a gun up your nose, but that doesn't matter -- the word "is" can be redefined any time the people in charge want, and they want.
Your money, that is.
It will not be long ladies and gentlemen, when the bulk of the folks running the algorithms deduce that they're exposed to the same risks - they have to post margin too, you know, and if it can be stolen then their capital isn't safe either. These deposits aren't supposed to be "at risk" when there's no position actively open -- that's a performance bond against possible failure to pay, but is supposed to be exactly as safe as a bank deposit in a checking account under FDIC limits.
Well, it wasn't. The CDS you bought on Greece wasn't. And it will only take another event like this or two before people conclude that everything is unsound as the jackals running the game will redefine the meaning of words to suit themselves and, failing that will simply steal the money.
30+ years of lawless behavior has now devolved down to blatant, in-your-face theft. They don't even bother trying to hide it any more, and Eric "Place" Holder is too busy supervising the running of guns into Mexico so the drug cartels can shoot both Mexican and American citizens.
What am I, or anyone else, supposed to do in this sort of "market" environment? Invest in.... what? Land titles are worthless as they've been corrupted by robosigning, margin deposits have been stolen, Madoff's clients had confirmations of trades that never happend and proved to worthless pieces of paper instead of valuable securities and while Madoff went to prison nobody else has and the money is still gone!
Without enforcement of the law -- swift and certain -- there is no deterrent against this behavior.
There has been no enforcement and there is no indication that this will change.
It will take just one -- or maybe two -- more events like MF Global and Greek CDS "determinations" before the entire market -- all of it -- goes "no bid" as participants simply stuff their hands in their pockets and say "screw this."
It's coming folks, and I guarantee you this: Whatever your "nightmare" scenario is for such an event, it's not bearish enough.
Will amend my prev post to add:
Some people (rightly) point out that the US will never default because it can just print $$ and/or the Fed will always be able to buy UST when no one else will. True enough, but this will lead to hyperinflation which will ge a default in all but name. People will be paid in $$ that will have ever decreasing value. There will be ever-longer waiting lines for services at Government mandated prices to the point where they will be unavailable. I can see a situation where UST and bank interest rates are technically at 2% but we have hyperinflation on everything else.
Do you trust the current administration to just let the whole house of cards come down and rebuild from the ashes? I don’t. There are a lot of potential revenue streams to keep the game going that have yet to be tapped. Extralegal, but “stroke of a pen, kinda cool” to quote another cretin from another time.
All the bellowing about law abiding citizens being armed won’t amount to a hill of beans other than the carefully managed appearance of a few stray outbreaks of crazy in isolated locales, which will be stomped into a greasy spot. We’ve seen this before, haven’t we.
We’ll have a thoroughly, openly authoritarian government with no pretense of being anything other than that. Assets will be seized, for the greater good of course. Collapse will be drawn out and camouflaged for years, and the spectre of grossly overpaid government workers lording it over their inferiors who pay for it all will continue, as will the swipe-swipe of grossly obese, irresponsible and hostile wards of the state who are protected because they aren’t of the putative majority, with which there has been a protracted cold war for practically my entire life.
And, they’re apparently about to win this war. Every asset class, every avenue of escape, every means of even remotely preserving wealth has been corrupted, degraded and therefore closed off. “Mistakes” that are consistently made to one’s disadvantage are in fact no mistake.
That’s what I see. Prove me wrong, please. I’m very open to being shown a less bleak outcome.
The waiter appears with the check and you either pay it or wash dishes or go to jail. Ahhhh....but there are other choices. You tell the waiter that the Republican at the next table is picking up the tab. You can tip the table over and run away. You think Democrats play by the rules?
Lol, good one!
I have a feeling that the time between now and the 1st of the year is going to get pretty darned exciting.
Concur that the Administration will pull out all the stops to prevent an outright crash before the 2012 election. However, I don’t think outright confiscation of assets is in the cards anytime soon. Its just too politically toxic; continuing to deficit sepnd and debase the currency is the [political] path of least resistance.
However, once Whites are no longer the majority (or the largest minority) all bets are off. Then you’ll see all kinds of race-based taxes & other penalities to “equalize” outcomes.
That won't stop Government. It won't even slow them down. The money is somewhere and they'll simply take it by force and they'll be more than happy to kill you if you resist.
Think your 401k or 403b is safe? Think again. That money is somewhere and Government can reach anywhere at all to get their paws on it. And believe me they will.
Money market funds, bond funds, index funds, ETF's, savings accounts, CD's, etc. aren't safe no matter what words are printed on those papers you have. All it'll take is one Executive Order and it'll be GONE. And there won't be a damned thing you can do about it. Nothing.
Get what you have out and get it out now, in cash. Then get yourselves ready to hunker down for a while, quite possibly a very long while. It's about to get really, really ugly out there folks.
And I've never in my entire life hoped more fervently that I'm wrong. Never.
I’ve been waiting for the big event that brings things crashing down. Now I am beginning to realize that the economic collapse is like a slow motion train wreck. Each day things just get a little worse. Yeah there will probably be a few big events, but for us ordinary people it more like every day is a little harder then the day before and after a few years things are gonna be just plain terrible.
So true. It was a different world in the 30’s. People still had respect for the govt and the president. People were a lot more self sufficient and 80% lived on the farm. Its going to be a lot worse this time around. If you are not prepping its time to get started.
I can hear it now. "In these troubling times we need a law to protect middle class 401Ks. From now on all 401Ks need to be majority invested in USA Treasury Notes. The safest investment in the world". lol, dido other investment monies lying around.
I’m visiting the bank today. One thing my elders hammered home about bank runs is you don’t want to be last in line.
Very well said. I hope majorities of people see it as clearly as you laid it out because November ‘12 we can ‘prove’ this scenario is unacceptable. In reality, it’s our only recourse.
A slow motion train wreck if there is no trigger event.
Say, a war in the ME that extends to Iran, then blocks the Hormuz Strait oil chocke point.
Or many other potential triggers. So my timeline is tomorrow to two years, outside.
it is simply the facts. Most people have no more understanding of how to live that way
There was a great short story by George O. Smith,titled Lost Art, published in 1943, and reprinted in A Treasury of Great Science Fiction that deals with this exact subject. It matches your observations.
I strongly suggest you buy A Treasury of Great Science Fiction ( 2 volumes) online.
It is very inexpensive on Ebay or online booksellers and contains many great short Stories including The Weapon Shops of Isher which neatly sums up the moral argument for the 2nd amendment.
You will see more than that - far more.
Think Rwanda was an isolated incident?
Very good.
“I’ve been waiting for the big event that brings things crashing down. Now I am beginning to realize that the economic collapse is like a slow motion train wreck. “
To follow our suicide wipe-out we have swallowed the Pill and wallowed in the mall while bailing out the world and exported our manufacturing seed cord. We have a bevy of GOP candidates, save 2 without support, who advocate more of the same plus Obama as the candidates of both parties vie to be the war time President ushering Western Civilization off the stage of history. God Help Us.
Better late than never. Welcome to the club, guys.
Well...the money wouldn't be there if the government hadn't allowed and even encouraged you to put it there, tax free no less.
If the government is financially stressed, it is only right, even fair, that you allow the government to use that money to help less fortunate Americans.
How greedy of you to think otherwise and only of yourself.
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