The Complete Economic Collapse of Great Britain | Global Depression.

you know it's bad when the CEO of

JPMorgan Chase says the following quote

I was surprised to see how much leverage

there was

oh boy

three days ago folks the bank of England

warned us that you have quote three days

left to basically get your Affairs in

order for potential massive pain in the

markets and the potential collapse of

the sixth largest economy in the world

that's the United Kingdom he used to be

the fifth largest well

today that time is up and in this video

I'm going to catch you up to speed with

some new Clarity on the near

bankruptcies that happened over the last

three weeks I'll give you some insights

into this we'll also talk about what's

happening today and most importantly

what's next now before we begin it's

important to remember the most important

thing that happens next is the

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alright folks let's get into the bank of

England on September 6th the Liz truss

took over as prime minister of the

United Kingdom replacing the disgrace to

Boris Johnson whose reputation had

really faltered during his handling of

covet and allegations that he was

regularly partying as the country was in

lockdown this became known as partygate

two days later after Liz truss took over

Queen Elizabeth died and Queen Elizabeth

was put to rest on September 19th 11

days later then just four days after

that not even three weeks into Liz

truss's new role her treasury secretary

or the equivalent of that the chancellor

of the exchequer kawasi cavatang

announced plans for a mini budget to be

voted on in November and in this budget

he called the United Kingdom a country

of entrepreneurs and said that the way

out of the depressive economy we face

now is to Simply reduce taxes for a lot

of people and specifically reduce taxes

for rich people by for example cutting

the top tax rate from 45 to 40 and

instead of raising the 19 corporate tax

rate to 25 getting rid of that hike as

well as cutting stamp duties to buy real

estate and offering stimulus for energy

bill to businesses and homeowners all of

this would should have been made

official in November of course that

night quasi-cartang allegedly went out

partying with hedge funds who likely

stand to benefit from the now lower top

tier taxes that was on a Friday but on

Monday oh boy the market led Liz trusted

staff know they hated this because to

the market it sounded like the United

Kingdom was about to spend a whole lot

more money and reduce tax revenues

during an inflationary time basically

stimulating the economy while reducing

revenue for the government requiring

essentially more money printing which

again is more inflation all while

interest rates should be going up to

lower inflation especially when the

inflation rate in the United Kingdom is

just down from a high all the way down

to 9.9 percent yeah that's right they

almost have a 10 inflation rate in the

United Kingdom so when you couple a 10

inflation rate with a bunch more

stimulus of course the Market's going to

free and over the next week the British

pound collapsed to a new low of dollar

and three cents that is one British

pound could buy you a dollar and three

cents almost at one to one it did

recover to a dollar and twelve but not

before causing massive stress in the

bond market and really exposing as uh

Warren Buffett says when that tide goes

out is when you really find out who's

been swimming naked see what happened

was basically their equivalent of the

30-year treasury bond known as gilts

it's just a bond it's like an IOU in

Great Britain they lost 20 percent of

their value extremely quickly so just

think about owning a stock just as an

example let's say it's worth a hundred

and all of a sudden it's worth 80. well

originally If you're sort of a buy and

holder kind of person this isn't a big

deal you're just like all right well I

mean that sucks you know I could buy

more if I have some cash or I just

hoddle and hope one day it recovers

right but Pension funds aren't buyers

and holders they're Borrowed by and

holders in fact there's an entire

pension fund system that's known as ldi

Asset Management and it stands for

liability driven Investment Management

this is why Jamie Diamond came out and

said just today I was surprised to see

how much leverage there was in some of

these pension plans and that's exactly

where the real drama came in these ldis

basically because interest rates have

been so low for over a decade in order

for Pension funds to do their job they

felt the need to borrow a lot more money

remember what Pension funds do they're

basically a retirement plan for you

right let's say you retire and you're

promised a pension of 50 000 pounds a

year for the rest of your life just call

it fifty thousand dollars a year for the

rest of your life right you put 30 years

in you expect to get that pension or

retirement whatever the pension fund

needs to invest money that they have

today to make sure they can make those

payments to you every year in the future

well because interest rates were so low

and cash flows for so low on the things

that they could invest in they decided

the best thing to do is just buy borrow

money to increase their returns and you

know that works really well when the

Market's going up but it becomes a

problem really fast when all of a sudden

rapidly bonds drop 20 and this quickly

led to a spiral of panic as Pension

funds were starting to get margin called

on debt due to the rapidly plummeting

value of their assets this led Pension

funds to sell more bonds depressing

value further and the spiraling is known

as a doom Loop right now there's about

one and a half trillion Great British

pounds worth of ldi investments in the

system so basically it's a way of saying

it's potentially a too big to fail

segment of the entire UK economy on top

of that one of the custody banks that

was dealing with these Pension funds had

so many margin calls they were dealing

with they didn't even have enough staff

to help process how many margin calls

were coming in and there wasn't enough

liquidity to make this to cover that

means Pension funds didn't have enough

cash so they had to dump to be able to

move money and cover so there are a lot

of steps involved the issue here wasn't

so much that rates went up and bonds

fell it's just how quickly the bond

market reacted when Liz trusts's crazy

plan came out which seems like which

ultimately seemed like it would require

more rate hikes to prevent even more

inflation so after this Insanity the

bank of England intervened on September

28th just five days later promising an

unlimited bailout basically setting a

floor price under the price of these

bonds this helped guilts regain

somewhere around 20 in value but they

also quickly gave that up again because

the United States inflation rate came in

at uh on October 13th at a completely

disastrous level and see the more the

FED raises rates the more people are

attracted to invest in U.S bonds and so

they dump their UK bonds and go invest

in something they think is safer like

U.S bonds that's really bad for the

United Kingdom and just creates more

pressures for them so to ease the drama

even further than the Central Bank

saying we're just gonna buy all the

bonds we can and basically bail everyone

out which we'll get into some more

detail about how much they actually were

able to pull off Liz trusses government

u-turned they killed the idea of getting

rid of the top tax rate on October 3rd

they will not eliminate the 45 tax

bracket and at this point her popularity

fell to a lower level than Boris

Johnson's popularity or approval rating

which is kind of sad because she's only

three weeks in her job and today she

u-turned again she said that the

corporate tax raid will not actually be

held at 19 they're going to take that 25

percent rate hike back and they're going

to move corporate tax rates to 25 that

is in April as planned and after quasi

quartang ran out of the IMF in

Washington yesterday he came back home

to learn that he had been fired he now

has the award by the way of the shortest

serving treasure treasury secretary and

almost well Chancellor of the exchange

in almost

190 years he's uh right there in the

yellow the yellow box there on the left

after having served just 38 days he's

the second person ever to have such a

short term in the UK's history now today

Liz trust said that her plans went quote

further and faster than markets were

expecting so she appointed someone else

to the job of Quasi quateng this new

person is named Jeremy Hunt and the goal

is that maybe he can relax markets a

little bit now what's with this whole

three-day thing so on Tuesday Andrew

Bailey said he's the head of the bank of

England that's their Central Bank he

told Pension funds and investment

institutions that you have quote three

days left to offload any bonds that you

have and he said quote you've got to get

this done

and while the bank of England said they

would buy up to an unlimited amount of

bonds they set aside an expectation that

they might have to buy around 100

billion dollars of bonds well today day

three has come and take a look at what

we have this is the total number of

bonds that have been bought and as of

today only 19 billion dollars in bonds

have been bought the majority of those

were bought within the last three days

right before the deadline which sends a

little bit of a signal that potentially

Pension funds just aren't actually ready

to be able to liquidate and take

advantage of the bank of England's deal

though there's also the argument that

what the bank of England was willing to

pay was basically locking in losses it's

kind of like hey we'll bail you out of

your you know crappy hundred dollar

stock that's now worth 80 and we'll bail

you out at 80 and you're like uh but I

don't really want to sell at 80 like I

guess I'll give you some anyway

technically now the bank of England is

done and so now there are concerns that

Pension funds were not prepared enough

to be able to sell I mean you heard

about the debacle of how hard it was

just during the Margin Call era and so

some folks are saying uh oh this is now

a bomb ready to explode now that's the

more Dark Side of course you have

positive people like Larry over at

BlackRock they do a lot of ldi investing

by the way and he's the CEO it's a

little more optimistic he thinks that

this whole craziness we just went

through is a way of normalizing the

markets more of course that's also what

was said when bear Stearns failed to

join the bailouts of 1998 and then they

famously blew up and went bankrupt

during the Great Recession just 10 years

later the CEO of JP Morgan plays both

sides here he says on one hand quote my

experience in life has been that when

you have things like what we're going

through today there are going to be

other surprises someone is going to be

offsides in other words warning of

coming bankruptcies and surprises then

we're not even aware of yet now at the

same time he he also says hey but it

looks like at least some of the problems

are being resolved now and we don't see

anything that looks systemic that's his

argument my response is yeah you don't

see that yet so what happens next well

the bailout floor is technically gone

and if Panic strikes again it's going to

be a matter of the market to deal with

it unless of course the central bank

intervenes again which would totally

create moral hazard and Crush their

credibility because they said they're

done so if they come back nobody's ever

going to believe them again and they're

just going to think they're always going

to come to save the day well if markets

have to deal with any kind of pension

fund blow up then Pension funds could

end up going bankrupt now people are

still technically owed their money from

the corporations they worked for their

pensions so that means if Pension funds

go bankrupt corporations have to pay

those pensions and if corporations have

to pay those pensions they could see

their stock values plummet massive

corporations could see their stock

values plummet because now they have to

absorb all of these extra costs the only

way out of this would be if the

corporations end up going bankrupt which

they could do which would absolutely

decimate shareholders and potentially

have Global implications of companies

just going bankrupt one after another

after another kind of like dominoes But

ultimately you'd probably see the

government slide in to try to restore

some faith in the pension system and

make sure that the 11 million pensioners

in the United Kingdom are covered of

course in the meantime you'd have some

massive shock waves spreading through

the economy again there's also the flip

side that the Central Bank could jump in

but again that kills credibility even

more than credibility has already been

killed and so really as sort of like a

longer bottom line to all of this beyond

the idea that you got to check out those

programs on building your wealth link

down below and use that coupon code

before it expires tonight Rising rates

is dangerous Rising rates and seeing

rates go up really fast

is even more dangerous this is when

quantitative tightening starts to feel

like quantitative destruction and we

haven't actually really had full

quantitative tightening yet it just

shows you that again the people who are

out there swimming naked or high in debt

are getting exposed and unfortunately

those could be really big institutions

so somehow Pension funds right now are

trying to come up with up to 280 billion

pounds just to have enough collateral to

stop the margin pressures now this could

end up leading to some short-term

corporate borrowing where the Pension

funds are basically like hey Corporation

we need some time to dump some other

assets can you just lend us a bridge

loan and we'll pay you back as soon as

we go sell some other stuff fine that

buys the pension fund some more time but

guess what they end up liquidating then

well they probably end up liquidating

things that take longer to sell like

real estate after all in the United

States for comparison 87 percent of

Pension funds that are public and 73 of

private Pension funds invest in real

estate to a high degree and selling now

could give them the opportunity to lock

in relatively higher prices and build

Capital buffers that they need to buoy

debts that they've taken on somewhere

else now while that might help offload

some of the risks of these Pension funds

it's possible you could end up seeing a

real estate property crash because of

pension fund offloading in both the

United Kingdom the United States and

potentially even other countries

consider the Netherlands the Netherlands

have the world's biggest pension system

at 214 of their gross domestic product

with over 1.9 trillion dollars in assets

almost all of it in defined pension

plans exactly the type of plan that

frequently uses liability driven

investment ldi's so what could happen

well you could have a few things happen

one the United Kingdom could start a

domino effect of margin calls pen should

fund bankruptcies and corporate

bankruptcies which end up flooding to

Liquidations in the real estate market

in the United States market and the

Netherlands Market this could cause a

global depression or nothing could

happen and this was all just a little

bit of a warning call

don't take out too much debt I don't

know what do you think