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Britain Goes Bonkers After Brexit: The End of the Beginning

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Published on The Doomstead Diner on June 26, 2016

 

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Brexit Discussion with Jason Heppenstall, Monsta & RE

 

The carnage across the markets and the political hornet's nest unleashed on Friday after the Brexit Vote came in with a LEAVE result has been truly amazing to behold, and this is only on Day 1.

We can be sure the Central Banks have been working furiously over the weekend to get a strategy for calming the markets on Monday, which undoubtedly will amount to huge injections of liquidity to keep any of the large systemic banks from locking up.  However, there is so much PANIC right now through all sectors in all markets it's hard to imagine how they can plug all the leaks here.

HERE THEY COME TO SELL 'EM AGAIN!

http://www.monologuedb.com/wp-content/uploads/2011/01/braveheart.jpg For the crowd supporting Brexit, there is some initial Blowback which nobody predicted, which is that on the heels of this it Split the UK itself, with Scotland and Ireland in favor of Bremain, while Britain and Wales voted Brexit.  So now Scotland and Ireland are talking about holding their own Referendums on leaving the UK so they can stay part of the EU.  Scotland already held one of these referendums last year where the Leave camp lost, but with this latest change probably would sswing a new referendum the other way.  Ireland is a really peculiar example here of how confused things are, because way back when they actually voted AGAINST joining the EU initially, but then the thunbscrews were put on them and in a revote were persuaded to join.  “If at first you don't succeed, try, try again to get the voting result you want”.

Speaking from this POV, Paul Craig Roberts doesn't think the Leave Vote will stand up, with Brussels and the IMF, World Bank etc again putting the thumbscrews down to either force a new vote or to force Parliament to go against the vote of the people and Bremain anyhow.  The Referendum is supposedly “non-binding”, and in order to be enacted into Law, Parliament has to send a Letter or at least make an Official Statement invoking Article 50 of the Lisbon Treaty.

1. Any Member State may decide to withdraw from the Union in accordance with its own constitutional requirements.

2. A Member State which decides to withdraw shall notify the European Council of its intention. In the light of the guidelines provided by the European Council, the Union shall negotiate and conclude an agreement with that State, setting out the arrangements for its withdrawal, taking account of the framework for its future relationship with the Union. That agreement shall be negotiated in accordance with Article 218(3) of the Treaty on the Functioning of the European Union. It shall be concluded on behalf of the Union by the Council, acting by a qualified majority, after obtaining the consent of the European Parliament.

3. The Treaties shall cease to apply to the State in question from the date of entry into force of the withdrawal agreement or, failing that, two years after the notification referred to in paragraph 2, unless the European Council, in agreement with the Member State concerned, unanimously decides to extend this period.

4. For the purposes of paragraphs 2 and 3, the member of the European Council or of the Council representing the withdrawing Member State shall not participate in the discussions of the European Council or Council or in decisions concerning it.

A qualified majority shall be defined in accordance with Article 238(3)(b) of the Treaty on the Functioning of the European Union.

5. If a State which has withdrawn from the Union asks to rejoin, its request shall be subject to the procedure referred to in Article 49.

Even after such an “official” declaration by Da Goobermint, the negotiations to unwind this marriage have a timeline of 2 years.  That is a LOT of time for still more SHTF in both the UK and in the EU as a whole.

http://i.telegraph.co.uk/multimedia/archive/01528/Van-Rompuy_1528073c.jpg Far as the Brit Pols and the Eurocrat Clowns & Jokers are concerned, you have 2 opposing camps on this part of the debate also.  Current Prime Minister David Cameron is stepping down, but not for another 3 months.  As a Bremain supporter, he doesn't think he is the Man for the Job of negotiating a Brexit, which is about the first true thing I have heard out of the mouth of a politician in a long time.  Kudos to DC for that.  However, DC was also the person who actually suggested a Referendum, confident at the time I suppose that Brexit was a laughable idea and would be soundly defeated.

Unfortunately in the interim, the Refugee Crisis escalated out of control and the EU Clowns & Jokers have proved ever increasingly ineffective, anti-democratic and just plain stupid.  Any credibility they may have once had has long since been lost.  Really NOBODY in the entire EU except the Political Class beholden to Brussels can STAND these people, or being under their thumb economically, and as a result politically as well.  You don't bow to the will of Brussels, they make your life miserable.  See the Greeks for this, who after a brief and fairly impotent attempt at getting some kind of reasonable deal on their small mountain of debt totally capitulated to their Masters in Brussels.

The Brits (and Welsh, Scots & Irish) are in a slightly better position than the Greeks were.  First off, when they joined the EU they never gave up their own currency of Sterling.  So they can still print their own money.  Second, the UK is home to the City of London, one of the largest financial centers in the world, exceeded only perhaps by Wall Street.  This bollixes up all their operations, and while maybe they can move to Frankfurt or Brussels itself over some period of time, that would be an extremely expensive and difficult move to make.  Thus you get still further turmoil in the financial markets during this period.

http://www.galadjianlaw.com/wp-content/uploads/2013/09/divorce-argument.jpg In any event, the EU Clowns are pushing the Brits to Invoke Article 50 IMMEDIATELY, to get on with this divorce! "Let's get it OVAH with here already!  We HATE each other and we don't want to sleep together anymore!  The Marriage is OVAH!"

The Brits on the other hand are shuffling their feet here on this, as mentioned Cameron won't send this letter and is stepping down to let some other Pol do the dirty work.  From the Brexit side, they are in no rush either to carry through with the Referendum Results, especially given the already nasty fallout from the first day!  They want to now use this to try to negotiate a better deal with the Euroclowns, but like the Greeks before them they don't REALLY want to leave the EU.

Problem on this of course is that at least by EU standards, the Brits ALREADY had the best deal, they got to keep their currency but ALSO had access to the Eurozone trading market with low or no tariffs, etc.  The Euroclowns don't want to negotiate a STILL BETTER deal with them, since of course directly after that everybody will be clamoring for the same deal.

Which now brings us to another perhaps even larger problem than Brexit (which certainly is a big enough problem on its own!), which is the fact that in just about all the countries in the Eurozone, there are simmering Populist Movements that want OUT, extant even before the Brexit Vote.

Podemos in Spain under Pablo Iglesias wants Out.  5 Star in Italy under Beppe Grillo wants Out.  The National Front under Marine LePen in France wants Out.  The Party for Freedom in the Netherlands under Geert Wilders wants Out.  Just about every country on the Balkan Migration Route of the MENA Refugees does NOT want Brussels dictating to them precisely how many Refugees they should or should not give Asylum to.  This includes places like Austria, Hungary, Croatia etc.  So Brussels is under a LOT of political pressure here, and in the medium to long run simply will not hold together as a union.  That does not mean though that in the near term they will not use all tools at their disposal to keep this Ponzi afloat, they most certainly will do that.  Everything depends on this, the solvency of the banking system leading the way on this.

Next week certainly will have a lot of Market Turmoil as all the Big Players try to reposition themselves in the aftermath of the initial carnage.  How well the Central Banks can contain this and prevent Financial Contagion from spreading throughout the entire system is an Open Question.  Interest Rate tools are pretty much shot since they are at ZIRP or NIRP all through the bond market.  Ouright monetization of debt would destroy whatever is left of credibility here, and beyond that there still is no mechanism to deliver freshly printed money to the consumers who spend that money.  Without that, you have no flow of funds, velocity of money drops to zero and it does not matter how much you print.

To sum it up, this would be a good time to load up on preps.

RE

BREXIT! The FUN Begins!

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Published on The Doomstead Diner on June 24, 2016

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Unbelievably, INCREDIBLY, the Brits Voted for BREXIT, aka divorcing from the European Union.

As this campaign went on over the last few months, the Brexit Champions seemed to be gaining the upper hand, and as of about a week ago I thought Brexit would win over Bremain.

But then, by SHEER COINCIDENCE, something happened.  A Brit MP, Jo Cox was ASSASSINATED, with the Assassin reportedly crying BRITAIN FIRST or something like that anyhow before he shot and stabbed her to death.  Not quite ALLAHU AKBAR! but similar enough to turn off people to voting for Brexit if this reminded them of Terrorist Tactics.

Campaigns were suspended for 3 days on both sides, and although there was some variation in the Polling, the tactic appeared to have WORKED, and the major Polling companies began reporting that Bremain would win.

Global Markets breathed a sigh of RELIEF, and after being hammered for a few weeks the Pound Sterling began to recover.  The markets calmes, all would be well, BAU would continue onward.

However, in the driving rain and flooding in many locations, with Polling locations having to be moved due to the weather issues, the Brits still turned out to vote, and in the end, the Brexit crowd won the day.

Tomorrow, and all of next week as well will see complete TURMOIL in the Financial Markets as well.  Nobody is certain of the repercussions, other than at least at the beginning the financial markets both in Britain and Europe will get positively HAMMERED.

At the same time though, just a Vote by the population at large to dissolve this marriage doesn't instantaneously dissolve all their financial entaglements, any more than when you get a divorce the financial entaglements with your spouse instantly dissapear.  In fact, it is orders of magnitude WORSE in a case like this, with "International Law" and "International Treaties" all involved.  Not just a few, hundreds if not thousands of laws and contractual agreements are on the chopping block here, and each one of them can run into hundreds if not thousands of pages of Legalese.  So what you will have here is a long and interminable set of court cases being held, and trust me the people who voted for Brexit will have no say whatsoever in how those cases are adjudicated.  What comes out at the end of it a few years down the line is a complete mystery, although if BAU ontinues, you can expect the result to benefit the Trnasnational Corporations rather than the people of Britain.

On Sunday here on the Diner on our Collapse Cafe discussion, we will be getting together with a few of the Diner Brits to discuss the outcomes and possible future resultant from the Brexit Vote.  We will go off LIVE @ High Noon Alaska Time, 4PM Eastern Time, 9PM Brit Summer Time.  Be there, or be Square.

RANK BAD SCIENCE

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Published on the The Slog on January 3, 2016

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Uncontrollable Shanghai panics, wealth that won’t trickle down & consumers who can’t consume.

From San Diego to Shanghai, measurable human behaviour is teaching anyone who’ll listen that you can’t base an economic system on skitty narcissists

The collapse of the Shanghai index in China was artificially halted this morning as Beijing’s automatic closedown system came into effect to stop a 7% slump. Commentators are fingering poor economic data for the near-tank, but I don’t buy that. I think three other factors are at work.

The first is that traders have been trade-starved and had time to absorb just how bad things are economically and geopolitically; the second is the Saudi Arabia vs Iran relations meltdown which, if it gets any hotter, does threaten to affect energy supplies. And yes, I know that in a global slump when nobody wants oil anyway that doesn’t make sense, but my view for decades has been that bourses very rarely make sense. Exchanges don’t like instability, and the Middle East now is starting to look like underwater rugby without the ball. The Eurostoxx, Dax and FTSE are all well off, and I’d say its that situation among Muslim sects and energy gangsters that lies behind it.

But looking only at China, I’d say that the third (for me, anthropological) factor is that this new circuit breaker – including a trading suspension clause – only came in this morning: I suspect a lot of traders decided to get out of positions before it was too late. In other words – like most State interventions – it was self-defeating…designed to patch a crack in the dam, it evoked a major attack from 617 Squadron.

°°°°°°°°°°°°°°°°°°°°°°°°°°°°°°°

The Chinese are still novices at this game, but I’ve been saying for years now that neoliberalism in general and an overdependence on bourse-raised funds for business are about the best way dreamed up thus far to destroy genuinely entrepreneurial capitalism forever. Having said that, a new study has just emerged adding grist to the commonsense arguments against neolib growth mania and its privileged megamillionaires.

Far from being put out by some obscure Hard Left University in Venezuela, the study is a major feature in the current issue of Time Magazine. Written up with engaging prose by Maia Szalavitz  (a neuroscience journalist), it adds greatly to the arsenal trying in vain to bomb the nonsense put out by the Greedies.

When Scott Fitzgerald told Hemingway and others that “the rich are different”, Irish author Mary Colum responded by saying “Yes they are, they’ve got more money”. But in the ninety years since then, lots of us have wondered whether they got rich because they’re different….or they got rich and then became different”.

Ms Szalavitz tackles the question head on in the best way – by bringing to light cleverly designed fieldwork to monitor the attitudes and behavioural patterns of the rich. This work and that of others is particularly germain to the myth of ‘trickle-down wealth’, in that recent studies suggest wealthier people are more likely to cut people up in traffic, and behave unethically in simulated business and charity scenarios.

Further, last year, statistics on charitable giving revealed that the poor donate a far higher percentage of their meagre incomes to charity than the rich do. Far from giving them a sense of duty to give back and help, the new study suggests, the rich feel they deserve the level of privilege they enjoy. In fact, five separate experiments led researchers to record much higher levels of both narcissism and entitlement among those of a higher income and social class.

I turns out not to be clinical narcissism disorder (from which I’m sure Julian Assange suffers) because this gets in the way of success, given such people positively repel cooperation rather than attracting it. But it does suggest a kind of overweening confidence which becomes more insufferable still once they’re rich….and once their offspring have in turn chosen to decide they must be special too. It is pretty clear I think that Cameron, Osborne, Hunt, Hannan and Fallon all display this outcome to a tee. And so too, of course, do Tony Blair and Harriet Harman.

Ultimately, it all comes back to my Page One pet-hate: privilege. The attitude and behaviour it engenders I would describe as “Well, I’m here so I must be good….and people treat me as somehow special, so obviously I am”. This can apply equally to the Lord Snooties of this world as it does to the Dianne Abbotts. Wealth, rank, special treatment, private education and the ability to jump every queue while evading any law merely solidify the delusion. See also Rupert Murdoch, Rebekah Brooks, Piers Morgan, and Boris Johnson.

The good news is that, when forced by the piercing of their bubble to listen to those with other lives, developing narcissists do very rapidly begin to behave rather more sensibly: Szalavitz concludes:

‘Psychologists emphasize, however, that being able to see the world from other people’s perspectives — empathy — is critical to fighting narcissism…..The wealthier certain segments of society become, then the more vulnerable communities may be to selfish tendencies — and the less charity the least among us can expect’.

In other words, Friedmanism, Reaganism, Thatcherism and Camerlot’s Big Society are complete and utter bunk. But – and it’s a very big but indeed, not say a pain in the butt – this change in their behaviour from uncaring materialist self-styled Superman isn’t going to “just happen”. Only the likes of Peter Jukes hammering away at Newscorp, Jan Cunliffe fighting to bury the law of Joint Enterprise, Nicholas Wilson refusing to drown the HSBC’s bottomless ocean of lies, and WASPI’s refusal to accept that they should pay for the elite’s broken promises will make a difference.

Doing nothing will still be the default position for most citizens. If that continues, it will be too late to do something….because by then, the trail of violence will be globally viral: and the real extremists will take charge.

There is no such thing as NVE – non-violent extremism. But there desperately needs to be a lot more NVRR – non-violent radical realism.

Joint digital action and the abandonment of ideological tribalism is absolutely central to achieving this: Socialists and crypto-Marxists still stuck in ‘One More Heave’ mode need to get real, do their psephological sums, and join others of decently socialised bent.

Only then can we make life peacefully impossible for those who act as paymasters to the Greedies….and bring down a Government still supported by only a quarter of those entitled to vote.

The Consumers who can’t consume: How neoliberalism destroys its own food supply

 

 

 

 

Pretend to the Bitter End

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Originally Published on Clusterfuck Nation January 4, 2016
 

Forecast 2016

There’s really one supreme element of this story that you must keep in view at all times: a society (i.e. an economy + a polity = a political economy) based on debt that will never be paid back is certain to crack up. Its institutions will stop functioning. Its business activities will seize up. Its leaders will be demoralized. Its denizens will act up and act out. Its wealth will evaporate.

Given where we are in human history — the moment of techno-industrial over-reach — this crackup will not be easy to recover from; not like, say, the rapid recoveries of Japan and Germany after the brutal fiasco of World War Two. Things have gone too far in too many ways. The coming crackup will re-set the terms of civilized life to levels largely pre-techno-industrial. How far backward remains to be seen.

Those terms might be somewhat negotiable if we could accept the reality of this re-set and prepare for it. But, alas, most of the people capable of thought these days prefer wishful techno-narcissistic woolgathering to a reality-based assessment of where things stand — passively awaiting technological rescue remedies (“they” will “come up with something”) that will enable all the current rackets to continue. Thus, electric cars will allow suburban sprawl to function as the preferred everyday environment; molecular medicine will eliminate the role of death in human affairs; as-yet-undiscovered energy modalities will keep all the familiar comforts and conveniences running; and financial legerdemain will marshal the capital to make it all happen.

Oh, by the way, here’s a second element of the story to stay alert to: that most of the activities on-going in the USA today have taken on the qualities of rackets, that is, dishonest schemes for money-grubbing. This is most vividly and nauseatingly on display lately in the fields of medicine and education — two realms of action that formerly embodied in their basic operating systems the most sacred virtues developed in the fairly short history of civilized human endeavor: duty, diligence, etc.

I’ve offered predictions for many a year that this consortium of rackets would enter failure mode, and so far that has seemed to not have happened, at least not to the catastrophic degree, yet. I’ve also maintained that of all the complex systems we depend on for contemporary life, finance is the most abstracted from reality and therefore the one most likely to show the earliest strains of crackup. The outstanding feature of recent times has been the ability of the banking hierarchies to employ accounting fraud to forestall any reckoning over the majestic sums of unpayable debt. The lesson for those who cheerlead the triumph of fraud is that lying works and that it can continue indefinitely — or at least until they are clear of culpability for it, either retired, dead, or safe beyond the statute of limitations for their particular crime.

Of course it says something about the kind of society we’ve become that such racketeering has become so normative and pervasive, and that evading responsibility for its consequences has been elevated to a sort of enviable skill-set. In fact, the art of evasion has taken the place of what used to be called honor. We live in a low time that honors only low men. Ironically, we affect to admire only “superheroes” because it has become impossible to imagine mere humans showing courage, fortitude, and respect for truth. All conduct is provisional and equivocal. Every law can be parsed to serve what it was created to oppose. Anything goes and nothing matters.

In this year’s go-round, I’ll try to describe what happened so far, where we stand, and where I think things are going. My method is emergent and heuristic. I’m allergic to charts and graphs, which are among the prime tools of the racketeers and the wishful thinking impresarios for bending the truth. Sadly, also, statistical analysis plays into the fantasy that if you can measure enough things you can control them. (And if you mis-measure things on purpose, you can pretend to be in control.) This illusion of control is the weakest ingredient in the financial system. When it does finally reach failure mode, it tends to produce calamity.

I’m more interested in the longer view than the moment-at-hand. The swirl of events generally includes more vectors and factors than any calculus can manage. Outcomes easily slip away from the linear. Ultimately this is a exercise that might be called a history of the future — that is, just a story.

Banking and Markets

The big event of the year past was the Federal Reserve’s Waiting for Godot act concerning the fed funds rate. When Godot finally showed up two weeks before year’s end, it was in the expected-but-pitiful form of a 25-50 basis point hike — which gives the impression of a possible 50 point rise, but with the way more likely probability of actually sticking to the lowest end of the gradient (and actual overnight lending rates were already a few basis points above zero, so the net was really less than 25 basis points.)

The background of this charade was pretty clear to anyone not brain damaged from the rigors of playing Candy Crush on their phone: the Fed was hiking rates into a wobbling global economy; they were forced to act at year’s end or surrender the last shreds of their credibility (i.e. being taken to mean what they say); and they left the door open to retreat in 2016 if necessary. But the damage to the Fed had already been done. They were unmasked as a propaganda machine powerless against the real tides of economy, creating only mischief and misunderstanding, and ultimately undermining all soundness in the relationship between money and real human activity. Anything they do in the election year ahead will be viewed with suspicion, specifically of pimping for Hillary Clinton’s coronation. And her relationship with the biggest banks is well-understood. So they had to make their grand gesture in December.

The stock markets skidded a little below sideways this year (except for the Nasdaq) which glided up more than 5 percent (techno-grandiosity rules!) — with one upchuck at the end of the summer that was remedied by China bailing out its own janky stock markets and playing games with its currency.

Gold and silver continued their four-year swoon thanks to repeated massive wee hour dumps of futures contracts before the traders in New York even got out of bed. The charts conclusively show this shady activity, raising the question: why would any seller want to hugely undercut the price of what he seeks to sell by selling into a market where no buyers are present… or even awake? The answer seems to be: to make the dollar appear more firm than it really is.

The many years of ZIRP (zero interest rate policy), combined with the previous accumulation of debt unlikely to be paid back has made it ever more difficult to issue new debt with any likelihood of being paid back. But ZIRP has also nullified the relationship between interest rates and risk. In a system unencumbered by central bank interventions, interest rates would have to go a whole lot higher on instruments with such poor prospects. Of course, higher interest rates would only make new bonds that much less likely to be serviced by their issuers, especially governments laboring under Himalayan-scale debt loads. The tension in this equation has been provisionally papered over by the use of interest rate swaps, reverse repos, and other abstruse machinations and derivatives aimed at suppressing true price discovery.

The corporate stock buyback fiesta of 2015 was the perfect example of an anything goes and nothing matters ethos. It happened in full view of everyone, and it happened solely to assure corporate executives that they would enjoy their bonuses and fringe benefits and nobody complained about it. Even so, it barely accomplished anything index-wise. The markets went sideways even with all that insider action because the fundamentals suck and the global economy was obviously sinking into a deflationary contraction.

My auditors derive no end of mirth from my attempts to predict the stock markets each year. So, to add to their enjoyment, I’ll be even more precise this time around. I predict that the S & P will top on January 15, 2016, at 2142, and then crumple below 1000 by June. Carnage at the margins of the bond market — high yield paper — will spread to the center and we’ll finally see the re-pricing of risk back in the European sovereign market. French, Spanish, UK, and Italian 10-year paper below 2.0 percent? What a colossal joke that’s been! Fasten your seat belts and check your pension funds.

Oil and Deflation

The oil picture has bamboozled both the broad public and the smaller cohort of supposedly sentient observers. I maintain that the deflationary contraction underway worldwide is largely due to the fact that the world has run out of a particular form of oil: affordable oil. Turns out the peak oil story is still true, just playing out differently than a lot folks predicted. We’re at the mercy of a pretty basic equation: oil over $75-a-barrel destroys industrial economies; oil under $75-a-barrel destroys oil companies. There is no “just right” Goldilocks place on the gradient.

The public got bamboozled by the Ponzi scheme of shale oil. It seemed like a fabulous techno-rescue: the “fracking miracle!” It operated by converting mountains of cheap leveraged capital into a very rapid bump-up in US oil production. It got full traction after a couple of years of $100 oil squashed economic activity — and then squashed demand for oil. Whoops. The problem was that shale oil was very expensive to produce even if reduced demand drove the market price very low. Back at $100-plus a barrel, hardly anyone made any profit on shale. At $40 a barrel shale was a laughable loser. So, in 2015, the shale oil companies laid off thousands of workers, idled the drilling rigs, and kicked back to pray that the price would go back up. Which it didn’t. Incidentally, all kinds of associated ventures went bust with that. The landscape of North Dakota is littered with unfinished garden apartment complexes that may never be completed, and the discharged construction carpenters and roofers drove back to Minnesota ahead of the re-po men coming for their Ford F-110s. Sad, I know….

The rapid ramp-up in shale oil production from 2010 to 2014 was intended as a demonstration project to convince Wall Street to stuff ever more investment capital into oil companies. It was also part of an enormous PR campaign to allow the people running things in business and government to pretend that America’s oil problems were behind us. The “shale miracle” was going to make us “Saudi America,” It was going to boost us into “energy independence.” It played into the Master Wish beneath all the wishful thinking in America: Please, God, let us be able to drive to WalMart forever. It wasn’t so much an evil conspiracy as a feckless collective effort in denial and self-delusion

It happened that a lot of that Wall Street finance came in the form of high-yield (junk) bonds issued by the oil companies — with fat commissions for the big banks to cream off in creating the bonds. So when the price of oil crashed below $50, a lot of oil companies — especially the smaller ones with no cash flow — couldn’t service the interest payments. What lies ahead in 2016 is a debacle of bond defaults and corporate bankruptcies in the US oil patches. What’s more, because of the peculiar geology of shale oil and the rapid depletion of the fracked wells, it is necessary to incessantly drill and frack new wells to keep production even level, let alone rising. That calls for evermore rounds of new financing. But since the current financial obligations can’t be serviced, new financing will not be not forthcoming. And so neither will additional production. All of which means that shale oil production is going to crash in 2016 when the backlog of previously-drilled but untapped wells runs out. I’ll predict that US oil production will go down a million barrels a day before 2017. That includes the roughly 5 percent annual decline of conventional oil.

Some might suppose that such a crash would drive prices back up again as the supply necks down. There are a couple of problems with that supposition. One is that the previous round of $100-plus oil did a lot of permanent damage to the economy, in particular to small businesses and households (i.e. middle-class workers). That damage looks more and more permanent, meaning a smaller aggregate economy and still-shrinking demand base as businesses and citizens go broke and stay broke. If oil prices do return to a level that would justify exploration and production of expensive, hard-to-get oil, (probably north of $110) it will only crash industrial economies again — and there are only so many times this can happen before the system is so damaged recovery is no longer possible. Another problem is that the oil price crash has done significant damage to the oil industry itself, including its credibility as a viable target for investment. Contrary to hopes and expectations, current low oil prices are doing nothing to re-stimulate economic activity. It all has the look of a self-reinforcing feedback loop, a downward spiral in a global complex networked system getting clobbered by the diminishing returns of its principal activities.

Hence I would predict that the price of oil will fall further in 2016, below the $30 mark, and that it will lead to more carnage in the oil industry, in banking and debt defaults, and to new manifestations of geopolitical trouble that could lead to profound oil scarcities and rationing. We can’t seem to face the fact that our techno-industrial paradigm was designed to run on cheap oil, which is just no longer available.

Geopolitics

People are getting very nervous. They can’t help harking back a hundred years to the mysterious lead-up of the First World War, which brought an end to the first iteration of globalism with a bang. The great nations of 1914 just seemed to get haplessly drawn into a debacle that no one had bargained for — the slaughter of the trenches, bankrupted national treasuries, the fall of three dynasties, the rise of the fascists and Bolsheviks… ugh!

Many people with more than half a brain are seeing similar motifs today — a general movement toward major war by way of sheer fecklessness. For instance, the ongoing effort led by the USA to antagonize Russia for no apparent good reason, dragging the dupes of NATO along with it. I won’t rehash our stupid operation to destabilize Ukraine. David Stockman covered that so nicely last week in his blog. Anyway, that Ukraine action was all back in 2013-14. Ukraine is now a failed state. I predict that in 2016 Ukraine will beg Russia to take it back into the Russian sovereign fold, to become once again a province of greater Russia. However, Russia will demur. Russia actually can’t afford such a woebegone, unreliable, and expensive ward. So Ukraine will then go begging back to the US and NATO to dole out financial life-support. By that time, the US and western Europe will be so economically distressed that they will only pretend to bail out Ukraine, just as they pretend to bolster their own economies via smoke-and-mirrors central bank shenanigans. Ukraine will sink into a World Made By Hand level of neo-medievalism, blazing the trail for everybody else in the world. Think: lawlessness, banditry, gangster autarky, neo-serfdom. Sounds harsh, I know, but it is what it is.

In 2015 the action between the US and Russia shifted to Syria. Our monumental blunderings in the Middle East, which included enabling the creation of ISIS, left us bereft of any coherent way to counter the barbarism and animus of radical Islam. So, our “adversary” Mr. Putin stepped in, on the premise that destabilizing what remains of the Syrian government under Mr. Assad was not such a good idea — as he explained very clearly to the UN General Assembly. It remains to be seen whether Russia will be able to pacify Syria, much of which lies in ruins now. But unlike the USA, Russia doesn’t have ambivalent intentions where ISIS is concerned. We’ve pretended that any old freelance gang opposing Assad is our friend. Russia’s aims are pretty straightforward: prop up Assad, rescue whatever governing institutions remain in Syria, and smash ISIS. In exchange they get a warm-water naval base on the Mediterranean. That’s supposed to be an existential threat to the USA.

The basic regional beef there, anyway, is between the Sunni and the Shi’ite, which is to say Arabian-sponsored Islamic maniacs versus Persian-sponsored Islamic maniacs. Unfortunately, that translates into the Saudi Arabia / USA and Iran / Russia contest of wills. Throw in some league wild-card players like Hezbollah and Israel and you have a pretty yeasty mix for rising animosities. Sadly, the US can’t seem to formulate a strategy that doesn’t make things worse for people in the region or for the US homeland (or for our allies in Europe, plagued by refugees they cannot comfortably absorb and the awful threat of terror events).

I expect in 2016 that Obama’s policy will be to just get out of the way of Putin and see what happens. He doesn’t have much left in the kit-bag for now. The worst thing to come out of this for Obama, really, is if Putin can succeed in pacifying Syria, America’s leaders will look bad — incompetent and foolish — which is the actual case, of course. Maybe sometimes you just have suck up your mistakes. Much as Obama dislikes Hillary, I doubt he wants to upend the whole groaning Democratic Party Washington DC patronage pyramid, so he might be careful to not start World War Three during the election year. He can leave that to Hillary, should her coronation actually occur on Jan 20, 2017.

Anything might happen across the Islamic world in 2016. Every Islamic nation is grossly overpopulated, given the poor quality of the terrain. Most of them occupy territory that has been horribly degraded during the population explosion of the past hundred years, and stand to suffer hugely from climate and weather abnormalities ahead. Governments will fall and may not be replaced by anything resembling a coherent polity. Algeria, Libya, Egypt, Iraq (fuggeddabowdit), Pakistan, Malaysia, Indonesia are all only marginally stable for now. Afghanistan is hopeless. We will never control the terrain or the people who live there. But we will continue to maintain a garrison to defend Kabul, pretending that control of the capital city is enough.

And then there is the Big Kahuna: Saudi Arabia, with its dwindling oil income and growing multitude of dependant layabouts. King Salman’s misadventure in Yemen’s civil war has birthed another failed state and dented Saudi Arabia’s resources. If the other clans of Arabia, whoever they turn out to be, overthrow Salman, they will also create an opening for ISIS-flavored non-royals to incite a multi-dimensional civil war. An upheaval in KSA would surely produce profound disorder in the oil markets. The USA would get suckered into this tar-pit wrestling match. The attempt to stabilize our old “ally” with troops on the ground would probably work out about as well as our adventure next door in Iraq did. The further result will be more conflict in this broad swathe of the world over remaining scarce resources, especially water, along with hot war at various scales, and ever more massive movements of populations fleeing the turmoil. If they journey to Europe, they will be turned away. The Camp of the Saints becomes a reality show.

Turkey, with the second-largest military in NATO, could have been a force for stability in the Middle East, but strongman President Recep Tayyip Erdo?an can’t get out of his own way. He can’t decide whether he’s on the side of the Islamists or the West and his attempts to play footsie with both, while piling up private booty, have left him suspect among both camps. Lately he has ventured into such misadventures as shooting down a Russian warplane and receiving stolen goods in the form of ISIS oil shipments from Syrian and Iraqi wells. He was unable to enlist NATO into joining the argument over Turkish airspace and has fatally alienated his western auditors by his actions. He’s lucky that Putin didn’t turn Ankara into an ashtray. The Kurds on Turkey’s southern border threaten to start a civil war by asserting their own nationhood, now just de facto. Meanwhile, the Turkish economy is faltering again, reinforcing its longtime status as “the sick man of Europe.”

Europe’s decades as the West’s delightful tourist theme park are over. The continent is back to being a dangerous free-for-all of nations, tribes, and factions, with the overlay of alien Islamic intruders making things worse. Who knows who or what will blow up next over there. When it becomes obvious in 2016 that the 2015 refugee influx was not a one-off that the Eurozone could comfortably absorb, the individual nations will commence the deportations. Getting to that has been a difficult road, with the headwind of the memory of the Holocaust. But then, unlike the Jews of the 1930s, the Islamists are slaughtering concert-goers, booby-trapping subways, shooting civilians in restaurants, beheading journalists, and explicitly threatening the existence of European society. This business with Islam is different and we are now four generations past Auschwitz. Europeans may just have to get real about defending their respective and collective cultures.

2016 will be the lead-up to the French presidential election of 2017. François Hollande has the whole of the coming year to demonstrate his weakness. But can the French stomach Marine Le Pen’s demi-fascist National Front. The French right wing is not for reduced government, just for pushing people around differently. As 2016 goes on, look for good ole Sarko (Nicolas Sarkozy) to flank them both. Sarko is a bit crooked, but as strong-willed as Le Pen, and not as crazy. French voters will be fed up Hollande-style squishiness, but unready for a female Hitler. Sarko is the Devil they know and they will want him back.

The same election time-line goes for Germany. Voters there will increasingly revolt against what Mutti Merkel represents: how she jammed a million Islamic refugees down Europe’s craw. They’re not shopping for another Hitler, either, but they will be looking for a strong-willed someone to protect the volk against the foreign hordes, of whom they are getting good and goddam sick. There is also the matter of Germany baby-sitting all the bankrupt nations to the south.

As 2016 unfurls, the PIIGS will spin back into financial intensive care. Spain, Italy, Portugal, Greece will eventually have to face the absence of buyers for their bonds and the falsity of their low interest rates. Spain, for one, is not finished with the Catalonian secession problem. Portugal needs to return to the 18th century. The clowns in Brussels have no plan to repair the finances of Euroland beyond massive QE that cannot be endless. Whoever replaces Merkel as chancellor may be the one who senses that Germany ought to lead the way out of the Euro currency fantasy and all the awful liabilities it entails.

Great Britain is a basketcase in search of a basket to land in. It has no economy left besides the swindlers of “the City,” its version of Wall Street, and that janky establishment is losing its grip as a desirable financial capital after years of sharp practice, with much of its action moving to Shanghai. Conservative Prime Minister David Cameron is a catamite for the big banks. The Labour Party leader, Jeremy Corbyn is an old-school romantic unionist Leftie in a nation with little remaining industrial workforce. Unlike France or Germany, Britain’s parliamentary system can route a government on short notice. The debt implosion of 2016 and rescheduled Great Depression 2.0 will thrust UK Independence Party’s Nigel Farage into the spotlight to salvage what remains of Old Blighty.

The big question around Asia is whether China can navigate its way out of the blind alley it’s trapped in: a banking system steeped in crony corruption, bad debt everywhere, and malinvestment like unto nothing the world has ever seen before. The country is choking on excess industrial capacity just as the world enters its epic Peak Everything contraction. Can they keep on pumping out salad shooters and Han Solo dolls to a world drowning in plastic crap and too broke to buy more of it? They still have $3.4 trillion in foreign exchange reserves to theoretically bail themselves out. But that starts affecting the value of their pegged currency, and their main trading partner (us) can play endless currency war games with them to dissuade them from dumping the rest of their accumulated US treasury paper, which, of course, only pisses them off more and makes them look for surreptitious ways to fight back — which is what currency war is all about. Which is also exactly why China (with Russia and others) has started up its own Asian version of the IMF, the BRICs Development Bank, and an alternative to the SWIFT international clearing system.

Chinese economic and financial statistics are even less reliable than the overcooked sludge offered up by the US agencies, but the tanking of commodity prices worldwide tells enough of a story: China is sure not expanding as much as the good old days, if at all. It’s been a great ride, but it was super-quick, and it happened just prior to the world reaching the bona fide limits to growth. China’s contraction may be as quick as its rise, and if that is the case, it will be rough ride into the same vortex of contraction that everybody else is entering.

My one wild-hair prediction about China for 2016: after Kim Jong-Un pulls some bonehead move against his neighbor to the south, China invades North Korea and installs a more rational management regime there. Kim Jong-Un ends up as a lounge singer in Macao. Lucky boy.

Homeland Frolics

            Be very afraid. Donald Trump isn’t funny anymore. He’s Hitler without the brains and the charm. But he’s gotten where he is for a reason. He expresses perfectly the depravity of the culture he springs from: narcissistic, morally rudderless, vulgar, shameless, lost in fantasy, and sadistic. Hillary (last name unnecessary) is not much better, but she’s not nearly as dumb, only more thoroughly corrupt. These are the avatars of our two major political parties. Be very afraid and weep!

The good news is that political parties do occasionally blow up and vanish from the scene, and that would be an interesting possible outcome of the 2016 national elections. Trump could accomplish this much more briskly with the Republicans. He’s made it clear already that he feels zero loyalty to the Red Team, and noises offstage can be heard that the party faithful would find some way to either expel or end-run the Donald Creature. Given our litigious society, one outcome of this would be an election held hostage by the courts. Oy vey is mir. Another possibility is that a message would be transmitted to the Trump Team from some combination of rogue elements in the NSA and the US Military that he’d better drop out or else. It would be done in such a way that Trump would not be able to use it for further narcissistic grandstanding. Were that not to happen, and were Trump somehow able to get elected, I predict there will be a coup d’état against him inside of April 2017. Hello constitutional crisis. Where it might go from there, no one can say.

Of Trump’s opponents for the Republican nomination, the only one I can grudge up any interest for is Rand Paul, who is a truly disruptive figure without being a maniac. In fact, I think he would make a good president, sober, thoughtful, unencumbered by obligation to the forces of racketeering. But he appears to have a near-zero chance of winning the party’s nomination.

Hillary is the opposite of a disrupter; she is the racketeer Godmother. As things proceed, however, she would merely preside over Great Depression 2.0. Unlike FDR in GD 1.0, Hillary would inspire no trust among a fractious population out for revenge against the very enablers of Hillary’s election, namely the Wall Street bankers. The nation would fall into factional fighting and possibly even regional breakup under Miz It’s-My-Turn. But I get ahead of myself…. The question at hand for 2016 is: Can Hillary be stopped. At this point, I don’t see how, given all the weight of the party machinery calibrated in her favor by the equally odious National Party Chairperson, Congressperson Debbie Wasserman Schultz.

Bernie Sanders mounted a noble opposition campaign, and perhaps it is too early to write him off here before the Iowa caucuses and the New Hampshire primary. Perhaps something can happen and he can at least slay the candidacy of Rodan the Flying Reptile – my other nickname for the Hillary Creature. Apart from that is my basic aversion to Bernie’s political philosophy as a self-proclaimed “socialist.” I know it sounds like a glib dismissal of a cartoonish political label, but Bernie’s self-applied label implies ever more intrusion by ever bigger government into the life of this nation. History wants to take us in another direction now, away from so much hyper-centralized control, and we go against the flow at our peril. While I admire Bernie’s presence as a vocal opposition to Hillary, I’m not keen on what he’s actually selling.

I know that Martin O’Malley is still “out there,” but he appears to be a blank cartridge, or a six-pack in search of worldview, and I don’t believe as some observers have averred that this is the fault of the media. In the few Democratic “debates” held last fall he offered next to nothing outside a conventional punch-list of shopworn center-left ideology — that is, no recognition of the extraordinary problems this country faces in the climax of the techno-industrial idyll, and the long emergency that is following it.

And that’s all you get on the Democratic side for the moment: a powerful sense that the fix is in. Yet there is the very real problem of Hillary’s loathsomeness and how that would go down at the polls. There’s even a pretty good chance that many women would vote against her. So my provisional conclusion / prediction for the November contest is that Hillary runs and loses against some as-yet-unknown un-Trump person. President Cruz? Ach! Rubio? Back in the playpen! Christie? Leave the body, take the canoli…! Jeb? El pendejo supremo! To be continued….

Race Relations and the Cowardice of the Thinking Classes

2015 was sure a bad year for different groups of Americans trying (or not) to get along, especially black people and white people. American society is feeling the full force of the identity ideologies cooked up on the college campuses over the past several decades, now boiling over into an orgy of victim-pleading, identity grandstanding, sexual hysteria, scapegoating, intellectual despotism, juridical blackmail, and (let’s not forget) careerist posturing. The more irrelevant higher education gets, the more strenuously the social justice inquisitors mount their persecutions against those who don’t buy the race-gender-privilege party line. In 2015 it has morphed into a campaign against free speech and free inquiry. The “diversity” deans multiply like fruit flies.

I made the “error” last year of suggesting that black Americans would benefit if the teaching of spoken English were made a high priority of primary and secondary schooling — and I was vilified for saying that. My opponents have not offered any useful counter-ideas beyond name-calling. I suspect that many people of good intentions are running out patience with this racket — and it is a racket for extorting preferential treatment and money from guilt-tripped white people.

In the arena of crime and policing, the situation is especially bad. Black lives matter, but not so much for black people themselves, who are ardently slaughtering each other in places like Baltimore, St. Louis, Detroit, Milwaukee, and “Chi-raq” at a rate proportionately much greater than other ethnic groups in the land. The martyrs of the movement act in ways likely to get them in trouble, for instance the hapless 12-year-old Tamir Rice, shot brandishing a BB gun designed to look exactly like the US Army 1911 issue .45 caliber ACP, Michael Brown thugging out on officer Darren Wilson, Trayvon Martin beating down George Zimmerman. The cops present at several notorious incidents include black officers; a black female sergeant who was supervising the action on the sidewalk in Staten Island when her colleagues choked Eric Garner. (she did nothing to intervene); the several black policemen in Baltimore who took Freddy Gray on his fatal ride in the paddy wagon. It’s a scene fraught with ambiguity, to be generous.

Where are we going with race relations in this country? For now, not in a favorable direction. The trend will be for police to regard certain neighborhoods as “no-go” areas — if only to avoid the gigantic multi-million dollar litigations that grow out of these ambiguous confrontations. Some may view that as a good thing, but it will only play into the decadent ethos that anything goes and nothing matters in this country. The larger question going forward is whether Black America will continue to insist on being an oppositional culture. That is what it has become, though the cowed thinking classes will not acknowledge it. They also will not recognize the need for a common culture in this nation, a set of truly shared values and standards of conduct.

Climate Change

This is the underlayment of despair that reflective persons cannot avoid thinking about when all the other petty issues of human relations and the project of civilization are disposed of. Weird weather? Biblical Floods? Melting icecaps? Sea level creep? It was 70 degrees on Christmas Eve here in upstate New York, dandelions blooming in the yard, just a week or so ago. Some people I know can’t stop thinking about climate change. Somehow I manage to put it out of mind and ruminate on other things, or even feel good about something that is happening in the present — a good meal, a gathering of friends, an evening of live music…. but it’s always lurking there in the background like some hooded reaper in a New Yorker cartoon.

Despite the hoopla of the Paris climate change talks, I’m not persuaded that national governments will really do anything, or even that anything they might do would avail to make things better. I’m not even so concerned about whether climate change is man-made or not. I just accept that something is up and that as things change, we will have to adjust. It seems to me that the adjustment will not be easy and five hundred years from now there will be far fewer human beings, if any, around. From the point of view of the planet’s well-being, that is probably a good thing.

In the mean time, let’s do the best we can to carry on and be as kind as possible to one another. Good luck in 2016!

 

James Howard Kunstler is the author of many books including (non-fiction) The Geography of Nowhere, The City in Mind: Notes on the Urban Condition, Home from Nowhere, The Long Emergency, and Too Much Magic: Wishful Thinking, Technology and the Fate of the Nation. His novels include World Made By Hand, The Witch of Hebron, Maggie Darling — A Modern Romance, The Halloween Ball, an Embarrassment of Riches, and many others. He has published three novellas with Water Street Press: Manhattan Gothic, A Christmas Orphan, and The Flight of Mehetabel.

Collapse Cafe 8/23/2015: TSHTF Part II Economics

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Audio Only Podcast:

 

Well, we certainly timed this Vidcast well! 🙂

It's a marathon between the 3 parts we got recorded, we skipped over Part 3 to record at a later date on Climate & Geopolitics.  Part 2 here focuses on Economics,  and Part 4 is Futurology, doing the Cassandra and Nostradamus thing.  Part 1 was on Energy.

I will Feature Part 3 on Sunday. Part 1 went up last Sunday immediately after the Live Vidcast. All 3 parts are currently up on the Collapse Cafe You Tube Channel.

Thanks to all the participants, Nicole Foss, Gail Tverberg, Steve Ludlum, Tom Lewis, Norman Pagett, Ugo Bardi & my co-host Monsta.

RE

Death Cross in the Markets

Off the keyboard of Michael Snyder

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Published on The Economic Collapse on August 12, 2015

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Financial Despair - Public Domain

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A Death Cross, Wild Market Swings And A Currency War – And We Haven’t Even Gotten To September Yet

Things continue to line up in textbook fashion for a major financial crisis by the end of 2015.  This week, Wall Street has been buzzing about the first “death cross” that we have seen for the Dow since 2011.  When the 50-day moving average moves below the 200-day moving average, that is a very important psychological moment for the market.  And just like during the run up to the stock market crash of 2008, we are starting to witness lots of wild swings up and down.  The Dow was up more than 200 points on Monday, the Dow was down more than 200 points on Tuesday, and it took a nearly 700 point roundtrip on Wednesday.  This is exactly the type of behavior that we would expect to see during the weeks or months leading up to a crash.  As any good sailor will tell you, when the waters start getting very choppy that is not a good sign.  Of course what China is doing is certainly not helping matters.  On Wednesday, the Chinese devalued the yuan for a second day in a row, and many believe that a new “currency war” has now begun.

So what does all of this mean?

Does this mean that the time of financial “shaking” has now arrived?

Let’s start with what is happening to the Dow.  When the 50-day moving average crosses over the 200-day moving average, it is a very powerful signal.  For example, as Business Insider has pointed out, if you would have got into stocks when the 50-day moving average moved above the 200-day moving average in December 2011, you would have experienced a gain of 43 percent by now…

The Dow Jones Industrial Average has been on an unrelenting upward trajectory since its October 2011 low.

The signal that convinced many traders that the market was now moving with a bullish bias was when the 50-day moving average of the index price rose above the 200-day moving average a couple of months later at the end of December.

Since then the market rallied 6,200 points to a high of 18,333 before pulling back to last night’s close of 17,404. That’s a gain of around 43% even though the market is 5% off its high.

But now a cross is happening in the other direction.  That is why it is called a “death cross”.  It is quite understandable why a lot of investors are freaking out about the fact that the 50-day moving average has moved below the 200-day moving average for the first time in four years.  Every major stock market in history has been preceded by a death cross.

Of course no indicator is perfect.  Sometimes these death crosses come just before market crashes, and other times nothing much seems to happen.  The following comes from MarketWatch

The 50-day moving average (or “MA”) crossed below a rising 200-day MA on July 7, 2010, when the Dow closed at 10,018.28. The Dow’s closing low for 2010 was actually hit two sessions earlier, at 9,686.48.

But the Dow fell another 5.9% over six weeks after the Aug. 24, 2011 death cross, and tumbled as much as 50% over 14 months after the one appearing on Jan. 3, 2008.

And keep in mind that when the January 2008 death cross appeared, the Dow had lost just 7.8% from its Oct. 9, 2007 peak. That means the bull market was still firmly in place, as the rule of thumb is a bear market is defined by a decline of at least 20% from a significant peak. In addition, the 200-day moving average didn’t turn lower until two weeks after the death cross appeared.

But this is not the only indicator pointing to trouble ahead.  Even while we have many stocks hitting 52-week highs, we also have an extraordinary number hitting 52-week lows.  This is called a “split market”, and this is a very ominous sign.  In fact, according to Peter Boockvar 62 percent of all stocks on the New York Stock Exchange are already trading below their 200-day moving average…

Peter Boockvar, market strategist at Lindsey Group, said he believes the market is in a correction that began a few weeks ago, starting with commodities names getting hit. The small-cap Russell 2000 was also a leader of the declines. “The key is it’s infecting other areas of the market. You have every headwind and every reason to continue this correction,” he said.

Going into today, 62 percent of the NYSE stocks were trading below the 200-day moving average,” said Boockvar. “More and more companies are dropping out of the bull market.”

At this point, we have already had more than 50 “split days” this year.  King World News has just released an article which has pointed out this has only happened four times before, and a major stock market crash has followed each occurrence…

The only other times in history we’ve seen more than 50 split days during the past year were March 1968, August 1972, October 2000 and July 2006.

After all four of those, stocks lost more than a third of their value at some point during the next two years.

Are you starting to see?

A stock market crash is coming.

Another thing that has investors concerned is the fact that we have seen a large divergence between high yield credit and stocks.  As Bloomberg has pointed out, when this happens a significant stock market decline follows more than 70 percent of the time…

While not without precedent, instances when anxiety in bonds didn’t seep into equities are rare. More than 70 percent of the time since 1996, as spreads widened as much as they have since April, the S&P 500 has fallen, with the average decline exceeding 10 percent, data compiled by Bloomberg show.

This is something that sooner or later is going to impact the stock market,” said Russ Koesterich, global chief investment strategist at New York-based BlackRock Inc., which oversees $4.7 trillion. “Credit market conditions have not been benign and easy as where they were last summer.”

On top of everything else, it looks like a global currency war could be erupting.

According to USA Today, this desperate move by China to devalue the yuan may indicate that the Chinese economy is in far worse shape than most had thought…

One, China’s move suggests that its economy is in worst shape than believed. “It highlights the fragility of the global economy,” says Donald Luskin, chief investment officer at TrendMacro. Second, a weaker yuan means a stronger dollar, and a stronger dollar means U.S. products sold in China are more expensive, which means fewer sales of Apple iPhones, hotel rooms offered by Wynn Resorts and computer chips made by Micron Technology.

Lastly, there is a fear that other nations will respond to China by devaluing their own currencies to stay competitive.

When people start talking about ‘currency wars,’ it’s never a good thing,” says Michael Farr, president of money-management firm Farr, Miller & Washington. “China’s move to devalue its currency could be the first shot across the bow towards a wider currency war.”

As I discussed yesterday, it seems like the phrase “currency war” has been thrown around a lot lately.

But what would that look like, and what would that mean for the global economy?

Well, former IMF economist Stephen Jen is suggesting that we could soon see major currencies all over the planet being devalued by up to 50 percent

[The] devaluation of the yuan risks a new round of competitive easing that may send currencies from Brazil’s real to Indonesia’s rupiah tumbling by an average 30 percent to 50 percent in the next nine months, according to investor and former International Monetary Fund economist Stephen Jen.

Volatility measures were already signaling rising distress in emerging markets even before China’s shock move. An index of anticipated price swings climbed above a rich-world gauge at the end of July, reversing the trend seen for most of the past six months.

The surging U.S. dollar combined with crashing prices for commodity exports has already created a state of crisis in South America.  If emerging markets such as Brazil are forced to devalue their currencies to stay competitive with nations such as China, that is going to just exacerbate the problems.

For a long time, things in the financial world were pretty quiet.

But now events are beginning to accelerate.

A lot of people are extremely concerned about what is going to happen in September, and I think that there are very good reasons to be concerned.

Throughout our history, the majority of our stock market crashes have happened in the fall.  Just remember what happened in 1929, 1987 and 2008.

Now we are approaching that time of the year once again, and things are lining up perfectly for a major financial crisis.

Now is the Time

Off the keyboard of Michael Snyder

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Published on The Economic Collapse on July 27, 2015

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Fear - Public Domain

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Fear Rises As Financial Markets All Over The Planet Start To Crash

Can you feel the panic in the air?  CNN Money’s Fear & Greed Index measures the amount of fear in the financial world on a scale from 0 to 100.  The closer it is to zero, the higher the level of fear.  Last Monday, the index was sitting at a reading of 36.  As I write this article, it has fallen to 7.  The financial turmoil which began last week is threatening to turn into an avalanche. On Sunday night, we witnessed the second largest one day stock market collapse in China ever, and this pushed stocks all over the planet into the red.  Meanwhile, the twin blades of an emerging market currency crisis and a commodity price crash are chewing up economies that are dependent on the export of natural resources all over the globe.  For a long time, I have been warning about what would happen in the second half of 2015, and now it is here.  The following is a summary of the financial carnage that we have seen over the past 24 hours…

-On Sunday night, the Shanghai Composite Index plunged 8.5 percent.  It was the largest one day stock market crash in China since 2007, and it was the second largest in history.  The Chinese government is promising to directly intervene in order to prevent Chinese stocks from going down even more.

-Over 1,500 stocks in China fell by their 10 percent daily maximum.  This list includes giants such as China Unicom, Bank of Communications and PetroChina.

-Ever since peaking in June, the Shanghai Composite Index has dropped by a total of 28 percent.

-Even Chinese stocks that are listed on U.S. stock exchanges are being absolutely hammered.  The following comes from USA Today

The 144 China-based stocks with primary listings on major U.S. exchanges have erased nearly $40 billion in paper wealth since the Shanghai Composite index peaked on June 12. It’s an enormous destruction of wealth that in effects wipes out the market value of a company the size of cruise ship operator Carnival.

-The Chinese stock market crash pushed European stocks significantly lower on Monday…

The pan-European FTSEurofirst 300 provisionally closed 2.1 percent lower, while the Germany’s DAX and France’s CAC closed respectively 2.4 percent and 2.5 percent lower.

The U.K.’s benchmark FTSE outperformed its euro zone peers, but still closed unofficially down 1.0 percent.

-Overall, European stocks have been falling steadily since the beginning of last week.  To get an idea of how much damage has been done already, just check out this chart.

-As I mentioned above, an emerging market currency crisis is causing havoc for economies all over the planet.  The following comes from an article that was published by the Telegraph

The currencies of Brazil, Mexico, South Africa and Turkey have all crashed to multi-year lows as investors flee emerging markets and commodity prices crumble.

The drastic moves came as fears of imminent monetary tightening by the US Federal Reserve combined with shockingly weak figures from China, which stoked fears that the country may be sliding into a deeper downturn and sent tremors through East Asia, Latin America and Africa.

-The government of Puerto Rico has announced that it does not have enough cash to make a scheduled debt payment of 169 million dollars on August 1st.  The Obama administration says that there are no plans in the works to bail out Puerto Rico.

-On Monday, the Dow was down another 127 points.  It was the fifth day in a row that the Dow and the S&P 500 have both declined.

-Overall, the Dow is now down more than 650 points since July 20th.

-480 stocks on the New York Stock Exchange have hit new 52-week lows.  Many analysts consider this to be a very, very ominous sign.

-I have repeatedly written about the danger of the commodity collapse that we are currently witnessing, and the Bloomberg Commodity Index fell another 1.22 percent on Monday to a fresh low of 92.1493.

-On Monday, the price of U.S. oil hit a 52-week low of $46.92.

-So far, the price of U.S. oil has fallen about 20 percent this month.

-Back in June 2014, the price of a barrel of West Texas Intermediate crude was above 107 dollars.  Since then, the price of U.S. oil has fallen an astounding 56 percent.

-Thanks in large part to the collapse in energy prices, junk bonds are cratering.  This is something that happened just before the financial crisis of 2008, and now it is happening again.  The following comes from Wolf Street

Among the bonds: Cliffs Natural Resources down 27.6%, SandBridge down 30%, Murray Energy down 21.2%, and Linn Energy down 22.3%, according to Bloomberg.

For example, Linn Energy 6.25% notes due in 2019 were trading at 78 cents on the dollar at the beginning of July and at 58 on Friday, according to LCD. There was bloodshed beyond energy, such as AK Steel’s 7.625% notes due in 2021. They were trading at 62 cents on the dollar, down 22% from the beginning of July.

“The performance is a disappointment to investors who purchased about $40 billion of junk-rated bonds from energy companies this year, thinking that the worst of the slump was over,” Bloomberg noted.

This is exactly what we would expect to see during the early stages of a financial crisis.

Of course global financial markets may bounce back somewhat tomorrow.  If you will remember, some of the largest one day gains in stock market history happened right in the middle of the stock market collapse of 2008.  So don’t get fooled by what happens on any one particular day.

With so much fear in the air, literally anything could happen in the weeks and months ahead of us.  One month ago, I issued a red alert for the last six months of this year.  I warned that a major financial crisis was imminent and that people needed to start protecting themselves immediately.

As I write this article on Monday evening, financial markets are already opening up over in Asia.  Japanese stocks are already down 251 points even though the market has only been open for about an hour over there.

We have entered a time when what is happening to global stock markets will once again be headline news.  We are right on the precipice of another great financial crisis, only this one is going to ultimately end up being much worse than the last one.

Now is the time.

Please get prepared while you still can.

BRICS/SCO sow panic in Exceptionalistan

Off the keyboard of Pepe Escobar
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Originally published in RT on July 13, 2015

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As austerity-ravaged Europe watches its undemocratic “institutions” grapple with the Greek tragedy, and the US backtracks on a fair nuclear deal with Iran, geopolitical tectonic plates are shifting in the Urals.

Can you feel an inchoate multipolar world? Well, just look right here at the BRICS 2015 Ufa declaration. The EU is hardly featured in the BRICS declaration and not by accident.

Forget about the dead on arrival G7. This – the joint BRICS/SCO summit – is the real deal in 2015. Russia’s diplomatic masterstroke was to merge two summits – BRICS and the Shanghai Cooperation Organization (SCO) – with a third, informal meeting of the Eurasian Economic Union (EEU). 

After all, some nations with leaders present in Ufa are members of at least one of these organizations. But the absolute key point is that getting BRICS, SCO and EEU leaders in one place packs a graphic punch about the emergence of a coordinated, Eurasia-wide, and in some aspects worldwide drive towards a more equitable world order not dictated by exceptionalists.

And then there’s Iran. President Rouhani met President Putin in Ufa to discuss a formidable range of topics. Not least the coming acceptance of Iran as a member of the SCO, assuming there is a deal in Vienna and after UN sanctions are lifted. 
Right on cue, and also not by accident, US President Barack Obama issued marching orders to Secretary of State John Kerry to backtrack from some positions the entire Iran/P5+1 diplomatic corps was already taking for granted – as a top Iranian negotiator confirmed to me in Vienna.

So here’s the not-so-veiled message to Rouhani and Foreign Minister Zarif: Iran will be “punished” for getting too close to Moscow.

Have strategy, will travel


Only Russia is a member of all three organizations – BRICS, SCO and EEU. Russia and China are key members of two – BRICS and SCO. The Russia-driven EEU is slowly but surely merging with the China-driven New Silk Roads. The key structural framework is the ever-solidifying Russia-China strategic partnership.

As the Pentagon remains self-absorbed in its 2002-concocted Full Spectrum Dominance doctrine, Russia and China counterpunch with full spectrum cooperation on politics, economics, finance, diplomacy and defense.

The endgame – which will be the apex of the current New Great Game in Eurasia – is a new global geopolitical structure anchored on Eurasian integration. Thus the importance of Iran: no matter what happens in Vienna, Iran is the vital hub/node in Eurasia.

The road has been long for the SCO. I remember when Euro-bureaucrats only a few years ago dismissed it as a mere talk shop. What started as a security forum to integrate the Central Asian “stans” so they would not be ravaged by terrorism and extremism evolved into a serious economic/political organization.

So now the SCO is starting to add to, and draw upon, the BRICS’s ever expanding economic cooperation, which features two essential pillars: the Asia Infrastructure Investment Bank (AIIB) and the BRICS’s New Development Bank (NDB). As for the EEU, it is also indirectly linked to China, as part of the Russia-China strategic partnership.

This will all translate in the next few years into a complex maze of economic and trade/commerce networks traversing Eurasia. Call it the road map of the myriad New Silk Road(s).

Faster! Dust up our war plans!

Here’s just a sample of what has been decided in Ufa: Putin and Chinese President Xi Jinping actively discussed, face-to-face, interlinks in the New Silk Road(s); India will become a full member of the SCO next year; Russia’s Finance Minister Anton Siluanov was appointed chairman of the BRICS New Development Bank (NDB), which will finance infrastructure projects not only in the five BRICS countries, but in other developing nations as well. And all that based in their own currencies, bypassing the US dollar.

The NDB has the potential to accumulate as much as $400 billion in capital, according to bank head KV Kamath. The parent capital is $100 billion.

Currency swaps are the way to go. It already applies to Russia and China on trade in futures, and Putin has dubbed its expansion to other nations as “interesting.”

A strategy for BRICS economic partnership has been devised that “touches upon the responsibility of different ministers and requires high-level coordination,” according to Russia’s Economic Development Minister Aleksey Ulyukaev, which means in essence easier trade between BRICS nations.

Both the China-led Asian Infrastructure Investment Bank (AIIB) and the NDB are headquartered in China. However, they won’t compete with each other; they will add to and complement one another.

Russia’s Direct Investment Fund (RDIF) signed a memorandum of understanding with the other BRICS. Significantly, China’s Silk Road Fund and India’s IDFC (Infrastructure Development Finance Company) are key partners.

Russia will lift restrictions on Chinese banks working in Russia, accelerating Beijing’s drive to invest in all sectors of the Russian economy.

Russia proposed a roadmap for investment cooperation. Crucially, that includes the possibility of an energy association, according to Putin, as well as an international energy research center.

The subject of energy brings us to Greece. Russia’s Turkish Stream pipeline – yet another diplomatic/energy counterpunch after the EU scored a proverbial own goal by scotching the South Stream – will be linked to Greece.

No wonder that elicited panic in Exceptionalistan. What if Syriza’s “flirting with Moscow” becomes a strategic shift, thus causing NATO’s eastern flank to fall to pieces?

It doesn’t matter that Russia wants a strong EU – and the EU won’t be strong without Greece, as Russia’s Foreign Minister Sergey Lavrov emphasized in Ufa.

So what does NATO propose to seduce anyone across Eurasia away from all the frantic BRICS, SCO and EEU politico/economic activity? Nothing less than an obsession with a “strategy rethink.” In other words, detailed “secret” scenarios for a war on European soil.

That’s all one needs to know about who wants what in the new, emerging geopolitical order.


Pepe Escobar is the author of Globalistan: How the Globalized World is Dissolving into Liquid War (Nimble Books, 2007), Red Zone Blues: a snapshot of Baghdad during the surge (Nimble Books, 2007), and Obama does Globalistan (Nimble Books, 2009).

Financial Turmoil In Europe, China And The United States

Off the keyboard of Michael Snyder

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Published on The Economic Collapse on June 19, 2015

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Earth In Peril - Public Domain

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As we move toward the second half of 2015, signs of financial turmoil are appearing all over the globe.  In Greece, a full blown bank run is happening right now.  Approximately 2 billion euros were pulled out of Greek banks in just the past three days, Barclays says that capital controls are “imminent” unless a debt deal is struck, and there are reports that preparations are being made for a “bank holiday” in Greece.  Meanwhile, Chinese stocks are absolutely crashing.  The Shanghai Composite Index was down more than 13 percent this week alone.  That was the largest one week decline since the collapse of Lehman Brothers.  In the U.S., stocks aren’t crashing yet, but we just witnessed one of the largest one week outflows of capital from the bond markets that we have ever witnessed.  Slowly but surely, we are starting to see the smart money head for the exits.  As one Swedish fund manager put it recently, everyone wants “to avoid being caught on the wrong side of markets once the herd realizes stocks are over-valued“.

I don’t think that most people understand how serious things have gotten already.  In Greece, so much money has been pulled out of the banks that the European Central Bank admits that Greek banks may not be able to open on Monday

The European Central Bank told a meeting of euro zone finance ministers on Thursday that it was not sure if Greek banks, which have been suffering large daily deposit outflows, would be able to open on Monday, officials with knowledge of the talks said.

Greek savers have withdrawn about 2 billion euros from banks over the past three days, with outflows accelerating rapidly since talks between the government and its creditors collapsed at the weekend, banking sources told Reuters.

All over social media, people are sharing photos of long lines at Greek ATMs as ordinary citizens rush to get their cash out of the troubled banks.  Here is one example

 

And if there is no debt deal by the end of this month, the Greek debt crisis is going to totally spin out of control and financial chaos will begin to erupt all over Europe.  But instead of trying to be reasonable, EU president Donald Tusk “has delivered an ultimatum to Greece”, and it almost appears as if EU officials are more concerned about winning a power struggle than they are about averting financial catastrophe…

EU president Donald Tusk has delivered an ultimatum to Greece, claiming the country must ‘accept an offer or default’ at an emergency summit set for Monday – in a last-ditch effort to stop the debt-stricken nation crashing out of the euro.

‘We are close to the point where the Greek government will have to choose between accepting what I believe is a good offer of continued support or to head towards default,’ Mr Tusk said today.

His comments come as Greek Prime Minister Alexis Tsipras warned that his country’s exit from the eurozone would trigger the collapse of the single currency.

‘The famous Grexit cannot be an option either for the Greeks or the European Union,’ he said in an Austrian newspaper interview.

‘This would be an irreversible step, it would be the beginning of the end of the eurozone.’

While all of this has been going on, the obscene stock market bubble in China has started to implode.  Just check out the following numbers from Zero Hedge

As the carnage began last night in China we noted the extreme levels of volatility the major indices had experienced in recent weeks. By the close, things were ugly with the broad Shanghai Composite down a stunning 13.3% on the week – the most since Lehman in 2008 (with Shenzhen slightly better at down 12.8% and CHINEXT down a record-breaking 14.99%).

Under normal circumstances, numbers like these would be reason for a full-blown financial panic over in Asia.  But these are not normal times.  Even with these losses, stock prices in China are still massively overinflated.  For example, USA Today is reporting that the median stock over in China is “trading at 95 times earnings”…

Margin debt in China has soared to a record $363 billion, according to Bloomberg, and the median stock in mainland China is now trading at 95 times earnings, which even tops the price-to-earnings multiple of 68 back at the 2007 peak.

That is absolutely ridiculous.  When a stock is trading at 25 or 30 times earnings it is overpriced.  So these numbers that are coming out of China are beyond crazy, and what this means is that Chinese stocks have much, much farther to fall before they get back to any semblance of reality.

Meanwhile, in the U.S. money is flowing out of bonds at a staggering pace.  The following quote originally comes from Bank of America

“High grade credit funds suffered their biggest outflow this year, and double the previous week (and also the biggest since June 2013). High yield outflows also jumped to $1.1bn, the biggest since the start of the year. However, government bond funds suffered the most amid the recent spike in volatility, with outflows surging to the highest weekly number on record ($2.7bn). This brings the total outflow from fixed income funds to almost $6bn over the last week, the highest since the Taper Tantrum and the third highest outflow ever.”

What this means is that big trouble is brewing in the bond markets.  This is something that I warned about in my previous article entitled “Experts Are Warning That The 76 Trillion Dollar Global Bond Bubble Is About To Explode“.

For the moment, U.S. stocks are doing fine.  But just about everyone can see that we in a massive financial bubble that could burst at any time.  Presidential candidate Donald Trump says that what we are witnessing is a “big fat economic and financial bubble like you’ve never seen before”

Yesterday during an interview on MSNBC, presidential candidate Donald Trump said he has some big names in mind for the Treasury secretary if he wins the White House. “I’d like guys like Jack Welch. I like guys like Henry Kravis. I’d love to bring my friend Carl Icahn.” He also opined on the economy and the stock market, admitting that the Fed has benefited people like him but that the economy and is in a “big fat economic and financial bubble like you’ve never seen before.

Ron Paul also believes that this financial bubble is going to end very badly.  Just check out what he told CNBC earlier this week

Despite record highs in the market, former Rep. Ron Paul says the Fed’s easy money policies have left stocks and bonds are on the verge of a massive collapse.

“I am utterly amazed at how the Federal Reserve can play havoc with the market,” Paul said on CNBC’s “Futures Now” referring to Thursday’s surge in stocks. The S&P 500 closed less than 1 percent off its all-time high. “I look at it as being very unstable.”

In Paul’s eyes, “the fallacy of economic planning” has created such a “horrendous bubble” in the bond market that it’s only a matter of time before the bottom falls out. And when it does, it will lead to “stock market chaos.”

Yes, this financial bubble has persisted far longer than many believed possible, but all irrational bubbles eventually burst.

And you know what they say – the bigger they come the harder they fall.

When this gigantic financial bubble finally implodes, it is going to be absolutely horrifying, and the entire planet is going to be shocked by the carnage.

Oil Market Unravels

Off the keyboard of Michael Snyder

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Published on The Economic Collapse on January 5, 2015

20130410-peak-oil-america

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Oil Falls Below 50 As Global Financial Markets Begin To Unravel

Crisis Silhouette - Public DomainOn Monday, the price of oil fell below $50 for the first time since April 2009, and the Dow dropped 331 points.  Meanwhile, the stock market declines over in Europe were even larger on a percentage basis, and the euro sank to a fresh nine year low on concerns that the anti-austerity Syriza party will be victorious in the upcoming election in Greece.  These are precisely the kinds of things that we would expect to see happen if a global financial crash was coming in 2015.  Just prior to the financial crisis of 2008, the price of oil collapsed, prices for industrial commodities got crushed and the U.S. dollar soared relative to other currencies.  All of those things are happening again.  And yet somehow many analysts are still convinced that things will be different this time.  And I agree that things will indeed be “different” this time.  When this crisis fully erupts, it will make 2008 look like a Sunday picnic.

Another thing that usually happens when financial markets begin to unravel is that they get really choppy.  There are big ups and big downs, and that is exactly what we have witnessed since October.

So don’t expect the markets just to go in one direction.  In fact, it would not be a surprise if the Dow went up by 300 or 400 points tomorrow.  During the initial stages of a financial crash, there are always certain days when the markets absolutely soar.

For example, did you know that the three largest single day stock market advances in history were right in the middle of the financial crash of 2008?  Here are the dates and the amount the Dow rose each of those days…

October 13th, 2008: +936 points

October 28th, 2008: +889 points

November 13th, 2008: +552 points

Just looking at those three days, you would assume that the fall of 2008 was the greatest time ever for stocks.  But instead, it was the worst financial crash that we have seen since the days of the Great Depression.

So don’t get fooled by the volatility.  Choppy markets are almost always a sign of big trouble ahead.  Calm waters usually mean that the markets are going up.

In order to avoid a major financial crisis in the near future, we desperately need the price of oil to rebound in a substantial way.

Unfortunately, it does not look like that is going to happen any time soon.  There is just way too much oil being produced right now.  The following is an excerpt from a recent CNBC article

The Morgan Stanley strategists say there are new reports of unsold West and North African cargoes, with much of the oil moving into storage. They also note that new supply has entered the global market with additional exports coming from Russia and Iraq, which is reportedly seeing production rising to new highs.

Since June, the price of oil has plummeted close to 55 percent.  If the price of oil stays where it is right now, we are going to see large numbers of small producers go out of business, the U.S. economy will lose millions of jobs, billions of dollars of junk bonds will go bad and trillions of dollars of derivatives will be in jeopardy.

And the lower the price of oil goes, the worse our problems are going to get.  That is why it is so alarming that some analysts are now predicting that the price of oil could hit $40 later this month

Some traders appeared certain that U.S. crude will hit the $40 region later in the week if weekly oil inventory numbers for the United States on Wednesday show another supply build.

‘We’re headed for a four-handle,’ said Tariq Zahir, managing member at Tyche Capital Advisors in Laurel Hollow in New York. ‘Maybe not today, but I’m sure when you get the inventory numbers that come out this week, we definitely will.’

Open interest for $40-$50 strike puts in U.S. crude have risen several fold since the start of December, while $20-$30 puts for June 2015 have traded, said Stephen Schork, editor of Pennsylvania-based The Schork Report.

The only way that the price of oil has a chance to move back up significantly is if global production slows down.  But instead, production just continues to increase in the short-term thanks to projects that were already in the works.  As a result, analysts from Morgan Stanley say that the oil glut is only going to intensify

Morgan Stanley analysts said new production will continue to ramp up at a number of fields in Brazil, West Africa, Canada and in the U.S. Gulf of Mexico as well as U.S. shale production. Also, the potential framework agreement with Iran could mean more Iranian oil on the market.

Yes, lower oil prices mean that we get to pay less for gasoline when we fill up our vehicles.

But as I have written about previously, anyone that believes that lower oil prices are good for the U.S. economy or for the global economy as a whole is crazy.  And these sentiments were echoed recently by Jeff Gundlach

Oil is incredibly important right now. If oil falls to around $40 a barrel then I think the yield on ten year treasury note is going to 1%. I hope it does not go to $40 because then something is very, very wrong with the world, not just the economy. The geopolitical consequences could be – to put it bluntly – terrifying.

If the price of oil does not recover, we are going to see massive financial problems all over the planet and the geopolitical stress that this will create will be unbelievable.

To expand on this point, I want to share an excerpt from a recent Zero Hedge article.  As you can see, a rapid rise or fall in the price of oil almost always correlates with a major global crisis of some sort…

Large and rapid rises and falls in the price of crude oil have correlated oddly strongly with major geopolitical and economic crisis across the globe. Whether driven by problems for oil exporters or oil importers, the ‘difference this time’ is that, thanks to central bank largesse, money flows faster than ever and everything is more tightly coupled with that flow.

Oil Crisis Chart - Zero Hedge

So is the 45% YoY drop in oil prices about to ’cause’ contagion risk concerns for the world?

And without a doubt, we are overdue for another stock market crisis.

Between December 31st, 1996 and March 24th, 2000 the S&P 500 rose 106 percent.

Then the dotcom bubble burst and it fell by 49 percent.

Between October 9th, 2002 and October 9th, 2007 the S&P 500 rose 101 percent.

But then that bubble burst and it fell by 57 percent.

Between March 9th, 2009 and December 31st, 2014 the S&P 500 rose an astounding 204 percent.

When this bubble bursts, how far will it fall this time?

Golden Showers

logopodcastOff the microphone of RE

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Aired on the Doomstead Diner on December 11, 2014

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Snippet:

 

my_precious…One of the more interesting and somewhat comical manifestations of the ongoing banking collapse, manifested mostly in the crashing currency value of the Yen and Euro but visible elsewhere in skyrocketing Stock prices is the attempt by various countries like Germany, Switzerland and Belgium to “Repatriate” Gold they have stored overseas in the Basement Safe of Da NY Fed and the BoE primarily. Well, it is supposed to be there anyhow…

Why do they want to repatriate said stacks of Gold? Obviously, because nobody TRUSTS anybody anymore, so everybody wants their own hands on their Precious, Gollum style.

Of course, very little of this stuff is actually moving around from one safe to another, various excuses are made for this, but of course the main reason is that there are multiple claims to every Gold Bar in existence, many times over here. It is “leased” out, which is the most preposterous idea you can imagine, HTF does Renting a Gold Bar improve your financial situation? Besides that, there is an enormous amount of “Paper Gold” traded every day, which has no corresponding Gold bar attached to it, it is just a bet on what the current and future price of Gold might be.

To demonstrate how ridiculous this whole deal is though, let us do a Thought Experiment and imagine what occurs even IF all this Gold actually still is in the Basement Safes of Da Fed and the BoE, AND all the countries requesting return of their Precious actually get it back!…

http://www.quickmeme.com/img/de/de7b0d100f2bbdfcb3686fb5c4e35ddb3a1657a43f8c190eff9d1ee0e721a2e9.jpghttp://www.quickmeme.com/img/d1/d131e378f41f1d548fd565cc09cca5c3e60b9d35b3dc82d1465f2494152cc4d3.jpg

For the rest, LISTEN TO THE RANT!!!

Note: For Non-Native speakers of English and folks who prefer to read rather than listen, you can find the Full Transcript of this Rant HERE

The Mix of the VIX

Off the keyboard of John Ward

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Published on The Slog on October 18, 2014

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THE SATURDAY ESSAY: there’s no consumer credit or liquidity funds left folks….and the Vix knows it

CORRECTIONS: THE MARKETS KNOW PERFECTLY WELL THAT THIS IS JUST THE BEGINNING

For those too young (or late) to realise it, The Slog as a brand name is derived from the term Bollockslog. Following last week’s end of the beginning of the end of globalist neoliberal mercantilist claptrap, you may have noticed that the bollocks has been spewing forth from the defenders of this foundation-free and entirely idiotic ‘model’ of capitalism. But we should not be deceived.

Two inalienable truths remain for critics of this economic construct to keep banging on about:

1. The world economy has been 100% dependent on sovereign debt and consumer credit for the best part of fifteen years.

2. The current system’s ability to find finance via banks and bourses is not sustainable without constant injections of taxpayer monies.

This second point is really the killer, but both are fundamental. We are being asked to believe in/support/accept or whatever a system of economic activity that works like this: 97% of electors subsidise it (by maxing credit cards, losing interest rate income, paying higher taxes, and being deprived of social services) while 3% of troughers at the top hoover up all the money for themselves.

Put succinctly: consumers have no real money with which to consume, and the private sector has no liquidity to help producers grow.

Ergo, the system grinds to a halt…very, very slowly….until an important sovereign debt is no longer sustainable, and/or borrowing rates rise, at which point, the entire deck of cards collapses.

Night and day, week in week out, two things have to be in perfect focus all the time – just to keep even the appearance of there being a show that might be on the road: QE driven liquidity, and Zirp. Stop doing either, and boom, you’re dead.

…………………………..

But you wouldn’t think that judging from the ‘élite’ output. This is from the freshly-baked IMF Report for October 2014. I’ve highlighted the bleeding obvious and the blinding illogic therein:

‘Despite setbacks, an uneven global recovery continues. Largely due to weaker-than-expected global activity in the first half of 2014, the growth forecast for the world economy has been revised downward to 3.3 percent for this year, 0.4 percentage point lower than in the April 2014 World Economic Outlook (WEO). The global growth projection for 2015 was lowered to 3.8 percent.

Downside risks have increased since the spring. Short term risks include a worsening of geopolitical tensions and a reversal of recent risk spread and volatility compression in financial markets. Medium-term risks include stagnation and low potential growth in advanced economies and a decline in potential growth in emerging markets.

Given these increased risks, raising actual and potential growth must remain a priority.’

It’s like something out of a Solzhynitsin novel about Soviet doublespeak. Why have growth targets been reduced? ‘because of weaker than expected activity’. You don’t say, Cisco? I was thinking maybe it might be down to sunspots, or perhaps a supply-chain problem in the treacle-bending sector.

And don’t you love those medium term risks? Stagnating developed markets, low potential, and declining potential. Jumping jetcars Batman, stagnating decline and an absence of potential….that’s a pretty exhaustive risk-list.

But fear not, because the Lone Ranger and Tonto have made raising potential their next stop on the DoGood trail. “How do yer think we’re gonna raise that low decline into high growth Tonno?” The faithful Indian pauses before responding to the superior White masked man. “Keemosabbe, important we make economy low in decliningness, high in growingness”. With a hi-ho Silver and ha-wayeeee.

The truth is – as nearly always – very much simpler. The people out there doing the buying, selling, directionalising and cash-cow milking (but not a lot of wheel-oiling on the whole) know the game’s up, and the only thing on their minds right now is how to keep a close eye on the vintage Krug glass.

There is no test in history that can match the Krug Test. It works like this: we’re all on a big ship, a ship so big and unwieldy because it has been built to go at very high speeds but not to avoid big lumps of hard stuff in its path. The trick is to constantly trough 24/7 at the goodies table, while always having a beady eye on the Krug glass.

When the glass shivers a little, and spills a minute drop of the amber nectar onto the caviar-stained tablecloth, we’ve hit the iceberg. So this is the time to smile at the glass, drink its contents, and every so casually retreat from the dining room to the comfort of that First Class Cabin, open the safe, put all the jewellery in a carpet-bag, and load the Colt 45 to the brim with lead.

The next stage will involve a great deal of volatility, but for your personal chances of survival to remain in double figures, the chief requirement is the bold act of jumping up to the nearest lifeboat, putting a gun to the steward’s head and shouting (with a degree of firmness) “F**k the women and children, lower this sucker into the sea before the SS Leviathan drags us under”.

That such volatility lies ahead is obvious to those running the show, and luckily we can measure this using the Vix, or volatility index….more precisely, expectations of what the Vix will itself show going forward.

Last week’s Vix of itself was small compared to 2008. But the forward expectation was higher than anything ever recorded before. Put simply, this means that the vast majority of people not only think that much worse shit lies ahead: they think that nobody can see any fat ladies singing, and for that matter we don’t even know there’s a fat lady with a good voice on the ship.

Equally simple to explain is why they think that way. The chart below shows the degree to which Point 2 at the start of this piece is incontrovertibly correct:

QEgraphptnetFor me, there are two startling colours in the above: the the Bank of England, and and the ECB. For what they tell us is that at the end of 2013, the two big Europe-based central banks of the Pound and Euro gave up on liquidity injection – ie, QE.

Now, we already knew that about the Dollar’s Fed – and that’s confirmed by the tailoff in navy blue. But what we can now do is see how the markets have reacted over time, leading up to last week. The bottom line on this in hard cash terms is that just stopping a market rout costs the public purse some $800 billion a year.

In an astonishingly bonkers piece for the Daily Telegraph two days ago, Ambrose Evans-Pritchard opined that such a permanent QE position might be inevitable. He just didn’t say how on earth that could ever be either possibly or desirable.

Abe san in Tokyo, of course, thinks it’s just a matter of scale, because he is mad. But the crucial point to take away from this analysis I would summarise as follows. If the cost of keeping the circus alive costs “the West” not far shy of a trillion bucks a year – and the West is already neck-deep in further trillions of debt – that sum is unaffordable. But if you take away the stimulant, the patient goes into a coma.

This is known among the elevated circles in which I operate as the Lifeboat or Drown Event.

………………………………..

The human misery that has been inflicted upon entirely innocent electorates in order to prop up this ridiculous cross between sham and scam is off the scale of pernicious insanity, but whatever the smug cynics believe, push is now coming to shove.

A desperate jobless father entered the tax office in Rhodes holding in his arms his 18-month-old baby earlier this week. “Take it,” he told the stunned tax officers “I cannot feed it anymore.” The father discovered that the tax office had confiscated €300 from his bank, which meant he was skint.

Not only did he find himself in that position as a result of corrupt, spineless politicians who over-borrowed from rapacious lenders; he was also in that position because a trident of greed, Washington and Brussels (egged on by Berlin) force-fed the Greeks an austerity plan certain to depress consumption in a capitalist system that could only function in the first place through fake money aka credit.

Now I am not saying here that a starving populace will make any of these dangerous lunatics change direction. To think that really would be to adopt a naivety flying in the face of all the empirical evidence. No: what is going to happen now is that those wannabe survivors without guns to force the lifeboat issue will try and buy one….in a situation where guns are scarce, and the stern is rising out of the water.

And that’s the point at which the steerage passengers will decide enough is enough….unless forcibly dissuaded from such a conclusion.

………………………………..

Logically, I think we are looking at another, this time more concerted, correction in stock markets fairly imminently. Then two options remain, each delivering its own likelihoods:

OPTION 1: THE SHIP IS DOOMED, EVERY MAN FOR HIS OWN LIFEBOAT

* Collapse of the entire fabric of banking, investment, and economic activity.

* Anarchy, chaos, revolution, widespread violence

* Breakdown of vital services allowing pandemics to spread

* Resultant huge cull in the human population as a result of civil strife, nuclear exchanges and disease.

OPTION 2: THE SHIP IS SALVAGEABLE, WE MUST LIMP TO THE NEAREST PORT

* Growing awareness of the markets’ doom

* Exacerbation of that with a rapidly deteriorating eurozone crisis involving one or more of failing banks, lost confidence in the ECB, Bankfurt rebellion against the single currency, Italian default and French truculence

* Money-printing on a massive scale

* Lurch to the hard-Right in the face of divided and muddled liberal Parties

* Emergency Powers being extended beyond ‘anti-terrorism’ laws

* It all depends, hard to tell etc etc etc.

My money is on the second option, which might be both a good and a bad thing. Certainly, in that eventuality the outcome will depend entirely on whether the thinking minority can outgun the thoughtless élites, and thus get the brainless onside against those élites. David Cameron says I am now a non-violent extremist, and so obviously I would want the whole thing managed without violence. Whether it will be or not is an entirely different matter.

However, I thought I’d end this essay with an extract from an email sent to a Greek friend earlier today:

‘Real people get on the ground and listen to other real people. Real people know it’s all tits up. I estimate about 3-4% of the populations are doing very nicely thank you out of this, and another 7% have practical experience + discernment to realise what’s going on and want to stop it. Maybe another 1% are in government or the media, but they get about 90% of the airtime when it comes to opinion. The other 89% are too tired or thick to care.
So the battle in the end is going to consist of 7% trying to persuade 89% that the 4% are talking out of their backsides. We outnumber them, but they have all the levers and the munneeeee. Our two main weapons are inventiveness and not being egomanic. That’s it’.
Enjoy the weekend.

The Era of Bad Feeling

From the keyboard of James Howard Kunstler
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stupidtattooartist14
Originally Published on Clusterfuck Nation  September 15, 2014

There are times when events are in charge, not personalities. The unseen forces that hold the affairs of nations and economies in equilibrium dissolve, particles fly out of the many centers, and things heat up toward criticality.

Glance in the rear-view mirror and say goodbye to the Era of Wishful Thinking. This was the time when the USA was inspired by its Master Wish: to be able to keep driving to Wal-Mart forever. Looked at closely, the contemporary idea of Utopia was always a shabby package. On one side, all the pointless driving. For most Americans it was nothing like the TV advertising fantasy of a lone luxury car plying a coastal highway in low, golden light. More like being stuck near the junction of I-55 and I-90 in Chicago at rush hour in July in an overheating Dodge Grand Caravan with three screaming ADD kids whose smart phone batteries just died — plus your fiercely over-filled bladder and no empty Snapple bottle to resort to.

On the other side, there’s the Wal-Mart part: the unbelievable cornucopia of insanely cheap plastic goodies, like, somewhere in the 1990s America became one giant loading dock for nearly free stuff. Wasn’t that fun? Now, everybody has got the full rig, from the flatscreen to the salad shooter, but we’re tired of seeing Kim Kardashian’s booty, and nobody really liked salad, even when you could shoot the stuff into a bowl. The thrill is gone, and so is the paycheck that was your ticket to the orgy. It’s especially gloomy over in the food department, where the boxes of Lucky Charms are suddenly half the weight and twice the price. And that was going to be the family dinner! Must be Nature’s way of telling you it’s time for a new tattoo.

In this weird liminal time since the so-called Crash of 2008 leadership has depended on lies and subterfuges to prop up the illusion of resilience. One biggie is the shale oil revolution, kind of a national parlor trick to wow the multitudes for a long enough moment to convince them that their troubles with the national energy supply are over. Even people paid to think were hosed on this one. Wait until they discover that the shale oil producers have never made a buck producing shale oil, only on the sale of leases and real estate to “greater fools” and creaming off the froth of the complex junk financing deals behind their exertions. Expect that mirage to dissipate in the next 24 months, perhaps sooner if the price of oil keeps sinking toward the sub $90-a-barrel level, where there’s no economically rational reason to bother drilling and fracking.

The lies, frauds, and cons run between the axis of Wall Street and Washington had two fatal consequences with still-lagging effects. 1) They destroyed the capacity for markets to establish the real price of anything — rendering markets useless. 2). They disabled capital formation to the degree that we might not have the money to rebuild an economy to replace the “financialized” matrix of rackets that currently pretends to function. A lot of observers like myself have been waiting for the moment when the fog of pretense lifts and exposes all the broken machinery within. We may be so close now that you can smell it.

Change is in the air, literally, as we wake this still-summer morning with the thermometer so low you wish the furnace was prepped and ready to run. Much is in the air, too, where the news of events near and far provoke swirls of transformation in the disposition of people, nations, and affairs. Who would have guessed a few years ago how nervous Scotland would make the whole Western world? The sharpies at the Pentagon, and the White House, and the CIA may be waiting with indigestion and palpitations for the next ISIS decapitation video, but maybe you have to wonder instead which of five thousand shopping malls across this land will be visited by black-flagged desperados armed with automatic rifles and RPG’s.

Finally, there are the people themselves of this sclerotic polity: too dumb and distracted to help themselves, full of inchoate grievance and resentment, tending ever deeper into darkness. Welcome to the season of the witch in the Era of Bad Feeling. Somewhere “out there” there is a light of virtue waiting for us, but we are a long way from finding our way to it.

 

 

***

James Howard Kunstler is the author of many books including (non-fiction) The Geography of Nowhere, The City in Mind: Notes on the Urban Condition, Home from Nowhere, The Long Emergency, and Too Much Magic: Wishful Thinking, Technology and the Fate of the Nation. His novels include World Made By Hand, The Witch of Hebron, Maggie Darling — A Modern Romance, The Halloween Ball, an Embarrassment of Riches, and many others. He has published three novellas with Water Street Press: Manhattan Gothic, A Christmas Orphan, and The Flight of Mehetabel.

Lies, Damn Lies & STOCHASTICS

Off the keyboard of John Ward

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Published on The Slog on August 15, 2014

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Discuss this article at the Kichen Sink inside the Diner

Taking stock of market stochastics

So here I sit, in my kitchen, at 8.30 pm CET, noting that the sunsets are getting earlier. But the temperature is that normally associated with May – whereas in May, we had the sort of temperatures one expects in July. In late March/early April it was like August. January this year was similar to September. The pool temperature is a chilly 19 degrees. God, isn’t life a bitch?

It could well be that someone on the commodity markets – in league with the Pentagon – is shuffling the weather deck with a view to making vast virtual profits from the physical death of millions. Or, on the other hand, it could just be that weather glitches do not a climate change make, and that weather is a stochastic sort of thing.

There’s a word you’ve heard from time to time, and then forgotten – or looked up, and then forgotten what it means. ‘Stochastic’ is one of those words that comes into vogue now and then among the commentariat: like gestalt, eclectic, tendentious, inchoate, mnemonic and – one of my favourites – systemic. At University, my Liberal Democratic Theory tutor (a Welshman disabled by eccentric pronunciation of English ) used that last word all the time, and for the first two terms of our Fresher year there was much debate in the Arts Lab coffee lounge as to WTF it was.

WTF it was went much deeper than WTF it meant: we didn’t even know how it was spelt. And if you don’t know how something is spelt, you can’t look up what it means. This is the ultimate jean-creaming aim of all those pretentious folks who use such words: to bamboozle, and thus control. (There is a very good US site devoted to PAWS – Pompous Ass Words)

The first time I heard the word stochastic was in a market research meeting about thirty years ago, except it was in the plural – as in, stochastics. Doing this gives any word added scientific credibility, because the addition of the ‘s’ makes it a field of venerable analysis: as in electronics, media studies, aeronautics and so forth. There’s just one problem with the analysis of stochastic stuff: it defies analysis, because it is completely random.

The dictionary definition of stochastic is not at all stochastic. It states that stochastic phenomena have ‘a random probability distribution or pattern that may be analysed statistically but may not be predicted precisely’.

Isn’t that a belter? Not predicted precisely. This is the scientific equivalent of a politician saying “Not as such”. Let’s get real here, stochastic means ‘unpredictable’. Unpredictable means “You can’t f**king predict it”.

And yet, here are all these onanists engaged in applying statistical probability to the unpredictable. Onanism, by the way, is another of those PAWS, and it means wanking.

Let’s jerk off a little more now and get into the stochastic variable a variable quantity that is random. Financial, commodity and futures markets are full to bursting with people doing what humans always do in the end: try to control that which they cannot control. Thus, in the technical analysis of securities trading, the stochastic oscillator is a momentum indicator that uses support and resistance levels. Dr. George Lane promoted this indicator in the 1950s. It attempts to predict price turning points by comparing the closing price of a security to its price range. The indicator is defined like this:

%K = 100 *(Price-L5)/(H5-L5)
%D  =  100*H3/L3

Well of course it is, for heaven’s sake. Stands to reason, squire. Except, of course, that if a variable quantity is random, it could go up to $1980.35, or down to a dime. Further, if you have the Fed Reserve and the Bank of England pumping not so much unpredictability as directionalised cheating into, say, the Dow Jones Index, then investment in that sector is what we seasoned stochasticians call A Mug’s Game. Had one applied stochastic analysis to the gold market since 2010, for example, by now one would almost certainly have gone blind.

Google the term ‘stochastics’ (2.54m results) and you will find details of stochastic oscillator seminars, conferences about stochastically matching markets, the Infinite Dimensional Stochastic Analysis Perspective René Carmona, stochastic uniform market price formulae, and even a Local Stability Analysis of a Stochastic Evolutionary Financial Market Model with a Risk-free Asset.

FFS guys, get real: stochastic means ‘God knows what’s going to happen’. Applying words like uniform, formula, risk-free and matching is merely another version of the sad bastard gambling his fortune away in Monte Carlo, still convinced that he is but millimetres away from perfecting A System. Or as my tutor at Uni might have said, “The whole point about something stochastic is that it isn’t systemic”.

Two things will, ultimately, render all formulae and process redundant: left-field ideas, and unforeseen events. Homo sapiens has an insatiable desire to control, and to triumph over that of which it doesn’t approve. This is, I suspect, what makes us such a nuisance as a species.

Gold, Greed & Global Collapse

Off the keyboard of John Ward

Published on The Slog on April 13, 2013

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GOLD, GREED & GLOBAL COLLAPSE: who benefitted most from yesterday’s spectacular fall

goldfall13413

What you see above isn’t just the tale of a horrendous day for gold – it fell $88, or just over 4%, in a day – it is the record of a fall that steepened the minute New York opened, twice tried (and failed) to rally, and yet managed to do all this on a day when the vast majority of fundamentals should’ve been pushing the price up, not down.

The one exception to this was the Troika demand on Thursday that Cyprus sell its gold to help pay off debt. I have two observations to make about that: one, why do that to Cyprus now and not to anyone else before? And two, on paper it didn’t look like the sort of volume to start a gold freefall.

This is a murky business, so we need to consider it from all sensible angles.

The fundamentals

The US is degrading and diluting its currency, the UK’s austerity strategy is falling apart, the EU economy is flatlining, and Russia is massively overdependent on energy sales in a world where the outlook for energy consumption is awful: indeed, only the coldest european Spring for decades has enabled it to maintain any kind of momentum.

China’s slowdown now looks inevitable given the atrocious consumption outlook outside its borders, and US economic nerves tightened yesterday when the IMF cut its growth forecast for the year from 2% to 1.7%, alongside official figures confirming a 0.4% slump in retail sales in March – the biggest fall since last July. Factory output in the EU declined, and the north-south imbalance worsened as Slovenia edged towards the centre of the debt radar. Italy’s output fell by a disastrous 8%, and Portugal’s constitutional Court has rejected the Troika’s bailout plan. 41% of Germans no longer believe their banked money is safe.

The myth of Obama’s ‘recovery’ long ridiculed here is now clearly seen for the lie it was. The Cyprus ‘bailin’ has caused massive leakage of capital from the eurozone. The Troika’s Athens talks are acrimonious and stalled.

Every last indicator last week suggested a turning tide for gold as a hedge against currency devaluation, and as an asset which – even if it fell in value medium term – would be better than worthless paper. But that wasn’t the market mood, and it wasn’t what happened. To call that strange is like referring to the Krakatoa eruption as a small bang: worldwide gold demand in 2012 was another record high of $236.4 billion in the World Gold Council’s latest report. This was up 6% in value terms in the fourth quarter to $66.2 billion – the highest fourth quarter ever and real volume demand in the fourth quarter of 2012 was up 4% to 1,195.9 tonnes.

So who were the suspects behind what, I’m fairly sure this morning, was a massive fix?

The manipulation clues

The central banks bought gold at a rate ahead of market growth last year – which means their share of it grew.

Central bank buying for 2012 rose by 17% over 2011 to some 534.6 tonnes – the highest level since 1964. Central bank purchases stood at 145 tonnes in the fourth quarter – up 9% from the comparable period in 2011. Central banks have now been net purchasers of gold for eight consecutive quarters. This despite the non-stop stream of CB spin about there being no money-printing or inflation to get concerned about. Fancy that.

Did anything else make sense of this strategic decision by the Draghulas? Spookily enough it did. Last year, Basel III moved the goalposts on gold’s risk score, moving gold from tier 3 to quasi tier 1 status. Gold thus became “zero percent risk-weighted” in terms of credit risk – a whopping upgrade for the shiny metal. But to buy lots of it (and thus reduce risk-panic among investors) one needs the price to go down.

And guess what? Despite that massive Central Bank buying splurge since late 2010, gold has hovered and wobbled, been weak in its challenging of top prices – and persistent in challenging lows. Or put another way, the exact opposite of what the first rule of Supply and Demand dictates. My oh my.

The Guardian this morning ran a truly daft piece saying that ‘gold fell to its lowest level in more than 18 months on Friday night amid fears that sales of the precious metal forced on Cyprus by its desperate financial plight would lead to wholesale dumping by hard-pressed countries in the coming months’. Pardon me Gruauniad, but “Bollocks”. The sum total of Cypriot selling required is €400m tops. That is a flea-bite on the ankle of the gold sector.

More pertinent, perhaps, is that the Cyprus sale (1) enabled the CBs to buy still more of it, and (2) provides an excuse for the price fall that naifs might accept at face value.

Other potential culprits are also implicated. During January 2013, the COMEX gold futures platform pushed expectations for the price up by 8.3%. One wonders who pushed it in that direction, and why. What’s more, over the last 90 days without any announcement, stocks of gold held at Comex warehouses plunged by the largest figure ever on record. JP Morgan Chase’s reported gold stockpile dropped by over 1.2 million ouncesa staggering $1.8 billion dollars worth of physical gold in just 120 days. The owners involved took their metal offsite, and it’s no longer stored in Comex warehouses…did they do so from a lack of trust? Or did they know something we didn’t?

Then there’s the chance that the Fed itself was trying to reduce its cost of returning gold:  Germany’s Bundesbank recently announced it would be moving a major portion of its reserves from the US and all of its reserves from France back to Frankfurt. Nearly half of Germany’s gold reserves are held in a vault at the Federal Reserve Bank of New York. Nice way to reduce loss of face on safe assets if you work for Washington.

Is there a bottom line here?

There is, but I don’t think one can see the exact nature of it just yet. What seems to me clear, however, is that this was a fix….and Cyprus was a cover story for it, not the reason why.

On balance, it feels to me like some leaking, some massaging, and some reduction in the cost of global looting. But whatever: next week is indeed going to be interesting.

 

Facepalm Suckers the Suckerbugs

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As the spin down proceeds along here, the circular nature of Money Creation and Destruction becomes ever more apparent, even I think to the Casual Observer now.  Reason it is becoming much more obvious now than in the past is that BOTH Money Creation and Destruction are occurring exponentially more rapidly these days than just a few  years ago.

We have all been Witness to TARP, QE1 & QE2, and the EFSF Slush Fund, which in combination add up to TRILLIONS of some Fiat created over the last 4 years since the 2008 Financial Crisis.  This non-stop creation of credit to maintain liquidity has provided an enormous amount of Fodder for the arguments of Hyperinflationistas and Gold Bugs alike.  According to BOTH John Williams and Speedy Gonzalo Lira, all this Printing SHOULD have resulted in HI of the Dollar in around 2011 at the LATEST, if you read their arguments in 2009-10 anyhow. Here we are in 2012 though, and it still does not take a wheelbarrow to buy a Loaf of Bread, though Bread IS more prcey today than in 2009.

Why has HI not occurred as of yet in the Dollar?  A few reasons for this.  First of all, the Dollar is just a COMPARATIVELY valued currency, valued against the worth of other currencies in operation.  It’s not a good currency, but compared to the other main currencies it is valued against, it is positively Sterling!  Bad as FSofA debt is, it is better debt than that owed by the various PIIGS nations.  Its better than Glow inthe Dark Yen.

The ABSOLUTE Truth of course is that ALL Fiat is diminishing in it’s relative worth against Oil, which in this industrial cuture provides the underpinning for the value of all Fiat.  PMs play a tangetial role in this, their worth depends on valuation against both the Oil resource and the perceived Safety of PMs while Fiat loses its value. Overall though, Gold is a minor player in a much bigger game, and Gold cannot abosrb the lost value in Industrial Equities.  Put it this way, if you took all your Monsanto,IBM,GE etc Stock and tried to convert it to Gold, at current valuations for Gold there is not enough around to place all that value. Gold would have to raise in value by orders of magnitude to take on the current valuations, and that is not going to happen. Why?  Because the current valuations of equities are entirely WRONG to begin with! You cannot transmute false valuations in equities (or real estate or derivatives etc) into “real”valuations in Gold anymore than you can transmute Lead into Gold. The shit simply isn’t WORTH what the “market”says it is worth, because the “market” marks to MAKE BELIEVE now, not any real valuation.

Anyhow,it is the recent IPO of Facepalm that leads me to write this analysis, because inside the Diner the case was made by GO that $100B worth of fiat was created in this IPO, which is for the most part true.  At this point, Morgan Stanlety who underwrote the IPO is going to have to Borrow money to buy the stock itself and keep the price propped up at anywhere near its IPO price. MS can only do this for so long though, even with an open spigot from Helicopter Ben. The rest of the competitors to MS will see this weakness and keep dumping stock forcing MS into a deeper hole to prop it up. The OTHER sharks in the water will eat MS ALIVE if they persist in propping it up.

So,the $100B or so created to purchase this stockrather quickly goes up in flames here without EVER making it out into the Main Street Economy to Hyperinflate anything. Rinse and repeat said process with all the recent IPOs from Poopon to Zinger to the “new”GM.They are ALL losing their value, all the money created to buy them is going right up in SMOKE here.

Forget HI, even just keeping regular Inflation going is a daily job for Helicopter Ben that overall he is losing.  None of the Funny Money being created makes it any further out to the Real Economy than the Bonuses paid to the Banksters for making these deals and setting up a new paper construct, in this case Facepalm.  Facepalm has no real good revenue model here, it is a fucking FAD.  In the end, social networking and Tweeting the details of your daily life is just BORING.  Really, even the Tweets of Bill Gross are BORING,and he is worth BILLIONS.

Facepalm is a fabulous example for what is going on in the Grand Schema here, which is to try to keep this monetary system running blowing ever more and newer Bubbles,but the latest Bubbles are so full of HOLES they capture no Air whatsoever, not even for a MOMENT after they are offered up for consumption.Railroads,Carz, they captured some air for a while when the Black Gold came a-bubblin’up from Jed Clampett’s farm, but these things at leasthad some SUBSTANCE to them. Virtual Creations on the internet HAVE NO SUBSTANCE.  In REALITY,they are quite worthless things. Facepalm is a MIRAGE of wealth,though to be sure Suckerbug cashed out himslf on this mirage. For everyone ELSE who invested in it, you are the Suckerbug’s Sucker holding the bag.

RE

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Bond Market Collapse and the Banning of Cash

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Do Central Bankers Recognize there is NO GROWTH?

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Singularity of the Dollar

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Kurrency Kollapse: To Print or Not To Print?

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SWISSIE CAPITULATION!

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Of Heat Sinks & Debt Sinks: A Thermodynamic View of Money

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Merry Doomy Christmas

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Peak Customers: The Final Liquidation Sale

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Collapse Fiction

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