A quick anecdote that should quickly confirm just how broken everything is: earlier today MarkIt reported European manufacturing data that was atrocious, with both German and European PMIs tumbling to levels not seen since mid-2013, and with Europe's growth dynamo now in a contraction phase clearly signalling what has been long overdue: a European triple dip recession. So what happens? Moments later Germany sells €4.1 billion in 10 Year paper at a record low yield below 1%.... even as the Bundesbank had to retain a whopping 17.84% of the auction, the highest since June, with only €4.663 Bn in bids for the €5 Bn target, the first miss since May 21. So hurray for the central banks, boo for the economy, and as for that mythical creature, once known as bond vigilantes, our condolences: good luck figuring out what the hell just happened, and good luck recalling what a free market is.
"If China were to convert a relatively modest part of its $4 trillion foreign exchange reserves into gold, the country’s currency could take on unexpected strength in today’s international financial system. It would be a gamble, of course, for China to use part of its reserves to buy enough gold bullion to displace the United States from its position as the world’s largest holder of monetary gold.... If the dollar or any other fiat currency were universally acceptable at all times, central banks would see no need to hold any gold. The fact that they do indicates that such currencies are not a universal substitute... Whereas Simon, following the economist Milton Friedman’s view at that time, argued that gold no longer served any useful monetary purpose, Burns argued that gold was the ultimate crisis backstop to the dollar." - Alan Greenspan
Even though it ultimately failed at the ballot box, the recent campaign for Scottish independence should cheer supporters of the numerous secession movements springing up around the globe. The growth of support for secession should cheer all supporters of freedom, as devolving power to smaller units of government is one of the best ways to guarantee peace, property, liberty — and even cheap whiskey!
New Global Crisis Imminent Due To “Poisonous Combination Of Record Debt And Slowing Growth", CEPR Report WarnsSubmitted by Tyler Durden on 09/29/2014 07:52 -0400
A “poisonous combination” of record debt and slowing growth suggest the global economy could be heading for another crisis, a hard-hitting report will warn on Monday. It warns of a “poisonous combination of high and rising global debt and slowing nominal GDP [gross domestic product], driven by both slowing real growth and falling inflation”. The total burden of world debt, private and public, has risen from 160 per cent of national income in 2001 to almost 200 per cent after the crisis struck in 2009 and 215 per cent in 2013. “Contrary to widely held beliefs, the world has not yet begun to delever and the global debt to GDP ratio is still growing, breaking new highs,” the report said. Luigi Buttiglione, one of the report’s authors and head of global strategy at hedge fund Brevan Howard, said: “Over my career I have seen many so-called miracle economies – Italy in the 1960s, Japan, the Asian tigers, Ireland, Spain and now perhaps China – and they all ended after a build-up of debt.”
While the bond market is still reeling from Friday's shocking Bill Gross departure, and PIMCO has already started to bleed tens of billions in redemptions (see "Billions Fly Out the Door at Pimco About $10 Billion Is Withdrawn After Departure of Gross"), stocks which may have been hoping for a peaceful weekend after Friday's ridiculous no volume ramp in the last two hours of trading, got hit by a double whammy of first Catalan independence fears rising up again after Catalan President Mas signed a decree committing Catalonia to a referendum bid on November 9th, leading to a move wider in Spanish bond yields, and second the sharpest surge in Hong Kong violence in decades, which led to a 2% drop in the Hang Seng, are now solidly lower across the board, with the DAX dropping below its 50 DMA, while US equity futures are printing about 9 points lower from Friday's close despite another epic ramp in the USDJPY which flited with 110 briefly before retracing to 109.50, and also threaten to push below the key technical support level unless the NY Fed's "Markets group" emerges out of its new Chicago digs and buys up enough E-minis to restore confidence in a rigged market.
Straight forward discussion of the key events next week. Weak on bluster. Strong on analysis. You've been warned.
Can market forces prevail in the Eurozone? With another round of central bank intervention coming four plus years after the start of the Eurozone debt crisis, this is a question worth considering, at a time when the Southern Eurozone members - Italy, Spain, Greece and Portugal, which collectively account for over 30% of the GDP of the early adopters of the Euro as a whole – continue to struggle. This is a complex topic for sure, but a simple economic indicator can be used to help frame the situation.
For the longest time anyone suggesting that Europe's economic collapse was nothing short of a deflationary collapse (which would only be remedied with the kind of a money paradopping response that Japan is currently experiment with and where, for example, prices of TVs are rising at a 10% clip courtesy of the BOJ before prices rise even more) aka a "Japan 2.0" event, was widely mocked by the very serious economist establishment, and every uptick in the EuroSTOXX was heralded by the drama majors posing as financial analysts as the incontrovertible sign the European recovery has finally arrived. Well, they were wrong, and Europe is now facing if not already deep in a triple-dip recession. Which also explains why now it is up to the ECB to do all those failed things that the BOJ did before the Fed convinced it it needs to do even more of those things that failed the first time around, just so the super rich can get even richer in the shortest time possible. So we were a little surprised when none other than Goldman Sachs today diverged with the ranks of the very serious economists and the drama major pundits, and declared that "recent trends in some European economies already qualify as a Japanese-style stagnation."
We have corporate insiders selling the farm, investment legends warning of a collapse, institutional investors selling stocks, and global growth slowing rapidly.
* Where is Venezuela's 366 tonnes of gold?
* Does Venezuela still control and own unencumbered it’s own gold reserves?
* Is any of the country's gold encumbered, loaned or leased to Goldman Sachs or other banks?
History may not repeat exactly because technology, resource discoveries, and political dynamics change the nature of society, but it does rhyme because the human foibles of greed, lust for power, arrogance, and desire for conquest do not vary across the ages. The corruption, arrogance, hubris, currency debasement, materialism, imperialism, and civic decay that led to the ultimate downfall of the Roman Empire is being repeated on an even far greater scale today as the American Empire flames out after only two centuries. The pillars of western society are crumbling under the sustained pressure of an immense mountain of debt, created by crooked bankers and utilized by corrupt politicians to sustain and expand their welfare/warfare state. Recklessness, myopia, greed, willful ignorance, and selfish disregard for unborn generations are the earmarks of decline in this modern day empire of debt, delusion and decay.
Is the Great Republic been on the verge of fragmenting as classic political philosphy said was the fate of all large republics?
Some British newspapers have declared that “the dream is over” for Scottish independence. That seems hardly likely, unless by “over,” the newspapers mean “over for the next few years.” Europe-wide, the drive for more regional independence and autonomy will only continue to grow as economies stagnate, and as elites from Brussels or Rome or Madrid continue to maintain that they know best. Eventually, the promises of the centralizers will fall on very deaf ears. Even without a majority vote for secession, the campaign for separation from the United Kingdom has already provided numerous insights into the future of secession movements and those who defend the status quo.
So with regards to BABA’s $230 billion market cap at week’s end, you can say this: None dare call it price discovery! What it shows is that Wall Street is well and truly off it rocker. The Chinese swindlers behind BABA didn’t even have to tap their home market. These preposterously over-valued shares were sold overwhelmingly to Wall Street - to the gamblers, speculators and robo-traders that have occupied what was once a reasonably honest capital market. So why did Wall Street capitalize an opaque mass merchant operating in a precarious economy at 27X sales? The answer is that Wall Street is a momentum driven casino that is now over-valuing everything that moves and all that stands still. That’s the ultimate evil of monetary central planning. Having destroyed honest price discovery in the financial markets, the Fed now “accommodates” the speculators one meeting at a time - in deathly fear of a hissy fit.