Thursday, September 29, 2016

First DeutscheBank and now Commerzbank...

The German banking system is likely ready to collapse.  It started with Deutsche Bank which is now apparently in need of a government bail out and now we are hearing about "stress" at Commerzbank.

But wait a minute.  I thought everything was fixed.  I thought that central banks got together and threw in the kitchen sink and huffed and puffed and by the will of their sweaty bureaucratic ball sacks FIXED all of the problems.  So what happened?  Why are these German banks rolling over?  I thought Germany was the powerhouse of the EU!!???  WHAT THE F--- IS GOING ON?

That is what people should be thinking to themselves.  WTF is going on and where do we go from here?  Well, I haven't changed my story one bit since I began this blog back in early 2010.  Not one little bit.  I know what's going on and why.  This understanding has allowed me to author many very prescient predictions over the years.  Many of them have come true including EU breakup.  Others are now about to blossom.  For example, when Germany and France were calling pretty much everyone else in the EU "PIIGS", explained how it was REALLY the net exporters who were the pigs:
  • THEY started the EU in order to create fake credit worthy customers for them to sell to.  Without the Euro, Germany and France manufacturers would have pulled back their horns.  But once the Euro was in place, all the small countries with long histories of inflating away their trade debt suddenly became AAA credit members with the ability to borrow to the moon.  And with all this new debt based purchasing ability, Germany and France had new and spendy customers.  Thus the REAL pigs of the EU, namely Germany and France, were themselves allowed to borrow to the moon in order to meet this fake, debt driven demand.  They built factories and created productive capacity that far outstripped the REAL purchasing power of their customers and they did it all on debt.

The whole thing is a debt Ponzi and the EU is just part of it.  ALL countries which primarily use fake money, AKA fiat currency, are in the same boat.  All will receive the same reward eventually, that of a global collapse the likes of which has never been seen before.

The US is now the central bank of the world.  The US fed cannot raise rates because if they do the dollar will become too strong and US exports will suffer.  This is exacerbated by the fact that people in the EU are losing confidence in the issuing authority of the Euro.  Why do you think the UK bailed out of the EU?  Simply because they are less marginal than the other EU players.  The people of the UK simply lost faith in the faith based system.  The full effects of Brexit have not been felt yet but they are coming.  The UK has gotten out early and they never gave up the GBP in the first place so they were never really full members.  These things taken together mean that the UK will fare better than the rest of the EU.

At some point all the people in all countries will realize that fake paper money is at the heart of nearly every problem on the planet and they will revolt against it.  We will know this is happening because US treasury rates will spike WITHOUT PERMISSION from the fed.  The fed might again play the role of fast follower in this game, raising the fed funds rate as they see the market raising the rate of the 10 year treasury but the fed will not lead the effort else the fed will be blamed for collapsing the global economy AND THEY KNOW IT.  They also know that if too many people end up homeless and starving with nothing left to lose then someone is going to get dragged into the streets and killed in a very unpleasant way.  I'm quite serious about this because there is so much precedent in history: when Mark and Patsy eventually wake up to the fact that they were conned, the con man better beat a hasty retreat or face street justice.

When interest rates begin to rise they will not be rising because demand for loans is increasing which is the usual reason for rising rates.  It will be different this time; they will rise because holders of US debt will become concerned about repayment.  When interest rates next begin to rise, and they will begin to rise at some point, it will be because the players in the system will lose confidence in the issuing authority.  The fed will have lost control of the bond market.  So look for a rise in interest rates to know when the time grows close. 

Additionally, people hoard something when they think it has value and they want to have some security.  But if what they are hoarding is a paper asset and they lose confidence in the issuing authority, they dump the paper in exchange for hard assets as fast as they can.  The chart below is essentially a chart of how paper assets are being hoarded, probably by retirees.  That 5th wave is long in the tooth.  This aggressive slope cannot continue for very much longer or the Velocity of Money will approach zero.  What cannot continue will not in fact continue.  When that 5th wave bottoms and then turns up it will likely announce the arrival of massive if not hyperinflation in the US and in all other countries of the world.  What once was hoarded will be tossed into the street.  Fake paper money will at some point return to its intrinsic value of zero.

It will not be easy and it will not be fun.  Whenever there is fear and anger in the herd there is loss of life and probably great wars will attend it.  Nobody knows the day and the hour with certainty but banks are the energy source of a debt Ponzi and if banks go down, the entire system will not be far behind.

I continue to watch velocity of M2 as a primary indicator that the US is finally near economic collapse.

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