The Deflation Monster Has Arrived

Also, where are the central banks in those charts? Isn't that what the QE and various other acronyms are all about? Aren't they now buying like half the government debts? Are any western governments defaulting on their debt? No. Why is there any reason the governments would default on their debts even if 100% of their funding came from CB's? It's pretty easy for the banks to keep things together – just loosen the market support a bit and let deflation strengthen the dollar, and then hit the print button, voila, negligible inflation and free money. Replace dollars up the Exter's Pyramid with dollars lower down. Steal wealth from the masses via deflation and bring it back into existence in their own accounts with the printing presses.

I think we have all underestimated the sophistication of the market manipulation activities over the last few years. Even in 2008 the crash was allowed to drop 777.7 points – I don't chalk that up to chance any more than Thomas Anderson's passport in The Matrix just happening to expire on 9/11/01 by chance. Clearly the banks were in full control even back then, despite them telling us that we were mere hours away from a total global collapse – since when does anyone here believe anything the banks say?

Are we in a deflationary period? Obviously. Is it out of control? I doubt it. I'm sure the CB's have the electronic printing press hooked directly up to their derivative accounts and are milking the ride down for all it's worth, making billions, who knows maybe trillions on levered derivative bets, with the added bonus of an appreciating dollar for their ill gotten winnings.

In terms of how the financial system works, we are not smarter than the banks. They can and do read the internet just like everyone else. Beyond this, they have access to insider information we could only dream of. Does anyone honestly believe they don't know what's going on? No one could have kept this scheme together this long if they were incompetent buffoons. Nomi Prins was talking to Fed officials who gave the impression that they are bumbling idiots not knowing what they are doing? Well do lower Fed officials make any big decisions? Aren't Fed officials known to be puppet-stringed actors? Is it possible that the Fed officials she was talking to actually know who she is and put on the face that they wanted her to see?

Will the system soon collapse? Who knows, we've all seen that predicting the future in this game is near impossible but based on the last few years I'm guessing we've still got a ways to go. I think we'll see the stock markets go back up before the crash. I think we can expect to see the crash when we see activities and plans form the central banks seriously change tone, and by this I mean we won't see discussion of their plans for the next few months over meaningless nonsense like rate hikes or negative rates, that kind of waffling. When we are near the end, I believe that kind of talk will end.

It would appear that Capensis would rather I not ask rude questions,  and has deleted my piece.
I am amused.  It was obliquely pertinent to to question of where the money went. 

Still, what a pity we have to make allowances for peoples feelings. I am sure that Queen's Council would have no time for such niceties if we ever did find out where it went and bring the perps to stand in the dock.

Sigh I'm such a romantic old fool and hold to such old fashioned ideas such as the rule of law and the dispensation of justice. 

Suspending Mark to Market for shale debt???  So now the FED is micro managing the banks…this is going to get REALLY bad!


Just saw the Zerohedge headline…they did it!

Next will be auto and students loans, ban mark to market problem fixed.

I don't see how this market downturn will be worse than 2008, since the entire mechanism for this upturn in the first place was due to injection of large quantities of base money into the banks by the Fed. Base money doesn't just disappear. This isn't the unraveling of a private credit bubble a la 2008, since at the end of the day, the banks still have the built up stores of base money on its balance sheets. I don't see the Dow going below 14k to be honest.

Stock markets across the Middle East saw more than £27bn wiped off their value as the lifting of economic sanctions against Iran threatened to unleash a fresh wave of oil onto global markets that are already drowning in excess supply. 

All seven stock markets in the Gulf states tumbled as panic gripped traders. London shares are now braced for a second wave of crisis to hit when they open on Monday morning after contagion from China sent the FTSE 100 to its worst start in history last week

Dubai's DFM General Index closed down 4.65pc to 2,684.9, while Saudi Arabia's Tadawul All Share Index, the largest Arab market, collapsed by 7pc intraday, before recovering to end down 5.44pc at 5,520.41, its lowest level in almost five years.


Not in our lifetimes Chris.

  1. It would still have to be issued first as Bonds which are just more debt
  2. The amount needed to goose the economy would be truly staggering and the banks would never permit it because
  3. A very significant amount of it would be used to pay down existing debt, transferring personal debt to the state, usurping the privileges of the financial sector.
  4. The distribution would be a political nightmare. If you want a real shitfight, just try suggesting that the "worthless" unemployed, welfare queens, blacks, immigrants, Muslims, women, you name it, get as much or more than the middle aged white guys.
Nope, you, and the system will need much more imagination than that.

The Fed decisions may only appear to look bad, if their intent was to further other objectives (conspiracy references notwithstanding):″-the-economist-magazine/


Regardless of any further action, on either their part or of any other governing authorities, the following proportions will likely be maintained, if not grow wider, in how this all plays out:


The key going forward will be to maintain our own meager proportion, and I am grateful for the insights of this community in my own attempts to do so.

It seems I didn't convey my points well enough…but again it's this simple; if faced between a collapsing, black-hole of deflationary badness, and using electronic digits to prevent worse and get things going again 'in the right direction' it is my view that the Fed would do exactly that.

To your points:


  1. More debt would need to be issued? So what?  More debt is no big deal.  The government issues the debt and the Fed monetizes it.  That's nothing different than has been happening for 7 years without anybody in power making a any stink at all.   So I'm saying even more could happen.  Easy. Because it already has.
  2. "Truly staggering"?  Care to quantify that?  More than the nearly $4 trillion already printed?  Who's to say that the Fed's balance sheet could not expand to $10 trillion?  Or $100 trillion?  It's not like any actual limits exist.  I got in arguments with people who insisted that the  Fed could not take its balance sheet much beyond $1 trillion "because bad things would happen."  Well, they haven't.  That's the lesson so far.
  3. Yep.  that would be the down the debts that would otherwise enter default and go to zero.  Faced between a ruined balance sheet and one paid off, are you seriously proposing that banks would prefer ruin?  Time for you to go talk to a banker or two...
  4. A political nightmare?  Possibly, but again when an emergency is afoot, all sorts of previously unthinkable things suddenly become quite doable.  And I seriously doubt that the people would put up any stink at all over a massive free handout.  It would be among the most popular of all government programs in a very long time.

I try to imagine myself trying to warn my family and friends that the government's big free handout of money is a VERY bad sign, and trying to convince them to pay down all their debt and spend everything they have left on tangible assets they're going to need to survive.  I imagine those that have paid taxes getting a refund on all their federal taxes from the last year or two, and those who didn't pay taxes getting a check for $500. They're going to think I've totally lost my mind at that point because I've equated that program with the beginning of the end of the world as we know it.
BTW, at that point, I would probably either retire early, sell my house in the big city and head for the hinterlands, or buy the property up there and be ready to go on a moment's notice.  Of the various possible outcomes, I see this one as likely as any other.

We just have to reach 8 years into the memory hold to recall that there's precedent for an attempt to goose the economy by giving money to Main St.


We also goosed the economy with the payroll tax holiday, which was in effect from 2011 - 2012.  It reduced the employee contribution toward social security taxes from 6.2% to 4.2%.  When the payroll tax holiday expired on 12/31/13, it made a noticeable difference in take home pay for lower paid employees.

I can easy carry a $ 1,000,000.00 on the debit card; electric money size dose matter. Value on the other hand is harder to come by?

Just to get into somebody else's dogfight for no good reason, I'm going with EFarmer ,backing Fitts over Hudes as she's the "devil" I know best, though ignoring Arthur's McDonald's 5 star rating of Hudes is not for the the faint hearted. 
As a minimillist Roman Catholic, my opinion of the Vatican's prowess in any sphere these days is low to lower. OTOH my opinion of Pope Francis is very high, and I have been concerned almost since he appeared that he is going to assassinated sooner or later. He must have stepped on the toes of everybody who is easily upset by decency in high places by now.

For totally different reasons, I would have Hillary Clinton's security tightened, as it could be in many people's interest to give Donald a helping hand.  Of course I fully realize that Hillary herself is probably more than capable of mixing it with the darkest of devils. 

How is all of that for minding other peoples business?

And thanks Chris for the great interview with Art Berman

Point 3 the bankers win again!  Let's modify that: downsize banking by forcing receivership and writing off much debt.  

Dow futures were down -400 points earlier this morning. Currently at +1000 points (1800 points round trip)…and rising. PPT on a tear!

I'm jumping the gun.  Pulling the pin. Spinning the wheel. 
Today I blow a large percentage on land. The best I can afford. There are too many weird abstractions out there in what passes for Reality these days. 

"There must be some way out of here," said the joker to the thief,
"There's too much confusion, I can't get no relief.
Businessmen, they drink my wine, plowmen dig my earth,
None of them along the line know what any of it is worth."
"No reason to get excited," the thief, he kindly spoke,
"There are many here among us who feel that life is but a joke.
But you and I, we've been through that, and this is not our fate,
So let us not talk falsely now, the hour is getting late."
All along the watchtower, princes kept the view
While all the women came and went, barefoot servants, too.
Outside in the distance a wildcat did growl,
Two riders were approaching, the wind began to howl.
Songwriters: BOB DYLAN
You may prefer "A hard rain"

Dylan was a genius, but on this one I prefer Hendrix's version:

Son #2 moved to the east coast an stole my favorite Dylan bootleg (Newport Folk Festival 1966) but left this this jem behind:

Fresh post.