The definition of Ponzi Borrowing is borrowing the interest to pay back existing debt. This is what dozens of sovereign nations (including the U.S.) have been doing for the past several years. Due to the paradox of thrift, none of these nations could stop spending and borrowing, because austerity would mean economic collapse. Therefore a complicit compact was formed between borrower and lender to propagate the illusion of solvency as long as possible (or at least until bonus time). Why would lenders be willing to throw good money after bad? Because the alternative was immediate default and 100% loss on their portfolios of shit debt. So it was better to buy time by attending the recurring debt auctions and keeping interest rates under control (i.e. facilitating the auctions by buying more debt). All that started to unravel over this past summer in Europe, because yields (interest rates) on various nations' debt started to rise above levels considered commensurate with solvency.
Hence, like the U.S. Federal Reserve before it, the European Central Bank stepped into the open debt markets and became the marginal buyer of otherwise worthless debt, to keep interest rates low and keep the illusion of solvency alive. Bear in mind that both Central Banks used FRESHLY PRINTED money to buy up this sovereign debt, thereby levying an implicit tax on all of us, given that there are now that much more dollars/euros now in circulation. Did we give the Bennie Bernank taxing authority? I wasn't aware of that. Getting back to the story - in becoming the marginal buyer of debt, the ECB went ALL IN and showed its hand - snake eyes - nothing, nada, zilch - because now everyone knows that the normal debt market is not functioning and everyone who owns said worthless debt has to get out ASAP.
At that point, the clock started ticking on the Global Financial Ponzi's ultimate collapse i.e. when, not if. Yet, bonus payout is a mere 3 weeks from now, so financial markets need to maintain calm at all costs. Therefore, it was by no small coincidence that global central banks (including the Federal Reserve) entered the markets on a coordinated basis last week to calm the credit markets. The stock market was up 6.4% in 3 days because apparently a fortunate few insiders were leaked the information early. Just think, 6.4% is over half of the historical average annual return for the stock market - in just 3 days. Imagine with short-term call options - 10 years of return in 3 days - NICE ! And imagine the brass you have as the Bennie Bernank, to take overt action to support markets during the same week that it was revealed that the Fed lent no less than $7.7 trillion (half of U.S. annual GDP) to banks during 2008, all in secret. Now that is true brass, and a big middle finger to the U.S. general public - latest proof that the Bernank is Wall Street's most loyal water boy.
So now the markets are already back at the trough waiting for the really big feed bag from the ECB, because the clock is ticking and they have to get out before someone blinks and heads for the exits early. What they need is for the ECB to pull out the "bazooka" and agree to monetize trillions in debt - essentially a blank check - one that will stimulate the risk markets through Dec. 31 bonus time AND let them unload the shit debt on the general public. And by all accounts the big bazooka (if it comes) should cause one hell of a parabolic rally as speculators front run (buy up) any and all risk assets. You see, those big funds that hold all of that worthless debt are going to unload it on the ECB and then they will take those freshly minted Euros and buy anything that is not nailed down. But don't worry about hyperinflation, because not one dime of that money is ever going to trickle down the middle class. Just as when the Fed was monetizing debt (QE'n'), inflation will be constrained to commodities (gas, food) and therefore further impoverish the average citizen.
Bear in mind, that anything short of the big bazooka will cause the Global Ponzi scheme to collapse immediately. Don't pass GO. Don't collect $200.
Bear in mind, that anything short of the big bazooka will cause the Global Ponzi scheme to collapse immediately. Don't pass GO. Don't collect $200.
Why the Bazooka will Fail Regardless
Here is why the Big Bazooka (ECB debt buyback) is GUARANTEED TO fail. Any fund manager who is holding on to insolvent debt will sell that debt back to the ECB. It will start with Greek debt, then Italian, Spanish, Portuguese, Irish - you get the idea. Why? Because they know for 100% certain this is the last chance to unload that worthless shit, and therefore it will all come to market. Therefore, according to the law of unintended consequences, the ECB will essentially kill the very same credit markets they are trying to save. In other words, going forward, who is going to be the marginal buyer of Greek/Italian/Spanish debt? The answer is no one. Markets are not stupid. This will be the biggest pump and dump in world history. Furthermore, none of this bond buying solves the underlying solvency issue. In fact in exchange for the big bazooka, rumour has it that the ECB will require even more austerity from these struggling nations, which would further undermine their ability to service their debt. In addition, while the ECB will buy the debt and hence bail out the existing lenders, the ECB will not forgive/retire the debt therefore, let's be clear, this would be yet another bailout of the 1% at the expense of the general public who will continue to be burdened by the debt until their economies collapse irrevocably.
GLOBAL PONZI COLLAPSE - CHAIN OF EVENTS
All it takes for the Global Ponzi to collapse now is for ONE sovereign debt rollover auction to fail. Once that auction fails, then that country will be in DEFAULT. It's debt will become worthless on bank balance sheets and in the various funds that hold that debt. The losses will destroy equity, and trigger various credit covenants which require a certain level of quality of debt and equity to be maintained, which will lead to wholesale shedding of the next lower quality country's debt, so forth and so on. Meaning it will be a race for quality and out of risk assets i.e. everyone trying to get out the same door at the same time.
Compounding this stampede is the fact that the dollar will go parabolic, mostly because, in his infinite wisdom, the Wizard-of-Bernank has created the largest carry trade in the history of the planet by taking interest rates to 0%. i.e. Everyone borrowed in U.S. dollars and leveraged up to buy assets around the world - free money after all. So when the stampede occurs, all of that money will come back to the U.S. like a fucking Tsunami, causing massive hedge fund losses in the process.
But Europe Doesn't Matter, right?
Now we hear the Fucktards in the Idiocracy telling us that it's no big deal if Europe goes belly up, because exports to Europe are only a small part of U.S. GDP. Unfortunately, exports are not the problem.
Let's review: Back in 1997, there was a run on the Thai Bhat of all currencies (who cares about Thailand, right?). The Thai currency collapse quickly spread across Asia: Korea, Singapore, Philippines etc. decimating those risk markets. Next thing you know, you had a near collapse of the global financial system which in the event had to be stabilized by the IMF. Fast-forward one year and you had the echo collapse of just ONE highly leveraged macro hedge fund, LTCM, that had big investments in Russia that were affected by the Thai Baht implosion. Due to the amount of leverage, that one fund's collapse, managed to trigger another global financial crisis/collapse/cluster fuck and required the Federal Reserve to take actions to forestall complete collapse. Meanwhile, I would hope some of the amnesiacs extending the Europe-doesn't-matter thesis at least remember 2008 when the failure of just two investment banks in the U.S. (Bear Stearns and Lehman) caused the worst collapse since the 1930s.
Ok, so now picture THIS impending scenario:
- MULTIPLE countries in Europe defaulting in sequence
- Dozens if not hundreds of banks failing globally
- Dozens if not hundreds of hedge funds failing
- ALL of the remaining investment banks failing
- The Bennie Bernank afraid to show his face in public ever again, much less bail out any financial institutions
- The Bennie Bernank afraid to show his face in public ever again, much less bail out any financial institutions
ALL at the same time.
So the clock is ticking, and the only question on the table is whether Wall Street is going to make it to Dec. 31st bonus time and leave the general public as the bag holder, yet again.
Or not...
Or not...
