Zero hour: The day the dollar stood still

[Redstar Kachina]

..........

[mgray]

Not much there, there in the pdf document. Rising yields/lower bond prices will not create panic. Those actions are hedged in the derivatives cited.

US 10yr treasuries off 13% since Taper talk in May.
Anemic 1% US GDP avg. growth over last 6 months takes taper off the table.

I am more concerned over China banking woes in the form of liquidity squeeze coming to a head in the next few days.

[ThePythonicCow]

Posted by toddhathaway (here)
Updates will only be posted in Adobe Connect via the link found online at http://pscinet.us ...

Has anyone else discovered this "link found online at http://pscinet.us" ?

When I go to http://pscinet.us, what I see is the following:

I don't see any documents or links to Adobe Connect there.

===

Aha ! Update: that http://bit.ly/14frjIY link goes to Adobe Connect, and then one can login as Guest (just supply any random username, it seems.)

[ThePythonicCow]

Posted by toddhathaway (here)
... The ramp-up to a currency devaluation scenario ...

From what I can tell, the currency devaluation scenario that the zerohour.pdf paper that Todd provides us is as accurate a forecast as one can expect to see at this point.

As soon as key interest rates, such as for short term inter-bank lending rates and on the ten year US Treasury (TNX) rise noticeably, then the global derivative market will blow up, banks (initially major banks, but within hours, all banks) will be unable to conduct ordinary business for want of cash or ability to transfer funds between banks, and the global financial markets (including one's local ATM machine and bank office, wherever one is on this planet) will cease functioning.

The only detail I noticed in Todd's paper that I suspect is incorrect is the estimation of when this will occur, based on declining official unemployment statistics in the US. As anyone who might have followed John Williams' work at ShadowStats.com is aware, official US statistics for pretty much anything, certainly including unemployment, are bogus.

The prerequisite triggering conditions for blowing up the world's financial markets no doubt exist; but like the timing of a major bank robbery by a well organized gang, are not visible to the bank or its customers ahead of time. The bastards will blow it up when they're good and ready to blow it up. My current best guess is sometime in 2014, but if it were later this afternoon, or late in the year 2017, I wouldn't be particularly surprised. The US unemployment stats are just a bit of the window dressing to keep us peons amused, until the next major event.

The best explanation I've heard so far for what the sequence of events might be is from Lindsey Williams (if you can tolerate his style of presenting) such as Jackovesk posted yesterday: Lindsey Williams - Pending 'Collapse' More Insider Globalist Plans Revealed (2013.06.24)..!.

[ThePythonicCow]

Posted by mgray (here)
Not much there, there in the pdf document. Rising yields/lower bond prices will not create panic. Those actions are hedged in the derivatives cited.

Those derivatives are why the "panic" (freezing of global financial markets, right down to your local bank branch) will occur, in my view .

What happened to the Industrial and Commercial Bank of China (ICBC) a few days ago was apparently not "just a computer glitch", but a lack of liquidity requiring China’s central bank to "fix". From what I can tell (I could easily be wrong here) the ICBC's freezing of operations was preceded by a rise in interbank lending rates, which was preceded by a rise in the US ten year Treasury rates and by talk by various figures such as Bernanke of tapering off US quantitative easing. Given the essential and critical foundation of derivatives on the interest rates used to discount their value, and the massive dependency of the systemically critical banks on derivatives to maintain the appearance of a solvency, the connection between rising core interest rates and the insolvency of some too big to fail banks seems self evident. That's what leads directly to rising interbank lending rates (no one trusts the other party anymore), which leads directly in turn to the closing of bank operations due to illiquidity.

The derivatives enable smaller imbalances to be compensated for, but also by the same mechanism enable larger imbalances to build up, unresolved. They become like a huge brick and mortar building, able to withstand the weather, termites, and fires that would take down a lessor building, but a death trap in a major earthquake. That's by design, from what I can tell.

[norman]

Posted by Paul (here)

...The derivatives enable smaller imbalances to be compensated for, but also by the same mechanism enable larger imbalances to build up, unresolved. They become like a huge brick and mortar building, able to withstand the weather, termites, and fires that would take down a lessor building, but a death trap in a major earthquake. That's by design, from what I can tell........

Very well said.

[Vitalux]

things change

[mgray]

China's liquidity squeeze is a product of it's money market fund maturity fund coming due at quarter's end 6-30-13. Liquidity or lack thereof will be the down fault or trigger of collapse.
This voodoo on derivatives being the monster under the bed is wrong. Because it has a large number attached to it really means very little. Most contracts are zero-sum and amount to no money changing hands once executed.
Remember Lehman Bros. not being able to get liquidity from the Fed brought on this Great Recession. The derivatives, well they are still unwinding those 5 years after.

[gripreaper]

Derivatives can never be unwound. How do you unwind a 1.4 quadrillion pile of junk backed by nothing?

Debt can never be paid off. Debt requires more debt to service it, thus creating more debt. If you slow down the amount of debt instruments (capital) entering the market, you get too few dollars chasing too much debt.

Banks who then slow down liquidity (the velocity of debt instruments) and stop new debt instruments from entering commerce, exasperate the problem.

Keynesian economics is a failed experiment and a failed premise. There is a point where more debt instruments entering commerce do not increase the amount of GDP to help chase the debt, but actually create a situation where the increased debt puts pressure on the current obligations to fail.

We have "jumped the shark" and "crossed the Rubicon" into this territory of imminent collapse. The only unanswered question is when.

[Nanoo Nanoo]

i love Dr Evil .. throw me a frikkin bone ! lol


if i may ... the last shot from fight club rings as a good way to get it all back to even.


but i dont like the idea of so much dust to contend with.

hmm


N

[ThePythonicCow]

Posted by mgray (here)
China's liquidity squeeze is a product of it's money market fund maturity fund coming due at quarter's end 6-30-13. Liquidity or lack thereof will be the down fault or trigger of collapse.
This voodoo on derivatives being the monster under the bed is wrong. Because it has a large number attached to it really means very little. Most contracts are zero-sum and amount to no money changing hands once executed.
Remember Lehman Bros. not being able to get liquidity from the Fed brought on this Great Recession. The derivatives, well they are still unwinding those 5 years after.

So what happens to the "MGray Hedge Fund", if say:

• They sold tons of interest rate swaps to municipalities who were worried that interest rates would rise on their debt. (MGray is short higher rates.)
• They hedged that exposure to higher interest rates with derivatives bought from JPMorgan. (MGray is long higher rates.)

Net-net, MGray has no exposure to interest rates, right?

Then say interest rates finally do rise, and JPMorgan is supposed to pay MGray Hedge Fund on that derivative. Jamie Dimon gets a call Friday night saying "Boss - you've got a choice - stop payment to MGray on that derivative, or declare Chapter 11 bankruptcy." Dimon will surely say something like "f* MGray -- what else do they hold, and how can we make money by blowing them up?"

In other words, derivatives are a zero-sum game only so long as you assume that the counter party risk is zero. Just as soon as you put a desperate Dimon or Blankenfein on the other side of that contract ... the game changes.

[Selene]

Anyone reading this thread will greatly enjoy Michael Lewis's vastly entertaining - and wise - book "The Big Short: Inside the Doomsday Machine". It's an insider's look at how the Great Derivatives Debacle blew out Big Money, Goldman, Citibank et al when the US mortgage market collapsed. http://www.amazon.com/The-Big-Short-.../dp/0393338827 It's an object lesson.

It answers the critical question: Who knew?

Lewis is a wonderfully readable and insightful insider. He couches this vast tale in human terms, a story filled with wonderfully-seen character studies of the key players and snarkily insightful summaries of the key issues. Five stars from me (an MBA in Finance ex-commodities trader, anyway.)

Enjoy (if that's the word....),

Selene

[Redstar Kachina]

..........

[Oouthere]

There has not been a budget since Obama took office. So long as people continue to allow unprecedented growth in welfare systems, allow the energy industry to aggressively drain the disposable incoming from the economy, and people have in their heads that they have a right (without working) to free homes, food, and education we will never recover.

It's pretty simple, take personal responsibility and stop being leaches then capitalism will work fine. Most people are good and decent (but lazy by nature) so the poor and disabled would be handled at the local level by those earning the money. Socialism and communism have failed every time and now our capitalist system is being forced into socialism/communism so history shows there can only be one outcome.

Rich

[Dennis Leahy]

Todd, can you explain what you mean by these two:

Posted by toddhathaway (here)
...
* Gold/Silver COMEX market implosion (FY 2014)
* Gold is "delisted" by the banking system as a "zero risk" asset (FY 2014)
...

By "implosion", do you expect the "value" of these metals to drop? If yes, and if this timeline proceeds, will the only valuable asset be one you can eat or drink (food/water?) I am not trader-savvy, and don't know what "COMEX market implosion" really implies - maybe it is just the trading of metals futures or paper contracts for metals that you expect to 'implode', but not the value of the metals themselves?

The second of your two bullet points highlighted here is mysterious to me (again, I know nothing of the trading world), and can you explain what it means, as well as what it means to someone who has gold (I don't, but I am still curious.)

The fattest of the fat-cats on the planet can (evidently) take any commodity and play with the price/value, to their advantage, but it is difficult to understand the specifics of their (assumed) plans with 'precious metals' when we are led to believe that the ultra-rich have invested heavily in metals. So, do they drop the value only temporarily, knowing they will not have to "spend" any of their metal, and can ride out the storm they create (until it crushes the common man), knowing they will make the price/value higher, later?

Any insight would be appreciated...and though I addressed this to Todd, if others have insights into this, fell free to expound.

Dennis

[Oouthere]

Dennis, energy (i.e. petroleum, electricity, coal, etc) needs to be added also. Without energy you cannot have the other....

[Redstar Kachina]

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[Billy]

Hi Todd. I am very pleased that you have decided to continue to update us all here on Avalon. I see that you would prefer to update on this thread as you mentioned in the post on this thread.https://projectavalon.net/forum4/show...736#post717736

Can i make a suggestion. As well as adding updates on the Original post on this thread, (Then thread does not bump up) could you also update as a new post here. As this will bump the thread up. Then we can see that an update has been posted. This helps keep us all in the loop.

For your consideration.

Regards

Billy

[Redstar Kachina]

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[ThePythonicCow]

Posted by toddhathaway (here)
http://m.seekingalpha.com/article/1648072 - Congress, Not The Fed, Will Derail The Rally

This article pretty much sums it up - Congress will take the fall for the global economic implosion, as outlined in the post at the top of this thread:
https://projectavalon.net/forum4/show...483#post693483

Jim Willie, CB, in his latest Hat Trick Letter, calculates that Comdex will have run out of gold in its warehouse at the end of October.

Early November is shaping up to be a rip roaring time .