Mr. Denninger is not optimistic

So much for Mr. Bernanke’s magic printing press:

Now we’re really in trouble:

The ECB failed to auction the €55bn in fixed term deposits it had planned to, and what it did auction (€31.86bn) was at a much-higher rate (0.54 per cent) than what it offered at the start of its Securities Markets Programme (SMP). The market seems to be holding tight to liquidity.

The wall has been hit.

This is a clear warning to the money-printing screamers (of which there are many adherents) and the “we can do this without impacting aggregates” crowd (commonly known as Central Banks with God complexes.) Sadly, as I have repeatedly pointed out, all Ponzi Schemes fail, and they fail at the most inopportune time, after you have spent the proceeds of your previous scamming and thus lack the ability to deal with the failure to sell your latest batch of whatever it is you’re attempting to do.

Oh, and by the way, it gets better. Much better.

See, the ECB has a rollover problem coming, in that they need to roll a significant amount of term liquidity deposits Thursday. If those rolls fail, the markets will crash. Both credit and equity.

As I have repeatedly paraphrased Bob Prechter, the problem with the Whiskey Zulu scenario is that neither Europe nor the USA have a paper money system. The debt money system requires that each new note find a borrower. But when the limits of demand for debt are reached, it’s not possible to continue to issuing more money. Furthermore, most money is created through the fractional reserve banking system, not the central bank, and creating that money also requires a constantly growing demand for credit.

Now, it’s true, the national governments could convert to a paper money system and this is one of the legitimate possibilities, but they cannot possibly do so fast enough to avoid a period of deflationary crash, especially when the politicians who would be responsible for the switch would have to brave the wrath of the financial powers who would be ruined by such a move.

Which is why it’s not going to happen. My best guess is that Plan A was another attempt to solve the problem through more centralization; devaluing the current currencies as they are converted to a regional or global currency. However, given that the global public is already furious with the banking establishment, this probably isn’t viable now. The stimulus plans were supposed to work well enough to give them time to smoothly transition to the next stage of monetary harmonization, but due to their reliance on a bad economic model, that obviously hasn’t happened.

Interesting times indeed.

Mailvox: And yet they wonder….

JH writes what I am apparently supposed to regard as what passes for a rebuttal to yesterday’s WND column. The amazing thing is that there will be people who genuinely regard this as not only a coherent reply, but a decisive one:

If men are so much more moral than women, why is it that 96% of the people in jail in the U.S. are male? And are you really suggesting that men self-sacrifice more than women? Have you ever known a mother? One last thing: when I was in the 5th grade, my teacher informed me that “boys are just smarter at math” and that was the reason there were only boys in the accelerated math group in my class. There was no testing – that would’ve been too fair – she had just picked 3 boys that she thought were “smart at math.” All of us have to deal with bad attitudes in our lives at some time; it’s not just boys. Did someone just break up with you?

First, I never claimed that men are more moral than women. Second, even if I had, JH is confusing legality with morality. Yes, I really do believe that men are more self-sacrificing than women; how many female Medal of Honor winners are there? How many women have ever been known to act by the motto “men and children first”? It pains me to have to point out the obvious, but most women who are mothers very much want to be mothers. Self-sacrifice is about sacrificing your desires, not fulfilling them, and it is no more inherently self-sacrificing for the average woman to be a mother than it is for the average man who enjoys the clean lines of the unadorned female form to contribute to the college fund of a young, sartorially-challenged woman.

And since I attempt to make it my habit to answer even the most ridiculous questions, yes, I have been acquainted with the occasional mother. I did not, as it is often held, spring fully armored from the black helmet of Darth Vader. But we have to thank JH for not only demonstrating my point about women and logic with her deeply compelling tale of her fifth grade math class which apparently overturns decades of standardized math tests, but also the way in which few women are capable of considering an issue without making it personal. But no, no one broke up with me, I am not bitter about anything except last season’s NFC championship game, and I am totally indifferent your willingness or unwillingness to perform sexually for me.

Above the law

Apparently the big banks aren’t just too big to fail, they’re too big to be prosecuted for breaking all of those invasive laws that require you to turn over fingerprint, blood, and DNA samples in order to open a checking account or buy a cell phone, just in case you might be a Mexican money launderer:

Oh, so the banks don’t just bilk investors and rip off municipalities, they also help Mexican Gangs run drugs?

This was no isolated incident. Wachovia, it turns out, had made a habit of helping move money for Mexican drug smugglers. Wells Fargo & Co., which bought Wachovia in 2008, has admitted in court that its unit failed to monitor and report suspected money laundering by narcotics traffickers — including the cash used to buy four planes that shipped a total of 22 tons of cocaine. The admission came in an agreement that Charlotte, North Carolina-based Wachovia struck with federal prosecutors in March, and it sheds light on the largely undocumented role of U.S. banks in contributing to the violent drug trade that has convulsed Mexico for the past four years.

That’s nice. Guns and ammunition cost money – lots of it. Getting that money requires some means of transporting it and “laundering” it. For that, we turn to the largest financial institutions in the world, who, it turns out, have never been prosecuted for these felonious acts.

This is the salient quote: “No big U.S. bank — Wells Fargo included — has ever been indicted for violating the Bank Secrecy Act or any other federal law. Instead, the Justice Department settles criminal charges by using deferred-prosecution agreements, in which a bank pays a fine and promises not to break the law again.”

It is completely obvious that there is no longer any rule of law in the USA. There increasingly isn’t even any pretense at it. It is no longer a republic, but a financial aristocracy divided into a thousand corporate fiefdoms. Given human nature, how long can it be before the executives begin granting themselves titles like the Archduke of Wells Fargo and the Grand Count of Google?

Demographic decline

The pace of American decline and fall picks up:

An analysis of census data by the Pew Research Center, being released Friday, documents the changes in fertility rates that are driving government projections that U.S. minorities will become the majority by midcentury. The figures show that among all women ages 40-44, about 18 percent, or 1.9 million, were childless in 2008. That’s up from 10 percent, or nearly 580,000 in 1976. Broken down by race, roughly 20 percent of white women are childless, compared with 17 percent of blacks and of Hispanics and 16 percent of Asians.

20 percent of white American women are childless, and 28 percent of the children who are born to them are illegitimate. Assuming an equal distribution of childbirths among women who have children for simplicity’s sake, this suggests that white American women have around a 42% probability of being either childless or a single mother. And since both the childless and illegitimacy rates are rising rapidly, it’s probably more like a one-in-two chance for the average young woman today.

Needless to say, that is not the hallmark of a self-sustaining society. Unfortunately, there have been no winners in the long-running American war against men, and it is children who have been the biggest losers. And from the economic perspective, these demographic patterns strengthen the probability of debt-default, as children who were never born, fatherless criminals, and immigrants of non-Western heritage are not likely to be willing to pay for the massive debts incurred by aging white people.