Threatened with deflation, the authorities will want to turn the tide in the worst possible way. What’s the worst way to stop deflation? With hyperinflation. Yes, we may suffer a year or two more of sluggish growth... or even deflation. Stocks will crash and people will be desperate for paper dollars. But sooner or later, the feds will find their feet and lose their heads. Most likely, the credit-drenched world of 2015 will end... not in a whimper of deflation, but in a bang. Hyperinflation will bring the long depression to a dramatic close long before a quarter of a century has passed.
While we are sure President Obama will find a way to comment on today's jobs number (focusing on the unemployment rate we suspect and not the quality of jobs or record number of people out of work), his main topic of discussion is how wonderful the ultra-secret "Trans-Pacific Partnership" deal is for Americans... and why congress must pass it asap.
"The transition from investment to consumption in the Chinese economy, together with a shift towards cleaner energy sources, has caused a sharp deceleration in dry bulk trade. After expanding at an average annual rate of 7% over the period 2005-14, seaborne demand in iron ore, thermal and metallurgical coal is set to increase by only 2% in 2015 to 2.5 billion tonnes as these trends persist," Goldman says, before warning that freight rates aren't likely to recover until at least 2020.
The politicians like the bankers and the central bankers, are happy to kick the can down the road and let their successors and future generations pick up the tab and pay for the economic mess that they refuse to address.
"If you want to hear the details of the Trans-Pacific Partnership trade deal the Obama administration is hoping to pass, you’ve got to be a member of Congress, and you’ve got to go to classified briefings and leave your staff and cellphone at the door. If you’re a member who wants to read the text, you’ve got to go to a room in the basement of the Capitol Visitor Center and be handed it one section at a time, watched over as you read, and forced to hand over any notes you make before leaving. And no matter what, you can’t discuss the details of what you’ve read."
This is what “justice” looks like in the Oligarch States of America. If you’re a pleb who gets caught having consensual sex on the beach, you’re immediately convicted and face up to 15 years in the gulag. Meanwhile, if you’re a banking executive responsible for crashing the global economy, you’re rewarded with trillions in taxpayer bailouts and backstops and given free reign to continue your crime spree.
As with everything in life, there are winners and losers, and the recent rout in the oil market is no different. The four flip sides below should be closely monitored in the coming months, for the oil market will be impacted by these factors – regardless of if they change their tune, or become a broken record.
Gillian Tett, markets and finance commentator and an Assistant Editor and former U.S. Managing Editor of the Financial Times, wrote an important and little noticed article last week questioning complacency on the part of European policy makers regarding a Greek default and potential exit or ‘Grexit’. Tett argues that a Greek failure would lead, as Lehman’s did to “wider policy uncertainty: when Lehman failed, the entire paradigm for finance suddenly seemed unpredictable”.
The world economy is in the grips of a dangerous delusion. As the great boom that began in the 1990s gave way to an even greater bust, policymakers resorted to the timeworn tricks of financial engineering in an effort to recapture the magic. In doing so, they turned an unbalanced global economy into the Petri dish of the greatest experiment in the modern history of economic policy. They were convinced that it was a controlled experiment. Nothing could be further from the truth.
For the first time in more than ten years, the IMF believes the yuan is close to fairly valued. This comes as the fund considers the yuan for SDR inclusion later this year and as China attempts to promote the currency to a more prominent role in the global economy. Meanwhile, Bill Gates says that although he "loves the dollar" he'd "put his bet on yuan."
It seems yet another hero of the recent cyclical bull market, resp. echo bubble, may be in danger of falling from grace. This has already happened to his predecessor Alan Greenspan, who has been gradually demoted from “Maestro” to “irresponsible bubble blower”. In this sense the somewhat less praise-laden verdicts that are lately emerging with respect to Ben Bernanke could be seen as an early warning sign.
The new age of Economic Totalitarianism is upon us all. As we warned previously, Australia will be the first to introduce a compulsory tax on savings. This is the ultimate Marxist state for now anyone with spare cash is the enemy of the Conservative Tony Abbott government. The introduction of this tax on money in Australia led by Tony Abbott is the trial balloon for the global economy.
“When does our credit based financial system sputter / break down? When investable assets pose too much risk for too little return. Not immediately, but at the margin, credit and stocks begin to be exchanged for figurative and sometimes literal money in a mattress.” We are approaching that point now as bond yields, credit spreads and stock prices have brought financial wealth forward to the point of exhaustion. A rational investor must indeed have a sense of an ending, not another Lehman crash, but a crush of perpetual bull market enthusiasm.
As with all good socialists, central banks have locked the global economy onto but a single path without any possibility of choice. The purpose of all this intrusive nature through finance is actually to dethrone the defining quality that makes capitalism so useful in society’s advance – dynamic destruction. Despite the radical alteration as to what is taught in “business” schools, credit is not capital and it will never be. No amount of math will make it so, but the longer it remains operative the greater the potential we all end up with something even worse.
It seems that for the global warming lobby, all that is necessary to set everything right is to hand control of the global economy over to governmental central planners. In their minds, the machinery of government only needs to be set in motion, and everything will be done with righteous precision to preserve the climatological status quo by increasing the cost of energy and cutting economic activity. The costs of such a venture, whether in money or in human lives and human comfort, need never be considered, because, we are told, the only alternative is the total destruction of planet earth. This “Follow Us or Die!” routine is a propagandist’s dream of course, but in real life, where more rational heads - on occasion - prevail, the costs of any proposed government action must be considered against the costs of the alternatives.