US DOLLAR WILL DEVALUE BY 20% TO 30%

Submitted by J.C. Collins  –  philosophyofmetrics

A U.S. dollar note (L) and a Chinese yuan banknote are seen through a pair of spectacles in this file picture illustration taken in Taipei October 13, 2010. Chinese banks must rate their clients' risk of criminal conduct on a scale of 1-5 as part of the central bank's moves to curb money laundering and fraudulent transactions estimated at hundreds of billions of dollars a year. The new rules come as some experts cite China as the world's biggest source of 'dirty' funds and as it faces growing foreign pressure to scrutinise its financial links with North Korea and block cash transfers tied to Pyongyang's nuclear ambitions. Picture taken October 13, 2010. To go with Exclusive CHINA-LAUNDERING/RISK-RATINGS   REUTERS/Nicky Loh/Files (TAIWAN - Tags: BUSINESS)I’m just going to come right out and state it with absolute clarity.  Gold will continue to depreciate.

Not only that, but the Fed will continue with the planned incremental interest rate increases which are set to begin at any time now.  The normalization of monetary policy is considered impossible by many analysts and economic commentators. This is mainly because the larger play, being the transformation of the monetary framework, is not fully understood.

The incorrect assumption is that the US dollar will be replaced as the international reserve currency by the Chinese yuan, which in turn will cause the USD denominated assets (Treasuries) in the foreign exchange reserve accounts around the world to be “dumped”, leading to a flood of dollars coming back to American shores and causing the ever-threatened and often-predicted hyper-inflation.

It is concluded that this hyper-inflation will see a mad rush into gold and silver, leading to upward valuations in multiples of thousands.  With so many other alternatives developing (explained below), does this seem like a realistic scenario?

The volatility surrounding everything from commodity prices, exchange rates, sovereign debt, and equity markets, are jumbled together in passionate conclusions of doom and gloom.  We are told by many that the only viable means of protecting ourselves is to purchase more and more gold, which continues to decrease in value more and more.

Common-sense would strongly suggest that there are multiple paths forward from the point where we currently are located.  Though gold has its own unique and valuable qualities, and should be held in any strategically diversified portfolio, going “all-in” on one investment path is both harmful and irresponsible by those who promote such goofiness.

Let’s explore this in more detail. Continue reading

Give All Refugees A Free Ticket To Brussels

Submitted by Raúl Ilargi Meijer  –  The Automatic Earth


Russell Lee Migrant family in trailer home near Edinburg, Texas Feb 1939

A few days ago, I joked to Nicole that Paddypower should by now have a bet open on how much longer the Schengen open border treaty will be valid in Europe. Didn’t check if they actually had one, mind you.

But it can’t be long anymore, so it wouldn’t be a big money maker even if it existed. I give it a few days at most. Italy just announced it wants guards at Brennero, one of its main border posts with Austria. One down, a few hundred to go, and they may go at a rapid clip.

Europe’s countries are not each other’s enemies yet, but they will shut borders. Germany pulled a fast one yesterday by telling Hungary to stop the trains from rolling west, but now Budapest has a big problem. They should have just allowed the refugees to board the trains and leave. Put them on a train, give them food and drink and make them first Austria’s and then Germany’s problem.

And Germany’s a fine place for the refugees to go, since Berlin is sort of the de facto capital of the EU, at least when that seems a profitable position to be in, but it’s not the perfect place to go, because Merkel and her ilk will denounce their leadership claims whenever that looks more beneficial in the polls.

Merkel and Schäuble can screw over Greece three ways to Sunday, but they’re like this Bill Pesek headline on Bloomberg two weeks ago about the Chinese leadership that said something to the effect that they like the power but not the responsibility. That’s at least as true for Europe as it is for Beijing.

And that makes it hard to call any supposed leaders on any of their responsibilities. It’s also why thousands of refugees have drowned and not one of the ‘leaders’ have lifted a finger. They’re there for the power, not the other stuff.

And that, as I’ve said a hundred times before, is embedded in the EU model, in its design, its regulations, its laws, the whole shebang. When I read that Yanis Varoufakis wants a pan-European anti-austerity movement, I’m thinking he doesn’t understand how it’s set up. The whole bureaucracy was made to resist change, democracy, and any challenges to its ‘belief’ system.

It’s no use saying the EU should do something or another in the refugee crisis, because it won’t. And what it may do will always be way too late and way too little. It’s how it was structured. The EU is geared towards accumulating more power, not solving its own problems. Continue reading

Factory Orders Starting To Register the True Risks

Submitted by Jeffrey Snider  –  Alhambra Investment Partners

Factory orders gained slightly month-over-month on a seasonally-adjusted basis but collapsed in year-over-year unadjusted terms. The latter was due, only in part, to base effects of the huge surge in July last year for Boeing. Even factoring that somewhat ill-suited comparison, factory activity is still way down and, as other indications, only undergoing a slight pause in the downward trend. Even in the seasonally-adjusted series, factory orders for July registered about the same as March 2012 which isn’t in any way a significant improvement no matter how hard one might look for the bright side:

Orders to U.S. factories posted a modest gain in July, helped by the biggest rise in motor vehicles orders in a year and a solid gain in a category that tracks business investment plans.

And:

New orders for U.S. factory goods rose for a second straight month in July on strong demand for automobiles, which could help to keep manufacturing supported as it deals with a strong dollar and softening global demand.

Those narratives are supposed to apply to what is still only a growing economic hole. It does not follow that because it is not immediately getting worse that it must be getting better, as no contraction or crisis follows a straight line. What matters for setting economic direction is the deviation from trend and especially how long and intense that deviation remains. On that score, the extrapolations are not at all favorable (including how, to very little mention, orders for non-durable goods actually fell, seasonally-adjusted, 1.3% in July M/M).

ABOOK Sept 2015 Factory Orders SA LongerABOOK Sept 2015 Factory Orders SA Shorter

Continue reading

A Perfect Storm?

Submitted by Pater Tenebrarum  –  The Acting Man Blog

Greece is Still Lying in Wait …

We haven’t written much about Greece recently, but there have actually been a few developments worth paying attention to. Several easily foreseeable things have indeed happened in the meantime: Prime minister Tsipras felt forced to call a snap election after securing the first bailout tranche, the radical Marxist faction of Syriza led by Panaghiotis Lafazanis has split from the party, and so has its “youth wing”. In the meantime, the Greek economy has predictably nosedived as a result of the banking system freeze (Mish reports the grisly details here).

persto

The reason why we feel we should mention these developments at this juncture is an article that appeared at Zerohedge yesterday: Third Greek Bailout Suddenly In Jeopardy. Alexis Tsipras can no longer be certain that he will receive a majority of the vote. In fact, the decline in support for the Syriza rump he now leads has been quite significant, and as a result, the New Democracy party (sans Antonis Samaras these days) has been able to close the gap between itself and Syriza considerably. Here is a chart from the WSJ showing the most recent poll results, including the approval rating of Mr. Tsipras – as every incumbent in the middle of an economic crisis, he is losing support quite fast.

tablemodGreek snap election polls- the Syriza rump led by Alexis Tsipras still leads, but its lead is melting like butter in the sun – click to enlarge. Continue reading

Part I of ‘America – The Good, The Bad, and The Ugly’

Submitted by Thad Beversdorf  –  The First Rebuttal Blog

I wanted to start with The Bad and then move on to The Ugly so that I can end on a positive note with The Good.

So over the past couple days I’ve read several articles in which someone who is publicly an adamant proponent of righteous behaviour was exposed as being a complete hypocrite (think essentially any politician).  And this really got me to thinking about the epidemic that has befallen America.  We no longer have anyone in positions of trust acting with any sense of integrity.  Our policymakers, bankers, corporations, unions, etc., all of these institutions have become nothing but a mechanism to enhance the personal positions of those who have the ability to directly or indirectly control the actions of those institutions.

By the late 1990’s the world was in the most prolonged period of global peace since WWII.  Accordingly, military budgets around the world were being slashed.  And so those with the powers that be decided the world therefore required some new wars to ensure peace continued (not kidding that is exactly what they argued), as I evidenced in an article last year, The Most Essential Lessons of History that No One Wants to Admit.  Now the thing is, it’s not just politicians and policymakers that are devoid of any common decency these days but those who can manipulate every facet of our society.

Let’s look at central bankers for instance.  The other day David Stockman wrote a great article highlighting the ridiculousness of statements by the Fed Vice Chair, Stanley Fischer.  The point is Fischer is either out of touch, out of his mind or lying to us.  But it’s not just at the highest levels that we see this type of human decay.  Not at all.  Let’s look to an area that so many of us know intimately, the financial services sector.  Now there are a lot of examples we could use here but let’s look at a particularly interesting firm infamous for its culture of indiscretions.  Jefferies LLC, which used to be Jefferies & Company Inc., is a mid tier investment bank, similar to Goldman Sachs in that it has no retail branches. Continue reading

This Is Not A Retest – It’s A Live Bear!

By the lights of bubblevision Tuesday’s plunge was just a bull market “retest” of last week’s lows, which posted at 1867 on the S&P 500. As is evident below, the test was passed with 80 points to spare at today’s close.

So according to the talking bull heads—–CNBC had three of them on the screen at once about 2pm—–its time to start nibbling on all the bargains. Soon you may even want to just back up the truck.

You can supposedly see it right here in the charts. The market hit the October 15 Bullard Rip low last week, and has gone careening upwards where it is now allegedly forming a new bottom around 1950. Remember, its a process. Be patient.
^SPX Chart

^SPX data by YCharts

Not on your life! The world is heading into an unprecedented monetary deflation——with output and trade falling nearly everywhere. That implosion is already rumbling through Canada, Mexico, Brazil, Australia, South Korea, Malaysia, Indonesia, Russia, Japan, the Persian Gulf oil states and countless lesser economies in between. And at the center, of course, is the unraveling of the Great Red Ponzi of China. Continue reading

QE One More Time; All Risk, No Reward

Submitted by Jeffrey Snider  –  Alhambra Investment Partners

The re-crash of oil prices during the recent “dollar” wave/run were hard on almost everyone involved, economically and otherwise, but perhaps not more so than the ECB and its QE proponents. Despite being attributed with every minor upward move that could plausibly be assigned, for all the hype there has been very little actual movement anywhere of significance. The virtuous circle was intended as: liquidity > lending > economy; which would be confirmed by rising “inflation” given the orthodox treatment of official inflation as if it were synonymous with real downstream growth (particularly wages).

If you were to view the economy backwards in that formation, you might be forgiven for thinking that there never was any QE in the first place with its impact so utterly undetectable. Clearly, the European economy has gone nowhere so far and, one step down the chain, conspicuously without any actual burst of lending (beyond exclusively financial rearrangements to take advantage of the ECB’s banking “generosity”) and a liquidity system that appears increasingly unsettled if not fully grotesque.

That has left only “expectations” of QE’s success with which to suggest that outcome. It began almost straight away, in March, even before QE’s launch when inflation breakevens and calculated forward rates jumped. That was, of course, taken as proof QE had the economic performance already in the bag. Continue reading

“No Safe Assets Anymore” So “Focus On Precious Metals” – Faber

Submitted by Mark O’Byrne  –  GoldCore

DAILY PRICES

Today’s Gold Prices: USD1130.05, EUR 1005.88 and GBP 739.63 per ounce.
Yesterday’s Gold Prices: USD 1140.00, EUR 1010.73 and GBP 746.46 per ounce.
(LBMA AM)

“No Safe Assets Anymore” So “Focus On Precious Metals” – Faber

Respected economist and historian and the editor of the ‘Gloom, Boom & Doom Report’ Marc Faber warned on Bloomberg TV’s Market Makers yesterday that there are now “no safe assets” including deposits and said that he is focusing “on precious metals.”

In another informative and interesting interview, Faber spoke about dangerous central bank policies and the stupidity of QE, the cause of inequality including competitive currency devaluations and warned that even deposits are no longer safe.

Marc Faber - No Assets Safe Anymore

Marc Faber – There Is No Safe Asset Anymore (via Bloomberg TV) Continue reading

The Daily Debt Rattle

Submitted by Raúl Ilargi Meijer  –  The Automatic Earth

Syrians are the Famine Irish of the 21st Century (Glavin)
Shocking Images Of Drowned Syrian Boy Show Tragic Plight Of Refugees (Guardian)
Family Of Drowned Syrian Boy Had Been Rejected By Canada For Refugee Status (NP)
Germany Targets Billions in Refugee Aid by Late September (Bloomberg)
Italy Revives Border Checks (Deutsche Welle)
European Police ‘Scarier Than ISIS Terrorists’ (Finian Cunningham)
The End Of A Flawed Globalisation (Guardian)
Devaluation Strengthens China’s Hand at IMF (WSJ)
Wall Street Surges As Turbulence Becomes The Norm (Reuters)
We Are In A Great Transition Period (Ron Paul)
Wall Street and the Military are Draining Americans High and Dry (Edstrom)
The Chinese Bubble (Beppe Grillo)
Why The Federal Reserve Should Be Audited (John Crudele)
Marc Faber Warns “There Are No Safe Assets Anymore” (ZH)
Giant US Pension Fund To Sell 12% Of Stocks In Fear Of “Another Downturn” (WSJ)
Pimco Assets Drop Below $100 Billion For The First Time Since ’07 (Reuters)
House Sales Plunge In Calgary As Energy Sector Job Losses Mount (Globe and Mail)
Tens Of Thousands Of Greek Companies Fear Closure In Coming Months (Kath.)
Lucky Britain To Win 21st Century Jackpot From Carbon Capture (AEP)
Two More European Countries Ban Monsanto GMO Crops (EcoWatch)

Read much more here: Debt Rattle September 3 2015 – TheAutomaticEarth.com

The danger of eliminating cash

Submitted by Alasdair Macleod – FinanceAndEconomics.org

In the early days of central banking, one primary objective of the new system was to take ownership of the public’s gold, so that in a crisis the public would be unable to withdraw it.

Gold was to be replaced by fiat cash which could be issued by the central bank at will. This removed from the public the power to bring a bank down by withdrawing their property. A primary, if unspoken, objective of modern central banking is to do the same with fiat cash itself.

There are of course other reasons for this course of action. Governments insist that they need to be able to trace all private sector transactions to ensure that criminals do not pursue illegal activities outside the banking system, and that tax is not evaded. For the government, knowledge of everything individuals do is necessary control. However, in the monetary sense, anti-money laundering and tax evasion are not the principal concern. Central banks are fully aware that the financial system is fragile and could face a new crisis at any time. That’s why cash in their view must be phased out.

A gold run against a bank or banks, in the ordinary course of banking, is no longer a systemic threat, but the possibility that depositors might queue up to withdraw physical cash from a bank in which they have lost confidence is very real. Furthermore it is a public spectacle associated with monetary disorder of the most alarming sort. It is far better, from a central banker’s point of view, to only permit the withdrawal of a deposit to be matched by a redeposit in another bank. That way, a bank run can be hidden through the money markets, with or without the intervention of the central bank, and the deflationary effects of cash hoarding are avoided.

This is commonly understood by followers of monetary matters. What has not been addressed properly is how a cashless economy behaves in the event of a significant alteration in the public’s preferences for money relative to goods. Normally, there is a balance in these matters, with the large majority of consumers unconcerned about the objective exchange-value of their money. There are a number of factors that can change this complacent view, but the one that concerns us for the purpose of this article is the speed at which the relationship between the expansion of money and credit and the prices of goods and services can change. Continue reading