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Domestic & international monetary war
The myth of the perpetually growing economy is giving way to the reality that we are nearing the end of the credit cycle. Even Alphabet had a big earnings miss. Much of the fortunes of the upper loop are tied to the earnings of the lower loop. The lower loop, in both numbers and earnings, is shrinking away. So, what solutions are offered from the upper loop?
Chamber of Commerce Demands More Immigration: ‘U.S. Is Out of People’
Bring in several million new welfare cases will just shift the financial burden to the State. And, the State is already broke.
Q for Armstrong, "QUESTION: Martin, if Europe and Japan have destroyed their bond markets, would it be a good idea for them to get the government out of the bond market and have short term rates be floating in the free market?
"Get the government out of the bond market?" That's like saying, get the Pope out of religion.
Answer, "ANSWER: What will happen is that there is already unfolding a bifurcation in interest rates with a widening spread between real rates (Private Sector) and government. If they allow government rates to float, that means they must abandon QE."
This is denial writ large. In the last several years, the CBs pumped out / in $247 trillion. GOV has no intention of going back to the old days when it had to entice bond buyers.
"Neither the BoJ nor the ECB is ready to admit total failure. This means that the entire Keynesian-Monetarist tools have failed and they have no economic theory upon which to manage the economy. That means the government cannot control the economy and therein lies the denial of power."
I wouldn't jump to this conclusion too quickly. Regulatory capture will go into reverse when the State is desperate to survive.
India hasn't really lowered their fertility rate and, problems are developing.
"In India, the Indian Railways posted 90,000 job vacancies. 28 million candidates applied, "
The Indian GOV is trying to squeeze out every rupee that ic can find.
https://www.armstrongeconomics.com/i...may-23rd-2019/
Smith writes about the wind-down of the credit cycle.
"Both new households and new businesses are in secular decline. Goosing the stock market and GDP doesn't change this reality.
Better guides to expansion than GDP are sales volumes, prices, profits, wage increases and sustained rises in new enterprises and households. All of these measures of expansion are stagnant, indicating that monetary and fiscal stimulus are no longer moving the needle.
New households and enterprises drive expansion. New households buy homes, furniture, home improvements, appliances and so on, while new businesses buy equipment, hire workers and sign on professional services such as accounting, insurance, etc.
Young people loaded down with student loans don't do any of the above.
Rising prices are also classic late-cycle signs. To make a buck, everyone has to raise prices and cut what they can, and rising prices impacts sales.
The first doubts triggered the decline from October to December, and the sharp rebound this year once the Federal Reserve signaled "we'll do whatever it takes" is very typical of the late-cycle topping process: price sags as doubts emerge about the ageing expansion,"
https://www.oftwominds.com/blogapr19/end-cycle4-19.html
Globalized capital flows were necessary for globalization. Co-ordination by various CBs was also necessary and, co-ordinated by the BIS. We made war on any State that was not a member of the BIS because we didn't want any holdout upsetting the global apple cart. It was also necessary to make a war on gold by creating the paper-gold market.
This globally synchronized inflation / regulation created a worldwide credit bubble that was supposed to be universal and, self-sustaining.
As we see in the EU, Greece is not the same as Germany. The same is true for many States. Globalization only benefited 6 States. How can the world reconcile vast differences in productivity with a one-size-fits-all monetary system?
It turns out that you can't. But, since everything is connected and synchronized, The meltdown of the weakest economies injects contagion into the stronger economies.
https://www.alhambrapartners.com/201...-synchronized/
"Let’s not forget how easy it is to get a big GDP print when you’re running the biggest deficits in history.
So what’s the real story. Well, as always, it’s the dollar, stupid, as I said yesterday over at Money & Markets. The dollar synthetic short thanks to that decade of cheap access to them has created a monster not only in emerging markets per normal, but also in developed markets as well."
"The problem now is that both the pound and euro have broken down out of their ranges and are threatening free fall. "
MAGA baby!
"This wasn’t supposed to happen
with the European Union winning the Battle of Brexit by keeping the U.K. locked into its death spiral like a peregrine falcon hanging onto a wolverine and getting torn to shreds."
"A decade of zero-bound and/or negative-bound interest rates have so thoroughly screwed up the market for dollars globally that any small shift in perceived dollar liquidity results in massive volatility."
About that dollar liquidity.
"Dollar liquidity is falling rapidly as bank reserves are increasingly becoming more illiquid; needed to cover collateral liabilities."
WAIT, the Chinese need dollars to service dollar-denominated debt.
"And to make matters worse currency in circulation has expanded 50% in the past seven years, in case you’re wondering where all the stagflation is coming from."
Banks don't hold currency.
"The banks wouldn’t be hitting the reverse repo window or holding huge balances with the Treasury dept. if there wasn’t trouble"
The banks are in trouble.
"In the two weeks prior to earnings the banks would go to the Fed and park a few hundred billion to dress up their balance sheets to report earnings and then drain it out. "
"the offshore dollar liquidity system, spasmed last May and hasn’t recovered."
"Even China has a dollar problem now, apparently. "
"Most importantly this trend is starting to go parabolic and coincides with this week’s breakout of the USDX and the breakdown of the euro and British pound to new lows."
All those dollar-denominated loans need to be serviced and, there is great demand. This raises the dollar and makes it increasingly difficult to find them. The longer we hold off QE (or hide it), the more that the dollar crashes other currencies.
"Trump and his torturer-in-chief John Bolton are only adding fuel to this fire with their insane foreign policy. Weaponizing the use of the dollar which forms the backbone of your empire will eventually cause that dollar to spike, as it is right now."
"Trump, Bolton and Mnuchin feel now is the time to tighten pressure until ‘the pips squeak,’ as Bolton recently put it. But don’t worry, it won’t be his fault when a spiking U.S. dollar boomerangs back on an over-leveraged U.S. economy in ways they can’t conceive of."
https://www.zerohedge.com/news/2019-...-tide-went-out
That "boomerang" is going to wipe out Europe before it returns here.
The myth of the perpetually growing economy is giving way to the reality that we are nearing the end of the credit cycle. Even Alphabet had a big earnings miss. Much of the fortunes of the upper loop are tied to the earnings of the lower loop. The lower loop, in both numbers and earnings, is shrinking away. So, what solutions are offered from the upper loop?
Chamber of Commerce Demands More Immigration: ‘U.S. Is Out of People’
Bring in several million new welfare cases will just shift the financial burden to the State. And, the State is already broke.
Q for Armstrong, "QUESTION: Martin, if Europe and Japan have destroyed their bond markets, would it be a good idea for them to get the government out of the bond market and have short term rates be floating in the free market?
"Get the government out of the bond market?" That's like saying, get the Pope out of religion.
Answer, "ANSWER: What will happen is that there is already unfolding a bifurcation in interest rates with a widening spread between real rates (Private Sector) and government. If they allow government rates to float, that means they must abandon QE."
This is denial writ large. In the last several years, the CBs pumped out / in $247 trillion. GOV has no intention of going back to the old days when it had to entice bond buyers.
"Neither the BoJ nor the ECB is ready to admit total failure. This means that the entire Keynesian-Monetarist tools have failed and they have no economic theory upon which to manage the economy. That means the government cannot control the economy and therein lies the denial of power."
I wouldn't jump to this conclusion too quickly. Regulatory capture will go into reverse when the State is desperate to survive.
India hasn't really lowered their fertility rate and, problems are developing.
"In India, the Indian Railways posted 90,000 job vacancies. 28 million candidates applied, "
The Indian GOV is trying to squeeze out every rupee that ic can find.
https://www.armstrongeconomics.com/i...may-23rd-2019/
Smith writes about the wind-down of the credit cycle.
"Both new households and new businesses are in secular decline. Goosing the stock market and GDP doesn't change this reality.
Better guides to expansion than GDP are sales volumes, prices, profits, wage increases and sustained rises in new enterprises and households. All of these measures of expansion are stagnant, indicating that monetary and fiscal stimulus are no longer moving the needle.
New households and enterprises drive expansion. New households buy homes, furniture, home improvements, appliances and so on, while new businesses buy equipment, hire workers and sign on professional services such as accounting, insurance, etc.
Young people loaded down with student loans don't do any of the above.
Rising prices are also classic late-cycle signs. To make a buck, everyone has to raise prices and cut what they can, and rising prices impacts sales.
The first doubts triggered the decline from October to December, and the sharp rebound this year once the Federal Reserve signaled "we'll do whatever it takes" is very typical of the late-cycle topping process: price sags as doubts emerge about the ageing expansion,"
https://www.oftwominds.com/blogapr19/end-cycle4-19.html
Globalized capital flows were necessary for globalization. Co-ordination by various CBs was also necessary and, co-ordinated by the BIS. We made war on any State that was not a member of the BIS because we didn't want any holdout upsetting the global apple cart. It was also necessary to make a war on gold by creating the paper-gold market.
This globally synchronized inflation / regulation created a worldwide credit bubble that was supposed to be universal and, self-sustaining.
As we see in the EU, Greece is not the same as Germany. The same is true for many States. Globalization only benefited 6 States. How can the world reconcile vast differences in productivity with a one-size-fits-all monetary system?
It turns out that you can't. But, since everything is connected and synchronized, The meltdown of the weakest economies injects contagion into the stronger economies.
https://www.alhambrapartners.com/201...-synchronized/
"Let’s not forget how easy it is to get a big GDP print when you’re running the biggest deficits in history.
So what’s the real story. Well, as always, it’s the dollar, stupid, as I said yesterday over at Money & Markets. The dollar synthetic short thanks to that decade of cheap access to them has created a monster not only in emerging markets per normal, but also in developed markets as well."
"The problem now is that both the pound and euro have broken down out of their ranges and are threatening free fall. "
MAGA baby!
"This wasn’t supposed to happen
with the European Union winning the Battle of Brexit by keeping the U.K. locked into its death spiral like a peregrine falcon hanging onto a wolverine and getting torn to shreds.""A decade of zero-bound and/or negative-bound interest rates have so thoroughly screwed up the market for dollars globally that any small shift in perceived dollar liquidity results in massive volatility."
About that dollar liquidity.
"Dollar liquidity is falling rapidly as bank reserves are increasingly becoming more illiquid; needed to cover collateral liabilities."
WAIT, the Chinese need dollars to service dollar-denominated debt.
"And to make matters worse currency in circulation has expanded 50% in the past seven years, in case you’re wondering where all the stagflation is coming from."
Banks don't hold currency.
"The banks wouldn’t be hitting the reverse repo window or holding huge balances with the Treasury dept. if there wasn’t trouble"
The banks are in trouble."In the two weeks prior to earnings the banks would go to the Fed and park a few hundred billion to dress up their balance sheets to report earnings and then drain it out. "
"the offshore dollar liquidity system, spasmed last May and hasn’t recovered."
"Even China has a dollar problem now, apparently. "
"Most importantly this trend is starting to go parabolic and coincides with this week’s breakout of the USDX and the breakdown of the euro and British pound to new lows."
All those dollar-denominated loans need to be serviced and, there is great demand. This raises the dollar and makes it increasingly difficult to find them. The longer we hold off QE (or hide it), the more that the dollar crashes other currencies.
"Trump and his torturer-in-chief John Bolton are only adding fuel to this fire with their insane foreign policy. Weaponizing the use of the dollar which forms the backbone of your empire will eventually cause that dollar to spike, as it is right now."
"Trump, Bolton and Mnuchin feel now is the time to tighten pressure until ‘the pips squeak,’ as Bolton recently put it. But don’t worry, it won’t be his fault when a spiking U.S. dollar boomerangs back on an over-leveraged U.S. economy in ways they can’t conceive of."
https://www.zerohedge.com/news/2019-...-tide-went-out
That "boomerang" is going to wipe out Europe before it returns here.
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