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John Mauldin and Jim Rickards discuss the Looming Debt Crisis and the Fiscal Abyss!
Welcome to Capital Account. The Eurozone Purchasing Managers Index (PMI) points to a European recession, according to Markit Economics. Meanwhile a successful bond auction in Spain brought lower than expected yields. Is Europe on a “choose your own disaster” track? We talk to our guest co-host, Jim Rickards, Senior Managing Director at Tangent Capital Partners, and John [...] By Stephanie Kelton Aug 30, 2012, 6:26 AM Author’s Website My Twitter followers are constantly asking me if I think more spending would really help the economy recover. I understand their skepticism. Many are probably struggling with high debt levels, and the last thing they want is some economist urging them to rack up more debt for the good of the economy. (Bad advice, indeed.) Others have heard President Obama talk about putting Americans back to work [...] via USAWatchdog: The next collapse will make the 2008 meltdown look like a day at the beach. According to Professor William Black, it looks like a mathematical certainty. Black is a former top bank regulator who helped unwind the Savings and Loan scandal. He is also a professor of both law and economics and studies why we have“reoccurring and intensifying financial crises.” In an interview this week, he told me, “. . . each [...] By Andy Xie BEIJING ( Caixin Online ) — By most measures China’s economy has slowed quickly since the last quarter of 2011. Electricity production, the National Bureau of Statistics reports, grew 1.7% in April and May from last year. Over the past decade the annual growth rate was 12%. Also in April and May, the railroad ton-kilometer figure grew by 1.3% compared to the same months [...] By now, the bubble in student loans is becoming more widely understood. The absolute level continues to rise significantly and growth is accelerating with 8% YoY growth just reported, via the WSJ. Of course the reasons are anathema but attending college on the back of hope of a better-paying job when everyone else is also attending college in that hope (thanks to endless student-loan funding from your helpful government) seems to be self-defeating as the [...] by Chris Martenson Bill Black: Our System Is So Flawed That Fraud Is Mathematically Guaranteed “When plunder becomes a way of life for a group of men in a society, over the course of time they create for themselves a legal system that authorizes it and a moral code that glorifies it.” - Frederic Bastiat
Bill Black is a former bank regulator who played a central role in prosecuting the corruption responsible for the S&L crisis [...] It is rather surprising that in a world in which anything and everything is only about money, it is next to impossible to find a consolidated balance sheet of the world’s insolvent economies (i.e., the developed countries: US, Japan and the Euro Area). So for all those seeking a visual presentation of all the liabilities that have to be inflated away by the central banks (because that’s what this is [...] The money-on-the-sidelines argument has reached deafening and self-confirming as anchoring bias among any and every swollen long-only manager seems to have made them ignore the realities of the situation. David Rosenberg, of Gluskin Sheff to the rescue with good old fashioned facts – as much as they might disappoint the audience. Barton Biggs quote in the USA Today article points out how bullish he is and how cash levels are very high [...] While European leaders would prefer to eschew concerns about individual sovereign nations’ ability to pay, borrow, and spend in favor of an aggregate EU that they believe reflects better in the world comparisons (if any aliens are considering stimulus support we assume), Goldman’s Hugo Scott-Gall is out today with his normal compendium of insightful charts. One specifically caught our eye on How Governments Spend as we makes the critical point [...] By Andy Xie BEIJING ( Caixin Online ) — The year 2012 is the most important test for China in two decades. The growth downturn is not just a correction or even a cyclical downturn. It is the end to a two-decade-long, invest-and-export growth model. Shifting to a new growth model requires painful reforms. If China refuses to change, it could experience a lost decade. China’s economic [...] For a few decades now, the Communist Party in China has had an implicit social and political contract with the Chinese populous for decades, which goes something like: “We will deliver economic growth and improvements in your material living standards. You will meekly do as you are told, refrain from dissent, work hard, save a huge percentage of your money, and ignore obvious corruption.” While nearly everyone in China has benefited to [...] by Tim Staermose of Sovereign Man One Alarming Indicator From China For a few decades now, the Communist Party in China has had an implicit social and political contract with the Chinese populous for decades, which goes something like: “We will deliver economic growth and improvements in your material living standards. You will meekly do as you are told, refrain from dissent, work hard, save a huge percentage of your money, and ignore obvious [...] by ZH Everyone hoping that the last quarter of the year would start on an optimistic note was disappointed following not just the continuation of last week’s manipulations now that hedge funds have their marching orders from their LPs, who are certainly seeking to redeem tens if not hundreds of billions in capital, but also from Bill Gross’ monthly letter who in “Six Pac(k)in’” writes that [...] by ZH Let’s cut right down to the case, or in this case the section UBS titles, “Risk Scenarios”: Risk case 1: Disorderly default It may be, however, that compromise between the ‘troika’ and the Greek government becomes at some point impossible. That could occur if the Greek government (and broader socio-political backdrop) is unable to deliver compliance with the IMF program of fiscal austerity, structural adjustment and privatization. This [...] by ZH JP Morgan, whose Banker In Chief has not spared harsh words in the past to describe the POTUS, has released its just as uncompromising assessment of tomorrow’s Obama speech which if predictions are correct, will be such a load of hot air, that the mere non-news factor alone should send the market into a volumetric coma on Friday, hence pushing ES limit up easy [...] by ZH MAIN POINTS: 1. Fed Chairman Bernanke delivered a balanced assessment of the policy outlook, saying that the economy could evolve in a way that would “warrant a move toward less-accommodative policy”, but that persistent weakness in activity and renewed deflationary risks would “imply a need for additional policy support”. In contrast to our expectations, the prepared remarks included a list of potential easing options—communication [...] by ZH As Feroli explains: “This rise has little to do with landlords getting more from their tenants. In fact, it has very little to do with what speakers of the English language would normally consider “rent.” Instead, it mostly reflects mortgage payments of the household sector coming down, in part because of the aggregate decline in household mortgage debt due to net cancellation of mortgages [...] QEII has boosted reserves but banks continue to reduce credit, while broad money has contracted. There is material downside risk to equity valuations. In his latest Market Outlook, CLSA’s Russell Napier: “Whether equities will fall further depends on how flexible and successful the Fed’s next monetary package will be. Given the risk, investors are better off watching from the sidelines.” This should not come as a [...] China has formally overtaken Japan as the world’s second largest economy. Yet, for all the recent excited commentary, there’s less cause for baijiu toasts in Beijing than they might think. That’s because China’s economic growth has followed what’s sometimes called “the Japanese model.” In Japan and other Asian countries, this model has proved extraordinarily successful in the short term in generating eye-popping rates of growth — but it always eventually [...] http://english.caing.com/2011-01-19/100218740.html The numbers still blow me away. In the wake of the crisis, there are observable divergences in the types of responses by developed economies. The challenge is to bring down leverage. A good measurement for national indebtedness is the ratio of the total debt level of the real economy-government, non-financial companies and households relative to GDP. For example, the U.S. government debt is US$ 14 trillion, [...] by Zh Here is David Rosenberg’s take on today’s NFP, recent market action, impact of D.C. gridlock (bad for fiscal policy, no impact, we believe on monetary – all hail emperor Ben) On NFP: NICE TREAT IN U.S. PAYROLLS, BUT THERE WAS A TRICK IN THE HOUSEHOLD SURVEY Well, that was quite the shocker. Nonfarm payrolls managed to dramatically exceed expectations and rung up a total of 151,000 jobs in [...] Amazingly, we discovered that the Household Sector is actually just a catch-all category. It represents the buyers left over who can’t be slotted into the other group headings. For most categories of financial assets and liabilities, the values for the Household Sector are calculated as residuals. That is, amounts held or owed by the other sectors are subtracted from known totals, and the remainders are assumed to be the amounts [...] quote Although an unexpected increase in inflation would let the government repay its debt in cheaper dollars for a short time, financial markets would not be fooled for long, and investors would demand higher interest rates going forward. If the government continued to print money to reduce the value of the debt, the policy would eventually lead to hyperinflation (as occurred in Germany in the 1920s, Hungary in the 1940s, [...] Since another huge stimulus would be DOA within Congress because of widespread public worry over huge and growing deficits, the Obama administration is looking for another “recess appointment” approach. With the US Treasury (borrowing from our children and grandchildren) now set up to provide unlimited backing to Fannie & Freddie, rumor has it that on August 17 when Treasury is set to release plans for the future of Fannie & Freddie, [...] |
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