Brazil

“I’ve always known about your and your people’s complete lack of trust in me and the PMDB. A lack of trust that is incompatible with what we’ve done to maintain personal and partisan support for your government.”

The suicide rate in Alberta has increased dramatically in the wake of mounting job losses across the province. According to the chief medical examiner's office, 30 per cent more Albertans took their lives in the first half of this year compared to the same period last year. "This is staggering," said Mara Grunau, who heads the Centre for Suicide Prevention.  "It's far more, far exceeds anything we would ever have expected, and we would never have expected to see this much this soon."

While EM sovereigns as a group may be in better shape now in terms of “original sin” (i.e borrowing heavily in foreign currencies) than they were during say, the Asian Currency Crisis, the confluence of factors outlined above means no one is truly “safe” in the current environment as moving from liquidation back to accumulation will entail a sharp reversal in commodity prices and a pickup in the pace of global growth and trade.

A terrible deterioration.

"Deteriorating market breadth and herding into an ever-narrower number of stocks is classic market top behavior. Currently, there are many other warning signs that are also being ignored. The merger mania, the stock buyback frenzy, the year-over-year declines in corporate sales and falling earnings for the entire S&P 500 index, the plunges this year in the high-yield and leveraged loan markets, the topping and rolling over of the massive (record) level of stock margin debt... and I could go on."

"Very much in evidence, once more, has been the perennial contrast between the hectic rhythm of markets and the slow motion of the deeper economic forces that really matter. Markets can remain calm for much longer than we think. Until they no longer can."

The system is beyond the point where it is merely showing stresses and fractures. Things are now falling apart and there may well be no way of putting them back together again. The media will continue to claim everything is fine, until the day of panic and reckoning when it will suddenly be the "next Greece" or "2008 all over again"... but worse.

"The liquidity picture for EM corporates in 2017 looks less appealing, due to a 38% yoy increase in USD bond maturities (to USD122bn) and lingering uncertainty on commodity prices (an important component of the corporate sectors’ cash flow) and FX (a headwind for domestic-oriented players). A further depletion in cash buffers and reduced appetite for certain portions of the EM corporate universe may lead to increased refinancing stress in 2017."

Draghi’s Friday talk of a “no limit” ECB balance sheet must have Weidmann and responsible members of the ECB at their wits end. It’s the nature of monetary inflations that there’s always a need for more. Throughout history, it’s been ‘just one more round of ‘printing’’ or ‘just one more year and then we’ll rein things in’. But things spiral out of control – and there’s a lot of currency with a lot more zeros. It can end in hyperinflation, at least when monetary inflation is afflicting the real economy. Today’s strange variety is inflating securities market Bubbles. It will end with Bubbles bursting and confidence collapsing. Integral to the bursting Bubble thesis is that policymakers are losing control. Granted, such analysis has about zero credibility when markets are in melt-up mode. But perhaps the markets’ response to Draghi is a forewarning.

"In the year ahead, geopolitics likely poses the greatest potential to disrupt markets in terms of event risk. There is also the potential for geopolitical risks to intersect with economic fragility in the event of a downturn, amplifying both."

For about three weeks, beginning on August 11, just about all anyone wanted to talk about were EM FX reserves, and for good reason. But because the market has a short memory, the global EM FX reserve liquidation story has been largely forgotten even as commodity prices remain in the doldrums and even as a laundry list of idiosyncratic factors are still weighing on the world’s most important emerging economies from Brasilia to Ankara to Beijing to Kuala Lumpur.

"People are afraid. They don’t like to see the headlines and that is why they are withdrawing their money. It shows the panic that is going on from the investors’ perspective.”

But just like in 2008, the “experts” at the Federal Reserve are assuring all of us that everything is going to be just fine.  This is the exact same kind of mistake that the Federal Reserve made back in the late 1930s.  They thought that the U.S. economy was finally recovering, and so interest rates were raised.  That turned out to be a tragic mistake.

"If you don’t provide them with good food, a good place to sleep and comfortable temperature, they won’t be able to recover and bring the A-plus product that the world is demanding. To cut the budget on athletes’ hospitality and comfort, that’s just going to cheapen the games.”