July 22, 2016

Donald Trump’s Convention Speech Highlighted The Truth About America’s Decline

America is in decline.  There are some that still attempt to deny this, but the reason why Donald Trump’s campaign slogan has so strongly resonated with the American people is because deep inside most of us realize that America is not as great as it used to be.  Our economy is a mess, we are 19 trillion dollars in debt, our infrastructure is crumbling, crime is on the rise, moral decay is all around us, other countries don’t respect us as much anymore, and our nation is the most divided that it has been in decades.  Anyone that believes that America is better than it has ever been in 2016 is either completely delusional or simply has not been paying attention.

As I write this article, the prepared text of Trump’s speech has already been released to the press.  So the following remarks may differ slightly from how he actually delivered them, but the differences are not likely to be too great.  At one point during his speech, Trump highlighted the rising crime and violence in our cities, and the numbers that he had to share were more than just a little bit alarming…

Decades of progress made in bringing down crime are now being reversed by this Administration’s rollback of criminal enforcement. Homicides last year increased by 17% in America’s fifty largest cities. That’s the largest increase in 25 years. In our nation’s capital, killings have risen by 50 percent. They are up nearly 60% in nearby Baltimore.

In the President’s hometown of Chicago, more than 2,000 have been the victims of shootings this year alone. And more than 3,600 have been killed in the Chicago area since he took office.

The number of police officers killed in the line of duty has risen by almost 50% compared to this point last year. Nearly 180,000 illegal immigrants with criminal records, ordered deported from our country, are tonight roaming free to threaten peaceful citizens.

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July 21, 2016

19.4 Trillion Dollars In Debt – We Have Added 1.1 Trillion Dollars A Year To The National Debt Under Obama

In 2006, U.S. Senator Barack Obama’s voice thundered across the Senate floor as he boldly declared that “increasing America’s debt weakens us domestically and internationally. Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren.”  That was one of the truest things that he ever said, but just a couple of years later he won the 2008 election and he turned his back on those principles.  As I write this article, the U.S. national debt is sitting at a grand total of $19,402,361,890,929.46.  But when Barack Obama first entered the White House, our federal government was only 10.6 trillion dollars in debt.  That means that we have added an average of 1.1 trillion dollars a year to the national debt under Obama, and we still have about six more months to go.

Even though Barack Obama is on track to be the first president in all of U.S. history to not have a single year when the U.S. economy grew by 3 percent or better, many have still been mystified by the fact that the economy has been relatively stable in recent years.

But the explanation is rather simple, actually.  Anyone can live like a millionaire if the credit card companies will lend them enough money.  You could even do it yourself.  Just go out and apply for as many credit cards as possible and then spend money like there is no tomorrow.  In no time at all, you will be living the high life.

Of course many of you would immediately object that a day of reckoning would come eventually, and you would be right.  Just like for those that abuse credit cards, a financial day of reckoning is coming for America too.

In the United States today, our standard of living is being massively inflated by taking trillions of dollars of future consumption and moving it into the present.  The politicians love to do this because it makes them look good and they can take credit for an “economic recovery”, but what we are doing to our children and our grandchildren is beyond criminal.

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July 20, 2016

Prominent Gold Skeptic Willem Buiter Says "Gold Looks Pretty Good"

Back in November 2014, Willem Buiter, who has so far been wrong in his recent gloomier forecasts about the fallout from the Eurozone mess, or his predictions about a global economy, decided to become a commodity expert and announced that "Gold Is A 6,000 Year Old Bubble." The irony is that while virtually every other asset class in the span of these 6,000 years has risen, risen more, in many cases indeed formed a bubble, burst, fallen, and ultimately turned to dust and forgotten, gold remains and furthermore has seen its value in recent years soar.

What is interesting is that almost two years later, Buiter may have realized just that, and in an interview with the Epoch Times' Valentin Schmid, the Citi strategist admits that he "would hold gold" due to the global tidal wave of negative interest rates:

“I will never argue with a six thousand-year-old bubble. So gold, in times of uncertainty and especially in days of uncertainty laced with negative rates looks pretty good."

Looks like we have another post-conversion Alan Greenspan on our hands. Here is his full interview, courtesy of the Epoch Times.

Citigroup’s Willem Buiter Says ‘Would Hold Gold’

Famous gold skeptic says gold wins against fiat currencies in negative rate environment

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July 19, 2016

Don't Reform The Fed, Fed-Exit!

Opponents of a central bank should take advantage of the post-Brexit vote revival of secessionist sentiments to promote a secession from central banking, or “Fed-exit.” Ending the Federal Reserve's monopoly on money is the key to restoring and maintaining our liberty and prosperity.

By manipulating the money supply to fix interest rates, the Federal Reserve engages in price fixing. After all, interest rates are nothing more than the price of money. Like all prices, they communicate information about economic conditions to market actors. Federal Reserve attempts to override the market rate of interest with a Fed-favored rate distort the price signals sent to businesses, investors, and consumers. The result of this distortion is a Fed-created boom, followed by a Fed-created bust.

The Fed’s action affects the entire economy and impacts the lives of all Americans, as well as of people around the world. Therefore, it is no exaggeration to say that the attempt to fix interest rates is the most harmful example of price fixing.

Many who normally oppose government intervention in the marketplace claim that central banking could work if only the Fed adhered to a monetary rule. Supporters of a “rules-based” monetary policy claim that a rules-based approach will bring stability and predictability to monetary policy, and thus put the economy on a path to permanent prosperity. But under a rules-based monetary policy, the Federal Reserve retains the power to manipulate interest rates. So under a rules-based approach, investors and entrepreneurs would still receive distorted price signals, which would still result in a boom-bust cycle. No rule can fix the flaws inherent in our system of monetary central planning.

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July 18, 2016

Deutsche Bank Loves Helicopter Money: Why "Big Inflation Is Coming... But Will First Require A Crisis"

Just over a month ago, Deutsche Bank's chief economist David Folkerts-Landau, unleashed an epic rant against the ECB, warning of social unrest and another great depression unless the ECB changes its ways. Some thought that DB was genuinely concerned about central planning, and was urging the ECB to stop all intervention altogether, but that naive read was quickly stomped out just one week ago when it emerged that the Deutsche Bank economist was merely acting out of purely selfish reasons when he called for a €150 billion bailout of Europe's banks, with the unspoken demand that Deutsche Bank should be on the very top.

Finally, any doubt was squashed this weekend, when DB's macro strategist Alan Ruskin issued a positively glowing review of Helicopter Money, barely stopping short of demanding it be unleashed immediately. To wit:

Because Helicopter money is less directed at using currency weakness as a core transmission mechanism than QE or particularly negative rates, Helicopter money should be more, rather than less acceptable to an international community worried about currency wars.

What was less emphasized is that unlike NIRP, "helicopter money", if it works, pushes the long end of the yield curve higher ahead (after all the endgame is soaring, if not hyper, inflation), something the global banking sector cripped by trillions in debt,desperately needs, and thus is precisely what Deutsce Bank needs, whose stock continues to trade just barely off all time lows.

As such, any delusions that DB was raging against failed monetary policy in general can be forgotten. All DB wanted was monetary policy that benefits, drumroll, Deutsche Bank... as the following amusing DB table "ranking" various monetary approaches shows. Needless to say, DB really likes helicopter money.

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July 15, 2016

The UK Is Now "At The Front Of The Queue" As America Rushes To Pass A Trade Deal

Less than 3 months ago, on April 22, in an address to the British people that may have cost David Cameron his job and led to the ever more rancorous divorce between the UK and the EU, Barack Obama warned that the UK would be at the “back of the queue” in any trade deal with the US if the country chose to leave the EU, as he made an emotional plea to Britons to vote for staying in.

Two months later, a majority of Brits gave Obama the finger and Britain is no longer part of Europe.

But while that story in itself would be quite satisfying, it turns out that Obama lied. Again.

As it turns out, not only is the UK not at the back of the queue, it now finds itself at the very front. As reported by the FT, the Obama administration has begun preliminary discussions with senior UK officials about how they might pursue a trade agreement between the two countries following Britain’s exit from the EU, Washington’s top trade official said. 

The discussions were revealed on Thursday by Mike Froman, the US trade representative, and coincide with a growing push by Republican Brexit supporters in Congress for President Barack Obama to launch talks on a commercial pact quickly.

So much for yet another typically hollow, worthless threat by the well-spoken, teleprompted golfer in chief. Even the FT is amused by the idiotic diplomacy of the president, which highlights "how quickly the president and his administration have backed away from his warnings before last month’s referendum that Britain would be at the “back of the queue” for any trade deals with the US if it voted to leave the EU."

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July 14, 2016

"Soon" And "Really, Really Crazy": Starting Up The Helicopters

As the abject failures of the past few years’ monetary experiments became apparent, it was clear that something else would have to be tried. The only questions were when this would happen and how crazy the next iteration would be. Both answers are now coming into focus, and they’re looking like “soon” and “really, really crazy.”

Beginning with the most enthusiastic experimenter, Japan just reelected Shinzo Abe, of “Abenomics” fame, by a landslide, setting him free to turbo-charge his policy of massive government deficits fueled by unprecedented currency creation:

Abe orders drafting of new stimulus package to breathe life into Japan’s economy

(Japan Times) – Prime Minister Shinzo Abe ordered economic revitalization minister Nobuteru Ishihara on Tuesday to draft a range of economic measures to bust deflation and raise Japan’s growth potential, including with a supplementary budget for fiscal 2016.
The government will submit the budget draft for fiscal 2016 to an extraordinary Diet session this fall, Ishihara told a news conference later in the day.

Ishihara declined to comment on the size of the economic measures, saying that will be decided at the end of the month using a “bottom-up approach.”

Read the entire article

July 13, 2016

The Dow And The S&P 500 Soar To Brand New All-Time Record Highs – How Is This Possible?

The Dow and the S&P 500 both closed at all-time record highs on Tuesday, and that is very good news.  You might think that is an odd statement coming from the publisher of The Economic Collapse Blog, but the truth is that I am not at all eager to see the financial system crash and burn.  We all saw what took place when it happened in 2008 – millions of people lost their jobs, millions of people lost their homes, and economic suffering was off the charts.  So no, I don’t want to see that happen again any time soon.  All of our lives will be a lot more comfortable if the financial markets are stable and stocks continue to go up.  If the Dow and the S&P 500 can keep on soaring, that will suit me just fine.  Unfortunately, I don’t think that is going to be what happens.

Of course I never imagined we would be talking about new record highs for the stock market in mid-July 2016.  We have seen some crazy ups and downs for the financial markets over the last 12 months, and the downs were pretty severe.  Last August, we witnessed the greatest financial shaking since the historic financial crisis of 2008, and that was followed by an even worse shaking in January and February.  Then in June everyone was concerned that the surprising result of the Brexit vote would cause global markets to tank, and that did happen briefly, but since then we have seen an unprecedented rally.

So what is causing this sudden surge?

We’ll get to that in a moment, but first let’s review some of the numbers from Tuesday.  The following comes from USA Today

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July 12, 2016

"Something Big" Indeed Came - Bernanke's Japan Visit Unveils "Helicopter Money", Sparks Monster Rally

When we first heard this past Thursday that private blogger and Citadel employee Ben Bernanke was going to "secretly" meet with both the BOJ's Haruhiko Kuroda and Japan PM Abe, we warned readers that "something big was coming."

As noted late last week, "Bernanke will be in Japan next week. It has been arranged for him to meet officials including Abe and Bank of Japan Governor Haruhiko Kuroda, according to a government official speaking on condition of anonymity. Bernanke is expected to discuss Brexit and the BOJ's negative interest rate policy with Abe and Kuroda, the official said." Reuters also added that "some market players speculate Kuroda might decide, in a surprise, to provide "helicopter money."

We concluded as follows:

So is it time? Is Bernanke about to unleash the next, and final, monetary policy evolutionary step, one which launches "helicopter money" in Japan, and if successful, brings it across the Pacific to the US?

We don't know, but if anyone is still holding on to USDJPY shorts, now may be a good time to quietly close them out, because if Reuters is right, and a "helicopter money" is about to be served for the first time in modern history, things are about to get very volatile, very fast.

Two trading days later, Japan's stocks have soared by 4% - the biggest one day gains since February - and the USDJPY is more than 200 pips higher...

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July 11, 2016

Is “Helicopter Money” About to Rain Upon the World?

Ever since the BOJ announced a new negative interest rate policy earlier this year (NIRP) the yen has stopped falling and reversed upwards. That is, despite weak Japanese growth, despite an inverted yield curve and deeply negative long bond, and despite still weak inflation, markets have bet on spectacularly easy monetary policy generating even more of all four.  This is what is know as “quantitative failure”, the notion that negative interest rates will not expand the monetary base owing to such phenomenon as crushed bank margins and the hoarding of cash under mattresses, so the currency is therefore going to rise.

CLSA has a nice little note on what this means for Japanese policy:

This is because Bank of Japan governor Haruhiko Kuroda is now looking for a new alternative form of monetary easing, given he has probably reached the practical limits of responsible JGB buying, as already discussed, while his initial move to impose negative rates in January led to the opposite market reaction than expected (ie, a stronger yen and a weaker stock market, see Figure 8) while also proving politically very unpopular. This probably explains why Kamikaze Kuroda has not expanded the negative rate policy further since January even though inflation and inflation expectations have moved in the opposite direction of what he has been targeting.

The latest data will make it harder for Kuroda to do nothing at the next BoJ policy meeting due to be held on 28-29 July given the stress he has put on monitoring inflation expectations. That is unless he just admits he has failed!

Given the unattractive options of buying still more JGBs or ETFs, or risking an undoubtedly unpopular expansion of negative rates, Kuroda and indeed Abe will be looking for a new approach. Monetisation of infrastructure stimulus may be the option.

Read the entire article

July 8, 2016

"Maybe You Can Reverse Brexit" - Jamie Dimon Chimes In On How To Ignore The Voters

There's been much fearmongering around Brexit and how it will impact the people of the UK specifically, and the broader global markets. What the people of the UK truly need, just like a hole in the head, is some friendly advice from Jamie Dimon.

Thankfully, everyone can relax, because Dimon has imparted his wisdom on the Brexit situation - with a bit of a carrot for listening to him as well, in true banker fashion.

"Brexit has put a lot of uncertainty in the markets and in the economy. The markets will calm down a bit." Dimon said

Alas, as we reported earlier the Nasdaq erased all Brexit losses this morning - so far so good Jamie, so far so good.

Dimon's next comment, as reported by Bloomberg, is the key - Dimon was discussing the results of Brexit and specifically the use of the "passport rule" which currently enables companies with operations in the UK to sell their services to the other 27 nations in the bloc. If the UK can't win continued use of the passport rule, Dimon said he would be "forced" to consider shifting his 16,000 UK-based staff...

"If we have that passport after Brexit, we likely would not have to make any change at all. But I think the European Union will not accept that. It will put more conditions on the UK and might force banks to become smaller in London."

Read the entire article

July 7, 2016

Gundlach: "When Deutsche Bank Goes To Single Digits People Will Start To Panic"

Following today's Fed minutes release, Jeff Gundlach had a far less "uncertain" message: “Things are shaky and feeling dangerous,” Gundlach told Reuters in a telephone interview.

It's not just stocks that Gundlach was not too excited about, he also had some choice words about buying Treasuries here. "You're seeing people who hated the '2 percent' 10-year suddenly loving it at a 1.38-1.39 percent revisit of the all-time low closing yield," Gundlach said. "If you buy 10-year Treasuries now, I would say, it is a terrible trade location. In fact, it is the worst trade location in the history of the 10-year Treasury."

True, just like buying stocks less than 2% from all time highs, however what Gundlach failed to mention is that those who are buying Treasurys here are not doing it for the yield (or lack thereof on more than $11 trillion in notional), they are simply doing so to frontrun even more central bank purchases now that the monetary spigots have once again been activated as "confused" central banks around the world have just one trick left up their sleeve - to monetize even more debt in hopes of pushing every last investor into risk assets.

The DoubleLine bond king also had some choice words about Europe's banking crisis: "Banks are dying and policymakers don’t know what to do," Gundlach said. "Watch Deutsche Bank shares go to single digits and people will start to panic... you'll see someone say, 'Someone is going to have to do something'."

So Gundlach hates equities and bonds; what does he like? According to Reuters' Jennifer Ablan, Gundlach said that "gold remains the best investment amid fears of instability in the European Union and prolonged global stagnation, as well as concerns over the effectiveness of central bank policies."

Gundlach, a staunch supporter of the precious metal, sees gold rising to $1400 an ounce this year.

"I am not selling gold."

Read the entire article

July 6, 2016

The Big Unravel – US Commercial Bankruptcies Skyrocket

This year through June, there have been 91 corporate defaults globally, the highest first-half total since 2009, according to Standard and Poor’s. Of them, 60 occurred in the US. Some of them are going to end up in bankruptcy. Others are restructuring their debts outside of bankruptcy court by holding the bankruptcy gun to creditors’ heads. In the process, stockholders will often get wiped out.

These are credit fiascos at larger corporations – those that pay Standard and Poor’s to rate their credit so that they can sell bonds in the credit markets.

But in the vast universe of 19 million American businesses, there are only about 3,025 companies, or 0.02% of the total, with annual revenues over $1 billion; they’re big enough to pay Standard & Poor’s for a credit rating.

About 183,000 businesses, or less than 1% of the total, are medium-size with sales between $10 million and $1 billion. Only a fraction of them have an S&P credit rating, and only those figure into S&P’s measure of defaults. The rest, the vast majority, are flying under S&P’s radar. About 99% of all businesses in the US are small, with less than $10 million a year in revenues. None of them are S&P rated and none of them figure into S&P’s default measurements.

So how are these small and medium-size businesses doing – the core or American enterprise?

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July 5, 2016

"China Is Headed For A 1929-Style Depression"

Andy Xie isn’t known for tepid opinions.

The provocative Xie, who was a top economist at the World Bank and Morgan Stanley, found notoriety a decade ago when he left the Wall Street bank after a controversial internal report went public. Today, he is among the loudest voices warning of an inevitable implosion in China, the world’s second-largest economy.

Xie, now working independently and based in Shanghai, says the coming collapse won’t be like the Asian currency crisis of 1997 or the U.S. financial meltdown of 2008.

In a recent interview with MarketWatch, Xie said China’s trajectory instead resembles the one that led to the Great Depression, when the expansion of credit, loose monetary policy and a widespread belief that asset prices would never fall contributed to rampant speculation that ended with a crippling market crash.

China in 2016 looks much the same, according to Xie, with half of the country’s debt propping up real-estate prices and heavy leverage in the stock market — indicating that conditions are ripe for a correction.

“The government is allowing speculation by providing cheap financing,” Xie told MarketWatch. China “is riding a tiger and is terrified of a crash. So it keeps pumping cash into the economy. It is difficult to see how China can avoid a crisis.”

A longtime critic of Chinese economic growth
Xie’s viewpoints have at times attracted unwelcome attention. In 2006, when he was a star Asia economist at Morgan Stanley, a leaked email to colleagues in which he said money laundering was bolstering growth in Singapore led to his abrupt departure from the bank.

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July 4, 2016

A Former NYMEX Trader Explains "The Mechanics Of Silver Manipulation"

The Mechanics of Silver Manipulation

JPMorgan Chase on Wednesday won the dismissal of three private antitrust lawsuits, including from hedge fund manager Daniel Shak, accusing the largest U.S. bank of rigging a market for silver futures contracts traded on COMEX. The lawsuits accused JPMorgan of having in late 2010 and early 2011 placed artificial bids (i.e., spoofing) onto the trading floor, harassed employees at metals market COMEX to obtain prices it wanted (i.e., intimidation) and made misrepresentations to a committee that set settlement prices. (i.e., manipulating settlements).

What follows is how JPM manipulated the silver markets by selling the Silver contango during illiquid hours, then used their deep pockets to push settlements, then waited until margin calls made the large locals puke their positions. JPM in effect stretched the relationship between forward rates and futures spreads until they made no sense anymore. Not unlike a company trading at 50x earnings. It cannot last long. But it only has to last long enough until the guy with the position opposite you has to liquidate. That guy does not have access to cheap money, political influence or the most physical silver in the world in a single vault at his disposal to create a squeeze.

From Reuters:

U.S. District Judge Paul Engelmayer in Manhattan, however, said the plaintiffs, who also included traders Mark Grumet and Thomas Wacker, did not show that JPMorgan made "uneconomic" bids, or intended to rig the market at counterparties' expense. He also questioned the plaintiffs' use of Silver Indicative Forward Mid Rates ("SIFO") as a benchmark for determining proper levels for the spreads in their lawsuits.

Analysis: The demand was fabricated

The market was only partially backwardated. Spot was below the next 6 expirations. Translation: there was no massive demand for immediate delivery. There was only demand in months where the last remaining MEN who took risk trading their own money had positions. JPM's own book was likely short and had to get liquidity to cover their positions. We knew Shak from our floor days, and were trading spreads off-floor when this happened. They should not have lost this case. Comex traders do not trade physical spot. Spot was under the backwardation. Smoking gun? No, but damning circumstantial evidence in the least.

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