Economic pressures

[Danny B]

Fear and liquidity

When we went off the gold standard, banks were able to conjure up near endless liquidity. Exter's Pyramid shows an inverted pyramid with gold at the bottom and, derivatives at the top. Each level in the pyramid had a decreasing level of "moneyness". Each level in the pyramid needed an increasing level of confidence. After we escaped gold, we had increasing liquidity built on increasing confidence. This translated to increased tangible wealth for the non-producers.
Finance is now 40% of the economy and 51% of Americans receive a check from GOV.
There were 21,995,000 employed by federal, state and local government in the United States. As a percentage, this has been falling.
https://img.washingtonpost.com/wp-ap...eak.png&w=1484
They're just getting paid a lot more now.

This constant expansion of liquidity has mostly benefited the banks. Confidence has recently changed for the worse. Liquidity has supplanted money.
"I would posit that some time ago Liquidity completely supplanted the monetary aggregates as the key focal point for market flow analysis. Unfortunately, there is no quantity of “Liquidity” to measure and tabulate. I am not familiar with an adequate definition or even common understanding."
"Liquidity is an amalgam of real financial flows and intangible market perceptions. There is no aggregate that would signal whether Liquidity is either expanding or contracting. "
https://creditbubblebulletin.blogspo...liquidity.html

You can't measure liquidity because you can't measure confidence. The "VIX" is called the "fear gauge" It wobbles around but, is only indicative. Liquidity has collapsed to the lowest on record.
https://www.zerohedge.com/news/2018-...idity-collapse

"What murdered functioning markets is intervention by central banks, in alleged attempts to save those same markets."
The CBs were desperate to rescue the non-producers. Markets had a total panic attack when the original TARP bill was turned down.
"Now Jerome Powell and the Fed he inherited are apparently trying to undo the misery Greenspan, Bernanke and Yellen before him wrought upon the economic system"
Powell and Volker are Goy and, exceptions to the rule. Rubin was the one who got rid of our gold.
" Central banks don’t serve societies, they serve banks. They fool everyone, politicians first of all, into believing that societies automatically do well if only the demands of banks are met first, "
I have frequently shown that the STATE is the entity that forced the CBs to buy GOV bonds. You can blame it on the CBs for sure. BUT,
Wilson approved the creation of the FED. Wilson brought us into WW I. Roosevelt got us into WW II to save England and, hopefully drag us out of Great Depression one.,
Of course, Great Depression one was caused by the FED.

"In physics terms, price discovery, and therefore markets themselves -provided they’re ‘healthy’ and ‘functioning’- delivers negative feedback to the system, i.e. it injects self-correcting measures. Take away price discovery, in other words kill the market, and you get positive feedback, where -simplified- changes tend to lead to ever bigger changes until something breaks."
"You can let interest rates rise, as Powell et al are indicating they want to do, but that will cut off debt growth, and since debt is exclusively what keeps the economy going, it will cut into economic growth as well"
"It’ll be a long time before markets actually function again, and we won’t get there without a world of pain. Which will be felt by those who never participated in the so-called markets to begin with."

"The only parties who have profited from rising home prices are the banks who dole out the mortgages and the zombie economy that relies on them creating the money society runs on that way. We have all come to rely on a bunch of zombies to keep ourselves from debt slavery, and no, zombies are not actually alive. Nor are the financial markets, and the economies, that prop them up."
"Among the first things in 2019 you will see enormous amounts of junk rated debt getting rated ever -and faster- lower , and the pace at which ever more debt that is not yet junk, downgraded to(wards) junk, accelerating."
Sucked into a black hole when the illusion of moneyness turns to smoke.
"It doesn’t look to me that a year from now we’ll see 2019 as a particular peaceful year, not at all like 2018. I called it from Chaos to Mayhem earlier, and I’m sticking with that. We’re done borrowing from the future,"
https://www.theautomaticearth.com/20...fore-the-fall/

"After a brief pause, induced mainly by the threat of an unstoppable collapse in equity prices, the Fed will be forced to continue to raise interest rates to counter price inflation pressures, which will take the rise in the heavily suppressed CPI towards and then through 4%, probably by mid-year. The recent seizure in commercial bond markets and the withdrawal of bank lending for working capital purposes sets in motion a classic unwinding of malinvestments. Unemployment begins to rise sharply, and consumer confidence goes into reverse."

"Equity prices continue to fall, as liquidity is drained from financial markets by worried investors. The US enters a severe recession, which is similar in character to the 1930-33 period. The notable difference is in an unbacked pure fiat dollar, which being comprised of swollen deposits[ii] (currently 67% of GDP versus 36% in 2007), triggers an attempted reversal of deposit accumulation."
"Most of the ECB’s money has been spent on government bonds for a secondary reason, and that is to ensure Eurozone governments remain in the euro-system. Profligate politicians in the Mediterranean nations are soon disabused of their desires to return to their old currencies. Just imagine the interest rates the Italians would have to pay in lira on their €2.85 trillion of government debt, given a private sector GDP tax base of only €840bn, just one third of that government debt."
He's too blind to see that the Italians are just going to default.

"It never takes newly-elected Italian politicians long to understand why they must remain in the euro system, and that the ECB will guarantee to keep interest rates significantly lower than they would otherwise be. Yet the ECB is now giving up its asset purchases, so won’t be buying Italian debt or any other for that matter. "
Stay or go, interest rates will go up. They will do better to go and, default.
"A side effect of the ECB’s asset purchase programme has been the reduction of Eurozone bank lending to the private sector, which has been crowded out by the focus on government debt. This is illustrated in the following chart."
The GOV sucks in all the capital to support the bureaucrats and muizzies. Then, it defaults.
https://www.goldmoney.com/research/g...-credit-crisis

12/29 “Leveraged loans” bite: record-bad year-end for loan mutual funds & ETFs – WS Just wait for next year.
So much money has pulled out of the markets that; a normally low-amplitude movement creates a huge effect,,, volatility.
https://www.marketwatch.com/story/he...art-2018-12-28
12/29 The Malaysia scandal is starting to look dire for Goldman Sachs – Rolling Stone We can only hope.
12/29 Don’t get fooled by Wednesday’s market action – Casey Research
A $64 billion rotation out of bonds and, into stocks created a 900 point move,,, chump change.

[Danny B]

behavioral finance theorists

" three possible “echoes” deserve attention in coming weeks and months. "
"Whichever historical echo turns out to be loudest as the Great Monetary Inflation of 2011-18 enters its late dangerous phase. Whether we're looking at 1927-9, 1930-3, or 1937-8, the story will seem obvious in retrospect, at least according to skilled narrators. "
https://mises.org/wire/depression-2019-2021

[Danny B]

FED put,,,stabbing China,,,socialism = dis-incentive,,, Armstrong on Cheney

From the link in the previous post,
"The characteristic of 1926-8 was a “Fed put” in the midst of an incipient cool-down of asset inflation (along with a growth cycle slowdown or even onset of mild recession) which succeeds apparently in igniting a fresh economic rebound and extension/intensification of asset inflation"
So, the FED "put" was backstopping markets. There was a bit of a cool down and the FED tried to stop it.
Fast-forward, "Greenspan put was a term coined in the 1990s. It referred to a reliance on a stock market put option strategy that if utilized could help investors mitigate losses and potentially profit from deflating market bubbles. "
This was carried over by Bernanke and Yellen. The FED heads didn't want any investor to ever lose a dime. After decades of asset inflation, Powell is trying to unwind the inflation.
"Greenspan took on the Chairman role with the Fed’s first actions following the 1987 stock market crisis."
By blocking all negative corrections, the FED ensured that all markets and valuation would be artificial.

12/30 Trump says “big progress” made in US-China talks – Morningstar
It all depends on how you define progress. The PBOC created more liquidity than the BOJ, FED and ECB combined. The more debt, the more instability. Trump has pushed a dagger into China.
https://www.theepochtimes.com/deflat...g_2748628.html

12/29 At 20, euro remains a currency giant on fragile footing – Japan Times
Footing ! WHAT footing?
You already know what socialism did to East Germany. Look what it has done to Venezuela.
Sultan Knish: Socialism Can Kill You, But It Won't Bury You
"Capitalism, as it is acknowledged unreservedly in the Communist Manifesto, brought about economic growth, technical progress and unprecedented prosperity to the world. However, it also generated unemployment, fluctuations and crises, frequently and on an increasingly large scale, thus creating over time an ever-increasing inequality, especially in the last post-War period. The rise of socialism is rooted in these drawbacks of capitalism."
https://www.socialeurope.eu/the-rise...of-socialism-1

"drawbacks of capitalism." The drawbacks of capitalism are easily understood. Capitalism is competitive. It has no rewards for the lazy and the stupid. The lazy and the stupid want to consume just like the productive people. As more and more job niches are automated, more and more people are falling off the end of the job ladder. For a great many of them, it isn't their fault that they chose a career path that was susceptible to automation. Socialism isn't going to make stupid people smart. It isn't going to provide motivation to lazy people,,, quite the opposite.
"ever-increasing inequality"
A New Kind of Classroom: No Grades, No Failing, No Hurry - The New ...
https://www.nytimes.com
A-F school grades aren't the answer if we want to raise empathetic and self-motivated students

Socialism just doesn't prepare a person for the competitive capitalist workplace. Being a slacker in school doesn't prepare a person for a competitive workplace. Man competes for survival. The slackers are drawn to government jobs. In America, GOV jobs account for about 10% of the population. In Saudi Arabia, it is 78%.
"The nonprofit Transparency International says it has identified at least 511 companies that are either wholly or majority owned by the government of Venezuela — and 70 percent of them are losing money,

Read more here: https://www.miamiherald.com/news/nation-world/world/americas/venezuela/article138402248.html#storylink=cpy"
Venezuela destroyed their oil industry by replacing experienced engineers with socialist flunkies. In an effort to support the lazy and the stupid, socialism invariably breaks the bank.

Most investors operate on a thin margin. If a market isn't predictable, they either leave or, demand more margin / interest. Volatility is the death of markets because nobody knows what to invest in.
https://dailycaller.com/2018/12/29/k...y-fluctuating/

12/29 Opioid crisis leaves 700,000 Americans dead: “epidemic continues to worsen” – ZH
YES, but, it was profitable. That's all that matters in certain quarters.
This is the best news in years (crosspost) https://www.theamericanconservative....attis-dunford/

Armstrong on Dick Cheney,,, and the depths of the swamp.
"The World Trade Center 7 collapsed like a pancake when no plane ever touched it. That building has all the evidence of many things we will never know about. I have 20 years worth of recordings that would have been enough to put all the major New York trading banks in prison"
https://www.armstrongeconomics.com/i...ld-conspiracy/

Armstrong says that the FED is raising rates to rescue the pension funds. I claim that it will never work in time.
Armstrong, "Therefore, the Fed realizes that the next crisis is a pension crisis and they need to raise rates to help try to bail out the pension funds. They will not be able to raise the rates fast enough to avoid the crisis coming very rapidly which will contribute to raising tax rates and further suppressing economic growth into the future."

[Danny B]

4 good articles

Here is a great article that covers everything.
https://www.theburningplatform.com/2...g-perspective/
The higher the leverage, the less actual capital you need.
oftwominds-Charles Hugh Smith: The Crisis of Capital
Another good article;
https://www.home.saxo/insights/conte...a-pandoras-box
Your advanced degree allows you to survive paycheck to paycheck.
https://www.washingtonpost.com/busin...=.62b8c8419bad

[Danny B]

Labor-value,,,automation,,, consumption,,, debt

Capitalism is defined as ; taking something from nature and, adding your labor. Then trading this for something that you want. Even hunter-gatherers might trade spear points for hides,,, or whatever. The family and the clan were the original socialist units where the producers supported the non-producers to create offspring and genetic survival. Capitalism is the only system that works in the long run. Nobody works for free for those who are not direct genetic lineage.
Socialism endeavors to perpetuate a free-ride for people who are not our direct genetic lineage. Socialism has always failed because it runs counter to human nature. It has been tried over and over but fails.
Slavery works because of the lash and the whip. Wage-slavery works to transfer our labor value to the controllers. The State has locked up ALL private lands so that we can't exit the system and live a meager existence on a small plot of land. We have to keep running on the treadmill of productivity to transfer our labor-value to the rich. The State also taxes us exorbitantly to keep us on the treadmill.

The worker on the treadmill is supporting 2 groups. 1. The underachievers who have no niche in the private workplace. 2. The banker and bureaucrat who gain their sustenance by manipulating the instrument of exchange.
Redistribution to the non-employable is called socialism.
Redistribution to the banker & bureaucrat is called fascism.... sometimes, communism.
As far as the actual worker is concerned, it is theft of labor. He is held in chains by either the lash or the lawbook.

"CAPITALISTS PURCHASE labor-power on the market. In general, the wage--the price of labor-power--is, like all other commodities, determined by its cost of production, which is in turn regulated by struggles between workers and capitalists over the level of wages and benefits, and by competition between workers for jobs."
"In other words, the price of labor-power is determined by the cost of food, clothing, housing and education at a given standard of living. Marx adds that "the cost of production of...[labor-power] must include the cost of propagation, by means of which the race of workers is enabled to multiply itself, and to replace worn-out workers with new ones." So, wages must also include the cost of raising children, the next generation of workers."
That's not happning any more.

"The crucial point is that the cost of wages or labor-power depends on factors completely independent of the actual value produced by workers during the labor process. This difference is the source of "surplus value," or profit. So let's compare the price of labor-power to the value, expressed in price, of the commodities that workers creates through their labor."
"Similarly, struggles over wages and benefits are struggles over the value and price of labor-power, which is an expression of workers' standard of living. Capitalists seek to lower wages and slash benefits, decreasing the price of labor-power in order to increase the accumulation of surplus value, to maximize their profits."
Wages in America have been static for decades. The native birthrate has crashed at the same time. The southern border was left open to keep wages depressed. With the advent of containerized shipping, the jobs were simply sent to low-age producers. Any demands by workers for decent wages is met by either outsourcing or automation.
CNC robots don't demand wages or retirement. They are also self-propagating to a great extent.

"Most importantly, Marx's theory of exploitation reveals that because the source of capitalists' wealth is the unpaid labor of workers, the interests of workers and capitalists--like slave and master or serf and lord before them--are diametrically opposed and are impossible to reconcile. The two will always come into conflict since capitalists can only increase their share of the wealth at the expense of workers"
"But as long as the capitalist system exists, workers will be exploited, and their unpaid labor will remain the source of the profits that are the lifeblood of the system."
https://socialistworker.org/2011/09/...n-exploitation

"I suggest environmentalist critiques often misunderstand Marx’s value theory as a theory that “values” workers over nature. His critical theory is better understood as an explanation of how capitalist value exploits both workers and the environment."
" Marx’s contention that nature does not contribute to value helps us explain its degradation under capitalism"
https://www.tandfonline.com/doi/abs/...nalCode=rcns20

The world is not in a crisis of productivity. It is in a crisis of consumption. Since wages have stagnated, the State through, warfare and welfare has tried to maintain consumption.
"unpaid labor will remain the source of the profits that are the lifeblood of the system"
OK, how much are we talking about? Take a look at this graph.
https://pix-media.priceonomics-media...292/image5.png
THIS is the source of wealth transfer to the rich. The unpaid labor of automatic machines. Energy figures very high on this list.
We lost out to automated machines and consequently, cut back on consumption and procreation. Our wages just did not cover the cost of creating replacement workers who have no job prospects.

The finance sector of the economy has created a bubble that is multiples of the GDP. The human-machine partnership wiped out human reproduction in Japan decades ago. The fertility rate in China is only 1.6. 25% below replacement. Runaway automation will ensure that consumption by humans will continue to drop. The current financial bubble is an effort to counter the effects of a drop in consumption.

Many writers have speculated what the financial landscape will look like AFTER the crash. What could possibly bring a renewal of the birth rate?,,,consumption?,,,debt money?,,, credit?

[Danny B]

Prognosis for 2019

Ronald Reagan Quotes. Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.
The middle class stopped consuming and, the State tries to be a stand-in for the missing consumption. But, WE are the State.
Another epic economic collapse is coming - The Washington Post
$250 Trillion in Debt: the World's Post-Lehman Legacy - Bloomberg
The State has been subsidising TOO MANY entities. The public debt is just too high. The private sector unloaded everything on Uncle Sam.
Here's who owns a record $21.21 trillion of U.S. debt - MarketWatch
Remember that this figure doesn't include $3 trillion owed to SS,,,, part of the $212 unfunded liabilities (Kotlikoff)

We are starting a new year. Which way will the winds of sentiment and confidence blow?
You can bet that the shutdown and turmoil in the District of Corruption will spook the markets.

The yield curve has always been a good predictor of recession. It's not looking good right now. There is too much volatility of investors to stomach.
https://moneymaven.io/mishtalk/econo...kylgXl7PMgnPA/

12/31 China’s December manufacturing contracts even more than expected – CNBC
12/31 Japan and China forge alliance to boost fiscal stimulus – SCMP
Stimulus to who? Both have a shrinking population. China's Belt and Road initiative is trying to develop external markets. But, the global mean wage doesn't allow for much consumption.
1/01 Chinese markets’ 2018 performance was their worst in a decade – CNBC
China is strangling on pollution.
https://www.youtube.com/watch?v=OwOBRH56Ic0
Also, automation isn't going to go away. https://qz.com/1510405/gms-layoffs-c...into-machines/

The markets have finally come to the realization that solar power is a technology, NOT a fuel. As such, they will no longer fund losing proposition like Nuke power or coal power. Natural gas too is losing market share to solar. This will play havoc with energy markets.
https://www.greentechmedia.com/artic...ons#gs.SE6P=KY
Germany just closed their last coal mine. Hawaii has shown the way to going to 100% solar.

#15 According to the U.S. Department of Agriculture, almost 1 out of every 4 children in rural areas is currently living in poverty.

#16 At this point, almost 52 percent of all children live in a home that receives monthly help from the federal government.

"#21 In 1980, the average American worker’s debt was 1.96 times larger than his or her monthly salary. Today, that number has ballooned to 5.00.

#23 According to one recent study, the “rate of people 65 and older filing for bankruptcy is three times what it was in 1991”.

#24 More than 100 churches in the United States are dying every single week."
#28 The number of married couples with children in the U.S. just reached a 56 year low.

#29 In the city of Baltimore, approximately one out of every four babies is born as an opioid addict.
44 Numbers From 2018 That Are Almost Too Crazy To Believe

1/01 Prepare for global debt bubble collapse in 2019 – Goldcore
1/01 FTSE 100 tumbles by 12.5% in 2018 – its biggest fall in a decade – Guardian
1/01 Looking forward to Dow 11,000 – Bear’s Lair
1/01 2019 market meltdown: what the new year brings – SRSrocco Report
1/01 Record outflow from US junk bond funds in 2018 – AFR
So, what is all this going to do for confidence?

Here is an article from Kunstler. You should read the whole thing. The newly Dem Controlled house will be in a full-on battle with Trump. They will NOT bother to address minor things like an economic collapse. What about the debt?
"Inflation is typically the choice of governments because it reduces the face value of debts while it allows government to pretend that it is taking action. In the end, you may have plenty of worthless money, which is no different from having not enough money that retains value. The latter was the main feature of the Great Depression.

So, inflation is the usual choice, but it also typically leads to incendiary resentment among the citizenry when they realize they’ve been played and it takes a wheelbarrow full of cash to buy a loaf of bread and a jar of peanut butter."
http://kunstler.com/cluster****-nati...rgin-call-usa/

"Bulls and bears – both human and artificial – will fight to the death for the upper hand.

By mid-year, however, the bulls will have exhausted their resources. Shrewd investors will sell the multiple bounces leading up to the summer months, and go to cash and gold. About this time, the brief boon to businesses from President Trump’s tax cuts will be over. The economy will be en route to recession.

Predictive models based on faulty earnings estimates will be thrown out the window. Pre-programmed buying will morph to pre-programmed selling, and an abrupt collapse will be triggered. The bottom will drop out of the stock market in short order.

By October, as Wall Street and Washington scream for the Fed to do something, new experiments in ZIRP, NIRP, QE, and Fed equity purchases, will be rolled out with poise and confidence. Yet the Fed’s efforts to pump liquidity into the financial system will have little avail. Reality will be delivered to investors like buckets of ice water to the face.

An abrupt, yet destructive, bear market will extend into early 2020. When the dust clears, the S&P 500 will have decline by 60 percent from its record high. Yet that’s nothing. Treasury investors are in for much greater levels of capital destruction…"
"Moreover, we are 100 percent certain that 2019 will be the year that yields commence their long-term rise in earnest. After many years of being wrong about the end of the great Treasury bond bubble, it is about time we were right."
Evidence indicates that interest rates can never rise while the population is falling. How do you raise interest cost when wages are static and population is falling?
https://acting-man.com/?p=53976
Pretty good article.

[Danny B]

Nobody knows which way to run for cover

Charles Hugh Smith has lots to say that is well worth reading.
https://www.oftwominds.com/blogjan19...ughts1-19.html
Armstrong, "in early 2019 trading, it looked as though we were set to resume the ‘sell at any price’ trend" "The trigger today was the China Factory Activity, as it released way below consensus and encouraged a 3% in the Hang Seng and a 1.2% fall for Shanghai."
https://www.armstrongeconomics.com/m...anuary-2-2018/
1/01 Chinese markets’ 2018 performance was their worst in a decade – CNBC
So, don't buy Chinese stocks.
Avoid US stocks, Go With Emerging markets - Morgan Stanley
The merging markets have $13 trillion in debt that is increasingly more difficult to service.

There is a very good reason that quantitative easing isn't done. With a flow of new liquidity entering the markets, nobody can formulate a strategy for long-term investment. They have to lock in to short term investments. Valuations for short term assets get overly inflated. This causes a yield curve inversion and, everybody knows that short term assets are primed for a fall. The world-improvers are trying to inflict socialism on America. Did they cause the FED to maintain QE? Did the FED do it on it's own? Greenspan, Brnanke and Yellen insisted that we needed 2% inflation,,,, to maintain price stability. The Goy FED heads wanted nothing to do with this.

QE Has Done Something Much More Damaging Than The Fed Could Have Imagined
"The abnormally long, QE-fueled bull market killed off anything that wasn't, at its core, a short volatility strategy. Now, whether it's risky credit, levered equities, or risk parity, almost all strategies are taking similar risks. QE has done something much more damaging than the Fed could have imagined. It changed the very nature of the market,"

"If we have a recession with overnight rates still at 2.50%, what can the Fed do? Coordinated easing with the ECB and BOJ is off the table -- their rates are negative and they're running out of assets to buy for QE. At least the Fed won't have that issue. With surging budget deficits, the Fed will have plenty of Treasuries to buy. And that's only just begun, because the next put for the markets is really from fiscal, not monetary policy."
But, will the FED buy treasuries after all the warning signs?
https://www.zerohedge.com/news/2019-...fed-could-have

1/02 ECB appoints temporary administrators for troubled Italian bank Carige – CNBC
The whole board of directors walked out. What is the admin going to do?
1/02 It’s time to dump FAANG investing in the trash – Yahoo!
All the FAANGs are falling badly. Sentiment and confidence don't look good so, this will probably go down for several more weeks.

1/02 Yield curve ends year flattest since 2007 – Reuters
1/02 Why we should worry about the U.S. Treasury yield curve inverting – Forbes
The ECB is the only entity buying Italian debt. Will the FED be the only one buying U.S. debt?
1/02 Australian home prices mark worst year since 2008 – Reuters
When China sneezes,,,,,

"Let’s start by talking about politics. According to Axios, Donald Trump is currently the subject of 17 different investigations.

Yes, you read that correctly.

We have never seen anything like this in American history. Even during the Nixon era there was some measure of restraint, but at this point they are trying to come up with any angle that they possibly can to get rid of Donald Trump.

And the left truly believes that this is the year that they are going to get rid of him. In fact, the Hill just published an article containing 30 predictions for 2019, and these were the top three…

Donald J. Trump’s presidency will not survive 2019;
The downward trajectory of every aspect of his tenure indicates we are headed for a spectacular political crash-and-burn — and fairly soon;"
"Unfortunately, economic conditions are really starting to slow down, and big corporations are beginning to announce large scale layoffs. Just like we saw during the last recession, eventually there will be millions of Americans that lose their jobs, and mortgage defaults will spike dramatically once again.

And just like in 2008, the stock market is starting to plunge in a major way.

2018 was the worst year for the stock market in a decade, we just witnessed the worst month of December for Wall Street since the Great Depression, and at this point approximately 12 trillion dollars of global stock market wealth has been wiped out."
2019: It Is Going To Be Much Worse Than You Think… – End Of The American Dream
Ukraine is going down hard and fast. It was recently proved that they shot down the MH17 flight. Food is getting expensive, https://www.rt.com/business/447207-e...ending-rating/
Fresh Russian sanctions will make things worse.

[Danny B]

Confidence has turned to doom loops

Ronnie Rayguy put together the plunge protection team. Their job was to put a floor under the markets if they fell too much. It did work after a fashion. The Western CBs put together a cartel to suppress the price of gold. It did work for several years. There are lots of claims that the PPT is at work again, trying to stop the fall in markets. Along with the PPT is the exchange stabilization fund.. Remember that these groups have a key to the printing press and, it doesn't cost anything to pump in liquidity.
Armstrong claims that the PPT can not change anything. BUT, his program Socrates gets the RSS feeds and knows ALL. Did Socrates allow for the actions of the PPT in it's calculations?
Here is Armstrong to tell you that nobody can manipulate the markets.
https://www.armstrongeconomics.com/h...otection-team/
A. Socrates knows what the PPT is doing.
B. It is OBVIOUS that the markets can be controlled in the short run.

"All of this rates discussion at a time of worry about a looming economic slowdown thanks to the possibility of a trade war, along with worries among monetarists and supply-siders (who should know better) who fear the Fed’s alleged cessation of its “easy money” policies will stop the present economic boom in its tracks. Couldn’t the Fed undo its supposed damage through so-called monetary ease? No, it couldn’t. “Easy money” is a myth, one that members of the right should be embarrassed to associate themselves with.

Seemingly forgotten by proponents of what's so flamboyantly ridiculous it is that borrowers of dollars are not borrowing the currency itself. In truth, they’re borrowing what dollars can be exchanged for. In commercial terms, borrowers seek dollars in order to exchange them for capital goods like trucks, tractors, computers, WiFi access, and most crucial of all, human capital."
https://www.forbes.com/sites/johntam.../#1f872c19468e
You see the fallacy, don't you. Borrowers are NOT borrowing dollars to buy tractors. They are borrowing dollars to speculate. They are NOT borrowing dollars to invest in human capital. Robots, maybe, but not people.

If you borrow money for pure consumption, you likely can't repay it. If you borrow money for investment, there is a good chance that you can repay it. If you borrow money for pure speculation, you might be able to repay it. If EVERYBODY borrows money for pure speculation, they can't all repay it. When it all unwinds, everything is affected.
https://www.bloomberg.com/opinion/ar...nfront-in-2019

OK, so, the doom loops have started to loop and loop. What else does that affect?
https://www.zerohedge.com/news/2019-...-yields-dollar

An Inside Look At The Social Decay That Is Eating Away At America Like An Aggressive Form Of Cancer
https://moneymaven.io/mishtalk/econo...UeLV2_NITYWdg/

1/03 China issues a stark warning about its housing sector – Zero Hedge
China is both a liar and, a cheerleader. If they issue a warning, it is probably too late to stop the crash.
1/03 Worse than obsolete: NATO creates enemies – Future of Freedom
1/03 NATO partisans started a new cold war with Russia – American Conservative
As long as it sells expensive arms, everybody should be happy.

[Danny B]

Banishing the business cycle,,,Preserving the power of the "elites"

Confidence runs in cycles.
Credit creation runs in cycles.
Economic activity runs in cycles.
1926-8 was a “Fed put”. This was an attempt to stop a normal, cyclical downtrend.
October of 1929, "We have permanently banished the business cycle and stocks are on a permanently high plateau. "
You know what happened next.
Pre-WW II, the FED bought war bonds. They were forever-after hooked up to buying federal debt. Small cyclical downtrends were smoothed out of the system. The credit cycle became a super-cycle because the buildup of bad debt was allowed to go on for a much longer time before it all blew up.
Greenspan executed the FED put to rev up the system after the 1987 crash. Naturally, the politicians thought this was great. 2 more FED heads followed the same path.
Here is a graph of gdp minus FED credit.
https://static.seekingalpha.com/uplo...ebt_thumb1.png

"I then took the GDP data and subtracted the annual federal budget deficit from the GDP. I did this because deficit spending is in essence "borrowing" prosperity from the future, either through direct government spending or through payments to states, local governments, and individuals who then go out and spend money. As we know, about 70% of GDP is consumer spending and about 60% of the federal government budget is devoted to payments directly to or for citizens. It's pretty easy to see how deficit spending artificially inflates GDP, since that borrowing leads directly to consumption which would not occur without it."
https://seekingalpha.com/article/266...ederal-deficit
No president was willing to have the FED take away the punch bowl during his tenure. ALL credit cycles come to an end. Trump is willing to take the heat for a controlled demolition instead of letting things go uncontrolled. His corporate tax reduction made FED GOV that much weaker but, it bought some time for others to collapse first.

Smith, "Any political elite that delivers the bad news that prosperity is over risks being overthrown or voted out of office, and so the ruling elites seek to extend high returns on capital and general prosperity by any means available."
"Successful economies generate a double-bind once they reach the stagnation-decline phase: the populace (and capital) both expect strong permanent growth as a birthright, and they see the previous boost-phase and maturity phase as evidence that the economy "should" continue delivering outsized returns on capital and widespread prosperity essentially forever."
" The stagnation phase has many causes: a reduction in resources or depletion of soil/water resources; a sustained shortage of energy or a sharp rise in the cost of energy; stagnating productivity, and the rise of parasitic elites, insiders who feather their nests at the expense of the many.
All of these factors act as friction in the system, and eventually the system is unable to sustain the parasitic elites, high returns on capital and general prosperity."
That friction can be seen as the debt load and interest payments that is dragging down the system.

" You see the double-bind: the ruling class must deliver outsized returns on capital and general prosperity, and the only way they can do so is to create new money rather than new wealth, something that is beyond their power.
Depending on the wealth and productivity of the existing economy, the world may accept this new money as having value for a time. But as the need for more currency increases, ruling elites start to "print" or borrow new currency in excess of what the economy actually generates in income and value."
Been there,,, doing that.
"In developed economies, the ruling elites protect their own incomes and power, and those of capital, as the owners of capital are part of the ruling elite. The net result of this is rising income/wealth inequality as the few increase their share at the expense of the many. (Thomas Piketty characterized this process as a higher rate of return on capital than on labor.)"

" At that point the proponents and the ruling elites will be trapped: they won't be able to withdraw all the benefits ("free money") of QE for the People, nor can they reverse runaway inflation without drastically reducing the creation of currency.
Various politically expedient policies will be tried--wealth taxes, the issuance of a new currency, perhaps even a state cryptocurrency--but none of these can reverse the underlying dynamic."
oftwominds-Charles Hugh Smith: The Crisis of 2025

1/04 2019: mayhem, misallocation and mockery of true price discovery – Streetwise
1/04 Ambrose Evans-Pritchard: the euro has failed and should be abolished – GATA
The Lisbon Treaty removed sovereign power from the individual States. Brussels then set itself up to destroy the productive class to enrich the bankers.

"Varoufakis identifies true economic purpose and consequences of the EU system and the Euro in their service to giant banks HSBC Holdings, Deutsche Bank, Crédit Agricole and BNP Paribas against Greece, Ireland, Italy, Portural, Cyprs and Spain and how the EU Central bank "fixed" the debt crisis by transferring the cost of the credit collapse to the victims via austerity and deflation. Before the EU Greeks had very little debt and 90% owned their own houses. "
https://www.youtube.com/watch?v=rhSg...ature=youtu.be

Democracy and prosperity were destroyed in Europe to forever put the lower loop in servitude to the upper loop. The Kalergi Plan to destroy racial unity and harmony were forced in to ensure that no political movement would have the cohesiveness to challenge the bankers. Pritchard may talk about getting rid of the Euro, but, the PTB will make that prospect as painful as possible. You saw what they did to Greece to dissuade others from breaking away. What is unfolding in Europe is , neo-feudalism.
The Italian right & left united to battle it. The French are warming up for the fight. I wish them all luck.

[Danny B]

Trying to exit the debt trap with as little damage as possible

The FED started out as a small, private group that created emergency liquidity and then, destroyed the new liquidity. This was too much temptation for the U.S. GOV to resist. The FED was hitched up to create fresh liquidity for the State to pay it's bills. Eg, warfare and welfare.
FED GOV is now the biggest debtor.
"However, the rolling over of old debts and the continual addition of new ones will almost certainly become a problem for governments everywhere. It is less of a problem when the debt is put to productive use, but that is rarely, if ever, the case with government finances. To judge whether the rolling over of debt is sustainable and at what cost, we need to rely on other metrics. The traditional method is to compare outstanding debt with GDP, and by using this approach two economists (Carmen Reinhart and Ken Rogoff) came up with a rule of thumb, that once a government’s debt to GDP ratio exceeded approximately 90%, economic growth becomes progressively impaired.[ii]

Key to this reasoning is that rising debt levels divert savings from financing economic growth, and therefore a government’s ability to service it from rising taxes is undermined. At the Rubicon level of 90% and over, median growth rates in the countries sampled fell by 1%, and their average growth rates by “considerably more”. It is entirely logical that a government forced to tax its private sector excessively in order to pay debt interest will restrict economic potential overall.
So, just print new money.

To look at the increase of government debt between 2007 and 2009, as Reinhart-Rogoff did, was not, as it turned out, a long enough time-frame to fully reflect the consequences of the Lehman crisis on government debt. The increase recorded over 2007-09 was 32%, yet economists and others were still talking of austerity until only recently. The whole period between the Lehman crisis and the election of President Trump is perhaps a better time-frame, and we see that US Government debt between 2007 and 2016 increased by an astonishing 217%.
The State was / is stuck on control+P

It turns out that the Reinhart-Rogoff report severely understated the problem by reporting early. Their 90% debt to GDP Rubicon has been left behind anyway, with government debt to GDP ratios around the world in excess of 100% becoming common. In the case of the US, total Federal debt, including intragovernmental holdings, is currently over 105% and rising. The Congressional Budget Office is forecasting substantial budget deficits out to 2028, adding an estimated further $4.776 trillion in deficits between fiscal 2019-23, or $9.446 trillion between fiscal 2019-28.[iii]

This assumes there is no credit crisis, so for those of us who know there will be one during the next ten years, these numbers are far too optimistic. Accordingly, we should look at two possible outcomes
Our best-case outcome of controlled price inflation is essentially that forecast by the Congressional Budget Office. Working from the CBO’s own figures, by 2023 we can estimate accumulated debt including intragovernmental holdings will be $26.3 trillion[iv] including our estimated interest cost totalling $1.3 trillion[v].

That is our best case. Now let us assume the more likely outcome, our base case, which is where the effects of a credit cycle play a part. This will lead to a fall in Federal Government receipts and an increase in total expenditures. Taking the last two cycles (2000-07 and 2007-18) these led to increases in government debt of 59% and 239% respectively. Therefore, it is clear that borrowing has already been accelerating rapidly for a considerable time due in large measure to the destabilising effect of increasingly violent credit cycles. If the next credit cycle only matches the effects on government finances of the 2007-18 credit cycle, government debt including intragovernmental holdings can be expected to rise to $51.4 trillion by 2028.

Because the underlying trend is for successive credit cycles to worsen, the $51.4 trillion figure for federal Government debt becomes a base figure from which to work.
The growth in Federal debt that replicates the post-Lehman experience will leave the US Government with a debt to GDP ratio of over 170%. The CBO assumes GDP will increase by 48% by 2028 to $29.803 trillion, whereas our cyclical case is for debt to rise to $51.4 trillion.
Price inflation is already no longer something that can be dismissed by hedonics, product-switching and repackaging goods into smaller quantities. Ordinary people and businesses will increasingly baulk at the low levels of time preference that do not take real price inflation adequately into account. Therefore, it is hard to see how central banks will be able to suppress interest rates in the way they have managed in the past. That was the hard lesson learned in the UK in the 1970s: The Bank of England had higher interest rates forced upon it by markets, eventually peaking at 17% in 1979."
https://www.goldmoney.com/research/g...ll-about-flows

America has definitely entered a debt-trap. Powell is trying to do a controlled demolition. Powell has said that he won't resign even if Trump asks him.
Everybody KNOWS that the FED will eventually return to QE. I believe that Powell will refuse. Powell will take the heat instead of Trump. The previous FED heads destroyed the economy to save the banks. I believe that Powell will try to unwind all that without collapsing sovereign debt to nothing.

[Danny B]

Profitless prosperity,,, competing for investor money in the bond markett

Everybody saw that the runup to the dotcom was full of venture capitalists throwing $millions at anything that sounded like a good idea. Well, the FED has done it again. They pumped in megatons of liquidity. There weren't enough good investments to absorb all that liquidity so,,,, it flowed into bad invetsments.
The losses piled up very quickly and, everybody tired to get out. In the final analysis, there just wasn't enough profit to keep it all going. It is happening again. Profits don't matter,,,, just grow your share of the markets and, riches will follow,,for all participants.

"However, Tesla (TSLA – USA) is the clear thought leader in the Profitless Prosperity Sector where revenue growth is all that matters and profitability can be ignored indefinitely. When investors lose over $60 billion in Tesla equity value and learn that their bonds are severely impaired, they will stop investing in other money losing start-ups. The collapse of Tesla will be the catalyst for the rest of the Profitless Prosperity Sector to unwind.

Q3/2018 was the high water mark for Tesla’s supposed “profitability.” Q4/2018 will be the high water mark for deliveries. Both metrics will begin to comp negative in Q1/2019."
Amazon was the rare outlier to lose money for years while rapidly growing revenues before eventually inflecting towards profitability. Most copycat companies have no chance of ever becoming profitable—their businesses simply aren’t structured in a way that makes this possible. Even the winners trade at insane valuations. Yet, they have all somehow convinced investors to keep funding them because they are the “Amazons” of their respective sectors.

Without fresh cash, many of these businesses will collapse—quite rapidly. That is because they aren’t businesses—they are market share grabs in highly competitive industries with few barriers to entry. "
More importantly, after a decade of Profitless Prosperity, investors have a false sense of confidence. When the bubble unwinds, it will be fast and vicious as there is no natural buyer of a money losing business that’s run out of capital. It took half a decade to create the internet bubble yet it all vaporized in a few months. This bubble will also collapse at a similar rate."
If something cannot survive without fresh equity capital, if a valuation is justified by unlimited growth funded by future equity capital, if a company has yet to inflect into profitability, it’s time to re-assess your investment."
The Profitless Prosperity Sector Will Collapse... | AdventuresInCapitalism | Small Companies--Big Upside

I can't seem to copy from this article but, losing companies are at a level last seen in 2000.
https://www.cnbc.com/2018/08/29/no-p...companies.html

Even the Chinese business model is focused on gaining market share and, ignoring profits.
China started out as an export economy but, planned to change over to an economy centered on domestic consumption. China previously had a very large current account surplus.
"for the first time in its modern history, China's current account balance for the first half of the year had turned into a deficit."
"Then back in November, UBS wrote that the upcoming loss of China's current account cushion, softening domestic activity, and upcoming tariffs mean that "for the first time in 25 years, China would have to make a choice between external stability and growth.
"and in early 2018, China got more of its growth from consumption than the U.S., the global king of consumer spending where some 70% of economic growth is due to consumer spending. And as China's increasingly wealthy population spends more at home and abroad, its total trade surplus with the rest of the world has shriveled to a fraction of its former size."
As a reference, China's trade surplus has shrunk by a third in just three years:


“Capital inflows, especially those into the bond market, will be very crucial for China’s balance of payments, as the current account will deteriorate further
if China’s bond market receives waves of overseas cash, that will help finance the deficits without running up a dangerous amount of debt in foreign currency. Then again, that's precisely the same boat that the US finds itself in as well.

Curiously, just like the US needs hundreds of billions in outside capital, so does China. Estimates on inflows in coming years vary from about $760 billion over the long term at Morgan Stanley to Goldman’s $1 trillion by the end of 2022 to $3 trillion through 2020 at UBS. "
https://www.zerohedge.com/news/2019-...iced-investors
So, China and America will be competing for investor cash. What about Japan and Europe? I think that those 2 are screwed.

[Danny B]

QE, the only game in town,,,BS from the BLS

“Italy has got four trillion in loans they said there are not going repay… France has got a similar situation but they’ve got civil unrest with the population burning down Paris."
https://www.rt.com/business/448182-e...le-burst-2019/

'When market tumbled in 2015 and 2016, global central banks embarked on the largest combined intervention effort in history. The sum: More than $5 trillion between 2016 and 2017, giving us a grand total of over $15 trillion, courtesy of the U.S. Federal Reserve, the European Central Bank and the Bank of Japan:"
"When did global central-bank balance sheets peak? Early 2018. When did global markets peak? January 2018."
"In September 2018, for the first time in 10 years, the U.S. central bank’s Federal Open Market Committee (FOMC) removed one little word from its policy stance: “accommodative.” And the Fed increased its QT program. When did U.S. markets peak? September 2018."
"the ECB slowed its QE program and finally ended it in late 2018.
The DAX peaked in January 2018, as the ECB started reducing its QE program."

"What’s the larger message here? Free-market price discovery would require a full accounting of market bubbles and the realities of structural problems, which remain unresolved. Central banks exist to prevent the consequences of excess to come to fruition and give license to politicians to avoid addressing structural problems. And by preventing these market forces from playing out at each sign of trouble, the can gets kicked further and further down the road. Each successive recovery keeps the illusion alive,"
https://www.marketwatch.com/story/st...uth-2019-01-05
So, our wages wouldn't suffice to keep it all going. Free money for the bankers was the answer.

U.S. economy added 312,000 jobs in December and wage growth ...
https://www.washingtonpost
Despite the headlined number (subject to revisions, including months after the fact), the Bureau of Labor Statistics (BLS) admits that “(t)he confidence level for the monthly change in total employment is on the order of plus or minus” hundreds of thousands of jobs.
"The Labor Department’s so-called “birth-death model,” estimating net non-reported jobs from new businesses minus losses from others no longer operating, is a convenient way to add jobs that may not exist.

The BLS assumes workers from non-operating companies are employed elsewhere. From 30 – 50,000 more jobs are added monthly, assuming new business creations whether or not they exist."
" True unemployment is 21.3%, according to economist John Williams, reengineering the number based on how it was calculated in the 1980s – before numbers were manipulated lower to create the illusion greater jobs creation, low unemployment, and prosperity than exist.'
https://stephenlendman.org/2019/01/u...ation-reality/

1/05 Bank of America says it’s ‘time to buy’ stocks and junk bonds – Bloomberg
Evidently, THEY are planning to sell these stocks to you.
1/05 Trump’s Fed attacks show why markets should set interest rates – The Hill
True, but, if the markets set the interest rate, the State would be broke long ago.
1/06 Iran’s central bank proposes slashing four zeros from falling currency – GATA
How about that? both Venezuela and Iran have LOTS of oil. Both have slashed at least three zeros off their currency. When will Saudi Arabia follow?
1/06 U.S. Senate’s first bill, in shutdown, is defense of Israel from boycotts – Intercept It's all about priorities.

1/06 Hacker group says ‘9/11 papers’, will ‘burn down’ US deep state – RT
Bring weinies and marshmallows.
Kunstler is at his pessimistic best.
And the Circus Came to Town - Kunstler

[Danny B]

Finance is freaked out by Powell slowly letting the air out of the bubble

A combination of factors has made the FED all-powerful in world financial markets.

Post-WW II, America became a powerhouse of manufacturing and profit. The FED became a de facto global leader because the U.S. dollar was such a stable currency.
Here is Ambrose Evans-Pritchard explaining that things have turned down so bad that the FED and Powell have relented on rate increases.
https://www.telegraph.co.uk/business...world-markets/

Acting Man has great graphs showing clearly what is happening.
https://acting-man.com/?p=54002
The Automatic Earth laments the total world control the FED has.
https://www.theautomaticearth.com/20...he-ugly-truth/

Greenspan, "I never said that the FED is independent"
Previous presidents have always "caused" the FED to goose the economy on THEIR watch. Nobody seems to understand the vacillating that Powell is doing. He said that he will watch the economy VERY carefully. He is doing a controlled reduction of stimulus. He is trying to carefully let the air out of the bubble. Everybody throws rocks at the FED but, it is the State that gives them their marching orders.

"As I said in my 2018 forecast and again last week, I think a Federal Reserve policy mistake is our top risk. That’s less a “forecast” and more a recognition of reality, since the mistake is already happening. The Fed is raising rates and reversing its quantitative easing at the same time. They should be doing one or the other, not both. I think the global balance sheet reduction is especially harmful. I think/hope Jerome Powell will realize this in early 2019. If he doesn’t, or the rest of the FOMC disagrees with him, the year could get very rocky, very quickly.



I’ve been tough on the Fed but I may actually be understating the danger. My friend Chris Whalen described the problem last week. After noting work by economist Zoltan Pozsar, who said QE-created bank reserves aren’t “excess,” Chris wrote (with my bolding):

The obvious points to take from Pozsar’s work are two: First, the FOMC cannot withdraw the liquidity provided to the US financial system via QE without causing the system to implode. Chairman Jerome Powell needs to publicly state that the Bernanke-Yellen inflation in asset prices will entirely reverse as the FOMC tries to reduce “excess reserves” to pre-crisis levels. Regardless of whether the FOMC raises the Fed funds target rate or not, continuing to shrink bank reserves via QT implies a significant reduction in prices for stocks and real estate.

Second and more important, Powell needs to inform Congress that so long as the Treasury intends to run trillion-dollar-plus annual deficits, the Fed’s balance sheet must grow rather than shrink. To have the FOMC try to follow a narrative set in place half a century ago when fiscal deficits were minuscule is obviously impossible given the Treasury’s borrowing needs. This implies that the FOMC must embrace an explicit policy of inflation that is at odds with the legal mandate enshrined in Humphrey-Hawkins."
https://www.mauldineconomics.com/fro...ng-dangerously

Historically, finance was about 7% of the economy,,,, even though it produced nothing. It is now about 40%. Here is a graph of GDP minus FED stimulus.
https://static.seekingalpha.com/uplo...ebt_thumb1.png
The entire finance sector has become grossly bloated by easy money that has negated ALL price discovery. The entire financial sector is desperate to keep it that way. The money supply inflation that floats the finance sector has caused price inflation in the working economy. Powell is trying to bring a legitimate reduction of the excesses of the finance sector to bring some relief to the non-finance sector. The finance sector doesn't like that one bit.
"bears-beware-fed-has-listened-primordial-scream-world-markets/"
This isn't entirely correct. The FED has amply demonstrated that is narrowly focused on American markets.
Previously, ALL the CBs did QE to keep any one currency from becoming a safe haven. Under Trump, the FED broke ranks and raised interest rates to let some air out of the credit bubble. The Other CBs reluctantly joined the FED and cut back on their QE. Once again, they did this to forestall capital flight. The ongoing creep of increased socialism was all financed by QE. Trump has slashed at growing socialism by forcing foreign CBs to cut funding for runaway State welfare.
At the same time, the Powell FED is cutting way back on socialist support / funding for banker welfare.

"The Chinese, Japanese and Eurozone slowdown are all happening in the middle of massive stimuli and deficit spending"
https://www.dlacalle.com/en/last-yea...-by-liquidity/
Stimulus just can't make up for rising automation / falling employment.
Nobody seems to put the blame where it belongs. The wipeout of wages in the lower loop has created a wipeout in the finance sector.
1/06 Iran’s central bank proposes slashing four zeros from falling currency – GATA
And people wonder why everyone wants to hold dollars.

[Danny B]

Trump stabs the dragon,,,.IMF warning,,,bigger bumps in the finance road

Trump ain't taking any prisoners.
“Capital inflows, especially those into the bond market, will be very crucial for China’s balance of payments,"
"World Bank President Kim Unexpectedly Resigns"
"Kim began his second five-year term at the bank on July 1, 2017, after convincing the lender’s board of directors to reappoint him.

In the past year, the Trump administration has put pressure on the World Bank to justify its lending practices, including loans to China"
So, it looks like Trump has ousted the president of the World Bank to keep it from rescuing Chinese bond markets.
https://www.zerohedge.com/news/2019-...ctedly-resigns
1/07 Looser China drops hints of trade pain ahead – Breaking News

"In the starkest warning yet about the upcoming global recession, which some believe will hit in late 2019 or 2020 at the latest, the IMF warned that the leaders of the world’s largest countries are "dangerously unprepared" for the consequences of a serious global slowdown. The IMF's chief concern: much of the ammunition to fight a slowdown has been exhausted and governments will find it hard to use fiscal or monetary measures to offset the next recession, while the system of cross-border support mechanisms — such as central bank swap lines — has been undermined,"
Donald Trump: 'I don't care about Europe
Read between the lines and you get; European banks won't get liquidity from the FED when the ECB collapses. No more swap lines because nobody wants the Euro currency.
https://www.zerohedge.com/news/2019-...obal-recession
Making America great, one bloodbath at a time.

"For reference: The 2008 financial crisis reversed more than 100% of the advance from the 2002 lows to the 2007 highs. So if anyone thinks such a move is impossible, it indeed is the historic reversal record of the last 2 bubbles.

Except this time central banks have much less ammunition 😳."
" Indeed we saw record redemptions in December following record passive ETF inflows in the early half of 2018."
"Note this correction was no ordinary correction, in fact it was extraordinary "
"These reconnects look much better now but still haven’t fully reconnected yet and hence the potential for a retest of December lows with a new low is a very probable scenario at some point in 2019."
"A horrific outcome for market participants would be if even a positive resolution to trade wars cannot change the structural business cycle realities and a global recession ensues as evidenced by slowing production, revenues and earnings."
Not one mention of wages.
"And then all of us would be confronted with the scariest unknown monster of all: A coming downturn with central banks never having normalized policy and a lot less ammunition in their coffer compared to previous downturns."
https://northmantrader.com/2019/01/0...arket-outlook/
It is ALL about the finance sector. Consumption doesn't matter.

"The energy sector was at or near the bottom of the S&P 500 for the second year in a row, Sanzillo pointed out. And that was true even within segments of the oil and gas industry. For instance, companies specializing in hydraulic fracturing fell by 30 percent, while oil and gas supply companies lost 40 percent. "
"Oil demand growth is flat in developed countries"
So, demand and consumption do eventually matter.
https://oilprice.com/Energy/Energy-G...-Continue.html

1/07 Average UK household debt now stands at record £15,400 – Guardian
1/07 Theresa May pleads for EU to give ground and rescue Brexit deal – Guardian
AND
EC Rules Out Brexit Renegotiation - Will Continue Implementing No-Deal Plan
This is head bashing at it's finest,,,, just to see whose head can take the most bashing.

[Danny B]

The CBs wind down liquidity, finance cried in their champagne

"• Global Liquidity falling at its fastest rate since 2007/08 Crisis

• Over-zealous Central Banks are largely to blame. Not a broken banking system like 2007/08 Crisis
They are over-zealous if they don't keep pumping up the bubble. The finance community doesn't care how much damage is done by QE, they never want the party to stop.
"World private sector liquidity has fallen by some US$3 trillion, with roughly two thirds of the drop coming from the Developed economies, while World Central Bank liquidity has fallen by another US$1.1 trillion, with two-thirds of its drop recorded in Emerging Markets, paced by their large foreign reserve losses. Added together, Global Liquidity has in total fallen by just over US$4 trillion to US$124.1 trillion.

This 3% drop looks more serious when set against its 7% ‘normal’ trend. Put another way, after its brief recovery Global Liquidity has fallen back again to stand some 25% below its long-term trend."
ALL BS. It's RECENT long term trend since the FED started pumping about 1989. A 30 year bond bull market does wonders for the private sectors but, it destroys the public debt sector.
"Central Banks have an outsized-effect in deregulated financial systems, where retail deposits are not the sole funding source, because what matters most is the ability to re-finance positions and at the margin Central Banks are the marginal suppliers of liquidity. Put another way liquidity is not fungible in crises, the very times that it matters most, and so Central Bank interventions are required. "
Nope, we can't let any institution fail.

"Figure 2 shows the dramatic expansion in the size of the US dollar money markets to around US$9 trillion and the dominant role played by the US Federal Reserve in the period since 1980. These markets have increasingly supplemented retail deposits and now fund a rising proportion of US credit and liquidity, notably wholesale lending activity."
Thank you Alan Greenspan, you juiced it all up and, screwed anybody who wasn't connected to the free money spigot.

"Consequently, traditional banks do not face the same funding constraints as other financial intermediaries, so making their lending more elastic. In theory, as long as capital requirements are met, the traditional banking system can accommodate additional credit demands by simply creating new means of payment in the process of making new loans."
Love that elasticity. The lower loop calls it inflation.
"However, shadow banks largely repackage and recycle existing savings. By lengthening intermediation chains they became involved in large volumes of wholesale funding, without creating much new lending. The data show that they are involved in 66% of gross funding, but directly account for barely 15% of new lending. Shadow banks, therefore, increase the elasticity of the traditional banking system by relaxing banks’ capital requirements, through, say, selling loans externally to GSEs or internally to off balance sheet vehicles, so boosting the credit multiplier. "
They have over-stretched the elastic with too many multipliers.

" Yet, shadow banks could not have originated the credit boom that preceded the 2007/08 Crisis, since they themselves depend on bank credit. The fragility of this wholesale funding model based on short-term repos has heightened systemic risks, not least because it is market collateral-based and highly pro-cyclical, and it always threatens to feed-back negatively on to the funding"
Keep running faster an faster.

"Therefore, we suggest that, unlike the 2007/08 Crisis which was more about a broken banking system involving the sudden collapse of leverage among over-extended banks and shadow banks, the current credit squeeze looks more like the 1997/98 Asian Crisis when Central Banks, led by the US Fed, tightened the supply of primary liquidity and cross-border flows rapidly retreated. This time around financial markets are probably even more interconnected and more global. Consequently, this could be an Asian Crisis-like sell-off, but one not only confined to Asia. "
" sudden collapse of leverage" No mention of default by home buyers.

"The explanation for this collapse is that in the run-up to 2007/08 shadow banks had been borrowing against new collateral, such as US dollar deposits, and re-hypothecating existing collateral (i.e. the so-called collateral multiplier) to create what might be dubbed a ‘shadow monetary base’"
So, you multiplied my house.
https://www.linkedin.com/pulse/why-h...ichael-howell/

Kunstler, "The national chain retail model has fallen apart, along with new car sales. Something is up in this foundering land, despite all the heraldic trumpet blasts on cable news about the “booming economy.”

What’s up is the international implosion of the bad debt, and the fading illusion that it doesn’t matter. It has any number of ways to express itself, from store closings, to dissolving pensions, to stock market instability, to divorce, homelessness, and war. It’s what you get from a hyper-financialized economy that doesn’t really produce wealth but only steals it from somewhere else."
"Zero interest rates made savings a mug’s game, and zero interest rates were necessary to extend the borrowing far beyond the credible boundaries of repayment. Debt isn’t capital, it just pretends to be for a period of time. Wall Street made its trillions off the time-value of that pretence and now time is up."
A Farewell to "Bargain Shopping" - Kunstler

1/08 California’s new governor needs to address pension crisis – LA Times
And
Democrat proposes government-funded healthcare for all illegal ..
I'm sure that they will get all of this worked out.
1/08 Cities across OC struggle with law enforcement and fire pensions – Voice OC
I'm sure that orange County will get all of this worked out.

1/08 Chairman of Germany’s far-right party brutally beaten in “assassination attempt” – ZH
This "far right" wants Germany to be for Germans, NOT worthless rabble from north Africa.