Economic pressures

[Danny B]

Slipping even faster

Some of the writers are creating good imagery;
"Imagine your doctor put you on a daily dose of oxycontin, phenobarbital and Quaaludes for six years straight. Then he suddenly cancelled your prescription.
Do you think your behavior might become a bit erratic?
This is what’s going on with the stock market."
Markets Gone Mad
"1 out of 25 states are ready to collapse within months, as are 1 out of 20 US cities, 1 out of 15 US government authorities and 1 out of 7 US corporations."
Waiting for Collapse: USA Debt Bombs Bursting
Kris Kristopherson did a movie, "Rollover" about an economic collapse. The trigger was when the oil exporters withdrew their money from the bond markets.

https://www.youtube.com/watch?v=fIlECk1Nv9Y

Saudi Arabia is doing just that. Saudi Arabia withdraws overseas funds

[Danny B]

Glencore,,, stock valuations

American wages crashed when we crashed into a low-wage competitor in manufacturing. The financial sector tried to stay insulated and isolated from the crash in wages. Wages are back to where they were about 40 years ago,, depending on the sector.
Commodities have now crashed and the financial sector is trying to stay insulated and isolated from the commodity crash. GOV / banking has inflated a huge blimp to hold up valuations in the stock market. BUT, there are a lot of derivative bets on commodities. Glencore is one company with huge bets.
"After its biggest daily crash in history on concerns Glencore's equity is worthless unless commodities stage a dramatic rebound ",,,,

http://www.zerohedge.com/news/2015-09-29/glencore-cds-rout-continues-curve-remains-inverted-even-stock-rebounds-sellside-defe

Manufacturing is WAY down around the world. Not a big surprise when consumption is way down. Glencore is supposed to be the new "Lehman Bros". Glencore Could Trigger A Global Derivatives Nuclear Meltdown | Investment Research Dynamics
Efficiency is trying to give us price deflation as we become better and better at everything. The financial sector is trying to block price deflation.
"Price deflation never was, nor ever will be, an economic problem. Asset bubbles are always a problem. The Fed still has not figured this out.
Read more at Mish's Global Economic Trend Analysis: #1 Reason Stocks are Declining; Is Hillary to Blame for Biotech Smash?
When wages crashed, manufacturing thought that it was great. Apparently, they gave no thought to the resulting crash in purchasing power. When commodities crashed, that was a whole new ball game. When oil crashed, it took out over $ 3 trillion in derivatives. The FED quietly made good on the derivatives. QE has stopped except for propping up failed derivatives.
Who knows what would happen if the FED tried to bail out hundreds of $ trillions of failing derivatives?

[wayne.ct]

Failing derivatives

I think the phrase, "possession is 9/10 of the law" is applicable in this case. People with a little bit of cash are converting to commodities, i.e. metals, that have usefulness and value. Paper can be used to warm your hands when you burn it. Etc. etc. If you have a lot of paper assets you are going to have to work real hard to hold you ground economically, so to speak. I think it is true that derivatives are volatile and risky. If possible, unwind. If you think it is impossible and you don't, just remember the risk you are taking on. Soon there will be a lot of empty "Mac Mansions". Several sources are saying the US has a 2-year window before the chickens come home. The FED will do whatever they think they can get away with politically. Therefore, derivatives will collapse and fail. I don't think it will matter much which side of the deal one thinks one is on. The puts will be just as worthless as the calls in the end. That is what I think when considering the question you posed.

[Danny B]

Economic competition and war

Consumptive power is way down. There is no need for wealth creation if there are no buyers. The bankers are starving because of the dramatic drop in commerce. Lacking wealth creation, they have turned to the only game they know,,, money creation. They absolutely must keep the money (debt) supply growing. While they pump in new debt, valuations for existing tangibles are falling. Not a big surprise because people can't buy these tangibles.
"Since the start of June, global equity markets have lost over $13 trillion." No kidding?? maybe it has something to do with poverty. Global 'Wealth' Destruction - World Market Cap Plunges $13 Trillion To 2 Year Lows | Zero Hedge

Armstrong said U.S. Treasuries would collapse in October. The Chinese hang on every word he says. The war in Syria is a proxy war between Russia and israel + her batch. Thank the neo-cons.
A proxy war no longer. The collapse starts in October. Russia and China are sending large armed forces to Syria. They will arrive in October. This is a big F-you to the neo-cons. Checkmate ! | Veterans Today
Bibi made a secret visit to the Kremlin in 2009 to threaten Putin. Putin personally threw him out and told him that he could make israel a sheet of radioactive glass in 24 hours. Kremlin source: Netanyahu made secret trip to Moscow - Israel News, Ynetnews
Bibi is now warning the U.N. to stay away from Iran. ISIS is a creation of the West. With Russia and China in Syria, israel and her batch can not risk direct confrontation. If the collapse unfolds as Armstrong predicts, America will be in far too much trouble at home to get involved in foreign wars.
Russia, China, Saudi and others are dumping U.S. sovereign debt to hurry the collapse.
1/3 of israelis would leave the "promised land" given the opportunity. Poll: One-third of Israelis Think About Leaving - National - Haaretz
When Russia prevails in Syria, you can bet those numbers will increase. If Great Britain joined the Shanghai Cooperation organization, that means that they are betting that America will crash and China will prevail.

EDIT: A bit more about the action in Syria. "Today, Russia gave the U.S. one hour notice before they began bombing both ISIS and rebels who were seeking to overthrow the Syrian government." Today’s Turning Point on the ECM | Armstrong Economics
The rumor is that the U.S. military refused to do a full-on assault of Syria because they just didn't have the money. A mercenary army was cobbled together and mountains of supplies were left behind for them. SOMEBODY hacked U.S. GOV personnel files and took every GOV employee record. ALL the U.S. spies are leaving China. You can bet that the Russians are doing the same. They may have even asked a few questions of the spooks before they booted them.
Russia and China now feel confident enough to go directly into Syria. Armstrong says that confidence is the most important factor. McCain is probably frothing at the mouth. The U.S. slapped down every small State that tried to escape the petrodollar. Russia and China together are definitely out of the question.
The tin-pot army of mercenaries will go up against the meanest drunks from the Caucasus. Putin is a grand master at chess. The neo-cons can't possibly escalate the war in Syria to a direct confrontation. The bumblers and megalomaniacs don't have a clue or a chance.

EDIT; The rumor might be true that the U.S. military is short of funds.
US Military Faces $38Bln Shortfall Covering Operational Costs

Read more: http://sputniknews.com/us/20151001/1...#ixzz3nNcMZjP1

[Danny B]

EM market crash

The FED printed and about $ 14 trillion flowed into emerging markets. The FED stopped printing and this pushed up the value of the dollar. There just wasn't enough dollars in the system for the EMs to service all that debt. The debt total is about $ 18 trillion now. World set for emerging market mass default, warns IMF - Telegraph The IMF warns that there will soon be massive defaults in the EMs.
Everybody is trying to get out. Traders Flee Emerging Markets at Fastest Pace Since 2008 - Bloomberg Business
Yu Yongding - currently a senior fellow at the Chinese Academy of Social Sciences in Beijing but most notably a member of the PBOC's Monetary Policy Committee from 2004 to 2006 as well as a member of China's central planning bureau itself, the Advisory Committee of National Planning - gave a speech,,,,
"expects a China-driven global meltdown, one which "would more than likely send the world economy into a tailspin. Its impact could be the worst the world has ever seen."

Meanwhile, in the West, monetary authorities have come up with a BRILLIANT idea; print tons of money to finance infrastructure projects. A few years ago, Japan was pouring more cement that all the rest of the world combined. It didn't save them. China has built enormous amounts of infrastructure,,, that they didn't need. It isn't saving them. China just opened a 10 million ton a year steel plant. Their EXCESS steel capacity is more than the total steel capacity of America and Europe combined.
‘Cold Fusion’ Is Citi's Answer to Fading Central Bank Firepower - Bloomberg Business
All the rich people are trying to figure out how to get all the poor people spending again.

[Danny B]

No jobs,,, no money

The good news; "U.S. Jobless Claims Are Near Decade Lows" U.S. Jobless Claims Are Near Decade Lows - Bloomberg Business
The bad news; payrolls are going straight down. http://www.zerohedge.com/news/2015-0...t-america-week
"SGS-estimated long-term discouraged workers, who were defined out of official existence in 1994." Alternate Unemployment Charts
94 million not in the work force. It's getting more difficult day by day to consider them invisible.EDIT: "Trump Just Said What Others Feared To Say: Unemployment Rate Might Be 42%"
Trump Just Said What Others Feared To Say: Unemployment Rate Might Be 42%

[Danny B]

Willie + Price

The oil price crashed into the basement. There were over $ 3 trillion in hedges and derivatives. Now, you don't hear a word about them. "the hidden $1 trillion monthly QE volume for aiding Wall St banks in oil hedge losses,"
"grand blemish in $40bn in daily Failures to Deliver in USTreasurys (naked shorting by Wall St banks)" Cantor-Fitzgerald and a few of the big banks ran off quite a few extra bonds when they got control of the presses.
"the USFed being trapped and unable to hike rates for many reasons, rate hike would kill the entire USTBond market rapidly and Wall Street banks even more rapidly"
" the new Iran oil supply guarantees low oil price and continued damage to US oil sector and Wall Street underwriters to oil hedge contacts," Saudi Arabia is starting to come apart at the seams.
the one year delay in Global Currency Reset under agreement by US & China, They may agree to it but, that doesn't mean that it can be postponed.
"the hyper inflation to come to the USEconomy from a newly launched Scheiss Dollar (worthy of a Third World Nation) with fast rising imported product prices, and the wheels coming off the entire system," This, I agree with. Hyperinflation can not appear with our current dollar.
GOLDEN JACKASS.COM - The Golden Jackass Knows Gold, Currencies & Bonds"
Everyone complains that the U.S. dollar has lost most of it's original purchasing power. EVERYTHING is relative. "“From 1976 to date, from 12.50 pesos (to $1 US) we are now at 15,100 pesos (to $1 US) and going further down." Apocalypse and Enormous Disorder Coming-Hugo Salinas-Price | Greg Hunter’s USAWatchdog
America didn't need to nurture our manufacturing base. We could just print paper to buy everything that we wanted. This is coming to an end. The new scheiss dollar will be overprinted and probably distributed by helicopter. This will cause inflation. When Americans are cut off from cheap Chinese stuff, this will cause price inflation.

[Danny B]

Trafigura

First Glencore, now Trafigura. "But who is Trafigura? Only the world's third largest private commodity trader after Vitol and Glencore. "
These big commodity traders are crashing because commodities are crashing, because consumption is crashing, because wages are crashing. It's not a difficult connection to make.
What about Glencore? "Glencore insiders pour millions into crashing shares" Glencore insiders pour millions into crashing shares - Oct. 2, 2015
So, what are the chances for survival of the commodity traders?
"In other words, it is safe to assume that up to two-third of Chinese commodity companies are now at imminent danger of default, as they can't even generate the cash to pay down the interest on their debt, let alone fund repayments. " Chinese Cash Flow Shocker: More Than Half Of Commodity Companies Can't Pay The Interest On Their Debt | Zero Hedge
This must be the mass defaults in emerging markets that the IMF warned about. The State can print money to keep a company open but, it can't create jobs when there is no demand for products. The corporate world has driven wages down and profits up. That pile of money that they have accumulated is just an idea, not wealth. The corporatocracy has driven out discretionary spending. Money is an idea and a social contract. If they kill these 2 and confidence, deflation sets in.

[Danny B]

Comparitive economic ideas

Dick Eastman's tiny lesson in economics

production - rent - interest = profit + wages

Henry George emphasizes rent as the cause of low wages and recommends a tax on land

Gottfried Feder and Kitson views interest as the cause of low wages and especially the cause when the very money supply must be borrowed from international finace

Karl Marx views profit was the cause of low wages and recommends taking the means of production from gentile businessmen and giving it to a centralized state run by communist Jews in a dictatorship over the proletariat where the Jewish commisars determine what work each is able to provide and determine what goods people need to receive.

Thomas Malthus believes that if wages are too great then people will overpopulate the world -- therefore bankers and landlords do a service by reducing the amount of wages (of production) the general population is allowed to receive.


Irving Fisher points out that there is real production, real rent, real interest, real profit and real wages in terms of production (as in the equation above), but that there is also nominal profit, nominal wages, nominal interest and nominal rent -- measured not in terms of product (goods) that each represents or commands -- but rather in numbers of the money unit as when the same nation's product in a year may be measured as either a million dollars or a billion dollars even though the amount and quality of goods is the same. Therefore we have three two equations -- one equation for real rent, real interest, real profit and real wages; and another equation for nominal rent, nominal interest, nominal profit and nominal wages. and a third equation, the equation of exchange, that relates on equation to the other. That third eqation is
MV + M'V' = PQ where "Q" is production and "P" is the price level, a variable measuring changes in nominal values. M is currency in circulation. M' is deposits in banks that we transfer by check or debit card. V and V' are respectively the velocity at which the average dollar of currency is spent per time period and the velocity at which the average dollar of deposit money is transferred from a buyer's account to a seller's account.


Aristotle, Adam Smith, John Stuart Mill, Alfred Marshall, Chamberlin and Pigou are some of the economists who explored the phenomenon of monopoly power, of artificial versus natural monopoly, of different kinds of monopoly behavior versus the behavior and power of firms under competition. This analysis requires a modification of the first equation to something like this:

production -rent - interest -monopoly gain = competition profit + wages


David Ricardo believes that rent is the rightful charge by owners for use of land superior in fertility or industrial use or commercial location above that of the near zero amount that is charged marginal land that people hardly want to use for free.

C H Douglas maintained in his books and lectures that wages are low because money paid for goods gets lost in accounting so that not all of it paid out to people of a nation so that they do not have enough money to buy, as consumers the goods they produced as workers.

Von Mises, von Hayek and Rothbard taught that giving the economy more money is simply "mal-investment" and only results in inflation followed by depression which can only be "cured" by austerity, default and bankruptcy and the gold standard.

Dick Eastman

[wayne.ct]

The eye of the tiger?

An old English saying: Beauty is in the eye of the beholder.

Interpretation: Each individual has his or her own perception of production, rent, interest, profit, wages, etc. These are useful terms because most people think they know what they are and if they don't know what they are they at least have a feeling that they have a pretty good idea what they are.

Still, each individual has their own perception of what these things are and if they have some measure of maturity and intelligence they also place a value on these things. Again, each individual places a value on each of these things and acts accordingly. It is somewhat predictable what values people put on things and it is somewhat measurable what these value are for various people in various times and circumstances.

However, from moment to moment these values can shift. Perhaps not in large measure, but it is not a static situation. Not by a long shot.

Call it my unique perspective or my opinion, if it suits you to do so.

From a macro perspective, some shifts and changes may be predictable. But, in the main, things don't often match expectations and stuff happens.

As far as the views of the various economists and authors (above) are concerned, it does not seem to me that there can be such a clear cut conclusion that this one or that one is exclusively correct. They each have a measure of reason behind what they have to say.

The problem right now is that some people with less that altruistic intent have more ____ than sense. I don't know whether to put cash, credit or debt in the blank. I just don't think these people have good sense. They have the capability to mess things up but don't have the smarts or the wisdom to not create a huge mess. That is what we seem to be facing: a huge mess.

We have one side trying to tell us things are improving and the other side telling us things are falling apart. I am pessimistic enough to think things are falling apart.

In spite of all that, I think people will act in their own self interest and that is good. That makes me optimistic. When people get together and act for their personal best interests and the best interests of the SMALL group that share a common interest, they will succeed, survive and probably thrive.

They will produce, trade among themselves and negotiate with nearby groups. The self-appointed rulers will be the bullies and goons and will be revealed to be what they are at heart. Just be sure you know what I mean by self-appointed rulers. These are not institutional figures that are supported by the people because they earned the trust of the people. They do stuff that is not good for the people because they have set themselves up and act selfishly. Their actions are in opposition to the needs and desires of the general population. This becomes appreciated over time. Perhaps they lied to get elected, or whatever. These rulers will resort to force because they have lost their sense of what is right, fair, honest and true.

[BroMikey]

An old English saying: Beauty is in the eye of the beholder.

if they have some measure of maturity and intelligence ---------------


However, from moment to moment these values can shift.


The problem right now is that some people with less that altruistic intent have more ____ than sense.


I just don't think these people have good sense.

They have the capability to mess things up'''''''''''''''''''''''


We have one side trying to tell us things are improving and the other side telling us things are falling apart.

I am pessimistic enough to think things are falling apart.

Just be sure you know what I mean by self-appointed rulers. These '''''''''''''''''''''''''''''''''''''''''''''''''' '''''''''''''''''''''''''''''''''''''''''''''''''' '''''''''''''''''''''''''''''''''''''''''''''''''' '''''''''''''''''''''''''''''''''''''''''''''''''' '''''''''''''''''''''''''''''''''''''''''''''''''' '' act selfishly.

These rulers will resort to force because they have lost their sense of what is right, fair, honest and true.

Your last statement has some high lighting. Let me play the part of the

voice of the world as we see it today. "Your values are obsolete so

right and wrong is nothing more than a fleeting opinion." Big DOG eats

the little DOG when the "RULES" are derived from the animalistic.

"Survival of the fittest" "Kill and Eat for tomorrow we die"



"And if it feels pretty good? it is good! " Another one is

"Do unto others BEFORE they do unto you" besides who needs to trust

in any gOd for rules when we are god's who make our own rules/money

power, eternal existence.


"Don't get in my way becoming GOD or I'll murder you."

With slogans such as these firmly rooted in the hearts mankind

will always slaughter each other so one man can have all of the pie.

After that, all that is left is to eat your flesh. Right off

the bones while your heart is still pumping blood. "SAME THING"

[wayne.ct]

Words, words, people say crazy things.

I tend toward the serious, but I appreciate a 'good' joke. Yes, indeed. The world is going to the dogs. I know you too well to take offense. The lack of ethics, morality, justice, and common sense is leading to a world-wide catastrophe. To use a 'new age' phrase, it is written in the stars. It is so sad that the world can't see what is going down. To use a Biblical phrase, there is a 'veil' before their eyes. I'm looking forward to seeing the devil get his due. Thanks for chipping in with your thoughts.

[Danny B]

Demographics and the interest rate

Armstrong said that sept 30 / oct 1 would be the date of major changes. He was completely right on that. He is right in so many areas that it is difficult to disagree with him. I have to disagree in 2 areas.
The first is gold manipulation. He says that it does not exist. The bankers have been investigated for manipulating, interest rates and foreign exchange rates. They are now being investigated for manipulating gold. Jeffrey Christian conclusively proved that precious metals are being manipulated. He sat down at a terminal with a reporter and told him ahead of time just when PMs would be hit.
The other area where I disagree is interest rates. J.M. Keynes said that we would be so rich that we wouldn't have to keep working. Interest rates are at a 5,000 year low. A Question of Money — Interest & Bankers | Armstrong Economics
The world is awash in capital. Demand for credit is falling. How could interest rates remain high when nobody wants more debt? When we lived in a survival economy, credit was in high demand,,, for survival. Today's economy is about non-essentials. We can cut back on Jet-Skis and dune buggies. The debt bubble will collapse if we cut back to an"Amish" economy.

Keynes based his theories on growing population. Like Armstrong, he never took birth-control into his calculations. Americans cut their birth rate back below replacement. The southern border was left open to try to raise the numbers. Germany and a few others have a low birth rate. You can't grow a debt bubble if you can't grow a population bubble. Keynesian economics demands a constantly growing debt bubble. What happens when people no longer make it grow? The poster child is Japan. Their population is crashing. Their economy has been in the doldrums for decades. They talk about all kinds of financial planes to revive it. They don't talk about the fact that the Japanese are pretty disgusted with life in Japan. They have even cut out sex. They are in a complete demographic crash. Various countries are trying to suck in immigrants to keep the Keynesian system going.

U.S. GOV won't talk about how important it is.
"In my previous article, I made the assertion that the Federal Funds Rate was nearly, if not solely, driven by the annual change to the US core population of 15-64 year olds." Demographics - The Real Opponent The Fed Has Been Fighting For Decades | Seeking Alpha

Japan clearly proves that a State can't escape the debt trap with a falling population.

Jobs report; "“Adding insult to injury and revealing an even softer underbelly to this report was the contraction in the workweek to 34.5 hours from 34.6 hours in August, which is effectively equivalent to an added 348,000 job losses.”

“So take the headline number, tack on the downward revisions, and the loss of labour input from the decline in the workweek, and the “real” payroll number was -265,000. You read that right.”
- See more at: Bad News Friday

So 1/4 million jobs lost.
"Here at 2015.75, they are kicking the debt ceiling can down the road, assuming it can wait until December. However, Treasury Secretary Lew says the U.S. will run out of money by November. So it does not appear they will even make it to December" 2015.75 & Debt: Did 9/30 Mark the Beginning of the End? | Armstrong Economics

[Danny B]

Stranded assets

10/04 Half of world's coal output is unprofitable – Bloomberg
10/03 Solar Energy price at all-time low: average price of solar in US falls – Cost of Solar
" Norway cuts rate to record low as oil slump rears recession risk ."
Demand-deflation and solar power are cutting way back on the value of the energy sector. The FED is printing a $ trillion a month to rescue hedges and derivatives gone sour in the energy markets. There is crashing deflation in many segments of the markets. Part of the cost of doing business is, the cost of money. The FED continues ZIRP to help hold down costs to business.
There is a coal mine in OZ that was valued at $ 475 million just 2 years ago. A few months ago, it sold for $ 1. If 1/2 the world’s coal output is unprofitable, those businesses become "stranded assets". They are held on the books at nominal prices but, nobody would buy them.
Unemployment rises, consumption falls, production falls, asset values fall, the CB prints and buys to rescue assets. Eventually, the "deflation" of unemployment catches up to the "inflation" of money printing. Assets are stranded by a lack of demand.
With the economy shrinking, there is a lack of demand for credit from qualified borrowers. To keep the debt bubble floating, the banks lend to unqualified borrowers. Student loans are a good example of stranded assets. These loans have a nominal value but, nobody is repaying.
The FED is pumping $ trillions into equities to uphold their value when consumption can't do it. They are rescuing businesses that should have failed. As employment falls, the list of zombie businesses grows. When the credit bubble pops, the zombies will fall over dead.

[Danny B]

From deflation to desperation

Couple of headlines.
10/02 World's biggest pension fund is moving into junk and emerging bonds – Bloomberg
John Rubino; Panic Is Spreading, Part 1: Surge in Junk Bond Defaults Imminent.
It's obvious that emerging markets will NEVER get the dollars to service their dollar debt. 10/02 "There are 5 times more claims on dollars than dollars in existence" – Zero Hedge
Yet, we see the largest pension fund moving into EM and junk. The big funds would like to think that Main Street just doesn’t matter. Almost 100 million NOT in the labor force and ; 10/02 Typical male worker earned less in 2014 than in 1973 – My Budget 360
The aggregate wage deflation is the West is now wiping out the financial system.
51% of Americans receive a check from GOV. 94 million are not in the labor force. The FED is trying to carry this whole mess with the printing press.
For a pension fund to move into EM and junk, they have shown that it is desperation time.
The upper loop of the economy is up to the gills in capital. BUT, most of this notional capital is DEBT. It can only be vitiated by consumption-production in the lower loop. As nominal valuations diminish, the debt paper becomes untradable. This is a collapse of collateral.