IT’s ALL OUR FAULT


ww1

The End Times that we’re in now is in my observation, reversing to WWI scenario of deaths and destruction estimated 8.5 million combatant deaths and 13 million civilian deaths as a direct result of the war, while resulting genocides and the related 1918 Spanish flu pandemic caused another 17–100 million deaths worldwide.

The political/financial OBSERVERS and ANALYSTS are reporting the “faults” of the SYSTEM and the wrongdoings and mistakes of the players and stewards.

All of the above put together made it most certain of the greatest catastrophe to befall mankind.

Almost if not all of the experts are blind to the fact:

THE SYSTEM WAS DESIGNED TO COLLAPSE

ENTROPIC SYSTEM IN A ORGANIC ENTROPIC WORLD

entropy and inertia combined is a classically perfect Runaway Train 🚂🚃🚃🚃…….

…so, those who’re looking and hoping for a recovery are in for a shock and despair causing their own demise.

Is it the END OF THE WORLD?

…it is the end of the world as we knew it

Harsh as it may be, REALITY is at its peak REAL-TIME.

As blind as the experts, we the people are as blind

…it is our fault!

The end is nigh..

May the road you choose be the right one.

..

The Federal Reserve Is Setting Up Trump For A Recession, A Housing Crisis And A Stock Market Crash?


TheEconomicCollapse

How The Federal Reserve Is Setting Up Trump For A Recession, A Housing Crisis And A Stock Market Crash

By Michael Snyder

Most Americans do not understand this, but the truth is that the Federal Reserve has far more power over the U.S. economy than anyone else does, and that includes Donald Trump.  Politicians tend to get the credit or the blame for how the economy is performing, but in reality it is an unelected, unaccountable panel of central bankers that is running the show, and until something is done about the Fed our long-term economic problems will never be fixed.  For an extended analysis of this point, please see this article.  In this piece, I am going to explain why the Federal Reserve is currently setting the stage for a recession, a new housing crisis and a stock market crash, and if those things happen unfortunately it will be Donald Trump that will primarily get the blame.

On Wednesday, the Federal Reserve is expected to hike interest rates, and there is even the possibility that they will call for an acceleration of future rate hikes

Economists generally believe the central bank’s median estimate will continue to call for three quarter-point rate increases both this year and in 2018. But there’s some risk that gets pushed to four as inflation nears the Fed’s annual 2% target and business confidence keeps juicing markets in anticipation of President Trump’s plan to cut taxes and regulations.

During the Obama years, the Federal Reserve pushed interest rates all the way to the floor, and this artificially boosted the economy.  In a recent article, Gail Tverberg explained how this works…

With falling interest rates, monthly payments can be lower, even if prices of homes and cars rise. Thus, more people can afford homes and cars, and factories are less expensive to build. The whole economy is boosted by increased “demand” (really increased affordability) for high-priced goods, thanks to the lower monthly payments.

Asset prices, such as home prices and farm prices, can rise because the reduced interest rate for debt makes them more affordable to more buyers. Assets that people already own tend to inflate, making them feel richer. In fact, owners of assets such as homes can borrow part of the increased equity, giving them more spendable income for other things. This is part of what happened leading up to the financial crash of 2008.

But the opposite is also true.

When interest rates rise, borrowing money becomes more expensive and economic activity slows down.

For the Federal Reserve to raise interest rates right now is absolutely insane.  According to the Federal Reserve Bank of Atlanta’s most recent projection, GDP growth for the first quarter of 2017 is supposed to be an anemic 1.2 percent.  Personally, it wouldn’t surprise me at all if we actually ended up with a negative number for the first quarter.

As Donald Trump has explained in detail, the U.S. economy is a complete mess right now, and we are teetering on the brink of a new recession.

So why in the world would the Fed raise rates unless they wanted to hurt Donald Trump?

Raising rates also threatens to bring on a new housing crisis.  Interest rates were raised prior to the subprime mortgage meltdown in 2007 and 2008, and now we could see history repeat itself.  When rates go higher, it becomes significantly more difficult for families to afford mortgage payments

The rate on a 30-year fixed mortgage reached its all-time low in November 2012, at just 3.31%. As of this week, it was 4.21%, and by the end of 2018, it could go as high as 5.5%, forecasts Matthew Pointon, a property economist for Capital Economics.

He points out that for a homeowner with a $250,000 mortgage fixed at 3.8%, annual payments are $14,000. If that homeowner moved to a similarly-priced home but had a 5.5% rate, their annual payments would rise by $3,000 a year, to $17,000.

Of course stock investors do not like rising rates at all either.  Stocks tend to rise in low rate environments such as we have had for the past several years, and they tend to fall in high rate environments.

And according to CNBC, a “coming stock market correction” could be just around the corner…

Investors are in for a rude awakening about a coming stock market correction — most just don’t know it yet. No one knows when the crash will come or what will cause it — and no one can. But what’s worse for most investors is they have no clue how much they stand to lose when it inevitably happens.

“If you look at the market historically, we have had, on average, a crash about every eight to 10 years, and essentially the average loss is about 42 percent,” said Kendrick Wakeman, CEO of financial technology and investment analytics firm FinMason.

If stocks start to fall, how low could they ultimately go?

One technical analyst that has a stunning record of predicting short-term stock market declines in recent years is saying that the Dow could potentially drop “by more than 6,000 points to 14,800″

But if the technical stars collide, as one chartist predicts, the blue-chip gauge could soon plunge by more than 6,000 points to 14,800. That’s nearly 30% lower, based on Friday’s close.

Sandy Jadeja, chief market strategist at Master Trading Strategies, claims several predicted stock market crashes to his name — all of them called days, or even weeks, in advance. (He told CNBC viewers, for example, that the August 2015 “Flash Crash” was coming 18 days before it hit.) He’s also made prescient calls on gold and crude oil.

And he’s extremely concerned about what this year could bring for investors. “The timeline is rapidly approaching” for the next potential Dow meltdown, said Jadeja, who shares his techniques via workshops and seminars.

Most big stock market crashes tend to happen in the fall, and that is what I portray in my novel, but the truth is that they can literally happen at any time.  If you have not seen my recent rant about how ridiculously overvalued stocks are at this moment in history, you can find it right here.  Whether you want to call it a “crash”, a “correction”, or something else, the truth is that a major downturn is coming for stocks and the only question is when it will strike.

And when things start to get bad, most of the blame will be dumped on Trump, but it won’t primarily be his fault.

It was the Federal Reserve that created this massive financial bubble, and they will also be responsible for popping it.  Hopefully we can get the American people to understand how these things really work so that accountability for what is coming can be placed where it belongs.

..

George Soros’ World is Falling Apart, Blames Everyone but Himself


For his own part, Soros, ironically at Davos, predicted that Trump had no chance of being elected president. And he was wrong. Now it appears he can’t deal with the outcome. Perhaps because he feels his life’s work is slipping away.

Covert Geopolitics

Call it by any other fancy names, but Corporate Tyranny continue to be exposed for what it truly is, worldwide. Behind it all are big bankers and financial assassins, willing to send taxpayer-funded armed mercenaries into countries unwilling to participate in their self-emolation.

One of the most notable financial assassins is the dying George Soros.

View original post 1,488 more words

Russia Issues Full-Scale War Alert As West Faces Financial Armageddon


whatdoesitmean

By: Sorcha Faal, and as reported to her Western Subscribers

A new Ministry of Defense (MoD) report circulating in the Kremlin today states that the first squadrons of Sukhoi Su-24, Sukhoi Su-34 and Sukhoi Su-25 ground support fighter aircraft ordered to Syria by President Putin to take part in the freeing of Aleppo from Obama regime backed Islamic terrorists have begun to arrive in the Levant War Zone at the same time that the Ministery of Foreign Affairs (MoFA) is warning that “full-scale war may be imminent” and as the West “is nearing financial Armageddon”. [Note: Some words and/or phrases appearing in quotes in this report are English language approximations of Russian words/phrases having no exact counterpart.]

According to this report, President Putin’s ordering these fighter aircraft to support the freeing of Aleppo from the grip of “Obama’s terrorists” is in “direct retaliation” to these “modern day barbarians” ceaseless attacks upon the innocent civilians of this city—and that the US shockingly this week stated they were preparing for nuclear war with Russia in order to let this “senseless slaughter of innocents” continue.

To how grave the situation in Aleppo has become, this report continues, Syrian supreme commander Major-General Zaid Saleh outlined this week by stating: “The terrorist groups are using civilians as human shields to prevent the Army from targeting them. They heavily depend on US and Turkey to supply them with weapons. But we won’t allow this to happen”.

With Syrian troops, under the protective cover of Russian aircraft, now penetrating more deeply into Aleppo against “Obama’s terrorists, this report notes, this proxy war where the Gulf States, the US and until recently, Turkey have poured billions-of-dollars and hundreds of tons of equipment into while using tens-of-thousands of foreign fighters to kill hundreds-of-thousands is nearing its end.

 

As all hope is now lost for the Obama regime to protect its Islamic terrorists, this report says, the Americans and its allies have gone into “hyperbolic mode” accusing Russia of “savagery” and are not only threatening to “send Russian’s home in body bags”, they are, also, now saying that they are going to give these terrorists portable ground to air missiles—which if happens, most assuredly, will soon after be used to shoot down planes over Europe and the United States.

Particularly angering the Obama regime about Russia’s impending total victory in Syria over these Islamic terrorists, this report explains, is President Putin’s playing by what the American’s call the “Grozny Rules”—which is a reference to Russia’s total war against Chechen Islamic terrorists where the entire city of Grozny was destroyed in order to eliminate these terrorists forever.

Angering the Obama regime even worse, this report continues, is their “losing the information war” over this conflict to Russia—but that Federation experts more rightly state is people simply knowing what the truth is, and who have bluntly stated about Western media hypocrisy:

The Western media have become so embedded in the ideological matrix of the ruling Western class that they no longer know what the meaning or purpose of genuine journalism is. Just this week, American forces and their various allies killed civilians in Syria, Afghanistan and Yemen. Bloodied children’s bodies were pulled like lifeless rag dolls from rubble in Yemen after US-supported Saudi air strikes continued their week-after-week slaughter of civilians there. No coverage of these crimes in Western media. No emotive denunciations from UN officials. No calls for sanctions, prosecutions or editorial condemnations of Washington and its allies as “outlaw states”.

 

With Russia, however, knowing what an “outlaw state” looks like, this report says, the Ministry of Affairs this morning bluntly told the Obama regime about their continued support of Islamic terrorists by warning that unless stopped it will result in a full-scale war that will lead to “tectonic shifts” in the whole region—if not the entire world.

With Brexit clearly showing these Western elites the limitations of their continuous fear-based campaigns against all who oppose them, MoD experts in this report point out, they still fail to see that the credibility of their “third-way politics” as championed by Bill Clinton, Tony Blair and other communist-like leftists ruling Europe and America, has been completely savaged by the very people they rule over—but who are now prepared to start World War II in their last gasp bid to continue their monstrous rule.

But to the latest tragedy to befall these Western peoples at the hands of their elite rulers, this report warns, is the financial Armageddon they are soon to face as one of their largest banks, Deutsche Bank, is nearing complete collapse due to its over $42 trillion in derivatives (bets) and whose failure will take down nearly every bank in the United States and Europe with it.

 

With German Chancellor Merkel already stating that her government will not bail out Deutsche Bank (as it would be political suicide to do so), this report continues, these German bankers are now rushing to the United States in hopes that the Obama regime will.

Grimly too, this report points out, is that aside from Deutsche Bank nearing collapse, according to the global banking body The Bank for International Settlements (BIS), both Canada and China are nearing a total banking collapse too.

This report concludes by noting that among the least prepared people in the world for total war and economic collapse are the Americans—who like in 2007 when they failed to heed the warnings that their entire economy was about to collapse (and we, likewise, reported on in our 28 June 2007 report US Banking Collapse ‘Imminent’ Warns French Banking Giant) and who are, once again, are listening to their propaganda media, instead of hearing the truth, while their life savings, pensions and stock holdings are about to disappear into the hands of their elite rulers—just like the last time.

 

Other reports in this series include:

“Level B” Russian Ministries Ordered To Bunkers After US Threat To Cut Off Diplomacy

Putin Convenes “Holy Council Of War” As Obama Regime Threats Intensify

Russia Collapses Entire US Intelligence System Using Microsoft, Facebook And Google

Russia Moves ICBM’s To EU Border After Recording Confirms Pentagon Coordinated ISIS Attack

World On Brink After Obama Activates Missile Shield, Prepares Weapons For Space

Top Russian Ministries Flee To Bunkers As “Hillary Clinton War” Warned May Be Unstoppable


October 2, 2016 © EU and US all rights reserved. Permission to use this report in its entirety is granted under the condition it is linked back to its original source at WhatDoesItMean.Com. Freebase content licensed under CC-BY and GFDL.

..

Will #Deutsche’s Problem Ever End?


BANG! More Bad News For Deutsche and Friends as the Take Down Intensifies
Finance

There should be no doubt in anyone’s mind that the Official Take Down of the Global Monetary System has kicked into OVERDRIVE!!

Even the government and regulators are doing their part to destroy the system!!

Deutsche Bank, Paschi, Numora Staff Charged Over False Accounts
http://www.bloomberg.com/news/articles/2016-10-01/deutsche-bank-paschi-nomura-staff-charged-over-false-accounts-itr5z2ku

“Six current and former managers of Deutsche Bank AG — including Michele Faissola, Michele Foresti and Ivor Dunbar — along with two former executives at Nomura Holdings Inc. and five at Banca Monte dei Paschi di Siena SpA were charged in Milan for colluding to falsify the accounts of Italy’s third-biggest bank and manipulate the market.”


The charges deal another blow to Deutsche Bank, which is seeking to reassure investors and clients that it will be able to withstand pending U.S. penalties over the bank’s sale of mortgage-backed securities and its dealings with some Russian clients. Monte Paschi, the world’s oldest bank, restated its accounts and has been forced to tap investors twice to replenish capital amid a surge in bad loans and losses on derivatives. It’s now attempting to convince investors to buy billions of soured debt before a fresh stock sale. – Bloomberg


END

This couldn’t happen at a WORSE time for the world’s largest derivative holder.

And there will be more “bad news” soon.

PS – At this end of this Road is a Silver Moonshot that will be for the record books!!

May the Road you choose be the Right Road.

Bix Weir
http://www.RoadtoRoota.com

..

EU Banking Mayhem: One Bank at a Time – Then All at Once


 

by Wolf Richter

Investors are not amused.

The European banking crisis simply doesn’t let up. Currently, the big two German banks are grabbing the headlines away from the Italian banks, due to their size and the damage they could do to the global financial system. Other banks are in bigger trouble still, and some have already collapsed, with bailouts and bail-ins getting lined up.

Deutsche Bank had to endure a horrendous Monday after it was leaked on Friday that Merkel had refused to entertain bailing out the bank before the general elections a year from now. Merkel’s popularity has gotten broadsided recently, and bailing out bank bondholders with taxpayer money is just not popular at the moment.

Then Commerzbank, in which the government already owns a stake of 16% as a result of the bailout during the Financial Crisis, graced the headlines with leaks that it would lay off 9,000 employees, nearly one-fifth of its workforce. This will cost about €1 billion, according to the sources. To pay for it, the bank will scrap its dividend for 2016 to reduce the bleeding and preserve capital, in what is turning out to be the hellish environment of negative interest rates.

We’ve been writing about the European banking crisis for a long time, it seems, as it drags on, and meanders from one country to another, and sometimes we write about it in an amused fashion because we’ve got to keep our sense of humor in all this gloom.

But investors who believed in all the hype and in Draghi’s promises and in Merkel’s strength and in the willingness of all of them to do whatever it takes to protect bank bondholders and stockholders, and who believed in the miracle of Spain’s recovery, and in Italy’s new government and what not – well, they’re not amused.

For them, it has been bloody. The global financial crisis got swept under the rug. Then the euro debt crisis took down some banks at the periphery, and taxpayers stepped in to bail out the bondholders, mostly, and a lot more things got swept under the rug. But the problems weren’t solved. And as the decomposing assets under the rug kept exuding their pungent odor, investors held their nose and played along for a while.

But now it’s just getting worse. And investors are wondering what exactly is under these rugs – or maybe they’d rather not know for it’s too ugly to behold. And every time someone does look, for example at the Italian banks, they find even bigger problems that have started to metastasize.

This banking crisis has the potential to transmogrify into a financial crisis. All it takes is for one of the big ones to suddenly topple. The flow of credit would freeze up instantly. In an economic system that depends on credit, and whose lifeblood is credit, such an event is a financial crisis.

The problem isn’t restricted to a couple of Italian or German banks. It’s deep and wide.

Here are the 29 banks in the ESTX Banks Index of Eurozone banks (so Swiss and UK banks, for example are not included). It shows the percentage drop from their 52-week high. But for some of these banks, particularly for Italian and Portuguese banks, that 52-week high was just about last year’s 52-week low, so relentless has their decline been over the years. Some of them had already been reduced to penny stocks years ago, and for them, in euro terms, the biggest losses occurred back then. So these mayhem banks, color coded by country:

eurozone-bank-estx_from-52-week-high

If a bank stock plunges from €0.04 to €0.01 over the 52-week period, such as Banco Comercial Português in Portugal, it has been toast for longer than 52 weeks, and the percentage plunge is essentially meaningless because shares were worthless to begin with.

The shares of five of these banks trade under €1. Another 8 banks trade under €3. These 29 banks form a big part of the European financial system. It includes some of the world’s largest banks, such as Deutsche Bank, Societe Generale, and BNP Paribas. It includes a slew of other “systemically important financial institutions,” such as Unicredit, ING, and Santander.

They’re troubled at the same time. The can has been kicked down the road for years. Now negative interest rates appear to have inadvertently crushed the can.

So when will Merkel buckle? Read…  Deutsche Bank in Free Fall. Shares, CoCo Bonds Plunge. Merkel Gives Cold Shoulder on Bailout. Bank Denies Everything

..

World Trade Collapsing On Schedule


…the planned financial/economic collapse is perfectly on schedule

The UN warns of next financial crisis imminent


ArmstrongEconomics

world-trade-2-433x600

The World Trade Organization (WTO) has warned that there is a “dramatic slowing of trade growth” unfolding. The WTO has revised downward its projections, saying trade is now on track this year to grow at the slowest pace since 2009.

The hunt for taxes is destroying the world economy and on January 1, 2017, all governments will begin sharing info on foreigners. The assumption is that anyone doing anything outside the USA is hiding money from taxes. With this attitude, world trade will continue to collapse into 2020.

..

Warren Buffett Is Out Of The Casino


TDV

Jeff Berwick

Warren Buffett Is the Latest Billionaire To Jump Ship From The Markets

Right now the market is perceived to be so dangerous that it’s even chased the most fearless value investors to the sidelines.

Just this evening, in the Presidential debate, Trump warned that the stock market was a bubble “about to pop”.

Now, the bearish billionaire circle has grown even wider with the addition of Warren Buffett.

The “Oracle of Omaha” as he’s known, currently has more money outside the markets than ever before in his five decades running Berkshire-Hathaway.

buffetscashholdings

This is a striking fact considering that Buffett is very well known for his long-term investment strategy – an approach that requires one to constantly have most of their capital tied up in order to generate consistent returns.

That’s right, as the S&P 500 is near record highs, Warren Buffet is more out of the market than he has ever been and waiting for a collapse.

That the 86 year old has so much dry powder, shows his anticipation of a massive market crisis and quite possibly the biggest buying opportunity of his life. Just like us, Buffet is ready to survive and prosper through this calamity.

And with asset prices at all time highs and CNBC and Fox business puppets still perpetuating the great recovery myth, you might expect all these smart money billionaires to be piling into stocks to ride the upside. Instead they obviously know the “goldilocks” recovery holds true to its name’s fairytale origin.

They say “follow the smart money”… and Buffett is known as one of the smartest!

And even more multi-billion dollar fund managers are coming out and warning.

Tad Rivelle, the chief investment officer of TCW’s $195 billion investment fund, is yet another outspoken multi-billion dollar fund manager who’s expressed concern about the economy and monetary policy gone awry.

Rivelle mentioned in a Bloomberg interview last week that he thinks it’s “Time to leave the dance floor” because, to paraphrase, corporate debt is piling up faster than income is increasing.

In a note to investors Rivelle argued, “Face it: the central banking Emperors have no clothes.” he continued:

“…The Fed could continue to use its printing press to falsify capital market signals, but to what end? When a central bank buys an asset with an electronically printed dollar, a “something for nothing” trade has taken place. Unless everything we understand about economics is plain wrong, the Fed cannot go on blithely adding printing press dollars to the system and expect no ill effects.”

The letter continues:

“Our counsel remains as it has been: avoid those assets that will be broken in the coming de-leveraging while keeping a ‘steady as she goes’ attitude towards the future purchase of those assets that will merely bend when the flood comes.”  

He actually called the coming de-leveraging, “the flood”. Even the language of these top money people is biblical in nature.

When we first began ringing the alarm bells about an impending financial crisis last summer, we were nearly the only ones doing it.  Then, month after month, some of the biggest names in money and finance have not only climbed aboard our bandwagon, but have practically stampeded past us.

Now, we can barely keep up with the amount of people warning of impending doom.

Last summer we made a call for subscribers that earned 4,500% in just three days by calling the market crash in late August correctly.

And, our Senior Market Analyst, Ed Bugos, has just reissued a very similar play in an alert to Premium subscribers on September 16th.

There is no guarantee we’ll make another 4,500% gain in a short amount of time, of course.  But it is virtually the exact same investment play we made last summer which made a fortune.

And, that was before we had the likes of Soros, Trump, Rothschild, Jim Rogers and numerous other billionaires, also feeling the same way as us.

We are now less than a week away from the end of the Jubilee Year and if our call is right, we could again make mind boggling returns in just the next few weeks or months.

And, the best part about this type of an out-of-the-money shot is that you can put a small amount of money into it and possibly make large returns… and if it is wrong, you lose just a small amount of money.

Subscribe to TDV Premium and get immediate access to Ed Bugos’ pick in his alert of September 16th.

If the ship’s going down, and soon, it’ll be much more enjoyable making a massive investment return off of it than going down with everyone else.

..

Say What You Like About The Fed Or The Central Banks, The Bank$terS Are Above Governments


FT

Fed on ropes as Yellen seeks to fend off Trump blows

Populist attacks from all sides make central bank vulnerable to calls to rein it in, say analysts

After a fusillade of excoriating and in many ways unprecedented attacks on the Federal Reserve by the Republican presidential candidate, Janet Yellen, the US central bank’s chair, finally hit back.

Ms Yellen last Wednesday dismissed as emphatically wrong Donald Trump’s claims that she and her institution were keeping short-term interest rates low at the behest of the Obama administration. “Partisan politics play no role in our decisions,” she declared.

Mr Trump is throwing punches at a time when the US central bank is under assault from both sides of the partisan divide, and at a time when polling suggests public confidence in its leadership has declined during a subpar economic recovery.

Some experts say the Fed is vulnerable and that the populist attacks could fuel demands by politicians for tighter constraints on its policy freedoms. Mr Trump “is tossing a lot of fuel on the fire”, says Sarah Binder, a professor of political science at George Washington University. “It intensifies the partisan criticism of the Fed and keeps the Fed in the politicians’ crosshairs.”

Mr Trump’s interventions by no means mark the first time the Fed has been turned into a political punching bag. Previous Fed chairs have been the subject of barbs during presidential campaigns — including in 2011 when Republican candidate Rick Perry accused former Fed chair Ben Bernanke of “treasonous” behaviour by conducting quantitative easing. Past administrations have seen outbreaks of tension with Fed chiefs, including under presidents George HW Bush and Richard Nixon.

Ms Yellen herself has become accustomed to fielding hostile questions from lawmakers during often fractious Capitol Hill appearances.

Mr Trump has, however, set a new standard for anti-Fed invective — at least when it comes to presidential nominees. He has said in recent weeks that Ms Yellen should be “ashamed” of what she is doing to the country, accusing her of creating a false stock market with low rates and setting policy to bolster President Barack Obama’s fortunes…

Read further


Central banks: Peak independence

http-com-ft-imagepublish-prod-s3-amazonaws-com-cf449596-84a9-11e5-8e80-1574112844fd

After a post-crisis surge in central bankers’ power, some politicians want to rein in their role


Yellen To Trump: The Fed Is Above The President

CorbettReport.com


Trump goes after Fed Reserve’s Yellen, claims she’s ‘more political’ than Clinton – Fox

“We are in a very big, ugly bubble,” Trump said Monday. “The Fed is not doing its job. The Fed is being is more political than Hillary Clinton.”


..

Of September, October, Good Guys And The Bad Guys.


So it comes down to this week for the Good Guys. This is their last chance to crash the system and take the Bad Guys out once and for all. This is for all the marbles and they have set it up perfectly targeting the world’s most systemically unstable bank…Deutsche Bank.


Deutsche Bank Slumps as Investors Question Lender’s Health – Bloomberg


A Crashing Deutsche Bank Scrambles to Assure Markets It’s Fine
http://www.zerohedge.com/news/2016-09-26/crashing-deutsche-bank-scrambles-assure-markets-it-fine

With Deutsche Bank stock plunging to fresh all time lows in early trading after Merkel reportedly ruled out state aid the embattled German lender, the bank found itself in the unenviable position of once again having to defend its balance sheet to avoid further stock price declines, especially as doubts mounted if the German government response was due to a pre-emptive request for aid. DB quickly tried to squash such speculation when a bank spokesman said that “CEO John Cryan at no point asked the German Chancellor for the government to intervene in the U.S. Justice Department’s mortgages case.”

He added that Deutsche Bank will solve its problems without relying on help from Berlin, Germany’s flagship lender said on Monday.

The market remains unconvinced: shares in Germany’s biggest bank hit a record low of 10.62 euros on Monday.

END

…If the Good Guys can’t take the system down over the next few weeks then the Bad Guys will get their shot in the LAST week of October. Either way the system is coming down.

On the debate front – should be quite entertaining tonight…if Clinton even shows!

May the Road you choose be the Right Road.

Bix Weir
http://www.RoadtoRoota.com


Major world power struggles and changes due in October

Multiple, reliable sources inside the world’s intelligence agencies and secret societies are predicting major changes in the world’s power structure in October. The struggle is centering on who will control the United States and its military industrial complex, the sources agree.

CIA and Pentagon sources are now both saying neither Hillary Clinton nor Donald Trump will become the next president of the United States. However, they disagree on who will become president, showing that the issue is still up for grabs.

US based CIA sources are still insisting Vice President Joe Biden will become President only to be quickly replaced by VP candidate Tim Kaine. These sources are also saying there is a faction pushing to have Michelle Obama become President thus de-facto prolonging the Obama Presidency.

However, Pentagon sources say a Biden Presidency “would be a disaster.” They are saying that instead “The October surprise may have the Republic restored and new candidates for President like speaker Paul Ryan (R) and Senator Elizabeth Warren (Dem), who gained national profile for publically flogging Wells Fargo CEO.”

The White Dragon Society, for its part, is recommending that Canadian Prime Minister Justin Trudeau head a North American Union. When the US and Canada parted ways in 1776, the Americans opted for “life, liberty and the pursuit of happiness,” while the Canadians promoted the more prosaic “good government.”

The institutions of the United States are now so corrupted it may well take friendly outsiders like the Canadians to clean them up. It is also worth noting that Scotland only became part of England because a Scottish king ended up ruling both, so having a Canadian rule the US would have a similar result in the long term. Also a United States of North America would have a population of 475 million and would thus be a much stronger entity. Absorbing the 122 million relatively poor Mexicans would be the main drawback to this proposal but at the same time, these Mexicans would help North American industry compete with the Asians.

These topics came up during negotiations between WDS representatives, CIA white hats and Asian secret society plus Chinese government representatives last weekend. The talks went very well.

It was agreed between the Chinese government and the CIA that massive funding would be made available for…read further


…and the Yuan will be placed in the IMF’s SDR basket

…and then there is this thingy called the Shemitah, the Debt Jubilee

…we’re into some very interesting times on Earth

 

..

 

Martial Law Rolls Out Across the US As Jubilee Nears


TDV

This is a continuation of last summer’s Jade Helm seven-state military exercise that many in the area saw as a prelude to military occupation. After Jade Helm  came the US Army Special Operations Command’s Unconventional Warfare Exercise 16 (UWEX 16) that ran in Texas through June.

And now, after yet another police shooting in Charlotte, the city’s bus and light rail services ceased after midnight.  New Yorkers would recognize this kind of action as they have been exposed to their own occupation following recent Manhattan bombings. Tanks, humvees and other kinds of military vehicles and equipment flooded the city, leaving behind shocking pictures of a city under siege..

Much was similar, though one difference between Manhattan and Charlotte was George Soros, who has made a habit of funding the provocations that the government then responds to. He obviously had a hand in the Charlotte riots that were precipitated by Soros-assisted Black Lives Matter.

Back in June, we covered Wikileaks exposure of the elite’s pre-planned “summer of chaos” when whistleblowers provided numerous documents illuminating Soros’ role with dedicated agitation from BLM.

Remember Deray Mckesson? He was the former BLM leader who had two of his email accounts hacked revealing that the Soros-backed social justice group was working with the Obama regime. The idea, he suggested, was to create so much chaos that martial law could be declared and elections canceled.

According to financial records and key players in the Ferguson Missouri protests, billionaire Soros donated $33 million to community organizers and organizations who helped turn the events there from a local protest into a politicized and televised race “crisis”.

Now there’s further evidence of George the puppet master along with his “open-borders” foundation, have been facilitating unrest.

Charlotte, North Carolina, is merely the latest riot-destination for his paid protesters, but one that comes with compelling evidence of his involvement.

About 70% of the rioters arrested had out of state IDs. No doubt they traveled to Charlotte in buses paid for by Soros.

In a CNN interview. Todd Walther, the spokesman for the Charlotte-Mecklenburg Fraternal Order of Police, told Erin Burnett, “This is not Charlotte that’s out here. These are outside entities that are coming in and causing these problems. These are not protestors, these are criminals.”

Yes, criminals – funded by a criminal. The most ridiculous aspect of these “peaceful protests” as CNN and MSNBC continue to call them, is that they are not protests. They are riots.

The rioting is obvious. “Protesters” broke into the Charlotte Hornets’ team store to steal basketball merchandise. “Protesters” looted the NASCAR Hall of Fame. “Protesters” vandalized and destroyed buses, stores and homes in poor black neighborhoods.

That’s probably how Soros lured them. He let it be known that looting would be the main “protest” in Charlotte.

When it comes to globalism and globalists, we don’t rule anything out. To the elites behind all of this – and Soros is just an employee –  this is all a sick game. They actually enjoy controlling the sheeple and then laughing at their inability to recognize who’s manipulating them.

This is not going away with the end of the Jubilee Year in October or even with the end of 2016. It’s just getting started – and the false flags are growing more numerous. They feed the growing militarization around the country.

After the false flag shooting that occurred in Dallas, for instance, where the assailant was supposedly bombed by a drone before any information could be extracted from him, the NYPD was compelled to purchased $7.5 million worth of military grade protection equipment and weapons for themselves.

The NYPD officer from what Bloomberg called “the world’s 7th largest army,” even took pride in his force’s purchasing of these weapons and armor, saying, “There’s not a police department in America that is spending as much money or as much thought and interest on this issue of officer safety.”

Just what kinds of scenarios are these officers envisioning? If it weren’t for the camouflage it would be nearly impossible to differentiate between them and the actual military.

None of this seems to matter to Americans who don’t even bat an eye at these “troops” on their streets.  Many, dumbed down by the fluoride in the water and in government schools, and propagandized by the mainstream media television programming, actually cheer when they see their very own forces of occupation.

Most of them are unaware of the existence of Posse Comitatus – the part of their constitution that used to prohibit troops on their streets in times of peace – let alone it’s nullification back in 2006, which made declaring martial law even easier in the event of a “terrorist attack” or “natural disaster”.

Americans are too busy watching sitcoms and fake news to figure out the disaster headed in their direction. And the ones that do figure it out are supposed to be discouraged by people like Soros.

That’s why there are so many news reports featuring Soros. And that’s why he’s never been arrested, by the way.

They want you to understand all the bad things he’s doing. And they want you to be clear on one thing: He can keep on doing it with impunity. No one is going to stop him. He’s going to continue his agitations until chaos rises up around the world.

The elites behind this world-shaping gambit want you to be thoroughly discouraged. They want to emotionally paralyze you.

There is violence and strife looming and it’s all being planned to control you. The elites intend to steal your wealth and livelihood by any means necessary. Stay one step ahead of them by getting your money out the financial system while you still can. To help your family and yourself survive and prosper through the collapse of the dollar, check out my book Shemitah Trends on Amazon or become a subscriber and receive the book free here.

We are now exactly one week from the end of the Jubilee year.  Will something else happen before or on that date?  Perhaps not. But, as we’ve described all year, all the pieces for continued chaos have been put in place.

And it won’t stop after October 2nd either. In fact, it looks like it is just getting started.

..

U.N. Warns Next Financial Crisis Imminent


GoldCore

Savings Guarantee? U.N. Warns Next Financial Crisis Seems Imminent

“There remains a risk of deflationary spirals in which capital flight, currency devaluations and collapsing asset prices would stymie growth and shrink government revenues. As capital begins to flow out, there is now a real danger of entering a third phase of the financial crisis …”

UN Conference on Trade and Development’s Annual Report (UNCTAD), September 22, 2016


image (5)Image from “Extraordinary Popular Delusions and the Madness of Crowds” by Charles Mackay – Wikipedia

This hard hitting critique in the UN Conference on Trade and Development’s Annual Report, released this week, is suggesting that the ‘third leg of the world’s intractable depression is yet to come.’

“Alarm bells have been ringing over the explosion of corporate debt levels in emerging economies, which now exceed $25 trillion. Damaging deflationary spirals cannot be ruled out,” said the annual report of the UN Conference on Trade and Development (UNCTAD).

But what does these grand, scary predictions really mean for us? Bankruptcy? Economic collapse? Apocalypse now? End of the world as we know it?

The UN economists certainly think that a la 2007/2008, we are on the verge of the third leg of the global financial crisis – with prospect of epic debt defaults.

We may soon experience the end of the financial world as we know it … but investors and savers feel fine! Many bond and stock markets, including the S&P 500, continue on their merry way to all time record highs.

Few know, or (it seems) care anymore. As we end yet another week with yet another anticlimactic announcement from the “all powerful” Fed, it is understandable that many of us are feeling some cognitive dissonance when it comes to the real impact of central bank announcements, economic forecasts and political changes.

Bail-In Regime Cometh

There was one major ‘solution’ to the crisis that was announced in recent years with so much spin you would be forgiven for thinking it has little to do with you. When in truth you are the one who could be most affected.

In 2012 the release of a joint paper from the US Federal Deposit Scheme and the Bank of England included the words; “deposit schemes may have to contribute to the recapitalisation of a failed bank”. Bail-ins in the UK banking system had become a possibility.

This was made official by a “watershed” moment in 2014 when Mark Carney announced the end of the bail-out era, he was calling time on ‘too big to fail’ for banks.

“Let’s face it, the system we’ve had up until now has been totally unfair…The banks and their shareholders and their creditors got the benefit when things went well. But when they went wrong, the British public and subsequent generations picked up the bill – and that’s going to end.”

The media, politicians and until now, the general public fell for this. The promise of no more bailouts has resulted in feelings of reassurance that the taxpayer won’t be asked to foot the bill when irresponsible bankers mess up.

But this is fundamentally wrong. As we outline in a forthcoming report on bail-ins, the British public and subsequent generations are still going to be ‘picking up the bill’.

For the first time depositors in the form of retail savers and companies with capital, (who also happen to be taxpayers) will also be exposed in the event of governments bailing out banks again.

But what about the much supported Deposit Guarantee Scheme? It’s unlikely to last, or mean much when crunch time comes.

“It is not enough to have just a Deposit Guarantee Scheme [for a major bank rescue] if the losses are vast enough, then the haircuts imposed by the resolution authority can in principle permeate to any level of the creditor stack. In the case of insured deposits, that means Deposit Guarantee Schemes suffering losses …”

Paul Tucker, Deputy Governor Financial Stability of the Bank of England, October 2013

In the EU depositors are protected by some form of a deposit guarantee scheme, EUR100,000 or £75,000 for UK depositors, is protected in the event of bank failure. However, as we outline in our forthcoming report this amount or even any kind of insurance, is not guaranteed. Some politicians and think tanks are even recommending that deposit guarantee schemes be removed.

What does this mean in the context of a forthcoming third financial crisis and are your savings”guaranteed”?

..

“The Committee to Destroy the World” Just Tipped Its Hand


The Road to Roota Theory postulates that there is a group of people in the United States as well as around the world that are working to remove and destroy the financial banking powers that have secretly controlled all aspects of our lives for hundreds of years. The original idea of this group sprang from the mind of Alan Greenspan and involved rigging markets with computer programs that he had invented in the 1960’s.

The ongoing financial crisis is nothing but a planned collapse by Alan Greenspan’s “Golden Agenda”


MoneyMorning

The Federal Reserve Board is largely made up of tenured economics professors who are long on theory and short on practical. So it’s not surprising that their dot plots rarely reflect anything close to a realistic, well-reasoned forecast. A 3.25% short-term rate prediction, for instance, is pure science fiction.

dot-plot-graphic

Central Banks Are Willfully Destroying This Critical Market Function

Michael E Lewitt

With central banks owning $25 trillion of financial assets and sovereign wealth funds owning countless trillions more, it is time to ask whether capitalism as we know it is a thing of the past.

These non-economic actors have different motivations than traditional investors who buy assets in order to earn a profit over a reasonable period of time.

Central banks are buying stocks and bonds in order to monetize government debt and keep afloat the endless Ponzi schemes required to finance massive entitlement promises to their constituents.

Sovereign wealth funds are looking for places to park their cash for extremely long periods of time and often focus on assets with trophy or strategic value.

But the most important thing these two types of buyers have in common is that they don’t have to sell, which means that their ownership can inflate the value of what they own for prolonged periods of time.

This destroys the price discovery mechanism that markets are supposed to provide. And without price discovery, markets cease to function properly.

Then the destruction starts in earnest…read further

 

..

The World’s Graveyards of Unsold Cars


ZeroHedge

Where the World’s Unsold Cars Go To Die

In the past several years, one of the topics covered in detail on these pages has been the surge in such gimmicks designed to disguise lack of demand and end customer sales, used extensively by US automotive manufacturers, better known as “channel stuffing”, of which General Motors is particularly guilty and whose inventory at dealer lots just hit a new record high. But did you know that when it comes to flat or declining sales and stagnant end demand, channel stuffing is merely the beginning?

Presenting…

Where the World’s Unsold Cars Go To Die

cars 1

Above is just a few of the thousands upon thousands of unsold cars at Sheerness, United Kingdom.  Please do see this on Google Maps….type in Sheerness, United Kingdom.  Look to the west coast, below River Thames next to River Medway. Left of A249, Brielle Way.

Timestamp: Friday, May 16th, 2014.

There are hundreds of places like this in the world today and they keep on piling up…

THE WORLDS UNSOLD CAR STOCKPILE

Houston…We have a problem!…Nobody is buying brand new cars anymore!  Well they are, but not on the scale they once were.  Millions of brand new unsold cars are just sitting redundant on runways and car parks around the world.  There, they stay, slowly deteriorating without being maintained.

Below is an image of a massive car park at Swindon, United Kingdom, with thousands upon thousands of unsold cars just sitting there with not a buyer in sight. The car manufacturers have to buy more and more land just to park their cars as they perpetually roll off the production line.

cars 2

There is proof that the worlds recession is still biting and wont let go.  All around the world there are huge stockpiles of unsold cars and they are being added to every day.  They have run out of space to park all of these brand new unsold cars and are having to buy acres and acres of land to store them.

NOTE:

The images on this webpage showing all of these unsold cars are just a very small portion of those around the world.  There are literally thousands of these “car parks” rammed full of unsold cars in practically every country on the planet.  Just in case you were wondering, these images have not been Photo-shopped, they are the real deal!

Its hard to believe that there are so many unsold cars in the world but its true.  The worse part is that the amount of unsold cars keeps on getting bigger every day.

It would be fair to say that it is becoming a mechanical epidemic of epic proportions.  If anybody from outer space is reading this webpage, we here on Earth have too many cars, why not come and buy a few hundred thousand of them for your own planet! (sorry but this is all I can think of)

Below is shown just a few of the 57,000 cars (and growing) that await delivery from their home in the Port of Baltimore, Maryland, U.S.A. With Google Maps look South of Broening Hwy in Dundalk for the massive expanse of space where all these cars are parked up.

cars 3

The car industry would never sell these cars at massive reductions in their prices to get rid of them, no they still want every buck.  If they were to price these cars for a couple of thousand they would sell them.  However, nobody would then buy any expensive cars and then they  would end up being unsold.  Its quite a pickle we have gotten ourselves into.

Below is shown an image of the Nissan test track in Sunderland United Kingdom.  Only it is no longer being used, reason…there are too many unsold cars parked up on it!  The amount of cars keeps on piling up on it until its overflowing.  Nissan then acquires more land to park up the cars, as they continue to come off the production line.

cars 5

UPDATE: Currently May 16th, 2014, all of these cars at the Nissan Sunderland test track have disappeared? Now I don’t believe they have all suddenly been sold.  I would guess they may have been taken away and recycled to make room for the next vast production run.

Indeed next to that test track and adjacent to the Nissan factory, they are collating again as shown on the Google Maps image below.  So where did the last lot go? This is not an employees car park by the way.

nissan

None of the images on this webpage are of ordinary car parks at shopping malls, football matches etc.  Trust me, they are just mountains and mountains of brand spanking new unsold cars. There is no real reason why you should be driving an old clunker now is there?

The car industry cannot stop making new cars because they would have to close their factories and lay off tens of thousands of employees.  This would further add to the recession.  Also the domino effect would be catastrophic as steel manufactures would not sell their steel. All the tens of thousands of places where car components are made would also be effected, indeed the world could come to a grinding halt.

Below is shown just a small area of a gigantic car park  in Spain where tens of thousands of cars just sit and sunbathe all day.

cars 6

They are also piling up at the port of Valencia in Spain as seen below.  They are either waiting to be exported to…nowhere or have been imported…to go nowhere.

cars-valencia

Tens of thousands of cars are still being made every week but hardly any of them are being sold.  Nearly every household in developed countries already has a car or even two or three cars parked up on their driveway as it is.

Below is an image of thousands upon thousands of unsold cars parked up on a runway near St Petersburg in Russia.  They are all imported from Europe, they are all then parked up and they are all then left to rot. Consequently, the airport is now unusable for its original purpose.

cars94

The cycle of buying, using, buying using has been broken, it is now just a case of “using” with no buying. Below is an image of thousands of unsold cars parked up on an disused runway at Upper Heyford, Bicester, Oxfordshire. They are seriously running out of space to store these cars.

cars4

It is a sorry state of affairs and there is no answer to it, solutions don’t exist.  So the cars just keep on being manufactured and keep on adding to the millions of unsold cars already sitting redundant around the world.

Below are parked tens of thousands of cars at Royal Portbury Docks, Avonmouth, near Bristol in the United Kingdom. If you look on Google Maps and scan around the area at say 200ft you will see nothing but parked up unsold cars. They are absolutely everywhere in that area practically every open space has unsold cars parked up on it.

avonmouth-cars

Below is that same area in Avonmouth, UK, but zoomed out. Every gray space that you see is filled with unsold cars.  Anyone want to hazard a guess at how many are there…

avonmouth-unsold

As it is, there are more cars than there are people on the planet with an estimated 10 billion roadworthy cars in the world today.

We literally cannot make enough of them. Below are seen just a few of the thousands of Citroen’s parked up at Corby, Northamptonshire in England. They are being added to daily, imported from France but with nowhere else to go once they arrive.

cars7

So there they sit, brand spanking new cars, all with a couple of miles on the clock that was consummate with them being driven to their car parks.  Below is the latest May 2014 Google Maps image of unsold cars in Corby, Northamptonshire.

corby-unsoldcars

Manufacturing more cars than can be sold is against all logic, logistics and economics but it continues day after day, week after week, month after month, year in year out.

Below is shown a recent (April 2014) screen grab from Google Maps of the Italian port of Civitavecchia.  All those little specks are a few thousand brand new unsold Peugeots.  Just collecting dust and maybe a bit of salty sea spray!

TheItalianJob

Below, all nice and shiny but with nowhere to go.  Red and white and black and silver, purple, pink and blue, all the colors of the rainbow and be they all brand new.  Indeed all the colors of the rainbow are down there on those cars, making pretty mosaics, montages of color and still life.  Maybe that is all they will now ever be, surreal urban art of the techno production age.  Magnificent metal boxes, wasting space and saving grace, all sitting still, because its business at mill.

cars8

All around the world these cars just keep on piling up, there is no end in sight.  The economy shouts out quite loud that nobody has the money anymore to spend on a new car. The reason being that they are making their “old” cars go on a lot longer.  But we cannot stop making them, soon we will run out of space to park them.  We are nearly running out of space to drive them that’s for sure!

Below, more cars mount up in the port of Valencia in Spain. They will not be exported as there is nowhere for them to go, so they just sit and rot in their colorful droves.

cars9

Gone are the days when the family would have a new car every year, they are now keeping what they have got.  It may be fair to say that some  families still get a new car every year but its the majority that now do not.

The results are in these images, hundreds of thousands if not millions of cars around the world are driven from their factories, parked up and left.

cars91

Could we say that these cars have been left to rot!  Maybe, as these cars will certainly rot if they are not bought, driven and cared for.  It does not look like they will be sold any day soon, many of them have been standing for over 12 months or even longer and this is detrimental to the car.

Below, as far as the eye can see, right into the background, cars, cars and more cars. But what’s beyond the horizon?  Have a guess…Yes that’s right…even more cars!  All brand new but with no homes to go to.  Do you think they will ever start giving them away, that may be the only radical solution.  Who knows, you could soon be getting a free car with every packet of cornflakes.

cars92

When a car is left standing idle, all the oil sinks to the bottom of the sump, and then corrosion begins to set in on all the internal engine parts where the oil has drained away.

Cold corrosion is when condensation builds up in the cylinders and rust forms in the bores. The engines would then start to seize and would need to be professionally freed before they could be started.  Also the tires start to lose air and the batteries start to go flat, indeed the detrimental list goes on and on.

cars93

So the longer they sit there the worse it slowly becomes for them.  What is the answer to this?  Well they need to be sold and that just isn’t happening.

The epidemic is not improving, it is getting worse.  Car manufactureres are constantly coming out with new models with the latest technology in them.  Hence prospective buyers of, for example, a new Citroen Xsara Picasso want the latest model, not last years model.  Hence all the unsold Citroen Xsara Picasso cars from the previous year will now have even lesser chance of being sold.

The problems then just keep on mounting up.  In the end, the unsold cars that are say 2 years old will have no alternative but to be either crushed up, dismantled and/or their parts recycled.

Some car manufacturers moved their production over to China, General Motors and Cadillac are examples of this.  They are then shipped over in containers and unloaded at ports.  However they are now being told to put a big halt in their import into the U.S.A. as they just can’t sell them in the quantities they would desire.  Consequently Chinese car parks are now filling up with brand new American cars.  Well nobody in China can afford them on their meagre pittance wages, so there they will stay until our economy improves…which it might do in a few generations.

 

http://www.vincelewis.net/unsoldcars.html

..

Banking – A Criminal Enterprise


WallStreetOnParade

By Pam Martens and Russ Martens: September 19, 2016

The Debate Is Over: Banking Has Become a Criminal Enterprise in the U.S.

richard-selby-chair-of-the-u-s-senate-banking-committee

Senator Richard Shelby – Chsir of the Senate Banking Committee

Tomorrow the U.S. Senate Banking Committee will hold a hearing to take testimony from Wells Fargo CEO John Stumpf and Federal regulators to understand how this mega bank was able to get away with opening more than two million fake customer accounts over a span of years. The accounts and/or credit cards were never authorized by the customer and were opened solely by employees to meet sales quotas, get bonuses or to avoid getting fired for failing to meet sales targets.

The only reason the Republican-controlled Senate is holding this hearing is because the Wells Fargo fake-account story got a lot of coverage in the media when the Consumer Financial Protection Bureau (CFPB) announced a $185 million settlement over the charges on September 8. The reason the story got a lot of media coverage is because it’s a simple story to tell: widely respected bank opens two million accounts for its customers without their knowledge or permission, sometimes illegally funneling money to the new account from the old account to generate fees.

In July of last year, when Citibank, the deposit-taking retail bank settled charges with the CFPB for $700 million for deceptively selling add-on products to credit card customers, the Senate Banking Committee yawned and did nothing.  The story didn’t get major press attention because it was a complicated story to tell. Among a long list of fraudulent practices, the CFPB found that Citibank led 2.2 million customers to believe they were paying to have their credit card monitored for fraud and identity theft, “when, in fact, these services were either not being performed at all, or were only partially performed,” according to the CFPB.

The CFPB charges against Citibank came exactly two months after Citbank’s parent, Citicorp, pleaded guilty to a felony with the Justice Department in connection with the rigging of foreign currency. On the same day, another U.S. mega bank, JPMorgan Chase, also pleaded guilty to a felony related to the same crime. Both banks are more than a century old and both banks, on May 20 of last year, pleaded guilty to a felony for the first time in their history.

The public first got its peek into the corrupt culture at Citigroup, the bank holding company of Citibank, on December 4, 2011 when Richard Bowen, a former Citigroup Vice President and whistleblower, appeared on 60 Minutes. Bowen explained how he had found that Citigroup was buying fraudulent mortgages and selling them to investors as sound investments. When his superiors ignored his warnings, in November 2007 he wrote to top management, including the CFO, chief risk officer and Robert Rubin, the Chairman of Citigroup’s executive committee who, as a former Treasury Secretary under Bill Clinton, had pushed to deregulate Wall Street banks – allowing them to hold FDIC insured products and cross-sell their carnival barker wares to the public.

Bowen explained on 60 Minutes what happens when an honest employee speaks out in one of the Wall Street banking behemoths: “I was relieved of most of my responsibility and I no longer was physically with the organization.” He was told not to show up at the bank.

Bowen’s treatment at Citigroup was replicated against a different whistleblower at JPMorgan Chase, now the largest U.S. bank by assets, according to a report by Matt Taibbi in Rolling Stone. Alayne Fleischmann, an attorney, described to Taibbi what she saw within JPMorgan Chase as “massive criminal securities fraud.” Taibbi describes what happened to Fleishmann as follows:

“Six years after the crisis that cratered the global economy, it’s not exactly news that the country’s biggest banks stole on a grand scale. That’s why the more important part of Fleischmann’s story is in the pains Chase and the Justice Department took to silence her.”

Fleishmann had found problems very similar to what Bowen had found at Citigroup. JPMorgan Chase was buying fraudulent mortgages and packaging them and selling them to investors. In one package of mortgage loans, Fleishmann found that approximately 40 percent were based on overstated incomes in violation of Chase’s tolerance for error of five percent in securitizations. Fleischmann told a managing director at JPMorgan Chase that “the bank could not sell the high-risk loans as low-risk securities without committing fraud,” according to Taibbi.

JPMorgan Chase went on to sell boatloads of these fraudulent mortgage products while Fleishmann was “quietly dismissed in a round of layoffs.” Obama’s Justice Department took all of this testimony from Fleishmann and had evidence of her written warnings that went unheeded. But even then, it let JPMorgan Chase and its executives off without prosecution.

When the big Wall Street banks collapsed under the weight of their own corruption in 2008, rather than being prosecuted by the Justice Department, the banks were bailed out through a secret, unprecedented $13 trillion revolving loan program operated by the Federal Reserve. Citigroup received the largest amount of these loans: over $2.5 trillion between 2007 and 2010. These loans were made frequently at less than one percent interest while the insolvent Citigroup charged some of its customers double-digit interest rates on credit cards.

Which brings us to today’s crisis of confidence in the U.S. banking system. The underfunded Consumer Financial Protection Bureau, which Republicans in Congress are attempting to neuter further, has received thousands of new complaints against the banking giants of Wall Street, which are publicly available for viewing here. (Just put the name of the bank you want to inspect in the search box.) Searching under the name Citibank brings up 29,000 rows of complaints. A search under Chase, the retail banking unit of JPMorgan Chase, brings up 37,000 rows of complaints.

The seriousness of the complaints against these two banks strongly suggests that the failure to prosecute these banks for frauds against their customers has led to far more than moral hazard. The complaints paint a crystal clear image of a U.S. banking sector that is evolving at lightning speed into an entrenched criminal enterprise.

The Senate Banking Committee is adding to this crisis by holding isolated hearings of isolated banks that look only at the current scandal. The serial scandals are simply symptoms. The disease is a U.S. banking sector that relies on fraud and abuse of its customers to meet its profit targets just as the low level employees of these banks are pressured into fraudulent acts to meet their sales quotas.

If you need more evidence, check out this timeline of regulators’ serial charges of abuses of its customers by JPMorgan Chase, compiled by two trial attorneys. Below is just a partial timeline of the serial abuses at Citigroup.

..

The Coming Dark Age


ArmstrongEconomics

 

QUESTION:

Mr. Armstrong,

Thank you for the time you are spending to educate the public about what it really going on. I have followed your work for years, from before you were released from prison. Over the years you have made several comments about directional changes and have alluded to the idea that a crossroads is coming in that we will either enter another Dark Age or we will see the light towards greater liberty and freedom. More recently, you mentioned the year 2032 as a critical year in this regard.

In addition, you have mentioned that Trump winning the election would postpone the inevitable chaos, but that HRC winning would speed it along.

In terms of the distal effects of the November election on 2032, does either Trump or Clinton winning increase the likelihood of entering a Dark Age over something more hopeful? Should we be attempting to kick the can down the road or should we get it over with?

Thanks again for your service.

HA, Ph.D.


ANSWER: Hillary is just corrupt and rotten to the core. She represents everything that is wrong with our political economy. Politicians no longer care about the people. Every election promises “change” in some variation. That is admitting something is broken, but it always comes down to the same thing – it’s just about them.

twain-mark-if-voting-made-any-difference-they-would-not-let-us-do-it

Indeed, it was Mark Twain who put it best during the last century: “If voting made any difference, they wouldn’t let us do it.” We must understand that this has been an age old battle between the rulers and the people. In Athens where Democracy was born, they constantly fought to seize power back and even made Pericles stand trial. Government has always sought to bribe the people creating a welfare state. The Romans knew that the way to power was to promise everything but give them bread and circuses (sport games) and they could maintain power. It was Decimus Iūnius Iuvenālis, commonly known as Juvenal, who was a Roman poet active in the late 1st and early 2nd century AD that wrote that phrase:

… Already long ago, from when we sold our vote to no man, the People have abdicated our duties; for the People who once upon a time handed out military command, high civil office, legions — everything, now restrains itself and anxiously hopes for just two things: bread and circuses

[…] iam pridem, ex quo suffragia nulli / uendimus, effudit curas; nam qui dabat olim / imperium, fasces, legiones, omnia, nunc se / continet atque duas tantum res anxius optat, / panem et circenses. […]

(Juvenal, Satire 10.77–81)

Nothing has changed. Many people can name every person on some sports team but cannot name their political minister, congressman, or whatever lofty title they call themselves. The judge in a courtroom demands to be called “honorable” as do all public servants. They make a mockery of the very word.

We are approaching the grave danger of a Dark Age beginning from the aftermath of 2032. Hopefully, I will be gone by then and will not have to face this horrible event. Yet Dark Ages are reoccurring events throughout history and in all cultures. The Greeks endured their between the Homeric Age that marked the end of the Mycenaean civilization around 1100 BC, to the first signs of the Greek cities (poleis) rising again in the 6th century BC (508–322 BC). It was during the 9th century BC (900-801BC) that we begin to see the rise of great cities outside of Greece including Carthage, which was founded by the Phoenicians.

Japan went through its Dark Age, which also lasted about 600 years and the same impact was endured in Europe with the collapse of Rome in 476AD. Dark Ages seem to come in units of 3 so they are 300 or 600 years. The cause is always political corruption.

Japanese-Debasement 760-958AD

In the case of Japan, each new emperor devalued the money in circulation with a decree that it was worth 10% of his new coins. There was no intrinsic value since they were bronze or iron. This process led people NOT to hoard money. Chinese coins were sought after since they would not be devalued. Eventually, nobody would accept Japanese coins and they ceased to be issued for 600 years. People used Chinese coins or bags of rice.

roman-follis-295-348ad

The Roman Monetary Crisis that saw silver vanish by 268AD, was naturally followed by  an attempt to restore the monetary system. A new bronze coin was introduced in 295AD known as the Follis. Again, one 52 year cycle saw its collapse from over 16 grams to under just 2 grams.

zenonis

By the time you come toward the very end of the Roman Empire, you rarely find any bronze and when you do, it is less than an American penny. Coinage is debased because of the corruption in government. Those who think restoring the gold standard would do anything are wrong. Such monetary reforms appear repeatedly throughout history with little lasting impact. The system as we know it is always doomed to failure simply because we are satisfied as a whole with bread and circuses and let politicians run wild in their greed. Hillary is the example for everyone to see.

I will gather all the accounts and this is on my bucket-list of books to complete. We do have a choice. We can understand what is coming and WHY, and perhaps take that first step out of darkness and move into the light of a realistic political system that ends the bribing of citizens and this eternal battle of political corruption. We need a REAL democracy without career politicians. Only then can we hope to advance as a society.

..

The Mother of Central Banks Worried About World’s Financial System??


Telegraph

 

China facing full-blown banking crisis, world’s top financial watchdog warns

The BIS said there are ample reasons to worry about the health of world’s financial system.

 

By

China has failed to curb excesses in its credit system and faces mounting risks of a full-blown banking crisis, according to early warning indicators released by the world’s top financial watchdog.

A key gauge of credit vulnerability is now three times over the danger threshold and has continued to deteriorate, despite pledges by Chinese premier Li Keqiang to wean the economy off debt-driven growth before it is too late.

The Bank for International Settlements warned in its quarterly report that China’s “credit to GDP gap” has reached 30.1, the highest to date and in a different league altogether from any other major country tracked by the institution. It is also significantly higher than the scores in East Asia’s speculative boom on 1997 or in the US subprime bubble before the Lehman crisis.

Studies of earlier banking crises around the world over the last sixty years suggest that any score above ten requires careful monitoring.  The credit to GDP gap measures deviations from normal patterns within any one country and therefore strips out cultural differences.

It is based on work the US economist Hyman Minsky and has proved to be the best single gauge of banking risk, although the final denouement can often take longer than assumed. Indicators for what would happen to debt service costs if interest rates rose 250 basis points are also well over the safety line.

China’s total credit reached 255pc of GDP at the end of last year, a jump of 107 percentage points over eight years. This is an extremely high level for a developing economy and is still rising fast .

Outstanding loans have reached $28 trillion, as much as the commercial banking systems of the US and Japan combined. The scale is enough to threaten a worldwide shock if China ever loses control. Corporate debt alone has reached 171pc of GDP, and it is this that is keeping global regulators awake at night.

bis1

The BIS said there are ample reasons to worry about the health of world’s financial system. Zero interest rates and bond purchases by central banks have left markets acutely sensitive to the slightest shift in monetary policy, or even a hint of a shift.

“There has been a distinctly mixed feel to the recent rally – more stick than carrot, more push than pull,” said Claudio Borio, the BIS’s chief economist. “This explains the nagging question of whether market prices fully reflect the risks ahead.”

Bond yields in the major economies normally track the growth rate of nominal GDP, but they are now far lower. Roughly $10 trillion is trading at negative rates, and this has spread into corporate debt. This historical anomaly is underpinning richly-valued stock markets at time when profit growth has collapsed.

bis2

The risk is a violent spike in yields if the pattern should revert to norm, setting off a flight from global bourses. We have had a foretaste of this over recent days.  The other grim possibility is that ultra-low yields are instead pricing in a slump in nominal GDP for years to come – effectively a trade depression – and that would be even worse for equities.

“It is becoming increasingly evident that central banks have been overburdened for far too long,” said Mr Borio.

The BIS said one troubling development is a breakdown in the relationship between interest rates and currencies in global markets, what it describes as a violation of the iron law of “covered interest parity”.

The concern is that banks are displaying a highly defensive reflex, and could pull back abruptly as they did during the Lehman crisis once they smell fear. “The banking sector may become an amplifier of shocks rather than an absorber of shocks,” said Hyun Song Shin, the BIS’s research chief.

This conflicts with what the Bank of England has been saying and suggests that recent assurances by Governor Mark Carney should be treated with caution.

Yet it is China that is emerging as the epicentre of risk. The International Monetary Fund warned in June that debt levels were alarming and “must be addressed immediately”, though it is far from clear how the authorities can extract themselves so late in the day.

The risks are well understood in Beijing. The state-owned People’s Daily published a front-page interview earlier this year from a “very authoritative person” warning that debt had been “growing like a tree in the air” and threatened to engulf China in a systemic financial crisis.

The mysterious figure – possibly President Xi Jinping – called for an assault on “zombie companies” and a halt to reflexive stimulus to keep the boom going every time growth slows. The article said it is time to accept that China cannot continue to “force economic growth by levering up” and that the country must take its punishment.

One bright spot is a repayment of foreign debt denominated in dollars. Cross-border bank credit to China has fallen by a third to $698bn since peaking in late 2014 as companies scramble to slash their liabilities before the US Federal Reserve raises rates. The tally for emerging markets as a whole has fallen by $137bn to $3.2 trillion.

bis3

China’s problem is internal credit. The risk is that a fresh spate of capital outflows will force the central bank to sell foreign exchange reserves to defend the yuan, automatically tightening monetary policy. In extremis, this could feed a vicious circle as credit woes set off further outflows.

The Chinese banking system is an arm of the Communist Party so any denouement will probably take the form of perpetual roll-overs, sapping the vitality of economy gradually.

The country was able to weather a banking crisis in the late 1990s but the circumstances were different. China was still in the boom phase of catch-up industrialisation and enjoying a demographic dividend.

Today it is no longer hyper-competitive and its work-force is shrinking, and time the scale is vastly greater.

…and BOE is also worried?

Bank of England concerned over rapidly growing Chinese debt bubble

Britain’s central bank has warned that growing Chinese debt is a threat to global financial stability. Chinese firms are borrowing faster than the GDP is growing, according to the bank. ….read further

 

..

Save

NYSE and its stocks will sink to the bottom of the ocean if they were in a shipping container


Many people think that the stock markets are the “indicators” and signs of whether the economy is healthy or otherwise. The mainstream media controlled by Wall Street and governments are always painting a rosy picture of the economy and placing the wool on people’s eyes.

As many (not that many actually) know the too-big-to-fail banks have failed, but because they are still seemingly conducting business as usual, most would think , “Oh its just a small hiccup” and are very confident that their governments are there ever-ready to protect their monies and assets. Anyway, that’s what an elected government is for right? Wrong!

The boneheads in the financial sector depend on the central bank$ to “regulate” the casinos and Ponzi schemes of the world’s banks and bursars. In every tight situation they would wait for the central ban$ter$’ solutions, eagerly with their fingers crossed hoping the sun shines again the next day for another bigger scoop, or a newer scheme to rob the masses. The picture is downright pathetically horrendous.


Once again, the rosy view on U.S. economy wilts

Federal Reserve bigwigs meet this week to debate when to raise a key short-term U.S. interest rate. The outcome, however, is not expected to be a cliff-hanger. Wall Street investors only see a 15% chance that the Fed will hike rates.

The final nail in the proverbial coffin may have come with a decline in retail sales and manufactured goods in August, reflecting persistent caution on the part of consumers and businesses. – Market Watch


Latest today…a real classic garbage from who else – The Financial Times

Stocks gain and the dollar drifts ahead of central bank meetings

Oil prices rise on talk of Opec deal to stabilise global production


For me, I look at the sea where I could see the ships. If the horizon is empty of freighters it simply means no cargo is moving. One cannot make up the data of the Export-import (Exim) business. No buying means no selling, no manufacturing means no trading, and its that simple to gauge the (real and true) economy.  The Baltic Dry Index figures dropped to its all-time low.

In trading Thursday, the benchmark Baltic Dry Index continued its fall with another record low at 298, its first value ever below three hundred points. Capesize and supramax day rates were down, while panamax vessels traded slightly higher. The worsening market is forcing an increased volume of vessel and enterprise sales, and, for well-positioned buyes, creating an opportunity to purchase at distressed-asset prices. – The Maritime Executive

The word economy has taken a turn from its original meaning and intention by Keynesian economists and what is apparent is its now only meant to measure the profits, wealth and assets of the 1 percent and has nothing to do with the 99 percent.

The reports of the shipping industry is terrifying news for the global economy. The horizon is empty and the shipping lanes are scarce if not empty of cargo ships.

The shipping industry is taking a beating.

As the Wall Street Journal reports, about 1,000 ships capable of hauling 52 million metric tons of cargo will be cut up and sold for scrap metal this year. Owners have only ordered 293 vessels this year through July — a stark decrease from 2010 to 2015 when owners were buying 1,450 ships annually.

The reason? A stagnant global economy that stems back to little growth in Europe and a slowdown in China. Chinese imports from the European Union fell 14% last year, the WSJ reports. In the first quarter of this year, Chinese imports from the EU fell 7% from a year prior. Exports to Europe have fallen as well. Continue reading

That sinking feeling for Hanjin as falling freight rates fuel a global shipping crisis

They just keep slitting each other’s throats with lower rates,” the  shipbroker says. His sense of desperation is common in the industry, but he still asks not to be named. Tomorrow he will be fixing deals for the same shipowners who have flooded the market with new vessels in recent years, driving shipping rates lower as the glut of unused vessels grows. – The Telegraph

China’s ports hit hard by global trade slowdown

In the first half of the year, Hong Kong handled 10 per cent fewer containers than during the same period in 2015 and is on course for its fifth consecutive year of declines. – FT

Look up the Internet for more reports of the dying sea-freight business, and you’d find its definitely not a sign of a healthy global economy, but the world’s economist will tell you differently and that’s because the economic profession is in a sad state

It is not an exaggeration to say the current reputation of economists is probably just below that of a used car salesman. The recent failures of economic policies to boost growth or employment have tarnished this image even more. This, however, is in sharp contrast to the past when economists were seen as the intellectual roadblock to popular misconceptions, bad ideas, or more importantly, government policies sold to the public on false assumptions. – Frank Hollenbeck

Hanjin to return chartered vessels

South Korean container line says it is losing $2m a day

Hanjin Shipping is to return all of its chartered vessels to their owners to cut costs, after the South Korean container line said it was losing $2m a day amid the logistics chaos prompted by its bankruptcy last month. – FT

If Wall Street and the world’s con-stock marketers, and their stocks are in shipping containers they would all sink to the bottom of the oceans…literally.

..

US economy may be ruined by ‘crazies’, warns Alan Greenspan


…take it from the horse’s mouth… the designer and architect of the rotten system. Read about Alan Greenspan’s “golden agenda”


RT

Former Federal Reserve Chairman Alan Greenspan has expressed deep concern over the current economic and political situation in the US, saying it is the worst he has ever seen.

Greenspan, who ran the Fed from 1987 to 2006 during America’s longest economic boom, said the country is headed toward high inflation, high unemployment, and stagnant demand in the economy.

“I hope we all find a way out because this is too great a country to be undermined, by how should I say it, crazies,” the 90-year-old economist said at a conference set up by Stanford University and the University of Chicago. Greenspan refused to comment on whom he was referring.

“It is the worst economic and political environment that I’ve ever been related to,” he told the audience, stressing that the economy was not in a stable equilibrium.

The growing government spending on social security and healthcare is pushing out private investors and slowing down economic growth, according to Greenspan. He said neither presidential nominee was open to talk about the reining in this expensive item.

“Nobody wants to discuss it” for fear of a political backlash, said Greenspan.


Paralysis in US political system threatens American global competitiveness – Harvard Business School

A scathing report from the Harvard Business School has blamed the US political system with its Democrat-Republican bickering as the main stumbling block on the way to economic recovery and the reason behind the US losing its global edge.
.

“We have reached the conclusion that the paralysis in the US political system is one of the gravest threats to our economic competitiveness,” professor of business administration and co-author Jan Rivkin wrote in Thursday’s annual report, which comes as the United States enters its eighth year of recovery from the Great Recession of 2008.

Read further…

..

Why the EU is doomed


FinanceAndEconomics

Alasdair Macleod

We are accustomed to looking at Europe’s woes in a purely financial context. This is a mistake, because it misses the real reasons why the EU will fail and not survive the next financial crisis.

We normally survive financial crises, thanks to the successful actions of central banks as lenders of last resort. However, the origins and construction of both the the euro and the EU itself could ensure the next financial crisis commences in the coming months, and will exceed the capabilities of the ECB to save the system.

It should be remembered that the European Union was originally a creation of US post-war foreign policy. The priority was to ensure there was a buffer against the march of Soviet communism, and to that end three elements of the policy towards Europe were established. First, there was the Marshall Plan, which from 1948 provided funds to help rebuild Europe’s infrastructure. This was followed by the establishment of NATO in 1949, which ensured American and British troops had permanent bases in Germany. And lastly, a CIA sponsored organisation, the American Committee on United Europe was established to covertly promote European political union.

It was therefore in no way a natural European development. But in the post-war years the concept of political union, initially the European Coal and Steel Community, became fact in the Treaty of Paris in 1951 with six founding members: France, West Germany, Belgium, Luxembourg and Italy. The ECSC evolved into the EU of today, with an additional twenty-one member states, not including the UK which has now decided to leave.

With the original founders retaining their national characteristics, the EU resembles a political portmanteau, a piece of assembled furniture, each component retaining its original characteristics. After sixty-five years, a Frenchman is still a staunch French nationalist. Germans are characteristically German, and the Italians remain delightfully Italian. Belgium is often referred to as a non-country, and is still riven between Walloons and the Flemish. As an organisation, the EU lacks national identity and therefore political cohesion.

This is why the European Commission in Brussels has to go to great lengths to assert itself. But it has an insurmountable problem, and that is it has no democratic authority. The EU parliament was set up to be toothless, which is why it fools only the ignorant. With power still residing in a small cabal of nation states, national powerbrokers pay little more than lip-service to the Brussels bureaucracy.

The relationship between national leaders and the European Commission has been deliberately long-term, in the sense that loss of sovereignty is used to gradually subordinate other EU members into the Franco-German line. The driving logic has been to make the European region a protected trade area in Franco-German joint interests, and to protect them from free markets. It was not easy to find the necessary compromise. Since the Second World War, France has been strongly protectionist over her own culture, insisting that the French only buy French goods. Germany’s success was rooted in savings, which encouraged industrial investment, leading to strong exports. These two nations with a common border had, and still have, very different values, but they managed to conceive and set up the European Central Bank and the euro. In Germany, the sound-money men in the Bundesbank lost out to industrial interests, which sought to profit from a weaker currency. This was actually in line with her political preferences, and it was the political class that controlled the relationship with France. In France the integrationists, politicians again, defeated the industrialists, who sought to insulate their home markets from German competition.

When a common currency was first mooted, two future problems were ignored. The first was how would the other states joining the euro adapt to the loss of their national currencies, and the second was how would the UK, with her Anglo-Saxon market-based culture adapt to a more European model. It wasn’t long before the latter issue was met head-on, with the withdrawal of sterling from the Exchange Rate Mechanism, the forerunner of the euro, in September 1992.

The euro was eventually born at the turn of the century. The Franco-German compromise led to the appointment of a Frenchman, Jean-Claude Trichet, as the ECB’s second president. All was well, because the abandonment of national currencies and the gradual acceptance of the euro meant that states in the Eurozone were able to borrow more cheaply in euros than they ever could in their own national currencies.

Bond risk was measured against German bunds, traditionally the lowest yielding bonds in Europe. It was not long before the spread between bunds and other Eurozone debt was commonly seen as a profitable opportunity, instead of a reflection of relative risk. European banks, insurance companies and pension funds all benefited from the substantial rise in the prices of bonds issued by peripheral EU members, and invested accordingly. In turn, these borrowers were only too willing to supply this demand by issuing enormous quantities of debt, in contravention of the Maastricht Treaty. Bank credit expanded as well, leaving the banking system highly geared.

The control mechanism for this explosion in borrowing was meant to be the Exchange Stability and Growth Pact, agreed in Maastricht in 1993. This laid down five rules, of which two concern us. Member states were bound to keep their national budget deficits to a maximum of 3% of GDP, and national government debt was limited to 60% of GDP. Neither Germany nor France qualified on the debt criteria, without rigging their national accounts, and the only reason that deficits came within the Pact was a mixture of dodgy accounting and fortuitous timing of the economic cycle. The control mechanism was never enforced.

So from the outset, no nation had any sense of responsibility towards the new currency. The rules were ignored and the euro became a gravy-chain for all member governments, spectacularly brought to public attention by the failure of Greece.

The Eurozone’s banking system, incorporating the national central banks and the ECB, bound together in a bizarre settlement system called TARGET, became the means for member nations to buy German goods on credit. Very good for Germany, you may say, but the problem was that the credit was supplied by Germany herself. It is the same as lending money to the buyer of your business in a rigged transaction. This flaw in the system’s construction is now a rumbling volcano ready to blow at any moment.

The Germans want their money back, or at least don’t want to write it off. The debtors cannot pay, and need to borrow more money just to survive. Neither side wishes to face reality. It started with Ireland, then Cyprus, followed by Greece and Portugal. These are the smaller creditors, which Germany, led by its Finance Minister Wolfgang Schäuble, managed to crush into debtor submission and are now economic zombies. The real problem comes with Italy, which is also failing and has a debt-to-GDP ratio estimated to be over 133% and rising. If Italy goes, it will be followed by Spain and France. Herr Schäuble cannot force these major creditors into line so easily, because at this stage the whole Eurozone banking system will be in deep trouble, as will the German government itself. German savers are also becoming acutely aware that they will pick up the bill.

The first line of defence, as always, will be for the ECB as lender of last resort to keep the banks afloat. The only way it can do this is to accelerate the printing of euros and to monopolise Eurozone debt markets. Whether or not the ECB can hold the currency with all these liabilities on board its own balance sheet, and for how long, remains to be seen.

For the moment, the euro stands there like a Goliath, seemingly invincible. It represents the anti-free-market European establishment, which no one has dared to challenge. This surely is the underlying reason the ECB can impose negative interest rates and get away with it. But serious cracks are appearing. First we had Brexit, likely to be followed by other small states wanting out. The Italian banking crisis is almost certain to come to a head soon, and an Italian referendum on the constitution next month is also an important hurdle to be overcome. The politicians are in panic mode, reassuring everyone there is nothing wrong more integration and a new army won’t cure.

The market effect, besides being a severe shock to all markets, is likely to be two-fold. Firstly, international flows will sell down the euro in favour of the dollar. Given the euro’s weighting in the dollar index, this will be a major disruption for all currency markets. Secondly, Eurozone residents with bank deposits are likely to increasingly seek refuge in physical gold, as signs of their currency’s impending collapse emerge, because there is nowhere else for them to go.

Whichever way one looks at it, it is increasingly difficult to accept any other outcome than a complete collapse of this ill-found political construction, originally promoted in US interests by a CIA-sponsored organisation. The euro, being dependant on political cohesion instead of original market demand, will simply cease to be money, somewhat rapidly.


FinanceAndEconomics

Alasdair started his career as a stockbroker in 1970 on the London Stock Exchange. In those days, trainees learned everything: from making the tea, to corporate finance, to evaluating and dealing in equities and bonds. They learned rapidly through experience about things as diverse as mining shares and general economics. It was excellent training, and within nine years Alasdair had risen to become senior partner of his firm. Subsequently, Alasdair held positions at director level in investment management, and worked as a mutual fund manager. He also worked at a bank in Guernsey as an executive director. For most of his 40 years in the finance industry, Alasdair has been de-mystifying macro-economic events for his investing clients. The accumulation of this experience has convinced him that unsound monetary policies are the most destructive weapon governments use against the common man. Accordingly, his mission is to educate and inform the public in layman’s terms what governments do with money and how to protect themselves from the consequences.

..

The Too-Big-to-Fail Banks Have Failed and How Come The Whole World is Still Up and Running?


I am no economist. Keynesian economics makes no sense to me nor does any of the financial gurus’ reports.

Since 2008 there have been numerous reports about too-big-to-fail banks that have failed and more are failing as we speak.

These are a few big name banks to mention:

wells fargo

My question is why are they still standing? Oh yeah I know its got something to do with ‘bailouts’ and QE. The bailors are the central banks and governments. I think I can understand the central banks’ role in this, but I don’t understand governments bailing out the failed banks. Governments don’t have their own money and are in perpetual (national) debts which are too big-to-repay as the debts ‘grow’ every seconds, hour, day, week, month and yearly.

Let’s try to see the clear picture and try to understand what a “bank failure” means and its repercussions:

A bank failure occurs when a bank is unable to meet its obligations to its depositors or other creditors because it has become insolvent or too illiquid to meet its liabilities. More specifically, a bank usually fails economically when the market value of its assets declines to a value that is less than the market value of its liabilities. The insolvent bank either borrows from other solvent banks or sells its assets at a lower price than its market value to generate liquid money to pay its depositors on demand. The inability of the solvent banks to lend liquid money to the insolvent bank creates a bank panic among the depositors as more depositors try to take out cash deposits from the bank. As such, the bank is unable to fulfill the demands of all of its depositors on time. Also, a bank may be taken over by the regulating government agency if Shareholders Equity (i.e. capital ratios) are below the regulatory minimum. – wiki

In the above picture (if that’s accurate), a bank failure means it affects and virtually freezes all its customers’ activities be it business or personal in nature. Its just like when the electric power supplier stops every one will be in the dark.

The failure of a bank is generally considered to be of more importance than the failure of other types of business firms because of the interconnectedness and fragility of banking institutions. Research has shown that the market value of customers of the failed banks is adversely affected at the date of the failure announcements. It is often feared that the spill over effects of a failure of one bank can quickly spread throughout the economy and possibly result in the failure of other banks, whether or not those banks were solvent at the time as the marginal depositors try to take out cash deposits from these banks to avoid from suffering losses. Thereby, the spill over effect of bank panic or systemic risk has a multiplier effect on all banks and financial institutions leading to a greater effect of bank failure in the economy. As a result, banking institutions are typically subjected to rigorous regulation, and bank failures are of major public policy concern in countries across the world. – wiki

But according to wiki (again), a certain bank’s failure has the “spill over effect” and that to me seems catastrophic and that’s my big question –“How come the whole world is still up and running?”

Who or what organization / institution is holding and keeping the movie running when the theater have no more movies?

As aforementioned, the failure of a bank is relevant not only to the country in which it is headquartered, but for all other nations that it conducts business with. This dynamic was highlighted quite dramatically in the 2008 financial crisis, during which the failures of major bulge bracket investment banks held dire consequences for local economies throughout the broader global market. The high degree to which markets are integrated in the global economy made this a near inevitability. This interconnectedness was manifested not on a high level, with respect to deals negotiated between major companies from different parts of the world, but also to the global nature of any one company’s makeup. Outsourcing is a key example of this makeup. As major banks such as Lehman Brothers and Bear Stearns failed, the employees from countries other than the United States suffered in turn. – wiki

Whoever or whatever has the capacity to keep the world running after the banks have failed must be a power to reckon with, so mighty perhaps second only to god?

Originally posted on Steemit

..

Save

Save

Save

Suddenly, the banks all agree: monetary policy doesn’t work…


BusinessInsider

Suddenly, the banks all agree: monetary policy doesn’t work and governments need to ramp up the spending

Something unusual happened over the summer.

Deutsche Bank, Barclays, HSBC, Credit Suisse, Morgan Stanley and Bank of America Merrill Lynch all published notes to investors that said something similar:

Central bank monetary policy isn’t working anymore and now is the time for governments to turn on their money spigots, running deficits if need be. 

It is the opposite of what we are used to hearing from bank analysts. These people are, after all, bankers. They are supposed to be apostles of Milton Friedman, the fighter pilots of capitalism. In the traditional banker view, governments only get in the way, budgets are for balancing, and spending is for cutting.

But the 2008 collapse changed all that.

Central banks all over the world — Japan, Europe, the UK and the US — have held interest rates near zero for years in the hopes of making money cheap enough to boost investment and growth. But this grand experiment in monetarism has failed: GDP growth is sluggish across the planet, and in decline in China, the UK and parts of Europe.

Now, eight years after the great financial crisis, investment bank analysts all agree: Something more is needed, and that thing is “fiscal policy.” That is the fancy economics word for government spending, even if it increases debt.

Quantitative easing is broken,” Algebris Investments’ Vincent Gallo wrote in the Financial Times the other day.

“Instead of helicopter money — the extreme version of an ineffective monetary playbook — the ideal policy mix would be a combination of fiscal stimulus together with some normalisation in interest rate guidance to improve the banks’ ability to lend. Positive interest rates, QE and fiscal stimulus can turn Europe from a good trade into good investment.”

That is a surprisingly common take. Deutsche Bank analysts Mark Wall and Marc de-Muizon wrote to investors on September 13:

“The argument that monetary policy is failing and that a fiscal policy or coordinated monetary and fiscal policy is necessary is building in markets again. With criticism of ECB policy on the rise — not least because of the counter-productive impact of unconventional monetary policy on banks — and the euro area economic cycle struggling to normalize, the question inevitably arises: will the euro area also ease fiscal policy?”

Antonio Garcia Pascual at Barclays agrees: “Fiscal easing is gaining traction globally while central bankers are hesitating to add more monetary stimulus to an already ultra-accommodative stance.”

Their rivals and colleagues at the other banks listed above have all published notes echoing that point.

Here is the problem they are trying to solve. There has been a decades-long collapse in productivity across the developed world. Despite improvements in technology which are supposed to make us more productive, GDP growth per hour worked is a long, secular decline:

There are lots of reasons for this, but one of the main ones is changing demographics. The more old people you have in proportion to young workers, the harder it is to grow an economy and provide jobs and profits for all.

The central banks’ zero interest rate policies have not changed the downward trajectory. These charts from Barclays show that as central banks bought more and more bonds, flooding the financial system with cheap cash, their balance sheets ballooned:

And that has led to a high level of government debt to GDP:

But none of this has produced the intended growth. The current forecast for UK GDP growth is 0% by the end of the year.

So now the commercial investment banks are cooking up a new plan. Forget about low interest rates, they say, governments need to start spending, too.

Peter Hooper and his team at Deutsche Bank do not mince their words:

“The euro area is where conventional fiscal stimulus is needed most and would be most effective, but it also faces political impediments.”

“… Getting the political arguments for a clear easing in fiscal policy in place will require structural changes. Fiscal policy coordination would have to evolve, meaning an infringement of sovereignty.”

Hooper’s colleagues, Mark Wall and Marc de-Muizon, published a roadmap for that on Monday.

They argue that if the euro area governments could agree to expand their budget deficits by an average of just 0.4% across the board, then the added growth would be “self-financing,” i.e. the growth would overtake the added debt:

“The additional easing of the structural budget deficit required is only 0.4% of GDP on average per year for the euro area in aggregate. The benefit of spillover effects from one country’s growth on another keeps the required easing down. To keep the cost down there needs to be strong commitment from all member states and no free-riding.”

“The strategy should be self-financing. 0.4% of GDP for three years is equivalent to about EUR130bn in cash terms in total, but the positive impact on GDP growth pushes the nominal fiscal deficit and public debt- to-GDP ratios below what they would have been without this stimulus.”

The spending would have to be targeted, ranging from 0% to 3%, depending on the country. There is only one snag — the rules of the EU require conservative, budget-balancing fiscal austerity.

General government deficit must be no more than 3% and gross debt must be no more than 60%, in relation to GDP, for any euro country.

Anais Boussie at Credit Suisse proposed that the ECB should execute a fiscal stimulus via the back door, by buying government bonds that let those governments finance new spending projects cheaply. “With rates so low and QE in place, the OECD and the IMF, amongst others, have warmly advised governments around the world, but in particular those with a fiscal space available (read Germany), to do more to boost capital expenditure.”

The market is ready for it, according to Michael Hartnett and his team at BAML. A net positive of 48% of investors think fiscal policy is currently too tight and needs to be loosened:

We are all Keynesians now, apparently.

 

..

Hoarding Cash – Prelude to the Crash & Burn


Armstrong Economics

We are monitoring confidence in the banking system as reflected by cash withdrawals. The sale of home safes has exploded in many countries. I previously reported that one in ten currency notes in Switzerland being printed is now the 1000 franc note. In fact, there is some 41.6 billion in Swiss francs now in circulation in 1000 CHF notes exclusively. The ECB is truly brain-dead for they thought by moving with negative interest rates, people would spend their money and that would rekindle inflation. They are correct that people would not want to pay negative interest rates. However, they totally never guessed that they would withdraw their money and hoard it rather than spend it. The trend toward hoarding cash really became in 2011. It started to make the news in 2012. Now the German savers are buying home safes as well and pulling out cash. Of course, they attribute this primarily to negative rates. However, the concerns that Deutsche Bank may be in serious trouble is also helping matters.

Crash-Burn.gifWe are witnessing this trend around the world throughout Asia as well. Japan has been printing 10,000 yen notes like crazy. The Japanese are also withdrawing cash and keeping it at home. Even Americans began hoarding cash also back in 2011, which began to make news by 2014. In fact, 43% of Americans keep their savings in cash these days for interest pays nothing. Yet, an amazing 53% of those cash-hoarders “plan to hide bills in a secret location at home.”

Everything is going as our model has projected. The peak in trusting banks and government is in place. From here on out, all we have is the collapse in public confidence and the 2016 elections bring that home.

All we are waiting for now is simply the Crash & Burn. This will be a serious topic for this year’s WEC in Orlando.

..

Hungry Venezuelans break into Caracas zoo and butcher a horse for food


Venezuelans starving and the rest of the world sit by as the bank$ter$ rip the country apart.

Wherever you are your country is next!

Utopia

Venezuela
August 2016VENEZUELAVenezuelans suffering from hunger and shortages in their struggling country broke into Caracas zoo and pulled a black stallion from its pen, butchering it for the meat. The crime occurred late last month, in the small hours of the morning at Caracas’ Caricuao Zoo. A gang of people sneaked into the state-run park under the cover of darkness and seized the horse – the only one of its kind in the zoo. The animal was then led to a secluded area and butchered on the spot.
Zookeepers arriving for duty the next morning, on July 25, found only its head and ribs left behind in a pile. Dalila Puglia, an environmental prosecutor, has been commissioned by the government to investigate. But the horse was not the first zoo animal to suffer the effects of Venezuela’s crippling food shortages. Vietnamese pigs and sheep were reportedly stolen…

View original post 433 more words

Thousands of ships are being destroyed – and it’s terrifying news for the global economy


Lost Faith In Central Banks And The Economic End Game

Central banks have focused most of their efforts on levitating the Dow as well as energy markets for some time now.

Why? Because the general public does not pay attention to any other market indicators. They do not care that equipment giant Caterpillar is having the worst profit period in the company’s history. They do not care that the Baltic Dry Index, a measure of global shipping rates and thus a measure of global orders for raw goods, continues to bounce around well below its original historic lows due to crashing shipping demand. They do not care that according to the World Economic Forum, oil demand has dropped to levels not seen since 1997. They do not know nor do they care to know. Their only barometer for economic danger is the Dow, and central banks know this well.

 


Economic Slump Sends Big Ships to Scrap Heap

Cargo-vessel recycling surges amid overcapacity and tumbling freight rates – WSJ


Business Insider

sinking-ship-2

REUTERS / Danish Siddiqui

The shipping industry is taking a beating.

As the Wall Street Journal reports, about 1,000 ships capable of hauling 52 million metric tons of cargo will be cut up and sold for scrap metal this year. Owners have only ordered 293 vessels this year through July — a stark decrease from 2010 to 2015 when owners were buying 1,450 ships annually.

The reason? A stagnant global economy that stems back to little growth in Europe and a slowdown in China. Chinese imports from the European Union fell 14% last year, the WSJ reports. In the first quarter of this year, Chinese imports from the EU fell 7% from a year prior. Exports to Europe have fallen as well.

All of that means there’s an overcapacity of ships, leaving owners no choice but to leave them idle or recycle them. Typically, ships are recycled every 30 years. But this year, the average of ships getting recycled is 15 years.

“If you go back five years ago, people saw growing demand at very high rates. There was a bit of an uptick in the number of ships that were brought on, particularly in 2012, 2013, and 2014,” Sean Monahan, a partner at the consulting firm A.T. Kearney, told Business Insider.

“But generally demand has flattened, and in some cases a little bit declined …. there are a lot more ships either being dry docked or being scrapped,” Monahan, who is an expert on shipping, said.

And owners aren’t getting the same bang for their buck when recycling ships, either. A sharp drop in the price of steel has dropped the rate of return an average of 10% to 15% of the price of a new ship, the WSJ reported.

Monahan said he sees this being an issue for the next two to three years before demand bounces back to the point where more ships can be in use.


The current picture of world trade and shipping may not be as good as what it was according to the latest Baltic Dry Index figures, but the map drawn out by UCL’s Energy Institute is awesome nevertheless. Baltic Dry Index … Continue reading

Japan’s Exports Sink at Its Fastest Rate Since the Financial Crisis

The country’s exports have now fallen for 10 consecutive months. Japan‘s exports tumbled in July at the fastest pace since the…continue reading


World’s 7th largest container shipper files for bankruptcy

South Korea’s Hanjin Shipping Co Ltd filed for court receivership on Wednesday after losing the support of its banks, setting the stage for its assets to be frozen as ports from China to Spain denied access to its vessels…continue reading

..

Save

Germany to tell people to stockpile food and water in case of attacks: FAS


Road To Roota

db

Germany holds one of the triggers to the collapse the system. They have had it since 2012. I talked about it when they held meetings about trying to get their gold back from the US Fed. Their power lies in pulling the derivative time bomb held at Deutsche Bank.
.
So when the German government tells their people to stock up on 10 days of food and water because of potential “terrorist strikes” my mind immediately goes to my BS Meter which says…HIGH!
.
It’s not terrorist attacks they need to stock up for…it’s the take down of the monetary system!!!

Germany to tell People to Stockpile Food and Water

For the first time since the end of the Cold War, the German government plans to tell citizens to stockpile food and water in case of an attack or catastrophe, the Frankfurter Allgemeine Sonntagszeitung newspaper reported on Sunday.

Germany is currently on high alert after two Islamist attacks and a shooting rampage by a mentally unstable teenager last month. Berlin announced measures earlier this month to spend considerably more on its police and security forces and to create a special unit to counter cyber crime and terrorism.

“The population will be obliged to hold an individual supply of food for ten days,” the newspaper quoted the government’s “Concept for Civil Defence” – which has been prepared by the Interior Ministry – as saying.

The paper said a parliamentary committee had originally commissioned the civil defense strategy in 2012.


If Germany is telling their people to hold 10 days of food and water then YOU should be holding 2 MONTHS worth of food and water!!
.
There’s no more time to waste on preparing for the monetary crash.
.
May The Road you choose be the Right Road.
.
Bix Weir

Related

..

You’re looking at the greatest monetary policy experiment in history | Lord Rothschild


The rotten system was designed to collapse…and these so called ‘experiments’ are the bank$ter$’ bids to suck from the people more vigorously towards the end.

Covert Geopolitics

Currently, the world is experiencing the greatest financial experiment ever in history. Those are the words of a Rothschild referring to the low interest rates, negative yields on government debt and quantitative easing…

View original post 491 more words

Which Items Will Disappear First During A Major National Emergency?


prep

In natural disasters most who perished are the unprepared. Most important of preparation is “mental preparation” – anticipation

 

 

 


The Economic Collapse

One day in the not too distant future, a major emergency will strike this nation, and that will set off a round of hoarding unlike anything we have ever seen before.  Just think about what happens when a big winter storm or a hurricane is about to hit one of our major cities – inevitably store shelves are stripped bare of bread, milk, snow shovels, etc.  Even though winter storms and hurricanes are just temporary hurdles to overcome, they still cause many people to go into panic mode.  So what is going to happen when we have a real crisis on our hands?

We can get some clues about which items will disappear first during a major national emergency by taking a look at where such a scenario is already playing out.  One recent survey found that over 80 percent of all basic foodstuffs are currently unavailable in Venezuela, and about half the country can no longer provide three meals a day for their families.  Thankfully, some stores still have a few things that they are able to offer, but other key items are completely gone.  The following comes from USA Today

Oh, there are some things to buy. Besides salt, there are fresh vegetables and fruits, dairy products but no milk, some cereal, lots of snacks and a few canned goods.

The only meat is sausages; there are three kinds of cheese. The only problem: A kilogram of each costs more than a fourth of our monthly minimum wage of 15,050 bolivars.

But basic foodstuffs – the things most Venezuelans want to eat  such as corn meal, wheat flour, pasta, rice, milk, eggs, sugar, coffee, chicken, mayonnaise, margarine, cooking oil and beef – are conspicuous by their absence. And there is no toilet paper, no sanitary napkins, no disposable baby diapers, no shampoo, no toothpaste, no hand soap and no deodorant.

Do you have plenty of the items in bold above stored up?

If not, you may want to stock up while you still can.

Venezuela was once the wealthiest nation in all of South America, but now lines for food often begin as early as three in the morning.  Some people have become so desperate that they are actually hunting cats, dogs and pigeons for food, and there are even a few very sick people that have been killing and eating zoo animals.

Someday similar things will happen in the United States and Europe too.

When that day arrives, will you be prepared?

One of the things that got my attention from the article quote above was the lack of milk.  My wife is always telling me that we should store up more dried milk, and I believe that she is right.

Just imagine not having any milk and not being able to get any more.

What would you do?

Another thing that really stood out to me in the article was the fact that there is a severe shortage of personal hygiene items.  Most people don’t really think of those as “prepper goods”, but the truth is that life will become very uncomfortable without them very rapidly.

What would you do if there was no more toilet paper?

And if you have a little one, how are you going to manage without any diapers?

In general, it is wise to always have an extra supply of just about everything that you use on a daily basis stored away somewhere in your home.  The generation that went through the Great Depression of the 1930s understood this concept very well, but most of us that are younger have had it so good for so long that we don’t even really grasp what a real crisis looks like.

Another thing that we are seeing happen right now in Venezuela is the rise of a barter economy

Many of my urban friends are now planting vegetables in their outdoor spaces – if they have any – or in pots. Another friend, who is a hairdresser, is charging clients food to do their hair. For a shampoo and dry, she charges a kilo of corn meal, saying that she doesn’t have time to stand in line like some of her clients.

As you prepare for what is ahead, you may want to consider stocking up on some items that would specifically be used for bartering in a crisis situation.

For example, you may not drink coffee, but there are millions upon millions of people that do.  In a crisis situation, there will be many that will be extremely desperate to get their hands on some coffee, and so any coffee that you store away now may become a very valuable asset.

We live in a world where one out of every eight people already goes to bed hungry each night, and where one out of every three children is underweight.  As global weather patterns become more extreme, as natural disasters continue to become more frequent and more intense, and as terror and war continue to spread, it is inevitable that the stress on the global food system is going to continue to grow.

Today you can waltz into Wal-Mart and buy giant cartloads of very inexpensive food, but it will not always be that way.

Unfortunately, more than half the country is currently living paycheck to paycheck, and most Americans do not have any emergency food stored up at all.

In addition to food and personal hygiene supplies, here are some other items that are likely to disappear very rapidly during a major national emergency…

-Flashlights

-Batteries

-Generators

-Propane

-Can Openers

-Water Filters

-Water Containers

-Anything Related To Self-Defense

-Axes

-Knives

-Sleeping Bags

-Tents

-First Aid Kits

-Matches

-Candles

-Firewood

-Shovels

-Bottled Water

-Warm Clothing

-Lanterns

-Portable Radios

So in addition to food and personal hygiene items, you may want to do an inventory of the items that I have listed above and see where you may have some holes in your preparation plans.

I understand that there will be some people that will read this article and think that all of us “preppers” are being just a tad ridiculous.

But when a major emergency strikes this nation and you haven’t done anything to prepare, you will dearly wish that you had bothered to take action while there was still time remaining to do so.

..

Brink of Collapse? Leading German economist says emergency Deutsche Bank takeover needed now


Deutsche Bank Analyst Says a Market Shock Is the Only Way Out.

“Without an external economic shock it is hard to see policymakers being prepared to take dramatic, fiscal action to jumpstart the global economy and bounce it out of a financial repression defined by low and falling real yields to one that at least initially is defined by rising nominal yields through higher inflation expectations.”

“Ironically the shock that is needed would require a collapse in risk assets for policymakers to then really panic and attempt dramatic fiscal stimulus.”Dominic Konstam, global head of interest rates research at Deutsche Bank.
https://www.dollarvigilante.com/blog/2016/08/15/deutsche-bank-analyst-says-market-shock-way.html

Utopia

Deutsche B
August 2016GERMANYFor the fourth consecutive Sunday, Germany’s leading financial newspaper Frankfurter Allgemeine Zeitung has run an analysis of the perilous and declining state of its largest bank, Deutsche Bank. This Sunday, the FAZ interviewed a very prominent German economist who says, “Nationalize Deutsche Bank on an emergency basis! It is in worse crisis than in 2008” in the global bank panic. That Martin Hellwig of the Max Planck Institute in Bonn would make this call—in a country where nationalizations were never discussed even at the depth of the 2007-09 panic and collapse—indicates that Deutsche Bank is nearing a real implosion unless it is “saved.” And the IMF has already formally found it to be the one giant bank which “radiates more risk” to other banks and banking systems, than any other in the world.
Its implosion will signal a general economic crash, which will exacerbate the…

View original post 529 more words

Memories of a Reserve Currency Collapse


Penang Monthly

By N. Balakrishnan

If the history of global capitalism is anything to go by, massive social unrest can be only one financial event away.

currency1

Mobs attempting to overturn a bus.

As the ringgit tests multi-year lows and I hear people talk about the coming collapse of the US dollar as the world’s reserve currency, I look back to my time in Penang in 1967 when I witnessed first hand the severe social consequences that a sudden collapse in a reserve currency can bring.

Malaysia in November 1967 was just about four years old – though it had existed as independent “Malaya” since 1957. The country had a currency board system with the Malaysian dollar backed by the British pound sterling which then was in widespread use in former British colonies.

The Malaysian government was in the process of issuing its own currency backed by its own Central Bank to replace the currency issued by the Board of Commissioners of Currency of Malaya and North Borneo set up in 1938 and backed by the sterling. This Currency Board system had been able to provide a level of monetary stability and prosperity to Malaysia, Singapore and Brunei which other Asian countries – including giants such as China and India – could not even dream of.

In June 1967 the Malaysian dollar, issued by the new central bank, Bank Negara Malaysia, replaced the Malaya and British Borneo dollar at par and both currencies were allowed to circulate, with the Board’s currency backed exclusively by sterling and the Malaysian dollar by the Malaysian Central Bank. The plan was to withdraw the Board’s currency eventually, but no one was in a hurry to do that, what more with a currency note backed by the mighty sterling of a former colonial power.

But then came November 1967. Five months after the introduction of the Malaysian dollar, the pound was suddenly devalued by 14.3%. The new currency issued by Malaysia was not affected but the Malayan and British Borneo dollar were still pegged at 8.57 dollars per pound, and these reduced in value overnight by 15%. Since the devaluation of the sterling was unexpected and even the Malaysian government was not told about it by the UK, Malaysia found itself in a strange situation with two currency notes in circulation as legal tender – and one worth 15% less than the other! Malaysia’s then-Finance Minister was the capable Tun Tan Siew Sin, who definitely could not be blamed for not anticipating this turn of events.

The irony was that many Malaysians, conditioned to think of Britain as a strong power and to be sceptical of the financial abilities of fledgling states like their own, had been storing up on the “old British” notes. Malaysia at that time was underbanked, and most people, especially the poorer ones, literally kept their savings in large denomination notes under their mattresses.

Their savings suddenly lost value and, naturally, they were deeply angered.

Malaysia in those days had legitimate socialist parties such as the Socialist Front, which had deep support from smaller businessmen and workers. Huge demonstrations were organised asking for the government to offer compensation to holders of the old notes. The demonstrators had a point, since the government had told the public not to rush to the banks to convert to new notes and that both currencies were backed by the government equally. No one was in the mood to listen to the arcane explanations of the government about how the notes were actually backed differently.

The Socialist Front was particularly strong in George Town at that time, and had elected Members of Parliament and a good political infrastructure.

Unsurprisingly in a nascent post-colonial nation with large ethnic ghettoes, the anti-government demonstrations soon took on a racial dimension. Dozens of people were killed and a curfew was imposed for several days.

Though Indian, my family lived on Lebuh Cina, which was populated mostly by the Chinese. It was not far from where many inter-ethnic clashes took place between marauding youths from all ethnic groups. In my mind, I can today still sense the acrid smell of tear gas coming from canisters that the passing police vans threw – to our eyes, rather randomly and callously – along the streets.

currency2

The use of tear gas to disperse the mobs.

currency4

The deserted streets of the once-holiday island of Penang.

It was also the first time and fortunately only time I saw men being knifed and blood running in the streets. The victims were unlucky, being of the wrong ethnic group in the wrong place at the wrong time. Eventually the situation returned to normal but two years later in May 1969, more interethnic clashes broke out, this time largely in KL following a bad showing by the ruling Alliance coalition.

But it was the 1967 riots and killings in Penang that left a deep impression. I was too young to understand the economic and monetary dimensions of it. Those revelations came to me later, in 1980 when I was working as a rookie reporter for a news agency based at the World Trade Center in New York. Cigar-chomping Paul Volcker was in charge of the Federal Reserve then. The prime interest rates were in the high teens, and the gold price was rising rapidly. In fact, the Aden Sisters, based in Costa Rica, were predicting that the gold price would reach US$5,000 an ounce.

The markets and the market gurus of that time were fixated on the narrow money supply – “M-1B” – and were watching it diligently. If it went up, then the high interest rates were there to stay, and if it went down then there was hope for lower rates. Despite some economic training from a very good American college, it was a shock for me to see billions changing hands on the basis of this one number!

Those were pre-Internet days and I was the youngest of half a dozen reporters invited to the briefing every Friday afternoon at in the New York Federal Reserve on Liberty Street. The numbers were released to us at 4pm but we were only allowed to use the fixed line phone to call our offices at 4.10pm. So for a precious ten minutes, I was in possession of a number that could have made a lot of money for anyone who knew them in advance!

The Federal Reserve briefings went on for about 30 minutes, detailing “wire problems” and various problems afflicting the US banking system. Any faith I had that bankers and banks knew what they were doing with all that money evaporated then. I also have fond memories of the fluffy folded hand towels that adorned the men’s room at the New York Fed. I doubt whether there were women’s rooms then, and if there were, whether they had fluffy towels in them.

But the expected Weimar Republic of America scenario never happened, and the conservatives in America triumphed in convincing the populace to swallow immediate sharp pain for the long-term good. Today, the Liberty Street crowd seems instead to want the Federal Reserve to not only increase the money supply but print more and more money to make the markets go up. Some are even proposing negative interest rates!

Is this a new era where lax money does not matter anymore, or is it just the calm before the storm? Will what happened in Penang in 1967 happen on a global scale soon, with the masses taking to the streets when they finally realise that the “currency” in their pockets is not worth what they were told? Having seen how sudden changes can come about in 1967 Penang and 2008 New York, I am no longer reassured by “expert” assurances that things are all right on the monetary front.


N. Balakrishnan is an entrepreneur with diverse interests who has been based in Hong Kong for more than 20 years. He grew up in Penang and attended Penang Free School. More information about him can be found at http://www.coolinvestor.biz

Related

Penang’s forgotten protest – The 1967 Hartal

For almost two months in 1967, Penang erupted in violence and bloodshed. To many, the incident has been largely forgotten, but what inspired the 1967 Hartal, and how did it descend to chaos?

st

..

The demise of governments of the bank$ter$ by bank$ter$


Armstrong Economics

The 2015.75 Crisis Moving into 2020.05

Crisis-600x600

The world financial crisis that is unfolding post-2015.75 is different from that which followed the 2007.15 peak in the ECM. As stated countless times, each event is a crisis in a different sector. The 2007.15 crisis was the over-leverage in real estate that the bankers created. This time, we are looking at the demise of governments. Under normal conditions, bond prices would be falling with interest rates in the public sector rising. We still see this unfolding in the peripheral markets. The markets where central banks have been buying government bonds to try to stimulate the economy has utterly failed and created a crisis beyond contemplation. We are looking at the collapse of government’s ability to issue debt as we move forward into this cycle. The only buying will be central banks at the end of the day – totally insane.

Bailout-R-600x408

The Sovereign Debt Crisis of the 1840s was the demise of the states, thanks to Andrew Jackson shutting down the Bank of the United States. This led to a banking crisis with individual states trying to support their banks. Because the states could not create money. The states issued debt to bailout the banks, but the crisis was far too massive, and as a result, the banks took down the state governments, which had no choice but to permanently default on their debt. This time, governments are trying bail-ins and this is causing confidence to collapse. Why should people trust banks at all? Once they hoard cash; that is it. The velocity of money implodes and you end up with an economic depression.

euroTo answer all the questions about whether this will be covered at the World Economic Conference — of course. And to answer why we did not hold one in Berlin, yes, our models were warning about significant civil unrest in Europe as a consequence of the complete fiscal mismanagement of the ECB. It appears that the negative interest rates are totally insane. This is the complete incompetence of those who think they know how to manipulate society from Larry Summers to Mario Draghi.

These people will never admit a fatal mistake. Thus, we have to stand by and what Rome burn.

..

The Fed’s Interest Rate Decision Makes No Difference


Road to Roota

Bix Weir


The Fed will decided whether or not to raise interest rates today. Oh Boy! Will they or Won’t they?…the whole financial world depends on this decision…and yet nobody knows how the markets will react after the decision.

HA! It makes no difference if they raise the rates a quarter point or a half point or a full point or even 20 points – the markets will be “steered” to where the US Fed and Treasury WANT them to go.

It makes 0% difference.

The answer lies in the QUESTION…”Where does the Fed and Treasury want the markets to go?”

My take, they want to destroy the US Dollar by September so watch for a bit of “Forced Volatility” this week leading into the “Unforced Massive Volatility” surrounding the BREXIT Vote next week (June 23rd).

NOTE: Lookout for another “False Flag Attack” in London around the time of the BREXIT Vote. In my 2016 Economist Analysis from Book 3 the only “arrow” that found a target in the Calendar Artwork was on a political podium with the word “London” on it. We all know what happened in Orlando related to the “Rainbow Flag” featured so prominently on the front cover of the Economist’s “Year in 2016″…

economist

The World in 2016

I will cover the Orlando attack in this week’s Friday Road Trip.

There are rumors that the “Black Lives Matter” group have been instructed by US Attorney General, Loretta Lynch to create “The Summer of Chaos” by disrupting the July Political Conventions. I would add that this would be only ONE of the many chaotic events planned for this summer.

The game continues and the battles are heating up.

May the Road you choose be the Right Road.

Bix Weir
http://www.RoadtoRoota.com

Pity the Poor Central Bankers: Playing Masters of the Universe Is No Longer Fun


oftwominds

by John Hugh Smith

It was fun playing Masters of the Universe when expectations were low.

Ah, the good old days, when a simple, completely empty promise to do whatever it takes could move the world. It was fun being a central banker back in the good old days–back then playing Master of the Universe was wondrously good fun.
.
Now–not so fun. Now that interest rates are drifting below zero, there’s not much room for fun left in that sandbox.
.
As for mortgage rates: they’re so low, some countries are effectively paying people to take out a mortgage, and the resulting bubbles and market distortions are no fun.
Buying assets with newly created trillions was very good fun, but now people are demanding results in the real economy from our asset buying sprees–ugh, that’s no fun at all.
.
Now that the Federal Reserve is maintaining its balance sheet at a mere $4.5 trillion, the thrill of expansion is gone.
.
The Bank of Japan is still ramping up asset purchases, but the results are, well, nowheresville–a real drag in the fun department.
.
It was fun playing Masters of the Universe when expectations were low. Just saving the banking system from well-deserved collapse was enough to win the undying gratitude of greasy politicos left and right.
But now, the Great Unwashed are demanding some actual positive impact on the real economy–and that’s beyond the powers of central banks.
.
Central banks can create free money for financiers, but they can’t move the needle of the real economy, except to distort and cripple it with perverse incentives to gamble borrowed money on malinvestments and skimming operations, a.k.a. high frequency trading, stock buybacks, etc.
.
As former Master of the Universe Ben Bernanke noted: “Higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending (that) will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion.”
.
Yeah, right. What we’re really talking about when central bankers revel in being Masters of the Universe is the pathology of power. To better understand the pathology of power, we should turn first to Pathology Of Power by Norman Cousins, published in 1988.
Cousins’ description of the pathology of power is an uncannily accurate account of the Fed and other central bank fiefdoms.
.
“Connected to the tendency of power to corrupt are yet other tendencies that emerge from the pages of the historians:
.
1. The tendency of power to drive intelligence underground;
2. The tendency of power to become a theology, admitting no other gods before it;
3. The tendency of power to distort and damage the traditions and institutions it was designed to protect;
4. The tendency of power to create a language of its own, making other forms of communication incoherent and irrelevant;
5. The tendency of power to set the stage for its own use.”
.
In broader terms, we might add: the tendency of power to manifest hubris, arrogance and failure.
.
My new book is #5 on Kindle short reads -> politics and social science: Why Our Status Quo Failed and Is Beyond Reform ($3.95 Kindle ebook, $8.95 print edition)For more, please visit the book’s website.
..

Something Big That Always Happens Right Before The Official Start Of A Recession Has Just Happened


Job

FT


TheEconomicCollapse

Temporary Help ServicesWhat you are about to see is major confirmation that a new economic downturn has already begun.  Last Friday, the government released the worst jobs report in six years, and that has a lot of people really freaked out.  But when you really start digging into those numbers, you quickly find that things are even worse than most analysts are suggesting.  In particular, the number of temporary jobs in the United States has started to decline significantly after peaking last December.  Why this is so important is because the number of temporary jobs started to decline precipitously right before the last two recessions as well.

You see, when economic conditions start to change, temporary workers are often affected before anyone else is.  Temporary workers are easier to hire than other types of workers, and they are also easier to fire.

In this chart, you can see that the number of temporary workers peaked and started to decline rapidly before we even got to the recession of 2001.  And you will notice that the number of temporary workers also peaked and started to decline rapidly before we even got to the recession of 2008.  This shows why the temporary workforce is considered to be a “leading indicator” for the U.S. economy as a whole.  When the number of temporary workers peaks and then starts to fall steadily, that is a major red flag.  And that is why it is so incredibly alarming that the number of temporary workers peaked in December 2015 and has fallen quite a bit since then…

Temporary Help Services

In May, the U.S. economy lost another 21,000 temporary jobs, and overall we have lost almost 64,000 since December.

If a new economic downturn had already started, this is precisely what we would expect to see.  The following is some commentary from Wolf Richter

Staffing agencies are cutting back because companies no longer need that many workers. Total business sales in the US have been declining since mid-2014. Productivity has been crummy and getting worse. Earnings are down for the fourth quarter in a row. Companies see that demand for their products is faltering, so the expense-cutting has started. The first to go are the hapless temporary workers.

Another indicator which is pointing to big trouble for American workers is the Fed Labor Market Conditions Index.  Just check out this chart from Zero Hedge, which shows that this index has now been falling on a month over month basis for five months in a row.  Not since the last recession have we seen that happen…

Fed Labor Market Conditions MoM

Of course I have been warning about this new economic downturn since the middle of last year.  U.S. factory orders have now been falling for 18 months in a row, job cut announcements at major companies are running 24 percent higher up to this point in 2016 than they were during the same time period in 2015, and just recently Microsoft said that they were going to be cutting 1,850 jobs as the market for smartphones continues to slow down.

As I have been warning for months, the exact same patterns that we witnessed just prior to the last major economic crisis are playing out once again right in front of our eyes.

Perhaps you have blind faith in Barack Obama, the Federal Reserve and our other “leaders”, and perhaps you are convinced that everything will turn out okay somehow, but there are others that are doing what they can to get prepared in advance.

It may surprise you to learn that George Soros is one of them.

According to recent media reports, George Soros has been selling off investments like crazy and has poured tremendous amounts of money into gold and gold stocks

Maybe the best argument in favor of gold is that American legendary investor and billionaire George Soros has recently sold 37% of his stock and bought a lot more gold and gold stocks.

George Soros, who once called gold ‘the ultimate bubble,’ has resumed buying the precious metal after a three-year hiatus. On Monday, the billionaire investor disclosed that in the first quarter he bought 1.05 million shares in SPDR Gold Trust, the world’s biggest gold exchanged-traded fund, valued at about $123.5 million,” Fortune and Reuters reported Tuesday.

George Soros didn’t make his fortune by being a dummy.

Obviously he can see that something big is coming, and so he is making the moves that he feels are appropriate.

If you are waiting for some type of big announcement from the government that a recession has started, you are likely going to be waiting for quite a while.

How it usually works is that we are not told that we are in a recession until one has already been happening for an extended period of time.

For instance, back in mid-2008 Federal Reserve Chairman Ben Bernanke insisted that the U.S. economy was not heading into a recession even though we found out later that we were already in one at the moment Bernanke made that now infamous statement.

On my website, I have been documenting all of the red flags that are screaming that a new recession is here for months.

You can be like Ben Bernanke in 2008 and stick your head in the sand and pretend that nothing is happening, or you can honestly assess the situation at hand and adjust your strategies accordingly like George Soros is doing.

Of course I am not a fan of George Soros at all.  The shady things that he has done to promote the radical left around the globe are well documented.  But they don’t call people like him “the smart money” for no reason.

Down in Venezuela, the economic collapse has already gotten so bad that people are hunting dogs and cats for food.  For most of the rest of the world, things are not nearly that bad, and they won’t be that bad for a while yet.  But without a doubt, the global economy is moving in a very negative direction, and the pace of change is accelerating.

Those that are wise have already been getting prepared, and those that are convinced that everything is going to be just fine somehow have not been getting prepared.

In the end, most people end up believing exactly what they want to believe, and we are not too far away from the time when those choices are going to have very severe consequences.


America’s Hidden Jobless Rate is a Product of This Conspiracy

It is the force of the state that creates the overwhelming bigness of multinationals – to the detriment of smaller corporations and entrepreneurs. That’s the real employment “conspiracy”. – TheDailyBell

..

 

 

Why do we wait for the next crisis, when we know its all a fraud?


That the whole ‘financial’ system is a fraud concocted and designed by the central banks is no more a big secret, and yet what they keep on doing is to maintain the deception. The rotten system should have collapsed yesterday, but the tomorrows of the collapse is still being projected and discussed by the financial prophets.

“The markets can remain irrational longer than you can remain solvent.” – John Maynard Keynes


A new monetary order will only emerge from the next crisis

FT

913e30cb-11bb-4a83-aa12-99616ff3bfd2.img

Most investors tend to focus on the current business cycle or the next possible downturn, few think in terms of eras.

The current era began with the collapse of Bretton Woods and its replacement with a fiat currency system that provided policymakers with enormous latitude in setting policy and accumulating debt. The growing imbalance created by numerous attempts to mitigate the downside of the business cycle is leading to recurrent crises. The most severe began nearly ten year ago and is still unfolding, with the emerging markets its latest epicentre.

While there is little disagreement on how the crisis has developed, there is a big split on what it means or what happens next. Some believe this is a banking crisis that has largely been addressed and, in time, the system will revert to equilibrium. The opposing view is that this is largely an insolvency problem resulting from an excess of supply relative to demand combined with a mountain of debt collateralised with overinflated assets. Disinflation, weak capex, and currency wars are just symptoms of this broader malaise.

True reform is difficult, so instead policymakers have been experimenting with how far they can push monetary policy. But monetary policy is not well suited to dealing with the problems that we currently confront (for all of central bankers’ efforts we still have anaemic growth in the developed world and emerging markets in varying states of crisis). All that has been done is buy time, but even that comes with the collateral damage of distorted asset prices and ever more debt.

There is a popular saying that if you want to get out of a hole, you should first stop digging. Monetary policy is providing the shovels for the global economy to carry on digging an ever deeper hole.

The most charitable explanation for the actions of policymakers is that they have been guilty of reacting to outmoded models. The goal of any interest rate cut is to stimulate demand. The working assumption of policymakers is that lower interest rates act as an incentive to consumption and a disincentive to savings.

Unfortunately, this relationship seems to have broken down. This may be partly a function of demographics and partly psychology. In the aftermath of the Great Depression, regardless of the interest rate, people refused to spend. They were so worried about another downturn that they rebuilt their savings. John Maynard Keynes became a Keynesian when he realised that monetary policy was not sufficient to stimulate demand under these conditions.

We are reaching the limits of monetary policy. In all likelihood interest rates will head further into negative territory. When that fails, the probable conclusion will be a fiscal expansion that is likely to be monetised. The mindset shift towards such an outcome has become more established in academic circles and another crisis will quickly spread it to policymakers.

It is possible that the ultimate goal is to generate enough inflation to act as a wealth transfer between generations and from savers to borrowers. This may well be the democratically acceptable way of defaulting on debt. But it may prove more difficult to create inflation in the current environment.

Even if it this may take longer than hoped for, inflation is a monetary phenomenon and in a fiat currency system policymakers will eventually succeed in creating it. In such an environment the best thing you can do is try to identify assets that will perform reasonably well regardless of the future course of policy and its impact on growth and inflation rather than try to maximise return in the shorter term.

Ideally such an asset should possess two key characteristics: good cash flow visibility and stability; and an embedded inflation hedge. That tends to lead you to hard assets rather than financial assets; though there are parts of securities markets that also have these attributes.

While demographics, debt accumulation and globalisation were all supportive of growth in the 1980s and 1990s, those tailwinds have reversed and are increasingly headwinds. This is an interlocking problem with no easy way out. There are steps that can be taken that would help. Reform of the social contract between generations is clearly needed. Productivity also needs to increase though this is proving very difficult to achieve in the developed world.

The challenges we currently confront are profound and intractable and it seems likely that we are approaching the end of an era. A new monetary order will eventually emerge but it is still difficult to discern its outlines. In academic circles there are already debates around what form this will take.

These range from relatively modest evolution, for example using the IMF’s special drawing rights as an anchor for exchange rates, to radical proposals such as an end to fractional reserve banking. One thing seems to be certain; the new order will arise only after another significant crisis as the political system seems incapable of implementing true reforms without it.

Robert Louis Stevenson wrote: “Sooner or later everyone sits down to a banquet of consequences.” That moment is coming.

..

When They Start Praising the Fed, You Know We’re Headed for Disaster


TheDailyBell

dollar-sinking

The Fed’s Amazing Self-Fulfilling Forecast … The Federal Reserve’s track record of economic forecasting is a lot better than many observers recognize. It might also offer some insight into the central bank’s approach to managing the recovery.  -Bloomberg

This Bloomberg article makes the point that the Federal Reserve is competent.

Worrisomely, such articles tend to appear at the top of the business cycle. For proponents of central banking any gradually, sustained upturn is an excuse to celebrate central bank supervision.

This sort of propaganda is endlessly present at Bloomberg. Let the last cyclical economic disaster finally begin to fade from memory and Bloomberg columnists proclaim Fed competence once again.

In fact, we would have a hard time recalling when the Bloomberg editorial section criticized the central bank paradigm itself.  They are much more apt to either minimize Fed power (so as to make the facility more palatable) or in some sense endorse it.

This article argues that starting in 2011, the Fed brought policies in line with action and its handling of the economy became far more competent.

More:

From 2011 through 2015, the Fed managed the economy with two complementary goals: Get the unemployment rate down to 5 percent (from near 10 percent) and keep inflation in a range between 1 percent and 2 percent.

It adjusted monetary policy in response to shocks in order to achieve these complementary goals. In other words, the forecast for unemployment and inflation was accurate because the Fed made it so.

This raises another question: Could the Fed have achieved better growth and gotten interest rates back up to normal more quickly if it had aimed for a sharper decline in the unemployment rate and allowed inflation to run above target?

The basic thrust of these observations is that Fed officials finally figured out the right approach to the economy after fumbling around.

What would that right approach be? Presumably aggressive easing using such unusual methods as “quantitative easing.”

The article also provocatively if the Fed might have run the monetary engines even harder to  create more jobs. Answer: This question will be studied for years to come.

No, it probably won’t. Once the next crash comes, probably sooner rather than later, Fed “management” will be revealed for the disaster it is. Short term arguments for Fed competence always come unstuck.

These are cyclical arguments in fact.

They usually occur toward the top of whatever bubble the Fed is currently engaged in blowing.

We remember articles during the Greenspan era proclaiming that the Fed had basically abolished the business cycle. Then 2001 happened.

Ben Bernanke was very confident about the Fed’s economic management right up until the 2007-2008 unraveling.

And now, again, we begin to see articles promoting the Fed’s management skills regarding a particularly stubborn business cycle.

But central banks do not have management skills. All that central banks do is exacerbate cycles already present in the economy.

Any modern economy would likely have some sort of cycle. Central banks considerably exacerbate those cycles. Additionally, central banks homogenize monetary policy.

Regional cycles are far preferable to national cycles because during a regional downturn, people can go elsewhere. Once the cycle is nationalized, people’s employment options are considerably lessened.

As central banking becomes more internationalized – as the Bank for International Settlements increasingly coordinates monetary policy – what was once local becomes global.

The disasters associated with a truly international central banking regime are evident and obvious. The downturns will be all encompassing.

There literally will be no place to go to avoid an economic collapse.

Speculating about how central banking success only encourages this homogenization by giving people the false impression that monetary management of an economy is viable.

It is not. The successes that are identified are inevitably ephemeral. Always we see articles of this sort, celebrating central bank management at a time when money printing has finally managed to generate asset bubbles.

These asset bubbles are mistaken for a “recovery.” But there are never any “recoveries” in a modern, central bank environment, only asset expansions propelled by misaligned interest rates and monetary debasement.

Conclusion: When we read articles like this one, we become painfully aware that we are probably approaching the top of the economic cycle. When it once again turns down, as it certainly will, these articles become signposts on the path to disaster.

..

We’re in the Eye of a Global Financial Hurricane


oftwominds

Charles Hugh Smith

The only “growth” we’re experiencing are the financial cancers of systemic risk and financialization’s soaring wealth/income inequality.

The Keynesian gods have failed, and as a result we’re in the eye of a global financial hurricane.

The Keynesian god of growth has failed.

The Keynesian god of borrowing from the future to fund today’s consumption has failed.

The Keynesian god of monetary stimulus / financialization has failed.

Every major central bank and state worships these Keynesian idols:

1. Growth. (Never mind the cost or what kind of growth–all growth is good, even the financial equivalent of aggressive cancer).

2. Borrowing from the future to fund today’s keg party, worthless college diploma, particle board bookcase, stock buy-back, etc. (oops, I mean “investment”)–a.k.a. deficit spending which is a polite way of saying this unsavory truth: stealing from our children and grandchildren to fund our lifestyles today.

3. Monetary stimulus / financialization. If private investment sags (because there are few attractive investments at today’s nosebleed valuations and few attractive investments in a global economy burdened with massive over-production and over-capacity), drop interest rates to zero (or below zero) to “stimulate” new borrowing… for whatever: global carry trades, bat guano derivatives, etc.

Here is my definition of Financialization:

Financialization is the mass commodification of debt and debt-based financial instruments collaterized by previously low-risk assets, a pyramiding of risk and speculative gains that is only possible in a massive expansion of low-cost credit and leverage.

That is a mouthful, so let’s break it into bite-sized chunks.

Home mortgages are a good example of how financialization increases financial profits by jacking up risk and distributing it to suckers who don’t recognize the potential for staggering losses.

In the good old days, home mortgages were safe and dull: banks and savings and loans institutions issued the mortgages and kept the loans on their books, earning a stable return for the 30 years of the mortgage’s term.

Then the financialization machine revolutionized the home mortgage business to increase profits. The first step was to generate entire new types of mortgages with higher profit margins than conventional mortgages. These included no-down payment mortgages (liar loans), no-interest-for-the-first-few-years mortgages, adjustable-rate mortgages, home equity lines of credit, and so on.

This broadening of options (and risks) greatly expanded the pool of people who qualified for a mortgage. In the old days, only those with sterling credit qualified for a home mortgage. In the financialized realm, almost anyone with a pulse could qualify for an exotic mortgage.

The interest rate, risk and profit margins were all much higher for the originators. What’s not to like? Well, the risk of default is a problem. Defaults trigger losses.

Financialization’s solution: package the risk in safe-looking securities and offload the risk onto suckers and marks. Securitizing mortgages enabled loan originators to skim the origination fees and profits up front and then offload the risk of default and loss onto buyers of the mortgage securities.

Securitization was tailor-made for hiding risk deep inside apparently low-risk pools of mortgages and rigging the tranches to maximize profits for the packagers at the expense of the unwary buyers, who bought high-risk securities under the false premise that they were “safe home mortgages.”

Financialization– which can only expand to dominate an economy if it is supported by a central bank bent on expanding credit–has two inevitable and highly toxic consequences:

Risk seeps into every nook and cranny of the financial system, greatly increasing the odds of a systemic domino reaction in financial meltdowns. This is precisely what we saw in the 2008-09 Global Financial Meltdown (GFM): supposedly “contained” subprime mortgages toppled dominoes left and right, bringing the entire risk-saturated system to its knees.

Extraordinary wealth and income inequality, as those closest to the central bank money/credit spigots can scoop up income-producing assets first at much lower costs than Mom and Pop Main Street investors.

The rising anger of the masses left behind by the central bank / financialization wealth harvesting machine is the direct result of Keynesian monetary stimulus that rewards debt-based speculative gambles by those closest to the cheap-credit spigots.

As I explain in my book Why Our Status Quo Failed and Is Beyond Reform, the only possible output of central bank monetary stimulus is financialization, and the only possible output of financialization is unprecedented wealth and income inequality.

The global financial system is in the eye of an unprecedented hurricane. While central bankers are congratulating themselves on their god-like mastery of Nature, and secretly praying to the idols of the Keynesian Cargo Cult every night, the inevitable consequence of borrowing from the future, the obsession with “growth” at any cost and financialization /monetary stimulus, a.k.a. the rich get richer thanks to central banks is systemic collapse.

Don’t fall for the mainstream media and politicos’ shuck-and-jive that all is well and “growth” will return any day now. The only “growth” we’re experiencing are the financial cancers of systemic risk and financialization’s soaring wealth/income inequality.

..

All the incentives in our status quo are perverse


oftwominds

by Charles Hugh Smith

Either Reverse All the Perverse Incentives or the System Will Implode

Every perverse incentive is the cash cow for a vested interest or cartel.

I hope it’s not a great shock to discover all the incentives in our status quo are perverse: those who rig the financial system while creating zero real value, jobs, goods or services reap all the big profits; those who take near-zero responsibility for their own health are subsidized by those who take responsibility for their own health; those who try to start enterprises and hire workers are saddled with endless regulations, junk fees and taxes while those who game the system to get welfare (household or corporate) skim the cream for doing nothing for their community or for the nation.

Systems in which all the incentives are perverse implode under their own weight. Those who struggle to pay the mounting costs of Imperial Over-Reach, crony-capitalism and all the skimmers and scammers eventually go bankrupt or quit in disgust, while the army of state dependents and cronies explodes higher.

It has taken decades for the incentives to become so perverse, so we no longer notice the perversity or the pathological consequences.

High-frequency traders and financiers with the ready ear of well-paid political lackeys, stooges, toadies and sycophants run never-lose skimming operations and pay lower tax rates than self-employed and small business owners.

Corporations have increased their share prices not by earning more money by producing more goods and services but by borrowing cheap money from the Federal Reserve and buying back outstanding shares.

Corporations pay less tax if they move production overseas and keep their profits in other countries.

If I wreck one vehicle after another due to reckless irresponsibility, what happens to my insurance premiums? They skyrocket, of course, reflecting the higher risks that result from my behavior and poor choices. Nobody thinks safe drivers should subsidize irresponsible drivers.

But if I wreck my health by recklessly pursuing risky behaviors, I pay the same as people who are careful “drivers” of their health. What sort of incentives does this system generate?

If I want to buy an over-priced home, the system is loaded with incentives to encourage that potentially poor financial decision. But if I want to launch a small enterprise, the incentives are all perverse: steep upfront fees, taxes from the first dollar, and in many cases, fees and taxes on revenues, regardless of whether I am making a profit or losing my shirt.

Corporate profits have soared as financialization and rigging the system have paid much higher returns than risking capital in new goods and services.

The incentives for home ownership have turned the bottom 90% into debt-serfs in servitude to banks while the top 5% own income-producing assets and businesses.

Larded with the most perverse incentives possible, the U.S. healthcare system in the final stages of maximum costs, just before it implodes:

It’s not hard to design positive incentives. For example:

1. Make preventative care essentially free to everyone ($5 co-pay) but weight the risks and costs created by irresponsible behaviors that ruin health. Reward those who take responsibility for their health by reducing the premiums they pay.

2. Tax all profits on securities held less than a day at 95%. Raise corporate taxes generated by financial activities to 50%, and lower the corporate tax rate on profits earned from producing domestic goods and services to zero.

3. Lower the tax for the first $25,000 earned by small enterprises to zero. Limit total government fees to 5% of revenues for all businesses up to $10 million in annual revenues.

4. Phase out the mortgage interest deduction. Limit mortgage interest deductions to the first $100,000 of mortgage debt.

5. Eliminate the personal income tax (and the need to file a return) for every household with income of $100,000 or less.

6. Automatically sunset every government regulation. Make city, county, state and federal governments renew every regulation every few years via a majority vote or it vanishes from the law books.

7. Make every politician wear a NASCAR-style jacket plastered with the names and logos of their corporate, union and financier contributors. The California Initiative to make this a reality is seeking signatures of registered California voters. Since politicians are owned, let’s make the ownership transparent.

8. Treat drug abuse and addiction as medical conditions rather than crimes.

9. Eliminate the Federal Reserve and its free-money for financiers perverse incentives for debt-serfdom and financial plundering.

10. Eliminate all student loans and debts. Make colleges compete for students on a cash-only basis.

As you no doubt noticed, every perverse incentive is the cash cow for a vested interest or cartel. That’s why the perverse incentives will endure until the system implodes under their pathological weight.

..

The Status Quo Has Failed and Is Beyond Reform


Yet those who benefit from our status quo (or hope to benefit from it upon retirement) naturally deny it has failed, for the reason that it has yet to fail them personally.


oftwominds

John Hugh Smith

The truth is the usual menu of reforms can’t stop this failure, so we have to prepare ourselves for the radical transformations ahead.
.
That the status quo–the current pyramid of wealth and power dominated by the few at the top–has failed is self-evident, but we can’t bear to talk about it.This is not just the result of a corporate media that serves up a steady spew of pro-status quo propaganda–it is also the result of self-censorship and denial.
.
Why do we avoid talking about the failure of the status quo? We know it is beyond reform, and we’re afraid: afraid that the promises of financial security cannot be kept, afraid of our own precariousness and fragility, and afraid of what will replace the status quo, for we all know Nature abhors a vacuum, and when the status quo crumbles, something else will take its place.
.
We all prefer the comforting promises of vast central states. No wonder so many Russians pine for the glory days of the Soviet Union, warts and all.
.
But the central bank/state model has failed, and history can’t be reversed. The failure is not rooted in superficial issues such as which political party is in power, or which regulations are enforced; the failure is structural. The very foundation of the status quo has rotted away, and brushing on another coat of reformist paint will not save our societal house from collapse.
.
Yet those who benefit from our status quo (or hope to benefit from it upon retirement) naturally deny it has failed, for the reason that it has yet to fail them personally.
.
So we pretend to not understand that all unsustainable systems eventually collapse, and hope that the next central bank policy–negative interest rates, or bank bail-ins or helicopter money–will postpone it.
.
But the writing is already on the wall for us to read: these are the tell-tale signs of systemic failure leading to systemic collapse:

 

  • We keep doing more of what has failed spectacularly.
  • What began as emergency measures are now permanent policies.
  • The returns on status quo solutions are diminishing to less than zero.
  • Social mobility has eroded.
  • We have lost social cohesion and shared purpose.

 

But the failure runs even deeper: Our status quo is not only failing to solve humanity’s six core problems– it has become the problem.
.
To explain why this is so, I wrote Why Our Status Quo Failed and Is Beyond Reform, a new book that’s focused (90 pages) and affordable, i.e. the cost of a latte ($3.95 Kindle ebook, $8.95 print edition).
.
Why can’t our status quo be reformed? There are two primary reasons:
.
1) Those benefiting from the current arrangement will resist any reforms that threaten their share of the pie–and meaningful reforms will necessarily threaten everyone’s slice of the pie.
.
2) Reforms that actually address the structural flaws will bring the system down, as the status quo can only continue if its engine (permanent expansion of debt and consumption) is running at full speed. Once the engine stalls or even slows, the system collapses.
.
This is unwelcome news not just to privileged insiders–and the harsh reality is that our status quo exists to protect the privileges of the few at the expense of the many–but to everyone who hopes to benefit in some way from our status quo’s cornucopia of promises.
.
So we cling to the dangerous hope that all the promises can be met by some future magic, and cocoon ourselves in an equally dangerous denial that collapse is inevitable. We don’t just want to avoid the decay and collapse of all the happy promises–we want to avoid the responsibility of taking part in shaping the replacement system.
.
We all want to wallow in the false security of one form of the old Soviet Union or another. Call it Japan, or the Eurozone, or the U.S.A., or Russia, or the People’s Republic of China–they’re all versions of the doomed Soviet model of central planning, propaganda and supression of anything that isn’t supportive of the status quo, i.e. dissent.
.
The truth is the usual menu of reforms can’t stop this failure, so we have to prepare ourselves for the radical transformations ahead. The decay and collapse of our status quo is not the disaster we assume; rather, it is good news for the planet and everyone who isn’t in the privileged elites, as the collapse will clear the way for a much more sustainable decentralized system that is already visible to those who know where to look (crypto-currencies, local community economies, etc.).
.
The decay phase of the status quo (i.e. the present) offers us a magnificent opportunity to fashion alternative systems that operate in the shadow of the status quo, making use of technologies such as the Internet. Alternative systems can arise without challenging the status quo; indeed, sustainable, decentralized systems offer open-minded elements of the status quo new models and new partners.
.
My own proposal for a replacement system is called CLIME–the Community Labor Integrated Money System. Whether you agree with my proposal or not, the point is that we have to wake up from our propaganda-induced slumber and take responsibility for being part of the solution rather than passively clinging to the problem, i.e. our status quo.
.
You can find our more about Why Our Status Quo Failed and Is Beyond Reform($3.95 Kindle ebook, a 20% discount thru May 1, $8.95 print edition) on the book’s website. The book is #3 on Kindle short reads -> politics and social science.

..

Path to the Great Reset


TwoIceFloes

By Joe Withrow

Author of ‘The Individual is Rising’

Gold has been money for most of recorded human history. Industrial capitalism operated on a global gold standard up until the world wars shredded Europe’s economy. In 1933, President Roosevelt criminalized private gold ownership using an executive order, and the U.S. government forced citizens to sell their gold at a below-market valuation. This gold was melted down into bricks and shipped to Fort Knox where KPMG says it still sits to this day.

The Bretton Woods Agreement was executed in 1944, which pegged the U.S. dollar to gold at $35 per ounce, and installed the dollar as the world’s reserve currency. Under Bretton Woods, all other national currencies were pegged to the dollar, and foreign central banks could exchange dollars for gold at the fixed rate.

The Bretton Woods Agreement required the U.S. government to maintain the dollar-to-gold exchange ratio, but that didn’t happen. The U.S. government instead ramped up the printing presses to power its “Guns and Butter” campaigns in the fifties and sixties. Eventually foreign central banks caught on and began to exchange their dollar reserves for gold through the gold window. Gold steadily flowed out of the U.S. Treasury until August 15, 1971 when President Nixon unilaterally closed the gold window and ended the U.S. dollar’s direct convertibility to gold.

This action thrust the entire world onto a fiat monetary standard where all currencies floated in value against one another. The word “fiat” is defined as: an arbitrary order or decree, and the word very literally means “let it be done” in Latin. Fiat money is simply money that comes into existence and derives its value exclusively from government decree.

Free market economists, specifically those of the Austrian school, decried this move immediately. Fiat money had been used on a national level on numerous occasions throughout history, they said, and each time it led to economic disaster. Now you want to try it on a global scale? You are asking for a catastrophe!

Many of the Austrians didn’t think the fiat system would even survive the decade.

The reason being is really just common sense: if you give a select group of people the ability to create money out of thin air then they are going to do just that. And they are going to keep on doing just that in greater quantities, especially when they discover that they can funnel the new money to their own friends and business partners. Here’s the kicker: each new monetary unit that comes into circulation necessarily steals value from all of the other monetary units in existence.

This is just basic economics, but French economist Richard Cantillon noticed something especially nefarious about this dynamic way back in the early 1700’s. When such a fiat money system is employed, the people who receive the new money first – always the politically connected and financial elite – become fantastically wealthy while everyone else becomes poorer over time. In other words, Cantillon said, this system actively transfers purchasing power away from everyone who holds money, and it funnels this purchasing power directly to the few people who are on the receiving end of the printing presses!

This came to be known as the Cantillon effect, and it is the sole reason for the massive wealth disparity that has come to exist in the U.S. over the past four decades. There is a reason why the suburbs surrounding Washington, DC have become the wealthiest counties in the country. The Federal Reserve has been systematically transferring the nation’s wealth to Washington (and New York) for forty years now.

The fiat monetary system has fundamentally transformed how the economy operates as well. Free market purists, of which I am one, can list numerous reasons why the Bretton Woods System was a crony fractional gold standard that was riddled with problems right from the start, but it did serve to restrict the creation of currency and credit to a certain degree.

Gold was the restrictive mechanism. The amount of currency and credit in circulation was tied directly to the amount of gold in the vaults. Though the system was imperfect, credit could only come from real savings which could only come from real production prior to 1971.

Contrast this to the creation of credit today. Banks are required to hold a fraction of deposits in reserve in order to issue credit. This reserve number is roughly 10%.

In other words, banks can issue a $1,000 loan for every $100 on deposit with a simple journal entry. But the $1,000 created by the loan typically finds its way back into the banking system. Very few people take out a loan and stuff the cash in their mattress; they usually use it to purchase something. The business or person on the receiving end of that transaction typically deposits the proceeds from the sale into their bank account. At that point there is an extra $1,000 floating around in the system… which means banks can now issue additional loans up to $10,000 on top of the new $1,000 deposit.

Now it may not be the same bank with the additional $1,000 deposit, but all of the banks are tied together via the central banking system so the net effect for the entire system is the same. The credit expansion feeds itself and self-perpetuates.

The U.S. national debt was effectively restricted by gold as well, as the Feds found out when French President Charles de Gaulle began shipping dollars back to the U.S. Treasury in exchange for gold.

Gold was like the fuddy-duddy who collected everyone’s car keys at the door of the college party. He would let you have a little bit of fun, but he drew a distinct line in the sand.

So what has happened to the economy since 1971 is not a mystery – everything can be traced back to the fact that we went from using real money to using money created from thin air. The data very clearly shows the results of this:

  • The U.S. money supply has exploded since 1971.
  • The cost of living has risen dramatically because of this monetary expansion.
  • The U.S. national debt has exploded by a factor of 10 – it has quite literally doubled more than three times in forty years.
  • Unfunded government liabilities have exploded all around the world – eclipsing $210 trillion in the U.S.
  • Household debt has exploded significantly, and household debt-to-income has now surpassed 130%.
  • Interest rates have been pushed negative around the world, and to near-zero in the U.S. which has prevented seniors and conservative investors from earning any real returns on their savings.
  • Real money and savings have been replaced by credit – the entire economy has been hooked on cheap credit.

The perpetuation of this system depends entirely on continued credit expansion. The house of cards will fall as soon as the credit dries up.

Here’s the funny thing about this: the Baby Boomers have spent most of their adult lives immersed in this system. Their children have spent their entire lives in this system. This monetary system is anomalous from a historical perspective and it is completely unsustainable, but most people alive today consider it absolutely normal. They have known nothing else.

So the fiat money system has chugged right along with its booms and busts, seemingly oblivious to the mounting problems and the select few voices crying wolf. The system has hit road blocks several times during each decade, but it has overcome and persevered on each occasion – elevating asset prices in the U.S. to new highs as it advanced.

This has made the average investor complacent. Talk to your neighborhood financial professional and he will tell you decisively how it all works: Stocks always go up over time. So does real estate. Government bonds are your safe haven. Corrections happen from time to time – you just need to wait them out.

He’s not trying to trick you – that is what mainstream finance believes. Indeed, that’s mostly how it has worked for quite some time now. The normalcy bias is firmly entrenched.

What isn’t often considered, however, is that we haven’t seen the other side of the credit cycle since the fiat monetary system came to being. Credit has been expanding consistently, and interest rates have been falling since the early 1980’s. At some point the cycle has to turn.

That point may be rapidly approaching. The puppet masters are engaging in more and more aggressive policies in an effort to keep the system progressing forward.

Policymakers in Japan and Europe have already pushed sovereign interest rates into negative territory. Chinese policymakers, as of last week, have done the same. This is capitalism flipped upside down. Instead of receiving a rate of return on their capital, savers actually must pay interest to purchase government bonds or to keep their money in the bank.

Think about what this means for large institutional investors. Are they really going to deploy their capital in a way that guarantees a loss?

What about insurance companies? Millions of people and businesses around the world have bought insurance policies to protect their homes, businesses, property, and even entire cities. These insurance companies must maintain a huge cash reserve in order to honor their guarantees as claims come in. Are these companies going to keep their cash reserves in accounts that steadily eat away at their capital because of negative interest rates?

You could ask the same question about pension funds.

And how about individuals all around the world? Are people going to keep their money in the bank and watch their account steadily dwindle month in and month out? Aren’t deposit accounts supposed to protect capital in a liquid manner?

A general rule of thumb is that capital flows to where it is treated best. Right now, that place is the United States. With the rest of the world descending into negative interest rate territory, the Federal Reserve has actually been talking about raising interest rates.

It is only logical to expect huge amounts of capital to rush into the U.S. credit and financial markets to escape the ills of negative interest rates. But this would drive Treasury yields down and send the U.S. dollar skyrocketing relative to all other currencies which would cause massive imbalances in the global economy.

Here’s just one example: emerging market debt has exploded by more than 600% in the last ten years alone. This debt is denominated in dollars, but the emerging market debtors earn money in their own currencies. This means they must convert their currencies to dollars to service this debt. If the dollar-to-emerging market currency exchange ratio is too extreme then these debts simply cannot be paid. Then problems in the credit markets really start to cascade.

So if the Fed pursues its “normalization” policies then the global economy faces some major problems. But the Fed has taken a more dovish stance recently, and Janet Yellen has even name-dropped negative interest rates.

Will the Fed follow the world into the realm of negative interest rates to suppress the dollar and avoid shaking up the global economy? This of course would lead to a different set of problems. If all of the world’s major economies were submersed in negative interest rates, there would be no safe haven for the aforementioned economic actors to run to within the financial system. So what would they do?

Maybe they would just take it on the chin and let their capital gradually decay. Or, much more likely, they would move into physical cash and gold as a means to preserve their capital thus triggering a global bank run – something long thought conquered in the age of central banking.

Oh, and this is more than just a theory… a number of power players are already starting to do just that – move into physical cash and gold.

Could the Great Reset be at hand?

Of course, nobody knows for certain. Prominent Austrian economists thought the fiat monetary system would crash and burn a long time ago. They have been wrong for decades on this. Maybe they will be wrong for decades more… or maybe they will finally be proven right.

What’s important to take from this is that the rules of the game are changing. Those stuck within the old paradigm of mainstream finance have huge threats facing their retirement, and quite possibly even their current standard of living.

..

Lost Faith In Central Banks And The Economic End Game


Central banks have focused most of their efforts on levitating the Dow as well as energy markets for some time now.

Why? Because the general public does not pay attention to any other market indicators. They do not care that equipment giant Caterpillar is having the worst profit period in the company’s history. They do not care that the Baltic Dry Index, a measure of global shipping rates and thus a measure of global orders for raw goods, continues to bounce around well below its original historic lows due to crashing shipping demand. They do not care that according to the World Economic Forum, oil demand has dropped to levels not seen since 1997. They do not know nor do they care to know. Their only barometer for economic danger is the Dow, and central banks know this well.


TheActivistPost

We live in strange economic times, stranger perhaps than at any other point in history. Since 2007-2008, the globally intertwined and dependent fiscal system has suffered considerable declines in every conceivable area. Manufacturing around the world is in a slump, from Japan to China to Europe, with the minimal manufacturing accomplished in the U.S. also fading. Consumption is falling, most notably in petroleum and raw materials. Employment is truly dismal, with the U.S. posting over 94 million people as “non-participants” in the national work force.

High-paying jobs are disappearing, and the only jobs replacing them are in the low-wage service sector. This problem is becoming so pervasive that certain more socialist states including California and New York are attempting to offset the loss of sustainable income jobs by forcing retail and service companies into paying an inflated minimum wage. That is to say, states hope to stop the bloodletting in wages by magically turning low-paying jobs into high-paying jobs.

As anyone with any economic sense knows, you cannot have a faltering consumer sector in which people are buying less and force service-based companies to pay their employees far more per hour than the job is worth. Those companies will simply lay off more employees, cut hours or shut down entire branches of their operations in order to maintain their profit margins. Either that, or those companies will go out of business.

One sector, though, has continued to reap certain benefits (for now), and that is equities. There is a good reason for this.

The stock market is a kind of Pavlovian control mechanism, a mental trigger in the minds of the masses that dominates their perceptions of the world’s financial health. The drooling public sees green lines and they hail impending “recovery;” they see red lines and suddenly they begin to wonder if all is not well. As the former head of the Federal Reserve Dallas branch, Richard Fisher, admitted in an interview with CNBC, the U.S. central bank in particular has made its business the manipulation of the stock market to the upside since 2009:

What the Fed did — and I was part of that group — is we front-loaded a tremendous market rally, starting in 2009.

It’s sort of what I call the “reverse Whimpy factor” — give me two hamburgers today for one tomorrow.

I’m not surprised that almost every index you can look at … was down significantly. [Referring to the results in the stock market after the Fed raised rates in December.]

Fisher went on to hint at the impending danger:

I was warning my colleagues, “Don’t go wobbly if we have a 10-20% correction at some point…. Everybody you talk to … has been warning that these markets are heavily priced.”

Central banks have focused most of their efforts on levitating the Dow as well as energy markets for some time now.

Why? Because the general public does not pay attention to any other market indicators. They do not care that equipment giant Caterpillar is having the worst profit period in the company’s history. They do not care that the Baltic Dry Index, a measure of global shipping rates and thus a measure of global orders for raw goods, continues to bounce around well below its original historic lows due to crashing shipping demand. They do not care that according to the World Economic Forum, oil demand has dropped to levels not seen since 1997. They do not know nor do they care to know. Their only barometer for economic danger is the Dow, and central banks know this well.

Something has changed recently, though. Why, for example, did the Fed go against its long-time mandate of manipulating equities into positive territory by committing to the taper of QE3? Why did they then later commit to hiking interest rates, an action they KNEW would cause a massive downturn in stocks?

The jawboning of stocks in March back from the brink actually tells us a lot in terms of the central bank’s intentions. First, it tells us that the Fed does not intend to use tools such as rate cuts and stimulus measures to buy back market optimism. Rather, they are relying solely on investor faith that central banks are not going to leave them high and dry. They have decided to use manipulative language alone, rather than the manipulative monetary policy we have grown accustomed to.

Second, the action of the Fed in raising rates has torn away the veil and shown the public stocks truly cannot survive without central bank support. The moment the Fed leaves markets to their own devices, the only things left for investors to turn to are the fundamentals, and of course the fundamentals are ugly beyond belief. Thus, stocks begin to plummet.

As I point out in my article “Markets Ignore Fundamentals And Chase Headlines Because They Are Dying,” some of the greatest market rallies in U.S. history occurred during the onset of the Great Depression, and all of these rallies were based on a false sense of public faith that recovery was “right around the corner”. The rally this past March is no different. There are no fundamentals to back it, it was built entirely on faith, and soon it will implode as similar rallies did during the Depression.

Just in the past week alone, certain signs are bubbling to the surface to undermine the facade of the recent dubious rally.

For anyone who was betting on oil markets to continue their rally past the $40 per barrel mark, there was a lot of bad news. Saudi Arabia crushed optimism by announcing that it would not be entertaining a “production freeze” proposal unless ALL other oil producing nations, including Iran, also agreed to it.

Iran then doubly crushed optimism by announcing an increase in production rather than committing to a freeze.

Russia then administered the final blow by releasing data showing that their oil output had risen to historic levels, indicating that they will not be entering into any agreement on a production freeze.

Besides a recent overly optimistic (and rather suspicious inventory draw) which has caused a short-term rebound, all indicators show that oil will be headed back to the lows seen at the beginning of this year.

Why do oil markets matter? Well, it would seem that stocks for the past few months have been loosely tracking oil. When oil has taken a dramatic turn to the negative, so have stocks. This may be a purely psychological correlation, but that is kind of the point. ALL stock market movements are purely psychological today, and when psychological optimism fails, the fundamentals strike hard. So far, oil is solidly back in volatile territory, and equities are following.

In fact, most of the world is beginning to feel tremors yet again in stocks as central bank meeting and announcements are having less and less affect on positive psychology.

..

Central banks are already doing the unthinkable – you just don’t know it


The Telegraph 

heli

Helicopter drops may have already arrived in stealth form, as monetary policy is forced into truly uncharted territory

By Mehreen Khan

19 MARCH 2016 • 7:00PM

The lords of finance are losing their touch.

Institutions which dragged the world from its worst depression since the early 20th century are finally seeing their magic desert them, if conventional wisdom is to be believed.

Eight years on the from the Great Recession, voices as authoritative as the International Monetary Fund and the Bank of International Settlements – dubbed the ‘central bank of central banks’ – have called time on the era of extraordinary monetary policy.

Having hoovered up $12.3 trillion (£8.5 trillion) in financial assets and carried out 637 interest rate cuts since 2008, central banks have been stunned back into action in the last six weeks.

The Bank of Japan kicked off a new round of global easing with its decision to cross the rubicon into negative interest rate territory on January 29.

Eurozone policymakers followed suit earlier this month with a triple whammy of interest rate cuts, €20bn in additional asset purchases a month, and an unprecedented move to allow commercial banks to borrow money at negative rates.

The Federal Reserve has also taken its foot off the pedal by slashing its expected interest rate hikes from four a year to just two.

cbgraph
But the new wave of policy accommodation has ushered in fresh panic that monetary policy is suddenly subject to dwindling returns.

Instead, talk has turned to governments finally pulling their weight to support the shaky global recovery.

Fiscal policy has been largely dormant in the wake of the crisis as countries have concentrated on bringing down debt and deficits levels, binding themselves to stringent spending rules in the process.

But without tax breaks and greater state investment, the world is at risk of another “economic derailment”, the IMF has warned.

In its latest communique the G20 paid lip service to the idea that global governments will adopt policies to “strengthen growth, job creation and confidence”.

Realistically, there are little signs that politicians are ready to jettison their fixations on low debt and balanced budgets to support global growth.

Act now to stop global crisis, IMF warns governments

banksters

Central bankers have led the world out of recovery as politicians have stood on the sidelines

In Europe, it is an issue which is straining relations between central bankers and their respective governments.

Faced with accusations of impotence, Vitor Constancio, vice president of the ECB, launched a dogged defence of the central bank’s actions, claiming they have been responsible for two-thirds of all eurozone growth since 2014.

Not only is it wrong to start talking down monetary policy – 
it’s actually dangerous ECB vice president Constancio

Moreover, the very design of the euro actively prohibits governments from stepping in to stimulate weak economies, says Constancio.

“Stabilising fiscal policy is restricted by law in the EU. Countries that could use fiscal space, won’t; and many that would use it, shouldn’t.”

Amid such constraints, Constancio warns “not only is it wrong to start talking down monetary policy – it’s actually dangerous”.

ecbgraph

Thinking the unthinkable

Faced with political intransigence, central bankers are openly talking about the previously unthinkable: “helicopter money”.

A catch-all term, helicopter drops describe the process by which central banks can create money to transfer to the public or private sector to stimulate economic activity and spending.

Long considered one of the last policymaking taboos, debate around the merits of helicopter money has gained traction in recent weeks.

ECB chief Mario Draghi has refused to rule out the prospect, saying only that the bank had not yet “discussed” such matters due to their legal and accounting complexity. This week, his chief economist Peter Praet went further in hinting that helicopter drops were part of the ECB’s toolbox.

“All central banks can do it”, said Praet. “You can issue currency and you distribute it to people. The question is, if and when is it opportune to make recourse to that sort of instrument”.

draghi

Embattled central bankers are beginning their fight back against accusations of impotence

With 16 out of Europe’s 28 economies still in deflation and annual eurozone growth set to hit just 1.4pc in the middle of a cyclical upturn, the opportune moment may soon be upon us.

“We have had forward guidance, QE and negative interest rates, says Gabriel Stein at Oxford Economics.

“But none of these has proven a panacea and their shelf-life is getting shorter.”

Helicopter drops by stealth

For some observers, the next phase in extraordinary central bank action is already upon us, and it is Japan which is leading the way.

The Bank of Japan’s move to impose a three tiered deposit rate on banks is a covert attempt to inject funds directly to the private sector, argues Eric Lonergan, economist and hedge fund manager.

He notes that the BoJ’s decision to exempt some reserves from the negative rate represents a transfer of cash to commercial lenders at rate of 0.1pc.

The system “separates out the interest rate on reserves from that which affects market rates”, says Lonergan.

“It is taking the first step along the journey towards helicopter money and opens up a whole new avenue of stimulus”.

In the same vein, the ECB has also signaled its intention to move towards targeted attempts to boost private sector credit demand.

From June, eurozone banks will be paid as much as 0.4pc to borrow from the ECB for four years – a scheme dubbed ‘Targeted Long-Term Refinancing Operations’ (TLTRO’s). Lenders who do the most to pass on cheap loans to customers will be rewarded with the most favourable rates.

Erwan Mahe, chief macro strategist at HPC, calls the ECB’s moves a “veritable revolution” in monetary policy which marks the end of an erstwhile central bank taboo.

“For the first time in the history of central banking, private-sector agents will be able to borrow money from the ECB and give back less than the capital borrowed,” says Mahe.

“As long as fiscal authorities do not act to offset the counter-cyclical lag in aggregate demand, [TLTRO’s)] will probably play an increasingly important role” in eurozone policy, he notes.

“I wish they’d done it an awful lot sooner”, says Lonergan, who says that for all its institutional constraints, the ECB still boasts a number of tools to boost bank lending.

With government borrowing costs at rock bottom across the eurozone, even more QE would be unnecessary at this stage, he says.

TLTRO’s however, “open the possibility of two different rates where you can leave the policy rate unchanged but lend to banks at lower and lower rates contingent on them lending to the real economy” he adds.

“It is much cleverer way of doing things because savers do not suffer.”

Smashing the taboo

But central bank ingenuity – however welcome – raises separate concerns about the accountability of institutions whose independence is sacrosanct but where decision-making is often insulated from public view.

Lord Adair Turner, a former chairman of the Financial Services Authority, and one of the earliest advocates of helicopter money, calls for more transparency in a bid to finally smash the taboos around injecting money straight into the hands of consumers or governments.

“I think it is more dangerous for central banks to forever deny what they are doing,” says Lord Turner.

He calls Japan’s move to issue government debt at a rate of 40 trillion yen, while the central bank expands its balance sheet at a rate of 80 trillion yen a year, “a de facto debt monetisation”.

“You are effectively replacing government debt with central bank money,” says Lord Turner. “It would be better for authorities to publish a statement, laying out the rules and assuring the world it is not too much.”

Lord Adair Turner has been a long standing supporter of a scheme of “money financing” between central banks and governments

But with much of the global economy witnessing steady if unremarkable expansion, any such admission is unlikely to come before another full-blown crash.

Mapped: Where in the world have rates turned negative? (click to view map)

map

Until then, debate will rage over the optimal way to engineer helicopter drops and the dividends they could bring to a subdued global economy.

For critics, the world’s recent oil price crash is an ominous sign that consumers are still not ready to spend any free windfalls. The boost to global spending from this effective tax cut has not been as direct as economists would have expected, as people continue to pay down their debts or save for rainy day funds.

In the eurozone meanwhile, still stuck in a low-growth and high unemployment morass, the political barriers to extraordinary measures should not be underestimated.

Where is the government Draghi can turn to if he ever wanted 
to fire up his helicopter? 
Ashoka Mody, former IMF bail-out chief

For all the exasperation aimed at the political class, the ECB still faces insurmountable barriers to action in an incomplete monetary union.

“Where is the government Draghi can turn to if he wanted to fire up his helicopter?” asks Ashoka Mody, a former assistant director at the IMF.

Seeking technocratic solutions to intractable economic problems also risks further damage to the fabric of the single currency, already facing huge challenges from migration flows and the rise of political extremism.

“By substituting so directly for fiscal policy, helicopter money becomes a profoundly political act”, says Mody, who led the IMF’s bail-out of Ireland from 2011.

“Europe has tried to govern itself through technocratic rules, especially the budget limits, and it has never worked.”

The challenges of the eurozone – where 19 differing governments are under the aegis of one central bank – are a far cry from Japan, where both fiscal and monetary policy are working in tandem to revive the economy.

“I think we will be lucky if Europe does as well as Japan did during its lost decade”, says Mody.

But the debate around helicopter drops has given way to a welcome fightback from central bankers who reassert that they are never powerless to generate inflation.

Citing Milton Friedman’s maxim that “inflation is always and everywhere a monetary phenomenon”, economist Tim Congdon is adamant that monetary policy is still the only game in town.

“Monetary policy can never – repeat, never – ‘run out of ammunition’”, he says.

..

Why Our Financial System Is Like the Titanic


oftwominds

by Charles Hugh Smith

The “unsinkable” global financial system is rushing headlong toward its encounter with the iceberg.

Why did the Titanic sink, despite being considered unsinkable? The conventional answer is the design of its watertight compartments was flawed: the watertight bulkheads were limited in height to a few feet above the waterline.
.
The ship was designed such that if the first few compartments were flooded, the flooding would be contained by the watertight bulkheads.
.
But the iceberg ripped open a gash almost a third the ship’s length, flooding the first six compartments. As the ship’s bow sank, water poured over the bulkhead into the seventh compartment, and so on, until the ship’s bow sank deep enough to bring the ship almost vertical, at which point the hull broke roughly in half–hence the two hull sections discovered on the bottom of the Atlantic in 1985.
.
But further analysis has revealed this isn’t the only reason Titanic sank. It turned out the ship’s hull plates were brittle due to high sulfur content in the steel, especially at cold temperatures (the water was near freezing at the time of the wreck).

Rather than deform as the iceberg scraped against the hull, the plates and rivets fractured, opening the gash that sank the ship.

The technologies of the early 1900s enabled shipbuilders to construct enormous ships almost 900 feet in length capable of steaming at 24 knots, transporting passengers across the Atlantic in comfort, but the technologies that made such ships and transits low risk were not yet developed.

.
The fact that large ships and powerful engines could be built created the illusion of low risk, because the risk factors were invisible until disaster struck. After the disaster, the flaws in the design of the watertight bulkheads, the inadequacy of the lifeboat requirements (there were not enough lifeboats for the crew and passengers), and the deficiencies in the wireless/radio requirements (ships were not required to have radio operators on duty 24 hours a day) were all obvious.
.
But the flaws in the steel plates and rivets would remain invisible until the technologies of steel production finally caught up with the other shipbuilding technologies. And better detection and tracking of icebergs would have to wait for radar and better navigational technologies.
.
Our financial system is like the Titanic: technologies such as high-frequency trading (HFT) and innovations such as securitization and complex derivatives have enabled major players to construct an enormous, fast-moving financial system that creates the illusion of low risk because the risks are not visible until disaster strikes.
.
The Global Financial Meltdown of 2008-09 was a close call, the equivalent of the Titanic veering off and barely missing the iceberg. In response, authorities imposed a variety of new regulations that are the equivalent of changing the regulations guiding lifeboats and radio operations.
.
But these regulations did nothing to address the risks created by the technologies of financialization that have leapfrogged safety systems and the real economy. In effect, the idea that the financial system is unsinkable remains intact, even though the flaws in its design (the equivalent of the watertight bulkheads) and its core technologies (the equivalent of the flawed steel plates) remain invisible.
.
The financial system’s huge size and apparent strengths have created a false confidence that it is unsinkable, and the ineffective regulations imposed after 2008-09 have only added to the illusion that the risk of a complete collapse is low.
.
All that has been accomplished since 2008-09 is there are a few more lifeboats and better communication when disaster strikes. But the risks of financial disaster have actually increased since 2008-09, as participants have bypassed regulations via shadow banking, dark pools,etc., and deepened their dependence on HFT skimming via superfast trades executed by superfast computers.
.
The “unsinkable” global financial system is rushing headlong toward its encounter with the iceberg, while the passengers and crew remain supremely confident and unaware of the risks, risks that will only become “obvious” after the global financial system has broken in half and sunk to the bottom, destroying most of those who believed it unsinkable.

..

2016, The Year Of The Red Monkey: Expect Wild, Unending Volatility


The past 25 years of “growth” and brief recessions may not be a good guide to the next few years.
.
In the lunar calendar that started February 8, this is the Year of the Red Monkey.
.
I found this description of the Red Monkey quite apt:
.
“According to Chinese Five Elements Horoscopes, Monkey contains Metal and Water. Metal is connected to gold. Water is connected to wisdom and danger. Therefore, we will deal with more financial events in the year of the Monkey. Monkey is a smart, naughty, wily and vigilant animal. If you want to have good return for your money investment, then you need to outsmart the Monkey. Metal is also connected to the Wind. That implies the status of events will be changing very quickly. Think twice before you leap when making changes for your finance, career, business relationship and people relationship.”
In other words, the financial world will be volatile. And few will have the agility and wile to outsmart the market-monkey.
.
For those who don’t believe in astrological forecasts, there are plenty of other reasons to anticipate sustained volatility in 2016 that strips certainty and cash from bulls and bear alike.
What’s the Source of Volatility?
.
Why are global markets now so volatile? The basic answer is as obvious as it is officially verboten: the global growth story is unraveling, and central banks and governments are increasingly desperate to re-ignite stagnating growth.
.
When solid evidence of flagging trade, sales and profits surfaces, markets drop. When central banks and states talk up monetary and fiscal stimulus, markets leap higher, as seven years of stimulus programs have rewarded those who “buy the dips.”
.
The relatively brief downturns and quick recoveries of the past seven years have led many to believe that this tug of war will resolve itself one way or the other in a few months. But the past seven years may not be a good guide to the next year or two: volatility might persist, month after month, with no clear resolution.
.
Indeed, the past 25 years of “growth” and brief recessions may not be a good guide to the next few years, as there are no analogous periods of sustained volatility in recent history. Rather, the current period shares characteristics with each crisis and crash of the past 25 years, but combines all these causal factors in one overlapping series. This makes the present volatility unique.
.
Another causal factor is also unique to this era: after seven long years of zero interest rate policy (ZIRP), central banks have started pursuing an unprecedented policy of financial repression: negative interest rates (NIRP), in effect punishing savers for holding capital.
.
The uncertainties generated by these policies are fueling rapid cycling between selling and buying in both human and machine (trading bots) participants.  Money managers fear losing capital in a crash, but are forced to seek yield in a zero or negative interest world.
.
No wonder volatility will reign supreme for some time to come: never before have all these causal factors been mixed together in a toxic brew of over-indebtedness, impaired collateral, faltering growth, collapsing commodity valuations, zero interest rates and currency devaluations.
.
The question everyone seeks to answer is simple: is the global economy sliding into recession? If so, it’s smart to sell all risk assets such as stocks and emerging-market currencies before the herd panics and triggers a crash.
.
Triggers of Recession
.
The classic recession is the result of the ebb and flow of credit in the business cycle: in the expansion phase, credit blossoms as households borrow money to buy autos, homes, etc., and businesses borrow more to expand production, retail outlets, etc.
.
The “animal spirits” of heady expansion inevitably exceed prudent limits, and credit is eventually extended to marginal borrowers and marginal investments. As marginal borrowers default and risky bets sour, loans must be written off and the expansion of credit ceases: households and enterprises pay down debt (deleverage) and cut expenses, causing sales, profits and employment to slump.
.
Once the deleveraging has cleared the economy of impaired collateral, mal-investments and unsustainable debt loads, credit once again begins to expand as cheap assets and new opportunities present themselves to creditworthy borrowers.
.
A variety of crises can trigger a reversal of risk-on “animal spirits” to fear-based risk-off prudence.  One classic trigger is a liquidity crisis: as euphoria shifts to caution, lenders are wary of rolling existing  risky debt into new loans.  Firms that owe the principal on existing debt find themselves short of cash and unable to access new credit, i.e. liquidity.  These vulnerable firms founder, launching a panic in which assets are sold to raise cash and marginal lenders and borrowers alike become insolvent.
.
In the status quo narrative, central banks arose to eliminate liquidity crises: when credit dries up, your friendly central bank stands ready to issue unlimited credit to banks, enabling the banks to roll over existing debt and fund cash-poor enterprises.
.
These liquidity-driven panics are typically short-term events, as the washout is violent and brief, much like a thunderstorm. But asset bubbles/collateral crises are more like hurricanes—slow-moving storms that shred the bubble assets over months or even years.
In a credit-fueled asset bubble, the asset prices have been pushed to the moon by easy credit extended to marginal borrowers and speculators—participants who would have been unable to buy assets in more prudent eras.
.
All this new debt is based on collateral: if a house is valued at $250,000 and the mortgage is $200,000, the $250,000 market value is the collateral supporting the mortgage. The difference between the debt and the market value—$50,000—is the owner’s collateral, and the lender’s cushion against any future decline in value.
.
If the house soars in a bubble to $500,000, a lender might extend a $450,000 mortgage on the property. Once the house value falls back to $250,000, the collateral is woefully inadequate: if the owner defaults, the lender is facing a $200,000 loss on the eventual sale of the asset.
.
This is the “balance sheet” recession: the balance sheets of households and enterprises are crippled by heavy debt loads and non-performing debt.
.
Understandably, lenders are reluctant to book these horrendous losses, as they render highly leveraged lenders insolvent.  Borrowers may be reluctant to declare bankruptcy, and governments fear the decline in property values and taxes.
.
Those with the most to lose share a common purpose: mask the collapse of collateral and delay the day of reckoning, i.e. the booking of the losses.  There are a number of ways to accomplish this: allow banks to maintain an unrealistic value on the property, i.e. “mark to fantasy,” or roll the mortgage over into a new larger loan that enables the owner to use new debt to make token payments on the new mortgage, and so on.
.
These stalling tactics drag out the process of writing down bad debt and liquidating impaired assets.  As a result, participants can never be confident that asset values have truly been washed out.
.
A third trigger of recession is an external shock that saps confidence by raising costs or introducing uncertainty. Energy shortages, widespread natural disasters and war are examples of external shocks.
.
The Great Stagnation
.
A fourth and relatively new kind of recession is the “stagflation” or “Great Stagnation” type of recession that may not even qualify technically as a recession (the classic definition of recession is two quarters of negative growth).  An economy that expands by a meager .2% year after year escapes the technical definition of recession, but it is mired in stagnation—a stagnation that can be accompanied by inflation in “stagflation” or by mild deflation/near-zero inflation.
.
Great Stagnations are deadly to the status quo of debt-dependent growth because without expansion of assets, revenues, profits and payrolls, credit cannot expand except if it is extended to marginal borrowers and mal-investments—precisely the type of risky borrowers that default and trigger a classic business-cycle recession of falling asset values, mass defaults and the resulting insolvency of overleveraged lenders, enterprises and households.
.
Since voters famously vote their pocketbooks, politicians presiding over deep recessions tend to get voted out of office. As a result, the political establishment is absolutely loathe to allow the cleansing of impaired debt and failed gambles that is necessary to establish a new foundation for prudent borrowing and healthy expansion.
.
Now that the global engine of rapid growth in credit, trade and asset valuations—China—has ceased to expand, the global economy is now mired in a Great Stagnation.  For many regions, the Great Stagnation started in 2008 and has never really ended.
.
The problem is governments and central banks attempted to force an exit from the Great Stagnation by inflating asset bubbles—bubbles that were intended to restore confidence and the “animal spirits” that fuel more borrowing, investing and spending.
But these asset bubbles failed to lift household incomes or generate employment; as a result, the asset bubbles are teetering precariously on more promises of fiscal and monetary stimulus.
.
Unfortunately for those who own these bubble-assets, the returns on fiscal and monetary stimulus have rapidly diminished: China, for example, has created a stupendous $1 trillion in new credit in the past two months, and has very little in sustainable income/employment growth to show for this explosive expansion of debt. (Source)
.
No wonder markets are volatile: everything that worked for seven years is no longer working, but the promises of more stimulus are generating hope that the asset bubbles won’t burst.
.
In Part 2: Outsmarting The Monkey, we look at capital flows and controls, and consider what average investors might do to protect themselves from volatility.
.
The mischievous red monkey’s purpose is to make this time as difficult as possible for investors to preserve their wealth. Fortunes have already been lost in the first few months of this year, and he’s just getting started.
.
Click here to read Part 2 of this report  (free executive summary, enrollment required for full access)
.
This essay was first published on peakprosperity.com, where I am a contributing writer.

 

 

When Currency Pegs Break, Global Dominoes Fall


oftwominds

by Charles Hugh Smith

When a currency peg breaks, it unleashes shock waves of uncertainty and repricing that hit the global financial system like a tsunami.

The U.S. dollar has risen by more than 35% against other major trading currencies since mid-2014:

If all currencies floated freely on the global foreign exchange (FX) market, this dramatic rise would have easily predictable consequences: everything other nations import that is priced in dollars (USD) costs 35% more, and everything the U.S. imports from other major trading nations costs 35% less.

But some currencies don’t float freely on the global FX markets: they’re pegged to the U.S. dollar by their central governments. When a currency is pegged, its value is arbitrarily set by the issuing government/central bank.

For example, in the mid-1990s, the government/central bank of Thailand pegged the Thai currency (the baht) to the USD at the rate of 25 baht to the dollar.

Pegs can be adjusted up or down, depending on a variety of forces. But the main point is the market is only an indirect influence on the peg, not the direct price-discovery mechanism as it is with free-floating currencies.

If central states/banks feel their currency is becoming too strong via a vis the USD, they can adjust the peg accordingly.

Why do states peg their currency to the U.S. dollar? There are several potential reasons, but the primary one is to piggyback on the stability of the dollar without having to convince the market independently of one’s stability.

Another reason to peg one’s currency to the USD is to keep your currency weaker than the market might allow. This weakness helps make your exports to the U.S. cheap/ competitive with other nations that have weak currencies.

Nations defend their peg by selling dollars and buying their own currency. The way to understand this is supply and demand: if nobody wants the currency, the demand is low and the price falls. If there is strong demand for a currency, it rises in purchasing power if the supply is limited.

By selling USD and buying their own currency, nations put downward pressure on the dollar and put a floor under their own currency.

The problem is you need a big stash of dollars to sell when you want to defend your peg. If you run out of dollars (usually held in U.S. Treasury bonds), you can’t defend your peg, and the peg breaks.

This is why China amassed a $4 trillion stash of U.S. Treasuries. Now that the USD has soared, China’s yuan (RMB) has also soared against other currencies because it’s pegged to the USD. This has made Chinese goods more expensive in other currencies.

Currently, the government/central bank of China is attempting to adjust its currency peg to weaken the yuan vis a vis the dollar. To avoid showing signs of losing control, China is attempting to defend the yuan against a break in the peg, and it has burned over $700 billion of its stash of USD in the past few months defending the yuan peg.

Here is a chart of the yuan in USD. Note that China moved the peg from 8.3 to 6.8 to the dollar to strengthen the yuan when the U.S. complained that it was undervalued. The yuan rose to 6 to 1 USD in early 2014, and has since started to weaken as the dollar has soared.

The problem with currency pegs is they have a nasty habit of breaking. The Seneca Cliff offers a model for the way pegs appear stable for a long time and then collapse:

Why the Chinese Yuan Will Lose 30% of its Value

When a currency peg breaks, it unleashes shock waves of uncertainty and repricing that hit the global financial system like a tsunami. When Thailand’s 25-to-1 peg to the USD broke in 1997, it triggered the Asian Contagion that nearly pushed the world economy into recession.

Now that China’s peg to the dollar is under assault, what happens to the global economy when a weakening China finds it can’t stop a rapid devaluation of its currency?

Gordon Long and discuss this and other critically important aspects of currency pegs in THE U.S. DOLLAR & THE GLOBAL “PEG PAIN TRADE” (28:36 min.)

watch the program on YouTube

..

Think Another Crash Is “Impossible”? Think Again


oftwominds

February 19, 2016

by Charles Hugh Smith

The confidence that risk can be quantified and mitigated is misplaced.

If there are limits on what we can know of the future–and clearly there are–this sets limits on our ability to quantify and mitigate risk. Longtime correspondent Lew G. submitted this thought-provoking riff on the system’s intrinsic capacity for cascading decisions (for example, selling everything not nailed down) that upend our understanding of risk.

Here is Lew’s commentary on risk:

There is a tradeoff of importance, detail and distance into the future, sort of a Heisenberg’s uncertainty principle. The cost of certainty and detail at any future time goes up as the economic importance goes up because so many more people are trying to understand and control that small part of the future. This introduces more variables and more uncertainty because many of those variables will be linked in unknown ways. (emphasis added by CHS)

Estimating risk is inherently a matter of dealing with those links. The number of paths through a net which must be evaluated to determine risk is exponential, as cascades can start from anywhere and rapidly take down connected nodes in the network.

One would expect that a bank’s internal risk analysis programs will try to do some of this, but they can only know the bank’s point of view, not the exposure of any other financial nodes in the network, or the fantasy level of their accounting.

Because everyone is super-optimistic in a boom, crashes are inevitable, and the size of the crash is proportional to the fuzz/misinformation in information flows, e.g. mark-to-fantasy entries in banks’ assets, details of all the outstanding derivatives, swaps and contracts, etc.

Thank you, Lew, for describing the complex nature of risk. There are a number of ways to uncrate the dynamics of risk addressed here, and I’d like to address two specific instances.

1. Lew conjectures a risk-equivalent of Heisenberg’s uncertainty principle, which holds that the more precisely the position of a particle is determined, the less precisely its momentum can be known, and vice versa.

In a financial setting, a great many analysts and programs are seeking precise forecasts on GDP, capital flows, future profits and revenues, valuations and so on–all the components needed to forecast the likely range of outcomes.

This information is needed to properly hedge risk, and to profit from markets moving in the anticipated direction.

But if Lew is right about a Heisenberg analog in finance, this suggests the greater the certainty in the forecast, the less precisely the risks can be accurately estimated.
This limitation in our knowledge of the future helps us understand why “impossible” cascades of selling and the implosion of “safe” assets occur with regularity, despite the widespread use of sophisticated risk-management tools.

(Given the concentration of talent seeking certainty in a narrow slice of financial data, the potential for group-think, both in humans and in the software written by humans, is another potential source of risk.)

2. If the linkages between variables and nodes are incompletely known or understood, disruptive cascades can arise in areas thought to be low-risk. As the cascade spreads through the network, it starts taking out nodes that participants suddenly discover are connected in unexpected ways to other nodes that were considered only lightly connected to risky nodes.

In a Heisenberg analog network, risk can never be nailed down with any certainty. The confidence that risk can be quantified and mitigated is misplaced. A system riddled with various forms of misinformation and links that are not apparent until the cascade has begun is intrinsically prone to crashes that take down every node in the network.

This is not “impossible;” it is an excellent description of what happened in 2008-09.

..

The Opaque Process of Collapse


oftwominds

Charles Hugh Smith

February 4, 2016

The ultimate cost of protecting the privileges of the few at the expense of the many is the dissolution of the social order that enabled the rule of the privileged few.

When I write about the demise of unsustainable systems, readers often ask me to describe the collapse I see as inevitable. This is a tough assignment, as there are as many kinds of collapse as there are systems: fragile ones can collapse suddenly, and resilient ones can decay for years or even decades before finally imploding or withering away.

Another way of describing collapse is: complex systems become much less complex.

Certain features of modern life could collapse without affecting everyday life much–for example, the derivatives markets could stop working and the impact would be enormous on those playing financial games and those who entrusted money to the gamblers, but the consequences would be extremely concentrated in the gambler/speculator class. Despite the usual cries that financial losses in the gambler/speculator class will destroy civilization, the disruptions and losses would be widely dispersed for the economy as a whole.

Other collapses–in food or energy distribution, digital communications, etc.–would have immediate and severe impacts on daily life.

My three primary models of decay and collapse are:

1. Historian David Hackett Fischer’s masterwork The Great Wave: Price Revolutions and the Rhythm of History (given to me by longtime correspondent Cheryl A.)
2. Thomas Homer-Dixon’s The Upside of Down: Catastrophe, Creativity, and the Renewal of Civilization
3. The decline of the Western Roman Empire (the process, not Edward Gibbon’s epic 6-volume history). My recommended book on the topic (a short read): The Fall of the Roman Empire

Fischer’s primary thesis is that society and the economy expand in times of plentiful resources and credit, and this increased demand eventually consumes all available resources. When demand exceeds supply and excesses of credit reach extremes, inflation and social disorder arise together.

Though we have yet to see inflation on a global scale, it is inescapable that demand will soon outstrip supply of essential resources and that the global credit bubble will pop, depriving the economy of the means to buy resources regardless of cost.

The Upside of Down describes the process of increasing complexity adding fixed costs to the system, and the way in which this diminishes returns: more and more labor, capital and resources must be devoted to maintain production. At some point, the yield is negative–costs are higher than the output.

At that point, systems start unraveling, and people simply abandon costly complex systems because the means to support them no are no longer readily available.

This is similar to John Michael Greer’s process of catabolic collapse, in which costly complex systems go through a re-set to a much lower energy consumption and less complexity. The system stabilizes at that level for a time, and then as costs rise and resources dwindle, it goes through another downsizing.

The Western Roman Empire (along with the Tang Dynasty in China) is the premier historical template for slow decline/decay leading to an eventual collapse. (Recall that the Eastern Roman Empire, the Byzantine Empire, endured for another 1,000 years.)

Depending on how you slice it, Western Rome’s Imperial decline took a few hundred years to play out. Unusually competent and energetic leaders arose at critical junctures in the early stages, and these leaders managed to stem the encroachment of other empires and “barbarian” forces and effectively re-order Rome’s dwindling resources.

By the end, The Western Roman Empire was still issuing a flood of edicts to the various regions, but there was no one left to follow the edicts or enforce them: the Roman legions existed only on parchment. The legion had a name and a structure, but there were no longer any soldiers in the field.

A number of real-world examples of decline/collapse are playing out in real time. Venezuela is one; Greece is another. Both demonstrate the opacity of the process of collapse; it is not as clear as we might imagine. A recent first-hand account of a sympathetic visitor to Venzuela captures the flavor and despair of slow-moving, uneven collapse:

Venezuela: Is There A Driver At The Wheel? (via Arshad A.)

“A dollar traded in the bank officially, or pulled out of an ATM machine, however, is worth about six bolivars only. This is how big the gap is between the black market rate (600-700 to the USD) and the official rate.

Despite the fact that the price of petrol is incredibly cheap, the government has not raised the prices even a slight amount, although this would create revenue for the state and despite the health risks of pollution.This suggests that the government is engaging in populism by refusing to take a step demanded by common sense due to its need to get reelected in December when parliamentary elections will take place.

One can easily get assassinated, as Venezuela has one of the highest homicide rates in Latin America and there are enough people who would not mind killing someone for the fee of $200.

However, when there is massive violence in the streets and many in the government seem to be corrupt, while a sense of anarchy prevails and it seems that the government turns a blind eye to violence when it takes place by local bandits, preferring to continuously blame outsiders, then there is indeed a source for concern.”

Reports out of Greece demonstrate the dynamics of decline and collapse: medicines are unavailable, pensions have been slashed and many households are now below the EU poverty level in income.

But we also hear that life goes on; the social order does not appear to have broken down into anarchy.

Clearly, the Greek economy has contracted, and millions of households have less income than they did before. But has daily life broken down? Have the institutions of public order collapsed?

Perhaps not, but what is collapsing is public trust in these institutions’ ability and willingness to manage the financial crisis and the political disorder that follows.

There is no good solution to the multiple crises in Greece, and the small circle of financial and political elites that benefited from Greece’s entry into the Eurozone remains largely untouched by the crisis. When the status quo is rigid and unbending, the odds of sudden collapse rise: what doesn’t bend will snap.

The process of collapse is thus heavily dependent on how the financial and political elites respond to the decline of resources and credit. If they manage the contraction skillfully and absorb their share of the inevitable losses, then the re-set will likely be successful and the pain short-lived.

If however the ruling elites cling to every scrap of their power and wealth, and begin fighting over the spoils while forcing the underclasses to absorb the losses of the re-set, then the fragility of the system rises in direct proportion to the policy extremes being pursued by vested interests focused on protecting their privileges regardless of cost.

The ultimate cost of protecting the privileges of the few at the expense of the many is the dissolution of the social order that enabled the rule of the privileged few.

**This essay was drawn from Musings Report 40. The weekly Musings Reports are emailed exclusively to subscribers and major contributors ($50+ annually).

..

“SHEAR PANIC!” Bank Runs have begun in Italy!


https://www.superstation95.com/index.php/world/796

MILAN — A “run” has begun on Italian Banks, with Depositors taking out money in a PANIC, fearing they will lose everything if they leave their money deposited.

Banca Monte dei Paschi di Siena SpA’s shares shed one fifth of their value after plunging for a third consecutive day Wednesday, as the bank scrambled to reassure investors its finances are solid.

The bank said that it had suffered outflow of deposits as a result of market jitters and that its accounts had improved in the last quarter.

The bank’s Chief Executive Fabrizio Viola said in a statement that deposit outflows were limited and lower than those that had taken place in 2013.

In February 2013, it emerged the bank was entangled in a legal scandal involving loss-making complex financial transactions, something that spooked investors and caused a deposit-outflow of “some billions,” the bank said in April that year.

But Mr. Viola’s words didn’t stop the massive selloff.

Trading in the bank’s shares was suspended for most of Wednesday’s session and shares ended up shedding 22.2%. Since Monday, the bank’s shares have lost 46% of their value, plunging to €0.51 ($0.56) per share. Since the beginning of the year, the bank’s share price has declined 58%.

The bank is now capitalized at roughly €1.6 billion, despite having tapped investors for €8 billion in the last two years to pay back a €4 billion government loan and shore up its capital position, amid mounting bad loans and a chronic lack of profitability.

“It’s pure panic, we are going beyond the prospects of the bank’s low profitability,” said Vincenzo Longo, a strategist at IG Markets in Milan.

The bank will post fourth-quarter earnings on Feb. 5.

In 2012, the bank started to implement a drastic restructuring plan, aimed at bringing it into the black and to pay back a €4 billion government loan. For the first half of last year, the bank posted a net profit of €194 million, after having accumulated losses of over €10 billion in earnings periods since the second quarter of 2012.

But it posted a €109 million loss for the third quarter, mainly due to a one-off hit caused by the unwinding in September of a complex structured-product transaction.

It also tapped investors for €8 billion in the last two years to pay back a €4 billion government loan and shore up its capital position, amid mounting bad loans and a chronic lack of profitability.

Meanwhile, UniCredit SpA’s Chief Executive Federico Ghizzoni ruled out any intervention to support Monte dei Paschi, adding that he had received no requests from the Italian government to do so.

Sources in the financial markets throughout Europe have confirmed to SuperStation95 that “These bank runs will spread” to other countries, with one analyst saying “This is the beginning of the end for all of Europe.”

In fact, it is likely to spread to Germany next. Just this week, Germany’s largest bank, Deutsch Bank, revealed they will post a loss of 6.7 BILLION Euros for last year; the worst loss in that bank’s entire history! Investors were stunned by this news and there is now open and public worry that Deutsch Bank may not be solvent.

Elsewhere in Europe, banks admitted last week they are sitting on . . . . . . ONE TRILLION IN BAD LOANS . . . . . and may have to be “re-capitalized.” Therein lies the problem: Under the new banking laws, governments will no longer “bail-out” banks. Instead, the banks must be “bailed-IN” by taking money from DEPOSITORS and replacing that with newly-issued stock in each bank! Average citizens would lose a major portion of all accounts in each bank (Checking, Savings, Certificates of Deposit, IRA/401-K Retirement plans, etc.) and would be given shares in the bank as compensation. The trouble is, depositors cannot pay their bills or eat with stocks.

In the United States, Wells Fargo admitted during a conference call this week, their commercial loan portfolio contains “$17 Billion” in loans that they described as “less than investment grade.” That was a nice way of saying “bad loans.” Wells Fargo made things worse when they admitted they only have $1.2 Billion set-aside to cover bad loans. So if all $17 Billion are bad, where will the other $15.8 Billion come from? YOU! Your checking, savings, CD, IRA, 401-K will all be “levied” by the bank to cover its losses!

Also in the US, the Chairman of Citibank refused this week, to disclose how much in bad loans are on their books! He also refused to reveal how much cash the bank has set-aside to cover bad loans! It is not a good sign when a bank Chairman refuses to disclose how bad things might be. After that stockholder conference call, rumors began to circulate that Citibank may be “in bad financial shape.”

If true, where will Citibank get the money to cover its losses? YOU! Your checking, savings, CD, IRA/401-K retirement accounts will all be levied to cover the bank’s losses and you will be given stock in the bank as compensation. How will you pay your bills with stock? How will you eat?

When the analysts mentioned earlier said “This will spread” and “This is the beginning of the end for Europe” people stood-up and took notice. Now a “run” is taking place against banks in Italy. If those analysts are correct, then the contagion could spread to the United States. Will YOU be one of the people who leaves his money at a bank while it fails? How will you eat if that happens? How will your family eat?

In the movie “Forrest Gump” he famously said “stupid is as stupid does.” Are YOU stupid?

..

Can We See a Bubble If We’re Inside the Bubble?


I think the Boomland scenario is in most cities of the world and especially so here in Kuala Lumpur. Construction is everywhere and these so called “developments” have become a hazard for the city folks. Don’t they know what’s going on in the decrepit financial system? Yes and no. But, ‘the show must go on’ ….as they say. I guess we’ll just wait for the bubble to burst. 


 

oftwominds

Can We See a Bubble If We’re Inside the Bubble?

by Charles Hugh Smith

housing-bubble

We want this time to be different so badly, we can almost taste it.
.
If you visit San Francisco, you will find it difficult to walk more than a few blocks in central S.F. without encountering a major construction project. It seems that every decrepit low-rise building in the city has been razed and is being replaced with a gleaming new residential tower.

 

Parking lots have been ripped up and are now sprouting condos and luxury rental flats.
The influx of mobile/software tech into the S.F. Bay Area has triggered not just a boom in tech but in all the service sectors that cater to well-paid techies. This mass of new people has created traffic jams that last virtually all day and evening, and overloaded the area’s BART transit rail system such that trains at 11 pm are as jammed as any during rush hour.
This phenomenal building boom is truly something to behold, as it has spread from S.F. to the East Bay as workers priced out of S.F. move east across the Bay, driving up rents to near-S.F. levels.
.
This is of course a modern analog of the Gold Rush in the 1850s, and the previous tech/building boom in the late 1990s: an enormous influx of income drives a building boom and a mass influx of treasure-seekers, entrepreneurs, dreamers and those hoping to land a good-paying job in Boomland.
.
The same phenomenon has been visible in the Oil Patch states every time oil/gas skyrocket in price.
.
We know how every boom ends–in an equally violent bust. Yet in the euphoria of the boom, it’s easy to think this one will last longer than the others.
.
I distinctly recall the mass excitement of COMDEX in 1999, the big computer-tech trade show in Las Vegas. The city was packed, the convention centers were packed, and an enormous banner announcing the then revolutionary slogan “the network is the computer–Sun Microsystems” welcomed the faithful.
.
I saw Bluetooth demonstrated for the first time in that show (at a Motorola booth), and dozens of other consumer technologies that never quite caught on–kits to turn your PC into a TV, etc.
.
A year later the bubble had burst, and a decade later Sun Micro had lost its edge and would end its glorious run in the ignominy of being sold to Oracle for pennies on the dollar.
Rents in San Francisco are now so obscene that there is even a parody in which Hitler tries to rent a flat in S.F.
.
Across the Bay in Oakland, new relatively large 1-bedroom flats with Bay views are asking $3,300 a month. The same flat in S.F. would fetch $4,000 or more per month. Techies working for free on a buddy’s start-up have famously rented the space beside the washing machine in a laundry room for $400 a month.
.
How many average workers can afford to pay $40,000 a year in rent? After taxes, even techies earning $80,000/year would have little to show for their labor once they paid $40K after $20K in taxes and deductions have been subtracted from their annual wage.
.
The current Gold Rush will collapse, and as the newly fired marginalized workers pack up and leave, nobody will be renting the flats for $4,000/month. The owners will try reducing the rents to $3,000/month, and with no takers, they will go bust and the gleaming towers will be auctioned off. Eventually rents will decline to what people can actually afford.
This process will take a few years, as owners are reluctant to accept secular declines in rent and the resulting insolvency. Restaurants and other secondary businesses that arose to serve the techies will hang on, paying insane rents, for a few months and then give up losing money and close.
.
We naturally cling to the euphoria and glory of a boom; they generate such hope and positive emotions. The bust is no fun at all, a slow cascade of layoffs, insolvencies, moves to cheaper and far less exciting locales, busted dreams and all the mourning that accompanies the shattering of dreams and hopes.
.
Knowing all this doesn’t prepare us for the bust, any more than the initial signs of a boom prepared us for the bubble. We want this time to be different so badly, we can almost taste it. But this time is only different on the margins; the flavor of the bust remains the taste of ashes.

..

Russian “Weaponized Default” Will Cause Financial Collapse Of Entire Western World


Russian “Weaponized Default” Law Threatens Collapse Of Entire Western World

By: Sorcha Faal, and as reported to her Western Subscribers


 

A new report issued today by the Security Council (SC) states that President Putin has just forwarded to the Duma (legislator/parliament) one of the most feared set of laws ever seen in modern Russian history that once enacted would create the worst “economic cyclone” the Western world has ever seen and plunge both the United States and European Union into immediate depression, if not outright total economic collapse.

owa2

 

According to this report, these new laws were ordered drawn up this past year by the Security Council who tasked famed economist Sergei Glazyev with devising what is being labeled as a “Weaponized Default” and Russia’s “ultimate answer” to Western aggression and orders all Federation companies, both public and private, to immediately cease paying over $700 billion in loan payments to any bank having a nationality, or even branches, in any country currently having sanctions, or threatening sanctions, against Russia.

Once these “Weaponized Default” laws are enacted, this report continues, they would serve as payback for the twin Western manipulation of global oil prices and the Russian ruble—the manipulation involved unleashing on the global oil market over five million barrels a day of excess reserve production that were held back by Saudi Arabia, plus derivative manipulation at the New York Mercantile Exchange (NYMEX) crashing the price of oil last year.

owa3

 

To the timing of President Putin submitting these feared “Weaponized Default” laws to the Duma today, this report explains, was due to the grim report given to the Security Council by Economic Development (MoED) Minister Aleksey Ulyukayev warning that the current period of low oil prices may last for decades—and which British experts are now saying could fall to the “doomsday” level of $10 a barrel.

Also spurring President Putin’s timing of submitting these laws to the Duma, this report notes, was the successful opening of the St. Petersburg International Mercantile Exchange (SPIMEX) which will forever de-dollarize Russian oil from the United States global petrodollar system thus breaking America’s hegemony and its ability to finance its wars using other nations money.

Adding to the growing pushback against the United States petrodollar system and its allies continuing to advocate for global war, this report continues, is China—who this past week ordered all of its banks to cease purchasing US Dollars in its bid to protect its nation and economic interests from these warmongers too.

owa4

 

Though the American “presstitute” mainstream media has failed to allow their citizens to know the full and dreadful impact that President Putin’s new “Weaponized Default” laws will have upon them, this report further states, the same cannot be said of that nations oligarchs—who in the past fortnight alone have caused their stock markets to lose over $1 trillion—and to put that stunning figure in context, it’s like wiping out the combined value of the following tech giants: Google (GOOGL, Tech30) ($508 billion), Facebook (FB, Tech30) ($281 billion), Intel (INTC, Tech30) ($154 billion), Netflix (NFLX, Tech30) ($50 billion) and Yahoo (YHOO, Tech30) ($29 billion).

Even more astounding than this massive loss of wealth to the American people holding their retirement and saving monies in stocks and bonds, this report grimly says, was President Obama telling his nations citizens last night that their US was economy was doing fine and that his critics were “peddling fiction”—like legendary American stock market guru Art Cashin who yesterday warned that panic in this market “will shock the world” and the Royal Bank of Scotland (RBS) warning all of its elite clients yesterday to “Sell Everything!” and stating: “This is about return of capital, not return on capital. In a crowded hall, exit doors are small.”

owa5

 

To the only Americans that will be protected in this “economic cyclone” enveloping the Western world, this report further notes, are their elite oligarchs who have had gifted to them by the Obama regime a separate tax structure designed to protect their billions—while the rest of the American people will be left competing for jobs in the only industry the United States is now the unquestioned global leader of—prisons, and that have become so morally corrupt the Obama regime even had passed a new law mandating that at least 34,000 ‘illegal’s’ have to be behind bars everyday to benefit that nations private jailing companies profits.

 

With Russia being the world’s largest oil producer, this report continues, fully 75% of its oil can be exported which President Putin’s new “Weaponized Default” laws will protect no matter how low the price of oil goes—but the same cannot be said of the Obama regime backed barbaric Middle Eastern ally Saudi Arabia whose despotic de facto leader, Deputy Crown Prince Mohammed bin Salman, has not only brought his nation to brink of ruin—its soon collapsing will, undoubtedly, cause the Western nations to unleash a new set of oil wars too.

But before the West embarks upon these new oil wars, this report concludes, they should first re-familiarize themselves with their own history—and as recently detailed by the American foreign policy writer Michael Peck who in his article 5 Oil Wars that Ended in Disaster succinctly warned:

“For the last hundred years, oil has been a frequent reason for war. Nations have fought wars, or shaped their military strategy during a war, to conquer oil fields or prevent rivals from controlling the commodity that is the lifeblood of industrial economies and modern militaries.

But what good is capturing an oil field when you wreck your country in the process? Several nations have learned the hard way that the price for capturing oil can be much greater than its value.

For the American leaders, and plenty of others throughout history, the price of oil indeed proved to be higher than any could imagine.”

 

January 13, 2016 © EU and US all rights reserved. Permission to use this report in its entirety is granted under the condition it is linked back to its original source at WhatDoesItMean.Com. Freebase content licensed under CC-BY and GFDL.

..

RBS tells investors: ‘sell everything’ as crisis nears


RT

5694c68cc36188fe488b45e6

The Royal Bank of Scotland has recommended its clients prepare for a “cataclysmic year,” as major stock markets could drop by a fifth and Brent oil could hit $16 a barrel.

“Sell everything except high quality bonds. This is about return of capital, not return on capital. In a crowded hall, exit doors are small,” said the bank’s credit team in a note sent to clients, quoted by the Telegraph.

According to RBS analysts, the markets are showing the same stress alerts as seem before the 2008 crisis.

Andrew Roberts, the bank’s credit chief, says that “China has set off a major correction and it is going to snowball.” China “has very high debt levels (as a percentage of GDP) given they are still emerging” and crucially they have accumulated this debt incredibly fast, he said.

He predicts European and Wall Street markets to drop from 10 to 20 percent this year. London’s FTSE100 was predicted to plummet even lower.

“London is vulnerable to a negative shock. All these people who are ‘long’ oil and mining companies thinking that the dividends are safe are going to discover that they’re not at all safe,” said Roberts.

READ MORE: UN sees moderate global growth for 2016-2017 due to major ‘headwinds’

“We are moving in a short-term $26 target and once reached down to $16. Our forecasts are for this to occur through 2016, but the risk is it occurs in Q1 as global oil demand drops off according to IEA forecasts and the world runs out of ships to store it in,” he said.

This follows a bearish outlook for this year from Roberts’ team, issued late last year.

At the time Roberts said there are “a number of bad headwinds affecting the world right now, which will worsen in 2016.”

..

2016 – One week has passed. Are you still asleep?


Reading through my mails this morning I see the changes I expected in 2015 (which didn’t quite happened) will definitely take place this year.
.
20160107_124509
.
The change I personally wish for is the end of the world as we knew it and this could only be brought about by the people as they awaken. The critical mass needed wasn’t enough in 2015.
.
Telling people to wake up I see is not enough or effective at all. A catalyst is needed and a different one to each one, which means would take a very long time for everyone to get out of their comfort zone.
.
There is only one way (one catalyst) to jolt people into kingdom come, and that is the collapse of the whole fucking system. The anatomy of the whole rotten system is a construct of five main bodies:
.
  1. Financial
  2. Legal
  3. Government
  4. Medical
  5. Education
.
To demolish this decrepit system is simple and that is to take down the debilitated fake financial system. Remove this and the anatomy of the system will turn ground zero like the twin towers.
.
At the core of the financial system is the central bank, which issue and control the fake fiat money. The fake money coagulates the whole fucking system. It is the glue. It is the fucking thingy that makes the enslaved world go round. It is the sleeping pill for the people.
.
When the pill is destroyed it will hit every one on Earth. It will wake up every living Soul as they would not be able to slumber anymore. There is no natural catastrophe, be it an earthquake, or a tsunami that is big enough to keep people out of their beds.
.
The news thus far in the first week of 2016 point to the destruction of the financial system. Everyone thinks China is taking over the hegemony from the incumbent US the corporation, but I think its not true as she is in great trouble herself and the news this week is an indication:
.
chinastockstop
.
.
What keeps the matrix spinning is oil and today is this picture:
.
oildrop
.
The House of Saud is crumbling:
.
.
iransaud
 .
The sweetest news (it is sweet!) is the banksters are unpacking amidst the fucking “bail-ins“:
.

wall-street-shrinking

Fiat Bankers’ Massive Layoffs Now, Bail-Ins Soon; Withdraw Bank Deposits While You Can

.
OK people…see if you can still afford to sleep without the money.
.
To get a clearer picture read :
.
.
Its been seven days…for me that’s enough said of what’s coming in 2016
.
..

2016 Theme #4: The End-Game of Debt-Fueled “Growth”


oftwominds

by Charles Hugh Smith

This week I am addressing themes I see playing out in 2016.
A number of systemic, structural forces are intersecting in 2016. One is the end-game of debt-fueled “growth.”
.
We can summarize the official “solution” to the Global Financial Meltdown of 2008 in one line: borrow and blow trillions–of yen, yuan, dollars, euros, reals, you name it.
.
The goal of borrowing and blowing trillions was to re-invigorate “growth”— any kind of “growth,” no matter how wasteful, unproductive or even counter-productive it might be: wars, nation-building, ghost cities, needless MRIs, useless college diplomas, bridge to nowhere–anything the borrowed money was squandered on counts as “growth” in the Keynesian status quo.
.
Unsurprisingly, this strategy yields diminishing returns as the negative returns on all this debt-fueled spending piles up. While the yield on the “investment” is either negative or only fleetingly positive, the interest due on the debt is forever. That’s the source of diminishing returns in a nutshell.
The diminishing returns on additional debt is clearly visible in these charts.
.
Global debt has soared but this massive stimulus has yielded subpar “growth” (and the final costs of all the astounding mal-investment have yet to be totaled):
.
Has borrowing and blowing $9 trillion solved any structural problem in the U.S. economy? No.
While total credit in the U.S. has exploded, GDP (a measure of actual output) has under-performed for years. The tiny decline of credit in the 2008-09 financial meltdown almost collapsed the global economy. The strategy of borrowing and blowing trillions has backed the global economy into a corner: expand debt or die.
While U.S. bank credit has expanded by 40%, GDP has risen 21.7%–roughly half the rate of credit expansion. This is diminishing returns on a vast scale.
It’s requiring more borrowed yen/yuan/dollars/euros just to keep the global economy from collapsing in a heap of impaired debt. The costs of waste, fraud and mal-investment are finally coming home to roost, and while near-zero interest rates serve to mask the future costs, near-zero rates cannot stem the rising tide of mal-investment.
Rather, near-zero rates have fueled mal-investment, waste and unproductive spending. The diminishing returns on that strategy of “growth” are inescapable.
.
Related reads:
..

Emergency Christmas Eve Message: January 1st is Doomsday! Only an FDR Action Can Save You.


Larouche Pac

President Barack Obama and the entire U.S. Congress have betrayed you, the American people, by refusing, out of cowardice, to take the necessary emergency actions to prevent the greatest financial and economic crash — far worse than 1929 and 2008 — from happening in the hours and days just ahead. Unless you, the American people, stand up and demand immediate action, the nation and much of mankind is facing catastrophe at the start of the New Year.

The entire trans-Atlantic financial system is about to blow. In just the past few weeks, $15 billion in junk and investment grade bonds have been wiped out. This is but a harbinger of an imminent total crash of the trans-Atlantic financial bubble. As of Jan. 1, 2016, a $72 billion debt bubble is set to explode in Puerto Rico. Congress had the opportunity to act to prevent this before leaving town, but failed to act.

An estimated $5 trillion in debt, tied to the collapsing U.S. domestic shale oil and gas sector is blowing up. In Western Canada, this bubble has already been shattered, triggering the loss of 100,000 jobs in 2015 – the equivalent of 750,000 jobs lost in the United States — a crash of the real estate market, and a social breakdown. That same crisis is coming to the United States, at an accelerating rate, but on a much larger scale.

In Europe, starting on Jan. 1, 2016, new laws go into effect, eliminating all protections for bank depositors, who will have their savings stolen under “bail-in” regulations, as has already happened in Cyprus. More than 10,000 Italian depositors had their savings “bailed in” (expropriated] in the collapse of four banks this month. The same measures are included in the Dodd-Frank bill here in the United States. If your bank collapses, your life savings can be stolen to save the bank. It can and will happen here, thanks to the cowardice and corruption of your elected officials, who have kept you in the dark and violated their oaths of office.

Congress had the chance, before leaving town, to prevent this now onrushing crisis. They were warned. They could have passed bills, already introduced in both Houses of Congress, to reinstate Glass-Steagall, the FDR legislation that broke up the Depression era too-big-to-fail banks, by separating commercial banking from all of the gambling activities. But Congress was bought out by Wall Street and failed you. President Obama is a wholly-owned creature of Wall Street and London. Wall Street is hopelessly bankrupt, and they intend to cling to power by stealing your money, wiping out your health care, and shutting down what is left of the real economy. Within days or weeks, you could be facing food shortages, hyperinflation and a complete breakdown of everything you think of as normal.

President Obama, on behalf of Wall Street and London, is also provoking confrontation with Russia, driving the world towards global war, a war that some top American and Russian military commanders warn could rapidly become a war of thermonuclear extinction.

On Jan. 1, 2016, under U.S. and International Monetary Fund approval, Ukraine will default on $3 billion in debt to Russia, an act of open Western provocation against Moscow, on top of the already ongoing sanctions, the eastward expansion of NATO and other acts of direct military provocation.

This is all deadly serious. The world is on the cusp of a worse than Great Depression crash and a new world war. You must now act because your elected officials have abandoned you out of cowardice and corruption. They, along with President Obama, deserve your derision and anger, for their cowardly behavior.

There are solutions readily available. Wall Street must be shut down immediately. Not one penny more to bail out these criminals! Congress must remove Wall Street puppet Barack Obama from office, through impeachment or through invoking the 25th Amendment, which provides for the removal of a President from office who is mentally unfit to continue to serve. Glass-Steagall must be immediately reinstated, and a series of initiatives must be taken, all modeled on what the great American President Franklin Roosevelt did in his first months in office, to create millions of productive jobs, rebuild the nations collapsed infrastructure, and restore the nation’s dignity.

Congress can take these actions in a matter of hours, but they will only act in time if you wake up and demand it.

The alternative is Hell on Earth, by the start of the New Year. Do you, your friends, your neighbors, have the moral fitness to survive? That is the question on your table this Christmas Eve.

Join us at 8 PM eastern Wednesday night for an emergency webcast event featuring Jeff Steinberg & Matthew Ogden, followed by a live Fireside Chat discussion with Lyndon LaRouche at 9 PM. These back to back presentations are part of an emergency mobilization Mr. LaRouche launched Tuesday evening to marshal the sane and patriotic forces in the United States and Europe to handle the blow out of the transatlantic financial system on the eve of the New Year.

..

 

This Week: Shut Down Wall Street, No More Suicides!


Larouche Pac

This Week: Shut Down Wall Street, No More Suicides!

With so-called “junk debt” markets plunging and experts warning of a “riot in the Wall Street casino” this week if the Federal Reserve raises rates, EIR Founding Editor Lyndon LaRouche made a very strong proposal yesterday; indeed, a demand on the elected representatives and citizens of the United States.

LaRouche said: “Close in on this and shut this Wall Street casino down, this week. Remember what is the effect on the people of this kind of crash. We cannot have more suicides, or any more of what happened in Italy last week.”

Italy is in an uproar since an Italian citizen committed suicide after an insolvent bank expropriated all his savings in an outrageous “bail-in” procedure, which also expropriated many others across four failing banks. This infamous “Cyprus-style” procedure has been repeatedly used in Europe as banks collapse, and more expropriations are coming. “People have been being murdered by their banking systems,” as LaRouche put it.

In the United States the sudden “junk debt collapse” is only a harbinger of a Wall Street collapse worse than 2008, with worse impacts on human livelihoods on a global scale.

LaRouche added:

“We cannot allow it to continue, you have worthless accounts, of so-called debt “assets” which are in collapse, and they’re being used to kill people’s income, their employment, potentially their food supply, and even to kill them. If you don’t shut down these Wall Street ‘funds,’ now, you will see what has just happened in Italy, on a grand scale.”I mean it is an ‘edge of death’ situation, if we don’t shut down those pretended assets. Close down the Wall Street system, bankrupt it as Franklin Roosevelt did during his Presidency.

“Then, countries have to create national credit for productivity and employment, again as Roosevelt did.”

It is Barack Obama who has blocked restoration of the Glass-Steagall Act, which is the key to bankrupting Wall Street and allowing productive credit to take effect on the economy.

The same Obama has brought in the “Paris climate agreement,” so-called, which — if it were to be carried out — would reduce the economy’s ability to support human life, by 80-90% in the next 35 years.

“This is a bold human genocide if allowed to occur,” LaRouche said. We can’t allow it to occur.

“That means closing out Wall Street — and that includes Donald Trump — and getting Obama out. Good people in both political parties can agree, to move the responsible authorities in Congress to get these objectives done.”

SUPPORTING MATERIAL

‘Riot in the Casino’ This Week?

That the was the forecast of former Reagan Administration budget official David Stockman, referring to the Federal Reserve’s apparent intention to raise interest rates — for the first time in 10 years — in the teeth of an accelerating junk-debt and commodity price collapse.

Junk debt (junk bonds and leveraged loans) in the U.S. economy, as a reminder, totals at least $2 trillion in “assets” mainly held by banks, although many mutual, pension, and hedge funds are also involved. The junk-debt market decline has become very sharp in December, with interest rates on middling (CCC-rated) junk bonds hitting 17.25% Dec. 10 and shooting upwards. This debt is essentially impossible to refinance. In recent weeks the ratings agencies and banks have charted a “spike” in defaults and bankruptcies of junk debtors — concentrated in oil and gas exploration and related services — and warned the “spike” will become a “wave” in January-February.

Now, two junk creditors have gone under. Two debt-invested funds have liquidated in the past few days. The first was actually a mutual fund: the $1.8 billion, “well-respected” Third Avenue Capital on Dec. 10. Its founder Martin Whitman is designated a “legendary vulture investor.” Just as that was being explained away (“it was investing in unrated debt”), the second went under on Dec. 11. It was Stone Lion Capital, a $2 billion hedge fund which was one of those investing in Puerto Rico distressed debt.

Some see a “Bear Stearns moment” — i.e., the bankruptcy of the two CLO-invested hedge funds in June 2007, which exposed the “non-containment” of the mortgage securities/derivatives meltdown. Vulture investor Carl Icahn gave a “keg of dynamite” interview on CNBC, saying “I believe the meltdown in High Yield is just beginning.”

The Wall Street Journal wrote Dec. 11, “The move is also a sign of how much the market for [all —ed.] corporate debt is deteriorating. “‘Investors have been dazzled that yields on bonds have climbed so high, even while default rates remained low,’ said … a longtime junk-bond analyst. ‘Currently, though, the ability to sell a large position is especially poor. When that tension gets especially high, you can see something snap.'”

The century-old British colonial looter Anglo American, which was making “energy-junk” loans on a large scale, is suddenly at the brink of junk itself, with Moody’s downgrading it Saturday to one step above junk for all its divisions and placing a negative advisory on all of them. Credit default spreads on both Anglo American and Glencore rate them at more than a 50% chance of default, requiring $1,000 cash up front to insure $10,000 of their debt.

..

December 16, 2015—–When The End Of The Bubble Begins


CONTRA CORNER

David Stockman

150420113144-money-bomb-780x439

They are going to layer their post-meeting statement with a steaming pile of if, ands & buts. It will exude an abundance of caution and a dearth of clarity.

Having judged that a 25 bps pinprick is warranted, the FOMC will then plant itself firmly in front of the great flickering dashboard in the Eccles Building. There it will repose to a regimen of “watchful waiting”, scouring the entrails of the “incoming data” to divine its next move.

Perhaps the waiting won’t be so watchful as all that, however. What is actually coming down the pike is something that may put the reader, at least those who have already been invited to join AARP, more in mind of that once a year hour-long special broadcast by Saturday morning TV back in the days of yesteryear; it explained how the Lone Ranger got his mask.

Memory fails, but either 12 or 19 Texas Rangers rode high in the saddle into a box canyon, confident they knew what was around the bend. Soon there was a lot of gunfire and then there was just one, and that was only because Tonto’s pony needed to stop for a drink.

Yellen and her posse better pray for a monetary Tonto because they are riding headlong into an ambush in the canyons of Wall Street. To wit, they cannot possibly raise money market interest rates—-even by 75 bps—-without massively draining liquidity from the casino.

Don’t they know what happened to the $3.5 trillion of central bank credit they have digitally printed since September 2008? Do they really think that fully $2.8 trillion of it just recycled right back to the New York Fed as excess bank reserves?

That is, no harm, no foul and no inflation? The monetary equivalent of a tree falling in an empty forest?

To the contrary, how about recognizing the letter “f” for fungibility. What all that “excess” is about is collateral, not idle money.

The $2.8 trillion needed an accounting domicile—so “excess reserves” was as good as any.  But from a financial point of view it amounted to a Big Fat Bid for existing inventories of stocks and bonds.

Stated more directly, Wall Street margined the Fed’s gift of collateral, and did so over and over in an endless chain of rehypothecation.

So that’s why December 16th will be the beginning of the end of the bubble. If the Fed were to actually raise money market rates the honest way, and in the manner employed by central banks for a century or two, it would have to drain cash from the system; and it would have to do so in the trillions in order to levitate the vast sea of money it has pinned to the zero bound.

Yet actually raising money market rates the honest way would amount to the opposite of what has gone before. That is, it would become the Big Fat Offer, triggering a selling stampede in the casino.

The front-running smart money of the bubble’s inflation phase would become a bow-wave of retreat; and the hypothecated chains of collateral would morph into a monetary black hole of margin calls and liquidations.

So the Keynesian monetary plumbers of the Eccles Building will try something truly stupid. That is, they will try to levitate the entire sea of money-like liabilities they have conjured over the last two decades, but especially since September 2008, mainly by paying higher rates of interest to banks on those $2.8 trillion of so-called excess reserves.

Well now. Will higher IOER (interest on excess reserves) cause money market funds to pay more to their long-suffering investors; or cause the repo rate on trillions of government and other fixed income securities to rise in sympathy; or lift the rate on short-term CP and the multiple other forms of wholesale money?

No it won’t. The Fed is fixing to call a rate rise but its preferred tool is powerless to make it happen. The so-called IOER scheme has always been a pointless crony capitalist sop to the Fed’s banking system constituency, anyway.

After all, we do not (yet) pay prisoners to stay in jail, but paying banks on idle reserves amounts to the same thing. Just where were they going?

The truth is, IOER payments were designed to compensate the banks for the regulatory cost of capital required to be set-aside against these assets under the new rules. So the banks got their capital costs subsidized and Wall Street got more fungible collateral in the bargain.

Yet wait until the cowboys on Capitol Hill figure this out. In not too many months down the road, the $100 billion per year of so-called “profit” which the Fed remits to the US Treasury will largely disappear, leaving one of many gapping holes in the Federal deficit that are lurking just around the corner.

That’s because even 100 basis points of IOER would cost $30 billion a year. On top of that there is also the mega-risk that prices of the $4.4 trillion of Treasury and GSE debt owned by the Fed will keep heading south, requiring it to carve out “reserves” from its earnings to offset the balance sheet losses.

The whole maneuver is a world class scam anyway, and indicative of the lunacy which passes for national policy. The Fed’s $98.7 billion of “profits” last year was generated by the $116 billion of interest paid to it by the US treasury and the GSE’s——less a goodly rake-off for system expenses and salaries and for funding contract research by say 85% of the monetary economists in the US who don’t already work for Wall Street.

Capture

Click to enlarge. (Source: The Federal Reserve.)

In any event, Congress will surely blow its top if the Fed uses up this $100 billion “deficit reducer” by paying IOER or other forms of bribes aimed at make pretend interest rate raising.

For instance, another so-called tool to effectuate rate normalization is the TDP or term deposit facility. Under that particular gem, banks may offer cash to the Fed for seven days in return for an interest rate that would presumably be above the money market rate or say 30 bps after Wednesday.

Now isn’t that brilliant! The regulated banks are drowning in excess liquidity—-so sopping up cash seven days at a time will not constrain their ability to lend in the slightest.

Nor would it elevate the money market rate of interest unless the Fed issues a humungous open-ended tender to the banking system to take any and all deposits offered. Exactly thereupon, however, the number of histrionics-filled hearings on Capitol Hill would be limited only be the number of TV crews available to cover them.

It would be perceived as, and in fact would be, a massive subsidy to the banking system. That is, a reward for not lending to main street America.

At the end of the day, the Fed will not be able to bribe the money market higher in a manner that is politically feasible. So it will be forced to repair to the old fashioned recipe——-draining cash from the Wall Street dealer markets.

Even on this matter, however, these Keynesian fools can’t manage to be honest about what they will be doing. They will offer up another tool called RRP or reverse repo; it will be described as an instrument to manage market liquidity in a manner consistent with its measured journey toward normalization.

Folks, RRP is nothing more than selling bonds with your fingers crossed.

Once they get started down this path in earnest, they will either keep rolling the RRPs, which is the same thing as selling down their $4.5 trillion inventory of treasury bonds and GSEs, or they will relent and admit the whole interest rate raising gambit had been a blithering failure.

When the US economy joins the worldwide slide into deflationary recession some time next year, this will all be academic anyway. But in the interim you haven’t seen nothing yet in terms of Fedspeak gibberish and cacophony.

Within no time the hapless 19 Federal Reserve Rangers will be debating about whether they have actually tightened in the first place; and whether any actual liquidity that they drain from Wall Street via TDF or RRP is meant to be permanent or just a short-term market “smoothing” maneuver.

This much can’t be gainsaid. The combination of encroaching recession and even moderate liquidity draining moves will be enough to trigger Wall Street fainting spells, like those of this past week, and with increasing amplitude and frequency.

The fact, that the junk bond market is already falling apart and CCC yields have soared back to 17% is not just due to an isolated bust in the shale patch; its a warning that the hunt for yield that massive central bank financial repression triggered in the financial markets is about ready to become a stampede for the exists.

So get ready for the monetary gong show which starts next week.

Today’s Commerce Department report on total business sales and inventories further confirmed that the inventory to sales ratio is now decidedly in the recession red zone. This means that the Fed’s liquidity draining moves will join hands with rising risks of recession.

Can the third great bubble of this century survive a Fed that finally wants to get off the zero bound after its way too late, but can’t do it anyway without a massive crash inducing cash drain from Wall Street? And in the teeth of the next recession to boot?

Yes, the end of the bubble does begin on December 16th.

[Money Bomb image from: money.cnn.com]

..

2015: The Last Christmas in America


oftwominds

by Charles Hugh Smith

The game of enabling more debt by lowering interest rates and loosening lending standards is coming to an end.

If we define Christmas as consumer spending going up while earnings are going down, 2015 will be the last Christmas in America for a long time to come. In broad brush, Christmas (along with all other consumer spending) has been funded by financialization, i.e. debt and leverage, not by increased earnings.

The primary financial trick that’s propped up the “recovery” for seven years is piling more debt on stagnating incomes. How does this magic work? Lower interest rates.

In a healthy economy, households earn more money (after adjusting for inflation, a.k.a. loss of purchasing power), and the increased earnings enable households to save, spend and borrow more.

In an unhealthy, doomed-to-implode economy, earnings are declining, and central banks enable more borrowing by lowering interest rates to zero and loosening lending standards so anyone who can fog a mirror can buy a new pickup truck with a subprime auto loan.

The problem with financialization is that it eventually runs out of oxygen. As earnings decline, eventually there’s no more income to support more debt. And once debt stops expanding, the economy doesn’t just stagnate, it implodes, because the entire ramshackle con game of financialization requires a steady increase in debt and leverage to keep from crashing.

The trickery of substituting financialization for earned income–the trickery that fueled the last seven years of “recovery”–is exhausted.

The incomes of even the most educated workers are going nowhere, while the earnings of the bottom 90% are sliding:

Wages as a percentage of gross domestic product (GDP) have been declining for decades. Note the diminishing returns on financialization and asset bubbles that always bust: wages blip up in the bubble and then crash to new lows when the bubble bursts:

Look at how debt has soared while GDP has essentially flatlined. This is diminishing returns writ large: we have to pile on ever-increasing mountains of debt just to keep GDP from going negative.

This dependence on debt for “growth” leaves the economy exquisitely sensitive to any decline in debt growth. The slightest drop in debt growth in the Global Financial Meltdown almost collapsed the entire global economy:

The essential fuel of “growth”–credit expansion–is rolling over:

Even the vaunted prop under a soaring stock market, corporate profits, are rolling over as the stronger dollar and stagnating sales pressure profits:

The game of enabling more debt by lowering interest rates and loosening lending standards is coming to an end. Debt is not a sustainable substitute for income, and households are increasingly finding themselves in two camps: those who can no longer afford to borrow and spend, and those who recognize that going in to debt to support spending is a fool’s path to poverty and insolvency.

Say good-bye to Christmas, America, and debt-based spending in general–except, of course, for the federal government, which can always borrow another couple trillion dollars on the backs of our grandchildren.

..

If the Economy is Great, Why Are These Assets Crashing?



If the Economy is Great, Why Are These Assets Crashing?

The following is an excerpt from Private Wealth Advisory...

November 11, 2015


Two of the most economically sensitive assets in the world indicate that the global economy is in a free-fall.

I’m talking about Coal and Oil.

In the US, Coal has become a political hot button. Consequently it is very easy to forget just how important the commodity is to global energy demand. Coal accounts for 40% of global electrical generation. It might be the single most economically sensitive commodity on the planet.

With that in mind, consider that Coal ENDED a multi-decade bull market back in 2012. In fact, not only did the bull market endbut Coal has erased ALL of the bull market’s gains (the green line represents the pre-bull market low).

111115.png

Those who believe that the global is in an economic expansion will shrug this off as the result if the US’s shift away from Coal as an energy source. The US accounts for only 15% of global Coal demand. The collapse in Coal prices goes well beyond US changes in energy policy.

What’s happening in Coal is nothing short of “price discovery” as the commodity moves to align itself with economic reality. In short, the era of “growth” pronounced by Governments and Central Banks around the world ended. The “growth” or “recovery” that followed was nothing but illusion created by fraudulent economic data points.

And the REAL crisis hasn’t even started yet!

We get confirmation of this from Oil.

For most of the “so called” recovery, Oil gradually moved higher, creating the illusion that the world was returning to economic growth (demand was rising, hence higher prices).

7-21-15-2.png

That blue line could very well represent the “false floor” for the recovery I mentioned earlier. Provided Oil remained above this trendline, the illusion of growth via higher energy demand was firmly in place.

And then Oil fell nearly 60% from top to bottom in less than six months.

7-21-15-3.png

As was the case for Coal, Oil’s drop was nothing short of a bubble bursting. From 2009 until 2014, Oil’s price was disconnected from economic realities. Then price discovery hit resulting in a massive collapse.

Moreover, the damage to Oil was extreme. Not only did it collapse 60% in a matter of months. It actually TOOK out the trendline going back to the beginning of its bull market in 1999.

111152.png

This is a classic “ending” pattern. Breaking a critical trendline (particularly one that has been in place for several decades) is one thing. Breaking it and then failing to stay above it during the following bounce is far more damning.

We’ve briefly reclaimed for a few months… but have since broken back below it.  Oil will be dropping down to $30 per barrel if not lower in the coming months.

This is a precursor of what will be spreading to other asset classes, including stocks. The era the phony recovery narrative has come unhinged.  We have now entered a cycle of actual price discovery in which financial assets fall to more accurate values.

This will eventually result in a stock market crash, very likely within the next 12 months…

..

American Online Retailer Holds 3 Months Of Food, $10 Million In Gold For Employees In Preparation For The Next Collapse


Zero Hedge

overstock

Overstock CEO Patrick Byrne’s crusade against naked short sellers in particular, and Wall Street and the Federal Reserve in general, has long been known and thoroughly documented (most recently with his push to use blockchain technology to revolutionize the multi-trillion repo market).

But little did we know that Overstock’s Chairman Jonathan Johnson is as vocal an opponent of the fiat system, and Wall Street’s tendency to create bubble after bubble, if not more than Byrne himself.  That, and that his company actually puts its money where its gold-backed money is and in preparation for the next upcoming crash, has taken unprecedented steps to prepare for what comes next.

One week ago Johnson, who is also candidate for Utah governor, spoke at the United Precious Metals Association, or UPMA, which we first profiled a month ago, and which takes advantage of Utah’s special status allowing the it to use gold as legal tender, offering gold and silver-backed accounts. As a reminder, the UPMA takes Federal Reserve Notes (or paper dollars) which it then translates into golden dollars (or silver). The golden dollars are based off the $50 one ounce gold coins produced by the Treasury of The United States. They are legal tender under the law and are protected as such.

What did Johnson tell the UPMA? Here are some choice quotes:

We are not big fans of Wall Street and we don’t trust them. We foresaw the financial crisis, we fought against the financial crisis that happened in 2008; we don’t trust the banks still and we foresee that with QE3, and QE4 and QE n that at some point there is going to be another significant financial crisis.

So what do we do as a business so that we would be prepared when that happens. One thing that we do that is fairly unique: we have about $10 million in gold, mostly the small button-sized coins, that we keep outside of the banking system. We expect that when there is a financial crisis there will be a banking holiday. I don’t know if it will be 2 days, or 2 weeks, or 2 months. We have $10 million in gold and silver in denominations small enough that we can use for payroll. We want to be able to keep our employees paid, safe and our site up and running during a financial crisis.

We also happen to have three months of food supply for every employee that we can live on.

The contents of the rest of his speech are largely familiar to advocates of sound money: fiat paper has no value, solid gold – as both a currency and an asset – has tremendous value but is difficult to transport (and since a systemic collapse would certainly involve gold confiscation, portability would be an issue); gold-backed money may be the best option, and so on.

We are confident the echo-chamber of worthless econohacks and macrotourists, the same ones who were absolutely certain the great financial crisis will never happen, will be quick to mock “prepper” Johnson and Wall Street pariah Overstock. And they have every right to do so. We only hope that after the next crash, with central banks all in and when calls for another global bailout hit a fever pitch, that all those pundits who made fun of the Johnsons of the world, will keep their damn mouth shut.

..

‘Real f***ing news’ on RT: Raging reporter Jonathan Pie delivers it raw on UK economy


RT

Jonathan Pie

It’s really hard to report on the profits of the banks, which destroyed the global economy a couple of years ago, when you yourself can’t afford to buy or even rent a house in London – and spoof correspondent, Jonathan Pie knows all about this.

This is a usual report on the markets seen on every news channel:“…Which in turn left the Shanghai Composite down by 0.7 percent and Japan’s NIKKEI tumbling 0.6 percent. The upturn of it all? Well, a bit of a scare on the London markets and, it’s safe to say, a bit of a headache for George Osborne,” Jonathan Pie says as his video kicks off.

What? Makes little sense for somebody without an MBA degree? The reporter confesses that he himself only understands “one word in three” of what he was saying – and since his editors didn’t seem to be any brighter on the topic, he has to deliver it raw.

“Interest rates are up. GDP is down. Your mom’s playing footsie with Dow Jones. And my a**hole is full of jam,” that’s what economy looks like according to Pie.

Jonathan Pie became a fresh internet sensation after posting a series of videos online, in which he unmasked the true agenda behind the news, acting as an angry correspondent, who is fed up with fooling his audience.

Don’t miss Jonathan Pie’s “Real f***ing news” reports every Friday on RT UK.

..

LaRouche Mobilizes to Shut Down Wall Street, As Bankers Shriek: “The System Is Cracking”


LaRouche Pac

Statue of Liberty

As you read this report, a strong delegation of LaRouche PAC organizers from New York City—seasoned veterans of Lyndon LaRouche’s “Manhattan Project”—has arrived in Washington, D.C. to head up a day of organizing and lobbying on Capitol Hill on Oct. 7, to urge key responsible Congressmen and Senators to act at once to shut down Wall Street, and implement Glass-Steagall. As LPAC’s 7-point statement, “For Urgent Attention of Congressmen, Senators and Other Members of the U.S. Government” specifies: “There is now an acute emergency which threatens to kill millions of Americans, primarily, and also citizens of other countries,” which requires action now, this week.

Panic among Wall Street and City of London bankers is evident just barely below the surface. The lead article in the Oct. 3-9 edition of the Economist, the banner publication for City of London financial interests, warns that “the system is cracking,” and calls for a massive effort to backstop the bubble with new waves of quantitative easing—exactly as Lyndon LaRouche has warned is their intention. Similarly, Forbes magazine frets that “there are over $600 trillion in OTC [over-the-counter] derivatives outstanding” on the books of the mega-banks (although the real number is probably twice that amount), which could blow the entire system apart, once a run begins. “For the likes of JP Morgan, Bank of America, Citigroup, Goldman Sachs and Morgan Stanley, these issues remain a topic of life or death.”

The British Empire is also panicked because their errand-boy Barack Obama is sinking, and sinking fast, both inside the United States and internationally. The impact of the United Nations General Assembly, and Russian President Putin’s bold actions in Syria, are rumbling around the planet, and people are waking up to the fact that a new international order is possible. They have watched as Putin took Obama to the cleaners in Syria, and not only survived to tell the story, but is going strong, while Obama is flailing about in frustration. The idea that “maybe we don’t have to suffer Obama any more; maybe we don’t need to submit to Wall Street and watch our nations die,” is a growing force across the planet.

This is a historic moment pregnant with potential, Helga Zepp-LaRouche has emphasized. It is a moment when we can not only sink Wall Street and reinstate Glass-Steagall, but also shift radically towards the policies of the World Land-Bridge and global reconstruction. The fact that leading scholars, think- tankers, and others in China have publicly endorsed the LaRouches’ Land-Bridge policy, that the second largest economy in the world has essentially adopted that policy, is of dramatic import globally. Now that the Chinese-language edition of EIR’s book “The New Silk Road Becomes the World Land-Bridge” has been published with such powerful endorsements, we will bring that message back home to the United States, with a large-run publication of the Special Report, priced for broad circulation across the country.

Lyndon LaRouche stated what is at stake, in his Oct. 5 weekly webcast with the LPAC Policy Committee:

“We can no longer tolerate the risk which is involved in the renewal of Wall Street’s conditions. And therefore, for that reason, we have to shut down Wall Street, in order to protect the people of the United States… We must take preemptive action. What we’ve done, and what I’ve pushed for, is to have an immediate decision, by relevant members of the Congress, to assemble and deal with the situation as such. That was, foreclose against Wall Street without letting them get a bail-0ut effort. Because the giving another option for bail-out to Wall Street would almost certainly ensure a great catastrophe of the people of the United States.””So therefore, we have to protect the population. We have to cancel Wall Street. And we have to proceed to restructure the organization of our employment for the intent of actually getting productive processes going into effect, essentially, a more exigent sort of requirement which Franklin Roosevelt did. But what Franklin Roosevelt suffered, and had to face and deal with, is minor compared to what this condition is of the United States right now.”

“But we have the means available, right at this critical point; we have the means internationally to create a solution for this problem.”


SUPPORTING MATERIAL

Wall Street Bankers Openly Discuss the Coming Crash: “The System Is Cracking”


As the LaRouche movement goes into high gear to shut down Wall Street and return to Glass-Steagall before a crash strikes, Wall Street and City of London bankers are now openly discussing the coming crash… and quietly panicking over how to handle it.

The lead article in the Oct. 3-9 edition of the Economist, the banner publication for City of London financial interests, warns that “the system is cracking,” and calls for an all-out effort to backstop the bubble with new waves of so-called quantitative easing—exactly as Lyndon LaRouche has warned is their intention. The article frets, however, that this hyperinflationary bailout policy may not work as it did in 2008, because the U.S. Congress might go instead for more regulation of the banks—although the article studiously avoids mentioning the feared words, “Glass-Steagall.”

A major problem today, the Economist writes, “is the lack of a backstop for the offshore dollar system if it faces a crisis. In 2008-09 the Fed reluctantly came to the rescue, acting as a lender of last resort by offering $1 trillion of dollar liquidity to foreign banks and central banks. The sums involved in a future crisis would be far higher. The offshore dollar world is almost twice as large as it was in 2007. By the 2020s, it could be as big as America’s banking industry. Since 2008-09, Congress has grown wary of the Fed’s emergency lending. Come the next crisis, the Fed’s plans to issue vast swap lines might meet regulatory or congressional resistance.”

The Economist article concludes: “There are things America can do to shoulder more responsibility–for instance, by setting up bigger emergency swap lines with more central banks. More likely is a splintering of the system, as other countries choose to insulate themselves from Fed decisions by embracing capital controls. The dollar has no peers. But the system that it anchors is cracking.”

Similarly, Forbes magazine’s Antoine Gara wrote on Oct. 2 about the danger of a new blowout, which unusually admits that the underlying problem is the gigantic pile of derivatives sitting on top of numerous nominal debt bubbles. Gara, in reviewing the current Glencore crisis, tries to whistle past the graveyard, arguing that “Glencore’s unraveling won’t turn into the next Lehman Brothers crisis.” He says that is because Glencore does not have the derivatives exposure that Lehman had.

But, he admits, “were Goldman Sachs, Morgan Stanley, or any other large investment bank to be thrown into Glencore’s current predicament, there would be good cause to worry about a Lehman 2.0. There are over $600 trillion in OTC derivatives outstanding [in actuality, there are probably double that amount–ed.], a greater number than prior to the crisis, and many of those contracts continue to trade bilaterally among banks, linking firms together.”

Gara concludes: “For the likes of JP Morgan, Bank of America, Citigroup, Goldman Sachs and Morgan Stanley, these issues remain a topic of life or death. Last quarter, each firm disclosed trillions, if not tens of trillions outstanding in OTC derivatives contracts. No amount of rising retained capital would
protect those firms if there were a messy Lehman-like bankruptcy.”


 

Latest

The First Crack: Deutsche Bank Preannounces Massive Loss, May Cut Dividend

..

World set for emerging market mass default


Foreign investors may pull US$1b out of Malaysia this week

Foreign investors could pull up to another billion dollars out of embattled Malaysia’s bond markets this week, pushing the country a step closer to a currency reserves crisis that would send shudders across the region.

A widening political scandal and tumbling currency have steadily taken their toll on investor sentiment towards the South-East Asian economy, unnerving its emerging Asian neighbours despite the central bank’s efforts to contain the damage. – Malaysiakini

Traders Flee Emerging Markets at Fastest Pace Since 2008

Investors have pulled $40 billion out of developing economies in the third quarter, fleeing emerging markets at the fastest pace since the height of the global financial crisis. – Bloomberg


The Telegraph

World set for emerging market mass default, warns IMF

Higher US interest rates will expose weaknesses in emerging market corporations which have gorged themselves on cheap debt, IMF warns

The International Monetary Fund (IMF) has issued a double warning over higher US interest rates, which it said could trigger a wave of emerging market corporate defaults and panic in financial markets as liquidity evaporates

The IMF said market liquidity, or the ease with which investors can quickly buy or sell a securities without shifting their price, was ‘prone to sudden evaporation’, particularly in bond markets Photo: Rex

.

By Szu Ping Chan

6:50PM BST 29 Sep 2015


The International Monetary Fund (IMF) has issued a double warning over higher US interest rates, which it said could trigger a wave of emerging market corporate defaults and panic in financial markets as liquidity evaporates.

The IMF said corporate debts in emerging markets ballooned to $18 trillion (£12 trillion) last year, from $4 trillion in 2004 as companies gorged themselves on cheap debt.

It said the quadrupling in debt had been accompanied by weaker balance sheets, making companies more vulnerable to US rate rises.

“As advanced economies normalise monetary policy, emerging markets should prepare for an increase in corporate failures,” the IMF said in a pre-released chapter of its latest Financial Stability Report.

Emerging market corporate debt has grown to $18bn  Photo: International Monetary Fund

It warned that this could create a credit crunch as risks “spill over to the financial sector and generate a vicious cycle as banks curtail lending”.

In a double warning, the IMF said market liquidity, or the ease with which investors can quickly buy or sell securities without shifting their price, was “prone to sudden evaporation”, particularly in bond markets, when the Federal Reserve started to raise interest rates.

It said a steady growth environment and “extraordinarily accommodative monetary policies” around the world had helped to maintain a “high level” of liquidity. However, it warned that this was not the same as “resilient” liquidity that could support markets in time of stress.

Gaston Gelos, head of the IMF’s global financial stability division, said these factors were “masking liquidity risks” that could trigger violent market swings.

“Liquidity is like the oil in an engine, when there’s too little of it, the machine starts stuttering,” he said.

The IMF said an “illusion” of abundant liquidity may have encouraged “excessive risk taking” by some investors that could cause market ructions if many investors suddenly rushed to the exit.

“Even seemingly plentiful market liquidity can suddenly evaporate and lead to systemic financial disruptions,” the IMF said.

“When liquidity drops sharply, prices become less informative and less aligned with fundamentals, and tend to overreact, leading to increased volatility. In extreme conditions, markets can freeze altogether, with systemic repercussions.”

Bond inventories have fallen considerably since the financial crisis. However, regulators have argued that this position was unsustainable.Banks have scaled-back their market making activities in the wake of the financial crisis, which has reduced their ability to act as a stabilising force by absorbing excess supply.

Structural factors, such as large holdings of relatively illiquid securities by mutual funds and concentrated holdings by institutional investors, could also exacerbate a sell-off.

Market liquidity indicators for high-yield and emerging market bonds have started to weaken relative to those for investment-grade bonds.

While the IMF said central bank bond buying had been positive because it provided the market with a “committed and solvent buyer” to support the market, it said higher interest rates would “inevitably boost volatility”.

“Smooth normalisation of monetary policy is crucial” to avoid “sudden drops” in risk appetite, the IMF added, as it urged central banks to stand ready to “set up policies in advance that will maintain market functioning during periods of stress”, such as stepping into the short-term money markets to offer loans.

A ban on some debt default insurance instruments had drained liquidity from some markets, the IMF foundIt also urged EU policymakers to “reevaluate” regulations brought in to restrict transactions on credit default swaps (CDS) of sovereign debt, which provide insurance against default but the IMF said had distorted the market.

While the IMF said tighter regulation had played a role in tighter liquidity conditions, it said evidence that it would make the next financial crisis worse was “still lacking”.

“Indeed, the reforms have made the core of the financial system safer,” the IMF said.

..

Why Malaysia Is In Trouble – It Borrowed Heavily In The Fed’s Easy Dollars


CONTRA CORNER | Bloomberg

by Sharon Chen at Bloomberg

When the U.S. Federal Reserve last week opted against its first rate hike in nine years, governments around Asia breathed a sigh of relief. But that relief could be short lived.

While the region’s biggest economy, China, can likely withstand any negative flow through whenever the Fed does eventually move, others, like Malaysia are braced for a hit to growth.

That’s because a U.S. rate hike could accelerate declines in developing Asian currencies and in the process raise funding costs for firms and consumers, constraining demand and disrupting growth, according to HSBC Holdings Plc. The relationship is particularly dangerous in economies where consumption and investment is driven by debt and may be exacerbated when U.S. dollar interest rates begin to rise, it said.

Take Malaysia, where credit to the non-financial private sector as a share of gross domestic product rose to 135 percent in the first quarter from 115 percent in the same period in 2009, data from the Bank for International Settlements show. The ratio is even higher in China, where it rose to 198 percent from 130 percent.

China’s “exchange rate adjustment in August, and resulting capital outflows, may have temporarily tightened financial conditions in the country,” said Frederic Neumann, co-head of Asia Economics Research at HSBC. “However, PBOC easing helped to blunt this effect and reinforced capital controls should ensure that there’s only a tenuous link between currency moves and funding conditions on the mainland.”

BIS graph
Yet, the People’s Bank of China has cut interest rates five times since November and lowered the proportion of deposits banks have to set aside as reserves in a bid to boost lending and avert a further slowdown.

The yuan has fallen about 2.6 percent against the U.S. dollar this year, compared with Malaysia’s ringgit, which has dropped more than 18 percent against the greenback, the biggest loser among the 11 most-traded Asian currencies tracked by Bloomberg.

Ringgit graph
Malaysia’s economy expanded the least in almost two years in the three months through June. Private consumption is expected to moderate as households continue to adjust to the implementation of a new consumption tax and the more uncertain economic environment, the central bank said in a Sept. 15 statement.

“Malaysia is among the most vulnerable given that it has seen among the biggest moves in the currency and it has a high debt-to-GDP ratio,” said Neumann. “That would make Malaysia likely to suffer a tightening of financial conditions which could impact growth over time.”

With Fed officials arguing an interest-rate increase is still warranted this year, emerging Asia’s recovery may be a ways off.

Source: China could dodge Fed bullet, but Malaysia in the firing line – Bloomberg Business

..

The Global Financial System – It’s Booby-Trapped With Debt Bombs


CONTRA CORNER

By Greg Hunter’s USAWatchdog.com

Former Reagan Administration budget director David Stockman says the biggest crash coming is not going to be in the stock market. Stockman warns, “I think we are headed for a central calamity. The central banks of the world have been on a 20 year campaign to massively expand their balance sheets and intrude into financial markets in ways that were never before imagined. In the process, they falsified every asset value there is from overnight money all the way to 30-year bonds and the stock market. Everything now is trading off the central banks, but the central banks have hit the end of the road. They have printed so much money and created such a massive global bubble that we are now in the process of that bubble fracturing. The central banks are now beginning to become confused and panicked about what to do. The Chinese have no idea what to do with their $28 trillion credit bubble and that house of cards in China. Our Fed is now on the verge of another meeting where they are debating if 80 months of 0% interest rates is enough. That is crazy.”

Stockman, who also had a 20 year career on Wall Street, says enormous amounts of global bond debt will never be repaid. Stockman explains, “That’s why I say the financial system is booby-trapped with debt bombs waiting to explode. I use the 100 year Brazilian bonds as an example, but there are trillions of dollars of this stuff all over the place. You know the central bankers pretend that they don’t see any bubbles. These people are not only bubble blind, they are bubble deaf. They have no capacity to understand the explosive nature of the financial markets that they are toying with.”

Stockman goes on to paint a grim picture and says, “What happens when the financial breakdown comes is there is a great margin call. Everybody says ‘I want my money back and I’ll take your collateral if I don’t get it back. If I do take your collateral, I will sell it for whatever price I can get and cut my losses.’ So, this is truly a house of cards. The whole pyramid of debt and what we call hypothecation and rehypothecation of financial assets, that is the real bubble. That’s what people don’t focus on enough. Sure, you can think of stocks that are a bubble, like Tesla and its current price of around $250, or the biotech index which is trading at hundreds of times earnings is crazy. What’s really crazy is all of this debt that has been created has been turned into collateral and borrowed against at a very high rate. The whole thing is very unstable and tottering as we speak.. . . Much of this collateralized credit that has been created is a confidence game. It is a daisy chain, and when the confidence breaks and they start to unwind the chain, the amount of debt outstanding will shrink. That will create tremendous broken furniture in the financial system.”

How do you protect yourself? Stockman says, “The place to go in my view is cash. Stay short and liquid because we are going into deflationary collapse. We are going into a great reset in the financial markets where inflated asset values are going to be marked down tremendously, bond prices and stock prices. As a result of, that there will be great opportunity after the dislocation runs its course to buy things much cheaper than they are priced today.”

Stockman thinks the whole system unwinds sometime before the 2016 Presidential race is finished.

..