With the biggest Hong Kong protest in recent history taking place over the weekend, and continuing indefinitely because one thing is certain: the local student demands for more democracy and the ouster of HK chief executive CY Leung will not be met, what everyone has focused on is what China's response, call it crackdown, to the breakout of violence will be. After all, while algos and the Fed's liquidity tsunami have priced in pretty much everything short of (or including, according to some) World War III, a repeat of Tiananmen square could well be large enough to where it registers as a slight downtick in the Fed's balance sheet, pardon the S&P 500.
New Global Crisis Imminent Due To “Poisonous Combination Of Record Debt And Slowing Growth", CEPR Report WarnsSubmitted by Tyler Durden on 09/29/2014 07:52 -0400
A “poisonous combination” of record debt and slowing growth suggest the global economy could be heading for another crisis, a hard-hitting report will warn on Monday. It warns of a “poisonous combination of high and rising global debt and slowing nominal GDP [gross domestic product], driven by both slowing real growth and falling inflation”. The total burden of world debt, private and public, has risen from 160 per cent of national income in 2001 to almost 200 per cent after the crisis struck in 2009 and 215 per cent in 2013. “Contrary to widely held beliefs, the world has not yet begun to delever and the global debt to GDP ratio is still growing, breaking new highs,” the report said. Luigi Buttiglione, one of the report’s authors and head of global strategy at hedge fund Brevan Howard, said: “Over my career I have seen many so-called miracle economies – Italy in the 1960s, Japan, the Asian tigers, Ireland, Spain and now perhaps China – and they all ended after a build-up of debt.”
With the revelations of systemic, widespread corporate criminality of banking institutions in recent years, it is clear that global Bank CEOs are becoming the new Drug Lords.
- This is why the locals are furious at the US: U.S-led raids hit grain silos in Syria, kill workers (Reuters) explaining this
- Billions Fly Out the Door at Pimco: About $10 Billion Is Withdrawn After Departure of Gross (WSJ)
- Pimco’s Ivascyn Takes on Gross With Unconstrained Fund (BBG)
- Revealed - the Troika threats to bankrupt Ireland (The Independent)
- Private Bad Debt Build-Up Casts Shadow on Greek Rebound (BBG)
- Fed Questions Bank Maneuver to Reduce Hedge Funds' Dividend Taxes (WSJ)
- Yuan-Euro Direct Trading Begins Tomorrow as China Promotes Usage (BBG)
- Geneva Report warns record debt and slow growth point to crisis (FT)
- Greenberg Team to Grill Bernanke, Geithner on AIG Bailout (BBG)... sadly only metaphorically
While the bond market is still reeling from Friday's shocking Bill Gross departure, and PIMCO has already started to bleed tens of billions in redemptions (see "Billions Fly Out the Door at Pimco About $10 Billion Is Withdrawn After Departure of Gross"), stocks which may have been hoping for a peaceful weekend after Friday's ridiculous no volume ramp in the last two hours of trading, got hit by a double whammy of first Catalan independence fears rising up again after Catalan President Mas signed a decree committing Catalonia to a referendum bid on November 9th, leading to a move wider in Spanish bond yields, and second the sharpest surge in Hong Kong violence in decades, which led to a 2% drop in the Hang Seng, are now solidly lower across the board, with the DAX dropping below its 50 DMA, while US equity futures are printing about 9 points lower from Friday's close despite another epic ramp in the USDJPY which flited with 110 briefly before retracing to 109.50, and also threaten to push below the key technical support level unless the NY Fed's "Markets group" emerges out of its new Chicago digs and buys up enough E-minis to restore confidence in a rigged market.
The Hong Kong protests, which we covered over the weekend, and which took a dramatic turn for the worse overnight when thousands of students camped out and demand universal suffrage on the city streets and were in turn tear-gassed and arrested en masse by the local riot police demanding students disperse or else, and where the leader of the student protest, Joshua Wong - who had been previously arrested and was released on Sunday night - has openly called for the resignation of Hong Kong Chief Executive Leung Chun-ying in an interview with Hong Kong Cable TV, have done the unthinkable: they have impacted financial markets and the "wealth effect" transmission mechanism of the local billionaires.
Can market forces prevail in the Eurozone? With another round of central bank intervention coming four plus years after the start of the Eurozone debt crisis, this is a question worth considering, at a time when the Southern Eurozone members - Italy, Spain, Greece and Portugal, which collectively account for over 30% of the GDP of the early adopters of the Euro as a whole – continue to struggle. This is a complex topic for sure, but a simple economic indicator can be used to help frame the situation.
Brinkmanship, a failure of diplomacy and increasing militarism appears to have the world on the verge of a serious military conflict. Everybody should own some physical gold as a hedge and a safe haven asset to protect against the significant risks challenging us today which include bail-ins, currency wars, terrorism and war.
Yesterday we reported that the biggest riot over the weekend was not in Ferguson (although things there are hardly stable after a local police officer was shot in the violent town overnight) but in Hong Kong, where students and other mostly young people are protesting the recent loss of their democratic vote powers and thus "the loss of their freedom." Since then things have gotten from bad to worse when late last night Hong Kong declared the start of the Occupy Central disobedience campaign, leading to violent skirmishes with the police, which over the past hour have included the use of tear gas by the police as well as the first outright warning by the cops demanding that the student protesters disperse or risk being fired upon.
In a dramatic stroke of luck for the Kremlin, this morning there is hardly a person in the world who is happier than Russian president Vladimir Putin because overnight state-run run OAO Rosneft announced it has discovered what may be a treasure trove of black oil, one which could boost Russia's coffers by hundreds of billions if not more, when a vast pool of crude was discovered in the Kara Sea region of the Arctic Ocean, showing the region has the potential to become one of the world’s most important crude-producing areas, arguably bigger than the Gulf Of Mexico. The announcement was made by Igor Sechin, Rosneft’s chief executive officer, who spent two days sailing on a Russian research ship to the drilling rig where the find was unveiled today.
We actually to believe that the Federal Reserve can lift the entire front-end of the curve from 0-1% (current rates out to three years) to 2-4% over the next two years without adding massive further stress onto the deficit, and only adding to the debt? Servicing 2% interest when growth is 2% means you are doing worse than standing in place if you also have a budget deficit. Whatever the timing, the US, China and Europe are all headed for another Minsky moment: the point in debt inflation where the cash generated by assets is insufficient to service the debt taken on to acquire the asset. Productivity growth in the US last year was +0.36%. The real growth per capita was about 1.5%.
No, this is not Ferguson: it is, according to many, the world's most capitalist city, Hong Kong, where over the past few hours, around 50,000 students are said to have massed on late Saturday, demanding more democracy, as tensions grew over Beijing's decision to rule out free elections in the former British colony.
Gold bullion in Singapore climbed $9.29 to $1230.29 and gold was on track for a gain of almost 0.8% for the week prior to concentrated and continual selling in London and then on the COMEX pushed gold lower. Trading action had all the hallmarks of the Gold Anti Trust Action Committee's (GATA) 'gold cartel' and their determination to keep gold prices capped and "animal spirits" low in the gold market.
For the longest time anyone suggesting that Europe's economic collapse was nothing short of a deflationary collapse (which would only be remedied with the kind of a money paradopping response that Japan is currently experiment with and where, for example, prices of TVs are rising at a 10% clip courtesy of the BOJ before prices rise even more) aka a "Japan 2.0" event, was widely mocked by the very serious economist establishment, and every uptick in the EuroSTOXX was heralded by the drama majors posing as financial analysts as the incontrovertible sign the European recovery has finally arrived. Well, they were wrong, and Europe is now facing if not already deep in a triple-dip recession. Which also explains why now it is up to the ECB to do all those failed things that the BOJ did before the Fed convinced it it needs to do even more of those things that failed the first time around, just so the super rich can get even richer in the shortest time possible. So we were a little surprised when none other than Goldman Sachs today diverged with the ranks of the very serious economists and the drama major pundits, and declared that "recent trends in some European economies already qualify as a Japanese-style stagnation."
To claim that this is the market at work makes no sense anymore. Today central banks, for all intents and purposes, are the market. Our overall impression is that the Fed has given up on the US economy, in the sense that it realizes – and mind you, this may go back quite a while - that without constant and ongoing life-support, the economy is down for the count. And eternal life-support is not an option, even Keynesian economists understand that. Add to this that the "real" economy was never a Fed priority in the first place, but a side-issue, and it becomes easier to understand why Yellen et al choose to do what they do, and when. When the full taper is finalized next month, and without rate rises and a higher dollar, the real US economy would start shining through, and what’s more important - for the Fed, Washington and Wall Street - the big banks would start 'suffering' again.