This Time Is The Same – And Worse!

The current stock market melt-up hardly qualifies as limp. Even the robo-machines and hyper-ventilating day traders apparently recognize that their job is to tag the May 2015 highs and then get out of the way.

So when and as they complete their pointless mission, the question recurs as to why the posse of fools in the Eccles Building can’t see that they are inflating one hellacious financial bubble; and that when it blows it will deconstruct their entire 7-year project of make-pretend recovery.

In fact, if it weren’t for the monumental pain and suffering the next bubble collapse will bring to main street, you might even be tempted to urge them on toward the Wile E. Coyote moment just ahead. After all, if 84 straight months of ZIRP and $3.5 trillion of fraudulent debt monetization (QE) brings nothing more than another thundering financial collapse, it will be curtains time at the Fed.

And here’s why they can’t duck the blame this time with tall tales about a global “savings glut” causing lax underwriting in the mortgage market, or the lack of transparency on Wall Street balance sheets. The fact is, stock prices are just plain nuts given the intense and manifold global economic headwinds and the advanced age of the US business cycle. Continue reading

Global Fiscal and Monetary Madness

Submitted by Michael Pento – Pento Portfolio Strategies

Last week China’s central bank (the PBOC) cut borrowing costs for the sixth time in a year and eased the reserve requirement ratio (RRR) for the third time this year, in a desperate attempt to achieve the prescribed growth target of 7% off the back of ever-increasing credit issuance. The PBOC lowered the one-year benchmark bank lending rate by 25 basis points to 4.35%, the one-year benchmark deposit rate was also lowered by 25 basis points to 1.5%.

In addition to this, the RRR was cut by 50 basis points for all banks, bringing the ratio to 17.5% for the biggest lenders, while banks that lend to small companies and agricultural firms received an additional 50-basis-point reduction to their RRR.

This latest round of easing followed a report showing that despite a surprise devaluation of the yuan in August, economic growth in the third quarter was the slowest in six years. Goldman Sachs Group Inc. estimates the easing will release 600 to 700 billion yuan ($94 billion to $110 billion) into the financial system, keeping borrowing costs at the regime’s all-time low.

These destabilizing moves come on the heels of a steep stock market decline in August and concerns that Communist China’s growth fairy tale has come to an unhappy end. Here are some troubling economic statistics about China’s growth aggregated by Zero Hedge:

  • China export trade: -8.8% year to date
  • China import trade: -17.6% year to date
  • China imports from Australia: -27.3% year over year
  • Industrial output crude steel: -3% year to date
  • Cement output: -3.2% year over year
  • Industrial output electricity: -3.1% year over year
  • China Manufacturing Purchasing Managers Index: 49.8 (below 50 is contractionary)
  • China Services Purchasing Managers Index: 50.5 (barely in growth category)
  • Railway freight volume: -17.34% year over year
  • Electricity total energy consumption: -.2% year over year
  • Producer price index (PPI): -5.9% year over year, 43 consecutive months of declines
  • China hot rolled steel price index: -35.5% year to date
  • Shanghai Stock Exchange Composite Index: -30% since June

Continue reading

Europe Will Never Be The Same. Neither Will The World.

Submitted by Raúl Ilargi Meijer  –  The Automatic Earth

RLOppenheimer New flag for EU 2015

To reiterate: People are genetically biased against change, because change means potential danger. People are also genetically biased against acknowledging this bias, because they wish to see themselves as being able to cope with both change and danger. Put together, this means that when changes come, people are largely unprepared or underprepared.

Take this beyond the bias of the individual, and apply it to that of the group (s)he belongs to, the vantage point of a society, and you find the bias multiplies and becomes self-confirming. That is, the members of the group reinforce each other’s bias. When change comes in small and gradual steps, as it mostly does, this can be said to work relatively well. When it comes in large and sudden steps, trouble ensues.

This little bit of psychology 101 may seem redundant, but it is indispensable if we wish it to recognize the implications of Europe -and the entire world with it, in its slipstream- having already entered a period of change so profound it is impossible to predict what the impact will be. We can do a lot better at this than we do today, where so far the drivers of change, and indeed the changes themselves, are ignored and/or denied.

This ignorance and denial threatens to lead to a needless increase in nationalism, fascism, violence, misery, death and warfare. If we were to acknowledge that the change is inevitable, and prepare ourselves accordingly, much of this could be avoided.

There are two main engines of change that have started to transform the Europe we think we know. First, a mass migration spearheaded by the flight of refugees from regions in the world which Europeans have actively helped descend into lethal chaos. Second, an economic downturn the likes of which hasn’t been seen in 80 years or so (think Kondratieff cycle).

Negative ideas about refugees are already shaping everyday opinion and politics in many places, and this will be greatly exacerbated by the enormous economic depression that for now remains largely hidden behind desperate sleight-of-hands enacted by central bankers, politicians and media.

People, first in Europe, then globally, will need to learn to share what they have, and do with much less. This is not optional. The refugees won’t stop coming, and neither will the depression. It would be much better if people were prepared for this by those same central bankers, politicians and media, but the opposite is happening. Continue reading

What’s Next: Deflation, Inflation, or Hyperinflation?

Submitted by William Bonner, Chairman – Bonner & Partners

Divided Opinions

POITOU, France – Last week, young colleagues at Bonner & Partners HQ in Delray Beach, Florida, put us on the spot.

“What do we stand for as a publishing business?” they asked. “Who are we? How are we different from anyone else? What do we think that others don’t?”

We are not the only publishers to offer opinions. And not the only ones with alternative points of view. So, to answer these questions, let’s look first at the range of opinions on offer…

First, there is “the authorities must know what they are doing… besides, I have more important things to think about” camp. This is by far the largest group: hoi polloi. The masses. The lumpenproletariat.

border collieSaved by the border collie

Cartoon by Gary Larson

There may be some grumbling and kvetching. But most people count on the feds to manage the economy, foreign policy, the future, and the government. They expect mistakes from time to time. But they also believe the system can be trusted to produce an acceptable, although perhaps not always ideal, outcome.

And if not, God help them. Because the difference between the outcome if they bothered to think about it and the outcome if they didn’t is the same. They have no ability to influence public policy… and not much room to maneuver in their private lives.

They get salaries, pensions, Social Security. They need jobs, mortgages, student loans, and medical insurance. They have little capital to invest or protect. They depend so heavily on “the system” that they can’t afford to believe there is something deeply wrong with it. They go along. They get along. Continue reading

The Punishment Society

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

Once upon a time, a dental or medical exam was an opportunity to read a book. No more. The TV blares. It was talking heads discussing whether a football player had been sufficiently punished. The offense was unclear. The question was whether the lashes were sufficient.

It brought to mind that punishment has become a primary feature of American, indeed Western, society. A baker in Colorado was punished because he would not bake a wedding cake for a homosexual marriage. A county or state clerk was punished because she would not issue a marriage license for a homosexual marriage. University professors are punished because they criticize Israel’s inhumane treatment of Palestinians. Whistleblowers are punished—despite their protection under federal law—for revealing crimes of the US government. And children are punished for being children.

But not by their parents. Police can slam children around and seriously injure them. But parents must not lay a hand on a child. If a child gets spanked, as everyone in my generation was, in comes the Child Protective Services Gestapo. The child is seized, put into “protective custody,” and the parents are arrested. The CPS Gestapo receives a federal bonus for every child that they seize, and they want the money.

About all parents can do today is to restrict TV or video game playing time. Even this is dicey, because the kids are taught at school to report abusive behavior of parents. For many kids being told what to do by parents is abusive behavior. Kids have learned that they can pay back parents for disciplining them by reporting the parents to teachers or by themselves calling CPS. Kids who retaliate in this socially approved manner do not realize that they run a high risk of ruining the lives of their parents as well as their own and ending up in foster care where the risk of sexual abuse is present. Continue reading

Seeing Right Through ‘Stimulus’

Submitted by Jeffrey Snider  –  Alhambra Investment Partners

For those inclined to see only the positive side, the current down drift in at least manufacturing globally still holds no special distinction. Either it is to be dismissed as a trivial concern unconnected to the “real” economy or, more blatantly, it doesn’t matter because it only means more “stimulus.” Thus, the positive side can never lose as every negative account is effortlessly rejected or just as easily fixed.

Given the global PMI submerging of late, both sides of that equivocation have been offered in greater emphasis; if not manufacturing as “only” 12% then the surety by which global “stimulus” and “easing” will come and wash away the doldrums. China is most on that point in late 2015, especially as its slowdown is no longer arguable:

“We do think there is more easing to come in China. They are in the midst of a long-running easing cycle that is probably going to go on until late next year,” said Andrew Kenningham at Capital Economics.

There are, of course, any number of problems with such shorthand; as that is all it amounts to. The PBOC (or ECB, BoJ, BoE, FOMC) does something and it is just accepted that its exact form doesn’t make a difference nor how it is even supposed to get from A to B. A good deal of that generic appeal, if not all of it, is that nobody seems to want to know the details; better to simply assume than to pull back the curtain and be averted from all the sustained ugliness. It is far more than from A to B, obviously, as there are innumerable channels and pathologies standing in between that turns “stimulus” into wasted hope.

That much should be fully apparent by now, as everything the PBOC has done in the past year amounted to no change in the downslope. Though every minor uptick variation was taken as a herald for the believed-resurrection, the sinking remains completely undeterred and unmoved. If five “rate cuts” since last November have had so little effect, why consider the sixth any different? Imagining any affirmative answer is to deny the complexity. Continue reading

Apocalypse Now: Has Next Giant Financial Crash Already Begun?

Submitted by Mark O’Byrne  –  GoldCore

Paul Mason, writing in The Guardian, describes how we are already at the beginning of a financial Apocalyse.  “A predicted global meltdown passed without event. But there are enough warning signs to suggest we are sleepwalking into another disaster”.

GoldCore: Expansion, Boom, Recession and Depression.

He suggests all the signs are present to indicate that the financial apocalyse has begun:

“Let’s assemble the evidence. First, the unsustainable debt. Since 2007, the pile of debt in the world has grown by $57tn (£37tn). That’s a compound annual growth rate of 5.3%, significantly beating GDP. Debts have doubled in the so-called emerging markets, while rising by just over a third in the developed world”.

“John Maynard Keynes once wrote that money is a “link to the future” – meaning that what we do with money is a signal of what we think is going to happen in the future. What we’ve done with credit since the global crisis of 2008 is expand it faster than the economy – which can only be done rationally if we think the future is going to be much richer than the present”.

“This summer, the Bank for International Settlements (BIS) pointed out that certain major economies were seeing a sharp rise in debt-to-GDP ratios, which were well outside historic norms. In China, the rest of Asia and Brazil, private-sector borrowing has risen so quickly that BIS’s dashboard of risk is flashing red. In two thirds of all cases, red warnings such as this are followed by a major banking crisis within three years.”

“The underlying cause of this debt glut is the $12tn of free or cheap money created by central banks since 2009, combined with near-zero interest rates. When the real price of money is close to zero, people borrow and worry about the consequences later.”

“So, the biggest risk to the world, despite its growing seriousness, is not the deflation of a bubble. It is the risk of that becoming intertwined with geopolitics. Any politician who minimises or ignores this risk is doing what the purblind economists did in the run up to 2008″.

Read the full article “Apocalypse now: has the next giant financial crash already begun?

Paul Mason2Paul Mason is a respected journalist and broadcaster.  He is a former economics editor of BBC’s Newsnight and currently he is economics editor of Channel 4 News.

He can be followed on @paulmasonnews.

The Daily Debt Rattle

Submitted by Raúl Ilargi Meijer  –  The Automatic Earth

The Market May Have Had Enough of Share Buybacks (Bloomberg)
Debt Traders Send Warning On Corporate America’s Balance Sheet Fiesta (BBG)
Money Is Flooding Out Of Canada At The Fastest Pace In The Developed World (BBG)
The Self-Defeating, ‘Grand Delusion’ of Monetary Policy (WSJ)
Foreign Banks Use US Repo Deals To ‘Window-Dress’ Risk (FT)
China State Owned Enterprise Debt Explodes By $1 Trillion In September (Chiecon)
Six Ways to Gauge How Fast China’s Economy Is Actually Growing (Bloomberg)
China Financial Crackdown Intensifies as Funds, Banks Targeted (Bloomberg)
VW Emissions Scandal Widens To Include Porsche, Audi Claims (Guardian)
ECB Officials Met Regularly With Financial Institutions on Key Moments (WSJ)
Standard Chartered Cuts 15,000 Jobs And Raises $5.1 Billion (BBC)
TransCanada Requests Suspension of US Permit for Keystone XL Pipeline (WSJ)
Coywolf: Greater Than The Sum Of Its Parts (Economist)
Melting Ice In West Antarctica Could Raise Seas By 3 Meters (Guardian)
Abrupt Changes In Food Chains Predicted As Southern Ocean Acidifies Fast (SMH)
October’s Migrant, Refugee Flow To Europe Matched Whole Of 2014 (Reuters)
Merkel Rejects Shutting Border Amid Standoff With Party Critics (Bloomberg)
Erdogan’s Election Win Means He Can Dictate Terms To EU On Refugees (Guardian)
Winter Is Coming: The New Crisis For Refugees In Europe (Guardian)
No Place Left On Lesvos To Bury Dead Refugees (AP)
Powerful Gestures: America and Refugees (New Yorker)