Wednesday, April 28, 2010

The Equation Must Feed

Click on the image above to see a better picture.

The equation must be feed, as you can see from the chart above, the equation is not being feed it's required feeding. Debt/credit creation is rolling over and has been for over a year. You can see the federal government spending increase to try and bridge the gap between what is required and what is being created by everyone else. As I explained in an earlier post, it's the equivalent of bridge to nowhere.

The equation must feed, if you don't feed it, it will start to feed on the non-funded liabilities sooner or later.


  1. So when do you think it will become critical? Will failed treasury auctions mark the start of the critical phase?

    Will it all go in order? Greece, Portugal, Italy, Spain, UK, Japan, and then the US? Or random?

  2. Wish I knew, actually I don't want to know. The final date and the exact details I don't know. I mean this could have ended in Sept 08 if massive intervention was done.

    I would say the countries in Europe will continue to collapse, it very well could spark another derivatives issue which could blow the whole thing open overnight.

    Without derivatives blowup... the countries of Europe will continue their decline but just like everything it doesn't have to necessarily move in a straight line.

    It could be random country as well like Japan, when the US goes it all goes though.

  3. Thanks for the reply. Yeah I'm especially intrigued watching Japan. Someday they are going to have a debt spiral/ currency collapse. Everyone will be like - "who could have seen that coming?"

    But also I wonder if Bernacke wakes up screaming in a cold sweat in the middle of the night. He's gotta know.

  4. Benny has done a ton of research into GD, his conclusion was the central bank failed by not being the true lending of last resort. As you can see he is wrong, which is why the Fed is no longer the lender of last resort but now the BUYER of last resort.

    There simply is no one that wants to borrow, or at least at the rate needed to keep the system going.

    You are correct, sometimes things come out of the least likely places.... would not be surprised by more deterioration in Japan.

  5. "There simply is no one that wants to borrow, or at least at the rate needed to keep the system going"

    I don't know why you keep writing this as something significant. The commercial banks have gotten around this limitation ages ago. They create money out of thin air, in fact they are mini-central banks.

  6. All credit comes from thin air, if not tell me where it is stored.

    Commercial banks have never gotten around this, that why credit creation has been negative for a year, and has been collapsing for over 2 years.

    Commercial banks will lend, there simply is no one to lend to at the rate needed. It's almost like you missed the last two decades in Japan, their system is exactly the same.

    If you can fund your own "credit" then the credit would never exist... Economic 101.