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Economic Outlook

Big Policies, Bigger Failures

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Posted by Peter Schiff - Euro Pacific Capital

on Friday, 19 August 2016 07:08

schiffEconomics is far simpler than most in academics or government would have you believe. To make accurate predictions all you really need is an honest appreciation of the self-interest that is at the heart of free market transactions and an ability to understand how regulations that attempt to "correct" these realities don't work. This is certainly the case with the completely predictable slow-motion train wrecks that are the signature U.S. domestic policy experiments of the last eight years: Obamacare and Federal Reserve stimulus. From the start, I issued countless commentaries on why both would fail spectacularly. The jury has started to come back on Obamacare, and the results are a disaster. And while the verdict on the Fed's policies has yet to arrive in similarly stark terms, I believe that its failure is just as certain.

As I explained in my July 30, 2012 commentary "Justice Roberts is Right: The Plan Won't Work," the central flaw (among many others) in Obamacare is that it incentivizes younger, healthier people to drop out of insurance coverage while encouraging older, sicker people to sign up. The result would be a pool of insurance participants that would guarantee losses for those providing coverage. That's exactly what we are seeing.



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Economic Outlook

US Economy Priced in Gold

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Posted by Gary Christenson - The Deviant Investor

on Wednesday, 08 June 2016 18:43

We all know the debt load in the US economy is horrendous and unsustainable. The US government runs deficits of approximately $1 Trillion per year, even with interest rates at historical lows. Current official national debt exceeds $19 trillion, of which $13.9 trillion is public debt. Unfunded liabilities are much larger. Even a 7% average interest rate would require nearly $1 trillion per year for interest only debt service, thereby increasing national debt even more rapidly.

national debt 50 years



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Economic Outlook

The Current Humungous Depression

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Posted by The Burning Platform

on Friday, 20 May 2016 07:25

Bowery-Bread-LineWe are not in a recession. We are in a depression, and have been since the turn of the century.

"If one dates the beginning of a depression from the beginning of the unsustainable expansion of debt that preceded it, then the current depression began in 1987."

"Governments and central banks turn recessions into depressions, which are preceded by unsustainable expansions of debt untethered from the real economy."

"Economic depressions unfold slowly, which obscures their analysis, although they are simple to understand.

...read the entire article HERE

 

related: Greenspan: Monetary policy has done everything it can

 

 



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Economic Outlook

Media Darling Naomi Klein's Unfettered Capitalism

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Posted by Michael Campbell - Money Talks - Money Talks

on Wednesday, 11 May 2016 11:37

What! With over 40 billion dollars spent annually to comply with CDN Government regulations. A third of which are useless. More than a million Provincial regulations from bicycles to Ice Cream stands. Billions in tax compliance costs and state cronyism.....

michaelcampbellpic3This May 11th Daily Comment is from Michael Campbell, Canada’s top rated nationally syndicated financial radio show, along with the digital platform moneytalks.net



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Economic Outlook

Big Problem

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Posted by John Rubino - DollarCollapse.com

on Tuesday, 03 May 2016 06:55

Consensus Forming: China Heading Back Into Financial Crisis

China’s historic post-2009 debt binge flew largely under the radar — fooling most observers into thinking the global economy was recovering rather than just re-leveraging. 

Now Beijing is back at it, borrowing over $1 trillion in this year’s first quarter, buying up commodities and creating the illusion of global growth. But this time the scam hasn’t gone unnoticed. Reporters, editors and money managers seem, at last, to be catching on. Some representative headlines: 

George Soros warns of credit crisis in China

Chinese cities dive back into debt to fuel growth even as defaults rise

China debt climbs to US$25 trillion 

China’s banks cut bad debt buffer as profits flatline

Doug Noland, meanwhile, goes to the heart of the problem in last night’s Credit Bubble Bulletin:

I recall an early-1998 Financial Times article highlighting the explosive growth in Russian ruble and bond derivatives. Not only had the “insurance” market for risk protection grown phenomenally, Russian banks had become major operators in what had evolved into a huge speculative Bubble in Russian debt exposures. That was never going to end well. 

There was ample evidence suggesting Russia was a house of cards. Yet underpinning this Bubble was the market perception that the West would not allow a Russian collapse. With such faith and the accompanying explosion in speculative trading, leverage and a resulting massive derivatives overhang, any break in confidence would lead to illiquidity, panic and a devastating bust. Just such an outcome unfolded in August/September 1998.

From a recent Financial Times article: “The [Chinese] market for pledge-style repos — short-term, bond-backed loans — is currently bigger than the stock of outstanding debt”. Within this undramatic sentence exists the potential for a rather dramatic global financial crisis. And, to be sure, seemingly the entire world has operated under the assumption that Chinese officials (and global policymakers in general) have zero tolerance for crisis – let alone a collapse. So Credit, speculation and leverage have been accommodated – and they combined to run absolute roughshod. 

The Financial Times article includes a chart worthy of color printing and thumbtacking to the wall: “China’s Use of Bonds as Loan Collateral Rises Sharply”. The pink line shows “Onshore Market Bonds” having almost doubled since mid-2011 to about 40 TN rmb ($6.17 TN). The Red Line – “Pledge-Style Repos” – has ballooned four-fold since just early 2014 to surpass 40 TN rmb. So basically, in this popular market for inter-bank borrowings, borrowing banks have pledged bond positions larger than the entire market as collateral for their (perceived safe) short-term borrowing needs.

China-repos-April-16



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Economic Outlook

Jim Rogers on America’s Imminent Recession

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Posted by JIm Rogers via The Financial Post

on Tuesday, 26 April 2016 07:33

sdfs"I don’t pay any attention to China’s government officials’ numbers any more than I pay attention to America’s or Germany’s or Canada’s, for that matter. None of them really know, it’s all made up. I do know that things are getting slower in China, they have to. One of their largest trading partners, Japan, is in recession. Many European nations are in recession. Parts of America are slowing down. So if your customers are slowing down, certainly parts of China must be slowing down, and there has been over-building in China......continue reading HERE

related:

Now is a Good Time To Raise Cash



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Economic Outlook

Greenspan: Monetary policy has done everything it can

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Posted by Alan Greenspan via CNBC

on Tuesday, 19 April 2016 07:55

Screen Shot 2016-04-19 at 7.46.30 AMFormer Fed Chairman Alan Greenspan said Thursday that monetary policy has reached the outward bounds of its effectiveness without another round of quantitative easing. 

"Monetary policy … has done everything it can unless you want to put additional QEs on. They're not helping that much in the sense that ultimately determines whether or not you're getting an effect from the QEs" beyond increasing price-to-earnings ratios in the stock market, he said during an interview on CNBC.

....read or listen to more HERE

also:

Marc Faber on Terror's Effect on Markets

 



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