The US Exposure To The ‘Goods Economy’ Remains

Submitted by Jeffrey Snider  –  Alhambra Investment Partners

The ISM for August was the lowest reading since the taper drama of 2013. At just 51.1, there isn’t any real basis for suggesting the manufacturing sector is even expanding (no matter what these sentiment surveys claim about that 50 dividing line). The “correct” interpretation is one which discards the exact figure for the relativism. For once, media commentary was in the ballpark:

Manufacturing in the U.S. expanded in August at the slowest pace since May 2013 as anemic demand from emerging markets such as China translated into leaner factory order books.
The Institute for Supply Management’s index fell to 51.1, lower than the Bloomberg survey median, from 52.7 in July, a report from the Tempe, Arizona-based group showed Tuesday. A measure of exports matched the weakest reading since April 2009.
“It raises a warning flag about the outlook,” said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York. “We’re going to have an inventory adjustment and, on top of that, weak exports are going to remain a weight. We’ll see a period of time when manufacturing is soft.”

With the direction for manufacturing established, what’s left is arguing about the degree of adjustment that is, in time, absolutely going to take place. The driving imbalance remains inventory which, in the context of sluggish and even contracting sales, suggests to me something far more than “soft.” And that view was formed even before the second “dollar” wave fully crested. I don’t think the sales imbalance from that is yet revealed, though the updates in manufacturing from the regional Fed surveys suggest it’s getting quite serious. Continue reading

US Credit Growth – the First Cracks?

Submitted by Pater Tenebrarum  –  The Acting Man Blog

Inflationary Bank Lending and Money Supply Growth

Given that there is currently no “QE” program underway – with the exception of the reinvestment scheme designed to prevent the Fed’s balance sheet from shrinking (if it were to shrink, the money supply would decline as well) – money supply growth depends primarily on the amount of fiduciary media created ex nihilo by commercial banks.

Putting it differently, it depends on the growth in bank lending, since new uncovered deposit money comes into being by the extension of credit by banks. This deposit money is a money substitute that is only partially covered by standard money, or potential standard money (i.e., bank reserves). However, it has to be regarded as part of the money supply, given that it is used for the final payment of goods and services. From the perspective of its users, it is money.

financial-bubble-credit

Photo credit: .Kai

Since the crisis of 2008 and the collapse of the mortgage credit bubble, the following trends have been in evidence: lending to corporations has quickly reached growth rates usually associated with boom conditions. Consumer lending has by contrast been more subdued, with mortgage credit growth not surprisingly only very slowly moving back into positive territory. Most of the acceleration in bank lending could be observed once “QE” was tapered and ended – as a result, broad US money supply growth has remained brisk, even though it is far below its peak levels of recent years. Continue reading

Europe’s Refugees Are A Global Crisis

Submitted by Raúl Ilargi Meijer  –  The Automatic Earth


Dorothea Lange Depression refugee family from Tulsa, Oklahoma 1936

At the moment I start writing this, leaders of European nations are in a meeting in which they talk about refugees that, though it was announced over a week ago, was nevertheless labeled an ’emergency’ meeting. The only thing that truly tells you is that Europe still refuses to see the refugee situation as an emergency. And that’s not just semantics.

Of course there’ll be all sorts of bickering about the difference between migrants and refugees, and tons of words about how “we” should separate the two, and send people back, and strengthen European borders, and fight the human smugglers. None of which addresses reality, or at least at best a tiny sliver of it.

“Smugglers” are not the problem, it’s the people they “smuggle” that are. Or perhaps we should turn that around and admit that in fact it’s the European leaders who are the problem. It’s they who lack any courage or vision, or even a basic understanding of what is going on.

Angela Merkel has gotten a lot of accolades when she opened Germany’s borders to Syrians, even though that only lasted a few days. But people seem to forget that she is Europe’s most powerful politician, and that makes her responsible for a lot of the drowned children who lose their lives on a daily basis in a small stretch of the Mediterranean between Turkey and Greece.

Merkel should have acted much faster. She’s just as culpable as all the other jokers in Brussels and various EU capitals. They all were, and still are, hoping this issue would go away by itself. Instead, the issue has only just started, and the whole continent is woefully unprepared to this day.

German paper Die Welt ran a story this weekend (in German) that detailed how Merkel and her government were warned in Q1 by the German federal police (Bundespolizei) that a million refugees would be coming to Germany in 2015. And did nothing. The paper didn’t provide a precise date, but Q1 ended close to 6 months ago, so we know Merkel et al could have acted on this information -and prepared- at least half a year ago.

Have they? Given the chaos that developed within a few days of allowing refugees to enter the country, our money’s on a resounding NO. So those portraits we’ve seen with Angela dressed up as Mother Teresa can now be filed away as ludicrous. Continue reading

Il Fatto Quotidiano interview on M. Renzi’s ‘comment’ & my reply

Submitted by Yanis Varoufakis  –  The Yanis Varoufakis Blog

FATTO QUOTIDIANO page of my interview - 23 SEP 2015Italian daily Il Fatto Quotidiano just published an interview with me regarding PN Renzi’s recent comments on my “removal” and my reply to him. Here are is the original Q&A in English.
1. The Italian premier Matteo Renzi has said “sto Varoufakis se lo semo tolti” (we got read of Varoufakis). Your replied was to say that what it was lost was democracy, not Varoufakis. A lot of people are expecting to know which your next step will be . Are going to continue in politics in Greece?
One thing I learned in the past year is that we need a pan-European movement to democratise the Eurozone. Our national parties cannot achieve this either through national politics or through flimsy alliances at the level of the European Parliament. We need a pan-European network with a simple objective: To democratise the euro! This is what Europe needs desperately today. This is what I am working towards, together with many other from across Europe. So, yes, I shall continue in politics in Greece and in Europe.
2. Renzi is the face of the new social-democracy in Europe, young face for old politics, has Tsipras become like him?
 
No, I do not think so. Alexis knows better. What he must watch out for is the insidious process that can lead to mutations when one acquiesces to non-viable policies devised by faceless Brussels-Frankfurt bureaucrats for the purposes of maintaining their own authority. Matteo Renzi knows well what I an referring to.
3. It seems nobody can stand against Merkel’s rules. Is there any alternative? Is it the moment to create a strong European anti-austerity movement?
 
The problem with the Chancellor’s rules is that they cannot be implemented, even if we want to. And this is the conundrum that, again, Mr Renzi knows well: Italy’s France’s, Greece’s (etc.) governments are forced to clash either with the established “rules” or with… reality. And since reality is ruthless, the result is insoluble crisis.

Continue reading

Clueless Carly – Crony Capitalist Warmonger With Flash Cards

Carly Fiorina proved at least one thing last week. Namely, you don’t have to be a career GOP politician to come across as a war-mongering neocon and abortion-bashing statist demagogue. She took the stage fully formed as a frightul modern-day Torquemada, threatening to bring fire and brimstone down on anyone running afoul of her righteous indignation and crystal clear grasp of the Truth.

That included about everyone on the world stage, save for the presumably sainted Bibi Netanyahu. As for the others, Putin was to be given the silent treatment and a stiff dose of NATO encirclement, while Iran was to be occupied by US inspectors at “every military and every nuclear facility…….. anytime, anywhere……”

In trying to sound like she actually knows something about national security policy there is not a single neocon shibboleth that she didn’t name check, nor any possibility for bolstering Washington’s military might she failed to mention:

Having met Vladimir Putin, I wouldn’t talk to him at all. We’ve talked way too much to him…….What I would do, immediately, is begin rebuilding the Sixth Fleet, I would begin rebuilding the missile defense program in Poland, I would conduct regular, aggressive military exercises in the Baltic states. I’d probably send a few thousand more troops into Germany. Vladimir Putin would get the message…..We could also, to Senator Rubio’s point, give the Egyptians what they’ve asked for……..We could give the Jordanians what they’ve asked for…bombs and materiel. We have not supplied it…We could arm the Kurds.

Yada yada. If you thought Fiorina was actually running for CEO of the military-industrial complex, you would not necessarily be wrong. After the above riff, she was just getting warmed-up:

We need the strongest military on the face of the planet, and everyone has to know it. And, specifically, what that means is we need about 50 Army brigades, we need about 36 Marine battalions, we need somewhere between 300, and 350 naval ships, we need to upgrade every leg of the nuclear triad…….we need to reform the Department of Defense, we need as well… …to invest in our military technology, and we need to care for our veterans so 307,000 …aren’t dying waiting for health care.

Ok, Carly has a distinct facility for memorizing flash cards. But here’s one she missed. Contrary to her suggestion from the debate transcript below, the Russians did not just show up in Syria last week because Iranian General Suleimani recently flew to Moscow. Continue reading

Confusion in Fantasy Land

Submitted by Pater Tenebrarum  –  The Acting Man Blog

Triangle Breakout Failure?

The stock market’s initial reaction to the FOMC announcement was interesting, to say the least. After receiving the umpteenth excuse as to why rates can still not be raised, coupled with a promise that they eventually will be, the market initially rallied on Thursday. And why wouldn’t it? More free money is good for stocks, right?

 

800px-Marriner_S._Eccles_Federal_Reserve_Board_Building

The Eccles Building, home of the FOMC – Meetings

Photo credit: AgnosticPreachersKid

The rally only lasted for one hour though. In the final hour of trading, the market sold off and closed in negative territory. On Friday, the sell-off intensified somewhat. By Friday’s close, the SPX had lost more than 60 points from its Thursday intra-day high, a sizable chunk over such a brief time period. Below is a chart showing the triangle from which it initially broke out to the upside (ahead of the announcement) and a Fibonacci grid – resistance was encountered right between the traditional 50% and 61.8% retracement levels.

SPX fibo gridS&P 500 Index, daily: the breakout from the triangle seems to have failed – click to enlarge. Continue reading

Fed’s “Doom Loop” Locks Us On Course for Another Crisis

Submitted by William Bonner, Chairman – Bonner & Partners

Too Much of a Good Thing

PARIS – We’ve seen at least three articles explaining why the Fed failed to increase interest rates last Thursday. One says Goldman Sachs is calling the shots now. Another says China has the Fed under its thumb. Still another claims the Fed is a victim of its own policies and is now stuck in a “doom loop”…

All of them are right. All of the powers that be – including the Fed – want the party to continue. All know that if the Fed starts going around and turning off the lights and unplugging the music, the party is over.

romansPartying in ancient Rome – against the wishes of the guests, this party ended too …

Painting by Thomas Couture

As we tried to understand in our recent book, Hormegeddon: How Too Much of a Good Thing Leads to Disaster. Public policies create their own support. When they’re big enough, and go on for long enough, they become unstoppable. Continue reading

Of Eurodollars And Asian Dollars, That Is The Question

Submitted by Jeffrey Snider  –  Alhambra Investment Partners

Copper prices are getting pummeled this morning. Since copper is somewhat unique in its setting between wholesale finance and the real economy, but most especially what might fairly be termed the Asian dollar, it functions not just as a “dollar” proxy but perhaps more focused than that. We can assume by copper’s selloff today (the price for October futures delivery is down more than 9 cents to barely above $2.30 again) that wholesale finance surrounding China’s connection to the “dollar” is again disturbed (and disturbing).

As noted yesterday, that would not be clear via the SHIBOR rate since the PBOC has certainly taken to targeting at least its O/N maturity. Today, again, O/N SHIBOR barely moved, setting at 1.901% (the last eight trading days are, in order: 1.899%, 1.9001%, 1.899%, 1.899%, 1.90%, and now 1.901%).

ABOOK Sept 2015 Asiandollar COpperABOOK Sept 2015 Asiandollar SHIBOR

Continue reading

The Daily Debt Rattle

Submitted by Raúl Ilargi Meijer  –  The Automatic Earth

Signs Point To Deepening China Distress (FT)
Shadow Finance Expansion by Chinese Banks Deepens Credit Mystery (Bloomberg)
China Flash PMI Falls To Lowest Since May 2009 (CNBC)
China’s Workers Stumble as Factories Stall (WSJ)
Xi Jinping Defends China Stock Market Interventions On First US Visit (Guardian)
China Has A Message Markets Don’t Understand (CNBC)
VW Scandal Caused Nearly 1 Million Tonnes Of Extra Pollution (Guardian)
California Tests To Include Larger Diesel Engines From Audi, Porsche (Reuters)
VW Emissions Fallout Spreads To Asia (FT)
VW Emissions Investigations To Widen to Entire Auto Industry (WSJ)
VW Emissions Cheating Affects 11 Million Cars Worldwide (WaPo)
Europe Stumbles Towards A Migrant Plan (BBC)
EU’s East-West Rift Exposed In Refugee-Sharing Plan (Reuters)
Hungary Mobilizes Troops, Prisoners, Jobless To Fence Out Refugees (Reuters)
Hollande Wrongfooted on Refugee Surge, Fearing Le Pen’s Rise (Bloomberg)
The Fed Just Made A Gigantic Mess (CNBC)
Economic Policy Often Seems To Have Little To Do With Economists. Why? (Ind.)
English Farmland Prices Double In Five Years (Guardian)
Alaska Fossil Find Points To New ‘Lost World Of Dinosaurs’ (Guardian)

Read much more here: Debt Rattle September 23 2015 – TheAutomaticEarth.com