Durable & Capital Goods Tank In November

Submitted by Jeffrey Snider  –  Alhambra Investment Partners

The “other” part to the GDP euphoria of the tax-like increase in non-discretionary spending was the apparent increase in business optimism. The latest durable goods figures, which includes capital goods, show that like the PCE revisions for health insurance spending there were relative changes that may account for better “investment” results in Q3. However, October and November more than suggest another temporary mid-year expansion seriously waning.

ABOOK Dec 2014 Dur Goods Cap Goods

There is an almost identical mini-cycle playing out in 2014 in reflection of 2013. While shipments had been better this year (until October), the mid-year peaks are prominent in relation to likely inventory builds that are not satisfied as expected. In other words, production and productive investment rise (recall that winter weather was blamed for Q1 2013 as Q1 2014) in anticipation of that elusive “second half” economic takeoff only to be disappointed yet again. Capital goods orders fell essentially to zero in November after hitting 10% in September.

ABOOK Dec 2014 Dur Goods cap goods Avgs

Continue reading

Here Is The Reason For The “Surge” In Q3 GDP

Submitted by Tyler Durden  –  ZeroHedge

Back in June, when we were looking at the final Q1 GDP print, we discovered something very surprising: after the BEA had first reported that absent for Obamacare, Q1 GDP would have been negative in its first Q1 GDP report, subsequent GDP prints imploded as a result of what is now believed to be the polar vortex. But the real surprise was that the Obamacare boost was, in the final print, revised massively lower to actually reduce GDP!

This is how the unprecedented trimming of Obamacare’s contribution to GDP looked like back then.

Of course, even back then we knew what this means: payback is coming, and all the BEA is looking for is the right quarter in which to insert the “GDP boost”. This is what we said verbatim:

Don’t worry thought: this is actually great news! Because the brilliant propaganda minds at the Dept of Commerce figured out something banks also realized with the stub “kitchen sink” quarter in November 2008. Namely, since Q1 is a total loss in GDP terms, let’s just remove Obamacare spending as a contributor to Q1 GDP and just shove it in Q2.

Stated otherwise, some $40 billion in PCE that was supposed to boost Q1 GDP will now be added to Q2-Q4.

And now, we all await as the US department of truth says, with a straight face, that in Q2 the US GDP “grew” by over 5% (no really: you’ll see).

Well, we were wrong: it wasn’t Q2. It was Q3, albeit precisely in the Q2-Q4 interval we expected.

Fast forward to today when as every pundit is happy to report, the final estimate of Q3 GDP indeed rose by 5% (no really, just as we predicted), with a surge in personal consumption being the main driver of US growth in the June-September quarter. As noted before, between the second revision of the Q3 GDP number and its final print, Personal Consumption increased from 2.2% to 3.2% Q/Q,  and ended up contributing 2.21% of the final 4.96% GDP amount, up from 1.51%. Continue reading

You Thought The Saudis Were Kidding?

Submitted by Raúl Ilargi Meijer  –  The Automatic Earth


NPC Sidney Lust’s 18th Street cinema decorated for Halloween, Washington, DC Oct 1920

There are many things I don’t understand these days, and some are undoubtedly due to the limits of my brain power. But at the same time some are not. I’m the kind of person who can no longer believe that anyone would get excited over a 5% American GDP growth number. Not even with any other details thrown in, just simply a print like that. It’s so completely out of left field and out of proportion that you would think by now at least a few more people understand what’s really going on.

And Tyler Durden breaks it down well enough in Here Is The Reason For The “Surge” In Q3 GDP (delayed health-care spending stats make up for 2/3 of the 5%), but still. I would have hoped that more Americans had clued in to the nonsense that has been behind such numbers for many years now. The US has been buying whatever growth politicians can squeeze out of the data and their manipulation, for many years. The entire world has.

The 5% stat is portrayed as being due to increased consumer spending. But most of that is health-care related. And economies don’t grow because people increase spending on not being sick and/or miserable. That’s just an accounting trick. The economy doesn’t get better if we all drive our cars into a tree, even if GDP numbers would say otherwise. Continue reading

The Greater Abomination: Washington’s Lies About TARP’s “Success” Are Worse Than The Original Bailouts, Part I

The mainstream economics narrative is so far down the monetary rabbit hole that the blinding clarity of the chart below has no chance whatsoever of seeing the light of day. That’s because it dramatizes the real truth regarding all the Fed gibberish about “accommodation” and “stimulus”. Namely, that what lies beneath its “extraordinary measures”, such as ZIRP, QE, wealth effects and the rest of the litany, is a central banking regime that systematically destroy savers.  Period.

Just take the simple case of a worker who joined the labor force in 1969 at $100 per week or $5,200 annually, and worked at the average non-supervisory weekly wage posted by the BLS every year through 2009. By that point he or she would have attained an ending wage of $600 per week or $31k annually, and a 40-year average annual income of about $20k in nominal terms. With a normal load of payroll and state and local withholding, the latter would have left about $15,000 per year on an after-tax basis.

Upon retirement this BLS tracking worker could have possibly accumulated $100,000 in a savings nest egg—-but only if he or she had been completely atypical and set aside an average of 17% of after-tax income each and every year. Needless to say, that would have precluded nearly all everyday “luxuries” such as  a regular new car, an occasional trip to Disneyland, a bass boat for weekend fishing and most other like and similar modest indulgences. Instead, deep thrift would have been the omnipresent watchword of this household. Continue reading

The Daily Debt Rattle

Submitted by Raúl Ilargi Meijer  –  The Automatic Earth

OPEC Will Not Cut Output However Far Oil Falls: Saudi Oil Minister (Reuters)
On Fuel, Airlines Gambled And You Lost (Reuters)
Billionaire Shale Pioneer Cuts Spending 41% on Oil Crash (Bloomberg)
Morgan Stanley, Rosneft Oil-Unit Deal Fails On Sanctions (Bloomberg)
If Shell Backs Out, Arctic Oil Off the Table for Years (Oilprice.com)
Biggest Arctic Gas Project Seeking Route Around U.S. Sanctions
Outlook Sours for Europe’s Oil Titans on Crude Slump (Bloomberg)
Arab OPEC Sources See Oil Back Above $70 By End-2015 (Reuters)
Cheap Oil Is Dragging Down the Price of Gold (Bloomberg)
Ruble Swap Shows China Challenging IMF as Emergency Lender (Bloomberg)
China’s Shadow Banking Thrives Even As Rules Tighten (Reuters)
Russia Faces Full-Blown Crisis Says Former Finance Minister (FT)
IMF Raises Fears Of Global Crisis As Russian Bank Forced Into Bailout (Guardian)
Belarus Blocks Online Sites, Closes Stores To Stem Currency Panic (AFP)
Market-Rigging Laws Will Also Cover Currency, Gold, Oil And Silver (Guardian)
Ukraine Cuts Gold Reserve to Nine-Year Low as Russia Buys (Bloomberg)
Ukraine Central Bank Sees $300,000 in Gold Swapped For Lead Bricks (RT)
Fresh Doubt Over the Bailout of AIG (Gretchen Morgenson)
If Wishes Were Loaves and Fishes (James Howard Kunstler)

Continue Reading: Debt Rattle December 23 2014 – The Automatic Earth

Euro Hits New Lows as Prospects for a Greek Parliamentary Election Rise

by Victor Golovtchenko  –   Institutional Forex

The single European currency is on track to finish the year at its lowest levels since August 2012 as the country’s parliament failed to elect a new president in the second vote on the nomination of Stavros Dimas.

As the currency market praises the newly acquired strength of “king dollar,” and market analysts are highlighting the staggering five percent third quarter US GDP growth number, the main reason for the decline of the euro is not only that.

The Greek parliament has failed to elect a new president in a second of three votes requiring parliamentary supermajority. While the governing coalition’s nominee Stavros Dimas has picked up support of eight independent members of parliament, the required 200 out of 300 votes have not been secured.

During the third vote scheduled for the 29th of December, the supermajority requirement is reduced to 180 votes, with the current result of the president nominee standing at 168 votes.

The euro currency is trading below the 1.2200 mark, currently at 1.2170, spelling that the Euro Zone crisis is not over yet as anti-austerity movements gather political speed across the continent, and Greek Coalition of the Radical Left (SYRIZA) is likely to be victorious in parliamentary elections next year. Continue reading

Logical Fallacy Under The Coming Neo-Keynes Orientation

Submitted by Jeffrey Snider  –  Alhambra Investment Partners

As distasteful as it can be, there will be, I believe, a necessary condition whereby closer examination of Paul Krugman’s writings and rantings is fruitful. The rise of Keynesian doctrine, more specifically the re-rise, seems to be more and more prevalent especially as the global economy careens out and away from all the trillions in monetarisms that have been perpetrated these past seven years. Part of that is due to Krugman’s assertions, which have been very blunt and emphatic to his credit, that monetarism would not work. Thus what is more important are his prescriptions for what to do next, not as if they will be more effective but rather as instructive as to what further mistakes policymakers will render in the near future.

As this becomes true, his reasoning as to why he believed monetary unsuitability to be the case becomes paramount – namely that monetary “stimulus” without fiscal “stimulus” especially at the zero lower bound is useless. He is of the “liquidity trap” generation, as he diagnoses the current condition as “pushing on a string.”

This was not, apparently, a long-held position for Dr. Krugman, but one in which he converted out of Japan’s “experiment” in the late 1990’s. Continue reading

USD NEEDS YUAN IN THE SDR BASKET

Submitted by JC Collins  –  philosophyofmetrics

USD RMB SDRThe international monetary system is inherently unstable, and the process to shift from a unipolar to a multi-polar system is well underway.  The transition itself will take considerable time to fully implement and we are now somewhere between the first and second stages, with a third stage scheduled to be completed in the coming years.

The unipolar USD framework which forms the base of the international financial system today is built on the accumulation of USD assets in the foreign reserve accounts around the world.  One of the transition requirements for the multilateral framework is to mitigate the demand for these foreign reserves and to implement a method of diversifying the existing accounts.

We have previously discussed the purpose of the substitution accounts as a method of mitigating USD instability in the foreign reserve accounts, and moving forward with  diversifying the composition of those accounts with SDR bonds to increase global liquidity. Continue reading

Are Americans Prepared For A Soviet Style Collapse?

Submitted by Dmitry Orlov  –  The ClubOrlov Blog

http://www.drescapes.com/2014/12/19/dmitry-orlov-are-americans-prepared-for-a-soviet-style-collapse-interview/

Last week I gave an interview to Barry at DR Escapes which is now up on Youtube. Please follow the link to listen to the interview. Barry’s notes on it are pasted in below.

If the social and financial structure around you collapsed tomorrow, as it did for many people during the fall of the Soviet Union, are you prepared to survive and even prosper? In my latest interview with best selling author Dmitry Orlov we discuss lifestyle and how your lifestyle decisions may dramatically impact how your family will fare if times get tough.

Dmitry left Russia with his family in 1976 and settled in the Boston area to pursue an education in computer science and  linguistics.  Along the way Dmitry realized he was trapped in the traditional American pursuit of a career.  He was working day and night to make money to pay for the car and city condo and all the trappings of success.  He needed the car and condo and all the trappings of business to keep making money.  The same vicious cycle most Americans face every day.  Well Dmitry gave it all up for a life on a sailboat full of travel and freedom.
In our interview, I passed along some of your questions as well as my own to get Dmitry’s perspectives. As you probably know if you follow Dmitry or the ClubOrlov blog, Dmitry brings an interesting perspective to the whole lifestyle and survival dialog. In this interview, Dmitry shares his thoughts on why he believes that Russian citizens were far better prepared for a collapse than the typical American citizen.  His logic is sound and it definitely makes you question…. “what would my family  do in a collapse, faced with”: Continue reading

PCR interviewed by Sputnik: Who Does Obama Serve?

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

On the 20th of January President Obama is delivering his annual State of the Union address to a joint session of Congress. “The new year will bring a new American Congress, and with it, the opportunity to continue our work to build a stronger economy and secure a better future for our country,” John Boehner — the House speaker- wrote to his President.

According to Princeton economists Alan S. Blinder (formerly Vice Chairman of the Federal Reserve Board) and Mark W. Watson, as quoted in the Time magazine, ‘Even though the U.S. economy had improved substantially in recent years, Democrats lost decidedly in many sections of the nation.

Democrats’ failed to excite voter support, partly because average American workers had seen little or no personal economic improvement in the years of the Obama presidency and Democratic influence in Washington’.

So what exactly has President Obama achieved and how has he handled what still remains the biggest global economy – as of now? Continue reading

Money Astronomy

Submitted by Pater Tenebrarum  –  The Acting Man Blog

Sovereign Bond Buying by ECB No Longer Taboo

Reuters reports that the governor of Belgium’s central bank and ECB council member Luc Coene has come out in support of full-fledged quantitative easing by the ECB in the form of sovereign bond purchases. Not surprisingly, he too is singing from the “deflation danger” hymn sheet:

“The European Central Bank should start buying government bonds to tackle poor investor confidence and low inflation in the euro zone, governing council member Luc Coene said in an interview published on Saturday.

The Belgian central bank chief said the bank had already waited too long, and that this could be one tool to spur economic activity in the 18-country euro zone and fight off deflationary pressures.

“In this context, the purchase of sovereign bonds could prove to be an effective tool,” he told La Libre Belgique.

“Since the beginning of 2014, we have systematically underestimated deflationary effects…if we were to find ourselves at the beginning of next year with negative inflation and fall into a deflationary spiral, the effects on the behavior of households and businesses could be very negative.”

Inflation in the single currency area was 0.3 percent year-on-year in November, well below the ECB’s headline target of inflation below, but close to 2 percent.

(emphasis added)

As we pointed out last week, the only central banker in Europe who hasn’t yet completely lost his mind over the alleged “danger” of the prospect of ever so slightly declining consumer prices is BuBa chief Jens Weidmann (see: “Mr. Nein” for details).

Moreover, prices are in fact not (yet) declining in the euro area overall. There are of course differences from country to country, with mildly declining prices recorded in several of the “crisis countries” – which is to say,precisely the countries that most urgently need lower prices – while prices are rising rather rapidly in others (e.g. in Austria, the annual change rate in CPI is close to the 2% target that allegedly produces economic bliss). Continue reading