Economic pressures

[Danny B]

China and debt recap

Just a short recap. There are $trillions of derivatives soon to default that were written on oil contracts. There are $trillions of derivatives written guaranteeing Greek debt that are probably going to default.
A Day of Reckoning for the Euro Has Arrived ? 26 TRILLION in Currency Derivatives at Risk | The Daily Sheeple
Greece is Playing to Lose | Zero Hedge
The ECB looked over the edge of the precipice and did NOT like what they saw; Greece is simply 'too big to fail'?commentary
There is over a $trillion in student loans that already have a very high default rate.
Then, there is a BIG pop to the east of us;
http://www.24hgold.com/english/news-...O%27Byrne&mk=1
People are starting to notice;
Gordon T Long :: MACRO ANALYTICS :: Global Macro Economic Discussions
Y'all better plant a garden.

[Danny B]

income inequality and default

Automation should have brought us much lower prices. It didn't. The fall in cost of manufacturing was absorbed by corporations and handed out as stock dividends. Bloomberg is a PTB mouthpiece. They have this to say; Investor: Peasants Will Be Out With Pitchforks if We Don't Start Sharing the Wealth"
Investor: Peasants Will Be Out With Pitchforks if We Don't Start Sharing the Wealth - Bloomberg Business
Wages have dropped because we crashed into a low-wage competitor AND automation reduced the number of jobs. At this late date, the rich have discovered that they need for the masses to be happy and employed.

"The second gale of concern is corporate profit margins and cash flows. They’re at 50-year highs. "
3 Gales Ripping Across the Market Will Hit U.S. Companies
That's very nice. Redistribution, aka socialism isn't the answer. The answer would be to not gouge the public until they are flat broke. It is impossible to pay good wages when a low-wage competitor is just across the ocean waiting to grab any job that can be outsourced. The PTB blew a bubble in housing
because housing construction can't be outsourced. We should have had massive price reduction to reflect a massive increase in productivity. It didn't happen because it was handed out as returns to investors. Sure, the investors
provide capital but, what is a legitimate return?

The investors were compensated TOO much. If the average worker can't afford to live at a decent level, he doesn't earn enough money for the prices. Either the wages go up or the prices go down. Wages can't very well go up so, the prices should have gone down. Didn't happen and now, the rich are starting to see some serious problems.

The financial sector gained ( not earned ) a lot of money they didn't deserve. Simple parasitism. The Perils of a Parasite Economy (Video) - Peter Schiff's Gold News
Because of the imbalance, the whole thing is coming down. It is far too late to "share the wealth". We are long past the point of no return.

ALL DEBTS MUST BE PAID. They are paid either by the lender or the borrower. So, how much is our debt? Stockman says $ 90.6 trillion. About That $18 Trillion National Debt—–It’s Really $91 Trillion! | David Stockman's Contra Corner
Kotlikoff says $ 212 trillion. The usual plan is to cause high inflation by pumping money into the economy. That way, everybody pays the debt. The FED is trying to cause high inflation by pumping CREDIT into the system, rather than currency.
The world is in a currency war so, everybody is printing. All this QE enters the system as DEBT. So, who is going to pay back this debt? How much is it?
Seven Years Later, Global Debt Keeps Piling Up, $57 Trillion More Than 2007
Read more at Mish's Global Economic Trend Analysis: Seven Years Later, Global Debt Keeps Piling Up, $57 Trillion More Than 2007
In the construction of a house of cards, there are no extra cards. Every piece of debt structure is holding up some other piece. When it starts to fall, it will come down very quickly. Credit requires trust. In a collapse, trust goes out the window. Paper currency is referred to as MZM money of zero maturity Currency will be king when credit collapses.

We are currently in deflation because ZIRP actually destroys capital. The PTB desperately want currency inflation so that they can inflate away the value of the debt. Gideon Gono created hyperinflation in Zimbabwe by printing PAPER. He eventually had to knock off 23 zeros. The FED is trying to cause high inflation by creating CREDIT, not currency. I seriously doubt that they can get inflation above 10%. That leaves default.

[Danny B]

Germany pushing Greece

Germany desperately wants to exit the Eurozone. The imbalance between north and south will never go away. The Germans have been thrashed twice already for trying to go their own way. They will thrive very well in the unfolding Eurasian union. How to exit without being bombed again??? The Germans are playing hardball with Greece and being completely intractable. EVERYBODY knew from the beginning that Greece would eventually go bankrupt. Plan A was to seize numerous public assets to pay off the phony debt.
Carney, Monti, Draghi,,, all from Goldman Sachs. Then, there is; Petros Christodoulou - Head of Greek Debt Management Department. (Former Senior Executive Goldman Sachs
GS planned to take title of everything in sight for pennies. Then came Tsipras and Varoufakis. If the talks this week don’t provide a solution, or a realistic proposal for one, Greece will be very close to leaving the eurozone. Syriza will not agree to continue with the deals the Samaras technocrats have agreed with the Troika, for the simple reason that their voters have trusted them with the mission to throw out those deals.

Germany is playing hardball and appears to be forcing a Grexit. Which leads to the next idea: what makes you think Germany isn’t being strict precisely BECAUSE they know it will force Greece to exit? They want to flip East to save their economy/life, but are in a bind with the US/EU. If Greece exits, the EU shatters, throw in some bank turmoil, then Germany has cover to say, “this thing isn’t working, we’re starting a northern trade zone” which is why Netherlands/Belgium/Austria/Germany all recently got their gold back–to float the new currency block they know they’re starting. Greece will be the excuse. They decided Greece will exit already last year, they need to force it to happen and Tsipras to take the blame.

Russia is willing to help Greece. There would be conditions, of course. These might include Greece joining the East Eurasian Union, hosting naval bases, making the Russian-Turkish-Greek gas pipeline work, and leaving NATO (this is in Syriza’s party policy already). International banking transactions would be handled by Russia’s RosSWIFT alternative the the west’s SWIFT system. It would mean a huge upheaval for Greece, but they could blame all their problems on the nasty Europeans. Syriza also plans to nationalize the banks. that should piss off quite a few people.

[Danny B]

Then, there is Portugal

It is unfair to pick on Portugal but its public and private debts are 380pc of GDP - the highest in Europe and higher than those of Greece - making is acutely vulnerable to toxic effects of deflation on debt dynamics.

Portugal's net international investment position (NIIP) - the best underlying indicator of solvency - has reached minus 112pc of GDP.
Walden Pond

Like I wrote, the plan was to crash every State and buy up the pieces for pennies. The crash part is working but, the electorate is tossing out the technocrats who signed on to this.
" The EU elites themselves have run their currency experiment into the ground by imposing synchronized monetary, fiscal, and banking contraction on the southern half of EMU, in defiance of known economic science and the lessons of the 1930s. It is they who pushed the eurozone into deflation, and thereby pushed the debtor states into accelerating compound-interest traps.

It is they who deployed the EMU policy machinery to uphold the interest of creditors, refusing to acknowledge that the root cause of Europe's crisis was a flood excess capital flows into vulnerable economies."
Germany faces impossible choice as Greek austerity revolt spreads - Telegraph

Italy; All three opposition parties are now anti-euro in one way or another. Beppe Grillo's Five Star movement - with 108 seats in parliament - is openly calling for a return to the lira.

Mr Grillo proclaims that Syriza is carrying the torch for all the long-suffering peoples of southern Europe, as it is in a sense.

"What’s happening to Greece today, will be happening to Italy tomorrow. Sooner or later, default is coming," he said.

[wayne.ct]

Netherlands/Belgium/Austria/Germany all recently got their gold back–to float the new currency block they know they’re starting. Greece will be the excuse.

I want to ask you about this. Specifically, I'd like to know when Germany asked to trade in their US currency for gold. (I'm sorry, but I don't remember the details.) As I remember it, they wanted to repatriate "all" their gold and the US response was, "Sure, as long as you pay fair market value, you can certainly do that, with one small provision. You have to spread the transaction over a number of years." As I remember, they would require it to be spread over seven years or more. What I want to know is this. Has it been seven years? or five or ten? Have they REALLY got all their gold, now? if they are even getting close, I would more readily believe what you are suggesting.

Thanks for whatever additional insight you can provide.

[Danny B]

Avoidance of war and movement of capital

The international warmongers ( you know who you are) have often been able to sleepwalk Europe and other countries into wars that benefited nobody except bankers and arms dealers. The internet is a fantastic tool for compressing history so that old history pops up just the same as contemporary history.
"It was a new study released last week by a US defense industry-funded consortium of "think tanks" urging direct US military involvement in the Ukraine crisis that spooked Hollande and Merkel into action. While Washington had a collective swoon-fest over the report's conclusion that $3 billion worth of US weapons should be sent to US client regime in Kiev, the Europeans suddenly remembered their last 100 years of history and realized that the scorched earth left by the war that would likely follow US direct involvement would not leave Washington or L.A. charred, but Brussels. And Munich, Paris, and so on.

So Merkel and Hollande decided to leave Obama home alone and travel to Kiev and Moscow themselves."
http://www.ronpaulinstitute.org/arch...lled-vladimir/
This is very good news in that it might keep the West from sleepwalking into WW III. Many people will be disappointed but, that is just too bad.

China has a stupendous credit bubble. Maybe they can manage it,, maybe not. The R.O.W. is willing to work with China just to forestall the next big war. China has plans to be the world’s creditor. This would be bad news for the warmongers. Remember, he who has the gold makes the rules; China Moving to Replace USA as Financial Capitol of World | Armstrong Economics
"When we turn 2015.75, this is going to be one of the deepest economic turns because government has simply reduced the disposable income of the masses. There is a collapse in investment in the West and we are seeing China where its investment externally will exceed internally."
Australia – A Crisis in Confidence | Armstrong Economics
If you read Tom Bearden, "Brink of Oblivion", you learn that the new energetic weapons are the stuff of science fiction. America has counted on physical distance to protect it from attack. This no longer applies.

[Danny B]

German gold

Wayne, the story of German gold goes back a long time.
"Boehringer cites an anecdote from almost a century ago to argue that Germany has failed to zealously protect its gold holdings. In the 1920s the president of the German central bank, Hjalmar Schacht, paid a visit to the New York Fed and its founding president, Benjamin Strong. In an episode recounted in his 1955 autobiography, Schacht wrote, “Strong was proud to be able to show us the vaults which were situated in the deepest cellar of the building and remarked: ‘Now, Herr Schacht, you shall see where the Reichsbank gold is kept.’ ”

The two bankers waited as New York Fed staff sought the German stash. “At length we were told: ‘Mr. Strong, we can’t find the Reichsbank gold.’ ” Schacht comforted the flabbergasted Fed banker: “Never mind; I believe you when you say the gold is there. Even if it weren’t you are good for its replacement.” The men left without the German seeing his bars, instead accepting their existence as a matter of trust."
Germany's Gold Repatriation Activist Peter Boehringer Gets Results - Bloomberg Business

Up until Aug 15, 1971, France and a few other countries were exchanging their dollars for gold. In Aug 11, 1971, the British GOV notified the U.S. treasury that they were going to exchange dollars for about 3900 tons of gold. Nixon closed the gold window 4 days later and was , consequently, impeached. There has been no government exchange of gold for dollars since then. The German gold was stored in New York and Paris to keep it safe from the U.S.S.R. It was only stored. It had been bought on the free market, not exchanged. Germany paid storage every year.

Germany repatriated only 5 tons of gold in 2013. They have stepped that up.
Germany's Bundesbank Resumes Gold Repatriation; Transfers 120 Tonnes Of Physical Gold From Paris And NY Fed | Zero Hedge
There is a LOT of BS connected with the FED and gold.
The Real Reason Why Germany Halted Its Gold Repatriation From The NY Fed | Zero Hedge
I really don't know how much gold the Germans have.

[Danny B]

The Fourth Turning

Strauss and Howe wrote a book, "Generational Turnings". The book shows very clearly, that the economy and civilization have cyclic patterns. We are going in to the fourth turning.
“History offers no guarantees. Obviously, things could go horribly wrong – the possibilities ranging from a nuclear exchange to incurable plagues, from terrorist anarchy to high-tech dictatorship. We should not assume that Providence will always exempt our nation from the irreversible tragedies that have overtaken so many others: not just temporary hardship, but debasement and total ruin. Losing in the next Fourth Turning could mean something incomparably worse. It could mean a lasting defeat from which our national innocence – perhaps even our nation – might never recover.” – The Fourth Turning – Strauss & Howe"
The article has a long list of graphs and statistics;
FOURTH TURNING ? THE SHADOW OF CRISIS HAS NOT PASSED ? PART TWO « The Burning Platform
Part three; FOURTH TURNING ? THE SHADOW OF CRISIS HAS NOT PASSED ? PART THREE « The Burning Platform

[wayne.ct]

Germany in control?

You may be right in your conclusion, but your logic escaped me and I wanted to understand. It seems this little "gold repatriation" scheme was publicized in 2012, seven years taking the process to about 2020. We are approx. 3 years into the "scheme" and the reports seem to say 5 tons in 2013 and 120 odd tons in 2014. Not "all" by any means. I also find the commentary in Barrons, Zero Hedge, etc. to be somewhat illogical. Germany could trade their "receipts" for gold in NY for warehouse receipts for gold in another country X with little difference to them. One of the articles focusses on getting physical gold from France. Perhaps you get my drift. You draw your own conclusions.

It is all politics until someone starts shooting. They are shooting in Ukraine. Germany may be a military power of itself, but I doubt it. It seems to me to be a game of "who's toes are getting crushed?" There will be plenty of bruised toes all around when the currency war hits its stride. We are witnessing the collapse of the Euro, firstly. That will temporarily delay the collapse of the Federal Reserve Notes. So it seems to me.

I do follow your commentary, Danny, and I appreciate you sharing your point of view.

[Danny B]

German gold

Germany believes that it has 3,396 tonnes of gold. Buba explains why US only gave Germany back 5 tonnes of gold | MINING.com
Nobody else has that much to exchange receipts with Germany. The Swiss may very well have it but, it is all owned by somebody who will not part with it.
Germany has a big handicap when it comes to intelligent decisions;
Rampant Lying in German Media Exceeds Anything in UK or US Press - Russia Insider

[Danny B]

Triffin's Dilemma and the FED

The U.S. has worked very hard to push gold out of the consciousness of the West. It wasn’t able to do this with the East. The dollar was declared the reserve currency and America likes it that way. As the world gets more and more industrialized, it gets richer and richer. To store those riches, it previously turned to gold and silver. NOW, instead of gold, the world demands U.S. dollars as a store of wealth. The dollars flood the world. We just print to buy international goods. BUT, as we print to supply all these dollars, the dollar becomes ever-more risky. This is known as Triffin's dilemma.
Triffin Dilemma Definition from Financial Times Lexicon

All this hot money and power is corrupting everybody.
From one point of view, Greece and Ukraine are linked. Germany has huge debt exposure to both. America the beautiful is working hard to light up Europe in another war. The Minsk agreement happened WITHOUT America the warmonger. NO PROBLEM. America will light up Europe anyway.
The A-10 Warthog is such a deadly weapon that America NEVER exported it to anyone. We are sending the A-10 to Germany to get the party started.
http://rt.com/news/231255-pentagon-e...cises-ukraine/
I suspect that the IMF and FED are leveraging Germany to attack near Russia. Europe has a lot of dollar-denominated debt and only the FED can provide dollars to keep them going. The FED will float Germany in Exchange for Germany precipitating WW III. Hell of a deal. Our navy is in both the Black Sea and the Baltic.

[Danny B]

FOFOA; wealth vs capital

I posted on Triffin's dilemma before but, I wanted it fresh in your mind for the next post. Keep in mind that ALL of the reserve currency, both notes and bonds is DEBT. Everybody is saving up DEBT. In a delusional world, debt can be considered wealth.


I found an absolutely fascinating article concerning Yanis. It has a great examination of wealth vs Capital. It touches Marxism and libertarians. It examines Pikkety and the proposed global wealth tax. It easily dismisses socialism.

"That the libertarians’ readiness to separate ‘good’ from ‘bad’ inequality, rather than to treat inequality as a single, uni-dimensional metric, held more promise to those who wished to understand the vagaries, and instability, of capitalism than the social democrats’ protestations that income and wealth outcomes were too unequal."
"Think about capitalism… it is a metaphorical production line that produces two things simultaneously: immense wealth and unprecedented poverty.

You see, his complaint about capitalism is the same as my complaint
about the $IMFS. When savers save in debt, it leads to not only way too
much debt, but also a conflict of interests between the debtors and the
savers. "
FOFOA
I consider this article a tour-d-force at clarifying a few facets of the economy. Though, you must read it with Triffin's dilemma in the back of you mind.
YIKES !! this is post number 666

[Danny B]

West coast port problems

The ports of Los Angeles and Long Beach unload about 50---60,000 containers a day. There is a labor dispute and things are slowed way down. Ships are sitting anchored doing nothing. The 50,000 trucks ( a day ) that would normally haul all this stuff are parked everywhere.
The "Catastrophic Shutdown Of America's Supply Chain" Begins: Stunning Photos Of West Coast Port Congestion | Zero Hedge
Originally, the Chinese planned to develop a deep water port in Santo Tomas B.C.S to get around high American labor costs.

[Danny B]

Backwardation and contango

[QUOTE=wayne.ct Germany could trade their "receipts" for gold in NY for warehouse receipts for gold in another country X with little difference to them. [/QUOTE]
Wayne, there is another aspect that I should clarify. There just isn’t a lot of gold available. Sometimes future gold sells for less than today's gold.
https://www.goldbroker.com/news/back...planations-466
The central banks are at a 50 year high for gold purchase. Gold is a barbaric relic. Saving up a stack of IOUs and debt notes is a much more civilized idea.

[Danny B]

Oil glut and money shortage

GOV taxes economic activity. That is why it hides bad news. It doesn't want economic activity to slow down. Capitalism needs capital. Every increase of $1 in taxes results in a $ 3 reduction in economic activity. This is much debated but, $3 seems about right. GOV tends to raise taxes when there is an economic slowdown. This causes even more slowing. If GOV prints new currency instead of raising taxes, this causes hot money to flow into commodities. It certainly won't flow into wages when there is so much competition from low-wage markets. As commodities go up in price, this is seen as a wage reduction at street level. This causes even more slowing.
Pick your poison.

With falling purchasing power, people spend less. Less spending means more layoffs. After the 2008 crash everybody closed their wallets. There were shiploads of BMWs sitting off the coast with nobody to buy them. GOV force-fed currency into the banks but, ignored the little guy. Consumption is crashing again and the warehouses are crammed full.
http://theeconomiccollapseblog.com/w...er-425x292.png
We've seen this before; Two More Harbingers Of Financial Doom That Mirror The Crisis Of 2008

All the oil storage tanks are full,, most of the super tankers too.
Crude Oil Glut Forecast for 2014
As the price of oil falls, there is even less cash available to be re-invested in money markets. This cuts way back on economic activity,,, lack of capital.
Coming 'oil glut' may push global economy into deflation - Telegraph

Sentiment seems to be falling in spite of all the GOV lies. UMich Consumer Confidence Tumbles, Biggest Miss On Record | Zero Hedge
As confidence fades away, the economy fades away. We go from a consumer economy to an "Amish" economy.