Reality

If the American Dream depends on skyrocketing debt built on a weakening foundation of stagnant productivity and income, then it is indeed over. Voters sense this fragile, debt-dependent economy is one repricing away from implosion, and they're uneasy for good reason. Voters are rightly angry that the official statistics mask or manipulate this reality, for if we can't face reality then we have zero hope of solving any problems.

According to Bank of America's credit and debit card spending data, core retail sales (those excluding autos which are mostly non-revolving credit funded) just dropped by 0.2% in November, the first annual decline since the financial crisis!

With prices below $50, what is a stripper to do?

Andy Hall's Astenbeck hedge-fund lost 9.7% in November, bringing 2015 losses to more than 26%. As a result of capital losses and mounting redemptions, Astenbeck’s assets under management fell to $2.4 billion, down from $3 billion at the start of the year and nearly $5 billion less than three years ago.

Government interference by both central banks and regulators (the latter are desperately fighting the “last crisis”, bolting the barn door long after the horse has escaped, thereby putting into place the preconditions for the next crisis) has created an ever more fragile situation in both the global economy and the financial markets. As the below charts and data show, price distortions and dislocations have been moving from one market segment to the next and they keep growing, which indicates to us that there is considerable danger that a really big dislocation will eventually happen.

Between commodity-backed financing deals and the centrally-planned mal-investment boom-driven excess capacity, China has a lot of 'liquidation' to do to normalize from a credit-fueled smoke-and-mirrors world to a painful reality. As Bloomberg notes, there’s no let-up in the onslaught of commodities from China. While the country's total exports are slowing in dollar terms (as we noted last night), shipments of steel, oil products and aluminum are reaching for new highs, flooding the world with unwanted inventories. China's de-glutting is now the rest of the world's problem as the deflationary tsunami grows ever higher. This is not going to end well. Not for anybody. Other than the arms lobby. What it will do is change geopolitics forever, and a lot.

Of the many economic policies that are accepted as true yet are absolute nonsense, perhaps none is more achingly nonsensical than the notion that weakening a nation's currency will magically make that nation prosperous. No empire has ever prospered by weakening its currency. Reducing the purchasing power of one's money is the road to ruin, not prosperity.

Over the weekend, in its latest quarterly presentation, the Bank of International Settlements made what may have been a very premature assessment that China is now contained. Judging by events in the past 24 hours, the reality is anything but.

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."

"We’re broke. We’re basically living off of debt. We’ve had a huge transformation of the American economy. Look at all the Americans now on food stamps, on disability, on unemployment... The whole economy has imploded... the bottom hasn’t dropped out yet because we’re able to go deeper into debt. But the collapse is coming."

The dream and demand of Bernie Sanders and all of the other "democratic socialists" of all political parties is that all or at least significant parts of human life need to be micromanaged and controlled by government so people may be liberated from the "tyranny" of not having all they may want without finding effective ways of acquiring it through honest and peaceful work. The "freedom" about which Bernie Sanders speaks, and before him Franklin Roosevelt, in fact, involves a loss of liberty into an even greater degree of political paternalism.

Confidence in central bankers is now hanging by a thread. Mario Draghi (and his fellow Goldman Sachs alum Mark Carney at the Bank of England, for that matter) might want to adopt a little humility before that thread snaps completely. It is always tragic when we filthy peasants stop banging rocks together momentarily to listen to the awe-inspiring intellects at the central banks, only to misunderstand them. Perhaps the real problem is one of overconfidence. Not our overconfidence. Theirs.

While countless overzealous obituaries have been written about OPEC’s vanishing influence, OPEC is indeed acknowledging that it cannot influence prices to the degree that it once could. However, the result at least shows that OPEC is going to see its current strategy through to its logical conclusion, to the chagrin of most of its members.