by Reverse Engineer, Doomstead Diner
Collapse in 2015 is now in the grave, a thing of the past, an artifact of history. Not to be forgotten though, because of course those who do not learn from history are doomed to repeat it. Of course, those who do learn from history are doomed to watch others repeat it too. lol. Regardless of that, I wanted to chronicle the watershed year of 2015 in Collapse Dynamics, which I have been an active student of for the last 8 years, the last 4 of which have been spent mainly here on the Doomstead Diner.
Listen only to podcast or watch with pictures on YouTube. Full transcript follows further below.
Here is the full transcript for today’s rant:
Greetings Doomfans, and welcome to another edition of the Frostbite Falls Daily Rant, here on the Doomstead Diner.
The crash in the global markets which took off with the New Year shows no signs of abating, if anything it’s accelerating now. Oil prices broke through the $30 barrier and as I write this rant have sunk to a $28 handle, and that’s just the official price. Discounts are being offered up all over the place to try to get rid of the inventory, but unfortunately despite the new low, low prices every day konsumers are not stepping up to the plate to burn the stuff in copious quantities, demand is at best stagnant and actually in decline in many places despite low prices. The Chinese economy is in full on implosion mode, so they’re not picking up the slack on the demand end, while at the same time sanctions have been lifted off Iran, so they’re already to start dumping more oil on a saturated market.
I am reminded of the scene in Dances With Wolves where Kevin Costner and his flatulent teamster wagon driver who is bringing him out to the remote fort on the prairie run across a skeleton full of arrows. The teamster comes over and laughs and says, “Somebody back east must be sayin’, ‘Now why don’t he write?'”. In this case you have dimwitted economistas and energy shills wondering “Now why don’t they buy?” Cheap prices! Why isn’t everybody taking off on Road Trips for the Great White North? They apparently missed the memo that when you are completely broke with no job it doesn’t matter how cheap the price gets, you still can’t afford it.
At the current prices now in the $28 range, just about none of the tight oil or tar sands from the Great White North is profitable, all the extractors are bleeding red ink like pigmen in a slaughterhouse, but so far to date quite magically just a very few small players have declared bankruptcy, leading one to wonder how the bigger boys manage to keep floating here?
This s fairly simple, they fit in the category of TBTF, and none of the TBTF banks who hold their debt are marking to market, they are marking to make believe. Just like the sub-prime fiasco of the last financial crisis in 2008, just this time on a bigger scale with about $2T in impaired assets out there. “Impaired” is Newzspeak for “fucking worthless dogshit”.
Besides the $2T directly in increasingly non-performing loans are all the derivatives written on this debt, which nobody knows just how much it is but is quite certainly at least an order of magnitude greater than the debt itself, and probably more than that. Nobody has money to pay off this shit, so nobody wants to declare a “credit event” on anything but the smallest companies, because once the cascade gets rolling the whole house of cards comes down in the greatest bonfire of paper wealth in all of recorded history.
Despite the fact nobody wants to admit to it on the credit level, the panic is already quite evident in equities, with Global stock markets absolutely tanking over the last 2 weeks. The Nikkei is already in bear market territory 20% down, some bourses in MENA have hit 40% down and the Hang Sei index is on a Downhill race to the bottom that would even scare Picabo Street.
The famed PPT or Plunge Protection team from Da Fed appears completely impotent to stop this slide here in the FSoA, the Smartest Guys in the room appear to have limp dicks at the moment. Somebody better send out for some Viagra PDQ.
Across the Pacific Pond, the Chinese PPT isn’t doing any better, draining the massive $3T in FOREX reserves they accumulated in the Piggy Bank down to $2M here already in the effort to prop up the market and their sinking currency, which may have slowed things down some but they look to be getting nervous as the bank account dwindles. It took 30 years of slave labor to work up that savings account, and at the rate they’re gong they’ll burn through the whole pile in a couple of years at the outside.
Same deal for the Saudi Princes, who also worked up a nice Savings account over the years of high oil prices, but who now have accumulated such large bills to manage a blown up population that they also are burning through their reserves as their own currency circles the toilet, along with the currencies of every other OPEC country, Canada and Mother Russia also. The only real question at the moment is whose Goobermint will collapse first and where the first big riots will be.
Saudi seems like a good bet on this, as the Saudis pursue a foreign policy that is pissing off just about everyone outside their borders, and the population inside their borders is none too happy about skyrocketing food prices either. How long they can keep the oil flowing out of Gawhar at any price remains an open question here.
All across the board you see dollar liquidity drying up as “investors” run for the fire exits but find it increasingly more difficult to find a greater fool who will buy the dogshit on their books. Investor is another newzspeak euphimism, it conjures up pictures of individuals with a few stocks in the retirement portfolio, but Investors are really the TBTF banks themselves. Not only are their loan books going south, but stocks they use as collateral are also losing value on a daily basis now. Something like $5T in notional “wealth” has already been lost here, which means these banks aren’t as well capitalized as they were just a few weeks ago, and the “reserves” they hold against losses are increasingly questionable and increasingly illiquid.
Whle there aren’t too many individual “investors” out there anymore, there are of course some very large pension funds both public and private that have their retirees money sprinkled all over stock and bond markets that are going south. These funds often project out a 5% rate of return in order to be solvent on paper which few of them have actually been getting in the days of ZIRP, and those that did show those kind of returns did it by investing in junk energy bonds which are now going worthless. Unlike the TBTF Banks, Da Fed does not generally bailout Pension Funds of J6P, so one waits for the first big one of those to go tits up, like CALPERS or the United Federation of Teachers. The FSoA Military pensions aren’t doing so well either, and the history of the Bonus Army indicates that Da Goobermint will let military vets twist in the wind also while bailing out the fat cats.
Which all means of course somebody here that is TBTF is going to need a Bailout, Bailin or Bailorama here in the not too distant future. Exactly how Da Fed will pull this off when their own balance sheet is filled with more dogshit than anyone else out there is another one of those great mysteries of the universe.
In tandem with the financial system tanking, the flip side of the equation is that more military confrontations and saber rattling goes on every day and it’s become impossible to determine who is allied with who and where anymore, although ISIS appeas to be universally hated by everyone except maybe the Saudis. Japan while it is conflicting with China over the Spratly Islands and the South China Sea is now jawboning closer ties with Mother Russia, except weren’t China and Russia supposed to be allied here, isn’t Japan supposed to be allied with the FSoA and isn’t Vlad the Impaler supposed to be Satan? Everybody is Pivoting in a different direction every newzday, making it quite clear that we’re on a rudderless ship in a minefield.
The big question in the mind of the Kollapsnik though is “Is this the Big One”? Is this the fast collapse scenario getting underway?
I’d have to go back to the Great Depression to make a WAG on that one. The Stock Crash occurred in 1929, but it wasn’t until 1932-1934 that the Great Depression really got into full swing with the default of Credite Anstaldt, a Rothschild bank in 1931. It takes a while for the losses that accrue from market crashes to finally get recognized as a great amount of book cooking and financial fraud follows in the aftermath of the crash. It could go faster or slower in this case due to the advent of computers, on the one hand it could happen quicker since all the transactions are now at the speed of light, or it could go slower because computers vastly scale up the amount of financial fraud possible. Figuring these two effects cancel each other out, a 2-3 year period before the market crash makes its way out to the real economy and trashes it even worse than it is already trashed seems like a reasonable WAG.
There are of course numerous Black Swans that could come in for a landing in the intervening period, the Saudis and Iranians could get into a shooting war with each other rather than battling it out through proxies as one possibility there. The Big One Earthquake hitting the pacific northwest and sliding Seattle into the ocean is another possibility.
The one thing you can be sure of however is that the mayhem is going to keep increasing through the time period, and there will be no shortage of collapse stories to chronicle along the way to the bottom.
And that’s all the doom, this time until next time, here on the Doomstead Diner.