StealthFlation – Defined

 

By Bruno de Landevoisin

money-priting-620x476

STEALTHFLATION:  An intractable economic condition that inevitably arises as excessively issued fiat currency compulsively pursues non-productive wealth assets in a grossly over-leveraged economy which has been artificially reflated by Central Banking authorities in a misguided attempt to synthetically engineer economic growth via extreme monetization (ie: Counterfeit Quantitative Easing & Interest Rate Suppression).

This ill-advised monetary regime effectively prevents the real economy on the ground from realizing the healthy normalization of free market forces crucial to genuine capital formation, authentically derived from bonafide industrious productivity which generates actually earned savings, the very life blood essential to creating legitimate and sustainable growth.

Under the imposition of StealthFlation, asset prices are deliberately inflated in an irrational attempt to elicit a vapid wealth effect, while the generative velocity of money is extinguished. Worse still, the seeds of hyperinflation are sown, as the compromised overtly financialized economy becomes increasingly dependent upon the interminable entirely destructive monetization largess.

Also known as; wishful thinking, and robbing Peter to pay Paul.

Qe Cartoon 2

This entirely synthesized approach to capital formation brings about the following disastrous conditions:

1) Engenders stealth dormant velocity of money, concealing embedded inflationary risks to the economy.
2) Produces highly unstable and recurring capital market asset bubbles.
3) Drives superfluous misallocation of true investment capital, disregarding and disadvantaging the crucial SME sector.
4) Generates excessive capital market volatility and unpredictability, disrupting deliberate business development and planning.
5) Delivers lethargic overall economic activity with limited and unsustainable growth.
6) Encourages deleterious off-shoring of the manufacturing base.
7) Facilitates fantastic fiscal deficit spending sprees.
8) Decreases median incomes and new job creation.
9) Spawns extreme income inequality and social discontentment.
10) Eviscerates the essence of money by compromising the means of exchange and its crucial role as a conduit for savings.

Visualizing the Vanishing Velocity of Money Vortex 

Velocity-Of-Money-M1

The inflationary risks are deliberately concealed and remain latent due to the synthetic suppression of determinant free capital market forces.  However, the grossly excessive supply of money has definitively been created, and it will debase the currency via inflation, it’s just a function of time. Continue reading

R.I.P. – ALI

By Bruno de Landevoisin

One of the first who openly told the Neocon Warmongers to get lost…………………at great cost to himself I might add.

“My conscience won’t let me go shoot my brother, or some darker people, or some poor hungry people in the mud for big powerful America. And shoot them for what? They never called me nigger, they never lynched me, they didn’t put no dogs on me, they didn’t rob me of my nationality, rape and kill my mother and father.

Shoot them for what? How can I shoot them poor people? Just take me to jail.  Why should they ask me to put on a uniform and go 10,000 miles from home and drop bombs and bullets on brown people in Vietnam while so-called Negro people in Louisville are treated like dogs and denied simple human rights.

This is the day when such evils must come to an end. I have been warned that to take such a stand would cost me millions of dollars. But I have said it once and I will say it again. The real enemy of my people is here.

I will not disgrace my religion, my people or myself by becoming a tool to enslave those who are fighting for their own justice, freedom and equality. If I thought the war was going to bring freedom and equality to 22 million of my people they wouldn’t have to draft me, I’d join tomorrow.

I have nothing to lose by standing up for my beliefs. So I’ll go to jail, so what? We’ve been in jail for 400 years.”

The bad smell hovering over the global economy

Contributor Guest Post – Written by Gray Elliot

Two red helicopters fly over Hong KongAll is calm. All is still. Share prices are going up. Oil prices are rising. China has stabilised. The eurozone is over the worst. After a panicky start to 2016, investors have decided that things aren’t so bad after all.

Put your ear to the ground though, and it is possible to hear the blades whirring. Far away, preparations are being made for helicopter drops of money onto the global economy. With due honour to one of Humphrey Bogart’s many great lines from Casablanca: “Maybe not today, maybe not tomorrow but soon.”

But isn’t it true that action by Beijing has boosted activity in China, helping to push oil prices back above $40 a barrel? Has Mario Draghi not announced a fresh stimulus package from the European Central Bank designed to remove the threat of deflation? Are hundreds of thousands of jobs not being created in the US each month?

In each case, the answer is yes. China’s economy appears to have bottomed out. Fears of a $20 oil price have receded. Prices have stopped falling in the eurozone. Employment growth has continued in the US. The International Monetary Fund is forecasting growth in the global economy of just over 3% this year – nothing spectacular, but not a disaster either.

Don’t be fooled. China’s growth is the result of a surge in investment and the strongest credit growth in almost two years. There has been a return to a model that burdened the country with excess manufacturing capacity, a property bubble and a rising number of non-performing loans. The economy has been stabilised, but at a cost.

The upward trend in oil prices also looks brittle. The fundamentals of the market – supply continues to exceed demand – have not changed.

Then there’s the US. Here there are two problems – one glaringly apparent, the other lurking in the shadows. The overt weakness is that real incomes continue to be squeezed, despite the fall in unemployment. Americans are finding that wages are barely keeping pace with prices, and that the amount left over for discretionary spending is being eaten into by higher rents and medical bills.

For a while, consumer spending was kept going because rock-bottom interest rates allowed auto dealers to offer tempting terms to those of limited means wanting to buy a new car or truck. In an echo of the subprime real estate crisis,vehicle sales are now falling.

The hidden problem has been highlighted by Andrew Lapthorne of the French bank Société Générale. Companies have exploited the Federal Reserve’s low interest-rate regime to load up on debt they don’t actually need.

“The proceeds of this debt raising are then largely reinvested back into the equity market via M&A or share buybacks in an attempt to boost share prices in the absence of actual demand,” Lapthorne says. “The effect on US non-financial balance sheets is now starting to look devastating.” Continue reading

Donald Trump – Bad For Dollar, Good For Gold?

Submitted by Mark O’Byrne  –  GoldCore

Donald Trump’s emergence as the Republican frontrunner and possible future U.S. President is causing some gold and investment analysts to suggest diversifying into gold according to the Wall Street Journal.

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Donald Trump – Gage Skidmore via Commons.wikimedia.org

 

From the WSJ:

The other winner from Super Tuesday could be gold.

With Donald Trump solidifying his status as the front runner in the Republican field, some investors and analysts watching from overseas say that the ascendancy of the brash New York businessman could rattle global markets as the November presidential election inches closer. Nervous investors, they say, could pile in to gold and other safe-haven assets as an insurance policy.

The journal quotes David Govett of London-based commodities broker Marex Spectron:

“The mere thought would suggest a good opportunity to buy gold,” said Mr. Govett, who heads the firm’s precious-metals trading desk.

“Who knows what could happen should he be handed the keys to the White House,” said Mr. Govett.”

James Sutton, a London-based portfolio manager on the global natural resources equities team at J.P. Morgan Asset Management concurs:

“If there’s any uncertainty regarding the U.S. election and the potential for a slightly off-center candidate, whether that be Sanders or Trump winning the election, then I can see a scenario where that’s bad for the dollar.”

It is important to note that gold’s fundamentals are very sound and the possible “Trump gold factor,” if there is one, is only one of a myriad of fundamentals that are driving the gold market. Continue reading

Here Come The SDR Bonds

Submitted by J.C. Collins  –  philosophyofmetrics

IMFLogo041115_0Over two years ago now I began a series of articles titled SDR’s and the New Bretton Woods.  The ten post series focused on the SDR and its eventual evolution into an internationally traded asset. There was very little information out there at the time on this future transformation of the IMF’s Special Drawing Right currency, and POM broke new ground on many of the facts, trends, and methodologies behind the transition to a multilateral monetary framework.

Each month more and more information and confirmation of the POM thesis emerges which further validates much of what has been presented to readers for over two years.  The latest validation comes from the G20 Communique from last weekend’s summit in Shanghai.

Item 11 under Issues for Further Action states the following:

“We look forward to the IMF’s report to examine and reflect on the possible broader use of the SDR by July.”

This one statement provides the largest validation yet for POM readers that we are in fact on the correct course with this thesis.  What isn’t clear in the statement is whether July is the deadline for the report to be presented, or when the broader use of the SDR should begin.  Considering the time it takes to decide on changes and implement them, it would be my interpretation that it is only the report which is meant to be completed by July.

What started as a recreational analysis on the Federal Reserve, China, and a new monetary framework, has morphed into a full time obsession which has defined a new path in my life.  The evolution of my understanding and comprehension surrounding this transition has increased by hundreds of multiples. Presenting this information to the tens of thousands of readers out there who are interested in such things has been one of the greatest honors of my life. Continue reading

“Stimulus Hopes” – a Dog that Ain’t Hunting no More

Submitted by Pater Tenebrarum  –  The Acting Man Blog

A Rebound in Stocks Begins

Given that a very sharp downturn in so-called “risk assets” is well underway globally, but not yet fullyconfirmed by US big cap indexes, we are keeping an eye out for confirmation. This is to say, we are looking for events, market moves, positioning data, even newspaper headlines, that will either confirm or refute the notion that a larger scale bear market (as opposed to just a deep correction) has begun.

Bank of Japan Governor Haruhiko KurodaHaruhiko Kuroda will stimulate us back to Nirvana! Hurrah!

Photo credit: Yuya Shino / Reuters

Readers may recall an article we posted earlier this year, discussing historical examples of the stock market swooning in the seasonally strong month of January (see: “Stock Market Suffers Worst Start to the Year Ever” for details). When the market does something like this, it is more often than not sending a message worth heeding. Chart patterns of course never repeat in precisely the same manner, but such historical patterns are nevertheless often useful as rough guides.

As a reminder, here is a chart of the DJIA from 1961 to 1962. Both the distribution period preceding the sell-off, as well as the timing and pattern of the sell-off itself show many similarities to what has so far occurred in 2015 to 2016:

1-DJIA-1961-1962The DJIA from 1961 to 1962. We may be at the beginning of the period equivalent to the one in the green rectangle – click to enlarge. Continue reading

Where Deflation Comes From

Submitted by Raúl Ilargi Meijer  –  The Automatic Earth


Dorothea Lange We’ll be in California yet. We’re not going back to Arkansas 1938

Financial bubbles blown on the back of massive amounts of debt, of necessity lead to debt deflation (it’s just entropy, really). Fighting this is futile, and grossly costly to boot. The only sensible thing to do is to guide the process as best you can and try to minimize the damage, especially at the bottom rungs of society, because that’s where the deflation first takes hold, and where it spreads out from.

Attempting to boost inflation, or boost demand, before letting the debt deflation run its course through restructuring and defaults (perhaps even a -partial- jubilee) leads only to -further- distortion, and -further- impoverishes society’s poorer (at some point to a large extent the former middle classes). Whose lower spending, as nary a soul seems to comprehend, is the origin of the deflation to begin with.

All the attempts by central bankers to boost inflation that we’ve seen so far squarely ignore this, and operate on the false assumption that if only prices for financial assets and real estate can be raised even higher -artificially-, deflation can be warded off.

Thing is, deflation starts not at the top, it starts at the bottom. It’s not the banks or the bankers or the well-off who are maxed out and stop spending, but the people in the street.

They are responsible for most of the spending in an economy, and therefore for the velocity with which money moves in a society. And if the velocity of money falls below a critical point, no increase in the other side of the inflation/deflation equation -the money/credit supply- can make up for the difference. There is a point where all of the King’s horses and all of the King’s central bankers can’t put Humpty Dumpty together again. Continue reading

Gold Price Pulls Back As “Bad Actor” Fed Signals Slower Rate Hike Cycle

Submitted by Mark O’Byrne  –  GoldCore

Volatility, loss of confidence and central bank impotence stalk the capital markets. Gold pulls back in an expected retrenchment. Equity markets are still digesting what the world looks like: absence of a strong Chinese domestic economy, developing economies losing their easy credit, oil prices adjusting to demand levels indicative of economic activity and, most tragically, the continuing proxy wars fought in the middle east as warmongers continue to slaughter innocent civilians.

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Gold in USD – 1 Week

Monetarily speaking the markets are just not playing to the script. It must be infuriating for the unelected officials at our all-powerful central banks to have to take steps to remind or tell, nay, instruct the markets what is correct and what is not. By enforcing interest rates on the market, the Fed, and by extension every other central bank, has denied the market its internal risk rebalancing mechanism. They have manhandled the markets into short term submission, created unintended bubbles which inconveniently burst and exposed the sheer madness and short-sightedness of the modern Keynesian-based monetary model.

When the markets do not buy the message, central banks summon their proxies to bid up or smack down the markets for debt, equities and commodities. They write the script, provide insiders sight of their plans and coordinate market manipulation to give the script meaning and the impression of their competence and foresight. Continue reading

It Was Never About Oil

Submitted by Jeffrey Snider  –  Alhambra Investment Partners

The link between stock prices and oil has been especially high of late, and that has left quite a few traders and experts stumped. For a good long while any impact from oil was denied as only “transitory” or even helpful to consumers through some sort of “tax cut” effect. In January 2016, however, liquidations appeared regularly in one alongside the other. This is/was not supposed to occur. From last month:

“Absent an economic recession, stocks have fallen too far in my mind as a long-term investor,” says John Buckingham, who manages about $600 million as chief investment officer of Al Frank Asset Management…
“It’s a big move, and the sentiment in crude is driving pretty much all asset classes right now,” said Brett Mock, managing director at brokerage JonesTrading Institutional Services LLC.

Again today, stocks sold precipitously (in the morning) while oil crashed, as if there might be some common monetary theme behind all the liquidation efforts. It has left even the most veteran stock watchers as reluctant petroleum analysts still wondering why so much crude supply could be so devastating.

“It’s the oil tail wagging the market dog ,” said Art Hogan, chief market strategist at Wunderlich Securities.

That has left the “market” seemingly in desperation for the Fed to come back and save stocks as so many believed had happened before.

“There could be some growing optimism ahead of Janet Yellen’s testimony. She has in the past had the ability to push markets higher, although that’s diminished in recent years,” said Randy Frederick, managing director of trading and derivatives at Charles Schwab.

It’s a nice fairy tale, but the very fact that stocks and oil are where they are suggests the Fed hasn’t been effective at all; particularly since all anyone will talk about is a looming recession contradicting everything monetary policy has described or promised. In fact, the entire idea of the “Greenspan” put, updated from Bernanke to Yellen, never materialized. When needed, when the market was most pressed, the Fed failed – spectacularly. And 2008 was not the first as this century has already witnessed just 15 years in two 60% declines in stocks (for the S&P 500; worse in other segments/indices). Continue reading

The Daily Debt Rattle

Submitted by Raúl Ilargi Meijer  –  The Automatic Earth

‘Panic Situation’ As Asia Stocks Tumble Amid Fears Of New Global Recession (G.)
Global Bond Rally Near ‘Panic’ Level With Japan Yield Below Zero (BBG)
Japan’s 10-Year Yield Falls Below Zero for the First Time (BBG)
US Bank Stocks And Bonds Clobbered By Recession Worry (Reuters)
Investors Dump Stocks, Seek Safe Havens As Bank Fears Flare (Reuters)
Banks Bonds Are “The Epicenter Of Growth Concerns Globally” (BBG)
Goldman Sachs Sees Near-Zero Risk Of UK Recession Despite Market Tantrum (AEP)
Chesapeake Energy Plunges On Bankruptcy Fears (Forbes)
150 Oil And Gas Companies “At Risk Of Bankruptcy” As Prices Fall (BBG)
US Oil Industry Woes Grow As Storage Levels Hit ‘Critical Level’ (MW)
Jim Rogers: “The Market Knows It’s Over” (SHTF)
Can Hobbit Tourism Save New Zealand’s Troubled Dairy Farmers? (BBG)
Turkey’s Erdogan Threatened To Flood Europe With Migrants (Reuters)
35 Refugees Die Off Turkish Coast (Guardian)

Washington Is The Greatest Threat To World Order

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

Sergei Naryshkin, the Chairman of the Russian Parliament says that the growing tensions in international relations result from Washington’s lack of morals and violations of international law:

“The increasing crisis in international relations is rooted in Western nations’ lack of morals and their reluctance to observe basic norms of international law,” State Duma chairman Sergey Naryshkin has said.
“The tensions in the international situation have seriously increased over the past few years and this happens primarily because a group of Western nations, first of all, the United States of America, are neglecting the major principles of international law or interpret them freely,” Interfax quoted the Russian parliamentary leader as saying at a meeting with law students on Monday.
“I would be more direct – it happens due to the lack of morals,” Naryshkin added. He emphasized that the argument of “American exceptionalism” often used by many US politicians was against not only the legal principle of equality of all nations and peoples, but also contradicted basic human morality.
READ MORE: We will never play by US rules – State Duma chief
The Duma speaker also said that at the moment he considered Russia as the key protector of the basic foundations of international law. He noted that as one of the victor nations in World War II, Russia played a decisive role in introducing international law and that it had paid a great price for this achievement.
In May 2015, Naryshkin published an article in the Rossiiskaya Gazeta daily in which he urged European politicians to stop heeding advice from the United States and to start working on common Eurasian economic interests with Russia. If this doesn’t happen, Washington will eventually destroy the EU’s economic sovereignty by skillful manipulation of WTO mechanisms, Naryshkin wrote.
READ MORE: Europe should overcome US pressure, resume cooperation with Russia – Duma chief
Naryshkin has also backed the idea of a future merger between the Russian Federation and the European Union, and in April 2015 he suggested immediately starting consultations. The idea of the possibility of such a merger originally came from Czech President Milos Zeman, who confessed to having a dream that one day Russia would join the EU.” https://www.rt.com/politics/330860-duma-speaker-blames-west-for/

Naryshkin has a good point. Until the advent of the “war on terror,” torture was a rarely used tool of post-WW II governments in Europe and the US. But in the 21st century illegal torture became so commonplace that a magazine, Torture, was created to expose and combat torture. The magazine’s editorial board consists of Nilantha Ilangamuwa, Lauren Glenmere, and Eric Bailey. Continue reading

The Daily Debt Rattle

Submitted by Raúl Ilargi Meijer  –  The Automatic Earth

• Recession Risks Warn Of ‘Severe’ Drop In The Stock Market (MW)
• Exxon Faces First Downgrade in 86 Years (BBG)
• Iraq Sells Oil At $22, Fiscal Cliff Looms (BI)
• Goldman Sachs Questions Capitalism (BBG)
• Eurozone Manufacturing & Service Industries Cut Prices (BBG)
• Plan To Increase The Yuan’s Trading Flexibility Gains Momentum (BBG)
• Spring Festival Travel A One-Way Journey For Many Chinese (CNBC)
• Buying A Home Is Overrated (MW)
• The Bank of Japan Is Selling Out Its People (Gefira)
• Hedge Funds, Wall Street not Happy with the New Spain (Don Quijones)
• Thousands Of Greek Firms Flee To Bulgaria (Kath.)
• Australian Asylum Ruling Paves Way For Deportation Of Infants (Reuters)
• Greek Military To Oversee Response To Refugee Crisis (Kath.)
• More Than 62,000 Migrant Arrivals In Greece Last Month (Reuters)
• UN Says One-Third Of Refugees Sailing To Europe Are Children (Guardian)
• Nine Migrants, Including Two Babies, Drown En Route To Greece (Reuters)