Reality

Periods of transition between “rising powers” and “declining powers” have been described in terms of the so-called Thucydides Trap, when fear within a static or declining power (historically, Athens) of a rising power (historically, Sparta) makes war seemingly inevitable. The phenomenon today applies not only to the China-U.S. dynamic - as has been widely remarked - but to the Middle Eastern imbalance, the “north-south” imbalance, and so on. Accompanying this sliding vertical scale of strategic power balance is the sliding horizontal scale of population volatility and movement, characterized by the breakdown of the Westphalian nation-state concept.

When markets begin a "bear" cycle, they can remain in an oversold condition for extended periods. There is an important 'truism' to remember - "Markets crash when they’re oversold."

Following a comprehensive review of China's housing market, we now realize it's much worse than the consensus understands.

Europe has voluntarily begun the process of giving up its liberal and hard-fought-for freedoms. Free speech no longer exists, only -- straight out of totalitarian ideologies -- "responsible" free speech: "free" only if it does not "offend" anyone. The desire of many Europeans and other self-declared devotees of "human rights" to cover up, downplay or explain away what is happening in Europe, in fact represents the opposite of respect for others and equality before the law.

• Islamic State launches militant assault on Indonesia's capital (Reuters)
• Three winners emerge in $1.6 billion Powerball jackpot (Reuters)
• European Stocks Tumble, Credit Markets Weaken on Growth Concern (BBG)
• Stocks and commodity currencies floored by new oil plunge (Reuters)
• China Bear Market Looms as PBOC Fails to Stop Flight to Safety (BBG)
• Anxious phone calls, tense moments before Iran's Supreme Leader okayed U.S. sailors' release (Reuters)

European shares tumbled, wiping out gains from a two-day rally, Asian stocks slid and the cost of insuring corporate debt rose as investor concern over global growth prospects resurfaced. U.S. equity-index futures pared gains of as much as 0.9 percent. Government bonds rose, with yields falling to records in Japan and China amid anxiety over the world economy. U.S. crude prices stabilized after dropping below $30 a barrel on Tuesday to touch the lowest since 2003 as Iran moved closer to boosting exports.

EM debt bubble... emaciated, FX Carry... crucified, Crude...crushed,  High yield bonds... burst, Chinese equities... blown, Trannies... trounced, Small Caps... slammed, Biotechs... busted, and FANGs finally FUBAR! But there is one big (very big) bubble left in the world that no one is talking about, and a rather large liquidity-busting pin beckons...

Correlation or Causation?

After all, in yesterday’s oil trading there were over 600,000 contracts trading hands on the Globex exchange Tuesday with over 1 million in estimated total volume at settlement.

While Chinese New Year seasonals are undoubtedly one factor in last night's "surprisingly good" Chinese trade data, the following chart shows the level of "bullshit factor" was extreme by anyone's measure. Three years ago we first brought China's 'fake' trade data and abundant discrepancies to the public's attention and despite an apparent crackdown by regulators, the gaping difference between imports from Hong Kong and exports to Hong Kong is downright embarrassing for China's SAFE as it is clear that capital outflows are being disguised as exports with "over-invoicing" back in play.

“Following technical and operational investigations and in interaction with relevant political and national security bodies of the country and after it became clear that the US combat vessels’ illegal entry into the Islamic Republic of Iran’s waters was the result of an unpurpuseful [sic] action and a mistake and after they extended an apology, the decision was made to release them."

As the towering forces that are prevailing against failing global economic architecture and the pit of debt beneath that structure, as laid out below, it is clear that the 'Epocalypse' - encompassing the roots "economic, epoch, collapse" and "apocalypse" - is here, and it is everywhere. The Great Collapse has already begun. What follows are the megatrends that will increasingly gang up in the first part of 2016 to stomp the deeply flawed global economy down into its own hole of debt.

When we first wrote on the subject, there was considerable criticism as to the possibility that such a program would ever be attempted, let alone succeed. And, granted, it was so Orwellian that it was understandably seen as a crackpot idea. But since that time, the program has been developing extremely rapidly. In the last six months alone, it has become so visible that it has even garnered a name - "the War on Cash." Once complete, state wealth control will exist.

Three weeks out from the Iowa caucuses, and clarity emerges. Hillary Clinton, the likely Democratic nominee, is in trouble. But if a cloud is forming over the Clinton campaign, the sun continues to shine on The Donald. What does the surge for socialist Sanders and the Republican base’s backing of the outsiders Trump and Cruz and collective recoil from the Republican establishment candidates tell us? As Dylan sang, "The times they are a changing."