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  • BAD economic models

    The vast majority of academia accepts BS economic theory like Keynesian economics. We are in the midst of a BIG, FAT experiment. Big, Bad, Bald Ben Shalom Bernanke bet the farm that he could stop deflation. Unfortunately, it is OUR farm. He said that he could print his way out of any mess. He reasoned that he could always drive down interest rates. He drove them down to zero but, consumption had left the room by that time.
    QE was supposed to last a short time but, the banks locked into place with their derivatives. So, the printing continued. He knocked down the long end of the yield curve but, is losing control of the short end (90 day)
    All that pixel printing does NOT increase liquidity or collateral. It's all pixels and paper but, no wealth.
    NOT included in his theories is that fact that QE destroys wealth.
    "relentless central bank monetization of debt, liquidity in bond markets would decline at an ever faster pace even as, paradoxically, these same central banks added "phantom liquidity" (the topic of another post from two years ago) to equity markets in their attempt to artificially inflate stock prices to record levels without fundamental justification.

    Sure enough, with the usual 2-5 year delay, in 2015 the primary financial topic sweeping the mainstream financial media and all the "serious" pundits, is the collapse in bond market liquidity. "
    "Our answer, at that point, QE will have officially failed, because instead of lowering bond yields - which as a reminder is the primary QE transmission mechanism, one which forces investor to reach not only for yield but also for risk in other asset classes such as equities - any incremental bond purchases will start raising yields as the adverse impact from the illiquidity "premium" surpasses the price appreciation benefit from frontrun central bank buying. "
    Do NOT worry about GOV going broke. They are organizing EVERY last detail of your life in a quest to ensure that you pay your fair share.
    What does the taxman know about you, your finances and your lifestyle? - Telegraph
    Last edited by Danny B; 06-26-2015, 06:15 PM. Reason: bad link


    • 6-25-2015 Gold and China

      The Report From Iron mountain states emphatically that America must have continuous war to hold the nation together. We MUST have a slew of enemies so that fear binds us. The CIA does it's part to create enemies. The world war mongers are working very hard to fire up a hugely expensive cold war and a limited hot war if they can. They say that we need hundreds of $ billions for new weapons. It doesn't matter if the planes can't fly. It doesn't matter if it is too risky for the warships to leave harbor, We MUST build them.

      Wolfowitz gave us the master plan. We MUST dominate Eurasia. Eurasia is not too keen on this part. They need to stop the warmongers before it gets too dangerous. We have the power to destroy all life on the planet with minimal effort. The insane neocons ( all of them) plan to take on Russia first and then China. China is not the kind of adversary that is likely to wait.

      Chinese savers hold about $21 trillion. China can control markets. the important market is the gold market. The West is controlling the gold market through paper manipulations. The COMEX hasn't delivered any gold in 2 years.
      " And since the Comex has not actually delivered any metals for more than two years despite them being a futures delivery market, the potential that China's move to take over physical gold pricing within the next six months could very easily cause a derivatives meltdown, and drive the price of gold even higher than the SGE might set it at."
      " In fact, sources claim that right now premiums on large sales of gold bullion are ranging as high as $600 over the current paper spot price."
      China announces they will be setting new gold price by end of year - National Finance Examiner |
      "It could be at any price they fix. There's a lot of things that they can do to make this work," he says.

      Hoffman estimates that to create an exchange rate of one ounce of gold for every $64,000, the country would need about 10,000 metric tons of the metal. "That's nine times the national official holdings and about 6 percent of all the bullion ever mined globally," Hoffman says. "
      Chinese Gold Standard Could Create 'Fireworks' - Bloomberg Intelligence - TheStreet
      China is expected to receive approval from its central bank for a yuan-denominated gold fix, with a potential for an announcement as early as next week.
      China can pick the time and place and number for revaluing gold. If the Yuan is reset to a given gold value, ALL currencies must follow. Just like poker, you must lay your cards on the table. All States would have to reveal and audit their gold holdings for the reset / revaluation of the currency.

      If China feels too threatened, it may force the issue. It would have to crash the entire U.S. economy to get the military to back off.
      China is believed to have the 10,000 tons of gold. There is a vid linked here on the repricing of gold by China.
      China's takeover of the West continues as they receive invite to set gold prices - National Finance Examiner |
      The American gold is gone. You can thank Rubin. The world is no longer going to allow us to roll over our debt forever. Our balance will be "zeroed out" periodically with gold. GOV will print up a new currency but, It won't fly with the rest of the world. We will have huge shortages.

      By rattling sabers at China, we have forced their hand.

      Edit: Buffet said that derivatives are weapons of mass financial destruction. The world trades about 4500 tons of gold every day. Very little is physically moved. It is just used as a reference of value compared to other commodities. With this view in mind, you can see that it is the interests of the PTB to keep the price of gold low.
      Just imagine that you found a HUGE bomb with the fuse already lit. It is a waterproof fuse. You continually pour water on the fuse to keep the bomb from exploding.
      The FED is printing up $ billions to try to stop the price explosion in gold from wiping out the rest of the economy. It has forced price discovery into the paper markets that don't actually sell any gold.
      "When the gold price moves against a fully-leveraged futures speculator?s bet, their entire capital risked can literally be wiped out within days. At 31.3x, a mere 3.2% adverse move in gold would devour 100% of the money bet on that contract. "

      The West drives down the P. O.G. to hold off the explosion. The more they drive it down, the more gets sold off to the East. If the Chinese are already paying $ 600 over spot, you can bet that they will re-price the P.O.G. much higher and annihilate the shorts. When the shorts get skinned alive, any corresponding derivatives will melt down whatever is left of any precious metal speculators.
      If a 3.2% increase would wipe out everybody, you can expect a 30% increase to create un-payable margin calls. The brokerage houses would melt down to the foundations.

      At the Bretton Woods conference, dozens of States agreed that currency printing MUST be controlled. 40--50 States have signed up for Yuan swap lines. Even Great Britain signed up. This is an indication that the world has once more arrived at the conclusion that currency creation must be managed intelligently.
      Last edited by Danny B; 06-27-2015, 05:13 PM. Reason: More info


      • I think the Americas (North and South) will need to go to a silver standard. I see Mexico/South America being invaded for it's silver mines.

        As for FED devaluing the dollar, they need a strong dollar to increase interest rates correct? Or would a weak dollar be needed for a rate increase?

        It seems to me that if a strong dollar was allowing for more purchasing power on imports, a rate increase would slow spending and further strengthen the dollar from bond purchasing outside the boarders. I don't see how the FED can increase rates with a weak or devalued dollar, do you?


        • Trendy

          I sometimes look up various words or phrases to see if Google can "predict" events.

          So far I've found nothing useful, but a lot of people looked up God in March 2010 for what reason I don't know.


          • Stashing Greek loot in the Cayman islands

            "UNITED States of America - It can now be reported that the Greek euro denominated debt has escalated to $360 billion. This now represents as much as $25 TRILLION of worthless cross-collateralized derivatives, which are now outstanding with the Bank of England and the Bank of New York Mellon as counter parties."
            "Without a Greek deal all of these aforementioned banks collapse leading to capital controls and the possibility of worldwide bank runs."
            "We can also divulge that the Greek government is enraged having learned that various financial ministers tied to European Union nations have created secret offshore tax havens in the Cayman Islands using the euro payments of the Greek People to establish these illegal offshore accounts."
            So, this gets VERY interesting.
            "The Cayman Islands’ Department of International Tax Compliance (DITC) has notified Cayman financial institutions of its intention to move forward with implementing the OECD’s Common Reporting Standard (CRS), with the introduction of local regulations by the Economic Confidence Model turning point – October 1, 2015. This of course will end banking in the Cayman Islands and will impact many hedge funds as well."
            Cayman Islands to Begin Reporting Everyone on October 1, 2015 | Armstrong Economics

            So, the crooks moved all their loot to the Cayman Is. The Cayman Is. will soon rat them out.
            Hot Explosive Breaking News: It's Contagion: Banks in the Bucket | Alternative
            I can't vouch for all the numbers in the above article.
            Apparently, the stock market is returning a big fat ZERO.
            The Euro and the Eurozone were designed and destined to fail. The Eurocrats believed that they would just slide in even more control. Derivatives in the form of interest rate swaps did not exist when the Euro was created. There is no backup plan. Yanis has created another extension whereby the ECB is pumping banknotes into Greek banks. It won't be much longer before ALL Greek paper wealth is held at home.


            • Ruphus, a strong or weak currency is somewhat of a misnomer. The currency is just a tool. What matters is a strong or weak economy.


              • Currency re-alignment

                Jim Rickards did war-game exercises with our 16 intelligence agencies. They expect the dollar to collapse. Now, you see Rickards everywhere on the net talking about the "spooky new currency" he's talking about the Special Drawing RightsSDR. This has been around for many years and hasn't caught on. It sounds like somebody wants to force-feed it to us.

                The Yuan is expected to be accepted as a reserve currency very soon. "They" are making a big deal of this. First Look: U.S. Dollar Substitute to Go Public on Oct 20th?

                Jim Willie said that America will get a new dollar to replace the current one. He also said that foreign States will not accept it because we will overprint it.
                Saudi, Iran, Russia and China are all aligned as a major petro hub. They will demand balance-of-trade settlement in gold.
                October looks to be a very busy month.

                Edit: if your following the stock market, there is news.
                "Smart Money Just Sold The Most Stocks in History"
                , Zero Hedge, June 23, 2015
                So, where did that money go? It probably went to a bank where it will be available for the bail-in.
                Last edited by Danny B; 06-29-2015, 05:03 AM. Reason: one addition


                • europe

                  The EU was designed and destined to fail. After the inevitable collapse, the various states were to be locked into an ever-tighter union.
                  Activist Post: The U.S. And EU Will Collapse Regardless Of Economic ''Contagion''
                  I’d be willing to bet that the original "eurocrats" did NOT count on the numerous emerging problems. The migrant crisis, Islamist terrorism, Grexit and Brexit: a perfect storm of crises blows apart European unity | World news | The Guardian
                  The Eurozone was planned to be maxed-out socialism with the wealth being transferred to the pestilent overlords. (bureaucrats). Their numbers are legion and their demands insatiable. Their qualifications and abilities???
                  "Müller described the bloc's decision making process as plagued by "helplessness, cowardice, selfishness." Yep, sounds like bureaucrats.

                  Read more: Merkel's European Strategy Didn't Just Fail, It Failed Spectacularly / Sputnik International

                  Greece must be punished severely so that nobody gets the same idea. This will prolong the agony, NOT save the union.


                  • The end of GOV mandated profits

                    The various trade agreements are designed to bring guaranteed profits to corporations that are unprofitable. Obummercare is designed to bring profits to Big Pharma when Americans can no longer afford medical care. Profits are drying up and dying. The emerging fascism is an attempt to support corporatism by GOV fiat when the consumer can no longer afford to support the corporate behemoths. The consumer has fallen at the side of the road. GOV is trying to print the necessary wealth to support the corporations.

                    This bubble is close to exploding, NOT popping. The consumer is no longer a producer. He worked harder and harder to be more productive than the machines that would replace him. Like the draft horse, he finally lost the competition.
                    A World Without Work - The Atlantic
                    Man is not the same as a horse. He MUST have a center to his life. Take that away and he loses all identity.
                    The Movie Every Screwed Millennial Should Watch | Alternet
                    The whole economy is being carried along by printing for the survival of both the corporation and the consumer. Man is de-materializing.
                    Editorials | Mauldin Economics
                    At the same time, we enter a gigantic demographic crash. Hundreds of $ trillions of unfunded liabilities, much of it to seniors.
                    "Starting in 2015, the IPAB will give 15 unelected bureaucrats unprecedented power to slash billions of dollars from Medicare when spending exceeds targeted growth rates. The cuts made by the board will come on top of the $500 billion that was transferred from Medicare to a new entitlement program as a result of the new health care law." - See more at: Obamacare is a Public Requiem by Supreme Decree

                    So, what happens when FED GOV defaults? What happens to all those programs that guarantee profits to unprofitable enterprises? How much further does employment go down?


                    • The China mess

                      There is no shortage of things to write about. I'll start with China because they take your breath away,,, literally.
                      Pan Yue, China's eloquent, young vice-minister of China's State Environmental Protection Agency (SEPA),
                      "We are using too many raw materials to sustain [our] growth ... Our raw materials are scarce, we don't have enough land, and our population is constantly growing. Currently there [are] 1.3 billion people living in China, that's twice as many as 50 years ago. In 2020 there will be 1.5 billion ... but desert areas are expanding at the same time; habitable and usable land has been halved over the past 50 years ... Acid rain is falling on one third of Chinese territory, half of the water in our seven largest rivers is completely useless, while one fourth of our citizens do not have access to clean drinking water. One third of the urban population is breathing polluted air, and less than 20 percent of the trash in cities is treated and processed in an environmentally sustainable manner ... Because air and water are polluted, we are losing between 8 and 15 percent of our gross domestic product. And that doesn't include the costs for health ... In Beijing alone, 70 to 80 percent of all deadly cancer cases are related to the environment."

                      "Developed countries with a per capita gross national product of $8,000 to $10,000 can afford that, but we cannot. Before we reach $4,000 per person, different crises in all shapes and forms will hit us. Economically we won't be strong enough to overcome them."
                      "The government has squandered astounding quantities of resources building entire industries China does not need."
                      China's Communist-Capitalist Ecological Apocalypse

                      Ah yes, empty cities.
                      "China plans to build 20 cities per year for the next 20 years." "Moreover, according to the website, as of the end of 2011, 64 million newly built apartments were vacant in China. "
                      "so they build cities on an unprecedented scale, essentially erecting the equivalent of Rome every two months. And since seven to eight million people are added to the workforce every year, the government must do what it can to keep them busy. "
                      Ah yes,,, keep them busy. China moved 300 million self-sufficient peasants off the farm and into the cities.
                      What Should I Know about China?s Ghost Cities?
                      China is burning the economic candle at both ends to keep everybody working. When the crash comes, there will be a few hundred million people who will wish that they were back on the farm.

                      " The policy easing should be viewed as a measure to contain the risk of a hard landing or systemic crisis rather than one to achieve faster growth. In this case, the stronger-than-expected monetary easing may help stem the decline in the equity market following a 10.6% drop over the past two trading days. The positive wealth effect of the equity market on consumption or aggregate demand is limited in China, but an equity market collapse would hurt millions of mid-class households and pose great danger to the economy and social stability."
                      There's that word again, "social stability". Often used in the same paragraph as social unrest.
                      "And there you have it: just like all other central banks, the opportunity cost to markets returning to fair value is nothing short of social conflict (as admirably displayed with every passing day in the US) and even, perhaps, civil war. "

                      "1928–1929 U.S. market rally of 100%, which occurred over the course of 18 months." The PTB created/allowed TOO MUCH credit expansion.
                      "The Chinese A share market has been historic, rising 150% in less than a year " " This rally has been fueled by margin trading, with margin debt up 464.57% over the past year"
                      China pumped it up too fast,,, too high. They sacrificed their environment and their health. World in Review: The Greek Tragedy Continues to Set the Tone | Armstrong Economics

                      China is making big moves in finance but, it won't do them any good if they are in civil war.
                      China Resets The Currency Markets - Gold Forecast - Silver Forecast - ETF Trading Strategies - ETF Trading Newsletter


                      • Fear and lies from the BIS

                        The world is run by politicians whose primary attribute seems to be deviousness. In the corporate or academic hierarchy, most politicians would be stuck at a very low level. The politicians constantly proclaim that they have consulted with "experts" in the field. They NEVER follow the advice of the experts because it would cost them money or votes.
                        The Bank of International Settlements is staffed by people who have considerable intelligence. Like the FED, these people are using a lot of bad models. Just the same, they do come up with accurate analysis when a problem is very close (obvious).

                        The B.I.S. is now quite worried; "The BIS is critical of the low interest rate environment and is, apparently, appalled by the actions of some central banks – namely, those of Switzerland, Sweden and Denmark – who have introduced negative interest rates which it describes as “stretching the boundaries of the unthinkable”.
                        Boundaries of the unthinkable,,, has a nice ring to it.
                        The BIS claims that we need structural reforms. The idiots claim that we have to cut loose the non-producers (pensioners) who PAID into the system. We have to cut them loose to save the banks,,, who never produce anything except misery and debt.
                        Grexit?, BIS Warning, Chinese Market Crash & Systemic Risk Shake the Global Economy

                        "The BIS claimed that central banks have backed themselves into a corner after repeatedly cutting interest rates to shore up their economies. "
                        The usual lie. They only tried to save the banks, not the economy. Every action from the central banks has been an effort to save banks. The producing economy has crashed but, the banks think that they are the center of the universe and must be saved at all costs.
                        Much of the article is total BS.
                        The world is defenceless against the next financial crisis, warns BIS - Telegraph
                        “Misallocated labour needs to move from these sectors to other parts of the economy,” These people are unemployed, not mis-allocated.


                        • Puerto Rico hits the wall

                          Yanis refused to borrow any more money. Evidently, the governor of Puerto Rico has the same idea. "And this one: any deal with hedge funds, who are desperate to inject more capital in PR so they can avoid writing down their bond exposure in case of a default, "would only postpone Puerto Rico’s inevitable reckoning. “It will kick the can,” Mr. García Padilla said. “I am not kicking the can.”
                          The idea is to inject more money and exit your position before the can hits the wall.
                          "This is not politics, this is math.”

                          Funny: math went out the window in 2009 when central bank "faith" took over. The problem is that faith has run out, as has the "political capital" to keep an insolvent global system running, and first Greece now Puerto Rico are finally realizing it.

                          As the NYT adds, this is "a startling admission from the governor of an island of 3.6 million people, which has piled on more municipal bond debt per capita than any American state."


                          • Expanding bond crisis

                            Banks have just assumed that they would always get bailed out by taxpayers,,, naturally without the approval of the taxpayers. With this "backup" in mind, they engaged in irresponsible lending. The numbers have become so large that GOV can't bail them out. Puerto Rico isn't a new problem.
                            "According to MarketWatch: Chicago's six pension plans are 40% funded; New Jersey's are at 51.5%; and Puerto Rico, which is facing its own crisis moment, is grossly underfunded at 3%.

                            Read more: Puerto Rico, Chicago, Detroit: Is the US Set to Be the Next Greece? / Sputnik International
                            How can anybody be surprised that Puerto Rico is failing?
                            "A survey by the Center for Retirement Research found that 150 state and local pension plans had an average ratio of assets to liabilities of 74%. In other words, for every dollar those funds owe their pensioners, they only have 74 cents in assets."
                            None of this is an overnight development. Irresponsible lending nurtured it.

                            "To avoid disaster, the US Congress may move to allow US territories like Puerto Rico to file for bankruptcy protection."
                            Marvellous, they will declare bankruptcy to avoid disaster.

                            Italy is in the hot seat because they are the tenth largest economy but, the third largest bond market. Italian stocks plunge as borrowing costs soar - The Local
                            Spanish bonds tumbled.

                            Varoufakis drained every Euro out of Greece so that creditors couldn't demand more money. Everyone is clear on the fact that austerity will never work. He has positioned things so that debt forgiveness is the only avenue available. He doesn’t have to say a word. Merkel says, "compromise".
                            If Euro Fails, Europe Fails: Merkel Urges Compromise as Greek Default Looms / Sputnik International
                            The banks demand that no investor or banker lose even a penny. Debt writeoff is the only answer. Of course, the bankers want all the loses thrown on the taxpayers.
                            Deutches bank holds lots of Greek debt and they are ready to blow up any minute. The very big risks of the Greek debt crisis - Jun. 29, 2015
                            They are now rated lower that Lehman Bros. was rated just before they blew. All these debt transfers to GOV are what is going to blow the sovereign bond market.

                            Reportedly, the bank runs are going to start in the "shadow banking" system.

                            Charles Hugh Smith writes about "Magical Thinking".

                            Armstrong has a plan ready to go to save Greece. Hopefully, Syriza will implement it.
                            Stockman says that the FED will bailout Europe. Seems strange because the Euro is a competitor to the dollar. Of course, they don't want to lose the NATO base in Greece.
                            Do NOT worry, Everything is going to be OK. (EGBOK)
                            Consumer Confidence Index climbs to 101.4 in June – ABC News


                            • Another day,,, a new bond problem.

                              France seems unhappy that Greece and Italy are getting all the attention;
                              French Economy In "Dire Straits", "Worse Than Anyone Can Imagine", Leaked NSA Cable Reveals | Zero Hedge
                              Socialism isn't necessarily a bad idea. The problem comes in that it tries to maintain a standard of living for everybody that eventually breaks the bank.
                              Puerto Rico refuses to kick the can for long enough to permit bond holders to exit their positions; Bond Insurers Crash, Hit by Puerto Rico’s Default Shrapnel | Wolf Street
                              Greece is winding down and China will take center stage;
                              John Rubino ? End of the Greek Tragedy is Here, Just as the Chinese Tragedy Starts « Financial Survival Network
                              But, there is still plenty of drama to play out in Greece; Panicked hedge funds now praying for a miracle in Greece – Wolf Street
                              America has it's own Greek Tragedy; Illinois Government Stumbles Toward Shutdown in Budget Stalemate - Bloomberg Politics
                              Hedge fund manager just lost millions on Greece and Puerto Rico – Fortune
                              The headlines show panic in the public bond market. This is slowly turning into contagion. Armstrong calls for a crash in U.S. GOV bonds. Looking at the spreading contagion, this isn't hard to believe.

                              Argentina was a good object lesion of a country that got screwed by the bankers. Iceland came along a broke the "plan". Greece is going to break the plan. Puerto Rico caught on even faster. If Marine Le Pen gets her way, France will bolt in a flash. Bepe Grillo will do the same for Italy. When the bankers get a warning, they are able to dump toxic paper on GOV. Sure, this saves the banker's position. BUT, GOV can only absorb just so much toxin. Save the banks,,,, bring down GOV.
                              The bankers may have saved their skin but, they risk destroying the currency.
                              Inflation / deflation is often selective. Equities have been grossly inflated. They will be grossly deflated. Same is true for GOV bonds. Hopefully, food commodities will be somewhat stable.


                              • Tsipras lit the fuse

                                Europeans are serial defaulters. The bankers invented the Eurozone to put them in a debt straitjacket.
                                "Instead, the troika’s authoritarian bailout regime has stimulated political revolt throughout the continent. Tsipras’ defiance is only the leading indicator and initial actualization–the match that is lighting the fire of revolt..

                                But what it means is that there is now doubt, confusion and fear in the gambling halls. The punters who have grown rich on the one-way trades enabled by the money printing central banks and their fiscal bailout adjutants are being suddenly struck by the realization that the game might not be rigged after all.

                                So let the price discovery begin. In the days ahead, we will catalogue the desperate efforts of the regime to reassert its authority and control and to stabilize the suddenly turbulent casino.

                                In riding the central bank bubbles to unconscionable riches the big axes in the casino have falsely claimed to be doing “gods work”.

                                As they are now being forced to liquidate these inflated assets, they actually are.

                                Last fall one of the most detestable members of the regime, Jean-Claude Juncker, arrogantly issued the following boast.

                                “I say to all those who bet against Greece and against Europe: You lost and Greece won. You lost and Europe won.”

                                This morning that smug proclamation is in complete tatters. Good on you, Alexis Tsipras."
                                The Eurocrats have nothing left to offer except poverty.
                                "What changed is that after Juncker’s speech, the discussion is no longer about data or numbers or facts anymore (but who understands that?), because he never mentioned them.

                                It’s instead now about fear and fight and flight and various other base instincts, you name them. And that’s not a coincidence. The reason he, and the EU as a whole, resort to this ‘message’ (and no, these guys’ spin teams are not stupid) is to a substantial extent that it’s simply all they have left. "
                                Europe's Controlled Demolition - The Automatic Earth