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What Central Bank Defeat Would Look Like, In Charts
Deflation remains the enemy thanks to debt, deleveraging, demographics, tech disruption & default risks. US aggregate debt is today a staggering $58.0 trillion (327% of GDP); the number of people unemployed in the European Union is 23.6 million; Greece has spent 90 of the past 192 years in default or debt restructuring. 7 years on from the GFC... The massive policy response continues. Central bank victory means that lower rates, currencies, oil successfully boosts global GDP & PMI’s in Q2/Q3, allowing Fed hikes in Q4. Bond yields would soar in H1 on this outcome. Defeat, no recovery, and currency wars, debt default and deficit financing become macro realities.
Via BofAML,
The Moment Of Truth Looms...
The massive policy response continues: since Lehman global rate cuts total 542 (that’s a rate cut once every three trading days – Chart 1); and global central bank assets total $22.5 trillion, a sum larger than US & Japanese GDP.
But monetary ammo is now close to exhaustion, volatility is fighting back, and assets are becoming tougher to reflate (the price of both global stocks & high yield bonds are down in the past 8 months).
Years after the Great Financial Crisis, the nominal growth of the US & the global economy remains extremely low by historic standards. US nominal GDP growth has averaged 3.5% in the past 7 years, well below its 6.6% average since WW2 (Chart 2). Global nominal GDP grew just 5.4% in 2014, well below its 50-year average of 8.0%.
Labor markets remain weak. The current number of unemployed men & women in the European Union is 23,605,000. Spain’s unemployment rate is currently 23.7% (Chart 3), marginally down from a 40 year high. Even in an improving US labor market, wage pressures are minimal as unemployment is compounded by both technological disruption & demographics.
Minimal deleveraging since the Great Financial Crisis and a large debt overhang remain impediments to growth. US total credit market debt owed is $57,982,000,000 or 327% of GDP (Chart 4). Meanwhile global debt as a % of GDP has surged from 162% in 2001 to 211% in 2013, an all-time high.
Debt default risks thus remain high. Greek default risks are once rising dramatically. Note the number of Greek sovereign debt defaults in the past two centuries is 6 (Chart 5). Indeed, Greece has spent 90 of the past 192 years in either default or debt restructuring.
Inflation rates in 2015 symbolize the ongoing struggle with the secular Deflationary forces of excess Debt, Deleveraging, Default risks, technological Disruption and Demographics. Swiss inflation has averaged zero in the past 7 years (Chart 6); the CPI of the Euro-area is currently deflating 0.6% YoY; and BofAML’s forecast for US inflation in 2015 is…0%.
A massive monetary policy response aimed at averting Deflation continues. The Fed’s monetary base now totals over $4 trillion (Chart 7); its balance sheet represents 23% of GDP. Global central bank assets now total $22.5 trillion, a sum larger than the combined GDP of the US and Japan.
Recent cuts by Australia, India, Canada, Brazil take the running total of global rate cuts since Lehman to 542 (that’s a rate cut once every three trading days). In 300 years of history, the Bank of England's base rate has never been lower than the 0.5% in the past 5 years (Chart 8). Zero Interest Rate Policies across the globe now support 83% of the world’s equity market capitalization.
Government bond yields have fallen to record lows. 52% of all government bonds in the world currently yield 1% or less. There is now $7.3 trillion of negatively-yielding government debt in the Eurozone, Switzerland & Japan. Spain’s government bond yield has never been lower in the past 200 years (Chart 9). It’s the same for the US, UK, Germany, France, Japan…and many more.
An era of maximum liquidity has also caused record high levels of equity prices (Chart 10). The current US stock bull market is the fourth longest and the fifth largest on record.
* * *
Finally 2015 could see a bear market rally in gold (Chart 19), as investors look to hedge debt default, inflation/deflation risks.
More ominous would be a renewed bull market in gold reflecting a loss of faith in central banks.
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It's not a loss of faith in central banks. It's recognition that fractional reserve banking is inherently a ponzi scheme where phantom and senior financial claims on real flows of value concentrate "wealth" and control with TBTJ banks over time. It is a financial asset ponzi scheme and ONLY a bull market in gold can restore integrity to the financial system.
Wow. You used integrity and financial system in the same sentance. Impressive.
The only entities that can print and spend forever* are governments with printing presses. Debt saturation does not apply to them. For consumers/businesses limited by finite incomes there is a limit to debt carrying capacity- and we're there. That's why the only source of growth, at least since the Great Recession, has been government.
* Forever only in nominal terms. Governments with printing presses can theoretically spend endlessly. However, when inflation and then hyperinflation begin to happen the real goods and services they can purchase with their currency falls as well. They can still keep spending right through it if they choose, but the decline in real purchasing power outruns the increases in their nominal purchases.
A government that can print doesn't need to create debt. Through seigniorage, it can issue money debt-free.
The ability of a government to keep going "forever" depends on whether or not it is self sufficient in physical resources. As long as it doesn't have to import anything, it can keep going forever.
Well, the debt ceiling debates in DC tell me that they have no intentions of printing w/o the coinciding debt slavery and gov. take over of the economy.
Anyone got a chart of the body count that will result from CB defeat?
A government that can print doesn't need to create debt.
Walked dogs with my neighbor. A smart affiable guy. A geophysicist. A natural nose for sniffing out bubbles of oil hiding in seismic charts. Has a good fix on reality. For example, he understands that just because someone calls a refugee center a concentration camp don't make it so.
On other issues, like all of us, he is either afraid of not conforming, or ain't been paying attention. During one dog walk I asked, "Is the president leader of the free world?" He responded, "I don't know if he's the leader of the free world, but he is my leader."
Ya see what's going on with the hypno-machine don't cha?
The president is not any Americans leader, he is every Americans employee. He has our authorization to be commander and chief. He's boss off the white staff. He's an employee entrusted with our, again "OUR" authorizations. Not his authorizations, not some banking clan authorizations, but your, my, our neighbors, friends, etc etc. He is entrusted, by us, to manage our "authorizations". We are the government. He is a node in an organizational chart that is referred to as so called "government". But we, all of us, are the government.
We need new ways of thinking about this shit. Many of assign assign attributes like "leader", "powerful", "godly" to public servants we hire and pay (they live and breath at our pleasure for the of service we allow them) from our production. We are the producers. They are the consumers.
I hate being referred to as a consumer by some banker get fat and laid and coked up off the sweat of our brows.
Counterfeiting is a criminal act by criminals. Not an act of any legitimate public servant we, the American people who are the true and only government by definition.
Chart number 7. Maximum Liquidity.
A few days back Stockman penned a tribe on the Federal reserve. And I am thinking didn't you read Benjamin Freeman's 1961 speech before your became a public servant.
Why are the markets so full of bullshit. Cause the assets are based on price not value. Chart no 7 shows everything Benjamin said. The Federal reserve was borne out of the terms of Declaration of Balfour proffered by what we now refer to as London's Shadow Banks, the World Zionist Organization (WZO). It was set up to finance war.
Balfour lead to Woodrow Wilson reneging on his promise not to join in WWI, and allow, as Americans wanted him to do, Britain to submit to Germany's gracious terms of surrender.
Balfour was the basis for the Federal Reserve Act, The Internal Revenue Service. The Federal Income Tax Act (Wesley Snipes has doubts that that act was properly amended into law), the direct election of Senators, and America's entry, despite the plurality against it and the rule of law, into world war one.
THE FEDERAL RESERVE IS A BANK DESIGNED TO FINANCE WAR. It has no other purpose.
So now you know why the K-Street Kiddie Brothel Dandies on C-SPAN are so hot to get an industrial scale blood letting off the finish line.
THe f-ups on C-SPAN are not the governemt. We are. THe C-SPAN dandies are dime bags for war crimes.
when there were no standards, kings used gold because it was the standard for being a reliably accepted medium.
this meant YOU HAD TO MINE GOLD AND PURIFY IT. . and then kings decided to coin gold making it into fiat. yes, coined gold is a form of fiat as the standard of the UNIT and PURITY is declared THE ONLY STANDARD FIT FOR TRADE.
the penalty for using non standard coins was death.
there is no such thing as honesty , just the speed at which a standard bearer slowly uses up their standard. rome debased slowly at first and then faster and faster. such is the nature of waning empire.
gold too can be manipulated as those who mine and warehouse it can withhold or flood the market at a time that suits them. after all, money , as ALL THINGS, HAVE VALUE ONLY IN TERMS RELATIVE TO OTHER THINGS.
EVERYTHING IS RELATIVE. and the concept of integrity and dishonesty is also relatvistic particularly so with respect to what comprises a standard.
even in science our standard measures for lenght and distance and mass
they are ALL RELATIVE TO OTHER THINGS. distance is relative to that which can be measured and the plank distance ( the smallest thing that can now be measured , the smallest possible distance , is relative to the instruments we have and the energies of particles we are observing, and those energies are relative to the instruments we observe them with.
all i'm saying is that if you think our dollar lacks integrity now, just you wait, things can get so so much worse. there is no reason they cant. central banks might not be nearly as worried about their credibility as everyone thinks because their plans might not have to include preserving credibility.
after all, they need only preserve themselves , not their credibility. they could well make plans that include destroying themselves and their apparent power, while preserving the substance of their power...!!!!
Looks good to me.
"Defeat is just another word, for nothin' left to lose"
No More Bush's and Clinton's!
Well thank goodness the USA has never defaulted!
(On a side note it is interesting to track dollar/pound and the "Battle Royale.)
IMO the us defaulted in 1971 when it closed the gold window. When you promise topay in specie and don't,,, that's default.
A continuum of default with currency debasement.
Boiled frogs and all ...
Yeah that 'bear market rally' in gold... Just a respite in the ongoing journey to - what, $250...? This year maybe? Surely by 2016 no? When unemployment is down to 4% or therebouts and interest rates are back at 6 or 7%...? Russia, China and who knows what else? Bah...!!!
Charts 7,8 & 10, full retard.
Never go full retard, it kills faith in your credit and leads to chart 19.
Only when gold is at all time highs-over $2k an ounce-can we say the Central banks have been decisively defeated!
When the Fed and its member banks own 80%+ of all assets these cycles will not be a problem. Prices, rates and values will be determined to achieve the optimal results. The problem is getting from here to there as most individuals tend to sell at the wrong time, exacerbating temporary weakness in the business cycle. The good news is that these so-called problems will disappear in a few years.
And then what. After Central banks buy up all assets, what is left to buy? How can they stimulate when they already own everything?
No. They only way out is World War III. An existential struggle for survival will bring full employment and build new industries. Just don't lose the war.
Why anyone still has faith in these liars is beyond me. I am short these banker shits.
Bond bubble Bond bubble Bond bubble Bond bubble Bond bubble Bond bubble Bond bubble Bond bubble Bond bubble Bond bubble Bond bubble Bond bubble Bond bubble Bond bubble Bond bubble Bond bubble Bond bubble Bond bubble Bond bubble Bond bubble Bond bubble Bond bubble Bond bubble Bond bubble Bond bubble Bond bubble Bond bubble Bond bubble Bond bubble Bond bubble Bond bubble Bond bubble Bond bubble Bond bubble Bond bubble Bond bubble Bond bubble Bond bubble Bond bubble Bond bubble
The democratic states of the West, and certainly including the US, have all bought into fascist-socialist governance. You couldn't find a quorum in a VW bus that would actually vote to slash the Federal budget, along with its super-legislature, the Bureaucracy. We all have fully embraced what so many here recoil in justifiable horror. Regulatory edits, programs, tax credits, tax deductions, and monopolistic carve outs (NFL for one) have gained society wide support for this monstrosity. Tax exemptions of churches if they stay non partisan (except black churches), child tax credits, teacher bought supply credits, education and mortgage deductions, crop insurance and subsidies, ethanol bio fuels industry (gov't/industry creation), CFL/LED lightbulbs...there are thousands of webs encouraging and enrolling nearly every single special interest (aren't we all by design at this point) into the grand body politic where "we all belong to our government" (DNC 2012 convention advertisement).
It will be a lonely clap of hands if and when the system collapses. BTW, the Central Banks support all these programs for the benefit of the government controlled by the Party apparatus.
Being long equities is how the banksters survived Weimar, and how Mugabe and his cronies held on to their wealth during the "Zimbabwean" hyperinflation.
Proles are the ones told to keep all their money in "safe" gubmint bonds that can easily be hyperinflated away.
Exactly, owning assets (some more golden than others) is how you escape hyperinflation which is why the mega wealthy are busy buying right now.
BEAUTIFUL ARTICLE, THANK YOU!
I appreciate both the facts & opinions written here.
A lot of this stuff goes over my head. The cb loans out money it creates from nothing to the gov. The gov. spends the money into the econ. A massive, MASSIVE dept follows. That part I get. So whats to stop the c.b. from buying all the gov. paper it doesn't hold, and just retiring it along with the paper it currently holds ? dept gone. problem solved. After all you can't go broke when you can create more money anytime you like. Not a plan that inspires confidence, but who cares since you now own EVERYTHING. ( Purchased with counterfit money of course )
Think of it this way. Greece economy is frostbitten toes of Euro. Gexit must happen if gangrene has set in. Similar situation is for US dollar no longer reserve currency. That cuts out the US as the market maker of the world. Maybe the UN will move their headquarters to Hong Kong.