Soaring Debt = Slow Growth = Even More Debt = Systemic Crisis

It’s just common sense: Borrow too much money and the weight of this debt makes it hard to do things that used to be easy. This truism is now (finally!) hitting home, and blame is being apportioned. A couple of recent examples:
Over The Last 10 Years The U. S. Economy Has Grown At EXACTLY The Same Rate As It Did During The 1930s
(Economic Collapse Blog) – Even though I write about our ongoing long-term economic collapse every day, I didn’t realize that things were this bad. In this article, I am going to show you that the average rate of growth for the U. S. economy over the past 10 years is exactly equal to the average rate that the U. S. economy grew during the 1930s.
The hard fact is that the past decade’s $10 trillion in deficit spending has produced the worst economic growth as measured by Gross Domestic Product in our nation’s history. You read that right, in the past decade our nation’s economy grew slower than even during the Great Depression. This stagnant, new normal, low-growth economy is leaving millions of working age people behind who have given up even trying to participate, and has led to a malaise where many doubt that the American dream is attainable.

This post was published at DollarCollapse on JUNE 4, 2017.

Summer Storm Keeps Building as Second Dip of Great Recession Approaches

These updates to my list of ‘Seven Troubles Assailing the US Economy’ are far too important to remain buried at the end of that article since many readers may not return to the article to check for updates. The summer economic crisis I’ve been predicting is building even more rapidly than when I reported a week ago. It’s almost here:
Total household debt now exceeds the peek it hit just before the economic collapse into the Great Recession. While the number of households is also up, wages are correspondingly down, so households have maxed out … again:

This post was published at GoldSeek on 4 June 2017.

Will Millennials Ever Become A Generation Of Homeowners: BofA Has A Troubling Answer

America’s biggest as of 2016 generation, the Millennials, has a heavy burden on its collective 150 million shoulders: its task is to not only step in as a buyer of stocks once the baby boomers begin selling in bulk, but to also provide the much needed support pillar for the recovery of the US housing market. In fact, there have been countless “bullish” housing market theories built upon the premise that sooner or later tens of millions of young American adults will emerge from their parents’ basements, start a household, and buy a house.
So far that theory has not been validated. One simple reason is that Millennials simply can’t afford to buy a house. As we reported last week, a study from Apartment List showed that nearly 70% of young American adults, those aged 18 to 34 years old, said they have saved less than $1,000 for a down payment. This is similar to what a recent GoBanking Survey found last year, according to which 72% of “young millennials”- those between 18 and 24 years old – had $1,000 in their savings accounts and 31% have $0; a sliver (8%) have over $10,000 saved. Of the “older millennials”, those between 25 and 34, 67% had less than $1,000 in their savings accounts, 33% have nothing at all, and 15% had over $10,000.
So does that mean that Millennials can simply be written off as a potential generation of homeowners, and if so, what are the implications for the broader housing market?

This post was published at Zero Hedge on Jun 4, 2017.

“They’re Going To Have All Sorts Of Issues” – Citi Urges Regulators To Address Australia’s “Spectacular Housing Bubble”

Citigroup Chief Economist Willem Buiter says Australia is experiencing ‘a spectacular housing bubble’ that needs to be addressed with tougher regulatory measures – something we’ve noted time and time again.
A shortage of housing, coupled with record-low interest rates, has made Sydney the world’s most second-most expensive property market. The city’s home prices jumped 16% in the 12 months through April, stoking record household debt and putting home ownership out of the reach of many.

This post was published at Zero Hedge on Jun 4, 2017.

The Chinese Economic ‘Death Spiral’

China has reported annual growth rates since the panic of 2008 of between 6.7% and 12.2%, with a steady downward trend since early 2010. If China’s growth engine is running out of steam, as I’ve described, how has China managed to maintain such relatively high growth rates?
The answer is contained in three key words: debt, deflation and waste.
Waste is a blunt word referring to non-productive investment. The investment component of China’s GDP is about 45% of the total. Most major economies show about 25% to 35% for investment.
But at least half the Chinese investment is wasted. It goes to projects that will never produce an adequate return, either on an absolute basis or relative to alternative uses of the funds.
If this wasted investment is subtracted from GDP, similar to a one-time write off under general accounting principles, then 8% growth would be 6.2%, and 6% growth would be 4.7%. There are other distortions in Chinese growth figures, but wasted investment is one of the most glaring.
A simple example will make the point. During a recent visit to China I took the high-speed train from Beijing to Nanjing and passed through the magnificent new Nanjing South train station.
The train had the smoothest, quietest ride I’ve ever experienced even at speeds of 305 kph. The noisy clickity-clack of Amtrak’s Acela service from New York to Washington seems like a Wells Fargo stagecoach ride through the Old West compared to the Chinese railroad.

This post was published at Wall Street Examiner on June 2, 2017.

The US Jobs Market Is Much Worse Than The Official Data Suggest: The Full Story

Following Friday’s disappointing payrolls report, yesterday we showed another even more troubling fact about the state of the US labor market: since 2008, over 93% of the total 6.7 million net jobs “created” in the past decade, have been statistical, existing simply inside an excel model somewhere in the US Department of Labor, as a result of the BLS’ favorite fudge factor, the Birth/Death adjustment.
Unfortunately, that’s just the tip of the iceberg for why the US labor market “recovery” is perhaps the biggest ‘fake news’ of the US economic narrative, and as a comprehensive recent analysis issued by Morningside Hill reveals, the state of the US jobs market is far worse than the official data suggest.
Here is the real story.
The US jobs market has been described as the backbone of the recovery – 80 months of continuous jobs growth with unemployment hitting 4.3% – the lowest since 2001. However the perceived strength in jobs creation is at odds with other economic indicators. President Trump ran on a campaign that repeatedly touted ‘jobs, jobs, jobs.’ His emphasis on jobs creation and bringing employment back to America struck a chord with voters. Trump’s election in itself contradicts the popular narrative that the US jobs market is tight and robust. Wages, disposable income and real earnings growth along with low productivity and overall slow economic growth all challenge the BLS’s jobs numbers and thus Wall Street’s perception that the jobs market is tight.
Since the monthly jobs report is eagerly awaited as the most important piece of economic data for financial markets, it warrants a deep dive in order to understand what is going on under the hood. Before we delve into the data, here are some highlights of our findings.

This post was published at Zero Hedge on Jun 4, 2017.

Gold Miners in 2017 Whipsaw

Ever since 2012’s failure of the ‘QE 3 rally’ in the precious metals it has not been fruitful to micro manage the gold sector, because that failure jump started a savage bear market that would need time to work out the excesses both in the sector’s investor base and in its mining businesses, which had become bloated and inefficient. That’s what bear markets do; they clean out the landscape to make it inhabitable for new investors one day. Here is a weekly chart showing the bear’s kickoff. HUI’s 55 week EMA then became the ball and chain that kept its fate sealed (red arrows) until January of 2016.

This post was published at GoldSeek on 4 June 2017.

A Bird’s-Eye View Of American’s Largest Auto Port

In 1963, the Port of Baltimore was the first port of entry for the Volkswagen Beetle. We have to thank the Germans for supplying the ‘Conscious Revolution’ of the 1960s with transportation. On a side note, while everyone was getting high in their new Volkswagen, the Globalist started their grand scheme of stripping America of her wealth, ending the generational cycle called ‘the American High’ (1946-1964). What followed next is 50 years of deindustrialization and the decay of America’s inner-cities.
While deindustrialization crushed Baltimore City, Maryland, the powers to be constructed the Port of Baltimore to be America’s largest auto port of entry. The reason for it, is due to the area’s strategic positioning of 150-miles inland than any-other Mid-Atlantic port, which means shorter distances between critical links in the supply chain.
Fast forward to today, where decades of debt has peaked Motor Vehicle Loans at $1.2 Trillion signaling a possible generational top in the auto market. According to FT, US banks are now fearing a subprime bubble in auto loans, which is similar to the subprime mortgage crisis. On the chart below, notice how the 1960’s started the upward cycle in auto loans? Interesting to say the least…baby boomers needed transportation.

This post was published at Zero Hedge on Jun 4, 2017.

Gold Miners Weak but not Oversold

If looking at Gold only in a vacuum, it looks good. Its uptrend since the start of the year remains intact and it has pushed above its 50 and 200-day moving averages. It closed the week at $1280/oz and could test $1300 next week. But looks can be deceiving. Considering the US Dollar index closed at a 7-month low today, Gold is lagging a bit. Moreover, both Silver and the gold miners have not confirmed Gold’s recent rise. In fact, the miners are lagging the metals ‘bigly.’ At the moment the miners are not so oversold but a reversal in Gold could be the catalyst that pushes miners to oversold extremes.
Both gold and silver miners are sporting another bearish divergence. The early April divergence (new highs in metals but not in the stocks) preceded a selloff into May and now we must be on guard for the May divergence causing a selloff in June. Since the middle of May both Gold and Silver have climbed higher while the shares (GDX, SIL) have not. The shares are again lagging the metals while Silver is again lagging Gold. These divergences are an obvious warning sign.

This post was published at GoldSeek on 4 June 2017.

Household Debt: Myth vs. Reality

Consumer Credit Card default rates have ‘surged’ to 4-year highs. Capital One reported its largest write off since 2011 due to credit card delinquencies. Discover Card loan loss provisions in the 1st quarter 2017 rose a whopping 38% to $586 Million. Sounds like the alarm bells have rung! Myth or Reality?
Alarming headlines are not always tethered to reality, seeking to grab your attention and ‘go viral’. The next chart is identical to the chart above with a broader time perspective. Wake us up when default rates rise into the 4 to 5% neighborhood! If the economy improves we would expect default rates to rise as consumers take on more risk and banks tighten credit ahead of excess speculation and potential inflation. In spite of the sensationalist ‘the sky is falling’ stories, Credit Card delinquencies are still historically low with considerable room to rise before banks tighten credit enough to choke off this slow growth economy.

This post was published at FinancialSense on 06/02/2017.

If There Was Ever An Example Of “Reward-Free Risk” This Is It

‘What is the opposite of a ‘margin of safety’?’ This is a question I’ve been considering because it seems that’s exactly what investors have settled for in passively buying equities today. But first we should probably define ‘margin of safety’ before we can begin to understand its opposite.
Ben Graham famously wrote in The Intelligent Investor, ‘Confronted with a challenge to distill the secret of sound investment into three words, we venture the motto, MARGIN OF SAFETY.’ Here we have Warren Buffett’s mentor telling us these are the three most important words in investing. So what do they mean?
Well, Buffett explains it like this: ‘When you build a bridge, you insist it can carry 30,000 pounds, but you only drive 10,000 pound trucks across it. And that same principle works in investing.’ When you buy a stock, you estimate its intrinsic value and then try to buy it at a discount that allows for a possible error in judgement or some unforeseen, adverse development.

This post was published at Zero Hedge on Jun 4, 2017.

When Central Bankers Tell You There Is No Need To Panic, It’s Time To Take Action – Episode 1297a

The following video was published by X22Report on Jun 4, 2017
The US unemployment is now below the average recession numbers. Virtually every time the unemployment numbers reach the lowest point the US went into a recession or depression. 93% of the jobs that were created since 2008 was done so through the birth/death rate model . More retailers are going bankrupt. Hiring is beginning to decline in San Francisco. Sales of luxury homes are declining. The central banks are now holding a 3rd of the global assets. When the central bankers say do not panic it is time to take action.

Gold Nearing A Major Breakout

Quite the week for stocks as we continue to notch new highs after new highs.
Get it while the getting is good.
The metals also did great and gold is on the cusp of a big move.
Everyday there is just so much political jargon it’s hard to ignore, but I do try my best.
What matters to me most is the action in the charts and it continues to be great.
Let’s just dive right into what matters and begin with a look at the weekly chart of gold.

This post was published at GoldSeek on Sunday, 4 June 2017.

Hedge Fund CIO: “Normally The Fed Would End This Bubble, But It Can’t This Time For One Reason”

In his latest weekend notes, One River Asset Management CIO, Eric Peters, picks up where BofA’s Mike Hartnett left off on Friday when he said that the “QE Monster” will only end when “the Wall Street bubble” finally shocks the Fed. Yes, but what will “end it”, or better yet, what will “shock” Yellen and company out of their complacency?
To this, Peters’ response is that the Fed finds itself in a big “quandary” not so much due to the S&P500, and overall asset levels, which even Yellen now admits “pose risks to financial stability” as per the latest FOMC Minutes, but due to China:
‘The real credit excesses haven’t been created here, they’ve formed in China, which leaves the Fed in a quandary.’ Much as the Fed would like to have jurisdiction over every corner of global finance, they no longer control China.

This post was published at Zero Hedge on Jun 4, 2017.

Realism Is The New Pessimism (Or Why 4% GDP Targets Are Ludicrous)

The American core population (aged 15-64) is the greatest economic consumptive force on earth. They make up 2/3rds of the total US population and 95% of US employment. When considering growth, particularly the all important annual growth in Gross Domestic Product, the growth of this population should be the first consideration (although it is strangely nowhere in typical economists or Federal Reserve accounting). From a growth perspective, it doesn’t matter if this population is 3.25 million or 325 million…all that matters is how many more there are than the year before. Some will point to wage growth but this is essentially equally offset by rising prices. It is the growth in this population that drives the need for new housing, new infrastructure, and generally adds millions of new consumers every year (aka, demand growth)…until now.
The core US population growth has been slowing since ’00 and as of this year (drum roll please) that growth is ending. To be clear, this wasn’t “supposed” to happen. Not according to the Census or all those planning on perpetual growth. But as the chart below highlights (yoy change on a monthly basis), for the first time since WWII (and perhaps in US history) the core US population has ceased growing…and is likely to begin declining in the coming months and years. FYI – The spikes of ’90, ’00, ’10, and more since are due to Census adjustments, not sudden population changes. Further downgrades should be expected as Census estimates for growth remain overly optimistic.

This post was published at Zero Hedge on Jun 4, 2017.

Central Banks Now Own A Third Of The Entire $54 Trillion Global Bond Market

Two weeks ago we asked a question: maybe behind all the rhetoric and constant (ab)use of sophisticated terms like “gamma”, “vega”, CTAs, risk-parity, vol-neutral, central bank vol-suppression, (inverse) VIX ETFs and so forth to explain why despite the surging political uncertainty in recent years, and especially since the US election…
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… global equity volatility, both implied and realized, has tumbled to record lows, sliding below levels not even seen before the 2008 financial crisis, there was a far simpler reason for the plunge in vol: trading was slowly grinding to a halt.
That’s what Goldman Sachs found when looking at 13F filings in Q1, when it emerged that the gross portfolio turnover of hedge funds had retreated to a record low of just 28%. In other words, few if any of the “smart money” was actually trading in size.

This post was published at Zero Hedge on Jun 4, 2017.

Macron – False Hope for Europe

Those who think that the election of Emmanuel Macron to the Presidency of France is the savior of the Euro probably believe that politicians are really there for the people rather than themselves. Macron’s idea of federalizing Europe some call the ‘transfer-union’ is politically never going to happen. The EU is being torn apart at the seams for centralized government dictating to an economy and regulating everything just does not work. Ask Russia and China.
Socialism is the same as Communism, with the minor distinction that you formally own your property, but are regulated and taxed so you are still not ‘free’ to do as you like. To a large degree socialism is worse for you have to fill out forms and pretend that your vote will actually change something – when they do not listen anyway.

This post was published at Armstrong Economics on Jun 4, 2017.

May Vows “Enough Is Enough”, Slams “Evil Islamist Extremism” As “One Of Great Challenges Of Our Time”

After the third deadly terrorist attack on UK soil in less than three months (and one which paradoxically took place just days after the UK lowered its “imminent attack” terror alert), Prime Minister Theresa May – facing a crucial election on Thursday – vowed to (finally?) step up Britain’s fight against Islamist extremism, saying ‘enough is enough’ after Saturday night’s terrorist attacks left seven dead and 48 injured.
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Calling for the country to unite, which incidentally is what she did after the last two terror attacks in a well-meaning gesture that achieved nothing, the British Prime Minister said in a Sunday statement that “it is time to say enough is enough, everybody needs to go about their lives as they normally would. Our society should continue to function in accordance with our values. But when it comes to taking on extremism and terrorism, things need to change.” It was not immediately clear just what #hashtag campaign on Twitter would embody this particular vow.

This post was published at Zero Hedge on Jun 4, 2017.