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Wed. September 18th , 2013
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THE SECRET US GEO-ECONOMIC STRATEGY
Part I: The Petro$$ Imperative Part II: The Social Engineering of US Complacency w/F. WILLIAM ENDAHL, Author and Freelance Researcher and JOHN RUBINO What Are Tipping Poinits?
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EM equities: do not catch the falling knife yet! |
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EMERGING MARKETS - Increasing Liquidity Problem In Selected Markets
Don't Catch The Liquidity-Impacted EM Falling Knife (Yet) 09-17-13 Societe General via ZH The Euro area is no longer the centre of all the stress... EM countries are! Despite their significant correction in recent months, SocGen notes that valuations remain far more extreme (or cheap) and outflows are dominating (despite a 24% discount on a price-to-book basis across EM stocks, they reain rich historically). Significant structural issues like balance of payments, deficit or inflation may lead to further turmoil in emerging markets, potentially destabilising the underlying economies. Via Societe Generale, Epicentre of the crisis is moving towards EM Countries We read history in a simple way. In 2007/08, what was supposed to be a liquidity crisis at the beginning finally switched into a full blown financial and economic crisis centred in the US. Since 2008, the US has climbed a wall of worries, allowing US assets (both bonds and equities) to outperform. In the period 2009/mid-2012, the epicentre of the crisis switched to the eurozone, where a mix of bad governance and structural weaknesses led to bailouts and recession. Eurozone assets (except in Germany) are today where the US assets were in 2009, ready to “climb their wall of worries”, with significantly improved governance and an improving growth outlook. Since 2013, signs of weaknesses have appeared in the EM World, burdened by the prospect of a tighter US monetary policy (read: higher USD) and huge outflows. Significant structural issues like balance of payments, deficit or inflation may lead to further turmoil in emerging markets, potentially destabilising the underlying economies. When the liquidity tide turns, EM assets are hurt Recent outflows from EM assets: minor compared to previous inflows EM assets (both bonds and equities) have suffered strong outflows this year. However, these outflows remain minor compared to cumulative inflows over the last 5 years. So potentially, much more outflows should be expected when the Fed effectively tightens its policy. When the liquidity support falls, all EM assets (FX, bonds, equities) suffer The average correlation between EM equities, EM bonds and EM FX has strongly increased since Bernanke first signalled he was considering the tapering of asset purchases. EM: some structural issues around The bull story has turned sour in some emerging markets as external balances have deteriorated Quality first! Countries with a deteriorating external balance have seen their currencies depreciated strongly since 22 May (e.g. India). On the contrary, South Korea has been relatively resilient. EM currencies now fully floating Compared to historical crises in EM countries, fewer and fewer EM currencies are directly pegged to the USD. While this may be a source of vulnerability in times of market turmoil, it has helped EM countries absorb external shocks more easily. As always, the market will concentrate on the weakest countries, putting their currency under strong pressure and drying up liquidity. Elections in sight likely to paralyse decision making for some months ahead On top of the economic imbalances highlighted above, some EM countries risk paralysis in the coming quarter due to political events. Governments that seek to be re-elected will want to avoid policy tightening, increasing the risk of a market attack. EM asset valuations have further to fall EM bonds: spread (versus US Tresuries) is far from extreme and could widen further Despite the strong correction of EM bonds (+44bp since May 2013), their valuation is far from extreme. The EM bonds spread over US Treasuries has recently widened. Nevertheless, it remains far from last year’s level and could widen again. EM equities: do not catch the falling knife yet! EM equities started to correct in 2010, when they traded at a premium of around 20% relative to developed markets (as measured by the price to book value ratio). We continue to stay away from EM equities (despite a 24% discount), as outflows are running at high levels. EM equities and commodities: six versus half a dozen! Commodity and EM equity cycles have been strongly synchronised over the last 15 years. They obviously have some common key drivers: Chinese demand, the liquidity factor and sensitivity to the USD. Nevertheless, commodities have recently been more resilient, as many of them are getting close to their cost of production. |
09-18-13 | MACRO INDICATORS GROWTH
GLOBAL RISK ASIAN CRISIS |
39 - Financial Crisis Programs Expiration |
TAPER - The Fed Taper Playbook The Fed Taper Playbook In 2 Simple Charts 09-17-13 Zero Hedge As we previously noted, it would appear - unlike the exuberance in the market - the 'taper downside risk' is very much in equity markets rather than bonds. Today's aggressive equity and credit hedging and bond stability perhaps signal more apprehension than a rallying volumeless equity market might suggest but if the following 2 charts are anything to go by, a shift to removing the punchbowl (no matter how biased to longer, lower, forward rate guidance - of course stymied by 2016 economic projection dilemmas) has seen bonds surge and stocks purge... Charts: DoubleLine Perhaps - as we noted earlier - credit markets are on to something |
09-18-13 | US MONETARY | CENTRAL BANKS |
FEDERAL RESERVE - The Fed's Double-Bind The Fed's Double-Bind Charles Hugh-Smith of OfTwoMinds blog via ZH The Fed will blow up the economy if it continues money-pumping, but it will choke off the fragile recovery if it cuts back its money-pumping. The Federal Reserve is in a classic double-bind: as its policies to boost growth bear fruit, interest rates rise, threatening the very recovery the Fed has lavished trillions of dollars of quantitative easing (QE) to generate. Higher growth naturally leads to higher interest rates, which then choke off growth. The Fed's goal was a self-sustaining recovery, in which growth reaches "escape velocity," i.e. is strong enough to support higher interest rates. But the pursuit of that goal via trillions of dollars of asset purchases has inflated asset bubbles in stocks and real estate. The Fed's goal was to push speculative and institutional money into risk assets such as stocks, generating a "wealth effect" that was supposed to spill over into the real economy via higher borrowing and spending. The pursuit of "the wealth effect" via inflating asset bubbles has created another double-bind: now that markets have become dependent on Fed money and liquidity pumping, the Fed cannot reduce its QE money-pump (currently $1 trillion a year) without tipping the stock market into free-fall. If the Fed continues its massive monetary easing programs, asset bubbles will only inflate to speculative extremes, to the point where violent bursting becomes a matter not of "if" but of "when." (This is also known as "the music stopping.") If the Fed cuts back its money-pumping and asset purchases, interest rates will rise, as interest rates will seek a market level that isn't pushed to near-zero by the Fed's financial repression. Higher rates will choke off tepid Fed-induced growth. We already see home refinancing rates plummeting to 2009 recessionary levels. So the Fed risks blowing asset bubbles that will devastate the economy if it continues the QE pumping, but it risks killing the tepid recovery if it cuts back its pumping. Darned if you do, darned if you don't. Put another way: if growth is needed to boost corporate sales and profits, but growth leads to higher interest rates and reduced central-bank suppport of markets, this is a double-bind with no exit. |
09-18-13 | US MONETARY | CENTRAL BANKS |
MOST CRITICAL TIPPING POINT ARTICLES THIS WEEK - September 15th - September 21st |
RISK REVERSAL | 1 | ||
JAPAN - DEBT DEFLATION | 2 | ||
BOND BUBBLE | 3 | ||
EU BANKING CRISIS |
4 |
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SOVEREIGN DEBT CRISIS [Euope Crisis Tracker] | 5 | ||
2007 REDUX - Total public and private debt levels are 30pc higher as a share of GDP in the advanced economies Five Years After Lehman, BIS Ex-Chief Economist Warns "It's Worse This Time" 09-15-13 Zero Hedge The froth is back. As we noted yesterday, corporate leverage has never been higher - higher now than when the Fed warned of froth, and as the BIS (following their "party's over" rant 3 months ago) former chief economist now warns, "this looks like to me like 2007 all over again, but even worse." The share of "leveraged loans" or extreme forms of credit risk, used by the poorest corporate borrowers, has soared to an all-time high of 45% - 10 percentage points higher than at the peak of the crisis in 2007. As The Telegraph reports, ex-BIS Chief Economist William White exclaims, "All the previous imbalances are still there. Total public and private debt levels are 30pc higher as a share of GDP in the advanced economies than they were then, and we have added a whole new problem with bubbles in emerging markets that are ending in a boom-bust cycle." Crucially, the BIS warns, nobody knows how far global borrowing costs will rise as the Fed tightens or “how disorderly the process might be... the challenge is to be prepared." This means, in their view, "avoiding the tempatation to believe the market will remain liquid under stress - the illusion of liquidity."
Think its different this time and that we are indeed invincible - after all Maria Bartiromo and Hank Paulson told us so on Meet The Press this morning, right? Wrong! Here are the fact... (Via The BIS),
and so back to Mr. White for the endgame...
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0916-13 | MACRO MONETARY | 5- Sovereign Debt Crisis |
BAML WARNS - If The US Economy Does Not Significantly Accelerate Now, It Never Will BAML Warns "If The US Economy Does Not Significantly Accelerate Now, It Never Will" 09-14-13 BAML via ZH Significant monetary stimulus, the end of fiscal austerity, a booming housing market, a cheap dollar, record corporate cash balances... BofAML warns - if the US economy does not significantly accelerate in coming quarters, it never will. Crucially, they note, asset prices will not do as well in the next 5 years, no matter what the “nouveau bulls” say. Central banks will be less generous, corporations less selfish. And when excess liquidity is removed it will get "CRASHy" as we discussed previously. In the meantime, five years after Lehman, Wall Street has soared, but Main Street has soured. After Lehman... An unprecedented financial and economic crisis, crystallized by the September 15th 2008 bankruptcy of Lehman Brothers, was followed by an unprecedented monetary policy response, which in turn has been followed by unprecedented bull markets in bonds, stocks and now real estate. Wall Street has soared, but Main Street has soured. The exceptional “sweet spot” engendered by generous central banks and selfish corporations has been great for owners of capital, but bad for labor. Wall Street vs Main Street The "race to reflate" in the developed world and faltering Chinese macro leadership dictated the winners & losers of the past 5 years: Gold, High Yield, EM debt & Asian equities have been big winners; Commodities, Government Bonds & Japanese equities have been the big losers. QE was the prime driver of the ‘09 trough in stocks & the ‘11 trough in real estate, and liquidity withdrawal has driven the jump in global interest rates in 2013. A further rapid, jump in rates would destabilize asset markets, but this threat remains low in coming quarters. The 100 basis point summer surge in the 30-year Treasury yield has tethered the S&P500 index to a tight 1600-1700 range and traumatized many fixed income & emerging markets. We previously discussed BofAML's CRASH meme here - Conflict (policy, military), Rates (liquidity), Asia, Speculation (forced selling) and Housing are all potential catalysts for a much more contagious autumn market event - it is well worth a reminder. |
0916-13 | MACRO MONETARY | 5- Sovereign Debt Crisis |
CHINA BUBBLE | 6 | ||
ASIAN CRISIS II - The plight of four Asian countries - China, India, Indonesia and Japan. A Wake-Up Call For Asia 09-15-13 Asia Confidential If there's one thing which stands out about the West since 2008, it's this: there's been almost no substantive economic reform. There's been a lot of money printed, talking up of prospects (forward guidance in central banker parlance), huge subsidies to save certain sectors, but little restructuring of economies to put them on a more sustainable footing. Where the financial crisis showed the dangers of relying on ever-expanding debt to fund consumption, that reliance has only increased since. Asia isn't immune from criticism on the reform front either. Much of the region has been busy congratulating itself for avoiding the worst of 2008, while ignoring the growing problems at home. China has fallen into the western-style trap of relying on more debt to produce enough economic growth to ward off a serious downturn. India's in trouble after backtracking on the broad-ranging reforms of the early 1990s which fuelled an average 6% GDP growth over the past two decades. Meanwhile, Indonesia - considered the rising star of Asian economies only a short time ago - has slowed quickly after keeping interest rates too low for too long and failing to sufficiently cut spending on the likes of energy subsidies. Unlike the West though, the problems in Asia - barring Japan - appear soluble. But the time for reform is now if Asia's to take the next leap forward in its economic development. Today we're going to look at what Asia needs to do to get back on track. Easy gains are over If you'd told someone just 20 years ago that emerging markets - of which Asia is by far the largest - would account for more than 50% of global GDP or that China would be the world's second-largest economy, they'd have probably laughed at you or recommended that you visit the nearest psychiatrist. Such has been the rapid rise of the East. Asia's astonishing progress can be put down to a mix of good management and good luck. The former includes: 1) Bold reform . Think Deng Xiapao's dramatic opening up of China's economy from 1978, India's 1991 balance of payments crisis resulting in broad-ranging economic deregulation, the 1997 Asian crisis and subsequent political, economic and social overhaul of Indonesia, Malaysia, Thailand, South Korea and the Philippines. 2) Relatively stable politics, particularly during the past five years. For instance, Indonesia has had a stable, albeit minority-ruling, government for almost a decade. Even Thailand and the Philippines - both notorious for throwing out leaders through violent and non-violent means - now have well-entrenched governments. 3) Regional integration . Intra-Asia trade has flourished as barriers have come down. The formation of associations such as Asean has helped (though Asean has suffered setbacks of late). Luck has also played a part, including: 1) The fall of the West from 2008 resulted in investors looking to park their cash in a better, higher-yielding growth story and Asia fit the bill. 2) The commodities boom from 2000 disproportionately benefited the region, particularly China and South-East Asia. 3) Most of Asia has benefited from positive demographics with young populations driving increased economic productivity. But many of the trends mentioned above are now turning around. Reform has stalled across the region. While politics remains relatively stable, that could change with key elections in India and Indonesia next year. Regional integration has taken a step backward as U.S.-China rivalry in Asia heats up. Potential QE tapering in the U.S. has already led to investors cashing out of Asia. That hasn't been helped by faltering growth as the commodities boom fades. Finally, demographics have turned negative in the likes of China where the working age population is now in decline. That doesn't mean the Asian growth story is over. It just means that the easy gains of yesteryear are over. And the region needs to adapt quickly. Kick-starting economic reform to drive growth should be a key priority. Asia is a large, diverse region though and its countries are at different stages of development and have different issues which need to be tackled. Today, we're going to explore the plight of four Asian countries - China, India, Indonesia and Japan.Will Xi be the next Deng? Many people forget how far China has come in a relatively short period of time and yet how poor it remains. In 1978, GDP per capita in China was just US$228. That figure has risen 26x to today's US$6,000. Amazing work. But to put it into context, Chinese GDP per capita is only 12% of the U.S. equivalent of close to US$50,000. China still has a long way to go. What's got China to this point though has been an aggressive reform zeal. In 1977, the National Congress of the Communist Party chose Deng Xiaoping as Mao Zedong's replacement after the chaos and disastrous social experiments of the Mao years. Deng quickly freed rural households to farm their own plots and keep the earnings. That led to a huge acceleration in farm profits and productivity. Deng also allowed farmers to sell their produce in the city, opening the way for the vast migration of people from country to city, which has transformed China. From 1982, Deng also proceeded to promote a younger generation of like-minded leaders. These leaders extended many of the reforms into the cities and loosened control of government enterprises and regulations. And in 1992, Deng kick-started the reform process again by endorsing market experiments of export manufacturing zones on the southern coast. This paved the way for China to become the exporting powerhouse that it is today. Importantly, however, though Deng died in 1997, the like-minded leaders he groomed carried on his legacy. Deng handpicked his successor, Jiang Zemin, and was also a mentor to Jiang's successor, Hu Jintao. In 2001, China pushed to enter the World Trade Organisation and was eventually accepted. To join the organisation, China had to roll back trade barriers. In effect, the country opened itself up to foreign trade. This had an enormous impact in subsequent years. What's clear though is that the economic reform which propelled China's rise stalled under regime of Hu Jintao. Since 2009, the country has instead relied on increasing amounts of debt to sustain its growth. That's led to significant distortions in the economy (real estate and alternative lending bubbles, for instance). And the debt seems to be achieving less and less, with GDP growth decreasing from the 10% average of 1980-2010 to the current 7.5%. China needs a fresh bout of economic reform to increase productivity and reduce the reliance on debt to fuel growth. Here are some of the things that it needs to do:
The Communist Party holds a key economic meeting in November where the announcement of wide-ranging economic reforms is expected. I remain cautiously optimistic that Xi Jinping can deliver the necessary reforms but their impact will only be felt in the long-term. In the meantime, China may slow further as it deals with the unwinding of the recent credit bubble. The move against India seems overdone Unlike China, India seems to need a large crisis for change to happen. In 1991, a balance of payments crisis precipitated widespread economic deregulation which is credited for driving the rapid economic growth of the past two decades. Another crisis in the early 2000s led to further deregulation and privatisation of key industries. Like clockwork, a decade later, another crisis beckons. And the calls for reform grow stronger. Unlike many commentators though, I believe the current crisis has been less about India's current account deficit (which essentially means you're investing more than you're spending) and more about capital flows and confidence. The fact is that India's trade deficit (a key component of the current account) has been decreasing since May and is likely to continue to decrease. And there's no correlation between the fall in the currencies of emerging markets and their respective current account deficits. If this view is right, the substantial depreciation in the rupee seems overdone. The best way to stabilise the rupee would be to raise interest rates but this would impact the economy which has already slowed markedly. Not to mention that increasing rates in the lead-up to a general election is never favoured by incumbent governments. Alternative options to stabilise the situation include measures to reduce the large budget deficit - at close to 5% of GDP-, the phasing out of energy subsidies - accounting for 2.3% of GDP - and the issuing of international sovereign bonds, denominated in rupee, to bring in capital to fund the current account deficit. In the long-term, the subsidy issue is crucial. Growing subsidies from a government intent on bribing rural voters has been a central cause of the high inflation. Fertiliser subsidies have increased almost three-fold over the past five years, while petrol subsidies have grown by more than 20x! India's legendary bureaucracy and corruption will also need to be addressed. The country ranks 94th out of 176 countries in Transparency International's Corruption Perception Index. The likes of China and Sri Lanka, not exactly doyens of clean government, rank higher than India (ie. are perceived as less corrupt). There are some estimates that suggest corruption has cost India more than US$120 billion over the past ten years. Indonesia: that sinking feeling Of course, Indonesia is the other country whose currency is under attack. Only 18 months ago, Indonesia was the darling of the investment community. Now, it's become a pariah. Investors have focused on Indonesia's large current account deficit, which is 3% and growing, versus the 0.7% average of 2008-2011. Clearly the economy has overheated as interest rates were kept too low for far too long (which should have been obvious to the investors who piled into the country's bonds in 2011-2012). To stabilise the currency, the government has hiked rates by 150bps this year. Further rate rises are likely until the trade deficit improves. A key issue remains reducing fuel subsidies. The government has taken some positive steps on this front, but needs to do more. It raised petrol prices by 44% this year. But the budget deficit is still expected to swell to 3.8% of GDP this year, with fuel subsidies expected to cost 200 trillion rupiah, equivalent to 13% of government revenue. Like India, Indonesia has a huge corruption problem. The government has long promised to address the problem but few results have been achieved. Indonesia ranks 118 out of 176 countries in Transparency International's Corruption Perception Index. India ranks much better on this index, as noted above, which shows you how much work that Indonesia has to do to tackle corruption. Decentralisation of government probably hasn't helped the corruption issue. Decentralisation has been lauded for redistributed economic gains from the capital, Jakarta, to regional cities. On the flipside though, corruption has spread with decentralisation, making it harder to detect and fix. Savings from cutting subsidies and corruption should be used to bolster infrastructure. Anyone who's spent time in Jakarta traffic (the worst of any capital city in Asia if not the world?) knows the extent of the infrastructure problem. To put it into context, Indonesia spends less than 5% of GDP on infrastructure compared with China's 9%. Granted, China has probably overspent on infrastructure, but that shouldn't detract from Indonesia having a much greater need than China for better roads and transport systems and yet it's spending less. Yes, Indonesia has its problems but let's not forget how far the country has come since 1997 when it was on its knees. Now it's a flourishing democracy, with a relatively strong economy and low debt. Indonesia's issues should prove temporary if a new government can provide fresh impetus to economic reform. Japan's third arrow may come too late Japan is very different from the rest of Asia as it's been a developed country for more than 20 years. It's so different that the geniuses in finance developed an Asia ex Japan stock market index, which spawned many Asia ex-Japan funds. This was recognition that Japan was indeed different, but for all the wrong reasons as the country's growth stalled while the rest of Asia boomed. Better to cut Japan off to bring in investor money, the financial world thought. How things have changed. Japan has attracted droves of investors of late, drawn to the world's biggest turnaround story (at least in their eyes). These investors have followed a simple equation: more stimulus equals a higher stock market. Recent history has taught them as much as the correlation between U.S. stimulus and the stock market there sits at more than 90% since 2009. The bulls on Japan certainly outnumber the bears at present. They argue the massive stimulus being undertaken, unprecedented in scope, is the best for the country to move its way out of deflation. And promised economic reforms will provide the necessary tonic for sustainable, long-term growth. These reforms, the so-called third arrow of "Abenomics", may include the following:
The bears on Japan, of which I am one (see this post for more), argue that the country debt burden is so huge that the country is cornered, whatever it does. If inflation rises to the government's target of 2%, interest rates will rise too and so will the interest burden on government debt. At 2%, this interest burden would be the equivalent of 80% of government revenue. If the stimulus strategy fails, the government will be forced to print more and more money to stay solvent. Either way, the bond market will revolt at some point. And the impact from any reforms is likely to come too late. |
09-16-13 | MACRO INDICATORS GROWTH
GLOBAL RISK ASIAN CRISIS |
39 - Financial Crisis Programs Expiration |
TO TOP | |||
MACRO News Items of Importance - This Week | |||
GLOBAL MACRO REPORTS & ANALYSIS |
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US ECONOMIC REPORTS & ANALYSIS |
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CENTRAL BANKING MONETARY POLICIES, ACTIONS & ACTIVITIES | |||
FEDERAL RESERVE - At the very heart of our economic problems 25 Fast Facts About The Federal Reserve 09-17-13 Michael Snyder of The Economic Collapse blog via ZH Submitted by Michael Snyder of The Economic Collapse blog, As we approach the 100 year anniversary of the creation of the Federal Reserve, it is absolutely imperative that the American people understand that the Fed is at the very heart of our economic problems. It is a system of money that was created by the bankers and that operates for the benefit of the bankers. The American people like to think that we have a "democratic system", but there is nothing "democratic" about the Federal Reserve. Unelected, unaccountable central planners from a private central bank run our financial system and manage our economy. There is a reason why financial markets respond with a yawn when Barack Obama says something about the economy, but they swing wildly whenever Federal Reserve Chairman Ben Bernanke opens his mouth. The Federal Reserve has far more power over the U.S. economy than anyone else does by a huge margin. The Fed is the biggest Ponzi scheme in the history of the world, and if the American people truly understood how it really works, they would be screaming for it to be abolished immediately. The following are 25 fast facts about the Federal Reserve that everyone should know... #1 The greatest period of economic growth in U.S. history was when there was no central bank. #2 The United States never had a persistent, ongoing problem with inflation until the Federal Reserve was created. In the century before the Federal Reserve was created, the average annual rate of inflation was about half a percent. In the century since the Federal Reserve was created, the average annual rate of inflation has been about 3.5 percent, and it would be even higher than that if the inflation numbers were not being so grossly manipulated. #3 Even using the official numbers, the value of the U.S. dollar has declined by more than 95 percent since the Federal Reserve was created nearly 100 years ago. #4 The secret November 1910 gathering at Jekyll Island, Georgia during which the plan for the Federal Reserve was hatched was attended by U.S. Senator Nelson W. Aldrich, Assistant Secretary of the Treasury Department A.P. Andrews and a whole host of representatives from the upper crust of the Wall Street banking establishment. #5 In 1913, Congress was promised that if the Federal Reserve Act was passed that it would eliminate the business cycle. #6 The following comes directly from the Fed's official mission statement: "To provide the nation with a safer, more flexible, and more stable monetary and financial system. Over the years, its role in banking and the economy has expanded." #7 It was not an accident that a permanent income tax was also introduced the same year when the Federal Reserve system was established. The whole idea was to transfer wealth from our pockets to the federal government and from the federal government to the bankers. #8 Within 20 years of the creation of the Federal Reserve, the U.S. economy was plunged into the Great Depression. #9 If you can believe it, there have been 10 different economic recessions since 1950. The Federal Reserve created the "dotcom bubble", the Federal Reserve created the "housing bubble" and now it has created the largest bond bubble in the history of the planet. #10 According to an official government report, the Federal Reserve made 16.1 trillion dollars in secret loans to the big banks during the last financial crisis. The following is a list of loan recipients that was taken directly from page 131 of the report... Citigroup - $2.513 trillion Morgan Stanley - $2.041 trillion Merrill Lynch - $1.949 trillion Bank of America - $1.344 trillion Barclays PLC - $868 billion Bear Sterns - $853 billion Goldman Sachs - $814 billion Royal Bank of Scotland - $541 billion JP Morgan Chase - $391 billion Deutsche Bank - $354 billion UBS - $287 billion Credit Suisse - $262 billion Lehman Brothers - $183 billion Bank of Scotland - $181 billion BNP Paribas - $175 billion Wells Fargo - $159 billion Dexia - $159 billion Wachovia - $142 billion Dresdner Bank - $135 billion Societe Generale - $124 billion "All Other Borrowers" - $2.639 trillion #11 The Federal Reserve also paid those big banks $659.4 million in fees to help "administer" those secret loans. #12 The Federal Reserve has created approximately 2.75 trillion dollars out of thin air and injected it into the financial system over the past five years. This has allowed the stock market to soar to unprecedented heights, but it has also caused our financial system to become extremely unstable. #13 We were told that the purpose of quantitative easing is to help "stimulate the economy", but today the Federal Reserve is actually paying the big banks not to lend out 1.8 trillion dollars in "excess reserves" that they have parked at the Fed. #14 Quantitative easing overwhelming benefits those that own stocks and other financial investments. In other words, quantitative easing overwhelmingly favors the very wealthy. Even Barack Obama has admitted that 95 percent of the income gains since he has been president have gone to the top one percent of income earners. #15 The gap between the top one percent and the rest of the country is now the greatest that it has been since the 1920s. #16 The Federal Reserve has argued vehemently in federal court that it is "not an agency" of the federal government and therefore not subject to the Freedom of Information Act. #17 The Federal Reserve openly admits that the 12 regional Federal Reserve banks are organized "much like private corporations". #18 The regional Federal Reserve banks issue shares of stock to the "member banks" that own them. #19 The Federal Reserve system greatly favors the biggest banks. Back in 1970, the five largest U.S. banks held 17 percent of all U.S. banking industry assets. Today, the five largest U.S. banks hold 52 percent of all U.S. banking industry assets. #20 The Federal Reserve is supposed to "regulate" the big banks, but it has done nothing to stop a 441 trillion dollar interest rate derivatives bubble from inflating which could absolutely devastate our entire financial system. #21 The Federal Reserve was designed to be a perpetual debt machine. The bankers that designed it intended to trap the U.S. government in a perpetual debt spiral from which it could never possibly escape. Since the Federal Reserve was established nearly 100 years ago, the U.S. national debt has gotten more than 5000 times larger. #22 The U.S. government will spend more than 400 billion dollars just on interest on the national debt this year. #23 If the average rate of interest on U.S. government debt rises to just 6 percent (and it has been much higher than that in the past), we will be paying out more than a trillion dollars a year just in interest on the national debt. #24 According to Article I, Section 8 of the U.S. Constitution, the U.S. Congress is the one that is supposed to have the authority to "coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures". So exactly why is the Federal Reserve doing it? #25 There are plenty of possible alternative financial systems, but at this point all 187 nations that belong to the IMF have a central bank. Are we supposed to believe that this is just some sort of a bizarre coincidence? |
09-17-13 | US MONETARY | CENTRAL BANKS |
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COMMODITY CORNER - HARD ASSETS | PORTFOLIO | ||
PRIVATE EQUITY - REAL ASSETS | PORTFOLIO | ||
AGRI-COMPLEX | PORTFOLIO | ||
SECURITY-SURVEILANCE COMPLEX | PORTFOLIO | ||
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2013 - STATISM |
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2012 - FINANCIAL REPRESSION |
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2011 - BEGGAR-THY-NEIGHBOR -- CURRENCY WARS |
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2010 - EXTEN D & PRETEND |
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CORPORATOCRACY - CRONY CAPITALSIM | |||
CRONY CAPITALISM - The 7 Choices Left To The Military-Industrial Complex The 7 Choices Left To The Military-Industrial Complex 09-14-13 Since 2002 the US government has presided over one of the most dramatic financial bubbles of all time: the bubble of the military-industrial complex. (A few will remember that Dwight Eisenhower warned Americans about this in 1961.) This bubble, like all others, will pop, and it looks to be deflating right now - as we have pointed out vociferously. The amounts of money that have been spent in the past decade can only be characterized as obscene. But the point that really matters is this: Military spending is just part of the bubble. The military-industrial-intelligence-law enforcement complex has only a few choices left in front of it. (Aside from rational things, like giving up their immoral and abusive game.) Submitted by Paul Rosenberg via Free-Man's Perspective blog, ...In addition to the military complex, we have a massive intelligence complex. Not only that, but we also have a massive law enforcement complex. The Department of Homeland Security has given them at least $34 Billion in the past several years, on top of their take from local taxes, state taxes, fines, seizures, and other Fed money. Take a look at these graphs. First, defense spending: Then, intelligence spending, or as close as I’ve been able to get to real numbers: Lastly, War on Drugs spending, which we’ll use as a proxy for overall law enforcement spending (numbers that are more difficult to acquire): Needless to say, this multi-headed beast is huge, requiring oceans of money… and it’s about to have its rations cut. Actually, that may be why they’re so hot for a war in Syria – they need to goose spending again, and quickly. Power Corrupts, but Arrogance “Stupidizes”Yeah, I know that word’s not in the dictionary, but it should be. These agencies are drunk on power and stupid on arrogance. There’s no other way to describe a situation where the intelligence and law enforcement branches of this beast have been waging a war against the American people for the last few years. Think of the endless search for “domestic terrorists,” the sickening NSA spying on everyone, and the 135 SWAT team raids per day in America. Apparently it has never entered their minds that people might eventually resent being abused. It’s also useful to understand that “intelligence agency” is the same thing as “secret service,” and very little different from “secret police.” They’ve had secret courts for some time, after all. I won’t even talk about the rampant corruption that runs through all of these departments; you can either trust me on that one or not. And this situation reaches all the way to local cops. I had a conversation recently with a young man who recently completed a stint with the US Marines and didn’t know what he wanted to do next. At one point, he said that he thought about being a police officer (an easy fit for a Marine), but he rejected the idea. “Why?” I asked. “Cops are bullies,” he responded. And indeed they are. They lie all the time, they intimidate people all the time, and they treat everyone as a violent perp. (Except if you’re rich or politically connected, of course.) Like the rest of the military-industrial complex, they are out of control. There used to be cops who were exceptions to this young man’s “bully” statement, but they have been vanishing rapidly. Cops are routinely taught to intimidate and lie. What Dooms ThemSo, while things look absolutely horrible at the moment, the rug is being pulled out from underneath these wastrels. The issue here (as it so often is) is fiat currency. The money for all of this War Welfare has NOT come from taxes. Instead, it has come from deficits, a.k.a. money printing. The problem is, the money printing game is sputtering. And without a strong money printing program, future increases in military spending will have to come from increased taxes – and there simply isn’t any more to be taken. American workers already have about half their money taken from them. The now-denuded middle class is surviving on food stamps, disability payments, and a dozen other programs that dish out federal money. They’ve undergone a long, hard fall, from working machines to working government programs. Their ChoicesThe military-industrial-intelligence-law enforcement complex has only a few choices left in front of it. (Aside from rational things, like giving up their immoral and abusive game.) Those choices include:
The one other possibility for them is to convince the Fed to print faster and damn the consequences. And they may choose that option first, since it would allow them to kick the can just a little bit further down the road. But once that’s done, they’ll be right back to these seven choices.
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09-16-13 | THEMES |
CRONY CAPITALISM
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GLOBAL FINANCIAL IMBALANCE | |||
SOCIAL UNREST |
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CENTRAL PLANNING |
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STANDARD OF LIVING |
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CORRUPTION & MALFEASANCE | |||
NATURE OF WORK | |||
CATALYSTS - FEAR & GREED | |||
GENERAL INTEREST |
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Tipping Points Life Cycle - Explained
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