• Tag Archives Debt
  • The ECB Has Bought 1.9 Trillion In Bonds: Here Is Who Sold And What They Did With The Money

    Since the ECB launched its sovereign debt QE, initially known as PSPP, in March 2015 and later expanded to include corporate debt, or CSPP, in June 2016, the world’s biggest hedge fund central bank has created enough money out of thin air to purchase bonds with no consideration for price to grow its balance sheet, i.e. investment portfolio, by 1.89 trillion.
    Meanwhile, over the entire QE period, net European bond new issuance has only amounted to 394 billion – only one-fifth of what the ECB has bought – and that only after picking up recently. In fact, through much of 2016, there was hardly any net issuance at all according to Citi data.

    This post was published at Zero Hedge on Oct 17, 2017.

  • How The Elite Dominate The World – Part 2: 99.9% Of The Global Population Lives In A Country With A Central Bank

    Even though the nations of the world are very deeply divided on almost everything else, somehow virtually all of them have been convinced that central banking is the way to go. Today, less than 0.1% of the population of the world lives in a country that does not have a central bank. Do you think that there is any possible way that this is a coincidence? And it is also not a coincidence that we are now facing the greatest debt bubble in the history of the world. In Part I of this series, I discussed the fact that total global debt has reached 217 trillion dollars. Once you understand that central banks are designed to create endless debt, and once you understand that 99.9% of the global population lives in a country that has a central bank, then it finally makes sense why we have accumulated so much debt. The elite of the world use debt as a tool of enslavement, and central banking has allowed them to literally enslave the entire planet.
    Some of you may not be familiar with how a ‘central bank’ differs from a normal bank. The following definition of a ‘central bank’ comes from Wikipedia…
    A central bank, reserve bank, or monetary authority is an institution that manages a state’s currency, money supply, and interest rates. Central banks also usually oversee the commercial banking system of their respective countries. In contrast to a commercial bank, a central bank possesses a monopoly on increasing the monetary base in the state, and usually also prints the national currency,[1] which usually serves as the state’s legal tender.

    This post was published at The Economic Collapse Blog on October 16th, 2017.

  • Nordstrom Plunges After Suspending ‘Going-Private’ Explorations

    Nordstrom shares are tumbling uin the pre-open (down over 5% to 3-month lows) as the company temporarily suspends its explorations for going-private, citing “difficulties in obtaining debt financing.”

    This post was published at Zero Hedge on Oct 16, 2017.

  • How Debt Is Keeping the Lights Off in Puerto Rico

    On September 20, 2017, Hurricane Maria slammed into Puerto Rico and knocked out the entire power grid of the U. S. territory.
    Nearly three weeks later, about 90% of the island’s electrical grid was still without power.
    In Puerto Rico, electrical power is solely provided to some 1.5 million households and businesses by the Puerto Rico Electric Power Authority (PREPA), which is a monopoly owned by the territory’s government.
    That matters because the government of Puerto Rico used its ownership of the electric utility and the revenue it generates to borrow against. And because the government has borrowed far more than it can hope to ever pay back, it is very constrained in the actions it can now afford to take.
    Gavin Bade of UtilityDive, an electrical utility industry trade publication, describes how those constraints are now affecting PREPA’s ability to restore electrical service to the island in the following brief (emphasis mine):

    This post was published at FinancialSense on 10/16/2017.

  • Falling Productivity of Debt, Gold and Silver

    Last week, we discussed the ongoing fall of dividend, and especially earnings, yields. This Report is not a stock letter, and we make no stock market predictions. We talk about this phenomenon to make a different point. The discount rate has fallen to a very low level indeed.
    Discount in stocks is how you assess the present-day value of earnings to occur in the future. For example, if the discount rate is 10%, then a dollar of earnings per share at Acme Piping next year is worth $0.90 today. At a 1% discount, it’s worth $0.99. As you look forward many years, the difference between these rates is very large.
    A buck of earnings at 10% discount = $1.00 + $0.90 + $0.81 + $0.73 … = $10.
    At 1% discount = $1.00 + $0.99 + $0.98 + $0.97 … = $100.
    A rising stock price is equivalent to a falling discount rate, assuming earnings are not growing commensurately. Our graph last week shows that they aren’t.
    The idea of commensurate is important in economics. Any economist can paint a rosy picture by, for example, showing rising GDP. If you object that debt is rising with GDP, the economist switches to a chart of debt/GDP. He will tell you that the solution is to grow GDP with the right fiscal and regulatory policies.
    However, we can look at how much additional GDP is added for each newly-borrowed dollar. This is called marginal productivity of debt. This shows a clear picture, a secular decline over many decades. To produce this graph, take change in GDP divided by change in debt.

    This post was published at GoldSeek on Monday, 16 October 2017.

  • China’s Mortgage Debt Bubble Raises Spectre Of 2007 US Crisis

    In an inglorious echo of 2007 America, many young homeowners in booming cities owe more than they earn, and some even falsify salary details to get bigger mortgages…
    Young Chinese like Eli Mai, a sales manager in Guangzhou, and Wendy Wang, an executive in Shenzhen, are borrowing as much money as possible to buy boomtown flats even though they cannot afford the repayments.
    Behind the dream of property ownership they share with many like-minded friends lies an uninterrupted housing price rally in major Chinese cities that dates back to former premier Zhu Rongji’s privatisation of urban housing in the late 1990s.
    Rapid urbanisation, combined with unprecedented monetary easing in the past decade, has resulted in runaway property inflation in cities like Shenzhen, where home prices in many projects have doubled or even tripled in the past two years.

    This post was published at Zero Hedge on Oct 15, 2017.

  • How The Elite Dominate The World – Part 1: Debt As A Tool Of Enslavement

    Throughout human history, those in the ruling class have found various ways to force those under them to work for their economic benefit. But in our day and age, we are willingly enslaving ourselves. The borrower is the servant of the lender, and there has never been more debt in our world than there is right now. According to the Institute of International Finance, global debt has hit the 217 trillion dollar mark, although other estimates would put this number far higher. Of course everyone knows that our planet is drowning in debt, but most people never stop to consider who owns all of this debt. This unprecedented debt bubble represents that greatest transfer of wealth in human history, and those that are being enriched are the extremely wealthy elitists at the very, very top of the food chain.
    Did you know that 8 men now have as much wealth as the poorest 3.6 billion people living on the planet combined?
    Every year, the gap between the planet’s ultra-wealthy and the poor just becomes greater and greater. This is something that I have written about frequently, and the ‘financialization’ of the global economy is playing a major role in this trend.
    The entire global financial system is based on debt, and this debt-based system endlessly funnels the wealth of the world to the very, very top of the pyramid.
    It has been said that Albert Einstein once made the following statement…
    ‘Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.’
    Whether he actually made that statement or not, the reality of the matter is that it is quite true. By getting all of the rest of us deep into debt, the elite can just sit back and slowly but surely become even wealthier over time. Meanwhile, as the rest of us work endless hours to ‘pay our bills’, the truth is that we are spending our best years working to enrich someone else.

    This post was published at The Economic Collapse Blog on October 15th, 2017.

  • WORLD’S LARGEST OIL COMPANIES: Deep Trouble As Profits Vaporize While Debts Skyrocket

    The world’s largest oil companies are in serious trouble as their balance sheets deteriorate from higher costs, falling profits and skyrocketing debt. The glory days of the highly profitable global oil companies have come to an end. All that remains now is a mere shadow of the once mighty oil industry that will be forced to continue cannibalizing itself to produce the last bit of valuable oil.
    I realize my extremely unfavorable opinion of the world’s oil industry runs counter to many mainstream energy analysts, however, their belief that business, as usual, will continue for decades, is entirely unfounded. Why? Because, they do not understand the ramifications of the Falling EROI – Energy Returned On Invested, and its impact on the global economy.
    For example, Chevron was able to make considerable profits in 1997 when the oil price was $19 a barrel. However, the company suffered a loss in 2016 when the price was more than double at $44 last year. And, it’s even worse than that if we compare the company’s profit to total revenues. Chevron enjoyed a $3.2 billion net income profit on revenues of $42 billion in 1997 versus a $497 million loss on total sales of $114 billion in 2016. Even though Chevron’s revenues nearly tripled in twenty years, its profit was decimated by the falling EROI.
    Unfortunately, energy analysts, who are clueless to the amount of destruction taking place in the U. S. and global oil industry by the falling EROI, continue to mislead a public that is totally unprepared for what is coming. To provide a more realistic view of the disintegrating energy industry, I will provide data from seven of the largest oil companies in the world.

    This post was published at SRSrocco Report on OCTOBER 14, 2017.

  • Hotel California and the Federal Reserve

    In 1977 the Eagles spoke to us about ‘Hotel California.’ Lyrics are here.
    A few lines from the song …
    ‘On a dark desert highway, cool wind in my hair…
    Up ahead in the distance I saw a shimmering light…
    Then I was thinking to myself this could be Heaven or this could be Hell
    Welcome to the Hotel California
    Some dance to remember, some dance to forget
    They’re living it up at the Hotel California
    We are all just prisoners here of our own device
    Relax, said the night man, We are programmed to receive,
    You can check out any time you like but you can never leave.’
    The lines have been rewritten to fit the Federal Reserve – the hypothetical ‘Hotel Marriner Eccles:’ ‘On a dark digital highway, QE rewarding my pals
    Up ahead in the distance I saw a burning pyre of debt
    I was thinking to myself this should be Heaven but it’s Hell
    Welcome to the Hotel Marriner Eccles
    Some pontificate to remember, some lie to forget

    This post was published at Deviant Investor on October 12, 2017.

  • 13/10/17: Debt Glut and Building Dublin

    Just back from Ireland, a fast, work-filled trip, with some amazing meetings and discussions, largely unrelated to what is in the ‘official’ newsflow. Some blogposts and articles ahead to be shared.
    One thing that jumps out is the continued frenzy in building activity in Dublin, predominantly (exclusively) in the commercial space (offices). Not much finished. Lots being built. For now, Irish builders (mostly strange new players backed by vultures and private equity) are still in the stage where buildings shells are being erected. The cheap stage of construction. Very few are entering the fit-out stages – the costly, skills-intensive works stage. And according to several sector specialists I spoke to, not many fit-out crews are in the market, as skilled builders have not been returning to the island, yet, from their exiles to the U. S., Canada, Australia, UAE, and further afield.
    Which should make for a very interesting period ahead: with so many construction sites nearing the fit-out stages, building costs will sky rocket, just as supply glut of new offices will start hitting the letting markets. In the mean time, many multinationals – aka the only clients worth signing – have already signed leases and/or bought own buildings on the cheap. Google owns its own real estate (hello BEPS tax reforms that stress tangible activity over imaginary revenue shifting); Twitter has a refurbished home; Facebook is quite committed to a lease (although it too might take a jump into buying); and so on. Tax inversion have slowed down and Trump Administration just re-committed to Obama-era restrictions on these, while Trump tax plan aims to take a massive chunk out of this pie away from Ireland. So demand… demand is nowhere to be seen.

    This post was published at True Economics on Friday, October 13, 2017.

  • Robert Gore’s “Hard Core Doom Porn”

    It will be a crash like we’ve never seen before.
    SLL has been accused of trafficking in ‘doom porn.’ Guilty as charged. If you don’t like doom porn, don’t read this article, it’s hard core. If you prefer feel good and heartwarming, there are plenty of Wall Street research reports and mainstream media stories about the economy available. Enjoy!
    In 1971, President Nixon closed the ‘gold window,’ which allowed foreign governments to exchange their dollars for gold. This severed the last link between any government and central bank-created debt and the real economy. Debt could be conjured at whim, and governments and central banks have done so for the last 46 years.
    Not surprisingly, credit creation without restraint has papered the globe with the greatest pile of debt mankind has ever amassed, measured in nominal terms or relative to the underlying economy. A measure of how extraordinary this situation is: most people regard it as normal, if they think of it all. Debt is a first mover, a financial constant. Any exigency small or large can be met from an unlimited credit pool that will always be with us. How to rebuild Houston, Florida, and Puerto Rico? No problem, borrow.
    Although fiat credit creation by governments and central banks is unconnected to the real economy, its effects are not. Their debt becomes an asset within the financial system. Through fractional reserve banking, securitization, and derivatives it become the basis for a multiplication of the original debt. That multiplication is many times the multiplier (the reciprocal of the reserve requirement) taught in introductory macroeconomics classes whereby the debt is contained within the banking system.

    This post was published at Zero Hedge on Oct 12, 2017.

  • What Not To Buy In Today’s Stock Market

    Dear reader, if you are overcome with fear of missing out on the next stock market move; if you feel like you have to own stocks no matter the cost; if you tell yourself, ‘Stocks are expensive, but I am a long-term investor’; then consider this article a public service announcement written just for you.
    Before we jump into the stock discussion, let’s quickly scan the global economic environment.
    The health of the European Union did not improve in the last year, and Brexit only increased the possibility of other ‘exits’ as the structural issues that render this union dysfunctional went unfixed.
    Japan’s population has not gotten any younger since the last time I wrote about it – it is still the oldest in the world. Japan’s debt pile got bigger, and it remains the most indebted developed nation (though, in all fairness, other countries are desperately trying to take that title away from it). Despite the growing debt, Japanese five-year government bonds are ‘paying’ an interest rate of – 0.10 percent. Imagine what will happen to its government’s budget when Japan has to start actually paying to borrow money commensurate with its debtor profile.
    Regarding China, there is little I can say that I have not said before. The bulk of Chinese growth is coming from debt, which is growing at a much faster pace than the economy. This camel has consumed a tremendous quantity of steroids over the years, which have weakened its back – we just don’t know which straw will break it.

    This post was published at Zero Hedge on Oct 12, 2017.

  • Outgoing German Finance Minister Warns Global Policies Are Causing Bubbles

    We live in a world full of bubbles. We’ve reported extensively on the stock market bubble, the student loan bubble, and the auto bubble. We even told you about a shoe bubble. Last summer, US Global Investors CEO Frank Holmes called global debt ‘the mother of all bubbles.’
    So what happens when these bubbles start to burst?
    In a recent interview, outgoing German Finance Minister Wolfgang Schuble warned about bubbles and said global debt could set off the next financial crisis.
    The IMF and others agree with us that we are in danger of encouraging new bubbles to form. We have no idea where the next crisis will happen but economists all over the world are concerned about the increased risks arising from the accumulation of more and more liquidity, and the growth of public and private debt.’

    This post was published at Schiffgold on OCTOBER 12, 2017.

  • Schuble Warns of Coming Economic Crisis

    In his farewell interview for the Financial Times, Federal Minister of Finance Wolfgang Schuble warned of a new global financial crisis predicated upon the Quantity of Money theory that the central banks had pumped trillions of dollars into the financial system that is creating a risk of ‘new bubbles’. Indeed, many just do not comprehend what is going on and are blaming the new highs in share markets on concerns about the increased risks from the accumulation of more and more liquidity and the growth of public and private debt.

    This post was published at Armstrong Economics on Oct 12, 2017.

  • Millennials Have Never Been More In Debt, And It Is Creating A Major Risk For The Economy

    There is a seemingly unlimited number of disconnects in financial markets these days, not the least of which is the shocking divergence in recent years between the ever plunging unemployment rate in the United States and stubbornly rising delinquencies on consumer debt. In fact, according to a note published earlier today by UBS strategist Matthew Mish, that divergence continues to soar to all time highs with each passing month…but why?
    As it turns out, the answer to the enigma above may just have something to do with the fact that, despite declining unemployment levels, wage growth remains completely non-existent at a time when consumer leverage, particularly in the form of student loans and auto debt extended to the most financially vulnerable cross sections of the American public, is soaring. Let’s explore the data from UBS…
    Per the charts below, when you break out rising consumer delinquencies into their individual buckets the catalyst for the trend above suddenly becomes more clear. While delinquency rates on mortgages, HELOCs and credit cards are improving, or at least not deteriorating rapidly, delinquency rates on student loans and auto loans are a completely different story.

    This post was published at Zero Hedge on Oct 11, 2017.

  • De-dollarization Not Now

    USD-denominated debt outside the US hits record – even junk bonds.
    China announced today that it would sell $2 billion in government bonds denominated in US dollars. The offering will be China’s largest dollar-bond sale ever. The last time China sold dollar-bonds was in 2004.
    Investors around the globe are eager to hand China their US dollars, in exchange for a somewhat higher yield. The 10-year US Treasury yield is currently 2.34%. The 10-year yield on similar Chinese sovereign debt is 3.67%.
    Credit downgrade, no problem. In September, Standard & Poor’s downgraded China’s debt (to A+) for the first time in 19 years, on worries that the borrowing binge in China will continue, and that this growing mountain of debt will make it harder for China to handle a financial shock, such as a banking crisis.
    Moody’s had already downgraded China in May (to A1) for the first time in 30 years. ‘The downgrade reflects Moody’s expectation that China’s financial strength will erode somewhat over the coming years, with economy-wide debt continuing to rise as potential growth slows,’ it said.
    These downgrades put Standard & Poor’s and Moody’s on the same page with Fitch, which had downgraded China in 2013.

    This post was published at Wolf Street on Oct 11, 2017.

  • Hoisington Quarterly Review and Outlook, Third Quarter 2017

    Lacy Hunt and Van Hoisington of Hoisington Investment Management do not exactly get us off to a hopeful start in their third-quarter review, today’s Outside the Box:
    The worst economic recovery of the post-war period will continue to be restrained by a consumer sector burdened by paltry income growth, a low and falling saving rate, and an increasingly restrictive Federal Reserve policy. Additionally, with the extremely high level of U. S. government debt and deteriorating fiscal situation, the economy is unlikely to benefit from any debt-financed tax changes. Finally, from a longer-term perspective, the recent natural disasters are an additional constraint on economic growth.
    Having set the stage for this rather dark and doomy tale, our intrepid authors launch into a blow-by-blow exegesis of the role the beleaguered consumer has played in keeping the economic beast on its feet and slowly stumbling forward.
    We consumers account for two-thirds of US GDP, they remind us. And ‘Consumer spending is funded either by income growth, more debt, or some other reduction in saving. Recent trends in each of these categories, as outlined below, do not bode well for this critical sector of the U. S. economy.’ I’ll let Lacy and Van fill in all the gruesome details.
    But they bring up the point – and do it mathematically and in depth – that I made in last week’s letter: The Federal Reserve is embarked upon an extraordinarily dangerous course as it both raises rates and reduces its balance sheet.

    This post was published at Mauldin Economics on OCTOBER 11, 2017.

  • China Riding the Global Economic Recovery

    The global economic recovery is strengthening and becoming more synchronized, according to updated projections for 2017 and 2018 by both the Organization for Economic Cooperation and Development (OECD) and the International Monetary Fund (IMF). China, the world’s second largest economy, is an important part of this improved outlook, and its equity markets have been outperforming.
    Last year’s global growth was 3.1%. The OECD is forecasting a 3.5% advance this year and even stronger, 3.7% growth in 2018. China’s economic growth rate is projected at 6.8% this year, compared with 6.7% in 2016. The OECD anticipates moderate slowing to a 6.6% pace in 2018, in response to some easing of stimulus measures and efforts to stabilize the corporate debt and further balance the economy.
    The IMF sees the present acceleration of the global economy as the broadest in the past 10 years. Their economists project a 3.6% advance this year, slightly faster than the OECD estimate, and 3.7% growth in 2018. China’s economy is projected to grow 6.8% this year, a 0.2 percentage point increase over the IMF’s April forecast. Similarly, their forecast for 2018 has been increased by 0.3 percentage points to 6.5%, based on the expectation that expansionary policies will be sufficient to maintain such an advance and external demand will remain strong

    This post was published at FinancialSense on 10/11/2017.

  • Asian Metals Market Update: October-11-2017

    11 October 2017
    Political developments from every nook and corner of earth make me believe that I should increase my contingency fund and also increase the allocation to physical gold. Short term corrections (if any) are a part and parcel of a long term bull rally. The pace of rise of gold and silver will be slow till the end of next year. Gold and silver are not for make a quick buck and vanish. Hit or miss traders should trade in bitcoins and not in gold or silver.
    The world is on the verge of total chaos due to some maverick politicians in every nation. Protectionism and bilateral trade are on the rise. The global banking system should collapse in the next five years. Nations will not be able to protect their ‘too big too fail’ banks. Your money in the banks could turn into a bad debt for you. So I will prefer to invest in physical gold and silver. Why not buy some copper utensils and silver utensils for your home as a part of investment diversification. Health and investment side by side.

    This post was published at GoldSeek

  • This is the craziest mortgage scheme I’ve ever seen

    The Great Financial Crisis happened because Wall Street was financing homes for people who couldn’t afford them.
    Leading up to the GFC, there was a voracious appetite from investors for ‘AAA’-rated mortgage debt. So lenders would make lots of loans to subprime borrowers and sell them to Wall Street. Wall Street would pool them together and one of the major ratings agencies (like Moody’s or Standard & Poor’s) would stamp the steaming pile of garbage with AAA.
    AAA by Moody’s definition means the investment ‘should survive the equivalent of the U. S. Great Depression.’ In other words, it’s rock solid.
    The reasoning was that one subprime mortgage was risky. But if you bundled thousands together, you get AAA… Because they couldn’t all go bad at once. And, hey, you can’t lose money in real estate.

    This post was published at Sovereign Man on October 11, 2017.