Category Archives: Financial markets

When Things Don’t Add Up, by James Howard Kunstler

Things don’t generally add up for people whose idea of mathematics is that it’s a white male plot. From James Howard Kunstler at kunstler.com:

It was only a week ago that the American Medical Association (AMA) declared that the category formerly known as “sex” must be removed from US birth certificates — replaced, one supposes, by a tacit “to-be-determined” status in the great Progressive rush to extract the human race from the animal kingdom. Of course, that’s only one skirmish in the great Woke Jacobin war on the moiling masses who clutter up planet Earth, cramping the style of its transhuman-seeking ubermanagers, Bill Gates, Bezos, Daszak, Zuck, Jack, Elon, Klaus & Company, et al.

But this was the old redoubtable, white-coated AMA, you understand, not some claque of screeching, size-16, “body-positive,” gender-cryptic freshman hopping up and down outside the Yale faculty lounge to gurn at the sherry-sipping toffs within. Amateur diagnosticians out there might recognize it as another symptom of the hebephrenic toxicosis infecting America’s elites, especially those who work in realms supposedly based on facts, figures, and the general effort to make sense of life in our mysterious universe.

This national freak-show-of-the-mind might account for the many recent instances of science talking out of its booty-hole, led by its very personification, Dr. Anthony (“The Science”) Fauci, proud papa of SARS-CoV-2 (stage-name: Covid-19), with all its fabulous HIV and monkeypox gain-of-function bells and whistles. Dr. Fauci’s mighty, 20-year effort to bring forth this gift to mankind happens to coincide neatly with the collapse of advanced techno-industrial economies, a frightful condition that was already causing enough trouble in the world before Covid-19 marched in. Some suspect that Covid-19 is a contrived cover for all that, perhaps even an attempt to manage the journey down.

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Western socialism and Eastern capitalism, by Alasdair Macleod

Are the Chinese more capitalistic than the US? From Alasdair Macleod at goldmoney.com:

There has been a significant shift in geopolitics in recent months, with the US consciously deciding to withdraw from Asian conflicts, notably in Afghanistan. But the diplomatic war against Iran also appears to have been downgraded and the US presence in Iraq is to be wound down. Furthermore, President Biden has downplayed his objections to the Nord Stream 2 pipeline between Russia and Germany.

In this, the greatest of Great Games, America has seen the strategic advantage move to the China—Russia partnership, which probably explains why the US is backing off from Asia. Meanwhile, China’s production-based economy is strong while that of the US remains weak, a weakness only disguised by monetary inflation.

China will accelerate her policy of encouraging domestic consumption and trans-Asian trade expansion to become increasingly independent from US markets, which are likely to be hampered by a renewed bout of trade protectionism.

This article examines these and related issues, concluding that China and her close allies will be positioned to survive the worst of a developing monetary and economic crisis about to engulf the West.

Introduction

At the root of the political conflict between the West and China is economics and the global distribution of capital. To understand it, we must sweep away the fog of disinformation, and analyse it dispassionately, devoid of all nationalist instincts.

As soon as the state takes over economic functions from the private sector they get lost and replaced by political objectives. The West’s move from free markets towards greater state control in recent decades while China moved in the opposite direction is behind current geopolitical tensions. Since the days of Deng, China’s authoritarian leadership has prioritised free trade to create national wealth for its people. Meanwhile the objectives of social fairness, to redistribute wealth from the haves to the have-nots, have become a destructive obsession for Western-style democracies.

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Countdown To The Next Lockdown: Biden Says “In All Probability” US Will See More Restrictions, by Tyler Durden

If at first, second, third, etc. you don’t succeed, try the same thing again. The difference this time is that people see through the bullshit and they’re completely fed up with it. From Tyler Durden at zerohedge.com:

By now the narrative has gotten so absurdly grotesque and stupid, it’s as if a platoon of monkeys or, worse, woke SNL writers put it on the back of a shampoo bottle.

Today, when we discussed how US consumers have already burned through almost all of their savings from Biden’s fiscal firehose…

… just as the next burst of inflation is about to come and unleash a stagflationary recession or worse, we said that “there is just one event that could short circuit what appears to be a near-certain recession heading into 2022 and mid-term elections which would be devastating for Democrats faced with an imploding economy: another multi-trillion stimulus, just enough to kick the can by another 4-6 months. But for that to happen, the US economy needs to be shut down again which will only happen only once there is enough covid Delta-variant fearmongering. Which should also explain everything that’s happening right now.”

Well, guess what: after the CDC’s legendary flipflop which has steamrolled the credibility of “science”, and concurrent narrative whiplash it has made even the head of ultra-left liberals spin, today the president who earlier needed an aide to tell him he has “something” stuck to his chin, laid out the Delta endgame when he said that the US will, “in all probability,” see more guidelines and restrictions amid rising coronavirus cases…

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Game Over, by Sven Henrich

Central banks have put themselves in a bind from which they cannot extricate themselves. From Sven Henrich at northmantrader.com:

Game over. Occam’s Razor: The simplest explanation is often the best one. Central banks will never extract themselves. Whether they ultimately end QE is besides the point. They won’t reduce their balance sheets. They can’t. Powell’s “performance” yesterday was not an accident. He’s been running on the same theme of offering absolutely zero specifics. Why? 3 reasons: 1. There are none as there is no plan. 2. To maintain flexibility and not to be held accountable or anything 3. To not upset markets.

We saw this recently when he actually got challenged on MBS and QE. He couldn’t and wouldn’t offer a rationale as to what is actually economically accomplished by it:

More importantly.

He doesn’t know. And why would he? There is zero precedent for this much combined liquidity from the fiscal and monetary side along with a rapid economic reopening with consumers’ pockets stuffed with free money from the government.

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David Stockman on Why Money Printing Doesn’t Generate Economic Growth

How can the simple act of printing out scrip or making an electronic bookkeeping entry generate anything real, like increased productivity or real economic growth? From David Stockman at internationalman.com:

Fed stimulus

To understand the Fed’s culpability for the inflationary disaster afflicting the American economy, it is necessary to start with the Big Lie that underlies all of its destructive machinations: the claim that market capitalism gravitates toward cyclical instability, recession and chronic shortfall from its potential Full Employment path.

From this presumption, there flows an alleged requirement for continuous central bank “stimulus.” Deft action by the central banking arm of the state is purportedly needed to compensate for the inherent prosperity-retarding imperfections of the free market.

If Fed policy has actually been reducing cyclical instability and pushing the $21 trillion US economy ever closer to its Full Employment potential, then productivity growth should be rising over time commensurate with the Fed’s more aggressive deployment of its “stimulus” policies.

In this context, it should be noted that productivity growth is a purer measure of monetary policy impact than total real GDP growth. That’s because the latter is in part driven by long-run demographics and the annual growth of the labor supply.

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Save, Invest, Speculate, Trade or Gamble? by Doug Casey

The way you deploy your money will determine the quality of your retirement and probably the rest of your life as well. From Doug Casey at internationalman.com:

save, invest

For some time, I’ve been saying that the economy is in the “eye of the storm” and that when it emerged, the weather would be far rougher than in 2008. The trillions of currency units created since 2007, combined with artificially suppressed interest rates, have papered over the situation. But only temporarily. When the economy goes into the trailing edge of the hurricane, the storm will be much different, much worse, and much longer lasting than what we experienced in 2008 and 2009.

In some ways, the immediate and direct effects of this money creation appear beneficial. For instance, by not only averting a sharp complete collapse of financial markets and the banking system, but by taking the stock market to unprecedented highs. It’s allowed individuals and governments to borrow more, and live even further above their means. It may even create what’s known as a “crack-up boom”.

However, a competent economist (as distinguished from a political apologist, many of whom masquerade as economists) will correctly assess the current prosperity as an illusion. They’ll recognize it as, at best, a natural cyclical upturn – a “dead cat bounce.”

What we’re really interested in, however, are not the immediate and direct effects of QE— “Quantitative Easing”, and ZIRP—Zero Interest Rate Policy. As much as I love the way they fabricate these acronyms and euphemisms, what we’re really interested in is their indirect and delayed effects. In particular, how do we profit from them? What is likely to happen next in the economy? Which markets are likely to go up, and which are likely to go down?

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In a Hall of Mirrors You Have To Break Some Glass To See Clearly, by James Howard Kunstler

Perhaps the biggest driver of vaccine refusal is not their demonstrated dangers, but rather the full court press by people and institutions that lost whatever trust they had with the public long ago, particularly the government. From James Howard Kunstler at kunstler.com:

I’ll tell you what’s really funny: the new Sam Harris “Making Sense” podcast with Dr. Eric Topol, veep of Scripps Research. These two just can’t make sense of why the folks outside their Southern California smuggery bubble have any reservations about getting vaxed-up against Covid-19. It’s like a mental illness to them — all these selfish, Trump-driven, flag-smooching ignoramuses beyond the pale of Wokery, who are putting at risk their science-loving betters in the PhD hives of the New Normal, while that King Kong of Covid variants (code-name Delta) rages through the hillsides and canyons beneath Mulholland Drive. The insolence! Can’t these morons just follow simple instructions (available 24/7 at CNN)?

Okay, here’s why, Sam and Eric: Because every institution in American life has squandered its credibility in the service of a political program that seeks to destroy whatever used to be worth caring about in Western Civ, including free thought, free speech, free inquiry, free movement, truth, beauty, and the right to resist official coercion. Half the country has no trust in the government’s public health apparatus, led by the — shall we say — slippery Dr. Anthony Fauci. Should they believe NPR? The New York Times? CBS-News? Should they follow every bob and judder of Rachel Maddow’s Adam’s apple? Should they swallow every globule of obvious horse-shit served up by Jen Psaki?

Hey Sam and Eric, have you followed what went on in the US Department of Justice and the FBI the past five years, these supposed redoubts of rectitude? The manufactured “Russian Collusion” hoax? The official lying to FISA courts? The malicious prosecutions? The transparently seditious activities of CIA agent Eric Ciaramella & Co.? The hiding of Hunter Biden’s evidence-stuffed laptop?  The enlistment of Facebook, Twitter, and Google in suppression of the news and censorship of opinion? Do you expect people to believe that the basement-haunting “Joe Biden” won an election with those slim victories in the Wokester-controlled, fraud-drenched city precincts of Philadelphia, Atlanta, Milwaukee, and Detroit? Or that Merrick Garland and Christopher Wray wouldn’t lie about it?

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Cascade of Consequences, by Jim Quinn

The consequences we’ve seen have been bad enough, but the worst is yet to come. From Jim Quinn at theburningplatform.com:

“There was truth and there was untruth, and if you clung to the truth even against the whole world, you were not mad.” – George Orwell 1984

Image

“People will agree with you only if they already agree with you. You do not change people’s minds.”Frank Zappa

Orwell and Zappa’s words of wisdom have never been truer than they are today. The level of untruth proliferated by the government, mainstream media, central bankers, military leaders, Big Tech, Big Pharma, Big Corp., and billionaire oligarchs has reached prolific heights. We are lost in a whirlwind of lies, destined to grow into a tornado of tragedy and ultimately result in a cascade of consequences.

Since the installation of the illegitimate dementia patient as president of this dying empire of debt by the Deep State (billionaire oligarchs, surveillance state agencies, military industrial complex, Silicon Valley censorship tyrants, corrupt bought off state politicians, Soros installed bureaucrats, and their propaganda arm – fake news media outlets), the country has further fractured into warring factions.

It has been driven by political party, moral vs. immoral, black vs. white, criminals vs. police, normal vs. abnormal, capitalists vs. communists, Federal Reserve vs. the people, vaxxer sheep vs. natural immunity realists, authoritarians vs. freedom fighters, critical thinkers vs. non-thinking believers, privileged elite vs. common men and women, citizens vs. traitors, powerful vs. powerless, and evil versus good.

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Bond Market Has Been Clueless about Inflation for Decades, Now More so Than Ever. The Meme the Drop in Yields = End of Inflation is a Fantasy, by Wolf Richter

Bonds are probably the worst investment out there, but even if they’re not, they certainly make the top three. From Wolf Richter at wolfstreet.com:

Even before QE, the 10-year yield lagged years behind CPI, up and down. And now, the Fed manipulates the market with QE.

The 10-year Treasury yield was 1.75% at the end of March, but by July 19, it had dropped to 1.19%, and on Friday it closed at 1.30%. This drop in the yield occurred even as inflation spiked. On a month-to-month basis for the past three months, and annualized, the Consumer Price Index spiked by 9.5%, the red-hottest since 1982. Year-over-year, CPI in June jumped 5.4%.

But the new meme now is that the drop in the 10-year Treasury yield is telling us the spike in inflation is nothing to worry about, and that by next early year, CPI will be at 1% or 1.5% or whatever. The meme now is that the bond market is right and CPI is wrong or something.

Historically, for much of the time, the 10-year yield is higher than the rate of annual CPI, meaning the “real” 10-year yield (after inflation) is positive. But there are periods when the 10-year “yield” is below CPI, for a negative real yield. Currently, with the 10-year yield at 1.3% (black line) and annual CPI at 5.4% (red line), the 10-year “real” yield is -4.1%, the most negative since June 1980:

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2020—2022 versus 1929—1932, by Alasdair Macleod

If the earlier period is an analogue, then we’re headed for a severe depression. From Alasdair Macleod at goldmoney.com:

Current levels of equity markets are not only divorced from their underlying economic and business realities but are repeating the madness of crowds that led to the Wall Street crash of 1929—1932. The obvious difference is in the money: gold-backed dollars then compared with unbacked fiat today.

We can now begin to see how markets and monetary events are likely to develop in the coming months and this article provides a rough sketch of them. Obviously, the financial asset bubble will be burst by rising interest rates, the consequence of rising prices for consumer essentials. Fiat currencies will then embark on a path towards worthlessness because the monetary authorities around the world will redouble their efforts to prevent interest rates rising, bond yields rising with them, and equity values from collapsing; all by sacrificing their currencies.

The ghost of Irving Fisher’s debt-deflation theory will soon be uppermost in central bankers’ minds, preventing them from following anything other than a radically inflationary course regardless of the consequences.

Current views that tapering must be initiated to manage the situation miss the point. More QE and even direct purchases of bonds and equities are what will happen, policies that will certainly fail.

Anyone seeking to survive these unfolding conditions will be well advised to put aside some sound money — physical gold and silver.


Introduction

In the past I have compared the current market situation with 1929, when the US stockmarket suffered a major collapse that October. With memories short today, many will have even forgotten that between 12 February and 23 March last year the Dow Jones Industrial Index fell 38.4% top to bottom in less than six weeks, paralleling the 66% fall between 4 September and 13 November 1929 on an eerily similar timescale. Figure 1 shows the Dow of ninety years ago superimposed on top of that of today, shifted so that November 1929 coincides with March last year.

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