The Great Fixer

Submitted by William Bonner, Chairman – Bonner & Partners

Former Top Obama Economist Is Living in a Make-Believe World

NORMANDY, France – A family matriarch – such as JFK’s mother Rose Kennedy – may speak for her entire clan … former mayor William Donald Schaefer used to claim he spoke for all the people of Baltimore … French president Charles de Gaulle, grandly spoke for the French …

… but only a leading economist, or a complete lunatic, would claim to speak for the entire planet.

summers2_rtr_imgMeet the Great Fixer. Apparently, the Good Lord has bungled when he made the world, and has graciously sent us his personal assistant Larry to fix it up. Clearly, he is the right man for the job, since he knows everything there is to know.

Photo credit: Molly Riley / Reuters

Many adjectives can be applied to Larry Summers: pompous, foolish, asinine. But not small-minded. His brain is big… impossibly big. Go ahead. Ask him anything. Really, there is no subject so complex, so remote, or so gnarly that it can stump Mr. Summers.

MIT and Harvard alum… former president of Harvard… former secretary of the Treasury… former chief economist of the World Bank… Summers now writes for British newspaper the Financial Times.

In his columns, we find humankind’s problems fixed… the world’s challenges met… galactic issues resolved. Yes, Larry – one of President Obama’s candidates to replace Ben Bernanke at the Fed and the former director of the president’s National Economic Council – is the Great Fixer.

The savior of the planet and his former butler

Cartoon by Danziger Continue reading

The Stench Of Freddie Mac Is Back – An $18 Billion Spree Of Crony Capitalist Thievery

Washington’s capacity to foster crony capitalist larceny and corruption never ceases to amaze. But according to the Bloomberg story below, Wall Street’s shameless thievery from US taxpayers is about to get a whole new definition.

To wit, Freddie Mac is handing three private equity billionaires deeply subsidized debt financing in order to undertake $18 billion in rental apartment deals. According to no less an authority than Morgan Stanley, the subsidy embedded in this cheap financing amounts to 150 basis points or roughly $150 million per year on the loan amounts in play.

Yet this largesse will serve no discernible public purpose whatsoever. Indeed, over the 10-year term of these loans the bonanza will amount to billions, but it will not generate a single new unit of housing. Nor will it provide a single dollar of incremental rent relief to any low or moderate income tenant.

That’s because the purpose of these giant loans is not to fund new construction of rental housing—– for which there is currently an arguable shortage. And it’s not even to incentivize owners to convert existing apartment buildings to so-called “affordable” housing.

Instead, its sole effect will be to put the taxpayers in the business of  highly leveraged Wall Street deal making. That is, it will fund what amounts to apartment company LBOs being undertaken by the largest players in the private equity world including Barry Sternlicht’s Starwood Capital Group, Steve Schwarzman’s Blackstone Group and John Grayken’s Lone Star Fund.

Each of these cats are billionaires many times over and their remit most definitely does not include bolstering the social safety net. What they are doing is buying giant apartment companies in high priced takeover deals. These LBOs will shower sellers and speculators with windfall gains, and Wall Street dealers and themselves with prodigious fees now and the prospect of pocketing double, triple or quadruple their modest cash equity investments not too far down the road.

Freddie Mac, of course, is the one and same crony capitalist monstrosity that helped push the US financial system to the brink in 2008. If Washington had any common sense and gumption at all, it would have taken it out back and shot it years ago.

But the K-Street lobbies kept it alive during the dark days after the crash and have now invented a new mission to purportedly facilitate affordable rental housing. But that’s a crock, and the true purpose could not be more blatantly obvious than in the three deals described in the Bloomberg article. Continue reading

The Conspicuous Temperature Gradient of Finicky US Consumers

Submitted by Jeffrey Snider  –  Alhambra Investment Partners

Janet Yellen and orthodox economists claim that the economy can only be gaining, and that word is taken, on faith, as if some updated, modern gold standard for meaning. No matter the contrary in actual evidence and observation, the “word” remains as if diktat were the only employ. It has produced some very strange dichotomies, particularly of late, where those within that economic cage are struggling mightily and obviously to find some kind of consistency with it all. It has led to an Orwellian deployment of qualifications and words quite contrary to their established meaning.

For one, apparently the American economy cannot withstand anything but the fattest, meatiest part of the Bell Curve for temperature. Anything outside of a narrow range in weather (which, if you are paying attention, is what weather actually is) and somehow economists and their media parrots become disenthralled and unhinged. We all know about the constant appeal, three winters in a row, of cold and snow and vortices of some blusterous nature, but now warm weather has been assigned the same depressive instincts. I wish I were making this up, for it does not suggest anything good about the economy nor the state of the commentary class that still clings to Yellen’s desperate narrative no matter how much and how deeply actual observation moves sharply against it all.

As expected, balmy October days failed to inspire people to shop for winter coats, but the retail sales results were even a little worse than forecast. The Thomson Reuters Same Store Sales Index actual result for October 2015 showed no change, missing its final estimate of a 0.3% gain. Excluding drug stores, the SSS Index registered a -0.2% comp for October, missing its 0.1% final estimate.
It’s important to note that these results are not final, as the Gap will report October SSS on Nov. 9. However, 75% of retailers missed estimates, hit by lower gasoline prices, the effect of a strong U.S. dollar and the warmer-than-usual weather. [emphasis added]

A negative same store sales index register is recession, but Yellen has declared that all “transitory” so the people at Reuters are left making a mockery of their own work. Worse, Thompson Reuters just over a week ago, in projecting the alarming re-appearance of negative retail figures in its own index, even stated that a negative was consistent with recession:

During the first recession, in 2001, the index dipped below the 3% healthy mark and remained within the 0% – 3.0% range. Then, the SSS Index recuperated nicely afterwards and consumer spending remained within the 2% to 5% monthly growth during 2002 – 2007, for the most part. Subsequently, the index dropped to its lowest level ever during the Great Recession (Dec 2007 – June 2009). Since, then the index has fluctuated as consumer behavior has changed since the Great Recession. The index also started to dip into negative levels similar to the Great Recession. [emphasis added]

You can see the logical strain just in the progression of that paragraph, where once low and negative results were recession but now as if “consumer behavior has changed since the Great Recession” can address the recurrence. The Yellen/economist narrative can only be registered as something like a cult, for it makes otherwise quite sensible people doubt their very own observations and conclusions. Again, Thompson Reuters SSSI clearly shows something very much amiss, both in recent context and historically so. Continue reading

Gold Bullion Demand Surges 27% In Q3 – New Chinese “Buying Spree”

Submitted by Mark O’Byrne  –  GoldCore

Gold Demand Trends Q3 2015 was released by the World Gold Council today. The quarterly publication is the leading industry resource for data and opinion on global gold demand and examines demand trends by sector as well as geography.

The key findings from the report are as follows:

[Graphic source: World Gold Council]

GoldCore: Gold Demand Trends

 Overall demand increased by 8% year-on-year to 1,121t as selling of futures contracts and ETFs contributed to a price dip, 6% in July, which buoyed gold demand around the world.

 Total consumer demand – made up of jewellery demand – totalled 928t, up 14%.

 Global investment demand saw a significant rise of 27% to 230t, up from 181t in Q3 2014.

This was led by the US which saw a surge in bar and coin demand – ittripled and was up 207% to 33t from 11t on the same period last year, with massive demand from China, up 70% to 52t and Europe up 35% to 61t.

China’s sharp devaluation of the yuan this summer sparked another gold bar and coin “buying spree” in China according to the World Gold Council, as canny store of wealth buyers sought to shelter themselves from further market volatility and sharp falls in stock markets.

Much of this European demand came from Germany and Austria where demand remains very high due to heightened German concerns about the euro, the European and global economy.

 Global jewellery demand for Q3 2015 was up 6% year-on-year to 632t compared to 594t in Q3 2014. In India, demand was up 15% to 211t and China was up 4% to 188t. The US and the Middle East also saw gains, up 2% to 26t and 8% to 56t respectively. Continue reading

The Daily Debt Rattle

Submitted by Raúl Ilargi Meijer  –  The Automatic Earth

Interest Rate Swaps Indicate Big Banks Safer Than US Government (Bloomberg)
World’s Biggest Bond Bubble Continues To Burst As China Defaults Rise (ZH)
China Credit Growth Slows As Tepid Economy Erodes Loan Demand (Bloomberg)
China Coal Bubble: 155 Coal-Fired Power Plants To Be Added To Overcapacity (GP)
China Warns WTO Its Cheap Exports Will Soon Be Harder To Resist (Reuters)
Germany’s ‘Wise Men’ Call ECB Policies Risk To Financial Stability (Reuters)
‘Sick Man Of Europe’ Finland Agonises Over Austerity (Reuters)
Syriza Faces Mass Strike In Greece (Guardian)
Why Owning A House Is Financial Suicide (Altucher)
Major Oil Companies Have Half-Trillion Dollars to Fund Takeovers (Bloomberg)
US Energy Default Alarms Get Louder as Pain Seen Lasting Into 2016 (Bloomberg)
Saudi Arabia Risks Destroying OPEC And Feeding The ISIL Monster (AEP)
Germany Cites Signs of More Elevated Diesel Pollution in Probe (Bloomberg)
The Melting Arctic Is Like ‘Discovering A New Africa’ (CNBC)
Europe’s Leaders Struggle To Save Floundering Migrant Policy (FT)
EU Leaders Court Turkey in Bid to Stem Flow of Refugees (Bloomberg)
EU’s Deep Dilemmas Over Refugees Laid Bare At Malta Summit (Guardian)
Tiny Slovenia Tries To Stem Massive Migrant Surge Across Balkans (AP)