en Moar Stuff <p>Essential...</p> <p>&nbsp;</p> <p><a href=""><img src="" width="604" height="425" /></a></p> <p>&nbsp;</p> <p><a href=""><em>Source: Cagle</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="604" height="425" alt="" src="" /> </div> </div> </div> Fri, 28 Nov 2014 23:00:46 +0000 Tyler Durden 498380 at What Can Hong Kong And Cuba Teach Us About Economic Policy? <p><a href=""><em>Submitted by Daniel Mitchell</em></a>,</p> <p>Early this year, I shared <a href="">an amusing but accurate image</a> that showed an important difference between capitalism and socialism.</p> <p>And in 2012, I <a href="">posted a comparison of Detroit and Hiroshima</a> to illustrate the damage of big government.</p> <p>Well, if you combine those concepts, you get this very pointed look at the evolution of Cuban socialism and Hong Kong capitalism.</p> <p><a href=""><img alt="" class="alignnone" src=";h=554" style="width: 600px; height: 462px;" /></a></p> <p>Some might dismiss these photos as being unrepresentative, and it&rsquo;s reasonable to be skeptical. After all, I&rsquo;m sure it would be easy to put together a series of photos that make it seem as if the United States is suffering from decay while France is enjoying a boom.</p> <p>So let&rsquo;s go to the data. In previous posts, I&rsquo;ve shared comparisons of long-run economic performance in market-oriented nations and statist countries. Examples include <a href="">Chile vs. Argentina vs. Venezuela</a>,&nbsp;<a href="">North Korea vs. South Korea</a>, <a href="">Cuba vs. Chile</a>, <a href="">Ukraine vs. Poland</a>, <a href="">Hong Kong vs. Argentina</a>,&nbsp;<a href="">Singapore vs. Jamaica</a>, and the <a href="">United States vs. Hong Kong and Singapore</a>.</p> <p>Now let&rsquo;s add Cuba vs. Hong Kong to the mix.</p> <p><a href=""><img alt="" class="alignnone" height="401" src="" width="562" /></a></p> <p>Wow, this is amazing. Through much of the 1950s, Hong Kong and Cuba were economically similar, and both were very close to the world average.</p> <p>Then Hong Kong became a poster child for capitalism while Cuba became an outpost of Soviet communism. And, as you might expect, the people of Hong Kong prospered.</p> <p>What about the Cubans? Well, I suppose a leftist could argue that they&rsquo;re all equally poor and that universal deprivation somehow makes Cuban society better Hong Kong, where not everybody gets rich at the same rate.</p> <p>But even that would be a lie since Cuba&rsquo;s communist elite doubtlessly enjoys a very comfortable lifestyle. So while the rest of the country endures hardships such as <a href="">a toilet paper shortage</a>, the party bosses presumably drink champagne and eat caviar.</p> <p>The bottom line is that statists still don&rsquo;t have an acceptable answer for <a href="">my two-part challenge</a>.</p> <p style="padding-left:30px;"><strong>1. Can you name a nation that became rich with statist policies?</strong></p> <p style="padding-left:30px;">Before you say <a href="">Sweden</a>, or even <a href="">France</a>, note that I asked you to name a nation that became rich during a period when it followed policies of interventionism and big government. Countries in Western Europe became rich during the 1800s and early 1900s <a href="">when government was very small</a>. <a href=""><img alt="" class="alignright" src="" style="width: 600px; height: 460px;" /></a></p> <p style="padding-left:30px;">Indeed, government spending consumed only about 10 percent of economic output in Western Europe prior to World War I and there was <a href="">almost no redistribution</a>. That&rsquo;s more libertarian than what you find today in places such as Hong Kong and Singapore.</p> <p style="padding-left:30px;">Speaking of which, what I&rsquo;m really asking my leftist friends is that they give me the left-wing versions of Hong Kong and Singapore. These jurisdictions were relatively impoverished at the end of World War II, but they are now <a href="">both very rich by global standards</a>. And libertarians and other advocates of small government and free markets can make a very strong case that good policy played a role in their amazing rise to prosperity.</p> <p style="padding-left:30px;">So where&rsquo;s the role model for statists? What nation can they put forth as a successful example?</p> <p>I won&rsquo;t hold my breath waiting for an accurate answer.</p> <p>Now for the other part of the challenge.</p> <p style="padding-left:30px;"><strong>2. Can you name a nation that with interventionism and big government that is out-performing a similar nation with free markets and small government?</strong></p> <p style="padding-left:30px;">Before you embarrass yourself by asserting that, say, <a href="">Denmark</a> is richer than <a href="">Paraguay</a> because of statism, you need to look at the data. Denmark has a bigger welfare state than Paraguay, but it&rsquo;s much more pro-market in other respects. Indeed, it is ranked #14 in the <em><a href="">Economic Freedom of the World</a></em>, compared to #89 for Paraguay. You&rsquo;d be more clever to ask why, for example, #42 Belgium is richer than #6 Mauritius.</p> <p style="padding-left:30px;">But this is why I asked for a comparison of similar nations. In other words, find two countries that are, or were, roughly equal in terms of demographics, economic development, resource endowments, and other factors. And then I want an example of a nation with statist policy that has out-performed a nation that instead chose small government and free markets. Or the jurisdictions don&rsquo;t even need to be that similar. Just show me a statist nation that grows faster, over a meaningful period of time, than a pro-market jurisdiction.</p> <p style="padding-left:30px;">From a libertarian perspective, I can cite lots of examples, such as <a href="">Chile vs. Argentina vs. Venezuela</a>. Or <a href="">North Korea vs. South Korea</a>. Or <a href="">Ukraine vs. Poland</a>. Or <a href="">Hong Kong vs. Argentina</a>. Or <a href="">Singapore vs. Jamaica</a>. Or the <a href="">United States vs. Hong Kong and Singapore</a>. Or even <a href="">Sweden vs. Greece</a>. I could continue, but I think you get the point.</p> <p>I will patiently wait for my left-wing friends to provide examples that support their perspective, but cobwebs will form before they fulfill my challenge.</p> <p>In the meantime, here&rsquo;s <a href="">a video</a> that explains the simple recipe that countries should follow if they want to enjoy growth and prosperity.</p> <p><iframe allowfullscreen="" frameborder="0" height="360" src="//" width="480"></iframe></p> <p>You&rsquo;ll notice that the video heavily borrows from <a href=""><em>Economic Freedom of the World</em></a>.</p> <p>That&rsquo;s no surprise. There&rsquo;s no better source for making apples-to-apples comparisons to see whether countries are following good policy.</p> <p>The bad news is that the United States has <a href="">taken a dive in the wrong direction</a> in these rankings.</p> <p>When Bill Clinton left office, the United States had the world&rsquo;s 3rd-freest economy. Today, thanks to <a href="">years of statism under both Bush and Obama</a>, we&rsquo;ve dropped to #17.</p> <p><a href=""><img alt="" class="alignleft" src="" style="width: 600px; height: 395px;" /></a></p> <p>This Lisa Benson cartoon is a very painful illustration of what&rsquo;s happening.</p> <p>America is copying the nations that are in deep trouble because of excessive government.</p> <p>Which is the same message you find in <a href="">this Glenn Foden cartoon</a> and <a href="">this Michael Ramirez cartoon</a>.</p> <p>But maybe some leftist can answer one or both of the questions above and we can stop worrying about the ever-expanding welfare state.</p> <p>*&nbsp; *&nbsp; *</p> <p><em>P.S. If you prefer stories rather than images or data, this<span class="Apple-converted-space">&nbsp;</span><a href="">updated version of the fable of the ant and the grasshopper</a><span class="Apple-converted-space">&nbsp;</span>makes a key point about incentives and redistribution. And you get a similar message from the<span class="Apple-converted-space">&nbsp;</span><a href="">PC version of the Little Red Hen</a>.</em></p> <p><em>P.P.S. Cuba&rsquo;s system is so wretched that <a href="">even Fidel Castro confessed it is a failure</a>. So maybe there&rsquo;s hope that Obama will have a similar epiphany about American-style statism!</em></p> Belgium Demographics Detroit France Greece Hong Kong North Korea Poland Ukraine Fri, 28 Nov 2014 22:10:46 +0000 Tyler Durden 498379 at “An Unstoppable Zombie Holiday” – Humanity Shudders As America Exports Black Friday To the World <p>Because nothing gives &quot;Thanks&quot; like Americans fighting over things they don&#39;t need...</p> <p><a href=""><span style="text-decoration: underline;"><strong>Exhibit 1:</strong></span></a> Doorbuster deals at a Wal-Mart in Michigan City, Indiana, had shoppers literally stealing items from other people&rsquo;s carts.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><iframe frameborder="0" height="315" src="//" width="560"></iframe></p> <p>&nbsp;</p> <p><strong>Things appeared to get a little out of hand Thursday night, as shoppers swarmed the Wal-Mart in Michigan City</strong>, pushing and shoving as they fought to grab heavily discounted merchandise.</p> <p>&nbsp;</p> <p>A shopper named Rich grabbed his cell phone camera and filmed as one man tried to grab what appeared to be a home theater system from another man in a Bears jersey. The Bears fan was able to wrestle it away, and get out of the scrum.</p> <p>&nbsp;</p> <p><strong>Some bystanders seemed amused by the chaos, others looked a little frightened.</strong></p> <p>&nbsp;</p> <p>It appeared the scene was about to repeat itself, with a woman as the victim, but she also managed to get away with her prize.</p> </blockquote> <p><span style="text-decoration: underline;"><strong>Exhibit 2:</strong></span> 2 Women Fight At Norwalk Walmart Over Barbie Doll</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p> <script type='text/javascript' src=';;playerWidth=620;playerHeight=349;isShowIcon=true;clipId=10898054;flvUri=;partnerclipid=;adTag=News;advertisingZone=CBS.LA%252Fworldnowplayer;enableAds=true;landingPage=;islandingPageoverride=false;playerType=STANDARD_EMBEDDEDscript;controlsType=overlay'></script></p> <p>&nbsp;</p> <p>Authorities said two women got into a pushing and shoving match &mdash; with at least one of them reportedly throwing a punch &mdash; over a Barbie doll on Thanksgiving evening.</p> <p>&nbsp;</p> <p>Sheriff&rsquo;s Deputies has to be called to the Walmart store in the 11700 block of Imperial Highway after reports of the fight broke out.</p> <p>&nbsp;</p> <p>Witnesses said the two women began fighting over a Barbie doll just before 7 p.m.</p> <p>&nbsp;</p> <p>Deputies were able to diffuse the situation and said no one was arrested.</p> <p>&nbsp;</p> <p>Officials also said no one was injured in the altercation.</p> <p>&nbsp;</p> <p><strong>&ldquo;The whole thing was pretty stupid,&rdquo; said a shopper named Sonia, &ldquo;that was very dumb.&rdquo;</strong></p> </blockquote> <p>But it&#39;s not just America, it appears the UK as caught the post &#39;Thanksgiving Day&#39;? bug...</p> <p><u><strong>Exhibit 3: </strong></u>Girls fight over cheap panties...</p> <p><iframe allowfullscreen="" frameborder="0" height="360" src="//" width="480"></iframe></p> <p>&nbsp;</p> <p><u><strong>Exhibit 4:</strong></u> Americans celebrating Thanksgiving in Britain may have felt right at home as Black Friday shopping chaos caused disruptions.</p> <p>The practice of offering bargain basement prices the day after Thanksgiving has spread across the Atlantic, with some retailers opening overnight to lure shoppers.</p> <p>Police were called early Friday morning to help maintain security at some supermarkets and shopping outlets that offered deep discounts starting at midnight.</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 399px;" /></a></p> <p><a href=""><u><em><strong>As Liberty Blitzkrieg&#39;s Mike Krieger notes,</strong></em></u></a></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em><strong>Greater Manchester Police said two arrests were made and injuries reported as police closed some stores to prevent more severe problems. One woman was injured by a falling television set.</strong></em></p> <p>&nbsp;</p> <p><strong><em>The force tweeted &ldquo;Keep calm, people!&rdquo; at one point.</em></strong></p> <p>&nbsp;</p> <p><strong><em>There were problems in many parts of Britain, including Wales and Scotland.</em></strong></p> <p>&nbsp;</p> <p>&ndash; From the <i>Associated Press</i>:&nbsp;<a href="">Black Friday Chaos Hits Britain</a></p> </blockquote> <p>Black Friday is one of those days when&nbsp;all the hope and optimism one possesses for the future of humanity is threatened by the gross, primal, in-your-face reality. I&rsquo;ve written about the holiday before, specifically,&nbsp;in the piece,&nbsp;<strong><a href="">The SDR: The Same Demented Regime</a></strong>.&nbsp;Here&rsquo;s an excerpt:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong><em>The great game is of course the never-ending global struggle for power and dominance.&nbsp; The current entrenched powers that be have been in their positions for a very long time and they have no intention of giving up that role.&nbsp; What the moral and decent percentage of humanity need to understand in no uncertain terms is that these folks and their minions have no conscience.&nbsp; They could care less how many starve to death, get blown to bits in war or waste their lives away in front of the television set watching Snookie on the Jersey Shore.&nbsp; In fact, I am certain that they totally get off on these things.&nbsp; Degrading humanity into an animal-like state clearly appears to be their aphrodisiac.&nbsp; Notice how the media encourages people to go out and trample each other for a $2 waffle maker on Black Friday.&nbsp; The scenes of people running into Wal-Mart or Best Buy in the early morning hours when they should be at home with their families having conversation after Thanksgiving dinner reminds me of scenes of cattle being shuffled into a sorting pen.&nbsp;</em></strong></p> </blockquote> <p>It was always a uniquely American embarrassment. A day when the rest of the world could smugly and confidently&nbsp;sneer at the their consumption-obsessed, overweight, and violent brothers and sisters abroad; secure in the fact that were&nbsp;distinctly different.</p> <p>Well, as Bob Dylan sang, &ldquo;The Times They are a Changin&rsquo;,&rdquo; and the highest-holy day of the American religion of consumerism is coming your way whether you like it or not. Naturally, it is gaining its&nbsp;most robust foothold in the United Kingdom. I thought Arriana Huffington summarized&nbsp;it well in the following tweet:</p> <blockquote class="twitter-tweet" lang="en"><p>How did <a href="">#BlackFriday</a> migrate to the UK without <a href="">#Thanksgiving</a>? It&rsquo;s like an unstoppable zombie holiday <a href=""></a></p> <p>&mdash; Arianna Huffington (@ariannahuff) <a href="">November 28, 2014</a></p></blockquote> <p>Here are some of the observations from that article:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em>LONDON (AP) &mdash; Americans celebrating Thanksgiving in Britain may have felt right at home as Black Friday shopping chaos caused disruptions.</em></p> <p>&nbsp;</p> <p><strong><em>The practice of offering bargain basement prices the day after Thanksgiving has spread across the Atlantic, with some retailers opening overnight to lure shoppers.</em></strong></p> <p>&nbsp;</p> <p><strong><em>Police were called early Friday morning to help maintain security at some supermarkets and shopping outlets that offered deep discounts starting at midnight.</em></strong></p> <p>&nbsp;</p> <p><em>Some of the worst problems were in the Manchester area in northwestern England where police were summoned to seven Tesco supermarkets after disturbances.</em></p> <p>&nbsp;</p> <p><em>Greater Manchester Police Chief Peter Fahy said he was &ldquo;disappointed&rdquo; that stores did not have enough security personnel on duty for the after-hours shopping.</em></p> <p>&nbsp;</p> <p><em>&ldquo;This created situations where we had to deal with crushing, disorder and disputes between customers,&rdquo; he said.</em></p> <p>&nbsp;</p> <p><strong><em>Fights broke out at some stores and major websites stopped functioning because of too much traffic as shoppers sought online bargains.</em></strong></p> </blockquote> <p>But that&rsquo;s just the tip of the iceberg. As Glenn Greenwald notes, the Black Friday virus has also infected his adopted home country of Brazil. See below:</p> <blockquote class="twitter-tweet" lang="en"><p>&quot;Black Friday&quot; everywhere in Thanksgiving-free Brazil <a href="">#infection</a> <a href=""></a></p> <p>&mdash; Glenn Greenwald (@ggreenwald) <a href="">November 28, 2014</a></p></blockquote> <script async src="//" charset="utf-8"></script><p>&nbsp;</p> <p>Think you&rsquo;re safe in Africa? Think again. Check out this piece <a href="">from <em>MarketWatch</em></a>:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em>NEW YORK (MarketWatch) &mdash; Funmi Adeyemi has been saving all year for Black Friday. Since October, she&rsquo;s been surfing U.S. websites and has picked out $300 worth of merchandise, including Ralph Lauren apparel for her two-and four-year-old kids and shoes from Neiman Marcus for herself.</em></p> <p>&nbsp;</p> <p><em>And she&rsquo;s made her selections from the comfort of home &mdash; in the Nigerian capital, Abuja.</em></p> <p>&nbsp;</p> <p><em>Black Friday &ldquo;is when I wait to do most of my shopping,&rdquo; Adeyemi said. &ldquo;I can buy everything in one day. I buy whatever catches my eye and whatever is the right price. It&rsquo;s a big thing here and has gone viral. A lot of people are waiting for (U.S.) Black Friday sales.&rdquo;</em></p> <p>&nbsp;</p> <p><em>The 32-year-old project manager is waiting until Friday to see what discounts she can get before placing final online orders. And she&rsquo;s a pro. This is the fifth Black Friday that she has spent shopping for U.S. deals from Nigeria with the help of mobile shopping app,&nbsp;<a href="" target="_new">MallforAfrica</a>.</em></p> <p>&nbsp;</p> <p><em>Major U.S. retailers do not ship directly to Nigeria, so MallforAfrica acts as middleman, shipping the goods bought on U.S. websites to the West African country. MallforAfrica CEO and founder Chris Folayan, a Nigerian who lives in the U.S., said there has been a spike in signups to the app in the past two days.</em></p> <p>&nbsp;</p> <p><strong><em>And Adeyemi and her fellow Nigerians aren&rsquo;t alone. While&nbsp;<a href="">Black Friday</a>, the day after Thanksgiving that traditionally kicks off the U.S. holiday shopping season, may be&nbsp;<a href="">losing its sizzle in its home market</a>, it&rsquo;s gaining ground overseas.</em></strong></p> <p>&nbsp;</p> <p><strong><em>&ldquo;We&rsquo;ve certainly exported the Black Friday madness to the world,&rdquo; said Borderfree&nbsp;CEO Michael DeSimone. &ldquo;It&rsquo;s become a big shopping day around the world. We don&rsquo;t just see (orders) from Canada and Australia but also the Middle East and China.&rdquo;</em></strong></p> </blockquote> <p>Here&rsquo;s a billboard&nbsp;from Nigeria:</p> <p><img alt="Screen Shot 2014-11-28 at 11.58.37 AM" class="alignnone size-large wp-image-19346" height="349" src="" width="620" /></p> <p>Just in case you needed further&nbsp;proof that the religion of consumerism knows no borders.</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="456" height="338" alt="" src="" /> </div> </div> </div> Australia Black Friday China Indiana Michigan Middle East Fri, 28 Nov 2014 21:20:46 +0000 Tyler Durden 498378 at The First Oil-Exporting Casualty Of The Crude Carnage: Venezuela <p>In the aftermath of OPEC's failure to cut oil production, Russia has been acting surprisingly sanguine, perhaps as a result of less leverage in its system as compared to America's own high yield-funded shale complex - now that it is a race to who will default first and be <em><strong>forced </strong></em>to take production offline - with <a href="">Putin today saying </a>"Russia will cope with the rout in crude oil",&nbsp; and adding that “we are satisfied overall with the situation and do not see anything so extraordinary in what is happening. Winter is coming and I am sure that the market will come into balance again in the first quarter or toward the middle of next year." Maybe it will, or maybe not, if indeed as those with a working frontal cortex suggest the plunge in crude prices is merely a function of a collapse in global demand now that the worldwide slowdown which has gripped Japan, Europe and China. In that case, the race to the bottom between Russia with its higher cash costs, and the US shale sector, loaded to the gills with billions in junk bonds, will be an epic one to watch. </p> <p>But one country whose fate is now virtually assured - with a happy ending now sadly out of the picture - is the same one <a href="">that stormed out furious</a> at yesterday's failure by OPEC's cartel members to carve out a consensus leading to higher oil prices: Venezuela. </p> <p>Here pretty much everything is about to go unhinged, with what now looks like an almost inevitable sovereign default as the endgame, coupled with the removal of a few million barrels of oil from the global supply chain, something which all the other OPEC members will be delighted by. </p> <p>For confirmation one can merely look at the Venezuela bolivar, <strong>which earlier today feel to a record low of 150.76 VEF/USD </strong>on the black market according to, which tracks rate at Colombian border, and as reported by Bloomberg moments ago. Indicatively, the official rate is 6.3 VEF/USD; the <em><strong>first </strong></em>unofficial rate that based on Sicad I, is 12 VEF/USD, while the <em><strong>second </strong></em>unofficial rate, per Sicad II is 50 VEF/USD. </p> <p>But what best shows that for Venezuela it is essentially game over, is that as the chart below shows, Venezuela’s international reserves declined $1.3 billion in the week after President Nicolas Maduro transfered $4 billion of Chinese loans to the central bank. In other words, the scrambling oil exporter was forced to <strong>burn one third of its Chinese bail-out loan to keep itself solvent.&nbsp; </strong>The country’s reserves dropped to $22.2 billion today, according to central bank data. </p> <p><a href=""><img src="" width="600" height="320" /></a></p> <p>As <a href="">Bloomberg also notes</a>, Maduro on Nov. 18 ordered the Chinese loan proceeds to be moved from an off-budget fund, so that they would show up in reserves and help boost investor confidence in an economy beset by the world’s highest inflation and widest budget deficit. The following day, Venezuelan bonds rose the most in six years in intraday trading.</p> <p>“<strong>If the plan was to calm the bondholders, then burning through a third of that money in five working days doesn’t do it in any way</strong>,” Henkel Garcia, director of Caracas-based consultancy Econometrica, said in a telephone interview. But while Venezuela's bondholders will be livid, Venezuela's "friends" from the OPEC cartel will be delighted: after all its default means one less producer on line, and a natural increase in the price of oil. </p> <p>Trading in Venezuela’s dollar bonds was closed today for a U.S. holiday. It will reopen on Monday at which point we expect the market to be as close to "offer-only" as possible, because burning through over $1 billion in reserves in 1 week with crude plunging to under $70 means that Venezuela now may have about 6 months of liquidity left at best, since one thing is certain: China will not throw more good money, as in Venezuela bailout loans, after bad. </p> <p>The only thing that is uncertain is how long until some army general figures out what is going on and decides to go "Kiev" on that paragon of best efforts socialism, Venezuela's soon to be ex-president Nicolas Maduro. </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="719" height="383" alt="" src="" /> </div> </div> </div> Budget Deficit China Crude Crude Oil default Japan OPEC Sovereign Default Fri, 28 Nov 2014 20:31:36 +0000 Tyler Durden 498386 at Guest Post: How Bloomberg’s Algo-Writers Serve The Cult Of Keynesian Central Banking <p><em>Submitted by <a href="">David Stockman via Contra Corner blog</a>,</em></p> <p>If you ever needed proof that the financial press has been&nbsp;completely indoctrinated in the cult of Keynesian&nbsp;central banking consider the attached Bloomberg note on the recent&nbsp;tiny decline in Chinese industrial company profits. Without breaking for&nbsp;anything more than a&nbsp;comma, its hapless Hong Kong stringer, one Malcolm Scott, conjoined the fact of less profits with the imperative for moar&hellip;&hellip;money.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>Industrial profits in <a href="" target="_blank"><span style="text-decoration: underline;"><span style="color: #0066cc;">China</span></span></a> fell the most in two years, underscoring the need for looser monetary conditions as the world&rsquo;s second-largest economy slows.</p> </blockquote> <p><strong>Perhaps Bloomberg is no longer using carbon units to post its news stories and has gone straight to algo-writers designed to directly&nbsp;feed algo-readers without the bother or cost of human intercession.</strong> But regardless of whether &ldquo;Malcolm Scott&rdquo; is carbon or silicon based, the attached is clearly presented as a news story and the above excerpt as a declarative sentence. Accordingly, by the lights of Bloomberg and the rest of the mainstream&nbsp;financial press which it&nbsp;echoes, it is now&nbsp;the job of central banks to print money to ensure that at no point in time do profits&mdash;-and therefore their stock&nbsp;market capitalizations&mdash;-fall by even so much as 2.1% over prior year.</p> <p>That&rsquo;s right. In&nbsp;the land of red capitalism, where corporate&nbsp;accounting and reporting are so advanced that profit results are published on a monthly basis, the&nbsp;doctored number for all of&nbsp;China&rsquo;s&nbsp;industrial companies in October came in&nbsp;at 2.1 percent less than last year&rsquo;s fictional number.</p> <p>Once upon a time, even journalists recognized&nbsp;that accounting profits are the swing residual after all fixed and variable costs have been accounted for and that&nbsp;in every capitalist economy known to history profits have been violently cyclical. But now, apparently,&nbsp;a 2% change in the bottom line&nbsp;results of&nbsp;China&rsquo;s cooked corporate books is straight-away proof of the need for &ldquo;looser monetary conditions&rdquo;.</p> <p>Well, here is the balance sheet trend for the People&rsquo;s Printing Press of China. It has expanded by a stunning 9X since the year 2000, thereby fueling the greatest sustained explosion of new credit in recorded history. In fact, total credit owed by China&rsquo;s household, business, financial and government sectors has risen from $1 trillion to $25 trillion over the same period. Exactly how can you get any &ldquo;looser&rdquo; than that?</p> <p><img alt="Historical Data Chart" id="ctl00_ContentPlaceHolder1_ctl00_ChartUC1_ImageChart" src=";d1=19990101&amp;d2=20141231" style="height: 275px; width: 601px;" /></p> <p>Needless to say, this immense explosion of credit did not disappear&nbsp;quietly in the night. Instead, it funded the greatest&nbsp;construction and investment boom&nbsp;ever recorded. That&rsquo;s why China&nbsp;produced&nbsp;2.2 billion tons of cement in 2013, for example, or&nbsp;29X more than the 77 million tons produced in the US last year. Or, even more dramatically, why it produced more cement on an average day that year than did the UK during the entire year!</p> <p>Likewise, that&rsquo;s why China has 1.1 billion tons of steel production capacity, but hardly 600 million tons of sustainable &ldquo;sell-through&rdquo; requirements for consumer durables and capital replacement. The difference represents the monumentally bloated one-time production of plate steel for ships, rails for transit lines and structural steel and rebar for a vast building binge. The latter, in turn,&nbsp;has&nbsp;bequeathed China with 70 million empty apartments, scores of ghost cities and dramatically under-utilized office towers, shopping malls and other commercial real estate facilities throughout the length and breadth of the land&mdash;&mdash;but most especially in the second and third tier cities where Beijing&rsquo;s approach to GDP manufacturing reached its most absurd parody.</p> <p>Stated simply, China allocates GDP targets from the center and cascades&nbsp;them down through the party and governmental apparatus (essentially the same thing) to regional, county and city units. The latter,&nbsp;in turn,&nbsp;dutifully achieve&nbsp;their GDP targets by building things.&nbsp;Anything. Everything.</p> <p>Needless to say, of the many dubious gifts that the West has supplied to the Middle Kingdom, surely Keynesian GDP accounting is among the most unfortunate.&nbsp;How does building pyramids increase a society&rsquo;s wealth, exactly?</p> <p>The least that Simon Kuznets and his merry band of Keynesian pioneers might have done 80 years ago&nbsp;is to&nbsp;measure&nbsp;annual economic output based on the market value of buildings, machinery and tools actually consumed during the current year&mdash;not&nbsp;mere spending for&nbsp;fixed assets that might never be used.</p> <p>In&nbsp;any event, China and much of its EM supplier base is inundated in excess capacity for everything&mdash;cement, steel, aluminum,&nbsp;silicon based solar panels, refrigerators, automobiles and every manner of&nbsp;industrial fabrications and machinery, such as backhoe loaders and construction cranes; and also, vast excess capacity to export goodies and trinkets to the rest of the world including toasters, sneakers and socks.</p> <p>This means that unless the construction and fixed asset boom is fueled with ever greater amounts of freshly minted credit, the house of cards known as red capitalism will eventually collapse. And it doesn&rsquo;t matter whether the latter occurs all&nbsp;at once with a thud, or more gradually in the manner of a tire going flat. The result will be the greatest deflationary&nbsp;swoon the world has ever known.</p> <p>It will manifest itself first in falling industrial prices such as currently underway for iron ore,&nbsp;coal and crude oil.</p> <p><img alt="" src=";type=image/jpeg&amp;chart_type=line&amp;recession_bars=on&amp;log_scales=&amp;bgcolor=%23e1e9f0&amp;graph_bgcolor=%23ffffff&amp;fo=verdana&amp;ts=12&amp;tts=12&amp;txtcolor=%23444444&amp;show_legend=yes&amp;show_axis_titles=yes&amp;drp=0&amp;cosd=2014-04-28&amp;coed=2014-11-24&amp;width=670&amp;height=650&amp;stacking=&amp;range=Custom&amp;mode=fred&amp;id=DCOILWTICO&amp;transformation=lin&amp;nd=&amp;ost=-99999&amp;oet=99999&amp;scale=left&amp;line_color=%234572a7&amp;line_style=solid&amp;lw=2&amp;mark_type=none&amp;mw=1&amp;mma=0&amp;fml=a&amp;fgst=lin&amp;fq=Daily&amp;fam=avg&amp;vintage_date=&amp;revision_date=" style="width: 600px; height: 582px;" /></p> <div class="irc_mutc"><a class="irc_mutl image-anchor" data-ved="0CAcQjRw" href=";rct=j&amp;q=&amp;esrc=s&amp;source=images&amp;cd=&amp;cad=rja&amp;uact=8&amp;ved=0CAcQjRw&amp;;ei=a0h3VKP_C8WbNrKQhJgH&amp;bvm=bv.80642063,d.eXY&amp;psig=AFQjCNHF53e0qbJFqHT1g7dgh63tnG3Isg&amp;ust=1417189808717335" target="_blank"><img alt="" class="irc_mut" src="" style="width: 600px; height: 353px;" /></a></div> <p>The deflation from this crack-up boom&nbsp;will inexorably move upstream, of course, to the pricing of everything made from these&nbsp;commodities owing to both lower materials costs; and also due to the fact that artificially cheap credit&nbsp;resulted in vast excess capacity in these fabrication and manufacturing&nbsp;sectors, as well. And, yes, the bloated wage bill of this overbuilt supply chain will also shrink.</p> <p>Stated differently, &ldquo;fiat credit&rdquo; fuels the generation of &ldquo;fiat wages&rdquo; and especially &ldquo;fiat profits&rdquo;&nbsp;during the boom phase of over-investment and runaway construction. Consequently, when the credit tsunami finally crests&mdash;as even the leaders in Beijing are now resigned to&mdash;- fiat wages and fiat&nbsp;profits&nbsp;are also liquidated.</p> <p>Indeed, what gets hit first&nbsp;during the bust phase is the accounting residual.&nbsp;That&nbsp;is, net profits and apparently so, even under Chinese accounting.</p> <p>In short, the global economy is cooling rapidly and profits are already&nbsp;falling sharply in the primary sectors of mining and energy&nbsp;extraction. And that is only a foretaste of things to come down the industrial food chain.</p> <p>Yet contrary to the Bloomberg algo-writer, this nascent profits collapse&nbsp;is not a result of too little money now; it is a consequence of&nbsp;way too much money over the past decade or two - and not only in China but in the entire central bank dominated world wide economy.</p> <p><strong>So Mises was right. &ldquo;Moar&rdquo; fiat credit&nbsp;always leads to a crack-up boom. Someone needs to reprogram the algos.</strong></p> <p><a href=""><em><strong>&nbsp;By Malcolm Scott&nbsp;Bloomberg News</strong></em></a></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>Industrial profits in <a href="" target="_blank"><span style="text-decoration: underline;"><span style="color: #0066cc;">China</span></span></a> fell the most in two years, underscoring the need for looser monetary conditions as the world&rsquo;s second-largest economy slows.</p> <p>Total <a class="web_ticker" href="" target="_blank" title="Get Quote"><span style="text-decoration: underline;"><span style="color: #0066cc;">profits</span></span></a> of China&rsquo;s industrial enterprises fell 2.1 percent from a year earlier in October, the National Bureau of Statistics said today in Beijing. That compares with September&rsquo;s 0.4 percent increase and is the biggest drop since August 2012, based on previously reported data.</p> <p>&nbsp;</p> <p>The People&rsquo;s Bank of China, which last week cut benchmark <a href="" target="_blank"><span style="text-decoration: underline;"><span style="color: #0066cc;">interest rates</span></span></a>, refrained from selling <a href="" target="_blank"><span style="text-decoration: underline;"><span style="color: #0066cc;">repurchase agreements</span></span></a> in open-market operations today for the first time since July, loosening monetary policy further. Mired by a property slump, overcapacity and factory-gate deflation, China is headed for its slowest full-year economic expansion since 1990.</p> <p>&nbsp;</p> <p>Data released Nov. 13 showed the economy&rsquo;s slowdown deepened in October. Factory production rose 7.7 percent from a year earlier, the second weakest pace since 2009, while investment in fixed assets such as machinery expanded the least since 2001 from January through October. Retail sales gains also missed economists&rsquo; forecasts last month.</p> </blockquote> <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="359" height="275" alt="" src="" /> </div> </div> </div> Bloomberg News Central Banks China Commercial Real Estate Crude Crude Oil fixed Global Economy Guest Post Hong Kong Monetary Policy Real estate Fri, 28 Nov 2014 19:50:32 +0000 Tyler Durden 498377 at Treasury Yields Crater To 19-Month Lows After Stocks Close <p>Having already tumbled 10bps on the week, US Treasury yields plunged 4bps after the US equity market cash session closed... to the <strong>lowest 30Y yield close since May 2013</strong>.</p> <p>&nbsp;</p> <p>Yields tumbled after stocks closed...</p> <p><a href=""><img src="" width="600" height="314" /></a></p> <p>&nbsp;</p> <p>Closing at 19 month lows...</p> <p><a href=""><img src="" width="600" height="319" /></a></p> <p>&nbsp;</p> <p><em>Charts: Bloomberg</em></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="960" height="502" alt="" src="" /> </div> </div> </div> Fri, 28 Nov 2014 19:10:04 +0000 Tyler Durden 498376 at Gold Shortage, Worst In 21st Century, Sends 1Y GOFO To Lowest Ever... And India Just Made It Worse <p>While we have covered the aberration that is a negative gold GOFO rate previously and in <a href="">extensive detail in this post</a>, an abridged version of what negative GOFO means comes courtesy of Deutsche Bank's recent discussion on what a successful Swiss gold referendum. To wit: "It is interesting to note that benchmark gold-dollar swap rates have recently traded negative, <strong>meaning investors are paying to borrow gold</strong>. This is unusual as gold is traditionally used as a source of collateral for cash financing.... [A] number of factors may play a role, <strong>such as excess dollar liquidity or an increased demand for collateral on the back of the global regulatory developments</strong>." In short a gold shortage at the institutional, read commercial and central bank, level. And not just a shortage but the biggest shortage in history, judging by today's latest plunge in the 1 Month GOFO which just dropped to -0.5% and , worse, 1 Year GOFO that <a href="">just hit its lowest print in the 21st century</a>, and is also about to go negative: <strong>something that has never happened before further suggesting the gold shortage could go on for a long, long time! </strong></p> <p><strong>Negative GOFO</strong></p> <p>To be sure, GOFO has printed negative in the past, although the two most prominent historic plunges were due to acute events which promptly renormalized, and were not the result of what has now become a chronic gold collateral shortage via the swaps market. </p> <p>The best known example of a complete collapse in the GOFO rate, is the <a href="">September 1999 Washington Agreement on Gold</a>, which was an imposed "cap" on gold sales (mostly European in the aftermath of Gordon Brown's idiotic sale of UK's gold) to the tune of 400 tons per year. The tangent of the Washington Agreement is quite interesting in its own right. Recall the words of Milling-Stanley from the 12th Nikkei Gold Conference:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>"Central bank independence is enshrined in law in many countries, and central bankers tend to be independent thinkers. It is worth asking why such a large group of them decided to associate themselves with this highly unusual agreement...At the same time, through our close contacts with central banks, the Council has been aware that some of the biggest holders have for some time been concerned about the impact on the gold price—and thus on the value of their gold reserves—of unfounded rumours, and about the use of official gold for speculative purposes.</p> <p>&nbsp;</p> <p>"Several of the central bankers involved had said repeatedly they had no intention of selling any of their gold, but they had been saying that as individuals—and no-one had taken any notice. I think that is what Mr. Duisenberg meant when he said they were making this statement to clarify their intentions."</p> </blockquote> <p>Of course, this happened in a time long ago, when the primacy of Fractional reserve banking was sacrosanct, when the first Greenspan credit bubble (dot com) was yet to appear, and when barbarous relics were indeed a thing of the past, only to be proven oh so contemporary following not one, not two, but three subsequent cheap-credit bubbles which have vastly undermined the religious faith in fiath and central banking, sending the price of gold to all time highs as recently as 2011.</p> <p>Another subsequent negative GOFO episode occurred in early 2001, which coincided with what has been rumored to be a speculative attack and reversal of the futures market. However, while pushing 1 month rates negative, 3 month rates remained well positive.</p> <p>The only other time when both 1M and 3M GOFOs were both negative or almost so (3M touched on 0.05%) was in the aftermath of the AIG bailout following the Lehman collapse in November 2008, which reset the GOFO rate to just barely above 0% where it has traded for most of the time, at least until last summer when in a widely documented episode of negative GOFO rates, <a href="">GOFO went negative in July of 2013 </a>and remained in negative territory for over a month. </p> <p>Which brings us to today, when <a href="">not only is the 1 Month GOFO rate </a>the most negative it has been since 2001, not only is 2 through 6 Month GOFO also negative, and in fact the 6 Month GOFO is now negative for the longest stretch in history clocking in at 11 consecutive days, but, strangest of all, the gold curve backwardation is about to become absolutely historic with 1 Year GOFO just a whisper away from hitting negative territory for the first time ever at 0.02667%. </p> <p><a href=""><img src="" width="600" height="336" /></a></p> <p>But how is it possible that there is a shortage of gold when gold prices keep tumbling day after day, the skeptics will ask? Simple: the shortage involves gold "available" in the repo market, i.e., gold that already has been rehypothecated one ore more times. Keep in mind that central banks rarely if ever purchase gold outright in the open market, unlike Russia of course (and perhaps China), which has been engaging in an unprecedented gold buying spree over the past year. The rest of the commercial and central banks merely rely on shadow banking conduits and other repo channels to satisfy their gold needs, all of which merely demand the "presence" of synthetic, if not actual physical gold. </p> <p>It is this synthetic "shadow" gold that is now actively disappearing from the system.Of course, if and when central banks were to tip their hand and reveal the unprecedented synthetic shortage to the physical market, the actual cleared market may well go bid only. </p> <p><strong>India shocks observers by scrapping gold import rule</strong></p> <p>One event that may stretch the already ridiculous disconnect between physical and swap-based gold, is the announcement earlier today by India which just scrapped a rule mandating traders to export 20 percent of all gold imported into the country, in a surprise move that could cut smuggling and raise legal shipments into the world's second-biggest consumer of the metal after China.</p> <p>As <a href="">Reuters reports</a>, "along with a record duty of 10 percent, India introduced the so-called 80:20 import rule tying imports to exports of jewellery last year to bring down inbound shipments and narrow the current account deficit that had hit a record.</p> <p>"It has been decided by the Government of India to withdraw the 20:80 scheme and restrictions placed on import of gold," the Reserve Bank of India (RBI) said on Friday, without giving a reason for the change in the rule.</p> <p>The reason today's announcement was stunning is that only days ago there were talks between officials of the Mumbai-based central bank and the finance ministry in New Delhi to bring back curbs on some trading houses following a surge in imports over the past few months.</p> <p>Traders said before the decision on Friday that India's gold imports could climb to around 100 tonnes for a third straight month in November as dealers bought heavily on fears of curbs on overseas purchases, especially as the wedding season picks up.</p> <p>The government's latest move came as a surprise even to some officials.</p> <p>A policymaker associated with India's gold import policy said the government instructed the RBI at 1830 local time on Friday to urgently change the rule. A notification was posted on the central bank's website two hours later.</p> <p>"We were not informed about the reason for scrapping this rule. The restrictions on who all can import who can't are still valid," said the policymaker, declining to be named as he is not authorised to talk to media.</p> <p>And while those in control are unhappy that India's relentless appetite for gold is about to return, and in the process slam the country's current account deficit, at least one group is happy: "the rule change was a relief to jewellers facing difficulties in sourcing gold during the key festival and wedding season that started in October." </p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>Bachhraj Bamalwa, director of the All India Gems and Jewellery Trade Federation, said the 80:20 rule was not only encouraging smuggling but was also misused by many traders. </p> <p>&nbsp;</p> <p>From getting human mules to swallow nuggets to hiding gold bars in dead cows, smugglers had raised their activity since the middle of last year after the import curbs. </p> <p>&nbsp;</p> <p>Following the disbanding of the 80:20 rule, the government may place a monthly or yearly quota for traders, said Sudheesh Nambiath, a senior analyst at consultancy Thomson Reuters GFMS. </p> <p>&nbsp;</p> <p>"Quota is a more logical and simple way of monitoring and limiting gold imports," Nambiath said.</p> </blockquote> <p>Bottom line: one can again add India to the list of end-market where hundreds of tons of physical gold will end up, never to be heard from again. </p> <p>And then there is of course the wildcard of the Swiss gold referendum on Sunday, where a "Yes" vote would lead to the immediate collapse of the gold price suppression mechanism as the swap-based gold shortage breaks through merely shadow conduits and finally makes its way to the real market. Which, of course, is why it will never be allowed to happen.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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="1044" height="584" alt="" src="" /> </div> </div> </div> AIG Backwardation Central Banks China Fractional Reserve Banking Futures market India Lehman Nikkei Repo Market Reuters Shadow Banking Fri, 28 Nov 2014 18:59:23 +0000 Tyler Durden 498374 at Crude Carnage Continues After Close: WTI Now $65 Handle, Lowest Since 2009 <p>Not 'off the lows'</p> <p>Big flush into WTI's close...</p> <p><a href=""><img src="" width="600" height="313" /></a></p> <p>&nbsp;</p> <p>And Brent under $70... first time since May 2010</p> <p><a href=""><img src="" width="600" height="314" /></a></p> <p>&nbsp;</p> <p>To 5 year lows...</p> <p><a href=""><img src="" width="600" height="305" /></a></p> <p>&nbsp;</p> <p>Houston, we really&nbsp; have a problem...</p> <p><a href=""><img src="" width="600" height="359" /></a></p> <p>&nbsp;</p> <p>But it's priced in right?</p> <p><a href=""><img src="" width="600" height="314" /></a></p> <p>&nbsp;</p> <p>Charts: Bloomberg</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="485" alt="" src="" /> </div> </div> </div> Crude Fri, 28 Nov 2014 18:35:08 +0000 Tyler Durden 498373 at WTF Chart Of The Day: Centrally Planned Confidence Edition <p>Because nothing says "spend on Black Friday" like a fractionally positive Dow Jones Industrial Average closing in the green with a last minute surge that gets its from red to just barely green... and completely unrigged.&nbsp;<strong><em> </em><span style="text-decoration: underline;"><em>&nbsp;</em></span></strong></p> <p>&nbsp;</p> <p><a href=""><img src="" width="600" height="359" /></a></p> <p>&nbsp;</p> <p>WTF!!!</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="1184" height="709" alt="" src="" /> </div> </div> </div> Black Friday Dow Jones Industrial Average Fri, 28 Nov 2014 18:18:31 +0000 Tyler Durden 498372 at Dow Record Close Despite Bond Yields, Bullion, & Black Gold Battering <p>Despite the best efforts of business media to paint a rosy picture of the Black Friday spend-fest, stocks had only one trajectory - from upper left to lower right - from the open. <strong>Small Caps were slammed </strong>but all major indices gave up significant knee-jerk &quot;energy schmenergy&quot; gains to close ugly. However, The Dow was pushed just into the green - and new record highs - to prove everything in the centrally planned world is awesome. Crude oil prices were monkey-hammered to 5-year closing lows. <strong>The USDollar gained on the day - after 3 down days</strong> - and combined with Swiss referendum expectations, gold faded notably (as did Silver with oil). Treasury yields tumbled 10-12bps on the week and <strong>HY credit notably underperformed</strong>.</p> <p>&nbsp;</p> <p>Ugly day for stocks...</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 416px;" /></a></p> <p>&nbsp;</p> <p>As the week&#39;s gains disappear...</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 338px;" /></a></p> <p>&nbsp;</p> <p>Stocks decoupled from USDJPY</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 318px;" /></a></p> <p>&nbsp;</p> <p>Credit markets were hit hard today - driven by HY energy collapse</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 340px;" /></a></p> <p>&nbsp;</p> <p>While stocks were ugly, it was commodities that took the proverbial biscuit today...</p> <p><a href=""><img height="314" src="" width="600" /></a></p> <p>&nbsp;</p> <p>As the dollar rallied from OPEC&#39;s decision after 3 down days...</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 319px;" /></a></p> <p>&nbsp;</p> <p>Treasury yields plunged...</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 321px;" /></a></p> <p>&nbsp;</p> <p>&nbsp;</p> <p>&nbsp;</p> <p>&nbsp;</p> <p>Charts: Bloomberg</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="671" height="380" alt="" src="" /> </div> </div> </div> Black Friday Bond Crude Crude Oil OPEC Fri, 28 Nov 2014 18:10:05 +0000 Tyler Durden 498371 at