There are three fundamental forces disrupting the conventional order, and everyone with their eyes open sees them at work every day:
- Essential resources are becoming more expensive.
- The system of expanding credit/debt to fund more consumption (i.e. “growth”) has reached marginal returns and is failing.
- Networked software, automation and robotics are reducing the need for human labor on a global scale.
As a result of these three structural forces, economic instability is not going to go away any time soon. Technology leapfrogs the obsolete and inefficient; no wonder conventional sectors and the market for traditional 9-to-5 jobs are both stagnating.
One of the biggest games played by the bean counters in Washington in the US is the overstatement of GDP growth by understating inflation.
With peripheral European sovereign bond yields at or near record lows, no matter how much GDP gets downgraded (Italy), banking system collapses (Portugal), or loan losses surge (Spain); things must be great for borrowers, right? Wrong! And this is exactly what keeps Mario Draghi up at night... In fact, as the following dismal reality chart shows, real corporate lending spreads are at record highs... crushing the credit-created-growth dream of a European Renaissance.
While Iraqi crude represents about 4.4% of world production, or around 3.4 mmbd (5th largest in the world); enabling investors to shrug at any fears that ISIS will spread to the South and interrupt this supply (since it will be 'contained'); what many do not comprehend is that in such a tight oil market as we currently have, Goldman warns that as much as 60% of OPEC’s expected capacity growth over the next five years to come from Iraq. Production losses so far have been fairly small, and have only been felt domestically. However, the larger impact of the conflict potentially lies in the medium to long term.
Russia Accuses US Of Fabricating MH17 Evidence As US Reveals More "Evidence" Of Russian Military InvolvementSubmitted by Tyler Durden on 07/24/2014 16:47 -0400
The farce of facts continues to grow as Ukraine's national security council head says US is wrong and claims to have proof MH17 was shot down by Russians... and then the US State Department unleashes another statement of alleged 'proof' that Russia is sending rockets to separatists and firing on Ukraine's military from within Russia. And then Russia hit back, blasting Washington's claims that pro-Russian rebels fired a missile that hit the plane on July 17 "mostly cited social networks" and did not correspond to reality.
Corruption ceases to be corruption when it becomes the Status Quo; what was once recognized as corruption is seen as just another cost of doing business. Our political order is structurally corrupt: the key dynamic in every level of governance is favoritism and extortion.
Readers are familiar with our quarterly summary of the IMF's laughable forecasts, which we compile after every quarterly release of the fund's World Economic Outlook. Moments ago, the IMF released its latest update for world growth and trade for 2014 and 2015. Since we have said it all already, we will cut straight to the charts.
New Home Sales in June plunged to 406k vs 504k in May... (remember that 504k print was the catalyst for 'weather' is over and the market to surge 10%) Now that has soaked in, consider this is equal lowest sales print since September 2013 (and Dec 2012) and the biggest miss since July 2013.The last 3 months of exuberance have all been revised significantly lower (most especially May's appartently make-believe number). What is even more troubling in the "survey" vs "reality" world is this collapse in sales when NAHB Sentiment surged to near cycle highs. For context, this is a 5-standard-deviation miss from economists' expectations, below the lowest guess and a massive miss from almost highest estimate Joe Lavorgna's 510k.
Meghan O’Sullivan, Harvard's Director of Geopolitics (and former deputy national security adviser for Iran and Afghanistan) warns, "The US should have already panicked." As she notes, major American economic and political interests are at stake. The erasure of the Syria-Iraq border by a group that is considered too radical for al-Qaeda, the takeover of Iraq’s second largest city by IS, the kidnapping of international diplomats, and the declaration of an Islamic caliphate in large parts of Iraq and Syria – each one of these should be a major signal about the gravity of the situation. The Sectarian Divide remains key...
In yet another development that seems as if we are all living within the pages of Ayn Rand’s seminal work Atlas Shrugged, the United States Congress latest brainchild is to set up a new government bank, stuff it full of taxpayer funds, and loan the money to American workers for the exclusive purpose to help them form collectives and buy the companies they work for. It’s called the United States Employee Ownership Bank Act.
From Alexander the Great to British rule, history, if it has a lesson, teaches us that no group of men can conquer the world. It’s simply too big, too vast, and too complex. Humanity is far too restless to sit and take orders from dictators halfway across the globe. The mindset that wishes one country to have an iron-grip on world affairs is horribly naïve. Empires are not free. Washington’s credit card can’t be charged to infinity. The need for prudence is growing larger by the day. For the sake of average Americans, and peaceful citizens across the world, let’s hope it gets here sooner than later.
Just as the Federal Reserve cannot directly force you to stick the needle of monetary heroin (debt) into your arm, it also can't force employers to pay employees more. The ultimate hubris of the Keynesian Cargo Cult (which includes the global economy's central banks) is the naive notion that they can manipulate an entire system with a few levers such that the desired outcome--and only the desired outcome--is the output. The idea that you can change one input in an interconnected system of systems and only affect the one output you want is not just naive and simplistic: it requires a level of blindness and incompetence that is off the charts.
The reality of what happened in Cyprus is a far different matter. And the reason that this reality has not been featured as headline news is because doing so would reveal the following:
There is no better way to describe what the recently departed CFTC commissioner Scott O'Malia just did when he bailed from the commodity watchdog to become the new head of the International Swaps and Derivatives Association, aka ISDA, the biggest banking group that has constantly opposed every intervention and attempt to regulate the swaps market by the CFTC since the Lehman crisis, than an epic farce.