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If anyone wants to see where western civilization is headed they need only to look at Venezuela today. The Bolivar has gone from 6.3 per dollar to 1,000 per dollar in the past few years. Last year farmers were ordered to turn over certain crops to the government for dispersion in government owned stores. About 100 shopping malls are now having their power cut for several hours a day as power shortages become a problem. But, as one citizen said, it doesn’t really matter because there isn’t anything to buy anyway. Last year their economy dropped 10% and this year it is expected to drop another 8%. They just had 36 747 cargo aircraft deliver newly printed cash to keep up with inflation.

This is the price of socialist programs and lack of sound economic practices. With currency inflating at this rate it is impossible for anyone to save from one year to the next. With government taking farm commodities how long will farmers continue to produce crops they will not get paid for or be paid in increasingly worthless currency. With power shortages commerce cannot continue in any serious way.

Gold has begun its move upwards in reaction to failing bank policies and the realization by the public that all is not well. If you do not get resources before they are gone you will not get them or you will pay dearly for them. Empty stores and closed banks make resource acquisition difficult if not impossible and life becomes much more difficult to survive on a daily basis. Nothing can create shortages like socialist policies and global war.

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

The Public Is Being Looted By Privatization And Deregulation

February 23, 2016

The Public Is Being Looted By Privatization And Deregulation

The privatization movement and the deregulation movement have turned out to be failures.

Privatization in Britain under the Thatcher government had its origin in the belief that the absence of incentivized managers and shareholders with a stake in the bottom line resulted in nationalized companies operating inefficiently, with their losses covered by government like the big private banks’ losses today. Thatcher’s government believed that privatizing socialized firms would reduce the UK budget deficit and take pressure off the British pound.

Today privatization is a way that governments can reward cronies by giving them valuable public resources for a low price. When the UK government privatized the postal system, there were news reports that one postal property in London alone was worth the purchase price of the entire postal service.

Privatization is also a way that conservatives, who object to social pensions and national health, can stop “taxpayer support of welfare.” In the US conservatives want to privatize Social Security and Medicare. In the UK conservatives want to privatize the National Health System.

It looks like the UK Conservative government is taking a step in the direction of privatizing the national health system, one of the great social reforms in British history. https://www.rt.com/uk/333270-nhs-professionals-privatized-deloitte/

In the US there are advocates of privatizing the national forests. In some ways the forests are already privatized as private timber companies are allowed to “harvest” the trees at favorable prices, and often the government even builds the roads for them.

In the US deregulation has resulted in high prices and poor service. When airlines were regulated, they competed on service. They had spare equipment so that mechanical problems did not mean cancelled flights. Stopovers did not involve additional costs.

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

Panic Below The Surface: “Banks Are Selling Energy Loans At Cents On The Dollar To Ensure Their Own Survival”

February 21, 2016

Panic Below The Surface: “Banks Are Selling Energy Loans At Cents On The Dollar To Ensure Their Own Survival”

One week ago, when we commented on the latest weekly update from Credit Suisse’s very well hooked-in energy analyst James Wicklund, one particular phrase stuck out when looking at the upcoming contraction of Oil and Gas liquidity: “while your borrowing base might be upheld, there will be minimum liquidity requirements before capital can be accessed. It is hitting the OFS sector as well. As one banker put it, “we are looking to save ourselves now.“

In his latest note, Wicklund takes the gloom level up a notch and shows that for all the bank posturing and attempts to preserve calm among the market, what is really happening below the surface can be summarized with one word: panic, and not just for the banks who are stuck holding on to energy exposure, or the energy companies who are facing bankruptcy if oil doesn’t rebound, but also for their (now former) employees. Curious why average hourly earnings refuse to go up except for those getting minimum wage boosts? Because according to CS “It is estimated that ~250,000 people have lost their jobs in the industry in the last 18 months.”

Which is bad news: as we reported late last week, the restaurant “recovery” is now over, so as these formerly very well-paid and highly skilled workers scramble to find a job, any job, they’ll find that even the “backup plan” has failed, with not even the local McDonalds suddenly hiring.

From the latest Things we’ve learned this week

One Last Cigarette? Some comments that stood out to us during earnings include, “We are in a period of unprecedented uncertainty.” “We are managing our business week-by-week, crew-by-crew and unit-by-unit.” “We are in a generational downturn.”

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

As Banks Seek Monopoly Over Economy, “Cash Is Being Gradually Taken Away”

February 19, 2016

As Banks Seek Monopoly Over Economy, “Cash Is Being Gradually Taken Away”

emergency-cash

There is a war on for the extermination of cash.

It is the ultimate monopoly game, but there are those who are willing to put up a fight to keep cash in the game.

The powers that be on Wall Street and in the central banks are aiming to eliminate paper money in large part to continue “sustaining and even intensifying the central banks’ nightmarish experiment with negative interest rates” – a doubly dangerouseffort for economic

And banks stand to have all the control as digital transactions flow through their institutions, closely monitored and accumulating fees, penalties and charges that enrich the banks and hold customers hostage.

As Europe moves to take the 500 Euro note out of circulation, former Treasury Secretary and enabler of past crises, has called for an end to the Benjamins – the celebrated $100 note of outlaws, gangsters and all those who would oppose the new world economic order.

As Wolf Street notes:

Those motives include sustaining and even intensifying the central banks’ nightmarish experiment with negative interest rates, increasing public dependence on big banks, destroying the last vestiges of personal financial freedom and anonymity, expanding government surveillance of and control over the economy, and in the case of credit card companies and fintech firms, doing away with their biggest competitor, physical currency.

The powers that want to kill off cash already have vital technological and generational trends firmly on their side, as a result of which cash’s days as a commonly used payment method may well be numbered anyway. They also have the added bonus of widespread public ignorance, apathy, and disinterest.

[…]

“It would be fatal if citizens got the impression that cash is gradually taken away from them”: Bundesbank President Weidman.

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

Central Banking Goes Negative

February 18, 2016

Central Banking Goes Negative

NEW HAVEN – In what could well be a final act of desperation, central banks are abdicating effective control of the economies they have been entrusted to manage. First came zero interest rates, then quantitative easing, and now negative interest rates – one futile attempt begetting another. Just as the first two gambits failed to gain meaningful economic traction in chronically weak recoveries, the shift to negative rates will only compound the risks of financial instability and set the stage for the next crisis.

The adoption of negative interest rates – initially launched in Europe in 2014 and now embraced in Japan – represents a major turning point for central banking. Previously, emphasis had been placed on boosting aggregate demand – primarily by lowering the cost of borrowing, but also by spurring wealth effects from appreciating financial assets. But now, by imposing penalties on excess reserves left on deposit with central banks, negative interest rates drive stimulus through the supply side of the credit equation – in effect, urging banks to make new loans regardless of the demand for such funds.

This misses the essence of what is ailing a post-crisis world. As Nomura economist Richard Koo has argued about Japan, the focus should be on the demand side of crisis-battered economies, where growth is impaired by a debt-rejection syndrome that invariably takes hold in the aftermath of a “balance sheet recession.”

Such impairment is global in scope. It’s not just Japan, where the purportedly powerful impetus of Abenomics has failed to dislodge a struggling economy from 24 years of 0.8% inflation-adjusted GDP growth. It’s also the US, where consumer demand – the epicenter of America’s Great Recession – remains stuck in an eight-year quagmire of just 1.5% average real growth. Even worse is the eurozone, where real GDP growth has averaged just 0.1% over the 2008-2015 period.

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

As War on Cash Escalates, Cash Lovers Fight Back

February 18, 2016

As War on Cash Escalates, Cash Lovers Fight Back

“It would be fatal if citizens got the impression that cash is gradually taken away from them”: Bundesbank President Weidman.

Over the last couple of days, bureaucrats at the European Commission and European Central Bank have expressed a keen interest in withdrawing the €500-note from circulation – barely a week after former Standard Chartered CEO Peter Sands published a report calling for the exact same measure. Allegedly the currency of choice for organized crime outfits around the world, the so-called “Bin Laden bill,” accounts for close to a third of the total amount of cash in existence in the Eurozone.

Then on Tuesday, Larry Summers, in an effort to keep his name in the media by hook or crook, called for the death of the $100 bill, though he lamented that removing existing notes was probably “a step too far”:

But a moratorium on printing new high denomination notes would make the world a better place. In terms of unilateral steps, the most important actor by far is the European Union. The €500 is almost six times as valuable as the $100. Some actors in Europe, notably the European Commission, have shown sympathy for the idea and European Central Bank chief Mario Draghi has shown interest as well.

We have warned for over two years (here, here, here and here) that a loose, albeit powerful, coalition of governments, central banks, big banks, credit card companies, fintech firms, NGOs, and large corporations seeks to pull the plug on cash, for their own disparate motives.

Those motives include sustaining and even intensifying the central banks’ nightmarish experiment with negative interest rates, increasing public dependence on big banks, destroying the last vestiges of personal financial freedom and anonymity, expanding government surveillance of and control over the economy, and in the case of credit card companies and fintech firms, doing away with their biggest competitor, physical currency.

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

The Banking Turmoil Spreads—-Massive Banking Crisis Brewing In Singapore

February 17, 2016

The Banking Turmoil Spreads—-Massive Banking Crisis Brewing In Singapore

By Singapore Business Review

The three biggest banks are losing capital.

A crisis of staggering proportions is looming in China, and tiny Singapore will be caught right in the middle of the storm once the disaster finally erupts.

Speaking at the annual Barron’s roundtable, Swiss billionaire investor Felix Zulauf warned that Singapore’s largest banks are at risk of massive capital outflows if the Chinese economy experiences a hard landing, which he expects will happen this year.

“We are in a down cycle that will end with crisis and calamity. China in today’s cycle is what US housing was during the financial crisis in 2008,” Zulauf warned.

Zulauf warned that capital outflows in China will continue, prompting regulators to devalue the yuan by as much as 15% to 20% within the year. When this happens, Asian economies which are heavily dependent on China—particularly Singapore—will suffer because Chinese corporates will cut their imports even more, while indebted Chinese companies will be placed at greater risk of default.

“I expect the situation the deteriorate to a point where we will witness a banking crisis in Asia that will hit Singapore and Hong Kong particularly hard,” Zulauf said.

“It is conceivable that Singapore, which has attracted a lot of foreign capital over the years because of its image as a strong-currency state, will be extremely exposed to the situation in China. Singapore’s banking-sector loans have grown dramatically in the past five or six years. Singapore is now losing capital, which means the banking industry is losing deposits,” Zulauf said.

He said that such a situation will cause carry trades to go awry, which will result in steep losses for heavily-leveraged traders.

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

Draghi Lies Claiming withdrawing €500 note is for crime not Taxes

February 16, 2016

Draghi Lies Claiming withdrawing €500 note is for crime not Taxes

The Hunt for Taxes

While Mario Draghi has denied that the European Central Bank would only withdraw its €500 highest-denomination banknote to combat crime, not to curb the use of paper money, you really cannot expect that he would tell the truth. If he really told the truth, hew would set off a panic withdraw from banks.

The USA use to print $10,000 notes in 1934. The stopped with Roosevelt and the birth of Socialism to prevent people from storing cash to escape taxes. There was no excuse of terrorism or crime. Crime has actually declined. Draghi is simply engaging in political bullshit – deny the truth so you can quietly remove cash from society. Teddy Roosevelt even used recorded speeches for people to listen to during the election of 1912 to press the socialist agenda under the Progressive Party. The night of the election in 1932, there were rumors that Roosevelt would close the banks and devalue the dollar. Hoover begged him to come out and say he would not for the rumor set in motion a banking panic. Those with money withdrew it. Roosevelt came out the high of the election and lied to the public saying he would never do such a thing. In fact, if he told the truth, people would have poured into the banks and withdrew their deposits in gold. So he lied, and then demanded all gold be turned over to the Treasury, and then he devalued the dollar in 1934.

So never pat attention to the words of politicians or central bankers. They can never say what they will do for the public will act in a counter-trend move. Draghi is withdrawing the €500 notes for the same reason FDR stopped the Treasury from issuing high denomination notes – taxes; not crime nor terrorism. It has always been about money.€

This Is The NIRP “Doom Loop” That Threatens To Wipeout Banks And The Global Economy

February 12, 2016

This Is The NIRP “Doom Loop” That Threatens To Wipeout Banks And The Global Economy

Remember the vicious cycle that threatened the entire European banking sector in 2012?

It went something like this: over indebted sovereigns depended on domestic banks to buy their debt, but when yields on that debt spiked, the banks took a hit, inhibiting their ability to fund the sovereign, whose yields would then rise some more, further curtailing banks’ ability to help out, and so on and so forth.

Well don’t look now, but central bankers’ headlong plunge into NIRP-dom has created another “doom loop” whereby negative rates weaken banks whose profits are already crimped by the new regulatory regime, sharply lower revenue from trading, and billions in fines. Weak banks then pull back on lending, thus weakening the economy further and compelling policy makers to take rates even lower in a self-perpetuating death spiral. Meanwhile, bank stocks plunge raising questions about the entire sector’s viability and that, in turn, raises the specter of yet another financial market meltdown.

Below, find the diagram that illustrates this dynamic followed by a bit of color from WSJ:

From WSJ:

In a way, the move below zero was a gamble. The theory went like this: Banks would take a hit, but negative rates would get the economy moving. A stronger economy would, in turn, help the banks recover.

It appears that wager isn’t working.

The consequences are deeply worrying. Weak banks may now drag the economy down further. And with the economy weak and deflation—a damaging spiral of falling wages and prices—looming, central banks that have gone negative will be loath to turn around and raise rates.

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

Rising Systemic Risk for all Markets

February 10, 2016

Rising Systemic Risk for all Markets

We are on the precipice of what can only be described as rising systemic risk for all markets. The Fed is now hinting that banks should prepare for NEGATIVE INTEREST RATES and this insanity of following the crowd is undermining the entire world economy. The increasingly unstable footing that we find ourselves standing upon is reflected in widening credit spreads demonstrating that CONFIDENCE is indeed collapsing. The EU Commission will no longer classify government bonds in bank balance sheets as “risk”. Banks would also have government bonds on par with “equity” yet government bonds have proven to be risky and are inferior to what would in some financial institutions result in an increased capital requirement. Turning to Goldman Sachs, we see the so called world’s greatest trader closed out its long-USD trade against a basket of Euro and Japanese yen with a potential loss of around 5% which is being bantered about on the street showing they too got this all wrong. This early 2016 destabilization is stopping out short gold positions but not replacing them with any buying conviction while the Euro trade of long Italian 5 year against short German 5 year has also turned into a blood-bath as the Euro finally rallied begrudgingly to reach our first resistance target in the mid-113 area.

Global economic growth has been anemic at best in the States but it is clearing turning down since 2015.75. This new world order of NEGATIVE INTEREST RATES is so insane and focused solely on trying to stimulate borrowing, it is undermining pensions and the elderly creating an economic storm of the century on the horizon, which is far worse that the Great Depression of the 1930s. Even the Japanese 10 Year bond has gone NEGATIVE demonstrating the total collapse in CONFIDENCE.

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

A 918 Point Stock Market Crash In Japan And Deutsche Bank Denies That It Is About To Collapse

February 10, 2016

A 918 Point Stock Market Crash In Japan And Deutsche Bank Denies That It Is About To Collapse

On Tuesday junk bonds continued to crash, the price of oil briefly dipped below 28 dollars a barrel, Deutsche Bank was forced to deny that it is on the verge of collapse, but the biggest news was what happened in Japan. The Nikkei was down a staggering 918 points, but that stock crash made very few headlines in the western world. If the Dow had crashed 918 points today, that would have been the largest single day point crash in all of U.S. history. So what just happened in Japan is a really big deal. The Nikkei is now down 23.1 percent from the peak of the market, and that places it solidly in bear market territory. Overall, a total of 16.5 trillion dollars of global stock market wealth has been wiped out since the middle of 2015. As I stated yesterday, this is what a global financial crisis looks like.

Just as we saw during the last financial crisis, the big banks are playing a starring role, and this is definitely true in Japan. Right now, Japanese banking stocks are absolutely imploding, and this is what drove much of the panic last night. The following numbers come from Wolf Richter…

Mitsubishi UFJ Financial Group plunged 8.7%, down 47% from June 2015.
Mizuho Financial Group plunged 6.2%, down 38% since June 2015.
Sumitomo Mitsui plunged 6.2%, down 26% since May 2015
Nomura plunged a juicy 9.1%, down 42% since June 2015

A lot of analysts have been very focused on the downturn in China in recent months, but I think that it is much more important to watch Japan right now.

I have become fully convinced that the Japanese financial system is going to play a central role in the initial stages of this new global financial meltdown, and so I encourage everyone to keep a close eye on the Nikkei every single night.

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

Negative Interest Rates Destroying World Economy: “Doom-and-Gloom Outlook for Banks in Europe”

February 9, 2016

Negative Interest Rates Destroying World Economy: “Doom-and-Gloom Outlook for Banks in Europe”

global-reset---shadow-banking

Trying to simply hold onto the standard that you’ve got has become a new normal for financial challenges.

Equity erodes away when interest rates go negative… then everything starts to sour.

China’s economy and stock market are effectively in the toilet, or poised to further collapse the next time anything big happens in Europe or the United States, and perhaps any part of the world.

The U.S. stock market has become jumpy and prone to collapse as well, and all major markets are now global, and trip up anytime the string tied around their ankle is yanked from across the ocean. And collapsing oil prices are adding huge pressures to everything.

Now Europe banks are at the brink. Will it be enough to set off the major crisis everyone has been warning about?

Via MarketWatch:

Europe’s bank index has posted its longest weekly string of losses since 2008 […] the Stoxx Europe 600 Banks Index has logged six straight weeks of declines.

Lackluster profits and negative interest rates, have prompted investors to dump shares in the sector that was touted as one of the best investment ideas just a few months ago.

[…]

The negative interest rates set by the ECB means that banks effectively have to pay to have cash on their balance sheets, while at the same time getting squeezed on their net interest margins. Debt levels are already really high on the continent, which means further loan growth is expected to be low, he said.

Negative interest rates, a result of the overkill of quantitative easing at the Federal Reserve, is plenty enough rope for all involved to hang themselves. The desperate and poor will fall as a result of borrowing too much on easy credit, and the richer and better off will fall as a result of declining returns and falling standards for income.

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

The Return Of Crisis

February 9, 2016

The Return Of Crisis

Suddenly banks everywhere are in deep, deep trouble

Financial markets the world over are increasingly chaotic; either retreating or plunging. Our view remains that there’s a gigantic market crash in the coming future — one that has possibly started now.

Our reason for expecting a market crash is simple: Bubbles always burst.

Bubbles arise when asset prices inflate above what underlying incomes can sustain. Centuries ago, the Dutch woke up one morning and discovered that tulips were simply just flowers after all. But today, the public has yet to wake up to the mathematical reality that over $200 trillion in debt and perhaps another $500 trillion of un(der)funded liabilities really cannot ever be paid back under current terms. However, this fact is dawning within the minds of more and more critical thinkers with each passing day.

In order for these obligations to be reset to a reality-based level, something has to give. The central banks have tried to modify the phrase “under current terms” by debasing the currency these obligations are written in via inflation. Try as they have, though, they’ve been unable to create the sort of “goldilocks” low-level inflation that would slowly sublimate that massive pile of debt into something more manageable.

Wide-spread inflation has not happened. Why not? Because they’ve failed to note that plan of handing all of their newly printed money to a very wealthy elite — while a socially popular thing to do among the cocktail party set — simply has concentrated the inflation to the sorts of assets the monied set buys: private jets, penthouse apartments, fine art, large gemstones, etc. So yes, their efforts produced price inflation; just of the wrong sort.

Even worse, all the central banks have really accomplished is to assure that when the deflation monster finally arrives it will be gigantic, highly damaging and possibly uncontrollable.

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

Day Of Reckoning: The Collapse Of The Too Big To Fail Banks In Europe Is Here

February 9, 2016

Day Of Reckoning: The Collapse Of The Too Big To Fail Banks In Europe Is Here

There is so much chaos going on that I don’t even know where to start. For a very long time I have been warning my readers that a major banking collapse was coming to Europe, and now it is finally unfolding. Let’s start with Deutsche Bank. The stock of the most important bank in the “strongest economy in Europe” plunged another 8 percent on Monday, and it is now hovering just above the all-time record low that was set during the last financial crisis. Overall, the stock price is now down a staggering 36 percent since 2016 began, and Deutsche Bank credit default swaps are going parabolic. Of course my readers were alerted to major problems at Deutsche Bank all the way back in September, and now the endgame is playing out. In addition to Deutsche Bank, the list of other “too big to fail” banks in Europe that appear to be in very serious trouble includes Commerzbank, Credit Suisse, HSBC and BNP Paribas. Just about every major bank in Italy could fall on that list as well, and Greek bank stocks lost close to a quarter of their value on Monday alone. Financial Armageddon has come to Europe, and the entire planet is going to feel the pain.

The collapse of the banks in Europe is dragging down stock prices all over the continent. At this point, more than one-fifth of all stock market wealth in Europe has already been wiped out since the middle of last year. That means that we only have four-fifths left. The following comes from USA Today…

The MSCI Europe index is now down 20.5% from its highest point over the past 12 months, says S&P Global Market Intelligence, placing it in the 20% decline that unofficially defines a bear market.

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

After Crashing, Deutsche Bank Is Forced To Issue Statement Defending Its Liquidity

February 8, 2016

After Crashing, Deutsche Bank Is Forced To Issue Statement Defending Its Liquidity

The echoes of both Bear and Lehman are growing louder with every passing day.

Just hours after Deutsche Bank stock crashed by 10% to levels not seen since the financial crisis, the German behemoth with over $50 trillion in gross notional derivative found itself in the very deja vuish, not to mention unpleasant, situation of having to defend its liquidity and specifically assuring investors that it has enough cash (about €1 billion in 2016 payment capacity), to pay the €350 million in maturing Tier 1 coupons due in April, which among many other reasons have seen billions in value wiped out from both DB’s stock price and its contingent convertible bonds which are looking increasingly more like equity with every passing day.

DB did not stop there, but also laid out that for 2017 it was about €4.3BN in payment capacity, however before the impact of 2016 results, which if recent record loss history is any indication, will severely reduce the full cash capacity of the German bank.

From the just issued press release:

Ad-hoc: Deutsche Bank publishes updated information about AT1 payment capacity

Frankfurt am Main, 8 February 2016 – Today Deutsche Bank published updated information related to its 2016 and 2017 payment capacity for Additional Tier 1 (AT1) coupons based on preliminary and unaudited figures.

The 2016 payment capacity is estimated to be approximately EUR 1 billion, sufficient to pay AT1 coupons of approximately EUR 0.35 billion on 30 April 2016.

The estimated pro-forma 2017 payment capacity is approximately EUR 4.3 billion before impact from 2016 operating results. This is driven in part by an expected positive impact of approximately EUR 1.6 billion from the completion of the sale of 19.99% stake in Hua Xia Bank and further HGB 340e/g reserves of approximately EUR 1.9 billion available to offset future losses.

The final AT1 payment capacity will depend on 2016 operating results under German GAAP (HGB) and movements in other reserves.

The updated information in question:

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

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