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“We’ve got strong financial institutions…Our markets are the envy of the world. They’re resilient, they’re…innovative, they’re flexible. I think we move very quickly to address situations in this country, and, as I said, our financial institutions are strong.” – Henry Paulson – 3/16/08

“I have full confidence in banking regulators to take appropriate actions in response and noted that the banking system remains resilient and regulators have effective tools to address this type of event. Let me be clear that during the financial crisis, there were investors and owners of systemic large banks that were bailed out . . . and the reforms that have been put in place means we are not going to do that again.” – Janet Yellen – 3/12/23

With the recent implosion of Silicon Valley Bank and Signature Bank, the largest bank failures since 2008, I had an overwhelming feeling of deja vu. I wrote the article Is the U.S. Banking System Safe on August 3, 2008 for the Seeking Alpha website, one month before the collapse of the global financial system. It was this article, among others, that caught the attention of documentary filmmaker Steve Bannon and convinced him he needed my perspective on the financial crisis for his film Generation Zero. Of course he was pretty unknown in 2009 (not so much anymore) , and I continue to be unknown in 2023.

The quotes above by the lying deceitful Wall Street controlled Treasury Secretaries are exactly 15 years apart, but are exactly the same. Their sole job is to keep the confidence game going and to protect their real constituents – the Wall Street bankers. And just as they did fifteen years ago, the powers that be once again used taxpayer funds to bailout reckless bankers. Two hours before the only solution the Feds know – print money and shovel it to the bankers – Michael Burry explained exactly what was about to happen.

…click on the above link to read the rest…

Why Recession Is Imminent, In Three Charts

January 20, 2023

Why Recession Is Imminent, In Three Charts

Any one of these would be enough to make the case

The idea that the world’s central banks can inflate the biggest financial bubble in human history — appropriately called the everything bubble — and then deflate it gently into a soft landing is mathematically and philosophically impossible. So the question is not if but when we get a bust that’s commensurate with the boom.

Based on the following three indicators, that bust is imminent.

Massively inverted yield curve
When short-term interest rates rise above long-term rates, a slowdown usually follows. That’s because traditional banks (though not necessarily the monstrous hedge funds that the biggest banks have evolved into) make most of their money by borrowing short and lending long. In normal times, long-term rates are higher than short-term, reflecting the higher risk of lending into the distant future, so the spread between a bank’s borrowing and lending rates produces a nice spread, which translates into a decent profit.

Invert the yield curve by pushing short-term rates above long-term rates, and this business model breaks down. Banks stop making suddenly-unprofitable loans, their customers have less money to spend and invest, and the economy shrinks.

Note two things on the following chart, which depicts the spread between 10-year and 2-year Treasury bond yields. First, when this spread went slightly negative (i.e., 2-year rates higher than 10-year) in 2000 and 2007, recession followed within a year or so. Second, today’s yield curve is a lot more than slightly negative. It is, in fact, one for the record books, implying that the credit markets expect a dramatic slowdown.

Shrinking money supply
A Ponzi scheme needs ever-greater amounts of money flowing in to avoid collapse. Today’s global economy is a classic example of a Ponzi scheme. Therefore, it needs an increasing money supply to function.

…click on the above link to read the rest…

World Bank Warns Global Economy “Perilously Close To Falling Into Recession”

January 10, 2023

World Bank Warns Global Economy “Perilously Close To Falling Into Recession”

Six months ago, The World Bank slashed its global growth outlook for 2022 and 2023 to +2.9% and +3.0% respectively blaming “the war in Ukraine, lockdowns in China, supply-chain disruptions, and the risk of stagflation” for hammering growth.

Today, in its latest report on global economic prospects, The World Bank has slashed its growth forecast for 2023 by almost a half to just +1.7%, led by weaker growth in all the world’s top economies — the United States, Europe and China.

“Global growth has slowed to the extent that the global economy is perilously close to falling into recession,” the World Bank said.

That would mark the third-weakest pace of global growth in nearly three decades, overshadowed only by the 2009 and 2020 downturns.

The World Bank called on global central banks to remain alert to the risk that aggressively tightening monetary policy to fight inflation could spill across borders. The new report called for discussions between central bankers to “help mitigate risks associated with financial stability and avoid an excessive global economic slowdown in the pursuit of inflation objectives.”

“Weakness in growth and business investment will compound the already devastating reversals in education, health, poverty, and infrastructure and the increasing demands from climate change,” said David Malpass, president of the World Bank.

For now, those central bankers are facing their nemesis… Stagflation…

Though the United States might avoid a recession this year – the World Bank predicts the U.S. economy will eke out growth of 0.5% – global weakness will likely pose another headwind for America’s businesses and consumers, on top of high prices and more expensive borrowing rates.

The United States also remains vulnerable to further supply chain disruptions if COVID keeps surging or the war in Ukraine worsens.

…click on the above link to read the rest…

BlackRock says we’re all doomed. It’s being optimistic

January 9, 2023

BlackRock says we’re all doomed. It’s being optimistic

The world’s largest asset manager has forecast systemic economic chaos. The reality is even worse

BlackRock predicts a lasting fall in living standards for the many, alongside huge profits for the few

| Maureen McLean/Alamy Live News

The working assumption, for governments and central banks across the world, is that at some point soon everything will get back to ‘normal’ – our economies will return to either pre-pandemic or, sometimes, even pre-2008 crash levels.

These beliefs are reinforced by media economics commentary and across political parties.

But what if they’re wrong? The world’s largest asset manager, overseeing $10trn in assets across the globe, thinks we are, instead, entering a period of increased risk and uncertainty, defined by unavoidable recession and much higher inflation.

BlackRock – a well-connected, influential and hugely profitable pillar of global capitalism – made the predictions in its ‘2023 Global Investment Outlook’ report.

It states: “The Great Moderation, the four-decade period of largely stable activity and inflation, is behind us.”

Instead, BlackRock forecasts a new regime with a “brutal trade-off” – falling living standards for the many becoming profits for the few.

This reality, of a world undergoing fundamental transformations and disrupting our settled modes of existence, has so far barely entered the economic mainstream.

For BlackRock to break with this consensus might, potentially, be one of the first signs of a broader shift in how major institutions in the Western economies view the world.

Systemic chaos

Annual food inflation in the UK rose to 13.3% – an all-time high – last month, according to trade body the British Retail Consortium, ahead of the official government figures out later this month.

…click on the above link to read the rest…

Inflation, recession, and declining US hegemony

December 24, 2022

Inflation, recession, and declining US hegemony

In the distant future, we might look back on 2022 and 2023 as pivotal years. So far, we have seen the conflict between America and the two Asian hegemons emerge into the open, leading to a self-inflicted energy crisis on the western alliance. The forty-year trend of declining interest rates has ended, replaced by a new rising trend the full consequences and duration of which are as yet unknown.

The western alliance enters the New Year with increasing fears of recession. Monetary policy makers face an acute dilemma: do they prioritise inflation of prices by raising interest rates, or do they lean towards yet more monetary stimulation to ensure that financial markets stabilise, their economies do not suffer recession, and government finances are not driven into crisis?

This is the conundrum that will play out in 2023 for the US, UK, EU, Japan, and others in the alliance camp. But economic conditions are starkly different in continental Asia. China is showing the early stages of making an economic comeback. Russia’s economy has not been badly damaged by sanctions, as the western media would have us believe. All members of Asian trade organisations are enjoying the benefits of cheap oil and gas while the western alliance turns its back on fossil fuels.

The message sent to Saudi Arabia, the Gulf Cooperation Council, and even to OPEC+ is that their future markets are with the Asian hegemons. Predictably, they are all gravitating into this camp. They are abandoning the American-led sphere of influence.

2023 will see the consequences of Saudi Arabia ending the petrodollar. Energy exporters are feeling their way towards new commercial arrangements in a bid to replace yesterday’s dollar. There’s talk of a new Asian trade settlement currency…

…click on the above link to read the rest…

BlackRock: Prepare For Recession “Unlike Any Other”… And What Worked Before “Won’t Work Now”

December 9, 2022

BlackRock: Prepare For Recession “Unlike Any Other”… And What Worked Before “Won’t Work Now”

The world’s largest investment manager has gone all in – and says a global recession is right around the corner. What’s more, the financial tricks deployed by Central Banks in the past ‘won’t work this time.’

According to BlackRock, the global economy has entered a phase of elevated volatility, and that a recession is imminent due to central banks aggressively boosting borrowing costs to tame inflation. Their actions, according to a team of BlackRock strategists, will ignite more market turbulence than ever before.

“Recession is foretold as central banks race to try to tame inflation. It’s the opposite of past recessions,” the team wrote In their 2023 Global Outlook (embedded below), which says that the global economy has already exited a four-decade period of stable growth and inflation, and has now entered a period of heightened instability.

And when things get bad, “Central bankers won’t ride to the rescue when growth slows in this new regime, contrary to what investors have come to expect. Equity valuations don’t yet reflect the damage ahead.”

“What worked in the past won’t work now,” said the strategists. “The old playbook of simply ‘buying the dip’ doesn’t apply in this regime of sharper trade-offs and greater macro volatility. We don’t see a return to conditions that will sustain a joint bull market in stocks and bonds of the kind we experienced in the prior decade.”

So what can actually tame inflation? A deep recession, according to the report.

To navigate the coming storm, BlackRock recommends more frequent portfolio changes and taking a more “granular view on sectors, regions and sub-asset classes.”

Compounding the issue is aging workforces around the world – which is one key reason that the supply of US labor is struggling to keep up with demand.

…click on the above link to read the rest…

Jeremy Grantham: What’s Coming is Worse Than a Recession

November 30, 2022

Jeremy Grantham: What’s Coming is Worse Than a Recession

#243. The Great Inflexion

November 23, 2022

#243. The Great Inflexion

A SYSTEM UNRAVELS

INTRODUCTION

As everyone surely knows by now, the global economy has entered a recession which is likely to be both severe and protracted. For the most part, governments and central bankers are concentrating on the task of trying to tame inflation.

Their critics tend to argue for more expansionary fiscal and monetary policies, contending that stimulus could soften or shorten the recession. They claim, in defiance both of experience and of logic, that expansionary monetary policies needn’t contradict the effort to bring inflation under control.

Where almost everybody is in agreement is that, however long it takes, the recession will end. But there’s a striking absence of explanations for how or why growth is supposed to resume. The fall-back position is no more than an assumption – a recovery will arrive for no better reason than that all previous economic downturns have been followed by rebounds.

The underlying presumption here is cyclicality, a process accepted as routine, not just by policy-makers and central bankers, but by investors, business leaders and the general public alike. It is well understood that the Big Numbers – like economic output, and the aggregate value of the markets – oscillate in sine-wave patterns around central trends.

It’s further assumed that these secular trends are always positive – each recovery exceeds the preceding recession, and each market rebound more than cancels out the latest dip.

This latter assumption has reached the point of invalidation. What economies and markets are now experiencing is trend-inflexion. Cyclicality may indeed continue but, from here on, it will do so around downwards-inflected trends. This process of reversal can only be managed if it is recognized.

The consequences of trend inflexion are readily summarised. On an ex-inflation basis, economic output will deteriorate, whilst the real costs of necessities will carry on rising, even if there are some retreats from the severe spikes experienced in recent times.

…click on the above link to read the rest…

Europe May See Forced De-Industrialization As Result Of Energy Crisis

November 14, 2022

Europe May See Forced De-Industrialization As Result Of Energy Crisis

European industries including ferroalloys, fertilizer plants and specialty chemicals are shutting down as a result of the ongoing energy crisis.
Certain industries may not come back, even if the energy crisis eases.
An increasingly tight regulatory environment is another reason for de-industrialization in Europe.

The European Union has been quietly celebrating a consistent decline in gas and electricity consumption this year amid record-breaking prices, a cutoff of much of the Russian gas supply, and a liquidity crisis in the energy market.

Yet the cause for celebration is dubious: businesses are not just curbing their energy use and continuing on a business-as-usual basis. They are shutting down factories, downsizing, or relocating. Europe may well be on the way to deindustrialization.

That the European Union is heading for a recession is now quite clear to anyone watching the indicators. The latest there—eurozone manufacturing activity—fell to the lowest since May 2020.

The October reading for S&P Global’s PMI also signaled a looming recession, falling on the month and being the fourth monthly reading below 50—an indication of an economic contraction.

In perhaps worse news, however, German conglomerate BASF said last month it would permanently downside in its home country and expand in China. The announcement served as a blow to a government trying to juggle energy shortages with climate goals without extending the lives of nuclear power plants.

“The European chemical market has been growing only weakly for about a decade [and] the significant increase in natural gas and power prices over the course of this year is putting pressure on chemical value chains,” said BASF’s chief executive, Martin Brudermueller, as quoted by the FT, in late October.

…click on the above link to read the rest…

NOPEC Bill Won’t Bring Oil Prices Down

October 13, 2022

NOPEC Bill Won’t Bring Oil Prices Down

Washington responded angrily to OPEC+’s decision to cut output.
U.S. legislators have suggested the introduction of a bill called NOPEC in order to reduce OPEC’s power.
NOPEC could send oil prices higher and end the dominance of the petrodollar.

“Nobody f*cks with a Biden,” said the U.S. president, and the oil ministers of the member countries of the Organization of the Petroleum Exporting Countries (OPEC+) replied, “Hold my beer.” OPEC+ then proceeded to approve production cuts of 2 million barrels per day, despite a full court press by the administration in the weeks leading up to the decision, and raised the price of oil for the U.S., lowered it for Europe, and left it unchanged for Asia. According to National Security Advisor Jake Sullivan, “the President is disappointed by the shortsighted decision by OPEC+ to cut production quotas” and “the Biden Administration will also consult with Congress on additional tools and authorities to reduce OPEC+’s control over energy prices,” neglecting to mention that Biden administration decisions to cancel the Keystone XL pipeline and to stop issuing new oil and gas leases on public lands gave OPEC+ the upper hand.

Apparently, a fist bump only gets you so far.

There followed a lot of “how dare they!” by the great and good, but OPEC+ was having none of it. The day before the announcement, the Saudi energy minister dressed down a Reuters reporter for shoddy work by his colleague who claimed that Russia and Saudi Arabia (the Kingdom) conspired to price oil at $100 per barrel, and later explained OPEC+ was being proactive as the West is attacking inflation with higher interest rates which, in turn, may cause a recession and drive down oil demand (and price)…

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

A historic global bond-market crash threatens liquidation of the world’s most crowded trades, says BofA

September 26, 2022

A historic global bond-market crash threatens liquidation of the world’s most crowded trades, says BofA

‘If the bond market does not function, then no other market functions, really,’ say Ben Emons of Medley Global Advisors

A newspaper headline is shown after the Treaty of Versailles was signed in 1919. Global bonds are in one of their worst bear markets since the treaty went into effect in 1920, establishing the terms for peace at the end of World War I.

SOURCE: UNIVERSITY OF DENVER

Global government-bond markets are stuck in what BofA Securities analysts are calling one of the greatest bear markets ever and this is in turn threatening the ease with which investors will be able to exit from the world’s most-crowded trades, if needed.

Those trades include positions in the dollar, U.S. technology companies and private equity, said BofA strategists Michael Hartnett, Elyas Galou, and Myung-Jee Jung. Bonds are generally regarded as one of the most liquid asset classes available to investors. If liquidity dries up in that market, it’s bad news for just about every other form of investment, other analysts said.

Financial markets have yet to price in the worst-case outcomes for inflation, interest rates, and the economy around the world, despite tumbling global equities along with a selloff of bonds in the U.S. and the U.K. On Friday, the Dow industrials DJIA, -1.62% sank almost 500 points and flirted with a fall into bear-market territory, while the S&P 500 index SPX, -1.72% stopped short of ending the New York session below its June closing low.

U.S. bond yields are at or near multiyear highs. Meanwhile, government-bond yields in the U.K., Germany, and France have risen at the fastest clip since the 1990s, according to BofA Securities.

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

OPEC agrees to produce slightly more oil as recession fears loom

August 4, 2022

OPEC agrees to produce slightly more oil as recession fears loom

SCHWEDT, GERMANY - MAY 03: In this aerial view, huge tanks for crude oil of the PCK oil refinery, which is majority owned by Russian energy company Rosneft and processes oil coming from Russia via the Druzhba pipeline, stands on May 3, 2022 in Schwedt, Germany. European Union member states are to meet later this week to possibly agree on a phased-in ban on oil imports from Russia after Germany, which relies heavily on Russian energy imports, recently said it was willing to support a ban. (Photo by Hannibal Hanschke/Getty Images)

London (CNN Business)The world’s oil-exporting countries have agreed to a tiny increase in output next month amid fears that a global recession will crimp demand.

The Organization of the Oil Exporting Countries and its allies — which includes Russia — also known as OPEC+, said on Wednesday that it would produce an additional 100,000 barrels a day in September.

This was the first OPEC meeting since US President Joe Biden visited Saudi Arabia last month. Biden urged the country — which is the group’s biggest oil producer — to start pumping more.

For months, prices have climbed as Western embargoes on Russian oil have limited global supply. Those prices have helped the world’s biggest oil companies reap record profits, even as millions face surging fuel bills.

A gallon of regular gasoline in the United States surpassed $5 for the first time in June, though prices have fallen back significantly since then.

The price of Brent crude, the global benchmark, also hit a high of $139 a barrel in March in the days after Russia invaded Ukraine, but Brent is now trading at around $100 as traders fear a global recession will hurt demand.

Brent crude and West Texas Intermediate crude — the North American benchmark — both rose initially on Wednesday after OPEC’s announcement, as oil investors expected a bigger increase in production. But prices fell about 2% by midday.

“As a production rise it is a very small percentage of overall production, and much smaller than previous months increases, and thus makes little difference to the overall supply picture,” Hazel Seftor, senior research analyst for global oil supply at Wood Mackenzie, told CNN Business.

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

‘We live in an Orwellian hell-scape’: Facebook fact-checks top economist for stating America IS in a recession after Biden refused to admit it

August 1, 2022

‘We live in an Orwellian hell-scape’: Facebook fact-checks top economist for stating America IS in a recession after Biden refused to admit it

Phillip Magness, the research and education director at the American Institute for Economic Research, believes the U.S. is in a recession
Economists usually say it is a recession when two successive quarters have seen negative growth: data on Thursday showed the definition had been met
The White House is instead relying on an ‘official declaration’ from the the National Bureau of Economic Research (NBER), which can be very slow
Magness’s post on Facebook about the U.S. being in a recession was fact-checked by Facebook and a warning posted online
‘We live in an Orwellian hell-scape,’ he tweeted. ‘Facebook is now ‘fact checking’ anyone who questions the White House’s word-games’

Facebook placed a ‘fact-checking’ label on a post written by a top economist stating that the United States is now in a recession – a move he termed ‘Orwellian’.

Two consecutive quarters of negative growth is the standard definition of a recession, and Phillip Magness, the research and education director at the American Institute for Economic Research, posted on Facebook a commentary about the country now being in a recession.

The post – which is no longer visible – was marked by Facebook’s fact checkers as being misleading.

‘We live in an Orwellian hell-scape,’ he tweeted.

‘Facebook is now ‘fact checking’ anyone who questions the White House’s word-games about the definition of a recession.’

Biden on Thursday (pictured) insisted that the country was not in a recession, despite new data showing a second consecutive quarter with negative growth

Phillip Magness, an economic historian, believes the U.S. is in recession – but the White House disagrees

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

‘The economy is going to collapse,’ says Wall Street veteran Novogratz. ‘We are going to go into a really fast recession.’

June 16, 2022

‘The economy is going to collapse,’ says Wall Street veteran Novogratz. ‘We are going to go into a really fast recession.’

Veteran investor and bitcoin bull Michael Novogratz’s economic outlook is not rosy

Michael Novogratz, founder and chief executive officer of Galaxy Digital Capital Management LP, spoke with MarketWatch on Wednesday ahead of a historically aggressive Fed rate hike.

Veteran investor and bitcoin bull Michael Novogratz doesn’t have a rosy outlook on the economy, which he described as headed for a substantial downturn, with the likelihood of a “fast recession” on the horizon.

“The economy is going to collapse,” Novogratz told MarketWatch. “We are going to go into a really fast recession, and you can see that in lots of ways,” he said, in a Wednesday interview before the Federal Reserve decided to undertake its biggest interest-rate hike in nearly three decades.

“Housing is starting to roll over,” he said. “Inventories have exploded.”

“There are layoffs in multiple industries, and the Fed is stuck,” he said, with a position of having to “hike [interest rates] until inflation rolls over.”

Central-bank policy makers agreed to deliver an unusual 0.75-percentage-point rate increase, concluding a closely watched two-day policy meeting with a move that would push the Fed’s benchmark federal-funds rate rising to a range between 1.5% and 1.75% as it steps up the effort to quell an inflation rate that is hovering around a 40-year high.

It was the largest increase in the central bank’s policy rate since November 1994.

Before the Fed announced its decision, Novogratz speculated — accurately, it turned out — that the central bank would lift interest rates by 75 basis points and that the market would rally on that news. He also predicted that stocks will sell off in the coming days.

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

Walking backward into the storm

April 26, 2022

Walking backward into the storm

Are we in a recession? It is an interesting question because nobody can know for sure. A recession is defined as two successive quarters of negative growth. Okay, but how do we know if, in the quarter we are in, the economy is shrinking? Again, we cannot know this. This is because the latest data we have is for February 2022… and it showed an unexpected fall in growth to just 0.1 percent. In the event that growth turned sufficiently negative in March 2022, then the first quarter of 2022 as a whole might have been negative. And in the event that this negative trend continued through April and on through May and June 2022, then we would indeed be in a recession… but we will only know for sure when the data is published in August.

It is on this kind of uncertainty that economic policy is set. On top of the slowdown in growth – which may have improved or worsened, but nobody knows yet – comes data for March showing a dramatic fall in retail spending, largely resulting from rising food and fuel prices. Is this because households and businesses can no longer afford to buy, or are they reining in their spending in anticipation of higher prices in future? Again, we do not know. Certainly, food and energy retailers have warned that prices will have to rise in future. At the same time, households and businesses face higher local and national taxes and utility bills. And so, falling sales is likely a combination of both prices that have already risen and the expectation of price rises to come.

Crucially though, the lens through which economic policy makers are viewing the economic clouds gathering on the horizon is a financial lens which looks back fondly on the sunlit uplands of the pre-2008 years as some kind of normal…

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

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A newspaper headline is shown after the Treaty of Versailles was signed in 1919. Global bonds are in one of their worst bear markets since the treaty went into effect in 1920, establishing the terms for peace at the end of World War I.

Michael Novogratz, founder and chief executive officer of Galaxy Digital Capital Management LP, spoke with MarketWatch on Wednesday ahead of a historically aggressive Fed rate hike.

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