"We've Never Seen Anything Like This" - Dumbfounded Central Bankers Brace For "Rolling Series Of Crises"

One of the most important things to grasp about the Fed’s September (in)decision is that the FOMC had no viable options when it came to emerging markets. 

The combination of low commodity prices, falling demand, slumping global trade, a decelerating China, and the yuan devaluation have all served to accelerate capital outflows for EM and there’s certainly an argument to be made for the contention that a Fed hike and a subsequent spike in the dollar would be just about the last thing EM needs when it comes to stopping the bleeding. 

That said, there’s another line of argumentation which says the Fed missed its window to hike long ago and so now, all they’re doing in the Eccles Building is fostering continued uncertainty which is also causing capital to flow out of EM. 

In the simplest terms possible: no one really has any idea whether it’s best to rip the band-aid off or not, and adding to the confusion is the fact that the Fed has now telegraphed its own uncertainty by explicitly acknowledging the reflexivity problem, meaning EMs (and everyone else for that matter) are desperately trying to figure out how to incorporate themselves into their own outlook for what the Fed may or may not do. 

Here’s how one former Treasury economist framed the latter argument:

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Fed Quietly Revises Total US Debt From 330% To 350% Of GDP, After "Discovering" Another $2.7 Trillion In Debt

For those who have not seen it, as well as for those who are familiar with this chart, take a long look, because this is the last update of this particular data series, pulled straight from the Fed's Z.1 Flow of Funds (section L.1), you will ever see.

So did the Fed spontaneously terminate the reporting of what until the second quarter's update of the Flow of Funds, was the most comprehensive official summary of Household, Financial, Corporate and Government debt in existence? And if so why?

Many Fed watchers assumed that this is precisely what happened, and indeed, searching high and low for the infamous L.1 Section revealed nothing.

We can only assume that the vocal outcry that emerged in the aftermath of the Fed's release of its Q2 Flow of Funds statement missing this most critical of data sets on September 18, was so loud that three weeks later, this past Friday on October 9, the Fed released an official follow up explanation what exactly happened.

Here is what happened to the missing so very critical data series, straight from the horse's mouth:

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Why Are The IMF, The UN, The BIS And Citibank All Warning That An Economic Crisis Could Be Imminent?

The warnings are getting louder.  Is anybody listening?  For months, I have been documenting on my website how the global financial system is absolutely primed for a crisis, and now some of the most important financial institutions in the entire world are warning about the exact same thing.  For example, this week I was stunned to see that the Telegraph had published an article with the following ominous headline: “$3 trillion corporate credit crunch looms as debtors face day of reckoning, says IMF“.  And actually what we are heading for would more accurately be described as a “credit freeze” or a “credit panic”, but a “credit crunch” will definitely work for now.  The IMF is warning that the “dangerous over-leveraging” that we have been witnessing “threatens to unleash a wave of defaults” all across the globe…

Governments and central banks risk tipping the world into a fresh financial crisis, the International Monetary Fund has warned, as it called time on a corporate debt binge in the developing world.

Emerging market companies have “over-borrowed” by $3 trillion in the last decade, reflecting a quadrupling of private sector debt between 2004 and 2014, found the IMF’s Global Financial Stability Report.

This dangerous over-leveraging now threatens to unleash a wave of defaults that will imperil an already weak global economy, said stark findings from the IMF’s twice yearly report.

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Global Financial Meltdown Coming? Clear Signs That The Great Derivatives Crisis Has Now Begun

Warren Buffett once referred to derivatives as “financial weapons of mass destruction“, and it was inevitable that they would begin to wreak havoc on our financial system at some point.  While things may seem somewhat calm on Wall Street at the moment, the truth is that a great deal of trouble is bubbling just under the surface.  As you will see below, something happened in mid-September that required an unprecedented 405 billion dollar surge of Treasury collateral into the repo market.  I know – that sounds very complicated, so I will try to break it down more simply for you.  It appears that some very large institutions have started to get into a significant amount of trouble because of all the reckless betting that they have been doing.  This is something that I have warned would happen over and over again.  In fact, I have written about it so much that my regular readers are probably sick of hearing about it.  But this is what is going to cause the meltdown of our financial system.

Many out there get upset when I compare derivatives trading to gambling, and perhaps it would be more accurate to describe most derivatives as a form of insurance.  The big financial institutions assure us that they have passed off most of the risk on these contracts to others and so there is no reason to worry according to them.

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Commodity Trading Giants Unleash Liquidity Scramble, Issue Record Amounts Of Secured Debt

Earlier today, in its latest attempt to restore confidence in its brand and business model after suffering a historic stock price collapse, Glencore - whose CDS recently blew out to a level implying a 50% probability of default - released a 4 page funding worksheet which was meant to serve as a simplied summary of its balance sheet funding obligations and lending arrangements to equity research analysts who have never opened a bond indenture, and which among other things provided a simplied and watered-down estimate of what could happen if and when the company is downgraded to junk.

Meanwhile, in a furious race to shore up as much liquidity as possible, Glencore - which a month ago announced a dramatic deleveraging plan - and its peers have been quietly scrambling to raise billions in secured funding. Case in point none other than Glencore's biggest competitor and the largest independent oil trader in the world, Swiss-based, Dutch-owned Vitol Group, whose Swiss unit Vitol SA earlier today raised a record $8 billion in loans.

It is not alone.

As Bloomberg reports, another name profiled previously here, privately-held (but with publicly-traded debt) Trafigura  "won improved terms on a $2.2 billion loan refinancing deal on Oct. 1 via a group of 28 banks. Swiss commodity traders Gunvor Group Ltd. and Mercuria Energy Group Ltd. are also marketing credit facilities totaling $2 billion."

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World's Largest Sovereign Wealth Fund Is Forced To Begin Liquidating Assets

Populist rhetoric aside, the SWF will have no choice but to sell: "capital coming into to the fund has already started to dwindle. Inflows were just 17 billion kroner in the first half of this year, compared with a quarterly average of 60 billion kroner over the past 10 years. Central bank Governor Oeystein Olsen, who oversees the fund as head of the bank’s board, said in February that oil around $60 would mean transfers to the fund "may come to a halt."

Oil is now nearly 20% lower, and as goes the price oil, so go the inflows into the fund. Which means that any month now, if not already, Norway will shift from net buyer of global financial assets to a net seller, in the process joining the Emerging Markets and, of course, China in soaking up even more liquidity, mostly USD-denominated, out of the market, in the process removing much of the liquidity injected by the Fed and its peer central banks.

This situation will only deteriorate that much further, and force the wealth fund to sell even more assets should the Fed hike rates, pushing the dollar even higher, and sending the price of oil crashing below. In fact, the coordinated selling of US-denominated assets will be precisely the catalyst that sends the global stock market tumbling, and ultimately serve as the catalyst for NIRP and/or QE4.

The only question is whether Yellen has finally figured this out and will proceed straight to the NIRP/QE4 part or whether she will subject the market to 6-9 months of gut-wrenching volatility as the world's largest sovereign wealth fund realizes what it means to try to sell billions of assets into an illiquid, bidless, market.

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Right Now There Are 102.6 Million Working Age Americans That Do Not Have A Job

The federal government uses very carefully manipulated numbers to cover up the crushing economic depression that is going on in this nation.  For the month of September, the federal government told us that 142,000 jobs were added to the economy.  If that was actually true, that would barely be enough to keep up with population growth.  Sadly, the truth is that the real numbers were actually far worse than that.  The unadjusted numbers show that the U.S. economy actually lost 248,000 jobs in September and the government added more than a million Americans to the “not in the labor force” category.  When I first saw that number I truly believed that it was inaccurate.  But you can find the raw figures right here.  According to the Obama administration, there are currently 7.9 million Americans that are “officially unemployed” and another 94.7 million working age Americans that are “not in the labor force”.  That gives us a grand total of 102.6 million working age Americans that do not have a job right now.

That is not an economic recovery – that is an economic depression of an almost unbelievable magnitude.

This is something that my friend Mac Slavo pointed out the other day.  I encourage you to read his analysis right here.  If we measured unemployment the way that we did decades ago, we would all be talking about how similar Obama’s economy is to the Great Depression of the 1930s.

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How ‘Competitive’ Tax and Incentive Policies Hurt Small U.S. Businesses

Recently we have written about how supposedly ‘competitive’ national policies on tax and the financial sector in Britain tend to favour large multinational firms over smaller, more locally-based ones, and how they also tend to lead to less competition in markets too.

This is the result of what we sometimes call the “Competitiveness Agenda”, which pushes the idea that you have to pamper and give subsidies to mobile capital, for fear that it will flee to more hospitable jurisdictions. Of course the firms that are most able to flee (or partly flee) to foreign jurisdictions are naturally the internationally-focused ones – and that usually means larger multinational corporations. The smaller locally-focused ones, which are most wholly embedded in the local economy won’t generally flee.

The result is that this ratchets up the tendency for the big to overwhelm the small, based on factors (such as tax breaks) that have nothing to do with wealth creation and everything to do with unproductive wealth extraction.

This morning Good Jobs First in the United States have published an important new report entitled In Search of a Level Playing Field: What Leaders of Small Business Organizations Think About Economic Development Incentives. Its findings very much reflect the workings of the Competitiveness Agenda.  Its summary states:

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The American Public Will Get Screwed Again…Just Like in 2008

Wall Street legend Carl Icahn just posted a warning to America...

During the 1980s, Icahn built a reputation as a feared “corporate raider.” He buys huge stakes in “broken” companies…takes a seat on the board…and tries to turn the companies around. He’s an “activist investor,” and it’s made him one of the thirty richest people on the planet.

Now, Icahn says it’s America that’s broken. On Monday night, he released a 15-minute video called “Danger Ahead.” In the video, he talks about huge problems facing the U.S. economy.

Low interest rates are one of Icahn’s biggest worries. He calls them “a scary issue,” and says borrowing money is “like taking a drug.”

Here’s Icahn:

…low rates, by almost definition, [are] building bubbles; building real estate bubbles; building bubbles even in the art market.

•  For some Americans, Icahn’s message is a wake-up call…

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Carl Icahn Says Market "Way Overpriced", Warns "God Knows Where This Is Going"

To be sure, no one ever accused Carl Icahn of being shy and earlier this year he had a very candid sitdown with Larry Fink at whom Icahn leveled quite a bit of sharp (if good natured) criticism related to BlackRock’s role in creating the conditions that could end up conspiring to cause a meltdown in illiquid corporate credit markets. Still, talking one’s book speaking one’s mind is one thing, while making a video that might as well be called “The Sky Is Falling” is another and amusingly that is precisely what Carl Icahn has done. 

Over the course of 15 minutes, Icahn lays out his concerns about many of the issues we’ve been warning about for years and while none of what he says will come as a surprise (especially to those who frequent these pages), the video, called “Danger Ahead”, is probably worth your time as it does a fairly good job of summarizing how the various risk factors work to reinforce one another on the way to setting the stage for a meltdown. Here’s a list of Icahn’s concerns:

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Is Glencore The Next Lehman? The World’s Largest Commodities Trading Company Is Toast

Are we about to witness the most important global financial event since the collapse of Lehman Brothers in 2008?  Glencore has been known as the largest commodities trading company on the entire planet, and at one time it was ranked as the 10th biggest company in the world.  It is linked to trillions of dollars of derivatives trades globally, and if the firm were to implode it would be a financial disaster unlike anything that we have seen in Europe since the end of World War II.  Unfortunately, all signs are pointing to an inescapable death spiral for Glencore at this point.  The stock price was down nearly 30 percent on Monday, and overall Glencore stock has plunged nearly 80 percent since May.  There are certainly other candidates for “the next Lehman” (Petrobras and Deutsche Bank being two perfect examples), but Glencore has definitely surged to the front of the pack.  Right now many analysts are openly wondering if the firm will even be able to survive to the end of next month.

If you are not familiar with Glencore, the following is a pretty good summary of the commodity trading giant from Wikipedia…

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Did The PBOC Covertly Buy 1,747 Tonnes Of Gold In London?

The London Float And PBOC Gold Purchases

This BullionStar blogpost is part of a chronological storyline. Please make sure you’ve read The Mechanics Of The Chinese Domestic Gold Market, PBOC Gold Purchases: Separating Facts from Speculation and The London Bullion Market And International Gold Trade, or it will be difficult to understand the finesses. 

This week I listened to an interview with a Swiss refiner which promptly reminded me of an interview I conducted with Alex Stanczyk (currently Managing Director of Physical Gold Fund SP) on 9 September 2013 about what he was hearing from industry insiders on Chinese gold demand. Back then we knew very little about the Chinese gold market and how physical gold across the globe was flowing towards China. This started to change on 18 September 2013 when I published my first analysis on the structure of the Chinese gold market with the Shanghai Gold Exchange (SGE) at its core; a topic that since then has been discussed by researchers at investment banks, in the blogosphere and in the mainstream media. The Western gold space has learned a great deal about the Chinese gold market and global gold flows, though we’re always left with loose ends. For example, the issue regarding PBOC gold purchases; how much gold do they truly have and where was it bought? Does the PBOC buy 400-ounce Good Delivery (GD) bars in London and covertly transports these gold bars to its gold vaults in China mainland, or are the Good Delivery gold bars shipped to Switzerland, refined into 1 Kg 9999 gold bars, sent forward to the Chinese mainland where they’re required to be sold through the SGE gold exchange and from where they can be bought (in clear sight) by the PBOC. The latter would imply that the full gold flow would be visible for anyone with an Internet connection.

Yesterday I re-read my interview with Alex from September 2013 in which he shared information from industry insiders. From Alex (September 2013):

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The Stock Markets Of The 10 Largest Global Economies Are All Crashing

You would think that the simultaneous crashing of all of the largest stock markets around the world would be very big news.  But so far the mainstream media in the United States is treating it like it isn’t really a big deal.  Over the last sixty days, we have witnessed the most significant global stock market decline since the fall of 2008, and yet most people still seem to think that this is just a temporary “bump in the road” and that the bull market will soon resume.  Hopefully they are right.  When the Dow Jones Industrial Average plummeted 777 points on September 29th, 2008 everyone freaked out and rightly so.  But a stock market crash doesn’t have to be limited to a single day.  Since the peak of the market earlier this year, the Dow is down almost three times as much as that 777 point crash back in 2008.  Over the last sixty days, we have seen the 8th largest single day stock market crash in U.S. history on a point basis and the 10th largest single day stock market crash in U.S. history on a point basis.  You would think that this would be enough to wake people up, but most Americans still don’t seem very alarmed.  And of course what has happened to U.S. stocks so far is quite mild compared to what has been going on in the rest of the world.

Right now, stock market wealth is being wiped out all over the planet, and none of the largest global economies have been exempt from this.  The following is a summary of what we have seen in recent days…

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The Worst Part Is Central Bankers Know Exactly What They Are Doing

The best position for a tyrant or tyrants to be in, at least while consolidating power, is tyranny by proxy. That is to say, the most dangerous tyrants are those the people do not recognize: the tyrants who hide behind scarecrows and puppets and faceless organizations. The worst position for the common citizen to be in is a false sense of security and understanding, operating on the assumption that tyrants do not exist or that potential tyrants are really just greedy fools acting independently from one another.

Sadly, there are a great many people today who hold naïve notions that our sociopolitical dynamic is driven by random chaos, greed and fear. I’m sorry to say that this is simply not so, and anyone who believes such nonsense is doomed to be victimized by the tides of history over and over again.

There is nothing random or coincidental about our political systems or economic structures. There are no isolated tyrants and high-level criminals functioning solely on greed and ignorance. And while there is certainly chaos, this chaos is invariably engineered, not accidental. These crisis events are created by people who often refer to themselves as “globalists” or “internationalists,” and their goals are rather obvious and sometimes openly admitted: at the top of their list is the complete centralization of government and economic power that is then ACCEPTED by the people as preferable. They hope to attain this goal primarily through the exploitation of puppet politicians around the world as well as the use of pervasive banking institutions as weapons of mass fiscal destruction.

Their strategic history is awash in wars and financial disasters, and not because they are incompetent. They are evil, not stupid.

By extension, perhaps the most dangerous lie circulating today is that central banks are chaotic operations run by intellectual idiots who have no clue what they are doing. This is nonsense. While the ideological cultism of elitism and globalism is ignorant and monstrous at its core, these people function rather successfully through highly organized collusion. Their principles are subhuman, but their strategies are invasive and intelligent.

That’s right; there is a conspiracy afoot, and this conspiracy requires created destruction as cover and concealment. Central banks and the private bankers who run them work together regardless of national affiliations to achieve certain objectives, and they all serve a greater agenda. If you would like to learn more about the details behind what motivates globalists, at least in the financial sense, read my article 'The Economic Endgame Explained.'

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Top UK Hedge Fund Manager Admits: "Central Banks Made The Rich Richer"

With each passing day, the lies and fictions we have been exposing since 2009 - from HFT, to the truth about QE, to the ultimate downfall of central banks through their own actions - are being debunked ever faster, called out and/or confirmed by increasingly more "serious" people, those who have benefited and been protected by the lie itself.

Case in point, an Op-Ed by Paul Marshall, CIO of Marshall Wace, one of the London's and Europe's largest hedge funds, with an AUM of $22 billion (so he probably knows what he is talking about) which is a tour de force of slamming the countless lies shoved down the population's throat every single day just so the rich can get richer.

Labour’s new shadow chancellor has got at least one thing right. Amid the brickbats thrown at John McDonnell, there is a nagging failure to acknowledge the validity of one part of his critique of the money-creation programmes of the four leading central banks. Quantitative easing, as this policy is known, has bailed out bonus-happy banks and made the rich richer. 

It is a surprise that the UK opposition party and other leftwingers have not made more of this. Maybe they thought it was too complicated. It isn’t really, and it might appeal to voters’ sense of justice far more effectively than threats to raise the top rate of income tax or to introduce a financial transactions tax (which Mr McDonnell also supports).

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