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Off The Cuff: Why The Market Has To Crash

Too much bad debt
Monday, September 3, 2018, 2:25 PM

In this week's Off The Cuff podcast, Chris and Mish Shedlock discuss:

  • Tax-Cut Sugar-High
    • Corporate earning shoot the moon, but wages are little changed
  • Emerging Markets Deja-Vu
    • Crisis always follows borrowing too much debt from foreign creditors
  • Our Captive Political System
    • The democratic dream has long been suffocated by those who control DC
  • A Gold Suprise?
    • Historical precendent strong suggests gold will rebound sharply soon

As the markets hang at record highs (yet again), Chris and Mish revisit the data -- are these levels justified by the data?

A fresh look makes it very hard to defend them. And while there are lots of reasons to support that conclusion, the core one is the same as it was prior to the 2008 crash: Too Much Bad Debt.

Click to listen to a sample of this Off the Cuff Podcast or Enroll today to access the full audio as well as all of PeakProsperity.com's other premium content. » Read more

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This Is The Turning Point

The driving trends of the past decade are now reversing
Friday, April 6, 2018, 11:32 PM

The saying "the worm has turned" refers to the moment when the downtrodden have finally had enough, and turn on their powerful oppressors.

The worms have finally turned against the privileged elites -- who have benefited so greatly from globalization, corruption, central bank stimulus and the profiteering of state-enforced cartels. » Read more

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The Future Ain't What It Used To Be

Looks like we're in for a much rockier ride than many expect
Friday, March 30, 2018, 8:36 PM

This marks our our 10th year of doing this.  And by “this”, we mean using data, logic and reason to support the very basic conclusion that infinite growth on a finite planet is impossible. 

The only remaining question concerns how fast the adjustment happens. Will the future be defined by a "slow burn", one that steadily degrades our living standards over generations? Or will we experience a sudden series of sharp shocks that plunge the world into chaos and conflict? » Read more

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Daniel Nevins: Economics for Independent Thinkers

It's time we stop trusting the 'experts'
Wednesday, February 28, 2018, 6:03 PM

Economists are supposed to monitor and analyze the economy, warn us if risks are getting out of hand, and advise us on how to make things runs more effectively -- right?

Well, even though that's what most people expect from economists, it's not at all how they see their role, warns CFA and and behavioral economist Daniel Nevins.

In short, they are the wrong people to advise us, Nevins claims, as they have no clue how the imperfect world we live in actually works.

 
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It's Looking A Lot Like 2008 Now...

Did today's market plunge mark the start of the next crash?
Friday, February 2, 2018, 9:57 PM

Economic and market conditions are eerily like they were in late 2007/early 2008.

Remember back then? Everything was going great. Home prices were soaring. Jobs were plentiful.

The great cultural marketing machine was busy proclaiming that a new era of permanent prosperity had dawned, thanks to the steady leadership of Alan Greenspan and later Ben Bernanke. And only a small cadre of cranks, like me, was singing a different tune; warning instead that a painful reckoning in our financial system was approaching fast.

It's fitting that I'm writing this on Groundhog Day, as to these veteran eyes, it sure has been looking a lot like late 2007/early 2008 lately... » Read more

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So What Comes Next & How Can We Prepare For It?

Prices and incomes are headed (much) lower
Friday, December 29, 2017, 8:14 PM

Executive Summary

  • The dangerous unintended risks and consequences of central bank policies
  • Returns diminish as you move along the expansion S-curve
  • Why the current practice of moderating extremes will fail
  • What comes next & how to prepare for it

If you have not yet read Part 1: The Inescapable Reason Why the Financial System Will Fail, available free to all readers, please click here to read it first.

In Part 1, we covered the financial system’s dependence on credit, and the central bank’s conundrum: they can’t raise rates without stifling the credit-binge-dependent “recovery” and asset bubbles, but they also can’t keep pushing asset bubbles higher without increasing systemic risks, as valuations are already stretched to historic extremes.

So what happens next?  Can central banks raise rates without popping the bubbles the system needs to remain solvent? Or can they keep yields near zero and keep pushing asset valuations higher for years or decades to come?

I hate to spoil the ending, but the short answer is: these are incompatible goals.  The central banks cannot raise yields (i.e. normalize rates to historically average levels) and push asset valuations higher, nor can they eliminate the systemic risk generated by extreme valuations and leverage.

Unintended Risks and Consequences

Extreme financial policies generate unintended consequences as a result of being extreme: a moderate policy wouldn’t have the “whatever it takes” impact, but it also wouldn’t jam all the levers to maximum.

Once the levers are on maximum, the extremes generate instability and blowback, as those who benefit from the extremes are incentivized to go even deeper into speculative gambles in the mistaken belief that “the central banks have my back” while those who did not benefit express their dissatisfaction in the political arena, a dynamic that is often dismissed or derided as “populism.”

Central banks have suppressed measures of volatility in an effort to mask the rising risk that their policy extremes will trigger...   [enroll now to continue reading] » Read more

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The Inescapable Reason Why the Financial System Will Fail

Credit cannot expand faster than fundamentals forever
Friday, December 29, 2017, 8:13 PM

Central banks are now trapped.

If they raise rates to provide low-risk, high-yield returns to institutional owners, they will stifle the “recovery” and the asset bubbles that are dependent on unlimited liquidity and super-low interest rates. But if they keep yields low, the only way institutional investors can earn the gains they need to survive is to pile into risk assets and hope the current bubbles will loft higher.

This conundrum has pushed the central banks into yet another policy extreme: to mask the rising systemic risk created by asset bubbles, central banks have taken to suppressing measures of volatility—measures than in previous eras would reflect the rising risks of extreme asset bubbles deflating.
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silentera.com

The Great Oil Swindle

Is leading us to destruction
Friday, December 15, 2017, 7:41 PM

When it comes to the story we're being told about America's rosy oil prospects, we're being swindled. And the swindle is not just limited to the US.

At its core, the swindle is this: The shale industry's oil production forecasts are vastly overstated.

The false conclusions the world is drawing as a result of the deception and outright lies we're being told is putting our future prosperity in major jeopardy. Policy makers and ordinary citizens alike have been misled, and everyone -- everyone -- is unprepared for the inevitable and massive coming oil price shock. » Read more

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When The Bubbles Burst...

How bad will it get? And how should you prepare?
Saturday, December 2, 2017, 12:58 AM

Executive Summary

  • It's Time To Name The Guilty
  • The Gross Global Mis-Pricing Of Risk
  • The New Fed Looks Even Worse Than The Old
  • What You Should Do To Prepare

If you have not yet read Part 1: You're Just Not Prepared For What’s Coming, available free to all readers, please click here to read it first.

So I just want to raise my hand here and say that I am in favor of handing out serious punishments to the central bankers who negligently placed all but a very tiny few directly into harm’s way, knowingly and maliciously.  They knew they were harming pensions, savers, retirees, the young, the poor and the middle-classes.   They knew what they were doing was harming an entire generation of young people, fostering a deeply unfair and ultimately dangers wealth and income gap, and backstopping bank losses even (especially?) when those banks did stupid things that deserved losses. 

Yet they insisted and they persisted.  And here we are, with the third set of bubbles in 20 years and the largest wealth and income gaps in all of history.  I say the people responsible should be held accountable.

This Time Is Going To Be Different?

When these bubbles burst, and trust me they will, the aftermath is going to be especially ugly.  Like all bubbles, we’ll discover that a vast amount of lending took place towards ideas and projects and in support of spending habits that really should not have been undertaken.

Credit bubbles always end up making a pile of loans to really derelict ideas.  This time is no different, except the scale is so much larger.  There are so many bright red warning lights that it’s difficult to figure out which ones to convey.

Like the charts above, each one of these next charts could easily be an entire meditation that, if deeply understood, would reveal the whole story.  So settle in, take a deep breath and please consider the following.

First up, we have this deeply shocking chart for which the data has only gotten more shocking in recent months... » Read more

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Ron Paul: We Are Reaching A Point Of No Return

When the system will break no matter what the Fed tries
Monday, November 6, 2017, 5:08 PM

Dr. Ron Paul has long been a leading voice for limited constitutional government, low taxes, free markets, sound money, civil liberty, and non-interventionist foreign policies.

As a multi-term member of Congress, Dr. Paul knows the players and policies responsible for the growing unfairness and inequality now rampant in society. He does not expect the offenders will reform willingly. Instead, he predicts the system will collapse under its own unsustainability -- offering a rare and valuable chance then for more sound and fair solutions to prevail. » Read more