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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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Peak Prosperity

Debt - Crash Course Chapter 13

There's just too damn much of it
Friday, September 12, 2014, 9:04 PM

The fundamental failing of today's global economy can be summarized simply: Too Much Debt

We have taken too much of it on, too fast, in too many markets around the world, to have any hope of making good on it. Not only does the math not work out, but also on a moral level » Read more

video

This chapter of the new Crash Course series has not yet been made available to the public.

Each week over the rest of 2014, in sequential order, a new chapter will be made publicly available (we've currently published up to Chapter 12)

If you don't want to wait, you can:

 

 

 

 

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Why We All Lose If the Fed Wins

Fighting the wrong battles
Monday, August 19, 2013, 7:20 PM

If we hold the view that humans are behaving unsustainably in terms of any of the 'three Es'  the economy, energy, or the environment  then any rapid resumption of a paradigm of exponential growth in our consumption of natural resources or in our growth of debt over income simply takes us more quickly to the bitter end of this story. » Read more

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Housing Prices Are Being Dangerously Distorted by Big Institutional Money

Do we really want to live through Housing Bubble 2.0?
Tuesday, June 4, 2013, 10:20 AM

The airwaves are full of stories of economic recovery. One trumpeted recently has been the rapid recovery in housing, at least as measured in prices.

The problem is, a good portion of the rebound in house prices in many markets has less to do with renewed optimism, new jobs, and rising wages, and more to do with big money investors fueled by the ultra-cheap money policies of the Fed. » Read more

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This Gold Slam is a Massive Wealth Transfer from Our Pockets to the Banks

It likely signals a big downdraft in the stock market, too
Monday, April 15, 2013, 3:55 PM

I am very disappointed by, but not surprised at, the latest transfer of wealth to the bankers from everyone else.  The most recent gold bear raid has vastly enriched the bullion bankers, once again, at the expense of everyone trying to protect their wealth from global central bank money printing.

The central plank of Bernanke's magic recovery plan has been to get everybody back borrowing, spending, and "investing" in stocks, bonds, and other financial assets.  But not equally so, as he has been instrumental in distorting the landscape towards risk assets and away from safe harbors. » Read more

Daily Digest

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Daily Digest 3/20 - Workers Saving Too Little to Retire, Lawmakers Back PMs As Currency

Wednesday, March 20, 2013, 10:39 AM
  • Workers Saving Too Little to Retire
  • Bad debts at Italian banks top 126 bln euros in January
  • Spanish Lenders’ Bad-Loan Ratio Resumed Increase in January
  • Darling: Cyprus savings raid could trigger bank runs across Europe
  • France, Belgium told to count Dexia bailout in deficits
  • Lawmakers back gold, silver as currency
  • National student loan debt triples, Miami average fifth highest in Ohio
  • As crop prices surge, investment firms, farmers vie for land
  • Speed on green cameras paying off
  • Cyprus parliament rejects deposit levy: reports
  • PIMCO reduces exposure to euro in wake of ‘botched’ Cyprus bailout: report
  • National debt jumps $300 billion ytd
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Let's Stop Fooling Ourselves: Americans Can't Afford the Future

Unemployment, taxes & unfunded retirements are squeezing us
Tuesday, March 12, 2013, 11:24 AM

The truth is: The three adult generations in the U.S. are suffering, and their burdens are likely to increase with time. Each is experiencing a squeeze that is making it harder to create value, save capital, and pursue happiness than at any point since WWII. At that point, we were a creditor nation with an economy exploding into dominance on the world stage. Now, however, the U.S. is the largest debtor nation and our economic hegemony is increasingly at seige across a number of fronts.

A continuation of the status quo is a decision to sleepwalk face-first into the constraints hurtling towards us.

Instead, shouldn't we stop fooling ourselves and ask: What should we be doing differently? » Read more

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The Unsafe Foundation of Our Housing 'Recovery'

Overdependence on subsidies, debt, and unfounded optimism
Monday, February 25, 2013, 5:55 PM

What could go wrong with the housing 'recovery' in 2013?

To answer this question, we need to understand that housing is the key component in household wealth. And, that Central Planning policies are aimed at creating a resurgent “wealth effect,” as follows: When people perceive their wealth as rising, they tend to borrow and spend more freely. This is a major goal of U.S. Central Planning.

Another key goal of Central Planning is to strengthen the balance sheets of banks and households. And the broadest way to accomplish this is to boost the value of housing. This then adds collateral to banks holding mortgages and increases the equity of homeowners.

Some analysts have noted that housing construction and renovation has declined to a modest percentage of the gross domestic product (GDP). This perspective understates the importance of the family house as the largest asset for most households and housing’s critical role as collateral in the banking system. » Read more