High Stakes Gambling in a Town Called Zugzwang

Did you ever read "Jabberwocky""? It must really be read aloud for best effect.

'Twas brillig, and the slithy toves
Did gyre and gimble in the wabe;
All mimsy were the borogoves,
And the mome raths outgrabe.

"Beware the Jabberwock, my son!
The jaws that bite, the claws that catch!
Beware the Jubjub bird, and shun
The frumious Bandersnatch!"

He took his vorpal sword in hand:
Long time the manxome foe he sought—
So rested he by the Tumtum tree,
And stood awhile in thought.

And as in uffish thought he stood,
The Jabberwock, with eyes of flame,
Came whiffling through the tulgey wood,
And burbled as it came!

One, two! One, two! and through and through
The vorpal blade went snicker-snack!
He left it dead, and with its head
He went galumphing back.

"And hast thou slain the Jabberwock?
Come to my arms, my beamish boy!
O frabjous day! Callooh! Callay!"
He chortled in his joy.

'Twas brillig, and the slithy toves
Did gyre and gimble in the wabe;
All mimsy were the borogoves,
And the mome raths outgrabe.

So goes the poem "Jabberwocky", the classic and famed nonsense poem written by Lewis Carroll and included within his book "Alice through The Looking glass". It's a marvellous poem which I have always loved since I enthusiastically memorized it in my youth.

He wrote it in 1871, as a sequel to his 1865 novel "Alice in Wonderland".  It's a long time ago for such a popular childrens' story. The first novel, also a classic, was about Alice in a land found after she slipped down a rabbit hole in which the characters she met were based upon the playing cards in a deck of cards.

"Alice Through The Looking Glass" (which I'll refer to as ATTLG from here on) is set also in a fantasy world, but this time it is a world encountered by Alice after she steps through a mirror. It begins when she is playing with her two kittens, Kitty a black one, and Snowdrop a white one. After going through the mirror she finds a book containing strange unintelligible characters, and finds that it is mirror writing, and when held up to the mirror the reflection of the writing in the book can be read. And what she read was the poem "Jabberwocky". As an aside, Carroll wrote the first verse of jabberwocky several years earlier, during 1855, and the rest of the poem was apparently added onto the first stanza 16 years later while writing ATTLG.

The main characters of ATTLG are, unlike Carroll's prior novel, representative of pieces from the game of chess. Thus the King and Queen, in both chess and playing cards provide continuity as do Mad Hatter and March Hare, but the game is now chess. In Looking Glass, each field is a chess square, a Red Queen and a White Queen, and the brooks which Alice crosses to the next field are each a move in the game. Alice is a pawn in the game, and when she crosses the last brook she is promoted to a Queen just as in chess. She grabs the Red Queen thus checking the King and the game comes to an end. Alice wakes up and finds her kitten again.

The game of chess itself appears to have originated in India about the 6th century where it was called Chaturanga, which in Sanskrit refers to 4 divisions of the military - Infantry, Cavalry, Elephants, and Chariotry. It made it's way to Persia about 600, and upon the Muslim conquest of Persia in 633 became known as Shatranj. Then it passed to Greece, Portugal, Spain and Europe, where the "Shah" (in "Sha-trang") became a "King".

Here are a couple of Templar Knights (the international bankers of that time) playing it in the 13th century:

Between 1200 and 1500 the rules evolved and some more pieces were added and it became the modern chess as we now know and play.

To my way of thinking, chess was an interesting choice of subject for Lewis Carroll to have made for his book ATTLG. His story was fantasy and illogical and full of paradox both in events and also in dialogue. Chess on the other hand could not be more different. It is logical, and strategic and sequential in nature.

The next person I would like to introduce in my little tale is Allesandro Salvio (1870-c. 1640) .  Salvio was a great Italian chess player in the early 17th century. He wrote several books about chess. In one of them he described a strategy which was used in chess to gain advantage particularly during the latter part of a chess game, called the endgame which had been used in Shatrang since the 9th century.

This strategy was given a name in the German language during the 1800s, and in 1905 a well known German chess champion wrote about it in his chess magazines and books, and introduced the German word for this strategy into the English language. His name was Emanuel Lasker ( 1868 - 1941)

This chess strategy I am talking about is called "Zugzwang".

At this point I should mention that when I decided to write today about Zugzwang, I began my research for my article, and quickly discovered an article in Dailyreckoning which can be seen here about the very same term and discussing Bernanke's congressional testimony during May 2013. I was put off for a while upon finding that, but on reflection I decided that what I planned to say would not be diminished by the presence of that piece. I wouldbe  relevant for readers so long as I firmly connect the idea of Zugzwang to my topic, and so long as I stick to my guns and plough on in the right direction there would be no plagiarism. So with that said let's get back to the main story.

Zugzwang, in chess, is the name used to describe a situation whereby one player finds it his turn to make a move, but there is no good move to make. The player must move. Every available move worsens his position. Therefore when our player eventually, and reluctantly, makes his move, it is a step towards disaster which his opponent will capitalize on and exploit as much as possible, and it leads some way towards loss of the game.

For beginner chessplayers here is a beautifully clear example of Zugzwang:

Credit: I found the above neat little picture here.

For non chessplayers, the above shows the white pawn about to be taken by black king, but white king is protecting the white pawn leading to the situation shown. However white must now make a move, his pawn's progress is blocked, he has no other pieces left, the white square beside his pawn is attacked so his king can't go there, therefore he must move his king .... away from his pawn. Zugzwang! Next move black gets the white pawn.

So now we get to the big issue.

The powers that be have run the Keynesian designed economy into a wall. Not for the first time. Every 30 years or so this happpens. The recipe for solving the situation is long worked out and tested. The government must quickly note and admit the arrival of a recession, then borrow as much as it can and print the rest of the required capital. It then deficit spends thereby pumping money and activity into the economy until the private sector revives and takes up the slack. At that stage the money priming can be eased (tapered off) and soon after ended. It worked in the 1930s, eventually, it worked in the 1970-80s eventually. Here we are once again.

Now I have already characterized this economic strategy as a trading strategy called the Martingale gambling strategy in a previous article called: Rogue Traders, Martingales and Central Banks in January 2014. The fact that some managers of economies call this an economic strategy is irrevelant to the fact that it is a gambling strategy being used for running economies. It is also a long discredited trading strategy, which led for example to the trades of "rogue trader" Nick Leeson and the bankruptcy of Barings Bank. The idea underlying the martingale is to play double or quits when in a losing trade and underwater (in negative capital) trading with borrowed money. Hopefully, eventually, a single win will materialize which clears the problems away. Until the win comes, keep on doubling up with each bet. If you can borrow more you can win and get out. And a central bank can print as much as it requires enabling inevitable victory with a Martingale plan. So they say. But even though that is assumed, I wonder if nowadays a CB really can print as much as it requires.

The real world has an obvious problem with this. If you are sitting at a poker table, and winning big, and your opponent says "Double or Quits". You have the ability to make a decision whether to play or not. If you win, he owes you double the debt, if you lose, the slate is cleaned, but your winnings accumulated so far are gone. So I think it is fair to say that while the debtor likes the martingale strategy, the other party, the counterparty has some thinking to do when offered the bet.  Can he pay off a bigger debt? Can he pay what he already owes? Accept or refuse? More credit, or not?

Now in the rarified world of central banks and politics, there can be an ability to not notice reality creeping up until a moment of crisis pulls back the curtain of spin and words which conceal a real problem. This is such a situation.

In our example a central bank can always print more dollars or euros or pounds, to prime the pump and fund increased deficit spending by the government as it tries repeatedly to kickstart a stagnant economy which has stopped generating sufficient taxe receipts to pay for said government's employees, projects, and careers.

So during the 1970s the stagnation took over, the money printing began. Oil producers didn't want declining dollars for real oil and so they hiked their prices in a reaction to money printing. It moved into stagflation.

Physical wealth like Oil and gold rose in price as a result. To compete with these the return on debt had to rise. Interest rates rose to enable bonds to be sold to finance the government and fund the next money printing. It nearly came apart. But after increased private business failures in 1980-1981 the stock market made a higher low in 1982 and things took off. Before moving on, let's consider for a moment if that higher low in 1982 was higher in real inflation adjusted terms? A lot of money had been printed during the late 70s.

Maybe in inflation adjusted terms the late 70s low might have been closer to the 82 low (in real purchasing power adjusted price) than a simple look at a chart would suggest. (ergo historic stocks charts fail to show the latter half of recessions/depressions except as higher lows) But I'm not arguing which was the lower low, that's not the point. My point is that the stock market rises during times when businesses are failing if money is being printed. So the 1936 stocks high was during the depression, significant lows followed. The 1980 high was something similar, in 82 there was a selloff.

And as I just said, here we are again. Stocks making highs, businesses going out of business. But the inflation indicators have been changed, and the money printing seems to not have produced inflationary effects - so say the official economists and governments (their new CPI formula does not include energy as it did during the 70s). They can point out that interest rates have not risen like they did during the 1970s. They point out the stock market highs and say "Look at the signs of green shoots".

Well the money priming of the freshly printed money has propped up the financial sector, it is true. The stock market has risen. But here is a little problem. Despite the claims that we are in a financial dominated economy, what remains when finance stalls? Are there any voices saying "What about the consumer economy?"

So here is how I see it.

The "Central Banks" printed as per Keynes, and deficit spent and saved their closest friend, "Finance". But they did the opposite to the "Middle Class", cannibalizing it via low interest rates to pay the banks.

The Central Banks' partner, "Government", taxed "Middle Class" to raise money which also cannibalized "Main St" since these are comprised of the same individuals. "Government" also in a regulatory fashion pandered to, and are still pandering to their closest friend "Multinational Corporations", which require a Main St (somewhere) to make a living off of.

But by now the Main St depression ripple has now gone round the globe and is returning to home as a wave. This means the big caps will face decreasing advantage, leaving tricks to produce expected results. Corporations borrow fresh money and buy their own stocks in mini replica of the Central banks buying their own bonds. That will only last a certain time, so pretending is going to get more difficult. It's important to note that big cap corps are now in the same boat as central banks, made of high debt and stocks ownership. Their fates have intertwined.

So until "Finance" lets some money into Main St, tax receipts will stay down. Until Main St gets fresh money, who will buy the stocks and property back off the central banks and wealth funds who currently hold these assets? The powers that be see now that Main St needs money, and their circle will not complete itself until Main St gets enough money to restart itself. And money in Main St will put pressure on interest rates to rise, and bonds to fall. But they still need to sell bonds to finance their affairs.

So they print and buy their own bonds themselves. "It's not so bad and it works" they say. Except for one thing. There are a lot of other bonds already out there which fall due for renewal some day soon. Those bonds are owned by heavy hitters at this particular table of poker players. During the 70s the sellers of oil saw money printing and put they their prices up to compensate for it. Sovereigns are unreasonable like that! That was bad for the powers that be. After some wars in the middle east it went away. And today we see wars in many places where energy comes from, or through. This is not a coincidence.

Come back to the game being played at that table. Let's assume it is more like chess than poker, but with high stakes gambling on the outcome. Double or quits reduces ability to pay debts already racked up, but nobody wants to leave.

Let's assume that big bondholders (eg China/Middle East) are playing against energy producers (Russia, Middle East) and energy consumers US/EU/China). Let's assume that consumer nations are concerned to a high degree that their future energy costs do not rise, but they still want to print new money because although they have "done" finance, they want to "do" their consumers next with fresh money. However if energy costs rises, that hits the consumer, and that will undo the plan to revive (the taxpaying) Main St within their nations.

How can the western central banks/military deal with competition to buy energy from the east (who are willing to pay more for it than the west) and at the same time print more money, and at the same time avoid bondholders selling their bonds and causing interest rates to rise? The reaction to printing will undo what they have planned to restart the taxpaying Main St within their nations too. So it's a "teams of nations" game not single nations.

Main St lies on the casualty table gasping and it is the hard worker that pays for the big extended family. The cleverest of the lazy relatives who live off Main St's tax payments stand nearby and look on in horror. They get the implications. Many less well informed parasite relatives are at home watching TV totally unaware of this real life drama which will decide their future lives.

Back in the playing hall, the air is getting so smoky the big players can only see some of what their opponents might be doing while their hands are out of sight. It once seemed real, but sometime a while ago reality shimmered and vanished. Now everything looks fantastical like maybe the Jabberwock's world. All solutions carry a big problem embedded inside them due to the reaction of the opponent to that action.

The players look across the table into each other's eyes. The piano player has come to the end of his tune and stopped. Nobody blinks. But somebody must make a move. Soon.

This is ZUGZWANG!!!

Best regards

Argentus Maximus

The author posts daily commentary on the gold and silver markets in the TFMR forum: The Setup For The Big Trade. More information about the author & his work can be found here: RhythmNPrice.


infometron's picture

check first mate!

Whoa! Really!

Edit: Great article AM. I wonder who is in the best position to tip the board?

For those unfamiliar with chess:

Ivars: Which one of the above is Rock and which one is Roth? :^)

treefrog's picture


II th

Dagney Taggart's picture

Who Needs Main Street

with robotics waiting in the wings?

Next generation nuclear power, rare earths, palladium, and silver.

Good general assessment, AM!

2c piece's picture

Interestiing chess position

Interestiing chess position to illustrate zugzwang. Whoever has the next move loses.

infometron's picture

July 4th weekend

Someone posted this earlier (sorry for not being able to find the original turdite link). On this July 4th weekend, I thought it was worth reposting, and I added a couple of additional items as well that seemed germane.

by Gary Hildrith

Have you ever wondered what happened to the fifty-six men who signed the Declaration of Independence? This is the price they paid:

Five signers were captured by the British as traitors, and tortured before they died. Twelve had their homes ransacked and burned. Two lost their sons in the revolutionary army, another had two sons captured. Nine of the fifty-six fought and died from wounds or hardships resulting from the Revolutionary War.

These men signed, and they pledged their lives, their fortunes, and their sacred honor!

What kind of men were they? Twenty-four were lawyers and jurists. Eleven were merchants. Nine were farmers and large plantation owners. All were men of means, well educated. But they signed the Declaration of Independence knowing full well that the penalty could be death if they were captured.

Carter Braxton of Virginia, a wealthy planter and trader, saw his ships swept from the seas by the British navy. He sold his home and properties to pay his debts, and died in rags.

Thomas McKeam was so hounded by the British that he was forced to move his family almost constantly. He served in the Congress without pay, and his family was kept in hiding. His possessions were taken from him, and poverty was his reward.

Vandals or soldiers or both, looted the properties of Ellery, Clymer, Hall, Walton, Gwinnett, Heyward, Ruttledge, and Middleton.

Perhaps one of the most inspiring examples of "undaunted resolution" was at the Battle of Yorktown. Thomas Nelson, Jr. was returning from Philadelphia to become Governor of Virginia and joined General Washington just outside of Yorktown. He then noted that British General Cornwallis had taken over the Nelson home for his headquarters, but that the patriot's were directing their artillery fire all over the town except for the vicinity of his own beautiful home. Nelson asked why they were not firing in that direction, and the soldiers replied, "Out of respect to you, Sir." Nelson quietly urged General Washington to open fire, and stepping forward to the nearest cannon, aimed at his own house and fired. The other guns joined in, and the Nelson home was destroyed. Nelson died bankrupt.

Francis Lewis's Long Island home was looted and gutted, his home and properties destroyed. His wife was thrown into a damp dark prison cell without a bed. Health ruined, Mrs. Lewis soon died from the effects of the confinement. The Lewis's son would later die in British captivity, also.

"Honest John" Hart was driven from his wife's bedside as she lay dying, when British and Hessian troops invaded New Jersey just months after he signed the Declaration. Their thirteen children fled for their lives. His fields and his grist mill were laid to waste. All winter, and for more than a year, Hart lived in forests and caves, finally returning home to find his wife dead, his chidrvanished and his farm destroyed. Rebuilding proved too be too great a task. A few weeks later, by the spring of 1779, John Hart was dead from exhaustion and a broken heart.

Norris and Livingston suffered similar fates.

New Jersey's Richard Stockton, after rescuing his wife and children from advancing British troops, was betrayed by a loyalist, imprisoned, beaten and nearly starved. He returned an invalid to find his home gutted, and his library and papers burned. He, too, never recovered, dying in 1781 a broken man.

William Ellery of Rhode Island, who marveled that he had seen only "undaunted resolution" in the faces of his co-signers, also had his home burned.

Only days after Lewis Morris of New York signed the Declaration, British troops ravaged his 2,000-acre estate, butchered his cattle and drove his family off the land. Three of Morris' sons fought the British.

When the British seized the New York houses of the wealthy Philip Livingston, he sold off everything else, and gave the money to the Revolution. He died in 1778.

Arthur Middleton, Edward Rutledge and Thomas Heyward Jr. went home to South Carolin tight. In the British invasion of the South, Heyward was wounded and all three were captured. As he rotted on a prison ship in St. Augustine, Heyward's plantation was raided, buildings burned, and his wife, who witnessed it all, died. Other Southern signers suffered the same general fate.

Among the first to sign had been John Hancock, who wrote in big, bold script so George III "could read my name without spectacles and could now double his reward for 500 pounds for my head." If the cause of the revolution commands it, roared Hancock, "Burn Boston and make John Hancock a beggar!"

Here were men who believed in a cause far beyond themselves.

Such were the stories and sacrifices of the America revolution. These were not wild eyed, rabble-rousing ruffians. They were soft-spoken men of means and education. They had security, but they valued liberty more. Standing tall, straight, and unwavering, they pledged: "For the support of this Declaration, with firm reliance on the protection of the Divine Providence, we mutually pledge to each other, our lives, our fortunes, and our sacred honor."


"What has destroyed every previous civilization has been the tendency to the unequal distribution of wealth and power." -- Henry George (1839-1897)


"The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants."

-- Thomas Jefferson

Marchas45's picture

That Was A Neat Read

Thank You. AM I'll never forget this word. Lol

ZUGZWANG!!! ( End of the Line) and it's getting close. Keep Stacking

InsAndArts's picture

Well written piece A. Maximus...always a pleasure to read.

"And a central bank can print as much as it requires enabling inevitable victory with a Martingale plan. So they say. But even though that is assumed, I wonder if nowadays a CB really can print as much as it requires.

The real world has an obvious problem with this."


This is the crux of the matter...the 'disconnect' from reality. Each time they raise the stakes.

This latest go round since 2008, they support about half of equities and buy 85Billion per month in Tbonds. Nobody can wrap their minds around that one. I can't.  This is some very thin ice. Never did any of that in 2000 did they?

You're correct, each time 'the strategy' gets increasingly bold, brazen, outrageous and then finally...in the very last moves, it breaks with reality.

treefrog's picture

saudi insanity

squib's picture

Very nice Argentus Maximus

And so, will we the proles (be allowed to) see the next move or will it be hidden like so much else...and we are presented with something actually several moves ahead (b/c the prior moves are hidden as always)? Faking us out with zugzwang, only to be given/presented with the next game/board/distraction.

argentus maximus's picture

States have had many options

States have had many options to play their subjects for fools and tax cows. They have far fewer option while playing other sovereign peers. We won't be privy to decisions, but with only a few viable options available to them, we can make reasonable guesses as to what comes.

Look to the repercussions of the past times sovereigns and their central banks did this and compare with the present and near future. It's the period between money printing and asset inflation, and with the misleading stocks high, though the old stocks low may or may not be seen again, depending on the chosen inflation.

They may draw important red lines in the sand all they like. Other sovereigns will just step over and look them in the face while doing so as Russia recently did to the west. All that is left to alter the character of this stagflationary cycle is new big data, new financial instruments, new energy, and mechanized new cheap labour (robotics which does not raise Main St+ the consumer tax receipt generating machine) which are material things if they get produced. The laws will be changed to suit the needs of any particular day and should not be relied on.

Dr Jerome's picture

Great read AM

I suppose that time works against all players as well. To stall and not make a move will eventually be a move. Is that where we are now? Everybody stalling, talking about moves they can make, but not moving.

boomer sooner's picture

When do we know the ZUGZWANG

When do we know the ZUGZWANG is in play? The attached talks about $50,000 handout to middle-class families. I don't think this will happen, because the free shit army would riot. My end game is near play, $10,000 to all who have a SSN, legit or not. Taxable of course.


Thanks AM, might have to break out the old stone board and see if the youngsters can make a match.

Add - interesting interview on IRD with Claudio Grass from Switzerland, first few minutes give a short rundown.


squib's picture

Beautiful, Argentus

Thank you for the wisdom, insight and sharing (effort).
It's so difficult to wrap the head around things and stay on track in this matrix.
Reasonable predictions always give one 'back up' (and layers) and this is key
as ' The laws will be changed to suit...'
Thank you for bearing with us noobs (new to asking questions and critical thinking, 2007/08 woke me up).

Off topic: Marchas45 - hilarious! (That's me, kissing a beloved boom stick)

stackaloha's picture

very interesting as usual AM

The move that begins the final process of losing this financial chess game will be hidden/shrouded until the results cannot be hidden any longer. Similar to the 2007/2008 crash and many others. The writing is on the wall at this point but the masses are unable/unwilling to notice. Who knows, the pivotal move in the ZUGZWANG may have already taken place? It seems possible, the snowball rolling down the mountain gathering material and inertia is just as dangerous early in it's existence when it is small as later on down the mountain, because it is all the same process. What matters is whether it can be stopped. Much too late for that now I believe. I hope to avoid direct contact by sidestepping. Thanks for the great read, very well done sir!

@infometron: Thanks for the Hillarious chess fight. I recognized Rik from young ones immediately and although I'm not sure I think the guy on the right used to play Vyvyan on that show also?  I liked that show when MTV used to play it weekly in mid 80's. Funny stuff about 4 college students sharing a flat. A trendy socialist, a knucklehead punk/metal guy, a hippy, and a capitalist. That show always featured a band from that era also. I'll have to watch that stuff again now I think. Thanks for the reminder!

squib's picture

Dr. Jerome reminds me

'You can choose a ready guide in some celestial voice...if you choose not to decide, you still have made a choice' - Peart, 1979

argentus maximus's picture

Poor old Rik Mayall. He died

Poor old Rik Mayall. He died three weeks ago!

I really liked the sheer anarchy in "The Young Ones". He also made a gifted movie called Drop Dead Fred which the reviewers completely failed to "get". It lists on Rotten Tomatoes with a totally undeserved rating of 9%. Drop Dead Fred outraged the PC movie review community bigtime by breaking probably every "rule" and created fury from the first nosepicking gag.  But my kids laughed themselves silly at it as I did before them. Go figure.

RIP Rik. I'll watch and laugh at you in Blackadder from time to time.

infometron's picture

@AM & stackaloha Re: Rik Mayall

Yes, RIP Rik!

DeaconBenjamin's picture

Crimea euphoria fades for some Russians

Women inspect T-shirts, displaying images of Russia's President Vladimir Putin, which are on sale at GUM department store in central Moscow, June 11, 2014. REUTERS/Sergei Karpukhin

(Reuters) - When she was asked to give up a day's pay to help Crimea, Russian hospital therapist Tatyana could not hide her anger - why should she subsidise others when struggling to make ends meet herself?

Living in southern Russia close to the border with Ukraine, Tatyana was caught up in the euphoria that gripped the nation when Russia annexed Crimea in March and still welcomes "our" people back in the fold.

But more than three months on, she is worried that her wage of 9,000 roubles ($260) a month is not stretching as far as it used to, and fears she will be forced to take on extra work to cover the rising cost of food and utilities.

In Tatyana's hometown of Taganrog, the request for hospital workers to sacrifice a day's pay was taken up by only a few - by those people, she says, who wanted to impress their employers.

"The bosses informed us of this in June in a tone which made clear they recommended it ... They distributed and asked us to fill out a form for the donation. People started complaining - why should they donate to Crimea?" said Tatyana, 52, who declined to give her surname for fear of retribution.

"In our department, not one of us made the donation and our boss understood because she was of the same opinion," she said by telephone.

Russia started a new low-cost airline to Crimea, Dobrolyot (Good Flight), which made its maiden flight to the region's capital, Simferopol, last month.

But with the first wave of tourists back in Russia and complaining about bad service and amenities, the 'champagne effect' of feeling that Russia had outwitted the West over Crimea may have started to wear off.


transplanted baby's picture

Wonderful article

and I get to the end, and it reminds me of the shoot-out in The Good, The Bad and The Ugly. (sorry, can't paste it now- go to you tube). The guy who wins is the fast shooter who knows what the others are holding. Don't blink.

infometron's picture

@transplanted baby

here it is:

boomer sooner's picture

From John Mauldin


Snippet from inside.  My question is who is playing who, or is the game just changing leading players in cntlP openness.  We know virtually all CB's are printing behind the scenes, but now the ECB is taking the stage.

Yellen’s Counter-Riposte

On July 2, two days after the release of the BIS report, Janet Yellen took the stage at the IMF conference and basically said (translated into my local Texas patois), “Kiss my grits.” She was having nothing to do with risk and productivity and spent her time defending the low-rate environment she has been fostering in the US. With just a brief hat tip to the fact that monetary policy can contribute to risk-taking by going “too far, thereby contributing to fragility in the financial system,” she proceeded to maintain that monetary policy should “focus primarily on price stability in full employment because the cost to society in terms of deviations from price stability in full employment that would arise would likely be significant.” (You can read the speech here if you have nothing else to do and your recent entertainment options have been limited to watching the microwave cook.)

In other words, Janet has her dual mandate, and the rest of the world can go pound sand. When she did allude to the risk of financial instability, she hastened to say that it was not something that would require a change in monetary policy but would instead call for what she termed a “more robust macroprudential approach.” In fact she used that word macroprudential no fewer than 29 times. For those not fluent in Fedspeak, what she meant is that we can deal with financial instability through increased regulation procedures, whatever the hell that means. Exactly what did macroprudential policy do for us during the last crisis?

Hold that thought as we move on to Mario Draghi, who piled on the next day, as if to reemphasize that the leading central bankers of the world are simply not going to pay any attention to increasing financial instability risk. (Interestingly, the voice recognition software that I use to dictate this letter insists upon transcribing Draghi as druggie. Given what he is pushing, maybe it knows more than the typical software package.)

Immediately following a European Central Bank meeting, Mario gave us the following statement:

The key interest rates will remain at present levels for an extended period ... [and] the combination of monetary policy measures decided last month has led to a further easing of the monetary policy stance. The monetary operations to take place over the coming months will add to this accommodation and will support bank lending.

My friend Dennis Gartman summarized the actual meaning of Draghi’s comments quite succinctly:

In other words, European-style quantitative easing is now the course that the Bank shall take. As we understand it ... and this is a bit confusing and shall take a while to fully comprehend what the ECB has done and shall be doing ... the Bank will be making as much as €1 trillion available to the banks in two early tranches and will make that money available for the next four years as long as the money is being used for direct lending operations.

Mr. Draghi made it clear that the new program is complex and shall take some time for everyone to understand the program but said that he is quite “confident that banks will quickly understand” the program’s details and will embrace it.

My own interpretation is that Mario said, “I’ll see the Fed’s tapering and raise it by €1 trillion.”

Wow! A double-teamed double smackdown! Even The Rock would be impressed.


DeaconBenjamin's picture

Mike Maloney: The Dollar As We Know It Will Be Gone in 6 Years

silver66's picture

squib--free will

i use that quote frequently with my teenagers


Spartacus Rex's picture

High Stakes Russian Roulette: Banksters Versus The People

So Many remain mathematically challenged. It is a known Fact that 2013 saw just over Eight Hundred Million (800,000,000) Ounces of Silver produced. But hey let's be generous, round it up and call it 1 Billion Ounces of Silver produced for the entire year of 2013, and round the fiat price of Silver to 21.00 just to keep it simple.

So simply 21 Billion of counterfeited QE Fiat could purchase an entire year's worth of Silver Production.

Now think about how the Phed Reserve Banksters have been creating 85 Billion of counterfeited QE Fiat out of thin air each and every month for YEARS!

ie In a SINGLE MONTH of Phed Bankster counterfeiting, they can easily purchase over FOUR YEARS of actual Silver production, X 12 Months and now we're talking a half a Century's worth of Silver production with their counterfeited fiat paper. Two years worth of QE counterfeiting buys an entire Century's worth of Silver production.

And QE to Infinity has been going on for how many years now?

The reason why this is not presently obvious, is that the Banksters have funneled all of the freshly counterfeited QE Fiat to the 1%, ergo why the "Money Velocity" Charts are screaming All Time Lows!

And just like the Elites did back in 1929 right before they pulled the plug on the Stock Market, because people simply refuse to learn from history, they will once again, suddenly and without any warning whatsoever  snap up every available Ounce of Precious Metals with their gifted Trillions of counterfeited QE Fiat  (at Taxpayers Expense, no less) while everyone else (except the physical stackers) will see their investments, pensions and retirement accounts, life savings, bank accounts and fiat on hand go up in smoke, just like the flash paper that Bookies used in case of being raided by the Vice Squad.

So think long and hard about those Numbers above, when grasped and comprehended properly they are screaming a warning to the wise to forget Fiat "Price", don't walk, RUN and pick up as many Silver Dimes, Quarters, Half Dollars, Silver Dollars, and if you can afford it, Gold Coins as well, because this simply isn't a GAME, ergo "ZUGZWANG!!!" This is actually Life or (Starve to) Death Survival, and Those who have been through the Meat Grinder, refer to it as FUBAR!!!  Cheers, S. Rex

Spartacus Rex's picture

Koos Jansen:Chinese Gold Demand 947 MT YTD

Chinese gold demand, as measured by SGE withdrawals, accounted for 27 metric tonnes in week 26 (June 23 – 27), year to date the counter stands at 947 tonnes. A quick calculation tells us 639 tonnes (SGE withdrawals – scrap – mining) had to be imported for this, annualized 1278 tonnes. Note, these are estimates. For a clear structure of this blog I will expand in a separate post on a recent article by Reuters titled “China gold imports may drop 400T hit by financing curbs”.

My research indicates that SGE withdrawals equal Chinese wholesale gold demand. For more information read this.

Shanghai Gold Exchange withdrawals 2014 week 26

This is a screen shot from the weekly Chinese SGE trade report; the second number from the left (blue – 本周交割量) is weekly gold withdrawn from the vaults in Kg, the second number from the right (green – 累计交割量) is the total YTD.

Schermafbeelding 2014-07-05 om 17.49.42

This chart shows SGE gold premiums based on data from the SGE weekly reports (it’s the difference between the SGE gold price in yuan and the international gold price in yuan).

Shanghai Gold Exchange gold premium

In Gold We Trust


Spartacus Rex's picture

France lashes out at dollar dominance in int'l transactions

By Michael Stothard
Financial Times, London
Sunday, July 6, 2014

AIX-EN-PROVENCE, France -- France's political and business establishment has hit out against the hegemony of the dollar in international transactions after US authorities fined BNP Paribas $9 billion for helping countries avoid sanctions.

Michel Sapin, the French finance minister, called for a "rebalancing" of the currencies used for global payments, saying the BNP Paribas case should "make us realise the necessity of using a variety of currencies."


The writing on the Wall is using a larger Font with each passing day! Cheers, S. Rex

Spartacus Rex's picture

Lifted From Jesse's:

Video: The Truth vs. DC's Propaganda Machine

from BillMoyers.com


Spartacus Rex's picture

London's scandal-hit gold price fixing under spotlight this week

By Jessica Berthereau

“The World Gold Council (WGC) will host an eagerly-awaited forum with retail and central banks, exchanges, mining firms, refiners, traders and other industry groups, while Britain's Financial Conduct Authority (FCA) watchdog will attend as an observer.”

“Analysts said that the market price of gold, which is driven by investment and jewellery(sic) demand, could climb as a result of an overhaul.”

LMAO! Really? Gee, I wonder what was their first Clue?

Full article @


Hammer's picture

Reality for the ordinary

Reality for the ordinary man/woman

Syndicate contentComments for "High Stakes Gambling in a Town Called Zugzwang"