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Are Consumers Nearing the End of Their Road of Debt?

Are Consumers Nearing the End of Their Road of Debt?

Are consumers getting close to the end of their road of debt?

There are some indications that they might be and that’s not good news for an economy built on consumers spending money they don’t have.

Total consumer debt grew and set yet another new record in November, according to the most recent data released by the Federal Reserve. But the rate of growth slowed and credit card debt contracted slightly for the third month out of the last four.

Total consumer debt grew by $12.5 billion to $4.176 trillion. (Seasonally adjusted). That represents an annual growth rate of 3.6%, down from 5.5% in October.

The Fed consumer debt figures include credit card debt, student loans and auto loans, but do not factor in mortgage debt.

Revolving credit outstanding, primarily credit card debt, fell by $2.4 billion, a 2.7% decline. That was offset by a healthy increase of $14.9 billion (5.8%) in non-revolving credit, including student loans, automobile loans and financing for other big-ticket purchases.

Even with the decline in revolving credit card debt, Americans still owe nearly $1.1 trillion on their plastic.

But the overall trend in borrowing has fallen over the last six months and credit card borrowing has taken a noticeably steep downturn.

Some are taking the sagging level of borrowing as a warning sign. As one analyst put it in an article on Seeking Alpha:

It could be that the consumer end of the economy has reached the point at which it cannot add any more debt. Unlike the federal government which has sovereign dollars to print, the consumer has a fixed amount they can spend including paying back any loans.”

Generally, consumer spending and consumer debt tend to move in the same direction. In other words, the drop in borrowing could indicate consumers are shutting their wallets.

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

Opinion: The Federal Reserve is stuck in quantitative-easing hell

Opinion: The Federal Reserve is stuck in quantitative-easing hell

The central bank’s short-term buying of securities could morph into long-term easing

Federal Reserve Chairman Jerome Powell

Imagine doing the same thing over and over again, with little progress and no relief. Sounds like most people’s vision of hell — or the Federal Reserve’s current predicament. 

Since September, the central bank, through the Federal Reserve Bank of New York, has been purchasing securities hand over fist to alleviate short-term pressures in the overnight money markets. It has used repurchase (“repo”) and reverse repurchase (“reverse repo”) agreements to provide liquidity and keep overnight borrowing rates from spiking. 

But these complex money market operations already have caused the Fed to buy a net $400 billion worth of securities, after Chairman Jerome Powell shrank the Fed’s balance sheet by $700 billion. That “normalization,” which also included raising the federal funds rate through late 2018, is now effectively dead and the Fed’s balance sheet is growing again.

Powell and the Fed have repeatedly denied this is a new phase of “quantitative easing (QE),” three rounds of which added $3.6 trillion to the Fed’s balance sheet in the years after the financial crisis. And indeed, in the earlier rounds of QE, the central bank bought Treasuries and mortgage-backed securities of various maturities. The current buying has been focused on Treasuries with maturities of 12 months or less. 

On the way: QE4

But that may not continue, says Danielle DiMartino Booth, CEO and chief strategist at Quill Intelligence, a Dallas-based boutique research firm. Booth, who worked on both Wall Street and in the Federal Reserve Bank of Dallas, has been a critic of Fed policies since the central bank pushed fed funds down to near zero and launched its three rounds of QE after the financial crisis. (She also was one of the few people to connect the dots between the housing bust and Wall Street before the crisis hit.)

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

944 Trillion Reasons Why The Fed Is Quietly Bailing Out Hedge Funds

944 Trillion Reasons Why The Fed Is Quietly Bailing Out Hedge Funds

On Friday, Minneapolis Fed president Neel Kashkari, who just two months earlier made a stunning proposal when he said that it was time for the Fed to pick up where the USSR left off and start redistributing wealth (at least Kashkari chose the proper entity: since the Fed has launched central planning across US capital markets, it would also be proper in the banana republic that the US has become, that the same Fed also decides who gets how much and the entire  democracy/free enterprise/free market farce be skipped altogetherissued a challenge to “QE conspiracists” which apparently now also includes his FOMC colleague (and former Goldman Sachs co-worker), Robert Kaplan, in which he said “QE conspiracists can say this is all about balance sheet growth. Someone explain how swapping one short term risk free instrument (reserves) for another short term risk free instrument (t-bills) leads to equity repricing. I don’t see it.

To the delight of Kashkari, who this year gets to vote and decide the future of US monetary policy yet is completely unaware of how the plumbing underneath US capital markets actually works, we did so for his benefit on Friday, although we certainly did not have to: after all, the “central banks’ central bank”, the Bank for International Settlements, did a far better job than we ever could in its December 8 report, “September stress in dollar repo markets: passing or structural?”, which explained not just why the September repo disaster took place on the supply side (i.e., the sudden, JPMorgan-mediated liquidity shortage at the “top 4” commercial banks which prevented them from lending into the repo market)…

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

The Fed “Just Let The Cat Out Of The Bag”, Admits Being Forced To Fuel Asset Bubble

The Fed “Just Let The Cat Out Of The Bag”, Admits Being Forced To Fuel Asset Bubble

Well the cat’s out of the bag…

The worst kept secret in the financial world is now not only accepted orthodoxy, but finally being discussed openly by, at least some, authorities.

Central bank policies are directly driving asset prices and the bubbles therein. It’s what they do. It has been so stunningly obvious that, at this point, it makes a mockery of things to deny it as an ongoing, and essential, part of how their strategy is implemented. Oddly enough, however, it’s a revelation that is, apparently, coming late to many people with a lot of savings and nothing to show for it. And it is an undeniable factor in this January’s price action.

  • Alan Greenspan knew it to be the case.
  • Ben Bernanke had no problem with it. His strategy required it.
  • Jerome Powell, was probably initially not enamored about it but saw no way around it. It fell on ardent loyalists to take his insistence that it was “not QE” with any seriousness. Otherwise, they would have had to admit to knowing little about financial markets.

In some ways it was refreshing that Dallas Fed President Robert Kaplan openly talked about it in an interview Wednesday. Although he did couch it in terms that implied it was a matter of some concern to him. But, of course, he went on to say, “we’ve done what what we need to do up until now.”

“My own view is it’s having some effect on risk assets,” Kaplan said.

“It’s a derivative of QE when we buy bills and we inject more liquidity; it affects risk assets. This is why I say growth in the balance sheet is not free. There is a cost to it.”

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

Localism in the 2020s (Part 2) – Facial Recognition, Psilocybin and Beyond

Localism in the 2020s (Part 2) – Facial Recognition, Psilocybin and Beyond

Contrary to popular opinion, I think a loss of faith in Washington D.C. and its institutions is entirely rational and healthy. Maintaining faith in something due to tradition or the fumes of hope won’t lead to anything productive, rather, it’s preferable to honestly assess the reality of whatever situation you’re in and reorient your worldview and priorities accordingly.

Whether the issue relates to above the law criminal bankers, a Federal Reserve which systematically funnels free money to the already wealthy and powerful, the societal dominance of free speech and privacy-despising tech giant monopolies, or the national security state’s undeclared forever wars for empire, there’s no good reason to maintain any faith in the federal government and the oligarchs/special interests who control it.

Philosophically speaking, I’ve come to conclude the only way to truly have self-government where community life reflects the desires and needs of the people who live there is by concentrating decision making at the local level. I’ve become increasingly interested in the general idea of localism not just because I agree with it in theory, but because it seems more and more people will begin to gravitate toward this perspective and life strategy out of necessity and frustration.

Rather than groveling to Washington D.C., grassroots movements should focus more on the local level where community can be built and things can get done to reflect the desires of the people living there. The entire notion of a one-size fits all approach to virtually all aspects of life dictated via laws passed by corrupt egomaniacs in the swamp is certifiably deranged.

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

David Stockman on What Triggers the Next Financial Collapse

David Stockman on What Triggers the Next Financial Collapse

financial collapse

International Man: You have sounded the alarm on a coming financial crisis of historic proportions. How do Trump’s trade policies figure into your view that a crisis is coming?

David Stockman: Trump’s trade policies only create more risk and rot down below.

They’re just kicking the can down the road. With this latest move by the Fed, they have cut the interest rates three times and short-term rates are back at 1.55%. They’re pumping their balance sheet back up—it’s up $300 billion just since September.

The Fed has reverted to all of the things that have created the underlying rot—and that means when finally things break loose, it’s going to be far worse than it would have otherwise been.

Given that they’re kicking the can down the road, they’re building the pressure in the system to really explosive levels.

The trade chaos that Trump’s creating is probably the catalyst that will bring down the whole house of cards.

At end of the day, it’s about the Red Ponzi. The world economy would be not nearly as good as it looks had the Chinese not been borrowing like there’s no tomorrow and building regardless of whether its efficient or profitable.

This has kept the global economy inching forward on a totally artificial basis. You could track it; some people call it the “China credit impulse.” Every time they get into trouble, they turn on the printing press. That causes commodity prices to rise and industrial activity and trade to pick up. It shows up in the GDP numbers, and then everybody gets all excited.

The fear of recession that we had a while back has now abated. We’re back to another global reflation meme, but none of this is sustainable.

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

“This Is Insanity!” – Jim Rogers Warns Of “Horrible Time” Ahead

“This Is Insanity!” – Jim Rogers Warns Of “Horrible Time” Ahead

The Fed has increased its balance sheet over 500% in the past decade; The Bank of Japan is printing money to buy bonds and stock ETFs; and The European Central Bank is mired in insane negative interests. And, according to legendary investor Jim Rogers, they will continue this “madness” as long as its necessary.

In an interview with RT’s Boom Bust, Rogers exclaims, that interest rates around the world have never been this low:

“… this is insanity, that’s not how sound economic systems are supposed to work.”

In 2008, Rogers notes that we had problems because of too much debt, however, “since then the debt has skyrocketed everywhere and it’s going higher and higher. We are going to have a horrible time when this all comes to an end.”

Adding that:

…eventually, the market is going to say: ‘We don’t want this, we don’t want to play this game anymore, and we don’t want your garbage paper anymore’.”

And when that happens, Rogers warns that central banks will print even more and buy even more assets.

“And that’s when we will have very serious problems… We all are going to pay a horrible price someday but in the meantime it’s a lot of fun for a lot of people.”

When it comes to an end, Rogers laments, “it will be the worst of my lifetime.”

Hedge Fund CIO: Will The Fed Ever Be Held Accountable For Turbocharging Inequality That Poisons America

Hedge Fund CIO: Will The Fed Ever Be Held Accountable For Turbocharging Inequality That Poisons America

“I do solemnly swear that I will support and defend the Constitution of the United States against all enemies, foreign and domestic; that I will bear true faith and allegiance to the same; and that I will obey the orders of the President of the United States and the orders of the officers appointed over me, according to regulations and the Uniform Code of Military Justice. So help me God,” pledged the 2.7mm young, courageous American soldiers that our Commanders-in-Chief sent to Iraq and Afghanistan Since 2001. Over 6,900 of them died there. Over 52,000 have been wounded. Bush, Obama and Trump spent over $6 trillion. 480,000 Iraqis, Afghanis and Pakistanis died, half civilians. Millions were displaced. Who is accountable? What are the consequences?
 
Overall

“This airplane is designed by clowns who in turn are supervised by monkeys,” wrote one of Boeing’s employees, referring to their 737 Max. “I don’t know how to fix these things… it’s systemic. It’s culture. It’s the fact we have a senior leadership team that understands very little about the business and yet are driving us to certain objectives,” wrote another. “I still haven’t been forgiven by God for the covering up I did last year. Can’t do it one more time, the pearly gates will be closed,” wrote another. Boeing is our mightiest manufacturing exporter. A symbol of American greatness. Boeing’s board held the CEO accountable, fired him. The consequence for the catastrophe of his leadership? He walked away with $61mm in compensation.

Carlos Ghosn held an absurd press conference to clear his name, having fled Japan in box barely big enough to contain his greed and shamelessness. Set against Adam Neumann’s $1.7bln golden parachute, Ghosn perhaps believes Japanese consequences are overly harsh.

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

Central Bankers Are Quietly Freaking Out About How To Fight The Next Recession

Central Bankers Are Quietly Freaking Out About How To Fight The Next Recession 

Mark Carney warns about the limits of central bank policy.
Mark Carney, governor of the Bank of England (BOE), listens at the annual Mansion House dinner in … [+]2018 BLOOMBERG FINANCE LP

The world’s top central bank officials are rightly concerned that politicians in rich economies missed one key lesson of the last recession: Interest rate cuts can help to moderate a downturn, but aggressive fiscal policy is key to a healthy recovery. 

It was a pro-austerity stance both in the United States, and even more saliently in the euro zone, that arguably prolonged the period of high unemployment and low wage growth that plagued most of the decade-long recovery from the 2007-2009 U.S. Great Recession. 

Outgoing Bank of England Governor Mark Carney told the Financial Times this week that central banks are running low on fuel. “If there were to be a deeper downturn, [that requires] more stimulus than a conventional recession, then it’s not clear that monetary policy would have sufficient space,” he said.Today In: Money

“It’s generally true that there’s much less ammunition for all the major central banks than they previously had and I’m of the opinion that this situation will persist for some time.”  

That echoed the sentiment of Christine Lagarde, who recently took over the European Central Bank. She’s telling budget-shy European politicians (especially in Germany) to get to work

Now, a new paper from Fed board economist Michael Kiley points to similar alarm among U.S. central bankers about their ability to fight future slumps. 

Drawing up two basic assumptions of what a downturn might look like, Kiley finds that “a recession may result in near-zero interest rates at long maturities, bringing U.S. experience closer to that seen in Europe and Japan.”

This, says Kiley, “could imply limits on the ability of monetary policy to support a recovery.”

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

Gold’s outlook for 2020

Gold’s outlook for 2020 

This article is an overview of the economic conditions that will drive the gold price in 2020 and beyond. The turn of the credit cycle, the effect on government deficits and how they are to be financed are addressed.

In the absence of foreign demand for new US Treasuries and of a rise in the savings rate the US budget deficit can only be financed by monetary inflation. This is bound to lead to higher bond yields as the dollar’s falling purchasing power accelerates due to the sheer quantity of new dollars entering circulation. The relationship between rising bond yields and the gold price is also discussed.

It may turn out that the recent extraordinary events on Comex, with the expansion of open interest failing to suppress the gold price, are an early recognition in some quarters of the US Government’s debt trap. 

The strains leading to a crisis for fiat currencies are emerging into plain sight.

rum 1

Introduction

In 2019, priced in dollars gold rose 18.3% and silver by 15.1%. Or rather, and this is the more relevant way of putting it, priced in gold the dollar fell 15.5% and in silver 13%. This is because the story of 2019, as it will be in 2020, was of the re-emergence of fiat currency debasement. Particularly in the last quarter, the Fed began aggressively injecting new money into a surprisingly illiquid banking system through repurchase agreements, whereby banks’ reserves at the Fed are credited with cash loaned in return for T-bills and coupon-bearing Treasuries as collateral. Furthermore, the ECB restarted quantitative easing in November, and the Bank of Japan stands ready to ease policy further “if the momentum towards its 2% inflation target comes under threat” (Kuroda – 26 December). 

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

Global Markets commentary and outlook

Global Markets commentary and outlook

…..’Cause I’ve had the time of my life..and I owe it all to you..

The original song from Dirty Dancing is one of my all time favourites and somehow reminds me of the Global Markets performance this year.Every conceivable asset class (except cash) posted positive returns ,thanks to the LIQUIDITY provided by global central banks.The Fed is my view moved to implement the “ high pressure economy” regime outlined in former chair Janet Yellen’s 2014 speech at the Boston Fed Reserve bank       https://www.federalreserve.gov/newsevents/speech/yellen20161014a.htm

Indirecly this document suggest the US central Bank has returned to the Greenspan approach to bubbles- they will deal with the consequences once it pops.

The chart below explains the LIQUIDITY story.

Gone are the good old days when Earnings used to be tailwind for market valuations.

The polarising performance of US markets.

The two stocks, Apple and Microsoft, each having a market cap of USD 1 trillion have contributed the most to 2019’s total stock-market returns and also hold that position for the entire decade.

The number of Zombie companies continue to rise along with their market caps.

The above charts were examples of distortion created by excess pumping of money.

Jerome Powell raised the bar  for raising rates significantly whereas the bar for lowering rates has gone down. More evidence that Central Bankers will tolerate higher inflation and low or negative real rates.

BOFA has a crystal ball and they see the endgame approaching .

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

Peter Schiff: The 20’s Will Be An Explosive Decade for Gold

Peter Schiff: The 20’s Will Be An Explosive Decade for Gold

In 2019, gold had its best year since 2010. Peter Schiff appeared on the RT Dec. 31 and said he thinks the yellow metal should have done even better. And given the current economic conditions, he believes the 20’s will be an explosive decade for gold.

You know, the reason the US stock market went up this year is because the Fed surprised everybody by doing exactly what I had been predicting they would do. They aborted their feigned attempt to normalize their interest rates and shrink their balance sheet. They went back to rate cuts and quantitative easing. This is extremely bullish for gold.”

Peter emphasized that gold should have been up a lot more in 2019, but he thinks it will catch up over the next several years — probably next year in particular.

Gold is going to be one of the best-performing assets classes, if not the best-performing asset class on the planet.”

Peter noted that gold made significant gains in 2019 despite a dollar that was relatively flat.

But the dollar is going to fall through the floor. That means gold prices are going to go through the roof.”

Peter said we are about to enter a new decade of stagflation  – low economic growth and increasing inflation. He said it’s going to be even worse than the stagflation we saw in the 1970s.

This is going to be more like an inflationary depression. So, this century, the depression is going to come a decade early. It’s not going to be the roaring 20s. It’s going to be a decade of inflationary depression in the United States.”

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

Dr. Fed Frankenstein Kept Alive by Zombies

Dr. Fed Frankenstein Kept Alive by Zombies 

Did you know Dr. Frankenstein created a monster that stays alive to this day by eating zombies? Neither did the zombies. Neither, apparently, did Dr. Frankenstein. In fact, the zombies, being braindead as zombies are, do not realize that they are also keeping alive the diabolical doctor who made the monster that is eating them.

This little article, however, is going to tell you how all of that has become the strange case of the world as we all know it today. And, at the end of the article, I’m going to give everyone access to the first “Patron Post” I wrote as my thank-you to supporters who chose to keep this blog alive at the close of last year. That post was titled “2019 Economic Headwinds Look Like Storm of the Century.” 

Before I do, I want to recap 2019 by shining a light on the occulted diabolical nature of the single most important economic event this past year … so that you can read the article in an appropriate frame of mind. You would not, after all, watch a horror movie without first turning out the lights to set the mood. In this case, however, I must also turn on a single small lamp to shine a light on the face of the monster hidden the dark corner of the banking world. Then we will be ready to review the article in context of all that transpired.

One purpose I had for laying out what I thought would be the prevailing headwinds in 2019 was, of course, to help people realize what they should keep their eyes on for their own sakes. That may or may not give them information they factor into investment decisions, but investments decisions are not at all what this blog is about.

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

A Major Bank Admits QE4 Has Started, And That Stocks Are Rising Because Of The Fed’s Soaring Balance Sheet

A Major Bank Admits QE4 Has Started, And That Stocks Are Rising Because Of The Fed’s Soaring Balance Sheet

There was a period of about two months when some of the more confused, Fed sycophantic elements, would parrot everything Powell would say regarding the recently launched $60 billion in monthly purchases of T-Bills, and which according to this rather vocal, if always wrong, subsegment of financial experts, did not constitute QE. Perhaps one can’t really blame them: after all, unable to think for themselves, they merely repeated what Powell said, namely that  “growth of our balance sheet for reserve management purposes should in no way be confused with the large-scale asset purchase programs that we deployed after the financial crisis. Neither the recent technical issues nor the purchases of Treasury bills we are contemplating to resolve them should materially affect the stance of monetary policy. In no sense, is this QE.

As it turned out, it was QE from the perspective of the market, which saw the Fed boosting its balance sheet by $60BN per month, and together with another $20BN or so in TSY and MBS maturity reinvestments, as well as tens of billions in overnight and term repos, and soared roughly around the time the Fed announced “not QE.”

And so, as the Fed’s balance sheet exploded by over $400 billion in under four months, a rate of balance sheet expansion that surpassed QE1, QE2 and Qe3…

… stocks blasted off higher roughly at the same time as the Fed’s QE returned, and are now up every single week since the start of the Fed’s QE4 announcement when the Fed’s balance sheet rose, and are down just one week since then: the week when the Fed’s balance sheet shrank.

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

Shattering the Overton Window

Shattering the Overton Window

Aim your rocks at glass houses.

The Overton window is the range of policies politically acceptable to the mainstream population at a given time.[1] It is also known as the window of discourse. The term is named after Joseph P. Overton, who stated that an idea’s political viability depends mainly on whether it falls within this range, rather than on politicians’ individual preferences.[2][3] According to Overton, the window frames the range of policies that a politician can recommend without appearing too extreme to gain or keep public office given the climate of public opinion at that time.

CIA Wikipedia

Heaven forbid anyone appear too extreme. Our rulers keep discourse safely within the Overton window by allowing debate about the details of what the government does or doesn’t do. However, those who question the necessity of particular government agencies or programs, or government in general, are beyond-the-pale extremists and cast into the Abyss of the Unacceptable, one zip code over from the Abyss of the Deplorable.

The Federal Reserve has been much in the news lately, The term “repo” is shorthand for a repurchase agreement. The repo market allows those who own securities to sell them to lenders and repurchase them on a set day at a higher price. The difference between the sale and the repurchase price is interest to the lender. The repo market is huge, providing short-term financing for hundreds of billions of dollars worth of transactions daily, primarily in government and agency debt.

On September 16 the repo market blew up. Short term repos usually carrying interest rates of 1 or 2 percent required rates approaching 10 percent for the market to clear. The Fed stepped in, offering massive fiat credit to push rates back down. It wasn’t just a one-time glitch. Since then, the repo market has required substantial and repeated injections of Fed fiat credit.

…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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