http://www.zerohedge.com/fullrss2.xml/contributed/contributed/news/speaking-credibility-here-cbos-2001-forecast-which-predicted-negative-25-trillion-net-debt-2011 en One Last Look At The Real Economy Before It Implodes - Part 5 http://www.zerohedge.com/news/2015-04-17/one-last-look-real-economy-it-implodes-part-5 <p><a href="http://www.alt-market.com/articles/2568-one-last-look-at-the-real-economy-before-it-implodes-part-5"><em>Submitted by Brandon Smith via Alt-Market.com</em></a>, <em>(click here for <a href="http://www.zerohedge.com/news/2015-03-04/one-last-look-real-economy-it-implodes-part-1">Part 1</a>, <a href="http://www.zerohedge.com/news/2015-03-11/one-last-look-real-economy-it-implodes-part-2">Part 2</a>, <a href="http://www.zerohedge.com/news/2015-03-20/one-last-look-real-economy-it-implodes-part-3">Part 3</a>, and <a href="http://www.zerohedge.com/news/2015-04-10/one-last-look-real-economy-it-implodes-part-4">Part 4</a>)</em></p> <p>Since I began writing analysis for the liberty movement more than eight years ago, I have always said that<strong> we will know when the endgame of the globalists is upon us when the criminals come out into the light of day and admit to their crimes.</strong> At that moment, it will be because they no longer fear either the repercussions or their plans being obstructed.</p> <p>As I plan to show in this installment of my series on the hidden fiscal collapse of America, the endgame has indeed arrived. At the very least, the international elites seem to think success is within their grasp, for they now openly expose their own criminality. <strong>But they do so in a way that attempts to divert blame or to rationalize their actions as being for the &ldquo;greater good.&rdquo;</strong></p> <p>In <a href="http://www.alt-market.com/articles/2563-one-last-look-at-the-real-economy-before-it-implodes-part-4">Part 4 of this series</a>, I discussed the reality of the false East/West paradigm and the fact that the &ldquo;conflict&rdquo; between Eastern and Western interests is nothing more than Kabuki theater constructed by globalists and designed to mesmerize the masses. You see, the problem with most people is that they tend to let their innate sense of tribalism drive them to take sides in war without understanding the fundamental root of that war. In most cases, they believe one side must be &ldquo;good&rdquo; and one side must be &ldquo;bad.&rdquo; Globalists understand this weakness of human collectivism, and they exploit it as often as possible. <strong>They create conflicts from out of the void, conflicts in which BOTH sides are controlled. Then, they let the masses fumble like idiots trying to set the noose around the other guy&rsquo;s neck.</strong></p> <p><strong>The East/West paradigm is just another in a long line of false confrontations engineered by the elites,</strong> but it is one that is most dangerous to the liberty movement itself. In our rage over the destruction of freedom and prosperity within our own country, some of us have come to assume that the source of all that is unholy bubbles at the heart of U.S. corporate and government activity and that the East is in the midst of some kind of rebellion. This is simply nonsense.</p> <p>Recently, a reader sent me a link that reminded me of comments made by Rep. Louis T. McFadden, chairman of the House Banking Committee, on May 4, 1933. In the wake of his battle against the Federal Reserve, he said:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em><strong>&ldquo;&hellip; the treacherous signing away of American rights at the 7-power conference at London in July 1931 &hellip; put the Federal Reserve System under the control of the Bank of International Settlements.&rdquo;</strong></em></p> </blockquote> <p>Even in 1933, there were some people who could see that the Federal Reserve was just an errand boy, an economic hit man for a more powerful entity. Sadly, McFadden died in 1936 from coronary thrombosis before he could make any headway in his crusade. The truth he stamped into the public record, though, lives on; and it is a truth that many people just don&rsquo;t want to hear. It is easier to quantify the threat of the Federal Reserve. It is easier to believe that the Fed either controls the entire game or (for the more sheep-minded citizenry) that the Fed is a harmless &ldquo;quasi-governmental body.&rdquo; Many of us in the movement want to believe it is the gateway to the seventh circle of hell because if the Fed dies, then we win. And the Fed appears to be killable, most notably in light of certain actions on the part of the East. Unfortunately, the problem is far more complex.</p> <p>As McFadden exposed,<strong> the Fed is merely a tentacle, one of many slithering at the behest of a larger vampire squid. </strong>The Bank for International Settlements appears to be the eye of the leviathan. I have been happy to see that the BIS is gaining more and more attention from the alternative media as a primary threat to the stability of the world. Zero Hedge published a very interesting article on the BIS banking cabal recently, excerpted from a book by Adam LeBor and titled <a href="http://www.zerohedge.com/news/2015-04-11/meet-secretive-group-runs-world" target="_blank">&ldquo;Meet The Secretive Group That Runs The World.&rdquo; </a></p> <p>Of course, this is not the first exposé on the BIS. Even Harper&rsquo;s published a surprisingly honest (though only half the story) piece on the bank, titled <a href="http://www.bibliotecapleyades.net/sociopolitica/sociopol_globalbanking140.htm">&ldquo;Ruling The World Of Money,&rdquo;</a> back in 1983. In it, the magazine claims that &ldquo;&hellip;the unabashed purpose of its (BIS) elite monthly meetings is to coordinate and, if possible, to control all monetary activities in the industrialized world.&rdquo;</p> <p><strong>Any central bank that ends up on the membership roster of the BIS should be for all intents and purposes considered a pawn of the BIS. </strong>This includes the central banks of Eastern nations supposedly in opposition to Western power. The very beginning history of the BIS is stained with blood, since it financially played both sides of World War II and aided the funding of the Nazi apparatus. Keep in mind that Germany, Japan and the Allies were all members of the BIS from 1931 on and remained members through the war. Bankers have been pitting countries against each other for a very long time, and they have no loyalties to any particular nation.</p> <p><strong>The BIS had to fade into the background for a time after its partnership with fascists was made public after the war.</strong> So the elites formed yet another monstrosity, the International Monetary Fund, to take its place in the public eye. However, the BIS continues to this day to pull the strings of the world&rsquo;s central banks and, by extension, the world&rsquo;s governments.</p> <p>The strategy of engineered conflict has not changed. I have written numerous articles on the undeniable collusion between Russia and the IMF, including the avid Russian support for the IMF&rsquo;s new global reserve currency, the Special Drawing Rights. You can read those articles <a href="http://www.alt-market.com/articles/2074-russia-is-dominated-by-global-banks-too" target="_blank">here</a>, <a href="http://www.alt-market.com/articles/2168-the-new-world-order-and-the-rise-of-the-east" target="_blank">here</a> and <a href="http://www.alt-market.com/articles/2126-false-eastwest-paradigm-hides-the-rise-of-global-currency" target="_blank">here</a>.</p> <p>Vladimir Putin and the Kremlin have continued their love affair with the IMF since 2009, when they called for the SDR to become the <a href="http://www.themoscowtimes.com/business/article/at-g20-kremlin-to-pitch-new-currency/375364.html" target="_blank">world reserve currency</a>.</p> <p>Last year, <a href="http://www.wh-china.com/world/201407/t2504534.htm" target="_blank">Putin reasserted</a> the goal of the BRICS to become more involved (enveloped) in the IMF system:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em><strong>&quot;In the BRICS case we see a whole set of coinciding strategic interests. First of all, this is the common intention to reform the international monetary and financial system. In the present form it is unjust to the BRICS countries and to new economies in general. We should take a more active part in the IMF and the World Bank&rsquo;s decision-making system. The international monetary system itself depends a lot on the US dollar, or, to be precise, on the monetary and financial policy of the US authorities. The BRICS countries want to change this.&quot;</strong></em></p> </blockquote> <p>I also <a href="http://www.alt-market.com/articles/784-how-the-us-dollar-will-be-replaced" target="_blank">have been covering</a> the Chinese shift away from the dollar and into the arms of the IMF&rsquo;s currency basket for years.</p> <p><strong>The great lie today is that China and Russia are anti-New World Order.</strong> Yet as I discussed in my last article, China (and Russia) have consistently called for a global conversion into the SDR basket system, and they want this system to be run by the IMF. The IMF, in turn, has consistently called for the end of the dollar as the world reserve currency and has openly embraced institutions like the new Asian regional bank, the AIIB, which is dominated by China, despite the fact that many people wrongly believe that the AIIB is somehow &ldquo;competition&rdquo; to the IMF or World Bank.</p> <p>This excerpt comes from the <a href="http://www.ibtimes.co.uk/world-bank-adb-welcome-asian-infrastructure-investment-bank-say-this-will-boost-global-1493112" target="_blank">International Business Times</a>:</p> <p>World Bank managing director Mulyani Indrawati told Xinhua in an interview.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em><strong>&ldquo;We will definitely open for cooperation with AIIB [sic]. Even now, we are working very closely in the beginning and looking at the setting, principle and framework of this institution.&rdquo;</strong></em></p> <p>&nbsp;</p> <p><em><strong>She also dismissed worries that the AIIB will compete against the World Bank or existing regional development banks and noted the global need for infrastructure is huge to accommodate multiple organisations.</strong></em></p> <p>&nbsp;</p> <p><em><strong>Speaking at the opening of the China Development Forum in Beijing, IMF chief Christine Lagarde said the IMF would be &ldquo;delighted&rdquo; to co-operate with AIIB, and the institutions have &ldquo;massive&rdquo; room for cooperation.</strong></em></p> </blockquote> <p>More on the history of China and its partnership with the New World Order can be found in James Corbett&rsquo;s excellent video analysis <a href="https://www.youtube.com/watch?v=5M1KD7Dnq4s">here</a>.</p> <p>At the level of international banking and monetary policy, there is absolutely NO indication of any legitimate conflict between the East and the West. Again, such battles are only theater for the masses. But what purpose does this theater serve?</p> <p><strong>The fake economic war between East and West provides cover and rationale for the true goal of the internationalists: the destruction of the dollar as the world reserve currency and the ascendency of the SDR global monetary system.</strong> The endgame of the bankers is, of course, global government. It has been the longtime dream of the Fabian socialists permeating the central banking universe. A global currency system and centralized economic management are first-step psychological weapons against the public. If the world operates on a singular currency mechanism and a singular economic authority, why not have a singular governmental system as well?</p> <p>The mistake many liberty movement analysts make is the assumption that the internationalists are somehow dedicated to U.S. interests. The idea that globalists have any loyalties to any sovereign government is a ridiculous notion. Fabians hate sovereign separations between nations (as much as they hate individual liberties), and they seek to ultimately destroy all boundaries for the sake of a singular global fiscal-political edifice.</p> <p><strong>But the elites cannot simply kill the dollar and replace it outright. They need a magic trick, a smoke-and-mirrors hologram, a sexy assistant in a sequined bathing suit and fireworks galore while they pull their global basket reserve out of a top hat.</strong> The false East/West paradigm is the perfect distraction. What better way to destroy the dollar and conjure a new world reserve than to pit one block of nations you dominate against the other block of nations you dominate and blame the resulting economic catastrophe on the &quot;barbarism of sovereign nationalism,&rdquo; which you also plan to erase in due course?</p> <p>The elites are preparing for this event, and they are not content only to trigger it then sit back and watch it happen. They also hope to construct a new image for themselves as the prophets who tried to warn the world &mdash; the financial &ldquo;sages&rdquo; who would be our rescuers.</p> <p><u><strong>The criminals are coming into the light, and they are wearing the masks of saviors.</strong></u></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><a href="http://www.wsj.com/articles/former-fed-chief-greenspan-worried-about-future-of-monetary-policy-1414597627" target="_blank">Alan Greenspan</a> is now suddenly a staunch promoter of economic caution, warning that &ldquo;something big &hellip; a significant market event &hellip;&rdquo; is about to happen, and that gold is now a good investment as opposed to the dollar.</p> <p>&nbsp;</p> <p><a href="http://www.zerohedge.com/news/2015-03-27/santelli-stunned-janet-yellen-admits-cash-not-store-value" target="_blank">Janet Yellen</a> has openly conceded that cash is <em>not</em> a convenient store of value.</p> <p>&nbsp;</p> <p><a href="http://www.scribd.com/doc/261340754/JPMC-AR2014-LetterToShareholders" target="_blank">Jamie Dimon</a> is getting in on the prognosticator action, asserting that another financial crisis is coming.</p> <p>&nbsp;</p> <p>The IMF now consistently warns of <a href="http://blogs.wsj.com/economics/2015/04/08/imf-warns-again-of-growing-shadow-banking-risks/" target="_blank">&ldquo;shadow banking risks&rdquo;</a> bringing disaster to the economic environment.</p> <p>&nbsp;</p> <p>The <a href="http://www.cnbc.com/id/101749088" target="_blank">World Bank</a> has been polite enough to warn the public that &ldquo;now is the time to prepare for the next crisis.&rdquo;</p> <p>&nbsp;</p> <p>The <a href="http://www.telegraph.co.uk/finance/economics/11162217/BIS-warns-on-violent-reversal-of-global-markets.html" target="_blank">BIS</a> now produces statements on a regular basis predicting a possible &ldquo;violent reversal of global markets,&rdquo; just as it conveniently <a href="http://www.telegraph.co.uk/finance/economics/2811081/BIS-warns-of-Great-Depression-dangers-from-credit-spree.html" target="_blank">alerted</a> the public to the possibility of credit collapse in 2007 right before the derivatives crisis.</p> </blockquote> <p><strong>Literally every elitist and his drunken uncle now publicly discuss the danger of another market crash.</strong> That&rsquo;s a rather stark reversal from a few years ago when recovery was a mainstream absolute, Bernanke was being called a hero, and fiat stimulus was the fountain of youth. How would they know that such an event is coming? They built the conditions by which a collapse is inevitable, and now they want to purify themselves in the waters of Lake Minnetonka and absolve their institutions of all future ugliness.</p> <p>I would like to point out, though, that<strong> banker warnings of volatility and crisis are generally given far too late for average people to act accordingly</strong>. I would also like to point out that the rising chorus of mainstream voices giving predictions of destabilization are also marginalizing and isolating the U.S. and the Federal Reserve as the root cause. The U.S. is nothing more than a storefront for elitist activities. And the Federal Reserve is a tentacle that can be sacrificed if it means achieving total centralization. <strong>All signs and evidence point to what the IMF calls the &ldquo;great global economic reset.&rdquo; The plans for this reset do not include U.S. prosperity or a thriving dollar.</strong></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="448" height="362" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20150417_alt.jpg?1429304948" /> </div> </div> </div> http://www.zerohedge.com/news/2015-04-17/one-last-look-real-economy-it-implodes-part-5#comments Alan Greenspan Bank of International Settlements BIS BRICs Central Banks China Federal Reserve Germany International Monetary Fund Jamie Dimon Janet Yellen Japan Market Crash Monetary Policy Nationalism Reality recovery Reserve Currency Shadow Banking Vladimir Putin Volatility World Bank Sat, 18 Apr 2015 02:25:16 +0000 Tyler Durden 504964 at http://www.zerohedge.com Sand-nado - Beijing Battered By Blanket Of Red Dust http://www.zerohedge.com/news/2015-04-17/sand-nado-beijing-battered-blanket-red-dust <p>In yet another ripped from the movies-screen-esque event, <strong>Beijing was brought to a standstill today as a massive Interstellar-like sandstorm covered the Chinese capital in thick blanket of red dust</strong>, sparking social media discussions of the end of the world. <a href="http://rt.com/news/250301-beijing-sand-storm-dust/"><em>As RT reports,</em></a> The China Meteorological Administration issued a yellow sandstorm alert &ndash; the third-most serious danger level, which given the images below, makes us wonder just WTF it takes to get to a level 1 sandstorm...</p> <p>Stunning!! In a city of 21 million people...</p> <p><iframe allowfullscreen="" frameborder="0" height="315" src="https://www.youtube.com/embed/eQwA-X2pKTo" width="560"></iframe></p> <p>&nbsp;</p> <p><a href="http://rt.com/news/250301-beijing-sand-storm-dust/"><em>As RT reports,</em> </a><strong>Some areas in the city of 21 million recorded air pollution of nearly 1,000 micrograms per cubic meter, which is considered hazardous for people&rsquo;s health.</strong></p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/04/20150417_sand2.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/04/20150417_sand2.jpg" style="width: 598px; height: 661px;" /></a></p> <p>&nbsp;</p> <p>Beijing residents had to wear face masks and goggles to protect themselves from the red sand and avoid injury and respiratory problems.</p> <p><iframe allowfullscreen="" frameborder="0" height="360" src="https://www.youtube.com/embed/AgCi7lGaf5g" width="640"></iframe></p> <p>The bad visibility seriously disrupted traffic, causing large traffic jams all over the capital.</p> <blockquote class="twitter-tweet" lang="en"><p>Massive sandstorm rolling into central Beijing, view from our office window: <a href="http://t.co/VUaz6jJV7P">pic.twitter.com/VUaz6jJV7P</a></p> <p>&mdash; Steve George (@steve0george) <a href="https://twitter.com/steve0george/status/588282799058124800">April 15, 2015</a></p> </blockquote> <p>Chinese internet users were quick to label the weather phenomenon &lsquo;Sand-ageddon,&rsquo; comparing it to the end of the world.</p> <p><em>&ldquo;It&rsquo;s very dirty, I feel like it is the end of the world,&rdquo;</em> one of the users was cited by South China Morning Post.</p> <blockquote class="twitter-tweet" lang="en"><p>Sandstorm in Beijing, it appears. <a href="http://t.co/GfjThxtEgE">pic.twitter.com/GfjThxtEgE</a></p> <p>&mdash; Ben Ross (@BenRoss) <a href="https://twitter.com/BenRoss/status/588282014308163584">April 15, 2015</a></p> </blockquote> <p>While another person on social networks wrote that <em>&ldquo;it feels like we are living in a desert. I wonder how we can survive such bad weather.&rdquo;</em></p> <p>Despite being far from the red danger level, Wednesday&rsquo;s sand storm was the strongest in the Chinese capital in 13 years.</p> <blockquote class="twitter-tweet" lang="en"><p>Sandstorm, smog, willow catkins and traffic. Just another day in Beijing... <a href="http://t.co/YSTELa71QA">pic.twitter.com/YSTELa71QA</a></p> <p>&mdash; Li Yuan (@LiYuan6) <a href="https://twitter.com/LiYuan6/status/588326932468531200">April 15, 2015</a></p> </blockquote> <p>Besides Beijing, 11 other provinces in the north of the country were impacted by the storm, which led to electricity blackouts and chaos on the roads.</p> <p>Sandstorms are a common event in China in the spring, with the dust originating from the outer edge of deserts in Mongolia, northern China and the Hexi Corridor.</p> <blockquote class="twitter-tweet" lang="en"><p>For those bored by <a href="https://twitter.com/hashtag/Beijing?src=hash">#Beijing</a> pollution, behold the <a href="https://twitter.com/hashtag/Beijing?src=hash">#Beijing</a> sandstorm. <a href="http://t.co/qt1O5Sv47K">pic.twitter.com/qt1O5Sv47K</a></p> <p>&mdash; Janis Mackey Frayer (@janisctv) <a href="https://twitter.com/janisctv/status/588281247727804417">April 15, 2015</a></p> </blockquote> <p><strong>Beijing is considered among the most polluted cities in the planet,</strong> with environmental watchdog Chinese Hazardous saying on Thursday that air particles, which cause asthma and breathing problems, were more than double the national target in the capital.</p> <p>*&nbsp; *&nbsp; *</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="479" height="408" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20150417_sand1.jpg?1429303885" /> </div> </div> </div> http://www.zerohedge.com/news/2015-04-17/sand-nado-beijing-battered-blanket-red-dust#comments China Twitter Twitter Yuan Sat, 18 Apr 2015 01:50:57 +0000 Tyler Durden 504962 at http://www.zerohedge.com Putting The Real Story Of Energy & The Economy Together http://www.zerohedge.com/news/2015-04-17/putting-real-story-energy-economy-together <p><a href="http://ourfiniteworld.com/2015/04/15/putting-the-real-story-of-energy-and-the-economy-together/"><em>Submitted by Gail Tverberg via Our Finite World blog</em></a>,</p> <p><strong>What is the real story of energy and the economy?</strong> We hear two predominant energy stories. One is the story economists tell: The economy can grow forever; energy shortages will have no impact on the economy. We can simply substitute other forms of energy, or do without.</p> <p>Another version of the energy and the economy story is the view of many who believe in the &ldquo;Peak Oil&rdquo; theory. According to this view, oil supply can decrease with only a minor impact on the economy. The economy will continue along as before, except with higher prices. These higher prices encourage the production of alternatives, such wind and solar. At this point, it is not just peak oilers who endorse this view, but many others as well.</p> <p><strong>In my view, the real story of energy and the economy is much less favorable than either of these views.</strong> It is a story of oil limits that will make themselves known as <em>financial limits,</em> quite possibly in the near term&mdash;perhaps in as little time as a few months or years. Our underlying problem is diminishing returns&mdash;it takes more and more effort (hours of workers&rsquo; time and quantities of resources), to produce essentially the same goods and services.</p> <p>We don&rsquo;t measure our investment results with respect to the quantity of end product produced (barrels of oil produced, liters of fresh water produced, kilos of copper produced, or number of workers provided with sufficient education to work in high tech industries), so we don&rsquo;t realize that we are becoming increasingly inefficient at producing desired end products. See my post &ldquo;<a href="http://ourfiniteworld.com/2014/12/29/how-increased-inefficiency-explains-falling-oil-prices/">How increased inefficiency explains falling oil&nbsp;prices</a>.&rdquo;</p> <div class="wp-caption aligncenter" data-shortcode="caption" id="attachment_38773" style="width: 650px"><a href="https://gailtheactuary.files.wordpress.com/2014/01/cost-of-extracting-a-barrel-of-oil.png"><img alt="Figure 2. The way we would expect the cost of the extraction of energy supplies to rise, as finite supplies deplete." class="wp-image-38773 size-large" src="https://gailtheactuary.files.wordpress.com/2014/01/cost-of-extracting-a-barrel-of-oil.png?w=640&amp;h=385" /></a><br /> <p class="wp-caption-text"><em>Figure 1. The way we would expect the cost of the extraction of energy supplies to rise, as finite supplies deplete.</em></p> </div> <p><strong>Wages, viewed in terms of the product produced&ndash;oil in this case&ndash;can be expected to decrease as well. </strong>This change isn&rsquo;t evident in usual efficiency statistics, because some of the workers are providing new kinds of services, such as fracking services, that weren&rsquo;t required before.</p> <div class="wp-caption aligncenter" data-shortcode="caption" id="attachment_39685" style="width: 650px"><a href="https://gailtheactuary.files.wordpress.com/2015/03/wages-per-worker-in-units-of-oil.png"><img alt="Figure 3. Wages per worker in units of oil produced, corresponding to amounts shown in Figure 2. " class="wp-image-39685 size-large" src="https://gailtheactuary.files.wordpress.com/2015/03/wages-per-worker-in-units-of-oil.png?w=640&amp;h=385" /></a><br /> <p class="wp-caption-text"><em>Figure 2. Wages per worker in units of oil produced, corresponding to amounts shown in Figure 1.</em></p> </div> <p><strong>Even investment is becoming increasingly inefficient.</strong> It takes more and more investment to extract a given quantity of oil or other energy product. This investment needs to stay in place longer as well. The ultra-low interest rates we have been experiencing reflect the poor returns investments are now making.</p> <p>The myth exists that prices of all of the scarce goods and services will rise high and higher, as the economy encounters scarcity.<strong> The real story, though, is that the inflation-adjusted purchasing power of common workers is falling lower and lower, especially in the United States, Europe, and Japan.</strong> Not only can these workers afford to buy less, but they can also afford to borrow less. This means that their ability to purchase expensive goods created from commodities is falling.</p> <p><strong>At some point, this lack of purchasing power can be expected to affect the financial markets, and the prices of many commodities can be expected to fall. In fact, this already seems to be happening.</strong></p> <p>The likely impact of such a fall in commodity prices is not good. If low oil prices cannot be &ldquo;turned around,&rdquo; they will lead to debt defaults, and these debt defaults are likely to lead to failing financial institutions. Failing financial institutions have the potential to bring down the system, because it becomes very difficult for businesses to continue if they are not supported by a banking system that allows a company to pay its employees. Workers also need the banking system to pay for goods and to save for a &ldquo;rainy day.&rdquo;</p> <p><strong>A big part of what has allowed the economy to grow to the size it is today is increasing debt levels.</strong> These rising debt levels play many roles:</p> <ul> <li>They make high-priced goods more affordable to consumers.</li> <li>They create greater demand for goods, allowing more end-product goods to be produced.</li> <li>They create more demand for commodities required to make end-product goods, allowing the price of these commodities to rise, so that more businesses have more incentive to create/extract these commodities.</li> </ul> <p><strong>At some point, debt levels stop rising as fast as they have in the past (because of a lack of growth in purchasing power because of diminishing returns in investment), and the whole system tends to fall toward collapse.</strong> We seem to have reached this point in the middle of 2014. China was raising its total debt level rapidly up until the early part of 2014, then suddenly moderated its growth in debt level in mid 2014. At about the same time, the US scaled back and eliminated it program of quantitative easing (QE). Oil prices dropped starting in mid-2014, at the time debt levels started moderating. Other commodity prices started falling as early as 2011, indicating likely affordability problems.</p> <p>We are now in the period when many people still believe everything is going well. Oil prices and other commodity prices are low&mdash;what is &ldquo;not to like&rdquo;? <strong>The answer is that the system in not at all sustainable&mdash;profits of oil companies and other commodity businesses are down, just as wages of common workers in developed countries are down in inflation-adjusted terms. Companies are cutting back in investment in oil production. Soon oil production will drop. With lower oil supply, the economy will face huge challenges.</strong></p> <p>Many people believe that oil prices can bounce back up again, but this really isn&rsquo;t the case, because of growing inefficiency related to limits we are reaching&ndash;the need to use more advanced techniques to produce oil; the need for desalination for water in some places; the need for more pollution control equipment that doesn&rsquo;t really increase the finished goods and services we are producing but instead makes goods more expensive to produce.</p> <p><strong>Each worker is, on average, producing less and less of the finished goods we really need.</strong> Whether we like it or not, standards of living will have to fall. The amount of debt workers can afford decreases rather than increases. This new reality can be expected to manifest itself in debt defaults and increasing financial system problems.</p> <p>Even if oil prices bounce back up again, it is doubtful that shale oil drillers will be able to again borrow at a sufficiently high rate to increase their production again&mdash;<strong>what lender will believe that oil prices will remain high indefinitely?</strong></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="485" height="353" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20150417_energy.jpg?1429291787" /> </div> </div> </div> http://www.zerohedge.com/news/2015-04-17/putting-real-story-energy-economy-together#comments China Copper Japan Purchasing Power Quantitative Easing Reality Sat, 18 Apr 2015 01:15:52 +0000 Tyler Durden 504960 at http://www.zerohedge.com Compare And Contrast: Putin vs Draghi http://www.zerohedge.com/news/2015-04-17/compare-and-contrast-putin-vs-draghi <p>Spot the difference:</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/04/20150417_putinghi.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/04/20150417_putinghi_0.jpg" width="600" height="179" /></a></p> <p>&nbsp;</p> <ul> <li>A topless protester gets "two thumbs up" and a smile from Vladimir Putin.</li> <li>A terrified Mario Draghi reels from a fully-clothed female protester.</li> </ul> <p>&nbsp;</p> <p><a href="https://twitter.com/RudyHavenstein/status/589086883398881280"><em>Source: @RudyHavenstein</em></a></p> http://www.zerohedge.com/news/2015-04-17/compare-and-contrast-putin-vs-draghi#comments Vladimir Putin Sat, 18 Apr 2015 00:55:15 +0000 Tyler Durden 504956 at http://www.zerohedge.com Is The Student Debt Bubble About To Witness Its 2007 Moment? http://www.zerohedge.com/news/2015-04-17/student-debt-bubble-about-witness-its-2007-moment <p>Two days ago <a href="http://www.zerohedge.com/news/2015-04-15/staggering-student-loan-defaults-deck-27-students-are-month-behind-their-payments">we highlighted a new study</a> from the St. Louis Fed where someone had the very prudent idea to strip out loans in deferment and forbearance from the denominator of the student debt delinquency rate equation so everyone could get a better idea of what the real numbers look like.&nbsp;</p> <p>The thing is, you can’t be delinquent when you aren’t required to make payments, so if you divide the number of delinquent student loans by the total amount of outstanding debt including loans in deferment and forbearance, you are comparing apples to oranges. Only around 55% of outstanding student loans are in repayment, and obviously, what we really want to know is what percentage of <em>those</em> loans are delinquent. We don’t care what percentage of total outstanding student debt is delinquent because 45% of borrowers aren’t yet required to make payments so it makes absolutely no sense to include them in the equation — we know what percentage of that group is delinquent, it’s 0%, because no one is asking them for any money yet.&nbsp;</p> <p>What we can do though, is divide the amount of debt that’s delinquent by the total amount of debt in repayment and then extrapolate from that and say something like this: <strong>“If 55% of total student debt is currently in repayment and 27% of that is delinquent, then it seems reasonable to assume that a similar rate will prevail for the other 45% of borrowers once they go into repayment unless something changes in the economy which it won’t, so in all likelihood, about 1 in 3 student borrowers will end up 30 or more days delinquent and that adds up to about $400 billion in student debt that likely won’t be in good standing.”</strong></p> <p><span style="font-size: 1em; line-height: 1.3em;">This is particularly bad news <a href="http://www.zerohedge.com/news/2014-12-10/treasurys-worst-case-scenario-over-33-trillion-student-loans-decade-and-32-default-r">when you consider</a> that “the TBAC forecasts, in its worst economic case scenario for the millennial generation (which sadly, based on recent employment and income trends for America's young adults is more like the base case scenario), total student loans, which currently stand a little over $1 trillion (or more than all the credit card debt in America), is set to triple in just the next decade, hitting a whopping $3.3 trillion by 2024.” </span></p> <p><span style="font-size: 1em; line-height: 1.3em;">Needless to say, a near 30% delinquency rate on a projected $3.3 trillion mountain of debt is a very, very bad thing especially when that debt ends up packaged and sold to investors in the form of ABS. Here’s a brief look at what the market looks like for student loan-backed ABS currently via Deutsche Bank:</span></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><em>With $3.5 billion pricing year-to-date, student loan ABS issuance lags Q1 2014 by 20%, but remains on track to reach our projection of $15 billion in 2015. Navient leads the way with $1.7 billion in issuance year-to-date, followed by Nelnet with $1.3 billion. Although they have yet to come to market during 2015, we expect to see Sallie Mae issue multiple transactions during the remainder of 2015. Additional supply resulting from FFELP loan portfolio sales should continue to bolster SL ABS issuance as well.</em></p> </blockquote> <p><a href="http://www.zerohedge.com/sites/default/files/images/user92183/imageroot/2015/04/ABSQ1Breakdown.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user92183/imageroot/2015/04/ABSQ1Breakdown.jpg" width="225" height="184" /></a></p> <p>Given (real) delinquency rates on the assets backing this paper, we wonder when this market will have its own version of what happened to the MBS market in July 2007 when suddenly, all three major ratings agencies woke up to what they had helped facilitate in the housing market and quickly moved to downgrade billions in deals backed by souring mortgages. Here, as a reminder, is a recap of what happened then:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><em>On July 10, 2007 Moody’s downgraded 399 bonds backed by subprime mortgages which together totaled some $5.2 billion. Meanwhile, S&amp;P suggested it was close to cutting ratings on more than $12 billion in mortgage-backed securities due to declining home prices and rising default rates. On July 12, Fitch Ratings placed 19 structured collateralized debt obligations on Ratings Watch Negative due to a significant deterioration in the underlying portfolios of residential mortgage-backed securities. Fitch said that as part of a revised rating methodology, it was raising the default probability it assumed on residential mortgage-backed securities issued since 2005 by a full 25%. That same day, S&amp;P cut its ratings on 498 subprime mortgage related bonds worth some $6.39 billion.</em></p> </blockquote> <p>With all of the above in mind, we bring you the following, <a href="https://www.moodys.com/research/Moodys-reviews-for-downgrade-several-tranches-in-FFELP-student-loan--PR_322642?WT.mc_id=AM~WWFob29fRmluYW5jZV9TQl9SYXRpbmcgTmV3c19BbGxfRW5n~20150408_PR_322642">from Moody’s</a>:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong><em>Moody's reviews for downgrade several tranches in FFELP student loan securitizations as a result of the risk of default at maturity</em></strong></p> <p>&nbsp;</p> <p><strong><em>Approximately $3.0 billion of asset-backed securities affected</em></strong></p> <p>&nbsp;</p> <p><em>New York, April 08, 2015 -- Moody's Investors Service has placed on review for downgrade the ratings of 14 tranches in 14 securitizations backed by student loans originated under the Federal Family Education Loan Program (FFELP). The loans are guaranteed by the US government for a minimum of 97% of defaulted principal and accrued interest.</em></p> </blockquote> <p><strong>That’s right, just 9 days ago, Moody’s put $3 billion (so nearly the equivalent of 2015 Q1 supply) of student loan-backed ABS on watch for downgrade based on the likelihood of default.</strong> Here’s a list of which tranches from which deals are at risk:</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user92183/imageroot/2015/04/SLABDefault.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user92183/imageroot/2015/04/SLABDefault_0.jpg" width="600" height="310" /></a></p> <p>Here’s a little color from DB:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><em>On April 8, Moody’s placed 14 FFELP SL ABS tranches on review for downgrade due to their view that these bonds may not be fully paid down prior to legal final maturity, resulting in an event of default for these transactions. In an event of a default, repayment of the class A notes may be accelerated at the request of the majority of class A note holders…</em></p> <p>&nbsp;</p> <p><strong><em>Prepayments in the affected deals have come in slower than anticipated at issuance due to factors including higher-than-expected utilization rates of deferral and forbearance, weakness in the job market for new grads following the financial crisis, and expanded availability and uptake of income-based repayment (IBR) plans. The use of IBR has been heavily marketed by the Obama administration as it helps borrowers avoid default by lowering monthly payments and ultimately forgiving any remaining principal after 25 years.&nbsp;</em></strong></p> </blockquote> <p>So just as we have been warning about for sometime now: an underestimation of the impact of deferral and forbearance and weakness in the job market is likely to trigger defaults on billions in student loans and because these loans comprise the collateral pool backing ABS sold to investors, the ripple effect is magnified and we wonder if the July 2007 moment for the student loan-backed ABS market may come sooner rather than later.</p> <p>* &nbsp;* &nbsp;*&nbsp;</p> <p>Full text of Moody’s PR:</p> <p>RATINGS RATIONALE</p> <p><strong>The reviews for downgrade are a result of the increased risk that the tranches will not fully pay down by their respective final maturity dates. Failure to repay a note on the final maturity date represents an event of default under the trust documents.</strong> Recoveries upon default would be very high, although the timing of such recoveries would depend on the transaction structures and voting rights upon default for each transaction.</p> <p>The risk is a result of low payment rates on the underlying securitized pools of student loans, driven by low rates of voluntary prepayments, high volumes of loans in deferment and forbearance, and the growing popularity of Income-Based Repayment (IBR) and extended repayment programs.</p> <p><strong>Voluntary prepayment rates in FFELP loan pools remain historically low as a result of sluggish economic growth and high unemployment rates among recent graduates. Although prepayments rose to 2%-3% of the loans in repayment in 2014, partly as a result of borrowers refinancing their FFELP loans through private student loans and Federal Direct consolidation loans, prepayments remain low relative to historical levels. Deferment and forbearance levels remain high throughout the life of the collateral pools, although they recently declined slightly from peak levels in 2009-11. As of December 2014, roughly 33% of loans in repayment in Navient's non-consolidation loan collateral pools were in deferment and forbearance, compared with 16% for Navient's consolidation loan collateral pools. The growing popularity of IBR, which extends the life of the loans to up to 25 years from the standard 10-year term of non-consolidation loans, and the extended repayment option (for borrowers with balances of more than $30,000) is further lengthening the weighted-average life of the student loan collateral pools. In some pools, loans in IBR and extended repayment represented 10%-12% of the balance of loans in repayment. </strong>Similar trends are common among most collateral pools underlying FFELP student loan securitizations.</p> <p>The rating actions are focusing on tranches that mature in the next five years because they are at most risk of breaching final maturity dates. Tranches that mature after that could benefit from higher voluntary prepayments and lower deferment and forbearance rates as economic conditions continue to improve.</p> <p>During its review, Moody's will evaluate recent and expected future pool amortization trends and structural features of the transactions. In addition, Moody's will consider Navient's December 2014 amendments to a number of its transactions that allow for the limited and discretionary repurchase of loans. Any such repurchases would accelerate the repayment of the related notes. In its review, Moody's will consider, among other things, the amount and timing of any such loan repurchases.</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="279" height="215" alt="" src="http://www.zerohedge.com/sites/default/files/images/user92183/imageroot/StudentDebtBubble.png?1429311557" /> </div> </div> </div> http://www.zerohedge.com/news/2015-04-17/student-debt-bubble-about-witness-its-2007-moment#comments Asset-Backed Securities Collateralized Debt Obligations default Default Probability Deutsche Bank Fitch Housing Market Nelnet Obama Administration ratings Ratings Agencies Sallie Mae St Louis Fed St. Louis Fed Student Loans Subprime Mortgages Unemployment Sat, 18 Apr 2015 00:40:00 +0000 Tyler Durden 504966 at http://www.zerohedge.com 300 US Paratroopers Arrive In Ukraine After Russia Says Its Missiles Will Target NATO Member States http://www.zerohedge.com/news/2015-04-17/300-us-paratroopers-arrive-ukraine-after-russia-says-its-missiles-will-target-nato-m <p>While the escalation of the second Cold War between Russia and the US over their proxy conflict in Ukraine has been relegated to the back pages due to the lack of any flash points in recent months, events in eastern Europe continue to build up to an increasingly unstable equilibrium. Just yesterday, Russia <a href="http://www.reuters.com/article/2015/04/16/us-ukraine-crisis-russia-idUSKBN0N70W820150416">again accused </a>the United States of "seeking political and military dominance and sought to put blame on the West for international security crises, including the conflict in east Ukraine."</p> <p>It didn't stop there. <a href="http://www.wsj.com/articles/russia-threatens-nato-over-missile-shield-1429185058">According to the WSJ</a>, Russia’s top general warned European <strong>countries planning to host installations for a U.S.-led missile-defense shield that Russian forces would be forced to target them</strong>.</p> <p><strong>“Nonnuclear powers where missile-defense installations are being installed have become the objects of priority response,” </strong>Gen. Valery Gerasimov said, referring to Poland and Romania.</p> <p>It was unclear if Russia would use conventional weapons or tactical short-range nuclear missiles for deterrence purposes. </p> <p>The comments came at a defense conference in Moscow where a series of high-level Russian leaders repeatedly warned of perceived threats that the U.S. and the North Atlantic Treaty Organization posed to modern Russia.</p> <p>Russian Defense Minister Sergei Shoigu said, <a href="http://www.reuters.com/article/2015/04/16/us-ukraine-crisis-russia-idUSKBN0N70W820150416">according to Reuters</a>, that a drive by the United States and its allies to bring Kiev closer to the West was a threat to Moscow and had forced it to react.</p> <p><strong>"The United States and its allies have crossed all possible lines in their drive to bring Kiev into their orbit. That could not have failed to trigger our reaction,"</strong> he told an annual security conference in Moscow.</p> <p>General Valery Gerasimov, chief of the General Staff of the Russian Armed Forces, reiterated Russia's warning: "Considering themselves the winners of the Cold War, the United States decided to reshape the world to fit its needs."</p> <p><strong>"Aiming at complete dominance, Washington stopped taking into account the interests of other countries and respect international law.</strong>"</p> <p>When asked about the annexation of Crimea and the ongoing conflict in Ukraine, Shoigu "blamed the violence on Kiev and sought to dismiss Western criticism that Russia was forcibly remaking European borders, pointing in turn to Western military involvement in Serbia, Iraq and Libya."</p> <p>Russian Foreign Minister Sergei Lavrov told the conference attended by envoys from China, Iran, Pakistan and some of Russia's regional allies, that Kiev had to deliver on its obligations under peace agreements reached in Minsk to "safeguard unity of the Ukrainian state".</p> <p>The problem is that at this point it doesn't matter who started what, where and how: just like the Intifada, or any other regional, thousand year-old conflict in Europe or any other part of the world, all that remains are the escalating steps, and how long until one of the two adversaries snaps and engages in an action from which there is no return. </p> <p>Yet despite Russia's very clear threat that its missiles are now armed at two more NATO countries, and numerous previous warnings that the official dispatch of US troops in Ukraine, besides the countless ones who are there on a mercenary basis, will lead to a flash point in the second Cold War, earlier today 300 hundred US paratroopers arrived in Ukraine - <strong>a non-NATO country</strong> - to "train its forces fighting pro-Russian rebels" <a href="http://www.army.mil/article/146549v">according to the US army website</a>. </p> <p>As <a href="http://www.abc.net.au/news/2015-04-17/300-us-troops-arrive-in-ukraine-to-train-local-military/6402124">AFP notes, </a>the move could "destabilize" the war-torn ex-Soviet country, which clearly is the intention. Because as we have warned on numerous occasions, the entire world is now headed into an event horizon in which the neo-cons have bet that only regional (or not so regional) war can be the economic stimulus that pushes the world out of its global depressed funk. Just like the first Great Depression.</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>According to AFP, the troops from the 173rd Airborne Brigade arrived on Tuesday and Wednesday in Yavoriv, western Ukraine, to spend six months training three battalions of Ukrainian troops, the army said in a statement. </p> <p>&nbsp;</p> <p>"We will have about 300 soldiers from the brigade on the ground providing the training that will last over the next six months," said US army spokesman Donald Wrenn.</p> </blockquote> <p>Moscow was obviously displeased: "The participation of instructors and experts from third countries on Ukrainian territory ... of course, does not help to resolve the conflict," president Vladimir Putin's spokesman Dmitry Pekov said, quoted by Russian news agencies.</p> <p><strong>"On the contrary, it can seriously destabilise the situation."</strong></p> <p>Just as Russian troops training Mexican Federales would be sternly frowned upon by the Obama administration.&nbsp; <strong><br /></strong></p> <p>But that's doesn't matter: what matters is that US troops will now train the National Guard of Ukraine, a reservist force that was reformed in 2014 to bring volunteers and militia under government control. They will do so literally within meters of the Russian border. </p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>"We will be conducting classes on war-fighting functions, as well as training to sustain and increase the professionalism and proficiency of military staffs," Major Jose Mendez, operations officer for the brigade, was quoted as saying on the US army website. </p> <p>&nbsp;</p> <p>Ukraine had asked the United States to send the training mission, dubbed Operation Fearless Guardian, according to an article published by the US army on April 11. </p> </blockquote> <p>This is what paratroopers, from the 173rd Airborne Brigade, arriving at Lviv International Airport on April 11, 2015 look like <a href="http://www.army.mil/article/146549">courtesy of the US Army's website</a>:</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/04/size0%20%285%29.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/04/size0%20%285%29.jpg" width="640" height="423" /></a></p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/04/size0%20%286%29.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/04/size0%20%286%29.jpg" width="640" height="423" /></a></p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/04/size0.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/04/size0.jpg" width="640" height="423" /></a></p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/04/size0%20%281%29.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/04/size0%20%281%29.jpg" width="640" height="423" /></a></p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/04/size0%20%282%29.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/04/size0%20%282%29.jpg" width="640" height="423" /></a></p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/04/size0%20%283%29.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/04/size0%20%283%29.jpg" width="640" height="423" /></a></p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/04/size0%20%284%29.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/04/size0%20%284%29.jpg" width="640" height="423" /></a></p> <p>According to the US Army the brigade, as the Army Contingency Response Force in Europe, is conducting continuous operations in six different countries.&nbsp; </p> <p>"This is the new norm for the 173rd," Mendez said. "The 173rd is in a special position, as the only forwardly-positioned airborne brigade in Europe, we have the ability to be anywhere in the U.S. European Command area of responsibility in 18 hours or less."</p> <p>The brigade has trained with Ukrainian forces in international exercises throughout Europe, as well as within Ukraine, most recently last September in the Rapid Trident series of exercises, an annual U.S. Army Europe-led exercise designed to promote regional stability and security. The two forces are scheduled to participate in Exercise Rapid Trident 2015 later this year.</p> <p>More:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>Paratroopers, from the 173rd Airborne Brigade, arrive at Lviv International Airport in Lviv, Ukraine, April 11, 2015, in support of Fearless Guardian, a program to train Ukrainian national guard troops. </p> <p>&nbsp;</p> <p>A ground convoy drove all the way from the brigade's base in northern Italy to the Ukrainian military zone in Yavoriv near the Polish border, with vehicles and equipment. </p> <p>&nbsp;</p> <p>The US and Ukrainian armies stressed the equipment was for use by the US brigade in the training and is not to be issued to Ukrainian forces. Fifty paratroopers travelled with that 25-vehicle convoy, which arrived on April 10, while further troops arrived on April 14 and 15, the US army website said.</p> <p>&nbsp;</p> <p>Ukraine's defence ministry said in a statement that the training would begin with a ceremony on April 20.</p> </blockquote> <p>What happens after will likely assure the second consecutive very "volatile" summer. The good news for economists whose GDP predictions will be dead wrong once more, is that they will have yet another aspect of that thing called "reality" to blame it on.</p> http://www.zerohedge.com/news/2015-04-17/300-us-paratroopers-arrive-ukraine-after-russia-says-its-missiles-will-target-nato-m#comments China Eastern Europe Great Depression Iran Iraq Italy Obama Administration Poland Reality Reuters Romania Ukraine Sat, 18 Apr 2015 00:20:20 +0000 Tyler Durden 504965 at http://www.zerohedge.com Did WalMart Close A California Store To Punish Employees Who Protested Wages And Working Conditions? http://www.zerohedge.com/news/2015-04-17/did-walmart-close-california-store-punish-employees-who-protested-wages-and-working- <p>On Wednesday, <a href="http://www.zerohedge.com/news/2015-04-15/why-walmart-mysteriously-shuttering-stores-nationwide-plumbing-issues">we asked why WalMart</a> simultaneously closed multiple geographically distinct stores across the US for “plumbing issues.” We began by noting that the company — the largest retailer in the world — raised wages across the board just two months ago. Here’s an excerpt from the letter sent to employees by President and CEO Doug McMillon:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><em>For our current associates, we’ll start by raising our entry wage to at least $9 an hour in April, and, by February of next year, all current associates will earn at least $10 an hour. &nbsp;I’m also excited about an innovative program we’re launching for future associates that will allow you to join Walmart at $9 an hour or more next year, receive skills-based training for six months, and then be guaranteed at least $10 an hour upon successful completion of that program. &nbsp;We’re also strengthening our department manager roles and will raise the starting wage for some of these positions to at least $13 an hour this summer and at least $15 an hour early next year. &nbsp;There will be no better place in retail to learn, grow, and build a career than Walmart.</em></p> </blockquote> <p>We went on to point out that there is no free lunch especially when you operate on razor thin margins in order to retain the “low price leader” crown and so someone has to pay for all those extra pennies the company is now paying out to its employees and because passing along the costs to customers is a no-go, the supply chain has to foot the bill, and because of WalMart’s size, vendors have no choice but to cooperate. WalMart is legendary for its supply chain management, but as <a href="http://www.wsj.com/articles/wal-mart-ratchets-up-pressure-on-suppliers-to-cut-prices-1427845404">WSJ notes</a>, the company is finding it more difficult to maintain its competitive advantage and must figure out how to retain its leadership position in the market all while striking a conciliatory tone on wages:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><em><span style="font-size: 1em; line-height: 1.3em;">Wal-Mart has long had a reputation for pressing its suppliers to cut costs to help lower prices, but the retailer’s new leadership has embraced the concept with fresh vigor. Wal-Mart’s price advantage against its competitors has been eroded, and it has steadily been losing market share in the U.S. since the recession ended, while rivals including KrogerCo. and Costco Wholesale Corp. gained share, according to data from the consultancy Kantar Retail.</span></em></p> <p>&nbsp;</p> <p><em>With the growth of dollar stores and other discounters, Wal-Mart is facing ever more competition on price, which for many customers is the most important selling point.</em></p> </blockquote> <p><strong>It’s against this backdrop that the company recently began closing stores and laying off thousands of employees citing “ongoing plumbing issues that will require extensive repairs.”</strong> Once we discovered that <strong>no plumbing permits</strong> had been filed and that seemingly none of the affected workers could offer even a shred of anecdotal evidence as to the existence of the “clogs and leaks” WalMart officials claimed were at the heart of the problem, <strong>we suggested that perhaps — just perhaps — something else might be behind the store closures such as the company’s desire to cut costs in a tough economic and competitive environment.</strong> Here’s a list of the affected stores:</p> <p>1620 W. Church St. Livingston, TX</p> <p>4517 N Midland Dr. Midland, TX</p> <p>207 S. Memorial Dr. Tulsa, OK&nbsp;</p> <p><strong>8500 Washington Blvd. Pico Rivera, CA</strong></p> <p>1208 E. Brandon Blvd. Tampa, FL</p> <p>When we began to look into each of these locations <strong>we came across something rather interesting involving the Pico Rivera, CA store. </strong>As it turns out, <strong>it’s been the site of wage and working condition protests on a number of occasions, the most recent of which was less than six months ago.</strong> Here’s more via local news footage:&nbsp;</p> <p><iframe src="http://launch.newsinc.com/?type=VideoPlayer/Single&amp;widgetId=1&amp;trackingGroup=69016&amp;siteSection=latimes_hom_non_sec&amp;videoId=28148833" width="590" height="332" frameborder="no" scrolling="no"></iframe></p> <blockquote class="twitter-tweet" lang="en"><p>Protesters chant "we are proud of you as police arrests 4th person." <a href="http://t.co/p33uwVsYtW">pic.twitter.com/p33uwVsYtW</a></p> <p>— Making Change @ WMT (@ChangeWalmart) <a href="https://twitter.com/ChangeWalmart/status/533087778285027328">November 14, 2014</a></p></blockquote> <script src="//platform.twitter.com/widgets.js"></script><p>&nbsp;</p> <p><img src="http://www.zerohedge.com/sites/default/files/images/user92183/imageroot/2015/04/PICO20141.jpg" width="630" height="353" /></p> <p>Almost exactly one year earlier, the Pico Rivera store was (along with multiple other locations across the US) the site of protests alleging that the company did not pay enough to keep many of its workers from seeking government assistance to supplement their meager wages (<strong>recall that <a href="http://www.zerohedge.com/news/2015-04-14/more-half-welfare-spending-goes-working-families">73% of those receiving public assistance</a> in the US come from working families</strong>). Here was the scene at Pico Rivera in November of 2013:</p> <p><img src="http://www.zerohedge.com/sites/default/files/images/user92183/imageroot/2015/04/PICO2013.jpg" width="606" height="361" /></p> <p>And just a little over a year before the 2013 Black Friday protests, more than 200 workers at Pico Rivera went on strike and protested in front of the store waving signs that read “On Strike for the Freedom to Speak Out,” suggesting the company was retaliating against those who fought for better wages and working conditions.&nbsp;</p> <p><span style="font-size: 1em; line-height: 1.3em;">Here’s what The <a href="http://www.nytimes.com/2012/10/05/business/walmart-workers-in-california-protest.html">NY Times had to say</a> at the time of the October 14, 2012 walkout:</span></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong><em>Several dozen Walmart workers in Southern California staged a one-day strike on Thursday, according to workers and union officials, a move that culminated in a rally of some 250 workers and supporters in front of a Walmart store in Pico Rivera.</em></strong></p> <p>&nbsp;</p> <p><em>The strikers, who union officials said came from nine Walmarts in the Los Angeles area, said they were mainly protesting what they said was management’s frequent retaliation against employees who spoke up about working conditions.</em></p> <p>&nbsp;</p> <p><em>Several of the workers, who said this was the first-ever strike against Walmart in the United States, also said they were protesting low wages and short hours.</em></p> <p>&nbsp;</p> <p><strong><em>Manuela Rosales, 25, who works in the cellphone department of the Pico Rivera store, said she walked out on Thursday, missing her afternoon shift, because “when we speak out, they cut my hours in retaliation and they have me pull pallets, which is very hard work.” She added, “I’m a single mom and I can’t afford them cutting my hours.”</em></strong></p> </blockquote> <p><img src="http://www.zerohedge.com/sites/default/files/images/user92183/imageroot/2015/04/PICO20121.jpg" width="513" height="355" /></p> <p><span style="font-size: 1em; line-height: 1.3em;">Then, one month later in November of 2012, the same workers planned a similar demonstration against what some called “degrading” circumstances. Here’s </span><a href="http://www.atvn.org/news/2012/11/walmart-employees-protest-working-thanksgiving" style="font-size: 1em; line-height: 1.3em;">a</a>&nbsp;visual from&nbsp;<span style="font-size: 1em; line-height: 1.3em;">that event:</span></p> <p><img src="http://www.zerohedge.com/sites/default/files/images/user92183/imageroot/2015/04/PICO2012.jpg" width="555" height="301" /></p> <p><span style="font-size: 1em; line-height: 1.3em;">Given the history at the Pico Rivera location, <strong>one could be forgiven for suggesting the store closure could very well have more to do with employees’ views on wages, working conditions, and retaliation than it does with “clogs, leaks, and plumbing issues.”&nbsp;</strong></span></p> <p><span style="font-size: 1em; line-height: 1.3em;">What's especially interesting here is that one of the groups which has consistently backed protests at the Pico Rivera store is the The United Food and Commercial Workers International Union or, UFCW. The group posted the following video to its website during the 2014 "Pico Rivera Sit Down Strike":</span></p> <p><iframe src="http://www.ustream.tv/embed/19307063?v=3&amp;wmode=direct" width="480" height="296" frameborder="0" scrolling="no"> </iframe><br /> <br /><a href="http://www.ustream.tv" target="_blank" style="font-size: 12px; line-height: 20px; font-weight: normal; text-align: left;">Broadcast live streaming video on Ustream</a></p> <p>The UFCW has a history with the company. <strong>Back in 2004, when workers at the&nbsp;Jonquiere, Quebec location voted to join the organization, WalMart closed the store six months later <a href="http://www.bloomberg.com/bw/articles/2012-12-13/labor-disputes-the-walmart-way">noting</a> that "you can’t take a store that is a struggling store anyway and add a bunch of people and a bunch of work rules."</strong> This case ended up before the Supreme Court in Canada and just last year, the high court ruled against the company (the full decision is embeded below). Here's more on that via <a href="http://thinkprogress.org/economy/2014/06/30/3454511/walmart-canada-union/">ThinkProgress</a>:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><em>In September of 2004, the United Food and Commercial Workers Union (UFCW) was certified as a representative of employees in a store in Jonquiere, Quebec. In April 2005, just before an arbitrator was about to impose a collective agreement, Walmart closed the store.</em></p> <p>&nbsp;</p> <p><strong><em>On Friday, the Supreme Court of Canada ruled that Walmart violated Quebec’s labor laws in doing so. It found that the company closed the store during a freeze period codified in the law, which limits a business’s ability to change working conditions from the time that employees file to unionize to when they have a contract, go on strike, or are locked out. The court ruled that Walmart ran afoul of this law without a valid reason for closing the store, which never re-opened.</em></strong></p> <p>&nbsp;</p> <p><em>The company has said it didn’t close the store because workers joined a union. In an email to the AP a Walmart spokesperson said, “We are disappointed by the decision.”</em></p> <p>&nbsp;</p> <p><em>An arbiter will now determine remedies for the 190 fired employees, including possible payment for damages and interest.</em></p> </blockquote> <p><strong>So here is a WalMart location which has staged protests each and every year dating back to at least 2012, the latest of which led to two dozen arrests and these protests are backed by the same organization which was involved in a Canadian Supreme Court case against the company for closing a store where workers had agreed to adopt the UFCW as their representative.</strong> While there may or may not be any connection to all of this and the Pico Rivera location's "plumbing issues," we would note that several people are beginning to draw a parallel. One manager at the store told a local CBS affiliate the following on Thursday:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><em>Venanzi Luna was one of 530 employees told Monday that the store is closing for six months to fix plumbing issues.</em></p> <p>&nbsp;</p> <p><em>Luna has worked as a deli manager at the store for seven years getting paid $14 an hour. <strong>She explains that she was slated to get a raise in June.</strong></em></p> <p>&nbsp;</p> <p><strong><em>Luna says that as a member with the Organization United for Respect at Walmart, a group funded by the Food Workers Union, she has led strikes and sit-ins.</em></strong></p> <p>&nbsp;</p> <p><strong><em>Pico Rivera has been a hotbed for worker activism as protests took place there for higher wages.&nbsp;</em></strong><strong style="font-size: 1em; line-height: 1.3em;"><em>Luna wonders if Walmart was targeting the workers who spoke out.</em></strong></p> <p>&nbsp;</p> <p><em><strong>“This is the first store that went on strike. This is the first store in demanding changes for Walmart,” </strong>she said.&nbsp;</em><em style="line-height: 20.7999992370605px;">“I can’t speculate on Walmart’s motives,” City Manager Rene Bobadilla said. “What we were told that it was a sewer issue.”</em></p> </blockquote> <p>Yes, a sewer issue at WalMart, which is something one would think WalMart plumbing technician Codi Bauer would know something about. This is <a href="http://www.wfla.com/story/28817311/out-of-work-brandon-walmart-employees-looking-for-answers">what he told</a> a local reporter in Florida:&nbsp;</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><em>"Even if they had to replace the whole sewer line, it wouldn't take six months to replace a whole sewer line in that store.”&nbsp;</em></p> </blockquote> <p>So that is the short history of the Pico Rivera WalMart location where hundreds of employees were laid off as part of the company's mysterious nationwide "plumbing" problem. <strong>We again leave it for readers to decide whether WalMart — in an attempt to kill two birds with one stone by eliminating a "problem" store while simultaneously giving an incremental boost to a nationwide cost cutting effort —created a problem which didn't really exist as an excuse to shut the doors, or whether somewhere, deep beneath the now empty California location, the pipes are truly clogged up and leaking.</strong>&nbsp;</p> <p>Pico Rivera has not received any building repair permit requests from the company.&nbsp;</p> <p><strong><em>***Update</em></strong></p> <p>Then, just this afternoon, this comes across the wires (Via <a href="http://www.reuters.com/article/2015/04/17/us-walmart-management-idUSKBN0N82A720150417">Reuters</a>):</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><em>Wal-Mart Stores Inc, the world's largest retailer, is cutting the role of zone manager from its stores as part of efforts to simplify its operations, Bloomberg reported, citing people familiar with the matter.</em></p> <p>&nbsp;</p> <p><em>The duties of zone manager, of which there are generally about six per store, will be transferred to other managers, Bloomberg said.</em></p> </blockquote> <p><strong>Expect more "plumbing."</strong></p> <p>* &nbsp;* &nbsp;*</p> <p>Full WalMart/ UFCW decision:</p> <p style="margin: 12px auto 6px auto; font-family: Helvetica,Arial,Sans-serif; font-style: normal; font-variant: normal; font-weight: normal; font-size: 14px; line-height: normal; font-size-adjust: none; font-stretch: normal; display: block;"> <a href="https://www.scribd.com/doc/262196890/WalMart-UFCW" title="View WalMart UFCW on Scribd" style="text-decoration: underline;">WalMart UFCW</a></p> <p><iframe src="https://www.scribd.com/embeds/262196890/content?start_page=1&amp;view_mode=scroll&amp;show_recommendations=true" width="100%" height="600" frameborder="0" scrolling="no"></iframe></p> http://www.zerohedge.com/news/2015-04-17/did-walmart-close-california-store-punish-employees-who-protested-wages-and-working-#comments Black Friday Florida Market Share None Recession Reuters Twitter Twitter Sat, 18 Apr 2015 00:10:03 +0000 Tyler Durden 504963 at http://www.zerohedge.com Japan's "Over 65" Rise To Record 33 Million, More Than Double Number Of Children http://www.zerohedge.com/news/2015-04-17/japans-over-65-rise-record-33-million-more-double-number-children <p>With Abenomics seemingly a total failure (aside from managing to collapse the currency and living standards of the population - <a href="http://www.zerohedge.com/news/2014-06-05/abenomics-legacy-greatest-misery-33-years">worst Misery Index in 33 years</a>) the demographic crisis that Japan faces just got more crisis-er. <a href="http://www3.nhk.or.jp/nhkworld/english/news/20150417_35.html">As NHKWorld reports</a>, <strong>Japan&#39;s population continues to fall (4th year in a row)</strong> but what is worse, there are now 33 million people over the age of 65 (a record 26%), more than double the number under the age of 14 (16.2 million). The ministry says the population will likely continue declining for some time as <strong>fewer babies are born and society ages</strong>.</p> <p><a href="http://www3.nhk.or.jp/nhkworld/english/news/20150417_35.html"><em>As NHK World reports, </em></a><strong>Japan&#39;s government says the country&#39;s population continues to decrease and become grayer.</strong></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>The internal affairs ministry estimates that the population stood at 127.1 million on October 1st last year. That&#39;s down 215,000 from the previous year, f<strong>or a fourth straight year of decline.</strong></p> <p>&nbsp;</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/04/20150417_japanpop.jpg"><img height="340" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/04/20150417_japanpop_0.jpg" width="600" /></a></p> <p>&nbsp;</p> <p>The population comprised 61.8 million males and 65.3 million females.</p> <p>&nbsp;</p> <p>The figures include foreigners who lived in the country for three months or longer.</p> <p>&nbsp;</p> <p><strong>The number of people considered to be of working age -- from 15 to 64 -- fell nearly 1.2 million, to 77.9 million.</strong></p> <p>&nbsp;</p> <p><u><strong>The number of children aged up to 14 stood at 16.2 million. That&#39;s down nearly 160,000</strong></u> from the previous year. They accounted for a little less than 13 percent of the total, hitting a record low for the second straight year.</p> <p>&nbsp;</p> <p><u><strong>The number of people aged 65 or over was 33 million, up 1.1 million year-on-year. </strong></u>They made up a record-high 26 percent of the population. The age bracket is more than twice the size of that for children for the first time since comparable data became available in 1950.</p> <p>&nbsp;</p> <p>People born after the end of World War Two in 1945 accounted for more than 80 percent of the total for the first time.</p> <p>&nbsp;</p> <p><strong>The ministry says the population will likely continue declining for some time as fewer babies are born and society ages.</strong></p> </blockquote> <p>*&nbsp; *&nbsp; *</p> <p><a href="http://www.zerohedge.com/news/japans-demographic-death-rattle-3-charts-and-333-words"><em>As we discussed before, </em></a><strong>there are now more than one in four Japanese citizens will be over the age of 65, up from one in five in 2006 and one in 10 in 1985</strong>. The proportion of the population over 65 is expected to swell to 30 percent by 2022 and to 40 percent by 2050, according to government estimates. This will put the country as a whole in the demographic range of the prefectures that experienced the sharpest declines in growth in the decade ended 2009.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2012/07-2/Japan%20Demo%201.jpg"><img height="366" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2012/07-2/Japan%20Demo%201_0.jpg" width="600" /></a></p> <p><strong>Fewer workers and less labor will reduce the potential output of the Japanese economy, which will increase the country&rsquo;s reliance on imports as retirees continue to spend, inhibiting GDP growth</strong>. The rising number of retirees will strain the government&rsquo;s welfare programs and the country&rsquo;s pension funds, which have been major buyers of government bonds. <strong>Japan already maintains the world&rsquo;s second-largest debt load in nominal terms at more than $13.7 trillion and growing</strong>.</p> <p>The government sees this problem and has passed a bill giving private-sector workers the right to remain at their jobs until the age of 65, rather than the current 60.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2012/07-2/Japan%20Demo%202.jpg"><img height="364" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2012/07-2/Japan%20Demo%202_0.jpg" width="600" /></a></p> <p><strong>Japan&rsquo;s demographics will also likely have an impact on consumer behavior.</strong> Japanese consumers older than 65 are less likely to shop for alcohol, clothing, books and electronics compared with younger consumers, according to a McKinsey survey from 2011. The average senior shops for books and clothing 38 and 35 times per year, respectively, compared with 73 and 58 times for people between the ages of 18 and 34. The only item seniors shop for more frequently than younger consumers is food, McKinsey found.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2012/07-2/Japan%20Demo%203.jpg"><img height="364" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2012/07-2/Japan%20Demo%203_0.jpg" width="600" /></a></p> <p><strong>How Japan faces its demographic challenges over the next several decades may provide important lessons for countries such as China,</strong> which has a rapidly increasing senior population due largely to the one-child policy. People over 65 account for nearly 10 percent of the population in China &mdash; similar to Japan in 1985 &mdash; up from 6 percent 20 years ago.</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="955" height="541" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20150417_japanpop.jpg?1429302478" /> </div> </div> </div> http://www.zerohedge.com/news/2015-04-17/japans-over-65-rise-record-33-million-more-double-number-children#comments Abenomics China Demographics Japan McKinsey Sat, 18 Apr 2015 00:05:57 +0000 Tyler Durden 504959 at http://www.zerohedge.com Slight Production Declines Hide Bigger Oil Storage Issues http://www.zerohedge.com/news/2015-04-17/slight-production-declines-hide-bigger-oil-storage-issues <p style="margin: 0px; font-family: 'Times New Roman'; font-size: medium; line-height: normal;">By&nbsp;<a href="http://www.econmatters.com/search/label/EconMatters">EconMatters</a></p> <p class="separator" style="margin: 0px; font-family: 'Times New Roman'; font-size: medium; line-height: normal; clear: both; text-align: center;"><a href="http://1.bp.blogspot.com/-jjminyxdNvk/VTBAQlyVTNI/AAAAAAAAFbY/k4hUoDMxZfA/s1600/images.jpg" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img src="https://images-blogger-opensocial.googleusercontent.com/gadgets/proxy?url=http%3A%2F%2F1.bp.blogspot.com%2F-jjminyxdNvk%2FVTBAQlyVTNI%2FAAAAAAAAFbY%2Fk4hUoDMxZfA%2Fs1600%2Fimages.jpg&amp;container=blogger&amp;gadget=a&amp;rewriteMime=image%2F*" width="320" height="212" border="0" style="cursor: move;" /></a></p> <p style="margin: 0px; font-family: 'Times New Roman'; font-size: medium; line-height: normal;">&nbsp;</p> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;"><strong><span style="font-size: 12pt; line-height: 17.1200008392334px;">Storage Builds</span></strong></p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;"><strong><span style="font-size: 12pt; line-height: 17.1200008392334px;"><br /></span></strong></p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">Everyone this week focused on the slight production declines that this was a sign to go long oil, but what seemed to go under the radar was another build in both&nbsp;<a href="http://www.econmatters.com/2015/03/cushing-and-gulf-coast-storage-filling.html">Cushing and the Gulf Coast storage hubs</a>.</p> <p style="margin: 0px;">&nbsp;</p> <p style="margin: 0px;">Cushing added another 1.3 million barrels to weekly storage and stands at 61.5 million barrels. The Gulf Coast added another 600 thousand barrels to storage and stands at 237 million barrels. By comparison Cushing had 26.8 million barrels in storage this time last year, and the Gulf Coast had 207.2 million barrels in storage a year ago.</p> </div> <p style="margin: 0px; font-family: 'Times New Roman'; font-size: medium; line-height: normal;">&nbsp;</p> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;"><strong><span style="font-size: 12pt; line-height: 17.1200008392334px;">Refinery Utilization Rate 92%</span></strong></p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;"><strong><span style="font-size: 12pt; line-height: 17.1200008392334px;"><br /></span></strong></p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">This is with refineries operating at 92.3 percent of capacity which is robust and near the top end of this metric. We also have about 17.6 million more barrels of Gasoline in storage versus this time last year, and 17 million more barrels of Distillate stocks in storage this year versus last year.</p> <p style="margin: 0px;">&nbsp;</p> </div> <p class="separator" style="margin: 0px; font-family: 'Times New Roman'; font-size: medium; line-height: normal; clear: both; text-align: center;"><a href="http://3.bp.blogspot.com/-ElFKFTWZ1Pc/VTBAeSvIf_I/AAAAAAAAFbg/WH9DpCeR6pU/s1600/crstusm16.gif" style="margin-left: 1em; margin-right: 1em;"><img src="https://images-blogger-opensocial.googleusercontent.com/gadgets/proxy?url=http%3A%2F%2F3.bp.blogspot.com%2F-ElFKFTWZ1Pc%2FVTBAeSvIf_I%2FAAAAAAAAFbg%2FWH9DpCeR6pU%2Fs1600%2Fcrstusm16.gif&amp;container=blogger&amp;gadget=a&amp;rewriteMime=image%2F*" width="640" height="342" border="0" style="cursor: move;" /></a></p> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">&nbsp;</p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;"><strong><span style="font-size: 12pt; line-height: 17.1200008392334px;">Artificial Demand</span></strong></p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;"><strong><span style="font-size: 12pt; line-height: 17.1200008392334px;"><br /></span></strong></p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">Analysts have pointed out the increased demand for products, and this makes sense given lower prices, but the numbers are inflated because much of the demand is artificial by turning the oil into gasoline and distillates and just storing the products in&nbsp;<strong>another form of storage</strong>. It isn`t as if demand is so robust that we are lower in product inventories versus this time last year, in fact it is just the opposite.</p> <p style="margin: 0px;">&nbsp;</p> <p style="margin: 0px;"><em><span style="font-size: 12pt; line-height: 17.1200008392334px;">Read &gt;&gt;&nbsp;</span><span style="line-height: 17.1200008392334px;"><a href="http://www.econmatters.com/2015/03/thoughts-on-current-oil-market.html">Thoughts on the Current Oil Market</a></span></em></p> <p style="margin: 0px;">&nbsp;</p> </div> <p class="separator" style="margin: 0px; font-family: 'Times New Roman'; font-size: medium; line-height: normal; clear: both; text-align: center;"><a href="http://3.bp.blogspot.com/-t5KFSzRQ7z4/VTBAjdL3fJI/AAAAAAAAFbo/i5bsRTEp_rU/s1600/crtpusm17.gif" style="margin-left: 1em; margin-right: 1em;"><img src="https://images-blogger-opensocial.googleusercontent.com/gadgets/proxy?url=http%3A%2F%2F3.bp.blogspot.com%2F-t5KFSzRQ7z4%2FVTBAjdL3fJI%2FAAAAAAAAFbo%2Fi5bsRTEp_rU%2Fs1600%2Fcrtpusm17.gif&amp;container=blogger&amp;gadget=a&amp;rewriteMime=image%2F*" width="640" height="342" border="0" style="cursor: move;" /></a></p> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">&nbsp;</p> </div> <div style="font-family: 'Times New Roman'; font-size: medium; line-height: normal; text-align: center;"> <p style="margin: 0px;">&nbsp;</p> </div> <p style="margin: 0px; font-family: 'Times New Roman'; font-size: medium; line-height: normal;">&nbsp;</p> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;"><strong><span style="font-size: 12pt; line-height: 17.1200008392334px;">Imports</span></strong></p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;"><strong><span style="font-size: 12pt; line-height: 17.1200008392334px;"><br /></span></strong></p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">The only reason total inventories didn’t have another 10 million build this past week was because imports were down 1.12 million barrels per day versus this same period last year. This would add an additional 7.9 million barrels to last week’s 1.3 million barrels build bringing the total to 9.2 million barrels. So the market got a respite this past week, but with OPEC and Saudi Production at record levels as witnessed by the latest readings, traders may not be able to rely on lower import numbers as the norm going forward into the summer driving season.</p> <p style="margin: 0px;">&nbsp;</p> <p style="margin: 0px;"><span style="font-style: italic;">Read &gt;&gt;&nbsp;</span><a href="http://www.econmatters.com/2015/04/more-thoughts-on-current-oil-market.html" style="font-style: italic;">More Thoughts on the Current Oil Market</a></p> <p style="margin: 0px;">&nbsp;</p> </div> <p class="separator" style="margin: 0px; font-family: 'Times New Roman'; font-size: medium; line-height: normal; clear: both; text-align: center;"><a href="http://1.bp.blogspot.com/-DMF4YJ_9mp8/VTBAocZLNuI/AAAAAAAAFbw/Cjx2gRzidbc/s1600/gtpsusm18.gif" style="margin-left: 1em; margin-right: 1em;"><img src="https://images-blogger-opensocial.googleusercontent.com/gadgets/proxy?url=http%3A%2F%2F1.bp.blogspot.com%2F-DMF4YJ_9mp8%2FVTBAocZLNuI%2FAAAAAAAAFbw%2FCjx2gRzidbc%2Fs1600%2Fgtpsusm18.gif&amp;container=blogger&amp;gadget=a&amp;rewriteMime=image%2F*" width="640" height="342" border="0" style="cursor: move;" /></a></p> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">&nbsp;</p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;"><strong><span style="font-size: 12pt; line-height: 17.1200008392334px;">Oil Drawdowns</span></strong></p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;"><strong><span style="font-size: 12pt; line-height: 17.1200008392334px;"><br /></span></strong></p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">Moreover, despite lower import numbers and the refinery capacity utilization rate above 92% and a slight drop in US Production both Cushing and the Gulf Coast storage hubs both added oil to storage facilities. I am not sure we are out of the storage capacity constraints problem quite just yet! The Midwest corridor which fuels the Gulf Coast Refinery trade for exporting refined products to other countries is still building in storage despite the robust 92% utilization rate. We would expect oil drawdowns in this region given a 92% refinery run rate, so something to pay attention to going forward.</p> <p style="margin: 0px;">&nbsp;</p> </div> <p class="separator" style="margin: 0px; font-family: 'Times New Roman'; font-size: medium; line-height: normal; clear: both; text-align: center;"><a href="http://2.bp.blogspot.com/-XtGzgr2R4U8/VTBAw64WYsI/AAAAAAAAFb4/776Pa7TQ-Kg/s1600/gtstusm19.gif" style="margin-left: 1em; margin-right: 1em;"><img src="https://images-blogger-opensocial.googleusercontent.com/gadgets/proxy?url=http%3A%2F%2F2.bp.blogspot.com%2F-XtGzgr2R4U8%2FVTBAw64WYsI%2FAAAAAAAAFb4%2F776Pa7TQ-Kg%2Fs1600%2Fgtstusm19.gif&amp;container=blogger&amp;gadget=a&amp;rewriteMime=image%2F*" width="640" height="342" border="0" style="cursor: move;" /></a></p> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">&nbsp;</p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;"><strong><span style="font-size: 12pt; line-height: 17.1200008392334px;">The Race</span></strong></p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;"><strong><span style="font-size: 12pt; line-height: 17.1200008392334px;"><br /></span></strong></p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">The race seems to be slight US Production declines (and we mean slight .02) versus rapidly filling storage facilities along the Midwest Corridor. Does it really matter if there are slight production declines but Cushing continues to add to storage facilities, and ramps up against capacity limits?&nbsp;</p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">&nbsp;</p> </div> <p class="separator" style="margin: 0px; font-family: 'Times New Roman'; font-size: medium; line-height: normal; clear: both; text-align: center;"><a href="http://2.bp.blogspot.com/-cMVxjMr_VUk/VTBA7X5lA4I/AAAAAAAAFcA/4jrQL_Fc4-w/s1600/disstusm20.gif" style="margin-left: 1em; margin-right: 1em;"><img src="https://images-blogger-opensocial.googleusercontent.com/gadgets/proxy?url=http%3A%2F%2F2.bp.blogspot.com%2F-cMVxjMr_VUk%2FVTBA7X5lA4I%2FAAAAAAAAFcA%2F4jrQL_Fc4-w%2Fs1600%2Fdisstusm20.gif&amp;container=blogger&amp;gadget=a&amp;rewriteMime=image%2F*" width="640" height="342" border="0" style="cursor: move;" /></a></p> <p style="margin: 0px; font-family: 'Times New Roman'; font-size: medium; line-height: normal;">&nbsp;</p> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;"><strong><span style="font-size: 12pt; line-height: 17.1200008392334px;">The “Fundamentals” Don`t Matter in an ‘Electronic Market Place’</span></strong></p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;"><strong><span style="font-size: 12pt; line-height: 17.1200008392334px;"><br /></span></strong></p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">Of course none of this matters in the financial markets because anybody that participates regularly in financial markets understands that powerful players who have the ability to move markets will do whatever they want whenever they want until reality forces them to do otherwise, i.e., the fundamentals are so contrary to their market making movements that stronger forces take the other side or they finally throw in the towel and close their substantial positions.</p> <p style="margin: 0px;">&nbsp;</p> <p style="margin: 0px;"><em>Read &gt;&gt;&nbsp;<a href="http://www.econmatters.com/2015/03/another-8-million-barrels-added-to-oil.html">Another 8 Million Barrels Added to Oil Storage</a></em></p> <p style="margin: 0px;">&nbsp;</p> </div> <p class="separator" style="margin: 0px; font-family: 'Times New Roman'; font-size: medium; line-height: normal; clear: both; text-align: center;"><a href="http://4.bp.blogspot.com/-X90nhomJfxQ/VTBBCRhONXI/AAAAAAAAFcI/n3AnB0uIJLk/s1600/download23.png" style="margin-left: 1em; margin-right: 1em;"><img src="https://images-blogger-opensocial.googleusercontent.com/gadgets/proxy?url=http%3A%2F%2F4.bp.blogspot.com%2F-X90nhomJfxQ%2FVTBBCRhONXI%2FAAAAAAAAFcI%2Fn3AnB0uIJLk%2Fs1600%2Fdownload23.png&amp;container=blogger&amp;gadget=a&amp;rewriteMime=image%2F*" width="640" height="362" border="0" style="cursor: move;" /></a></p> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">&nbsp;</p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">Right around the April WTI Futures expiration last month in March some players decided they were going to make at least $15 dollars a barrel in Oil, that`s $15,000 per contract, consider WTI routinely trades 400,000 contracts on a daily basis, and you get the picture. This isn`t about oil fundamentals, the electronic oil markets are about one thing making money. And these players deemed they could make more money moving oil up than down in the given time frame. The fundamentals actually deteriorated in the oil storage metrics, Global Production remained at record levels, and China printed a (cough, cough) 7% GDP number.</p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">&nbsp;</p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;"><strong><span style="font-size: 12pt; line-height: 17.1200008392334px;">Speculators</span></strong></p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;"><strong><span style="font-size: 12pt; line-height: 17.1200008392334px;"><br /></span></strong></p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">This is part of why oil will stay lower for longer because oil speculators will always keep prices above the fundamentals, this is how we got into the supply glut problem in the first place. Every time there is some slight Middle East disturbance which never affects actual overall supply in the market, or traders are pushing oil up along with equities, or some pipeline needs to be repaired, or the dollar is weak, or the Federal Reserve provides more stimulus, or Goldman puts out a bullish report on oil; prices ramp like no tomorrow. Even though none of these people actually use the commodity, they don`t ever take delivery, they just borrow using carry trades and click some buttons with the goal of making money like a Professional Gambler; all the time being completely divorced from the fundamentals of supply and demand in the marketplace!</p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">&nbsp;</p> <p style="margin: 0px;"><strong><span style="font-size: 12pt; line-height: 17.1200008392334px;">US Producers Hang On</span></strong></p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;"><strong><span style="font-size: 12pt; line-height: 17.1200008392334px;"><br /></span></strong></p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">So every time speculators push the price up in oil, the producers can just go and hedge future production along the curve, and stay in business another year producing as much as they possibly can crank out into the market. Unfortunately for the OPEC players, getting rid of US Production isn`t as easy as they thought! These small producers just issue more shares, raise cash to fund their debt obligations, wait for an artificial speculative ramp in oil prices, and hedge some more production on the forward curve. Shoot reduce some overhead and costs, renegotiate some contracts, improve drilling efficiencies and there is no telling how long these small Producers can hang in there! This is why speculation in a long-oriented market which oil is by nature because of the synergistic ties to equities, financial markets in general, and oil being a needed commodity will always price ahead of the fundamentals.</p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">&nbsp;</p> <p style="margin: 0px;"><em>Read &gt;&gt;&nbsp;<a href="http://www.econmatters.com/2015/03/michael-lewis-is-right-spoofing-proves.html">Market Rigged on Daily Basis</a></em></p> <p style="margin: 0px;">&nbsp;</p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;"><strong><span style="font-size: 12pt; line-height: 17.1200008392334px;">The Oil Market should be a “Deliverable Market”</span></strong></p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;"><strong><span style="font-size: 12pt; line-height: 17.1200008392334px;"><br /></span></strong></p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">If the oil market was a deliverable market, supply and demand with regard to price in the futures market would be much more aligned, and this oil glut would never have occurred to this degree of market imbalance in the first place. Until price gets to a point and stays at a point for a significant length of time to put producers out of business altogether there will remain a supply and demand imbalance in the oil markets. I am afraid $60 oil isn`t low enough to put any large dent in the global production supply of oil coming to market, if anything it is bringing more supply to market as producers hang on by producing more oil to help mitigate lower prices. Producers need to be put out of business, and I am not just talking about US Shale producers. OPEC, Russia and the Global Oil supply chain got fat and happy on the BRIC Super growth cycle and $100 a barrel oil for a decade. The world just doesn’t need that much oil, China has run up against infrastructure constraints, real-estate bubbles, pollution problems and the law of large numbers – they are no longer building the equivalent of an entire small city every month.</p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">&nbsp;</p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;"><strong><span style="font-size: 12pt; line-height: 17.1200008392334px;">7 Years of overpriced Oil Market</span></strong></p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;"><strong><span style="font-size: 12pt; line-height: 17.1200008392334px;"><br /></span></strong></p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">I imagine we will experience spikes in the oil market with lower highs until equilibrium between supply and demand becomes more balanced, but we are nowhere near there yet, speculators are just doing what they do today in the era of modern electronic markets. By my analysis prices have been well above the fundamentals of supply and demand since 2008 and the financial crisis, that`s 7 long years of a poorly priced asset compared with the underlying fundamentals of the commodity. Six months of lower prices isn’t going to fix the market imbalances, and the longer speculators push up the prices of oil on the latest headline, or players want to take a $15 a barrel piece out of the market and add it to their returns, this just prolongs the inevitable. The oil market remains an over supplied market.</p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">&nbsp;</p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;"><strong><span style="font-size: 12pt; line-height: 17.1200008392334px;">Crazy Oil Economics</span></strong></p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;"><strong><span style="font-size: 12pt; line-height: 17.1200008392334px;"><br /></span></strong></p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">The five year averages for oil stored just in the US alone have been rising for over a decade, we have almost doubled our amount of oil stored. For example, in February of 2003 we had 270 million barrels in storage; today we have almost 500 million barrels in storage facilities not counting the Strategic Petroleum Reserves. Furthermore, prices were $33 a barrel in February 2003, welcome to the wonderful world of electronic markets. Accordingly in 12 years we have added 214 million barrels to storage facilities, and even after the 50% plus reduction in oil prices, the price of oil is still $24 a barrel higher today!</p> <p style="margin: 0px;">&nbsp;</p> </div> <p class="separator" style="margin: 0px; font-family: 'Times New Roman'; font-size: medium; line-height: normal; clear: both; text-align: center;"><a href="http://1.bp.blogspot.com/-3-dfwSYoNdw/VTBBZdFMb_I/AAAAAAAAFcQ/rUb3Nz1UB6I/s1600/download21.png" style="margin-left: 1em; margin-right: 1em;"><img src="https://images-blogger-opensocial.googleusercontent.com/gadgets/proxy?url=http%3A%2F%2F1.bp.blogspot.com%2F-3-dfwSYoNdw%2FVTBBZdFMb_I%2FAAAAAAAAFcQ%2FrUb3Nz1UB6I%2Fs1600%2Fdownload21.png&amp;container=blogger&amp;gadget=a&amp;rewriteMime=image%2F*" width="640" height="362" border="0" style="cursor: move;" /></a></p> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">&nbsp;</p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;"><strong><span style="font-size: 12pt; line-height: 17.1200008392334px;">Efficient Market Hypothesis is a joke</span></strong></p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;"><strong><span style="font-size: 12pt; line-height: 17.1200008392334px;"><br /></span></strong></p> </div> <p style="margin: 0px; font-family: 'Times New Roman'; font-size: medium; line-height: normal;">Financial markets really have become complete mockeries of their intended and original purpose. Remember the original goal of the commodities futures market in the days of farmers hedging future production? They are so easily mispriced, and like the oil market can stay poorly priced for over a decade before the market fundamentals force the hand of speculators to adjust money flows. Speculators in the oil market are part of the reason the market is so poorly balanced today, and as long as 99.9% of all oil futures contracts never have to commit to actually taking delivery of the physical commodity, this market imbalance will remain for some time.</p> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">&nbsp;</p> <p style="margin: 0px;">&nbsp;</p> </div> <p style="margin: 0px; font-family: 'Times New Roman'; font-size: medium; line-height: normal;">©&nbsp;<a href="http://www.econmatters.com/">EconMatters</a>&nbsp;All Rights Reserved |&nbsp;<a href="http://www.facebook.com/EconMatters">Facebook</a>&nbsp;|&nbsp;<a href="http://twitter.com/#!/EconMatters">Twitter</a>&nbsp;|&nbsp;<a href="http://feedburner.google.com/fb/a/mailverify?uri=EconForecast">Free Email</a>&nbsp;|&nbsp;<a href="http://astore.amazon.com/econforecast-20?_encoding=UTF8&amp;node=80">Kindle</a></p> http://www.zerohedge.com/news/2015-04-17/slight-production-declines-hide-bigger-oil-storage-issues#comments China Distillates Federal Reserve Futures market Middle East None OPEC Reality Twitter Twitter Fri, 17 Apr 2015 23:40:11 +0000 EconMatters 504967 at http://www.zerohedge.com Men Go Mad In Herds http://www.zerohedge.com/news/2015-04-17/men-go-mad-herds <p><a href="http://www.theburningplatform.com/2015/04/17/men-go-mad-in-herds/"><em>Submitted by Jim Quinn via The Burning Platform blog</em></a>,</p> <p><img alt="" class="aligncenter" src="http://meetville.com/images/quotes/Quotation-Charles-Mackay-senses-men-Meetville-Quotes-88907.jpg" /></p> <p>The Chinese real estate bubble has been imploding for the last year. The Chinese economy is barely growing at 1.6% after decades of 10% growth. There are millions of unoccupied condos. There are dozens of ghost cities and empty office towers. It&rsquo;s the most corrupt nation on earth. We are in the midst of a global recession.It&rsquo;s pure madness that the Chinese stock market would soar when its leading economic indicators crash to 2008 lows.</p> <p><img alt="" height="301" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/04/20150415_shcomp_0.jpg" width="600" /></p> <p>Its stock market has gone up 115% in the last 9 months. It has gone up 80% in the last 5 months. It has gone up 35% in the last month. Housewives and other uneducated gamblers have opened a record 10.8 million new stock accounts this year, more than the total number for all of 2012 and 2013 combined.</p> <p><img alt="" height="524" src="http://www.marketwatch.com/kaavio.Webhost/charts/big.chart?nosettings=1&amp;symb=SHCOMP&amp;uf=7168&amp;type=2&amp;size=2&amp;sid=123437&amp;style=1013&amp;freq=1&amp;time=8&amp;rand=966323583&amp;ma=1&amp;maval=50&amp;lf=1&amp;lf2=4&amp;lf3=0&amp;height=444&amp;width=579&amp;mocktick=1" width="570" /></p> <p>The Hong Kong stock market has gone up 14% in three weeks.</p> <p><img alt="" height="523" src="http://www.marketwatch.com/kaavio.Webhost/charts/big.chart?nosettings=1&amp;symb=HSI&amp;uf=7168&amp;type=2&amp;size=2&amp;sid=123709&amp;style=1013&amp;freq=1&amp;time=4&amp;rand=251830365&amp;ma=1&amp;maval=50&amp;lf=1&amp;lf2=4&amp;lf3=0&amp;height=444&amp;width=579&amp;mocktick=1" width="569" /></p> <p>Since real estate investing is failing miserably, the Chinese middle class have piled into stocks on margin. Where have I seen that before? Margin debt on the Shanghai Stock Exchange climbed to a record 1.16 trillion yuan on Thursday. When has buying overvalued stocks on margin when the economy is tanking ever gone wrong before? Have we already forgotten 2000 and 2008? Humans truly act like irrational herds of cattle stampeding in whatever direction they are pushed by their keepers.</p> <p>&nbsp;</p> <p><img alt="" height="395" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/03/Margin%20Debt_0.jpg" width="568" /></p> <p>After the markets closed for the weekend today in China regulators announced they were clamping down on the use of shadow financing for equity purchases and increased the supply of shares available for short sellers. Bloomberg explained what happened a few hours ago:</p> <p style="padding-left: 30px;"><em>Investors have used umbrella trusts, which allow for more leverage than brokerage financing, to ramp up wagers on Chinese stocks after monetary stimulus sparked a world-beating rally in the nation&rsquo;s benchmark equity gauge. Permitting mutual funds to lend their holdings to short sellers would make it easier for bearish traders to bet on a retreat after the Shanghai Composite Index closed at a seven-year high on Friday.</em></p> <p>The announcement immediately caused Chinese stock market futures to crash by 6%. A similar move in U.S. markets would be a 1,000 point crash in the Dow. Monday should be interesting. The Chinese Plunge Protection Team is probably conferring with Yellen and her minions to avoid a worldwide contagion of people coming to their senses.</p> <p><img alt="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/04/china%20futures.png" class="shrinkToFit" height="574" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/04/china%20futures.png" width="570" /></p> <p>Bloomberg stumbles upon the truth of all the stock markets in the world hitting record highs:</p> <p style="padding-left: 30px;"><em>Chinese investors have been piling into the equity market after the central bank cut interest rates twice since November and authorities from the China Securities Regulatory Commission to central bank Governor Zhou Xiaochuan endorsed the flow of funds into equities.</em></p> <p><strong>Central bankers in the U.S., Europe and Asia have created another massive bubble. </strong>This time it is a bubble in stocks, bonds and real estate simultaneously. There is no place to hide. We are now in the blow-off stage. Markets are totally disconnected from reality, amateurs and muppets have been lured into the fray, margin debt is off the charts around the globe, and confidence in the infallibility of Yellen, Draghi, and the Asian central bankers couldn&rsquo;t be higher. These bankers have been tasked by their .1% masters to elevate markets across the globe so they can extract the remaining wealth of the clueless plebs. We are now in the death throes of this latest tulip mania. It may go on for many more months or today may be the peak, but one thing is for sure &ndash; it will crash and burn. What happens next is anyone&rsquo;s guess. <strong>But I&rsquo;d put my money on war, chaos, and revolution. There will be no impunity for our gambling.</strong></p> <p><img alt="" height="402" src="http://upload.wikimedia.org/wikipedia/commons/thumb/a/ac/Tulip_price_index1.svg/2000px-Tulip_price_index1.svg.png" width="569" /></p> <p style="padding-left: 30px;"><em>&ldquo;Nations, like individuals, cannot become desperate gamblers with impunity. Punishment is sure to overtake them sooner or later.&rdquo;</em> <strong>? Charles Mackay</strong></p> http://www.zerohedge.com/news/2015-04-17/men-go-mad-herds#comments China Gambling Hong Kong Leading Economic Indicators Real estate Reality Recession Yuan Fri, 17 Apr 2015 23:30:39 +0000 Tyler Durden 504958 at http://www.zerohedge.com