View Single Post
Old 01-10-2019, 05:20 AM
Danny B Danny B is online now
Platinum Member
Join Date: Oct 2012
Location: L.A. Ca.
Posts: 4,281
Public debt,,, more speedbumps

I'm back to playing the devil's advocate for the FED.
"Federal Reserve regulations are rules put in place by the Federal Reserve Board to regulate the practices of banking and lending institutions, usually in response to laws enacted by the legislature. "
"I: Issue and Cancellation of Capital Stock of Federal Reserve Banks"
They created liquidity for emergency loans that was subsequently destroyed,,, no monetary inflation.
"O: Loans to Executive Officers, Directors and Principal Shareholders of Member Banks"
That was their only mandate when formed.
"V: Loan Guarantees for Defense Production Facilitates the extension of credit for national defense production"

No bid,,, no problem. No limit on money for defense.
"in response to laws enacted by the legislature. "
It wasn't the FED that came up with the idea of buying war bonds and other government debt.

"Currently, MB is declining and m is countervailing to a slight degree, but the drop in the base and the increased Federal funds rate has resulted in sharp slowdown in M2 growth from a peak of 8% per annum to slightly less than 3.9% per annum now. Slower M2 growth resulted in a sharp slowdown in nominal GDP in the third quarter of 2018."
"Tangible signs of this include: a sharp slowdown in M2 growth in Japan, the Eurocurrency zone and China, a drop in world stock and commodity prices as well as synchronized deceleration in major foreign economies. Chinese money growth recently fell to the lowest in four decades, " they can thank Trump.
"One other point: Excess reserves have declined far more sharply than the monetary base, serving to severely restrict the US depository institutions. Excess reserves have dropped from a peak of $2.7 trillion to $1.6 trillion. Quantitative tightening cut excess reserves about approximately $400 billion while the first eight hikes in Federal funds rate reduced excess reserves about $700 billion."
People wonder why there is a liquidity crisis.
"M2 growth from a peak of 8% per annum" Gee, I wonder why we have so much price inflation.

"In the fourth quarter of 2017 the combined asset purchases of the Fed, European Central Bank (ECB) and Bank of Japan (BOJ) were $100 billion per month. The total dropped to zero in late 2018 and this quarter will turn negative, to withdrawals of roughly $20 billion per month." Deflation that will work it's way down to every level.
Corporate debt has reached new highs. $800 billion needs to be rolled over at even higher rates.

From the World Bank;
“At the beginning of 2018 the global economy was firing on all cylinders, but it lost speed during the year "
It was running on free money, nothing else.
"Hard-won central bank independence and transparency could erode in the face of pressures to finance government. "
That horse left the barn many decades ago.

Consumer credit is humming along nicely.
"November, the surge consumer credit continued, rising by $22.1 billion, above the $17.5 billion expected, after October's whopping $25 billion increase as non-revolving credit surged by the most since December 2017. The surge in borrowing in November brought the total to $3.979 trillion"
"American consumers have clearly returned to doing what they do best - spending money they don't have - with revolving credit jumping by $4.8 billion, one month after it surged by $9.3 billion. The latest monthly increase brought the total credit card debt to a new all time high of $1.042 trillion."

"But the big reason behind the November surge in consumer credit was nonrevolving credit, i.e. student and auto loans, which soared by $17.4 billion, the highest monthly total since 2017, and bringing the nonrevolving total to a new all time high of $2.937 trillion."
"$1.564 trillion in student loans outstanding, an impressive increase of $33 billion in the quarter, while auto debt also hit a new all time high of $1.141 trillion, an increase of $16 billion in the quarter."
Fitch may downgrade Uncle Sam.

"The U.S. debt-to-GDP ratio is now 106%, the highest since the end of the Second World War. The Chinese debt-to-GDP ratio is a more reasonable 48%, but that figure is misleading because it does not include the debts and guarantees of provinces, state-owned enterprises, banks, wealth management products and numerous other entities that the government in Beijing is directly or indirectly obligated to support.

When that additional debt is taken into account, the real debt-to-GDP ratio is over 250%, about the same as Japan’s."
What about U.S. $3 trillion owed SS? What about $ 212 trillion in unfunded liabilities?
"Debt-to-GDP ratios below 60% are considered sustainable; ratios between 60% and 90% are considered unsustainable and need to be reversed; and ratios in excess of 90% are in the red zone and will produce negative growth along with default through nonpayment, inflation or other forms of debt repudiation. The world’s three largest economies — the U.S., China and Japan — are all now deep in the red zone."
"What is striking is the speed with which synchronized global growth has turned to synchronized slowing. Indications are that this slowing is far from over."
Powell broke ranks with the other CBs.
"Analysts estimate that reducing the balance sheet by $600 billion per year (the current tempo) is equivalent to increasing the fed funds target rate by 1% per year. This implied rate hike comes on top of the 0.25% rate hikes the Fed has been announcing every quarter. QT and actual rate hikes taken together are increasing rates by 2% per year from a 2.5% base, an extreme form of monetary tightening." DEFLATION

Armstrong says that stocks are going WAY up,,,, dunno.
"ANSWER: That was a minor signal at year end. It served to put us on notice that the slingshot to the upside will be extended. That is very good news for I was concerned that such a move would have peaked by 2020/2021. It appears we have been granted a huge reprieve in that regard and we will be looking at profound events unfolding ahead"
"REPLY: Unfortunately, this is exactly what the computer is forecasting. We are in a rising cycle of civil unrest. The political divide is growing everywhere even in the United States. This will ONLY lead to outright violence and in many cases civil war. The left is ALWAYS the most violent. They are not tolerant of opposition"
"In the USA, the rising tide against Trump is stunning. But people have no idea what is coming. I have warned that analysing Trump in terms of a market, he represents a reactionary bounce only – not a change in political trend. What I mean by that is we are headed to a clash of titans as you are there in Germany. NEITHER side will be willing to accept a loss. What comes after Trump will be massive civil unrest as well."

1/09 Germany heads for a technical recession – Wolf Street
1/09 China’s stability is at risk – National Interest
1/09 Gundlach says “get out” of junk bonds – Seeking Alpha
1/09 Ohio police and fire pension fund slashes retirees’ insurance – Fox

1/09 Weakest Treasuries demand since 2008 sends bond-market warning – Bloomberg
Wait, the public debt increased by $205 billion in November. Who is buying?
1/09 China car sales fall for the first time in 20 years – BBC
Yep, they have definitely had a turnaround.
1/09 ECB rate hike now unlikely before mid-2020, money markets bet – Reuters
Zombies don't do rate hikes.
1/09 France moves to ban all protests as PM announces major crackdown – ZH
Macron's popularity has fallen to 18% . It will go lower.

1/08 Hypersonic weapons pose “significant challenge to world peace” – Zero Hedge
Now that Russia and China have weapons that will reach the politicians,,, the politicians are getting nervous.

1/08 Global warming of oceans equivalent to an atomic bomb per second – Guardian
How Centuries-Old Seawater Is Cooling The Deep Pacific Ocean
Reply With Quote