Generational Dynamics Forum - New Site

** 28-Feb-2020 World View: Collapse of interconnected, interlocking debt

richard5za wrote: > It may well be forced selling; it depends upon just how reckless
> the trading became; time will tell.

Warren Dew wrote: > I don't see how covering shorts can cause a crash, even selling to
> cover shorts. Covering a short is a buy action, so you're buying
> as much as you're selling.

A chain reaction panic would not be caused by recent reckless
transactions or recent shorts. It would be caused by the unraveling
of hundreds of trillions of dollars of interlocking debt that has
been built up since the end of World War II, and people increasingly
ignored the lessons of the Great Depression.

• IMF graph of Global debt growth, 1950-2017

That graph is a year old. Global debt has continued to increase
exponentially, and had reached $253 trillion by September, and is probably
around $260 trillion today.

-- Global debt hits new record of $253 trillion and is set to grow
even more this year
https://www.cnbc.com/2020/01/14/global- ... -says.html
(CNBC, 14-Jan-2020)

This debt has been growing exponentially for decades. In addition,
the number of interlocking connections has been growing exponentially.

(This is analogous to the interlocking, interconnected global supply
chains through China that are much in the news these days.)

So the chain reaction panic would be triggered by a major bankruptcy
in one company, which won't then be able to make payments on their
debts, and will sell off their assets, including stocks. Other
companies or hedge funds that counted on receiving those debt payments
would then be forced to sell stocks to pay their own debts, to
cover shorts, or meet margin calls.

The point is that this has nothing to do with recent transactions.
This has to do with an ocean of interlocking, interconnected debt
that has built up since WW II.

In 1929, it took for years for the interconnected debt to unravel
completely, and the market only reached bottom in 1933.

In 1987, ther was a "false panic" that fizzled quickly because there
was still a reasonable amount of interconnected debt.

In 2008, I wrote a lot about this interconnected debt situation,
especially after Bear Stearns and Lehman went backrupt. Normally, the
ocean of interlocking, interconnected debt is self-healing, but in
2008 it wasn't.

** Investors fear a 'chain reaction' in stock market.
** http://www.generationaldynamics.com/pg/ ... m#e080317b


** Investors are having another nail-biting weekend as Lehman heads off the cliff
** http://www.generationaldynamics.com/pg/ ... tm#e080913


The thing that I didn't understand in 2008 is that the Fed could
"print money" in massive amounts using quantitative easing.

The purpose of QE was specifically to allow people to borrow more
money instead of being forced to sell off.

So today we're facing the same situation we faced in 2008, but with
some differences. If you look at the IMF graph, it seems that debt in
the US has leveled off (at an extremely high), but has grown much
faster outside the United States. If a new panic begins, the Fed and
other central banks would try to "print money" to patch things up, but
with $260 trillion in global debt, that may not be possible.

Ordinarily I wouldn't be talking like this, but the world economy
is extremely fragile today because of the US-China trade talks, and
especially because of the world coronavirus crisis, which has already
resulted in millions of businesses in China going bankrupt. These
factors are an enormous shock to the body of interlocking,
interconnected debt that I described.

If we follow the same pattern as in 1929, then investors will spend
the weekend becoming increasingly worried, and be ready to sell first
thing Monday morning, resulting in a massive Black Monday selloff.

I'm starting to get a bit concerned because I have planned travel to the Philippines in June connecting through South Korea. My company is now banning all travel to or through China, Hong Kong and South Korea and is prohibiting people passing through those countries from returning to the office for 14 days. While I can work from home, it would be very inconvenient. I'm hoping the Wuhan flu burns out before then.

Me and my cousin, and his wife are planning to go to Niagara Falls in a couple weeks.
We are thinking of canceling.

If we follow the same pattern as in 1929, then investors will spend
the weekend becoming increasingly worried, and be ready to sell first
thing Monday morning, resulting in a massive Black Monday selloff.

They will also have three more days of exponentially increasing covid-19 infections.

The AlJazeera article says this:

"Meanwhile, Turkish media quoted officials as saying Turkey's police, coastguard and border security officials had been ordered against trying to stop Syrian refugees from reaching Europe, in anticipation of their imminent arrival from Idlib.

"We have decided, effectively immediately, not to stop Syrian refugees from reaching Europe by land or sea," one official who requested anonymity told Reuters news agency. "All refugees, including Syrians, are now welcome to cross into the European Union.""

https://www.aljazeera.com/news/2020/02/ ... 19672.html

This coronavirus is so overblown. Just look back at the flu pandemic that originated in Hong Kong back in 1968. About a million people died globally from that one. In 2019 about 57,000 people in the US died from the flu. Globally the flu kills between 290,000 and 650,000 annually.

Around 10,000 US citizens have died from the flu in 2020 so far. Why aren't the media freaking out about it?

Guest wrote:This coronavirus is so overblown. Just look back at the flu pandemic that originated in Hong Kong back in 1968. About a million people died globally from that one. In 2019 about 57,000 people in the US died from the flu. Globally the flu kills between 290,000 and 650,000 annually.

Around 10,000 US citizens have died from the flu in 2020 so far. Why aren't the media freaking out about it?

Because they haven't found a way to blame Trump for it.

Guest wrote:This coronavirus is so overblown. Just look back at the flu pandemic that originated in Hong Kong back in 1968. About a million people died globally from that one. In 2019 about 57,000 people in the US died from the flu. Globally the flu kills between 290,000 and 650,000 annually.

Around 10,000 US citizens have died from the flu in 2020 so far. Why aren't the media freaking out about it?

The issue isn't that it could kill a whole bunch of people, as the flu does.

The issue is that the organism MIGHT be so novel that a vaccine could be extremely difficult if not impossible to develop, and that it would create an unstoppable brush fire.

Also, the immediate problem is that the CCP has mangled the world supply chain(s).

The idea that this new disease could be a weapon makes everyone nervous that specific "viral hardening" may be built into it, such as long asymptomatic infecting time and rapid anti-targeting mutation rate (rapidly mutating identity markers which leave it's lethality intact).

Perhaps the virus is a two-part agent, where the first infection kills a few but sets up the survivors with a "backdoor" into their immune system that future waves of reinfection kill off in greater numbers.

Perhaps the "maker" has a vaccine already made, but holds it hidden as it's a weapon, which would be pretty stupid NOT to do if you've got this "fantastic" bioweapon.

People can get pretty crazy when "the scary unknown" comes into the big picture.

There's only way to deal with the Wuhan virus...

https://www.youtube.com/watch?v=aCbfMkh940Q

FishbellykanakaDude wrote:

Guest wrote:This coronavirus is so overblown. Just look back at the flu pandemic that originated in Hong Kong back in 1968. About a million people died globally from that one. In 2019 about 57,000 people in the US died from the flu. Globally the flu kills between 290,000 and 650,000 annually.

Around 10,000 US citizens have died from the flu in 2020 so far. Why aren't the media freaking out about it?

The issue isn't that it could kill a whole bunch of people, as the flu does.

The issue is that the organism MIGHT be so novel that a vaccine could be extremely difficult if not impossible to develop, and that it would create an unstoppable brush fire.

Also, the immediate problem is that the CCP has mangled the world supply chain(s).

The idea that this new disease could be a weapon makes everyone nervous that specific "viral hardening" may be built into it, such as long asymptomatic infecting time and rapid anti-targeting mutation rate (rapidly mutating identity markers which leave it's lethality intact).

Perhaps the virus is a two-part agent, where the first infection kills a few but sets up the survivors with a "backdoor" into their immune system that future waves of reinfection kill off in greater numbers.

Perhaps the "maker" has a vaccine already made, but holds it hidden as it's a weapon, which would be pretty stupid NOT to do if you've got this "fantastic" bioweapon.

People can get pretty crazy when "the scary unknown" comes into the big picture.

This. This is an excellent comment. Yes, this.

Guest wrote:

FishbellykanakaDude wrote:

Guest wrote:... People can get pretty crazy when "the scary unknown" comes into the big picture.

This. This is an excellent comment. Yes, this.

I very much DO think the whole "panic" as regards Covid-19 is completely insane,.. but the point is that people these days are looking for ANY stupid excuse to rant and rave and stir as much panic as possible.

..especially if it MIGHT hurt their political opponent.

"I was INFECTED by evil nazi hitler orange man...!"

"I was DISINFECTED by Clorox and my socialist facemask doesn't fit properly,.. but I don't care...!"