Friday, 25 August 2017

Is economic collapse imminent?

We have so far avoided the worst with economic collapse and the most dire predictions have not, so far, come to pass.

My instinct tells me that with what is happening in the United States and a geopolitical earthquake in the making that the threat might be real.

The article below suggests the economy might be COLLAPSED and then blamed on Trump.

I have my own views which I will share when the time is right. I have a busy couple of days right now.

The Collapse Is Coming! Prepare For The Imminent Economic Collapse 2017 Stock Market CRASH!

There are some dire predictions that say in the next year, or 18 months, we have something arriving worse than 2008 and 2009, the downturn is much worse. The biggest stock market crash and economic collapse imminent.

The Economic Doomsday is here. The second financial bubble is going to soon burst, and there’s nothing anyone can do about it. The Federal Reserve has set up the American economy for financial collapse for printing trillions of dollars back in 2008 and 2009. The next crash is coming, and the decision by central banks to paper over their economy's troubles with a massive injection of debt likely means that the next economic collapse and stock market crash is already overdue.

The Federal Reserve’s policies of printing trillions of dollars back in ’08-09 have locked into place a serious financial crisis at some point in our future,” Going so far as to intimate the financial collapse and market crash will occur at least some time in the next two years, “It’s unavoidable, and even Donald Trump can’t stop it.”

Top economists predict that within the next 18-24 months, the imminent economic collapse will happen. The Federal Reserve has set up the American economy for financial collapse and market crash for printing trillions of dollars back in 2008 and 2009.

The Federal Reserve’s policies of printing trillions of dollars back in ’08-09 have locked into place a serious financial crisis....

This Is How Trump Is Going To Be Blamed For The Next Financial Crash

24 August, 2017

On Wednesday there were a lot of Trump fans who were celebrating the latest progress in the stock market. 

For the first time in over 100 years, the DOW gained 4,000 points over the course of 200 working days. That’s 4,000 points since Trump was elected, so it’s easy to draw a connection between the stock market’s dizzying new heights and Trump’s ascent to the White House.

But Trump’s supporters shouldn’t really celebrate that, because there’s no way that this can last. It’s been pointed out 

The elites simply can’t wait to pull the plug on the many financial bubbles that are haunting our economy. If they do it now, they’ll walk away with a lot of money while Trump is left with all the blame, since he took so much credit for the stock market’s remarkable performance.

Of course, a financial crash won’t look so bad for Trump if it comes out of nowhere. 

What the elites really need is a financial crash that can be easily pinned on the President, and it appears that they may finally have it.

You may recall that Trump recently said that he will veto the next spending bill that’s due in September, if the Senate and Congress don’t include funding for his border wall. He basically threatened to cause a government shutdown if the Democrats don’t cooperate with him.

Coincidentally, the House will likely need to raise the federal debt ceiling next month. That effort could be seriously hindered if our representatives and president can’t agree on a new spending bill. 

And if the federal debt ceiling isn’t raised, all hell could break loose.

Credit ratings agency Fitch Ratings on Wednesday said a failure by U.S. officials to raise the federal debt ceiling in a timely manner would prompt it to review the U.S. sovereign rating, “with potentially negative implications.”
Fitch, which currently assigns the United States its highest rating — “AAA” — said in a statement that the prioritization of debt service payments over other government obligations, should the debt ceiling not be raised, “may not be compatible with ‘AAA’ status.”
The U.S. sovereign debt rating is Fitch’s measure of confidence in the soundness of the U.S. economy.
Without the ability to sell more debt, the government is expected to run out of cash, possibly in early October, and faces the risk of not paying the interest and principal on its debt on time. The United States defaulting on its bonds, traders fear, would rattle financial markets worldwide.

It’s understandable that Trump wants to put his foot down and demand that our legislative branch fund his border wall. It was the crux of his campaign, and his base will grow restless if he doesn’t get it built.
But if he causes a government shut down in the process, it could trigger the next financial crisis, and lead to the demise of his presidency. And the people who turned out economy into a casino will walk away without receiving any blame.

It's So Quite You Can Hear A Pin Drop, Is Something About To Happen?

Did The Economy Just Stumble Off A Cliff?

24 August, 2017

The signs are everywhere for those willing to look: something has changed beneath the surface of complacent faith in permanent growth.

This is more intuitive than quantitative, but my gut feeling is that the economy just stumbled off a cliff.

 Neither the cliff edge nor the fatal misstep are visible yet; both remain in the shadows of the intangible foundation of the economy: trust, animal spirits, faith in authorities' management, etc.

Since credit expansion is the lifeblood of the global economy, let's look at credit expansion.

Courtesy of Market Daily Briefing, here is a chart of total credit in the U.S. and a chart of the percentage increase of credit.
Notice the difference between credit expansion in 1990 - 2008 and the expansion of 2009 - 2017.

 Credit expanded by a monumental $40+ trillion in 1990 - 2008 without any monetary easing (QE) or zero-interest rate policy (ZIRP). The expansion of 2009 - 2017 required 8 long years of massive monetary/fiscal stimulus and ZIRP.

This chart of credit change (%) reveal just how lackluster the current expansion of credit has been, despite unprecedented trillions of stimulus pumped into the financial sector.

Here are two other snapshots of debt: margin debt and private credit.

 Both have hit new highs.

Note the tight correlation of margin debt to the S&P 500 stock index: when punters borrow more on margin to buy more stock, stocks keep rising.

When credit stops expanding, the economy stumbles into recession.
Back in the real world, have you noticed a slowing of animal spirits borrowing and spending?

Have you tightened up your household budget recently, or witnessed cutbacks in the spending habits of friends and family? Have you noticed retail parking lots aren't very full nowadays, and once-full cafes now have empty tables?
According to the conventional economic statistics, everything's going great:

 there are millions of job openings, unemployment is near historic lows, GDP is expanding nicely and of course,everyone's favorite signifier of wonderfulness, the stock market, is hovering near all-time highs.

The possibility that the real economy just stumbled off a cliff creates instant cognitive dissonance

, as the official narrative is the economy is expanding slowly but surely and everything is nominal: there's plenty of everything, from oil/gas to consumer credit to jobs to student loans.

Nonetheless, I feel a disturbance in the Force: once credit expansion slows or ceases, the economy will roll over into recession, as wages have been stagnant for the past 17 years, and the bottom 95% of households can only spend more if they borrow more.

Recessions are not mechanical processes; they are ultimately measures of human emotions and assessments:

 greed/complacency gives way to fear and caution, and denial /magical thinking is brought to Earth by reluctant acceptance of less-than-ideal realities (for example, we really can't afford to borrow more, it makes no sense to buy negative-interest rate bonds, etc.)

Though it's bad form to mention it, 

everyone's favorite signifier of wonderfulness, the stock market, is by most measures overvalued and priced to perfection.

Meanwhile, after failing to normalize interest rates and its balance sheet years ago when the economy had already recovered some stability, the Federal Reserve (and a few other central banks) are hurrying to make a grand show of ticking rates a bit higher before the next recession reveals the systemic failure of their 8-year long campaign of permanent monetary stimulus and near-zero rates.

Everything that could rescue the stock market from swooning has already been done:

 buy hundreds of billions of dollars of stocks via index funds? Done. Constantly communicate the god-like powers of central banks to fix anything and everything in global equity and bond markets? Done, to the point of boredom.

How can anyone trust a market that has been massaged and manipulated for 8 long years?

What sort of price discovery is possible if central banks have been major buyers for years?

Beneath the surface of complacent tranquility and absolute faith in the god-like powers of central banks, a skittish awareness of risk and fragility is rising.

 I would contend that this is true not just in moneyed circles with access to the best private research, but in households that are sensitive to the first tremors of the coming earthquake, and alert to the note of alarm in the canary's warblings down in the coal mines of the economy.

I suspect all those who have placed their trust in everyone's favorite signifier of wonderfulness, the stock market, have forgotten that signifiers can work both ways:

 nothing signals recession and a panicky urgency to sell everything that isn't nailed down like a sharp swoon in stocks that fails to respond to a "buy the dip" buying frenzy.

The faith in "buy the dips" (i.e. "the Fed has our backs") is not based on an immutable law of Nature; stocks can (gasp!) actually succumb to gravity.

 And when they finally do feel the tug of gravity, the belief that "buy the dips" is a permanent strategy will be revealed for what it is: a long, heavily-juiced run that eventually ends.

The signs are everywhere for those willing to look: beneath the surface of complacent faith in debt-fueled permanent growth, the economy is stumbling. 

Recessions are typically identified after months of squinting in the rearview mirror, but we don't need an official declaration to sense that something has changed.

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