Saturday, June 2, 2018

John Mauldin finally gets it exactly right. [NKE225]

I strongly encourage my readers to check out Mauldin's latest free online Thoughts From The Frontline.  In that piece he wrote, "

Fatal Flaws

Italy is not Europe’s only problem. The big Kahuna is Germany, which spent years offering generous vendor financing to the rest of the continent to entice the purchase of German goods. The result: a giant trade surplus for Germany and giant, unpayable debts for those who bought German goods. Greece, for instance.

Well well well.  FINALLY someone is seeing exactly what I saw back in 2010 which is that Germany (and France) will turn out to be bigger PIIGS than the PIIGS because, and this is so key, GerFrance was and is running a vendor finance scam on the back of the Euro.  In short, when there were multiple currencies over there, the German (and French) export machines would trade their goods for the paper money of other countries.  That of course is not trade!  Trade is goods for goods but when you trade goods for a paper marker, that's a loan, pure and simple.  So GerFrance would loan all these goods to everyone else and take fake IOUs in exchange.  Soon everyone was indebted to GerFrance over there.  But every so often when the bill would become too big to pay, the debtors would default on part of the debt by inflating their currencies.  As a result they had poor credit ratings and they were not allowed to borrow as much.  This meant that German industrialists could not make as much fast money as they wanted so they invented the fake Euro currency and got everyone to accept it.

At first it was great because use of the Euro meant that the member countries could no longer inflate their way out of debt and so they were given ridiculously high credit ratings which drove silly low interest rates.  This encouraged them to consume well beyond their means.  In response to the dramatic uptick in fake and temporary demand GreFrench industrialists took on massive loans to build capacity to feed the fake, debt driven demand.  So they pulled in consumption from 20 years in the future and they became rich satisfying that demand with products.  The only problem is that the production capacity was never paid for.  GerFrench industrialists made the minimum payments on those loans so that they could pay themselves the maximum amount possible.

I hope you see where this is going.  These fucking con men privatized all the fat short term, temporary gains which they will keep when demand finally collapses because interest rates get too high (sooner or later they will...).  With collapsing demand, the industrialists will stop making payments on those plants which they built using massive debt.  And so those plants will go back to the banks but at valuations worth pennies on their original cost.  Since the bankers own the money supply, when they get screwed everyone who counts on that money supply get screwed.  And so it happens that the losses incurred by the industrialists will fall back upon the banks and then the banks will have to get bailed out by the government, which is to say the people.  That is the act of socializing losses.

The vendor finance scam is all about privatizing gains and socializing losses.

If you are German, please talk about this with your family and friends.  Let them know that this was no accident.  Go search my blog for the very many times I explained this scam in great and gory detail while people laughed and considered me a conspiracy theorist.   It's no theory folks; it's simply a global conspiracy which I refer to as the Global Debt Ponzi.

At the rate he's going I suspect Mauldin will be using these same words within 6 months.  He's almost caught up to my level of understanding of what is really going on with the fake money system of the world, that which I call Mammon Money.  All he really has to do at this point is use the word "Ponzi" and then figure out who is running it for him to have caught up.  I have told you many times who is running it.  Well, at least those with ears to hear and eyes to see who also have an open mind.  And if Mauldin is getting it then the rest of the world cannot be far behind because he's simply another mainstream market watcher.  So if all this bad stuff is coming, the big question is "when?".

Well of course nobody knows for sure but have a look at my model of the Nikkei 225.  It's akin to the US S+P 500.  When it goes into collapse mode I don't think it will be going down in flames alone.  The N225 peaked around 1990 and then collapsed into 2009 at which time the global banks began a coordinated attempt to reflate the collapsing debt.  They did the by buying assets for which there was essentially no bidders.  So here we are in 2018 and working on the E wave (yellow E) of a rising wedge.  Rising wedges generally either finish mid channel or at the upper rail.  I expect the chart to test that lower rail soon and if that test does not hold then times up right now because the C wave of an expanded flat correction with a 3-3-5 count will likely have begun. The scale is log folks.

If the test of the lower rail hold then yellow e' converts to A of yellow E, the test of the lower rail becomes B of yellow E and then the final blow off top becomes C of yellow E.  After that, again, we see the big C wave breakdown where the Japanese stock market loses 90-95% of it value.

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