I stumbled onto one of Peter Schiff’s radio shows and it was the one where he discusses CNBC chief economic correspondent, Steve Liesman’s call that the American economy needs more consumer debt, which is right in line with the Keynesian theory of spending our way to prosperity. I expect most non-liberal arts degree carrying economists would agree that Steve, once again, out did himself to put economic analysis through a meat grinder and serve it up as a David Burke’s Primehouse 40-day-bone-in ribeye. I’m going to prove that such a theory is simply impossible, and show how it has become that basis of American economics. This is going to get a bit heavy so grab a coffee.
Steve says consumer debt is the bridge between working hard and playing hard. America was built on consumer debt he argues. He claims that debt levels are very low in America which he claims is a sign of a bad economy. Now he also seems to have a hint of understanding that too much debt can cause bubbles and he uses student loans as an example, yet he says that a bit trepidatiously despite the fact that we’re still trying to crawl out of one of the worst credit induced recessions in history. However, despite his caution with student debt he claims the over leverage from the mid 2000′s “has been unwound” and that we are now at the “bottom of the credit cycle”. And that is why, he claims, the American economy needs more consumer debt.
Iit was only this week that Bloomberg reported that "China Offers Russia Help With Currency Swap Suggestion." But in order to fully backstop Russia away from a SWIFT-world in which the dollar reigns supreme, one extra step was necessary: the launching of direct FX trade involving the Russian and Chinese currencies, either spot or forward - a move away from purely theoretical bilateral FX trade agreements - which would not only enable and make direct currency trading more efficient by sidestepping the dollar entirely, but also allow Russian companies to budget in Chinese Yuan terms. It is no surprise then that this is precisely the missing step that was announced overnight, and will be implemented starting Monday.
By Marin Katusa, Chief Energy Investment Strategist, Casey Research:
If you only paid attention to the mainstream media, you’d be forgiven for thinking that the U.S. is going to get away from the collapse in oil prices scot free. According to popular belief, America is even going to be a net winner from cheaper oil prices, because they will act like a tax cut for U.S. consumers. Or so we are told.
In reality, though, many of the jobs the U.S. energy boom has created in the last few years are now at risk, and their loss could drag the economy into a recession.
The view that cheaper oil automatically boosts U.S. GDP is overly simplistic. It assumes that U.S. consumers will spend the money they save at the pump on U.S.-made goods rather than imports. And it assumes consumers won’t save some of this windfall rather than spending it.
Those are shaky enough. But the story that cheap fuel for our cars is good for us is also based on an even more dangerous assumption: that the price of oil won’t fall far enough to wipe out the U.S. shale sector, or at least seriously impact the volume of U.S. oil production.
We have descended fully into the Orwell/Rand vision. We have a Government that is corrupted to the core by enormous amount of money from Wall Street and big business. Laws have now been passed which enable the Government/Wall Street to fully extract every last nickel and dime of wealth still possessed by the middle class.
From Ron Paul at The Ron Paul Institute for Peace and Prosperity:
Last week, we learned that the key to a strong economy is not increased production, lower unemployment, or a sound monetary unit. Rather, economic prosperity depends on the type of language used by the central bank in its monetary policy statements.
All it took was one word in the Federal Reserve Bank’s press release − that the Fed would be “patient” in raising interest rates to normal levels − and stock markets went wild. The S&P 500 and the Dow Jones Industrial Average had their best gains in years, with the Dow gaining nearly 800 points from Wednesday to Friday and the S&P gaining almost 100 points to close within a few points of its all-time high.
Just think of how many trillions of dollars of financial activity occurred solely because of that one new phrase in the Fed’s statement. That so much in our economy hangs on one word uttered by one institution demonstrates not only that far too much power is given to the Federal Reserve, but also how unbalanced the American economy really is. ...
In a larger sense, the Fed is already intervening in the oil sector via its zero interest rate policy (ZIRP) and its unlimited liquidity for financial speculation.
The problem with financializing a critical sector of the economy is the financialization process transforms it into a systemic risk. The trajectory of every financialized sector is the same: debt and leverage are piled ever higher on a base of collateral that eventually collapses as heightened risk becomes the Monster Id of a crowded trade.
The Lawless Manipulation of Bullion Markets by Public Authorities
Paul Craig Roberts and Dave Kranzler
Note: In this article the times given are Eastern Standard Time. The software that generated the graph uses Mountain Standard Time. Therefore, read the x-axis two hours later than the axis indicates.
The Federal Reserve and its bullion bank agents are actively using uncovered futures contracts to illegally manipulate the prices of precious metals in order to keep interest rates below the market rate. The purpose of manipulation is to support the U.S. dollar’s reserve status at a time when the dollar should be in decline from the over-supply created by QE and from trade and budget deficits.
Historically, the role of gold and silver has been to function as a means of exchange and a store of wealth during periods of economic and political turmoil. Since the bullion bull market began in late 2000, It rose almost non-stop until March 2008, ahead of the Great Financial Crisis, which started with the collapse of Bear Stearns. When Bear Stearns collapsed, gold was taken down over the course of the next 7 months from $1035 to $680, or 34%; silver from $21 to $8, or 62%. The most violent takedown occurred as Lehman collapsed and Goldman Sachs was about to collapse.
Something strange is going on in China. On one hand, as the chart below shows, China's trade surplus is growing and growing, and just hit record highs. In other words, China is - on paper - receiving record amounts of foreign currencies in exchange for its (mostly) goods exports.
That much is clear in the Chinese (record) trade balance chart below:
Yet on the other hand, a chart from Deutsche Bank shows something very peculiar: even as China's foreign reserves should be rising, they are not only dropping, but just suffered their biggest quarterly drop in the past decade! ...
Click through for the full read and all the charts. It definitely bears some thought.
Indian gold importers are offering a discount of $2 an ounce versus London prices for the first time in almost five months due to market oversupply. Indian dealers offer gold discount for first time in 5 months
The temptation is to create money out of thin air to solve the other problems: just create money (or borrow it into existence) to pay for old-age social security, youth unemployment, higher energy costs, and every other problem facing the status quo.
But this “solution” generates its own problem. Even more damaging, issuing money and credit doesn’t actually solve any of the other structural problems; it simply papers them over, allowing them to fester behind the façade of freshly printed money and debt.
The Central Bank of Russia (CBR) has launched a new SWIFT-style payment service aimed at moving away from Western financial dominance. The system is already operating, and will be fully functional within six months.
"The new service was launched in order to ensure smooth and safe transmission of financial messaging within the country, and is another step towards improving the system of services provided by the Bank of Russia,” said the bank statement Friday.
The regulator said the new service will allow credit institutions to transmit messages in a SWIFT format through CBR to all Russia’s regions without restrictions.
The calls to disconnect Russian banks from the global interbank SWIFT system came amid the deterioration of relations between Russia and the West and the introduction of sanctions.
Today a former White House official stunned King World News by saying the United States is already at war with China and Russia. Former presidential adviser and member of the U.S. President's Working Group on Financial Markets, Dr. Philippa Malmgren, also discussed how and where this dangerous war is taking place and why the public is totally unaware of it up to now.
Eric King: “Because you are friends with former defense ministers you are up to speed on geopolitics, but I kind of laughed because NATO was talking about creating a ‘Spearhead Force’ of 3,000 – 4,000 soldiers, and the United States said they are going to send 100 tanks to the Baltic States. (Laughter)”
Dr. Malmgren: “Yes." (Laughter).
Eric King: “The reason I’m laughing is because just one battle in World War II, the Battle of Kursk in Russia, involved 2,000,000 men, 6,000 tanks, and 4,000 aircraft. I laugh because what does the West think it’s going to do by getting 3,000 – 4,000 men together and sending 100 tanks up against Russia? (Laughter). It’s comical.”
Last week, after the unanimous passage of the Ukraine Freedom Support Act of 2014 in Congress we wrote that "World Awaits Russian Response As Obama Makes "Lethal Aid" To Ukraine Legal." We didn't have long to wait: one short hour ago, Putin adopted an updated version of its military doctrine, which "reflects the emergence of new threats against its national security" and which names both the NATO military buildup on Russia's borders, as well as the US and the destabilized situation in some regions (read Ukraine) as the main foreign threats to Russian security. The doctrine update also, for the first time, put protection of Russian national interest in the Arctic (read oil and nat gas) among the key priorities for Russia's armed forces. In other words, Putin is not only not backing down, but has once again explicitly warned NATO that any western action, either in Ukraine or elsewhere, will have a proportional response.
The financial wars are taking other steps toward an all out conflict. Rhetoric is ramping up.
The end of rising wages = the end of mass affluence: we just enjoyed the Last Christmas in America (TLCIA).
As unemployment topped 10%, the January 1975 cover of Ramparts magazine blared: The End of Affluence: The Last Christmas in America. (TLCIA)
The government responded to the high unemployment, rampant inflation and rising budget deficits by manipulating data to mask the politically inconvenient realities of inflation, unemployment and deficits by playing with Social Security Trust Funds, inflation data, etc.--games it continues to play to cloak reality from the media-numbed public.
The economic stagnation, despite various stock market rallies and false starts, essentially lasted 10 years, from 1973 to 1982. ...
For the second time in a week, on December 17, 2014, the OCC (regulator of nationally-chartered banks), issued a Press Release containing some pretty alarming statements regarding credit risk among U.S. banks. The Release, titled "OCC Highlights Key Risks Facing National Bank and Federal Savings Associations," described key findings from the OCC’s just-published, Semiannual Risk Perspective for Fall 2014 ("RP Report").
Highlights of the Press Release included:
"The [RP Report] noted declining revenues and profitability in OCC-supervised institutions contributed to the increasing credit risk within the banking sector."
"Competition for limited lending opportunities is intensifying, resulting in loosening underwriting standards, particularly in direct and indirect auto lending, leveraged lending, asset-based lending, commercial real estate lending, and commercial and industrial loans. Increased risk layering is also occurring in commercial loans."
Financial writer Bill Holter says the record stock market does not reflect reality. Holter explains, “This will go on until it doesn’t. Very quietly, this past week, they postponed the “Volcker Rules” for the banking system. The reason they did that is they can’t allow the Volcker Rule to come into place. That would require increased capital ratios. It would bring mark to market back. We live in a financial fantasy land, and they need to continue the fantasy to prevent collapse.”
The recent spending bill passed by Congress, which puts taxpayers on the hook for more than $300 trillion in future derivative losses, is another ominous sign financial trouble is coming. Holter contends, “It tells me that they know something. They know something we suspect, and they know something they don’t want to tell us. They know a crash is coming and they are preparing. For the Republicans to vote “yes” on this after they won a landslide election is throwing the voters under the bus. People voted for change and we got change, but it was change into a greater direction of taxpayers being screwed.”
The Gems and Jewellery Export Promotion Council (GJEPC) has released the details of imports of raw materials for gems and jewellery for the month of November this year. India's gold bar imports surged 49% in Nov '14: GJEPC
By Greg Hunter’s USAWatchdog.com (Early Sunday Release) Chris Powell, Secretary/Treasurer of the Gold Anti-Trust Action Committee (GATA), says recent bombshell evidence shows intense central bank “interventions” at the CME Group, which handles $1 quadrillion ($1,000 trillion) worth of business annually. Powell explains, “The greatest documentation that’s come out recently has been filings by the CME Group which operates the major futures exchange in the United States. They filed a letter with the U.S. Commodity Futures Trading Commission (CFTC) . . . showing that central banks are receiving special volume discounts for trading futures on all the major futures exchanges, not just financial futures contracts and metals futures contracts, but even agricultural futures contracts. The CME Group’s most recent 10-K filing with the U.S. Securities and Exchange Commission (SEC) lists its customers. Included in that list are governments and central banks. This is really a sensational development. Nobody can trade against central banks, they create infinite money. If central banks are secretly trading in the futures markets, there are no markets. The CME Group defended this as a matter of adding liquidity to the futures markets, but it’s liquidity in the sense of the Atlantic Ocean.” ...
The sudden dramatic collapse in the price of oil appears to be an act of geopolitical warfare against Russia. The result could be trillions of dollars in oil derivative losses; and the FDIC could be liable, following repeal of key portions of the Dodd-Frank Act last weekend. Senator Elizabeth Warren charged Citigroup last week with “holding government funding hostage to ram through its government bailout provision.” At issue was a section in the omnibus budget bill repealing the Lincoln Amendment to the Dodd-Frank Act, which protected depositor funds by requiring the largest banks to push out a portion of their derivatives business into non-FDIC-insured subsidiaries. Warren and Representative Maxine Waters came close to killing the spending bill because of this provision. But the tide turned, according to Waters, when not only Jamie Dimon, CEO of JPMorgan Chase, but President Obama himself lobbied lawmakers to vote for the bill.