An Architect Of The 1998 Bailout Sees A Crash Coming

We’ve been riding the hairy edge for a while now, and everyone makes it up as they go along:

In 1998 we were hours away from collapse and did everything wrong following that.

In 2008, we were hours away from collapse and did the same thing. Each crisis is bigger than the one before…

People know a lot less about 1998, partly because it was almost 20 years ago. I was right in the middle of that crash. It was an international monetary crisis that started in Thailand in June of 1997, spread to Indonesia and Korea, and then finally Russia by August of ’98. Everyone was building a firewall around Brazil. It was exactly like dominoes falling…

Then came Long-Term Capital Management. The next domino was not a country. It was a hedge fund, although it was a hedge fund that was as big as a country in terms of its financial footings… It was a thundering herd of lawyers, but I was on point for one side of the deal and had to coordinate all that.

It was a 4 billion dollar all-cash deal, which we put together in 72 hours with no due diligence. Anyone who’s raised money for his or her company, or done deals can think about that and imagine how difficult it would be to get a group of banks to write you a check for 4 billion dollars in 3 days… If Long-Term Capital had failed, and it was on the way to failure, 1.3 trillion dollars of derivatives would’ve been flipped back to Wall Street.

The banks involved would’ve had to run out and cover that 1.3 trillion dollars in exposure, because they thought they were hedged. They had one side of the trade with Long-Term and had the other side of the trade with each other.

When you create that kind of hole in everyone’s balance sheets and everyone has to run and cover, every market in the world would’ve been closed. Not just bond markets or stock markets. Banks would’ve failed sequentially. It would’ve been what came close to happening in 2008…

This is all in my new, The Road to Ruin… Hopefully, it’s an entertaining and readable, but it’s serious in the sense that I could see it coming a mile away…

I was looking at the buildup of scale, the buildup of derivatives, the dynamic processes and the fact that one spark could set the whole forest on fire. It didn’t matter what the spark was. It didn’t matter what the snowflake was. I knew the whole thing was going to collapse. Eight years after the crisis of 2008, nothing’s been fixed.

What’s going to come is a crisis, and it’s going to come very quickly.

The extent of the house of cards, and the degree to which any card could trigger the collapse is unbelievable. National Debt, State debt, municipal debt, student loan debt, credit card debt, mortgage debt, corporate debt, personal debt, unfunded state pension funds, unfunded federal pension debt, car loan debt, Social Security, Medicare, derivatives, and even fractional banking savings accounts all represent wealth which people presently see flooding the system. They also represent wealth that will evaporate overnight, the moment the collapse begins.

It really is the perfect mechanism to initiate an almost instantaneous K-shift, taking people who see a world of limitless resources, and suddenly turning them into people desperate for any resources they can get, and seeing no resources available.

Even better, as the system heads toward collapse, they keep finding a way to raid any store of real wealth, flood it out into the system, and replace it with yet more ephemeral debt, that ostensibly appears as future value now, but which will evaporate with everything else when the collapse comes.

This isn’t one Ponzi scheme, it is hundreds. As it goes on, everything worth anything is being raided, and “invested” in the system, with the promise of regular payments to be forthcoming later on – payments that nobody will see once the Ponzi schemes begin coming down. There is no difference between this and Bernie Madoff, other than the issue of scale. This will take down the entire system, and affect everyone.

It will be like nothing that anyone living has ever seen.

Help tell the world about r/K Selection Theory, because the entire house of cards is coming down