Economic pressures

[Danny B]

2%BS,,, the flavor of the next crash,,, look ma, no taxes.

"to avoid a potentially dangerous rise in inflation that economic theory says could result from the hot jobs market. Powell and some of his colleagues have been perplexed and perturbed by the Fed’s failure to convincingly raise inflation to its 2 percent target.
Powell’s also shown willingness to seriously consider an approach under which the central bank would seek price rises above its objective for a while. That’s fanned fears among Powell and his colleagues that companies and consumers may lose faith in the central bank’s ability to deliver 2 percent inflation.
'"The latter, price stability, is often interpreted to mean low and stable inflation. To meet the price stability objective, Federal Reserve policymakers target an inflation rate of 2 percent. ""As mentioned earlier, the FOMC interprets an inflation rate of 2 percent as consistent with price stability. As such, the FOMC adopted an explicit inflation target of 2 percent in January 2012. "
Bernanke

"Therefore, stating an inflation goal—and maintaining credibility with respect to that goal—helps the FOMC manage the public’s expectations when it comes to inflation. In turn, this helps in achieving price stability as per the Fed’s mandate. "
https://www.stlouisfed.org/open-vaul...rget-2-percent
ALL BS.
FED chair Paul Volkler, " Volcker is no stranger to presidential pressure on the Fed. ... Volcker writes that the Fed's adoption of a 2 percent inflation target in ... to achieve both full employment and stable prices, saying it causes more harm than good."
So, the bankers force prices up to maintain stable prices.

Smith, "Financial crises come in two flavors: fraud and credit-valuation over-reach. Fraud-based financial crises may differ in particulars, but they share many traits: perverse incentives are institutionalized; the perverse incentives reward figuring out how to evade oversight via fraud, embezzlement, masking risk, etc. which are soon commoditized; regulations are gutted by insider-funded lobbying; regulators fail to do their job in hopes of getting lucrative positions in the industry they're supposed to be regulating; reports of systemic, commoditized fraud are ignored because everyone's getting rich, and so on."

"The resolution has to 1) eliminate the perverse incentives that fueled the crisis; 2) institutionalize oversight that actually functions to limit dangerous excesses and 3) all the malinvestment / bad debt must be liquidated and the losses taken / distributed."
Rather than clean house, politicos bailed out the banks and regulators added new regulations that left the system essentially unchanged.
Interestingly, modern financial crises seem to oscillate between fraud and over-reach:
The dot-com meltdown arose from unprecedented extremes of overvaluation for tech companies profitable and unprofitable alike.

The brewing financial crisis will be different: the twin sins of extreme levels of debt and extreme overvaluation of assets now characterize corporate bonds, many sovereign bonds, stocks and real estate. Pretty much the only traditional assets that aren't at nosebleed levels are precious metals and bat guano. (
Extreme levels of debt and overvaluation characterize the entire global economy, and are not limited to any one nation or sector. When this crisis gathers steam, there will be few avenues of escape. Adding regulations won't stop it, adding liquidity won't stop it, waving chicken entrails and dancing won't stop it"
This graph shows the size of the pile of fuel waiting to be torched.
https://zh-prod-1cc738ca-7d3b-4a72-b...?itok=-6T60UAn
https://www.zerohedge.com/news/2019-...l-be-different

The joys of regulatory capture.

https://www.zerohedge.com/news/2019-...d-pay-no-taxes
"60 profitable Fortune 500 companies managed to avoid all Federal Income Taxes in 2018. omputer maker International Business Machines (IBM) which earned $500 million in U.S. income and received a federal income tax rebate of $342 million. The retail giant Amazon reported $11 billion of U.S. income and claimed a federal income tax rebate of $129 million. The streaming service Netflix paid no federal income tax on $856 million of U.S. income. Beer maker Molson Coors enjoyed $1.3 billion of U.S. income in 2018 and received a federal income tax rebate of $22.9 million. Automaker General Motors reported a negative tax rate on $4.3 billion of income."
Corporate welfare for the rich.

4/18 Infrastructure or pensions – states are only choosing one – Birch Gold
I'm hitting a LOT more potholes lately.
4/18 U.S. retail sales, jobless claims data brighten economic picture – Reuters
4/18 US retail sales soared 1.6% in March – Fox News
AND
4/18 5,994 stores already closed in 2019, blowing past 2018’s full year total – ZH
4/18 Fed may need to buy more bonds than before crisis to manage U.S. rates – Reuters" pump in more liquidity before the election"
4/18 If Trump country soars, will the president glide to a second term? – NY Times

[Danny B]

Chinese credit meltdown,,, chain reaction in the West,,, rigging the confidence game.

I'll skip MMT. The BS is knee deep.
China is a different story. Same amount of BS.
"Nor is it clear what can be achieved with more credit. The IMF said in its Fiscal Monitor that the country now needs 4.1 yuan of extra credit to generate one yuan of GDP growth, compared to 3.5 in 2015, and 2.5 in 2009. '
"Let us concede that Beijing has opened its fiscal floodgates to some degree over recent weeks. Broad credit grew by $US430 billion ($601 billion) in March alone. Business tax cuts were another $US300 billion. Bond issuance by local governments was pulled forward for extra impact. "
Signifying extra desperation.

"The thinking is that China will rescue Europe. Optimists are doubling down on another burst of global growth, Bear in mind that if China’s economy is a fifth or a quarter smaller than claimed it implies that the total debt ratio is not 300 per cent of GDP (IIF data) but closer to 400 per cent.
"Of course it is not true. Japan’s manufacturing exports to China fell by 9.4 per cent in March (year on year). Singapore’s shipments dropped by 8.7 per cent to China, 22 per cent to Indonesia, and 27 per cent to Taiwan. Korea’s exports are down 8.2 per cent."
"After taking on more debt in a single decade than any other country ever — in the process helping to pull the US and Europe out of the Great Recession — China recently shifted into an even higher gear, creating a world record amount of credit in the most recent reporting month. "
https://www.dollarcollapse.com/china...-numbers-risk/
You can see where Chinese liquidity is important to the West.

"The 2019 growth rate would be the weakest since 2009, when the world economy shrank. It's the third time the IMF has downgraded its outlook in six months."
https://www.smh.com.au/business/the-...10-p51cl3.html

The U.K. is worried about credit card debt, https://www.dailymail.co.uk/news/art...ble-burst.html

The world is in the later stages of the confidence game. The Chinese are well known for being gamblers in everything.
The Chinese report that they are pumping in mega tons of liquidity.
The Japanese report that the BOJ has bought up half of the markets.
The ECB reports that it is going to resume QE

Meanwhile, the FED reports that it is shrinking it's balance sheet. Halted for the moment. There are NO reports of U.S. GOV pumping up everything in sight. The U.S. military reports that $21 trillion is unaccounted for. 10 years ago, the U.S. comptroller David Walker refused to certify that the U.S. books were accurate and honest. Where do you think that $21 trillion went? The military spent it into the economy.
The treasury gets the bills and just sends out a check. Before the spread of GOV plastic money, SS, etc, U.S. GOV was writing 80 million checks a month.
MMT would have the Treasury just write checks for all State expenses.
IF U.S. GOV was spending more than was approved in the appropriations and budget, who would know?

Exclusive: The Pentagon's Massive Accounting Fraud Exposed | The ...
https://www.thenation.com/article/pe...-budget-fraud/

Alexandria Ocasio-Cortez and the $21 trillion Pentagon accounting ...
https://www.vox.com/policy-and.../12...dicare-for-all

Dec 3, 2018 - The US military budget is such a bloated monstrosity that it contains accounting ... $21 TRILLION of Pentagon financial transactions “could not be traced, .

SO, the Pentagon has spent mega-bucks into the economy with no way to track or trace it.
This money doesn't show up on official budget records. Europe, Japan and China report just how much they are pumping in. This weakens confidence in their currencies and Central Banks. China and Russia are buying gold expressly to strengthen confidence in their fiscal strength. The confidence game is growing ever-more important. The game is rigged. Uncle Sam is dealing from the bottom of the deck.

Armstrong says, "absolutely do not raise taxes on the rich."
https://www.armstrongeconomics.com/w...ve-government/
292,864

[Danny B]

Can truckloads of pixels save the day again?

The war is between the upper loop and, the people who actually work.
“Chicago Federal Reserve President Charles Evans said on Monday that he’d be comfortable leaving interest rates alone until autumn 2020 to help ensure sustained inflation in the U.S"
“The U.S. Federal Reserve should embrace inflation above its target half the time and consider cutting rates if prices do not rise as fast as expected, a top policymaker at the central bank said"
Credit Bubble Bulletin : Weekly Commentary: Full Capitulation

"Back in 2016 the financial world was falling apart. The US dollar was spiking. Emerging market currencies were getting destroyed. The S&P 500 equities was exhibiting a classic head-and-shoulders formation, indicative of a coming plunge. The macro-economic outlook looked grim, too, with global trade slipping into contraction:
But then everything suddenly turned around, as if by magic.
Well, we now know that ‘magic’ was actually a massive quantity of monetary and fiscal stimulus pumped into the system by the world's central banking cartel.
But can they? Maybe. Or maybe not.

If the answer is “yes,” our prediction is to expect what we got last time, just taken to more extremes: a vastly wider wealth gap between the 1% and everyone else, accelerated destruction of savers and the middle classes, and anemic GDP growth coupled with explosive further growth of global debt levels.

If the answer is “no,” a massive crash of epic proportions, unlike any most of us have ever experienced, is in store. Credit bubbles are ugly beasts. They're fun while they last but devastating when they burst. The longer they carry on, the worse the crash when it comes -- this bubble has been going on for longer than most people ever could have imagined.
In 2016, there were slumping emerging markets, a slew of macro indicators pointing to a global slowdown, and equity bear markets all over the place. And then – presto! – everything reversed during one night in February 2016. It was as if nothing had ever happened.

Somehow all those fundamental macro warnings just melted away in a burst of financial market exuberance.

S&P futures took off in the overnight session between Feb 7th and the morning of February 8th as if the entire world suddenly had a change of heart:
Massive buy orders showed up in the middle of the night and it was only later that the economic data began to turn the corner.

What came first was the tremendous application of monetary, fiscal and financial stimulus. Just gobs and gobs of it. Economic recovery, such as it was, showed up later.
It didn't take long for their combined printing hit the highest run-rate of the entire crisis at $2.5 trillion dollars by mid-2016. They then kept the pedal to the metal clear through mid-2018.
But behind the scenes they were hastily, and often haphazardly, dumping the largest-ever quantity of money and credit into the system the world had ever seen
We warned that "until and unless" the world’s central banks reversed course and began printing like crazy, the vast global cesspool of over-expensive bubbly financial assets would soon undergo a painful downwards re-pricing.

And start fall they did; through September 2018 up through Christmas Eve. Then, as they have done so many times, a “miracle” bottom was formed
https://www.peakprosperity.com/blog/...all-over-again
In Part 2: Why This Better Work, we look closely at just how awful the fast-deteriorating macroeconomic situation is. It's very bad. GDP is falling in nearly every region of the globe,

4/20 The eurozone slowdown is worse than the global one – Daniel Lacalle
4/20 Cord-cutting is quickly picking up pace – Zero Hedge
4/20 Federal gov’t financial condition worsened by $4.5 trillion in 2018 – Truth in Accounting
4/19 Crisis at China’s JPMorgan wannabe deepens on bond defaults – Bloomberg
Chinese bonds are crashing.

"Everywhere the establishment and their neoliberal policies are being rejected by the masses of working people who have only recently begun to wreak havoc on a system that has ignored them for more than 30 year"
"rump’s public approval ratings have improved, not because he has “drained the swamp” as he promised, but because he is still seen as a Washington outsider despised by the political class, the foreign policy establishment and the media. His credibility rests on the fact that he is hated by the coalition of elites who working people now regard as their sworn enemy.

The president of the prestigious Council on Foreign Relations, Richard Haass, summed up his views on the “weakening of the liberal world order” "

"What Haass is saying is that the cure for globalisation is more globalization, that the greatest threat to the liberal world order is preventing the behemoth corporations from getting more of what they want; more self-aggrandizing trade agreements, more offshoring of businesses, more outsourcing of jobs, more labor arbitrage, and more privatization of public assets and critical resources."
It’s a policy that focuses almost-exclusively on the free movement of capital in order to enrich wealthy shareholders and fatten the bottom line. The sporadic uprisings around the world– Brexit, yellow vests, emergent right wing groups– can all trace their roots back to these one-sided, corporate-friendly trade deals that have precipitated the steady slide in living standards, the shrinking of incomes, and the curtailing of crucial benefits for the great mass of working people across the US and Europe."
https://www.unz.com/mwhitney/brzezin...ng-to-america/

[Danny B]

E. U. and China,,, ,capital flight

New debt is rising enormously. BUT, the marginal utility of new debt is falling. Traditionally, the confidence of the bond buyers is the controlling factor for bond sales. As confidence is falling, buyer demand higher interest,,, until bonds can't be sold. Since banks create money out of thin air, they aren't limited to savings. Bonds are sold because their is so much "homeless money" sloshing around. Who knows how low the utility of new debt can go?

The various States of Europe have defaulted many times. The EU is their local form of World GOV that will stop ALL bond defaults. This is the aim of the corporatocracy.
"As Nigel Farage said recently on the floor of the European Parliament, Brussels always wins.

And that’s the message Brexit is supposed to convey to everyone around Europe.

“Defy us and we will destroy you. See what we’ve done to the mighty Brits?”
"The EU elections could be an atomic bomb that atomizes the sclerotic political structure of the U.K." "We’re still seeing capital flee Europe"
https://moneyandmarkets.com/luongo-a...begins-in-may/

"I could expand on the subject, but I trust everyone gets a sense of the mismatch in fantastical narratives, the price action in markets and the reality on the ground. If the economy is as great as markets indicate the Fed should have no problems raising rates. If the signals parts of markets send is false and the rally construct is simply based on cheap money, buybacks and a dovish Fed, then the Fed itself may have ignited the final bubble run. Out of sheer desperation no less."
"As markets are now close to all time human history highs on the heels of a dovish Fed new highs seem a lay up to embrace the bubble in full, "
The article is essentially about the mismatch between the lower loop and the bubble for the bankers.

https://www.dlacalle.com/en/the-euro...he-global-one/

[Danny B]

Reportedly, stimulus actually precedes a meltdown

Fracking lost over $200 billion. Reportedly, Wall St is getting tired of this.
SHALE STOCK LOSES 99% OF ITS VALUE: Investor Warning For The Future Of The Industry?
https://srsroccoreport.com/shale-sto...-the-industry/
The FED is pumping in so much money from so many avenues that it is very difficult to get a real feel for capital flows.
Here is a very interesting article showing that the FED pumped in money prior to the various crashes.

In our view, three flawed narratives are driving late-cycle euphoria in financial markets today:

1. “Central banks can always prevent a downturn in financial markets and the business cycle”;
2. “US stocks valuations remain attractive”; and
3. “Chinese stimulus and a US-China trade deal will reignite growth in the second half of 2019.”

We believe that the first two storylines are simply wrong. We show why herein. Regarding the third, in our view, China is much more likely to tank the world economy over the next several quarters than rescue it given the historic credit imbalances there, which we also explain below.
"here has been a huge misconception that global central bank liquidity is what is driving stock prices up today. Our work shows that both global M2 money supply and central bank assets have been contracting on a year-over-year basis so far in 2019. That tells us liquidity has not been the driver of the current market-top-retest rally; hope has been."
I suspect that they are reading the official figures for M2.

"starting in September 2006 led by China, global central banks increased their balance sheets by $3.9 trillion or more than 50% through March of 2009. This unprecedented level of money printing did not prevent the Global Financial Crisis. Rather it preceded and accompanied it."
Even the Fed’s QE1 which started in 2008 did not stop stocks from plunging; it only coincided with it as shown below
"As we show in the chart below, there were twelve times since 1954 (the history of the Fed Funds) that the US central bank paused its interest rate hiking cycle and then reversed it. Only three of those reversals ended in soft landings (1966, 1984, and 1995)."
! Of the nine pauses associated with market downturns and recessions, the economic contraction began an average of just five months from the date of the last rate hike. That would be next month if this is the average delay!

Lotsa good charts https://www.crescat.net/crescat-capi...etter-q1-2019/

The French GOV is in a hurry to get a European army formed. Apparently, the French police can't be depended on to murder French people.
https://www.armstrongeconomics.com/w...-among-police/

[Danny B]

Stopping the bankers from creating the final crash

The world is full of stupid people and many of them are drawn to politics. Besides being stupid, they always seem to have agendas to increase their own personal power and wealth. Merkel won the Kalergi prize for her destruction of Germany. May seems to be on track to do as much damage to Britain as possible. Both of them stooges to the corporatocracy that wants to destroy the States of Europe for greater profits.
So, who could arise up and galvanize the people to throw out the criminals.
Information-bandwidth limitations have made it near impossible to have a clear idea of what is going on for the average voter. The corporatocracy has worked hard to get the voters OUT of the control loop.

King Solomon is in his grave. Who could be wise enough and informed enough to come up with a viable alternative to the corporatocracy? Armstrong and his computer program, Socrates spent quite a long time doing exactly that. He is giving a presentation in Rome in May. Here is the index for his presentation. It appears to be all-encompassing.
https://www.armstrongeconomics.com/i...ate-of-europe/
Keep in mind that Armstrong has always taken human nature into account.

The taxes and predations form the State are usually responsible for the financial collapses. Here is a good paper on how the State plans to finance itself in the future.
"The proposal is for a central bank to divide the monetary base into two separate local currencies—cash and electronic money (e-money). E-money would be issued only electronically and would pay the policy rate of interest, and cash would have an exchange rate—the conversion rate—against e-money. This conversion rate is key to the proposal. When setting a negative interest rate on e-money, the central bank would let the conversion rate of cash in terms of e-money depreciate at the same rate as the negative interest rate on e-money. The value of cash would thereby fall in terms of e-money."
https://www.zerohedge.com/news/2019-...ir-plan-fk-you

So, you would be charged interest on your cash.

"Discussion might be further enriched by the Obama administration's 2015 Economic Report of the President, which highlights the growth in middle-class incomes during the Bretton Woods system of fixed exchange rates. The report describes the period from 1948 to 1973 as the "Age of Shared Growth." The period was characterized by accelerating labor productivity, falling income inequality, and increased workforce participation. What if post-1973 productivity growth had continued at its pace from the previous 25 years? The report posits that "incomes would have been 58 percent higher in 2013" and "the median household would have had an additional $30,000 in income."

"2011 paper "Reform of the International Monetary and Financial System," published by the Bank of England, which analyzed the performance of the gold standard (1870-1913) and the Bretton Woods gold-exchange system (1948-72) relative to current monetary practices. The report concludes that today's system has performed poorly relative to prior monetary regimes,"
"The increasing financialization of gross domestic product is unhealthy because the growing size and profitability of the finance sector come at the expense of the rest of the economy and increase income inequality. When the value of money is fixed, as under a gold standard, economic growth reflects higher levels of productive output."
Judy Shelton: The case for monetary regime change | Gold Anti-Trust Action Committee
"system has performed poorly" NOT for the bankers.

[Danny B]

Chicage and blob state pensions

I'm picking on Chicago today. That city is the avant garde of the pension crisis.
"For 169 governmental bodies, the numbers are lopsided. In some cases hundreds — and in Chicago’s case, thousands — more retirees are drawing from a fund than active workers are paying into it."
"But Moody’s Investors Service recently estimated that public pensions are underfunded by $4.4 trillion. That amount, accounts for one-fifth of national debt. "
"Since 1996, total property tax extensions in Illinois have increased 52 percent after adjusting for inflation. ' Over 6,000 local taxing districts are responsible for raising these property tax levies, " Analysis of state and local government records over the last two decades reveal most of the property tax increase between 1996 and 2016 was caused by:

State education funds being diverted to teachers’ pensions
Growth in local government employee pensions and benefits
The state’s contribution to education increased more than $5.4 billion from 1996 to 2016, an 87 percent jump. But 66 percent of that increase – $3.6 billion – went to teachers’ pensions instead of the classroom.
Chicago area drops population for fourth straight year, census data ...
"Spread out the $145 billion in overlapping government pension and retiree health care debt – from the city, the Chicago Public Schools, Cook County governments and the state – and each Chicago household is, on average, on the hook for more than $139,000 each. "
https://wirepoints.org/chicagos-pens...-ponzi-scheme/
"Some New Trier Township residents were stunned to see the assessed value of their homes jump by as much as 40, 60 or even 100 percent this year."
So, if you can't legally raise tax rates, just raise assessed valuations.


Various governments everywhere plan to finance their growing horde of State employees by imposing negative interest rates. This won't work if people go to cash. That is why there is a war on cash. Now, there is pushback to the war on cash.
https://www.nestmann.com/is-cash-win...c0223e68310bb1

[Danny B]

The next big thing, euthanasia

I needed to do a second post because of recent info from Armstrong. There is quite a conspiracy going on.
"If governments can no longer borrow from the private sector thanks to this quantitative easing and negative interest rates, then there will be nothing that remains familiar as we forge ahead.. Armstrong.
"This is why the capital flows are going crazy pouring out of Europe into US Equities. I do not think people comprehend that we are staring a crisis in the eyes that is so fundamentally changing with regard to how the world monetary system functions, "
https://www.armstrongeconomics.com/w...ncial-unknown/
OK, so, the CBs have destroyed the sovereign bond markets. WHY?

"There is no liquidity any more so the market is dead because of the central bank’s monetary policy.” Mr Nagai confirmed what I have been stating that “The fixed-income market is dead due to the zero interest rate.”

Both the central bank of Japan and of Europe have destroyed their respective bond markets. Looking forward, we are facing a very dark period when it comes to the ability of governments to continue to function."
https://www.armstrongeconomics.com/w...e-bond-market/

Why am I the only one who makes the connection. MMT bursts out on the scene. The CBs have destroyed the sovereign bond market. The crash is assured. What solution will be demanded?
Keynes wrote about this LONG ago. If interest drain is killing the economy, get rid of interest drain.
Keynes long ago proposed Euthanasia of the rentier.
https://medium.com/@DuncanWeldon/neg...y-dc3131d8d85e
Never let a good crisis go to waste.
Everybody complains about boom & bust. So, just create a steady-state economy.
https://www.sciencedirect.com/scienc...21800911004873

Regulatory capture by the banks has been very hard on the rest of the economic body. They were allowed to grab everything in sight. We get a crash. By popular demand, the banks get squeezed out of financial markets.

[Danny B]

Loose cannons on the economic ship

The bankers of the world wanted instant capital transfer so that they could speculate in anything around the world. The corporatocracy wanted one-world GOV so they could dictate labor rates and, never lose a dime in the bond markets. Evidently, they weren't smart enough to see what the final result would be. Globalism has only benefited SIX nations. This just isn't good for business,,, especially if you aren't one of the six.
Trump, by his actions, has emboldened other States to try to break away. The Eurocrats want a European army to squash down any potential escapees.
They claimed, We need a European army to counter an invasion by Russia. Nigel Farage got up in the European Parliament and asked them. WHO DO YOU THINK YOU'RE KIDDING?

Another sticking point; private capital is a very large part of global liquidity. Since capital flows are mostly unrestricted, they tend to flow into jurisdictions that are undeveloped nations with LOW wages and no environmental restrictions. Capital flows out of States with high wages and expensive government.
This has hit Europe especially hard.
Armstrong, "This is why the capital flows are going crazy pouring out of Europe into US Equities."
Repost, https://www.armstrongeconomics.com/w...ncial-unknown/

So, where does this capital flow? Net inflows into the U.S.
https://cfrd8-files.cfr.org/sites/de...p-category.png
"‘Extreme’ Stock-Valuation Gap Looms Over Gravity-Defying Rally"
https://www.bloomberg.com/news/artic...rnd=markets-vp

Sure seems like it. $SPX and $NDX closing at all time highs, a vertical move out of the gate today and people throwing all caution to the wind chasing stocks with 80+ RSI readings. Risk assets? What are risk assets? These are risk free assets.
https://northmantrader.com/2019/04/23/blowoff-2/

Post Great Depression One, the legislature heard testimony about great pools of "dark liquidity" Flowing hither and yon, destabilizing EVERYTHING. Well, the world is even more interconnected now. There is about 200 times as much hot money flowing around as during the late '20s The current great pools are the hedge funds.

The State makes the laws that govern the banks. Regulatory capture has negated much of this power. When everything blows up, the state will use it's powers for self-preservation. Remember, the FED has no army.
I believe that the CBs are soon to go into kamikaze mode. Globalism just hasn't worked out as planned.

[Danny B]

Up a river with no boat and no paddle

ZIRP, NIRP and instant capital transfers. Rising automation and falling birth rates. This is ALL new.
Armstrong, "The term “iliad” in Greek mean a series of miseries or disastrous events and “Odyssey” meant a long wandering or voyage usually marked by many changes of fortune. Welcome to the Economic Iliad & Odyssey. What we are facing is truly extraordinary. There is absolutely NO economic theory from Adam Smith to Keynes that ever addressed negative interest rates no less sustaining such a trend. There have been four major players who ventured into the negative interest rates territory but the disasters of this policy in Europe and Japan were implemented in hopes to stimulating the economy"
https://www.armstrongeconomics.com/m...iliad-odyssey/

The ONE thing that would stimulate large sectors of the economy would be PRICE .DEFLATION. This is the one thing that bankers fear most. They tear their hair out if they can't cause price inflation. They use our savings AND, free money to speculate and cause price inflation. We, necessarily cut back on consumption because we are income constrained. The State hopes to inflate away the pain of paying back the debt. Historically, they have inflated away 50% of the burden over time. BUT, it requires a wage-price spiral. Since China & India have used containerized shipping to take over markets, there has been no wage inflation.... NO spiral.
True price inflation is running about 10 % but, that number must be hidden so that bond buyers don't realize just how negative ZIRP really is.

The bankers have a different arrangement. The FED gave them $trillions of pixel dollars. Then, the FED said,,, leave them with us,,,, We'll pay you 2.4% interest on them. We can't have you going broke, You're too important.
https://www.truthdig.com/articles/wh...rest-to-banks/
Just one of the many ways that the FED channels money into the upper loop.

Armstrong, "PRIVATE BLOG: The Shift From Public to Private – US Share Market Private blog posts are exclusively available to Socrates subscribers."
ALL the losses were socialised on to the backs of the taxpayer. Sovereign debt is going up astronomically. So, naturally, money is moving to private debt. Armstrong claims that public debt will blow up but, private debt like stocks and private bonds will do OK.
FED GOV claims that it spends about 24% of the economy. But, it also has 23$? trillion that appeared but, is unaccounted for. If all confidence is lost in public debt, I seriously doubt that the stock market will be un-affected.

Armstrong, "We are now on the threshold of the most PROFOUND economic event which has never before in history ever taken place."
I doubt that he can make any accurate predictions in anything but the short term.
"This is where opinion becomes worthless. All we can do is approach this on a collective basis internationally and without bias."
He's talking about international cooperation. Currently, the Central Banks are loading up on gold. They have no intention of cooperating. There will be NO running trade deficits. International trade accounts will be closely monitored and settled monthly by physical gold exchange. The U.S. trade deficit is a leftover artefact of the Bretton Woods agreement.

Technically speaking: running on empty – Real Investment Advice
4/25 Deutsche Bank-Commerzbank merger talks collapse – CNBC
A very big deal. I guess that the White Knight didn't want to get poop on his armour.
4/25 U.S. weekly jobless claims surge – Reuters
4/25 World stocks slip, euro suffers, growth fears linger – Reuters
Growth, what growth?
4/25 $100 oil? – Seven Figure Publishing
Well shoot, let's just block Iran and Venezuela and see just how fast this puppy will go down.
[B]4/25 Dow on track for triple-digit loss after worse-than-expected 3M earnings –
4/25 Fed resigned to blowing biggest bubble ever just to extend expansion – Zero Hedge
4/25 ECB and Fed in unison: loose(r) policy here to stay – Gold Republic
4/25 BOJ commits to very low rates at least through spring 2020 – Reuters
Yes, a whole squadron of Kamikazes

4/25 U.S. dollar index hits 22-month high;
And
4/25 China dollar bond default tests bank guarantees for first time – Bloomberg
Yep, it is getting expensive to service dollar-denominated debt.

[Danny B]

Everyone sees it coming

Here is a good article from John Mauldin. He lays out the numbers very well. He shows what would happen if they tried to pay the deficit with additional taxes. His conclusion.
"I predict an unprecedented crisis that will lead to the biggest wipeout of wealth in history."

https://www.forbes.com/sites/johnmau.../#1164984635a0
A good article on youth employment.
https://econimica.blogspot.com/2019/...canary-in.html

4/26 US economy grows by 3.2% in Q1, topping expectations – CNBC
4/26 Fed finds itself trapped by rising GDP – Zero Hedge
At best, GDP is just a measure of how much money is floating around in the country. At worst, it is useless.
4/26 World trade plunging at fastest pace in decade – Bloomberg

4/26 Farage: Brexit party will use EU poll to oust ‘remain parliament’ – Guardian
4/26 ‘Brexit godfather’ Nigel Farage seeks a new political upset – Time
Thatcher managed to keep GB out of the common currency. As more Brits see the ECB crashing, they want more distance.
"Both the ECB and the BoJ are completely trapped. They have destroyed their respective bond markets meaning they can no longer even tolerate a free market with respect to interest rates. They cannot stop buying government debt for there is no bid at these rates. We are far beyond every economic theory ever contemplated. How we deal with this government-created financial crisis will be extremely interesting."
https://www.armstrongeconomics.com/w...e-bond-crisis/

Illinois has famously high taxes. There is a way around this.
4/25 Illinois gov. JB Pritzker, first lady under investigation for property tax fraud – Mish
4/25 The budget will never balance until the wars end – American Conservative
Burke, "War is the health of the State"
Keynes,"'we need perpetual warfare to stimulate the economy"
Iron Mountain, "peace must be avoided at all costs"
Well, something has to give.

Note on global warming. If the cooling trend lasts through the rest of this year, we have definitely turned into global cooling.
https://www.armstrongeconomics.com/w...-summer-cycle/

[Danny B]

Oil spike, broken CBs,,, broken everything

"The last five economic recessions all were preceded by a spike in crude oil prices."
Trump has taken a big gamble with his sanctions on Iran and Venezuela.
"This time OPEC is going to wait until Mr Trump is irreversibly committed and the market is as tight as a drum. The fiscal break-even price of oil for the Saudi regime is $US88. That is the target.
"Westbeck's Mr Le Mee says global spare capacity will fall to 1.2m barrels a day by the third quarter. This will not be enough to cover demand even if nothing goes wrong, and a great deal is likely to go wrong.
Mr Trump has taken the biggest economic gamble of his presidency. He has set in motion a potential oil crunch."
https://www.smh.com.au/business/mark...26-p51hdi.html
Good article.

We all hear the claim that capitalism is broken.
Central Banks Have Broken Capitalism
CBs have rescued private banks by hyper inflating the upper loop.
"In February, the staff at the International Monetary Fund published a guide to make even more negative interest rates work. Meanwhile, proponents of “modern monetary theory” argue that governments should generate money and distribute it across the economy, until it reaches full employment."
The blob State is trying to come up with a scheme to fund itself in perpetuity. It doesn't particularly care about you. C.O.L.A. to the moon.

The article comes up with 3 alternative schemes to make everything work.
"Private debt outgrew gross domestic product by four times in the U.S. since the 1960s. The Institute of International Finance says global debt stands at $243 trillion, more than three times worldwide gross domestic product.
https://www.bloomberg.com/opinion/ar...d=premium-asia
It's an interesting read but, the 3 ideas just won't work. It would mean everybody in power would voluntarily give up power.

Nearly 102 Million Americans Do Not Have Jobs In Trump's 'Booming Economy'
America's crippling debt: Every man, woman & child owes Uncle Sam $220,000
" The spiralling US government debt is apparently much higher than the official figure of $22 trillion. The indebtedness of the American financial system has now reached $72 trillion, according to the numbers compiled by the US Fed.

The higher debt estimate includes corporate borrowings, consumer loans along with debts being added by state and local governments."
"The current US population stands at 328,675,066 according to the World Population Review. Simple calculations show that an average American owes some $220,000, while the share of a family of four is fluctuating around $880,000.'
https://www.rt.com/business/457603-u...debt-per-head/

[Danny B]

Gold,,, the confidence battle,,, insolvency ratio

World Gold Council: central banks buy most gold since 1967
https://www.cnbc.com/2019/.../world-...most-gold-sinc...

Jan 31, 2019
World's Central Banks Want More Gold as India Joins Spree ...
https://www.bloomberg.com/.../2019.....oost-as-india-...

4 days ago - India's central bank is likely to join counterparts in Russia and China ... The RBI may purchase 1.5 million ounces in 2019, or about 46.7 tons, ...
The private Indian gold accumulation is supposed to be 20,000 TONS.
In any kind of a meltdown, nobody will know the value of a given currency. The CBs know very well that a crash is coming. They need enough gold to pay for food & fuel.
Gold buying is increasing indicating that confidence is leaving.
"his is an orchestrated and unprecedented move by bullion banks into physical gold, the buying of which is backwashing into the synthetic markets, which in turn is increasingly exposing just how large the naked short gold bubble is. The Gold short bubble is directly proportionate to the concurrent bursting of the artificially inflated asset price bubbles."
"Both bubbles can be directly blamed on the FED and the Western cabal of global central bankers printing cash to infinity, creating a “Buy The F*cking Dip” risk environment where the only fear asset managers have had is not being on board the risk train. The general rule is that if everyone gets it wrong, no one gets fired.
So regardless of the alarm bells going off, no one dares to leave the burning building, until it is too late."
https://kingworldnews.com/andrew-mag...d-gold-shorts/

ZH "There is only one way a government funds the excess of spending over tax revenue without it being inflationary, and that is to borrow money from savers. There is a downside to this. The government bids for existing savings, including those held in pension and insurance funds, diverting them from other borrowers. In the 1980s this was described as “crowding out” other borrowers and had the effect of increasing interest rates"
Well shoot, just fire up the MMT pixel machine.

t"he other two sources of finance for high-spending governments are simply inflationary. Bank credit is expanded to finance short-term treasury bills and treasury bonds. Before 2008, a combination of savings and bank credit expansion was used to cover government funding requirements. But since the great financial crisis, money-printing by central banks through quantitative easing has opened a new avenue for government funding.| Control-P
"Notionally, quantitative easing is promoted as a monetary policy to stimulate the economy by injecting large amounts of base money into a failing banking system and allowing banks to build their reserves. But the more important effect is it permits a government to spend even more beyond its tax revenues."

"My colleague, James Turk, calculates the US Government’s insolvency ratio (the interest cost as a percentage of government revenue) to be 17.2% for the first six months of fiscal 2019.[i] In other words, for every $100 raised in taxes, $17.20 goes to pay interest. On this measure, federal government finances are already in crisis."

" To appreciate the full ramifications, we need to understand what GDP represents. GDP is simply a total of recorded qualifying transactions in the economy during a stated period, normally annual or annualised. Growth in the GDP number is not a record of anything else other than monetary inflation applied to those qualifying transactions."

"As a fix, it may temporarily benefit government finances. But it is the worst thing a government can do, because through wealth-transfer it impoverishes and destroys the non-government economy upon which the government relies for its future tax revenue. "
MMT to the rescue.
"It is an increasingly serious problem. According to the Chapwood Index[ii], price inflation on the goods and services Americans typically buy has been running at close to 10% on average in 50 major cities over the last five years. Instead, financial analysts doggedly accept government CPI statistics, which claim price inflation has averaged only 1.52% over the same timescale."

"The timing of an economic awakening is likely to be linked to the credit cycle, when public support for reflationary actions evolves from complacency to sudden concern."
51% of Americans receive a check from GOV. They will be quite concerned if the checks stop.
"The most inflationary funding mechanism is for one government department (the treasury) to issue bonds to the public and the banks, and another government department (the central bank) to buy them off the public and the banks by issuing raw currency. So as to not raise inflationary suspicions, this overtly inflationary mechanism is called quantitative easing and it is set to return big-time.

So far, QE has covered only part of the US Government’s funding requirement since the Lehman crisis. The full breakdown is shown in the following table, which incorporates both long-term and short-term debt."
"It should be noted that foreigners bought an estimated $3,611bn of Treasury debt, significantly more than US banks, funds and other US private sector investors.[iv] By mid-2018, total foreign investments in US Treasuries amounted to $6,201bn, so their holdings have more than doubled since the Lehman crisis.
PURE BS"
"That being the case, at the same time that the US Government’s funding requirement starts increasing above forecasts, foreigners will be liquidating their Treasury holdings and selling dollars. Therefore, QE is set to become the principal funding mechanism for US Government debt."
Stop saying QE. It's MMT now.
"So long as lenders believe government finances are reasonably stable and state-issued statistics are credible, a central bank can depress borrowing costs through an expansionary monetary policy. This is the current position; but when it is no longer the case, a central bank faces an impossible task."
That is why the FED is attacking Europe, China and Japan. We want their money.
https://www.zerohedge.com/news/2019-...eres-no-escape

Production and imports of goods fell for the first 3 months.
AND
"According to the government, $32 billion of goods were added to inventories this quarter, "
https://www.marketwatch.com/story/th...rom-2019-04-26

He wants to get re-elected.
"This week saw all-time highs in the S&P500, the Nasdaq Composite, the Nasdaq100, and the Philadelphia Semiconductor Index. Microsoft's market capitalization reached $1 TN for the first time. First quarter GDP was reported at a stronger-than-expected 3.2% pace. "

China "They have no experience with a multi-trillion (US$) money-market complex – and minimal with derivatives. Beijing has zero experience with a banking system that has inflated to about $40 TN – financing a wildly imbalanced and structurally impaired economy (not to mention fraud and malfeasance of epic proportions)"
"Keeping the historic Chinese apartment Bubble levitated will require enormous ongoing cheap Credit. Keeping the incredibly bloated Chinese corporate sector afloat will require only more ongoing cheap Credit. Ditto for the frighteningly levered local government sector. And the acute and unrelenting pressure on the banking system to support myriad Bubbles with generous lending terms will require massive unending banking balance sheet expansion. Worse yet, at this late “terminal phase” of the cycle it becomes impossible to control the flow of finance. "
http://creditbubblebulletin.blogspot...cially-on.html

Police do a night raid and kick down the door because the family had a kid who was not vaccinated.
https://www.armstrongeconomics.com/i...se-of-a-fever/
BUT
Marking tires of parked cars is unconstitutional.
https://www.newsmax.com/newsfront/co.../25/id/913260/

4/27 Donald Trump shows a new level of contempt for Congress – NY Times

[Danny B]

So, who funds the State?

About 250 years ago, the sovereign States started borrowing large amounts of money from the private bankers. This process was formalized as the Sovereign bond market.
The Central Banks were first created to handle the finances of the State, primarily war finance. Various European States regularly defaulted on these bonds. Greece has spent 50% of their modern history in default. As we move forward in time, we see that, wars got more expensive and, the State needed even more money. All democracies eventually fail because the electorate discovers that they can vote for themselves the whole pie.
As more and more leaders bought votes with promises, State expenses went ever higher.
The burden of financing the welfare-warfare State was shifted to the private taxpayer.
Regulatory capture allowed corporations to avoid taxes for the most part.

This year, Americans had to work until April 15th (ironically) to pay the State's bills. These bills are just too expensive. Price inflation has gone way up but, wage inflation is lagging far behind. Wages and purchasing power have gone way down. This left very little extra money to save. The banks previously depended on savings to advance money for loans.
They were controlled by the FED requiring a reserve to be maintained to cover bank runs or bad loans. At one time, gold was the prime reserve. When banks were allowed to hold derivatives and each other's paper, there was no reserve requirement hat meant anything. Several years ago, the FED gave the banks about $2.6 trillion to hold as excess reserves. Then, they paid them interest on these reserves. The upper loop of the economy is running heavy on instruments and, LIGHT on liquidity / money. Apparently, the banks are running out of money.
https://www.zerohedge.com/news/2019-...-out-liquidity
A paper dollar is a bearer bond with zero maturity that, effectively, has no counterparty risk. Everything else besides precious metals is an instrument of varying fungibility. Nobody knows just what an instrument is worth if you try to trade it for cash.

Regulatory capture allowed the corporations to starve the State at the same time that State expenses have gone way up. The State hates the idea of having to work to get money from private investors. The solution; print up hundreds of $trillions so that the sovereign bond markets are destroyed.
Armstrong, "PROFOUND economic event which has never before in history ever taken place."
The State needs a money spigot that is not under the control of any private interest. It is in the State's best interests to break the current arrangement. You can bet that the State is going to look out for itself.
Jim Willie proposes that America have 2 separate dollars, A stable gold-convertible dollar for imports and, a domestic dollar that floats or sinks.
The nature of automation added to regulatory capture means that the current arrangement will come to an end.

The U.S. government has the pedal to the metal when it comes to borrowing. Ron paul wanted to audit the FED. Trump wants to annihilate it.
https://www.zerohedge.com/news/2019-...eres-no-escape

There is going to be a house cleaning.
4/27 Investors are falling into a false sense of security again – Daily Reckoning
4/28 Traders have never been this complacent about risk… ever – Zero Hedge
4/27 Investors are falling into a false sense of security again – Daily Reckoning
Corbyn has a PLAN. 4/28 Corbyn launches bid to declare a national climate emergency – Guardian

[Danny B]

Who dies, bonds or stocks?... or both?

"The bottom line is that there’s been a worldwide revolution in favor of private savings and the United States is falling behind.
A far better approach is personal retirement accounts. I’ve written favorably about the Australian system, the Chilean system, the Hong Kong system, the Swiss system, the Dutch system, the Swedish system. Heck, I even like the system in the Faroe Islands.
The bottom line is that there’s been a worldwide revolution in favor of private savings and the United States is falling behind."
Social Security Is Facing a $42.1 Trillion Shortfall, Trustees Report Says
https://www.rethinkingthedollar.com/...s-report-says/
NOPE, no can do. If retirement money was held in private accounts, it would NOT be available to the State to use for countless wars. Pox Americana faces a huge funding gap in the future. 51% of Americans receive a check from GOV. FED GOV will dump the FED and emit money from the Treasury. It's trying to smooth the transition by talking up MMT to give people the idea of State emitted money for their pensions.

Armstrong, "We are facing a very interesting financial crisis that has never before been witnessed because this is how the Socialist Utopian Society will crash and burn. We are beyond all economic theories for nobody from Keynes back to Adam Smith ever contemplated what would happen with the deadly theory of Quantitative Easing constructed upon the Quantity Theory of Money.
We are simply off the charts, as they say, in terms of markets and economics. We are entering one of the most challenging periods perhaps in the history of financial and economic forecasting"
The Geat unknown ---The Bond Contagion

OK, that is straightforward enough. Armstrong has long predicted a collapse of the sovereign bond market and, a rotation into private stock & bonds.
At the moment, that is NOT what is happening.
Here is a mind-numbing technical article that has a few good points.
"One need look no further than market action in 2019 where despite fresh record highs in the S&P - mostly the product of the Fed's sudden tightening bias reversal and subsequent easing by both the US central bank and its global peers - equity outflows have hit an unprecedented pace, with continued stock upside attributable almost exclusively to stock buybacks, forced short squeezes and delta and gamma-imbalanced dealer books, where the higher equities rise, the greater the "forced chase" by dealer to keep bidding stocks even higher. Meanwhile, both institutional and retail investors have continued to flee global equities as the chart below from EPFR"
https://zh-prod-1cc738ca-7d3b-4a72-b...?itok=s8gW4vis

Money is fleeing equities in favor of bonds. Does that mean that Armstrong is wrong OR, does it mean that bond investors are going to get slaughtered?
"And while prior to the 2008 crisis, the "prosperity of financial sector and low volatility show high degree of coordination",
The FED has been stamping out volatility to keep the banks profitable. Eventually, volatility always returns..
"consequence of the changes in the regulatory environment and redistribution of leverage away from the financial into corporate sector, "
Yes, the corporate bond market is leveraged way up. At the same time, 15% of companies are zombies supported by free money.

"first-quarter corporate earnings started coming in better than what economists expected. Except that barely “beating expectations” is kind of pathetic when expectations are dumbed down as far as they were.'
"What does it really say that the new gauge for earnings is whether or not they are better than horrible? (Forget about growth. Earnings were actually down an average of 3% YoY, meaning they may already be deep in recession.)"
US GDP Not All it was Cracked up to be - The Great Recession Blog
"Here is something to bear in mind: Regardless of what stock averages are doing, the major corporations that are likely to be harbingers of what is coming for the general economy are foreshadowing, as I reported in my last article, darker times ahead.

Exxon, which broadly reflects the critical central role energy plays throughout our economy, just pulled a 3M face plant. These are some major downbeats. Exxon reported a MASSIVE 50% drop in profit, and that fell far short of lowered expectations. (60% drop quarter on quarter.)"
Investors are aware of the crash in fracking. They are aware that buybacks and FED money are the only things holding up equities. They are fleeing.
"Although stabilizing, in the existing paradigm, this appears to stifle growth -- by preventing bad behavior, in the economy which is dependent on financialization, the system is deprived of one of the main engines of growth."
This "growth" has nothing to do with productivity.

"boost the credit impulse that could possibly stimulate investment and in turn lead to higher productivity growth."
"However, a problem emerges, as the demand-side has to be addressed at the same time. Indeed, the new technologies that would attract investment now destroy more jobs than they create as "the old paradigm does not seem to be capable of achieving these goals"
NO KIDDING
"To Kocic, this is also the most negatively convex sector which is sensitive to spread wideners in steepening sell off. In other words, a possible wholesale downgrade to BB or lower would result in disorderly unwind of positions of the IG money managers which would be capable of raising volatility significantly. From there it would promptly spread to the rest of the market, and global economy, and lead to the next financial crisis. What happens to vol then should be clear to anyone."
The whole article is about creating volatility to return to profitability for speculators.
BUT, it glosses over the true effect of a wholesale downgrade of bbb to bb
" disorderly unwind of positions"
The junk bond market is something like 42% of the total.

"That said, to Kocic the worst case scenario, as note above, is a bear-steepener, which "is seen as tail risk that would cause the most violent repricing in credit." Which incidentally is precisely what we said one month ago, if with far fewer words in"
https://www.zerohedge.com/news/2019-...ng-after-kills
"violent repricing in credit"
Translation; a popping of the credit bubble.