Thursday, November 27, 2014

It Really Isn’t Hard To Connect The Dots And See The Real Economy In The Real World, Outside Wall Street, Is A Disaster And Getting Worse By The Hour.

by James Quinn
It really isn’t hard to connect the dots and see the real economy in the real world, outside Wall Street, is a disaster and getting worse by the hour. Below are a bunch of dots that have been issued in the last 24 hours. Here are the facts.
Real disposable income has risen at a 1.8% annual rate over the last four months. Meanwhile, real consumer spending has increased at a 2.4% annual rate over the last four months. I thought all those jobs Obama talks about should result in wages. Why is disposable personal income so pitiful if the unemployment rate is really 5.9%? And of course, these figures are based upon a fake inflation rate of less than 2%. We all know it is 5% or higher.

If things are going so well, why are unemployment claims surging to the highest level in 3 months? Shouldn’t the wonderful holiday season be resulting in massive retail hiring to service all the well off citizens buying more shit they don’t need, with money they don’t have? Consumer debt outstanding will surely hit a new high in December.


Maybe the lack of disposable income is because the number of people receiving free shit for not working is now at a 14 year low. As we know, government transfers of our money to people not working counts as personal income in the warped minds of government bureaucrats. It looks like the free rides are getting shorter.

With the stock market hitting new highs every day, the millionaire pundits on the corporate mainstream media are ecstatic as the wealth of billionaires and bankers skyrockets. If it is good for Wall Street it must be good for Main Street. Right? Not according to Gallup. It seems the Americans living in the real world ain’t so ecstatic. They plan to barely spend more on Christmas than last year, and 6% LESS than they spent in 2011 and 2012. How about 17% less than they spent in 2007? How about 16% less than they spent in 1999? Does this jive with an economic recovery and a stock market at all-time highs?

Back in the real world of businesses, it seems things aren’t so good. Zero Hedge pithily describes the situation:
The Durable Goods ex-transports number dropped by a whopping -0.9%, far below the 0.5% increase expected, and the biggest drop since the December -1.8% tumble which was blamed on the Polar Vortex. It is unclear what the October tumble will be blamed on: the Ebola scare? The Bullard Bottom?

If the high level numbers weren’t enough proof, how about an iconic American manufacturer? Their sales and profits are falling. They expect sales for the current quarter to PLUNGE by 21%. That only happens in recessions. I thought the agricultural economy was booming. Maybe not.

Deere’s stock slips after downbeat outlook for equipment sales

By Tomi Kilgore
Published: Nov 26, 2014 7:18 a.m. ET
NEW YORK (MarketWatch) — Deere & Co.’s stock DE, +0.31% fell 3.4% in premarket trade Wednesday, after the farm equipment maker beat fiscal fourth-quarter profit and sales forecasts, but provided a downbeat outlook for equipment sales. For the quarter ended Oct. 31, the company reported earnings of $649.2 million, or $1.83 a share, down from $806.8 million, or $2.11 a share, in the year-earlier period, but above the FactSet consensus analyst estimate of $1.57. Revenue fell 5% to $8.97 billion, as equipment sales fell 7%, but topped analyst forecasts of $7.73 billion. For the current quarter, Deere expects equipment sales to fall 21%, on expectations of a continued pullback in the agricultural sector. “The slowdown has been most pronounced in the sale of large farm machinery, including many of our most profitable models.” The stock has lost 3.9% so far this year through Tuesday, compared with a 12% gain in the S&P 500.

The government laughingly told the sheep that GDP in the 3rd quarter had soared. A critical thinking person might wonder how that could be. We know from the data presented above that the consumer has not been spending, because they don’t have anything to spend. As detailed below, corporate profits crashed in the 3rd quarter. We’ve got corporate profits growing at 2.1% when the PE ratio of the S&P 500 is 20.  Based on every valuation method ever used, the stock market is now overvalued by at least 50%.

Growth in corporate profits slows sharply in third quarter

By Jeffry Bartash
Published: Nov 25, 2014 8:31 a.m. ET
WASHINGTON (MarketWatch) – Growth in adjusted corporate profits slowed sharply in the third quarter, new government figures show. Adjusted pretax profits increased by $43.8 billion, or a 2.1% annual rate. That’s down from $164.1 billion, or an 8.4% increase, in the second quarter, the Commerce Department said Tuesday. Profit figures are adjusted for depreciation and the value of inventories.

So despite these factual data points, the MSM and Wall Street will party on with the belief that Grandma Yellen and the rest of the corrupt central bankers around the globe will devalue the world to prosperity. Or at least provide prosperity to the .1% that control them.

Not just gold and silver… New lawsuit says precious metals manipulation is even worse

From Bloomberg: 
Goldman Sachs Group Inc. (GS) and HSBC Holdings Plc (HSBA) were sued in New York over claims they conspired for eight years to manipulate prices for the precious metals platinum and palladium in what plaintiffs’ lawyers say is the first class-action lawsuit of its kind in the U.S.
Standard Bank Group Ltd. and a metals unit of BASF SE (BAS), the world’s largest chemical company, were also sued. The four companies used inside information about client purchases and sale orders to profit from price movements for the metals used in products ranging from jewelry to cars, according to a complaint filed yesterday in Manhattan federal court.
The lawsuit by Modern Settings LLC, a jeweler that buys precious metals and derivatives set on their prices, claims the companies “were privy to and shared confidential, non-public information about client purchase and sale orders that allowed them to glean information about the direction” of prices.
Similar lawsuits have been filed this year in Manhattan accusing banks of rigging the benchmark price for gold. Authorities around the world are examining the gold market for signs of wrongdoing.
Regulators tightened scrutiny of benchmarks after uncovering price-rigging in interbank-loan rates and currencies. Silver became the first precious metal to change its traditional procedure in August, and Intercontinental Exchange Inc. (ICE) will run the replacement for the 95-year-old London gold fixing. A new mechanism for platinum and palladium starts Dec. 1.
Read more:
http://thecrux.com/not-just-gold-and-silver-big-banks-now-being-sued-for-manipulating-platinum-and-palladium-too/
https://www.bloomberg.com/news/2014-11-25/hsbc-goldman-rigged-metals-prices-for-years-suit-says.html
Big Banks Busted Massively Manipulating Foreign Exchange, Precious Metals … And Every Other Market

Currency Markets Are Rigged

Currency markets are massively rigged. And see this and this.
Reuters notes today:
Regulators fined six major banks including Citigroup (C.N) and UBS (UBSN.VX) a total of $4.3 billion for failing to stop traders from trying to manipulate the foreign exchange market, following a year-long global investigation.
HSBC (HSBA.L), Royal Bank of Scotland (RBS.L), JP Morgan (JPM.N) and Bank of America (BAC.N) also face penalties resulting from the inquiry that has put the largely unregulated $5 trillion-a-day market on a tighter leash, accelerated the push to automate trading and ensnared the Bank of England.
In the latest scandal to hit the financial services industry, dealers shared confidential information about client orders and coordinated trades to make money from a foreign exchange benchmark used by asset managers and corporate treasurers to value their holdings. Dozens of traders have been fired or suspended.
***
Britain’s Financial Conduct Authority (FCA) fined five lenders $1.77 billion, the biggest penalty in the history of the City of London, and the U.S. Commodity Futures Trading Commission (CFTC) ordered them to pay a further $1.48 billion.
***
The U.S. Office of the Comptroller of the Currency, which regulates banks, also fined the U.S. lenders $950 million and was the only authority to penalise Bank of America.

Gold and Silver Are Manipulated

Today, Switzerland’s financial regulator (FINMA) found “serious misconduct” and a “clear attempt to manipulate precious metals benchmarks” by UBS employees in precious metals trading, particularly with silver.
Reuters reports:
Swiss regulator FINMA said on Wednesday that it found a “clear attempt” to manipulate precious metals benchmarks during its investigation into precious metals and foreign exchange trading at UBS …
Gold and silver prices have been “fixed” in daily conference calls by the powers-that-be.
Bloomberg reported last December:
It is the participating banks themselves that administer the gold and silver benchmarks.
So are prices being manipulated? Let’s take a look at the evidence. In his book “The Gold Cartel,” commodity analyst Dimitri Speck combines minute-by-minute data from most of 1993 through 2012 to show how gold prices move on an average day (see attached charts). He finds that the spot price of gold tends to drop sharply around the Londonevening fixing (10 a.m. New York time). A similar, if less pronounced, drop in price occurs around the London morning fixing. The same daily declines can be seen in silver prices from 1998 through 2012.
For both commodities there were, on average, no comparable price changes at any other time of the day. These patterns are consistent with manipulation in both markets.

Derivatives Are Manipulated

Runaway derivatives – especially credit default swaps (CDS) – were one of the main causes of the 2008 financial crisis. Congress never fixed the problem, and actually made it worse.
The big banks have long manipulated derivatives … a $1,200 Trillion Dollar market.
Indeed, many trillions of dollars of derivatives are being manipulated in the exact same same way that interest rates are fixed (see below) … through gamed self-reporting.
Reuters noted in September:
A Manhattan federal judge said on Thursday that investors may pursue a lawsuit accusing 12 major banks of violating antitrust law by fixing prices and restraining competition in the roughly $21 trillion market for credit default swaps.
***
“The complaint provides a chronology of behavior that would probably not result from chance, coincidence, independent responses to common stimuli, or mere interdependence,” [Judge] Cote said.
The defendants include Bank of America Corp, Barclays Plc, BNP Paribas SA, Citigroup Inc , Credit Suisse Group AG, Deutsche Bank AG , Goldman Sachs Group Inc, HSBC Holdings Plc , JPMorgan Chase & Co, Morgan Stanley, Royal Bank of Scotland Group Plc and UBS AG.
Other defendants are the International Swaps and Derivatives Association and Markit Ltd, which provides credit derivative pricing services.
***
U.S. and European regulators have probed potential anticompetitive activity in CDS. In July 2013, the European Commission accused many of the defendants of colluding to block new CDS exchanges from entering the market.
***
“The financial crisis hardly explains the alleged secret meetings and coordinated actions,” the judge wrote. “Nor does it explain why ISDA and Markit simultaneously reversed course.”
In other words, the big banks are continuing to fix prices for CDS in secret meetings … and have torpedoed the more open and transparent CDS exchanges that Congress mandated.

Interest Rates Are Manipulated

Bloomberg reported in January:
Royal Bank of Scotland Group Plc was ordered to pay $50 million by a federal judge in Connecticut over claims that it rigged the London interbank offered rate.
RBS Securities Japan Ltd. in April pleaded guilty to wire frauda s part of a settlement of more than $600 million with U.S and U.K. regulators over Libor manipulation, according to court filings. U.S. District Judge Michael P. Shea in New Haventoday sentenced the Tokyo-based unit of RBS, Britain’s biggest publicly owned lender, to pay the agreed-upon fine, according to a Justice Department Justice Department.
Global investigations into banks’ attempts to manipulate the benchmarks for profit have led to fines and settlements for lenders including RBS, Barclays Plc, UBS AG and Rabobank Groep.
RBS was among six companies fined a record 1.7 billion euros ($2.3 billion) by the European Union last month for rigging interest rates linked to Libor. The combined fines for manipulating yen Libor and Euribor, the benchmark money-market rate for the euro, are the largest-ever EU cartel penalties.
Global fines for rate-rigging have reached $6 billion since June 2012 as authorities around the world probe whether traders worked together to fix Libor, meant to reflect the interest rate at which banks lend to each other, to benefit their own trading positions.
To put the Libor interest rate scandal in perspective:
  • Even though RBS and a handful of other banks have been fined for interest rate manipulation, Libor is still being manipulated. No wonder … the fines are pocket change – the cost of doing business – for the big banks

Energy Prices Manipulated

The U.S. Federal Energy Regulatory Commission says that JP Morgan has massively manipulated energy markets in California and the Midwest, obtaining tens of millions of dollars in overpayments from grid operators between September 2010 and June 2011.
Pulitzer prize-winning reporter David Cay Johnston noted in May that Wall Street is trying to launch Enron 2.0.

Oil Prices Are Manipulated

Oil prices are manipulated as well.

Commodities Are Manipulated

The big banks and government agencies have been conspiring to manipulate commodities prices for decades.
The big banks are taking over important aspects of the physical economy, including uranium mining, petroleum products, aluminum, ownership and operation of airports, toll roads, ports, and electricity.
And they are using these physical assets to massively manipulate commodities prices … scalping consumers of many billions of dollars each year. More from Matt Taibbi, FDL and Elizabeth Warren.

Everything Can Be Manipulated through High-Frequency Trading

Traders with high-tech computers can manipulate stocks, bonds, options, currencies and commodities. And see this.

Manipulating Numerous Markets In Myriad Ways

The big banks and other giants manipulate numerous markets in myriad ways, for example:
  • Engaging in mafia-style big-rigging fraud against local governments. See this, this and this
  • Shaving money off of virtually every pension transaction they handled over the course of decades, stealing collectively billions of dollars from pensions worldwide. Details here, here, here, here, here,here, here, here, here, here, here and here
  • Pledging the same mortgage multiple times to different buyers. See this, this, this, this and this. This would be like selling your car, and collecting money from 10 different buyers for the same car
  • Pushing investments which they knew were terrible, and then betting against the same investments to make money for themselves. See this, this, this, this and this
  • Engaging in unlawful “Wash Trades” to manipulate asset prices. See this, this and this
  • Bribing and bullying ratings agencies to inflate ratings on their risky investments

The Big Picture

The experts say that big banks will keep manipulating markets unless and until their executives are thrown in jail for fraud.
Why? Because the system is rigged to allow the big banks to commit continuous and massive fraud, and then to pay small fines as the “cost of doing business”. As Nobel prize winning economist Joseph Stiglitznoted years ago:
“The system is set so that even if you’re caught, the penalty is just a small number relative to what you walk home with.
The fine is just a cost of doing business. It’s like a parking fine. Sometimes you make a decision to park knowing that you might get a fine because going around the corner to the parking lot takes you too much time.”
Indeed, Reuters points out today:
Switzerland’s regulator FINMA ordered UBS, the country’s biggest bank, to pay 134 million francs ($139 million) after it found serious misconduct in both foreign exchange and precious metals trading. It also capped bonuses for dealers in both units at twice their basic salary for two years.
Capping bonuses at twice base salary?  That’s not a punishment … it’s an incentive.
Experts say that we have to prosecute fraud or else the economy won’t ever really stabilize.
But the government is doing the exact opposite. Indeed, the Justice Department has announced it will go easy on big banks, and always settles prosecutions for pennies on the dollar (a form of stealth bailout. It is also arguably one of the main causes of the double dip in housing. And there is no change in the air.)
Indeed, the government doesn’t even force the banks to admit any guilt as part of their settlements.  In fact:
The banks have been allowed to investigate themselves,” one source familiar with the investigation told Reuters. “The investigated decide what they want to investigate, what they admit to, and how much they will pay.
Wall Street has manipulated virtually every other market as well – both in the financial sector and thereal economy – and broken virtually every law on the books.
And they will keep on doing so until the Department of Justice grows a pair.
The criminality and blatant manipulation will grow and spread and metastasize – taking over and killing off more and more of the economy – until Wall Street executives are finally thrown in jail.
It’s that simple …
http://www.washingtonsblog.com/2014/11/banks-big-busted-massively-manipulating-foreign-exchange-precious-metal-markets.html

Dr. Rima E. Laibow: Now a crime in Japan to speak of Fukushima nuclear d...

Putin: “Americans are printing dollars and have turned their national currency into a global currency… the printing machine is held by them and they’re obviously capitalizing on this.”

Vladimir Putin: We are strong because we are right
The Russian president in the TASS special project Top Officials

- From Luhansk.
– OK, from Luhansk. You definitely know that if you ask a person, whose ethnicity is identified in his passport as Ukrainian, you’ll see he doesn’t give much thought to it. People there perceive themselves as parts of the greater Russian world. No doubt, the Ukrainian nation has its original culture, language, and self-identity – unique, with marvelous sounding, and very beautiful. But fairly recently a colleague of mine showed me documents dating back to 1924. The word ‘Velikoross’ (‘Great Russian’) was entered in a passport. And today Ukrainians would have written ‘Maloross’ (’Little Russian’). There was no difference in practical terms. We are told, why are you pressing forward with the idea of the Russian world all the time, what if people don’t want to live in it? No one is pressing forward with it, which doesn’t mean however that it does not exist.
When I speak to people from Crimea, for example, or from the east of Ukraine, I ask them “What is your nationality?” Some of them tell me, “We don’t draw any difference.” But when Russia begins to speak about it and to defend people and its own interests, it turns into a bad guy at once. And do you think it’s the east of Ukraine that really matters? Does the problem lurk in our position on eastern Ukraine or Crimea? Not at all. Were it not this particular pretext, any other would be found. And this has always been so.
Take a look at our millennium-long history. As soon as we rise, some other nations immediately feel the urge to push Russia aside, to put it “where it belongs,” to slow it down. How old is the theory of containment? We tend to think it dates back to the Soviet era but, however, it is centuries-old. But we shouldn’t fan any passions over it on our side because that’s how the world is functioning. It implies the struggle for geopolitical interests and, consequently, the nation’s significance, as well as the ability to generate a new economy, to resolve social problems, and to improve living standards. This position is not aggressive a bit. But if you take the United States, our American friends…
- Friends?
- Surely, they’re all our friends. Americans are printing dollars and have turned their national currency into a global currency, although they gave up the gold equivalent several decades ago. But all the same, the printing machine is held by them and they’re obviously capitalizing on this.
- Good guys!
– Good guys. But why did this happen? The US achieved a certain position after World War Two. Why do I say this? The struggle for geopolitical interests leads to the situation when a country either becomes stronger, resolving its financial, defense, economic and subsequently social issues more effectively, or slides into the category of third-, fifth-rate countries, losing a possibility to safeguard the interests of its people.
http://en.tass.ru/russia/761152?page=3

The Fed now owns more than 50% of all outstanding 10-15 year Treasuries:

View image on Twitter
the now owns more than 50% of all outstanding 10-15 year Treasuries: source: Peter Tchir via ZH

U.S. student loan debt reaches $1.1 trillion, $4 billion more than all credit-card debt.

View image on Twitter
U.S. student loan debt reaches $1.1 trillion, $4 billion more than all credit-card debt. http://online.wsj.com/articles/americans-borrowing-more-briskly-for-cars-homes-1416931220 

UK Money Creation Debate: What’s the most important fact to learn about money creation?


19 US Shale Areas That Are Suddenly Endangered, "The Shale Revolution Doesn't Work At $80"

Despite the constant blather that lower oil prices are "unequivocally good" for America, we suspect companies working and people living these 19 Shale regions will have a different perspective...

Drilling for oil in 19 shale regions loses money at $75 a barrel, according to calculations by Bloomberg New Energy Finance. Those areas pumped about 413,000 barrels a day, according to the latest data available from Drillinginfo Inc. and company presentations.


“Everybody is trying to put a very happy spin on their ability to weather $80 oil, but a lot of that is just smoke,” said Daniel Dicker, president of MercBloc Wealth Management Solutions with 25 years’ experience trading crude on the New York Mercantile Exchange. “The shale revolution doesn’t work at $80, period.”
Source: Bloomberg

The Mystery Of Surging Q3 GDP Explained And Why Americans Are Suddenly $80 Billion "Poorer"

The final major datapoint of the day was the Consumer Income and Spending data from the US Dept of Commerce's Bureau of Economic Analysis, the same outfit that yesterday shocked everyone with just how much better US GDP was. Well, today, we learned just where the offset came from. Because while on the surface, both income (+0.2%) and spending (+0.2%) missed expectations of a 0.4% and 0.3%, respectively...

... it was the revised data that the US department of data fudging once again showed why it has long since surpassed China.
Behold what is perhaps the most important data series in all of US eco: Disposable Personal Income. We say behold, because there are some rather massive variations between what the BEA reported a month ago, and what it reported today, as relates to all the data issued since March. To wit:

Essentially, the just reported Disposable Persona; Income print of $13.109 trillion as of the end of October, is where according to the old, unrevised data US houshold income was some time in August. Whatever happened to two months of income?
Which brings us to the other all important number: the personal savings rate. At just reported at 5.0%...

... something strucks us: this number was reported at 5.6% last month.
And sure enough, since Disposable Personal Income flows into personal savings, net of outlays, it was clear that American savings would be dramatically impacted as a result of the massive data revision.
Sure enough, this is how the US personal savings rate looked like based on the old and just revised data.


And, the punchline: US savings in absolute terms, an $80 billion decline in savings from the old September print and the latest, post-revision, number of just over $650 billion.

So there you have it: in order to "suggest" that the US economy had grown by a far greater than expected run-rate, the BEA was forced to revise away personal income, and "assume" these had instead been invested in the US economy, in the form of a surge of durable goods purchases. Sure enough, while both incomes and savings tumbled, spending magically surged:

So if that "statistical" amount of money you thought you had saved in the BEA's savings.xls spreadsheet just dropped by 10%, fear not dear Americans: it was all used for a good cause: to fabricate a much stronger than expected Q3 GDP number.
Source: BEA

HSBC, Goldman Rigged Metals’ Prices for Years, Suit Says :

Goldman Sachs Group Inc. (GS) and HSBC Holdings Plc (HSBA) were sued in New York over claims they conspired for eight years to manipulate prices for the precious metals platinum and palladium in what plaintiffs’ lawyers say is the first class-action lawsuit of its kind in the U.S.
Standard Bank Group Ltd. and a metals unit of BASF SE (BAS), the world’s largest chemical company, were also sued. The four companies used inside information about client purchases and sale orders to profit from price movements for the metals used in products ranging from jewelry to cars, according to a complaint filed yesterday in Manhattan federal court.he lawsuit by Modern Settings LLC, a jeweler that buys precious metals and derivatives set on their prices, claims the companies “were privy to and shared confidential, non-public information about client purchase and sale orders that allowed them to glean information about the direction” of prices.
Smilar lawsuits have been filed this year in Manhattan accusing banks of rigging the benchmark price for gold. Authorities around the world are examining the gold market for signs of wrongdoing.regulators tightened scrutiny of benchmarks after uncovering price-rigging in interbank-loan rates and currencies. Silver became the first precious metal to change its traditional procedure in August, and Intercontinental Exchange Inc. (ICE) will run the replacement for the 95-year-old London gold fixing. A new mechanism for platinum and palladium starts Dec. 1.
Read more: http://www.bloomberg.com/news/2014-11-25/hsbc-goldman-rigged-metals-pric...
- See more at: http://xrepublic.tv/node/11329#sthash.v1gY2vo8.dpuf

SHOCK: Can OPEC Breakup Collapse Petro Dollar


Sell, Sell, Sell… The Central Bank Madmen Are Raging… Everywhere The Real World Evidence Points To Cooling Growth, Faltering Investment, Slowing Trade, Vast Excess Industrial Capacity, Peak Private Debt, Public Fiscal Exhaustion, Currency Wars…

The global financial system has come unglued. Everywhere the real world evidence points to cooling growth, faltering investment, slowing trade, vast excess industrial capacity, peak private debt, public fiscal exhaustion, currency wars, intensified politico-military conflict and an unprecedented disconnect between debt-saturated real economies and irrationally exuberant financial markets.
Yet overnight two central banks promised what amounts to more monetary heroin and, presto, the S&P 500 index jerked up to 2070. That is, the robo-traders inflated the PE multiple for S&P’s basket of US-based global companies to a nose bleed 20X their reported LTM earnings.
And those earnings surely embody a high water mark in a world where Japan is going down for the count, China’s house of cards is truly collapsing, Europe is plunging into a triple dip and Wall Street’s spurious claim that 3% “escape velocity” has finally arrived in the US is soon to be discredited for the 5th year running. So it goes without saying that if “price discovery” actually existed in the Wall Street casino, the capitalization rate on these blatantly engineered earnings (i.e. inflated EPS owing to massive buybacks) would be decidedly less exuberant.
In truth, nothing has changed about the precarious state of the world since yesterday. Except….. except the Great Bloviator at the ECB made another fatuous and undeliverable promise—- this time that he would do whatever he “must to raise inflation and inflation expectations as fast as possible”; and, at nearly the same hour, the desperate comrades in Beijing administered another sharp poke in the eye to China’s savers by lowering the deposit rate to by 25 bps to 2.75%.
Let’s see. Can it possibly be true that European growth is faltering because it does not have enough inflation? Or that China’s fantastic borrowing and building boom is cooling rapidly because the People Bank of China (PBOC) has been too stingy?
The answer is not on your life, of course.  So why would stocks soar based on two overnight announcements that can not possibly alleviate Europe’s slide into recession or the collapse of China’s out-of-control investment and construction bubble?
It can’t be a case of debatable data. Europe’s real GDP is no higher today than it was in the third quarter of 2006. Self-evidently, the temporary slowdown in consumer inflation during recent months owing to plunging oil prices and the transient impact of exchange rates cannot possibly explain this long-standing trend of going nowhere.
Indeed, during this same period, Europe’s CPI has risen by nearly 20%. Where is it written or proven that an average of 2% annual inflation causes economic growth to grind to a halt? There is not a shred of evidence for that proposition—so Draghi’s pledge to restore 2%/year shrinkage in the value of the wages and bank accounts of European households cannot possibly mean more growth, more profits and more S&P market cap. In fact, the whole clamor about “deflation” and Draghi’s overnight pledge to do whatever it takes to get inflation rising quickly has to do with a transient blip in the price index during the last 12-18 months. But is this the first time that a shift in the global commodity cycle and the euro exchange rate has caused a temporary dip in short-run consumer price trends? The historic data indicate a resounding no. Historical Data ChartIn fact, the only manner in which weakening inflation could possibly impact short-run real GDP growth is if European consumers were to sharply raise their savings rate, waiting for lower prices tomorrow. This is the hackneyed claim of the Keynesian money printers, of course, but where’s the evidence? After a temporary surge in Europe’s personal savings rate during the Great Recession, it has regressed to its recent historical average, and has remained on the flat line, even as inflation rates have decelerated since 2012.
The idea that the hard pressed households of France, Italy, Spain and even Germany have gone on a buyers strike and are hoarding cash is a flat-out lie. But it is one that suits the convenience of the desperate Keynesian apparatchiks pulling the levels in Brussels and Frankfurt.  And, yes, it also makes for the kind of headline policy announcements that robo-traders can snatch with blinding dispatch. No, the problem in Europe is not too little inflation in the short-run; it is staggering levels of taxes, public debt and interventionist dirigisme that represents a permanent, debilitating barrier to growth. Draghi already has driven deposit rates through the zero bound at the ECB deposit facility, and now its spreading rapidly through the banking system to businesses and consumers.
So precisely who will finance this soaring mountain of public debt at negative real returns when the fast money is flushed out of the ECB’s now plummeting euro? The “algos”, needless to say, didn’t get to that question during this mornings frenzied buying. Likewise, last night”s signal from China was a warning to take cover, not to get all giddy in the casino. The People’s Printing Press of China has been on a rampage for this entire century, and has expanded its balance sheet by an incredible 9X since the year 2000.
Now, even the hapless masters of red capitalism taking shelter in Beijing recognize that this colossal money printing spree has fueled fantastic levels of over-building, over-investment and mind-boggling real estate speculation throughout the land.
The fact that—despite their better judgment—-they have had to once again open the monetary spigot is evidence that China’s addiction to the printing press is terminal, and that a hard landing is only a matter of time. No one told the algos that, either. Historical Data ChartThe real downward trajectory in China is tracked by the canary in the iron ore pit. Like almost everything else, China’s iron and steel industry is massively overbuilt. It has 1.1 billion tons of capacity but in the order of 600 million tons of sustainable “sell-through” demand. That is, need for steel for use in consumer products and capital replacement, not the current one-time construction binge.
Stated differently, China’s excess steel capacity is greater than the combined output of the US, Japan and the EC combined. Accordingly, when its real estate and construction bubble finally collapses, the world market will be inundated with cheap steel and every manner of goods made from it, including automobiles. During the current year alone, China will export more steel than the US industry will produce, and it is just getting started on the greatest “dumping” campaign the world has ever seen. Iron Ore Spot Price (Any Origin) ChartIn short, there is a tidal wave of industrial deflation coming down the pike—- owing to two decades of world-wide central bank financial repression that has fueled vast malinvestments in mining, manufacturing, transportation and trade. That, in turn, will trigger a monetary race to the bottom by the central banks—a race that is already underway owing to Japan’s Halloween Massacre of the yen. Soon the rest of East Asia—and especially China— will have to join the exchange rate plunge or find their export based economies hitting the shoals.
Then will come more desperate maneuvers from the ECB, as even the German export machine falters in the face of collapsing growth in China and competitive devaluation all around the world. Stated differently, last night’s central bank announcements were the starting guns for a monetary implosion that will soon shock financial markets and real production, trade, employment and incomes on a world-wide basis.
Someone should reprogram the algos. Otherwise, one of these days they will snatch a headline which says sell, sell, sell!

The Guardian: Swiss Referendum Could Spark Gold Rush

Today I was interviewed by the Guardian on the Swiss gold referendum. Again, I was fortunate to share my opinion with a wide audience.
…The debate has underlined the emotional and arguably romantic pull of the precious metal in an age where less tangible assets dominate.
“Gold continues to trigger impetuous and irrational reactions in many people,” Sergio Rossi, professor of macroeconomics and monetary economics at Fribourg University, told the Swiss news agency SDA.
Others say it has rather emphasized the flaws in the monetary system. “It has shown just how unsustainable the debt-based monetary system we have is,” said Koos Jansen, an Amsterdam-based gold analyst for the Singaporean precious-metal dealer BullionStar.
“The Swiss initiative is merely part of an increasing global scramble towards gold and away from the endless printing of money. Huge movements of gold are going on right now. Recently the Dutch repatriated 122 tons, Germany is bringing home its gold from the US, whilst the Bric countries are accumulating large quantities of it for their banks.
“While those behind the Swiss initiative have often been portrayed as crazy, they’re merely acting out of fear that their central bank is losing control of its monetary policy, and of the Swiss franc being sucked into this currency war and losing its value,” he said.
https://www.bullionstar.com/blog/koos-jansen/guardian-swiss-referendum-spark-gold-rush/


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The Guardian: Swiss Referendum Could Spark Gold Rush https://www.bullionstar.com/blog/koos-jansen/guardian-swiss-referendum-spark-gold-rush/ 
 
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