China Open Gold Trade in Yuan as Proxy for the Yuan

China keeps moving gradually to open up their economy to international forces. The People’s Republic of China has expanded the trade in gold in yuan and thus the internationalization of the national currency is moving closer. Gold merchants from the industrial metropolis of Shenzhen have been trading their yuan gold at the Hong Kong Stock Exchange since last week. Previously, this was only possible for Hong Kong gold traders. While some immediately claim this is China attacking the dollar, they are completely ignorant of international capital necessities.

This post was published at Armstrong Economics on Nov 14, 2017.

Key Events In The Coming Week: Taxes, Inflation, Yellen, Draghi, Kuroda And Brexit

This week’s economic calendar features several key data releases and Fedspeak. The main data release in US include: CPI inflation, retail sales, industrial production, housing data and monthly budget statement. We also get the latest GDP and CPI reading across the Euro Area; the employment report in the UK and AU, Japan GDP, China IP, retail sales and FAI. In Emerging markets, there are monetary policy meetings in Indonesia, Chile, Egypt and Hong Kong.
Market participants will also want to pay close attention to tax reform progress in Washington. The House Ways and Means Committee had voted along party lines (24-16) to deliver its bill to the full House. The Senate Finance Committee’s proposal was also revealed last week and is slated for markup this week. Both versions are essentially opening gambits by the two chambers and the hard work begins when the two bills are ‘reconciled’. As a reminder, the Senate version is likely to be closer to the final version. In our view, there is a decent chance that some version of tax reform can be achieved, but this is likely to be a Q1 event and there are numerous potential stumbling blocks along the way.
With respect to the data, October inflation and retail sales reports are the main focus. Tuesday, DB expects headline PPI (+0.1% forecast vs. +0.4% previously) to moderate following a spike in gasoline prices last month due to hurricane-related supply disruptions. However, core PPI inflation (+0.2% vs. +0.1%) should firm. Analyst will focus on the healthcare services component of the PPI, as this is an input into the corresponding series in the core PCE deflator – the Fed’s preferred inflation metric. Recall that healthcare has the largest weighting in the core PCE.

This post was published at Zero Hedge on Nov 13, 2017.

Japan Rocked By Violent Stock Plunge As Nikkei Tumbles 850 Points Before Recovering Losses

Something snapped in Japan today.
With Asian stocks finally breaking out a decade-long doldrum, and hitting record highs earlier in the session, and with Japanese equities starting off the session on the right foot and continuing their recent ascent which until Wednesday had seen them rise on 23 of the past 25 days, Japanese shares suddenly lurched on Thursday, plunging sharply lower after dramatic intraday swings took the Nikkei and Topix indexes to multi-decade highs only to drop in the afternoon on futures-driven trading ahead of the following day’s options settlement. All told, in a little over an hour, what had been another solid rally in Japanese stocks turned into some rather sharp clear-air turbulence, with the Nikkei 225 Stock Average plunging about 3.6% from the afternoon-session high to its low for the day.
It all started off well enough: in the morning session, the Topix notched a new 26-year high and the Nikkei 225 broke the 23,000 level for the first time since January 1992, as financial and securities shares rallied.
Then something flipped and in a gut-churning rollercoaster of a move, the Nikkei lurched from an over 2% gain which took it to a fresh 25 year high at the end of the morning session, to a loss of as much as 1.7%. The sudden reversal quickly spread to the currency market, with the yen surging before spreading across Asia: South Korean and Hong Kong equities also tumbled in sympathy. As Bloomberg snarks, “Sydney traders could count themselves lucky their market had already closed before the worst of the sell-off.”

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

Global Stock Meltup Sends Nikkei To 25 Year High

The global risk levitation continues, sending Asian stocks just shy of records, to the highest since November 2007 and Japan’s Nikkei topped 22,750 – a level last seen in 1992 – while European shares and US equity futures were mixed, and the dollar rose across the board, gains accelerating through the European session with EURUSD sumping below 1.16 shortly German industrial output shrank more than forecast, eventually dropping to the lowest point since last month’s ECB meeting. Meanwhile soaring iron-ore prices couldn’t provide relief to the Aussie as the RBA held rates unchanged as expected; Oil traded unchanged at 2.5 year highs, while TSY 10-year yields rose while the German curve bear steepened, both driven by selling from global investors.
The Stoxx Europe 600 Index edged lower, erasing an early advance, despite earlier euphoria in stocks from Japan to Sydney, which reached fresh milestones. Disappointing reports from BMW AG and Associated British Foods Plc weighed on the European index as third-quarter earnings season continued. Earlier, the Stoxx Europe 600 Index rose as much as 0.3%, just shy of a 2-year high it reached last week. Maersk was among the worst performers after posting a quarterly loss, saying a cyberattack in the summer cost more than previously predicted. Spain’s IBEX 35 gains crossed back above its 200 day moving average. European bank stocks trimmed gains after European Central Bank President Mario Draghi said that the problem of non-performing loans isn’t solved yet, though supervision has improved the resilience of the banking sector in the euro region. Draghi was speaking at a conference in Frankfurt.
Over in Asia, equities rose to a decade high, with energy and commodities stocks leading gains as oil and metals prices rallied. The MSCI Asia Pacific Index gained 0.8 percent to 171.40, advancing for a second consecutive session. Oil-related shares advanced the most among sub-indexes as Inpex Corp. rose 3.7 percent and China Oilfield Services Ltd. added 4.6 percent. The MSCI EM Asia Index climbed to a fresh record. The Asia-wide gauge has risen 27 percent this year, outperforming a measure of global markets. The regional index is trading at the highest level since November 2007. Hong Kong’s equity benchmark was at its highest since December 2007 as Tencent Holdings Ltd. advanced for an eighth session. Australia’s S&P/ASX 200 index closed at its highest level since the financial crisis.

This post was published at Zero Hedge on Nov 7, 2017.

Frontrunning: November 3

House GOP Readies for Tax-Bill Battle (WSJ) GOP’s United Front on Tax Cuts Masks Divisions (BBG) Republican tax plan a blow to Democratic states, officials say (Reuters) As Trump Embarks on Asia Tour, North Korea Looms Large (WSJ) Apple Store Lines Return as iPhone X Debuts (WSJ) There’s Some Good News About 401(k)s in the Tax Bill (BBG) iPhone Xs Are Already Being Resold in Hong Kong (BBG) CNN to Launch Subscriptions for Digital News (WSJ) Mr. Ordinary: Who Is Jerome Powell, Trump’s Fed Pick? (WSJ) U. S. bomber drills aggravate North Korea ahead of Trump’s Asia visit (Reuters) Bitcoin Is the ‘Very Definition’ of a Bubble, Credit Suisse CEO Says (BBG) Goldman Retreats From Options as Stock Derivatives Trading Struggles (WSJ) Here’s a Juicy Tax Break. Now, How to Keep Everybody From Claiming It? (BBG) Dark Side at Fidelity: Women Describe a Culture of Revenge (BBG) Get Ready for an Appalachian Gas Bonanza (BBG) PDVSA Bonds Slump After Venezuela Calls for Restructuring: Chart (BBG) Drug Deaths Rose More Last Year Than in the Previous Four Combined (BBG) Overnight Media Digest
WSJ
– Two U. S. B-1B bombers flew near North Korea on Thursday, alongside Japanese and South Korean jet fighters, provoking anger from Pyongyang ahead of President Donald Trump’s closely watched trip to Asia. on.wsj.com/2gZ02qP
– The Justice Department is laying the groundwork for a potential lawsuit challenging AT&T Inc’s planned acquisition of Time Warner Inc if the government and companies can’t agree on a settlement, according to people familiar with the matter. on.wsj.com/2ipyGuh
– T-Mobile US Inc and Sprint Corp are working to salvage their potential blockbuster merger, people familiar with the matter said, days after Sprint Chairman Masayoshi Son appeared to call off the talks. on.wsj.com/2gZNq2Q

This post was published at Zero Hedge on Nov 3, 2017.

Market Talk- October 31, 2017

A slow but steady day in Asian equity markets, but happy in the knowledge that the BOJ left almost everything unchanged. The Nikkei closed almost unchanged but has set an impressive two month rally. At above 22k the index closes at a 21 year high, but after the weak opening it took all day to recover unchanged. The Yen was a little weaker (0.5%) as it challenges the 114 handle again. The Australian ASX did open better but drifted throughout the day eventually closing on its low. However, irrespective of todays price action it has been a constructive month for the All Ords with a gain of around 3%. Shanghai managed to shake-off the PMI miss (51.6 against market expectations of 52), with Services also declining. In Hong Kong the Hang Seng we closed down -0.3% with bank stocks weighing on the market.
Although we finished the month on a positive note, volumes were low. This usually is the case when a large index is closed and with Germany on a national holiday the absence of the DAX was noticeable. Spain’s IBEX helped sentiment though with a daily gain of +0.7%. The market is valuing ‘no news’ as positive these days, so with the demand for yield ever present any quiet day is good for low grade paper. This is present when comparing global credits to the states where it is not uncommon to find BBB credits trading even yield with US treasuries. The CAC managed a small +0.2% gain whilst the largest bank (BNP Paribas) recorded as the worst performing European bank stock today (-2.7%). UK’s FTSE managed a small positive for the day but an +0.5% in the currency helped international investors as traders continue to price in a BOE move on Thursday. Talk is that BREXIT discussions may be progressing better than many had expected but we have yet to hear details.

This post was published at Armstrong Economics on Oct 31, 2017.

Meet Sophia: The Humanoid Robot That Was Granted Citizenship By Saudi Arabia

One of the reasons why Saudi Arabia has found itself in fiscal and budgetary dire straits in recent years, is that as a result of the plunge in oil prices in recent years, the government has been unable to keep paying the thousands of local and foreign workers who are (or were) employed on any number of local infrastructure and development projects. However, with the Aramco IPO also suddenly on the rocks even as the country’s reserves continue to shrink and deficits grow, the Gulf kingdom appears to have come up with a radical solution to its structural problems, when on Wednesday Saudi Arabia became the first nation in the world to grant a robot citizenship.
The outspoken humanoid robot called Sophia, flown in from Hong Kong, was granted Saudi citizenship at the Future Investment Initiative, a major investment conference hosted by the Public Investment Fund (PIF) that aims to highlight the Kingdom’s ambitious Vision 2030 plan for the future.
“We have a little announcement. We just learnt, Sophia; I hope you are listening to me, you have been awarded the first Saudi citizenship for a robot,’ said panel moderator Andrew Ross Sorkin of CNBC’s ‘Squawk Box’ and the NYT.
‘Thank you to the Kingdom of Saudi Arabia. I am very honored and proud for this unique distinction,’ Sophia told the panel. ‘It is historic to be the first robot in the world to be recognized with citizenship.’

This post was published at Zero Hedge on Oct 26, 2017.

SWOT Analysis: How Will Gold Move Into 2018?

Strengths
The best performing precious metal for the week was palladium, off 1.44 percent for the week. Citigroup favors palladium in the short term, in response to pollution control, but says substitution risks prevent the bank from taking a more bullish view long term as the price of palladium is now higher than the price of platinum. After the Indian government eased rules on gold purchases, the country’s demand for gold jewelry and branded coins appears to be better than the last quarter, according to P. R. Somasundaram, MD for India at the World Gold Council. The ensuing wedding season is the key for quarterly demand performance, Bloomberg reports, and with a good monsoon season, stable gold prices should encourage consumers. In the month of September, Swiss gold exports doubled month-over-month to 148.4 metric tons, reports Bloomberg. In August, exports were only 72 tons, according to the Swiss Federal Customs Administration. Specifically, Swiss exports to China rose 21 percent and to Hong Kong rose 92 percent. Weaknesses
The worst performing precious metal for the week was platinum, off 2.41 percent as palladium seems to be the more crowded trade. September makes 11 months straight of China officially reporting a zero increase in the level of its gold reserves, writes Lawrie Williams. The only time in recent years that the Asian nation has published any month-by-month gold reserve accumulations was in the 16 months ahead of the yuan being accepted as an integral part of the International Monetary Fund’s (IMF) Special Drawing Rights basket of currencies, Williams continues. ‘We don’t think it coincidence that such month-by-month reporting effectively ceased once the yuan became part of the SDR, thus paving its way for acceptance as a reserve currency,’ the article reads.

This post was published at GoldSeek on 23 October 2017.

Alarm! Hang Seng Index Plunges -1.92% (FTSE MIB [Italy] Down -1.24%)

The US stock market is boring, to say the least. It just keeps going up like a crazed Energizer bunny on steroids. Even The Hindenburg Omen, which predicted the crash in 2007-2008, has been flashing furiously since 2012. Yet the US stock market keeps banging its cymbals.
Which brings us to Hong Kong’s stock market, the Hang Seng index which fell -1.92% overnight.

This post was published at Wall Street Examiner on October 19, 2017.

Buy-The-Black-Monday-Echo-Dip – Stocks Dip & Rip After China Bubble Warnings

pic.twitter.com/g4EjXXJofL
— StockCats (@StockCats) October 19, 2017

NOTE: Before we start – something went very funky in the last couple of minutes of the market today – TRUMP SAID TO BE LEANING TOWARD POWELL FOR FED CHAIR: POLITICO – a Dovish pick…
For a brief moment there this morning, some reality poked its head out of the cave after PBOC’s Zhou raised fears of asset bubbles needing to be controlled, Hong Kong stocks crashed, Spain appeared to invoke Article 155, and AAPL slid on sales concerns… but that did not last long as commission-takers reminded the machines that 1987 can never happen again.. ever.. and that every dip is beholden to be bid…
Small Caps and Nasdaq remain red on the week as The Dow pushes on…

This post was published at Zero Hedge on Oct 19, 2017.

What a Gold-Backed Yuan and Cryptocurrencies May Mean for the Dollar

Amoungst all the crypto news this, and crypto news that, was a tiny item appearing in the Nikkei Asian Review on September 1st. Reporting from Denpasar, Indonesia, Damon Evans wrote, ‘China is expected shortly to launch a crude oil futures contract priced in yuan and convertible into gold in what analysts say could be a game-changer for the industry.’
Not bitcoin backed, not ethereum backed, g-o-l-d backed. How low tech of the Chinese. For the moment, oil is priced in dollars, whether it’s Brent or West Texas Intermediate.
Evans explained,
China’s move will allow exporters such as Russia and Iran to circumvent U. S. sanctions by trading in yuan. To further entice trade, China (the world’s largest oil importer) says the yuan will be fully convertible into gold on exchanges in Shanghai and Hong Kong.
This will be China’s first commodities futures contract open to foreign companies such as investment funds, trading houses and petroleum companies.

This post was published at Ludwig von Mises Institute on October 20, 2017.

Global Markets Shaken By Sudden Equity Sell-Off: Hong Kong Crashes, VIX Surges

Has the market’s “melt-up” levitation finally ended? Of course, it could be much worse: as Bloomberg’s Paul Jarvis recalls, thirty years ago on this day traders around the globe were staring at their screens in disbelief as stock markets turned to a sea of red: the Dow, S&P 500, FTSE, DAX and CAC fell -23%, -20%, -10%, -9% and -10% respectively.
Fast forward to 2017 and the day known as Black Monday appears as little more than a blip in U. S. and European stock markets’ relentless progress. Having closed above the 23,000 mark for the first time on Wednesday, the Dow Jones Industrial Average has led markets back from the abyss, rising more than 13-fold since falling 23% in a single trading session on Oct. 19, 1987. Then again, “all” it took was central banks collectively buying a little over 30% of global GDP in debt over the past 3 decades, and especially in the past 8 years, to create the world’s most artificial “bull market” and “recovery” in history, and one day there will be hell to pay, but not just yet. Instead, on “Not Green Thursday”, traders wake up today to a modern day version of mini Black Monday, in which a sudden “risk-off” equity selloff has swept across global markets during early European trading, before gradually running out of steam, following a day in which the Dow Jones closed at one of its most overbought levels in the past 100 years.

This post was published at Zero Hedge on Oct 19, 2017.

Own this currency [no, it’s not a cryptocurrency]

With the nearly daily moves to record highs among the hundreds of cryptocurrencies that currently exist, talking about ‘regular’ currencies seems about as out-of-fashion as that hideous shoulder pad trend from the 1980s.
[Millennial readers: see here if you’re confused.] But there are actually a few currencies out there worth talking about right now.
And top among them, especially for anyone holding US dollars, is the Hong Kong dollar.
The Hong Kong dollar is different because it is ‘pegged’ to the US dollar at a pre-determined rate.

This post was published at Sovereign Man on October 18, 2017.

The World Turned Upside Down

Thoughts from the Frontline The World Turned Upside Down BY JOHN MAULDIN
OCTOBER 14, 2017
Options Email Print Where Has the Volatility Gone?
A Bull Market in Complacency
San Francisco, Denver, Lugano, and Hong Kong
Strange things did happen here
No stranger would it be
If we met at midnight
In the hanging tree.
– Lyrics from the theme song of The Hunger Games
If buttercups buzz’d after the bee,
If boats were on land, churches on sea,
If ponies rode men and if grass ate the cows,
And cats should be chased into holes by the mouse,
If the mamas sold their babies
To the gypsies for half a crown;
If summer were spring and the other way round,
Then all the world would be upside down.

This post was published at Mauldin Economics BY JOHN MAULDIN OCTOBER 14, 2017.

“My Watch Is Off”: HSBC Traders Used Code Words To Trigger Front-Running Trades

According to prosecutor Carol Sipperly, former HSBC currency trader Mark Johnson used just four words to trigger a massive, international front-running operation that netted his firm some $8 million in illicit profits: “my watch is off.”
The bank’s former global head of foreign exchange alerted the traders around the globe via a phone call in December 2011 that was recorded, a prosecutor said Thursday. The gambit was designed to take advantage of a $3.5 billion client order to buy sterling, the U. S. says.
After Johnson’s trial recessed for the day, prosecutor Carol Sipperly asked that the jury hear the recordings on Friday, in which Johnson allegedly tipped off a trader in Hong Kong. That signal eventually reached others on both sides of the Atlantic, she said. Johnson was in New York that day, speaking to Stuart Scott, the bank’s former head of currency trading in Europe, who was in London, just before the transaction for its client, Cairn Energy Plc.
Prosecutors say Johnson and Scott, along with other traders, bought pounds before the transaction. Johnson is on trial in federal court in Brooklyn, New York, accused of a scheme that produced a $8 million profit for his bank.

This post was published at Zero Hedge on Oct 6, 2017.

Market Talk- October 6th, 2017

The end of a holiday week for markets in Asia. We have to wait until Monday to see mainland China, South Korea and Hong Kong’s reaction to the US NFP’s release and also the reaction to the turn of the US Dollar Index. Markets that were opened were seeing futures initial response trading firmer as the US number is ‘accepted’. Lets just concentrate on the afternoons events, as it only feels the markets just smelt the coffee and woken-up – now that the weekend is upon us!
The alarm clock came in the shape of a negative headline number to the US No-Farm Payrolls at -33k, with a 13k upward revision to previous release. Unemployment rate (September) came in 4.2%, participation rate 63.1% and a +0.5% average hourly earnings increase. The response was higher bond yields, stronger US Dollar, weaker oil (probably because of the USD strength), marginally weaker gold price – although the bias remains negative. Still, many question this US rally and even more are awaiting (or hoping for) a pullback. This remains the most unloved rally in years and now the market questions, ‘Is the FED about to get the blame for ending the anguish’! We won’t hear until December, but meanwhile the continued speculation on who gets next FED Chair remains a top talking point.

This post was published at Armstrong Economics on Oct 6, 2017.

Here Are The Cities Of The World Where “The Rent Is Too Damn High”

In ancient times, like as far back as the 1990s, housing prices grew roughly inline with inflation rates because they were generally set by supply and demand forces determined by a market where buyers mostly just bought houses so they could live in them. Back in those ancient days, a more practical group of world citizens saw their homes as a place to raise a family rather that just another asset class that should be day traded to satisfy their gambling habits.
But, thanks to the efforts of global central banks, the days where home prices roughly reflected the ability of the marginal local buyer to afford those homes, is long gone. As a general rule of thumb, a house was historically considered “affordable” if it was less than 2.5 times a family’s annual gross income…by those metrics, at least according to the UBS Global Real Estate Bubble Index released earlier today, the median buyer can’t afford housing in pretty any of the major cities of the world.
Buying a 60m2 (650 sqft) apartment exceeds the budget of people who earn the average annual income in the highly skilled service sector in most world cities. In Hong Kong, even those who earn twice the city’s average income would struggle to afford an apartment of that size. House prices have also decoupled from local incomes in London, Paris, Singapore, New York and Tokyo, where price-to-income multiples exceed 10. Unaffordable housing is often a sign of strong investment demand from abroad, tight zoning and rental market regulations. If investment demand weakens, the risk of a price correction will increase and the long-term appreciation prospects will shrink.

This post was published at Zero Hedge on Sep 29, 2017.

Bond Market Bulls Embrace China Debt Downgrade

It appears credit ratings agencies simply get no respect…
Four months after Moody’s downgraded China to A1 from Aa3, unwittingly launching a startling surge in the Yuan as Beijing set forth to “prove” just how “stable” China truly is through its nationalized capital markets, S&P followed suit this week when the rating agency also downgraded China from AA- to A+ for the first time since 1999 citing risks from soaring debt growth, less than a month before the most important congress for Chiina’s communist leadership in the past five years is set to take place. In addition to cutting the sovereign rating by one notch, S&P analysts also lowered their rating on three foreign banks that primarily operate in China, saying HSBC China, Hang Seng China and DBS Bank China Ltd. are unlikely to avoid default should the nation default on its sovereign debt. Following the downgrade, S&P revised its outlook to stable from negative.
‘China’s prolonged period of strong credit growth has increased its economic and financial risks,’ S&P said.
‘Since 2009, claims by depository institutions on the resident nongovernment sector have increased rapidly. The increases have often been above the rate of income growth. Although this credit growth had contributed to strong real GDP growth and higher asset prices, we believe it has also diminished financial stability to some extent.”
According to commentators, the second downgrade of China this year represents ebbing international confidence China can strike a balance between maintaining economic growth and cleaning up its financial sector, Bloomberg reported. The move may also be uncomfortable for Communist Party officials, who are just weeks away from their twice-a-decade leadership reshuffle.
The cut will ‘have a relatively big impact on Chinese enterprises since corporate ratings can’t be higher than the sovereign rating,’ said Xia Le, an economist at Banco Bilbao Vizcaya Argentaria SA in Hong Kong. ‘It will affect corporate financing.’

This post was published at Zero Hedge on Sep 23, 2017.

S&P Downgrades China To A+ From AA- Due To Soaring Debt Growth

Four months after Moody’s downgraded China to A1 from Aa3, unwittingly launching a startling surge in the Yuan as Beijing set forth to “prove” just how “stable” China truly is through its nationalized capital markets, moments ago S&P followed suit when the rating agency also downgraded China from AA- to A+ for the first time since 1999 citing risks from soaring debt growth, less than a month before the most important congress for Chiina’s communist leadership in the past five years is set to take place. In addition to cutting the sovereign rating by one notch, S&P analysts also lowered their rating on three foreign banks that primarily operate in China, saying HSBC China, Hang Seng China and DBS Bank China Ltd. are unlikely to avoid default should the nation default on its sovereign debt. Following the downgrade, S&P revised its outlook to stable from negative.
‘China’s prolonged period of strong credit growth has increased its economic and financial risks,’ S&P said. ‘Since 2009, claims by depository institutions on the resident nongovernment sector have increased rapidly. The increases have often been above the rate of income growth. Although this credit growth had contributed to strong real GDP growth and higher asset prices, we believe it has also diminished financial stability to some extent.”
According to commentators, the second downgrade of China this year represents ebbing international confidence China can strike a balance between maintaining economic growth and cleaning up its financial sector, Bloomberg reported. The move may also be uncomfortable for Communist Party officials, who are just weeks away from their twice-a-decade leadership reshuffle.
The cut will ‘have a relatively big impact on Chinese enterprises since corporate ratings can’t be higher than the sovereign rating,’ said Xia Le, an economist at Banco Bilbao Vizcaya Argentaria SA in Hong Kong. ‘It will affect corporate financing.’
‘The market has already speculated S&P may cut soon after Moody’s downgraded,’ said Tommy Xie, an economist at OCBC Bank in Singapore. ‘This isn’t so surprising.’

This post was published at Zero Hedge on Sep 21, 2017.

Pension Storm Warning

Thoughts from the Frontline Pension Storm Warning BY JOHN MAULDIN
SEPTEMBER 16, 2017
Options Email Print Storms from Nowhere
Blood from Turnips
Promises from Air
Chicago, Lisbon, Denver, Lugano, and Hong Kong
This time is different are the four most dangerous words any economist or money manager can utter. We learn new things and invent new technologies. Players come and go. But in the big picture, this time is usually not fundamentally different, because fallible humans are still in charge. (Ken Rogoff and Carmen Reinhart wrote an important book called This Time Is Different on the 260-odd times that governments have defaulted on their debts; and on each occasion, up until the moment of collapse, investors kept telling themselves ‘This time is different.’ It never was.)
Nevertheless, I uttered those four words in last week’s letter. I stand by them, too. In the next 20 years, we’re going to see changes that humanity has never seen before, and in some cases never even imagined, and we’re going to have to change. I truly believe this. We have unleashed economic and technological forces we can observe but not entirely control.
I will defend this bold claim at greater length in my forthcoming book, The Age of Transformation.
Today we will zero in on one of those forces, which last week I called ‘the bubble in government promises,’ which I think is arguably the biggest bubble in human history. Elected officials at all levels have promised workers they will receive pension benefits without taking the hard steps necessary to deliver on those promises. This situation will end badly and hurt many people. Unfortunately, massive snafus like this rarely hurt the politicians who made those overly optimistic promises, often years ago.

This post was published at Mauldin Economics on SEPTEMBER 16, 2017.