mercoledì 2 maggio 2012
IMF: full blown panic
Jailbird, the plane used in Con Air later operating as a freighter crashed on August 2, 2010 in Alaska and three crew members perished.
There was a line from the movie Con Air, where John Malkovich says “Make a move and the bunny gets it.” That’s why it is so important to understand context. It’s not so much that Malkovich’s character Cyrus Grissom was threatening the life of a stuffed bunny rabbit. It’s the context of having the only gun on an airplane. You kill the bunny, you kill everybody including yourself.
The concept of “Nobody move or I’ll kill myself” is one that is similar to a hostage-taking situation but it has one key distinction. First of all, are other people going to die if the person blows themselves up, as in the case of a terrorist walking into a market in the Middle East with explosives strapped to their chest? Then again, if no one is within shrapnel receiving distance to the bomb, it’s just a regular suicide albeit much messier than say a drug overdose.
It’s a common comparison to say that what Hank Paulson did during the Lehman Brothers meltdown and the TARP $700 billion (that arguably rose to $7.77 trillion) was the equivalent of suicide banking. Basically the concept is “Give me what I want, or we blow up the banking system and everyone connected to it.” That’s suicide banking. Three-and-a-half years later, the landing is scheduled for that fateful fascist financial flight that was piloted by Secretary Paulson, air traffic controlled by President Bush and fueled by Congress.
Dave woke up wondering if this was the day, so instead of heading over to Radio Shack at five o’clock on the morning, he simply goes to Google and types in the following question. “Is Bruno Iksil trading JP Morgan credit defaul swaps?” Dave wasn’t expecting to get much of an answer. Dave was wrong. Seems like a bunch of folks had this idea ten days ago. The most telling fact seems to be a divergence within the credit defaul swap graphs of Goldman Sachs, Morgan Stanley and Bank of America. You can read about the idea here: http://uti.is/2012/04/could-bruno-iksils-100bn-bet-be-related-to-jp-morgans-own-cds/
Dave wasn’t really approaching his research from the same angle as these folks, but it sure helps to get a confirmation that there is a distinction between JPM and three of the other too big to fail institutions. My instincts were that rather than try to defend their actions as some type of violation of the Volcker Rule, the Jamie Dimon team was helping to usher in the Volcker Rule and even promoting a new and improved version of Glass-Steagall that has been referred to here on the blog as Glass-Jiabao in head-bowing homage to the new Occidental/Oriental paradigm.
What really got me thinking that I was on to something was when Chris Whalen went on CNBC a few days ago (link here:http://tradewithdave.com/?p=9905 ) and started talking about the “unintended consequences of the Volcker Rule.” Chris more than insinuated, he came right out and said that Paul Volcker failed to understand the market implications of his own rule. At that point, Dave was down right certain that he was on to something. What is it that Dave is onto? It’s simple – a planned demolition.
Dave’s going out on a limb here and he has no particular reason to do it and Dave’s going to issue a clear warning that coming out on the limb with Dave may lead to a long and rapidly accelerating fall with a sudden and painful impact at the bottom. In other words, do NOT trade with Dave. Talk to your advisor and if he works for any of the institutions mentioned so far in this post, you may want to keep two grains of salt handy; one for taking and the other for throwing over your shoulder because the devil is in the details and Dave’s not a detail guy.
Dave believes the fix is in. The split is coming and the divorce decree that is written into the living wills of the banks is going to be imposed soon.
I. The currency is going to be divorced. One half is going to be for the double coincidence of wants and the other half for wealth accumulation. There’s dozens of posts on this site on this topic. The coin currency is going to be turned into an electronic form of media and it’s going to be used to satisfy the double coincidence of wants while the currency side is going to be the half that is used for the accumulation of wealth. Suffice it to say, you’ll be issued a card. Everyone will be issued a card. This will require new legal tender laws and these laws will be implemented as part of an emergency orders such as the
II. The TBTF banks are going to be divorced. The side of the banks that deals in the double coincidence of wants (think tellers, ATM machines, car loans, etc.) are going to be separated from the invesment/wealth side of the banks. It’s like the Volcker Rule and it’s like Glass-Steagall, but the line is not going to be drawn where folks expect it to be drawn and this is why JP Morgan is trading its own CDS. This is why it’s building up its treasury rather than its investment bankign side. It’s the one bank that knows the coordinates for the crash. The big banks, from a consumer perspective, will be nothing more than big global information networks which will co-exist with socialist model credit unions in your community. You won’t need an FDIC anymore because the bank networks and credit unions will no longer be based on a fractional reserve model. The money will actually be there and what isn’t (say the car loans) will be provided for in a shared reserves model amongst the member institutions. The asset side of the big banks balance sheets (JP Morgan partially excluded) will be rolled up into the new and improved Fed hedge fund.
III. The ratio between gold, silver and platinum is going to be divorced. When the U. S. Mint stamps a silver eagle it say $1 on it. When it stamps a gold eagle it says $50 on it. When it stamps a platinum eagle it says $100 on the face. This is going to be reset and it is going to happen through a coordinated effort of the Federal Reserve and will involve a revaluation of the books of the Fed which currently carries gold at $42 per ounce. The Fed’s gold will be shipped out to its rightful owners in exchange for the implementation of a new global pricing standard (aka the Occidental/Oriental version of Bretton Woods). Keep in mind that the NY Fed is a private enterprise, so moving its gold around is simply a private accounting entry among private investors.
IV. The fourth corner in this squaring up of the global financial markets will be the mortgage jubilee. Every American family will get some outrageous amount of money (their share of the hedge fund). Think of it as Cash for Clunkers for underwater mortgageholders where if you have a mortgage or a student loan, the money will have to be applied to the mortgage. Fannie Mae, Freddie Mac and the bank’s portfolio of mortgage backed securities will be turned over to the American people in a debt-for-equity swap for the ages.
How many people have to go on the financial networks and say “We’re setting ourselves up for another systemic collapse” before you’re going to be convinced that “We’re setting ourselves up for another systemic collapse”? The difference this time around is that the surveillance functions intraday rather than interday. This time around there won’t be any memos from JP Morgan to Barclays’ saying their transfers are being DK’d in the middle of the day. That’s old school. The Depository Trust and Clearing Corporation is the one that is reporting on the JP Morgan credit default swaps and its the organization that controls all the marbles, including your stock accounts held in the street name of Cede & Co.
Reuters wrote about the Iksil trades being JP Morgan betting against itself a week ago. Dave must have been sleeping: http://blogs.reuters.com/felix-salmon/2012/04/09/counterparties-should-we-fear-voldemort/
Shelia Bair wrote about the need for a separate Volcker Rule for banks back in December:http://finance.fortune.cnn.com/2011/12/09/volcker-rule-sheila-bair/?utm_source=Daily+Digest&utm_campaign=f1d8a40f47-DD_12_12_1112_12_2011&utm_medium=email
To launch the beginning of the end, the CFTC has their meeting scheduled for today to discuss the “final rule” not to be confused with making the “final rule” as required by law. The agenda calls for further definition of “Swap Dealer”, “Security-Based Swap Dealer”, “Major Swap Participant” and “Eligible Conract Participant.” Watch the presentation live: http://www.onlinevideoservice.com/clients/cftc/video.htm?eventid=cftclive
What is all this in essence. It’s the end of Wall Street as we know it. Simply replaced by BlackRock’s proprietary trading platform:
What is it exactly that Dave suggests will be crashing. Well, it won’t be the stock market because it serves as an alternative to the continued debasement of the dollar through continued quantitative easing. In other words, why hold dollars when you can hold stocks in multi-nationals that don’t depreciate as quickly. Will corporations cease operations and will the commercial paper market dry up? Not hardly. Corporations are flush with cash and rates continue to be very low. There’s no shortage of cash sloshing around an no chance of dying of thirst.
Will the bond market crash? Well if it does you certainly won’t be able to see it on your Bloomberg terminal because BlackRock’s bond black box won’t be available for viewing by the public. It will be the proverbial tree falling in the woods with no one left to hear it but Larry Fink. To say the bond market will crash would be the equivalent of saying companies and countries will quit borrowing money… not likely.
Then what is it that’s going to crash? Your sovereignty and that of your country. Add to that the too big to fail institutions which will lose their sovereignty too. So how will it be? You’ll hardly feel a thing. Which way will gold move? That depends. Will the historical ratio for gold be reset to silver or silver reset to gold? You see the firewalls are in place and are sufficiently strong to let the risk half of the TBTF banks to be burned up in the roll-up.
For anyone who believes that Dave may be exaggerating, take a look at page 17 of the International Monetary Fund’s World Economic Outlook just released. Under the paragraph marked “Tail Risk” you will find the words “full blown panic.”