Friday, October 31, 2014



Alan Greenspan Speaks........VERY IMPORTANT!

Alan Greenspan: QE Failed To Help The Economy, The Unwind Will Be Painful, "Buy Gold"

It appears it is time for some backtracking and Liesman-esque translation of just what the former Federal Reserve Chief really meant. As The Wall Street Journal reports, the Fed chief from 1987 to 2006 says the Fed's bond-buying program fell short of its goals, and had a lot more to add.

Mr. Greenspan's comments to the Council on Foreign Relations came as Fed officials were meeting in Washington, D.C., and expected to announce within hours an end to the bond purchases.

He said the bond-buying program was ultimately a mixed bag. He said that the purchases of Treasury and mortgage-backed securities did help lift asset prices and lower borrowing costs.But it didn't do much for the real economy.

"Effective demand is dead in the water" and the effort to boost it via bond buying "has not worked," said Mr. Greenspan. Boosting asset prices, however, has been "a terrific success." FOR THE SHORT TERM ONLY!

He observed that history shows central banks can only prick bubbles at great economic cost. "It's only by bringing the economy down that you 
can burst the bubble," and that was a step he wasn't willing to take while helming the Fed, he said. COWARD! HE WAS AFRAID TO DO WHAT HE KNEW HE SHOULD HAVE DONE, THAT'S JUST GREAT! NOTHING BUT A COWARDLY ASSHOLE.

The question of when officials should begin raising interest rates is "one of those questions I cannot answer," Mr. Greenspan said.


"Recent episodes in which Fed officials hinted at a shift toward higher interest rates have unleashed significant volatility in markets, so there is no reason to suspect that the actual process of boosting rates would be any different, Mr. Greenspan said.

"I think that real pressure is going to occur not by the initiation by the Federal Reserve, but by the markets themselves," Mr. Greenspan he said.


And finally - while CNBC's audience is told what a terrible thing gold is, "The Maestro", having personally created the financial cataclysm the world finds itself in following a lifetime of belief in fiat, Keynesian ideology and "fixing" one bubble with an even greater and more destructive asset bubble, has suddenly had an epiphany and now has a very different message from the one he preached during his decades as the head of the Fed.

Mr. Greenspan said gold is a good place to put money these days given its value as a currency outside of the policies conducted by governments.





Japan Shocked Markets With More QE 

In the face of disappointing inflation, Bank of Japan governor Haruhiko Kuroda has hiked Japan's bond purchases.  THE ONLY ANSWER CENTRAL BANKS HAVE FOR A PROBLEM THEY CREATED! SADLY, THIS ANSWER IS NOT A SOLUTION.

Russia Hiked Interest Rates Massively

The Russian central bank raised rates by 150 basis points to 9.5% in a gamble that higher rates will halt the ruble's slide against the dollar and the euro.  CALLING THE BLUFF OF CENTRAL BANKS EVERYWHERE....

Putin To Western Elites: Play-Time Is Over

Most people in the English-speaking parts of the world missed Putin's speech at the Valdai conference in Sochi a few days ago. Western media did their best to ignore it or to twist its meaning. Regardless of what you think or don't think of Putin, this is probably the most important political speech since Churchill's "Iron Curtain" speech of March 5, 1946. In this speech, Putin abruptly changed the rules of the game. To sum it all up: play-time is over. Children, put away your toys. Now is the time for the adults to make decisions. Russia is ready for this; is the world?

A recent surge in Russian military transports and support units to the Artcic, in a scramble to defend its vast natural resource deposits located close to the North Pole. And not surprisingly, this weaponization of the Artic was confirmed two days ago when a senior military commander said that Russia will build at least 13 airfields and 10 radar stations in the Arctic to safeguard the nation's military security in the region.  A WARNING TO A DELUSIONAL AND VERY ARROGANT WORLD.

The Hidden Cost Of Central Bank Actions

Central banks are printing rules almost as fast as they're printing money. The consequences of these fast-multiplying directives — complicated, long-winded, and sometimes self-contradictory — is one topic at hand. Manipulated interest rates is a second. Distortion and mispricing of stocks, bonds, and currencies is a third. Skipping to the conclusion: "The more they tried, the less they succeeded. The less they succeeded, the more they tried. There is no 'exit.'"  THE TRUTH, CAUGHT BETWEEN A ROCK AND A VERY HARD PLACE. STOCKS MAY FOR THE TIME BE HEADING BACK UP, BUT REALITY, A VERY HARSH REALITY IS NIPPING AT THEIR OVERVALUED HEELS. NO ONE WANTS TO FACE THE TRUTH SO THEY IGNORE IT AND KEEP ON BUYING, IT'S CALLED DELUSION! 

German Retail Sales Fell Through The Floor 

Germany's retail sales dropped 3.2% in September, the worst monthly decline since May 2008.  THE PLAIN TRUTH, TRUTH FOR ALL TO SEE, IS SPREADING AROUND THE WORLD QUICKLY! 

Worsening Fukushima Disaster......BECAUSE RADIATION IS FOREVER!

Worsening Fukushima Disaster

Nothing has been fixed at Fukushima. !!!!!

After typhoon Phanfone dumped a bunch of water on Fukushima earlier this month, radioactive tritium levels jumped tenfold.

After typhoon Vongfong dumped a bunch more water on the plant, radioactive cesium and strontium levels soared.

Radiation levels in the water are at all-time highs.

Officials said there's nothing they can do to stop it, and they have no idea how much radiation is running into the ocean.

The reactors didn't just suffer a melt down, or even a China syndrome type melt-through, but a series of melt outs. Scientists have no idea where the cores of the nuclear reactors are. Well actually, maybe they have found them … scattered all over kingdom come.

The Japanese have dumped their plan to build an "ice wall" around the plant to contain the radiation. Indeed, they don't have much of a plan to stabilize the reactors or contain the radiation. Their plan seems to be to dump it all in the ocean.

Radiation from Japan's Fukushima nuclear disaster is approaching the U.S. West Coast, the Woods Hole Oceanographic Institution is reporting.

A sample taken Aug. 2 about 1,200 kilometers west of Vancouver, B.C. tested positive for Cesium 134, the Fukushima "fingerprint" of Fukushima.

Thursday, October 30, 2014

Good Riddance To QE - It Was Just Plain Financial Fraud......VERY IMPORTANT!

Good Riddance To QE - It Was Just Plain Financial Fraud

QE has finally come to an end, but public comprehension of the immense fraud it embodied has not even started. In round terms, this official counterfeiting spree amounted to $3.5 trillion— reflecting the difference between the Fed's approximate $900 billion balance sheet when its "extraordinary policies" began at the time of the Lehman crisis and its $4.4 trillion of footings today. That's a lot of something for nothing. It's a grotesque amount of fraud.

The scam embedded in this monumental balance sheet expansion involved nothing so arcane as the circuitous manner by which new central bank reserves supplied to the banking system impact the private credit creation process. As is now evident, new credits issued by the Fed can result in the expansion of private credit to the extent that the money multiplier is operating or simply generate excess reserves which cycle back to the New York Fed if, as in the present instance, it is not.

But the fact that the new reserves generated during QE have cycled back to the Fed does not mitigate the fraud. The latter consists of the very act of buying these trillions of treasuries and GSE securities in the first place with fiat credits manufactured by the central bank. When the Fed does QE, its open market desk buys treasury notes and, in exchange, it simply deposits in dealer bank accounts new credits made out of thin air. As it happened, about $3.5 trillion of such fiat credits were conjured from nothing during the last 72 months. PRIOR TO QE ONLY A FOOL WOULD HAVE BELIEVED THIS PATH WAS EVEN POSSIBLE. DURING QE, ONLY FOOLS BELIEVED IT WOULD WORK. AFTER QE, ONLY FOOLS BELIEVE THE CONSEQUENCES OF THIS MADNESS WON'T BE VERY NEGATIVE FOR A LONG TIME TO COME.  AS TIME GOES BY, IT WILL BE PROVEN, BEYOND A SHADOW OF A DOUBT, THAT OUR LEADERS ARE FOOLS AND THE VAST MAJORITY IN FINANCE ARE NOTHING BUT GREEDY, CLUELESS, SHILLS.  

All of these bonds had permitted Washington to command the use of real economic resources. That is, to consume goods and services it obtained directly in the form of payrolls, contractor services, military tanks and ammo etc; and, indirectly, in the form of the basket of goods and services typically acquired by recipients of government transfer payments. Stated differently, the goods and services purchased via monetizing $3.5 trillion of government debt embodied a prior act of production and supply. But the central bank exchanged them for an act of producing nothing but digital fiat.

Contrast this monetization process with honest funding of government debt in the private market.In the latter event, the public treasury taps savings from producers and income earners and re-allocates it to government purchases rather than private investments. This has the inherent effect of pushing up interest rates and, on the margin, squeezing out private investment. It is a zero sum game in which savings retained from existing production are reallocated.

To be sure, the economic effect is invariably lower investment, productivity and growth down the line, but the process is at least honest. 

When the public debt is financed from savings, government purchase of goods and services are funded with the fruits of prior production. There is no exchange of something for nothing; there is no financial fraud.

And it is the fraudulent finance of public deficits which is the real evil of QE because the ill effects go far beyond the standard that there is nothing wrong with central bank monetization of the public debt unless is causes visible inflation of consumer prices. In fact, however, it does cause enormous inflation, but of financial asset values, not the CPI.

Despite the spurious implication to the contrary, central banks have not repealed the law of supply and demand in the financial markets. Accordingly, their massive purchases of the public debt create an artificial bid and, therefore, false price. Moreover, government debt functions as the "risk free" benchmark for pricing all other fixed income assets such as home mortgages, corporate debt and junk bonds; and also numerous classes of real assets which are typically heavily leveraged such as commercial real estate and leased aircraft.

In short, massive monetization of the public debt results in the systematic repression of the "cap rate" on which the entire financial system functions. And when the cap rate gets artificially pushed down to sub-economic levels the result is systematic over-valuation of all financial assets, and the excessive accumulation of debt to finance non-value added financial engineering schemes such as stock buybacks and the overwhelming share of M&A transactions.

Needless to say, the false prices which result from massive monetization do not stay within the canyons of Wall Street or even the corporate business sector. In effect, they ride the Amtrak to Washington where they also deceive politicians about the true cost of carrying the public debt. 

At the present time, the weighted average cost of the $13 trillion in publicly held federal debt is at least 200 basis points below a market clearing economic level—–meaning that debt service costs are understated by upwards of $300 billion annually.

At the end of the day, the fraud of massive monetization makes the rich richer because it drastically inflates the value of financial assets—–roughly 80% of which is held by the top 5% of households; and it makes the state more bloated and profligate because its enables the politicians to spend without imposing the pain of taxation or the crowding out effects which result from honest borrowing out of society's savings pool.

In the more wholesome times before 1914, the Federal government didn't borrow at all. During the half-century between the battle of Gettysburg and the eve of World War I, the public debt did not rise in nominal terms, and amounted to just $1.5 billion or 4% of GDP at the time of the Fed's creation.  Even then, the Fed was established as only a "bankers bank" which could not own a dime of public debt, but instead existed for the narrow mission of liquefying the banking market by means of discounting solid commercial paper on receivables and inventory for ready cash.

The modern form of monetization arose in the service of financing war bonds, not managing the business cycle, levitating the GDP or boosting the labor market toward the artifice of "full employment". These latter purposes reflect a century of "mission creep" and the triumph of the statist assumption that governments can actually tame the business cycle and elevate the trend rate of economic growth.

But history refutes that conceit. In the early post-war period, central bank interventions mainly caused short term bouts of unsustainable credit growth and an inflationary spiral which eventually had to be cured by monetary stringency and recession. In the process of repetition over several decades culminating in the 2008 crisis, the household and business leverage ratios were steadily ratcheted upwards until the reached peak sustainable debt.

Now the credit channel of monetary policy transmission is broken and done. The Fed's most recent massive monetization and "stimulus" has therefore simply inflated financial asset values—-meaning that the Fed has become a serial bubble machine.

There is a better way, and it contrasts sharply with the systematic fraud of QE. That alternative is called the free market, and at the heart of the latter is interest rates which are "discovered" by the market, not pegged and administered by the central bank. Stated differently, the free market requires that all debt and other forms of investment be funded out of society's pool of honest savings—-that is, income that is retained out of production already made.

Under that regime there is no fraudulent bid for public debt and other existing assets based on something for nothing. Markets clear where they will, and interest rates are the mechanism by which the supply of honest savings and the demand for investment capital, including working capital, are balanced out.

Needless to say, free market interest rates are the bane of Wall Street speculators and Washington spenders alike. They can spike to sudden and dramatic heights when demand for funds to finance government deficits or financial speculation out-run the voluntary pool of savings generated by society. So doing, they bring financial bubbles and fiscal profligacy up short.

In stopping QE after a massive spree of monetization, the Fed is actually taking a tiny step toward liberating the interest rate and re-establishing honest finance. But don't bother to inform our monetary politburo. As soon as the current massive financial bubble begins to burst, it  will doubtless invent some new excuse to resume central bank balance sheet expansion and therefore fraudulent finance.

But this time may be different. Perhaps even the central banks have reached the limits of credibility—- that is, their own equivalent of peak debt.


US economy and monetary policy are not on the right path!........

The Fed has spawned this 'buy now, pay later' scheme of the American consumer... but there comes a point when the 'pay later' overwhelms the 'buy now'... and when that happens monetary policy is basically ineffective.

Yellen is only "weak-data"-dependent and by its past policy errors, the Fed has put itself out of business, enabling massive build ups of debt, debt is an increase in current spending in lieu of future spending," and confirms the truth that rather than deleveraging, the world is significantly more leveraged now than in 2008.

Alan Greenspan: "I don't think it's possible" for the Fed to end its easy-money policies in a trouble-free manner. ..."Effective demand is dead in the water" and the effort to boost it via bond buying "has not worked.

US economy and monetary policy are not on the right path!

Mortgage Purchase Applications Plunge To 19-Year Lows.........ANOTHER PESKY FACT!

Mortgage Purchase Applications Plunge To 19-Year Lows

Realistically what is there to say about a so-called 'housing recovery' when the volume of applications for home purchases is the lowest since August 1995. Keep believing that lower rates will support home prices... keep believing the Fed's QE worked... or face facts, this is not your mother's housing market any more...

The Recovery...

The long-term...

The transmission channel is officially broken...

An Important Recession Indicator Is Flashing Red..........

An Important Recession Indicator Is Flashing Red

The following chart of a much more macro-economic-data-related indicator and is a very useful timing tool for suggesting recessionary conditions exist, currently it provides some useful context about our artificially manipulated 'market' interest rate.

The ratio of coincident-to-lagging conference board indices has an admirable record as a recession forecaster... and is at its lowest level since Sept 2009.

Wednesday, October 29, 2014

The Fed's Grand Illusion........AN ABSOLUTE MUST READ!

The Fed's Grand Illusion

Ever since Fed Gov. Bullard's agoraphobic performance on Bloomberg TV,
as the market was falling hard, it should be crystal clear to the FOMC and investors just how powerfully markets will react to any shifts in Fed policy or attempts at policy normalization.  

An equity market freefall abruptly took an about-face, resuming its 'melt-up' trade, after a worried Bullard merely hinted at the possibility of more QE stimulants.

The FOMC should take this as a major warning sign.  It would be irrational for the Fed to believe that after QE purposefully elevated asset prices and generated a one-way moral hazard spectacle, that there is not going to be some-type of reversal (reaction) when QE is withdrawn and the first hike nears.

The new flaw in Fed communication that has arisen recently, and that was amplified by Bullard's interview, is how Fed policymakers fundamentally assess and mollify the trade-off between attempts at stimulating real economic activity and financial stability risks.

For several years, the FOMC has been confronted with the delicate balance between removing accommodation too slowly and removing it too quickly. Since the Fed is basically out of effective bullets and its balance sheet has ballooned to the practical limits of prudence, the Fed is therefore trying to err on the side of not removing accommodation too quickly. 

In this regard, the Fed has allowed the fog to roll in, by repeatedly and cunningly changing the markets' focus in order to 'buy time'. 

Yet, how far can this asymmetrical leaning go before negative second-order effects and risks to financial stability via asset bubbles make this stance a (ever-growing) poor trade-off.  It seems to me that if the Fed were truly data dependent then it would have ended QE a long time ago and even hiked rates already. WHAT THEY ARE IS IGNORANT LIARS AND CON MEN! 

The Unemployment Rate is currently 5.9%; not far from the 5.5% level that is widely considered full-employment. It could be argued that technological advancements or demographic shifts alone could have structurally lifted the level considered full-employment. Given this, and the plenty of other economic indicators that look quite strong, I find it astonishing that the Fed is still providing depression-like policies, let alone not already hiking.

No wonder why financial markets are (temporarily) in 'melt-up' mode': the appearance of an accommodative Fed, maintains the relative-peer-performance race that is driving so many portfolio managers. MANY OF WHOM ARE NOTHING BUT VERY IGNORANT ORDER FILLING DRONES THAT ARE PLEASANT ON THE PHONE, QUICK TO BUY A DRINK OR PICK UP THE TAB ,AND WEAR NICE SUITS. THEY KNOW NOTHING.........

Last week's wild fall trade was a precursor of the unwind trade that will occur when the one-way bets have to find a two-way equilibrium clearing price.   

Dreadful market liquidity due to regulatory constraints have been evident recently and will cause a down-side overshoot during the unwind process.  I suspect that barring some negative global event, the Fed will want to hike in March (if not sooner to regain some credibility).  However, the chance of 6 months passing without encountering a problem is probably small; thus the Fed could be confronted with losing its ideal window to do so.  YOU SHOULD BE VERY CONCERNED ABOUT YOUR MONEY....BE PROACTIVE, NOT REACTIVE! 

The FOMC's dialog needs to change immediately.   !!!!!!!

The current trade-off is not the contemporaneous one between more versus less policy stimulus today, but is a trade-off between more stimulus today at the expense of more challenging and disruptive policy exit (and disruptive markets) in the future. FACT CERTAIN!

Another factor that has magnified market stresses and helped to keep a bid in the Treasury market recently has been the release by the Fed and other regulators of the final version of the liquidity coverage rule (LCR). LCR-mandates have led to large bank hoarding of 'level-one' risk-free highly-liquid securities (e.g., Treasuries) at the expense of riskier less-liquid securities.  Volatility has increased partially due to those risks migrating to less well-capitalized institutions.  This factor is not going away any time soon.

I expect the pace toward lower yields to quicken once the Fed's policy pivot leads to unwinds of the QE-generated asset bubbles that have been created; and which were chased by so many who were fearful of missing the upside or of underperforming peers.  This circumstance is a Hobson's choice which now has a shortening 'half-life'.

Someday soon we'll stop to ponder what on Earth's this spell we're under.....

Anyone who isn't really concerned doesn't understand the situation.

No Wizards And No Recovery Either......AN ABSOLUTE MUST READ!

No Wizards And No Recovery Either

"Complex Systems that have artificially suppressed volatility tend to become extremely fragile, while at the same time exhibiting no visible risks. In fact, they tend to be too calm and exhibit minimal variability as silent risks and accumulate beneath the surface. Although the stated intention of political leaders and economic policymakers is to stabilize the system by inhibiting fluctuations, the 
result tends to be the opposite.

                   Nassim Nicholas Taleb and Mark Blyth, May/June 2011 issue of Foreign Affairs 

The job of the investor is to answer the impossible question, ' What is the correct valuation for this financial instrument?' 

There is never a simple or exactly correct answer to this question, but there are, of course, many wrong ones. Eliminating as many of the wrong answers, especially when valuing an investment which already discounts the future, is an important strategy in coming up with better answers than the competition.

The current, most common answer to the question, 'What is the correct valuation for this financial instrument?' is clearly wrong, most likely very wrong! 

It is demonstrably wrong because the answer is 'Whatever the central bankers say is the correct value'. It is clearly wrong because it has never been true in the past. 

It was recognised as clearly the wrong answer as early as 1810 in the words of the so-called ' Bullion Committee'

'The most detailed knowledge of the actual trade of a country, combined with the profound Science in all the principles of Money and circulation, would not enable any man or set of men to adjust, and keep always adjusted, the right proportion of circulating medium in a country to the wants of trade.'

                                                                 Report of the Select Committee of the House of Commons 1810

The 'Bullion Committee' of 1810 realised the virtual impossibility of remaining off the gold standard. It realised a simple truth: that no 'man or set of men' could provide the appropriate amount of money for an economy. And thus it has been true ever since that central bankers, when freed from any form of monetary anchor, have created the wrong amount of money. 

All we have to decide is which side of wrong are they on, too much or too little? 

Market movements now clearly indicate that the answer is far too little and that central banks can never create enough funny money to overwhelm actual market forces, otherwise known as reality. 

The world is beginning to see that central bank action is insufficient to overwhelm the forces of deflation. The reported deflation of 2009 lasted only briefly. The consensus view is that it was defeated by developed world central bankers flooding the world with money.

The consensus view is clearly wrong, and becoming more obvious, to many, as time passes. Since 2009 almost 80% of the increase in the world's money has come from Emerging Markets in general, and China in particular. It is the rapid slowdown in EM, exacerbated by the strong US$, that is bringing deflation to the world. The developed world will feel that deflationary wind and it will raise real rates of interest at a time when the central bankers cannot reduce nominal rates of interest. The chart below shows how, even in the USA, inflation expectations are declining and real rates of interest rising.

US 5 Year Treasury Inflation Protected Securities- Inflation Breakevens

Since July the markets expected average annual inflation rate, over the next five years, has declined from 2.1% to just 1.6%. After five years of QE inflation expectations are right back where they were in the final quarter of 2009. With no ability to reduce nominal rates further, the efficacy of monetary policy rests almost entirely upon its ability to generate inflation and depress real rates of interest. 

Monetary policy is failing to create inflation and if the central bankers don't control this variable they certainly don't control the price of financial instruments.

This is the third time that inflation expectations have dived in the post QE world and, on each occasion when expected inflation has neared 1.5%, the S&P500 has fallen sharply. It falls sharply because, in a land of near-zero nominal rates, the success or failure of the Fed is gauged solely on its ability to produce inflation. On both previous occasions when inflation expectations got this low the Fed responded with even easier monetary policy, causing inflation expectations to rise; but crucially inflation did not.

The bell has rung for Pavlov's dogs twice before, but the meat of higher inflation has not been delivered. Now the bell is ringing for the third time. With the key driver of inflation events well beyond US shores, the inability of the Fed to generate the meat of inflation will be much more apparent on this occasion. 

After five and a half years of QE there is still no meat for the dogs: real rates of interest are rising rapidly and almost all financial market instruments are overvalued. If you believe that the correct price for financial market instruments is the price decreed by the Federal Reserve, you need to look at the chart above and ask yourself a simple question, 'With inflation expectations back at 4Q 2009 levels, what evidence is there that QE works?'

Financial markets continue to price in the God-like omnipotence of central bankers, while the evidence mounts of their all-too-human mortality. 

When it comes to central bankers, do not forget the words of the Wonderful Wizard of Oz from the great monetary allegory of the same name. Unmasked and accused by Dorothy of lying about his great powers, he could only remark-

Oh, no, my dear… I'm… I'm a very good man. I'm just… a very bad Wizard.

The current Chair of The Governors of The Federal Reserve system may not be a man, but she is also no wizard.



Tuesday, October 28, 2014

We Don't Have One Problem - We Have Three Interlocking Sets Of Problems......AN ABSOLUTE MUST READ!

We Don't Have One Problem - We Have Three Interlocking Sets Of Problems

The additional sets of problems added as "solutions" only guarantee that the third and final crash of asset bubbles just ahead will be far more devastating than the crashes of 2000 and 2009.

The conventional view tacitly assumes the global economy is dealing with one problem: recovering from the Global Financial Meltdown of 2008-09. Stimulating a "recovery" has been the focus of central banks and states everywhere.

Short-sighted political expediency is a hallmark of the modern state's reaction to crisis, but political expediency isn't the only flaw in the central banks/states' obsessive focus on "recovery;" it's not even the primary flaw.

The real flaw is the central banks/states don't even recognize that we face three interlocking sets of problems, not one. Each set of problems is layered on top of the previous layer, and each sets reinforces the other two. In other words, the entire problem set is more than just the sum of the three problem sets.
1. Financialization of the economy. 

As the post-industrial funk of the 1970s dragged on, the neoliberal ideology of liberalizing credit markets and eliminating the regulatory wall between investment banking and commercial/mortgage banking was presented as the fundamental fix to post-industrial stagnation: free up credit, leverage and speculation, and the results would be an expansion of asset prices and growth.
The first wave of financialization in the 1980s did indeed boost asset valuations and growth, but it did so by eroding the productive economy and the middle class that arose from gains in productivity. 

Financialization substitutes finance for productive investments, such that financial games such as originating subprime home mortgages become far more profitable than non-financial capital investments.

Financialization has wrought immense structural damage to our economy.
Why have the central banks and central states allowed financialization to hollow out the real economy? Because they have no choice. Extreme financialization is the last source of the monumental profits the state needs to fund itself, and the last source of economic "growth" in an economy gutted by previous rounds of financialization.
2. Extremes of credit, leverage, risk and speculation. 

As conventional financialization failed to reflate the asset bubbles of the late 1990s that crashed in 2000, central banks and states opened the doors to extremes of credit expansion, leverage and risk. Financial fraud and embezzlement became the models of choice as lenders and borrowers alike engaged in a monstrously profitable churning of securitized mortgages, liar loans, initial public offerings of companies with no hope of generating profits, and all the other tricks of the finance trade.
The inevitable result of these extremes of supposedly low-risk leverage and sleight of hand was the Global Financial Meltdown of 2008-09, when bubbles in credit, risk, stocks and real estate popped.

3. The central bank/state "solutions" to the Global Financial Meltdown are the third set of problems.

The monetary/fiscal solutions--dropping interest rates to zero, printing trillions of dollars, yen, euros and yuan out of thin air and giving banks and financiers free access to all this loot, with the implicit promise that any bets that went bad would be backstopped by the taxpayers--have not only done nothing to repair the damage done by the first two problem sets but have unleashed even more destructive dynamics.
The analogy is monetary heroin: the first hits of quantitative easing had an immediate effect on moribund assets. But each successive wave of monetary heroin has had diminishing effects as the addict became habituated to the endless stimulus.
The central bank solution to this habituation is to increase each new dose of stimulus. Unfortunately, at some point the dose becomes large enough to kill the addict: The Fed's Failure Complicates Its Endgame.
Each monetary/fiscal "fix" inflated a bubble that crashed. Rather than face the harsh consequences of financialization and successive waves of monetary extremes, central banks and states have elected to reflate the bubbles as the politically expedient solution that leaves the crony-cartel-state status quo intact.
But the additional sets of problems added as "solutions" only guarantee that the third and final crash of asset bubbles just ahead will be far more devastating than the crashes of 2000 and 2009.


The Fed Must Stop Pandering To Markets, Or Face The Unintended Consequences .......A MUST READ!

The Fed Must Stop Pandering To Markets, Or Face The Unintended Consequences

The Fed needs to let the market cry itself to sleep, and can't keep pandering to each sell off because traders fear that the lights are going to be dimmed.

As Bloomberg reports,

Each Fed response to "such market episodes" will make the eventual exit harder and more painful; it should be hoped that Fed "sticks to its plans" and ends QE

Few now believe Fed's asset purchases are boosting the economy;

Some argue the Fed is accentuating a distortion in the markets that's already having unwelcome and unintended consequences.

Likely that FOMC statement will offer some "palliative to the markets by making clear that 'considerable' period language remains"

However, be careful what you wish for...

If Fed were to delay QE's end because of recent volatility, the market would probably grow alarmed that the central bank was more worried about global growth than had previously been assumed

The Fed's messaging would become subject to another round of market criticism and its eventual exit would become even more difficult to execute.



Euro Outflows at Record Pace as ECB Promotes Exodus

Repeat after us: all China data is fake - China Fake Invoice Evidence Mounts as HK Figures Diverge

The Myth Of The Free Press.... The role of the mass media is to entertain or to parrot official propaganda to the masses.

Fake wealth is unmasked for what it really is: crippled capital formation. In the meantime, the distractions are many and powerful.

Sterne Agee Warns, The Correction Hasn't "Fixed" Anything, Rebounding stocks are back to "difficult" levels where sellers may re-exert control.

Quantitative Easing Is Like "Treating Cancer With Aspirin" Quantitative Easing "works in practice, but it doesn't work in theory."  Has QE done anything to reform an economic and monetary system urgently in need of restructuring? We think the answer, self-evidently, is "No".

The Russian Ruble Just Hit An Historic Low. Russia's currency crossed 54 rubles to the euro in early trading, the first time it had ever crossed that level, on the back of months of weakening against major currencies.

Sweden Just Slashed Interest Rates To Zero. After months dipping from low inflation into deflation, Sweden's Riksbank has cut its main policy rate to 0%.

UBS Set Aside $2 Billion For Settlements. UBS, Switzerland's largest bank, has had to set aside 1.84 billion Swiss francs ($1.9 billion) in legal provisions to pay for possible fines and to settle regulatory investigations.

Lloyds Is Laying Off Another 9,000 Staff. Britain's Lloyds Banking Group has taken another £900 million ($1.5 billion) charge to compensate customers mis-sold loan insurance, and is laying off thousands of workers to reduce costs.

Standard Chartered Is Getting Hammered. Shares are down 9.5% after results this morning revealed a 16% drop in profits in the third quarter of the year.

Twitter Shares Are Tanking In Pre-Market. Shares are down by more than 11% ahead of the open, after some disappointing results.

BP issues an implicit profit warning... BP's third-quarter results took a hit from declining oil prices and a sharp drop in income from Russia as Western sanctions on Moscow led to a slump in earnings from the oil major's local partner, Kremlin-controlled Rosneft .

Air France's Dutch Arm Is Reportedly Shedding 7,500 Workers. The Dutch arm of Air France-KLM plans to cut its workforce by 7,500 jobs, or 25%, largely through outsourcing, a Dutch daily newspaper reported on Tuesday.

Record short selling in Japanese equities... with around 35% of daily trading volume being shorted.

The market does not believe the European Central Bank... with all banking stocks yesterday erasing early gains following the stress-test results. 

Monday, October 27, 2014



Anyone who isn't really concerned doesn't understand the situation.



Retail chains, large and small, have announced a veritable epidemic of store closings in 2014.

Here are the "Top 20 announcements of store closings. For these 20 chains, the total number of stores to be closed exceeds 4,200!

This process has been going on for years. It's tough out there.

Mega-retailer Walmart has seen nearly stagnating profits over the past three years as sales growth barely beat inflation. 

When all this washes out, who is going to fill the vacant retail space in our malls? That's one of the many secondary effects of the troubles in the American retail industry.

American consumers are stressed. Inflation has been eating into their incomes, and they have to curtail their spending, or make up the difference with borrowed money. Savers have seen their incomes from their $9.5 trillion in bank accounts, CDs, and money market funds whittled down to nearly nothing, and they too had to tighten their belts and curtail their spending. These are the designated losers of monetary policy. There are a lot of them. And it's hurting the real economy.

Anyone who isn't really concerned doesn't understand the situation.




Anyone who isn't really concerned doesn't understand the situation.

Sunday, October 26, 2014

ONE THING.........

Why Jesus Has Not Yet Returned?.........A Merciful Delay

Why Jesus Has Not Yet Returned?

The exact timing is the Lord's. However, it is clear that we have reached some critical phase of history.

The Father urges each of us "to implore God's mercy for humanity in this hour of history ... to beg for it at this difficult, critical phase of the history of the Church and the world as we approach the end times.

Christ's first coming was in humility, as a Servant, to free the world from sin. He will return in glory, as the lion of judah to judge and rule the world.

"The Lord is not slack concerning His promise, as some men count slackness; but is longsuffering to us-ward, not willing that any should perish, but that all should come to repentance." 

                                                                                                                                 2 Peter 3:9

Have you ever wondered why Jesus has not yet returned? 

I'll tell you why. Because our Lord is waiting on people to be saved. He's waiting on your family member, your neighbor, your co-worker, or maybe you, but one of these days soon, very soon, Jesus will come.

You see, it is the mercy of God that holds back the Second Coming of Jesus, but the justice of God and the judgment of God require that one day soon He will come.

Even now, the raging waters of God's wrath are furiously pounding against the dam of His mercy. And one of these days, the dam of God's mercy will give way to God's judgment, and the
day of the Lord will come. 

Our Lord is coming!

Does the Lord's return make your heart beat faster because you anticipate His coming or dread His coming?

No One Knows the Day or the Hour...........

No One Knows the Day or the Hour

"But of that day and hour knoweth no man, no, not the angels of heaven, but my Father only."

                                                                                                                                       Matthew 24:36

Anybody who sets an exact date for the Second Coming of Jesus Christ may be crossing the line of blasphemy. The Bible teaches very clearly and plainly, and our Lord taught, that no one knows the time-no one.

But we are commanded by Jesus himself to be watching and to understand the signs of the time so we will know the season and be ready.

No one knows the day when Jesus Christ is coming again, but what a glorious day that will be!

16 For the Lord himself will come down from heaven, with a loud command, with the voice of the archangel and with the trumpet call of God, and the dead in Christ will rise first. 17 After that, we who are still alive and are left will be caught up together with them in the clouds to meet the Lord in the air. And so we will be with the Lord forever. 18 Therefore encourage one another with these words.

        1 Thessalonians 4:16-18

In The Last Days;

People will be lovers of themselves, lovers of money, boastful, proud, abusive,disobedient to their parents, ungrateful, unholy, without love, unforgiving, slanderous, without self-control, brutal, not lovers of the good, treacherous, rash, conceited,lovers of pleasure rather than lovers of God— having a form of godliness but denying its power. Have nothing to do with such people.

                                                                                                                                         2 Timothy 3:2-5

What encouragement do you need to share with someone today?  

Understanding the End Times: Video clip, The Rapture Of The Church...........

Understanding the End Times: Video clip, The Rapture Of The Church

The rapture is considered controversial in some areas of the Church but I really believe that if all Scriptures are looked at carefully and christians understand that the great tribulation is not about the church but Israel and the unbelieving world, then everything fits perfectly into place. The Church is in Heaven at the beginning of Revelation 4 and comes back to earth with the Lord Jesus at the end of the great tribulation period in Revelation 19. 

Understanding the End Times: Video clip, The Grim Reality of the last days..............

Understanding the End Times: Video clip, The Grim Reality of the last days

Saturday, October 25, 2014


OKLAHOMA CITY — Authorities say someone drove across the Oklahoma Capitol lawn and knocked over a Ten Commandments monument that a group has been suing to have removed, smashing it to pieces.

Oklahoma Highway Patrol Capt. George Brown says the person drove into the monument on the statehouse steps Thursday night, abandoned the vehicle and fled. Brown says the vehicle was impounded and authorities are searching it for evidence.

The 6-foot-tall granite monument was erected in 2012 after Republican state Rep. Mike Ritze and his family paid nearly $10,000 for it. The American Civil Liberties Union had been suing to have the monument removed, arguing it violates the Oklahoma Constitution.

Other groups have since asked to erect statues on the Capitol grounds, including one that wants to erect a 7-foot-tall statue of Satan.

"We Have Everything Under Control".......REALLY?

"We Have Everything Under Control"

"There is no crueler tyranny than that which is perpetuated under the shield of law and in the name of justice." 

               Charles de Montesquieu

Orwell Was Only Wrong About The Date........

Orwell Was Only Wrong About The Date


President Obama went to the bank to cash a check and he didn't have his ID. 

The teller said you've got to prove who you are.

He said, "How should I do that?" She said the other day Phil Mickelson came in, he didn't have his ID but he set up a little cup on the ground, took a golf ball, and he 
putted it right into that cup so we knew it was Phil Mickelson, and we cashed his check.

And then Andre Agassi came in. And Andre Agassi didn't have his ID either. He put a little target on the wall, took a tennis ball and racquet– and he 
hit the ball onto the target time after time. We knew he was Andre Agassi,so we cashed his check.

she said to Obama, "Is there anything you can do to prove who you are?" 

Obama said, "I don't have a clue."

And she said, "Well, Mr. President, do you want your money in small bills or large bills."


Incompetence Is No Excuse..........

Incompetence Is No Excuse     

A Guide To President Obama's Defense Readiness Condition (DEFCON).........

A Guide To President Obama's Defense Readiness Condition (DEFCON)

Friday, October 24, 2014

The Recent Rally Will Not Last.........AN ABSOLUTE MUST READ!

The Recent Rally Will Not Last

Be Cautious: The Correction Isn't Over.

The Last Great Bubble is bursting — faith in central banks to solve all our problems is coming to a bad end.

Since the steadiest part of the bull market began two-years ago, every pullback was very sharp and very quick. Some call them 'V' bottoms although that term is really reserved for the end of bear markets, not market dips. However, the meaning is similar as the market's mood turned on a dime from fear to greed.

There is something profoundly different about the rebound this week versus prior rebounds. 

This time, it occurred below the bull market trendline. When a major trendline such as this is broken to the downside, strict interpretation of the technicals says that the bull is over. Therefore, rebounds now take place in the context of a flat or even falling market, not a bull market.

The recent correction has inflicted a good bit of technical damage to the market that is unlikely to be cleared on an extremely short-term basis. While anything is certainly possible, the ability of the markets to make a run at new highs is much more suspect given the extraction of the Fed's liquidity driven support next week. 

With the Fed's liquidity support now ending, the markets have once again plunged below the bullish trendline. The current rally, like every other time, is most likely a short-lived rebound from extremely oversold short-term conditions.


Importantly, the deterioration in the internal dynamics of the market also suggest that the current rebound is not the resumption of the current bull market cycle, but rather a bounce that will likely be used to liquidate holdings. This will likely lead to a retest of lows, or even perhaps the setting of a new low.

The rally from last weeks low does not have enough merits on its own to continue much higher so the bears may be resurrected from the depths of short-covering hell.

The mantra has been over the last five years that you "do not fight the Fed." The problem is that the Bank of Japan, the ECB and the Fed have all failed in accomplishing their objective of "reflating" the global economy.

The issue that has been consistently ignored is the massive, and expanding, debt burdens that act as a deflationary drag on economic growth and inflation. Despite statistical economic headlines, the underpinnings of the domestic economy remain far too weak to create the level of consumption needed to support stronger economic growth. 


The bond market has already recognized that inflation isn't comingJapan and the Eurozone economies are slipping quickly back into recession, and even China's seeming inexhaustible growth has begun to drag. These aren't the drivers of a "secular" bull market.

A growing economy coincides with rising inflation expectations. A healthy bull market coincides with rising inflation expectations. Fight the Fed? You sure they are going to get that inflation target when the market itself is screaming they won't, at the same time quantitative easing is ending?

This time really is different....But not in a good way!

If It Is All About Earnings Then The Market Has Big Problems ......

If It Is All About Earnings Then The Market Has Big Problems

A third of the companies in the Dow have posted shrinking or flat revenue over the past 12 months, as WSJ notes,

"steady has become stagnant as companies once considered among the market's most reliable post poor growth, quarter after woeful quarter."

WORLD ECONOMY HAS REAL PROBLEMS.........Central Banks Have Failed!

Central Banks Have Failed

The biggest fear of the Federal Reserve has been the deflationary pressures that have continued to depress the domestic economy. Despite the trillions of dollars of interventions by the Fed, the only real accomplishment has been keeping the economy from slipping back into an outright recession.

Despite many claims to the contrary, the global economy is far from healed which explains the need for ongoing global central bank interventions. However, even these interventions seem to be having a diminished rate of return in spurring real economic activity despite the inflation of asset prices.

Despite the ongoing rhetoric of those fearing inflation due to the Fed's monetary interventions the reality is that such actions have, so far, failed to overcome the deflationary forces of weak global demand.

What is quickly being realized on a global basis is that injecting the system with liquidity that flows into asset prices, does not create organic economic demand. Both Japan and the Eurozone's interventions have failed to spark inflationary pressures as the massive debt burden's carried by these countries continues to sap the ability to stimulate real growth. 

The U.S. is facing the same pressures as continued stimulative measures have only succeeded in widening the wealth gap but failed to spark inflation or higher levels of economic prosperity for 90% of Americans.

40% Of Eurozone Banks Are In Bad Shape

130 banks are being tested. 12-18 will fail. And on top of that, almost a third of 130, that's over 40, will pass while still being in very bad shape. That means anywhere between 40% and 44% of Eurozone banks either fail or are in bad shape.  If 40% of your banks are either dead in the water or barely floating, I'd say you have a major problem. We all know our world, be it politics or economics, consists almost exclusively of spin these days, but in the face of these numbers we very much wonder how many people will be willing to bet their own money that Europe can get away with another round of smoke and mirrors come Monday. EUROPE IS GOING DOWN IN FLAMES AT SOME NOT TO DISTANT FUTURE DATE!

The Ruble Is Getting Crushed 

The Russian ruble has fallen further against the dollar and the eurohitting record new lows against the currencies.

The Russian ruble has fallen further against the dollar and the euro hitting record new lows against the currencies.

Russia's currency has been put under pressure by a combination of falling oil prices and fears on Friday over a possible sovereign debt downgrade by Standard & Poor's.

The Russian central bank has spent over $15 billion in October to prop up the currency, burning through Russia's foreign exchange reserves but so far has been unable to halt the slide. QE DOES NOT WORK!

China's Crumbling Property Market Just Wiped Out A Year's Gains.

Property prices are falling in 69 of China's 70 major urban areas.

Asian Economic Growth Is Set To Languish As China Slows. Emerging Asia will contribute less to the global economy in 2015 than was expected just months ago as a slowdown in China drags on growth in the region.

The EU Is Ordering The UK To Pay An Extra $2.6 Billion To Brussels

Britain has been told it must pay an extra €2.1 billion into the European Union budget by the end of next month because the UK economy is doing better relative to other European economies.  HOW LONG BEFORE THE WORKERS REVOLT AND REFUSE TO SUPPORT THE TAKERS IN EUROPE? 

Staring Into the Great Abyss.......A MUST READ!

Staring Into the Great Abyss

A five-year regime of artificially low interest rates is responsible for a bubble in stocks, bonds, real estate, emerging markets and many other asset classes…

James Rickards regarding the crisis with LTCM in 1998 and the banking crisis in 2008:

"What the crisis of 1998 and the crisis of 2008 had in common and what the next crisis will have in common is that regulators and risk managers are using the wrong models to understand and measure risk.  

And if you have the wrong models you will get the poor results every time. … 

So the system becomes very vulnerable to a rapid collapse. …  That's why another financial crisis is coming sooner rather than later."

James Rickards on the Fed and money printing:

"So the Fed is trying the same remedies:  The money printing goes on and the banking system continues to inflate which is setting us up for an even bigger crisis."

The world has looked over the edge of the great abyss many times before.  Supposedly the financial world was close to collapse during the LTCM crisis and also during the Paulson TARP crisis.

Regarding another great abyss:

"Bank of England Governor Eddie George spoke to Nicholas J. Morrell (CEO of Lonmin Plc) after the Washington Agreement gold price explosion in Sept/Oct 1999.  Mr. George said, 'We looked into the abyss if the gold price rose further.  A further rise would have taken down one or several trading houses, which might have taken down all the rest in their wake. Therefore at any price, at any cost, the central banks had to quell the gold price, manage it.  It was very difficult to get the gold price under control but we have now succeeded.  The US Fed was very active in getting the gold price down.  So was the U.K.'"

And today leverage and the derivatives market is MANY times larger than it was in 1998-99.

And the geopolitical situation seems much more dangerous and unstable than in 1998-99.

And the groups in the middle-east are most definitely not "playing nice" with each other.

And many more nations are bypassing the use of the US dollar for international trading.

And the mood of the people, so it seems, in Europe, the U.S. and the U.K. is much darker and less confident than in the "dot-com" exuberance of 1999.

And 9-11 and all of the after-effects had not yet happened in 1998-99.

The next crisis/correction/crash will be far worse than the 2000 – 2002 debacles or the 2008 financial crisis.

Further, US stocks look like they are in a bubble similar to 1999 and 2000.  

Consider the following monthly chart of the S&P 500 Index since 1984.  Notice the blue line peaks in 1987, 1994, 2000, 2007, and 2014.  A major stock market peak every 7 years deserves our attention, especially since it is peaking along with dollar and bond bubbles (generational low interest rates), massive global QE, geopolitical disasters, foreign policy failures, and the probability of new and devastating wars.

S&P 500 Index - 30 years

From General Martin E. Dempsey, U.S. chairman of the Joint Chiefs of Staff regarding ISIS and expanding the war in Iraq and nearby countries:

"This is an organization that has an apocalyptic end-of-days strategic vision that will eventually have to be defeated."

The same article goes on to state that:

"Dempsey noted that destroying ISIS will require 'the application of all the tools of U.S. national power – diplomatic, economic, information, military."

And "truly defeating ISIS would require full scale war that would involve fighting in Iraq and Syria."

The looming war coincident with an all-time stock market peak and other distortions is the edge of the abyss.  A new war, a derivative crash, a spike in crude oil prices, another scandal, a dollar collapse, or perhaps a failure to deliver on gold contracts could trigger a stock market correction/crash, another massive debt increase, and an upward spike in the price of gold.

Gold has gone down for nearly three years, while the stock market has gone up for well over five years.  The reversal may not occur tomorrow or next month, but it will occur.

This is, in my opinion, a time for caution in the stock and bond markets and for purchases of gold and silver.  It is better to leave the Wall Street party early than to crowd the exit doors with about 500 million others who overstayed their welcome at the Wall Street "stocks always go up" extravaganza.

Furthermore the "high-frequency-traders" can levitate the S&P and suppress gold prices for only so long.  Eventually the prices for bonds, stocks and gold will be reset in accordance with the realities of massive "money printing," exponentially increasing debt, generational-low interest rates, huge deficits, escalating war in the middle-east, and Asian purchases of physical (not paper) gold.

Market peaks, market crashes, political crises, wars, deficits, debts, and cycles of confidence and despair seem to be inevitable in our current financial structure.

Understanding Asset Bubbles.....

Understanding Asset Bubbles

Throughout the long sweep of history, the bursting of asset bubbles has always been traumatic. Social, political and economic upheavals have a bad habit of following asset bubbles, while wealth destruction is a guaranteed feature.

Bubbles only used to happen once every generation or so, because it took substantial time for the victims to forget the pain of the damage.

But that's changed in the new millennium. Less than ten years after the bursting of the dot-com bubble we saw the rise & bursting of the housing bubble.  This is simply astounding and thoroughly unprecedented. These more frequent bubbles are being promoted and fostered by central banks. 

More astonishingly, there are now concurrent equity and bond bubbles raging across the entire financial market structure of the world.

We are in our third bubble period in less than 15 years. This new era of serial bubble-blowing signifies that we are now in new turbulent territory with which we have little historical guidance to draw on.

The recent years of money printing by the world's central banks has NOT ushered in a "permanent plateau of prosperity". And, as with all bubbles, symmetry indicates the downslope after the bursting will be steep, swift, and likely quite scary.