http://www.zerohedge.com/fullrss2.xml/component/option%2Ccom_docman/Itemid%2C200023/gid%2C397/BoomBustBlog/BoomBustBlog/BoomBustBlog/BoomBustBlog/Is-this-the-Breaking-of-the-Bear.html en Does Anyone Really Believe In A Grexit? http://www.zerohedge.com/news/2015-02-01/does-anyone-really-believe-grexit <p><img src="http://sproutmoney.com/files/2013/09/Greece.jpg" alt="Greece" width="600" height="391" style="display: block; margin-left: auto; margin-right: auto;" class="size-full wp-image-2005 aligncenter" /></p> <p>The new left-wing government hasn’t wasted any time and at a press conference in Athens, the new Greek minister of finance has torpedoed the existing bailout agreement between the troika (consisting of the IMF, the European Central Bank and the European Commission), citing it has <a href="http://www.theguardian.com/business/blog/live/2015/jan/30/greece-awaits-meeting-with-eurozone-finance-chief-live-updates" target="_blank">no intention to honor an agreement</a> with an organization which hasn’t been ratified by the European Parliament. This has strengthened the market's belief there will be a Grexit in the very near future.</p> <p>Cancelling the bailout agreement shouldn’t really come as a surprise as Syriza, the left-wing party which won the recent elections promised the Greek citizen it would escape from the European stranglehold. To show the Troika he wasn’t bluffing, Prime Minister Tsipras appointed Varoufakis as his Minister of Finance, a professor wo’s known to be a hardcore opponent of the bailout program as it stands.</p> <p><a href="http://sproutmoney.com/"><img src="http://sproutmoney.com/files/2015/02/Varoufakis-Minister-Greece.jpg" alt="Varoufakis Minister Greece" width="599" height="336" style="display: block; margin-left: auto; margin-right: auto;" class="size-full wp-image-10302 aligncenter" /></a></p> <p><em>Minister of Finance Yannis Varoufakis. <a href="http://tegenlicht.vpro.nl/.imaging/stk/tegenlicht/zoom/media/tegenlicht/2012/februari/Goldman-sachs-en-Griekenland/120126_Stills_GS/GS_Yannis_Varoufakis/original/GS_Yannis_Varoufakis.jpg" target="_blank">Source</a></em></p> <p>So what is Greece trying to do? It is definitely putting pressure on the European Union to re-negotiate the bailout deal the Greeks got a few years ago. The current phase of that program is expiring at the end of February and there’s no doubt the Greeks are torpedoing the deal now as there’s still a fair few weeks before the deadline expires.</p> <p>Whereas some people see this as the start of the ‘Grexit’, we aren’t so sure Greece will indeed leave the Eurozone as there are several indications they are just playing hardball. When the ECB announced it would start its Quantitative Easing program whereby it is planning to pump 60B EUR per year in the economy of the Eurozone, Tsipras specifically said he would hope that <a href="http://uk.reuters.com/article/2015/01/03/uk-greece-politics-idUKKBN0KC0IG20150103" target="_blank">'the ECB would include Greece as part of its QE-program</a>'. This obviously raises the question why Tsipras wants to be part of QE if he’d be planning to leave the Eurozone anyway? We do believe he really tipped his hand with that remark.</p> <p>Secondly, Varoufakis has left the door open to re-start negotiations on a renewed deal and specifically asked the syndicate of lenders to write off a large part of the debt. This probably won’t happen as the majority of Greece’s bailout plan was financed by the other member states of the Currency Block. Can you imagine what the repercussion would be if all these other countries had to write off a large part of the sum they lent to Greece? The effect would be absolutely devastating as every single country would suddenly have large multi-billion euro deficits as a loan would suddenly be evaporated.</p> <p><a href="http://sproutmoney.com/"><img src="http://sproutmoney.com/files/2015/02/Varoufakis-Dijsselbloem.jpg" alt="Varoufakis Dijsselbloem" width="599" height="336" style="display: block; margin-left: auto; margin-right: auto;" class="size-full wp-image-10305 aligncenter" /></a></p> <p><a href="http://fd.nl/images/04/99/65/landscape/1024x576/high/dijsselbloemenvaroufakis.jpg?v=38" target="_blank"><em>Source</em></a></p> <p>So forgiving a large part of the debt is very likely a bridge too far, but the Greeks are aiming high in order to secure something less invasive. They know damn well the Euro-countries won’t accept a large write-down but there seems to be some potential to discuss a longer payback period as well as a lower interest rate being charged on the Greek debt. Additionally, it’s also very likely the ECB would agree to purchase a relatively seen larger amount of Greek sovereign bond to relieve some of the pressure on the country and thus avoiding a Grexit.</p> <p>And last but not least, should Greece leave the Eurozone, the country will have some serious problems to ever tap the international capital markets again. Its economy would crumble and it would be extremely difficult to get it resuscitated. It’s also unlikely Tsipras wants to go into history as ‘the prime minister who ruined the country’, upsetting every single country in the Eurozone as well as international and national creditors. He’s playing hardball, and Greece will definitely get something out of the negotiations. The only issue is that Tsipras must be able to tell his citizens that it’s a Greek victory over the Troika, meaning the gesture from the Euro-bloc must be big enough to make Tsipras look good.</p> <p><a href="http://sproutmoney.com/"><img src="http://sproutmoney.com/files/2015/02/Kitco-gold-price.jpg" alt="Kitco gold price" width="599" height="384" style="display: block; margin-left: auto; margin-right: auto;" class="size-full wp-image-10309 aligncenter" /></a></p> <p><a href="http://www.kitco.com/" target="_blank"><em>Source</em></a></p> <p>There will be no Grexit as the sacrifices would be much higher than the sacrifices which had (and still have) to be made under the bailout program. However, any renegotiated deal will also increase the pressure on the entire Eurozone as it will take much longer than anticipated to see a single dime back from Athens. And even if our assumptions on the Grexit-case are wrong, gold once again would prove to be a safe haven as the gold price jumped by $25/oz last Friday when the news hit the wires.</p> <p><strong><a href="http://sproutmoney.com/guide-gold/" target="_blank"> &gt;&gt;&gt; Check Out Our Latest Gold Report!</a></strong></p> <p><em>Sprout Money offers a fresh look at investing. We analyze long lasting cycles, coupled with a collection of strategic investments and concrete tips for different types of assets. The methods and strategies from Sprout Money are transformed into the <a href="http://sproutmoney.com/gold-silver">Gold &amp; Silver Report</a> and the <a href="http://sproutmoney.com/technology">Technology Report</a>.</em></p> <p><em>Follow us on Twitter <a href="https://twitter.com/Sproutmoney"><strong>@SproutMoney</strong></a></em></p> http://www.zerohedge.com/news/2015-02-01/does-anyone-really-believe-grexit#comments Bond Capital Markets Creditors European Central Bank European Union Eurozone Greece Quantitative Easing Twitter Twitter Sun, 01 Feb 2015 14:58:05 +0000 Sprout Money 501263 at http://www.zerohedge.com Nomi Prins: The Sinister Evolution Of Our Modern Banking System http://www.zerohedge.com/news/2015-02-01/nomi-prins-sinister-evolution-our-modern-banking-system <p><em>By Adam Taggart of <a href="http://www.peakprosperity.com/podcast/91631/nomi-prins-sinister-evolution-our-modern-banking-system?utm_source=twitterfeed&amp;utm_medium=twitter&amp;utm_campaign=Feed%3A+PeakProsperity+%28Peak+Prosperity%29">PeakProsperity</a></em></p> <p><strong>Nomi Prins: The Sinister Evolution Of Our Modern Banking System</strong></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>I quit Wall Street and decided that it was time to talk more about what was going on inside it, as it had changed. It had become far more sinister and far more dangerous. </strong></p> </blockquote> <p>&nbsp;&nbsp;&nbsp;&nbsp; ~ Nomi Prins</p> <p>Today, the 'revolving door' connecting our political and financial systems is evident to anyone with eyes. But this entwined relationship between Washington DC and Wall Street is nothing new, predating even the formation of the Federal Reserve.</p> <p>To chronicle the evolution to where we find ourselves today, we welcome Nomi Prins, Wall Street veteran turned financial industry reformist, and author of the excellent expose <a href="http://www.amazon.com/gp/product/156858749X/ref=as_li_qf_sp_asin_il_tl?ie=UTF8&amp;camp=1789&amp;creative=9325&amp;creativeASIN=156858749X&amp;linkCode=as2&amp;tag=peakprosp-20&amp;linkId=FIAZYOLFYGFVPGZM">All The Presidents Bankers.</a></p> <p>In this well-detailed interview, Nomi goes into depth of the rationale and process behind the creation of the Federal Reserve, and more important, how its mandate -- and the behavior of the banking system overall -- metastasized into the every-banker-for-himself regime of sanctioned theft we now live with.</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>Chris Martenson</strong>:&nbsp;&nbsp; To me, it couldn’t have been more obviously obscene then in 2010, and I believe maybe 2009, right after the big banks had been handed just vast, huge, very favorable handouts and bailouts during the Great Recession -- and then they handed themselves record bonuses. I thought optically that was just horrible. As somebody who was inside the banking system: Are they that tone deaf? What’s behind that sort of behavior? </p> <p>&nbsp;</p> <p><strong>Nomi Prins</strong>:&nbsp;&nbsp; Indeed, they have become very isolated. </p> <p>&nbsp;</p> <p>It began with the period before the 1970s when different people were rising to leadership in banks, and worsened in the 80s when we started seeing people who had more sociopathic tendencies or less ability to appreciate the idea of the public's economic stability being beneficial to growing their institutions. They no longer viewed it as necessary. </p> <p>&nbsp;</p> <p>And with the advent of the larger futures market, the options market, the derivatives market, and all the off-shore elements of banking that were able to be developed, so much capital was now available and off of the books that the idea of maintaining some sort of a connection to stability policy -- or even to whatever the Presidency might want -- dissolved. At the same time, all the Presidents that were involved in running the country around that time didn’t ask or require accountability towards financial stability from them. </p> <p>&nbsp;</p> <p>So there was a bunch of things that were happening at the same time, and that’s why the media does a poor job of critiquing this because they’re not looking at all the strands. None of this is simple. A lot of things happened at the same time to create these kinds of shifts. On the one hand, you have no restraint:<strong> you don’t have the Gold Standard anymore, so you have less of a strain on having something physical be reserved against your leverage</strong>. You now have this ability of petrodollars being recycled. You have the ability to leverage more debt. You have less humility. You have a more technologically-advanced, less transparent global financial system, <strong>so you can make and hide money easier</strong>. And then you have <strong>ascendancies of leadership in banks and in the government that are OK with all this, and allow it to fester. </strong></p> <p>&nbsp;</p> <p>It's all defended as some sort of example of a free market and competition -- "the best gets the best", and so forth -- when the reality is it just destabilizes the entire system and creates an artificiality. <strong>We see central banks supporting all of this mess, as opposed to figuring out what the exit policy is -- which none of them have a clue about. </strong>That’s really where we’ve evolved to. </p> </blockquote> <p>Click the play button below to listen to Chris' interview with Nomi Prins (52m:45s)</p> <p><iframe src="http://www.youtube.com/embed/mcPcBI8pNoM?version=3&amp;autohide=1&amp;fs=1&amp;modestbranding=1&amp;rel=0&amp;wmode=transparent&amp;showinfo=0" width="640" height="360" frameborder="0"></iframe></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="357" height="240" alt="" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/nomi%20prins.png?1422800506" /> </div> </div> </div> http://www.zerohedge.com/news/2015-02-01/nomi-prins-sinister-evolution-our-modern-banking-system#comments Central Banks Chris Martenson Federal Reserve Futures market None Reality Recession Sun, 01 Feb 2015 14:23:32 +0000 Tyler Durden 501262 at http://www.zerohedge.com Caught On Tape: Dijsselbloem To Varoufakis: "You Just Killed The Troika" http://www.zerohedge.com/news/2015-01-31/caught-tape-dijsselbloem-varoufakis-you-just-killed-troika <p>Amid &#39;turmoiling&#39; stock markets on Friday, CNBC&#39;s Simon Hobbs summed up the status quo&#39;s thinking on the new Greek leadership when he noted, somewhat angrily and shocked, <strong><em>&quot;The Greeks are not even trying to reassure the markets,&quot;</em></strong> seeming to have entirely forgotten <em>(and who can blame him in this new normal the world has been force-fed for 6 years)</em> that political leaders are elected for the good of the people (by the people) not for the markets. Yesterday saw the clearest example yet of Europe&#39;s anger that the Greeks may choose their own path as opposed to following the EU&#39;s non-sovereign leadership&#39;s demands when the most uncomfortable moment ever caught on tape - the moment when <strong>Eurogroup chief Jeroen Dijsselbloem </strong><a href="http://www.zerohedge.com/news/2013-03-26/what-dijsselbloem-really-said-full-record-transcript"><em>(he of the &quot;template&quot; foot in mouth disease)</em></a> stood up at the end of the EU-Greece press conference,<strong> awkwardly shook hands with Greece&#39;s new finance minister, and whispered...&quot;you have just killed the Troika,&quot; to which Varoufakis responded... &quot;wow!&quot;</strong></p> <p>&nbsp;</p> <p><a href="http://www.keeptalkinggreece.com/2015/01/30/dijsselbloem-you-just-killed-troika-varoufakis-wow-video-pics/"><em>As Keep Talking Greece reports</em></a>,</p> <p>The joint press conference was concluding, when Greek Finance Minister<strong> Yanis Varoufakis</strong> droped a last bombshell.&nbsp; <em><strong>&ldquo;&hellip;and with this if you want &ndash; and according to European Parliament &ndash; flimsily-constructed committee we have no aim to cooperate. Thank you.&rdquo;</strong></em> Varoufakis was referring to the famous Troika, the country&rsquo;s official creditors consisting of the European Union, the International Monetary Fund and the European Central Bank..</p> <p>After concluding with a &ldquo;Thank you&rdquo; Varoufakis gives the word to Eurogroup Chief <strong>Jeroen Dijsselbloem</strong>, who wants to hear the translation first. Then he takes off the ear phones, he stands up and sets to leave. An enforced-looking shaking of hands delays the&nbsp; departure of the Dutch FinMin.</p> <p>Dijsselbloem quickly whispers something to Varoufakis&rsquo; ear, he briefly replies back and the Eurogroup chief leaves the press conference hall as soon as it was possible.</p> <p><strong>Video: the Awkward Greek-Eurogroup Moment</strong></p> <p><iframe allowfullscreen="" frameborder="0" height="315" src="https://www.youtube.com/embed/LPmFHW60Ho8" width="560"></iframe></p> <p>&nbsp;</p> <p>The whole afternoon, Greek and international media were trying to find out <u><strong>&ldquo;What the hell did they two men said to each other!?&rdquo;</strong></u></p> <p><img alt="" src="http://4.bp.blogspot.com/-Q8NxM9BVn5I/VMvQ1DgK7QI/AAAAAAAG5XI/BSeaOdyS2Pc/s1600/ntai.jpg" style="border-width: 0px; border-style: solid; width: 600px; height: 554px;" /></p> <p>&nbsp;</p> <p><em>Private Mega TV reported short before 9 pm on Friday.</em></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><u><strong>Eurogroup chief whispered to Greek FinMin&rsquo;s&nbsp; ear &ldquo;You just killed the Troika&rdquo; and that Varoufakis replied with a simple &ldquo;WOW!&rdquo;</strong></u></p> </blockquote> <p>&nbsp;</p> <p><img alt="" src="http://www.protothema.gr/files/1/2015/01/30/varr1.jpg" style="height: 400px; width: 600px;" /></p> <p><strong>Dijsselbloem</strong><em>: Whisper&hellip;whisper&hellip;</em></p> <p><img alt="" src="http://www.protothema.gr/files/1/2015/01/30/var.jpg" style="height: 400px; width: 600px;" /></p> <p><strong>Varoufakis:</strong> <em>Whisper&hellip;.</em></p> <p>&nbsp;</p> <p><img alt="" src="http://www.protothema.gr/files/1/2015/01/30/varr2.jpg" style="height: 400px; width: 600px;" /></p> <p>Dijsselbloom slides his hand away</p> <p><img alt="" src="http://www.protothema.gr/files/1/2015/01/30/varr8.jpg" style="height: 400px; width: 600px;" /></p> <p>Back remains Varoufakis with one palm open and the left hand stuck in his pocket &ndash; relaxed Greek style</p> <p><img alt="" src="http://www.protothema.gr/files/1/2015/01/30/varr5.jpg" style="height: 400px; width: 600px;" /></p> <p>The two men talk for a couple of minutes with lips hidden from the cameras.</p> <p><img alt="" src="http://www.protothema.gr/files/1/2015/01/30/varr7.jpg" style="height: 400px; width: 600px;" /></p> <p>Dijsselbloem leaves without turning back to watch his interlocutor.</p> <p><img alt="" src="http://www.protothema.gr/files/1/2015/01/30/varr00.jpg" style="height: 400px; width: 600px;" /></p> <p>I don&rsquo;t quite understand why Dijsselbloem is sour. I&rsquo;m sure that Varoufakis told him the same things when they had their 2-hour face-to-face talks.</p> <p>Unless they were talking about <em>Gouda</em> and <em>Feta</em> and the Greek FinMin surprised him when he said at the press conference, that the <a href="http://www.keeptalkinggreece.com/2015/01/30/varoufakis-tells-dijsselbloem-greek-govt-will-not-negotiate-with-troika/" target="_blank">Greek government will not negotiate with the Troika.</a></p> <p><u><strong>And furthermore, why is he offended? He is chief of the Eurogroup, he does not represent the Troika&hellip;</strong></u></p> <p><u><strong>Most probably he was expecting a Yes-Man behavior like in the past with HOHOHO-jocker Jean-Claude Juncker, when he was Eurogroup head.</strong></u></p> <p><a href="http://www.keeptalkinggreece.com/wp-content/uploads/2015/01/juncker-venizelos.jpg"><img alt="juncker venizelos" class="alignnone size-full wp-image-32350" src="http://www.keeptalkinggreece.com/wp-content/uploads/2015/01/juncker-venizelos.jpg" style="width: 601px; height: 318px;" /></a></p> <p><strong><em>Juncker &ndash; FinMin Venizelos</em></strong></p> <p><a href="http://www.keeptalkinggreece.com/wp-content/uploads/2012/03/Juncker.jpg"><img alt="Juncker" class="alignnone size-full wp-image-15774" src="http://www.keeptalkinggreece.com/wp-content/uploads/2012/03/Juncker.jpg" style="width: 601px; height: 497px;" /></a></p> <p><strong><em>Juncker &ndash; Spanish FinMin</em></strong></p> <p>*&nbsp; *&nbsp; *</p> <p>Later that evening Yanis Varoufakis gave an excellent more in depth interview with BBC&#39;s Newsnight... to explain why Greece will not accept more debt from the EU...</p> <p><iframe frameborder="0" height="315" src="https://www.youtube.com/embed/BiIO4YciewU" width="560"></iframe></p> <p>* * *</p> <p><u><strong>One final thought - how long before this chart converges?</strong></u></p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/01-overflow/20150131_GRE.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/01-overflow/20150131_GRE.jpg" style="width: 599px; height: 316px;" /></a></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="338" height="347" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20150131_troika.jpg?1422723106" /> </div> </div> </div> http://www.zerohedge.com/news/2015-01-31/caught-tape-dijsselbloem-varoufakis-you-just-killed-troika#comments Creditors European Central Bank European Union Greece International Monetary Fund New Normal Sun, 01 Feb 2015 04:58:45 +0000 Tyler Durden 501244 at http://www.zerohedge.com The German 10 Year Bund Effectively a Call Option at 30 Basis Points http://www.zerohedge.com/news/2015-01-31/german-10-year-bund-effectively-call-option-30-basis-points <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/-5W5pYFbC4lo/VM09t8s81FI/AAAAAAAAEmE/ILl0GZ7gp1c/s1600/th7GUJA451.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-5W5pYFbC4lo%2FVM09t8s81FI%2FAAAAAAAAEmE%2FILl0GZ7gp1c%2Fs1600%2Fth7GUJA451.jpg&amp;container=blogger&amp;gadget=a&amp;rewriteMime=image%2F*" border="0" style="cursor: move;" /></a></p> <p style="margin: 0px; font-family: 'Times New Roman'; font-size: medium; line-height: normal;">&nbsp;</p> <p style="margin: 0px; font-family: 'Times New Roman'; font-size: medium; line-height: normal;"><strong><span style="font-size: 12pt; line-height: 17.1200008392334px;">Bonds are not Stocks</span></strong></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;">On Friday the German 10 Year Bund yield touched the 0.30 mark or 30 basis points, yeah that`s right the same instrument that was yielding 90 basis points in November of last year, a 140 basis points last May 2014, and 195 basis points at the beginning of 2014. It has gotten so ridiculous in the bond markets that I think investors have forgotten what bonds actually are as an asset class, they trade based on price appreciation like stocks, and this perverted mentality has completely ignored the risk component of what bonds represent as debt obligations. &nbsp;&nbsp;</p> <p style="margin: 0px;">&nbsp;</p> </div> <p style="margin: 0px; font-family: 'Times New Roman'; font-size: medium; line-height: normal;"><strong><span style="font-size: 12pt; line-height: 17.1200008392334px;">German Core CPI expected to be 1.1% in 2015</span></strong></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;">But the case of the German 10 year Bund has gotten so idiotic that all finance logic has been thrown out the window. Excluding food and energy, consumer prices are expected to increase by 1.1 percent year on year in Germany for 2015. Yes&nbsp;<a href="http://www.econmatters.com/2014/12/the-russia-mexico-opec-failed-agreement.html">energy has dropped 50%</a>&nbsp;and so the comps are skewing everyone`s inflation readings to the downside, this is the rationale for focusing on the core inflation readings historically because of the high volatility of these two categories. Once the bad year over year comps start coming out of the energy components all the inflation readings will start spiking up again late next year, but remember the German Bund yielding 30 basis points is for the duration of 10 years, not 3 months!</p> <p style="margin: 0px;">&nbsp;</p> <div style="text-align: center;"> <p style="margin: 0px;"><strong><em>Read More:&nbsp;<a href="http://www.econmatters.com/2015/01/the-bond-market-has-reached-tulip.html">The Bond Market Has Reached Tulip Bubble Proportions</a></em></strong></p> </div> </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://1.bp.blogspot.com/-eaZ3aFdPUvA/VM096KUZUAI/AAAAAAAAEmM/2D95-mPTEjE/s1600/Germany%2B10-Year%2BBond%2BYield(15%2BMinutes)20150131134452.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-eaZ3aFdPUvA%2FVM096KUZUAI%2FAAAAAAAAEmM%2F2D95-mPTEjE%2Fs1600%2FGermany%252B10-Year%252BBond%252BYield(15%252BMinutes)20150131134452.png&amp;container=blogger&amp;gadget=a&amp;rewriteMime=image%2F*" width="624" height="640" 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;"><strong><span style="font-size: 12pt; line-height: 17.1200008392334px;"><br /></span></strong><strong><span style="font-size: 12pt; line-height: 17.1200008392334px;">Bund Yields in the Financial Crisis</span></strong></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;">There is talk about slow growth in Europe responsible for these low yields, but during the financial crisis of 2008/2009 the German 10 year yield was between 3% and 4%, and this was a time of the global recession where oil was trading as low as $33 a barrel, things were much worse during the financial crisis compared to today.</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/-aKa-BVWS6D4/VM0-L098siI/AAAAAAAAEmU/gZG6ZHvX0BI/s1600/Germany%2B10-Year%2BBond%2BYield(Weekly)20150131134511.png" 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-aKa-BVWS6D4%2FVM0-L098siI%2FAAAAAAAAEmU%2FgZG6ZHvX0BI%2Fs1600%2FGermany%252B10-Year%252BBond%252BYield(Weekly)20150131134511.png&amp;container=blogger&amp;gadget=a&amp;rewriteMime=image%2F*" width="624" height="640" 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;"><strong><span style="font-size: 12pt; line-height: 17.1200008392334px;"><br /></span></strong><strong><span style="font-size: 12pt; line-height: 17.1200008392334px;">ZIRP is the Elephant in the Room</span></strong></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;">The real reason the German 10 year yield has dropped so dramatically is the abundance of cheap money in the financial system, all the big financial institutions are basically borrowing at ZIRP levels from government central banks, levering up their balance sheets, and taking advantage of this delta or difference in abnormally low borrowing costs and government bond yields, without any concern or notion of the risks associated with this strategy.</p> <p style="margin: 0px;">&nbsp;</p> <div style="text-align: center;"> <p style="margin: 0px;"><em><strong>Read More:&nbsp;<a href="http://www.econmatters.com/2014/12/the-russia-mexico-opec-failed-agreement.html">The Fed Has to Sell Treasury Holdings Back to Marketplace</a></strong></em></p> </div> <div style="text-align: center;"> <p style="margin: 0px;"><em><br /></em></p> </div> </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/-KauwrZAtLc0/VM0_lc0tilI/AAAAAAAAEmo/t_RqH1Lyew8/s1600/euro-area-interest-rate2.png" 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-KauwrZAtLc0%2FVM0_lc0tilI%2FAAAAAAAAEmo%2Ft_RqH1Lyew8%2Fs1600%2Feuro-area-interest-rate2.png&amp;container=blogger&amp;gadget=a&amp;rewriteMime=image%2F*" width="640" height="291" 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;">Remember these are 10 year bond durations we are talking about, and not 3 months! Do the central banks themselves think these are wise investments for financial institutions to be taking on their balance sheets at these prices and yield levels? They have to know, we can see the direct correlation of the ECB`s equivalent Fed Funds Rate dropping from 0.25 to 0.15 to 0.05 and the yield crashing in the German 10 Year Bund. But again this is for a duration of 10 years, for instance just 6 short years ago the ECB main borrowing rate was set at 3.75%.</p> <p style="margin: 0px;">&nbsp;</p> <div style="text-align: center;"> <p style="margin: 0px;"><strong><em>Read More:&nbsp;<a href="http://www.econmatters.com/2014/12/wall-street-will-always-find-excuse-for.html">Wall Street Will Always Find An Excuse For Not Raising Rates</a></em></strong></p> </div> </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://3.bp.blogspot.com/-wonbQaS4Dk4/VM0_2Dzub_I/AAAAAAAAEmw/0zyHOWDTCnY/s1600/euro-area-interest-rate3.png" 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-wonbQaS4Dk4%2FVM0_2Dzub_I%2FAAAAAAAAEmw%2F0zyHOWDTCnY%2Fs1600%2Feuro-area-interest-rate3.png&amp;container=blogger&amp;gadget=a&amp;rewriteMime=image%2F*" width="640" height="292" 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;"><strong><span style="font-size: 12pt; line-height: 17.1200008392334px;">Unintended Consequences</span></strong></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;">Does the ECB realistically think about the long term consequences of these financial institutions levering up their balance sheets with German 10 year Bunds trading with a 30 basis points yield? They have to realize that their policies are directly incentivizing this insane, irresponsible investing behavior with fallout being far more detrimental to the entire financial system of the European Union than a Greek exit, or a slow growth environment.&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> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">All of these European Bonds are going to be extensively underwater from current price and yield levels for any holders at anywhere near these valuation metrics 5 and 10 years from now. This is like buying real estate in a hot real estate market, with no down payment loans, no documentation loans, and at zero percent borrowing costs with no borrowing limits, it is the housing crisis on steroids.</p> <p style="margin: 0px;">&nbsp;</p> <div style="text-align: center;"> <p style="margin: 0px;"><strong><em>Read More:&nbsp;<a href="http://www.econmatters.com/2014/10/the-5year-bond-is-emblematic-of.html">The 5–Year Bond is Emblematic of Careless Risk Taking in Bond Markets</a></em></strong></p> </div> </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;">I have heard the response that these financial institutions believe that the ECB will buy these underwater bonds in a bailout scenario so they don`t really worry about traditional bond valuation metrics. Really the ECB is going to be able to buy all these bonds from them without steep haircuts? Why would any rationale central bank even go down this road in the first place, kicking the can down the road is one thing, going full boar into a suicide financial implosion is another matter entirely?</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;">Out of the Money Prices versus Risk under Normal Mean Reversion of 10 Year Average</span></strong></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;">At 30 basis points yield, a short on this German Bund via the futures market is basically a call option on the utter destruction of this Massive Yield Chasing Strategy on behalf of financial institutions that has taken place over the last few years.</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;">Seriously what is the downside risk of this trade, does the German Bund go down to yielding only 15 basis points? And what after the deflationary cycle the inflationary, or even hyper-inflationary cycle takes off? Remember it isn`t like Germany doesn`t remember the hyper-inflationary cycle. So what is the upside of this trade, it really is off the charts for the next 10 year period from a risk reward standpoint.&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://1.bp.blogspot.com/-dP0COlBWYcc/VM0-xsOgmqI/AAAAAAAAEmg/0PfSEMFoY2s/s1600/Germany%2B10-Year%2BBond%2BYield(Monthly)20150131134536.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-dP0COlBWYcc%2FVM0-xsOgmqI%2FAAAAAAAAEmg%2F0PfSEMFoY2s%2Fs1600%2FGermany%252B10-Year%252BBond%252BYield(Monthly)20150131134536.png&amp;container=blogger&amp;gadget=a&amp;rewriteMime=image%2F*" width="624" height="640" 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> <p style="margin: 0px;">Just to put some rough numbers here let`s say 15 basis points risk, and 400 plus basis points reward on this trade scenario over the duration of this 10 year bond. Actually the sound investment for financial institutions is exactly the opposite of the one they are so aggressively seeking out at the moment in the bond markets. Remember these positions often sit on financial institutions balance sheets for years if not decades in some cases. I can just imagine the write downs on these Yield Chasing Trading Positions at the large financial institutions in the future.</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://1.bp.blogspot.com/-9vF87RlrvQA/VM1AFqn0-qI/AAAAAAAAEm4/OfPbVSaSYEo/s1600/euro-area-interest-rate.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-9vF87RlrvQA%2FVM1AFqn0-qI%2FAAAAAAAAEm4%2FOfPbVSaSYEo%2Fs1600%2Feuro-area-interest-rate.png&amp;container=blogger&amp;gadget=a&amp;rewriteMime=image%2F*" width="640" height="292" 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;">There is no way in hell the German 10 Year Bund is trading at 30 basis points in five years’ time, let alone in ten years. When bond yields become so compressed that they represent far out of the money call option`s prices, but are not even premium priced for a normal reversion to the mean of the last 10 year average yields of the bonds, this sets up the entire financial system for systemic risk on a grand scale that central banks better start focusing on right now. We have a problem central banks, and it isn`t the problem you are worrying about, forget sluggish growth, we have the biggest financial bubble brewing right now in the largest financial asset class in the world, and the German 10 Year Bund yielding 30 basis points is a disaster waiting to happen for any investor levering up their balance sheets with this ridiculous bond investment.</p> </div> <p style="margin: 0px; font-family: 'Times New Roman'; font-size: medium; line-height: normal;">&nbsp;</p> <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">Email Subscribe</a>&nbsp;|&nbsp;<a href="http://astore.amazon.com/econforecast-20?_encoding=UTF8&amp;node=80">Kindle</a></p> http://www.zerohedge.com/news/2015-01-31/german-10-year-bund-effectively-call-option-30-basis-points#comments 10 Year Bond Bond Borrowing Costs Central Banks Consumer Prices Core CPI CPI European Union Futures market Germany Mean Reversion Real estate Recession Twitter Twitter Volatility Sun, 01 Feb 2015 03:48:38 +0000 EconMatters 501261 at http://www.zerohedge.com Socialist Exceptionalism http://www.zerohedge.com/news/2015-01-31/socialist-exceptionalism <p><em>"In the minds of the statists, "Government Works Better" and 'things' work at the surface; but at the core, it's a disaster... The <strong>Americans that look to the government to 'save' them</strong> - and even gleefully thank the government for helping bail them out - <strong>fail to realize that it was the government that f##ked them in the first place</strong>..."</em></p> <p>&nbsp;</p> <p>Simply put, <strong><em>"debt-financed socialism and corporatism isn't working"</em></strong> and a day of reckoning is coming...</p> <p><iframe src="https://www.youtube.com/embed/3WddN1Qx3hg" width="560" height="315" frameborder="0"></iframe></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="797" height="466" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20150131_socialism.jpg?1422743085" /> </div> </div> </div> http://www.zerohedge.com/news/2015-01-31/socialist-exceptionalism#comments Fail Sun, 01 Feb 2015 03:00:16 +0000 Tyler Durden 501259 at http://www.zerohedge.com How Ukraine Can Save China From Its Existential Threat (Spoiler Alert: Girls) http://www.zerohedge.com/news/2015-01-31/how-ukraine-can-save-china-its-existential-threat-spoiler-alert-girls <p><strong>In China last year, just over 115 boys were born for every 100 girls</strong>, and since sonogram technology was introduced to China in the 1980s - allowing families to determine a baby&rsquo;s gender during the first few months of pregnancy - the gender imbalance in the world&#39;s largest economy has grown colossal. However, <a href="http://mp.weixin.qq.com/s?__biz=MjM5MjMxMTY0MA==&amp;mid=203360550&amp;idx=2&amp;sn=f8598eb191de673f6b49bf5f38ffd094#rd">as Beijing News recently explained</a>, <strong>there may be a solution for China&#39;s 34 million woman shortfall... Ukrainian women, as &quot;their economy is depressed but beautiful women are running rampant.&quot;</strong> While <a href="https://foreignpolicy.com/2015/01/28/ukrainian-brides-may-solve-chinas-gender-gap-chinese-media-claims/">Foreign Policy notes</a> that the best destinations for Chinese men to find spouses are Japan and South Korea, there appears to be plenty of fish in the sea, at least outside China. Oh the wonders of Ricardian comparative advantage - <em>Ukraine needs an export business (and produces - from what we have heard - attractive women) and China needs to import &#39;women&#39; (to fill its massive shortfall)</em>. Global economic growth problems, solved...</p> <p>&nbsp;</p> <p><a href="https://foreignpolicy.com/2015/01/28/ukrainian-brides-may-solve-chinas-gender-gap-chinese-media-claims/"><em>As Foreign Policy reports,</em></a></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><u><strong>&quot;Their economy is depressed but beautiful women are running rampant,&rdquo; the state-run Beijing News reported Jan. 22 in a story suggesting that Ukrainian women could be the solution to China&rsquo;s woman shortage.</strong></u> The piece, illustrated with charts, bubbles, and cartoon illustrations of lonely Chinese men, was a breezy attempt to make light of China&rsquo;s missing women and the severe gender imbalance caused by couples aborting female fetuses in favor of boys. So widespread is the practice that it has badly skewed the country&rsquo;s sex ratio: The global average is around 105 boys born for every 100 girls; but in China last year, just over 115 boys were born for every 100 girls.</p> <p>&nbsp;</p> <p><strong>The problem has been brewing since sonogram technology was introduced to China in the 1980s, allowing families to determine a baby&rsquo;s gender during the first few months of pregnancy. </strong>Combined with the country&rsquo;s restrictive family-planning policies &mdash; until recently, most urban families were only allowed a single child in order to curtail population growth &mdash; and a traditional preference for sons, the newfound ability to practice sex-selective abortion has resulted in one of the world&rsquo;s highest gender imbalances. The topic flared anew in the public mind after the National Bureau of Statistics announced the latest population figures on Jan. 20, <strong>noting that at the end of 2014 China had 701 million men and 667 million women, a shortfall of nearly 34 million women.</strong></p> <p>&nbsp;</p> <p>...</p> <p>&nbsp;</p> <p><strong>China is not alone in these cultural predilections. </strong>Indian social scientist Ravinder Kaur wrote in an August 2013 paper that &ldquo;the common response&rdquo; in both China and India &ldquo;when the connection between sex selection and bride shortage is pointed out is that rather than allow daughters to be born, they would resort to importing brides.&rdquo; Kaur also wrote that bride shortages in China and India can lead to &ldquo;kidnap marriage,&rdquo; which includes &ldquo;deception and enticement&rdquo; and &ldquo;luring women for marriage into high sex ratio areas.&rdquo;</p> <p>&nbsp;</p> <p><strong>To address the problem, China has resorted to propaganda campaigns extolling the virtues of daughters and offering cash incentives for couples who have them. </strong>These measures have spurred more female births, but not enough &mdash; <u><strong>China&rsquo;s gender imbalance is still &ldquo;the most serious in the world and has lasted for the longest time and affected the largest number of people,&rdquo; China&rsquo;s National Health and Family Planning Commission said in a Jan. 21 statement.</strong></u></p> </blockquote> <p>Beijing News provided a tongue-in-cheek infographic explaining the problems and potential solutions... (our Chinese is not great but the pictures seemed to speak for themselves)...</p> <p>&nbsp;</p> <p>Encourage feather-boah tickling parties...?</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/01-overflow/20150131_ukraine1.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/01-overflow/20150131_ukraine1.jpg" style="width: 599px; height: 382px;" /></a></p> <p>&nbsp;</p> <p>or marry a Ukrainian woman...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/01-overflow/20150131_ukraine2.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/01-overflow/20150131_ukraine2.jpg" style="width: 600px; height: 354px;" /></a></p> <p>&nbsp;</p> <p>*&nbsp; *&nbsp; *</p> <p>Be careful though when &#39;googling&#39; Mail Order Brides - Ukraine...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/01-overflow/20150131_ukraine4.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/01-overflow/20150131_ukraine4.jpg" style="width: 600px; height: 500px;" /></a></p> <p>&nbsp;</p> <p>Because, from what we are told, not all Ukrainian women look like this...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/01-overflow/20150131_ukraine3.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/01-overflow/20150131_ukraine3.jpg" style="width: 599px; height: 205px;" /></a></p> <p>&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="300" height="250" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20150131_ukraine4.jpg?1422742349" /> </div> </div> </div> http://www.zerohedge.com/news/2015-01-31/how-ukraine-can-save-china-its-existential-threat-spoiler-alert-girls#comments China India Japan Ukraine Sun, 01 Feb 2015 02:00:15 +0000 Tyler Durden 501258 at http://www.zerohedge.com What Do They Know? Why Are So Many Of The Super Wealthy Preparing Bug Out Locations? http://www.zerohedge.com/news/2015-01-31/what-do-they-know-why-are-so-many-super-wealthy-preparing-bug-out-locations <p><a href="http://endoftheamericandream.com/archives/what-do-they-know-why-are-so-many-of-the-super-wealthy-preparing-bug-out-locations"><em>Submitted by Michael Snyder via The End of The American Dream blog</em></a>,</p> <p><strong>A lot of ultra-rich people are quietly preparing to &ldquo;bug out&rdquo; when the time comes.&nbsp;</strong> They are buying survival properties, they are buying farms in far away countries and they are buying deep underground bunkers.&nbsp; In fact, a prominent insider at the World Economic Forum in Davos, Switzerland says that &ldquo;very powerful people are telling us they&rsquo;re scared&rdquo; and he shocked his audience when he revealed that he knows &ldquo;hedge fund managers all over the world who are buying airstrips and farms in places like New Zealand&rdquo;.</p> <p><strong>So what do they know?&nbsp;</strong> Why are so many of the super wealthy suddenly preparing bug out locations?&nbsp; When the elite of the world start preparing for doomsday, that is a very troubling sign.&nbsp; And right now the elite appear to be quietly preparing for disaster like never before.</p> <p>The insider that I mentioned above is named Robert Johnson.&nbsp; He is the president of the Institute of New Economic Thinking, and what he recently told a packed audience in Davos&nbsp;<a href="http://www.theguardian.com/public-leaders-network/2015/jan/23/nervous-super-rich-planning-escapes-davos-2015" target="_blank" title="is making headlines all over the planet">is making headlines all over the planet</a>&hellip;</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>With growing inequality and the civil unrest from Ferguson and the Occupy protests fresh in people&rsquo;s mind, the world&rsquo;s super rich are already preparing for the consequences. At a packed session in Davos, former hedge fund director Robert Johnson revealed that worried hedge fund managers were already planning their escapes. &ldquo;<strong>I know hedge fund managers all over the world who are buying airstrips and farms in places like New Zealand because they think they need a getaway</strong>,&rdquo; he said.</p> </blockquote> <p>But he didn&rsquo;t stop there.</p> <p>In a separate interview, Johnson admitted that &ldquo;very powerful people are telling us they&rsquo;re scared&rdquo; and that the elite &ldquo;see increasing evidence of social instability and violence&rdquo;.&nbsp; You can watch <a href="https://www.youtube.com/embed/Sriuwxwols8" target="_blank" title="video of the entire interview">video of the entire interview</a> below&hellip;</p> <p><center> <p><iframe allowfullscreen="" frameborder="0" height="315" src="https://www.youtube.com/embed/Sriuwxwols8" width="560"></iframe></p> <p></p></center> </p><p>Wow.</p> <p><strong>And Johnson is not the only one saying these things.</strong></p> <p>The following quote comes from&nbsp;<a href="http://www.mirror.co.uk/news/world-news/panicked-super-rich-buying-boltholes-5044084" target="_blank" title="the Mirror">the Mirror</a>&hellip;</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>His comments were backed up by Stewart Wallis, executive director of the New Economics Foundation, who when asked about the comments told CNBC Africa: &ldquo;Getaway cars the airstrips in New Zealand and all that sort of thing, so basically a way to get off.&nbsp; <strong>If they can get off, onto another planet, some of them would</strong>.&rdquo;</p> </blockquote> <p>Of course not all elitists are planning to jet off to the other side of the globe.</p> <p><strong>Some are planning to go deep underground when things hit the fan.</strong></p> <p><strong><a href="http://www.zerohedge.com/news/2014-12-22/doom-boom-us-families-increasingly-prepared-modern-day-apocalypse">For example, there is an underground decommissioned missile silo in Kansas that has been transformed into luxury survival condos by a real estate developer.&nbsp; </a></strong>The following is from a <a href="http://www.wsj.com/articles/for-sale-renovated-luxury-condo-can-survive-nuclear-attack-1415575922" target="_blank" title="Wall Street Journal article">Wall Street Journal article</a> about those condos&hellip;</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>The so-called Survival Condo complex boasts full and half-floor units that cost $1.5 million to $3 million each. The building can accommodate up to 75 people, and buyers include doctors, scientists and entrepreneurs, says developer Larry Hall.</p> <p>&nbsp;</p> <p>Mr. Hall, who lives in a Denver suburb, bought his first missile-silo site in Kansas in 2008 and completed construction in December 2012. A year later, he says, the development had sold out. Work on the second security compound&mdash;the one where Mr. Allen bought a unit&mdash;is under way, and Mr. Hall says he is considering additional sites in Texas and elsewhere.</p> <p>&nbsp;</p> <p>As former nuclear missile sites built under the supervision of the Army Corps of Engineers, the structures were originally designed to withstand a direct hit by a nuclear bomb. At ground level, they can be sealed up by two armored doors weighing 16,000 pounds each. Mr. Hall added sophisticated water and air-treatment facilities, state-of-the-art computer network technology and several alternate power generation capabilities.</p> </blockquote> <p>Other wealthy individuals are turning their current homes into high tech security fortresses.</p> <p>Those that are involved in providing these kinds of services have seen business&nbsp;<a href="http://www.dailymail.co.uk/news/article-2515221/Sci-Fi-home-security-systems-rich-The-rise-billionaire-bunker.html" target="_blank" title="absolutely soar">absolutely soar</a> in recent years&hellip;</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>Wealthy families across the country are shelling out millions to protect their loved ones from intruders, natural disasters or the apocalypse as home security goes increasingly sci-fi.</p> <p>&nbsp;</p> <p>Companies that provide concerned homeowners with futuristic gadgets &ndash; and a priceless peace of mind &ndash; have revealed the growing demand of costly bunkers, passageways, panic rooms and recognition software.</p> <p>&nbsp;</p> <p>Chris Pollack &ndash; president of Pollack+Partners, a design and construction adviser in Purchase, New York &ndash; told <a href="http://www.forbes.com/sites/morganbrennan/2013/11/27/billionaire-bunkers-beyond-the-panic-room-home-security-goes-sci-fi/?utm_campaign=forbestwittersf&amp;utm_source=twitter&amp;utm_medium=social" rel="nofollow" target="_blank" title="Forbes ">Forbes </a>that, while security has always been important for the wealthiest clients, the spending on home security has noticeably grown in the past five years.</p> <p>&nbsp;</p> <p>And the options available on the market are like something from a Bond film.</p> </blockquote> <p>For much more on this, please see my previous article entitled &ldquo;<a href="http://endoftheamericandream.com/archives/why-are-so-many-wealthy-people-building-futuristic-high-tech-security-bunkers" title="Why Are So Many Wealthy People Building Futuristic High Tech Security Bunkers?">Why Are So Many Wealthy People Building Futuristic High Tech Security Bunkers?</a>&rdquo;</p> <p><strong>So why are all of these wealthy people so alarmed?</strong></p> <p>Well, the truth is that they can see what is happening.</p> <p>They can see that millions of people <a href="http://theeconomiccollapseblog.com/archives/27-facts-show-middle-class-fared-6-years-barack-obama" target="_blank" title="are falling out of the middle class">are falling out of the middle class</a>.&nbsp; They can see that society is breaking down <a href="http://endoftheamericandream.com/archives/category/moral-crisis" title="in thousands of different ways">in thousands of different ways</a>.&nbsp; They can see that anger and frustration are rising to unprecedented levels.&nbsp; And they can see that things are likely to boil over once the next major economic crisis strikes.</p> <p>Even though the economy is still fairly stable for the moment, signs of increasing economic suffering are everywhere.&nbsp; For example,&nbsp;<a href="http://www.latimes.com/local/california/la-me-homeless-encampments-20150125-story.html" target="_blank" title="the Los Angeles Times">the Los Angeles Times</a> is reporting that homeless encampments are rapidly spreading throughout the Los Angeles area&hellip;</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>Over the last two years, street encampments have jumped their historic boundaries in downtown Los Angeles, lining freeways and filling underpasses from Echo Park to South Los Angeles. The Los Angeles Homeless Services Authority, a city-county agency, received 767 calls about street encampments in 2014, up 60% from the 479 in 2013.</p> </blockquote> <p><strong>We live at a time when almost everyone is getting poorer <a href="http://www.shtfplan.com/headline-news/this-chart-tells-a-story-americas-middle-class-thrived-after-wwii-and-died-under-obama_01272015" target="_blank" title="except for the elite">except for the elite</a>.&nbsp;</strong> The top 1 percent now have close to 50 percent of the wealth in the entire world, and each year wealth becomes even more concentrated in their hands.</p> <p>The elite know that eventually a breaking point is going to come.&nbsp; Those that are smart don&rsquo;t want to be around when that happens.</p> <p>And we got a few clues about what things might look like what that time comes from the recent &ldquo;snow scare&rdquo; in New York.&nbsp; Frightened consumers wiped out supplies of bread, milk and eggs within just a few hours.&nbsp; People started to take advantage of one another, even the journalists seemed like they were on the verge of panic, <a href="http://www.bbc.com/news/world-us-canada-30996010" target="_blank" title="and virtually the entire city shut down">and virtually the entire city shut down</a>.</p> <p>All of this over just a few snowflakes.</p> <p>So what is going to happen when we have a real crisis?</p> <p><strong>If the elite are preparing to bug out, it is hard to blame them.</strong></p> <p>I wouldn&rsquo;t want to be right in the middle of a volcano when it erupts either.</p> <p><strong>Life is about to dramatically change, and signs of the coming storm are everywhere.</strong></p> <p>I hope that you are getting prepared for what is about to hit us while you still can.</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="469" height="386" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20150131_bunker.jpg?1422737648" /> </div> </div> </div> http://www.zerohedge.com/news/2015-01-31/what-do-they-know-why-are-so-many-super-wealthy-preparing-bug-out-locations#comments Bond Davos headlines New Zealand Real estate Switzerland Wall Street Journal Sun, 01 Feb 2015 01:15:15 +0000 Tyler Durden 501256 at http://www.zerohedge.com 16% Of Global Government Bonds Now Have A Negative Yield: Here Is Who's Buying It http://www.zerohedge.com/news/2015-01-31/16-global-government-bonds-now-have-negative-yield-here-whos-buying-it <p>A week ago <a href="http://www.zerohedge.com/news/2015-01-24/how-mario-draghi-unleashed-14-trillion-negative-interest-rate-tsunami">many were surprised to learn </a>that in his attempt to "fight deflation", the ECB's Mario Draghi unleashed the biggest deflationary wave of all time, when in the aftermath of the ECB's NIRP policy, and subsequently QE, an unprecedented €1.4 trillion in European debt with a maturity of more than 1 year traded down to subzero, as in negative, yields. </p> <p>But what happens if one expands the Eurozone NIRP universe to include the debt of other countries including Japan, Denmark, Sweden, Switzerland and so on? Conveniently, JPM has done the analysis and finds that a mindblowing $3.<span style="text-decoration: underline;"><em><strong>6 trillion of government debt </strong></em></span>traded with a negative yield as recently as last week. This represents 16% of the JPM Global Government Bond Index, <strong>or in other words </strong><span style="text-decoration: underline;">nearly a fifth</span><strong> of all global government debt is now trading with a negative yield, meaning investors pay sovereigns, using other people's money of course, for the privilege of buying their issuance</strong>!</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/01-overflow/Global%20NIRP.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/01-overflow/Global%20NIRP_0.jpg" width="600" height="623" /></a></p> <p>JPM's full take: </p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>There is currently €1.5tr or $1.7tr of Euro area government bonds of greater than one year maturity trading with negative nominal yields, almost all of them of core euro governments of up to 5 years maturity. This figure rises to $1.8tr if one adds $16bn of Swedish, $60bn of Swiss and $45bn of Danish government bonds currently trading with a negative yield. <strong>Almost all Japanese government bonds are trading with positive yields this week, but last week around $1.8tr of them were trading with a negative yield. </strong>So the total universe of government bonds traded with a <strong>negative yield was $3.6tr last week or 16% of the JPM Global Government Bond Index</strong>.</p> </blockquote> <p>The logical follow up question: as the entire world appears slowly but surely headed to a uniform NIRP platform, where every single sovereign's debt will have a negative yield thanks to one or more central banks' guarantees that said debt will be monetized no matter what (those curious what happens when there is even a faint doubt if a given nation's Treasurys <em><span style="text-decoration: underline;"><strong>won't</strong></span></em> be backstopped and purchased by a central bank, just look at what happened to Greek bonds this past week), why do investors keep dumping their cash in securities that have a negative carry? </p> <p>Here again courtesy of JPM's Nikolaos Panigirtzoglou, are six investor classes which, even with US stocks trading at the <em>low, low </em>forward GAAP PE of a modest 20x, prefer to incentivise governments around the globe to issue <em>even "<strong>moar</strong>" debt</em>, in the process making a global debt crisis that much worse, as the stock of government debt rises to truly catastrophic proportions.</p> <ol> <li>Investors who fear or expect deflation tend to find nominal bonds with even negative yields attractive as long as expected deflation makes real yields positive. In a deflationary environment investors tend to shift away from real into nominal assets. During the previous two decades in Japan, this took the form of a shift away from equities and real estate into cash and nominal JGBs.</li> <li>Investors who speculate on currency appreciation, for example investors buying Swiss or Danish government bonds to speculate on CHF or DKK currency appreciation.</li> <li>Investors who expect capital gains from central bank easing i.e. rate cuts or QE. For example, investors who have been buying euro area bonds over the past six&nbsp; months in anticipation of ECB rate cuts and QE, have seen strong capital gains already and some of them hold on to their investments despite negative yields as they expect further capital gains. Another example is investors buying Swedish bonds currently to speculate on Riksbank cutting its repo rate to negative over the coming months.</li> <li>Central banks can buy bonds with negative yields. For example, the ECB stated that its QE program will encompass purchases of nominal bonds with negative yields. <strong>The ECB funds its bond purchases at a depo rate of -20bp so buying bonds with slightly negative yields is still a positive carry trade</strong>. The BoJ bought government debt securities at negative yields in recent months.</li> <li>Indexed or passive funds have to buy bonds with negative yields. This universe is considerable and has been growing due to an increasing shift towards passive investing. In the US the universe of bond and hybrid mutual funds that are passive is $375bn or 7.8% of all bond and hybrid mutual funds. Extrapolating this to the global bond and hybrid mutual fund universe of $11.5tr implies a passive bond and hybrid mutual fund universe of $900bn. And this excludes bond ETFs, a $350bn universe globally. Admittedly only a portion of these passive bond funds invest in government bonds only, but this portion is significant. In the case of bond ETFs for example we note that $150bn out of $350bn of bond ETFs invest in government bonds only.</li> <li>Banks buy bonds with negative yields to escape negative depo rates such as those by the ECB, SNB and the Danish central bank. There is currently a large amount of €220bn of reserves subjected to negative interest rates and this amount looks set to grow exponentially due to ECB's QE (this €220bn includes the ECB’s excess reserves, Danish central bank’s certificates of deposits and Swiss sight deposits subjected to a negative depo rate). And the recent experience in Switzerland shows that even a small amount of reserves subjected to negative interest rates can have a big impact on bond yields. For example, there are CHF380bn of sight deposits at the SNB’s balance sheet but only a small portion of around 10%-15% is subjected to the punitive -75bp depo rate. This is because this charge is only levied above a threshold which is 20 times the minimum reserve requirement. Most Swiss banks including the two biggest are said to be below this threshold. But foreign banks are more likely to be subjected to the negative depo rate. This is also true for financial institutions that do not have&nbsp; inimum reserve requirements, such as insurance companies. These domestic financial institutions are subjected to a fixed threshold of only CHF10m, above which the negative depo rate will be applied. As of the end of December, foreign banks had CHF17bn of sight deposits with the SNB while non-bank domestic institutions had CHF33bn of deposits. At a depo rate of -75bp these CHF50bn of sight deposits could cost CHF375m per annum to their owners. This is enough for these institutions to rush to get rid of these deposits by purchasing bonds with yields as low as -75bp in order to reduce this loss. Most likely they purchase these bonds from banks not subjected to negative depo rate. As a result, 7-year Swiss government bond yields declined to as low as -67bp last week. <p>In addition to negative depo rates, commercial banks still have a large gap between deposits and loans, meaning that they need to invest a large amount of excess deposits into securities. A big portion of this liquidity is invested in short-dated/intermediate government bonds of 2-5 year maturity given banks’ reluctance to take duration risk as it would compound the mismatch between asset and liabilities, given zero risk weighting for government bonds and given the liquidity coverage ratio regulation which forces commercial banks to buy high-quality government-related bonds.</p></li> </ol> <p>Of note: in their infinite wisdom, regulators continue to keep government debt at a "<em>zero risk weighting</em>", which is perhaps the biggest self-fulifilling prophecy ever and one which is only valid as long as the weakest link in the "<em>central banks are infallible"</em> chain holds. Because a few more episodes like the SNB's shocking, and <em>confidence-crushing,</em> reversal in January, and the faith in central banker omnipotence will slowly but surely start to evaporate, and as it goes, it will also reveal just how much <em><strong>risk </strong></em>there truly is in this biggest "<em>frontrun-the-central-banks</em>" bandwagon trade of all time.</p> <p>In the meantime, prepare for much more laughter as well as sheer horror, as such until recently Onionesque market dislocations as <em>negative interest rate mortgages </em>(<a href="http://www.zerohedge.com/news/2015-01-30/denmark-you-are-now-paid-take-out-mortgage">now available in Denmark</a>, soon everywhere else) become an ubiquitous feature of a broken financial system now clearly in its terminal phase, where prudent behavior is punished outright, while spending money one doesn't have, and will <em>never </em>be able to repay, becomes the most rewarded activity.</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="759" height="788" alt="" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/Global%20NIRP.jpg?1422752645" /> </div> </div> </div> http://www.zerohedge.com/news/2015-01-31/16-global-government-bonds-now-have-negative-yield-here-whos-buying-it#comments Bond Carry Trade Central Banks Eurozone Excess Reserves fixed GAAP Insurance Companies Japan Real estate Sovereigns Swiss Banks Switzerland Sun, 01 Feb 2015 01:04:13 +0000 Tyler Durden 501260 at http://www.zerohedge.com "King Dollar" Is Crushing 'Recovery'Dreams, 87% Of US Companies Have Guided Lower http://www.zerohedge.com/news/2015-01-31/king-dollar-crushing-recoverydreams-87-us-companies-have-guided-lower <p><em><a href="http://www.zerohedge.com/news/2015-01-24/chart-day-souring-mothers-milk-edition">The &#39;souring&#39; of the mother&#39;s milk of stock markets continues</a>.</em> Management guidance and commentary implies 3-5pp impact due to &#39;king dollar&#39; FX headwinds as an <strong>astounding 87% of companies guided below consensus expectations for next quarter</strong>. Bottom-up consensus 2015 EPS estimates were cut by 4% during January, and, as Goldman Sachs warns, <strong>4Q EPS is tracking 7% below the consensus estimate at the start of reporting season</strong>. Finally, and perhaps most worrisome, granular bottom-up consensus is below top-down &#39;strategist&#39; consensus for the first time since 2009... as the <strong>gap between Forward P/E valuations and long-term growth is as wide as it has ever been</strong>.</p> <p><strong>&quot;King Dollar&quot; is not &#39;unambiguously good&#39; for America...</strong></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>Revenue results are correlated to dollar strengthening,</strong> which has led to weaker revenue results and lower forward guidance that incorporates the FX headwind.</p> <p>&nbsp;</p> <p><img height="428" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/01-overflow/20150131_mothersmilk2.jpg" width="600" /></p> <p>&nbsp;</p> <p>Anecdotally, management commentary implies the dollar strengthening will lower revenue growth by 300-500 bp. Foreign sales accounted for 33% of aggregate revenue for the S&amp;P 500 in 2013.</p> <p>&nbsp;</p> <p>Based on our earnings model, <strong>a 10% strengthening of the trade-weighted dollar lowers S&amp;P 500 2015 EPS by about $3.</strong></p> </blockquote> <p><strong><span style="text-decoration: underline;">Bottom-up Consensus 2015 EPS is tumbling...</span></strong></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>An astounding 87% of companies (39 of 45) guided below consensus expectations for next quarter, the highest level in our 34-quarter history.</strong> Historically, 71% of firms guide down in a typical quarter.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/01-overflow/20150131_mothersmilk3.jpg"><img height="805" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/01-overflow/20150131_mothersmilk3.jpg" width="600" /></a></p> <p>&nbsp;</p> <p><strong>Full-year 2015 guidance also disappointed. 80% of firms guided earnings below consensus.</strong></p> <p>&nbsp;</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/01-overflow/20150131_mothersmilk4.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/01-overflow/20150131_mothersmilk4.jpg" style="width: 600px; height: 365px;" /></a></p> <p>&nbsp;</p> <p>The median company guided 4% below consensus expectations for 1Q 2015 and 2% below consensus for full-year 2015.</p> <p>&nbsp;</p> <p>Bottom-up consensus 2015 EPS estimates plummeted by 4% during January due to both falling oil prices and negative company guidance.</p> <p>&nbsp;</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/01-overflow/20150131_mothersmilk5.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/01-overflow/20150131_mothersmilk5.jpg" style="width: 600px; height: 517px;" /></a></p> <p>&nbsp;</p> <p>&nbsp;</p> <p>The $4.50 decline in EPS to $120.50 from $125 now places bottom-up consensus estimates below our forecast of $122 and the top-down consensus forecast of $125. Bottom-up consensus estimates were last below top-down estimates in 2009.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/01-overflow/20150131_mothersmilk6.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/01-overflow/20150131_mothersmilk6.jpg" style="width: 600px; height: 471px;" /></a></p> </blockquote> <p><span style="text-decoration: underline;"><strong>And finally - valuations...</strong></span></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>Consensus long-term growth estimates are slumping... whch means multiple expansion is the only way to keep the dream of wealth creation alive. As @Not_Jim_Cramer exposes, this &#39;gap&#39; has seldom - if ever - been wider...</p> <p>&nbsp;</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/01-overflow/20150131_mothersmilk1.jpg"><img height="406" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/01-overflow/20150131_mothersmilk1.jpg" width="600" /></a></p> <p>&nbsp;</p> </blockquote> <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="503" height="395" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20150131_mothersmilk6.jpg?1422730172" /> </div> </div> </div> http://www.zerohedge.com/news/2015-01-31/king-dollar-crushing-recoverydreams-87-us-companies-have-guided-lower#comments Goldman Sachs goldman sachs Jim Cramer recovery Sun, 01 Feb 2015 00:30:29 +0000 Tyler Durden 501254 at http://www.zerohedge.com Here's Some Frightening Honesty (Courtesy Of The US Congress) http://www.zerohedge.com/news/2015-01-31/heres-some-frightening-honesty-courtesy-us-congress <p><a href="http://www.sovereignman.com/trends/heres-some-frightening-honesty-courtesy-of-the-us-congress-16051/"><em>Submitted by Simon Black via Sovereign Man blog</em></a>,</p> <p>A member of my staff caught an obscure resolution that was introduced in the US House of Representatives last week&mdash;<a href="http://www.gpo.gov/fdsys/pkg/BILLS-114hres41ih/pdf/BILLS-114hres41ih.pdf" target="_blank">Resolution no. 41.</a></p> <p>The fact that there was essentially no coverage of this Resolution really shows how the mainstream media is completely turning a blind eye to the true fiscal situation of the United States of America.</p> <p><strong>The entire point of the resolution is to say that the federal government is broke.</strong></p> <p><strong><u>It can&rsquo;t pay its own bills, and therefore is shouldn&rsquo;t be responsible to pay anyone else&rsquo;s either.</u></strong></p> <p>It doesn&rsquo;t&rsquo; take a rocket scientists to figure out what a bankrupt government will do&mdash;just like any thief, they&rsquo;ll go after easy targets first.</p> <p>The easiest target of all is future generations.</p> <p>They&rsquo;re going to run up the debt as high as they can, which essentially means pulling future tax revenues into today. It&rsquo;s the easiest tax of all, <strong>because unborn children do not vote.</strong></p> <p>The <a href="http://www.sovereignman.com/tax/how-you-can-avoid-dying-as-property-of-the-state-16052/" target="_blank">estate tax is another one to watch out for</a>&mdash;because, like unborn children, <strong>dead people don&rsquo;t vote either.</strong></p> <p>We had a <a href="http://www.sovereignman.com/podcast/031-another-step-down-the-long-slow-road-to-ira-nationalization-audio-16042/" target="_blank">great podcast yesterday about retirement savings</a>, where there&rsquo;s an easy $5 trillion treasure chest for them to raid.</p> <p>And, of course, there&rsquo;s the greatest tax of all, the inflation tax, which decreases the standard of living for most of the population as the cost of living rises much faster than incomes.</p> <p><strong>This Resolution is a pretty scary dose of honesty. But again, what&rsquo;s even more concerning is that it was just ignored and has objectively a zero percent chance of passing.</strong></p> <p>I do encourage you to check it out though&mdash;even the government is admitting it&rsquo;s finished.</p> <p><strong>I&rsquo;ll quote from the Resolution now without comment and wish you a very pleasant weekend:</strong></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>Whereas the Federal Government is operating at an annual deficit and is increasing its outstanding debt every year;</p> <p>&nbsp;</p> <p>Whereas the Federal Government, as of January 2015, is carrying more than $18.0 trillion in debt, of which $13.0 trillion is owed to the public and $5.08 trillion is owed to Social Security and other trust funds;</p> <p>&nbsp;</p> <p>Whereas foreign governments, individuals, and corporations as of October 2014 own 47 percent of Federal debt held by the public;</p> <p>&nbsp;</p> <p>Whereas Social Security&rsquo;s unfunded liabilities in 2014 are $10.6 trillion over 75 years and $24.9 trillion over the infinite horizon;</p> <p>&nbsp;</p> <p>Whereas the Federal debt held by the public is expected to increase by more than $7 trillion from 2014 to 2024 according to the Congressional Budget Office;</p> <p>&nbsp;</p> <p>Whereas more than 16 percent of the entire Federal budget goes directly to States and local governments;</p> <p>&nbsp;</p> <p>Whereas more than 22 percent of total State and local government general revenue comes from the Federal Government according to Census Bureau&rsquo;s latest Annual Survey of State and Local Government Finance;</p> <p>&nbsp;</p> <p>Whereas several State and local pension plans are expected to fully exhaust their funds within ten years.</p> </blockquote> <p class="postbottom_title">*&nbsp; *&nbsp; *</p> <p class="postbottom_title"><a href="http://www.sovereignman.com/crash-course/">Our goal is simple: To help you achieve <strong>personal liberty</strong> and <strong>financial prosperity</strong> <em>no matter what happens</em>.</a></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="385" height="309" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20150131_res.jpg?1422737154" /> </div> </div> </div> http://www.zerohedge.com/news/2015-01-31/heres-some-frightening-honesty-courtesy-us-congress#comments Census Bureau Congressional Budget Office Sat, 31 Jan 2015 23:46:17 +0000 Tyler Durden 501255 at http://www.zerohedge.com