Economic pressures

[Danny B]

Central Bank war

I built a woodgas truck because fracking is such a money loser. I also put together a propane engine for my '65 Chevy. Fracking is going down fast.
https://srsroccoreport.com/the-u-s-s...own-continues/
12/20 US stocks plunge to 14-month low, Nasdaq enters bear market – CNBC
12/20 Global trade tensions boil over at staid W.T.O. forum – NY Times
Well, gold is up for the year. The Central Banks are at war with each other.
Billionaire 12/20 David Tepper urges move to cash: The Fed put is dead” – Zero Hedge
Remember that the credit bubble MUST grow. If people go to cash, this is liquidity drawn OUT of the credit bubble.

The BIS and IMF have it all worked out to use this crash to force the SDR into use.
https://www.zerohedge.com/news/2018-...rnings-bis-imf

"We are witnessing indeed not a Currency War but a Central Bank War. "
"The ECB is trapped and I have warned that it is the ONLY central bank that can actually go bankrupt because all central banks do not have the same structure. I have made it clear that by their very own standards, the ECB itself is insolvent."
"Summers is the man behind the curtain wanting to eliminate cash and making money national cryptocurrencies to ENFORCE negative rates. If you eliminate paper money, you eliminate bank runs. You eliminate hoarding of money (cash) and that would allow Summers to enforce a -5% interest rate stealing your money which would enrich the banks on top of the taxes you pay to the government."

"This is why we are in a Central Bank War. There are a lot of problems taking place and the Fed knows the Pension Crisis is taking down state and municipal governments. True, they raise rates and government debts explode. But the failure to raise rates means pension funds collapse and bailouts become necessary while states raise taxes which lower economic growth as disposable income declines. So if you can move to one of the state that do not have an income tax, do so while you still can."
https://www.armstrongeconomics.com/m...tral-bank-war/

"In plain speak, Powell bluntly stated that a stock market correction or even a 20% bear market is not enough… it would require a CRISIS for the Fed to stop being hawkish."
"Jerome Powell is worth over $100 million. He is not using his position as Fed Chair to launch a later career giving speeches for $250K or signing advisory deals as former Professors Bernanke and Yellen were.

As a result of this, Powell actually believes in his role as Fed Chair as it was originally intended… namely to focus on the ECONOMY, not the stock markets. He isn’t interested in maintaining the Bernanke/ Yellen created Everything Bubble. He is interested in getting the Fed back on course by normalizing policy."
https://www.zerohedge.com/news/2018-...mportant-three

Just about everybody is predicting that Powell will raise rates now so that he can lower them later. Going by his latest rate rise and the resultant fallout, I think that he is serious about squeezing much of the excess out of the markets.

[Danny B]

X22, dismantling the FED,,,Syrian and Afghanistan withdrawal

I always notice the X22 reports but, never much follow them. I try to stick with things that have some documentation attached to them. Here are a couple of intriguing vids
https://www.youtube.com/watch?v=7xIF5gUZtnw

https://www.youtube.com/watch?v=LQWBmBdcMhI
The Syrian withdrawal.
https://www.youtube.com/watch?v=Z3G4zjoQqeA

Afghanistan is next.
https://www.youtube.com/watch?v=lYhSTQi-8-k
Mattis was against pulling out. Trump has a LOT of practice saying "you're fired" .
Everybody keeps forgetting that Trump isn't some pantywaist politician.

The Bubble in Defense Stocks: Why It May Burst Soon - Investopedia
https://www.investopedia.com › News › Company News

The F-35 was such a piece of garbage that they are dangerous to fly. "They" are proposing a replacement that costs $ 300 million each.

[Danny B]

Powell cutting off both Viagra and Cocaine in the stock market

Pox Americana invaded Afghanistan just months after the Taliban destroyed the poppy crops. Shortly after the invasion, Poppy and heroin production rose way up. Why do you think that they called him Poppy Bush?
Trump plans to pull have the troops out of Afghanistan. The entrenched powers are doing everything that they can to stop this.
Taliban's Ban On Poppy A Success, U.S. Aides Say - The New York ...
https://www.nytimes.com/2001/05/.../...-aides-say.htm...
May 20, 2001
During the 2008 crash, drug money was the only thing moving through the banks. They had no other liquidity. I wish Trump luck in prevailing against the dark powers of the swamp.

12/21 Shades of 1987 and 2008 in current level of stocks getting crushed – Bloomberg
12/21 ETFs, major supporter of US stock market, stop buying the dip – Reuters
12/21 U.S. stock funds set for record monthly withdrawals – Reuters
Floggings will continue until morale improves. Powell doesn't care about the stock market.
12/21 NYC subway chief warns of ‘death spiral’ without $40 billion fix – Bloomberg
They want to dump $40 billion into a hole in the ground.
12/21 Japan’s FY2019 budget to top 100 trillion yen for first time – Bloomberg
QE is socialism for the banks. There is no limit.
12/21 Cramer feels ‘powerless’ after Fed hike, tells investors to buy gold – CNBC
Substitute brainless for powerless.

12/18 There is a new “most crowded trade” on Wall Street – Zero Hedge
Everybody is buying the dollar so, gold isn't up much in dollar terms. It is way up in foreign currencies.
The tax protest, https://economyandmarkets.com/econom...vest-movement/

Here is a short read with a great graph showing that confidence levels are WAY up.
https://moneymaven.io/mishtalk/econo...0-51UHFTuRnCA/
And, here is the reality check, https://www.zerohedge.com/news/2018-...ll-assets-down

[Danny B]

Nothing will save the pensions

My job is getting easier. I don't have to do as many excerpts as we get closer to default.
sputniknews
Saudi Arabia Adopts Biggest Budget in History With Expenditure at Over $294Bln -
and
"Saudi Arabia Is Going Bankrupt" Taleb Exclaims After Seeing Kingdom's Latest Budget | Zero
The Central Banks had the money hydrants all the way open in 2017,
"The record bearish print is made all the more fascinating, considering that just one year ago, 2017, was the 'best' year ever for markets on this measure, when just 1% of assets finished with a negative total return in dollar terms "
"2018 continues to the be the worst year on record on this measure with 93% of assets currently down -worse than the years of the Great Depression"
Repost, https://www.zerohedge.com/news/2018-...ll-assets-down

https://www.zerohedge.com/news/2017-...ource=engageim

Armstrong, " The Fed MUST raise rates to help the crisis in Pension funds. Raising rates is NECESSARY for the Fed also realizes that come the next economic recession, the only tool they have is to lower rates.
This is why we are in a Central Bank War. There are a lot of problems taking place and the Fed knows the Pension Crisis is taking down state and municipal governments. True, they raise rates and government debts explode. But the failure to raise rates means pension funds collapse"
TOO LITTLE, TOO LATE.

12/21 Brace for “seismic” volatility: pensions to buy $60bn in stocks – Zero Hedge
Raising of interest rates isn't going to help stocks. Stocks go down as rising interest charges make everything more expensive.
12/21 Dow dives 400 points to end its worst week in 10 years – CNBC
Armstrong, "The market has still not breached important support levels."
So, how low does it have to go before it is at an important level?
The smart money at the ETFs,,
12/21 ETFs, major supporter of US stock market, stop buying the dip – Reuters
I think that Armstrong is grasping at straws.
12/21 High-yield credit spread blowout – Macro Tourist
Corporate bonds are blowing to the moon. How can corporate stocks survive that?

12/21 Trump promises a ‘very long’ shutdown if Senate rejects border wall money – CNBC
So, how much money is really needed?
850 miles of US-Mexico 'wall' not needed, ex-border officials sayReveal
Nearly 700 Miles of Fencing at the US-Mexico Border Already Exist ...
$5 billion should cover the major smuggling routes.
12/21 Apple just entered a death cross, and Wall Street should ‘prepare for the worst’ – CNBC
12/21 Corporate bond issuance shrinks to 7-year low as selloff deepens – Reuters
Offers have been pulled because nobody is buying. What about roll-over time?

[Danny B]

Power and money always attract corruption

As I already mentioned, Central Banks are created by the State to finance wars.
The FED was created in 1913. By strange coincidence,,, "WW I started July 28, 1914" War is big business and big profits. America wanted to get in on it. More correctly, American bankers wanted to get in on it. A Central Bank was necessary to reap the big rewards.
Armstrong, "The original design of the Federal Reserve in 1913 was PERFECT!!!!!! It “stimulated” by purchasing corporate short-term paper which created an elastic money supply. The paper naturally matured and thus the money supply contracted."
The money supply temporarily expended,,, and then, contracted. The FED had the power to create money and, power attracts corruption.
Armstrong, " When Congress usurped the Fed in World War I and ordered it to buy only government bonds to fund the war, they NEVER returned the Fed to its original design."
"Changing the structure of the Federal Reserve has altered everything. Now the Fed “stimulates” buying government debt EXCLUSIVELY!"

This is socialism, nothing more, nothing less. True, it was socialism for the rich. The poor got a burial on the battlefield. The banks got a goldmine. The FED was an association of bankers who put up their own money to have a liquidity backstop in times of panic. The FED was ALSO a great temptation. The State was never good at resisting temptation.
Not just the State. FED head, Benjamin Strong was found to be illegally selling Treasury bonds on the secondary market. They eventually made this retroactively legal.
The FED was hitched up to the cart to make the State grow and grow. The taxpayer was hitched up to repay all this.
Like all redistribution schemes, the parasite just kept growing without limit. State debt is growing faster than exponentially. The FED was unable to resist the mandates of crooked politicians.

After the war, the Bretton Woods agreement was supposed to tie the FED to gold and, all other States to the U.S. dollar. This would prevent CBs from inflating the bond market to ring in a war. Once again, crooked politicians would rule the day and create the welfare-warfare state. Everyone is pointing the finger at the FED for all of out problems.
2015, 21,995,000 to 12,329,000: Government Employees Outnumber Manufacturing Employees 1.8 to 1
This is a ratio of producers to non-producers. This isn't going to end well.
The State borrows money from the future to finance present-day consumption by parasites.

"In business, time is a cost working against profit, because profit is always measured within a time-frame. Time is also the basis of interest rates, which far from being a cost of money, is an expression of time preference. Time preference is the discounted future value of materials, energy and effort not yet in possession, but promised to be so at a given future date."
"Through monetary policy the state commandeers our time preferences, forcing its own omnibus version upon us. It commands the value of our personal futures relative to cash."
"If we understood the state was depriving us of time, we would probably be angry. The embezzlement of its use is behind the growing frustration felt by ordinary people. It is the underlying theme to Hayek’s Road to Serfdom, how the state conspires to steal its people’s freedom for statist priorities."
"First, we produce. Then we are paid. Then we spend and save. Money is the temporary storage of our labour for future use. Time and money are synonymous and common to all these activities.
We think the state is taking only our money, but it is also taking our time"

"we find ourselves working increasingly for the state, spending almost half our working lifetime doing so, our discontent and resentment builds. We are no longer in control of the fruits of our labour, our time. The central bank then springs to our rescue, creating the extra money we have lost in taxes, and encouraging the banks it regulates to extend credit to allow us to make more and spend more. It debases both our time preferences and the true cost of our wages to our employers. For a brief period, it might appear to work, so long as the losers don’t notice and complain. "
"Earnings and savings, the fruits of our time spent, are transferred from ordinary citizens and gifted to others favoured by the state, simply by suppressing interest rates, thereby reducing time preferences. Time-value is taken from consumers and given to producing borrowers. "
https://www.goldmoney.com/research/g...-money-is-time

Here is a very good article on the end of the European project.
https://gefira.org/en/2018/12/21/eur...mes-to-an-end/
Another article that links the end of cheap oil to our unfolding monetary crisis.
https://medium.com/insurge-intellige...e-1f520d7e2d89

China is looking at ways to keep it's people working.
12/22 Chinese leaders promise tax cuts to boost flagging economic growth – CNBC
12/22 Loan market is freezing: banks fail to sell $1.6 billion in loans – Zero Hedge
12/22 Trump wants to fire the Fed chair, which could wreak financial havoc – CNBC

[Danny B]

No substitute for work and wages

30---40 % of Athenians were slaves. This was the accepted way of skimming off someone's surplus labor and time. But, you had to care for your slave's welfare from cradle to grave. Wage slavery was more profitable because, you only had to worry about a slave's welfare during it's productive years. Along with this came tax slavery. You paid the king for his protection.
With the advent of the industrial revolution and, the rise of mechanization, there was a dwindling need for human slaves. We continuously invented labor-saving devices. Every technological advance made more workers redundant. The only way that the credit bubble could continue to grow was for consumption to continue to grow. The finance sector extended more and more credit so that we could reach further and further into future wages. The advent of the computer created a huge rise in the destruction of job niches.

The State stepped in to provide support to those who lost their job niche. Here is a graph of government dependence.
https://www.heritage.org/sites/defau...chart41000.jpg
The credit bubble & consumption have been maintained with money from the bond market supposedly pulling future consumption to today. There is an admission that this money won't be repaid. Just the debt service on this money is at $ 450 billion.
There is a falling need for slaves but, the financial sector has an always growing need for consumption.

The University of California system reports that they have $90.1 billion in cash and investments. This is reported yearly in their comprehensive annual financial report.
All State entities are required to file an annual report. On the site, CAFR1 Walter Burien shows that 37,000 State agencies report that they are sitting on a cumulative $230 trillion. One could make the argument that the State charges us for everything just to keep us working and productive. There are over 92 million Americans of working age who are not employed. The State takes about 40% in taxes and, burns it up on wars. This keeps us working. The number of employed people is expected to fall dramatically in the future.
The States plan to just raise taxes to keep the State going. The French demonstrations are characterized as being a tax revolt. The State is trying to counter-balance automation with increased taxes. The generally accepted figure is; for every 1$ increase in taxes, the producing economy is reduced by 3$.

Leaving the free $hit army aside, MANY of the people who are redundant do want to work. The State can raise taxes on those who still have gainful employment in the private sector but, that is the worst facet of socialism. Socialism kills motivation. Just the same, it appears that the PTB are heavily promoting socialism. Socialism brings a complete lethargy to the population as amply demonstrated in East Germany.

The Kalergi Chodoroff plan calls for migration replacement of existing populations in Europe with dumb brown people, who would be more controllable. This isn't any kind of solution to the problem of inadequate job niches.
The key problem is; an inadequate and falling number of wage-earners in the productive enterprises.
Japan addressed this by printing more money. Japan has the highest number of robots per capita.
The economy is soon to go into a cascade of default. Japan has tried all the conventional tools. There is very LITTLE talk about what we will do after the inception of the collapse. The conventional tools just won't work with a falling population. If U.S. sovereign debt collapses as predicted by Armstrong, The fallout will go on for a long time.

[Danny B]

Kicking off the death spiral.

12/23 ‘Stunned’ by recession talk — El-Erian warns of self-fulfilling prophecies – CNBC
Everybody and their dog knows that the stock market has bubbled up to about 2.5 times historical valuation. They have all been edging to the exits just waiting to make a break. If the HUGE ETFs have stopped buying the dips, it is definitely time to get out.

Big Funds Begin Liquidating As Panic Grips The Loan Market
Look at the collateralized loans origination.
https://www.zerohedge.com/sites/defa...?itok=ya5PyK56
The credit market is rapidly deflating.
https://www.zerohedge.com/news/2018-...ps-loan-market
The banks are forced to keep sketchy loans on their books because nobody will buy them. This cuts back on both their stock price and, their income. Just imagine if they are never able to sell them.

Sovereign debt, "“$20 trillion got to $21 trillion in 186 days" "Global debt rose from 276% of global GDP in 2007, wallowed through the Great Recession, came out the other side topping 327% of global GDP, and continues to expand at >10% per annum.ref 324 Simon Black notes that while the economy grew 36%, the debt grew 123%.ref 325"
https://www.peakprosperity.com/blog/...sovereign-debt

Credit "Death Spiral" Accelerates As Loan ETF Sees Record Outflow, Primary Market Freezes
"but over 800 million has been pulled in last current month, the biggest monthly outflow ever as investors are packing it in."
"Incidentally the behavior described by Citi's strategists, in which ETF administrators first sell high quality paper then shift to deep discount holdings, was one of the catalysts that hedge fund manager Adam Schwartz listed three weeks ago as a necessary condition for credit ETFs to enter a "death spiral." And with virtually everyone - including the Fed, BIS and IMF - all warning that the next crisis will begin in the leverage loan sector, the question to ask is "has it begun"?"
"In Europe, the market appears to have already locked up, "
"According to JPM, the percentage of loans trading above face value has dropped to just 3.9%, a 29-month low, down from 65.4% in early October. This suggests that virtually all leverage loan investors are now underwater on a total return basis."
"that are so deep underwriters may have to book a loss, if they can be sold at all. This is precisely what happened in late 2007 and early 2008 when underwriters found themselves with pipelines of debt sales that sudden got blocked, "
Viewing Conspirology feeds ~ World Professional News

[Danny B]

No safe place for money

The last post showed the hedge funds abandoning the exchange traded funds.

Stock market selloff erases 2018 gains for Dow and S&P 500.
https://www.usatoday.com/story/money....../2064956002
The pension funds have moved into credit funds and private equity.
https://www.valuewalk.com/2018/12/pu...-credit-funds/
All 11 sectors of the S&P 500 are now negative for December, the fourth quarter and the full year.
https://www.cnbc.com/2018/12/24/us-s...-a-decade.html

Treasury secretary Mnuchin says that investors will now move from stocks to bonds. He has NO idea of how markets work. He wants to get the Plunge Protection Team to go to work. They would buy up stocks to support markets.
https://moneymaven.io/mishtalk/econo...EiLHx0E2ss45g/

BOJ Is Now A Top-10 Shareholder In 40% Of All Japanese Companies; Owns 42% Of All Government Bonds
"The last time we looked at how much of the stock market the Bank of Japan controls, we found that as of September, Kuroda's central bank owned a stunning 75% of all Japanese ETFs"
https://www.zerohedge.com/news/2018-...vernment-bonds
So, America is preparing to go down a road previously trodden by the Japanese. It didn't work for them. Look at Italian bonds. When the ECB started buying up Italian bonds, this gave private investors a GREAT opportunity to sell garbage the the Central Bank at a good price. The State wants to do a fresh transfusion into zombie companies to keep them floating,,, like dead fish.
Japan plans to try a plan B ,,, because plan A didn't work.
https://moneymaven.io/mishtalk/econo...kyPlAbrw6y5_Q/

12/24 Mnuchin bid to calm markets risks making bad situation worse – Bloomberg
What do you expect? he's from the government.
12/24 From Goldilocks to Humpty-Dumpty markets – Zero Hedge That about covers it.
Kunstler is just a ray of sunshine, "And this solemn night a great stillness falls upon the land as the Leviathan of Washington is sent to its room to get its mind straight, and the USA gets on with collapse in earnest. There will be no visions of sugarplums for the Deep Staters as the government enters its induced coma, only premonitions of anarchy and insolvency,"
http://kunstler.com/cluster****-nati...istmas-to-all/

Jorge G. Castañeda writes about the bankruptcy of socialism.
https://www.nytimes.com/2018/06/02/o...socialism.html
Parallels with the 1930s;
https://www.youtube.com/watch?v=Jjr4xEl5uw8

[Danny B]

It's officially true when you hear the official denial

Mnuchin really stirred things up by stating that; "Mnuchin bizarre, crisis-era announcement that bank liquidity is fine, "
Notes;
"Mnuchin’s statement about banks “clearly backfired,” Upadhyaya said. “It smacks of desperation and nervousness."
"I’m not sure what they planned to achieve with this plunge protection team since none of the agencies involved have legal authority to intervene in the equity markets."
A lack of legal authority would never stop them. The FED sends a boatload of pixels to the SNB and, the SNB buys a ton of the FAANGS. Don't forget that the CAFR1 site shows local GOV has bought $trillions of stocks by squeezing us for every dime.
"What’s more troubling is the selloff in bank stocks, which signals distress in the credit market."
Do Not Worry,,, the banks are adequately capitalized. They are required to hold capital of 8% of their loans. It means NOTHING that their stock is down 20%

"what really brings banks down -- is a liquidity shortage. And these banks are incredibly liquid.”
Another denial.
"December has been the worst month for the stock market since the Great Depression - the average one-day drop in the S&P this month has been 1.6% - and was appropriately capped with a Christmas Eve crash which not only saw it plunge almost 3% "
https://www.zerohedge.com/news/2018-...uchin-massacre

A derivative is a financial contract with a value that is derived from an underlying asset. Derivatives have no direct value in and of themselves, Investopedia.
Just Four Banks Account For 90% of $200 Trillion in Derivatives Says OCC Report
The continuous currency inflation from the central banks created a constantly rising price in the asset market. By using derivatives, banks had their most profitable year in history in 2017. The derivatives themselves are an enormous lever for creating profits.
The derivatives themselves are an enormous lever for creating losses when they go into reverse. The bank may very well have adequate capital reserves for surviving a <10%> loss in the underlying asset but, they have no possibility of surviving this same loss when it is leveraged up by derivatives.

From the IMF, "A number of large bond mutual funds use derivatives—contracts that permit investors to bet on the future direction of interest rates. However, unlike bonds, most derivatives only require a small deposit to make the investment, which amplifies their potential gains through leverage,"
"the amount of leverage that can be achieved through derivatives exposure is potentially large, often multiples of the market value of their portfolios. This may explain why mutual funds accounting for about 2/3 of the assets in our sample disclose derivatives leverage ranging from 100 percent to 1000 percent of net asset value "
https://blogs.imf.org/2015/12/17/the...-mutual-funds/

The banks are required to hold adequate capital for a loss in their loan book. Since derivatives technically don't have any value, they don't require loan-loss provisions.
There are a few more trading days left in the year. This official denial of problems with bank liquidity may bring a thunderous climax to 2018.
The markets have lost over 20% this year. While the financial sector is the most prominent loser, the corporate sector is in big danger also.
"Where investors share heightened concerns over market illiquidity is in the smaller universe of corporate bonds.
https://www.marketwatch.com/story/if...lem-2018-12-24
$9 trillion corporate debt bomb is 'bubbling' in the US economy
Will Record Corporate Debt Cause the Next U.S. Recession ... https://www.bloomberg

We've seen this story before, https://www.marketwatch.com/story/co...ndi-2018-08-27
Good graphs, https://www.marketwatch.com/story/th...and-2018-11-29

Because of the outsized leverage of derivatives, the FEDs interest rate rise has an outsized effect on losses in derivatives.
Paul Volker raised rates to about 21% to control price inflation. Powell is hoping just to get to 3%.
Real wages haven't gone up in 40 years. The finance sector is horrendously bloated. The FED has tried to support a finance sector that the consumer just can not support. The finance sector went from 15% of the economy to about 40%. The CBs goosed the economy with $trillions of support. Powell has shoved the transmission into reverse. Trump is trying to wind down military expenses to free up some money for domestic problems.
The deep state would willingly throw us into a SEVERE depression to save their perks and control. Trump and Powell are trying to ease us into a much less depression.

12/25 2 year Treasury yield flash crashes – Zero Hedge
12/25 Japan’s Nikkei drops 5 percent after Wall Street slide deepens – CNBC

[Danny B]

Oil,,, the dept poison is back and, spreading

In a general sense, the economy goes down when the cost of energy goes up. In a general sense, the financial sector goes down when the cost of oil goes down. Oil is going down.
The Kuwaitis say that they can extend the production cuts until it finally causes a rise in price. The price of oil now is 1$ a gallon,,, $42 a barrel.
https://oilprice.com/Latest-Energy-N...Oil-Falls.html
The IMF says that Saudi Arabia could be bankrupt by 2020. That would definitely cause financial markets to puke up.
https://www.rt.com/business/319465-s...rojection-imf/

"When asked why stock prices are falling, the talking heads on television and the internet point to the Fed’s continuing interest rate hikes and the ongoing trade war with China. Those factors are important, but there’s another component that gets less attention: soaring levels of debt. Much of that debt is of highly dubious quality. "
"financial wizards on Wall Street turned sub-prime mortgages into mortgaged-back securities called collateralized debt obligations"
"However, with the help of global credit rating agencies, the purveyors of mortgage-backed securities were able to do something roughly akin to converting lead into gold."

Since the banks were rated AAA, the ratings agencies rated the sub-prime loans AAA.
"Millions of borrowers defaulted on their mortgages, and the value of collateralized debt obligations collapsed. Then the banks and insurance companies backing those securities started to collapse, along with stock markets worldwide.

Now it’s happening again. Credit rating agencies are once again using questionable assumptions to give trillions of dollars in dodgy debt much higher ratings than is deserved."
"he volume of debt rated BBB- has ballooned from $700 billion in 2008 to $3 trillion today.

Drilling down into these numbers, there are some alarming statistics. In 2007, companies rated BBB- had an average net debt of 2.1 times earnings. Today, that ratio is 3.2. And more than a third of companies with a BBB- rating have a debt-to-earnings ratio larger than five."
"I won’t be surprised if a large chunk of supposedly investment-grade debt is effectively junk and written off if the correction we’re now experiencing in the stock market turns into a recession. And that could trigger a financial crisis that dwarfs the one that we experienced a decade ago."
https://www.nestmann.com/the-poison-...nancial-system

"in the early 2000s, the Fed’s easy-money bias spawned a monstrous credit bubble, which subsidized the leveraged monetization of housing-market froth.

And so it went, from bubble to bubble. The more the real economy became dependent on the asset economy, the tougher it became for the Fed to break the daisy chain."
https://www.project-syndicate.org/co...-roach-2018-12
The economy SHOULD have been commensurate with our wages. It took serial bubbles to save the finance sector from a crash with reality. At the same time, the welfare-warfare State had to be constantly financed and the State was not about to reel in the FED.

12/26 House Democrats line up behind huge expansion of gov’t – Daily Caller Just what we need.
12/25 Trump ‘plunging us into chaos’, Democrats say, as markets tank – Guardian
Yep, put the dems in charge and , everything will be great.
California is starting to enter it's own special hell.
https://www.sgvtribune.com/2018/12/2...te-budget/amp/
https://www.cnbc.com/2018/12/24/why-...-finances.html

[Danny B]

The piggy banks (bond market) is breaking

1908, the bankers started a panic to justify the creation of a Central Bank.
1913, we got a Central Bank
1914, WW I started
1917 America entered WW I
1917, the FED was coerced to buy war bonds.
Apr 24, 1917 Emergency Loan Act authorizes issue of $1.9 billion in bonds at 3.5 percent.
Oct 1, 1917 Second Liberty Loan offers $3.8 billion in bonds at 4 percent
Apr 5, 1918 Third Liberty Loan offers $4.1 billion in bonds at 4.15 percent.
Sep 28, 1918 Fourth Liberty Loan offers $6.9 billion in bonds at 4.25 percent.

The FED was created as a private liquidity backstop for it's members. It loaned from the overnight window to create emergency liquidity. The short-term loan was repaid and, the liquidity was destroyed. Buying State bonds was never a part of it's original design. The FED was to provide emergency liquidity to private companies for a very short term.
In 2003, the banks were required to create sub-prime housing loans to increase the rate of home ownership. In 2004, both the FBI and SEC warned that a serious bubble in RE was forming. Both units were disbanded.
It all blew up in 2007--2008. The FED was required to buy many $trillions of mortgage backed securities. Their balance sheet eventually reached $ 4.4 trillion. They have been trying to sell all this dodgy paper but, have only sold 10%.

The FED is much maligned but, they never asked to buy and broker GOV bonds.

In 1925, Social Security was created to support widows and orphans. It paid out old age benefits after 65 years of age,,, back when the average life span was 57. It was financed by contributions from workers and their employers. Eventually, ALL the funds in SS were replaced by non-negotiable GOV bonds. If SS had invested in stocks, it would have much more money.

"The roots of IRS go back to the Civil War when President Lincoln and Congress, in 1862, created the position of commissioner of Internal Revenue and enacted an income tax to pay war expenses. The income tax was repealed 10 years later."
"The United States imposed income taxes briefly during the Civil War and the 1890s. In 1913, the 16th Amendment was ratified, permanently legalizing an income tax."
We got an income tax in 1913 and a war in 1917.

America's history is a long litany of war and taxes. Since LBJ instituted the war on poverty America has spent $ 25 trillion.
51% of Americans receive a check from GOV. 44 million receive direct support.
"There were 21,995,000 employed by federal, state and local government in the United States "
GOV debt is growing faster than exponentially. 44% of Americans pay no income taxes.
The bond market is the big piggy bank that was subverted 100 years ago to ensure the continuation of wars and welfare. The FED has been an unwilling enabler.
There is much talk of ending the FED but, the FED buys up all the dodgy assets when the credit markets freeze up. The FED and IRS support the GOV. GOV does redistribution. GOV does much of it's distribution by creating make-work jobs and wars.
The ultimate problem is; GOV tries to create make-work jobs in an amount equal to the jobs lost to automation and outsourcing.

Here is an article about our coming system that will no longer include money. we will just receive everything that we want.
https://medium.com/s/story/the-econo...y-5a703e0ad30b

12/27 Mutual fund outflows surge to $56 billion, most since 2008 – Bloomberg
12/27 Mother of all sucker rallies sends Dow 1,000 points higher – Mish
12/27 Richmond Fed mfg index record plunge coupled with twilight zone hiring – Mish
12/27 Bid-to-cover at U.S. 5-year auction weakest since 2009 – Reuters
Avoiding GOV debt.
12/27 Insider stock buying surges to 8-year high – Bloomberg
Insider stock buying used to be illegal.
12/27 China to take over Kenya’s largest port over unpaid Chinese loan – Zero Hedge
What did you think would eventually happen?

"U.S. credit market debt is about $70 trillion. The 10 year rate doubled in the past two years. Suppose that 1.7% increase applied to $70 trillion of debt. The cost to corporations, state and local governments, credit card holders, students etc. would be $1.2 trillion of reduced spending on other necessities."
This is a good article in credit markets.
https://deviantinvestor.com/10548/tr...conomic-night/

[Danny B]

suckers rally,,, Armstrong,,,All-consuming public pensions,,, advanced weapons

Charles Hugh Smith writes about the general rise in taxes.
oftwominds-Charles Hugh Smith
$125,000: The pension debt each Chicago household is really on the hook for

Armstrong, "The total global debt hit a record $184 trillion, which is the equivalent to more than $86,000 per person. That is actually more than double the average per-capita income. People ask me will our solution work? Can we really just end government debt and convert it to cash restricted to investing in domestic companies? I will put it this way. There is absolutely NO OTHER CHOICE!!!!"
Sorry, I'm not yet at a level of understanding to where I could visualize this process.
"We either default, which will result in civil war and revolution, or you inflate your way out like Venezuela so your Social Security check will not even buy a cup of coffee. A default will result in war. People will then be demanding they have been cheated. Inflating the way out is completely different. You paid them what was promised. It’s their fault it buys nothing.

To inflate the way out requires a completely different set of patterns. Right now, the theory is that WE THE PEOPLE are the problem. If we all paid what the government thinks we should then they will be fine. They increase taxes and increase enforcement and believe it is their divine right of kings to act in this manner. What we are witnessing so far is not the inflation path – but the hardline path that leads to only violence as we are witnessing in France."
Armstrong dearly hates the U.S. GOV that threw him in prison to get his program. I think that his hatred is coloring his view.
Armstrong, Illinois House had voted 72-45 to pass a 32% income tax hike as government refuses to address the real issue of a never-ending need for more and more tax revenue to keep state employees rolling in their pensions. The governor vetoed the tax increase and he was overriden.

The problem has been that government pretends that socialism is to take care of the poor when in fact they have their hand in the cookie jar before anyone else. The crisis stems from the fact that they have been giving themselves pensions with outrageous benefits
More-often-Than-Not, the revolutions throughout history come about when the taxes of government simply break the back of the economy. We are reaching one of those moments as we cross the threshold into 2018.
The low-interest rate policy for nearly 10 years has not merely destroyed the bond market in Europe, it has undermined the pension system both privately and publicly. Indeed, adding to this crisis is the mandate that all pension funds hold some or the majority of their investments into government debt"

Mass Exodus from NYC Due to Taxes
Another favorite of Armstrong., https://www.armstrongeconomics.com/w...endless-taxes/
"QUESTION: Mr. Armstrong; I understand at the WEC you told the audience the stock market would correct sharply into January/February. For those of us who could not afford to attend a WEC, are we to expect the slingshot you have been warning should take place?
"ANSWER: Yes. Timing is absolutely everything. DO NOT ANTICIPATE anything. Time is more important than price"
"Yes, when I say we can see a monetary reset as soon as 2021, this is no joke. There are critical points in a number of markets that I will reveal in Singapore. These are the lines in the sand. Once we cross them, there is no going back. This is a global systemic collapse. I cannot emphasize how serious this is going to be."
It appears that we have 13 months or a bit more to go until we are in deep do-do.... shortly after the next election.

"Europe continues to suffer with some key names still under significant declines even raising questions of continuity! Deutsche Bank shares fell to 6.68 today a decline of 58% YTD. Lots of talk of European names liquidating US paper not as trading strategy but for survival. Financials and auto’s have had a combined affect on the DAX this year and have resulted in one of its worst years in history"

"Mr. Armstrong; A spectacular call. You gave the day and the market bottomed within 100 points of your number. You always nail it. "
"The problem is he has the classic TV talking heads view that stocks will crash with higher interest rates. Trump’s frustration with the central bank chief intensified following the interest-rate increase and months of stock-market losses. He is oblivious to the real crisis which is the low-interest rates are destroying the pension funds."
Armstrong is obsessed with the pension funds. I suppose that it is possible to save the pension funds with higher interest rates. Higher interest rates would destroy; corporate debt, emerging market debt service, FED GOV debt service

"For now, the news will bash the stocks when down, and when investors/traders see there can be no flight to bonds as quality, the real panic will begin. I wish I could reverse this mess, but reality states Trump’s handlers are rooting for the Deep State and would never let me near him.

The Democrats want the stocks to crash for they can blame Trump and try to win the losers to vote for their team. The shame here is this is not about running the nation or the economy to benefit all, it is just about winning the 2020 election. Since the ECM turns in January 2020 rather than the elections in November 2020, this is indicating that we may have a psychological shift prior to the elections."

12/27 Trump declares end to US ‘policeman’ role in surprise Iraq visit – Yahoo
Raytheon and General Dynamics are NOT going to like that. The hard truth is, Russia has a mach 27 missile. They have a nuclear powered cruise missile that can stay aloft for days. It can avoid all ABM systems. China has a hypersonic glider that they are willing to sell to anybody who comes along. Russia has a super torpedo that is pretty much undetectable. It can be launched over great distances. So What !
It can cause a giant tsunami on any coastal city. The F-35 is such a P.O.S. that the israelis have to build it over with new wings. It's about time that pox Americana got out of the war business.
The Pentagon admits that it doesn't have anything that could counter the new Russian weapons. Russia says,,, "you haven't seen everything.
https://www.rt.com/russia/447533-ava...-speed-russia/

12/27 Falling total fertility rate should be welcomed, population expert says – Guardian
12/27 Japan shrinking as birthrate falls to lowest level in history – Guardian
12/27 US population growth hits 80-year low in year of demographic stagnation – Brookings
So, what is the plan to grow the economy?
12/27 US stocks reverse big early decline to end higher – CNBC
China Shows Mnuchin How It's Done As Beijing's Plunge Protection Team Reverses Stock Rout
They pumped zillions into financial markets. There will be no controlled demolition for them.

[wayne.ct]

Converting deflation into inflation

The way the stock market has performed recently is indeed very interesting and it is the cause of much consternation and ink which is interesting of itself. However, the "solution" proposed by Armstrong prompts this comment.

Also, btw, I don't claim to understand or know exactly what his solution is. I just want to throw something out here in black and white regarding inflation and deflation!

It appears that governments and banks (one entity?!) would like to have inflation but at the same time conceal the cost to the economy. I believe that to be true. How to do that when so many are waking up and beginning to act?

Those people who are able to do so and those people who have no choice are able to discontinue going further into debt and even reduce their debt. This causes a major problem for govs and banks. It takes "debt money" out of circulation and to some degree "real money" as well. I would argue that this is the core of deflation, i.e. less "money" in circulation.

What if, by some means legal or deceptive, the accountants obtain the legal option of transferring part of their bad debt to the government in such a way that it "disappears". The bank's balance sheet improves and the government's credibility declines.

If you agree with that premise you probably think that is exactly what they are doing now. Anyway, if the process continues along those lines, is this not what you have?

Those who don't trust the government now will continue to not trust the government.

Likewise, those who do trust the government will continue in the misguided beliefs.

Same for banks.

Same for the legal profession and local governments.

Nothing changes!

Unless people switch sides in this battle, there can be no change in direction. This sea change is more like steering the Titanic than paddling a kayak. The public is being fed the same line they have heard every year, year after year, for a long long time now. We each have to do our part but the prospects are not bright. The public is being conditioned to believe we are just going through a "normal" economic cycle and no fundamental change is required or needed.

Therefore, don't expect a change of course. The world is going to ride this train right over a cliff while thinking "no big deal" everything is fine!

[Danny B]

Falling population crashes into rising debt

In the 2008 crash, millions defaulted on RE loans. This locked up the banks and credit markets. The FED, most likely unwillingly, bought up all those impaired assets at 100%. The banks themselves bought out their competitors for pennies on the dollar. The Sec of the Treasury was a Goldman guy and he made sure that GS had plenty of cash and opportunities to buy or destroy rivals. Lehman Bros was executed by withholding monies owed to them.
Congress was told that the FED must buy all these impaired assets so that the banks could start loaning to the public once more. The banks couldn't find very many credit-worthy people who wanted a loan. The banks speculated rather than loaning. The banks held their excess reserves at the FED and received interest payments. The bloated banking sector conjured up derivatives to create new fees. They pushed student loans to conjure up credit growth.
So, yes, The bank's balance sheet improves and the government's credibility declines.
I hear conflicting numbers but, it appears that the State spends 30% of the GDP. I read conflicting numbers but, it appears that; for every one dollar increase in taxes, the productive economy shrinks by three dollars.
As automation bites harder, social spending goes up. If GOV maintains social support with rising taxes, this reduces the economy. If GOV maintains social support with debt money, debt service becomes exorbitant.
When children were a financial asset because they could be put to work, we had big families. Since children are a financial drain, it makes sense to not have children. The State is running out of people to tax. The economy is shrinking but, the pension funds project 7% returns. The State pension funds require enormous new tax "contributions".
Birth control and the demographic crash can NOT be factored in to a system with debt money.

Our current debt money system AND the financial system will continue to flounder faced with population reduction and wage reduction. Our productivity has gone up but, our consumptive power has gone down. The State tries to make up the difference by war spending and social spending. If sovereign debt collapses as predicted by Armstrong, total spending will fall until it reaches a point commensurate with our wages.
The only thing that could offset this to some degree is a big fall in the master resource.
If the FUSOR or the MEG were to bring down the price of energy by 80%, this would go a long way towards allowing general prices to fall so that we could better survive.

[Danny B]

Jim Willie, Kunstler,,,FED as a suicide bomber

Jim Willie; "We have finally arrived at the ten-year anniversary of the Lehman event, a killjob whereby JPMorgan and Goldman Sachs bought a few $billion in mortgage bonds and never paid Lehman Brothers. The firm died, called a financial failure, but was actually a strangulation. Goldman went on to capture AIG, in order to claim 100 cents per dollar on insured mortgage bonds, a second crime. The Wall Street banks, under the leader Henry Paulsen as the managing USTreasury Secretary, completed the third crime, by pitching the $700 billion TARP Fund. They stole it,
, instead of making the funds available for lending purposes. Here ten years later, nothing has been fixed. In fact, all the abuses heaped upon the mortgage finance sector have been repeated in sovereign bonds. The USTreasury Bond has become a subprime bond, financed by pure monetization, almost no actual bonds buyers"

"The outcome of the unfolding crisis will be three to five times more magnificent that what was witnessed in 2008 and 2009.
Then the Deutsche Bank saga, better known as the Bush Narco Bank. Then the entire US big bank takedowns, evident in the BKX bank stock decline. In fact, the Western banks have kept the EM nations afloat by lending them funds in the last two years, just to maintain and to float the loans owed to the same Western banks.
The USGovt tax revenue in total does not cover the USGovt borrowing costs any longer. The entire USGovt function is currently in deficit, the entire shebang.
The lit fuse will be Western bank declines and Emerging Market debt default."

So, while the banks are declining, they are loaning money to emerging markets to keep the from defaulting.
" GOLD HAS BEEN THE BEST PERFORMING ASSET IN THE ENTIRE 2018 YEAR !! Gold feeds off crisis."
"calls for powerful recession, corporate debt defaults, official debt rating downgrades, rising unemployment, rising price inflation, and growing scattered talk of a USGovt debt restructure (default)."
Armstrong made the somewhat cryptic remark that GOV debt must be converted to cash.

"The Wall Street banks desperately propped up the crude oil price, with the collusion of the USFed itself. Next it all unwinds, and massive losses to Wall Street banks threaten to expose tremendous losses in the $billions for these hollow pillars posing as banks,"
"Consider Deutsche Bank, whose stock was once well over $100 per share. It serves as the Western bank toilet lever. The DB share price is heading to 50 cents in one of the greatest tragedies in the modern financial era. Hundreds of $billions in market capitalization are being vaporized. Little known to the sheeple and even to many financial mavens is that DBank is the Bush Narco Bank, which has moved $billions in narco money for three decades"

" Dozens of big US corporations will suffer additional debt downgrades. Expect at least 1$trillion in bond losses. Expect the Wall Street managers to have very significant option puts in place for the S&P500 and the NASDAQ tech stocks. They will sabotage the main US stock market, in order to drive money into the USTreasury Bonds. But their initiative of sabotage will not succeed this time. The reason why is very solid and very understood. The funds will not find safe haven in the USTBonds since they are the new subprime bond. The tax revenue does not even cover the debt borrowing costs,
Gold and Global Financial Crisis Redux

Well, you didn't expect him to be an optimist..

Kunstler; "You had to love the narrative that the financial media put over about the 1000-plus point zoom in the DJIA on Wednesday: that pension funds were “rebalancing” their portfolios. It dredged up the image of a drowning man at the bottom of the deep blue sea with an anchor in one hand and an anvil in the other, switching hands."
"Thursday’s last minute 900-point turnaround was another marvelous stunt to behold. Somebody gave the drowned man a pair of swim fins to kick himself furiously to the surface for a gulp of air. The truth, of course, is that pension funds are sunk, however you balance their investment loads while they’re underwater. They over-bought stocks out of sheer desperation during ten years of near-ZIRP bond yields, and started rotating back into bonds as they crept above the ZIRP handle, and now with bond yields retreating, they’re loading up again on still-overpriced stocks that pretend to be “bargains.” Everybody knows that this will not end well for pension funds. Glug Glug."

Armstrong says that the FED is raising rates to save the pension funds. Just imagine that you are a deeps sea diver in a dive suit with an air hose to the surface. The air compressor dies and, the crew takes 20 minutes to fix it.
"What The Times and its media compadres fail to notice is that the nation has entered an irreversible transition out of our familiar techno-industrial arrangements into the uncharted territory of deferred fantasies and real hard times. Financialization of the economy was the last ploy to keep this boat floating. It allowed political and business leaders to pretend that asset-stripping the interior of the country — so that coastal moralizers could enjoy micro-green lunches and sex-change surgery — would promote the general welfare. "

"The true rebalancing of pension funds, and everything else in American life, will come with the recognition that we are tapped out and bumping up against actual limits. Alas, economies don’t de-grow, at least not in an orderly way."
Mitigationists versus the Adapters
Which Side Are You On? - Kunstler

Merkel and Macron equate patriotism with treason.
https://www.zerohedge.com/news/2018-...ew-world-order
Brandon Smith says that the FED is a suicide bomber trying to destroy the economy to usher in one world GOV. Some of his stuff is hard to believe BUT, he has a very good track record of getting stuff right. Don't forget, The Economist Magazine (mouthpiece of the "elites") predicted20 years ago that the new world currency would come in 2018.
https://bitcoin.com.au/wp-content/up...d-currency.jpg
https://www.zerohedge.com/news/2018-...-deeper-agenda
An interesting graph of gasoline prices, https://www.globalpetrolprices.com/V...soline_prices/

12/28 Credit spreads blow out amid accelerating liquidations – Zero Hedge
The 1,000 point rise was manufactured by a $64 billion stock purchase. How long can you expect that to last?
12/28 As credit losses pile up, one bond guru dismisses crisis talk – Bloomberg Just one?
12/28 Nobody has any clue about how to trade this “bewildering” market – Zero Hedge Just wait a couple of months.
12/28 Why stock-market investors fear a ‘wicked bear trap’ – MarketWatch Because they are in one.

12/28 Sears may be down to its last 24 hours – CNBC Eaten alive by corporate vultures
12/28 Apple lost $11 billion buying back its own stock in 2018 – Zero Hedge
12/28 Market gives finger formation to Fed’s dot plot take – Mish
I wonder why?
12/28 Danielle Park – Markets finally head south – Market Sanity
Death toll from the cold doubles, https://www.armstrongeconomics.com/w...-not-over-yet/

12/28 Huge divergence between the Dow Transportation index and Dept of Transportation stats – Mish Somebody lied !
12/28 Gerald Celente: worldwide riots, recessions – 2019 will be nuts – Market Sanity
Move to some place warm and, buy more popcorn. I suggest Darwin N.T.

12/27 Trump is a test of the economy’s breaking point – Bloomberg
I'm beginning to suspect that the shutdown is not about the wall. I think that the shutdown is meant to set off something else but, have no idea what.