Earlier today, Brits were greeted with some good news: London house prices rose to a record in November, “as strengthening demand pushed values higher in all regions of England and Wales” according to Acadametrics. Bloomberg reported that values increased 0.6 percent from October to an average 238,839 pounds ($390,900), and that prices reached an all-time high in London, soaring 9.2% in the quarter, and parts of the southeast as average values climbed 4.9 percent from a year ago. “The trajectory is clearly upward,” said David Brown, commercial director of LSL Property Services. “Competition is strong as a result of rising demand and supply of new instructions not growing, a factor that will continue to prop up prices in the long term.” As usual, much was left unsaid, such as where demand is coming from. The answer, as is the case virtually everywhere else in the world, is simple: China.

According to another Bloomberg report citing Jones Lang LaSalle, Chinese investment in London between 2010 and Q3 of this year has risen by a “ludicrous speed” comparable 1,500%, or from a frugal GBP54 million to over GBP 1 billion! And boy do the Chinese love London – according to the same report, over 50% of European property investment by Chinese buyers is now in London.  As a result, China is now the third-largest overseas purchaser in U.K. behind Germany and U.S., which invested GBP 1.2 billion and GBP 1.1 billion respectively. “We expect the pool of investors from China targeting London to grow significantly in the coming years. They will consider everything from urban regeneration sites through to trophy assets,” Damian Corbett, JLL’s head of Central London office investment, said in statement.

In other words, as London real estate becomes ever more unaffordable to orinary UK citizens, who instead are forced to rent out shipping containers, Chinese buyers will buy pretty much anything in the UK, with no regard for cost, since ever more of that ~$200 billion in monthly credit created by the government, which as we showed before blows both the Fed and BOJ money creation out of the water, is parked outside of China, which is aggressively trying to stop its own domestic housing bubble, and in the process blowing housing bubbles everywhere else around the world.

Which brings us to point number two: the latest target of the Chinese hot money colonization is none other than bankrupt Detroit.

Forbes explains:

Detroit, broke with almost no prospects for recovery, is the fourth most popular U.S. destination for Chinese real estate investors.  In fact, it was bad news—the city’s July 18 bankruptcy filing—that triggered renewed interest.  “While the bankruptcy is viewed as a bad thing elsewhere, it raised the exposure level of Detroit’s real estate market in China,” says Evonne Xu, a Michigan attorney catering to Chinese purchasers.  Middle Kingdom, meet Motown.

 

Chinese shoppers can’t resist a bargain.  Where else can you buy a two-story home in the U.S. for $39?  China Central Television, the state broadcaster, in March reported that two houses in Detroit cost the same as a pair of leather shoes.  No wonder a poster on Sina Weibo, the Twitter-like service, asked, “Seven-hundred thousand people, quiet, clean air, no pollution, democracy—what are you waiting for?”

 

Who says the Chinese are waiting?  Dongdu International Group of Shanghai bought, sight unseen, two downtown icons, the David Stott building for $4.2 million and the Detroit Free Press building for $9.4 million, both at auction this September.

 

Moreover, Chinese purchasers are making bulk purchases of “inexpensive properties”—those selling for $25,000 or less—in the rings surrounding the city center.  “They’re banking on the downtown resurgence spiraling out into those rings,” explains Kelly Sweeney of Coldwell Banker Weir Manuel.  Mainland parties often buy at tax and foreclosure sales, hold their property, and patiently wait for appreciation.

 

…

 

The Chinese are coming, but what are they doing?  Dongdu International will make a big contribution to downtown by redeveloping the Detroit Free Press building, turning it into a retail and residential complex, but that ambitious plan appears to be the exception.  China’s rich are investing in the Motor City like they invest in their own country, where they buy multiple units at a time.  In China, like here, they often keep their acquisitions vacant, treating new properties like stores of value.

As we have been repeating for the past three years, all China’s intrepid real estate investors are doing, is parking China’s record hot money – one of the three pillars of the so-called US housing recovery – abroad. In this case, in a broke city.

The Chinese buy-and-hold tactics in Detroit suggest patience, but that’s not the whole story.  The bigger story is that the parking of wealth offshore indicates capital flight.  The Chinese have only 13% of their wealth outside China, according to Oliver Williams of WealthInsight, while the global average is 20% to 30%, so some of transfers of wealth abroad are normal for a developing society.

There may be more, however, and as China prepares to liberalize its financial and social policies, the wealthiest part of the population may be considering outright getting the hell out of dodge, and taking trillions with it.

But it’s not just money that is fleeing.  A study conducted by Bank of China and Hurun found that more than half of China’s millionaires have taken steps to emigrate or are considering doing so.  This statistic tells us the transfers of cash out of China are not just normal diversification.

 

There is substantial disagreement as to how much Chinese individuals have already stashed offshore.  Boston Consulting Group estimates they hold $450 billion in assets outside their country, and WealthInsight believes the number to be $658 billion. 

 

Yet everyone agrees that the figure, whatever it is, will go up fast.  Boston Consulting, for instance, predicts offshore assets will double in three years.  CNBC late last month called the movement of Chinese capital “one of the largest and most rapid wealth migrations of our time: hundreds of billions of dollars, and waves of millionaires flowing out of China to overseas destinations.” 

Forbes’ conclusion is accurate: Detroit is not an investment destination as much as it is a safe(r) place to park cash which may or may not have been procured by legal means, but which thanks to the epic cash creation tsunami emanating from the Middle Kingdom will be sure to continue for the foreseeable future: “So the Chinese buying up Detroit says less about the prospects of Motown than what they think of their own country.  It’s not like the Motor City is a good place to invest.  It has what is surely the worst housing market in the U.S.  “I’ve been in the Detroit area for 35 years,” says Chen, the broker from Troy.  “Thirty-five years ago downtown Detroit was like this, and it’s not getting better.” But that doesn’t matter – there is money to be parked outside of China, and any place will do. After all, in a globalized monetary system, money is instantly fungible to any corner of the globe, especially when facilitated by such “dumbest banks of 2013” who defy all money-laundering regulations, as RBS.

The conclusion:

As grim as the future is for Motown, it is evidently better than China’s, at least according to many Chinese.  They are pouring their cash into Detroit.  

So yes: the colonization of the world’s premier, and not so premier, metropolitan centers by China will continue, until the liquidity spigot is finally turned off. In the meantime recall that this is nothing new: after all Japan experienced an identical liquidity-driven colonization of the developed world in the 1980s, when it seemed Japan would buy up Manhattan. That didn’t work out too well for them. With China, this time won’t be any different either.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/jLDblZTCvlo/story01.htm Tyler Durden

Quietly, while no one was watching, European stocks have been pummeled lower in the last 2 weeks. Since the start of December, Spanish and Italian stock markets are down 6% and the broad-based Bloomberg 500 Index is down 4.75% – its biggest such drop in 6 months – to 2-month lows. With the EUR testing multi-year highs against the USD, and the earnings picture fading dismalling into the dark, it seems all those “believers” in a European recovery (on the basis of some “soft” surveys) have been proved wrong (or early?).

 

European stocks are at 2-month lows…

 

As Earnings hope collapses….

 

Led by Spain and Italy…

 

as stocks catch down to macro reality?

 

Intrestingly, European stocks caught up to the region’s improve dmarket-based credit risk perception… but has disconnected lower in recent weeks (as bonds remains under the control of the ECB…)

 

 

Charts: @Not_Jim_Cramer and Bloomberg

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/z5ge7IXgNjc/story01.htm Tyler Durden

Bonus:

General Electric Knew Its Reactor Design Was Unsafe … So Why Isn’t GE Getting Any Heat for Fukushima?

The NSA’s main justification for Constitution-shredding mass surveillance on all Americans is 9/11.

In reality:

• Top security experts say that mass spying interferes with U.S. counter-terror efforts (more here and here)

• American presidents agree

• The chairs of the 9/11 Commission say that the spying has gone way too far (and that the Director of National Intelligence should be prosecuted for lying about the spying program)

• Top officials say that the claim that the government could only have stopped the attacks if it had been able to spy on Americans is wholly false

• The NSA was already conducting mass surveillance prior to 9/11

But we want to focus on another angle:  the unspoken assumption by the NSA that we need mass surveillance because “lone wolf” terrorists don’t leave as many red flags as governments, so the NSA has to spy on everyone to find the needle in the haystack.

But this is nonsense. The 9/11 hijackers were not lone wolves.

The former Chair of the Senate Intelligence Committee, outside adviser to the CIA, and Co-Chair of the congressional investigation into 9/11 – Bob Graham – says:

I have personally talked to the other cochair of the Congressional Joint Inquiry, a man who was a very distinguished congressman and, later, director of the CIA [Porter Goss], I have talked to the two chairs of the … 9/11 Commission, asking them, what do you think were the prospects of these 19 people being able to plan, practice, and execute the complicated plot that was 9/11 without any external support?

 

All three of them used almost the same word: “Implausible”. That it is implausible that that could have been the case.

 

Yet that has now become the conventional wisdom to the aggressive exclusion of other alternatives.

 

Indeed, it is pretty clear that 9/11 was state-sponsored terror … although people argue about which state or states were responsible (we personally believe that at least two allied governments were involved. Zero Hedge readers:  Which governments do YOU think were involved?).

Indeed, Graham – unlike with 9/11 Commissioner and former Senator Bob Kerrey – said in sworn declarations that the Saudi is linked to the 9/11 attacks.  They’re calling for either a “permanent 9/11 commission” or a new 9/11 investigation to get to the bottom of it.

An FBI report implicates the Saudi government.

And many other top U.S. counter-terrorism officials say that the government’s explanation of the 9/11 hijackers being “lone wolves” connected only to Al Qaeda is ridiculous. See this and this.

If this sounds implausible,  remember that Saudi Prince Bandar – head of Saudi intelligence – helped to arm the Mujahadeen in Afghanistan, and is now arming Al Qaeda in Syria. (Background).   Respected financial writer Ambrose Evans-Pritchard says that Prince Bandar admitted that Saudi Arabia carries out false flag terror.

Indeed, the Joint Congressional Inquiry into 9/11 found that the Saudi government supported the 9/11 attacks,  but the Bush administration classified the 28 pages of the report which discussed the Saudis.

Bipartisan Bill to Publicly Release Report on Saudi Involvement In 9/11

A bipartisan bill – introduced by  congressmen Walter B. Jones (Republican from North Carolina) and Stephen Lynch (Democrat from Massachusetts)  would declassify the 28 pages of the Joint
Inquiry which implicate the Saudi government.

Some assume that passage of the bill is assured …

But both the Bush and Obama administrations have fought to keep Saudi involvement under wraps for more than 10 years.

Remember, the U.S. government allowed members of Bin Laden’s family – and other suspicious Saudis – hop on airplanes and leave the country right after 9/11 without even interviewing them, even though air traffic was grounded for everyone else.

Additionally, a Saudi FBI informant hosted and rented a room to Mihdhar and another 9/11 hijacker in 2000.

Investigators for the Congressional Joint Inquiry discovered that an FBI informant had hosted and even rented a room to two hijackers in 2000 and that, when the Inquiry sought to interview the informant, the FBI refused outright, and then hid him in an unknown location, and that a high-level FBI official stated these blocking maneuvers were undertaken under orders from the White House.

As the New York Times notes:

Senator Bob Graham, the Florida Democrat who is a former chairman of the Senate Intelligence Committee, accused the White House on Tuesday of covering up evidence ….The accusation stems from the Federal Bureau of Investigation’s refusal to allow investigators for a Congressional inquiry and the independent Sept. 11 commission to interview an informant, Abdussattar Shaikh, who had been the landlord in San Diego of two Sept. 11 hijackers.

 

In his book “Intelligence Matters,” Mr. Graham, the co-chairman of the Congressional inquiry with Representative Porter J. Goss, Republican of Florida, said an F.B.I. official wrote them in November 2002 and said “the administration would not sanction a staff interview with the source.” On Tuesday, Mr. Graham called the letter “a smoking gun” and said, “The reason for this cover-up goes right to the White House.”

The government obstructed the 9/11 Commission in every way possible.  During both the Joint Congressional Inquiry into 9/11 and the 9/11 Commission investigation, government “minders” intimidated witnesses and obstructed the investigation.

Obama has been no better.  Obama’s Department of Justice filed an amicus brief in the U.S. Supreme Court arguing that the lawsuit brought by the families of victims killed in the 9/11 attacks against Saudi Arabia should be thrown out of court (it was).

And Graham said that he’s lobbied Obama for years to release the 28 pages and to reopen the investigation, but Obama has refused.  The former Chair of the Senate Intelligence Committee and 9/11 investigator has even resorted to filing Freedom of Information requests to obtain information, but the Obama administration is still stonewalling:

Graham said that like the 28 pages in the 9/11 inquiry, the Sarasota case is being “covered up” by U.S. intelligence. Graham has been fighting to get the FBI to release the details of this investigation with Freedom of Information Act (FOIA) requests and litigation. But so far the bureau has stalled and stonewalled, he said.

Still Urgent Today

Ancient history, you say?

Graham notes:

Although it’s been more than a decade ago when this horrific event occurred, I think [the questions of who supported the attacks] have real consequences to U.S. actions today.

For example, the U.S. might not want to support – let alone launch joint military adventure alongside – a regime which supported the 9/11 hijackers.

As Graham told told PBS last year:

[Question]: Senator Graham, are there elements in this report, which are classified that Americans should know about but can’t?

 

SEN. BOB GRAHAM: Yes … I was surprised at the evidence that there were foreign governments involved in facilitating the activities of at least some of the terrorists in the United States.

 

I am stunned that we have not done a better job of pursuing that to determine if other terrorists received similar support and, even more important, if the infrastructure of a foreign government assisting terrorists still exists for the current generation of terrorists who are here planning the next plots.

 

To me that is an extremely significant issue and most of that information is classified, I think overly-classified. I believe the American people should know the extent of the challenge that we face in terms of foreign government involvement. That would motivate the government to take action.

 

[Question]: Are you suggesting that you are convinced that there was a state sponsor behind 9/11?

 

SEN. BOB GRAHAM: I think there is very compelling evidence that at least some of the terrorists were assisted not just in financing — although that was part of it — by a sovereign foreign government and that we have been derelict in our duty to track that down, make the further case, or find the evidence that would indicate that that is not true and we can look for other reasons why the terrorists were able to function so effectively in the United States.

 

[Question]: Do you think that will ever become public, which countries you’re talking about?

 

SEN. BOB GRAHAM: It will become public at some point when it’s turned over to the archives, but that’s 20 or 30 years from now. And, we need to have this information now because it’s relevant to the threat that the people of the United States are facing today.

And – most importantly – if the entire mass spying program is based on the “lone wolf” theory of 9/11, it is unnecessary and counterproductive.

Postscript:  Ironically, the U.S. government has in the past alleged state sponsorship of 9/11 when it suited its purposes.  Specifically, people may not remember now, but – at the time – the supposed Iraqi state sponsorship of 9/11 was at least as important a justification for the Iraq war as the alleged weapons of mass destruction.  This claim that Iraq is linked to 9/11 has since been debunked by the 9/11 Commission, top government officials, and even – long after they alleged such a link – Bush and Cheney themselves.  But 70% of the American public believed it at the time, and 85% of U.S. troops believed the U.S. mission in Iraq was “to retaliate for Saddam’s role in the 9-11 attacks.”

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/XObfDHUNqPQ/story01.htm George Washington

As the surreal facts and fictions surrounding Nelson Mandela’s death grow (as hundreds breached security and flooded his coffin), the story of the “fake” interpreter goes from the sublime to the ridiculous. eNCA is reporting that Thamsanqa Jantjie – who stood mere feet away from the world’s leaders (and waved his hands like a muppet) is being treated for schizophrenia, has also faced rape (1994), theft (1995), house-breaking (1997), malicious damage to property (1998), murder, attempted murder and kidnapping (2003) charges. Many of the charges brought against him were dropped, allegedly because he was mentally unfit to stand trial.  

Via eNCA,

The man now known by many as the ‘fake interpreter’, stood just a foot away from world leaders, including US President Barack Obama, who is one of the most heavily protected men on the planet.

 

…faced a murder charge in 2003.

 

…It’s unknown if the case was ever concluded as the court file is mysteriously empty.

 

eNCA’s investigations have found that Thamsanqa Jantjie, who is being treated for schizophrenia, has also faced rape (1994), theft (1995), housebreaking (1997), malicious damage to property (1998), murder, attempted murder and kidnapping (2003) charges. 

 

Many of the charges brought against him were dropped, allegedly because he was mentally unfit to stand trial.

 

Jantjie was acquitted on the rape charge, but he was convicted of theft for which he was sentenced to three years in prison. It’s unclear if he ever spent time in jail.

…

During the memorial, it emerged on social media networks that Jantjie wasn’t a properly qualified sign language interpreter and that his signing during that historic event didn’t make any sense.

The story went global and Jantjie was portrayed as a joke.

But this story took a serious turn when eNCA established he was mentally ill.

Jantjie admitted that he was heavily medicated for schizophrenia and has spent time at the Sterkfontein Psychiatric Hospital.

 

But apart from that… we are sure his mom says he is really good boy…

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/T7-xFkCpZ0A/story01.htm Tyler Durden

As the surreal facts and fictions surrounding Nelson Mandela’s death grow (as hundreds breached security and flooded his coffin), the story of the “fake” interpreter goes from the sublime to the ridiculous. eNCA is reporting that Thamsanqa Jantjie – who stood mere feet away from the world’s leaders (and waved his hands like a muppet) is being treated for schizophrenia, has also faced rape (1994), theft (1995), house-breaking (1997), malicious damage to property (1998), murder, attempted murder and kidnapping (2003) charges. Many of the charges brought against him were dropped, allegedly because he was mentally unfit to stand trial.  

Via eNCA,

The man now known by many as the ‘fake interpreter’, stood just a foot away from world leaders, including US President Barack Obama, who is one of the most heavily protected men on the planet.

 

…faced a murder charge in 2003.

 

…It’s unknown if the case was ever concluded as the court file is mysteriously empty.

 

eNCA’s investigations have found that Thamsanqa Jantjie, who is being treated for schizophrenia, has also faced rape (1994), theft (1995), housebreaking (1997), malicious damage to property (1998), murder, attempted murder and kidnapping (2003) charges. 

 

Many of the charges brought against him were dropped, allegedly because he was mentally unfit to stand trial.

 

Jantjie was acquitted on the rape charge, but he was convicted of theft for which he was sentenced to three years in prison. It’s unclear if he ever spent time in jail.

…

During the memorial, it emerged on social media networks that Jantjie wasn’t a properly qualified sign language interpreter and that his signing during that historic event didn’t make any sense.

The story went global and Jantjie was portrayed as a joke.

But this story took a serious turn when eNCA established he was mentally ill.

Jantjie admitted that he was heavily medicated for schizophrenia and has spent time at the Sterkfontein Psychiatric Hospital.

 

But apart from that… we are sure his mom says he is really good boy…

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/T7-xFkCpZ0A/story01.htm Tyler Durden

A BoomBustBlogger (h/t @johnjoechad) forewarded an interesting report to me this morning. An Irish MEP from Dublin, Paul Murphy, who seems damn bright wrote it and if I didn’t know any better I would have sworn I wrote it myself about 4 years ago. Here are excerpts from the document along with my comments. 

Irish bailout exit economic reality 1    

  Irish bailout exit economic reality 2 

This GDP growth and EC forecast thingy is one of the primary reasons why the EU is taking so long to get back on its feet. A total, complete and unequivocal lack of believability. Exactly how many times can one be caught in the same lie. Let’s reference my work 2010 – that’s right, nearly 4 years ago. Our (subscriber only)  Ireland public finances projections report shows Ireland getting very, very optimistic with their economic forecasting, to wit:

Irish bailout exit economic reality 5

I want you to think about his carefully. The Irish government actually made the EC look conservative. So, if you peruse my other public piece on the topic, Lies, Damn Lies, and Sovereign Truths: Why the Euro is Destined to Collapse!:

If this article goes viral around the web, I wouldn’t be surprised if the euro tanks and several European sovereign states’ spreads blow out. I have busted several of them in another of a long series of “creative” economic forecasting schemes to fudge the appearance of “austerity”.

And what about Italy???

image042.pngimage042.png

 So, have I proven my point yet? Which one of you want to bet me that the EC has accurately and adequately forecasts Ireland’s growth at a level that can assure market participants to fund it through the next 20 years??? 

Irish bailout exit economic reality 3   

The issue of debt is an interesting one. Our (subscriber only)  Ireland public finances projections report had the most pessimistic forecasts for Ireland that I know of, yet it was still unrealistically optimistic. Add to this the fact that I belive the Irish banks are sitting on a stockpile of unreported and/or unrecognzied debt and we have a bailout du jour, or at least a bail-in du jour followed by a bailout to clean up the loose ends. 

SUN-SUN-PAGES-NEWS-MONEY-6066 copy copy

I warned the Germans – Angela Merkel Should Talk To Me If She’s Truly Enraged By The Anglo Irish Revelation, For That’s Just The Beginning! This warning was based on multiple earlier warnings to the Irish, summarized (more or less) in the posts – Ireland, You May Very Well Be Bust & I Make No Apologies For What I’m About To Show You and The Beginning Of The Great Irish Unwind and  If I Provide Proof That The Entire Irish Banking System Is A Sham, Does It Set Up A Much Needed System Reboot? Let's Go For It. As for bail-ins, I reference: 

• Are You About To Get Cyprus’d in Ireland? When A Single Word’s Worth Billions Of Euros…
• Dear Ireland (& AIB), Haven’t We All Learned The Problem Is Insolvency, Not Liquidity?

 

 Irish bailout exit economic reality 4

 

See also: 

 Exactly As I Warned, “Cyprusization” Goes Mainstream! Ireland On Tap, Next Up For Citizen Fund Confiscation (Again)

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/LS0hIaYSt9U/story01.htm Reggie Middleton

A BoomBustBlogger (h/t @johnjoechad) forewarded an interesting report to me this morning. An Irish MEP from Dublin, Paul Murphy, who seems damn bright wrote it and if I didn’t know any better I would have sworn I wrote it myself about 4 years ago. Here are excerpts from the document along with my comments. 

Irish bailout exit economic reality 1    

  Irish bailout exit economic reality 2 

This GDP growth and EC forecast thingy is one of the primary reasons why the EU is taking so long to get back on its feet. A total, complete and unequivocal lack of believability. Exactly how many times can one be caught in the same lie. Let’s reference my work 2010 – that’s right, nearly 4 years ago. Our (subscriber only)  Ireland public finances projections report shows Ireland getting very, very optimistic with their economic forecasting, to wit:

Irish bailout exit economic reality 5

I want you to think about his carefully. The Irish government actually made the EC look conservative. So, if you peruse my other public piece on the topic, Lies, Damn Lies, and Sovereign Truths: Why the Euro is Destined to Collapse!:

If this article goes viral around the web, I wouldn’t be surprised if the euro tanks and several European sovereign states’ spreads blow out. I have busted several of them in another of a long series of “creative” economic forecasting schemes to fudge the appearance of “austerity”.

And what about Italy???

image042.pngimage042.png

 So, have I proven my point yet? Which one of you want to bet me that the EC has accurately and adequately forecasts Ireland’s growth at a level that can assure market participants to fund it through the next 20 years??? 

Irish bailout exit economic reality 3   

The issue of debt is an interesting one. Our (subscriber only)  Ireland public finances projections report had the most pessimistic forecasts for Ireland that I know of, yet it was still unrealistically optimistic. Add to this the fact that I belive the Irish banks are sitting on a stockpile of unreported and/or unrecognzied debt and we have a bailout du jour, or at least a bail-in du jour followed by a bailout to clean up the loose ends. 

SUN-SUN-PAGES-NEWS-MONEY-6066 copy copy

I warned the Germans – Angela Merkel Should Talk To Me If She’s Truly Enraged By The Anglo Irish Revelation, For That’s Just The Beginning! This warning was based on multiple earlier warnings to the Irish, summarized (more or less) in the posts – Ireland, You May Very Well Be Bust & I Make No Apologies For What I’m About To Show You and The Beginning Of The Great Irish Unwind and  If I Provide Proof That The Entire Irish Banking System Is A Sham, Does It Set Up A Much Needed System Reboot? Let's Go For It. As for bail-ins, I reference: 

• Are You About To Get Cyprus’d in Ireland? When A Single Word’s Worth Billions Of Euros…
• Dear Ireland (& AIB), Haven’t We All Learned The Problem Is Insolvency, Not Liquidity?

 

 Irish bailout exit economic reality 4

 

See also: 

 Exactly As I Warned, “Cyprusization” Goes Mainstream! Ireland On Tap, Next Up For Citizen Fund Confiscation (Again)

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/LS0hIaYSt9U/story01.htm Reggie Middleton

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

If credit expansion leads the stock market, the market is in trouble.

Before you buy the dip "because this Bull market will run until 2016," please ponder this chart from our Chartist Friend From Pittsburgh of total credit and the Dow Jones Industrial Average (DJIA). Unsurprisingly, the stock market advances when credit is expanding and declines when credit growth slows.

Why is this unsurprising? Because ours is a debt-dependent consumer economy: everything from local government building projects to the purchase of vehicles to going to college requires borrowing money (i.e. credit expansion).

 

Source: The Dome Top Bears Have Been Given Their Stock Market Sell Signal

Here is Chartist Friend From Pittsburgh's commentary:

Total Credit Market Debt (TCMD) growth is not confirming the new DJIA high at all.

The trend of TCMD growth clearly reversed lower in 2007 by making a new all time low. The uptrend of the DJIA appears to be up since it's recently made new all-time highs.

The point is – there's a serious disconnect/divergence/non-confirmation going on here and in the end credit growth is the more important of the two and determines the trend because people can't make a move nowadays without taking out a loan (house, car, student, government spending, etc.).

I would add these points:

1. Notice that credit growth is rolling over, and that its recent peak was significantly lower than the 2007 peak. In other words, despite rescuing the Too Big To Fail Banks (TBTF) to the tune of $16 trillion and the creation of $3.2 trillion that it pumped into the financial system to goose housing and stocks, the Federal Reserve's unprecedented campaign to reflate leverage and credit only managed a weak bounce from 2007 highs in credit growth.

This is known as diminishing returns: Our Era’s Definitive Dynamic: Diminishing Returns (November 11, 2013)

The Fatal Disease of the Status Quo: Diminishing Returns (May 1, 2013)

2. In a debt-dependent consumer economy beset with declining real income for the bottom 90%, the only way to expand credit is to blow asset bubbles that boost phantom assets long enough to leverage new debt:

Why Our Consumer-Debt Dependent Economy Is Doomed December 10, 2013

Why We're Stuck with a Bubble Economy December 9, 2013

See those two little blips up in the real wages of the bottom 90%, circa 1999 and 2007? Those modest boosts in income were the result of monumental credit/asset bubbles. Once those bubbles popped, real income for 100% of households plummeted, and the bottom 90% saw its real income (i.e. the purchasing power of earnings) decline by 7%.

You can't leverage more debt off declining income unless you loan money at near-zero rates of interest. That explains the Fed's Zero Interest Rate Policy (ZIRP), which has the sole purpose of enabling more leverage and debt even as real income stagnates.

And just to remind us how those bubbles ended:

 

Buy the dip "because this Bull market will run until 2016?" Based on what? Does liquidity from the Fed ultimately drive the market, or does credit expansion drive the market? We will find out in 2014.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/d67UBya54vg/story01.htm Tyler Durden

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

If credit expansion leads the stock market, the market is in trouble.

Before you buy the dip "because this Bull market will run until 2016," please ponder this chart from our Chartist Friend From Pittsburgh of total credit and the Dow Jones Industrial Average (DJIA). Unsurprisingly, the stock market advances when credit is expanding and declines when credit growth slows.

Why is this unsurprising? Because ours is a debt-dependent consumer economy: everything from local government building projects to the purchase of vehicles to going to college requires borrowing money (i.e. credit expansion).

 

Source: The Dome Top Bears Have Been Given Their Stock Market Sell Signal

Here is Chartist Friend From Pittsburgh's commentary:

Total Credit Market Debt (TCMD) growth is not confirming the new DJIA high at all.

The trend of TCMD growth clearly reversed lower in 2007 by making a new all time low. The uptrend of the DJIA appears to be up since it's recently made new all-time highs.

The point is – there's a serious disconnect/divergence/non-confirmation going on here and in the end credit growth is the more important of the two and determines the trend because people can't make a move nowadays without taking out a loan (house, car, student, government spending, etc.).

I would add these points:

1. Notice that credit growth is rolling over, and that its recent peak was significantly lower than the 2007 peak. In other words, despite rescuing the Too Big To Fail Banks (TBTF) to the tune of $16 trillion and the creation of $3.2 trillion that it pumped into the financial system to goose housing and stocks, the Federal Reserve's unprecedented campaign to reflate leverage and credit only managed a weak bounce from 2007 highs in credit growth.

This is known as diminishing returns: Our Era’s Definitive Dynamic: Diminishing Returns (November 11, 2013)

The Fatal Disease of the Status Quo: Diminishing Returns (May 1, 2013)

2. In a debt-dependent consumer economy beset with declining real income for the bottom 90%, the only way to expand credit is to blow asset bubbles that boost phantom assets long enough to leverage new debt:

Why Our Consumer-Debt Dependent Economy Is Doomed December 10, 2013

Why We're Stuck with a Bubble Economy December 9, 2013

See those two little blips up in the real wages of the bottom 90%, circa 1999 and 2007? Those modest boosts in income were the result of monumental credit/asset bubbles. Once those bubbles popped, real income for 100% of households plummeted, and the bottom 90% saw its real income (i.e. the purchasing power of earnings) decline by 7%.

You can't leverage more debt off declining income unless you loan money at near-zero rates of interest. That explains the Fed's Zero Interest Rate Policy (ZIRP), which has the sole purpose of enabling more leverage and debt even as real income stagnates.

And just to remind us how those bubbles ended:

 

Buy the dip "because this Bull market will run until 2016?" Based on what? Does liquidity from the Fed ultimately drive the market, or does credit expansion drive the market? We will find out in 2014.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/d67UBya54vg/story01.htm Tyler Durden

 

 

This picture explains our QE

The Fed pouring out some Chablis

Elites get their fill

The rest – a blue pill

That makes sheeple think they are free

The Limerick King

 

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via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/bTMqn4EQ4Zk/story01.htm williambanzai7