Saudimizing Frankenstein ~ The Risk Averse Alert

Wednesday, December 11, 2013

Saudimizing Frankenstein

As unlikely as it might seem, a setback from which there is no turning back, quickly sinking major indexes to levels last seen in the 1987-1994 period, finds both fundamental circumstance, as well as technical conditions over the short-, intermediate- and long-term, poising today's grossly mispriced markets for an historic shock up and down the capital structure. Coming entirely from out of nowhere, today's amassed "wealth" likely will be forever condemned to a place from which its purchasing power will never recover. Dashed into a chasm of misery in the ensuing onset of hyperinflationary hell, the fortunes of fantasy-filled dupes who wouldn't know value from venereal disease will be destroyed by the most ruthless process imaginable.

Fundamentally, a hopelessly insolvent banking system, only the more concentrated since 2008, still leveraged to the teeth and, most critically, situated beneath a central bank with no shortage of worthless, mortgage-backed trash on its balance sheet (unlike 2008), is the indisputable driver of this now well considered view forward. For the sake of expediency we consider August 15, 1971—the date when the Bretton Woods system of fixed exchange rates was ended—the starting point of a process that since has led to the banking system's current state of insolvency. Leverage added to the banking system in the age of wildcat finance evolving over the interim of the past forty years was greatly facilitated by King Ponzi, Alan Greenspan, through his endless sophistry rationalizing "market-based risk mitigation" afforded through the use of derivatives. Unfortunately for the man who in fact should be Bernie Madoff's cellmate, his was not some new discovery. Rather, his was but part of the same old tired means an anti-social Venetian oligarchy deceives. In King Ponzi's case destructive dynamics involving leverage were hoisted on what once was the greatest economic powerhouse the world has ever seen, built during FDR's presidency mobilizing the nation to overcome the London-initiated Great Depression, and rising to the challenge of defeating fascism in Europe—a scourge in fact resurfacing today through the initiation of the same morally bankrupt London-New York combine (whose work recently was rebuked by Pope Francis).

Parabolically increasing leverage added to the banking system in the form of illegitimate debt—the kind impossible to repay but through increasing indebtedness: the very essence of a Ponzi scheme—positively condemns assets at the bottom of the capital structure to increasing volatility. This dynamic we have in fact seen with increasing intensity since the 1997-1998 period. King Ponzi's CYA, known forever as his late 1996 "irrational exuberance" speech, no doubt acknowledged the trap the Fed had laid, and into which we now have fallen. Increasing volatility promoted by ill-founded leverage is the heritage of King Ponzi's reign. Yet the hapless Ivy League academic following him, and soon his clone, are no less disposable pawns in service to a game being played to the end of the destruction of the United States itself. We are well along in this process, while the worst is yet to come.

Courtesy CrossCurrents

Not only have derivatives been instrumental in facilitating the banking system's leverage through parabolic increase of illegitimate debt, but the effect of this process is smashing economic growth, as well. This can be seen by way of the 5-year growth rate in GDP, which admittedly is a faulty measure, as it fails to distinguish productive, wealth creating economic activity from unproductive, debt-fed speculation and money changing.

Still, considering diminishing capacity of illegitimate debt to sustain even unproductive economic activity, we see something of our increasing dilemma, which cause and effect certainly will only more vividly expose our national ruin once we cross into hyperinflationary hell. That transition will mark the moment when Venice's stable of Ivy League hacks in Washington will find selling "recovery" in the face of depressionary collapse virtually impossible. The manner in which the general populace will be picked apart, bled dry and made even more destitute in all probability will make today's awful congressional approval ratings appear downright heavenly.

We might consider in this light, too, how impending acceleration of a hyperinflationary process initiated following termination of the Bretton Woods system of fixed exchange rates on August 15, 1971 will further serve oligarchy's drive to destroy the constitutional republic of the United States. The moment the 14th Amendment, section 4 is put in jeopardy by a Treasury no longer able to meet its obligations, the ensuing crisis very well could mark the Constitution's demise, particularly if supposedly well-educated believers in black magic still are ruling the roost, as regrettably seems likely.

Courtesy CrossCurrents

Here we have another view of a fraud running out of gas. Speaking of which, rather interesting is the fact that, the Shiller P/E Ratio displayed a similar disposition following the market's top in the mid-1960s, after which point major indexes more or less traded sideways in a broadening range whose depths were reached in the 1973-1974 period, coinciding with the first energy shock of the post-Bretton Woods era.

As chance would have it, we are anticipating some kind of manufactured event having the same destructive effect on energy prices as did the 1973 OPEC oil embargo. This could strike imminently and prove far more devastating to the stock market than was the case in the 1973-1974 period, being as back then the U.S. had something far more substantial than a grossly leveraged Ponzi scheme backing its banking system and its currency.

An event whose consequence in energy markets would profoundly squeeze a physical economy running on fumes and so threaten complete collapse—which is to say another Great Depression—is virtually certain to bring Pavlov's Ivy League monetarist dogs to salivate at the opportunity to hyperinflate the dung pile they have made of the trans-Atlantic banking system. Who knows what event will upset energy markets? Then again, maybe Saudi Arabia is being antagonized for a reason. Or is it being hung out to dry? There are a lot of fundamentalist cannibals in the area, and as London discovered with its Nazi creation, Frankensteins are apt to turn on their master. For quite some time now there obviously has been a concerted intention to douse the Middle East in flames. As the Syrian venture is failing, thoughts turn to the many ways to skin a cat and amends the United States recently made with Iran, Saudi Arabia's ideological enemy.

Technically speaking the way is well paved for a market collapse sinking major indexes to levels last seen in the 1987-1994 period. Here we see a longer-term, RSI-based view showing positive technical confirmation (green) and negative technical divergence (red). Our takeaway simply must conclude that, from the above technical perspective human beings and money are two distinct beasts. Whereas with the former fairy tales can come true, with the latter these often spell doom.

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