Conflicts & Pressure Points: Jim Willie

Some extremely powerful differentials in power are setting themselves up, in a manner never seen before in modern history. Those who dismiss the uniqueness of the situation are those who continually are surprised by events as they unfold. The pressure features the managers of the system, complete with corruption and fraud with official coverups in a never-ending sequence of crime scenes, pitted against the forces of justice and fair markets. Not a single fair market exists in USDollar terms. In pure Orwellian style, every single market has a US-based or London-based financial engineer at a control panel doing duty in price intervention. The Western defenders of the syndicate do not wish for the price structure to reflect the reality of physical shortage or the bounty of paper-based surplus, for the currencies to reflect true toxic value, and for the discovery price systems to reflect the raids of private accounts. The system is broken, and the pressure is building.

When young in school, the principles of entropy and enthalpy were introduced in chemistry classes. The ENTROPY was taught as the thermodynamic property toward equilibrium and dissipation. In layman’s terms it was the tendency for a system to seek greater randomness. Sometimes the dissipation comes from the scattered heat, but often the spread of physical items. Like smoke from a fireplace to spread about the neighborhood, like for the odor of nail polish remover to dissipate about the house or porch, like for the toys from a children’s playbox to relocate in every corner of the house, like for pet mice to scatter from a shoebox in a bedroom closet, like for the heat from a car engine to spread across the driveway and around the yard. Extend toward information to spread on grapevines about the office building.

The ENTHALPY was taught as a measure of the total energy of a thermodynamic system. It includes the internal energy, and the amount of energy required to contain a system by displacing its environment when establishing its volume and pressure. Enthalpy is a thermodynamic potential, which is layman’s terms can be thought of as the tendency for an object or system to seek its lowest potential energy. Like a tree toppling in the wind, like a group of items moving from the top of the stairwell to the bottom, like tattered roof parts falling to the ground, like wall ornaments hitting the floor during a storm or tremor. Extend toward a market removing its props, where all channels of data enter the room to effect change toward an equilibrium. Transfer the concept the the financial system. The lower potential energy comes from the extraordinary coils and loaded springs that hold the artificial price structure in place, even the information devices that distort truth. Enthalpy is more recently defined as the amount of heat content used or released in a system at constant pressure. Notice the rising heat within the current distorted financial system. Enthalpy is usually expressed as the change in enthalpy. The pressure in the financial markets is building. Heat is soon to be released in great volumes. The victim will be the USDollar, the USEconomy, the USTreasury Bond, and the price structures all held with great artificial forces. The system seeks the familiar randomness of fair equilibrium-based structures, not the 8am daily whack to the gold price from the London fix, not the regular 10am or 3pm rescue to the S&P500 stock index, not the regular ceiling placed on a 1% upleg in the gold price from capping efforts. The most prominent energy relief valve is the USTBond 10-year yield, which had moved below the 1.5% mark comfortably, as the Jackass forecasted. Its move toward 1.0% would signal systemic failure, as capital needs would give way to the vortex of the Black Hole of USTBonds described in May.

Consider in brief terms the many extreme conflicts and pressure points. None of these existed five or ten or fifteen years ago, yet all are somehow considered part of the New Normal landscape. Give credit to Mohamed El-Erian for his contribution to Orwellian logic, the new spokesman for established normality and revisionist equilibriumn stasis. Nothing normal here, even if declared by the Harvard escapee. The conflicts and pressures come from every conceivable financial arena and marbled office, every nook and cranny.

EURO CENTRAL BANK VS MARGIN CALLS

The European Central Bank is in a pickle. The opened their windows to accept all manner of toxic paper as collateral for newer fresher toxic paper. Market forces reduce the value of the sovereign bonds. The stream of debt downgrades is making life difficult within their chambers. The pressure rises for acquiring cash funds, as the resistance grows toward fair pricing of garbage paper bearing ink and signatures adorned in fancy calligraphy. The debt downgrades force many borrowers at the EuroCB window into a corner. They must deal with margin calls in the same way speculators do at the COMEX on futures positions. Thus the natural tendency toward lower potential energy. So conclude the ECB is nothing more than a purveyor of leveraged toilet paper with ornate trim, whose officers have dropped their pants, yet few notice. What holds constant is the utterly ghastly odor emanating from the window, where greater dispersion is underway of fecal effluence. It will end ugly, as the ECB will simply dispense paper currency to hold the system upright and to avoid collapse. They long ago became a Weimar apprentice. The conflict and pressure will grow until the pressure spills over.

EU TROIKA BANKERS VS PIIGS PEOPLE

The battle between bankers and people has been clear for over two years. The Greek Model is stark and clear. The bankers wish to redeem their toxic sovereign bonds by whatever means. The European Commission of babblers from Brussels has not shown any restraint, despite their forum being discredited as an empty chamber of voices. The finance ministers continue to talk a good game but with nothing under their belts to impress eager hands from the private sector in search of satisfaction, even a cheap thrill from a quick redemption. The Euro Central Bank has conspired to accumulate a mountain of worthless bonds in its basement, sure to disappoint their masters in the castles. Their balance sheets are running negative in the $trillions. On the other side is the people, the depositors at banks, the taxpayers to fund the government offices, even if their disheveled outposts resemble a tsunami on the day after in Athens. The stock investors and bond investors have been ravaged by the Troika who pay homage to the bankers with one vacant bailout after another. My forecast 12 to 18 months ago was that the bailouts would continue until the streets witnessed protest and violence. That has come. The pressures build for public release of anger. The dissipation is of people to the streets, out of their confined offices which no longer seem to harbor the function of added value in production terms. Random violence has grown common. The conflict and pressure will grow until the pressure spills over.

LIBOR BIG BANKS VS LILLIPUTIAN VICTIMS

The LIBOR scandal is best described as an assault on the center of Western banking, where the discovery process as part of justice will pry open every conceivable filing cabinet, computer hard drive, email box, and contract in a drawer. Permission is granted to search. The process will relieve the pressures upon distorted markets and inherent collusion. The brush fires will extend from the basic LIBOR forest to the narco money laundering fields to the Allocated Gold account basements to the raided GLD fund vaults. The extended brush fires will be enabled by the dispersion forces known to the crowbar. As the light is directed to the scummy basements and putrid laundry fields, the potential exists for serious systemic change as the pillars of syndicate controls are slowly removed. That process will come by means of erosion, faltering, and dismantlement. The other side is chockfull of victims, the lists becoming gradually clear. Any recipient of a swap contract is a loser. Any underwriter to an adjustable rate mortgage is a loser. Any financial engineer who re-geared complex machinery via swaps is a loser. They will all line up in lawsuits, sure to capture attention. The gaggle of class action cases will be just as important as the collection of high profile cases.

The armada of smaller victims will form like Lilliputians to tie down the oversized Too Big To Fail banks. Oh, how the Jackass despises that moniker! It means too big to control, too big to enforce the law, too big to succeed, standing as the billboard of failure on the flipside to the Fascist Business Model. Pressure will be relieved and lower potential energy will be realized as the big banks suffer massive lawsuit awards as pent-up grievances are addressed. Their control of the system cannot continue under such circumstances. The greater de-centralization of bank power will be the manifestation of much higher randomness. Systems might seek some concentration of power, but not like what the West has formed. The banks will eventually serve a noble but boring cause, of acting like utilities in bill payments, cash dispersal, and currency conversion. They will also manage credit dispensation. The age of the investment banker will revert to regional offices. The conflict and pressure will grow until the pressure spills over.

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