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QUESTION: Marty, years ago you did a chart showing the projection for unemployment. I believe I understand what you were projection for the company I work for has been replacing people with technology on a large scale. So we can have rising corporate profits with rising unemployment as technology changes everything. Is there a point when rising unemployment brings down corporate profits for it reduces consumer spending?

Thank you for your consideration

ANSWER: Absolutely. The peak in unemployment during the Great Depression was during the technology shift that was a result of the introduction of the combustion engine. Tractors began to replace farm workers, as agriculture had been 70% of GDP in the mid-19th century, 40% by 1900, and later dropped to 3% by 1980. This technology shift, combined with the Dust Bowl, changed the face of labor dramatically.

Politicians are brain-dead. Hillary claims she will champion equal pay for women and raise the minimum wage to $15. I do not know what planet she is on but such a combination will clearly create a major depression, given we already have this technology shift underway with so many jobs being automated. You park your car, push a button for the ticket, and pay by sticking your card in a machine without ever seeing a person. McDonalds announced its answer to $15 an hour minimum wage – touch-screen cashiers.

robot-8

The combination of a $15 minimum wage and Obamacare is a lethal injection for the economy. But hey, we elect corrupt lawyers to public office who say what the people want to hear and have no concept of the result if such ideas are implemented.

Tell your children to study computer programming. What will the world be like in 25 years? Will any menial jobs remain?

We are approaching the reality of the movie series “Terminator.” Government is striving to develop robot warriors whose loyalty will never be questioned.

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

“A Total Illusion from QE and Financial Engineering”

April 22, 2016

“A Total Illusion from QE and Financial Engineering”

The 10-Year Treasury Is Less Than You Think

When the Fed was created in 1914, it was set to task of controlling short-term interest rates in an attempt to iron out financial cycles. It succeeded for many years. But by avoiding the natural rebalancing (and occasional pain) from free markets, we just got a bigger bubble into 1929. Then, when it finally burst, we got the greatest depression in all of modern history!

Since the Fed and other central banks were created, they have always manipulated short-term interest rates to try to encourage borrowing and spending in slowdowns – to make the natural economic cycle “go away.”

And every time, it suppresses the economic cycles that were already in place, until finally they come roaring back.

So it always strikes me as funny to see highly educated, seemingly reasonable people in pin-striped suits and pantsuits stand in front of us and basically say that there’s a free lunch after all – that we can get something for nothing!

To them, economics is no longer a matter of supply and demand, free markets and rebalancing. They think we’ve found a way to program the economy so we never have a recession again.

All the apparent education and sophistication of these top economists, financial officials and central bankers boils down to this simple automaton explanation: if we don’t keep taking more of the financial drug that we used to keep the bubble going, like zero interest rates and QE, we will collapse and go into detox.

It’s the same logic of any extreme addict. When a serious drug addict comes off a high, he realizes the only non-painful choice is to take more of the drug.

As Charlie Sheen said: “the key to drinking is to not stop.”

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

Bernanke’s New Helicopter Money Plan——-Sheer Destructive Lunacy

April 14, 2016

Bernanke’s New Helicopter Money Plan——-Sheer Destructive Lunacy

If you don’t think the current central bank driven economic and financial bubble is going to end badly, recall a crucial historical fact. To wit, the worldwide race of central banks to the zero bound and NIRP and their $10 trillion bond-buying spree during the last seven years was the brain child of Ben S Bernanke.

He’s the one who falsely insisted that Great Depression 2.0 was just around the corner in September 2008. Along with Goldman’s plenipotentiary at the US Treasury, Hank Paulson, it was Bernanke who stampeded the entirety of Washington into tossing out the window the whole rule book of sound money, fiscal rectitude and free market discipline.

In fact, there was no extraordinary crisis. The Lehman failure essentially triggered a self-contained leverage and liquidity bust in the canyons of Wall Street, and it would have burned out there had the Fed allowed money market interest rates to do their work. That is, to rise sufficiently to force into liquidation the gambling houses like Lehman, Goldman and Morgan Stanley that had loaded their balance sheets with trillions of illiquid or long-duration assets and funded them with cheap overnight money.

There would have been no significant spillover effect. The notions that the financial system was imploding into a black hole and that ATMs would have gone dark and money market funds failed are complete urban legends. They were concocted by Wall Street to panic Washington into massive intervention to save their stocks and partnership shares.

The same is true of the claim that corporate payrolls would have been missed for want of revolving credit availability and that the entirety of AIG had to be bailed out to the tune of $185 billion in order to protect insurance and annuity holders.

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

Demand for World Bank loans nears crisis levels

April 13, 2016

Demand for World Bank loans nears crisis levels

Lending forecast at £25bn for 2016 as developing countries struggle to cope with weakening global economy

A banner announces the 2016 spring meetings of the IMF and World Bank in Washington DC. Photograph: Mandel Ngan/AFP/Getty Images

Demand for loans from the World Bank has reached levels unsurpassed outside of financial crises as developing countries struggle to cope with the weakness of the global economy.

Ahead of its half-yearly spring meeting in Washington later this week, the Bank said it expected to lend more than $150bn (£105bn) in the four years from 2013 – a period when global economic activity repeatedly failed to match expectations.

The Bank said its growth forecast of 2.9% for 2016 already looked under threat after a deterioration in the outlook since the start of the year, adding that it was increasing its financial help to both middle-income and the least-developed countries.

Those developing countries that rely heavily on exports of commodities have been hard hit over the past two years by the slowdown in China, which has led to a crash in the cost of oil and industrial metals.

“We are in a global economy where growth is expected to remain weak, so it is critically important that the World Bank play our traditional role of helping developing countries accelerate growth,” said Jim Yong Kim, the bank’s president.

“We have an historic opportunity to end extreme poverty in the world by 2030 but the only way we can achieve this goal is if developing countries – from middle-income to low-income nations – get back on the path of faster growth that helps the poorest and most vulnerable.”

The global crisis of 2008-09 led to a surge in World Bank lending to middle-income countries that struggled as trade flows and industrial production fell at rates similar to those in the early stages of the Great Depression.

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

We are exiting the eye of the giant financial hurricane

April 1, 2016

We are exiting the eye of the giant financial hurricane

(Editor’s Note: This is Doug Casey’s foreword to Casey Research’s Handbook for Surviving the Coming Financial Crisis.)

Right now, we are exiting the eye of the giant financial hurricane that we entered in 2007, and we’re going into its trailing edge.

It’s going to be much more severe, different, and longer lasting than what we saw in 2008 and 2009.

In a desperate attempt to stave off a day of financial reckoning during the 2008 financial crisis, global central banks began printing trillions of new currency units. The printing continues to this day.

It’s not just the Federal Reserve that’s printing. The Fed is just the leader of the pack. The U.S., Japan, Europe, China… all major central banks… are participating in the biggest increase in global monetary units in history.

These reckless policies have produced not just billions but trillions in malinvestment that will inevitably be liquidated. This will lead us to an economic disaster that will, in many ways, dwarf the Great Depression of 1929–1946. Paper currencies will fall apart, as they have many times throughout history.

This isn’t some vague prediction about the future. It’s happening right now. The Canadian dollar has lost 25% of its value since 2013. The Australian dollar has lost 30% of its value during the same time. The Japanese yen and the euro have crashed in value. And the U.S. dollar is currently just the healthiest horse on its way to the glue factory.

These are gigantic losses for major currencies. After all, we’re not talking about small volatile stocks. We’re talking about the value of money in peoples’ bank accounts. These moves show we’re in the early stages of a currency crisis.

At this point, it’s a lock cinch that the world’s premier paper currency – the U.S. dollar – will lose nearly all its value.

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

The Biggest Short

March 24, 2016

THE BIGGEST SHORT

Some reversals of financial trends prove so momentous they define the generation in which they occur. The stock market crash in 1929 kicked off the Great Depression, which ushered in the welfare and then the warfare state and redefined the relationship between government and citizens.

Bonds and stocks began their bull market runs in the early 1980s. Now, those markets are fonts of optimism increasingly unhinged from reality. The US has come full circle. The New Deal and World War II marked a massive shift of resources and power to the federal government. Conversely, financial reversal will fuel a virulent backlash against the government and its central bank.

Such epochal reversals are usually foreseeable. However, they are long in the making and involve such a confluence of powerful forces that usually only a handful get the timing right. Calling the end of the current bull markets has been difficult because of governments and central banks are desperate to keep them alive. Central bankers prattle on about the wealth effects of elevated stock markets and how low interest rates promote debt and consumption, supposedly the fountainhead of economic progress. Those emissions are noxious nonsense. Central banks promote rising markets because they are under the thumbs of their governments; independent central banker is an oxymoron. High stock prices are a popular barometer of social mood, while high bond prices keep interest rates low, benefitting the largest borrowers, governments.

Consider the absurdity of loaning money to any of today’s welfare state governments, including the most indebted of them all, the US government. Most of them haven’t run an honest, GAAP budget surplus in decades. They have compiled staggering amounts of debt relative to their economies’ GDPs.

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

Economics Is Like A Religion – Just Faith In Theory

March 15, 2016

Economics Is Like A Religion – Just Faith In Theory

Everyone is missing the serious problem that ultra-low interest rates have created for retirees.

Pension funds are still assuming that future returns will be in the 7½–8% range. And as people get older and have no practical way to go back to work, pension funds that are forced to reduce payments in 10 or 15 years (and some even sooner) will destroy the lifestyles of many.

So what made Europe and Japan agree that negative rates-with all their known and unknown consequences—are a solution to our current economic malaise?

I have been trying to explain this by comparing economic theories to a religion.

Everyone understands that there is an element of faith in their own religious views, and I am going to suggest that a similar act of faith is required if one believes in academic economics.

Economics and religion are actually quite similar. They are belief systems that try to optimize outcomes. For the religious, that outcome is getting to heaven, and for economists, it is achieving robust economic growth-heaven on earth.

I fully recognize that I’m treading on delicate ground here, with the potential to offend pretty much everyone. My intention is to not to belittle either religion or economics, but to help you understand why central bankers take the actions they do.

The No. 1 Commandment of a Central Bank

Central bankers are always-and everywhere-opposed to inflation. It’s as if they are taken into a back room and given gene therapy. Actually, this visceral aversion is also imparted during academic training in the elite schools from which central bankers are chosen.

This is our heritage; it’s learning derived not only from the Great Depression but also from all of the other deflationary crashes in our history (not just in the US but globally).

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

Greenspan Explains The Fed’s Miserable Track Record: “We Didn’t Forecast Better Because We Can’t”

March 12, 2016

Greenspan Explains The Fed’s Miserable Track Record: “We Didn’t Forecast Better Because We Can’t”

On March 11, the National Archives announced its first opening of Financial Crisis Inquiry Commission (FCIC) records, along with a detailed 1,400-page online finding aid (yes, just the index is 1,400 pages). The records which are available via DropBox, seek to identify the causes of the 2008 financial crisis.

Among the numerous materials are interviews with key players in Washington and on Wall Street, from Warren Buffett to Alan Greenspan. The documents also include minutes of commission meetings and internal deliberations concerning the causes of the financial crisis.

While we admit we have yet to read the several hundred thousand pages released yesterday, here is what has so far emerged as of the better punchlines within the data dump, and it comes courtesy of the man who many believe is responsible not only for the second global great depression (which needs trillions in central bank liquidity to be swept under the rug every day), but for the “bubble-bust-bigger bubble” cycle that was unleashed with Greenspan’s Great Moderation.

Here is Allan Greenspan meeting with Dixie Noonan et al on March 31, 2010:

This is a reason why the Board is getting an unfair rap on this stuff. We didn’t forecast better than anyone else; we regulated banks that got in trouble like anyone else. Could we have done better? Yes, if we could forecast better. But we can’t. This is why I’m very uncomfortable with the idea of a systemic regulator, because they can’t forecast better.

This comes from the person in charge of the most powerful central bank in the world; a world which now is reliant exclusively on central bankers for its day to day pretend existence.

Good luck to all.

Are You Kidding Me? Chinese Exports Plunge 25.4 Percent Compared To Last Year

March 9, 2016

Are You Kidding Me? Chinese Exports Plunge 25.4 Percent Compared To Last Year

We just got more evidence that global trade is absolutely imploding. Chinese exports dropped 25.4 percent during the month of February compared to a year ago, and Chinese imports fell 13.8 percent compared to a year ago. For Chinese exports, that was the worst decline that we have seen since 2009, and Chinese imports have now fallen for 16 months in a row on a year over year basis. The last time we saw numbers like this, we were in the depths of the worst economic downturn since the Great Depression of the 1930s. China accounts for more global trade than any other nation (including the United States), and so this is a major red flag. Anyone that is saying that the global economy is in “good shape” is clearly not paying attention.

If someone would have told me a year ago that Chinese exports would be 25 percent lower next February, I would not have believed it. This is not just a slowdown – this is a historic implosion. The following comes from Zero Hedge…

Things are not getting better in China as Exports crashed 25.4% YoY (the 3rd largest drop in history), almost double the 14.5% expectation and Imports tumbled 13.8%, the 16th month of YoY decline – the longest ever.Altogether this sent the trade surplus down to $32.6bn (missing expectations of $51bn) to 11-month lows.

So much for that whole “devalue yourself to export growth” idea…

I don’t know how anyone can possibly dismiss the importance of these numbers. As you can see, this is not just a one month aberration. Chinese trade numbers have been declining for months, and that decline appears to be accelerating.

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

Is Any Asset Safe?

February 22, 2016

Is Any Asset Safe?

SilverCoins

QUESTION: Hi Marty, I have been following your blog for several years and attended your “Cycles of War” presentation in Philadelphia. It has been rewarding and very educational. My question, is there any one investment that is a safe haven in the chaos that approaches? I recently sold my company and placed the proceeds into “Certificates of Deposits” at several large FDIC banks laddering over several years. Are these safe or will it all be for naught? Meanwhile, I look forward to utilizing Socrates “traders” software when it comes available.

Thanks,

ANSWER: Certificates of deposits are ok for now. Keep in mind this will change probably in 2017, but by 2018 for sure. The risk is government paper where they can by decree convert short-term to long-term. The USA is probably less likely to do that compared to Europe. But with people like Larry Summers shooting off his mouth, all bets on that are a 50/50 game.

There is no investment that survives. If you look at the Great Depression, absolutely EVERY asset class was hit. Nothing survived intact. This means we will have to stay on top of this more closely than ever before because liquidity is also declining and that means volatility will increase, which is often what hurts people. The vast majority assume whatever trend in motion will stay in motion. They are incapable of seeing the turns.

We still show that equities will probably be the safest place moving forward insofar as they are recognizable and liquid. Cash is still king, but the war on cash itself is disturbing. Silver coins will be useful, perhaps even more so than gold, since they are tracking gold but not old, common date, silver coins. This may replace cash, which they are desperately trying to destroy.

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

What Markets Are Telling Us

February 15, 2016

What Markets Are Telling Us

Last week US stock markets tumbled yet again, leaving the Dow Jones index down almost 1500 points for the year. In fact, most major world markets are in negative territory this year. There are many Wall Street cheerleaders who are trying to say that this is just a technical correction, that the bottom is near, and that everything will be getting better soon. They are ignoring the real message the markets are trying to send: you cannot print your way to prosperity.

People throughout history have always sought to acquire wealth. Most of them understand that it takes hard work, sacrifice, savings, and investment. But many are always looking for that “get rich quick” scheme. Monetary cranks throughout history have thought that just printing more money would result in greater wealth and prosperity. Every time this was tried it resulted in failure. Huge economic booms would be followed by even larger busts. But no matter how many times the cranks were debunked both in theory and practice, the same failed ideas kept coming back.

The intellectual descendants of those monetary cranks are now leading the world’s central banks, which is why the last decade has seen an explosion of money creation. And what do the central bankers have to show for it? Lackluster employment numbers that have not kept up with population growth, increasing economic inequality, a rising cost of living, and constant fear and uncertainty about what the future holds.

The past decade has been a lot like the 1920s, when prices wanted to drop but the Federal Reserve kept the price level steady through injections of easy money into the economy. The result in the 1920s was the Great Depression. But in the 1920s prices were dropping because of increased production.

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

Deranged Central Bankers Blowing Up the World

February 15, 2016

DERANGED CENTRAL BANKERS BLOWING UP THE WORLD

It is now self-evident to any sentient being (excludes CNBC shills, Wall Street shyster economists, and Keynesian loving politicians) the mountainous level of unpayable global debt is about to crash down like an avalanche upon hundreds of millions of willfully ignorant citizens who trusted their politician leaders and the central bankers who created the debt out of thin air. McKinsey produced a report last year showing the world had added $57 trillion of debt between 2008 and the 2nd quarter of 2014, with global debt to GDP reaching 286%.

The global economy has only deteriorated since mid-2014, with politicians and central bankers accelerating the issuance of debt. These deranged psychopaths have added in excess of $70 trillion of debt in the last eight years, a 50% increase. With $142 trillion of global debt enough to collapse the global economy in 2008, only a lunatic would implement a “solution” that increased global debt to $212 trillion over the next seven years thinking that would solve a problem created by too much debt.

The truth is, these central bankers and captured politicians knew this massive issuance of more unpayable debt wouldn’t solve anything. Their goal was to keep the global economy afloat so their banker owners and corporate masters would not have to accept the consequences of their criminal actions and could keep their pillaging of global wealth going unabated.

The issuance of debt and easy money policies of the Fed and their foreign central banker co-conspirators functioned to drive equity prices to all-time highs in 2015, but the debt issuance and money printing needs to increase exponentially in order keep stock markets rising. Once the QE spigot was shut off markets have flattened and are now falling hard. You can sense the desperation among the financial elite. The desperation is borne out by the frantic reckless measures taken by central bankers and politicians since 2008.

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

A Contagious Crisis Of Confidence In Corporate Credit

February 14, 2016

A Contagious Crisis Of Confidence In Corporate Credit

Credit is not innately good or bad. Simplistically, productive Credit is constructive, while non-productive Credit is inevitably problematic. This crucial distinction tends to be masked throughout the boom period. Worse yet, a prolonged boom in “productive” Credit – surely fueled by some type of underlying monetary disorder – can prove particularly hazardous (to finance and the real economy).

Fundamentally, Credit is unstable. It is self-reinforcing and prone to excess. Credit Bubbles foment destabilizing price distortions, economic maladjustment, wealth redistribution and financial and economic vulnerability. Only through “activist” government intervention and manipulation will protracted Bubbles reach the point of precarious systemic fragility. Government/central bank monetary issuance coupled with market manipulations and liquidity backstops negates the self-adjusting processes that would typically work to restrain Credit and other financial excess (and shorten the Credit cycle).

A multi-decade experiment in unfettered “money” and Credit has encompassed the world. Unique in history, the global financial “system” has operated with essentially no limitations to either the quantity or quality of Credit instruments issued. Over decades this has nurtured unprecedented Credit excess and attendant economic imbalances on a global scale. This historic experiment climaxed with a seven-year period of massive ($12 TN) global central bank “money” creation and market liquidity injections. It is central to my thesis that this experiment has failed and the unwind has commenced.

The U.S. repudiation of the gold standard in 1971 was a critical development. The seventies oil shocks, “stagflation” and the Latin American debt debacle were instrumental. Yet I view the Greenspan Fed’s reaction to the 1987 stock market crash as the defining genesis of today’s fateful global Credit Bubble.

The Fed’s explicit assurances of marketplace liquidity came at a critical juncture for the evolution to market-based finance.

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

The Age Of Stagnation (Or Something Much Worse)

February 14, 2016

The Age Of Stagnation (Or Something Much Worse)

Excerpted from Satyajit Das’ new book “The Age Of Stagnation”,

If you look for truth, you may find comfort in the end; if you look for comfort you will not get either comfort or truth, only . . . wishful thinking to begin, and in the end, despair. C.S. Lewis

The world is entering a period of stagnation, the new mediocre. The end of growth and fragile, volatile economic conditions are now the sometimes silent background to all social and political debates. For individuals, this is about the destruction of human hopes and dreams.

One Offs

For most of human history, as Thomas Hobbes recognised, life has been ‘solitary, poor, nasty, brutish, and short’. The fortunate coincidence of factors that drove the unprecedented improvement in living standards following the Industrial Revolution, and especially in the period after World War II, may have been unique, an historical aberration. Now, different influences threaten to halt further increases, and even reverse the gains.

Since the early 1980s, economic activity and growth have been increasingly driven by financialisation – the replacement of industrial activity with financial trading and increased levels of borrowing to finance consumption and investment. By 2007, US$5 of new debt was necessary to create an additional US$1 of American economic activity, a fivefold increase from the 1950s. Debt levels had risen beyond the repayment capacity of borrowers, triggering the 2008 crisis and the Great Recession that followed. But the world shows little sign of shaking off its addiction to borrowing. Ever-increasing amounts of debt now act as a brake on growth.

Growth in international trade and capital flows is slowing. Emerging markets that have benefited from and, in recent times, supported growth are slowing.

Rising inequality and economic exclusion also impacts negatively upon activity.

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

Deutsche Bank Is Scared: “What Needs To Be Done” In Its Own Words

February 9, 2016

Deutsche Bank Is Scared: “What Needs To Be Done” In Its Own Words

It all started in mid/late 2014, when the first whispers of a Fed rate hike emerged, which in turn led to relentless increase in the value of the US dollar and the plunge in the price of oil and all commodities, unleashing the worst commodity bear market in history.

The immediate implication of these two concurrent events was missed by most, although we wrote about it and previewed the implications in November of that year in “How The Petrodollar Quietly Died, And Nobody Noticed.”

The conclusion was simple: Fed tightening and the resulting plunge in commodity prices, would lead (as it did) to the collapse of the great petrodollar cycle which had worked efficiently for 18 years and which led to petrodollar nations serving as a source of demand for $10 trillion in US assets, and when finished, would result in the Quantitative Tightening which has offset all central bank attempts to inject liquidity in the markets, a tightening which has since been unleashed by not only most emerging markets and petro-exporters but most notably China, and whose impact has been to not only pressure stocks lower but bring economic growth across the entire world to a grinding halt.

The second, and just as important development, was observed in early 2015: 11 months ago we wrote that “The Global Dollar Funding Shortage Is Back With A Vengeance And “This Time It’s Different” and followed up on it later in the year in “Global Dollar Funding Shortage Intensifies To Worst Level Since 2012” a problem which has manifested itself most notably in Africa where as we wrote recently, virtually every petroleum exporting nation has run out of actual physical dollars.

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

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