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Russia Readies Back-up System For Potentially Explosive “Split With International Banking System”

Russia Readies Back-up System For Potentially Explosive “Split With International Banking System”

Vladimir Putin Examines Gold at Russia's Central Depository

The grand order of things could be undergoing some major overhauls.

To put it more bluntly, a war to reset the global financial order is about to be unleashed.

Preparations inside Russia are being made in case the ultimate banking sanctions are placed on them, cutting off commerce inside the all-encompassing Worldwide Interbank Financial Telecomm SWIFT system – which runs credit, debt, and banking card transactions across a real time global network.

As it would be doled out by the banking elites, the price for misbehavior at the Kremlin could be ostracization from this global commerce vehicle.

But that isn’t the end of the story… Putin is readying his people to divorce from the international banking system altogether, and start over with a nationalistic platform, backed by thousands of tons of gold, and growing alliances with Europe, China and the BRICS nations, the Middle East and several emerging powers.

A major attempt to bring Russia under heel could result in the greatest schism the global system of finance has ever seen. Then what?

via Russia Insider:

Russia has successfully developed and implemented an alternative should it be excluded from international banking systems, according to a recent report.

As far as western sanctions go, by far Russia’s largest vulnerability is in its banking sector, which for better or for worse is tied to the hip with international banking.

If Russia wishes to maintain the status quo, there’s not much that can be done about this dependency. But shortly after sanctions were announced in 2014, Moscow set out to prepare for the worst-case scenario: being cut off from the Worldwide Interbank Financial Telecommunication (SWIFT) system. 

…click on the above link to read the rest of the article…

Hayes: “A Lot Of What I Know Even The DOJ Is In The Dark”

Hayes: “A Lot Of What I Know Even The DOJ Is In The Dark”

An exclusive excerpt from the hot new financial and legal thriller “The Spider Network” by David Enrich

The small ski resort town, nestled in the mountains outside the city of Karuizawa, was a popular destination for day trips for Japanese families. Bustling during the day, it was mostly quiet this Saturday night. Clouds cloaked the moon.

A chartered bus pulled up outside a bar, its windows aglow. A light snow was falling. Out into the peaceful evening stumbled dozens of rowdy bankers, some toting tall cans of Asahi and Kirin. Most of them were drunk. They quickly took over the small bar.

The drinkers were employees of the American bank Citigroup, one of the world’s largest and most troubled financial institutions. A year earlier, at the beginning of 2009, American taxpayers had finished pumping a staggering $45 billion into Citigroup to bail out the collapsing behemoth. Now the transfused recipient was treating dozens of its investment banking employees to a weekend getaway. The bankers were housed nearby in a sprawling luxury hotel, each employee’s room designed in Japan’s typical spare style.

These festivities weren’t so spartan. The point was to foster camaraderie, and that was happening in spades. The party had begun on the hundred-mile ride on the bullet train out from Tokyo. After a day of hitting the slopes, Citigroup ferried the bankers to a bowling alley, where they drank and bowled and drank some more. Their bus had then deposited the intoxicated crew at this bar, before leaving the partiers behind to fend for themselves.

…click on the above link to read the rest of the article…

Watch These Geopolitical Flashpoints Carefully

Watch These Geopolitical Flashpoints Carefully

Anyone who has been involved in alternative geopolitical and economic analysis for a decent length of time understands that the establishment power structure thrives according to its ability to either exploit natural crises, or to engineer fabricated crises.

This is not that hard to comprehend, but for some reason there are a lot of people out there who simply assume that global sea-change events just happen “at random,” that the elites are stupid or oblivious, and that all outcomes are a matter of random chance rather than being directed or manipulated.  I call these people “intellectual idiots,” because they believe they are applying logic to every scenario but they are sabotaged by an inherent bias which causes them to deny the potential for “conspiracy.”

To clarify, their logic folds in on itself and becomes faulty.  They believe themselves objective, but they abandon objectivity when they staunchly refuse to consider the possibility of covert influence by organized special interests. When you internally dismiss the possibility of a thing, no amount of evidence will ever convince you of its reality.  This is how the “smartest” people in the room can end up being the dumbest people in the room.

In the survivalist community there is a philosophy – there is no such thing as a crisis for those who are prepared. This is true for prepared individuals as much as it is true for prepared communities and prepared nations. The only way a society can fall is when it becomes willfully ignorant of potential outcomes and refuses to organize against them.

By extension, it would make sense that by being prepared for a particular crisis or outcome an individual or group could not only survive, but also profit.

…click on the above link to read the rest of the article…

Why This Market Needs To Crash

bofotolux/Shutterstock

Why This Market Needs To Crash

And likely will 

Like an old vinyl record with a well-worn groove, the needle skipping merrily back to the same track over and over again, we repeat: Today’s markets are dangerously overpriced.

Being market fundamentalists who don’t believe it’s possible to simply print prosperity out of thin air, we’ve been deeply skeptical of the financial markets ever since the central banks began their highly interventionist policies. Since 2009, they have unleashed over $12 Trillion in new money into the world, concentrating wealth into the hands of an elite few, while blowing asset price bubbles everywhere in the process (see our recent report The Mother Of All Financial Bubbles).

Our consistent view is that price bubbles always burst. Which is why we predict the world’s financial markets will implode spectacularly from today’s heights — destroying jobs, dreams, hopes, economies and political careers alike.

When this happens, it will frighten the central bankers enough (or merely embarrass them enough, being the egotists that they are) that they will respond with even more aggressive money printing — and that will then cause the entire money system to blow up.  Ka-Poom!  First inwards in a compressed ball of deflation, then exploding outwards in a final hyperinflationary fireball (see our recent report When This All Blows Up…).

It really cannot end any other way.  Money is not wealth; it is merely a claim on wealth.  Debt is a claim on future money.  The only way to have faith in our current monetary policies is if one believes that we can always grow our debts at roughly twice the rate of GDP — forever.   That is, compound the claims at twice the rate of income year after year from here on out.

…click on the above link to read the rest of the article…

Venezuela In Dire Straits As Oil Production Falls Further

Venezuela In Dire Straits As Oil Production Falls Further

Oil Pipe

Venezuela’s economic crisis continues to deepen. The South American OPEC member is thought to be sitting on nearly 300 billion barrels of oil, far more than any other country in the world, including Saudi Arabia (estimated at 268 billion barrels). But the economy has been in freefall for several years, with conditions continuing to deteriorate.

The economic crisis has morphed into a full-blown humanitarian disaster. Just this week the Wall Street Journal reported on Venezuelan women traveling to neighboring Colombia to give birth because the state of Venezuela’s hospitals are horrific, with shortages of medical supplies and trained staff. Infant mortality is worse than in war-ravaged Syria.

Food and other essential items are also painfully scarce, leading to long lines at shops. Tensions run high because there is not enough to go around.

Now even gasoline is running low in Caracas, Reuters reports, an unusual development for the capital city.

Gas shortages suggests problems for Venezuela’s state-owned oil company PDVSA are deepening. The government depends on oil production for more than 90 percent of its export revenues, and the collapse of oil prices back in 2014, coupled with a long-term slide in output, have ruined the company’s finances.

That, in turn, puts even more pressure on PDVSA. A shortage of cash is straining the company’s ability to import refined products as it falls short on bills to suppliers. PDVSA needs to import refined products to dilute its heavy crude oil, but without enough cash, tankers are sitting at ports unable to unload their cargoes. Reuters also says that “many tankers are idle because PDVSA cannot pay for hull cleaning, inspections, and other port services.”

…click on the above link to read the rest of the article…

India: The next Pakistan?

This is Part XI of a series of articles (the most recent of which is linked here) in which I have provided regular updates on what started as the demonetization of 86% of India’s currency. The story of demonetization and the ensuing developments were merely a vehicle for me to explore Indian institutions, culture and society.

The Modimobile is making the rounds amid a flower shower. [PT]     Photo credit: PTI Photo

Tribal cultures face an inherent contradiction. They create poison from within to grow more collectivist, controlling and tyrannical — members of the populace looks for nannies, and they readily find sociopaths to exploit that need. Their lack of organizational skills, their inability to engage in economic calculation and their irrationality lead to massive internal stresses and the ultimate devolution of such an unnatural society.

India finds itself in a situation where it is grasping for more totalitarianism to solve the problems that totalitarianism created. The demonetization exercise was an assertion of India’s underlying tribal and collectivist culture.

Demonetization Pain Continues

Cashless ATMs continue to be the new normal in India. In a recent conversation, economist Professor Madhusudan Raj mentioned that as many as 70% of the ATMs in his city are still not operational. The situation in villages and small towns is much worse. Banks are often clogged with people.

Eventually most people who must have cash will get it, but businesses need easy access to large amounts of their own cash without incurring transaction costs. They continue to face horrendous problems, which are translating into closures, retrenchment of staff, and bankruptcies. The tax authorities are getting increasingly rapacious. According to Professor Madhusudan Raj:

…click on the above link to read the rest of the article…

How Solid are Canada’s Big Banks?

How Solid are Canada’s Big Banks? - Peter Diekmeyer

The World Economic Forum consistently ranks Canada’s banks among the world’s safest. Competent regulators have overseen stress tests, tightened lending standards and delinquency rates are low. Demographics are good and the country’s diversified economy is backed by a treasure of oil, wood, gold and other natural resources.

So the experts say.

Institutional investors, relying on the work of Jeremy Rudin, Canada’s chief bank regulator, agree. In fact, Canadian financials accounted for 35.5% of the market capitalization of the benchmark exchange (NBF February).

However this façade hides major uncertainties. Key concerns stand out, which if unaddressed, could spark solvency and liquidity issues in one or more of Canada’s Big Six banks.

The fragilities can be seen in an IMF report, which calculated that Canada’s financial sector accounted for a stunning 500% of GDP in 2012. Today, the assets of the Big Six banks alone are more than double the size of the country’s economy.

Each (RBC, CIBC, Scotiabank, BMO, TD and National Bank) have been designated “systemically important,” which in turn, due to sheer size and interconnectedness, suggests that they are almost certainly “too big to fail.” That means the collapse of any one Big Bank would threaten to trigger systemic implosion.

More ominously, if Canada’s financial system, arguably the world’s best, is riddled with pores, what does that say about the US, the UK, and Japan? Let alone Italy and Spain?

Yet signs of fragility are everywhere. Consider:

Complacency following “secret” $114 billion bailout

A quick review of key metrics suggests Canada’s banking sector, which, on the surface, having largely escaped the 2008 financial crisis, has thus learned little from it.

As David Macdonald demonstrated in a paper for the Canadian Center for Policy Alternatives, Canada’s Big Banks benefited from nearly $114 billion in cash, liquidity, and other bailout help from both local and US sources following the financial crisis.

…click on the above link to read the rest of the article…

Venezuela Stops Publishing Money Supply Data For Obvious Reasons

Venezuela Stops Publishing Money Supply Data For Obvious Reasons

More than a year after hyperinflating banana republic Venezuela stopped reporting official inflation data, Venezuela has stopped publishing money supply data, depriving the general public of the last, and best, available tool to ascertain soaring inflation in what has become the world’s worst-performing economy. Then again, one hardly needs official data to confirm the blistering wave of hyperinflation sweeping through the nation which has seen the value of the bolivar disintegrate under the Maduro regime.

The money supply indicator suddenly stopped appearing on the central bank’s website on Feb. 24. The data in question, which will no longer be updated, looked as follows most recently.

Despite the halt of CPI data, consumer price rises are widely seen to be in triple digits, driven by an unraveling socialist system in which many people struggle to obtain meals and medicines. The M2 money supply was up by nearly 180% in mid-February from a year earlier, according to the central bank before it halted the release of the weekly data without explanation last month Reuters reports. In contrast, Reuters reports that neighboring Colombia’s M2 was up 7 percent in the same period and the United States’ was up 6 percent.

“If they are not publishing, you know it must be skyrocketing,” Aurelio Concheso, director of the Caracas-based business consultancy Aspen Consulting, stated the obvious. The central bank and ministry of communications did not respond to a request for comment, Reuters adds.

An increase in M2, the sum of cash together with checking, savings and other deposits, means more currency is circulating. That can accelerate inflation when coupled with a decline in the output of goods and services – such as in Venezuela, which is in the fourth year of a recession. When money supply is growing exponentially, as it has been in Venezuela, academics usually point to the infamous example of the Weimar Republic and leave it at that.

…click on the above link to read the rest of the article…

“This Is Going To Blow Sky High” – Observations On Canada’s Housing Market

“This Is Going To Blow Sky High” – Observations On Canada’s Housing Market

For months we’ve been warning about real estate bubbles re-emerging in various markets around the world from Canada to Australia (see “There Are 66,719 Empty Mansions In Vancouver” and “Vancouver Home Sales Crash 40%, As Toronto Home Prices Soar 22%“).  And while facts and figures clearly indicate that certain markets are bubbling over courtesy of all the same mistakes that caused the ‘great recession’ in 2008, nothing helps to confirm the truly obscene nature of a real estate bubble quite like attending a good ole-fashioned, get-rich-quick real estate expo. As such, below are the musings of one financial market observer who recently attended the Canadian Real Estate Wealth Expo as a joke but walked away convinced the system is about “to blow sky high.”

* * *

Originally Authored By Tim Bergin of On Beyond Investing

Originally, I thought this would be a bit of a joke.  There were billboards in all the Toronto subway cars advertising the Canadian Real Estate Wealth Expo – learn how to become a millionaire.  I thought this was so ridiculous, it may be fun.  What better way to experience the top of the housing market than watching Tony Robbins and Pitbull along with a bunch of US real estate professionals explain how Toronto real estate is the path to riches.

Prices were originally $150 per ticket, but I was able to buy for $50.  While it deeply bothers me that I paid $50 to these shameless (amoral) self-promoters, I thought it would be worth it to witness, in person, the top of the housing market.

I had thought, there can’t be that many people stupid enough to attend this, but I was very wrong – 15,000 people were there!  I was blown away.  Bubbles are largely psychological.  This crowd was tangible proof of that.

…click on the above link to read the rest of the article…

Bank Loan Creation Crashes At Fastest Pace Since The Financial Crisis

Bank Loan Creation Crashes At Fastest Pace Since The Financial Crisis

Last weekend, after looking at the latest H.8 statement by the Fed, we noted something concerning: total loans and leases by U.S. commercial banks were rising at an annual pace of about 4.6%, based on weekly Fed data. That is down from a 6.4% pace for all of last year and peak rates of around 8% in mid-2016. This is the slowest pace of debt creation since the spring of 2014. This deceleration has prompted numerous questions about the sustainability of the recovery, and led the WSJ to noted that the slowdown, “is at odds with the idea of a stronger economy and rising sentiment.”

But the slowdown was especially acute in the all important for growth Commercial and Industrial loan category, which after growing at a pace of 10% in the first half of 2016, had unexpectedly slowed to just 4.0%, nearly 50% lower than the 7% growth notched at the start of the year.  This was the lowest pace of loan growth since July of 2011.

Fast forward one week, when after the latest update to the Fed’s latest weekly commercial bank loan data, we find that the trends have deteriorated substantially.

As shown in the chart below, after growing 4.6% one week ago, total loans and leases grew only 4.2% in the week ended March 8: the lowest growth rate since May 2014. However, it was once again the Commercial and Industrial loans creation – or lack thereof – which was more problematic, because after growing 4.0% on a year over year basis as of March 1, and 5.7% one month ago as of February 8, the growth rate has since tumbled to just 2.9%, a 1.1% decline in the growth rate over the past week.

As shown in the chart below, on a cumulative 4-week basis the slowdown in C&I loan creation tumbled by 2.8% as of the latest period: this was the biggest monthly slowdown going back to the financial crisis.

…click on the above link to read the rest of the article…

Banks Are Evil

Barandash Karandashich/Shutterstock

Banks Are Evil

It’s time to get painfully honest about this 

I don’t talk to my classmates from business school anymore, many of whom went to work in the financial industry.

Why?

Because, through the lens we use here at PeakProsperity.com to look at the world, I’ve increasingly come to see the financial industry — with the big banks at its core — as the root cause of injustice in today’s society. I can no longer separate any personal affections I might have for my fellow alumni from the evil that their companies perpetrate.

And I’m choosing that word deliberately: Evil.

In my opinion, it’s long past time we be brutally honest about the banks. Their influence and reach has metastasized to the point where we now live under a captive system. From our retirement accounts, to our homes, to the laws we live under — the banks control it all. And they run the system for their benefit, not ours.

While the banks spent much of the past century consolidating their power, the repeal of the Glass-Steagall Actin 1999 emboldened them to accelerate their efforts. Since then, the key trends in the financial industry have been to dismantle regulation and defang those responsible for enforcing it, to manipulate market prices (an ambition tremendously helped by the rise of high-frequency trading algorithms), and to push downside risk onto “muppets” and taxpayers.

Oh, and of course, this hasn’t hurt either: having the ability to print up trillions in thin-air money and then get first-at-the-trough access to it. Don’t forget, the Federal Reserve is made up of and run by — drum roll, please — the banks.

…click on the above link to read the rest of the article…

James Howard Kunstler on Fox News

The Long Run Economics of Debt Based Stimulus

Something both unwanted and unexpected has tormented western economies in the 21st century.  Gross domestic product (GDP) has moderated onward while government debt has spiked upward.  Orthodox economists continue to be flummoxed by what has transpired.

What happened to the miracle? The Keynesian wet dream of an unfettered fiat debt money system has been realized, and debt has been duly expanded at every opportunity.  Although the fat lady has so far only cleared her throat (if quite audibly, in 2008) and hasn’t really sung yet, it is already clear that calling this system careening toward a catastrophic failure.

Here is the United States, since the turn of the new millennium (starting January 1, 2001) real GDP has increased from roughly $10.5 trillion to $18.6 trillion, or 77 percent.  Over this same time government debt has spiked nearly 250 percent from about $5.7 trillion to $19.9 trillion.  Obviously, some sort of reckoning’s in order to bring the books back into balance.

Throughout this extended episode of economic and financial discontinuity, the government’s solution to jump-starting the economy has been to borrow money and spend it.  Thus far, these efforts have succeeded in digging a massive hole that the economy will somehow have to climb out of.  We’re doubtful such a feat will ever be attained.

In short, additions of government debt over this time have been at a diminishing return.  Specifically, at the start of the new millennium the debt to GDP ratio was about 54 percent.  Today, it’s well over 100 percent.

US GDP and US federal debt, indexed (1984 = 100). Mises noted back in the late 1940s already that “it is obvious that sooner or later all these debts will be liquidated in some way or other, but certainly not by payment of interest and principal according to the terms of the contract.

…click on the above link to read the rest of the article…

Beware the Debt Ceiling

Euphoria has been pervasive in the stock market since the election. But investors seem to be overlooking the risk of a U.S. government default resulting from a failure by Congress to raise the debt ceiling. The possibility is greater than anyone seems to realize, even with a supposedly unified government.

In particular, the markets seem to be ignoring two vital numbers, which together could have profound consequences for global markets: 218 and $189 billion. In order to raise or suspend the debt ceiling (which will technically be reinstated on March 16), 218 votes are needed in the House of Representatives. The Treasury’s cash balance will need to last until this happens, or the U.S. will default.

The opening cash balance this month was $189 billion, and Treasury is burning an average of $2 billion per day – with the ability to issue new debt. Net redemptions of existing debt not held by the government are running north of $100 billion a month. Treasury Secretary Steven Mnuchin has acknowledged the coming deadline, encouraging Congress last week to raise the limit immediately.

Reaching 218 votes in favor of raising or suspending the debt ceiling might be harder than in any previous fiscal showdown. President Donald Trump almost certainly wants to raise the ceiling, but he may not have the votes. While Republicans control 237 seats in the House, the Tea Party wing of the party has in the past has steadfastly refused to go along with increases.

The Republican Party is already facing a revolt on its right flank over its failure to offer a clean repeal of the Affordable Care Act. Many members of this resistance constitute the ultra-right “Freedom Caucus,” which was willing to stand its ground during previous debt ceiling showdowns. The Freedom Caucus has 29 members, which means there might be only 208 votes to raise the ceiling. (It’s interesting to recall that, in 2013, President Trump himself tweeted that he was “embarrassed” that Republicans had voted to extend the ceiling.)

…click on the above link to read the rest of the article…

Canada Flagged for Recession by BIS

Canada Flagged for Recession by BIS

canadadebt

This can’t be good…

As if Canadians needed more proof that the country’s real estate is in a bubble, and that this misallocation has spread to other sectors of the economy, the Bank of International Settlements released its latest quarterly confirming what any critical observer can see: binging on debt is rarely a good idea.

Canada’s debt-to-GDP gap is widening and even the central bank of central banks is concerned.

The BIS uses its credit-to-GDP analysis as an indicator and predictor of troubling economic waters. They claim successes in predicting financial crises in the United States, England and a few other economies. Generally speaking, according to the BIS, when a country’s credit-to-GDP gap is higher than 10% for more than a few years, a banking crisis emerges which is followed by a recession.

Canada entered that territory in 2015, warmly welcomed by the Chinese who’s debt-to-GDP gap has put them in the danger zone for at least the last five years.

In another parallel universe, perhaps Canadian authorities took the correct measures to counteract this high credit-to-GDP gap or to even prevent it from getting this out of control. But in our reality, we kept trudging across the tundra, mile after mile, pushing our credit-to-GDP gap up to 17.4%.

China’s “basic dictatorship” means they can turn their economy around on a dime, or so goes the thinking. Perhaps they will better absorb the economic slap in the face compared to Canada’s relatively freer market and less dictatorial government. 

Still, both countries have a massive real estate bubble. In China, entire cities are centrally planned and built by government-connected contractors only to house absolutely nobody. 

Wealthy Chinese families, witnessing the crony-capitalist chaos and subsequent malinvestments, have taken their hard-earned cash and moved it overseas. Enter stage-right the true north strong and free enough. Foreign speculation has helped drive up real estate prices in places like Vancouver and Toronto.

…click on the above link to read the rest of the article…

Olduvai II: Exodus
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Olduvai
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Olduvai II: Exodus
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Olduvai III: Cataclysm
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