The Grand Finale Pt. III: Janet Does Davos (latest update p. 195)

A potential false flag is a wild card in the scenario obviously...

I don't address it because it's just not my area of expertise, but I could see that used as a tool at the appropriate time in this...

Honestly if the collapse is 10 times as bad as the Depression, and I agree with you that it will be....they won't need a false flag. They will have to implement martial law with soldiers on the streets in the armored vehicles, the rioting, crime and desperation will be rampant.

That is another big difference between then and now....In the 30th people were generally decent and would help each other. People will slit your throat for $20 today. Racial wars.


Sheesh.

Honestly if the collapse is 10 times as bad as the Depression, and I agree with you that it will be....they won't need a false flag. They will have to implement martial law with soldiers on the streets in the armored vehicles, the rioting, crime and desperation will be rampant.

That is another big difference between then and now....In the 30th people were generally decent and would help each other. People will slit your throat for $20 today. Racial wars.


Sheesh.

Russia is in kindof a unique position, they have an "Emerging Market" growth, and bond/currency set, but they have a lot of stable resources (which many emerging markets don't have). I wouldn't invest in France, but I would be tempted to invest in Russia's energy resources, assuming that investment was sufficiently safe...

I wouldn't invest in Russia -- your money will be swallowed up in Russia's epic levels of corruption.

Well, I wouldn't invest in Wall St. either -- for similar reasons...

saddle, when will deflation hit?

if it really does end with hyperinflated (worthless) money,
no amount of good will, nor even control freak dictators
will stop the south from succession this time.

i'm curious how much of the midwest will follow.

What are your feelings on martial law due to this scenario?

I can't shake the feeling that Obama can't wait to use the upcoming crisis to implement martial law, suspend term limits amid the chaos ( elections won't be possible amongst the chaos ) and America will become a totally different entity. A socialist/ communistic society with a dictator, and part of the new world order.

The Grand Finale Part III: Janet Does Davos


Well here we are again. And as many of you know, I have “called it”, meaning I feel we have now entered a stage of the economic collapse that is beyond the “point of no return”.

Thread: I'm Calling It...

Now this collapse will not be anything like 2008-09, it will be exponentially worse, but it will be a progressive collapse, and it will happen in stages. Stage one began the minute three things happened and they all happened within two weeks of each other. First, the Fed taper of their QE bond buying program began in December of 2013 with a $10 billion dollar reduction, then continued in January of 2014 with another $10 billion dollar reduction, bringing the bond purchase program down to $65 billion per month, a 23.5% reduction in just two months, the effects of which began to hit the world markets in the middle of January. Second, the implementation of the Dodd-Frank banking rules and regulations began in January of 2014 (you can read more about Dodd-Frank in Part I of the Grand Finale). Third, the implementation of the Basel III Financial Reform regulations which also began in January of 2014 (you can also read more about Basel III in Part I of the Grand Finale).

In short they are pulling back on the amount of money in the system, and this will invariably lead to a credit crunch and, initially at least, deflation. This credit crunch is already happening, and it is currently extending into bonds and derivatives around the world as emerging market after emerging market finds their currencies under attack, and their bonds essentially worthless as failed bond auction after failed bond auction begin to pile up.

Recap:

So with the synopsis of the current events now in mind, in order to put all of this together we have to now recap the past (if you’ve already read and remember Part I and Part II of the Grand Finale you can probably skip this section if you are so inclined.) But if you haven’t read Part I and Part II I urge you to do so, without them Part III will be confusing and seem incomplete.

*From The Grand Finale Part I: What Is About To Happen To You, An Economic Love Story, Of Fifty Shades Of Green? 5/13/2013

Thread: The Grand Finale Pt. I: Here Is What Is About To Happen To You...An Economic Love Story, or Fifty Shades of Green?

Please review the section: Problem, Reaction, Solution; a Hegelian Love Story, from Part I of the Grand Finale. This section outlines the currency/economic reset as I see it happening based on the evidence I have collected.


*From The Grand Finale Part II: Behind The Green Door... 11/13/2013

Thread: The Grand Finale Pt. II: Behind The Green Door...

Please review the entire OP: Behind The Green Door from Part II of the Grand Finale. The OP of this thread gives a good re-cap and evidence to support my conclusions of where we have been, where we are, and where we are going.


And so history repeats itself yet again...


Janet Does Davos


Yeah, I “Called It” and I damn well meant it...

So yeah, I “called it”, but some of you might not completely understand what I meant by that. What I’m saying is, we have breached the "point of no return” in their plans to perform a controlled demolition of the fiat monetary systems of the world.

And if anything in my previous analysis has been wrong, it has been that I overestimated the strength of the world economy when I said that the 10 Year Treasury Yields crossing the 3.00% level was just a yellow alert – get yourself prepared signal. I expected the 10 Year Yield to have to cross into the 3.25% range to cause the kind of devastation of world currency/bond and derivative markets that we are seeing now. I was wrong, 3.00 to 3.10% was enough.

From the last week of December ‘13 into the second week of January ‘14 yields on the 10 Year Treasury Note broke over and remained over 3.00% for almost three weeks, the rise in yields corresponded with the opening round of QE taper announced by the FOMC in December of ‘13. The consequences of this rise in yields corresponding with the tapering of monetary expansion are currently being seen in emerging market economies and currencies around the world. From Turkey to Argentina to Russia the currency market went into turmoil because of the dramatic rise in interest rates at the very time when many of these countries roll over Treasuries for swap lines and repos, and issue their own bonds for their annual spending needs.

Understand this, the fast growing manufacturing economies of China, India, Brazil, South Africa, etc. are entirely dependent on the emerging market economies for the continued growth in their manufacturing economies. The mature or established market economies of the United States and European Union offer a stable to declining market at best, but the real growth in sales for manufacturing and exporting centers has been in the emerging markets. Now with the sudden rise in interest rates and a strengthening dollar, many of the emerging markets will be lucky to have enough cash on hand to buy food and energy for their people, much less a bunch of blue jeans and iPhones from China.

In short, with the taper the Fed has not only pulled the plug on world stock markets, they’ve also pulled the plug on any hope of growth in the world economy. The “Ogre of deflation" looms on the horizon smacking his lips and thumping his chest. A liquidity crisis looms like a thunderstorm on the horizon as banks hoard cash for Dodd-Frank and Basel III regulations. We are Wiley Coyote who just went over the cliff without realizing it, still running on air, pumping our arms and legs, looking across the canyon. But when we look down and realize there is no longer ground beneath our feet...

Well I think you get the picture...

But before you reach for your bug out bags, remember I said in the Grand Finale Part I this would be a controlled demolition, and while I think there’s no going back now, they can stall and prolong stages of this collapse with directed liquidity injections, and I have no doubt they will, and have already done this (you need only look at the stabilizing bounce in the Stock Market last week, the first week of Feb ‘14, despite terrible economic news and miss after miss on earnings to see an example of what I’m talking about).

In short, “controlled demolition” means just that – controlled. Because even though Wiley Coyote is running on air, he still hasn’t looked down to see his fate.

The collapse you and I will be witness too will be the worst in the history of the world (at least the history we know), it has no other way to go. If you want to know how much worse this will be than the Great Depression, simply look at the meteoric rise in world population since WWII, and the mountain of debt we have accumulated, both public and private. My math gives us a Great Depression times between ten and twenty (+/- depending on the factors you use). But instead of happening all at once and causing a world wide panic (they don’t want that to happen until the appropriate time after all) it will happen in stages. This collapse I believe will be progressive. It will look bad for awhile, then it will suddenly and inexplicably (because of a targeted liquidity injection and/or a war) look like it has stabilized for awhile. But eventually that stabilization will play out when the money runs out, and off to the races we will go again.

After all, Wiley Coyote never ever makes it to the other side of the canyon...

So the dry run stress test of Q3-Q4 2013 (admitted to by the head of the IMF, Christine Lagarde in a speech to the Economic Press Club) is over, the weakness and strengths have been determined, the players have their ques and are in place, the curtain has risen...


Let The Show Begin!


All The World Is Their Stage...

This brings us down to it, that question on everyone’s lips: How is this going to play out, and what is the time line?

The Five Ring Circus:

Remember the Opening Ceremony at Sochi and the Olympic Rings lighting up, and remember the one that failed to expand. Think of that ring as the stage or ring that has already completed its act.

Now you could group these stages differently, and many economists will as we move forward. I went with five distinctive phases in honor of the Olympics and the symbolism therein. And also because there will be a lot of overlap, just like the Olympic Rings. Furthermore some of the signature events within these stages may start sooner or later in the scenario, so feel free to group them however you would like. I’m not here to argue that point.

The First Ring, A Stage Already Gone Dark: In case you missed this act of the circus I will recap, it really began with the dry-run-stress-test in Fall of 2013, but you could argue that the beginning of taper in December of 2013 was the beginning of the actual collapse if you’re so inclined. I said in Part II of the Grand Finale that QE taper and Basel III/Dodd-Frank were inexorably tied together, and indeed they were. Because immediately after the announcement of QE taper by the Fed, on Jan 1, 2014 Basel III and the banking rules and regulations of Dodd-Frank became fully operational.

Taper was first greeted with enthusiasm by the world markets, a sign that the economy had turned and was moving forward in high gear. But then inexplicably (and as I warned in Part II of the Grand Finale) the bond and stock markets diverged somewhat as the yields on Treasuries began to rocket upwards, even while the Stock Markets showed significant gains despite the bad reports of retail sales and employment during the Christmas Season.

The yield on the 10 Year Treasury Note topped over 3.00% and stayed there for almost three weeks before pulling back on the bad data from the Christmas season. However the effect was fatal and already in play even though no one was reporting it at the time. Emerging markets, once flooded with money from the Fed had their spigots suddenly go dry, and their currencies and bond markets reacted accordingly. What little momentum the world economy had, just stalled out on the road.

The Coyote had stepped off into the thin air of the canyon.

The Second Ring, The Ring In Play (Pay particular attention to the woman with the bad haircut behind the curtain): Then came the January announcement by the FOMC that despite the “disappointing” economic numbers, and despite Ben Bernanke’s exit, they would continue tapering QE by another $10 billion, bringing the grand total to $20 billion or 23.5% (in degrees the tilt of the axis of earth) of the total bond buying QE program, and since the January FOMC they have consistently held to the position that they will continue the taper no matter what . Shock waves that had already begun to drag on Wall St. now hit full force and the DOW began to drop. Then came the State of The Union address by Mr. Obama, where the only really important thing he mentioned was the new myRA plan that would create an individual retirement account for every American, and that account would put their money into “zero risk” U.S. Treasuries. The timing couldn’t have been better. Hedge fund managers, leery of the overbought equities markets were already moving large portions of people’s 401k’s and IRA’s into the “safety” of bond funds. Government pension programs had already been directed to put every new penny into Treasuries, now the American people finally had some place “safe” to put their money, and the Fed finally has another way to soak up dollars in circulation. But you can’t sell a product that has a yield negative to inflation without safety, so a controlled demolition of the stock markets was (and is) necessary for their plan, and it has begun. And don’t think just because it stabilizes for awhile as the result of targeted liquidity injections that it is over. The second ring of this circus has only just begun.

We still have another debt ceiling fight coming up, that will lead to another rise in yields on Treasuries, that will lead to further erosion within the emerging markets, which will put more pressure on extremely over-leveraged exporting countries like China, forcing their hand to either allow defaults in their banking and shadow banking sectors to occur, or to vastly expand their monetary base with a bail-out and risk crippling inflation with subsequent revolution.

Without the green heroin of regular Fed liquidity injections to give them courage the DOW and world equity markets will fall, sometimes precipitously before they appear to stabilize at a new lower level. Envision a steep stair-case here, because they have a long way to go before they come back to realistic PE ratios in a receding world economy. Over the expanse of this collapse a 50% fall in the DOW is not out of the question here.

Wealth will be evaporating hand over fist, and near the end of this stage you will hear financial pundits begin to mention that dreaded Ogre of Deflation (as Christine Lagarde put it). The liquidity crisis will be in full swing, and as margin requirements increase because of volatility no investor will be entirely spared.

The Third Ring: Where The Players Are Warming Up In The Darkness: When the banks get their “direction” from their respective regulators regarding Basel III and Dodd-Frank regulations that have gone into effect. When yield on the 10 Yr has once again moved higher because of political wrangling over the debt ceiling. When financial pundits are talking deflation and bear markets, the lights will come up on the third ring.

Some of the more educated economists will begin talking about a “liquidity crisis” brewing in the exporting market economies.

The emerging markets will begin to totally collapse under the weight of rising interest rates and currency devaluations, putting more and more pressure on over-leveraged exporting economies like China. Something will finally give in Asia and/or Central America, defaults will begin to occur with snowballing regularity, a large banking center (or shadow banking center) in one of these exporting countries will fold, and though it may never be tied back to these defaults in the hindsight of history, Japan will suddenly come back into focus. Yield on Japanese bonds will climb as world interest rates climb, the Nikkei will plunge, and in the seeming blink of an eye Japan will crater because it has been ripe for that collapse for far too long now.

Japanese companies, over-exposed to Japanese bonds will begin to face a massive liquidity crunch, and the contagion which first spread from the seemingly small and inconsequential emerging markets, will now fully infect Japan and begin to spread to the rest of the Asian manufacturing base. Companies and countries that had begun by pledging Treasuries for liquidity at the Fed repo desk, will now begin to liquidate, and the yield on Treasuries will continue to fluctuate wildly though these emerging market treasuries may be soaked up in a flight to safety move from investors around the world. Debts will be called in these countries, public and private, in an attempt to scour up much needed liquidity.

Some time in stage II or III of this the Fed will hold it’s March FOMC and they will continue to taper, saying that the unemployment numbers are well within tolerances, and that the markets cannot dictate monetary policy (which is a complete reversal of the last five years). The key to watch from the March FOMC is whether they slow the taper to $5 billion, continue the taper at $10 billion, or increase the taper at $15 billion. This will be a primary clue about the overall timing of this event. A decrease in taper means the collapse is going faster than planned, a continuation of the current rate of taper means it is on schedule, an increase in taper means they want to speed it up.

This meeting, and the amount of Taper they continue, will also signal the change of a bull market to a bear market in Equities. Treasuries will have a mixed reaction at first, but will eventually go higher as bond fund managers, ever trusting of Fed guidance, realize the Fed isn’t really basing taper on economic conditions at all.

The Fourth Ring, Where The Players Are Rolling A Snowball Into a Mountain: Established manufacturing and exporting nations will be presented with a quandary at this point. Do they take up the policy abandoned by the Fed and do massive liquidity injections in the face of potential of hyperinflation and revolution in their over populated countries, or do they follow the example of the Fed and soak up the wealth of their newly created middle class, millionaires, and billionaires?

I believe they will follow the Fed into the initial deflation of this plan, knowing that the deflation won’t last forever. They are privy to the end game of this plan even if the masses are not, so they will knuckle down, bash some heads, steal the wealth, and allow the defaults just like everyone else, because simply put, it’s just that time.

So there will begin massive loan defaults and deflation in the manufacturing hub of Asia, and that contagion will spread westward into an already over-leveraged Europe. Stocks will continue to slide, interest rates around the world will continue to rise, liquidity and paper wealth will continue to evaporate, credit will become increasingly hard to find, and then one or more nations in Europe will require another bail-out.

But that bail-out will be denied (not in so few words of course) and instead will become a bail-in. The last of the hot money will flee Europe and Asia to the perceived safety of U.S. Treasuries (which has so far been relatively insulated from the effects of the building economic crisis).

Then when Europe lets loose the Ogre of deflation, the derivative markets will come into focus. Rumors of default on derivative contracts will surface, gold and silver will seemingly disappear from vaults around the world, and there will be a run on the COMEX ending in a COMEX default. Then the crisis will wash up on the shores of the USA, and by then it will be a juggernaut.

The Fifth Ring, Where The Players Stand Ready With Locked Hands To Take a Bow: So now the spotlight falls on the stage of the fifth ring, and the contagion of the world economic collapse has finally washed ashore in the USA. The Fed will stubbornly say this is all going according to plan, money will flee from other markets to Treasuries, and they will say the dollar has been insulated. It will look like they are ready to proclaim the peak of the crisis, the trumpets will blare that the dollar has endured, and then the COMEX will default, and perhaps a major business important to the infrastructure of the U.S. will run out of money, or a large bank will come into focus and claim they have enough reserves to survive the end of the world, then around three days later they will fold their tent like Bear Stearns or Leheman Brothers.

Precious metals and commodities will take a moon shot, interest rates will skyrocket, and the hot money will now begin to flee out of Treasuries. So falls the Oger of Deflation to the Genie of Inflation (again, Christine Lagarde’s terminology), or rather hyperinflation, and now the real pain for the average member of the worlds populations begins. The Fed may well reverse the taper course at this point, but it will be perceived as a panic move, and the markets will continue to fall, interest rates will continue to rise. Now instead of the word “deflation” falling from the lips of financial pundits, the word “hyperinflation” begins to be whispered in back rooms over whiskey sours and G&T’s.

Until finally, when the pain is bad enough, and the masses are screaming for someone (anyone) to save some small part of the value of their house and their life savings; someone, somewhere, will mention the words, “economic reset”.

And the Hegelian Love Story I talked about in Part I of the Grand Finale will be fully underway, and while the prospects are bantered about at world financial forums, China will back the Yuan with gold that has recently more than quadrupled in value, and possibly the promise of their rare earth mineral reserves as well. This move will force their hand. And so it will begin, the great currency reset will be underway, the dollar will lose hegemony as the World Reserve Currency, and the five ring circus will be complete.

And the Fat Lady will sing over America as night falls on the greatest country the world has ever known. Another great experiment failed...

*For details about the currency reset plan I see happening please see the section: Problem, Reaction, Solution; a Hegelian Love Story in Part I of the Grand Finale.

Now some of you will ask about timing, and my answer is as plain and educated as I can give at this point in the story. It has already begun, and it will move as fast or slow as the financial cartel feels comfortable with. I’ve outlined the major occurrences I see happening, so this is probably the best I can say...watch the signs!

However, with that caveat up front I will say this. If things hold to their current schedule we will see the fifth ring opening by Q3 or Q4 of 2014. There will be plenty of financial chaos to precede it, ups and downs, wild volatility, apparent stabilization, and precipitous falls from cliffs, but how long it takes before people will accept the prospect of a currency reset as I have outlined in Part I of the Grand Finale remains to be seen. That is the real wild card in this entire scenario.

But remember, they are ready, and they have all the time in the world. Ask yourself the honest question, are you ready, and what do you have?

Thanks for the info, this is amazing. They know that the only way to get rid of the debt that is burdened on all the countries is to do some type of reset. But I still say it won't go smoothly.

The paragraph below is Very sound reasoning and something I can agree with. Its one I have felt will dictate the decent into hell.

"Some time in stage II or III of this the Fed will hold it’s March FOMC and they will continue to taper, saying that the unemployment numbers are well within tolerances, and that the markets cannot dictate monetary policy (which is a complete reversal of the last five years). The key to watch from the March FOMC is whether they slow the taper to $5 billion, continue the taper at $10 billion, or increase the taper at $15 billion. This will be a primary clue about the overall timing of this event. A decrease in taper means the collapse is going faster than planned, a continuation of the current rate of taper means it is on schedule, an increase in taper means they want to speed it up."

Indeed, we're entering a liquidity crisis, just the raw numbers tell us that, and despite what Janet Yellen said to Congress today, her written testimony plainly says the Fed is committed to continuing the taper...so what do you believe, what she writes, or what she says?

Fed Chairmen have been famous for this little trick over the years...but usually it's what they put in their written testimony that actually gets done.

That was something that confused me in todays hearing. The market acted like it was un-taper time but the words from yellen were neither here nor there.

Now it makes sense.....ya right!

They always put things off until after November elections. What happens in March 2015 when there are no elections until November 2016? Of course by 2015 election mania will be in full swing and of course Obama won't give a rat's ass. Another two years of putting things off? They can't keep this up too much longer.