It is what it is – and what “IT” is, is that we’re living in the vision of the future laid out by George Orwell 70 years ago. The markets are rigged, elections are rigged; Congress is completely owned by wealthy corporations and individuals; the power of the Oval Office is owned by wealthiest and most ruthless corporations and individuals: Wall Street Big Banks, Big Oil, Big Defense, Big Pharma and Big Tobacco.
Most Hillary Clinton supporters know she defines the word “criminality,” but will vote for her as a vote against Trump. Think about how absurd that it is. The system is so completely rigged that even individual thought-process has been hijacked.
Without the stimulus of ever-rising credit, the global economy craters in a self-reinforcing cycle of defaults, deleveraging and collapsing debt-based consumption.
In an economy based on borrowing, i.e. credit a.k.a. debt, loan defaults and deleveraging (reducing leverage and debt loads) matter. Consider this chart of total credit in the U.S. Note that the relatively tiny decline in total credit in 2008 caused by subprime mortgage defaults (a.k.a. deleveraging) very nearly collapsed not just the U.S. financial system but the entire global financial system. ...
In regard to monetary policy, Mexico is a good neighbor to the U.S. It has been mirroring Fed policy since the financial crisis. As the U.S. Fed cut rates to zero, Mexico did the same by cutting rates to a 3% low by 2014.
When the Fed did QE, Mexico did too. When the Fed raised rates for the first time in seven years on Dec. 16, 2015 by 25 basis points, so did Banco de Mexico, the very next day. But, there’s a twist…
Banco de Mexico raised rates again on Feb. 17, 2016 by 50 basis points. No one saw that coming. Thus, the peso — that had declined steadily from 10 to 19 to the dollar between 2008 and mid-February 2016 (and by 18% during 2015) — strengthened back to 17.66 to the dollar as of March 24, 2016.
Banco de Mexico didn’t raise rates to fight inflation. Mexico has the lowest inflation in Latin America and one of the region’s highest 2016 growth projections. ...
The priesthood's insane obsession with forcing people to spend their savings by punishing savers with ZIRP/NIRP has failed spectacularly for a simple reason: it completely misunderstands human psychology. Let's start with a simple chart of the Fed Funds Rate, which the Federal Reserve has pinned near zero for years. This Zero Rate Interest Policy (ZIRP) is the god the PhD economists in the Fed and other central banks worship as the supreme force in the Universe, along with its even more severe sibling god, NIRP (negative interest rate policy), which demands that banks and depositors must pay for the privilege of holding cash. Precisely what have ZIRP and NIRP fixed in the global economy? The short answer is "nothing." Instead of fixing what's broken, ZIRP and NIRP have pushed a broken system further along the path of self-destruction.
China’s Plan For Gold & A New Monetary System Stephen Leeb: “The world is headed to a new monetary system. But most in the West are still valiantly trying to deny that reality. Whether you’re reading The New York Times or Bloomberg News, or delving into recent white papers released by various institutions, you’re sure to find anti-gold propaganda, stories about how oil is plentiful, all the while stalwartly maintaining that the dollar won’t be superseded by the renminbi…
At 8:30 a.m. this morning, 10 minutes after the Comex gold pit opens, over 70 tons of gold was dropped into the entire Comex trading system. If this happened on the NYSE, one of the ECN’s (usually BATS) would have mysteriously “broke” and trading would have been halted – before the damaging effects of the systemic paper overload hit the market.
Click through for the rest of the post and the chart.
The New Yorker writer defended the way the unemployment rate is calculated by saying "we've got top people on this--top people:" we should accept the official metrics as meaningful because they're the work of PhD economists-- you know, "top people" who are far above peasants' non-expert skepticism. The only problem with this "top people" defense is it is increasingly clear that the economic models that PhD economists claim are working well are in fact failing. They are failing for a number of reasons I list in my book Why Our Status Quo Failed and Is Beyond Reform, one of which is: the current metrics are answering the wrong questions, and as a result they've lost their explanatory and predictive value.
Stock prices are massively inflated when you strip corporate earnings of all the fancy accounting tricks, according to research done for me by Thomson Reuters.
For the last couple of years, I’ve been telling you how companies have gotten away from reporting their profits on what is called a Generally Accepted Accounting Principles (GAAP) basis. Instead, they report special factors like extraordinary items and noncash charges that make earnings look better than they really are. ...
Janet Yellen’s recent speech at Jackson Hole, Wyoming, was eagerly awaited, and a complete non-event. The headlines were dominated by breathless accounts of Janet Yellen’s speech at a Federal Reserve conference in Jackson Hole.
The robot scanners read the speech first; it took a while for humans like me to catch-up. But I’ve since had the chance to digest it. What was striking about the speech was how ordinary it was. As I predicted she would, she threw a bone to the hawks (“the case for an increase in the federal funds rate has strengthened”) and then threw another bone to the doves (“as ever, the economic outlook is uncertain, and so monetary policy is not on a preset course”). She also talked about “data dependence,” etc., and then went to lunch.
The conference at which the speech was delivered was titled “Designing Resilient Monetary Policy Frameworks for the Future.” That title at least suggested that some new thinking and new policies might be on display. They weren’t....
On Wednesday gold continued to build on gains sparked by disappointing US economic news and a weaker dollar.
Gold futures trading on the Comex market in New York for delivery in December, the most active contract, were exchanging hands at $1,353.70 an ounce, a three week high. Gold is now up some $50 since the release of weaker than expected payroll data on Friday.
Yesterday, the price of gold enjoyed another leg up – the best one day gain since June's Brexit poll surprised markets – when a reading of economic activity from the US Institute for Supply Management fell to its lowest level since February 2010.
A year ago at this time, it was hard for investors to find available inventory for the most popular silver products – as well as some gold coins. Premiums for the silver American Eagle reached nearly $6.00 per coin. Mints and refiners couldn’t keep up with demand, and long lead times became par for the course across the silver product line.
Today, retail buying of physical silver has slowed considerably. There is lots of inventory in dealer vaults and the number of bullion investors looking to sell is on the rise.
Demand slowed even though nothing has changed the underlying fundamentals of metals markets. The world financial system is even more rickety today than it was in 2007, just before the last crisis. Bullion premiums are at the low end of their range. And prices finally appear to have bottomed and turned up. Yet bullion investors are largely sitting on sidelines.
Michael Covel reveals the little-known formula tucked within a footnote in Yellen’s Jackson Hole speech that has market watchers in an uproar. Then, contributor Ben Hunt of Salient Partners tells you why “magical thinking” about our monetary overlords at the Fed can lead to disaster.
Fantasy is a nice place to visit, but... Click through for the rest.
DB stock is now in a full panic sell-off as I write this. It just hit another new all-time NYSE low on by the heaviest volume ever in the stock since its 2001 NYSE listing. It’s currently down almost 10%. No doubt the Central Banks will try to bounce it.
Deutsche Bank may well be the scapegoat this time around just like Lehman was the scapegoat in 2008. Central Banks in collusion can prevent just one bank from collapsing. It was the co-collapsing of AIG and Goldman Sachs that prompted then-Secretary of Treasury, ex-Goldman CEO Henry Paulson, to put in motion the bailout of the U.S. and European banking system.
Yesterday it was reported that the rate the Fed charges the banks to borrow collateral surged to its highest rate in 7 years – LINK. The rush to borrow collateral was no doubt prompted by OTC derivatives-related counter-party collateral calls.
Listening to Janet Yellen splitting hairs and blathering in circles about the state of the economy yesterday was enough to put you in mind of a paint-by-the-numbers robot built in the labs at MIT and programed by its Keynesian economics department. After all, the latter has also inflicted on the world Paul Samuelson, Stanley Fischer, and his infamous student, Ben Bernanke.
So why not a four-fer?
There is only one question that Yellen needs to answer and then all else is readily explained. To wit, does she actually believe that the money market rate——as formerly measured by Fed funds before Bernanke nationalized the interbank market in September 2008——is a wholly owned property of the FOMC? ...
Donald Trump has made repeated calls to remove Fed chair Janet Yellen from office, saying that she should be ‘ashamed’ of what she’s doing to the country. So what exactly would a Trump presidency mean for the Fed and for the markets? We speak with David Stockman, former Office of Management and Budget Director under Reagan and author of “Trumped! A Nation on The Brink of Ruin and How to Bring it back.”
The pinnacle of the global financial system is warning that conditions are right for a “full-blown banking crisis” in China. Since the last financial crisis, there has been a credit boom in China that is really unprecedented in world history. At this point the total value of all outstanding loans in China has hit a grand total of more than 28 trillion dollars. That is essentially equivalent to the commercial banking systems of the United States and Japan combined. While it is true that government debt is under control in China, corporate debt is now 171 percent of GDP, and it is only a matter of time before that debt bubble horribly bursts. The situation in China has already grown so dire that the Bank for International Settlements is sounding the alarm…
Gold To Reenter The Monetary System Gold is going to reenter the monetary system — this discussion has already been underway for some time. KWN has stated for many, many years that this day is coming. The first thing that has happened is the Chinese yuan has been included in the SDR basket. At some point, gold will also be included, but only on the establishment’s timetable. From now until then, the establishment has instructed their agents — the bullion banks — to scare the hell out of anyone who goes near the gold market and mentally exhaust those who are already in it.
We’ll be hearing and reading about this for a long time, in all kinds of iterations: “Americans last year reaped the largest economic gains in nearly a generation,” the New York Times gushed. “Household incomes surged 5.2% in 2015, first gain since 2007,” the Wall Street Journal raved. Everyone was happy. Poverty rates dropped 1.2 percentage points. Finally, some good data in that beleaguered sector! The middle class and those below had been getting hammered for too long.
The impetus of these happy moments in the US economy is the Census Bureau’s Income and Poverty survey for 2015. It reported that median household income – 50% of households earn more, 50% earn less – rose 5.2% to $56,516, adjusted for inflation via the Consumer Price Index.
Median household income had been declining in fits and starts since the peak in 1999. But even after this phenomenal rise in 2015, it was still 1.6% lower than in 2007 and 2.4% lower than in 1999.
.I got an email from a colleague today that said, among other things: “The economy is tanking and, while you may be the most pessimistic around, you may not be pessimistic enough.”
To that I would say that I’m significantly more bearish than is reflected in my public analysis. I spoke to a couple people today who offered anecdotal stories about their particular business niches – businesses in which new orders are somewhat tied to discretionary spending – and they both said that new business activity is unusually slow and that the last time they experienced new order flow this slow this was in 2008.
I’ve been suggesting for most of this year that retail sales were slowing and would fall off a cliff heading into fall. I presented RL as a short idea in my Short Seller’s Journal on August 14th at $108 after visiting the Ralph Lauren store in Aspen..
The US and other countries consume more energy each year. Crude oil is a major source of energy. The US runs a trade deficit of about half a $ Trillion each year, much of it is due to the cost of imported crude oil. If the US had paid for imported crude oil in gold, the total cost since 1970 would have been approximately 8.2 BILLION ounces of gold. Clearly this was not possible since the total US official gold hoard is listed as about 260 MILLION ounces of gold, of which 147.3 million supposedly is vaulted in Fort Knox. It is easier to print T-Bonds and IOU’s than to mine and produce gold.
Our society does not make it easy to control what you can control.
One of the aphorisms to live by here at Of Two Minds is control what you can.We don't control the erosion of our money from inflation, the state's vast criminalization machinery, the nation's foreign policies or the central bank's free money for financiers policies. So what do we control? Amazingly enough, we still control a few things. We control what we eat (at least those of us who aren't institutionalized do), what fitness/ stretching/ bodywork routine we do or don't do, and we still control what we do with our surplus money: we can salt it away as savings rather than spend it, and we control where to invest our savings.
While his recent warnings about a return to market turbulence may have fizzled as a result of another unprecedented recent round of central bank intervention, by both the BOE and BOJ, who expanded their asset purchase programs to corporate bonds and doubling ETF monetizations, respectively while scapegoating Brexit, the period of calm is ending, and moments ago JPM’s head quant Marko Kolanovic has released a new report, according to which the recent period of eerie, record calm across asset classes is about to end, warning that “we expect a significant increase in realized volatility, correlations and tail risk in September and October.”
According to Kolanovic while a driver of the recent market stability the “relatively stable macro data and a seasonal decline in trading activity” he explains that “a significant driver of the volatility collapse was derivatives hedging effects, also known as pinning”, as well as the near all-time high leverage for Volatility Targeting and Risk Parity strategies. However, “this is all about to change as a number of important catalysts materialize this month (ECB, BOJ, Fed meetings), seasonals push market volatility higher, and leverage in systematic strategies and option positioning provide fuel for volatility.”
At the other end of the elephant’s tail is the broader impact of the strong dollar over time, since one month does not a trend make. A trend makes a trend, and the trend of American exports in a strong-dollar world is depressing.
Exports of American goods and services are down nearly $64 billion so far this year. Every primary category is sucking on a barrel of red ink — foods, feeds and beverages; industrial supplies and materials; capital goods, except automotive; automotive vehicles, parts and engines; and consumer goods.
For 19 consecutive months on a year-over-year basis.
That we might rightly call a trend.
Click through for the full article. I've snipped a section from the midst of it.
By California Lawyer | Tuesday, September 6, 2016 at 1:50 pm For-profit ITT Technical Institute shuts down, leaving 40,000 students in limbo, and adding 8,000 to the unemployment rolls. Oops, this was not the narrative that was supposed to happen.
ITT Technical Institute, a for profit educational institution, is, according to them, forced to shut down after the federal government basically shut off the flow of government-guaranteed tuition. ITT whines: “the actions of and sanctions from the U.S. Department of Education have forced us to cease operations of the ITT Technical Institutes, and we will not be offering our September quarter.”
So, with this in mind, let us examine the incentive structure, and see if we can learn any lessons.
ITT was a for-profit school. That means they had an incentive to enroll students, that is, their profits increased from a greater number of students. In a normal world, one without incessant government intervention and malinvestment, a prospective student would size-up the burden benefit analysis of attending ITT. It is simple: what does it cost to graduate, versus what are the job prospects, including expected starting salary, upon graduation? If the costs far exceed the benefits, the rational student would not pay the tuition, and would find something alternative to do, like interning for free, taking classes part time while working part time, going to a state run community college, going to a shorter trade school, or perhaps foregoing school altogether and entering the workforce in whatever capacity was available.
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