Where Money Ceases

Submitted by Jeffrey Snider  –  Alhambra Investment Partners

While Abenomics continues to be classified as “pro-growth” rather than vilified for what it has done, that is as clear in the real economy as it is in the financial realm. Japanese experimentation with ZIRP has destroyed, effectively, any informational content from the JGB curve which contributes to continued resource waste. The Japanese just auctioned a 2-year note at a negative yield, as the nation continues to achieve these dubious milestones of global repute. Their 10-year has collapsed to barely 30 bps in yield.

These kinds of results are the death of “money” (using the term broadly here, certainly not specifically applicable as true money would prevent all of this). Is it any wonder that the one economy that has been totally disabled for a quarter of a century is ground zero for financial experimentation of the highest order? The death of money is the inevitable conclusion of this trend, and no economy will be able to survive it outside of long-term zombification dooming its people to stagnation and decay. Japanification is not a theory any longer.

Less far along on that trend are the Europeans. The economy is not as obviously in distress as it is in Japan, but it is acknowledged and nearly conventional wisdom that it is not far off from that woeful fate. And like Japan, Europe is awash in the death of money, perhaps even comically so given the state of finance there.

For a detached observer, there is nothing quite like the Swiss government bond “curve.” Of course, it ceased being a curve denoting anything fundamental of Swiss or even broader European economics a long time ago, but in the space of just four months it has been tortured and twisted into a thing unrecognizable to logical finance.

ABOOK Dec 2014 Euro Credit Swiss

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Am I Wrong to Doubt the Government’s Economic Figures?

Submitted by Bill Bonner – Chairman, Bonner & Partners

“Has anyone seen my charger?” was probably the most common question heard in the Bonner household this Christmas.

Everyone has an electronic communication device of some sort. Every device has a charger. And at any given moment its owner can’t find it.

iPhones and chargers all look alike. If you are in a house full of young people, and you are slightly retarded, the one in your pocket probably belongs to someone else.

That leaves the poor owner disconnected from what he believes is the real world – the world of Facebook, Twitter, Spotify and Instagram.

Cut off, he soon goes into a kind of catatonic withdrawal – like a dead Christian mistakenly assigned to the Devil – and cries out in indignation, desperation and pain:

“Who took my phone?”

Thus prompted, your editor pulls the phone out of his pocket and tries his passcode on it. It doesn’t work. So, he replies: “I can’t find my phone either.” Continue reading

China’s Communists Commit To More Of A Market Approach Than The ‘Free World’

Submitted by Jeffrey Snider  –  Alhambra Investment Partners

There has been nothing good out of China in the past few months, which is why the call for more action by the PBOC has only grown. Despite what are really clear intentions, economists continue to look at financial operations in China as if it were still 2010 or even 2012. When the China PMI disappointed (for whatever that is worth) for December, showing “contraction” (as if PMI’s could)n or at least readings under 50, the usual commentary showed itself right on schedule.

“The manufacturing slowdown continues in December and points to a weak ending for 2014,” Hongbin Qu, chief economist for China at HSBC, said after the survey was released on Tuesday.
“The rising disinflationary pressures, which fundamentally reflect weak demand, warrant further monetary easing in the coming months.”

While the mainstream continues to look at China as China’s problem, there is the fundamental matter of its export orientation that has left the system vulnerable to extended weakness in the US and Europe (and even Japan, now that China is the largest exporter to the Japanese thanks to Abenomics). That position makes “stimulus” of whatever redistribution variety already dubious, leaving the Chinese in a precarious position of trying to transition to a more domestically-focused economy.

ABOOK Dec 2014 China IP US Imports Longer

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The Daily Debt Rattle

Submitted by Raúl Ilargi Meijer  –  The Automatic Earth

US Opening Door to More Oil Exports Seen Foiling OPEC Strategy (Bloomberg)
The Market Chart Of The Year: Nope, It’s Not Oil (CNBC)
Commodities Head for Record Losing Run on Oil to Dollar (Bloomberg)
As Oil Prices Fall, Alaska Governor Halts Project Spending (AP)
Falling Energy Costs And Economic Impacts (STA)
Chart Shows How US Drillers Respond To Oil Price Drop (MarketWatch)
Chinese Stocks, Dollar And Debt The Stars Of 2014 (Reuters)
We’re Not Communists, Greek Opposition Insists (CNBC)
‘Snap Elections Will Be Decisive For Greece’s Eurozone Future’ (Guardian)
Europe Deflation Fears Back After Weak Spain, Greece Data (CNBC)
Will the Real Angela Merkel Please Stand Up? (Bloomberg)
Obama Suggests Putin ‘Not So Smart’ (BBC)
China Factory Activity Shrinks (BBC)
Japan Is Writing History As A Prime Boom And Bust Case (Grass)
The Rigging Triangle Exposed: The JPMorgan-BP-BOE Cartel (Zero Hedge)
BP Probes In-House Foreign Exchange Traders (FT)
The Prison State of America (Chris Hedges)
Recolonizing Africa: A Modern Chinese Story? (CNBC)
Ebola Wrecks Years Of Aid Work In Worst-Hit Countries (Reuters)
Protecting Money or People? (James K. Boyce)
Goodbye To One Of The Best Years In History (Telegraph)

Continue Reading: Debt Rattle New Year’s Eve 2014 – The Automatic Earth

The Rigging Triangle Exposed: The JPMorgan-British Petroleum-Bank Of England Cartel Full Frontal

Submitted by Tyler Durden  –  ZeroHedge

The name Dick Usher is familiar to regular readers: he was the head JPMorgan FX market manipulator, who waspromptly fired after it was revealed that JPM was the bank coordinating the biggest FX rigging scheme in history, as initially revealed in “Another JPMorganite Busted For “Bandits’ Club” Market Manipulation.” Subsequent revelations – which would have been impossible without the tremendous reporting of Bloomberg’s Liam Vaughan – showed that JPM was not alone: as recent legal actions confirmed, virtually every single bank was also a keen FX rigging participant. However, the undisputed ringleader was always America’s largest bank, which would make sense: having a virtually unlimited balance sheet, JPM could outlast practically any margin call, and make money while its far smaller peers were closed out of trades… and existence.

But while the past year revealed that FX rigging was a just as pervasive, if not even more profitable industry for banks than the great Libor-fixing scandal (for details see “How To Rig FX Like A Pro “Bandit”, And Make Millions In The Process“), the conventional wisdom was that it involved almost exclusively bankers at the largest global banks including JPM, Goldman, Deutsche, Barclays, RBS, HSBC, and UBS.

Now, courtesy of some more brilliant reporting by Vaughan, we can finally link banks with the other two facets of what has emerged to be an unprecedented FX-rigging “triangle” cartel: private sector companies that have no direct banking operations yet who have intimate prop trading exposure, as well as central banks themselves. Continue reading

Will Cheap Oil Bail Out The Consumer?

Submitted by Michael Pento – Pento Portfolio Strategies

Analysts on every financial news network are screaming about how the lower oil and gas prices will spur on the U.S. consumer and lead to a stronger economy.  It is true that total retail sales rose 0.7 percent in November, beating analysts’ expectations of 0.4 percent. And the Thomson-Reuters University of Michigan survey of consumers saw its December 2014 “preliminary index of consumer sentiment” soaring to 93.8–well above last month’s 88.8 reading. Yet, despite this, global markets are throwing off many deflationary signals that should not be ignored.

The first important market signal is the dramatic decline in oil prices.  Since peaking at just over $100 a barrel this summer, prices have since fallen by 45 percent. In fact, the last time we have seen a decline nearing this magnitude was during the financial crisis of 2008.  If this one data point existed in a vacuum, it may be easy enough to attribute it to just an increase in the oil supply.

If happening in isolation, a surge in the supply of oil would lead to less spending at the pump and be a boost to the consumer. However, that is not what is occurring today. First off, years’ worth of QE and ZIRP have caused massive economic imbalances to occur. Capital spending by the energy industry accounted for 33% of all capital spending in the last few years. States where fracking is prevalent have accounted for all the job growth in the nation. This would never be feasible if oil prices weren’t drive into bubble territory in the first place. Continue reading

The Imperial Collapse Playbook

Submitted by Dmitry Orlov  –  The ClubOrlov Blog

Some people enjoy having the Big Picture laid out in front of them—the biggest possible—on what is happening in the world at large, and I am happy to oblige. The largest development of 2014 is, very broadly, this: the Anglo-imperialists are finally being forced out of Eurasia. How can we tell? Well, here is the Big Picture—the biggest I could find. I found it thanks to Nikolai Starikov and a recent article of his.

Now, let’s first define our terms. By Anglo-imperialists I mean the combination of Britain and the United States. The latter took over for the former as it failed, turning it into a protectorate. Now the latter is failing too, and there are no new up-and-coming Anglo-imperialists to take over for it. But throughout this process their common playbook had remained the same: pseudoliberal pseudocapitalism for the insiders and military domination and economic exploitation for everyone else. Much more specifically, their playbook always called for a certain strategem to be executed whenever their plans to dominate and exploit any given country finally fail. On their way out, they do what they can to compromise and weaken the entity they leave behind, by inflicting a permanently oozing and festering political wound. “Poison all the wells” is the last thing on their pre-departure checklist. Continue reading

Commodity Prices Are Cliff-Diving Due To The Fracturing Monetary Supernova—The Case Of Iron Ore

Crude oil is not the only commodity that is crashing. Iron ore is on a similar trajectory and for a common reason. Namely, the two-decade-long economic boom fueled by the money printing rampage of the world’s central banks is beginning to cool rapidly. What the old-time Austrians called “malinvestment” and what Warren Buffet once referred to as the “naked swimmers” exposed by a receding tide is now becoming all too apparent.

This cooling phase is graphically evident in the cliff-diving movement of most industrial commodities. But it is important to recognize that these are not indicative of some timeless and repetitive cycle—–or an example merely of the old adage that high prices are their own best cure.

Instead, today’s plunging commodity prices represent something new under the sun. That is, they are the product of a fracturing monetary supernova that was a unique and never before experienced aberration caused by the 1990s rise, and then the subsequent lunatic expansion after the 2008 crisis, of a cancerous regime of Keynesian central banking.

Stated differently, the worldwide economic and industrial boom since the early 1990s was not indicative of sublime human progress or the break-out of a newly energetic market capitalism on a global basis. Instead, the approximate $50 trillion gain in the reported global GDP over the past two decades was an unhealthy and unsustainable economic deformation financed by a vast outpouring of fiat credit and false prices in the capital markets. Continue reading

Olympic Waste Isn’t Just For The Olympics

Submitted by Jeffrey Snider  –  Alhambra Investment Partners

Every once in a while it is heartening to think that world’s people may finally be awakening from their economic anesthesia and experiencing rightful revulsion about what has occurred. We are told that the global economy fell on its own into a pit of despair in 2008 and has been unable to escape it all “despite” the best efforts and heavy doses of government (including monetary) “stimulus.” The theoretical underpinning of government “stimulus” is the very Keynesian notion that spending on anything during periods of “slack” is far, far better than doing nothing.

That is a notion that has been swallowed whole by not just neo-Keynesian academics but monetarists that are practicing it through central banks all over the world. The mantra of “aggregate demand” is activity for the sake of activity. Better to do something, so they say, with “idle” resources than do nothing and let the economy languish.

With another round of Olympic bidding, for 2024 games, opening up, there is indeed a pushback against the massive “costs” that hosting entails. Even Italy, the sick big man of Europe, is planning on making a pitch but one that isn’t universally applauded.

“Proposing Rome as a future Olympic city is like painting an old Fiat 500 red and hoping that people will believe it’s a Ferrari,” said Luca Zaia, the governor of the Veneto region and a heavyweight in the Right-wing Northern League party.
“This is madness, they’ll be the Olympics of Waste,” said Matteo Salvini, the head of the Northern League, who added that arrests are being made in Rome on an almost daily basis as investigators probe the links between politicians and the mafia.

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Greek Turmoil Could Spread – Risk of Bail-Ins in U.S. and Globally

Submitted by Mark O’Byrne  –  GoldCore

Greece’s financial markets are in turmoil again as a vote in parliament – failing to elect a new president – made a general election inevitable. Greek markets saw severe sell offs , with yields on Greek government bonds rising and shares prices collapsing 13% at one point yesterday and closing 7% lower on the day.

Greece 10 Year – 3 Months (Thomson Reuters)

Greek bank shares collapsed by even more. Two of Greece’s largest banks, Piraeus bank and Alpha bank, shed more than 14% of their share value as concerns of bank solvency, bank runs and Cyprus style bail-ins reemerged.

Market reaction elsewhere was mixed with markets in low volume Christmas trading. Northern European stock markets, the FTSE, DAX and CAC, eked out small gains while southern markets saw renewed jitters.

The Greek result led to sell offs in Spain and Italy, which narrowly escaped the sovereign debt crisis that led to Greece’s 2010 bailout. Spanish and Italian bond yields rose, pushing Madrid’s IBEX stock market down 1 percent while Italy’s FTSE MIB fell 1.2 percent.
Greece and the risk of new Eurozone debt crisis will now – again – be a key focus for investors in 2015. Continue reading

The Daily Debt Rattle

Submitted by Raúl Ilargi Meijer  –  The Automatic Earth

Greece Comes Back To Haunt Eurozone As Anti-Troika Rebels Scent Power (AEP)
Syriza Can Transform The EU From Within (Costas Lapavitsas)
‘Perfect Storm’ Could Send Euro Even Lower (CNBC)
Oil Falls Further But Saudi Arabia Doesn’t Care (CNBC)
Oil Industry Set For Year Of Mergers And Takeovers, Says PwC (BBC)
The Cartel: How BP Used a Secret Chat Room for Insider Tips (Bloomberg)
Iron-Ore Slump Fails to End Glut as Australia Mines Grow (Bloomberg)
Bernanke Tells UK’s King: We Saved Our Economies (MarketWatch)
Goldman Sachs Set for Fight Over $835 Million Loan to Banco Espírito Santo (WSJ)
Petrobras Deadline Prompts Bondholders To Push For Default (Reuters)
Foreign Automakers Taken To Task In China Over Dealers’ Inventories (Reuters)
Ditching Dollar: China, Russia Launch Financial Tools In Local Currencies (RT)
Jeb Bush and the Making of a $236 Million Federal Contract (Bloomberg)
Inside the NSA’s War on Internet Security (Spiegel)
Bill Cosby Hires PI’s To Dig Up Dirt On Women Who Accuse Him of Rape (Ind.)
Large Hadron Collider To Switch Back On At Double Power (Ind.)
The Trigger (James Howard Kunstler)
Ebola Spurs Call for Global Health Reserve Corps, Challenging WHO (Bloomberg)
Ebola in UK: One Patient Diagnosed With Ebola, Two More Tested (Independent)

Continue Reading: Debt Rattle December 30 2014 – The Automatic Earth

The Outlook for the New Year

Submitted by Dr. Paul Craig Roberts – Institute for Public Economy

Washington has shaped 2015 to be a year of conflict. The conflict could be intense.

Washington is the cause of the conflict, which has been brewing for some time. Russia was too weak to do anything about it when the Clinton regime pushed NATO to Russia’s borders and illegally attacked Yugoslavia, breaking the country into small easily controlled pieces. Russia was also too weak to do anything about it when the George W. Bush regime withdrew from the ABM treaty and undertook to locate anti-ballistic missile bases on Russia’s borders. Washington lied to Moscow that the purpose of the ABM bases is to protect Europe from non-existent Iranian nuclear ICBMs. However, Moscow understood that the purpose of the ABM bases is to degrade Russia’s nuclear deterrent, thereby enhancing Washington’s ability to coerce Russia into agreements that compromise Russian sovereignty.

By summer 2008 Russian power had returned. On Washington’s orders, the US and Israeli trained and equipped Georgian army attacked the breakaway republic of South Ossetia during the early hours of August 8, killing Russian peacekeepers and civilian population. Units of the Russian military instantly responded and within a few hours the American trained and equipped Georgian army was routed and defeated. Georgia was in Russia’s hands again, where the province had resided during the 19th and 20th centuries.

Putin should have hung Mikheil Saakashvili, the American puppet installed as president of Georgia by the Washington-instigated “Rose Revolution”, and reincorporated Georgia into the Russian Federation. Instead, in a strategic error, Russia withdrew its forces, leaving Washington’s puppet regime in place to cause future trouble for Russia. Washington is pushing hard to incorporate Georgia into NATO, thus adding more US military bases on Russia’s border. However, at the time, Moscow thought Europe to be more independent of Washington than it is and relied on good relations with Europe to keep American bases out of Georgia. Continue reading