ND FEB 17 19 SIT EC y POL
ND denounce Global-neoliberal debacle y propone
State-Social + Capit-compet in Econ
ZERO HEDGE ECONOMICS
Neoliberal globalization is over. Financiers know
it, they documented with graphics
"The
same old tired, failing inflationist responses are being lined up,
despite the evidence that monetary easing has never stopped a credit crisis developing..."
The major economies have
slowed suddenly in the last two or three months, prompting a change of tack in
the monetary policies of central banks. The same old tired, failing inflationist responses are being lined up,
despite the evidence that monetary easing has never stopped a credit crisis
developing. This article
demonstrates why monetary policy is doomed by citing three reasons. There is
the empirical evidence of money and credit continuing to grow regardless of
interest rate changes, the evidence of Gibson’s paradox, and widespread
ignorance in macroeconomic circles of the role of time preference.
We which is to point out why the underlying
assumption, that interest rates are the cost of money which can be managed with
beneficial results, is plainly wrong. If demand for money and credit can be
regulated by interest rates, then there should be a precisely negative correlation between official interest rates and the
quantity of money and credit outstanding. It is clear from the following chart
that this is not the case.
See Chart:
Broad Money (US M3) and FED Funds Rate
Gibson’s paradox
disproves the efficacy of monetary policy
From the chart above, it is clear that the central
tenet of monetary policy, that the quantity of money can be regulated by
managing interest rates, is not borne out by the results, and therefore the
role of interest rates is not to regulate demand for credit as commonly
supposed. This is confirmed by Gibson’s paradox, which demonstrated that a long-run positive correlation existed between wholesale
borrowing rates and wholesale prices, the exact opposite of that assumed by
modern economists. This is shown in our second chart, covering over two
centuries of British statistics.
See Chart:
Gibson’s Paradox
Economists dismissed the contradiction of
Gibson’s paradox because it conflicted with their set view, that interest rates
regulate demand for money and therefore prices[i]. Instead,
it is ignored, but the evidence is clear. Historically,
interest rates have tracked the general price level, not the annual inflation
rate. As a means of managing monetary policy, interest rates and
therefore borrowing costs are ineffective, as confirmed
in our third chart below.
See Chart:
The only apparent correlation between
borrowing costs and price inflation occurred in the 1970s, when price inflation
took off, and bond and money markets woke up to the collapsing purchasing power
of the currency.
Continue reading at:
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"When
upstarts periodically challenge their dominance, central bankers throw the
economy into recession, bankrupting new money, consolidating and preserving the
existing power structure. That’s how capitalism mixed with democracy and rule
of law works."
See Draft 1:
The Conspirators
See Draft 2:
Coming Money Trust
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[[ Even main profiteers of the system can't believe that the
US Econ is OK ]]
Markets frequently change their mind, but even adjusting for that, the
shift in ‘conventional wisdom’ in recent months has been nothing short of
whiplash.
Markets frequently
change their mind, but even adjusting for that, the shift in ‘conventional
wisdom’ in recent months has been nothing short of whiplash. In December, there was widespread agreement among
investors that recession risk had risen sharply, that rising inflation
pressures would keep central banks tightening policy, and that US-based risks
around trade and government funding had risen sharply. Skip
forward two months and these fears have been replaced by a different (if
familiar) term: Goldilocks.
See Draft:
https://www.zerohedge.com/s3/files/inline-images/MS%20goldilocks.jpg?itok=eR6mqDqk
The Goldilocks
narrative depends on a lack of inflation, which gives central banks the
opportunity (although not the obligation) to continue accommodative policy. Core inflation readings in developed markets have
moved sideways in recent months, forward-looking inflation expectations have
dropped sharply, and my colleague Chetan Ahya notes that emerging market
inflation currently sits near 15-year lows. Taken
together, investors sound more emboldened that a lack of inflation pressure
means that central banks have nothing but time.
All these
suggest that DM economies are working with significantly less spare capacity
than they were under prior periods when ‘Goldilocks’ reigned. .. And lest one thinks that inflation
provides a true late-cycle warning signal, this is a good time to remember that
core CPI is currently at the same level as May 2007 and higher than
May-December 1999.
But Goldilocks
is about more than a lack of inflation; it also requires enough growth to allay
downside fears. And that’s our
other problem with this argument. Global growth data remain poor.
Meanwhile, it’s important
to remember that, for US earnings, the weakness is just beginning. Our US equity
strategists now expect just 1% EPS growth for the entire year, a reminder that
the challenges to the US fundamental story aren’t going away any time soon.
See Chart:
Recent decline in the
S&P500
In short, we think that
investors should be sceptical of the Goldilocks narrative, and look for
strategies that benefit from inconsistencies within it. Big picture, we are not
looking to add exposure here, and have been looking to reduce some emerging
market beta into strength. Our forecasts for stimulus
that will help China growth stabilise while US growth continues to moderate
support the strategic case to be short the broad USD and overweight
international over US equities, and a bullish view on both A-shares and
the renminbi. On a smaller scale, our rates strategists continue to think that
the level of US real rates is too high relative to expectations that the Fed is now done hiking for the cycle. Either those
expectations of further hikes should come up, or 10-year real rates should come
down.
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...the Fed was not birthed from nothing in
1913. The monster was the natural outgrowth of an increasingly troubled banking
system.
The Federal
Reserve’s doors have been open for “business” for one hundred years. In explaining the creation of this money-making
machine (pun intended - the Fed remits nearly $100
bn. in profits each year to Congress) most people fall into one of
two camps
Those inclined to view the
Fed as a helpful institution, fostering financial stability in a world of
error-prone capitalists, explain the creation of the Fed as a natural and
healthy outgrowth of the troubled National Banking System. How helpful the Fed has been is questionable at best, and in
a recent book edited by Joe Salerno and me — The
Fed at One Hundred — various contributors
outline many (though by no means all) of the Fed’s shortcomings over the past
century.
Others, mostly those with
a skeptical view of the Fed, treat its creation as an
exercise in secretive government meddling (as in G. Edward
Griffin’s The
Creature from Jekyll Island) or crony
capitalism run amok (as in Murray Rothbard’s The Case Against the Fed).
Read theses subtitles:
Before
the Fed
Why Did
Clearinghouses Have So Much Power?
Fractional-Reserve
Free Banking and Bust
In conclusion, the Fed was not birthed from nothing in 1913. The monster was
the natural outgrowth of an increasingly troubled banking system
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Based on what
has happened in the global economy, one should be extra careful when calling
for more stimulus. It will most likely not benefit the real economy, but it is
likely to propel over-valued asset markets even higher.
See Chart:
Total Debts and Nominal GDP in China
see more charts at:
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This is a classic “bull trap” in the making which sucks investors in
before inflicting as much pain as possible. Erring to the side of caution, for now, will likely be the right
choice...
See Chart:
Stuck in the middle
There are two things driving the advance
currently.
The first, is
the Fed.
As we discussed with our RIA PRO subscribers (use code PRO30 for a 30-day free trial) last
week,
“Today, [Cleveland Fed Reserve Governor Loretta Mester] all but put the
kibosh on further rate hikes and, per Mester’s comments, will end balance sheet
reduction (QT) in the months ahead.”
John
Rubino also made an important note in this regard as well.
“Take the
world that we were in over the past five years and flip it upside down. For the Fed, the risk that another rate
increase could cause significant economic harm outweighs the risk that not
raising rates could lead to slightly higher inflation.” – Gennadly
Goldberg, TD Ameritrade.
And with that, the odds of a rate “hike” in
2019 have evaporated in favor of a rate “cut.”
See Chart:
However, the problem for the Fed is that
they have now effectively “boxed” themselves in. As John
notes:
“If caving to the stock market re-energizes
the bond market, leading corporations to increase their already record-high
debt load, that will
boost economic growth while
raising both inflation and commodity/real estate prices – thus forcing the Fed to go back to tightening, thus causing chaos in
the financial markets, thus
forcing the Fed to back off and return to easing. And so on, with each
iteration ratcheting up overall leverage in the economy.”
Opps….Too Late
See Chart:
The second, is “hope.”
On Friday, on headlines that talks are continuing
with China, the market pushed through those resistance levels as shown
below.
See Chart:
NOT Stuck in the middle
While there is
nothing wrong with “hoping” for a positive outcome from “trade
talks,” the rush to “buy” equities has
effectively “priced in” the best of all possible outcomes. This leaves investors vulnerable a whole
host of possible disappointments:
- Trade deal isn’t reached as China refuses to give in to demands for economic reform.
- Trade deal is made but the magnitude of concessions is disappointing.
- Trade deal gets extended, again, with no real progress towards a “deal.”
- Trade deal made and tariffs are ended, but such is likely already priced into current asset prices.
- Trade negotiations collapse. (Worst possible outcome.)
The point here is that there are few outcomes for
the trade deal which are extremely optimistic which would support a further
surge in assets prices. The
most likely outcome is this simply a “buy the rumor, sell the news” type
event, and if the news is bad, the resulting sell-off could be substantial.
Market Has
Gotten Way Ahead Of Itself
See Chart:
A correction
following that rally SHOULD be highly anticipated.
Read
Level 1 = 38.2%:
Level
2 = 50%:
Level 3 = 61.8%:
This analysis also corresponds to the extremely
rapid reversion of both technical and sentiment measures.
As Mark
Hulbert noted on Friday:
“That’s because the mood has shifted from the extreme pessimism that
prevailed in late December to nearly as extreme optimism today. Some call
current conditions a ‘slope of hope.'”
See Chart:
Wall of worry is now a slope of hope
https://www.zerohedge.com/s3/files/inline-images/MW-HD992_slope__20190214133201_ZH.jpg?itok=YYP8dn8U
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"We now expect a reversion to a period of low-single-digit earnings
growth without the driver of higher valuation, which was a key driver of
returns in recent years."
See Chart:
Top Line growth has being
falling along with declining nominal GDP
See more interesting
charts at:
…
SOURCE: https://www.zerohedge.com/news/2019-02-17/world-full-zombies-global-revenue-growth-has-collapsed
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the total
amount is twice the amount the U.S. Treasury paid to bail out the auto
industry during the last recession
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US
DOMESTIC POLITICS
Seudo democ duopolico in US is obsolete; it’s full
of frauds & corruption. Urge cambio
False News:
A torrid post-crisis recovery in the NYC housing market came to a
screeching halt last year as a chasm opened up between what sellers were asking
and what buyers were willing to pay.
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Reputed master of the clapback Alexandria Ocasio-Cortez just got a taste
of her own medicine...dished out by Amazon senior vice president for worldwide
operations Dave Clark.
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"He is
going to protect his national emergency declaration, guaranteed..."
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US-World ISSUES (Geo Econ, Geo Pol &
global Wars)
Global depression is on…China, RU, Iran search for
State socialis+K-, D rest in limbo
In the latest
"serious blow" to US efforts to persuade allies to ban the Chinese
supplier from high-speed telecommunications systems, the FT reports that the
British government has concluded that it can "mitigate the risk from using
Huawei equipment in 5G networks."
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TRAMP Theater: TRUMP
TO EUROPE: TAKE BACK 800 ISIS FOREIGN FIGHTERS OR WE'LL BE FORCED TO
RELEASE THEM
They'll
"permeate Europe"...
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More stupid theater: MEASLES
ARE BACK AFTER 900 DEAD IN MADAGASCAR; TIME TO BLAME RUSSIA
"Are
Russian Trolls Saving Measles From
Extinction?"
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Jail’ Business: How much they will pay for Sweden’
comforting hotel ? how much for T?
"I was angry when I read
about how it worked with immigrants and how they avoid punishment for
everything they do. They get acquitted, though they steal and do other things. It is unfair that those who commit gross
crimes can go free..."
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SPUTNIK and RT SHOWS
GEO-POL n GEO-ECO
..Focus on neoliberal expansion via wars & danger of WW3
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IF RU and US Billionaires went out of earth .. that
will be the greatest news in history
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OSCE
Urges Kiev to Contribute to Democracy, Allow Russia to Observe Ukrainian
Presidential Election Neo-nazis are masters
in democ elections? Hi Hitler?
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Le encontraron el culo al mundo? What is next?
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Now I know what is next: UK
Military to Introduce Swarm Drones ‘By End of the Year
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Fueron por lana y salieron trasquilados?
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NOTICIAS IN SPANISH
Lat Am search f alternatives to neo-fascist regimes
& terrorist imperial chaos
REBELION
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Diferencia económica entre hombre y mujer Hedelberto López
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RT EN ESPAÑOL
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PARA MAÑANA
INFORMATION CLEARING HOUSE
Deep on the US political crisis: neofascism &
internal conflicts that favor WW3
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COUNTER PUNCH
Analysis on US Politics & Geopolitics
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GLOBAL RESEARCH
Geopolitics & Econ-Pol crisis that leads to more
business-wars from US-NATO allies
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DEMOCRACY NOW
Amy Goodman’s team
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PRESS TV
Resume of Global News described by Iranian
observers..
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