Let's gather for the Chinese New Year and tell stories around the bank campfire

              Imagine there is a tinder and wood filled "log cabin style" campfire that has been constructed, but not lit. Lets call it the bank campfire.   Let's call the firewood "derivatives" and "investment products for the public"   Every minute that goes by without the fire being lit, the stack keeps getting bigger.   But the common people in camp need warmth (economic freedom) so they start to light personal campfires (Ukraine, Thailand, turkey etc.)  The sparks of this unrest are floating dangerously close to the bank campfire. The US fed bank was the assigned fire tender.  The somewhat shady Chinese central bank also has water buckets, but they are leaving in a few hours for a weeklong New Year holiday....

 
      The firewood represents derivatives: complex instruments known as repo loans, gold lease arrangments, interest rate swaps, and mortgage backed securities.  The fuelwood  for the fire also comes in the form of fancy investment products, high frequency trading and other flammable items.

 

To illustrate the fire danger, let's look at a forecaster of consumption: "The Baltic Dry Index"   THe BDI averages the rate international supertankers (ships) are receiving for "dry goods cargo" (Goods that fit in a shipping container).  When the rate goes down, that means demand for space and is slowing down.  Here is a chart of recent BDI rate since 2011.  Note the recent fall.

 

  Since cashflow payments are the drivers of profit in the bank campfire, it is a Growth Driven system, that requires growth of the fuel wood pile in order to avoid defaults and collapse.  It is an inflation based system that is predesigned to fail.  When it fails, bailouts allow the rich to get richer and wipe out the independent guy.