While all the western banks are clearly envious at the facility with which Zimbabwe managed to hyperinflate away its debt mountain after simply printing a few trillion in fiat monetary equivalents, which instead of the stock market hit the broader economy, there is much more the "developed" world can learn and is learning from Robert Mugabe domain of experimental yet practical monetarism.
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 the European triple-dip alert was barely glowing a muted red until this morning, then following the latest German PMI data, which tumbled to 49.9 from 50.3, below the 50.3 consensus, and is the first contractionary print in 15 months, then they are now screaming a bright burgundy. And while the European recession has now clearly made its way to the core, it wasn't just Germany: French PMI continued to be solidly in a contracting phase, at 48.8, unchanged from the previous month, the overall European Manufacturing PMI also missed and declined, dropping from a flash reading 50.5 to only 50.3, which was a 14 month low, with the average PMI reading for Q3 the lowest since a year ago, and as MarkIt summarized, "Eurozone manufacturing edges closer to stagnation." Have no fear, though, Mario Draghi and his monetization of Greek Junk Bonds will fix everything!
While Greek government yields (and political leaders) proclaim the troubled peripheral European nation is 'recovering', the risk of major political upheaval in Greece has not gone away ahead of next year's presidential vote next year. As Reuters notes, under growing pressure from anti-bailout leftists, Greek Prime Minister Antonis Samaras desperately needs a new narrative to get the backing of lawmakers and rally Greeks fed up with four years of austerity. We wish him luck as Keep Talking Greece notes, it is high time that the real data of the economic situation of the Greek society come to the surface and so it did this week. A report from Greece's State Budget Office found that three in every five Greeks, or some 6.3 million people, were living in poverty or under the threat of poverty in 2013 due to material deprivation and unemployment.
When America's social security, health care, and entitlement systems were first conceived, the country had a very different age distribution. There were roughly 7 active workers per retiree, and the ability to transfer some of that employee wealth to support older citizens was supportable. However, by 2030, just 15 short years away, there will be less than 3. Our national demographic architecture no longer can afford the entitlement system we have. And that's even assuming entitlements were currently sufficiently funded. Simp0ly put, America's demographic situation is a ticking time bomb.
At some point, the markets will call BS on Spain’s dreams of recovery and the bond markets will rebel. When this happens the whole fraud will come unraveled. However it might take a full-scale political crisis before this happens. And by the look of things we’re not far from one.
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.
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.
We actually to believe that the Federal Reserve can lift the entire front-end of the curve from 0-1% (current rates out to three years) to 2-4% over the next two years without adding massive further stress onto the deficit, and only adding to the debt? Servicing 2% interest when growth is 2% means you are doing worse than standing in place if you also have a budget deficit. Whatever the timing, the US, China and Europe are all headed for another Minsky moment: the point in debt inflation where the cash generated by assets is insufficient to service the debt taken on to acquire the asset. Productivity growth in the US last year was +0.36%. The real growth per capita was about 1.5%.
Self-evidently, all the major economies are saturated with debt. Accordingly, central bank balance sheet expansion has lost its Keynesian magic entirely. Now the great sea of freshly minted liquidity simply fuels the carry trades as gamblers everywhere load up with any asset that generates a yield or short-run capital gain, and fund these bloated positions with cheap options and repo style finance. But here’s the obvious thing. Central banks can’t normalize interest rates - that is, allow the money markets to rise off the zero-bound - without triggering a violent unwind of the carry trades on which today’s massive asset inflation is built. On the other hand, they can no longer stimulate GDP growth, either, because the credit expansion channel to the main street economy of households and business is blocked by the reality of peak debt. Yes, the era of Keynesian money printing is over and done. But don’t wait for the small lady at the Fed to sing, either.
Beneath the surface wealth of bullet trains, cute robots and exuberant fashions, this is the Japan few outsiders understand: the one gripped by a deepening social depression. Japan is the global bellwether in social depression, and we can already see the same symptoms and official panic to mask these symptoms in Europe, China and the U.S.
In the current GDP-based way we measure "prosperity" (i.e. "growth"), healthy living, low-cost lifestyles and capital accumulation are catastrophes for the economy rather than tremendous benefits. Clearly, we need an entirely new set of metrics and ways of measuring them. This will instantly create an entirely new set of agendas, priorities and incentives that change day-to-day choices without any central-state coercion, bureaucracies or top-down Central Planning.
Is the Great Republic been on the verge of fragmenting as classic political philosphy said was the fate of all large republics?
After the end of the cold war, the United States dominated world affairs for nearly twenty years. However, the situation of a unipolar world has changed since the financial crisis of 2008 to a now multipolar world that includes China, Russia, India, Brazil and South Africa. These powers are influencing and manipulating the conflict zones we have today to their advantage. By analysing and dissecting the issues concerning the major conflict zones on our world map, as well as illustrating the parties involved, this article will explain what political and strategic interests are at play and how the development in major hotspots shape the big picture. This will identify the geopolitical forces that affect the European continent and what future concerns and worries await us.
Behold Obama’s dream project – a global infrastructure fund. This idea was floated and endorsed at The G-20 in Cairns this weekend. “We have agreed to come away from government-financed growth measures to more private investment,” said Australia’s Finance Minister Joe Hockey. These are being called Public Private Partnerships (PPP), and will be extremely critical in the future for here lies the final destruction of the pension funds precisely as Japan bankrupted the Japanese Postal Saving Fund using that private money for political purposes to try to stimulate the economy, which failed. With PPP, public funds will be sold to the public as being a highly professional long-term investment that will further shrink economic growth and liquidity. They cannot possibly work.