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The following article is (after very light editing) something your author wrote early in October of 2008, when the padlocks on the Lehman office building doors were still swinging. The reader will, he hopes, find that most of the presentiments expressed and the analysis submitted sadly turned out to be more accurate than otherwise.

It is to our collective detriment that, eight long, painful, underemployed, increasingly indebted, more societally divisive years on, few if any of these lessons seem to have been drawn by the Powers-that-Be.

…The general confusion, and the introduction of paper money, infused in the minds of people vague ideas respecting government and credit. We expected too much from the return of peace, and of course we have been disappointed. Our governments have been new and unsettled; and several legislatures, by making tender, suspension, and paper money laws, have given just cause of uneasiness to creditors.

By these and other causes, several orders of men in the community have been prepared, by degrees, for a change of government; and this very abuse of power in the legislatures, which, in some cases, has been charged upon the democratic part of the community, has furnished aristocratical men with those very weapons, and those very means, with which, in great measure, they are rapidly effecting their favourite object.

And should an oppressive government be the consequence of the proposed change, posterity may reproach not only a few overbearing unprincipled men, but those parties in the states which have misused their powers.

Letter from the Federal Farmer to the Republican, Oct 8th 1787

After a blizzard of unco-ordinated initiatives and the usual spate of grossly unintended consequences, state intervention in the banking system seems to have reached a near apotheosis this week as the authorities finally seek a comprehensive solution to the extraordinary bank-on-bank run which has so roiled world markets in recent months.

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

Without Recovery There Is Every Need To Examine The Worst Case

May 18, 2016

Without Recovery There Is Every Need To Examine The Worst Case

There is a great deal that is wrong with mainstream economic commentary, starting with its unwavering devotion to orthodox economics and unshakable faith in their “stimulus.” No matter how little is actually stimulated there is never any doubt that the media will simultaneously forget the last one while lavishing praise on the next one. It is, however, the actual economic commentary itself that may be the most damaging. Because nothing works, every news story is printed from the shallowest, narrowest perspective. It is a grave disservice to the public and journalism.

As an example, on July 15, 2015, the Wall Street Journal published an article on Industrial Production that wasn’t unique or atypical. If you read these kinds of stories you find them utterly devoid of differences, so this effort was entirely symptomatic. At the time, industrial production for June 2015 was estimated to have risen 0.3% month-over-month, ending a string of six consecutive M/M declines. That fact more than the degree of the rise was cheerfully reported as if meaningful.

U.S. industrial production rose in June, a sign that the improving economy is helping the sector break out of a slump.

Industrial production, a measure of output in the manufacturing, utilities and mining sectors, rose a seasonally adjusted 0.3% from May, the Federal Reserve said Wednesday.

Even though the article noted that one month was nowhere near enough to overcome those prior declines, it didn’t matter because it was finally a plus sign conforming to the mainstream “narrative.”

The pickup comes as other measures show improvement in the economy this spring, with employment continuing to climb and wages creeping up as the labor market tightens…

“Weakness in manufacturing appears to be past its peak,” wrote Jim O’Sullivan, chief U.S. economist for High Frequency Economics in a note to clients.

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

Chaos & Volatility On The Rise

May 7, 2016

Chaos & Volatility On The Rise

The systems that support us are breaking down

No, that’s not a ‘click bait’ sensationalist title. Things are getting ‘weird’ out there if you’re trying to be polite, and downright ‘chaotic’ if you’re being blunt. Everywhere we look, we see signs that the systems that support us are breaking down.

The economy no longer spins off enough surplus for the elites to take what they consider their share with enough left over for everyone else. So the wealth gap grows unchecked into politically and socially destabilizing levels.

The oceans are rapidly dying off: with corals bleaching, tide pools acidifying, and phytoplankton disappearing. Weather weirdness is now so entrenched that all of the 50, 100 and 500-year events that happen each week are mainly reported on locally and garner little national and international attention.

Financial markets are increasingly volatile and dominated by an unruly universe of computer algorithms that now mainly play against each other, having driven off all the humans.

Politically, we’re seeing the former fringes of both parties increasingly come into power as they appeal to increasingly disenfranchised and disappointed electorates.

All of these are signs that the status quo has failed and continues to fail us. But the form of power expressed by our so-called ‘leaders’ today seems nearly incapable of healthy introspection coupled to correct action; preferring instead to do more of the same things that got us into this mess in the first place.

Those of us who can read the signs for what they are, not what we wish or believe them to be, have a special duty to first prepare ourselves for what’s coming and then help others. To put on our own oxygen masks first, and then help the others around us.

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

Why Real Reform Is Now Impossible

April 28, 2016

Why Real Reform Is Now Impossible

The endless bleating of well-paid pundits in the corporate media about “reform” is just more circus.

It’s difficult for well-meaning pundits to abandon the fantasy that meaningful reform is possible. Indeed, a critical function of the punditry and corporate media is to foster the fantasy that the status quo could be reformed if only we all got together and blah blah blah.

As I explain in my new book Why Our Status Quo Failed and Is Beyond Reform, real structural reform would trigger the collapse of the status quo. (As a reminder, the status quo benefits the few at the expense of the many.)

But there’s another dynamic that makes reform impossible. I’ve prepared a chart to explain this dynamic:

Central banks have transformed the market–in stocks, bonds, commodities and risk–into the signaling mechanism that tells us all is well. Even though the real-world finances of the bottom 95% continue deteriorating, a rising stock market and suppressed measures of risk signal that the economy is doing well. If you’re not doing well, it’s your personal problem; the status quo is fine and needs only minor tweaks.

Elevating the market into the oracle of economic health creates a systemic risk: If the market tanks, the status quo is called into question. People start asking, is it truly a wonderful arrangement that benefits us all, or is it really just a skimming machine that funnels money and wealth from the many into the voracious maws of the few?

Central banks thwart this existential danger to the status quo by rescuing the market every time it approaches the market clearing event level. (see chart) In a market clearing event, risky loans and bets are liquidated, credit dries up, risk soars and the price of assets falls to levels that once again make fundamental sense.

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

What Have ‘We’ Been Doing All This Time?

April 20, 2016

What Have ‘We’ Been Doing All This Time?

Amidst all the pearls of wisdom unleashed in mainstream economics over the past unbelievable eight years or so, it was one paragraph of common sense that had it been written and appreciated at the start of this period might have saved us all the inordinate and totally unwarranted trouble.

But borrowers will only demand more credit if they have optimistic expectations of future income—and banks will only supply it if they deem them creditworthy. Interest rates, which is [sic] all ECB policy can affect, are less important than economic expectations.

That was published by the Wall Street Journal in an article describing how European banks are largely if not completely at the margins indifferent to QE and NIRP. Monetarism has failed on every count and by every standard. QE was supposed to be a simultaneous boost to liquidity, a push on banks (into lending) from “portfolio effects”, and then via price channels a huge lift to those very economic expectations.

None of it worked anywhere it was tried. Full stop.

The worst part is that anyone operating on common sense rather than ideology knew it wouldn’t work right from the start at the very least because of the reasons stated in that exact paragraph. Throw in some continued monetary irregularity and there was no chance.

Ben Bernanke claimed that savers would benefit from their disturbed position once QE had performed its magic largely upon expectations – the full recovery would push interest rates back up to their natural position whatever that might be. Savers and investors are still waiting and with interest rates lower now than when QE was in effect; despite Bernanke’s successor having “raised rates” in the meantime. They really don’t know what they are doing. They never have. And nobody stops them.

Guessing the future without Say’s law

March 26, 2016

Guessing the future without Say’s law

Or some reflections to read over the Easter holidays

With Japanese and Eurozone interest rates becoming increasingly negative, and the Fed backing off from at least some of the planned increases in the Fed funds rate this year, economists are reassessing the interest rate outlook.

Economists lack consensus, with some expecting yet more easing, based on the apparent collapse in cross-border trade last year. The fact that the Bank of Japan and the European Central Bank see fit to pursue increasingly aggressive monetary reflation is taken as evidence of underlying difficulties faced in these key economies. And lingering doubts about the sustainability of China’s credit bubble point to a high risk of a credit-induced slump in the world’s growth engine.

Other economists, citing official US data and relying on the Fed’s statements, point out that unemployment levels have more than satisfied the Fed’s target, and that core inflation has picked up to the point where the Fed would be fully justified to increase interest rates over the course of this year, or risk overheating in 2017.

These two opposite camps conflict in their forecasts, but where they fundamentally differ is in expectations of future economic growth. Far from displaying the highest levels of macroeconomic discipline, their diversity of opinion should alert us that their forecasts may lack sound theoretical foundation. The purpose of reasoned theory is to reduce uncertainty, not promote it. And the explanation for most of the failures behind modern macroeconomic thinking is the substitution of market-based economics by economic planning.

The fact that today’s macroeconomics dismisses the laws of the markets, commonly referred to by economists as Say’s law, explains all. Subsequent errors confirm. The many errors are a vast subject, but they boil down to that one fateful step, and that is denying the universal truth of Say’s law.

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

Plunging Manufacturing Numbers Mean That It Is Time To Hit The Panic Button For The Global Economy

March 2, 2016

Plunging Manufacturing Numbers Mean That It Is Time To Hit The Panic Button For The Global Economy

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…

Donald Trump Is Right – Here Are 100 Reasons Why We Need To Audit The Federal Reserve

February 24, 2016

Donald Trump Is Right – Here Are 100 Reasons Why We Need To Audit The Federal Reserve

When one of our major politicians gets something exactly right, we should applaud them for it. In this case, Donald Trump’s call to audit the Federal Reserve is dead on correct. Most Americans don’t realize this, but the Federal Reserve has far more power over the economy than anyone else does – including Barack Obama. Financial markets all over the planet gyrate wildly at the smallest comment from Fed officials, and virtually every boom and bust cycle over the past 100 years can be traced directly back to specific decisions made by the Federal Reserve. We get all excited about what various presidential candidates say that they “will do for the economy”, but in the end it is the Fed that is holding all of the cards. The funny thing is that the Federal Reserve is not even part of the federal government. It is an independent private central bank that was designed by very powerful Wall Street interests a little over 100 years ago. It is at the heart of the debt-based financial system which is eating away at America like cancer, and it has no direct accountability to the American people whatsoever.

The Fed has been around for so long that most people assume that we need it.

But the truth is that we don’t actually need the Federal Reserve. In fact, the greatest period of economic growth in United States history happened during the decades before the Federal Reserve was created.

A little over 100 years ago, very powerful forces on Wall Street successfully pushed for the creation of an immensely powerful central bank, and since that time the value of the U.S. dollar has fallen by about 98 percent and our national debt has gotten more than 5000 times larger.

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

Whatever It Takes?

February 19, 2016

WHATEVER IT TAKES?

In the midst of all the recent uproar, one anonymous Twitterer seized his chance to have his Uber-Warholian, 140-characters-of-fame moment and thundered: ‘Central banks are losing control of this market!’ no doubt eliciting whatever the social media equivalent of a cry of ‘Hear! Hear!’ and an approbatory nodding of the head might be from among his followers.

In truth, that such a sentiment could even be expressed shows how far from grace we have fallen. It truly is a thing of wonder that a small, secretive panel of bureaucrats, career politicians, and largely second-string—if comfortably conformist—academics should be thought to have the duty—as well as, Saints preserve us, the means at their disposal—to ensure that no-one speculating in financial markets should ever suffer a serious loss, or that no company’s share price or bond spread should ever move in too adverse a fashion.

Though the history of central banks is nothing if not a tale of unplanned interventions, derogations from the law, behind-closed-doors horse-trading, and hazardous improvisation—often spiced up with a decent dose of personal and institutional favouritism—it has surely never previously been assumed that their role is to act as playground supervisors in quite this way.

Yes, it has been their lot firstly to keep the domestic currency convertible into the international ones of gold or US dollars and, by extension, for trying to manage the balance of payments. Yes, they have gained their often lucrative prerogatives by dint of the assistance they could offer to their sovereign in his conduct of what we would now recognise as fiscal policy. Yes, they have been called in to act as lender of last resort when less privileged banks have pushed the heady temptations offered by fractional reserve banking too far beyond the bounds of prudence.

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

Markets Ignore Fundamentals And Chase Headlines Because They Are Dying

February 17, 2016

Markets Ignore Fundamentals And Chase Headlines Because They Are Dying

Normalcy bias is a rather horrifying thing. It is so frightening because it is so final; much like death, there is simply no coming back. Rather than a physical death, normalcy bias represents the death of reason and simple observation. It is the death of the mind and cognitive thought instead of the death of the body.

Ever since the derivatives collapse of 2008 the public has been regaled with wondrous stories of recovery in the mainstream to the point that such fantasies have become the “new normal”. These are grand tales of the daring heroics of central bankers who “saved us all” from impending collapse through gutsy monetary policy and no-holds-barred stimulus measures.

Alternative economists have not been so easy to dazzle. Most of us found that the recovery narrative lacked a certain something; namely hard data that took the wider picture into account. It seemed as though the mainstream media (MSM) as well as the establishment was attempting to cherry-pick certain numbers out of context while demanding we ignore all other factors as “unimportant.”

We just haven’t been buying into the magic show of the so called “professional economists” and the academics, and now that the real and very unstable fiscal reality of the world is bubbling to the surface, the general public will begin to see why we have been right all these years and the MSM has been utterly wrong.

Mainstream economists have done absolutely nothing in the way of investigative journalism and have instead joined a chorus cheerleading for the false narrative, singing a siren’s song of misinterpreted statistics and outright lies drawing the masses ever nearer to the deadly shoals of financial crisis.

Why do they do this? Are they part of some vast conspiracy to mislead the public?

…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…

Rising Systemic Risk for all Markets

February 10, 2016

Rising Systemic Risk for all Markets

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

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

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

The Federal Reserve Just Made Another Huge Mistake

January 28, 2016

The Federal Reserve Just Made Another Huge Mistake

As stocks continue to crash, you can blame the Federal Reserve, because the Fed is more responsible for creating the current financial bubble that we are living in than anyone else. When the Federal Reserve pushed interest rates all the way to the floor and injected lots of hot money into the financial markets during their quantitative easing programs, this pushed stock prices to wildly artificial levels. The only way that it would have been possible to keep stock prices at those wildly artificial levels would have been to keep interest rates ultra-low and to keep recklessly creating lots of new money. But now the Federal Reserve has ended quantitative easing and has embarked on a program of very slowly raising interest rates. This is going to have very severe consequences for the markets, but Janet Yellen doesn’t seem to care.

There is a reason why the financial world hangs on every single word that is issued by the Fed. That is because the massively inflated stock prices that we see today were a creation of the Fed and are completely dependent on the Fed for their continued existence.

Right now, stock prices are still 30 to 40 percent above what the economic fundamentals say that they should be based on historical averages. And if we are now plunging into a very deep recession as I contend, stock prices should probably fall by a total of more than 50 percent from where they are now.

The only way that stock prices could have ever gotten this disconnected from economic reality is with the help of the Federal Reserve. And since the U.S. dollar is the primary reserve currency of the entire planet, the actions of the Fed over the past few years have created stock market bubbles all over the globe.

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

New Harbor: A Time For Staying Out Of Harms Way

January 24, 2016

New Harbor: A Time For Staying Out Of Harms Way

Preserving your financial capital

Given the brutal start to the markets in the first three weeks of 2016, we thought it a good time to check in with the team at New Harbor Financial. We have had them on our podcast periodically over the past years as the market churned to ever new highs, and have always appreciated their skepticism of these liquidity-driven “”markets”” as well as their unwavering commitment to risk management should the party in stocks end suddenly.

So, how is their risk-managed approach faring now that the S&P 500 has suddenly dropped 8% since Christmas? Quite well. Their general portfolio is flat for the year so far — evidence that caution, prudence and hedging can indeed preserve capital during market downdrafts.

We’ve invited the New Harbor team back on this week to hear their latest assessment on the markets, as well as how they’re approaching their portfolio positioning moving forward:

We spend a lot of time talking about position sizing. Right now we have very little in the stock market. We never cheer for a crash in the sense that we know a lot of people would likely get harmed in such a scenario, but we also spend our time assessing reality and probability. The likelihood of probability for a crash certainly has never been non-zero, but it has developed a greater likelihood than it had even just a few weeks ago. There has been a notable sentiment change.

I’d like to point out: we’re not even a month into the year and we have already clawed back over two years’ worth of gains in the stock market. Even if you look at the S&P 500, which has been the most lofty because of its capitalization-weighted nature, where we are at right now takes us all the way back near the end of 2013.

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

The 21st Century: An Era Of Fraud — Paul Craig Roberts

January 18, 2016

The 21st Century: An Era Of Fraud — Paul Craig Roberts

In the last years of the 20th century fraud entered US foreign policy in a new way. On false pretenses Washington dismantled Yugoslavia and Serbia in order to advance an undeclared agenda. In the 21st century this fraud multiplied many times. Afghanistan, Iraq, Somalia, and Libya were destroyed, and Iran and Syria would also have been destroyed if the President of Russia had not prevented it. Washington is also behind the current destruction of Yemen, and Washington has enabled and financed the Israeli destruction of Palestine. Additionally, Washington operated militarily within Pakistan without declaring war, murdering many women, children, and village elders under the guise of “combating terrorism.” Washington’s war crimes rival those of any country in history.

I have documented these crimes in my columns and books (Clarity Press).
Anyone who still believes in the purity of Washington’s foreign policy is a lost soul.

Russia and China now have a strategic alliance that is too strong for Washington. Russia and China will prevent Washington from further encroachments on their security and national interests. Those countries important to Russia and China will be protected by the alliance. As the world wakes up and sees the evil that the West represents, more counries will seek the protection of Russia and China.

America is also failing on the economic front. My columns and my book, The Failure of Laissez Faire Capitalism, which has been published in English, Chinese, Korean, Czech, and German, have shown how Washington has stood aside, indeed cheering it on, while the short-term profit interests of management, shareholders, and Wall Street eviscerated the American economy, sending manufacturing jobs, business know-how, and technology, along with professional tradeable skill jobs, to China, India, and other countries, leaving America with such a hollowed out economy that the median family income has been falling for years.

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

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