Tag Archives: Italy

  • Insider

    Off The Cuff: Into The Abyss

    The Fed's actions are quickly becoming the trigger that will blow up the system
    by Adam Taggart

    Thursday, June 13, 2019, 6:56 PM

    4

    In this week’s Off The Cuff podcast, Chris and John Rubino discuss:

    • The Fed’s Desperation
      • It’s just playing for time at this point
    • Why Lower Rates Will Blow Up The System
      • ZIRP/Negative rates create all sort of perversities
    • Italy Threatens To Revert To The Lira
      • Is the Eurozone about to break up?
    • Bad Corporate Debt Is The Ticking Time Bomb
      • There’s simply way too much of it now

    In this excellent analysis, John does an exceptional job clarifying the unique point in economic history in which we live. The Federal Reserve is truly out of ideas at this point; it is simply playing for time until the system breaks:

    The point in the cycle where we are now is a really unusual time to talk about lowering interest rates. Normally when the labor markets are this tight, and wage inflation is running around 3% which it is right now, the Fed is usually tightening. Wage inflation is a kind of inflation they understand. This is as opposed to stock prices going up, bond prices, or house prices going up. That is inflation, but they do not count it as inflation. When wages go up, they usually start raising interest rates. It is really telling that they are seeing things that lead them to maybe start easing again even with the economy, in theory at least, still growing ten years into the beginning of an expansion.

    I think they are recognizing the fact that the world – not just the US, but the whole global financial system – is so highly leveraged that any kind of downturn becomes systemically risky. In other words, a 20% drop in stock prices which is the definition of a bear market is something that happens all the time at least historically. This time around, it might knock down other dominos in a way that is uncontrollable. This is just because there is so much bad debt out there.

    When you take on huge amounts of debt, by definition a lot of it has to be bad debt. Usually the good credits have already done their borrowing. If you are going to expand that beyond that point, you are going to have to work your way down into the barrel to the bottom of the barrel. That is where we are now. A lot of people who have borrowed money cannot pay it back. They are only hanging on because the economy is growing and because their paychecks are there. If you take that away, then Boom!. The system starts to fall apart.

    These guys know that at the Fed. They are trying to delay the inevitable easing because they know that interest rates are already so low. The European Central Bank and the Bank of Japan never did get to raise interest rates. The Fed only got to raise interest rates a little bit, which means they have no ammo going into the next recession. Normally the Fed will cut interest rates by about 5 percentage points from peak to trough. This is as a way of reinvigorating the economy during a recession. If they were going to do that now, we would be at negative 2 or 3% on the Fed funds rate. It would be more deeply negative for Europe and Japan. That is uncharted territory.

    What the Fed is doing now is using words. They are trying to talk the market up. It works (for now). Whenever they announce the possibility of easing or the cessation of tightening, you get a nice pop in the stock market. They are hoping that they can elevate asset prices until the China trade deal gets signed and until the turmoil in the Middle East has settled. That will also give the markets a pop, and that will keep the economy growing for a while. It will allow them to raise interest rates another couple of percentage points at the short end of the spectrum to give them ammo for the next recession.

    They really do not want to start cutting right now. From here, they really do not have much room to cut. I think it is highly unlikely that they are going to get what they want. In other words, it is an economy that grows for the next three years and allows them to raise the Fed funds rate to 5 or 6%. That is really, really unlikely in the scheme of things. They are going to be forced in the recession that is probably imminent just because the expansion has been going on for way longer than a normal expansion. It is going to run out of steam pretty soon. They are going to be forced to cut interest rates to zero and beyond.

    That is why Powell was talking about that. Now he is talking about the effective lower bound of interest rates which is below 0%, we found out in this last cycle. We do not know how far below zero it is. That is what we are going to find out this time around. In other words, how negative can you make interest rates before it becomes the problem rather than the solution? From an economic theory standpoint, that is fascinating. That is the kind of experiment you never expect to see in the real world. We are going to do it this time.

    We are going to find out what the absolute lowest level interest rates can go to before it blows up the system. I do not use the words “blow up” lightly. That is what could really happen when interest rates get down to that point, and it turns out they do not work. Then it is game over.

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  • Daily Digest
    Image by AidanAshby, Flickr Creative Commons

    Daily Digest 10/22 – The Tells Of Fiat News, How Many People Have Lived On Earth?

    by DailyDigest

    Monday, October 22, 2018, 2:32 PM

    13
    • 5 companies that spent lavishly on stock buybacks while pension funding lagged
    • The Tells Of Fiat News
    • America’s Ghost Legions of Idle Men
    • Kremlin: Russia will 'restore balance' with new missiles if U.S. pulls out of treaty
    • Dow Jones Futures Rise After More Leaders Break Support In Stock Market Correction
    • GOLDMAN SACHS: Staying away from these 20 stocks could help you avoid the pain of Trump's trade war with China
    • How Many People Have Lived on Earth?
    • Things in the middle of the Arctic are getting really strange
    • Brazil’s Offshore Boom Is Facing The Same Problem As U.S. Shale
    • This scientist keeps winning money from people who bet against climate change
    • The Greek Dark Age & Climate Change
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  • Daily Digest
    Image by Mark Turnauckas, Flickr Creative Commons

    Daily Digest 9/3 – Next Financial Crisis Lurks Underground, ‘Point Of No Return’ For Earth 17 Years Away

    by DailyDigest

    Monday, September 3, 2018, 1:41 PM

    5
    • 10 years after the financial crisis, is the housing market still at risk?
    • The Next Financial Crisis Lurks Underground
    • The Global Alliance for Evil 
    • Lead in US school water “disturbing”—Detroit just shut off all fountains
    • Trump Has Changed How Teens View the News
    • The point of no return for our planet is only 17 years away
    • Melting Arctic Creates New Opportunities For LNG
    • Bangkok Struggles To Stay Afloat Amid Global Warming, Rising Sea Levels
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  • Insider
    barkingdogma.com

    Off The Cuff: The Trouble With Trade Wars

    The uncertainty whipsaws markets, media & investors alike
    by Adam Taggart

    Thursday, June 28, 2018, 10:37 PM

    0

    In this week's Off The Cuff podcast, Chris and Axel Merk discuss:

    • The Trouble With Trade Wars
      • The uncertainty is whipsawing the markets
    • Actions Have Repercussions
      • China's investment in the US plummets
    • The Rules Of Brinksmanship
      • Chris & Axel give book recommendations
    • Oil & Gold
      • Where to from here?

    It's hard to keep one's head in today's world. Developments are changing at a pace the world just can't handle. As a result, the uncertainty and confusion makes it very difficult to 'surf' events as they unfold.

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  • Insider
    Punyaruk Baingern/Shutterstock

    Italy Votes No(!)

    Et tu, Brute?
    by Chris Martenson

    Monday, December 5, 2016, 2:52 AM

    18

    The Italian vote delivered the most unsurprising surprise today – another rejection of the elites by the people.

    Oh the humanity!

    Time for the elites to get out of their echo chambers and find out what life is like for the people laboring under their poorly thought through and inhumane policies. 

    Remember, we humans like it better when things are fair and just.  Heck, it goes further than that; primates like it better when things are fair and just.

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  • Podcast

    Alasdair Macleod: Europe is a Hot Mess

    Its banks are the weak point in the global financial system
    by Adam Taggart

    Sunday, July 28, 2013, 2:42 PM

    7

    It's almost August, the month everyone in Europe takes off on holiday to forget their troubles. This year may be different, though, as not only can many not afford a vacation, but Europe's troubles loom so large that forgetting them won't be easy…

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  • Blog
    © Mopic | Dreamstime.com

    Europe’s Precarious Banks Will Determine the Future

    Ticking time bombs
    by Alasdair Macleod

    Tuesday, June 25, 2013, 9:09 PM

    6

    Crying Wolf?

    It is easy to get the impression that the naysayers are wrong about Europe. After all of the predictions of Armageddon, ten-year government bond yields for Spain and Italy fell to the 4% level, France (which is retreating into old-fashioned socialism) was able to borrow at about 2%, and one of the best-performing bond investments has been until recently – wait for it – Greek government bonds! Admittedly, bond yields have risen from those lows, but so have they everywhere. It is clear, when one stands back from all the usual euro-rhetoric, that, as a threat to the global financial system, it is a case of "panic over."

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  • Daily Digest
    Image by EpSos.de, Flickr Creative Commons

    Daily Digest 5/23 – Big Wind’s Trail Of Wings, Living Buildings For Tomorrow’s Cities

    by DailyDigest

    Thursday, May 23, 2013, 2:22 PM

    8
    • Gold ETFs Are Liquidating By The Ton
    • Schizophrenic investors expect slump: bet on boom
    • Clients Denied Gold At Major Banks As Shortage Intensifies
    • Thanks To QE Bernanke Has Injected Foreign Banks With Over $1 Trillion In Cash For First Time Ever
    • Gramm and McMillin: The Debt Problem Hasn't Vanished
    • Want to Save the Environment? Build More Cities
    • Republic of Ireland calls for international tax action
    • US Treasury secretary says he has begun tapping federal retiree pension fund to avoid default
    • Millions falling into poverty in recession-racked Italy: report
    • Seven Ways Today's Economy Is Like The NHL Playoffs
    • PBS Killed Wisconsin Uprising Documentary "Citizen Koch" To Appease Koch Brothers
    • Court upholds B.C. mining company’s use of temporary foreign workers from China
    • Big Wind’s trail of wings
    • Living buildings for tomorrow’s cities
    • Food swapping: The movement taking off in the UK

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  • Daily Digest
    Image by Leonid Mamchenkov, Flickr Creative Commons

    Daily Digest 4/17 – Cyprus Braces For Russian Exodus, Half NYC Workforce On Food Stamps

    by saxplayer00o1

    Wednesday, April 17, 2013, 6:37 PM

    2
    • Ohio’s $500 Billion Oil Dream Fades as Drillers Misjudge: Energy
    • Cyprus braces for Russian cash exodus
    • Italy May Cut $6.6 Billion in Defense Spending This Year
    • Detroit's encroaching blight as seen through Google and Bing maps
    • Smithsonian to close galleries due to budget cuts
    • Three-fold increase in demand for Gold: Jewellers
    • Bailouts push German debt to new record
    • Italy's temporary layoff scheme runs out of cash, sparks protests
    • Almost half of NYC workforce on food stamps
    • Let them eat vegetables: Egypt's wheat farmers hit hard by diesel price hikes
    • South Korea Proposes $15.3 Billion Stimulus Budget
    • EU warns of budget constraints as Cyprus seeks more aid

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  • Daily Digest
    Image by sacks08, Flickr Creative Commons

    Daily Digest 4/10 – Americans Skipping Meds To Save Money, Italians’ Spending Power Crumbles

    by saxplayer00o1

    Wednesday, April 10, 2013, 3:14 PM

    1
    • Blue Angels Grounded by Budget Cuts for Rest of 2013
    • Cyprus Faces Risk of Payments Freeeze, Budget Shortfall Looms
    • Arizona gold bill moving forward
    • Five million households in debt to energy firms
    • Fitch Cuts China Yuan Debt Rating on Local Government Borrowing
    • French economy stalls as budget deficit grows
    • Stately Detroit Homes Rot As Appraisals Stall Sales
    • US homeless numbers expected to rise as spending cuts deepen
    • Italians' spending power crumbles in recession
    • Bass Says Japan Bondholders’ Reaction to Stimulus Telling
    • Interest on government student loans set to double this summer
    • Americans Skipping Prescription Meds To Save Money

    Read More »