Home » Posts tagged 'john rubino' (Page 4)

Tag Archives: john rubino

One of history’s hard lessons is that collapsing financial systems beget authoritarian politics.

Today’s world, alas, is following this script, as rising debts lead to wrenching political changes in nearly every country that holds free elections, while fascism and socialism are once again being taken seriously by people who in normal times would inhabit the political center.

But there’s one big difference this time around: the advanced state of social control technology. Past governments, when trying to tamp down dissent, were limited to blunt-instrument policies like curfews, phone taps and press shutdowns. Today’s would-be Big Brothers can do vastly more, and in many cases will use the coming financial/political emergency as an excuse to place Orwell’s proverbial boot on their citizens’ necks.

Some examples from a recent Wall Street Journal article titled The Autocrat’s New Tool Kit:

• Chinese authorities are now using the tools of big data to detect departures from “normal” behavior among Muslims in the country’s Xinjiang region—and then to identify each supposed deviant for further state attention.
• The Egyptian government plans to relocate from Cairo later this year to a still-unnamed new capital that will have, as the project’s spokesman put it, “cameras and sensors everywhere,” with “a command center to control the entire city.”
• Moscow already has some 5,000 cameras installed with facial-recognition technology, and it can match faces of interest to photos from passport databases, police files and social media.

But scary as these things sound, they’re crude compared to what’s coming. From the same WSJ article:

“Microtargeting” enables governments to build personality assessments of citizens and tailor propaganda for targets’ psychological weak spots. Russia’s Internet Research Agency reportedly harvested data from Facebook to craft specific messages for individual voters during the 2016 US presidential race. Private firms are developing artificial intelligence that can automate this customization for whole populations.

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

Central Banks Cave, Usher In The Crack-Up Boom

March 11, 2019

Central Banks Cave, Usher In The Crack-Up Boom

This was going to be the year when the other big central banks joined the Fed in “normalizing” interest rates and reversing the past decade’s QE experiment. Instead, the other central banks blinked and went back to aggressive ease, and the Fed is following them. This is a very big deal.

Let’s consider some before-and-after stories:

In September 2018, the European Central Bank began tightening:

European Central Bank to take next step in tapering stimulus

(AP) – The European Central Bank is expected to ratchet back its stimulus efforts again on Thursday as it gingerly phases out extraordinary support for the economy left over from the Great Recession and the euro currency union’s debt crisis.

The bank’s 25-member governing council is expected to cut its monthly bond-purchase stimulus to 15 billion euros ($17.4 billion) a month from 30 billion a month, on the way to ending the purchases at the end of the year.

Reinhard Cluse, chief European economist for UBS, said that after the June meeting “the ECB is now essentially on autopilot.” Cluse said that the ECB can phase out the bond purchases and then decide the exact timing of next year’s first rate increase in the summer or fall.

But before any actual tightening took place, the EU economy slowed and turmoil flared in Italy and France. This week:

European Central Bank announces major policy reversal

(WSWS) – The European Central Bank has reversed its policy of slight monetary tightening and announced a new stimulus package in the face of data which show a sharp downturn in growth in the euro zone. The unanimous decision was taken at the meeting of the ECB’s governing council held in Frankfurt yesterday.

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

Poetic Justice For The Aristocracy

March 7, 2019

Poetic Justice For The Aristocracy

Two points about today’s political economy – and then a prediction involving Illinois:

Point One: What’s coming is poetic justice for the aristocracy. The wave of populism/socialism/proto-fascism that’s sweeping the US and Europe is a direct result of the breathtaking hubris of a ruling class that didn’t know when to quit stealing.

While it is possible for societies dominated by a small group of rich/connected people to endure and even thrive, they can do so only if the 99% enjoys a rising standard of living and a certain amount of upward mobility. In other words, people will accept the existence of an entrenched elite as long as everyone else does a little better each year.

Today that’s not the case. The current crop of aristocrats (Google “Davos World Economic Forum images” for faces to go with the concept) are now simply harvesting the wealth of their subjects without much thought for their own vulnerability.

For an easy-to-grasp example of how this works, look at interest rates. Over the past couple of decades, the world’s central banks have been pushing rates lower in each cycle, impoverishing small savers and retirees who depend on income from bonds and bank accounts while enriching the already rich by raising the prices of stocks and real estate. The following two charts (from Charles Hugh Smith’s recent Who Killed The Middle Class?) illustrate the widening gap between the pay and assets of the haves and the used-to-haves. To put this in economist-speak, capital is gobbling up labor.

So the coming political tsunami is bit of French Revolution-style poetic justice, since most of the resulting policy changes will be aimed – either explicitly or accidentally – at the 1%.

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

Remember, The Fed Hasn’t Actually Done Anything Yet

March 1, 2019

Remember, The Fed Hasn’t Actually Done Anything Yet

When the financial markets got, um, choppy towards the end of 2018, the Fed caved almost instantly. But only rhetorically.

Fed chair Powell promised to stop raising interest rates and shrinking the money supply, and the financial markets, trained to salivate at the sound of Fed happy talk, immediately morphed from “risk-off” to “risk-on.” Stocks are now approaching last year’s all-time highs, bond prices are way up (which is to say long-term interest rates are way down) and the financial press is back to celebrating the “Goldilocks economy.”

But remember that as far as actual monetary policy goes, nothing has changed. Last year’s Fed Funds rate increases are still in place, while the Fed’s balance sheet remains diminished (which is to say the cash drained from the economy as the bonds in the Fed’s account were retired remains out of action). So the damage has not been undone, and it’s starting to bite. Some examples:

US retail sales are falling:

source: tradingeconomics.com

Housing, which a year ago was in a mini-bubble, is rolling over. Housing starts are down…

source: tradingeconomics.com

… while existing home sales have cratered:

source: tradingeconomics.com

US manufacturing orders missed big in the most recent reporting month:

Corporate earnings, meanwhile, are so weak that analysts are talking about an “earnings recession”:

From a February Zero Hedge article:

One week ago, when looking at the dramatic collapse in consensus Q1 EPS estimates, we noted that the “profit party” is over and the days of near record earnings growth are about to end with a bang as a result of the recent barrage in profit warnings and negative preannouncements, first and foremost starting with Apple, which issued a shocking guidance cut one month ago for the first time since 2001.

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

Doug Noland: Central Banks Are “Hostages Of Market Bubbles”

February 18, 2019

Doug Noland: Central Banks Are “Hostages Of Market Bubbles”

Doug Noland’s weekly Credit Bubble Bulletin is always required reading. The latest – befitting the amazing things that have happened lately – is more necessary than usual. But at 10,000 words it’s also a lot longer than usual. So while everyone should definitely read the whole thing, here are some excerpts to get you started:

I wonder if the Fed is comfortable seeing the markets dash skyward – the small caps up 16.4% y-t-d, the Banks 15.9%, the Transports 15.2%, Biotechs 18.5% and Semiconductors 17.0%. Or, perhaps, they’re quickly coming to recognize that they are now fully held hostage by market Bubbles.
Similarly, I ponder how Beijing feels about January’s booming Credit data – Aggregate Financing up $685 billion in the month of January. Do officials appreciate that they are completely held captive by history’s greatest Credit Bubble?
Bubbles have become a fundamental geopolitical device – a stratagem. Things have regressed to a veritable global Financial Arms Race. As China/U.S. trade negotiations seemingly head down the homestretch, each side must believe that rallying domestic markets beget negotiating power. Meanwhile, emboldened global markets behave as if they have attained power surpassing mighty militaries and even nuclear arsenals.
China’s banks made the most new loans on record in January – totaling 3.23 trillion yuan ($477bn) – as policymakers try to jumpstart sluggish investment and prevent a sharper slowdown in the world’s second-largest economy.
January’s record China new bank loans were 11.4% higher than the previous record from January 2018 – and 15% above estimates. Total Bank Loans expanded 13.4% over the past year; 28% in two years; 45% in three years; 91% in five years; and an incredible 323% over the past decade.
“The San Francisco Fed put out a white paper about the benefits of negative interest rates. I hope that’s not where we’re going, but we can only cut rates about 225/250 bps to be at zero” — Kyle Bass, Hayman Capital Management.

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

If You Could Design A Perfect World For Gold…

January 27, 2019

If You Could Design A Perfect World For Gold…

Are you sick of your gold just sitting there when it was supposed to have long since made you rich? Have you been fantasizing about a world in which your gold really does make you rich?

If so you’re in good – or at least numerous – company.

So let’s sketch out such a world.

Start by envisioning an America in which a handful of oligopolies have captured banking, media, healthcare and several other important industries, while a tiny group of super-rich neo-aristocrats control as much wealth as the 200 million least-rich citizens.

Toss in a US president who goes out of his way to pick fights which he then proceeds to lose, leading to both falling poll numbers and derisive headlines around the world.

That’s a good start but probably not enough to take gold to its rightful price of $10,000. So let’s add a US opposition party – which, given the above president’s declining popularity, has at least a 50-50 shot at taking power in the next election – that is skewing madly, unprecedentedly to the left. For more on the three most popular Democrats:

Elizabeth Warren proposes ‘wealth tax’ on Americans with more than $50 million in assets

Ocasio-Cortez buzz hits Davos with talk of 70% tax-rate plan

[Socialist frontrunner] Bernie Sanders set to announce 2020 presidential run

Meanwhile, imagine that that same opposition party recently gained control of the branch of Congress that can investigate the President, leading to an escalating battle between legislature and executive that adds an element of legal chaos to what would already have been a presidential campaign of off-the-charts vitriol.

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

Record Global Debt & Chaos in 2019 – John Rubino

January 9, 2019

Record Global Debt & Chaos in 2019 – John Rubino

Financial writer John Rubino says no matter what country, the global debt has exploded to record highs, and it’s going to go even higher in the coming years. Rubino contends, “Government debt is going to soar going forward no matter what. Whether we have three more years of growth or a recession next year, we are going to see massive new deficits and massive increases in government debt all over the world. This is coming at a time when we have already hit record levels of debt and blown right through previous record levels. The last crisis, that almost ended the global financial system, was debt driven. The next one is going to be that much, much more serious because we basically doubled the amount of debt that’s out there since 2005 and 2006.”

On the political front, Rubino says, “The idea that things get more extreme from here is not that out of the ordinary and not that hard to believe. We are not just going to see gridlock here in the U.S., we are going to see chaos. That means of the things that should be gotten done, very few of them will be. . . . Political chaos is good for precious metals . . . both metals are way undervalued.”

Few would disagree, that at some point, the financial system is going to explode. Rubino says, “Let’s look at what happens when this finally blows up. The pressure is going to be on currencies when the financial system starts to spin out of control next time. In other words, people are going to see the amount of debt we are taking on, see the amount of currency we are creating to service all this debt, and will wonder what that does to the value of the currencies that are being aggressively created. They will lose faith in those currencies.

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

Jay Taylor: Gold Is The Go-To Safe Haven Of 2019

January 8, 2019

Jay Taylor: Gold Is The Go-To Safe Haven Of 2019

2019 is looking like one of those either/or years, where growing financial instability leads to either a 2008-style financial crash or another round of asset inflation. In Jay Taylor’s latest newsletter, he concludes that both scenarios are good for gold:

Which Safe Haven Markets Will Dominate in 2019?

If we are, as I believe, on the precipice of a major decline in stocks, the question in my mind as we head into 2019 is to what extent U.S. Treasuries will continue to be the main go-to market in the risk-off trade and to what extent might a loss of confidence in the dollar as the world’s reserve currency lead to a rise in the price of gold?

The answer requires an examination of likely flows of money in 2019 and beyond, and those flows are very much determined by the point at which we exist in the current credit cycle.

We are in one of the longest credit cycles on record, with 2018 being the tenth year of expansion. GoldMoney’s Alasdair Macleod quite correctly points out that in the late stages of the credit cycle money flows out of the financial sector into the real economy and with the flow out of financial assets, interest rates begin to rise.

10-Year U.S. Treasury yields rose from 1.385% on July 5, 2016, to 3.227% on October 1, 2018. The 10-year rate has corrected to 2.652% as of this writing, but it is clear that with the real economy doing better, interest rates have risen, which in turn has put downward pressure on stocks. With increased volatility in U.S. equities, the recent decline in rates reflects the safe haven risk off attitude.

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

Three Things That Will Definitely Happen In 2019

January 4, 2019

Three Things That Will Definitely Happen In 2019

Much about 2019 is uncertain. But a few things are pretty much guaranteed, including the following:

Government debt will rise at an accelerating rate
Like a life-long dieter who finally gives up and decides to eat himself to death, the US is now committed to trillion-dollar deficits for as far as the eye can see. And that’s – get this – assuming no recession in the coming decade. During the next downturn that trillion will become two or more, but in 2019 another trillion-plus is guaranteed.

But the US debt binge is downright orderly compared to much of the rest of the world.

After Paris nearly burned to the ground last month, president Macron responded – surprise! – with massively higher spending:

Macron Bets Spending Binge Can Save His Plan to Transform France

(Bloomberg) – Emmanuel Macron is rolling the dice with France’s public finances to keep his grand plans for the economy alive after weeks of protests on the streets.

Macron’s government will set out a raft of measures to try to calm the so-called Yellow Vest protests on Thursday and they will almost certainly see France breach the European Union’s budget deficit ceiling next year.

The 40-year-old president is arguing the concessions are necessary to maintain public support for his efforts to make the economy more efficient.

“Macron is now facing an impossible trilemma,” said Bernhard Bartels, associate director at Frankfurt-based Scope Ratings. “You can’t have have popular support, ongoing structural reforms and fiscal consolidation all at the same time.”

Macron’s announcement Monday that he’ll raise the minimum wage, abolish taxes on overtime, and get rid of a controversial tax on pensions will send next year’s budget deficit to about 3.5 percent of output, up from a previous target of 2.9 percent, according to media reports. That’s well beyond the 3 percent limit imposed on members of the euro zone.

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

The Yield Curve Flattens And Bank Stocks Plunge. Here’s The Connection – And The Prediction

December 20, 2018

The Yield Curve Flattens And Bank Stocks Plunge. Here’s The Connection – And The Prediction

Despite all the ominous press being devoted to the soon-to-be-inverted yield curve, it’s not always clear why such a thing matters. In other words, how, exactly does a line on a graph slipping below zero translate into a recession and equities bear market, with all the turmoil that those things imply?

The answer (which is both simple and really easy to illustrate with charts) is that banks – the main driver of our hyper-financialized society – still make at least some of their money by borrowing short and lending long. They take money that’s deposited into savings accounts and short-term CDs (or borrowed in the money markets) and lend it to businesses and home buyers for years or decades. In normal times long-term rates are higher than short-term to compensate lenders for tying their money up for longer periods. The banks earn that spread, which can be substantial if borrowers make their payments.

When the yield curve flattens and then inverts — that is, when short rates exceed long rates — banks lose the ability to make money this way. They lend less, which restricts building and buying and spooks the broader markets.

So, here’s the flattening, apparently soon-to-invert yield curve:

And here’s how bank stocks are behaving in response. The following chart is for the BKX bank stock ETF that includes all the major US banks. Note how it was stable for the first nine months of the year and then fell off a cliff as it became clear that the yield curve really was going to invert.

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

Yet Another Trillion-Dollar Unfunded Liability: WHY California Is Burning

December 9, 2018

Yet Another Trillion-Dollar Unfunded Liability: WHY California Is Burning

The apocalyptic fires that hit California last month have left observers scratching their heads and wondering how destruction on that scale could be possible – and how much it will cost in the future if the causes aren’t addressed immediately.

This morning’s Wall Street Journal concludes that 1) the problems aren’t being addressed and 2) this failure is going to cost a fortune that no government is prepared to cover (emphasis added below).

Why Californians Were Drawn Toward the Fire Zones

Building codes, state grants and low insurance rates have encouraged people to flee expensive cities for their dangerously fire-prone fringes.

A Nov. 15 view in Paradise, Calif., above, shows charred remains of houses among the trees after the Camp Fire burned down more than 11,000 homes. PHOTO: CAROLYN COLE/LOS ANGELES TIMES/GETTY IMAGES

The historically deadly wildfires that have roared through California this fall, and a string of similarly destructive ones over the past two years, are boosting calls to do more to slow climate change. But another underlying problem has contributed to the fires’ tragic damage: For decades, California, supposedly the greenest of states, has artificially lowered the cost of encroaching on nature by living in the woods.

Permissive building codes, low insurance rates and soaring taxpayer spending on firefighting and other services have provided an economic framework that has encouraged people to flee the state’s increasingly expensive cities for their leafy fringes. The forested exurbs, including places once thought too hilly or too dry to develop safely, have offered comparatively affordable living with jaw-dropping views.

The upshot: More houses have been packed into the fire-prone border between civilization and forest—known among planners as the “wildland-urban interface,” or WUI—in California than in any other state.

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

Why We’re Ungovernable, Part 17: In Latin America, Soaring Population + Soaring Debt = “Brutal Justice”

December 8, 2018

Why We’re Ungovernable, Part 17: In Latin America, Soaring Population + Soaring Debt = “Brutal Justice”

There are two ways of looking at the intersection of debt and population. One way says that if debt is rising population should also rise to allow future workers to pay for the retirement of today’s. More people thus make debt easier to manage.

The other point of view is that debt and population soaring simultaneously creates a negative feedback loop that eventually destroys a culture.

Today’s Latin America appears to validate the second thesis. Debt and population are both soaring, and big parts of the culture seem to be collapsing.

The following chart shows Latin America’s population more than tripling since 1950:

The next chart shows the government debt of Brazil, Latin America’s largest economy, spiking since the end of the Great Recession:

Brazilian Government Debt % of GDP

source: tradingeconomics.com

As for the culture collapsing, consider this (rather grisly) excerpt from today’s Wall Street Journal:

In Latin America, Awash in Crime, Citizens Impose Their Own Brutal Justice

The 16-year-old had spent a balmy Saturday afternoon in May with his high school friends at a funk music party in Brasília’s central park, not far from the country’s presidential palace.

As he headed home shortly after sundown, someone in the crowd grabbed his classmate Ágatha from behind and snatched her phone, witnesses told police. She spun around and saw Victor. Believing him to be the thief, she screamed out for help. Her friends knocked him to the ground and began to beat him.

Hearing Ágatha’s shrieks, another group of partygoers presumed he must be the same teen who had swiped a pair of sunglasses from them earlier. One of them jammed a broken bottle into Victor’s stomach.

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

The Makings of a Global Debt Crisis Are in Place

December 6, 2018

The Makings of a Global Debt Crisis Are in Place

In 2017, the financial world was filled with talk of synchronized sustainable growth in major economies for the first time since before the 2008 global financial crisis. This was being proclaimed by global financial elites including Christine Lagarde, head of the IMF.

Now that vision is in ashes. Synchronized global growth has turned into a synchronized global slowdown. Growth has already turned negative in two of the world’s largest economies, Japan and Germany, and is slowing rapidly in the world’s biggest economies, China and the U.S.

China may report something like 6.8% GDP growth, but when all the waste in its economy is stripped out the actual growth is probably closer to 4.5%. That’s still growth, but not nearly enough to sustain China’s massive debt overload. Its debt is growing faster than the economy and its debt-to-GDP ratio is even worse than the U.S.

For a sense of perspective, China had about $2 trillion total debt in 2000. Today, it’s about $40 trillion. That’s an unbelievable 2,000% increase in under 20 years.

Growth is also slowing in the U.S. The 2009–2018 recovery has already been the weakest recovery in U.S. history despite a few good quarters here and there. And there’s little reason to expect it to pick up from here.

GDP expanded 3.5% last quarter, which looks good on paper. But the trend is pointing down. Since this April, we’ve seen growth of 4.2% (Q2), and 3.5% (Q3). This trend tends to confirm the view that 2018 growth was a “Trump bump” from the tax cuts that will not be repeated. And Q4 GDP will probably be lower than Q3.

Goldman Sachs, for example, projects fourth-quarter GDP to expand at 2.5%. It further expects growth to drop to 2.2% by the second quarter of 2019, and to 1.6% by the end of the year.

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

Empty Words Are Failing. A Timeline For What Comes Next

December 5, 2018

Empty Words Are Failing. A Timeline For What Comes Next

A quick recap of the past couple of months:

Stocks plunge.

The politicians, bureaucrats and bankers who depend on artificially-elevated financial asset prices start to panic.

The Fed announces that maybe it won’t have to raise interest rates any more, and the president announces a temporary cease-fire in the trade war with China.

The markets bounce, leading some to conclude that the worst is over and it’s time to go back to buying the dip.

A larger number of people conclude that the changes in policy were really just empty words. No actual actions had taken place.

Stocks start falling again. You are here — as this is written on Tuesday Dec 4, the Dow is down about 300 points.

What happens next?
Think of the past few months as the first act in a play that is performed in virtually every business cycle, with later acts following a predictable script. Here’s how it’s likely to go this time:

Words give way to modest action (early 2019). When the markets figure out that empty promises don’t change the underlying reality of slowing growth, falling corporate profits and rising loan defaults, they return to panic mode. Governments are then forced to actually do things to try to stop the bleeding. In the current US case, that means the Fed will announce that it’s done raising rates and will soon start cutting. Trump, meanwhile, will cut a trade deal with China that accomplishes little but removes the future uncertainty.

This will be greeted with another few days of market euphoria, followed by the realization that, again, nothing substantive has changed. Stocks will resume their decline. Let’s call this “2008 revisited.”

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

Corporate Share Buybacks Looking Dumber By The Day

November 26, 2018

Corporate Share Buybacks Looking Dumber By The Day

A recent MarketWatch article notes that:

GE was one of Wall Street’s major share buyback operators between 2015 and 2017; it repurchased $40 billion of shares at prices between $20 and $32. The share price is now $8.60, so the company has liquidated between $23 billion and $29 billion of its shareholders’ money on this utterly futile activity alone. Since the highest net income recorded by the company during those years was $8.8 billion in 2016, with 2015 and 2017 recording a loss, it has managed to lose more on its share repurchases during those three years than it made in operations, by a substantial margin.

Even more important, GE has now left itself with minus $48 billion in tangible net worth at Sept. 30, with actual genuine tangible debt of close to $100 billion. As the new CEO Larry Culp told CNBC last Monday: “We have no higher priority right now than bringing those leverage levels down.” The following day, GE announced the sale of 15% of its oil services arm Baker Hughes, for a round $4 billion.

Of course, since that sale values Baker Hughes at $26 billion, and GE paid $32 billion for 62% of Baker Hughes as recently as last year, which looks to me like a valuation for the whole company of $52 billion, GE shareholders appears to have lost half the value of their investment in Baker Hughes in about 18 months.

But GE is just one of several hundred big companies with CEOs who now have to justify a massive, in some cases catastrophic waste of shareholder cash.

This most recent share buyback binge was dumb money on steroids, with artificially low interest rates leading corporations to borrow big and buy back their stock on the twin assumptions that 1) since the cost to borrow was less than their stock dividend, they were generating “free cash flow” and 2) buying their own stock forced up the price, which would make the CEO look smart.

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

Tag Archives: john rubino

Content

Post categories

Economic Links

Energy/Resource Links

Environmental Links

Geopolitical Links

Liberty Links

News Links

Other Links

Survival Skills

Post Archives by Category

In Latin America, Awash in Crime, Citizens Impose Their Own Brutal Justice

Post navigation

Latest Posts