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  • Danny B
    The galloping printing press

    The GDP is essentially a count of how much money is in the system. When GOV prints money, GOV counts it as part of the GDP. When GOV spends this money it counts it a second time as part of the GDP. U.S GOV spends about 24% of the GDP. But, it spends debt-money that purportedly must be paid back to banks and investors. The more that it spends today, the more inflation it gets. BUT, as this debt is repaid (extracted from the producing economy), the more deflation we get at some future point.
    This future deflation can only be held at bay by pumping ever-more money into the system. There is always a risk that these bonds might not be rolled over. That would bring the dreaded deflation. The solution is for GOV to sell 50 year and 100 year bonds.

    There are 102 million working-age people who are not employed. Somehow, the economy is still growing. The take-away from all this is; don't give a moment's notice to ANY GDP figures.

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  • wayne.ct
    The truth in a sea of lies

    Much of what you say is, of course, true. And, the bone I pick is not with YOUR word, but the word of others. That bone is the fake facts repeated whenever new GDP numbers are announced, not to mention the idea that the FED has somehow miraculously raised interest rates by the sleight of hand known as the discount rate. Now, to my point about the GDP. The GDP is a BIG LIE. You know this, of course, but it seems you are in the 0.0001 percent. About 300 people out of the roughly 300,000,000 in the US actually know that GDP is not the gross domestic product as the initials indicate. What is included in the GDP? Such things, of course, as the business transacted by banks and "government". What business is that? It is not truly business. If is positively not production or product. It has no business being included in the GDP since it is not really a product. GDP is not a measure of "product" as if, somehow, a service is a product. I can hire a plumber or fix my own toilet or let my toilet leak. It is my decision and I can contribute to the decline of the fake GDP any day of the week by procrastination. At the same time, the pundits and PTB can increase the phony GDP at will by various means using phony paper or electronic means but the biggest fraud is making people imagine the GDP is the gross domestic product when it is not. Perhaps someone can extract the true productivity data from the official tabulation but if they did would I believe it? I don't know I would be able to recognize the true figures if they were available. I am doing what I can and what I believe is best for me and I'm feeling pretty good right now. I can only hope I feel the same a few weeks from now.

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  • Danny B
    Failing economy... rising rates

    6/14 Oil at 7-month low of $44.73 on spike in US gasoline stockpiles – CNBC The consumer is busted.
    6/14 Q2 GDP in trouble as business inventories tumble – Zero Hedge
    6/14 Drop in retail sales signals uneven consumer spending – Bloomberg
    'Uneven", my culo !
    6/14 Fed hikes rates despite low inflation, promises balance sheet reduction – CNBC
    As the FED hikes, more and more companies and States will find it harder to service their debt. You can bet that the higher prime rate will NOT be passed on to savers.
    At this point in time, 72% of businesses are not profitable, Record "Wealth" In America? 72% Of US Businesses Are Not Profitable | Zero Hedge
    Here is a graph of FED "tightening"
    The FED will set off a bomb somewhere in the markets, When the Fed Tightens, It Leads to Financial "Events" | Zero Hedge
    The Quants and Algos are doing 90% of the stock trades. How will they react when the defaults happen? Just 10% of trading is regular stock picking, JPMorgan estimates

    6/14 Are public pensions a thing of the past? – PA Home Page FED GOV has $212 trillion in unfunded liabilities. Throw in another $7 trillion for State and local GOV. Illinois will show us the roadmap.
    6/14 Government public pension liabilities are understated by trillions – Value Walk
    6/14 Consumer prices unexpectedly fall – Reuters Unexpectedly? Our income has been falling for decades.

    ALL of the CBs are printing in unison so that no State's currency will be seen as a safe haven. If a State's currency goes up, it loses export market share. If you look at the U.S. dollar compared to a basket of currencies, the value had been fairly steady.
    For all of history, you could buy one ounce of gold with another ounce of gold. The price was static, varying only depending on world turmoil. Here is a graph of the price of the dollar. The chart is labelled, "the price of gold".

    The finance loop must constantly inflate the money supply for the non-producers to have an income. ALL of their financial support is passed on to the eventual consumer. They pay the inflation tax also but, all of their income is sourced from inflation to begin with. Labor's share of the GDP has been falling for decades. The finance sector has grown by leaps and bounds, they only survive on freshly-printed money.
    A currency note is a claim on goods and services. The CB pulled consumption forward by lowering rates. The banks have pulled consumption forward by creating liar-loans. The banks are now pushing sub-prime RE loans again.
    Every debt-note creation without a corresponding creation of new wealth just pumps a bit more air into the credit bubble.
    Everyone believes that they hold a great deal of wealth.

    GOV must pump in liquidity to maintain confidence. GOV is buying up all the stock and bonds that come up for sale. GOV must keep investors from cashing-out.
    The FED managed to keep everything moving during the obummer administration. It looks like they are going to pull out the rug for the current admin. At some point, the great collateral grab is going to take out almost everyone.

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  • Danny B
    Financialization... labor vs automation

    If the FED raises rates today, this will be somewhat of an indicator of whether or not they intend to crash the economy. Reportedly the FED believes;
    "Since then, the unemployment rate has fallen to a 16-year low of 4.3% and economic growth appears to have reaccelerated"
    Federal Reserve'''s Interest Rate Announcement Wednesday |

    Bill Gross, “New Normal” high debt, aging demographics, and deglobalization along with technological displacement of labor"
    "Excessive debt/aging populations/trade-restrictive government policies and the increasing use of machines (robots) instead of people, create a counterforce to creative capitalism in the real economy,"
    "So instead of making money by investing in the real economy, savers/investors increasingly are steered toward making money in the financial economy – making money with money"
    "The real economy has been usurped by the financial economy."

    "But asset prices and their growth rates are ultimately dependent on the real economy and, the real economy’s growth rate is stunted by secular forces which monetary and even future fiscal policies seem unable to reverse."
    "Faulty finance-based capitalism supported by the increasingly destructive monetary policy begins to erode, not support the real economy."
    "My point in all of this is that making money with money is an inherently acceptable ingredient in historical capitalistic models, but ultimately it must then be channeled into the real economy to keep the cycle going."
    Why is it that he can't come out and say that; the upper loop can NOT survive if wages are inadequate in the lower loop.

    2012, "Govt sets target to skill 500 million people by 2022"
    2017 "Govt abandons goal of training 500 mn people by 2022"
    There is too little recognition that globalism and automation have permanently wiped out labor demand. The Indians don't even know what to train people for.
    The upper loop doesn't produce anything so it must depend of bleeding off the wages of the lower loop where all the production happens. There is less and less to bleed off so, the upper loop does more and more printing to survive.
    The upper loop is losing a lot of jobs to automation also.
    The top levels of the upper loop get even more income (temporarily) as labor's share of the GDP is reduced.
    The money that flows to the very top flows AWAY from purchasing power of the middle class. The more that the economy is "financialized", the more that consumption and commerce fall. The corporatists want to reduce wages even further to compensate for the drop in profits from trade and consumption.

    India is a very poor country with very low labor rates. If India can't figure out where the job markets of the future will be, what is the West going to do?

    Kunstler brings some grim humor; Moby Trump - Kunstler
    "Six months from now, nobody will trust anyone or anything, and we may easily see a great deal of kinetic lashing out against each other in the ringing, raging confusion of the political vortex we’ve gleefully ventured into."

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  • Danny B
    Ingrained myopia

    Martin Armstrong is a real smart guy. He constantly harps on the idea that you must be completely dispassionate about investing. Somehow, he is completely missing an important facet.
    Armstrong; "Well Mr. Gates, I needed 240 employees in the 1980s and 1990s to maintain databases and collect everything around the world. I can do that at the push of a button today. So perhaps we should tax the entire internet and the computers you make along with your software because I can do myself with an assistant what it took 240 people to do 30 years ago."
    "First of all, robots are killing jobs because taxes and demand for benefits are going crazy. Healthcare costs are consuming the net disposable income and government taxes, and the combination is conspiring to lower annual economic growth rates dramatically."
    He admits that he has eliminated 239 jobs. He fails to see that those 239 people need State help to survive. He acts like there is an unlimited pool of employment available.

    The corporatists are hard at work to do trade agreements and lower wages across the board. They piss and moan about GOV taxes. The French GOV spends 57% of the GDP. Italy,, 50%. What do they think would happen if this support was withdrawn?
    The upper loop is all in agreement that non-working people will go back to work if State support is withdrawn.
    Armstrong is part of the group that is solely focused on finance and productivity. They seem to believe that consumption will take care of itself.
    Armstrong blames the State for extracting too much tax from the finance sector. The State is the entity that pumped in the money in the first place. He sees the finance sector as being distanced from the consumer.

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  • Danny B
    Searching for the greater fool

    For every irresponsible borrower there has to be an irresponsible lender.
    The Ponzi chain;
    "The ‘Greater Fools’ Amongst Us
    1. When you put zero down on the ‘purchase’ of your house and re-finance it each and every time it goes up in value your leverage is literally infinite and you are playing a Ponzi game hoping a ‘greater fool’ than you will be there to buy your house when the time came for you to buy yet another house that you can not afford.

    2. When the bank sells you a mortgage for zero down with interest only for a while, with negative amortization, and an initial teaser rate, the bank is playing a Ponzi game. They are hoping that you will stay employed; that you will be able to afford the eventual increased mortgage payment; that you will be able to sell the house for more than its original value; that you will always honor the terms of the mortgage. They are even ‘greater fools’ than you are.

    3. When private equity firms engage in leveraged buy-outs with excessive debt-to-earnings ratios they are Ponzi firms playing Ponzi games – all “greater fools” hoping that future earnings will just grow and grow in future years with no likelihood of declining.

    4. When our government issues trillions of dollars of new debt to pay for a severe recession and to socialize private losses it becomes a Ponzi government hoping that the Chinese and other foreign purchases of their debt will continue doing so regardless of the value of the U.S. dollar vis-à-vis their respective currencies and the level of interest paid. How foolish to expect foreign governments to be ‘greater fools’ than ours.

    5. When our country spends more than it raises in taxes and thus runs an endless string of current account deficits and becomes the largest net foreign debtor in the world it becomes a Ponzi country hoping that foreigners will be even ‘greater fools’ and continue to finance their conspicuous consumption.

    6. When consumers consumed more than their income year after year (i.e. a household with negative savings; a government with a budget deficit; a firm or financial institution with persistent losses; a country with a current account deficit) they are playing the ultimate Ponzi game hoping that some ‘greater fool’ will come along and bail them out.

    These households, firms and banks and the government itself can be characterized as ‘Ponzi borrowers’ who need to borrow more to repay both principal and interest on their previous debt and, such being the case, need ever-increasing prices of the assets they have invested in to keep on refinancing their debt obligations. What fools they all are to expect that some ‘greater fool’ knight in shining armor will come along and wave a magic sword and make it all go away. Instead, they all must recognize that they will be forever poorer but, hopefully, more fiscally responsible in the future."
    Who Are the 'Greater Fools" Now? - munKNEE

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  • aljhoa
    Originally posted by Danny B View Post
    You're asking a question that has a long answer. The owners and controllers of the FED are/have been almost entirely jewish.

    Herzyl's dream has turned into a nightmare. Israel is just a garrison surrounded with very high walls.

    The terror gangs went house to house killing mostly women and children because the men were NOT present. This action and many others like it set the pattern for subsequent genocide.

    The jews are starting to catch on that judaism has been hijacked by zionism,

    The current claim is that Ashkenazi jews are responsible for all the excesses of warring and power-mongering. I haven't read deeply into this.

    The jews have been kicked out of MANY places. What about the Amish, the Menonites, The Jains, the Buddhists? Hopefully, the jews will throw off the yoke of zionism and be forego the dream of world conquest.
    I've gone way off-topic but, it is background for our economic situation.
    Originally posted by Ufopolitics View Post

    It is all about a few families WORLDWIDE which control MAJORITY OF THE WEALTH GLOBALLY.

    These Families do not operate under any "PARTY NAME" of either Left nor Right, nor Blue nor Red.

    They only follow MONEY AND POWER.
    Originally posted by BroMikey View Post

    Yes a few families control much money and THEIR right and left
    arms are the RIGHT and LEFT political system, THEY all do what
    THEY are told.

    The world has been operating in commerce for 6000 years. Judges, bankers, and lawyers are in the Bible. They have mastered and passed on their secrets for 6000 years (2). Knowledge of how your brain works have been hidden for centuries. These people accomplished control over your thoughts before you were five years old by "legal" drugs (3), the media [television (4) (5) / music (6)] Controlled by a few corporations (7). Then by schooling (8). You have been programmed not to think (9). This was done incrementally over time so you did not notice (10).

    What are TPTB?

    Last edited by aljhoa; 06-13-2017, 05:26 PM. Reason: 161,715

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  • Danny B
    Credit Ice Age.. hot seat for Illinois.. paper money and virtue

    Everybody knows that the majority of Americans have no savings. Limitless monetary expansion gave them endless credit so they didn't have to worry about a distant future when they wouldn't be working. The (seemingly) limitless expansion allowed them to believe that the State would always be there to support them.
    "Under “natural money” like gold Hulsmann explains, prices tend to fall over time.

    So natural money encourages the virtues of saving… thrift… deferred gratification. It sets the mind to the future:
    In a free economy with a natural monetary system, there is a strong incentive to save money… Investments in savings accounts or other relatively safe investments also play a certain role, but cash hoarding is paramount."
    “The trouble with gold is that it turns its back on world improvers, empire builders and do-gooders,”
    "Only a debt-backed system of paper money could finance the great wars, the social improvements and the fevered dreams of the 20th century.

    But the same debt-based money also seeped its way into the cultural marrows… got into the bloodstream… and went to work…

    The slow grind of saving yielded to lure of the fast buck. Hulsmann says it all encouraged a short-term perspective.
    “Fiat-money systems tend to make people insatiable in their quest for ever higher monetary returns on their investments,” Hulsmann notes."
    “By contrast,” Hulsmann adds,”in a fiat money society you are more likely to increase your returns by remaining in debt and continuing to chase monetary revenue indefinitely by leveraging more and more funds.”
    Debt-Based Money Corrodes Society | Zero Hedge

    America had 5 times the retail space per person that France had. We had LOTS of money (credit) and we were going to SPEND it. Plastic included. It is now expected that 25% of the malls will be closing in the next 5 years. The State gooses the upper loop of the economy but, this does little for the lower loop. Consumption accounts for about 70% of the GDP. Consumption is falling and taking out commerce with it.
    Record "Wealth" In America? 72% Of US Businesses Are Not Profitable | Zero Hedge

    "As UBS' analyst Arend Kapteyn wrote then, the "global credit impulse (covering 77% of global GDP) has suddenly collapsed"
    " As a result: whereas back in Jan '16 the global credit impulse was positive to the tune of 3.8% of global GDP (of which China comprised 3.5% of global GDP) it has now fallen back to -0.1% of global GDP (China's contribution is -0.3% of global GDP)."
    UBS Has Some Very Bad News For The Global Economy | Zero Hedge
    SO, credit growth is DEAD in the water. How are we going to roll-over the existing debt if there is no new credit?
    " in the US the correlation between activity and the impulse is very strong, and the lack of credit growth could constrain an acceleration in GDP from weak Q1 levels (the credit impulse suggests domestic demand growth should be close to 1% rather than the 2+% which consensus is currently tracking). "
    Keep in mind that the U.S. GOV spends 24% of the GDP. Any cutbacks in GOV spending translate to negative GDP.

    The markets crashed in early 2016. It took a LOT of liquidity to drag them back from the abyss. It's happening again.
    "Also, if it became clear to them that their recovery was going to fail, they wouldn’t want their globalist friend, Obama, to take the blame — being globalists themselves — and certainly wouldn’t want themselves to take the blame for a recovery that failed the moment they pulled the stimulator’s plug out of the wall. They’d need a scapegoat, and they would love for it to look like the crash was entirely the fault of anti-globalists. So, their private motto, should Trump win, would be “Trump for Chump” if they knew everything was hopeless (as I’ve been saying it is for a long time because their recovery plan was always a horrible solution)."
    Is the Central Bank?s Rigged Stock Market Ready to Crash on Schedule? | Zero Hedge

    Congress will take an August recess. That will leave little time to work out a debt ceiling.
    "The Sooner We Do It, The Better": Congress Should Raise Debt Ceiling Before August Recess, Mnuchin Says | Zero Hedge

    Illinois has until July 1 to cough up $billions of payments. Chances are, they will be downgraded and their bond market will crash.

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  • Danny B
    Kunstler gets a post by himself

    Kunstler is a registered Democrat and laments the decomposition of the party. In the beginning, he had NOTHING good to say about Trump. He ridiculed him and referred to him as the "golden golum of greatness. He now calls him the "President of the United States. Like many people, he has begun to focus on the state of the State that Trump has inherited. He is well aware of the state of depression and despair. Well aware of the desperation and resulting drug epidemic. Well aware of the incarceration rate and suicide rate.

    "As our politicos creep deeper into a legalistic wilderness hunting for phantoms of Russian collusion, nobody pays attention to the most dangerous force in American life: the unraveling financialization of the economy.

    Financialization is what happens when the people-in-charge “create” colossal sums of “money” out of nothing — by issuing loans, a.k.a. debt — and then cream off stupendous profits from the asset bubbles, interest rate arbitrages, and other opportunities for swindling that the artificial wealth presents. It was a kind of magic trick that produced monuments of concentrated personal wealth for a few and left the rest of the population drowning in obligations from a stolen future. The future is now upon us.

    Financialization expressed itself in other interesting ways, for instance the amazing renovation of New York City (Brooklyn especially). It didn’t happen just because Generation X was repulsed by the boring suburbs it grew up in and longed for a life of artisanal cocktails. It happened because financialization concentrated immense wealth geographically in the very few places where its activities took place — not just New York but San Francisco, Washington, and Boston — and could support luxuries like craft food and brews.

    Quite a bit of that wealth was extracted from asset-stripping the rest of America where financialization was absent, kind of a national distress sale of the fly-over places and the people in them. That dynamic, of course, produced the phenomenon of President Donald Trump, the distilled essence of all the economic distress “out there” and the rage it entailed. The people of Ohio, Indiana, and Wisconsin were left holding a big bag of nothing and they certainly noticed what had been done to them, though they had no idea what to do about it, except maybe try to escape the moment-by-moment pain of their ruined lives with powerful drugs.

    And then, a champion presented himself, and promised to bring back the dimly remembered wonder years of post-war well-being — even though the world had changed utterly — and the poor suckers fell for it. Not to mention the fact that his opponent — the avaricious Hillary, with her hundreds of millions in ill-gotten wealth — was a very avatar of the financialization that had turned their lives to $hit. And then the woman called them “a basket of deplorables” for noticing what had happened to them.

    And now the rather pathetic false promises of President Trump, the whole MAGA thing, is unraveling at exactly the same time that the financialized economy is entering its moment of final catastrophic phase-change. The monuments to wealth — especially the stock and bond portfolios and the presumed value of real estate investments — will surrender to a process you might call price-discovery-from-Hell, revealing their worth to be somewhere between little and nothing. The accumulated monstrous debts of persons, corporations, and sovereign societies, will be suddenly, shockingly, absolutely, and self-evidently unpayable, and the securities represented by them will be sucked into the kind of vortices of time/space depicted in movies about mummies and astronauts. And all of a sudden the avatars of that wealth will see their lives turn to $hit just like the moiling, Budweiser-gulping, oxycontin-addled deplorables in the flat, boring, parking lot wastelands of our ruined drive-in Utopia saw their lives rendered into a brown-and-yellow slurry draining clockwise down the toilet of history.

    Nobody in power in this country is paying attention to how close we are to that epic moment — at least, they’re not talking about it. If the possibility of all that even occupies some remote corner of their brains, they surely don’t know how to prepare the citizenry for it, or what to do about it. The truth is that societies respond emergently to major crises like the imminent unraveling of our financialized economy, often in disorderly and surprising ways. I suppose we’ll just have to watch the nauseating spectacle play out, and in the meantime enjoy the Russian collusion melodrama for whatever it’s worth — probably more than a ticket to Wonder Woman or the new Tom Cruise Mummy movie."

    The gutting of the industrial base caused by our low-wage competitors AND our penchant for shopping at Wal Mart started out in what is now called the "rust belt". As you well know, rust never sleeps. The corrosion of or industrial base is spreading and causing a corrosion of society.

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  • Danny B
    Nobody knows what is going to blow first

    The various CBs and States have bought up tons of stocks to maintain prices and drive down volatility. There are 315 Billion shares traded per trading day worldwide. Every time that and "important" stock starts to fall, the CBs step in. SO, the investors know that they can always sell to the CB. The CBs tend to buy & hold rather than churning to make a few cents.
    Everyone and their cousin are claiming that stocks are going to crash. The CBs have upheld prices and killed volatility. As long as the CBs continue to pump in $300 billion a month , asset prices may very well stay up.

    The S&P is firmly in lock step with the printing press,
    Who knows how long that can be maintained?
    6/11 The five biggest tech stocks lost nearly $100 billion in value on Friday – CNBC

    "Unsecured households, Auto loans and Student debts. Outstanding debt for each one of these categories exceeds $1 trillion and growing. But not only are the debts growing but so are bad debts. Eventually most of these debts will become bad debts with no chance of ever being repaid. Also, US corporate debt is growing and is up $8 trillion since 2010."

    The resource economies have been especially hard. Canada, Australia, Venezuela, Saudi Arabia, et al. Australia is particularly tied to the fortunes of China.
    "The abrupt end to the commodities supercycle drove the RBA to join the global currency war. The mining-dependent nation’s economy was so debilitated that policy makers felt they had no choice but to ease financial conditions. In February 2015, after an 18-month honeymoon, the RBA reduced its official rate to 2.25 percent, marking the start of a cycle that ended last August with the fourth cut to a record low of 1.5 percent."

    "Two resource-rich economies reacting similarly to body blows is intuitive enough. They eased the pressure on their given economies.

    How they’ve landed in their current predicaments is less easy to explain. Propelled by soaring home prices from Sydney to Toronto to Melbourne to Vancouver, Australia’s household debt-to-income has hit a record 190 percent, the highest among developed nations; it is trailed closely by Canada, which has a 167 percent ratio.

    To put this in perspective, at the peak of the housing bubble, debt-to-income in the U.S. peaked at 130 percent."
    "Of course it’s acceptable to build infinitely high levels of debt -- as long as rates never rise. But then there's the inconvenient truth that when the price of the collateral backing those millions of subprime mortgages cratered, those irrelevant debt loads became relevant overnight."
    "Some policy makers have begun to push back against the conventional stupidity. “Sometime between now and Armageddon, interest rates will go up,” warned Australia’s Treasury Secretary John Fraser on May 30."

    "World Economic Forum, which said longevity and lackluster investment returns will viciously collude to create a $400 trillion retirement savings shortfall in 30 years’ time."
    So, everybody took on debt in the good times and now, they don't know what to do about high debt loads,,, other than pray for continued low interest rates.

    6/12 US Fed to raise rates despite sluggish economic data – Yahoo!
    6/12 Baby boomers blame Millennials for perceived ills in economy – My Budget 360
    The blame-game is just getting started.
    6/12 Puerto Rico warns it may grab sales-taxes claimed by bondholders – Bloomberg This is the kind of action that will really spook debt holders.
    6/12 Desperate retirees reach for yield – BaWerk Eventually, they will reach for the suicide pill.

    6/12 Macron landslide amid record 50.2% abstentions: peak Macron already? – Mish
    6/12 Osborne says Theresa May is a ‘dead woman walking’ – Guardian
    6/12 Is another Spanish bank about to bite the dust? – Wolf Street

    These are just a few examples of the blinding speed of change.

    6/09 Drug overdoses now the leading killer of American adults under 50 – Zero Hedge The same is true for suicides in Japan.

    "The derivatives are the black holes of financial engineering, and can easily consume all the physical wealth and all the money in the world, and still be bankrupt. Gordon Brown's demand of $500 billion for the IMF is enough to bankrupt several nations, but pitifully inadequate to deal with the derivatives. "
    "It is time to lift the crushing weight of derivatives from the backs of humanity before the world economy and the major nations collapse into irreversible chaos and war, as seen during the 1930s."

    "5) Derivatives are fictitious capital. No matter what type of derivative contract an investor buys, his money flows into the US credit market. As a result, while derivatives give investors the illusion of worth, they are in fact backed by the largest credit bubble in the history of mankind. Their real worth is zero (hence they are fictitious capital)."

    Italy; " Italy has one of the most indebted governments in the world. It’s borrowed over $2.4 trillion. Its debt-to-GDP ratio is north of 130%. (For comparison, the US debt-to-GDP ratio is 104%.)

    But the situation is actually much worse.
    GDP measures a country’s economic output. However, it’s highly misleading. Mainstream economists count government spending as a positive when calculating GDP. A more honest approach would count it as a big negative.
    In Italy, government spending accounts for a whopping 50%-plus of GDP."
    "You see, the European Central Bank (ECB) has been printing money to buy Italian government bonds hand over fist. Since 2008, the ECB and Italian banks have bought over 88% of Italian government debt, according to a recent study."
    "talian government bonds are, without a doubt, in super-bubble territory. It won’t be long before a pin pricks this bubble and… pop.

    That could happen soon.
    Earlier this month, the credit rating agency Fitch downgraded Italy’s credit rating from BBB+ to BBB."
    " If the ECB stops buying Italian government bonds, who will step up? The answer is nobody… Italian banks are already completely saturated with government bonds.
    Germany wants the money printing to stop. Italy wants it to continue."
    " Once the ECB—the only large buyer—steps away, Italian government bonds will crash and rates will soar.

    Soon it will be impossible for the Italian government to finance itself.
    Italian banks—which are already insolvent—will be decimated. They hold an estimated €235 billion worth of Italian government bonds. So the coming bond crash will pummel their balance sheets.
    It’s shaping up to be a lovely train wreck."
    " The Financial Times commented on what would happen if the EU were to collapse:

    It would probably lead to the most violent economic shock in history, dwarfing the Lehman Brothers bankruptcy in 2008 and the 1929 Wall Street crash.

    A crisis in Europe would send a lethal lightning rod through the world’s currency and stock markets."
    This Super Bubble Is About to Pop | International Man
    So, we're going to have a supernova, an ice age and a lightning rod,,, while flying blind, jacked up on monetary Viagra, through a casino loaded with debt-bombs.
    This Super Bubble Is About to Pop | International Man

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  • Danny B
    FED funds rate,, june 14 meeting... reinstatement of Glass-Steagall

    ALL governments eventually default. Loaning money to the U.S. federal government is considered risk-free. Since it is risk-free, all other investments must reference off of the FED funds rate. Lowering the rate essentially pumps money into the economy. When the BRICs burst on the scene and killed out manufacturing base, Greenspan responded by lowering the rates to make up the difference ,,, the lack of money in the lower loop.

    The lower loop continues to fall in discretionary spending. The consuming population continues to fall. Raising the prime rate is essentially deflationary because it removes "money" from circulating in the economy and attracts it to GOV bonds. The FED is scared witless (they are generally witless anyway) of deflation. Volker raised the rates to <21%> to combat inflation.
    The FED lowers the prime rate to goose the economy. The economy has been "goosed' for several years now. Cheap money does NOT make up for lost jobs and lost wages.

    The FED desperately wants to raise rates so the that,,, they can lower them in the next crash. Problem is; the last crash never ended. It just got put on "hold" by the money pumping.
    June 14 is the next FED meeting. They are looking to raise rates. If they raise rates, this attracts capital from all over the world. The dollar goes up, This kills our exports AND screws every country that has dollar-denominated debt to repay. The U.S gets a cold and the rest of the world gets diarrhoea.
    It also makes it more expensive for GOV to service sovereign debt. This puts Trump at loggerheads with the FED.

    The FED can raise the prime rate but, this does not mean that the banks will raise rates. There has to be a demand for credit.

    Here is payroll growth vs the FED funds rate;
    They can't effectively raise the cost of money when people are losing their jobs and income.

    "Next Wednesday, the Fed will likely press forward on its mission to raise rates and cut its balance sheet. But, assuming it makes this move (as widely expected), it will be the first time in 80 years it has pursued this kind of policy amidst such tumultuous economic conditions."
    The Federal Reserve Hasn?t Enacted This Policy in 80 Years

    The FED MUST increase the money supply by about 2% a year to supply liquidity for hordes of speculators that don't actually produce anything,,, but want to eat anyway.
    The producing loop had a huge downturn to the FED had to print like crazy.
    In figuring out it's actions the FED uses the Taylor Rule to adjust interest rates. The Taylor rule takes into account the employment figures. The current employment figures used by the FED are comparable to a buffet served out of a cesspool. The FED has missed EVERY downturn and recession. They have some 200 PHDs working for them.

    The FED is desperate to raise rates BUT, raising rates may very well set off the recession that they are preparing to cope with. The FED has killed interest-income. With a little lick, they can kill the markets too.

    The upper loop has been generating boatloads of financial assets and they feel quite rich.
    "The 200 bubble blown by Greenspan was bad, the next one by Bernanke was horrible, but this one by Yellen may well prove fatal. At least to entire financial markets, large institutions, and a few sovereigns.

    It's essential to note that more than two-thirds of the net worth tracked in the above chart is now comprised of ‘financial assets.’ That is, paper claims on real things. "
    Things started to crash in early 2016 and the CBs rode to the rescue. The price of rescues keeps going up and up.
    The stock market is going down and down in spite of all the money pumping.
    EVERYTHING done to boost the economy has been done to support the speculators at the expense of the laborers.

    The banks buy the politicians with OUR money and they all have a merry little party. They lose sight of the fact that the financial loop is nothing without the productive loop. The party eventually becomes totally corrupt with the politicians leading the way. The bankers can at least claim that they have a legitimate profession.

    "I have often pointed out the fate of the city of Mainz. They had their technological boom with the invention of the printing press there. The politicians couldn’t wait to spend tax money assuming the business cycle would never end. So they spend the money before the taxes were due and borrowed against future tax revenues. The debt quickly became a Ponzi scheme issuing new debt to pay off the old as we are doing today. The interest kept rising so they just raised taxes. The rich began to leave and the city was quickly left with the people who didn’t really pay taxes. The bubble burst when they could not sell the next new issue of debt to pay off the last one. The city defaulted. The Pope excommunicated the politicians. And eventually the city was simply sacked and burned to the ground.

    Politicians are the scourge of human society. They are the great destroyers of civilization and the instruments of war. "
    "People champion gold standards as if this would solve anything. The common fault is not what we call money, it is always, and without exception, those who we put in charge of it."
    " Illinois as of June 1, on a combination of a state government budget impasse and a seemingly unstoppable unfunded pension obligation that has now ballooned into at least a $130 billion shortfall. You better get out of the State before it is too late."

    "For 66 years the Glass-Steagall act reduced the risks in the banking system. Eight years after the act was repealed, the banking system blew up threatening the international economy. US taxpayers were forced to come up with $750 billion dollars, a sum much larger than the Pentagon’s budget, in order to bail out the banks. This huge sum was insufficient to do the job. The Federal Reserve had to step in and expand its balance sheet by $4 trillion in order to protect the solvency of banks"
    "So, what we can say about the repeal of Glass-Steagall is that it turned a somewhat egalitarian democracy with a large middle class into the One Percent vs. the 99 percent. The repeal resulted in the destruction of the image of the United States as an open prosperous society."
    Thank You Bill Clinton.

    "So, where is there any democracy when the One Percent can cover their losses at the expense of the 99 Percent, which is what the repeal of Glass-Steagall guarantees?"
    " was present when George Champion, former CEO and Chairman of Chase Manhattan Bank testified before the Senate Banking Committee against national branch banking. Champion said that it would result in the banks becoming too large and that the branches would suck savings out of local communities for investment in traded financial assets. Consequently, local communities would be faced with a dearth of loanable funds, and local businesses would die or not be born from lack of loanable funds.

    I covered the story for Business Week. But despite the facts as laid out by the pre-eminent banker of our time, the palms had been greased, and the folly proceeded. "
    "US Representatives Walter Jones and Marcy Kaptur and members of the House and staff on both sides of the aisle, along with former Goldman Sachs executive Nomi Prins and leaders of citizens’ groups, have arranged a briefing in the House of Representatives on June 14 about the importance of Glass-Steagall to the economic, political, and social stability of the United States. Let your representative know that you do not want the financial responsibility for the reckless financial practices of the big banks. "

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  • Danny B
    The poison slowly spreads through the system

    I found an excellent article on cryptocurrencies. Purportedly, Bitcoin has value because the number than can be mined is strictly limited.
    BUT, "But let's not forget that there are over 700 cryptocurrencies, digital coins, and altcoins in existence today and there will be over 1,000 by the end of the year, so this argument (limited supply)will not hold in the test of time for the cryptocurrency ecosystem itself."
    Cryptocurrencies: Intrinsic Value Boil Down

    Jim Rogers, “Well, it’s interesting because these things always start where we’re not looking. In 2007, Iceland went broke.
    People said, ‘Iceland? Is that a country? They have a market?’ And then Ireland went broke. And then Bear Stearns went broke. And Lehman Brothers went broke. They spiral like that.
    Always happens where we’re not looking. I don’t know. It could be an American pension plan that goes broke and many of them are broke, as you know. It could be some country we’re not watching. It could be all sorts of things. It could be war. Unlikely to be war but it’s going to be something. ”
    Jim Rogers Warns Next Crisis Will Be "Biggest In My Lifetime" | Zero Hedge

    "Goldman Sachs tried to calculate China’s real debt load last year, and came up with 250% of GDP. And as Bloomberg reported in April, a rash of bankruptcies are unearthing hidden debt and suggesting that the true debt load in China’s corporate sector is much higher than previously believed.

    What can be done once the crisis arrives? The Fed, with interest rates near zero and its balance sheet still swollen at $4.5 trillion, will probably be powerless to mitigate the fallout from the coming crisis, Rogers said"
    "Springing forth from the financial turmoil, the political turmoil that ensues could topple governments, or lead to the demise of other venerated institutions, be they investment banks or universities."
    “You’re going to see institutions that have been around for a long time - Lehman Brothers had been around over 150 years. Gone. Not even a memory for most people. You’re going to see a lot more of that next around, whether it’s museums or hospitals or universities or financial firms.”

    "An inverted yield curve, which has correctly predicted the last seven recessions going back to the late 1960's, occurs when short-term interest rates yield more than longer-term rates. "
    "And when asset bubbles are starved of that monetary fuel they burst. The severity of the recession depends on the intensity of the asset bubbles in existence prior to the inversion."
    "The inversion and subsequent recession that began in the year 2000 caused NASDAQ stocks to plummet 80%. The next inversion engendered the Great Recession in which the S&P 500 dropped 50% "
    "the yield curve should invert around the end of 2017. Market chaos and another brutal recession should soon follow."
    "There will be unprecedented volatility between inflation and deflation cycles in the future due to these factors."

    6/10 Illinois bonds fall as budget impasse pushes rating toward junk – Bloomberg When they fall to junk, all the funds will have to sell off Illinois bonds. Their charter does not allow them to invest in junk bonds. What does that imply for other States?

    "The basic idea is that Schiff will be proven right in the end. Eventually a financial crisis in the US will see capital flee elsewhere. You see, his basic premise is correct. The US is in financial trouble for all sorts of reasons. But it remains the world’s financial safe haven. Any American crisis still leads to a surging dollar. For now."
    "Greek GDP is around US$200 billion. The US state of Illinois is about four times the size. Their governments are both in dire financial straits for the same reason, but we only hear about Greece. I think Illinois will prove far more important to you in the end."
    "Illinois hasn’t had a budget for two years. The governor of the state declared it to be a banana republic thanks to its government’s complete lack of credibility. Debt ratings agencies have downgraded Illinois bonds eight times in recent years. The state’s treasury is refusing to pay its basic bills, with the unpaid amount over US$14 billion."

    "But Illinois’ debt-to-GDP ratio is below 20%. So what’s the problem? " " The state owes impossible amounts to former and future employees. But these aren’t counted in the official debt statistics."
    "And there are states in even worse positions than Illinois. Three in particular – Massachusetts, Connecticut and New Jersey." "According to the Government Accountability Office, state tax revenue as a per cent of GDP won’t be back at 2007 levels until 2047!"
    "In aggregate, the 564 state and local systems in the United States covered in this study reported $1.191 trillion in unfunded pension liabilities (net pension liabilities) under GASB 67 in FY 2014. This reflects total pension liabilities of $4.798 trillion"

    "what is really going on is that the governments create a binding contract with their employees to loot – at some point in the future – the general taxation funds to cover the shortfalls on these contracts. How much looting is on the pensions liabilities? Take the unfunded liability estimate of $4.738 trillion. And consider that in 2014, total revenues collected by state and local governments stood at $1.487 trillion. Pensions deficits alone amount to 3.2 times the [governments’] income."
    A bit more info on Illinois. "A federal judge has now intervened ordering the Comptroller to now prioritize who it pays. This is turning into the clash of titans – the epic battle between medical expenses that constantly rise regardless of the business cycle and state employees demanding pensions."

    "Banco Popular’s senior bond holders get their money back while shareholders and junior bonds get wiped out.

    But it’s all a practice run for the main event – rescuing Italy’s banking system. The toxic real estate loans there dwarf Spain’s."
    "shareholders and junior bonds get wiped out."
    Every time that they pull something like this, other banking shareholders dump their shares. Then, the bank runs low on capital and,,,,, crashes for lack of liquidity.

    "Illinois bonds fall as budget impasse pushes rating toward junk" So, what happens when the upcoming debt and budget battle goes to stalemate?
    Last edited by Danny B; 06-11-2017, 12:30 AM. Reason: new link

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  • Danny B
    Will the FED bring it all down OR not?

    "central banks are now injecting a record $300 billion in liquidity per month, above the $200 billion which Deutsche Bank recently warned is a "red-line" indicator for risk assets."
    "Central Banks Have Bought A Record $1.5 Trillion In Assets In 2017"
    "Today BofA's Michael Hartnett provides an update on this number: he writes that central bank balance sheets have now grown to a record $15.1 trillion, up from $14.6 trillion in late April"
    "Nothing Else Matters": Central Banks Have Bought A Record $1.5 Trillion In Assets In 2017 | Zero Hedge
    So, how long can / will they keep this up? What would stop it,,, what could stop it?

    The cash has moves into stocks,
    "This is the age old excuse why the current “bull market” rally is set to continue into the indefinite future."
    "The higher the ratio, the more comfortable investors have become holding stocks; the lower the ratio, the more uncertainty there is in the market. Currently, with the ratio at the highest level on record there is little fear of holding stocks."
    6/09 VIX crashes back to 24 year lows – Zero Hedge There is NO volatility because the CBs buy up everything in sight to uphold prices.

    Artificial support like this can NEVER be withdrawn.
    The CBs MUST maintain value but, can do nothing for growth,
    The FANG stocks are the poster child for the economic recovery. EVERYBODY piled in. There are no returns for almost all of the S&P 500. Now, the FANGS are going down.

    6/09 Nasdaq drops 2% as tech stocks tank – CNBC
    The CB can't do much for the consumer, 6/09 Credit card defaults surge most since financial crisis – Zero Hedge
    The FED ended QE and everything fell. They can never end QE but, now, they are talking about shrinking their balance sheet.

    6/08 ECB drops guidance on rate cuts in step toward stimulus exit – Bloomberg
    6/08 Mario Draghi predicts faster growth, lower inflation – Guardian

    They are ALL on drugs.
    NOBODY can afford to cut off stimulus now.
    6/09 Australian rooftop solar installs hit 93MW in May – Renew Economy
    Wait, wait! What about all the oil they found around Coober Pedy?
    6/08 TaaS, an illusion wrapped in a mirage inside a fantasy – Seeking Alpha
    "an illusion wrapped in a mirage inside a fantasy " That could apply to a LOT of things today.

    So, there is no volatility, NO fear. The CBs will pump in liquidity forever. Why are the FANGS falling?
    Alex Jones predicts that the FED will bring it all down to stop Trump.

    Leave a comment:

  • Danny B
    Britain and the election

    The free market is millions and billions of people acting in their own best interests. Communism requires that the State control every facet of production and consumption instead of the individual. Armstrong makes the claim that; "the market is never wrong". Here is an interesting article on the attempts of Corbyn.
    "Corbyn is a full blown neo-Marxist who would love to convert Britain to a modern version of Communism. Instead of guaranteed minimum wages, he wants maximum wage limits"
    "This election illustrated the entire problem I have been warning about. We are facing a generational battle. Ironically, the youth do not quite realize that voting Labour was a vote for the very neo-Marxist policies that have created the crisis we have in pensions going forward. It has been this type of promising manna from heaven with assurances to make the rich pay for it. This is exactly the same policies of Hollande in France, which proved so disastrous"

    "Since the computer has been warning that Sterling can fall back to the 1985 low at $1.03, it was hard to reconcile this with the polls calling for a major landslide for the Conservatives. This is Corbyn’s chance for the big time and you can expect he is going to really muddy the waters because he truly believes in Marx."
    "The problem is the big numbers he hears that CEOs make is stock options typically more so than salary. Nevertheless, in his mind if everyone is reduced to the same wage, somehow that will solve everything. Nobody should earn more than he thinks is appropriate. "
    "His policies would be the final straw that ends Britain as any type of financial capital whatsoever. With Corbyn in Britain and the EU insanity on the Continent who wants to outlaw short-selling, the pound will not survive even to be a hedge against the Euro."

    "The real question is somehow the market is always correct and forecasts the future with extreme precision."
    "What the youth have done looks very well like fulfilling what our computer has been projecting – the fall of the British pound long-term."

    So, the Pound is toast. What about the Euro?
    "ECB stops buying since it owns 40% of Eurozone sovereign debt, and (3) a compromise with Germany who is against surrendering the power to issue debt to Brussels. The policies of Merkel have been to maintain the single currency at all costs, but there will be no single debt."
    "The central bank’s announcement kept important wording that its bond-buying stimulus program could be stepped up if the economic outlook worsens. This is not very likely, it is simply a statement of denial that the ECB is trapped and in trouble. The entire policy has utterly FAILED to stimulate the economy and has only kept governments on life-support. When the plug is pulled, will their heart stop? That all depends upon finding buyers of government debt to (1) take up the slack that the ECB was buying 40% of all debt and a greater proportion of new debt. Remove the biggest bidder, and you end up with a NO BID crisis."

    NO ONE besides the Central Bank will buy GOV debt. In a general sense, sovereign debt was created to support socialism. The Eurozone is going to get a hard lesson that; you can't borrow money to support socialism. You can print it debt-free but, you can't borrow it.
    In America, the CB created money to support wars,,, and then, the money was cycled through the economy to support socialism.

    China is creating debt-free (essentially) money to support productivity. Will the Eurozone follow their lead when push comes to shove? When all confidence is lost in the sovereign bond market, will the ECB just print up what is needed? I suspect that is a "bridge too far".

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  • Danny B
    Household debt

    Student debt, "When Obama left office, they had one set of default figures, and subsequent to his departure another set were introduced and the figures were significantly higher. What is the real default rate? It’s likely that half of the loans are highly delinquent over 60 days or defaulted."
    "what was interesting about their (Japan)bubble and real estate is that real estate prices became wildly inflated and they were issuing 100 year mortgages. If the person borrowing money died, his wife could inherit the mortgage and when she died the children would inherit. "
    Financial Repression Authority

    Household net worth, Household Net Worth Hits A Record $95 Trillion... There Is Just One Catch | Zero Hedge
    "The share of families in debt (those whose total debt exceeded their total assets) remained almost unchanged between 1989 and 2007 and then increased by 50 percent between 2007 and 2013."
    "And there is your recovery: the wealthy have never been wealthier, while half of America, some 50% of households, now own just 1% of the country's wealth, down from 3% in 1989, while America's poor have never been more in debt."
    "The above is particularly topical at a time when either party is trying to take credit for the US recovery. Here, while previously Democrats, and now Republicans tout the US "income recovery" they may have forgotten about half of America,"

    "What does it mean for the global economy to be “broken”? It means that its gains are going to the top. “Bad” growth. A rich man parks his money in a hedge fund. That creates quite literally nothing. A poor man educates his kids, creating jobs, trust, human capital, more intelligent citizens, and so on. So economies grind to a halt when gains flow only to the top. While “countries” are “getting richer”, that is a statistical abstraction. It’s truer to say that the rich within countries are getting richer faster than the poor, and so globally the eonomy is grinding to a halt."
    Much of the article is bunk.

    Steve Keen, “Expenditure is what causes income,” he said. “Reducing expenditure also reduces income.”

    “Expenditure is what causes income,” he said. “Reducing expenditure also reduces income.”

    “Individuals can save (without a significant effect on national income), but if you extrapolate that to the whole economy, you are going to make a huge error.”

    Similarly, the economist says the idea that the government can save by paying down the national debt is misleading.

    “Believing that government saving will increase employment or growth is like believing the Earth sits at the centre of the universe”, he says.

    All it does is destroy spending which would otherwise have created private sector incomes.

    “If you don’t understand where income comes from, then it means you don’t understand economics, or the economy.”
    "Professor Stephanie Kelton, economic advisor to Bernie Sanders and former Chief Economist of the US Senate Budget Committee says treating Federal Government as if it has to abide by the same rules as states and cities, let alone a household budget, demonstrates “a fundamental misunderstanding of the way currencies work”.
    Keen and a few others argue for GOV to supply the money that the producing economy needs. The current, common arrangement is to supply money that the speculators need.

    GOV created coco bonds To soften the crash of any bank. The Spanish bank crashed with blinding speed and the bonds never came into play. This same speed can be expected when the default cascade kicks off.
    We've greatly surpassed the 2007 bubble. We're in the home stretch to surpass the 2000 bubble.

    So, if FED GOV does not issue debt-free money, the meltdown will continue to get worse. If FED GOV does issue debt-free money, the bankers will be out of business,,, to a great degree.
    You can bet that congress will blow the whole system.

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