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Tick Tock

I am off filming for a few weeks now.  Apologies for not writing. I have had my head down with work.  Hope you’ll forgive me. Before I go a few scattered thoughts


8 years to fix the malfunctioning heart of the world’s financial and legal systems but nothing was actually done … and now the clock is ticking and  there is hardly any time left.

The number of red lights now blinking at us, largely ignored by those who are supposed to be flying this thing, is growing all the time.  It is not that any one of them is a clear harbinger of the end but taken together they paint a dismal and coherent picture – of a system eating itself.

What I mean is that every political and financial system, every bureaucracy, public or private is originally set up to do a necessary job. And the duty of those who work in it is to make sure the system does that job. But when the challenges facing the system change so that the system begins to no longer be able to do its job, those in it have two choices: they can work for the greater good and help change the old system into a new one better fit to the new challenges, or they can ignore the problems, forget the reason they and the system were created in the first place, and instead seek merely to get as much as they can from the failing system before it implodes.

It seems obvious to me that is where we are today,  both politically and financially. We are living in the End Times not because some angry supernatural being is coming to punish us, but because we are living in a system, a machine, which we built and therfore can change, but we have forgotten this. Some time in the recent past we crawled inside our machine, closed the last hatch to the outside behind us, and then forget there was an outside.  Our leaders are the worst of us. They are the lords of the machine and they are sure outside there is only chaos.  We must all save the machine. Their power and wealth demands it.

And yet they do not know how.

“Something Happened”  but “Noting appears to be breaking” 

So said JPM’s chief economist Bruce Kasman. He was refering to the recent extreme ‘turbulence’ on the stock markets and the continuing drop in global market values.  All I can say is that only  a person who lives resolutely in a linear world, despite it being over a 100 years since we discovered that our world is not linear but non-linear, could say such a thing. In a linear world effects tend to follow their causes quickly and clearly. When things are  non-linear, however, effects can surface long after and far away from their cause.

Mr Kasman, I suspect, held his breath, waited for everything to fall down and after a couple of days, when they didn’t he concluded nothing had broken after all. He looked at the on-going trend in events and saw they were much as before the inexplicable ‘turbulence’ and concluded that all was as before and the ‘turbulence’ was just ‘one of those things’.

He could be right. But I doubt it. Ours is a non-linear world and we should remember that. Think back to August 9th 2007. That was the day when PNB Paribas suddenly closed three large sub-Prime mortgage finds. The world at large had not even heard of sub-prime. To little fanfare the ECB pumped €95 billion in to the markets to steady nerves. It was not enough. The next day, August 10th The ECB pumped in another €156 billion, the FED injected $43 Billion and the BoJ a trillion Yen.

Five days later Countrywide Financial haemorrhaged 13% of it value. 16 days later Ameriquest the largest specialist sub-prime lender in the US collapsed and on September 14th there was a bank run on Northern Rock. It was a turbulent time.

And then do you know what happened? Nothing. Something had happened but nothing appeared to be broken.  The linear pundits went about their crooked business. Six whole months later Bear Stearns collapsed. Its a non-linear world.

And I think we are going to be reminded … again.



ETF’s – have grown to the point where any prolonged large scale exit will exceed the funds available to those who control the funds and make the markets. I think they know this and some time ago those market makers and fund controllers began to boost the credit they could draw upon.  Problem is the very banks they are agreeing larger credit lines with, are drawn from the same group of financial companies who make the ETF markets.

I have written about this before – ETFs – A warning  which contains links to the posts in which I explain how ETFs work  and why they are The Next Accident Waiting to Happen. In short the liquidity choke built in to the ETF market is that the ETF market depends very heavily on a very few financial firms who run the funds and make the markets.

We have already seen in the recent ‘turbulence’ that the ETF market is not so much liquid as fragile. When there is a scare people want out. They withdraw their money  which quickly leads to zero liquidity, which leads on to forced selling and as we have already seen prices will dump to far below what the assets in the underlying market are nominally worth. Leading to an even greater pressure to get out.

The ETF market with its promise of easy withdrawal means when there is an event which spooks people and they want out it happens in seconds not days or even hours,

What it means is that this time around I think it very likely the Central Banks will have even less time than they had back in 07-09, to act before the bomb goes off.  Which means in turn I expect no creative thought, only a knee-jerk reaction to do again the only things they know how to do despite the fact they have not worked.

Today it is not a bank run that will amplify some large local event in to a global wave, but a fund run.

Where might that trigger be?


The world in which and for which our old system was built is now changing around it in fundamental ways.


China is now making the move to position the Yuan as a rival reserve currency. To become a, or the, new reserve currency the Yuan needs first to be the clearing currency in much more of the world, in many more of the vital markets and be central to any relationship any country wants to have with China. So it seems important to me that Russia has now eclipsed Saudi as the  number one oil exporter to China and is now settling its oil exports to China in Yuan.  Gazprom is also settling some of its contracts with China in Yuan.

Saudi is now only the number three supplier to China. Angola is number two. And it is very clear if Saudi wants to regain its position it will have to accept settlement in Yuan. Will Saudi risk alienating the US?  Well China is a larger market for its oil than the US. And other countries in the region, less tied to the US are already forging close relations with China. Just a few months ago Qatar opened the first Yuan clearing hub in the region. Its central bank and China’s now work together and Qatar is poised to make itself the new Mid East financial centre for trading with China. At the moment all the local currencies are still pegged to the dollar because oil and gas are traded in dollars. But as more gas and oil deals are cleared and done in Yuan it would be less important for them to be pegged to the dollar.

Oil and gas is moving away from the dollar. China is the largest customer. They have clout. They also have in Hong Kong and Shanghai the financial centres able to house the trade. Shanghai in particular is looking aggressively to capture oil futures which would cement the Yuan’s position. Things, as they say, are a changing.

Apart from the fairly seismic changes this would herald in this massive market it would have even larger potential effects. The end game for the dollar is when it is no longer the sole or preponderant reserve currency. At the moment the US can carry a mind boggling amount of debt and find buyers for more. But once countries no longer need dollars for buying oil and gas then something will happen to the world’s appetite for US debt and the world’s  opinion of how much debt the US can sustain.

Why is China pushing the Yuan more aggressively now?  In my opinion, China  now needs, not just wants, but needs the Yuan to become a major settlement and then reserve currency. To my mind this is one part of how China might salve if not solve its out of control bad debt problem. China has a mountain range of bad debts in the financial vehicles created by its regional governments.

This we have all known for several years. Less well known is that China’s insurance industry is now up to its neck in these bad debts. When the Chinese central authorities tried to reign in bank lending the shadow financial sector ignored them and found ways around the limits. As the FT reported,

Egged on by provincial leaders desperate to keep the wheels of GDP growth rolling forward and cash-strapped property developers, other institutions have jumped into the fray. And one of the biggest are Chinese insurance companies.

By the end of January 2015, alternative investments surged 66.4 per cent year-over-year to Rmb 2.3tn, accounting for a whopping 24 per cent of total insurance investments.

I had more to write but sadly time has run out. I have to go immediately to catch a plane.  Bye for now.


26 Responses to Tick Tock

  1. Schatzie September 12, 2015 at 6:58 pm #

    David – thank you so much! Very informative. Do you think that (for the reasons you mention above) Qatar is being bundled into our TPP to counter its attraction to the “dark side” of China/Russia? Qatar just seems a strange player in our TPP, in my opinion.

    I also wonder if another gigantic load of economic collapse is coming our way because the oil and gas industry (here in the US) is way overextended, financially, with debt they now cannot service and which may trigger both the end of lending and an acceleration of bankruptcies, with the only “trickle down” palpable being economic pain for those at the bottom of the food chain.

  2. Spartacus Rex September 13, 2015 at 7:40 am #

    Hickory Dickory, Doc…

    “It is difficult to get a man to understand something when his salary depends upon his not understanding it.” Upton Sinclair

    I hope your better half is fully recovered.
    Both of you are continuously in my prayers.

    BTW: Bang On & Go Manchester United!

    S. Rex

    For in that universal call,
    Few bankers will to heaven be mounters;
    They’ll cry, “Ye shops, upon us fall!
    Conceal and cover us, ye counters!

    When other hands the scales shall hold,
    And they, in men’s and angels’ sight
    Produced with all their bills and gold,
    ‘Weigh’d in the balance and found light!'”
    — Jonathan Swift, The Run on the Bankers

    “Wall Street had been doing business with pieces of paper; and now someone asked for a dollar, and it was discovered that the dollar had been mislaid.”
    Upton Sinclair

    Paper is a check drawn by legal looters upon an account which is not theirs: upon the virtue of the victims. Watch for the day when it bounces, marked, ‘Account overdrawn.’ – “Ayn Rand, Atlas Shrugged”

    “The world will soon wake up to the reality that everyone is broke and can collect nothing from the bankrupt, who are owed unlimited amounts by the insolvent, who are attempting to make late payments on a bank holiday in the wrong country, with an unacceptable currency, against defaulted collateral, of which nobody is sure who holds title.”- Anonymous

    The issue which has swept down the centuries…and which will have to be fought sooner or later…is the people vs. the banks. – Lord Acton, Historian…1834 – 1902

    “We are all born ignorant, but one must work hard to remain stupid.” Benjamin Franklin

  3. steviefinn September 13, 2015 at 8:59 am #

    It does surprise me how the concept of a linear world seems to be hung onto like some sort of comfort blanket, by those who need only to look at history, to see that the idea is idiotic. Perhaps it gives them a feeling that they have control over events & the future while justifying their means to an end that just happens to suit them.

    In terms of the Corbyn phenomenon there are lots of people predicting a negative outcome for the 2020 election, as if they have some sort of crystal ball. The fact that no-one could have predicted Corbyn’s rise should at least give them pause for thought that in a complex system, predictions are basically useless. During the short period of the leadership election, most people did not expect the China crash, or the refugee crisis, but yet in a world which it seems to me is becoming ever more turbulent, they still insist on adopting a certainty about the outcome of the future.

    It could of course all end in tears, but at least now as events such as David’s above highly likely financial shitstorm, further blowback from the middle East, more evidence of climate change, the always unexpected & the Tories likelihood of not just pissing in those at the bottoms cornflakes, means that someone will at least be there who will oppose them on the above & other issues like TTIP.

    Good to see the abstainers arrogance & the initial Tory glee evaporate under the forces of uncertainty & I imagine that the Neoliberal steamroller might at least be slowed in the next four years through a true opposition – whatever happens in 2020. the Tories at least will not be able to rely on the historical support of their impersonators when it comes to issues such as their recent cynical attempt to use the refugee crisis, as an excuse to bomb those who are left behind, due to the fact that they cannot afford to pay pirates a £1000 to escape the mess that has already been made by our glorious all seeing leaders..

  4. Jim September 14, 2015 at 3:49 am #

    Instead of August 9, 2007, let’s go back to February, 2007.

    February 26, 2007, Greenspan warns that the economic cycle is coming to an end: “”When you get this far away from a recession, invariably forces build up for the next recession, and indeed we are beginning to see that sign, for example in the U.S., profit margins … have begun to stabilize, which is an early sign we are in the later stages of a cycle,” the Journal reported him as saying.”

    February 27, 2007

    Shanghai stock index plunged 8.8%

    February 28, 2007

    DOW drops 400 points, India down 4%, Singapore minus 3.7%, Japan down 2.9%, South Korea minus 2.6%, and Hong Kong down 2.5%.

    BTW, February 27, 2007 was a major top in financial markets in Martin Armstrong’s Economic Confidence Model. The date was predicted back in 1985.

    If the drop in August 2015, disclosed one troubling issue, it is the lack of liquidity. We have been warned time and time again of the lack of liquidity in the Treasury market. August, 2015 clearly discloses a lack of liquidity in the equity and futures markets. The market can no longer handle a market that turns bearish. Thanks to Dodd-Frank, the “market maker” was forced out, creating a major vacuum in a down market. If you noticed, the market action was down, stop, down, stop, no relief rallies. At some point, we are going to have a vacuum collapse as the market will become untradeable.

    2015.75 or October 1, 2015 marks the beginning of another trend according to Armstrong’s model.

    • tom kauser September 15, 2015 at 11:13 pm #

      In 2006 the rate increases where presumed to be tepid and ineffective as commodities prices were soaring and of course THE DOLLAR WAS ABOUT TO COLLAPSE and the FED was running out or SOON WOULD BE OUT OF MONEY TO STOP INTEREST RATES GOING TO DOUBLE DIGITS and…. 9 years later the FED has trillions of interest producing assets on its and not America’s balance sheet and continues to go to the fear well every hour of everyday even on weekends scaring people out of the rest of their income producing property?

  5. Shaun S September 17, 2015 at 12:12 pm #

    Linear or non-linear, there is a third possibility and that is “blinker vision”. That the majority of the “experts”, actors and players are all too concerned with their own little areas and any full “spectrum” vision is lacking. ie. they are too scared, lacking critical depth, or simply ignorant of all the other factors in the financial situation that we will find ourselves.

    Nice to see you back golem. Looking forward to the next bit with interest.
    PS. It is not only that the Chinese are selling treasuries and setting up alternative international financial organisations, they are also setting up the reserves necessary for a credible backup – gold. Several days ago the US (JPM ) had only enough for one withdrawal from their vaults, and they have a direct tunnel to the Fed gold vaults in NY !

  6. Ole Guy September 20, 2015 at 11:50 am #

    Good to see another blog that is spot on. Indeed the world is moving away from the US dollar in many parts of the world.

    I think you and I discussed that a couple of years ago when Obama basically took over the SWIFT system and used it to sanction countries. I stated then as I do now this will be our undoing. A world reserve currency needs to be neutral and not abused to further a countries or continent’s objectives. The world was then as I look out my window now tired of being bullied by the USA.

    Governments want people to believe they are punishing governments for their misdeeds and yet we are punishing populations and business that use or used the swift system to settle international debt. Our media here in the USA proudly parades sanctions and how they work so well and yet forget about the misery it is causing around the world. In some countries people starve and we should be proud of this? I am appalled.

    Governments around the world especially emerging governments are basically at the mercy of the Fed. I think the world has had enough and want a new basket of currencies so they are not choked out of world markets. Globally we are in a slump and no matter how the central banks manipulate their markets higher, the common person on the street is taking a beating. Governments wonder why their economy is not growing and yet forget they imposed new programs and increased taxes on us that basically destroys our disposable income. Many of us still buy basic needs and they too have gone up quite a bit. But hey we do not count food and shelter as part of inflation.

    Good to see a new post!

  7. Mike Hall September 20, 2015 at 11:40 pm #

    You have to read this piece by Johnathan Cook about the media and Corbyn..

    “… Corbyn is not just threatening to expose the sham of the PLP as an alternative to the Conservatives, but the sham of Britain’s liberal-left media as a real alternative to the press barons. Which is why the Freedlands and Toynbees, who are the keepers of the Guardian flame, of its undeserved reputation as the left’s moral compass, demonstrated such instant antipathy to his sudden rise to prominence…”

    – See more at:


    It’s one of the best pieces I’ve read… & I agree with everything he says.

  8. desmond September 24, 2015 at 7:25 pm #

    great to see you back Golem. Reserve currency changes are not smooth or predictable nor do they happen quickly. People mention the dollar the yuan and oil but there are other factors. i.e. to maintain their hegemony the fed themselves can debauch then trash the dollar. Start with NIRP then helicopter cash. Then rip roaring inflation that requires sorting (ha ha) by the same fed. So a new digital dollar but no cash, which can then be banned and as before gold as well.

    and that could be just the start of their new tools with more to follow….. including war when nothing else avails. they must see their biggest asset as their own military muscle.

  9. Salford September 27, 2015 at 5:20 pm #

    In the meantime the world of geopolitics could be coming to a crunch point in Syria.
    There are many players with different interests in the overthrow of Bashir Assads’ Govt,
    Turkey wish to suppress the Kurds and grab the oil rich area.
    Saudi Arabia and Qatar wish to install a compliant regime to enable a gas pipeline to degrade Russian near monopoly of gas to Europe. This is in line with Washington interests.
    Israel wish to consolidate their hold on the Golan Heights and exploit the oil/gas deposits there and offshore Syria.
    Finally for Washington, Syria is but a chess piece in the GREAT GAME picture of world domination, economic and military.
    The Great Game has not changed .
    Control of the trade routes and resources of the Central Asian heartlands, is ultimately the geopolitical target of the USA Empire of Chaos. Syria is a choke point at present.
    Vladimir Putin has had enough of the faffing about and has drawn his line in the sand in Syria. He is aware that if ISIS overthrow Bashir Assad’s Govt , the next target of this Washington proxy army is the soft underbelly of Russia, the ‘Stans. Turkmenistan ,Krygistan,Uzbekistan,Azerbijan,
    These countries are majority Muslim and ripe for Wahhabi extremist agitation, directed by the USA and financed by Saudi Arabia.
    China will also be affected by disruption of the high speed rail Silk Road trade routes and will not stand idle.
    Syria will be a major turning point to for who controls the world order. East or West..

  10. Jesse September 30, 2015 at 3:13 pm #

    Here is my ‘quote for the day.’

    “Ever since the Tories were re-elected, they have been engaging in a concerted campaign to undermine laws and regulations designed to bring proper controls to the activities of the legions of organised criminals, spivs, wide-boys and other bankers who populate the City of London, and who serve only the interests of the very rich within the Tory party. They are doing this deliberately and with every intention so to do, because it is directly enriching their friends.”

    Rowan Bosworth-Davies

  11. BobRocket October 8, 2015 at 9:29 pm #

    ‘I had more to write but sadly time has run out. I have to go immediately to catch a plane. Bye for now’

    And before Bob had time to digest what Golem had told him, he was gone.

    • BobRocket October 8, 2015 at 9:51 pm #

      23 days later,

      Life goes on as ‘normal’, DeutcheBank reports $7B missing, Tesco report less is more, Morrisons less match, more torch.
      Bank rates on hold, IMF global downgrade.
      UK grain harvest up, prices down on news.

      The monetary price of everything seems to be falling through the floor.

      Is this the death of money ?

      Is this really the end of times, I’ve noticed the web is going dark, blogs not updated.

  12. Patricia October 9, 2015 at 10:36 pm #

    As much as I like, no love, this web site I do think that if you are not wanting to write any more articles Golem you should just take it down.

  13. JayD October 9, 2015 at 10:52 pm #

    If I understood this I would probably be worried…..

  14. Roger October 12, 2015 at 3:47 am #

    Hello from Roger, Been busy with my new company selling water to the thirsty.

    The Waterstillar WaterDollar. Stop Press . PRESS RELEASE.
    Waterstillar Works close to signing first Contracts in Sacramento hills.Stop.!
    The new California Gold Rush. Water the new Oil? Stop!

    In an effort to prop up the value of the dollar, Waterstillar has negotiated a deal with California so that in exchange for Pure distilled Drinking Water . California will denominate all future water purchases in Waterstillar Water dollars. Subsequently, the other US states and other World leaders are expected to agree to similar deals thus ensuring a global demand for Waterstillar Water dollars and allowing the Danish parent company Aquadania to export Waterstillar works production globally. Since these Waterstillar waterdollars do not circulate within the FIAT money Paradigm and thus are not part of the normal money supply, economists feel that another term is necessary to describe the Water stillar WaterDollars received by bottled water importing countries, (WSOPEC) in exchange for clean drinking water on tap, so the term Waterstillar Water dollars was coined by Roger Lewis Waterstillars director of Global Sales and Marketing

    Because the United States was the largest producer and consumer of bottled drinking water in the world, the world water market had been priced in Waterstillar Water Dollars since the end of October 2015. International bottled water prices were based on discounts or premiums relative to that for Water sold in 5 gallon bottles by Walmart Sacramento California.[1] But, although bottled water sales prior to october 2015 were denominated in U.S. dollars, nothing precluded settlement in the new Waterstillar water dollar currency.

    Waterstillar Waterdollars are presently priced in California at 12 cents a litre half the previous prevailing Wallmart spot rate of 23 cents a litre.(1)

    In October 2015, (WSOPEC) declared an water embargo in response to the United States’ and Western Europe’s support of the production and export of branded bottled water worldwide the reasons for this ethical stance was well explained in the excellent film available on line , The story of Bottled water.

    Welcome to the Solar powered drinking water revolution


    Press Release Ends.


    Hello David would love to cacth up on the phone lots of news

  15. Phil October 13, 2015 at 2:09 am #

    I’ve put David’s 1996 documentary about globalisation, ‘Icon Earth’, back up on Youtube.


    Rather prescient one might say!

  16. BobRocket December 25, 2015 at 9:45 am #

    Merry Christmas David and all your family and the same to all your readers.

  17. JayD December 30, 2015 at 4:34 pm #

    Likewise and all the best for the New Year!


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