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Is the US Economy Running out of Gas?

By John W. Schoen. Is there another U.S. recession on the way? . . .

The answer depends a lot on how you measure the strength and durability of the recovery, now in its seventh year based the business cycle dates tracked by economists at the National Bureau of Economic Research . . .

To see how this recovery compares, CNBC tracked a series of economic and market data over the last eight recessions since 1960 — starting each cycle with the beginning of each downturn.

By just about every measure, the current expansion has been the weakest of the eight.

One of the main reasons has been the relatively sluggish pace of spending and investment — by consumers, government and businesses — since the Great Recession began in December 2007. Consumer spending has recovered far more slowly than past recoveries. And despite a massive stimulus program in 2010, government spending at all levels is actually lower than when the Great Recession hit. (Read more from “Is the US Economy Running out of Gas?” HERE)

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The World Can’t Afford Another Financial Crash – It Could Destroy Capitalism as We Know It

By Allister Heath. They bounce back after terrorist attacks, pick themselves up after earthquakes and cope with pandemics such as Zika. They can even handle years of economic uncertainty, stagnant wages and sky-high unemployment. But no developed nation today could possibly tolerate another wholesale banking crisis and proper, blood and guts recession.

We are too fragile, fiscally as well as psychologically. Our economies, cultures and polities are still paying a heavy price for the Great Recession; another collapse, especially were it to be accompanied by a fresh banking bailout by the taxpayer, would trigger a cataclysmic, uncontrollable backlash.

The public, whose faith in elites and the private sector was rattled after 2007-09, would simply not wear it. Its anger would be so explosive, so-all encompassing that it would threaten the very survival of free trade, of globalisation and of the market-based economy. There would be calls for wage and price controls, punitive, ultra-progressive taxes, a war on the City and arbitrary jail sentences.

For fear of allowing extremist or populist parties through the door, mainstream politicians would end up adopting much of this agenda, with devastating implications for our long-term prosperity. Central banks, in desperation, would embrace the purest form of money-printing: they would start giving consumers actual cash to spend, temporarily turbo-charging demand while destroying any remaining respect for the idea that money needs to be earned. (Read more from “The World Can’t Afford Another Financial Crash – It Could Destroy Capitalism as We Know It” HERE)

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Ethanol Is the Anchor Baby of Our Economic System

“They won’t be able to be slurping off the gravy train.” ~ Sarah Palin, during her speech endorsing Donald Trump.

Throughout the debate over birthright citizenship last year, we were told by the liberal elites in both parties that foreign nationals have the right to violate our sovereignty, drop an anchor baby in our country, assert jurisdiction, and unilaterally demand citizenship and welfare on the taxpayer dime. At its core, the anchor baby strategy is designed to legitimize an illegitimate entitlement to other people’s sovereignty and money, absent their consent.

In the same respect, we can say the ethanol mandate is the anchor baby of our economic system. Energy is the lifeblood of a free economy. Much like immigration stands at the nexus of our culture, security and fiscal solvency, energy stands at the nexus of the bread and butter economic issues – jobs, income, and cost of living. Rather than allowing Americans to use our freedom to purchase the best form of fuel, the Washington cartel ethanol lobbyists have violated our sovereignty as individual consumers and used the boot of government to mandate that we only purchase fuel blended with their ineffective product.

To paraphrase Donald Trump, only the pathetic losers and dummies in the political establishment could think it’s a good idea to take 40% of the corn crop and shove it into our engines, thereby raising the cost of food and fuel—the two staples of middle class households in America.

Just how devastating is the ethanol mandate?

According to a study cited by the Heartland Institute, families are forced to pay $2,055 more for food every year because 40% of the corn crop – the antecedent of the food chain – is used for fuel. A study from PricewaterhouseCoopers found that restaurants pay $18,000 more per year.

Ethanol is so impotent as a fuel for automobiles that when Rep. Ron DeSantis offered an amendment to repeal the mandate, he was told by the Congressional Budget Office that it would increase the deficit by decreasing tax revenue. How? By alleviating consumers from purchasing diluted fuel and allowing them to actually fill up their tanks with unvarnished gasoline, motorists wouldn’t have to refill their tanks as often as they do now. That would result in less revenue for the government!

Hence, we have an entire venture socialist, government/corporate racket embedded in our economy that relies upon coercing individuals to purchase a terrible product. Much like Obamacare has wreaked havoc on affordable insurance plans, we have an energy mandate that bankrupts food producers, restaurants, and consumers, all so a few cronies can slurp off the gravy train.

The ethanol mandate was foisted upon the American people by the establishment in both parties. Not surprisingly, Iowa Gov. Terry Branstad, who is the textbook definition of the GOP establishment, is trashing Ted Cruz for opposing the anchor baby of energy policy. Evidently, Donald Trump loves the establishment so long as they support the ethanol anchor baby.

Over the past few months, I’ve criticized some of the “D.C. conservative movement types” for focusing on small-potato issues while ignoring the issues pertaining to our sovereignty, security, and society. But ethanol is not some in-the-weeds fiscal issue. It pollutes the lifeblood of our free economy and represents the most tyrannical venture socialist policies of the political establishment. To force Americans to purchase the defective product of well-connected cronies to service our most vital needs is a violation of our individual sovereignty the same way unconditional birthright citizenship violates our national sovereignty.

Nobody can call themselves a conservative, much less a populist conservative, and associate themselves with the ethanol gravy train. To quote Joe Biden: the ethanol mandate is a “big…deal.”

Sarah Palin is absolutely right to rail against the crony capitalists and those who slurp off the gravy train. Hopefully she will convince Donald Trump to change his mind and ignore the gravy-slurping Terry Branstad and deport the anchor baby of our economy – once and for all. (For more from the author of “Ethanol Is the Anchor Baby of Our Economic System” please click HERE)

Watch a recent interview with the author below:

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What Really Happened in 2015, and What Is Coming in 2016…

A lot of people were expecting some really big things to happen in 2015, and most of them did not happen. But what did happen? It is my contention that a global financial crisis began during the second half of 2015, and it threatens to greatly accelerate as we enter 2016. During the last six months of the year that just ended, financial markets all over the planet crashed, trillions of dollars of global wealth was wiped out, and some of the largest economies in the world plunged into recession. Here in the United States, 2015 was the worst year for stocks since 2008, nearly 70 percent of all investors lost money last year, and it is being projected that the final numbers will show that close to 1,000 hedge funds permanently shut down within the last 12 months. This is what the early stages of a financial crisis look like, and the worst is yet to come.

If we were entering another 2008-style crisis, we would expect to see junk bonds crashing. When financial trouble starts, it usually doesn’t start with the biggest and strongest companies. Instead, it usually starts percolating on the periphery. And right now bonds of firms that are considered to be on the risky side of things are rapidly losing value.

In the chart below, you can see that a high yield bond ETF that I track very closely known as JNK started crashing in the middle of 2008. This crash began to unfold before the horrific crash of stocks in the fall. Investors that saw junk bonds crashing in advance and pulled their money out of stocks in time saved an enormous amount of money.

Now, for the very first time since the last financial crisis, we are seeing junk bonds crash again. In December, there was finally a sustained crash through the psychologically-important 35.00 level, and at this point JNK is sitting a bit below 34.00. This stunning decline is a giant red flag that tells us that stocks will soon follow in the exact same direction…

In 2015, Third Avenue Management shocked Wall Street when they froze withdrawals from a 788 million dollar mutual fund that was highly focused on junk bonds. Investors that couldn’t get their money out began to panic, and other mutual funds now find themselves under siege. If junk bonds continue to crash, this will just be the beginning of the carnage.

One of the big reasons why junk bonds are crashing is because of the crash in the price of oil. Over the past 18 months, the price of oil has plummeted from $108 a barrel to $37 a barrel.

There has only been one other time in all of history when we have ever seen an oil price crash of this magnitude. That was in 2008 – just before the greatest financial crisis since the Great Depression…

Why can’t people see the parallels?

Crashes are happening all around us, and yet so many of the “experts” seem completely blind to what is going on.

Unlike 2008, the price of oil is not expected to rapidly rebound any time soon. The following comes from CNN…

Crude prices dropped a whopping 35% last year and are hovering around $37 a barrel. That’s a level not seen since the global financial crisis.

It won’t get better any time soon. Most oil experts believe prices will bounce back in late 2016, but they expect more pain first.

Goldman Sachs forecasts that oil will average about $38 a barrel in February, even lower than for most of 2015.

Meanwhile, the prices of industrial commodities have been crashing as well. For example, the chart below shows that the price of copper started crashing hard just before the great financial crisis of 2008, and the exact same thing is happening once again right before our very eyes…

Things are unfolding just as we would expect they would during the initial stages of a new global financial crisis.

And we have already seen a full blown stock market crash in many of the largest economies around the planet. For instance, just look at what has been happening in Brazil. The Brazilians have the 7th largest economy in the world, and Goldman Sachs says that they have plunged into an “outright depression“. In the chart below, you can see the sharp downturn that took place in August, and Brazilian stocks actually kept falling all the way through the end of 2015…

We see a similar thing when we look at our neighbor to the north. Canada has the 11th largest economy on the entire planet, and I recently wrote a lengthy article about the economic difficulties that the Canadians are now facing. 2015 was a very bad year for Canadian stocks as well, and they just kept falling steadily all the way through December…

Of course nobody can forget what happened to China. The Chinese have the second largest economy on the globe, and news about their economic slowdown in making headlines almost every single day now.

Last summer, Chinese stocks crashed about 40 percent, and they did manage to bounce back just a bit since then. But they are still down about 30 percent from the peak of the market…

And there is plenty more that we could talk about. European stocks just had their second worst December ever, and Japanese stocks are down about 500 points in early trading as I write this article.

Here in the United States, the Dow Jones Industrial Average, Dow Transports, the S&P 500 and the Russell 2000 all had their worst years since 2008. As I mentioned the other day, 674 hedge funds shut down during the first nine months of 2015, and it is being projected that the final total for the year will be up around 1000.

But we aren’t hearing much about this financial carnage on the news yet, are we?

Many people that I talk to still think that “nothing is happening”, but don’t you dare say that to Warren Buffett.

He lost 7.8 billion dollars in 2015.

How would you feel if you lost 7.8 billion dollars in a single year?

The truth, of course, is that signs of financial chaos are erupting all around us. Corporate profits are plunging, the bond distress ratio just hit the highest level that we have seen since the last financial crisis, and corporate debt defaults have risen to the highest level that we have seen in about seven years.

If you run a business, you may have noticed that fewer people are coming in and it seems like those that do come in have less money to spend. Economic activity is slowing down, and inventories are piling up. In fact, wholesale inventories have now risen to the highest level that we have seen since the last recession…

Do you notice a theme?

So many things that have not happened in six or seven years are now happening again.

History may not repeat, but it sure does rhyme, and it astounds me that more people cannot see that 2015/2016 is looking eerily similar to a replay of 2008/2009.

Another number that I watch closely is the velocity of money. When an economy is running well, money tends to circulate efficiently through the system. But when an economy gets into trouble, people get scared and start holding on to their money. As you can see from the chart below, the velocity of money declined during every single recession since 1960. This is precisely what one would expect. And of course during the recession that started in 2008, the velocity of money plunged precipitously. But then a funny thing happened when that recession supposedly “ended”. The velocity of money just kept going down, and now it has fallen to an all-time record low…

A big reason for this is the ongoing decline of the middle class. In 2015, we learned that middle class Americans now make up a minority of the population for the first time ever.

But if you go back to 1971, 61 percent of all Americans lived in middle class households.

Meanwhile, the share of the income pie that the middle class takes home has also continued to shrink.

In 1970, the middle class brought home approximately 62 percent of all income. Today, that number has fallen to just 43 percent.

As the middle class is systematically destroyed, the number of Americans living in poverty just continues to grow. And those that often suffer the most are the children. It may be hard for you to believe, but the number of homeless children in the U.S. has increased by 60 percent over the past six years.

60 percent!

How in the world can anyone dare to claim that “things are getting better”?

Anyone that says that should be ashamed of themselves.

We are in the midst of a long-term economic collapse that is now accelerating once again.

Anyone that tries to tell you that “things are getting better” and that 2016 is going to be a better year than 2015 is simply not being honest with you.

A new global financial crisis erupted during the last six months of 2015, and this new financial crisis is going to intensify throughout the early months of 2016. Financial institutions will begin falling like dominoes, and this will result in a great credit crunch around the world. Businesses will fail, unemployment will skyrocket and millions will suddenly be faced with economic despair.

By the time it is all said and done, this new financial crisis will be even worse than what we experienced back in 2008, and the suffering that we will see around the world will be off the charts.

So does that mean that I am down about this year?

Not at all. In fact, my wife and I are greatly looking forward to 2016. In the midst of all the chaos and darkness, there will be great opportunities to do good and to make a difference.

What a great shaking comes, people go looking for answers. And I think that this will be a year when millions of people start to understand that our politicians and the mainstream media are not telling them the truth.

Yes, great challenges are coming. But now is not a time to dig a hole and try to hide from the world. Instead, this will be a time for those that have prepared in advance to love others, help others and show them the truth.

What about you?

Are you ready to be a light during the dark times that are coming? (For more from the author of “What Really Happened in 2015, and What Is Coming in 2016…” please click HERE)

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58 Facts About the US Economy from 2015 That Are Almost Too Crazy to Believe

The world didn’t completely fall apart in 2015, but it is undeniable that an immense amount of damage was done to the US economy. This year the middle class continued to deteriorate, more Americans than ever found themselves living in poverty, and the debt bubble that we are living in expanded to absolutely ridiculous proportions. Toward the end of the year, a new global financial crisis erupted, and it threatens to completely spiral out of control as we enter 2016. Over the past six months, I have been repeatedly stressing to my readers that so many of the exact same patterns that immediately preceded the financial crisis of 2008 are happening once again, and trillions of dollars of stock market wealth has already been wiped out globally. Some of the largest economies on the entire planet such as Brazil and Canada have already plunged into deep recessions, and just about every leading indicator that you can think of is screaming that the U.S. is heading into one. So don’t be fooled by all the happy talk coming from Barack Obama and the mainstream media. When you look at the cold, hard numbers, they tell a completely different story. The following are 58 facts about the U.S. economy from 2015 that are almost too crazy to believe…

#1 These days, most Americans are living paycheck to paycheck. At this point 62 percent of all Americans have less than 1,000 dollars in their savings accounts, and 21 percent of all Americans do not have a savings account at all.

#2 The lack of saving is especially dramatic when you look at Americans under the age of 55. Incredibly, fewer than 10 percent of all Millennials and only about 16 percent of those that belong to Generation X have 10,000 dollars or more saved up.

#3 It has been estimated that 43 percent of all American households spend more money than they make each month.

#4 For the first time ever, middle class Americans now make up a minority of the population. But back in 1971, 61 percent of all Americans lived in middle class households.

#5 According to the Pew Research Center, the median income of middle class households declined by 4 percent from 2000 to 2014.

#6 The Pew Research Center has also found that median wealth for middle class households dropped by an astounding 28 percent between 2001 and 2013.

#7 In 1970, the middle class took home approximately 62 percent of all income. Today, that number has plummeted to just 43 percent.

#8 There are still 900,000 fewer middle class jobs in America than there were when the last recession began, but our population has gotten significantly larger since that time.

#9 According to the Social Security Administration, 51 percent of all American workers make less than $30,000 a year.

#10 For the poorest 20 percent of all Americans, median household wealth declined from negative 905 dollars in 2000 to negative 6,029 dollars in 2011.

#11 A recent nationwide survey discovered that 48 percent of all U.S. adults under the age of 30 believe that “the American Dream is dead”.

#12 Since hitting a peak of 69.2 percent in 2004, the rate of homeownership in the United States has been steadily declining every single year.

#13 At this point, the U.S. only ranks 19th in the world when it comes to median wealth per adult.

#14 Traditionally, entrepreneurship has been one of the primary engines that has fueled the growth of the middle class in the United States, but today the level of entrepreneurship in this country is sitting at an all-time low.

#15 For each of the past six years, more businesses have closed in the United States than have opened. Prior to 2008, this had never happened before in all of U.S. history.

#16 If you can believe it, the 20 wealthiest people in this country now have more money than the poorest 152 million Americans combined.

#17 The top 0.1 percent of all American families have about as much wealth as the bottom 90 percent of all American families combined.

#18 If you have no debt and you also have ten dollars in your pocket, that gives you a greater net worth than about 25 percent of all Americans.

#19 The number of Americans that are living in concentrated areas of high poverty has doubled since the year 2000.

#20 An astounding 48.8 percent of all 25-year-old Americans still live at home with their parents.

#21 According to the U.S. Census Bureau, 49 percent of all Americans now live in a home that receives money from the government each month, and nearly 47 million Americans are living in poverty right now.

#22 In 2007, about one out of every eight children in America was on food stamps. Today, that number is one out of every five.

#23 According to Kathryn J. Edin and H. Luke Shaefer, the authors of a new book entitled “$2.00 a Day: Living on Almost Nothing in America“, there are 1.5 million “ultrapoor” households in the United States that live on less than two dollars a day. That number has doubled since 1996.

#24 46 million Americans use food banks each year, and lines start forming at some U.S. food banks as early as 6:30 in the morning because people want to get something before the food supplies run out.

#25 The number of homeless children in the U.S. has increased by 60 percent over the past six years.

#26 According to Poverty USA, 1.6 million American children slept in a homeless shelter or some other form of emergency housing last year.

#27 Police in New York City have identified 80 separate homeless encampments in the city, and the homeless crisis there has gotten so bad that it is being described as an “epidemic”.

#28 If you can believe it, more than half of all students in our public schools are poor enough to qualify for school lunch subsidies.

#29 According to a Census Bureau report that was released a while back, 65 percent of all children in the U.S. are living in a home that receives some form of aid from the federal government.

#30 According to a report that was published by UNICEF, almost one-third of all children in this country “live in households with an income below 60 percent of the national median income”.

#31 When it comes to child poverty, the United States ranks 36th out of the 41 “wealthy nations” that UNICEF looked at.

#32 An astounding 45 percent of all African-American children in the United States live in areas of “concentrated poverty”.

#33 40.9 percent of all children in the United States that are being raised by a single parent are living in poverty.

#34 There are 7.9 million working age Americans that are “officially unemployed” right now and another 94.4 million working age Americans that are considered to be “not in the labor force”. When you add those two numbers together, you get a grand total of 102.3 million working age Americans that do not have a job right now.

#35 According to a recent Pew survey, approximately 70 percent of all Americans believe that “debt is a necessity in their lives”.

#36 53 percent of all Americans do not even have a minimum three-day supply of nonperishable food and water at home.

#37 According to John Williams of shadowstats.com, if the U.S. government was actually using honest numbers the unemployment rate in this nation would be 22.9 percent.

#38 Back in 1950, more than 80 percent of all men in the United States had jobs. Today, only about 65 percent of all men in the United States have jobs.

#39 The labor force participation rate for men has plunged to the lowest level ever recorded.

#40 Wholesale sales in the U.S. have fallen to the lowest level since the last recession.

#41 The inventory to sales ratio has risen to the highest level since the last recession. This means that there is a whole lot of unsold inventory that is just sitting around out there and not selling.

#42 The ISM manufacturing index has fallen for five months in a row.

#43 Orders for “core” durable goods have fallen for ten months in a row.

#44 Since March, the amount of stuff being shipped by truck, rail and air inside the United States has been falling every single month on a year over year basis.

#45 Wal-Mart is projecting that its earnings may fall by as much as 12 percent during the next fiscal year.

#46 The Business Roundtable’s forecast for business investment in 2016 has dropped to the lowest level that we have seen since the last recession.

#47 Corporate debt defaults have risen to the highest level that we have seen since the last recession. This is a huge problem because corporate debt in the U.S. has approximately doubled since just before the last financial crisis.

#48 Holiday sales have gone negative for the first time since the last recession.

#49 The velocity of money in the United States has dropped to the lowest level ever recorded. Not even during the depths of the last recession was it ever this low.

#50 Barack Obama promised that his program would result in a decline in health insurance premiums by as much as $2,500 per family, but in reality average family premiums have increased by a total of $4,865 since 2008.

#51 Today, the average U.S. household that has at least one credit card has approximately $15,950 in credit card debt.

#52 The number of auto loans that exceed 72 months has hit at an all-time high of 29.5 percent.

#53 According to Dr. Housing Bubble, there have been “nearly 8 million homes lost to foreclosure since the homeownership rate peaked in 2004″.

#54 One very disturbing study found that approximately 41 percent of all working age Americans either currently have medical bill problems or are paying off medical debt. And collection agencies seek to collect unpaid medical bills from about 30 million of us each and every year.

#55 The total amount of student loan debt in the United States has risen to a whopping 1.2 trillion dollars. If you can believe it, that total has more than doubled over the past decade.

#56 Right now, there are approximately 40 million Americans that are paying off student loan debt. For many of them, they will keep making payments on this debt until they are senior citizens.

#57 When you do the math, the federal government is stealing more than 100 million dollars from future generations of Americans every single hour of every single day.

#58 An astounding 8.16 trillion dollars has already been added to the U.S. national debt while Barack Obama has been in the White House. That means that it is already guaranteed that we will add an average of more than a trillion dollars a year to the debt during his presidency, and we still have more than a year left to go.

What we have seen so far is just the very small tip of a very large iceberg. About six months ago, I stated that “our problems will only be just beginning as we enter 2016″, and I stand by that prediction.

We are in the midst of a long-term economic collapse that is beginning to accelerate once again. Our economic infrastructure has been gutted, our middle class is being destroyed, Wall Street has been transformed into the biggest casino in the history of the planet, and our reckless politicians have piled up the biggest mountain of debt the world has ever seen.

Anyone that believes that everything is “perfectly fine” and that we are going to come out of this “stronger than ever” is just being delusional. This generation was handed the keys to the finest economic machine of all time, and we wrecked it. Decades of incredibly foolish decisions have culminated in a crisis that is now reaching a crescendo, and this nation is in for a shaking unlike anything that it has ever seen before.

So enjoy the rest of 2015 while you still can.

2016 is almost here, and it is going to be quite a year… (For more from the author of “58 Facts About the US Economy from 2015 That Are Almost Too Crazy to Believe” please click HERE)

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Financial Analyst Warns: The Whole Economy Has Imploded… Collapse Is Coming [+video]

Back before 2008 Peter Schiff was harshly criticized and laughed at for his predictions about a coming economic collapse. Among other things Schiff warned that consumer spending had hit a wall, stocks were overpriced and lax credit lending practices would lead to a detonation of the banking system. Rather than heed the warnings, the biggest names in mainstream media tried to discredit him for not toeing the official narrative. Shortly thereafter, of course, Schiff was vindicated and much of the doom he had forecast came to pass.

Today, Schiff continues to argue that the economy is on a downhill trajectory and this time there’ll be no stopping it. All of the emergency measures implemented by the government following the Crash of 2008 were merely temporary stop-gaps. The light at the end of the tunnel being touted by officials as recovery, Schiff has famously said, is actually an oncoming train. And if the forecast he laid out in his latest interview is as accurate as those he shared in 2007, then the the train is about to derail.

We’re broke. We’re basically living off of debt. We’ve had a huge transformation of the American economy. Look at all the Americans now on food stamps, on disability, on unemployment.

The whole economy has imploded… the bottom hasn’t dropped out yet because we’re able to go deeper into debt. But the collapse is coming.

Fundamentally, America is worse off now than it was pre-crash. With the national debt rising unabated and money being printed out of thin air without reprieve, it is only a matter of time. (Read more from “Financial Analyst Warns: The Whole Economy Has Imploded… Collapse Is Coming” HERE)

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David Stockman: Global Economy, More Unstable and Incendiary by the Day

o-GLOBAL-ECONOMY-facebookIt’s getting downright hazardous out there, and not just because the robo-machines were slamming the “sell” key today. The real danger comes from the loose assemblage of official institutions which claim to be running the world.

They might better be referred to as “can kickers united.” It is now blindly obvious that they have lapsed into empty ritualism, contrivance and double-talk in the face of a global economy and financial system that is becoming more unstable and incendiary by the day.

Who in their right mind would pile $95 billion of new debt on the busted remnants of Greece? Likewise, how can Japan possibly consider enacting still another round of fiscal stimulus when it already has one quadrillion yen of debt? And what geniuses are trying to fix the bankrupt finances of China’s local governments by swapping trillions of crushing bank loans for equivalent mountains of new municipal bonds?

Turning to the the home front it is more of the same. By what rational calculus can it be said, as the Fed did in its meeting minutes, that 80 months of free money has not quite yet done the job? And that is exactly what these mountebanks had to say:

The Committee concluded that, although it had seen further progress, the economic conditions warranting an increase in the target range for the federal funds rate had not yet been met. Members generally agreed that additional information on the outlook would be necessary before deciding to implement an increase in the target range.

Say again! We are now 74 months into a so-called “recovery” cycle that is well longer than the post-war average, yet the Fed is still manning the emergency fire hoses:

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Even its own research department at the St. Louis Fed has just confessed that the whole rigmarole of QE and ZIRP has had no favorable impact on the main street economy. In a White Paper dissecting Fed actions since the financial crisis, Stephen D. Williamson, vice president of the St. Louis Fed opined that,

…….. the zero interest rates in place since 2008 that were designed to spark good inflation actually have resulted in just the opposite. And he believes the “forward guidance” the Fed has used to communicate its intentions has instead been a muddle of broken vows that has served only to confuse investors. Finally, he asserts that quantitative easing, or the monthly debt purchases that swelled the central bank’s balance sheet past the $4.5 trillion mark, have at best a tenuous link to actual economic improvements……..”There is no work, to my knowledge, that establishes a link from QE to the ultimate goals of the Fed—inflation and real economic activity. Indeed, casual evidence suggests that QE has been ineffective in increasing inflation,” Williamson wrote.

Self-evidently there is no main street emergency, but it is undeniable that ZIRP is the mother’s milk of Wall Street speculation. After all, the money market is where dealers and hedge fund gamblers finance themselves and put on their carry trades. That’s because no one with productive inventories of raw materials, work-in-process and finished goods would be foolish enough to fund their working capital in the overnight markets.

By contrast, speculators in tradable financial assets are thrilled to do that all day and night. They know that the shills who run the central bank’s printing press would never allow the money market to be parched for liquidity. Bernanke’s hair on fire panic in September 2008 proved that beyond a shadow of a doubt.

They also know that the Keynesian scholastics on the FOMC are so utterly naïve that they believe telegraphing to traders exactly what the intend to do for months in advance is an effective form of “policy”. Well, thank you Ben, Janet, et. al. for removing risk entirely from the oldest sin of finance—–that is borrowing short and hot and investing long and less liquid.

So the Wall Street gamblers back up their trucks and load-up all they can get of whatever is on offer in the casino. As long as it has a yield or a short-run appreciation potential, it is a no brainer to fund such “assets” in the zero rate money markets with repo, options and more exotic forms of bespoke leverage.

This creates unspeakable windfalls to the fast money which plays in the casino, of course. And it also generates enormous incentives for rank gambling in the capital markets and an endless inflation of financial asset prices. Indeed, it sucks endless capital, credit and collateral into the gambling enterprise that is enabled by contemporary Keynesian central banking, while depriving the real economy of true risk capital.

Needless to say, for the third time this century we have arrived at a bubble extreme. In fact, the aggregate market cap of the Russell 5000 at 133% of GDP is now higher relative to national income than even during the dotcom bubble (112%) and the housing blow-off (104%).

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But that’s what ZIRP does—-it inflates financial bubbles. It is more than obvious by now that the household credit channel of monetary policy transmission is broken and done.

US households reached peak leverage in 2008, and have been struggling ever since to work out from under the mountain of debt that was created after Alan Greenspan arrived in the Eccles Building and discovered the printing press in the Fed’s basement could make him an enormously popular man about town.

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But does it take a PhD in econometrics to read the obvious message of the above chart on total household debt. During the entire 80 months of ZIRP and country our brilliant monetary politburo has been pushing on a string. At the end of Q1 2015 there was still less mortgage, credit card, auto, student and other consumer loans outstanding than there were in Q4 of 2007.

Indeed, not a net dime of the massive $3.5 trillion of new liabilities created on the Fed’s balance sheet during that period ever escaped the canyons of Wall Steet. So read the Fed’s minutes of its latest meeting and weep: These fools are waving their arms at invisible Humphrey Hawkins goal posts and claim to be making steady, measureable progress toward the end zone.

The truth is, the Fed’s endless blathered about its 2% inflation target is a colossal hoax. In the first place there is no evidence whatsoever that real output and wealth increase faster at 2.0% inflation than the do at 1.0%—-or at any inflation rate at all. In fact, the Fed’s claim that it is still well shy of achieved its inflation target is the overriding reason why it keeps shoving zero cost credit into the money market.

Well, here a chart of inflation since the year 2010. The heavily medicated CPI published by the BLS has risen at a 1.8% compound rate and the core consumer component of the PPI has risen at a 2.6% annual rate. Only the PCE less food and energy has fallen appreciably below the Fed’s ostensible target, and that’s entirely due to the phony housing deflators on which it is constructed.

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(Re-posted with permission, “David Stockman: Global Economy, More Unstable and Incendiary by the Day”, originally appeared HERE)

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The 75 Trillion Dollar Shadow Banking System Is in Danger of Collapsing

Keep an eye on the shadow banking system – it is about to be shaken to the core. According to the Financial Stability Board, the size of the global shadow banking system has reached an astounding 75 trillion dollars. It has approximately tripled in size since 2002. In the U.S. alone, the size of the shadow banking system is approximately 24 trillion dollars. At this point, shadow banking assets in the United States are even greater than those of conventional banks. These shadow banks are largely unregulated, but governments around the world have been extremely hesitant to crack down on them because these nonbank lenders have helped fuel economic growth. But in the end, we will all likely pay a very great price for allowing these exceedingly reckless financial institutions to run wild.

If you are not familiar with the “shadow banking system”, the following is a pretty good definition from investing answers.com . . .

The shadow banking system (or shadow financial system) is a network of financial institutions comprised of non-depository banks — e.g., investment banks, structured investment vehicles (SIVs), conduits, hedge funds, non-bank financial institutions and money market funds . . .

Shadow banking institutions generally serve as intermediaries between investors and borrowers, providing credit and capital for investors, institutional investors, and corporations, and profiting from fees and/or from the arbitrage in interest rates.

Because shadow banking institutions don’t receive traditional deposits like a depository bank, they have escaped most regulatory limits and laws imposed on the traditional banking system. Members are able to operate without being subject to regulatory oversight for unregulated activities. An example of an unregulated activity is a credit default swap (CDS).

These institutions are extremely dangerous because they are highly leveraged and they are behaving very recklessly. They played a major role during the financial crisis of 2008, and even the New York Fed admits that shadow banking has “increased the fragility of the entire financial system” . . .

So let’s hope that the financial devastation that we have seen so far this week is not a preview of things to come. The global financial system has been transformed into a delicately balanced pyramid of glass that is not designed to handle turbulent times. We should have never allowed the shadow banks to run wild like this, but we did, and now in just a short while we are going to get to witness a financial implosion unlike anything the world has ever seen before.

(Read more from “The 75 Trillion Dollar Shadow Banking System Is in Danger of Collapsing” HERE)

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HSBC WARNS: The World Economy Faces a ‘Titanic Problem’

titanic-19HSBC chief economist Stephen King is already thinking about the next recession.

In a note to clients Wednesday, he warns: “The world economy is like an ocean liner without lifeboats. If another recession hits, it could be a truly titanic struggle for policymakers.”

Here’s King’s warning:

Whereas previous recoveries have enabled monetary and fiscal policymakers to replenish their ammunition, this recovery — both in the US and elsewhere — has been distinguished by a persistent munitions shortage. This is a major problem. In all recessions since the 1970s, the US Fed funds rate has fallen by a minimum of 5 percentage points. That kind of traditional stimulus is now completely ruled out.

King notes that this far into the recovery, there’s a lack of “traditional policy ammunition.” For instance, Treasury yields have not risen, the budget deficit is not falling, and welfare payments are still on the rise. (Read more from “HSBC WARNS: The World Economy Faces a ‘Titanic Problem'” HERE)

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While Overall Jobless Numbers Remain at Record Highs, U.S. Job Openings Near 5 Million

Photo Credit: Washington Examiner By Joseph Lawler. There were just under 5 million job postings advertised in November, the Bureau of Labor Statistics reported Tuesday.

The job openings number beat Wall Street’s expectations, as businesses continued to add positions at a fast pace toward the end of 2014.

Hiring was flat in the month, while job separations were down, according to the BLS’ Job Openings and Labor Turnover Survey.

The data on job openings and hiring released by the Labor Department on Tuesday lags the more widely-followed jobs report by a month. Officials at the Federal Reserve and investors still watch the report closely, however, because it contains more detailed information about the state of labor markets in the U.S. relating to the pace of labor market churn.

With 4.97 million job openings advertised on the last day of November, total job openings were up 20 percent year over year. The highest job creation mark on record is 5.27 million, set in 2001. (Read more about “Job Openings Near 5 million” HERE)

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San Bernardino Ranked Worst in Nation for a Job

By Rob Mcmillan. San Bernarndino has been rated the worst place for finding a job in the nation, according to financial website WalletHub.

The website’s list featured 150 different cities ranked from best to worst with San Bernardino listed in the very last spot.

San Bernardino resident Kevin Kenaga said he is a good example of the struggling economy in the city. He has to take a bus to get to his job in Redlands.

“There isn’t very much work here,” he said.

Wallethub looked at the number of job opportunities, starting salary and the rate of job growth for each city ranked. (Read more from this story HERE)

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Poll: More Americans Hearing Good News About Jobs

Photo Credit: Tax Credits/flickr

Photo Credit: Tax Credits/flickr

For the first time since the financial crisis began, as many Americans are hearing good news about the job market as bad news, according to a poll released Tuesday.

Twenty-six percent of people surveyed by the Pew Research Center said that they were hearing mostly good news and 25 percent said they were hearing mostly bad news about the nation’s job situation. Forty-five percent said they were hearing a mix of both good and bad news.

It marks the first time that roughly the same number of Americans have said they are hearing good news as bad about jobs since the poll question was introduced in 2009.

The poll comes as the unemployment rate sits at 5.8 percent and gas prices continue to fall. President Obama is touting the economic rebound as a key part of his legacy. Republicans, though, say that millions of Americans have given up looking for jobs and are no longer in the workforce.

See poll results HERE.

Read more HERE.