Dispassionate view that Italy poses the biggest risk for the euro area and it will not wait for the German elections.
The twenty-first-century economy has thus far been shaped by capital flows from China to the United States – a pattern that has suppressed global interest rates, helped to reflate the developed world’s leverage bubble, and, through its impact on the currency market, fueled China’s meteoric rise. But these were no ordinary capital flows. Over the last decade, the vast quantities of short-term capital that were being pumped into China’s banking system drove commercial banks and other financial institutions to expand credit substantially, especially through the shadow-banking system, leading to a massive credit bubble and severe over-investment. Given this, in the event of a crisis, China would most likely have to begin selling off its massive store of US debt - and indeed it is. After spending years attempting to insulate the US economy from the upshot of its own banking crisis, the Fed may ultimately be forced to bail out China’s banks, too.
"The latest numbers that we have received, in particular from Germany, are encouraging, whether it's manufacturing, whether it's service activity, whether it's exports. That is heading in the right direction, but it needs to be sustained over time. And I'm crossing fingers for the eurozone..."
Chinese society is on the verge of a structural transformation even more profound than the long and painful project of economic rebalancing, which the Communist Party is anxiously beginning to undertake. As we recently discussed, Stratfor warns China's population is aging more rapidly than it is getting rich, giving rise to a great demographic imbalance with important implications for the Party's efforts to transform the Chinese economy and preserve its own power in the coming decade. In fact, as BofAML notes, China's working-age population peaked last year (3 years ahead of demographers' schedule) representing a major turning point for the world's economy.
There’s always someone waiting to dethrone the one in the position at the top of the roost, isn’t there?
The war against privacy is ultimately being fought to make sure you don't keep anything hidden when the global government funding crises comes to a head.
There are all sorts of candidates for the root cause of the systemic global financial crisis, but if we separate the wheat from the chaff we're left with risk and moral hazard. Pointing to human greed and cupidity as the cause doesn't identify anything useful about this era's crisis, as human greed, self-interest and opportunism are default settings. Programs that backstop banks and social insurance systems like Medicare are not like fire or life insurance because they are effectively open-ended in terms of costs and in exposure to risk. A system which pools risk without distributing it to the participants and eliminates the causal connection between risk and consequence introduces moral hazard on a grand scale.
Even after seven years of writing macroeconomic analysis and bearing witness to astonishing displays of financial and political stupidity by more “skeptics” than we can count, it never ceases to amaze us the amount of blind faith average Americans place in the strength of the U.S. dollar. One could explain in vast categorical detail the history of fiat currencies, the inevitable destruction caused by inflationary printing and the conundrum caused when any country decides to monetize its own debt just to stay afloat - often, to no avail. The dollar is no more invincible than any other fiat currency in history. In some ways, it is actually far weaker than any that came before. The dollar is entirely reliant on its own world reserve status in order to hold its value on the global market.
“Is there any good news?”
The good news is that this fraudulent system of unchecked, unbacked paper currency is finally coming to an end.
Believing official reassurances based on Fantasyland projections of ever-rising payroll taxes and employment does not magically make the Social Security system viable. Questioning the financial viability of the Social Security system is often taken as an attack on the program itself. Nothing could be further from reality. Anyone who truly wants Social Security to continue as is should take an active interest in structural trends rather than focusing all their energy on attacking those who question the official reassurances that the the system is sound until 2033.
Asia has become the most important issue for the markets today. The Central Bankers’ dream of endless QE has become a nightmare for Japan while China’s “growth miracle” is rapidly falling to pieces.
No one can predict accurately at what point slower growth will start producing political turmoil on a scale that’s unprecedented in the China that Deng made, what the magic number is, or even whether there’s an iron connection between economic and political crises. Yet the increase in capital flight from China and soaring applications for American and European residential visas by well-heeled Chinese suggest that the elite is hedging its bets. Some may be overstating things, but the rebalancing camp is too sanguine.This much is certain: China’s leaders are in uncharted waters, and because of the diminishing utility of the established formula for rapid growth their maps may be of questionable value.
The Department of Justice’s (DOJ) latest civil suit against Bank of America (B of A) is an embarrassment of tragic proportions on multiple dimensions. We're "only" going to explore seven of its epic fails here. The two most obvious fails (except to most of the media, which failed to mention either) are that the DOJ has once again refused to prosecute either the elite bankers or bank that committed what the DOJ describes as massive frauds and that the DOJ has refused to bring even a civil suit against the senior officers of the banks despite filing a complaint that alleges facts showing that those officers committed multiple felonies that made them wealthy by causing massive harm to others. Those two fails should have been the lead in every article about the civil suit. There are many more...
How would America ever survive without the central planners in the Obama administration and at the Federal Reserve? What in the world would we do if there was no income tax and no IRS? Could the U.S. economy possibly keep from collapsing under such circumstances? The mainstream media would have us believe that unless we have someone "to pull the levers" our economy would descend into utter chaos, but the truth is that the best period of economic growth in U.S. history occurred during a time when there was no income tax and no Federal Reserve. We never needed a central bank, we never needed the IRS and we never needed an income tax. America would be doing just fine without any of them. But instead, America chose to go down the path of collectivization and central planning, and now we are heading toward the biggest economic disaster in the history of mankind.
Traditionally, metals markets are supposed to be a solid fundamental signal of the physical and psychological health of our overall economy. Steady but uneventful commodities trade meant a generally healthy industrial base and consumption base. An extreme devaluation was a signal of deflation in consumer demand and a flight to currencies. Extreme price hikes meant a flight from normal assets and currencies in the wake of possible hyperinflation. This is how gold and silver markets were originally designed to function – however, welcome you to the wacky world of 2013, where bad financial news is met with the cheers of investors who believe stimulus will last forever, where foreign investors dump the U.S. dollar in bilateral trade while mainstream dupes argue that the Greenback is invincible, and where everyone and their uncle seems to be buying precious metals yet the official market value continues to plunge. The reason our entire fiscal system now operates in a backwards manner is due to one simple truth - every major indicator of our economy today is manipulated by our central bank...