If you’re not petrified, you’re not paying attention to the 5% chance of complete collapse of global financial system

Stacy Summary:  It’s been compared to the Great Depression, and, as with then, there are all sorts of claims that the worst is over.  I think the next leg of the crash is about to begin soon.  As with the Great Depression, the second leg down is when it gets really bad.   What are you thinking?

37 comments on “If you’re not petrified, you’re not paying attention to the 5% chance of complete collapse of global financial system
  1. Mr Supergeek says:

    ‘If you aint scared, You aint right’

  2. Palantíri says:

    Timothy Geithner Secretary Loophole
    http://spectator.org/archives/2009/05/15/secretary-loophole
    that story tells me what a big sneak of a snake he is.

    A question to this quote from the text: In school, teachers call the Federal Reserve “the banker’s bank.” That’s where banks keep their reserves—the fraction of all deposits that federal law requires them to actually have on hand. The Fed also lends money to banks from its “discount window,” which requires collateral from the banks.

    Just wondering, do the Federal Reserve (and other central banks) lend out the reserve fraction from the smaller banks or do they lend out “fresh” money when needed? I mean, If the Fed is lending out the reserve fraction they got from other banks as a normal bank lending out peoples deposits then where is the security?

  3. richard says:

    @Palantiri: In addition, the FED is acting as the repository while also providng interest payments( a recent innovation ), on the reserves that the member banks are required to hold ( remember there is a 8-10% reserve in fractional reserve banking) on account with the FED…thus limiting all that new local applications for credit they are supposed to provide for their AAA customers is on a oh so slow approval rate ( if at all )…And when the FED IGO went before Congress and Congr.Grayson’s now famous retort with the IG, refuses ( obfuscates?) to reply coherantly about her investigations and audits… well all those trillions are just too pesky to account for..HA!! regards, Richard

  4. Mr Supergeek says:

    Still waiting on upload of ‘On The Edge with Max Keiser’, did anyone see the show how did it go?

  5. Danny says:

    Morning Stacy and Max

    This morning I have been mostly reading…

    US Public Health Community Begins Discussing Peak Oil
    http://www.energybulletin.net/node/48895

    Goldman Pays to End State Enquiry Into Loan
    http://www.nytimes.com/2009/05/12/business/12lend.html?_r=1&scp=2&sq=goldman&st=cse

    UK Defies Argentina By Claiming Atlantic Seabed Rich in Oil and Minerals
    http://www.guardian.co.uk/environment/2009/may/12/uk-argentina-falklands-seabed

    Fears of Rat Plague in UK Grow
    http://www.guardian.co.uk/world/2009/may/03/fears-rat-plague-pest-control

    @Stacy- comedy to keep you sane! :D
    http://www.youtube.com/watch?v=s3RilarkqE8

  6. pg says:

    you havent seen anything yet…………………

  7. snoop diddy says:

    Thinking much the same Stacy, about the next leg down. But the big difference this time around is the US is in massive debt. The famines were in China last Depression. They have money to feed themselves this time around. The US is relying on the destructive power of the printing press and trying to con the rest of the world into taking IMF SDRs to transfer their debt and give the USD some strength. The Obama regime has continued supporting the oligarchs who created this mess and the next few years will be a complete fiasco. The only thing the Fed is trying to do is cause inflation to make the stockmerket go up nominally and wipe out some debt with massive inflation. It will be an inflationary nightmare for the same people who have to bail out the oligarchs – the middle class taxpayers as well as the poor. There is simply no way around it regardless of the propaganda spewing from Geithner, Bernanke, Obama and the MSM.

  8. snoop diddy says:

    Economic stimulus: Transportation infrastructure projects by county:
    http://hosted.ap.org/dynamic/files/specials/interactives/wdc/stimulus_counties/index.html?SITE=YAHOO&SECTION=HOME

    That’s a lot of freaking money.

  9. snoop diddy says:

    correction: that’s a lot of freaking magic money.

  10. snoop diddy says:

    Toot, toot, all aboard the gravy train to oblivion:

    Serbia to Get EUR 2,9 B from IMF
    http://www.novinite.com/view_news.php?id=103676

  11. Matt Smyth says:

    A 5% chance of a great/greatest depression ? I thought it was better chances then that.

    I am buying Bullion and mining stocks that pay dividends and that have no debt. I want to save capital and cash for the next couple years because I think RIETS with be given away. I am also eying up good dividend stocks like Phillip Morris Intl. and Royal Dutch Shell. I think the best stock out there is RDS. After the next fall in oil RDS with be under 5 PE and should be around 8-9% yield.

  12. snoop diddy says:

    It’s not surprising to me that long term govt is the best place to be. Private business has to restructure all the time to make glorious benefit of the latest loopholes and govt regulations. CEOs loot private companies and then scamper off to their next job. Meanwhile govt finds excuses to grow during good times and bad times. Govt is closer to the printing presses too, which means they never go bankrupt under the crushing weight of debt due to interest having to be paid back. What competition do they have to put up with too?

  13. Youri Carma says:

    I was thinking about what Bob Chapman said a short while ago: “Hold on to your , bud and say your ass goodbye!”

  14. Chris says:

    Palantiri,

    Thanks for that article on Geithner.

    It does a good job of explaining what happened with Bear Sterns. Its pretty amazing the machinations they went through to circumvent the law. I remember Bernanke correcting a congress woman: “We didn’t GIVE them money; at the Federal Reserve we only LOAN money”. But its now clear that the Fed is loaning out money, and taking worthless toxic trash as collateral for loans which will never be paid back.

    If you haven’t had a look at this story (first 2 pages at least) I recommend it:

    http://spectator.org/archives/2009/05/15/secretary-loophole

  15. Photoception says:

    Very good point by Davidowitz that the TARP money is almost gone. Therefore Giethner & Bernanke are trying to bullshit their way out of this. My guess is that “the market” is not retarded enough to buy anymore bullshit. Absolutely nothing has changed for 8 months now.

    What kind of crack head would seriously believe this is some sort of cyclical recession? Oh yeah, a central banker…

  16. Youri Carma says:

    Found a new term: “oligarchical crony capitalism” only to the benefit of the anointed of the Wall street cabal but at expense of everyone.

  17. Palantíri says:

    @richard – does that mean you agree that fed\central banks lend out the money other banks has deposited? I know about the interest payment (foliorente – don’t know the English word) but I don’t know where that money to pay the interest to the bank’s deposits in a central bank comes from…printed or taxpayer money or the interest the Fed/central bank gets from loans it gives?

    @Chris – yes for Geithner to go such a length to “provide a service” must make one wonder why he does it.

  18. Don (Joe bag O chickens) says:

    Well, either it is all by design, in which case we are all terribly screwed, or it is simply a few mistakes made by the government , the banking system, and fiat currency. For some reason the latter just sounds more insanely preposterous than the design theory.

    Common, these people are educated, they are smart right? The best education that money can buy, right?

    Count on blood. The question is who’s blood, and how much of it?

  19. Dan from Bayfield Canada says:

    I agree with Stacey, the next leg down appears to be very close at hand. Get your physical gold and silver now. Stocks will drop more than the last time by 30- 50 %……

  20. Phil says:

    Greece / Bilderberg meeting – RealTime …

    I don’t know if anyone here has already seen this, but it seems that the German communist party – I didn’t realize there was one ;-) is protesting actively in Greece right now.

    Communists storm Bilderberg Meeting Kommunisten stürmen Bilderberg-Konferenz
    http://www.youtube.com/watch?v=deuch0QTxJg

    Here’s an ongoing transcript :
    http://alles-schallundrauch.blogspot.com/
    ( sound and smoke = equivalent to = Everything’s smoke and mirrors )

    FWIW

    PS:
    Some in German, some in English.

  21. Rich says:

    I’m thinking….

  22. Rich says:

    …..I’m still thinking…..

  23. Rich says:

    ….what was the question again?

  24. Danny says:

    Ireland biggest external world debtor in the world- 811% of GDP!
    …..Fianna Fáil (‘ruling’ party) with 10% approval rate- and not a sniff of revolution. you think you got it bad in America….ppfffttt…

  25. richard says:

    @Palantiri: I guess that’s a trillion dollar question; as no one has access to the FED’s books ( yet?? ); and as I am not a CPA, I can only surmise that the interest paid to the individual banks is an electronic accounting modification ( this new feature is a ploy by the FED so that the banks keep their money in the repository and DON’T lend out the money to their customers)….As I understand the FED’s style of accounting, most of the amounts we are hearing about ( including the toxic collateral instruments and mortgages on their books) are mounting so rapidly that now Congress wants in on the “transparency” issue. The FED have been successful ( so far ) at hiding the “printing press” numbers when they stopped publishing the M3…regardless, http://www.Shadowstats.com have been able to discover the numbers monthly anyway. The last time I looked it was advancing beyond a 18% inflation rate ( and so that effects the value of the currency, the FOREX trades and the bond sales. Thus we are faced with the real possibility that government bonds/bills might face hard times at the auctions soon….apparently the number of auctions has increased and the amount per auction too….also a 7 year bond was added….these auctions, held throughout the year enable the government to function ( and in this instance that means to pay down the debt to the FED…which this year is aprox. <$2 trillion in interest!!!!!….That’s why guys like Max Keiser have been calling for an increase in the FED prime/funds rate to attract foreign buyers into the bond auctions ( the warning is that if some auctions fail and the likelihood increases daily here-and in Britain too-then either/or country’s bond rating agencies MIGHT downgrade the government treasury bonds @ auction from it’s current AAA rating to a lower one…Now remember some enormous investment funds are mandated to only buy AAA rated funds…that’s part of what got us into this mess to begin with!!!) …so the private banking sector is possibly not in the back seat and was never in the front…and might be hanging on to the bumper by now….that’s how precarious the financial world is traveling in a forward direction…..A further consolidation in the banking sector will imo continue over the months ahead. Hope my seminal rant answered your question, Richard@lattitude30N

  26. richard says:

    @Palantiri: When I state “the private banking system” I am referring to the many regional and small cap banks, S&L’s, credit unions and the like…NOT the inner sanctum of G-S, BofA, Citi, Wells Fargo, Morgan-Stanley, AIG, and a host of other “bailout banks”, former credit card issuing companies(ie: AMEX), and other institutions (ie:Chrysler)….There is a hold on furthering the credit market from heading down the road to “recovery” as imo there will be no recovery as we might envision;or one that former and current economists have become Nobel prize lauriats previously describing (theorizing?) in this area of cyclical economics…We are in in a place “where no man has dared to go” —-UNCHARTERED WATERS~~~~regards, richard@lattitude30N

  27. Phil says:

    Good article on :
    The Exuberance Glut Or The Dollar-Euro Short Squeeze Race

    from ZeroHedge .. just in :

    http://zerohedge.blogspot.com/2009/05/exuberance-glut-or-dollar-euro-short.html

  28. Mep says:

    @ Stacy, there are 3 statistics that frequently haunt me:

    1. That there are only 2 points in American history where household debt was the equivalent of total GDP: in 1929 and now.

    2. Only 2 points where the top 1% of Americans earned 20% of the nation’s income: 1929 and now.

    3. Only 2 points where the top 1% owned 40% of the nation’s wealth: 1929 and now.

    PBS made a good documentary on the 1929 crash. In the section on “Mass Illusion,” they talk about how indicators of the health of the real economy were ignored in 1928 and in the run-up to the crash. Wall Street ignored rising unemployment, falling demand for autos and other consumer goods, and they kept pumping up the markets. Seems to me that the same sort of disconnect happened between Wall Street and the real economy this time around. To a large degree, it looks like it’s still happening.

    Documentary: http://www.pbs.org/wgbh/amex/crash/program/index.html

    I believe that you’re right: that the worst is yet to come.

  29. harry_w says:

    Snoop,

    I share your view. I’ve just removed the specifics to the US oligarchs, because the same applies to the UK and any other countries now going down the ZIRP/QE road to financial corporatism:

    “The … regime has continued supporting the oligarchs who created this mess and the next few years will be a complete fiasco. The only thing the [central bankers are] trying to do is cause inflation to make the stock-market go up nominally and wipe out some debt with massive inflation. It will be an inflationary nightmare for the same people who have to bail out the oligarchs – the middle class taxpayers as well as the poor. There is simply no way around it regardless of the propaganda…”

    The emerging oligarchy have been acting through these bailouts, ZIRP and QE to secure their positions and to extend the corporatist model (long seen in the military-industrial complex) to their cohorts in finance — banking, insurance, investment.

    This corporatist oligarchy of public and private debt merchants, have effectively captured the state through corruption of political parties and mass media.

    They’ve gamed the democratic process by exploiting the support of a vast population of perpetual debt slaves who live in fear being thrown to the wolves and turning toxic; and pandering to the dreams of debt speculators who want to join the elite who never have to work gain wealth again.

    Everyone else is supposed to consider themselves lucky just to be taxed and worked to death in order to keep a corrupt bunch of mediocrities in the style they’ve become accustomed to.

  30. Per says:

    Mr. Herbert, I think you are doing a VERY GOOD JOB here!!!

  31. juergenwahl says:

    Sorry, but I’m less than petrified, at present.

    Economic positives — The yield spread is becoming more positive; LIBOR and the TED spread are declining; the Baltic Dry Index is trending upwards; and the SPX, FTSE, CAC, DAX, NIKK, and SSEC indices are all in uptrends, albeit in currently corrective modes (ex SSEC).

    Economic negatives — Aaa/Baa spreads are widening reflecting tight money conditions. The McClellan Summation Index has rounded over after a breathtaking run upwards, precursing a significant correction in the US stock markets.

    Although no one of whom I’m aware possesses a crystal ball, one thing I know for sure is that some day there will be a recovery and most commentators will deny such a situation until it is well in progress. The most important, upcoming act we can perform will be assessing the extent of the the correction currently in process in the stock market. Per the Dow Theory, should there be a new low, the bear will continue and rougher times be ahead. Should the prior low hold and the recent rally high be pierced, then a baby bull will be in prospect leading the way to better times.

    The best we can do is to observe and accumulate the many threads contributing to the formation of trends, and react appropriately to the trend as it unfolds.

  32. Rebecca says:

    I have a few questions regarding this whole fiasco:

    How can an oligarchy run a fascist dictatorship after the system of money is valueless? Who would work for a measly wage?

    We hear about China being the new reserve currency. Are people going to accept a new currency value based on another culture hundreds of thousands miles away? (I may be off a little).

    I believe the option of revolt would then ensue for even the local and federal military operations that would evidently grind to a sad halt. Who would want to enforce draconian laws for pennies?

  33. harry_w says:

    Rebecca,

    “How can an oligarchy run a fascist dictatorship after the system of money is valueless? Who would work for a measly wage?”

    People can be found willing to slit anyone’s throat to gain or maintain even the most trivial privilege and power.

    That’s why I made the point the vast population of perpetual debt slaves who live in fear being thrown to the wolves and turning toxic. They’ll support measures like ZIRP/QE to make their debt cheaper, to make them feel like they’re winners, not losers.

    That’s where I see the base of popular support for instituting corporatist measures to control the economy and maintain a financial oligarchy in perpetual power.

  34. Don (Joe bag O chickens) says:

    @Rebecca

    consider that most Americans work for measly wages already and have been for years.

    Why not China thousands of miles away. They took the Dollar as the dominant global currency for a long time, it was thousands of miles away, unless it was in hand.

  35. Palantíri says:

    @richard – hehe thanks for reply, the problem by asking questions is that, somehow, you always ends up with even more questions…

  36. Rebecca says:

    I predict the Chinese will demand a full audit of the American banking system by the end of September. Just a guess.

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