Tuesday, July 29, 2014

Some Signs That Say
This Is As Far As We Can Go
Take An Honest Look At The Quality
Of America’s Mountain Of Debt
Another version of our oft repeated theme point expressed by 'the chart that says it all' .. new debt is not producing new growth .. simple English interpretation for those who are not economically inclined: our system is screwed.
"The mainstream media is delighted to highlight positive U.S. economic data, but nobody ever asks about the quality of the borrowers who are behind the rosy numbers. Behind the rosy numbers, sales and profits are increasingly dependent on marginal buyers and borrowers: those buying on credit who would not qualify to borrow money in a system ruled by prudent risk-management .. These marginal borrower/buyers are last on, first off: they qualify for loans at the end of a credit expansion, when lenders throw caution to the winds to reap the profits from issuing new mortgages, auto loans, student loans, credit cards, etc. to marginal borrowers .. These marginal borrowers are the first to default, because they have insufficient income and collateral to support their loans .. Anecdotally, I see plenty of people who defaulted/declared bankruptcy in previous downturns who are once again in hock to the hilt, and they know the drill: borrow and spend as much as you can, because all you have to do is stop paying .. So before you jump on the Bull market bandwagon of 'don't fight the Fed,' perhaps you should take a look at the quality of the debt the Fed has enabled and the diminishing returns on all that debt."
- Charles Hugh Smith*
link here to the reference
How Can U.S. Cities
Fix Their Financial Problems?
Get People To Forfeit Assets!
More Financial Repression To Pay Down Debt
Article highlights the growing trend among U.S. local city & state municipalities to use asset forfeiture to help finance their budgets & pay down debt .. In a nutshell, civil forfeiture is the practice of confiscating items from people, ranging from cash, cars, even homes based on no criminal conviction or charges, merely suspicion .. lots of this going on in especially Texas, Tennessee, Michigan .. "A town of 150 people called Estelline Texas earns more than 89% of its gross revenues from traffic fines and forfeitures .. If you think that example is just a one-off, think again. One of the most horrific instances of non-lethal police abuse last year was the story of David Eckert, the New Mexico man for whom a routine traffic stop turned into a nightmare of torture, including multiple involuntary anal probes. The police dog that 'sniffed drugs' and kicked off the entire episode wasn’t even certified to sniff for drugs in the state of New Mexico at the time. His certification expired two years earlier, but that didn’t stop local police from using it to harass and torture state residents."
LINK HERE to the article
LINK HERE to related article
LINK HERE to related article
Grant Williams* 5*
Which Is Better For Getting People 
To Understand The Economy's Problems?
A Classic Comedic Metaphor?
Or Graphic Statistical Analysis?
Grant Williams Does An Admirable Job Of Bringing Both Together
click to enlarge the graphs
Get a load of the first one that shows European banks are not lending to people anymore. On the second one, understand that above 0 means the math of it all is getting worse, even with austerity.
In his latest Hmmm, Grant Williams* makes the analogy of an episode from Monty Python’s Flying Circus, to the 'line' we are being fed by the Fed & other central banks .. highlights the example of Europe where the central bank has encouraged the buying of bond of bankrupt countries - "we'll make sure you don't lose money" - financial repression European-style .. "European banks loaded themselves to the gills with peripheral European debt as part of the quid pro quo with Draghi, but making free carry off the desperate central bank is hardly what used to pass for banking. Remember when banking used to be about things like making loans?" This is a thoughtful piece with graphs to substantiate the commentary. Don't miss it.

Click on "Hmmm July 28" to download the report (may have to provide your email address), or hit "View Fullscreen" far below next to the 'S' icon to enlarge the viewing .. John Mauldin, Best-Selling author and recognized financial expert, is also editor of the free Thoughts From the Frontline that goes to over 1 million readers each week. For more information on John or his FREE weekly economic letter go to: http://www.frontlinethoughts.com/learnmore .. permission granted by Grant Williams to us to post the below, courtesy of www.vulpesinvest.com funds.

Similarities Between
U.S. & China Inequality 
"How unequal has the current Chinese economic system become in comparison to capitalist systems in countries such as the United States? .. Income inequality is a global problem. It has always existed in traditional oligarchical systems such as those in South America. It was less prevalent in North America and Europe and former Commonwealth nations that had a strong rule of law and offered good economic opportunities to those people who did not necessarily start out from a privileged position .. It was also not much of a problem in Communist nations such as Russia and China because there was relatively little wealth to begin with. Elites may have lived better but they were constrained by the relative poverty of their countries. Since the new age of globalization began in 1989, China and Russia have become much richer, which increases the opportunities for cronyism .. by elites .. The situation in the U.S. is exacerbated by bank and auto bailouts, other forms of government favoritism, and an opaque and complex tax system. The causes of income inequality in China, Russia and the U.S. are different but the result is the same. China has greater income inequality than the U.S., but both countries are approaching the point where income inequality is so extreme that it threatens to cause social disorder .. However, the Chinese elites are themselves the main beneficiaries of income inequality in the short run. Capital flight from China is accelerating, which is a sign that at least some elites have adopted a 'take the money and run' attitude and no longer care about continued Communist Party dominance provided they can extract enormous wealth from the country before the social disorder become more pronounced. The widening wealth gap is troubling, but it is not clear whether there is much political will to stop it."
- Jim Rickards*
link here to the reference
The Next Economic Disaster: 
Why It's Coming & 
How to Avoid It
Richard Vague, author of new book The Next Economic Disaster Why It's Coming and How to Avoid It .. Traditionally, economic crises have fueled debates focused primarily on the role that public debt & debt-fueled public spending play in economic growth .. Vague argues that it is in fact the rapid expansion of private rather than public debt that constrains growth & sparks economic calamities like the financial crisis .. over 1 hr
Central Bank of Russia
Continues To Buy Gold
Another 500,000 ounces made its way into the vaults of the Central Bank of Russia in June of this year .. not only has the trajectory of Russia’s accumulation changed dramatically since 2008, but since mid-2006 there have been only four months when minor sales were made .. click on chart to enlarge
link here to the source
The Element of Change
New video from the The Silver Institute .. Silver: The Element of Change ..  The video covers numerous facets of one of the most widely-used & indispensable precious metals: silver .. explores silver's role in history, how it changed the course of countless lives in times of the Greek & Roman Empires, when it was used to prevent infection .. looks at silver's role in industry, highlighting its ability to make today's mobile interconnected life possible as well as its use in medicine & water purification, which relies primarily on its natural antibacterial qualities .. notes silver's importance to fashion through exquisite silver jewelry, finally it speaks to silver's intrinsic worth as well as its role as a store of value, given its historical and modern use as a popular investment .. 7 minutes

Richard Russell*:
"I’m Afraid We Will See
Blood In The Streets"
"Any fool can be in this stock market and ride the waves. 60 years of experience tells me that being in this market is not worth the risk .. Anxiety and worry can take years off your life. Have you ever wondered how or why I've lived to be 90? I started Dow Theory Letters in 1958, and during all the years since then I've never allowed my subscribers to ride through a bear market. I like that record and intend to keep it. Good luck to the hedge funds and the money managers, most of whom are half my age, and are bold and brave with other people's money. I have always treated my subscribers' money as if it were my own, and will continue to do so .. The public is not in this market. Today the market is run by money managers, and every money manager must be in a market that is rising .. But how far will the market rise? No tree grows to the sky, and this market will be no exception. At some point the stock market will become top-heavy and fall over on its own weight. But when will that time come? Nobody on earth knows. But every money manager believes he'll be able to exit the market before the fall .. I read an article in a great magazine, The Christian Science Monitor Weekly, that the youth of the world are disgusted with the world we have left them. They are in the mood to revolt. They can't find jobs and are moving back in with their parents. They equate Islam with a revolt against the current world. As a result, thousands of young people from all over Europe are leaving their homes to fight in Syria. This is now becoming a real problem in Europe, and particularly in France .. The rule, 'thou shalt not spend more than 30% of thy after tax income on housing,' has become impossible for the average person. I think we are becoming a “mac n cheese” nation. If the squeeze continues on the middle and lower classes, I'm afraid we are going to see a revolt of the masses. I'm also afraid that we will see blood in the streets. As a result the safest place to be will be on a small farm away from large populations." 
- Richard Russell*
link here to the article
Japan's Plan
By Its Central Planners
For Financial 'Repression' Of The People:
Central Bank To Buy Bonds,
Pension Funds To Buy Stocks
Japan is moving to get its pension funds to sell Japanese government bonds (JGB) to its central bank, then use corporate governance & regulatory changes to force the pension funds to buy stocks .. "A return to more normal JGB interest rates of above 3% – which will prove loss-making for present holders such as the BoJ – is not likely for at least two years. Part of the Bank of Japan (BoJ)/Ministry of Finance (MoF) strategy of encouraging Japanese private sector portfolio shifts away from JGBs into equity-type assets is that the BoJ can bear such losses far more easily than other investing institutions. One of the most important moves concerns redeployment of assets held by the $1.2tn government pension investment fund (GPIF), where decisions are imminent on investing more in domestic equities rather than government bonds."
LINK HERE to the article
35% Are Facing
Debt Collectors!
More than 1/3 of Americans have debts & unpaid bills that have been reported to collection agencies, according to a study released Tuesday by the Urban Institute .. "These consumers fall behind on credit cards or hospital bills. Their mortgages, auto loans or student debt pile up, unpaid. Even past-due gym membership fees or cellphone contracts can end up with a collection agency, potentially hurting credit scores and job prospects."
link here to the article
Dr. Marc Faber*:
Stock Markets Are Up Because Of
Central Bank Money Printing
The market is up because of central bank asset purchases - this is not helping Main Street, it is helping the stock market .. likes Hong Kong stocks, sees the Chinese stock market breaking out on the positive side - this will help the Hong Kong stock market .. 2 minutes

Comparison of Stock Market 
Margin Debt
Versus Investor Net Worth
click to enlarge
Richard Duncan* - 
Prepare for Correction 
Once QE3 Ends
Financial Sense interview of Richard Duncan*, Chief Economist at Blackhorse Asset Management in Singapore .. Duncan explains how the markets and economy are now purely driven by credit growth & liquidity, which is bad news for both when the Federal Reserve’s third quantitative easing program is expected to wind down in .. 5 minutes
What Is the Effective Limit?
..on the Federal Reserve's Ability to 'Print Money?'
"The notion that a sovereign government issuing their own currency and debt cannot fail flies in the face of history, if not common sense. The ability of the government to enforce an increasingly arbitrary valuation ultimately comes down to a measure of the oppressive power and reach of the regime. Therefore the failures tend to begin at the edges, where arbitrary force does not reach as effectively .. This is not to say that the U.S. is at that point. But to say we are not yet at that point is like the drunk who says he has not crashed his car into a brick wall yet. It is to say that the idea that money can be created endlessly without engaging powerful forces of political and financial hazard is nonsense .. One of the reasons that this current scheme of the Fed seems to be succeeding is that instead of increasing the overall money supply by distributing it freely 'out of helicopters' and stimulating aggregate demand to the objective of stimulating a recovery, they are printing loads of money and then carefully handing it to their cronies in the Banks .. The resulting distortion does not yet result in a general inflation, but certainly facilitates and promotes a bubble in certain financial paper, and a massive wealth transfer from the public to the privileged.. This system will not cohere. But it has become very profitable for the status quo, if one ignores the consequences. It results in a society turned upside down, a bizarro world where nothing makes sense .. It always ends badly, in social disruption and worse."
- Jesse's Café Américain
link here to the reference
Dr. Marc Faber*:
Stock Market Will Peak,
Then Go Down 20%-30%
Dr. Marc Faber* says he first thinks stocks will peak within in the next 2 months, then the market will go down meaningfully .. 3 minutes

Federal Reserve Is Blowing a 
Global Stock Market Bubble 
Despite Media Denials
Daily Bell essay describes the mainstream media's social theme that the Federal Reserve is a responsible creature & would never create a speculative mess .. the essay dispels the notion that the Federal Reserve has little power to create "irrational" bubbles & that the current stock bubble is a rational one .. "Central banks create bubbles by expanding the money base and debasing currencies, thus setting into motion investment euphorias that lead inevitably to crashes and terrible economic busts. We long ago predicted the rise of the Wall Street Party and wrote that globalist elites were determined to expand this stock-buying binge as far as possible and for as long as possible, longer than might seem feasible .. They would print and print beyond anyone's expectations of what was remotely justifiable .. This is just what's happening. The reason we are observing a new 'anti-bubble' meme is because the current expansion is becoming ridiculous even to the average investor or observer. So now those behind this unsustainable expansion need to explain their actions while downplaying the significance of bubbles generally or specifically .. This is to be, apparently, the party to end all parties. And when it does stop – whenever that is – the bust will be absolutely horrific. And the calls will rise for a more internationalized monetary system. This happened after the U.S. crash of 1907. Elite strategies never change. They are simply recycled .. Eventually this party will be over, and the resultant crash will surely reverberate – grimly and ruinously – for many decades to come."
LINK HERE to the essay
Stock Indices & Debt Levels Are At Their Highest Levels Since XXX:
 And That’s a GOOD Thing??
In his latest commentary, John Rubino* lists countless examples of the mainstream media highlighting how "XYZ is at its highest level since XXX" - like how tech stocks are at their highest levels since 1999, or how bond issuance & margin debt & U.S. M&As are back to their levels just prior to the financial crisis .. "The reporting in the mainstream media is positive, celebrating the new records as a sign of economic progress .. Overstretched markets and excessive debt led to crises that nearly crippled the global financial system .. This time the milestones are a combination of 1999 and pre-financial crisis levels, which implies a more-broad-based financial bubble than occurred in either of those previous periods. At the risk of repeating the same tired complaint, if the media’s job is to sense patterns and give today’s news some historical context, you’d think the tone of most reporting would be, rather than 'Yippee, we’re growing,' 'Ooops, here we go again.'"
LINK HERE to the commentary
to notice how tall some brides are these days