• Category Archives Economy
  • Inflation v Deflation – State Finances

    There is a general belief, and that is all it is, that state finances fare better in an inflationary environment than a deflationary one. This perception arises from the transfer of wealth from lenders to the state through a devaluation of the currency, which occurs with monetary inflation, compared with the transfer of wealth from the state to its creditors through deflation. The effect is undoubtedly true, even though it is played down by governments, but it ignores what happens to continuing government obligations and finances. This article looks at this aspect of government finances in the longer term, first on the route to eventual currency collapse which governments create for themselves by ensuring a continuing devaluation of their currencies, and then in a sound money environment with a positive outcome, for which there is good precedent. This is the second article exposing the fallacies of supposed advantages of inflation over deflation, the first being posted here.
    Inflationary policies While central bankers have convinced themselves, in defiance of normal human behaviour, that consumption is only stimulated by the prospect of higher prices, there can be little doubt that the unmentioned sub-text is the supposed benefits to borrowers in industry and for government itself. Furthermore, the purpose of gaining control over interest rates from free markets is to reduce the general level of interest rates paid to lenders, further robbing them of the benefits of making their capital available to willing borrowers.

    This post was published at GoldMoney on December 07, 2017.


  • What You’re Not Being Told About The Real Economy

    The year 2000 was a transition year in a lot of ways. Though Y2K amounted to mild mass hysteria, people did have to get used to writing the date with 20 in front of the year rather than 19. It was a new millennium (depending on your view of Year 0) that seemed to have started off under the best possible terms.
    Not only were stocks on fire at the outset, the economy was, too. The idea of this ‘new economy’ leading toward a permanent new plateau of low inflation growth, driven by the breathtaking productivity gains in telecommunications and computing, seemed quite real on the surface. US GDP advanced by more than 3% in 15 straight quarters from Q2 1996 through Q4 1999, averaging a sizzling 4.7% in those nearly four years of dot-com supremacy.
    The labor market was clearly robust, too. In March 2000, the BLS estimates (current benchmarks) that total payrolls (Establishment Survey) rose by 468k from that February. That brought the 6-month average up to +303k, a record of expansion that also mystified economists for its lack of inflationary wage pressures. In any case, the late nineties had roared up to the doorstep of the 21st century.
    We all know what happened in April 2000, as investors suddenly got cold feet about first the high flying NASDAQ. It wasn’t just stock prices and IPOs, of course, as it really meant one of the major economic themes of that age was in danger being undermined, if not thoroughly debunked. The new economy of the 21st century might not have been grounded so solidly in true economics (small ‘e’) as everyone thought (especially those running the Fed).

    This post was published at Zero Hedge on Dec 10, 2017.


  • The $10 Trillion Investment Plan To Integrate The Eurasian Supercontinent

    Authored by Federico Pieraccini of Strategic Culture
    The Chinese Belt and Road Initiative (BRI), by lending out money using an alternative currency to the dollar, opens up huge spaces for investment and the strategic transformation of the region.
    The overland integration of the BRI, led by China and Russia, aims to create different transit routes for goods as well as different areas of economic development along the new Chinese Silk Road. A great opportunity is thereby opened up for Chinese banks and for private investors interested in creating infrastructure or developing potential industrial poles in the countries involved in this grand Chinese initiative.
    Hong Qi, president of China Minsheng Bank, recently said during an economic forum held in Beijing regarding investments in the BRI that there is potentially about $10 trillion worth of investments in infrastructure in the countries that make up the BRI, such as in railways, urban development, logistics and cross-border e-commerce.
    At this point, more than $10 billion has already been committed in investments, thanks to companies already present in over thirty countries and regions along the BRI, with the ongoing intention of financing these loans through China’s public and private sectors. According to data from the China Banking Regulatory Commission, a total of nine Chinese banks are involved in the financing of projects, with 62 branches having been opened in 26 countries. A further $10 billion could come from European countries as a result of investments stemming from the China-CEEC forum.
    Despite a delay in investment, and especially in the development of such projects, analysts believe that the BRI is the ideal ground for making regional cooperation agreements based on trust and win-win prospects for future integration of the region. Thus, not only are public and private banks involved in investments but the Asian Investment Infrastructure Bank (AIIB) and the Silk Road Fund are also part of the financial package that should lay the foundation for the accelerated development of the Chinese BRI. Confirming a new approach to the development of the BRI, Chinese investors during the first ten months of 2017 proposed projects totalling $11 billion in the 53 countries involved.

    This post was published at Zero Hedge on Dec 9, 2017.


  • Crypto-Cornucopia Part 4 – “Without It, You’re Talking Mad Max”

    Authored by Dr. D via Raul Ilargi Meijer’s The Automatic Earth blog,
    Part 1 “Bitcoin Is A Trust Machine” here.
    Part 2 “This System Is Garbage, How Do We Fix It?” here.
    Part 3 “A System With No Justice, No Order, No Rules, & No Predictability” here.
    Well, all parts of the system rely on accurate record-keeping.
    Look at voting rights: we had a security company where 20% more people voted than there were shares. Think you could direct corporate, even national power that way? Without records of transfer, how do you know you own it? Morgan transferred a stock to Schwab but forgot to clear it. Doesn’t that mean it’s listed in both Morgan and Schwab? In fact, didn’t you just double-count and double-value that share? Suppose you fail to clear just a few each day. Before long, compounding the double ownership leads to pension funds owning 2% fake shares, then 5%, then 10%, until stock market and the national value itself becomes unreal. And how would you unwind it?
    Work backwards to 1999 where the original drop happened? Remove 10% of CALPERs or Chicago’s already devastated pension money? How about the GDP and national assets that 10% represents? Do you tell Sachs they now need to raise $100B more in capital reserves because they didn’t have the assets they thought they have? Think I’m exaggerating? There have been several companies who tired of these games and took themselves back private, buying up every share…only to find their stock trading briskly the next morning. When that can happen without even a comment, you know fraud knows no bounds, a story Financial Sense called ‘The Crime of the Century.’ No one blinked.

    This post was published at Zero Hedge on Dec 9, 2017.


  • Here’s How Much Retirees Are Spending To Support Their Adult Kids

    At one point in time in America, living at home with mom and dad after crossing out of your teenage years and into your 20s was embarrassing and something that was generally avoided at all costs. And while hard times come and go, 20-somethings who were forced back into their parents’ care worked their tails off until they could save up enough money to once again regain their freedom.
    But, these days millennials seem to be embracing the free room and board provided by their parents. According to a new study from the Census Bureau, roughly one-third of all millennials live at home with their parents and one-fourth of them can’t be bothered with enrolling in school or finding a job.
    Of course, while living at home can help millennials cut down on costs, according to a new study from Nerd Wallet, it can also have a devastating impact on the retirement savings potential of their overly accommodating parental units…to the tune of a quarter million dollars. Here are some of the key takeaways from Nerd Wallet’s survey.
    Parents could miss out on almost a quarter-million dollars in retirement savings by paying their adult kids’ expenses: According to NerdWallet analysis, a parent’s retirement savings could be $227,000 higher if they chose to save the money that would otherwise go to their child’s living expenses and tuition. Parents paying college costs could be missing out on almost $80,000 in retirement savings: More than a quarter of parents of children 18 and older (28%) are paying or have paid for their adult children’s tuition or student loans. The average parent takes out $21,000 in loans for their child’s college education, but the hit to retirement savings is almost quadruple that amount.

    This post was published at Zero Hedge on Dec 9, 2017.


  • More Evidence That Rising Minimum Wages Are Going To Crush The Restaurant Industry

    Casual dining investors, despite the retail route, have become increasingly optimistic over the past month and a half with several of the largest names in the industry rallying 15-20% into the holiday season.

    As TDn2K points out, part of the optimism is attributable to a recent “acceleration” in average check size across the restaurant space with comps up 2.4% in November and 2.5% in October. Despite many brands focusing on price promotions to drive sales and traffic amid a decline in mall/retail foot traffic, both figures are higher than the 2.0% check growth experienced the first nine months of the year.

    This post was published at Zero Hedge on Dec 9, 2017.


  • Doug Noland: Q3 2017 Flow of Funds

    This is a syndicated repost courtesy of Credit Bubble Bulletin . To view original, click here. Reposted with permission.
    In nominal dollars, Total U. S. System (Non-Financial, Financial and Foreign) borrowings expanded $1.007 TN during the third quarter to a record $68.012 TN. Total Non-Financial Debt (NFD) rose a nominal $732 billion during the quarter to a record $48.635 TN. It’s worth noting that NFD has expanded 46% since ending 2007 at $33.26 TN.
    Total Non-Financial Debt expanded a seasonally-adjusted and annualized rate (SAAR) of $2.954 TN during Q3, the strongest Credit growth since Q4 2015. As has often been the case over the past nine years, Washington led the Credit expansion. Federal borrowings jumped to SAAR $1.656 TN, the strongest in seven quarters. Total Business borrowings expanded SAAR $751 billion, up from Q2’s $692 billion. Total Household debt growth slipped slightly q/q to $550 billion.
    On a percentage basis, Non-Financial Debt expanded at a 6.2% rate during Q3, accelerating from Q2’s 3.8%, Q1’s 1.7% and Q4 2016’s 3.1%. Federal borrowings grew at a 10.3% pace, Total Business at 5.4% and Total Household debt expanded at 3.7%.

    This post was published at Wall Street Examiner by Doug Noland ‘ December 9, 2017.


  • Shocking New Stock Market Prediction Shows When We’ll Hit a Top

    The current bull market is in its ninth year, but Money Morning Liquidity Specialist Lee Adler’s newest stock market prediction shows that we are now in its final stages. In fact, he sees the S&P 500 hitting its final high sometime in the first quarter of 2018.
    As December unfolds, we’ve seen a breakout in stocks, and Adler’s technical analysis bumped up his long-term price target on the S&P 500 to 2,800. That’s based on his work with market cycles and published in his Wall Street Examiner Pro Trader Market Updates each week. Simply put, by rising above 2,630, the market’s character changed for the better, suggesting one more leg higher.
    However, December looks like the last chance to ride the current bull markethigher before conditions change and a bear market becomes likely…
    Stock Market Prediction: Expect a Market Top in Q1
    Pundits considered the U. S. Federal Reserve’s quantitative easing (QE) program as the punch bowl keeping the recovery party going and goosing the economy and the stock market for several years.
    However, as Adler has been warning, things will change in 2018…
    This Book Could Make You a Millionaire: The secrets in this book have produced 42 chances to double, triple, and even quadruple your money this year alone. Claim your free copy…
    And it already has, now that the Fed’s bond purchases are over. Plus, we’ve already seen the first of several planned hikes in short-term interest rates.
    So far, it has not made much of a dent.
    However, the forces of monetary policy and liquidity will be hostile to the markets in 2018. The Fed’s program, which it calls ‘normalization,’ is designed to reduce the size of its balance sheet.

    This post was published at Wall Street Examiner on December 6, 2017.


  • November Jobs Report: 228K New Jobs, Better Than Forecast

    This morning’s employment report for November showed a 228K increase in total nonfarm payrolls, which was better than forecasts. The unemployment rate remained at 4.1%. The Investing.com consensus was for 200K new jobs and the unemployment rate to remain at 4.1%. September and October nonfarm payrolls were revised for a total gain of 3K.
    Here is an excerpt from the Employment Situation Summary released this morning by the Bureau of Labor Statistics:
    Total nonfarm payroll employment increased by 228,000 in November, and the unemployment rate was unchanged at 4.1 percent, the US Bureau of Labor Statistics reported today. Employment continued to trend up in professional and business services, manufacturing, and health care.
    Here is a snapshot of the monthly percent change in Nonfarm Employment since 2000. We’ve added a 12-month moving average to highlight the long-term trend.

    This post was published at FinancialSense on 12/08/2017.


  • Are US Shale Stocks Finally Set for a Rebound?

    After years of meager returns and overspending to boost production at all costs, US shale explorers and drillers are finally about to see their share prices rise next year, according to veteran energy investor Shawn Reynolds.
    The new wave of a more disciplined approach to spending and the focus on higher returns will benefit mostly the exploration and production companies. Drilling firms and oilfield services providers are also set to benefit, Reynolds told Bloomberg in an interview published on Friday.
    Read Energy Analyst: “Meaningful Upside” for Oil Prices…
    Shale companies have already started to realize the need to finally reward their shareholders, and firms are now planning within their means, not just spending to grow production at any cost.
    Shale companies now have more growth potential than conventional oil and gas producers, because shale firms face lowered risks in resources extraction, said Reynolds, a fund manager at Van Eck Associates.
    ‘With shale, you have incredible visibility on growth, possibly the best visibility of any industry in the entire market, and lower risk,’ Reynolds told Bloomberg.

    This post was published at FinancialSense on 12/08/201.


  • Market Talk- December 8, 2017

    Asia started where the US markets off and confidence ahead of payrolls Friday, a government shut-down averted and hopes riding high for a BREXIT deal – which ran on the back of Sterling’s strength. For the Nikkei it felt important that we saw a 1.5% rally today taking us back to returning a roughly flat week. The GDP data certainly helped sentiment blasting the market 1.4% expectation and printing an impressive +2.5%. Yen lost a little as expected (0.4%), but that was a full big figure change and was in-place ahead of the US payrolls number. China’s economic data was also in the news with Trade figures better than forecast, resulting in a strong Hang Seng (+1.2%) and Shanghai (+1.1%) indices. Including the near 1% rally for the SENSEX also, these were strong and confident closes for Asia.

    This post was published at Armstrong Economics on Dec 8, 2017.


  • Bitcoin’s ‘Message’ & Tax Reform’s ‘Hidden Agenda’

    Authored by James Howard Kunstler via Kunstler.com,
    The hidden agenda in the so-called tax reform bill is to act as stop-gap quantitative easing to plug the ‘liquidity’ hole that is opening up as the Federal Reserve (America’s central bank) makes a few gestures to winding down its balance sheet and ‘normalizing’ interest rates. Thus, the aim of the tax bill is to prop up capital markets, and the apprehension of this lately is what keeps stocks making daily record highs. Okay, sorry, a lot to unpack there.
    Primer: quantitative easing (QE) is a the Federal Reserve’s weasel phrase for its practice of just creating ‘money’ out of thin air, which it uses to buy US Treasury bonds (and other stuff). The Fed buys this stuff through intermediary Too Big To Fail banks which allows them to cream off a cut and, theoretically, pump the ‘money’ into the economy. This ‘money’ is the ‘liquidity.’ As it happens, most of that money ends up in the capital markets. Stocks go up and up and bond yields stay ultra low with bond prices ultra high. What remains on the balance sheets are a shit-load of IOUs.
    The third round of QE was officially halted in 2014 in the USA. However, the world’s other main central banks acted in rotation – passing the baton of QE, like in a relay race – so that when the US slacked off, Japan, Britain, the European Central Bank, and the Bank of China, took over money-printing duties. And because money flies easily around the world via digital banking, a lot of that foreign money ended up in ‘sure-thing’ US capital markets (as well as their own ). Mega-tons of ‘money’ were created out of thin air around the world since the near-collapse of the system in 2008.

    This post was published at Zero Hedge on Dec 8, 2017.


  • Weekend Reading: Recession Risk Hidden In Tax Bill

    Authored by Lance Roberts via RealInvestmentAdvice.com,
    Since the election, equity bulls have been pinning their hopes on ‘tax cuts’ as the needed injection to support currently elevated stock prices. Stocks have advanced sharply since the election on these expectations, and while earnings have recovered, primarily due to the rise in oil prices, whatever economic growth was to come from tax reform has likely already been priced in.
    For some background on our views, both Michael Lebowitz and I have been discussing the tax bills as they are currently proposed since May of this year.
    The Spurious Math Of A Tax Cut Rally Corporate Tax Cuts – The Seen & Unseen 3-Myths About Tax Cuts Bull Trap: The False Promise Of Tax Cuts The Conundrum Of Debt, Tax Cuts & The Economy Tax Cuts – The Economic Cure-All Buy The Rumor – Sell The News
    We are currently in the second longest economic expansion since WWII. While Republican lawmakers are betting on jump-starting economic growth, the problem becomes the length of the current liquidity-driven expansion. All economic cycles end, and we are already closer to the end of the current expansion than not.

    This post was published at Zero Hedge on Dec 8, 2017.


  • Where The Jobs Were In November: Who’s Hiring… Who Isn’t

    Assuming that the BLS’ estimate of avg hourly warnings growing only 0.2% in November is accurate, it would imply that – as has often been the case – the bulk of job growth in November took place in minimum-paying and other low-wage jobs. However, a breakdown of jobs added by industry shows the contrary to expectations, the bulk of new job creation, and 3 of the 4 top category, were not in the “low wage” bucket. In fact, as shown below, with the exception of Education and Health jobs which rose by 54K in November, Manufacturing (+31K), Professional and Business Services (+27), and Construction (+24) were the fastest growing occupations in the previous month.

    This post was published at Zero Hedge on Dec 8, 2017.


  • Can You Trust this Stock Market? Warning Signs Grow.

    Some of the same warning signs that emerged before the 1929 to 1933 market crash, the tech mania crash of 2000, and the epic Wall Street meltdown of 2008 are flashing red.
    If you have significant amounts of your 401(k) invested in equity mutual funds (that is, those invested in stocks), it’s time to take an objective appraisal of today’s market versus historic benchmarks.
    This is also a good time to remember that markets have lost as much as 50 percent of their value from peak to trough in the last 20 years. If that’s more pain than you’re prepared to suffer, it may be time to trim back your exposure.
    We’ll get to the specifics on today’s market shortly, but first some necessary background.
    In the market crash of 1929 to 1933, the stock market lost 90 percent of its value. It did not return to the level of 1929 until 1954 – a quarter of a century later.
    There is some basis to speculate that the bear market of October 2007 to March 2009, which included the epic Wall Street crash of 2008, would have produced far more serious pain than the 50 percent retracement in the S&P 500 that did occur – perhaps pain on the level of 1929 to 1933 – had it not been for the secret $16 trillion in almost zero-interest loans that the Federal Reserve Bank of New York sluiced into the major brokerage firms on Wall Street – which was on top of the hundreds of billions of dollars in bailout funds that were authorized by Congress.

    This post was published at Wall Street On Parade By Pam Martens and Russ Marte.


  • WeWork: London’s Soon-To-Be Biggest Property Renter Makes Massive Bet On Office Market Despite Brexit

    The rationale for creating WeWork, the eco-friendly serviced workspace provider, was simple as co-founder Adam Neumann explained to the New York Daily News.
    ‘During the economic crises, there were these empty buildings and these people freelancing or starting companies. I knew there was a way to match the two. What separates us, though, is community.’ It wasn’t a bad idea since the company was recently valued at $20 billion. The first WeWork location was established in New York’s fashionable SoHo district (above) in 2010. Only four years later, Wikipedia notes that WeWork was the ‘fastest growing lessee of new office space in New York’. The company currently manages office space in 23 cities across the United States and in 21 other countries including China, Hong Kong, India, Japan, France, Germany and the UK.
    WeWork’s growth has been little short of stratospheric, and investors have included heavyweight financial names such as JP Morgan. T. Rowe Price, Goldman, Wellington Management and Softbank. As Bloomberg reports, WeWork is about to repeat its success in New York and other cities by becoming the largest private lessee of office space in London. However, some old-school property developers are predicting that WeWork’s break-neck expansion is ill-timed.

    This post was published at Zero Hedge on Dec 8, 2017.


  • The Euro Is Not Dead, Claims EU Survey

    The mood has shifted.
    By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET. Europeans are finally learning to love the euro, it seems, at least according tothe latest edition of the Eurobarometer, which is published twice yearly by the European Commission: 64% of the respondents, representing 16 out of 19 Eurozone economies, believe that having the euro is ‘a good thing for their country,’ the highest proportion since 2002, and up from 56% in 2016. Only 26% of respondents thought it was a bad thing.
    A further 74% of respondents said that the euro is a good thing for the EU as a whole, the highest proportion in the 2010-2017 series. This is somewhat ironic given that even the ECB conceded this week that the main idea behind the euro as a driving force for regional economic convergence has produced, let’s say, mixed results, having essentially failed where it mattered the most, in Southern European economies:
    ‘It is striking, however, that little convergence has occurred among the early euro adopters, despite their differences in GDP per capita. In contrast to some initial expectations that the establishment of the euro would act as a catalyser of faster real convergence, little convergence, if any, has taken place for the whole period 1999-2016’
    Nonetheless, the results of the survey point to a marked improvement in Europe’s love affair with the single currency, as growth in the Eurozone has reached its highest level (a forecast 2.6% for 2017) since the financial crisis began 10 years ago.

    This post was published at Wolf Street on Dec 8, 2017.


  • November Payrolls Jump 228K, Beat Expectations But Wage Growth Disappoints

    In a continuation of the recent theme shown by the labor market, the BLS reported that November payrolls rose by a seasonally adjusted 228K, beating expectations of 200K, if lower than October’s downward revised 244K (from 261K) while September was revised up from +18,000 to +38,000. With these revisions, employment gains in September and October combined were 3,000 more than previously reported.
    There were few surprises in the report, which saw the labor force participation rate flat at 62.7%, near a 30+ year low, while the unemployment rate also remained unchanged at 4.1%, the lowest since Dec 2000.
    And while overall the labor report was strong, there was once again disappointment in wage growth, with average hourly earnings rising 0.2% m/m, below the consensus estimate of est. 0.3%, with the October number revised lower to -0.1%. The Year over year number also missed, printing at 2.5%, up from October’s 2.3% but below the consensus print of 2.7%.

    This post was published at Zero Hedge on Dec 8, 2017.


  • Jobs Report Preview: Here’s What Wall Street Expects

    What a difference a year makes: last December, just as the ECB was about to shock the market with the announcement of its first 20 billion QE tapering, macroeconomic data mattered, especially since the Fed’s tightening intertia appeared to truly be data-dependent, if only for a very short period of time. Fast forward one year, when 3 rate hikes into the Fed’s “paradoxical” tightening cycle, in which much to the BIS’s shock the higher Fed Funds rates rise, the easier financial conditions get, a “dovish” December rate hike is assured, and as such Friday’s payroll report, which will probably print withint a few thousands of 200K, is completely irrelevant.
    Still, to at least some headline-scanning algos, the jobs report will matter, if only so that it can respond in a knee-jerk reaction, and be stopped out by yet another group of headline-scanning algos whose only job is to make sure the first group of algos pukes their trades at a loss, regardless of what the underlying data is.
    With that in mind, and with the understanding that fundamental data hasn’t really mattered since 2009, here is what Wall Street expects – and algos – will expect from tomorrow’s charade, which no matter what will send the market higher.
    From RanSquawk
    The BLS will release November’s Employment Situation Report at 1330 GMT (0830 EST) on Friday 8 November
    After October’s bounce-back, analysts expect normalisation in the rate of payroll additions (consensus 200k) Wage growth may be buoyed by calendar effects, pushing the Y/Y rate up to 2.7% SUMMARY: Analysts expect payroll growth to ease in November; the October data was boosted by unwinding negative effects from hurricanes Harvey, Irma and Maria, and therefore, analysts will see a slowing as more of a normalisation, rather than the beginning of a new slowdown. There may be some upside in retail hiring given the early Thanksgiving Holiday. Rounding effects may result in the rate of joblessness slipping slightly. Earnings growth is likely to be supported by calendar effects, which may push the Y/Y rate up to 2.7%, matching the pace of annualised wage growth seen in Q3.

    This post was published at Zero Hedge on Dec 8, 2017.