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For the Record (Read 173290 times)
perceptions_now
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Re: For the Record
Reply #1095 - Sep 29th, 2014 at 1:57pm
 
The End of Monetary Policy (Cont)


That Pesky Budget Thing
Developed governments around the world are running deficits. France will be close to a 4% deficit this year, with no improvement in sight. Germany is running a small deficit. Japan has a mind-boggling 8% deficit, which they keep talking about dealing with, but nothing ever actually happens. How is this possible with a debt of 250% of GDP?

The US is at 5.8% and the United Kingdom at 5.3%, while Spain is still at 5.5%.

Let’s focus on the US. Everyone knows that the US has an entitlement-driven spending problem, but very few people I talk with understand the true nature of the situation, which is actually quite dire, looming up ahead of us. In less than 10 years, at current debt projection growth rates, the third-largest expenditure of the United States government will be interest expense. The other three largest categories are all entitlement programs.

Social Security, Medicare, and Medicaid now command nearly two-thirds of the national budget and rising. Ironically, polls suggest that 80% of Americans are concerned about the rising deficit and debt, but 69% oppose Medicare cutbacks, and 78% oppose Medicaid cutbacks.
...

At some point in the middle of the next decade, entitlement spending plus interest payments will be more than the total revenue of the government. The following chart is what will happen if nothing changes. But this chart also cannot happen, because the bond market and the economy will simply implode before it does.
...

A Multitude of Sins
Monetary policy has been able to mask a multitude of our government’s fiscal sins. My worry for the economy is what will happen when Band-Aid monetary policy can no longer forestall the hemorrhaging of the US economy. Long before we get to 2024 we will have a crisis.

And these projections assume there will be no recession within the next 10 years. How likely is that? What happens when the US has to deal with its imbalances at the same time Europe and Japan must deal with theirs? These problems are not resolvable by monetary policy.

Sometime this decade (which at my age seems to be passing mind-numbingly quickly) we are going to face a situation where monetary policy no longer works.

If we were to enter a recession with rates already low, what would dropping rates to the zero bound again really do? What kind of confidence would that tactic actually inspire? And gods forbid we find ourselves in a recession or a period of slow growth prior to that time. Will the Fed under Janet Yellen raise interest rates if growth sputters at less than 2%?

An even scarier scenario is what will happen if we don’t deal with our fiscal issues. You can’t solve a yawning deficit with monetary policy.

Further, at some point the velocity of money is going to reverse, and monetary policy will have to be far more restrained. The only reason, and I mean only, that we’ve been able to get away with such a massively easy monetary policy is that the velocity of money has been dropping consistently for the last 10 years. The velocity of money is at its lowest level since the end of World War II, but it is altogether possible that it will slow further to Great Depression levels.

For Keynesians, we are in the Golden Age of Monetary Policy. It can’t get any better than this: free money and low rates and no consequences (at least no consequences that can be seen by the public). This will end, as it always does…

Not with a Bang but a Whimper
Will we see the end of monetary policy? No, policy will just be constrained. The current era of easy monetary policy will not end (in the words of T.S. Eliot) with a bang but a whimper. Janet or Mario will walk to the podium and say the same words they do today, and the markets will not respond.

We are the hollow men
We are the stuffed men
Leaning together
Headpiece filled with straw. Alas!
Our dried voices, when
We whisper together
Are quiet and meaningless
As wind in dry grass
Or rats’ feet over broken glass
In our dry cellar…

This is the way the world ends
This is the way the world ends
This is the way the world ends
Not with a bang but a whimper.

–  T. S. Eliot, “The Hollow Men”

Current market levels of volatility and complacency should be seen as temporary. Plan accordingly.

http://www.mauldineconomics.com/frontlinethoughts/the-end-of-monetary-policy
======================================================
I mostly concur, nuff said!




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Re: For the Record
Reply #1096 - Sep 29th, 2014 at 11:07pm
 
perceptions_now wrote on Sep 26th, 2014 at 10:51am:
perceptions_now wrote on Sep 26th, 2014 at 12:01am:


Well, Global markets did continue to Roller-coaster and as usual, it seems the local (OZ) market is a follower!
https://invest.etrade.com.au/


It seems the Roller coaster is still in full flight -

All Ords down 47 today.
https://invest.etrade.com.au/

Dow Futures currently down some 150.

http://www.investing.com/indices/us-30-futures-advanced-chart

The way things are going, October MAY well earn its reputation, yet again, for being a very volatile & perhaps, not so nice, month!

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Re: For the Record
Reply #1097 - Sep 29th, 2014 at 11:41pm
 
perceptions_now wrote on Sep 29th, 2014 at 11:07pm:
perceptions_now wrote on Sep 26th, 2014 at 10:51am:
perceptions_now wrote on Sep 26th, 2014 at 12:01am:


Well, Global markets did continue to Roller-coaster and as usual, it seems the local (OZ) market is a follower!
https://invest.etrade.com.au/


It seems the Roller coaster is still in full flight -

All Ords down 47 today.
https://invest.etrade.com.au/

Dow Futures currently down some 150.

http://www.investing.com/indices/us-30-futures-advanced-chart

The way things are going, October MAY well earn its reputation, yet again, for being a very volatile & perhaps, not so nice, month!



Oh & btw, the DOW has just opened and is Down, some 160.
But, the Big winner loser, at the moment is on the Brazilian Bovespa, which has opened & is down some 2,500 or over 4%!

http://www.investing.com/indices/major-indices
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Re: For the Record
Reply #1098 - Oct 1st, 2014 at 7:22am
 

This is an interesting article explaining how the market is manipulated.

Will Russia and China Hold Their Fire Until War Is the Only Alternative? — Paul Craig Roberts

Obama’s September 24 speech at the UN is the most absurd thing I have heard in my entire life. It is absolutely amazing that the president of the United States would stand before the entire world and tell what everyone knows are blatant lies while simultaneously demonstrating Washington’s double standards and belief that Washington alone, because the US is exceptional and indispensable, has the right to violate all law.

It is even more amazing that every person present did not get up and walk out of the assembly.

The diplomats of the world actually sat there and listened to blatant lies from the world’s worst terrorist. They even clapped their approval.

The rest of the speech was just utter bullshit: “We stand at a crossroads,” “signposts of progress,” “reduced chance of war between major powers,” “hundreds of millions lifted from poverty,” and while ebola ravages Africa “we’ve learned how to cure disease and harness the power of the wind and the sun.” We are now God. “We” is comprised of the “exceptional people”–Americans. No one else counts. “We” are it.

It is impossible to pick the most absurd statement in Obama’s speech or the most outrageous lie. Is it this one? “Russian aggression in Europe recalls the days when large nations trampled small ones in pursuit of territorial ambition.”

Or is it this one? “After the people of Ukraine mobilized popular protests and calls for reform, their corrupt president fled.  Against the will of the government in Kiev, Crimea was annexed.  Russia poured arms into eastern Ukraine, fueling violent separatists and a conflict that has killed thousands.  When a civilian airliner was shot down from areas that these proxies controlled, they refused to allow access to the crash for days.  When Ukraine started to reassert control over its territory, Russia gave up the pretense of merely supporting the separatists, and moved troops across the border.”

The entire world knows that Washington overthrew the elected Ukrainian government, that Washington refuses to release its satellite photos of the destruction of the Malaysian airliner, that Ukraine refuses to release its air traffic control instructions to the airliner, that Washington has prevented a real investigation of the airliner’s destruction, that European experts on the scene have testified that both sides of the airliner’s cockpit demonstrate machine gun fire, an indication that the airliner was shot down by the Ukrainian jets that were following it. Indeed, there has been no explanation why Ukrainian jets were close on the heels of an airliner directed by Ukrainian air traffic control.

The entire world knows that if Russia had territorial ambitions, when the Russian military defeated the American trained and supplied Georgian army that attacked South Ossetia, Russia would have kept Georgia and reincorporated it within Russia where it resided for centuries.

Notice that it is not aggression when Washington bombs and invades seven countries in 13 years without a declaration of war. Aggression occurs when Russia accepts the petition of Crimeans who voted 97 percent in favor of reuniting with Russia where Crimea resided for centuries before Khrushchev attached it to the Soviet Socialist Republic of Ukraine in 1954 when Ukraine and Russia were part of the same country.

cont.........
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"When the power of love overcomes the love of power, the world will know peace." Hendrix
andrei said: Great isn't it? Seeing boatloads of what is nothing more than human garbage turn up.....
 
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Re: For the Record
Reply #1099 - Oct 1st, 2014 at 7:23am
 
And the entire world knows that, as the separatist leader of the Donetsk Republic said, “If Russian military units were fighting with us, the news would not be the fall of Mariupol but the fall of Kiev and Lviv.”

Which is “the cancer of violent extremism”–ISIS which cut off the heads of four journalists, or Washington which has bombed seven countries in the 21st century murdering hundreds of thousands of civilians and displacing millions?

Who is the worst terrorist–ISIS, a group that is redrawing the artificial boundaries created by British and French colonialists, or Washington with its Wolfowitz Doctrine, the basis of US foreign policy, which declares Washington’s dominant objective to be US hegemony over the world?

ISIS is the creation of Washington. ISIS consists of the jihadists Washington used to overthrow Gaddafi in Libya and then sent to Syria to overthrow Assad. If ISIS is a “network of death,” a “brand of evil” with which negotiation is impossible as Obama declares, it is a network of death created by the Obama regime itself. If ISIS poses the threat that Obama claims, how can the regime that created the threat be credible in leading the fight against it?

Obama never mentioned in his speech the central problem that the world faces. That problem is Washington’s inability to accept the existence of strong independent countries such as Russia and China. The neoconservative Wolfowitz Doctrine commits the United States to maintaining its status as the sole Unipower. This task requires Washington “to prevent any hostile power from dominating a region whose resources would, under consolidated control, be sufficient to generate global power.” A “hostile power” is any country that has sufficient power or influence to be able to limit Washington’s exercise of power.

The Wolfowitz Doctrine explicitly targets Russia: “Our first objective is to prevent the re-emergence of a new rival, either on the territory of the former Soviet Union or elsewhere.” A “rival” is defined as any country capable of defending its interests or those of allies against Washington’s hegemony.

In his speech, Obama told Russia and China that they can be part of Washington’s world order on the condition that they accept Washington’s hegemony and do not interfere in any way with Washington’s control. When Obama tells Russia that the US will cooperate with Russia “if Russia changes course,” Obama means that Moscow must accept the primacy of Washington’s interest over Russia’s own interest.

Clearly, this is an inflexible and unrealistic position. If Washington keeps to it, war with Russia and China will ensue.

Obama told China that Washington intended to continue to be a Pacific power in China’s sphere of influence, “promoting peace, stability, and the free flow of commerce among nations” by building new US air and naval bases from the Philippines to Vietnam so that Washington can control the flow of resources in the South China Sea and cut off China at will.

As far as I can tell, neither the Russian nor Chinese governments understand the seriousness of the threat that Washington represents. Washington’s claim to world hegemony seems too farfetched to Russia and China to be real. But it is very real.

By refusing to take the threat seriously, Russia and China have not responded in ways that would bring an end to the threat without the necessity of war.

For example, the Russian government could most likely destroy NATO by responding to sanctions imposed by Washington and the EU by informing European governments that Russia does not sell natural gas to members of NATO. Instead of using this power, Russia has foolishly allowed the EU to accumulate record amounts of stored natural gas to see homes and industry through the coming winter.

Has Russia sold out its national interests for money?

Much of Washington’s power and financial hegemony rests on the role of the US dollar as world reserve currency. Russia and China have been slow, even negligent from the standpoint of defending their sovereignty, to take advantage of opportunities to undermine this pillar of Washington’s power. For example, the BRICS’ talk of abandoning the dollar payments system has been more talk than action. Russia doesn’t even require Washington’s European puppet states to pay for Russian natural gas in rubles.

One might think that a country such as Russia experiencing such extreme hostility and demonization from the West would at least use the gas sales to support its own currency instead of Washington’s dollar. If the Russian government is going to continue to support the economies of European countries hostile to Russia and to prevent the European peoples from freezing during the coming winter, shouldn’t Russia in exchange for this extraordinary subsidy to its enemies at least arrange to support its own currency by demanding payment in rubles? Unfortunately for Russia, Russia is infected with Western trained neoliberal economists who represent Western, not Russian, interests.

When the West sees such extraordinary weakness on the part of the Russian government, Obama knows he can go to the UN and tell the most blatant lies about Russia with no cost whatsoever to the US or Europe. Russian inaction subsidizes Russia’s demonization.

cont........
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"When the power of love overcomes the love of power, the world will know peace." Hendrix
andrei said: Great isn't it? Seeing boatloads of what is nothing more than human garbage turn up.....
 
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Re: For the Record
Reply #1100 - Oct 1st, 2014 at 7:24am
 
China has been no more successful than Russia in using its opportunities to destabilize Washington. For example, it is a known fact, as Dave Kranzler and I have repeatedly demonstrated, that the Federal Reserve uses its bullion bank agents to knock down the gold price in order to protect the dollar’s value from the Federal Reserve’s policies. The method used is for the bullion banks to drive down the gold price with enormous amounts of naked shorts during periods of low or nonexistent volume.

China or Russia or both could take advantage of this tactic by purchasing every naked short sold plus all covered shorts, if any, and demanding delivery instead of settling the contracts in cash. Neither New York Comex nor the London market could make delivery, and the system would implode. The consequence of the failure to deliver possibly could be catastrophic for the Western financial system, but in the least it would demonstrate the corrupt nature of Western financial institutions.

Or China could deal a more lethal blow. Choosing a time of heightened concern or disruptions in US financial markets, China could dump its trillion dollar plus holdings of US treasuries, or indeed all its holdings of US financial instruments, on the market. The Federal Reserve and the US Treasury could try to stabilize the prices of US financial instruments by creating money with which to purchase the bonds and other instruments. This money creation would increase concern about the dollar’s value, and at that point China could dump the trillion dollars plus it receives from its bond sales on the exchange market. The Federal Reserve cannot print foreign currencies with which to buy up the dollars. The dollar’s exchange value would collapse and with it the dollar’s use as world reserve currency. The US would become just another broke country unable to pay for its imports.

Possibly, Washington could get Japan and the European Central Bank to print enough yen and euros to buy up the dumped dollars. However, the likelihood is that this would bring down the yen and euro along with the dollar.

Flight would occur into the Chinese and Russian currencies, and financial hegemony would depart the West.

By their restraint, Russia and China enable Washington’s attack upon them. Last week Washington put thousands of its NGO operatives into the Moscow streets protesting “Putin’s war against Ukraine.” Foolishly, Russia has permitted foreign interests to buy up its newspapers, and these interests continually denounce Putin and the Russian government to their Russian readers.

Did Russia sell its soul and communication system for dollars? Did a few oligarchs sell out Russia for Swiss and London bank deposits?

Both Russia and China have Muslim populations among whom the CIA operates encouraging disassociation, rebellion, and violence. Washington intends to break up the Russian Federation into smaller, weaker countries that could not stand in the way of Washington’s hegemony. Russian and Chinese fear of discord among their own Muslim populations have caused both governments to make the extremely serious strategic mistake of aligning with Washington against ISIS and with Washington’s policy of protecting Washington’s status quo in the Muslim world.

If Russia and China understood the deadly threat that Washington presents, both governments would operate according to the time honored principle that “the enemy of my enemy is my friend.” Russia and China would arm ISIS with surface to air missiles to bring down the American planes and with military intelligence in order to achieve an American defeat. With defeat would come the overthrow of Saudi Arabia, Bahrain, Qatar, the United Arab Emirates, Jordan, Egypt and all of the American puppet rulers in the area. Washington would lose control over oil, and the petro-dollar would be history. It is extraordinary that instead Russia and China are working to protect Washington’s control over the Middle East and the petro-dollar.

cont.......
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"When the power of love overcomes the love of power, the world will know peace." Hendrix
andrei said: Great isn't it? Seeing boatloads of what is nothing more than human garbage turn up.....
 
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Re: For the Record
Reply #1101 - Oct 1st, 2014 at 7:26am
 
China is subject to a variety of attacks. The Rockefeller Foundation creates American agents in Chinese universities, or so I am informed by Chinese academics. American companies that locate in China create Chinese boards on which they place the relatives of local and regional party officials. This shifts loyalty from the central government to the American money. Moreover, China has many economists educated in the US who are imbued with the neoliberal economics that represents Washington’s interests.

Both Russia and China have significant percentages of their populations who wish to be western. The failure of communism in both countries and the success of American cold war propaganda have created loyalties to America in place of their own governments. In Russia they go by the designation “Atlanticist Integrationists.” They are Russians who wish to be integrated into the West. I know less about the Chinese counterpart, but among youth Western materialism and lack of sexual restraint is appealing.

The inability of the Russian and Chinese governments to come to terms with the threat posed to their existence as sovereign countries by the neoconservative insistence on American world hegemony makes nuclear war more likely. If Russia and China catch on too late in the game, their only alternative will be war or submission to Washington’s hegemony. As there is no possibility of the US and NATO invading and occupying Russia and China, the war would be nuclear.

To avoid this war, which, as so many experts have shown, would terminate life on earth, the Russian and Chinese governments must soon become far more realistic in their assessment of the evil that resides in what Washington has turned into the world’s worst terrorist state–the US.

It is possible that Russia, China, and the rest of the world will be saved by American economic collapse. The US economy is a house of cards. Real median family incomes are in long-term decline. Universities produce graduates with degrees and heavy debts but no jobs. The bond market is rigged by the Federal Reserve which necessitates rigging the bullion markets in order to protect the dollar. The stock market is rigged by the outpouring of money from the Federal Reserve, by the Plunge Protection Team, and by corporations repurchasing their own stock. The dollar is supported by tradition, habit, and currency swaps.

The American House of Cards continues to stand only as a result of the tolerance of the world for vast corruption and disinformation and because greed is satisfied by the money made from a rigged system.

Russia and/or China could pull down this House of Cards whenever either country or both had leadership capable of it.


The end

http://www.paulcraigroberts.org/2014/09/25/will-russia-china-hold-fire-war-alter...
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"When the power of love overcomes the love of power, the world will know peace." Hendrix
andrei said: Great isn't it? Seeing boatloads of what is nothing more than human garbage turn up.....
 
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Re: For the Record
Reply #1102 - Oct 1st, 2014 at 10:55am
 
Ex Dame Pansi wrote on Oct 1st, 2014 at 7:26am:
China is subject to a variety of attacks. The Rockefeller Foundation creates American agents in Chinese universities, or so I am informed by Chinese academics. American companies that locate in China create Chinese boards on which they place the relatives of local and regional party officials. This shifts loyalty from the central government to the American money. Moreover, China has many economists educated in the US who are imbued with the neoliberal economics that represents Washington’s interests.

Both Russia and China have significant percentages of their populations who wish to be western. The failure of communism in both countries and the success of American cold war propaganda have created loyalties to America in place of their own governments. In Russia they go by the designation “Atlanticist Integrationists.” They are Russians who wish to be integrated into the West. I know less about the Chinese counterpart, but among youth Western materialism and lack of sexual restraint is appealing.

The inability of the Russian and Chinese governments to come to terms with the threat posed to their existence as sovereign countries by the neoconservative insistence on American world hegemony makes nuclear war more likely. If Russia and China catch on too late in the game, their only alternative will be war or submission to Washington’s hegemony. As there is no possibility of the US and NATO invading and occupying Russia and China, the war would be nuclear.

To avoid this war, which, as so many experts have shown, would terminate life on earth, the Russian and Chinese governments must soon become far more realistic in their assessment of the evil that resides in what Washington has turned into the world’s worst terrorist state–the US.

It is possible that Russia, China, and the rest of the world will be saved by American economic collapse. The US economy is a house of cards. Real median family incomes are in long-term decline. Universities produce graduates with degrees and heavy debts but no jobs. The bond market is rigged by the Federal Reserve which necessitates rigging the bullion markets in order to protect the dollar. The stock market is rigged by the outpouring of money from the Federal Reserve, by the Plunge Protection Team, and by corporations repurchasing their own stock. The dollar is supported by tradition, habit, and currency swaps.

The American House of Cards continues to stand only as a result of the tolerance of the world for vast corruption and disinformation and because greed is satisfied by the money made from a rigged system.

Russia and/or China could pull down this House of Cards whenever either country or both had leadership capable of it.


The end

http://www.paulcraigroberts.org/2014/09/25/will-russia-china-hold-fire-war-alter...


I'm not sure whether it is a "house of cards" or a "house of mirrors" or both?

BUT, all the things that make the system the illusion that it is, are currently teetering at the edge & all it will take now is that last nudge, for the whole charade to come tumbling DOWn, just like Humpty Dumpty!

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Re: For the Record
Reply #1103 - Oct 2nd, 2014 at 12:23pm
 
I repost the following here, as it is relevant.

perceptions_now wrote on Oct 2nd, 2014 at 11:45am:
To provide "SOME" Real World, non Political information -
1) A government Deficit is the figure, where the annual Expenditure, exceeds the annual Revenue.

2) A government Surplus is the figure, where the annual Revenue, exceeds the annual Expenditure.

3) A government Debt is the accumulation of both annual Deficits & Surpluses.

4) Globally, most governments have historically run at a modest Deficit & Debt, But both of these figures fluctuate depending on the Local & Global Economy & where the Economic cycle is, at any given point in time.

5) Due to the GFC, which "officially" commenced in 2007, most government Debt to GDP ratio's have increased Globally, although the reasons for these problems actually go back quite some time & governments of both major persuasions have contributed to a lack of adequate planning, going back some 30-50 years, both locally & Globally! 

6) Despite the fact that both Labor & Liberal have done "somewhat better" than many/most other countries, we still have a growing Debt problem. Not an emergency just yet, But it is heading in that direction.

7) To put our growing Debt problem into perspective, many other countries are far worse than Australia, for example on a NET DEBT basis & based on 2012 or 2013 figures, as per the following site, other countries bear roughly the following relationship to Australia -
http://en.wikipedia.org/wiki/List_of_countries_by_public_debt
Greece - 14 times worse
Japan - 12 times worse
Portugal - 10 times worse
Italy - 9 times worse
USA - 8 times worse
France - 7.5 times worse
United Kingdom - 7 times worse
Germany - 5 times worse

Conversely Norway & some of the Oil producing nations have substantial Surpluses NOT DEBT and consequently they are much better placed to withstand the GFC Mark2 which is about to revisit the Global Economy.

I expect that the GFC Mark2, when it arrives, which I expect will be sooner rather than later, will initially see a loss on most Global share markets, in the order of some 50%, irrespective of which Political Party/s happen to be in power.

That may not be nice news, But it is what is likely!   
    
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Re: For the Record
Reply #1104 - Oct 3rd, 2014 at 12:58pm
 
Japan's Public Debt Problem Will Have Global Implications


Summary
Once key interest rates rise again around the globe, Japan will find it hard to keep its domestic interest rates levels near zero. Domestic investors need higher yields.
Japan's debt/GDP levels are not sustainable, especially once interest rates rise. Japan would have to use huge portions of its tax revenue to just cover the debt interest payments.
Current account deficits and Japan's demographics (aging population) as well as moves by major central banks (rising interest rates by the FED) could trigger these debt events between 2015-2020.

...

Why could Japan, still considered a global economic powerhouse, join this list for the first time in the near future?

The short answer is Japan's debt/GDP level well above 200%, even its net debt is among the highest in the world along with Greece:

    Since 1990, public finances have deteriorated significantly. Government spending to stimulate economic activity has outstripped tax revenues, resulting in a sharp increase in Japanese government gross debt to around 240% of GDP. Net debt (which excludes debt held by the government itself for monetary, pension and other reasons) is about 135%.

Domestic interest rate levels near zero helped mask this problem since the 1990s and allowed Japanese politicians to pile on more and more debt to appease their interest groups while delaying important but painful structural reforms.

The reason why Japan is going to be first is that they spend 50% of their central government tax revenue on debt service alone. They are near the point where they just can't borrow anymore.
They've taken rates to zero. Their economy has continued to move along for the past 10 - 15 years because it was export based. That's changed − there is nowhere to go.


Japan's trade surplus is negative. The balance of trade is negative. The current account is moving into a negative position. The demography of the country is unstoppably rolling over.
It's a multivariate equation in which everything is working against the government at the same time.


As a result, Japan's annual budget (below are 2013 figures) now uses almost 25% to just cover existing debt servicing. Also note that a substantial portion of Japan's revenues is simply coming from issuing new debt, not tax revenue (!):
...

That's the status quo and it held up until today. So far, all skeptics (including Kyle Bass) have been proven wrong. Japan had no trouble growing and financing its huge debt pile thanks to two decades of very low interest rates - also because over 90% of its debt was held domestically.

That era is about to end and that's where the FED connection becomes relevant:
Once the FED and other central banks let key interest rates rise or have to raise them (very likely in 2015-2020) Japan's huge debt can no longer be financed - at the very least the unmanageable long-term outlook of that scenario will become obvious.


Japan has been lucky that patient domestic investors have been accepting ultra-low returns on JGB, that truce will not hold up forever as the population is aging and there no longer is an account surplus (for example, Japan relies on energy imports after the shutdown of most nuclear reactors after 2011, that is a major negative factor in external trade balances).

I see three likely outcomes between 2015 and 2020 once large domestic investors (such as the world's largest pension fund, GPIF) get nervous about their huge JGB holdings and will diversify more money into foreign assets and stocks:

- Massive volatility in the JPY trade (since Japanese investors still hold a lot of assets abroad) with a substantial drop of the JPY against other major currencies once the dust settles.
- Turmoil in other public debt markets, especially in countries with high public and total debt levels. Japan could trigger a public debt crisis
- Monetary reform in Japan as a last-gap solution by the BoJ

Japan is still the World's third-largest economy and a public debt or JPY currency crisis could send unprecedented shock waves through bond and stock markets across the globe.


http://seekingalpha.com/article/2532285-japans-public-debt-problem-will-have-glo...
=====================================================
As I have said previously, Japan IS the Canary in this Coal Mine!
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Re: For the Record
Reply #1105 - Oct 3rd, 2014 at 1:15pm
 
A New Fed Playbook For The New Normal


Summary
Zero percent interest rates is the new normal.
Even if the Fed talks higher rates, they know that they can't without crashing the so called recovery.
When rates do rise, it won't be by choice, and the results won't be pretty.

This paradigm shift, as yet unaddressed in the textbooks, changes the basic policy tools that have traditionally defined the sphere of macroeconomic decision-making.

The job of a central banker is supposed to be the calibration of interest rates to achieve the optimal rate of growth for any particular economic environment. It is hoped that successful decisions, which involve perfectly timed moves to raise rates when the economy overheats and lower them when it cools, would bring consistency and stability to the business cycle that many fear would be dangerously erratic if left unmanaged. That's the theory. The practice is quite different.

Over the past thirty years or so, interest rates have been lowered far more often than they have been raised.
But things have really become distorted over the past eight years, a time period during which interest rates have never gone up. They just go down and stay down.

Back in the early years of the last decade, Alan Greenspan ventured into almost unknown territory when he lowered interest rates to 1% and left them there for more than a year. But in today's terms, those moves look hawkish. In the wake of the 2008 financial crisis, Ben Bernanke brought interest rates to zero, where they have remained ever since.

But old habits die hard, and economists still expect that rates can and will go back to normal. They assume that since the economy is now apparently on solid footing, the period of ample accommodation is over. In reality, we have built an economy that is now so leveraged that it needs zero percent interest rates just to tread water.

Rates lower than GDP, in theory, should stimulate the economy. But instead we are stuck in the mud.

Twenty-odd years ago the textbooks still seemed to work. A recession hit in 1991, which brought GDP close to zero. In response, the Fed cut rates by more than 200 basis points (from 5.7% in 1991 to 3.5% in 1992.) As expected, 1992 GDP rebounded to a reasonably healthy 3.6%.
As expected, 1992 GDP rebounded to a reasonably healthy 3.6%. But the rate cuts did little for asset prices. In that year the S&P 500 crept up just 4.4% and the Case-Shiller 10-City Composite Index of home prices actually fell almost 2% nationally.

Compare that to 2013. With Fed Funds still near zero, GDP actually fell to 2.2% from 2.3% in 2012. But asset prices were a different story. Stocks were up 26% and real estate up 13.5%. It would appear that interest rates have lost their power to move GDP and can now only exert pressure on asset prices. As a result, rates are no longer the main attraction in central banking. The real action takes place elsewhere.

The Fed and other central banks have made the active purchase of financial assets, known as quantitative easing, to be their main policy tool. QE is a more powerful drug than interest rates. It involves actual market manipulation by the purchases of bonds on the open market. Whereas zero interest rates could be compared to a general stimulant, QE is a direct shot of adrenaline to the heart. When the next recession comes, the syringe will likely come into greater use.

Since 1945 the U.S. economy has dipped into recession 11 times. The average length of the recoveries between those recessions was 58.4 months, or just under five years. The current "recovery" is already 73 months old, or 15 months longer than the average. How will the Fed deal with another contraction (which seems likely to begin within the next year or two) with rates still at or very close to zero? QE appears to be the only option.

Given that reality, the big question is no longer whether the Fed will raise or lower rates, but by how much they will ramp up or taper off QE.But interest rates will always remain at zero or, at the least, stay far below the rate of inflation.

The truth is the Fed knows the economy needs zero percent rates to stay afloat, which is why they have yet to pull the trigger.


The Fed is making an even graver mistake now if it thinks the economy can handle a measured reduction in QE. The end of QE will prick the current bubbles in stocks, real estate, and bonds, just as higher rates pricked the housing bubble in 2006. And as was the case with the measured rate hikes, the tapering process will only add to the severity of the inevitable bust.


http://seekingalpha.com/article/2532205-a-new-fed-playbook-for-the-new-normal?if...
====================================================
As I have said previously, THIS TIME IS DIFFERENT and wriggle room is running out quickly!






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Re: For the Record
Reply #1106 - Oct 4th, 2014 at 12:23pm
 
The following look like they may be worth a look, But I don't have time right now, so I will just post them, make them available & I will come back to them later.

Wall Of Worry: Another Spooky October?
http://seekingalpha.com/article/2537805-wall-of-worry-another-spooky-october?ifp...

These 2 Sectors Warn Of Trouble Brewing In The Stock Market
http://seekingalpha.com/article/2537425-these-2-sectors-warn-of-trouble-brewing-...

Shiller Data Suggest A Bear Market Could Be Looming
http://seekingalpha.com/article/2537225-shiller-data-suggest-a-bear-market-could...

Europe Is Crumbling Into Collapse
http://seekingalpha.com/article/2536755-europe-is-crumbling-into-collapse?ifp=0

Federal Debt Will Continue To Surge
http://seekingalpha.com/article/2536675-federal-debt-will-continue-to-surge?ifp=...
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Re: For the Record
Reply #1107 - Oct 4th, 2014 at 3:06pm
 
perceptions_now wrote on Oct 4th, 2014 at 12:23pm:
The following look like they may be worth a look, But I don't have time right now, so I will just post them, make them available & I will come back to them later.

Wall Of Worry: Another Spooky October?
http://seekingalpha.com/article/2537805-wall-of-worry-another-spooky-october?ifp...

These 2 Sectors Warn Of Trouble Brewing In The Stock Market
http://seekingalpha.com/article/2537425-these-2-sectors-warn-of-trouble-brewing-...

Shiller Data Suggest A Bear Market Could Be Looming
http://seekingalpha.com/article/2537225-shiller-data-suggest-a-bear-market-could...

Europe Is Crumbling Into Collapse
http://seekingalpha.com/article/2536755-europe-is-crumbling-into-collapse?ifp=0

Federal Debt Will Continue To Surge
http://seekingalpha.com/article/2536675-federal-debt-will-continue-to-surge?ifp=...


Ok, a few pertinent issues -
Shiller Data Suggest A Bear Market Could Be Looming


Summary

The Shiller P/E currently sits at 26. The last three times the level was above 25 were during the Great Depression, the tech bubble and the financial crisis.

The S&P 500 has gone almost three years now without a 10% correction - the longest such period in 100+ years of stock market history.

In a world with thousands of analysts espousing their opinions on the financial markets and economics, one person's opinion that I respect a great deal is that of Robert Shiller. Mr. Shiller is the Yale economics professor who happened to win the Nobel Prize in economics in 2013 for his work studying asset price behavior.

He is also the developer of the Shiller P/E ratio which takes inflation adjusted earnings from the past 10 years and compares them to current stock market prices to determine the relative value of the market (as opposed to the traditional P/E ratio which only uses the prior year's earnings or future year's estimates).

Here's the chart of the Shiller P/E ratio for the S&P 500 (NYSEARCA:SPY) for the past 130 years.
...

The Shiller P/E currently sits at around 26. That's far above the long term average of around 16 although the Shiller P/E has been in the 20s for much of the last two decades. A Shiller P/E of 25 seems to be the magic number though.

The first time it broke through the 25 mark was during the Great Depression in 1929.
In 1999, the Shiller P/E hit an all-time high of 44 right around the time that the tech bubble was bursting.
It broke through again in the mid-2000s just prior to the financial crisis and helped wrap up what is widely considered the "lost decade".


http://seekingalpha.com/article/2537225-shiller-data-suggest-a-bear-market-could...
==================================================
Federal Debt Will Continue To Surge


Summary
US Federal debt has surged to $17.6 trillion and the debt is likely to increase further.
Unfunded liabilities ensure that Federal debt will continue to rise even if the economy is on a sustainable growth path.
Increase in interest rates can create another problem from a rising debt servicing cost perspective.


The big question - Is the United States in an inescapable debt trap or will Federal debt continue to surge?

The answer is likely to be yes.


As the chart below shows, the total public debt in the US has surged to $17.6 trillion as of second quarter of 2014.
...

With the country's GDP at $17.3 trillion for the second quarter, the US debt-to-GDP is now in excess of 100%.

Going back to the fourth quarter of 2007, the US total public debt was $9.2 trillion and the GDP for the same period was $14.7 trillion.
Therefore, just before the crisis, the debt-to-GDP in the United States was 62.5%. The big surge in debt is a concern and I believe that debt will continue to surge for factors to be discussed below.

The first important point I want to mention here is that the US public debt has increased by $8.4 trillion in since the fourth quarter of 2007. During the same period, the US GDP has increased by only $2.6 trillion. The big debt increase by the government therefore had a minimal impact on GDP growth.

I believe that another big concern here is an increase in interest rates over the next few years. With $17 trillion of Federal debt, which is likely to increase further, the country will have a big interest service cost few years down the line even if interest rates surge by 50-100 basis points.

http://seekingalpha.com/article/2536675-federal-debt-will-continue-to-surge?ifp=...
===================================================
Of course, it would be "interesting" to see where the stats would be now, IF US Government & FedRes stimuli's had not been invoked!

It is also worth noting that the FedRes have put up some $4 Trillion on top of the US Government Debt, so US debt to GDP Ratio is probably already above 125% - Officially that is???
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Re: For the Record
Reply #1108 - Oct 9th, 2014 at 10:39am
 
perceptions_now wrote on Sep 29th, 2014 at 11:41pm:
perceptions_now wrote on Sep 29th, 2014 at 11:07pm:
perceptions_now wrote on Sep 26th, 2014 at 10:51am:
perceptions_now wrote on Sep 26th, 2014 at 12:01am:


Well, Global markets did continue to Roller-coaster
and as usual, it seems the local (OZ) market is a follower!
https://invest.etrade.com.au/


It seems the Roller coaster is still in full flight -

All Ords down 47 today.
https://invest.etrade.com.au/

Dow Futures currently down some 150.

http://www.investing.com/indices/us-30-futures-advanced-chart

The way things are going, October MAY well earn its reputation, yet again, for being a very volatile & perhaps, not so nice, month!



Oh & btw, the DOW has just opened and is Down, some 160.
But, the Big winner loser, at the moment is on the Brazilian Bovespa, which has opened & is down some 2,500 or over 4%!

http://www.investing.com/indices/major-indices


And the Roller coaster is still going!

US DOW was DOWN 272 the previous session and last night it was UP 275.


US stocks jump after Federal Reserve minutes


US stocks rallied at the close after the latest minutes from the Federal Reserve suggested the central bank would move cautiously on raising rates.

At the closing bell, the Dow Jones Industrial Average climbed 275 points, or 1.6 per cent, to 16,994, bouncing back after dropping as many as 56 points earlier in the session.

Stocks extended gains to reach session highs after the Fed meeting minutes unexpectedly showed more focus on slowing growth overseas and lessening inflation pressures. Fed officials have become more concerned about the impact that weak growth in Europe, Japan and China could have on the US economy. At the same time, they noted that a stronger dollar could put downward pressure on already low levels of inflation.



The latest rally followed a string of declines on worries about international growth.

“The volatility has been shaken out of the market,” Erin Gibbs, from S & P Capital IQ, said. She said the recent declines came, in part, because US benchmarks were trading above many long-term average valuation metrics.


In overseas markets, sputtering German industrial data, combined with a gloomy assessment of growth by the International Monetary Fund, has quickly darkened the global economic outlook, particularly in Europe, where stocks continued to sink.

Stocks have seen big swings in recent days, halting a mostly unhindered rise for US stocks since the start of this year. The Dow plunged nearly 273 points on Tuesday in its biggest one-day slide since the end of July, marking its third move of at least 200 points in the past five trading days.


http://www.theaustralian.com.au/business/markets/us-stocks-jump-after-federal-re...
=======================================================
Why was it UP last night? Well, it seems the FedRes was playing a little more "smoke & mirrors" and the "market players", liked the light show.

MORE FUN to come!


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Re: For the Record
Reply #1109 - Oct 9th, 2014 at 1:41pm
 
It Is Getting Ugly Out There


Europe & Global Growth:
Growth forecasts are being revised down throughout the globe recently. Industrial demand was just reported to drop in Germany by four percent during August, the deepest decline since 2009. This follows the International Monetary Fund lowering its GDP forecast for Germany earlier in the week. Germany is the major growth engine in Europe even with the recent economic readings which is telling on how weak the economy is in the eurozone currently.

Central Bank Distortion:
The distortions that central banks around the world are causing are substantial and make the market hard to read. Our domestic economy just posted over 4% GDP growth in the second quarter and we have run up the national debt to over $17 trillion in the last six years, but 10 year treasury yields are under 2.4%.
Even stranger are 10 year yields on Italian and Spanish government debt that are under 2.3% despite both countries being insolvent over the long term with no growth, dismal demographics and huge debt loads.

It is hard to imagine a sane individual loaning money to these entities (especially in dollars) at such low rates given their eventual haircut bondholders will take at some point in the future.


No one knows how all this liquidity central banks have provided the market over the years will work out in coming years but it is an uncertainty one has to factor into their view of the markets.

http://seekingalpha.com/article/2546215-it-is-getting-ugly-out-there?ifp=0
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