Month: November 2017

Professor Liping He from Beijing Normal University has produced a most comprehensive and useful scholarly treatment of world hyperinflation. It is hot off the press. This is a welcomed addition to the literature. Indeed, Hyperinflation: A World History is destined to become a standard reference on the topic. 

My basis for this judgment rests on my own travails in grappling with the literature and data on hyperinflation.  It also rests on my experience with measuring and stopping hyperinflation. The ”Hanke-Krus World Hyperinflation Table” first appeared in the authoritative The Routledge Handbook of Major Events in Economic History (2013). What was the genesis of this Table? 

In 2010, I was invited to write a survey article on hyperinflation for The Routledge Handbook of Major Events in Economic History. I accepted the invitation, thinking it would require routine work on my part, and that I could complete the task in short order. I had already surveyed the literature on hyperinflation. In addition, I had accurately estimated the inflation rates in several countries that had experienced episodes of hyperinflation. These included two relatively recent, dramatic episodes of hyperinflation – Yugoslavia, which peaked at a monthly rate of 313 million percent in the month of January 1994, and Zimbabwe, which peaked at an annual rate of 89.7 sextillion (10^23) percent in November 2008. In addition, I had designed and implemented currency reforms that had stopped episodes of hyperinflation, notably Bulgaria’s, which peaked at a monthly rate of 242% in the month of February 1997.

While reflecting on the hyperinflation literature, I was struck by its lack of uniformity and clarity. The literature was widely scattered in time and space; it had been written by many different researchers, and those researchers had used diverse methods to estimate and analyze the inflation episodes studied.

So, I concluded that the best way to “clean up” the subject of hyperinflation was to create a “World Hyperinflation Table.” In my mind, this table would include all of the world’s hyperinflations. The data would be presented in a uniform and clear manner, so that all episodes of hyperinflation could be compared. But, what criteria would be used for an episode of inflation to qualify as a hyperinflation? I specified the following three criteria:

1. Following Professor Phillip Cagan’s classic article on hyperinflation, the economics profession adopted the following criterion: to qualify as a hyperinflation, the inflation rate had to be at least 50 percent per month. I adopted this convention. 
2. In addition, I specified that the 50% rate had to persist for at least 30 consecutive days. 
3. Lastly, I concluded that the inflation episode had to be fully documented and that inflation estimates had to be replicable.

It turned out that the third criterion was the most difficult one. Fortunately, my chief research assistant at the time, Nicholas Krus, was capable of, and interested in, taking on this research task. Krus and I spent the better part of two years constructing what has come to be known as the Hanke-Krus World Hyperinflation Table. We documented and recalculated the inflation rates for all alleged episodes of hyperinflation in history. The project required the gathering of primary data for each potential case of hyperinflation. This proved to be very difficult and time consuming. For example, primary data for the French episode of hyperinflation of 1795 to 1796 – the first verified hyperinflation – had to be obtained and analyzed. But, that was not the most difficult set of data to obtain. That “prize” was awarded to the Republika Srpska, which experienced a hyperinflation episode in the 1992-1994 period. Fortunately, I was able to use my extensive contacts in the former Yugoslavia to eventually obtain high-quality inflation data. 

After a long and onerous research effort, the Hanke-Krus World Hyperinflation Table was published. It is contained in “World Hyperinflations,” a chapter in The Routledge Handbook of Major Economic Events in History (2013), which I co-authored with Nicholas Krus.

I recount these reflections because I thought there would not be too much to say about hyperinflation after the publication of the Hanke-Krus World Hyperinflation Table. However, Prof. Liping He has proven me wrong. 

I would also add that new developments in Venezuela have proven me wrong, too. Venezuela became the 57th episode of hyperinflation in history on December 3, 2016. At present (10/28/2017), the annual inflation rate in Venezuela, which I regularly measure, is 2800%. This now stands as the world’s highest rate of annual inflation, but it has not surpassed the 50% per month for 30 consecutive days, hyperinflation threshold. Accordingly, Venezuela, although it has the world’s highest annual inflation rate, is not hyperinflating. 

It turns out that Zimbabwe, recently, has also proven me wrong. On October 17, 2017, Zimbabwe entered its second episode of hyperinflation in less than 10 years. The chart below shows what the annual inflation rate for Zimbabwe is today (11/28/17): 37%. 

Unfortunately, many journalists and writers play fast and loose with the term “hyperinflation” – a term that has a very specific meaning. Not only is the meaning of the “word” specific, but also its measurement, if properly conducted, can be just as precise. 

via http://ift.tt/2AmfZ3h Steve H. Hanke

It’s been just over a day since a shaken Savannah Guthrie informed Today Show viewers that her former co-host Matt Lauer had been fired due to allegations of sexually inappropriate behavior – the latest, and one of the highest-profile casualties in the widening national reckoning with sexual harassment in the workplace. And now, NBC’s top brass, which said they fired Lauer after an employee filed a complaint about inappropriate behavior that reportedly began during NBC’s coverage in Sochi (and who claim they were blissfully unaware of what was going on) are saying that the number of women accusing Lauer of harassment has risen to eight.

According to Fox, NBC’s Stephanie Gosk revealed to Megyn Kelly during the 9 am  hour of “Today” that there could be up to eight accusers, as details surfaced about the star's alleged lewd behavior and old video clips back in circulation raised eyebrows.

There was also this 2012 clip where the former Today co-host Katie Couric told Andy Cohen that Lauer’s most annoying habit was his fondness for pinching her ass.

Somewhat humorously, NBC said it has reached out to area police departments, and the network can "safely report" that there are no open criminal investigations involving Lauer at this time.

“We have reached out to New York City police; we have reached out to police departments in Long Island. We know of no open criminal investigation against Matt Lauer,” Gosk said.

That could change.

One of the most disturbing stories about Lauer’s conduct emerged yesterday when a former NBC employee told the New York Times about a  2001 incident where Lauer called her into his office, asked her to unbutton her blouse, then bent her over his desk and violated her. During the middle of the act, she apparently passed out. He then had one of his assistants take her to a nurse.

haven’t heard anyone call lauer a rapist but this is rape isn’t it? http://pic.twitter.com/vycEnDFzd8

— Matt E G (@mattegeez) November 30, 2017

The former NBC employee told the Times that Lauer sexually assaulted her, but that she didn’t report it for fear of losing her job.

Another woman told Variety that Lauer had gifted her a sex toy with a graphic description, while another said he exposed himself to her in his office, which reportedly had a door that locked via a button under his desk. A video also surfaced of Lauer telling Meredith Vieira to "keep bending over like that" back in 2006.

In another cringeworthy moment, Meredith Vieira brought up a "huge bag of sex toys" she once found in Matt Lauer's office when Lauer and fellow Today host Savannah Guthrie were guests on Vieira’s talk show. To be sure, Matt was "quick on his feet", and blamed a sex therapist who had appeared on "Today", although his co-hosts don't seem to recall that particular encounter.  In light of the latest developments, this anecdote takes on a whole different meaning.

Lauer broke his silence on Thursday morning, and issued a public apology admitting that “there is enough truth to these stories to make me feel embarrassed and ashamed."

In an interesting twist to the familiar sexual-harasser script, the New York Times is reporting that the reverberations from Lauer’s firing have made it all the way to New Zealand.

A New Zealand government agency said on Thursday that it was in discussions with Lauer’s representative over his purchase of a 16,000-acre farm there. Foreigners must pass a good-character test to be allowed to buy New Zealand land, and while Lauer’s purchase was approved earlier this year, the country’s Overseas Investment Office is revisiting his case in light of his firing.

Officials from that agency “are seeking further information,” said Lisa Barrett, a spokeswoman for the agency. The agency can require buyers to dispose of the property if it believes the rules have been violated.

We expect more disturbing stories of Lauer’s workplace conduct will emerge in the near future.

via http://ift.tt/2irANBS Tyler Durden

The longest short-squeeze streak in history continues…

 

John McCain's "Yes" at 1051ET seems to have been the catalyst that extended overnight gains into melt-up mania… (Small Cap smanaged to scramble back green on the day as Trannies rose 2%)

 

But the Nasdaq remains red on the week…

 

Futures show the crazy moves best…

 

The market is convincing itself that tax reform is going to happen as high-tax stocks soar relative to low-tax…

 

And bookies' odds are soaring to 80%…

 

The short-squeeze continues for a record 10th day in a row (the biggest percentage squeeze since the election)

Financials and Retailers are ripping higher…

 

But even Bloomberg notes that this looks a lot like a short squeeze…“There’s a short squeeze here,” said Eric Balchunas, ETF analyst at Bloomberg Intelligence. “XRT is being lent by people who borrowed it, so the release valve when that happens is they have to create new shares.”

 

But while everyone was excited about The Dow, Tech stocks barely managed a blip in context to yesterday's turmoil…

 

On the month, FANG and SOX were lower…

 

On the month, Trannies were best – roaring higher in the last week…

 

The Momo vs Value chaos this week seems to have normalized the month's moves…

 

Here's the month in bonds/stocks… equities rally, bonds ignore it, then stocks plunge back to reality and they both squeeze higher…

 

HYG (high yield bonds) fell for the 2nd straight month – the biggest drop since October 2016 and remain below the 200DMA…

 

While bonds were all sold on the day, the short-end underperformed…

 

Once again flattening the yield curve in the face of the equity market melt up…5s30s -3bps!

 

On the month, yields are very mixed with the short-end higher and long-end lower…

 

In fact the 2s30s yield curve collapse in November is the biggest flattening since Sept 2011

 

While on the topic of rates, very few mainstream media types have commented on the massive spike in EONIA the last two days!!

European money markets were shaken by an unexpected jump in the Eonia benchmark rate for the second time Thursday, that left the overnight interbank rate 12.1 basis points higher and traders looking for answers. The move spurred heavy selling across front-end euribors. Bund and Treasury futures were also weighed, extending earlier losses. Traders had few explanations for the sudden move, the scale of which would normally be justified by a shift in the European Central Bank’s benchmark rate. One potential reason is month-end related flows, such as an account locking in funding for the turn of the month a day early, a trader in New York said. Thursday’s fix was higher by 6bps at -0.241%, highest since March 9 2016 and comes after Wednesday’s 6.1bp move higher; the European Money Markets Institute (EMMI), which publishes Eonia, said that Wednesday’s fixing data was correct.

 

The Dollar Index ended November lower – the first drop since July…

 

On the month, gold managed to cling to green as Crude led the gains with copper and silver lower…

 

Gold tumbled once again but managed to scramble and close abovee its 200DMA (blue dotted line)…

 

Finally, we note that Bitcoin was up 49% in November (slightly less than the 52% gain in October)…

 

Bonus Chart: Your Fun-durr-mental driven equity markets…

via http://ift.tt/2iu3bDw Tyler Durden

Unless the world comes to a very serious end overnight, global equity markets are about to do something they have never done before… rise for 13 consecutive months.

Not one losing month so far in 2017…

 

The global equity gauge was on course to finish November with its 13th straight monthly gain – the longest monthly winning streak in the index’s 30-year history. The total gain over the 13 months nears 23 percent.

 

But then again.. the world has also never seen so many central banks, printing so much money, for so long a time…

Just don't stop!!

via http://ift.tt/2Bn97BU Tyler Durden

Adam Schiff, the ranking member of the Intelligence Committee, has accused Attorney General Jeff Sessions of refusing to disclose information of vital importance to his committee’s probe into collusion between the Russians and the Trump campaign by relying on a loose interpretation of executive privilege.

To wit, following the attorney general's closed door testimony before the House Intel Committee, Schiff told reporters that Sessions declined to answer whether President Trump ever asked him to obstruct the ongoing investigation into Russian inference in the 2016 presidential election, the Hill reported.

"I asked the attorney general whether he was ever instructed by the president to take any action that he believed would hinder the Russia investigation and he declined to answer the question," Rep. Adam Schiff told reporters after the closed-door meeting concluded.

"If the president did not instruct him to take any action that he believed would hinder the Russia investigation, he should say so. If the president did instruct him to hinder the investigation in any way, in my view, that would be a potentially criminal act and certainly not covered by any privilege," the California lawmaker continued.

Unsurprisingly, a spokeswoman for Sessions pointed out that the attorney general has already made it clear that he would refuse to divulge the details of any of his conversations with President Trump, a position he has adhered to since becoming attorney general in February.

However, Schiff told reporters that he believes Sessions’s reasoning for not answering the question is suspect, calling the attorney general’s defense a “weak argument.”

“That, under any conceivable idea, is not privileged, so I think that is even a weaker argument to make than with respect to a particular conversation that he may have had with the president,” he added.

Schiff opined that the Republican lawmakers on the committee decided “in a unilateral fashion” against releasing the AG’s testimony, pointing to previous agency heads who have openly appeared before the panel.

"The Congress has the need to know and so do the American people," Schiff said, adding that he feels the committee should "compel" Sessions to answer the questions he did not answer during the meeting.

During Sessions’ testimony, Schiff said the panel “extensively” covered the interactions he had with former Trump campaign officials like Carter Page and the interactions that he had with George Papadopoulos, adding “that was certainly a big focus of our interview today.”

Sessions's appearance on Thursday comes as the panel continues to investigate Russian interference in the 2016 presidential election and possible collusion between Moscow and Trump campaign staff. Over the next week, the committee will also be interviewing Erik Prince, former CEO of Blackwater and brother of Education Secretary Betsy DeVoes, and, later, Donald Trump Jr.

The meeting comes two weeks after Sessions, during a public appearance before the Judiciary Committee, clarified that he didn’t remember Papadopoulos raising the possibility of setting up a meeting between Trump and the Russians. He was also grilled by a Republican lawmaker about why he didn’t appoint a special prosecutor to investigate the Clintons.

Of course, even former FBI Director James Comey – whose firing has been cited by Democrats as an example of Trump possibly trying to obstruct an FBI investigation – has said he didn’t feel Trump’s behavior in firing him could be considered obstruction of justice. And given reports that Trump still resents Sessions for recusing himself from the DOJ’s Russia investigation, thereby handing the reins to Bob Mueller, it seems like Schiff is senselessly seizing on another opportunity to attack the Trump administration. 
 

via http://ift.tt/2AKdJpp Tyler Durden

Authored by David Stockman via Contra Corner blog,

The lemmings are now in full stampede toward the cliffs. You can literally hear the cold waters churning, foaming and crashing on the boulders far below.

From bitcoin to Amazon, the financials, the Russell 2000 and most everything else in between, the casinos are digesting no information except the price action and are relentlessly rising on nothing more than pure momentum. The mania has gone full retard.

Certainly earnings have nothing to do with it. As of this morning, the Russell 2000, for instance, was trading at 112X reported LTM earnings.

Likewise, Q3 reporting is all over except for the shouting and reported LTM earnings for the S&P 500 came in $107 per share. That's of signal importance because fully 36 months ago, S&P earnings for the September 2014 LTM period posted at $106 per share.

That's right. Three years and $1 of gain. They talking heads blather about "strong earnings" only because they think we were born yesterday.

What happened in-between, of course, was the proverbial pig passing through the python.

First, the global oil, commodities and industrial deflation after July 2014 took earnings to a low of $86.44 per share in the March 2016 LTM period.

After that came the opposite—the massive 2016-2017 Xi Coronation Stimulus in China. The new Red Emperor and his minions pumped out an incredible $6 trillion wave of new credit, thereby artificially stimulating a global rebound and a profits recovery back to where it started three years ago.

The difference of course is that $106 of earnings back then were priced at an already heady (by historical standards) 18.6X, whereas $107 of earnings today are being priced at a truly lunatic 24.6X.

After all, nothing says earnings bust ahead better than an aging business cycle, a cooling Red Ponzi, an epochal shift toward central bank QT (quantitative tightening) and a massive Washington Fiscal Cliff. Yet every one of those headwinds are self-evident and have made their presence known with a loud clang in the last few days.

Self-evidently, we are now 36 months closer to the next recession in a business cycle which at 101 months is already approaching the 1990s record of 118 months and facing far greater headwinds. Foremost among these is the unprecedented but unavoidable turn of the central banks—after two decades of relentless expansion— toward interest rate normalization, QT (quantitative tightening) and trillions of debt and other securities sales (demonetization or balance sheet shrinkage).

The new Janet Yellen in tie and trousers made that perfectly clear at yesterday's confirmation hearing:

Powell said he expected the balance sheet to shrink to about $2.5 trillion to $3 trillion over the next three to four years under a program set in motion by Yellen……On interest rates, Powell said: "I think the case for raising interest rates at our next meeting is coming together."

Actually, the promised balance sheet shrinkage process is going to rapidly escalate from $10 billion per month of Fed bond sales now, to $30 billion by spring and $50 billion by next October. That amounts to a $600 billion annual run rate; and when the ECB and other banks join the "normalization" party in 2019 and beyond total central bank bond sales will pierce through the $1 trillion per year level.

And that's a very big deal because the law of supply and demand has not yet been abolished, meaning prices and yields in the global bond market are heading for a big reset. For instance, if the UST 10-year benchmark note normalizes to a yield of 4.0%, its price will fall by more than 40% from current levels (2.35%).

Needless to say, the entire market for risk assets including equities, junk bonds, corporates and real estate is predicated upon current ultra low yields and historically unprecedented leverage. So smash the price of the benchmark bond by 40% and you have a cascading chain of downward valuation adjustments that will reach the tens of trillions.

But that's not all. The 19th Party Congress is over, but the Red Suzerains of Beijing wasted no time throttling down China's red hot credit bubble and hyperventilating housing market. The chart below is the smoking gun—-and puts the lie to the foolish Wall Street meme of the moment that the world economy is in the midst of an outburst of "synchronized growth".

Actually, it's puffing on the exhaust fumes of a veritable housing hysteria during the run-up to China's 19th Party Congress, which saw home mortgage issuance soar by nearly 60% in 2016.

Now, however, Beijing's clampdown is giving Ross Perot's famous "sucking sound to the south" an altogether new definition. In the most recent period, year over year mortgage growth actually turned negative—-meaning China's gigantic apartment construction and building materials complex will be cooling rapidly, too.

Needless to say, what happens in the Red Ponzi does not stay in the Red Ponzi. The modestly rebounding global figures for industrial production, trade and GDP reported recently were just feeding off the massive credit impulse evident in the red line below.

When S&P earnings were peaking back in September 2014, China's total credit growth from all sources—including its $15 trillion shadow banking system—had slowed to a 15% annual run rate, but then was gunned to upwards of 30% during the Coronation Boom from early 2016 onwards.

But now that Mr. Xi's very thoughts have been enshrined in the Communist Party constitution—check-by-jowl with the wisdom of the Great Helmsman, Mao Zedong—-credit growth is plummeting. Even China's new Red Emperor recognizes that $40 trillion of debt on a purported $12 trillion economy (actually far lower when massive malinvestments are deleted from the reported GDP "flows") is a recipe for collapse.

Xi Jinping may well be delusional about the capacity of centralized bureaucrats–even ones with all the guns— to tame and stabilize the greatest Ponzi-style digging, constructing, borrowing, spending and speculating scheme in recorded history. But his goal is a third term in 2022, and in the interim he means to mop down China's fevered borrowing and building spree with alacrity.

Accordingly, the global commodity and CapEx cycle will rapidly weaken as the red line in the chart heads toward the flat-line. The talking heads will not be gumming about synchronized global growth much longer.

But what they will be talking about soon is a US Fiscal Cliff like none before. It now seems that the desperate GOP politicians of Capitol Hill have come up with so many fiscal gimmicks that they may actually cobble together 51 votes in the Senate.

But the emerging Rube Goldberg Contraption, which sunsets all of the individual tax cuts after 2025, and then piles on top a "trigger tax", which most surely would turn the whole things into massive ($350 billion) tax increase after a 2024 "growth" test, is actually a giant debt trap.

In fact, between 2018 and 2024 the emerging Senate "compromise" would generate upwards of $1.4 trillion of new debt including interest on the added borrowing. That's because as we explained yesterday the Senate tax bill is front-loaded with the annual revenue loss peaking at $250 billion in 2020 and diminishing steadily thereafter to just $145 billion in 2025 and a slight surplus in 2027.

Consequently, the public debt builds up rapidly in the early years—long before any added growth could possibly move the needle. We will provide more detailed calculations on this crucial point tomorrow and completely debunk the "growth will pay for it" story.

But suffice it to say here that the massive front-loaded borrowing embedded in the Senate tax bill would come on top of the $6.1 trillion already built into the CBO baseline for the 2018-2024 period and another $1 trillion that will be needed for disaster relief and the Donald's massive defense build-up and dramatically heightened pace of global military operations.

In a word, we do not think you can finance $8.5 trillion of new Federal debt in an environment in which the Fed and its convoy of fellow traveling central banks are also selling bonds by the trillions. That is, without triggering a "crowding out" effect of the kind that has been in hibernation every since Greenspan's cranked up the Eccles Building printing presses after the 22% stock market plunge in October 1987.

The irony is that the GOP is setting up a fiscal cliff which will exceed $1 trillion per year of new borrowing as early as 2020 ($775 billion baseline plus $225 billion of revenue losses and added interest from the tax cut) based on the erroneous view that domestic economic growth is being stunted by high corporate taxes.

This chart below should put the lie to that confusion once and for all. Even as the effective corporate tax rate has been marching down hill for decades, the trend rate of economic growth has been steadily falling.

Notwithstanding today's GDP blip, real final sales have grown at just 1.2% per year over the last decade or by only one-third of the rate extant when the effective corporate tax rate was more than double the current 20% level.

So today's lemming actually are marching toward a Fiscal Cliff—- oblivious to the true meaning of the Senate tax bill maneuvers. But by definition, at the blow-off peak of a great financial bubble markets are oblivious to everything except the price action.

In that context, Bitcoin is neither an outlier nor a one-off freak; it's a poster boy for an unhinged financial system where honest price discovery, two-way markets, fear of risk and financial discipline have been completely destroyed by the central banks.

Whatever its eventual merits as a private money and payment system away from the grasping hand of the Deep State, bitcoin (and the mushrooming slate of other cryptos) at the moment is in the throes of the kind of mania that reminds us of why runaway bubbles eventually generate their own demise.

For want of doubt, Zero Hedge early today calculated out bitcoin's accelerating rate of rise.

Needless to say, the sequence below is not the birthing throes of a new money being born; it's just another iteration of the same old lemmings stampeding toward the cliff:

• $0000 – $1000: 1789 days
• $1000- $2000: 1271 days
• $2000- $3000: 23 days
• $3000- $4000: 62 days
• $4000- $5000: 61 days
• $5000- $6000: 8 days
• $6000- $7000: 13 days
• $7000- $8000: 14 days
• $8000- $9000: 9 days
• $9000-$10000: 2 days
• $10000-$11000: 1 day

Big dip overnight was bought and as US equity markets prepare to open, Bitcoin just topped $11,000…

via http://ift.tt/2kdvEhm Tyler Durden