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Having told banks and investors “don’t panic” in September, amid spiking interbank lending rates and surging default/devaluation risks, it appears the massive shortage of dollars that we warned about in December has washed tsunami-like ashore in oil-producing Nigeria. Following the Central bank’s decision this week to halt dollar sales to non-bank FX market operators, black market exchange rates spiked to 282/USD (vs 199 official) and CDS spiked to record highs implying drastic devaluations loom.

As Reuters reports, Nigeria’s central bank is halting dollar sales to non-bank foreign exchange operators and letting commercial banks accept dollar deposits with immediate effect, its governor said on Monday, in an effort to shore up dwindling foreign reserves.

Africa’s biggest economy, an OPEC member state that depends on oil sales for about 95 percent of its foreign reserves, has been hammered by a collapse in global oil prices, which has triggered a slide in its naira currency.

Godwin Emefiele said the sale of foreign exchange to bureaux de change would be discontinued because they were using up the country’s foreign reserves for illegal transactions and selling the dollar at 250 naira compared to the official central bank rate of 197 naira.

The currency hit a record low of 282 per dollar on the unofficial market on Monday after the central bank’s announcement.

Emefiele said foreign reserves stood at around $28 billion compared with $37 billion in June 2014, and that the bureaux were depleting them at a rate of $28.4 million per week.

“This is a huge haemorrhage on our scarce foreign exchange reserves, and cannot continue,” Emefiele told a news conference in the capital Abuja.

To avoid devaluing the currency, a stance so far supported by President Muhammadu Buhari, the central bank adopted increasingly stringent foreign exchange rules last year and effectively banned dollar access for the purchase of 41 items, which has also been criticised at the World Trade Organisation by the United States and the European Union.

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

Yes, The ECB Chief Economist Really Said It: “If You Print Enough Money, You Always Get Inflation. Always.”

January 6, 2016

Yes, The ECB Chief Economist Really Said It: “If You Print Enough Money, You Always Get Inflation. Always.”

Once upon a time there was a cute, if amusing and terribly disingenuous debate among those who have never actually traded but pretend to know finance, about what QE and “unconventional policy” actually was. “It’s an asset swap” they said, “it’s not printing money” they said.

We are happy to close the chapter on all those sophist hacks once and for all, with a painfully obvious, if stunning in its honesty, declaration by none other than ECB Executive Board Member Peter Preat, who earlier today said the following: “If you print enough money, you always get inflation. Always.”

The full context from Reuters, which reports that “money-printing plan has so far failed to drive up inflation” and touches on Europe’s odd fascination with never having a backup plan: “the bank does not have an alternative “plan B”, ECB Executive Board member Peter Praet said in a magazine interview published on Wednesday.

More details:

“I accept that our policy has not yet been successful: inflation in Europe has for a long time been at a very low level of almost zero,” Praet, the ECB’s chief economist, told Belgian weekly magazine Knack.

Praet said various factors, notably low oil prices and less buoyant emerging economies, meant it was taking longer to reach the goal of inflation of close to but below 2 percent.

“We need to be attentive that this shifting horizon does not damage the credibility of the ECB,” he added.

Too late, friend.

Inflation has missed the ECB’s target of close to but below 2 percent for almost 3 years and it will still take years at best to drive up price growth towards the target, the bank forecast earlier.

Praet said that, despite this shifting horizon, the ECB did not have an alternative to its policy of low interest rates and 1.5 trillion euro asset buying scheme.

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

This Is Going To Happen In 2016: “One Of The Greatest Commodity Plays Of All Time”

January 3, 2016

This Is Going To Happen In 2016: “One Of The Greatest Commodity Plays Of All Time”

While stock markets held strong near their all-time highs, the last year saw massive financial destruction in global commodities markets. Oil, gold, silver, steel, coal and other raw materials experienced price drops not seen since just before the the Crash of 2008. As an example of how bad it has gotten in the raw materials space one need only look at the Baltic Dry Index, which is used to assess the cost of shipping raw materials by sea. Signaling serious economic problems, the BDI recently hit its all-time low, surpassing even the lows hit during the last financial crisis.

That a significant financial, economic or monetary event will soon be upon us cannot be denied.

Yet within crisis there is opportunity, and knowing what can happen and how to position yourself accordingly ahead of the fallout will not only ensure that your wealth is preserved, but will help you thrive financially. While we have always urged those concerned with the state of affairs in the world to have a healthy storage of food and supplies in anticipation of supply disruptions or hyperinflationary monetary policy, a major financial event will, as it did following the last crisis, likely lead to significant gains in precious metals as investors the world over shift capital into the historical monetary asset of last resort.

As Future Money Trends explains in the following micro-documentary, there are three perfect catalysts for why silver and gold are headed to new highs in the very near future: low prices and global supply shortages, war, and the collapse of U.S. bond markets.

What we are about to show you is undeniable evidence… This is going to happen within the next year… Silver is likely the most undervalued asset available to investors today.

Watch (Courtesy Future Money Trends):

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

Albert Edwards Explains Why The “Global Economy Will Be Thrown Into Chaos”

November 13, 2015

Albert Edwards Explains Why The “Global Economy Will Be Thrown Into Chaos”

SocGen’s permarealist, Albert Edwards, has been the one person who for the past decade has firmly held the belief that a “deflationary Ice Age” is upon the world – courtesy of an unmanageable debt load – no matter what central banks do.

There is, of course, one way to short circuit said Ice Age, and it involves paradropping money in an act of terminal fiat desperation (the outcome is always hyperinflation) onto the general population, something which as we reported last Friday is already in the works courtesy of first Adair Turner and the IMF, and soon all other “very serious people”. Keep an eye on Japan as this is where said paradropping will be attempted first as Ben Bernanke suggested back in 2003 when he said to “consider for example a tax cut for households and businesses that is explicitly coupled with incremental Bank of Japan purchases of government debt – so that the tax cut is in effect financed by money creation.”

But before we get there, here is a snapshot of where, according to Edwards, we are now and why “there” is getting very close.

In his latest note he says, quite simply, that it is now too late to put the “Orc-like monster” of excess debt and declining cash flows back in the bottle, and why “the global economy will be thrown into chaos.”

The deeply held wish of central bankers not to de-rail the fragile economic recovery is on display for all to see as they grasp at the slightest excuse for their continued inaction. The UK’s central bank governor, Mark Carney, exceeded all dovish expectations recently in his latest rate flip-floppery. But what is this? The Fed has finally summoned up its courage and looks set to raise rates next month.

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

A Stunning Admission From A BOE Central Banker: This Is What The Coming “Helicopter Money” Will Look Like

November 7, 2015

A Stunning Admission From A BOE Central Banker: This Is What The Coming “Helicopter Money” Will Look Like

Back in early 2009, just around the time the Fed announced it would unleash QE1, we warned that any attempt to reflate the debt (a pathway which ultimately leads to hyperinflation as monetary paradrops are the only logical outcome as a result of the deflationary failure of the intermediate steps) would fail, and instead would saddle the world with even more debt, making monetary financing, i.e., paradropping money, the inevitable outcome.

We said that instead, the right move would be to liquidate the excess debt, and start anew – a step which, however, would wipe out trillions in (underwater) equity, something which the status quo would never agree to, as that is where the bulk of its wealth is contained.

7 years later, debt is well over $200 trillion, having risen by more than $60 trillion in the interim, and we are rapidly approaching the peak of the world’s debt capacity as we noted a month ago in “The World Hits Its Credit Limit, And The Debt Market Is Starting To Realize That.”

Today, we find that none other than Adair Turner, a member of the Bank of England’s Financial Policy Committee and a Chairman of the Financial Services Authority, wrote a long essay in Bloomberg which admits everything we have warned about.

To wit:

Advanced economies’ public debt on average increased by 34 percent of GDP between 2007 and 2014. More important, national incomes and living standards in many countries are 10 percent or more below where they could have been, and are likely to remain there in perpetuity.

The fundamental problem is that modern financial systems inevitably create debt in excessive quantities. The debt they create doesn’t finance new capital investment but the purchase of existing assets, and above all real estate. Debt drives booms and financial busts. And it is a debt overhang from the last boom that explains why recovery from the 2007–2008 crisis has been so anemic.

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

What’s Next: Deflation, Inflation, or Hyperinflation?

November 3, 2015

What’s Next: Deflation, Inflation, or Hyperinflation?

Divided Opinions

POITOU, France – Last week, young colleagues at Bonner & Partners HQ in Delray Beach, Florida, put us on the spot.

“What do we stand for as a publishing business?” they asked. “Who are we? How are we different from anyone else? What do we think that others don’t?”

We are not the only publishers to offer opinions. And not the only ones with alternative points of view. So, to answer these questions, let’s look first at the range of opinions on offer…

First, there is “the authorities must know what they are doing… besides, I have more important things to think about” camp. This is by far the largest group: hoi polloi. The masses. The lumpenproletariat.

Saved by the border collie
Cartoon by Gary Larson

There may be some grumbling and kvetching. But most people count on the feds to manage the economy, foreign policy, the future, and the government. They expect mistakes from time to time. But they also believe the system can be trusted to produce an acceptable, although perhaps not always ideal, outcome.

And if not, God help them. Because the difference between the outcome if they bothered to think about it and the outcome if they didn’t is the same. They have no ability to influence public policy… and not much room to maneuver in their private lives.

They get salaries, pensions, Social Security. They need jobs, mortgages, student loans, and medical insurance. They have little capital to invest or protect. They depend so heavily on “the system” that they can’t afford to believe there is something deeply wrong with it. They go along. They get along.

sheeple

Going along, getting along…
Cartoon by Gary Larson

At the other end of the idea spectrum, there are the edgy, malcontent, and extremely marginal opinions. A man, sitting in his double-wide watching TV can come to hold all sorts of wacky views. There is an entire infotainment industry that provides screwball opinions.

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

Highly Respected Economist Warns: “Hyperinflation Is On The Table… It Will Be Completely Uncontrollable”

October 20, 2015

Highly Respected Economist Warns: “Hyperinflation Is On The Table… It Will Be Completely Uncontrollable”

Thibaut Lepouttre is a highly educated and well respected economist from Belgium. But unlike many of his counterparts who often toe the line of mainstream politicians and financial pundits, he’s not one to sugarcoat the seriousness of the current global economic, financial and monetary environment. According to Lepouttre, while the Federal Reserve has worked feverishly to prevent a widespread destabilization of the system, their machinations will soon be revealed as an abject failure.

Whereas many of his colleagues suggest the possibility of inflation is an unlikely scenario, Lepouttre says that we will see it begin to manifest in the near-term in the form of higher prices for essential resources. In his latest interview he explains why we’re within the prime target dates for inflation to take hold, the snowball effect that will lead to uncontrollable hyperinflation, and how to strategically position assets ahead of this unprecedented monetary event.

There is no doubt that the Federal Reserve has almost run out of options to get the economy going.

(Watch at Youtube)

Let’s go back to the basics of the economy. It takes a while when money gets printed before it really gets circulated in the system. In normal economic times, it takes like 24 to 36 months before a newly printed $100 bill is really brought into circulation, and you can see the trickle down effects of that.

The problem in the current economic situation is the fact that the velocity of money is much slower than it used to be. Due to the lower velocity of the money, it takes much longer before you feel the trickle down effects. So instead of the 24 to 36 months, it’ll take, I’ll say 60-72 months before we see any of the trickle down effects into the real economy.

…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

October 18, 2015

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…

The G-30 Group Of Central Bankers Warn They Can “No Longer Save The World”

October 11, 2015

The G-30 Group Of Central Bankers Warn They Can “No Longer Save The World”

In a detailed report by the Group of Thirty, central bankers warned that ZIRP and money printing were not sufficient to revive economic growth and risked becoming semi-permanent measures. As Reuters reports, the flow of easy money has inflated asset prices like stocks and housing in many countries but have failed to stimulate economic growth; and with growth estimates trending lower and easy money increasing company leverage, the specter of a debt trap is now haunting advanced economies. “Central banks have described their actions as ‘buying time’ for governments to finally resolve the crisis… But time is wearing on,” sending a message of “you’re on your own” to governments around the world.

The G30 begins their report rather pointedly…

Central banks worked alongside governments to address the unfolding crises during 2007–09, and their actions were a necessary and appropriate crisis management response. But central bank policies alone should not be expected to deliver sustainable economic growth. Such policies must be complemented by other policy measures implemented by governments.

At present, much remains to be done by governments, parliaments, public authorities, and the private sector to tackle policy, economic, and structural weaknesses that originate outside the control or influence of central banks. In order to contribute to sustainable economic growth, the report presumes that all other actors fulfill their responsibilities.

Roughly translated… central bankers are saying “you are now on your own.”

Central banks alone cannot be relied upon to deliver all the policies necessary to achieve macroeconomic goals. Governments must also act and use the policy-making space provided by conventional and unconventional monetary policy measures. Failure to do so would be a serious error and would risk setting the stage for further economic disturbances and imbalances in the future.

And the “need to exit” appears to be front and center for The G30 bankers…

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

Austerity or Hyperinflation. Which is the Precursor to Revolution?

October 5, 2015

Austerity or Hyperinflation. Which is the Precursor to Revolution?

QUESTION: Mr, Armstrong;

I recently read an article claiming to be a case study that it was somehow the French hyperinflation that led to the revolution. It seems that as you say they are again mixing facts to support a rise in gold with hyperinflation. I am a collector of French monetary history and the paper money came after the revolution not before. Unquestionably, there was austerity prior to the revolution and that seems to be repeating in Europe once again. Would you care to comment on this issue for it seems they are distorting history once again to sell gold.

Your debut here in Paris was super. It has really made some impact starting a discussion.

ANSWER: Yes you are correct. The French hyperinflation came after the French Revolution for they defaulted on their national debts accumulated by the crown and then confiscated the property of the Catholic Church to try to back their post-revolutionary currency. The nation went into hyperinflation because the revolution defaulted on all prior debt and they were then hunting the rich, taking everything they had, and beheaded them. This was not an atmosphere that promotes CONFIDENCE.

These people try to claim the hyperinflation is caused by paper money rather than revolution which results in hunting the rich. The German hyperinflation was the same sequence. It was a communist revolution in 1918 which also defaulted on the national debt of the prior government. It is not the paper money, it is the default that distinguishes both hyperinflation events for CONFIDENCE simply collapses and the economy implodes. By attributing this to “fiat” paper they then assume that we must go into hyperinflation simply because we too have paper money. That is just an unsupported analysis which distorts the entire sequence of events. This analysis is highly dangerous and amounts to consumer fraud.

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

Deflation Warning: The Next Wave

October 1, 2015

Deflation Warning: The Next Wave

The global economic slump is accelerating

The signs of deflation are now flashing all over the globe. In our estimation, the possibility of an associated financial crisis is now dangerously high over the next few months.

As we’ve been saying for a while, our preferred model for how things are going to unfold follows the Ka-Poom!Theory as put out by Erik Janszen of iTulip.com.

That theory states that this epic debt bubble will ultimately burst first by deflation (the “Ka!”) before then exploding (the “Poom!”) in hyperinflation due to additional massive money printing efforts by frightened global central bankers acting in unison.

First an inwards collapse, then an outwards explosion. Ka-Poom!

We’ve been tracking the deflationary impulse for a while, and declared deflation the winner back in July of this year.

A Failed Strategy

What exactly do we mean by deflation? Back in 2008 the central banks of the developed world, as well as China, had a choice:

admit that prior policies geared towards encouraging borrowing at a faster rate than income growth were a horrible idea, or
double down and push those failed policies even harder

As we all know, they chose option #2. And so here we are, just 8 years later, with nearly $60 trillion in new debt piled on top of the prior mountain — while GDP grew by only $12 trillion over the same time period:

(Source)

[Note: Global nominal GDP is projected to be $68.6 trillion in 2015, virtually unchanged from 2013]

In other words, instead of saying to ourselves: Hmmm…. it was probably a terrible idea to pile up debt at 2x the rate of income growth, what the world did instead was to double down on that terrible idea and pile on more debt at 5x the rate(!) of nominal GDP growth.

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

China Cannot Let This Happen

September 26, 2015

China Cannot Let This Happen

After borrowing — and largely wasting — $15 trillion during the Great Recession, China now looks like a typical decadent developed-world country, complete with slow growth, anemic consumer spending and unstable financial markets.

But it’s not France, Canada or the US, where recessions happen and voters peacefully replace one major party with the other. China, within living memory, has seen civil unrest beget open rebellion beget multi-decade civil war.

Just as Germany is never going back to hyperinflation, China will not tolerate mass protests. Which means it somehow has to find jobs for the tens of millions of citizens who aspire to middle class life. This need for growth at any price explains the borrowing/infrastructure binge of the past five years. And soon it will explain a massive devaluation/QE program. From Monday’s Wall Street Journal:

China’s Workers Stumble as Factories Stall

XIGUOZHUANG, China—For decades, an army of migrant workers drove China’s boom times, flocking to its cities to sew T-shirts, assemble iPhones, or build apartment blocks and Olympic stadiums.

The arrangement helped millions of poor, rural Chinese join a new consumer class, though many also paid a heavy price.

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.

In Xiguozhuang, a village among cornfields some 155 miles south of Beijing, it had been rare to see working-age men for much of the year. This year, however, many of the men are at home, sidelined by a fading property boom.

“Times are tough now,” said Wang Hongxing, a 39-year-old father of three who has worked at building sites across China’s northeast since his teens, but who has spent the past two months tending his farmland plot. “There are too many workers and wages are dropping.”

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

Buiter: Only “Helicopter Money” Can Save The World From The Next Recession

September 9, 2015

Buiter: Only “Helicopter Money” Can Save The World From The Next Recession

It is to be expected that economists – even economists working for the same team – have different views about the likelihood of different future outcomes. Economics isn’t rocket science, and even rockets frequently land in the wrong place or explode in mid-air.

That rather hilarious characterization of the pseudoscience that is economics comes from the desk of Citi’s Chief Economist Willem Buiter and it’s apparently evidence that even if you don’t think too much of his views on “pet rocks” (gold is a 6,000 year-old bubble) or on the efficacy and/or utility of physical banknotes (ban cash), you’d be hard pressed to disagree with him when it comes to critiquing his profession. Of course we don’t want to give Buiter too much credit here because the quote shown above could simply be an attempt to stamp a caveat emptor on his latest prediction in case, like his predictions on when Greece would ultimately leave the euro, it turns out to be wrong.

As tipped by comments made at the Council of Foreign Relations in New York late last month, Buiter is out with a damning look at the global economy which he says will be drug kicking and screaming into a recession by the turmoil in China and the unfolding chaos in EM. Here’s the call:

In the Global Economics team, however, we believe that a moderate global recession scenario has become the most likely global macroeconomic scenario for the next two years or so. To clarify further, the most likely scenario, in our view, for the next few years is that global real GDP growth at market exchange rates will decline steadily from here on and reach or fall below 2%.

More specifically, Buiter says the odds of some kind of recession (either mild or terrifying) are 55%. Not 54%, or 56% mind you, but exactly 55%, because as indicated by the introductory excerpt above, economic outcomes are very amenable to precise forecasting:

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

Quantitative Easing for People: The UK Labour Frontrunner’s Controversial Proposal

September 9, 2015

Quantitative Easing for People: The UK Labour Frontrunner’s Controversial Proposal

British MP Jeremy Corbyn has proposed a “People’s QE” that has critics crying hyperinflation and supporters saying it’s about time.

Dark horse candidate Jeremy Corbyn, who is currently leading in the polls for UK Labour Party leadership, has included in his platform “quantitative easing for people.” He said in a July 22nd presentation:

The ‘rebalancing’ I have talked about here today means rebalancing away from finance towards the high-growth, sustainable sectors of the future. How do we do this? One option would be for the Bank of England to be given a new mandate to upgrade our economy to invest in new large scale housing, energy, transport and digital projects: Quantitative easing for people instead of banks.

As his economic advisor Richard Murphy further explains it:

People’s quantitative easing is . . . a highly directed process where the debt that is . . . repurchased has been deliberately created and issued either by a green investment bank or by local authorities, health trusts and other such agencies for the specific purpose of funding new investment in the economy at the time when big business and financial markets are completely failing to deliver the scale of investment that is needed to get the UK working again and to restore our financial prosperity.

According to the Positive Money group:

Ideas in a similar vein have been advocated or at least suggested by notable economists including J M Keynes (1), Milton Friedman (2), Ben Bernanke (3), William Buiter (4) and Martin Wolf (5). Most recently, Lord Adair Turner (6) has proposed similar ideas, highlighting that ‘there are no technical reasons to reject this option’.

Perhaps, but critics have found plenty to criticize. Peter Spence writes in the UK Telegraph:

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

Venezuela Increasingly Looks Like A War Zone

August 2, 2015

Venezuela Increasingly Looks Like A War Zone

Over the years, we have repeatedly poked fun at the transformation of Venezuela into a “socialist utopia” – an economy in a state of terminal collapse, where the destruction of the currency (one black market Bolivaris now worth 107 times less than the official currency’s exchange rate) and the resulting hyperinflation is only matched be barren wasteland that local stores have transformed into now that conventional supply chains are irreparably broken.

Just this past Wednesday we showed a clip of what is currently taking place inside Venezuela supermarkets, noting that “the hyperinflationary collapse in Venezuela is reaching its terminal phase. With inflation soaring at least 65%, murder rates the 2nd highest in the world, and chronic food (and toilet paper shortages), the following disturbing clip shows what is rapidly becoming major social unrest in the Maduro’s socialist paradise… and perhaps more importantly, Venezuela shows us what the end game for every fiat money system looks like (and perhaps Janet and her colleagues should remember that).”

Unfortunately, while mocking socialist paradises everywhere is a recurring theme especially once they have completely run out of other people’s money to burn through, what always follows next is far less amusing – completely social collapse, with riots, civil war and deaths not far behind.

That is precisely what the video shown below has captured. In the clip, a demonstration against Venezuela’s poor transportation services quickly turned violent. End result: one person dead from a gunshot wound, more than 80 arrested and four shops looted on the Manuel Piar Avenue in San Felix.

What is most distrubing is how comparable to an open war zone what was once a vibrant, rich and beautiful Latin American country has become.

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

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