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We haven’t seen numbers like these since the last global recession. I recently wrote about how global trade is imploding all over the planet, and the same thing is true when it comes to manufacturing. We just learned that manufacturing in China has now been contracting for seven months in a row, and as you will see below, U.S. manufacturing is facing “its toughest period since the global financial crisis”. Yes, global stocks have bounced back a bit after experiencing dramatic declines during January and the first part of February, and this is something that investors are very happy about. But that does not mean that the crisis is over. All bear markets have their ups and downs, and this one will not be any different. Meanwhile, the cold, hard economic numbers that keep coming in are absolutely screaming that a new global recession is here.

Just consider what is happening in China. Manufacturing activity continues to implode, and factories are shedding jobs at the fastest pace since the last financial crisis…

Chinese manufacturing suffered a seventh straight month of contraction in February.

China’s official Purchasing Managers’ Index (PMI) stood at 49.0 in February, down from the previous month’s reading of 49.4 and below the 50-point mark that separates growth from contraction on a monthly basis.

A private survey also showed China’s factories shed jobs at the fastest rate in seven years in February, raising doubts about the government’s ability to reduce industry overcapacity this year without triggering a sharp jump in unemployment.

For years, the expansion of the Chinese economy has helped fuel global economic growth. But now things have shifted dramatically.

At this point, things are already so bad that the Chinese government is admitting that millions of workers are going to lose their jobs at state-controlled industries in China…

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

Striking Admission By Former Bank Of England Head: The European Depression Was A “Deliberate” Act

March 2, 2016

Striking Admission By Former Bank Of England Head: The European Depression Was A “Deliberate” Act

Once again we find that it is only after they leave their official posts that central bankers finally tell the truth.

Last night, it was Alan Greenspan who blasted the state of the economy, saying that “we’re in trouble basically because productivity is dead in the water” and when asked if he is optimistic going forward, Greenspan replied “no, I haven’t been for quite a while.”

Then on Sunday, the former head of the BOE, Mervyn King, warned that another aspect of the global economy, namely the financial system whose structural problems remain untouched since the financial crisis have been untouched, is “certain to have another crisis.

“To be sure, warnings by former central bankers who are more responsible about the current global mess sound as nothing but revisionist bullshit. And yet, it was what King said today at the launch of his new book that left us surprised.

As the Telegraph reports today, according to the former head of the Bank of England Europe’s economic depression “is the result of “deliberate” policy choices made by EU elites. Mervyn King continued his scathing assault on Europe’s economic and monetary union, having predicted the beleaguered currency zone will need to be dismantled to free its weakest members from unremitting austerity and record levels of unemployment.

King also said he could never have envisaged an economic collapse of the depths of the 1930s returning to Europe’s shores in the modern age. But, he added, the fate of Greece since 2009 – which has suffered a contraction eclipsing the US depression in the inter-war years – was an “appalling” example of economic policy failure, he told an audience at the London School of Economics.

“I never imagined that we would ever again in an industrialised country have a depression deeper than the United States experienced in the 1930s and that’s what’s happened in Greece.

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

Fear The Smell Of (Monetary) Napalm In The Morning

February 26, 2016

Fear The Smell Of (Monetary) Napalm In The Morning

Via ConvergEx’s Nick Colas,

Warm up the choppers and put some Wagner on the loudspeakers – “Helicopter money” is a hot economic topic.

That’s where central banks print money and either hand it to the government for things like infrastructure investment or just send it out to consumers to spend. While that may sound like an extreme measure, advocates of this novel approach argue that it is a valid response to an extreme problem: slowing global growth and central banks with no “Standard” tools left in the shed.

But would it work? There are two real-world examples in the last 15 years that offer some clues: the 2001 and 2008 tax rebate checks mailed to millions of Americans for up to $600 (2001) and $1,200 (2008). Studies by the National Bureau of Economic Research done in the wake of both events show notable differences.

In the first “Drop” (mid 2001), recipients reported spending most (53-73%) of their windfall.

In the second (early 2008), the percentage dropped to one third and most recipients reported saving the cash or using it to reduce debt.

The key lesson here: if policymakers are considering “Helicopter money”, they need to have the choppers in the air before a crisis hits. After that, it is too late.

The world’s central bankers are apparently out of ideas for how to stimulate the global economy back to health. Low interest rates? Check. Zero interest rates? Check. Buying bonds to lower long term interest rates? Big check. Negative interest rates? Ditto. If monetary policy were a theme park, we could safely say we’ve been on every ride in the whole place.

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

G-20 Needs To “Man Up” Or Risk Sparking Market Chaos, Citi Warns

February 26, 2016

G-20 Needs To “Man Up” Or Risk Sparking Market Chaos, Citi Warns

Two days ago, the man who now signs your Federal Reserve notes threw cold water on hopes for a so-called “Shanghai Accord.”

Over the past month or so, anticipation has built among market participants for some manner of coordinated policy response at this weekend’s G20 summit in Shanghai. The hoped for agreement would ideally be something akin to the 1985 Plaza Accord between the United States, France, West Germany, Japan, and the United Kingdom, which agreed to weaken the USD to shore up America’s trade deficit and boost economic growth.

Calls for coordinated action come on the heels of a turbulent January in which collapsing crude, RMB jitters, and worries that central banks are out of bullets have sowed fear in the minds of investors. “We remain sellers into strength in coming weeks/months of risk assets at least until a coordinated and aggressive global policy response (e.g. Shanghai Accord) begins to reverse the deterioration in global profit expectations and credit conditions,” BofA said last week, ahead of the summit.

“Don’t expect a crisis response in a non-crisis environment,” Lew said in an interview broadcast Wednesday with David Westin of Bloomberg Television. “This is a moment where you’ve got real economies doing better than markets think in some cases.”

Whether or not you agree with Lew’s assessment of “real economies” or not, the message was clear. The US isn’t set to support some kind of joint statement on fiscal stimulus and may not even be willing to be part of a consensus on the need to implement emergency measures to juice global growth and trade.

On Friday, the soundbites are rolling in as the world’s financial heavyweights opine on the state of the decelerating global economy and the turmoil that likely lies ahead for markets.

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

World Trade Collapses Most Since Crisis

February 26, 2016

World Trade Collapses Most Since Crisis

One question now dominates the global macro discussion: has subdued global growth and trade become the norm in the post-crisis world?

That is, have lackluster growth and trade become structural and endemic rather than transient and cyclical?

Those are the burning questions that keep central bankers (not to mention sellside economists) up at night and they are front and center at the G-20 in Shanghai.

Warning signs abound. The Baltic Dry is in a veritable free fall. Germany’s manufacturing juggernaut is showing signs of faltering. The BRICS have ceased to be a reliable driver of global growth. US freight volumes are falling for the first time in years. And the list goes on.

“We have seen this burst of globalization, and now we’re at a point of consolidation, maybe retrenchment,” WTO chief economist Robert Koopman said last autumn. “It’s almost like the timing belt on the global growth engine is a bit off or the cylinders are not firing as they should.”

As we noted earlier this month, to the extent Maersk is a bellwether, things are looking pretty grim. Maersk Line – the company’s golden goose and the world’s largest container operator – racked up $182 million in red ink last quarter and the outlook for 2016 isn’t pretty either. The company now sees demand for seaborne container transportation rising a meager 1-3% for the year.

On Thursday we got the latest evidence that the wheels are falling off. According to new data from the Netherlands Bureau of Economic Policy Analysis’s World Trade Monitor, global trade (defined as the value of goods that crossed international borders) plunged nearly 14% in 2015.

That’s the first contraction since 2009.

“The new data released on Thursday represent the first snapshot of global trade for 2015,” FT notes. “But the figures also come amid growing concerns that 2016 is already shaping up to be more fraught with dangers for the global economy than previously expected.”

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

Where Negative Interest Rates Will Lead Us

February 25, 2016

Where Negative Interest Rates Will Lead Us

Despite zero-interest-rate-policy (ZIRP) and multiple quantitative easing programs — whereby the central bank buys large quantities of assets while leaving interest rates at practically zero — the world’s economies are stuck in the doldrums. The central banks’ only accomplishment seems to be an increase in public and private debt. Therefore, the next step for the Keynesian economists who rule central banks everywhere is to make interest rates negative (i.e., adopt negative-interest-rate-policy or “NIRP.”) The process can be as simple as the central bank charging its member banks for holding excess reserves, although the same thing can be accomplished by more roundabout methods such as manipulating the reverse repo market.

Remember, it was the central bank itself that created these excess reserves when it purchased assets with money created out of thin air. The reserves landed in bank reserve accounts at the central bank when the recipients of the central bank’s asset purchases deposited their checks in their local banks. Now the banks have liabilities that are backed by depreciating assets (i.e., the banks still owe their customers the full amount in their checking accounts), but the central bank charges the banks for holding the reserves that back the deposits. In effect, the banks are being extorted by the central banks to increase lending or lose money. The banks have no choice. If they can’t find worthy borrowers, they must charge their customers for the privilege of having money in their checking accounts. Or, as is happening in some European banks, the banks try to increase loan rates to current borrowers in order to cover the added cost.

In European countries where NIRP reigns, so far, the banks are charging only large account holders for their deposits. So, these large account customers are scrambling to move their money out of banks and into assets that do not depreciate.

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

Even The Average Joe Gets It: “They’re Winding Us All Up For A Minsky Moment”

February 24, 2016

Even The Average Joe Gets It: “They’re Winding Us All Up For A Minsky Moment”

With global central bank policy in disarray following the Fed’s now admitted “policy error” of tightening just as the US and global economy are heading for recession, while the rest of the world desperate to cut to ever more negative rates, not to mention Japan’s abysmal foray into NIRP, there was hope that this weekend in Shanghai the G-20 would “bail us out” and unveil some miraculous rescue for risk takers at least one more time.

However, as Jack Lew explained earlier today, this won’t happen, leaving traders in a state of limbo and cognitive shock – after all if not even the central banks have your back, then who does?

Still something has to happen, or otherwise the world will careen into a deflationary, NIRP collapse and the Fed’s 25bps “recession buffer” will have absolutely no impact before the US itself plunged into economic contraction.

One proposal comes from BBG trader Richard Breslow, who like most others, is sick and tired of the constant market manipulation, endless central bank jawboning, and who like us, is hoping that one day markets will once again be free and efficient, not for any other reason but because as Breslow notes, even the average Joe gets it: “if you really want to see people spend and invest there has to be some belief this won’t all end in tears.”

His full note:

Parole For Prisoners With A Dilemma

If the U.S. wants to really do some good at the G-20, they should try to get their heads around the concept of embracing a stronger U.S. dollar. That would be showing a commitment to global leadership, both economic and moral, which has been long absent. It’s a bet on a stronger global economic tide raising all boats.

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

The World Is Hoarding Gold: “This Was Just A Taste Of What’s To Come”

February 22, 2016

The World Is Hoarding Gold: “This Was Just A Taste Of What’s To Come”

Earlier this month, as retail investors lost confidence in the global economy and broader stock markets, an air of panic began to set in. Reports indicate the lines were literally forming around the block at gold stores throughout London and elsewhere. It was, by all accounts, the very scenario one might expect in an environment where trust in government and central banks has been eroded.

But it’s only the beginning, explains Auryn Resources executive chairman Ivan Bebek in an interview with SGT Report, as nation states and large investors are trying to get their hands on gold as fast as they can:

Before any big move in gold we have always seen extreme volatility or volatility pick up. This was just a taste of what’s to come in the next few years… We’ll look back at this and be reflecting on how minimal this move was compared to what’s going to happen as we go forward…

It’s a smart money trend… they can see where their countries are going… where the world economy is going… it’s surprising how late they are to the party… late to a very small door to get a bit of gold that’s out there… it’s going to be a remarkable reaction when that all comes to fruition. They’re just positioning themselves for what’s to come and that’s what they have to do. And getting back into the gold trade, the gold business and hoarding gold… they’re doing that because they see a very big gold market coming ahead like the rest of us.

Full Video Interview:

(Watch At Youtube)

And while there is most certainly big money moving into gold ahead of negative interest rates, a potential ban on high denomination cash bills and the global calamity to come, Bebek highlights the fact that retail investors haven’t yet begun to get involved on any meaningful scale.

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

The Danger Of Low Oil Prices For The Global Economy

February 22, 2016

The Danger Of Low Oil Prices For The Global Economy

Oilprice.com wanted to check in with Dr. John C. Edmunds, a Professor of Finance at Babson College, to get his thoughts on the OPEC deal, oil markets, and some developments in Latin America. He is an expert in international finance, capital markets, foreign exchange risk, and Latin American stock markets.

Dr. Edmunds holds a D.B.A. in International Business from Harvard Business School, an M.B.A. in Finance and Quantitative Methods with honors from Boston University, an M.A. in Economics from Northeastern University, and an A.B. in Economics cum laude from Harvard College. He has consulted with the Harvard Institute for International Development, the Rockefeller Foundation, Stanford Research Institute, and numerous private companies.

This interview has been edited for brevity and clarity.

Oilprice.com: I wanted to start off with the OPEC deal that was announced [on February 16], the production freeze. Notably, Iran declined to comment on whether or not they’d freeze production. So most people think that means they won’t, and that they will still pursue their pre-sanctions production levels. I was wondering what you thought of this deal and if it had any practical implications for the oil markets?

Dr. John Edmunds: Well, I would say that it has not come together yet. Pretty soon they are going to do something because there are countries that are really just flat out desperate. I wouldn’t mention Iran specifically, although, they have been years and years without full income. But the ones I’m aware of right now…Nigeria just announced that they couldn’t pay their school teachers.

Venezuela, that place is just flat out desperate. They have had nothing but oil for, well, since the 1920s. And they don’t even know how to grow food.

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

The Fatal Flaw That Has Doomed Our Economy

February 22, 2016

The Fatal Flaw That Has Doomed Our Economy

What Went Wrong?

BALTIMORE – We are searching for an insight. Each time we think we see it… like the shadow of a ghost in an old photo… it gets away from us. It concerns the real nature of our money system… and what’s wrong with it. Here… we bring new readers more fully into the picture… and try to spot the flaw that has doomed our economy.

Let’s begin with a question. After the invention of the internal combustion engine, people in Europe… and then the Americas… got richer, almost every year. Earnings rose. Wealth increased. Then in the 1970s, after two centuries, American men ceased making progress.

1859: Frenchman Etienne Lenoir builds a double-acting, spark-ignition engine that can be operated continuously. The internal combustion engine is born.

Despite more PhDs than ever… more scientists… more engineers… more capital… more knowledge… more Nobel Prizes… more college graduates… more machines… more factories… more patents… and the invention of the Internet… after adjusting for inflation, the typical American man earned no more in 2015 than he had 40 years before.

Why? What went wrong? No one knows. But we have a hypothesis. Not one person in 1,000 realizes it, but America’s money changed on August 15, 1971. After that, not even foreign governments could exchange their dollars for gold at a fixed rate.

The dollar still looked the same. It still acted the same. It still could be used to buy booze and cigarettes. But it was flawed money. And it changed the whole world economy in a fundamental way… a way that is just now coming into focus.

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

Why According To One Bank, Massive Central Bank Intervention Is Imminent

February 20, 2016

Why According To One Bank, Massive Central Bank Intervention Is Imminent

Any time the relative performance of global financials to US Treasuries has stumbled as far as it has, as shown in the chart below, it has meant one thing – a major central bank intervention was imminent.

At least that’s the interpretation of BofA’s Michael Hartnett, who shows that in order to provide the kick for the bounce in this all too important “deflationary leading indicator”, central banks engaged in major unorthodox easing episodes, whether QE1-3, or the ECB’s QE.

Why intervene now? Here are the problems according to Hartnett:

Problem 1: US economy in “bad Goldilocks”, i.e. US economy not hot/strong enough to lift global GDP & EPS; but not cold/bad enough to induce global coordinated response
Problem 2: global policy-maker rhetoric in recent days shows “coordinated innocence” not stimulus, all blaming global economy for weak domestic economies(“Overseas factors are to blame”…Japan PM Abe; “drag on U.S. economy from greater-than-expected-slowdown in China & other EM economies“…FOMC minutes; “increasing concerns about the prospects for the global economy”…ECB Draghi; “the change in China’s growth rate can be attributed in part to weak performance of the global economy”…PBoC)

Problem 2 is static, meant for media propaganda and jawboning; it can easily be removed once the global economy takes the next leg lower. Which incidentally would also resolve the gating factor of Problem 1 – as we have said for months, the Fed and its central bank peers need the political cover to launch more stimulus.

And in a reflexive world, where the “economy is the market”, this means just one thing – a big leg lower in stocks is the necessary and sufficient condition to once again push stocks higher, as policy failure is internalized, and global risk reprises from square 1.

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

NIRP Won’t Work – What Ray Dalio Thinks Central Banks Will Do Next

February 18, 2016

NIRP Won’t Work – What Ray Dalio Thinks Central Banks Will Do Next

Just as we first warned in September 2013, so it seems the view of “helicopter money” being imminent is now becoming more mainstream as the powers that be slowly propagandize the benefits.

If dropping interest rates to zero was Unorthodox Policy #1 and QE was Unorthodox Policy #2 then it seems very possible Helicopter Money will be Unorthodox Policy #3. Whether this new level of expansionism, with all the hopes and theoretic power it is supposed to hold, can generate growth of the red-hot rather than lukewarm kind remains to be seen.

However in so much as it could potentially raise nominal GDP, it may become an increasingly more attractive policy option around a global economy (especially DM) economy that faces many natural and structural growth concerns in the year ahead.Forcing the nominal economy to grow into the problems of the bubble era could be the most realistic policy choice over the remainder of the decade.

And today, the latest in a long line of realists has now come to the same conclusion that the only thing the central planners have left is a money-drop…

Authored by Bridgewater’s Ray Dalio (via ValueWalk.com),

Monetary Policy 1 was via interest rates. Monetary Policy 2 was via quantitative easing. It will be important for policy makers and us as investors to envision what Monetary Policy 3 (MP3) will look like.

While monetary policy in the US/dollar has not fully run its course and lowering interest rates and quantitative easing can still rally markets and boost the economy a bit, the Fed’s ability to stimulate via these tools is weaker than it has ever been. The BoJ’s and ECB’s abilities are even weaker. As a result, central banks will increasingly be “pushing on a string.” Let’s take just a moment to review the mechanics of why and then go on to see what MP3 will look like.

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

OECD cuts growth outlook for Canada’s economy this year and next

February 18, 2016

OECD cuts growth outlook for Canada’s economy this year and next

Canada, other economies ‘reliant on commodity exports’ bear brunt of global slowdown

A worker builds a jet engine at a factory in Quebec. According to the OECD, Canada's economy is going to perform worse than previously anticipated this year and next.

A worker builds a jet engine at a factory in Quebec. According to the OECD, Canada’s economy is going to perform worse than previously anticipated this year and next. (Radio-Canada)

The Organization for Economic Co-operation and Development said Thursday that after eking out a 1.2 per cent expansion in 2015, Canada’s economy is on track to grow by 1.4 per cent this year and 2.2 per cent next year.

The forecasts for this year and next are less than had been expected by the group, which conducts research on the world’s richest nations, in its last quarterly forecast.

As recently as November, the group was expecting Canada’s economy to grow by two per cent this year and 2.3 per cent next year.

The group singled out Canada and other economies described as “reliant on commodity exports” for bearing the brunt of a global economic slowdown that seems underway.

In 2015, the world’s economy grew by five per cent, it’s slowest pace in five years, the OECD said. The group expects a repeat performance in 2016.

“Trade and investment are weak,” said Catherine Mann, the organization’s chief economist. “Sluggish demand is leading to low inflation and inadequate wage and employment growth.”

The estimate for U.S. growth has been lowered by 0.5 to 2.0 per cent in 2016 and by 0.2 to 2.2 per cent in 2017. There were also downgrades for the other G7 countries — Germany, France, Italy, Japan and the United Kingdom — as well as Brazil.

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

First Iran, Now Iraq Refuses To Commit To Oil Production Freeze

February 18, 2016

First Iran, Now Iraq Refuses To Commit To Oil Production Freeze

For all the euphoria about the proposed OPEC oil production freeze deal, the reality is that nothing has been actually decided. As readers will recall, the only “decisions” agreed to between the Saudi and Russian oil ministers were to cap production at already record high levels of output, however contingent on everyone else voluntarily joining said production cap.

Then yesterday, as part of its own meeting, Iran made it clear that while it supports efforts to push the price of oil higher, it would certainly not limit its output at current levels, and instead requires an explicit loophole granting it a production limit from the pre-sanctions period. This put OPEC in a bind: if it grants Iran special treatment, then who else will have a similar request.

The answer was revealed just hours later when Iraq earlier today stopped short of saying it would curb production of oil to prop up sagging prices, saying negotiations are still ongoing between members of the Organization of the Petroleum Exporting Countries.

According to the WSJ, Iraq oil minister Adel Abdul Mahdi said his country supports any decision that will serve producers, prop up prices and achieve balance in the crude markets. However, just like Iran he didn’t explicitly say whether Iraq would curb its own output but said any rapprochement between all sides to restrict crude output is a step in the right direction.

As the WSJ summarizes, his comments “came a day after Iran’s oil minister didn’t commit to limiting production, throwing into question the future of a plan brokered by Saudi Arabia and Russia this week for major oil producing countries to limit their output to last month’s levels.”

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

21 New Numbers That Show That The Global Economy Is Absolutely Imploding

February 17, 2016

21 New Numbers That Show That The Global Economy Is Absolutely Imploding

After a series of stunning declines through the month of January and the first half of February, global financial markets seem to have found a patch of relative stability at least for the moment. But that does not mean that the crisis is over. On the contrary, all of the hard economic numbers that are coming in from around the world tell us that the global economy is coming apart at the seams. This is especially true when you look at global trade numbers. The amount of stuff that is being bought, sold and shipped around the planet is falling precipitously. So don’t be fooled if stocks go up one day or down the next. The truth is that we are in the early chapters of a brand new economic meltdown, and I believe that all of the signs indicate that it will continue to get worse in the months ahead. The following are 21 new numbers that show that the global economy is absolutely imploding…

#1 Chinese exports fell by 11.2 percent year over year in January.

#2 Chinese imports were even worse in January. On a year over year basis, they declined a whopping 18.8 percent.

#3 It may be hard to believe, but Chinese imports have now plunged for 15 months in a row.

#4 In India, exports were down 13.6 percent on a year over year basis in January.

#5 In Japan, exports declined 8 percent in December on a year over year basis, while imports plummeted 18 percent.

#6 For the sixth time in six years, Japanese GDP growth has gone negative.

#7 In the United States, exports were down 7 percent on a year over year basis in December.

#8 U.S. factory orders have fallen for 14 months in a row.

#9 The Restaurant Performance Index in the United States has dropped to the lowest level that we have seen since 2008.

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

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