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The Real Reason US Central Bankers Cannot Raise Interest Rates for the Rest of 2019

The Real Reason US Central Bankers Cannot Raise Interest Rates for the Rest of 2019

The real reason why the US Central Bank cannot raise interest rates can traced back to eight simple words – their response to the 2008 global financial crisis. US Central Bankers reached a crossroad of responsibility versus socialism for the über wealthy years before the 2008 financial crisis manifested, and they chose socialism for the über wealthy as could be expected, because Central Bankers have to somewhat appease the highest echelons of global wealth if they don’t want this class to turn their resources against them and argue for the dissolution of Central Banks. When Central Bankers, both in the US and in Europe, deliberately and very consciously chose the path of catering to the few thousands that constitute the class of the über wealthy over helping the remaining 6.8 billion people on planet Earth in 2008, they sealed the fate of what their decisions had to be some ten years later. 

During 2008, all of the largest European banks and US banks were completely bankrupt. To this day, I know that claim is disputed even though Finance Ministers that had privy to this data, like Greece’s Yanis Varoufakis, have made such claims. Furthermore, any reasonable person that looked more deeply into the financial health of all major US and European banks, the failure of which triggered the 2008 global financial crisis, would have understood that their unwillingness to operate as banks, but as massive hedge funds and to risk their clients’ deposits in hopes of making billions of profits every year, would have realized that regulatory agencies that suspended the necessity of banks marking their financial assets to market value  was enacted to allow banks to lie about their bankrupt status and project a robustness in financial health that simply did not exist.

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

The Pivot Point

The Pivot Point 


The massive economic shock following the banking collapse of 2007–8 is the direct cause of the crisis of confidence which is affecting almost all the institutions of western representative democracy. The banking collapse was not a natural event, like a tsunami. It was a direct result of man-made systems and artifices which permitted wealth to be generated and hoarded primarily through multiple financial transactions rather than by the actual production and sale of concrete goods, and which then disproportionately funnelled wealth to those engaged in the mechanics of the transactions.

It was a rotten system, bound to collapse. But unfortunately, it was a system in which the political elite were so financially bound that the consequences of collapse threatened their place in the social order. So collapse was prevented, by the use of the systems of government to effect the largest ever single event transfer of wealth from the poor to the rich in the course of human history. Politicians bailed out the bankers by using the bankers’ own systems, and even permitted the bankers to charge the public for administering their own bailout, and charge massive interest on the money they were giving to themselves. This method meant that the ordinary people did not immediately feel all the pain, but they certainly felt it over the following decade of austerity as the massive burden of public debt that had been loaded on the populace and simply handed to the bankers, crippled the public finances.

The mechanisms of state and corporate propaganda kicked in to ensure that the ordinary people were told that rather than having been robbed, they had been saved. In the ensuing decade the wealth disparity between rich and poor has ever widened, to the extent that this week the BBC announced the UK now has 151 billionaires, in a land where working people resort to foodbanks and millions of children are growing up in poverty.

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

The revolution of the petty bourgeoisie

The revolution of the petty bourgeoisie 

Source: shutterstock.com

The 2008 financial disaster marked the beginning of a deep identity crisis in the West. After the collapse of American Lehman Brothers, governments around the globe began to support their financial institutions with unlimited amounts of tax money. Small and middle size companies would bankrupt and people in the United States continued to be evicted from their houses while the financial elite would receive a handsome amount of public support. In other words: socialism for Wall Street, capitalism for Main Street. It became painfully clear that the free market and capitalism did not work for the banks and financial institutions.

Then followed the euro crisis, with Greece’s debt at its centre. Particular European economies are suffering from the imbalance between income and a rising public debt. In 2015 it was apparent that the European leadership had no solution for Greece let alone for similar problems that will soon inevitably emerge in Spain, France and Italy.

During the 2008-2015 time frame there was a widespread opposition among the common against the financial establishment, European governments and the monetary system. The resentment was stoked by the perception that the whole system was unfair against the normal working man. In 2015 radical left-wing politician Alexis Tsipras took office in Greece and socialists like Yanis Varoufakis, Jeremy Corbyn and Bernie Sanders became the protectors of the middle and working classes. The political climate seems perfect for the socialists and yet socialist parties are declining.

It is not merely inequality that matters. Most Western countries are implementing a redistribution of wealth from the middle to the lower classes. For example, in the Netherlands a family with one working adult and a yearly income of 20 thousand gets 7 thousand euros in subsidies, thus pocketing 27 thousand, whereas a person having a 31 thousand income must pay 3 thousand euros in tax, and since he receives no subsidies, he lands up with 28 thousand euros.

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

It’s the Banks Again

It’s the Banks Again

US bank stock index down 17% from January. EU bank stocks crushed, crushed, crushed since Financial Crisis.

Monday early afternoon, the US KBW Bank index, which tracks large US banks and serves as a benchmark for the banking sector, is down 2.5% at the moment. It has dropped 17% from its post-Financial Crisis high on January 29. If the index closes at this level, it would be the lowest close since September 18, 2017:

While that may be a nerve-wracking decline for those who have not experienced bank-stock declines, it comes after a huge surge that followed the collapse during the Financial Crisis:

The second chart is on a different scale than the first chart above. So this year’s decline is small fry compared to the movements since 2006, including the dizzying plunge toward zero in early 2009, and the subsequent boom when it became clear that the Fed would pull out all stops to save the banks with all kinds of mechanisms, including ruthless financial repression – forcing interest rates to 0% – that it waged on depositors and savers for a decade. Profits derived from these mechanisms effectively recapitalized the banks.

The 55% jump in bank stocks after the 2016 election through the peak in January 2018 was a reaction to promises for banking deregulation and tax cuts from the new Trump administration along with signs of lots of goodwill toward Wall Street, as top positions in the new administration were quickly being filled with Wall Street insiders. However, the “Trump bump” for banks is now being gradually unwound.

But unlike their American brethren, the European banks have remained stuck in the miserable Financial Crisis mire – a financial crisis that in Europe was followed by the Euro Debt Crisis. The Stoxx 600 bank index, which covers major European banks, including our hero Deutsche Bank, has plunged 27% since February 29, 2018, and is down 23% from a year ago:

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

IMF Issues Dire Warning – ‘Great Depression’ Ahead?

IMF Issues Dire Warning – ‘Great Depression’ Ahead?

– “Large challenges loom for the global economy to prevent a second Great Depression” warn IMF
– Massive government debts and eroded fiscal buffers since 2008 suggest global dominos await a single market crash
– 2008 crisis measures cast long, dark “terrifying” shadow

Is another “Great Depression” on the horizon?

It would be easier to dismiss these words from Nouriel Roubini, Marc Faber or other doom-and-gloom prognosticators. Coming from Christine Lagarde’s team, though, they take on a new dimension of scary.

The International Monetary Fund head isn’t known for breathlessness on the world stage. And yet the IMF sounded downright alarmist in its latest Global Financial Stability report, stating that “large challenges loom for the global economy to prevent a second Great Depression.”

Even some market bears were taken aback. “Why,” asks Michael Snyder of The Economic Collapse Blog would the IMF use this phrase “in a report that they know the entire world will read?”

Perhaps because, unfortunately, the findings of other referees of global risks – including the Bank for International Settlements – hint at similar dislocations.

Ten years after the Lehman Brothers crisis, these worrisome warnings that will be explored in depth at this week’s annual IMF meeting in Bali. The tranquil setting, though, will offer few respites from cracks appearing in markets everywhere – from Italy to China to Southeast Asia, where currencies are cratering like it’s 1998 again.


Source: Wikipedia

Potential flashpoints and a long line of dominos

Italy is the current flashpoint – and the latest target of “domino effect” chatter in frothy world markets. China’s shadow-banking bubble, and the extreme opacity and regulations that enable it, also came in for criticism. And, of course, the 800-pound beast in any room where global investors gather these days: Donald Trump’s assault on world trade.

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

The Fed’s Easy-Money Policies Aren’t Helping Income Growth

The Fed’s Easy-Money Policies Aren’t Helping Income Growth

inequality1.PNG

Back in August, Bloomberg interviewed Karen Petrou about her research on quantitative easing and the Fed’s policies since the 2008 financial crisis. What she has discovered has not been encouraging for people who aren’t already high-income, and in recent research presented to the New York Fed, she concluded “Post-crisis monetary and regulatory policy had an unintended but nonetheless dramatic impact on the income and wealth divides.”

This assessment is based on her own work, but also on a 2018 report released by the Minneapolis Fed.1  The report showed that both income and wealth growth in the US have been much better for higher-income households in recent decades

Notably, when indexed to 1971 (the year Nixon ended the last link between gold and the dollar) we can see the disparity between the top wealth groups and other groups:

income_wealth.PNG

 Petrou continues:

What did we learn [from the Minneapolis Fed report]? This new dataset shows clearly that U.S. wealth inequality is the worst it has been throughout the entire U.S. post-war period. We also know now that the U.S. middle class is even more “hollowed out” than we thought in terms of income, with any gains made by the lower-middle class sharply reversed after 2007.

Indeed, the report concludes: “…half of all American households have less wealth today in real terms than the median household had in 1970.”

A closer look at income data also suggests that income growth has been especially anemic since 2007. Using data from the Census Bureau’s 2017 report on income and poverty, we find that incomes for the 90th percentile are increasingly pulling away from both the median (50th percentile) income and from the 20th-percentile income.2

income_percentile.PNG

 The household income for the 20th percentile increased 70 percent since 1971, while it has only increased 20 percent at the 20th percentile.

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

The Myth Of The Eternal Market Bubble And Why It Is Dead Wrong

The Myth Of The Eternal Market Bubble And Why It Is Dead Wrong

Economic collapse is not an event — it is a process. I’ve been saying this since the initial 2008 crash, and I suppose I will keep saying it until it burns into people’s minds because I don’t think that it is a widely understood concept. When alternative analysts talk about financial collapse, we are not talking about something that suddenly happens out of the blue, we are talking about an ongoing decline that occurs in stages. This decline is happening today in the U.S. and around the world, and it has been accelerating since the chaos of 2008. When we bring up the reality of collapse, we are referring to something that is happening NOW, not something waiting on the distant horizon.

The reason why some analysts can see it and others cannot is most likely due to the delusions surrounding market bubbles. These fiscal fantasy worlds are artificially created by central bank intervention and represent an attempt to mislead the populace on the true health of the system — for a limited time. People with foresight see beyond the false data of the bubble to the core economic reality; other people see only the bubble and nothing else.

When it comes to stock markets, bond markets, forex markets and the general casino economy, much of the public has a terrible inability to look beyond the next month let alone the next year. If the markets appear good now, the assumption is that they will always be good. If the central banks have intervened for the past 10 years, the assumption is they will intervene for the next 10 years.

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

World economy at risk of another financial crash, says IMF

Debt is above 2008 level and failure to reform banking system could trigger crisis

The floor of the New York stock exchange in September 2008.
The floor of the New York stock exchange in September 2008. Photograph: Richard Drew/AP

The world economy is at risk of another financial meltdown, following the failure of governments and regulators to push through all the reformsneeded to protect the system from reckless behaviour, the International Monetary Fund has warned.

With global debt levels well above those at the time of the last crash in 2008, the risk remains that unregulated parts of the financial system could trigger a global panic, the Washington-based lender of last resort said.

Much has been done to shore up the reserves of banks in the last 10 years and to put in place more rigorous oversight of the financial sector, but “risks tend to rise during good times, such as the current period of low interest rates and subdued volatility, and those risks can always migrate to new areas”, the IMF said, adding, “supervisors must remain vigilant to these unfolding events”.

A dramatic rise in lending by the so-called shadow banks in China and the failure to impose tough restrictions on insurance companies and asset managers, which handle trillions of dollars of funds, are highlighted by the IMF as causes for concern.

The growth of global banks such as JP Morgan and the Industrial and Commercial Bank of China to a scale beyond that seen in 2008, leading to fears that they remain “too big fail”, also registers on the IMF’s radar.

The warning from the IMF Global Financial Stability report echoes similar concerns that complacency among regulators and a backlash against international agreements, especially from Donald Trump’s US administration, has undermined efforts to prepare for another downturn.

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

Seth Klarman: These Are The 20 Forgotten Lessons From The 2008 Crisis

On the 10 year anniversary of the Lehman bankruptcy, a cottage industry of crisis experts, historical apologists, and generally freelance reminiscers (sic) had emerged, opining on what happened, what should have happened, what changed in the interim ten years, and what will happen in the future.

Most of these opinions are worthless with many of them coming from those who were either responsible for the financial crisis or never saw it coming in the first place. So instead, we have chosen to go with the far more actionable and erudite take of investing legend Seth Klarman who many years ago, one the 1 year anniversary of Lehman’s failure, described the 20 lessons from the financial crisis which, he said “could and should have been learned from the turmoil of 2008” but instead “were either never learned or else were immediately forgotten by most market participants.”

The Forgotten Lessons of 2008

One might have expected that the near-death experience of most investors in 2008 would generate valuable lessons for the future. We all know about the “depression mentality” of our parents and grandparents who lived through the Great Depression. Memories of tough times colored their behavior for more than a generation, leading to limited risk taking and a sustainable base for healthy growth. Yet one year after the 2008 collapse, investors have returned to shockingly speculative behavior. One state investment board recently adopted a plan to leverage its portfolio – specifically its government and high-grade bond holdings – in an amount that could grow to 20% of its assets over the next three years. No one who was paying attention in 2008 would possibly think this is a good idea.

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

Schiff: “The Next Crisis Is Not Going To Look At All Like 2008

Peter Schiff is an economist who served as an advisor to Ron Paul in 2008 and even made a run for Senate on his own at one point. He’s well-known in the “Austrian” as well as the libertarian economic community, but is perhaps best known for his belief that our next coming crisis is going to be “an order of magnitude larger than the crisis in 2008”, only this one, the Federal Reserve is not going to be able to print their way out of, Schiff predicts in his most recent interview.

“What the Fed is worried about is a repeat of the 2008 financial crisis. What they don’t realize is the next crisis is not going to look like the 2008 crisis,” Schiff said.

He makes the why the dollar going up in 2008 helped the Fed bail everyone out, and why it’s going to be impossible for the Fed to do the same thing when the dollar collapses during the next recession. Schiff also explains that a loss of confidence in the dollar as the world’s reserve currency could see interest rates move much higher, resulting in the U.S. defaulting on its debt.

Despite getting the 2008 housing crisis right, Schiff’s appearances in the mainstream financial media have declined precipitously due to his bearish outlook. As an alternative, he has created a substantial voice for himself on his YouTube channel, which boasts hundreds of thousands of subscribers.

On Saturday, August 4, Peter Schiff appeared on the Quoth the Raven podcast to talk about a multitude of topics, including:

  • Why the mainstream media doesn’t have him on anymore, despite predicting the 2008 financial crisis production dead-on
  • Why the government should have let more banks fail in 2008
  • Why he believes that a socialist will be elected in 2020 and why a libertarian may actually have a chance in 2024

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

If the Economy is So Good, Why are Wages Flat?

If the Economy is So Good, Why are Wages Flat?

Photo by Nathaniel St. Clair

We are supposedly seven years into a “recovery” from the global economic collapse that commenced in 2008. The latest evidence offered to promote this oft-peddled mantra is that U.S. gross domestic product showed a strong uptick for the second quarter of 2018, an annualized rate of 4.1 percent, nearly double that of the first quarter.

Coupled with the ongoing decline in unemployment (although standard unemployment rates greatly underestimate the true rate of employment), orthodox economists, conservative propagandists and apologists for the Trump administration would have use believe happy days are here again.

So why aren’t our wages increasing?

In part, it is because the true unemployment rate is not nearly so low as the “official” unemployment rate used by governments around the world, and thus the ranks of unemployed and underemployed are sufficiently large that there is no upward pressure on wages. Orthodox economists, dedicated as they are to ignoring any evidence that doesn’t match their models designed to “prove” that all manners of capitalist excess are as natural as the tides of the ocean — and thus in practice the professional wing of conservative propagandists — have various excuses for stagnant wages and ever increasing inequality. A favorite among these is an alleged “skills mismatch” — too many unskilled workers and a shortage of skilled workers for the high-tech jobs of today.

The data tells a different story, however. A 2014 report by the National Employment Law Project found that low-wage jobs were created at a faster pace than higher-paid jobs were lost in the first years to that point. The Project reported this breakdown:

* Lower-wage industries ($9.48 per hour to $13.33) constituted 22 percent of the 2008-2010 losses, but 44 percent of jobs gained since then.

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

The Economic Impact of the Bipartisan Bank Deregulation Bill

The Economic Impact of the Bipartisan Bank Deregulation Bill

Photo by Paul Siarkowski | CC BY 2.0

Dante Dallavalle: The Senate recently passed the Economic Growth, Regulatory Relief, and Consumer Protection Act or S.2115 with bipartisan support. Essentially the bill rewrites parts of the 2010 Dodd Frank Act. The piece of legislation whose purpose was to create a framework for oversight of the banking system responsible for the 2008 financial crisis and the economic downturn that resulted from basically the behavior of unscrupulous speculators.

The bill S.2115 was purportedly passed to exempt smaller banks from oversight and requirements for loans, mortgages, and trading. It would change the size at which banks are subjected to regulatory scrutiny. The bill has been called the Crapo bill, after its main author Senate Banking Committee Chair Mike Crapo. Crapo touts the bill as one that aims to help consumers gain easier access to credit and as a boon to regional banks by freeing them from burdensome regulations. Seen as the most significant portion of the legislation is the increase in the level at which a financial institution is considered a systemically important financial institution or SIFI – which subjects institutions to more oversight than other banks not given this designation. It would drop the number of SIFI designated institutions from 38 to just 12. The problem opponents cite is that many of the institutions that contributed to the downturn were capitalized at significantly less than the SIFI threshold–namely 250 billion dollars.

Professor, what are your thoughts on this bill?

Michael Hudson: They are using a lot of euphemisms as a cover for dismantling the fairly modest regulation that was put in by Dodd Frank. They want to work at the weakest link, which is the local community banks – and after starting with them, then proceeding to the larger banks.

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

Peter Schiff: ‘We Will Live Through Another Great Depression Which Will Be MUCH MUCH WORSE’

Peter Schiff: ‘We Will Live Through Another Great Depression Which Will Be MUCH MUCH WORSE’

Financial guru Peter Schiff, who accurately predicted the recession of 2008, says the problems we face now are even bigger. We will live through another Great Depression if Schiff is correct. And one of the main concerns is something very few dare to even mention or show a concern about: the national debt.

Schiff’s podcast from a few days ago highlights a very important problem with not only the economy as we know it but the mainstream media as well. Unable to take their attention off gun control regulations for even a moment to focus on a much bigger concern, the national debt, the mainstream media is effectively trying to hide what’s coming down the pipe. The lack of coverage seems to be spurring a lackadaisical attitude about the almost $21 trillion debt.

Let’s start at the beginning. Schiff begins his podcast talking about a book his father wrote; one of the only books to have been banned by the United States government. Yes, the US government banned a book titled “The Federal Mafia: How It Illegally Imposes And Unlawfully Collects Income Taxes” by Irwin Schiff in the “land of the free.”

“The bad news is, we are going to live through another Great Depression and it’s going to be very different. This will be in many ways, much much worse, than what people had to endure during the Great Depression,” Schiff says. “This is going to be a dollar crisis.”

“These hot inflation numbers that we’ve been getting are going to get a lot hotter…all this inflation that has been in the financial markets, in the stock markets, in the bond market, in the real estate market, everybody loved inflation when it was making you rich…the problem is going to be when it makes you poor.

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

Quantitative Tightening Is the Biggest Economic Threat in 2018

Quantitative Tightening Is the Biggest Economic Threat in 2018

In response to the 2008 financial crisis, the Fed and other central banks deployed zero or near-zero interest rates, quantitative easing, and assorted other interventions.

These may have averted an even worse disaster, but their impacts were far from ideal. Nonetheless, the economy slowly lifted off as consumers rebuilt their balance sheets and asset values rose.

The asset values climbed in large part because the Fed practically forced everyone with money to invest it in risk assets: stocks, real estate, corporate bonds, etc.  But as my long-time Thoughts from the Frontline readers know, the Fed’s trickle-down monetary policy hasn’t really worked.

The resulting wealth effect theoretically enabled more spending, at least by those in the top income quintile. But the recovery has been slow and ugly, and too many people still don’t feel the progress.

QE Benefits Were Not Evenly Distributed

Those who gripe about income inequality actually have points to make.

Even if you filter out the top one half of 1% (the tech billionaires, Warren Buffett, et al.), there is still a large imbalance in how much the top and bottom earners have benefited from the Fed’s lopsided monetary policy.

The chart below shows that the share of unmarried adults in double-up households has increased in all age brackets, and especially among Millennials.


Source: Zillow

Having a few Millennials in my own family, and even some young Gen Xers, the need to double up is readily apparent to me. Rents are just too high for the average person. Also notice that nearly one in three people between ages 50 and 59 is living with someone else in order to save on rent and other expenses.

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

Better A Year Early Than A Day Too Late

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Better A Year Early Than A Day Too Late

Preparation only has value if it’s done in advance

He who hesitates is lost.
~proverb

Change, especially a collapse scenario, often happens quite fast. So fast that there’s little to no time to react in the short frenzy between “before” and “after”.

This is true throughout nature. Glaciers that took millennia to form calve off into the sea in a matter of moments. Old-growth forests filled with thousand-year-old trees can be decimated by a single wildfire. The bubonic plague “Black Death” pandemic of the Middle Ages killed one-third of the Earth’s human population within just four short years.

Fast change is also a hallmark of human society. Movements and ideas — oftentimes simmering for years, decades or longer — suddenly reach a critical state in which the populace is swept up into history-making action. The outbreak of World War I. The Civil Rights movement. The dissolution of the USSR. The Digital Age.

When it comes, change happens swiftly. And life after — for better or worse — is forever different.

I’ve witnessed this time and time again since co-founding PeakProsperity.com. And in pretty much every instance, I notice that the vast majority of people — including even many of the the watchful and preparation-minded folks who read this site — are caught by surprise.

Fukushima

A good example of this was the disaster at the Fukushima Daiichi nuclear power plant in March of 2011. Of course, no one could have foretold the timing and scale of the tsunami, and virtually nobody expected that it could overwhelm the facility as spectacularly as it did. So in the immediate aftermath of the plant’s failure, the world looked on in sympathy, not fear.

But on March 12th, that changed as the first of several hydrogen explosions was observed among the reactors. And then my phone rang.

…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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