Thursday, December 17, 2015

The Biggest Economic Crash in History | Mike Maloney and Stefan Molyneux

In the flux of never before seen economic uncertainty, Stefan Molyneux and Mike Maloney discuss the difference between currency and money, the historical role of gold as money, the dependence of the United States government on wall street for tax revenue, the role of the Federal Reserve in the creation of unstable economic bubbles, the possibility of deflation, $20,000 gold and how you can protect yourself in these uncertain economic times.
Michael Maloney is the founder and owner of, a global leader in gold and silver sales and is also the author of the bestselling precious metals investment book of all time, “Guide To Investing in Gold & Silver: Protect Your Financial Future.”

Torrent Of Bad News Greets Fed As It Prepares To Raise Rates

by John Rubino
Ideally, a central bank would like the party to be rocking when it takes away the punch bowl. This party, however, is not cooperating. For every sign of exuberance (high-end real estate bubbles, equity and bond bull markets, job growth) there are five or six things going wrong, some of them in a big way. This morning’s news illustrates the point:
Oil slump resumes on U.S. supply build, expected Fed rate hike
Plunging energy prices are a tax cut for consumers but a calamity for the leveraged speculating community. And since finance now wags the economic dog, the latter effect is potentially a lot more serious. Look for a wave of bankruptcies and defaults across the energy world in 2016.
Why the current credit crisis might be 35 times worse than you thought
The failure of Third Avenue high yield fund spooked the market, but might have been nothing more than a one-off event. But Yahoo Finance crunched the numbers and found a long list of other funds in similar straits, most of which are concentrated in energy assets, and concluded that liquidity problems are about to become a lot more widespread.
Freight Shipments Hammered by Inventory Glut, Weak Demand
Wolf Richter’s blog notes that “In November, the number of freight shipments in North America plunged 5.1% from a year ago, according to the Cass Freight Index. It hit the worst level for any November since 2011.”
Baltic Dry Crashes To New Record Low As China “Demand Is Collapsing”
This measure of shipping rates fell to its lowest level ever, indicating that global trade is shrinking — something which simply doesn’t happen outside of recessions (and is rare even then).
US Markit flash manufacturing PMI slips to three-year low in December
This measure of the manufacturing sector’s health is still showing expansion, but at a dramatically slower rate. Another few months like the last one and this part of the economy will be back in recession.
US industrial output falls as manufacturing stays flat
From CNBC: “U.S. industrial production saw its sharpest decline in more than three and a half years in November as utilities dropped sharply, a sign of weakness that could moderate fourth-quarter growth. Industrial output slipped 0.6 percent after a downwardly revised 0.4 percent dip in October, the Federal Reserve said on Wednesday, marking the third straight month of declines. Economists polled by Reuters had forecast industrial production slipping 0.1 percent last month.
Brazil’s currency sinks after Fitch cuts rating to junk status
From MarketWatch:
“The Brazilian real dropped sharply Wednesday after Fitch Ratings cut the country’s credit to BB+, widely considered junk status, from BBB-. The real was slammed 1.1% lower against the dollar. The downgrade “reflects the economy’s deeper recession than previously anticipated, continued adverse fiscal developments and the increased political uncertainty that could further undermine the government’s capacity to effectively implement fiscal measures to stabilize the growing debt burden,” wrote Shelly Shetty, head of Latin American sovereign ratings at Fitch. Brazil’s rating could be downgraded further in part if a prolonged recession “further undermines government debt dynamics and stokes political and social instability,” said Fitch.
None of this is likely to stop the Fed from raising rates today, but it does illustrate the shocking variety of sectors and entities that are slowing, crashing, or imploding. The world’s industrial and financial systems, after three decades of excessive borrowing and almost supernaturally bad capital allocation, are much closer to generalized collapse than to the kind of sustainable growth that invites rising interest rates.

HOW LOW CAN CHINA DEVALUE ITS CURRENCY? Weak Chinese Yuan / Renminbi Moves Away From U.S. Dollar Peg

HOW LOW CAN CHINA DEVALUE ITS CURRENCY? Weak Chinese Yuan / Renminbi Moves Away From U.S. Dollar Peg
International Monetary Fund designated the Chinese yuan as one of the global currencies used to calculate the value of Special Drawing Rights. This event may portend a significant reordering of the world’s monetary system, and serve as a recognition that the US dollar’s ongoing status as the world’s reserve currency is not guaranteed. Jim Rickards terms this a “political decision” by the IMF, and discusses what it means both for China and the US.]
Membership in the exclusive SDR currency club has changed only once in the past thirty years.
That change took place in 1999, and was purely technical due to the fact that the German mark and French franc were being replaced by the euro.
Leaving aside this technical change, the SDR has been dominated by the “Big Four” (US, UK, Japan, and Europe) since the IMF abandoned the gold SDR in 1973. This is why inclusion of the Chinese yuan is so momentous.
Putin Says Dump Dollar
Would mean the creation of a single financial market between Russia, Armenia, Belarus, Kazakhstan, Kyrgyzstan, Tajikistan and other countries of the former Soviet Union “This would help expand the use of national currencies in foreign trade payments and financial services and thus create preconditions for greater liquidity of domestic currency markets”, said a statement from Kremlin.
currency forex usd dollar “united states” usa america world economy devalue “exchange rate” trade “stock market” trading power control “forex trading” global competition weak GBP JPY CNY china “China RMB” bank banking “bank account” investment investing export import “made in usa” “china wholesale” factory money cash wealth elite debt credit “credit card” capital mortgage 2015 2016 oil gold silver “silver coin” “gold bullion” commodity euro future history “elite nwo agenda” jim rogers marc faber david icke wembley truth exposed alex jones infowars gerald celente trends in the news bilderberg 2016 end game george soros rothschild rothchilds poverty poor middle class collapse montagraph jsnip4 lindsey williams louis farrakhan
The bill would also help to facilitate trade in the region and help to achieve macro-economic stability. It’s a known fact that the Russians and Chinese have already begun divesting themselves of dollar dependency by implementing trade agreements that completely sidestep the world’s reserve currency, but there has been no overt sign of a sell-off that might be indicative of a coming attack on our currency. Just 3 weeks after the world could not purge itself fast enough of ‘pet rocks’, Gold is pushing to one-month highs this morning (at $1120) and Silver just broke a key technical level at its 50-day moving average as USD weakness and global turmoil have seen Precious metals gain for the last few days… Peter Schiff, economist, best-selling author, and CEO of Euro Pacific Capital, believes a U.S. dollar crisis is underway. World affairs analyst Joel Skousen recently made a compelling case against an imminent economic collapse, while others argue that the end is nigh for the U.S. economic, financial and monetary systems.
Whatever the case, remain vigilant and prepare for the worst, because the hammer is going to drop sooner or later. The Chinese do not plan to live in a world dominated by the U.S. dollar for much longer. Chinese leaders have been calling for the U.S. dollar to be replaced as the primary global reserve currency for a long time, but up until now they have never been very specific about what they would put in place of it. Many have assumed that the Chinese simply wanted some new international currency to be created. But what if that is not what the Chinese had in mind? What if they have always wanted their own currency to become the single most dominant currency on the entire planet? What you are about to see is rather startling, but it shouldn’t be a surprise. When it comes to economics and finance, the Chinese have always been playing chess while the western world has been playing checkers. Sadly, we have gotten to the point where checkmate is on the horizon.

Billionaire Sam Zell Warns The Fed Is Too Late, “Recession Likely In Next 12 Months”

When last we checked in with billionaire Sam Zell, the real estate mogul was busy offloading some $5.4 billion in apartments from Equity Residential’s portfolio. The 23,000 units were sold to Barry Sternlicht’s Starwood Capital and as we noted at the time, Zell has traditionally had a very keen nose about such things as “market peaks”: the 74 years old is credited with calling the top of the real-estate market in 2007, when he sold another one of his companies, Equity Office Properties Trust, to Blackstone for $23 billion.

Despite his penchant for getting it right, Zell warned last September that when it comes to calling market peaks, “you’ve got to tiptoe [because] if you’re wrong on when, that’s a problem.”

Well on Wednesday, Zell “tiptoed” into an interview on Bloomberg TV and made a rather decisive prediction about where the economy is headed now that the Fed has waited too long to hike.

“I think this interest rate hike is too late,” Zell said, before suggesting that “this economy is closer to falling over than it is to going up.”

Zell’s conclusion: “I think there’s a high probability that we’re looking at a recession in the next twelve months.”

Note that this is entirely consistent with the notion that if, as a result of the Fed missing its window, NAIRU undershoots, if (or, more appropriately “when”) it snaps back, a recession is a virtual certainty if history is any guide. Recall what BNP said last month: “NY Fed Fed President William Dudley recently pointed out that whenever the US unemployment rate has increased by more than 0.3-0.4pp from its low, there has always been a recession. Knowing this, it is perhaps not surprising that the median Fed forecast always shows the unemployment rate levelling off close to its equilibrium. The Fed would presumably be reluctant to forecast that its actions (or lack of them) would cause an undershoot in the unemployment rate, which would more than likely end in a recession.”

“The central bank has been too cautious and the economy would already be adjusting if it raised rates six to nine months ago, giving Chair Janet Yellen ‘more room if a recession is on the way,'”, Zell says.

Again we see the old “hike so we have room to cut after we cause a recession” argument.

In any event, the interview touches on a number of topics from energy, to the slump in world trade, to real estate. Watch below.

Baltic Dry Crashes To New Record Low As China "Demand Is Collapsing"

Despite a brief dead-cat-bounce late November, which Jim Cramer heralded as evidence of stabilization in China, the world's best known freight index has collapsed to new all-time record lows this morning. Amid a persistent glut of ships and ongoing concerns about Chinese steel imports, The Baltic Dry has tumbled to 471 - the lowest level in at least 30 years.
Worst. Ever.

As Bloomberg adds, China, which makes about half the world’s steel, is on track for the biggest drop in output for more than two decades, according to data compiled by Bloomberg Intelligence...
Owners are reeling as China’s combined seaborne imports of iron ore and coal -- commodities that helped fuel a manufacturing boom -- record the first annual declines in at least a decade. While demand next year may be a little better, slower-than-anticipated growth in 2015 has led to almost perpetual disappointment for rates, after analysts’ predictions at the end of 2014 for a rebound proved wrong.

“It doesn’t help that Chinese steel production is about to see the most dramatic decline to the lowest in 20 years,” said Herman Hildan, a shipping-equity analyst at Clarksons Platou Securities in Oslo. “Demand growth is collapsing.”
*  *  *
Sounds like a perfect time to hike rates and exaggerate the deflationary tsunami and monetary outflows from the world's potentially growing economies.

US Manufacturing PMI Plunges To Lowest Since 2012 As Factory Orders Collapse To 2009 Lows

Following the collapse in industrial production, it is no surprise that Markit's Manufacturing PMI has plunged to 51.3, its lowest since October 2012. Under the surface it is a disaster with production volume growth the softest since October 2013, and new orders crashed to worst since September 2009.

But do not ignore manufacturing because, as Markit notes,
Although manufacturing only accounts for around one-tenth of the economy, the Manufacturing PMI exhibits a high correlation of 77% with GDP as industrial activity has an important cyclical impact on other parts of the economy.

With many sectors such as transport and business services dependent upon the manufacturing economy’s health, the downturn in the survey data sends a warning signal that the US upturn appears to be rapidly losing momentum as we move into 2016. However, the picture will become clearer with the publication of services PMI numbers on Friday.”
Seems like the perfect time to raise rates.
Charts: Bloomberg

PROCEED WITH CAUTION: Key Bankers Told Bank Holiday is Near

(I read for the visually impaired and for small device users. If anyone does not wish to listen to the entire broadcast, please use the link provided.)
Credit: Dave Hodges
Dated: Dec. 14, 2015

Rand Paul: ‘The Greatest Threat to Our National Security Is Our Debt’

“We borrow a million dollars a minute. And whose fault is it? Well, frankly, it’s both parties’ fault”

While Syria, Russia and other national security issues featured prominently in Tuesday’s Republican debate, only one candidate brought up the nation’s crushing debt load.

“The greatest threat to our national security is our debt,” Sen. Rand Paul (R-Ky.) said in his closing statement. “We borrow a million dollars a minute. And whose fault is it? Well, frankly, it’s both parties’ fault.

“You have those on the right who clamor and say, oh, we will spend anything on the military, and those on the left who say the same for domestic welfare.
But what most Americans don’t realize is there is an unholy alliance. They come together. There’s a secret handshake. We spend more money on everything. And we are not stronger nation if we go further into debt. We are not projecting power from bankruptcy court.

“To me, there is no greater threat than our debt. I’m the only fiscal conservative on the stage because I’m willing to hold the line on all spending,” Paul concluded.

The other candidates, in their 30-second closing statements, chose to discuss other issues, as excerpted below, and in the following order:
Ohio Gov. John Kasich: “No Republican has ever been elected president of the United States without winning Ohio. Let me give you a little tip on how you win Ohio, it’s reform, it’s hope, it’s growth, it’s opportunity, and it’s security.”
N.J. Gov. Chris Christie: “Terrorism — radical jihadist terrorism is not theoretical to me. It’s real. And for seven years, I spent my life protecting our country against another one of those attacks. …I will protect America from the wars that are being brought to our door step.”
Carly Fiorina: “…We need to unify our party, we need a real Conservative in the White House, and we need to beat Hillary Clinton to take our country back and keep our nation safe.”
Jeb Bush: “…Hillary Clinton has aligned herself with Barack Obama on ISIS, Iran and the economy. It’s an alliance doomed to fail. My proven record suggests that — my detailed plans will fortify our national and economic security. And my proven record as governor makes — will give you a sense that I don’t make false promises. I deliver real results.”
Sen. Marco Rubio (R-Fla.): “…This election is about electing a president that will restore our economic vibrancy so that the American dream can expand to reach more people and change more lives than ever before. And rebuild our Military and our intelligence programs so that we can remain the strongest nation on earth.”
Sen. Ted Cruz: “…Ronald Reagan reignited the American economy, rebuilt the Military, bankrupted the Soviet Union and defeated Soviet Communism. I will do the same thing. Cutting taxes, cutting regulation, unleashing small businesses and rebuilding the Military to defeat radical Islamic terrorism — our strategy is simple. We win, they lose.”

Read more

Natural Gas: Prices Still Trending Down

Greeks Watch Passively as Government Drains Them Dry

If one had asked any Greek exactly one year ago, that the full of promises SYRIZA party would come to power to finish off the crisis-stricken Greek economy and drain his personal wealth, with his blessing, he would have called them a lunatic.
Yet, a year later, the SYRIZA-ANEL coalition has legislated measures and reforms that would have made even the most strict neoliberal wince. Pension cuts, tax hikes, taxation of nonexistent incomes, monitoring personal wealth, capital controls, privatizing state properties, home auctions, raising retirement age, are some of the measures and reforms that the self-proclaimed leftist ruling party is forcing on the shoulders of Greek people.
On Tuesday only, a new set of measures passed in Greek Parliament with the 153 votes of the coalition. Measures such as the privatization of 14 regional airports and the passing of bad loans to the hands of distress funds. The exact same things Alexis Tsipras had promised not to do and won him the prime minister’s seat in January. The things that the militant PM had called Greeks to revolt against less than a year ago.
At the moment, revolting is the last thing Greek people seem willing to do. They watch passively as the Greek government, once more — like it has been happening for many years now — put its greedy hands in their pockets without giving anything in return. It can be compared to the last of the five stages a person goes through when they find out that they are terminally ill: Acceptance.
The first stage is denial: Initially Greek people could not believe they will have to bleed financially to pay off the humongous debt previous governments had accumulated. They also denied that Tsipras agreed to borrow 86 billion more. The second stage, anger, saw them rage against the previous New Democracy-PASOK coalition and punishing them with their vote.
The third stage, negotiation, saw them negotiate that maybe, just maybe, the bailout memorandum might be a good thing. After all Tsipras told them that the third bailout program is a leftist bailout program which is a good thing. He promised that by enforcing it, Greece will return to growth in 2016.
Since the signs are not so good, Greeks passed to the fourth stage, that of depression. The clinical depression cases skyrocketed, with a study showing that 44 percent of Greeks have psychological problems.
Now Tsipras rides his high horse as Greeks go through the final stage, that of acceptance. The general population has finally accepted that all 300 politicians are crooks and liars who just get the parliament seats dirty. The acceptance of what those who smile at you and promise to save you really want, is power and money, whether they come from the left, right or center. Forty-five percent who abstained from voting in the September election is the proof.
After going through the five stages of grief, Greeks are now passive spectators in the surrealistic comedy played daily in the House. Only two days ago, a SYRIZA minister said that the privatization of regional airports was actually a measure brought by the New Democracy-PASOK coalition(!) and that he is against it. To the logical question by an opposition MP why he voted in favor when he disagrees, he answered that he voted for it even though it pained him to do so.
And while Greek people are drained dry by heavy taxes and unemployment, Tsipras keeps repeating imaginary success stories such as managing to save the homes of the very poor from auctioning or protecting very low pensions from cuts. And all that while some members of his cabinet show that they have hidden assets worth millions.
Source: Philip Chrysopoulis, Greek Reporter, 16 December 2015

Normal Interest Rates are Not Possible at Our Debt Levels, Gold Miner May Be On The Verge Of A Massive Strike – Bill Holter Interview

Is it possible they will bring the TPP up for vote right after a stock market crash?

Here’s my theory about what could possibly happen in the future to get the TPP passed. Imagine a stock market crash coming along (engineered or half-engineered or just natural) and after it’s crashed a bit, in the ensuing panic, they say “we need new trade and banking regulations to help save the day, we need this now to stem the bleeding!” and this will be the TPP. It will be passed in 3 days, 1 in the House, 1 in the Senate, and 1 in the Executive office, like the PATRIOT act.
Then the stock market will recover (they will make sure it recovers) and then the TPP will be law, and half of people will be bewildered in to thinking it’s a good thing because it made the stock market go up. Then the actual effects will set in during the following decades.
It’s just a thought, it’s one possibility of many so I doubt it will happen. But they are looking for an excuse to push the TPP through, and a dramatic catastrophic economic failure would give them grounds to convince the public of the necessity of the TPP. And the companies trying to pass the TPP are the same ones who basically control the stock market, the biggest banks and companies. And pairing the TPP with a good event like the stock market going up would convince a lot of people that it’s a good thing due to the emotional pairing, like Pavlov’s Dog and the bell. It makes a lot of sense to me.
How plausible does my theory seem to you? What do you think?

The End of the Bubble


They are going to layer their post-meeting statement with a steaming pile of if, ands & buts. It will exude an abundance of caution and a dearth of clarity.

Having judged that a 25 bps pinprick is warranted, the FOMC will then plant itself firmly in front of the great flickering dashboard in the Eccles Building. There it will repose to a regimen of “watchful waiting”, scouring the entrails of the “incoming data” to divine its next move.

Perhaps the waiting won’t be so watchful as all that, however. What is actually coming down the pike is something that may put the reader, at least those who have already been invited to join AARP, more in mind of that once a year hour-long special broadcast by Saturday morning TV back in the days of yesteryear; it explained how the Lone Ranger got his mask.

Memory fails, but either 12 or 19 Texas Rangers rode high in the saddle into a box canyon, confident they knew what was around the bend. Soon there was a lot of gunfire and then there was just one, and that was only because Tonto’s pony needed to stop for a drink.

Yellen and her posse better pray for a monetary Tonto because they are riding headlong into an ambush in the canyons of Wall Street. To wit, they cannot possibly raise money market interest rates—-even by 75 bps—-without massively draining liquidity from the casino.

Don’t they know what happened to the $3.5 trillion of central bank credit they have digitally printed since September 2008? Do they really think that fully $2.6 trillion of it just recycled right back to the New York Fed as excess bank reserves?

That is, no harm, no foul and no inflation? The monetary equivalent of a tree falling in an empty forest?

To the contrary, how about recognizing the letter “f” for fungibility. What all that “excess” is about is collateral, not idle money.

The $2.6 trillion needed an accounting domicile—so “excess reserves” was as good as any.  But from a financial point of view it amounted to a Big Fat Bid for existing inventories of stocks and bonds.

Stated more directly, Wall Street margined the Fed’s gift of collateral, and did so over and over in an endless chain of rehypothecation.

So that’s why December 16th will be the beginning of the end of the bubble. If the Fed were to actually raise money market rates the honest way, and in the manner employed by central banks for a century or two, it would have to drain cash from the system; and it would have to do so in the trillions in order to levitate the vast sea of money it has pinned to the zero bound.

Yet actually raising money market rates the honest way would amount to the opposite of what has gone before. That is, it would become the Big Fat Offer, triggering a selling stampede in the casino.

The front-running smart money of the bubble’s inflation phase would become a bow-wave of retreat; and the hypothecated chains of collateral would morph into a monetary black hole of margin calls and liquidations.

So the Keynesian monetary plumbers of the Eccles Building will try something truly stupid. That is, they will try to levitate the entire sea of money-like liabilities they have conjured over the last two decades, but especially since September 2008, mainly by paying higher rates of interest to banks on those $2.6 trillion of so-called excess reserves.

Well now. Will higher IOER (interest on excess reserves) cause money market funds to pay more to their long-suffering investors; or cause the repo rate on trillions of government and other fixed income securities to rise in sympathy; or lift the rate on short-term CP and the multiple other forms of wholesale money?

No it won’t. The Fed is fixing to call a rate rise but its preferred tool is powerless to make it happen. The so-called IOER scheme has always been a pointless crony capitalist sop to the Fed’s banking system constituency, anyway.

After all, we do not (yet) pay prisoners to stay in jail, but paying banks on idle reserves amounts to the same thing. Just where were they going?

The truth is, IOER payments were designed to compensate the banks for the regulatory cost of capital required to be set-aside against these assets under the new rules. So the banks got their capital costs subsidized and Wall Street got more fungible collateral in the bargain.

Yet wait until the cowboys on Capitol Hill figure this out. In not too many months down the road, the $100 billion per year of so-called “profit” which the Fed remits to the US Treasury will largely disappear, leaving one of many gapping holes in the Federal deficit that are lurking just around the corner.

That’s because even 100 basis points of IOER would cost upwards of $30 billion a year. On top of that there is also the mega-risk that prices of the $4.4 trillion of Treasury and GSE debt owned by the Fed will keep heading south, requiring it to carve out “reserves” from its earnings to offset the balance sheet losses.

The whole maneuver is a world class scam anyway, and indicative of the lunacy which passes for national policy. The Fed’s $98.7 billion of “profits” last year was generated by the $116 billion of interest paid to it by the US treasury and the GSE’s——less a goodly rake-off for system expenses and salaries and for funding contract research by say 85% of the monetary economists in the US who don’t already work for Wall Street.
Click to enlarge. (Source: The Federal Reserve.)

In any event, Congress will surely blow its top if the Fed uses up this $100 billion “deficit reducer” by paying IOER or other forms of bribes aimed at make pretend interest rate raising.

For instance, another so-called tool to effectuate rate normalization is the TDF or term deposit facility. Under that particular gem, banks may offer cash to the Fed for seven days in return for an interest rate that would presumably be above the money market rate or say 30 bps after Wednesday.

Now isn’t that brilliant! The regulated banks are drowning in excess liquidity—-so sopping up cash seven days at a time will not constrain their ability to lend in the slightest.

Nor would it elevate the money market rate of interest unless the Fed issues a humungous open-ended tender to the banking system to take any and all deposits offered. Exactly thereupon, however, the number of histrionics-filled hearings on Capitol Hill would be limited only be the number of TV crews available to cover them.

It would be perceived as, and in fact would be, a massive subsidy to the banking system. That is, a reward for not lending to main street America.

At the end of the day, the Fed will not be able to bribe the money market higher in a manner that is politically feasible. So it will be forced to repair to the old fashioned recipe——-draining cash from the Wall Street dealer markets.

Even on this matter, however, these Keynesian fools can’t manage to be honest about what they will be doing. They will offer up another tool called RRP or reverse repo; it will be described as an instrument to manage market liquidity in a manner consistent with its measured journey toward normalization.

Folks, RRP is nothing more than selling bonds with your fingers crossed.

Once they get started down this path in earnest, they will either keep rolling the RRPs, which is the same thing as selling down their $4.5 trillion inventory of treasury bonds and GSEs, or they will relent and admit the whole interest rate raising gambit had been a blithering failure.

When the US economy joins the worldwide slide into deflationary recession some time next year, this will all be academic anyway. But in the interim you haven’t seen nothing yet in terms of Fedspeak gibberish and cacophony.

Within no time the hapless 19 Federal Reserve Rangers will be debating about whether they have actually tightened in the first place; and whether any actual liquidity that they drain from Wall Street via TDF or RRP is meant to be permanent or just a short-term market “smoothing” maneuver.

This much can’t be gainsaid. The combination of encroaching recession and even moderate liquidity draining moves will be enough to trigger Wall Street fainting spells, like those of this past week, and with increasing amplitude and frequency.

The fact, that the junk bond market is already falling apart and CCC yields have soared back to 17% is not just due to an isolated bust in the shale patch; its a warning that the hunt for yield that massive central bank financial repression triggered in the financial markets is about ready to become a stampede for the exists.

So get ready for the monetary gong show which starts next week.

Today’s Commerce Department report on total business sales and inventories further confirmed that the inventory to sales ratio is now decidedly in the recession red zone. This means that the Fed’s liquidity draining moves will join hands with rising risks of recession.

Can the third great bubble of this century survive a Fed that finally wants to get off the zero bound after its way too late, but can’t do it anyway without a massive crash inducing cash drain from Wall Street? And in the teeth of the next recession to boot?

Yes, the end of the bubble does begin on December 16th.

Wells Fargo Reacts to Fed Rate Hike and Raises Rates for Borrowers

It took Wells Fargo just 12 minutes to raise its prime rate after the Federal Reserve's interest rate hike .
It is the first major bank to raise its prime rate in reaction to the Fed hike. The Fed said at 2 p.m. ET that it was raising its fed-funds target rate by a quarter percentage point to a range of 0.25% to 0.5%;

Wells Fargo said at 2:12 p.m that it was raising its prime rate to 3.50% from 3.25%, effective Thursday.

(via Market Watch)

Oil Bust Contagion Spreads, Retail Sales in Texas Plunge

Wolf Richter,
Retail sales in Texas, based on sales tax collections as reported by the Texas Comptroller of Public Accounts, have been booming since March 2010, the low point in the Great Recession.
Sales tax collections jumped 44% from $18.3 billion during the first 11 months of 2010 to $26.3 billion during the same period in 2015! The state government was ecstatic. Retailers were happy. People were spending money they didn’t have on things they preferably didn’t need, and in doing so, were paying lots of taxes. The state was firing on all cylinders.
Sales tax collections aren’t a perfect indicator of retail sales. Not all sales are taxable, such as food products (flour, sugar, bread, milk, eggs, fruits, vegetables, and similar groceries), though many edible goods are taxable, as are most other goods. Taxes on motor vehicle sales and rentals are in a separate category. And collections are raw data, not seasonally adjusted, so they can only be compared to data from the same months in prior years. But they’re an unvarnished approximation of the movements of retail sales.
That retail boom in Texas coincided with the oil boom, when WTI traded above $100 a barrel for part of the time, and fracking became the new miracle activity that ate up billions of dollars every year and knew no limits.Drill, Baby Drill.
When the price of oil began collapsing in the summer of 2014, retail sales continued to soar. The meme emerged that, sure, certain aspects of the Texas economy would be hit by the oil price plunge, and there would be some layoffs, but it would be contained, and the vast diversified Texas economy would keep firing on all cylinders and overcome the struggles of the oil patch. And that meme was correct – until suddenly it wasn’t.
The first hint arrived in the June sales tax collections. Collections lag sales by one month. So collections reported in June were on sales that occurred in May. And those collections, instead of rising on a year-over-year basis, as they’d done every June since 2009, suddenly fell 1.4%.
It broke the perfect trend of year-over-year increases every month since the low point in March 2010. But in July they rose again. Then in August, they fell 0.4%. Something was amiss. But in September, sales tax collections rose again, and observers breathed a collective sigh of relief. It had just been a brief dip.
But then came the October collections: they plunged 5.4% year-over year; and now November collections that fell 3.3%. Two months in a row of declines; four months of the last six, and the first declines since the Great Recession low of March 2010.

WTI now trades at around $35 a barrel, a seven-year low. Today, another Texas oil & gas driller, Cubic Energy, filed for bankruptcy. The entire service and manufacturing sector that supplies the oil & gas industry is in depression. Tens of thousands of people, including director-level engineers, have been laid off in the state. In November, this number was estimated to have hit 56,000. Since then, numerous layoff announcements have echoed across the state. And as the oil bust is getting worse, it is now slamming retails sales.
This chart by “David in Texas,” based on data from the Texas Comptroller, shows the year-over-year boom in sales tax collections since the Great Recession low in early 2010 (orange columns), which has now run into trouble. The four months of year-over-year declines are circled in red, (yellow = 2014, green = 2015):
But it hasn’t hit the brouhaha about the Texas housing boom yet, though the first effects may be rippling through Houston right now, as smaller oil-patch towns are e getting hit.
The November issue of Texas Monthly had this exuberant cover about the “Great Texas Housing Boom”: $100-bills blowing out the chimney of a home and settling on the lawn as some guy, presumably the seller or the entire housing industry, is raking them in as if they were fallen leaves, while a young family watches the spectacle with incredulous body language:
“David in Texas” added this bit of color:
You wouldn’t get any sense of economic decline in the Park Cities area of Dallas, though. There is a big concentration of hedge-fund and structured-finance types, so sales of super-luxury cars (Bentleys, Maseratis, Lamborghinis and the like) are still going strong. Real estate (at least residential) in the area is still going nuts, too. From what I hear, Chinese capital flight has discovered Dallas as well.
But contagion has a nasty habit of spreading far beyond the origin of trouble.
Oil & gas junk bonds were the first ones to crash, starting about a year ago. It would be contained to oil & gas junk bonds – that was the meme at the time. Early 2015, hedge funds and PE firms touted them as a “lifetime” opportunity and a rally ensued. But that rally collapsed. Over the summer, the energy junk-bond contagion spread to other sectors, and the stocks and bonds of many junk-rated companies outside energy have gotten mauled. On Thursday, a bond mutual fund imploded, the first since the Financial Crisis.

Rate Hike: Beginning Of The End For Confidence In Fed – Grant Williams

Superintendent: Phila. Schools Face Shutdown In January Due To State Budget Impasse

HARRISBURG, Pa. (AP) —  Pennsylvania’s long budget stalemate could soon make it impossible for some school districts to get another loan to stay open.
William Hite, superintendent of the Philadelphia School District, says in light of the budget impasse, it can continue making payroll while operating without state funds through the end of January. After that, whether schools remain open, Hite says, is uncertain.
“Our goal throughout the budget talks has been to keep educating students for as long as possible. At this point, we can continue to make payroll, operating without state funds, through January 29, 2016. After that date, our ability to keep schools open, issue paychecks and pay bills is uncertain,” Hite said in a letter to school district employees issued Tuesday.
“The prospect of running out of operating funds is dire. We are exploring all options for contingency planning with our lenders and considering possibilities across many fronts to provide for students’ uninterrupted education. We will also provide financial planning information to employees in the near future. We will continue to communicate with you in the weeks ahead,” the letter continued.
Hite urges staff to contact state Legislature and Governor Tom Wolf to “advocate for a budget that provides the critical support all Pennsylvania students deserve.”
Standard & Poor’s says it has withdrawn its ratings on a state government program that helps school districts borrow by giving a guarantee to repay bondholders.
In a Friday note, Standard & Poor’s says Pennsylvania can’t ensure the timely payment of debt service because of the stalemate.
The Pennsylvania Treasury Department’s chief counsel, Christopher Craig, says if the other ratings agencies were to follow suit, some of the state’s poorest districts would be effectively cut off from the debt market, or the cost would be so high, they couldn’t afford it.
The state auditor general’s office has tallied about $900 million in borrowing by Pennsylvania school districts to pay bills during the impasse.
(© Copyright 2015 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.)

Fed rate hike: Watch what they say, not what they do

The Federal Reserve is expected to announce the first interest rate hike since 2006. Adam Shell with America’s Markets.
A Federal Reserve interest rate hike today is pretty much a sure thing, as readings on inflation and jobs are headed in the right direction.
And, assuming the consensus opinion on Wall Street is correct, and the Janet Yellen-led Fed does announce its first increase in short-term borrowing costs since 2006, the market's focus will quickly shift to what Yellen and the Fed say about the pace of future rate hikes.
In short, the market reaction will be all about what the Fed says — not what it does, as a quarter-point rate hike is pretty much baked into prices already.
Heading into today's big announcement, stocks are riding a two-day winning streak, with the Dow Jones industrial average posting back to back triple-digit point gains. And the Dow is up more than 100 points today in pre-market trading.
The market is betting on an 80%-plus probability the Fed will hike rates Wednesday, but futures markets are pricing in only two additional quarter-point moves next year.
So, the big question in the Fed statement and in Yellen’s faceoff with reporters is this: Will the Fed back up the market’s current “hike and wait” or “one and done” expectations for future rate hikes — or will the nation’s central bank surprise the market and move away from its party line of moving rates up in a “gradual” fashion?
“What matters most is the market perception, and subsequent reality, of the future trajectory of Fed actions,” the asset management team at Amundi Smith Breeden told clients in a research report.
Adds Haverford CIO Hank Smith: “The Fed should symbolically hike rates with dovish language, suggesting that this won’t be the beginning of a tightening cycle.”

BREAKING Fed Raises Rates

The Federal Reserve has just released a statement announcing that they have raised the interest rates they control.

The Federal Reserve has decided to raise the target range for the federal funds rate to 1/4 to 1/2 percent, from 0 to 1/4.

The full statement is here.


There were no dissents. All voting members of the FOMC voted for the hike.


 The interest rate paid on required and excess reserve balances at the Federal Reserve has been raised to 0.50 percent from 0.25 percent, effective December 17, 2015.


Wells Fargo Reacts to Fed Rtae Hike and Raise Rates for Borrowers

Fitch cuts 2016 global shipping outlook to negative

FITCH Ratings has lowered its 2016 global shipping sector outlook to negative from stable in 2015The agency said tepid growth in worldwide trade and decelerating economic activity in emerging markets, particularly China, will likely aggravate the glut in shipping capacity and cause freight…
Gloomy outlook for Japan’s shipping industry, says Tokyo research house
TOKYO-based research firm Teikoku Databank Ltd is predicting that the number of Japan’s shipping industry companies exiting the market may start rising again going into 2016 given that “cargo movements are expected to remain sluggish amid a slowdown in the China economy and a global ship oversupply is still continuing,” it said.
The number of shipping industry players withdrawing from the market, including as a result of voluntary closures and bankruptcies, has been declining since fiscal 2011, standing at 28 in fiscal 2014, which ended in March.
Of the 28 companies that pulled out of the market four were ocean going shipping firms and seven were domestic shipping firms. The remaining 17 were ship-leasing firms.
Despite their improved business performance in fiscal 2014 when the overall revenue of Japan’s ocean-going shipping reached JPY4.61 trillion (US$37.9 billion), Japan’s ocean-going shipping firms “will now face low-visibility conditions due to the China risk”, the research firm said, reported IHS media.
Teikoku Databank’s warning follows the collapse of Daiichi Chuo Kisen Kaisha, a equity-method affiliate of MOL and mid-size Japan shipping firm, which filed for bankruptcy protection on September 29, leaving behind debts of JPY120 billion, after it was hit hard by the economic slowdown in China and higher fees to charter vessels.

If Fed Raises Interest Rates by 0.25% it's Like QE2 in Reverse Overnight!

Government Centralization is the Main Problem in Today’s Financial System – David Friedman Interview

Yellen and the FED are in deep trouble in that the highly likely recession (just like 1937) following any rate hikes.

The FED has no bullets left except ‘negative interest rates’……..and they are ‘scared’. They will probably raise on Wednesday…..but that will be it for over a year or so…….They are all academics…and actually have a real problem making decisions unless the decision comes from a formula or ‘computer model’! The all wonder why wage increases haven’t shown up…with low gas prices, low mortgage payment interest rates..etc….well…1) the young people have heard nothing except Social Security will not be there when they get old…so….they are ”’saving””’ and 2) Baby Boomers are now scared they haven’t ‘saved’ enough for retirement..(I know,,I have several friends in their late 50’s and 60’s who talk about this all the time….and 3) low interest rates on the people who made good money and saved born between 1933 and 1945……and they..even though ..they saved very good for retirement……can’t make any dividends or interest on their money (trying to keep it secure for their later days)…so,,this group is not spending…but just living..and cutting back where they absolutely can…….does the FED FOMC group understand this…….I doubt if they fully do……and so they sit around a conference table ‘wringing their hands’ in trying to understand why “”no one is spending” to drive the economy. Doesn’t take much economic education to understand this…..if only the FED FOMC group really understood ””’the people””’!!!! They will never will as all their experiences in life have pretty much been out of ”books”’ BASED ON PAST HISTORY!!! To Bad…for us all!!!
Bad News: “This Is The Worst Global Dollar GDP Recession In 50 Years”, Deutsche Calculates
The following brief summary of the global economic situation should, once and for all, end all debate about whether the world is “recovering” or is now mired deep in a recession.
From DB’s 2016 Credit Outlook
Debt has continued to climb since the crisis with Global Debt/GDP still on the rise, with no obvious sign of when this rise stops for many major countries. Indeed much of the post GFC increase in debt has been raised on the back of the commodity super-cycle which is currently unraveling in EM and the US HY market. Outside of this, the US overall has de-levered to some degree but even there debt levels remain very high relative to all of history excluding the GFC period.

With limited tolerance from the authorities to see defaults erode the huge debt burden, the best hope for a more normal financial system is for activity levels to increase so we can slowly grow the economy into the debt burden. However this requires strong nominal GDP growth and we continue to see the opposite. The left hand graph of Figure 6 looks at a global weighted average of Nominal GDP growth in the G7. On this measure we are still seeing historically weak activity.

In dollar terms the situation is even worse. The right hand chart of Figure 6 shows a much more volatile global NGDP series which converts the size of each economy in dollar terms and then looks at the growth rate YoY. With the recent strength in the USD we are seeing a huge global dollar nominal GDP recession – the worst since the 1960s. Whilst this might not be a series that is followed, it does show the sharp contraction of dollar activity levels in the global economy over the last year or so which has to have ramifications given it’s the most important global financial market currency.

Another billion-dollar tech startup smacked by reality
While there are numerous and often conflicting opinions about the underlying causes that lead up to the Great Financial Crisis, most agree that the proximal catalyst which finally exposed all the overvalued, illiquid “cockroaches” and confirmed that subprime “is not contained” in the process unleashing the chain of events that culminated with the collapse of Bear, Lehman and AIG, was the failure of one of Bear Stearn’s credit-focused hedge funds in the early summer of 2007.
Here is how the conventional wisdom recalls this development:
On June 22, 2007, Bear Stearns pledged a collateralized loan of up to $3.2 billion to “bail out” one of its funds, the Bear Stearns High-Grade Structured Credit Fund, while negotiating with other banks to loan money against collateral to another fund, the Bear Stearns High-Grade Structured Credit Enhanced Leveraged Fund. CEO James Cayne and other senior executives worried about the damage to the company’s reputation. The funds were invested in thinly traded collateralized debt obligations (CDOs). Merrill Lynch seized $850 million worth of the underlying collateral but only was able to auction $100 million of them. The incident sparked concern of contagion as Bear Stearns might be forced to liquidate its CDOs,prompting a mark-down of similar assets in other portfolios. Richard A. Marin, a senior executive at Bear Stearns Asset Management responsible for the two hedge funds, was replaced on June 29 by Jeffrey B. Lane, a former Vice Chairman of rival investment bank, Lehman Brothers.
The rest is history.
We bring up this part of ancient financial history, because while looking at Stone Lion Capital Partners – the first hedge fund that gated investors as reported last night (Third Avenue’s likewise gating high yield  fund was technically a mutual fund) – something curious emerged.
Here are the founders of Stone Lion Capital: Alan Mintz and Gregory Hanley. Those names sounded awfully familiar… and then we remembered why:
  • Alan Jay Mintz, CPA, a co-founder of Stone Lion Capital was Co-Head of the Distressed Debt and High Yield trading group at Bear Stearns
  • Gregory Augustine Hanley, a co-founder of Stone Lion Capital was Co-Head of the Distressed Debt and High Yield trading group at Bear Stearns

Wall Street’s proclivity to create serial equity bubbles off the back of cheap credit has once again set up the middle class for disaster. The warning signs of this next correction have now clearly manifested, but are being skillfully obfuscated and trivialized by financial institutions. Nevertheless, here are ten salient warning signs that astute investors should heed as we roll into 2016.
  1. The Baltic Dry Index, a measure of shipping rates and a barometer for worldwide commodity demand, recently fell to its lowest level since 1985. This index clearly portrays the dramatic decrease in global trade and forebodes a worldwide recession.

2. Further validating this significant slowdown in global growth is the CRB index, which measures nineteen commodities. After a modest recovery in 2011, it has now dropped below the 2009 level—which was the nadir of the Great Recession.

3. Nominal GDP growth for the third quarter of 2015 was just 2.7%. The problem is Ms. Yellen wants to begin raising rates at a time when nominal GDP is signaling deflation and recession. The last time the Fed began a rate hike cycle was in the second quarter of 2004. Back then nominal GDP was a robust 6.6%. Furthermore, the last several times the Fed began to raise interest rates nominal GDP ranged between 5%-7%.

4. The Total Business Inventories to Sales Ratio shows an ominous overhang: sales are declining as inventories are increasing. This has been the hallmark of every previous recession.

5. The Treasury Yield curve, which measures the spread between 2 and 10 Year Notes, is narrowing.Recently, the 10-year benchmark Treasury bond saw its yield falling to a three-week low, while the yield on the Two-year note pushed up to a five-year high. This is happening because the short end of the curve is anticipating the Fed’s December hike, while the long end is concerned about slow growth and deflation.
Banks, which borrow on the short end of the curve and lend on the long end, are less incentivized to make loans when this spread narrows. This chokes off money supply growth and causes a recession.

6. S&P 500 Non-GAAP earnings for the third quarter were down 1%, and on a GAAP basis earnings plummeted 14%. It is clear that companies are desperate to please Wall Street and are becoming more aggressive in their classification of non-recurring items to make their numbers look better. The main point is why pay 19 times earnings on the S&P 500 when earnings growth is negative–especially when those earnings appear to be aggressively manipulated by share buy backs and through inappropriate charges.


Third Avenue Ripples Hit Credit in Europe as Bond Risk Rises

Bloomberg2 hours ago
The Markit iTraxx Asia index of credit-default swaps on corporate and sovereign debt, rose 2 basis points to 146 basis points as of 2:17 p.m. in Hong Kong, …

Junk Bonds Stagger as Funds Flee

Wall Street Journal – ?15 hours ago?
Traders and regulators have fretted for more than a year that mayhem might ensue if U.S. mutual funds sought to sell rarely traded bond investments. After junkbond prices posted their largest drop since 2011 on Friday, investors say they are bracing

Wall Street fears a run on junk bonds — and worse

CBS News – ?5 hours ago?
Fasten your seat belts, investors. We may be in for a bumpy ride. Large-cap U.S. stocks suffered their worst one-day loss since September last Friday as many popular big-tech stocks — such as Amazon (AMZN) and Facebook (FB) — rolled over. And it

Junk Rated Stocks Flashing Same Signal as High-Yield BondMarket

Bloomberg – ?9 hours ago?
Think equity investors have been blind to warning signs coming from junk bonds? Not quite. For most of the year pessimists have warned that equity markets were missing signals in high-yield credit, where losses snowballed even as gauges like the

ECB’s Mario Draghi committed to further stimulus if needed

Financial Times3 hours ago
They also cut their deposit rate to a fresh record low of minus 0.3 per cent and agreed to buy municipal bonds alongside standard sovereign debt.

PBOC Defends Stance After Yuan Hits Four-Year Low

Nasdaq – ?11 hours ago?
Investors sold off the currency on speculation that the Chinese central bank would allow further weakening of the yuan as part of its potential move to loosen the yuan’s de facto peg to the U.S. dollar and instead let it track a broad group of

S&P Warns It Could Cut Anglo American Rating to Junk

Nasdaq36 minutes ago
… a downgrade to junk status wouldn’t impact the company’s financing costs. Anglo had net debt of $13.5 billion as of the end of June, or $11.9 billion on the July …

Canadian Household Debt Hits Fresh High

Wall Street Journal – ?2 hours ago?
The country’s net worth declined 1.3% to C$9.49 trillion ($6.91 trillion) in the third quarter, reflecting lower commodity prices. Excluding natural resources, net worth rose 1.7%. The latest report on household debt comes just days after the Canadian …

Household debt level rises, hits 163.7 per cent of disposable income: StatsCan

CTV News – ?2 hours ago?
The increase came as disposable income increased 0.8 per cent, while household credit market debt grew 1.4. Total household credit market debt, which includes consumer credit, and mortgage and non-mortgage loans, reached $1.892trillion. Consumer …

Hong Kong Property Foreclosures Seen Doubling in 2016 on

Bloomberg11 hours ago
At risk was President Xi Jinping’s aim to keep the $10 trillion economy … Left with a $28 trillion debt overhang after that spree, a new tack is now being taken.

School pension bill to hit 30 percent of employee salaries next year

Bucks County Courier Times (subscription)6 hours ago
“The underfunding of PSERS has been the largest contributor to the existing $37.3 billion pension debt,” the resolution stated. “Extending the use of rate collars …

‘Black Hole’ in Funds Causes Deficit in Pensions

Greek ReporterDec 13, 2015
It appears that IKA has drawn the short straw in regards to this “secret” debt, since the fund’s obligations to other public funds amounts to 11.26 billion euros.

Chicago teachers to announce whether they have votes for strike

Yahoo News5 hours ago
The district, which serves about 400,000 students at more than 600 schools, faces a $1.1 billion structural deficit and thousands of possible teacher layoffs after …

1000 defined benefit pension plans ‘unlikely’ to pay in full

Financial Times – ?19 hours ago?
The analysis indicated that a new regulatory objective, which allows employers to divert pension contributions to invest in business growth, was in “direct conflict” with their role to support trustees and simply served “to kick the [pension deficit

Audit: Unfunded liabilities in public workers pension grow to over

Watchdog.org7 hours ago
LIABILITIES GROW: The unfunded liabilities for one of North Dakota’s largest public worker pensions grew to over $680 million in 2015. The pension also added …

Walker looks at borrowing to balance Alaska budget

Alaska Dispatch News18 hours ago
Walker is also proposing $2.5 billion in borrowing for pension obligation bonds, to pay annual costs towards the state’sunfunded liability. Hoffbeck said that …

Cost of public-sector pensions equal to 85% of GDP, thinktank warns

The Recorder Journal (blog)17 hours ago
… which has the largest proportion of unfunded schemes of the three countries, has the biggest problem. The public-sectorpension cost in the USA and Canada …

NYSUT outlines $416 million in ‘liabilities’ to the union’s staff members

Albany Times Union12 hours ago
That’s the amount of future liabilities owed by the New York State United Teachers to the union’s staff members, primarily for pension and health care costs, …

Kazakhstan CDS jump, Eurobonds fall after tenge hits record low

Reuters5 hours ago
Data from Markit showed that five-year credit default swaps rose 23 basis points (bps) to 314 bps, the highest since late-October. Kazakh dollar-denominated …

Ouch! Here’s How Much the Average Obamacare Penalty Will Run

Motley Fool22 hours ago
We’re also seeing big dollar differences in the underlying price of health insurance plans. The failure of more than half of Obamacare’s approved healthcare …

14800 Minnesotans face deep cuts to their pensions

Minneapolis Star Tribune14 hours ago
Retired Teamsters argue that the current solution unfairly shifts the burden of a bailout onto them. They have a right to what they have earned, they say. “If they’re …

Big News! Hawaii’s Big Island Moves Closer to Being GMO-Free!

Hot off the presses – Mayor Kenoi on the Big Island, in Hawaii, recently signed Bill 113 into law, prohibiting GMOs. The bill prohibits biotech companies from operating on the island, and stops farmers from growing new GM crops. This is a historical moment for Hawaii, a place which has been called ‘ground zero for GMOs.’
Mayor Kenoi has taken a huge stand against agrichemical companies and actually followed the will of the people. Big Island, Hawaii will hopefully lead the way for the rest of the islands as well as the rest of the United States.

Hawaii has fought long and hard to ban GMOs. With the ideal climate to grow food year-round, agrichemical companies like Monsanto, Dow, and Syngenta have used it as their own personal testing ground for all manner of genetically modified crops. This is because the growing season allows them to advance their interests at a 400% faster pace than growing on the mainland US where the growing season is more limited. But that doesn’t make it right for them to poison the environment, and harm human health.
The Islands of Hawaii also have to import 90% of their food, much of it being genetically modified. Monsanto, BASF, DOW Agri-Sciences, Syngenta and DuPont Pioneer conduct field trials and grow GMO Seed for export on 24,000 acres on Hawaiian Islands.
Kauai and Molokai are quickly becoming toxic environments due to contamination of soils and ground water caused by pesticide abuse. Oahu and Maui are seeing similar patterns due to the very same abuse by these careless corporations. Hawaii once enjoyed pristine water and land, but people have been getting sick and even children have to worry about pesticide exposure used with GM crops, less than 100 meters from their school playgrounds.
Fortunately, the Big Island has told these agrichemical companies – NO MORE! If you want to thank Mayor William P. Kenoi for standing up to the biotech bullies, you can contact him here. We need more politicians like him who won’t be pushed around by Big Biotech.

Additional Sources: GMO protest photo by Rodney Yap (photo represents resistance to GMOs)

Larry Summers Says the Fed Is Walking Into a Trap

The central bank will be powerless to fight the next recession.

If Larry Summers were Fed Chair, it would be unlikely that we’d be preparing for the first interest rate hike in nine years this afternoon.
The former Treasury Secretary and Obama Administration economic advisor has come out forcefully on his blog and in interviews against the Fed’s apparent plan to raise rates, arguing that the risks of raising them too soon—like smothering the economy recovery—far outweigh the risks of excessive inflation that may be the result of waiting too long.
On the other hand, Summers believes it’s too late now for the Fed to change course, since its communication leading up to Wednesday’s meeting has so strongly signaled a rate hike.
“Given the strength of the signals that have been sent it would be credibility destroying not to carry through with the rate increase,” Summers writes.
In other words, today’s decision was already made when Janet Yellen and company decided to communicate to markets that a rate hike was coming. But that doesn’t mean that the Fed needs to now commit to a policy of even slow-but-steady rate increases in the months and years ahead.
“I hope the Fed will not now invest its credibility in signaling further increases until and unless there is much clearer evidence of accelerating inflation,” he writes.
But Summers also argues that the Fed is ultimately damned, no matter what it does. That’s because the next recession, which is likely only a couple years away, will come well before the economy is ready to handle interest rates of 3% or more. As he told Marketplace:
I think that we face a structural problem in monetary policy and that is when recession comes we lower interest rates by … three percentage points. And on anybody’s forecast it’s gonna be a long time before we’re gonna be in a position to reduce rates by three percentage points.
In the past, Summers has argued that the only way to save the U.S. economy from a recession that the Federal Reserve is helpless to reverse (because interest rates are already so low) is for the federal government to borrow at today’s historically low interest rates and use those funds to invest in economically productive stimulus, like building our and repairing American infrastructure.

Wall St opens higher ahead of Fed rate decision

Wall Street opened sharply higher on Wednesday ahead of a widely anticipated interest rate hike by the Federal Reserve later in the day.

The Fed will announce the outcome of its policy meeting at 2 p.m. ET (1900 GMT), followed by a press conference by Chair Janet Yellen at 2:30 p.m. ET.

An increase in the Fed's benchmark rate, from near zero, would be the first since June 29, 2006.
After more than a year of posturing and a couple of false starts, the U.S. central bank is seen raising rates by a token 25 basis points.

Traders see an 81.4 percent chance of a rate hike, according to the CME Group's FedWatch tool.

The Fed is expected to move gradually on subsequent rate hikes after the initial liftoff, according to a Reuters poll. That will help soothe jittery markets, which have been roiled recently by a rout in crude oil prices and a fall in the Chinese yua ..

"I think the ideal outcome today is that the Fed raises rates and they give us a lot of verbiage that says we're going to go slow," said Scott Wren, senior global equity strategist at Wells Fargo Investment Institute in St. Louis.

"Yellen is a dove and she is going to remain a dove. She has to follow through and hammer home that they're not going to be in a hurry and that's what the market wants."

At 9:34 a.m. ET, the Dow Jones industrial average was up 16.28 points, or 0.8 percent, at 2,059.69 and the Nasdaq Composite index was up 40.54 points, or 0.81 percent, at 5,035.90.

Apple's 1.24 percent rise gave the biggest boost to the Nasdaq and the S&P 500.

Nine of the 10 major S&P sectors were higher, with the industrial index's 0.90 percent rise leading the advancers.

Higher interest rates make loans more expensive, crimping profit margins. Banks, however, will benefit.

Goldman Sachs was up 1.7 percent and gave the biggest boost to the Dow. JP Morgan, Bank of America and Citigroup were up about 1.5 percent.

The rate hike will be a highly symbolic move, coming exactly seven years to the day, since the Fed cut rates to zero as the financial crisis engulfed the world.

Since then, the U.S. stock market has staged a spectacular bull-run, with the S&P 500 index more than doubling and the Nasdaq composite index briefly breaching its dotcom boom highs

The Fed has said it would raise rates when it saw a sustained recovery in the economy. While the unemployment rate has fallen to multi-year lows, inflation remains stuck below the Fed's 2 percent target.

"We expect the start of policy normalization to serve as a catalyst for normalization of the investment environment," said Mike O'Rourke, chief market strategist at Jones Trading.

The prolonged period of extremely accommodative monetary policy has distorted investment objectives, he said in a note.

Shares of Dow component Disney were up 1.85 percent at $114.13 as the newest installment of "Star Wars" hit screens worldwide.

Advancing issues outnumbered decliners on the NYSE by 2,084 to 567. On the Nasdaq, 1,686 issues rose and 502 fell.

The S&P 500 index showed seven new 52-week highs and two new lows, while the Nasdaq recorded 10 new highs and 19 new lows.