NOV 15 20 ND SIT EC y POL
ND denounce Global-neoliberal debacle y propone State-Social + Capit-compet in Eco
ZERO HEDGE ECONOMICS
Neoliberal globalization is over. Financiers know it, they documented with graphics
A EUPHORIC MORGAN STANLEY LISTS "THREE FEATURES THAT WILL DISTINGUISH THE GLOBAL ECONOMY IN 2021"
By Chetan Ahya, Morgan Stanley chief economist and global head of economics
Morgan Stanley believes that i) a global synchronous recovery, last seen in 2017, will unfold in 2021; ii) Emerging Markets will "board the reflation train" and iii) an inflation regime change in the US which pushes core PCE inflation to 2% in H2 2021 and sustainably higher from in 2022.
We remain constructive on the prospects for macro and markets in 2021. On the macro side, we think that the global economy will enter the next phase of the V-shaped recovery. In the first stage, the global economy has reached pre-COVID-19 output levels, a milestone we expect to pass this quarter. By 2Q21, we envision the economy getting back on its pre-COVID-19 path (i.e., where GDP would have been absent the COVID-19 shock).
See Chart:
https://www.zerohedge.com/s3/files/inline-images/covid%20in%202021.jpg?itok=-UMeADYF
Three features will distinguish the global economy in 2021:
- A synchronous global recovery: At 6.4%Y, our 2021 global growth forecast remains above consensus (5.3%Y), a stance bolstered by the news on vaccines and antibody treatments.
2. EMs boarding the reflation train: The past eight years have been tough for EMs, as a series of challenges have brought about a prolonged downturn.
3. Inflation regime change in the US: We see an altogether different inflation dynamic taking hold, especially in the US.
To read the explanation on these 3 features open:
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S&P FUTURES SURGE ABOVE 3,600, NASDAQ JUMPS 1%
"There is certainly elevated chatter that potential shutdowns in the U.S. will weigh more in the near-term and maybe so, but investor sentiment is the most elevated since 2017."
On Friday both the S&P 500 and small caps (Russell 2000), rallied to new all time highs, and if the early euphoria is any indication...
See Chart:
https://www.zerohedge.com/s3/files/inline-images/2020-11-15%20%281%29.jpg?itok=rNP2CMdE
... tomorrow we should see new records across the board, especially with the S&P now having broken out to the upside of the recent wedge, a key technical according to Morgan Stanley's Michael Wilson.
See Chart:
https://www.zerohedge.com/s3/files/inline-images/spx%20divergence_0.jpg?itok=7nw-AXC1
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SOURCE: https://www.zerohedge.com/markets/sp-futures-surge-above-3600-nasdaq-jumps-1
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IS ANOTHER "CRISIS" IMMINENT: THE FED MUST DOUBLE QE IN 2021 BUT IT NEEDS A CATALYST
The only question is what crisis will be used as a scapegoat for the next massive QE expansion.
One certainly can't blame the Fed for not doing enough to stabilize markets during the covid crisis: having expanded its balance sheet by over $3 trillion this year alone and injecting $120 billion in liquidity every month, the US central bank - which is also buying corporate bonds and junk bond ETFs - remains the first and last line of defense for any equity drawdown.
See Chart:
FED Balance Sheet
https://www.zerohedge.com/s3/files/inline-images/Fed%20BS.jpg?itok=KZ2VIJ0O
As an aside, and for those asking why the Fed continues to "confuse" markets with the economy, the answer is simple: since the value of financial assets in the US economy at a record 620%+ of GDP, for the Fed capital markets are the functional equivalent of the economy since a market crash would destroy the highly financialized US economy, and thus can never be allowed.
See Chart:
US Private Sector Financial assets % of GDP at all- time high
https://www.zerohedge.com/s3/files/inline-images/financial%20assets%20to%20gdp_0.jpg?itok=CShxgSUl
There is just one problem: after a year in which the US budget deficit hit a record $3.1 trillion, and with the US facing a deluge in new debt issuance in 2021 which has already led to the biggest October deficit on record and which at $284 billion suggests another full-year deficit of well over $3 trillion (assuming no further lockdowns)...
See Chart:
https://www.zerohedge.com/s3/files/inline-images/deficit%20summary%20oct%202020_0.jpg?itok=JS9li2RB
As Bank of America's Michael Hartnett calculated in his latest Flow Show report published on Friday, over the next year, "Treasury supply will significantly outstrip Fed purchases in Q4 & Q1", and this is even without factoring in the possibility of another major fiscal stimulus.
See Table:
https://www.zerohedge.com/s3/files/inline-images/bofa%20fed%20flows_0.jpg?itok=7YGCn2ky
In short: the Fed needs to more than double its scheduled monthly QE in 2021 just to catch up to where it was in 2020.
Of course, other central banks are facing the same challenge of insufficient monetization and some have already taken appropriate steps: recently both the RBA and BoE announced an expansion in their QE.
See Table 2
How the Central Banks are easing again
https://www.zerohedge.com/s3/files/inline-images/central%20banks%20easing%20again.jpg?itok=7zAeL2tm
Furthermore, now that we have Congressional gridlock for at least 2 more years (absent a dramatic victory for Democrats in the Georgia Senate race runoffs in January), the Fed's much desired multi-trillion fiscal stimulus will simply not come, leaving it as the only source of potential stimulus for the foreseeable future, effectively ensuring that (much) more QE is just a matter of when not if.
In fact, one can argue that the creeping economic shutdowns, first at the state level and soon at the Federal, have just one purpose: to catalyze the next crash... and next bailout by the Fed.
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IS THE FED STUCK WITH "FOREVER STIMULUS"?
Authored by Lance Roberts via RealInvestmentAdvice.com,
I recently have discussed both the “Importance of Recessions” and how the ongoing “Rescues Ruining Capitalism.” However, while the data is clear that ongoing stimulus programs lead to weaker economic growth and a rising wealth gap, is the Fed stuck with “forever stimulus?”
“They are increasingly on what I call a no-exit paradigm...”
To date, the Federal Reserve, and the Government, have pumped more than $36 Trillion into the economy. As shown below, the amount of economic growth achieved has been minimal during that same time frame. (The chart is the cumulative growth of interventions compared to the incremental increase in GDP.)
See Chart:
Cumulative Fed/Govt bailout vs Real GDP growth
Trapped
The trap the Federal Reserve has stumbled into is that it continues to require more interventions to sustain lower rates of economic growth. Whenever the Fed withdraws interventions, economic growth collapses.
As shown, since the turn of the century, each economic cycle has failed to attain a higher rate of growth than previously. The Federal Reserve lowered interest rates to stimulate growth. However, after reaching the “zero bound,” the Fed engaged in expansionary monetary policy.
See Chart:
Despite zero rates & QEs the economy never achieve Econ Growth
Such is why Fed Chairman Jerome Powell has repeatedly pressed for more “fiscal” support from Congress. Without more debt issuance, the Federal Reserve’s ability to “monetize” bonds to provide “monetary stimulus” to the markets is limited. In theory, boosting asset markets should increase consumer confidence and create a “trickle-down” effect on the economy.
Unfortunately, as shown below, this has yet to be the case. Since 2009, the raw increase in just the Fed’s balance sheet, excluding all the other interventions in the table above, was 438%. During that same time frame, the S&P 500 increased by 199.94% and GDP just 21.24%.
See Charts:
Again, while Jerome Powell continues to suggest “the recovery will be stronger and move faster if monetary policy and fiscal policy continue to work side by side,” there is little evidence to support that statement.
Debts Are The Problem
The question that plagues Central Bankers globally is why higher economic growth rates, and ultimately inflation, fail to appear.
“Instead, faced with slowing global growth and resurgent infections, the focus of policy makers at last week’s all-virtual International Monetary Fund and World Bank meetings was on more support for the world economy, not less. Central banks are pulling out the stops to do all they can, boosting financial markets with massive asset purchases and pushing government borrowing costs to record lows.” – Bloomberg
As previously discussed, there is a long historical correlation between increasing debts and lower economic growth rates.
“Unfortunately, higher levels of debt continue to retard economic growth keeping the Fed trapped in a debt cycle as hopes of “growth” remain elusive. The current 5-year average inflation-adjusted growth rate is just 1.64%, a far cry from the 4.79% real growth rate in the ’80s.”
See Chart:
Total System Leverage
https://www.zerohedge.com/s3/files/inline-images/Debt-5-yr-GDP-Growth-102220_0.png?itok=Q4fb-A1s
“In 1998, the Federal Reserve “crossed the ‘Rubicon,’ whereby lowering interest rates failed to stimulate economic growth or inflation as the “debt burden” detracted from it. When compared to the total debt of the economy, monetary velocity shows the problem facing the Fed.”
See Chart:
Total GDP vs GDP vs Monetary Veloity
https://www.zerohedge.com/s3/files/inline-images/Total-Debt-GDP-M2V-080620_1.png?itok=Kpw57_9w
No Exit
As stated, the Federal Reserve is in a trap from which there is no exit.
In an economy laden by $75 Trillion in debt, a record number of “Zombie” companies kept alive only by low borrowing costs, and a near-record number of companies with negative equity, higher rates are a “death knell.”
See Chart:
Negative Equity
https://www.zerohedge.com/s3/files/inline-images/1-6_5.png?itok=7aWtG6jB
Markets Are Now Dependent On The Fed
“The Central Bank has conditioned the market to such an extent that every time the Fed tries to step back, the market forces them back in by selling off and tightening financial conditions.” – Mohammed El-Erian
We know that the Fed is dependent on the financial markets, believing the “Fed” will provide support as needed. With the entirety of the financial ecosystem now more heavily levered than ever, the “instability of stability” is now the most significant risk.
The Paradox
The “stability/instability paradox” assumes that all players are rational, and such rationality implies avoidance of destruction. In other words, all players will act rationally, and no one will push “the big red button.”
The Fed is highly dependent on this assumption as it provides the “room” needed, after more than 10-years of the most unprecedented monetary policy program in U.S. history, to try and navigate the risks that have built up in the system.
The Fed is dependent on “everyone acting rationally.”
Unfortunately, that has never been the case.
The behavioral biases of individuals is one of the most severe risks facing the Fed. Throughout history, the Fed’s actions have repeatedly led to adverse outcomes despite the best of intentions.
See Chart:
RSI 16 Period (Quarterly)
https://www.zerohedge.com/s3/files/inline-images/SP500-Crisis-Chart-110420.png?itok=qxj6Hz5-
The Single Biggest Risk To Your Money
“If the Fed and other central banks are constrained from scaling back emergency stimulus, the continued flood of liquidity could spur asset bubbles and even too-rapid inflation.” – Bloomberg
Yet, the list of concerns remains despite being completely ignored by investors and the mainstream media.
- Growing economic ambiguities in the U.S. and abroad: surging autos and housing against a backdrop of high unemployment.
- Political instability.
- The failure of fiscal policy to ‘trickle down.’
- An important pivot towards easing in global monetary policy.
- Geopolitical risks.
- Deteriorating earnings and corporate profit margins.
- Record levels of private and public debt.
For now, none of that matters as the Federal Reserve continues providing stimulus to the market. The problem comes when they can’t do more, or the markets demand more than the Fed can give.
That is the point where “INSTABILITY” will exceed the grasp of Central Bankers.
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SOURCE: https://www.zerohedge.com/markets/fed-stuck-forever-stimulus
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IN STRIKING REVERSAL, ONE BANK WARNS THAT 2021 COULD SEE THE "BIGGEST FISCAL CONTRACTION IN HISTORY"
"The challenge for investors is that, with a divided Congress and appetites for budget austerity rising in both parties, 2021 could also become a record year via the fastest and largest fiscal contraction in history."
Indeed, in a world where what goes up must come down - unless extended indefinitely which however can't happen under gridlock - Woodard warns that after the fastest budget expansion on record, "the fastest fiscal contraction ever looms."
See Chart:
After the fasted budget expsnsion.. the fastest fiscal contraction looms
In his narration of election night, Woodard who one month ago put together the 4 election scenarios for markets...
See Graphic:
https://www.zerohedge.com/s3/files/inline-images/scenario%20outcomes_5.jpg?itok=wkxSNiWc
..said there was no surprise in the market's response: investors initially reacted that a unified government is bullish if short-lived: as "Blue wave" odds peaked on election night, small caps rallied and Treasury yields spiked to 5-month highs, then reversed as it became clear the election results would be close and contentious
See Chart:
In other words, if Woodard is right and the fastest ever fiscal contraction is imminent, it only means that the Fed will have no choice but to offset it with an even greater monetary injection. In retrospect, Goldman's 2022 price target for the S&P of 4,600 may prove to be too conservative after what is shaping up as the biggest monetary deluge ever.
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US DOMESTIC POLITICS
Seudo democ duopolico in US is obsolete; it’s full of frauds & corruption. Urge cambio
"I CONCEDE NOTHING": TRUMP BLASTS "FAKE NEWS MEDIA" FOR SAYING HE CONCEDED TO BIDEN
"He only won in the eyes of the FAKE NEWS MEDIA. I concede NOTHING! We have a long way to go. This was a RIGGED ELECTION!"
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TRUMP LAWYER SIDNEY POWELL: "WE'RE GETTING READY TO OVERTURN ELECTION RESULTS IN MULTIPLE STATES"
"...we’ve identified mathematically the exact algorithm they’ve used - and planned to use from the beginning” that allegedly switched votes to Biden...
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BIDEN'S STUDENT LOAN FORGIVENESS PROMISES LIKELY DEPEND ON A DEMOCRATIC SENATE
And a Democratic senate hinges on two Georgia races in January...
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DR. FAUCI WARNS US LIKELY TO CANCEL CHRISTMAS, HINTS THAT MASKS & SOCIAL DISTANCING ARE HERE TO STAY
"I would recommend to people to not abandon all public health measures just because you’ve been vaccinated..."
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SOUTH DAKOTA GOV. NOEM REFUSES TO ENFORCE BIDEN MASK MANDATE, CITING LACK OF AUTHORITY
"There is considerable uncertainty as to the value of wearing masks."
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SPUTNIK and RT SHOWS
GEO-POL n GEO-ECO ..Focus on neoliberal expansion via wars & danger of WW3
-Trump Says Major Lawsuits Showing Unconstitutionality of Presidential Election Coming
-Syrian Foreign Minister Walid Muallem Dies, State Media Report Citing Ministry
-Participants of Libyan Political Dialogue Agree to Continue Talks in One Week
-President of Soros-Linked Voting Software Firm on Biden Transition Team
-Trump Tweets Bolton Was 'One of the Dumbest People' He've Worked With
-Twitter in Denial With #TrumpConceded After POTUS Corrects Apparent Slip Saying That 'Biden Won'
-Peru's Interim President Manuel Merino Steps Down Less Than a Week Into His Administration
-Obama Confident Biden to Be Next US President
-'Shameful': Ivanka Trump Blasts Media For 'Total Silence' on Violence Against Conservatives
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