The World\u2019s Most Dangerous Systemic Risks for the Week Ending October 14,\u00a02016<\/h1>\n<\/div>\n\nA Weekly Intelligence Briefing Integrating the Risks Presented on the Prevailing Gray Swans\u00a0List<\/h2>\n
by Jim Autio
\nDEEP CONNECTIONS<\/a><\/p>\nThe purpose of this intelligence briefing is to consolidate and integrate into a single document on a weekly basis an assessment of the world\u2019s most dangerous systemic risks that can impact your quality of life. The assessment is grounded by the Prevailing Gray Swans List<\/em><\/strong><\/a> and its in-depth, intelligence briefings. This document provides a succinct synthesis for those readers desiring only a 10-minute executive summary of \u201ca current big picture of the clear and present dangers in the world\u201d<\/em> but without sacrificing the Deep Connections<\/strong> philosophy<\/a>. The approach is designed to minimize noise and error while avoiding speculative over-reach. The references and details are readily accessible as follows:<\/p>\n[this document \u2192 deep background\/threat forensics\/logic path \u2192 original source material]<\/strong><\/p>\n<\/div>\n<\/div>\n<\/section>\n\n\n
\n<\/div>\n\n\nWhat are the most dangerous real\u200a\u2014\u200anot merely theoretically possible\u200a\u2014\u200athreats we face right now that can blindside us?<\/em><\/p>\nCutting through the noise, what truly matters?<\/em><\/p>\n<\/div>\n<\/div>\n<\/section>\n\n\n
\n<\/div>\n\n\nThere are presently two paramount foreground dangers and a third that is moving closer to the foreground. We are currently experiencing the biggest, global-scale, financial bubble in history (the \u201cmother of all bubbles\u201d or MOB) and this is not a one-dimensional bubble like the \u201cCrash of 1929\u201d, the 2000 dot com bubble or the 2008 housing bubble: the MOB is simultaneously present in all asset classes: stocks, bonds, and real estate. Because of these properties, the MOB is both quantitatively and qualitatively in a different category than any previous bubble<\/em>. The driver behind this enormous bubble is central bank intervention that has been sustained since 2008 on an unprecedented scale when viewed by the aggregate activity of the world\u2019s central banks: the US Federal Reserve, the European Central Bank (ECB), the Bank of Japan (BOJ), the Bank of England (BOE) and the Swiss National Bank (SNB). What also makes the MOB categorically different, besides its size and ubiquity, is its vulnerability to a massive implosion due to inherent structural defects:<\/p>\nThe MOB\u2019s network architecture is the three-tiered hierarchy and dense interconnectedness of {currencies \u21cb bonds \u21cb derivatives} and this network is embedded in every global systemically important bank (GSIB) node, not just a single node failure like Deutsche Bank (or Lehman Brothers in 2008) in the GSIB network architecture. Simply, it is a network nested inside a network. A bond selloff has high <\/em>network centrality<\/em><\/a> in every node, not just one<\/em>, and then radiates outwardly simultaneously from each and every node\u200a\u2014\u200ait is like every major star in a galaxy exploding at the same time. The MOB\u2019s gargantuan size is highly appreciated but this architectural vulnerability and its detonation is an unrecognized hazard\u200a\u2014\u200aa black swan hereby is now a gray one<\/em>.<\/p>\nThroughout history all financial bubbles have the same fate\u200a\u2014\u200athey all collapse, sooner or later<\/em>. Due to sociological phenomena, they never deflate in an orderly manner; greed and fear dominate as actors in a zero-sum mindset exit simultaneously in an attempt to maximize personal gain or mitigate losses.<\/p>\n\n\n<\/div>\n![](\"http:\/\/cdn-images-1.medium.com\/max\/600\/1*puhphnlolhrUIy7tX130SA.png\")
<\/div>\n<\/div>The sheer enormity of the presently still expanding MOB bubble dwarfs previous bubbles. The MOB\u2019s collapse is inevitable but the timing and trigger event are unknown. (Source page: @jsblokland<\/a>)<\/figcaption><\/figure>\nBecause the sovereign bond market is the underlying reference asset for much of the world\u2019s total derivative exposure (particularly US Treasury bonds which benchmark everything<\/em>) while composing what is considered high-quality collateral for maintenance of margin in leveraged positions throughout the structure, a bond collapse (i.e. a rapid increase in interest rates) is both functionally and structurally the detonator for the entire derivatives network which notionally exceeds USD 1Q (one quadrillion US dollars).<\/p>\n<\/div>\n<\/div>\n<\/section>\nhttp:\/\/twitter.com\/JanusCapital\/status\/740907764046659584?ref_src=twsrc%5Etfw<\/p>\n\n\n\nBill Gross on negative interest rate bonds (NIRP).<\/h3>\n
In other words, the Achilles heel of the global financial system is a sustained, high-volume, sovereign bond selloff. <\/em>The timing and precise trigger event for the bursting of the MOB are unknown but there are several known possible triggers, many of which are mentioned below. <\/em>The collapse of the MOB is inevitable and is already on borrowed time; even though the consequences are dire the event itself will be an iconic anti-surprise\u200a\u2014\u200athere is absolutely no reason that any rational person can\u2019t see this coming<\/em>. Because of the all-encompassing, unprecedented nature of this mega-bubble, the conditions in its aftermath are purely speculative, even defiantly unpredictable due to the number of moving parts on many levels from political quandaries to legal entanglements to impact of societal blindside. Quite possibly, this will burst a multi-century, fiat-currency based \u201ctrust bubble.\u201d But for now, tragic complacency reigns<\/em>.<\/p>\n[Deep Background:<\/strong>Financial Bubble<\/a> (Understanding the MOB: evolution, historical perspective, structure, vulnerabilities, aftermath psychology)]<\/p>\n<\/div>\n<\/div>\n<\/section>\n\n\n
\n<\/div>\n\n\n<\/div>\n\nRussia ships new anti-aircraft system to Syria and promptly warns the U.S. not to target the Assad regime. https:\/\/t.co\/1TJbNkKd6s<\/a> pic.twitter.com\/rSlSL21ONd<\/a><\/p>\n— Foreign Policy (@ForeignPolicy) October 7, 2016<\/a><\/p><\/blockquote>\n
A Weekly Intelligence Briefing Integrating the Risks Presented on the Prevailing Gray Swans\u00a0List<\/h2>\n
by Jim Autio The purpose of this intelligence briefing is to consolidate and integrate into a single document on a weekly basis an assessment of the world\u2019s most dangerous systemic risks that can impact your quality of life. The assessment is grounded by the Prevailing Gray Swans List<\/em><\/strong><\/a> and its in-depth, intelligence briefings. This document provides a succinct synthesis for those readers desiring only a 10-minute executive summary of \u201ca current big picture of the clear and present dangers in the world\u201d<\/em> but without sacrificing the Deep Connections<\/strong> philosophy<\/a>. The approach is designed to minimize noise and error while avoiding speculative over-reach. The references and details are readily accessible as follows:<\/p>\n [this document \u2192 deep background\/threat forensics\/logic path \u2192 original source material]<\/strong><\/p>\n<\/div>\n<\/div>\n<\/section>\n What are the most dangerous real\u200a\u2014\u200anot merely theoretically possible\u200a\u2014\u200athreats we face right now that can blindside us?<\/em><\/p>\n Cutting through the noise, what truly matters?<\/em><\/p>\n<\/div>\n<\/div>\n<\/section>\n There are presently two paramount foreground dangers and a third that is moving closer to the foreground. We are currently experiencing the biggest, global-scale, financial bubble in history (the \u201cmother of all bubbles\u201d or MOB) and this is not a one-dimensional bubble like the \u201cCrash of 1929\u201d, the 2000 dot com bubble or the 2008 housing bubble: the MOB is simultaneously present in all asset classes: stocks, bonds, and real estate. Because of these properties, the MOB is both quantitatively and qualitatively in a different category than any previous bubble<\/em>. The driver behind this enormous bubble is central bank intervention that has been sustained since 2008 on an unprecedented scale when viewed by the aggregate activity of the world\u2019s central banks: the US Federal Reserve, the European Central Bank (ECB), the Bank of Japan (BOJ), the Bank of England (BOE) and the Swiss National Bank (SNB). What also makes the MOB categorically different, besides its size and ubiquity, is its vulnerability to a massive implosion due to inherent structural defects:<\/p>\n The MOB\u2019s network architecture is the three-tiered hierarchy and dense interconnectedness of {currencies \u21cb bonds \u21cb derivatives} and this network is embedded in every global systemically important bank (GSIB) node, not just a single node failure like Deutsche Bank (or Lehman Brothers in 2008) in the GSIB network architecture. Simply, it is a network nested inside a network. A bond selloff has high <\/em>network centrality<\/em><\/a> in every node, not just one<\/em>, and then radiates outwardly simultaneously from each and every node\u200a\u2014\u200ait is like every major star in a galaxy exploding at the same time. The MOB\u2019s gargantuan size is highly appreciated but this architectural vulnerability and its detonation is an unrecognized hazard\u200a\u2014\u200aa black swan hereby is now a gray one<\/em>.<\/p>\n Throughout history all financial bubbles have the same fate\u200a\u2014\u200athey all collapse, sooner or later<\/em>. Due to sociological phenomena, they never deflate in an orderly manner; greed and fear dominate as actors in a zero-sum mindset exit simultaneously in an attempt to maximize personal gain or mitigate losses.<\/p>\n Because the sovereign bond market is the underlying reference asset for much of the world\u2019s total derivative exposure (particularly US Treasury bonds which benchmark everything<\/em>) while composing what is considered high-quality collateral for maintenance of margin in leveraged positions throughout the structure, a bond collapse (i.e. a rapid increase in interest rates) is both functionally and structurally the detonator for the entire derivatives network which notionally exceeds USD 1Q (one quadrillion US dollars).<\/p>\n<\/div>\n<\/div>\n<\/section>\n http:\/\/twitter.com\/JanusCapital\/status\/740907764046659584?ref_src=twsrc%5Etfw<\/p>\n In other words, the Achilles heel of the global financial system is a sustained, high-volume, sovereign bond selloff. <\/em>The timing and precise trigger event for the bursting of the MOB are unknown but there are several known possible triggers, many of which are mentioned below. <\/em>The collapse of the MOB is inevitable and is already on borrowed time; even though the consequences are dire the event itself will be an iconic anti-surprise\u200a\u2014\u200athere is absolutely no reason that any rational person can\u2019t see this coming<\/em>. Because of the all-encompassing, unprecedented nature of this mega-bubble, the conditions in its aftermath are purely speculative, even defiantly unpredictable due to the number of moving parts on many levels from political quandaries to legal entanglements to impact of societal blindside. Quite possibly, this will burst a multi-century, fiat-currency based \u201ctrust bubble.\u201d But for now, tragic complacency reigns<\/em>.<\/p>\n [Deep Background:<\/strong>Financial Bubble<\/a> (Understanding the MOB: evolution, historical perspective, structure, vulnerabilities, aftermath psychology)]<\/p>\n<\/div>\n<\/div>\n<\/section>\n Russia ships new anti-aircraft system to Syria and promptly warns the U.S. not to target the Assad regime. https:\/\/t.co\/1TJbNkKd6s<\/a> pic.twitter.com\/rSlSL21ONd<\/a><\/p>\n — Foreign Policy (@ForeignPolicy) October 7, 2016<\/a><\/p><\/blockquote>\n
\nDEEP CONNECTIONS<\/a><\/p>\n
\n<\/div>\n
\n<\/div>\n![](\"https:\/\/stateofthenation2012.com\/wp-content\/uploads\/2016\/10\/Screen-Shot-2016-10-15-at-5.27.45-PM.png\")
<\/div>\n<\/div>Bill Gross on negative interest rate bonds (NIRP).<\/h3>\n
\n<\/div>\n\n