Category Archives: Debt

As the wealthy flee New York, poorest will be most affected, by Kristin Tate

New York City and State are becoming anti-magnets for younger people seeking opportunity. From Kristin Tate at thehillcom:

Are you a young person thinking of moving to a happening city? Chances are New York is not even on your list of potential hotspots, and if you are already living there, then you are looking for a way out. The last dividends of 20 years of leadership under Rudy Giuliani and Michael Bloomberg are being squandered by well intentioned but increasingly radical policies.

Dragging business practices, skyrocketing taxes, telecommuting, and loss of special status is a toxic mix for New York. Among young people, New York is becoming passe. During recent years, both the city and the state of New York have lost residents, as waves of educated and high earning millennials have fled. In fact, more than 46 percent of New Yorkers of all ages moving out of the state are in the bracket earning above $150,000.

The Empire State budget is in near freefall, in no small part due to lower revenue from middle class and upper class workers, while growing stateslike Texas and Florida are in surplus. Governor Andrew Cuomo noted a $2.3 billion hole in the state budget earlier this year, caused largely by oppressive policies that have gutted the local population and economy. More than 450,000 people moved out of New York in the last year alone.

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Free Money Socialism, by Sven Henrich

The world’s central banks keep spiking the punch bowl. From Sven Henrich at northmantrader.com:

In lieu of my weekly technical update this opinion piece instead: The free money whores are back again. Harsh? Perhaps. Untrue? Not really. As I’ve stated before our market system is broken, central banks, originally created to save economies from disasters have now become the prime movers in preventing so much as a cold propagating free money socialism for the top 1%. Indeed after a series of financial panics (particularly the panic of 1907) the Fed was created in 1913 for central control of the monetary system in order to alleviate financial crises. Now they are in the business of managing markets full time, all the time and have become the primary focal point of price discovery.

It is self evident:

According to Jay Powell the Fed’s primary mission is now to “sustain the economic expansion.” I’ve never used the term “manipulation” before, but let’s just be clear what “sustain the economic expansion” really means: To prevent natural market forces from taking hold. That’s manipulation.

Business cycles are natural. They serve a purpose, they lay the foundation for new growth, they weed out the excess, they permit for a reset of an aging expansion, for a renewed flourishing of innovation, new solutions, creativity, and yes growth.

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Iran goes for “maximum counter-pressure”, by Pepe Escobar

The second order effect of shutting down the Strait of Hormuz would be to collapse huge derivatives market. From Pepe Escobar at strategic-culture.org:

Sooner or later the US “maximum pressure” on Iran would inevitably be met by “maximum counter-pressure”. Sparks are ominously bound to fly.

For the past few days, intelligence circles across Eurasia had been prodding Tehran to consider a quite straightforward scenario. There would be no need to shut down the Strait of Hormuz if Quds Force commander, General Qasem Soleimani, the ultimate Pentagon bête noire, explained in detail, on global media, that Washington simply does not have the military capacity to keep the Strait open.

As I previously reported, shutting down the Strait of Hormuz

would destroy the American economy by detonating the $1.2 quadrillion derivatives market; and that would collapse the world banking system, crushing the world’s $80 trillion GDP and causing an unprecedented depression.

Soleimani should also state bluntly that Iran may in fact shut down the Strait of Hormuz if the nation is prevented from exporting essential two million barrels of oil a day, mostly to Asia. Exports, which before illegal US sanctions and de facto blockade would normally reach 2.5 million barrels a day, now may be down to only 400,000.

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Feeling the Heat of a Civilization on the Downside, by MN Gordon

The old order is fighting an impossible battle to preserve itself. From MN Gordon at acting-man.com:

An Epic Folly for the Ages

Today we begin with a list.  A partial list.  And in no particular order…

Angela Merkel. Donald Tusk. Mario Draghi. Donald Trump. Jerome Powell.  Shinzo Abe.  Haruhiko Kuroda.  Theresa May. Boris Johnson. Mark Carney. Xi Jinping.  Emmanuel Macron.  Vladimir Putin. Justin Trudeau. Juan Trump.  And many, many more…

Politicians and bureaucrats of the modern age of statism and central planning… fighting a rearguard action doomed to fail. [PT]

These central planners – though they may not know it – are facing a no-win situation. They have extrapolated the past and are attempting to preserve the status quo into the future.  Yet their efforts to perpetuate the upward growth curve of their countries and unions are useless against the relentless turn of history.

The political, financial, economic, and social foundations that have been in place over the last 75 years – and perhaps, over the last 220 years – are breaking down.  And no policy directive, no interest rate adjustment, no trade tariff, no five year plan, no extraordinary measures, no green new deal, and no technocratic prevarication is going to stop it. Big Government doesn’t stand a chance.

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The Financial War Escalates, by Alasdair Macleod

Both China and the US will need to borrow a lot of money, and the competition for those funds could turn into a war. from Alasdair Macleod at goldmoney.com:

Behind the scenes, the financial war between America and China is escalating dangerously into a war to secure global financial resources.

At a time of growing liquidation of dollar assets by foreigners, the US Treasury’s internal analysis will highlight future government funding problems in the light of a developing US recession. This will result in an overdependency on inflationary financing, threatening to destabilise the dollar’s purchasing power. For these reasons, America needs foreign portfolios to invest in US Treasuries, at a time when China also needs them to help finance her infrastructure plans and future development. We face a battle for these funds, and the outcome will determine all our futures.

Introduction

When you see a rash, you should look beyond the skin for a cause. It has been like this with Hong Kong over the last few weeks. On the surface we see impressively organised demonstrations to stop the executive from introducing extradition laws to China. We observe that university students and others not much older are running the demonstrations with military precision. The Mainland Chinese should be impressed.

They are unlikely to see it that way. The build-up of riots against Hong Kong’s proposed extradition treaty with the Mainland started months ago, supported and driven by commentary in the Land of the Free. America is now coming out in the open as China’s adversary, no longer just a trading partner worried by the trade imbalances. And Hong Kong is the pressure point.

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Square Minus Zero, by Raúl Ilargi Meijer

Central banking is killing the global economy. From Raúl Ilargi Meijer at theautomaticearth.com:

I intentionally start writing this mere minutes away from Fed chair Jay Powell’s latest comments. Intentionally, because the importance ascribed to those comments only means we have gotten so far removed from what capitalism and free markets are supposed to be about, that it’s pathetic. The comments mean something for rich socialists, but nothing for the man in the street. Or, rather, they mean that the man in the street will get screwed worse for longer.

And it’s not just the Fed, all central banks have it and do it. They play around with rates and definitions and semantics until the cows can never come home again. And they have such levels of control over their respective societies and economies that the mere use of the word “markets” should result in loud and unending ridicule. There are no markets, because there is no price discovery, the Fed and ECB and BOJ got it all covered. Any downside risks, that is.

But it doesn’t, because the people who pretend they’re in those markets hang on central banks’ every word for their meal tickets. These are the same people we once knew as traders and investors, but who today function only as rich socialists sucking the Fed’s teats for ever more mother’s milk.

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It IS Different This Time, by Sven Henrich

The crash is going to be worse than what’s happened in the past, simply because debt levels are higher. From Sven Henrich at northmantrader.com:

They’re right. It IS different this time. It’s worse. Much, much worse. What is? Everything. In terms of preparedness for the next recession that is. Debt is higher than ever, be it corporate debt, government debt, central banks balance sheets, available ammunition to deal with a new recession, wealth inequality, the social divisions and political extremes, and now trillion dollar deficits, everything points to a much more fragile system. Oh yes on paper low rates keep it all afloat, but the context is as ugly as it gets.

Here we are, the great collapse unfolding in front of us. With yesterday’s Fed meeting we witnessed a confirmed breakdown in central bank narratives over last the year, an utter capitulation to market realities that are forcing central banks to commence the new easing cycle. No, this is not a temporary little rate cut event they are promising, it’s a new cycle. The Fed yesterday offered a 3 rate cut outlook, precisely what markets had been pricing in. The Fed bowing before market demands. Give us drugs. Yes, whatever you want, you got it.

The response: An overnight collapse in yields to now below 2% on the 10 year, the lowest reading since the US election in 2016.

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