Sunday, April 26, 2015

The Negative Yield Matrix: 
Red Pill or Blue Pill?
"In the 1999 movie The Matrix, the main character Neo (Keanu Reeves) is faced with this choice. Take the red pill and face the 'truth of reality' or take the blue pill and live the 'ignorance of illusion' .. In reflecting on the global economy today, most seem to be choosing the blue pill .. The blue pill represents the dreamy idea that central bankers can save the world through easy monetary policies that force interest rates to 0% and even negative levels, artificially driving up asset prices. As long as asset prices are going up, the policies are deemed to be 'working' regardless of the reality in the real economy. And as long as money is cheap, governments and consumers can continue to borrow and spend beyond their means .. On the other hand, taking the red pill would mean facing the truth that unending easy money policies only borrow from the future, and the virtuous 'wealth effect' sold to the masses has yet to take place after six long years of unprecedented easing. The red pill means acknowledging that you have the slowest U.S. expansion in history, another recession in Japan, tepid growth in Europe, and the slowest growth in China since 2009. And that you have this backdrop in spite of (and perhaps, because of) record central bank easing and government borrowing/spending .. Understandably, though, the blue pill is more appealing. The dream world matrix of negative yields throughout Europe is an easy choice over the looming reality of market-based yields in Greece .. And so global policymakers and their minions have successfully convinced the intelligentsia that driving up asset prices (from a deflated bubble that they created in the last cycle) is all that matters and that there are no adverse consequences to their actions. To markets and the 0.1% dream world, perhaps this is true. But to the rest of us who live in the red pill reality, what’s going on today can only be described as madness."
- Pension Partners
link here to the commentary
Asset Correlations Make Market 
Riskier Today Than Before
The degree to which things move hand-in-hand is measured by correlation. For securities, a correlation closer to +1 implies more of a dollar-to-dollar move in prices .. According to a new study from the IMF, correlations in general are much more elevated these days than they were before the financial crisis. In other words, there are fewer places to hide in the markets when the markets start tanking.
link here to the article
The “War on Cash” 
Migrates to Switzerland
Acting Man reports on a number of pension funds in Switzerland thinking about keeping their money in an external vault instead of leaving it in bank deposits due to the negative interest rates .. financial repression is leading to a war on cash .. some Swiss banks are refusing to pay out money in large amounts now .. Acting Man: "It is undoubtedly a huge red flag when in one of the countries considered to be a member of the 'highest economic freedom in the world' club, commercial banks are suddenly refusing their customers access to their cash. This money doesn’t belong to the banks, and it doesn’t belong to the central bank either. If this can happen in prosperous Switzerland, based on some nebulous notion of the 'collective good', which its unelected central planners can arbitrarily determine and base decisions upon, it can probably happen anywhere. Consider yourself warned. As the modern day fiat money system inevitably cruises toward its final denouement, individual rights will come increasingly under attack as the world’s ruling elites and centrally directed banking cartels begin to batten down the hatches."
LINK HERE to the article
OUTSIDE OUR BOX
How Mars might hold the Secret 
to the Origin of Life
Sunday Night Special
Planetary scientist Nathalie Cabrol takes us inside the search for microbes on Mars, a hunt which counterintuitively leads us to the remote lakes of the Andes mountains. This extreme environment — with its thin atmosphere and scorched land — approximates the surface of Mars about 3.5 billion years ago. How microbes adapt to survive here may just show us where to look on Mars —  & could help us understand why some microbial pathways lead to civilization while others are a dead end .. 16 minutes
Mish Shedlock*:
Global Currency Crisis
Coming Soon
Wall St For Main St interviews Mish Shedlock* .. discussion about interest rates & financial repression .. Shedlock says the Federal Reserve would probably never admit they are trapped & is probably too stupid to know they are basically trapped .. discussion on financial repression in the U.S., Japan .. discussion on the recent article about the pension plan crisis developing in the U.S. .. discussion if asset price inflation is intentionally being done to help generate higher returns for pension funds .. likes gold, gold miners, Japanese stocks the most .. says Keynesian central bankers will do almost anything to fight deflation & that ultimately this will lead to a global currency crisis in the near future .. 47 minutes

Financial Repression in
Venezuela
Joint Paper with Carmen Reinhart
Miguel Ángel Santosalumni is Senior Research Fellow at the Center for International Development at Harvard University. He recently won an award for a paper he has written with Harvard Professor Carmen Reinhart .. he shares some background on the paper & some results - financial repression is significantly higher in periods of exchange controls & financial repression is big in Venezuela .. "right now inflation is running at a rate five times higher than yields on domestic bonds or bank deposits" .. capital controls, exchange controls in effect also.
LINK HERE to the article


click to enlarge
Joe Salerno: Austrian Economics 
& Crony Academia
Jeff Deist & Joseph T. Salerno discuss the health & vitality of the Austrian school of economics .. Joe also provides great insights into the state of academia, whether it's wise for libertarians to pursue a PhD. .. 18 minutes
Liquidity Gauge Warning: 
After mid-year, Look Out!
"Liquidity determines which way asset prices move. When there is excess liquidity, the price of stocks, bonds and property tends to rise. When liquidity is negative, the price of those assets tends to fall. After two years of excess liquidity – and rapidly appreciating asset prices – liquidity will turn negative in the second half of this year AND REMIAN NEGATIVE FOR THE NEXT FIVE YEARS! This approaching liquidity drain is not only likely to cause a significant selloff in the financial markets, it is also likely to push the economy back into recession .. Given this bleak outlook for liquidity, we’ll see that the only way stock prices could move higher is if interest rates move lower. The possibility that interest rates will fall significantly further can’t be ruled out, but if they do, it would most probably be as the result of the United States falling back into recession."
- Richard Duncan*
link here to the article
The Petrodollar Collapse
Money Morning series on the catalysts for triggering a collapse of the economy .. this time taking a look at the U.S.$, its tie with oil through Middle East/OPEC politics known as the petrodollar .. discussion on the scenario where the U.S.$ falls due to linkages with oil & the Middle East/OPEC. [Note: This short clip leads to solicitation unrelated to us. We trust our readers to use judgement & extract substance.]
The War on Cash
Martin Armstrong* highlights one of the pillars of financial repression - "ring-fencing" regulations restricting the use & mobility of capital .. in this case, on cash .. "The MAJOR benefit for banks to eliminate cash is that it will eliminate bank runs .. The good old days of lining up at the bank to withdraw your money will be gone forever. With banks on the brink of total disaster in Europe, eliminating cash will have the desired effect of eliminating the crisis in their mind. U.S. banks see the writing on the wall, for whatever starts in Europe eventually migrates here, just like plays and fashion .. The government can simply cancel ALL CURRENCY. That will force people into electronic money; it is coming faster than you may ever suspect."
link here to the commentary
Jim Puplava’s Big Picture: 
Financial Repression
about 1 hour total program
click to enlarge
OUTSIDE OUR BOX
Daydreaming (not multitasking)
to process the amount of information we now face?
Sunday Afternoon Special
Modern society is in a state of data deluge, our brains are struggling to keep up with the demands of the digital age .. Daniel Levitin explains how our brains organise a flood of information, how we can harness that understanding to be more efficient, less stressed in an increasingly wired & distracted world .. recommended watching by Barry Ritholtz* .. 7 minutes
"Secular Stagnation"
"Just like in the world of fashion, economic terminologies come in and out of vogue. One such economic term trending recently is Secular Stagnation. First proposed by Keynesian economist Alvin Hansen back in the 1930s, Secular Stagnation was coined to explain America’s dismal economic performance—in which sluggish growth and employment levels were well below potential .. The term is now back in style thanks to the likes of the contemporary heroes of Keynesian economics, like Larry Summers and Paul Krugman; and is based on the notion that a chronic savings glut has resulted in the economy operating well below potential. The notion that the developed world is trapped in some type of stagnation is something I can agree with .. However, the reasoning offered for this stagnation completely dismisses the role of central banks and assumes low growth and interest rates are instead being driven by those pesky savers. This theory is not only philosophically and economically bankrupt, it also dismisses all of the factual evidence about the actual decline in worldwide savings rates. The truth is real savings and real investment do not cause secular stagnation, but are rather the very foundations of productivity and growth. However, the developed world’s current condition of secular stagnation is brought on by central bank debt monetization; which leads to asset bubbles, debt saturations and the desolation of middle classes. In reality, the economy is mostly suffering from the stagnating brains of those who control governments and banks. And it is this blatant form of secular stagnation that will soon bring down the entire global economy."
- Michael Pento
link here to the commentary
TAKE A BREAK
AeroMobil — The Incredible Flying Car
Free Market innovation is awesome. Straight out of Slovakia by a designer who originally dreamt of a flying car as a way to escape Soviet oppression .. The AeroMobil is the world’s first fully transformable flying car. It drives along the road like a space-age roadster. It flies through the skies like a private jet. And if everything goes to plan, it could be in customers’ garages within 2 years, reports FT.

A Catalyst That Could Trigger
An Economic Collapse:
China's Gold Reserves?
Money Morning on how many in the U.S. Intelligence Community warn a severe economic collapse is unavoidable...One that will ignite a 25-year Economic Depression. [Warning: This leads to someone's marketing piece]