Skydiving Without a Parachute: "Because that's How We Roll Baby !"
Post-2008, if Econo-Dunce regulators had any brains in their head, they would have put together a contingency plan. You know, on the off chance that borrowing 40% more money doesn't fix a global debt crisis or if the free bailout for Wall Street didn't discourage gambling...
PLAN B:
Frat boys can't face the prospect that this will all end so they have no contingency plan. Presumably they will just jump off of the nearest building. However, if they had a plan, here is an idea of what it would look like:
Step 1: Print Real Cash
Frat boys can't face the prospect that this will all end so they have no contingency plan. Presumably they will just jump off of the nearest building. However, if they had a plan, here is an idea of what it would look like:
Step 1: Print Real Cash
The current money supply and derivative money supply consists almost entirely of debt. When investors say they are "going to cash", what they really mean - whether they know it or not - is buying short-term money market instruments and t-bills. All of which are debt instruments, backed by some corporate or government counter-party. Suffice to say, in a true liquidity crisis, faith in any and all debt instruments will be questioned. As it always has in the past, this will lead to bank runs and the re-discovery that most banks only hold at most ten cents on the dollar in physical cash (most far less). Whether or not authorities can or will ultimately "make good" on these various counter-party claims will vary by asset class. However, in the short-term at least there will be a massive drawdown in liquidity. So, as a first precautionary step, regulators should have been stockpiling hard cash in government vaults in case of a bank run.
Step 2: Create a super bank
The corrupt concept that saved the banks in 2008 was "too big to fail". That concept will be re-tested and end disastrously this next time around when the stoned Idiocracy realizes that they were conned again, and this time they are ending up with no job, no income, and no savings. At that point, banks globally will fail and there will be a massive shortfall of available credit and liquidity - the lifeblood of the economy. At that point, governments will have to step in and set-up a centrally managed "super bank" to be the lender of last (and now first) resort. No one will be going to Bank of America to get a loan or line of credit anymore. Meanwhile, the super bank could also make good on the trillions in FDIC claims that will stem from the bank run. In other words, the super bank would stave off total anarchy and meltdown. Back in the 1930s, the U.S. government instituted "bank holidays" during which private banks would shut their doors and replenish their cash reserves, and balance their books. Only the strongest banks were allowed to re-open again. It was a very Darwinian process with over 9,000 bank failures. This time around, most banks are far more massively leveraged thanks to electronic money and securitized derivatives, so most private banks will be shutting their doors forever. At that point, there needs to be an alternative mechanism for protecting deposits and making loans.
The Dunces who created and benefited from this fiasco can't fix it
Have any of these steps been taken? Of course not.
The biggest deficit we face as a corrupt developed world society, is not the budget or trade deficit, it's the deficit in commonsense, honesty, and morality. Once the Idiocracy realizes that the game show hosts who helped create this fiasco, can't possibly fix it, the underwear will be mighty stained and the currency of the day will be ammunition.
[NOTE: Unlike EWI who assume that treasury interest rates will rise any day now, I don't put any more faith in the worthless dollar that can be printed at whim, than I do in a worthless Treasury bond that can be issued at whim. They seem to assume that a dollar is more immune to loss of faith than a Treasury. A short-term t-bill is the closest thing to physical cash and also by far the easiest to store, own and trade in quantity. Even EWI agree with that point. As always, the order and sequence of events will be critical to personal solvency. Still, to believe that treasury yields will rise this time around when they utterly collapsed in 2008 is only "proved" by the numerology arbitrarily placed on an EWI graph, that can change at any time, without notice]
Third World Poverty is spreading. There is no plan in place to stop this Deflationary trend from accelerating as it did in 2008:
The Elliot Straight Down Wave (ESDW) Visualized:
Third World Poverty is spreading. There is no plan in place to stop this Deflationary trend from accelerating as it did in 2008:
The Elliot Straight Down Wave (ESDW) Visualized:
