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China Warns “Social Stability Threatened” As 400,000 Steel Workers Are About To Lose Their Jobs

China Warns “Social Stability Threatened” As 400,000 Steel Workers Are About To Lose Their Jobs

In late September, we were stunned to read (and report) that in the first mega-layoff in recent Chinese history, the Harbin-based Heilongjiang Longmay Mining Holding Group, or Longmay Group for short, the biggest met coal miner in northeast China had taken a page straight out of Jean-Baptiste Emanuel Zorg’s playbook and fired 100,000 workers overnight, 40% of its entire 240,000 workforce.

For us this was the sign that China’s long awaited “hard landing” had finally arrived, because as China’s paper of record, China Daily, added then: “now, many migrant workers struggle to find their footing in a downshifting economy. As factories run out of money and construction projects turn idle across China, there has been a rise in the last thing Beijing wants to see: unrest.

We added that “if there is one thing China’s politburo simply can not afford right now, is to layer public unrest and civil violence on top of an economy which is already in “hard-landing” move. Forget black – this would be the bloody swan that nobody could “possibly have seen coming” and concluded that as for the future of China’s unskilled labor industries, the Fifth Element’s Jean-Baptiste Emanuel Zorg has a good idea of what’s coming.

Fast forward to today when, if not a full million, Xinhua reports that as part of China’s proposed excess capacity production curtailments the country’s steel production slash will translate into the loss of jobs for up to 400,000 workers, estimated Li Xinchuang, head of China Metallurgical Industry Planning and Research Institute. Li said more people will be affected in the upstream and downstream industries. According to some estimates just like every banker job in New York “feeds” up to three downstream jobs, so in China every worker  in the steel industry helps support between 2 to 3 additional job.s Which means, 400,000 primary layoffs would mean a total job loss number anywhere between 1.2 and 1.6 million jobs!

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

War On Cash Escalates: China Readies Digital Currency, IMF Says “Extremely Beneficial”

War On Cash Escalates: China Readies Digital Currency, IMF Says “Extremely Beneficial”

Remember when Bitcoin and its digital currency cohorts were slammed by authorities and written off by the elite as worthless? Well now, as the war on cash escalates, officials from The IMF to China are seeing the opportunity to control the world’s money through virtual (cash-less) currencies. Just as we warned most recently herestate wealth control is the goal and, as Bloomberg reports, The PBOC is targeting an early rollout of China’s own digital currency to “boost control of money” and none other than The IMF’s Christine Lagarde added that “virtual currencies are extremely beneficial.”

By way of background, as we explained previously, What exactly does a “war on cash” mean?

It means governments are limiting the use of cash and a variety of official-mouthpiece economists are calling for the outright abolition of cash. Authorities are both restricting the amount of cash that can be withdrawn from banks, and limiting what can be purchased with cash.

These limits are broadly called “capital controls.”

Why Now?

Why are governments suddenly so keen to ban physical cash?

The answer appears to be that the banks and government authorities are anticipating bail-ins, steeply negative interest rates and hefty fees on cash, and they want to close any opening regular depositors might have to escape these forms of officially sanctioned theft. The escape mechanism from bail-ins and fees on cash deposits is physical cash, and hence the sudden flurry of calls to eliminate cash as a relic of a bygone age — that is, an age when commoners had some way to safeguard their money from bail-ins and bankers’ control.

Forcing Those With Cash To Spend or Gamble Their Cash

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

How Neocons Banished Realism

How Neocons Banished Realism


In a widely remarked upon article for the online version of Foreign Policy last week, Harvard’s Stephen Walt asked a very good question. Why, Walt asked, are elite outlets like the Washington Post, the Wall Street Journal and the New York Times “allergic to realist views, given that realists have been (mostly) right about some very important issues, and the columnists they publish have often been wrong?”

Walt then went on to do something pundits are generally loath to do: he admitted that he’d didn’t really know the answer. This is not to say that I do, but I think Walt’s question is worth exploring.

Prominent neocon intellectual Robert Kagan. (Photo credit: Mariusz Kubik, http://www.mariuszkubik.pl)

Prominent neocon intellectual Robert Kagan. (Photo credit: Mariusz Kubik, http://www.mariuszkubik.pl)

Why indeed? My own hunch is that we realists are a source of discomfit for the Beltway armchair warrior class not so much because we have been right about every major U.S. foreign policy question since the invasion of Iraq, but because we dare to question the premise which undergirds the twin orthodoxies of neoconservatism and liberal interventionism.

The premise, shared by heroes of the Left and Right, is this: America, a “shining city on a hill” (John Winthrop, later vulgarized by Ronald Reagan) “remains the one indispensable nation” (Barack Obama) and deprived of America’s “benevolent global hegemony” (Robert Kagan) the world will surely collapse into anarchy.

This strain of messianic thinking has deep roots in the psyche of the American establishment and so, in a sense, neoconservatism, which is really little more than a latter-day Trotskyist sect, is as American as apple pie.

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

Trapped Inside The Zero-Bound: Crossing The Economic “Event Horizon”

Trapped Inside The Zero-Bound: Crossing The Economic “Event Horizon”

Screen Shot 2016-01-12 at 11.45.19 AM

The professor, gazing over his glasses and down his nose at what obviously had to be an imbecile in his lecture hall calmly set aside a second of his podium time to shoot the idea down: “No.”, he said quite simply, as if he couldn’t believe he had to be explaining this to university level students, “it has to be a positive number….”.

My colleague believed him. After all, being in technology he was familiar with the computer code analogy of a negative interest rate, that being the dreaded divide by zero error. Coders take great pains to avoid these because if it actually happens, the currently running program basically “shits the bed” and all bets are off.

If the currently running program was generating a balance sheet, it may set the line printer on fire instead. If it’s deploying an airplane’s landing gear it may jettison everything in the cargo bay. It’s impossible to guess what will happen. So when people who viscerally understand the kind of consequences the ERR:DIV0 can cause extrapolate it out to an entire economy, they’re the ones that end up “shitting the bed”. It’s really bad.

I always knew that ZIRP was bad, but I just thought it would be normal, run-of-the-mill bad. You know, where most normal people get screwed for a long time, and then “suddenly” everything comes unglued and the financial system implodes, followed by a government intervention while the usual suspects (free markets and capitalism) get hung from telephone poles.

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

Last Bubble Standing

Last Bubble Standing

EM debt bubble… emaciated, FX Carry… crucified, Crude…crushed,  High yield bonds… burst, Chinese equities… blown, Trannies… trounced, Small Caps… slammed, Biotechs… busted, and FANGs finally FUBAR!But there is one big (very big) bubble left in the world that no one is talking about, and a rather large liquidity-busting pin beckons…

In May 2015 we first explained exactly why China was blowing its equity market bubble. Simply put, with more “equity,” companies were better able to refinance/roll (note, no interest in debt reduction or deleveraging) their record-breaking mountain of debt and avoid the systemic collapse that is utterly imminent for just a few more months/years.

Now that the equity market bubble has burst, Chinese authorities have chased investors into another bubble.

In October 2015, we warned of the relative risk building in the Chinese corporate bond market.

As the rout in Chinese stocks this year erased $5 trillion of value, investors fled for safety in the nation’s red-hot corporate bond market. They may have just moved from one bubble to another.

Into Chinese corporate bonds…

As we detailed just two months ago, this historic bond bubble is paradoxical for the simple reason that China’s credit fundamentals have never been worseand as we further showed, as a result of the ongoing collapse in commodity prices (which today’s Chinese rate and RRR-cut will have absolutely no impact on), more than half of commodity companies can’t generate the cash required to even pay their interest, a number which drops to “only” a quarter when expanded to all industries.

“The equity rout merely reflects worries about China’s economy, while a bond market crash would mean the worries have become a reality as corporate debts go unpaid,” said Xia Le, the chief economist for Asia at Banco Bilbao. “A Chinese credit collapse would also likely spark a more significant selloff in emerging-market assets.”

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

Russell Napier Explains How The Decline Of The Yuan Destroys Belief In Central Banking

Russell Napier Explains How The Decline Of The Yuan Destroys Belief In Central Banking 

It’s Not a Pet, It’s a Falcon: How the decline of the RMB destroys belief in central banking and a successful reflation
Turning and turning in the widening gyre
The falcon cannot hear the falconer;
Things fall apart; the centre cannot hold;

      – The Second Coming- W.B. Yeats

First catch your falcon, as the formidable Mrs Beeton might have said if she was in need of a method of catching her main course (see Mrs Beeton’s Book of Household Management 1861- ‘Recipe for Jugged Hare’).

Having caught your wild falcon, you can now begin the training process. You are attempting to impose your will upon a creature that, in its wild state, catches, kills and devours other birds. This is creative destruction in its rawest form as those acts of savagery provide the fuel to keep our falcon flying. Taming such wild forces is not easy, whether they be birds of prey or the desires, wishes, greed and fear of millions of people determining prices through their supply and also their demand.

Let’s get some advice from the field of falconry for our central bankers, and the other handmaidens of state control, as they seek to impose their wishes on the will and acts of millions-

‘Falconry is a great sport, but there is a lot of time involved. You will want to have enough time to train your bird. If you don’t have the time, or the willingness, then you might as well not do it at all. If you are one of those people who is not patient, falconry may not be for you. You should not take up falconry if you want the falcon as a pet, or something to show off.

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

Bank of Montreal Asks If “Oil Prices Could Collapse To $20”; Answers: “Yes”

Bank of Montreal Asks If “Oil Prices Could Collapse To $20”; Answers: “Yes”

When looking at the price of oil in 2015, Canada’s Bank of Montreal admits it was wrong. Very, very wrong.
In our “2015 Year Ahead” report we laid out three plausible scenarios: (1) our base case, which forecast Brent crude oil prices of $50-60/bbl over the first half of 2015 and $60-80/bbl over the second half of the year; (2) a bull case, which forecast a Brent trading range of $85-95; and a bear case, which suggested a Brent trading range of $50-60/bbl. The actual trading range in 2015 proved to be even more ‘bearish’ than our bear case, with Brent generally trading between $36 and $60/bbl. So what did we get wrong?

The answer: pretty much everything but mostly the fact that in the race to the production bottom (“we’ll make up for plunging prices with soaring volumes”) only dramatic outcomes, which shock the status quo, have any impact, to wit:

“we assumed that Iraq production would average 2.9 million bpd; actual production was roughly 1 million bpd higher. We also assumed that Saudi Arabia would be content to hold production at 9.2 million bpd whereas actual production was roughly 800,000 bpd higher. In our view, this incremental 1.8 million bpd of production was the principal reason that global oil inventories swelled by more than 340 million barrels to a record high of approximately 3.1 billion barrels and why crude oil prices have collapsed.”

Well, that, and the fact that the financial BTFD community finally threw in the towel on the most financialized commodity, and following two failed attempts at dead cat bounces, may have thrown in the towel. That said, just looking at speculative positions, oil may have a long way to drop still.

Which may also explain why, as noted last week, someone has made material directional (and/or hedge) bets via puts that oil will slide to $25, $20, even as low as $15.

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

6 Positive Signs That Mainstream Media is Collapsing

6 Positive Signs That Mainstream Media is Collapsing

Off-Air Mainstream Media TVThere is an information awakening taking place right now, and mainstream media is being outed for what it really is: corporate and government controlled propaganda. People are turning to alternative news sources more swiftly than ever now, and as a result, the old guard of media is collapsing at free-fall speeds.

Here are 6 positive signs of the collapse of mainstream media:

1. Mainstream Media is Owned by a Handful of Corporations and the People Know It

It’s no secret anymore that nearly everything we see, read, and hear comes from just a handful of mega-corporations. Thanks to the alternative media, it has become a widely known fact that just six corporations control 90% of the media we consume. These big six have the ability to make key decisions and delegate the news to their lower subsidiary companies by cutting out important stories or alternative points of view. People recognize this and are moving over to the indy media as a result.

2. Fox Stops Disclosing Live Viewership Ratings

Fox News, a subsidiary company owned by Rupert Murdoch of News Corp and top mainstream media outlet has just announced that it will stop disclosing its ratings for live TV viewership. They argue that these statistics are no longer relevant because of how many record their television shows, but it is also being seen as a way to hide a decaying audience. Fox will now be repackaging statistics on a weekly basis to make even the most modest results appear positive.

3. 98% of Young Adults Do Not Trust Mainstream Media

A recent poll shows that only 2% of young adults trust the mainstream media to do the “right thing” on a regular basis. This poll, which was conducted at the Harvard Institute of Politics on over 3,000 18-29 year olds, shows that only 2% of young adults trust the media to “do the right thing” “all of the time.” 

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

“It’s A Bloodbath” – Here Is The Biggest Casualty Of Canada’s Recession

“It’s A Bloodbath” – Here Is The Biggest Casualty Of Canada’s Recession

In the past year, we have extensively profiled the collapse of ground zero of Canada’s oil industry, Calgary, as a result of the plunge in the price of oil, in posts such as the following:

Since then it has only gotten worse for Canada, and as of two it culminated with the first official recession in 7 years.

Additionally, in September we profiled the expected collapse of the Calgary commercial real estate market when we reported that in Alberta Canada now has 1.7 million square feet of empty office space, the most in North America, with another 5.2 million under construction! After years of booming construction, the natural resource rich country is starting to feel the pinch.

Overnight Bloomberg followed up on this stunning deterioration when it, too, reported that “office-tower owners in Canada’s energy hub are about to feel the full force of the oil-price crash.”

Using data from real estate brokers including Jones Lang LaSalle Inc. and Avison Young, Bloomberg calculates that vacancy is already at a five-year high in Calgary and rents are the lowest since 2006 after thousands of office jobs were cut. Energy company tenants have now begun to ask for rental relief and are offering subleases for as little as half the going rate.

The backlog is even worse: five new office towers with about 3.8 million square feet (353,031 square meters) of space hits the market in the next three years.

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

One Analyst Says China’s Banking Sector Is Sitting On A $3 Trillion Neutron Bomb

One Analyst Says China’s Banking Sector Is Sitting On A $3 Trillion Neutron Bomb

To be sure, we’ve long contended that official data on bad loans at Chinese banks is even less reliable than NBS GDP prints. Indeed, the lengths Beijing goes to in order to obscure the extent to which banks’ balance sheets are in peril is truly something to behold and much like the deficient deflator math which may be causing the country to habitually overstate GDP growth, it’s not even clear that China could report the real numbers if it wanted to.

We took an in-depth look at the problem in “How China’s Banks Hide Trillions In Credit Risk: Full Frontal”, and we’ve revisited the issue on a number of occasions noting in August that according to a transcript of an internal meeting of the China Banking Regulatory Commission, bad loans jumped CNY322.2 billion in H1 to CNY1.8 trillion, a 36% increase. Of course that’s just the tip of the iceberg. In other words, that comes from a government agency and although the scope of the increase sounds serious, it still translates into an NPL ratio of just 1.82%. Here’s a look at the “official” numbers (note that when one includes doubtful accounts, the ratio jumps to somewhere in the neighborhood of 3-4%):

Source: Fitch

There are any number of reasons why those figures don’t even come close to approximating reality. For instance, there’s Beijing’s habit of compelling banks to roll over bad loans, and then there’s China’s massive (and by “massive” we mean CNY17 trillion) wealth management product industry which, when coupled with some creative accounting, allows Chinese banks to hold some 40% of credit risk off balance sheet.

Is GDP Over?

Is GDP Over?

(Photo: World Bank Photo Collection / Flickr)

Organizers of October’s fifth OECD World Forum on Statistics, Knowledge, and Policy could barely contain their sense of satisfaction when the three-day event opened in Guadalajara, Mexico.

Why all the good cheer? Officials at the OECD, the official economic research agency of the developed world, feel they haven’t just been organizing gabfests since the first of these triennial forums in 2004. They believe they’ve been helping change how the world — or at least the global public policy community — thinks about inequality.

And that belief, prominent independent observers believe, reflects a healthy dose of reality.

“We now have a broad consensus that more equal societies perform better,” as Nobel Prize-winning economist Joseph Stiglitz put it in his World Forum keynote address to the over 1,000 government statisticians, academics, and civil society analysts on hand in Guadalajara.

The OECD, Stiglitz observed, deserves much of the credit for this new consensus. The agency’s efforts have helped shift the global analytical mainstream off a mindless fixation on GDP — an economy’s total output of goods and services — and onto the importance of developing a sustainable “prosperity for all.”

In the United States today, pundits and politicians still regularly dismiss worries about our contemporary global prosperity for just a few as little more than do-gooder posturing. But at the World Forum in Guadalajara, no one treated inequality as anything less than a dangerous social pathology.

“Inequality is becoming unbearable,” former Inter-American Development Bank president Enrique Yglesias pronounced. Our economic chasms have reached “obscene proportions.”

Deeply unequal nations like Britain, lamented Catrina Williams of the UK Social Mobility and Child Poverty Commission, stand “on the brink of being permanently divided” as the offspring of the most affluent increasingly occupy most of the key levers of power in everything from the judiciary to the media.

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

A Failure of Imagination

A Failure of Imagination

Simply stated we create our own reality……although it is a ‘reality’ strictly limited to the range and scope of our beliefs and imagination. Thus if we can conceive of a world no different than what we believe actually exists, which in turn is based solely upon our present day (deliberately) limited perception, then this is exactly what we shall (co)create, maintain and interact with.

This concept is staggering in its simplicity and self evident when we consider it from all sides and with an open mind. Of course, it follows then that those of limited imagination, either by way of training, conditioning, ignorance or denial, will see my statement as nonsensical and ridiculous, thus perpetuating their (and our) own narrow, stagnant and self destructive reality.

It is my contention we are all conceived as perfect reality creators, though not yet fully formed and completely untrained, who are hijacked and sidetracked into a slave culture reality designed to serve others and not our ‘selves’. This process has so twisted our natural human impulse for free and unique reality creation the end result expresses as individual and collective insanity. Sadly, tragically, we are all terribly insane and getting worse by the moment.

Ultimately this deeply implanted and completely alien subversion of our mind, spirit and body acts as a lingering virus or infection which, while not deadly (yet), is extremely debilitating and exhausting. This serves to further reinforce the inner insanity while also undermining defensive devices employed by our inner ‘self’ in order to recover from what we subconsciously ‘know’ deep within is an externally applied alien abomination.

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

The World Hits Its Credit Limit, And The Debt Market Is Starting To Realize That

The World Hits Its Credit Limit, And The Debt Market Is Starting To Realize That

One month ago, when looking at the dramatic change in the market landscape when the first cracks in the central planning facade became evident and it appeared that central banks are in the process of rapidly losing credibility, and the faith of an entire generation of traders whose only trading strategy is to “BTFD”, we presented a critical report by Citigroup’s Matt King, who asked “has the world reached its credit limit” summarized the two biggest financial issues facing the world at this stage.

The first is that even as central banks have continued pumping record amount of liquidity in the market, the market’s response has been increasingly shaky (in no small part due to the surge in the dollar and the resulting Emerging Market debt crisis), and in the case of Junk bonds, a downright disaster. As King summarized it models linking QE to markets seem to have broken down.” 

Needless to say this was bad news for everyone hoping that just a little more QE is all that is needed to return to all time S&P500 highs. And while this concern has faded somewhat in the past few weeks as the most violent short squeeze in history has lifted the market almost back to record highs even as Q3 earnings season is turning out just as bad, if not worse, as most had predicted, nothing has fundamentally changed and the fears over EM reserve drawdown will shortly re-emerge, once the punditry reads between the latest Chinese money creation and capital outflow lines.

The second, and far greater problem, facing the world is precisely what the Fed and its central bank peers have been fighting all along: too much global debt accumulating an ever faster pace, while global growth is stagnant and in fact declining.

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

America’s “Inevitable” Revolution & The Redistribution Fallacy

Here’s the good news: The chaos and upheaval we see all around us have historical precedents and yet America survived.

The bad news: Everything likely will get worse before it gets better again.

That’s NYPost.com’s Michael Goodwin’s chief takeaway from “Shattered Consensus,” a meticulously argued analysis of the growing disorder. Author James Piereson persuasively makes the case there is an inevitable “revolution” coming because our politics, culture, education, economics and even philanthropy are so polarized that the country can no longer resolve its differences.

To my knowledge, no current book makes more sense about the great unraveling we see in each day’s headlines. Piereson captures and explains the alienation arising from the sense that something important in American life is ending, but that nothing better has emerged to replace it.

The impact is not restricted by our borders. Growing global conflict is related to America’s failure to agree on how we should govern ourselves and relate to the world.

Piereson describes the endgame this way: “The problems will mount to a point of crisis where either they will be addressed through a ‘fourth revolution’ or the polity will begin to disintegrate for lack of fundamental agreement.”

He identifies two previous eras where a general consensus prevailed, and collapsed. Each lasted about as long as an individual’s lifetime, was dominated by a single political party and ended dramatically.

First came the era that stretched from 1800 until slavery and sectionalism led to the Civil War.

The second consensus, which he calls the capitalist-industrial era, lasted from the end of the Civil War until the Great Depression.

It is the third consensus, which grew out of the depression and World War II, which is now shattering. Because the nation is unable to solve economic stagnation, political dysfunction and the resulting public discontent, Piereson thinks the consensus “cannot be resurrected.”

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

Obama Won’t Back Down After Chinese Threat, Sends U.S. Warships To Contested Islands In “Matter Of Days”

Obama Won’t Back Down After Chinese Threat, Sends U.S. Warships To Contested Islands In “Matter Of Days”

On Friday, we reported the latest provocation in what has truly become a very dangerous, if largely pointless, staring contest between Beijing and Washington over China’s reclamation of land in The South China Sea.

Responding to suggestions that the US was set to sail warships around the islands Beijing has constructed atop reefs in the Spratlys, China served noticed that it would “never allow any country to violate China’s territorial waters and airspace in the Spratly Islands, in the name of protecting freedom of navigation and overflight.” This was simply a formalized version of the more concise phrasing the PLA navy used when they instructed the pilots flying a US spy plane to “Go now!” when it ventured too close to Fiery Cross earlier this year.

It’s not immediately clear what China intends to do with the islands and further, it’s not entirely clear why anyone should necessarily care if Beijing wants to build “sand castles” in the middle of the ocean, but then again, for America’s regional allies the land reclamation efforts look a lot an attempt to build a series of military outposts by creating sovereign territory where there was none thereby effectively redrawing maritime boundaries and so, big brother in Washington is set to step in in order to protect vital shipping lanes.

Of course having already said that the navy plans to sail ships into the waters around the islands, the US can ill-afford to allow China’s “we won’t tolerate that” pronouncement to deter the Pentagon because the optics around that would be terrible at a time when the world is already questioning the strength and resolve of the US military. So the ships will indeed sail. Here’s WSJ:

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

Olduvai IV: Courage
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Olduvai II: Exodus
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