The ragged Keynesian excuse that all will be well in Japan once the jump in the consumption tax from 5% to 8% is fully digested is false. Here’s the problem: this is just the beginning of an endless march upwards of Japan’s tax burden to close the yawning fiscal gap left after the current round of tax increases, and to finance its growing retirement colony. There is no possibility that Abenomics will result in “escape velocity” Japan style and that Japan can grow its way out of it enormous fiscal trap. Instead, nominal and real growth will remain pinned to the flatline owing to peak debt, soaring retirements, a shrinking tax base and a tax burden which will rise as far as the eye can see. Call that a Keynesian dystopia. It is a cautionary tale for our times. And Japan, unfortunately, is just patient zero.
It’s a funny world when stocks can soar on a -6.8% Japanese GDP print but stumble when a Russian armored personnel carrier finds itself on the wrong end of a Ukrainian howitzer shell. That’s what you get, though, in the Golden Age of the Central Banker, as all events are filtered through the narrative of central bank control.
The irony of maintaining a veneer of authenticity over a fundamentally inauthentic market is rich: the more the authorities manipulate the market to maintain high valuations and suppress turbulence, the greater the odds of a collapse of trust as inauthentic markets cannot self-correct or discover the price of assets, capital and risk. Once risk has been effectively hidden by perception management, participants lack the essential information they need to make informed decisions. And so their decisions will be catastrophically mis-informed. This is how declines morph into crashes.
Today's story of the day just took a major turn for the bizarre...
"Anti-Putin" Alliance Fraying: Germany, Slovakia, Greece, Czech Republic Urge End To Russian SanctionsSubmitted by Tyler Durden on 08/16/2014 11:04 -0400
Greece, Slovakia, Czech Republic, Germany... the chorus of voices demanding an end to Russian sanctions is starting to drown out the neocon warmongering efforts of the west...
"We seem to be headed for such a fateful turn. We are approaching a serious turning point that may reshape the world as did 1932 following the economic trend of the Great Depression. We are witnessing the collapse of democracy."
Aside from English (and Spanish), you may be surprised to find out what the most spoken language in your state is...
If you don’t understand the concept of “order out of chaos,” then you’ll never understand a thing. Each supposed disintegration of global unity has eventually led to greater centralization, and this is something the skeptics seem to forget. The progression of crises suggests that the next war will lead to total globalization under the dominance of a minority of elitists posing as "wise men" who only wish to bring peace and harmony to the masses. In the meantime, the skeptics will continue to mindlessly debate in the face of all reason that the whole thing was a fluke, an act of random mathematical chance, leading coincidentally to the one thing the establishment rulers crave: total global totalitarian micromanagement.
Going into this year’s Jackson Hole meeting, it does not appear to BofAML's Ethan Harris that the FOMC is leaning toward a policy change as in 2010, let alone on the verge of a big shift as in 2012. Instead, the Fed is in a bit of a limbo state as it waits for clear evidence that 1Q GDP was a fluke and convincing signs of stronger wages. With significant policy changes a long way off, and with the intense market focus on Jackson Hole, we expect the Fed Chair to try to say nothing interesting about the policy outlook.
High yield mutual funds and ETFs reported a small $0.71bn inflow (of knife catchers) last week (ending on August 13th) after four straight weeks of outflows including a record $6.7bn outflow in the prior week. As BofAML notes, the turn in flows follows a strong rebound in high yield bond prices (drop in spreads), which (before the Ukraine news) had reversed more than half of the losses incurred in July. However, European high-yield funds saw further significant outflows, $3bn more compared to $4bn last week and European equities saw massive outflows. Furthermore, modest equity inflows hide the fact that the only buyer of stocks in the US remain corporates (buybacks) as institutional sellers dominate.
Back in the early 1990s, the North American Free Trade Agreement was one of the hottest political issues in the country. When he was running for president in 1992, Bill Clinton promised that NAFTA would result in an increase in the number of high quality jobs for Americans that it would reduce illegal immigration. Ross Perot warned that just the opposite would happen. He warned that if NAFTA was implemented there would be a "giant sucking sound" as thousands of businesses and millions of jobs left this country. Most Americans chose to believe Bill Clinton. Well, it is 20 years later and it turns out that Perot was right and Clinton was dead wrong. But now history is repeating itself, and most Americans don't even realize that it is happening. As you will read about at the end of this article, Barack Obama has been negotiating a secret trade treaty that is being called "NAFTA on steroids", and if Congress adopts it we could lose millions more good paying jobs.
Texas Governor, and 2016 Presidential hopeful, Rick Perry has been indicted by a grand jury. Rather ironically, as AP reports, Perry carried out a threat to veto funding for state prosecutors investigating public corruption, promising publicly to nix $7.5 million over two years for the public integrity unit unless District Attorney Rosemary Lehmberg (who pled guilty to drunk driving) resigned. He was indicted by an Austin grand jury on felony counts of abuse of official capacity (maximum punishment 5-99 years in prison) and coercion of a public servant (2-10 years in prison). Perry is the first Texas governor indicted since 1917. Full indictment below. We have one word... oops!
There is a standard view of energy and the economy that can briefly be summarized as follows: Economic growth can continue forever; we will learn to use less energy supplies; energy prices will rise; and the world will adapt. The following view of how energy and the economy fit together is very different - it is based on the principle of reaching limits in a finite world.
Ferguson Police Release Surveillance Video Of Alleged Mike Brown Robbery - Press Conference Live FeedSubmitted by Tyler Durden on 08/15/2014 17:12 -0400
Having released the name of the police officer that allegedly shot and killed Michael Brown in Ferguson, the local police department has released the convenience store surveillance video that appears to show an altercation involving Brown.
As regular readers are well aware, when it comes to "more than arms length" equity market intervention in New Normal markets, the New York Fed's preferred "intermediary" of choice to, how should one say, boost investor sentiment aka "protect from a plunge", is none other than Chicago HFT powerhouse, Citadel. Yet one question had remained unanswered: just how does Citadel manipulated stocks? We now know the answer, and perhaps more importantly, it also links in to the true culprit behind the May 2010 Flash Crash, no not Waddell & Reed, but quote stuffing. Most importantly, the revelation that for Citadel quote stuffing is not just some byproduct of some "innocuous" HFT strategy, is that none other than the Nasdaq has now stated on the record, that the most leveraged hedge fund (at 9x regulatory to net assets), and the third largest after Bridgewater and Millennium, used quote stuffing as a "trading strategy."