Jun 132012
 
 June 13, 2012  Posted by at 3:48 pm Finance





Gordon Parks Seafood City June 1943


"A scene at the Fulton Fish Market, New York"

The only thing that has been achieved -if we can even use that word- by the European bailouts thus far, is that bank debt is kept hidden from view. That's all. No economies have been rescued or restored, no jobs have been created, nothing. And the bank debt that we now can't see even though we know it's there, will one day forcibly be forced out into the daylight anyway, and kill the banks that hold it. And those that bailed them out.

Eventually Europe will then be forced to deal with it after all, but with the added problem of being trillions of euros poorer, in debt transferred from the private to the public sector. Hence, what Europe has been doing until now, and is doing still, severely weakens its ability to adequately execute necessary measures in the future. Europe is dragging itself and its people into the furnace, just to keep a bunch of failed banks and their loser shareholders whole. Utter madness, an extortion scam.

Last year I started to label the money used to allow zombie banks to continue to extend and pretend, zombie money. It's conjured up out of thin air, the thinnest air on the planet. The only thing that serves as collateral is the future taxability of the future citizens of bankrupt nations.

In the end, the only truth that remains, though people are seemingly completely blind to it, is this:

The banks that are kept alive with the zombie money will use it to do what they will – rightfully, in the present economic model – see as the most profitable thing to do: bet against, and ultimately bring down, the very system that has "saved" them. This is how perverted the entire scheme has become. The money taken from you by your "leaders" will be, and already is, used to bring you to your knees.

The €100 billion for Spain agreed on last weekend evaporated in two days. 18 Spanish banks were downgraded this week, and Spain's 10 year bonds are at 6.69% as we speak, reflecting, among other things, that the Spanish government, re: – future – population, is on the hook for that €100 billion. 6.69% is close enough to the 7% threshold that it effectively means Spain has no access to the markets. In the same way, Italy's 10-year 6.20% is a big red alarm flag, and Italy today paid 3.79% for €6.5 billion in 1-year debt, up from 2.34% last month, a 62% raise.

Moreover, the €100 billion for Spain will by default have to be the model for other bailouts. New lines have been drawn in the sand, and Greece, after the June 17 election, Portugal, and soon Italy, will not accept different, stricter, terms than Spain has gotten.

Not that any of it truly matters; it all just prolongs the agony. It does so, however, at a very steep price for the woman in the street, and even more so for her children. Raphael Minder at the New York Times:

Bailout in Spain Leaves Taxpayers Liable for the Cost

"Unfortunately Spain didn't manage to reach one of its main goals in the negotiations, which was to have Europe bear part of the risk of rescuing the financial sector, without letting it fall instead directly onto the shoulders of the Spanish taxpayer," said Luis Garicano, a Spanish economist who teaches at the London of School Economics. "Ultimately, those who lent to our financial system were the banks and insurance companies of Northern Europe, which should bear the consequences of these decisions."

Patrick Allen at CNBC quotes Strategy Economics analyst Matthew Lynn, who has some insights, and lovely new words to go with them:

Crisis Path: 'Spanic,' 'Quitaly' and 'Fixit'

So how will the euro zone debt crisis finally resolve itself? One analyst believes it will happen after "Spanic" hits, then discussion will turn to "Quitaly" before Finland leaves — or "Fixit."

Strategy Economics analyst Matthew Lynn advanced the three terms in a research note on Wednesday, in which he maps out the path of the crisis going forward. "A fresh panic in Spain might be followed by rising demands for Italy to quit if it doesn't get the same terms its Mediterranean neighbor has been offered, followed by a Finnish departure from the single currency that might finally bring the whole saga to a climax," he said. [..]

"Nothing has really been done to make sure that Spain is on the path to recovery," he said. "If the rescue falls apart, however, and Spain has to come back for another package, then there will be a massive run on its financial system." [..]

"Italy has to stump up around 22% of the Spanish rescue — borrowing money at 6% to give to its neighbors at 3%. That isn’t going to go down well," he added. "Inside Italy, pressure is inevitably going to grow for it to get the same terms — and if it doesn’t it will threaten to quit the single currency, with all the chaos that could bring about."

Lynn believes things will finally come to a head when one country decides enough is enough, and that country could be Finland. "It doesn’t particularly have to worry about the impact on the EU, in the way that Germany would if it opted out," he said. "If a country such as that leaves, it is effectively game over, but no one can really say that of a tiny place such as Finland."

We've read about limiting ATM withdrawals, border patrols and capital controls, in reports leaking from the EU. These measures could happen sooner than we'd like to believe (if only because they were leaked). In fact, it looks inevitable. The leaks imply that it will be Greece only, if the June 17 votes go the "wrong way" (for the "leaders", that is), but the amounts of euros bleeding out of Spain are already so large that they very directly endanger the survival of the very banks that have just been bailed out (or promised a bailout, to be more precise).

They're going to do something, and they'll do it when it's least expected.

Meanwhile, here's one more time what should be done, and should have been done all along, and in all likelihood won't be done until it's truly too late for you and your offspring. And don't think this is a European issue; in fact, Europe just copies American examples. Business Insider's Editor-in-Chief Henry Blodget explains it, like I have so often, and this time in more detail:

Hey, Europe, Here's The Right Way To Bail Out Banks…

[..] In fact, the U.S. started this string of bad bank bailouts–making a mistake that the country is still suffering from. And now Europe is following our lead.

The most annoying thing about this is that bank bailouts can work–and they can be done without costing taxpayers hundreds of billions of dollars or rewarding executives and investors for making bad decisions. They just have to be done the right way.

What's the right way? 7 steps:

• Seize the bank

• Fire management

• Write down the value of the bad loans to the amount they are actually worth

• Zero out the bank's equity (shareholders lose everything)

• Apportion the losses to the bank's subordinated debtholders (they lose something)

• Inject new capital in the form of senior debt and new equity

• Refloat the bank (by selling all or part of it).

In a restructuring like this, the bank doesn't stop operating–so the economy isn't screwed.

Meanwhile, the idiots who loaned the bank money and bought the bank's stock take the losses they deserve. And the bank is then immediately rendered rock-solid again, ready to make new loans to companies and countries that deserve it. (And, hopefully, the remaining loan officers are chastened by their prior stupidity and are more prudent next time.)

It doesn't matter how big the bank is–you can do this with any size bank. And, if necessary, you can do it with lots of banks at the same time. You just need an entity–like the US government or ECB–that has the power to seize and restructure banks before they actually go bankrupt and that can write the massive checks necessary to recapitalize the banks.

That's the right way to bail out banks. And that's the only way to do it without rewarding stupid, reckless lending and failing to address the root of the problem.

The root of the problem for Spanish banks, as it was for US and Irish banks, is stupid real-estate loans. And the Spain bailout, as currently described, will not force the banks to write down the value of those stupid loans. Rather, it will just give the banks enough money to "extend and pretend" and ignore or deny the fact that the loans have gone bad. But the banks will know the loans have gone bad. So they'll hoard their cash and not make new loans for fear that the old, bad loans will kill them in the end.

Spain's banks are broke.

They're broke because they made lots of stupid loans.

When anyone in the real world makes a stupid loan, they lose their money.

The idiots who loaned money to Spanish banks to make stupid loans deserve to lose their money.

The idiots at the Spanish banks who made the stupid loans deserve to lose their jobs.

And the rest of Spain should not have to suffer the consequences.

The problem, the reason why this doesn't happen, of course is obvious: the idiots run the asylum. Which makes them look and feel as if they're not the idiots at all. And perhaps they're right. Perhaps the rest of us are the idiots, for letting them get away with it.

There's nothing new about the right way to restructure a bankrupt company; it's been done a million times. But it's done not this time, not in Europe and not in the US. As a result, the whole banking system is now a $1 quadrillion zombie system, held up by zombie money that is injected into it in our name, no matter that if we don't have it. And our grandchildren will be born with a million dollars or so each in debt right from the get-go. And we’ll tell them we love them, and believe ourselves when we say it….

All of which is why maybe we should look forward to a Syriza victory in the Greek elections, or to Finland leaving the Eurozone. Just so the idiot emperors and the idiot clothes they don't wear are revealed as the zombies they are.

What happens to date helps a happy lucky few pay off their gambling debts, and devastates the rest of us. It's not working, and it will stop, so much is guaranteed. But if there’s ever been a time to say: the sooner the better, this is it. And if instead you want to wait for the Greeks or the Finns to save your asses, be my guest. But don't say you didn't know.

Let me quote myself:

The banks that are kept alive with the zombie money will use it to do what they will – rightfully, in the present economic model – see as the most profitable thing to do: bet against, and ultimately bring down, the very system that has "saved" them. This is how perverted the entire scheme has become. The money taken from you by your "leaders" will be, and already is, used to bring you to your knees.

It’s sort of like one of those autoimmune diseases, where the body attacks and kills itself, using its own defenses, isn't it, a kind of zombie disease? Then again, at least we seek to cure those …..

 

Home Forums Autoimmune Finance: The System Attacks Itself

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  • #8499

    Gordon Parks Seafood City June 1943 "A scene at the Fulton Fish Market, New York" The only thing that has been achieved -if we can even use
    [See the full post at: Autoimmune Finance: The System Attacks Itself]

    #3919
    steve from virginia
    Participant

    The banks that are kept alive with the zombie money …

    No solvent counterparty so the scheme is bankrupt from the get-go. It’s not really a scheme but an ironic expression of institutionalized cynicism.

    I keep waiting for the establishment to acknowledge that the entire modern idea is bankrupt … as sooner or later it must. We are children unwilling to accept that our childish craftiness has exhausted itself. No more toys, no more living outside of means.

    We have ‘getting back to means’ confronting ‘betting back to means’.

    … The smart-money insiders have suspected all along what is/has been underway.

    #3920
    davefairtex
    Participant

    Bailouts are just about hiding bank debt from view. I like that description. I think its dead on.

    I also agree that the bond market’s reaction to the latest bank bailout screams failure. Spanish bond yields have hit a new cycle high. Might a Blodget-style bank resolution solve the problem? From my look at Bankia’s balance sheet, the bill for just THAT bank would run perhaps 60 billion euros.

    If all the caja debt was made visible and Bankia accurately reflects the other caja’s conditions, my guess is the bill would be on the order of 300 billion euros. Likely less than half that could be borne by the bondholders, so that would leave a recapitalization bill to taxpayers of at least 150 billion euros.

    This assumes a retracement of about 50% on property values, along the lines of what happened in Ireland.

    Mass liquidation of the caja loans would likely crash the property market in Spain, increasing the losses. Spain would probably use a “bad bank” that would liquidate the bad bets in an orderly way – killing the property market there for years to come.

    My sense is, whenever the next intervention is announced, watch those Spanish bond yields. Ignore the news and happy talk and watch the numbers.

    https://www.marketwatch.com/investing/bond/10YR_ESP?countrycode=ES

    #3921
    YesMaybe
    Member

    Grexit, Spailout, Spanic, Quitaly… I’m getting sick of all these Euro portmanteaus, or rather, Euranteaus.

    Also a new blog post on the history of Spain’s problems:
    https://www.golemxiv.co.uk/2012/06/the-eurofiscal-corruption-contest-the-spanish-entry/

    #3923
    steve from virginia
    Participant

    One thing to keep in mind about ‘proper’ bank restructuring (Blodget): it assumes that the impaired assets represent a small fraction of total ledger assets.

    Most finance assets in 2012 are loans to leverage other loans which themselves are loans leveraged against still more loans. When first-order loans go bad the failure leverages across all the lower order loans.

    The outcome is rapidly expanding impairment across the entire asset-side of top-tier finance businesses. Instead of a modest percentage of bad loans equal to bank equity-plus-some-bondholders, all loans are bad or (rapidly) becoming so. Asset collapse crushes all liabilities including depositors.

    When depositors recognize their risk they ‘run’ which amplifies the impairment on the asset side.

    This is why establishment hesitates to restructure. Once begun, the danger is of cascading failures as marginal effect of (accurately) repricing impaired assets reprices all of them. Damned if you do restructure (damned if you don’t).

    Finance businesses must continually make new loans in order to finance existing loans, when the lending process slows or stops the lower order loans cannot be retired or serviced. As people are discovering, once on the debt treadmill there is no stepping off.

    Plus, industry is entirely debt dependent: no debt, no industry.

    #3924
    rlmrdl
    Participant

    Blodget has his baggage. I wouldn’t trust his view at an time.

    In any case, as shareholders and bondholders of these banks get wiped out or take a haircut, among them will be the pension funds that are already in the crap.

    Those of us who have had the good fortune not to put too much of our money into such funds wont be a hell of a lot better off, but at least we’ll have a shorter fall from where we think we are to where we WILL all be.

    There will be NO managed processed by which this is sorted out. Governments will not make the decisions in the end, nor will banks.

    The decisions will be made by ordinary people refusing, or being unable, to pay their debts, buy stuff they don’t need or obey TPTB and when the prisons are full comes Bastille day.

    In some cases, as in Greece or Portugal, they will retreat to family farms, islands and other holdings. In other cases, where those options don’t exist, they will suicide and/or revolt. Revolt as in burn buildings and start killing people.

    At some point the police will stop enforcing the laws and join the people.

    But don’t bet on any kumbayah outcome, hungry, sick and poor people with starving and sick kids will not sit around making good collective decisions.

    Right now the ride is making us nauseous, some of us are throwing up. But out there in the storm there is a mountain that we are flying into.

    #3925
    jal
    Participant

    Greek banks are bankrupt.
    Spanish banks are bankrupt.

    Let me say it another way
    they do not have any money.

    Let me say it another way.

    Who is supplying the money to the bankrupt banks to give to the depositors.
    HOW WILL THE the greek banks and Spanish banks that do not have any money, repay who ever is supplying the money for those deposits.

    Following the money trail means you are following the bankruptcy trail.

    Its a dark path.

    #3927
    Golden Oxen
    Participant

    Your seven step plan is a bulls eye sir. The only proper way to deal with that sewer of toxic debt and the imbeciles that created it. Might I add that the newly recapitalized banks be forbidden from all speculative activities in the bond, stock, and currency markets, as well as engaging in any derivative schemes whatsoever. Auditors should also be liable for accurate audits with clear prison and financial penalties for failure to live up to their fiduciary responsibilities. I realize it is hard to legislate integrity, but something has to be done to restore sanity and transparency.

    #3936

    Let us review the 7-Step Program for Banksters Anonymous:

    • Seize the bank
    Good start, but like seizing a rotten tomato, you don’t get anything but dirty hands.

    • Fire management
    Another Good Start, problem being that going down nearly to the level of Janitor, everybody in these organizations is corrupt. Loan Officers, Mortgage Brokers, Risk Analysts, Traders, the WORKS! Whose left to run an “honest” banking system here?

    • Write down the value of the bad loans to the amount they are actually worth
    ZERO!

    • Zero out the bank’s equity (shareholders lose everything)
    OK, now you have left of this Rotten Tomato a Bank with a loan book worth Zero, Equity of Zero, and nobody above the level of Janitor to staff it. You want to RECAPITALIZE this dogshit? What?!?!?

    • Apportion the losses to the bank’s subordinated debtholders (they lose something)
    Correction. They lose EVERYTHING. The Bank is rehypothecated up the wazoo. If they are lucky, the debtholders get a penny on the dollar here.

    • Inject new capital in the form of senior debt and new equity
    Whose New Debt are we “injecting” here? The Taxpayers? They should take on more Debt to “recapitalize” this dogshit? Who is going to buy the Equity? Wiped out Pension funds?

    • Refloat the bank (by selling all or part of it).
    WTF is going to BUY it? Another Bank? They ALL are broke! Da Goobermint? Broke ALSO! The Ferengi? Still Light Years away with the Freighters of Gold Pressed Latinum.

    Why do I think this process has about as much chance working at Rehabbing Banks as Rehabbing Lindsay Lohan?

    RE

    #3937
    Golden Oxen
    Participant

    @RE There are always folks ready to invest in an enterprise that has come clean. With losses accounted for, scoundrels punished, and a fresh eager new management team eager to instill confidence and show their worth investors will flock to it. Faith in the future is what investing is all about.

    #3944
    william
    Participant

    love the title – its the right perspective. Its the autoimmune disease stage.

    Good so everything is going as planned. Wondering what happens next though.

    When it becomes evident that bailouts lose credibility how will the system try next to force people to continue with the system? What is the next stage of fix one does when even reissuing a new currency loses credibility?

    #3950
    Alexander Ac
    Member

    Ok, now we have this: Oil price could plunge to $50, says Credit Suisse

    what will happen to Bob Hirsch’s tar sands investment? 🙂

    Alex

    #3957
    kito
    Participant

    no ashvin, you are too generous. inject capital? ha! refloat the bank? ha! the banks need to go under. period. protect the depositers. have the govt protect ONLY the depositers and NOT A DROP MORE. let the wildfire clear the underbrush. set an example that NEVER AGAIN will any portion of any bank be saved. let the bankruptcy courts deal with their mess. let the private, FREE MARKET, bid for scraps. its not the governments job to fire management. the market will take care of management. LET THE SYSTEM WORK THE WAY IT WAS INTENDED.

    #3962
    jal
    Participant

    Here is a point of view that should be added to the pot of soup.

    Highrev @ M.T.

    Since I’m a nice guy, and since I like you all, I’m going to try things from another angle by dumbing this down.

    What would you be saying about Spain if there had been no real estate bubble? Does it get any clearer with that?

    Well, when you look at the base population homeowner statistics, it looks like there was no bubble, doesn’t it? DON’T PROJECT!!! The Spanish real estate bubble was nothing like the U.S. real estate bubble. It wasn’t broad based! There was no Home ATM mentality! The liabilities, or toxic assets if you like, were in, and stayed in, the hands of a relatively few speculators (percentage wise). Do you dare take off the blinders and look more closely at how many of those speculators aren’t even Spanish?

    Is than understandable?

    Don’t bring out the unemployment rate on me now. What’s the REAL unemployment rate in the States? Compare apples with apples. The unemployment rate reported in Spain is the real unemployment rate. Benefits keep getting extended and people don’t roll off. And then if I asked another “if there were” question like if there were no illegal migrants on the dole? How many illegal migrants were allowed invited to enter Spain during the past 7 years of Socialist idiocy? If they weren’t here? If they were deported? (Don’t worry, they’re not going to be deported. They’re what is going to constitute a huge, cheap labor pool that’s not only going to be one of the pillars of Spain’s competitive advantage, but also what’s going to ultimately kill the unions. Once again, the Socialist hand backfires.)

    On top of that, on top of reality (that I hope has been made a little clearer anyway with that mental exercise), I’ve said it before, but I’m not sure if I’ve said it here: the current government is implementing Reaganomics. Yep, you heard me right. Study what they’re doing, then google Reaganomics, and then try to tell me they’re not.

    From his point of view, a few rich money managers/bankers made bad club med investments and want to make Spain pay the price.

    #3963
    Doubled
    Participant

    The main problem with “seizeing” the banks – “Derivatives”

    There are hundreds of Trillions of dollars in derivatives floating
    around. No one knows who the “counter parties” are, what
    type they are, or the terms. The one thing that most have in common
    is the counter parties have “first claim” on any and all assets!

    This would included deposits!! Talk about an international
    legal nightmare!! (MF Global comes to mind!)

    #3966
    steve from virginia
    Participant

    RE, if a bank’s assets are worthless, there is no bank, a restructuring cannot be done.

    At issue are (remaining) depositors, what to do with them?

    Since the insolvent banks tend to be ‘sinks’ or higher-order lenders which have large amounts of (derivative) bad loans on their books (and massive structured liabilities including those of depositors at other banks) it is very difficult to restructure them. See John Hussman’s “Freight Trains and Steep Curves”.

    At issue are local banks’ corresponding relationships with the giant money center banks. The funds in your bank account are re-deposited — swept overnight — into your bank’s account at the giant bank. This means your ‘real’ bank is effectively the giant bank not the local bank you actually use. Your account is a derivative liability of the giant bank.

    First of all, most commercial banks (except under extraordinary periods) are not insolvent. They are actually weakened by special treatment given to defunct corresponding banks.

    What must be done is separate smaller banks’ deposits from giant bank’s balance sheet.

    You have to start with the smaller banks if for no other reason than to find out how much the entire restructuring process is going to cost.

    Begin with partially solvent smaller banks that can be restructured by conventional means: Blodget’s approach is very basic ‘Restructuring 101’: converting debt-to-equity and recapitalization. As this is done the derived liabilities at the larger banks can be identified and dealt with. Liabilities can be ‘separated out’ from the giant banks (with an eye to either breaking up the giants or simply closing them down).

    The situation is the same in the Eurozone. The banks’ customers are other banks, which are in turn customers of still other banks in a gigantic circle jerk.

    Jumping in and busting banks down is no different from letting them simply crash … or bailing them out.

    As Margaret Hamilton so famously said, “These things must be done … delicately!”

    #3969
    ashvin
    Participant

    kito post=3586 wrote: no ashvin, you are too generous.

    Nope, not me.

    I think large-scale banking systems should be eliminated, and, more than that, they WILL be. No amount of debt restructurings and/or “capital” injections will retain confidence in them – they will be crushed by the ensuing spiral of debt deflation. The only question is how the populations and the central authorities of the rapidly growing police states will respond to all of this. No doubt the globalists will try to use it all to their advantage, but the complex dynamics and speed of collapse could overwhelm them.

    #3970
    Doubled
    Participant

    Steve,

    I am not sure if we are talking about the same thing.

    By derivatives I am talking about items like credit swaps,
    currency swaps, interest rate derivatives, commodities
    derivatives, plus combinations and other forms. The point
    I am trying to make is banks use deposits as collateral
    for various derivative “plays” (Jamie Diamond called it the
    Synthetic Market while testifying before the US Senate today).

    AFAIK the face value of the derivative “plays” for J. P. Morgan
    Chase was somewhere north of 90 trillion dollars, for Bank of
    America it was north of 50 trillion dollars, for CitiGroup it was
    north of 40 trillion dollars. It has been estimated the combined
    face value of derivative “plays” ( includes finance companies,
    brokerage houses, insurance companies, as well as banks) in
    America is around 300 trillion dollars!

    There will be no “Volker” rule, no “Dodd Frank” rules or any
    form of removing commercial accounts from the investment
    side of banks. The loss of that “collateral” would create the
    “mother” of all margin calls against banks and destroy trillions
    of dollars!!!

    #3974
    pipefit
    Participant

    Wouldn’t it be better if all the world’s major countries just did an etch-a-sketch? None of the sovereign debt is ever going to be repaid. We already did the 7 point plan back in the 1980’s with the savings and loan bust, but the system wasn’t overloaded, like it is now.

    We’re gonna get a depression anyway, from all the misallocated capital. Might as well lay the foundation for a decent recovery, eventually. that can’t happen in the USA with $15 trillion in debt and $100 trillion in unfunded liabilities, not to mention trillions more in individual and corporate debt, and hundreds of trillions in derivatives.

    Eventually, it is all going ‘poof’. Might as well be now.

    #3978
    pipefit
    Participant

    doubled said, “It has been estimated the combined
    face value of derivative “plays” ( includes finance companies,
    brokerage houses, insurance companies, as well as banks) in
    America is around 300 trillion dollars!”

    The world’s GDP is about $65 Trillion, much of which is not for sale. I don’t know how much of that $65 trillion is collateral and callable, but I assume it is a small percentage of the total. So what does that $300 trillion represent?

    I can bet you a trillion, or 500 trillion that the Yankees will win the world series. The banks can bet $300 trillion that interest rates will fall. It’s all pretend money either way.

    #3983
    AndrewP
    Member

    The only solution for insolvent worthless banks is to zero them out and guarantee the deposits by direct money printing.

    #3986
    Doubled
    Participant

    Pipefit,

    “The banks can bet $300 trillion that interest rates will fall. It’s all pretend money either way.”

    Almost, but as Jamie Diamond knows, not quite. If you “bet”
    150 trillion dollars that interest rates will go up and 150 trillion dollars that interest rates will go down you have 300 trillion dollars of f
    “face” value in derivatives but they are “covered”. The bettors try to make money on the differences in the premiums and by “tweaking” the contact terms. J. P. Morgan Chase had apparently some “uncovered” derivatives and lost 2 billion dollars of real money (so far) because they were on the “wrong” side of the bet.

    If the world total face value of derivatives is a quadrillion dollars and at any given moment 1% to 2% are “uncovered” that means between 10 and 20 trillion dollars of derivatives
    are “exposed” at any given time. The main problem is exactly which ones are “uncovered” at any given time is always changing. Know one knows who is “twisting in the wind”. Not even the CEO, as Jamie Diamond found out.

    “So what does that $300 trillion represent?”
    Leveraged bets! It has been estimated that MF Global leveraged the futures accounts under its control at a 100 to 1 ratio and used them as collateral to make CDS bets on sovereign debt bonds in Europe. Apparently they were not covered and the resulting “margin call” wiped them out. That was real money
    (ask the owners of the futures accounts that had them “scooped up” and liquidated by the counter parties in a matter of minutes!).

    #3991
    pipefit
    Participant

    If JPM lost $2 billion (or $20 billion) then someone else ‘won’ the same amount. But you never hear of any big winners. 1% $300 trillion is $3 trillion. 1/10 of that is $300 billion.

    What are you saying? There aren’t ever any big winners? If there were, surely we would have heard about it by now.

    What if you ‘won’ $300 billion? Where would you spend it? Anything other than US treasuries, and you would be pushing the price up dramatically against yourself just trying to buy.

    Perhaps I don’t fully understand this, but if you can’t spend it, is it really money?

    #3994
    Doubled
    Participant

    Pipefit,

    Don’t confuse money with currency. They are two different things. Money, also known as “tier two assets” is made up of mainly electronic digits that represent deposits, stock, bonds, contracts, pension accounts, ect… As long as the margin calls and bets do not envolve your personal accounts it makes no difference what the details are. But all of everyones accounts appear to be “in play” and can be wiped out
    if the wrong bet is made or a series of bad events occur (Black Swan!!). There is no safe place for money except in currency or “hard assets”. That is the main point TAE is making!!!

    #3998
    peebee
    Member

    “…will one day forcibly be forced out into the daylight anyway, and kill the banks that hold it. “

    If it’s not being forced into the daylight now, why will it be in the future and who will be doing the ‘forcing’ if it does? Can’t we just continue kicking the can until we can’t anymore at which point noone will have the luxury, due to massive system collapse, of caring about debt and who holds it.

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