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The notion that consequence can be as easily managed as PR is the ultimate artifice and the ultimate delusion.

The consequences of the drip-drip-drip of moral decay is difficult to discern in day-to-day life. It’s easy to dismiss the ubiquity of artifice, PR, spin, corruption, racketeering, fraud, collusion and narrative manipulation (a.k.a. propaganda) as nothing more than human nature, but this dismissal of moral decay is nothing more than rationalizing the rot to protect insiders from the sobering reality that the entire system is unraveling and heading for its final reckoning: collapse.

We’ve become so accustomed to the excesses of marketing that we’ve lost the ability to recognize the difference between “science” that’s been carefully designed to reach a pre-planned conclusion and science that accepts the outcome, even if it harms well-funded interests.

The vast expanses of ignorance greatly aid this artifice. Even though high school physics, chemistry and biology are sufficient to tease apart the vast majority of rigged experiments, trials and studies, few Americans have the interest or fortitude to read Phase III trial results, etc. critically, and so the corporate media can trumpet bogus results without fear of exposure: all the statistical tricks and gimmicks are passed off as “science” to the distracted and gullible.

And if someone dares to examine the results critically, then those benefiting from the ignorance make the results “secret” until the year 2929. And that’s the entire game in a nutshell: maximizing private gain from artifice, PR, spin, corruption, racketeering, fraud, collusion and narrative manipulation, all masked by an putrid spew of virtue-signaling and PR.

…click on the above link to read the rest of the article…

Look Out Below: Why a Rug-Pull Flash Crash Makes Perfect Sense

November 13, 2021

Look Out Below: Why a Rug-Pull Flash Crash Makes Perfect Sense

It makes perfect financial sense to crash the market and no sense to reward the retail options marks by pushing it higher.

An extraordinary opportunity to scoop up mega-millions in profits has arisen, and grabbing all this free money makes perfect financial sense. Now the question is: will those who have the means to grab the dough have the guts to do so?

Here’s the opportunity: retail punters have gone wild for call options, churning $2.6 trillion in mostly short-term calls–bets on gains now, not later. This expansion of retail options exposure is unprecedented not just in its volume but in its concentration in short-term bets (options that expire in a few days) and in mega-cap tech companies that are commanding rich premiums for options.

Goldman Stunned By The Record $2.6 Trillion In Option Notional Traded Last Friday

The options market is like every other market only more so. The price of an option–a bet that a stock, ETF or index will go up or down before the option expires–is sensitive to the volatility of the underlying equity, the demand of other punters for options and the premium being demanded for time: the farther out the expiration date, the higher the cost of the option.

Recall that anyone with 100 shares of the underlying equity can write/originate an option. Each option controls 100 shares, so a call option that is listed at $1 costs the buyer of the call $100.

This is very sweet leverage if the market goes your way. You get all the gains of the 100 shares for a cost considerably less than buying the 100 shares outright. No wonder retail punters are going crazy for this cheap leverage to maximize gains in “can’t lose” trades.

…click on the above link to read the rest of the article…

Revenge of the Real World

November 3, 2021

Revenge of the Real World

The status quo response would be amusing if the consequences weren’t so dire.

Rather than stare at empty shelves, you have two options for distraction: you can don a virtual-reality headset and cavort with dolphins in the metaverse, or you can trade various forms of phantom wealth that always go up (happy happy!) because the Fed.

Neither distraction actually solves any real-world problems, a reality we can call the Revenge of the Real World We’ve entered a peculiar phase in American history in which illusions of wealth and control are the favored distractions from the unraveling of the real world economy and social order.

Printing trillions of currency units can’t restore the global supply chain or social cohesion, Rather, jacking phantom wealth to the moon is only accelerating the collapse of the social order and the economy even as it accomplishes absolutely nothing in terms of solving real-world problems.

Let’s start with the core economic realities of the 21st century:

1. The number of high-consumption (“middle class”) people doubled from 1 billion to 2 billion. The human populace has expanded to 7.9 billion individuals, but poor people who don’t have enough money to consume large quantities of energy, goods and services delivered by the global supply chain don’t have much of an impact on global consumption of energy and resources. It’s the number of people jetting around the world playing their part in the landfill economy (toss the old one, buy a new one) who drive “growth” (i.e. waste is growth).

Strangely enough, there are actual physical limits to resources being transformed into junk being dumped in the landfills. Humanity’s rapacious appetite for stuff has extracted all the cheap-to-extract resources and now all that’s left are the increasingly expensive-to-extract resources.

…click on the above link to read the rest of the article…

Will China Pop the Global Everything Bubble? Yes

October 31, 2021

Will China Pop the Global Everything Bubble? Yes

The line of dominoes that is already toppling extends around the entire global economy and financial system. Plan accordingly.

That China faces structural problems is well-recognized. The list of articles in the August issue of Foreign Affairs dedicated to China reflects this:

Xi’s Gamble: the Race to Consolidate Power and Stave Off Disaster

China’s Economic Reckoning: The Price of Failed Reforms

The Robber Barons of Beijing: Can China Survive its Gilded Age?

Life of the Party: How Secure Is the CCP? (Chinese Communist Party)

These are thorny, difficult issues: a demographic cliff resulting from the one-child policy, soaring wealth-income inequality, pervasive corruption, public health issues (diabesity, etc.), environmental damage and a slowing economy.

What the conventional analysts do not fully grasp, in my view, are 1) the existential threat to the CCP and China’s economy posed by its unprecedented, metastasizing credit-asset bubble and 2) its incipient energy crisis.

As I explained in a recent blog post, What’s Really Going On in China?, the CCP and the government informally institutionalized moral hazard (the disconnection of risk and consequence) as a core economic policy.

Every financial loss, no matter how risky or debt-ridden, was covered by the state (via bail-out, refinancing debt, new loans, etc.) as a “cost of rapid development,” a reflection of the view that some inefficiency and waste was inevitable in the rapid development of industry, housing, infrastructure and a consumer economy.

What China’s leaders did not fully understand was this implicit guarantee of bail-outs–the equivalent of “The Fed has our backs”–incentivized debt-funded speculation as the lowest-risk, highest-return “investment,” especially when compared to low-profit, risky investments in low-margin export industries. (Recall the average profit margins of Chinese exporting enterprises is 1% to 3%.)

…click on the above link to read the rest of the article…

Doing 90 MPH on Deadman’s Curve: A Few Thoughts on Risk

October 26, 2021

Doing 90 MPH on Deadman’s Curve: A Few Thoughts on Risk

When the wreck is recovered, witnesses will wonder why they took such heedless, foolish risks.

You’re in the back seat wedged between tipsy revelers, the driver is drunk and heading into Deadman’s Curve at 90 miles per hour. Nobody’s worried because the driver has never crashed. Before they slid into euphoric incoherence, the other passengers answered your doubts with statistics and pretty charts showing that the driver had never had an accident, so there was nothing to worry about.

They also said that the driver’s Uncle Fed had rigged the vehicle with an anti-accident device, so a crash was impossible. One passenger blurted out that a fellow named Goldy Sacks said the driver could easily “melt up” and take Deadman’s Curve at 120 miles per hour without any trouble.

You see the problem here: the risk of crashing and expiring is soaring but the giddy occupants are completely confident there’s no risk, and this confidence is the source of the danger. If you’re sure Uncle Fed’s device can protect the vehicle from any crash, then why not take Deadman’s Curve at 90 miles per hour?

And if Goldy Sacks says you could actually take it at 120 miles per hour, then taking it at 90 MPH is actually quite prudent and cautious.

This confidence inspires tremendous risk-taking that eventually ends very badly for all the revelers. The irony is rich: the greater the confidence, the greater the risk, the greater the risk, the greater the odds of a crash. The greater the risks being taken, the greater the odds that the crash will be fatal to all occupants.

…click on the above link to read the rest of the article…

A Nation of Imposters

October 23, 2021

A Nation of Imposters

That’s how we’ve become a nation of imposters: our imposter stock market hits a new high and the imposters cheer because it proves the scam is still working.

You’ve read the warnings about the proliferating imposter scams: scammers posing as “officials”, representatives of utilities or “a close friend of a family member” all exploit the fast-draining reservoir of trust in America to extract financial information out of the unwary marks.

I’m not sure what’s more remarkable: the depths of scammer perversity or the fact that some people can still be conned by claims of authority or friendship. Most are seniors, of course, as the elderly still retain an easy-to-scam trust in institutions and officialdom as a holdover from an era before trust was unraveled by wholesale self-serving deception.

The deeper problem is that America is now a nation of imposters. Everything that is presented as august and trustworthy is an imposter organization designed to enrich the few at the expense of the many via deception and the cloaking of self-serving skims and scams.

A useful tool to uncloaking imposters is to ask: cui bono, to whose benefit? Take the nation’s central bank, the Federal Reserve. It claims to be serving the public and the common good, but who actually benefits from its policies?

1. Insiders frontrunning the Fed’s public pronouncements to enrich themselves. Here’s looking at you, Chairperson Powell and the rest of your self-serving imposter cronies.

2. The top 0.1% who own the majority of productive assets goosed ever higher by Fed policies.

3. Billionaires.

4. The top 10% who own 89% of all stocks: The wealthiest 10% of Americans own a record 89% of all U.S. stocks

…click on the above link to read the rest of the article…

Are We Really Crazy Enough to Believe This Is Going to Work?

October 15, 2021

Are We Really Crazy Enough to Believe This Is Going to Work?

Unbeknownst to the giddy participants, they’re not just betting on the omnipotence of the Fed Politburo, they’re also making a max-leverage bet that “the madness of crowds” will never end.

Imagine an economy so dominated by its central bank that all markets hang on every word of its priesthood as life or death. You know, like the Federal Reserve and the American economy.

Now imagine this central bank issues enormous sums of new money which supercharges speculative activity such as hundreds of billions of dollars in stock buybacks, special purpose acquisition casinos, oops, I mean companies, and so on. You know, like the Federal Reserve’s trillions in nearly free money for financiers.

Next, imagine that the central bank makes barely concealed promises that should any big gambler lose money in the casino, the bank will flood the financial system with even more nearly free money for financiers and bail out the loser.

Since flooding the system with nearly free money for financiers keeps the speculative frenzy going, the bank has implicitly promised that assets driven higher by speculative frenzy will never be allowed to drop. This promise naturally incentivizes even more speculative borrowing, leverage and risk, generating a titanic Everything Bubble in which risky assets skyrocket from pennies into dollars and dollars into fortunes.

Now imagine that this speculative frenzy spreads into every nook and cranny of the economy such that everyone is drawn into one casino or another, and previously sober, cautious people are seized by a quasi-religious fervor in which they become convinced that their gambling chips on NFTs, SPACs, meme-stocks, obscure alt-coins, homes, collectables and pretty much anything within the manic swirl of speculative frenzy is now a can’t lose path to carefree permanent wealth because the central bank guarantees it and anyone who questions this is in league with the Devil (or worse).

…click on the above link to read the rest of the article…

Life’s a Beach Until the Tsunami Hits: Four Waves Nobody Cares About–Yet

October 9, 2021

Life’s a Beach Until the Tsunami Hits: Four Waves Nobody Cares About–Yet

Four monster waves are about to crash onto the Fed’s beach party and sweep away the unwary revelers.

Hey, is the water in the bay receding? Never mind, free drinks are on the Federal Reserve, so party on, life’s a beach, asset bubbles will never pop, we’re safe. Of course you are. The Fed is all-powerful and would never let a rogue wave turn all its precious phantom wealth into broken detritus.

The water is fast receding and a wave is visible if you care to look, but nobody cares to look. Why bother? The Fed is invincible, that’s all you need to know to mint another fortune.

Just to keep life interesting, let’s look anyway. Gordon Long and I discuss four monster waves that are about to crash onto the Fed’s beach party and sweep away the unwary revelers:

1. Declining liquidity: while everyone is focused on the Fed’s ceaselessly repeated reassurance that the liquidity spigot will never be closed, never ever ever, so party on, asset bubbles will never pop, never ever ever, other central banks have already started reducing global liquidity while domestically, the Treasury General Account (TGA) is soaking up liquidity to fund the federal government’s monumental deficit spending.

2. Declining global growth: long before the pandemic swept ashore in 2020, global growth was faltering: the business cycle had not been abolished, despite Fed assurances that growth and asset bubbles will continue expanding until they reach Alpha Centuri and beyond (Dow one trillion, yowza baby!), growth by any conventional measure (PMI, ISM, industrial production, global trade flows, etc.) had stagnated or rolled over.

…click on the above link to read the rest of the article…

Why Shortages Are Permanent: Global Supply Shortages Make Fantastic Financial Sense

October 7, 2021

Why Shortages Are Permanent: Global Supply Shortages Make Fantastic Financial Sense

The era of abundance was only a short-lived artifact of the initial boost phase of globalization and financialization.

Global corporations didn’t go to all the effort to establish quasi-monopolies and cartels for our convenience–they did it to ensure reliably large profits from control and scarcity. Not all scarcities are artificial, i.e. the result of cartels limiting supply to keep prices high; many scarcities are real, and many of these scarcities can be traced back to the stripping out of redundancy / multiple suppliers of industrial essentials to streamline efficiency and eliminate competition.

Recall that competition and abundance are anathema to profits. Wide open competition and structural abundance are the least conducive setting for generating reliably ample profits, while quasi-monopolies and cartels that control scarce supplies are the ideal profit-generating machines.

The incentives to expand the number of suppliers, i.e. increase competition, are effectively zero. America’s corporations spent $11 trillion buying back their own stocks over the past decade; that’s equal to the combined GDP of Japan, Germany and Italy. If adding new suppliers to the global supply chain were profitable, some of that $11 trillion would have exploited those vast profits.

The financial reality is attempting to compete with an established cartel that has captured regulatory and political mechanisms is a foolhardy waste of capital. If firing up a new supplier of essential solvents, etc. was so captivatingly profitable, the why wouldn’t Google and Apple take a slice of their billions in cash and go make some easy money?

The barriers to entry are high and the markets are limited. A great many specialty lubricants, solvents, alloys, wires, etc. are essential to the manufacture of all the consumer and industrial products that are sourced globally, but the markets are narrow: manufacturers need X amount of a specialty solvent, not 10X.

…click on the above link to read the rest of the article…

Risk Was Never Low, It Was Only Hidden

October 4, 2021

Risk Was Never Low, It Was Only Hidden

The vast majority of market participants are about as ready for a semi-random “volatility event” as the dinosaurs were for the meteor strike that doomed them to oblivion.

Judging by euphoric gambler–oops I mean “investor”–sentiment and measures of volatility, risk of a market drop has been near-zero for the past 18 months. But risk was never actually low, it was only hidden. When it emerges, it’s a surprise only to those who mistakenly thought risk had vanished.

As Benoit Mandelbrot explained in his book The (Mis)behavior of Markets, crashes are an intrinsic feature of systems like stock markets. These risks are not generated by specific human actions or sentiment but by the system itself.

Just as humans make subconscious decisions and then conjure up quasi-rational justifications for their choice after the fact, market participants always conjure up some event or decision as the cause of the crash. Favorites include central bank policy error, black swan events (“bolts from the blue”), earnings surprises, technical levels were breached, and so on.

Mandelbrot’s insights reveal why markets crash without any policy error or other fabricated- after-the-fact justification: as those who witnessed the collapse of Japan’s massive credit-asset bubble in 1989-1990 observed, markets just stopped going up and started falling.

Risk is a reflection of many dynamics, but the key dynamic few participants seem to understand is the inherent instability of complex systems: surface tranquility is not an accurate reflection of the actual state of stability or risk, no mater how long the period of tranquility stretches.

The human mind rebels at the dominance of quasi-random crashes, as our hubris and need to be in charge generates an illusion of control:…

…click on the above link to read the rest of the article…

The Market Crash Nobody Thinks Is Possible Is Coming

September 30, 2021

The Market Crash Nobody Thinks Is Possible Is Coming

The banquet of consequences is being served, and risk-off crashes are, like revenge, best served cold.

The ideal setup for a crash is a consensus that a crash is impossible–in other words, just like the present: sure, there are carefully measured murmurings about a “correction” but nobody with anything to lose in the way of public credibility is calling for an honest-to-goodness crash, a real crash, not a wimpy, limp-wristed dip that will immediately be bought.

What I’m calling for is a rip your face off, weeping bitter tears over the grave of the speculative wealth that you thought was forever crash. All those buying the dip because the Fed will never let the market go down will be crushed like scurrying cockroaches and all those trying to rotate into the next hot sector or asset class will also be crushed like scurrying cockroaches because when the Everything Bubble pops, well, everything pops. There is no shelter in a risk-off cascade.

The crash is coming as a result of multiple mutually reinforcing dynamics, the first being that no “serious person” believes a crash is possible, much less imminent. In no particular order, here are a raft of other causally consequential triggers of a cascading market crash:

1. As I noted in my call for the top, Is Anyone Willing to Call the Top of the Everything Bubble? (September 6, 2021), there is no history to support the widespread confidence that the extremes of over-valuation, leverage, euphoria and speculation last forever, or even much longer than the lifespan of a cockroach. We’re well past that benchmark into unprecedented insanity. So what happens next: squish.

Just for the record, the Dow topped out on August 13, the S&P 500 topped out on September 2 and the Nasdaq topped out the day after my call, September 7. (Close enough for gummit work…)

2. The credibility of the Federal Reserve is in the dumpster, which just caught fire. As I explained in The Fed Is Fatally Corrupt– And So Is the Rest of America’s Status Quo (September 10, 2021), the Fed is corrupt on multiple levels–thoroughly, completely corrupt, and so are all its minions, proxies, apparatchiks, toadies, apologists and lackeys.

…click on the above link to read the rest of the article…

Charles Hugh Smith: The System Will Fall Apart

September 24, 2021

Charles Hugh Smith: The System Will Fall Apart

Ministry of Manipulation: No Wonder Trust and Credibility Have Been Lost

September 19, 2021

Ministry of Manipulation: No Wonder Trust and Credibility Have Been Lost

Now that every financial game in America has been rigged to benefit the few at the expense of the many, trust and credibility has evaporated like an ice cube on a summer day in Death Valley.

Here is America in a nutshell: we no longer solve problems, we manipulate the narrative and then declare the problem has been solved. Actually solving problems is difficult and generally requires sacrifices that are proportionate to one’s wealth and power. But since America’s elite are no longer willing to sacrifice any of their vast power for the common good, sacrifice is out in America unless it can be dumped on wage earners. But unfortunately for America’s elite, four decades of hidden-by-manipulation sacrifices have stripmined average wage earners, and so they no longer have anything left to sacrifice.

Enter the Ministry of Manipulation, which adjusts the visible bits to align with the narrative that the problem has been fixed and the status quo is godlike in its technocratic powers. All this manipulation doesn’t actually solve the problems, it simply hides the decay behind gamed statistics, financial trickery and glossy PR. The problems fester until they break through the manipulated gloss and the public witnesses the breakdown of all the systems that were presented as rock-solid and forever.

Let’s take three core fields of manipulation: cost of living, Social Security and the stock market bubble. Each is a key signifier of the status quo functioning as advertised, and so manipulating them to fit the narrative is the elite’s prime directive. Goodness knows what would happen if people were exposed to the unmanipulated reality, but it wouldn’t be good for America’s self-serving power elite.

…click on the above link to read the rest of the article…

The Banality of (Financial) Evil

September 13, 2021

The Banality of (Financial) Evil

The financialized American economy and State are now totally dependent on a steady flow of lies and propaganda for their very survival. Were the truth told, the status quo would collapse in a putrid heap.

Go ahead and be evil, because everyone else is evil, too, because being evil serves everyone’s interests far better than maintaining integrity, for integrity will cost you more than you can afford.

In other words, lying, fraud, embezzlement, misrepresentation of risk, material misrepresentation of facts, half-truths, the replacement of statements of fact with propaganda and spin: these are not the work of a scattered handful of sociopaths: they represent the very essence and heart of America’s economic status quo.

Hannah Arendt coined the phrase the banality of evil to capture the essence of the Nazi regime in Germany: doing evil wasn’t abnormal, it was normal. Doing evil wasn’t an outlier of sociopaths, it was the everyday “job” of millions of people, and not just Nazi Party members.

Not naming evil is the key to normalizing evil. Evil must first and foremost be derealized (a key concept in the Survival+ critique), detached from our realization and awareness by naming it something innocuous.

Here is a telling excerpt from the book Triumph of the Market:

Normalization of the unthinkable comes easily when money, status, power, and jobs are at stake…. Intellectuals will be dredged up to justify their (actions). The rationalizations are hoary with age: government knows best, ours is a strictly defensive effort, or, if it wasn’t me somebody else would do it. There is also the retreat to ignorance, real, cultivated, or feigned.

…click on the above link to read the rest of the article…

Is Anyone Willing to Call the Top of the Everything Bubble?

September 7, 2021

Is Anyone Willing to Call the Top of the Everything Bubble?

Can extremes become too extreme to continue higher? We’re about to find out.

Is anyone willing to call the top of the Everything bubble? The short answer is no. Anyone earning money managing other people’s money cannot afford to be wrong, and so everyone in the herd prevaricates on timing. The herd has seen what happens to those who call the top and then twist in the wind as the market continues rocketing higher.

Money managers live in segments of three months. If you miss one quarter, the clock starts ticking. If the S&P 500 beats your fund’s return a second time because you were bearish in a bubble, your doom is sealed.

When the bubble finally pops and everyone but a handful of secretive Bears is crushed, the rationalization will cover everyone’s failure: “nobody could have seen this coming.”

Actually, everyone can see it coming, but the tsunami of central bank liquidity has washed away any semblance of rationality. My friend and colleague Zeus Y. recently summarized the consequences of this decoupling of markets and reality:

“I used to be with the Bears until the uncoupling was complete when the Fed started guaranteeing non-investment grade junk bonds. At that point, any semblance of sanity, much less probity, much less integrity was gone. Rinse and repeat with digital dollars going into the tens and even hundreds of trillions of dollars.

For two decades we fiscal sanity-ists have been assuming SOME baseline reality. I see none in sight and still plenty of assets to plunder and pump and still resources to suck and suckers to shake down. The system is running hot and wild on its own algorithms, and actual people are lying back and simply lapping up the “passive” income created by delusion-made-reality.

…click on the above link to read the rest of the article…

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