Oh Shit Checklist #oh shit

From a Zerohedge comment here is your checklist for Oh SHIT the financial world is coming to an end!  Too Funny, unfortunately its pretty much all true.

Checklist of ‘Oh Shit’ –

Near Record or Record Margin
Near Record or Record Leverage
An Unregulated and Private Derivatives Market With a Notional Value Approximated at 600 Trillion USD, Which Will Ultimately Necessitate More Bailouts of ‘TBTF’ Entities Under Threat of “Martial Law” & “Tanks in the Streets” When Certain, Special Entities Lose Their Wagers:
Excessive Governmental Meddling That Distorts Supply/Demand Curve
Excessive Central Bankster Meddling Via Monetary Policy Distorting Supply/Demand Curve
Complete Lack of Transparency As To How, What, When & Where Central Banksters Are Doing Things
An Accumulated Debt Overhang Built Over 40 Years That Puts Interest Component On National Debt, Alone, At Several Multitudes of What The Entire National Debt Was Just 20 Years Prior
An Accumulated Debt Carried By the Federal Government So Large That Nearly 30 Cents of Every Dollar Borrowed by Federal Government in Form of Annual Deficit Spending Goes Toward Interest on the Debt
A Structural Change in Employment Base Whereby a True 20% of the Workforce (18 to 60 Year Olds – Not Disabled) Can Not Find Permanent Work
A Structural Change in Employment Base Whereby a True 30% of the Workforce Can Only Find Work that Puts Them In ‘Working Poor’ Status
A Structural Change in the Economy & Society Whereby a True 50% of the Population is Dependent on Direct Government Aid & Subsidization In Order to Meet the Basic Expenses of their Day-To-Day Subsistence
Having The ‘Financial Services’ Industry Constitute 40%+ of the U.S. Gross Domestic Product, While The ‘Manufacturing’ Sector Consitutes Roughly 16% (Exact Inverse of Where Things Stood in 1968)
The U.S. Government Spending 1.41 for Each Dollar of Revenue it Receives On An Annual Basis.
Having Property Taxes at the Local Level of Government Grow 480x Over In 80 Years in Real Dollar Terms
Having The Government Move From A Model Whereby It Is Able to Balance Its Budget Taking a Mere 6% of the Average Annual Income of Americans in 1913 to One Whereby It Is Running An Annual Deficit Equal to 16% of GDP and Has A Debt of 108% of GDP (It’s Actually Much Higher Than That) While Taking Nearly 20% of Average American’s Incomes (This Nearly 20% Doesn’t Include Sales Tax, Property Taxes, Use Taxes, Permit or License Taxes/Fees, License or Registration Taxes/Fees, State Income Taxes, Death Taxes, Personal Property Taxes, or a Myriad of other Taxes).
Having 3 Segment of the National Annual Budget Consume 80% of Spending: Medicare, Social Security & Defense
Having a Congress, Executive & Judicial Branch of Government in ‘Deep Capture,’ That Works For the Best Interests of the Military-Industrial-Financial Complex, Always
Having Sacrosanct Provisions of the Constitution Gutted, Shredded & Vaporized So Completely That The Constitution Becomes A Mere Reference Point & “Sometimes Persuasive,” Rather Than A Mandatory Roadmap

 

…One day this will all come tumbling down on us. Until then, protect yourself  now and keep laughing.

 

RE: China

I read a fantastic article on Zerohedge this morning about the world ending as per usual. However, this morning’s article “The ‘Game Over’ Redux” had something that I have been trying to explain to some friends/family regarding China for awhile but never really could. This is because I could never fully explain myself due to limited a understanding. That being, I know how it works and how it will collapse in the grand scheme of things but not necessarily all of the triggers and inner workings of the extremely complicated Chinese economy. The quoted text from Knight Research firm Mark Lapolla does a much better job with this.

I think the China situation, however, is profoundly obvious and profoundly simple. The idea that the free world is placing its hope in a repressive, communist regime employing command and control economic management while violating trade protections and human rights everywhere is absolutely astounding, amazing. I would suggest that, in itself, should be a sufficient warning flag. But let’s be a lot more specific. I actually see the situation in China as very analogous to the U.S. in 1929 and Japan in the 1980s….I’ll just tick off eight similarities between China circa 2011 and the U.S. before the Depression. 1) Massive disparity of wealth, income, and education. 2) Rapid industrialization and displacement of labor. 3) Opaque and misleading economic and financial data. 4) Massive build-up of leverage across the “rising” class. 5) Bubbles in both residential real estate and fixed asset/infrastructure development. 6) Accelerating and uncontrolled growth in disintermediated credit. 7) Expected transference of economic growth to domestic demand. And, finally, an accelerating price/wage spiral. Nonetheless, to China’s credit, they have a booming economy which has drawn the attention, admiration and certainly the economic aspirations of the world. The irony is, despite its hubris, China appears to have lost control — and has done so by doing everything it could to avoid that. Essentially, in its own zeal to placate its masses with rapid growth, China has created a tide of inflation that threatens it with wide-spread social unrest. But if it crushes speculation and clamps down on credit, it risks a deflationary collapse that would also threaten social harmony. The upshot is that China no longer controls its own destiny. The free markets do. As an aside, I would suggest that in the not-too distant future, when this all unravels, there will be downside as well as upside for the U.S., particularly as it relates to what we were talking about before, the way the U.S. has benefited from the value of intellectual property versus scale.

On China’s Lewis Point (discussed extensively here):

If there was one thing that pushed us over the edge to publish it last November, it was our belief, now confirmed, that China and an increasing number of other emerging markets are caught in a price/wage spirals that they’re not going to be able to control through monetary, fiscal or legislative policy. These are an inevitable result, not only of the credit boom, but of the manufacturing engine they’re living by. This is the great differentiator between the U.S. and China. The reason a systemic inflation cannot happen here for a long time and why it is happening in China is simply this: When labor is in the business of manufacturing goods (as opposed intellectual property or services), labor has a call on rising finished goods prices. When commodities prices begin to increase and manufacturers attempt to raise finished goods prices, wage rates must go up or labor’s value is necessarily diminished. This is the dynamic traditional U.S. manufacturing businesses faced decades ago, and now, in China, it has reached epic proportions. We’ve seen 20% to 30% wage increases by the government on the low end and by contract manufacturers such as Foxconn (FXCNF), which does the Apple (AAPL) iPhone, on the high end. It has raised wage rates, almost 30%. China bulls believe this wage inflation is good for workers and so ultimately is going to help China accelerate consumer demand as an engine of their growth. Nonetheless, it hasn’t and won’t, for a couple of reasons. 1) Savings rates actually are rising in the major city centers. 2) China’s consumer confidence numbers and research on the ground in China both show that labor has never been less secure than they are now, which seems paradoxical. One would think that China’s new¬found international power, along with higher incomes, would make Chinese workers feel all is right with the world. The problem is that the cost of living is growing even faster. Without getting too technical, China has probably crossed over what’s called, in academic theory, the Lewis Point, where the movement of labor from agriculture into manufacturing reaches a peak and begins to taper off as manufacturing labor begins to reconsider whether life in fact wasn’t better back on the farm.

In short, it’s a bubble. A giant one. Historically every bubble ever blown has popped. I don’t see this going any differently. China can talk and threaten the US, it’s people, it’s intellectual property, it’s monetary system all they want. THEY are in the bubble and are continuously trying to juggle it. It comes down to wages. Sustainability in China will only be possible if the wages increase, paradoxical because low wages are the very thing that attracts so much business to China in the first place.

…USA USA USA USA USA!

Moot point though considering the world ends this weekend.