A week ago, Zero Hedge first presented the now viral presentation by Raoul Pal titled “The End Game.” We dubbed the presentation scary because it was: in very frank terms it laid out the reality of the current absolutely unsustainable situation while pulling no punches. Yet some may have misread the underlying narrative: Pal did not predict armageddon. Far from it: he forecast the end of the current broken economic, monetary, and fiat system… which following its collapse will be replaced with something different, something stable. Which, incidentally, is why the presentation was called a big “reset”, not the big “end.” But what does that mean, and how does one protect from such an event? Luckily, we have another presentation to share with readers, this time from Eidesis Capital, given at the Grant’s April 11 conference, which picks up where Pal left off. Because if the Big Reset told us what is coming, Eidesis tells us how to get from there to the other side…
First of all, what is systemic risk?
Typical Systemic Risks:
- Wide-spread defaults, sovereign debt crises, devaluations, capital controls, bank holidays, etc.
How it usually happens:
- No warning;
- Emergency announcement over a weekend;
- Drastic measures to “protect the public” against [insert suitable culprits];
- Outcome- someone’s value gets expropriated.
Yes, it can happen here –it has in the past.
Usually, the best warning indicator of a major systemic “event” are soaring cross-asset correlations: something we are experiencing right now.
- Crisis of 2007-2009 was a “High Correlation” disruption:Reducing systemic risk called for lowering correlation, i.e. “firebreaks”, de-coupling, etc.
- Multiple institutions and majority of the population were affected.
- Instead, governments’actions since 2008 have been increasing correlation:
- Fiscal Policies –sovereign debts are higher than ever and still growing fast;
- Monetary Policies –broken price mechanism = system-wide misallocations and mispricings;
- Too-Big-To-Fail –bigger than before the crisis;
- Euro Zone Crisis –“solutions” keep increasing interconnectedness – a “mutual suicide” pact;
- Financial Regulation –was supposed to reduce the risk but stalled through stiff opposition:
- A single JP Morgan trader is reported to run $100 bln CDS book?!?!?!?!?! [ZH: now confirmed, and we all know the story since]
- Lack of Transparency –more opacity since the crisis; mark-to-market remains suspended.
Everyone knows this but only few are willing to accept the implications; fewer still are willing to act.
continue at ZeroHedge:
A Radioactive Nightmare – As Fallout From Fukushima Heads Our Way, The Government Turns A Blind Eye
Special Operations Forces Organize Against Obama