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One Last Look At The Real Economy Before It Implodes – Part 5
One Last Look At The Real Economy Before It Implodes – Part 5
Since I began writing analysis for the liberty movement more than eight years ago, I have always said that we will know when the endgame of the globalists is upon us when the criminals come out into the light of day and admit to their crimes. At that moment, it will be because they no longer fear either the repercussions or their plans being obstructed.
As I plan to show in this installment of my series on the hidden fiscal collapse of America, the endgame has indeed arrived. At the very least, the international elites seem to think success is within their grasp, for they now openly expose their own criminality. But they do so in a way that attempts to divert blame or to rationalize their actions as being for the “greater good.”
In Part 4 of this series, I discussed the reality of the false East/West paradigm and the fact that the “conflict” between Eastern and Western interests is nothing more than Kabuki theater constructed by globalists and designed to mesmerize the masses. You see, the problem with most people is that they tend to let their innate sense of tribalism drive them to take sides in war without understanding the fundamental root of that war. In most cases, they believe one side must be “good” and one side must be “bad.” Globalists understand this weakness of human collectivism, and they exploit it as often as possible. They create conflicts from out of the void, conflicts in which BOTH sides are controlled. Then, they let the masses fumble like idiots trying to set the noose around the other guy’s neck.
…click on the above link to read the rest of the article…
Magnificent Housing Bubble Unravels in Much of Canada
Magnificent Housing Bubble Unravels in Much of Canada
Canada’s housing bubble, which has been so much more magnificent than anything the US was ever able to conjure up, notched another gain in March, according to the Teranet-National Bank House Price Index, which rose 0.3% for the month. Prices were up in eight of the metropolitan markets and down in three, the broadest diffusion in seven months. Year over year, the index rose 4.7% to a new all-time record.
Since 2000, home prices have jumped 140% in the survey’s 11 metropolitan markets. A number of years charted double-digit gains before the Financial Crisis and right afterwards. Before the Financial Crisis, Canada’s home prices had largely followed the US run-up. But when US housing went into a terrific tailspin, Canada’s home prices just dipped about 8% before re-soaring, fired up by easy money, a resource boom that has now crashed, and in certain metropolitan markets an influx of flush and motivated foreign buyers.
Home prices are now 26% higher than they were at the already crazy peak in 2008. The chart of the Teranet–National Bank National Composite House Price Index is what areal housing bubble looks like. Note the now puny dip during the Financial Crisis:
But it wasn’t spread evenly. In some metro areas, home prices are still skyrocketing. In others, they’ve never moved much beyond the prior bubble. And in other areas again, once booming, home prices have already started to deflate.
…click on the above link to read the rest of the article…
There’s Trouble Brewing In Middle Earth
There’s Trouble Brewing In Middle Earth
For the second time in three years, I’m fortunate enough to spend some time in New Zealand (or Aotearoa). In 2012, it was all mostly a pretty crazy touring schedule, but this time is a bit quieter. Still get to meet tons of people though, in between the relentless Automatic Earth publishing schedule. And of course people want to ask, once they know what I do, how I think their country is doing.
My answer is I think New Zealand is much better off than most other countries, but not because they’re presently richer (disappointing for many). They’re better off because of the potential here. Which isn’t being used much at all right now. In fact, New Zealand does about everything wrong on a political and macro-economic scale. More about that below.
I’ve been going through some numbers today, and lots of articles, and I think I have an idea what’s going on. Thank you to my new best friend Grant here in Northland (is it Kerikeri or Kaikohe?) for providing much of the reading material and the initial spark.
To begin with, official government data. We love those, don’t we, wherever we turn our inquisitive heads. Because no government would ever not be fully open and truthful. This is from Stuff.co.nz, March 19 2015:
New Zealand GDP grew 3.3% last year
New Zealand’s economy grew 3.3% last year, the fastest since 2007 before the global financial crisis, Statistics NZ said. Most forecasts expect the economy to keep growing this year and next, although slightly more slowly than in the past year. For the three months ended December 31, GDP grew 0.8%, in line with Reserve Bank and other forecasts. That was led by shop sales and accommodation.
…click on the above link to read the rest of the article…
The Economic Wall Dead Ahead Is Hidden Behind False Signs Of “Recovery”
The Economic Wall Dead Ahead Is Hidden Behind False Signs Of “Recovery”
This morning I had left the TV mistakenly tuned to CNBC with the sound on—-and unavoidably caught another bullish strategist jawing about the US economy’s awesome strength. This one was peddling as exhibit #1 the recent surge in C&I loans, arguing that it is a sure sign that business is gearing up for a post-winter boom.
It turns out that the $1.8 trillion of C&I loans outstanding at the end of February, in fact, were up by 14% since January 2014. But then again, when are they going to find a guest which wasn’t born yesterday. That is to say, an analyst who is capable of looking at the historic context in which the latest data points are anchored, the quality of the numbers at issue and the deeper implications of the indicators.
In this case, like most of the blizzard of bullish factoids spewed out each day on bubble vision, the purported business lending boom is not all that. The upward blip during the last 13 months was from a level which had first been reached way back in October 2008. In other words, it had taken 63 months to dig out of the deep crater that had resulted from the liquidation of the mountains of bad debt that existed on the eve of the financial crisis.
Next consider the quality and content of the purported “surge” in business lending. The skunk in the woodpile is patently obvious in the graph below.
The “surge” is almost entirely due to financial engineering and LBOs. In fact, virtually all of the growth in business lending during the past two years is due to a dramatic rise in leveraged loans from the deal business. Thus, overall C&I loans are up a modest $220 billion since October 2008, but 100% of that gain is accounted for by the 37% rise in leveraged loans outstanding since 2008.
…click on the above link to read the rest of the article…
If Anyone Doubts That We Are In A Stock Market Bubble, Show Them This Article
If Anyone Doubts That We Are In A Stock Market Bubble, Show Them This Article
The higher financial markets rise, the harder they fall. By any objective measurement, the stock market is currently well into bubble territory. Anyone should be able to see this – all you have to do is look at the charts. Sadly, most of us never seem to learn from history. Most of us want to believe that somehow “things are different this time”. Well, about the only thing that is different this time is that our economy is in far worse shapethan it was just prior to the last major financial crisis. That means that we are more vulnerable and will almost certainly endure even more damage this time around. It would be one thing if stocks were soaring because the U.S. economy as a whole was doing extremely well. But we all know that isn’t true. Instead, what we have been experiencing is clearly artificial market behavior that has nothing to do with economic reality. In other words, we are dealing with an irrational financial bubble, and all irrational financial bubbles eventually burst. And as I wrote about yesterday, the way that stocks have moved so far this year is eerily reminiscent of the way that stocks moved in early 2008. The warning signs are there – if you are willing to look at them.
The first chart that I want to share with you today comes from Doug Short. It is a chart that shows that the ratio of corporate equities (stocks) to GDP is the second highest that it has been since 1950. The only other time it has been higher was just before the dotcom bubble burst…
…click on the above link to read the rest of the article…
The Fed Has Not Learnt From The Crisis
The Fed Has Not Learnt From The Crisis
The Financial Crisis of 2007 was the nearest thing to a “Near Death Experience” that the Federal Reserve could have had. One ordinarily expects someone who has such an experience—exuberance behind the wheel that causes an almost fatal crash, a binge drinking escapade that ends up in the intensive care ward—to learn from it, and change their behaviour in some profound way that makes a repeat event impossible.
Not so the Federal Reserve. Though the event itself gets some mention in Yellen’s speech yesterday (“Normalizing Monetary Policy: Prospects and Perspectives”, San Francisco March 27, 2015), the analysis in that speech shows that the Fed has learnt nothing of substance from the crisis. If anything, the thinking has gone backwards. The Fed is the speed driver who will floor the accelerator before the next bend, just as he did before the crash; it is the binge drinker who will empty the bottle of whiskey at next year’s New Year’s Eve, just as she did before she woke up in intensive care on New Year’s Day.
So why hasn’t The Fed learnt? Largely because of a lack of intellectual courage. As it prepares to manage the post-crisis economy, The Fed has made no acknowledgement of the fact that it didn’t see the crisis itself coming. Of course, the cause of a financial crisis is far less obvious than the cause of a crash or a hangover: there are no skidmarks, no empty bottle to link effect to cause. But the fact that The Fed was caught completely unawares by the crisis should have led to some recognition that maybe, just maybe, its model of the economy was at fault.
…click on the above link to read the rest of the article…
10 Charts Which Show We Are Much Worse Off Than Just Before The Last Economic Crisis
10 Charts Which Show We Are Much Worse Off Than Just Before The Last Economic Crisis
If you believe that ignorance is bliss, you might not want to read this article. I am going to dispel the notion that there has been any sort of “economic recovery”, and I am going to show that we are much worse off than we were just prior to the last economic crisis. If you go back to 2007, people were feeling really good about things. Houses were being flipped like crazy, the stock market was booming and unemployment was relatively low. But then the financial crisis of 2008 struck, and for a while it felt like the world was coming to an end. Of course it didn’t come to an end – it was just the first wave of our problems. The waves that come next are going to be the ones that really wipe us out. Unfortunately, because we have experienced a few years of relative stability, many Americans have become convinced that Barack Obama, Janet Yellen and the rest of the folks in Washington D.C. have fixed whatever problems caused the last crisis. Even though all of the numbers are screaming otherwise, there are millions upon millions of people out there that truly believe that everything is going to be okay somehow. We never seem to learn from the past, and when this next economic downturn strikes it is going to do an astonishing amount of damage because we are already in a significantly weakened state from the last one.
…click on the above link to read the rest of the article…
Inside The Federal Reserve: “Money For Nothing” – The Full Movie
Inside The Federal Reserve: “Money For Nothing” – The Full Movie
Nearly 100 years after its creation, the power of the U.S. Federal Reserve has never been greater. Markets and governments around the world hold their breath in anticipation of the Fed Chair’s every word. Yet the average person knows very little about the most powerful – and least understood – financial institution on earth. “Money For Nothing” is the first film to take viewers inside the Fed and reveal the impact of Fed policies – past, present, and future – on our lives. Join current and former Fed officials as they debate the critics, and each other, about the decisions that helped lead the global financial system to the brink of collapse in 2008. And why we might be headed there again…
It is perhaps a testament to the ability of the oligarchy (that 1% which owns some 50% of all US assets), as we noted previously, to distract and distort newsflow from what really matters, that a century after the creation of the Federal Reserve, the vast majority of Americans are still unfamiliar with the most important institution in the history of the US – an institution that unlike the government is not accountable to the people (if only as prescribed on a piece of rapidly amortizing paper), but merely to a few banker stakeholders as Bernanke’s and Yellen’s actions over the past six years have demonstrated beyond any doubt. It is for their benefit that Jim Bruce’s groundbreaking movie “Money for Nothing” is a must see, although we would urge everyone else, including those frequent Zero Hedge readers well-versed in the inner workings of the Fed, to take the two hours and recall just who the real enemy of the people truly is.
…click on the above link to read the rest of the article…
At the Fed in 2009, Rolling Dice in a Crisis
At the Fed in 2009, Rolling Dice in a Crisis
Ben Bernanke and his colleagues at the Federal Reserve Board have earned accolades from all corners for the extraordinary actions they took to rescue the financial system in 2009. While 2008 was the Fed’s annus horribilis, exposing how unaware the central bank had been of the risks building in the financial system, 2009 was its year of redemption.
So it was interesting, last week, to read the newly released transcripts from Federal Reserve Board meetings in 2009, which include some of the darkest days of the mess.
With the economy now on a sound footing and the stock market near a record high, the decisions made by the Fed to shore up credit markets in the aftermath of the 2008 crisis look even better.
But the transcripts also reveal for the first time what critics within the Fed were saying about some of the trillion-dollar programs. And even though the critics’ worst fears did not come to pass, their concerns are worth exploring. For this reason alone, the transcripts make for fascinating reading.
There were two basic camps within the Fed. On one side were the reserve bank presidents who wanted to throw anything and everything at the crisis. For the most part, these officials came from regions — like New York and Boston — that are home to big financial firms. They contended that the financial system was in such peril that big substantive action had to be taken, pronto.
…click on the above link to read the rest of the article…
A Day In The Life Of A Falling BRIC
A Day In The Life Of A Falling BRIC
It’s not that long ago, in 2001, that Jim O’Neill, then still with Goldman Sachs, coined the term BRICs, for the fast emerging markets of Brazil, Russia, India and China. O’Neill saw a global power shift from the west to these four nations happening. Fast forward to today, and we see Russia under multiple attacks, including economic ones, from the west, as India just announced the second rate cut this year and China is attempting controlled demolition of the possibly biggest financial bubble in the history of the world.
And Brazil? If anything, it’s falling even faster off its pedestal than the other three nations. And in Brazil, it’s as much corruption scandals as it is the financial crisis and the plunge in oil revenues that take center stage. The stories have long been simmering, but they all came together in the media yesterday.
First, a seemingly minor one. Eike Batista was once the richest man in Brazil, and one of the 10 richest men on the planet, having made a fortune in gold mining and later oil. Then he went on to become probably the one man to lose the most money in the shortest time, going from $32 billion in early 2013 to minus $5 billion or so a little over a year later, impossible to pin down exactly for numerous reasons, but spectacular for sure.
…click on the above link to read the rest of the article…
Reckless Stock-Market Leverage Intoxicates Politicians
Reckless Stock-Market Leverage Intoxicates Politicians
The sudden bloodletting that leveraged currency speculators experienced when the Swiss National Bank yanked the cap on the franc should have been a warning: central-bank promises that everything is under control are meaningless. And because of leverage, innumerable trading accounts blew up in a matter of moments.
Leverage acts like a powerful drug. It creates buying pressure and inflates asset prices further on the way up. But when asset prices sink, leverage begets forced selling, which drives down asset prices further, which begets more forced selling….
And stock-market leverage, encouraged by the Fed’s monetary policies that make nearly free money available to all sorts of speculators, has ballooned.
Some of it is closely watched, like margin debt. FINRA’s 4,000 member securities firmsreported that their customers carried $496 billion in margin debt by the end of December, after a multi-year surge. Margin balances had peaked in September at $504 billion, by far the highest in absolute terms, and at 2.8% of GDP, the highest ever in relationship to the economy. Alas, the last two stock-market leverage bubbles ended in phenomenal crashes – the dotcom implosion and the Financial Crisis.
And corporations are issuing mountains of debt to buy back their own shares at peak prices – replacing equity with debt on their balance sheets, leveraging them up to the hilt, like others leverage up their brokerage accounts. In many cases, such as IBM, “tangible net worth” has turned negative, and stockholders are already under water.
Other forms of stock-market leverage are more difficult to quantify, like people borrowing against their home equity lines of credit or their credit cards to plow that moolah into stocks to make that quick buck that their neighbors have been bragging about.
…click on the above link to read the rest of the article…
Two More Harbingers Of Financial Doom That Mirror The Crisis Of 2008
Two More Harbingers Of Financial Doom That Mirror The Crisis Of 2008
The stock market continues to flirt with new record highs, but the signs that we could be on the precipice of the next major financial crisis continue to mount.
A couple of days ago, I discussed the fact that the U.S. dollar is experiencing a tremendous surge in value just like it did in the months prior to the financial crisis of 2008. And previously, I have detailed how the price of oil has collapsed, prices for industrial commodities are tanking and market behavior is becoming extremely choppy.
All of these are things that we witnessed just before the last market crash as well. It is also important to note that orders for durable goods are declining and the Baltic Dry Index has dropped to the lowest level on record. So does all of this mean that the stock market is guaranteed to crash in 2015? No, of course not. But what we are looking for are probabilities. We are looking for patterns. There are multiple warning signs that have popped up repeatedly just prior to previous financial crashes, and many of those same warning signs are now appearing once again.
One of these warning signs that I have not discussed previously is the wholesale inventories to sales ratio. When economic activity starts to slow down, inventory tends to get backed up. And that is precisely what is happening right now. In fact, as Wolf Richter recently wrote about, the wholesale inventories to sales ratio has now hit a level that we have not seen since the last recession…
…click on the above link to read the rest of the article…
Shale sub-prime and the Ides of March
Shale sub-prime and the Ides of March
“Sub-prime” is the term by which became known the debt market segment that served low quality housing in the US. Essentially these were products supporting mortgages to low-middle class families, that in 2006/07, up against the simultaneous rise in interest rates and commodities prices, produced a wave of defaults that lead to the 2008 financial crisis.
The rise in petroleum prices was a key element to the 2008 crisis, but would eventually bring something positive to the US. Petroleum is usually extracted from large underground cavities known as reservoirs. However, it is formed at greater depth, within source rocks, where organic matter is slowly cooked by the internal heat of the planet until it degrades, first into petroleum and finally into gas. Prices persistently above 100 dollars per barrel meant that beyond traditional reservoirs it also became feasible to drill deeper for petroleum, down to source rocks and other rock formations of low permeability.
In 2010 the US Government and media thus embarked in a promotional campaign for source rock drilling, erroneously calling “shales” to these resources to ease the marketing. Vast amounts of money started flowing to the sector, the industry quivered with activity, plenty of new jobs were created and the country soon emerged from economic recession. The end result: in three years petroleum extraction in the US grew by 50%, returning to levels not seen since the 1980s.
…click on the above link to read the rest of the article…
Never before has drilling for oil collapsed this far this fast.
Never before has drilling for oil collapsed this far this fast.
The word “boom” can never be thought of as a stand-alone concept that everyone loves, particularly governments because they get to rake in the big bucks. It’s always attached to its miserable twin that no one wants to see, the “bust.” They come invariably in cycles, one after the other. You can’t have one without the other. It’s just a question of time. And in the world of fracking, it’s no different.
The fracking-for-oil boom started in 2005, collapsed by 60% during the Financial Crisis when money ran out, but got going in earnest after the Fed had begun spreading its newly created money around the land. From the trough in May 2009 to its peak in October 2014, rigs drilling for oil soared from 180 to 1,609: multiplied by a factor of 9 in five years! And oil production soared, to reach 9.2 million barrels a day in January.
That’s what real booms look like. They’re fed by limitless low-cost money – exuberant investors that buy the riskiest IPOs, junk bonds, leveraged loans, and CLOs usually indirectly without knowing it via their bond funds, stock funds, leveraged-loan funds, by being part of a public pension system that invests in private equity firms that invest in the boom…. You get the idea.
That’s how much of the American shale-oil revolution was funded.
…click on the above link to read the rest of the article…
Here’s a $9 Trillion Question
Here’s a $9 Trillion Question
(Bloomberg) — When Group of 20 finance ministers this week urged the Federal Reserve to “minimize negative spillovers” from potential interest-rate increases, they omitted a key figure: $9 trillion.
That’s the amount owed in dollars by non-bank borrowers outside the U.S., up 50 percent since the financial crisis, according to the Bank for International Settlements. Should the Fed raise interest rates as anticipated this year for the first time since 2006, higher borrowing costs for companies and governments, along with a stronger greenback, may add risks to an already-weak global recovery.
The dollar debt is just one example of how the Fed’s tightening would ripple through the world economy. From the housing markets in Canada and Hong Kong to capital flows into and out of China and Turkey, the question isn’t whether there will be spillovers — it’s how big they will be, and where they will hit the hardest.
“Liquidity conditions globally will start to tighten,” said Paul Sheard, chief global economist at Standard & Poor’s in New York. “Emerging markets won’t be the only game in town. You will have a U.S. economy that is growing more strongly and also offering rising interest rates and a return on capital that is starting to vie for new investment opportunities around the world.”
The broad trade-weighted dollar has strengthened 12.3 percent since June, and it’s forecast to advance further as the Fed tightens while the European Central Bank starts buying sovereign debt and Japan extends record stimulus. The stronger greenback will be the main channel through which the rest of the world feels the effects of a tighter Fed policy, according to Joseph Lupton, a senior global economist at JPMorgan Chase & Co. in New York.
…click on the above link to read the rest of the article…
