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Biggest Baddest Bubble Blown Bursts

Tim Knight from Slope of Hope's picture




 

china-bubble

The following article was written by Bruno de Landevoisin, a frequent contributor of creatively presented macro economic views on the Slope of Hope.

Well, my fellow Slope-a-Dopes, the time has finally come. The Idiot Savant has had more than enough.  BDI has unequivocally decided to prick Big Bad Ben Bernanke's Bloviated Bubble Butt.  I have outlined below seven fine needles and six sharp scalpels that I shall use to slice and slay his sorry sagging ass:

1)  The extensive capital flight outflows, steaming out of the cratering Emerging Market economies, frightfully seeking a safe haven, have most certainly found their way into the U.S. equity markets, pumping the final bit of hot air into an already overly bullish bursting balloon.  Taper blow back begins.

2)  The Fed has finally begun tapering in earnest, fearfully curtailing QE because they know that the extreme asset valuations it engenders are dangerous weapons of mass misallocated monetary destruction.  The teetering global economy is now facing the unintended consequences of economic disequilibrium that the Fed has unwittingly unleashed on the world, which is now disintegrating before us.

2014-03-22_20473)  As a consequence of the announced and scheduled diminishing QE, the 10 year yield has most certainly based. Moreover, after a monumental 30 year down trend, is now clearly working its way higher.  Each marginal increase off of these extremely low levels is huge in terms of a percentage move, and thus, the total costs of servicing the outstanding debt loads held both privately and publicly will quickly become a backbreaking burden on the U.S. economy.

4)  The outstanding U.S. public and private debt has never been larger in terms of overall USD exposure, the debilitating cost of carry on that tremendous debt has only been temporarily held at bay by a shortsighted FED which synthetically suppressed treasury rates in order to bail out its desperate TBTF private member mega banks.  That dubious degenerate policy has completely distorted the treasury bond yields and therefore the natural market cost of money has been eviscerated.  Clearly, this can no longer be sustained due to the gross misallocation of capital it has induced, which flows primarily into fixed non producing assets of all kinds in the FIRE economy, as well as the precious metals, gem stones, fine arts and collectibles markets, at the expense of genuine productive growth on the ground in the real economy..

5)  The the polyannish assumption that the FED will be able to continue blissfully containing the ever building rate pressures by simply jawboning the debt markets is laughable. The Fed is about to lose control of the United States bond market, by far the largest capital market in the world.  Don't be fooled, they are not and never have been an absolute omnipotent force with complete control of a private economy that generates an annual GDP of $16 trillion.  To believe that seven ace academic anal asses sitting in on an FOMC meeting, tweaking financial levers on a whim, can exert absolute control over the massive forces which drive the globe economy is preposterous.

China Corporate Debt to GDP6)  China, the acknowledged engine of economic growth for the world, over the past two decades, is apparently in serious trouble. The misallocation of overly cheap finance capital which created such tremendous economic imbalances on the ground, in terms of monumentally excessive development and productive over capacity with massive stock piles of raw materials ( all non cash producing assets), has now morphed into a full blown credit crisis spawned by the perilous parasitic shadow lending phenomenon which rapaciously over leveraged the final ferocious funding feeding frenzy.

7)  Japan's economy grew at a slower pace than initially thought in the last quarter of 2013, raising concerns about the pace of recovery under Prime Minister Shinzo Abe's crazed crafty kamikaze monetary policies.  With Japanese data weaker than expected and their April consumption tax hike imminent, the state of the Japanese economy is cause for significant concern. Tora, Tora, Tora!

8)  Despite brash statements and confident claims to the contrary, the EU & ECB have yet to solve the crippling monetary and fiscal structural problems that currently afflict their unfinished and imperfect union, which are distinctly intractable in its current form.  The Southern periphery nation states, now joined by La belle France are firmly entrenched in permanent recessions.  The latest unemployment data out of Paris is the worst since WW II.

Brics summit leaders9) The BRICS, which remain heavily dependent on commodity trade are now struggling.  Dr. Copper has demonstrably diagnosed their incapacitating illness. Additionally, an increasing number of bi-lateral trade agreements are now being established between the commodity producing nations, completely outside of the USD world reserve currency monetary hegemony, putting added pressure on the Petro-Dollar. The current natural gas impasse in Ukraine and probable retaliatory sanctions against Russia will undoubtedly serve to push Beijing and Moscow even further along those lines.  The Arab Spring has morphed into MENA mayhem, Syria is bleeding, Lybia is imploding, Iraq is self destructing, Egypt is a basket case, Saudi Arabia is afraid of Iran fomenting further Sunni Shia anarchy along its borders.  All of which could undermine the Petro-Dollar.

10)  The USD Index has been trending lower, barely holding onto the all important 80 level.  A clear breach of that critical level will put undue pressure on an economy which is 70% based on consumer consumption.  Consuming cluttering crap created by countless countries will become considerably costlier.

11)  The developed world is in the midst of a substantial consumer slow down.  This is particularly true in the middle and low end mass market sectors, which are the meat and potatoes of the largest consumer economy on the planet. The recent results at Walmart & Target highlight this unwelcome development.  It's not the weather stupid!

Goldman-Sachs-Twitter-IPO-prices-looks-promising112)  The freakish stock market sentiment boldly postulating that the wall street bull can never stumble again, because the global central bank reflation trade will always prop him up, is astoundingly foolhardy, you simply can not print your way to prosperity, same as it ever was.

13)  The fantastic social media gorilla glass gigabyte bubble will surely get the WhatsApp Snapchat Tweeter twits' party started.  Please "Like" me, I'm a LinkedIn Pinterest head party animal!  In fact, the unsuspected unenlightened user-base unravelling may have already begun.  Friday's bewitched Nasdaq action may be just the opening super social salvo.

6a014e60551070970c017d3d81aec6970c-800wi_yibaDi_m

 

The Joker red cards the Fed and its fantastically foolish frenetic faux market.

 

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Mon, 03/24/2014 - 21:19 | 4588301 ThanksIwillHave...
ThanksIwillHaveAnother's picture

Economist John Williams of SGS predicts $ Crisis starting June-August 2014.  Sure looks like many straws could start that fire.

Sun, 03/23/2014 - 20:27 | 4583796 Milestones
Milestones's picture

My goodness!! we may have stumbled into a tad of quicksand!!  Nah, our hoi paloi got everythig covered. Right?? I am right arn't I??

Milestones

Sun, 03/23/2014 - 22:10 | 4584054 Oldwood
Oldwood's picture

We seek so many different analogies to try and describe what we are experiencing, but eventually this mess, this disaster, will be the analogy used to describe all disasters of the future. The Titanic, the Hindenburg, the Great Depression will ultimately pale in comparison. The Great Failing.

Sun, 03/23/2014 - 20:15 | 4583758 besnook
besnook's picture

the s&p may make a modest correction but given that it is dependent on money flow the continued printing of excess dollars coupled with the acceleration of exdollar trade says the s&p will go to, at least, 5000 before it is all over. of course, the best hedge in that case is gold, silver gems, lead, food and water.

Sun, 03/23/2014 - 19:55 | 4583704 Ban KKiller
Ban KKiller's picture

The FED goal of moving the wealth to the top is on course.

What's the name of the ship? "U.S.S. We are Fucking the people".

Captain Yeller, the feller.

Sun, 03/23/2014 - 18:26 | 4583420 toadold
toadold's picture

Yellen? "Oh she's a lumber jack and she's OK "

"Oh you've got that pyramid chart upside dow, we are currently blanced on the point not the base......TIMBER!"

Sun, 03/23/2014 - 18:27 | 4583423 Bdelande
Bdelande's picture

LOL!

Sun, 03/23/2014 - 18:07 | 4583371 lasvegaspersona
lasvegaspersona's picture

A for alliteration

but what if the godless commies are just getting ready for hyperinflation stockpiling all those 'non-income producing assets'...like natural resources, gold and...kinds every thing but ...paper?

Sun, 03/23/2014 - 18:40 | 4583421 Bdelande
Bdelande's picture

oh, I'm sure the Chinese are protecting themselves as you have correctly suggested.  

 

The thrust of what I was trying to state was that BB & the Fed have unwittingly set the world on fire with their abomination ZIRP & QE unlimited.  It may have papered over things, made us all feel cozy again for the short term, but the long term is now upon us, and it's pay back time.

I suspect the Central Committee in China is well aware of what happens next and protecting themselves accordingly. 

Sun, 03/23/2014 - 17:31 | 4583274 ebworthen
ebworthen's picture

Planned programmed generational theft, plain and simple.

They don't call them Central "Banks" for nothing.

Sun, 03/23/2014 - 17:29 | 4583269 moneybots
moneybots's picture

"The teetering global economy is now facing the unintended consequences of economic disequilibrium that the Fed has unwittingly unleashed on the world, which is now disintegrating before us."

 

Indeed, it is very wittingly.  Bernanke wrote in 1988, that QE does not work, yet he did it anyway.

 

 

Sun, 03/23/2014 - 17:17 | 4583242 kaiserhoff
kaiserhoff's picture

Nice summary Tim.  It's the ten year that will crunch housing.

Let the games begin.

Sun, 03/23/2014 - 17:36 | 4583285 Bdelande
Bdelande's picture

FYI - This was written by a friend of Tim's that regularly contributes to SOH.

 

 

Sun, 03/23/2014 - 17:54 | 4583327 kaiserhoff
kaiserhoff's picture

Saw that later.  Thanks.

Sun, 03/23/2014 - 17:13 | 4583219 TruthInSunshine
TruthInSunshine's picture

"Let Them Eat Priceline.com, Zynga, Amazon, Lululemon, & Salesforce.com."

Sun, 03/23/2014 - 16:58 | 4583167 I Write Code
I Write Code's picture

The Queen has begun gathering Her crenellated petticoats because She knows the masticated monetary policies of The Bernank have drawn global tittering from the teetering disintermediated world zombie woof.

Is that a real poncho, or is it like a Sears poncho?

Sun, 03/23/2014 - 16:53 | 4583161 The Wisp
The Wisp's picture

A Large Ship does Not turn on a Dime, it Keeps moving along, But when it hits a Rock, it stops suddenly and does some real crazy Things.

 Hey Skipper, what's that Funny Black thing up there in the Water

Sun, 03/23/2014 - 16:38 | 4583133 jagercali
jagercali's picture

Great article and written with style....unfortunately the truth lies so deep in all of the above words....we are in for a burst of epic proportions....everyone agrees...or most everyone...Faber...Schiff...Cramer...Celente...Jones...Ruppert...the list goes on and on...however our gov't and supporting staff....the MSM...are pumping the soccer moms and dads with frivilous stories about missing 777's and who's getting their picture re-tweeted the most...what a joke...knowldege is power...history always repeats itself....but no one acts like this anymore in the 21st century according to Lurch or Kerry our fearless liar of a Secretary of State...strap in and get ready we are in for a hell of a ride...

Sun, 03/23/2014 - 18:44 | 4583490 Rafferty
Rafferty's picture

Question is, how long can the printing continue?  It's continued way way way longer than anybody dreamed (or nightmared) it could.  I'd say there's life in the old printer yet.  As soon as rates start to rise the taper will be untapered.  Just watch.

Sun, 03/23/2014 - 16:38 | 4583132 jagercali
jagercali's picture

Great article and written with style....unfortunately the truth lies so deep in all of the above words....we are in for a burst of epic proportions....everyone agrees...or most everyone...Faber...Schiff...Cramer...Celente...Jones...Ruppert...the list goes on and on...however our gov't and supporting staff....the MSM...are pumping the soccer moms and dads with frivilous stories about missing 777's and who's getting their picture re-tweeted the most...what a joke...knowldege is power...history always repeats itself....but no one acts like this anymore in the 21st century according to Lurch or Kerry our fearless liar of a Secretary of State...strap in and get ready we are in for a hell of a ride...

Sun, 03/23/2014 - 15:37 | 4583021 Bdelande
Bdelande's picture

Who wrote this?  It's fabulously fantastic fun!

Mon, 03/24/2014 - 22:46 | 4588664 Dr. Hannibal Lecter
Dr. Hannibal Lecter's picture

You know exactly who wrote this.  You did, and all you are doing now is blowing yourself.

 

Blow me, BDI, you self-centered pompus prick.

Fri, 03/28/2014 - 21:45 | 4604573 Bdelande
Bdelande's picture

You're lucky to even know me...........................

Mon, 03/24/2014 - 22:46 | 4588663 Dr. Hannibal Lecter
Dr. Hannibal Lecter's picture

You know exactly who wrote this.  You did, and all you are doing now is blowing yourself.

 

Blow me, BDI, you self-centered pompus prick.

Sun, 03/23/2014 - 15:08 | 4582934 foxmuldar
foxmuldar's picture

Have no fear, Janet Yellen is here. LOL

Sun, 03/23/2014 - 15:19 | 4582970 Tim Knight from...
Tim Knight from Slope of Hope's picture

Word around the water cooler is that she's shaving her back regularly now that she's in a position of real power. It's all about respect for the office.

Sun, 03/23/2014 - 17:06 | 4583190 El Vaquero
El Vaquero's picture

I didn't know that scales had hair follicles!?

Sun, 03/23/2014 - 16:57 | 4583170 OpenThePodBayDoorHAL
OpenThePodBayDoorHAL's picture

full Brazilian with a racing stripe up the front

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