Change They Don’t Believe In

Submitted by James Howard Kunstler  –  www.kunstler.com

The unfortunate consequence of not allowing the process of “creative destruction” to occur in banking and Big Business is that the historic forces behind it will seek expression elsewhere in the realm of politics and governance. The desperate antics of central banks to cover up financial failure can’t help but provoke political upheaval, including war.

It’s a worldwide phenomenon and one result will be the crackup of economic relations — thought by many to be permanent — that we call “globalism.” The USA has suffered mightily from globalism, by which a bonanza of cheap “consumer” products made by Asian factory slaves has masked the degeneration of local economic vitality, family life, behavioral norms, and social cohesion. That crackup is already underway in the currency wars aptly named by Jim Rickards, and you can bet that soon enough it will lead to the death of the 12,000-mile supply lines from China to WalMart — eventually to the death of WalMart itself (and everything like it). Another result will be the interruption of oil export supply lines.

The USA as currently engineered (no local economies, universal suburban sprawl, big box commerce, despotic agribiz) won’t survive these disruptions and one might also wonder whether our political institutions will survive. The crop of 2016 White House aspirants shows no comprehension for the play of these forces and the field is ripe for epic disruption. The prospect of another Clinton – Bush election contest is a perfect setup for the collapse of the two parties sponsoring them, ushering in a period of wild political turmoil. Just because you don’t see it this very moment, doesn’t mean it isn’t lurking on the margins.

This same moment (in history) the American thinking classes are lost in raptures of techno-wishfulness. They can imagine the glory of watching Fast and Furious 7 on a phone in a self-driving electric car, but they can’t imagine rebuilt local economies where citizens get to play both an economic and social role in their communities. They can trumpet the bionic engineering of artificial hamburger meat, but not careful, small-scale farming in which many hands can find work and meaning.

Getting October 15 Right, Even to Crude

Submitted by Jeffrey Snider  –  Alhambra Investment Partners

It is becoming settled wisdom that the most dangerous aspects of any current financial contours are due almost entirely to some version of HFT or electronic trading. That is undoubtedly true, as far as it might relate to one aspect, but to claim that computers are the single biggest source, let along only source, of financial impropriety is obtuse. The only question is whether that is intentional.

Last week was replete with warnings about liquidity but almost exclusively upon computer trading in treasuries. As with “evolution” in other “markets”, UST traders have left almost entirely the cash market and are dealing “depth” more so in futures. Such a shift isn’t obvious in why liquidity would falter, especially on October 15 which seems to form the basis of so many of these anti-computer tirades. Convenience is, of course, the first parameter necessary for the scapegoat.

The misconceptions about October 15 are growing in that respect, and I can’t help but think that is the goal. On the contrary, so many aspects of “dollar” function seem to have ruptured at that point so that even if HFT was a problem in the opening hour of that trading day, it was but a symptom of far deeper and maybe even intractable instability.

We know this without much ambiguity because of various market breaks documented all over the funding space. Perhaps the biggest and most relevant, tying economic concerns with financial, was in crude oil.

Long-term U.S. crude oil markets flipped into contango this week for the first time in years, as the dizzying descent in prices unleashed a wave of hedging by oil producers fearing prices may not stay above $80 a barrel for long.
Contango, in which longer-dated futures are more expensive than near-term contracts, has yet to take hold at the prompt end of the oil futures curve, from the front month, November 2014, well into 2015.

That was written into an article dated October 15, 2014, published at 9:08 pm after “it” was all over – or so everyone seems to want you to believe. The crude oil futures curve is most “naturally” in backwardation as it represents a real hedge for producers (as opposed to bond hedges and other financial elements that are removed expressions of something else; crude futures are actually tied to physically clearing quantities of a real substance). The break in the “dollar” that started back in late June had already pushed the curve flatter by October, but it was the drama of those first two weeks, culminating in the 15th, that radically altered the financial expression of clearing crude oil supply/demand.

Modern-Day Monetary Cranks and the Fed’s “Inflation” Target

Submitted by Pater Tenebrarum  –  The Acting Man Blog

One Bad Idea After Another

Ben Bernanke is frequently in the news these days. The latest occasion concerns his opinion on the Fed’s “inflation” target, i.e., the target for the speed at which money should be debased relative to consumer goods in order to finally attain centrally planned economic nirvana.

Price inflation is currently deemed to be “too low” by our bien pensants, in spite of the fact that the broad US money supply TMS-2 has more than doubled since 2008 (as of March, it is very close to $11 trillion, up from $5.3 trn. in early 2008). If recent CPI data are to be believed (which requires a bit of a leap of faith), consumers may actually get slightly more goods and services for their money henceforth. What an unimaginable horror!

CPI dips ever so slightly into negative territory year-on-year – the nightmare of central planners around the world – click to enlarge.

Bloomberg reports that Ben Bernanke has an idea how to combat this terrifying development. Obviously, with the CPI’s rate of change dipping a few basis points into negative territory, the end of the world is practically at hand, so something needs to be done pronto.

Bernanke delivered his remarks at a conference sponsored by another economic central planning institution, the IMF. The people running this surplus to requirement bureaucratic vampire den are dreaming of the day when the IMF will become the global central bank, in line with Keynes’ “Bancor” idea. This would allow fiat money inflation on a nigh unprecedented scale, as currencies would no longer compete and be comparable. However, we digress.

Here is Bernanke:

“Former Federal Reserve Chairman Ben S. Bernanke suggested that he would be open to an increase in the central bank’s 2 percent inflation target.

“I don’t see anything magical about targeting 2 percent inflation,” he told a conference in Washington sponsored by the International Monetary Fund. His comments come as the Fed and other major central banks are struggling to prevent their economies from falling into a disinflationary trap of diminished expectations. IMF officials have proposed that the monetary authorities raise their inflation goals to help limit the danger of future deflation.

Fed Vice Chairman Stanley Fischer and European Central Bank Executive Board member Peter Praet are slated to discuss the issue Thursday at George Washington University in a session titled “The Elusive Pursuit of Inflation.” The session is being held in conjunction with the spring meetings of the fund and the World Bank.

The U.S. central bank adopted its 2 percent goal in January 2012 when Bernanke was chairman. It has fallen short of meeting that objective for 34 straight months. In February, inflation, as measured by the personal consumption expenditure price index, the Fed’s preferred gauge, was 0.3 percent.

Some economists, such as professor Laurence Ball of Johns Hopkins University in Baltimore, have called on the Fed to raise its target to 4 percent. Others, such as Scott Sumner of Bentley University in Waltham, Massachusetts, argue that the Fed should adopt a goal for the growth of nominal gross domestic product, rather than focusing on a price index.”

Greece and its Global Partners – A talk at the Brookings Institution, 16th April 2015

Submitted by Yanis Varoufakis  –  The Yanis Varoufakis Blog

Greek Debt Crisis Coming To Head – Contagion?

Submitted by Mark O’Byrne  –  GoldCore

– Greece Rapidly Running Out Of Cash – Soon Must Fold To Troika Or Default
– IMF Rebuff Greek Suggestion To Delay Repayments
– ECB’s Draghi Warns Potential “Grexit” Puts EU In “Uncharted Waters”
– Despite Threats, Greece Remains Defiant, Won’t “Budge On Red Lines”
– ECB Considering A “Second Currency” For Greece

The Greek government and its “partners” appear to be reaching the end of the road in their negotiations to release the final €7.2 billion of its €240 billion bailout deal.

Eurozone countries are demanding that the new Greek government produce a list of reforms that prove its credibility before releasing euros to them. However, Finance Minister Varoufakis is suggesting that Greece will not retreat from its red lines and did not rule out a referendum or early polls if talks remain deadlocked.

Greece is rapidly running out of cash with which to pay public sector wages, pensions and welfare payments. At the same time Greece is expected to pay €930 million which is due over the next few weeks.

It would appear as though the moment of reckoning is fast approaching. If an agreement has not been reached by Friday when the Eurogroup of Finance Ministers meet in Riga it is quite likely that Greece will default.

The Greek government will likely maintain the support of the Greek population as they have have engaged with the Troika to the bitter end. If and when Greece finally defaults it will be able to place the blame squarely at the feet of the European elites.

“We will not sign up to targets we know our economy cannot meet by means of policies that our partners should not wish to impose,” said Varoufakis.

“We will compromise, we will compromise and we will compromise in order to come to a speedy agreement  … But we are not going to end up ‘being’ compromised. This is not what we were elected for.”

Ben Bernanke – The Courage to Cash In

Submitted by Pater Tenebrarum  –  The Acting Man Blog

Ben “I Didn’t See It Coming” Bernanke Hired by Big Hedge Fund

Ben Bernanke is not only blogging now and thereby making an unwelcome contribution to lowering the citizenry’s aggregate economic intelligence, he has also decided to once again follow in the footsteps of his predecessor, “Maestro” Alan Greenspan, by joining a hedge fund. Bernanke is calling in some markers and is about to cash in by becoming an advisor to the Citadel Group, the world’s most highly leveraged large hedge fund and HFT shop.

In an initial reaction our colleague Ramsey Su noted that Bernanke also has a book coming out soon, which is entitled “The Courage to Act”. According to Ramsey it would be more appropriate to re-title it “I Did Not See it Coming”. Needless to say, we would definitely agree with this title modification.

It seems rather obvious that Citadel isn’t hiring Bernanke for his prescience and forecasting prowess. To see why we are saying this, consider this collection of the former Fed chief’s economic forecasting gems:

Back when he was Fed chairman, Ben Bernanke frequently tried his hand at economic forecasting. This didn’t work out very well.

Beppe Grillo at the Salone Mobile Milan Furniture Fair 2015

Submitted by Beppe Grillo  – The Beppe Grillo Blog

“I am at the Milan Furniture Fair. It has 50 thousand visitors a day – 50% of Expò’s numbers – just at this event. In my view it’s organised in an extraordinary way.. You know me – I’m not overgenerous with praise – I’m angry with everyone – but – here I’ve given in! I’ve given in – on these great sofas – made by Italian artisans – and they are modelling their divans on the backsides of Chinese people – so I’ve had to put three sofas together so that I could sit down.

In my view, this is an event that really highlights who we really are.

We are people that don’t do miracles by walking on water but we are artisans that should be protected, because artisans are the backbone of our country. You know what we’re like with the small-scale entrepreneurs, with the medium-sized enterprises and so we have to be grateful, grateful to these great carpenters!

Where are the carpenters, the plumbers? Electricians, where are you? You have disappeared. We need to reconstruct this network of people working with their hands: this cannot be repeated. We must step back and make sure there is convergence of high tech with our art of creating things. We are inside a structure that no longer allows us to do stuff, either because there’s not the financing, or because of taxes. I’ve seen an artisan working away in secret. He said “don’t tell anybody that you’ve seen me working …”

We have to rethink our world so that we have the convergence of high tech with our SMEs: that’s something in our manifesto. But I haven’t come here to talk about politics. I’ve come here to walk on water. Just think of an artisan that has to walk on water in order to survive – otherwise – he’ll sink – and when he goes down he’ll find he’s up to his neck – but not in water …. Look after yourselves … Be good to everyone …. Thanks”Beppe Grillo

The Daily Debt Rattle

Submitted by Raúl Ilargi Meijer  –  The Automatic Earth

• World Braces for Taper Tantrum II Even as Yellen Soothes Nerves (Bloomberg)
• Caveat Creditor As IMF Chiefs Mull Unpayable Debts (AEP)
• Fed Crisis-Liquidity Function Reviewed for Potential Use by IMF (Bloomberg)
• Draghi Tells Euro Shorts To “Make His Day”, Again (Zero Hedge)
• Greece’s Varoufakis Warns Of Grexit Contagion (Reuters)
• Can Beijing Tame China’s Bull Market? (MarketWatch)
• China Cuts Bank Reserves Again To Fight Slowdown (Reuters)
• Why China’s RRR Cut Reeks Of Desperation (CNBC)
• China to Investors: Don’t Forget That Stocks Can Lose Money Too (Bloomberg)
• China Cracks Down On Golf, The ‘Sport For Millionaires’ (NY Times)
• China’s President Xi Jinping To Unveil $46 Billion Deal In Pakistan (BBC)
• You Do Need A Weatherman (Steve Keen)
• Auckland Property: Cashed-Up And Heading Off (NZ Herald)
• Secret Files Reveal the Structure of Islamic State (Spiegel)
• Russia Has Bigger Concerns Than Oil, Ruble: Deputy PM (CNBC)
• 5 Years After BP Spill, Drillers Push Into Riskier Depths (AP)
• US Army Commander Urges NATO To Confront Russia (RT)

Much more here: Debt Rattle April 20 2015 – TheAutomaticEarth.com