MAR 19 17
SIT EC y POL
ZERO HEDGE.
ECONOMICS
The Fed tightens on Wednesday
and bonds rally. What the hay? GaveKal, Jeff
Gundlach, and Jim
Bianco nailed it in that every spec and their mother are/were short
10-year Treasuries. But this is only a small part of the story: The global bond markets are broken. There
are no signals, there is no noise.
Trying to infer any sense of economic or financial information from bond yields
is futile.
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"Anyone buying stocks based on confidence that the Fed has their back notwithstanding Wednesday’s
action surely deserves the pounding just ahead. What Yellen had to say doesn’t even reach the status
of babbling; it was flaming incoherence..."
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"history suggests that with the duration
of the rally already in the top 10% by duration, the probability of seeing a negative shock is high."
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This
week has not been one to savor for USD bulls, with the FOMC rate hike accompanied by a statement
which failed to generate the fresh wave of hawkish sentiment markets had
positioned for. Fresh US data will therefore be
required to drive fresh direction...
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As shown on the attached chart, on
a cumulative 4-week basis the slowdown in C&I loan creation tumbled by 2.8%
as of the latest period: this was the biggest
monthly slowdown going back to the financial crisis.
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Attempting
to spend a nation to prosperity using borrowed money is not without
consequences. In the short run,
an illusion of wealth can be erected. In the long run, that illusion slips into decay and disrepair.
Here is the United States, since
the turn of the new millennium (starting January 1, 2001) real GDP has increased
from roughly $10.5 trillion to $18.6 trillion, or 77 percent. Over this
same time government debt has spiked nearly 250 percent from about $5.7
trillion to $19.9 trillion. Obviously,
some sort of reckoning’s in order to bring the books back into balance.
In short, additions of government debt over this time have
been at a diminishing return. Specifically, at
the start of the new millennium the debt to GDP ratio was about 54
percent. Today, it’s well over 100 percent.
US GDP and US federal debt, indexed (1984 = 100). Mises noted back in the late 1940s already
that “it is obvious that sooner or later all these
debts will be liquidated in some way or other, but certainly not by payment of
interest and principal according to the terms of the contract.”
The idea that the government could spend borrowed money to
grow the economy out of debt has become patently ridiculous. Nonetheless, government economists continue to
advocate these policies because, academically, they have no other
alternatives. At the same time, politics may now conspire to push the
U.S. government into debt default.
Arrested Development
This week the Obama
administration’s debt ceiling suspension expired, and a debt ceiling of $20.1
trillion was triggered. This reestablished
debt ceiling is just a horse’s hair above the U.S. government’s current debt
level. Furthermore, getting the debt ceiling lifted will likely require
an epic Congressional battle, including elaborate displays of Kabuki theater.
There’s a possibility a new debt ceiling agreement won’t be
reached before the Treasury’s money runs out sometime in late-summer or
early-fall.
Best case, a timely debt ceiling
resolution will cut into President Trump’s plans to boost the economy by
borrowing money and spending it on infrastructure and defense. This will also cut into his plans to reduce
taxes. A stumble in either of these areas could prompt a long overdue
stock market panic.
The debt ceiling
could become a real problem this time, as the treasury has massively drawn
down the cash balance it amassed by issuing humongous amounts of debt to US
money market funds in 2016. In the final quarter of 2016, i.e., the dying days of
the Obama administration, the federal deficit exploded by a stunning 208
billion dollars – click to
enlarge.
The fact is, perpetual economic
growth is required to sustain life as we know it in today’s debt-driven
economic social order. Any slight blip, such as 2008,
massively disrupts the lives of hundreds of millions of people. What’s
more, economic growth must be at a level
where the plebs believe they’re adequately reaping the fruits of their labors.
What that rate of
economic growth happens to be is uncertain. But so far the U.S.
economy of the 21st century has failed to attain it. But so far the U.S. economy of the 21st century
has failed to attain it.
The average
annual rate of real GDP growth of the U.S.
economy in the 21st century has been at a 1.78 percent state of arrested
development. The average annual rate of real GDP growth of the U.S.
economy for the 16 preceding years was 3.43 percent – nearly double.
Alas, it has been 12 years since the U.S. economy’s eked out a single year of 3
percent GDP growth.
In spite of
statistical distortions reaching fresh heights of absurdity year after year (their goal is generally
to make “inflation” look smaller and GDP larger than they really are),
economic output as measured by GDP is seemingly on a permanent downward
trajectory. Many European countries look even worse.
The Long Run Economics of Debt Based Stimulus
“In the long run, we are all dead,” said 20th Century economist, John Maynard Keynes. This, in a
nut shell, was Keynes’ rationale for why governments should borrow from the
future to fund economic growth today. Why wait for recessions to do the
work of equilibrating the economy when a little counter-cyclical stimulus can
push growth onward and upward?
Of course, attempting to spend a
nation to prosperity using borrowed money is not without consequences. In the short run, an illusion of wealth can be erected.
In the long run, that illusion slips into decay and
disrepair.
We’ve been investigating the chronic effects of what
happens when a government spends too much borrowed money, and then attempts to
lighten its debt burden by inflating its currency.
What follows a brief summation of our findings.
On surface, what happens is what you’d expect.
The currency gets utterly destroyed. This has the effect of blowing the
price of just about everything – especially imports – through the roof.
But it’s what happens after which is less obvious. For the ill-effects of
a debased currency express themselves in asymmetric ways.
Contrary to what Keynes posited, counter-cyclical
debt based stimulus didn’t produce the nirvana of rising long run living
standards. Rather it produced the disparity of stagnating GDP and rapidly
rising government debt. Later it produced the hell of declining living
standards over the long run.
The truth is, in the long run
we’re not all dead. Actually, some of us are still here, living with the
consequences of shortsighted economic policies.
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"In our view, for the cycle to last
another several years, we want to see
more of the same – a continued environment of ‘ok’ growth and low inflation,
which allows central banks to keep the party going."
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Then came a synchronized global cyclical recovery, which we may now
confuse as a Trump inspired break from this stranglehold. "If I thought
our new president could increase budget deficits by another 2% per year, my
thesis would crumble. I’d be wrong. But the odds of this are zero in the
absence of starting a new war."
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SHORT ECON NEWS
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POLITICS
BASTANTE
pelo que cortar .. cuando empiece el WW3 .. Aun así sobraran los peluqueros
There was no shortage of cuts proposed in
Trump’s budget for 2018, which was released earlier this week. However, one of the few departments that did not
receive a haircut was the Department of Defense...
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NO if she runs as DEM..
THE CRONYISM’ PARTY.. If she leads a 3RD option party.. she will win.
"Whoever run in 2020 has to have a post-neoiberal
agenda, better than the one proposed by Sanders. Young people didn’t vote
Hillary, not even the working classes, but its bureaucrats. When Bernie betray..
they vote Trump as lesser evil. These masses do not belong to Trump, they are
now against him,, but it doesn’t mean they favor the duopoly system financed by
big neconon corporations…MUCH LESS THEY WILL VOTE HILLARY.. E Warren could be
the option”
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WORLD ISSUES and ME
German Defense Minister Ursula von der Leyen responded to Trump,
rejecting the US president's claim: "There is no debit account at NATO,"
von der Leyen said in a statement, adding that it
was wrong to link the alliance's target
for members to spend 2 percent of their economic output on defense by
2024 solely to NATO.
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China home prices rose last month in 11 more
cities - 56 of 70 - as the government appears to have lost some of its recent
enthusiasm in curbing prices and imposing restrictions on property transactions
on concerns this may drastically impact the local Chinese "wealth
effect."
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Deutsche Bank on Sunday announced it would
issue 687.5 million new shares to raise €8 billion, pricing the Rights Offering
at €11.65, a 35% discount to Friday's closing price of €17.86.
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GLOBAL RESEARCH
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INFORMATION CLEARING HOUSE
The Ultimate Revolution
By Aldous Huxley
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No One Needs Another Korean War By Eric Margolis
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The CIA’s 60-Year History of Fake News By Robert Reich
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SPUTNIK and RT SHOWS
Saudi General Hails US Pledge to Boost Intel, Military Support Against Iran https://sputniknews.com/politics/201703201051752566-saudi-us-restore-relations/
RELATED
Si la
orden es atacar Iran, envien mas armas.. Our war profeteers are
ultra-happy ..
Boeing Inks $3.2 Billion Agreement to Sell Apache Helicopters to Saudi Arabia https://sputniknews.com/military/201703181051708405-boeimg-inks-sale-deal-saudi/
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Lavrov: Moscow Hopes to Find Common Ground With Tokyo at '2+2' Talks https://sputniknews.com/politics/201703201051754226-lavrov-moscow-tokyo-common-ground/
Related :
Shoigu Calls Suspension of Russia-Japan Military Ties in 2014
Unbeneficial https://sputniknews.com/politics/201703201051754226-lavrov-moscow-tokyo-common-ground/
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Shameless
Cynicism o lágrimas de cocodrilo
Trump Expresses Concern Over Venezuela's Crisis in Talks With Chilean President https://sputniknews.com/us/201703201051753927-trump-concerned-venezuela-crisis/
Related
Only a Fool Would Trust Rogue State USA https://sputniknews.com/columnists/201703191051744237-cunningham-us-tillerson-china-korea/
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The 'Birth Pangs' of a New Middle East, Remixed https://sputniknews.com/columnists/201703171051701194-birth-bangs-of-new-middle-east/
Related
Reflections on Six Years of Conflict in Syria https://sputniknews.com/analysis/201703141051574593-syria-six-year-conflict/
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RT SHOWS
On contact Birth
of American Empire with Stephen Kinzer
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NOTICIAS IN SPANISH
Francia La tormenta y la brújula Léon Crémieux
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PRESS TV
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Imposible probar que a Putin le guste
el POTUS grande
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'Insider
attack' injures 3 US troops in Afganistan
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