Economic pressures

[Danny B]

The timing of the meltup

It was assumed that Killary would win and nobody covered their tracks. "As soon as Hillary lost the election, all the foreign governments, including Saudi Arabia, withdrew their “donation” for a smoke-screen charity."
https://www.armstrongeconomics.com/i...bi-about-time/
It was assumed that Merkel would win so, the pension crisis was held off until after the election. It is not working out that way. Germany, like England is coming apart.
https://www.armstrongeconomics.com/w...crisis-begins/

Grantham wrote about the coming Meltup. His graphs were showing about a 3 1/2 year peak area. John Hussman has good replies showing that 3 1/2 years may be a bit too long. https://twitter.com/hussmanjp/status...825984/photo/1
https://www.themaven.net/mishtalk/ec...YEyaYMtegR-LkQ

What happens is; Everybody is afraid of missing out (FOMO) This keeps reluctant money-renters from leaving the markets. At some point, the rise is just too steep and, fear overcomes greed. The CBs are hard at work trying to inspire greed. IF the CBs have truly dialed back stimulus, one would expect fear to make a pretty fast appearance.

Don't look now, but Morgan Stanley wealth just took their high yield allocation to zero. They have exited the junk-bond market. How many others will take this as a cue to get out?
https://seekingalpha.com/article/4135751-wants-junk
Just how much of the market can the CB buy?

"The average pension fund assumes it can achieve a 7.6% rate of return on its assets in the future."
"The trouble is that for stocks to return anywhere near 8% they would need to fall more than 50% first. "
"Currently, the index trades at roughly 2,690 thus it would take a major stock market crash for investors to have the opportunity to invest at a level that would enable them to achieve anything close to what pensions now require."
The stupidity here is frightening. If the stock market crashes 50%, consumption will crash with that. These knuckleheads expect dividends to stay static if consumption crashes.
https://thefelderreport.com/2018/01/...-same-fashion/

"Shares are expensive – keep buying them. That appears to be investors’ consensus view. “Looking into 2018, we believe that the concerns about a bubble for US equities are overdone,” he says. “Compared to past crises [2000, 2007], we don’t see excess in terms of flows." Open your effing eyes.
"Prices have climbed so high that the average yield on stocks in the S&P 500, the broadest US index, has slipped below 2%. "
"One flashing light was the extreme difference between the performance of US “value” stocks – the type of reliable profit and dividend-earners he tends to prefer – and “growth” companies. The disparity was “greater than at any stage in stock market history”, Woodford said – yes, even including the 1929 Wall Street crash.

Woodford, who manages £15bn, famously sat out the dotcom bubble of the late 1990s and cleaned up afterwards."
"Grantham is the British-born veteran fund manager who in 1977 co-founded Boston-based GMO, which today manages $75bn (£55bn) of assets. The firm’s fame partly derives from its skill in having identified, and dodged, the last two big market blow-ups – the dotcom bubble of 1998-2000 and the US housing crisis that preceded the financial crash of 2007-09."
"He defines a bubble as being “excellent fundamentals euphorically extrapolated”.
https://www.theguardian.com/business...jeremy-bentham

1/08 11 Saudi princes sent to supermaxes for protesting utility bills – Bloomberg MbS wants to show everybody that he is ruthless. Sooner or later, the other royals are all going to chip in a few Rouble and hire a good Russian hitman.
1/07 China unveils world’s first solar-powered highway – Green Matters
Thieves shut China's solar highway after just five days | South China ...
1/08 Ron Paul: Sessions should be fired over marijuana move – CNN A LOT of Americans are going to need to be stoned to cope with the coming collapse.

[Danny B]

More immorality,,, more meltup,,,at what cost?

If you are into the markets, here is a technical examination of the divergence between stocks and Treasuries. It has previously been a good indicator.
https://www.zerohedge.com/news/2018-...ing-treasuries
"According to the Bank of International Settlements, in 2016, the yuan constituted only 4 percent of the world's currency trades. "
"just 1.1 percent of the world's forex reserves were held in yuan versus 63 percent in dollars"
https://www.bloomberg.com/gadfly/art...cidedly-dashed
The dollar saturated the markets post WW II because everything else was destroyed. That isn't the case now and China can't expect the Yuan to saturate anything. They probably know this and plan to rely on gold.

C. H. Smith, "The status quo delights in celebrating gains, but the costs required to generate those gains are ignored for one simple reason: the costs exceed the gains by a wide margin. As long as the costs can be hidden, diluted, minimized and rationalized, then phantom gains can be presented as real."
"You see the point: the cost are skyrocketing but the gains are diminishing. "
"The financial media is euphoric over the billions of dollars of profits "
"This is how our entire status quo maintains the illusion of normalcy: by avoiding a full accounting of the costs of a system set to maximizing profits by any means available, a system of public-private pillage overseen by the protected few at the expense of the vulnerable many."
oftwominds-Charles Hugh Smith: Yes, But at What Cost?

OK, how did we get to this point? A corporation is a mindless pile of money that will do anything it can to grow. Since it is "eternal" and has immunity from prosecution, "anything" can, and does include murder, genocide, slavery, addiction and every other evil.
Baxter Pharmaceutical sent deadly contaminated flu vaccine,,,
Several European countries have banned a flu vaccine produced by the Swiss pharmaceutical company, Novartis
The opioid crisis was done specifically to boost profits. As long as the rich can buy the regulators, they can kill-for-profit as many as they want.
It wasn't always like this. How did we get to the point that profit defined EVERYTHING? A corporation has officers who make the decisions. Lee Iacoca personally made the decision to build the Pinto with it's gas-tank flaw. It was simply cheaper to pay the lawsuits than to fix the car.

How did corporate America reach the point where every decision of the board was done strictly on profit with NO other consideration?
Seeds Of America?s Collapse | Real Jew News
Our cops have killed 1,000 Americans in the last year. When did shoot-first,,, ask questions later become S.O.P. ?
https://theintercept.com/2017/09/15/...dc-washington/

OK, back to the melt-up.
Why does money inflate? What a stupid question.
http://www.24hgold.com/english/news-...llionStar&mk=1
Power corrupts. These corrupt people get to control the issuance of money.
Zimbabwe is flat broke. Gideon Gono, the head of the CB lives in an 80 room mansion.

"Dow Jones Global Index $DJW Weekly RSI at 89.87 There is no historical reference even approaching this:"
https://i2.wp.com/northmantrader.com...68%2C254&ssl=1
OK, the speed of acceleration is just crazy. If debt is growing faster than exponentially, how long can the CBs keep a lid on things?
"It is no wonder that we see people such as GMO’s Grantham capitulating and calling for a melt-up in stocks. But excuse me, the $NDX is up 10 years in a row, the $DJIA is up 10 quarters in a row and global stocks are up 14 months in a row with RSI readings never seen before. Does that not qualify as a melt-up already having occurred?"
"To summarize: From my perch markets are engaged in a historic blow-off move fueled by artificial liquidity & complimented by a temporary earnings boost. The combined resulting excess in conjunction with no visible improvements to structural problems will worsen the impacts of an eventual recession. "
https://www.zerohedge.com/news/2018-...uidity-rainbow

[Danny B]

Extreme greed fuels the melt-up

More melt-up news.
" With dumb-money running close to the highest levels on record, it has generally led to outcomes that have not been favorable in the short-term."
"This past weekend, I discussed the surge in market exuberance in terms of both individual and professional investors. Of course, such surges in exuberance are generally indicative of the “capitulation phase” as the last of the “holdouts” finally jump back into a market which “can seemingly never go down.”
“There are many factors from economic, monetary, geopolitical, and financial which have ignited each bubble, and bust, period throughout history. However, each bubble had in common the same extreme levels of confidence, exuberance, valuation and price extension that we see today. And they all ended the same, as well.”

"The extreme net-short positioning on the volatility index suggests there will be a rapid unwinding of positions given the right catalyst. "
There is SO much money "short" in the VIX that any turnaround would involve massive losses.
A good article on the reversal of volatility, https://www.zerohedge.com/news/2018-...eversal-coming
"The recent attempt by crude oil to get back to $60/bbl coincided with a “mad rush” by traders to be long the commodity."
Yes, oil is rising but, somebody must consume that oil for the price to be supported.
"With crude traders currently extremely “long,” a reversal will likely coincide with both a reversal in the S&P 500 and oil prices being pushed back towards $40/bbl. "
"Just recently, that net-short positioning has turned positive which suggests a rally in the dollar is likely."
The dollar goes up,,, exports decline and, EMs can't service their dollar-denominated debt.
"With the dollar VERY oversold currently, look for a strong-dollar rally this year. "

“Even our composite fear/greed index which is a combination of AAII, INVI, MarketVane and the VIX is now also registering extreme greed on a rolling 4-week basis.”
Herd mentality at it's finest.
"Amazingly, investors seem to be residing in a world without any perceived risks and a strong belief that the financial markets are NOT in a bubble. "
https://realinvestmentadvice.com/tec...t-positioning/
1/10 Bill Gross calls a bond bear market after Treasury yield surges – Bloomberg
Grundlatch says that Bill Gross (the bond king) is early.
https://www.zerohedge.com/news/2018-...ion-highlights
"A main catalyst for Gundlach's bearishness - for both bonds and stocks - is that we are now entering an era of quantitative tightening, i.e., accelerating balance sheet unwind from all the major central banks"
"Additionally, Gundlach is confident that a "more hawkish ECB" is not priced into the market."

QE hasn't fixed anything. Have the CBs truly cooled off the printing presses,,, or, are they in stealth mode?
1/10 Japan takes away the last of the world’s ‘punch bowls’ – CNBC
1/09 Yen’s spike shows taste of what comes when BoJ really does shift – Bloomberg
The ECB and PBOC have been VERY reluctant to take away the punch bowl. Will the CBs carry through? Is this a game of "chicken"?
1/10 U.S. crude hits three-year high as prices climb in tight market – Reuters
America both imports and exports oil. Net imports are 4.1 mbd. Fracking is a losing business. If domestic oil prices go up, you can bet that our oil exports will go down,,, especially with a strong dollar.
The Asians see the falling dollar as downward pressure on Asian exports. They are working to weaken their currencies in respect to the dollar.
https://www.bloomberg.com/news/artic...anks-push-back
BUT, as the dollar goes up, they have more trouble servicing dollar-denominated debt.

12 years ago, Greenspan said that social security was "not working".
https://www.youtube.com/watch?v=HxSLtC62RG0&t=13s
"Greenspan: "There is nothing to prevent the government from creating as much money as it wants."
https://www.youtube.com/watch?v=DNCZHAQnfGU
"People are living longer than ever before– the average life expectancy in the US is a full EIGHTEEN YEARS longer than it was when Social Security was conceived back in the 1930s."
"The Social Security star has already exploded. But it will take the light another 15+ years to reach us."
https://www.sovereignman.com/trends/...enefits-22814/

[Danny B]

Debt as far as the eye can see,,, NAFTA,,,cyclical collapse

China floats a "trial balloon".
"Bloomberg News reported Wednesday, citing people familiar with the matter, that officials in Beijing have recommended the Chinese government lower — or even stop — its buying of U.S. sovereign debt.

The report also notes that Chinese officials think U.S. debt is becoming less attractive compared with other assets, adding that trade tensions between the two countries could provide a reason to slow down or halt the purchases."
"Treasury prices fell, boosting yields."
Reportedly, it is game over when Treasury yields hit 3.5%.
"I think the Chinese will contribute to the removal of liquidity from the U.S. bond market," said Michael Shaoul, chairman and CEO of Marketfield Asset Management. "

"The kneejerk reaction in fixed income was fast and furious, as over 35,000 10-year futures traded in the one-minute period after the news broke according to Bloomberg, sending 10Y yields as high as 2.59%, the highest since March 2017."
https://www.zerohedge.com/news/2018-...sury-purchases
From comments; "I mean with the Fed having initiated a program that will dump an additional $2,300,000,000,000+ of UST on the "market", above and beyond what will be dumped to finance the ongoing exploding debt load?? China doesn't want to take the other side of that trade?"
"China doesn't want to fund the USA's military which they see as will eventually be turned on them! Let's pay the country that labeled us an economic aggressor in their NSS to fund the war against us, LOL.

Strange coincidence that Trump last night announces how the US will revamp and modernize their Nuclear missiles and then China announces this, next day and only a week before they launch the Shanghai Energy Exchange to directly compete with the Petrodollar selling oil future contracts in Yuan!"
"The US will, you see they will open up private LLC's and such offshore in the islands and other places and use them to buy US treasuries without having to tell who is doing it. Essentially the treasury is buying the US treasuries but using a cutout to hide the fact that they are."

Trump is talking about killing NAFTA. It remains to be seen what the final effect might be. https://www.zerohedge.com/news/2018-...t-nafta?page=1

Comments; "Follow the money and the United States huge trade deficit with Mexico becomes even more disturbing as you begin to understand where the money eventually ends up. When you start thinking about all the money and jobs we shift into Mexico each year you would think by now Mexico would be rolling in cash.

A bit of research quickly confirms that the money Mexico receives by way of trading with America quickly passes through its lands and flows to Asia. It could be argued that when all is said and done we are still transferring our wealth to the far east only by the scenic route. More on the problem with this in the article below.

http://Follow The Money-The US Trade Deficit With Mexico Benefits China.html

The World bank gives bogus numbers but, they are still in a funk.
https://www.rt.com/business/415448-g...-decade-gloom/

“The labor force participation rate of men 25 to 54 years old continued its long-term decline,” said one part of that report. Less-educated men are working less than guys with better educations.

Are less-educated people really working less because they want to work less? Or is this myth of full employment simply bunk?"
https://nypost.com/2018/01/08/dont-b...ll-employment/

The Atlantic, "The United States is in the midst of one of the longest stretches of job creation in modern history. And most of that economic growth has been presided over by President Obama, and his appointee for Fed chair, Janet Yellen "
https://www.theatlantic.com/business...oyment/549932/

Armstrong, "Unfortunately, humans also possess at that inner level this same survival instinct that is hardwired. This makes it increasingly unlikely that willingness to change gains sufficient strength in time before the abyss is reached. Hence, we must crash and burn.

Because the government will respond in the same manner as an ameba, there is no hope that they will spontaneously look in the mirror and reach an OMG moment of realizing that they are causing the demise of our society. Consequently, they will consume our liberty until they push it to the point that society will then act only in its self-interest to survive. Historically, all governments collapse once they have consumed rights, liberty, and privileges in their desire to maintain control and in the end, die by their own greed for power. They lack any consciousness of what they are doing precisely as an ameba. There is no reasoning for there is no one single mind to reason with."
https://www.armstrongeconomics.com/i...like-an-ameba/

"According to the Institute of International Finance, total liabilities in the third quarter of 2017 surpassed $230 trillion (Public+Private). This is an increase of 16 trillion compared to the end of 2016. As the interest rates continue to rise, the debt servicing costs are simply going to explode. As a whole, Europe is over 100% of debt to GDP with respect to just Public Debt on average compared to the USA at about 73%. Global government public debt has exceeded $60 trillion."
https://www.armstrongeconomics.com/w...-230-trillion/

[Danny B]

Morality OR, collapse

Our country is now geared to an arms economy bred in an artificially induced psychosis of war hysteria and an incessant propaganda of fear. Douglas MacArthur
I am concerned for the security of our great Nation; not so much because of any threat from without, but because of the insidious forces working from within. Douglas MacArthur
History fails to record a single precedent in which nations subject to moral decay have not passed into political and economic decline. There has been either a spiritual awakening to overcome the moral lapse, or a progressive deterioration leading to ultimate national disaster."
Douglas MacArthur

Look around you and ask yourself; who brought us this collapse of morality? Who controls mass media? Who advocates perpetual war for profit? Who dreams of world control?

Churchill, "WW II could have been avoided but, the bankers wanted it."
"Germany’s unforgivable crime before WW2 was its attempt to loosen its economy out of the world trade system and to build up an independent exchange system from which the world-finance couldn’t profit anymore. ...We butchered the wrong pig."
-Winston Churchill (The Second World War - Bern, 1960)

There's no arguing that many of America's leaders are working hard at a personal moral collapse. The same is true for a large number of corporate leaders who only worship the god of profit.
What about religious leaders? The Popes have generally been a rotten bunch. The bishops and cardinals run pretty bad. The Priests have their own special problems with pedophilia.

Keep in mind that Germany was a very strong Christian country when it was attacked. Russia is now having a strong resurgence of the Christian faith. Those who bring us moral collapse have a real hatred of Russia and want to blow the place up. They destroyed it many years ago and, plan to do it again. Christian Europe is headed for a dark age. Christians in the ME, Indonesia and many other places are being killed in large numbers.

While organized religion has plenty of dark history of persecution, the Christians have been pretty good for the last couple of centuries. What is it about Christianity that so offends those who are working towards our moral collapse?
Christianity is a moral framework that we can teach our children. We don't have to conjure up a moral framework on our own. The Decalogue is the long, long existent framework that we pass on to each generation. The mass media tells us that morality is just relative,,,, and whatever you feel is correct in any given situation.
The mumbo-jumbo of the liturgy isn't the important part. The continuity of the norms of morality are what is important.
"There has been either a spiritual awakening to overcome the moral lapse, or a progressive deterioration leading to ultimate national disaster."
Apparently, Russia will get the spiritual awakening and, America will continue to collapse.
We spent our accumulated fortune on wars for the war-profiteers and world-dominators. At the same time that we collapse financially, we are collapsing morally. As the trust-horizon shrinks to just our immediate family, we will exclude all others. The deplorable will somewhat work together. The progressives will slit each other's throat.

[Danny B]

The B.I.S. throws in the towel

Creating <$220> trillion of new debt to stimulate the economy was strictly an experiment. There is now a better understanding of the actual economic rules,,, rather that the various delusions that previously dictated economic policy. The various CBs have all stimulated in round-robin fashion.
Who told them to do that? Who coordinated the process?
"Policy for most central banks around the world is dictated in Switzerland by the Bank for International Settlements. Fed chairmen like Janet Yellen are mere mascots implementing policy initiatives as ordered. This is why we are now seeing supposedly separate central banking institutions around the world acting in unison, first with stimulus, then with fiscal tightening."

"Now comes the era of Jerome Powell, who will oversee the last stages of fiscal tightening, the reduction of the Fed balance sheet, faster rate increases and the final implosion of the 'everything' bubble."
"a Trump presidency would inevitably be followed by economic crisis, and this would be facilitated by the Federal Reserve pulling the plug on fiat life support measures which kept the illusion of recovery going for the past several years. It is important to note that the mainstream media is consistently referring to Jerome Powell as "Trump's candidate" for the Fed, or "Trump's pick"

"Trump, and by extension all the conservatives that support him, are meant to take the blame when the 'everything' bubble vaporizes our financial structure. "
Powell, "He even admits the existence of the Fed's "short position on volatility." This explains the strange behavior of the VIX index, which has plunged to record lows as "someone" continually shorts VIX stocks in order to interfere with any decline in markets."
Party While You Can - Central Bank Ready To Pop The 'Everything' Bubble
Best read the whole article. You may not be in the markets but, you are directly affected by the broader economy. The slaughter of the money-renters will be only one facet of the credit collapse. The CBs (BIS) tried their doomed credit expansion experiment. They ran that horse until it died in it's tracks.

The people who are actual producers are not going to have it as hard as the non-producers. The largest non-producer is the State. It has tried every stimulus imaginable to ang on to control.
"Treasury volatility as measured by realized volatility in the U.S. 10-year Treasury note has fallen to a 52-year low, according to a new report from Bank of America Merrill Lynch."
"Indeed, we have already seen a stunning flattening in the yield curve as measured by the spread between the 10-year and 2-year Treasury yields. Furthermore, the 10-year yield has failed to take its high from the first quarter of 2017, and the 30-year has remained even more contained in its moves.
Ultimately, these long periods of muted moves will lead to a mean reversion."
https://www.cnbc.com/2018/01/08/the-...-52-years.html

"The MSCI World Index has gone 19 straight months without a 5 percent pullback, its longest on record."
https://www.cnbc.com/2018/01/10/glob...orrection.html

I'm sure that the B.I.S. is well aware that monetary inflation of the upper loop is slowly bleeding over into the lower loop. This slow progression of price inflation is forcing people out of housing. It is strangling consumption. A complete crash of the credit bubble is definitely a "bad thing". The B.I.S. is afraid of something even worse. The complete dispossession of the middle class would bring revolution.
The verdict is in on global cooling. Our weakened magnetosphere is allowing great climate volatility. The crop losses will get much worse.
The B.I.S. prefers to bring the collapse forward so that we can "reset" the financial system before the worst of the weather disasters throws everything into chaos.

[Danny B]

Setting up the fall-guy for the great unwinding

"On the plus side for South Korea, reunification with the North could unlock trillions of dollars of energy and mineral resources"
“From an economic development perspective, North Korea and Japan are a match made in heaven: an ample supply of natural resources and labor meets world-leading technology and capital,” Koll argues.
“ Engaging North Korea constructively would not just boost Japan’s economic fortunes, but surely create a historic legacy for Abe worthy of the Nobel Peace Prize.”
https://thediplomat.com/2018/01/shoc...-asia-in-2018/
WaPost - It’s Time To Accept A Nuclear North Korea
The fix is in. There is money to be made in in North Korea.

"students graduating under a $1.3 trillion pile of student loan debt. (Not to worry though: Goldman Sachs is promoting a way to profit from this debt by stuffing it into other assets and selling those off to investors, a la shades of the subprime mortgage crisis.)"
https://dailyreckoning.com/next-fina...orse-last-one/
"The Wall Street and London megabanks are scrambling out of this debt by securitizing it — packaging and selling it on — knowing it is not payable. U.S. banks’ securitization of debt — corporate junk, auto and credit card debt, student debt, etc. — has grown by $1.1 trillion or 25% just during 2017."
https://www.silverdoctors.com/headli...nancial-crash/
The banks are securitizing everything in preparation for the big unwinding. The default cascade will catch the investors who bought the notes, rather than the banks themselves.
1/11 China just reminded the United States Beijing is its banker – CNBC
1/12 Reports China will stop buying US Treasury debt is ‘fake news’ – Business Insider TRUE, but, it got the desired results.

Here is an important article from the CFR.
"As shown in the left-hand figure above, profits at private-sector enterprises rose 18 percent between 2011 and 2016, while profits at state-owned enterprises (SOEs) plunged by 33 percent. As shown in the right-hand figure, however, the share of corporate liability growth accounted for by SOEs soared from 59 percent in 2010 to 80 percent by 2016. This is the opposite of what one would expect in a market economy."
https://www.cfr.org/blog/china-heapi...tive-companies
Apparently, private industry is to be thrown on the funeral pyre of credit excesses AND, State enterprises will come out OK. China is capitalist when it is convenient AND communist when it is necessary.
Private industry goes on the chopping block, https://www.bloomberg.com/news/artic...ebt-coming-due
A warning on Japan,,,, I doubt this, https://www.marketwatch.com/story/th...rds-2018-01-10

There is widespread talk about a reversal in the 30 year downtrend of the 10 year bond. Here is a good short article on the subject.
https://www.marketwatch.com/story/th...ry_top_stories

1/12 Fed’s Bullard says inflation miss has ‘cost’ US lost growth – US News The feces-for-brains claims that; because prices didn't go up, America didn't grow.
Bullard goes on in depth to advocate for raising the price of everything. The MORON never mentions wages.
https://www.stlouisfed.org/news-rele...e-new-approach
1/11 Will our strong economy spike inflation in 2018? – ValueWalk Will pigs fly?
"Walmart Abruptly Closing Dozens Of Sam's Club Stores, Firing Thousands On Same Day It Raised Minimum Wages"
https://www.zerohedge.com/news/2018-...t-raised-wages
China set the roof on wages. Consumption goes down,,, stores close.

"The U.S. debt limit was suspended in September until Dec. 8. Mnuchin began using special accounting measures to stay below the ceiling since then and has said that Treasury could comfortably fund the government at least through January."
https://www.bloomberg.com/amp/news/a...nd-of-february

[Danny B]

FED,,, treasury paper,,, savings

I leave for ONE day and,,,, I'm a week behind on reading. It takes a lot of reading to make sense of all the moves in finance and economics.
ALL of the rise in the stock market is a product of wet-ink money from the FED.
http://www.birchgold.com/wp-content/...dBalanceSP.png
"Normally, Fed tightening policies should cause an ever-increasing boost to the dollar index. Instead, the dollar is facing a swift plunge not seen since 2003."
Yeah, right. Tightening at the front door,,, while liquidity pours out the back door. The 2 big buyers of Treasury paper have cut back.
https://wolfstreet.com/wp-content/up...an-2016-11.png
So, the FED does forward liquidity swaps with various States that use the liquidity to buy Treasury paper.
"The Fed, as well as the mainstream, have also planted the notion that the Fed “will be forced” to raise interest rates faster if the Trump Administration pursues its plans for Hoover-style infrastructure development."
OK, so, if Trump tries to do infrastructure improvements, the FED will kill everything.
"The central bankers need a scapegoat for the eventual bursting of the market bubble that they have produced. Why not simply allow that bubble to finally implode in the near term, blaming the Trump administration"
The chosenites will put a knife in his back, one way or another.
https://www.zerohedge.com/news/2018-...-it-means-gold

Ron Paul, "By the time the QE’s ended, the Central banks of the world had increased their balance sheet by $8.3 trillion, with only $2.1 trillion worth of GDP growth to show for it. This left $6.2 trillion of excess liquidity in the banking system that did not go where the economic planners had hoped."
THAT is because they have feces for brains.
The article has a vid and transcript. As usual, Ron Paul is painfully clear about our future.
https://www.zerohedge.com/news/2018-...has-qe-wrought
Historically, finance was about 4--5% of the economy. The money-renters managed to bump that WAY up when released from the chains of gold. Now, they are trying to fight off a reversion to the mean.

" First, recently enacted tax reform legislation is estimated to raise the deficit by more than $200bn, on average, each of the next four years, and Congress looks likely approve substantial new spending as well.
Second, Fed portfolio runoff will increase the amount of debt the Treasury must issue to the public.
Third, the Treasury’s cash balance is likely to rise by around $200bn once a longer-term debt limit suspension is enacted, which will also necessitate additional borrowing."
"What Goldman has left unsaid is what happens to interest rates at a time when on one hand US debt supply is set to double and on the other the Fed is set to continue shrinking its balance sheets"
"What is also unsaid is just who will be the marginal buyer of this debt tsunami when central banks increasingly shift away from debt monetization."
The Treasury plans to pump out bazillions in new debt issuance. The FED plans to end debt purchases.
https://www.zerohedge.com/news/2018-...re-double-2019

"Distilled to its roots, the Fed has been manufacturing “savings” from thin air for the better part of a decade. When the financial crisis hit in 2008, American savings were depleted, so the Fed had to step in to produce savings (to finance huge government deficits). Now the Fed is attempting to remove that “savings”
"It is the country’s seed corn. If there is no net savings, there can be no net investment."
It IS different this time, http://blog.knowledgeleaderscapital..../2017/09/2.png
"Not to state the obvious, but all else equal, if the Fed started shedding assets at $30 billion a month (or $360 billion a year), it would exhaust the entire stock of private savings."
"Net savings have fallen in the last 2 years from a peak of just over $700 billion to the current $355 billion. Will savings halve again in the next two years? If so, there is no mathematical way in the world the Fed can shed assets at the rate it outlined yesterday.”
http://thesoundingline.com/chart-of-...s-net-savings/
"side effects of the Fed’s QE programs has been unprecedented growth in excess bank reserves parked in cash at the Fed. While these excess reserves are currently at the Fed, under the right conditions, the excess reserves could begin to flow into financial assets, like treasuries and mortgage backed securities."

[Danny B]

Peak debt,,, peak inequality

It remains to be seen of the FED will actually shrink their balance sheet.
"Yesterday, The New York Federal Reserve announced that it actually increased their $4.2 trillion balance sheet by $1 million rather than shrinking it."
This is a good article speculating what might happen to those excess reserves.
https://www.zerohedge.com/news/2018-...llion-treasury
"In FY 2017, Walmart had pre-tax profits of around $20.5 billion. The great GOP tax cut heist will save the company almost $2 billion annually, maybe more - over 10 years likely over $20 billion. "
More Post-GOP Tax Cut Heist Mass Layoffs

The finance system is facing huge challenges from the tech industry. Here is a good article exploring the possibilities.
https://www.zerohedge.com/news/2018-...ech-disruption

More melt-up.
"It’s synchronized global speculation unlike anything I’ve witnessed. It’s evolved into a full-fledged speculative Bubble and intense Mania. This type of euphoria, while fun and captivating, comes with unfortunate consequences. But there will be no worry for now.
"I recall the speculative market that culminated in manic trading in the summer of 1998 – just weeks before the global system convulsed with the collapses of Russia and Long-Term Capital Management."
"The backdrop is extraordinarily fascinating because of the intensity of speculative excess in the face of key developments that hold the potential to bring this party to a conclusion. "
"This puts growth over the most recent three quarters at a staggering $2.124 TN (16% annualized)." What could possibly go wrong? BTY, where is the shrinkage I have been hearing about?
Credit Bubble Bulletin : Weekly Commentary: Mania

Look at this graph. Do you see a dip?
https://s3.amazonaws.com/cm-us-stand...2018-01-11.png
"Real wages are now 7% lower than they were in 1973 --and that's calculated using the official government-reported inflation rate, which we all know vastly undercalculates the actual inflation rate. (Read our report on The Burrito Index to understand why the true price inflation households suffer is more like 5x greater than the official reported rate).

So the assets held by the rich shoot the moon, and they get access to the 'money river', to boot. While the rest of us see stagnant real wages and a skyrocketing cost of living."
Good article with a great little GIF.
https://www.peakprosperity.com/blog/...ng-money-river

"All of the important activities in this land have been converted into odious rackets, by which I mean nakedly dishonest money-grubbing scams, especially the two sectors that used to be characterized by first, doing no harm (medicine), and seeking the truth (education). But everything else we do is infected by engineered falsehood and mendacity, including the news media, the law, banking, government, retail commerce, you name it. We’re living in a culture of pervasive control fraud, in which authorities set up looting and asset-stripping operations without any restraint."
http://kunstler.com/cluster****-nati...oved-my-xanax/

[Danny B]

Employment,,, headlines

"Lastly, as total US population growth has slowed nearly 2/3rd's (as a percentage) from peak '50's growth."
" How GDP can supposedly grow at 4% while the growth of the quantity of those capable of consuming more is growing at less than a third of previous periods and the quality of real wages are stubbornly flat...truly a mystery?"
Ah yes, the gdp number is a tally of the money in the economy.
"Despite a new peak in employment and asset prices, the net creation of full time employment over the past decade is less than a third of that seen almost five decades ago."
Don't complain, it is growing in China. Good graphs.
https://econimica.blogspot.com/2018/...and-4-gdp.html

1/14 The household debt ticking time bomb – Investment Research Dynamics
1/13 The move to $80 oil may be quick – Forbes
The corresponding downward move in the economy will be equally quick.
1/13 Global economy has China’s back as it confronts debt demons – Bloomberg
Two drunks holding each other up.
1/12 Good news just keeps stacking up for Europe assets on a roll – Bloomberg GREAT news,,,, what about the non-performing loans that are stacking up faster?

1/13 U.S. 2-year yield tops 2% for first time since financial crisis – Bloomberg GREAT news. When it hits <3.5> %, EVERYTHING crashes.
1/14 The dollar’s declines are just getting started, Peter Schiff warns – The Street Must be all that back-door printing.

1/14 KFC accepts bitcoin in Canada now – Motherboard BTC + trans-fats.
1/14 Staggering number of people are buying bitcoin on credit cards – Zero Hedge
1/13 Big crypto exchange goes dark and users are getting nervous – GATA
1/13 Cryptocurrency creation is now as easy as breathing – GATA That makes them even more valuable.
1/13 Bitcoin consumes 30 times more electricity than Tesla cars – Fortune
1/13 Bitcoin miners to use more electricity than all of Argentina – Fortune

1/14 Electric cars will fail, but we’ll build them anyway – Green Car Reports
NO, we won't. Short-term thinking at FED GOV has insured that we won't have the necessary rare earths.
Ahead of The Herd
When anthropogenic global warming reached a maximum stupidity point, the name was shifted to "climate change". NATURALLY, climate change is caused by man. If man caused it, man should pay up. But, not every man can pay. No problem, make the oil companies pay.
New York City Sues Major Oil Companies Over Climate Change | Fortune
Today, there is ample research to debunk anthropogenic climate change. Possibly, BIG OIL will assemble ALL of the proofs that man just doesn't have the power to overcome the power of the sun.

[Danny B]

Confidence,,, interest rates,,, sovereign debt service

What happened to last night's long, comprehensive post?

Interest rates are at the lowest point for the last 5,000 years. Interest rates generally reflect confidence. Our low-wage competitors took away our employment and high wages. We started serial crashes.
Stock market crash – 1987
Junk bond crash – 1989
Dotcom bubble – 1999 to 2000
Global financial crisis – 2007 to 2008
One result of all these crashes was, falling confidence. The welfare-warfare State could NOT service it's growing debt with high interest rates. When confidence could no longer depress interest rates, they were artificially depressed by flooding the markets with "liquidity". The oceans of liquidity forced interest rates down BUT, they also killed interest-income to many millions of banks, funds, retirees and savers. In trying to substitute liquidity for confidence, the State further eroded confidence.
The confidence is gone because the income is gone. This is true of both interest-income AND wage-income.
TARP was a case of buying confidence with liquidity. When the CBs propose reducing the creation of new liquidity, they are actually proposing that confidence can now take over the job of maintaining low interest rates.
We continue to slide down to a global-mean wage. The asset markets maintain their high values only because of liquidity injections. The production-consumption cycle has been short-circuited by automation. The predations of the finance sector has put the wealth in the hands of those who can't spend it.
The CBs are demanding / dreaming that private investors buy State bonds.
"Rising interest rates will always at first support a currency as should be expected with the Euro short-term. However, that will be the trend provided the confidence in government remains. If confidence collapses, then suddenly the interest rates will continue to rise exponentially and the currency will collapse along with asset values."
When confidence declined, this is when we see the highest levels of interest rates.
This is what will happen in Europe. It is all depending upon the fleeting whims of confidence. Only a complete fool thinks that a trend set for a few days will continue forever."
"These remain possible and will help to create the impression the euro will rally and the dollar will collapse. That will suck everyone in and then you have the stage set for the slingshot in the opposite direction."
In order to create the greatest amount of chaos, you always have to swing to extremes. If we are going to really create total havoc that will bring down the monetary system as we head into 2021 and force some sort of a new Bretton Woods, the only way to do that is a dollar rally."
https://www.armstrongeconomics.com/m...zy-times-roll/

"ANSWER: Central banks can only control short-term rates for brief periods of time. They cannot control the long-end. The problem the ECB has is by backing off of QE, it will require private buyers to replace them, which will not happen at negative to low rates. The interest rates will be set by the private sector – not the ECB. The QE program has degenerated from an economic stimulus to simply life-support for member states. "
"Once the government have to turn back to private buyers, that is when you will see rates rise sharply to try to sell new debt."
https://www.armstrongeconomics.com/m...ope-from-here/

So, the cost of sovereign debt service will go way up. Do we shrink GOV by 90% to manage the cost?

[Danny B]

The banks have a plan,,, take your money

"The major cause of the upcoming financial meltdown, as with the pre-2008 conditions, is globally systemic gambling against national economies; called derivatives. Derivatives are sold as a kind of betting insurance for managing fraudulent banking profits and risk. So, why fix systemic banking fraud when the final result allowed these same banks to make even more money in the aftermath of the national and personal financial destruction they originated in the first recession?"
"Instead, thanks to Dodd-Frank, derivatives suddenly have “super-priority” status in any bankruptcy. Applied to Dodd-Frank this means that all these bad bank bets on derivatives will be paid off first … before you may have your savings cash."

"The public, however, has an estimated total US cash deposits of US$7.36 trillion ,,,FDIC is armed with a paltry US$25 billion war chest to pay depositors. "
When YOUR Bank Fails, Don’t Walk … Run! | The Daily Sheeple
The banks have already started securitizing everything in preparation for the meltdown. That $ 7.36 trillion is considered (by law) to be a simple investment in the bank.

"Bitcoin investors may not recognise their motivation as such, but the impulse behind computer-generated currency is revolutionary: to take the production and control of money away from government."
"There’s too much money in the world right now, sloshing from investment to investment and bloating every bolt hole one can think of to stash with capital (an unholy proportion of which is founded on debt). Because it costs central banks nothing to turn on the pumps."
https://www.spectator.co.uk/2018/01/...re-the-answer/
The article fails to mention that the State can strangle BTC at any time.

[Danny B]

Collapse and groundwork for next international agreement

Couple notes from Armstrong;
"Yes. This is the beginning of the Monetary Crisis Cycle that will go into 2021. That is probably where we will see the dollar rally break the world monetary system."
"So far, everything is running its course. We are finally getting closer to the 125 threshold of resistance in the euro and the pound sterling has rallied with many starting to bet that BREXIT will not happen. "
https://www.armstrongeconomics.com/a...ic-cycle-year/
" In order to create the greatest amount of chaos, you always have to swing to extremes. If we are going to really create total havoc that will bring down the monetary system as we head into 2021 and force some sort of a new Bretton Woods, the only way to do that is a dollar rally."
https://www.armstrongeconomics.com/m...zy-times-roll/
The original Bretton Woods agreement locked in all currencies to America's gold stash,,,, about 25,000 tons. Nobody could inflate their currency to gain advantage. In the early '60s, various American politicians got visions of grandeur for all the good that they could do with an unstoppable printing press. The welfare-warfare State was created. Europe noticed that the presses were running much too fast. They demanded gold instead of paper dollars. The gold supply shrank to 8,000 tons.
It fell on Richard Nixon to stop the blood-letting of gold from the Treasury.
"On August 5, 1971, the United States Congress released a report recommending devaluation of the dollar."
On August 11, 1971, the British GOV (London bankers) notified the U.S. Treasury that they intended to carry off 1/3 of the remaining gold.
"on August 15, 1971, President Richard Nixon officially closed the gold window.
He was subsequently impeached. If he had revalued the gold-dollar ratio, it would have been a different story. This was the final break in the Bretton Woods agreement. The money presses went into hyperdrive and the world went back to competitive devaluations,,, the thing that Bretton Woods tried to prevent. The petro-dollar was a huge blessing to America but, a drain on the rest of the world. Triffin's Dilemma caused the R.O.W. to demand that we print ever-more dollars. We traded these dollars for all kinds of good stuff.

Armstrong posits a NEW Bretton Woods agreement. The old agreement was locked in to American gold AND American politicians. Wealth attracts the corrupted. Bretton Woods ended,,, the petro-dollar is on it's way out.
What new system will be proposed? Will it be re-anchored to gold? There is NO possibility of having a new "reserve currency".
Gresham's Law and Triffin's Dilemma make it clear to everybody that no sovereign currency can be a reserve currency. The SDR is useless and hopeless.
The West previously held gold as the premium reserve. The East has moved Big Time into gold. China had saved gold for centuries BUT, "In 1937 when Japan invaded China, thus helping themselves to 6,600 tonnes of gold " AND, The gold that was smuggled out of China to Taiwan between 1948 and 1949 amounted to 115 tons."
The East has clearly indicated that they prefer gold as a store of value. The next Bretton Woods conference will be held in 繁體字

[wayne.ct]

Which would you rather have?

A little gold or a little paper money? (a.k.a. cash?) Too many people "need" the cash to maintain their "comfort" It has to do with security and delayed gratification. Too many people are deceived and misguided or worse. When they wake up to the truth it will be very late in the overall process of monetary destruction. It may be too late for some to save themselves and they will end up in a very bad spot. The time to become educated about these things is here and now.

[Danny B]

Examining the objectives of the next monetary conference

Globalization's foundations are rotting away, spawning parochialism, nativism and xenophobia. If this stage of capitalism is not sustainable, what in the world comes next? Yanis Varoufakis writes.
Back in 1991, a left-wing friend expressed his frustration that "really existing socialism" was crumbling, with exaltations of how it had propelled the Soviet Union from the plough to Sputnik in a decade. Wrong but, go on.

I remember replying, under his pained and disapproving gaze: "So, what? No unsustainable system can be, ultimately, sustained." Now that globalization is also proving unsustainable, and is in retreat, its liberal cheerleaders resemble my friend when they proffer similarly correct, yet irrelevant, exaltations of how it lifted billions from poverty. Temporarily

Progressives who had opposed globalization, like my left-wing friend in 1991, can take no solace from the manner in which globalization is retreating.
At the discursive level, neo-parochialism is now trumping globalization's oeuvre in the United States, in Brexit Britain and elsewhere. Labour-saving technological change, meanwhile, underpins jobless deglobalization everywhere. None of these developments augur well for those who once believed in a borderless commonwealth of working people.
It's the non-working people who love open borders.

Humanity has been globalizing since our ancestors left Africa, the earliest economic migrants on record. Moreover, capitalism has been operating for two centuries like "heavy artillery," in Marx and Engels' words, using the "cheap prices of commodities" to batter "down all Chinese walls," "constantly expanding market for its products" and replacing "the old local and national seclusion and self-sufficiency" with "intercourse in every direction, universal interdependence of nations." An then came crony capitalism

It wasn't until the 1990s, when we noticed the unleashing of momentous forces, that we required a new term to describe the emancipation of capital from all fetters, which led to a global economy whose growth and equilibrium relied on increasingly unbalanced trade and money movements. It is this relatively recent phenomenon – globalization, we called it – that is now in crisis and in retreat. Let's agree to call it money PRINTING

Only an ambitious new internationalism can help reinvigorate the spirit of humanism on a planetary scale. But before arguing in favour of that antidote, it is worthwhile recounting globalization's origins and internal contradictions.


At the Mount Washington Hotel in Bretton Woods, N.H., world leaders gathered in the Gold Room in July, 1944, to sign an agreement that created the World Bank and International Monetary Funds, pillars of what would come to be called the Bretton Woods monetary system.

ROBERT ORR

In 1944, the New Deal administration in Washington understood that the only way to avoid the Great Depression's return at war's end was to transfer America's surpluses to Europe (the Marshall Plan was but one example of this) and Japan, effectively recycling them to generate foreign demand for all the gleaming new products – washing machines, cars, television sets, passenger jets – that American industry would switch to from military hardware. We had a lock on manufacturing and loaned them money to buy our stuff.

Thus began the project of dollarizing Europe, founding the European Union as a cartel of heavy industry, and building up Japan within the context of a global currency union based on the U.S. dollar. Yeah, we also forced them to buy about a $trillion in U.S. treasury notes.This would equilibrate a global system featuring fixed exchange rates, almost-constant interest rates and boring banks (operating under severe capital controls). Thanks to gold.

This dazzling design, also known as the Bretton Woods system, brought us a golden age of low unemployment and inflation, high growth and impressively diminished inequality.
Alas, by the late 1960s, it was dead in the water. Why? Because the United States lost its surpluses and slipped into a burgeoning twin deficit (trade and federal budget), Let's not forget $13 trillion for wars. Since then we have spent $25 trillion on the war on poverty. rendering it no longer able to stabilize the global system. Never too slow to confront reality, Washington killed off its finest creation: On Aug. 15, 1971, then-president Richard Nixon announced the ejection of Europe and Japan from the dollar zone. Unnoticed by almost everyone, globalization was born on that summer day. It was a flawed creation because it depended on honest politicians.
Mr. Nixon's decision was founded on the refreshing lack of deficit phobia particular to American decision-makers. Unwilling to rein in deficits by imposing austerity (that would have done more to shrink the country's capacity to project hegemonic power around the world than shrink its deficits), Washington stepped on the gas to boost them. Consequently, the United States functioned like a giant vacuum cleaner, sucking in massive net exports from Germany, Japan and, later, China. However, what gave that era (1980-2008) its energy and character was the manner in which the United States paid for its expanding deficits: by means of a tsunami of other people's money (European, Japanese and Chinese net exporters' profits) rushing into Wall Street in search of higher returns.

But for Wall Street to act as this magnet of other people's capital, there were two prerequisites. One was Wall Street's unshackling from New Deal-era regulations. Bank deregulation was central in this audacious reversal: William Jefferson Clinton took care of thatFrom recycling Amercian surpluses, via transferring them to Europe and to Japan, the United States was now recycling the supluses of the rest of the world rushing into Wall Street, completing the loop necessary to pay for America's deficits and keep globalization in rude health.

The second condition was the cheapening of American labour and the substitution of growing wages with escalating credit, provided via Wall Street. This cheapening of American labour was essential to helping push Wall Street's capital returns above those of Frankfurt and Tokyo, where competitiveness was based instead on enhancements to productivity.
Opening the southern border ensured downward wage pressure.

Through it all, neoliberalism emerged from the margins of political economics to dominate our discourse after the end of Bretton Woods. But it was nothing more than the sermon that steadied the hand of politicians repealing New Deal-era protections for workers and society at large from the motivated abuses of Wall Street bankers and predators such as Wal-Mart.

In summary, what we now call globalization was the result of a brave new financialized global recycling mechanism of immense energy and ever-increasing imbalances – with the rise of neoliberalism, wholesale bank deregulation and Wall Street's "greed is good" culture as its mere symptoms. Before long, the Soviet Union and its satellites collapsed, with the new rulers keen for a piece of the action and the Chinese Communist Party determined to survive by staging a managed insertion of China's workers into capitalism's proletariat.

Financial capital's inexorable march and two billion workers entering the global labour market ensured a stupendous redistribution of income and wealth. While billions of people were lifted from abject poverty in Asia, large swaths of Western workers were discarded, their voices drowned out by the cacophony of money-making in financialization's epicentres.

In 2008, a financial crisis began to close globalization in a steel trap of its own making.
To be comntinued