The Japanese Financial System Is Beginning To Spin Wildly Out Of Control (and why this is important)

[Prodigal Son]

Posted by mgray (here)
But thankfully no cicadas.

Yep...its so nice and peaceful without them. Besides, I think I would have to starve before I could eat one of those

I do feel sorry for the Cicada Killers though... I just love those guys with their war paint

[ThePythonicCow]

I have not read it yet, but I suspect that Antifragile: Things That Gain from Disorder by Nassim Nicholas Taleb also speaks to the issue of how the global derivatives markets effects the robustness/fragility of the world's financial/monetary system. I'll wager that Taleb (a former derivatives trader) concludes that these derivatives increase the risk of a major failure.

[donk]

But I'm no professional, and I'm covering all my bets. I not only could be wrong, I probably am wrong, based on my past record.

I know how you feel. You can make reasonable conclusions based on available evidence, and instead of what can logically happen--a loop is introduced, a rule is changed, scandals, "rogue traders", it's almost comical. I've learned to just sit back and take it all in....it's interesting to say the least.

Remember fat fingers? The Dow dropping 150 on fake tweets (last month)? Gotta laugh to keep from crying...you can't make this **** up (no one would believe you). Anyone that still believes there's some kind of science or even logic and reason to markets consider this:

Stock market "circuit breaker"

I gave up studying and researching deeply when my company was one of the first ones that ever trading was stopped for under these "rules", which happened several more times before we got eaten by a bigger bank. Read that article and say "free market" with a straight face. And don't feel bad not being able to figure out what part of this fantasy "they" will be bringing to our reality next.

God bless us, everyone....

[mgray]

Posted by Paul (here)

Posted by mgray (here)
While some estimate the the derivative market is a $67 trillion debt bomb, it is in reality nothing more than a hedge market with zero-sum losses. If you net out all the exposure, it would amount to very little profit, because the parties are for the most part on both sides of the trade with very little nominal exposure to losses. Yes the market exposure number seems huge, but net/net not a big thing.

Assuming you can net out the losses assumes that there is not significant counter party risk, and that all major players are honestly "playing the game" by the "rules".

If a few of the big players intended to use the derivative market to initiate a controlled demolition of the current monetary/financial system, they could. Ask Lehman Brothers or Bear Stearns what happens when JP Morgan and/or Goldman Sachs decides your time is up.

I presume that a few such big players so intend.

The failure of Bear and Lehman had nothing to do with derivative exposure and everything to do with liquidity being denied. A very big difference.
Liquidity is mother's milk on Wall Street and that's why the Fed is injecting $4B a day into the market. There is no one else able to provide the needed grease to oil the wheels.
I do not want to defend this action, but when people lump ten different market drivers into one pile and say TPTB are setting up the market for collapse, its just not how the markets operate, but does makes for great fear porn.

[giovonni]

don't know if its been posted yet ... but will share it here ...

Feds raid Liberty Reserve and indict founders on money laundering charges… is Bitcoin next ?

If there’s one thing monopolists hate, it’s competition. That’s probably why the U.S. government shut down Liberty Reserve yesterday, charging seven men with laundering $6 billion for over one million clients. Calling Liberty Reserve a “bank of choice for criminals,” the feds won’t be satisfied until they destroy every currency that competes with the U.S. dollar...

read more - http://www.infowars.com/feds-raid-li...-bitcoin-next/

[bruno dante]

The interest rate is still below 1%, isn't it?

Like everyone else here, I'm very concerned. Not panicking yet, though.

[donk]

Bruno...I wish 1% of the people understood the implications of that. Or if 1% of the finance industry were incapable of the denial required to be OK with it.

[bruno dante]

Ha! Me too Donk! This is the way I see it...

The long term interest rates are still less than 1%. To me, anyway, the combination of slightly rising interest rates and rising stock prices are cause for optimism, not worries about Japan's solvency.

I know there was a small sell off of Japanese stocks last week, but stocks are still up from last year.

I won't pretend to know the details of abenomics, but at least the Japanese are doing *something*...which is more than I can say for the western economic defeatism that is so prevalent at the moment.

[donk]

Defeatism if you mean people are starting lose faith in the faith-based system we've come to depend on for....everything. Life?

Japan seems to be more reality-based at the moment, but I don't have much faith this whole thing (on a global scale) is completely engineered and intertwined.

All I know is that reading zero-hedge for a week will give you infinitely more actual information than I received in my 4.5 years of "study" in University...

[ThePythonicCow]

Posted by mgray (here)
The failure of Bear and Lehman had nothing to do with derivative exposure and everything to do with liquidity being denied. A very big difference.

I did not intend to imply that derivatives were the cause of the demise of Bear and Lehman.

I meant that when some sufficiently larger entity decides it is time for you to go, you go, and the failure of a counter party to honor a derivative could be one of the "financial weapons of mass destruction" that takes you down ("you" being some big financial institution with critical exposure to derivatives.)

Derivatives are part of the liquidity structure of the current major players - if forex or bond rates shift substantially, they are counting on derivatives as "insurance" to keep their overall financial position viable.

If forex or bond rates shift, and the wrong derivatives fall through at the wrong time ... oopsie!

[KiwiElf]

Interesting stuff... Fulford has also stated this. Many years ago, someone once said, if either Japan or Germany's economy crashed, then the whole global financial system will go with it.

[Kimberley]

Posted by bruno dante (here)
The interest rate is still below 1%, isn't it?

Like everyone else here, I'm very concerned. Not panicking yet, though.

My Savings and checking account interest is .02 % and I have a money market account at the same interest rate... nothing is the rate... I remember when I was a kid with my first savings account in the early 70's to have about 6% interest rate...I made a few dollars every month.

Not now and not sure what to do with the savings I have....I have a good amount of physical silver and gold coins buried in my yard... and some real estate investments... although still have dollars in the bank that I do not want to have in the bank...

Do any of you have suggestions of what to do with the substantial virtual dollars I have in the bank?...collecting only .02% interest?

Much love and thank you for your suggestions...!!!

[gripreaper]

Posted by Kimberley (here)
Do any of you have suggestions of what to do with the substantial virtual dollars I have in the bank?...collecting only .02% interest?

Yes, I have a suggestion. Send it to me.

[PurpleLama]

kim, start collecting tools and heirloom seeds.

[gripreaper]

How the global Fed Keynesian fiat debt system works is highlighted here in this post:

https://projectavalon.net/forum4/show...745#post679745

So, in order for this system to sustain itself, it requires new debt to enter commerce exponentially, and the velocity of it's movement to maintain a certain quickening trajectory, to avoid implosion. Ask anyone who experienced Weimar at the beginning of the last century, or anyone who lived through the 30's in the USA.

There is rapid expansion of the money supply as debt, or there is contraction. Right now, we have contraction. The bonds issued, and the new fed debt IS NOT entering commerce, but is going into the Wall Street crooks hands to take down to the derivatives casino and piss it away and create more leverage, and to backstop this toxic crap so that the market does not move more than 2%. (think MF Global). When the spigot is turned off (and it is and will) the five top mega super rich globalist banks will call in their loans and reset the global system, taking everyone and everything that is in paper with it in it's wake.

The only alternative, is to tell these elite to stick it where the sun don't shine and default on the debt, create your own currency, and go back to work. Heck, California is equivalent to Japan's economy in scale, and could just start their own state currency just like North Dakota has, and be just fine. How come North Dakota has no debt, the lowest unemployment in the country, and a robust economy? Because they operate "partially" outside the clutches of the global currency.

Why is North Korea, Venezuela, Iran and a few other countries under such attack from the globalist military industrial complex? Why was Libya taken out? Because they wont bow to the globalist banksters and play their game their way. That's the way out.

There is no debt, no one owes anything to these globalist elite banksters, and it's time we tell them to go to hell, and just ship them off planet and take back our sovereignty. Those who want to remain slaves can go with them.

Source: https://youtube.com/watch?v=SHhrZgojY1Q

The change it HAD to come, we knew it all along. Meet the NEW boss, same as the old boss.... I hope we don't get fooled again!

[edit to add] Good on ya Fred, walkin the walk, not just talkin the talk. I always knew I liked you and can't wait to sit around the campfire one day and tip a cold one with you and talk about how we want the new future to look.

[T Smith]

Posted by Paul (here)

Posted by mgray (here)
I'm a professional at this, I write and edit market and economic stories for a living and while its easy to set out a crash scenario as Bill cites in the clip, its far too simplistic to happen that way.
When the Federal Reserve has 30-35% of the US Treasury issuance on its books, with the plan to run them off to maturity, there is little room for the crash.
The same could be said for European and Asian debt markets.
As I stated here over a year ago this global depression does not end well, but I do not believe it ends like Cyprus. That card was played and it did not work. I said 2013 would be a Jubilee Year in the biblical sense. A 50% haircut on all debt globally. Pushing the reset button in order for the system to reboot.

My guess (I'm not a professional) is that there is a crash, but not quite yet.

I'm figuring that the derivative market has been setup, like the explosives in a controlled demolition, to take down select portions of the current global monetary/financial system.

I don't see our current predicament as just a cycle in the waxing and waning of global debt, but rather as an engineered transition from the current world monetary system based on a hundred plus quasi-independent national central banks and the US Petro-Dollar as the dominant world's reserve and trade settlement currency, to a more obviously centrally controlled system using some new reserve basis that appears to be based on "baskets" of commodities and gold.

Like most controlled demolitions, there is a long, boring period of preparation, removing the light construction materials and other easily detached stuff and setting in place the wiring and explosives, which is followed by a short and noisy period as the explosives detonate, and is then followed by a second long boring period of cleanup and rebuilding.

At some point, I do expect that some combination of debt and derivative failure will cause the financial/monetary collapse of major banks, Japan, Europe and then the US.

My guess is that they aren't ready to set off the financial explosives ... not quite yet. What we're seeing here is the wiring of Japan as part of the fireworks, when they happen.

But I'm no professional, and I'm covering all my bets. I not only could be wrong, I probably am wrong, based on my past record.

Your assessment is "professional" enough for me. I for one concur and think the odds are much better that you're right given the broader scope of all the facts and all the data points.

BTW, as a side rant: what does being a "professional" have to do with anything anyway? More often than not, this only means somebody has been duped to pay somebody else for some derivative of snake oil. If you're wrong, on the other hand, for laying out an insightful and much more accurate assessment of the broader picture, you're merely erring for free. I'll go with the ladder, thank you.

Ben Bernanke is a "professional" among professionals.. he is the top professional. Save for assuming the role of professional lier and con artist (which is possible, to his credit), he discredits the legitimacy of being a professional altogether... Here is a slight sample:

July 2005

INTERVIEWER: "Ben, there's been a lot of talk about a housing bubble, particularly, you know [inaudible] from all sorts of places. Can you give us your view as to whether or not there is a housing bubble out there?"

BERNANKE: "Well, unquestionably, housing prices are up quite a bit; I think it's important to note that fundamentals are also very strong. We've got a growing economy, jobs, incomes. We've got very low mortgage rates. We've got demographics supporting housing growth. We've got restricted supply in some places. So it's certainly understandable that prices would go up some. I don't know whether prices are exactly where they should be, but I think it's fair to say that much of what's happened is supported by the strength of the economy."

July 2005

INTERVIEWER: "Tell me, what is the worst-case scenario? Sir, we have so many economists coming on our air and saying, "Oh, this is a bubble, and it's going to burst, and this is going to be a real issue for the economy." Some say it could even cause a recession at some point. What is the worst-case scenario, if in fact we were to see prices come down substantially across the country?"

BERNANKE: "Well, I guess I don't buy your premise. [a recession is] a pretty unlikely possibility. We've never had a decline in house prices on a nationwide basis. So what I think is more likely is that house prices will slow, maybe stabilize: might slow consumption spending a bit. I don't think it's going to drive the economy too far from its full employment path, though."

November 2005

BERNANKE: "With respect to their safety, derivatives, for the most part, are traded among very sophisticated financial institutions and individuals who have considerable incentive to understand them and to use them properly."

Feb 2006

BERNANKE: "Housing markets are cooling a bit. Our expectation is that the decline in activity or the slowing in activity will be moderate, that house prices will probably continue to rise."

October 2006

BERNANKE: "..the typical U.S. worker will be considerably more productive several decades from now. Thus, one might argue that letting future generations bear the burden of population aging is appropriate, as they will likely be richer than we are even taking that burden into account."

February 2007

BERNANKE: "We expect moderate growth going forward...[and] there's a reasonable possibility that we'll see some strengthening in the economy sometime during the middle of the new year. Our assessment is that there's not much indication at this point that subprime mortgage issues have spread into the broader mortgage market, which still seems to be healthy. And the lending side of that still seems to be healthy."

"Despite the ongoing adjustments in the housing sector, overall economic prospects for households remain good. Household finances appear generally solid, and delinquency rates on most types of consumer loans and residential mortgages remain low."

March 2007

BERNANKE: "...the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained. In particular, mortgages to prime borrowers and fixed-rate mortgages to all classes of borrowers continue to perform well, with low rates of delinquency."

May 17, 2007

BERNANKE: "...we believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited, and we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system. The vast majority of mortgages, including even subprime mortgages, continue to perform well. Past gains in house prices have left most homeowners with significant amounts of home equity, and growth in jobs and incomes should help keep the financial obligations of most households manageable."

July 2007

BERNANKE: "Overall, the U.S. economy seems likely to expand at a moderate pace over the second half of 2007, with growth then strengthening a bit in 2008 to a rate close to the economy's underlying trend."

Jan. 10, 2008

BERNANKE: "The Federal Reserve is not currently forecasting a recession."

Jan. 18, 2008

(Two months before Fannie Mae and Freddie Mac collapsed and were nationalized) BERNANKE: "They will make it through the storm."

June 3, 2009

(When asked directly during a congressional hearing if the Federal Reserve would monetize U.S. government debt) BERNANKE: "The Federal Reserve will not monetize the debt."

June 9, 2008

BERNANKE: "The risk that the economy has entered a substantial downturn appears to have diminished over the past month or so."

July 20, 2008

(Six weeks prior to the FHFA in concert with the Department of the Treasury putting GSEs into conservatorship, citing concerns about their financial conditions, their ability to raise capital, to continue funding themselves, and thus entering into an agreement to provide the GSEs with cash sufficient to eliminate what deficits they might incur in exchange for ownership of the GSEs senior preferred stock): BERNANKE: "The GSEs are adequately capitalized. They are in no danger of failing."

Aug. 2, 2010

BERNANKE: "The financial crisis appears to be mostly behind us, and the economy seems to have stabilized and is expanding again."

And finally:

Dec. 5, 2010

BERNANKE: "I wish I'd been omniscient and seen the crisis coming."

[Flash]

I was listening (while talking with my daughter, not one ear listening) at the money program on TV (this happens once i a blue moon), and they were mentioning the risky situation in Japan, the interventions of the Japanese government and the domino effect if Japan fails. So, it is on TV, it must be true. (lol)

This means that all the ones in the know have already taken their precautions. And there is nothing left for us.

[T Smith]

Posted by donk (here)
Remember fat fingers? The Dow dropping 150 on fake tweets (last month)? Gotta laugh to keep from crying...you can't make this **** up (no one would believe you). Anyone that still believes there's some kind of science or even logic and reason to markets consider this:

Stock market "circuit breaker"

I gave up studying and researching deeply when my company was one of the first ones that ever trading was stopped for under these "rules", which happened several more times before we got eaten by a bigger bank. Read that article and say "free market" with a straight face. And don't feel bad not being able to figure out what part of this fantasy "they" will be bringing to our reality next.

God bless us, everyone....

This sort of thing is just one of the data points that shouldn't be discounted. Naked shorts, market manipulation, fraud, banking cartels, outright broad conspiracy, etc., all function like "dark matter" in the world of the mainstream analysis of these things. A hidden influence somehow accounts for at least half of the matter in the known universe and influences all the laws of physics as we know them, and yet conventional physics fails to acknowledge it.

[donk]

Dark matter is a great analogy! Naked shorting is more like a black hole...I went to find an old article I liked but ce across this:

http://www.deepcapture.com/the-globa...han-bin-laden/

[mgray]

Posted by T Smith (here)
BTW, as a side rant: what does being a "professional" have to do with anything anyway? More often than not, this only means somebody has been duped to pay somebody else for some derivative of snake oil. If you're wrong, on the other hand, for laying out an insightful and much more accurate assessment of the broader picture, you're merely erring for free. I'll go with the ladder, thank you.

As a business editor for a major New York newspaper I have been beating up Bernanke since he decided not to rescue Lehman. That move alone has caused much of the pain we are still feeling today.
5 years after the fact they are still unwinding Lehman, that's how integrated the firm was in the markets.
Anyway my definition of professional is I have a bigger megaphone and can get these people on the phone to question policies and direction.
I have questioned each "green shoots" statements and QE move.
And most importantly I get paid to write and edit these stories, so I guess that's why I used the slightly inappropriate term of professional. I humbly apologize for that if it came off badly.