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  • Danny B
    Not to worry, the economy is expanding

    4/08 Americans are taking out the largest mortgages on record – MarketWatch
    4/08 Eurozone house price inflation at 9-year high – Morningstar
    4/07 San Fran so expensive that tech workers can’t afford it – CNBC
    4/08 ECB sticks with ultra loose monetary policy – Handelsblatt
    4/08 Consumer credit accelerates again as credit-card debt tops $1 trillion – MarketWatch
    Americans owe over $1.4 trillion in student loan debt,
    The US closed out 2016 with just shy of $1.2 trillion in outstanding auto loan debt

    Obummer ran the debt clock up to $20 trillion. It turns out, he was tight with money. Our ENTIRE system only works with debt growth.
    "the U.S. government (led by the Tea Party) cut discretionary spending to the bone. Remember the 2013 budget sequestration? All of that hullabaloo caused the government to shrink from 2011 to 2015."

    "Well, the reality is much of the spending that caused the increase in overall debt was the result of automatic stabilizers - unemployment insurance, etc… Although Obama probably wanted to spend much more, he didn’t. And this is one of the reasons the U.S. economy experienced its weakest post recession recovery. Just look at that chart above. Over the past three decades there has never been a government spending decline of that magnitude."
    "See the slight leveling off in 2007? That is the horrific debt de-leveraging that caused the greatest financial crisis since the Great Depression."
    " In a balance sheet challenged economy, the moment you cut spending, the paradox of thrift kicks in, and the economy rolls over. This is a lesson Japan has learned all too well over the past couple of decades. Not believing Japan’s example, the U.S. repeated the error after the credit crisis of 2008. "

    "This has encouraged too much borrowing. We have piled more and more debt on the problem. The trouble is that we have done this for so long, the consequences of allowing the cycle to play out has become catastrophic."
    "The pain that would accompany a true debt destruction reset would be too immense. The amount of social upheaval and instability would probably mean the end of the Western world as we know it."

    "That leaves the one tried and true solution. For thousands of years when societies have gotten in trouble with too much debt, they have solved their problem by printing their way out of it. To think the modern day situation will be any different is naive."
    "But what’s going to happen the moment things look dicey again? The governments and Central Banks will inflate. We saw it with BREXIT. We saw it with Eurocrisis of 2011. In fact, governments are becoming more and more quick to step on the gas pedal."

    "Yet today, I have come around to the idea that the debt problem is so pervasive, there is only way one forward - inflate. We are going to end up there anyway, so let’s just inflate away the burden and restart with a system that prevents this from ever happening again." That would be gold.
    " It is only a matter of time before they are simply dropping cash right into individuals bank accounts.

    I wish I could take credit for this, but it was Bill Fleckenstein who said it first. They will keep printing until the bond market takes the keys away."
    The FED is now buying the bonds.
    "The true end game won’t come from weakness, it will come from strength. What happens when economic growth picks up and causes inflation? "
    Economic growth is not going to pick up without higher wages and more workers.
    "Eventually we will hit a point where governments will be unable to raise rates because it would crush their balance sheet, yet inflation will dictate rates be higher. This will be checkmate. Governments will have no moves. Inflation will soar,"

    Debt growth is now parabolic. Wages are stagnant. The Central banks are on a death march. They are deathly afraid of deflation. Their only viable? tool is inflation. They are NOT able to inflate wages. So every move they make raises prices for the wage earner. They can only cause growth by funding liar-loans on grossly overpriced houses and cars and stocks. The very act of funding these things causes the prices to rise.
    As price inflation rises, the bond vigilantes demand higher interest rates. The FED must continue to buy the bonds that the investors shun. Since "all"
    interest rates are tied to the 10-year note, the FED has locked most of the economy into ZIRP.
    With ZIRP, all the funds die. Without ZIRP, GOV and the corporate sector die.
    Simply inflating the money supply isn't going to fix the problems.

    "See the slight leveling off in 2007? That is the horrific debt de-leveraging that caused the greatest financial crisis since the Great Depression."
    That brings us to Donald Trump. The inception of the welfare-warfare State in the mid 60s blew out the system. By 1971, the gold standard had to be abandoned. We've spent $25 trillion since the 60s to end poverty.
    Trump has inherited the flawed system that requires a huge growth in debt just to stay in one place.
    Nixon should have revalues gold / devalued the dollar. He didn't and now we are coming to the reset. Big, Bad, Bald Ben Bernanke came out and said that the FED caused the great depression I. The FED tightened and brought everything down. You can see the same effect from austerity in Greece. Bernanke said that he could avoid another depression by inflating instead of tightening. Ben feces-for-brains inflated the upper loop and the lower loop was left to twist in the wind. Same in Japan.
    The CB must rely on "trickle down" to inflate the wage-earner loop. That didn't work so now, The CBs are out of tools.

    Trump can't dismantle the 50 year old system without introducing debt-free money. "They" aren't about to let that happen.
    "What you will learn is that neoliberal economics is an apology for the rentier class and the large banks that have succeeded in financializing the economy, shifting consumer spending power from the purchase of goods and services that drive the real economy to the payment of interest and fees to banks. "

    The World’s Best Economist -

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  • Danny B
    Notes on the EU

    The technocrats envisioned the European Union as a techno-fascist bundling of European States MINUS any democratic control.
    Beyond a Failing European Super State : Waking Times

    It is hard to understand how a techno-fascist rule could be overlaid on an emerging socialist conglomeration. The techno-fascists were warned personally by Martin Armstrong that no currency union had ever survived if it didn't also have a debt union. They figured that they would just work it out later. Using wishful thinking for long range planning is unlikely to be successful. Ignoring human nature is a guaranteed recipe for disaster.
    Locking the various tribes of Europe into a common currency was predestined to fail.

    The eurocrats locked the various States into mandatory limits for debt. When there was no possible way to meet these limits, the ECB just got an IOU from them.

    80 central banks are DUMPING the Euro
    Flight capital has moved in this way ever since the financial crisis of 2008/09. Unfortunately, the amounts are now so large that no Eurozone jurisdiction can be said to be financially stable. What amounts to a systemic run on the weaker members of Eurozone banking system is deliberately concealed by the ECB’s intra-jurisdiction settlement system, TARGET2. The chart below is of the TARGET2 imbalances between the Eurozone’s national central banks, which at the end of February totalled a record €1.08 trillion

    So, the weaker States are about a trillion in the hole. Strangely enough, Germany seems to have an extra trillion.
    In effect, the ECB is using the settlement system to conceal the scale of capital flight.
    "Britain leaving the EU will expose a hole in the EU Commission’s budget of about €8bn, out of a total annual spend of €145bn. Of that total, roughly €136bn is committed to redistributions between member states. The EU Commission itself spends the balance, about €8.5bn, on its own administration and projects,
    €8.5b for P.O.S. bureaucrats.
    There is a further problem. Brussels has spending commitments over and above the official budget, which at the end of 2016 stood at a massive €238bn These are commitments incurred but not yet paid for, reste à liquider in the jargon. It includes capital projects and various items such as future pension liabilities for Commission staff. DO NOT FORGET THOSE GOLD-PLATED PENSIONS.

    A recent development is the appearance of a deficit on the ECB’s own books of €178bn, which, according to the ECB, has arisen from purchases through the ECB’s Asset Purchase Programme.
    the ECB’s asset purchase programme effectively financed all Italy’s debt requirements last year
    The credits and deficits within TARGET2 first attracted public attention in 2012, particularly in Germany, where the Bundesbank appeared to be on the hook. The issue is now likely to resurface, with the Bundesbank’s surplus getting on for nearly a trillion euros.

    The greatest threat to someone in a debt trap is to have the interest cost rise. And not only does the cost of financing and refinancing maturing debt threaten to rise exponentially, but the debtor is increasingly forced into short-term funding. For this reason, rising interest rates are the beginning of the end for countries like Greece and Italy.
    As with all bad ideas, the EU and its currency will find monetary or systemic collapse is the final consequence of all constructions founded on fallacious expediency.

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  • Danny B
    investment overshoot

    The FED tries to stop corrections in the markets. Everybody takes this as a "no lose" ticket to invest without worry. By trying to inspire confidence, the FED has managed to create runaway over-confidence. Stocks are bought by paying a "down payment" and the rest is conjured up. The difference is referred to as "margin debt". The FED pumped in many trillion dollars into markets and irrational exuberance took over from there. Margin debt is north of $500 billion.
    The FED has primed the pump and irrational exuberance has taken over.
    BUT, debt creation has gone parabolic so, it is doubtful that it can all go on.
    The New Scariest Chart In The World (For US Stock Investors) | Zero Hedge

    The notional value of the interest rate swaps are about $ 400 trillion. These swaps are coming under strain as interest rates rise. "The Interest Rate Swap Derivatives Market is Coming Under Strain As Foreign T-Bond Dumping Has Begun:"
    Has the END GAME Begun? | Jim Willie | Silver Doctors

    We have the biggest stock bubble in history so, we should have the biggest correction in history.
    The Biggest Stock Bubble In U.S. History | Investment Research Dynamics
    The bankers will probably get out in time and leave the pension funds to take all the losses. Just the same, here is my advice to the bankers,
    Last edited by Danny B; 04-08-2017, 01:14 AM. Reason: misstake

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  • Danny B
    Cost of sugar,,, health,,, entitlements

    Sugar consumption;
    Life expectancy vs healthcare costs over time;
    2 Charts Show How Close The U.S. Is To Healthcare Collapse | Zero Hedge

    Much of the high cost of medical care is because the industry has been "financialized". You can thank the banks for that

    There are a lot of claims about the cost of assistance for the poor;
    "And so based on this, whites only consumed $4,022.13 billion in government, but paid $4,529.52 billion in taxes "
    "That said, the ultimate takeaway is that US budget deficits are entirely a function of non-whites. And that is NOT hypothetical, even after assigning 100% of the military budget to whites."

    Much of our bad health is self-inflicted. The southern States seem to be the fatest,
    Entitlements seem to just keep growing,

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  • Danny B
    Private debt falling, SOMEBODY has to make up the difference

    Part of the reason for massive increases in corporate and public debt is; consumers have cut back on debt growth.
    "Private debt as a share of GDP fell by almost 30 percentage points in the UK between 2008 and 2015, according to the IMF, representing the biggest reduction in the advanced world."
    Debt can never shrink so, public debt has to increase. Global debt explodes at 'eye-watering' pace to hit £170 trillion

    Here are some great charts. Note that chart #6 shows public debt growing to compensate for the fall in private debt;
    Chart # 67 shows that capital inflows have gone negative. there are lots of good charts here but, they can be deceiving. They show household wealth rising steadily on chart # 46. That might be true but, only if you include all the rich households.
    50% Of Americans Live Payday-To-Payday; 33% Can't Write A $500 Emergency Check | Zero Hedge
    "37% of those aged 21-34 in Q4'16 stated they were likely to default on one loan over the next 12 months, up from 27% in Q3"

    "The IIF said total debt levels, including household, government and corporate debt, climbed by more than $70 trillion over the last 10 years to a record high of $215 trillion (£173 trillion) in 2016 - or the equivalent of 325pc of global gross domestic product (GDP)."
    The danger line is said to be at 90% (Reinhart and Rogoff).
    Global debt explodes at 'eye-watering' pace to hit £170 trillion

    It is rumored that stock valuations are soon to crash, Cudmore: "It's Now A Matter Of When, Not If, Markets Break Down" | Zero Hedge Not a particularly new rumor.

    Somehow, tax collections are at an all-time high. 96 million Americans are not in the labor force. As long as GOV continues to pump liquidity into the markets, taxes go up.

    "Which leads to three inescapable conclusions:

    1) Interest rates can never rise because rolling over this much debt at historically-normal rates would blow up the budgets of both the developed and developing worlds.

    2) The only solution – if you can call it that – is massive currency devaluation to make these debts manageable.

    3) Since the debt binge has apparently gone parabolic, the reckoning is fairly close at hand. 2018 might be one for the history books. "
    Yep, #2 seems to be in the works.

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