Tag Archives: Martenson Report

  • Blog

    The Pernicious Dynamics of Debt, Deleveraging, and Deflation

    by charleshughsmith

    Tuesday, June 5, 2012, 6:27 PM

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    At this moment, the news media is constantly clamoring about the “Three Ds” that are buffeting the markets: debt, deleveraging, and deflation. We intuitively sense that they’re linked — but how, exactly?

    Understanding this linking is critical; as debt has fueled the global expansion, it will also dominate its contraction.

    Debt and Deleveraging

    To illustrate the forces of debt and deleveraging, let’s consider a home mortgage.

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  • Blog

    OPEC Has Lost the Power to Lower the Price of Oil

    by Gregor Macdonald

    Tuesday, May 22, 2012, 3:39 PM

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    There’s been a lot of excitement in the past year over the rise of North American oil production and the promise of increased oil production across the whole of the Americas in the years to come. National security experts and other geo-political observers have waxed poetic at the thought of this emerging, hemispheric strength in energy supply.

    What’s less discussed, however, is the negligible effect this supply swing is having on lowering the price of oil, due to the fact that, combined with OPEC production, aggregate global production remains mostly flat. 

    But there’s another component to this new belief in the changing global landscape for oil: the dawning awareness that OPEC’s power has finally gone into decline. You can read the celebration of OPEC’s waning in power in practically every publication from Foreign Policy to various political blogs and op-eds. David Ignatius of the Washington Post wrapped up nearly all of the recent claims in a nice bundle in his May 4, 2012 piece, An Economic Boom Ahead?, when he quoted PFC Energy’s David West:

    “This is the energy equivalent of the Berlin Wall coming down,” contends West. “Just as the trauma of the Cold War ended in Berlin, so the trauma of the 1973 oil embargo is ending now.” The geopolitical implications of this change are striking: “We will no longer rely on the Middle East, or compete with such nations as China or India for resources.”

    (Source)

    While it’s true that the Americas hold great promise to convert natural gas resources to higher production levels, that is not the case with oil. The celebration of a geo-political swing in energy power therefore misses a crucial point: No region — from OPEC to Non-OPEC, from Africa to Russia — has the single-handed ability to lower the price of oil now, because none can bring on new supply quickly enough for a long-enough sustained period of time.

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  • Blog

    Get Ready: We’re About To Have Another 2008-Style Crisis

    by Chris Martenson

    Wednesday, May 16, 2012, 12:30 PM

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    Well, my hat is off to the global central planners for averting the next stage of the unfolding financial crisis for as long as they have. I guess there’s some solace in having had a nice break between the events of 2008/09 and today, which afforded us all the opportunity to attend to our various preparations and enjoy our lives.

    Alas, all good things come to an end, and a crisis rooted in ‘too much debt’ with a nice undercurrent of ‘persistently high and rising energy costs’ was never going to be solved by providing cheap liquidity to the largest and most reckless financial institutions. And it has not.

    Forestalled is Not Foregone

    The same sorts of signals that we had in 2008 are once again traipsing across my market monitors. Not precisely the same, of course, but with enough similarities that they rhyme loudly. Whereas in 2008 we saw breakdowns in the credit spreads of major financial institutions, this time we are seeing the same dynamic in the sovereign debt of the weaker European nation states.

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  • Blog

    The Europe Crisis from a European Perspective

    by Alasdair Macleod

    Tuesday, May 1, 2012, 12:35 PM

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    [This week, we introduce a new contributing editor to ChrisMartenson.com, Alasdair Macleod. He will mostly be contributing commentary focused on the situation in Europe, where he’s located. The credit crisis underway there is not Europe’s problem alone; it has the potential to send crippling financial shockwaves to the US and elsewhere around the world. Please join us in extending a warm CM.com welcome to Alasdair. — Adam] 

    The purpose of this report is to give readers the essential background to the economic problems in Europe and to bring you up-to-date in what has become a fast-moving situation. At the time of writing, there has been a lull in the news flow, but that does not mean the problems are under control. Far from it.

    Flawed from the Start

    When we talk about Europe today in an economic context, we really mean the Eurozone, whose seventeen members are the core of Europe and share a common currency, the euro. The euro first came into existence thirteen years ago, on January 1, 1999, replacing national currencies for eleven states; Greece joined two years later. In theory, the idea of a common currency for European nations with common borders is logical, and it was Canadian economist Robert Mundell’s work on optimum currency areas that provided much of the theoretical cover.

    However, the concept was flawed from the start.

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  • Blog

    What Data Can We Trust?

    by charleshughsmith

    Wednesday, April 25, 2012, 5:33 AM

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    Modern investing offers the promise that investors who “do their homework” and use data more intelligently than the herd can gain a valuable edge. But what if the underlying data available to the investing public is fundamentally flawed? 

    The federal government agencies that issue headline data and the mainstream media that reprints the data without skeptical analysis would have us believe that these indicators — the unemployment rate and the consumer price index (CPI), for example — accurately reflect economic realities.

    The other indicator that is implicitly or explicitly assumed to reflect the economy’s health is, of course, the stock market, generally represented by the S&P 500 index.

    That the government indicators and the stock market are both suspect is now a given.

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  • Blog

    Get Ready for ‘Hot’ Inflation

    by Gregor Macdonald

    Thursday, April 19, 2012, 2:15 PM

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    Ideological deflationists and inflationists alike find themselves both facing the same problem. The former still carry the torch for a vicious deflationary juggernaut sure to overpower the actions of the mightiest central banks on the planet. The latter keep expecting not merely a strong inflation but a breakout of hyperinflation.

    Neither has occurred, and the question is, why not?

    The answer is a ‘cold’ inflation, marked by a steady loss of purchasing power that has progressed through Western economies, not merely over the past few years but over the past decade. Moreover, perhaps it’s also the case that complacency in the face of empirical data (heavily-manipulated, many would argue), support has grown up around ongoing “benign” inflation.

    If so, Western economies face an unpriced risk now, not from spiraling deflation, nor hyperinflation, but rather from the breakout of a (merely) strong inflation.

    Surely, this is an outcome that sovereign bond markets and stock markets are completely unprepared for. Indeed, by continually framing the inflation vs. deflation debate in extreme terms, market participants have created a blind spot: the risk of a conventional, but ‘hot,’ inflation.

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  • Blog

    The Trouble with Money

    by Chris Martenson

    Tuesday, April 17, 2012, 1:28 PM

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    A Broken Narrative

    Recently I was asked by a high school teacher if I had any ideas about why students today seem so apathetic when it comes to engaging with the world around them. I waggishly responded, “Probably because they’re smart.”

    In my opinion, we’re asking our young adults to step into a story that doesn’t make any sense.

    Sure, we can grow the earth’s population to 9 billion (and probably will), and sure, we can extract our natural gas and oil resources as fast as possible, and sure, we can continue to pile on official debts at a staggering pace — but why are we doing all this? Even more troubling, what do we say to our youth when they ask what role they should play in this story — a story with a plot line they didn’t get to write?

    So far, the narrative we’re asking them to step into sounds a lot like this: Study hard, go to college, maybe graduate school. And when you get out, not only will you be indebted to your education loans and your mortgage, but you’ll be asked to help pay back trillions and trillions of debt to cover the decisions of those who came before you. All while operating within a crumbling, substandard infrastructure. Oh, and by the way, the government and corporate sector appear to have no real interest in your long-term future; you’re on your own there.

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  • Blog

    Gold is Manipulated (But That’s Okay)

    by Chris Martenson

    Thursday, March 29, 2012, 3:00 AM

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    The price of gold is being actively managed by central planners and their proxies. The main culprit here appears to be the US authorities, as the manipulation is most apparent in the US open gold market. For the most part, this ‘management’ has resulted in letting the price of gold rise, but not too much, or too quickly. 

    The price of gold has always been an object of interest for governments and central bankers. The reason is simple enough to understand: Gold is an objective measure of the degree to which fiat money is being managed well or managed poorly.

    As such, whenever paper money is being governed poorly, the price of gold becomes an important barometer. And this is why the actual price of gold is a strong candidate to be ‘managed.’ Or ‘influenced’. Or ‘manipulated’. Whichever word you prefer, they all convey the same intent.

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  • Blog

    A Primer for Those Considering Expatriation

    by Mark Nestmann

    Thursday, March 22, 2012, 1:32 PM

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    A growing number of Americans are frustrated with the way in which their economy has been managed and are becoming increasingly concerned about future measures the governement may take to keep its coffers full.

    A question that is arising with increasing frequency is: does expatraition offer a viable protection to those concerned about a more financially-intrusive US system?

    The answer is ‘yes’, it does offer a completely legal solution for ending your obligation to pay US income, captial gains, and gift taxes on your worldwide income. But it is certainly not for everyone and should only be pursued after lengthy and diligent consideration.

    And before you begin dreaming of a tax-free future, you should realize that the United States imposes taxes on a broader basis than any other country. The United States is one of two countries, and is the only major country, that imposes significant income, capital gains, gift, and estate taxes on its non-resident citizens.

    In virtually all other countries, individuals end their liability to pay income tax after a sustained period of non-residence, generally one year or longer. But to legally and permanently end U.S. tax liability on their worldwide income, U.S. citizens must also give up their U.S. citizenship and passport. This process is called “expatriation.”

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  • Blog

    Is Housing an Attractive Investment?

    by charleshughsmith

    Monday, February 27, 2012, 2:24 PM

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    In a previous report, Headwinds for Housing, I examined structural reasons why the much-anticipated recovery in housing valuations and sales has failed to materialize. In Searching for the Bottom in Home Prices, I addressed the Washington and Federal Reserve policies that have attempted to boost the housing market.

    In this third series, let’s explore this question: is housing now an attractive investment? 

    At least some people think so, as investors are accounting for around 25% of recent home sales.

    Superficially, housing looks potentially attractive as an investment. Mortgage rates are at historic lows, prices have declined about one-third from the bubble top (and even more in some markets), and alternative investments, such as Treasury bonds, are paying such low returns that when inflation is factored in, they’re essentially negative.

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