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Carl Mydans Sharecropper’s family in Mississippi County, Missouri 1936Lots of China again today. Most of it based on warnings, coming from the BIS, about the country’s financial shenanigans. I’m getting the feeling we have gotten so used to huge and often unprecedented numbers, viewed against the backdrop of an economy that still seems to remain standing, that many don’t know what to make of this anymore.

Ambrose Evans-Pritchard ties the BIS report to Hyman Minsky’s work, which is kind of funny, because our good friend and Minsky adept Steve Keen is the economist who most emphasizes the need to differentiate between public and private debt, in particular because public debt is not a big risk whereas private debt certainly is.

And that happens to be the main topic where people seem to get confused about China. To quote Ambrose: “..Outstanding loans have reached $28 trillion, as much as the commercial banking systems of the US and Japan combined. The scale is enough to threaten a worldwide shock if China ever loses control. Corporate debt alone has reached 171pc of GDP..”

The big Kahuna question then becomes: should Chinese outstanding loans and corporate debt be seen as public debt or private debt, given that the dividing line between state and corporations is as opaque and shifting as it is? Even the BIS looks confused. I’ll address that below. First, here’s Ambrose:

BIS Flashes Red Alert For a Banking Crisis in China

The Bank for International Settlements warned in its quarterly report that China’s “credit to GDP gap” has reached 30.1%, the highest to date and in a different league altogether from any other major country tracked by the institution. It is also significantly higher than the scores in East Asia’s speculative boom on 1997 or in the US subprime bubble before the Lehman crisis.

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

Ken Rogoff’s Government Debt Default Plan

September 17, 2016

Ken Rogoff’s Government Debt Default Plan

Ken Rogoff is by all accounts a brilliant man. The Harvard professor and former IMF chief economist is a chess grandmaster. His thesis committee included current Fed vice-chair Stanley Fischer. But like many survivors of Ivy League hoop jumping, the poor fellow appears to have emerged punch drunk.

That’s the only conclusion to be drawn from Rogoff’s new book, The Curse of Cash , which, in effect, proposes a ban on paper currency.

It’s terrifying piece of work, for several reasons.

First, the cashless society, which Rogoff proposes in order to make it easier for the US government to confiscate private wealth, in effect, amounts to an admission that Washington can’t pay back its debts.

Second, the fact that Rogoff uses the fight against “terrorism” and “crime” arguments in selling his proposals to the public – justifications which he as a mathematician should know are farcical – suggest that his arguments hide another agenda.

Third, and most important, is the fact that not only would banning cash not achieve Rogoff’s objectives – it could cause irreparable harm to the dollar’s role in the American economy and as a reserve currency.

Let’s look at these arguments one at a time.

Enforced negative rates ARE debt defaults

Rogoff’s “cashless society” is an elegant solution to a key problem bedeviling the Federal Reserve: with interest rates at the zero bound, the US central bank has no ammunition left to fight the next recession – because if cuts rates below zero, savers will withdraw their cash and put it under their mattresses.

“In principle, cutting interest rates below zero ought to stimulate consumption and investment in the same way as normal monetary policy,” Rogoff writes. “Unfortunately, the existence of cash gums up the works.”

That argument is spurious at best.

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

“The Resentment Will Explode” – In Dramatic Twist, McKinsey Slams Globalization

July 14, 2016

“The Resentment Will Explode” – In Dramatic Twist, McKinsey Slams Globalization

Moments ago, in a speech in Washington, IMF head Christine Lagarde said that “The greatest challenge we face today is the risk of the world turning its back on global cooperation—the cooperation which has served us all well. We know that globalization – and increased integration – over the past generation has yielded many economic benefits for many people.”

The IMF is not alone: for years, consultancy giant McKinsey towed the party line as well saying in 2010 that “the core drivers of globalization are alive and well” and adding as recently as 2014 that “to be unconnected is to fall behind.”

That appears have changing, and cracks are starting to form behind the cohesive push for globalization, at least among those who benefit the most from globalization.

In a stunning study released today, one which effectively refutes all its prior conclusions on the matter, McKinsey slams the establishment’s status quo thinking and admits that the economic gains of changes in the global economy have not been widely shared lately, especially in the developed world. In the report titled “Poorer Than Their Parents? Flat or Falling Incomes in Advanced Economies” it finds that prospects for income growth have deteriorated significantly since the financial crisis, and that the benefits from globalization are now over:

This overwhelmingly positive income trend has ended. A new McKinsey Global Institute report, Poorer than their parents? Flat or falling incomes in advanced economies, finds that between 2005 and 2014, real incomes in those same advanced economies were flat or fell for 65 to 70 percent of households, or more than 540 million people (exhibit). And while government transfers and lower tax rates mitigated some of the impact, up to a quarter of all households still saw disposable income stall or fall in that decade.

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

“Deutsche Bank Poses The Greatest Risk To The Global Financial System”: IMF

June 30, 2016

“Deutsche Bank Poses The Greatest Risk To The Global Financial System”: IMF

Over three years ago we wrote “At $72.8 Trillion, Presenting The Bank With The Biggest Derivative Exposure In The World” in which we introduced a bank few until then had imagined was the riskiest in the world.

As we explained then “the bank with the single largest derivative exposure is not located in the US at all, but in the heart of Europe, and its name, as some may have guessed by now, is Deutsche Bank. The amount in question? €55,605,039,000,000. Which, converted into USD at the current EURUSD exchange rate amounts to $72,842,601,090,000…. Or roughly $2 trillion more than JPMorgan’s.”

So here we are three years later, when not only did Deutsche Bank just flunk the Fed’s stress test for the second year in a row, but moments ago in a far more damning analysis, none other than the IMF disclosed that Deutsche Bank poses the greatest systemic risk to the global financial system, explicitly stating that the German bank “appears to be the most important net contributor to systemic risks.”

Yes, the same bank whose stock price hit a record low just two days ago.

Here is the key section in the report:

Domestically, the largest German banks and insurance companies are highly interconnected. The highest degree of interconnectedness can be found between Allianz, Munich Re, Hannover Re, Deutsche Bank, Commerzbank and Aareal bank, with Allianz being the largest contributor to systemic risks among the publicly-traded German financials. Both Deutsche Bank and Commerzbank are the source of outward spillovers to most other publicly-listed banks and insurers. Given the likelihood of distress spillovers between banks and life insurers, close monitoring and continued systemic risk analysis by authorities is warranted.

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

Bravo Brexit!

June 26, 2016

Bravo Brexit!

At long last the tyranny of the global financial elite has been slammed good and hard. You can count on them to attempt another central bank based shock and awe campaign to halt and reverse the current sell-off, but it won’t be credible, sustainable or maybe even possible.

The central bankers and their compatriots at the EU, IMF, White House/Treasury, OECD, G-7 and the rest of the Bubble Finance apparatus have well and truly over-played their hand. They have created a tissue of financial lies; an affront to the very laws of markets, sound money and capitalist prosperity.

After all, what predicate of sober economics could possibly justify $10 trillion of sovereign debt trading at negative yields?

Or a stock market trading at 24X reported earnings in the face of a faltering global economy and a tepid domestic US business cycle expansion which at 84 months is already long in the tooth and showing signs of recession everywhere?

And that’s to say nothing of the endless ranks of insanely over-valued “story” stocks like Valeant was and the megalomaniacal visions of Elon Musk still are.

So there will be payback, clawback and traumatic deflation of the bubbles. Plenty of it, as far as the eye can see.

On the immediate matter of Brexit, the British people have rejected the arrogant rule of the EU superstate and the tyranny of its unelected courts, commissions and bureaucratic overlords.

As Donald Trump was quick to point out, they have taken back their country. He urges that Americans do the same, and he might just persuade them.

But whether Trumpism captures the White House or not, it is virtually certain that Brexit is a contagious political disease. In response to today’s history-shaking event, determined campaigns for Frexit, Spexit, NExit, Grexit, Italxit, Hungexit and more centrifugal political emissions will next follow.

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

IMF Blames Bad Loans For Mozambique’s Soaring Debt-To-GDP Ratio

June 25, 2016

IMF Blames Bad Loans For Mozambique’s Soaring Debt-To-GDP Ratio

Mozambique has a broad swath of problems within its governing councils. Back in December of 2005, Management Systems International based out of Washington issued a report titled CORRUPTION ASSESSMENT: MOZAMBIQUE which said point blank: “The scale and scope of corruption in Mozambique are cause for alarm”.

Mozambique’s head of state Joaquim Chissano left office in February 2005 after 15 years. His replacement, Armando Guebza, that same year opened Mozambique’s coastline to international companies seeking to search for resources. Between 2005 and 2006 three firms were able to capture rights to explore the coast, Anadarko, Italy’s Eni, and Petronas. Some 75 trillion cubic feet of natural gas was discovered and this set of a a blitz into Mozambique as international banks, corporations, and organizations flooded the area. This opened a breeding ground for corruption and unregulated financing, specifically the controversial Tuna Bond that was supposed to be used to support regional fishing and was instead used for military expenditures and to purchase some 40 boats that remain anchored to this day.

The Collapse Of Mozambique’s FX – Annotated With Key Events

On Friday Reuters said the IMF blamed “undisclosed loans” for Mozambique’s 86% Debt/GDP ratio.

“Mozambique’s economic growth will likely slow to 4.5 percent in 2016 from 6.6 percent the previous year due to rapidly rising inflation and growing government debt, the International Monetary Fund said on Friday. The leader of a Fund team that visited the southern African country, Michel Lazare, said the discovery of more than $1 billion of previously undisclosed government debt would increase pressure on the economy.”

On April 19 2015 the IMF suspended its disbursement of $155M payment as part of a larger $286M emergency loan that was established as a means of stabilizing the nation’s currency after it collapsed. What’s frustrating is that the IMF is blaming the 86% Debt-to-GDP as if they had not planned for it.

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

Another Stern Stock Market Crash Warning Was Just Issued by the IMF

May 29, 2016

Another Stern Stock Market Crash Warning Was Just Issued by the IMF

Another stern stock market crash warning was just issued from the International Monetary Fund (IMF), and it’s fueling fear across global markets.

The IMF, an organization of 189 countries, is worried about the ripple effects should the United Kingdom vote to leave the European Union (EU).

A British vote to exit the EU, or “Brexit,” could have significant and negative effects on the UK economy, the IMF said last Friday. The quickly approaching Brexit voting date is June 23.

Christine Lagarde, the IMF’s managing director, said nothing positive could come from a Brexit. She cautioned a vote in favor of a Brexit could lead to a technical recession. Bank of England Governor Mark Carney shares a similar sentiment.

Dow Jones Industrial Average That has many investors worried that tensions overseas could lead to a 2016 stock market crash…

A Brexit vote would cause a “protracted period of heightened uncertainty” and “severe regional and global damage,” the IMF warned. A spike in interest rates, extreme financial market volatility, and damage to London’s revered status as a global financial hub are all likely outcomes.

Other concerns include falling stock prices, a plunge in real estate values, surging borrowing costs for businesses and households, and a steep drop-off in foreign investment.

The UK’s economy could contract by 1% to 9% following a Brexit, according to the IMF’s research. If the UK chooses to stay in the 28-country bloc next month, the IMF expects the economy to grow about 2% this year and around 2.25% in 2017.

And the issue isn’t isolated to the United Kingdom. All global economies will be affected, which is what has sparked the stock market crash fears.

Atlanta U.S. Federal Reserve President Dennis Lockhart said last month that a vote for the UK to leave the EU might have destabilizing consequences for the world economy.

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

Blockbuster Story – How Hedge Funds Invest Heavily in Washington D.C.’s Culture of Corruption

May 14, 2016

Blockbuster Story – How Hedge Funds Invest Heavily in Washington D.C.’s Culture of Corruption

Earlier today, Ryan Grim and Paul Blumenthal published a blockbuster piece in the Huffington Post, titled: The Vultures’ Vultures: How A New Hedge-Fund Strategy Is Corrupting Washington.

It details the secretive world of the dark money groups representing mercenary hedge funds in their insatiable quest for more and more money. In many ways, it’s merely a microcosm of America in 2016. A culture in which ethics has become so irrelevant, it isn’t even a nuisance; it simply never factors into the equation.

The first few paragraphs set the stage perfectly:

WASHINGTON – Take Robert Shapiro.

A Harvard-trained economist, Shapiro is the head of a consulting firm called Sonecon. That business card doesn’t do it for you? He’s got a few more in his wallet:

Senior fellow at the Georgetown University School of Business.

Adviser to the International Monetary Fund.

Director of the Globalization Initiative at NDN, a progressive think tank.

Shapiro, a Democrat, has advised presidents and presidential candidates, and has held powerful government posts. It stands to reason, then, that when he has thoughts on public policy, he can find an outlet ready to publish them.

Recently, he’s had ideas on how the government can address the debt crisis in Puerto Rico and how it can end the conservatorship of Fannie Mae and Freddie Mac by moving them into the private market. Before that, he had a take on how to deal with Argentina’s debt crisis. For all three, he produced academic-looking papers, complete with footnotes and charts.

All three situations have one thing in common: If they were resolved the way Shapiro suggested, a variety of bets placed by a select group of the most politically powerful hedge funds would pay off in a huge way. In the case of Argentina, they mostly have.

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

What Will The Global Economy Look Like After The ‘Great Reset’?

May 14, 2016

What Will The Global Economy Look Like After The ‘Great Reset’?

A very common phrase used over the past couple years by the International Monetary Fund’s Christine Lagarde as well as other globalist mouthpieces is the “global reset.” Very rarely do these elites ever actually mention any details as to what this “reset” means. But if you take a look at some of my past analysis on the economic endgame, you will find that they do, on occasion, let information slip which gives us a general picture of where they prefer the world be within the next few years or even the next decade.

A few goals are certain and openly admitted. The globalists ultimately want to diminish or erase the U.S. dollar as the world reserve currency. They most definitely are seeking to establish the International Monetary Fund’s Special Drawing Rights basket system as a replacement for the dollar system; this plan was even outlined in the Rothschild run magazine The Economist in 1988. They want to consolidate economic governance, moving away from a franchise system of national central banks into a single global monetary authority, most likely under the IMF or the Bank for International Settlements. And, they consistently argue for the centralization of political power in the name of removing legislative and sovereign barriers to safer financial regulation.

These are not “theories” of fiscal change, these are facts behind the globalist methodology. When the IMF mentions the “great global reset,” the above changes are a part of what they are referring to.

That said, much of my examinations focus on these macro-elements; but what about the deeper mechanics of the whole scheme? What kind of economic system would we wake up to on a daily basis IF the globalists get exactly what they want? This is an area in which the elites rarely ever comment, and I can only offer hypothetical scenarios.

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

Negative-Interest-Rate absurdity is another “rabbit out of the hat.”

May 14, 2016

Negative-Interest-Rate absurdity is another “rabbit out of the hat.”

For the second time this year, Spain’s caretaker government just managed to sell 50-year bonds in a €3 billion ($3.4 billion) deal. Despite maturing in the year 2066, when many of us won’t even be alive and the duty to pay back the debt (assuming it still exists) will have been handed down to our children’s children, the bonds will pay an annual interest rate of just 3.45%. Not only that, but the issuance was over-subscribed by €7 billion.

This is a mind-blowing turn-up for a country that just four years ago needed an unprecedented bailout from the Troika to save its saving banks and avert total financial collapse. It is also a resounding testament to the power of central bank policy to turn economic reality on its head.

Less than three years ago, when Draghi had only just begun doing “whatever it takes” to save the single currency, the Spanish government had to pay a 5% yield to get investors to buy their one-year bonds. Now investors are willing to take 50-year bonds off the government’s hands in exchange for an annual interest rate of 3.45%, despite all the attendant risks involved.

While the Spanish economy has improved somewhat since then, that is largely due to the fact that the government has sacrificed long-term stability for short-term growth, going so far as to plunder half of the nation’s social security reserve fund in order to keep spending at its current levels. The remaining half is exclusively invested in Spanish bonds. Even Brussels now admits that Spain’s public debt is out of control.

To make matters worse, Spain doesn’t have an elected government to speak of and could struggle to form one even after the next round of elections, on June 26.

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

How A Collapse In South America Could Trigger Martial Law In The U.S.

May 4, 2016

How A Collapse In South America Could Trigger Martial Law In The U.S.

If an economic system collapses in the woods and no one is paying attention, are there any consequences outside the woods? Well, yes, of course. As with most situations financial and global, however, consequences are not usually taken very seriously until they have spawned a vast bog of sewage we all have to then swim through.

The issue is and always will be “interdependency,” and the dissolution of sovereign borders. Take a close look at the European Union, for example.

You have a large network of fiscally interdependent nations struggling to maintain a sense of principled identity and heritage while participating in the delusion of multiculturalism. You have a system in which these nations are admonished or even punished for attempting to become self-reliant. You have a system which encourages a Cloward-Piven-style forced integration of incompatible cultures. You have unmanageable debt. You have a welfare addicted socialist population plagued by naive assumptions of entitlement. And on top of it all, you have a political structure dominated by cultural Marxists who would like nothing better than to see the whole of the old world go down in a blazing inferno.

This EU dynamic can only end in one of two ways — the complete dismantling of the supranational body and a return to sovereignty, or, a socio-economic crisis followed by even more centralization and the end of all remnants of sovereignty. Either way, the consequences will not be pretty.

In the EU there are particular nations that are being exploited by globalists to initiate greater disaster in the overall region. As Wikileaks exposed in transcripts of IMF discussions on Greece, the plan has always been to create enough chaos to drive fear into the general populace.

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

The Global Growth Funk

May 2, 2016

The Global Growth Funk

NEW YORK – The International Monetary Fund and others have recently revised downward their forecasts for global growth – yet again. Little wonder: The world economy has few bright spots – and many that are dimming rapidly.

Among advanced economies, the United States has just experienced two quarters of growth averaging 1%. Further monetary easing has boosted a cyclical recovery in the eurozone, though potential growth in most countries remains well below 1%. In Japan, “Abenomics” is running out of steam, with the economy slowing since mid-2015 and now close to recession. In the United Kingdom, uncertainty surrounding the June referendum on continued European Union membership is leading firms to keep hiring and capital spending on hold. And other advanced economies – such as Canada, Australia, Norway – face headwinds from low commodity prices.

Things are not much better in most emerging economies. Among the five BRICS countries, two (Brazil and Russia) are in recession, one (South Africa) is barely growing, another (China) is experiencing a sharp structural slowdown, and India is doing well only because – in the words of its central bank governor, Raghuram Rajan – in the kingdom of the blind, the one-eyed man is king. Many other emerging markets have slowed since 2013 as well, owing to weak external conditions, economic fragility (stemming from loose monetary, fiscal, and credit policies in the good years), and, often, a move away from market-oriented reforms and toward variants of state capitalism.

Worse, potential growth has also fallen in both advanced and emerging economies. For starters, high levels of private and public debt are constraining spending – especially growth-enhancing capital spending, which fell (as a share of GDP) after the global financial crisis and has not recovered to pre-crisis levels.

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

Venezuela at risk of unravelling as economic, energy turmoil deepens

May 2, 2016

Venezuela at risk of unravelling as economic, energy turmoil deepens

Violent protests follow decision to ration energy, cut work week for public employeesSo much is riding on the onset of the rainy season in Venezuela, where people across the drought-stricken country lined up on April 28, 2016, to buy food. So far, Caracas is being spared from energy-saving blackouts but its suburbs are increasingly being left in the dark. (Marco Bello/Reuters)

A devastating drought has brought Venezuela, already facing economic and energy crises amid simmering political unrest, to the brink and threatens the future of the oil-rich nation.

“Simply put, a natural disaster is making a man-made disaster much worse,” said Donald Kingsbury, a professor of political science and Latin American studies at the University of Toronto.

The “man-made disaster,” in this case, is a heavily petroleum-dependent, state-run economy gutted by the precipitous drop in crude oil prices.

Inflation will reach 720 per cent some time this year, the International Monetary Fund estimates, and the economy will contract another 10 per cent. Food staples and essential medicines are increasingly scarce. The costs of basic goods and services has skyrocketed. Incomes, for those lucky enough to still have one, are stagnant.

Further, crime rates have reached troubling levels. Venezuela now boasts the world’s second-highest per capita homicide rate after Honduras.

A man holds a picture of Venezuela’s late president Hugo Chavez, whose time in power still looms large over the country’s politics. (Ariana Cubillos/Reuters)

“People are fed up, from all over the political and social spectrum. At this point, it may not take much for things to erupt,” said Kingsbury.

The worst drought to hit Venezuela in almost half a century could be the catalyst, he said.

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

Eugen Bohm Von Bawerk: Chinese Dragon: Breathing Credit Fumes

April 25, 2016

EUGEN BÖHM VON BAWERK: CHINESE DRAGON: BREATHING CREDIT FUMES

Economic forecasting, no matter how complex the underlying model may be, is essentially about extrapolating historical trends. We showed last week how economic models completely fail to pick up on structural shifts using Japan as an example. On the other hand, if an economy doesn’t really change much, as in the case of Australia over the last thirty years, model “forecast” are generally quite accurate. However, spending millions of dollars to do the job of a ruler doesn’t seem like wise resource allocation to us. That said there’s obviously a very limited market for model based GDP forecast and most of them are not exchanged among pure market based players, but rather between governmental funded agencies. True, Wall Street spews out their sell-side GDP propaganda on a regular basis, but claiming international banking is anything akin to a free market is absurd. GDP forecasting is something only wasteful organizations do and that should tell you all you need to know about these exercises in futility.

Take the latest IMF forecast for China as a half decent example. According to the IMF, the credit junkie known as China, which needed one trillion dollar in fresh credit in the first quarter alone to create GDP “growth” of somewhere between 6.3 and 6.7 per cent (265 billion dollars for the quarter) will continue to race ahead with six per cent growth for the foreseeable future. The Chinese economy is 100 per cent dependent on ever more money and credit expansion to maintain its completely unsustainable momentum and will very soon come crashing down. And by the way, China’s reported GDP numbers are obviously grossly overstated anyway.

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

Government Officials Admit to ECONOMIC False Flag Operations

April 18, 2016

Government Officials Admit to ECONOMIC False Flag Operations

There Are Economic – As Well As Military – False Flag Attacks

False flag attacks don’t just involve physical deaths and wars …

They also involve faked economic events and financial casualties.

For example, two officials of the International Monetary Fund said last month that they needed the threat of an imminent financial catastrophe to force other players into accepting its measures such as cutting Greek pensions and working conditions, and – as the Greek government put it (via Bloomberg) – they were “considering a plan to cause a credit event in Greece and destabilize Europe.”

And high-level officials admitted to intentionally destroying their nations’ economies in order to “justify” structural economic reforms.

For example, Japanese Prime Minister Junichiro Koizumi and Japanese central bank officials admittedthat they kept Japan’s economy in a deflationary crisis to promote “structural reform” which would allow the Japanese economy to be looted by foreign interests. Japanese central bank officials admitted the same thing.

Something similar happened in Thailand and the EU.

Indeed, the former head of the Bank of England said last month that the depression in the EU was more or less a “deliberate” policy choice.

And an economist at insurance giant AIG – and former head of the European Commission’s unit responsible for the European Monetary System and monetary policies – said in 2008 that what European leaders wanted was to create a crisis to force introduction of “European economic government.”

And see this and this.

And The Tarp bank bailouts in the U.S. were passed using apocalyptic – and false – threats. And they were not used for the stated purpose.

For example, as I’ve previously reported:

The New York Times wrote last year:

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

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