collapseWhether you want to see it or not, the financial system is in a forced unwinding.
It took some 70 years to build this great credit edifice.
When it goes it may take less than 48 hours to take it ALL down.


Submitted by Bill Holter, JSMineset:

After my last article we received two logical questions from readers. The first one pertaining to “gaps” and the Deutsche Bank derivative exposure, the second pertaining to Japan’s strong currency with negative yields while the debt to GDP levels are astronomical. Below is the first question;

“In the past you have warned about derivative exposure and now gapping.

One of my worst fears as a day trader on a derivatives platform is gapping. That is why I will never have an open position when the market is closed. Even then, that is not guaranteed.

A lot of trading platforms got hammered when the Swiss franc was revalued.

Could you put out a letter for your readers explaining why for example the Deutsche Bank derivatives exposure is so dangerous in terms of gapping.”

In my opinion, this is a very astute observation. The reader will not carry overnight positions because as he says, “the Swiss franc revaluation killed many” within less than 10 minutes of the markets opening. That said, even if not in any overnight position and the great leveling moment comes, how does anyone know if their broker even survives the carnage …with YOUR MONEY?

But this is another topic entirely.

As for Deutsche Bank, we know they have been recently screaming about negative interest rates hurting their operations. This very well may be so, but it is my opinion it is not so much negative interest rates killing them. I believe it is off balance sheet derivatives. Not only has DB denied any problem, the German finance minister has now chimed in with reassurance! Where have we seen this before? Does Bear Stearns or Lehman Bros. ring a bell?  Doth the Germans protest too much? By the way, their credit spreads are stretching out, and stock price has now taken out the 2008 lows!

The second question regarding confusion of Japan’s 10 yr. yield hitting 0% and their currency strengthening while being the fiscal basket case of the world is also a good one but very simple to explain. Japan has a debt to GDP ratio of 260%, if you add in corporate debt it approaches 400%, how could they not have a crashing currency and 20% (or higher) interest rates? The simple answer is this, the global “carry trade” is unwinding. The Japanese yen was a major tool used to create and float the carry trade which inflated assets. Now, as asset prices are falling, this trade is being unwound (think of it as a margin call). Previous yen that were borrowed are now being bought back to settle the trade. This was a synthetic short similar to the dollar short being covered. A quick question and very short answer, why would anyone in their right mind invest money for 10 years at zero percent in a currency who’s issuer publicly states their goal is to grossly debase? Answer: BECAUSE THEY HAVE TO!

The problem is this, as the yen strengthens from short covering it is putting more and more of these carry trades under water and actually forcing more sales of assets and more buying of yen. This will end in one of two ways …both badly! Either the trades get unwound with asset prices collapsing and the yen at truly stupid levels, or someone “fails” and the derivatives chain breaks. I would personally bet the farm on option number two.

While writing this, CNBC is parading guest after guest as to whether a recession is “likely”.   This is not about a “recession”, this is about whether the entire system fails or not!

Can Deutsche Bank “fail” while being counter party to over $70 trillion in derivatives? Can even a small counter party fail without causing a cascade? Just look at the volatility in markets, junk bonds are collapsing, credit spreads blowing out, currencies making wild swings, $7 trillion worth of sovereign debt trading at negative interest rates …not to mention stock markets moving from all time highs into bear markets within just a couple of months. (While editing this, CNBC is actually questioning if DB is a “one off” situation? Is this even possible? Do they even understand what they are asking?!!!)

Do you think “someone” might have lost some money since January 1st? Enough to bankrupt them?  THIS is the question! The answer in my opinion is this, there are dead bodies strewn all over the place yet are hidden from view. They are being hidden from view because if they are seen, the entire system comes into question with answers being delivered within probably a 48 hour period. The answer of course will be the biggest “gaps” in all of history …both in price AND time! By this I am saying the re-opening gaps will be larger in percentage and the time to reopen longer than ever before.

Whether you want to see it or not, the financial system is in a forced unwinding. It took some 70 years to build this great credit edifice, when it goes it may take less than 48 hours to take it ALL down. To finish I leave you with a short clip of what the collapse might look like …and how quickly it can get there!

Standing watch,

Bill Holter
Holter-Sinclair collaboration
Comments welcome!  [email protected]

Buy Silver Coins and rounds at SD Bullion

    • I can’t wait for the t-shirts that read ” I survived the greatest depression of 2017″


      Can’t you just imagine that t-shirt on a dried up skeleton clutching an M-4 in one hand and an ASE in the other?

    • @DanDaley


      “Can’t you just imagine that t-shirt on a dried up skeleton clutching an M-4 in one hand and an ASE in the other?”

      No, I can’t.  But I CAN imagine it on a lot of poor dumb ba$tard$ who have neither M4s nor ASEs.  They simply will be running around aimlessly looking for whatever they can loot to survive while being bullet sponges.


  1. When complex systems collapse, they collapse very rapidly.  Example-the Soviet Union.  When the Soviet Union collapsed it was literally over a long weekend.  I remember this distinctly because I missed it. Normally, I keep up on current events, but for a long weekend trip with the family to the beach I didn’t look at newspaper, a computer, a cell phone, etc. for four days.  When I reengaged on Monday the Soviet Union was no more.  I remember being disappointed that I missed out on the fun.  If/when the global financial systems collapses, we can expect a similar timeframe.

    • You musta been a big $ [email protected]@ss!

      Because I was 18, and when I got out of the service we all had pagers!!! Lol

      Car phones were for rich yuppies, but cell phones!!??

      Were you a stock broker?

      Was your cell phone equal in length to a size 11 shoe?

      Haha! Jusy bustin on ya dog!

    • Even if you had a cell phone in 1989, it would be of litle use. There was no smartphones and internet in the eighties. Maybe some news agency used to brief you hourly on all important matters by phone back then?

    • No smart phones in the 80s for sure… but there was the Internet, which was expensive via The Source and Compuserve (aka Compuspend).  They charged by the hour of connection time, broken down by the minute, and sometimes tacked on additional charges for those with “high speed modems”… which were >2400 baud.  We pioneers got real used to logging on, downloading our email and logging off, answering them off-line, and then logging back on to upload our replies.  lol

      Back then, the Internet was all running on UNIX and FreeBSD servers, so users needed to know the 2-letter command set that allowed users to manipulate the system to get their all-text info.  Anyone carelessly messing things up or acting too noobish was soundly chastised and invited to go elsewhere.  Those running the servers sided with the experienced hands.  It was NOT a playground for children, so if anyone complained that their kids shouldn’t see some of the things that were there, they were quickly invited not to return to that particular site.  Gads, this sounds like digital stone knives and bear skins!  lol

      I remember my 1st 2400 baud modem.  It was a Supra external modem and was the 1st one that could download info faster than I could read it.  It was amazing… and only “$200” on pre-order.  Just for giggles, I looked at the serial number sticker on the bottom one day and it was something like “000001”.  Definitely an early one.  I had it for a few years and then the 14,400 baud models came out with the 56k models coming soon after.  Since then, it has been all cable, DSL, and satellite with speeds we could only dream of back in the day.


  2. True that @ugly dog.  Lehman was toast over a weekend   When the primary flash point is reached it will happen so fast that no one will be able to stop in.  The Co Co bonds at DBank dropped to 70 cents on the dollar. They are the first as well as  the last segment of capital resources, offered at 6% to unaware yet greedy buyers, with terms that mean they are the primary bail in instrument in DBanks Maginot line.

    This reminds me of the Battle of Verdun, one of the largest most deadly battles in history with the largest fatality count per square yard in the entire Great War


  3. It will happen slowly and then it will happen very quickly. We are still in the slow phase and nobody knows when the quick phase will happen. It certainly feels a lot closer, but I thought the same in each of the last 5 years and it hasn’t happened yet. There could be more time to the slow phase – there probably will be – but you have to assume it could happen tomorrow…

  4. It will happen when world deflation cycle terminates.  Meanwhile commodities and PM will trend down while USD pokes higher or sideways.  The impulse will simply be enough to possibly crush USA economy and absorb it into Eurasian satellite and Chinese manufacturing backwater


    Goldman Sachs forecast that bullion will be at $1,100 in three months, $1,050 in six months and $1,000 in 12 months.”

    So going on the principle that Goldman is always trying to wrong foot everyone we can expect the exact opposite.


    • @gbs

      I agree with that!!!  I think last year they were calling for $950 gold….  hmmmm I’m still waiting! Now they are calling for $1250 gold.  The price is the price, who knows what is going to happen. I’m a buyer of silver below $20 and a buyer of gold below $1125.  Those are my points and I stick to it.  I do not get caught up in all the hype!!!

  6. @shamus001  With a picture of an A bomb mushroom cloud exploding out of the heads of Obama, Bush and Hilary Clinton.

    Ah yes, the days of a shoe box sized cell phone.  The cool factor of those bricks was totally Miami Vice.

    Da bomb was the Motorola Flip Phone.

    That SOB was so cool it gave me ^^^^^^^^

    ‘Comments like this are not tolerated by the moderators.’

    ‘Ok Ok–Moddy, my man.’

    It  got me chicks.

    The rest took care of itself

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