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Why This Market Needs To Crash

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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…

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

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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…

Raising Interest Rates Can’t End Well!

Raising Interest Rates Can’t End Well!

Figure 1. WSJ figure indicating likely reasons for rate hike.

A finite world does not behave the way most modelers expect. Interest rates that worked perfectly well in the past, don’t necessarily work well now. Oil prices that worked perfectly well in the past don’t necessarily work well now. It seems to me that raising interest rates at this time is very ill advised. These are a few of the issues I see:

[1] The economy is now incredibly dependent upon rising debt to prop up its spending. The pattern of total debt to GDP for the United States is shown in Figure 2.

Figure 2. United States’ debt to GDP ratios based on Federal Reserve Z1 data and BEA GDP data. The red line represents the increase over the latest three years.

There was a huge increase in debt in the period leading up to the 2008 crash. Every year between 2001 and 2008, the increase in debt was greater than four times the increase in GDP. In fact, for some years in that period, more than $8 of debt were added for every dollar of GDP added.

We now seem to be starting a new run up in debt. In 2015, the amount of debt added was $2.5 trillion ($66.1 trillion minus $63.6 trillion), while the amount of GDP added was only $529 million. This indicates a ratio of over 4.7 for the single year of 2016. (Figure 2 shows only three-year averages, because of the volatility of amounts.)

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

The Bag Holder and His Bag

Can you see those swans coming in for a landing on Pond USA? They’re not exactly black swans, because you knew they were out there circling, but they’re dark enough against the twilight’s last gleaming to give you the heebie jeebies.

Troubles and portents of more trouble are stacking up as we approach the Ides of March zone of financial turmoil. You must surely surmise that a debt ceiling impact, a Federal Reserve interest rate hike, and the election of a Dutch anti-EU leader all scheduled for that one day are a good start on the greater unravel to follow. Glowering in the spotlight at center stage will be President Donald Trump, designated bag-holder of the Deep State and its myrmidons. And what’s in that bag he’s holding? Just a couple of shit sandwiches and a hair shirt for his journey down the lonely road to exile. But getting rid of Trump would only leave the Deep State with a bigger problem: itself. That is, an economy and a society that can’t be governed by any means.

I think many professional observers-of-the-scene are missing something in this unspooling story: the Deep State is actually becoming more impotent and ineffectual, not omnipotent. Case in point: RussiaGate — come on, let’s finally call it that — the popular idea that Russia hacked the 2016 presidential election. It’s popular because it’s such a convenient excuse for the failure of a corrupt, exhausted, and brain-dead Democratic establishment. But all the exertions of the Deep State to put over this story since last summer were negated this week by two events.

First, there was former NSA Director James Clapper’s appearance on NBC’s Sunday Meet the Press show with Chuck Todd featuring the following interchange:

CHUCK TODD:
Does intelligence exist that can definitively answer the following question, whether there were improper contacts between the Trump campaign and Russian officials?

 

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

When This All Blows Up…

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When This All Blows Up…

Understanding the how & when of the next economic crash 

This report marks the end of a series of three big trains of thought. The first explained how we’re living through the Mother Of All Financial Bubbles. The next detailed the Great Wealth Transfer that is now underway, siphoning our wealth into the pockets of an elite few.

This concluding report predicts how these deleterious and unsustainable trends will inevitably ‘resolve’ (which is a pleasant way of saying ‘blow up’.)

The Ka-POOM Theory

In terms how this will all end, we favor the scenario put forth by Eric Janszen in 1998 called the Ka-POOM theory.

This theory rests on the belief that the Federal Reserve along with the other world central banks looked at Japan’s several decades of economic stagnation and decided that deflationary recessions are to be avoided at all costs — even if that means blowing asset bubbles and then cleaning up the destruction left behind in their aftermath.

Because the Fed, et al. have a limited playbook (which is: print, and then print some more), the Ka-POOM model calls for limited periods of disinflation, followed by massive money printing sprees that then produce high inflation.

Despite the trillions and trillions in thin-air money printed by the world’s central banks over the past 8 years, a common rebuttal we hear is “But there’s been no inflation so far!”  To which I reply, “Yes, that’s what we’re being told. But that’s not actually true.”

Remember: inflation is simply “too much money chasing too few goods.”  We can detect today’s excess of money in the rising prices in our cost of living — but those higher prices are symptoms, not causes. Inflation is not “higher prices”. Inflation is “too much money”.

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

Can Yellen Keep the Boom Going?

Yellen, like notorious previous Fed chiefs including Strong, Martin, and Greenspan, can now claim success in having prolonged and strengthened an asset price inflation which otherwise may well have been about to enter its severe end phase. If history is any guide, the result of that success is to be feared.

Asset price inflations — always characterized by monetary disequilibrium empowering irrational forces — go through a mid-late phase where speculative temperatures fall sharply in some markets which were previously hot. Overinvestment, falling profits, and a discrediting of once popular speculative hypotheses are the usual trigger to such quakes. The central bank can respond by fresh monetary injection and this sometimes brings a new round of speculative enthusiasm even possibly in the recently bust sectors. Symptoms of a sudden climb of goods inflation may emerge. The eventual denouement of crash and recession and the cumulative economic damage are very likely worse than if there had been no late-cycle inflationary stimulus.

The Fed Abandons Plans to Raise Rates

The present Fed resolved to apply the course of monetary injection in early 2016, backtracking from its program of once a quarter 25bp rate hikes heralded in late 2015. The catalyst was a New Year mini-crash in US equities alongside a China currency shock all in the context of a bust in the oil sector and a US growth cycle downturn (2015 and early 2016). In response to the weakening of the dollar the ECB and BoJ intensified their monetary experimentation whilst Beijing pumped up its state credit bubble. In December 2016, amidst evidence of a strong global and US growth cycle upturn, Yellen announced a resumption of tame sporadic “data-dependent 25bp rate rises with no balance sheet reduction.” Such a cautious rate trajectory could be consistent with further aggravation of monetary disequilibrium — in effect a strengthening of late-cycle monetary injections.

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

Are We Witnessing The Weirdest Moment In Economic History?

Are We Witnessing The Weirdest Moment In Economic History?

It is an unfortunate reality that most people tend to be oblivious to massive sea changes in geopolitics and economics. You would think that these events would catch the immediate attention of everyone as they happen, but usually it is not until they realize that the microcosm of their personal lives is subject to the consequences of the macrocosm that they wake up and take notice.

There are, however, ways to train yourself to pick up on signals within the news cycle and within political and financial rhetoric; signals that indicate a great shift is perhaps on the way. Sometimes these initial signs are subtle, sometimes they are as subtle as a feminist slut-walk. I would point out that over the next few months there are dangerous correlations so numerous and blatant in the economic sphere that I would almost rather watch a marching gaggle of frumpy feminists wearing nothing but electrical tape than bear witness to the mayhem that is about to strike the unwitting public.

What am I talking about? Well, let’s go through the list…

Federal Reserve Meeting March 14-15th

As my readers know well, I have been warning since before the election that the Fed would use a Trump presidency as an opportunity to pull the plug on near-zero interest rates and remove a primary pillar supporting stock markets — stock buybacks made possible by free overnight loans to numerous banks and corporations. Without QE and low interest rates the equities bubble will inevitably implode.

Corporate earnings certainly aren’t holding up stocks, neither is GDP or consumer spending. The Fed is the only determining factor of the ongoing bull market. Anyone who claims otherwise is probably a mainstream analyst or overzealous day trader with a vested interest in keeping the illusion going.

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

Arizona Challenges the Fed’s Money Monopoly

Arizona Challenges the Fed’s Money Monopoly

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History shows that, if individuals have the freedom to choose what to use as money, they will likely opt for gold or silver.

Of course, modern politicians and their Keynesian enablers despise the gold or silver standard. This is because linking a currency to a precious metal limits the ability of central banks to finance the growth of the welfare-warfare state via the inflation tax. This forces politicians to finance big government much more with direct means of taxation.

Despite the hostility toward gold from modern politicians, gold played a role in US monetary policy for sixty years after the creation of the Federal Reserve. Then, in 1971, as concerns over the US government’s increasing deficits led many foreign governments to convert their holdings of US dollars to gold, President Nixon closed the gold window, creating America’s first purely fiat currency.

America’s 46-year experiment in fiat currency has gone exactly as followers of the Austrian school predicted: a continuing decline in the dollar’s purchasing power accompanied by a decline in the standard of living of middle- and working-class Americans, a series of Federal Reserve-created booms followed by increasingly severe busts, and an explosive growth in government spending. Federal Reserve policies are also behind much of the increase in income inequality.

Since the 2008 Fed-created economic meltdown, more Americans have become aware of the Federal Reserve’s responsibility for America’s economic problems. This growing anti-Fed sentiment is one of the key factors behind the liberty movement’s growth and represents the most serious challenge to the Fed’s legitimacy in its history. This movement has made “Audit the Fed” into a major national issue that is now closer than ever to being signed into law.

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

The Coming Great Wealth Transfer

WakingTimes.com

The Coming Great Wealth Transfer

Spoiler alert! It’s already here.

In the past, I’ve warned about the coming Great Wealth Transfer.  But now we need to talk about it in the present tense, because it’s here.

And it will only accelerate from here on out. The Rich will get richer at the expense of everybody else.

This isn’t personal. It’s simply a feature of what happens near the end of a debt-based monetary system run by corruptible humans.

Of course, those in charge don’t think of themselves as corrupted or villainous. I’m sure that Federal Reserve Chairs Greenspan, Bernanke and Yellen all think of themselves as good and decent people doing “God’s work”. But the truth is they’ve irrevocably harmed millions — if not billions — of innocent people.

They and other central bankers have become the standard bearers of a system that can best be described as a reverse Robin Hood scheme, one that takes from the poor and gives to the Rich. It’s just that in this tale, the ‘poor’ means everybody not in the top 1%.

So you need to understand this wealth transfer process — how it works, who’s perpetrating it, and what dangers to watch for. If not, you’ll be a victim of it. And you’ll probably live in confusion and shock by how hard just ‘getting by’ becomes going forward.

Realizing that you’re being specifically targeted by a system determined to separate you from your wealth is the essential first step towards figuring out how to evade the predators and protect yourself.

The Great Wealth Transfer

What do we mean by a Wealth Transfer?

It isn’t just some academic concept. It’s a playbook that’s been used many times in the past by governments to forcibly extract wealth from the public and use it for the benefit of those in power.

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

Why the Fed Needs to Raise Rates

yellen Janet

I have warned that rates will rise BECAUSE the Federal Reserve will be criticized if they fail to do so when they are faced with a stock market that is rising. However, while one by one, several Fed officials have all signaled in recent days that the Fed is ready to resume raising interest rates as soon as this month, the real crisis for the Fed will be raising rates will strength the dollar and put even more pressure on Europe and emerging markets. Hence, the 64 billion dollar question is will the Fed abandon international policy objectives for domestic?

Janet Yellen speaks today in Chicago on the topic of the Fed’s economic outlook. The pundits will scan ever possible word for any hint whatsoever of how likely the central bank is to raise its key short-term rate after it next meets March 14-15, 2017. Traders in futures markets have put the probability of a rate hike at 75%, according to data tracked by the CME Group. Last week the odds were just 50/50. With the rally in the share market this week, many are now fearing a rate hike.

Many Fed officials are suggesting that the strengthening U.S. economy warns of higher inflation and a surging stock market has confirmed a potential rate hike. On Tuesday, William Dudley, president of the New York Fed, said the case for raising rates had “become a lot more compelling”. Robert Kaplan, of the Dallas Fed, said he thought the Fed would likely raise rates “in the near future.” Then Lael Brainard, a Fed board member, also said she thought the case for another hike was strengthening: “Assuming continued progress, it will likely be appropriate soon to remove additional accommodation.” 

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

Contemplations for a Sunday (unless you can’t get around to it til Monday)

Contemplations for a Sunday (unless you can’t get around to it til Monday)

Some simple themes today…

Population growth, economic growth, and resultant energy consumption are inexorably slowing.  The Federal Reserve knows it can not stop this and is simply slowing the inevitable with interest rate cuts to incent greater consumption via skyrocketing credit/debt (particularly government debt….debt that is undertaken with no intent of ever repaying it and is really just pure monetization).
The chart below highlights that employment among 25-54yr/olds (the foundation of US consumption) ceased growing in ’00.  Once employment among this group ceased growing, total US energy consumption also ceased growing, and accelerating debt was substituted to maintain growth thanks to nearly 40yrs of interest rate cuts.
The impact of the declining rates and rising debt can be seen in the Wilshire 5000 (chart below).  The Wilshire represents all publicly traded US equities radically moving upward with surging US federal debt but inverse to US total energy consumption, jobs creation, and economic activity since ’00.
The driver of the Fed’s federal funds rate was and continues to be the rate of population growth and the growing demand this population growth represents.  The adult population growth rate peaked in ’79 and the federal funds rate peaked in ’80…rates plus population growth have been decelerating/declining together since.
The chart below showing the 0-64yr/old population growth vs. 65+yr/old growth.  The demographic and population situation only continues to get worse.  In fact, it’s unlikely the 0-64yr/old population growth will hit the already low estimates from 2017–>2030 due to the ongoing decline in birth rates and slowing immigration.
What about employment?  Chart below shows total full time jobs growth has slowed to a trickle (net basis from peak to peak) and total energy consumption growth likewise decelerating, peaking in ’05, and now declining.  Federal funds rate moving inversely, all the way to zero.  Finally, Public US Federal debt (w/out Intra-governmental holdings) skyrocketing.
…click on the above link to read the rest of the article…

In A Battle Between Trump And The Federal Reserve, Who Really Wins?

In A Battle Between Trump And The Federal Reserve, Who Really Wins?

As a part of the increasingly obvious set-up of conservative movements by international banking interests and globalist think-tanks, I have noticed an expanding disinformation campaign which appears to be designed to wash the Federal Reserve of culpability for the crash of 2008 that has continued to fester to this day despite the many claims of economic “recovery.”  I believe this program is meant to set the stage for a coming conflict between the Trump Administration and the Fed, but what would be the ultimate consequences of such an event?

In my article ‘The False Economic Recovery Narrative Will Die In 2017’, I outlined the propaganda trap being established by globalist owned and operated media outlets like Bloomberg, in which they consistently claim that Donald Trump has “inherited” an economy in recovery and ascendancy from the Obama administration.  I thoroughly debunked their positions and “evidence” by showing how each of their fundamental indicators has actually been in steady decline since 2008, even in the face of massive monetary intervention and fiat printing by the Fed.

My greatest concern leading up to the 2016 election was that Trump would be allowed to win because he represents the perfect scapegoat for an economic crisis that central banks have been brewing for years. Whether or not Trump is aware of this plan cannot yet be proven, but as I have mentioned in the past, his cabinet of Goldman Sachs alumni and neo-con veterans hardly gives me confidence.  In the best case scenario, Trump is surrounded by enemies; in the worst case scenario, he is surrounded by friends.

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

Is an Inflation Comeback in the Works?

LOVINGSTON, VIRGINIA – Amid all the sound and fury of the Trump news cycle, hardly anyone noticed. There is a specter haunting this economy. It is the specter of inflation…

See, if you want to whip inflation now, you don’t need to do any of the really difficult things, such as printing less money… or God forbid, return to honest, market-chosen money (shudder!). All you need is intelligent nutrition!     Image credit: Marshall Astor

Bloomberg has the report:

The U.S. cost of living increased in January by the most since February 2013, led by higher costs for gasoline and other goods and services that indicate inflation is gathering momentum. The consumer-price index rose a larger-than-forecast 0.6% after a 0.3% gain in December, Labor Department figures showed Wednesday. Compared with the same month last year, costs paid by Americans for goods and services rose 2.5%, the most since March 2012.

French investment bank Natixis makes a related observation:

The return of inflation in the euro zone with the rise in the oil price will drive the European Central Bank to give up QE […] Our estimate is that an end to QE would raise interest rates by 110 basis points. 

Wait – inflation is what the Fed has been looking for. And the latest numbers reveal it may have already reached the Fed’s target of 2%. If you’ll recall, the Fed set itself two targets: Unemployment would have to fall below 5%. And inflation would have to rise above 2%. Reaching those two targets would prove that the economy was healthy enough to allow the Fed to raise rates.

Higher rates of inflation – higher prices – signal more consumer demand. And more labor demand, too. It suggests there are more people with more money ready to spend it. How could that ever be a bad thing?

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

Alan Greenspan: Ron Paul Was Right About The Gold Standard

Alan Greenspan: Ron Paul Was Right About The Gold Standard

As John Rubino eloquently puts it, “when the history of these times is written, former Fed Chair Alan Greenspan will be one of the major villains, but also one of the greatest mysteries. This is so because he has, in effect, been three different people.” Greenspan started his public life brilliantly, as a libertarian thinker who said some compelling and accurate things about gold and its role in the world. An example from 1966: “This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.”

Yet everything changed a few decades later when Greenspan was put in charge of the Federal Reserve in the late 1980s, instead of applying the above wisdom, for example by limiting the bank’s interference in the private sector and letting market forces determine winners and losers, he did a full 180, intervening in every crisis, creating new currency with abandon, and generally behaving like his old ideological enemies, the Keynesians. Predictably, debt soared during his long tenure.

Along the way he was also instrumental in preventing regulation of credit default swaps and other derivatives that nearly blew up the system in 2008. His view of those instruments:

The reason that growth has continued despite adversity, or perhaps because of it, is that these new financial instruments are an increasingly important vehicle for unbundling risks.

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

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