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  • Danny B
    Volatility, liquidity,,, credit derivatives

    " from the economy to geopolitics to the natural world — things are swiftly worsening.
    Public perception is beginning to shift from complacency to fear. Countries are fast rejecting globalization in favor of nationalization. The holes in our ecosystem — vanishing birds, insects, amphibians and fish stocks — are becoming frighteningly obvious. The threats to life as we’re accustomed to it are becoming more visible while accelerating in both magnitude and frequency."
    " from the economy to geopolitics to the natural world — things are swiftly worsening.

    Public perception is beginning to shift from complacency to fear. Countries are fast rejecting globalization in favor of nationalization. The holes in our ecosystem — vanishing birds, insects, amphibians and fish stocks — are becoming frighteningly obvious. The threats to life as we’re accustomed to it are becoming more visible while accelerating in both magnitude and frequency."

    "What a nightmare it’s been over recent months for those attempting to hedge interest-rate risk. After trading to 4.10% in November, benchmark MBS yields were down to 3.02% near the end of March. MBS yields then rose to 3.34% in April, before reversing lower to trade all the way down to 2.51% by late June. Yields were back up to 2.91% in mid-July – only to then reverse to a three-year low of 2.30% on September 4th."
    Volatility writ large
    "“The Federal Reserve Bank of New York will offer to add at least $75 billion daily to the financial system through Oct. 10, prolonging its efforts to relieve funding pressure in money markets. In addition to at least $75 billion in overnight loans, the New York Fed… will also offer three separate 14-day repo contracts of at least $30 billion each next week… On Friday banks asked for $75.55 billion in reserves, $550 million more than the amount offered by the Fed, offering collateral in the form of Treasury and mortgage securities. The Fed’s operation was the fourth time this week it has intervened to calm roiled money markets."

    Dumping Treasuries and MBs for cash.
    "If risk suddenly becomes an issue for this shadowy network, the cost and availability of Credit for highly leveraged players is suddenly in question. And any de-risking/deleveraging at the nucleus of the global financial system would pose a clear and present danger for sparking “risk off” throughout Credit markets and financial markets more generally."
    "The Fed’s return to system liquidity injections after a decade hiatus received abundant media coverage. "
    "$18 TN of global investment-grade bonds traded at negative yields, including European corporate debt. " INVESTMENT GRADE
    " While a deficient indicator of system liquidity, it’s still worth noting M2 “money” supply has expanded $560 billion over the past six months. Money market fund assets (retail funds included in M2) are up $350 billion since the end of April. Where’s all this “money” been coming from?"
    "Bond markets have turned unstable – on both the up- and downside. Long/short strategies have been bludgeoned. "
    "rom the Fed to the ECB to the BOJ. Is monetary stimulus the solution or the problem?

    Autumn is set up for some serious instability. There’s all this talk of the need for the Fed to create additional bank reserves. The issue is not a shortage of reserves but a gross excess of speculative leverage. It started this week. The Fed’s balance sheet will be getting much bigger."
    Yes but, they want to shrink it. Apparently, many players are dumping treasuries and mortgage backed securities.

    "repo deep freeze as it has now been abundantly clear that the US financial system will need about $400BN more in reserves,"
    "New York Fed president John Williams, who earlier this year unexpectedly fired not only the head of the NY Fed's markets desk, Simon Potter, arguably the most important trader in the world, manning the world's most important trading desk but also the second most important person at the NY Fed's "Plunge Protection Team", the head of the Financial Services Group, Richard Dzina,"
    "New York Fed is examining "why banks with excess cash failed to lend to the overnight money market,"
    "Fed officials have said it's not their fault, and instead have focused on the role played by banks, or rather the role banks with excess liquidity did not play but stepping into fund their liquidity-challenged peers.

    Specifically, Williams and Lorie Logan, senior vice-president in the markets group at the New York Fed, said officials were looking at why cash failed to move from banks’ accounts at the Fed into the repo market, where banks and investors borrow money in exchange for Treasuries to cover short-term funding needs."
    OK, so we're in a big liquidity shortage. Some of the banks have cash,,, some don't. The repo market froze up because the banks with cash held on to it. This happened before in the LIBOR markets. As things get more volatile, more banks will refuse to offer funds to the overnight market.

    Armstrong cautioned the founders of the EU that no currency union had ever survived unless they had a debt union. "They" said that Germany would NEVER agree to take on the debts of southern Europe. Now, "They" are saying that Germany will have to reluctantly agree to take on those same debts. Is it any wonder that Germany is looking to dump the EU and, pair up with Russia?

    They are finally getting serious about putting bankers in jail.
    9/21 Goldman Sachs says the market is about to get wild in October – CNBC
    9/20 Interest rate derivatives trading explodes to $6.5 trillion/day – Wolf Street

    Somebody is going to get burned. It might all depend on the flap of a butterfly's wing,,,, or a tweet.
    Or even a hurricane.

    Leave a comment:

  • Danny B
    Where to interest rates and money creation?

    Notes on public debt;
    Italian government bonds make up 20 per cent of its national banks total assets — one of the highest ratios in the world — according to the Bank for International Settlements.

    FRANKFURT (Reuters) - An obscure clause in government bond contracts may help the European Central Bank clear a key hurdle to launching a fresh stimulus programme by allowing it to own even more government debt, according to central bank officials. But after hoovering up 2 trillion euros (£1.8 trillion) worth of public sector bonds in the past four years, the ECB
    The Euro's $2.7 Trillion Italy Problem - Bloomberg

    The BOJ holds about 50% of public debt,,, about $4.24 trillion

    About $2.8 trillion debt is held by Federal reserve banks
    They tried to unload a bunch of it but, that was deflationary to the general economy.

    Dean Hook, (somewhat dated)
    It is a myth that most of that $14 trillion debt is owed to the Chinese or other “governments”. The vast majority – around $10 trillion – is owed to the Eight Families Federal Reserve crowd.

    In a June 9, 2011 article for Marketwatch, Unicredit’s Chief US Economist Harm Bandholz stated that the Federal Reserve is the largest holder of US debt with around 14% of the total. This does not include debt held by Rothschild-controlled central banks of other nations – including China, Japan and the GCC oil fiefdoms.
    Through the recent QE2 program, the Fed purchased another $600 billion in Treasury bonds. They claimed it was a last ditch attempt to save the global economy from deflation. Instead, the banksters who got the interest free taxpayer-backed money pushed us further towards deflation
    Conversely and inherent in the printing of zero-interest money, they created inflation – speculating in oil, food and gold futures and rolling this increased US debt on the roulette tables at their various wholly-owned global stock exchanges. Is it any wonder the financial parasite class is now clamoring for QE3?
    Thomas Jefferson opined of the Rothschild-led Eight Families central banking cartel which came to control the United States, “Single acts of tyranny may be ascribed to the accidental opinion of the day, but a series of oppressions begun at a distinguished period, unalterable through every change of ministers, too plainly prove a deliberate, systematic plan of reducing us to slavery”.

    A recent report from Standard & Poor’s shows that 40 percent of global sovereign debt belongs to monarchies. However, only 39 out of the 129 countries have a king or queen as head of state, estimated the agency
    The most indebted monarchy is Japan, led by Emperor Akihito. Tokyo owes more than $11 trillion, over 25 percent of the total debt.

    Britain’s Queen Elizabeth II, who is also the head of state of more than a dozen nations within the Commonwealth, has the second-highest debt.
    Despite its large sovereign debt, an average monarchy has three rungs better ratings than the countries without a king or a queen that have an average of BBB to BBB-, says S&P.

    Below is a chart which shows the soaring amount of negative yield government debt. It has recently surpassed $15 trillion.
    More alarming is the amount of corporate debt that has also hit negative yield. Currently there is over $1.2 trillion in negative yield corporate debt.
    Just a few years ago there was virtually none.

    Armstrong claims that there will be a low interest rate for private debt AND, a high interest rate for public debt. He also said that it would be less inflationary fro the GOV to just print the money it needs. The appeal of MMT and UBI is that it would be painless for GOV.
    If the U.S. treasury originated all "money" creation, the banks would be mostly knocked out of business.
    Trump is stepping on the toes of a lot of rich people. Can he wrest control of "money printing" away from the bank cartels? Can he tell the holders of public debt to go piss up a rope?

    9/21 Goldman Sachs says the market is about to get wild in October – CNBC
    Remember; the higher the volatility, the higher interest rate the money renters demand.
    9/21 Illinoisans on hook for more than $18,000 per person in public pension debt – Newsbug
    Not the ones who bailed out and moved to Florida
    9/21 Bankrupt Illinois cities forced to cut services to fund pensions – Mish
    This has only just barely started
    9/20 Fed chairman fails to answer whether Wall Street banks are too big to manage – GATA
    9/20 Interest rate derivatives trading explodes to $6.5 trillion/day – Wolf Street
    Ah yes,,, the volatility

    9/20 India launches MMT: Stocks soar after surprise central bank-funded tax cut – ZH
    Yep, just print the money for GOV
    9/20 How the Houthis overturned the chessboard – Saker
    Ah yes, asymmetric warfare is now available to the little guy,,, just like hacking

    Kunstler on Pocahontas
    " doubt she could FDR her way through it. America back then still had plenty of everything except cash money. Lots of oil, ores, factories, and well-regimented workers. Now we’re officially $22 trillion in debt. The remaining oil costs so much to get out of the ground it’s bankrupting the oil companies. The ores are gone. The factories stand in ruin. And the workforce has degenerated into various mobs demanding something for nothing. The coming disposition of things will be less a depression than a long emergency of permanent contraction, and even Ms. Warren’s zesty grandmotherly charms may not avail to preserve the civil order under those conditions."****-nat...f-the-selfies/

    "everything except cash money."
    Big, Bad, Bald Ben Shalom Bernanke claimed that the FED caused great depression one because it did not pump enough money into the economy. QE has been ongoing for 10? years now. We are still sliding DOWN. At some point, it will become even more obvious that pumping money into the banks to loan to the producers is just not working.
    The proposal is to give free money to the lower loop instead of the bankers.
    there will be a lot of blood in the streets before that happens.

    Leave a comment:

  • Danny B
    world economy locked in to a fall in consumption

    Well, the climate change BS runs deep. Climate change is not a hoax because the sun is indeed changing. Add to that, the pole shift and, weakening of the magnetosphere. Just the same, charging additional taxes will NOT change the magnetosphere.
    Germany Disappoints: Announces Massive Climate Plan (That Is Fiscally Neutral)
    Despite all the hope of fiscal largesse from the market and pressure from ECB's Draghi, Germany has unveiled a "3-digit-billion" euro plan to address climate change, but it will have "neutral impact" on government finances.
    OECD Slashes Global Growth Outlook, Warns Germany Already In Recession
    Germany readying stimulus plan as contingency for deep recession.
    Pox Americana channels it's stimulus through the military-industrial complex.
    Apparently, Germany plans to channel it's stimulus through "green" projects.

    Cooperman: If Warren Wins They Won't Open The Stock Market

    Trader Deals With 'Strange Emotion': "With Each Uptick In Stocks, I'm Getting More Queasy"

    Futures Frozen With $8.3 Billion Expiring At S&P 3,000 On Quad-Witching Friday

    'Rogue' Oil Trader Lost $320 Million On Wrong-Way Derivatives Bets

    Escobar: How The Houthis Overturned The Chessboard

    The Yemeni Shiite group’s spectacular attack on Abqaiq raises the distinct possibility of a push to drive the House of Saud from power...

    Guatemala: 'We're Not Just A Drug Trafficking Hub - We Produce Tons Of Cocaine Too!'

    Precious metals manipulation started about 1974 with the creation of the first futures market for gold. Since then, every commodity has been cursed with a futures market. This originally helped producers to lock in profits. Later, it morphed into a system to allow speculators to lock in profits. The gold market is special because it's stock-to-flow ratio makes it exceptionally good as a bastion of stability. Over the years, gold has become suppressed in price by the State so that it would not be considered a store of value in competition with government bonds.
    GOV bond markets are falling apart, as predicted by Armstrong. "The Trump effect" is causing the State to go after the commodity manipulators. Theoretically, this could entice investors to move to gold.There are 100 ounces of paper gold for every 1 ounce of physical gold. Any move to true price discovery in gold would blow up most other markets also.

    Exposing The Financial-Political-Complex Protecting Its Own In The Gold Manipulation Maelstrom

    Regulators Expand Already Massive Precious Metals Manipulation Probe To Other Markets

    9/20 Dave Kranzler: repo rates and gold — something big is happening – GATA
    9/20 Gold consolidates as the Fed loses control – 321Gold
    9/19 You can’t print gold – Gold Republic

    A complete blowup of the paper gold market would / will? bring down a big mess.

    The Aussies are hunting for loose change.
    "Australia has become perhaps the MOST aggressive country in Western Culture to hunt down its own citizens for money. They follow school children and then investigate how the parents are paying for the school. The Australian Tax Office (ATO) has applied for access to everything to hunt for money. They want access to phone calls, emails, posts, and SMS text messages. New South Wales police have come up with the most bizarre excuse to rob your money I have ever heard of. They now claim that driver safety is the main reason for this new initiative to confiscate whatever coins you have in your car. They have the audacity to claim that “Loose coins within cars are a safety hazard.” '

    Here is something to think about from Armstrong;
    "So, why do I say that ALL currency is backed to this very day and it is not simply fiat with no intrinsic value? All currency is backed by the total productive capacity of its people. For further proof of that statement, just look at China, Japan, and Germany and you will see that each economy rose to the top 10 list in the world when they had NO gold reserves after World War II. It was the total capacity of its people that created the wealth of those nations."

    "Italy has more gold reserves than France. Yet, Italy is considered to be the third-largest economy in Europe behind France. Algeria has the largest gold reserves in Africa followed by South Africa. At the end of 2017, Algeria had a GDP of about US$170 billion. But South Africa’s GDP is about US$350 billion. The size of an economy does not correlate to its gold reserves."
    "Therefore, step back a moment and abandon this old world mercantilist idea of what is behind the wealth of a nation, which was more Phyisocrat than Adam Smith. Your labor is not worthless. Each of us constitutes the wealth of a nation. America has the greatest economy, NOT because of gold, but because we have the biggest consumer market on the planet to which everyone tries to sell goods in order to take home money."

    Armstrong definitely slips up here, "total productive capacity of its people." AND "biggest consumer market" He can NOT equate consumer with producer. Machines are not consumers. Consumption is still here but, production has gone elsewhere. Consumption is supported by runaway credit creation, NOT by wages.

    "Money is the perception of the wealth of a nation, which is its total productive capacity of its people, and not its gold reserves or tangible resources. Russia has tremendous natural resources, but its economy is dominated by oligarchs who have prevented Russia from expanding as China has shown the opposite. The fluctuations in currencies are how capital votes on the confidence of the political state behind each currency."

    This is just plain wrong. Russia has refused to blow a giant credit bubble.
    9/19 While the Fed has no ‘guts,’ the PBOC is on steroids – Bloomberg
    Russia refuses to blow a bubble and, has no government debt.
    China has runaway debt. Armstrong is premature. China will be in revolution and, Russia will NOT.
    Armstrong is simplistic on this account. Huge amounts of productive capacity have moved out of America. Automatic machines do most of the actual productivity. 96 million Americans of working age are not in the labor force. The U.S. dollar may very well be backed by our productive capacity but, all the products must be sold. The consumer base of 16 to 62 year olds is shrinking. Much of the productivity in America is absorbed by the war industries to be blown up (consumed). That is why the Pentagon gets so much. funding. Legitimate consumption is FAR below productive capacity.
    Massive debt creation is funding consumption in America. ALL the markets are close to blowing up. If additional debt creation is not forthcoming, consumption will crash WAY down. The idea of MMT and UBI is to get consumption going again.
    The dollar may very well be backed by our productive capacity but, that capacity has been falling for years.

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  • Danny B
    Squeezing liquidity out of the repo market

    9/20 Why is the Fed pumping money into the banking system? – BBC
    Well, because the banks need it,,,, because that is pretty much all they can do when ZIRP lays waste to the financial system

    Liquidity Shortage Getting Worse: Fed's Repo Oversubscribed As Funding Demand Soars 50% Overnight
    "What is immediately notable is that except for agency paper, there was a greater use of both Treasury ($40.9BN to $51.6BN) and Mortgage-backed ($11.7BN to $27.8BN) collateral."
    So, they're dumping Treasury paper and mortgage backed paper. That tells you something.
    "Yesterday's Fed repo operation - the first direct liquidity injection in a decade - was an unmitigated disaster, with the NY Fed forced to cancel it in the middle due to "technical difficulties" which nobody still know what they were"

    9/20 Yield curve still inverted despite Fed rate cut – Mish
    An ebb tide lowers all boats
    9/20 Mark Spitznagel warns “They’ve created a snowflake market” – Zero Hedge
    Reference to an avalanche?
    9/19 Repo chaos tests Wall Street confidence in NY Fed’s Williams – Reuters
    9/19 ‘This is crazy!’: Wall Street scurries to protect itself in repo surge – Bloomberg
    9/19 Liquidity shortage getting worse: Fed’s repo oversubcribed again – Zero Hedge
    9/19 Negative interest rates are just the price for the end of civilization – Hof Profit

    9/19 China’s mighty trade engine Is stalling as negotiators seek deal – Bloomberg
    Seeing this, Trump has put China up against a wall.
    9/19 Debt-wracked Chinese companies dump US & other foreign assets – Wolf Street

    9/20 The triumph of Trump’s foreign policy: backing off ‘disastrous war’ with Iran – ZH

    Leave a comment:

  • Danny B
    Armstrong and the repo storm

    Armstrong spent a total of 11 years in prison when crooked NYC banks tried to get his program. Ultimately, the fault was crooked GOV. Later, he advised the Chinese to buy treasury paper directly from the FED GOV and bypass the primary dealers. He got a bit of revenge on the big NYC banks.
    Armstrong predicts a rotation OUT of GOV debt and, INTO private debt. This may very well be true.
    As is typical, he was correct to the day on his predictions of the economic low point in India.
    Just how much temptation does he have to predict a crash of public debt to get back at the entity who stole 11 years of his life?
    The economic writers claim that there is NO legitimate replacement for the U.S.
    dollar because, there is no market with the size and depth of the U.S. treasury market.
    Currently, the repo market from the FED is going crazy trying to support all the sketchy banks. Will this lead to a breakdown of the public debt markets? I have no idea. If Armstrong is correct, something will lead to a breakdown.

    The State is forcing the CB to "fix" everything with monetary policy. The FED is crying for the State to fix everything with fiscal policy. The FED sees the writing on the wall and, is preparing to completely change it's "mission"
    "So what is a central banker to do? Hildebrand’s proposed solution was presented in a paper he wrote with three of his colleagues at BlackRock, the world’s largest asset manager, where he is now vice chairman. Released in August to coincide with the annual Jackson Hole meeting of central bankers, the paper was co-authored by Stanley Fischer, former governor of the Bank of Israel and former vice chairman of the U.S. Federal Reserve; Jean Boivin, former deputy governor of the Bank of Canada; and BlackRock economist Elga Bartsch. Their proposal calls for “more explicit coordination between central banks and governments when economies are in a recession so that monetary and fiscal policy can better work in synergy.” The goal, according to Hildebrand, is to go “direct with money to consumers and companies in order to enliven consumption,” putting spending money directly into consumers’ pockets."

    "directly into consumers’ pockets" Sounds a lot like universal basic income.
    "The central bank would maintain a “Standing Emergency Fiscal Facility” that would be activated when interest rate manipulation was no longer working and deflation had set in. The central bank would determine the size of the Facility based on its estimates of what was needed to get the price level back on target. "
    "n short, Hildebrand and co-authors are not talking about central banks giving up their ivory tower independence to work with legislators in coordinating fiscal and monetary policy. Rather, central bankers would be acquiring even more power, by giving themselves a new pot of free money that they could deploy as they saw fit in the service of “government objectives."

    Currently, the PPT, ESF, FED and treasury are pumping "money" into markets willy-nilly. The new idea proffered here would be to streamline and institutionalize liquidity injections to the individual rather than channelling injections through the private banks.
    The article goes on examining different possible plans.
    The East will NEVER endorse a reserve currency created out of thin air by the West.

    More on "repo"
    "QUESTION: Marty; You warned that there would begin a cash shortage and real rates would rise in the private sector starting in September after Labor Day. Ok, it’s about 15 days past that marker and Repo rates have gone completely nuts hitting 10% forcing the Fed to intervene. They were calling it Armstrong’s revenge here in the dealing room. It certainly appears the Fed has lost control of short-term rates as you warned. Is this the start of the chaos you have warned about?"
    "ANSWER: It’s not my revenge, it’s fiscal mismanagement. Look, this is the chaos we have coming and sorry, it is the beginning, not the end. It’s not even a fluke or a blip. So get used to it. Indeed, the Fed has lost control of short-term rates. Trump can jawbone all he wants for zero to negative rates. Sorry! The free markets are showing something else lies in wait.

    The Repo Rate reached a high of 10% by about 9 am just before the stock market opened. The fed funds rate was testing the Fed’s upper limit. The Fed was forced to intervene I believe for the first time since the 2008 crisis."
    "On Tuesday, the Fed offered $75 billion through its facility and received $53 billion of demand from borrowers who swap AAA Treasury holdings for cash at minimal rates"
    It's hard to believe that there is a shortage of cash at the bank level.

    "Overnight financing (REPO Rate) is a basic function which holds the economy together. Those who trade on leverage rely on the REPO market (Broker-dealers, hedge funds, and institutional). It is rarely written about for it is not generally seen by the public. The events of the past few days is a clear warning sign of what I have been yelling about which is on the horizon. The central banks are TRAPPED and in Europe, they have destroyed their bond market with more than $15 trillion and perhaps up to $17 trillion in negative-yielding bonds "

    "NEGATIVE Repo Rates can happen when there is a shortage of cash or particular collateral security, like negative-yielding bonds, are put up to borrow against. Therefore, trying to borrow against a negative-yielding bond can present a crisis. The standard Repo contracts, such as the Global Master Repurchase Agreement (GMRA), have been drafted under the implicit assumption that general collateral (GC) Repo Rates would only ever be positive."
    "We are looking at SERIOUS credit risk once again but instead of the time bombs being mortgage-backed securities, this time it will be negative-yielding bonds issued by governments. The bond markets have been converted into a child’s game of musical chairs. When the music stops, someone will be left holding negative-yielding bonds that will only be salable at even deeper discounts of perhaps as great as 50% in a few years."

    "The financial system simply doesn’t work with negative rates and this is also contributing to shortages of cash for Repo markets. A slight rise in interest rates will create a massive debt crisis and if you undermine the bond market, that is what creates great depressions. Negative yields have been confined to places outside the USA and the intervention of the Fed implies they are not prepared to allow negative rates to undermine the US economy as they have done in Europe."
    You can see the problem. Everyone dumps treasury debt. The sovereign bond market collapses. FED GOV is completely insolvent. 51% of Americans receive a check from GOV,,,, 44 million receive direct public assistance. The safety net would be completely useless. The FED now rolls out the Standing Emergency Fiscal Facility This would be activated when the bond market implodes. The banks will, obviously, fight against being bypassed for liquidity injections. This UBI can NEVER be implemented until after a crash.

    "Unlike the 2008 crisis where the time bombs were private debt, Tuesday’s abrupt rise in short-term rates wasn’t obvious that the financial system was in trouble because sovereign debt is assumed to be AAA and risk-free. Not sure whoever started that huge lie.

    Nevertheless, we have a convergence of forces which are creating the perfect financial storm on the horizon. Immediately, corporate tax payments are due so corps have less cash to sell overnight. Then there are big Treasury auctions as deficits continue to rise for governments always borrow, yet never pay off the debt as if this can continue without end."

    The interest rate risk that negative-yielding bonds carry is beyond unbelievable. It is totally artificial supported only by punters. The financial system simply doesn’t work with negative rates and this is also contributing to shortages of cash for Repo markets. A slight rise in interest rates will create a massive debt crisis and if you undermine the bond market, that is what creates great depressions. Negative yields have been confined to places outside the USA and the intervention of the Fed implies they are not prepared to allow negative rates to undermine the US economy as they have done in Europe.

    I have been warning that we are headed into a major financial crisis that will be a liquidity event which involves government – not simply the private sector as was the case in 2008. So buckle-up. I have been warning this is something NOBODY has ever witnessed before and if Socrates was actually alive, he would be screaming bloody-murder by now. The Institutional Bond Report will be going out to all our Institutional Clients. Those who have been thinking about joining our Institutional client base can purchase a copy $3,500."
    Ok, so there is a cash shortage and nobody wants to loan to the government. In 1913, the government gave up it's right to coin new money,,,, gold & silver. I'm sure that, if / when things get bad enough, US GOV will authorize itself to print money directly / electronically.

    Russia has reduced it's public debt,,, getting ready for the collapse in public debt.
    Here is a good article on mean reversion.

    Leave a comment:

  • Danny B
    Increasing volatility in finance

    I wrote about the FED repo market yesterday. Obviously, this means nothing to the average person. It is a big signal to the finance industry. The volatility in finance is slowing down demand for credit.
    "As Bloomberg reports, today’s surge in Treasury repo rates poses a threat to the market more broadly because traders won’t take new positions without confidence in their ability to obtain funding at consistent rates, "
    Overnight financing is the key to driving the economy, leverage.
    "This is without a doubt one of the worst things that can happen. In many respects it overshadows the Fed moving tomorrow, because if the plumbing doesn’t work everything starts to break down. "
    "It’s a bigger deal than a rate cut by far. It’s meaningless if you put in a rate cut and overnight financing reflects nothing of that rate cut. Which is what’s happening right now."
    This is a slowdown that the FED didn't plan on.
    "Suffice to say, we’re not supposed to be talking about $ funding markets – the linchpin of the largest & most important (there, I said it) market in the world, US Treasuries – in the same breath as the wreckage wrought in Argentina only a month earlier. We’re definitely not supposed to be saying “the collapse in the Argentine Peso was barely 1/3 of what we just saw in the market that the Fed controls…”
    As volatility and rates go up, more money will pull out of the markets. U.S. Treasuries are used as a funding pool for everything in the world.
    This will filter down and affect everything else.

    Armstrong, "ANSWER: Capital is beginning to move already. Europe is closing in and hunting taxes. The chaos of Brexit and punishing Britain rather than addressing the economic problems has really doomed Europe.

    As you can see, the peak in the PE ratio took place at the LOW in 2009, not the high. When you enter these periods of uncertainty, interest rates, dividends, and expectations of profits no longer mean anything. The primary objective is to park money in a safe place where you get it back. Banks are questionable with bail-in policies and negative interest rates. Now even gold is being targeted. Where else to go but equities?"
    Armstrong says that capital will flee public debt like treasuries and, move to equities. I just don't see this. Equities are just too small a market to shove $15 trillion in treasuries in. Forget about $6 trillion in corporate bonds. Various States are making it hard to buy gold without a report. The big money will just file the stupid report and, not worry. A lot of money is moving into silver.

    9/18 Fed’s first-in-a-decade intervention will be repeated Wednesday – Bloomberg
    It didn't work so, try it again.
    9/18 Rate cut odds dip below 50% from 92% a week ago – Mish
    "They" wanted to avoid another rate cut so, they did QE via the repo market.
    9/18 Illinois pension debt now a quarter-trillion dollars and counting: Moody’s – CB
    Illinois state workers highest paid in nation | Illinois Policy
    Nearly 40000 state workers to get pay raises under new contract

    9/18 Could ultra-low interest rates be contractionary? – Project Syndicate
    NIRP and ZIRP are supposed to stimulate the economy. BUT, they wipe out everything and everybody who depend on interest income. Apparently, the negative from the loss of interest income wipes out the positive from low rates. NIRP and ZIRP work wonders for the State that can finance expenditures for free. But, these are expenditures, NOT investments.

    9/17 In interview, GATA chairman asks: how far will rigging probe go? – GATA
    If it goes far enough, the paper gold market will self-destruct and, gold will go to a price of many $thousands an ounce. Since MANY other markets are referenced to the price of gold, there would be chaos in all other markets.
    9/18 Germany “cannot accept parallel currencies such as Facebook’s libra” – Reuters
    France vows to block development of Facebook’s Libra cryptocurrency on European soil

    The CBs can't very well tolerate competition for their paper.
    9/18 Orlando housing prices are up 9 percent since this time last year – Orlando Weekly
    9/17 One in four of New York’s new luxury apartments is unsold – NY Times

    NYC has high taxes and Florida has low taxes.
    9/17 Questions, not answers surround U.S. push to war with Iran – Tom Luongo
    Yeah, how did israel manage to launch missiles and drones from Iran?
    Every time that talks with Iran looked promising, "Iran" attacked a ship or an oil field or something else.

    It looks like Netanayahooo is OUT. This is the best of news. The world can breathe a little easier. The election is close and Bibi refuses to concede. Bibi is charged in 3 big investigations and, will go straight to prison.
    His opponent, Gantz is problematic also.
    A Dutch court has held a hearing on a war crime case against a former Israeli general challenging incumbent Israeli Prime Minister Benjamin Netanyahu in ongoing general elections.

    "Whatever the outcome, ordinary Israeli Jews will continue suffering under neoliberal harshness, Arab citizens treated far worse, Occupied Palestinians worst of all.

    If Netanyahu loses to Gantz/Lapid, his toxic presence will be gone, his destructive agenda to continue under new management."

    Leave a comment:

  • Danny B
    Liquidity crisis,,, repo window,,, QE

    The current problem that is emerging is; a lack of funding.
    "it now appears that the Fed is once again behind the curve, and this time the funding squeeze could have dire consequences for not only the economy but the market, as the broken repo plumbing means that despite $1.4 trillion in excess reserves, one or more banks are suddenly left without liquidity,"
    "Needless to say, such a move - without a clear catalyst - is a clear indication that plumbing in the overnight funding markets has just snapped, and is badly broken to be trading so far above the effective funds rate."

    Today's "Watershed" Repo-calypse Is "One Of The Worst Things That Can Happen"

    $53.2 Billion In QE Lite: Fed Concludes First Repo In A Decade Amid Liquidity Panic
    The first shot toward QE4 was just fired.

    Liquidity Traps of Our Own Design by rcwhalen - Sep 17, 2019 4:33 pm
    Is the Fed independent? No. The Treasury is the dog and the Fed is the tail

    Markets That Live By The Fed, Die By The Fed
    The "everything bubble" is not permanent.

    Did The Fed Fail: Repo Rate Refuses To Drop
    the broadest repo rate has continued to rise and according to BBG data has jumped to 3.9340%.

    The FED is trying to do QE via the repo market. It doesn't seem to be working out very well.
    9/17 Repo market chaos signals Fed may be losing control of rates – Yahoo!
    9/17 $53.2 billion: Fed concludes first repo in a decade amid liquidity panic – Zero Hedge

    Charles Hugh Smith, The Four Dynamics of Bubbles
    "Financial bubbles manifest three dynamics: The one we’re most familiar with is simple human greed, the desire to exploit a windfall and catch a work-free ride to riches.

    The second dynamic gets much less attention. Financial manias arise when there is no other more productive, profitable use for capital. And these periods occur when there is an abundance of credit available to inflate the bubbles."
    "Corporations can’t find any other more productive, profitable use for their capital than buying back their own shares (enriching the managers via stock options and the 10% of American households who own 93% of the stocks)."
    "So borrow billions at 2.5%, pour it all into buying back your own stock and reap the gains as your stock rises 10%."
    Stocks buybacks were previously illegal but, the money renters needed a new way to inflate markets.
    "The Fed and other central banks have created trillions of dollars, yuan, euros and yen for corporations and financiers to play with"

    9/17 JPMorgan inherited ‘spoof’ method from Bear Stearns and refined it – GATA
    9/17 JPMorgan’s metals desk was ‘criminal enterprise,’ DoJ says – GATA

    Once again, the Trump effect. DOJ is going after those who have manipulated gold down for many years.

    The Macron effect.

    Leave a comment:

  • Danny B
    The parasites over run the producerts

    In ages past, the farmer, hunter, herdsman, miner, forester, stonemason, fisherman, et al worked hard and, some of them produced excess "wealth". They traded amongst themselves to acquire things that they didn't produce directly. Their excess wealth was later stored as the most non-perishable items. Normally, metal and stone. As time past, the increasing productivity of the farmer and herdsman allowed some people to work as craftsmen and, build cities. For ease of trade, wealth was denominated in gold and silver. Those 2 metals were a standard much easier to judge than the value of oxhides or food.

    Different tradesmen offered their services to the producers. The bankers was an offshoot of the traders. The banker's job was to efficiently and intelligently allocate capital to entrepreneurs. All that he had to work with was the stored capital of the producers.
    Eventually, receipts for stored capital were used as a proxy for the actual, tangible capital. They were easier to transport and, less likely to be stolen. Talley sticks were one of the best forms of receipts because they couldn't be forged.
    All this time, bankers were limited to capital that had already been produced. Of course, there were exceptions for things like logs at a lumber mill or, crops in the field.
    "Money" was limited to promissory notes for tangible items.

    The bankers started fraudulently creating excess promissory notes. The modern monetary system was born.
    The gold standard was forced on the bankers from time to time to stop them from creating capital out of thin air. Since the banker added nothing productive to the economy, he was forever motivated to cheat the system.
    Since the State was also a non-producer, it too was motivated to support the banker. The State traded regulatory advantage to the banker in exchange for the banker buying government bonds. Regulatory capture was born.

    Since a parasite recognises no limitations on growth, the 2 major, symbiotic parasites always blew up the system. It is advantageous (over the producers) for the parasites to legislate away,,, inflate away the wealth of the producers.
    The '87....'01...07 crashes were in the private sector. Stocks, tech, real estate.
    Armstrong says that the upcoming crash will be in the Sovereign bond market. Though, corporate bonds are looking equally bad.
    The 2 mega parasites are creating megatons of new debt. The general belief is that producers will repay this debt as payment is slowly siphoned off from production & consumption activity.

    Armstrong writes convincingly that government will collapse. The State is completely entwined with the other mega parasite. ALL the recent stimulus is channelled through the banks. U.S. FED GOV spends 24% of the gdp. How could there be a total collapse of governments worldwide without a complete collapse of the banks?
    The parasites are strangling the producers. The producers are falling in numbers. Consumption and commerce are falling. The parasites continue to inflate the debt bubble to compensate for lost profits and taxes. 10 years of stimulus channelled through the bankers has failed to bring a return of commerce & consumption.
    The ideas of MMT and UBI are proffered to channel money directly to the consumer to revive the economy.
    At one time, the bankers was employed to efficiently and, wisely allocate stored capital to entrepreneurs. The money renters of today are throwing heaps of debt at any stupid idea that they can find. The bankers will fight UBI and MMT because it sidelines them. The rise of automation sidelines the worker. The bankers will call MMT, "communism".
    With, communism, the worker is demotivated because the fruits of his labor are stolen. The parasitism of crony capitalism accomplishes the same result. The parasitism of over-taxation is equally destructive for the motivation of the producer AND the entrepreneur.

    The bankers and bureaucrats are the direct enemy of the producer. The bankers use continuous price inflation to keep us from dropping out of the labor force. MMT would change this. The battle for control will not be a short one.

    Leave a comment:

  • Danny B
    Rickards on social unrest,,,, a new level of MAD

    The whole world has turned against israel because it is led by Netanayahooo. Hopefully, the israelis will toss him out in the upcoming election.
    Meanwhile Jim Rickards has a lot to say. The 16 U.S. intelligence agencies war-gamed the economy and, they asked Rickards to give them expert advice on the bond markets. They concluded that the economy is going to collapse. This is kind of a joke because nobody has an economic database anywhere near what Armstrong has.
    Here is what Rickards has to say;
    "With another financial crisis imminent, Mr Rickards posed the question: who is going to bail out the central banks?

    “Your only alternatives are turn to the International Monetary Fund (IMF) to basically bail out the world although that is a slow and difficult process.”
    "Mr Rickards said some people expect the US Federal Reserve to jump to the rescue again in the next financial crisis.

    “What are they going to do if a crisis hit tomorrow? Go to US$5 trillion, US$6 trillion?”
    Mr Rickards said the other alternative was to shut down the banks.
    “And that’s what I expect will happen. They’ll close exchanges, close banks, close ATMs, freeze accounts.”
    To me, this is just simplistic an answer.
    "Mr Rickards was quick to point out he doesn’t foresee a dystopian future or an end of the world scenario.
    However, he said he did expect the crisis will begin with “enormous social unrest”.
    "Civilised behaviour only lasts about three days in the absence of reliable water, food, electricity and all the things we take for granted.”
    In a situation where banks are closed and people can’t access their money, Mr Rickards said social disorder will break out “quite quickly”.
    "He said the social disorder will be most acute in major metropolitan areas.

    To survive this new system, Mr Rickards anticipates communities will shift to a semi-barter system where skills are traded and silver, or gold if you have it, can be used to buy food and other essentials."
    Once again, this is too simplistic. You can't break part of the infrastructure and, have the rest working ie fuel & food distribution.
    "As the crisis unfolds, the US dollar is expected to become worthless – with gold the primary valuable commodity.

    Even then, Mr Rickards said, in his opinion, it was safer to own mostly physical bullion rather than gold futures, options, unallocated gold contracts and ETFs etc."
    Wrong again. People will be desperate to get their hands on paper dollars.
    He is interesting but, spoken like a true goldbug.
    Here is the vid,

    Nassim Taleb coined the term, "black swan". Something that happens that never happened before. There are several candidates.
    9/15 Nearly two out of three cyber attacks targeting SMEs – Benzinga
    9/15 Oklahoma pension fund cyber attack shows rising risk for munis – Bond Buyer
    9/10 The untold story of Notpetya, the most devastating cyberattack in history – Wired
    9/08 Warning issued after malware hijacks bitcoin blockchain – Forbes
    9/07 4 biggest cybersecurity crises of 2019 to date – Hack Post

    Small actors can have huge effects. The tools from the NSA got out into the wild after they were hacked. There will never be a world free of hackers.

    The day after the 9/11 attack, I called up the FBI and warned them that a likely target for terrorists would be; take a big model airplane with a small charge of C-5 and, fly it into the side of a CNG or LNG tankship. There was one such explosion . It took out hundreds of square miles (shock and flame). The FBI guy agreed that it was a possible scenario.

    Charles Huge Smith writes that the modern drone planes are a "black swan". Nobody anticipated how effective they would be. The attack on the Saudi refinery showed that drone attacks are like malware attacks. They don't cost much and, are hard to stop.
    "This is asymmetric warfare on a new scale: $20,000 of drones can wreak $20 million in damage and financial losses of $200 million--or $2 billion or $20 billion, if global markets are upended."
    "there really isn't any reliable defense against a coordinated drone attack, nor is there any reliable way to distinguish between an Amazon drone delivering a package and a drone delivering a bomb."
    oftwominds-Charles Hugh Smith: The Black Swan Is a Drone
    Does the world have a whole new level of mutually assured destruction?

    Armstrong, "Meanwhile, economic data was released from China showing industrial growth slumping to the weakest rate in over 17 years. The US sanctions are taking a toll with the industrial output slowing down"
    "A new Reuters article suggests that Australian insiders within the intelligence agency have reason to believe that China was behind a recent cyber attack on its national Parliament and three other political parties before a general election in May."

    9/16 $1m a minute: the farming subsidies destroying the world – Guardian
    9/16 Saudi attacks reveal oil supply fragility in asymmetric war – Bloomberg

    Leave a comment:

  • Danny B
    OIL?,,,, GM,,,big pharma

    Oil Explodes 20% Higher, Biggest Jump On Record
    Satellite Images Reveal It Would Take "Months" To Fix Saudi Oil Facility

    "US officials "certain" the attack actually originated from Iraq"
    Well, shoot,,, bomb Iraq.
    Goldman Goes "Lehman Weekend" On Oil: Expects Chaos When Trading Reopens
    Our Energy And Debt Predicament In 2019
    Many people are concerned that we have an oil problem. Or they are concerned about recession and the need to lower interest rates... As I see the situation, we have a problem of a networked economy that is not functioning well.

    The Top 30 IPOs Of 2019 Will Burn A Total Of $12.5 Billion Between Them
    IPOs completed during 2019 are projected to be the least profitable IPOs of any year since the Tech boom.

    Yuan Extends Losses After China Macro Data Disappoints
    China Inc. is shutting down all over the country.
    Trump Preparing To Hit EU With Billions In Tariffs: Report
    That decision follows another WTO decision which found that Airbus had benefited from illegal state subsidies.

    Not happy with just pushing China off a cliff, Trump has picked Europe to be the next victim.
    "Liquidity Dies In Darkness": Trillions In Assets Have No Financial Disclosure To Support Them
    That is the "vapor" that I mentioned previously.
    "We Can Do This For 100 Years": Taliban Threaten More Violence After Trump Kills Peace Talks
    Ho Chi Minh — 'You will kill ten of us, we will kill one of you, but in the end, you will tire of it first.'

    Former CIA Spook: "Clear To Me That Spying On Trump Was Ordered By Obama"
    "It is clear to me that spying on Trump was ordered by Obama. It had to be, no doubt about it. He gets a Presidential brief on what the FBI, CIA, NSA are doing every single day. "

    Maybe he missed a day.
    Hedge Fund CIO: "The Biggest Market Player Is 15x Leveraged; That’s Why When It Starts Going Wrong, You’re Out"
    They can NEVER beat a robo-trader which can sell a billion shares between 2 heartbeats.
    "This Is Our Last Resort": 48,000 UAW Workers Set For First Nationwide Strike At GM In 12 Years
    "That’s going to have a big effect on the economy..."

    It's Official: GM Files For Bankruptcy - BankInfoSecurity › its-official-gm-files-for-bankruptcy-a-...
    General Motors filed for bankruptcy early Monday, marking the end of an era for GM, as the troubled automaker now represents the largest bankruptcy in history.

    Big pharma says that the judge in their case is biased because he mentioned the thousands of deaths related to opioids.
    They want him to recuse himself.
    The tag team of Trump & Johnson,

    Lastly, There's Nothing Natural About Socialism
    This is completely untrue. There is nothing natural about a State.
    A family and clan is a natural genetic group. They support each other because they want to. In a State, we support each other because we are forced to. The State tries to take the natural umbrella of clan protection & support and stretch it out over people who are NOT of our genetic group. THAT is what is not natural.
    The Kalergi plan is an old plan to saturate Europe (and america) with non-genetic immigrants to break genetic cohesiveness. They seem to ignore the fact that it will also break cooperation.

    The Automatic Earth writes about the new world order with Bibi Netahayahoo as king.

    Leave a comment:

  • Danny B
    Challenging the dollar,,,, deflecting blame ahead of time

    Oil To Hit $100? Pompeo Blames Iran For "Unprecedented" Drone Attack That Crippled Largest Saudi Oil Processing Facility

    Saudi Aramco describes the Buqyaq facility as "the largest crude oil stabilization plant in the world."

    6% of world oil production capacity is off-line.
    We're Ready For "Full-Fledged" War: Iran Responds To US Accusation It Launched Saudi Oil Attack

    IRGC commander announces American bases and ships "within range" of its missiles.

    Will McCabe Bring The FBI Down With Him?
    ...we should be prepared for McCabe carrying out his threat to bring them all down. We may yet find out what really happened in “Andy’s office”.

    YES, bring them ALL down.
    Only In Illinois: Wife Of Indicted Political Boss Will Hold Highest Judicial Post In State

    Retail Carnage Continues: Forever 21 Bankruptcy Expected By Sunday
    "The headwinds for retail are gaining hurricane force."

    "National Emergency" - US Business Formation Goes Negative

    This is just more bad news for the "greatest economy ever."

    Israeli Attacks On Syria Halted After Russia Threatened To Shoot Down Jets
    Russia threatened to shoot down any invading Israeli warplanes using fighter jets or their S-400 system.

    This is great news. It indicates that Netanayahooo is on his way out. His enemies are Xi, Putin and Trump,,, not to mention most of Europe and the East.

    IMF Estimates $15 Trillion Of World's Foreign Direct Investments Are "Phantom Capital"
    This total makes up 40% of the world's foreign direct investments, and is the equivalent to the combined GDP of China and Germany...

    Any hiccup in the system will turn all of it into vapor.

    Europe's Dream: Escaping the Dictatorship of the Dollar ...

    Why the Euro Won't Replace the Dollar - Barron's

    EU brings industry together to tackle dollar dominance in trade settlement.
    The Rise of the Dollar and Fall of the Euro as International currency
    Macron Says the Euro Is Not Yet an Alternative to U.S. Dollar ...
    The Euro At 20: A Victim Of Economic Malpractice - Forbes

    In 1989, Armstrong told the Eurocrats that a currency union with out a debt union had ALWAYS failed. They said that they were going to go ahead anyway and, "wing it"

    Here is a Spanish language vid from Armstrong, In the prologue (English) , Armstrong talks about his history and, what is coming. He focuses on the fact that the bad design of the Euro will take down Europe.

    The BRICs.
    BRICS Woes: Plunging Currency Values Belie Talk Of Challenging Dollar
    BRICs Discuss Alternative to Dollar | The Rio Times
    Is BRICS a True Alternative? - cadtm
    ​'BRICS system' – healthy alternative to 'defunct dollar system ...2014
    Brics move to unseat dollar as trade currency - Fin24 2012

    Not to be left out;
    Could the Renminbi Challenge the Dollar? - Carnegie
    MINTs (Mexico, Indonesia, Nigeria, Turkey) - Investopedia › Investing › Alternative Investments
    4 days ago

    BRICS Bank challenges the exorbitant privilege of the US dollar

    BRICS countries dump the euro, establish bank – EURACTIV .d
    The Root of All Evil? The Dollar, the BRICS and South Africa
    GeoEconomics – US Oil Dollars Empire vs BRICS – China ...
    The BRICS Initiatives Towards a New Financial Architecture ...
    Beyond the Dollar - Institute for New Economic Thinking

    Everybody wants to challenge the domination of the U.S. dollar. The Euro could have been an alternative but, Germany could not be talked into a debt union. For good reason. Germans are hard workers,,, southern Europe,,,, much less. Germany didn't want to be hitched up to pull the socialist cart for France.
    The BRICs infrastructure bank, along with the Belt & Road initiative could have worked but, Asian cohesiveness was all talk. Chinese dams have cut way back on the water supply for 2 billion people on; the Indus, Ganges, Baramputra and, Mekong.
    Then, there are all the problems around the South China Sea.
    China is in recession and, going down fast. World trade has crashed and the Chinese are closing down their shipyards.

    Armstrong blames the crash of the Euro on socialism. To a certain extent, that is true. The French government spends 57% of the GDP.
    Armstrong; "There is a sense of more concern beginning to emerge for the elites are at last starting to notice that this may have gone way too far and it is unfolding as a war against capitalism. Unfortunately, they may have simply overslept way too long. Donating to politicians is not going to save the day."

    "While my discussions have been with people who attend these elite conferences that others often associate with conspiracy theories of dominating the world, I can attest that they are no more in charge of the world economy than anyone reading this blog. The Club may have a get-out-of-jail-free card and never are prosecuted, but they ALWAYS lose on their manipulations and run to governments for bailouts. Even there they may have overstayed their welcome when the next one comes crashing down. So much for being in control!'
    I can attest that they are no more in charge of the world economy
    THAT is a big, steaming load of BS. They set the interest rates,,, the price of money and energy. Everything else follows. THEY are responsible for currency debasement
    to finance wars. They are responsible for price inflation that robs us of our purchasing power. They are responsible for supercharging the budgets of the war industries.
    they ALWAYS lose on their manipulations and run to governments for bailouts
    They make $trillions until they blow the system, THEN, they squeeze the taxpayers to make up their gambling losses.

    "The elites I have spoken to know our model and keep an eye on things. The Monetary Crisis Cycle coming due is also the convergence of many factors, not the least of which it is also the Pi turning point for Germany – October 3rd, 1990 German unification. Even the elites are starting to smell a crisis in the wind. But with all the people forecasting a recession now and Trump demanding zero or negative interest rates, I know one thing. They will all be wrong for what is unfolding is nothing like the last debacle which they always predict "

    "My discussions have been about this leftist agenda which the elite have ignored as a passing trend pretty much up there with the election of Donald Trump. They want to talk and respect that our computer has been the only thing to accurately forecast not just the bull market in the US shares, the capital concentration into the USA, the slow painful economic recession in Europe which has been like watching paint dry, but also the fact that it forecast the Trump and BREXIT victories, the chaos in Japan, and the trends in India and Southeast Asia not to mention the collapse of the Swiss Peg and the ERM crisis from the beginning of the Euro. They are becoming concerned and I see this ironically as right on schedule for the turning point come January 2020."

    "We are headed into a period that NO PERSON can forecast from an opinion perspective for this is not something anyone has seen in their lifetime and you really have to go past the Great Depression before you can catch a glimpse of what we face."

    "There is NO PLACE left of the earth that is not moving into crisis mode. Normally, I have been running around the world getting called in from one crisis to another. But they have been isolated crises. Now we are facing crises on every continent and it is all simultaneous. To survive this total complete mess, it will take a computer to monitor everything and sort out the correlations.

    This is by far the worst I have personally ever seen on top of the complete meltdown in the civility within politics. This is how republics die. They are not instruments for one side to suppress the opponent. Yet that is now the objective – crush the opposition at all costs. There can be no long-term management of the economy"

    Leave a comment:

  • Danny B
    ECB sinking beneath the waves

    Americans can't very well take a big rise in the price of energy.
    9/15 Drone strikes shut down half of Saudi Arabia oil production – Mish
    9/15 Cheaper gas puts a cap on consumer prices in August, but inflation rising – MW

    Russian State debt is now zero.
    "In 2017, total global debt reached an all-time high of $184 trillion (225 percent of global GDP) or, in per capita terms, $86,000 of debt per person on the planet. The top three borrowers in the world - the U.S. (256 percent of GDP), China (254 percent of GDP), and Japan (395 percent of GDP) "
    “This leads to a unique situation which points to a high credit worth of Russian bonds, "
    Russian bonds will be the only ones to survive the default cascade.

    Draghi from the ECB is a Goldman Sachs guy.
    "And nowhere was this mood represented better than by Germany's most popular tabloid, Bild, which on Friday accused Draghi of "sucking dry" the bank accounts of Germany’s savers, a day after the ECB cut interest rates deeper into negative territory. Next to a Dracula photomontage of Draghi, Bild’s headline read: “Count Draghila is sucking our accounts dry.”
    "Handelsblatt, in an article titled "The dangerous game with the money of the German savers",
    "That said, there were some complications when Bloomberg reported that Europe's top central bankers - the French, German and Dutch governors - all opposed more QE, as did Coeure and Lautenschlaeger "
    But, but, we have to save the banks.

    "So just how easy will it be for the ECB - and its new head Christine Lagarde - to force Europe into taking the politically unpopular move of issuing (much) more debt (even with the ECB's MMT-esque guarantee to monetize it) to support the economy."
    It supports the bans only, not the economy
    The ECB can print up lots of liquidity but, there is another problem.
    ECB is running out of debt to buy – more smoke and mirrors ...
    What If the ECB Runs Out of Bonds to Buy?

    Remember that Draghi is an ITALIAN and a Gold Man Sachs alumni. That makes him doubly irresponsible.

    "And while the Treasury has taken its time in rebuilding the cash over the past month, with the latest Treasury cash balance just $184BN as of Sept 11, it only means the ramp up in the coming weeks will be that much more acute. So acute in fact, that as BofA rates strategist Mark Cabana writes today, "the USD funding storm has been brewing for months and is likely to make landfall in Q4."
    "Why does this matter? Since the Fed does not know the minimum quantity of reserves needed in the banking system and it desires to hold "no more securities than necessary" for the efficient implementation of monetary policy, BofA believes that the Fed will likely want to test how low reserves can fall before intervening in funding markets. "This runs the risk of a temporary overshoot on the extent of money market tightness as the Fed plumbs how low reserves can fall before it ultimately needs to start growing its balance sheet."
    A game of "chicken" with Trump

    Interesting article on fiat currencies.
    9/15 We’re bankrupt. Isn’t that worthy of presidential discussion? – FEE
    Don't ask, don't tell.
    9/15 Cheney, Paul duke out foreign policy split in Trump’s GOP – JH News
    Why isn't Cheney's head on a pike somewhere?
    9/14 Nuclear war with Russia winnable said Trump’s new National Security Adviser – Mish
    Why isn't HIS head on a platter somewhere?
    9/15 US war hawk nut case Senator Graham responds to Saudi refinery attack – Mish
    OBVIOUSLY , Iran did it.

    Zero Hedge with a twist of Douglas Adams writes about economic conditions.
    "I look at markets right now and hold my temples, groaning. It as if we have all been drinking what the Hitchhikers’ Guide to the Galaxy calls “the best drink in existence”--Pan-Galactic Gargle Blasters--the effects of which are similar “to having your brains smashed out by a slice of lemon wrapped around a large gold brick.” "

    Leave a comment:

  • Danny B
    ECB, screwed either way.,, NIRP, the destroyer,,, Stockman

    Once again, my post got zapped. This time, my fault. I have to do the short version.
    The Pentagon warns of a complete breakdown of society as mega-cities rise. Just like Robocop andEscape From New York
    That is the projection for 2030. Here is what is happening right now.

    Disasters causing billions in agricultural losses, with drought leading the way
    The Midwest's Farms Face an Intense, Crop-Killing Future
    Drought and Extreme Heat Are Killing the World's Crops | Time
    Hurricanes, floods, drought and wildfires, 2017 the year of crop losses
    Hunger looms as floods destroy crops, sweep away animals in East Africa
    Devastating Impacts of Climate Change Threatening Farming
    How Climate Change Will Alter Our Food - State of the Planet
    Crop Failure A Growing Reality - Earth Changes and the Pole flip
    Crop failure and food shortages grand solar minimum and pole flip
    Cold and Wet Weather to blame for the Slowest Maize-Planting Season on Record

    The emerging solar cycle 25 will be very weak but, our magnetosphere is even weaker. The sunspots may be fewer but, the flares and coronal holes will still affect us. Along with this, we will get a lot more cosmic rays that will bring rain and cloud cover.
    You can monitor food production at Crop, Adapt 2030 and Ice Age farmer
    Here are the countries that are most at risk. Keep in mind that crop failures may completely change the list as exporters become importers.
    Apparently, you will go to walmart to get your food.

    9/13 Trump the Russian puppet. A story that just will not die – Strategic Culture
    Not until the bombs drop on Tehran.
    9/13 Banks seek lower credit score requirements for subprime borrowers – Zero Hedge
    9/13 Medical debt is crushing many Americans – Zero Hedge
    /13 Another surge in CPI medical care costs – Mish

    It's not the doctors getting rich.

    9/13 Draghi ties Lagarde’s hands with promise of indefinite stimulus – Reuters
    9/13 ECB’s open-ended push leaves it more isolated – Bloomberg
    9/13 ECB’s QE: whatever it takes morphs into “as long as it takes” – Mish
    9/13 Palace revolt at the ECB, legitimacy of policy out the window – Wolf Street
    9/13 The new ECB QE is a mistake. Here is what it should have done – Daniel Lacalle

    "Almost all economists and market pundits believe NIRP will be a short-lived phenomenon. However, I have a very different take.
    Negative interest rate policy changes the law of economics.
    I also believe that NIRP will not only go much lower than almost everyone expects but will be with us globally. Across the board. For much longer than we can imagine.
    First, let me explain why NIRP will go lower and stick around for a much longer time than anyone expects.
    The general perception of NIRP, using a bond at a -0.5% interest rate, for example, means that if I buy that bond, I will get back less money in the future.
    But, the reason why it’s working is the unit cost of the bond is rising significantly. This means the investor who is getting a negative interest rate, is making up for it on the bond price of the unit."

    "The price of Austria’s 50-year bond has gone up 28% year-to-date and 8.8%% in August alone. All the while the yield is -0.02% after taxes. That is an incredible return for the bond market unit." "From the perspective of a bond manager, he is aware he is taking the loss on the yield. But, he’s making a 28% gain on the unit price."
    So, as long as the CBs pump in new liquidity, the profit never stops.
    9/13 ECB’s QE: whatever it takes morphs into “as long as it takes” – Mish
    The printing presses can never slow down or,,, the bond market flames out.

    BUT, the CBs have to constantly increase the supply of bonds.
    9/13 Mnuchin says 100-year Treasury bond possible – Reuters
    So, all the funds and savers who depend on interest income are to be sacrificed to temporarily rescue the bond market.

    Stockman, "So, the first thing is to stay out of the casino. By that, I mean the financial-market stocks, bonds, and everything else.

    These markets are so artificial. They’re just chasing what the central banks are doing. There’s no honest price discoveries or supply and demand; nobody’s discounting the future of economic growth, productivity, and investment. You’ve got the chart monkeys, 29-year-old day traders who are in charge of the market.

    When the big correction comes, there are going to be massive losses, and the panic will be great. All correlations will go to 1—which means everything will fall: the good, the bad, and the indifferent."
    What about my safe-haven bonds?
    "You can’t be saved by picking high-yielding stocks or conservative blue chips or stocks that provide daily necessities like food—it doesn’t matter. Everything’s overpriced right now because of this huge financial distortion.

    When the real correction comes and the central banks are revealed to be impotent and powerless, then everything is going to collapse. You’ll be in harm’s way no matter how clever you’ve been in trying to pick and choose."
    "We have to recognize that the 30-year experiment in what I call “Keynesian Central Banking”—which is almost like central planning—is over."
    "Remember the Time magazine cover from the late ’90s, “The Committee to Save the World”? It had Robert Rubin, Alan Greenspan, and Larry Summers on the cover. They’re now going to be the ogres who destroyed the world."
    As long as it saves the bankers, that is what is important.

    "his ferocious attack against the Federal Reserve will tear away the veil that it’s a beyond-politics cabal of geniuses who are safeguarding your livelihood.

    He’s going to tear it apart. He’s going to totally besmirch and destroy the credibility of the Fed, at least in the eyes of his base. It’s going to create an enormous political debate about central banking."
    "and he’s going to go after the Fed. We haven’t seen anything yet. And I relish the prospect. They need to be beat to smithereens with a strong, lethal political club, and that’s Trump. And after the fragments end up all over the cutting room floor, we can figure out what to do next. But you must take down this institution.

    The Fed is the number one, the number two, and the number three enemy of prosperity, capitalism, free markets, individual liberty, and the wealth of people in the world today.
    Central banks have to be totally discredited and taken down."
    "The one thing that Trump is going to accomplish—as he desperately struggles for re-election—is he’s going to finally rip off the Band-Aid. We’re going to have a real debate about this awful curse of Keynesian central banking.

    Let's not blame Keynes for the State takeover of the CBs to do war finance.
    "And remember 80% of daily volume in the stock market is essentially either index-driven ETFs or various kinds of quantitative, machine-driven investment strategies. If that ever breaks loose, the market will go through an air pocket, and then it’s all over except for the shouting."
    Shouting !!! I want to hear some screaming from the money renters.
    "If the stock market cuts through these air pockets down below, the recession will happen instantly, and no one will see it coming—just like in 2008.

    I remember in the spring of 2008 they were still talking about the Goldilocks economy. And in November 2008, they were talking about the end of the world."
    "I think the odds are that it will happen before then, and if it does, Trump is toast. Elizabeth Warren will be the next president of the United States, and as that prospect becomes even more probable, the panic in the stock market will be something to behold. It will be worse than anything we’ve seen since October 1987.

    If you talk about volatility, you haven’t seen nothing yet. Wait until the election gets really in full heat next year."

    Buchanan; "To Bolton, Trump’s trashing of Barack Obama’s Iran nuclear deal was the first step toward a confrontation and clash to smash the Tehran regime. To Trump, it was a first step to a Trump-negotiated better bargain with Iran.

    Bolton’s hawkish stance of confrontation, and conflict if necessary to impose our will, from the Eastern Baltic, to Ukraine and the Black Sea, to the Middle East, Persian Gulf, Afghanistan, the Korean Peninsula, today finds almost no broad support among the American electorate." "It is only among foreign policy elites in Beltway think tanks, the generals who ran the national security state, liberal interventionists in the media"
    Don't forget Bibi Netanyahu,
    "What Mattis is saying is that Trump’s goal of extracting us from the “forever war” entails too great a risk, and U.S. troops in Syria, Iraq and Afghanistan will have to soldier on, indefinitely."

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  • Danny B
    war as a "cure" for economic doldrums

    Here is an interesting graph of currency debasement.
    Much of the debasement was a requirement of financing wars.
    Armstrong; "Trump is a borrower and only sees the world through his personal experience. The people with savings and pension funds are being wiped out."
    "I fully understand that the talking heads on TV also portray the stock market from the borrower’s viewpoint just as Trump has done. Not everyone borrows and the big money does not. So if people believe what they want to believe. I prefer to assemble the largest possible database, correlate everything, and see how the world REALLY ticks. So believe what you want. There are always two-sides to a market so I fully respect that it is ABSOLUTELY vital that the major be on the wrong side for that is what makes the markets move."

    Armstrong, ;"Willson took a rather interesting view of tariffs. He argued that the system of high tariffs
    “cuts us off from our proper part in the commerce of the world, violates the just principles of taxation, and makes the government a facile instrument in the hands of private interests.”
    Tariffs were really an additional tax on consumers which Trump does not understand for he is looking only at jobs which is typical. "

    This is typical of Armstrong. He assumes that consumption is a given. IT IS NOT.
    "The Revenue Act of 1913 reduced the average import tariff rates from approximately 40% to about 26% and the revenue shortfall was to be be made up with income taxes."
    Keep in mind that the "Grace Commission" reported that not one dime of your income tax money went to support GOV.
    "From 1914 until early 1917, Wilson’s tried to keep the USA out of the war in Europe. That did not sit well with the hawks in Congress."
    "All of that said, on the one hand we have Trump against war, as was Wilson, but in favor of tariffs as a tool to win free trade ignoring that they are really a consumer tax and protectionism for overpaid jobs."
    We absolutely can not have people receiving a "living wage". America was a high-price & high-wage economy. The money renters would like to maintain the high prices BUT, reduce wages. 3rd grade arithmetic tells you that this won't work for long.

    "The Fed was originally designed to stimulate buying corporate paper directly when banks would not lend. Now the Fed stimulates by supporting government buying bonds from the banks who in turn still do not lend to support the economy in a crisis. The very idea why we needed the Federal Reserve has been completely reversed."
    The mandate of the FED was completely distorted, first by FED head, Benjamin Strong and later by FED GOV demand that the FED buy war bonds.
    "There was a major debt crisis in Europe, but not the United States. This is what wiped out Britain as it lost the crown of the financial capital of the world to the USA. "

    Maybe GB should have avoided all the wars.
    Side note.
    Mike King, "But the one thing this dirty gang could never have accomplished by themselves was to trigger the actual war. As even the most geographically illiterate Boobus Americanus or Boobus Europithicus should know, neither the US, nor the USSR, and nor the UK shared a common border from which to make mayhem against Hitler's Germany.

    France does share a border with Germany, but when Hitler permanently renounced any claims to the disputed Alsace-Lorraine region in 1935, a possible flash-point between the two rivals was diffused forever. "
    "In November of 1938, the U.S. mid-term Congressional elections dealt a crushing blow to Franklin Delano Roosevelt's Democrat Party. With America still reeling from the decade-long Great Depression, absent some foreign "crisis", it appeared that the failed two-term President would not be able to seek a third term (He ultimately held office until his death in 1945). It should be noted that at this hard time in American history, prosperous Germany was enjoying full employment, a strong currency, the Autobahn, the Volkswagen, and a happy reconciliation between labor and the entrepreneurial class"

    "and so, by 1939, the New World Order crime syndicate and the British & French chauvinists had nearly run out of all options and all propaganda pretexts for instigating another war against peaceful and prosperous Germany, as they had done in 1914. The last hopes for starting the war to re-enslave Germany rested on the shoulders of one man, and one man only. His name was Edward Rydz-Smigly -- the criminal fool who started World War II. As is to be expected, his name is virtually unknown outside of Poland. It's high-time this dirty, rotten, ego-maniacal scoundrel gets the posthumous "credit" he so richly deserves. "

    "In 1939, supported from "behind the scenes" by elements in the UK, France, and the US (yes, Roosevelt was deeply involved!), Smigly was encouraged to ignore Hitler's sincere and generous proposals for resolving the bizarre and hated partition of Prussia that had caused tension ever since the end of World War I. At one point, Hitler had even agreed to give up claims to western Prussia in exchange for the return of Danzig and a 1-mile wide highway - railway passage linking Germany to eastern Prussia.

    Believing that the western powers were truly behind him, the cowardly Smigly 'stood down' and allowed predominantly Jewish-Bolshevik terror gangs to attack innocent Germans; both within "Prussian Poland" and inside of German border towns as well. These gangs of Red "partisans", as well as other Polish ultra-nationalists, had been salivating at the prospect of triggering a Western "holy war" against Germany ever since 1933."
    "By August of 1939, Germany had exhausted all efforts to reason with Smigly's gang. Earlier that year, the British and French had even urged Smigly to allow the Soviet Army to march westward, in the event that war should break out with Germany."
    "On September 1, 1939, after all German attempts to reason with Poland, France and Britain had failed, and after the Polish military, at the urging of Britain, went on full mobilization, the Germans invaded Poland and liberated Danzig. On September 7, along with most of the government, Smigly ran from Warsaw as it came under attack. The immediate counter-attack promised by Poland's French and British "allies" never materialized.

    Unbeknownst to the blinded idiot Smigly, the Allies had no such plans and fully expected not only the fall of Poland, but the entry of Stalin's hordes. The Allies only interest was to have an excuse to declare war upon Germany, and then wait for Stalin to attack Germany from the east, necessarily having to pass through Poland. Stalin was indeed ready to pounce on a distracted Poland, but his move against Germany was to be on his time-table"
    The long and the short of all this was Anglo-american-french wars as a panacea for a failed economy.
    The result of all this;
    Did you know ...

    ... that just 3 days before the start of the history-altering genocidal tragedy that was World War II, Adolf Hitler pleaded for peace with Britain and France. His sincere overtures were ignored as the Allies, under the phony pretext of "protecting" their aggressive and militaristic Polish ally, declared war first!


    Armstrong again, "This time, the debt crisis is systemic. The currencies are showing divergences as they did pre-World War I. But we have a socialist crisis whereas Western economies are collapsing unable to fund all the promises, as was the case with Communism in 1989-1991 in China and Russia. The central banks only keep governments on life-support and there is no direct stimulation of the economy. Every lesson from the past has been forgotten. We have put all the eggs in one basket (government) and we have politics in meltdown as republics are collapsing and the left v right is becoming much more intense which will, as always and without exception, lead to violence, civil unrest, separatist movements rising, and could result in revolutions which increases the risk of international war as politicians need a distraction from their failed domestic agenda.

    It is just now our turn to rock & roll."
    Assuming the economy collapses, can Trump hold back the war dogs?

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  • Danny B
    Spreading the message of UBI

    Once again, yesterday's post got zapped.
    Why Momentum Stocks Are Getting "Slaughtered" | Zero Hedge
    Charles Huge Smith writes about bubble dynamics. Good article.
    Here is one graph,
    Keep in mind that the stock market is distorted by foreign capital inflows.
    oftwominds-Charles Hugh Smith: The Inevitable Bursting of Our Bubble Economy

    Armstrong, Can governments prevent a major debt crisis?
    "ANSWER: In building the model, I assembled data on everything I could find and then put it all together to see how and what made the world tick. I investigated tax rates to see how civilizations operated. I investigated what types of governments worked best and what always collapsed into oligarchies, then tyrannical entities, before collapsing into dust."

    "The Romans generally had a 7% tax. They also had welfare. The difference was that they had NO central bank and NO national debt.
    The problem we face is that it would have been far less inflationary to print the money than borrow it.

    The Central banks claim that it is less inflationary to BORROW money rather than printing it.
    Monetarism: Printing Money To Curb Inflation - Investopedia
    Why Not Just Print More Money? | The New Yorker
    Why Can't the Government Just Print More Money to Get Out of debt?

    Armstrong, "We have a debt crisis that cannot be paid and the accumulative interest expenditures rose to reach at times even 70% of the national debt. Now that they have discovered NEGATIVE interest rates, they think they discovered a new way to tax people indirectly. They think we are too stupid to realize this is even a tax.

    But fear not. We are heading into a Monetary Crisis of untold proportions. If the governments do not listen, they will create the biggest civil unrest in all of history."
    One way or another, Trump must wrest control of money origination AWAY from the CBs. The bankers are juct one big club. All origination starts at the CB and passes through the banks FIRST. UBI would channel the money to the consumer instead of the speculator..

    "This is the collapse of socialism, for they have promised everything, funded nothing, and cannot keep raising taxes without causing the economy to collapse. This will undermine their entire tax system.

    There are ways to deal with this crisis if we have the courage to first admit that we have a crisis. That is step one."
    The CBs have distorted everything. MUCH of this has been done at the behest of government.

    What is needed is; a very large number of people must be made aware of the CB ripoff AND, the necessity of UBI.

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