Japan

Global equity markets, as measured by the MSCI Developed World index, are above the lows hit in early October but remain on a downtrend that began after markets peaked at the end of May this year. As SocGen's Andrew Lapthorne notes, the current level is now only just above where the index stood at the beginning of 2013 and less than 1% above the 2007 peak. In other words, as he warns, "the equity market has run out of momentum," and the 'bill' for the debt overhang is coming due.

After a week full of macroeconomic and headline news (and blooper) fireworks, it’s a fairly quiet start to the week today, with the usual post-payrolls lull in the US.

The US Federal Reserve (Fed) and European Central Bank (ECB) have created a very dangerous situation. And it is one that few if any investors are assessing.

With Draghi's Friday comments, which as we noted previously were meant solely to push markets higher, taking place after both Europe and Asia closed for the week, today has been a session of catch up for both Asian and Europe, with Japan and China up 1% and 0.3% respectively, and Europe surging 1.4%, pushing government bond yields lower as the dollar resumes its climb on expectations that Draghi will jawbone the European currency lower once more, which in turn forced Goldman to announce two hours ago that it is "scaling back our expectation for Euro downside."

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Over the last few months, in a prime example of currency failure and euro-defenders' narratives, Finland has been sliding deeper into depression. Almost 7 years into the the current global expansion, Finland's GDP is 6pc below its previous peak. As The Telegraph reports, this is a deeper and more protracted slump than the post-Soviet crash of the early 1990s, or the Great Depression of the 1930s. And so, having tried it all, Finnish authorities are preparing to unleash "helicopter money" to save their nation by giving every citizen a tax-free payout of around $900 each month!

Until pro-growth, low taxation and less regulation policy changes are enacted, we don’t foresee any changes to central bank policy nor the unsustainable market divergences and asset price distortions. Expect more media propaganda on how great the economy is while the reality is another story. Early signs are that retail sales this holiday season are poor. Nobody can predict when reality will set in and equity markets revert back to pre QE levels in 2008/09. The longer this charade continues, the lower equity markets will eventually go, and in the short-term so will commodities. Then the super cycle in commodities will begin anew. Much this will hinge on next fall’s election cycle.

"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."

Keynes is dead – unfortunately his etatiste nonsense didn’t expire with him. Meanwhile, the long run is catching up with those who have so far failed to die.

Optimism in US equity futures appears to have returned, and as of this moment US equity futures are higher by 9 points to 2060 as the attention shifts to what, according to BofA, is truly the most important ever. It is unclear just how the algos would take a second consecutive major disappointment in a row: should today's NFP print be well below the 200,000 consensus, December rate hike odd will tumble and the EUR will surge even more after declining modestly from overnight highs just below 1.10, leading to even more losses in European equities and spilling over to the US. 

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.

"Given the surge back towards the all-time highs in the S&P 500, we think that the best might be over for US equities and that indices might range trade more in 2016. We have downgraded US equities to neutral. This takes our overall equity weighting down to neutral, in many respects an extension of what we’ve been doing for most of this year as richer and richer asset markets, against a global background of economic risks, have made us more cautious."

"How does all this play out? Timing is the key because as gamblers know there isn’t an endless stream of Martingale chips – even for central bankers acting in unison. One day the negative feedback loop on the real economy will halt the ascent of stock and bond prices and investors will look around like Wile E. Coyote wondering how far is down. But when? When does Martingale meet its inevitable fate? I really don’t know; I’m just certain it will."

Yesterday's market swoon which unwound all of Tuesday's gains on concerns about a hawkish Fed and fears about terrorism in the US, are now completely forgotten, and have been replaced with the latest daily round of pre-ECB euphoria, driven by hopes that Mario Draghi will announce even more dovish details to Europe's Q€ 2 than just a 10 bps rate cut and a boost to QE more than €10 billion, both of which have been already priced in.

The very first major economic collapse in recorded history occurred in 218-202 BC when the Roman Empire experienced money troubles after the Second Punic War. As a result, bronze and silver currencies were devalued. As HowMuch.net depicts in the video below economic collapses date back thousands of years. While many countries today still feel the effects of the most recent Global Financial Crisis, it is important to note that economic troubles are not unique to the present-day, but rather date back to some of the oldest civilizations.