Margin Call, Gentlemen!…”Now, the margin call comes. Now comes the great unwind!”
by Bill Holter, JS Mineset
SGT Report.com
January 11th, 2016
Those who have been reading my work for any length of time know I have been adamant we would someday face a “global margin call”. I believe this call was issued last week! No matter how you look at the world, whether financially, geopolitically, macro, micro or whatever …what underlies everything in our world today is “credit”. Credit is used to build, wage war, to produce and deliver, to consume or to trade, EVERYTHING runs on credit. As a side note, in order for credit to be extended, the borrower must have some sort of “collateral”. This collateral can be physical, financial, or simply “faith”, meaning a good credit rating or at least trust by the lender.
We’ve now arrived at a point very similar to where we were in the fall of 2008 with several very grave exceptions. The world is facing a global margin call again, only this time there are no sovereign entities left with a clean balance sheet that can be levered up further. There are also no tools left available to the various central banks to administer monetary policy. They have already printed, monetized debt and lowered rates to zero. Richard Fisher has even admitted they have no ammunition left! As a side note, rates were cut to zero to make the higher debt balances serviceable but now even zero percent rates are not enough. From a macro standpoint, real economic activity is not generating enough cash flow (profits and tax revenues) to support this current debt. Lastly, there is no more “collateral” left to borrow against. Whether it be stocks, bonds, real estate, commodities or even “faith”, we are at the end of the road in the collateral department.
We have recently found out (not that we did not already know) through admission that many statistics have been wrong, and wrong for many years. What was reported and paraded as fantastic employment news on Friday turned out to really be a stinker as the truth turned out to be a whopping 11,000 job gain! What would have been considered heresy just 10 years ago is now “normal”, the Swiss National Bank has become a huge global hedge fund along with the PBOC and Bank of Japan. Does anyone doubt the Fed is not deeply in U.S. equity markets also (by the way, US monetary aggregates have gone into SHARP decline since the Dec. 6th report)? What kind of monetary policy is this? Sovereign “money” (currency) is foundationed on stock markets? Please keep in mind that global trade is crashing with the Baltic Dry Index making all time lows this past week and reports of tankers (non oil) all over the world being docked and empty. As for oil, there is such a global glut there are now fears of lack of storage space. All of this points toward a collapsing real global (depression) economy …which must service the most financial debt in the history of history!
The Rest…HERE
