Economic pressures

[Danny B]

gold again

Great Britain's exports of gold have gone up 10 fold... As much as 240 tons a month. Richard Nixon was impeached just because he stiffed the London Bankers for their gold in 1971 so, you can assume that the bankers hold on tightly to gold. Just why in hell is GB exporting so much gold? WHAT ARE THEY BUYING?
Here is a gold-to-oil chart. http://www.macro-investing-strategy....old-prices.jpg
Gold and oil track very nicely. EVERYONE knows that the price of gold has been driven down. The bullion banks and the miners have been flogged to keep prices low. The latest scheme in China has exposed commodity traders as being short by many billions of $$$$$ in actual physical (mostly) metals. This includes gold. My Blog
There is a chance that this will crash the bullion banks and they will default on deliveries that have been paid for but, don't actually exist.
(Formerly) Great Britain isn't alone at importing oil and exporting gold. America too, has been importing oil. Paul Craig Roberts says that we have been exporting gold.... EVERYBODY'S gold.
My Blog

The CME group that owns the COMEX stated that they sell every ounce of gold to 100 people. Should there be some kind of default, there are going to be 100 people looking to take possession OR sell. Jim Willie said that the COMEX hasn't delivered any gold in the last year. They settle everybody out in cash. As long as the price of gold doesn't spike, I expect that they are happy enough.
Any default by a bullion bank would cause quite a spike. The West can NOT afford to run out of gold and allow a spike. BUT, by suppressing the price of gold, they have caused a lot of mines to shut down and diminished the new supply.
It has long been stated that gold and oil flow in opposite directions. Why is GB sending out gold if it can print all the Sterling that it wants. I suspect that oil exporters don't want any more Sterling.
I suspect that the same is true for dollars.
Since gold and oil flow in opposite directions, one could imagine a halt in flow occurring almost simultaneously. Even the Amish would be in for hard times.

[Danny B]

When trickle down doesn't work, look out for pitchforks

Way back when, Henry Ford paid his workers an astonishing wage of $ 5 a day. He figured that, if they had money, they would buy his cars.
Nick Hanauer is pushing the same idea. He is part of the 1% or the .1%,, not sure. He says that the wealth inequality is hurting the business and profits of the rich. He is not at all subtle. He sees US coming for THEM with pitchforks.
The Pitchforks Are Coming… For Us Plutocrats - Nick Hanauer - POLITICO Magazine
Richard Steele did an interview for the Daily Bell where he spells out his proposals. The Daily Bell - Former CIA Spy Robert Steele Wants to Strangle Leviathan With 'Open Source' Governance
May you live in interesting times.

[Danny B]

Germeny, gold, paper money and debt

Antal Fekete is probably the most astute person alive when it comes to understanding markets and economics. He has an excellent recent article.
"According to the American master plan Germany is the last fort of the crumbling global fiat money system. Germany will not defect: that is the purpose of keeping American troops on German soil."
"Yet unknown to the general public a very great danger is looming, the like of which has not threatened the world since the collapse of the Western half of the Roman Empire more than fifteen hundred years ago. This danger, should it materialize, would mark the end of our civilization and the beginning of a new Dark Age. I am talking about a threat of the sudden and complete collapse of world trade."
AMERICAN BASES IN GERMANY AND THE GOLD BASIS | Lars Schall

lars Schall, "This is different. In the globalized, synchronized, meshed world of paper money today, every single paper money in the world is interlinked, and I am absolutely convinced, mathematically certain, that when one goes, they’ll all go. Absolutely. And this brings us to the situation where when every single paper currencies collapses at the same time, not only has the money collapsed but surely the validity of the issuing authority has collapsed, too. And I believe for the first time in recorded history, this collapse will see the credibility of governments as organizers of the money supply brought very much into question."
The gold standard is absolutely inevitable | Lars Schall
Through regulatory capture, the banks control GOV. That brought us enormous debt. "Rather, the fact that we are nearly 60 trillion dollars in debt as a society is what really matters.

The same thing applies for the globe as a whole. Right now, the citizens of the planet are more than 223 trillion dollars in debt, and "too big to fail" banks around the world have at least 700 trillion dollars of exposure to derivatives."
18 Signs That The Global Economic Crisis Is Accelerating As We Enter The Last Half Of 2014

Japan is the road map. They rescued the banks but killed the economy. What is next? Greece is being forced to sell 100 of it's best beaches to pay the banksters. You can expect the bankers to demand valuable infrastructure as their rightful payoff.
Devvy Kidd has been writing for years to try to wake people up. She covers a LOT of ground. Is America On The Edge Of A Depression? Get Prepared Now

[Danny B]

Hegel and communitarianism

The philosopher, Hegel influenced many people for many years. Hegel, " ("the State is the divine Idea, as it exists on earth") He felt that the State was all important and should come ahead of everything else. "Communitarianism is a collectivist philosophy that explicitly rejects individualism." The New Feudalists - EU Communitarian Agenda
All these various world-improvers ignore human nature; We don't work without motivation. Our families come first. This is part of our survival instinct.
Their credo, "from each, as to his abilities, to each, as to his needs.
The State has promoted itself as the ultimate "security blanket". Human nature is such that; if we are promised security from an outside party, we ignore personal responsibility. The result;
"Shock Report: 70 Million People Would Be Starving in the Streets Without Government Welfare Programs"
Activist Post: Shock Report: 70 Million People Would Be Starving in the Streets Without Government Welfare Programs
The State is getting a bit nervous about all this.
https://www.facebook.com/photo.php?v=467368290053268

[Danny B]

Deflation and default

The Bank of International Settlements is not a national bank. They have no particular State affiliation. They recently released a report on the world economy. They were particularly critical of the FED.

23. "In all but a handful of countries, bringing debt service ratios back to historical norms would require substantial reductions in credit-to-GDP ratios. Even at the current unusually low interest rates, credit-to-GDP ratios would have to be roughly 15 percentage points lower on average for debt service ratios to be at their historical norms. And if lending rates were to rise by 250 basis points, in line with the 2004 tightening episode, the necessary reductions in credit-to-GDP ratios would swell to over 25 percentage points on average. In China, credit-to-GDP ratios would have to fall by more than 60 percentage points. Even the United Kingdom and the United States would need to reduce credit-to-GDP ratios by around 20 percentage points"

so, how do we arrive at a better credit-to-GDP number? Either credit goes down or GDP goes up.

25. The alternative to growing out of debt is to reduce the outstanding stock of debt. This happens when the amortisation rate exceeds the take-up of new loans. This is a natural and important channel of adjustment, but may not be enough. In some cases, unsustainable debt burdens have to be tackled directly, through writedowns."
"The conclusion is simple: low interest rates do not solve the problem of high debt"
"Government debt-to-GDP ratios have risen further; in several cases, they appear to be on an unsustainable path."
"Output and financial variables can move in different directions for long periods of time, but the link tends to re-establish itself with a vengeance when financial booms turn into busts."

"Unless it is recognized, limited effectiveness implies a fruitless effort to apply the same measures more persistently or forcefully. The consequence is not only inadequate progress but also amplification of unintended side effects."
Mish's Global Economic Trend Analysis: BIS Slams the Fed; Ridiculous Question of the Day: "Is The Fed Going To Attempt A Controlled Collapse?"


Mish does a pretty good analysis. The takeaway is pretty clear; amplification of unintended side effects AND re-establish itself with a vengeance. The BIS is pushing for writedowns BEFORE defaults are a huge problem. Banks don't have near enough capital to survive writedowns or defaults. Bail-ins would help. Leave aside the huge problem of the various flavors of derivatives. The longer the banks avoid writedowns, the more fragile the system.

Lenzner says that you will NOT see the crash coming; Why You Will Be Blindsided By The Next Financial Crisis - Forbes
This site has a lot of interesting statistics; The Greatest Financial Crisis the World Has Ever Seen is Coming | Humans Are Free
They seem to think that we will get hit in April, 2015
Bris seems to think that we will get hit as soon as April 2015; IMD Prof Bris: Next Financial Crisis Will Be in April
Bris gives several reasons; "In the US there are only three companies left with an AAA rating: ExxonMobil, Microsoft and Johnson & Johnson. If ratings are an indicator of bankruptcy, there will be bankruptcies across the board. If interest rates increased by 2%, half of the corporate sector would be wiped out."
Finance Expert Sounds Alarm on 8 Ways a New Global Crisis Will Hit by 2015

"From 1950 to 1980, the world’s largest economy soared by 191% in inflation-adjusted terms, while the combination of household, corporate (including financial) and government debt increased by a mere 12%”

“In the following three decades, from 1980 to 2010, the U.S. GDP grew a more moderate 124%, yet total debt rose by an almost identical 125%”.

Did GDP increase or did the DEBT GROWTH create the illusion of GDP growth?"
http://tedbits.com/bombs-er-bonds-de...-our-doorstep/

So, the BIS demands that we reduce credit by at least 20%. Our growth has all been dependent on printing. I'll save the bad news for the next post

[Danny B]

Falling oil production

The oil majors are not allowed to export crude oil. They are allowed to export refined products. We pay $ 4 a gallon. European prices are much higher.
Fuel-prices-europe.info - Current Fuel Prices in Europe Italy pays about 8 bucks a gallon.
We have reached and passed cheap peak oil in the lower 48. GOV takes in more money on a gallon of gas than the oil companies do. The oil companies are losing money and are selling their exploration units. They claim that they need an additional $ 2 trillion for exploration and development ,,, per year. They also say that tight oil will decline in about 6 years.
IEA Says the Party’s Over | Oil Price | FINANCIAL SENSE
Doesn't sound good.

[Danny B]

central banks without a clue

It's been known for a long time that zero interest rates cause investors to throw money at anything. Junk bonds usually command 22-35% interest. Today, the only pay 5%. When money is free, everybody piles into anything that promises some kind of return. All this hot money drives down interest rates. The monetary nitwits claimed that they could get rid of any down days in the business cycle. They caused a lot of mal-investment that had to crash eventually. When free money removes all risk, it's not called investing. It's gambling.
"This corrosive game has been underway ever since the Greenspan Fed panicked on Black Monday in October 1987 and flooded the stock market with liquidity."
Once the free money spigot was turned on, it couldn't be turned off. The mal-investments didn't magically become good investments. Since all risk was off, you could invest in anything that moved. This compounded the mal-investment. The Implosion Is Near: Signs Of The Bubble’s Last Days | David Stockman's Contra Corner

After a certain point, there is no point in staying in the stock market. The institutional investors have fled the scene. They say that there are no more earnings to be made this year. The Wall Street Journal says that trading floors are eerily empty. Unfortunately, as institutional investors flee, private investors are flooding in.
The FED is reducing asset purchases and there is much less money flowing from the spigot. After QE1 was ended, the markets dropped badly. So, it became obvious that they needed QE2. When that ended,,, same story.
"S&P500 fell by -16% after QE1 stopped and by -17% after the end of QE2"
QE3 was launched. QE3 will be one for the history books. It is much more bubbly than the last 2 crashes; http://blogs-images.forbes.com/jesse...ince-19951.gif
There is general agreement that stocks are 40--50% overvalued.
These 23 Charts Prove That Stocks Are Heading For A Devastating Crash - Forbes

The FED is absolutely clueless; The Terrifying Reality of the Fed’s Decision Making Process | Zero Hedge
The ECB is desperate also, "The insanity doesn’t just continue, it intensifies. The overriding idea is still that the more companies and individuals borrow, the better the economy goes."
"The ECB is blind or borderline criminal. Blind, because lending is not the key weakness, spending is."
"The reason the ECB and the Fed are involved in these highly dubious actions, and have been from 7 years running now, can only be this: they know – or at least strongly fear – that the debts in the banks are so enormous they could make the entire economic system wobble if not crumble"
The Economy Is Deteriorating Fast - The Automatic Earth

[Danny B]

Bad debt and bad credit

Forbes;
"When we look at national debt as a percent
of GDP, we see few signs of danger by this rule. Debt-champion Japan is
over 180 percent, Greece is just under 150 percent, with Italy in third
place at 109 percent. The U.S. is in eleventh place (out of 34) with
debt equal to 61 percent of GDP."

"A better comparison is to examine each
country’s debt to government tax revenue, since that is the government’s
income. This also offers a better comparison because different
countries have very different levels of taxation. A country with high
taxes can afford more debt than a low tax country. Debt to GDP ignores
this difference. Comparing debt to tax revenue reveals a much truer
picture of the burden of each country’s debt on its government’s
finances.
When I compute those figures, Japan is
still #1, with a debt as a percentageof tax revenue of about 900
percent and Greece is still in second place at about 475 percent. The
big change is the U.S. jumps up to third place, with a debt to income
measure of 408 percent."

Forget Debt As A Percent Of GDP, It's Really Much Worse - Forbes

"This does not factor the several trillion
dollars owed to Social Security, yet it includes the Social Security
taxes collected. If Social Security taxes are not counted, the U.S.’s
debt to income ratio rises to 688 percent (still in third place)."

It can be argued that the U.S. can print all the dollars that it needs to meet obligations. I posted a dissertation showing that the BIS is disgusted with the actions of the FED. The BIS wants the FED to reduce the credit supply by at least 20%. The BIS is pushing and the FED GOV is pulling. The FED said that asset purchases will end in October.

Rickards; "The end of QE1 in June 2010 was, in effect, a 100% taper. The end of QE2
in June 2011 was also a 100% taper. So, the famous taper of December
2013 was actually the third time the Fed had tried to withdraw from
money printing. The first two times were failures as evidenced by the
fact that the Fed had to launch new money printing programs after each
withdrawal. By early 2014, it appeared that the taper of QE3 would also
be a failure."

It remains to be seen if the FED can stop QE AND hold down interest rates.

"In the US there are only three companies left with an AAA rating:
ExxonMobil, Microsoft and Johnson & Johnson. If ratings are an
indicator of bankruptcy, there will be bankruptcies across the board. If
interest rates increased by 2%, half of the corporate sector would be
wiped out."wiped out."
Finance Expert Sounds Alarm on 8 Ways a New Global Crisis Will Hit by 2015

In our current picture, there is a mad scramble for yield. With a view to history, I don't see any way that interest rates can be held down for much longer. Interest-rate-normalization will blow derivatives all to hell. It will also cause a mad stampede OUT of any currently held low-rate instruments. Like 2007-08, the money market funds will be the first to experience a run.

Forbes says that you won't see it coming.
Why You Will Be Blindsided By The Next Financial Crisis - Forbes

Devvy Kidd has a lot of interesting info.
Is America On The Edge Of A Depression? Get Prepared Now
Ron Paul says that the FED believes that it can control the collapse. NOT possible.

[Danny B]

Investment crash

Here is a chart on labor productivity, http://www.zerohedge.com/sites/defau...40716_prod.jpg
Not to worry, Goldman said;
"There are good reasons to expect further improvement in productivity growth over the next few years. In particular, stronger business investment is likely to boost the growth rate of the capital stock"

Here is a chart from IBM for debt-to-equity; http://www.zerohedge.com/sites/defau...ity%20debt.jpg
"Net Debt of IBM has risen by a ludicrous 55% in the past year to a record $36.8 billion"
Is This The Scariest Chart In IBM's History? | Zero Hedge
This "strong business investment" is not going to happen. There are $ trillions sitting on the sidelines. Consumption has crashed and , after a lag, investment and productivity has crashed. Q1 Productivity Collapsed Most In Over 60 Years; Goldman Fears Consequences | Zero Hedge

[Danny B]

Russian sanctions

The mental midgets in the district of corruption are placing more sanctions on Russia. Paul Craig Roberts; "The unilateral US sanctions announced by Obama on July 16 blocking Russian weapons and energy companies access to US bank loans demonstrate Washington's impotence. The rest of the world, including America's two largest business organizations, turned their backs on Obama. The US Chamber of Commerce and the National Association of Manufacturers placed ads in the New York Times, Wall Street Journal and Washington Post protesting US sanctions." Also, the Europeans have told DC to shove it.
The truth is that the sanctioned companies have plenty of cash on hand,,, even without all their ongoing business.

[Danny B]

crash the world

As the dollar became the reserve currency, it moved into every corner of the world. When the 2008 meltdown came it was because of a cascade of bad debt in the sub-prime housing market. The FED printed $ 700 billion or so for the domestic markets. Later testimony revealed that it had created close to $ 27 trillion. These dollars went to every corner of the earth that had a liquidity problem. “Almost 90% of the $5.3 trillion a day in foreign-exchange transactions last year involved the dollar, BIS data show. More than 80% of trade finance was done in dollars in 2013 … “
That's 5.3 trillion in daily exchanges. Also, there is about $ 10 trillion in finance. EVERYBODY used these dollars to rescue debt that was in danger of defaulting.
The FED left the liquidity taps open long enough for everybody to get used to the unending stream.
Everybody and their dog knew/knows that the FED will not stop the flow of liquidity. The FED is now cutting way back on liquidity. Since American markets were stagnant with ZIRP, much of that hot money flowed to emerging markets. The emerging markets have tons of debt denominated in dollars. The FED is cutting back the supply.
" This is not a margin call, it’s a margin scream. The demand for the US dollar will rise precipitously, at precisely the time that there’ll be far fewer of them available. This means mayhem in many developing nations, and it means the USD is set to surge. Ambrose Evans-Pritchard is dead on in that respect:"
The Rise Of The Super Dollar - The Automatic Earth

The world got complacent and denominated all that debt in dollars. Most nations of the world have signed on to an anti-dollar alliance. Now,(soon) dollars are in short supply. They may tell us to shove it. We will respond by sending HAARP and lots of diseases to mess with them. Wait a minute,,, we're already doing that.

[Danny B]

Russian sanctions

Here are a few headlines that are funny,,, in that they show how desperate things are.
$200 per barrel oil if Russia sanctions escalate- Oxford Economics
http://rt.com/business/174908-sancti...obal-meltdown/
EU to weigh far-reaching sanctions on Russia
EU to weigh far-reaching sanctions on Russia
Yep, the EU is going to weigh sanctions. They will conclude that self-immolation is not a good thing.
Eurozone economy dead in the water, with crisis expected to carry on 'a long time' Eurozone economy dead in the water, with crisis expected to carry on 'a long time' – Telegraph Blogs
Just imagine what $ 200 a bbl oil would do to an economy that is already dead in the water.
U.K. bank debt is $ 500 % of GDP. The B.O.E is pushing for bail-ins to save them. Sounds messy to me.

[Danny B]

2005 bankruptcy reform law

The 2005 Bankruptcy Reform Law.... If John Doe declared bankruptcy, he could no longer exercise a Chapter 7 BK. No more was permitted the lineup of all assets, placed against all debts, with a cleansing operation and single sweep. Ch-7 used to allow for the debtor to walk away with no more debts, the creditors dealt with fairly, using whatever assets existed. Imagine the debts being 5 times larger than the assets, which would mean the creditors would receive 20 cents per dollar in debt held. Clean, nice, done! It was eliminated, in favor of Chapter 13 BK. It instead stipulated a restructure of debts, often with reductions on amounts owed, along with a revised timetable for repayment, seemingly forever in many cases. Imagine a rework of a car loan or home mortgage, when more time is given, interest rate possibly reduced, with end result being more years to pay off but more manageable"

OK, that sounds pretty simple. You can't walk away from debt now. You will pay for the rest of your natural life.
No problem, you have savings in the bank to pay for your future debts.

"The far more onerous and deceptive side of the Reformed BK Law is seen in provisions for the financial institutions. The failure of big banks or other large financial institutions would never again be a simple failure, with liquidation, with trustee management, with a hierarchy of losers. The entire hierarchy was quietly altered, but with almost zero publicity. It took many alert analysts a few years to discover the fine points of the revised law. The new law dictated the derivatives would be first in seniority for satisfaction during any bankruptcy proceeding. The truly sadistic element of the new law was the accounting classifications, whereby depositors are called "unsecured lenders" to the bank, while derivative owners are called "secured lenders" to the bank. Hence, the depositors like with CD or passbook savings accounts no longer own their accounts."
Derivatives: Abuse, Props, Risks | Gold Eagle

Speaking hypothetically, the banks will steal all the money. They will not give it out. It will go to the holders of the derivatives. The money will be locked away and it's absence from the economy will bring even more deflation. No money circulating, prices for necessities will rise. Supply and demand.
Prices for real estate will fall until the banks feel good and ready to buy up everything with the money that they had locked away.
The Northern Command and Homeland Security will be the enforcers for the bankers. BLM and the EPA will prevent you from living off the land.

Jefferson; "If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered."

[wayne.ct]

Who will end up holding the short straw?

For every paper FRN (Fed Reserve Note) there are approx. 150 electronic "dollars" spread around the world economy. I heard from one person with questionable reliability that all paper money was going to be recalled and "overnight" the underground economy would be suppressed. In other words, it would be illegal to carry or spend cash. Who benefits is this should happen? Well, it is hard to say the average person "on the street" would benefit. Therefore, logically, the agencies that control the flow of electronic cash would seem to benefit. The most cash I can get from an automated teller is (let's pick a number) $500. Since this is a computer enforced limit it would be a trivial computer program enhancement to say "nobody is allowed to spend more than $500" per day on anything or more than $5000 per month on anything, blah blah blah. I suppose you get the idea. Good luck if you had plans to spend some of your money. Only insiders and connected "powers" are permitted into the club.

[Danny B]

2 currencies

Wayne, Jim Willie has written about the introduction of a "sheiss" dollar. It would be circulated internally. A new gold backed dollar would be required from our trading partners. Cuba has 2 currencies circulating at the same time. Adrian Salbuchi is a very astute Argentine economist who predicts that America will have 2 currencies. Adrian Salbuchi
The question gets down to; how much does the world need our stuff? We export lots of stuff,,, besides war. I suspect that the world could survive without us. America produces 136% of it's food supply. Canada, 144%
Food is the ultimate leverage. Ukraine did not plant this season. WE destroyed the Man-Made River project in Lybia. We HAARPed California to reduce the food supply. Imagine a high pressure zone off the coast that lasted for TEN MONTHS.

By some strange coincidence, we have virulent viruses in fowl and swine. Mad cow is slow at the moment. Then, there is UG99, a wheat disease. Terminator seeds will do what they are intended to do. Their genes are unstable and crashing.
Back on topic. "The Federal Reserve says that at any given time, between one-half and two-thirds of the M0 money stock of U.S. dollars is held overseas [source: Federal Reserve]."
If we were to do some kind of overnight changeover, there would be a lot of unhappy people. This doesn't include other types of GOV debt notes.
EVERY country has devalued their currency over time. This time is somewhat different. If you look at Wiemar Germany or Zimbabwe, they printed up tons of NOTES. I believe that only .4% of the U.S. money supply is in the form of paper. Paper in your pocket can not be stolen. Digits in your account can vanish at any time.