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Financial Skeptic Bulletin, 2015

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In top top news we present selected items which demonstrated superior level of their insight (and, unfortunately, to judge that is possible only in retrospect). In 2013 for Jan-May those would be people who understood that bond bubble is about to unwind (can be counted on one hand :-( ).


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[Sep 30, 2015] Becoming China From Shale Malinvestment Boom To We Are Overbuilt Bust

[Sep 30, 2015] Are American Schools Making Inequality Worse

[Sep 29, 2015] Carl Icahn Says Market Way Overpriced, Warns God Knows Where This Is Going Zero Hedge

[Sep 29, 2015] Worl4d set for emerging market mass default, warns IMF - Telegraph

[Sep 28, 2015] Why I Believe Paul Krugman Over Jim Hamilton Why a Chinese Slowdown Is by itself Little Threat to the U.S. Economy

[Sep 28, 2015] Exuberance and Disappoin4tment at Shell's About-Face in the Arctic

[Sep 28, 2015] Shell Exits Arctic as Oil Slump Forces Industry to Retrench

[Sep 28, 2015] Economic impo4rtance of China

[Sep 28, 2015] No shelter for U.S. stocks as trapped global investors flail

[Sep 27, 2015] Where Will 78 Million Boomers Retire Facing th4e Challenge of Aging in Place

[Sep 27, 2015] How Russia and Iran Plan to Push Oil Prices Back above $100

[Sep 27, 2015] Wall Street braces fo4r grim third quarter earnings season

[Sep 27, 2015] Shiller Stocks and housing are overvalued-- here's what to do about it

[Sep 27, 2015] A Few Less Obvious Answers on What is Wrong with Macroeconomics

[Sep 27, 2015] Cash flows beat stocks for first time since 1990

[Sep 27, 2015] Paul Craig Roberts Warns The Entire World May Go Down The Tubes Together

[Sep 26, 2015] Economists View Paul Krugman Dewey, Cheatem Howe

[Sep 26, 2015] The City Of London Has Turned Britain Into A Civilized Mafia State

[Sep 26, 2015] The Table Is Set For The Next Financial Crisis

[Sep 26, 2015] Is the shale gas revolution over

[Sep 25, 2015] Why Dont Commercial Bankers Understand the Interests of Their Class Fraction

[Sep 25, 2015] If a counterparty liquidates, net exposure becomes gross,"

[Sep 25, 2015] Big Business Is Economic Cancer, Part I Zero Hedge

[Sep 25, 2015] Upstream oil execs agree Low, long and living within means

[Sep 25, 2015] Why Inequality Matters

[Sep 25, 2015] Paul Krugman Dewey, Cheatem Howe

[Sep 24, 2015] Tight Oil Reality Check

[Sep 24, 2015] Central Banks Have Made the Rich Richer

[Sep 24, 2015] The Oligarch Recovery 30 Million Americans Have Tapped Retirement Savings Early In Last Year

[Sep 24, 2015] Michael Hudson – Episode 19

[Sep 24, 2015] Is Goldman Preparing To Sacrifice The Next Lehman

[Sep 24, 2015] Drilling Deeper

[Sep 24, 2015] Peak Oil Notes - 24 Sep

[Sep 21, 2015] The Mystery Of The Missing Inflation Solved, And Why The US Housing Crisis Is About To Get Much Worse

[Sep 21, 2015] Iran Deal May Redefine The Middle East

[Sep 21, 2015] HUGE part of the problem is we have a energy illiterate general public

[Sep 21, 2015] Is This The Bottom For Oil Prices

[Sep 21, 2015] Russian Oil Industry Braces For Tax Hike

[Sep 21, 2015] Oil Prices Gain On Higher Investor Confidence In Tightening Markets

[Sep 21, 2015] Economic Outlook, Indicators, Forecasts - Your Business

[Sep 21, 2015] Peak Oil Review - Sep 21

[Sep 21, 2015] Economist's View 'The Pope the Market'

[Sep 20, 2015] Fed To Main Street Screw You - Wall Street Matters More

[Sep 20, 2015] Which Shale Firms Will Cut Production

[Sep 20, 2015] Deep State America

[Sep 19, 2015] Peak Oil Notes - 17 Sep

[Sep 19, 2015] Syria peak oil weakened government's finances ahead of Arab Spring in 2011

[Sep 19, 2015] Unemployment Insurance and Progressive Taxation as Automatic Stabilizers

[Sep 19, 2015] A Knee-Jerk Free Trader Response is Faith-Based

[Sep 19, 2015] The Typical Male U.S. Worker Earned Less in 2014 Than in 1973

[Sep 19, 2015] The myth of Ronald Reagan: pragmatic moderate or radical conservative?

[Sep 18, 2015] Big oils broken model

[Sep 18, 2015] China Is Hoarding the World's Oil

[Sep 18, 2015] Goldman Sees 15 Years of Weak Crude as $20 U.S Oil Looms

[Sep 18, 2015] $50 Oil For 15 Years – Can Anyone Take Goldman Seriously Anymore

[Sep 18, 2015] Oil Prices Could Surge As This Country Fails To Meet Production Targets

[Sep 18, 2015] Peak Oil Review - Sep 14

[Sep 18, 2015] Age of the Unicorn How the Fed Tried to Fix the Recession, and Created the Tech Bubble

[Sep 18, 2015] The least Russia has held of American securities in the last two years was in April this year, when it held only $66.5 Billion

[Sep 18, 2015] IS sends every day 20000 barrels of oil sold for 30$ a barrel and under, and refined in Batman before being sold

[Sep 18, 2015] Oil prices weak on economic concerns, OPEC target on market share

[Sep 18, 2015] I would summarize the Keynesian view in terms of four points

[Sep 18, 2015] Axel Merk Warns Investors Are In For A Rude Awakening Zero Hedge

[Sep 16, 2015] Is This Americas Biggest Problem... And Why It Wasnt Always Like This

[Sep 16, 2015] Oil war Is Saudi Arabia walking into its own trap

[Sep 16, 2015] For Canadian Oil Sands It's Adapt Or Die

[Sep 16, 2015] Record 46.7 Million Americans Live In Poverty; Household Income Back To 1989 Levels

[Sep 16, 2015] Axel Merk Warns Investors Are In For A Rude Awakening

[Sep 16, 2015] Bankers Will Be Jailed In The Next Financial Crisis

[Sep 16, 2015] The pernicious effects of corporate bonuses

[Sep 16, 2015] To save the rich, relieve the poor!

[Sep 16, 2015] Oil, Iraq War, Neoliberalism

[Sep 16, 2015] Checkmate for Saudi Arabia

[Sep 15, 2015] Common factors in commodity and asset markets

[Sep 15, 2015] A Fiscal Policy Rule for Oil Exporters

[Sep 14, 2015] Jeffrey Brown To Understand The Oil Story, You Need To Understand Exports

[Sep 14, 2015] A Flock Of Black Swans

[Sep 14, 2015] Conceptual pitfalls and monetary policy errors VOX, CEPR's Policy Portal

[Sep 14, 2015] The Intellectual History of the Minimum Wage and Overtime

[Sep 13, 2015] Heart of Gold

[Sep 13, 2015] A Major Bank Just Made Global Financial Meltdown Its Base Case The Worst The World Has Ever Seen

[Sep 12, 2015] David Stockman Sums It All Up In 3 Minutes

[Sep 12, 2015] Declining oil prices: OPEC vs. (future) Shale?

[Sep 12, 2015] The 20-Year Stock Bubble - Its Origin In Wholesale Money Zero Hedge

[Sep 11, 2015] These Four Charts Show How Obama's Leverage Over Xi Is Increasing

[Sep 11, 2015] How Low Can Oil Go Goldman Says $20 a Barrel Is a Possibility

[Sep 11, 2015] IEA Sees U.S. Shale Oil Shrinking in 2016 on Price Slump

[Sep 11, 2015] Iranian Oil Minister Output to Return After Sanctions Lift, $80 Crude Would Be 'Fair'

[Sep 11, 2015] Deflationary Collapse Ahead?

[Sep 11, 2015] End Of Cheap Fossil Fuels Could Have More Severe Consequences Than Thought

[Sep 11, 2015] Why Vladimir Putin Won't Be Helping OPEC to Cut Oil Production

[Sep 11, 2015] IEA Sees Oil Supply Outside OPEC Falling by Most Since 1992

[Sep 11, 2015] Citi's Chief Economist Says China Is Financially Out of Control

[Sep 09, 2015] Disability Claims are not Skyrocketing

[Sep 09, 2015] The Fed Must Act Soon Why

[Sep 09, 2015] Neoclassical economic reforms were colossal failures

[Sep 09, 2015] How Rising Inequality Increases Political Polarization

[Sep 09, 2015] How an Area's Union Membership Can Predict Children's Advancement

[Sep 09, 2015] One Shale Boom That Is Bulletproof To The Current Market Chaos

[Sep 08, 2015] Weak economic outlook and oversupply weigh on oil markets

[Sep 08, 2015] Mystery Buyer Of US Treasurys Revealed

[Sep 07, 2015] US, Canadian Shale Sectors Doomed if Oil Price Drops Below $45 Per Barrel

[Sep 07, 2015] The divergence between pay and productivity

[Sep 07, 2015] The Thirty-Year Boom

[Sep 07, 2015] Why The New Car Bubbles Days Are Numbered

[Sep 07, 2015] Central banks can do nothing more to insulate us from an Asian winter

[Sep 06, 2015] The Dangerous Separation of the American Upper Middle Class

[Sep 06, 2015] Chinas stock market crash 11 things you need to know

[Sep 06, 2015] The Margin Debt Time-Bomb

[Sep 06, 2015] The Unemployment rate is misleading given the numbers of people who want to be employed but have given up looking for a job.

[Sep 06, 2015] Why the $20 Oil Predictions are Wrong

[Sep 06, 2015] Oil Shale Reserves

[Sep 06, 2015] U.S. tight oil production decline

[Sep 05, 2015] Tribes

[Sep 05, 2015] Range of reactions to realism about the social world

[Sep 05, 2015] Fed Watch: If You Ever Wondered Whose Side The Federal Reserve Is On...

[Sep 05, 2015] RE: Inflation, the Fed, and the Big Picture (Links for 09-04-15)

[Sep 05, 2015] Is Effective Demand showing the limit of the Business Cycle… again

[Sep 05, 2015] Global Economic Fears Cast Long Dark Shadow On Oil Price Rebound

[Sep 05, 2015] WORLD TRADE IS FALLING

[Sep 05, 2015] Deflation and Money

[Sep 04, 2015] Belabored and Befuddled - 'Error and Repair'

[Sep 04, 2015] What Happened to the Moral Center of American Capitalism?

[Sep 04, 2015] Four-fifths of the Economy is a Complete Waste of Time

[Sep 04, 2015] 6 reasons the bear market has just begun

[Sep 04, 2015] S P 500 may fall further 10-15% Nomuras Janjuah

[Sep 04, 2015] The political reasons for the opposition to the policy of creating employment

[Sep 04, 2015] An Indicator of Tribalism in Macroeconomics

[Sep 03, 2015] America's terrible roads are good for Michelin's business CEO

[Sep 03, 2015] Why Did Oil Prices Just Jump By 27 Percent in 3 Days

[Sep 03, 2015] Economics Has a Math Problem - Noah Smith

[Sep 03, 2015] Links for 09-01-15

[Sep 03, 2015] Non-intuiti4ve Neo-Fisherism

[Sep 03, 2015] The Dangerous Separation of the American Upper Middle Class

[Sep 03, 2015] Uber Strategy of Monopolization Through Sidestepping Labor Law May Be Coming to an End

[Sep 03, 2015] JPM Omen 2.0 Sparks Stock PumpnDump After Crude SurgesnPurges Zero Hedge

[Sep 03, 2015] Risk of big stock drops grows Robert Shiller

[Sep 03, 2015] Mapping The Crisis Contagion Process The Flowchart

[Sep 02, 2015] Bill Gross Fed tightening now could create self-inflicted instability

[Sep 02, 2015] West Texas Fracker Uses Toilet Water To Cut Cost

[Sep 02, 2015] US Oil Production Nears Previous Peak

[Sep 02, 2015] ConocoPhillips Fires 10% Of Global Workforce, Warns Of Dramatic Downturn To Oil Industry

[Sep 02, 2015] Financial Sector To Cut Credit Supply Lines For Oil And Gas Industry

[Sep 02, 2015] The Mirage Of An Iranian Oil Bonanza

[Sep 01, 2015] No fundamental reason for oil's 'meltdown' energy analyst

[Sep 01, 2015] Marc Faber We Have Reached Some Kind of Tipping Point

[Sep 01, 2015] Leveraged Bubbles

[Sep 01, 2015] Some Day, We'll Look Back at This, and Laugh

[Aug 31, 2015] Forget China Oil price main driver for market turmoil.

[Aug 31, 2015] Is China's Devaluation a Game Changer

[Aug 31, 2015] Price of Oil Jumps Above $48 Per Barrel for WTI

[Aug 31, 2015] Bernie Sanders Interview: The Business Model of Wall Street Is Fraud

[Aug 31, 2015] The Case for Realism in the Social Realm

[Aug 31, 2015] China can ride out this crisis. But we're on course for another crash

[Aug 30, 2015] The Dollar Now What

[Aug 30, 2015] 15 Science-Backed Way4s To Fall Asleep Faster

[Aug 30, 2015] Brace for Quantitative Tightening, As China Leads Forex Reserves Purge

[Aug 30, 2015] The Scary Number Hiding Behind Today's GDP Party

[Aug 30, 2015] Under the Hood of U.S. GDP Was Divide Between Growth, Incomes

[Aug 30, 2015] China Sneezes, Europe Catches a Cold

[Aug 30, 2015] Saudi Oil Strategy Brilliant Or Suicide

[Aug 30, 2015] Why The Great Petrodollar Unwind Could Be $2.5 Trillion4 Larger Than Anyone Thinks

[Aug 29, 2015] Great Recession Job Losses Severe, Enduring

[Aug 29, 2015] Shiller: Rising Anxiety That Stocks Are Overpriced

[Aug 29, 2015] The Fed Looks Set to Make a Dangerous Mistake

[Aug 29, 2015] Heres Why The Markets Have Suddenly Become So Turbulent

[Aug 29, 2015] Fly Me To the Moon

[Aug 29, 2015] Maintaining Confidence - Keep On Dancing

[Aug 29, 2015] Leveraged Financial Speculation to GDP in the US at a Familiar Peak, Once Again

[Aug 29, 2015] U.S. Inflation Developments

[Aug 28, 2015] A third scenario for stock markets

[Aug 28, 2015] Q2 GDP Revised up to 3.7%

[Aug 27, 2015] Oil Industry Needs Half a Trillion Dollars to Endure Price Slump

[Aug 27, 2015] Why Saudi Arabia Won't Cut Oil Production

[Aug 27, 2015] Oil Prices Driven Lower By Everything Except Fundamentals

[Aug 27, 2015] Oil Prices Must Rebound. Here's Why

[Aug 27, 2015] Smoke and Mirrors of Corporate Buybacks Behind the Market Crash

[Aug 27, 2015] Oil markets catch breath after biggest gains in six years

[Aug 27, 2015] Where Is Neo When We Need Him

[Aug 27, 2015] Shiller: Rising Anxiety That Stocks Are Overpriced

[Aug 27, 2015] Lies You Will Hear As The Economic Collapse Progresses

[Aug 26, 2015] Peter Schiff The market's 'pipe dream' is ending

[Aug 26, 2015] What If The Crash Is As Rigged As Everything Else

[Aug 25, 2015] Oil rallies but still near six-and-a-half-year lows

[Aug 25, 2015] Bulls back in charge; Intervention the 'new normal'; Hollywood's China love story

[Aug 25, 2015] It Feels Like 1997 Warns Art Cashin, Watch High Yield

[Aug 25, 2015] Oil Traders Race for Cover as Light at End of Tunnel Dims

[Aug 25, 2015] Out in the Real World, Oil Market Is Much Better Than It Looks

[Aug 25, 2015] Norway's Oil Minister Says Crude Price at $40 Can't Last

[Aug 25, 2015] What cheap oil means, and where do prices go from here

[Aug 24, 2015] Advice After Stock Market Drop Take Some Deep Breaths, and Don't Do a Thing

[Aug 24, 2015] A bedside guide for Henry Paulson By Julian Delasantellis

Blast from the past ;-)
Dec 9, 2008 | Asia Times

It was the unique genius of Woody Allen that turned Dr David Reuben's daring (for the time, anyway) 1969 question-and-answer book, Everything You Always Wanted to Know About Sex (but were afraid to ask) into a 1972 skit comedy film. To illustrate the book's inquiry "Why do some women have trouble reaching orgasm?", Allen presents the story of a modern Italian couple, Fabrizio (played by Allen) and Gina (played by Allen's real-life former paramour, Louise Lasser).

In response to Fabrizio describing to a worldly friend Gina's aforementioned problem, Fabrizio is advised that perhaps what Gina needs is the spark of danger, of risk, in their lovemaking. The pair start cautiously, making love in a friend's house, but before long they are locked in erotic embrace in a restaurant, even in front of a church. Fabrizio is pleased that he has solved the couple's problem, but he worries. He realizes that it is getting harder and harder, that he is having to subject himself and Gina to more and more risk, in order to create a satisfactory conclusion. What must he do next?

Lately, the US stock market is proving equally as hard to please as Gina. ...Much like Gina, it seems the government is being called to engage in ever-more vigorous and extensive endeavors to stimulate the stock market.

[Aug 24, 2015] It might well be the forth neoliberal financial crash on the horizon so it is time to update "Protecting your 401K savings" page

I started to update again Protecting your 401K savings -- the pages that are widely read during periods of extreme uncertainty and almost never during "good" periods of rising stock market ;-).

Neoliberal economics (aka casino capitalism) function from one crash to another. This is given taking into account hypertrophied role of financial sector under neoliberalism, the sector that introduces strong positive feedback look into the economic system. As attempt to put some sand into the wheels in the form of increasing transaction costs or jailing some overzelous bankers or hedge fund managers are blocked by political power of financial oligarchy, which is the actual ruling class under neoliberalism for ordinary investor (who are dragged into stock market by his/her 401K) this in for a very bumpy ride. I managed to observe just two two financial crashed under liberalism (in 2000 and 2008) out of probably four (daving and loan crisis was probably the first). The next crash is given, taking into account hypertrophied role of financial sector under neoliberalism. Timing is anybody guess but it might well be close.

Actually some people are worried. This month the most read pages include:

[Aug 24, 2015] Black Monday Brings Global Market Rout, Investors Mourn The Death Of Central Bank Omnipotence

[Aug 24, 2015] Why $20 Oil Won't Happen

[Aug 23, 2015] Are Stock Markets Setting Up For A New 'Black Monday'

[Aug 23, 2015] IMF official says 'premature' to speak of Chinese crisis

[Aug 23, 2015] Investors Race to Escape Risk in Once-Booming Emerging-Market Bonds

[Aug 23, 2015] Thomas Piketty: New Thoughts on Capital in the Twenty-First Century

[Aug 23, 2015] This Wasnt Supposed To Happen Crashing Inflation Expectations Suggest Imminent Launch Of QE4

[Aug 23, 2015] Gold Driving Higher: Spec Flambé

[Aug 23, 2015] 330 Ramp Capital™ on Twitter @BarbarianCap not what I'm seeing

Extreme fear

[Aug 22, 2015] Scientists Do Not Demonize Dissenters. Nor Do They Worship Heroes.

[Aug 22, 2015] Investors Flood Oil ETFs Looking For Bottom ETF.com

[Aug 22, 2015] Paul Krugman Debt Is Good

[Aug 22, 2015] How Complex Systems Fail

[Aug 22, 2015] From Russia to Iran, the consequences of the global oil bust

[Aug 22, 2015] Carnage Worst Week For Stocks In 4 Years, VIX Soars Most Ever

Aug 22, 2015 | Zero Hedge

Dow enters correction... this was the 9th largest point drop in the history of The Dow...

And The VIX ETF saw its biggest 2-day rise since 2011 (no wonder with 61.7mm shares short agaionst just 60.6mm outstanding)

Dropping for 8 straight weeks for the first time since 1986...

[Aug 21, 2015] What Will It Take For The Fed To Panic And Bail Out The Market Once Again BofA Explains

[Aug 21, 2015] Is The Oil Crash A Result Of Excess Supply Or Plunging Demand The Unpleasant Answer In One Chart

[Aug 21, 2015] Feels like 1986 Oil on track for longest weekly losing streak in 29 years

[Aug 20, 2015] Low Oil Prices Could Break The "Fragile Five" Producing Nations

[Aug 20, 2015] Rosneft Doubling Down To Survive Oil Price Storm

[Aug 20, 2015] Wolf Richter It Starts – Broad Retaliation Against China in Currency War

[Aug 16, 2015] 'International Money Mania'

[Aug 16, 2015] The Ron Paul Institute for Peace and Prosperity Republicans Cant Face the Truth About Iraq

[Aug 16, 2015] Deal or War': Is Doomed Dollar Really Behind Obama's Iran Warning?

[Aug 16, 2015] Welcome To The World Of ZIRP Zombies Zero Hedge

[Aug 16, 2015] And Quiet Flows the Con

[Aug 16, 2015] You Don't Need to Hire Rapacious Private Equity Firms to Get Their Returns

[Aug 15, 2015] Paul Krugman Bungling g's Stock Markets

[Aug 15, 2015] Are Automakers About To Hit The Panic Button

[Aug 12, 2015] Unwavering Fealty to a Failed Theory

[Aug 12, 2015] The Macroeconomic Divide

[Aug 09, 2015] Stephen Schork: The Commodity Crash Is A Canary In The Coal Mine For The Global Economy

[Aug 09, 2015] The Link Between Oil Reserves and Oil Prices

[Aug 08, 2015] How Russian energy giant Gazprom lost $300bn

[Aug 08, 2015] The "petrodollar" is a pillar of American power

[Aug 08, 2015] Global Oil Supply More Fragile Than You Think

[Aug 08, 2015] The elites not stupid: they need a crash to justify their draconian repressive and warmaking moves

[Aug 08, 2015] Don't Expect An Oil Price Rebound This Side Of 2017

[Aug 08, 2015] Top 6 Myths Driving Oil Prices Down

[Aug 07, 2015] U.S. adds Russian oil field to sanctions list

[Aug 06, 2015] Crude Carnage Continues As Goldman Warns Storage Is Running Out

[Aug 06, 2015] US layoffs hit nearly 4-year high in July Challenger

[Aug 03, 2015] Freshwater's Wrong Turn

[Aug 02, 2015] Shale Gas Reality Check

[Aug 02, 2015] Peak Oil Notes - July 30

[Aug 02, 2015] Debt Slaves: 7 Out Of 10 Americans Believe That Debt Is A Necessity In Their Lives

[Aug 01, 2015] Paul Romer: Freshwater Feedback on Mathiness

[Jul 31, 2015] Dentists and Skin in the Game

[Jul 31, 2015] Paul Krugman China's Naked Emperors

[Jul 31, 2015] Greed Is King - What We Learned Talking To Chinese Stock Investors

[Jul 31, 2015] Say A Little Prayer Bill Gross Warns, Zombie Corporations Now Roam The Real Economy

[Jul 30, 2015] How A Pork Bellies Trader And Milton Friedman Created The Greatest Trading Casino In World History

[Jul 29, 2015] Chevron cutting 1,500 jobs to help cut costs by $1B

[Jul 29, 2015] Bill Gross Explains (In 90 Seconds) How Its All A Big Shell Game

[Jul 29, 2015] Bill Gross Explains (In 90 Seconds) How It's All A Big Shell Game

[Jul 29, 2015] Fed staff error reveals "potential" output is mostly nonsense

[Jul 29, 2015] World Natural Gas Shock Model

[Jul 29, 2015] Why are these investors avoiding stocks in 401(k)s

[Jul 29, 2015] Is oil price set for rebound after losing streak

[Jul 29, 2015] Oil groups have shelved $200B in new projects as low prices bite

[Jul 29, 2015] Are Chinas Problems Responsible For Recent Market Slides

[Jul 27, 2015] 185 Billion Reasons Why The US Agreed To Nuclear Deal With Iran

[Jul 27, 2015] Can You Hear the Fat Lady Singing - Part III

[Jul 27, 2015] Watching Yields Rise Are Treasuries a Buy

[Jul 27, 2015] Which is more likely, $33 or $75 oil

[Jul 27, 2015] The Nuclear Deal is Mostly about Oil John Browne

[Jul 26, 2015] What Is Wrong with the West's Economies?

[Jul 26, 2015] Oil and gas crunch pushes Russia closer to fiscal crisis

[Jul 24, 2015] The End Of The Supercycle Commodity Capitulation Arrives

Jul 24, 2015 | Zero Hedge
The fund flow details indicate a "Great Rotation" out of commodities, Emerging Markets and, curiously, the US, and into bonds and continued flows into Europe, which has now seen 10 straight weeks of inflows with the latest one of $6.0 billion also the largest in the past 4 months.

Inflows into fixed income have been across the board:

While in equities it has been a tale of two flow directions: out of the US and into Europe (and to a lesser extent Japan):

By sector, inflows to secular growth areas of healthcare ($1.3bn) & technology ($0.4bn)

To be sure, the best example of the paper flow capitulation is where else but gold, where in the past week algo, 1% of total gold/silver AUM has been wihdrawn!

[Jul 24, 2015] Fed inadvertently publishes staff forecast for 2015 rate hike

"...The staff views were less optimistic about the economy than several key policymaker forecasts."
"...The Fed's staff also took a dimmer view of long-run economic growth, expecting gross domestic product to expand 1.74 percent in the year through the fourth quarter of 2020. The views of Fed policymakers for long-term growth range from 1.8 percent to 2.5 percent."

... ... ...

ONE HIKE IN 2015

In the projections prepared in June, the staff expected policymakers would raise their benchmark interest rate, known as the Fed funds rate, enough for it to average 0.35 percent in the fourth quarter of 2015.

That implies one quarter-point hike this year, as the Fed funds rate is currently hovering around 0.13 percent. (USONFFE=)

Analysts at JPMorgan and Barclays said this suggested the staff expected a rate hike before a scheduled December 15-16 policy meeting. The Fed also has policy meetings scheduled for July 28-29, September 16-17, and October 27-28.

All but two of the Fed's 17 policymakers said last month they think rates should rise in 2015. They were divided between whether it would be best to raise rates once or twice this year.

The staff views were less optimistic about the economy than several key policymaker forecasts.

In the projections, which stretched from 2015 to 2020, the staff did not expect inflation to ever reach the Fed's 2.0 percent target. By the fourth quarter of 2020, they saw the PCE (personal consumption expenditure) inflation index rising 1.94 percent from a year earlier.

The Fed's staff also took a dimmer view of long-run economic growth, expecting gross domestic product to expand 1.74 percent in the year through the fourth quarter of 2020. The views of Fed policymakers for long-term growth range from 1.8 percent to 2.5 percent.

[Jul 24, 2015] Peak Oil Review - July 23

[Jul 24, 2015] guaranteed retirement accounts

"The government would invest the money and guarantee a rate of return" So this is duplicate of TIPS. That money is going to WALL STREET one way or other.

http://www.nakedcapitalism.com/2015/07/200pm-water-cooler-72415.html#comments

Clinton advisor Teresa “Ghilarducci’s big idea is to create government-run, guaranteed retirement accounts (“GRAs,” for short). Taxpayers would be required to put 5 percent of their annual income into savings, with the money managed by the Social Security Administration. They could only opt out if their employer offered a traditional pension, and they wouldn’t be able to withdraw the money as readily and early as with a 401(k). The government would invest the money and guarantee a rate of return, adjusted to inflation” [National Journal]. Because fiat money is only for banksters.

Push to lift minimum wage now “serious business” [New York Times].

jrs, July 24, 2015 at 2:15 pm

Alright policy. At a certain point does one really even want to know what the new thing they have for us to bend over for is? So WHERE is the money going to be “invested” in these new retirement plans. Yes I know it’s possible to have a retirement plan without investing, it would be something like social security. But if that’s what they wanted they could just increase social security, not propose a new plan (yes even increase funding but not while it covers current outgo at least). A new plan rather than expanded social security is entirely unnecessary so by proposing one they are up to no good. That money is going to WALL STREET one way or other.

... ... ...

Brindle, July 24, 2015 at 3:07 pm

The optics of this look like part of Clinton’s feint left—for the base of the Dem party:

—For the Clinton campaign, Ghilarducci offers significant benefits, too. As Clinton tries to move away from the centrist economic legacy of her husband’s administration, with its welfare reform and deregulation of banks, Ghilarducci offers a fresh take—and a fresh face—on economic-policy debates long dominated by a small, sharp-elbowed cast of white men who have advised the Clinton or Obama administrations.

[Jul 24, 2015] Though the Heavens May Fall

[Jul 23, 2015] The Cost of Free [Trades]

The CIO that Eric Peters is quoting above is fortunate that markets aren’t a 24/7 affair with wide open access. I believe that most investors are as well.

Silicon Valley is enamored with a slew of new tech startups that offer free and instantaneous trading. The technology is cool and the price is, well, as good as it gets, but the larger question to me is “Why?” If an investment isn’t promising enough to justify paying seven dollars to execute the trade, maybe it’s not an investment worth making. Maybe there’s an unexpected benefit to there being some layer of friction between people and their ability to make moves.

Perhaps the relatively minor gateway of a trade confirmation screen – “Are you sure you’d like to place this order?” – or a small trading commission ends up being the thing that stands between the kind of frivolous transacting that undoubtedly destroys more value than it creates.


Warren Buffett and Charlie Munger say it is very unlikely that they can make hundreds of smart decisions each year. They can get the relatively few big decisions mostly right, which is why their investment process is oriented away from having to make a lot of good calls all the time. Can a guy trading out of boredom from his phone say otherwise with a straight face?

I’m all for efficiency and the trend toward lower investment costs. It’s a huge win for investors in the long run. But at what point do lower short-run costs create larger long-run costs by encouraging self-defeating behavior? Investors who are free and unfettered to act on their every impulse and whim are not necessarily being empowered – in many cases they are being endangered. Jack Bogle has made this case in terms of the ETFs that have gradually sucked assets away from traditional ’40 act mutual funds. He views them as carrying a built-in incentive to trade rather than invest because they’re moving up and down all day. He’s partially right – but a tool is only as good or as bad as the end user.

Free is never free; there’s always a price. This includes market access.

[Jul 23, 2015] Bernard Baruch’s 10 Rules of Investing

Posted February 17, 2013 by Joshua M Brown

You want someone to emulate?

Bernard Baruch (August 19, 1870 – June 20, 1965) was the son of a South Carolina physician whose family moved to New York City when he was eleven year old. By his mid-twenties, he is able to buy an $18,000 seat on the exchange with his winnings and commissions from being a broker. By age 30, he is a millionaire and is known all over The Street as “The Lone Wolf”.

In his two-volume 1957 memoirs, My Own Story, Baruch left us with the following timeless rules for playing the game:

“Being so skeptical about the usefulness of advice, I have been reluctant to lay down any ‘rules’ or guidelines on how to invest or speculate wisely. Still, there are a number of things I have learned from my own experience which might be worth listing for those who are able to muster the necessary self-discipline:”

  1. Don’t speculate unless you can make it a full-time job.
  2. Beware of barbers, beauticians, waiters — of anyone — bringing gifts of “inside” information or “tips.”
  3. Before you buy a security, find out everything you can about the company, its management and competitors, its earnings and possibilities for growth.
  4. Don’t try to buy at the bottom and sell at the top. This can’t be done — except by liars.
  5. Learn how to take your losses quickly and cleanly.
  6. Don’t expect to be right all the time. If you have made a mistake, cut your losses as quickly as possible.
  7. Don’t buy too many different securities. Better have only a few investments which can be watched.. Don’t try to be a jack of all investments. Stick to the field you know best.
  8. Make a periodic reappraisal of all your investments to see whether changing developments have altered their prospects.
  9. Study your tax position to know when you can sell to greatest advantage.
  10. Always keep a good part of your capital in a cash reserve. Never invest all your funds.10

Baruch would later go on from Wall Street to Washington DC as an advisor to both Woodrow Wilson and to FDR during World War II.

Later, he became known as the Park Bench Statesman, owing to his fondness for discussing policy and politics with his acquaintances outdoors.

He lived til a few days shy of his 95th birthday in 1965. You could do worse than to invest and live based on these simple truths.

[Jul 23, 2015] Big Trouble In Not So Little China...

[Jul 23, 2015] US Recession Imminent - World Trade Slumps By Most Since Financial Crisis

[Jul 23, 2015] Bernard Baruch's 10 Rules of Investing

[Jul 23, 2015] The Effect of New Production Methods on U.S Oil Output

[Jul 22, 2015] Far Worse Than 1986 The Oil Downturn Has No Parallel In Recorded History, Morgan Stanley Says

[Jul 22, 2015] DOT Vehicle Miles Driven increased 2.7% year-over-year in May, Rolling 12 Months at All Time High

[Jul 22, 2015] How A Pork Bellies Trader And Milton Friedman Created The Greatest Trading Casino In World History

[Jul 22, 2015] Oil falls, U.S. crude settles below $50 as inventories rise

[Jul 22, 2015] Metals are getting crushed

And following gold's plunge, analysts are getting increasingly bearish on the commodity.

Goldman Sachs now sees the price of the metal dropping below $1,000 an ounce, according to Bloomberg's Debarati Roy. .

Goldman's head of commodities research Jeff Currie told Bloomberg: "With the more positive outlook on the dollar, and with debasement risk starting to fade, the demand to use gold as a diversifying asset against the U.S. dollar becomes less and less important."

Currie also said the firm prefers to approach gold "on the short side" for the longer term.

Math-Chem-Physics

U.S. Treasury Yields are falling today July 22 due to Safe-Haven flight of Investment Money due to the impending military actions in the China Sea between the U.S. & China ; other areas such as Ukraine are also likely now to explode in conflict. This will soon attract Safe-Haven Investment into Gold and Silver also and the Gold & Silver Mining Stock Equities in XAU and HUI. My previous blog on July 20, 2015 below explains this in detail , and also explains why the FRB won't raise its Fed Funds Rate until 2017 :

China is a very shrewd Investor, and so some of its Gold was obviously sold near the top of 2011 and 2012 when Gold was approximately $1,900 per ounce. Of course, China is today buying hundreds of tons of Gold so that when the October 2015 IMF Adjustment is made to Voting Rights giving China equal weight to the U.S.A., China's Gold holdings will be at least 4,000 tons instead of the 1645 tons reported last week. The P8 Reconisance Flight over China's Manmade Military Islands in the China Sea by U.S. Admiral Swift today was vehemently protested by China, and likely will lead to shoot-down of a P8 by China soon, thus sparking powerful Gold and Silver gains for coming weeks throughout 2015 --
The sell-off that drove gold down to $1080.50 today within a few minutes of the Shanghai Stock market opening is yet another case of Manipulation of Gold price lower by some large Banks using "Naked Gold Shorts". The authorities will soon fine those responsible and thereby halt that, just as they have recently in 2015 in the cases of Currency Manipulation, and also Manipulation of the Libor Rate.

Gold is now rallying sharply off its bottom of $1080.50 hit within a few minutes of the Shanghai Market opening; Gold price has now recovered more than one-half of its loss, which loss is in spite of the strong Fundamentals of Gold; those strong Gold Fundamentals are related to the impending 86 Billion Euros Bailout for Greece that will strongly bolster the Euro and Gold as the U.S. Dollar sinks sharply, thus allowing the all-important Large Speculators today to sweep up thousands of Gold Contracts based on those strong Gold Fundamentals -- The weekly Commodity Report on Wednesdays will illustrate this on July 22; of course , today's panicked small speculators won't know this until it is too late on July 22. At 3:05 a.m. EDT, Bloomberg News reported that Greece will pay all 7.05 Billion Euros Debt Repayment on time that is due near-term. Gold has so far rallied up to $1119, and Silver has also rallied sharply to be down only a few cents, and the Euro is up 0.2%. Additionally, the FRB cannot raise its Fed Funds Rate according to FRB Vice Chair Fisher on July 17 because the Annual 1.2% PCE Core Inflation Rate fell from 1.3% of the previous month, which is far below the 2% Mandate; FRB Member Mester's notion to use a Interest Rate increase to improve "financial stability" was totally rejected by FRB Member Williams --
The German Parliament on July 18 voted overwhelmingly to immediately start the Bailout Negotiations with Greece, and German Chancellor Merkel then stated that the Greece Bailout must be agreed to quickly so that lengthening of the maturity of those loans by decades with lower Interest Rates will quickly make the Greece Debt "sustainable", thus allowing the IMF to quickly loan their fair share of the 86 Billion Euros -- July 20, 2015 at 7:30 a.m. PDT

[Jul 22, 2015] The current "gangbusters" wealth effect on consumption

[Jul 22, 2015] The Cost of Free [Trades]

The CIO that Eric Peters is quoting above is fortunate that markets aren’t a 24/7 affair with wide open access. I believe that most investors are as well.

Silicon Valley is enamored with a slew of new tech startups that offer free and instantaneous trading. The technology is cool and the price is, well, as good as it gets, but the larger question to me is “Why?” If an investment isn’t promising enough to justify paying seven dollars to execute the trade, maybe it’s not an investment worth making. Maybe there’s an unexpected benefit to there being some layer of friction between people and their ability to make moves.

Perhaps the relatively minor gateway of a trade confirmation screen – “Are you sure you’d like to place this order?” – or a small trading commission ends up being the thing that stands between the kind of frivolous transacting that undoubtedly destroys more value than it creates.

Warren Buffett and Charlie Munger say it is very unlikely that they can make hundreds of smart decisions each year. They can get the relatively few big decisions mostly right, which is why their investment process is oriented away from having to make a lot of good calls all the time. Can a guy trading out of boredom from his phone say otherwise with a straight face?

I’m all for efficiency and the trend toward lower investment costs. It’s a huge win for investors in the long run. But at what point do lower short-run costs create larger long-run costs by encouraging self-defeating behavior? Investors who are free and unfettered to act on their every impulse and whim are not necessarily being empowered – in many cases they are being endangered. Jack Bogle has made this case in terms of the ETFs that have gradually sucked assets away from traditional ’40 act mutual funds. He views them as carrying a built-in incentive to trade rather than invest because they’re moving up and down all day. He’s partially right – but a tool is only as good or as bad as the end user.

Free is never free; there’s always a price. This includes market access.

[Jul 21, 2015] Fat Tails The Invisible Vulnerability Of Markets

[Jul 21, 2015] Take Cover - Wall Street Is Breaking Out The Bubblies

"... After all, what’s a 61X trailing PE among today’s leading tech growth companies?"
Zerohedge

This charmed circle includes Google, Amazon, Baidu, Facebook, Saleforce.com, Netflix, Pandora, Tesla, LinkedIn, ServiceNow, Splunk, Workday, Yelp, Priceline, QLIK Technologies and Yandex. Taken altogether, their market cap clocked in at $1.3 trillion on Friday. That compares to just $21 billion of LTM net income for the entire index combined. The talking heads, of course, would urge not to be troubled.

After all, what’s a 61X trailing PE among today’s leading tech growth companies?

[Jul 20, 2015] The Complete Guide To ETF Phantom Liquidity

[Jul 20, 2015] Which Is A Bigger Act Of Faith - Owning Gold Or Stocks?

[Jul 19, 2015] How The Fed And Wall Street Are Eating Their Seed Corn

[Jul 19, 2015] Shell Warns, Oil Price Recovery To Take 5 Years

[Jul 18, 2015] Paul Krugman: Liberals and Wages

[Jul 16, 2015] It looks like Morgan Stanley absolutely nailed the end of the oil rig plunge

Oil's floor is based on the price to produce it AND ship it. The MSM's have no clue. It costs the Saudis $20 per barrel to deliver the stuff to the dock and load the tankers. (relative in Aramco) It costs them another $18 to ship it to Europe or Houston. With other costs and taxes, the floor for the cheapest oil in the world is about $44 at Houston or a European refinery with not a dime of profit for the Saudis with 10% of the output. Most of the rest need $15 to 20 per barrel more to break even which is why oil hovers around $60. That is the harsh reality and why the true floor is $50-60.

JamesB

there is another data set that matters more and that is the rig productivity data. Almost all of he older and smaller rigs have been take off line. One of the aspects of shale work is the huge leap in technology, perhaps the single largest advance ever in the industry. Traditional vertical drilling produced on average only 1 producing well out of every three drilled. The shale producers have almost completely eliminated dry holes with the newer wells which can steer the drill bits to hit tiny pockets. It is a huge change. The second thing is the first shale wells were drilled only 3/4 of a mile and one rig could cover about 2-3 square miles. They are now drilling 15 miles in shallow wells and one rig drilling site covers 150-180 square miles. What is also interesting is it takes only a couple days longer to drill the 15 miles than the 1 mile. The drilling rig count dropped in half, but the feet drilled actually dropped only about 10%. Deep well drillers are also seeing similar leaps forward. A well in the Gulf of Mexico recently hit a record 25 miles of horizontal reach. Morgan Stanley probably nailed it because they were watching the types of rigs.

Dave

These guys can drill all they want but it will just help keep prices down. The demand is simply not going to be there. Oil will remain oversupplied for a long time as long as they keep pumping and squeezing it out of the ground. And OPEC nations are sure not going to slow down. They have social programs to fund to keep their citizens happy. Now, lets get the price for gas in the US down to $2 a gallon where it should be.

LOREN

The rig count is all off, as far as judging how much oil is being discovered. Don't put much stock in rig counts based on past history. New drill bits have been developed and are now in wide us. They can now drill a well in half the time. So the rig count could be half of what it was years ago, but they can drill twice as many wells. This is what happens when you take your advice from bankers who sit in offices in NY. And the effect is clear, even with drastically reduced rig counts, US oil production continues to increase.

southerncomfort

I work in the oil field in Texas and was making over a $100,000 a year will barely make $60,000 this year. I have already secured a job in the healthcare field and will finish my last year to get my BA in Healthcare Administration. Oil field sucks

dan

The real data is the cost of production... We can't compete until the American Oil Companies decide to reduce profits and share revenue...
Period.

I work in the Middle East and I know.

How much money do you need ExxonMobil?...Texaco?

All of the people that you contract to drill your wells by running, non-stop, for 24 hours don't realize that they will be out of work in a few years...

I do... I am 3rd generation of an Oilfield Drilling Contracting family and I know who profits during the "bust" cycles.... You do!!!

ed

The time for claiming something actually happened is maybe a half year to a year after it happened. This is the problem today with everyone thinking that they MUST KNOW everything immediately, and even then, still make foolish mistakes.

Please, someone tell me why we "must know" which idiot won an election, one minute after the polls closed. Thank you in advance.

Steve

The IB's also were calling for oil to sink to $30 or below, which was ludicrous. Their call on rig count vs. actual data was coincidental at best. You can't make legitimate calls when your butt is sitting in a chair in a cubicle in NYC. My experience is most of these guys, while certainly intelligent and well educated, are arrogant and clueless of day-to-day decisions at the field level.

JamesB

The are nothing more than desk jockeys.

Oil's floor is based on the price to produce it AND ship it. The MSM's have no clue. It costs the Saudis $20 per barrel to deliver the stuff to the dock and load the tankers. (realtive in Aramco) It costs them another $18 to ship it to Europe or Houston. With other costs and taxes, the floor for the cheapest oil in the world is about $44 at Houston or a European refinery with not a dime of profit for the Saudis with 10% of the output. Most of the rest need $15 to 20 per barrel more to break even which is why oil hovers around $60. That is the harsh reality and why the true floor is $50-60.

[Jul 15, 2015] The Stock Market Is Too Important To Leave To The Vagaries Of An Actual Market by Babar Rafique of Setter Capital

"...“The primacy of politics over markets must be enforced.” —Angela Merkel "
"...The stock market is just too important to leave to the vagaries of an actual market now. Too much depends on good-looking numbers now. It must be guided and controlled, or else the stilts on which our global financial system balances become shakier and more visible. The market must be rendered increasingly meaningless simply because it's too meaningful to our current economic system."
"...Welcome to 1984. Has there ever been anything more Orwellian? We have to destroy it to save it? Around the world everything is officially rigged. It is hard to wrap my mind around how these people running things think."
"...Because criticizing a nation’s economic ideology is just like declaring its people subhuman."
Jul 15, 2015 | Zero Hedge

The stock market is just too important to leave to the vagaries of an actual market now. Too much depends on good-looking numbers now. It must be guided and controlled, or else the stilts on which our global financial system balances become shakier and more visible. The market must be rendered increasingly meaningless simply because it's too meaningful to our current economic system.

G.O.O.D

The stock market is just too important to leave to the vagaries of an actual market now. Too much depends on good-looking numbers now. It must be guided and controlled, or else the stilts on which our global financial system balances become shakier and more visible. The market must be rendered increasingly meaningless simply because it's too meaningful to our current economic system.

Welcome to 1984. Has there ever been anything more Orwellian? We have to destroy it to save it? Around the world everything is officially rigged. It is hard to wrap my mind around how these people running things think.

JustObserving

The stock market is just too important to leave to the vagaries of an actual market now. Levitating the stock market has been happening in the land of the free since at least 2009. Fraud and manipulation is the fastest way to wealth.

KnuckleDragger-X

It's getter harder for the propaganda to work when more and more people are going under and the systems like utilities are becoming less stable. The thing that'll likely start the collapse are things like race baiting the free shit army and destroying the working and middle class lifestyle. There are a lot of people who are giving up, but there are also a lot of people starting to get really pissed and it won't be a big thing but a little thing that starts the avalanche....

DOGGONE

http://showrealhist.com

Q: What is going on?
A: F__k the people!

alphamentalist

yes to 2009. and longer if you consider the discounting effect of ever lower rates that has been happening for decades. but the real damage to the micro structures of the market has happened since 2011/2012. single name stocks stopped effectively discounting information in 2012 (except for discounting that there was a lot of QE happening, with the hope of more to come, that all got discounted properly, of course). nowadays, very, very rarely do you see a stock actually trade off when it becomes obvious its management/model is flawed (maybe you get a -5% move for a situation that should have been a -25% move). aside from the obvious misallocation issues, this is a generation crime: it is forcing younger investors to bailout the boomers by paying 2-3x the fair price for their own retirement assets.

Falling Down

OT:

Poor Kruggers:

http://krugman.blogs.nytimes.com/2015/07/15/angry-germans/?module=BlogPo...

Renfield

hehe - first time I've voluntarily read anything on the NY Times site since - oh, I don't even know how many years.

But I must admit that article was kinda fun, short & sweet.

From the article:

<<Because criticizing a nation’s economic ideology is just like declaring its people subhuman.>>

I wonder if he realises what he just said, there?

Thanks for that little snack. I guess you're one of those who reads the NY Times so I don't have to. One of the almost-never times I have any sympathy for a Krugman whine. Krugman's hit his stopped-clock correctness quota with this one.

ETA: First the IMF, now the NY Times. Looks to me like Someone Up There is seizing this opportunity to put Germany firmly in its place. Hmmm... wonder what else is happening behind the scenes, to cause this sudden anti-German sentiment from TPTB? I suspect that whatever it is, it has very little to do with Greece.

Fun Facts

Until the current "financial system" fails, we will have a managed stock market. Just like the Chinese and everyone else.

Why ? If they stopped it would lose 50% or more until it found fair value. Interestingly, more and more inside the establishment see central bank stock market management as the proper course.

"And you may ask yourself, how did I get here ?"

Dr. Engali

It's not that hard to understand. The stawk "market" is a policy tool. The illusion of prosperity must be maintained even if the whole country is slowly going to shit right before our own eyes.

MASTER OF UNIVERSE

The NeoLiberals/NeoConservatives have lost control over the markets since March 10th 2008 @ 11:00am Bear Stearns NYC time. What controls the markets, and the future of all economies throughout the World is a Mandelbrot Set, or fractal, of actual economic destruction that continues to replicate itself each and every successive business quarter. The old 'growth models' that the Wall Street 'Quants' based their projections on was seriously flawed, and now the sand they built the American Economy on has shifted much like the World Trade Centers shifted on their foundations when the USA Military Grade Nano-Thermite cut into the support steel beams to control the demolition of WTC 1 & 2, plus Building #7.

NOTE: The appropriate algorithm to control the Mandelbrot Set that was triggered in 2008 when Bear Stearns was subject to a bear run has not been utilized yet because the 'Quants' do not understand what they did on a Quantum Mechanical level. Nor do they understand how the same fractal has been replicated each successive business quarter. Until they understand what is controlling the markets they will not be able to increase the growth model whatsoever. Each business quarter will be a repeat of the last with an increase in contraction until all the superstructure that was built by the 'Quants' is deconstructed and destroyed outright. In brief, the fractal replication is very aggressive, much like a runaway freight train on a Hegelian Spiral downwards.

moneybots

"The market must be rendered increasingly meaningless simply because it's too meaningful to our current economic system."

A manipulated market always returns the favor in the opposite direction.

farmboy

“The primacy of politics over markets must be enforced.” —Angela Merkel

Clowns on Acid

Fed policy = Stock and Awe !

BoPeople

So, WE are saddled with massively inefficient markets that allocate money to the least deserving and least productive and THEY are saddled with the knowledge that vast numbers of people, not on the inside, now know that the they and those they serve control things ... and when there is the next crisis (and there will be some day) that EVERYONE will quickly know who is responsible (just as the Chinese knew who to blame... and the Greek people know who to blame).

They cannot escape this responsibility and the consequences of that responsibility.

[Jul 13, 2015] OPEC expects a more balanced oil market in 2016

[Jul 12, 2015] The Best Way to End Homelessness

[Jul 12, 2015] Why Investing Is So Complicated, and How to Make It Simpler

[Jul 11, 2015] Gold Daily and Silver Weekly Charts - Some Group Is Sitting On These Markets

[Jul 10, 2015] 200PM Water Cooler 7-9-15

[Jul 10, 2015] Are Big Banks Using Derivatives To Suppress Bullion Prices

[Jul 09, 2015] Fed Watch: Mediocre Tranquility

"...A huge scam run by Angela the Hun."
"...On the case in point then neither Waldmann's nor Delong's explanation of the structural unemployment obsession precludes the other also being true and I would not write off " the Marxist faith that ideology must have some basis in someone's material interests somehow" either. Greedy people are often neurotically obsessive as well.]"
Jul 09, 2015 | economistsview.typepad.com

Tim Duy:

Mediocre Tranquility, by Tim Duy: The US economy is an island of mediocre tranquility in the midst of the stormy sea of the global economy. Tranquil enough to keep the Fed eyeing its first rate hike despite the surrounding storm, but sufficiently mediocre that they feel no reason to rush into that hike. As such, the Fed will remain on the sidelines until the forecast points toward sunnier skies. Uncertainty from Greece and China are likely raising the bar on the domestic conditions that would justify a rate hike

ilsm said in reply to pgl...

A huge scam run by Angela the Hun.

The troika is demanding Greeks take the international version of payday loans, to tighten their belt and need to borrow more at the next payday.

Unlike what US thugs these paydays are paydays to the banksters, the Greek has to go hungry.

New Deal democrat said in reply to pgl...

I agree with this comment. The Troika should allow Greece to meet its target by raising taxes rather than cutting benefits.

But ... here is an argument I don't have a good answer to: Slovakia asks why it should agree to a debt cramdown, and also extend a further bailout, to Greece, when Greece has more generous benefits than Slovakia? I haven't heard any good answer to that at all.

The Eurozone is sometimes contrasted to the USA, in that part of the fiscal union is that prosperous states like NY (analogous to Germany) see their taxes go to help poor states like Alabama (analogous to Greece). But isn't Alabama's state motto "Thank God for Mississippi!" because Mississippi is even poorer? But in the case of the Euro, Mississippi is also being asked for debt forgiveness and a bailout to aid Alabama.

Now I am fully on board with the idea that Germany is failing miserably (to put it politely) in the role of benevolent hegemon. But I just don't see how that can be extended to poorer European states.

pgl said...

Jeb! tells those earning low wages that they need to work more hours. Like this is a full employment economy. Jeb! is an idiot.

ilsm said in reply to pgl...

jeb1 thinks we are.......

As do the rest of the GOPster choir and Hil.

The candidate that insists on thought is Bernie.

pgl said...

The letter to Merkel that Simon Wren Lewis notes:

http://www.thenation.com/article/austerity-has-failed-an-open-letter-from-thomas-piketty-to-angela-merkel/

Message - no more austerity. Nice and the lead signature is Piketty.

Huh - JohnH keeps citing Piketty in his usual cherry picked way to support JohnH's gold bug insanity. But it seems Piketty does not support this gold bug insanity. I wonder if JohnH will finally take note or just find some way to misrepresent what Piketty has written again.

reason said...

Glad to see Robert Waldmann's excellent piece http://rjwaldmann.blogspot.de/2015/07/the-structural-problems-ideology-is-not.html linked to here.

I think Robert Waldmann is massively underappreciated.

RC AKA Darryl, Ron said in reply to Mitch...

"Yeah, I read his piece..."

[Really? Assumes facts not in evidence.]

"...he cited the stock market crash of 87 as the cause of structural employment..."

[Waldman states "the stock market crashed in 1987 and the lady who was not for turning turned to monetary stimulus" which means the reaction was to treat the crash as cyclical unemployment rather than structural. Then Waldman states "This caused increased inflation and an actual shortage of skilled labour" which one can safely assume indicated the counter-cyclical monetary policy was effective and ended the recession.]

"Do Europeans even understand the idea of structural employment?"

[Waldman states "The focus on the structural is free floating ideology" and that after the 1987 recession and recovery "Then the border of the stagnating swamp of structural stupidity shifted from the Atlantic to the English channel. The good tough rigorous market based structure became anglophone not American. The case of an inadvertant shift to excess aggregate demand and the long lasting consequences had no effect on the conviction that Europes problems were structural.

French and German technocrats can ignore aggregate demand, because they have learned to ignore double digit unemployment..."

Do you even understand Waldman? Apparently not.]

RC AKA Darryl, Ron said in reply to reason...

"...I think Robert Waldmann is massively underappreciated."

[I think Robert Waldmann is massively under-understood. TO say Waldmann is often misunderstood would be under-statement. He is not for the lazy casual reader. Now, I like that just fine, but he is really too clever by half for the average reader. I have had that same problem myself at times, but no one pays me anything for my idiosyncratic self-indulgence. Waldmann is less sophisticated than Sandwichman. Paine does not get a pay check for his idiosyncrasies either.

On the case in point then neither Waldmann's nor Delong's explanation of the structural unemployment obsession precludes the other also being true and I would not write off " the Marxist faith that ideology must have some basis in someone's material interests somehow" either. Greedy people are often neurotically obsessive as well.]


reason said...

This piece from Robert Waldmann is also excellent: http://angrybearblog.com/2015/07/a-case-for-grexit.html

RC AKA Darryl, Ron said in reply to reason...

Agreed. This Waldmann article was excellent. When he writes for his own blog then it may not be paid, but maybe at Angry Bear he is paid in some way. In any case, it was well written and thorough. Even Mitch should be able to comprehend this Waldmann article.

THANKS!

pgl said in reply to RC AKA Darryl, Ron...

I use to write for Angrybear. I never got paid. But I did enjoy a lot of back and forth discussions including some from the host here.

ilsm said...

From Krugman on Deflation:

Deflation had nothing to do with it, it was "German morals".

In 1932 no one was lending except payday loans like imposed by the ECB on Greece.

The link between Weimar inflation, and Hitler is imagery used to sell pillorying the economic victims, aka austerity.

In 1932 Germany and the rest of the world suffered the "disastrous attempt to stay on gold."

The UE was one of many factors that made "moral Germans" love Hitler.

There was a vast sea of issues beyond the economy: "German morals" favored politicians with brutal para-militaries (the SS was organized in 1933 from standing Nazi thug units) with propaganda organs to spew hatred and illogical blither like we see from Fox News and much more.

[Jul 09, 2015] A Case for Grexit

Jul 09, 2015 | Angry Bear
beene , July 9, 2015 5:19 am

It is a shame that our educators fail to teach during early education period the falsehood of the need for private banks.

“I believe that banking institutions are more dangerous to our liberties than standing armies.

If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around the banks will deprive the people of all property – until their children wake-up homeless on the continent their fathers conquered.” Thomas Jefferson said in 1802

Matt McOsker , July 9, 2015 12:05 pm

Robert Writes:
3) Greece will have to be austere — deficits will be impossible if no one wants their bonds.

This requires the typical refusal to believe that the balanced budget multiplier is positive. If Greece can tax the rich (and it certainly can tax wealth) it can stimulate without borrowing.

Long term this might only work in a closed economy with no trade, or with a trade surplus. By accounting identity they must run a government deficit with a trade surplus if they want growth unless the private sector can run up private debt (i doubt they can right now) to offset the negative balance of trade. If the new spending flows externally you will not have declining growth, and you will drain bank reserves.

(I-S) + (G-T) + (X-M) = Change NGDP

Also, they don’t need to issue bonds at all. How will they distribute the new currency? Most likely they will spend it into existence with all future government expenditures in the new currency only, they will literally print it up and spend it out there. They functionally don’t need borrowing to print (they could implement some combination of TANs tax anticipation notes). This goes to basic chartalism or MMT on why will Greeks demand the new currency? The greek government will demand all tax payments be made in the new currency. A VAT and property tax should accomplish this, and be hard to evade. Plus tourism will automatically cause the selling of other currencies to buy the new one to pay the VAT taxes. Of course, they would need to default on their debts to a large extent under this scenario – or just say they will defer dealing with payments until their economy stabilizes.

Spending without issuing bonds will drive the short term rate to zero as banks get flooded with reserves. Their new central bank can manage short rates with IOR, rather than bond sales to drain reserves. But in reality they should leave rates at near zero. Yes there will be inflation, but employment would be more important initially.

Matt McOsker, July 9, 2015 12:19 pm

Correction to my post above:

By accounting identity they must run a government deficit with a trade DEFICIT (not surplus)

Also here is a good article comparing Argentina to Greece – http://bilbo.economicoutlook.net/blog/?p=24010

[Jul 09, 2015] More Work Hours Jeb Bush, Try Talking to the Employers

[Jul 04, 2015] Yanis Varoufakis accuses creditors of terrorism ahead of Greek referendum

[Jul 03, 2015] Should make one blush to state that Greece is synonymous with creative accounting, when we had the head of the BoC trained for years at Goldman Sachs and now planted in the BoE.

Jun 30, 2015 | theguardian.com

AGuenther -> sztubacki

"...Should make one blush to state that Greece is synonymous with creative accounting, when we had the head of the BoC trained for years at Goldman Sachs and now planted in the BoE. "
30 Jun 2015 09:30

Utter nonsense fed to the masses by the current corrupt government.

Should make one blush to state that Greece is synonymous with creative accounting, when we had the head of the BoC trained for years at Goldman Sachs and now planted in the BoE.

October 10 2008: http://www.ctvnews.ca/banks-trim-prime-rate-as-ottawa-offers-mortgage-relief-1.332371

September 24 2009: http://www.ctvnews.ca/feds-to-reap-billions-from-mortgage-help-to-banks-1.437280

A couple of years ago this scheme was still going strong at almost $200 billion.. the max for CMHC is $600 billion and was then at something like $565 billion. And yes, this scheme was losing money.

No wonder Flaherty found it necessary to tighten up mortgage rules for ordinary Canadians, making it even more impossible for them to buy a home.

[Jul 03, 2015] The EIA's Questionable Numbers - Peak Oil BarrelPeak Oil Barrel

[Jul 03, 2015] Fed Watch Ahead of the Employment Report

Jul 03, 2015 | Economist's View

This is in-line with Fischer's assessment of the economy:

The U.S. economy slowed sharply in the first quarter of this year, with the most recent estimate being that real GDP declined 0.2 percent at an annual rate. Household spending slowed, while both business investment and net exports declined. Much of this slowdown seemed to reflect transitory factors, including harsh winter weather, labor disputes at West Coast ports, and probably statistical noise. Confirming that view, the latest monthly data on real consumption provide welcome evidence that consumer demand is rebounding, and that economic activity likely expanded at an annual rate of about 2.5 percent in the second quarter.

What about Greece? St. Louis Federal Reserve President James Bullard dismissed Greece as a reason for concern. Michael Derby at the Wall Street Journal reports:

What’s happening in Europe “would not change the timing of any rate hike. I would say September is still very much in play” for raising rates, Mr. Bullard told reporters after a speech in St. Louis. More broadly, he said “every meeting is in play depending on the data,” which he said had been “stronger” recently. He also described recent inflation data as being “more lively” and set to rise further over time.

I doubt other Federal Reserve officials are quite as confident, but they have plenty of time between now and September to assess the situation. As I said Monday, they will be looking for evidence of credit market spillovers. If they don't see it, the economic data will rule the day. Bullard also argued the case of a faster pace of rate hikes:

The Fed should hedge against the possibility of a third major macroeconomic bubble in coming years by shading interest rates somewhat higher than otherwise” would be the case based on historical norms, Mr. Bullard said. “The benefit would be a longer, more stable economic expansion.”

Mr. Bullard warned “my view is that low interest rates tend to feed the bubble process.” He did not point to any major imbalances right now even as he flagged high stock market levels as something to watch, acknowledging the role of technology could be changing how the economy interacts with financial markets.

Derby correctly notes, however, that this places Bullard out of the Fed consensus:

Mr. Bullard’s suggesting that rates may need to be lifted more aggressively in the future puts him at odds with some of his central bank colleagues. Many key Fed officials are now gravitating to the view that changes in labor market demographics and other forces may mean the Fed could keep rates at a lower level relative to historic benchmarks. Most officials now expect that the long-term fed funds rate target, now at near zero levels, will likely stand at around 3.75%.

Fischer, for example, still argues for a gradual pace of normalization and is much more sanguine on the financial market excess:

Once we begin to remove policy accommodation, the Committee's assessment is that economic conditions will likely warrant raising the federal funds rate only gradually. Thus, we expect that the target federal funds rate will remain for some time below levels viewed as normal in the longer run. But that is only a forecast, and monetary policy will, in practice, be determined by the data--primarily data on inflation and unemployment.

What about financial stability? We are aware of the possibility that low interest rates maintained for a prolonged period could prompt an excessive buildup in leverage or cause underwriting standards to erode as investors take on risks they cannot measure or manage appropriately in a reach for yield. At this point, the evidence does not indicate that such vulnerabilities pose a significant threat, but we are carefully monitoring developments in this area.

Fischer is closer to the FOMC consensus than Bullard on these points.

Bottom Line: Incoming data continues to support the case that the underlying pace of activity is holding, alleviating concerns that kept the Fed on the sidelines in the first half of this year. I anticipate the employment report, or, more accurately, the sum of the next three reports, to say the same. Accelerating wage growth could very well be the trigger for a September rate hike, while Greece could push any rate hike beyond 2015. I myself, however, tend to be optimistic the Greece situation will not spiral out of control.

[Jul 02, 2015] When People Jump In Even Though It's Overpriced, That's A Bubble Shiller Warns

"...Shiller also slams the bull$hit adage that "booms don't die of old age..." warning that inventories across goods-producing industries are building worryingly..."
Jul 02, 2015 | Zero Hedge
Bob Shiller moves beyond his normal fence-sitting perspective and goes full Marc Faber in this brief clip. Noting that his CAPE indicator of equity market valuation is flashing red (highest since 1929, 2000, and 2007), Shiller warns it is "when people jump into stocks even though they know valuations are high... that's a bubble," slamming CNBC's rosy perspective reflecting that this is the same as the dotcom rise. Notably he warns specifically "The US equity market is one of the highest in the world," and now is a good time to diversify away from it. Additionally Shiller warns of the slowing momentum in the housing market... warning that mean-reversion is likely with risk for further decline.

Shiller also slams the bull$hit addage that "booms don't die of old age..." warning that inventories across goods-producing industries are building worryingly...

As Shiller explains...

https://youtu.be/Q3MgxKeUoSc

Temerity Trader

Well duh! Another pedestrian article telling us all how the Fed’s loose money blows bubbles, and likely benefits the wealthy the most. Yes there is a huge property bubble in N.Y. but it pales in comparison to the Silicon Valley bubble; the largest the world has ever seen. Propelled by 40-years of tech innovation and high pay; culminating in the useless I-watch. They bring in more cheap Indian labor and export the rest. It will be interesting to see how these people will make those $10k/mo mortgage payments working at Wal-Mart. Living in a small house and upside-down $1mil or more. They will walk away in droves! The repo man will snatch the Lexus and the Tesla. The debt-ridden fools will have nothing! Then the banks will fail and demand bailouts…Greece times 1,000. Delay and pray…more debt will fix it all. Just try to take away all the entitlements and watch the riots start. Bankrupt Medicare, Medicaid, Obamacare, 40 million using EBT cards, broke pensions, thousands of veterans claiming every disability known, but never left the U.S. Everyone wants to sit on their asses and collect government handouts. Why work? Sit around and play with a new I-Toy, watch ‘Dancing With The Stars. Yes, just try to take it all away…

scatha

Bubbles are credit expansion/contraction, government policy driven monetary intervention cycles well described in "Money Masters" which now are completely divorced from economic cycle, which is stuck in US in depression levels over thirty years now.

In other words boom and bust cycles are only fueled now through credit policy into specific market tradable assets selected and ordered by policy makers.

The world central banking system is trying to moderate bubbles’ deflations or collapses through creation bubbles in another asset class just to maintain values of collateral from the initial bubbles.

For example if you overpaid for your house and prices are falling and you cannot sell without massive loss, windfall from another bubble is able to cover your mortgage, losses and/or margin requirements, so you hope and wait for better times. And so you go from one bubble to another and this relates all abstract paper assets and derivatives including, debt, oil and gold etc.

Hence, crash may occur only when CBs run out of bubbly and no more bubbles could be created otherwise party will go on while more and more weaker rats in this rat race are being eliminated via attrition and slide into socio-economic margins like most of us even if we do not know it yet, we are next.

Such practice, in essence denying basic tenet of capitalism namely capital re-production and recycling into productive assets, which is in the first place is labor, was and is widely implemented over last 30 years by world ruling elites and now even in China rendering population obsolete in grand scheme of illustrious progress of civilization.

The real economy is dead so its real economic cycle that included revolving commodity and labor investment assets, recycled in and out economy a classical capitalistic re-production cycle. This type of process is dead and buried.

There is no revitalization of labor power as well as commodity demand due to collapse of labor income and collapse of asset or commodities prices controlled by vast majority of population subjected to deadly deflation spiral due to removal of money from circulation among ordinary people a devastating process, getting stronger and more intense as bubbles become bigger and more numerous.

The only thing that keeps us from massive unrest, hunger and ultimately extinction now is money supply from government social programs such pensions, SS, social welfare, technical/scientific funding, military or security/police non-productive funding which ironically fuel spiral of debt needed to keep it blowing.

It’s like on Titanic, party was going on as usual while in lower decks people were slowly drowning. I hope that there would be not enough boats for all those murderous and gluttonous oligarchs when water reaches their noses.

[Jul 02, 2015] Current Oil Price Slump Far From Over

[Jul 02, 2015] Shale Drillers About To Be Zero Hedged As Loss Protection Expires

[Jul 01, 2015] Continued

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[Jul 01, 2015] Path to Grexit Tragedy Paved by Political Incompetence

[Jul 01, 2015] Syriza can't just cave in. Europe's elites want regime change in Greece

[Jul 01, 2015] http://uk.reuters.com/article/2015/06/30/uk-oil-supply-analysis-idUKKCN0PA1ZM20150630

[Jun 30, 2015] Russian culture minister calls for tax on Hollywood films

[Jun 19, 2015] Debt: War and Empire By Other Means

[Aug 22, 2015] Carnage Worst Week For Stocks In 4 Years, VIX Soars Most Ever

Aug 22, 2015 | Zero Hedge

Dow enters correction... this was the 9th largest point drop in the history of The Dow...

And The VIX ETF saw its biggest 2-day rise since 2011 (no wonder with 61.7mm shares short agaionst just 60.6mm outstanding)

Dropping for 8 straight weeks for the first time since 1986...

Shanghai stock tumble hits global markets

Commodities slide as growth worries mount

[Jul 24, 2015] The End Of The Supercycle Commodity Capitulation Arrives

Jul 24, 2015 | Zero Hedge
The fund flow details indicate a "Great Rotation" out of commodities, Emerging Markets and, curiously, the US, and into bonds and continued flows into Europe, which has now seen 10 straight weeks of inflows with the latest one of $6.0 billion also the largest in the past 4 months.

Inflows into fixed income have been across the board:

While in equities it has been a tale of two flow directions: out of the US and into Europe (and to a lesser extent Japan):

By sector, inflows to secular growth areas of healthcare ($1.3bn) & technology ($0.4bn)

To be sure, the best example of the paper flow capitulation is where else but gold, where in the past week algo, 1% of total gold/silver AUM has been wihdrawn!

[Jul 24, 2015] Fed inadvertently publishes staff forecast for 2015 rate hike

"...The staff views were less optimistic about the economy than several key policymaker forecasts."
"...The Fed's staff also took a dimmer view of long-run economic growth, expecting gross domestic product to expand 1.74 percent in the year through the fourth quarter of 2020. The views of Fed policymakers for long-term growth range from 1.8 percent to 2.5 percent."

... ... ...

ONE HIKE IN 2015

In the projections prepared in June, the staff expected policymakers would raise their benchmark interest rate, known as the Fed funds rate, enough for it to average 0.35 percent in the fourth quarter of 2015.

That implies one quarter-point hike this year, as the Fed funds rate is currently hovering around 0.13 percent. (USONFFE=)

Analysts at JPMorgan and Barclays said this suggested the staff expected a rate hike before a scheduled December 15-16 policy meeting. The Fed also has policy meetings scheduled for July 28-29, September 16-17, and October 27-28.

All but two of the Fed's 17 policymakers said last month they think rates should rise in 2015. They were divided between whether it would be best to raise rates once or twice this year.

The staff views were less optimistic about the economy than several key policymaker forecasts.

In the projections, which stretched from 2015 to 2020, the staff did not expect inflation to ever reach the Fed's 2.0 percent target. By the fourth quarter of 2020, they saw the PCE (personal consumption expenditure) inflation index rising 1.94 percent from a year earlier.

The Fed's staff also took a dimmer view of long-run economic growth, expecting gross domestic product to expand 1.74 percent in the year through the fourth quarter of 2020. The views of Fed policymakers for long-term growth range from 1.8 percent to 2.5 percent.

[Jul 24, 2015] guaranteed retirement accounts

"The government would invest the money and guarantee a rate of return" So this is duplicate of TIPS. That money is going to WALL STREET one way or other.

http://www.nakedcapitalism.com/2015/07/200pm-water-cooler-72415.html#comments

Clinton advisor Teresa “Ghilarducci’s big idea is to create government-run, guaranteed retirement accounts (“GRAs,” for short). Taxpayers would be required to put 5 percent of their annual income into savings, with the money managed by the Social Security Administration. They could only opt out if their employer offered a traditional pension, and they wouldn’t be able to withdraw the money as readily and early as with a 401(k). The government would invest the money and guarantee a rate of return, adjusted to inflation” [National Journal]. Because fiat money is only for banksters.

Push to lift minimum wage now “serious business” [New York Times].

jrs, July 24, 2015 at 2:15 pm

Alright policy. At a certain point does one really even want to know what the new thing they have for us to bend over for is? So WHERE is the money going to be “invested” in these new retirement plans. Yes I know it’s possible to have a retirement plan without investing, it would be something like social security. But if that’s what they wanted they could just increase social security, not propose a new plan (yes even increase funding but not while it covers current outgo at least). A new plan rather than expanded social security is entirely unnecessary so by proposing one they are up to no good. That money is going to WALL STREET one way or other.

... ... ...

Brindle, July 24, 2015 at 3:07 pm

The optics of this look like part of Clinton’s feint left—for the base of the Dem party:

—For the Clinton campaign, Ghilarducci offers significant benefits, too. As Clinton tries to move away from the centrist economic legacy of her husband’s administration, with its welfare reform and deregulation of banks, Ghilarducci offers a fresh take—and a fresh face—on economic-policy debates long dominated by a small, sharp-elbowed cast of white men who have advised the Clinton or Obama administrations.

[Jul 23, 2015] The Cost of Free [Trades]

The CIO that Eric Peters is quoting above is fortunate that markets aren’t a 24/7 affair with wide open access. I believe that most investors are as well.

Silicon Valley is enamored with a slew of new tech startups that offer free and instantaneous trading. The technology is cool and the price is, well, as good as it gets, but the larger question to me is “Why?” If an investment isn’t promising enough to justify paying seven dollars to execute the trade, maybe it’s not an investment worth making. Maybe there’s an unexpected benefit to there being some layer of friction between people and their ability to make moves.

Perhaps the relatively minor gateway of a trade confirmation screen – “Are you sure you’d like to place this order?” – or a small trading commission ends up being the thing that stands between the kind of frivolous transacting that undoubtedly destroys more value than it creates.


Warren Buffett and Charlie Munger say it is very unlikely that they can make hundreds of smart decisions each year. They can get the relatively few big decisions mostly right, which is why their investment process is oriented away from having to make a lot of good calls all the time. Can a guy trading out of boredom from his phone say otherwise with a straight face?

I’m all for efficiency and the trend toward lower investment costs. It’s a huge win for investors in the long run. But at what point do lower short-run costs create larger long-run costs by encouraging self-defeating behavior? Investors who are free and unfettered to act on their every impulse and whim are not necessarily being empowered – in many cases they are being endangered. Jack Bogle has made this case in terms of the ETFs that have gradually sucked assets away from traditional ’40 act mutual funds. He views them as carrying a built-in incentive to trade rather than invest because they’re moving up and down all day. He’s partially right – but a tool is only as good or as bad as the end user.

Free is never free; there’s always a price. This includes market access.

[Jul 23, 2015] Bernard Baruch’s 10 Rules of Investing

Posted February 17, 2013 by Joshua M Brown

You want someone to emulate?

Bernard Baruch (August 19, 1870 – June 20, 1965) was the son of a South Carolina physician whose family moved to New York City when he was eleven year old. By his mid-twenties, he is able to buy an $18,000 seat on the exchange with his winnings and commissions from being a broker. By age 30, he is a millionaire and is known all over The Street as “The Lone Wolf”.

In his two-volume 1957 memoirs, My Own Story, Baruch left us with the following timeless rules for playing the game:

“Being so skeptical about the usefulness of advice, I have been reluctant to lay down any ‘rules’ or guidelines on how to invest or speculate wisely. Still, there are a number of things I have learned from my own experience which might be worth listing for those who are able to muster the necessary self-discipline:”

  1. Don’t speculate unless you can make it a full-time job.
  2. Beware of barbers, beauticians, waiters — of anyone — bringing gifts of “inside” information or “tips.”
  3. Before you buy a security, find out everything you can about the company, its management and competitors, its earnings and possibilities for growth.
  4. Don’t try to buy at the bottom and sell at the top. This can’t be done — except by liars.
  5. Learn how to take your losses quickly and cleanly.
  6. Don’t expect to be right all the time. If you have made a mistake, cut your losses as quickly as possible.
  7. Don’t buy too many different securities. Better have only a few investments which can be watched.. Don’t try to be a jack of all investments. Stick to the field you know best.
  8. Make a periodic reappraisal of all your investments to see whether changing developments have altered their prospects.
  9. Study your tax position to know when you can sell to greatest advantage.
  10. Always keep a good part of your capital in a cash reserve. Never invest all your funds.10

Baruch would later go on from Wall Street to Washington DC as an advisor to both Woodrow Wilson and to FDR during World War II.

Later, he became known as the Park Bench Statesman, owing to his fondness for discussing policy and politics with his acquaintances outdoors.

He lived til a few days shy of his 95th birthday in 1965. You could do worse than to invest and live based on these simple truths.

[Jul 22, 2015] Metals are getting crushed

And following gold's plunge, analysts are getting increasingly bearish on the commodity.

Goldman Sachs now sees the price of the metal dropping below $1,000 an ounce, according to Bloomberg's Debarati Roy. .

Goldman's head of commodities research Jeff Currie told Bloomberg: "With the more positive outlook on the dollar, and with debasement risk starting to fade, the demand to use gold as a diversifying asset against the U.S. dollar becomes less and less important."

Currie also said the firm prefers to approach gold "on the short side" for the longer term.

Math-Chem-Physics

U.S. Treasury Yields are falling today July 22 due to Safe-Haven flight of Investment Money due to the impending military actions in the China Sea between the U.S. & China ; other areas such as Ukraine are also likely now to explode in conflict. This will soon attract Safe-Haven Investment into Gold and Silver also and the Gold & Silver Mining Stock Equities in XAU and HUI. My previous blog on July 20, 2015 below explains this in detail , and also explains why the FRB won't raise its Fed Funds Rate until 2017 :

China is a very shrewd Investor, and so some of its Gold was obviously sold near the top of 2011 and 2012 when Gold was approximately $1,900 per ounce. Of course, China is today buying hundreds of tons of Gold so that when the October 2015 IMF Adjustment is made to Voting Rights giving China equal weight to the U.S.A., China's Gold holdings will be at least 4,000 tons instead of the 1645 tons reported last week. The P8 Reconisance Flight over China's Manmade Military Islands in the China Sea by U.S. Admiral Swift today was vehemently protested by China, and likely will lead to shoot-down of a P8 by China soon, thus sparking powerful Gold and Silver gains for coming weeks throughout 2015 --
The sell-off that drove gold down to $1080.50 today within a few minutes of the Shanghai Stock market opening is yet another case of Manipulation of Gold price lower by some large Banks using "Naked Gold Shorts". The authorities will soon fine those responsible and thereby halt that, just as they have recently in 2015 in the cases of Currency Manipulation, and also Manipulation of the Libor Rate.

Gold is now rallying sharply off its bottom of $1080.50 hit within a few minutes of the Shanghai Market opening; Gold price has now recovered more than one-half of its loss, which loss is in spite of the strong Fundamentals of Gold; those strong Gold Fundamentals are related to the impending 86 Billion Euros Bailout for Greece that will strongly bolster the Euro and Gold as the U.S. Dollar sinks sharply, thus allowing the all-important Large Speculators today to sweep up thousands of Gold Contracts based on those strong Gold Fundamentals -- The weekly Commodity Report on Wednesdays will illustrate this on July 22; of course , today's panicked small speculators won't know this until it is too late on July 22. At 3:05 a.m. EDT, Bloomberg News reported that Greece will pay all 7.05 Billion Euros Debt Repayment on time that is due near-term. Gold has so far rallied up to $1119, and Silver has also rallied sharply to be down only a few cents, and the Euro is up 0.2%. Additionally, the FRB cannot raise its Fed Funds Rate according to FRB Vice Chair Fisher on July 17 because the Annual 1.2% PCE Core Inflation Rate fell from 1.3% of the previous month, which is far below the 2% Mandate; FRB Member Mester's notion to use a Interest Rate increase to improve "financial stability" was totally rejected by FRB Member Williams --
The German Parliament on July 18 voted overwhelmingly to immediately start the Bailout Negotiations with Greece, and German Chancellor Merkel then stated that the Greece Bailout must be agreed to quickly so that lengthening of the maturity of those loans by decades with lower Interest Rates will quickly make the Greece Debt "sustainable", thus allowing the IMF to quickly loan their fair share of the 86 Billion Euros -- July 20, 2015 at 7:30 a.m. PDT

[Jul 22, 2015] The Cost of Free [Trades]

The CIO that Eric Peters is quoting above is fortunate that markets aren’t a 24/7 affair with wide open access. I believe that most investors are as well.

Silicon Valley is enamored with a slew of new tech startups that offer free and instantaneous trading. The technology is cool and the price is, well, as good as it gets, but the larger question to me is “Why?” If an investment isn’t promising enough to justify paying seven dollars to execute the trade, maybe it’s not an investment worth making. Maybe there’s an unexpected benefit to there being some layer of friction between people and their ability to make moves.

Perhaps the relatively minor gateway of a trade confirmation screen – “Are you sure you’d like to place this order?” – or a small trading commission ends up being the thing that stands between the kind of frivolous transacting that undoubtedly destroys more value than it creates.

Warren Buffett and Charlie Munger say it is very unlikely that they can make hundreds of smart decisions each year. They can get the relatively few big decisions mostly right, which is why their investment process is oriented away from having to make a lot of good calls all the time. Can a guy trading out of boredom from his phone say otherwise with a straight face?

I’m all for efficiency and the trend toward lower investment costs. It’s a huge win for investors in the long run. But at what point do lower short-run costs create larger long-run costs by encouraging self-defeating behavior? Investors who are free and unfettered to act on their every impulse and whim are not necessarily being empowered – in many cases they are being endangered. Jack Bogle has made this case in terms of the ETFs that have gradually sucked assets away from traditional ’40 act mutual funds. He views them as carrying a built-in incentive to trade rather than invest because they’re moving up and down all day. He’s partially right – but a tool is only as good or as bad as the end user.

Free is never free; there’s always a price. This includes market access.

[Jul 21, 2015] Take Cover - Wall Street Is Breaking Out The Bubblies

"... After all, what’s a 61X trailing PE among today’s leading tech growth companies?"
Zerohedge

This charmed circle includes Google, Amazon, Baidu, Facebook, Saleforce.com, Netflix, Pandora, Tesla, LinkedIn, ServiceNow, Splunk, Workday, Yelp, Priceline, QLIK Technologies and Yandex. Taken altogether, their market cap clocked in at $1.3 trillion on Friday. That compares to just $21 billion of LTM net income for the entire index combined. The talking heads, of course, would urge not to be troubled.

After all, what’s a 61X trailing PE among today’s leading tech growth companies?

[Jul 16, 2015] It looks like Morgan Stanley absolutely nailed the end of the oil rig plunge

Oil's floor is based on the price to produce it AND ship it. The MSM's have no clue. It costs the Saudis $20 per barrel to deliver the stuff to the dock and load the tankers. (relative in Aramco) It costs them another $18 to ship it to Europe or Houston. With other costs and taxes, the floor for the cheapest oil in the world is about $44 at Houston or a European refinery with not a dime of profit for the Saudis with 10% of the output. Most of the rest need $15 to 20 per barrel more to break even which is why oil hovers around $60. That is the harsh reality and why the true floor is $50-60.

JamesB

there is another data set that matters more and that is the rig productivity data. Almost all of he older and smaller rigs have been take off line. One of the aspects of shale work is the huge leap in technology, perhaps the single largest advance ever in the industry. Traditional vertical drilling produced on average only 1 producing well out of every three drilled. The shale producers have almost completely eliminated dry holes with the newer wells which can steer the drill bits to hit tiny pockets. It is a huge change. The second thing is the first shale wells were drilled only 3/4 of a mile and one rig could cover about 2-3 square miles. They are now drilling 15 miles in shallow wells and one rig drilling site covers 150-180 square miles. What is also interesting is it takes only a couple days longer to drill the 15 miles than the 1 mile. The drilling rig count dropped in half, but the feet drilled actually dropped only about 10%. Deep well drillers are also seeing similar leaps forward. A well in the Gulf of Mexico recently hit a record 25 miles of horizontal reach. Morgan Stanley probably nailed it because they were watching the types of rigs.

Dave

These guys can drill all they want but it will just help keep prices down. The demand is simply not going to be there. Oil will remain oversupplied for a long time as long as they keep pumping and squeezing it out of the ground. And OPEC nations are sure not going to slow down. They have social programs to fund to keep their citizens happy. Now, lets get the price for gas in the US down to $2 a gallon where it should be.

LOREN

The rig count is all off, as far as judging how much oil is being discovered. Don't put much stock in rig counts based on past history. New drill bits have been developed and are now in wide us. They can now drill a well in half the time. So the rig count could be half of what it was years ago, but they can drill twice as many wells. This is what happens when you take your advice from bankers who sit in offices in NY. And the effect is clear, even with drastically reduced rig counts, US oil production continues to increase.

southerncomfort

I work in the oil field in Texas and was making over a $100,000 a year will barely make $60,000 this year. I have already secured a job in the healthcare field and will finish my last year to get my BA in Healthcare Administration. Oil field sucks

dan

The real data is the cost of production... We can't compete until the American Oil Companies decide to reduce profits and share revenue...
Period.

I work in the Middle East and I know.

How much money do you need ExxonMobil?...Texaco?

All of the people that you contract to drill your wells by running, non-stop, for 24 hours don't realize that they will be out of work in a few years...

I do... I am 3rd generation of an Oilfield Drilling Contracting family and I know who profits during the "bust" cycles.... You do!!!

ed

The time for claiming something actually happened is maybe a half year to a year after it happened. This is the problem today with everyone thinking that they MUST KNOW everything immediately, and even then, still make foolish mistakes.

Please, someone tell me why we "must know" which idiot won an election, one minute after the polls closed. Thank you in advance.

Steve

The IB's also were calling for oil to sink to $30 or below, which was ludicrous. Their call on rig count vs. actual data was coincidental at best. You can't make legitimate calls when your butt is sitting in a chair in a cubicle in NYC. My experience is most of these guys, while certainly intelligent and well educated, are arrogant and clueless of day-to-day decisions at the field level.

JamesB

The are nothing more than desk jockeys.

Oil's floor is based on the price to produce it AND ship it. The MSM's have no clue. It costs the Saudis $20 per barrel to deliver the stuff to the dock and load the tankers. (realtive in Aramco) It costs them another $18 to ship it to Europe or Houston. With other costs and taxes, the floor for the cheapest oil in the world is about $44 at Houston or a European refinery with not a dime of profit for the Saudis with 10% of the output. Most of the rest need $15 to 20 per barrel more to break even which is why oil hovers around $60. That is the harsh reality and why the true floor is $50-60.

[Jul 15, 2015] The Stock Market Is Too Important To Leave To The Vagaries Of An Actual Market by Babar Rafique of Setter Capital

"...“The primacy of politics over markets must be enforced.” —Angela Merkel "
"...The stock market is just too important to leave to the vagaries of an actual market now. Too much depends on good-looking numbers now. It must be guided and controlled, or else the stilts on which our global financial system balances become shakier and more visible. The market must be rendered increasingly meaningless simply because it's too meaningful to our current economic system."
"...Welcome to 1984. Has there ever been anything more Orwellian? We have to destroy it to save it? Around the world everything is officially rigged. It is hard to wrap my mind around how these people running things think."
"...Because criticizing a nation’s economic ideology is just like declaring its people subhuman."
Jul 15, 2015 | Zero Hedge

The stock market is just too important to leave to the vagaries of an actual market now. Too much depends on good-looking numbers now. It must be guided and controlled, or else the stilts on which our global financial system balances become shakier and more visible. The market must be rendered increasingly meaningless simply because it's too meaningful to our current economic system.

G.O.O.D

The stock market is just too important to leave to the vagaries of an actual market now. Too much depends on good-looking numbers now. It must be guided and controlled, or else the stilts on which our global financial system balances become shakier and more visible. The market must be rendered increasingly meaningless simply because it's too meaningful to our current economic system.

Welcome to 1984. Has there ever been anything more Orwellian? We have to destroy it to save it? Around the world everything is officially rigged. It is hard to wrap my mind around how these people running things think.

JustObserving

The stock market is just too important to leave to the vagaries of an actual market now. Levitating the stock market has been happening in the land of the free since at least 2009. Fraud and manipulation is the fastest way to wealth.

KnuckleDragger-X

It's getter harder for the propaganda to work when more and more people are going under and the systems like utilities are becoming less stable. The thing that'll likely start the collapse are things like race baiting the free shit army and destroying the working and middle class lifestyle. There are a lot of people who are giving up, but there are also a lot of people starting to get really pissed and it won't be a big thing but a little thing that starts the avalanche....

DOGGONE

http://showrealhist.com

Q: What is going on?
A: F__k the people!

alphamentalist

yes to 2009. and longer if you consider the discounting effect of ever lower rates that has been happening for decades. but the real damage to the micro structures of the market has happened since 2011/2012. single name stocks stopped effectively discounting information in 2012 (except for discounting that there was a lot of QE happening, with the hope of more to come, that all got discounted properly, of course). nowadays, very, very rarely do you see a stock actually trade off when it becomes obvious its management/model is flawed (maybe you get a -5% move for a situation that should have been a -25% move). aside from the obvious misallocation issues, this is a generation crime: it is forcing younger investors to bailout the boomers by paying 2-3x the fair price for their own retirement assets.

Falling Down

OT:

Poor Kruggers:

http://krugman.blogs.nytimes.com/2015/07/15/angry-germans/?module=BlogPo...

Renfield

hehe - first time I've voluntarily read anything on the NY Times site since - oh, I don't even know how many years.

But I must admit that article was kinda fun, short & sweet.

From the article:

<<Because criticizing a nation’s economic ideology is just like declaring its people subhuman.>>

I wonder if he realises what he just said, there?

Thanks for that little snack. I guess you're one of those who reads the NY Times so I don't have to. One of the almost-never times I have any sympathy for a Krugman whine. Krugman's hit his stopped-clock correctness quota with this one.

ETA: First the IMF, now the NY Times. Looks to me like Someone Up There is seizing this opportunity to put Germany firmly in its place. Hmmm... wonder what else is happening behind the scenes, to cause this sudden anti-German sentiment from TPTB? I suspect that whatever it is, it has very little to do with Greece.

Fun Facts

Until the current "financial system" fails, we will have a managed stock market. Just like the Chinese and everyone else.

Why ? If they stopped it would lose 50% or more until it found fair value. Interestingly, more and more inside the establishment see central bank stock market management as the proper course.

"And you may ask yourself, how did I get here ?"

Dr. Engali

It's not that hard to understand. The stawk "market" is a policy tool. The illusion of prosperity must be maintained even if the whole country is slowly going to shit right before our own eyes.

MASTER OF UNIVERSE

The NeoLiberals/NeoConservatives have lost control over the markets since March 10th 2008 @ 11:00am Bear Stearns NYC time. What controls the markets, and the future of all economies throughout the World is a Mandelbrot Set, or fractal, of actual economic destruction that continues to replicate itself each and every successive business quarter. The old 'growth models' that the Wall Street 'Quants' based their projections on was seriously flawed, and now the sand they built the American Economy on has shifted much like the World Trade Centers shifted on their foundations when the USA Military Grade Nano-Thermite cut into the support steel beams to control the demolition of WTC 1 & 2, plus Building #7.

NOTE: The appropriate algorithm to control the Mandelbrot Set that was triggered in 2008 when Bear Stearns was subject to a bear run has not been utilized yet because the 'Quants' do not understand what they did on a Quantum Mechanical level. Nor do they understand how the same fractal has been replicated each successive business quarter. Until they understand what is controlling the markets they will not be able to increase the growth model whatsoever. Each business quarter will be a repeat of the last with an increase in contraction until all the superstructure that was built by the 'Quants' is deconstructed and destroyed outright. In brief, the fractal replication is very aggressive, much like a runaway freight train on a Hegelian Spiral downwards.

moneybots

"The market must be rendered increasingly meaningless simply because it's too meaningful to our current economic system."

A manipulated market always returns the favor in the opposite direction.

farmboy

“The primacy of politics over markets must be enforced.” —Angela Merkel

Clowns on Acid

Fed policy = Stock and Awe !

BoPeople

So, WE are saddled with massively inefficient markets that allocate money to the least deserving and least productive and THEY are saddled with the knowledge that vast numbers of people, not on the inside, now know that the they and those they serve control things ... and when there is the next crisis (and there will be some day) that EVERYONE will quickly know who is responsible (just as the Chinese knew who to blame... and the Greek people know who to blame).

They cannot escape this responsibility and the consequences of that responsibility.

[Jun 30, 2015] The Limits to Growth and Greece Systemic or Financial collapse

[Jun 30, 2015] Greek failure to make IMF payment deals historic blow to eurozone

[Jun 30, 2015] World Oil Energy Consumption by Sector, 1973-2010

[Jun 30, 2015] Stiglitz: Troika has Kind of Criminal Responsibility

[Jun 30, 2015] Joseph Stiglitz: how I would vote in the Greek referendum

[Jun 29, 2015] Top Private Equity Reporter CalPERS is Either Lying or Has a Massive Breakdown in Financial Controls

[Jun 30, 2015] Cramer Danger alert-dont buy on the market dip

[Jun 29, 2015] Greek Tale(s)

[Jun 29, 2015] Capped

[Jun 29, 2015] European Leaders Insist Greek Deal Is Still Possible

[Jun 28, 2015] Former Finance Minister of Cyprus on the Greek Crisis

[Jun 29, 2015] College Is Wildly Exploitative Why Arent Students Raising Hell

[Jun 29, 2015] Shares slide as deepening Greek crisis shakes global markets

[Jun 29, 2015] Greece crisis: markets begin to tumble as investors flee

[Jun 28, 2015] The Greek Tragedy: Curtain Closes On Most Absurd Act

[Jun 28, 2015] The Troika pretends to suffocate Greece at all costs

[Jun 28, 2015] Keynes, The Great Depression And The Coming Great Default

[Jun 28, 2015] IMF and Germany Are Hell-Bent on Finishing Off Even a Moderate Left in Greece

[Jun 27, 2015] Greece: Its the Politics, Stupid!

[Jun 27, 2015] Breaking Greece

[Jun 27, 2015] Tsipras Bailout Referendum Sham naked capitalism

[Jun 27, 2015] Warmongering vs Economic Progress

[Jun 27, 2015] The Bankruptcy of Americas Elites naked capitalism

[Jun 27, 2015] The Greek PM has announced a national referendum on July 5 on the conditions of the debt deal with international creditors

[Jun 26, 2015]  Why Jim Rogers is buying what everyone else is selling By Michael Sincere

Jun 26, 2015  |  MarketWatch

Is the bond market in a bubble?

Whether it’s a bubble or not we will find out one day, but it probably is. For the stock market to go down, something has to happen, and it could happen if the bond market scares the socks off everyone. The previous bear market in bonds was from 1946 to 1981. Since 1981, the bond market has been in a bull market. When bonds start going lower, and rates go higher, rates will go much, much higher. Interest rates go to levels we cannot conceive right now. I cannot tell you how high interest rates could go but in 1981 U.S. government bonds were at 15%. Right now, there is inflation, but the U.S. Bureau of Labor Statistics say there is no inflation. I don’t know where they go to shop, or where they send their kids to school, or go to baseball games. There is inflation all over the world, not just in the U.S.

‘The only thing that works is when people fail, go bankrupt, and start over.’

Write this down for June 2015: This low interest rate environment will not continue forever. Bonds could go down for a long time, which will scare the bureaucrats in the central banks. This is why we might have a 10% to 13% decline in stocks.

... ... ...

What do you think of gold?

Gold (GCQ5, +0.16%) is in a correction, and the correction has gone on for four years. Although I am not buying gold, I am expecting an opportunity to buy gold sometime in the next year or two. For instance, if gold goes under $1,000, I hope I’m smart enough to buy a lot more gold.
 

[Jun 24, 2015] Russia overtakes Saudi Arabia as largest supplier of oil to China

[Jun 25, 2015] We Are Reaching Peak Energy Demand, BP Data Suggests

[Jun 24, 2015] US productivity – the dog that isn't barking at the Fed

[Jun 23, 2015]  Rumors of bond Armageddon are exaggerated By Agnes T. Crane, Neil Unmack

Economy is too weak to survive series of Fed rate raises. So there will be just minimal token gestures. The article below is from 2013. So it is more the two years old.  
May 28, 2013 | breakingviews.com/
Rumors of a credit bubble are only partially exaggerated. Tell-tale signs of a boom seem to be everywhere. Yet, most investors aren’t panicked. Who’s right? Breakingviews offers a bubble-meter for the credit market.

Raw yields aren’t a clear indicator. Central-bank buying helps keep returns down on government bonds so fixed income investors who want higher returns have to buy debt issued by companies more prone to default. The dash for yield makes a bubble more likely.

The five-part bubble-meter marks on a scale of one to 10, with one indicating ridiculous caution, five healthy moderation and 10 a mania in the style of 2007.
 

1) Are yields too low?

The premium investors charge to compensate for default risk has fallen by nearly a percentage point on average, helping to knock down yields to around 5.5 percent, according to JPMorgan. Moreover, there are signs that investors are failing to discriminate between borrowers. The 3 percentage point premium for bottom-of-the-barrel CCC-rated debt over comparable single-B paper is less than half the historical differential.

As of May 17, U.S. junk bond spreads were 1.33 percentage points too low to compensate for default risk, according to a model devised by bond veteran Marty Fridson. But then again, the average junk spread in 2007 fell to 2.5 percentage points, a little more than half today’s levels. Bubble rating: 8/10

2) Is there too much debt?

A surge in high-yield issuance is normally a pretty good sign of a bubble. There has certainly been a lot recently. So far this year global high yield bond sales have topped $200 billion. That’s already above the highest full year in the last cycle, according to Thomson Reuters data. Leveraged loans are also smoking hot, with new issuance on track to beat the $688 billion high-water mark hit in 2007, according to LPC data.

But there’s a hopeful caveat. New leveraged buyouts aren’t driving the fundraising. Much of the recent burst has actually been risk-reducing, as companies have refinanced old debt at lower rates and longer maturities. For example, in 2009 a seemingly-impossible $204 billion worth of debt from junk-rated U.S. companies was set to mature this year. Thanks to refinancing, the actual sum will be a tenth of that. Bubble rating: 7/10

3) Are terms and conditions too generous for borrowers?

In hot markets, issuers can get away with higher leverage ratios and looser lending terms. Currently, they are doing both.

The average debt-to-EBITDA multiples on U.S.-sponsored LBO deals has averaged 5.5 times this year and last, up from 4.2 times in 2009, according to LPC. Yet it’s still below the 6.5 average in the 2007 LBO peak year. Meanwhile, issuance of so-called covenant-lite loans, which give lenders weak or no enforcement rights when borrowers’ profits fall, has soared to all-time highs. And issuance of particularly lender-unfriendly Payment in Kind (PIK) loans was up around 13-fold last year from 2010, according to Morgan Stanley. Bubble rating: 9/10

4) Are financial engineers too active?

In the last credit bubble, banks’ whizz kids created imaginative securities - collateralized debt obligations, structured investment vehicles and complex derivatives - to juice up leverage and inject liquidity into markets. In 2006, global CDO issuance reached half a trillion dollars. In the first quarter of this year, only $23.5 billion have hit the market, according to SIFMA.

True, exchange-traded funds are booming, but they mostly don’t use leverage. Still, the ETFs are untested in a downturn, and a rush to sell could precipitate a rout. Even if financial engineering is subdued, the growth in funds owned by retail investors, like mutual funds, could be a source of turmoil. Bubble rating: 4/10

5) Are investors too complacent?

When credit conditions are loose, even the weakest companies can find funding. That puts a lid on defaults and breeds investor complacency. In 2007, defaults were less than 1 percent of outstanding debt defaulted. Two years later the ratio was over 8 percent.

Cheap funding provided by central banks has kept defaults low, even though GDP growth has been slow. The average default rate for single-B credits over the last four decades was 5 percent, according to Deutsche Bank, but only 1.6 percent in the last decade, despite two financial crises. In a world where credit risk is banished, investors are bound to get sloppy. Bubble rating: 7/10

Tot it all up: there’s an abundant amount of cheap debt on increasingly loose terms. But the unweighted average score of seven on the bubble-meter indicates credit markets aren’t yet showing the kind of excesses seen in the 2006/2007 boom. The bad news: it may not take long before they get there.

[Jun 23, 2015] "The End Of The Road" - Debt-Funded Buyback Boosts Are Finite

"...inorganic measures to boost profitability, like cost-cutting, wage suppression, layoffs, and stock buybacks, are finite in nature."
"...The question that investors need to be asking is what happens when companies inevitability reach "the end of road." Importantly, with the Fed determined to begin hiking interest rates, despite weak economic data, the end may be nearer than most are currently expecting."
"...More than $460 billion in repurchases were announced during the first five months of 2015, on pace to top last year’s record.""
Jun 23, 2015 | zerohedge.com

The problem for investors is that inorganic measures to boost profitability, like cost-cutting, wage suppression, layoffs, and stock buybacks, are finite in nature.

 Eventually, these options are exhausted. There are only so many employees that can be terminated, wages can only be suppressed for so long, and there is a finite number of shares that can ultimately be repurchased from shareholders.

The question that investors need to be asking is what happens when companies inevitability reach "the end of road." Importantly, with the Fed determined to begin hiking interest rates, despite weak economic data, the end may be nearer than most are currently expecting.

... ... ...

This aggressive use of this tactic was brought to light recently in a Bloomberg article by Oliver Renick which stated:

It’s official, using proceeds from debt sales to send cash to stockholders has never been more popular.

Standard & Poor’s 500 Index companies listed buybacks or dividends among the use of proceeds in $58 billion of bond deals in the past three months, the most on record, according to data compiled by Bloomberg and Sundial Capital Research Inc. More than $460 billion in repurchases were announced during the first five months of 2015, on pace to top last year’s record."

While there is much talk about the end of the "bond bull market," recent data suggests that this is far from the case. Investors, yield-hungry in a near zero interest rate environment, remain eager buyers of any and all debt issued, even if that debt is "junk rated."

[Jun 23, 2015] If you are heavely invested In stocks be ready for surprises

This one is from Hussman's weekly letter. He is based his prediction of the current value of the Q Ratio. The fact that we saw such pronouncements for a couple of years from ZH does not mean that current situation is healthy. That only means that the timing of correction in unpredictable. ECRI's most recent article presents slides and notes from ECRI's Lakshman Achuthan talk at the Madrid Fund Forum conference. He discussed the relationship between lower trend growth and recessions. "ECRI believes that minimally we're returning to a period of more frequent recessions, as we saw in much of the twentieth century....Going back to at least the 1970s, growth has been stair-stepping down during each successive expansion."
Jun 22, 2015 | zerohedge.com

Today will go down in history as one of the worst times in history to be invested in the stock market. Virtually no one believes this statement. That is why it will prove to be true. Every valuation method known to mankind is flashing red. A crash is baked in the cake. Will the trigger be Greek default, a Chinese market crash, a Fed rate increase, a derivative bet going boom, a Middle East event, someone doing something stupid in the South China Sea, a Ukrainian eruption, or a butterfly flapping its wings? When greed turns to fear, for whatever reason, the house of cards will collapse for the 3rd time in 15 years. Thank the “brilliant” bankers at the Federal Reserve.

[Jun 21, 2015] Game of chicken over Greece risks slipping out of control

Greece's bailout program expires in 10 days and money is draining from the country's banks. The resulting financial blowup could slip out of control and lead to Greece's departure from the 19-nation eurozone.

... ... ...

One crunch date is June 30. That's when Greece's bailout program expires and the last 7.2 billion euros ($8.1 billion) left in it will no longer be available.

On the same day, Greece has to pay the International Monetary Fund 1.6 billion euros ($1.8 billion) and it doesn't have the money to do so. If it doesn't pay, it won't be immediately declared in default by ratings agencies. But the IMF also says it wouldn't be able to lend Greece new funds until the arrears are taken care of.

the days go by and Greece and its creditors bet the other side will fold, the risk is that the politicians will be overtaken by events. The threat many economists cite as the major one: the possibility of a run on the banks in Greece.

The Greek government could try to stem that by imposing limits on withdrawals.

If the banks are seen as failing and the government is defaulting on its obligations, the European Central Bank would eventually face a decision on whether to end the emergency credit it allows Greeks banks to draw on to survive. The ECB, which represents all 19 eurozone countries, would be risking losing central bank money on a failing banking system.

Out of euros, the Greek government might have to print a new currency to rescue the banks and to pay its bills.

... ... ...

JJbama

If they don't default now, Greece will continue to take up all the administrative energy of the EU for the foreseeable future. That is until Spain, Italy and Portugal realize the consequences aren't so bad for ignoring budgetary guidelines, then all four will be basket cases. The EU won't be able to print money fast enough to prop up all four, so it will sink under its own weight. That will be a REAL shock to the world banking system. Let Greece default now, leave the Euro, and suffer the short-term consequences before the contagion spreads. They will be better off in the long run being able to devalue their currency as needed, and the Euro will survive.

Patrick M

I'm from Ireland. I agree with JJbama. If they allow Greece to it their way , the other countries will see Germany blinked and will elect Politicians that will allow them to go back to their "footloose and fancy free" ways.

Even though there are anti-austerity folks in Ireland, we do not forget the '80's and the "Mac the Knife" austerity combined with Foreign Direct Investment that produced the "Celtic Tiger" (Of course it also produced the materialist and greedy form of capitalism championed by the USA) which thankfully most Irish have now abandoned.

NAVYNUKE

Most people living today have never seen a good old fashioned bank run except watching "It's A Wonderful Life".

Fractional reserve banking requires only 10% reserves in cash, and those depositors slow to react will find the euros they deposited have been converted to worthless drachmas, or just vanished into thin air.

Monday should be a free-for-all.

Michael

There is no way in this world economy, with the coming political wars, and the real live wars, that the EU can continue to hold up Greece and they will not do anything to make it work, they are socialist and now as you see they do not want to pay back what they borrowed, they want it forgiven and more loans given.

The EU is crazy to keep such a weak link in their organization, they have several more that will fold in the future if the economy goes the way of the world conflicts on the horizon.

I think eventually the EU will fold under world tension and world economic pressures coming down the road for the whole world to contend with.

G

A committee convened by the Greek parliament has claimed much of the country's debt of 320bn euros was illegally contracted and should not be paid. Bail-out discussions should not take one more step until the Greek parliament votes to repudiate this position and affirms the full and legal debt obligation that the country owes its creditors.

Wolfowitz Doctrine

The US benefits greatly if Greece leaves the Eurozone and EU crashes.

As the world's ONLY universal currency. where we have exclusive keys to the printing press to make as many new dollars out of thin air as we want, nobody with threaten the US Empire.

FREEDOM

There is no solution to this mess- The Greeks can never repay the money loaned to them and the IMF and ECB knows this- this is a giant dog and pony show to help mitigate the fallout to what is the inevitable outcome. And to my fellow American peasant citizens - we too can never repay our debts - the only reason we are not in default is that we are the world's reserve currency status. This enables us the ability to manufacture and print money endlessly. When that privilege ends ( and it WILL end ) we will be in a position exponentially worse than Greece.

[Jun 21, 2015] China's stock market dream could bring about its worst nightmare

"...“The tide is going to go out, and there’s going to be a lot of people without their swimming trunks on,”"

China's ruling Communist Party has made it clear that it has a mortal enemy: social unrest.

Separately, it has also made it clear that the Chinese people should be heavily invested in the stock market.

And so, dutifully, the Chinese people have done just that, spurring the longest bull market in the country's history — the glorious 100% rally of the Shanghai Composite over the past year.

Unfortunately, it looks as if that rally may be coming to an end. This week, the Shanghai composite had its worst week since 2008, falling 6.5% on Friday. It is now officially in correction territory.

“The tide is going to go out, and there’s going to be a lot of people without their swimming trunks on,”

Ewen Cameron Watt, chief investment strategist at BlackRock — which oversees $4.8 trillion as the world’s biggest money manager — said in an interview on Bloomberg Television in London. “We’re seeing it deflating quite rapidly.”

When that happens, these two separate ideas — investing in the stocks and social unrest — could come together and turn China's Shanghai Composite dream into a nightmare.

[Jun 20, 2015] Wave of Defaults, Bankruptcies Spook Bond Investors

naked capitalism

For the week ended June 17, investors yanked “a whopping” $2.9 billion out of junk bond funds, according to S&P Capital IQ/ LCD’s HighYieldBond.com, on top of the $2.6 billion they’d yanked out in the prior week.

Those redemptions dragged down the year-to-date inflows to $3.6 billion, nearly 40% below last year at this time. But $201.5 billion remain in those funds.

Jill, June 20, 2015 at 8:12 am

Henry Ford was a fascist who hated Jewish people. Still, he got something right. People need to earn enough money to buy your product. If they can’t, your business is going down.

I know several local small business owners who have successfully been in business for a long time. They are now struggling to stay open. People cannot afford to patronize them as before. They are scared. These are people who have worked really hard to make their business a success. It’s not working any more.

The ruling elite thinks its going to be fine forever. In this, they are mistaken. As they bring down the economy again (really they never stopped since 2008 and before), they apparently believe they will thrive when the vast majority of people can’t pay for housing, food, utilities, etc and get to live on a poisoned planet. Yes indeed, these are our “best and brightest”.

Eileen Appelbaum, June 20, 2015 at 11:05 am

Private equity firms stepping in to fill the gap created by exits from junk bond funds and limits that regulators have placed on leveraged loans by banks http://www.bloomberg.com/news/articles/2015-02-02/kkr-seizing-on-banks-withdrawal-amid-leveraged-loan-clampdown.

Interest rates higher than junk on loans to oil and gas.

susan the other, June 20, 2015 at 11:43 am

Another catastrophe for pension funds? CDO holders might follow the MBS lead and sell everything to the Fed. So that might be a new QE. Or it might just be business as usual for the Fed that has never stopped buying this stuff.

[Jun 20, 2015] Paul Krugman Voodoo, Jeb! Style

[Jun 20, 2015] I Agree with Milton Friedman!

[Jun 20, 2015] Junk Bonds Are Not Leading Stocks Yet

[Jun 19, 2015] United States of Amnesia

[Jun 19, 2015] BLS Twenty-Five States had Unemployment Rate Increases in May

[Jun 19, 2015] Another Fed Insider Quits, Tells The Truth

Jun 19, 2015 | Zero Hedge

 
Once more, an "insider" from The Fed exposes the reality of an academic ivory tower clueless of the real financial markets. Former adviser to Dallas Fed's Dick Fisher, Danielle DiMartino Booth speaking in a CNBC interview slams The Fed for "allowing the [market] tail to wag the [monetary policy] dog," warning that "The Fed's credibility itself is at stake... they have backed themselves into a very tight corner... the tightest ever." As she writes in her first Op-Ed, "The hope today is that the current era of easy monetary policy will have no deep economic ramifications. Such thinking, though, may prove to be naive... All retirees’ security is thus at risk ith ign monetary policy had encouraged malinvestment, the scourge that Austrian Ludwig von Mises warned of in the early 20th century. An overabundance of debt, if left unchecked, inevitably leads to the misallocation of resources. In the case of the first years of the 2000s, the target was, of course, the housing market.

The hope today is that the current era of easy monetary policy will have no deep economic ramifications. Such thinking, though, may prove to be naive. It goes without saying that the heat of the financial crisis merited a monumental response on policymakers’ part. That said, the most glaring outgrowth has been politicians’ exploiting low interest rates to their benefit. While it’s conceivable that well-intentioned central bankers want no part in encouraging Congressional malfeasance, the fact remains that the lack of action on politicians’ part would not have been possible absent the Fed’s allowing Congress to abdicate its responsibilities to the manna of easy money.

Of course, we all appear to have been spoiled over the last 25 years. A funny thing happened when the Fed placed a floor under stock prices with assurances that investors’ pain and suffering would be mitigated – recessions faded from the norm. Over the past 25 years, the economy has contracted one-fourth as often as it did in the 25 years that preceded this benign era. Hence the illusion of prosperity, one that has rendered investors complacent to the point of being comatose. That’s what happens when entire industries are able to run with more capacity than demand validates simply because the credit to remain in operation is there for the taking. To take but one example, capacity utilization is at 78.1 percent, shy of the 30-year average of 79.6 percent some six years into the current recovery. The downside is that the cathartic cleansing that takes place when recession is allowed to play out all the way to the bitter end of a bankruptcy cycle never occurs – winners and losers alike stay in business.

The savvy fellows in the C-suites are not blind to reduced competitiveness. As such they are remiss to expand their core businesses too much, that is, until the time they can truly assess the operating environment in a post-easy money world. The tricky part is that the credit is still there for the taking. What’s to be done? In the words of one of the wisest owls on Wall Street, UBS’s Art Cashin, such environments raise the not-so-fine art of financial engineering to a “botox state”. It’s no secret that companies have been gorging themselves on share buybacks and mergers and acquisitions, non-productive but highly lucrative endeavors. When combined the results are magnificent – costs are cut, profits juiced and bonus season becomes the most wonderful time of the year.

The insult added to the economic injury is the players who are compelled to underwrite the not-so-virtuous cycle. Broken pension accounting and incentives continue to force the hands of the individuals tasked with allocating the portfolios underlying the nation’s $18 trillion in public pension obligations. One of the least discussed consequences of easy monetary policy is the damage wrought on the nation’s pension system. Not only have low interest rates compounded underfunded statuses, they have driven pension assets into riskier and less liquid investments than anything prudence would dictate. The catalyst is the perverse rate of return assumptions that are wholly disconnected from reality. Averaging 7.75 percent, these bogeys have forced allocations into credit plays, many of which are caged in the least liquid corners of the debt markets. The irony is that many pensions have sought to diversify away from their bloated equity holdings by seeking out what they perceive to be the traditional safe harbor of fixed income investments, much of which flows straight back into the stock market via debt-financed share buybacks and M&A.

All retirees’ security is thus at risk when the massive overvaluation in fixed income and equity markets eventually rights itself. Pension math, however, will forestall the day of reckoning in the financial markets given the demographic surge in retiring beneficiaries that require states and municipalities to top off pensions’ coffers. Pensions will thus dig themselves into a deeper grave than they would otherwise by buying the credit craze more time.

Meanwhile, would-be retirees who don’t have the safety of promised pensions continue to be punished by low interest rates. The past seven years have criminalized conservative cash savings. The Swiss Re report quantified what U.S. savers have lost in interest income at $470 billion, while debtors had an easier time. It’s no coincidence that the balance for a household nearing retirement will only cover two years based on the nation’s median income. Nor is it any wonder that the labor force participation rate for those aged 55 and older has increased by three percentage points over the past decade. If only they were all earning what they did in their prime years.

And the lesson to be learned when making ends meet is simply not feasible? That would be the tried and true economic offset, the magic behind the miracle of our consuming nation, which for too long now has been debt that pulls forward the demand that should have to wait. Despite the collapse in mortgages, overall household debt remains elevated; it isn’t that far below its pre-recession level, and households are now splurging on cars as lending standards have caved. Even credit card borrowing is making a comeback – the average household’s credit card balance of $7,177 is the highest in six years. Meanwhile, student debt is scaling record heights as families struggle to keep pace with the most egregious inflation plaguing household budgets, that of higher education.

As for the gravest sin of the QE era, in the fiscal year 2015, the U.S. government paid 1.8 percent on public debt. One would be hard pressed to identify any other debtor whose borrowing costs decrease despite its trebling in debt outstanding. Actually, that’s a privilege we need to protect. As for indemnifying the nation’s balance sheet, that opportunity has been squandered by spineless politicians who would rather maintain the veneer of scant deficits rather than extend the maturity of the nation’s debts. Our wise neighbors to the south recently issued a 100-year bond. Where, one must ask, is our leaders’ wisdom when we need it most?

Could it be that hiding behind the Fed’s largesse is the path of least resistance? It would certainly appear to be the case. All the while, the excesses in the financial markets continue to build unchecked. The time has long come and gone to abandon the model-driven decision framework that pushes the Fed into an ever-shrinking corner. It is high time central bankers acknowledge their complicity in enabling Congress to fiddle while the country burns. As was the case with the revelation that the Great Moderation was but a myth, it is crucial that our leaders retake the country’s reins thus also bringing to an end the deeply damaging era of The Great Abdication.

[Jun 16, 2015] Credibility Trap

"While we were not watching, conspiracy theory has undergone Orwellian redefinition. A 'conspiracy theory' no longer means an event explained by a conspiracy. Instead, it now means any explanation, or even a fact, that is out of step with the government’s explanation and that of its media pimps... In other words, as truth becomes uncomfortable for government and its Ministry of Propaganda, truth is redefined as conspiracy theory, by which is meant an absurd and laughable explanation that we should ignore." Paul Craig Roberts 
The Bucket Shop was quiet last Friday and today, as the usual punters were swapping stories and matching dollar bills for side bets.

There was a little spike in the precious metals as it was announced that the EU is preparing capital controls in the event of a Greek Default.

Keep an eye on these developments as I think that the powers that be are increasingly concerned that their fantastic (as in born of fantasy) plans are coming unraveled.

They do not know what they are doing but, of more concern, it is not clear that they even care, as long as they think that they are winning.

[Jun 16, 2015] A few sturdy sectors are preventing a market breakdown

"...speculative hedge funds now have more bearish positions than at any time since October."

The pressure of global market weakness is finally, slowly being felt by stocks in the U.S., where the Standard & Poor's 500 (^GSPC) is threatening to sag beneath the lower end of its stubborn, tight trading range.

It's been a low-drama, grinding pullback that has cost the U.S. benchmark some 2% over the past 16 trading days, taking it down to levels seen three times before over the past three months.

The retreat has not escaped the notice of tactical professional traders, as speculative hedge funds now have more bearish positions than at any time since October. Short selling in the broad market is also back up to October levels.

This rebuilt wall of worry and active hedging instinct are potentially good things for stocks, as caution can provide some insulation from steeper declines.

[Jun 16, 2015] This Is the Maximum Benefit You Can Get from Social Security

Top monthly benefit at 66, or full retirement age (which is the benchmark the agency uses), is $2,663 ($31,956 a year). If you wait until age 70 to claim, delayed retirement credits will boost your payment to $3,515 in today’s dollars ($42,182 a year)

Social Security bases your benefits on your highest 35 years of earnings after adjusting each year’s earnings to reflect wage inflation. In other words, your top 35 years, as documented via your payroll stubs, may not be your top 35 once they’re adjusted for wage inflation. Still, you can be certain that if you’ve earned at or above the annual payroll-tax ceiling for at least 35 years—lucky you!—a benefits bonanza awaits.

The size of that benefit check will also depend on wage inflation.

[Jun 15, 2015] Stocks are not cheap Carlyle's Rubenstein

Jun 15, 2015 | finance.yahoo.com

Billionaire private equity pro and philanthropist David Rubenstein on Monday said stock prices "are not cheap" right now, creating a tough environment for dealmakers looking for bargains.

[Jun 15, 2015] Res Publica, Res Imperium, Res Corporata

Keep an eye on Deutsche Bank and the Ukraine. I have a bad feeling about this market.
jessescrossroadscafe.blogspot.com
What is happening in Greece is clearly about more than just money. How can they blithely give Ukraine a pass and a free lunch, and Greece the Iron Heel?

I am wondering what will satisfy the Troika, short of tossing out the elected government of Greece and putting a Stellvertretender Reichsprotektor in place to administer their newly taken territories to the south.

Keep an eye on Deutsche Bank and the Ukraine.

I have a bad feeling about this market.

[Jun 12, 2015] 3 Questions Amy Glasmeier on the living wage

[Jun 12, 2015] Bilderberg 2015: where criminals mingle with ministers

[Jun 12, 2015] IMF to Alexis Tsipras: Do you feel lucky, punk?

[Jun 12, 2015] Europe Gives Greece 24 Hours To Comply; Germany Draws Up Capital Control Plans

Jun 12, 2015 | Zero Hedge
EU officials turned up the heat on Athens Thursday after the IMF withdrew its team and sent its lead negotiators back to Washington.

In what can only be described as a half-hearted effort, Greek PM Alexis Tsipras submitted two three-page proposals earlier this week that were dismissed by creditors as “not serious.” We suggested that perhaps that was intentional as Tsipras, having bought Greece some time by opting for the “Zambian” IMF payment bundle, is simply keeping up appearances while the real negotiating is going on behind the scenes with Syriza party hardliners who Tsipras desperately needs to support any proposal before it goes to parliament in order to avoid what could quickly deteriorate into a political and social crisis.

One has to believe that Brussels understands this, but it could very well be that between Tsipras’ scathing op-ed (published two Sundays ago) and the PM’s fiery speech to parliament last Friday, creditors are becoming concerned that Tsipras might actually be starting to believe that he can effectively blackmail the EMU by threatening to prove, once and for all, that the currency bloc is in fact dissoluble no matter what manner of protestations one might hear in polite company.

So, with the IMF having thrown in the towel, and with German lawmakers set to rally behind the incorrigible FinMin Wolfgang Schaeuble in what amounts to a mutiny on the SS Merkel, Europe appears to have finally had enough because by Thursday evening, reports indicated that EU officials have given Greece 24 hours to come back with a proposal that includes pension reform and VAT increases.

Via Bloomberg:

Greece was warned by a group of European Union officials in Brussels it had less than 24 hours to come up with a serious counter-proposal, according to a person familiar with the discussion.

Greek delegate told by EU officials that a list must includes reform on pension and VAT.

Greece told by the officials that they are taking seriously all scenarios.

EU official didn’t specifically say what would happen to Greece if there was no plan presented tomorrow.

And meanwhile, Reuters (citing Bild) says Germany is now engaged in “concrete” discussions over how to handle a Greek bankruptcy :

The German government is holding "concrete consultations" on what to do in the case of a bankruptcy of the Greek state, German newspaper Bild said, citing several people familiar with the matter.

This includes discussions about introducing capital controls in Greece if the crisis-stricken country goes bankrupt, Bild said in an advance copy of an article due to be published on Friday.

It said a debt haircut for Greece was also being discussed, adding that government officials were in close contact with the European Central Bank on that.

The German government did not, however, have a concrete plan of how it would react if Greece goes bankrupt and much would have to be decided on an ad-hoc basis, Bild cited the sources as saying.

The takeaway here is that come hell, high water, or "Grimbo," the EU is going to extract its pension cuts and VAT hikes from Tsipras, and not because anyone seriously thinks it will make a difference in terms of putting the country on a 'sustainable' path, but because the EU simply cannot afford for Syriza sympathizers in more economically consequential countries like Spain to get any ideas about rolling back austerity (of 'fauxsterity' as it were) and using EMU membership as a bargaining chip.

The only question now is whether Tsipras has been successful at convincing party hardliners to support further concessions, because if this turns into a protracted political battle, it's entirely possible that the country will descend into chaos, if only for a few weeks.

Stay tuned, and as a reminder, here's a flowchart that outlines various political and economic ramifications as well as a guide to what's being negotiated...

Haus-Targaryen

Ja, vee zee Germanz are giving you 24 hours to surrender. Wenn you do not surrender, you vill be given another 30 day grace period, followed by another 60 day emergency grace period.

YOU HAVE 24 HOURS!

cookie nookie

I agree with the Germans. Greece should be invaded, and her citizens should be sold into slavery. That's what happens to deadbeats.

Haus-Targaryen

I wondner if this is why the two Deutsche CEOs threw in the towel.

Greece is approximatly 20x Lehman.

DB is way more exposed Greek debt than AIG was.

Someone told the "inner circle" the game is over, and they were like "welp, um ....

I think its time to retire, and I am going to be diversifying my personal accounts into Russia & China. Königsburg is nice this time of year. You all have fun."

r00t61

Your theory is similar to Dave Kranzler's.

Fund Manager A Derivatives Bomb Exploded Within The Last Two Weeks SilverDoctors.com

I for one am getting tired of all the "stuff" being the worst Since Lehman®. Maybe soon it will be all the stuff being the worst Since DeutscheB®.

TeethVillage88

I think he is asking for a vote on if this is the "Final Event".

VinceFostersGhost

Draws Up Capital Control Plans

The smart money got out weeks ago.

Haus-Targaryen

They say those who panic first panic best.

I imagine the paranoid money left years ago. The smart money left in Jan/Feb, and now its just the average idiots dragging their heels.

Watson

FWIW:

1. My understanding was that although DB _did_ have a lot of Greek exposure, they have now moved it on (mostly to German state(AKA German taxpayers));

2. I still think that unless Greeks themselves pull out of EUR, at any genuine crisis Merkel will simply use German taxpayers to pay any Greek bills falling due - so I don't see why any Greek politico will ever pull out (doesn't mean situation is stable, sensible or even desirable);

3. I agree with another poster that Greece is basically distraction - if you want to worry about EUR-zone/EU breakup, look at Spain.

Haus-Targaryen

Watson,

This makes sense if you only look at primary debt exposure. That DB did shift to the Bund. However, I could not care less about the $330 billion or so in primary debt the Greek government could default on.

I care about CDS and then the subsequent margin calls from the chaos that follows, and then the subsequent CDS as the first round of CDS holders (secondary debt exposure) get margin called into oblivion.

This is what keeps me awake at night.

Wolferl

There´s so much talk about the DB´s CDS over the past years but in fact nobody knows exactly about the amount of liabilities in case of a Greek default. In my view the real dangers within the international finance system are alway there were the public cannot see them. So my gut feeling is that it´s not DB that will be the cause of a crash in the events of a Greek default, but something else. Of course, all the big players will be in danger in that event, including DB. And btw,

Throw those pathetic Greek dead beats out of Europe already.

Watson

DB Greek exposure via CDS would surely show up in DB's total Greek exposure.

Wouldn't this show up in published accounts?

Wolferl

If you have a public account that shows exactly DB´s Greek exposure provide a link or source please, i don´t have one. The only thing i know that they have a huge exposure in the derivative markets in general, which isn´t a good thing in general in the event of an overall market crash, but it´s possible too that they will be "winner" in such an event.

wiser

A restructuring of Greece's debt is absolutely essential, otherwise the chances of a recovery for the country are extremely slim, political economist Philippe Legrain said on Thursday, in a public hearing before the "Debt Truth" Committee in the Greek Parliament.

http://www.amna.gr/english/articleview.php?id=10041

The troika saved banks and creditors – not Greece

The funds were, to a large degree, channelled back to the creditor countries. This entailed a double shift in liabilities: from the banks of the periphery to the governments (and citizens) of the periphery; and from the banks of the core to the governments (and citizens) of the eurozone as whole, since most of the troika bailout funds came from EMU countries.

With most of the bailout money going to banks and creditors, Greece doesn't just need debt relief, it deserves it.

https://www.opendemocracy.net/can-europe-make-it/thomas-fazi/troika-save...

Haus-Targaryen

While you are correct, Greece cannot restructure debt within the EMZ. Its just impossible.

Haus-Targaryen

No, DB's CDS exposure is lumped into DB's Derivative Exposure, which is not subject to the same reporting requirements as other normal liabilities until they are realized. A.k.a. -

These won't show up on the balance sheet until they become due, at which point the game is over. No one knows their exact exposure, as this is internal to DB and there are no reporting requirements.

So, DB must report its direct exposure to Greek debt, it has no obligation to report its exposure to Greek debt via CDS.

wiser

The Elephant In The Room: Deutsche Bank's $75 Trillion In Derivatives Is 20 Times Greater Than German GDP
http://www.zerohedge.com/news/2014-04-28/elephant-room-deutsche-banks-75...

Haus-Targaryen

Even if just 1% of that is tied to Greek GDP, thats 750 Billion €.

That would be the end of DB.

new game

why cant the ecb stabilize the "out of balance" derivitives? they will keep the train on the tracks. behind the scenes they will do whatever it takes. and you and i will hear very little about the ugly print pledged to keep this shit show going. just another huge kick of da can...

Wolferl'

Because those derivatives are written in the branches of all the TBTF banks in the City of London, which is not part of the UK and not part of the EU.

Sirius Wonderblast

Don't forget that Spain retains a law which makes it legal not to disclose debts. Hence the likes of Santander get to perpetuate the myth that they escaped exposure to the Spanish property bubble. The published property market losses in Spain remain greatly understated, imho.

[Jun 11, 2015] Disaster Risk and Asset Pricing

[Jun 10, 2015] Peter Schiff Warns This May Be The First Bubble To Burst Without A Pin

[Jun 10, 2015] Why you4 should care that Robert Prechter is warning of a ‘sharp collapse’ in stocks

MarketWatch
Who is Robert Prechter, and why should investors care that he is warning them to be on high alert for a potential collapse in the stock market?

The president of Elliott Wave International, Prechter may not be a household name on Main Street, but he’s widely known on Wall Street as the foremost authority on the Elliott Wave principle, a forecasting methodology used by generations of technical analysts that is based on the belief that financial markets trend in five waves, and retrace in three waves.

Don’t miss the slide show: 5 charts to help unravel the Elliott Wave mystery

Prechter is also the executive director of the Socionomics Institute, founded to study how those same wave patterns define changes in social mood and govern social events.

‘If the cycle is still operating, the stock market is at high risk of a sharp collapse. Near term, we’re prepared to see the Dow make one more high. But it doesn’t have to happen.’
Robert Prechter, Elliott Wave International

Elliott Wave analysis, which was devised by Ralph Nelson Elliott in the 1930s, is much more than a bunch of numbers and letters placed on a chart to denote which wave, or degree of waves, the market is traversing. Those who fully embrace it say it is the only form of technical analysis that can incorporate and explain all the other techniques used by chart watchers.

Walter Zimmerman, chief technical analyst at energy research firm United-ICAP, calls it the “grand unified field theory of chart pattern analysis.” Head-and-shoulders reversals, technical divergences, candlestick charts — they can all be explained within the framework of the Elliott Wave principle, Zimmerman said.

Based on Prechter’s analysis of where the stock market is positioned within its wave structure, he believes the bull market is in a “precarious position.”

For one, he said the sentiment indicators he follows have reflected extreme optimism for over two years. That is often viewed as a contrarian signal, because it suggests those looking to buy have already done so, leaving fewer buyers to step in if the market starts slipping.

Plus: Read more about bullish exuberance.

In addition, Prechter said a number of momentum indicators have been revealing a “dramatic lessening” in the number of stocks and indexes that have participated in the rally in recent months.

For example, when the Dow Jones Industrial Average DJIA, +1.40% reached a record closing high on Feb. 27, there were 172 NYSE-listed stocks that achieved new 52-week highs, and 31 stocks that hit 52-week lows. But when the Dow rose to it is latest record on May 19, the number of new highs had fallen to 118, while new lows rose to 38.

[Jun 10, 2015] This Is What Happened The Last Time Pimco Dumped Its US Treasuries

"...The reason the bond market sells off before / during the "first" Fed hike is because investors start pricing in a series of rate hikes. Bonds always get crushed around the time of the "first" hike."
Jun 10, 2015 | Zero Hedge
taketheredpill

The reason the bond market sells off before / during the "first" Fed hike is because investors start pricing in a series of rate hikes. Bonds always get crushed around the time of the "first" hike.

However bonds do very well around the time of the "last" hike, when the market looks around the macro landscape and figures out that the Fed has "done enough".

So take a look around at the US economy. Imagine you had just come out of a coma and were not allowed to look at rates, only GDP, Employment Particiopation, %yoy Wages, % yoy Retail Sales, %yoy CPI. Then someone asked you whether we were at the start of a Fed rate hike cycle, about to see the "first" hike, OR, are we at the end of a Fed rate hike cycle, about to see the "last" hike.

If the Fed does hike it will be "One & Done" and any bond sell-off is a chance to buy cheap.

However if the Fed hikes and there is a severe Equity correction beware Fed-speak that hints of an emergency round of QE (aka Bond Killer).

Bam_Man

It's called "front-running the front-runners".

And it's why Treasury yields will actually fall once the Fed starts to raise rates.

[Jun 10, 2015] Fragility What Has the Watchers Worried In the US Debt Markets

"...The failure of two relatively minor hedge funds was not a great event. The failure of a tech bellwether to make its quarterly numbers is not either. But their interconnectedness to the other portions of the world markets through the financial institutions on Wall Street, and more importantly, the fragile nature of the entire pyramid scheme of fraudulently constructed and mispriced risk of financial assets, caused an inherently shaky system to fall apart. What was most shocking was how quickly it happened once the dominos started falling."
"...The gross mispricing of risks in financial paper, again, and the lack of reform in the financial system along with excessive leverage and mispricing of risk, the fragility of long distorted markets if you will, has certainly risen to impressive levels again."
"...It is a familiar template of recklessness, fraud, and then reckoning. Afterward there is the usual attempt to blame the government officials which have been corrupted, and the people who have been duped and swindled. Quite often some scapegoat will be found to be demonized."
"...Tell us why you think it might be different this time. What has really changed? From what I can tell, it has not only stayed the same for the most part under the cosmetics of change, and significant portions of the financial landscape have gotten decidedly more dangerous, larger, and more leveraged."
Jesse's Café Américain

As you know I am on the lookout for a 'trigger event' that might spark another financial crisis, given the composition of the economy and the financial markets.

In the last financial crisis 2008, it was the failure of the two Bear Stearns hedge funds that exposed the grossly mispriced risks in mortgage backed financial assets, and the generally flawed nature of the market's collateralized debt obligations. This led to a cascade of failures in fraudulently priced assets, and resulted in increasingly large institutional failures, including the collapse of Lehman Brothers.

One can draw some parallels with the financial crisis before that, which was the gross mispricing of risk and inflated values of internet-related tech companies that had grown to obviously epic proportions by 2000. A failure of several key tech bellwethers to make their numbers, and some negative results in the economy, showed the flaws in the underlying assumptions in what was clearly an asset bubble. And once the selling started, it was Katy-bar-the-door.

The failure of two relatively minor hedge funds was not a great event. The failure of a tech bellwether to make its quarterly numbers is not either. But their interconnectedness to the other portions of the world markets through the financial institutions on Wall Street, and more importantly, the fragile nature of the entire pyramid scheme of fraudulently constructed and mispriced risk of financial assets, caused an inherently shaky system to fall apart. What was most shocking was how quickly it happened once the dominos started falling.

The debt market in the US, with its deep ties to private equities, is probably not a trigger event, the fuse itself. But it well might serve as the powder keg that will transmit the effects of some more individual event throughout the world's markets and economies.

The gross mispricing of risks in financial paper, again, and the lack of reform in the financial system along with excessive leverage and mispricing of risk, the fragility of long distorted markets if you will, has certainly risen to impressive levels again.

It is a familiar template of recklessness, fraud, and then reckoning. Afterward there is the usual attempt to blame the government officials which have been corrupted, and the people who have been duped and swindled. Quite often some scapegoat will be found to be demonized.

I am thinking that this time the problem will arise overseas, with the failure of some major financial institutions there. Perhaps Greece will provide the spark. Or the Ukraine, or Mideast, or something yet unforeseen. The failure of some major European bank certainly has historical precedent.

And if we do experience another crisis, do not be surprised if the moguls of finance come to the Congress through their proxies again, with a sheet of paper in hand demanding hundreds of billions of dollars, or else.

Last time it was a bail-out, which was the printing of money by the Fed to monetize the banking losses and shift them to the public. This time they are thinking of something more direct, talking about a bail-in. What if they eliminated cash, and started utilizing and redploying financial assets like savings and pensions. The uber-wealthy already have their wealth parked in hard income-producing assets and offshore tax havens. Who would stop them?

Tell us why you think it might be different this time. What has really changed? From what I can tell, it has not only stayed the same for the most part under the cosmetics of change, and significant portions of the financial landscape have gotten decidedly more dangerous, larger, and more leveraged.

... ... ...

Read the entire article here.

[Jun 10, 2015] Here Is What’s Fraying Nerves Among the Financial Stability Folks at Treasury By Pam Martens and Russ Martens

"...the investment grade corporate bond market, which had heretofore held up “reasonably well” during the ongoing tumbles in government debt markets, has now joined the chaos."
"...“Adding to the concerns of bond bears, the market’s liquidity — the ability of traders to buy and sell securities smoothly and without moving prices excessively — has diminished dramatically. That exacerbates sell-offs and could in the worst case turn a natural correction into a crash — especially if retail investors are frightened by the fact that their supposedly safe bond funds can lose money and dump the asset class.”"
June 10, 2015 | Wall Street On Parade

On Monday, Richard Berner worried aloud at the Brookings Institution about what’s troubling the smartest guys in the room about today’s markets.

Berner is the Director of the Office of Financial Research (OFR) at the Treasury Department. That’s the agency created under the Dodd-Frank financial reform legislation to, according to their web site, “shine a light in the dark corners of the financial system to see where risks are going, assess how much of a threat they might pose,” and, ideally, provide the analysis to the folks sitting on the Financial Stability Oversight Council in time to prevent another 2008-style financial collapse on Wall Street.

Two notable concerns stood out in Berner’s talk. First was a concern about liquidity in bond markets evaporating rapidly for reasons they don’t yet “sufficiently understand.”

... ... ...

Another major concern are the bond mutual funds and ETFs that have mushroomed since the 2008 crisis and are stuffed full of illiquid assets or assets which might become illiquid in a financial panic. Berner quoted SEC Commissioner Michael Piwowar on this issue, who has said:

“The growth of bond mutual funds and exchange-traded funds (ETFs) in recent years means that these funds now hold a much higher fraction of the available stock of relatively less liquid assets than they did before the financial crisis…their growth heightens the potential for a forced sale in the underlying markets if some event were to trigger large volumes of redemptions.”

Within 24 hours of Berner delivering his warnings, Bloomberg News was out with this nail biter:

“BlackRock’s $14.3 billion high-yield bond ETF plunged 1.6 percent in the six days through Monday as $940.5 million exited the fund, Bloomberg data show. State Street Corp.’s $10.7 billion junk-debt ETF dropped 1.7 percent, with $571.7 million of withdrawals.”

The Financial Times threw more fresh worry into the bond market disarray this week by noting that the investment grade corporate bond market, which had heretofore held up “reasonably well” during the ongoing tumbles in government debt markets, has now joined the chaos. According to the Financial Times, “The average yield of debt issued by investment-grade companies has jumped from 2.8 per cent in mid-April to about 3.3 per cent, erasing investor gains made earlier this year.” (Bond prices move inversely to interest rates; when yields rise on existing bonds, their value falls in the market place.)

The Financial Times article noted the same concerns as those of the OFR, writing:

“Adding to the concerns of bond bears, the market’s liquidity — the ability of traders to buy and sell securities smoothly and without moving prices excessively — has diminished dramatically. That exacerbates sell-offs and could in the worst case turn a natural correction into a crash — especially if retail investors are frightened by the fact that their supposedly safe bond funds can lose money and dump the asset class.”

According to Bloomberg data, corporations have issued an astounding $9.3 trillion of bonds since the start of 2009 as borrowing costs have plummeted as the Fed cut and maintained its Fed Funds rate in the zero bound range. Much of the proceeds of those corporate bond offerings found their way into the stock market through corporate share buybacks, pushing stock prices artificially higher.

When you put all of these factors together, it’s clear this is an unprecedented era of risk with little visibility on how markets will behave during periods of extreme stress.

[Jun 09, 2015] Wholesale Inventory Ratio, Sales Stabilize At Recessionary Levels

Jun 09, 2015 | Zero Hedge

Despite continued slowing in the pace of inventory builds in the past few months, the ratio of inventory-to-sales remains mired in a recessionary quagmire; but today's data showed some hope - which stocks hated. Inventory-to-Sales dropped from 1.30 to 1.29 (still recessionary) as Wholesale Inventories rose 0.4% (againmst +0.2% expectations) and Wholesale Sales rose a notable 1.6% (against expectations of a 0.6% rise). YoY Wholesales Sales remain in negative territory however and confirm the recessionary warning that the ratio is sending.

Inventories rose...

[Jun 09, 2015] Interest Rates Natural or Artificial

"...When you move from a investment driven economy to a consumer driven economy, interest rates will decline."
"...The US can grow slower than in say the 1970's, yet the people can feel richer and more materially satisfied because of the rate of consumption is much larger in many respects to the 1970's despite slower gdp growth from recession to recession."
"...There are truly 3 notches to evolution :
  1. investment into heavy industry and infrastructure
  2. consumer subsistence economy
  3. consumer economy of Veblen Goods
Each notch ushers in less inflation but more disinflation. Add to that disinflation is the type of deflation provided by *Moore's Law*, economy of scale provided by labour division and years of experience. Each of above forces fuel our march toward a natural rate of deflation which provides an end to the complexities of finance, complexities that are exploited by rentiers galore. Recently our banking *industry* has been laying off and firing droves of *employees*. Banks have seen the handwriting on the graffiti wall."
"...What seems lacking in all this discussion is the issue of currency interdependence - the Fed isn't just setting rates for the USA, it is in a sense a central bank for the world economy. I would prefer that it wasn't, but it is. So long as the rest of the world keeps sucking up dollars, the Feds ability to control what happens in the US will be reduced."
"...Fiscal authorities have conducted austerity and decreased demand and sending inflation negative or too low. Monetary policy has attempted to counter bad fiscal policy by supporting lower interest rates. Underinvestment by governments including austerity is the biggest reason for low interest rates. Another is failure to adequately tax the wealthy leaving too much wealth that is not being spent looking for safe bonds to invest in. Collecting the excess as taxes would lower demand for bonds and help raise interest rates. "
"...The whole point of conservative economic policy is to preserve the haves and distract the have-nots. It is not about a thriving economy but about who wins and who loses. When you have enough money and never fight in wars then all of life just seems like a game."
"...I think what is missing from the discussion is effect of energy prices on interest rates. High oil prices lead to diminished profitability and as such depress interest rates."
Jun 09, 2015 | Economist's View

John Cummings

When you move from a investment driven economy to a consumer driven economy, interest rates will decline. It started in the mid-80's not the mid-90's as the US shifted its portfolio and tax policies around to support consumption over investment as means to reduce inflation and bring in cash to bonds.

This was the main mistake the Federal Reserve made in 2003. They saw weak investment, but ignored rapid growth in consumption. Were to slow to move off the floor and allowed the housing bubble to crest at full nadir instead of 'taking off the edge' like they promised to do. I have always heard whispers about Republican involvement as well.

Taylor's pov is to look historically at consumption, which is a extremely large share of GDP right now. The US can grow slower than in say the 1970's, yet the people can feel richer and more materially satisfied because of the rate of consumption is much larger in many respects to the 1970's despite slower gdp growth from recession to recession.

Lido Tuxedo said in reply to John Cummings...

"investment driven economy to a consumer driven economy, interest rates will decline. It started in the"
~~John Cummings~

There are truly 3 notches to evolution :

  1. investment into heavy industry and infrastructure
  2. consumer subsistence economy
  3. consumer economy of Veblen Goods

Each notch ushers in less inflation but more disinflation. Add to that disinflation is the type of deflation provided by *Moore's Law*, economy of scale provided by labour division and years of experience. Each of above forces fuel our march toward a natural rate of deflation which provides an end to the complexities of finance, complexities that are exploited by rentiers galore. Recently our banking *industry* has been laying off and firing droves of *employees*. Banks have seen the handwriting on the graffiti wall.

They see that with short rates near 0% FG, fed gubernatorial has run out of ammo. Congress has run out of excuses for blowing the stagflation payer's buying power and the taxpayers cash.

As long rates drift downward towards the event horizon, perhaps just short of 2%, there is the probability of a sudden collapse of long rates to less than 0%.

A the moment of collapse there will be no more excuse for printing t-bonds. Fiat, treasury notes, silver certificates, gold certificates, cash will be printed up instead.

The end game for high finance will be the game of sudden death analogous to the breaking the sound barrier with

a loud
bang --

reason said...

Mention Fed and interest rates and all sorts of funny ideas come to the surface!

What seems lacking in all this discussion is the issue of currency interdependence - the Fed isn't just setting rates for the USA, it is in a sense a central bank for the world economy. I would prefer that it wasn't, but it is. So long as the rest of the world keeps sucking up dollars, the Feds ability to control what happens in the US will be reduced.

bakho said...

Interest rates vary with demand and risk of the loan.

  • Payday loans are exorbitantly high reflecting high risk and few lenders.
  • Student loans are excessively high because demand is high and a small set of lenders.
  • Credit card loans are variable dependent on risk. There is stiff competition for low risk borrowers and lower rates. Some still borrow at 15% plus.
  • Mortgage loans have gone up recently to reflect the increased number of buyers.
  • Interest rates on bonds have fallen as investment as the risk premium for many investments (such as business expansion due to overcapacity) skyrocketed in the wake of economic crises. When bonds have high demand the interest paid is lower.

Fiscal authorities have conducted austerity and decreased demand and sending inflation negative or too low. Monetary policy has attempted to counter bad fiscal policy by supporting lower interest rates. Underinvestment by governments including austerity is the biggest reason for low interest rates. Another is failure to adequately tax the wealthy leaving too much wealth that is not being spent looking for safe bonds to invest in. Collecting the excess as taxes would lower demand for bonds and help raise interest rates.

Chris Herbert said...

I'm not certain whether this is important or not, but I suspect it is. Our tax laws, and apparently much of our economy, funnels income gains to the owner of capital almost exclusively. Capital and cash pool in private bank and investment accounts amongst the top two tenths of the top one percent. Meanwhile poverty spreads below. This is the classic Adam Smith notion of a rich nation going to ruin, by the way. Also, at the national account level we fail to fund any reasonable level of infrastructure development, and that which we do is considered 'deficit' spending because we no longer collect taxes, a la Greece. Why we consider this deficit spending as opposed to what it actually is, investment, is beyond me. As a result of this mistake, we cannot make the investments we need to remain a modern society. China can spit out bullet trains by the half dozen and we can't manage to build a single one. Apparently the real enemy of rich countries are conservatives who do not understand what makes an economy robust.

We need to relearn how to collect taxes and we need to relearn the difference between consumption and investment spending. It isn't the deficit that matters, it's what you spend your deficit on.

Darryl FKA Ron said in reply to Chris Herbert...

Well said.

The whole point of conservative economic policy is to preserve the haves and distract the have-nots. It is not about a thriving economy but about who wins and who loses. When you have enough money and never fight in wars then all of life just seems like a game.

Darryl FKA Ron said...

If money is artificial then interest rates would have to be artificial too, but that is not the point. First off, we are talking about Fed interest rates, which can be out of line with market rates at rare times. If Fed rates were too low given the demand for loanable funds then the market would take a higher interest rate spread for itself. What matters most is the effect on output, consumption demand, wages, and investment as Fed interest rates go up or down. If Fed rates are too high then the market tells this to the Fed by a collapse in demand for loanable funds.

If Fed rates are too low then the market tells this to the Fed by a boom in demand for loanable funds and lenders taking a higher spread. For those that invoke the natural interest rate euphemism then what they really mean is market rates.

What is the market telling them? Make them tell us how the market is saying that to them.

JF said in reply to Darryl FKA Ron...

Darryl FKA Ron - Good points, but can I get you to stop using the term "loanable funds" - it is a term that has theoretical meanings that are questioned as not being true in fact (though of theoretical and analytic interest).

You can simply substitute: "demand for lending"

JF said in reply to JF...

Here is a read, published July 2014, though you can also look at the most recent discussion from the Bank of England's bulletins.

http://web.stanford.edu/~kumhof/banks-lf-fmc.pdf

"Abstract

In the loanable funds model of banking, banks accept deposits of resources from savers and then lend them to borrowers. In the real world, banks provide financing, that is they create deposits of new money through lending, and in doing so are mainly constrained by expectations of profitability and solvency.

This paper presents and contrasts simple loanable funds and financing models of banking. Compared to otherwise identical loanable funds models, and following identical shocks, financing models predict changes in bank lending that are far larger, happen much faster, and have much larger effects on the real economy. "

Darryl FKA Ron said in reply to JF...

Yeah, I use the terms interchangeably too often. Demand for lending is appropriate for ordinary commercial banking. Loanable funds only has real meaning for lending by bond buyers, ordinarily through investment banking financial intermediation. For home loans commercial banks are often the loan originators, but they are not the lenders.

likbez said...

I think what is missing from the discussion is effect of energy prices on interest rates. High oil prices lead to diminished profitability and as such depress interest rates.

The Warren Buffet Economy, Part 1: Why Its Days Are Numbered

This central bank fueled boom will ultimately be paid for in the form of a prolonged deflationary contraction. Then, trillions of uneconomic assets will be written off, industrial sector profits will collapse and the great inflation of financial assets over the last 27 years will meet its day of reckoning. On the morning after, of course, it will be asked why the central banks were permitted to engineer this fantastic financial and economic bubble. The short answer is that it was done so that monetary central planners could smooth and optimize the business cycle and save world capitalism from its purported tendency toward instability, underperformance and depressionary collapse.

[Jun 09, 2015] Possible Q2 earnings recession nothing to lose sleep over

Rising price of oil should be the factor depressing earning, not increasing them. Drogen is wrong in this respect...
Jun 09, 2015 | finance.yahoo.com

Leigh Drogen of Estimize said an earnings recession is unlikely for the next quarter, citing low estimates and rising oil prices.

Last quarter yielded a 1.2% growth in earnings despite Wall Street’s prediction of negative 2%.

“Most of that was in energy, so obviously with the price of oil going down we saw a huge drop in energy earnings,” Drogen said. “But what happened was the analysts took their numbers way too far down.”

In Q2, similarly pessimistic predictions from Wall Street can be expected to produce further disparity in projections.

“When we see the price of oil this quarter, or last quarter which will affect this quarter’s earnings, it has gone up,” Drogen added. “And so we’re looking for better numbers than the Street is this quarter again and we don’t think there’s going to be an earnings recession."

[Jun 07, 2015] I'm so, so tired of political journalists

[Jun 07, 2015] CEO Pay Fueled Top 1% Income Growth

[Jun 07, 2015] Secular Stagnation: The Time for One-Armed Policy is Over

[Jun 05, 2015] May Employment Report 280,000 Jobs, 5.5% Unemployment Rate


[Jun 05, 2015] Gross Says Bond Rout Scary as Hell Even Without Bear Market By Wes Goodman

Bloomberg

The turmoil has sent U.S. government securities maturing in 10 years and longer down 7.4 percent since the end of March, heading for the biggest quarterly loss since 2010, based on Bloomberg World Bond Indexes. The decline is part of a global selloff, led by German bunds and fueled by what traders say is a lack of liquidity.

“I recognize the tremendous liquidity problems and the ups and the downs on a daily basis -- or even on a minute basis -- and it scares the hell out of me,” Gross said in an interview Thursday. “But I don’t think we’re in for a bear bond market just yet.”

Gross ... said Treasuries have fallen to fair levels. The benchmark Treasury 10-year yield rose three basis points, or 0.03 percentage point, to 2.34 percent at 6:56 a.m. New York time, according to Bloomberg Bond Trader data. It reached 2.42 percent on Thursday, the highest since October, having climbed from a year-to-date low of 1.64 percent.

Gross said 2.30 percent is “fair value.”

Treasury market volatility climbed to a three-month high this week, according to the Bank of America Merrill Lynch MOVE Index. The gauge increased to 91.81 Wednesday, from as low as 70.99 on April 27.

“People’s faces are within inches of their screens, eyes are glued to the screens, to the news sources, to the price action,” said Craig Collins, managing director of rates trading at Bank of Montreal in London. “You see the market move and it’s ‘what’s out, what’s out?’ Risk appetite is very, very low with the liquidity in the market being very low and that’s made for this really choppy price action.”

Trading activity is declining because of regulations such as the Volcker Rule and Basel III that require banks to cut back on risky activities and holdings, according to Hajime Nagata, who invests in Treasuries for Tokyo-based Diam Co. Bond-market moves have become exaggerated as a result, he said.

The primary dealers that underwrite America’s bonds have cut U.S. government debt holdings to $30.3 billion as of May 27, from a record $146 billion in October 2013, Federal Reserve data show.

... ... ...

Gross said he doesn’t see the threat of a bear market in bonds with inflation falling short of the Fed’s 2 percent target. The central bank’s preferred measure of costs was 0.1 percent as of the most recent report in April.

A period when returns aren’t positive is generally considered a bear market in bonds. While securities with the longest maturities have suffered the brunt of the global selloff, other debt investments fared better.

The Vanguard Total Bond Market Index Fund, the biggest bond mutual fund in the world with $118 billion in assets, is little changed this year, according to data compiled by Bloomberg. It’s returned 2.6 percent over the past 12 months.

The debt-market selloff probably doesn’t have much further to go, said Peter Jolly, the Sydney-based head of market research at National Australia Bank Ltd. “It’s been violent, and it’s happened in a short few days,” Jolly said. “We’re getting to the point where some investors are starting to see value in buying bonds again.”

ABC

There is no value in buying bonds unless it gets 3% and above while slowly getting to the average norm of the past. Ten years is a long time to get little to live on, right. If you die, then the government gets their take and not much left for the children.

Wall Street can be very risky at this time for the elderly. Got to eat and have a roof over your head. The eyeball gouging guys do not care if granny eats or has a roof over her head.

JB

Only "scary" for the idiots who piled in at the top - but not for "fund managers". They are gambling with someone else's money; they are ALL unaccountable.

[Jun 05, 2015] Vanguard guidance

Noni Robinson: Joe, when do you think the Fed will start to raise short-term interest rates and at what pace?

Joe Davis: Good question. You know, we certainly stated at the beginning of the year, Noni, in our past conversations, that the Fed was very likely to raise rates this year. And that is still the case. There's been a great deal of fixation in the marketplace around whether it would be June or September, perhaps even as late as December. And depending upon the data, I think, ultimately [that] will determine when the Fed raises rates. I think right now central tendencies are around September. I think that's clear from the Federal Reserve in the minutes, and the weak data we had in the first quarter, some of which is [because of] weather, some of it is not.

Joe Davis More importantly, what we've talked for some time Noni, is much more important than when the Fed raises rates, is—to your question—the pace, and where they ultimately stop. And in our minds, for some time, we've been of the thought that the Fed was unlikely to raise rates very high, and they were going to do so at a very gradual pace. And in fact we thought that the Federal Reserve would pause, perhaps as low as 1%, to reassess the economy and to see the performance. Particularly since the Federal Reserve is extremely likely to be the only central bank in the developed world that will be raising rates in the near future.

So again, I still think it's going to be a very gradual and slow pace. I think it's ultimately a positive for the U.S. economy. There is a limit to how far the Fed can raise rates. Two important points. First is, inflation is below where they want it, it's been there for four years and it's not near 2% on the official rate. And so, unlike previous tightening cycles, they may be raising rates with their inflation below where they want it, as opposed to the past when it was higher than they wanted, and they wanted to push it down.

And then secondly, whether or not they may directly acknowledge it, is the recent strength in the U.S. dollar, given in part due to the strength of the U.S versus other developed markets, there's a tightening bias in the appreciation of the dollar. So that, in itself, I think will be self-limiting in terms of how far the Federal Reserve will need to raise rates.

Noni Robinson: Roger, have the markets already priced in higher rates? Or do you think we'll see some volatility as rates start to rise?

Roger Aliaga-DiazRoger Aliaga-Díaz: Yes, Noni. In part, they have priced in some of the rate rise that's expected for 2015. But still there is a little bit of disconnect between the market-inferred path of rates, and what the Fed is stating. It's not a large disconnect, we're looking at a half of a percentage point. The market seems to be a little bit impacted by technical factors. Basically the flight to safety into the U.S. dollar, and dollar-denominated debt we've been seeing over the past few months. And that tends to push U.S. yields down below what economic fundamentals would determine.

On the other hand, the Fed projections are assuming, at the moment, that the Fed is going to raise rates to closer to historical levels, or to about 4% for what's called a terminal rate, long-term. But we believe that over time—and the Fed is basically acknowledging this gradually—that over time due to the low growth environment and subdued inflation environment, that terminal rate may come down closer to where the market is.

So [there could be] a little bit of volatility [because] the market may catch up to the Fed in the short-term as we get closer to lift off. The Fed is over time, gradually reducing that long-term rate. But volatility, yes. Usually at turning points we should expect some volatility. Not necessarily in one direction, it's not all bad. It's more uncertainty around the path of rates, the gradual path that Joe was referring to. So the best basic strategy for that is to stay well diversified across the maturity curve, accessing a broad bond benchmark

[Jun 05, 2015] 5 things to think about on your journey to retirement

May 04, 2015 | https://personal.vanguard.com/us/insights/article/5-things-journey-to-retirement-052015

... ... ...

Deji Akintoye: Figuring out how much you need to accumulate gets to the heart of the matter: the dollar amount you'll need to "afford" retirement.

... ... ...

By looking at a few factors (including your age, the amount you save, and your anticipated rate of return), you can project whether you're on track to meet your savings goals. The key is to set realistic expectations for retirement and create a plan.

... ... ...

Kahlilah Dowe: I've heard people say that retirement starts to seem "real" when it's about 5 years away. This can be a good time to think about how much income you'll need to make your vision of retirement a reality.

... If your portfolio will be your primary income source, it may be smart to invest more conservatively to preserve the value of your portfolio.

... focus on your asset mix. The level of risk you take on should correspond with how much your investment portfolio will have to shoulder the weight of supporting your daily living expenses in retirement.

... ... ...

Jane Simpson: For some investors, retirement means transitioning to a life of relaxing and spending—from a life of working and saving. In the midst of the transition, consider how your lifestyle changes can potentially impact your finances.

Using projected fixed expenses (costs that are the same every month) and discretionary expenses (costs that cover wants rather than needs), come up with a spending strategy to balance your expectations with your limitations.

Although it's prudent to plan ahead, it's also necessary to remain financially flexible—you can make a plan based on what you know right now, but you have to monitor your actual spending and make adjustments as needed. I encourage all newly retired clients to remember that the first few years of retirement are often about fulfilling lifelong dreams (like relocating or taking a trip of a lifetime), so it's unlikely that subsequent years of retirement will include the same expenses. It's okay to take some time to figure it out.

Julie Edwards: About 5 years after you retire, consider asking yourself whether or not retirement is what you thought it would be. Compare the vision you had for retirement with the reality of being retired. But before you place the blame on your finances for any unmet expectations, review your budget. Is your spending on track?

If you're overspending, you can either supplement your income (by getting a job) or reduce your expenses. Because you're on a fixed income, it's a good idea to periodically review your discretionary expenses and potentially give up or cut back on a membership, an activity, or a recurring expense that isn't crucial to your happiness.

... ... ....

[Jun 04, 2015] Pickens Saudis bluffing on oil production

[Jun 05, 2015] BONDS: U.S. government bond prices rose, pushing yields down. The yield on the 10-year Treasury note dropped to 2.30 percent from 2.36 percent late Wednesday.

[Jun 04, 2015] There is 'sheer panic' in the bond market

According to Bloomberg, bonds wiped out all their gains for the year. The benchmark US 10-year treasury yield pushed higher to about 2.42% overnight, a level it hadn't touched since October. German bund yields rose to about 0.99%.

There is chaos in global markets. Bonds sold off sharply on Thursday morning for a second day in a row. They've reversed the decline, but stocks are still lower, after the chaos spilled over.

... ... ...

The International Monetary Fund slashed US growth forecasts, and urged the Federal Reserve to delay its first interest rate hike until 2016, in a statement that crossed as the stock market opened.

In a speech last month, Fed chair Janet Yellen said it would be appropriate to raise interest rates "at some point this year" if the economy continues to improve.

In a morning note before the open, Brean Capital's Peter Tchir wrote: "It is time to reduce US equity holdings for the near term and look for a 3% to 5% move lower. The Treasury weakness is NOT a 'risk on' trade it is a 'risk off' trade, where low yields are viewed as a risk asset and not a safe haven."

The sell off in global bonds started Wednesday, as European Central Bank president Mario Draghi gave a news conference in which he said markets should get used to episodes of higher volatility.

Draghi also emphasized that the ECB had no intention to soon end its €60 billion bond-buying program, called quantitative easing, before its planned end date of September 2016.

Bond yields, which move in the opposite direction to their prices, spiked across Europe on Wednesday, and on Thursday this move is continuing, with German bund yields and US Treasury yields hitting new 2015 highs and continuing to climb overnight.

According to Bloomberg, bonds wiped out all their gains for the year.

... ... ...

The benchmark US 10-year treasury yield pushed higher to about 2.42% overnight, a level it hadn't touched since October. German bund yields rose to about 0.99%.

[Jun 03, 2015] The Fed’s low rates may be harming the middle class By Rick Newman

"...there’s new concern that the abnormally low interest rates resulting from central bank quantitative easing are creating perverse incentives for many companies to deploy cash in ways that benefit the wealthy without doing much, if anything, for workers or ordinary consumers. "

....nearly seven years on, aggressive monetary stimulus may now be hurting those it’s meant to help.

Fed critics have long warned that the gusher of liquidity opened by the Fed will generate runaway inflation, which hasn’t happened. But there’s new concern that the abnormally low interest rates resulting from central bank quantitative easing are creating perverse incentives for many companies to deploy cash in ways that benefit the wealthy without doing much, if anything, for workers or ordinary consumers. “Flooding the system with more cheap money is the wrong solution,” former FDIC chief Sheila Bair recently told Yahoo Finance. “It has made income inequality worse. We need to get back to real economic growth, not artificially stimulated growth with cheap interest rates.”

Wall Street barons and other one-percenters have gained the most from super-low rates that have diverted a flood of money out of low-yielding bonds and into stocks and other risky assets, producing an epic bull market that’s now in its sixth year. But a growing chorus of one-percenters, including BlackRock CEO Lawrence Fink and hedge-fund billionaire Stanley Druckenmiller, argue that raising rates is now the best way to help workers still struggling to join the economic recovery.

The reasoning goes like this: Low rates make debt so cheap that companies are borrowing to finance mergers, acquisitions, stock buybacks and other types of “financial engineering” instead of investing in ways that boost the real economy and create jobs. Mergers and acquisitions tend to eliminate jobs as firms consolidate, rather than creating them as a company might by expanding a factory, purchasing new equipment or directly taking on new workers.

Recent research by economist William Lazonick of the University of Massachusetts Lowell argues that a surge in stock buybacks in recent years has “concentrated wealth among the richest households while wiping out middle-income jobs that used to sustain many families. “Low interest rates are currently doing more to encourage buybacks than productive investment,” Lazonick says.

A doubling of corporate debt

Druckenmiller points out that the amount of corporate debt in circulation has doubled from $3.5 trillion in 2007—which we now know was the peak of the debt bubble that preceded the 2008 crash—to $7 trillion today, largely because low rates make it so appealing for companies to borrow. Much of the new debt on the market is rated below-investment grade, or “junk.” In a downturn, higher-than expected default rates on those risky bonds could leave unprepared investors shouldering heavy losses. “The risk of a credit bubble is extremely high,” Druckenmiller recently told Bloomberg. “If not addressed pretty soon, things could get pretty difficult three or four years down the road.” And just about every downturn hurts those living paycheck to paycheck a lot more than those with substantial savings.

... ... ...

Rick Newman’s latest book is Liberty for All: A Manifesto for Reclaiming Financial and Political Freedom. Follow him on Twitter: @rickjnewman.

Related Stories

  1. Bond Traders Know Things the Fed Doesn't Bloomberg
  2. Gundlach: Federal Reserve won't raise interest rates this year MarketWatch
  3. Bernanke still blind to market bubbles CNBC

[Jun 04, 2015] U.S. economy slow, disappointing and not about to change for the better

Notable quotes:
"...the primary culprit is the decline of main street citizen's spendable income. That is why the windfall of lower gas prices had no lasting effect. Many pundits talk about the lack of inflation but this too is inaccurate - ask main street citizens. Since our economy is regrettably tied to buying our country's "stuff", and the fed policies are moving wealth away from the majority of our citizens, our system is critically flawed. New wealth is not being returned to the economy. The horrible truth is killing entitlement programs, and the fact that other world nations are following the same pattern, does not bode well for a genuine recovery. "
"...No Central Banker is going to stick their neck out and raise rates..."
finance.yahoo.com

The U.S. economy shrank in the first quarter, the third such decline since the expansion officially began in mid-2009. But when the data came out last week most economists chalked up the 0.7% contraction to temporary factors like weather, the strong dollar and the West Coast port strike. The calendar has turned to June and the data now coming in for April and May suggest any second-quarter rebound will be limited, at best: The Atlanta Fed's real-time GDPNow model predicts growth of just 0.8% for the April-June timeframe.

"At the beginning of this year there was a hope and expectation things would pick up," recalls Kevin Logan, chief U.S. economist at HSBC. "Now it's five months in [to 2015] and we're reassessing everything. This is a slow, disappointing expansion [and] doesn't seem like it's changing now."

A big reason for the econo-optimism at the start of the year was the sharp drop in gasoline prices, which many economists predicted would be a "windfall" for U.S. consumers. But Logan notes the biggest part of the decline came at the end of 2014, helping spur a 4.5% growth rate in consumption in the fourth quarter. "There was a shift upward in spending and now we're trending [flat] again," he says, as reflecting the 0% consumption growth in the personal income/spending figures released Monday. "Consumer spending has picked up a bit but not to drive the economy to the rate of growth we thought we were going to get."

(As an aside, when I suggested in mid-April the U.S. economy may have already peaked, people thought I was nuts. It's still a variant few but fewer people are laughing now. On the other hand, with personal incomes up 0.4%, the savings rate has risen, which is good for the individual but not so good for the overall economy, aka the paradox of thrift.)

But Yes, We Have No Inflation

The other big news in that same personal income/consumption release Monday was the Core Personal Consumption Expenditures (PCE) index, the Fed's preferred inflation gauge, rose just 0.1% in April and is now up only 1.2% on a year-over-year basis, down from 1.4% in March.

"Fed officials want to be reasonably confident inflation will return to the 2% level they're targeting but the data is moving in the opposite direction," says Logan.

Barring a sharp rebound in both growth and inflation, Logan believes the Fed will postpone its first rate hike until September or December, noting the strong dollar presents another headwind for both U.S. inflation and growth. Exports suffered the biggest drop in six years in the first quarter and although the greenback's strength has moderated of late, the Fed's own model shows the impact of a rising dollar occurs with a lag and increases over time, The WSJ reports.

"Domestically things have picked up...but the appreciation of the dollar is going to hold the economy back," says Logan, whose forecasts have been below consensus for both growth and inflation in recent years -- meaning he's been more accurate than most of his peers, not to mention the Fed.

Aaron Task is Editor-at-Large of Yahoo Finance. You can follow him on Twitter at @aarontask or email him at atask@yahoo-inc.com.

proposedsolutionsblogspot

...double on food stamps than in 2008 plus food pantries and soup kitchens all over the country getting swamped and no media coverage given to these, we are flooded with stock pumping propaganda...

Just Some Guy Figuring

Since the "expansion began" the only common thread was the Federal Reserve was printing $3T worth of money that did not exist before and put it in the streets where the big guys did nothing but buy everything up on the cheap.

Six months ago the printing press was shut down.

With the well known lag of 6-12 months from when the Fed adjusts policy to actually seeing it in the economy, Guess what? No more "growth" because of money supply pumped into the economy.

The overall employment picture speaks to the fact no growth has happened since 2008.

In the prime 16-64 year old working age bracket 64M of 203M have left the labor force, are not in the labor force or are and unemployed.

203M 16-64 year olds is the largest number ever population wise in the history of the labor force.

The more than a third with of that number with no job is the highest since the depressions of 1929 and 1933.

MacDaddyWatch

Hillary Down the Crapper:

(CNN): More people have an unfavorable view of Democratic front-runner Hillary Clinton now than at any time since 2001, according to a new CNN/ORC poll on the 2016 race. The poll shows that her numbers have dropped significantly across several key indicators since she launched her campaign in April.

A growing number of people say she is not honest and trustworthy (57%, up from 49% in March), less than half feel she cares about people like them (47%, down from 53% last July) and more now feel she does not inspire confidence (50%, up from 42% last March).

Duane

He makes the point that everyone that works and owns/drives a car got a rise last year in the form of lower gas prices. Gas is a buck (+ -) than last year at this time-as the story goes; you may not have received a raise at your job, you none the less have one in the form of lower gas prices. This reasoning can be applied to beer prices, clothing, or any 'on sale' item. I know this is convoluted but this is how many see economics. And, if your told this over and over you may start to believe it too.

Happy

Mr. Task, with all due respect, your article is neither informative nor newsworthy. Much has been said about weather, higher dollar, and west coast ports being responsible for the decline of the US first quarter's economy. All perhaps influenced the decline (originally reported to be an increase) but the primary culprit is the decline of main street citizen's spendable income. That is why the windfall of lower gas prices had no lasting effect. Many pundits talk about the lack of inflation but this too is inaccurate - ask main street citizens. Since our economy is regrettably tied to buying our country's "stuff", and the fed policies are moving wealth away from the majority of our citizens, our system is critically flawed. New wealth is not being returned to the economy. The horrible truth is killing entitlement programs, and the fact that other world nations are following the same pattern, does not bode well for a genuine recovery.

wow

Do not worry, our propaganda (just look around) works great! It will solve all our problems! Remember that we claim that we had 5.4%,2.2% (now negative 0.7%) solid and thriving growth! China had 9%, 7.4% (now 7%) slowing and stagnant growth and will collapse like Japan; and ours will not (it is all our weather's faults and China has great weather!???). Foreign investments are flowing in US, and flowing out in China. We are the only booming economy in the world!

With Chinese collapsing economy, no way they will become a major power; and of course we should pull out from their market (and thus most of our investors here missed the bully market of the last few years there!). Their dictatorship government would never work! We are much better off than they are! Once China collapsed, no other country can support Russia and they will collapse also! We just need to chant this repeatedly in mind! Everything will be fine! We will be rich and powerful! LOL!

goldchest

No Central Banker is going to stick their neck out and raise rates. They have left that job to Investors who when they become wise stop buying Bonds that yield nothing but peanuts, thereby allowing Bond prices to fall and yields to rise. The Bond bubble is the biggest bubble seen in a century and when it bursts the flood will destroy all in its path. Slowly Investors are realizing that gimmickry has produced only spurious gains that will be washed away in a flash. Need to have the life jacket on at all times.

Clay

After all those trillions in central bank bond purchases . . . and this is what we've got to show for it? And it's the same all over the globe.

These central banks will soon have to make a decision. How much risk are they willing to take? Do we eat the frog now, or do we continue pumping? My bet is that they're in too deep to stop now.

[Jun 02, 2015] The Current Overproduction Crisis And War

[Jun 02, 2015] Angry Bear " Class Struggle In The USA

[Jun 01, 2015] Fischer Says Bankers Should Be Punished for Financial Crimes

[Jun 01, 2015] Monday Personal Income and Outlays, ISM Mfg Index, Construction Spending

Jun 01, 2015 | calculatedriskblog.com

From Jim Hamilton at Econbrowser: Current economic conditions: not as bad as it sounds

The new BEA data also allow us to calculate an alternative estimate of GDP, building the estimate up from income data instead of expenditures. In terms of the underlying concepts, the income-based and expenditure-based calculations should produce the identical number for GDP. But because the data sources are different, in practice the two estimates differ, with the difference officially reported as a “statistical discrepancy.” While the expenditure-based GDP estimate showed a 0.7% decline at an annual rate, the income-based GDP estimate implied 1.4% growth for the first quarter. Moreover, using the statistical method for reconciling and combining the different estimates proposed by Aruoba, Diebold, Nalewaik, Schorfheide, and Song (ADNSS), the best estimate of first-quarter real GDP growth based on the existing data might be about 2%.

1 currency now -yogi wrote on Sun, 5/31/2015 - 7:14 pm

The Obama Administration continues to brush aside warnings from legal experts and policymakers that “fast track” and free trade deals could threaten the Dodd-Frank Act and other protections against recklessness on Wall Street.

That’s despite the fact that the fact check by Bloomberg News headlined “Why Obama is Wrong and Warren is Right on Trade Bill Quarrel” stated simply that “Elizabeth Warren has got the law on her side” and that trade deals do pose a threat to Wall Street reform.

Lead trade negotiator Michael Froman is a former executive at banking giant Citigroup. While he helped staff the Obama Administration with bank-friendly officials as a senior member of the 2008 presidential transition team, he was still getting a salary from Citigroup – all while Citigroup was making history with history-shattering bailouts. Then he got a golden parachute worth millions from the bank when he went into government.

Demand Progress | No “fast track” to killing Dodd-Frank

Outsider wrote on Sun, 5/31/2015 - 7:49 pm
A global workforce will mean lower wages for Americans and higher wages for (previously) 3rd world countries. It's hard to argue against that because they're entitled to a decent standard of living as well. It is what it is. GDP is a strange barometer.
robj wrote on Sun, 5/31/2015 - 7:49 pm
The pattern has remained pretty much intact for 3-4 years. The doomerians jump on the winter/spring numbers like a cat on a lizard; instead it's slow, disappointing growth. Onwards and sideways.
The doom crash will come and we'll all be Raptured.

Outsider wrote on Sun, 5/31/2015 - 8:06 pm

"Robert Samuelson Does Battle With the Bureau of Labor Statistics | Beat the Press | Blogs | Publications | The Center for Economic and Policy Research"

Addendum:

The most obvious explanation for the continuing weakness of the economy is that there is nothing to fill the gap in demand created by a $500 billion annual trade deficit (@ 3 percent of GDP). In the last decade, the demand generated by the housing bubble filled the gap, while in the 1990s the demand from a stock bubble filled the gap. In the absence of another bubble and a refusal to run large budget deficits, there is no obvious source of demand to fill this gap.

I'm thinking the only way out of this pickle is virtual reality.

America's binky.

Outsider wrote on Mon, 6/1/2015 - 4:37 am

Record highs of Americans leasing vehicles

Officially, the latest report on automotive lending by Experian Automotive found the average new vehicle lease monthly payment in the first quarter was $405 while the average monthly payment for a new vehicle loan was $488.

Absurdity.

In Q1, the average length of new vehicle loans hit an all-time high of five years and seven months according to the report. Furthermore, a record 29.5 percent of those taking out a new vehicle loan stretched their loans out between six and seven years according to Experian. The report also found the 18.6 percent increase in those new vehicle loans with terms between 73 and 84 months.

How's the fed interest rate hike going to (eventually) affect this market?

Bruce in Tennessee wrote on Mon, 6/1/2015 - 4:45 am

Peering Toward Q2 | Alhambra Investment Partners – We Are Different.

"To make that even more plain and obvious, nominal final sales (a much better, if still flawed, view of the economy than GDP) were revised down by almost $30 billion. That doesn’t sound like a lot, but it is a massive downgrade for a first revision. Nominal final sales had already been negative for only the fourth time in the last five decades (with the other three being in the Great Recession itself), going from just slightly negative to now no doubt.

Again, that makes it difficult to accept that a sharp rebound is coming this very quarter, instead placing much more emphasis on the Atlanta Fed’s current estimate of just 0.8% for Q2 – particularly since, as of these revisions, it will take 0.8% just to get the economy back to zero for all of H1. So far the revisions suggest even that might be optimistic, as well as the current state of data coming in for April and now May."

...Should be a very interesting time for equity prices, this quarter.....

[Jun 01, 2015] Current economic conditions not as bad as it sounds

Jun 01, 2015 | econbrowser.com | 19 Replies

On Friday the Bureau of Economic Analysis released its second estimate of U.S. 2015:Q1 real GDP growth. The BEA now estimates that the economy contracted at a 0.7% annual rate rather than grew 0.2% as originally estimated. The number is discouraging, though I see some silver linings.

The primary factors that brought GDP growth down from the BEA’s original estimate were stronger growth of imports and a smaller inventory build than originally anticipated. Both components can be volatile, and I would not interpret the latter as a sign of fundamental weakness.

The new BEA data also allow us to calculate an alternative estimate of GDP, building the estimate up from income data instead of expenditures. In terms of the underlying concepts, the income-based and expenditure-based calculations should produce the identical number for GDP. But because the data sources are different, in practice the two estimates differ, with the difference officially reported as a “statistical discrepancy.” While the expenditure-based GDP estimate showed a 0.7% decline at an annual rate, the income-based GDP estimate implied 1.4% growth for the first quarter. Moreover, using the statistical method for reconciling and combining the different estimates proposed by Aruoba, Diebold, Nalewaik, Schorfheide, and Song (ADNSS), the best estimate of first-quarter real GDP growth based on the existing data might be about 2%.

Alternative estimates of real GDP growth at an annual rate.  Solid black: expenditure-based estimate reported by BEA.  Dotted black: income-based estimate calculated directly from BEA-reported statistical discrepancy and GDP price deflator.  Red: estimate calculated using the Aruoba, et al. method.  Source: Federal Reserve Bank of Philadelphia.

Alternative estimates of real GDP growth at an annual rate. Solid black: expenditure-based estimate reported by BEA. Dotted black: income-based estimate calculated directly from BEA-reported statistical discrepancy and GDP price deflator. Red: estimate calculated using the Aruoba, et al. method. Source: Federal Reserve Bank of Philadelphia.


Another factor contributing to the weak first-quarter GDP number was harsh winter weather. This is becoming a pattern, with the “seasonally adjusted” Q1 estimates coming in consistently below the other three quarters for the last decade. Jason Furman had this comment:

The debate so far over the cause of first-quarter underperformance has tended to treat residual seasonality and weather effects as analytically distinct explanations. However, to the extent that worsening winter weather is part of a long-term trend rather than a random occurrence, changing weather patterns may be related to residual seasonality. A seasonal adjustment algorithm should adjust for effects of normal weather within a particular quarter—and to the extent that global climate change leads to a new “normal” for weather, seasonal adjustments will eventually catch up.

Source: White House Council of Economic Advisers.

Source: White House Council of Economic Advisers.


But others caution that we shouldn’t simply dismiss the Q1 GDP numbers. Here’s Richard Moody, chief economist at Regions Financial Corp.:

Many analysts seem tempted to simply brush aside the contraction in real GDP in [the first quarter] as a function of transitory factors– harsh winter weather, the port strike– that will have no lasting effect. We caution against treating the first-quarter GDP data so cavalierly, as doing so overlooks the more structural forces that weighed on the economy in [the first quarter]– the ongoing pullbacks in job counts and investment in the energy sector and related industries, still uncertain global growth prospects, and the stronger U.S. dollar.

It’s certainly true that signs of weakness are not just showing up in GDP and are not confined to the first quarter. The latest numbers on industrial production, retail sales, and durable-goods orders all suggest the economy may have hit a soft spot that extended into April.

Source: FRED.

Source: FRED.

Source: FRED.

Source: FRED.

Source: FRED.

Source: FRED.


But Bill McBride explains why he’s still sanguine about housing:

Total housing starts in April were solid and well above expectations– and at the highest level since 2007…. Note the exceptionally low level of single family starts and completions. The “wide bottom” was what I was forecasting several years ago, and now I expect several years of increasing single family starts and completions.

Source: Calculated Risk.

Source: Calculated Risk.

But the key is ongoing gains in employment, which still show solid momentum that should carry the economy forward.

Source: FRED.

Source: FRED.

Overall, I can’t quarrel with this summary by Council of Economic Advisers Chair Jason Furman:

The first-quarter slowdown was the result of harsh winter weather, tepid foreign demand, and consumers saving the windfall from lower oil prices. The combination of personal consumption and fixed investment, the most stable components of GDP, has grown 3.4 percent over the past four quarters. This solid long-term economic trend complements the robust pace of job growth and unemployment reduction over the last year.

Source: White House Council of Economic Advisers.

Source: White House Council of Economic Advisers.

mp123 May 31, 2015 at 9:50 am

Great piece. Thanks

PeakTrader May 31, 2015 at 10:47 am

If the country was at full employment in 2007, we gained only 3 million jobs since then.

If 125,000 jobs were needed each month to keep up with population growth, we needed 11 1/4 million jobs, since 2007, to get back on track.

And, too many jobs, since 2007, have been part-time jobs.

PeakTrader May 31, 2015 at 11:17 am

And, part of the “train wreck” is declining real income of younger workers, while older workers postpone retirement to pay-down debt or build-up saving, that has to weigh on spending and borrowing, particularly in housing, and housing-related goods, while student loan debt continues to soar.

John Cummings May 31, 2015 at 1:06 pm

This is totally wrong. Older workers aren’t postponing retirement at all. They are speeding it up as the stock market recovered.

PeakTrader May 31, 2015 at 4:28 pm

Then why, since the last recession, has the 55 and older labor force participation rate held up near the highest level in over 50 years, while the total labor force participation rate had a steep decline and reached the lowest level in 40 years.

And, why is the 55 and older unemployment rate so much lower than the overall unemployment rate.

PeakTrader May 31, 2015 at 4:56 pm

And, there’s a lot more to it than the stock market:

“In 2012, 62 percent of survey respondents aged 45 to 60 said that the recent recession has made them consider postponing retirement, up significantly from 42 percent in 2010.

“Job losses, pay cuts, and significant declines in home values were among the major factors driving these planned delays…Workers who drew from their savings to help get through the tough financial times of recent years were also more likely to plan a delayed retirement.

Falling interest rates on even relatively stable investments…The yield on a 10-year Treasury bond was just about 3.5 percent two years ago; today it is below 2 percent.

The ongoing shift from employer-sponsored pension plans to employee-managed retirement savings…Without guaranteed benefits, more people may feel the need to work more years, in order to guarantee sufficient income after retirement.”

http://www.salary.com/older-workers-are-delaying-retirement/

New Deal democrat May 31, 2015 at 11:31 am

I take issue with one part of this analysis: failure to include the effect of the 20% appreciation of the U.S. $ in late 2014. The collapse in exports didn’t just happen because of foreign weakness. It happened because U.S. goods became 20% more expensive. Of the 5 times since 1973 that the dollar has appreciated this sharply, 3 were associated with U S recessions.

John Cummings May 31, 2015 at 1:03 pm

Yeah, but that was DX over 110. This is a historically “average” DX.

BC May 31, 2015 at 11:41 am

The sum of real per capita after-tax profits, disposable income, and gov’t receipts decelerated to historical “stall speed” after Q3 2014 to date, coincident with the crash in the price of oil and gasoline.

Retail sales imply sub-1% SAAR real GDP so far for Q2, which in turn implies “stall speed” for the 4-qtr. average or real GDP through Q2.

US Treasury withholding receipts have decelerated from the cyclical peak to a level similar to Mar-May 2008 and Jun-Aug 2001, implying that employment is overstated and growing below 1% for the 12-month average, supporting the weakness in reported retail sales (ex autos financed increasingly by subprime loans) and real GDP.

The proportional aggregate of real GDP per capita for 70-75% of the world economy decelerated below historical “stall speed” in 2014, which historically coincided with recession.

FDI and trade are not growing.

Housing remains weak because Millennials do not have the financial capacity to become mortgage debtors given their meager average real, after-tax incomes, lack of job tenure, inability to save, indebtedness, and medical insurance costs.

The level and rate of increase of household health care spending as a share of income, PCE, and GDP is recessionary for household spending and thus for GDP.

Moreover, housing as a share of GDP no longer contributes materially to GDP growth. Given the cyclical slow or no growth of gov’t spending since 2010-11 (accelerating recently because of Obamacare subsidies) , the net of growth of housing and gov’t spending as a share of GDP is a wash.

The energy sector is in an incipient bust, manifesting in various surveys in the Texas Fed region and parts of the Midwest and Mountain regions dependent upon the shale and energy-related transport sectors. The weakness in these sectors is dragging on orders, IP mfg., and mfg. employment.

The consensus continues to believe that there can’t be a recession without the Fed raising rates and the yield curve inverting, but this condition is not historically consistent during a debt-deflationary regime, which began in 2008 and has persisted in Japan since 1998.

Additionally, with the post-2007 trend for real final sales per capita at ~0% and slightly above 1% since 2010-11, the secular trend rate of growth since 2007-08 is within the margin or error of the estimates for the deflator and import prices. Therefore, the US economy is perpetually vulnerable to experiencing “stall speed” or contraction owing to any number of shocks, including weather, drought, natural disasters, labor actions, energy, popping financial bubbles, and geopolitics.

Finally, as the peak Boomer demographic drag effects bear down in the US, Canada, UK, EZ, Japan, China, and the Asian city-states, we will experience an intensification of the effects of a once-in-history shift in the composition of US household spending from high-multiplier housing, autos (not yet), and child rearing to a permanent, structural transition to low- or no-multiplier spending for property taxes, house maintenance, utilities, insurance, and out-of-pocket costs for medical services and medications. The coincident lack of growth of the labor force and wages/GDP at a record low will continue to cause productivity to decelerate along with the 10-year rate of real GDP per capita hereafter.

Therefore, there will be no “escape velocity” for real GDP growth, despite the Fed’s obligatory forward guidance. ~0% growth of post-2007 real final sales per capita is the “new normal” of “secular stagnation”, i.e., as good as it gets. Therefore, the Fed cannot raise the funds rate (or not much before reversing course) under these conditions. The deceleration of real GDP will cause the deficit/GDP to increase this year, making it more likely than not that the Fed will resume QEternity later in the year.

John Cummings May 31, 2015 at 12:47 pm

That isn’t real retail sales. Adjust out for the deflation adjusted to oil price decline, that means real pce is being underestimated. GDP boomed between Q3-2013 and Q4-2014. They have it at 2.95% during that time, but I have it at 4.4% in the same timeframe and may have been 5% without the port strike(which will accelerate the 2nd quarterly). That would change things quite a bit, quite a bit. My guess they under estimated the domestic energy boom was having on fixed non-residential spending. It created a good deal of catchup speed in the economy. So we slow down “real time” to 2.5%. My guess the “weakness” persists until Residential investment accelerates over the course of 2015 and the Arabs run out of gas and drive prices back up. I see domestic energy production in a mid-cycle slump. Lets note low gas prices are fueling a boom: in restaurants. Total bar/restaurant spending is at a bush era high.

Interbank lending has accelerated rapidly in since the 4th quarter of 2014.

Steven Kopits May 31, 2015 at 1:48 pm

The logic would suggest that underlying GDP was higher in Q1 than the reported figures. We added 550,000 jobs, which is a very solid quarter for the US and converts into 1.6% annualized GDP growth assuming only labor (no productivity) effects and assuming new entrants have average productivity rates (which I believe Menzie’s post suggested a couple of months back).

We just missed initial unemployment claims falling to the lowest since 1973–so that’s also a strong indicator. They are currently at the lowest level as a percent of the labor force since 1960.

The rig data suggest the US shale recession is ending. My view is that we’ll see a hard re-start of the sector before the end of the summer. To wit: Friday’s BH rig report indicated the Canadian horizontal oil directed rigs rose by 95% last week, and up three fold in the last three weeks, albeit from a low base. We don’t really have more than a leveling from the US side, but I think we’ll see a solid rebound pretty soon. That should also help Q3 GDP data.

Overall, Q1 data was pretty weak, but, like Jim, I don’t think we should read too much into it.

I’m on CNBC tomorrow in the 12-1 pm time slot.

New Deal democrat May 31, 2015 at 3:01 pm

Steve,

Well, we are 2/3 the way through Q2, and the weekly reports also show:
1. Johnson Redbook and Gallup consumer spending still stink (Gallup just had its most negative YoY 14 day average this year)
2. Steel production still stinks, down between -5% to -10% YoY
3. Rail carloads still stink, down about -9% YoY in the most recent week
4. The American Staffing Association’s staffing index turned flat YoY in the last two weeks, for the first time since the Great Recession ended.
Bottom line: the most up-to-date evidence is that the weakness in Q1 has persisted more than halfway through Q2.

Steven Kopits May 31, 2015 at 4:30 pm

I’m not sure I see what you see in the data.

Take rail. Coal shipments are down, but we expected that. Oil is flat, which is perhaps a bit better than I expected. Grains are down modestly but within recent averages.

Temporary and contract staffing is flat year over year. But wouldn’t we expect temporary workers to move into full time jobs as the economy recovers? Wouldn’t we expect to see weakness in ‘part time for economic reasons’?

As for steel, 2/3 of steel output goes to automotive or construction, and both these sectors seem to be doing well. About 10% of steel goes to energy, and it’s pretty clear that sector is taking a breather.

New Deal democrat May 31, 2015 at 6:01 pm

Steve, metals shipments by rail are also down. Coal for export is down as the US’s competitors have picked up some demand, due to USD strength.

Steel is also down due to a big increase in steel imports in the last year, again coinciding with USD strength.

As to staffing, first of all, there are plenty of full time temp jobs. Secondly, part time employment peaked about 4 or 5 years ago, and the temp staffing index had gone up almost relentlessly since.

Meanwhile, April industrial production and real retail sales declined.

Weekly steel, rail, and retail sales all turned down between the first of the year and mid-February, and have stayed down. Why shouldn’t we conclude that the part of the economy responsible for the Q1 decline is still down as well?

Steven Kopits May 31, 2015 at 8:06 pm

Don’t know what to tell you. Maybe you’re right. It’s clear that the strength of the dollar has taken a toll. But is that a reflection of economic weakness?

In April, hotels had the best month ever, according to McBride.
http://www.calculatedriskblog.com/2015/05/hotels-best-april-ever.html

Auto sales are the best in fifteen years
http://www.calculatedriskblog.com/2015/04/vehicle-sales-forecasts-best-april-in.html

Housing starts best since 2007, with plenty of running room ahead
http://www.calculatedriskblog.com/2015/05/housing-starts-increased-to-1135.html

Maybe things fall apart, but the data are not uniformly bad. I’ll wait to see until passing judgment.

BC May 31, 2015 at 4:04 pm

John, adjust retail sales and PCE for core CPI/PCE deflator and the effect of accelerating costs of so-called “health care”, and the real disposable income and potential spending capacity of the bottom 90-99% is weak and poised to weaken further.

Moreover, real, after-tax profits are contracting, which portends further weakness in real non-residential investment per employee, IP mfg., and thus further deceleration of real GDP per capita.

One has to understand the once-in-history transition of the composition of household spending to discern this clearly and its implications hereafter for the next 5-10 years.

BC May 31, 2015 at 4:29 pm

Steven, employment is being overstated/overreported since Aug-Nov 2014, as is typical at the peak of the business cycle and deceleration to, and below, “stall speed” prior to recession, i.e., a “banana”.

Moreover, the US economy is now increasingly dependent upon (1) the unprofitable, unusustainable energy costs of growth of energy extraction, (2) the discretionary spending of the top 1-5%, mostly for luxury imports and no-multiplier domestic spending, and (3) the working class bottom 90% borrowing via subprime loans for “higher education” and autos that they can’t afford to service.

IOW, the US is exhibiting increasing evidence of becoming (already is) a Third World economy/society.

Granted, I concede that no one of vetted professional legitimacy and standing can publicly concede or admit this, and I deeply empathize, believe ME.

But you and I are faithful students of history and human nature, and it will escape neither of us that the collective resources and intention of Anglo-American-Zionist empire, Wall St., the int’l banking syndicate, and the Anglo-American-Zionist imperial military war machine is now preparing for the full application of resources and power against the Middle Kingdom (that the empire created, incidentally) in the Pacific, Central Asia, the Middle East, Africa, and the western hemisphere, which will likely include, if history is our guide, blockades and embargoes against China, as in the case of Japan in the 1930s, precipitating the increasing risk of war of the West against China in the years hence.

Achilles last stand: https://www.youtube.com/watch?v=YWOuzYvksRw

sherparick June 1, 2015 at 4:08 am

I do think Jim underestimates the impact of the a 20% appreciation of the dollar over the last year (even with the slippage since the peak in March). When nominal economic growth is low in a a low inflation/disinflation environment, even a 1% increase in -net exports is going to flatten the economy and slow growth below the real 2% trend (growth in labor force plus productivity increases). Further, dollar appreciation not only weakens demand for U.S. exports, it reduces demand for U.S. goods and services that compete with foreign imports and places downward pressure on the wages in these sectors, a downward pressure that spreads out through the whole economy. Finally, as Dean Baker points out, the U.S. personal consumption level is not low (except in comparison to the bubble/HELOC fueled spending of the housing bubble years) when examined over the long term. Neoliberals who want to cut social security and medicare and other safety net programs should expect that ordinary people will reduce consumption and try to build savings in order to achieve “the self-reliance” they believe the hoi-polloi should have as their goal. The problem is that as U.S. consumer adopts private austerity, and states around the world adopt public austerity, a question arises as what to do with all the “supply” of stuff and labor coming into the world from societies previously not part of the global capitalistic economy.

rjs June 1, 2015 at 4:37 am

i have trouble with the revision to imports….recall that our imports jumped in March when the West coast dock strike ended and the ships were unloaded, and as a result the March trade deficit increased 43%…i went through the itemized list of March imports and found for instance, that imports of consumer goods rose by $9,013 million to $54,164 million on a $1,677 increase in imports of cell phones and similar household electronics, a $1,293 increase in imports of synthetic textiles, and a $981 million increase in our imports of furniture and similar household goods..in addition, our imports of cotton apparel and household goods, footwear, pharmaceutical preparations, toys, games, and sporting goods, televisions and video equipment. other consumer nondurables, non textile apparel and household goods, household appliances cookware, cutlery, tools, and camping apparel and gear all also rose by more that $250 million each…those increases almost certainly did not indicate an increase in consumption of consumer goods by that much, but rather just an offloading of ships…there were similar increases in every other catagory of imports except petroleum and similar industrial supplies…

since those goods were not consumer, i expected they’d show up as an increase in wholesale or retail inventories…did not show up in March business sales, business inventories, or anywhere in investment…so while BEA applied their GDP formula to subtract imports from 1st quarter GDP as they normally would, the reason imports are subtracted is because they represent consumption inventories or investment that was previously added to GDP that was not produced here…considering that those March imports don’t seem to have been added to any of the other national accounts, they shouldn’t subtract from GDP…where those March imports went is still a mystery, perhaps they’ll show up in consumption or inventories in the 2nd quarter, but from here it appears that the subtraction of the March jump in imports was misallocated by the automated GDP algorithm …

[May 31, 2015] Something Smells Fishy

May 30, 2015 | Zero Hedge

Submitted by Jim Quinn of The Burning Platform

It’s always interesting to see a long term chart that reflects your real life experiences. I bought my first home in 1990. It was a small townhouse and I paid $100k, put 10% down, and obtained a 9.875% mortgage. I was thrilled to get under 10%. Those were different times, when you bought a home as a place to live. We had our first kid in 1993 and started looking for a single family home. We stopped because our townhouse had declined in value to $85k, so I couldn’t afford to sell. In 1995 I convinced my employer to rent my townhouse, as they were already renting multiple townhouses for all the foreigners doing short term assignments in the U.S. We bought a single family home in 1995 with the sole purpose of having a decent place to raise a family that was within 20 minutes of my job.

Considering home prices on an inflation adjusted basis were lower than they were in 1980, I was certainly not looking at it as some sort of investment vehicle. But, as you can see from the chart, nationally prices soared by about 55% between 1995 and 2005. My home supposedly doubled in value over 10 years. I was ecstatic when I was eventually able to sell my townhouse in 2004 for $134k. I felt so smart, until I saw a notice in the paper one year later showing my old townhouse had been sold again for $176k. Who knew there were so many greater fools.

This was utterly ridiculous, as home prices over the last 100 years have gone up at the rate of inflation. Robert Shiller and a few other rational thinking people called it a bubble. They were scorned and ridiculed by the whores at the NAR and the bimbo cheerleaders on CNBC. Something smelled rotten in the state of housing. We now know who was responsible. Greenspan and Bernanke were at least 75% responsible for the housing bubble and its eventual implosion, which essentially destroyed our economic system. They purposely kept interest rates at obscenely low levels, encouraging every Tom, Dick and Julio to buy a home with a negative amortization, no doc, nothing down, adjustable rate mortgage, so they could live the American dream of being in debt up to their eyeballs.

Greenspan and Bernanke were also responsible for regulating the Wall Street banks. They allowed them to leverage themselves 30 to 1. They allowed them to create fraudulent high risk mortgage products. They looked the other way as Wall Street sliced and diced these guaranteed to default mortgages into AAA rated derivatives that were then spread throughout the global financial system like ticking time bombs. As home prices rose three standard deviations above the long term average, these Ivy League educated geniuses cheered it all on. Bernanke saw no bubble, just as it was bursting. He saw no mal-investment or systematic risk from this orgy of greed and fraud. And then it all blew up in our faces, while the perpetrators walked away unscathed to pillage and rape once more.

And now we come to present day and something really smells fishy again. Home prices crashed by 40% between 2005 and 2012, putting prices back to 1978 on an inflation adjusted basis. All of the bubble gains were wiped out in the blink of an eye. Bernanke and his Wall Street owners had a real problem with this development. Wall Street banks had/have billions in toxic mortgages on their books and only accounting fraud by not having to mark them to market has kept these banks from having to declare bankruptcy. Bernanke, Geithner, and the Wall Street banks hatched their master plan to save themselves at the expense of young people in 2011/2012.

We know for a fact that real median household income is still 7% below 2007 levels and sits at the same level as 1989. We know for a fact that wages have been stagnant since 2007. We know for a fact GDP has barely broken 2% since 2009. We know for a fact the price of healthcare, food, energy, tuition, rent, and a myriad of other daily living expenses are dramatically higher since 2009. We know mortgage originations are at 1997 levels. We know housing starts are 60% below the 2005 highs and at levels seen during the 1991 and 1981 recessions. Existing home sales are 30% below the 2005 high, only up 10% from 2012 levels, and sitting at levels reached in 1999 before the boom.

A critical thinking person might wonder how median single family home prices could possibly skyrocket by 37% in the last three years when household incomes are falling, living expenses rising, and the number of houses being sold are at recessionary levels. The stinking rotting fish again sits in the hallways of the Eccles Building in Washington D.C. Janet “Yellowfish” Yellen has inherited the bubble blowing machine from Ben “Blowfish” Bernanke and has continued to inflate a new housing bubble, because one housing bubble just isn’t enough.

There is nothing free market about the 37% increase in home prices. It has absolutely nothing to do with supply and demand. It has nothing to do with normal families looking for a home. It has everything to do with the Federal Reserve’s 0% interest rates, the $3.5 trillion of QE injected into the economic gambling system, Wall Street banks withholding foreclosures from the market, hedge funds buying up tens of thousands of foreclosed homes and renting them out to the former middle class, Fannie and Freddie guaranteeing 70% of all sales, the government encouraging 3.5% subprime loans again, Chinese and Russian billionaires parking their ill gotten wealth in US real estate, and flippers reappearing in the same old places (Las Vegas, Phoenix, Florida, California).

The Federal Reserve created the last housing bubble and they’ve created the new housing bubble, along with stock and bond bubbles, with their easy money policies designed to enrich their Wall Street owners and the parasites who feed off the financial industry. Their entire plan smells to high heaven. They have thrown young people and most of the middle class overboard, while the bankers, billionaires, politicians, and connected cronies party like it was 2005 on their $250 million yachts.

Now what? The Fed says they are going to raise rates. The QE spigot has been turned off. The hedge funds are selling their buy and rent hovel investments, cash buyers are dwindling, the flippers who appeared in 2005 are back, Boomers are looking to sell and downsize, young people are already in debt up to their eyeballs thanks to the government doling out student loans like candy, the number of full-time good paying jobs continue to dwindle, and the rigged 37% price increase has priced millions of people out of the market.

The good news is the Wall Street banks have inflated their balance sheets and celebrated by giving themselves $20 billion in bonuses for a job well done. If mortgage rates rise to 4% or God forbid 5%, the entire housing complex would implode faster than a blowfish out of water. If you’ve bought in the last two years you will be underwater sleeping with the fishes like Luca Brasi in the not too distant future.

bdc63

The FED works for the banks. The FED will always take actions that are in the best interest of the banks. Any benefits to the american public is unintended happenstance.

Any negative impacts on the american public is blamed on the policies of the political party not currently in power.

Wash. Rinse. Repeat.

stoneworker

Yeah you are right they are not going to screw themselves. Which is why imho all that this article do is provide evidence to the theory that they will not raise interest rates by any significant amount any time soon....and not in an election year either.

New_Meat

bdc:

"The FED works for the banks."

Actually The FED IS da banks.

- Ned

doctor10

Local, state and Fed.gov have trashed American business so badly that since 1995, the only remaining collateral underpinning the mountain of debt is real estate. The title-trashing that occurred in the mid-2000's as part of the securitization process instigated by WallSt to pump the balloon higher, has in reality trashed many property's for decades until their title provenance gets sorted out again at a local level.

The debt balloon breaks when finally real estate has to be "priced to reality'

It will be a double-whammy then, because the international derivative house of cards will detonate simultaneously with the domestic muni-bond market as property tax revenues will disappear.

depending upon how Fed.gov decides it will respond will then determine whether a modern multi-generational "dark-ages" can be avoided

[May 30, 2015] BYRON WIEN The Fed basically put $3 trillion into the stock market

Stocks have catapulted through the recovery.

Among the things that have driven the expansion, a key factor has been the role of the Federal Reserve.

In market commentary Wednesday, Blackstone's Byron Wien pegs a number on this: $3 trillion.

Even though we've seen company earnings more than double between 2009 and 2014, there has been concern that the market rally has largely been driven by so-called easy money the Fed supplied through its bond-buying program, or quantitative easing.

Wien quantifies its contribution:

It took the Fed 95 years to build up a balance sheet of $1 trillion and only six years to go from there to the present level. The Federal Reserve was providing this stimulus to improve the growth of the economy, but it is my view that three quarters of the money injected into the system through the purchase of bonds went into financial assets pushing stock prices up and keeping yields low. If I am right, the Fed contributed almost $3 trillion (some may have gone into bonds) to the $13 trillion rise in the stock market appreciation from the 2009 low to the current level, earnings increases explained $9 trillion (1.5 x $6 trillion) and other factors accounted for $1 trillion. You could argue that the monetary stimulus financed the multiple expansion in this cycle.

Wien also sees an increased likelihood that we could be headed for a 10% correction, something the market hasn't seen in over three years.

It has been three years since the last one. Sentiment among investors is optimistic or complacent, not a condition conducive to a sustained upward market move. I still maintain a positive outlook for the S&P 500 for 2015, but perhaps we have to endure a little pain first.

It is possible, however, that stocks will rise another 10% before the end of the year, Wien says. But they'll have to achieve that without the Fed's help.

Recently, there's been a focus on liquidity in the markets — how easily investors will be able to buy or sell securities at a given price.

And with the Fed getting ready to tighten monetary policy, commentators have said said we may see wild price swings as investors rush for the exits.

Read Wien's full commentary here »

SFS123

This is nothing but bubble. Simple arithmetic tells stock buy back should not effect the real price of remaining stocks because the company buying back is loosing cash reserve. In other words the balance sheet will have equal negative effect. Any increase has to be only short term. The reason this stock increase is sustaining long term is because buy back is not happening using company's cash reserve but using debt, which will have to be paid back. So all the stock increase even more unreal. When all this ends we will be left with bloated stock price of companies with huge negative balance sheets. In other words shell corporations. Many of these shells will blow up into nothingness. This is exactly what happened with housing market in previous round.

Boubou

So the $3T has raised asset prices to bubble levels, but the real US economy and wages are stagnant and ordinary savers are now beggars. This is flagrant pandering to the rich - the owners of assets, and total disregard for the working majority. If this has not produced any momentum from workers, the unions and the AARP then nothing will. And where is the party of the workers and the so called middle class in all this ??. Not a word from Obama or Hillary on this.

Jorge Fernandez

Yes, and possibly much more than just $3 trillion. That is the primary reason why the stock market has been manipulated into record levels. This allows the criminals to continue their Ponzi scheme at the expense of the suckers of the working class - you and me. They get to reap $billions; we get stuck with the bill. Meanwhile, our government -- which is supposed to protect us from such crimes -- is not only doing nothing, they are actually an active participant in the grand theft.

Wags

Earnings doubled because they lowered their borrowing costs due to the low interest rates. A lot of companies did share buybacks where they borrowed money to buy their own stock. There wasn't any real economic growth. We'll see how it ends, but I'd be cautious buying here.

5 Things To Ponder Is The Stock Market Rational Or Nuts

May 29, 2015 | Zero Hedge

Submitted by Lance Roberts via STA Wealth Management,

This past week, Houston, where I live, was flooded by a torrential down pour. However, it was not the rain itself that was the problem, it was the surge in rivers that flow through Houston. As far away as Austin and Dallas, rainfall had already began to flow into the San Jacinto and Colorado rivers which eventually culminated in rising water levels in Houston.

Furthermore, Houston is designed so that water flows into the streets and eventually into the bayou and rivers out to the Gulf of Mexico. It didn't take much more rainfall to send the rivers cresting over their banks creating a catastrophe following Memorial Day.

Like Houston, the financial system has been flooded with liquidity over recent years which has ultimately only had one place to flow - the financial markets. That excess liquidity has sent prices soaring to record highs despite weakling macro economic data. While many hope that the Central Banks can somehow figure out how to keeps the rivers of liquidity from overflowing their banks, history suggests that eventually bad things will happen. Of course, for investors, that translates into a significant and irreparable loss of capital.

As I discussed earlier this week, the next decade will likely be rather disappointing for investors. To wit:

"When using a relative comparison, in this case 10-years, what Shiller's data does provide is a key understanding as to what market returns should be. The chart below compares Shiller's 10-year CAPE to 10-year actual forward returns from the S&P 500."

... ... ...

OTHER STUFF OF INTEREST

19 Things That Actually Happened In 1999 by Michael Johnston via Poseidon Financial

"Although the events of 1999 are ancient history by many standards, some very clear memories no doubt remain for many investors. With technology and biotech stocks once again hot, a number of comparisons to the last bubble have been made. But the current environment can't come close to matching 1999, either in terms of valuations or in the sheer madness of the markets."

About Bulls, Bears & Pigs by Lvaylo Ivanov vis Ivanhoff.com

"The first thing I heard when I got in the business, not from my mentor, was bulls make money, bears make money, and pigs get slaughtered. I'm here to tell you I was a pig. And I strongly believe the only way to make long-term returns in our business that are superior is by being a pig. I think diversification and all the stuff they're teaching at business school today is probably the most misguided concept everywhere."

7 Lies Investors Tell Themselves by Jonathan Clements via MarketWatch

"'In a bull market, there's a tendency for investors to think they're brilliant,' says Brad Barber, a finance professor at the University of California, Davis, and an expert in behavioral finance. Indeed, as share prices climb, investors' confidence grows and they start making all kinds of dubious claims.

Here are seven comments you have probably heard from friends—and that may have escaped your own lips."

Robert Shiller Unlike 1929 This Time Everything - Stocks, Bonds And Housing - Is Overvalued

May 29, 2015 | Zero Hedge

Robert Shiller is a professor of economics and finance at Yale University. He is the author of Irrational Exuberance, which in 2000 predicted the collapse of the tech bubble and is now in its third edition. He was awarded the Nobel Prize in Economic Sciences in 2013 for his work on asset prices and financial market behavior.

In the attached interview he observes that the recent equity run-up seems to be driven more by fear than by exuberance, as a lack of confidence in the future prompts investors to save more and thereby bid up asset prices.

Below is an interview he gave to Goldman Sachs' Allison Nathan

Allison Nathan: Are US stocks overvalued today?

Robert Shiller: I think that compared with history, US stocks are overvalued. One way to assess this is by looking at the CAPE (cyclically adjusted P/E) ratio that I created with John Campbell, now at Harvard, 25 years ago. The ratio is defined as the real stock price (using the S&P Composite Stock Price Index deflated by the CPI) divided by the ten-year average of real earnings per share. We have found this ratio to be a good predictor of subsequent stock market returns, especially over the long run. The CAPE ratio has recently been around 27, which is quite high by US historical standards. The only other times it has been that high or higher were in 1929, 2000, and 2007—all moments before market crashes.

But the CAPE ratio is not the only metric I watch. In my book Irrational Exuberance (3rd Ed., Princeton 2015) I discuss several metrics that help judge what's going on in the market. These include my stock market confidence indices. One of the indicators in that series is based on a single question that I have asked individual and institutional investors over the years along the lines of, "Do you think the stock market is overvalued, undervalued, or about right?" Lately, what I call "valuation confidence" captured by this question has been on a downward trend, and for individual investors recently reached its lowest point since the stock market peak in 2000. The fact that people don't believe in the valuation of the market is a source of concern and might be a symptom of a bubble, though I don't know that we have enough data to prove it is a bubble. In general, I try to get a sense of investors' excitement and anxieties through these kinds of measures and even by just reading the news. You might say that's very unscientific, but I do what I can to understand the state of mind of investors, which I think is very important in understanding market moves.

Allison Nathan: Wharton professor Jeremy Siegel argues that using S&P 500 earnings data for the CAPE ratio inflates it. What is your response to this?

Robert Shiller: Jeremy Siegel's 2013 paper that makes this argument does say that the CAPE ratio is useful. He just wants to make an improved CAPE ratio. And he proposes an alternative based on National Income and Product Account (NIPA) earnings, which he says yields a CAPE ratio that has predicted returns better, at least over the time period for which he has these earnings data. I think it is an interesting paper. But I am not ready to endorse the switch to NIPA earnings partly because they are conceptually a little different, valuing not just publicly traded stocks but also other companies. But the critical point he makes is that NIPA earnings—at least as of 2013—were higher than S&P 500 earnings, which made the market look less overvalued. Given that market valuations have continued to rise, I think that discussion has faded somewhat.

Allison Nathan: Is the equity market a bubble today?

Robert Shiller: I define a bubble as a social epidemic that involves extravagant expectations for the future. Today, there is certainly a social and psychological phenomenon of people observing past price increases and thinking that they might keep going. So there is a bubble element to what we see. But I'm not sure that the current situation is a classic bubble because I'm not certain that most people have extravagant expectations. In fact, the current environment may be driven more by fear than by a sense of a new era. I detect a tinge of anxiety and insecurity now that is a factor in markets, which is quite different from other market booms historically.

Allison Nathan: How else does this period of apparent equity overvaluation compare to equity booms in the past?

Robert Shiller: This time around, bonds and, increasingly, real estate also look overvalued. This is different from other over-valuation periods such as 1929, when the stock market was very overvalued, but the bond and housing markets for the most part weren't. It's an interesting phenomenon.

Allison Nathan: What explains this phenomenon of asset valuations looking high across the board?

Robert Shiller: There are multiple answers to that question. But if I had to oversimplify with just one idea, it would be what I just alluded to a moment ago—that people are not confident in their future. They remember the financial crisis, and they worry. They hear about inequality through the Occupy Wall Street Movement and in many other places, and they worry where they will fall on the inequality spectrum in a decade or so. They observe the amazing but perhaps unsettling rise of information technology (IT), and they worry. As a result of all of this anxiety, they want to save more. But given the lack of options to invest in at a high return, they end up just bidding up the prices of existing assets. That, in turn, creates disappointment, more concern, and perhaps the feeling that they might be too late because of how much the market has already risen. But they still invest in it because of their anxieties.

Allison Nathan: What does this mean for market stability?

Robert Shiller: It means that the market could keep going up like this for some time. Its been an amazing run and looks like something that can't keep going indefinitely, but it might continue for several more years. So market bulls may be right that the market runs further. I think that could happen too. But I take a different view of the drivers of these runs; I tend to view them as more irrational. I just don't know when this bull market will end. And it might end very badly.

Allison Nathan: How concerned are you about a meaningful correction in the next six months to a year?

Robert Shiller: My concern has risen with the market. There could certainly be a correction in the next year. But the problem is that a correction might not come for five years. We just don't have any way to forecast when it will come.

Allison Nathan: Was it appropriate for Fed Chair Janet Yellen to express concern about equity valuations?

Robert Shiller: I think that there is a moral imperative for Fed leadership to express some opinion about the market. They have a staff of experts—a whole research army—to study these issues, and people look to the Fed as an authority. Believers in efficient markets would say that we shouldn't care about these opinions; that the market is smarter than any individual or any research team. But I disagree. I think that the market is not smart about these sorts of things and that we do need leadership from people who study these questions. And so I applaud Janet Yellen for making that statement, which helped put the current state of the market in perspective.

One reason why the boom in the 1990s went on as long as it did is that Fed Chairman Alan Greenspan made very little of worries about the market. At one point he used the term "irrational exuberance," which led to a sharp drop in markets, but he never came back to that theme.

Allison Nathan: Of all the expensive asset classes today, which looks the most convincingly like a bubble?

Robert Shiller: The bond market looks the most unusual relative to history, with real US yields just off record lows of recent years. The difference, though, between the stock market and the bond market is that historically the bond market doesn't seem to crash like the stock market. Notably, if you go back to 1929, there was a huge crash in the stock market and not much action in the corporate bond market. That might come across as a surprise, but it's history. We are now in different times, though, with a very long run of very low interest rates that has affected many countries in the world. So there could be a big correction in the bond market. I'm not forecasting that because I don't like to forecast things that almost never happen. But it could happen. And that's the problem we face.

Allison Nathan: What should investors do when so many assets look expensive?

Robert Shiller: I am not an investment advisor. But I would say that the main implication for most people is that they should save more because their portfolio probably won't do as well as they imagined. And if they're saving for some distant goal like retirement, they might be disappointed. People have learned about the power of compound interest. But what they don't understand is that if interest rates are zero, you don't get any compound interest. I think that there is complacency among investors today. People have seen how well the stock market has done over the last century. But the market might not do so well the next time. So you have to consider whether you are saving enough.

And as a general principle, I think people should diversify across assets and geographies because there is no way to predict what any one asset will do with any accuracy. I've been talking down US stocks because of their high valuation, but I would invest something into US stocks; I would just put a heavier contribution in stocks around the world, where CAPE ratios look lower. I keep coming back to the theme that there are lots of places outside of the US to invest. And I would also own bonds, real estate and commodities. Commodities are overlooked by many investors but they are an important part of an investing portfolio.

The reality is that people are not very good at diversifying. This has been documented in studies. They tend to be distracted, and focus too much on one sector or one thing that they have heard. They also tend to focus on their own country. There's no reason why one should invest only in one's own country. Quite the contrary, some people make the extreme statement you should short your own country and invest only elsewhere. I wouldn't go to that extreme, but it is a plausible argument.

Allison Nathan: But is the strong US growth story relative to elsewhere enough to warrant buying US stocks?

Robert Shiller: The US looks pretty good and in some ways brilliant. The exciting news about technology seems to come largely from the US. For example, fracking, which is predominantly a US technology, transformed the energy market, and just within the last five years or so. And many electronics and IT advances are also coming from the US. So there is reason to believe in this country.

But I think that we also have to understand that we tend to be biased. One sees and appreciates one's own country; that's human nature that one has to correct for. Amazing things can happen elsewhere as well. You see that in much of the developing world; over the last half-century, there's been remarkable economic progress and growth. And we're going to see more and more advancement in those countries. So maybe the high US CAPE ratio is partly justified.

But I think we have to nourish a healthy skepticism as investors and not get swayed too much by the idea that we're living in a new era here.

bwh1214

To keep the credit created boom alive took a stock bubble in the 90’s, took a stock and real-estate bubble in the 2000’s, now takes a stock, bond and real-estate bubble.

So we made it to where they were in 1929 in 2000. We are going to find out what the crash looks like if the fed had kept the music playing for another 15 years in 1929.

Ham-bone

Perhaps it because there's fewer of them with fewer jobs that generally pay less and they have more debt???

Consider...

The reason WHY the Fed and CB's did what they and did since '08 needs better publicity.

Why they changed from marginal manipulation to outright "being the market" since '08...why the big change??? And once you understand the problem, you understand why the Fed's actions are criminal because they were never going to work or "help" the nation...only offer a small and shrinking cadre an opportunity to strip mine the nation on the way out.

It was a "flow" (not "stock") issue of new consumers that killed an already very flawed model. The annual "flow" of new population growth in the US, EU, Japan, elsewhere all peaked in the '80's and annual new population growth began ebbing. By 2008 in the US, the 25-54yr/old annual population change went negative. The sliding #'s of new consumers had been hiden for years by lower interest rates, more available credit (subprime, etc.), longer duration credit. But the '08 outright annual fall of the consumer base was too much.

The Fed and CB's had to "suspend the free markets to save the free markets" (but what they really meant was they needed to suspend free markets because what a market would have done is found real pricing between lots of sellers and declining buyers).

Everything now is simply trying to hide the fact we have shrinking consumer bases and will for a decade...and maybe for the rest of our lifetimes.

I try to outline in the following links...all data from Fed's FRED...

http://econimica.blogspot.com/2015/05/2008-was-tremorwhy-main-event-is-still.html

http://econimica.blogspot.com/2015/05/reality-check.html

Mini-Me

I find it ironic that his only explicit mention of the Fed was that they need to exhibit leadership and voice their opinions. Baloney. They flap their gums all damn day, and most of it is a pack of lies.

Shiller needs to pull his head out of his ass and call a spade a spade. The world is in this mess because of excessive debt. And we have excessive debt because the central banks punish savings and incentivize spending.

Nothing changes for the better until central banking is discredited and abolished.

Pancho Villa

Asset prices are above historical norms because the average age is increasing. In general, net worth peaks around retirement age. The baby boomers are nearing retirement age or have just recently retired, which is creating an unprecedented demand for investment assets causing their prices to soar.

The baby boom peaked in 1957. Add 65 years to arrive in 2022. If this theory is correct, the late 2020's are going to be very interesting. And not in a pleasant way.

[May 29, 2015] Non-Farm Payrolls Next Week - Risk Management

If there has been any major adjustment it has been the timing elements. These things seem to unfold much more slowly than one would expect. And the audacity of the oligarchs, which is a counterpart to the surprising apathy of the public to scandal after scandal, is also a bit surprising.
Jesse's Café Américain

There is a lot of macroeconomic data coming out for the US next week. I have included the calendar below.

Among these will be the Non-Farm Payrolls number for May, which will be released on Friday.

This data will be watched closely because while the markets are sloughing off the newly revised contraction for GDP in the 1Q, they are nervously trying to maintain their belief in the story that this was some sort of weather-related anomaly. The more contemporaneous data is showing higher than expected unemployment claims and a truly awful Chicago PMI has them edgy to say the least. So next week's data will be very important since it is so current.

There was overnight commentary on the gold market. It is a broad summary of the market that paints a broader picture of what may be going on. It also sets the stage for the currency war. I urge you to read it here.

Of course there are other ways to explain all these things. I have read these explanations presented by very serious people. But I have been following this map or model of what is unfolding since roughly 2000, and it continues to surprise me as encompassing many more pieces of data from different places quite well without major modifications.

If there has been any major adjustment it has been the timing elements. These things seem to unfold much more slowly than one would expect. And the audacity of the oligarchs, which is a counterpart to the surprising apathy of the public to scandal after scandal, is also a bit surprising.

Moreso than ever I am convinced that the lack of reform and gross mispricing of risk is going to catch up with the US financial system, and the results may be quite impressive. There are bubbles which are being ignored again with a cavalier dismissal. So I do now think we are going to see a third financial crisis sometime within the next two years. And there may be noticeable political consequences because of this.

Fed's Policy Errors and Gross Mispricing of Risks: Nuts

And given the track record of the American ruling elite, I have little doubt they will keep doing the same things until they crash the financial system for the third time in less than twenty years. And they will recklessly view this as just 'another opportunity.'

"It took the Fed 95 years to build up a balance sheet of $1 trillion and only six years to go from there to the present level. "

The Federal Reserve was providing this stimulus to improve the growth of the economy,but it is my view that three quarters of the money injected into the system through the purchase of bonds went into financial assets pushing stock prices up and keeping yields low.

If I am right, the Fed contributed almost $3 trillion (some may have gone into bonds) to the $13 trillion rise in the stock market appreciation from the 2009 low to the current level, earnings increases explained $9 trillion (1.5 x $6 trillion) and other factors accounted for $1 trillion.

You could argue that the monetary stimulus financed the multiple expansion in this cycle."

Byron Wien, The Fed basically put $3 trillion into the stock market

I think Byron is being generous with the contribution of earnings, which are increasingly questionable artifacts of dodgy accounting and stock buybacks fueled by cheap debt.

But this is the very point on which I have been pushing so hard for what, six years now? There is nothing wrong with stimulus, but stimulus for its own sake being pushed top down into a largely unreformed financial system is a willful kind of policy error, bordering on an insular world view, if not collective madness.

And the great majority of economists have been on board with this latest financial folly, either through active rationalization or timid acquiescence. Professions that are build on powerful connections and 'reputations' often degenerate into a stubborn sort of herd mentality.
Let's not talk around this, or expend too many words on it.

This is nuts.

Stocks were sagging after the expected revision of the 1Q GDP to a contraction, which is what we said when the first 'positive' reading came out a month or so ago. Ho hum. So now we are 'looking forward' and the Chicago PMI, which is a reasonably current number, missed by a mile, and threw cold water all over this anomaly story for 1Q's slump.

And given the track record of the American ruling elite, I have little doubt they will keep doing the same things until they crash the financial system for the third time in less than twenty years. And they will recklessly view this as just 'another opportunity.'

Currency Wars, Gold Pools, and Comex Potential Claims Per Deliverable Ounce

Based on some interactions with newer patrons of Le Café, I thought it might be a good time to restate the general lay of the land in the gold market. The occasion for this is the latest measure of what might be called leverage in the futures market, what it is, and what it may or may not mean and why.

Clearly the paper markets, involving associated trades in ETFs, mining company stocks, derivatives, and so forth are much broader than the futures market alone. But the futures market is what one might call the locus of execution for our drama.

The potential claims number for gold at the NY Comex is calculated by Nick Laird at Sharelynx.com by taking the amount of gold bullion marked as 'registered' for delivery at current prices by the number of contracts open on the futures market at 100 ounces of gold per contract.

Yes there is more gold that the 373,000 ounces currently marked for delivery in all the warehouses. But that gold is merely there in storage by its owners, so counting it towards delivery, without the prior consent of the owner, is a bit presumptuous to say the least. One might safely assume that market rules apply, and more gold will become deliverable at higher prices.

With a potential 111 claims per ounce of gold marked 'registered' for delivery at these prices, one might expect to see quite a move higher in prices to reach a market clearing price, and perhaps even a significant short squeeze.

But we probably will not see any such short squeeze, and maybe not even a breakout from this price range, unless something unusual happens outside of the New York and London markets.

The Comex, aka The Bucket Shop on the Hudson, does not set prices in the usual supply and demand dynamics. And London and New York are playing a tag team with any number of markets these days, from forex to LIBOR to bonds.

Gold could break out in a big way. It would not take all that much for a large hedge fund, or even a well-heeled world class individual, to turn about three thousand of those contracts in for delivery AND take the gold bullion out of the warehouses, moving them to Asia and pocketing a substantial profit on the gain.
This assault on an unsustainable price peg is how Soros and associates in Zurich took the Bank of England for over a billion in their selling of the pound against an unrealistic price point.

Why doesn't anything like this happen?

Is it because people do not have the money to do it? In times of billion dollar art auctions and $500M homes being built on spec? Don't make us laugh.

Is it because people do not want gold bullion? The Shanghai Gold Exchange is routinely moving physical thirty to forty tonnes per week out of its warehouses. Thirty tonnes is about 965,000 troy ounces, about three times the total deliverable at the Comex now in total.

No, it will probably not happen because the big money has been warned off the Banks' turf, and their game is to keep the wash and rinse price cycles running to provide a steady profit as long as they can.
As long as price is the 'only component' in the market dynamics, with demand and supply artificially dampened by a 'no withdrawals' house rules, the liar's pokers carney games based on very loosely regulated price action can continue.

It is not all that dissimilar to a poker game in which there are unlimited raises, the rule of table stakes does not apply, and one does not have to show their cards, and can only be called if the house allows it. Those with the biggest wallets can keep selling paper gold as long as they wish at whatever price they wish, and never have to even show their cards, and cannot effectively be called unless they permit it.
I know this example is a bit rough, but not all that much. It almost looks like a scam, rigged in favor of the deepest pocketed players, doesn't it? And what if they get additional information about the hands of the other players and the size of their wallets. Well, now you know why I consider those smaller players who keep coming back to the action in that casino to be a bit out of touch.

So the bullion banks and their friends can keep cranking out steady profits while holding bullion prices within a range that is a comfort to the nervous money printers in the Federal Reserve. This keeps the government happy, the regulators off their backs so to speak, and the wash and rinse cycles rolling.
The reason why this sort of imbalance could get sorted out in the currency markets but not in commodities is illustrated by the relative experiences of George Soros and the Hunt Brothers.

Lucky for Soros that the forex markets are so broad and deep that no single group of cronies can control the exchange rules in the 'cash markets' to suit their plays. Yes some central banks can make it quite risky, even painful, but the solution is not so neat as what happened in with the Hunt Brothers and silver. There the exchange the US regulators just changed the rules of the game and that was that.
If one were to do something about a price imbalance in a commodities market, as opposed to an unregulated global market, you would tend to wish to do it off exchange by slowly accumulating a large portion of the available global supply, as quietly as possible. This only works obviously with a commodity that has inherently has a relatively stable supply.

The spoiler in the gold paper game might then be expected to be those 'outside' the range of the gold pool. They are those who do not do their business primarily in the betting parlors of New York and London.

If one cannot secure a sizable portion of supply via paper on the exchange where the cronies make the rules, one just cuts out the middlemen and buys it directly, and it works as long as they do it off exchange and have an unimpeachable line of credit. And then one would keep stacking their physical metal while enjoying what they think are very attractive prices.

Some analysts think that they know 'what China wants.' Who is China? Have the Chinese had a meeting and hammered out a single, unified policy plan? How about the Americans, and the Russians? Or are there various competing domestic factions in every country? And even more significantly perhaps, are there special interest groups, a self-defining elite, without preferences except for themselves? As you can see this is a complex scenario with many variables.

And in compressing the complexity of the scenario, we lose information and applicability, always, and sometimes intentionally. Simple sells, and is successful depending on your sales objective. Nothing was simpler and more powerful than the efficient markets hypothesis with perfectly rational actors. It led to an otherworldly market ideology that caused one of the greatest financial crises in history.

This is not the first time we have seen such a de facto pooling arrangement. There was the London Gold Pool, which sought to 'stabilize the gold price' at $35 dollars from 1961 until it collapsed in 1968. That mispricing caused a 'run' on the gold in the US, and led to the Nixon shock in 1971, the closing of the gold window, and the eventual rise in the price of gold to $850 in 1980.

Or we could point to the long bear market in gold, which reached its trough with the sale of England's gold in Brown's Bottom around $250 between 1999-and 2002, This was resolved with the so-called Washington Agreement, which provided a plan for more measured selling and leasing of Western central bank gold to control the price of bullion largely amongst the Europeans.

Their intention was to have had this agreement continue until 2009, but alas, the rising economies of Asia and the BRICS were not sharing their vision of the future. And so the purchasing of central bank gold reserves turned positive for the first time in over twenty years around 2006-7, ahead of the collapse of the US housing and credit bubble.

As you may recall, gold subsequently rose to around $1900 in a fairly short period of time, and has now fallen back to the current price range in dollars of $1180-1230.

And where are we now?

The BRICS are still buying. There is quite a bit of secrecy and jawboning surrounding the actual levels of bullion available and unencumbered in the Western central banks. The IMF, a ringmaster for the States if you will, has offered (threatened) to sell the same gold on about ten occasions.

Not all the Western banks are holding to plan. Some are even taking the unusual steps of repatriating their gold from the Anglo-American vaults where it has been since the Second World War. They fear that if things go off the rails, and there is a reckoning of ownership claims, possession will once again be nine-tenths of the law.

It will be interesting to see where the market forces take us eventually, if they are allowed to do so. I do not assume necessarily that they will.

However the fact remains that the existing 'Bretton Woods II' de facto reserve currency arrangement for global trade, based on a fiat US dollar, which was unilaterally put in place by the US in 1971 on the closing of the gold window, has reached its point of unsustainability.

I do not believe that there has ever been a purely fiat global currency of this magnitude before in recorded history. So we should not be too surprised if the situation seems to evolve rather slowly,
There is already a great deal of posturing by cross national special interest groups, with 'negotiation' on multiple levels from financial to diplomatic. We may even expect the abusive use of the military to push certain proposals forward rather forcefully.
Bureaucrats can become quite draconian when their schemes for personal power go awry. And in my own monetary thinking a purely fiat currency for international trade ultimately implies the development, or imposition, of a global government controlled by the monetary authority, whatever they may choose to call themselves. The imposition of fiat valuation relies on control, which means power, and often plenty of it.

The future composition of any world government is a very open question. There is very obviously an Anglo-American faction for 'the New American Century.' But there are also Pan-Asian, Pan-Pacific, sub-Saharan, Eurasian and Pan-European elements as well. Although it is most likely a bit of a reach, one has to wonder if this odd construction of the European Monetary Union is not some sort of a testbed for the future cooperation of regional oligarchies. I am not saying that there is 'A Plan' but there are certainly plans that some groups are clearly pushing towards their own objectives and agendas, and have been doing so for some time. Professor Carroll Quigley, Bill Clinton's mentor at Georgetown, has been instructive on this subject.
We are in exciting times with history being made it seems. There are a number of possible outcomes, which quite frankly no one can accurately forecast at this point. There are too many degrees of freedom, so they literally cannot. But they can throw up theories and strawmen of what may happen, and charge you to read about it. It is an honest source of income, rather like writing racing forms or novellas, or the weather report in the 1950's. And it is fun to talk about while we watch things develop.

But make no mistake, when some of these fellows overreach with their claims of certainty, if they really knew what will happen they would not be telling it to you. They would be playing with their own money in the casino, for all they were worth. Or running funds that increased their leverage for their theories, while providing a steady management income. This is a longer term play after all, and so speculative leverage is a short term risk to be managed. Banks like to catch the players indisposed.

And then, alas, there are those who play for pay, who promulgate their ideas for the special interests, spreading disinformation. Or just make the most dramatic sort of stuff up, selling a kind of financial pornography.

This landscape is what I, and several others some more notable certainly, have called The Currency Wars.

Going Off the Rails on a Crazy Train

28 May 2015

"And what happens when PR turns a profit, and truth goes penniless?"
Bill Moyers

"Insanity is doing the same thing, over and over again, and expecting different results."
Albert Einstein

"Has he lost his mind? Can he see or is he blind?
Now the time is here for Iron Man to spread fear." Ozzy Osbourne, Iron Man

Most Americans are completely unaware of FIFA or what it does, and only a bit more aware of the World Cup and non-US football. Unless they are school age children perhaps, the parents of same, or recent immigrants from Europe and South America. The official reason for the US to proceed with prosecutions of FIFA this week, after a 24 year investigation, is that the payoff schemes involved some of the Wall Street Banks. Since it is unlikely that there will be any action against these same Banks, one wonders as to the reason and the timing for this. This week FIFA was expected to sanction Israel on Wednesday for their truly terrible treatment of Palestinian football clubs. And the US was perturbed that Qatar was chosen as the 2022 World Cup host, despite their awful human rights record, and record donations to the Clinton Fund, and loyalty to the US ambitions in the Mideast. And finally, FIFA dared to award the 2018 World Cup to Moscow. Have you noticed that this FIFA prosecution, which so few understand and care about in the States, is getting so much more media coverage than the latest massive thefts by the Banks in wholesale rigging in the forex markets, for which no one is being prosecuted and no serious reforms are being undertaken? There are risks in standing in any way against the will of an empire.

And besides, FIFA is THEIR scandal, and it serves to distract from OUR scandals. Speaking of gold, it appears that Austria has decided that the risks of storing its sovereign gold in London are too great, and are repatriating it home. As well they may, because in the times that are just ahead, we might suspect that possession will be nine-tenths of the law, MF Global-style. Gold and silver are quite obviously in some sort of locked down trading range. Gold will become much more interesting next week as June is an active month, and the leverage on the deliverable portion of the Comex gold warehouses is historically rather high, indicating higher prices ahead. Of course, that is not the way things work necessarily in The Bucket Shop on the Hudson. The gold game in the US benefits The Central Bank storytelling, and the Banks, who 'make markets,' or make-up markets to suit themselves and their trading profits. It is quite lucrative as we have seen in so many other cases like is such as LIBOR, forex, derivatives, and so forth. On a final note, it must seem like madness to the non-US observers, what the Fed is doing with QE and top down stimulus.

Well not to the Brits, because they have taken such madness to heart, or the Continent, which is visiting senseless misery now on Greece, and a number of the usual suspects yet to come, until they finally make they way around to the volks at home. And so here we are, running off the rails on the neo-con and neo-liberal crazy train. Have a pleasant evening.

"In the eyes of empire builders, men are not men but instruments."

Napoleon Bonaparte

Stocks had a bit of a bobble this morning on the much worse than expected unemployment claims number.

But Wall Street came to its senses, and realized how little the average American matters in the greater scheme of things anymore.

Let's see how stocks go into the weekend.

Nothing New

27 May 2015

"This disposition to admire, and almost to worship, the rich and the powerful, and to despise, or, at least, to neglect persons of poor and mean condition, though necessary both to establish and to maintain the distinction of ranks and the order of society, is, at the same time, the great and most universal cause of the corruption of our moral sentiments.

That wealth and greatness are often regarded with the respect and admiration which are due only to wisdom and virtue; and that the contempt, of which vice and folly are the only proper objects, is often most unjustly bestowed upon poverty and weakness, has been the complaint of moralists in all ages.

We desire both to be respectable and to be respected. We dread both to be contemptible and to be contemned. But, upon coming into the world, we soon find that wisdom and virtue are by no means the sole objects of respect; nor vice and folly, of contempt."

Adam Smith, Theory of Moral Sentiment

אֵין כָּל חָדָשׁ תַּחַת הַשָּׁמֶשׁ

Nihil sub sole novum.

There is nothing new under the sun.

Ecclesiastes 1:9

Their is surely nothing new under the sun, except those who are called and will be held accountable for their labor, under it. Our moderns believe that they have learned to lie, to cheat, and to kill with unsurpassed skill, cleverness, and shamelessness.

They have discovered their will to power. Or perhaps, the will to power has discovered them. They think that they have gained some impunity, and have risen above humanity to become as gods. This week will see the last of the May contracts, and the beginning of the active month of June for gold.

[May 28, 2015] Why America's Debt Bomb Won't Explode... Yet by Samuel Rines

May 26, 2015 | The National Interest

Debt levels may be enormous, but interest payments aren't at historical highs.

In Schrodinger’s famous thought experiment, a cat is placed in a sealed box with a mechanism rigged to possibly release cyanide in an hour, depending on the rate of atomic decay. It is a quirk of quantum mechanics that, until the contents of the box are observed, the cat can be considered to be both alive and dead—simultaneously.

The thought experiment is well suited to pondering the U.S. federal government’s current debt situation. Currently, there is an unprecedented amount of debt in the proverbial “box,” and the outcome is difficult to observe until after the fact.

And this is part of the problem. Much like Schrodinger’s cyanide, the level of U.S. debt could be safely contained or mortally high, it depends on when, if, and by how much interest rates rise in the future. We neither know the timing or the extent interest rates will rise in the future—not to mention the level of debt that will need to be refinanced. This means that the debt situation is in a sort of limbo. We simply do not know when, or if, it will explode.

There are certainly reasons to be concerned. The absolute amount of debt amassed by the federal government is at an unprecedented $18.1 trillion with $13 trillion held by the public. These are astounding amounts, but the level of debt is not the end of the story, as the level of debt does not determine the amount of interest expense tied to the accumulated debt.

Debt to GDP is an often cited metric. It is catchy, simple to use and calculate, and sounds ominous. (A 100 percent debt-to-GDP really means that if all of GDP were used to repay debt, it would take one year to do it.) But it is a deficient measure. GDP itself cannot be used to repay the national debt, and then there is the question of real or nominal GDP use. GDP is a measure of consumption, but also contains government spending, inventories, and transfer payments—none of which should be counted in a metric that is attempting to convey information about a country’s indebtedness or ability to repay.

A far more relevant figure would be the amount of revenue the government is receiving—its tax receipts. GDP does not provide an indication of future government revenues, or even potential government revenues. Stepping back for a minute, we should remember that other countries have spent decades far above the 100 percent debt/GDP ratio (Japan) with little consequence.

Much the same criticism could be levied against the overuse of the “debt” number. The amount of debt is (to an extent) irrelevant—so long as the interest payments are manageable.

A more relevant and straightforward way to evaluate the seriousness of a country’s debt addiction is comparing a government’s revenues to the interest expense of its debt—“payment to revenue.” Simply, how much does the government collect during a fiscal year, how much does the government spend on interest in a fiscal year, and how does this compare to history.

This gives a useful indication of the actual costs of debt accumulation—not simply the size of the stockpile. It also provides a more complete context to the evolution of the federal debt by implicitly including interest rates and changes to the tax code.

Using this measurement, America’s federal debt picture brightens significantly. Whereas debt to GDP is 100 percent and has persistently crept higher, payment to revenue has consistently moved lower. While the total debt outstanding is sitting at an all-time high above the $18 trillion mark, both net interest expense and total interest expense are off their highs. Net interest subtracts the payments on the roughly $5 trillion in intra-governmental debt holdings, thereby reducing the reported number.

Exiting 2014, net payment to revenues is similar to the level of 1970’s, and the repayment dollar figure is below the level in 1995 with more than double the revenues. For perspective, the net interest payment in 1995 was $232.1 billion or 17 percent of revenues. In 2014, the net interest payment was $229 billion or 8 percent of revenues. Despite the ominous debt/GDP headlines, net interest payments are the same as 20 years ago.

Granted, the Federal Reserve’s low interest rate policy and subsequent QE program has caused borrowing rates to decline. And the aforementioned decline of interest payments to revenues was due to interest rates declining over the past couple decades. Therefore, the Fed is principally responsible for the phenomenon of low interest expenses, and some credit for the better economy and increasing revenue should be given to the Fed for its monetary intervention.

But there are still worrying possibilities. The potential for interest rates to rise in the future poses the most danger. A doubling of the interest payments would return the total interest payments to about 29 percent. This is a bit higher than 1992, when the debt level was lower, but the debt payments as a percent of revenues were far higher than today. A doubling of the net interest to about 15 percent would bring it to a level similar to the mid-90’s, but below the high teen figures that dominated the 1980’s.

There is a much higher debt level now, but a lower relative cost of debt service to revenues. This indicates interest rates and the resultant interest payments can move significantly higher without the debt becoming too much to handle.

There is no denying the debt amassed by the U.S. federal government is considerable, and has the potential to cause problems down the road. But looking at the issue through the narrow lens of debt/GDP would be a fallacy. Well publicized papers have argued that beyond a certain threshold level of debt/GDP, economic growth slows. In reality, the slowing was probably more attributable to changes in the costs of servicing the debt. The economics of debt change and so do the situations and context.

The U.S. “debt problem” is either nearing a crisis point—as it careens over the “slow growth” threshold—or is in fine shape—because revenue increases have outstripped interest payments. At the moment, there are plenty of revenues to cover the interest expenses, regardless of the absolute level of debt. Interest rates may rise, and with it the interest paid. The U.S. economy has dealt with higher revenue to interest paid, before. There is good reason to think that the cyanide is still contained, and the cat is still alive.

Samuel Rines is an economist with Chilton Capital Management in Houston, TX. Follow him on Twitter @samuelrines.

[May 27, 2015] The Art of the Gouge NYU as a Model for Predatory Higher Education

" a mind-numbing and degrading set of scams perpetrated on students, including the bait and switch of hitting them with extra charges they can’t possibly find out about before they have committed to the school, to the tune of an estimated $10,000 per year; providing mediocre education" That's the essence of neoliberal university. Be careful and check facts before getting into "predatory neoliberal university". The list of scams they’re running is impressive, but you can avoid them. Just go to your in-state public University, kids, you’ll be glad you did (or at least glad you didn’t go to NYU).
Under Chairman of the Board Martin Lipton and President John Sexton, New York University has been operating as a real estate development/management business with a predatory higher-education side venture. A group of 400 faculty members at NYU, Faculty Against the Sexton Plan (FASP), have been working for years against what Pam Martens has called “running NYU as a tyrannical slush fund for privileged interests.” FASP just published a devastating document, The Art of the Gouge, which describes how NYU engages in a mind-numbing range of tricks and traps to extract as much in fees as possible from students, while at the same time failing to invest in and often degrading the educational “product”.

The first part of the report goes through a mind-numbing and degrading set of scams perpetrated on students, including the bait and switch of hitting them with extra charges they can’t possibly find out about before they have committed to the school, to the tune of an estimated $10,000 per year; providing mediocre education in programs that require “study abroad” while also requiring them to stay in grossly overpriced university housing; admitting a high proportion of foreign students, precisely because they pay higher fees (and predictably, NYU’s premiums are even higher than that of other schools), and offering shamelessly overpriced, narrow, and not very good health services.

Mind you, that list only scratches the surface.

The second part, which describes how the funds are used, describes in gory detail how the school throws money at real estate empire-building, disproportionately for administrative space and housing when teaching facilities are in short supply. The third document describes how NYU is an even more extreme practitioner of squeezing the incomes of faculty while gold-plating administrator pay and perks. Consider one famous example that we discussed in 2013, Jacob Lew, who was then the presumed incoming Treasury Secretary:

Remember, Lew came from a job at NYU where he already looks to have been considerably overpaid. He received over $840,000 for the academic year 2002-2003, which had him earning more than most university presidents, including NYU’s president. And on top of that, as Pam Martens ferreted out, he was apparently given a $1.3 million house. I’m not making that up, go read her piece. The mechanism was that NYU lent the $1.3 million to buy the house to Lew and then forgave it over five years. Oh, and they paid him the money to pay the interest too. We will assume that the forgiveness of debt was reported properly to the IRS.

Pam Martens has long been bird-dogging the grifting at NYU. As she wrote later in 2013:

In September 2009, the New York Times published a remarkable exercise in inanity, profiling John Sexton, President of NYU..

We don’t, for example, learn from the interview that his home on Fire Island has been financed since 1994 by several million dollars in loans from the NYU School of Law Foundation and NYU itself…

This is not the only residence that NYU has made possible for its President. He has the use of two well appointed apartments owned by NYU in Manhattan. Sexton, who turned 70 in September, is also set to receive a length of service bonus of $2.5 million in 2015 and an annual pension of $800,000 when he retires. That pension is the equivalent of NYU taking $10 million of its assets and placing them in an immediate annuity for Sexton.

Sexton has plenty of company when it comes to getting out of the city in the summer through the generosity of NYU. Richard Tsien, Director of the NYU Neuroscience Institute, bought a house in East Fishkill, New York, 76 miles from the university, for $1,125,000 in February 2012 with $500,000 in financing from NYU. According to an online description, it’s a stone house on 7 park-like acres with a flowing stream and a functioning 12-foot water wheel.

Numerous other NYU professors have country homes financed by the NYU School of Law Foundation or NYU. Between primary residences and vacation homes, NYU and its affiliated nonprofits have an estimated $72 million to $96 million outstanding in loans to faculty and administrators. The university has acknowledged 168 loans.

So the sort of conduct documented in these three reports is no surprise if you’ve been following this story, but having them documented in so much detail is devastating. I hope you’ll read them and circulate them widely, above all to parents whose children might be considering applying to NYU.

Elizabeth, May 22, 2015 at 7:54 am

I’m an NYU grad and my son started there a few years ago. In that 30 years, the cost of housing roughly doubled, while the cost of tuition roughly quadrupled. So, Forbes’ “pocketbook demands of living in New York” rationale doesn’t really fly. The cost of educating a student there must be less now, in the era of faculty serfdom. I wonder if one reason the tuition has skyrocketed is because student loans are so easy to get – often “guaranteed.” Maybe the university charges as much as the families can borrow?

sufferin'succotash, May 22, 2015 at 8:12 am

It’s known as preparing students for the wider world.

hemeantwell, May 22, 2015 at 8:26 am

Here’s another link to a Doug Henwood KPFA interview, this time with Christy Thornton, a grad student at NYU who was part of a recent successful organizing drive among teaching assistants. It’s particularly good on NYU’s corporate-mimicking multinational strategy, funded by jacking up student fees. The Thornton interview is the second half.

http://shout.lbo-talk.org/lbo/RadioArchive/2013/13_12_19_16.mp3

Jim Haygood, May 22, 2015 at 9:45 am

Higher education, comrades: as with options, the big profits accrue to the seller, not the buyer. Is anyone surprised that, like our Dear Leader, NYU’s John Sexton is a Harvard Law grad? It’s not the musty old tomes on torts and trusts, but the lifelong networking with fellow toffs and racketeers that pays off big time.

An NYT article just revealed the biz model:

Seen from the Internet [sic], it is a vast education empire: hundreds of universities and high schools, with elegant names and smiling professors at sun-dappled American campuses.

Their websites, glossy and assured, offer online degrees in dozens of disciplines, like nursing and civil engineering.

Yet on closer examination, this picture shimmers like a mirage. The news reports are fabricated. The professors are paid actors. The university campuses exist only as stock photos on computer servers. The degrees have no true accreditation.

http://www.nytimes.com/2015/05/18/world/asia/fake-diplomas-real-cash-pakistani-company-axact-reaps-millions-columbiana-barkley.html

What other kind of biz gets customers lined up and pounding on the door to get in? I love it!

So I’m starting my own educational empire: Harward, Yates and Princetown. They’re all members of the prestigious Hanseatic League, and are accredited by IATA (the International Academic Transcript Authority).

Don’t miss our summer sale, at only $995 a credit hour. We accept Paypal and Bitcoin. Enter to win a free PhD Econ degree if you sign up by June 30th!

washunate, May 22, 2015 at 5:33 pm

His bio really is a fantastic who’s who of what’s wrong with our leadership class. He’s a banker lawyer professor extraordinaire. And he’s got quite a doctor running the med center.

President Sexton is Chair of the Independent Colleges and Universities of New York, Chair of the New York Academy of Sciences, and Vice Chair of the American Council on Education. He is a fellow of the American Academy of Arts and Sciences and a member of both the Association of American University Presidents and the Council on Foreign Relations. He has served as the Chairman of the Board of the Federal Reserve Bank of New York (2003-2006) and Chair of the Federal Reserve Systems Council of Chairs (2006). He served as a Board Member for the National Association of Securities Dealers (1996-1998), and was Founding Chair of the Board of NASD Dispute Resolution (2000-2002). He also serves on the Boards of the Council on Foreign Relations, the Institute of International Education and the Association for a Better New York. While Dean of the Law School he was President of the Association of American Law Schools.

http://www.nyas.org/whoweare/bog/sexton.aspx
http://nyulangone.org/our-story/our-leadership/executive-leadership/robert-i-grossman-md

sd, May 22, 2015 at 10:05 am

NYU had a scam going with student loans back in the 1980s that finally got exposed in the 1990s. It’s almost impossible to find anything about it now. The story never seemed to grow legs.

Michael Hudson, May 22, 2015 at 10:18 am

NYU is to education what Scientology is to religion.

Remember a generation ago, when NYU bought a spaghetti factory and claimed tax deductibility for its profits because the spaghetti was part of a tax-exempt “educational institution.”

There’s a metaphor here.

diptherio, May 22, 2015 at 10:29 am

But, but…they’re in New York City and everybody knows that whatever happens in NYC is better, and more advanced and more important–and just more real–than things that happen anywhere else in the country! Everybody knows that. NYU may have it’s share of problems, but at least it’s not located in some lame city in Missouri….jeesh!

Jim Haygood, May 22, 2015 at 11:00 am

“NYU bought a spaghetti factory”

How else are you gonna learn to write C code?

Plus it served as a case study for vertical integration of campus food services.

Got my doctorate in Motorcycle Mechanics there, based on lifetime experience in benching and wrenching.

diptherio, May 22, 2015 at 10:26 am

I’ll just note that “non-refundable deposit” is an oxymoron.

The list of scams they’re running is impressive, but in a bad way…go to your in-state public University, kids, you’ll be glad you did (or at least glad you didn’t go to NYU).

George Phillies, May 22, 2015 at 11:04 am

Readers may find of some interest
https://www.insidehighered.com/news/2013/06/19/nyu-vacation-home-loans-pay-narrative-administrative-excess

The high salaries sometimes percolate down the ladder.

Rosario, May 22, 2015 at 2:49 pm

Today’s universities only offer potentially three valuable opportunities for students: facilities (at huge cost covered by tuition), faculty (sometimes), and peers (the best of the three, think students as laborers versus employer with the potential for unionizing).

Students no longer attend universities as hubs of knowledge or information. They are hubs of opportunity. By analogy, it is like paying for the opportunity to get an interview at some high paying job.

Thus why attending NYU, Harvard, MIT, etc. is a must for any social climber, and what a dream in NYC with cocktail parties and beautiful people abound in the midst of perpetual fantasy.

craazyman

May 22, 2015 at 4:17 pm

The top 10 reasons why NYU bureaucrats get pay and perks worth millions . . .

Reason $10. You gotta show the kids how da woiled woiks

Reason $9. When you hire the students as hookers, you can afford to pay an internationally competitive fee

Reason $8. They want their own rung in Dante’s inferno! Whoa!

Reason $7. Take a look at Raphael’s School at Athens then think about all the marble and pillars. That’s not a low rent operation.

Reason $6. They’re too old to have their toga parties in a frat house.

Reason $5. When you live and work in NYU mansions, you’re always on the job! Isn’t that worth overtime pay?

Reason $4. They say they’re salesmen and salesmen make a lot of money. OK bucko?

Reason $3. Buildings are taller in New York than most other places. So there’s more to administer

Reason $2. They say they don’t need a reason.

and Reason $1 why NYU bureaucrats get pay and perks worth millions . . . drum roll please . . . They’re not really sure, but they’ve hired themselves as high-priced consultants to figure it out!!! . . whoa! ka-ching!

ginnie nyc, May 22, 2015 at 7:20 pm

Wow, Yves, thanks for posting this report. I made the very expensive mistake of enrolling in grad school at NYU in the early ’90’s – the degree of fraud and shaving, simply in the academic sense, was astonishing. My advisor was nowhere to be found after classes began for the entire first year; they lied about who headed my department (no one), and when someone was finally hired at year’s end, he was an administrative hack from within who had absolutely no foundation in the department, the division, or any related discipline. All my ‘professors’ except one were much-abused adjuncts.

The main library, Bobst, is a fitting monument to its pederast donor (look it up). A good deal of the collection was ‘missing’ or heavily vandalized; the NY Public Libraries books in circulation are in much better shape with far more users. There were no carrells for masters candidates in the library, for love or money. Most of the library’s cubic footage is occupied by a vast, central atrium that travels the height of the building, with the book collection squeezed around the periphery. This atrium is a favorite place for stressed students to end it all.

I decided to take some courses at their IFA (Institute of Fine Arts), which is near the Metropolitan Museum. The administrator there refused to let me enroll as I was not “in the school”. I thought about this, called the professors directly, got signed letters from them (naturally), and happily returned to give the admin apoplexy. None of this crap took place when I was an undergrad at Penn – I never had a problem enrolling in PhD classes, administratively, whether inside or outside my school.

New York University is not a university, it’s a random collection of isolated departments and special institutes created around famous, very expensive names, who usually do not stay beyond 4 or 5 years. It costs more than Columbia, which is Ivy League, for what that’s worth, and took me 15 years to pay off. Even after I had to go on SSDI, which was helluva lot of fun.

Michael Fiorillo, May 22, 2015 at 8:40 pm

As a lifelong Villager, NYU has always been The Enemy, and it has been a stock phrase of mine for a generation that it’s a real estate development company with a higher education subsidiary.

The university is a classic example of how geography is destiny, since for years it was a second-tier commuter school that happened to be located in a globally-hyped youth ghetto (which it then institutionalized). In many respects, it’s still a second-tier school (worse, given their extreme grabbiness) tarted up with some celebrity academics that students, treated like rubes, will never see.

From personal experience, I know that most departments are profit centers. Twenty years ago, I got a Master’s degree in education (and, to be fair, they gave me a fairly generous financial aid package). I had young children, so it was mostly a matter of convenience. Of the dozen classes I took, apart from student teaching and observations, only three were taught by full-time, tenured faculty. The others were taught by adjuncts and TAs who ranged from OK to really terrible.

That was graduate school; I hate to think of the poor, deluded kids who can’t afford the extortionate hustle of attending this school, indebting themselves for many years to do so.

Fool, May 23, 2015 at 5:00 pm

You’re not alone. NYU ruined New York City for all of us.

lord koos, May 24, 2015 at 12:03 am

Universities are now just another institution to loot. This piece reminds me of a scene in the 2014 documentary “Ivory Tower”, which if people haven’t seen, they really need to. Although I’m sure many readers here are familiar with the story of Cooper Union, there is an interview with the University president that is a priceless peek at the looting class.

He basically squandered Cooper Union’s legacy by taking the college’s money and gambling it in the stock market a little before the crash of 2008 and by spending $170,000,000 of the college’s money on a building that was not really needed. A school that had been pretty much funded in perpetuity (Cooper Union owns the land under the Chrysler building), became indebted for millions of dollars and they now must charge students to attend, as well as having to sell off assets. I can’t believe the guy is still president of the school.

https://en.wikipedia.org/wiki/Cooper_Union_financial_crisis_and_tuition_protests

Lambert Strether, May 24, 2015 at 12:41 am

NC: “How Is It Possible That the Trustees at Cooper Union Have Not Resigned in Shame?”

[May 24, 2015] Restoring the Public's Trust in Economists

[May 24, 2015] Will Robots Kill the Asian Century

[May 23, 2015] Former Fed Governor Says Fed Lost Credibility To Stay On Top Of Ticking Monetary Bomb

[May 23, 2015] The Children of the Abyss

[May 21, 2015] Consistent With

[May 19, 2015] Oil Prices Will Fall A Lesson In Gravity

[May 19, 2015] How To Spot Groupthink Among Economists

[May 18, 2015] Stock Market Valuation Exceeds Its Components' Actual Value - Slashdot

An anonymous reader writes: James Tobin, a Nobel Prize-winning economist, developed a concept called "Q-value" — it's the ratio between two numbers: 1) the sum of all publicly-traded companies' stock valuations and 2) the value of all these companies' actual assets, if they were sold. Bloomberg reports that the continued strength of the stock market has now caused that ratio to go over 1 — in other words, the market values companies about 10% higher than the sum of their actual assets. The Q value is now at its highest point since the Dot-com bubble. Similar peaks in the past hundred years have all been quickly followed by crashes.

Now, that's not to say a crash is imminent — experts disagree on the Q-value's reliability. One said, "the ratio's doubling since 2009 to 1.10 is a symptom of companies diverting money from their businesses to the stock market, choosing buybacks over capital spending. Six years of zero-percent interest rates have similarly driven investors into riskier things like equities, elevating the paper value of assets over their tangible worth."

Others point out that as the digital economy grows, a greater portion of publicly traded companies lack the tangible assets that were the hallmark of the manufacturing boom.

[May 17, 2015] This May Just Be The Start Of The Oil Price War Says IEA

[May 17, 2015] Dumping only works if you destroy, buy or otherwise acquire control on your competitor s

[May 14, 2015] A Short History of Financial Euphoria by John Kenneth Galbraith

Amazon.com Books
Sergio Da Silva, July 1, 2001
Bubble Story

IN THIS SMALL but witty and well-crafted book, Galbraith chronicles the major speculative episodes, from the seventeenth-century tulipmania to the junk-bond follies of the eighties. The book was first published in 1990 and thus the recent dotcom-bubble burst is not covered. Nevertheless, the Harvard professor's book is still worth reading. A reason is that he claims to have identified common patterns in the history of financial euphoria. `In small ways the history of the great speculative boom and its aftermath does change. Much, much more remains the same', he predicts.

The perennial features are these. Some seemingly new and desirable artifact or development captures the financial imagination of a large number of people (say, group 1). The arrival of tulips in Western Europe, gold in Louisiana, the advent of joint-stock companies (corporations), real estate in Florida, or the economic designs of Reagan are all examples. The price of the object of speculation goes up. The object when bought today is worth more tomorrow. This attracts new buyers and assures a further price increase. Those in group 1 are persuaded that the new price-enhancing circumstance is under control, and expect the market to stay up and go up, perhaps indefinitely. The individual or institution that discovered the novelty (in group 2) is thought to be ahead of the mob. Fewer in number, individuals of group 2 perceive the speculative mood of the moment, try to get the maximum reward from the increase as it continues, and plan to be out before the eventual crash. The affluence of group 2 is wrongly associated, by group 1, with a miraculous financial genius. When something triggers the ultimate reversal, group 2 decides now is time to get out. Group 1 finds its illusion abruptly destroyed. Both groups sell or try to sell. The market collapses.

Galbraith observes that, in this process, `speculation buys up the intelligence of those involved'. The crowd converts the individual in group 1 from possessing reasonable good sense to stupidity. Those in group 2 also make errors of vanity by thinking they will beat the speculative game. It seems that `all people are most credulous when they are most happy'. Reputable public and financial opinion reinforces euphoria by condemning those who express doubt or dissent by warning of a crash. The celebrated Yale economist Irving Fisher, for instance, spoke out sharply against Roger Babson, who foresaw the crash of 1929. But the critic must wait until after the crash for any approval, Galbraith laments.

Despite the fact that common features in speculative episodes recur, history counts little because a financial disaster is quickly forgotten by a new, self-confident generation. Something is perceived as a financial novelty merely because the financial memory is short: `financial operations do not lend themselves to innovation'. Insightfully, Galbraith notices that all financial innovation involves the creation of debt leveraged against more limited assets. This is the case of banks, whose debt is leveraged on a given volume of hard cash. This is also the case of the holding companies created in the 1920s, whose stockholders issued bonds and preferred stock to buy other stocks. And this is the case, too, of the junk bonds of the mergers-and-acquisitions mania in the 1980s, when high-risk, higher-interest bonds were issued in greater volume against the credit of the companies being taken over. As Galbraith puts it: `the world of finance hails the invention of the wheel over and over again, often in a slightly more unstable version'.

However a crisis may strike at any moment whenever a debt is perceived to become dangerously out of scale in relation to the underlying means of payment. After the crash, group 1 expresses anger against the `financial genius' of group 2. `Financial genius is before the fall', Galbraith prophesies.

Group 1 finally realizes that having more money may mean that a person in group 2 is indifferent to moral constraints. Group 2 could have even gone beyond the law, as far as leverage is concerned. Incarceration of some individuals of group 2 may follow. Leverage is seen as morally disputable at last.

Talks of regulation and reform follow. However, the speculation itself or the aberrant optimism that lay behind it will not be discussed. `Nothing is more remarkable than this: in the aftermath of speculation, the reality will be all but ignored.' Why? Because it is easier for group 1 to blame one individual or a few individuals in group 2 than to take responsibility for its own widespread naivety. And also because there is a need to find a cause for the crash that is external to the market itself. After all, the market is believed to be `a neutral and accurate reflection of external influences; it is not supposed to be subject to an inherent and internal dynamic of error'. The deficit in the federal budget was, for instance, blamed for the 1987 crash. Another anecdotal account of Black Monday has been that the crash was caused by portfolio insurance computer programs which sold stocks as the market went lower.

Galbraith's book is compulsory reading for economists, especially those working on behavioural finance or econophysics. Being an antidote to illusory financial euphoria, the book is thus of interest to the general public as well. Galbraith's own sense of déjà vu towards speculative financial bubbles enabled him to predict the crash of 19 October 1987. People really seem to be intrinsically unable to prevent getting stuck in the error-prone dynamics of bull markets, as in his `bubble story'.

But perhaps they have already learned some minor lessons on how to better protect themselves in the aftermath of crashes. Indeed despite the fact that the Black Monday crash was nearly twice as severe as the stock market collapse of 1929, it did not trigger a depression. Likewise the internet-bubble burst of 2000 had a surprisingly modest effect on wealth. Will we finally learn to learn from history?

[May 14, 2015] Russia crisis to hit ex-Soviet states harder than expected EBRD

In Ukraine, whose economy has been drained by the deadly separatist conflict in the country's east, "GDP is now expected to shrink by 7.5 percent this year -- a worsening outlook since January, when a five percent contraction was forecast," the EBRD said.

Mike

Ukraine's economy is not only being drained by the separatist war in the east, but the lack of work, foreign investment and the returning of thousands of Ukraine workers who live/work in Russia (just like other workers who have had to returned home to other ex-Soviet republics, something is not being mentioned here in the case of Ukraine) but the jobs have dried up do to the sanctions imposed by the West.

Real

That's exactly what Washington wanted -- weaken the economy and stability of Russia's neighboring countries to damage Russia in a long run.

[May 14, 2015] US Economy Collapses Again by JACK RASMUS

May 14, 2015 | CounterPunch
4th Time in 4 years

Data released last week by the U.S. government showed the U.S. economy came to a near halt in the first three months of 2015, falling to nearly zero – i.e. a mere 0.2 percent annual growth rate for the January-March quarter. The collapse was the fourth time that the U.S. economy in the past four years either came to a virtual halt or actually declined. Four times in four years it has stalled out. So what’s going on?

In 2011, the U.S. economy collapsed to 0.1 percent in terms of annual growth rate. At the end of 2012, to a mere 0.2 percent initial decline. In early 2014, it actually declined by -2.2 percent.

And now in 2015, it is essentially flat once again at 0.2 percent. The numbers are actually even worse, if one discounts the redefinitions of GDP that were made by the US in 2013, counting new categories as contributing to growth, like R&D spending, that for decades were not considered contributors to growth – in effect creating economic growth by statistical manipulation. Those highly questionable 2013 definitional additions to growth added around US$500 billion a year to U.S. growth estimates, or about 0.3 percent of U.S. GDP. Back those redefinitions out, and the U.S. experienced negative GDP four times in the last four years. We get -0.2 percent in 2011, 0 percent in 2012, -2.5 percent in 2014 and -0.1 percent earlier this year.

It is therefore arguable that the U.S. has also experienced at least one mild ‘double dip’ recession, and perhaps two, since 2010.

All the four U.S. economic relapses occurred following preceding month gains in growth sufficient to generate claims by politicians and pundits alike that the U.S. economy had finally ‘turned the corner’ and was now on a path of sustained economic recovery. Yet every time such claims were made, reality contradicted their predictions within a few months, and the economy collapsed again, creating a scenario not of sustained economic recovery but of a ‘stop-go’ trajectory.

The consequence of this ‘stop-go’ recovery is that the U.S. economy since 2009 – the official end of the last recession – has experienced the weakest recovery from recession in the last fifty years, just about half the normal post-recession recovery. And this ‘half normal’ recovery since 2009 occurs after an annual growth averaging only 1.7 percent during the years 2001-2010 in the U.S. Something new is happening to the U.S. economy since 2000. What is it?

Recessions in the U.S. have occurred on average every 7 years. It’s now year five since the last one officially ended in June 2009. What happens if the current weak recovery reaches its end at around 7 years, i.e. in mid-2016 a year from now? Will the next recession prove even worse, perhaps much worse, occurring as it will on a base recovery half of normal?

Unfortunately, such questions aren’t asked by most mainstream economists, and certainly not by politicians and business media pundits.

Stop-Go On A Steady Slowing Global Economy

The problem of weak, stop-go, recovery in the U.S. today is further exacerbated by a global economy that continues to slow even more rapidly and, in case after case, slip increasingly into recessions or stagnate at best.

Signs of weakness and stress in the global economy are everywhere and growing. Despite massive money injections by its central bank in 2013, and again in 2014, Japan’s economy has fallen in 2015, a fourth time, into recession.

After having experienced two recessions since 2009, Europe’s economy is also trending toward stagnation once more after it too, like Japan, just introduced a US$60 billion a month central bank money injection this past winter. Despite daily hype in the business press, unemployment in the Eurozone is still officially at 11.4 percent, and in countries like Spain and Greece, still at 24 percent. Yet we hear Spain is now the ‘poster-boy’ of the Eurozone, having returned to robust growth. Growth for whom? Certainly not the 24 percent still jobless, a rate that hasn’t changed in years. Euro businesses in Spain are doing better, having imposed severe ‘labor market reforms’ on workers there, in order to drive down wages to help reduce costs and boost Spanish exports. Meanwhile, Italy remains the economic black sheep of the Eurozone, still in recession for years now, while France officially records no growth, but is likely in recession as well. Elites in both Italy and France hope to copy Spain’s ‘labor market reforms’ (read: cut wages, pensions, and make it easier to layoff full time workers). In order to boost its growth, Italy is considering, or may have already decided, to redefine its way to growth by including the services of prostitutes and drug dealers as part of its GDP. Were the USA to do the same redefinition, it would no doubt mean a record boost to GDP.

Across the Eurozone, the greater economy of its 18 countries still hasn’t reached levels it had in 2007, before the onset of the last recession. Unlike the U.S.’s ‘stop-go’, Europe has been ‘stop-go-stop’.

Even beyond the Eurozone, in the broader Euro area the picture is not much better. After a brief, artificial real estate boom fueled by foreign investment, the UK is now growing again at a mere 0.3 percent rate. And then there’s China, where economic growth continues to slow, despite multiple fiscal and monetary stimulus programs introduced the past two years to try to boost the economy further. And the global slowdown applies not just the largest economies. Emerging market economies in Latin America, Africa, and elsewhere that are especially dependent on commodities production and exports have been descending one by one into recession, or at best stagnating.

Yet despite this growing global economic weakness, and the U.S. economy’s repeated annual economic relapses and ‘half normal’ recovery rate, we are still being told that the U.S. economy is sound and that it will lead the rest of the world economy toward sustained economic growth this year and next.

It’s the Weather!

We’re told the declines in U.S. growth the last two years – January to March 2015 and before that 2014 – have been due to ‘bad weather’. And that this coming summer 2015 the U.S. economy will ‘snap back’ again, as it did last summer 2014.

But is economic forecast by weather metaphor really the cause of the recent U.S. slowdown? Not really. Even economists themselves admit that, at the very most, only 0.5 percent of last quarter GDP decline can be attributed to weather. If the fourth quarter 2014 U.S. GDP was 2.2 percent, in other words, then only -0.5 percent of the drop was due to weather. So what about the other -1.5 percent drop from the fourth to the first quarter 2015?

A closer look shows that at least -1.25 percent of that -1.5 percent was due to the sharp decline in U.S. exports. That decline was due largely to the US dollar’s sharp rise in value compared to other currencies since last fall. A rising dollar makes U.S. exports more expensive. U.S. exporters lose out to European, Japanese and Chinese competitors. Since U.S. exports are largely manufactured goods, that means U.S. manufacturing slows – which it has. And that in turn means U.S. growth slows.

The reason for the dollar’s rise is threefold. First, the U.S. central bank’s repeated signaling of intent to raise U.S. interest rates this year. Second, the collapse of world oil prices that also drive up the dollar. Third, the massive money injections by Europe and Japan central banks in the form of ‘quantitative easing’ (QE) programs that are designed to drive down the value of the Euro and the Yen in order to achieve a competitive advantage for their region’s exports at the expense of U.S. exporters.

What’s going on globally today is rolling ‘competitive devaluations’ of currencies by means of massive central bank monetary injections. In ways this is somewhat like the 1930s depression. Then countries devalued their currencies by legal declaration, as they tried to boost their economies by stealing exports from competitors. The problem with that strategy is that all could do it, and they did. So no one gained in the end and the global economy and trade sank further. Today’s new form of competitive devaluation is no different. It signals the major capitalist regions of the world – i.e. north America, Europe, Japan, and now even China – are beginning to fight over a slower growing global economic pie. The devaluations are just assuming a different form. Not legal declaration but monetary injection by central banks.

In early 2014 Japan introduced its QE and central bank injection. It gained a temporary trade advantage. But then Europe did the same. Japan lost its advantage, which Europe gained. The U.S. lost the most in terms of exports, since its dollar rose for two reasons – Japan and Europe currencies falling and talk of U.S. interest rate hikes as well.

But most recently, the U.S. central bank has signaled that interest rates may not rise this year. Oops. There goes the Euro and Yen losing its advantage once more and their economies slipping again. This see-saw, back and forth, fighting over a shrinking trade pie only reveals a new instability growing in the global economy. Europe in particular will soon be hammered by a potential Greek debt default, a continually imploding Ukrainian economy it has committed to bail out at US$40 billion so far, and now the U.S. indicating it won’t raise rates. Watch Japan, which will likely again devalue still further to offset U.S. and Europe measures. Meanwhile, as China continues to slow, it could eventually reduce the Yuan to boost its exports as well.

What this global scenario means is that the U.S. economy significantly weakened in the first quarter 2015 due not to weather, but because of loss of global exports due to the reasons noted. But trade competition and currency wars are not the only explanation for the near collapse of the U.S. economy last quarter.

Collapse of Oil Prices and U.S. Economic Slowdown

Another major development in 2014 in the U.S., that disappeared by early 2015, was the Oil/Shale Gas boom. After having surged to record levels in the first half of 2014, contributing largely to the summer 2014 U.S. 5 percent GDP rise, after mid-year the global price of oil collapsed. By end of year 2014 the collapse was in full swing. Investment in this sector fell by nearly half, regional construction activity in the Dakota-Texas area also fell abruptly, as did the mining activity as oil/gas wells were shut down, and as railroad and trucking transport activity declined. A major contributor to 2014 economic growth in the U.S. thus fell through by early 2015. What’s significant, moreover, is that it won’t come back in 2015. So the ‘recovery’ in the summer of 2014 won’t have this contributing factor behind it in 2015.

One-Time Consumer Spending on Health Care

Another temporary factor that contributed to the summer 2014 surge in U.S. growth, that has also since disappeared, is first time consumer household spending on healthcare services. Last summer was the first full year of sign-ups by 10 million households to Obama’s ‘Affordable Care’ Insurance Program. Spending on new insurance premiums, and on healthcare services by millions of new customers for the first time, together served to give U.S. GDP last summer 2014 another major boost. But those sign-ups have leveled off. Most of those who wanted to sign up have done so. Future growth in health insurance and health care services has therefore leveled off.

So like the shale/oil gas surge and the export-trade advantage, the health care spending surge contribution to U.S. economic growth is most likely temporary as well.

Why the US Economy Will Continue A ‘Stop-Go’ Trajectory

There are three fundamental causes why the U.S. economy will continue on its 5 year long, stop-go recovery trajectory until the next recession in 2016 or after.

First, there is insufficient wage and income growth for the approximate 100 million wage earning households that constitute the bulk of consumer spending in the U.S., which accounts for roughly 70 percent of the US economy annually. In turn, the reason for the lack of wage and income growth by these households is the lack of full time, decent paying jobs creation in the US. Jobs that are being created are low pay, no benefit jobs. Part time and temp jobs. Service jobs, and few manufacturing or construction jobs. Working class consumption is also compressed by inability to earn interest on basic savings accounts. Then there’s household debt, for past education borrowing, for auto purchases, and credit cards, which also takes a toll on spending.

Second, there’s the lack of investment spending by business. Large, multinational corporations in particular continue to prefer to invest outside the U.S. rather than in it. When not investing abroad, they prefer to ‘spend’ their record profits on stock buybacks and dividend payouts to shareholders. More than US$5 trillion worth since 2009. Another trillion dollars projected in 2015 alone as well. Then there’s their growing investing in financial asset markets and securities, which now constitute about 25 percent of all multinational corporate investing. And what they don’t invest in financial assets, invest abroad, or spend in buybacks and dividends, they just hoard as cash on their balance sheets, reportedly now in excess of US$1.7 trillion in their offshore subsidiaries. None of these alternatives and diversions result in real investment that create real decent paying jobs, at decent pay and benefits. Hence, consumption by the 100 million households stagnates or lags—except for more debt based spending perhaps.

Third, there’s no sustained recovery on the near horizon because the U.S. government has clearly decided on growing only defense spending. The new Republican Party dominated U.S. Congress insists on cutting social programs further, including long time once sacrosanct programs like Medicare for seniors. In the first quarter U.S. GDP numbers, spending by State and Local governments slowed noticeably, as did US federal spending on non-defense products and projects.

Instead of sustained growth, the scenario is ‘stop-go’, as this or that temporary factor occur to boost U.S. GDP and growth temporarily, followed by other temporary developments that in turn subsequently drag U.S. GDP back to zero or negative growth. Add further to this scenario the Eurozone’s continuing economic instability, the UK’s new stagnant growth, Japan’s descent into yet another recession, China’s deepening struggle to maintain 7 percent growth that is almost certain to fall below that level soon, oil and commodity producing emerging markets that are already in recession, and an historic weak recovery already in its 5th year of an average 7 year cycle—then what remains is a likely further long term, stop-go US economy as the global economy continues to slow as well.

Jack Rasmus is the author of the forthcoming book, ‘Systemic Fragility in the Global Economy’, by Clarity Press, 2015, and the prior book’s, ‘Epic Recession: Prelude to Global Depression’, 2012, and ‘Obama’s Economy: Recovery for the Few’, 2012. He blogs at jackrasmus.com.

This article first appeared in teleSUR.

[May 13, 2015] What is neoliberalism

[May 12, 2015] Infinity And The Bond Market Wormhole

[May 12, 2015] An Open Letter to Bill McNabb, CEO of Vanguard Group

[May 12, 2015] Crude Prices 'Spike' Despite Saudis Increasing 'Surge' Production

[May 12, 2015] China overtakes US as biggest crude importer

May 11, 2015 | RT News

China has become world’s biggest importer of crude oil in April, reaching a record number of almost 7.4 million barrels per day, compared to America’s estimated 7.2 million bpd, Reuters reported. The growth came despite a slowing economy and was spurred by relatively low oil price and recent interest rate cuts in China as the government tries to stimulate growth. While the US may retake top spot in the months to come, China is expected to be the biggest importer of crude oil in the long run, while becoming the world’s leading exporter of almost all major commodities, including coal and most metals.

[May 11, 2015] Avoid Fraud

May 11, 2015 | FINRA.org

Even if you have never been subjected to an investment fraudster’s sales pitch, you probably know someone who has. Following the legendary Willie Sutton principle, fraudsters tend to go "where the money is"—and that means targeting older Americans who are nearing or already in retirement.

Financial fraudsters tend to go after people who are college-educated, optimistic and self-reliant. They also target those with higher incomes and financial knowledge, and have had a recent health or financial change. If you believe you've been defrauded or treated unfairly by a securities professional or firm, file a complaint. If you suspect that someone you know has been taken in by a scam, send a tip.

To entice you to invest, fraudsters use high pressure and a number of "tricks of the trade." Here are some common tactics:

Protect yourself with these strategies:

FINRA offers an array of information and resources to help you outsmart investment fraud.

  1. Red Flags of Fraud
    Knowing the important warning signs of financial fraud puts you in charge.
  2. Ask and Check
    Ask the right questions and verify the answers before you work with an investment professional or buy an investment product.
  3. How Social Pressure Cost One Family $30,000
    It's often hard to resist an investment tip from someone in your social circle. Before handing over any money, you need to check out the investment and the person selling it.
  4. Spot a Scam in 6 Steps
    Financial fraudsters use sophisticated and effective tactics to get people to part with their money. Here are six steps you can take to help you spot an investment scam.
  5. Investor Alerts
    Don’t be taken in by these frauds and scams. Learn how to protect yourself and your money.

More

[May 08, 2015] Brood of Vipers

[May 08, 2015] Capitalizing on Crisis The Political Origins of the Rise of Finance

[May 08, 2015] Power The Essence of Corrupt Banking and Politics Is to Grow and Control the Debt

[May 08, 2015] Will oil prices keep rising. Signs say yes

[May 06, 2015] Dangerous Markets Here Are Some Levels and Triggers to Watch

Jesse's Café Américain

We typically do not get major market corrections in May. They tend to cluster in the Spring and the Fall. By major correction I mean 15+%.

For example, in 1929 there was a 'market break' in March, and then the exchange shook it off and went on to have a bumpy summer of ups and downs with a final climb to a top in October.

Every market decline has its own specific course of events, but they do tend to have some things in common. There is generally a build up of conditions that make it the right kind of market, and then some trigger event occurs to set things in motion. It is much like what occurs in the build up to an avalanche, or a wildfire.

So we are talking about 'avalanche conditions.'

That does seem to be a little counter-intuitive, because we seem to have markets that are almost sleep walking within ranges with short term algo-driven volatility. These are very 'cynical markets.' The masters of the universe believe that they are firmly in control.

Looking at the composition of this market and the economies, I see bubbles both in the US and especially in China, in bonds and in stocks.

I see a paucity of liquidity of the right sorts, of determined investment money of the durable sort, and economies that are narrowing, with most of the discretionary money shoved well into the top tier of consumers and investors.

And the money is hot, compliments of the Fed, and the focus is for the most part short term. I think my opinion of the Fed is well known by now to any regular readers, and the ECB is no better.

So in surveying this mountain with its potentially dangerous conditions, one looks for potential trigger events.

Greece looms large. Despite the pooh-poohing and brinksmanship by both sides, a Greek failure could prove to be the underanticipated Lehman event that would set the cascade of dominos falling.

And then there are the many confrontational hotspots around the world, in the Mideast of course, in the South China Sea, and in the Ukraine among others.

What makes this particularly dangerous is the cavalier attitude of the neo-con chicken hawks towards military action, especially in some of the English speaking countries.

Two articles this morning brought this thinking into focus. But I have been having this conversation off and on with some trading friends for the past few weeks, and I also noted in the beginning of the year some signs of trouble. What 2000, 2008, and 2015 May Have In Common

The first, Shrinking Liquidity Exposes Markets to Crunch, sounds like a prelude to 'no one could have seen this coming.'

And the second from my friend Adam Taggart, For Heaven's Sake Hedge, shows some of the other aspects that make markets dangerous.

I have not yet seen the classic 'crash patterns' on the charts that I have documented extensively over the years, but as I am saying, and I hope I am clear about this, I see dangerous market conditions that, given the right kind of trigger event, could unleash quite a bit of mispriced risk and concealed fragility.

I don't get into sentiment or contrarian indicators all that often, because from my experience they can be very much in the eye of the beholder. But the tenor of the discussion on financial TV is especially disconnected from reality now, with a clueless bravado that is characteristic of a coming conflagration.

The discussion of the TPP this morning on Bloomberg and of gold on CNBC in particular were striking.

I am taking a defensive posture, not because I think we are going to crash the markets, since only mugs make those calls and bet on them with their own money. Rather, I think we are seeing dangerous markets, with the danger exacerbated by the willful arrogance of the market masters and their money men.

I extend this watch to October, and will keep looking for changes. I do not expect much to come of this. This is just a caution, but given a trigger event of sufficient magnitude, this could become a problematic market even during the dog days of Summer. Our leadership and financial management is just that bad, reckless and irresponsible.

One thing I learned, most painfully, is that the Fed can and will keep an obvious asset bubble going much longer than one might expect, given the lack of a major trigger event. And they have absolutely demonstrated a disregard for the consequences from doing so several times in the past fifteen years.

US Shale Sector Crashes After David Einhorn Repeats What Everyone Knows Already

Zero Hedge

Greenlight's David Einhorn has come out swinging at the Fed-fueled fracking frenzy and, after pointing out facts that are extremely widely known, and have been explained innumerable times here, sent Shale stocks tumbling... led by the so-called "MotherFracker" - Pioneer Natural Resources... Einhorn concludes, "Either way the frackers are fracked."

[May 04, 2015] Peak Oil Optimism

Zero Hedge

Speculative bets on rising Brent crude oil prices reached a new record last week but under the surface futures and options market positioning among managed money accounts is flashing a very red warning signal...

As Saxobank's Ole Hanson notes, the long/short ratio has reached 6.4 meaning that for each lot of shorts more than 6 lots are long.

Historically, this looks extreme and on three previous occasions since early 2013 a reading above 6 subsequently triggered sell-offs of which the most recent was last June when the price peaked at $115.

[May 04, 2015] Stephen Roach Derides Central Bankers' Mass Delusion

May 04, 2015 | Zero Hedge
Authored by Stephen Roach, originally posted at Project Syndicate,

The world economy is in the grips of a dangerous delusion. As the great boom that began in the 1990s gave way to an even greater bust, policymakers resorted to the timeworn tricks of financial engineering in an effort to recapture the magic. In doing so, they turned an unbalanced global economy into the Petri dish of the greatest experiment in the modern history of economic policy. They were convinced that it was a controlled experiment. Nothing could be further from the truth.

The rise and fall of post-World War II Japan heralded what was to come. The growth miracle of an ascendant Japanese economy was premised on an unsustainable suppression of the yen. When Europe and the United States challenged this mercantilist approach with the 1985 Plaza Accord, the Bank of Japan countered with aggressive monetary easing that fueled massive asset and credit bubbles.

The rest is history. The bubbles burst, quickly bringing down Japan’s unbalanced economy. With productivity having deteriorated considerably – a symptom that had been obscured by the bubbles – Japan was unable to engineer a meaningful recovery. In fact, it still struggles with imbalances today, owing to its inability or unwillingness to embrace badly needed structural reforms – the so-called “third arrow” of Prime Minister Shinzo Abe’s economic recovery strategy, known as “Abenomics.”

Despite the abject failure of Japan’s approach, the rest of the world remains committed to using monetary policy to cure structural ailments. The die was cast in the form of a seminal 2002 paper by US Federal Reserve staff economists, which became the blueprint for America’s macroeconomic stabilization policy under Fed Chairs Alan Greenspan and Ben Bernanke.

The paper’s central premise was that Japan’s monetary and fiscal authorities had erred mainly by acting too timidly. Bubbles and structural imbalances were not seen as the problem. Instead, the paper’s authors argued that Japan’s “lost decades” of anemic growth and deflation could have been avoided had policymakers shifted to stimulus more quickly and with far greater force.

If only it were that simple. In fact, the focus on speed and force – the essence of what US economic policymakers now call the “big bazooka” – has prompted an insidious mutation of the Japanese disease. The liquidity injections of quantitative easing (QE) have shifted monetary-policy transmission channels away from interest rates to asset and currency markets. That is considered necessary, of course, because central banks have already pushed benchmark policy rates to the once-dreaded “zero bound.”

But fear not, claim advocates of unconventional monetary policy. What central banks cannot achieve with traditional tools can now be accomplished through the circuitous channels of wealth effects in asset markets or with the competitive edge gained from currency depreciation.

This is where delusion arises. Not only have wealth and currency effects failed to spur meaningful recovery in post-crisis economies; they have also spawned new destabilizing imbalances that threaten to keep the global economy trapped in a continuous series of crises.

Consider the US – the poster child of the new prescription for recovery. Although the Fed expanded its balance sheet from less than $1 trillion in late 2008 to $4.5 trillion by the fall of 2014, nominal GDP increased by only $2.7 trillion. The remaining $900 billion spilled over into financial markets, helping to spur a trebling of the US equity market. Meanwhile, the real economy eked out a decidedly subpar recovery, with real GDP growth holding to a 2.3% trajectory – fully two percentage points below the 4.3% norm of past cycles.

Indeed, notwithstanding the Fed’s massive liquidity injection, the American consumer – who suffered the most during the wrenching balance-sheet recession of 2008-2009 – has not recovered. Real personal consumption expenditures have grown at just 1.4% annually over the last seven years. Unsurprisingly, the wealth effects of monetary easing worked largely for the wealthy, among whom the bulk of equity holdings are concentrated. For the beleaguered middle class, the benefits were negligible.

“It might have been worse,” is the common retort of the counter-factualists. But is that really true? After all, as Joseph Schumpeter famously observed, market-based systems have long had an uncanny knack for self-healing. But this was all but disallowed in the post-crisis era by US government bailouts and the Fed’s manipulation of asset prices.

America’s subpar performance has not stopped others from emulating its policies. On the contrary, Europe has now rushed to initiate QE. Even Japan, the genesis of this tale, has embraced a new and intensive form of QE, reflecting its apparent desire to learn the “lessons” of its own mistakes, as interpreted by the US.

But, beyond the impact that this approach is having on individual economies are broader systemic risks that arise from surging equities and weaker currencies. As the baton of excessive liquidity injections is passed from one central bank to another, the dangers of global asset bubbles and competitive currency devaluations intensify. In the meantime, politicians are lulled into a false sense of complacency that undermines their incentive to confront the structural challenges they face.

What will it take to break this daisy chain? As Chinese Premier Li Keqiang stressed in a recent interview, the answer is a commitment to structural reform – a strategic focus of China’s that, he noted, is not shared by others. For all the handwringing over China’s so-called slowdown, it seems as if its leaders may have a more realistic and constructive assessment of the macroeconomic policy challenge than their counterparts in the more advanced economies.

Policy debates in the US and elsewhere have been turned inside out since the crisis – with potentially devastating consequences. Relying on financial engineering, while avoiding the heavy lifting of structural change, is not a recipe for healthy recovery. On the contrary, it promises more asset bubbles, financial crises, and Japanese-style secular stagnation.

[May 04, 2015] Federal Reserve 1 - 0 Saudi Arabia

May 04, 2015 | Zero Hedge

Since we last updated the state of Saudi Arabia's reserve stash, things have gone from bad to worse. It appears the battle to crush US Shale producers is taking its toll as The FT reports, Saudi Arabia is burning through its foreign reserves at a record rate as the kingdom seeks to maintain spending plans (and thus social stability) despite lower oil prices. All the time The Fed remains 'easy', no matter how negative US Shale cashflows are, the muppets will buy their debt and keep the mal-invested market alive. Saudi reserves are now their lowest in almost 2 years (but they have plenty more to chew through to out-wait The Fed).

Saudi Reserves have dropped to 2 year lows and fallen by the most ever in the last 2 months...

As The FT reports,

The central bank’s foreign reserves have dropped by $36bn, or 5 per cent, over the past two months, as newly crowned King Salman bin Abdulaziz al-Saud dips into Riyadh’s rainy-day fund and increases domestic borrowing to fund public sector salaries and large development projects.

The latest data show Saudi’s foreign reserves dropped by $16bn to $698bn in March, driven by public sector bonuses paid by King Salman after he assumed power in January. This follows a fall of $20bn in February. Saudi Arabia has spent $47bn of foreign reserves since October.

As one analyst noted, “There is a need to rationalise spending,” as King Salman promised a bonus payment for military personnel engaged in the kingdom’s month-long bombardment of Houthi rebels in Yemen, a campaign that itself added pressure to state coffers.

...

“The [military] bonuses are not an encouraging sign,” said Steffen Herthog of the London School of Economics. “It shows the knee-jerk reaction to political challenges is to distribute more money.”

* * *
The royal family, whose social contract with the people offers cradle-to-grave care in return for loyalty, is seeking to reduce state subsidies without sparking popular anger. But analysts are unclear how quickly the government can move on such a sensitive topic.

* * *

Simply out, as long as The Fed keeps ZIRP, it will cost Saudi Arabia.

TeethVillage88s

Business is Business. SA has Oil Clout, but USA would look askance at returning Gold.

However, when you are cash starved, when you have an Obvious Reserves problem, but can't stop till you ruin the Industry... SA could get a way with a short term request for Gold Reserves.

Short term 2 years. 5-7 years would not help with the Driving of Oil Price to $50. USA would stall, stall, stall.

[May 04, 2015] Bill Gross Investment Outlook

Having turned the corner on my 70th year, like prize winning author Julian Barnes, I have a sense of an ending. Death frightens me and causes what Barnes calls great unrest, but for me it is not death but the dying that does so. After all, we each fade into unconsciousness every night, do we not? Where was “I” between 9 and 5 last night? Nowhere that I can remember, with the exception of my infrequent dreams. Where was “I” for the 13 billion years following the Big Bang? I can’t remember, but assume it will be the same after I depart – going back to where I came from, unknown, unremembered, and unconscious after billions of future eons. I’ll miss though, not knowing what becomes of “you” and humanity’s torturous path – how it will all turn out in the end. I’ll miss that sense of an ending, but it seems more of an uneasiness, not a great unrest. What I fear most is the dying – the “Tuesdays with Morrie” that for Morrie became unbearable each and every day in our modern world of medicine and extended living; the suffering that accompanied him and will accompany most of us along that downward sloping glide path filled with cancer, stroke, and associated surgeries which make life less bearable than it was a day, a month, a decade before.

Turning 70 is something that all of us should hope to do but fear at the same time. At 70, parents have died long ago, but now siblings, best friends, even contemporary celebrities and sports heroes pass away, serving as a reminder that any day you could be next. A 70-year-old reads the obituaries with a self-awareness as opposed to an item of interest. Some point out that this heightened intensity should make the moment all the more precious and therein lies the challenge: make it so; make it precious; savor what you have done – family, career, giving back – the “accumulation” that Julian Barnes speaks to. Nevertheless, the “responsibility” for a life’s work grows heavier as we age and the “unrest” less restful by the year. All too soon for each of us, there will be “great unrest” and a journey’s ending from which we came and to where we are going.

A sense of an ending has been frequently mentioned in recent months when applied to asset markets and the great Bull Run that began in 1981

A “sense of an ending” has been frequently mentioned in recent months when applied to asset markets and the great Bull Run that began in 1981. Then, long term Treasury rates were at 14.50% and the Dow at 900. A “20 banger” followed for stocks as Peter Lynch once described such moves, as well as a similar return for 30 year Treasuries after the extraordinary annual yields are factored into the equation: financial wealth was created as never before. Fully invested investors wound up with 20 times as much money as when they began. But as Julian Barnes expressed it with individual lives, so too does his metaphor seem to apply to financial markets: “Accumulation, responsibility, unrest…and then great unrest.” Many prominent investment managers have been sounding similar alarms, some, perhaps a little too soon as with my Investment Outlooks of a few years past titled, “Man in the Mirror”, “Credit Supernova” and others. But now, successful, neither perma-bearish nor perma-bullish managers have spoken to a “sense of an ending” as well. Stanley Druckenmiller, George Soros, Ray Dalio, Jeremy Grantham, among others warn investors that our 35 year investment supercycle may be exhausted. They don’t necessarily counsel heading for the hills, or liquidating assets for cash, but they do speak to low future returns and the increasingly fat tail possibilities of a “bang” at some future date. To them, (and myself) the current bull market is not 35 years old, but twice that in human terms. Surely they and other gurus are looking through their research papers to help predict future financial “obits”, although uncertain of the announcement date. Savor this Bull market moment, they seem to be saying in unison. It will not come again for any of us; unrest lies ahead and low asset returns. Perhaps great unrest, if there is a bubble popping.

Policymakers and asset market bulls, on the other hand speak to the possibility of normalization – a return to 2% growth and 2% inflation in developed countries which may not initially be bond market friendly, but certainly fortuitous for jobs, profits, and stock markets worldwide. Their “New Normal” as I reaffirmed most recently at a Grant’s Interest Rate Observer quarterly conference in NYC, depends on the less than commonsensical notion that a global debt crisis can be cured with more and more debt. At that conference I equated such a notion with a similar real life example of pouring lighter fluid onto a barbeque of warm but not red hot charcoal briquettes in order to cook the spareribs a little bit faster. Disaster in the form of burnt ribs was my historical experience. It will likely be the same for monetary policy, with its QE’s and now negative interest rates that bubble all asset markets.

But for the global economy, which continues to lever as opposed to delever, the path to normalcy seems blocked. Structural elements – the New Normal and secular stagnation, which are the result of aging demographics, high debt/GDP, and technological displacement of labor, are phenomena which appear to have stunted real growth over the past five years and will continue to do so. Even the three strongest developed economies – the U.S., Germany, and the U.K. – have experienced real growth of 2% or less since Lehman. If trillions of dollars of monetary lighter fluid have not succeeded there (and in Japan) these past 5 years, why should we expect Draghi, his ECB, and the Eurozone to fare much differently?

Because of this stunted growth, zero based interest rates, and our difficulty in escaping an ongoing debt crisis, the “sense of an ending” could not be much clearer for asset markets. Where can a negative yielding Euroland bond market go once it reaches (–25) basis points? Minus 50? Perhaps, but then at some point, common sense must acknowledge that savers will no longer be willing to exchange cash Euros for bonds and investment will wither. Funny how bonds were labeled “certificates of confiscation” back in the early 1980’s when yields were 14%. What should we call them now? Likewise, all other financial asset prices are inextricably linked to global yields which discount future cash flows, resulting in an Everest asset price peak which has been successfully scaled, but allows for little additional climbing. Look at it this way: If 3 trillion dollars of negatively yielding Euroland bonds are used as the basis for discounting future earnings streams, then how much higher can Euroland (Japanese, UK, U.S.) P/E’s go? Once an investor has discounted all future cash flows at 0% nominal and perhaps (–2%) real, the only way to climb up a yet undiscovered Everest is for earnings growth to accelerate above historical norms. Get down off this peak, that F. Scott Fitzgerald once described as a “Mountain as big as the Ritz.” Maybe not to sea level, but get down. Credit based oxygen is running out.

At the Grant’s Conference, and in prior Investment Outlooks, I addressed the timing of this “ending” with the following description: “When does our credit based financial system sputter / break down? When investable assets pose too much risk for too little return. Not immediately, but at the margin, credit and stocks begin to be exchanged for figurative and sometimes literal money in a mattress.” We are approaching that point now as bond yields, credit spreads and stock prices have brought financial wealth forward to the point of exhaustion. A rational investor must indeed have a sense of an ending, not another Lehman crash, but a crush of perpetual bull market enthusiasm.

asset prices may be past 70 in market years, but savoring the remaining choices in terms of reward risk remains essential

But what should this rational investor do? Breathe deeply as the noose is tightened at the top of the gallows? Well no, asset prices may be past 70 in “market years”, but savoring the remaining choices in terms of reward / risk remains essential. Yet if yields are too low, credit spreads too tight, and P/E ratios too high, what portfolio or set of ideas can lead to a restful, unconscious evening ‘twixt 9 and 5 AM? That is where an unconstrained portfolio and an unconstrained mindset comes in handy. 35 years of an asset bull market tends to ingrain a certain way of doing things in almost all asset managers. Since capital gains have dominated historical returns, investment managers tend to focus on areas where capital gains seem most probable. They fail to consider that mildly levered income as opposed to capital gains will likely be the favored risk / reward alternative. They forget that Sharpe / information ratios which have long served as the report card for an investor’s alpha generating skills were partially just a function of asset bull markets. Active asset managers as well, conveniently forget that their (my) industry has failed to reduce fees as a percentage of assets which have multiplied by at least a factor of 20 since 1981. They believe therefore, that they and their industry deserve to be 20 times richer because of their skill or better yet, their introduction of confusing and sometimes destructive quantitative technologies and derivatives that led to Lehman and the Great Recession.

Hogwash. This is all ending. The successful portfolio manager for the next 35 years will be one that refocuses on the possibility of periodic negative annual returns and miniscule Sharpe ratios and who employs defensive choices that can be mildly levered to exceed cash returns, if only by 300 to 400 basis points. My recent view of a German Bund short is one such example. At 0%, the cost of carry is just that, and the inevitable return to 1 or 2% yields becomes a high probability, which will lead to a 15% “capital gain” over an uncertain period of time. I wish to still be active in say 2020 to see how this ends. As it is, in 2015, I merely have a sense of an ending, a secular bull market ending with a whimper, not a bang. But if so, like death, only the timing is in doubt. Because of this sense, however, I have unrest, increasingly a great unrest. You should as well.

-William H. Gross

[Apr 22, 2015] Guess What Happened The Last Time Bond Yields Crashed Like This...

Long term bond prices and now really up. So what's next?
Apr 22, 2015 | Zero Hedge
If a major financial crisis was approaching, we would expect to see the “smart money” getting out of stocks and pouring into government bonds that are traditionally considered to be “safe” during a crisis. This is called a “flight to safety” or a “flight to quality“. In the past, when there has been a “flight to quality” we have seen yields for German government bonds and U.S. government bonds go way down. As you will see below, this is exactly what we witnessed during the financial crisis of 2008. U.S. and German bond yields plummeted as money from the stock market was dumped into bonds at a staggering pace. Well, it is starting to happen again. In recent months we have seen U.S. and German bond yields begin to plummet as the “smart money” moves out of the stock market. So is this another sign that we are on the precipice of a significant financial panic?

Back in 2008, German bonds actually began to plunge well before U.S. bonds did. Does that mean that European money is “smarter” than U.S. money? That would certainly be a very interesting theory to explore. As you can see from the chart below, the yield on 10 year German bonds started to fall significantly during the summer of 2008 – several months before the stock market crash in the fall…

... ... ...

Sadly, most people are not willing to learn from history. Even though it is glaringly apparent that we are in a historic financial bubble, most investors on Wall Street cannot see it because they do not want to see it. They want to believe that somehow “things are different this time” and that stocks will just continue to go up indefinitely so that they can keep making lots and lots of money.

And despite what you may think, I actually want this bubble to continue for as long as possible. Despite all of our problems, life is still relatively good in America today – at least compared to what is coming.

I like to refer to this next crisis as our “third strike”.

Back in 2000 and 2001, the dotcom bubble burst and we experienced a painful recession, but we didn’t learn any lessons. That was strike number one.

Then came the financial crash of 2008 and the worst economic downturn since the Great Depression. But we didn’t learn any lessons from that either. Instead, we just reinflated the same old financial bubbles and kept on making the exact same mistakes as before. That was strike number two.

This next financial crisis will be strike number three. After this next crisis, I don’t believe that there will ever be a return to “normal” for the United States. I believe that this is going to be the crisis that unleashes hell in our nation.

So no, I am not eager for that to come. Even though there is no way that this bubble of debt-fueled false prosperity can last indefinitely, I would like for it to last at least a little while longer.

Because what comes after it is going to be truly terrible.

Goldilocks

Stockholm syndrome
http://en.wikipedia.org/wiki/Stockholm_syndrome

Stockholm syndrome, or capture-bonding, is a psychological phenomenon in which hostages express empathy and sympathy and have positive feelings toward their captors, sometimes to the point of defending and identifying with the captors. These feelings are generally considered irrational in light of the danger or risk endured by the victims, who essentially mistake a lack of abuse from their captors for an act of kindness.[1][2] The FBI's Hostage Barricade Database System shows that roughly 8 percent of victims show evidence of Stockholm syndrome.[3]

Stockholm syndrome can be seen as a form of traumatic bonding, which does not necessarily require a hostage scenario, but which describes "strong emotional ties that develop between two persons where one person intermittently harasses, beats, threatens, abuses, or intimidates the other."[4] One commonly used hypothesis to explain the effect of Stockholm syndrome is based on Freudian theory. It suggests that the bonding is the individual's response to trauma in becoming a victim. Identifying with the aggressor is one way that the ego defends itself. When a victim believes the same values as the aggressor, they cease to be perceived as a threat.[5]

[Apr 21, 2015] 'Dollar valueless, about to crash' - World Bank whistleblower

This article from 2013 now is about danger of relying on expert judgment. In this case highly skeptical judgment about the US financial system. Is this woman just three years ahead of events? Or is she completely off the mark? Nobody knows.
Oct 8, 2013 | youtube.com
The US government shutdown - a temporary ailment or a symptom of a grave disease? Are the Republicans right in their move to block Obamacare spending? Who gains from the shutdown turmoil? Do the politicians care about their citizens? Our guest comes from the very heart of the banking system: Karen Hudes was World Bank lawyer when she blew the whistle on major corruption cases in the system and was fired as a result.

Follow@SophieCo_RT

Sophie Shevardnadze: Our guest today is whistleblower Karen Hudes, former senior counsel at the World Bank. Karen, it’s great to have you on a show today.

Karen Hudes: Thanks for having me. Sophie, I’m glad to be with you.

Read the full transcript

SS: So, the government shutdown. Is the move on the part of the Republicans justified? Is fighting off Obamacare worth all this mess?

KH: I think there is something more going on behind the scenes. A lot more, actually.

SS: What do you mean?

KH: Well, there is terrible currency problem. We’re on the verge of the currency war. The Federal Reserve is printing dollars like there is no tomorrow, and if they keep going, the rest of the world is not going to accept them. As it is, the BRICS countries – Brazil, Russia, India, China and South Africa – have decided that they are going to finance the trade among these countries with assets and pay for the difference in gold. And this is the right move for them...

SS: But how is that connected with a shutdown though?

KH: The US Congress has been fighting with the presidency, because the presidency have been in total contempt, and the highest legal officer of the United States government has also been in contempt of Congress in fighting this international corruption that is ruining the dollar as an international reserve currency.

SS: But you know, economists have been predicting the dollar will fall ever since the crisis in 2008. But the Government has managed to keep it afloat.

KH: Well, not for long. If you look at what’s going in the gold and other precious metals markets, silver as well, we’re headed towards something called “permanent gold backwardation”- that means there is a loss in confidence in the fiat currencies that are issued by those private banks. They like to consider themselves as ‘public banks’ but they really are owned by private entities. And these currencies are about to crash because they are valueless, that’s what always happens to paper currencies that aren’t backed by assets.

SS: Like you’ve mentioned - “gold backwardation”, gold is often chanted as perfectly safe investment and alternative to the dollar, even. But how come the price of gold is falling?

KH: Because of market manipulation - but that can only continue for so long because the Central Banks are running out of gold and the rest of the world are lining up to buy them. If you want to buy gold today, you have to pay a premium. What they are offering in the future is called ‘a naked short’. They don’t have the gold to back those offers, that’s illegal what they are doing.

SS: I will get back to gold in a bit. But for now I would like to focus on Obamacare. In your opinion, is Obamacare really that crucial for the US economy?

KH: What you have is something that’s very good for the medical insurers because most of the other countries that offer medical coverage do this through a single issuer. And that’s not what we have here. What we have here is a bill that was drafted by the medical insurance companies. It’s not good for this economy. It never was.

SS: Why do you say it’s not good?

KH: Because what’s happening is that workers that worked full-time are being put deliberately on part-time basis, so that the companies can avoid giving the medical insurance coverage under the provisions of the law.

SS: You know this Obamacare thing.. I’ve heard it many times being compared to Socialism, Communism sometimes even. Do you trace the resemblance?

KH: That’s just because the mainstream media, when they report about what’s going on, are doing it by telling lies and anything that’s good for the powers that be. The mainstream media is completely owned and controlled by the same companies, private companies that own the Federal Reserve System. Most of the American citizens are clueless about the corruption that’s rifling their economy.

SS: But just to make sure - are you saying that everything about Obamacare is bad? Or are there good things about it?

KH: No, of course, there are good things about it. But the problem is that the people that wanted to get up decent coverage were not given the tools, they were not given the equipment, they were not given the press coverage – the honest press coverage, that society needs to enact just legislation. The Congress people are all bribed by these corrupt forces and the American citizens have zero confidence in their Congress.

SS: So, at this point you side with the Republicans for blocking the medicare.

KH: I’m not siding with Democrats or Republicans, because both of those parties have been co-opted by these terrible corrupt forces I’m talking about.

SS: What we have right now is Americans being forced to get health insurance. How does it go with their love of liberties and freedom of choice?

KH: It’s not so much a question of being forced; you have to look at those parts of the society that have been thrown under the bus. The uneducated children, who are not given superior education, like we used to have. We are society that is giving short shrift to the people that need us. I’m not saying that we ignore the health needs of our country. I’m saying that we ignore the mainstream media, because they are not telling us the truth.

SS: You know, I’ve also heard Obama supporters argue that the American Capitalism is on the verge of death in its present form, the way it is existing now, and the social injections, meaning the medical care and Obamacare, are needed as the only way to reform it or save it. Do you agree or disagree with that?

KH: The problem is not with the American citizens, they are a wonderful group, their values are good. It’s just that they are not given the tools that they need to have a just society. They are not given the basic information about what is really going on and who is benefiting from the economies that they are being told… they are being told that they have no money, they have taken an entire city, Detroit, and declared it bankrupt. When what’s actually happening is their tax dollars are not even staying in the society, their tax dollars are going by treaty to the United Kingdom, and then they are being transferred to the Vatican, to the bank of the Vatican. This is not a society that is going to be sustainable on any basis, for any reason.

SS: Do you feel like American economy is picking up because we hear President Obama saying the shutdown hurts American economy but at the very sensitive moment, word is it has just started to catch up. Do you feel like it’s catching up really?

KH: Those numbers about the employment are completely fabricated because they are not counting those people who have given up ever finding a job as unemployed. That’s ridiculous! The real rate is just about double what they reported as being.

SS: So the American debt looks like a doomed patient. Is there any other possibility for it than just grow into eternity forever? I mean raising debt ceiling once or twice a year, what’s the problem?

KH: The problem is actually when you talk about debt, is that our currency is financed by debt; our currency is issued by the Federal Reserve instead of the Treasury which is unconstitutional. When the Federal Reserve System was instituted in 1913 most of the Congress was on break, they sneaked that legislation through. So the debt is there simply for those bankers to put in interest on it and have it grow and compound every year. The debt is a fabrication, it’s probably should be repudiated. But it can be repudiated until you’ll have looked that all of the implications.

SS: Do you think it’s going to go on and on forever?

KH: No, what I think it’s going to happen is that at the upcoming Bretton Woods meeting on October 9th the countries of the world, the foreign ministers of the world are going to sit down and have a rational basis for currency rather than this fiat currency which is absolutely... what can I say, it makes no sense to anyone but the bankers that are issuing it.

SS: So, when you look at the concept of the debt, it’s much more than just borrowing money - it makes you controllable. For example, in the case of US - who controls it, you mean the big corporations, or countries like China and Japan, who control large chunks of the debt?

KH: Well, that’s a very good question and, fortunately, some mathematicians at the Swiss Federal Institute of Technology have given us a very precise answer. They did a study of who owns and controls the companies on the capital markets - 43 000 companies. They found out that there is «a secret super-entity», they call it, that owns 60% of the earnings every year and 40% of the assets. They did this by putting the same people on the boards of these companies. So, they have ten times the economic power than there are entitled to. And they thought that none would catch them at it. This is a huge conglomerate that has been rigging the labor prices, it has been rigging all of the commodity’s prices, and it has been trading in the securities markets with the insider information. It has got to be stopped. It also bought up the media and has been lying to people deliberately. This is going to stop.

SS: So just to answer my question - the government is controlled by the conglomerate or the corporations rather than countries that are up and coming economically, right? Why haven’t these corporations or conglomerate, as you call it, been caught? Why is nothing changing?

KH: That’s the whole point about it. They’d like to think they are in control but they are not, they are not above the law. And we, citizens, know exactly what they are up to, we’ve been working on this problem, all of the governors of the States have been working on this terrible corruption, so have the Attorneys-General, so have the Sheriffs, and it’s not going to continue. The American people are taking back their government and they are stopping this terrible corruption.

SS: As of today, the United States is a financial heart of the world. Whether it collapses or keeps on going, it’s obviously wrong – this much power is concentrated in one place. Asia is a rising monster right now; could it be stealing this financial role from the US? Do you think China, for example, could steal its financial role from the US? Or are they also controlled by that same financial elite you’re mentioning?

KH: Well, I can tell you that the Jesuits have a very strong stranglehold on China as well but I can also tell you that the transition of economic strengths from the western countries to the east is going to happen, but it’s going to happen in a smooth way. It’s not going to be a transition through a currency war like that terrible corrupt group is trying to manipulate everyone into. No, we’re going to have a peaceful power transition this time around; we’re not going to have the World War III. They try to pull it off in Syria, they are now thinking they can pull it off in Iran, it’s not happening. The citizens of the world see what they are doing and we’re not letting them get away with it this time.

SS: Foreign governments keep buying US Treasury bonds despite obvious problems US economy is facing. What’s making them do that, in your opinion?

KH: I think the biggest market for the Federal Reserve notes is the US Treasury and there is a gut of dollars right now. But, yes, there is also a small market, unfortunately, the market is weakening as the dollar weakens because of all of this, what they call quantitative easing, where every month so many additional dollars are printed with absolutely no backing.

SS: Should we be buying gold?

KH: Well, yes and no, I think gold is probably a wise purchase right now, but more as insurance than investment, because there is actually a great deal of gold, there is even more gold than people know about. For example, the amount of gold in the deposit in the Bank of Hawaii is 170 000 tonnes, this is more than the World Gold Council says is available for all the gold on the Earth. People don’t know how much gold there is, there is a lot of gold.

SS: Are you buying gold?

KH: I did actually, yes. But not because it’s an investment, but because I’m not 100% certain that we’re going to get to act together before all of the paper fiat currency falls apart. So I see it as insurance, but because of the amount of gold that’s actually around in the world in deposit all over the world I’m not so sure it’s a great investment.

SS: So you think the return to the gold standard is a realistic thing? It could be a possibility?

KH: Well, actually, that’s not such a good thing. The currency ought to be backed by value, but there is no reason why it should be restricted to precious metals, it could be any of the commodities that are valuable. The important thing is that, yes, the currency should be backed by assets rather than by debt as we now have.

SS: But if a financial collapse happens , let’s say, will gold be of any use? I mean, there is shortage of food, look at the world today, the biggest problem we’re facing is the clean drinking water. What gold is going to do about that?

KH: First of all, I think that we’re going to manage to get our act together; I’m not expecting a collapse. Very accurate game-theory model is showing that we’re going to manage to make a transition in a very smooth way; maybe there’ll be a few fits and starts, but I think most of the countries in the world are in favor of working together and not to have a collapse. The only thing that you’re saying is that some of these crooks haven’t figured out, they haven’t seen the writing on the wall, they haven’t seen that we understand that there is a way to work together and avoid these problems, which are definitely avoidable.

SS: So, Karen, you were a senior counsel at the World Bank. Tell me something, honest banking is this an oxymoron?

KH: No, we have examples all over the place - in the United States, the state of North Dakota has its own state bank and many of the other states are looking at that - at the moment 22 other states are looking at it, and we’re urging the other 28 states to look at it. There was a bank in Amsterdam that, I think, went on for 300 years with no problem. We know how to do banking, it should be like infrastructure to support the economy, it shouldn’t be for the benefit of elites that think they are above the law as we currently have. If you look at the Bank for International Settlements (BIS) - that institution was established when the war reparations were being exacted from Germany after the World War I. That’s when it was started in 1930 and I believe its 60 central banks, that are members of the BIS - those are the corporates, those are the ones that really needs to go out of business.

SS: You first blew the whistle over corruption in the World Bank. Tell us more about your revelations?

KH: Well, that’s actually what happened: I was working in the Philippines and there was a bank… this was at the end of the East Asia financial crisis in the end of the 1990s. And the second largest bank in the Philippines, the Philippine National Bank, there was a loan to strengthen the banking sector and, what happened, that there was a man who own Philippine airlines, Lucio Tan, who ended up buying more than 10% of the shares of the Philippine National Bank without informing the security authorities in the Philippines - that was against the law. And then I told the person who was in charge of the World Bank Lending Program that they should tell the government of the Philippines that the conditions of the loan were not going to be met. And instead I was reassigned, and I didn’t accept that, so I went to the meeting, where it was decided whether or not to disburse the loan and I said that the board was not being informed that the conditions were not met. And then what happened was the loan wasn’t disbursed, but the people who had their money on deposit in that bank withdrew their money and the Philippine Deposit Insurance Corp. had to withdraw, had to back up the bank, for five hundred million dollars, and then we didn’t disburse our loan for two hundred million and the Japanese didn’t disburse their loan for two hundred million. So, that was nine hundred million dollars worth of a poor loan performance and when the evaluation department in the World Bank said that the World Bank had performed satisfactorily, I corrected that report and my correction was never given to the board. That was a cover up. You can’t have a cover up in a bank - that shows that money is going the wrong way. I’ve been working together with other whistleblowers at the World Bank, because we know that the board has to be informed about what’s actually going on. Other whistleblowers have reported double accounting, we reported this to the UK Parliament, I reported it to the European Parliament in 2011 and the European Parliament wrote the letter to the World Bank. I had a very detailed chronology - and the World Bank never responded. Then I’ve been reporting this to the US Congress and when the US Congress was asked to give a capital increase to the World Bank, they had asked for a government accountability office audit which never took place. I was reporting this to the International Organization of Supreme Audit institutions and then I asked the board to require KPMG to do an audit of the World Bank Internal Controls. KPMG did not follow the auditing standards, so I reported this to the public company accounting oversight board, I reported this to the SEC. But since the SEC couldn’t be bothered to sort out the insider trading for the Federal Reserve System, they certainly weren’t going to straighten out the bonds in the World Bank. So I bought a World Bank bond and I sued under the securities laws, and I also went to each and every Attorney-General in the States, and I told the States that they were responsible for making sure that there was accurate financial information going to the bond holders in their States, and I also went to the International Organization of the Securities Commissioners. So, the World Bank has got to be brought into compliance and there has to be transparency in the capital markets, and the insider training of the Federal Reserve System is going to be history in short order.

SS: Do you feel safe after all these leaks, I mean you were fired?

KH: You know I have been working with some very wonderful whistleblowers; in particular, I’d like to mention Mark Novitsky who has been reporting about insider trading and inaccurate financial reporting for Teletech, which is a company that had been spying on American citizens. So, when whistleblowers work together, and compare notes and share information you get a very accurate picture. In addition, I’d like to mention Larry Harrison, who has been my PR guy. So when you have people who you’re working with it’s not so easy to shut the whistleblowers down, we just gain in strength. We‘re going from strength to strength.

SS: Do you feel like you are being heard? Is anything changing?

KH: Well, that’s what I like to ask your audience.

SS: Do you feel like anything changing in the system by whistleblowing on it?

KH: Yes, I absolutely do. I think the number of people they are hearing my message and that are looking into this information, and every day they are sending me e-mails. They are going out and they are getting their neighbors to find out what’s really going on. I don’t think this mainstream media is going to have too big of an audience at the rate we’re going.

SS: There are liberty movements that are actually picking up now, the likes of Bitcoin, for example. Can they ever grow into a solid rival to the conventional system?

KH: I think they’re going to be a force to be reckoned with, yes. It’s a matter of fact. There are other similar kinds of payment systems that are now gaining currency. Yes, I think we’re going to have a world where there’s a lot of choice and the legal tender is not going to be used to put people into debt and to imprison them.

SS: Are you using a Bitcoin as of now?

KH: That’s a good question. I’m trying to learn how. There is a conference that is taking place and I’m going to try to get myself sorted out on that.

SS: Karen, thank you very much for your time. That’s all for today. Our guest was a former insider at the World Bank, ex-senior counsel Karen Hudes. Thanks for watching and we will see next time here in SophieCo.

[Apr 20, 2015] Stop The Presses Nobel-Prize Winning Economist Slams QE

[Apr 14, 2015] The Message from the 22 Year Old Suicide at the Nations Capitol

[Apr 14, 2015] Profiles In Hypocrisy, In the Garden of Beasts

[Apr 12, 2015] Why The Oil Price Collapse Is U.S. Shales Fault

[Apr 07, 2015] Decisions Life and Death on Wall Street

[Apr 12, 2015] The American Consumer Will Never Be Back

[Apr 10, 2015] Where's The Recovery™ - Shout and Feel It

Apr 7, 2015 | jessescrossroadscafe.blogspot.com

"We cannot look to the conscience of the world when our own conscience is asleep."
Carl von Ossietzky, German editor of Die Weltbühne, awarded the Nobel Peace Prize in 1935

"It would be no sin if statesmen learned enough of history to realize that no system which implies control of society by privilege seekers has ever ended in any other way than collapse."

William Dodd, historian and US Ambassador to Germany, 1933

There isn't any recovery. Or at least the false recovery that has been erected is showing great holes through its painted canvas and thin veneer of distorted statistics.

The Fed will still raise interest rates at least once or twice, for 'technical reasons' that have nothing to do with the real economy and everything to do with their own financial engineering practices and the desires of the financiers.

The credibility trap remains a powerful snare for the pampered princes and princesses. How can they admit what is wrong without endangering their own privileged positions and undermining the 'authority' that they so undeservedly enjoy?

And so by example and by continuing reinforcement, lies and deception have become the generally accepted way of doing business in the land of the exceptional. Exceptionally self-deluded that is.

The Banks must be restrained, and the financial system reformed, with balance restored to the economy, before there can be any sustainable recovery.

[Apr 10, 2015] Thursday Unemployment Claims

calculatedriskblog.com

Doc Holiday, Wed, 4/8/2015 - 6:54 pm

Mr. Butter's Warns of Stupid Shit Ahead:

'Profit recession' looms ahead of U.S. first-quarter financial reports - The Globe and Mail

According to FactSet senior earnings analyst John Butters, just 16 companies in the S&P 500 have issued positive guidance prior to releasing their first-quarter results, and 85 firms have ratcheted down their estimates.

“If 16 is the final number of companies issuing positive EPS guidance for the quarter, it will mark the lowest number since Q1 2006,” Mr. Butters said.

[Apr 07, 2015] Bernankes True Legacy

[Apr 05, 2015] Do not Underestimate the Power of Microfoundations

[Apr 07, 2015] Baker Hughes to close Bryan office, terminate employees by Nora Olabi

Apr 06, 2015 | Houston Business Journal

Houston-based Baker Hughes Inc. (NYSE: BHI) is permanently shutting down its Bryan, Texas, office, located just outside College Station, according to KHOU Channel 11.

Fifty-four employees at the office are expected to be terminated.

In a statement to the city of Bryan, Baker Hughes said it "must reduce its cost structure companywide in order to remain competitive in this challenging business environment." Employees may be eligible for redeployment.

Terminated employees will be paid for a 60-day period, and benefits will continue for three months following the closure.

The job cuts are part of a companywide workforce reduction that will minimize cost during this downturn in oil prices. Baker Hughes said it would cut about 7,000 jobs amid slumping oil prices.

Baker Hughes has also closed other facilities to reduce expenditures. Its Mineral Wells, Texas, plant closure affected 110 employees.

During the oil downturn, companies have turned to mergers and acquisitions to shore up finances. Shareholders at Halliburton and Baker Hughes recently approved the companies' $34.6 billion megamerger.

Slumped oil prices have also hit companies such as Weatherford International PLC (NYSE: WFT). The company announced it would cut up to 8,000 jobs in the first half, mostly from the U.S. The company eliminated nearly 7,000 jobs globally just last year.

Here's an update on the Texas energy companies that have cut back amid slumping oil prices this year.

[Apr 03, 2015] West is trying to buy allies of Russia

[Apr 03, 2015] Sitting On Top Of the World

Apr 02, 2015 | Jesse's Café Américain

"Larry [Summers] leaned back in his chair and offered me some advice. I had a choice. I could be an insider or I could be an outsider. Outsiders can say whatever they want.

But people on the inside don’t listen to them. Insiders, however, get lots of access and a chance to push their ideas. People — powerful people — listen to what they have to say. But insiders also understand one unbreakable rule: they don’t criticize other insiders."

Elizabeth Warren, A Fighting Chance

A favorite trick of perception management is to put out a good number, and revise it lower, even sharply so, in the next couple of months, thereby rolling over the material obtained to the more current month, whether it be jobs, or factory orders, or whatever is on display. We saw an example of this today with the Factory Orders.

They do it so regularly that is only remarkable that the mainstream commentators seem to fall for it every time. Thereby we obtain a rolling enthusiasm of improvement, while in the midst of a secular stagnation.

Yes there are certainly more jobs. We are coming off a calamitous decline in economic activity brought on by an asset bubble founded in regulatory capture and widespread financial fraud.

Unfortunately all the abundant monetary stimulus that has flowed from the Fed's Balance Sheet into the financial economy to create these 'jobs' is finding it almost impossible to reach sustainability through a revival in aggregate demand. Instead, it is being used to prop up the balance sheets of the zombie Banks.

This is shown in the unadorned GDP numbers year over year and the flagging velocity of money. Another enormous headwind is globalization that is creating unmanageable social and financial units, and the rise of corporate monopolies that span national borders.

The US may already have slipped into recession. There will most likely be no alarm raised, because the looting of the ship into the first class lifeboats continues, and it is easier if the lower decks remain unaware of the risk.

The rigging of the gold and silver markets is founded in this desire to manage perception. Oh, it is based on a more 'noble' desire to inspire confidence and not make people panic.

But at the same time, it has become an enduring illusion, while the disparities in economic health become increasingly pronounced. And so the looting by the nationless few continues, and justice is led down a hallway and strangled, draped in the national colors, to the sound of patriotic tunes. Such are times of currency war.

The self-serving policy errors of the Federal Reserve Bank are matched only by the horrendously destructive policy errors in political judgment by a Congress and an Executive that has been captured by the moneyed interests.

Who will dare even tell the truth, much less act on it, when the surrender of the truth for 'the story' is one's passport to the more favored classes, the insiders, with all that this implies in terms of comfort and security? The only resignation is to accept a permanent exile, to be without influence, without a voice, ignored.

One must go along to get along, to pay one's dues, extend and pretend, and never, ever, speak ill of the insiders and their schemes. Freedom, who needs it, when you can have security, comfort, and prestige.

So here we are, at peak illusion, just sitting on top of the world.

Have a pleasant evening.

[Apr 02, 2015] On Secular Stagnation: A Response to Bernanke

[Apr 01, 2015] Liquidity Traps, Local and Global (Somewhat Wonkish)

[Apr 01, 2015] Links 3-30-15

Apr 01, 2015 | naked capitalism

Jim Haygood, March 30, 2015 at 8:47 am

So does our dear Uncle Ben (Bernanke):

When I was chairman, more than one legislator accused me and my colleagues on the Fed’s policy-setting Federal Open Market Committee of “throwing seniors under the bus” (to use the words of one senator) by keeping interest rates low. The legislators were concerned about retirees living off their savings and able to obtain only very low rates of return on those savings.

I was concerned about those seniors as well.

http://www.brookings.edu/blogs/ben-bernanke/posts/2015/03/30-why-interest-rates-so-low

To paraphrase an old joke from engineering school, ‘Four years ago, I couldn’t even spell seniur. Now I are one!’

Ben’s screed sounds oh-so-plausible, until one focuses on what it doesn’t say. It doesn’t disclose that a steeply-sloped yield curve, with its lower end anchored at zero, is a direct, unlegislated subsidy to banks who borrow short and lend long.

Of course, borrowing short and lending long is risky. But as the events of 2008 proved, banks that blow themselves up with stupid, risky behavior will get bailed out with public funds if necessary, then subsidized for years afterward with ZIRP. Hey, it’s a bank cartel. When foxes guard the hen house, the dinner menu never varies: chicken!

craazyboy, March 30, 2015 at 9:58 am

More desperate Econ 101 verbiage, disconnected from any reality, attempting to validate the notion that Fed short term policy rates ( a bankers “cost” – not selling price) has any benefit to the economy*. Ok, we know Volker was able to break the economy with 15% short rates. So we are to believe that all you need to do is the opposite of Volker, and voila!, vibrant healthy economy. Yeah, binary brains rejoice!

No mention of securitization and the role it plays in modern banking. You can be interest rate insensitive when you are on the “fee model” and can sell off all your risks – after obfuscating the risks to make a prettier package for yield starved “investors”. “CDS with that”, they will offer for default risk. You might be able to hedge long term inflation/interest rate risk – but your total return probably goes back to zero. Anything to prop up housing prices beyond what the consumer can afford. But maybe the Fed doesn’t know that is going on and Ben is still unaware. hahahahaha. I’m just kidding. Ben isn’t an idiot…oh wait, we’re doing it again???

He was concerned about “seniors” – THEN he threw them under the bus. ‘Course no mention of that growing pre-senior bracket – when you are permanently out of the job market for whatever reason, but have many years to go prior to being eligible for SS.

Then no mention of time frame. Isn’t 6 years and counting long enough to see if you are getting these so called positive effects he claims? Anything weird happening to challenge your theoretical world view? Is a stock bubble a good thing or a bad thing? Is a bubble a store of value? hahahaha Stay tuned if you’re not sure yet.

* About the only “good” effect you can put your finger on is maybe some people and orgs can re-finance at lower rates. But this usually applies to someone that has good credit and not teetering on bankruptcy already. Then typically, to really get the good lower rate you need to get around going thru a bank. So the biggest beneficiaries would be large financially stable corporations with direct access to the bond market. Then this effect may warrant low rates for perhaps a year or so, at which point they all should have done it and be done. By now we have seen what they’ve done with the money, and it generally wasn’t hiring.

JTMcPhee

March 30, 2015 at 3:57 pm

cb, maybe you’ve seen the conglomerate (in the geology sense) behind the “Dismal Science” (sic) link above, http://www.nybooks.com/blogs/gallery/2015/mar/29/whats-wrong-with-the-economy/ How much additional evidence of the bankruptcy of competence (measured by decency and comity and mitigation of pain and such meaningless metrics, or even by the patent failure of economics to meet any of the tests of what constitutes a “scientific discipline”) amongst all the “economists” is needed to nail down an indictment?

Shoot, it is too much for me, at least, to gird myself to pick out the most horrific, all-too-human, and insufficiently humane (from my own “loser’s” perspective, of course), riffs and bits from that March 14–15, 2015, conference, “What’s Wrong with the Economy—and with Economics?” Which convocation seems a little like asking a bunch of bird colonels and 1-star generals and think-tankers and CEOs of post-national corporate thingies like Lockheed “We never Forget who we are Working For” Martin at a gathering at the War College to discuss “What (If Anything) Is Wrong With The Military-Industrial-Congressional-Petro-Financial Complex?”

I won’t pretend to know the CVs and bona fides of the participants (though I don’t see Noam Chomsky and those sorts represented at all), but it looks, reads and sounds like every one of the fat, dumb and happy folks in attendance are all feeding at the same trough. “Oh, our models just need tweaking!” and keep those political-economists at a very long distance, they might inject the notion that human pain is present and inherent, and so very distastefully so, in all their policies, but don’t let that get in the way of a lot of genteel comradery among those admitted to the club… Besides, the “right people” are doing very well indeed, thank you very much. And we need a little time to wrap some bland and dense formulae and definitional constraints around potentially combustible non-scientific notions like equity and morality and honor and decency.

“Burn it all down!” is gaining some steam, folks. Economists and their leash-holders can pretend all they want that they have nomenclature and handles and plans and contingencies for all this overlay of pseudo-scientific Ruler-serving complexity they have created in service to the Elite. The Crowd can be chivvied just so far, and then there’s a stampede.

I can hardly wait, out here in entertainment-space, to see how the fops and courtiers and courtesans and peacekeepers in “The Capital” fare in the last installment of “Hunger Games: Mockingjay II.” The word from the Districts: “President Snow! If we burn, you burn with us!”

Of course, maybe this conference and other such gatherings are really an arch subversive plot to undermine the minions of the “science” wing of the economist brand, and blow a little lift under the pinions of the “political” wing…

Reply ↓

craazyboy

March 30, 2015 at 6:46 pm

Who knows what may happen when you get a bunch of proctologists together for a navel gazing convention.

[Mar 28, 2015] Non-Farm Payrolls Next Week

Mar 28, 2015 | Jesse's Café Américain

"We sometimes forget that central banking as we know it today is, in fact, largely an invention of the past hundred years or so, even though a few central banks can trace their ancestry back to the early nineteenth century or before.

It is a sobering fact that the prominence of central banks in this century has coincided with a general tendency towards more inflation, not less. If the overriding objective is price stability, we did better with the nineteenth-century gold standard and passive central banks, with currency boards, or even with `free banking.'

The truly unique power of a central bank, after all, is the power to create money, and ultimately the power to create is the power to destroy."

Paul Volcker, foreword to The Central Banks, 1995

Price stability is not, of course, the only priority of a central bank, depending on how narrowly or broadly one wishes to define it. But I think that the record of the Federal Reserve over the past twenty to thirty years is abysmal enough to cast doubt on their competency and objectivity by almost any other range of metrics, considering the prolonged stagnant real wage, growing wealth inequality, massively fraudulent banking system, and serial asset bubbles interspersed with systemic crises.

What has gone wrong with our great experiment in central banking and fiat money is a good question, but for another day. But history does suggest that no class or organization is worthy of holding such power, without even more powerful safeguards against its abuse.

Gold and silver were capped around the round numbers for the better part of the day, and took a little cheap shot in the after hours as they did in the early open in New York.

Bubbe Yellen spoke at the San Francisco Fed near the close, basically stirring the verbal pot for the Fed's intended escape from the zero interest rate bound while hedging their bets broadly. See Janet Yellen's Pat Paulsen Speech.

That the program has been a failure to stimulate the economy, instead fostering bubbles, speculation, and much greater wealth inequality while failing to encourage organic growth in wages and livable jobs is besides the point.

The wealthy and the Banks are doing great, and look forward to doing even better as they continue to consolidate production and acquiring income producing assets on the cheap and paying for them with inflated paper like stock and bonds.

I have included the economic calendar for next week below, because it is likely to be more of an influence on the metals. Especially so in light of Bubbe's remarks about data dependency and the categories of data which she is setting her eyes upon.

The problem is much more than the Fed. The trade deals being negotiated, TTIP and TTP, are designed to continue to erode the power of people to make choices for their nation in terms of standards of living, social justice, child labor, environment, and so forth.

The bigger picture, which so few really understand, is the ongoing currency war, and the changes that are taking place to progress the post-Bretton Woods status quo. They cannot understand it because they have really known nothing else in their lifetimes, and their knowledge of history is highly selective and often wanting. They grasp on to often self-serving, crackpot theories to reassure themselves that change is not coming, and their pampered places are secure.

Change is coming. It may be entering modestly seated on the colt of an ass, but depending on how it is received, it may be bringing redemption for those who receive it, and a stinging rebuke for the den of thieves that have distorted the courtyards of the markets.

The choice is of course ours, but all things considered, we seem to be a people generally inclined to making very bad choices and building desolate places, and painting the bones of our folly contained therein with a thin coating of whitewash and rationalization. Those who rule those foul places were better off if they had never been born.

"And when he drew near and saw the City, he wept over it, saying, 'Would that you, even you, had known on this day the things that make for peace and prosperity! But now they are hidden from your eyes. For the days will come when your enemies will set up barriers around you, and surround you, and hem you in on every side, and tear you down to the ground, you and your children within you. And they will not leave one stone upon another in you, because you did not know the time of your judgement and redemption.'”

Have a pleasant weekend.

[Mar 28, 2015] The Confidence Witch

Mar 28, 2015 | Economist's View
Gloomy European Economist, Francesco Saraceno:
The Confidence Witch: ...The confidence fairy seems to have turned into a confidence witch. One more victim of the crisis. But this one will not be missed.
It is not shameful to change opinion. Rather the contrary, it is a sign of intellectual courage. Two years ago, the IMF famously surprised commentators worldwide with a rather substantial U-turn on the impact of austerity. Revised calculations on the size of multipliers led them to acknowledge that they had underestimated the impact of austerity on economic activity.
Even at that time it started with a technical paper. But significantly, that paper was coauthored by Olivier Blanchard, IMF Chief Economist. It then served as the basis for a progress report on Greece, in June 2013, that de facto disavowed the first bailout program arguing that austerity had proven to be self-defeating.
Let us just hope that in the ECB new building communication between the research department and the top guys is more effective than in the old one…

pgl said...

Maybe this should be called the Confidence Bitch.

kthomas said in reply to pgl...

The Confidence the Clown.

[Mar 26, 2015] Revealed: how the FBI coordinated the crackdown on Occupy by Naomi Wolf

Quote: "The fusion of the tracking of money and the suppression of dissent means that a huge area of vulnerability in civil society – people's income streams and financial records – is now firmly in the hands of the banks, which are, in turn, now in the business of tracking your dissent."
Dec 29, 2012 | The Guardian

RideAPaleHorse -> bullwinkle 29 Dec 2012 20:13

@bullwinkle - Sorry, but to merely put this down to misleading information on the internet is garbage.

Giving us interest on money is no return at all when inflation is factored in to it. Why is so much energy put into keeping the real inflation rate from the public? Because it shows us how much the money is being destroyed - how little wages go up compared to cost of living.

I haven't the time nor energy tonight to go into this but seriously, anyone who is reading bullwinkles rebuttal and thinking, "yeah, maybe this guys got it figured out. The banks aren't out to screw us over!!" He hasn't at all. Check it out for yourself. There are stacks of viable and credible sources of information online.

The money scam is the most pertinent issues facing us today.

[Mar 22, 2015] Economists View Controlling the Past

[Mar 22, 2015] That Was The Week That Was

[Mar 21, 2015] You Think Youre An Investor I Think Not Zero Hedge

[Mar 20, 2015] Here Is The Reason Why Stocks Are Soaring, Or Farewell Recovery... Again

[Mar 21, 2015] Ben Bernanke Was Right No Rate Normalization During My Lifetime

[Mar 20, 2015] The Fed's Reckless Gamble

[Mar 19, 2015] The Central Banks Will Not Be Able to Control This

[Mar 18, 2015] Here Is Why The Fed Cant Hike Rates By Even 0.25%

[Mar 19, 2015] How Many Shale Oil Plays Make Money At $37 Per Barrel (Spoiler Alert None)

[Mar 15, 2015] North America Crude Oil Production Remains Strong

[Mar 16, 2015] List of countries by oil consumption

[Mar 16, 2015] World Crude Oil Production by Year (Thousand Barrels per Day)

[Mar 16, 2015] File Under Improving Economy, Not

[Mar 16, 2015] Chris Hedges America is a Tinderbox naked capitalism

[Mar 12, 2015] The Rape of the American Mind

[Mar 11, 2015] The Gathering Storm

[Mar 11, 2015] U.S. oil production still surging

[Mar 10, 2015] Alan Greenspan Warns Of Explosive Inflation Tinderbox Looking For A Spark

Mar 10, 2015 |
Zero Hedge

Last month it was revealed that former federal reserve Chairman Alan Greenspan, the architect of U.S. monetary policy under four Presidents, is anticipating a significant market event as a result of the trillions of dollars that have been pumped into the system over the last several years. According to Greenspan, something big is coming.

His comments were shared by well known resource analyst Brien Lundin, who joined Greenspan for private discussions at last year’s New Orleans Investment Conference. In his latest interview Lundin further clarifies Greenspan’s private thoughts on current economic and monetary policy and sheds light on the former Fed Chairman’s suggestion that ‘something big is coming.

Greenspan made some good points to me… He was concerned about inflation… He was specifically concerned in relation to the outstanding, or excess, reserves which are close to three trillion dollars being held on the Fed balance sheet now… That money is just hanging over the U.S. economy like a big water balloon of liquidity and it’s just searching for a pin.

In fact, Greenspan referred to it as a tinderbox of explosive inflation looking for a spark.

Watch the full insider interview:

[Mar 07, 2015] How America Added 17 Million People In 7 Years... And Zero Full-Time Jobs

Mar 07, 2015 | Zero Hedge

Submitted by Chris Hamilton via Hambone's Stuff blog

Amazing Math from the Bureau of Labor Statistics

According to the most recent Bureau of Labor Statistics release, the UE (unemployment) rate fell to 5.5% as of February. The last time the UE rate was this low was May of 2008.

What I’m fascinated by is the fact that the US population grew from February 2008 to February 2015 by 16.8 million persons, or a 5.5% increase in total population, and on a net basis, not a single one of those 16.8 million persons got a FT (full time) job… while a net 2.7 million were lucky enough to get a (or multiple) PT (part time) job.

This means that 14.3 million persons, or 4.4% of the current US population, were added without a single job among them (chart below). This makes for fascinating math when a 4.4% increase of the total US population without jobs can nearly halve the UE rate down to 5.5%, equal to 2008’s UE rates?!?

The recent BLS data are considered "strong employment reports" and are taken as such booming harbingers of economic accomplishment that the Federal Reserve feels rates need to begin their long awaited hikes.

Just to avoid some confusion on this 16.8 million population growth…this does not mean there was a baby boom over this period…quite the opposite as a flat birth rate has been offset by an even faster declining death rate (the baby boom and older generations are living much longer than previous generations…thus the pig through the python population growth).

And just to make sure this isn’t cherry picking data…below is non-seasonally adjusted raw data from the Bureau of Labor Statistics back to ’08 showing rising PT jobs and declining FT jobs.

Renfield

The point isn't so much that BLS fakes its numbers. The point is the futility of believing ANY self-reporting - by government or anyone else, but especially by government. (Because they also have power of decree enforcement, their 'statistics' should be treated as propaganda and assumed to be lies as a matter of course.)

[Mar 05, 2015] Angry Bear » Why Liberals Keep Losing by Steve Roth

The problem is that a large part of Democrats are 100% pure neoliberals who might be even worse then Republicans. At least Republicans are less hypocritical. From comments: "The Democrats couldn’t round up enough solid votes to pass card check, a significant amount of the caucus is neo-liberal."
March 4, 2015 | angrybearblog.com

James Carville was certainly right: “It’s the economy, stupid.”

And under Democrats (compared to Republicans), the economy kicks ass:

Screen shot 2015-02-23 at 8.41.56 AM

This is GDP growth, but that kick-assness is blatant in any economic measure you look at, from job growth to stock-market returns to household income to government deficits. And it’s true over any lengthy period (say, 30+ years) over the last century. I could post fifty graphics here that tell exactly the same story. (Here’s a favorite: even the rich get richer under Democrats.)

But now ask yourself: how many Americans know that Democrats make them richer? (Lots richer.) One in ten? Maybe? Now ask yourself why liberals keep losing.

The Republicans have successfully branded themselves as “the party of growth,” and Democrats have just let them do it, for decades — even though it’s completely contrary to reality.

Democrats have the strongest possible political argument sitting in their rhetorical holsters, but for whatever reasons, they just won’t draw.

There is one and only one story that Democrats need to be telling, and they need to follow the Republican political playbook: repeat it endlessly, for years on end.

We will make you richer. We’ve been doing it for decades, and we’ll keep doing it.

“Equality” is important (especially because it does make people richer). But really: Americans just change the channel.

“Opportunity” is important. But it’s just a proxy for, a chance of, getting richer.

“Getting the rich” (truly progressive taxes, a more-level playing field, reining in finance) is necessary and important. But Americans get only visceral satisfaction from that message – it doesn’t speak to personal, direct, material benefit that they’re going to experience.

Americans want to hear how Democrats are going to make them more prosperous. Full stop.

And Democrats have a loud-and-clear story on that subject. They just need to 1) tell that story constantly, repetitively, ad nauseum, like the Republicans do, and 2) put aside other stories (like, identity politics) that dilute, confuse, and distract from that story.

Start with that lede — “we make America prosperous” — and a whole litany of talking points emerges. And they’re the very talking points that have driven Republicans’ (otherwise inexplicable) political success over the last thirty years.

But there’s one key advantage for Democrats: In their mouths…the story is true.

Democrats could be stealing Republicans’ best Frank Luntz/Grover Norquist talking points and riding them all the way to the ballot box. Here’s a sampling to start with:

Take the graph from the top of this post and put it on billboards all over America. It’s time for Americans to understand who makes them richer.

Cross-posted at Asymptosis.

Denis Drew , March 4, 2015 2:52 pm

I saw an idea in the Washington Post yesterday that might be the — no candidate could invent any excuse to oppose it/no candidate should dare — perfect Democratic win issue: a law requiring a vote for or against having a union in every workplace. This vote would take place in every workplace every so many years. How can a pol tell us we cannot vote?!

Laws that decimate unions may be inevitable. Here’s how labor can survive.

Mark Jamison, March 4, 2015 4:51 pm

Denis, I love your idea but it isn’t going to happen and I doubt it would be as cut and dried as you suggest. The Democrats couldn’t round up enough solid votes to pass card check, a significant amount of the caucus is neo-liberal.

One example, Senator Tammy Baldwin from Wisconsin. She has bent over backward to carry water for a large printer in her state and for the paper industry with respect to postal issues. She hasn’t shown a bit of concern for all the jobs lost at the various processing plants in Wisconsin, real job losses not the anticipated kind Quad Graphics and the paper companies say will occur with modest increases in advertising rates (losses that aren’t supported by any economic analysis).

Baldwin’s one expression of concern for labor was to demand that the PMG make sure the same percentage of managers lost their jobs as craft employees.

As for the general claim of this piece, it’s hard to disagree but Democratic growth hasn’t led to increases in wages. It hasn’t led to a system where productivity gains are shared beyond the 1%. There’s no question that at this point in time any nominal Democrat is better than any nominal Republican but quite frankly that isn’t saying much. Bill Clinton’s economic team helped set the table for a whole lot of pain for a whole lot of folks. Was Clinton’s triangulating better than what any Republican would have done? No doubt but that doesn’t mean that what Clinton did was all that good.
There’s a world of difference between Democrats like Warren, Brown, and Whitehouse than a good deal of the caucus. We need to return to ideas that value public goods, that create an even playing field for workers and labor while reining in the excesses of the technocratic watch state.

Thornton Hall, March 4, 2015 7:00 pm

If you want to know why something worked in the time of FDR but not in the time of Clinton, you might ask yourself: what has changed?

Have politicians changed? FDR was a rich scion of the Northeast. Congress was full of lawyers, doctors, and other wealthy people. Big banks used their cash for maximum influence. None of that is any “worse” now than it was then.

There has been a dramatic change, though. The media used to be produced by the working class, for the working class. Pulitzer and Hearst employed high school graduates who wrote things that other not-well-educated people wanted to read.

Today, our journalists have masters degrees and write breathy inside baseball stories that are all based on the (ruinous) Watergate formula of professional news: access, access, access.

The “left” bitches and moans about leadership and messaging and a long list of things that haven’t changed. Just because you’re educated, don’t mean you’re smart.

[Feb 27, 2015] The EU’s plan for an energy union would call Vladimir Putin’s bluff

[Feb 27, 2015] Over-Confidence on Steroids

"We run carelessly to the precipice, after we have put up a façade to prevent ourselves from seeing it.”

Blaise Pascal

Gold and silver were hit by selling in NY this morning.

Hey, why not? Things are just what we say they are, especially when they have an increasingly tenuous connection to reality.

There was intraday commentary about 'Debt Is Just Money That We Owe Ourselves Here.'

This is beginning to feel a whole lot like 2006, where a few were just about crawling out of their skins with the nonsensicalness of what they were hearing, and the looming disaster which they saw coming.

No one really listened. I remember vividly making noise on economic chatboards, with participants saying things like 'what does he want' and 'what is he saying?' After all, Greenspan had assured us that housing was invincible and incapable of being in a bubble, and Bernanke had things well in hand, with theory triumphing over all.

And then as it is now, the herd was just blithely rolling along, following Wall Street into the next unforeseeable financial crisis.

We are there again. And like then, they know it. But they think they can manage it to their benefit, so why would they care?

And given the chance, they will do it again. It is the pleasant cycle of financialisation and accumulation. We are diverted by bread and circuses, the media's sturm und drang that anesthetizes thought.

Economists-Say-Dumb-Things Chronicles: 'Debt Is Money We Owe To Ourselves'

11 February 2015

Like so many sloppy discussions of economics to make an important policy point, but badly, this one diverges from common shared reality fairly quickly.

Let me strike the key hypothesis in this, that prompts a leap of faith, over a cliff and into the abyss of fantasy.

"Debt is money we owe to ourselves."

Something on which Mr. Krugman can agree with Dick Cheney who said, 'Reagan proved that deficits don't matter.' How is that for a twist?

From an accounting standpoint and within the realm of theoretical identities this is true. Each debt is someone else's asset.

The key of course is how we define 'ourselves.'

If 'we' are the entire planet, equally and without distinction of interests and property, then perhaps one might say, ok, although it loses all meaning and significance. I would not mind pooling my household books with one of the Banking billionaires and to be able to step up to the Fed's free cash window anytime to do my business, with the assurance that I have a government guarantee underpinning my ledger, but alas.

And this is a problem because the paramount issue we are facing today is the historically extreme concentration of capital assets in a relatively few hands, and the burden of unpayable debts being imposed upon a large segment of the people by a system that has been hijacked by the moneyed interests.

If you take this pithless observation by Mr. Krugman down one level of detail in the States for example, one finds that the debt is an asset on the books of a increasingly small number of wealthy people, with much of it controlled for them by a handful of Banks.

This system is not sustainable, and I see no sign that it will even cohere, without substantial reform.

I wonder if the average American who is losing their car and house, and who is being hounded by debt collectors for whom those debts seems to matter a great deal, can use that argument with the Banks.

Putting aside private debts, let's just stay in the realm of sovereign debt, where the economic imagination can more easily take its flights of fancy.

Debt is just money we owe to ourselves is similar to the flat pronouncement that a sovereign that issues its own currency can never default. Money is just an accounting entry so why the fuss? And from this comes a Pandora's Box of muddy thinking, a selective myopia towards history, and Trillion Dollar Platinum coins.

I wonder if Greece can use this argument, that debt is just money that we owe to 'ourselves,' when they meet with the Germans this week.

But no, the US is different. Every other country may fail, and many have including that insubstantial nation of Russia not all that long ago, but not us. We are young and immortal. Our benchmark for virtue is power, and we are virtuous enough to be able to say that when things are not working out as we planned, we are able to decree that 'money is whatever we say it is,' and God help anyone who does not agree.

And so we might presume that the mighty US is going to be able to make that case about debt forever to its creditors who are outside the direct thought control of its monetary system, a short list of which is contained below.

It is funny how the moneyed interests and their courtiers are always saying, 'debt doesn't matter,' especially when they want us to assume their gambling debts which they incurred by frauds using our own money. Until, that is, they decide to call in the loans and the debts, and impose their will upon the people with foreclosures, garnishment, austerity, and debtors' prisons.

I agree wholeheartedly that the rhetoric around the discussion of spending priorities gets silly and overheated and quite frankly disgusting. That has more to do with a society in the grip of a greedy few, corrupt public servants, sophistical theoreticians, and boisterous minions than it does with the need to expand our economic theories into existential irrelevance. Madness is certainly attractive perhaps in a land going mad, but it is unlikely to be productive.

Arguments like those from the MMT crowd, both right and left, and economists like Paul do us no favors in concocting some fantastical solution to what is primarily a problem of governance, justice, transparency, and power gone horrible wrong.

The 'debt' and the 'budget' are not an economics argument but a policy argument. What is important to us? What do we continue to hold as these truths? And how do we resolve those disagreements? Avoiding that policy and priority discussion enables those who are caught in the credibility trap to continue to beg the question entirely, and the real task at hand, which is reform.

We cannot discuss reform until we expose the corruption. And therein lies the problem, because quite a few powerful hands have been dipping into the largesse, and quite a few courtiers have a vested interest in continuing to propagate the lies and myths of a failing system.

I am not a 'hard money' guy. I am certainly not in favor of a domestic gold standard as a remedy for our current set of problems.

What I am saying, and I think it has been consistently so, is that the system that we have now is so fundamentally broken that no matter what incidental things that we do, no matter how much stimulus is provided under whatever rationales, that all good will be turned to ill, the gap of inequality will keep widening, and that the situation will continue to worsen, lurching from crisis to crisis.

Is this not what we have seen since all the programs were put in place since the crisis of 2008? That the rich are getting richer, because all we have really done is prop up an unjust, broken, and unworkable system. And I think that this is the point that is being made by Greece in Europe today.

You cannot keep a game running when the insiders that control it are making up the rules as they go along, hiding their assets, dictating the judges' decisions, dipping into the other players money at will, and generally cheating and doing whatever they wish when they wish, because they can.

The system is too flawed to be sustainable, and must change in order to cohere.

NY Times

Debt Is Money We Owe To Ourselves

By Paul Krugman

February 6, 2015

Antonio Fatas, commenting on recent work on deleveraging or the lack thereof, emphasizes one of my favorite points: no, debt does not mean that we’re stealing from future generations. Globally, and for the most part even within countries, a rise in debt isn’t an indication that we’re living beyond our means, because as Fatas puts it, one person’s debt is another person’s asset; or as I equivalently put it, debt is money we owe to ourselves — an obviously true statement that, I have discovered, has the power to induce blinding rage in many people...

More than that, as Fatas points out, rising debt could be a good sign. Think of my little two-classes model of debt, where some people are less patient than others — perhaps (to step outside the model a bit) because they have better investment opportunities. Moving from a very limited financial system that doesn’t allow much debt to a somewhat more open-minded system should, in that case, be good for growth and welfare...

And the problems with public debt are also mainly about possible instability rather than “borrowing from our children”. The rhetoric of fiscal debates has been, for the most part, nonsense.

Read the entire piece here.

Posted by Jesse at 3:10 PM

[Feb 27, 2015] Sturm und Drang

"...it is the most alarming example of cheap demagoguery you are likely to have seen."

George Monbiot, on Rick Santelli

February 10, 2015 | jessescrossroadscafe.blogspot.com

I watched CNBC today, which is unusual.

When Adam Johnson left Bloomberg the quality declined markedly, wavering between screechy and vacuous, with lots of gossipy and giggly segways. A few notable exceptions like Julie Hyman, Tom Keene, and Eric Schatzker, but not as many since Adam Johnson left.

CNBC is not much better, again with a few notable exceptions like Bill Griffeth and Kelly Evans. It was pretty much the 'same old' as it was when I stopped watching it a few years ago.

But Rick Santelli was quite the sight.

His eyes became very open and wild as he pressed his face to the camera, his nostrils were flaring, and you could see the spit flying out of his mouth. Network for the one percent. Maybe time for a teeth cleaning.

I have seen him good naturedly gooning it up with his pit trading cronies several times before, who seem to be a dying breed by the way, and it was something you could just take in stride.

But this was something different, chewing-the-scenery-wise. Is there an inverse relationship between bombast and ratings?

It is 'financial television' after all. Infomercials interspersed with country club crudité infotainment. But today he had the persona of a park bench lunatic, and it was decidedly unattractive, if not disturbing.

And it was clearly an act.

Is he supposed to be the bad guy or the good guy? Or just the extreme guy, like George 'The Animal' Steele? Is this some new twist in broadcast journalism? Are they getting their production values from professional wrestling these days?

Who is doing their casting, Vince McMahon? And their directing, Ed Wood? Are they just following the fashions of the day? Are we all Bobby Heenan now?

Do we even know what genuine human life is all about, anymore? Do we even care? Living life in stereotypes and spin is simpler and more pliantly digestible. Is life imitating art, in caricature?

The saddest part is that this is becoming a tone for not just finance but 'the real news,' led by Fox and CNBC's sister, MSNBC. And the very serious Sunday morning shows are going off-the-hook as well, as they grapple with a credibility gap that prevents the political and media elite from acknowledging the decline in the average person's reality.

Speaking of unattractive and disturbing, the SP futures managed to rally solidly up to the top of the big resistance around 2065 for the fifth time since mid January.

The big tickle is going to be Greece this week, with maybe a nod from the Ukraine. If we get a surprise settlement on Greece by some miracle tomorrow, the markets will do a moonshot.

It is hard to tell. Most of the local (US) commentary is either hopelessly slanted or incredibly naïve. It is sad when very good financial commentators decide to be political analysts too. Or when financial commenters decide to embark on flights of fantasy. I have enough actual experience to know what I do not know, and that is quite a bit. At least I'll admit it. But speculating about what is happening or what might happen is fun when you are unconstrained by facts.

One has to tune out the sturm und drang with which the players are filling the airwaves as they prepare to get serious. This is the oh yeah, yeah! portion of the prototypical schoolyard encounter.

So let's keep an eye on the geopoliticals, because I do not think the stock markets will unleash the rally monkeys until they are more sure that something disruptive is not coming. Even if the talks completely break down and Greek says they will exit, I suspect we *might* see a relief rally after an initial plunge. Remember the mistaken optimism prior to the crushing reality of Lehman Brothers?

Have a pleasant evening.

[Feb 26, 2015] EU Warns of Debt Dangers Facing Ireland and Euro Zone – “Emperor Has No Clothes”

goldcore.com

- High “structural” unemployment, high levels of public and private debt and a still vulnerable banking sector are weighing on the Irish economy

- Report further casts doubt on the “recovery” narrative being touted by governments, banks and vested interests across the world

- Levels of spin and denial not seen since before the crash of 2008

[Feb 26, 2015] The Technical Fundamentals

Feb 26, 2015 | Jesse's Café Américain

This market feels heavier than it looks.

It is hard to judge 'sentiment' because the market is being almost totally dominated by a few institutions, a handful of very large trading desks, and a swirling crowd of HFT hit and run predators.

So given this concentration of power, the market can move in just about any direction that external events, or the lack thereof, may permit.

The 'fundamentals' are not in play, at least for now. And so the markets may continue to diverge from the real economy, until they cannot. And then the reckoning comes.

The Fed is absolutely NOT blameless in this exercise, as they were not blameless in the past. They publicly denied there was a stock bubble, while discussing it in private.

They just let it run its course without even taking the minimal actions which they possessed then as a regulator, which are much greater now.

Have a pleasant evening.

[Feb 25, 2015] Ukraine Enters The Endgame

Ex-Plunge Protection Team Whistleblower Governments Control Markets; There Is No Price Discovery Anymore

Feb 23, 2015 | Zero Hedge

Conspiracy 'Theory' becomes Conspiracy 'Fact.

"There's no price discovery anymore by the market... governments impose prices on the market." - Pippa Malmgren, former member of the U.S. President’s Working Group on Financial Markets.

In this 38 minute interview Lars Schall, for Matterhorn Asset Management, speaks with Dr Pippa Malmgren, a US financial advisor and policy expert based in London. Dr Malmgren has been a member of the U.S. President’s Working Group on Financial Markets (a.k.a. the “Plunge Protection Team”). They address, inter alia:

Full interview:

https://www.youtube.com/watch?v=mEGzfxHcbMA

See also

[Feb 23, 2015] What's Next For Oil And Gold Thoughts From Eric Sprott, Rick Rule And Marc Faber

Feb 23, 2015 | Zero Hedge
“ How can we have an economic recovery when there is barely any discretionary disposable income for 40% of the population? As we have shown above, those that have seen their incomes grow are not the ones most likely to spend, while the bottom 40% of households still rely heavily on government assistance, have had stagnant incomes and have been faced with increasing inflation for “non-discretionary” goods that constitute a very large share of their incomes. There is clearly no recovery…

- Eric Sprott, Chairman and Founder of Sprott Inc., July 2014

“ Most developed economies have consumed and borrowed at worrying levels. The US federal government has on-balance-sheet liabilities of over $16 trillion and off-balance-sheet liabilities estimated at about $70 trillion. These numbers do not include state and local government liabilities, or the likely liabilities from underfunded private pensions. Not to mention increased costs associated with more comprehensive health care and an aging population!”

- Rick Rule, Chairman of Sprott US Holdings Ltd., July 2014

“This is the second longest bull market in the last 100 years. I wouldn’t buy shares here. I’m not interested. Now can the market go up another 20 percent? I wasn’t interested to buy the NASDAQ in late 1999, but between January 2000 to March 2000, the NASDAQ went up another 30%. Afterwards people were crying when they realized their losses. The markets go up and down. I think that the upside potential now for the general stock market is very limited and there is considerable downside risk. Probably more downside risk than investors realize.”

- Marc Faber, Board of Directors of Sprott Inc., February 2014

Below are some further perspective on what may be next for oil and gold from Eric Sprott, Rick Rule and Marc Faber.

* * *

Weakness Around the World

The oil price is driven by the same dynamic that underpins the case for most commodities, such as copper, uranium, or iron ore.

As people get richer, especially in emerging markets, they tend to consume more metals with which to build houses and cars, and more fuels to generate energy and power machines.

Yet commodities have been flat since the Great Recession ended, suggesting, once again, that economic growth is slowing down.

The price of copper is at a four-and-a-half-year low of $2.60 per pound. Uranium sells for $36 per pound today, down from around $65 in 2011. Iron ore for delivery in 2015 trades for below $60 per tonne on the futures market, down from over $180 per tonne in 2011.

The price of oil, meanwhile, had not declined substantially over the last three years. Perhaps its recent price collapse is not as sudden and inexplicable as many believe.

Indeed, a low oil price is consistent with the price action we’ve seen in other commodities. It also dovetails with economic data we’re seeing from around the world, which suggest that global growth rates are simply decreasing.

The Eurozone is trudging along more slowly than the US, according to statistics from the European Central Bank. In the third quarter of 2014, its GDP was nearly flat at 0.3% in growth. Inventories were being dis-hoarded, falling by around 15 billion euros over the last 6 months. This suggests that fewer goods are being produced and stockpiled – a response to weak demand. Employment grew by 0.2% over the quarter, meaning that unemployment levels are still high for the developed world, and industrial production increased by only 0.1%.

The situation is similar in Japan. Despite sustained ultra-low interest rates and activist policies meant to stoke growth, the country is mired in what isn’t far off from being a depression. Its GDP shrank 0.5% in the third quarter of 2014, right on the heels of a more than 1.5% contraction in the second quarter.

Developed-world economies are not the only ones that are experiencing weakness now.

China’s annual growth rate has slowed from around 10% in 2011 to around 7.5% as of the third quarter of 2014. 11 Its domestic consumer market appears subdued. In the third quarter of 2014, the Consumer Price Index (CPI), which measures the average change in the prices of consumer goods and services, was its lowest since February 2010. The real estate market has been weak and domestic investments in fixed assets – which includes new building projects – grew by only 16.1%. That number was above 21% in early 2013, and has been declining steadily ever since.

Weak economies around the world offer weak demand for commodities and for capital. The effect is to keep interest rates extremely low and to push commodity prices down.

The same logic applies to oil, which has long been priced with the expectation of ever-increasing demand and ever-declining supply. We can therefore view the oil price as a symptom of poor global economic growth, which is a long-term problem – and not just as a short-lived consequence of a slight oversupply of oil.

Falling oil prices are yet another sign that the world economy may be more fragile than before the Great Recession.

Why is this important? Well, many write off the oil price drop as merely the machinations of Saudi Arabia to throw a monkey wrench in the wheels of the US shale industry – or perhaps a market that’s over-reacting to a slight supply and demand imbalance. You would then naturally expect a quick recovery after the market worked through the problem of oversupply, or once OPEC and Saudi Arabia had adequately bludgeoned its rivals. On the other hand, if you attribute the oil price decline to a more significant underlying issue within the world economy, then the oil price drop starts to look like the harbinger of a more long-term trend.

[Feb 20, 2015] No Tech Bubble Here, Says CNN This Time It's Different

when Uber is given a valuation of $40 billion, can a crash be far behind?

February 20, 2015 | Slashdot

ErichTheRed writes

I saw this on the Money page of CNN today. Apparently, various stock analysts have declared that this run-up in stock prices is different than the 1999 version. OK, we don't have the pets.com sock puppet, Webvan or theglobe.com anymore, but when Uber is given a valuation of $40 billion, can a crash be far behind?

Anonymous Coward

...Fool me twice, shame on me.

This is wise advice when discussing the Wall Street crowd.

[Feb 10, 2015] This Man Will Never Be Invited Back On CNBC

Feb 10, 2015 | Zero Hedge

And now for something completely unexpected: 2 minutes of pure truth (courtesy of Mizuho's Steve Ricchiuto) on CNBC...

148 seconds of awkward uncomfortable truthiness...

While Steve had a number of hard to hear quotes for the CNBC anchors - such as:

"There is no acceleration in underlying economic activity," and

"There's this wrong concept that I keep on hearing about in the financial press about the acceleration in economic growth... It's not happening!"

A stunned Simon Hobbs rebuffs, "That's a long list of non-ideal situations we find ourselves in," to which Ricchiuto snaps back "and we can keep on going!"

"After a string of dismal data on durable goods, retail spending, and inventories, we get a good jobs number and everyone saying the economy's good - it's not good!"

It was Sara Eisen that had the quote of the brief clip... (which has unbelievably been edited out since we posted it seems at around the 1:40 mark) when faced Steve's barrage of facts about the real economy, replied:

"but the key is that's not what The Fed is telling us."

Summing up the unbelievable 'faith' (misplaced beyond all reputational loss) that so many have in the central planners of the world.

realmoney2015

Nobody 'listens' to MSM. They have either turned it off or they zonk out. If people listen to MSM they would realize that it is all propaganda!

We all know that the Fed can't raise interest rates. Look at the housing market! It's terrible. What would it look like if interest rates were to rise? The economy has not and will not improve until it crashes completely and resets (hopefully with real free markets).

Until then, stop going in debt. Only buy what you can afford. Use cash as much as possible. Better yet, use silver where its possible. Friend helps you move, give him a silver eagle. Need a lift to the airport give them a few silver dimes. If your friends won't accept these as payments maybe these candles with silver coin prizes would be better appreciated:

https://www.etsy.com/shop/ScentSavers?ref=hdr_shop_menu

http://www.zerohedge.com/news/2015-02-05/3-things-56-lie-dividend-cuts-valuation

Now, Jim Clifton is back stating that not only is BLS wrong in its assumptions about employment activity, but also that the 5.6% unemployment number is "extremely misleading."

"The official unemployment rate, as reported by the U.S. Department of Labor, is extremely misleading.

Right now, we’re hearing much celebrating from the media, the White House and Wall Street about how unemployment is 'down' to 5.6%. The cheerleading for this number is deafening. The media loves a comeback story, the White House wants to score political points and Wall Street would like you to stay in the market.

None of them will tell you this: If you, a family member or anyone is unemployed and has subsequently given up on finding a job -- if you are so hopelessly out of work that you’ve stopped looking over the past four weeks -- the Department of Labor doesn’t count you as unemployed. That’s right. While you are as unemployed as one can possibly be, and tragically may never find work again, you are not counted in the figure we see relentlessly in the news -- currently 5.6%. Right now, as many as 30 million Americans are either out of work or severely underemployed. Trust me, the vast majority of them aren’t throwing parties to toast 'falling' unemployment."

Of course, Jim is once again correct. Many arguments of low labor force participation rates have focused on the retirement of the baby-boomer generation. Therefore, to exclude that argument, even though those over the age of 65 that are currently employed is at the highest level on record, we can look solely at the group of individuals that should be actively employed (16-54 years of age.) The following chart, which is the labor force participation rate of solely 16-54-year-olds, shows the real problem with the BLS's employment figures.

Employment-16-54-010615

Considering that only 46% of that age group are currently employed suggests that an unemployment rate of just 5.6% is highly misleading.

Of course, you already knew that didn't you?

Dividend Cuts To Impact Personal Incomes

Political Calculations brought out a very interesting point recently discussing the rise in dividend cuts due to the deteriorating economic backdrop. To wit:

"Going by the number of publicly-traded companies that acted to cut their dividends in January 2015, the U.S. economy didn't just experience recessionary conditions during the month. Instead, it outright contracted."

Dividend-Cuts

"Or perhaps a better description of what happened is that the U.S. oil industry's efforts to push its luck as far as it could has run out of good luck to push.

By that, we're referring to the consequences of falling oil prices, which are forcing an increasing number of companies tied to oil extraction activities in the United States to take the dramatic step of slashing their dividends. With 57 U.S. companies taking that action in January 2015, the number of companies taking that action in a single month is consistent only with previous months in which the U.S. economy either experienced contraction or in response to major dividend tax rate hikes.

January 2015 saw no major tax rate hikes on dividends, so contraction it is."

Importantly, another impact of the decline in dividend payout will be a reduction of the amount of dividend income that makes up part of the personal income and spending reports. The chart below shows the monthly net change of a few components of the personal income figure. Notice that in the most recent month personal interest income is negative due to the plunge in interest rates and dividend income was marginally positive.

Personal-Income-Mthy-Chg-020415

Considering that the decline in oil prices is supposed to good for the consumer, even though personal spending declined in the most recently reported period, the decline in dividends will certainly have a negative effect on those depending on those dividends. As I showed recently, the current detachment between spending and the stock market will likely be corrected rather harshly at some point.

PCE-SP500-020515

2nd Most Overvalued Market In History

I recently gave a presentation at the 2015 World Economic Conference (see full slide deck here) in which I discussed varying aspects of the market that should have investors fairly concerned. High yield spreads on the decline, extreme deviations from the long-term mean, and margin debt levels should all be at the top of the list.

One point I did not include, but should have, was noted recently by my dear friend Doug Short.

"The peak in 2000 marked an unprecedented 147% overshooting of the trend — nearly double the overshoot in 1929. The index had been above trend for two decades, with one exception: it dipped about 13% below trend briefly in March of 2009. But at the beginning of February 2015, it is 91% above trend, down from 95% above trend the month before. In sharp contrast, the major troughs of the past saw declines in excess of 50% below the trend. If the current S&P 500 were sitting squarely on the regression, it would be around the 1060 level. If the index should decline over the next few years to a level comparable to previous major bottoms, it would fall to the low 500 range."

Dshort-Valuation-020415

"Incidentally, the standard deviation for prices above and below trend is 40.6%. Here is a close-up of the regression values with the regression itself shown as the zero line. I've highlighted the standard deviations. We can see that the early 20th century real price peaks occurred at around the second deviation. Troughs prior to 2009 have been more than a standard deviation below trend. The peak in 2000 was well north of 3 deviations, and the 2007 peak was above the two deviations -- as is our current level."

As I stated during my presentation, we can certainly "hope" that the markets will continue to march endlessly higher. However, "hope" has never been an effective portfolio management strategy.

[Feb 05, 2015] Price of oil and the disruption of flow of oil dollars to the USA coffers

Additionally, low oil prices have blocked the flow of petrodollars in the United States. Oil exporters have invested their profits in US bonds. Now OPEC need to reduce state budget and spend some of those bonds that the US is holding. Well, the USA have debts to pay and now it just can't print the money as freely as before.
  1. On the amount of oil that costs $1 accounts there are more then $10 of all kind of securities.
  2. It turns out that the price is determined by Wall street mafia, large funds and holders of those securities, not so much by the producers or consumers of oil.
  3. Low oil prices have an obvious advantage: they inhibits Russia economic growth.
  4. But low oil prices have costs. They already starting to cause bankrupcy of companies extracting shale oil. And again, no so much companies as such, but all the mess of securities (shares, derivatives, insurance, insurance of insurance, etc) connected with them. If things begin to crumble, it might be something like a mini repetition of 2008, which was triggered by the collapse of mortgage giants.
  5. Additionally, low oil prices have blocked the flow of petrodollars in the United States. Oil exporters have invested their profits in US bonds. Now OPEC need to reduce state budget and spend some of those bonds that the US is holding. Well, the USA have debts to pay and now it just can't print the money as freely as before.
  6. Finally, low oil prices make China extremely happy. Strong dollar undermines the US exports.

In General, the conclusion is as following. Oil is a geopolitical resource and the USA financial cartel is powerful enough to set any price for oil. $30 or, may be even $20 per barrel. But the problem is that at such a low price several problems arise.

In fact, the oil price is a compromise between the elite U.S and the elite of OPEC designed "to deal with" Russia. But somebody might not be able to endure described economic war for long and associated costs..

[Feb 02, 2015] Gold Daily and Silver Weekly Charts - Carry On

Feb 02, 2015 | Jesse's Café Américain

People who follow price alone, and believe that this is the truest indicator of future value, have a point. And it is valid, based on a very short timeframe, most likely appropriate to a day trader.

And it is no coincidence that most day traders go broke.

Most traders overall go broke. They may have great runs for a time. I have seen runs at the crap table that were amazing. I had a run at poker that was astonishing, and that lasted for a couple of years. I had one night at the tables that was almost exhilarating. I made some short term profits playing the futures that were almost jaw dropping.

But they passed. And then came the steady losses. The most enduring profits I have made were done over a long time with a steady position, being right and sitting tight. The key to that is 'being right.' It is never easy.

People have different styles as traders. Some like the thrill of the short term, and others prefer what is called 'value investing' and the longer term. You have to pick what suits you.

But at the end of the day, most everyone loses except the casino, unless you can find and exploit some kind of edge.

That is the best that I can and will say regarding a commentator about the precious metals who might say that all that matters is price, because it does not matter who is buying or selling. Or why.

You don't need to know that. You do not need to know the players or their possible motivations. It is a point of view. And a good one if you wish to be a price follower and a day trader, and not have a real clue about the opportunities one may have to make some serious money.

The market makers and professionals all too often paint 'pictures' with price action. To somehow say that price contains all useful information and the truest picture at that moment is a corollary of the efficient markets hypothesis. And I would like to think after umpteen price rigging scandals, that we would reflexively know that this is all rubbish. And enough about that nonsense.

There are great changes underway in the world of money. And you will either understand them now, or understand them later. True, all sellers become buyers and all buyers become sellers given enough time. But that is the kind of timeframe about which Keynes remarked that 'in the long run we are all dead.' Someday will come. But its an odd logical fallacy to take the extremely short and the extremely long and reason from those examples, ignoring the great bulk of experience which is in-between.

As you may have noticed, most of the antics from yesterday's markets were erased today. The sharp rally in stocks dissipated, and the big hit on gold was largely erased.

As I had said, we had a real test for the precious metals this week, most notably gold, which is the metal of controversy. We had an option expiration, a first position day on a new active contract, an FOMC meeting, and a first estimate of 4Q GDP.

So far so good. If gold wanted to find a place to bounce, today's was about as good of a bounce as any.

The bounce in stocks with the subsequent flop was not surprising. The Fed hates to leave the market feeling like it has failed, perception management-wise.

Follow through is absolutely everything for gold and silver here. We are now in an 'active month' and the first delivery reports have reflected that. Deliveries were coming out of 'customer accounts' and the house accounts were the takers. But you don't need to know that.

What you do need to know is that gold bullion is flowing steadily and heavily from West to East. And that we are nearing the natural end for a currency cycle. And that the price of gold and silver are based on leverage, and rehypothecation, and that these things have failed in the micro level, such as at MF Global, and can fail at the macro level, as in the failure of the London Gold Pool.

Please remember the poor. Their lives are very hard, and they are easy to forget. And not just the people who are poor in things, but also those who are poor in spirit, and unable to love. Don't just worry and count your money, although that is practically important.

Remember the only things that really endure, that will stay with you, as you truly are, a soul that happens to have a body, for now. And that is measured not in dollars, but in love.

Have a pleasant weekend.

[Jan 31, 2015] The Bond Market Has Reached Tulip Bubble Proportions

Looks like Fed lost credibility...
Jan 30, 2015 | zerohedge.com

Fed Officials Trying to Send Signals to the Bond Market

James Bullard on Friday noted that the Bond Market was far too dovish in relation to where the Fed is in regard to raising rates in June, and this might be the understatement of the year so far. For example the U.S. 2-Year Bond Yield is 0.45 or 45 basis points, think about this for a moment. Even if the Fed fund`s rate finishes the year at 50 basis points which is well below the Fed`s most conservative forecasts, and we use a conservative annual inflation rate of 1% (I know oil has dropped but there are more inflation categories than just the energy component). Moreover, the overall annual inflation rate is well above 1% right now, and you factor in that this bond is paying a 2-year risk premium for tying up one`s capital with all kinds of inflation risks over that 2-year time frame, this has to be the stupidest investment of all time.

2-Year U.S. Bond Yield is 45 Basis Points

To buy the 2-Year Bond when the Fed has practically stated that after two FOMC meeting`s they are liable to raise rates at least 25 basis points at the earliest (think April) and June at the latest so that is 25 basis points right there added to the Fed Fund`s rate, and needs to be added to the 2-Year Bond calculation so the current Fed target rate is 0.00 - 0.25 with the daily rate on 1/29 of 0.11 or 11 basis points, so add the June 25 basis rate hike to the current daily rate of 11 basis points and you get a 36 basis point starting point for borrowing money, add an annual inflation rate of 1%, and we are at 136 basis points for evaluating the 2-Year Bond given this rather charitable and conservative analysis.

Thinking About the New Greek Crisis

NYTimes.com
... ... ...

5. Ideals aside, the consequences of playing hardball with Greece over its banks could very easily be immense. Up until now, the euro has proved very durable, largely thanks to the point Barry Eichengreen emphasized: any country that even hinted at the possibility of leaving would face the mother of all bank runs. But as I worried some time ago, this argument becomes moot if the banking system has already collapsed. Grexit — the often speculated about, never so far materializing Greek exit from the euro — becomes a very real possibility if European creditors try to exert leverage by taking away the safety net for Greek banks.

6. And if Greece really does leave the euro — if it turns out that the single currency is not irreversible — do you really think there would be no contagion? Wanna bet on it?

7. In particular, think about what happens if Greece leaves the euro and then manages to find its footing — which it probably would after a chaotic year or two. The EU could prevent that by deliberately undermining the post-euro Greek economy. But that would be a betrayal of European principles.

8. At the moment, Germany is talking as if it intends to follow the Michael Corleone strategy. But do we really think that Syriza will or even can retreat with its tail between its legs immediately after winning a dramatic election victory? Again, wanna bet on it?

Daniel Davies tells us that “European policy makers aren’t stupid.” But they do say stupid things, still talking about expansionary austerity, still treating debt as a purely moral issue. Can and will they be realistic, accept that they can’t extract blood from a stone — at any rate not at the rate of 4.5 percent of GDP — in time to avert a spiral into disaster?

Selected comments from Economist's View Links for 01-29-15
Darryl FKA Ron
RE: Whitewashing the Crazy, Fed Edition

[Krugman is just knocking them out of the park today.]

How does one report on politics when a significant wing of the political spectrum is, not to put too fine a point on it, stark raving mad? I appreciate that it’s hard to do without attracting accusations of bias; on the other hand, there’s a temptation to soft-pedal the crazy, to make it seem as if politicians were less out there than they really are...

*

[So, is it Ron's be kind of Krugman day? Well any day that Krugman addresses financialists' dogma head on and skewers idiotic Republican politicians without lapsing into Dembot apologetics is Ron's be kind to Krugman day.]

pgl said in reply to Darryl FKA Ron...
In the meantime John Taylor is defending this Rand Paul bill over at his blog. How you ask? First Taylor brags about his now (in)famous rule. And then he states this bill does not really require anything more than the FED being clear about its actions. Of course the FED has been clear. So why do we need a law if it does nothing?
Darryl FKA Ron said in reply to pgl...
Sorry, but I did not read about that. Don't feel bad though because I did not read the articles about Ted Cruz or Rick Perry either. I don't think of them as alternative viewpoints. Actually, I don't even think of them as viewpoints. So, I don't really think of the technocrats that serve them as economists either.
ilsm said in reply to Darryl FKA Ron...
Romney is Crazy; life coaches, charter schools, blame the single parent and backbone is funding the wars (more drone strikes, star wars and aircraft carriers to haul around broken F-35's with money taken from schools and kids' preschools).

You fix under funded schools, and kids who don't get remedies for lacking 3 year and up pre schooling by giving the money to charter schools run by amateurs wanting to teach how wrong the theme song to Big Bang Theory is and break up the NETU...........

Everyone is scared Nobel Prize winner Shiller

The human race has deep underlying fears about technology and the lives their children will lead and this can be seen - in all places -- in the negative yields in bond markets, Nobel Prize-winning economist Robert Shiller told CNBC.

"I think fears have been growing for years that represent the willingness of people to bid up bond prices," he told CNBC Wednesday." They are worried about their future. They are worried not just about next year, they are worried about the next twenty years, the next forty years. So they are desperately trying to provide for that, they'll even accept negative yields."

Shiller won the Nobel prize for economics in October 2013 for his research that has improved the forecasting of long-term asset prices and helped the emergence of index funds in stock markets. He was awarded the 8 million crown ($1.25 million) prize alongside fellow economists Eugene Fama and Lars Peter Hansen.

In London after a trip to the World Economic Forum, he said that the Davos event had helped him understand that there is not just pessimism about the global economy, but worry.

"There's this increasing fear of technology, information technology, artificial intelligence, robotics, 3-D printers, the internet and all these different forms," he said. Technology, he added "seems to be changing life in such a fundamental way and what it's leaving people thinking is 'where will I be in 30 years? Look how fast everything is changing now. Where will my children be? I want to leave something for them because they could be in terrible straits'."

The World Economic Forum's (WEF) Global Risk Report, released to coincide with last week's event, warned of people designing "bespoke viruses as murder weapons" and that computers could turn rogue.

In Davos, Yahoo chief executive Marissa Mayer told delegates that she expected internet privacy to swing further into the hands of governments over the coming months.

At another seminar, the Daily Mail reported, a panel of academics warned of mosquito-sized robots flying around and stealing DNA samples.

Responding to Shiller, Edmund Shing, the global equity portfolio manager at BCS Asset Management, told CNBC that he often wonders whether the world is not in the throes of a second industrial revolution but rather a technological revolution. He was concerned that a whole class of jobs could either disappear or become deflationary.

"You (might not) see any more wage increases because of the pressure from technology," he said. Shiller added that Davos had taught him that people are trying to make sure they are in the top 1 percent of global earners. "This is desperation for many people," he said. "The problem now is we are going through a technological revolution, unlike any in history because we seem to be getting right to core abilities that people have, that's the ability to think, to know."

He added that knowledge from humans was becoming even more absolute because of technology. The example he gave was that astronomy is becoming more redundant with the advent of mobile applications. "They just whip out their phone and they can beat you," he said.

DH

It is a bit ironic that technological advances have actually made people less happy. Numerous surveys have shown that people feel more detached and depressed than ever before.

We are bombarded with more information that our brains can handle. Some of the information involves the wealth and success of others (which makes us feel like failures). Other information involves crimes, death and terrorism (which make us feel scared and insecure). Furthermore, one small misstep becomes instant social media news in which you're penalized for your intolerance or insensitivity. Finally, people now socialize by playing video games and texting friends.

Jesse's Café Américain European 'QE' In a Nutshell - Propagating the Western Trickle Down Policy Errors

EU disparately trying to avoid recession caused by creaking economic ties with Russia.
This is about it in a nutshell. 'Stimulus' American style comes to Europe.

Printing money and giving it to your cronies inflates asset prices, lines the pockets of the well-heeled heels, but does little for the real economy.

But it doesn't produce broad inflation (or aggregate demand) so we can do it many times! Success!

"At last the euro’s lords and masters have accepted that something must be done about their zone’s lamentable growth. They will unleash a massive bond-buying programme totaling a reported €1tn. The former BBC economic pundit Stephanie Flanders told the world it was “Santa Claus time”; the European Central Bank (ECB) has ridden to the rescue.

No it has not. Europe’s great and good, partying on the slopes of Davos, are like courtiers at the Congress of Vienna. They are blinded by snow and celebrities. Santa Claus gives presents to people; the ECB gives presents to its banks. It is merely tipping large sums of money into the vaults of precisely the institutions whose crazy lending caused the crash of 2008, and which have been failing Europe’s economy ever since.

Quantitative easing is a gigantic confidence trick. It was promised that it would yield new investment. It has not. It was promised that it would “pump money into the economy”. It has not. It was also feared that printing money would lead to hyper-inflation. It has not, for the simple reason that no one gets to spend the money. It is a bookkeeping transaction between a central bank and a commercial bank. It means nothing as long as banks are told to build up their reserves.

Money in circulation matters. The whole of Europe, including Britain, is chronically short of demand, which is why deflation is such a menace. If no one can afford to buy anything, no one will sell anything or invest money in making anything..."

Simon Jenkins, QE for the eurozone is a gigantic confidence trick. It should fool no one

[Jan 22, 2015] Greek Elections, Europe's Identity Crisis

Jan 22, 2015 | Jesse's Café Américain
"Every man has a right to his own opinion, but no man has a right to be wrong in his facts...

Gold has worked down from Alexander's time. When something holds good for two thousand years I do not believe it can be so because of prejudice or mistaken theory."

Bernard Baruch

“What is a cynic? A man who knows the price of everything and the value of nothing.”

Oscar Wilde, Lady Windermere's Fan
I think you might replace the word 'cynic' in Oscar Wilde's famous quote with the word 'trader.' Especially the traders we have out and about in today's markets, who are better conmen than policy advisors. Of course one might say the same thing about our esteemed Congressmen, so perhaps it is better to say nothing, except to grasp your wallets more firmly.

President Obama will be giving his State of the Union tonight. Expect to hear some nice headline making proposals that will not have any impact on real legislation or policy. And this is by intent.

The plutocrats of Europe will be watching the Greek elections carefully on January 25. You may wish to keep an eye out for them as well. The EU is concerned that a left leaning government may be voted in that will buck the austerian trend.

American leadership has dementia, and is going to keep blundering around doing the same old, ineffective things, until something happens to change the situation.

Middle class income has been stagnant for forty years. Expect this to get a little attention, talk-wise. But little will be done.

[Jan 22, 2015] Financial TV Wasteland

The intellectual poverty of financial television is appalling:

Jan 22, 2015 | jessescrossroadscafe.blogspot.com

... ... ...

After the bell, both Netflix and IBM beat their earnings estimates, but missed on top line revenues.

Both are fine examples of low growth companies using accounting games to provide the appearance of vitality. IBM has been shrinking for quite some time, and Netflix, while it has potential, needs to change its model badly.

Or perhaps it would be more correct to say it should expand its portfolio of activities. But not being a true content provider, or a supplier of the pipe that carry its products, it is an interesting strategic position.

Let's see how the wash and rinse cycle proceeds. The Street would like to see stocks move higher now.

I turned to CNBC for relief from Trish Regan's pretty but nasal banality.

I noticed that CNBC had Rick Harrison, the purveyor of a Las Vegas pawn shop, and reality show star on as a guest commentator on macro-economics, providing policy advice. He may know the retail trade, but public economic policy, not so much.

I kept waiting for Steve Liesman to come on and provide the comic relief that Chumlee ordinarily delivers to give some entertainment value to Pawn Stars. Larry Kudlow was doing his schtick earlier on as 'Pops.'

The intellectual poverty of financial television is appalling: five miles wide, and an inch deep. No wonder the ratings were plummeting. See the quote from my friend Arby at the top of the page. Our elite ruling class is in the throes of cultural dementia.

[Jan 22, 2015] The Data Doesn't Lie - Here's What's Really Driving Interest Rates! Submitted by Thad Beversdorf via First Rebuttal blog,

Jan 22, 2015 | Zero Hedge
So Hilsenrath claims a little birdie (Fed insider) told him that rates will be raised later this year. I expect the Fed is just jerking him around. There is nothing fundamentally or otherwise to suggest rates will move up. I’m not sure if Hilsenrath is part of the game or just a gullible fool who is being used to keep the market off balance. Why would the Fed want the market off balance? The Fed does so intentionally because theory suggests such a strategy will improve the effectiveness of monetary policy (refer to rational expectation model).

Regardless of what the Fed says, the reality is that interest rates are not moving up anytime soon. It is shocking to me how arbitrarily economists make certain predictions. I mean don’t get me wrong, I’m not a fan of ZIRP or NIRP. I see them as theft in the same way I see inflation as theft. Both effectively destroy the time value of money by way of politics and, these days more than ever, politics is simply another word for skullduggery.

kaiserhoff

The Fed will raise rates because they can't stop themselves.

They are arrogant, ignorant, out of touch, and out of ammunition. They see themselves as managers of the economy. No one else does, but at the moment they have no levers to pull, or buttons to push, except ONE.

Therefore, the idiots will push the button.

malek

The Fed will raise rates because [they can't stop themselves].

That statement alone has no significance to me.

The question is if they would raise in a meaningful way, so more than 0.5% overall (not necessarily in one step) and without some new rule bending such as govt bonds are exempted from the rate rise.
I'm sure the answer is NO (short of an impeding currency collapse, then they might raise rates as a last fruitless effort to save the dollar.)

falak pema

God forbid if the FED were put in the same conundrum as the SNB :

To choose between the real economy and the financial, casino "economy".

That's what the SNB retreat was about. It hurt the real economy to protect the franc against being inundated by bigger cousin Euro to which it was linked. "Can't afford an inflow of 100 B euros/month, no way! We will be drowning in devalued euros!"

If King $ is now harassed in similar fashion --as whispers and grumbles the US secretary of commerce-- : "We are being clobbered (think Boieng vs Airbus) by a STRONG $ in our export business"...

Then Potus will have to revise his book, caught between a rock and a hard place : If the $ continues to climb as FED tightens bond rates to accompany the so called virtuous spiral of US growth, -- "I am saying we are now in a growth cycle --- it will condemn the trade balance even more. And that cuts the ground under our feet!"

That is exactly where the SNB found itself last week....

Basically this means that Pax Americana is finding itself more and more stretched in this crisis to play Unilateral hegemon and ASSUME the consequences of its acts.

USA is no longer a young giant that towers like a colossus, more an old, aging baby boomer who needs to watch his gall bladder or liver.

NEOSERF

Borrowing to buy cars we shouldn't have, borrowing to get an education that is malaligned with the economy, borrowing to keep the dividends and EPS numbers where they need to be, borrowing to pretend that the Fed is propping up Main St...at some point, the numbers will be unfudgeable and the day after that David Tepper will be on CNBC telling us he is short everything and the economy is in freefall.

Wait What

banking establishments are more dangerous than standing armies... and the spending of money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale... bank paper must be suppressed, and the circulating medium must be restored to the nation to whom it belongs.

Thomas Jefferson

Fuck you Central Banks!

Clesthenes,

“I’m not sure if Hilsenrath is part of the game or just a gullible fool…”

It doesn’t really matter: “part of the game” or “just a gullible fool”.

A very large fraction of Americans are that way; and the main thing you need to know about them is that they will die, or kill, rather than correct their self-destructive habits.

And the problem, from our perspective, is, ‘How do we protect ourselves from their murderous political system?’

First, a person in this “large fraction” is doing battle with a conscience riddled with guilt (for crimes committed or a life wasted). He will seek to control/destroy any action or word that might give power to his conscience; he will even destroy his own child for such end. And, when he is given political power, he will seek to control/destroy every such action or word within his power.

You can find these people by the millions: as family members, neighbors and, of course, thru-out every level of government, not to mention non-stop indoctrination machines (education systems, churches and media).

When you have millions of such people who use this power within their families, you have the political foundation for a nation-wide tyranny.

One of the co-relatives of this condition is that they will be led only by those who feed them a steady diet of pleasing lies. Let me make this clear: they will only be led by cutthroats and thieves: people who know they can obtain what they want only by falsehoods.

We live, in other words, in a system dominated by criminal and useless classes; and they know that their safety lies in crimes ever more numerous and heinous. As far as they are concerned, if destruction of the American economy – and, thus, the world economy – is necessary, so be it.

What is the solution?

We need to give them EXACTLY what they want: rule by thieves – and make sure they pay for it.

And that will be the problem, ‘How do we protect ourselves from their rule by thieves?’

Protection from their tyranny WILL NOT COME simply by wishing to be left alone. For, to win their struggle against their conscience, they, by the millions, secretly long for the day when they will have the power necessary to “permanently” rid the earth of those who ask too many questions or describe too many crimes. For those who doubt this aim, let them explain the all-too-many death squads established across the planet. Such death squads were trained at Academy of the Americas in the American state of Georgia. In America they go by several names, FBI, CIA, local police, the DHS – especially the DHS (Department of Homeland Security); for, the DHS was specifically modeled after French committees of terror (1792-4), the Judeo-Bolshevik Cheka (aka NKVD, KGB et cetera) and the Nazi Schutzstaffel.

The primary purpose of these organs of terror was to protect rule by thieves by eliminating all dissent. If the DHS is modeled after those historical instruments of terror, what possibly could be its purpose?

Isn’t that a silly question?

After all, what does the DHS plan to do with 2-3 billion rounds of ammo… an amount sufficient to wage an Iraqi War, at its highest rate, for 25 years? Remember, so-called terrorists do not travel as armies; but, rather cells of 5-10… and the DHS needs 2-3 billion rounds of ammo for these tiny cells… you know, the ones established by the CIA or FBI? Try again.

The real purpose of the DHS is to secure rule by criminal and useless classes by literally exterminating large numbers of productive and thrifty classes. Those in the productive class provide market-related goods and services; those in the thrifty class include all those who have accumulated an earned savings (opposed to a plundered savings). Such savings can be in the form of physical gold, or ownership of a business, stocks or bonds, among others.

Do you think you will survive this extermination merely by sitting back and waiting for the crash? You’d better reconsider your posture.

This is the warning that comes from reading the act of Congress that established the DHS. This Act created a system by which informers could make false allegations against anyone they please with near-total impunity. Of course, such informers aren’t described as informers; rather they are given the title “submitting person” and their falsehoods will never be examined by any court or legislature or law enforcement agency. The legislation even specifies how this immunity is obtained. The “submitting person” only has to give an “express statement” that his lies were “voluntarily given” and that he expected “protection from disclosure”. It’s all there, in the act that created the DHS.

I’m sorry guys, but silly season is over.

If you want to survive, you have to combine with others of like mind for the purpose of mutual protection, among other purposes. The big question now is, ‘HOW is this to be done?’ And the quick answer is, ‘You must establish First-Amendment assembliesthe only historically-proven method by which men have made their lives and property secure from rule by thieves.’

The American Revolution, you see, was powered by a large network of such assemblies: from town meetings, county meetings, state conventions and, ultimately, Continental Congresses.

I’m sorry, again: but I seem to be the only source for this information – despite all my efforts to distribute such knowledge.

Real, effective, protection is only possible by knowledge of the law and procedures of redress – and actions based on that knowledge.

[Jan 20, 2015] IMF says economic growth may never return to pre-crisis levels

Oct 7, 2014 | The Guardian

World economic outlook expects global growth to be 3.3% in 2014, down from its April forecasts as countries fail to recover strongly from recession

gtggtg -> dubium 10 Oct 2014 00:40

"Growth is the need for ever perpetually bigger profit. Nobody needs that."
Well, the capitalist system needs that.

"It does not even make sense."
Agreed, the capitalist system does not even make sense.

Dave Gardner 9 Oct 2014 09:48

IMF and this story make the Wall of Shame today at Growth Bias Busted: http://www.growthbiasbusted.org/wall-of-shame/entry/imf-repealing-laws-of-physics-taking-longer-than-we-thought

ruffsoft 8 Oct 2014 21:12

In a 3d world economy, which the world is devolving towards, high profits for corporations are matched with falling wages. The rich get richer, the working class gets pooer.

In the US, for over 30 years, median wages have fallen 40%, 15% since 2000.
Meanwhile, GDP is at record highs and CEO salaries are higher than ever.

Growing profits and GDP is not a recovery if wages continue to fall; it is just the signature of a 3d world economy, with fabulous wealth at the top and rising poverty among the working class.

Only shared prosperity is recovery; growing inequality is not economic recovery but successful class warfare.

Cynndara -> Mohammed Karim 8 Oct 2014 14:43

Don't worry. America is chock-full of salesmen. It's our specialty. Anyway, when the voters are faced with a choice between Tweedle-Dum and Tweedle-Dumber, it hardly matters whether they're sold or not. There are only two candidates for any job, and they are both owned and operated by the Big Banks. Americans no longer have an effective democracy, only the illusion of one. So if Goldman-Sachs feels that your recipe will do the trick, it will be rammed down our throats regardless of votes.

Cynndara -> Beginner20 8 Oct 2014 14:27

Right. The "developed" economies are no longer even producing enough to cover their own needs, let alone enough to create a positive net balance. With the interconnection of the world through mass communications, they can no longer plunder the smaller nations of the world and claim the loot as "productivity". So of course there can't be real growth. The idea that we could produce more and more every year was always an artifact of trading "free" goods from the natural and undeveloped world for the costly products of industry. When those "free" goods come with a pricetag, capitalism collapses.

Cynndara -> ID5088152 8 Oct 2014 13:52

Unionized manufacturing workers in the 50s made EXTREMELY good pay, on par with middle-management jobs. Remember that these were one-income families, with an employed male supporting a wife and several children from one salary. Also, immigration limits, lack of robotics and the residual labor-shortages of WWII made trained heavy-industry workers scarce and valuable.

GoddessOFblah -> hermanmitt 8 Oct 2014 13:30

There is actually nothing wrong with capitalism, but we have not had it for over 60 years.

What we now have is corporatism which, in short, can be described as financial fascism.

Don't agree with capitalism but that's very well said. Like with all ideologues - starts off great until the 1% horde the power/wealth for themselves.

simplevillageexpat 8 Oct 2014 12:08

Can't understand why all these economists are surprised that the Eurozone isn't recovering. Tied in the straight-jacket of the euro means EZ countries can do nothing for themselves except impose the slow death of austerity. With Germany racking up massive payments surpluses using the euro to avoid the otherwise inevitable currency appreciation for themselves. Other EZ countries cannot export within the Euro Zone as their prices are held too high. With Germany in the Euro the Euro itself is higher than they need to export outside the EZ (although they are doing a remarkable job in the circumstances). There is nothing left to fuel a recovery. Surely we are close to the end of this crazy game of Monopoly where the well placed get stronger and the others go bankrupt. Like a game of Monopoly the eventual winner now has no one to buy their products so they too are not recovering!

Its all been very predictable and predicted since Maastrict. But then, I'm just a simple ex-pat from the village. I know nothing!

AmandaMatthews 8 Oct 2014 10:11

The IMF is half our problem. They backed the financial terrorists who brought down half the world's economies. Their policies of rewarding rich at the expense of everyone else is one of the things that guarantees 'no growth'. The Austerity programs that they cursed so many nations with have caused nothing but chaos and hardship for everyone but our Wall Street/'City of London' financial terrorists.

Contrary to what the whizbangs of finance tell you, the true financial health of a nation isn't predicated on how well the stock market is doing, but on how well the people are doing.

SirTalbotBuxomly -> Gelion ,7 Oct 2014 9:59

As does Osborne in the UK where the Right Wing media and the Tories talk about a "Recovery" but for most people there is no such thing.

The recovery isn't measured by 'what most people think or feel' or whether their wages have gone up. Growth is measured objetively not anecdotall which is why the article says...

The Fund said the outlook was brighter in the US and the UK, which were “leaving the crisis behind and achieving decent growth”. Britain is forecast to see its gross domestic product increase by 3.2% in 2014 – up 0.3 points from the April WEO and the fastest of any G7 nation.

And that's why people trust the Tories much more than Labour with the economy and that's why Labour are behind int he opinion polls.

Investing Quotes

..“In a narrow market, when prices are not getting anywhere to speak of but move within a narrow range, there is no sense in trying to anticipate what the next big movement is going to be. The thing to do is to watch the market, read the tape to determine the limits of the get nowhere prices, and make up your mind that you will not take an interest until the prices break through the limit in either direction.”..

Jesse Livermore

My experience has been that in successful businesses and fund management companies, which performed well over the long-term, some courageous decisions were taken. Courageous fund managers reduce their positions when markets become frothy and accumulate equities when economic and social conditions are dire.

They avoid the most popular sectors, which are therefore over-valued, and invest in neglected sectors because being neglected by investors they are by definition inexpensive.

The point is that it is very hard and that it takes a lot of courage for a fund manager to avoid the most popular sectors and stocks and to invest in unloved assets.

Finally, every investor understands the principle ‘buy low and sell high’, but when prices are low nobody wants to buy.

Marc Faber

Michael Roberts Blog

Indeed, that is the story for most capitalist economies in 2014 (Europe, Japan, the US and the UK): weak economic growth, poor business investment and falling real incomes for the average household.

The global economy remains in a crawl and will do so in 2015 for one good reason: the failure of business investment to leap forward. Goldman Sachs reckoned this time last year that there would be a global investment boom in 2014. That has proved to be a mirage in Europe, Japan, the UK and in the major so-called emerging economies of China, India, Brazil and Russia, where investment growth has slowed markedly or collapsed, as in the case of Russia (see my post, https://thenextrecession.wordpress.com/2014/12/08/oil-the-rouble-and-the-spectre-of-deflation/).

The emerging markets of Brazil, Russia, India and China collectively known as the BRICs — will likely grow in 2015 at their slowest pace in six years, according to Oxford Economics. Only the US has shown some pick-up in investment.

As I said last year, the reason that business investment has not boomed is that in most economies average profitability remains below levels before the Great Recession and below levels reached in the late 1990s. Most economies are still experiencing the downwave in the profitability cycle, as explained above. Coupled with the downwave in the Kondratiev cycle, that is why the global capitalist economy is in what I call a Long Depression, with some years to run.

Daniel de França, December 31, 2014 at 12:01 pm

You said one of these days that to recover profitability a world war would be necessary. Or maybe I am confused?

michael roberts, December 31, 2014 at 1:11 pm

Not every depression has been ended by war. But there have not been many depressions to judge! Perhaps the first capitalist depression of the early 1800s was ended by the Napoleonic wars. And the Great Depression of the 1930s was ended when America entered the war in 1941 and built up arms before hand. The Long Depression beginning in 1873 did not end in a world or even European war so it actually lasted longer and with varying degree of severity in different countries up to 1896. The current Long Depression is only seven years old. I think it might end around 2018 if there is a sufficient destruction of capital values by then. All this is a calculated guess – but calculated. I have said the opposite to what you think I said. I dont think this current depression will be ended by a world war, although there is permanent war – regional and local ones.

Philip Ferguson, December 31, 2014 at 2:14 am

Hi Michael,

you might be interested in this: http://rdln.wordpress.com/2014/12/31/michael-roberts-essays/

We re-blog a lot of your articles – mainly the ones on the world economy rather than individual countries – so we’re happy to help out advertising your work.

This blog is a wonderful resource for anti-capitalists.

All the best for the New Year,
Phil

sartesian, January 4, 2015 at 1:06 am
Here’s a prediction: growth will slow, turn negative, etc; things will get worse, the rate of profit will fall, and capitalism will not collapse; it will go on being capitalism until it is overthrown. Overproduction, financial crises, plummeting oil prices are just part of capital being capitalism; “The price of beef may be high or low, but it always involves the same sacrifice for the ox.”
GrahamB, January 4, 2015 at 11:41 am
> Russia, Ukraine and Venezuela. Where else do you think growth be negative next year?
sartesian, January 4, 2015 at 1:07 pm
Italy, Cyprus, Slovenia, possibly the eurozone as a whole, Argentina, South Africa, Egypt, Nigeria, Angola, Libya, Senegal, Ecuador…..
GrahamB , January 4, 2015 at 1:46 pm
Well, the eurozone is of course the big unknown and I think the ECB will be forced to act early in the new year. If there is any improvement in the eurozone, global growth will probably be higher next year.
sartesian, January 4, 2015 at 4:38 pm
OK, that’s your prediction. I have two predictions: (1) This shit–capitalism– will continue until it’s overthrown. (2) Predictions will make absolutely no difference.

sartesian , January 5, 2015 at 6:25 pm

Now that’s very interesting. I think maybe the problem is in viewing Capital as a “close and abstract” model– rather than as a critical analysis of the laws of capital accumulation and the immanent contradictions of that accumulation.

In a sense– right, no abstract closed theory can account for all variations, iterations of structural changes in a concrete mode of production. But historical materialism can and does.

I think that’s what we’re “supposed” to do with Capital– grasp its analysis as a means for apprehending what is going on here (or there) now (and then) in the mode of production.

Capital is not complete, in, of and by itself, without that historical materialism– without that recognition and apprehension of class struggle.

Henry, January 5, 2015 at 6:37 pm

Yep, I agree with that. Except closed and abstract can be at the same time a critical analysis. i think Marx was fully justified in his abstractions in Capital. I just think some Marxists can’t see the world and the system beyond the abstractions.

GrahamB, January 5, 2015 at 7:01 pm

Some Marxists use a high frequency crisis predictor so it’s not surprising that they sometimes get it right. Predicting capitalist non-crisis periods is less successful. And slow, stagnation, crisis and depression get used too loosely.

Edgar , January 6, 2015 at 9:16 pm

Maybe, but 2008 was a crisis! Some think it was merely a blip.

There is one thing not predicting a crisis but if you can’t actually see one when it explodes in front of you then you have to ask, what use are you? I think the permanent revolution perspective, which I assume you are part of (Billj and that crowd), didn’t regard 2008 as a crisis at all?

davidellis987, January 6, 2015 at 3:07 pm

How did we get here and where will we go?

Behind every crisis of capitalism is the fact that it takes more and more capital to make a decent rate of return. Capital constantly comes up against its political economic limits which prevent further growth and even throws the system into reverse. It has to burst through these arrangement once so favourable if it is to grow again. It takes great violence to overthrow the previously established political economy. It took two world wars and a Great Depression to establish American hegemony over a declining Europe and even then the assistance of world Stalinism was required.

But the post-War political economic arrangements could only deliver a boom of less than thirty years duration before profitability became an issue once again. This crisis of profitability which left the West stagnant, sclerotic and monopolised forced it into seeking an aggressive victory in the Cold War. An assault on the domestic and international working classes was launched along with an unprecedented credit-driven boom based on bank de-regulation.

Stalinism surrendered in the teeth of the West’s spending and its weaponry not to mention a Western leadership seemingly mad enough to use them. Victory pushed America to seek to establish itself as the sole and only global super power. But the mighty US became militarily and morally bogged down in Iraq and Afghanistan and in 2008 the real cost of `winning’ the Cold War became apparent when the Bankers’ 30-year Ponzi Scheme collapsed in spectacular fashion.

The very forces whose emergence US imperialism had hoped to prevent were now evoked by its own efforts and US-sponsored globalisation began to unravel. The world economy is now stagnant, sclerotic, monopolised and irrevocably and completely bankrupt. The unravelling of globalisation will be a process ten times more violent than the process that established it and of course there is no America waiting in the wings to save America. There are no seriously conceivable new political economic arrangement into which capitalism can now move even if the old is swept away with great violence. A system that cannot change is a dead system.

Capitalism is a dead system. Our choice is to go with it to a New Dark Ages in which war is a permanent condition, a regime of global savagery a glimpse of which can be seen in Syria or Gaza or Baghdad today, or we can transcend capitalist globalisation through world proletarian revolution establishing a global commonwealth of proletarian nations taking global economic integration to the next level and putting our barbaric past behind us.

matt Says:

January 8, 2015 at 1:01 am

“So, I’d say that in terms of profit recovery, Russo-Japanese war is the start of a unique World War that lasted from 1905 until 1945.”

Yep, that’s a good starting point. Russia (Federation) and Japan, two sinking countries today.

Thanks for your mighty efforts generally, Michael.

Don’t know about Kontratief waves myself, but I agree that the end of the long depression involved an escalating series of imperialist wars, culminating in the First World War.

That’s not likely this time around, despite that destruction of the Russian Federation is virtually official U.S. policy. The Russian neo-con far right and fascist fringe cannot be mobilized for the destruction of the multinational federated state, as they presently have in Russian neo-imperialism what they would seek for if they were Ukrainian.

The Russian neo-liberals cannot overthrow the Putin regime, or any possible Russian Federation regime, without the Russian neo-fascists, as the actual outcome of the Maidan showed. And Ukraine is scheduled for reaming this year, by the EU and US oligarchs. Anyway a couple of key predictions neglected.

[Jan 19, 2015] Investment Outlook by Bill Gross

Be cautious and content with low positive returns in 2015. The time for risk taking has passed
January 2015

... I’ll leave the specific forecasting for a few weeks’ time and sum it up in a few quick sentences for now: Beware the Ides of March, or the Ides of any month in 2015 for that matter. When the year is done, there will be minus signs in front of returns for many asset classes. The good times are over

Timing the end of an asset bull market is nearly always an impossible task, and that is one reason why most market observers don’t do it. The other reason is that most investors are optimists by historical experience or simply human nature, and it never serves their business interests to forecast a decline in the price of the product that they sell

Nevertheless, there comes a time when common sense must recognize that the king has no clothes, or at least that he is down to his Fruit of the Loom briefs, when it comes to future expectations for asset returns. Now is that time and hopefully the next 12 monthly “Ides” will provide some air cover for me in terms of an inflection point

2015

Manias can outlast any forecaster because they are driven not only by rational inputs, but by irrational human expressions of fear and greed. Knowing when the “crowd” has had enough is an often frustrating task, and it behooves an individual with a reputation at stake to stand clear. As you know, however, moving out of the way has never been my style so I will stake my claim with as much logic as possible and hope to persuade you to lower expectations for future returns over the next 12 months

My investment template shares a lot in common with, and owes credit to, the similar templates of Martin Barnes of the Bank Credit Analyst and Ray Dalio of Bridgewater Associates. All three of us share a belief in a finance-driven economic cycle which over time moves to excess both on the upside and the downside. For the past few decades, the secular excess has been on the upside with rapid credit growth, lower interest rates and tighter risk spreads dominating the long-term trend. There have been dramatic reversals as with the Lehman Brothers collapse, the Asia/dot-com crisis around the turn of the century, and of course 1987’s one-day crash, but each reversal was met with a new and increasingly innovative monetary policy initiative on the part of the central banks that kept the bull market in asset prices alive

Consistently looser regulatory policies contributed immensely as well. The Bank Credit Analyst labels this history as the “debt supercycle,” which is as descriptive as it gets

Each downward spike in the economy and its related financial markets was met with additional credit expansion generated by lower interest rates, financial innovation and regulatory easing, or more recently, direct central bank purchasing of assets labeled “Quantitative Easing.” The power of additional and cheaper credit to add to economic growth and financial asset bull markets has been underappreciated by investors since 1981. Even with the recognition of the Minsky Moment in 2008 and his commonsensical reflection that “stability ultimately leads to instability,” investors have continued to assume that monetary (and at times fiscal) policy could contain the long-term business cycle and produce continuing prosperity for investors in a multitude of asset classes both domestically and externally in emerging markets

There comes a time, however, when zero-based, and in some cases negative yields, fail to generate sufficient economic growth. While such yields almost automatically result in higher bond prices and escalating P/E ratios, their effect on real growth diminishes or in some cases, reverses. Corporate leaders, sensing structural changes in consumer demand, become willing borrowers, but primarily to reduce their own outstanding shares as opposed to investing in the real economy. Demographics, technology, and globalization reversals in turn have promoted a sense of “secular stagnation” as economist and former Treasury Secretary Larry Summers calls it and the “New Normal” as I labeled it as early as 2009. The Alice in Wonderland fact of the matter is that at the zero bound for interest rates, expected Returns on Investment (ROI) and Returns on Equity (ROE) are capped at increasingly low levels. The private sector becomes less willing to take a chance with their owners’ money in a real economy that has a lack of aggregate demand as its dominant theme.

Making money by borrowing at no cost for investment in the real economy sounds like a no-brainer. But, it comes with increasing risk in an environment of secular stagnation, demand uncertainty, and with the ROI closer to zero itself than an entrepreneur is willing to bear.


The power of additional and cheaper credit to add to economic growth and financial asset bull markets has been underappreciated by investors since 1981

And so the miracle of the debt supercycle meets a logical end when yields, asset prices and the increasing amount of credit place an unreasonable burden on the balancing scale of risk and return. Too little return for too much risk. As the real economy of developed and developing nations sputter, so too eventually do financial markets. The timing – as mentioned previously – is never certain but the inevitable outcome is commonsensically sound. If real growth in most developed and highly levered economies cannot be normalized with monetary policy at the zero bound, then investors will ultimately seek alternative havens. Not immediately, but at the margin, credit and assets are exchanged for figurative and sometimes literal money in a mattress. As it does, the system delevers, as cash at the core or real assets at the exterior become the more desirable holding. The secular fertilization of credit creation and the wonders of the debt supercycle may cease to work as intended at the zero bound.

Comprehending (or proving) this can be as frustrating as understanding the differences between Newtonian and quantum physics and the possibility that the same object can be in two places at the same time. Central banks with their historical models do not yet comprehend the impotence of credit creation on the real economy at the zero bound. Increasingly, however, it is becoming obvious that as yields move closer and closer to zero, credit increasingly behaves like cash and loses its multiplicative power of monetary expansion for which the fractional reserve system was designed.

Finance – instead of functioning as a building block of the real economy – breaks it down. Investment is discouraged rather than encouraged due to declining ROIs and ROEs. In turn, financial economy asset class structures such as money market funds, banking, insurance, pensions, and even household balance sheets malfunction as the historical returns necessary to justify future liabilities become impossible to attain. Yields for savers become too low to meet liabilities. Both the real and the finance-based economies become threatened with the zero-based, nearly free money available for the taking. It’s as if the rules of finance, like the quantum rules of particles, have reversed or at least negated what we historically believed to be true

And so that is why – at some future date – at some future Ides of March or May or November 2015, asset returns in many categories may turn negative. What to consider in such a strange new world? High-quality assets with stable cash flows

Those would include Treasury and high-quality corporate bonds, as well as equities of lightly levered corporations with attractive dividends and diversified revenues both operationally and geographically. With moments of liquidity having already been experienced in recent months, 2015 may see a continuing round of musical chairs as riskier asset categories become less and less desirable

Debt supercycles in the process of reversal are not favorable events for future investment returns. Father Time in 2015 is not the babe with a top hat in our opening cartoon. He is the grumpy old codger looking forward to his almost inevitable “Ides” sometime during the next 12 months.

Be cautious and content with low positive returns in 2015. The time for risk taking has passed

[Jan 19, 2015] The End of Our Financial Illusions - By Simon Johnson

In retrospect, much of the financial innovation in the previous decades built up risk for the financial system in ways that were not properly understood by regulators or, arguably, by management at some of the largest banks.
April 17, 2014 | NYTimes.com

Simon Johnson, former chief economist of the International Monetary Fund, is the Ronald A. Kurtz professor of entrepreneurship at the M.I.T. Sloan School of Management and co-author of “White House Burning: The Founding Fathers, Our National Debt, and Why It Matters to You.”

The global financial crisis that broke out following the collapse of Lehman Brothers in September 2008 was a big shock. This is literally true in terms of the impact on investors and market prices; a wide range of financial variables moved rapidly in unexpected and worrying directions. But what happened was also a shock to the realm of ideas about finance.

Before September 2008 — or at least before 2007, when some of the underlying problems first became more clearly manifest — the prevailing consensus among officials and specialists was that financial innovation was a good thing. In isolated instances, a particular new product might not work out as planned, as happens, for example, with medical innovation. But over all, the consensus went, financial innovation led by the private sector was making the system safer and more efficient.

This view was wrong.

In its day, this line of thinking justified the legal and regulatory changes that allowed some banks to become very large and to build up a much more complex range of activities in the 1990s and early 2000s, including through various kinds of opaque derivatives transactions.

In retrospect, much of the financial innovation in the previous decades built up risk for the financial system in ways that were not properly understood by regulators or, arguably, by management at some of the largest banks.

Of course, some bankers knew exactly what they were doing as their companies increased their debt relative to their equity. On average, large complex global banks had about 2 percent equity and 98 percent debt on the liability side of the balance sheet before the crisis, meaning they were leveraged 50:1 (the ratio of total assets to equity).

The good news is that the official consensus was shattered in 2008, and is not coming back. Systemic risk slapped everyone in the face with an undeniable wake-up call.

However, the process of reforming the financial system is still at an early stage. The Dodd-Frank financial reforms of 2010 represent a useful start — including the Volcker Rule‘s restrictions on excessive risk-taking — and the recently adopted Basel III framework for capital regulation nudges equity requirements higher.

But the world’s largest banks will, by one informed estimate, end up — as things currently stand — with about 3 percent equity and 97 percent debt as the average structure of their balance sheet liabilities. In the United States, if the latest leverage rule is implemented and enforced properly, this will become 5 percent equity and 95 percent debt for the biggest eight banks by 2018. While 20:1 is better than 50:1, this is still not enough equity to assure a reasonable degree of financial stability in the foreseeable future.

The argument about finance has now shifted and is much more about whether capital requirements for the largest banks should be increased further. Those opposed to such a move offer three reasons why big banks should not be required to fund themselves with much more equity.

First, some people contend that the crisis of 2008 was a rare accident and Dodd-Frank fixed whatever problems existed. This is completely unconvincing — particularly because many of the same people have spent much of the last four years opposing and delaying financial reform.

Most importantly, it ignores the ways in which incentives and rules have changed since the 1980s. As James Kwak and I asserted in “13 Bankers,” the structure of the financial system is quite different now from what it was in 1980. In particular, the largest banks have become much bigger and more able to take on (and mismanage) much more risk.

The second argument is that the costs of the crisis were not huge, so there is no reason to fear a repeat. This is the view sometimes associated with former Treasury Secretary Timothy Geithner. (Mr. Geithner has a book coming out soon, and it will be interesting to see his current position on this point).

But the impact of any financial crisis is not measured primarily in terms of whether the Treasury made or lost money on specific investments. The criteria instead should be what happened to output and jobs, as well as what the impact was on the country’s fiscal accounts. How much more public debt do we have now relative to what we had before — and what kind of lasting negative effects will that have?

Mr. Kwak and I took this on in “White House Burning,” putting the recent surge in public debt in the longer-run context of American fiscal policy. No matter how you look at it, the financial crisis was a complete disaster for the real economy and, given the way fiscal politics work in the modern United States, for the budget and for investments in any kind of physical infrastructure and education.

The third counterargument is that large complex financial institutions are needed because they provide some sort of magic for the broader economy. This still seems to be the view of some people at the Federal Reserve Bank of New York, which recently published a set of research papers on the topic.

But the benefits they find are small relative to the potential costs. Anat Admati and Martin Hellwig’s “The Bankers’ New Clothes” makes the vulnerability of modern banking abundantly clear.

A recent report from the International Monetary Fund finds that the United States and other governments are providing large implicit subsidies to these big banks: The prospect of potential government support lowers their funding costs by about 100 basis points (one percentage point).

Many people are involved in the official sector’s rethinking of finance. This is the lasting contribution from books such as Sheila Bair’s “Bull by the Horns,” Neil Barofsky’s “Bailout” and Jeff Connaughton’s “The Payoff.” In government circles, key decision makers were swayed by officials including Thomas Hoenig and Jeremiah Norton (both of the Federal Deposit Insurance Corporation) and Sarah Bloom Raskin (then on the Board of Governors of the Federal Reserve System; now at the Treasury Department). As chairman of the Commodity Futures Trading Commission, Gary Gensler had an immensely positive impact, both directly on the regulation of derivatives and also more broadly.

The Democratic senators Sherrod Brown of Ohio, Jeff Merkley of Oregon and Carl Levin of Michigan and Ted Kaufman of Delaware (who has since left the Senate), along with David Vitter, Republican of Louisiana, played key roles in shifting opinion. Elizabeth Warren’s work, both before and after her election to the Senate from Massachusetts, has also had great influence.

Of all the civil society organizations seeking to promote financial stability, Dennis Kelleher’s Better Markets stands out for its major impact through a relentless surge of arguments, comment letters and research. Its report on the cost of the crisis made clear beyond any reasonable doubt that the crisis had profound negative consequences for millions of people.

Many other officials have also shifted their views in important ways. We are not going back to the old ways of thinking about finance, and allowing for changes in these theories is an essential part of any modern economy. Finance needs to be regulated effectively, and large banks should fund themselves with much more equity than is currently the case.

Selected Skeptical Comments

toom, germany 19 June 2014

The basic question is whether financial trickery and juggling can produce wealth? Certainly these tricks produce wealth for the bankers on Wall St. But how about the rest of us?

The answer is "maybe, sometimes". The pension funds profited from 1980 to 2007 and then again after 2010, with help from the Fed. However the wealth increase from 1980 to 2000 was mainly from the export of manufacturing jobs from the US to China. That will never occur again.

So we are stuck with 1% return on investment, unless trickery or some new invention (a new kind of cell phone, or more broadband or alternate energy?) occurs.

jack waymire, sacramento, ca 22 April 2014

Sure 20:1 leverage on balance sheets is better than 50:1 leverage, but the intellectuals are missing the point. Who wins when banks are excessively leveraged? Shareholders? Clients? The U.S. economy? I submit the primary beneficiaries are the executives who run the banks. They make decisions with impunity. Increased leverage increases profits which increase executive bonuses. Shareholders may benefit if company stocks rise in value. Highly leveraged balance sheets create a huge risk for all Americans - except the executives who made the decisions to leverage the balance sheets and get into businesses they barely understand.

Justin, Ohio 18 April 2014

You nail it perfectly. But we need to ask broader question: Is American Dream a myth?
It seems to me American Dream is clearly a form of both myth and illusion and propaganda used by the upper classes to keep the lower classes or the 99% in their place.

I'm shocked!, America 17 April 2014

"The second argument is that the costs of the crisis were not huge, so there is no reason to fear a repeat."

Let's find the person who said that and feed him to the tens of millions of unemployed people.

Jeff Atkinson, Gainesville, GA 17 April 2014

It's pretty simple. TBTF bank managers want to be regulated and paid like hedge fund managers but with a huge edge in the form of implied government assurances for their suppliers of capital. Such assurance can be purchased cheaply with political contributions and post government jobs for regulators.

Robert Baesemann, Los Angeles CA 17 April 2014

Bravo. I was prepared to read a rehash of the Collected Scientific Papers of Jamie Dimon," but this piece is very informative and helpful. The most critical issue on my horizon is the stability of the financial system. What I ask is whether or not the system is as stable as it was in 1998, or is it still teetering the way it was in 2007. In 2008, we observed the failure of Lehman, the rescue of several others (Merrill merged into BofA), and the failure and rescue of two money market funds that failed to make the buck. This seems to have been a global run on the banks which was cut off, but narrowly cut off. If there is a next time, the 2008 experience will only cause the fingers on the triggers to be quicker than they were in 2008. This seems to mean that we are not far removed from the lethally dangerous circumstances of 2008.

Thank you for pointing out the need for better financial regulation. As I recall, under Glass-Steagall commercial banking and investment banking were separate (no Merrill-BofA unions) and commercial bank reserve requirements were set by the FED at 20% to 25% or 4 to 1 or 5 to 1. In those days, commercial banks could not make profits like investment banks, but they could not drage the entire world into Depression. Investment banks were left to deal with people silly enough to gamble on Wall Street rather than Las Vegas. Oh for those halcyon days.

Murray Kenney, Ross, CA 17 April 2014

More equity = less lending. Less lending = less capital, particularly for small and medium sized businesses and for consumers with weak credit histories. Less capital for small and medium sized businesses and moderate income consumers = less economic growth.

That's why European Governments have resisted higher capital levels. They'd rather backstop their banks and treat bank debt as an off balance sheet liability of their governments than acknowledge the problem created by slow economic growth, excess supply, weak demand and low interest rates.

Michael F. Rhodes, Vancouver, Canada 17 April 2014

That is bunk. Financial alchemy has been tried in history (4th century Rome, post-war Germany and Basel risk weights). They don't work. Value creation, not finance creation, drives durable economics. Stop the apologetics. Tell people to work harder.

Manuel Morales, San Juan, Puerto Rico 17 April 2014

Financial illusions may be stronger than they may have ever been.

Professor Johnson writes that the financial crisis was a complete disaster to the real economy. Dennis Kelleher estimates a $12.8 trillion debacle in that same real economy with a negative impact that will be felt for years, if not decades, to come.

The doyens and shamans of ‘high finance’ have only received timid penalties for the global destruction they triggered while companies in the tangible economy, causing much less damage, are oftentimes chastised much more strongly and receive relatively far stricter punishments.

Regrettably the all-inclusive list of wizards of Wall Street are doing fine, are much alive and vigorously kicking while working compulsively to find ‘innovative’ and ingenious maneuvers to outfox regulations while moving higher on the 1% list.

The distressed state of affairs caused by the Great Recession may prove not to be the Main Event. Only time will tell.

Bob Feinberg, DC area 18 April 2014

At a recent event in Washington, Mr. Kelleher drastically raised his estimate of the embedded cost of the ongoing crisis due to overvaluation of swap positions of the TBTF banks. No one seems to know what this exposure is, and the prevailing view is that this is minimal because the positions net out.

The people who say this are the same ones who minimized the practices that gave rise to the 2008 episode of the ongoing, permanent crisis. The positions don't necessarily net out unless they are opposing sides of the same trade.

To estimate this exposure at several times the GDP of the US is probably conservative, but no one seems to know. Meanwhile the efforts of the so-called regulators are directed at preventing a so-called "default event" that would require these losses to be recognized.

BB, Orlando 17 April 2014

An excellent article. I completely agree that "Finance needs to regulated effectively and large banks should fund themselves with more equity." However, this is not going to happen until there are major political changes in the United States. The country is not a democracy, but a plutocracy. Wealthy people have benefited immensely by the status quo whereas the middle and lower classes have been devastated. This is because the government and the supreme court are controlled by big business. All elected government officials get in office with big business funding and they will act accordingly. The supreme court has exacerbated this situation by ruling that there should be no limits on campaign contributions. Campaign contributions need to be severely limited so educated, capable people from the middle and lower classes have an equal chance to play a significant role in government. How about a physicist as president(eg Ms Merkel)!.

Only a wealthy person such as Timothy Geithner would have the opinion that the costs of the financial crisis were not huge. He would feel differently if he was standing in the unemployment lines. The current plutocracy wants big profits which mean shipping jobs overseas, lower wages and more unemployment.

Dryly 41, 17 April 2014

Every thing that Professor Johnson says is spot on. Indeed, he is the only major economics professor that has identifies the source of the September 15, 2008 collapse of our financial system for the first time since October of 1929.

He is also the only one who has pointed out that Dodd-Frank didn't fix the problems created by the reversion to the Laissez Faire of Harding, Coolidge, Hoover and Mellon from the "strict supervision" of FDR.

We will once again return to "strict supervision" of finance. The only question is whether we do it before or after the next financial collapse. A wise and prudent nation would do it before but there is insufficient wisdom and prudence at this unfortunate time in American history.

Bob Feinberg, DC area 18 April 2014

Prof. Admati is another relentless leader of this debate. While the calls for stricter regulation of banks have grown louder, the opposition by the industry has hardened, and industry executives and lawyers are still running policy. This industry is, in effect, regulated by its own lawyers. To have meaningful regulation of this dangerous industry would required Transparency, Independence, and Accountability, all of which have been lacking throughout the decades of the ongoing, permanent crisis, and they still are.

Ms B, Buffalo 17 April 2014

Back in the 80's a local savings bank went "big time" around here with fancy deals in Florida and Texas. The deals were put together with the bank as lender with a piece of the ownership/equity as well. They bankers thought it was the cats meow, the cutting edge of sophisticated banking. The deals all tanked and the bank went down. Same nonsense now with different players and an even better means of obfuscation and rent seeking. Today, unfortunately the banksters are above the law and burning town the country has no consequences.

Larry L. Dallas, TX 18 April 2014

Here's a fact about the Oil Boom and the S&L Mess that happened in its midst that few people know:

EVERY SINGLE STATE BANK IN THE STATE OF TEXAS WENT UNDER IN THE AFTERMATH.

The 2008 Crisis was that smaller crisis writ large on the national and global scale. The fact that two idiots from Texas (Armey and Gramm) had a hand in the elimination of the Depression-era financial regulations that eventually led to 2008 just show that idiots are not capable of learning from prior experience.

Mark T, is a trusted commenter New York NY 17 April 2014

This sounds like a valedictory and indeed I hope it is the last post on this topic on which so much has been said (and repeated, and repeated).

One official unwisely unmentioned is Daniel Tarullo who is at the forefront of the push for greater macroprudential regulation. Among authors who should have been mentioned are Viral Acharya who has published a lot on systemic risk, Raghuram Rajan's Fault Lines is essential to understand the role of debt in the political economy of the post-gold-standard Western economies; and no analysis of the crisis is worthy of mention unless it faces up to the role that bank capital regulations played in shaping the portfolios of banks, which one can explore in Friedman's Engineering the Financial Crisis.

The post manages to discuss the financial crisis without once even alluding to the role of the GSE's and their politically driven acquisition of credit risk despite being overleveraged, through use of the implied government guarantee. Nor does it touch on the foreign role in the chase for yield, the connection between the trade deficit and the issuance of debt securities to countries with trade surpluses, or the mismatch between pension promises and pension funding that is one of the major sources of the growth of financial risk over the past two generations. Everything gets laid at the feet of 13 bankers. Unbelievable, yet so convenient, since it allows a whole sector of the elite to ignore the consequences of their policy preferences.

Larry L, Dallas, TX 17 April 2014

The problem with your argument is that same people who wanted to eliminate the Depression-era regulations were also the same people who wanted free trade which offshored a significant of the country's job base (and therefore its tax base and consumer spending capacity).

The result was higher federal deficits (which led to 5-fold increase in the national debt within a generation), higher gov't spending on transfer payments to make up for that lost personal income, a higher trade deficit from all of the imports and the reduced domestic expenditures on everything from education, R&D and infrastructure as a % of GDP.

The very same people who gave us the Financial Crisis were also responsible for the vicious cycle in the real economy.

E.T. Bass, SLC 18 April 2014

More to the point:

A bubble burst. "Bi-partisan" efforts at "home ownership" blew up, due to very highly questionable home mortgages. Which caused Lehman and Govt. Motors to blow up.

Outcome: second worst economic disaster in 100 years.

Today -- the most anti-small business president in history (per N.F.I.B.) who publicly snarls at the U.S. House and the slowest economic recovery in 100 years.

Res ipsa. Entirely predictable.

Steve, Raznick 17 April 2014

To be very clear, very precise, the banks were completely incapable of anything approaching accuracy when it came to the risks they took. Enough with this myth that these are unbelievably intelligent people who having attended a school with name people recognize inculcates them with special powers of divination.

We have 5 financial lobbyists for every congressmen. Just one illustration of how the game is tilted. Those lobbyists do not care about the financial security and welfare of the people. They care only about themselves and thwarting passage of any legislation which creates a sustainable, viable finance industry.

[Jan 16, 2015] Moody’s Says Russia’s GDP To Fall By 5.5% In 2015

There can not exist nether "free markets" nor independent rating agencies. Especially under neoliberalism. credibility. It's the same Moody that rate AAA mortgage CDOs before 2008. How many people dearly pay for their recklessness?
Moscow Exile, January 16, 2015 at 10:29 am

A Peter pre-empt:

Moody’s Says Russia’s GDP To Fall By 5.5% In 2015

Russia Says Inflation Could Hit 17% by March

For Navalny:

Get round here, Tagansky District, quick!

They’re still selling milk at our local supermarket for 45 rubles a litre.

Bring some Western hacks if you can.

kirill, January 16, 2015 at 2:45 pm
The same clown outfit, Moody’s, predicts a 2% drop in Ukraine’s GDP in 2015:

http://www.credo-line.com/en/media/news/Moodys-predicts-Ukraines-GDP-to-fall-by-8-this-year-and-2-in-the-next-year.htm

Moody’s has zero credibility.

[Jan 12, 2015] Goldman tries to make oil prices go lower

In a note to clients, Goldman Sachs slashed its forecast for oil prices. It now estimates that crude will average $50.40 a barrel this year, far below its previous forecast of $83.75. It also trimmed its forecast for Brent crude, a type used in international markets, to $70 a barrel from $90.
Jan 12, 2015 | NYTimes.com

Oil Slides Again, Taking Shares on Wall Street Down With It -

Falling oil prices dragged the stock market lower on Monday as Exxon Mobil, Chevron and other big energy companies sank along with crude.

The steep drop in oil prices over recent months has investors second-guessing expectations for the quarterly earnings season that starts this week.

Sam Stovall, the United States equity strategist at S&P Capital IQ, said that it seemed that every day brought another drop in Wall Street’s earnings forecasts.

“What’s happening is that we’re seeing the very low bar for fourth-quarter earnings raising anxiety,” Mr. Stovall said. “It’s the continued decline in oil, but it’s also that nearly half of the S.&P. 500’s revenues come from overseas. Japan is in recession, and Europe is teetering on the edge of it.”

The Standard & Poor’s 500-stock index lost 16.55 points, or 0.8 percent, to close at 2,028.26. The Dow Jones industrial average slid 96.53 points, or 0.5 percent, to 17,640.84, and the Nasdaq lost 39.36 points, or 0.8 percent, closing at 4,664.71.

... ... ...

In a note to clients, Goldman Sachs slashed its forecast for oil prices. It now estimates that crude will average $50.40 a barrel this year, far below its previous forecast of $83.75. It also trimmed its forecast for Brent crude, a type used in international markets, to $70 a barrel from $90.

Oil prices extended their slide, with American crude losing $2.29 to settle at $46.07 a barrel. Brent lost $2.68 to $47.43. Both were trading at their lowest levels since March 2009.

[Jan 12, 2015] Is the US economy overstretched

RT Op-Edge

Unfortunately at the same time, economic gravity will out and that leads to some concern for 2015. The US economy has averaged 57 months of expansion before matters get a tad overheated and a recession ensues. Equally, we have many indicators of somewhat frothy stock multiples. Are they expensive? Well they certainly aren’t cheap, with large US corporations making half their profits overseas. Even presuming growth elsewhere, a resurgent US dollar suggests lower profits for American corporations. Moreover, the bond bubble is on borrowed time with the shale economy likely subject to a “wildcat” cyclical downturn, given collapsing oil prices.

Admittedly, the US economy suffered a large downswing in the last recession but thanks to the flexibility of its employment and a relatively forgiving approach to redemption of entrepreneurial spirit after failure, the US has had a huge upswing which may continue awhile yet. However, January 2015 marks the 67th consecutive month of expansion (read that and weep, Europe!), already 10 more than the average upswing. Yes, the cycle may carry on for a while (we all hope so) but ultimately cyclical gravity will impact the US economy once more and it begins 2015 leveraging itself against the mean. A US recession is likely close at hand.

Ironically, while a US recession will adversely impact its citizens, the biggest losers in the process will likely be overseas markets. Even a short, relatively muted recession will likely cause a wave of dislocation, e.g. amidst the enormously over-leveraged government spendthrift continent of Europe where government continues to ignore the lessons of their own hubristic impotence to create growth.

An overstretched US cycle will likely cause America more economic pain before the lame duck Obama presidency ends. However, it will make the greatest impact on weakened states across the Atlantic

Mikhail R

Of course it is overstretched, and there are and will continue to be economic cycles. The U.S. and the world will soon be in another down cycle and whether we will have inflation or deflation remains to be seen. The U.S. and Russia need better communication. The Ukraine fiasco is a perfect example for much needed discussion. The U.S. should have kept Russia aware of its activities in Ukraine and Russia should have advised the U.S. of its intentions. Since neither party wanted to disclose their intentions, we now have sour relations between the two super powers. And, what affects Russia will eventually effect the U.S. and Europe, and vice versa. I am hoping a more conservative President will be elected in the U.S. and the White House will make it a priority to improve and re-establish better relations with Russia with an understanding that open communications is critical for a successful foreign policy and improved negotiations.

Serge Krieger

America growing rapidly ? hahaha! 5%. It is based upon purchases of health care plans. Yeah, great growing! America is one big lie.

Patrick O'Neil

How much industry does Russia have. It's GDP is about the same as Italy. LOL
Do a search of the highest revenue companies in the world. Look what country they are from. See the US multiple times? Now scroll for a Russian one. Keep scrolling. :)

[Jan 09, 2015] Larry Summers US economy not growing fast enough

Jan 09, 2015 | finance.yahoo.com

Former Clinton Treasury Secretary Larry Summers told CNBC Friday the U.S. economy is not growing fast enough.

While American economic growth is getting better and leads the rest of the world, investments need to be made to get the economy stronger, Summers said. "Confidence is the cheapest form of stimulus," he said on " Squawk Box ."

"We're not doing well enough. We haven't had a year of 3 percent [growth] in a very long time in the United States," he said.

Summers, also a former Obama administration economic advisor, said the U.S. bond market is indicating that investors are worried. "With forward interest rates coming down as much as they have, it suggests concern about underlying growth in this economy."

The government should be investing more, not less, in the economy, especially with borrowing rates at such low levels, he said. "We've got to be doing more to get the economy growing more rapidly and making sure everybody share in that prosperity."

Summers called for infrastructure investments in antiquated airports and shipping ports, and said tens of thousands schools around the nation need to be improved.

He said private-sector investments need to be made in energy, high-speech Internet and information technology. "Way over three- quarters of the investment that we're making is private-sector investment."

The government also needs to address burdensome regulations and policies, Summers said. "It's important to legislate tax reform in the corporate sector as soon as possible."

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