The Central Bankers’ Death Wish

This is getting just plain ridiculous. The robo-traders were raging to the tune of 300 Dow points Thursday after Mario Draghi confirmed that he actually is a complete monetary lunatic. And now that the People Printing Press of China has followed suit overnight, they are piling on for more.

In fact, Europe is stranded in economic stagnation because statist dirigisme and the massive crush of welfare state taxation and finance have ground enterprise and productivity to a halt. But Draghi says it’s all China’s fault, and that he will fix their dereliction with even more monetary madness:

In a news conference, Mr. Draghi stressed the “downside risks” to both economic growth and inflation arising from slowing growth in China and other large developing economies, as well as weak commodity prices.

These are the words of a slow-witted man who was born yesterday. That is, they evince an economic model that says every single year, month and day of prior history is irrelevant; and that regardless of how we got to the present moment the answer is always more heavy-handed central bank intrusion in the financial system in order to achieve an utterly bogus 2% inflation target.

In fact, the so-called slowdown in China is the best thing that ever happened to Europe, as is the present spot of unusually low consumer inflation. And there is no mystery as to why these things are happening.

China and the rest of the world have just come through a mind-pending credit binge which took global debt from $40 trillion in 1994 to $225 trillion at present. China was in the forefront of that binge, sporting a 56X gain in outstanding credit during the same two decade period (from $500 billion in 1995 to $28 trillion at present).

Global Debt and GDP- 1994 and 2014

The effect of that freakish $185 trillion debt eruption was a worldwide crack-up boom. It was initially manifested in a massive expansion of unsustainable debt financed consumption in the US and other DM economies and runaway fixed investment in China and the other EM economies which supply it. Continue reading

American Middle Class Is On The Endangered Species List

Submitted by Guest Contributor – Michael Snyder

51 Percent of Americans Make Less than $30,000 per year

October 22, 2015 “Information Clearing House” –  “End Of The American Dream” – We just got more evidence that the middle class in America is dying.  According to brand new numbers that were just released by the Social Security Administration, 51 percent of all workers in the United States make less than $30,000 a year.  Let that number sink in for a moment.  You can’t support a middle class family in America today on just $2,500 a month – especially after taxes are taken out.  And yet more than half of all workers in this country make less than that each month.  In order to have a thriving middle class, you have got to have an economy that produces lots of middle class jobs, and that simply is not happening in America today.

You can find the report that the Social Security Administration just released right here: .  The following are some of the numbers that really stood out for me:

38 percent of all American workers made less than $20,000 last year.

51 percent of all American workers made less than $30,000 last year.

62 percent of all American workers made less than $40,000 last year.

71 percent of all American workers made less than $50,000 last year.

That first number is truly staggering.  The federal poverty level for a family of five is $28,410, and yet almost 40 percent of all American workers do not even bring in $20,000 a year.

If you worked a full-time job at $10 an hour all year long with two weeks off, you would make approximately $20,000.  This should tell you something about the quality of the jobs that our economy is producing at this point.

And of course the numbers above are only for those that are actually working.  As I discussed just recently, there are 7.9 million working age Americans that are “officially unemployed” right now and another 94.7 million working age Americans that are considered to be “not in the labor force”.  When you add those two numbers together, you get a grand total of 102.6 million working age Americans that do not have a job right now.

So many people that I know are barely scraping by right now.  Many families have to fight tooth and nail just to make it from month to month, and there are lots of Americans that find themselves sinking deeper and deeper into debt. Continue reading

The Biggest Cost? Wasting Time

Submitted by Jeffrey Snider  –  Alhambra Investment Partners

There probably should be a cottage industry trying to figure out what Albert Einstein actually said or wrote quite against what is typically attributed to him (or Abraham Lincoln, Winston Churchill and many others). One such nugget purported from his genius was that compound interest is the most powerful force in the universe. That is how the sentiment seems to appear recently, though I have also seen a more direct “quote” in which Einstein may have put it, “Compound interest is the eighth wonder of the world. He who understands it, earns it…he who doesn’t pays it.” Einstein is also cited as having said, “When you got a reputation of a genius, you need get used to people misquoting you on all kinds of matters, even those which are as far away from your area of expertise as they can possibly be.”

So the very human logical fallacy of appeal to authority applies but does not necessarily blunt the forceful message of expression. It doesn’t really matter whether it came from Einstein’s brain, the meaning is well-taken and applicable. And since compounding is truly a function of time, that suggests time is a great force in the real world in consequence to finance even though it is often underappreciated. It takes almost no bearing on economics, however, particularly the modern orthodoxy that runs directly from John Maynard Keynes’ schoolyard solecism about how everyone dies.

In Europe, the HICP measure of “inflation” came out once more negative in September despite 6 months of completed PSPP (QE) and almost a year of monetary adventure in covered bonds that had once set commentary and expectations alight. Combined, the ECB has added nearly half a trillion euros under those programs and hasn’t moved the needle on lending let alone “inflation.”

The euro’s persistent rise came to a juddering halt after a European Central Bank policymaker voiced concerns about its ability to tackle inflation, raising expectations of further easing to boost the eurozone’s fragile economy.
Ahead of next week’s ECB policy meeting, Ewald Nowotny said the ECB was “clearly missing its inflation target”.

Continue reading

Gold On Verge Of Posting First Positive Year Since 2012

Submitted by Mark O’Byrne  –  GoldCore

Gold is looking likely to finish the year positive for the first time since 2012, according to Frank Holmes writing in Forbes today.  Holmes points to the weaker US dollar, the probability of near-zero interest rates for the remainder of the year and a seasonal increase in demand as underpinning the positive momentum.

GoldCore: GOld 200-day moving average

“…the yellow metal broke above its 200-day moving average and is close to erasing its 2015 losses. This could be the price reversal many gold bulls have been expecting”.

Holmes highlights the so-called US dollar “death-cross” which occurs when the 50-day moving average crosses below the 200-day moving average, an indicator that is “widely recognized as the start of a bearish trend” and not seen since September 2013.

This  may be  indicative of a downward trend for the dollar that would be good news for gold, allowing it “the breathing room it needs to reach the important $1,200 resistance level”. Continue reading

The Daily Debt Rattle

Submitted by Raúl Ilargi Meijer  –  The Automatic Earth

• ECB Rings The Bell For Pavlov’s Market Dogs (AFR) 
• ECB President Mario Draghi Reignites Currency War Talk (AFR)
• The Great Negative Rates Experiment (Bloomberg) 
• Every Day’s a Crisis for Europe as Merkel Heads Back to Brussels (Bloomberg) 
• Oil’s Big Slump Looks Like the 1980s ‘Lost Decade’ (Bloomberg) 
• As China Weakens, Recession Stalks North Asia (Reuters) 
• Credit Suisse Exiting Bond Role Sounds Alarm for Debt Market (Bloomberg) 
• US Regulator Raises Red Flag on Auto Lending (WSJ) 
• US Junk-Bond Default Rate May Nearly Double in a Year: UBS (Bloomberg) 
• Valeant Slump Poses Big Threat To Small Hedge Funds (Reuters) 
• Revised US Swaps Rule to Spare Big Banks Billions in Collateral (Bloomberg) 
• The ‘Miserable’ Metal Sinks to Its 2009 Low (Bloomberg) 
• ‘Flash Crash’ Trader’s Lawyer Calls US Extradition Request False (Guardian) 
• Inside Massive Injury Lawsuits, Clients Get Traded Like Commodities (BBG) 
• Millennials Face ‘Great Depression’ In Retirement: Blackstone COO (CNBC) 
• American Farmers Want Student Loans Forgiven (MarketWatch) 
• Inside Swiss Banks’ Tax-Cheating Machinery (WSJ) 
• Greece, A Unit For Measuring Catastrophe (Konstandaras) 
• A New Low: Czech Authorities Strip-Searched Refugees To Find Money (Quartz) 
• Rights Group Reports Fresh Assaults On Migrants In Aegean Sea (AFP) 
• Permafrost Thawing In Parts Of Alaska ‘Is Accelerating’ (BBC)