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Bank of America: "Sadly, It Took World War II..."
One week ago, we explained what happened to both the US economy and the stock market the last time the Fed tightened financial conditions back in 1936 when it, like now, erroneously thought the economy was strong enough to sustain it:
"The Fed exit strategy completely failed as the money supply immediately contracted; Fed tightening in H1’37 was followed in H2’37 by a severe recession and a 49% collapse in the Dow Jones."
This is what it looked like courtesy of BofA strategist Michael Hartnett:
We concluded with the following:
As can be seen on the above, in 1938, the stock market began to recover some. However, despite the easing stocks didn't fully regain their 1937 highs until the end of the war nearly a decade later.
It needed a world war for that.
Alas, the sad reality that a war is what will be needed to get out of the ridiculous broken market/record debt state the world finds itself in due to the unprecedented central bank intervention over the past 7 years to make the rich richer, is spreading.
Today we read from none other than the same Bank of America strategist who points out that while the Fed's next step may well be the opposite of success, i.e., quantitative failure, the resulting shock to the system will have to endure the same type of catharsis, as what "saved" the US financial system from the first Great Depression.
To wit:
The rotation from growth to value, DM to EM and so on, could occur in a bad way, following a potential Quantitative Failure.
The clash between a tightening Fed, QE in Europe & Japan, and potential devaluations in China & Saudi Arabia mean 2016 “tail risks” are high in our view. BofAML forecasts a 10% devaluation of the Chinese renminbi in 2016, and regards a de-pegging of the Saudi riyal as a potential “black swan”. Like a game of Jenga, a bull market built by central banks can collapse if further BoJ/ECB QE and Fed hikes engender US dollar spikes and EM/commodity swoons, FX-wars and volatility. 1937, 1987 & 1994 were all years of “policy divergence” and all years of market crashes.
If deflation intensifies, causing bear markets and recessions, investors should ultimately anticipate a major policy shift in 2016...in US/EU/Japan from QE to fiscal stimulus. A flip to fiscal stimulus is the most likely catalyst for a Great Rotation out of “deflation plays” into “inflation plays”, undoubtedly the biggest investment decision of 2016. Sadly it took the New Deal and WW2 to end the dominance of “growth” over “value” in the 1930s.
What Mr. Hartnett failed to mention, is that in addition to forcing the rotation out of "growth" and into "value" stocks - hardly the most important consequence of, well, a global war - it also took World War 2 to pull the US out of the Second Great Depression.
Which may also explain why currently in the Syria proxy war there already are US, British, French, German, Saudi, Turkish, Russian, Iranian (and shortly Chinese) forces in the air and on the ground. Because if the $200 trillion in global debt will not inflate itself on its own, it may just need the "push" of a few million tons of TNT to get it rolling.
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Central Bank Fuckery!
All wars are bankers wars. I hate you fucking cunts. Can you say "hate" on the Internet, or has that been executive ordered, too?
War = Broken Windows
But maybe they did not teach that wisdom and the source to any of you in college.
Guess what MF’s, this is not 1938... too many people know what you are up to and there will be hell to pay..
ON YOU.
The 1930's was a time when most Americans were hard working, honest, honerable, family oriented individuals.
So I'm going to say it...."this time it IS different"
our culture of parasites somehow tells me that someway this 'time around' will be even worse. There will not be an equivalent to the 40's and 50's in the next 50 years.
I am a bit more optimistic.
It’s not the indolent class that will make the difference.
The House holds the purse strings to the government, but the reasonably smart class holds the purse strings to the House.
The government has not acted responsibly and if even only 10 per cent of the paying class STOPS everything, all the balance sheets go upside down and change happens.
The banks don’t want the > $500K accounts because too few customers could bail in a heartbeat and wreck their system.
All the really big money is off shore anyway.
But they need the capital of the obliged class.
If enough of the obliged class decides to say F it – time to become un-obliged and STOPS (everything), pull their capital and renounces all their taxes and money center bank debt, things will change.
And.. they cannot put >12,000,000 mostly armed citizens in FEMA camps.
Hey, Barry did it to the GM bond holders, the IMF did it to Russia... why can't we do it to JPM?
The idea of mutual deterrence WILL lead to our inevitable annihilation.
Shall we play a game?
https://www.youtube.com/watch?v=MpmGXeAtWUw
In the 1930's, reported unemployment numbers were honest (the current tomfuckery is relatively recent).
This time around will be much worse.
Get ready for Operation Krugman......
"It took WW2 to..."
Welcome to the New Plan same as the OLD Plan.
WWII is the best thing that ever happened to 'banksters' (who perpetrated it & ALL wars) ~ FUCK BofA & it's dweeb ass history rewriting shill ass fucks!!!
ht/ 'Long Soup Line'
Sadly you criminal banker fucks were not taken out centuries ago.
Judging by DIA / CIA reports, 95% of the so-called FSA are actually aligned with ISIS, so the yellow arrow of 'suspected' funding etc from US to ISIS should be blue.
Ukraine should be included as it has supplied weapons to ISIS via Qatar. It is also providing safe haven for ISIS thugs escaping from Syria and for Gray WOlves from Turkey.
that map looks like a bunch of sperm cells seeking an egg, eventually one of them will hit paydirt!
(probably thanks to some Mossad trickery)
"If deflation intensifies, causing bear markets and recessions, investors should ultimately anticipate a major policy shift in 2016...in US/EU/Japan from QE to fiscal stimulus."
So AFTER the bear markets and recessions, investors should "ULTIMATELY anticipate a major shift?" How long does "ultimately" take is the question.
A flip to fiscal stimulus is the most likely catalyst for a Great Rotation out of “deflation plays” into “inflation plays”, undoubtedly the biggest investment decision of 2016.
So this all happens in 2016? Gonna be a busy year.
Sadly it took the New Deal and WW2 to end the dominance of “growth” over “value” in the 1930s.
News flash to BofA, the New Deal made things worse and should not preceed WW2 with the word "and".
We are actually working inside a full scale consumer war economy at the moment
Not quite sure a return to a earlier 20th century war economy make any difference
In the case of Ireland 75 % of diesel consumption is going into transport and a mere 6 % in agriculture
Looks like a war economy to me
Austerity is the rationing process required to sustain this transfer.
Bank of America wants more rationing to sustain " Growth" me thinks.
Starve the fuckers and all that.
I
LinksWe
Anybody that still does business with BAC should be considered an enemy sympathizer, and full blown retard.
This map looks like a real clusterfuck. Hmmm isnt this fight described in the end of the bible?
No worries, mates, we can't make an ideally smooth glass desert from your piece of land because of the Rocky mountains. You still have some time to find a cave.
"I´d just like to thank the Bank of America, without whom none of these wars would have been possible. I also want to give a shout out to the boys in the Zicatela Gang for their unerring faith that I won´t shoot them. Without you little people I couldn´t get away with raiding a chicken coup."
- Bigbaddy Billbaghdaddy
Growth has negative implications for the population.
In Ireland we have 7% growith and declining living standards.
Irishmen are dying of thirst.
Once you understand the fundamentals of modern fractional reserve banking and fiat currency, it is very easy to see that a world war is the only way 'out'.
You read and read fervently, trying to put the puzzle pieces together, and then one day a light bulb will turn on in your head, except it's much more like the visualization of an atom bomb going off than anything Edison could have imagined.
The trick now is to try and live through this fucking mess that's been created, and hope it doesn't tick off or come home to roost in your neck of the woods.
this isn't 1936. this is 1928.
It was exogenous spending that paid off private debts. This can be done without war.
How come mankind is so stuuupid when it comes to money, and he doesn't learn from history. This article is another piece in a long history indicating nothing is learned.
It was line item budgets such as the more than $1T spent by reconstruction finance corporation. This money then started up factories and put people to work. It originated as line item budgets in Washington.
Exogenous means money that comes from outside of the private banking system, hence it has no debt instrument counterpart. If it does happen to come into being with a debt instrument, it is public debt, not PRIVATE DEBTS. Public debts can be ignored or erased.
1920s there was a bubble economy as people borrowed bank credit to then gamble/bubble the stock market. When the crash happened, debt instruments still demanded payment. The paying off of private debts then vanished the credit money supply. (Credit when it returns to the ledger disappears.)
Banks stopped making loans, which accelerated the depression. The drain on money supply was not matched with new credit inputs.
Exogenous money for war production paid wages, which then paid off private debts.
Since all money today is bank credit, this notion of exogenous money is off of most peoples cognitive maps. Satan wins when nobody knows he exists.
Excising actual monetary history from the record is funded by usury out of private banks. They do this by buying up books, or influencing economic departments at university.
Germany used MEFO BILLS as their exogenous money. Canada converted BOC to a crown bank, where all of its stock was held by ministry of finance (MOF). Australia used a similar state bank.
Sovereign money would allow people to trade their output fairly without banksters siphoning off the productivity of the people. The outputs of a debt system are predicatable - all systems predicate their output.
www.sovereignmoney.eu
MEFOBILLS: This article is another piece in a long history indicating nothing is learned.
If I may add, sir:
This website commentators are an indication nothing is learned.
Wonder why of such propagated stupidity.
“Our great democracies still tend to think that a stupid man is more likely to be honest than a clever man, and our politicians take advantage of this prejudice by pretending to be even more stupid than nature made them.” — Bertrand Russell
By the way, great post, as usual. Kudos to you. You rock!
Exogenous money is the last thing the Banksters/Oligarchy want.
Moar debt money, even if QE/Counterfeiting, is preferable to the Banksters/Oligarchy as this perpetuates the debt/usury rentier complex.
Yes, they want to keep the con game going in order to make easy rents.
QE is endogenous money, meaning it comes from within the private banking system.
QE mechanism is a composition change of money supply, where TBills or MBS are swapped for FED keyboard money. This keyboard money appears as if it is general demand. But, this general demand isn't general. Some of this keyboard money has a transmission mechanism to general supply, and the exact mechanics I've posted here before.. BUt, the transmission mechanism is weak.
QE keyboard money is specific in that it typically channels into banker reserve loops and gets stuck. The FED buys TBills from their banking partners.
So QE does not put money into productivity channels. It effectively unprints TBills and said Tbills (bonds) end up expanding the balance sheet at the FED. Former TBills end up on ledger at FED and there they stay.
Banksters want to hold onto their power of doing magick swaps, where the swap is often uneven and usurious. Like a butcher with his finger on the scale, they always win, while the actual wealth producers are harvested for their output and real assets.
Wise up and leave your ignorance of money behind:
http://www.hiddensecretsofmoney.com/videos/episode-1
Watch all episodes, episode 4 describes the current monetary system.
Steve Forbes – Editor in Chief of Forbes Magazine endorses episode 4 (can be seen at the end) so it has very good credentials. He thinks the current monetary system is going to collapse too.
If you want to get in deeper read:
“Where does money come from” available from Amazon
The positive money alternative can be found on the Positive Money web-site.
well the Saudis just threw delivered the ultimatum...either Assad goes willingly or he will be removed by force.
the Turks are on board and are ready to go over the border in a big way massing large amounts of troops, tanks and artillery. apparently an Iraqi law maker was in the room when the PM was informed that there would be 100,000 arab and US troops deployed to the country ...and there wasn't shit he could do about it.
Putin mobilized Russia's strategic nuclear missile forces and not so subtly suggested that this conflict could turn nuclear at any moment.
zion and the DC coalition of mentally retarded Arab states are now openly bombing SAA positions.
while Putin ordered the military to instantly destroy any threat to Russian forces in Syria. reports are that t-90a mbt's are already on the ground and rolling to the Syrian/ Turkey boarder and new long range arty and mrls systems are popping up. rumor is that ground troops, numbering in the tens of thousands, are soon to be deployed. Iran and china appear ready to throw down as well.
add it all up and it seems that we are about to wrap up the preamble to WW3 and the mother of all corrections is about to begin.
The logistics of keeping tens of thousands of Russian troops in Syria in beans and bullets by air will be nigh impossible. If Turkey shuts off the Bospurus, it is a long way around from St. Petersburg to Latakia.
Why would Russia deploy ground troops in Syria? All they need to do is keep bombing Western and Western-allied troops from air or using missiles until they see sense. If they try to escalate, Russia will first announce and then nuke Western cities.
This is 2015. Soon we will have negative interest rates and anyone who does not spend will be branded an economic terrorist.
But now almost everybody has nukes so wait some of them make their landed on US soil.
How much did they hike back then?
Fed Reserve fuckwits will probably do a pathetic tokenistic "hiking cycle" to preserve a shred of credibility.
Real rates unlikely to even come back to 0 (2% nominal rate).
the fed was created to debt finance the "world wars" and depopulation of europe, period. the young men were that threatening to established power and dominance i guess?
coded into a "money" system.
the paradigm of 1913 dies real hard with its depopulation casualties, say what you
will and god willing, it dies yesterday. a transformation is at hand. the ideal
generic "man" demanding slaughter may be a thing of the past?
.
it is the authoritative, usurious, money system, man.
the root of evil, lives are destroyed in worship of it.
anyway ....
1 star. It is a damn lie that WW2 did anything about recovery. Wars tend to spend money and in fact I believe the U.S. has had some sort of recession after every war. The necessary fiscal conservatism that follows leads to the recovery. Why? Money is saved and then used for investments that supply some sort of return. Things that have lasting value get done, unlike today where you get $1+ billion valuation for some sort of trendy social app thing.
It took the Congress in 1947-8 to undo some of the centralization and statism. - Ned
In the 1920's - 1940 the US wasn't 20 trillion in debt, did not have the social program expenditures it has today , nor the ridiculous military and intelligence outlays, was a manufacturing powerhouse and had reasonably sound money.
I don't see how a comparison can be accurately made.
why worry china, when the shorts got your (as they did in americas great depression!) ass?
"The Uptick Rule" what's that...
https://en.wikipedia.org/wiki/Uptick_rule
We probably shouldn't assume this is all about money and the economy. The economy, currencies and war are a tool to these people and nothing more. The families behind the central banking cartel have built a much larger power structure since the last time they contrived a spectacular bubble, collapsed everything and then funded two sides of a war.
They are moving chess pieces and when they are ready they will pull the plug on the markets and currencies. They already have all the money they could ever want, they are making power moves and consolidations, everyone else is just playing the game to get a piece of the action or a pawn. They will bring the US economy back if and how they choose to. They will pick our place among nations.
These people have to brought to justice there is no other way.
Give me some addresses and we'll be on it.
Why do you think they built the NSA first? They would see you coming before you even landed on the right continent.
Wall Street's and the City's favoured solution for the Great Depression wasn't war, exactly. It was national socialism. They saw an opportunity to make themselves whole by bringing Hitler to power and having him expropriate the parts of Germany's capital stock owned by Jews, guessing, correctly, that few Germans would bother defending Jewish capitalists and Hitler would not be above liquidating anybody who did.
War wasn't on the cards until the demagogue whose rise to power and re-armament of Germany the City cheerfully bankrolled started ordering his air force to drop bombs near Threadneedle Street.
I cannot think of a single thing you got right on that post.
'Publik edukation really is a horrible and horrid thing.
I award you no points, and may god have mercy on your soul.
This isn't the 1940's or 1930's ...
(it really isn't)
(80% of Americans back then still lived on the "farm" or in rural areas)
(80% of Americans today live in cities - that have about a weeks worth of food on hand)
(back then Ma and Pa Kettle tripped over oil, today we boil tar sands - and only at $100 a barrel)
(not really the same is it?)
My point is our situation is way worse.
Not even close to being true. The grest immigration 1900-1920 from eastern and southern europe and blacks from the south to northern coties flipped the Urban/Rural mix which in 1920 was 50-50. By 1930, it was about 60-40 urban to rural and continued up from there. WWII was not built
on the backs of farmed but on the backs of urban laborers. On the oil front, while demand continues to rise so does supply. War isn't going to be won with massive jarmies of steel and oil but by financial manipulation, infowar and surgical strikes. In that regard, our army today is comprised of jews, silicon valley geeks and MIC contractors.
All it takes is an archduke to set off the 'mother of all corrections'.
It works in WWII for US, caused at that time. Raw materials miner/oils/gas are available from US domestic already. Todays that is that is not the case. US imported nearly everything (raw materials & energy), seeder industries (basic first stage raw materials processing plants) virtually doesn't exists.
In a war, you need those seeder plants to feed you continuesly your war machine plants. It would be suicidal to go to war w/o this capabilities. In this regards, India, China, Russia are in better positions to wage long & continiues war.
So, even if US suicidal enough to wage world war? It would be over AT THE LONGEST is 3 days. A FULL LAUNCH OF NUCLEAR ARSENALS in 6 hours! And DONE!! Even the still alive one? Wishing they were dead. Cause the live one, would died a pains death.
I don't think US warmonger people really that crazy. Not when their existinal are in danger (building bunker 1.5 km's deep doesn't help. Believe me. You'll dies harder.
So, like the collapsed Soviet Unions? US will have chaos, but the nuke stockpiles will be still guarded safe.
It is as simple as that.
However, your living standard currently? I'll expect you US to go bottom like Venezuela does currently. The only saving currently you relly on is Debt by printing money.
That can be done currently, cause your currency is still the recoqnized int'l currency. Well.. my guess is, starting from next year (2016) the days of your currency unwinding will be started.
Once yuans start to gains strength (the devaluation right now by china govt? Can only be done temporarily. Once people of the world start collecting yuans instead of dollar? There are no ways for yuans but goes UP. China CB? Just like feds, will havbe no power to stop the revaluations of yuans.) I dares treasury to be able to keep printing dollar like todays. I dare you to prints the dollar recklessly.
You'll find quickly your currency will behave like zimbabwe dollars of todays..
War is always the last refuge of failed Keynesians...
In the line up of contestants ...
Spot the odd one out ... go on I know you can do it!
FSA - no soldiers or dedicated leader so do they actually exist and is there a quantative number over 5 where they could not pick a leader from drawing straws.
A flag, got to have a flag even a false one.
Even more amusing ... France relying on US intelligence ... is that before or after they drop the leaflets telling them to "run away".
Reckon the depiction of who or what actually shows how bizzare this all is.
So wait until the FED and Yellen raises rates and all those little arrows point at the US.
All this shit because bankers (and lemming investors) believe that it is possible to make gains without having to work for them.
Whether or not Keynesian 'stimulus' work or not, it certainly does not work when there are already excessive levels of public and private debt, as there are today and as there were in 1929. Much of the Depression was the process of reducing that debt through bankruptcy or through paying it off with dollars that were much more valuable than when the debt was originally incurred. By the early '40s, however, total debt, as a percentage of the economy, had dropped to comparitively low levels so that the deficits incurred during WWII and afterward made things seem better, at least temporarily - which turned out to be about 60 years.
Bottom line is that fiscal 'stimulus' will be not be stimulus until debt levels are significantly reduced from what they are now. With an aging population this could take years. So forget about Keynesian 'stimulus' for now - or better yet, forget about it forever.
Growth in money supply or money velocity is a must for economic growth. Under a debt based monetary system, growth in money equals growth in debt. At some point individuals and businesses reach a peak in their ability to borrow as does banks' willingness to lend for the same purposes. Unless there is a constant supply of fresh borrowing (population growth or enterpreneurs with new ideas) there will be no economic growth. Governments borrowing in their own currency have no limits to their capacity to borrow, except, of course, fears of inflation. A bigger threat than inflation will always cause the government to throw away the objections to borrowing. An existential threat, like war, will serve the purpose. However, it is not always a necessity. There are other ways to be convinced that potential inflation shouldn't be the immediate concern. A potential for the collapse of the civil order within the country is just as big a threat as an external enemy and enough to justify resorting to completely innovative means of generating new money even in a debt-based economy, if the government is prevented from increasing its debt more than has already been approved.
War, unless it is a war of annihilation, is not an option for the US. They are testing Russia's resolve by using Turkey as a proxy, first by the shooting down of Russian military jet and later by the Turkish troops crossing into Iraq. Russia countered the first by declaring another such incident and Western jets over Syrian skies will be dropping like flies. The next is a little more tricky. Although Iraq had earlier requested Russian help to bomb from air IS positions in Iraq, they have not asked Russian help to secure their borders from invasion by other countries. They can do so now, but if Russia immediately started bombing Turkish troops in Iraq, it would look like Russia is deliberately picking a fight when those troops are involved only in "training". If Russia doesn't respond to this incursion of Turkish troops into Iraq, the West will deploy ground troops in Iraq and eventually invade Syria. So they have taken the smart approach, the UN Security Council route. Once the UN Security Council fails to order Turkey to withdraw its troops, which it will because the US will necessarily veto any resolution demanding it and Iraq requests Russian help in safeguarding her sovereignty, Russia will have the legitimacy to attack the Turkish troops sending a very clear signal that the same fate will befall any Western ground troop deployments to Iraq. Russia is likely to first send an army of drones to buzz the Turkish positions incessantly until Turkey brings one down, at which point Russia will order Turkey to withdraw its troops from Iraq or face consequences. Turkey will probably defy the Russian order and Russia will respond with aerial bombardments/missile strikes against Turkish troops. The West can bark all it wants, but can't bite knowing Russia can counter every move they make in Syria/Iraq.
With war not being an option to justify increasing government spending, the only excuse left will be the potential for a collapse of the internal order. However, it is unlikely the House republicans will approve further borrowing for increasing welfare spending beyond the already approved levels. So the only course left will be for the government to agree to sell government assets to finance the increased welfare spending planned. Then the Congress will approve additional spending, but with an explicit understanding that the debt limit will not be raised to finance the additional spending. So when the debt limit is hit with the same members of the House still in office, the government will have to sell assets to raise the funding. Since it has no assets to sell that can meet the shortfall, they will be forced to create assets, like a platinum coin with a face value of US$ 1 Trillion, whose valuation only the Fed can be forced to accept, in other words, creating debt-free money. The impact of this will be felt beyond the US. The implications of government creating as much money as it wants without corresponding debt will not be lost on the rest of the world. As foreign holders of the US$ start dumping the US$ and acquiring anything else available for the US$, the US$ will soon reach parity with the Zimbabwe $.