Systemic Collapse Certainty ~ The Risk Averse Alert

Monday, October 28, 2013

Systemic Collapse Certainty

As I said Friday, we can be rather certain the "Grand [Fascist] Bargain" is DOA. No Team Fraud tribute will be had on this front. This is the downside for those who insist on playing make believe, doing so in fact out of utter necessity, pretending the banking system is solvent, promoting a fantasy supposing a mountain of debt built up perpetuating a Ponzi scheme over the many decades since the collapse of the Bretton Woods system of fixed exchange rates presents no dilemma now that lenders of last resort are "all in," vainly attempting to sustain the Ponzi scheme that has become the U.S. dollar reserve system.

Yet the fact of the matter is there are many ways to skin a cat. The Grand [Fascist] Bargain might be DOA, but so, too, is the U.S. physical economy—decimated in the era of globalization and Ponzi finance—extraordinarily vulnerable to external shock whose effect in gouging the average American will prove even worse in its effect than were the social safety net viciously gutted right here and right now.

More on this shortly. First we need reiterate our view on the state of today's banking system. What makes it hopelessly insolvent? What is the nature of the present arrangement preordaining the banking system's collapse, all things remaining equal?

Never is it discussed in supposedly well-educated, well-informed circles the nature of today's real threat to the banking system. It's not the size of the mountain of debt superimposed on a physical economy whose functioning will determine whether all debts will be satisfactorily extinguished. Nor is it the degree to which the banking system is leveraged on account of it. Those who claim the banking system's leverage since 2008 has decreased, thus making it less vulnerable to collapsing, just don't get it.

First matter fundamental to our present day's precarious state is the fact that, increased leverage achieved through the addition of what rightly is called "illegitimate debt" imposes systemic risk in and of itself—this debt can never be extinguished, never paid back with new, tangible, physical economic wealth such added debt should otherwise help marshal. Well enough is the fact that, when leverage is superimposed on a vibrant, expanding physical economy there's risk of some unanticipated event causing a crisis threatening a negative effect extending beyond institutions directly exposed to debt facilitating leverage. Enter this natural risk into what has become a Ponzi dynamic, where more debt is needed to roll over and sustain debt of old. Risk of financial collapse is but amplified as a result. It does not matter which enterprise within the order of things is more, or less, "leveraged." All are more greatly exposed to risk of being caught in a chain reaction collapse initiated anywhere within a configuration sustained through Ponzi dynamics, such as alone props up today's banking system.

We must never forget it was reckless banking system policy perpetuated since August 15, 1971 bringing us to the present day's grave threat of systemic collapse. All the while the mantra rationalizing an increasingly financialized economy was "self regulating markets." Anyone with eyes sees there was no "self regulation." Rather there was a lemming effect fostered by "creative finance," enticing all captive interests to become utterly reckless. Of course, this arrangement was effortlessly perpetuated while "demand" for all things sustaining our modern day's securitized banking system could be easily increased in variety, quantity and "value" without negatively impacting broad confidence. Unfortunately, that capacity was extinguished in the 2007-2008 period. Confidence since has by no means recovered despite lender of last resort efforts. By "confidence" we mean unquestioning faith in the viability of the capital structure whose demonstration is in deeds, not words (money talks, and volume of securities exchanged reveals an increasing silence). Thus does today's banking system claimed to be less leveraged and better capitalized than in 2008 lie at the apex of a ruse sustaining today's woefully vulnerable global economy anchored by a U.S. dollar that is aggressively being debased. Truth is there's no other choice now but play make believe.

Enter the second matter fundamental to present day circumstance finding the banking system hopelessly insolvent: trapped lenders of last resort everywhere. Only to the degree these have allowed underlying conditions to become so threatening as to completely force their hand does responsibility for today's risk of systemic collapse lie at their doorstep. Truth is lenders of last resort exist never to be tapped so thoroughly as they are being tapped right now. That's the bottom line. The Federal Reserve, most emphatically, under the stewardship of King Ponzi, Alan Greenspan, bears the full brunt of responsibility for trapping lenders of last resort in today's hopeless cause that is the trans-Atlantic banking system. Implicit guarantees must never become explicit backstops. That's what regulators are there to prevent. Greenspan sold us "risk mitigation" and "self-regulating markets." As a result, the Fed has become captured—trapped—by the Ponzi dynamic Greenspan's sophistry ultimately wrought.

This amply summarizes why fear of the banking system's complete and utter collapse, a la the Florentine banking empire of the 14th century, is not the least far fetched and, indeed, ought dominate fear. So, how do we not suppose this state of affairs was intentionally imposed? Being it is impossible to deny today's frightful risk threatens systemic collapse, it is likewise impossible to think this state is something other than intended.

Surely, the regulatory mechanisms necessary to prevent dire threats from ever developing once were in place, yet have been persistently subverted over the course of the past several decades. Surely, too, the destruction of the social fabric in Europe has been less so necessary than it otherwise in fact has been utterly desired, and so actively pursued. Thus we arrive at another "bottom line" matter in the view we take here. The intention behind the imposition of today's extraordinarily vulnerable circumstance is the very destruction of the institution known as the sovereign nation state. The object of this intention extends all the way up to the destruction of the constitutional republic of the United States, itself.

There simply is no denying this, given the frightfully vulnerable condition in which the United States presently finds itself: by all moral standards an emperor with no clothes. Assigning "greed" as the underlying cause will not do. Greed is a symptom that has been deceptively exploited. Something far more sinister lies at the root of today's profound vulnerability threatening financial, economic and social chaos on a scale not seen in centuries.

Returning to the immediate moment, we have entering stage right a fascinating dynamic—intrigues putting the feudal monarchy of the Kingdom of Saudi Arabia dead center in the crosshairs. Or, said differently, a back door tax on the physical economy and on all who are sustained through its functioning appears on the verge of being astronomically raised. An energy market thrown into chaos by the breakup of Saudi Arabia seems a more or less certain outcome were we in fact witnessing a "Saudi suicide" in the making. Such an event's near-term consequence could trigger the banking system's final, fateful crisis, this in anticipation of the physical economy grinding to a halt in the face of skyrocketing energy prices.

As for Europe, belated claims of NSA spying made by the Spanish government appears to make Italy the target of the next round of euro swindle. This makes sense in fact, given that Spain is entirely decimated and has no more left to easily extort without prospectively risking blocking actions by other EMU member nations aiming to forestall a destructive swindle whose demand otherwise is the price of admission in fantasy land claiming the trans-Atlantic banking system is anything but hopelessly insolvent. Furthermore, Spain's political disintegration is considerably more advanced than is Italy's, and so having some catching up to do in the matter of intention being imposed by a Venetian-modeled oligarchy seeking destruction of the sovereign nation state, it stands to reason Italy's political destruction might be hastened through deep state initiated intrigues aiming to appreciate the euro's exchange rate value in a cause aiming to decimate Italy's physical economy, that its political surrender be provoked and prospect of its disintegration as a sovereign nation be furthered, much along lines as presently threaten Spain's continued existence as a unified nation consisting of autonomous republics, some of which already are well along in their pursuit of independence. We might imagine here, too, how the threat of Saudi Arabia's disintegration and consequent dislocation of energy markets would but hasten demise of sovereign nation states more generally, right up to the United States itself.

This is mighty strong language to be sure. Yet it is warranted on account of extraordinarily dire circumstance underlying everything, everywhere. Anyone with eyes that gaze beneath the veneer sustaining what is otherwise an unsustainable fantasy should realize what's at stake is beyond anything that has occurred in living memory. Although no one can say when systemic collapse might happen, there is no escaping the fact its occurring is both inevitable and intended.

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