Submitted by Raúl Ilargi Meijer  –  The Automatic Earth

Robert Capa Anti-fascist militia women at Barcelona street barricade 1936

Looking through a bunch of numbers and graphs dealing with China recently, it occurred to us that perhaps we, and most others with us, may need to recalibrate our focus on what to emphasize amongst everything we read and hear, if we’re looking to interpret what’s happening in and with the country’s economy.

It was only fair -perhaps even inevitable- that oil would be the first major commodity to dive off a cliff, because oil drives the entire global economy, both as a source of fuel -energy- and as raw material. Oil makes the world go round.

But still, the price of oil was merely a lagging indicator of underlying trends and events. Oil prices didn‘t start their plunge until sometime in 2014. On June 19, 2014, Brent was $115. Less than seven months later, on January 9, it was $50.

Severe as that was, China’s troubles started much earlier. Which lends credence to the idea that it was those troubles that brought down the price of oil in the first place, and people were slow to catch up. And it’s only now other commodities are plummeting that they, albeit very reluctantly, start to see a shimmer of ‘the light’.

Here are Brent oil prices (WTI follows the trend closely):

They happen to coincide quite strongly with the fall in Chinese imports, which perhaps makes it tempting to correlate the two one-on-one:

But this correlation doesn’t hold up. And that we can see when we look at a number everyone seems to largely overlook, at their own peril, producer prices:

About which Bloomberg had this to say:

China Deflation Pressures Persist As Producer Prices Fall 44th Month

China’s consumer inflation waned in October while factory-gate deflation extended a record streak of negative readings [..] The producer-price index fell 5.9%, its 44th straight monthly decline. [..] Overseas shipments dropped 6.9% in October in dollar terms while weaker demandfor coal, iron and other commodities from declining heavy industries helped push imports down 18.8%, leaving a record trade surplus of $61.6 billion.

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Permabulls Whistling Past The Grave

Goldman’s Fed farm team was out in force today peddling some pretty heavy-duty malarkey about the up-coming rate liftoff at the December meeting. Its newly seconded man at the Dallas Fed, Robert Kaplan, reminded that “accommodative policy does not necessarily mean a zero fed funds rate.”

And the B-Dud himself was even more explicit. Speaking to a conference about regulation, the New York Fed head and former Goldman chief economist said,

“If we begin to raise interest rates, that’s a good thing. That’s not a bad thing,” he said during a question and answer session after his opening remarks, which were on financial regulation. “That’s a sign that the economy is actually returning to health, the Federal Reserve is getting closer to achieving our dual mandate objectives of maximum sustainable employment and price stability.”

Excuse me for fumbling for my tin foil hat, but did the Vampire Squid actually just trot out its minions at the Fed to suggest that you buy this rally?

Why, yes it did. The robo-machines were raging in response to the Fed minutes, and that’s a flashing red warning sign if there ever was one.

To wit, Goldman is putting out the final mullet call for this Bubble Cycle because it knows that this bull is dying; that insiders still have massive amounts of stock winnings to unload; and that the clock is fast running out.

The expiring clock is evident in the S&P 500’s one-year round trip to nowhere. Despite the fact that the Fed has ponied-up a stick save at every single meeting this year, the market’s 27 separate efforts to rally have all failed for the simple reason that the jig is up.

^SPX Chart

That is, we are now in month 83 of zero interest rates and the Fed has pumped $3.6 trillion of fiat credit into Wall Street, but there has been no genuine economic recovery on main street. In fact, the tepid expansion cycle that we have actually experienced is now being extinguished by ferocious headwinds emanating from the deflationary global economy. Continue reading

Sowing the Wind – Busts, Bubbles and Blow-Ups

Submitted by William Bonner, Chairman – Bonner & Partners

A City on Edge

PARIS – We drove back into Paris last night…France is still in a state of emergency. A police blockade near Dreux stopped cars headed out of the city. There were about 20 gendarmes manning the barrier, some armed with machine guns. Police shined flashlights into passing cars, pulling over those they wanted to inspect more closely.


War and peace: a dove crosses the path of two French policemen from the anti-terror unit in Saint-Denis this morning.

Photo credit: François Mori / AP Photo


This morning, in our favorite café at the foot of Rue Poussin, in the 16th arrondissement, everyone drinks his coffee and eats his croissant while watching the big TV screen in the corner.

“A kamikaze woman has been killed,” is the headline story.

“Assault still going on…” says a subhead.

“Explosions rock St. Denis,” adds another.

St. Denis, a northern suburb of Paris, has been shut down. People who work in the area are told not to go to their jobs. Buses aren’t running. The streets are blocked by hundreds of police.

“Two terrorists killed,” says the latest headline…

Paris is on edge. Since France began bombing Islamic State (ISIS) strongholds in Syria, the group has targeted the city for special treatment, say the papers.

About 700 French citizens or residents have joined ISIS to fight in Syria – the largest number of any European country. That means “Daesh” (pronounced “dash” – the new… and apparently derogatory… name that political leaders are using for ISIS) has the potential manpower to carry out attacks.

A surveillance camera video from one of the attacks on a Pizzeria in the 11th arrondissement on Friday night. The people in this scene managed to avoid the worst, by ducking for cover just in time. One woman gets especially lucky: an attacker’s gun apparently jams just as he is about to shoot her and he walks away, giving her time to run inside the restaurant and hide.

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More Paris Puzzles

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

Some people who are not inclined to believe the official story of the Paris attack are troubled by the question why Muslim suicide bombers would blow themselves up for a false flag attack. The answer to this question is very simple. But first we should dispose of the question whether suicide bombers did blow themselves up. Is this something that we know, or is it part of the story that we are told? For example, we were told that during 9/11 passengers in hijacked airliners used their cell phones to call relatives, but experts have testified that the technology of the time did not permit cell phone calls from airliners at those altitudes.

To dispose of the question whether we have or do not have any real evidence that suicide bombers blew themselves up, I will assume that they did.

So we have suicide bombers blowing themselves up.

Now turn to the question that troubles some doubters: Why would suicide bombers blow themselves up for the sake of a false flag attack?

As I said, the answer is simple: Why assume that the suicide bombers knew who was organizing the attack? There seems to be abundant evidence that ISIL is a US creation, one that is still dependent on US active or passive support—thus the conflict between Putin and Washington over attacking ISIL. ISIL seems to be what Washington used to overthrow the government in Libya and afterward was sent by Washington to Syria to overthrow Assad. Obviously, Washington has ISIL infiltrated. Washington has long proven is ability to use Islamic extremists. As Washington used them in Afghanistan against the Soviets and in Libya and Syria against independent governments, Washington used them in Paris. By my last count, the FBI on 150 occasions has successfully deceived people into participating into FBI orchestrated “terror plots.” Continue reading

Oil Is Just Now Starting To Drag

Submitted by Jeffrey Snider  –  Alhambra Investment Partners

US industrial production contracted again in October, having declined now in seven out of 2015’s ten months. Year-over-year, US IP increased by the smallest amount since 2009, barely positive at just +0.34%. The last time IP was so slow was January 2010; on the way down into the Great Recession, it was equivalent to March 2008. Capacity utilization declined again to 75.5%, matching this year’s lowest point from June and confirming what has already been suggested in broad detail that the summer’s rebound was really more of variation than anything meaningful.


As much as oil and gas is blamed for the dramatic downturn, October represented instead the first time the oil industry has dragged down overall production year-over-year. That means that US industry itself is overall situated very much like energy production rather than oil being the exception. Continue reading

Junk Bonds Under Pressure

Submitted by Pater Tenebrarum  –  The Acting Man Blog

While the Stock Market is Partying …

There are seemingly always “good reasons” why troubles in a sector of the credit markets are supposed to be ignored – or so people are telling us, every single time. Readers may recall how the developing problems in the sub-prime sector of the mortgage credit market were greeted by officials and countless market observers in the beginning in 2007.


oil rigPhoto credit: Getty Images


At first it was assumed that the most highly rated tranches of complex structured products would be immune, as the riskier equity tranches would serve as a sufficient buffer for credit losses. When that turned out to be wishful thinking, it was argued that the problem would remain “well contained” anyway. After all, sub-prime only represented a small part of the overall mortgage credit market. It could not possibly affect the entire market. This is precisely the attitude in evidence with respect to corporate debt at the moment.


1-HYG weeklyA weekly chart of high yield ETF HYG (unadjusted price only chart) – click to enlarge.


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Dark Days: Vulnerable Europe faces crisis of confidence

Submitted by Mark O’Byrne  –  GoldCore

Europe is in a very dark place.  Under the cloud of on-going terrorist threats there is widespread fear of what the future holds – economically, socially and politically.

Jeremy Warner writing for the Telegraph yesterday describes the ‘abyss’ into which we are sliding and how this is precisely the reaction that the terrorists had hoped to elicit, despite the fact that – “even in Israel, citizens are far more likely to be the victim of a car accident than a terrorist outrage”.

GoldCore: European CrisisDespite the initial bravado and defiance of the population in the immediate wake of such attacks, there is inevitably always a knock-on effect.  “Most people will indeed carry on as before, but it only takes a 10pc reduction in footfall to have quite marked economic effects.”

“Yet it is to the wider geo-political impact of terrorism that we must look for the longer-term economic consequences.

In providing a pretext for war in Afghanistan and Iraq, 9/11 ended up having a massive economic impact far beyond any immediate behavioural changes.”

“The fiscal costs alone of these wars were vast. On its own, Iraq is estimated to have cost the US $1.1 trillion, and that’s ignoring myriad after conflict costs, which compound over time.”

“The wars also triggered a series of interest rate cuts in the US and beyond, helping to unleash a dangerous degree of credit expansion which ultimately culminated in the Global Financial Crisis (GFC). You can have guns or butter, it is sometimes said, but not both. America and Britain tried to have both, and paid the price.”

The Daily Debt Rattle

Submitted by Raúl Ilargi Meijer  –  The Automatic Earth

• China’s Steel Industry Peers Into Abyss as Output to Plunge (Bloomberg)
• Rio Tinto’s Optimistic About Iron Ore And That’s Reason To Worry (Bloomberg)
• Zinc Lowest in 6 Years, Nickel at 12-Year Low on China Concerns (Bloomberg)
• Can Anything Stop Companies From Loading Up on Debt? UBS Says No. (Alloway)
• Debt, The Never-Ending Story (Economist)
• Finland’s Depression Is The Final Indictment Of Europe’s Monetary Union (AEP)
• China Inclusion In IMF Currency Basket Not Just Symbolic (FT)
• New Players Break Into Credit Derivatives (FT)
• Atlantic City’s Mayor Warns of Insolvency by April Without Aid (Bloomberg)
• Fed Tipping Toward December Rate Hike, Minutes Show (Hilsenrath)
• Australia Blocks Ranch Sale to Foreigners on Security Fears (Bloomberg)
• Turkey Could Cut Off Islamic State’s Supply Lines. So Why Doesn’t It? (Graeber)
• Trudeau Tells Canada To Reject Racism Amid Opposition To Refugee Plan (Reuters)
• History Is A Cruel Judge Of Intolerance In America (Bloomberg)
• Former Yugoslav Republic of Macedonia Building Fence Along Greek Border (Kath.)
• EU Nations Miss Deadline To Appoint Officers For Refugee Relocations (Guardian)
• 20 African Migrants Lost At Sea In Atlantic After Boat Sinks (Reuters)
• Antibiotic Resistance: World On Cusp Of ‘Post-Antibiotic Era’ (BBC)