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  • Sliding downhill to a smaller world

    Automation won't be so much of a trigger as it will be a constant pressure.
    Bangladesh needs 2 million new jobs every year but, automation is cutting into all employment.
    The Industrial Revolution has been chipping away at job niches for more than a century.

    Robots will steal your white collar office job, too: 3 case studies ...
    Robots do destroy jobs and lower wages, says new study - The Verge

    The trigger is most likely to be State spending to support people who have lost all or part of their income to automation. Italy is blowing out their budget to try to give some support to the poor. They will most likely blow the EU apart.
    44 million Americans receive direct government support. 51% of Americans receive a check from the State. When the sovereign bond market blows, most of this support will come to an end. This public support is compensation to offset the loss of income. It won't be automation directly that blows up the sovereign bond markets. It will be the remedy for automation that blows the system.

    Post WW II, America had 3% of the population and, 50% of the manufacturing capacity (ex iron curtain States) We lost that lock on manufacturing and aggregate income has fallen proportionately.
    The computer has accelerated a process that began decades ago.

    In the very crowded populations, 20% of seagulls are lesbian. Mother Nature has mechanisms for reducing population. Japan is the perfect example where they have even lost the desire for sex. The fertility rate in China is only 1.6 Most people realize that price inflation and resource depletion will bring us a lower standard of living. The whole world (ex sub-sahara Africa) is reducing their birth rate. This is completely incompatible with the demands of a debt-money system AND, the credit bubble.
    The major CBs printed mega-pixels of new debt-money to try to compensate for the huge drop-off in consumption.
    10/18 America’s $1.5 trillion student-loan industry is a ‘failed social experiment’ – MW
    The debt bubble will blow when it is generally recognised that only debt-free money can keep it inflated. The FED prints debt-money but, the GOV has no ability or intention of paying it back. Last year, we paid $1/2 trillion in interest on public debt. It remains to be seen just how long the debt markets will allows the payment of interest-only with no hope of a return of principle. As interest rates climb, that $1/2 trillion will grow considerably.

    No money,,,,, NO kids
    10/19 Nearly half the world lives on less than $5.50 a day: World Bank – PhysOrg
    EVERYONE assumes that; when things crash, the CB printing press will come to the rescue. I'm somewhat doubtful.
    10/18 Saxo Bank outlook: A new easing cycle based on ugly realities – Mondo
    10/18 Guggenheim: “By Q2 2019, expect risk-off everywhere with a 40% crash” – ZH
    Buy more popcorn.
    10/18 US stocks resume their decline – CNBC
    Stocks had a short-lived dead-cat bounce but, they haven't stopped falling.

    10/18 China’s stock market getting pummeled; that’s bad news for US markets – CNBC
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    Posted Oct 19, 2018 by Martin Armstrong

    The Sovereign Debt Crisis in China among the provisional governments is alive and well. The off-balance sheet government liabilities in the regions amounted to an estimated 40 trillion yuan which is almost $6 trillion. Some are calling this a “gigantic credit risk” which is a hidden liability. This represents 60% of GDP which bypasses the debt-to-GDP ratio set by the central government on the provinces. "
    So, what happens to unemployment when this all blows?

    The banks were first in line for free money. 0% money from GOV. This is in addition to all of YOUR savings that they speculated with. They bought up everything with that money and,,,, jacked up the price before they resold it to the end consumer.
    This price inflation purely from speculation is what drove down the purchasing power of your wages. It is also the basis for the income inequality.
    Here is the graph,
    "Modern economies depend on a thriving financial sector, and the U.S. finance, insurance and real estate (FIRE) sector now accounts for 20 percent of GDP — compared with only 10 percent in 1947. But many observers believe that this expansion of the financial sector comes at a high cost"

    OK, but, how do you do a financial evaluation of a parasite that produces nothing?
    "They" make up a fictional value of what all this speculation is worth and, ADD it to the GDP.
    Last edited by Danny B; 10-19-2018, 03:52 PM.


    • My solution

      Originally posted by wayne.ct View Post
      ... What will break the cycle? My answer? Reduce the confiscatory taxes and regulations. How can that happen? Only when the corruption at the top is remedied. That could happen at any time. It only takes someone with police authority to arrest the criminal element in the structure. Do they have the spine or are they all weak, compromised and/or corrupt? How does AI fit into this picture? AI is a tool to increase productivity. It is not an independent "solution" or a means that really solves anything important. ...
      How does AI fit into this picture?
      Obviously have AI do this.

      ... arrest the criminal element in the structure.
      Yeah, I know. Sounds easy. Gotta watch for unintended consequences.

      Know a cure for greed?




      • Watch Powell, The dragon is eating itself

        Trump means what he says when he states that he is going to make America great. He is fully prepared to walk over the bodies of our competitors.
        Next, we have Powell. HE is the person to watch. There is universal agreement that Powell will reverse course when the bubbles start to melt down. Trump argues against him but, is that all for show? Armstrong said that America would be the last to go down. Trump and Powell seem to be prepared to carry this out. The R.O.W. had in excess of $13 trillion in dollar-denominated debt.
        "just look at what’s happened with Emerging Markets because of a tightening Federal Reserve, a stronger dollar, and drying liquidity.
        Don’t forget – a dollar shortage is synonymous with disappearing liquidity. Which means we can expect more violent and sudden market crashes to occur – just like we saw over the last two weeks.
        Stock markets (and bond markets) around the world took big losses."

        "Not to mention the cost of borrowing short-term dollars via LIBOR (aka London Interbank Offered Rate) is indicating aggressive financial tightening.
        Take a look at the 3-month U.S. dollar LIBOR rate – it just had its biggest one day jump since late May.
        And even more startling – it’s now at its highest level since 2008."
        Why is everybody so fascinated with the 2008 date?
        "with current tightening policies in place, the cost for borrowing dollars short-term will continue much higher."
        "there was a ticking time-bomb of over $7.5 trillion in debt that’s “highly vulnerable to rising LIBOR rates” (read here). . .

        For instance – I said, “Both corporate and non-corporate business loans and commercial mortgages are about half tied to LIBOR. . . To put this in perspective, a 35-basis point increase could raise business loan interest costs by $21 billion. "
        "But the problem is – the world created much more debt than the Fed’s created dollars.
        Putting this into perspective – for every dollar that’s been printed – there’s roughly 20 times the amount of debt outstanding.
        And most of that debt ended up abroad. Like in the Emerging Markets.
        And everything was fine – as long as the Fed was easing and inflation was low. . ."
        "The Treasury needs more dollars than ever as deficits continue soaring to levels not seen since 2008… The Fed’s ramping up their Quantitative Tightening (sucking dollars out of the banking system). This is pulling out as much as $50 billion dollars a month (or $600 billion a year) … Also – because of the Trump Tax Cuts – we’ve seen corporations take their cash piles back home. This suddenly yanked dollars out of foreign banks"
        "Hence – the dollar shortage problem i.e. there are just simply not enough dollars to go around.

        That is – under the current monetary policy of tightening. . .
        This is why I’m insistent that the Fed will reverse into easing – like pushing rates negative and heavy money printing – much sooner than many think."
        He is claiming that the FED will relent, and, rescue our economic competitors.
        "For example – we’ve already seen in China this year – they’ve had record onshore bond defaults as liquidity dries up."
        The Chinese may think that this is bad but, I doubt that Trump does.

        China is on a roller coaster to financial hell. They claim that they have 6.5% growth. BUT, they count money growth as part of the GDP. The end result.
        Borrowing from Wolf Richter, here are some stats on the stock market and a graph::
        • Lowest since November 27, 2014, nearly four years ago
        • Down 30% from its recent peak on January 24, 2018, (3,559.47)
        • Down 52% from its last bubble peak on June 12, 2015 (5,166)
        • Down 59% from its all-time bubble peak on October 16, 2007 (6,092)
        • And back where it had first been on December 27, 2006, nearly 12 years ago.

        As they fool fewer and fewer people, there is more and more capital flight.
        "how on earth is it possible that in an economy that’s supposedly been growing 6%+ for a decade, stocks have gone nowhere at all? "
        "“There’s a liquidity crisis in the stock market, and pledged shares are again starting to sound the alarm,” said Yang Hai, analyst at Kaiyuan Securities. [..] The fear is that if Beijing does nothing, the self-reinforcing liquidation is only set to get worse: with $603 billion of shares pledged as collateral for loans – or 11% of China’s market capitalization,"
        They desperately need dollars. But, Powell's phone is off the hook.

        "Yes, much of the western wealth has turned into a mirage, but in that respect, too, China has done what we did in a fraction of the time. "

        China was a huge gold buyer. They did everything that they could to depress the price,,, naturally. This may be coming to and end.

        "If global capital was buying empty flats in China, etc., and selling US-based assets, these numbers would be reversed. This suggests mobile capital is leaving China and other nations and moving into US-denominated assets."
        "In summary: follow the money. Smart money is mobile, opaque and constantly on the move seeking safety, tax shelters, yield and capital gains. If mobile capital continues flowing into US assets such that demand exceeds supply, the Bull Market will continue sloshing higher. "
        oftwominds-Charles Hugh Smith: Is the Greatest Bull Market Ever Finally Ending? (Hint: Follow the Money)


        • Italy and China

          Here is a graph showing the cost of capital,
          This is a good article on discounting capital flows.

          "October 19 - Reuters (Massimiliano Di Giorgio): "European Economics Commissioner Pierre Moscovici said on Friday he wanted to reduce tensions with Italy over its 2019 budget,"
          "At least for a few hours, Commissioner Moscovici's comments quelled tensions in the Italian (and European) bond market. "
          That won't last long.
          10/19 Italy’s credit rating cut to one notch above junk – Bloomberg
          10/19 Italy’s budget crisis threatens the entire EU project, strategist says – CNBC

          10/19 “One size fits Germany” math impossibility, get your money out of Italy now! – Mish
          Italy and the EU / ECB are playing a game of "chicken" . There is no possible way for the ECB to win.
          10/19 Italy’s budget crisis threatens the entire EU project, strategist says – CNBC

          A bit more on China. China wanted to slow down the printing presses. Trump put a real crimp in their plans.
          "China's broadest measure of new credit jumped in September, exceeding all estimates, as officials changed the dataset to reflect surging bond issuance amid steps to encourage investment in infrastructure. Aggregate financing stood at 2.21 trillion yuan ($319bn) in September… That compares with an estimated 1.55 trillion yuan"
          " China's September Credit data was an eye-opener. "Aggregate financing" jumped to 2.210 TN RMB, or $319 billion, with system Credit continuing its ongoing double-digit annual expansion (10.6%). September growth was about 40% above estimates and a 45% jump from August "
          Chinese shadow banking is failing and, the Chinese can't let up on the gas pedal. The more that they weaken the Yuan, the more capital flight they will get.
          "This suggests mobile capital is leaving China and other nations and moving into US-denominated assets."
          10/20 Trump’s trade war is forcing Beijing to retreat from its own anti-debt battle – CNBC
          10/20 There has been a ‘debt explosion’ in China for a decade, expert says – CNBC
          10/19 Implosion of stock market double-bubble as China hits new lows – Wolf Street

          It won't be just China. Corporate America is going off a cliff also.


          • The pervasive corruption created by the Central bank

            The river of lies runs VERY deep as the bankers try to maintain their privilege at raping the producer. The most important tool for doing this is the Central Bank. Central Banks were originally created to supply war finance for the sovereign. The gold standard drastically limits the creation of sovereign bonds and, severely curtails war.
            "Until the 1970s, all recorded history showed that bond yields were tied to the general price level, not the rate of price inflation as commonly believed. However, since then, the statistics say this is no longer the case, and bond yields are increasingly influenced by the rate of price inflation. This article explains why this has happened, and why it is important today."

            No mention of the abandonment of the gold standard in 1971.
            "This paper is a follow-up on my white paper of October 2015.[i] In that paper I explained why, based on over two-hundred years of statistics, long-term interest rates correlated with the general price level, and not with the rate of inflation. I now take the analysis further, explaining why the paradox appears to no longer apply."

            200 years,,, about the same amount of time that we have carried the heavy yoke of the CB.
            The article goes into great detail showing why Gibson's Paradox is no longer applicable. The article continually focuses on the role of savers / savings in the finance of productivity. NOT ONE MENTION of the fact that production is financed by the CB and, NOT by savings.
            There is quite a bit to be learned from the article. It essentially proves (without trying) that monetary inflation from the CB has warped every aspect of finance.

            The reason that I bring this up is; the CB was created to finance all the whims of the State,,,, be it war or, socialism. All of this money is channelled through the bond market. After all, when the CB buys sovereign bonds, the State can spend it as it wishes. The author of the preceding article claims that there is a new situation that is different "from all recorded history". The CBs have hyperinflated the bond markets. Armstrong claims that sovereign debt is soon to collapse. "Recorded history" may soon make comeback.

            "The mechanics of the Greenspan put are extraordinarily simple. When the stock market drops by about 20 percent, the Fed intervenes by lowering the federal funds rate. This typically results in a real negative yield, and an abundance of cheap credit.

            This gimmick has a twofold effect of seen and observable market distortions. First, the burst of liquidity puts an elevated floor under how far the stock market falls. Hence, the put option effect. Second, the interest rate cuts inflate bond prices, as bond prices move inverse to interest rates."
            "A portfolio manager could smile in the face of the occasional and inevitable stock market crash because it meant their bond holdings were rising. Then, after a pleasant dip buying opportunity, their stocks would be running back up to new highs. This was the story of U.S. financial markets and money management from 1987 to 2016."
            "But each time, the Fed came to the rescue by cutting interest rates, bumping up bond values, and engineering an extended stock market rally."
            "When stocks go down, bonds go up.
            Somewhere along the lines the flow of funds from stocks to bonds during a market panic became regarded as a flight to safety. But what if, in the year 2018, this flight is no longer to safety; but, to danger?"

            "What may come as a great big surprise in the next market downturn is that this relationship between stocks and bonds is not set in stone. In fact, over the next decade we suspect this relationship will be revealed to have been an aberration."
            Thank the FED
            "You see, the conditions that made the Greenspan put possible are the opposite of the conditions that exist today. Rates are low and are moving higher. The world’s oversaturated with debt. Policies of mass money debasement have bubbled stocks and treasuries out to extremes well beyond what’s honestly fathomable."
            "At the moment, Fed Chair Powell’s even determined to bring it on. We applaud his efforts.

            Yet when push comes to shove, and the Fed lowers the federal funds rate, expect the unexpected to happen. The Greenspan put – the market savior – will be mowed over like a ground squirrel beneath a tractor rotary tiller. The market carnage left in its wake will be grotesque and unrecognisable."
            Don't hold your breath waiting for Powell to lower rates. He means to kill China. U.S. corporate bonds will be collateral damage. BUT, what plan does Powell have for U.S. sovereign debt?

            Here is a short history of the sainted Central banks.

            "TWENTY years ago next month, the British government gave the Bank of England the freedom to set interest rates. That decision was part of a trend that made central bankers the most powerful financial actors on the planet, not only setting rates but also buying trillions of dollars’ worth of assets, targeting exchange rates and managing the economic cycle."
            "central banks have been widely slated for propping up the financial sector, and denting savers’ incomes, in the wake of the financial crisis of 2007-08."

            The State has sanctified the Central Bank because the CB finances the State. Sovereign debt is projected to blow up worldwide. Maybe it wasn't such a good idea to give the CB so much control. The academics claimed that they could smooth out the business cycle if a CB were given complete control over interest rates and the quantity of money. They have failed spectacularly. Anything that negates the business cycle is artificial and temporary.


            • Italy, China, Scientific American & Kunstler

              The bond market is a very well-known animal,,, very predictable. Salvini knows all this. By going head-to-head with the ECB and EU, he knows that investors will shun Italian debt. What is unknown is; how far will he take this?
              10/22 Italy’s banks at risk from widening spread, league official says – Bloomberg
              10/22 The European financial establishment has just declared war on Italy – Genfira

              Italy's Debt Rating Is Cut to One Level Above Junk - The New York Times
              Investors bet against Italian debt as budget fears intensify | Financial ...

              "Italy's bond yields rocketed above 7%. That's a crucial threshold--the bright red line Ireland and Portugal passed before their borrowing became so expensive that the European Union had to bail them out. This time, though, the stakes are higher and the options are more limited. Italy's debt is larger than the whole economies of Ireland, Portugal, and Greece combined. The euro zone simply might not have the political will or financial resources necessary to backstop those enormous obligations. As one analyst pointedly told CNBC, the country is "too big to fail, too big to save."

              "Then, like Venice in the lagoon, it slowly began to sink. Starting in 2001, Italy's GDP growth turned absolutely paltry. It finally plunged below zero during the global recession "
              Italy joined the EU in 1999 and, has been screwed ever since.

              Italy's debt per person, 40,392€
              Debt clock,

              "Ned Davis research writes ….note the red arrow at the top right. Readings above 70 have found us in recession 92.11% of the time (1970 to present). Several months ago, the model score stood at 61.3. It has just moved to 80.04."
              High Probability of Global recession – WorldoutofWhack

              The FED meeting.
              "A Number of Officials Saw Need to Hike Above Long-Run Level

              “A few participants expected that policy would need to become modestly restrictive for a time and a number judged that it would be necessary to temporarily raise the federal funds rate above their assessments of its longer-run level.”
              The long run level is considered to be 5%. Raising above 5% would be high-order demolition. Everybody expects Powell to relent. Your guess is as good as mine.
              "In other words, the Fed is “gonna hike until something breaks” and it will likely break in a credit related area like junk bonds, covenant-light, and leveraged loans.

              Important note: It won’t be one, or another, but all of them at once when “something breaks.”
              Here is a great chart but, you must remember that claimed GDP is just a measure of how much money is in the economy. The financial sector produces nothing but, claims to be 20% of the GDP.
              "Of course, with the Fed hiking interest rates, which is pushing debt servicing costs higher, it is only a function of time until the rate of change in interest rates causes a financial decoupling in heavily levered companies with marginal balance sheets and debt servicing capacity."
              YEP, we can't crash China without a lot of crashing here too.

              "When Alan Greenspan first executed the “Greenspan put” following the 1987 Black Monday crash, markets were well positioned for this centrally coordinated intervention. Interest rates, after peaking out in 1981, were still high. The yield on the 10-Year Treasury note was about 9 percent."
              Imagine what 9% would do today.

              Scientific American weighs in on the fading American dream.
              Imagine the world as a sinking lifeboat. The more States that get pushed overboard, the longer the time before the lifeboat eventually sinks.
              Trump / Powell are pushing heavily.

              Which brings us to Kunstler and, his gallows humor.
              "Thus, the US has decided to get through the approaching winter by setting its house on fire. The two political parties alternately in charge of things are driving around the burning house, stopping at intervals to run Chinese Fire Drills. We call these “elections.” Both parties pretend that the burning house is not a problem.
              He and his party have been piling all the furniture inside the house on the fire, to keep the heat up, rather heedless that flames are starting to shoot out of the attic.
              The other party has no quibble with burning down the house. In fact, this has been the Democratic Party’s sovereign remedy for problems since the War in Vietnam, when it was explicit policy to burn down villages in order to save them.

              So these days they’ve decided to destroy the culture that abided inside the burning house. They’re taking down the draperies and collecting all the clothing and tchotchkes and framed photographs of loved ones, and piling them on top of the burning furniture, doing their bit to keep the heat up.
              You might infer from all this that no matter whatever else the Republican and Democratic parties might do now is not going to prevent the house from burning down. In a month, or six months, or eighteen months, they will be left standing stunned in the ashes. How’d this happen!?! Even the clown cars they were riding around in will be smoldering wrecks. And then the rest of the people of this land can sift through ruins, seeking a few trinkets or useful tools with some remaining value. These people will be entitled to call themselves “survivors.” And they will act like survivors should
              If it happens that the Democrats lose the midterm elections a few weeks ahead, they will jump up and down and holler that the elections were stolen from them, that somebody meddled and colluded to deprive them of victory, and that will amount to throwing just enough gasoline on the still-burning house for one final glorious burst of heat and flame before the rafters crash through the floor. Welcome to the Long Emergency."


              • Slow unwind in China,,, Armstrong

                The unwinding of artificial markets, CHINA.
                " the summer of 2015, when worries about Chinese growth and extreme corporate opacity had shares in virtual free-fall. In just over three weeks, Shanghai stocks lost 30%,
                The exodus of liquidity had Beijing taking a “kitchen sink” approach – literally tossing everything it could think of at short-sellers. Officials slashed interest rates, loosened leverage requirements, bought shares, imposed capital controls, tweaked margin-trading regulations, suspended initial public offerings, allowed punters to put up homes as collateral.
                Despite those Herculean efforts, Shanghai shares are now below 2015 levels. The ongoing $3 trillion rout has the Shanghai Composite Index at the lowest since November 2014.

                "China might make this year’s 6.5% growth target, but at what cost in the long run?
                The yuan’s drop by that same amount – 6.4% –
                Xi is investing trillions of dollars in a “Made in China 2025” scheme to dominate software, artificial intelligence, renewable energies, robotics, self-driving vehicles, high-speed rail, pharmaceuticals, you name it.
                "due for a reckoning."
                Yes, China is a unique development specimen. That will happen when the most populous nation becomes the No. 2 economy well before per-capital income decisively tops $10,000 in nominal terms. "
                There you have it. Wages are just too low for it to escape it's position as an export economy. Wages are too low everywhere. The current minimum Chinese salary is U.S. $ 270 per month.
                Why China Inc is still stuck in 2015 | Asia Times

                Armstrong, "Yes. In all honesty, it was the Debt Crisis that ended the Roman Republic. There was a Sovereign Debt Crisis during the Roman Republic period resulted in a dictatorship and a debt default."
                "A period of excessive concentration of money and large profits came to an end with the rise of the Social War of 91-88BC"
                "Therefore, we find that the debt crisis was correlated with a separatist movement – which we are beginning to see worldwide starting in Europe, but will eventually become a contagion in the United States as the conflict between left and right erupts after the November elections."
                How bad will this conflict get?

                "The debt crisis continued and then in 86BC, the government was compelled into default. This is when the Valerian Law came into play and this remitted 75% of all debts. The State debts were deflated on and reduced to 25%."
                Déjà vu all over again?
                "So we must understand that there was a brewing debt crisis in Rome and the oligarchy was determined to keep power at any cost."

                10/22 Netflix to sell $2 billion of junk bonds to fund content – MarketWatch
                Netflix is burning through billions in cash - Yahoo Finance

                Interesting article from Armstrong on pole shift.

                Reportedly, the current mini-boom should be attributed to obummer

                Just in case that you need a reminder, most politicians are too incompetent to survive in the private sector. Once they get in and collect a salary, the next most important thing is to lock in a good pension.

                So, we have generally incompetent people running the legal framework of the country. What could go wrong?

                "In April 2008, a longtime investment adviser named Chris Tobe was appointed to the board of trustees that oversees the Kentucky Retirement Systems, the pension fund that provides for the state’s firefighters, police, and other government employees. Within a year, his fellow trustees named Tobe to the six-person committee that oversees its investments, becoming the only member of the committee with any actual investment experience. It was an experiment in fiduciary responsibility that ended badly. “I started asking questions when things weren’t sounding right,” Tobe said. “And a secret session was held where they voted to kick me off.”
                "Several weeks after he was removed, the remaining members of the committee approved a $200 million investment in a hedge fund called Arrowhawk Capital Partners. "

                "In the years since that big Arrowhawk play, Kentucky’s public pensions have descended into financial crisis, "
                Tobe had never heard of Arrowhawk, and he quickly figured out why: Arrowhawk was a new fund whose first investor was the Kentucky Retirement Systems,
                "the staff had steered the investment committee in 2009 to a startup fund with no track record."


                • 2008 Déjà vu,,, Italian cavalry charge

                  I read everything that doesn't look stupid from the headline. There are so many things that you can learn just from the headline. Here is a perfect example.
                  10/24 Italy openly defiant of Eurozone stability pact, deliberately and knowingly – Mish
                  10/24 By going nuclear the EU has already lost its battle with Italy – Tom Luongo
                  10/24 The EU has rejected Italy’s budget. That’s just what Rome wanted – Atlantic

                  Italy is the third largest bond market in the world,,, behind America and Japan. It is the tenth largest economy and, the bond load is outsized to the economy. There was a proposal of OMT.
                  Outright Monetary Transactions ("OMT") is a program of the European Central Bank under which the bank makes purchases ("outright transactions") in secondary, sovereign bond markets, under certain conditions, of bonds issued by Eurozone member-states.
                  Outright Monetary Transactions - Wikipedia

                  The Italian economy has not grown ever since it was saddled with the EU. The debt load is growing horrendously. The ECB could execute OMT but, it would only delay the final execution. Evidently, Salvini, et al are going to ride this pony right off the cliff.

                  10/24 Global banking stocks are crashing hard – just like they did in 2008 – Talk Markets
                  The Central Bankers inject free / fresh money into the upper loop as a support mechanism for the already-rich. The FED claims that we need 2% inflation per year. That is done to subsidise the rich bankers. Wages never keep up with price inflation. Since China, et al put a ceiling on wages, this has gotten even worse. The bankers want a continuous injection of free money. BUT, this money is debt-money and is deflationary. GOV takes about 50% of your income. As public debt service grows, there is less circulating money for the consumer.
                  The same is true for private debt-service. The bankers are holding $ bazillions of notes, loans and bonds. Not to mention several $trillion of margin debt from the stock market. Since most of this is debt-money saddled by an interest load, it actually has a negative worth.

                  Residential RE crashed in 2008. The price of a house has to be commensurate with the prevailing wages in the same area. If it isn't, there will eventually be a lot of defaults. The defaults hit and, the banks were rescued. Prevailing wages were never rescued. The 2008 bailout was just a bandage. The CBs pumped in even more debt money. This did nothing for wages. The 2008 crash continues to this day. But, not for much longer.
                  Good article.

                  10/24 50 percent of all American workers make less than $30,533 a year – ECB
                  We respond
                  US Birth Rate Hits All-time Low: What's Behind the Decline?
         › Health
                  The US fertility rate just hit a historic low - Vox

                  Just like Japan; the birth rate falls at the same time the debt load MUST grow.
                  10/24 A big secret in Japan debt market is getting harder to keep – Bloomberg
                  The Average Stock Is Overvalued Somewhere Between Tremendously And Enormously
                  10/24 Corporate earnings reports have been “horrible” so far – CNBC

                  A bubble in search of a pin.


                  • We don't need no stinkin 2% inflation. RE, Armstrong

                    One of the main responsibilities of the Federal Reserve is to maintain price stability. BUT, all the recent FED-heads have claimed that we MUST have 2% inflation to maintain stability.
                    Paul Volker was FED-head for several years. Here is what he has to say; “A 2 percent target, or limit, was not in my textbook years ago. I know of no theoretical justification.”
                    Paul Volker is a Lutheran. ALL the jewish fed-heads demanded 2% inflation.

                    An infusion of X dollars every year results in the hoped-for 2% inflation. This "money" is injected into the bankers loop so, no matter how much price inflation we get from the monetary inflation, the bankers are always ahead.
                    This constant monetary and price inflation resulted in minimal wage inflation. The time / terms of our credit purchases were extended way out to compensate for our lost ground on wages. The situation finally reached a point where we defaulted on our houses.
                    There is horrendous price inflation in the upper loop. It is slowly seeping in to the lower loop,,, especially for things that can be considered as a store of value.

                    Is it a coincidence that since 1913, leadership positions in the Federal Reserve have been held primarily by Jews?
                    "In "Jews and Money" Abraham Foxman of the Anti-Defamation League writes:
                    Of course, the theory is as fallacious as it is commonplace. The Federal Reserve is a U.S. government institution and is not “owned” by any private entities. The Rothschilds have nothing to do with it!"

                    10/24 Bricks and slaughter: part one – Exposing Australia’s housing crisis – 60 Minutes
                    10/24 Here comes the housing bust “reverse wealth effect,” Australia edition – DC
                    10/24 House prices ‘falling by over $1,000 a week’ in Sydney and Melbourne – ABC

                    10/24 EUR/USD, GBP/USD fall to fresh lows as USD breaks out to key level – MW
                    Armstrong warned that the rising dollar would destroy everything.

                    10/24 The financial system has just hit the perfect storm – Graham Summers
                    10/24 The stock market faces ‘unlimited downside risk,’ warns veteran trader – MW

                    Fear vs collateral,,,, lotsa graphs.
                    Here is a note from Armstrong. Look at the title of the picture. This sums up the biggest part of the crash.


                    • Chris Hedges

                      Chris Hedges is a long-time reporter from distressed areas of the world. He has seen MANY wars. He has a good interview here. For some reason, he believes in global warming,,, Kavanaugh is a sexual predator,,, Trump is a nincompoop, Christian fascists,,, a few oddball beliefs like that. Don't let that distract you from his projections.

                      Couple of quotes, "Wages have been kept far below what they should be, based on productivity which has increased by 77 per cent since 1973. If wages had kept pace with productivity, the minimum wage in the United States would be well over $20 per hour. "
                      He is talking JUST about our increased productivity. If wages had kept even with price inflation, the number would be much higher.


                      • Fallout from currency inflation

                        The politicians created the post-war welfare-warfare State. This was initially financed by our Bretton-Woods credit card. We maxed out the card (good name of the U.S. dollar) and had to go off the gold standard. Both the gold standard and, Bretton Woods were mechanisms to keep any State from juicing up the sovereign bond market to finance a war. Free of the gold standard, the Treasury debt could be run up much higher. In June of 1971, the debt was 398,129,744,455.54
                        Currently it is 21,671,062,290,012.80
                        Population, 207.7 million (1971)
                        Population, 327,482,993 (2018)

                        We hyper-inflated the bond market and, had wars aplenty. Out of historic momentum, many people still used the dollar as the reserve currency. We no longer had the Bretton-Woods agreement helping us but, the dollar was still considered the best reserve. Add to this, the Saudi agreement to price all oil in U.S. dollars. We had a very high demand for dollars. We needed all that dollar flow to keep the wars going.
                        Population went from 207M to 327M
                        Debt went from $398B to $21,671B

                        The inflationist army saddled up their beast-of-burden (the productive worker). They put on blinders and cracked the whip.
                        Money supply, 1971-01-01 632.9 B
                        Money supply, 2018-09-01 14241.5 B
                        The FED looks for 2% price inflation. Hard to say just how much monetary inflation it takes to get 2% price inflation.
                        Never the less, the FED channelled fresh liquidity into the historic banking class. You can see that a 2% increase applied to 14241.5 B is quite a bit of money.
                        During the '60s, wages went up pretty well because America still had a lock on manufacturing due to the destruction in Europe. By the middle '70s, Europe had rebuilt much of their manufacturing base. Wages went stagnant from the competition. The monetary inflation continued apace.
                        The R.O.W. Had to undercut our prices to accumulate the reserve currency. With our diminishing income, we had to extend credit terms farther and farther out into the future. We had recurring crashes because our income couldn't support the predations of the upper loop.

                        Enter China and India. They drove wages down even more. We still had a high cost of living thanks to FED pumping. Our economic competitors didn't have this burden and could survive on very low wages. Wages have been essentially flat for at least 40 years,,, maybe 60. We have a growing money supply and, a growing public debt. We also have 96.2 million of working age who are not in the labor force. Consumption, confidence and, the birth rate are falling.

                        The money supply must be grossly inflated to support the finance class. The productive class is withering away. Note that derivatives are reckoned to be somewhere in the neighborhood of one quadrillion dollars. The financial class is doing each other's laundry. They sell bogus instruments to each other to "earn" fees.
                        The money is channelled into the banking class. It is pretty much useless unless some producer takes out a loan. With low wages and mass unemployment, there is little demand for credit from actual producers. To keep the party going a bit longer, FED GOV is borrowing $trillions. But, the tax rolls are diminishing and, eventually people will avoid public debt.

                        The perennial inflation to support the banking class, has priced Americans out of a job. The resulting defaults will eventually work their way up to the bankers.
                        10/25 Value of Euro Zone banks drops by a third from 2018 peak – US News
                        We're still in 2018 and, there is a long way down in the future.


                        • Stocks are crashing and, Powell is on the sidelines

                          Armstrong, "We do not necessarily have to run and hide in a cave. I will let you know if it really is that bad. What we are looking at is the collapse of governmental systems. That does mean you have to run and hide someplace. Yes, that is possible in certain areas. "
                          Keep in mind that 51% of Americans receive a check from GOV
                          "So, no need to run and hide. We are looking at an economic implosion. Yes, that will result in civil unrest and that will most likely be focused in the big cities. So the risk would be greater for someone living in LA or NYC rather than in the suburbs. "

                          Notes on the bear market;
                          "uncertain how much lower the drop can take the market, which is only where it is thanks to trillions of liquidity created out of thin air by central banks - liquidity which is now being drained at an accelerating pace."
                          1. It’s (almost) officially a global equity bear market…MSCI equal-weighted global index down 19.6% from intraday high Jan 29th.

                          2. Asset carnage cross-market & has infected US tech leadership; since the January "big top"…

                          Annualized loss in US Treasuries (-9.7%) & IG bonds (-4.0%) 3rd largest since 1970
                          18 out of 21 commodities in corrections of >10% (lumber -53%, copper -23%)
                          FAANG stocks -21% from highs, semiconductors -22% from high
                          1742 of 2767 global stocks, 919 of 1150 EM stocks, 1164 of 1899 NYSE stocks in bear markets.
                          On profits: global EPS growth peaked March @ 23% YoY, it’s now 16% (ex. US it’s dropped to 10%)
                          63% of global stocks in bear market (80% in EM, 61% in US – Table 2)
                          Crash watch: $45tn of systemically risky shadow banking assets (source BIS), of which 72% (in bond ETFs, mutual funds, credit HFs, bank loan funds) are vulnerable to forced selling

                          You get the idea. Stocks are crashing. Previously, the FED always had your back. You could ALWAYS buy the dips. If Powell refuses to carry on what Greenspan started, there just won't be any rallies. Trump appears quite upset about this. One could assume that he doesn't want markets to blow before the election.

                          10/25 Google parent Alphabet’s shares plunge after missing revenues – Zero Hedge
                          No earnings and, NO Greenspan "put" means that it is time to pull out.
                          10/25 Will Fed capitulation forestall stock market crash? – Peter Schiff
                          THAT is a hypothetical question in all senses.
                          10/25 Spain’s mortgage market seizes up, bank stocks sink, legal uncertainty reigns – WS
                          This is just the beginning of market seize-ups.
                          10/25 ECB sticks to stimulus exit despite “bunch of uncertainties” – Reuters
                          Bond buyers deserted European markets a long time ago. If the ECB stops buying, there will be NO BID.
                          10/25 It’s too late to prepare UK borders for no-deal Brexit – Independent
                          Stock up on popcorn before the big event.

                          "These tremors are warnings that the “dollar” system’s decay is reaching critical points. The mainstream will tender that this is really no big deal, just a tantrum of spoiled markets unwilling to easily treat the coming end of ZIRP and accommodation; that is simply and flat out false. There is a systemic liquidity problem that is and has been fatal, exposed to a greater degree by the continued withdrawal of eurodollar bank participation"

                          A rising gold price is often considered an inflationary, or reflationary, sign. In this case, however, the jump especially during that particular two-week period was hardly of the same variety. It was raw, unadulterated fear permeating the entire global system. Something snapped and though it was never written into the conventional record it still happened all the same.

                          It was in this window that America finally noticed “overseas turmoil” in their 401k’s."
                          Then, as if to prove these points, the process was repeated in almost exactly the same fashion a second time in a matter of mere months. And to further demonstrate how clueless and useless central bankers are and can be, the Federal Reserve actually kicked off its “rate hike” program in the middle of all this still at that late date believing in that earlier “strong” economy fairy tale."
                          "This second deflationary wave ultimately proved more devastating than the first, even if Wall Street never fully accounted for it. In Asia as in other far-flung economies, the eurodollar damage was so severe that they still haven’t recovered from it even after suffering 2008-levels of contraction and shrinking. "


                          • What magic number brings the Powell put?

                            The more that China prints, the more that the Yuan devalues.
                            The ECB is definitely on a death march.
                            Leaving these 2 things aside, ALL the speculation is now centered on Powell. It is impossible to overstate the importance.

                            "In a time of rising concern about stock markets, as one of its questions in the latest Fund Managers Survey released last week, Bank of America asked "what level on the S&P 500 do you think would cause the Fed to stop hiking rates?" What it found is that according to the respondents, the Fed would stop hiking if the S&P 500 fell to 2390, suggesting the "Powell put" strike price is about -12% below current levels.
                            "On Thursday morning, with stocks having wiped out their 2018 gains and with increasing worries about a market that is seemingly no longer backstopped by a central bank, Bloomberg picks up on this theme and notes that with "global investors swimming in a sea of red", they have become consumed with one magic number: the strike price of the so-called Powell Put."

                            "It found that to the chagrin of those used to central bank intervention, for now at least Wall Street says that the $2 trillion drop in U.S. equities this month has yet to tighten financial conditions enough to levels that would spark a dovish monetary offset. "
                            "what are the specific price levels that could trigger the Fed to engage in a wholesale market recovery.

                            According to BNP Paribas, a 6% drop in the S&P 500 Index to 2,500 would be the resistance level that would prompt a response from Powell. "A 10 percent to 15 percent drop in equities is usually the difference between noise and signal," BNP Paribas analysts said in a note."
                            "Meanwhile, Evercore ISI has put the "Fed Put" below the 2,650 mark, compared with the S&P 500 Index’s closing level at 2,656 on Wednesday. Two weeks ago, after the latest two-day rout, Krishna Guha, the head of central bank strategy at Evercore ISI, warns that it will take a correction of at least 10 percent to get the Fed’s attention"

                            "A10% drop from the S&P’s record close of 2,930 would put the "Put" at around 2,638, just over 70 points below the current level in the S&P. A 20% plunge would take it all the way down to 2,345, a level not seen since the middle of 2017.

                            Other are more skeptical: BlackRock and River Valley Asset Management say the real economy remains relatively insulated from the stock meltdown."
                            These boneheads wouldn't know what the "real economy" is if they found it dead in the road.
                            "Andre de Silva, global head of emerging-markets rates research at HSBC, was even more blunt, telling Bloomberg TV on Thursday that the Fed needs something “more dramatic” than a stock rout to convince them to stray off course. "
                            "Meanwhile, the Fed itself has been cryptic with its "market rescuing" intentions, with officials downplaying bouts of market volatility in 2018, citing the health of the U.S. economic trajectory and the tight labor market."
                            Yeah, right.
                            "Deutsche Bank calculated the level of the new "Powell Put," noting that one can estimate the strike of that 'put' in two different ways.

                            First, delta neutral, in which a rise in vol is compensated with lowering of the strike in such a way that the underlying is unchanged. Using this approach we find that the S&P drop started at the point when S&P was at 2800 which places the new strike of the Fed put somewhere in the 2300 — 2400 range."
                            "it is very unlikely that the market will sell off in a calm, cool and collected manner from its current level to 2,300; in fact, the drop would likely be far more stormy as a result of unwinding convexity flows, which push investors out of equities and into bonds. "
                            NOBODY wants to be in bonds. They all read Armstrong. They will go to gold and cash.
                            "For now, bonds have been relatively immune from a "great rotation" out of equities - the 10Y is trading around 3.13% without any buying panic observed"
                            What about selling panic?
                            "For now, there are no signals that Powell is planning on intervening any time soon."
                            Add to this;
                            "10/26 Fed’s new Vice Chair backs more rate hikes in first major policy speech – CNBC"
                            So, the chair and vice-chair have a HUGE fan set up. It is switched to SUCK. Stocks and bonds are moving closer to the fan blades. Corporate America is going to crash no matter what. IF the FED can manage some kind of controlled demolition, it will probably avoid UN-controlled demolition.
                            Remember that when all this notional value of assets is falling, this is deflationary. People stop spending.


                            • Armstrong,,, insane algos

                              If those of you who live in Europe don't know already what is coming at you, you've had your head stuck in the sand. The Eurozone project was doomed from the beginning. Armstrong, once again makes this perfectly clear.
                              The derivative book at Deutsche Bank was at one time larger than the entire GDP of Germany. Now,

                              FED GOV squeezed out money from our paycheck and then, promised us a pension from the proceeds. The money was spent on wars. There is no money in most pension funds.

                              Vladimir Putin tried to reform Russia’s pensions system which is crumbling as is the case in the West. This giant Ponzi Scheme is collapsing and it has been the heart of Socialism. "
                              "tens of thousands of Russians taking to the streets to protest. This is what we are to expect over the course of the next two years. It is also why the Federal Reserve is desperately trying to gradually raise interest rates in hopes of stabilizing the Pension Crisis."
                              "There is simply NO system that will survive this Pension Crisis because the design was faulty from the outset."
                              Social Security was forced to buy U.S. GOV bonds. GOV needed the cash to fight wars. If the money had been invested in stocks, the fund would have grown ENORMOUSLY. The wars came first.

                              "The traditional way people took care of their future was to build a family structure. The children took care of the parents. The promises of socialism have relieved the children of such obligations for the government was there. As we begin to witness this crisis unfold, the world financial system will be turned on its head."
                              Invest in your family.

                              "While on paper, CTAs use computer-driven models to navigate markets and trade everything from equities to bonds to currencies to commodity futures, in reality they simply chase momentum and try to isolate an upward (and occasionally) downward pattern which to piggyback on. Unfortunately for their programmers, with volatility surging, the market's traditional patterns have all been shattered."
                              The algos don't know what to do.
                              "Computer-driven hedge funds were already headed for their worst year ever before this month’s volatility, "amid slowing corporate earnings, political turmoil in Italy and uncertainty over Brexit." During the February correction, they tumbled more than 4% for their worst month since 2001,"
                              Wait, what about 2008?

                              "It’s a bloodbath out there across almost every strategy with very few exceptions," V "CTAs have been caught by a double-whammy with rising rates and equities plummeting. There’s only one exit and everyone is trying to exit now because the models are telling them to do so."
                              Traffic jam at the rabbit hole.
                              "In fact, according to Goldman, equity long-short hedge funds suffered one of their worst ever losses on Wednesday, pushing declines this month to 8.7%."
                              Damn gravity!

                              "2631 in the S&P is the next "sell level", at which point CTAs will go down to just "14% Long." We're almost there. Meanwhile, should the selloff extend even further, a move below 2577 would see the CTA Trend position flip to outright "-100% Max Short",
                              YEP, everybody on one side of the boat.
                              "Only then- with all the algos short - will it be time to finally buy the dip, ahead of verbal central bank intervention and rise the next furious CTA short squeeze to new all time highs."
                              SO, what if verbal intervention does not appear?

                              Here is some heresy from RT,
                              10/26 The global selloff has erased $5 trillion from stock and bond markets – MarketWatch
                              The default cascade hasn't even started.
                              10/26 Rising dollar is major reason for stock sell-off, and it’s only getting worse – CNBC
                              As the dollar goes up, foreign divisions of domestic companies lose money on currency arbitrage.


                              • Alternative economists,,,kill stocks to save GOV bonds,,, dying shale

                                Here is all you need to know about the U.S. dollar. The rise of the dollar is destroying everything in it's path.
                                "the Fed is committing its habitual policy mistake by overtightening"
                                Yep, if they are cutting off the free money, they are definitely WRONG.
                                "JPMorgan's quant Marko Kolanovic had repeatedly pushed, advising clients - so far erroneously - on at least two occasions to buy the dip "
                                They got hammered. Everybody needs dollars and, they are driving them up.

                                "Federal Reserve officials have tried this week to ease concerns on Wall Street that bank reserves are growing scarce "
                                Just words, no action.

                                Armstrong tells us that bonds will crash but, stocks will do well. That is NOT possible.
                                "But on the other hand, they now find that U.S. trade deficit reaching its largest level on record - the precise deficit tariffs purported to narrow - is very worrying."
                                Like almost everything else, the theory did NOT work out in practice.
                                "The problem lies with government spending and monetary inflation, precisely those activities that global businesses have been taught either to ignore or, worse, to embrace and lobby for. "
                                The chickens are coming home to roost.
                                "In asking taxes for such payments the government makes the citizens answerable for money squandered in the past. The taxes paid are not compensated by any present service rendered by the government's apparatus. The government pays interest on capital which has been consumed and no longer exists."
                                YES, but, we got a lot of nice war stories to tell our kids.

                                "For my part, I outlined in 2015 that the Federal Reserve would undertake a policy of interest rates hikes and fiscal tightening, and that they would pursue this action until markets, long supported by cheap debt, finally broke under the pressure. Months before Trump's election I stated that Donald Trump would in fact be president and that the Fed would accelerate tightening during his administration. At the beginning of this year I predicted that Fed tightening would result in massive stock market reversal (worse than the 2008 crash) in 2018. In September I refined the timing of this crash to begin in the final quarter of 2018."

                                "The fact is, alternative economists have been RIGHT for the past 10 years and have been far ahead of the mainstream in terms of predicting fiscal trends based on real data. As I have always said, economic collapse is a process, not an event. It’s something that happens in stages or phases over time, not something that occurs overnight or in the span of a few days."
                                "The establishment banks and the economists that pander to them have burned up all their goodwill and social capital. They have been wrong so much and so often that the public is looking elsewhere for their information. This has led to the explosion of interest in alternative economic analysis that is occurring today."

                                The broken trend,
                                OF NOTE, "When bonds collapse, entire countries go broke.
                                With that in mind, once the US bond market began to collapse, pushing yields above their long-term trendline, it became apparent that the Fed would “sacrifice stocks to save bonds.”
                                "The reason? Letting stocks collapse will force capital into bonds, thereby forcing yields lower.

                                That process is now officially underway. And if you think the Fed is close to “stepping in” you’re mistaken. Cleveland Fed President Helen Mester just told CNBC this morning that “the stock market drop is FAR from hurting the US economy.”

                                This ties in with Fed Chair Jerome Powell’s assertion during a recent Q&A session that the Fed would not step in to prop up the stock market unless it was a sustained collapse that was bad enough to impact the REAL economy, specifically consumer spending.
                                In simple terms... the Fed's not coming to the rescue this time."
                                OK, the FED crashes the stock market to drive money into bonds. Keep in mind that most economic theory seems to be major BS. Stocks and bonds are now 100% correlated. They go up and down together.
                                "So whom has the bonds and will take the loss? Guess who? The central banks. They are loaded to the gills and cannot sell the long-bonds they bought. There is no bid. In this debt crisis, there is no bid for debt, which is typically how empires, nations, & city-states collapse."

                                2 links,

                                OK, enough of the good news. Here comes the bad news.
                                "So, it doesn’t seem to matter if the oil price is over $100 (2013-2014) or less than $70 (2017-2018), the shale oil industry continues to spend more money than it’s making. The shale energy companies have resorted to selling assets, issuing stock and increasing debt to supplement their inadequate cash flow to fund operations."
                                "For the U.S. Shale Oil Industry just to pay back its debt, it must produce 9 billion barrels of oil. That is one heck of a lot of oil as the industry has produced about 10 billion barrels to date. Again, as Mike states, it would take 9 billion barrels of shale oil to pay back its $285-300 billion of debt (based on the shale industry’s very own breakeven prices).

                                Furthermore, the shale industry may have to sell a quarter of its oil production (1.5 million barrels per day) just to service its debt by the end of 2019. "
                                "total upstream shale oil debt actually is. We found it to be between $285-$300B (billion), both public and private. Kallanish Energy Consultants recently wrote that there is $240B of long term E&P debt in the US maturing by 2023"
                                "So, as Pioneer issued over $5 billion in stock to produce unprofitable shale oil and gas, Continental Resources racked up more than $5 billion in debt during the same period. These are both examples of “Ponzi Finance.” Thus, the shale energy industry has been quite creative in hoodwinking both the shareholder and capital investor."