The real threat is what you can't see.

After recently updating an interesting and insightful graphic by Gordon Long I decided to go to his web site to see if he had an updated version.  While there I found an equally interesting graphic which I have copied below.  What it effectively shows is that the con men have been ramping up their asset prices by increasing the risk associated with said assets and then transferring the risk to the public.

Let me add some color to that because the implications might not be immediately clear.  Everyone has heard of the concept of risk and reward.  We all understand it as a basic part of capitalism.  What it essentially means is that real capitalism is economic Darwinism in action.  If you take a lot of risk then you can get ahead very quickly (and thus become prominent far before those who in other ways appear to be just like you).  You can also quickly face plant and die quickly.  The difference between the two end results is based on the knowledge, intuition, discipline etc. of the player.  In this way, the best of the herd rise to be leaders, the less capable fall back to find a comfortable place as middle of the road followers and those without any common sense at all and no ability to learn over time end up at the bottom of the barrel. 

Real capitalism works like this because you have to play with real money - money that you earned already.  Earning money takes work and work takes time.  So if you lose your money on a bad bet, you go into the penalty box and have to work your way out over time.  Those that do work themselves out of a hole are likely to be a bit the wiser for it.  We can only fail like this so many times because of our limited lifespans.  Thus, those with poor economic skills do not rise to be leaders in a real capitalistic society.

Crony capitalism is not capitalism at all because it relies at a basic level on a dishonest money supply.  Insiders are allowed to create huge quantities of fake wealth and then use it to enrich themselves.  There is no value in this wealth and there never was.  So the risk in this situation is simply who will own the fake asset once the fraud related to it is finally understood.  This is the very nature of the debt Ponzi.  The con men running this show have fooled everyone into believing that debt is money.  They used this debt to create huge profits for themselves.  When the game started becoming unstable, they began an accelerating process of transferring the debt instruments to the public where they will eventually be discovered and understood to be fraudulent.

The market is made up of a herd of people.  Anytime you get so many individuals interacting with each other you end up with an element of chance.  Another word for chance is risk.  One thing most people should understand about risk is that you can seem to avoid it for a long time but in aggregate not forever.  Having bought a ticket, someone has to win the lottery and having failed to buy insurance someone will get into a bad car accident that will wipe them out.  On the individual level, it makes little sense to buy a lottery ticket because the odds are so against you.  On an individual level, the odds are with you when you are young not to have healthcare insurance.  But as you get older, your reaction time and your general heath decline and so the odds go up that you will get into a car crash or fall sick some how.  This is why older people really need good auto and health insurance.

Those things are true for the individual. That means that some individuals might not live until 20 despite having great insurance while others live until they are 100 despite smoking cigarettes and racing cars with no insurance.  In other words, at the individual level it is possible to beat the odds (although not likely). But at a societal level it is not possible to beat the odds.  The pile of fake steaming financial crap that the con men have created will eventually lead to a crisis of confidence in our money supply because with rising interest rates the service on the debt will overwhelm the ability to make the interest payment. 

But the debt I am talking about is not limited to the visible portion of the con for that is only the tip of a much larger hidden iceberg of filthy un-keepable promises (aka "bad debt").  There are somewhere between 700 trillion to 1.4 quadrillion USD worth of derivative contracts in existence and most of them have some sort of interest rate clause in them.  The range of estimates is very great because they are mostly private contracts, not tracked by a formal trading mechanism.

The artificial downward manipulation of LIBOR and of US treasury bond rates has led to the writing of derivative contracts with very poor risk premiums built into them.  In other words, those who wrote the contracts got an increasingly diminishing something today in exchange for their promise to pay an increasingly larger something tomorrow. 

Unfortunately, like Wimpy ("I'll gladly pay you Tuesday for a hamburger today"), they got used to that income stream and did not want to live without it.  They got used to something for nothing.  So they just kept upping the nominal value of the contracts in order to receive the same premium as they got yesterday.  It's very much like a insurance salesman charging smaller and smaller premiums for higher and higher levels of coverage (well beyond the insurer's ability to pay) simply because people are not interested in buying insurance right now due to supply and demand.  The people are listening to the calming words of the federal reserve when it says it has everything under control.  So why pay for insurance when nothing can go wrong?...  Go wrong.  Go wrong.

Those writing these derivative "insurance" contracts now know they will never be able to pay should the contracts become payable.  They have known it for a long time.  This is why all the risk has been pushed onto the back of the public.  It's a long way of explaining the mechanics behind privatizing gains and socializing losses.  This is how crony capitalism works.  It is reverse economic Darwinism in that it enables the biggest a-holes in the economic world rise to the top like turds in a cesspool while good and capable should-have-been leaders get pushed down and under.

The bottom line here is that the risk in these end days of crony capitalism (which is, by the way, a liberal movement, NOT a true conservative one) is not whether or not a currency crisis will occur or not but rather when.  When not if.  As the risk continues to go up exponentially, the time until collapse gets compressed exponentially.  People who think we have decades until collapse are fooling themselves. They do not see the hidden, exponential risk being thrust upon the people and they do not understand the power of exponents as they relate to shrinking the amount of time remaining.