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  • Danny B
    Italy, Hopium & LIBOR

    The next meeting of the FED is December 18-19.
    The next meeting of the ECB is;
    Governing Council of the ECB: monetary policy meeting in Frankfurt
    Press conference following the Governing Council meeting of the ECB in Frankfurt
    Draghi, "The central bank has been treading a cautious path in recent months, seeking to start winding down its EUR2.6 trillion bond-buying program, known as quantitative easing or QE, without spooking international investors. "
    "Speaking at the European Parliament in Brussels, Mr. Draghi confirmed that the ECB would likely phase out QE after next month. The decision is likely to be formalized at the ECB's next policy meeting on Dec. 13."
    "Our policy had disastrous consequences? Yes, it created 9.5 million jobs in a few years," Mr. Draghi said."

    Armstrong 2016 "Our models have been targeting 2018 for the last 30 years as the first potential year for a monetary crisis and reform."
    "The most likely course of action has not changed. When confidence in government collapses among the GENERAL MASS PUBLIC, everything will breakout."
    "The days of searching for some guru who is never wrong from an opinion perspective are gone and only fools seek such ideals. We are heading into the eye of a financial storm that will topple governments. The future is being constructed before our eyes if we wake up and just look. "

    Italy wants to take the tried-and-true course of defaulting. Since they don't print their own currency, they have to default by way of the bond market. Investors will be reading the tea leaves leading up to the December meeting of the ECB. They are already starting to dump Italian debt.
    AT THE SAME TIME, they must try to guess what the FED open market committee will do about U.S. interest rates. Powell said that we are close to the neutral rate, NOT, at the neutral rate. This is all hogwash anyway. A so-called neutral interest rate depends on dozens of outside factors.
    I've already posted links showing that the interest rate is greatly affected by the birth rate. Armstrong already mentioned that December might bring some kind of big reversal.
    So, how are the markets reacting to all this news?

    London Inter Bank Overnight lending Rate. LIBOR
    "While stocks, and with a notable delay bonds, were happy to run with Powell's dovish reversal on Wednesday, one key market - arguably the most important one for financial conditions when it comes to the broader economy - has refused to respond.

    Earlier today, instead of reacting to what has been interpreted as the Fed Chair's "dovish repricing" of future rate hike expectations, 3 month USD Libor jumped over 3 basis points to 2.73813%, the highest level in more than ten years."
    The banks have a good idea of what is going on with their competitors.
    "The reason why rising Libor remains a major risk to financial conditions, is because as the table below shows, its footprint can be found everywhere, from OTC interest rate swaps, to leveraged loans - considered by many as the locus of the next credit crisis - to retail mortgages, to complex securitizations. According to the TBAC, just about $200 trillion in instruments are exposed to Libor's interest rate footprint."

    "Most affected by this ongoing rise may be the bond market, which has also been hit with the double whammy of tumbling oil, which earlier today dipped below $50/barrel, a price widely seen as a "red-line" for junk bond investors, below which some may sell their exposure indiscriminately. And since energy is one of the largest components of the junk bond index, it is only a matter of time before contagion spread from oil, through highly leveraged energy producers to the rest of the market."

    Putin calls for $60 oil. This pretty much puts a ceiling on price. Remember that oil hit $147 in 2008. That certainly put a whammy on the economy.

    "In any case, the ongoing rise in Libor which absent a reversal soon will result in even tighter financial conditions and higher interest expense on trillions in floating rate debt, Bloomberg's Alex Harris notes that those traders who took the "dovish" Powell at his word, "
    Powell said MAYBE.

    So, the bankers refused to rev up the money machines. They aren't buying "hopium". Italian debt is 130% of GDP. The meeting is next month.

    Central bank owns 18% of Italian government debt - Geotrendlines
    Mar 11, 2018 - Back in 1990, about 70% of the Italian government debt was financed by private investors, today it is less than 10%.
    France holds a LOT of Italian debt.
    The planned collapse of Italian debt is going to take out quite a few banks around Europe.
    Armstrong strongly recommended that Europeans get an American bank account.

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  • Danny B
    The State goes broke as we go broke

    After the Latin American debt crisis, several big banks were insolvent. The FED told them to just pretend that everything was OK and, they could grow their way back to solvency.

    "QUESTION: What mechanism prevents banks from creating fraudulent electronic deposits of currency?
    As an IT systems admin, I have the ability to add / subtract / adjust ERP systems inventory / costing outside the normal users ability. I could add widgets to the system at will, but fraud can’t be sustained very long, as the physical widgets can’t be sold, they only exist in the system. Electronic currency, however, is only a ledger entry, and since new currency units are created as loans – What prevents any bank from just changing the numbers in their systems to create more currency units at will?"

    "ANSWER: The creation of money electronically in the banking system is the degree of leverage. Reserve Requirement Ratio at the Federal Reserve was increased on January 18th, 2018. It required that all banks with more than $122.3 million on deposit maintain a reserve of 10% of deposits. Banks with $16 million to $122.3 million must reserve 3% of all deposits. They create money that is purely electronic and we do not see it. "
    "They cannot create entries out of thin air. They are audited and the reserve ratio is strictly enforced in the USA."
    This is an excellent article that goes into great detail at explaining reserve requirements. But the fact still remains; banks can fudge ALL the numbers when they are audited. They routinely borrow from the overnight window at the FED. Bribing an auditor is an old tradition.

    Here is a long, detailed article on how the government causes inflation. Left out is the explanation of WHY the government causes inflation. The State is a non-producer that has the guns, printing press, lawbooks and, taxing authority. A concentration of power attracts a concentration of corruption. What else do you expect?

    "Yesterday, Fed Chair Jerome Powell did a complete 180 on the Fed’s hawkishness."
    Nope, he said that we were NEAR the neutral rate.
    "Which is why his sudden decision to change course is not a good thing… in fact it’s very VERY bad.
    Because this signals that something truly horrific is brewing in the financial system. "
    The truly horrific thing that is brewing is; sovereign debt,,, nothing new.

    "Pump too much credit into the economy (created by central banking and fractional reserve banking) and mal-investments expand. A recession cleanses the excess. But in 2008 the Fed “papered over” the problems and didn’t allow liquidation of bad debts, insolvent big banks and weak businesses. Instead the Fed created dollars from nothing and gave loans to big banks, insiders and the politically connected. Loan examples:

    Citigroup $2.513 trillion (Yes, $Trillions!)
    Bank of America $1.344 trillion
    Goldman Sachs $814 billion
    "RETURN OF ZIRP AND QE: The central bank could allow banks to fail, tighten credit, increase interest rates and nurse the economy back to health over years, maybe decades. Will this happen? OF COURSE NOT! The Fed protects the big banks and treats the middle class as “milk cows” who feed banks and the political and financial elite. ZIRP and QE direct dollars to the big banks and create higher prices for everyone."

    So, the economy is going to return to health. The birth rate is falling and automation is taking all the jobs.

    Armstrong, "They never seem to simply correlate this with economics. Now we have more than 47,000 Americans committed suicide in 2017, according to the Centers for Disease Control and Prevention."
    This is only the number of people who commit fast suicide. Millions more take drugs that they know will eventually kill them.
    Do an image search for crocodile + drug.

    11/30 ECB’s Draghi: QE will end in Dec. despite data –MarketWatch
    Draghi and Salvini. Imagine to locomotives on the same track at high speed. This will blow out Italian debt and crash their bond market.

    11/30 Norridge hikes property taxes by more than 35% to pay for pensions – IL Policy
    Progressives Zero In On Exit Tax On Illinois Wealth | Wirepoints
    Nov 9, 2018 - They've figured out a way to tax wealthy folks trying to flee Illinois

    11/30 Global economic perceptions are shifting, part 1 – Technical Traders
    No kidding. $15 trillion lost in October alone.
    11/30 Rising rates are killing the housing market – Real Investment Advice
    11/30 30,000 empty homes and nowhere to live: inside Dublin’s housing crisis – Guardian

    The CBs pumped hot money into the banks. They converted this hot money into houses. Now, the working class can't compete with the speculative class.
    11/30 Senators seeking to shoot down Yemen bill were paid by Saudi lobbyists – Zero Hedge
    A ***** can't be particular. Moral collapse brings total collapse.

    11/30 The insect apocalypse is here – New York Times
    "Walmart has filed a patent for autonomous robotic bees, technically called pollination drones, that could potentially pollinate crops just like real bees. The drones would carry pollen from one plant to another, using sensors and cameras to detect the locations of the crops.Mar 14, 2018"

    "As we reported last week, some 90% of all assets Deutsche Bank tracks are negative on the year.

    In reminder, that is the highest percentage since 1901 — if you can believe it."
    "Their calculations reveal that QT to date has lifted 10-year Treasury yields by some 17 basis points (a typical fed funds rate hike is 25 basis points).

    Historically, they say, a 17-basis-point increase to the 10-year equals a 68-basis-point hike to the fed funds rate.
    A 17-basis-point increase to the 10-year Treasury yield, in other words, equals nearly three Fed rate hikes.
    In other words still:
    The Fed has effectively worked (nearly) three additional rate hikes than officially listed."

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  • Danny B
    U.S. cash flow,,,exponential growth,,,Corporate debt

    Where the money comes from and, where it goes.
    "11/29 The US is spending $1.5 billion on debt interest every day – Zero Hedge"
    "US military spending is $892 billion once you add components hidden in other budgets. "
    "in 2018, about 63 million Americans will receive approximately one trillion dollars in Social Security benefits."
    national health expenditure › ... › National Health Expenditure Data
    Apr 17, 2018 - Historical NHE, 2016: NHE grew 4.3% to $3.3 trillion in 2016, or $10,348 per person, and accounted for 17.9% of Gross Domestic Product (GDP). Medicare spending grew 3.6% to $672.1 billion in 2016, or 20 percent of total NHE. Medicaid spending grew 3.9% to $565.5 billion in 2016, or 17 percent of total NHE.

    Forget Debt As A Percent Of GDP, It's Really Much Worse - Forbes Jul 12, 2014
    "A country with high taxes can afford more debt than a low tax country. Debt to GDP ignores this difference. Comparing debt to tax revenue reveals a much truer picture of the burden of each country’s debt on its government’s finances.

    When I compute those figures, Japan is still #1, with a debt as a percentage of tax revenue of about 900 percent and Greece is still in second place at about 475 percent. The big change is the U.S. jumps up to third place, with a debt to income measure of 408 percent. "
    "This does not factor the several trillion dollars owed to Social Security, yet it includes the Social Security taxes collected. If Social Security taxes are not counted, the U.S.’s debt to income ratio rises to 688 percent (still in third place). "

    At $21 Trillion, The National Debt Is Growing 36% Faster Than The US economy.
    Mar 19, 2018
    Armstrong has predicted a collapse of U.S. sovereign debt going in to 2020.
    The US debt-to-GDP ratio has been growing exponentially. What will ...
    Jul 21, 2016
    Assuming that there is a collapse of the credit system , there will be a lot of people fighting over the table scraps. Try to be off to the side in all of this.

    So, the banks passed as much bad debt as possible onto the State. BUT, there is plenty of bad debt to go around for everybody.
    "NEW YORK (Reuters) - Debt among non-financial corporations across the globe rose to a record high of $75 trillion in the second quarter, driven mostly by China and the United States,"
    "Canada, India and Mexico rank first in nonfinancial corporate debt relative to cash holdings, the report said, while a “significant proportion” of Brazilian, Canadian, American and Chinese corporations still struggle to pay interests on their debt. "
    Brazil, India and China BRICs minus Russia.

    "IIF wrote in the report that one-third of small firms in France, the United States and China have an interest coverage ratio under levels generally accepted as optimal, meaning a sharp hike in interest rates could hurt their ability to stay current in their debt payments. "
    So, when Trump takes down China, France is collateral damage.
    "The total liabilities of nonfinancial corporations across the globe amount to about 92 percent of the world’s gross domestic product"

    Even the FED is getting worried.
    So, Brazil, India and China are in deep trouble. Russia is doing very well in both stocks and public debt. Money is moving there.
    11/29 Bloomberg industrial metals gauge falls to lowest in 17 months – Bloomberg
    Making America great by strangling China.
    11/29 Stock market’s selloff is only half-done, and final leg will come in 2019 – MW

    New Research Shows the Fed Accounts for 93% of Market Moves ...
    Federal Reserve Money Printing Is The Real Reason Why The Stock market rises

    And the,we have Armstrong, "All core indices are between 1.5% and 2% firmer today, but as we have witnessed recently – this could change in a heartbeat. Powell’s speech Wednesday should be closely watched as many still believe it's the FED that is undermining the stock market."
    Armstrong seems to believe that foreign capital flows have inflated the stock markets and, NOT FED printing.
    Last edited by Danny B; 11-30-2018, 04:26 AM. Reason: spelleng

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  • Danny B
    military spending vs people, LEI

    Just in case that you have forgotten, global warming is going to kill all of us,,,, SOON
    It's getting hot in here: Three reports show we are heading towards the end of the world - Strange Sounds

    China has figured out that domestic revolution is a very real possibility. They have finally figured out that revolution is what Trump is aiming for.
    They thought that it was a good idea to take 300 million+ self-sufficient peasants off the farm and, give them jobs. These peasants have now run out of things to do.

    The budget battle pits the military-industrial complex against the average American. ALL social programs MUST be cut to keep the military going.
    " Without a U.S. presence, the logic goes, more sinister forces will take over. What happens when American troops must be evacuated from all over the world because we can’t afford to keep them there anymore? "
    "Just like its warfare state, the government’s welfare state has plenty of internal calamities. But while it might be the preference of some megalomaniacal globalists to let the proles starve while preserving overseas holdings, it’s not going to happen. What would transpire if Social Security checks stopped showing up in mailboxes and Medicare benefits got cut off? When presented with that choice, will the average American choose his social safety net or continued funding for far-flung bases in Stuttgart, Okinawa, and Djibouti? Even the most militaristic congressperson will know which way to vote, lest they find a mob waiting outside their D.C. castles"

    The rest of the world is definitely getting tired of control by the FED. They brought it on themselves by originating many trillions of loans denominated in U.S. dollars. They don't plan to make that mistake again.
    The State wants it's taxes and, they have new laws to keep you from hiding money. I hope that they use them against drug dealers and crooked bankers.

    The number of owner-occupied homes hasn't gone up in years. The hot money buys up all the houses. Powell cut back on the hot money and,,,
    BTW, the FED did NOT blink. They said that they would maybe blink in the future.
    The hot money and speculators screw up everything.

    Leave a comment:

  • Danny B
    Military, energy, FUSOR, warming, cooling and carbon taxes

    This thread is running about 6--1 of visitors to members. Some things that members might know, I explain anyway to give a more complete picture to visitors.
    Pox Americana has spent many $ billions on weapons research and, craftily called it hot fusion research. Other countries are actually trying to create hot fusion.
    ITER - the way to new energy
    ITER is the world's largest fusion experiment. Thirty-five nations are collaborating to build and operate the ITER Tokamak, the most complex machine ever ...

    America reached peak cheap oil in the lower 48 many years ago. One of the projections of the upcoming default cascade is; we will no longer be able to run a trade deficit. We import about 19.1 mbd of oil. If we could no longer run a trade deficit, our price of oil would go way up. Because of the size of the U.S. this would severely reduce the economy.

    U.S. Military Is the World's Number One Consumer of Fuel :: QS ...

    "The Nimitz has eight steam turbine generators each of which can produce 8,000 kilowatts (8 MW) of electrical power for a total 64 MW. So I calculate that the Ford can generate 250% of this or 160 MW."
    "To support this the Zumwalt has the capacity to generate 78 megawatts (MW) of power."

    OK, so the military uses a LOT of energy. Moving on.
    The Farnsworth FUSOR is old technology that nobody has scaled up. We all know that it works.
    "Lockheed Martin has quietly obtained a patent associated with its design for a potentially revolutionary compact fusion reactor, or CFR. If this project has been progressing on schedule, the company could debut a prototype system that size of shipping container, but capable of powering a Nimitz-class aircraft carrier or 80,000 homes, sometime in the next year or so."
    Lockheed Martin Now Has a Patent For Its Potentially World Changing Fusion Reactor - The Drive
    Yep, first things first. We need to power our aircraft carriers. They are all sitting ducks for hypersonic missiles but, no cost is too great when it comes to the military.

    I keep mentioning that Mother Nature bats last. This climate change is really starting to be noticed.
    11/28 Climate desperation reaches new heights as sea turtles freeze to death – CCC
    I thought that they were going to boil.
    Seriously, climate change is starting to cost a LOT.
    The feces-for-brains at Yale and Harvard want to escalate the fight against global warming by,,, cooling the earth.
    Since chemtrailing has been going on for years ,,, and the upper atmosphere IS cooling, they can claim success in fighting global warming.

    Mike King, "Unknown to 30-something Generation X-ers and late teen / 20-something millennials, forty long years have passed since the thankfully-deceased Stanford University Professor and international Global Warming ™ guru, Stephen Schneider, (cough cough) converted (in an instant!) from the ice-age-ism which was the "scientific consensus" ™ of its day, to "Greenhouse Effect" alarmism -- which soon became the new "scientific consensus" ™ of the day.

    An understanding of the sudden switch, along with the historical scope of the hoax, would cause the house of marked cards to collapse in an instant --- which is why Sulzberger's Slimes and the rest of the Piranha Press / Fake News have erased both the memory of the 1970's ice-age scare, and the 40-year record of failed doom and gloom "warming" predictions."

    "The Trump White House, which has defined itself by a willingness to dismiss scientific findings (fake science) ... on Friday issued a scientific report that directly contradicts its own climate-change policies."
    "The 1,656-page (fallacy of verbosity & complexity) National Climate Assessment, which is required by Congress, is the most comprehensive scientific study to date detailing the effects of global warming on the United States economy, public health, coastlines and infrastructure. It describes in precise detail (the "precise" predictions have been wrong for 40 years!) how the warming planet (existential fallacy -- the planet isn't even warming at this time) will wreak hundreds of billions of dollars of damage in coming decades." (for four decades now, doomsday has always been projected for "the coming decades")

    "President Trump has often questioned or mocked the basic science of human-caused climate change, and is now working aggressively to encourage the burning of coal and the increase of greenhouse gas pollution." (plant food is not "pollution")
    "Under a 1990 law, the federal government is required to issue the climate assessment every four years." (so of course, the kept "scientists" are going to publish what they were hired to publish!)

    “I’m watching these arguments between politicians and scientists, but I’m on the ground with public works officials who say that argument’s irrelevant,” Mr. Chinowsky said. “People are going to get hurt and die if we don’t change the policy.” (Oh the bloody drama!)"
    "Say what you will about Donald Trump -- but right now, he and his generals are the only thing standing between us and world government through carbon taxes based on a HOAX."

    Leave a comment:

  • Danny B
    Michael Hudson and the jubilee

    I need a separate post to address an article posted by Gambeir.
    Traditionally, a State just defaults when it can't afford it's debt load. Greece has spent 50% of it's modern history in default. Italy is soon to join the list. They are going to push the EU and ECB into a corner that they can't get out of. Nature will take it's course and, the banks will collapse. This will be a completely uncontrolled demolition with very little structure.

    Michael Hudson has written very well about an alternative. I have to do a lot of excerpts to do comment.

    "To say that Michael Hudson’s new book And Forgive Them Their Debts: Lending, Foreclosure, and Redemption from Bronze Age Finance to the Jubilee Year (ISLET 2018)"
    "Over the past three decades, gleaned (under the auspices of Harvard’s Peabody Museum) and then synthesized the scholarship of American and British and French and German and Soviet assyriologists"
    "Hudson demonstrates that we, twenty-first century globalists, have been morally blinded by a dark legacy of some twenty-eight centuries of decontextualized history. This has left us, for all practical purposes, utterly ignorant of the corrective civilizational model that is needed to save ourselves from tottering into bleak neo-feudal barbarism."

    While reading anything that I write, keep in mind that; if you search on "Global Population Reduction" it returns 261 million pages. So, while there may be plenty of people trying to make the economy "work", there are a LOT of people trying to cause death, famine and disease.

    "This corrective model actually existed and flourished in the economic functioning of Mesopotamian societies during the third and second millennia B.C. It can be termed Clean Slate amnesty"
    "It is the necessary and periodic erasure of the debts of small farmers — necessary because such farmers are, in any society in which interest on loans is calculated, inevitably subject to being impoverished, then stripped of their property, and finally reduced to servitude (including the sexual servitude of daughters and wives) by their creditors, creditors. The latter inevitably seek to effect the terminal polarization of society into an oligarchy of predatory creditors cannibalizing a sinking underclass mired in irreversible debt peonage. Hudson writes: “That is what creditors really wanted: Not merely the interest as such, but the collateral — whatever economic assets debtors possessed, from their labor to their property, ending up with their lives”

    “Mesopotamian societies were not interested in equality,” he told me, “but they were civilized. And they possessed the financial sophistication to understand that, since interest on loans increases exponentially, while economic growth at best follows an S-curve. This means that debtors will, if not protected by a central authority, end up becoming permanent bondservants to their creditors. So Mesopotamian kings regularly rescued debtors who were getting crushed by their debts. They knew that they needed to do this. Again and again, century after century, they proclaimed Clean Slate Amnesties.”

    Something that is left out of this article. There were very often scheduled debt jubilees. This allowed creditors to taper down their loans as the date approached.

    "Hudson also writes: “By liberating distressed individuals who had fallen into debt bondage, and returning to cultivators the lands they had forfeited for debt or sold under economic duress, these royal acts maintained a free peasantry willing to fight for its land and work on public building projects and canals…. By clearing away the buildup of personal debts, rulers saved society from the social chaos that would have resulted from personal insolvency, debt bondage, and military defection”

    During the '30s in America, congress acted strongly to keep farmers from being tossed off their land. It was realized that dispossessing farmers would be disastrous. Times have changed and only 1% of Amricans work on the farm.

    " In ancient Mesopotamian societies it was understood that freedom was preserved by protecting debtors. "
    "In what we call Western Civilization, that is, in the plethora of societies that have followed the flowering of the Greek poleis beginning in the eighth century B.C., just the opposite"
    "For us freedom has been understood to sanction the ability of creditors to demand payment from debtors without restraint or oversight. This is the freedom to cannibalize society. This is the freedom to enslave. "

    “A constant dynamic of history has been the drive by financial elites to centralize control in their own hands and manage the economy in predatory, extractive ways. Their ostensible freedom is at the expense of the governing authority and the economy at large. As such, it is the opposite of liberty as conceived in Sumerian times”
    "And our Orwellian, our neoliberal notion of unrestricted freedom for the creditor dooms us at the very outset of any quest we undertake for a just economic order."
    "in the Bronze Age Mesopotamian societies that understood how life, liberty and land would be cyclically restored to debtors again and again. But, in the eighth century B.C., along with the alphabet coming from the Near East to the Greeks, so came the concept of calculating interest on loans. This concept of exponentially-increasing interest was adopted by the Greeks — and subsequently by the Romans — without the balancing concept of Clean Slate amnesty."

    "So it was inevitable that, over the centuries of Greek and Roman history, increasing numbers of small farmers became irredeemably indebted and lost their land. It likewise was inevitable that their creditors amassed huge land holdings and established themselves in parasitic oligarchies. This innate tendency to social polarization arising from debt unforgiveness is the original and incurable curse on our post-eighth-century-B.C. Western Civilization,"

    It is the corporation that controls so much of the land. They need very few workers to keep the farm going.

    "debt was a deliberate device on the part of the creditor to obtain more dependent labor rather than a device for enrichment through interest.” Likewise he quotes Tim Cornell: “The purpose of the ‘loan,’ which was secured on the person of the debtor, was precisely to create a state of bondage”

    You can see where this is going when you relate this to rising automation.

    "Second Punic War (218-201 B.C.). After that war the small farmers of Italy never recovered their land, which was systematically swallowed up by the prædia (note the etymological connection with predatory), the latifundia, the great oligarchic estates: latifundiaperdidere Italiam (“the great estates destroyed Italy”), as Pliny the Elder observed."

    A valid point but, still mostly negated by automation.

    "means to securing more equitable distribution of property and a restraint on the oppression of debtors by creditors.’ The latter attempt failed,” Hudson observes, “and European and Western civilization is still living with the aftermath"
    "The rules of the game had not been changed, but everyone had been dealt a new hand of cards’” (p. 133). Contrast the Greeks and Romans: “Classical Antiquity,” Hudson writes, “replaced the cyclical idea of time and social renewal with that of linear time. Economic polarization became irreversible, not merely temporary” (p. xxv). In other words: “The idea of linear progress, in the form of irreversible debt and property transfers, has replaced the Bronze Age tradition of cyclical renewal” (p. 7)."

    "I often availed myself of David Graeber’s book Debt: The First 5,000 Years when I struggled to follow some of Hudson’s arguments."
    "The basic moral financial principal should be that creditors should bear the hazard for making bad loans that the debtor couldn’t pay "
    Everything You Thought You Knew About Western Civilization Is Wrong, by John Siman - The Unz Review

    The article is good and, I'm sure that the book is great. but, times on the farm have changed.
    Six companies are about to merge into the biggest farm-business ...
    Sep 27, 2016 - Big farms are about to get a lot bigger. With six agricultural giants on the verge of merging into three separate companies,

    Previously, a debt jubilee was created to ensure agricultural production and free debt-bondage slaves. With the advent of the Industrial Revolution, most of the world is limited by consumptive ability, not by productive ability. A possible debt jubilee would not rescue the Ag industry. Though it does get a LOT of subsidies. Who knows where the future of that will go?
    Our system is too complex and integrated to survive a debt jubilee. That is why "they" are taking about universal basic income.
    Hudson draws on lessons learned when we had a survival economy.
    One area where he is completely correct; the very wealthy organize the system strongly to their advantage. They don't need to create wealth. They just control the transaction media. To a great degree, the wealthy have always kept us poor so that we would keep working. They can't own everything if we don't first produce it.
    Confidence, consumption and the birth rate continue to fall. Productivity rises. The credit system can't possibly survive all of this.
    Everything You Thought You Knew About Western Civilization Is Wrong, by John Siman - The Unz Review

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  • Danny B
    Creating $trillions to keep employment going

    "There’s $3 trillion in outstanding dollar-denominated debt issued by Chinese companies" "Defaults on dollar-denominated Chinese bonds stood at $3.4 billion in the first 10 months of this year,"
    "This is because more bonds are coming due. About $33.3 billion in dollar-denominated Chinese bonds are expected to mature each quarter through the end of 2020,"
    "Data from Dealogic shows that 385 billion yuan ($55 billion) of local-currency debt and $15 billion of dollar debt will come due next year for Chinese property developers, "
    China is in bad need of dollars and, Powell is cutting the supply.

    "Earlier this year, I wrote a series of articles (synopsis and links here) predicting a debt “train wreck” and eventual liquidation. I dubbed it “The Great Reset.” I estimated we have another year or two before the crisis becomes evident.
    Now I’m having second thoughts. Recent events tell me the reckoning could be closer than I thought just a few months ago."
    "Central banks enable debt because they think it will generate economic growth. Sometimes it does. The problem is they create debt with little regard for how it will be used."
    A common misconception. They are trying to preserve employment.
    "China’s debt productivity dropped 42.9% between 2007 and 2017. That was the worst among major economies, "
    Underwriting zombi companies to build 50 million extra housing units to keep people working

    " Notably, the combined debt of the US, Eurozone, Japan, and China has increased more than ten times as much as their combined GDP [growth] over the past year.
    Yes, you read that right. In the last year, the world’s largest economies are generating debt 10X faster than economic growth. "
    With 96 million Americans of working age NOT in the labor force, what do you expect. The debt is being created to finance consumption, NOT investment.
    "I am trying to imagine a scenario where this ends in something less than chaos and crisis. The best I can conceive is a decade-long (and possibly more) stagnation while the debt gets liquidated.

    But realistically, that won’t happen because debtors won’t let it. And they outnumber lenders. For this reason, something like “the Great Reset” will happen first."

    "After both investment grade and high yield bonds got crushed in the past month with spreads blowing out to multi-year wides and generated negative YTD returns as Morgan Stanley now sees the bear market gripping credit accelerating into 2019, many traders were wondering how long before the final bastion of the credit bubble - leveraged loans - would also pop.

    It appears the answer may be "now" because as Bloomberg reports,"
    Check out the graph,
    "As for the leveraged loans underlying these CLOs, Morgan Stanley has been warning that covenant quality is weaker than 2007"
    Covenants are protection clauses in financial instruments. They cost money and, are slowly being weakened. (covenant lite)
    "Morgan Stanley also expects new issue supply to fall to $90 billion for 2019 from $126 billion this year"
    To the asset markets, this is a serious deflation of liquidity.
    "As a result, the bank recommends defensive positioning "in AAAs instead of junior AAAs or AAs because of the better liquidity and lower spread duration"
    This pulls liquidity OUT of junk bonds that so many companies depend on. That is the reason that Ford is expected to crash.

    Exclusive: The Pentagon’s Massive Accounting Fraud Exposed
    Posted on November 27, 2018 by Dave LIndorff
    How US military spending keeps rising even as the Pentagon flunks its audits.

    By Dave Lindorff

    On November 15, Ernst & Young and other private firms that were hired to audit the Pentagon announced that they could not complete the job. Congress had ordered an independent audit of the Department of Defense, the government’s largest single cost center—the Pentagon receives two out of every three federal tax dollars collected—after the Pentagon failed for decades to audit itself. The firms concluded, however, that the DoD’s financial records were riddled with so many bookkeeping deficiencies, irregularities, and errors that a reliable audit was simply impossible.

    Deputy secretary of Defense Patrick Shanahan tried to put the best face on things, telling reporters, “We failed the audit, but we never expected to pass it.” Shanahan suggested that the DoD should get credit for attempting an audit, saying, “It was an audit on a $2.7 trillion dollar organization, so the fact that we did the audit is substantial.” The truth, though, is that the DoD was dragged kicking and screaming to this audit by bipartisan frustration in Congress, and the result, had this been a major corporation, likely would have been a crashed stock.

    As Republican Senator Charles Grassley of Iowa, a frequent critic of DoD’s financial practices, said on the Senate floor in September 2017, the Pentagon’s long-standing failure to conduct a proper audit reflects “twenty-six years of hard-core foot-dragging” on the part of the DoD, where “internal resistance to auditing the books runs deep.” In 1990, Congress passed the Chief Financial Officers Act, which required all departments and agencies of the federal government to develop auditable accounting systems and submit to annual audits. Since then, every department and agency has come into compliance—except the Pentagon."

    Leave a comment:

  • Danny B
    State dominance vs Mother nature & human nature

    C. H. Smith, " In the present era of corporate dominance, where can serfs go to demand redress and financial freedom from the neofeudal system? Nowhere. The global corporations that own the land and the productive assets have no castle that can be stormed; they exist in an abstract financial world of stock shares, buybacks, bonds, lobbyists and political influence.
    The reality is there is no avenue left for advocacy, grievances or redress in a system dominated by global corporations and self-serving political insiders."
    "The problem for well-meaning politicos is the system cannot be reformed or repaired: the cartel-state socio-economic system is now the wrong unit size and the wrong structure."
    "Mere debt-serfs and tax donkeys cannot compete with campaign contributions and influence purchased with tens of millions of dollars in cartel profits."
    "Corporate power and self-serving insiders destroy democracy. That is the heart of neofeudalism, which is the only possible output of the status quo."
    oftwominds-Charles Hugh Smith: The Politics of Debt-Serfs and Tax Donkeys: Our Only Choice Is the Least Bad Option
    The tax donkeys have gone on strike and, are not producing new children to be tax farmed.

    "Today, the value of the dollar has been eroded by over 97% of its 1913 purchasing power and is due for replacement. If the owners of the Federal Reserve are to continue to regularly scalp the hoi polloi, the best approach would be to engineer a second major buildup of debt, trigger a crash, then introduce a new currency to “save the economy.”

    This, they will most assuredly do. The debt has already been created. A crash can be triggered in many ways, including the tried-and-true method of raising interest rates.

    And, after the predictable crash, the public will most assuredly cry out for those in power to “do something.” The warning signs have been in view for some time that that “something” will be digital currency – a currency that will make it necessary for virtually all economic transactions to pass through the hands of banks. "

    "The IMF has recommended that all Central banks should issue their own cryptocurrencies. Indeed, they are looking at using Block Chain to keep track of taxes and to enforce negative interest rates with cryptocurrencies which would allow them to impose negative interest rates whenever necessary. With adopting cryptocurrencies that governments would control, we will come one step closer to losing all our freedom. Central banks could enforce negative interest rates with cryptocurrencies and thus people would find their accounts just garnished. You could not hoard cash and withdraw it from banks."

    " Because interest rates have been negative in Europe, the capital has been fleeing around the world."
    "Lowering interest rates to negative by the ECB has created one huge mess in international capital flows. The capital went everywhere BUT Europe and the ECB ended up buying the bulk of government debt because they singlehandedly destroyed the European bond market. "
    Several years ago, the cover of The Economist magazine predicted a complete crash with the phoenix of the SDR rising up out of the ashes. It is easy to claim that the crash has been engineered by the Central Banks. It is logical to believe that the State would like to have total control of the financial system.
    China shows us the social credit system where it monitors and controls every facet of Chinese lives. BUT, Japan shows us that people refuse to have children if they have no confidence in the future.
    The demographic crash will only get worse because of this. So, while the State would like to lock down control of every person, it must support / contend with millions of retirees who have no support.
    All this at the same time that global cooling and violent weather will take a huge toll on the economy.

    Leave a comment:

  • Danny B
    Armstrong, Salvini, Goldman Sucks,oil glut, GM and Ford,

    Well, there is plenty going on.
    "Oct 31, 2018 - The stock market lost nearly $2 trillion in October. Here's what happened. U.S. markets lost nearly $2 trillion in October. The biggest technology stocks — most well-known as FANG — were among the hardest hit this month."
    Armstrong, Nov 25 "The FAANGS’s all performed well"
    He couldn't leave well enough alone.
    "European markets opened on a very positive note following the EU acceptance of the BREXIT deal and also news that the Italian coalition would reconsider their 2019 budget proposal. "
    UN-NAMED sources said that Salvini would reconsider. The truth;

    This article also mentions that Goldman Sachs (the vampire squid) is in serious trouble. I hope that they all DIE.
    (Salvini) "And in doing this he not only speaks for Italians, he is now speaking for that growing part of the European population who sees what the EU is morphing into and recoiling in horror."
    "Angela Merkel and Macron are ratcheting up the rhetoric against the rising nationalism Salvini represents and are now pushing hard for their Federation of Europe before both of them leave the scene in the next few years, at best.

    If they lose their battles with Salvini and Hungary’s Viktor Orban they may be run out of office with pitchforks and firebrands."
    "Salvini declared with Orban to develop a “League of Leagues” to storm the Bastille of the European Parliament in May’s elections."
    Ah yes,,, those pesky elections. Maybe Macron shouldn't have pushed so hard for a EU army. People tend to figure those things out.
    "This is a major gambit by Salvini, and if he is successful he will become a lightning rod for Euroskeptics across Europe to break with Merkelism and the consolidation of power around Germany within the EU.

    Italy’s debt problems are not solvable within the euro. Salvini understands this. "
    "There’s something serious brewing within Goldman-Sachs. Martin Armstrong has been all over the potential wipeout of Goldman as part of the European sovereign debt crisis.

    Because we have 3 countries now bringing charges and/or suits against Goldman Sachs, it appears that this will mark the beginning of the end for the firm. When the Euro cracks, they will also be blamed for their role in Greece and the rest of Europe. Don’t forget that Mario Draghi is also ex-Goldman Sachs. When the Euro cracks, there will be a microscope applied to every communication that was ever carried out between Draghi and Goldman Sachs."
    "The rot within Goverment Goldman Sachs runs deep. The destruction of Greec was all about protecting Goldman.

    And even if there is no Goldman angle directly related to Italy’s debt and banking situation, which I very much doubt, remember formerPrime Minister Mario Monte, who was installed to stop Silvio Berlusconi from taking Italy out of the euro back in 2011."
    "Because don’t think for one second that Salvini doesn’t know what the real story behind Italy’s debt is and who is hurt worst by exposing it to the vicissitudes of the market. At this point he’s daring Draghi to stop supporting Italian bond yields.

    Let yields rise. Let’s find out who is behind the insolvent Italian banks swimming naked as the tide rolls out, liquidity dries up and the whole European debt market seizes up.

    And if it’s Goldman again then then expect the biggest fight yet for the future of the EU. If Salvini plays it right, Italeave not Brexit becomes the clarion call for ending the Davos Crowd’s push for global control."
    I just hope that Salvini doesn't get on any airplanes.

    Notes on BTC;

    "Energy prices have declined 30% over the past two months is being talked as another example of the slowing global economy."
    Wait a minute ! What about all that money invested in oil??
    "Saudi crude oil production hit 11.1-11.3 million barrels per day (bpd) in November, an all-time high, an industry source said. "
    Oil Giants Saudi Arabia, Russia Ramp-Up Production - Bloomberg
    Nov 19, 2018

    So, what happens to the banks if oil stays low?
    Jim Willie, "the global USTreasury dumping initiative motivated by massive USGovt debts & deficits coupled with lower oil price from energy wars "
    "the high risk to Wall Street banks from the declining crude oil price whereby the big banks have credit exposure to the suicidal shale sector, the theft of $3 trillion in USTreasury Bonds owned by the Saudis "
    "Prices on Friday hit their lowest since October 2017 amid intensifying fears of a supply glut. Brent sank to $58.41 a barrel, while WTI fell to $50.15 a barrel. "
    "The USFed has caused every financial crisis since the 1980s. Both outsourcing of US industry and QE monetary policy assure more crises. The actual price inflation is over 8%, thus the lie on GDP is over 5%, and therefore the USEconomy is stuck in a 12-year recession. The debt engine is broken, since it takes $5 in new debt to create $1 in economic activity. "
    "Herein we have Trump Putin and Xi to assure that the Gold Standard is installed without global war. The Gold Standard will be rolled out in a long organized tactical efficient schedule. The process has begun, and is not stoppable."
    "the USGovt deficit enormous problem characterized by current borrowing costs exceeding all tax revenue income that indicates Third World status,"

    11/26 Asia’s liquidity squeeze is the worst since 2008 – Bloomberg
    Making America great again.
    11/26 GM to slash 14,700 jobs in North America; 5 plants could close – CT

    Ford will probably be downgraded to junk. GM is trying to jump in and avoid that. Both are hurting because of a fall in sales to China.
    11/26 Climate change will wreck economic growth, major government report says – MW
    So, just don't read the report and,,,, DON'T worry.
    11/26 Cash outperforms stocks & bonds first time since 1992 – Upfina
    NO, NO, NO,,, you must stay in stocks.
    11/26 Lawmakers leak plan for $3 billion pension-fund bailout – Zero Hedge
    Marvellous,,, the pension funds are about $50 trillion short in aggregate.

    Amazon is breaking new ground in the stupidity contest.
    "police in Madrid were "dumbfounded" when Amazon asked them to intervene during a strike at one of the company's warehouses on the outskirts of the city. The company wanted the police presence to keep productivity high, or at least comparable to that of a normal working day.
    A spokesman for one of the labor unions that helped coordinate the strike told Business Insider that Amazon "wanted to send the police inside the warehouse to push people to work."
    I lived in Madrid for a while. The madrileños are very sensible.

    Leave a comment:

  • Danny B
    C. H. Smith, optimization and adaptibility

    I wrote about post-scarcity economics. It is the darling child of people who sit behind desks and plan out how to save the world. The deplorables would see things differently. Along with resource depletion, we have falling solar energy output and falling population. Add in failing ocean populations and soil depletion. Automated labor may be post-scarcity but, many other things are definitely scarce.
    John Tainter writes in The Collapse of Complex Societies that energy and resource over-shoot are usually the root cause.

    Charles Hugh Smith writes an interesting article about optimization and adaptability.
    "There are two basic drivers of systemic erosion, drivers that have little to do with leadership or policy. Our current delusion is that changing leaders and tweaking policies are enough to stave off systemic erosion, decline and collapse.
    The first is the gradual decline in the system's ability to adapt to changing circumstances. Life's core asset is the ability to evolve and adapt, and organisms, species and systems which fail to adapt fast enough and effectively enough to rapid change disappear.
    Today's modern complex systems are typically optimized to specific conditions, meaning that they've evolved (or been designed) to maximize production and output given a certain set of inputs and processes.
    If those conditions shift outside the expected parameters, the system's efficiency and output are heavily eroded.
    The vast majority of modern systems are heavily optimized in ways outsiders typically can't appreciate.

    "The path to sudden collapse is paved by increasingly narrow optimization. Adaptability and optimization are on a see-saw: as a general rule, adaptability requires flexibility, buffers and redundancies that are costly to maintain. So in a world driven by efficiencies in service of maximizing profits, these costs have been ruthlessly eliminated from complex systems. The adaptability of optimized systems is very low
    The second dynamic is the gradual rigging of the system to reward insiders, at the expense of its purported purpose and output.

    "Centralized hierarchies concentrate power and wealth in the hands of the few.Self-interest being what it is, these insiders naturally rig the system to protect insiders from criticism, reductions in budgets, etc.
    In other words, the very structure of our systems guarantees their failure once conditions change beyond their limited ability to adjust.
    To avoid decline and collapse, we need to develop new localized structures optimized for resilience and adaptability--a flexible, decentralized, sustainable, democratic, opportunity-for-all nation."
    oftwominds-Charles Hugh Smith: The Two Paths to Collapse

    Climate change driven by our failing magnetosphere will push a lot of things out side the current optimized path. The low birth-rate and demographic crash can NO way be reconciled with the expectations of pension programs. Climate change has brought floods to the desert and, drought to fertile areas. ALL of this supplies the backdrop to a finance system that had taken advantage of the working man just because it could. The finance world has drifted (was pushed) out of it's optimised path. The physical world has entered an extremely weak solar cycle at the same time that the pole shift is accelerating. I suspect that all of this is far too much change for us to adapt to when the power brokers are trying to maintain the status quo and their power & control.

    Leave a comment:

  • Danny B
    Abundance without purchasing power,,,, no confidence = no kids

    So, when will the crash go mainstream? How bad will it get? How long will it last? How many of the old folks will be cast out? How many millennials will opt for the slow suicide of drugs? How long will it last? WHAT could possibly bring us out of the crash?
    Sorry but, I haven't got any good news for the short term. The entire system is based on physical growth and credit growth. The State is nothing but a corrupt tax farmer. The finance system is nothing but, thinly veiled robbery,,, through inflation. Our current system is going down in flames. There is nothing to replace it because we have never had this problem before in history. The world has always had larceny and corruption. It has never had industrialization and automation anywhere near this level.
    Keep in mind that efficiency is the main focus of capitalism.

    " In the 21st century, we are more quickly approaching capitalism’s paradox than expected.
    Capitalism is working as intended. A constant exercise of finding the most efficient way to use scarce resources.
    It is providing miracle abundance through increasingly efficient processes that raise the public standard of life for everyone. Yet this progress comes at the cost of replacing labor with automation (or globalization providing cheap labor) and in recent trends has been distributing this new found wealth unequally. If you fire all your workers so you can automate/relocate to a country with cheap labor, then no one will be able to buy what you produce. "

    "This creates a paradox of abundance being created without anyone who can pay for it. This is dangerous because this begins to rip apart the mutually beneficial relationship between producer/consumer that holds our economy together."
    "In terms of food, production and supply chain institutions have become so efficient that half of the food that America produces is thrown directly into the trash without ever reaching a mouth. This food abundance problem occurs simultaneously as 43+ million Americans every year live in hunger."
    "The automation of moving humans, goods, and deliveries dramatically brings down the costs of travel and commerce, even advancing the possibility of a more sustainable access-economy. Yet simultaneously threatens to replace the jobs of over 5 million blue-collar Americans."
    This brings down the cost of goods you buy while replacing the bi-weekly paycheck received by 6% of working Americans (8 Million people)

    "Blockchain and smart contracts aim to remove intermediaries between individuals. But this also means a dip in many high-salaried jobs."
    "Populism. A response to inequality.

    This is already creating political polarization seen in the American Rust-Belt where this loss of production work (employment dropping from 18.9 million jobs to 12.2 million) has devastated towns and left millions in poverty and without a future they can believe in.
    Capitalism is working as intended."
    "Thus, to look at this paradox more objectively, it helps to look at how we got here. How did we go from our earliest tribal hunter/gather societies, where everyone is working together to fight for survival, to the modern economies of today, where decreasingly small percentage of the population focuses on these basic necessities for everyone. My favorite analysis of these transitions come from Marx’s Stages of Economic Development. Yet instead of ending with “communism”, my belief is that the incredible abundance created through capitalism creates the conditions for post-scarcity lifestyles and economies."

    " “Slaves acquired by conquest built most of its bridges, roads and aqueducts and took jobs in farming, mining and construction. As this cheaper labor replaced Roman citizens, idle, unemployed, hungry people filled the capital.”
    — Alice Schroder, Bloomberg"
    "Private property is no longer a reserved right of the aristocracy, but rather a reward to those who are mindful towards market forces (efficiency). Price signals allow complex social interactions that allow anyone to specialize and become an expert in their domain, providing a wealth of services that would be impossible to organize by a centralized planner. Capitalism is by far the most superior global incentive to efficiently exploit scarce resources and services into abundance. "

    " And just like previous socio-economic systems before us, our system has inner-contradictions which create unsustainable tensions. As business owners replace laborers with technology, wealth is concentrated amongst those who already have it. And if the laborers employed by these business owners are getting paid less (or fired), who’ll buy the products produced by these business owners? The paradox is these efficiencies make products and services more abundant than ever before, but decrease the ability to distribute this abundance and thus creates unsustainable wealth inequality."

    "Every socio-economic transition is born with the infrastructure and knowledge of the system before it. A post-scarcity economy is no different. The internet, AI, and automation are shaped in the free market as much as these technologies disrupt the market."

    In a true post-scarcity economy, everything would be free. The only thing to buy would be SEX & attention.
    Captain Capitalism: Why Post-Scarcity Economics is Scary
    The powers that be will definitely try to hang on to their advantages. Money, interest, finance, control, etc. BUT, the worker has been replaced by CHEAP labor in the form of a "robot". There is no going back on that one. Automation is not going to diminish without some kind of cataclysm that knocks us back 150 years.

    All this robbery by the State and banks to keep us working is losing effectiveness as more and more automation is introduced. As we get poorer and poorer, we must reduce expenses. We stop having children. As we cut down reproduction, economic activity falls further. As it falls further, we get squeezed harder and, reduce the birth rate even more..

    The current system is all based on collecting interest on money loaned. What if that can no longer be done?

    As we get more squeezed, we further cut the birth rate.
    Yes, this has a feedback loop.
    So, we can't possibly grow the economy with a falling population. The interest rate is tied to the fertility rate.
    What happens to an economy that is stuck at 0% interest? This also involves a feedback loop. As the economy shrinks, the fertility rate shrinks. China is at 1.6 and nothing will convince them to have more kids.
    Japan shows that there is no escape when confidence is lost and nobody believes in having children.
    The finance system can never recover in it's present configuration. There will be years of resistance to unfolding any new configuration

    Leave a comment:

  • Danny B
    Capital abandoning fracking

    "expects to see a flood of troubled credits topping $1 trillion as rising interest rates overwhelm low-quality loans and bonds", the one question left is how much of this BBB paper is likely to be downgraded?"
    The asset most at risk right now is the oil industry. This shouldn't come as a surprise.
    This Federal Policy Enabled the Fracking Industry's $280 Billion Loss ...

    Oil Is Above $70, but Frackers Still Struggle to Make Money - WSJ
    May 17, 2018

    "Crude is breaking down after the double top, which suggests in time it could test rising channel support at the $39 level at (3)."

    New Energy Institute Report Finds that U.S. Could Lose Nearly 15 ...
    ... that U.S. Could Lose Nearly 15 Million Jobs If Hydraulic Fracturing is Banned
    Just like China, we run expensive jobs programs to keep people working.
    The problem is that investors are starting to run away. Nov 23
    "Despite this being a low-volume holiday week, crude oil continues to plunge. West Texas Intermediate (WTI) crude oil is down $3.69 or 6.75% and Brent crude oil is down $3.60 or 5.75% today alone, which further confirms the concerns I had when when I wrote the article “Is A Crude Oil Liquidation Event Ahead?” on November 6th. In that piece, I warned that WTI crude oil’s technical breakdown below its key $65 level would likely lead to even more bearish action, which could then cause speculators or the “dumb money” to violently liquidate their large bullish position of nearly 500,000 net futures contracts. "

    "WTI crude oil keeps slicing below important technical levels: $60, $55, and the uptrend line that began in early-2016, which represents a very important and concerning technical breakdown. The next major support level to watch is $50; if WTI crude oil breaks below $50 in a convincing manner, it will likely try to gun for $40, then $30, and so on."

    "As I’ve been pointing out since the start of this year, crude oil futures speculators or the “dumb money” (the red line under the chart) have built a massive long position in WTI crude oil of just under 500,000 net futures contracts. There is a very real risk that these speculators will be forced to liquidate if the sell-off continues, which would greatly exacerbate the sell-off."
    Global recession risk;
    “Readings above 70 have found us in recession 92.11% of the time (1970 to present). Several months ago, the model score stood at 61.3. It has just moved to 80.04. Expect a global recession. It either has begun or will begin shortly. "
    "U.S. shale energy boom/energy junk bonds: This boom/bubble is closely related to the corporate debt bubble discussed above. Extracting oil and gas from shale via fracking is extremely capital-intensive and would not be feasible in a normal interest rate environment. Thanks to the artificially low interest rate environment since the Great Recession, the shale energy industry’s net debt surged to $200 billion in 2015 – a 300% increase from 2005. Rising interest rates and the bursting of the corporate debt/junk bond bubble will cause a major bust in the shale energy industry."

    "the Fed would raise rates “until something breaks.” There is a good chance that one of the first things that broke and continues to break is crude oil prices and the shale energy bubble. This has very serious implications because it is one of the most important drivers of economic activity and job creation in the U.S. since the Great Recession. "

    Goldman Sachs may be going down in flames.

    11/24 This sell-off is just one step in a methodical unwind of stock prices – Wolf Street
    11/24 Yet another plunge in crude: down 7 straight weeks and negative from year ago – Mish

    1/2 million contracts that investors will try to dump.
    So, as oil slips, the exodus grows. As the exodus grows, the bbb bonds financing fracking are reclassified to junk. Institutional investors are forced by their charter to unload the junk. That depresses the price and, the frackers have no capital. Along the way, there will be huge margin calls.
    When you get a margin call in a falling market, you sell what you can, NOT what you want. Good assets and gold sell first. Judging by the severity of the fall so far, I suspect that it has quite a ways to go.

    Ford sales in China dropped 43 percent in September -
    Ford Motor's Credit Rating Was Cut to One Notch Above Junk ...
    There is speculation of a collapse of Ford setting off a huge fall in markets.

    Leave a comment:

  • Danny B
    Italy is PAST the point of no return,,, margin debt,,, fallen angles

    China is going for all "stick" and, NO carrot.
    11/23 China ‘social credit’ system blacklists millions from flights – Independent

    "European banks have accumulated about $1.2 trillion in bad and non-performing loans (NPLs) that have continued weighing down heavily on their balance sheets. Italian banks are sitting on the biggest pile of bad debt: €224.2B ($255.9B), with NPLs and advances making up nearly a quarter of all loans."
    "The sharks can already smell the blood in the water, and investors have been shorting Italian banking stocks to death. Italian banks hold nearly a fifth of the country’s government bonds."
    Every time that the Italians harden their stance, more people will short Italian debt and banks. Salvini HAD to have known about the shorting sharks. He invited them to the table. I suspect that he wanted to bring Italy to the point of no return without being too overt about it. If 1/4 of all loans are technically non-performing, I believe that momentum will carry Italy off the cliff regardless of what the ECB does.

    "Meanwhile, total debt sits at a staggering 130 percent of GDP, the fourth highest in the world. The EC rules are clear: national debt should be maintained below 60 percent of GDP "
    The Italians see that they are WAY too far in debt to get out by legitimate means. As shorting and interest rates rise, it will become painfully obvious that nothing will save Italy.

    "The Italian coalition partners still command nearly 60% of all Italians’ support"
    " And roughly that same number now see the EU as mistreating Italy. These numbers will only get worse if the EU goes through with levying fines against Italy for submitting a budget Brussels doesn’t like.

    Moreover, now we’re seeing support for Italeave rise as well. A recent poll by Politico Magazine posted over at Zerohedge shows a slight majority of Italians under age 45 are ready to do just that, leave the European Union."
    "how Deputy Prime Minister Matteo Salvini is attacking Brussels’ hypocrisy over fiscal restraints.

    Salvini is doing exactly what he needs to do to shore up support and push the Italian electorate away from Brussels. It was a stroke of political genius to submit a budget which placated both halves of the coalition – tax and regulation cuts along with universal basic income – while ever so gently flaunting EU budget rules.

    Salvini and his partner in insurrection Luigi Di Maio crafted a perfect piece of political poison for the EU to swallow. There’s nothing really objectionable in the budget proposal. It won’t solve any of Italy’s problems nor make them materially worse.

    It was put forth to rankle EU leadership that has grown fat and lazy on having everything rigged in their favor. And they have over-reacted in the most predictable manner."
    "Think about what the EU is doing over this budget. They are threatening billions in fines to an Italian government that is in debt up to its eyeballs."
    " And don’t forget folks that the only reason the Italian sovereign debt issue isn’t front page news is because the European Central Bank is the only marginal buyer of Italian debt. And ECB President Mario Draghi isn’t doing this out of the goodness of his Goldman-Sachs-trained heart.

    He’s doing it because if he doesn’t then the entire European banking system collapses.
    So this whole thing is nothing more than Kabuki theatre. And Salvini knows it.
    He understands that the euro is a death trap for Italy. He also knows he has all the leverage because of the size of the debt pile."
    " It should, then, come as no shock to anyone that the EU is handling Salvini and his government with the same disdain and derision. And that’s exactly what Salvini wants. He has to maneuver Brussels into making them be the bad guys.
    Because if he’s going to get Italy free from Brussels it can’t be his idea. It has to be a popular groundswell.
    Thankfully for him and Italians in general, the dopes in high places in Brussels are only too happy to oblige. I think they like being odious jerks, frankly."

    " Why do you think French President Emmanuel Macron and Lame Duck German Chancellor Angela Merkel want a Grand Army of the EU so badly? It’s to invade and occupy wayward member states not protect themselves from Russia.
    The more the EU tries to bully and force Italy to do what it wants the more Italians, even older ones, will support Salvini’s crusade against them."
    The investors know ALL of this. They can short Italian debt with almost NO risk. If the ECB starts OMT, that will kill the bond market. If they don't start OMT, Italian debt will blow up like Vesuvius. Since Salvini has reached the point of no return, there is only one possible outcome. The article has quite a bit about getting screwed by May on Brexit. The British will remember who screwed them. When Italian debt blows up the entire EU, Brexit will happen anyway. Hopefully, there is still someone in Britain who remembers who to draw & quarter traitors.

    "during the stock market boom since the Financial Crisis, this measure of margin debt has surged from high to high, reaching a peak in May 2018 of $669 billion, up 60% from the pre-Financial Crisis peak in July 2007, and up 117% since January 2012. Since the peak in May, margin debt has dropped by $62 billion (-9.2%). Note the $40.5-billion plunge in October:"
    Great graph,

    "Surging margin debt creates stock-market liquidity out of nothing, and this new liquidity is used to buy more stocks. In this manner, rising margin debt is the great accelerator on the way up."
    "even as the S&P 500 index might decline at a moderate pace – investors, including hedge funds, with margin debt and concentrated holdings in these stocks may find that their portfolio has taken enough of a hit to where they get margin calls.

    Now they have to dump stocks to pay down margin debt. This begets further selling pressure, which begets more margin calls, which begets more forced selling…. In this manner, a high level of margin debt turns into the great accelerator on the way down."
    "But this money from those stock sales doesn’t go into other stocks or another asset class, and it doesn’t sit at the “sidelines” waiting to jump in again at the next dip. Nope, it is used to pay down margin debt. And thus, this liquidity just evaporates without a trace.
    October’s plunge in margin debt was just the beginning"
    Count this as deflation.

    Shorting the fallen angels.
    "the Next Bond Crisis will be the result of "Over $1 Trillion In Bonds Risk Cut To Junk Once Cycle Turns."

    with low-IG rated companies generously issuing debt to fund trillions in stock buybacks, or to acquire other companies, and now BBB debt accounts for nearly 60% of the entire $6.4 trillion US investment grade space, "
    ""expects to see a flood of troubled credits topping $1 trillion as rising interest rates overwhelm low-quality loans and bonds", the one question left is how much of this BBB paper is likely to be downgraded?

    Or, as one might say, that is the 6.4 trillion dollar question (the size of the US investment grade corporate bond sector)."
    "So around 10% of EUR BBB- bonds are already reasonably strong fallen angel candidates."
    "Judging by the recent blow out in IG spreads, the market has a far shorter, and less optimistic, timeframe.":
    "The biggest of the BBB issuers happened to be the large telecommunication companies. The sector has over USD300bn of BBB rated debt compared to a high-yield market of USD 1tn."

    11/23 History says FANG feast is finished – Dana Lyons
    11/23 Yet another plunge in crude: down 7 straight weeks and negative from year ago – Mish
    11/23 US stocks fall again as tech shares resume slide – CNBC

    The exit door is soon to narrow.

    Pensions in Los Angeles are starting to eat up the budget.
    "This would require an additional contribution of at least $500 million, if not more, chewing up close to 30% of General Fund revenues. "
    So, they will squeeze the taxpayer for $1/2 billion more.

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  • Danny B
    oil notes,,,Powell & chicken,,, social credit in China

    Oil is so important to finance that every little move in the price of oil has major repercussions in finance. Here are a few notes.
    "Oil and gas companies lost $1 trillion in oil price slide. The global oil and gas sector has lost $1 trillion in value over a 40-day period since October after crude prices fell by about $20 per barrel. U.S.-listed companies in the S&P 500 shed $240 billion."
    "Saudi petrochemical firm. Previously, Aramco had considered a $40 billion bond sale for the acquisition, but has rejected the idea because of the financial disclosures that would be required for the sale"

    "Producing shale gas in the UK may not ever be economic because of ample supplies on the continent and a growing source of supply in the form of LNG from Qatar, Norway and the UK. Beyond that, renewables are steadily falling in cost, down 50 percent since 2013."
    Damn free energy.

    "The firm apparently suffered a “catastrophic loss” by wrong-way bets on prices. Oil fell by 7 percent on November 13 and natural gas spiked by 18 percent on November 14. Individual investors, which apparently had to have made a minimum investment of $250,000, are set to lose their money."
    Damn free energy
    "Prices for Western Canada Select have dropped as low as $14 per barrel, as pipelines carrying oil from Alberta are full. "

    "According to the report, top oil and gas companies jointly spent around 1 percent of their 2018 budgets on clean energy. The study comes as European oil and gas heavy weights such as Royal Dutch Shell, Total, BP and others have in recent years accelerated spending on wind and solar power as well as battery technologies. The companies’ increased green investment shows that they are seeking a larger role in global efforts to slash carbon emissions to battle global warming, the report added. "

    Side note;
    Earth is Cooling…No it's Warming - NASA Earth Observatory

    "ExxonMobil, the world’s largest traded publicly owned oil company, for its part, was heavily criticized over its slower move to embrace the concerns of climate change. "
    "Also, earlier this year ExxonMobil announced a $500 million joint venture (JV) with Synthetic Genomics to genetically engineer photosynthetic algae to produce renewable crude from sunlight and carbon dioxide"

    "U.S. shale is not new to pipeline bottlenecks. The Permian basin has suffered from steep discounts this year, with WTI in Midland trading as much as $20 per barrel below WTI in Houston at times. Meanwhile, the midstream bottleneck is especially acute in Canada, where the inability to build a major pipeline out of Alberta has led to price discounts that have reached as high as $50 per barrel. Western Canada Select fell as low as $15 per barrel in recent days after a U.S. federal judge blocked construction on the Keystone XL pipeline, dealing yet another blow to Canada’s oil industry."

    "Crude oil stockpiles in China rose by 29.09 million barrels last month from a month before and are likely to continue up, S&P Global Platts calculations have suggested. The inventory build was a result of rising imports combined with lower refinery activity,"
    Yep, China is slowing down.

    Everybody in the world is wondering when Powell is going to fire up the printing presses and save the financial world.
    11/23 The Fed finally blinks – Macro Tourist
    "It is clear to me the Federal Reserve was intent on raising rates until something broke, and that last week enough things “broke” that they finally blinked."
    "I know it seems like a subtle distinction, but the market has interpreted this as the Fed blinking."
    So, he interprets some comment as "the FED will start printing". A lot of his wishful thinking is based on the extreme volatility in the oil markets. The next FOMC meeting will tell us if the FED is blinking or not. Powell is on a mission to do a slow crash of markets so that they will not suffer a fast crash. Trump is on a mission to destroy China. Since capital can instantly flee and flow to any place in the world, ALL CBs provide liquidity to all markets.
    When the FED withdraws liquidity, this subtracts liquidity from most markets. Powell is playing a game of "chicken" with Chinese markets hoping to suffer far less damage than China.

    Absent the enormous stimulus and liquidity from the FED,,, and to a certain extent the BOJ and ECB, China has had to go back to serious printing.
    Keep in mind that the ECB claims that it is still on track to terminate bond purchases at the end of the year. Willingly or not, the BOJ, ECB, and BOE are joining with the FED to gang up on China. China does not have a developed safety net as opposed to the West and Japan.

    How China Stays Stable Despite 500 Protests Every Day - The Atlantic
    Jan 5, 2012 - China saw 180,000 protests, riots, and mass demonstrations in 2010 alone
    China: Strikes and protest numbers jump 20% | Financial Times
    Jul 14, 2016 -
    Social unrest in China: A threat to regime legitimacy and the economy ...

    The West is hoping to get a big revolution going in China. Their business model of growth, not profit is far more vulnerable than the Western model of profit before people.
    Starting with TARP, the banks transferred their risk and bad paper to the State. The State is soon to collapse (Armstrong). When the default cascade hits, China will be in a very poor position to hold on to control. They have instituted a draconian / Orwellian system called social credit

    The odd reality of life under China's all-seeing credit score system ...
    China's social credit score system is doomed to fail | Financial Times
    Pushing The Ethical Boundaries Of Big Data: A Look At China's Social ...
    China Turns Big Data into Big Brother - MIT Technology Review

    They know that the crash is coming. They are betting on a lockdown of every individual.

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  • Danny B
    Just how fast will hope turn to fear?

    Hussman writes that we are "early" in the deterioration of market fundamentals. Here is an article on the breakdown of credit markets. It remains to be seen just what the speed of deterioration will be. BUT, everything is speeding up.

    The markets are starting to look more at fundamentals of risk.

    11/22 Hedge funds suffer worst month in three years; now down for the year – CNBC
    11/22 Multiple risks are converging on markets – Jim Rickards
    11/22 Get out now: SocGen releases the most bearish 2019 forecast yet – Zero Hedge

    Société Générale has been very accurate and very watched. It won't take much to reverse / deflate the delusions of investors.
    11/22 Owner of blown-up hedge fund left clients owing more money – Zero Hedge
    NOBODY wants to be left holding the bag. This will prompt more flight to cash.
    11/21 Mortgage refinance applications hit 18-year low – CNBC
    So, how is the credit bubble supposed to grow without new laons and new fees?
    11/21 Blain: “Who will purchase the €275 billion of debt Italy expects to issue in 2019?” – ZH
    11/21 EU calls for sanctions against Italy over budget – US News
    It will NEVER pass a vote of the general assembly.
    "So here we have the Pi Target and to the day Brussels has officially rejected Italy’s spending budget on Wednesday, November 21st"
    Armstrong's program is right on target.

    "The real curious thing is that the Abu Dhabi sovereign wealth fund filed a lawsuit against Goldman Sachs precisely on the Pi Target Wednesday (Nov 21) for allegedly conspiring against the Middle Eastern fund to further a criminal scheme by Malaysia’s scandal-plagued 1MDB. So here we have the suit filed precisely on the Pi Target and precisely at the top of the ECM back in 2007, that is when Goldman Sachs sold ABACUS2007-ACI which was a $2 Billion Synthetic CDO."
    "Them, on the Pi Target from the previous 8.6-year wave, April 16th, 2010, that is when the SEC charged Goldman Sachs with fraud with regard to the ABACUS2007 product. Here we now have Abu Dhabi filing suit for criminal fraud against Goldman Sachs precisely on the Pi Target of November 21, 2018."

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