Part 2:
BACKDOC: THE DEFLATION SPIRAL IS NOW WELL IN PLAY. WE ALL CAN NOW SEE THAT GLOBAL RISKS ARE MORE THAN JUST POSSIBILITIES. THEY APPEAR INEVITABLE.
SO LETS BREAK DOWN SOME ISSUES THAT WILL INFLUENCE THE GREATEST RISK SHALL WE?
WE ALL KNOW THE BREXIT VOTE ON JUNE 23rd IS ON ITS WAY. THREE DAYS LATER WILL BE ANOTHER VOTE IN SPAIN FOR CATALONIA TO SECEED. AND LETS NOT FORGET TO MENTION THE GREECE FIASCO.
ON TOP OF ALL THAT WE HAVE THE SHENGENG AGREEMENT IN TATERS! IS IT ANY WONDER THE EU AND THE UNBACKED EURO IS AT RISK OF FAILURE?
IS IT ANY WONDER WE HAVE TURBULENT UNSTABLE WATERS? DOC IMO
....
BACKDOC: THE DEFLATION SPIRAL IS NOW WELL IN PLAY. WE ALL CAN NOW SEE THAT GLOBAL RISKS ARE MORE THAN JUST POSSIBILITIES. THEY APPEAR INEVITABLE.
SO LETS BREAK DOWN SOME ISSUES THAT WILL INFLUENCE THE GREATEST RISK SHALL WE?
WE ALL KNOW THE BREXIT VOTE ON JUNE 23rd IS ON ITS WAY. THREE DAYS LATER WILL BE ANOTHER VOTE IN SPAIN FOR CATALONIA TO SECEED. AND LETS NOT FORGET TO MENTION THE GREECE FIASCO.
ON TOP OF ALL THAT WE HAVE THE SHENGENG AGREEMENT IN TATERS! IS IT ANY WONDER THE EU AND THE UNBACKED EURO IS AT RISK OF FAILURE?
IS IT ANY WONDER WE HAVE TURBULENT UNSTABLE WATERS? DOC IMO
....
Thunderhawk: ECB should change course before it is too late
Over the past century, central banks have become the guardians of our economic and financial security. The Bundesbank and Federal Reserve, for example, are respected for achieving monetary stability, often in the face of political opposition. But central bankers can also lose the plot, usually by following the economic dogma of the day. When they do, their mistakes can be catastrophic.
In the 1920s, the German Reichsbank thought it a clever idea to have 2,000 printing presses running day and night to finance government spending. Hyperinflation was the result. Around the same time, the Federal Reserve stood by as more than a third of US bank deposits were destroyed, in the belief that banking crises were self-correcting. The Great Depression followed.
Today, the behavior of the European Central Bank suggests that it too has gone awry. When reducing interest rates to historically low levels did not stimulate growth and inflation, the ECB embarked on a massive program of purchasing eurozone sovereign debt. But the sellers did not spend or invest the proceeds.
Instead, they placed the money on deposit.
So the ECB went to the logical extreme: It imposed negative interest rates. Currently almost half of eurozone sovereign debt is trading with a negative yield. If this fails to stimulate growth and inflation, “helicopter money” will be next on the agenda. Future students of monetary policy will shake their heads in disbelief.
What is more, as purchaser-of-last-resort of sovereign debt, the ECB is underwriting the solvency of its over-indebted members. Countries no longer fear that failure to reform their economies or reduce debt will raise the cost of borrowing. Six years after the onset of the European debt crisis, total indebtedness in the eurozone keeps on rising. Badly needed reforms have been abandoned.
As a result, the eurozone is as fragile as ever. Safe keepers of our wealth, such as insurance companies, pension funds and savings banks barely earn a positive spread. Inflation is just above zero, well below the ECB’s defined target. And with growth anemic, debt levels in some countries, such as Italy, are not sustainable.
Worse still, the ECB is failing in its other mandated duty — to promote stability. Popular opposition to low and negative interest rates, when combined with continuing high unemployment, is fomenting anger with the European project. Even if current policy eventually results in an overdue recovery, political pressure is unlikely to abate.
Monetary policy, therefore, has become the number one threat to the eurozone. This might seem counterintuitive, given the ECB’s famous readiness to ‘do whatever it takes’ to preserve the common currency. But trying to stimulate growth and inflation with ever-lower rates and bond purchases, while at the same time removing incentives for structural reforms, risks an unstoppable downward spiral.
Negative rates signal to the average consumer or small or medium-sized company that things are dire. Such uncertainty means people save more and capital expenditure remains stagnant. Capital supports businesses that would not be viable under normal conditions. Households without financial assets are hardest hit, while those owing equity-portfolios or property benefit from increasing asset prices.
It did not have to be this way. Governments could have enacted reforms. The ECB should never have usurped the role of savior of the eurozone and its president is disingenuous to blame politicians for failing to act. It is he who enabled them to postpone the hard choices. Further, the longer monetary policy prevents the necessary catharsis, the more it contributes to the growth of populist or extremist politics.
What should be done? The priority is breaking the negative spiral of lower confidence engendered by ever-looser money. The ECB needs to begin reversing its policy of negative interest rates. Moving back into the black would raise confidence across the eurozone.
This has to be accompanied by a return to a market — and risk-based pricing of sovereign risk, which would offer governments incentives to undertake structural reform. The ECB has to leave it to the politicians to deal with the debt crises that would inevitably follow in certain member countries.
Rarely has an institution held such sway over the economic and political future of an entire continent. But this is not the time for slavishly following a doubtful economic dogma — it is the time for common sense. The longer the ECB persists with unconventional monetary policy, the greater the damage to the European project will be.
http://ift.tt/272Kw0H
**************
Thunderhawk: Speaking of ships ?
BACKDOC: TURBULENT WATERS IS AN UNDERTOW OOPS I MEAN UNDERSTATEMENT. HEE HEE
IF WE DONT FIND SOME HUMOR WE WILL ALL BE CRYING! SLAP!
IM OK NOW!
BY ALMOST ANY MEASURE THE FINANCIAL BOAT IS SINKING. WHAT DO YOU THINK THE LIFEBOAT IS?
GOLD? SILVER? AHHHH NO!
EMERGING COUNTRY ASSET BACKED CURRENCIES! IMO SOME THAT MAY BE DONOR CURRENCIES TO THE SDR! DOC IMO
Mountainman: Yes {ALL} MARKETS are On (THIN ICE).......and WHAT we have Here is A CONVERGENCE of MULTIPLE REALITIES......Couple that w/the DEFLATION of the DOLLAR COLLIDING w/ INFLATION and This Could Turn Out to be A MAJOR DISASTER,worse than The TITANIC......
It's Understandable as Many in Financial Arenas See the Disaster, But Have Very Little if "ANY" Understanding at All Concerning the NEW VALUES on CURRENCIES Coming to A DOC....Sorry About that DOC....I Mean {DOCK} Near You......
In the Mean time It is A Necessity for What is TRANSPIRING on ALL the GLOBAL SEA STORM FRONTS.....
And (THOSE) =12/1 at the HELM Know Exactly What, When, Why, and HOW.......(THEY) are NAVIGATING these Troubled Waters that are taking 188+Countries into UNCHARTERED and Yet Mapped Out/CHARTERED Waters......
However,Like the TITANIC as The End Approaches for the FIAT SYSTEM there will be Tumultuous/Treacherous Waters that will IMPACT {ALL} One Way or Another......the DIFFERENCE is The {TRANSITION} will NOT be ONE of DEATH......but will be ONE that Rejoices to A New Found VALUE Based On A Countries TRUE VALUE=Their ASSETS/RESOURCES, and TRADE ........No LONGER will the FIAT DOLLARS DEBT be ONE that SINKS GLOBAL SHIPS/A COUNTRIES CURRENCY or their ECONOMIES.......A LIGHTHOUSE is in Ones LINE of SIGHT.....Yes A BEACON of HOPE......
Thus The NEW REALITY will OPEN MANY Windows of HOPE and PROSPERITY for Those Who........are RIDING the STORM OUT.........
LOL......Reminds Me of An Old 80's SONG.......So Hang Tough....Hold On to Your......ASSET(BACKED) CURRENCIES and Be PATIENT after the TRANSITION......for MANY AWAIT to PREY on Your PRAYERS thru this TITANIC JOURNEY......Do you Get it ???
Yes I {Know} You Do......INDEED......and that's WHY We Do What We Do......{ALL}.....
Blessings,Mountainman (8)=New Beginnings......for those Who are "RIDING the STORM OUT"........
Thunderhawk: Global economy like 'Titanic' about to sink
Over the past century, central banks have become the guardians of our economic and financial security. The Bundesbank and Federal Reserve, for example, are respected for achieving monetary stability, often in the face of political opposition. But central bankers can also lose the plot, usually by following the economic dogma of the day. When they do, their mistakes can be catastrophic.
In the 1920s, the German Reichsbank thought it a clever idea to have 2,000 printing presses running day and night to finance government spending. Hyperinflation was the result. Around the same time, the Federal Reserve stood by as more than a third of US bank deposits were destroyed, in the belief that banking crises were self-correcting. The Great Depression followed.
Today, the behavior of the European Central Bank suggests that it too has gone awry. When reducing interest rates to historically low levels did not stimulate growth and inflation, the ECB embarked on a massive program of purchasing eurozone sovereign debt. But the sellers did not spend or invest the proceeds.
Instead, they placed the money on deposit.
So the ECB went to the logical extreme: It imposed negative interest rates. Currently almost half of eurozone sovereign debt is trading with a negative yield. If this fails to stimulate growth and inflation, “helicopter money” will be next on the agenda. Future students of monetary policy will shake their heads in disbelief.
What is more, as purchaser-of-last-resort of sovereign debt, the ECB is underwriting the solvency of its over-indebted members. Countries no longer fear that failure to reform their economies or reduce debt will raise the cost of borrowing. Six years after the onset of the European debt crisis, total indebtedness in the eurozone keeps on rising. Badly needed reforms have been abandoned.
As a result, the eurozone is as fragile as ever. Safe keepers of our wealth, such as insurance companies, pension funds and savings banks barely earn a positive spread. Inflation is just above zero, well below the ECB’s defined target. And with growth anemic, debt levels in some countries, such as Italy, are not sustainable.
Worse still, the ECB is failing in its other mandated duty — to promote stability. Popular opposition to low and negative interest rates, when combined with continuing high unemployment, is fomenting anger with the European project. Even if current policy eventually results in an overdue recovery, political pressure is unlikely to abate.
Monetary policy, therefore, has become the number one threat to the eurozone. This might seem counterintuitive, given the ECB’s famous readiness to ‘do whatever it takes’ to preserve the common currency. But trying to stimulate growth and inflation with ever-lower rates and bond purchases, while at the same time removing incentives for structural reforms, risks an unstoppable downward spiral.
Negative rates signal to the average consumer or small or medium-sized company that things are dire. Such uncertainty means people save more and capital expenditure remains stagnant. Capital supports businesses that would not be viable under normal conditions. Households without financial assets are hardest hit, while those owing equity-portfolios or property benefit from increasing asset prices.
It did not have to be this way. Governments could have enacted reforms. The ECB should never have usurped the role of savior of the eurozone and its president is disingenuous to blame politicians for failing to act. It is he who enabled them to postpone the hard choices. Further, the longer monetary policy prevents the necessary catharsis, the more it contributes to the growth of populist or extremist politics.
What should be done? The priority is breaking the negative spiral of lower confidence engendered by ever-looser money. The ECB needs to begin reversing its policy of negative interest rates. Moving back into the black would raise confidence across the eurozone.
This has to be accompanied by a return to a market — and risk-based pricing of sovereign risk, which would offer governments incentives to undertake structural reform. The ECB has to leave it to the politicians to deal with the debt crises that would inevitably follow in certain member countries.
Rarely has an institution held such sway over the economic and political future of an entire continent. But this is not the time for slavishly following a doubtful economic dogma — it is the time for common sense. The longer the ECB persists with unconventional monetary policy, the greater the damage to the European project will be.
http://ift.tt/272Kw0H
**************
Thunderhawk: Speaking of ships ?
BACKDOC: TURBULENT WATERS IS AN UNDERTOW OOPS I MEAN UNDERSTATEMENT. HEE HEE
IF WE DONT FIND SOME HUMOR WE WILL ALL BE CRYING! SLAP!
IM OK NOW!
BY ALMOST ANY MEASURE THE FINANCIAL BOAT IS SINKING. WHAT DO YOU THINK THE LIFEBOAT IS?
GOLD? SILVER? AHHHH NO!
EMERGING COUNTRY ASSET BACKED CURRENCIES! IMO SOME THAT MAY BE DONOR CURRENCIES TO THE SDR! DOC IMO
Mountainman: Yes {ALL} MARKETS are On (THIN ICE).......and WHAT we have Here is A CONVERGENCE of MULTIPLE REALITIES......Couple that w/the DEFLATION of the DOLLAR COLLIDING w/ INFLATION and This Could Turn Out to be A MAJOR DISASTER,worse than The TITANIC......
It's Understandable as Many in Financial Arenas See the Disaster, But Have Very Little if "ANY" Understanding at All Concerning the NEW VALUES on CURRENCIES Coming to A DOC....Sorry About that DOC....I Mean {DOCK} Near You......
In the Mean time It is A Necessity for What is TRANSPIRING on ALL the GLOBAL SEA STORM FRONTS.....
And (THOSE) =12/1 at the HELM Know Exactly What, When, Why, and HOW.......(THEY) are NAVIGATING these Troubled Waters that are taking 188+Countries into UNCHARTERED and Yet Mapped Out/CHARTERED Waters......
However,Like the TITANIC as The End Approaches for the FIAT SYSTEM there will be Tumultuous/Treacherous Waters that will IMPACT {ALL} One Way or Another......the DIFFERENCE is The {TRANSITION} will NOT be ONE of DEATH......but will be ONE that Rejoices to A New Found VALUE Based On A Countries TRUE VALUE=Their ASSETS/RESOURCES, and TRADE ........No LONGER will the FIAT DOLLARS DEBT be ONE that SINKS GLOBAL SHIPS/A COUNTRIES CURRENCY or their ECONOMIES.......A LIGHTHOUSE is in Ones LINE of SIGHT.....Yes A BEACON of HOPE......
Thus The NEW REALITY will OPEN MANY Windows of HOPE and PROSPERITY for Those Who........are RIDING the STORM OUT.........
LOL......Reminds Me of An Old 80's SONG.......So Hang Tough....Hold On to Your......ASSET(BACKED) CURRENCIES and Be PATIENT after the TRANSITION......for MANY AWAIT to PREY on Your PRAYERS thru this TITANIC JOURNEY......Do you Get it ???
Yes I {Know} You Do......INDEED......and that's WHY We Do What We Do......{ALL}.....
Blessings,Mountainman (8)=New Beginnings......for those Who are "RIDING the STORM OUT"........
Thunderhawk: Global economy like 'Titanic' about to sink
There are cynics, there are naysayers, and then there's Albert Edwards of Societe Generale, who is in a League of Doom all of his own.
Edwards is probably the most notoriously bearish analyst in the world of finance, and is given to grand proclamations about the (broken) state of the world, Business Insider wrote.
So far this year he has predicted a ‘tidal wave’ of corporate defaults in the US; argued that central bankers are going to destroy the global economy and plunge the world into chaos; and said that we could concrete over the whole of Britain and house prices would keep rising.
The economist's latest gloomy prediction, in Societe Generale's weekly Global Strategy note to clients, is that the global economy is, like the 'Titanic', about to "sink below the icy waves."
Edwards said that US companies are using the recent weakening of the dollar to paper over serious problems in their businesses and it's akin to "a shuffling of deckchairs on the Titanic before the global economy sinks below the icy waves." In other words, mindless busywork before a massive crash.
Here's what Edwards has to say on the falling dollar (emphasis ours):
The dollar’s recent rapid slide has been accompanied by a constant backdrop of dovish cooing from the Fed. Until this week, both equity and commodity markets had embraced the weak dollar as the elixir to solve all their ills. That relief has now proved fleeting as fear of weak economic activity has reasserted its influence on investors. The weak dollar should be seen as merely a shuffling of deckchairs on the Titanic before the global economy sinks below the icy waves.
The dollar index, which tracks the greenback against a basket of the world's most important currencies, has slipped nearly five percent since the start of March, falling rapidly after a period of immense strength. That weakness buoyed investors, pushing up commodity prices and stocks across the board.
However, in recent weeks, markets have started to stutter thanks to the "fear of weak economic activity" Edwards mentions in his report.
Here's the perma-bear once again:
Risk assets are once again refocusing on the increasingly dismal prospects for global growth rather than the short-term relief of dollar weakness. The US remains the main concern, although the rapid unraveling of Abenomics in Japan and a likely imminent tightening of monetary policy in China to snuff out yet another housing bubble in the major cities also feature high on investors worry list.
But it is in the US that growth concerns remain most intense, with renewed weakness in the manufacturing ISM as we move into Q2 following on from the moribund 0.5 percent qoq Q1 GDP outturn.
Edwards also rounds on the US Federal Reserve, asserting that it doesn't actually care about global risks, but is more concerned about preserving the strength of the S&P 500. Edwards also calls the central bank ‘impotent’:
The sad thing is that the Fed has boxed itself into a corner, for surely it is clear to all in the markets by now that it's not ‘global risks’ that worry the Fed but the impact on the S&P. But all the Fed's loosey goosey will prove irrelevant as the cycle ends. Get ready to suck it up as the inevitable recession demonstrates the Fed's total impotence.
And here's the chart Edwards says proves it, showing that the Fed has said it is ‘concerned’ about global risks during all recent troughs on the S&P, but has not said it is concerned when it's doing well.
It ends with social unrest and double digit budget deficits (again). It ends with investors losing faith with the Fed as the resumption of QE proves ineffective in reviving the economy. It ends in deeply negative interest rates, currency and trade wars, helicopter money and ultimately inflation. In a nutshell, it ends badly.
http://ift.tt/272Kw0L
Edwards is probably the most notoriously bearish analyst in the world of finance, and is given to grand proclamations about the (broken) state of the world, Business Insider wrote.
So far this year he has predicted a ‘tidal wave’ of corporate defaults in the US; argued that central bankers are going to destroy the global economy and plunge the world into chaos; and said that we could concrete over the whole of Britain and house prices would keep rising.
The economist's latest gloomy prediction, in Societe Generale's weekly Global Strategy note to clients, is that the global economy is, like the 'Titanic', about to "sink below the icy waves."
Edwards said that US companies are using the recent weakening of the dollar to paper over serious problems in their businesses and it's akin to "a shuffling of deckchairs on the Titanic before the global economy sinks below the icy waves." In other words, mindless busywork before a massive crash.
Here's what Edwards has to say on the falling dollar (emphasis ours):
The dollar’s recent rapid slide has been accompanied by a constant backdrop of dovish cooing from the Fed. Until this week, both equity and commodity markets had embraced the weak dollar as the elixir to solve all their ills. That relief has now proved fleeting as fear of weak economic activity has reasserted its influence on investors. The weak dollar should be seen as merely a shuffling of deckchairs on the Titanic before the global economy sinks below the icy waves.
The dollar index, which tracks the greenback against a basket of the world's most important currencies, has slipped nearly five percent since the start of March, falling rapidly after a period of immense strength. That weakness buoyed investors, pushing up commodity prices and stocks across the board.
However, in recent weeks, markets have started to stutter thanks to the "fear of weak economic activity" Edwards mentions in his report.
Here's the perma-bear once again:
Risk assets are once again refocusing on the increasingly dismal prospects for global growth rather than the short-term relief of dollar weakness. The US remains the main concern, although the rapid unraveling of Abenomics in Japan and a likely imminent tightening of monetary policy in China to snuff out yet another housing bubble in the major cities also feature high on investors worry list.
But it is in the US that growth concerns remain most intense, with renewed weakness in the manufacturing ISM as we move into Q2 following on from the moribund 0.5 percent qoq Q1 GDP outturn.
Edwards also rounds on the US Federal Reserve, asserting that it doesn't actually care about global risks, but is more concerned about preserving the strength of the S&P 500. Edwards also calls the central bank ‘impotent’:
The sad thing is that the Fed has boxed itself into a corner, for surely it is clear to all in the markets by now that it's not ‘global risks’ that worry the Fed but the impact on the S&P. But all the Fed's loosey goosey will prove irrelevant as the cycle ends. Get ready to suck it up as the inevitable recession demonstrates the Fed's total impotence.
And here's the chart Edwards says proves it, showing that the Fed has said it is ‘concerned’ about global risks during all recent troughs on the S&P, but has not said it is concerned when it's doing well.
It ends with social unrest and double digit budget deficits (again). It ends with investors losing faith with the Fed as the resumption of QE proves ineffective in reviving the economy. It ends in deeply negative interest rates, currency and trade wars, helicopter money and ultimately inflation. In a nutshell, it ends badly.
http://ift.tt/272Kw0L
Thunderhawk: BINGO!!!!
VIETNAM: Firms adapt to anti-dollar drive
Domestic firms have taken the first measures in an effort to adapt to the State Bank of Vietnam (SBV)’s new regulation on tightening foreign currency credit.
Under Circular 24/2015/TT-NHNN, commercial banks are no longer allowed to provide lending in foreign currency to firms which do not need it for offshore payments since March 31 this year. The tightening in foreign currency credit is aimed to step up the central bank’s anti-dollarisation drive.
SBV said that the new regulation affects only those firms which often obtain foreign currency loans from banks and will later convert them into dong to fund their domestic production.
The new rules on foreign currency loans are expected to stabilise exchange rates and strengthen the dong. However, it also has side effects on firms, especially agriculture and seafood exporters, which often take loans in foreign currencies to meet their great funding demand. Read more at:
http://ift.tt/24ysHEA
************
Mountainman: BLESSINGS on those RIDING the STORM OUT.......Here is An Oldie but A Goodie.........MM
https://youtu.be/4T5gjIiLRCg
VIETNAM: Firms adapt to anti-dollar drive
Domestic firms have taken the first measures in an effort to adapt to the State Bank of Vietnam (SBV)’s new regulation on tightening foreign currency credit.
Under Circular 24/2015/TT-NHNN, commercial banks are no longer allowed to provide lending in foreign currency to firms which do not need it for offshore payments since March 31 this year. The tightening in foreign currency credit is aimed to step up the central bank’s anti-dollarisation drive.
SBV said that the new regulation affects only those firms which often obtain foreign currency loans from banks and will later convert them into dong to fund their domestic production.
The new rules on foreign currency loans are expected to stabilise exchange rates and strengthen the dong. However, it also has side effects on firms, especially agriculture and seafood exporters, which often take loans in foreign currencies to meet their great funding demand. Read more at:
http://ift.tt/24ysHEA
************
Mountainman: BLESSINGS on those RIDING the STORM OUT.......Here is An Oldie but A Goodie.........MM
https://youtu.be/4T5gjIiLRCg
via Dinar Recaps - Our Blog http://ift.tt/272Kypb
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