by Karl Denninger, Market Ticker:

There’s only one problem — your belt sucks and even a 5-point harness wouldn’t help with what’s coming.

I’ve been warning about this for a long time.  I’ve been laughed at too, especially as the market screamed higher over the last few years.  But as I’ve repeatedly noted, stock prices are immaterial until and unless you sell your holdings; they’re nothing more than a ghost in a machine until you do that.

This is very different than $100 bills in your safe, or alleged cash in a savings or checking account — provided, of course, that said amount is below FDIC limits (go ask depositors OVER FDIC limits when IndyMac blew up how that worked out for them.  And oh, by the way, it was later proved that IndyMac collapsed due to accounting fraud that the FDIC knew about and deliberately ignored with the individual who overlooked the backdating of deposits having done the same thing during the S&L crises decades earlier; that is the government caused those depositors to be screwed out of their money — on purpose.)

Treasury Direct is another place, provided you never allow a negative rate to come in.  Right now you can at least (into the range of a few million) buy a short term (e.g. 13 week or 4 week) bill and let it roll into a CofI — that pays no interest, but at least it doesn’t have a negative rate.  Incidentally, if Treasury intends to allow that horsecrap to happen here they’ll have to ban the CofI, as otherwise why would anyone accept it?

Oh wait — Greedscam says it doesn’t matter and is just a number.  He “justifies” this as there being such a thing as a negative time preference.  He’s wrong, for a whole host of reasons, not the least of which is that simply holding currency or a CofI doesn’t have a negative time preference and nobody will take that which they can evade under such circumstances; you’d have to be criminally insane to do so and, if you’re running someone ELSE’S money, you’d be committing criminal fraud.

No, “gold” doesn’t evade this either.  Ask the people who got blackballed for 30 years how that worked out for them in the 1930s.  The majority of the “smartest people in the room” died before they could redeem their “protection” and spend it.  Nor will Bitcon or any other so-called “cryptocurrency” do anything other than lead you straight into a prison cell; the latter is in fact the worst of all worlds as every transaction, ever, is indelibly cryptographically signed and thus can be traced to each individual transacting party forevermore and once linked to a person every transaction all the way back to the inception of said crypto that you participated in is linked to you.

If you won’t and didn’t shoot the government over “civil forfeiture” (stealing from people without convicting of a crime first) why would they fear you’ll shoot them if they simply lock down gold as they did the last time — or something even more outrageous, such as laying a 2% or 5% annual tax on all assets no matter what form?  Oh, never mind — you won’t be able to shoot anyone given the continued press for “gun control”; are you really so stupid as to not have figured out why they want it yet?

The 2/10 yield inversion, which has now occurred (this morning) has happened before every recession in the modern era.  There are plenty of people who think this time its different due to all the global central bank games and negative bond yields all over the world.  But you have to understand that nobody buys a negative yielding bond for the coupon; they are all speculating that the yield will go more negative and before time value decay destroys the spread the current price will rise due to new bonds being even more negative and thus they’ll make money selling that bond to someone else.

The utter insanity of this, especially when done with leverage which can be applied in unlimited amounts since sovereign bonds have a zero “risk weighting” — that is, you need hold no reserve against re-pledging them as collateral, is even more insane.  Yet our regulators have done that with the banks here, in this country.  Thus, a yield profile that unwinds on a disorderly basis can bankrupt every single financial institution at once.

Historically you always had to hold 10% in reserve as a financial institution — always.  That’s what “fractional reserve” means.  But Bernanke, ********** that he was and is, got inserted into the final TARP bill that passed a little one-sentence change in the rules allowing the reserves to be set to any amount by the Fed including zero.

I wrote about this at the time and said it would destroy our economy and markets — not immediately, but certainly.  It was one of the worst-read and worst-circulated articles in the history of the Ticker.  Not one Congress-****youer has ever questioned The Fed about this during their semi-annual testimony.  Not one.  Just like none did so after I faxed all 535 of those criminal jackasses at my own expense documenting that in 2008 as the market was collapsing the NY Fed’s own data proved that Bernanke actually pulled tens of billions of system liquidity out instead of adding liquidity as he claimed he was doing.  Oh, who ran the NY Fed at the time?  Anyone?  Tim Geithner, who Obama later tapped to run his fraudulent schemes at Treasury.  Did that SOB go to prison for intentionally exacerbating the crash?  Of course not.  How convenient.

Oh, and nobody went to prison for the millions of fraudulent mortgages and fraudulent, perjured foreclosure filings either.  Nobody.  Once again you sat on your ass even as millions of Americans were ripped off for literally everything they had to save a bunch of criminal bankers from the bankruptcies and prison terms they so richly deserved.

Well, here we go folks.  The ****storm is coming now.

Is the recession “now”?  Maybe, maybe not.  Remember that recessions are only declared by the NBER in hindsight.  The problem when there’s a recession isn’t the recession itself — those are ordinary business events.  It’s the leverage that was taken on that bankrupts people and even nations, not the recession.  If you have no leverage then you simply make less money for a while and tighten your belt.  For every turn of the crank in leverage, however, that expense ratio is multiplied and can easily drive your cash flow negative enough that you can’t pay the interest, at which point you’re economically dead.

Governments tend to think they’re immune from this.  They’re wrong.  Ask Greece.  The common chestnut is that a sovereign that issues bonds in its own currency can’t go bankrupt.  Sure it can.  It can have an obligation that requires it to issue more bonds to cover the interest payments and a buyer’s strike that makes them unable to be issued under any economically-reasonable terms.  No nation can protect against this — the only “alternative” if it happens is to ignore the premise of bonds entirely and print currency directly; once you do that the value of all existing bonds is instantly decimated by the percentage in which you do so plus a time value penalty because having done it once the presumption is that you will do it again.  The very first such instance violates an implied covenant on the issue of your debt and having done so the net present value of all outstanding debt instruments in that currency is severely impaired, possibly rendering them an effective zero.

Trump was elected by the people to force manufacturing back here into the United States from slave labor shops like China and Vietnam and to shut down the illegal invading army of slave labor coming from Mexico and elsewhere.  He was also elected to put a permanent stop to the medical collusion and monopoly scam.  The people had been squeezed relentlessly since the bubble burst in 2007, which was a con job in the first place orchestrated by Greedscam and Bush.  Bush was probably too stupid to realize what he was doing to people but Greedscam was not; he knew damn well that in the 1990s he and Clinton had intentionally robbed the Treasury and lied about financial conditions and markets.  But, of course, the interests aligned between the Tech Bubble scammers and the Government, which wanted to spend more money than it took in and enable foreign theft of everything not nailed down and half of what was, mostly to China.  Hell, between radar systems and even nuclear warhead designs we let it all go and established the “Chinese miracle” along with NAFTA, both of which were nothing more than covering up massive fiscal fraud through stealing assets in all their forms via subterfuge while destroying the American middle class by offshoring their labor to Mexico and China at slave-level “wages”, transferring the middle class American’s assets to the 0.1% of corporate board members along with members of Congress and their lobbyists.

Read More @ Market-Ticker.org