We’ve Reached The End Of The Line—–Now The Game Changes

Eventful days in the middle of summer. Just as the Greek Pandora’s box appears to be closing for the holidays (but we know what happens once it’s open), and Europe’s ultra-slim remnants of democracy erode into the sunset, China moves in with a one-off but then super-cubed renminbi devaluation. And 100,000 divergent opinions get published, by experts, pundits and just about everyone else under the illusion they still know what is going on.

There have been no functioning financial markets in the richer parts of the world for 7 years (at the very least). Various stimulus measures, in particular QE, have made sure of that.

Because we’ve reached the end of the line, the game changes. Of course there will be additional attempts at stimulus, but China’s central bank has de facto conceded that its measures have failed. The yuan devaluations, three days in a row now, mean the central People’s Bank of China has, openly though reluctantly, acknowledged its QE has failed, and quite dramatically at that. They just hope you won’t notice, and try to bring it on with a positive spin.

Central banks are not “beginning” to lose control, they lost control a long time ago. The age of central bank omnipotence has “left and gone away” like Joltin’ Joe. Omnipotence has been replaced by impotence.

We’ve Reached The End Of The Line—–Now The Game Changes

Well written article that i happen to agree with wholly. Nothing was fixed after '08 and the tape and glue is starting to fail. The author acknowledges that those of us who have been saying this for the last 6 years or so seem to have been crying wolf for the better part of a decade now:

It is fine for people to say that since it hasn’t happened yet, we were wrong about this, but for us it was never, and is not now, about timing. If you think like an investor -or at least you think you do- timing may seem to be the most important thing in the world. But that’s just another narrow point of view.

When deflation takes its inevitable place center stage, it will wipe away so much wealth, be it real or virtual or plain zombie, that the timing issue will be irrelevant even retroactively. Whether the total sum of global QE measures is $22 trillion or $42 trillion, its deflation-driven demise will wipe out individuals, companies and nations alike at such a pace, people will wonder why they ever bothered with trying to get the timing right.

But I'm afraid we are about to be vindicated in a terrible way. Please give the source a read, the author does an excellent job of making his case. Be careful with those retirement accounts my friends.

Cheers!

a reply to: soulshn

LOl, great minds think alike. I see this, too.

Really I must say I hate this present system any way for what it is doing to peoples' lives. The greed is like a man eating tiger on acid. The profit margins and the speed at which the investors want them have become quite literally insane.

If it carries on like this we will soon have the Biblical one loaf of bread for a whole day's work scenario.

If I had retirement investments I would be moving them into some other form of wealth right now.

In the US, so many retirement funds are invested in the government ... way too many. That will be a disaster when so many people have their retirement money wiped out over night. That could well be the spark that sets off We The People.

P

a reply to: soulshn

Think its pretty clear to most of us that our financial institutions have been failing since around the turn of the millennium. I just hope when push comes to shove the rich bastards and privileged few who instigated and essentially implemented our financial meltdown suffer like the rest of us.

Then again chance would be a fine thing indeed considering we all know the head honchos responsible for the debacle, the top 1%ers, will simple ride out the coming financial apocalypse in one of the many D.U.M.B build at numerous locations thou-out our globe while the rest of us fight over the last of the canned food and fresh bottled water that remains.

a reply to: Revolution9

That's funny, less than a minute apart, ha!

I agree China, who has been touted as the answer to all the problems in '08, is unraveling and it's going to bring the whole house of cards with it. I think its actually much worse than we see because of China's ability to suspend trading and outlaw short-selling on a day's notice.

All the cheap counterfeit goods in the world won't save you if no one can afford even your cheap knock-offs.

Going to be an interesting fall.

Well this is what happens when you rape the money from the average guy and collect it in great clumps by a few people i.e. Billionaires.

It's not the rich and powerful who keep an economy ticking over, no matter how much the fat greedy SOB's would have us believe it is. Nope, it is you and me, Joe and Susan average who go to work, pay our taxes and buy our modest things that do.

Bring on the meltdown and watch the fat piggies squeal in terror I say!

originally posted by: pheonix358
If I had retirement investments I would be moving them into some other form of wealth right now.

Since i'm stuck in my 401(K) and Roth 401(K) like so many others i've recently pulled out of equities and am sitting on a good bit of cash and just recently learned about inverse ETF's and have began to dabble.

I made 8.3% in SRTY in the last two weeks. Just have to be careful with the leveraged ones. Lots of money to be made, but easy to lose it also.

Cheers!

a reply to: soulshn

Absolutely fascinating article...and great post. The economy is probably my weakest area of knowledge. I just don't get how it all works and I like articles that I can read and understand with my limited knowledge. Thx mate good thread.

a reply to: soulshn

You guys are all missing one giant point.

Fiat currency works on faith.

And most Americans are so dumb, they will always believe a dollar is worth a dollar.

That is the only reason qe3 and our 18trillion in debt and 200trillion in unfunded liabilities havent caused outrageously high inflation.

We have the most self absorbed, uneducated, oblivious population on earth.

If America was a person and made $1,000,000 a year, they couldn't get a loan for a 15 year old used car.

Just saying

a reply to: soulshn

That is the only outcome to expect when the fundamentals of the economy are sidestepped.
Those fundamentals are the foundation of a healthy economy, not cheap credit nor is production based on false demand, especially not the financial market which is rigged.

Have we reached the end of the line? i doubt it.
Expect the rate hike to be postponed, salaries to be raised, everything to prevent deflation will be on the table in my opinion.

A crisis is normally very healthy because the sick elements in the economy will be erased, this has been prevented and losses have been socialized, i fail to see why they would not continue to try to manage the economy and accept deflation.
The free market simply does not exist, everything is managed and a deflationary spiral unwelcome.

a reply to: johnwick

That is the only reason qe3 and our 18trillion in debt and 200trillion in unfunded liabilities havent caused outrageously high inflation.

Lest we forget the real elephant in the room....an estimated 710 Trillion in derivatives exposure.

The global derivatives bubble is now 20 percent bigger than it was just before the last great financial crisis struck in 2008. It is a financial bubble far larger than anything the world has ever seen, and when it finally bursts it is going to be a complete and utter nightmare for the financial system of the planet. According to the Bank for International Settlements, the total notional value of derivatives contracts around the world has ballooned to an astounding 710 trillion dollars ($710,000,000,000,000). Other estimates put the grand total well over a quadrillion dollars.

Source

When this all finally breathes it's last gasp...the bloodbath is going to be breathtaking in it's scope and scale. Invest in physical metals...gold, silver, land...commodities....and lots of bullets...seriously, it could get that bad.

We should have DEMANDED justice and change after the banking crisis in 08...now the monster is much larger than it was before.

a reply to: soulshn

Yes but, even if all currency failed, we have an infastructure in America and a type of economy that is service based,
That it would just keep going, people are still going to need hair cuts, and people are going to need computer IT work, the list goes on and on I fail to see how a collapse of our currency or an all out default would just blow everything away. Sure times would be harder but we would still trade services that would not just stop.. That's why I don't see a ELE from a financial collapse. Conspiracy hat on, maybe that's just what they want you to believe, but in my opinion if it's a doomed system let it fail, live and let die.

a reply to: johnwick

ROFL!!! STOP IT!! Diplomacy is the best policy!

We had a great run in the Golden age, i enjoyed it, now its the Silver age. Or starting around the corner =)

a reply to: TechniXcality

Yea it wouldn't. Another way of looking at this is we're the 3rd most populous nation on the planet behind India and China. China has a hell of a long way to come, and India much further.

If you take away the BS, despite what the propaganda says, we still have a large economy. Heck, even manufacturing base is still larger than most other countries. We lost a chunk in the last 20 years, but still have that going for us if people bother to look into it.

a reply to: soulshn

I heard someone on a podcast recently talking about how inflation from QE hasn't actually hit yet and that has something to do with the Federal Reserve and interest rates.

I tried contacting them on Twitter for further commentary but they wouldn't reapond.

a reply to: soulshn

Deflation isn't bad at all from the consumer's point of view. Deflation also favors anyone holding wealth because that wealth will increase in buying power as the deflation lowers prices.

So I was wondering if you could summarize why deflation is bad.

originally posted by: rockpaperhammock
a reply to: soulshn

Absolutely fascinating article...and great post. The economy is probably my weakest area of knowledge. I just don't get how it all works and I like articles that I can read and understand with my limited knowledge. Thx mate good thread.

You can start with micro economics and follow that up with Austrian Economics to know how the economy would work without interference.

Then, hypothetically, you could figure out what will happen by adjusting the how it works naturally ( Austrian) to the real world controller distortions.

I think the PTB can create as much fiat (Have to accept it by law) money as they need to until a generation of Borg is born and raised.

Maybe 100 years of inflation, depression, and welfare.

Then Borg.

a reply to: onequestion

That is because the money does not find its way to the real economy, it effectively is a liquidation of assets.
The FED buys assets from banks, imagine what kind of assets, the banks get 'fresh printed money' in return which they can use to buy assets with better returns.
The losses on the assets which are held by the FED are the losses of the taxpayer.
Since 2009 wall street has been doing quite well financially, can the same be said of main street?