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The past two years have been especially brutal to so-called equity ‘bears’. Against all odds, and despite all the shocks, global capital markets—if not the real economy they are supposed to represent—have continued to climb to new heights. After the onset of the coronavirus catastrophe, the relentless rise of the asset markets, particularly in the U.S., has completely baffled many.

But it should not. We are in the midst of an asset market mania—perhaps the biggest of all time.

All the while we have been warning about the possibility of collapse of the world economy, beginning in March 2017, when we issued our first-ever warning of global crash. Then we wrote:

The crisis of 2007 – 2008 reversed the trend of financial globalization, which has undermined global growth. The pull-back in financial globalization has been masked by central bank-induced liquidity and continuous stimulus from governments which have created an artificial recovery and pushed different asset valuations to unsustainable levels. This implies that we live in a “central bankers’ bubble”.

We have noted in several times this year how central banks and especially the Federal Reserve (or the “Fed”) has been acting as the ‘de facto’ market-loss back-stopper, successfully pushing asset markets to new heights. However, it is obvious that the central bankers are only following the script they had written before. This is no ‘New Normal’.

So, let’s take a tour of the bailouts over the past 11 years.

Starting with a bang

In the depths of the Global Financial Crisis at the end of 2008, standard monetary policy tools became ineffective. After slashing the Fed funds rate below one percent in October 2008, the Federal Open Market Committee (FOMC) decided that more drastic action was needed.

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

The ‘new normal’ has been postponed (and probably canceled)

September 22, 2020

The ‘new normal’ has been postponed (and probably canceled)

There remains a hope that once we get past the economic and social effects of the pandemic, all of us will be able to return to something resembling normal life before the pandemic—even if it is a “new normal” marked by heightened vigilance and protection against infectious disease and more work at home for office workers as companies realize they don’t need to maintain as much expensive office space.

But the date for this recovery to a new normal seems to keep getting postponed. The International Air Transport Association now projects a full recovery in international passenger traffic will take until 2024, a year later than the association projected back in April. The hotel industry will get a bit of a jump on the airline industry with a projected recovery by 2023. The situation is so bad for restaurants that no one seems to be willing to project a date for anything that might be called a recovery.

Office building owners—who are suffering lower rent collections and lease cancellations—seem lucky in comparison with a recovery expected by the end of 2022.

Retailers of all kinds continue to suffer as closures abound throughout the United States. And, anyone who relies on commuter foot traffic for sales is hurting.

Meanwhile, the U.S. Federal Reserve Bank just signaled that in the wake of such a sluggish economy it will keep short-term interest rates near zero until 2023. One commentator provided a list of hobbies that Fed board members could take up to fill their time between now and then.

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

Here’s Why the “Impossible” Economic Collapse Is Unavoidable

August 15, 2020

Here’s Why the “Impossible” Economic Collapse Is Unavoidable

This is why denormalization is an extinction event for much of our high-cost, high-complexity, heavily regulated economy.

A collapse of major chunks of the economy is widely viewed as “impossible” because the federal government can borrow and spend unlimited amounts of money because the Federal Reserve can create unlimited amounts of money: the government borrows $1 trillion by selling $1 trillion in Treasury bonds, the Fed prints $1 trillion dollars to buy the bonds. Rinse and repeat to near-infinity.

With this cheery wind at their backs, conventional pundits are predicting super-rebounds in auto sales and other consumption as consumers weary of Covid-19 and anxious to blow their recent savings borrow and spend like no tomorrow.

As for the 30+ million unemployed–they don’t matter. Conventional analysts write them off because they weren’t big drivers of “growth” anyways–they didn’t have big, secure salaries and ample wealth/credit lines.

What this happy confidence in near-infinite money-printing and V-shaped spending orgies overlooks is what I’ve termed denormalization, an implosion of the Old Normal so complete that the expected minor adjustment to a New Normal is no longer possible.

The “New Normal” Is De-Normalization

We’re already in a post-normal world because the expansion of globalization and financialization needed to fuel the Old Normal has reversed into contraction. This reversal is an extinction event for all sectors and institutions with high fixed costs: air travel, resort tourism, healthcare, higher education, local government services, etc. because their fixed cost structures are so high they are no longer financially viable if they’re operating at less than full capacity.

Only getting back to 70% of previous capacity, revenues, tax receipts, etc. dooms them to collapse.

And there’s no way to cut their fixed costs without fatally disrupting all the sectors that are dependent on them.

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

SELCO: Pay Attention Because Your “New Normal” Should Be Survival Mode

August 1, 2020

SELCO: Pay Attention Because Your “New Normal” Should Be Survival Mode

In one of the articles a few weeks ago I mentioned stuff about adapting, and I used “boiling the frog” story as an example of how situations that slowly deteriorate can make us lose our sharpness.

We get accustomed to situations, things, or actions, and we have a tendency to portray it over time as normal.

Here are a few more thoughts.

“Nah, it is OK”

In a country where the economic situation was horrible even before this whole coronavirus thing, you do not need some large event to push things in a bad direction, and COVID hit us pretty hard.

Medical staff members have worked in bad conditions from the start of this, in double shifts, without proper equipment, and with the perspective of even more salary cuts because of the worsening economic situation.

At the beginning of all this, if a medical worker got into contact with a positive patient without PPE, he or she would go into self-isolation at home and be tested. As the situation deteriorates more (more medical workers getting sick, fewer tests and equipment) it got to the point where the medical worker (if in contact, without PPE)) does not get tested and does not go into isolation until symptoms show up. So in reality, until getting symptoms he would freely spread the disease to coworkers, family, and patients until he was actually sick.

Now the situation looks like this: If a medical worker gets sick, tested positive, and only has mild symptoms-he should work normally, with a mask. If masks are available. Usually, they are not.

One more thing is that now medical officials are instructing workers, “Nah, it is nothing, you just continue to work.” In other words, you work or lose the job.

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

Florence is not the ‘new normal’. We’ve destroyed normal forever.

September 25, 2018

Florence is not the ‘new normal’. We’ve destroyed normal forever.

If each new decade brings its own unique, ever-worsening climate disasters, there won’t be any new norms for a long, long time.

Hurricane Florence floods a local business on September 16 in Wilmington, NC. CREDIT: Mark Wilson/Getty Images — HURRICANE FLORENCE FLOODS A LOCAL BUSINESS ON SEPTEMBER 16 IN WILMINGTON, NC. CREDIT: MARK WILSON/GETTY IMAGES

You’ve probably seen the term “new normal” used to describe how human caused climate change has forever changed the kind of weather we can expect.

It’s a catchy, alliterative phrase used in connection with Hurricane Florence by the National Geographic and Washington Post — and to describe climate impacts more generally by The New York Times and many others.

But the problem is that the phrase is counter to both the latest climate science and the “normal” connotation of the word “normal” which means “conforming to a type, standard, or regular pattern.”

If each decade brings its own unique, ever worsening disasters — and if this never-stabilizing condition continues for a century (and, more likely, many centuries) — then there are no norms, no standards, no regular pattern or points of reference.

Because things will keep changing with rising temperatures, with extremes becoming more extreme, there is no point at which one can plausibly say “This is the new normal, and this is what it is going to be like from now on.”

So, the “new normal” catchphrase is utterly misleading to the general reader and should not be used.

A quick look at the science yields further insight into why this term can be so misleading.

First, in recent years, research has made it increasingly clear that — after an 11,000 year period of relative stability — the climate has become destabilized by human emissions of carbon pollution, putting us on a path towards steadily rising temperatures throughout the century.

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

In defense of using ‘the new normal’ to describe climate change

August 7, 2018

WHAT IS NORMAL ANYWAY?

In defense of using ‘the new normal’ to describe climate change

It’s been an unusual summer, to say the least. Heat maps keep taking on a red-orange glow, with some veering into rare magenta territory. The Carr Fire, one of the most severe in California history, has burned down 1,000 homes and spun a fire tornado through the air.

“Over a decade or so, we’re going to have more fire, more destructive fire, more billions that will have to be spent on it,” California Governor Jerry Brown said last week. “All that is the ‘new normal’ that we will have to face.”

Why on earth is the word normal being thrown around to describe such extraordinary times?

The new normal is a catchy phrase, and one you’ve probably heard before — if not from Brown, then perhaps from the New York Times. In recent years, the cliche has shown up after disastrous wildfires, hurricanes, heatwaves, and drought.

While government officials and the media like to throw the phrase around, scientists kind of hate it.

“It sounds like we left the old normal, the old conditions, and arrived at a new normal, a new stasis,” Crystal Kolden, a fire scientist at the University of Idaho, tells me. “Unfortunately, that’s not what our climate projections are telling us. They’re telling us that this is one step on a very long staircase that’s heading toward extreme conditions.”

In climate science, “normal” is a well-defined word: an average over a 30-year period. Thus, the use of normal does not describe our current period, in which we’re going to continue seeing things we’ve never seen, Kolden says.

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

Eight “New Normal” Charts That Are Insanely Abnormal–and Dangerous

May 4, 2016

Eight “New Normal” Charts That Are Insanely Abnormal–and Dangerous

Is there anyone on the planet who’s actually stupid enough to believe these New Normal charts are healthy and sustainable?

Anyone questioning the sustainability and rightness of The New Normal is immediately attacked by the mainstream-media defenders of the crumbling status quo. Not only is everything that broke in 2008 fixed, everything’s going great globally, and anyone who dares question this narrative in a tin-foil hat conspiracy nut or simply an annoyingly doom-and-gloomer who recalcitrantly refuses to accept the positive glories of official statistics: low unemployment, rising valuations of stock market Unicorns, etc.

But the New Normal is anything but normal; all the readings of artificial life-support and manipulation are off the charts. If the New Normal were indeed a return to normalcy, we’d see a rapid and sustained decline in official life-support of the economy.

Instead, we see official life-support efforts rising to new and dangerous levels.The only reason stocks are at nose-bleed valuations globally is massive, sustained intervention on multiple levels.

We also see increasing dependence on debt to sustain increasingly weak growth. The New Normal is all about diminishing returns on additional debt.

The New Normal is also about the loss of institutional credibility. The Federal Reserve denies it makes policy decisions based on the stock market, but as soon as stocks start tumbling, the Fed’s leadership hits the airwaves with a media blitzkrieg, frantically assuring the world that the Fed will do “whatever it takes” to keep stocks at absurdly overvalued levels forever.

It once cost the equivalent of a new auto to attend a highly regarded public university. Now they cost the equivalent of a new house–and a mansion at that. In the pre-New Normal world of academia, the highest paid employees were senior professors (other than the university president).

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

Schauble Throws Up All Over Mario Draghi: “The ECB Is Causing Extraordinary Problems”

April 12, 2016

Schauble Throws Up All Over Mario Draghi: “The ECB Is Causing Extraordinary Problems”

Following this weekend’s snafu in which Spiegel said that Germany is considering suing the ECB if it launched QE, Mario Draghi reportedly made attempts to “mollify” Germany with promises that this won’t happen (it will) and that it was willing to meet – literally – with the German finance minister to appease any concerns he may have. Moments ago, Reuters reports that the meeting appears to have gone… badly.

SCHAEUBLE SAYS ECB CAUSING ‘EXTRAORDINARY PROBLEMS’: REUTERS

Oops.He added that he doesn’t see the ECB seriously discussing helicopter money (it is) adding that ECB policy does not help trust in Europe integration, and conluded with the following condemnation of everything that has been tried, and failed, so far:

SCHAEUBLE: FISCAL, MONETARY POLICY LARGELY EXHAUSTED GLOBALLY

Meanwhile, the IMF says that only more monetary and fiscal policy can save the world from fiscal stagnation.

While it is unclear what happens next, it is very much clear that never during the New Normal has there been so much confusion on how to proceed and what the next steps should be.

A Quarter Century Of Monetary Voodoo

April 4, 2016

A Quarter Century Of Monetary Voodoo

A Witless Tool of the Deep State?

Finance or politics? We don’t know which is jollier. The Republican presidential primary and Fed monetary policies seem to compete for headlines. Which can be most absurd? Which can be most outrageous? Which can get more page views?

Politics, led by Donald J. Trump, was clearly in the lead… until Wednesday. Then, the money world, with Janet L. Yellen wearing the yellow jersey, spurted ahead in the Hilarity Run.

“Cautious Yellen drives global stocks near 2016 peak,” reported a Reuters headline. The story itself was a remarkable tribute to the whole jackass money system.

At first glance, “cautious Yellen” would seem incongruous with stocks rising to “near 2016 peak.” Caution normally means playing it cool, not encouraging speculation.

But it wasn’t so much what Ms. Yellen said that sent stocks racing ahead. It was what she hasn’t done. And she hasn’t done exactly what we thought she wouldn’t do. That is, so far this year, she has not taken a single step in the direction of a “normal” monetary policy; our guess is that she never will.

Why not? Is it because she is a witless tool of Deep State cronies? Is it because her economic theory is silly, superficial, and simpleminded? Or is it because she and her predecessor, Ben Bernanke, have done so much damage to the normal world that there is nothing to go back to?

A coo-coo for the stock market…

“Cautious Yellen drives global stocks near 2016 peak,” reported a Reuters headline. The story itself was a remarkable tribute to the whole jackass money system.

At first glance, “cautious Yellen” would seem incongruous with stocks rising to “near 2016 peak.” Caution normally means playing it cool, not encouraging speculation.

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

How Vancouver Is Being Sold To The Chinese: The Illegal Dark Side Behind The Real Estate Bubble

March 11, 2016

How Vancouver Is Being Sold To The Chinese: The Illegal Dark Side Behind The Real Estate Bubble

One month ago, when describing the latest in an endless series of Vancouver real estate horror stories, in this case an abandoned, rotting home (which is currently listed for a modest $7.2 million), we explained the simple money-laundering dynamic involving Chinese “investors” as follows.

Chinese investors smuggle out millions in embezzled cash, hot money or perfectly legal funds, bypassing the $50,000/year limit in legal capital outflows.
They make “all cash” purchases, usually sight unseen, using third parties intermediaries to preserve their anonymity, or directly in person, in cities like Vancouver, New York, London or San Francisco.
The house becomes a new “Swiss bank account”, providing the promise of an anonymous store of value and retaining the cash equivalent value of the original capital outflow.

We also explained that hundreds if not thousands of Vancouver houses, have become a part of the new normal Swiss bank account: “a store of wealth to Chinese investors eager to park “hot money” outside of their native country, and bidding up any Canadian real estate they could get their hands on.”

This realization has now fully filtered down to the local population, and as the National Post writes in its latest troubling look at the “dark side” of Vancouver’s real estate market, it cites wholesaler Amanda who says that “Vancouver seems to be evolving from a residential city into almost like a lockbox for money… but I have to live among the empty houses. I’m a resident, not just an investor.”

The Post article, however, is not about the use of Vancouver (or NYC, or SF, or London) real estate as the end target of China’s hot money outflows – by now most are aware what’s going on.

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

Here Is The Complete Scenario In Which The Fed Hikes Rates, Starts A Recession, And Launches QE4

November 22, 2015

Here Is The Complete Scenario In Which The Fed Hikes Rates, Starts A Recession, And Launches QE

Seven years after the Fed unleashed ZIRP and QE to “fix the economy”, it has finally admitted that ZIRP and QE failed to do that (although they certainly succeeded in blowing the biggest asset bubble ever), and for the past 6 months the Fed has engaged in what may be the most ridiculous case of revisionist history, as the narrative has been flipped on its head, and now the all too wise career economists of the Fed (with the help of a few good ex-Goldman bankers) are pitching the first rate hike in nearly a decade as the solution to all the economy’s problems.

For now the equity market has played along with this grotesque flip-flop in monetary policy, first by rising two months ago on terrible job numbers which made the December rate hike less realistic, and then rising some more in the aftermath of the October “hawkish” Fed announcement and minutes, which in no uncertain terms warned a December rate hike is coming after all, poor economic data be damned.

To be sure, while stocks as usual remain stuck in their imaginary ivory tower where good news is great, and bad news is even greater, other assets have been far less enthusiastic. In fact, as we have shown repeatedly, the dramatic flattening of the yield curve (via the 2s30s) is now screaming policy error.

Yet if bonds foresee a major monetary policy “error” why do stocks remain oblivious? One attempt at an answer was provided by Goldman late last week when the firm suggested that the natural rate of the economy (to which the Fed will hike rates before re-easing) has declined and will remain lower for longer: in other words, the Fed’s experiment has weakened the economy so much, its potential growth rate has been cut in half in the past decade.

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

China’s Central Bank Chief Admits “The Bubble Has Burst”

September 5, 2015

China’s Central Bank Chief Admits “The Bubble Has Burst”

In a stunningly honest admission from a member of the elite, Zhou Xiaochuan, governor of China’s central bank, exclaimed multiple times this week to his G-20 colleagues that a bubble in his country had “burst.”While this will come as no surprise to any rational-minded onlooker, the fact that, as Bloomberg reports, Japanese officials also confirmed Zhou’s admissions, noting that “many people [at the G-20] expressed concerns about the Chinese market,” and added that “discussions [at the G-20 meeting] hadn’t been constructive”suggests all is not well in the new normal uncooperative G-0 reality in which we live.

Surprise – The Bubble Has Burst!!

But, as Bloomberg reports, the admission that it was a bubble and it has now burst is a notablke narrative change for the world’s central bankers…

Zhou Xiaochuan, governor of China’s central bank, couldn’t stop repeating to a G-20 gathering that a bubble in his country had “burst.”

It came up about three times in his explanation Friday of what is going on with China’s stock market, according to a Japanese finance ministry official. When asked by a reporter if Zhou was talking about a bubble, Japanese Finance Minister Taro Aso was unequivocal: “What else bursts?”

A dissection of the slowdown of the world’s second-largest economy and talk about the equity rout which erased $5 trillion of value was a focal point at the meeting of global policy makers in Ankara.That wasn’t enough for Aso, who said that the discussions hadn’t been constructive.

…

It was China, rather than the timing of an interest-rate increase by the Federal Reserve, that dominated the discussion, according to the Japanese official, with many people commenting that China’s sluggish economic performance is a risk to the global economy and especially to emerging-market nations.

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

Abenomics End Game: Thousands Protest In Downtown Tokyo, Demand Abe’s Resignation As PM Disapproval Soars

July 26, 2015

Abenomics End Game: Thousands Protest In Downtown Tokyo, Demand Abe’s Resignation As PM Disapproval Soars

Considering that Shinzo Abe’s first reign as prime minister of Japan lasted precisely one year from September 26, 2006 until September 26 of the following year, when he voluntarily resigned due to diarrhea, the fact that he has managed to stay in power for nearly 3 years since ascending to power for the second time in December 2012 and unleashing the currency-crushing and market-surging policy of unprecedented debt and deficit monetization known as “Abenomics” is quite impressive.

It also confirms that as long as the stock market keeps going higher politicians have nothing to fear even if it means a total collapse in living standards for the rest of the population.

Yet even with the Nikkei pushing on 18 years highs, it appears that Abe may have reached his rigged market rating benefit cap, because even as the Nikkei was soaring, Abe’s approval rating was plunging.

As we reported a month ago, “Abe Cabinet’s approval rating plunged to 39%, matching a record low, as more than half of voters oppose the new US-sanctioned military/security legislation being debated in the Diet…. As his popularity has waned, Abe has become more and more desperate to keep support and has, for the first time in 70- years, lower the minimum voting age from 21 to 18.”

The overall decline in support was apparently attributable to the fact that 53 percent of the respondents oppose the security bills being deliberated in the Lower House. Only 29 percent support the legislation, the survey showed.

Three constitutional law scholars said in the Lower House Commission on the Constitution on June 4 that the security legislation is unconstitutional. The Abe Cabinet countered their stance by releasing an opinion paper that said the bills do not violate the Constitution.

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

PetroYuan Proliferation: Russia, China To Settle “Holy Grail” Pipeline Sales In Renminbi

June 18, 2015

PetroYuan Proliferation: Russia, China To Settle “Holy Grail” Pipeline Sales In Renminbi

Last week, in “The PetroYuan Is Born: Gazprom Now Settling All Crude Sales To China In Renminbi,” we discussed the intersection of two critically important themes which have far-reaching geopolitical and economic consequences. The first is the death of petrodollar mercantilism, the USD recycling system that has helped to buttress decades of dollar dominance and the second is the idea of yuan hegemony, a new, post-Bretton Woods world economic order characterized by the ascendancy of China-led supranational institutions.

These themes came together recently when it became apparent that Gazprom has begun settling all crude sales to China in yuan. Here’s a summary of the prevailing dynamics: Western economic sanctions on Russia have pushed domestic oil producers to settle crude exports to China in yuan just as Russian oil is rising as a percentage of total Chinese crude imports. Meanwhile, the collapse in crude prices led to the first net outflow of petrodollars from financial markets in 18 years, and if Goldman’s projections prove correct, the net supply of petrodollars could fall by nearly $900 billion over the next three years. All of this comes as China is making a concerted push to settle loans from its newly-created infrastructure funds in renminbi.

Now, it appears Russia and China will de-dollarize natural gas settlements as well.

First, a bit of history is in order.

Last month, Chinese President Xi Jinping visited Moscow, where Gazprom Chief Executive Alexei Miller and China National Petroleum Corp Vice President Wang Dongjin signed a gas export deal which paves the way for 30 bcm/y to China via a new “Western Route.”

(the Altai line)

As a reminder, the two countries ratified a “Holy Grail” gas deal last May for the delivery of up to 38 bcm/y over 30 years via an “Eastern Route.” Also known as the “Power of Siberia” pipeline, the Eastern route was billed as the largest fuel network in the world with a total contract value of around $400 billion.

(mapping the Western and Eastern routes)

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

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