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Welcome To The Newer Normal: Your Complete Guide To A World In Which The Fed Is No Longer In Control
Back in December 2013 we pointed out something that virtually nobody had noted or discussed: when it comes to "credit" creation, China's $15 trillion in freshly-created bank loans since the financial crisis - ostensibly the global credit buffer that allowed China to not get dragged down by the western recession - dwarfed the credit contribution by DM central banks.
This is how we simplified what was happening at the time:
In order to offset the lack of loan creation by commercial banks, the "Big 4" central banks - Fed, ECB, BOJ and BOE - have had no choice but the open the liquidity spigots to the max. This has resulted in a total developed world "Big 4" central bank balance of just under $10 trillion, of which the bulk of asset additions has taken place since the Lehman collapse.
How does this compare to what China has done? As can be seen on the chart below, in just the past 5 years alone, Chinese bank assets (and by implication liabilities) have grown by an astounding $15 trillion, bringing the total to over $24 trillion, as we showed yesterday. In other words, China has expanded its financial balance sheet by 50% more than the assets of all global central banks combined!
And that is how - in a global centrally-planned regime which is where everyone now is, DM or EM - your flood your economy with liquidity. Perhaps the Fed, ECB or BOJ should hire some PBOC consultants to show them how it's really done.
This dramatic divergence in credit creation continued for about a year, then gradually Chinese new loans topped out primarily due to regulation slamming shut debt creation in the shadow banking space, and since credit accumulation resulted in parallel build up in central bank reserves, the current period of debt creation going into reverse has led to not only China's currency devaluation but what we first warned was Reverse QE, and has since picked up the more conventional moniker "Quantitative Tightening."
But while China's credit topping process was inevitable, a far more sinister development has emerged: as we showed earlier, while DM central banks - excluding the Fed for the time being - have continued to pump liquidity at full blast into the global, fungibly-connected, financial system, there has been virtually no impact on risk assets...
... especially in the US where the S&P is now down not only relative to the end of QE3, but is down 5% Y/Y - the biggest annual drop since 2008.
This cross-flow dynamic is precisely what David Tepper was trying to explain to CNBC two weeks ago when the famous hedge fund manager declared the "Tepper Top" and went quite bearish on the stock market.
This dynamic is also the topic of a must-read report by Citi's Matt King titled quite simply: "Has the world reached its credit limit?" and which seeks to answer a just as important question: "Why EM weakness is having such a large impact", a question which we hinted at 2 years ago, and which is now the dominant topic within the financial community, one which may explain why development market central bank liquidity "has suddenly stopped working."
King's explanation starts by showing, in practical terms, where the world currently stands in terms of the only two metrics that matter in a Keynesian universe: real growth, and credit creation.
His summary: there has been plenty of credit, just not much growth.
So the next logical question is where has this credit been created. Our readers will know the answer: the marginal credit creator ever since the financial crisis were not the DM central banks - they were merely trying to offset private sector deleveraging and defaults; all the credit growth came from Emerging Markets in general, and China in particular.
So while we now know that EMs were the source of credit creation, why care? Why does it matter if credit was mostly being created in EMs vs DMs, and isn't credit created anywhere essentially the same? The answer is a resounding no, as King further explains.
First, looking at credit creation in the post-crisis developed markets reveals something troubling: because credit creation takes places mostly in markets and is locked in central bank "outside" money which does not enter the broad monetary system, as opposed to bank credit creation in which banks issue loans thereby creating both new loans and deposits, i.e., money, the direct impect of DM central bank liquidity injections has been to created asset-price inflation. However, the offset has been far lower broad money creation - as there is far less credit demand in the first place - leading to no incremental investment, and far lower economic multipliers.
Alternatively, it should come as no surprise that credit creation in EMs is the opposite: here money creation took place in the conventional loan-deposit bank-intermediated pathway, with a side effect being the accumulation of foreign reserves boosting the monetary base. Most importantly, new money created in EMs, i.e., China led to new investment, even if that investment ultimately was massively mis-allocted toward ghost cities and unprecedented commodity accumulation. It also led to what many realize is the world's most dangerous credit bubble as it is held almost entirely on corporate balance sheets where non-performing loans are growing at an exponential pace.
The good news is that at least initially the EM credit multiplier is far higher than in the DM.
The bad news, is that even the stimulative effect of the EM multiplier is now fading.
As a result, instead of going toward economic growth, even EM credit creation has been corrupted by the "western" bug, and is being allocated toward asset-price inflation... such as housing and markets.
* * *
The above lays out the market dynamic that took place largely uninterrupted from 2008 until the end of 2014.
And then something changed dramatically.
That something is what we said started taking place last November when we pointed out the "death of the petrodollar", when as a result of the collapse in oil prices oil exporters started doing something they have never done before: they dipped into their FX reserves and started selling. This reserve liquidation first among the oil exporting emerging market, is essentially what has since morphed into a full blown capital flight from the entire EM space, and has also resulted in China's own devaluation-driven reserve (i.e., Treasury) liquidation, which this website also noted first back in May.
As King simply summarizes this most important kink in the story, after years of reserve accumulation, EMs have now shifted to reserve contraction which, in the simplest possible terms means, "money is being destroyed" which in turn is the source of the huge inflationary wave slowly but surely sweeping over the entire - both EM and DM - world.
Ok, EMs are selling. But where is the money going? And won't dumping of Treasurys push yields higher. Answering the second question first, we remind readers of a note from several weeks ago titled "Why China Liquidations May Not Spike US Treasury Yields" which is precisely what DB also said, and which Citi agrees with: while there may be upward pressure on yields it will likely be temporary, especially if there is an even greater risk-aversion reaction in risk assets. The result to EM TSY selling would be a selloff in stocks, which in turn would push investors into the "safety" of bonds, thus offsetting Chinese selling.
But while one can debate what the impact on money destruction would be on equities and treasurys, a far clearer picture emerges when evaluting the impact on the underlying economy. As King, correctly, summarizes without the capex boost from energy (which won't come as long as oil continues its downward trajectory), and DM investment continues to decline, there is an unprecedented build up in inventory, which in turn is pressuring both capacity utilization, the employment rate, and soon, GDP once the inevitable inventory liquidation takes place.
The take home is highlighted in the chart above, but just in case it is missed on anyone here it is again: the "fundamentals point overwhelmingly downwards."
But wait, won't central banks react this time as they have on all those prior occasions (QE1, QE2, Operation Twist, QE3, BOE QE1, BOJ QQE1, ECB QE1, etc)? Well, they'll surely try... but even they know that every incremantal attempt to stimulate the private sector will have increasingly less impact. In other words, the CBs are not out of firepower, it is just that their ammo is almost nil. The reason for that: the "multiplier have fallen" because after 7 years of doing the same thing, this time it just may not work...
Furthermore, while we have listed the numerous direct interventions by central banks over the past 7 years, the reality is that an even more powerful central bank weapon has been central bank "signalling", i.e., speaking, threatening and cajoling. As Citi summarizes "The power of CBs’ actions has stemmed more from the signalling than from the portfolio balance effect."
So now that the "signalling" pathway is fading, all that's left are the flows - the same flows which, with very good reason, left David Tepper scratching his head. Flows, which, when one takes into account emerging market reserve liquidation to offset central bank purchases, paints a very ugly picture: one in which the central banks are for the first time since 2009, finally losing control as their inflows are unable to offset the EM outflows.
Where does that leave us? Well, all else equal, the New New Normal, the world in which central banks are no longer in control as a result of EM reserve liquidation, will be world in which slower credit growth translated into, you guessed it, slower overall growth, or as Citi states the conudnrum: "Even a deceleration in credit growth is negative for GDP growth."
This is precisely the secular stagnation which we have been warning about since 2009.
* * *
What is the conclusion?
It's not a pretty one for either the central bankers, nor the Keynesian economists, nor those who believe asset prices can keep rising in perpetuity, because it means that payment for the free lunch from the past 7 years is finally coming due.
But at least it is a simple conclusion: we are now at the credit plateau, or as Citi puts it: "Credit growth requires willing borrowers as well as lenders; we may be nearing the limits for both."
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The Chinese are beating the money lenders at their own game.
Art of War shit, nephews.
Maybe so, but the Fed Reserve Ponzi scheme is reaching the outer limits of extracting new resources to keep the game going. When the debt levels can no longer be increased, then the whole mess will collapse and be massively reset. Expect to see bailed in bank balances, and/or 30-50% instant devaluation.
As covered on Bloomberg this morning they have plenty of new “tools” they want to try out, and by tools I mean all of the worst parts of the Austrian Economic bible.
Bloomberg Talks Response to Next Crisis: Helicopter Money, Negative Rates, and Monetizing Debt
Or as covered by Zero Hedge:
Helicopter Money - September 2013
Negative Rates - January 2015
Monetizing Debt - March 2009
No question Zerohedge has done more than anyone to prepare us for these "tools" that are now being talked about so freely, but you've got to be surprised, and concerned, that the mainstream is talking about it as a eventuality. It likely means those "tools" are close to being deployed.
Kudos for calling it early and often Tyler!!!
Because the Petrodollar...
So, in the vein of an Agatha Christie mystery, who done it? Was it the US in an attempt to put the Russian bear in a vice grip? Was it the Saudis in an attempt to kill of US shale? Or was it all part of a broader plan?
Professor Plum in the Library with the Nail Gun.
I wish people would stop saying: "expand central bank assets." What they need to say is: "Counterfeit money to take ownership of every asset in society."
^ THIS!
The Fed, and its controllers, are a lot of things. Stupid is not one of them. I see the recurring meme that the Fed is "clueless" or "doesn't understand how things really are."
Laughable.
Their actions are self-serving and deceitful, to one who is charitably inclined. (Many other adjectives would work for those less kind.)
The fact remains: Fed buying of bonds and equities is positioned as a temporary measure to support the economy. But ask yourself how's that working? And remember that ALL of those purchases are funded with "money" that is conjured out of thin air.
Money for nothing, baby.
So "credit" is not "money", and excess "credit" destroys "money".
Who knew?
Douche bags
They knew.
Also, "they" told you. Or at least one guy did just a little before the Fed was created.
"Money is gold, and nothing else”
-- John Pierpont (J. P.) Morgan on December 19, 1912
1915 enslave a free peoples to debt and capture all assests thruogh boom and bust cycles with fiat created out of thin air. the jews.
Let me see if I understand this. The CBs (owned bt the private banks) buy up all the stock of the private corporations with "money" created out of thin air. Then the soverign nations pass TPP and TiPP which transfers soverign authority to trans-national corporations. So the private banks own the formerly soverign nations. Got it. Luckily the Moslem nations will not put up with this. Wait ......
Capturing assets through boom and bust cycles is the thing that I agree with. One wants to buy as cheaply as possible, so a bust comes in handy. Create one!
How fascinating the discussions about the limping developed economies are. Where do you find willing borrowers to invest when the customers are all in flexible workplaces, never knowing if they have an income tomorrow.?? "The best way to make money is to not spend what you got" had been my mantra when I was living with flexibility. Consumer confidence ain't happening through flexibility. It's not in the textbooks, so they think it does not apply.
exactly.
the Newspeak in economics has gone from 'a bit silly' to 'preposterous.'
answer to who dunit...millions of people doing billions of transactions involving trillions of dollars....ultimately it is the result of the superorganism going about it's business with the resources it has.
No grand conspiracy required...
Of course. And accidents "just happen".
Once the plan was in place it was just a matter of mathematics and time. Alea iacta est.
Qui bono?
End the Fed.
Ban usury, fractional reserve banking and fiat currency.
Institute Social Credit.
Elect Herd for President '16. (actually, I'm not a US citizen, sorry for the moment of false hope)
"Institute Social Credit."
WTH is that? Is that like Social Justice credit? If you're a preferred member of society, regardless of what kind of financial liability you may be, then you're worth X?
Edit:
https://en.wikipedia.org/wiki/Social_credit
why does that sound like utopian bullshit to me? oh....
"what we really demand of existence is not that we shall be put into somebody else's Utopia, but we shall be put in a position to construct a Utopia of our own."[
That helicopter money is going to be a massive Earned Income Credit that puts upwards of 10K plusin the account of every taxpayer below 50k gross. I think they want to restrict the drop to the lowest income earners who are more likely to use the $$$ on conspicous consumption. They'll save the 20K home buyer tax credit for AFTER Housing Bubble 2.0 implodes. 2017-2018 is going to look a lot like 2009-2010. It won't really work of course, but it will likely kick the can a while longer.
^ this. QE4 will be a blitz of money showered directly on Main Steet. Trickle up, meet trickle down.
Aka free stuff army, cash for crunkers. Doesn't this already not work?
All you need is the election year run up,
For example OB phone, OB homeownership, OB "stash"; all targeted bumper stickers benefiting Low Information Voters.
No need for viable long term solutions, just a bump.
Cap on prescription cost, Better climate control are the Clinton bumpers , more to come.
Yes, Tyler, you called it. But you keep giving articles incorrect titles. Everything is going according to the central banks plan. They know what they are doing and part of the plan is to make everyone believe the illusion that it isn't what they planned and therefore they are not at fault.
BINGO
Not sure we're yet at the pont where printed money isn't still going to be the fix for every ill. Just because the treatment has stopped working doesn't mean they won't still apply that treatment for some time to come.
just like medieval medicine, the answer to leeching not working is always to apply more leeches.
until the patient dies from blood loss, but at least they are cured of pneumonia
Never should have allowed privately owned banks and their CB's to create the money/debt supply...
what in the fuck was congress thinking back then?
They were thinking about going home early on Christmas Eve.
Barney Frank was dreaming of sugar plum faeries, no doubt.
http://www.washingtonpost.com/news/wonkblog/wp/2013/07/20/does-dodd-fran...
Bloomturd is a bit behind the curve. That's okay, we'll wait for them to catch up....., not.
Carol Quigley 's book Tregedy and Hope's first 20 chapters document that it's not an uncommon move in the last 200 years of history pre/post ww1 especially.
It's actually a hell of a lot longer than 200 years. More like 5500 years...but the last 600 have been better documented:
http://azizonomics.com/2012/01/04/a-history-of-reserve-currencies-in-one...
She will conveniently retire for health reasons when the shit really hits the fan.
And along comes a hyper emergency Fed Chairman, not so different from Hitler.
Everyone will be crying for grandma Yellen.
What are the sheeple going to do? Harm grandma? She was hired for her appearance not her financial acumen.
+1 If you like Scooby's comments.
"She will conveniently retire for health reasons when the shit really hits the fan."
I think you're absolutely dead-on right with that comment. Bitch just don't have the chops for a REAL emergency. Deer in headlights. Better off baking cookies and bouncing the grandkids on her knee.
Can't believe someone dipped their wick in that old stroke addled hag...
Everyone will be crying for grandma Yellen.
Tell that to the American people per Latin's comment above about massive currency devaluation(s) w/ bank bailins!
Barra at GM bought a Ghetto Mansion in Detroit as goodwill. Just blocks from where a judge was capped in his backyard.
People eat this stuff up.
Nationalize the Fed. #tarpleyforfedhead
Terrific article on money creation at ClubOrlov:
http://cluborlov.blogspot.fr/2015/09/the-financial-industrial-revolution...
This shows the DIABOLICAL cleverness of the bankers that changed everything and leads directly to our current crisis where the devil returns to get his due. See if you can spot it. Hint: It comes where the author mentions the mortal sin of the bankers.
Debt money is devil's money. DM=DM
The current state of affairs is better than any collapse scenario. Yet, like a large and painful dump that you are dreading, at some point the time has come to do what must be done.
Sure stinks up the place though.
It's been building pressure for 100 years.
Major impaction, probably with multiple hernias, ulcers, and piles.
Incoming !
"And that is how - in a global centrally-planned regime which is where everyone now is, DM or EM - your flood your economy with liquidity. Perhaps the Fed, ECB or BOJ should hire some PBOC consultants to show them how it's really done."
So...
...what's up with the bullshit talk about 'Capitalism Failed'??
How can people have both Capitalism (the absence of central planning) and be in a "centrally-planned regime" simultaneously?
Capitalism's Central Banking Model requires suspension of belief on the part of central planners, and government bureaucrats, as well as all the Corporatists, but the people are required to believe because that's the only way they are able to dupe us out of our hard earned money. Capitalism, in this light, really means Capitalism for the rich, and Socialism/poverty for the poor. The Corporate envelopes of cash are always full, and the municipal, provincial/state, and federal envelopes are always empty, or in deficit. DEBT for the people, and PROFIT for everyone else.
Get with the programme.
NOT THIS: "Credit growth requires willing borrowers as well as lenders; we may be nearing the limits for both."
THIS: Credit growth requires an ignorant group to prey upon.
Globalization accelerated the death of debt economics.
At least when China blew a bubble they got several U.S. equivalents of cities, roads, railways, bridges, factories, ports, power plants, etc.
Brazil----nada
India----a billion cell phones
EU----old people
Japan-----old people
USA------kleptocratic police state
Good point Jim. And those cities/industries are hungry for business from the world. It's not that China makes junk. China makes what you want made. Cheap stuff, ok. Expensive stuff, ok.
+1 If you like Scooby's comments. The green arrow.
Excellent comment Jim!
Along with what you said we got criminal banksters and wall street fat cats while our infrastructure crumbles and cities look like war zones! Literally like "Nero fiddled while Rome burned!".
word
Much of the money stolen from the PEOPLE went into setting up a standardized militarized police force to protect the "bankers" from the PEOPLE taking it back...
The bankers stole a lot more than our money.
http://www.SiriusDisclosure.com/
Source: https://youtu.be/0gVLv5eg4Xg?t=5093
Having the Fed no longer in control is a good thing, because they've screwed the pooch just about every 9 years since 1987. how many times must they blow up the economy before someone in power finally wakes up to the fact that these people running monetary policy have absolutely no idea what they're doing. Their initial mandate was to use monetary policy smooth out economic boom bust cycles, while at the same time (thanks to a back room deal) modulate inflation to prevent banks from deflationary loan losses. Well, in conjuction with their clueless politician bretheren, who wouldn't know stable fiscal policy if it smacked them in the face, they've failed at everything.....that is except blowing bubbles, popping them and causing misery amongst the workers and savers in the US.
The Fed has failed at everything AND degraded the value of the dollar to boot.
I'd say END THE FED OR WE'RE DEAD, but at this point, the poision is already in to deep.
At this point, does END THE FED matter?
Maybe after the reset...
I think they do know, and that the Fed is being fed all the rope it needs to hang itself. If they don't get it right, expect Congressional hearings/witchhunts to commence in short order.
The Fed is being maneuvered into place by those who know a HUGE mess is coming. The fiscal policy makers are positioning the monetary policy makers to take the fall.
That poor dumb bitch has no clue what's in her future. Sweet little Grandma Yellen is being groomed for the volcano-toss.
If only tossing her in would appease the volcano god's....
Burned and ruined, the eruption is going to make us all feel like citizens of ancient Pompeii
I'm at the point I no longer care...
Let it burn.
I don't remember the congressional witch hunts from 2008? The next reset will be the take down, and yes the Fed will be taking down their puppets in congress as well. Politics are nothing more then an entertaining scripted play for the International Banksters!
Happy Yom, Yellen, one day to repent for a year of lies and fucking the 99% real good... pretty cool religion, I may convert.
don't forget the "8 crazy nights" for Hanukkah.
They will be rolling out a new fiat. Right after the banks win WW3.
What about a super cool new age digi? Open sourced! Transparent and untraceable.
+1 If you like Scooby's comments. The green arrow.
This is a tough crowd.
WW3 no. Cold War 2 yes.
The "debts" on the books of the world's CBs are, for th emost part, simply never going to be repaid.
There will be massive sales of land and other 'real' property of sovereigns for pennies on the dollar sold to the 0.1% which is all part of the plan, indeed the name of the game is swapping paper and ink for soil and oil...
Hence, to not have accrued massive debt is to be fucked by the other guys who did have their egg roll and eat it, too.
China just has to figure out transpo for 1 million troops headed to Syria and/or Ukraine.
The similarities between pre-world war 1 and now is pretty remarkable and I'm sure George Washington or someone must have already written about it [but interested in any links to essays re same].
When the debt Ponzi collapses those .1% aren't going to be buying much of anything. THEY are the ones holding the bulk of that debt, either as loan takers themselves, or loan givers facing massive defaults.
THEY may be the ones liquidating. The rest of us no longer have much investment in the system, with little to liquidate.
A man living in a house really can't sell it unless he has someplace else to go. An 'investor' with many homes, and needing cash, HAS to unload some of those homes at SOME price or go under himself.
Meh - they lent paper and ink and are owed $X.
They make you a sweet deal - give them Yellowstone and a few million hectares in alaska, with all rights of th esoil and air attendant...
and they'll call it even.
At the end of the day, in a way, you were paid "less" than owed, but in another, more accurate way - you swapped paper for land.
Economics, Keynesian or otherwise, is not natural science.
It is more like a religion.
+1 on the pre WW I reference. The Great Game, part deux. Only this time the EU's odds are a bit longer.
When do we get the virtual Fed like the virtual boarder fence?
Seven years of feast and seven years of famine. I suspect that after 40+ years of pulling economic activity forward the famine is going to last far longer than seven years. Posts like these are what brought me to the Hedge to begin with. The commentary is what keeps me here.
Well, I hope you have saved 40 years of grain during this time of plenty. or, that you have a long lost son that has saved it for you and his evil, jealous, enslaving brothers. Or, that you are creative and can write a musical about it and makes lots of money.
In any case, the bill is due, and I didn't have enough cash to buy a senator, so I'll be taking it in the shorts.
The patient is not improving. More leeches!
More like using jumper cables with 240 Volts...
more tyrrany
Those are some mother big loans to pay back.
If the Central bank solutions aren't working any more we will need to find the "wealth creators" again.
Younger readers may not remember but the "wealth creators" used to create the wealth before 2008.
When profits became harder to come by, they all retired to their luxury yachts waiting for someone else to sort out the mess.
Central banks have had to fill the gap by money printing.
Does anyone know where the "wealth creators" are?
Their large flotilla of yachts was last seen in the Mediterranean in late 2008.
We must find them again.
The wealth created by humanity over the last 10,000 years has not been lost or destroyed. It was stolen, and we reclaim it.
Holy crap. This will not end well. This is like a spring that keeps getting wound tighter and tighter, then pop.
-Argenta
Fuck the FED just buy moar Facebook stock and you'll be 'aight; FB will carry us to the promised land.
weren't you pimping the market at 2120? now you're a cynic... lol
Yea man, I needed someone to buy all that shit I was selling.
Just like now I have finished loading the boat with short FB deltas so it's cool if you wanna sell it ;) last time I managed to be short it ~95 and was also loaded to the gills with long volatility into this most recent dip. Covered the FB@80 and sold out my long vol around 25 in the VIX (way too early in retrospect. But who knew?) I am much less long volatility today but even more short deltas in FB cause honestly I think it along with the rest of the 'market' has topped out.
That said my I think even if we manage to go higher through some CB miracle FB is gong to retest the 80 level first before it goes either to new highs or dead cat bounces into a bear market.
Time will tell; step up and place your bets.
When it is all said an done, Facebook stock will cause (not you ?) a facebrook. You heard this here first ! HAHAHAHA
C H E C K FUCKING M A T E , Professor Emeritus Milton Freidman, you N E O L I B E R A L slimebucket scumsucking douchebag wannabe pseudo intellectual bastard assClown asslicking functional retard.
ROT in Hell.
Agreed. As if this was not all according to plan. FFS its the same world order going back a very long time.
dont sugar coat it, tell us how you really feel
What exactly do you find wrong with Friedman? (besides your general rant)....??
I find the totalitarian control of the University of Chicago School of Economics via Milton Friedman's God-like status as the founder of the Neoliberalism movement in Economics to be the single most destructive force Economically that this world will ever know, or has known. Friedman destroyed fair trade & solidified Central Planning/Banking largesse under the guise of it being empirically logical while it was nothing of the sort. Today, we see empirical proof that the Central Banking Model is an abject failure, but all the Neoliberally trained Economists in the entire world refuse to accept that after 28 successive quarter reports of contraction the trend is not moving towards improvement anytime soon. Not only do they not admit the longitudinal trend, but they purport to think that somewhere down the line we will see growth return to these same destroyed markets without any sort of fundamentals changing qualitatively, or quantitatively. In brief, no regulatory reform, and they are down to crossing their fingers & toes for luck, or miracles.
Economics, as envisaged by Friedman, and his ilk, is a failed pseudoscientific pile of shit IMHO. Friedman shilled for his ideas, was lauded as gifted, received medals for being a propped up Jew Economist, and indoctrinated millions into a failed self serving collusive regime in Economics that has manifested into the largest academic fiasco in the history of academia, but you won't hear the academics admit to their failure, and their students will believe their misguided hubris.
And the beat goes on.
http://nelson-haha.com/
The real reason why the FED didn’t hike rates.
The FED knows the shit is going to hit the fan pretty soon and they have already prepared their response:
“It was nuffin to do wiv me Guvnor. We tapered QE ages ago and haven’t made any big moves since, so it can’t be our fault”
How would their response look if they had just raised rates?
See, they are cleverer than you think.
Be interesting to see what happens when Congress panics and throws the FED under the bus to save their own asses. civil war anyone?
The tragedy is that at some point, the Fed will throw up its hands and say "It all your fault. You didn't go out and buy stuff when we gave you the best rates and opportunity. So don't blame us." That'll go over well.
BRICS and others do not accept western money printing anymore. West therefore declared financial war until final colapse. Now ecb & fed are just pumping money to their corrupt governments and "democracies". Takover coming at final colapse
the BRICS are shit - a bigger worse mess than US/EU - tell me how good Brazil is doing? China? Russia? S. Africa? India? and any and all other 3rd world shitholes
The Flagellating Egotistical Dunderbrains will try NIRP, moar QE, and maybe even helicopter money for the masses before they ever raise rates.
It will end in a violent implosion, then explode like Old Faithful at Yellowstone.
don't be so sure - they need to gain back some credibility even if it means a few sacrafices - would not be the first time sacrafices were made now would it ? (Lehman, etc)
Good Bye Deutsche Bank.
https://www.db.com/usa/
Am I the first to thank ZH for this excellent comprehensive article?
http://www.2acheck.com/tag/sks-full-auto-conversion/
Ha! I remember this chart! The top one with 15 Trillion of China debt. Black swans are coming to roost.
People have to walk away from the neon god they made.
Thanks, ZH, for an excellent analysis and presentation. I have personally learned so very much from the Tylers over the years. My thanks are not enough, but thank you anyway.
Now you have the analysis and presentation, what will you do when the recession hits?
So help me out please, for the folks here he really know their shit. Is this thing possibly really coming down...Are you implying there is no solution to remedy this....
I have a small amount of debt (maybe 3k) but have access to nearly 60k of credit. Should I become a drunken sailor (sorta like out Gov't) and just start buying $hit that I don't need (vacations, clothes)...
But, but some talking head on Fox News just said that the recession isn't going to hit until March 2019. You guys are all wrong!
/s
why are you watching fox (or any other MSM) news ?
I watch it only incidentally because I happen to enter a room where others are watching it.
Having said that, MSM has the opposite effect on me. The more I see it, the ANGRIER I get and the more incredulous I become at the BS spewed forth.
A question for the "Pope" Papa Fransico:
What are you all celebrating? and why haven't you asked Obama why he hasn't honored his Noble Peace Price.?? (I know its all just fucking futile)....
Great "mile marker" piece Team Tyler. Thanx
What a BS analysis. Here are much better ones. Learn from China?! Don't think so unless it's about what not to do. A HUGE house of cards.:
China’s Monumental Debt Trap—-Why It Will Rock The Global Economy
by David Stockman • February 5, 2015
http://davidstockmanscontracorner.com/chinas-monumental-debt-trap-why-it...
A search on China debt as keywords on Stockman's site:
http://davidstockmanscontracorner.com/?s=china+debt
LOTS to read.
china is a bigger marxist mess & bust than the old soviet union - central planning & control mega failure
Cheers, Stockman has written heaps of great pieces lately.
FED still seems capable of manipulating the stock markets.
the FED guided by its covert overlords appears to still be in complete control with no signs of giving it up anytime soon - they may lose a battle now and then but they've been winning the war since 1913 hands-down - this is just wishful thinking
I want my mommy!!!
The HOR/AJ that controlls 40+% of world economy probably has a plan. They have been working this system a lot longer than most. There is an exit strategy. I'd love for to be as simple as crash it, let it burn and walk away...but it wont. Futur generations of HOR's and AJ"s will be hungrier and more ruthless. It wont end until there are no more advesaries ( china, Muslums, etc) and they turn on themselves.
JMHO
Sounds pretty promising for PMs.
Great analysis - but don't you mean huge DEFLATIONARY wave slowly but surely sweeping over the entire - both EM and DM - world?
In a Capitalistic Economy with Free Trade Agreements within a Democracy: not to mention an ally of Israel, this cannot happen.
Someone is just trying to scare us.
For a minute there you had me. Federal Reserve losing control, and all. So, I pulled a dollar bill out and there it was, right there at the top. "Federal Reserve Note."
complete iron fisted control, since 1913 - pretty good longevity if you ask me - and who are the main challengers? china? hahahaha!!!! good one! BRICS? HAHAHAHAAHAHAHAAA!!!! 3rd world shitholes combined just make for one HUMUNGUS SHITHOLE !!!!
After scanning all the comments here, the general gist is just waiting for RESET. (Holter and Sinclair confirm so much) Well, if you were paying attention back in March of this year, then you know without a doubt it is coming, and coming -- when. Why you never heard about this? Well, the readme explains so much ..
https://app.box.com/s/hfgvcqg7gqh7i27at6sv53ywu87lwarp
The title of this needs to be rephrased:
And save all the chart porn. The first chart is sufficient without further comment ..
they were merely trying to offset private sector deleveraging and defaults;
Stated with full knowledge that no measure of defaults exists anywhere.
Liquidity is traders' "willingness to make delivery promises." As long as they can see clear to delivery, they will make the promises. And they will deliver.
Liquidity has been corrupted to mean "availability of deposits to leverage by 10x" or "availability of capital to bless" the promises.
Further, once blessed, those promises fit into a cascading chain. Once one breaks, they all break.
That's not the proper way to manage any MOE process.
A properly managed MOE process can guarantee perpetual free supply of money and guarantee perpetual zero inflation of the MOE itself. It's all about the proper process.
This article is today's example of epicycles that Copernicus confronted 400+ years ago.
Having no clue what is going on they pile on complicated analysis ... and can't even read their own graphs (e.g. the one captioned "so why has it suddenly stopped working" that shows it also stopped working at several other points in the sample presented ... i.e. there was a lag).
I read it, was not really informed by it. The graphs were not as clear as the text seemed to claim and difficult to determine what they were supposed to illustrate/demonstrate. No coherent theme in them that I could really see. The text was a bit more interesting, but mostly referred to things already discussed much earlier.
Not much that was not already covered in earlier posts. I would have hoped for unambiguous data trends, and there was, downward. ... well duh. It was a cinch to see the steady macro slide over the past five years mid-2014 to account for the looming fall in oil demand and price, and to see that we were going negative on most indicators in mid-2015, so a slow-in and slow-out recession seemed baked in.
So this article/Citi report isn't really telling me anything I didn't already know. Credit induced AG is topping out and supported by lower and lower multiplier effect. Well that was clear from the macro trends too, confirmed by a recent trade slide. I mean what's the message? No one is lending and no one is borrowing, and CB bucks do not work = stagnation with reducing aggregate demand due debt servicing and falling nominal to real GDP?
Well like he says, they warned of that in 2009 - and so did many, many others btw.
So I just don't get why this is a 'Are the brokers broken' type exposition.
Well, the markets are closed and we're all still here.
Anybody got the inside scoop on what went wrong with today's Armageddon?
https://www.youtube.com/watch?v=mEQldSi-heE
Here are some more signs of a coming recession.
http://michaelekelley.com/2015/05/29/mergers-and-acquisitions-set-record...
http://michaelekelley.com/2015/02/20/fed-warns-of-two-bubbles/
http://michaelekelley.com/2015/02/24/would-you-pay-39-more-than-asked/
http://www.zerohedge.com/news/2015-07-27/when-will-we-ever-learn/
Here is how to respond.
http://michaelekelley.com/2014/10/16/8-things-to-do-when-recession-happens/
Here is how to get your mind off this stuff.
http://michaelekelley.com/category/humor/
Good luck!
The Fed never had control.
Yes they did. They said so.
BRICS and EM begging the Fed not to raise rates?
Power and influence in spades, shoot the moon.
Not in control, but able to cause complete chaos at the same time. How wonderful!
I believe the initial mexican peso devaluation in around 1994 was 30% after the consequences, it ended up being 90% or 10 to 1 could only get pesos from the banks (HEY I GOT DEVALUED) how did I get way down here?
One small correction - The Chinese devaluation did not "cause" treasury bond sales. These came about as a result of Chinese efforts to prevent further devaluation.
I think after the dust settles on this we will again be able to spot the path of the bouncing ball.
I am completely unconvinced that any of this is off plan and I firmly believe that while we may not know what the actual plan is that in fact they are on plan at almost all times.
None of this is accidental in my opinion.