Demographics

As discussed here on Tuesday evening, people flows (i.e. immigration and migration) are grabbing international headlines these days thanks in large part to i) the massive influx of asylum seekers entering Western Europe from war-torn Syria, and ii) GOP frontrunner Donald Trump’s outspoken position on illegal immigration in the US. With that in mind, we present Goldman's new flowchart which shows "where everybody is going." 

"It is like the board is a desperate gambler at the end of their run"...

The refugee crisis in Europe - sparked in large part by Syria’s four-year old, bloody civil war - recently reached a tipping point and the scramble to find a workable solution both in terms of allocating asylum seekers and finding the funds to accommodate them has become the single most pressing challenge facing European policy makers. Amid the chaos, Goldman may have found the silver lining. 

We live in a Fiat economy where growth is fuelled by debt, and less and less from productivity and demographics. This takes place in a closed circuit with the US dollar as the reserve currency. The problem now is that the economy can not get restarted without changes to one or several parameters. Simply put, this fiat economy is unsustainable and must change, and we must adjust to slower growth and start actually producing.

One might argue that the success of 15-year-old Brady Olsen - aka Deez Nuts - from Wallingford, Iowa, embodies more than simply a successful lampooning of the American political system. There are legitimate reasons to view this development as the opening salvo in an upheaval of the way Americans elect presidents. Does this sound hyperbolic? Let me take it a step further: Deez Nuts is actually critically important for the future of the country... and here’s why...

Even if it is short term oversold, this is actually a quite dangerous market – caveat emptor, as they say.

"I have learnt from history that it is very hard working out what the trigger is. In 2008, it was the collapse of Lehman Brothers that triggered a credit crunch. Now it could be a major event in Turkey or a default of the Brazilian oil company Petrobras or some event in Malaysia. But if I have to pick one I would say it is Turkey introducing capital controls. Such controls will mean that Turkey will not pay back principals amounting to 400 Bio. $ and the interests on it." - Russell Napier

"Arguably the only reason to be bullish risk assets right now is there are no reasons to be bullish."

We all know how sectarian, religious and political differences have thrown many Middle Eastern countries into chaos and armed conflict. But there is a deeper factor at play which deserves greater recognition: severe water scarcity.

The Fed has basically borrowed from the future to improve today. The intention of Fed policy over the past 30 years has been to self-correct business cycles into a ‘steadier state’ by easing interest rates into weakness and hiking them into strength. Unfortunately, there is political-asymmetry between easing and hiking which has resulted in the stair-stepping of official interest rates down to the zero lower bound. Monetary policy has reached the practical limits of what it can do.  Thus, the multi-decade credit era is coming to an end... Bad companies should be allowed to fail.  Creative destruction is beneficial in the long run.

A report from the U.S. Army War College discusses the use of American troops to quell civil unrest brought about by a worsening economic crisis. The report from the War College’s Strategic Studies Institute warns that the U.S. military must prepare for a “violent, strategic dislocation inside the United States” that could be provoked by “unforeseen economic collapse” or “loss of functioning political and legal order.” [The report also warns of a possible “rapid dissolution of public order in all or significant parts of the US.”]

You could call it the "Mystery of the Missing Worker" – why do so many people of working age chose not to enter the workforce? Here are the numbers, as of the most recent Employment Situation report: 250 million: the total number of people of working age in the United States; 149 million: the total number of people in that population that have a job; 8 million: the number of people who want a job but do not have one; leaving 93 million: the number of people who don’t work, and don’t want work. To put some context around that last number, it is 30% of the entire U.S. population. Why?

Having exposed the reality that the world's capital markets are a manipulated shell game, Janus' Bill Gross has a message for the perpetual bulls in his latest letter to investors - "say a little prayer." Gross continues, "low interest rates are not the cure – they are part of the problem," warning that ZIRP has enabled, "a host of zombie and future zombie corporations now roam the real economy. Schumpeter’s 'creative destruction' – the supposed heart of capitalistic progress – has been neutered. The old remains in place, and new investment is stifled." As he previously warned, when the central bank manipulation is removed the likely trajectory of prices is downward...

Few of us understand patient gradualism. We live and have our being within a few years and mostly in an unconscious automated state of mind. But people in power are long-term planners. They absolutely understand human nature and how to channel it to the evolution and refinement of the authoritarian state. The goal is perfect docility and perfect harmony with authoritarianism (economic, social and spiritual). Until the people accept collectivism under some pretext, they are not docile and completely subdued. Once they do, rebellion and confrontation are impossible. This is the ultimate goal of the globalists, and the American system is nearing this state.

Why I've come to thinking that Kyle Bass' short JGB premise may well be wrong