And if you believe the defaults will be isolated to Energy companies, you’re mistaken.
The global financial system is in the eye of an unprecedented hurricane. While central bankers are congratulating themselves on their god-like mastery of Nature, and secretly praying to the idols of the Keynesian Cargo Cult every night, the inevitable consequence of borrowing from the future, the obsession with "growth" at any cost and financialization /monetary stimulus, a.k.a. the rich get richer thanks to central banks is systemic collapse.
This past Thursday marked the one-year anniversary of the US stock market’s death when stocks saw their last high. Market bulls have spent a year looking like the walking dead. They’ve tried to push back up to that distant high that means new life several times, but each time the market falls into a pit again to where the market is once again lower than it was a year ago. These are the last gasps of a stock market (and economy) that is struggling to rise again, which it simply cannot do now that QE has been turned off and the oxygen tank of zero interest is being slowly turned down.
The last few weeks have seen 'Project Fear' taken to all new levels by the UK establishment as doom-mongering over a possible Brexit conjure images of post-apocalyptic movies. UK PM Cameron and Chanceller Osborne's latest op-ed tirade warns of 800,000 jobs lost and an "immediate year-long recession" if the Brits exercise their democratic right to vote for sovereignty over tyranny. Judging from the polls, which show Brexit odds tumbling, the fear-mongery is working, however, the markets disagree as forward volatility measures near 2016 highs.
"In January, we projected that the Fed rate hike would lead to increased financial stress and falling equity markets; this, we argued, would lead the Fed to turn more dovish, which – in turn – would allow equities to rebound. This has played out. Yet, the Fed relent has been partial – and the latest FOMC minutes point to increasing risks that we will re-enter the “doom loop” from a more hawkish Fed to a stronger dollar, lower oil prices, higher HY credit spreads and lower equity markets."
The world is threatened with a renewed wave of anti-capitalism and anti-business sentiments and policies. Many who cheered the demise of Soviet communism in the early 1990s, presumed that this meant that, by default, the case for free markets and competitive enterprise had won in the battle of ideas. Over the last twenty-five years it has become clear that the same misguided arguments against free market capitalism constantly reemerge, like an ideological vampire waiting to rise from the intellectual grave and drain market freedom of its lifeblood by more government regulations and controls.
Another week of volatility, but with no real resolution to the burning question of “where do we go next?”
There is perhaps no other area where the tunnel-vision, hypocrisy, and corruption of the U.S. media is more visible than with respect to its nearly incessant China-bashing. Previous commentaries have exposed such vacuous drivel again and again and again. Admittedly, the numbers involved should give any sober individual cause for concern. They are an obvious symptom of the global phenomenon of worthless, paper currencies being used to pump-up, manipulate, and destabilize our markets – to a degree never before seen in the history of our species. However, singling out China’s markets as being “prone to bubbles” represents hypocritical blindness on the part of the U.S. media which is too absurd to be accidental.
Somewhere back in the depths of time the world got the idea that easy money - that is, low interest rates and high levels of government spending - would produce sustainable growth with modest but positive inflation. And for a while it seemed to work. But that was an illusion.
This could not have come at a more perfect time, with the Fed once again flip-flopping about raising rates. After appearing to wipe rate hikes off the table earlier this year, the Fed put them back on the table, perhaps as soon as June, according to the Fed minutes. A coterie of Fed heads was paraded in front of the media today and yesterday to make sure everyone got that point, pending further flip-flopping. Drowned out by this hullabaloo, the Board of Governors of the Federal Reserve released its delinquency and charge-off data for all commercial banks in the first quarter – very sobering data.
Once again the Chicken Littles of the U.S. mainstream media are “warning us” that the sky could fall, because of “bubbles in China”. Somehow, all of the U.S.’s gigantic/precarious bubbles are completely invisible to these Chicken Littles. Whose bubbles are bigger? Whose bubbles are worse? The answer could not be more obvious.
USA has a FOREX Nuclear Option that can obliterate investment markets in one click.
It turns out that Puerto Rico's plan to default on its debt and beg congress for help is working out as planned. After a slight delay, House Republicans have reached an agreement with the Obama administration to provide a path to restructure Puerto Rico's $70 billion debt load. The bill would offer the island a legal out similar to bankruptcy and wouldn't commit any federal money according to the WSJ.
Saudi Arabia Admits To A Full-Blown Liquidity Crisis: Will Pay Government Contractors With IOUs, DebtSubmitted by Tyler Durden on 05/18/2016 11:04 -0400
Now, Saudi economic (and liquidity) problems just spilled out into the open, because Bloomberg reported moments ago, Saudi Arabia has told banks it is considering paying some outstanding bills to contractors with government-issued bonds, citing people with knowledge of matter say. Contractors would be able to hold bond-like instruments until maturity. Bloomberg adds that issuing bonds is one of several options being considered.