Sunday, December 25, 2016

More elitist bankers being pursued individually for their past crimes.

Remember the bad old days when a bank would get caught committing some heinous crime like money laundering, fraud, etc. and nothing would happen to any individual about it?  The bank would simply pay a fine and admit no wrongdoing, nobody got a criminal record and nobody ever went to jail.   Well, elite, them days is over.   The people will no longer be happy with the simple payment of fines that no citizen ever gets a portion of and has no idea what the money is ever used for or if the money was ever even paid.  For all we know, it was all a big show done for the benefit of fake justice.  After all, everything else was faked during the liberal years.

But with the conservative wave will come new justice and those who think they got away with crimes 3, 5, 10 or more years ago will now find that the law has not forgotten about them.  Today's story concerns two criminal executives of Barclay's who committed obvious fraud during the go go days of "financial innovation" AKA fraud on a scale never before seen. 

This is just the beginning and those who are paying for past crimes at this juncture will actually be glad later on that they did because as things get harder for the herd, the herd is going to make it harder on those perceived to be at fault.  Of course the herd itself is really the one at fault.  If a con man meets a citizen and promised all sorts of something for nothing, whose fault is it for falling for this obvious con?  The con mans?  Maybe.  But without a Mark and a Patsy no con could ever have worked.  Our societal lack of wisdom in believing that fake paper currency is actually the same as money is our sin and I guarantee you there will be Hell to pay at some point.  The exponentially rising debt assures I will be right.  There is no fixing this.  Stop thinking that it is possible because that is just being more of a Mark or Patsy.   Please go look at the exponential debt chart of the USA and tell me how it will end up being anything but bad or worse.

Monday, December 19, 2016

The people are coming for the elite.

As expected, past crimes have not been forgotten and big names in the elite world will be affected. Today's proof point is that Christine Lagarde, who is currently head of the IMF, was convicted in French court of negligence over an "improper payout".  Since there is no jail time and no fine associated with the ruling, Lagarde essentially got a hand slap over the incident which involved an improper payment of $429 million back in 2008.

What was improper about what she did?  The public is not really told.  But the payee had to repay the money with interest after the public complained about it. 

So this is the way it starts.  Early on, we see justice done in terms of making the people whole but not of punishing the scammers (I can only assume that Lagarde is in trouble over this because she acted with corruption).  So Lagarde gets publicly humiliated but stays out of jail and has no criminal record.  She should be thrilled with this outcome because if she waited 3 more years to settle, the charge would have been fraud or corruption and the herd would settle for nothing less that big time in jail.

The elite think they have gotten away with many past crimes, some of them 10 or 20 years ago or more.  But few have been as careful as the Clintons in tying up loose ends so to speak and this is going to come back to haunt many elite.  Once the people scream loud enough for blood, elite friendships and relationships will be set aside because then it becomes a matter of personal security for those administering the legal actions.  If they don't roll some heads down main street for the crowd to roar at, the crowd will find other ways to make their anger known.

International bartering.

tcmdo-2016-12-18The global money supply will at some point collapse.  Of that I am sure.  You want the reason?  Just scroll to the bottom of Mish's post.  Just above the comment section he posted a chart that he got from the federal reserve website (FRED) which I have pasted to left.  The global outstanding debt is now about 65 trillion dollars. When did the curve begin its exponential run up? Yeah, right after Nixon defaulted on dollar convertibility into gold.  Whether or not you realize it, this chart is really an inverted chart of the quality of the currency.  Why?  Because it just gets easier and easier to take on more debt and that is the sign of a weak currency, not a strong one.  Needless to say, 4+ trillion of monetary base is all that is authorized by the fed (all the issued shares in the USA if you will).  The other 61 trillion of outstanding debt can never be paid off because there simply isn't anywhere near enough of the currency in our system to do so

Those who lent all this cash out count on the hope that not everyone will demand repayment at once but if even 7% of the debt were to be recalled/demanded to be repaid at any time, there simply wouldn't be enough cash to cover it.  This is the so called liquidity crisis.  It's the scramble by debtors to find dollars needed to repay loans that got called.  And its the scramble by creditors to get their money back out of the system before the system collapses.  You can also think of it as a short squeeze on the naked short which is what is technically happening in a fractional reserve money supply each time credit is instantiated from thin air.  I'll say it again: fractional reserve credit is a naked short on the underlying currency. 

It amazes me that more people don't understand this.  Sure, the fed can go ahead and print up more cash, but it cannot simply hand that cash out.  Anyone who takes that cash from the fed in order to satisfy a claim on cash by some other party will have generated a debt to the fed in the same amount that they received.  It's the old borrow from Peter to pay Paul deal.  So the fed can and has acted as a shock absorber for short term liquidity problems (i.e. 2008) in the past, but it cannot absorb unlimited shock just as the shocks on a car have their performance limits.

I hope you can see how this can never end well.  It cannot be unwound gracefully by anyone.  It is a debt Ponzi and like every other Ponzi that ever existed, everyone involved believes that their money is safe and that they will be repaid.  But I'm telling you for a fact that 93% of the people will get stiffed because there is only enough cash to pay 7% of outstanding debt.  It almost happened in 2008 in what this senator called an electronic run on the dollar.  His description was very accurate.  Institutions were pulling their money out of money market funds.  In essence, these funds were loaned to the money markets.  The fund managers promised to manage the money to make a profit on the loans but the market got scared that the Ponzi was about to collapse and so it began to pull money out of the casino while there was still money there to pull.  The fed had to step in and calm everyone down and so the Ponzi lived another day but do not forget that even Charles Ponzi successfully stopped a major run on his Ponzi scheme one time before the eventual collapse arrived.

The big players know very well that this is musical chairs economics.  At some point the music will stop, the liquidity will dry up for good cash will become very scarce.  That is the deflationary crash.  Then the government will step in wind up the printing presses to full power in order to counteract it.  That's when everyone will know that the green paper Ponzi is in the collapse stage that ends with hyperinflation.  So repeat after me: first deflation and then massive inflation and then hyperinflation.  Same thing I have been saying since I began this blog in 2010.  I never changed my tune once about this.

In all of these things, the marginal players will be affected first.  That's just the way it is.  And so now we see Cuba looking to pay their long standing debts off to the Czech Republic not using currency which is a marker for labor, but rather using the productive output of the labor - Cuban rum.  This is just the kind of thing we will see more of as the dollar loses reserve currency status as the people of the world begin to vote no confidence on the it.

[/SI] - silver futures continuous contract

If there is anything good about the Think or Swim tool from TDAmeritrade it is the continuous futures charts which provide more history than was available in the now discontinued StrategyDesk tool.  /SI is the symbol for the silver continuous futures chart.  We can see from this that we are still in a long term uptrend which began back in 2003.  This counts as a couple of threes with the implication that we are looking at an expanding wedge in silver (a notion that I floated back in the legacy blog some time ago).

Silver came right back down to support at the start of 2016 and then had a nice bounce to middish year and now we are waiting to see where the pullback will take us.  I think that a worst case move would be to test the long term support line as shown by the bracket.  Doing this would kill the bulls off completely while opening the door for a massive explosion upward that takes off even faster than what happened in 1H 2016.

A break down below this long term support line spells near term doom for the metals complex, perhaps even ending up as a mania chart that goes to a lower low than 2002.  We can't rule it out and we must remain emotionally detached.  It is possible.  Not likely right now but we really must begin to rally here very, very soon or the odds go up quickly.

We could also see the bottom drop out of silver and do a unicorn tail to kiss that line.  This is why I stress to keep some powder dry and for God's sake no margin at this point (leverage in the 3xers is bad enough!).  Value keeping what you have more than trying to make new and you will still have cash at the bottom when everyone else is screaming that they rode it all the way down and now wish they had more cash.

Any gap down here is a sell signal, a signal that the final shakeout has begun and that we should look for support at that rising slope.

Use stops and do not curse lower prices because when you get stopped out for a small loss and then it goes down 30% more, that is actually a potential for you to make 30% off the bottom.

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