Month: November 2018

Authored by James Rickards via The Daily Reckoning,

Those who focus on the U.S. national debt (and I’m one of them) keep wondering how long this debt levitation act can go on…

The U.S. debt-to-GDP ratio is at the highest level in history (106%), with the exception of the immediate aftermath of the Second World War. At least in 1945, the U.S. had won the war and our economy dominated world output and production. Today, we have the debt without the global dominance.

The U.S. has always been willing to increase debt to fight and win a war, but the debt was promptly scaled down and contained once the war was over. Today, there is no war comparable to the great wars of American history, and yet the debt keeps growing.

In a new Weekly Standard article, the celebrated James Grant of Grant’s Interest Rate Observer reviews not only the current debt and deficit situation but provides an overview of the U.S. national debt since George Washington and Alexander Hamilton.

Grant makes the point that the debt has been increased and decreased on a regular basis but never until today was there a view that the deficit didn’t matter and could be increased indefinitely.

He points out that it took the United States 193 years to accumulate its first trillion dollars of federal debt. And amazingly, that it will add that much in the current fiscal year alone.

Grant also describes how these historic debt management efforts have been bipartisan.

Republicans Harding and Coolidge reduced the debt; the Democrat Andrew Jackson actually eliminated the debt in 1836. Today there is bipartisan profligacy. The article lays out the big picture and the likelihood of a U.S. debt crisis sooner rather than later.

The U.S. budget deficit under Trump is approaching $1 trillion per year, similar to what we saw in 2010 and 2011 under Obama. This is the result of tax cuts (that don’t “pay for themselves”), removal of spending caps, snowballing student loan defaults and defective growth estimates by the Office of Management and Budget, or OMB.

And it looks like annual deficits will exceed the trillion dollar level as soon as next year when projected spending is factored in.

With growth now fading after the Trump tax cut boost (there will be no tax cuts in 2019), the debt-to-GDP ratio is now up to 106%, since debt is growing faster than GDP.

As Grant points out, the national debt has registered compound annual growth of 8.8%, but only 6.3% for GDP. That’s not a sustainable situation. And it’s not at all clear that GDP will close the gap.

Basically, the United States is going broke.

I don’t say that to be hyperbolic. I’m not looking to scare people. It’s just an honest assessment, based on the numbers.

Right now, the United States is roughly $21.6 trillion in debt. Now, a $21.6 trillion debt would be fine if we had a $50 trillion economy. The debt-to-GDP ratio in that example would be about 40%. But we don’t have a $50 trillion economy. We have about a $20 trillion economy, which means our debt is bigger than our economy.

When is the debt-to-GDP ratio too high? When does a country reach the point that it either turns things around or ends up like Greece?

Economists Ken Rogoff and Carmen Reinhart carried out a long historical survey going back 800 years, looking at individual countries, or empires in some cases, that have gone broke or defaulted on their debt.

They put the danger zone at a debt-to-GDP ratio of 90%. Once it reaches 90%, they found, a turning point arrives…

At that point, a dollar of debt yields less than a dollar of output. Debt becomes an actual drag on growth.

Again the current U.S. debt-to-GDP ratio is 106%.

We are deep into the red zone, that is. And we’re only going deeper. The U.S. has a 106% debt to GDP ratio, trillion dollar deficits on the way, more spending on the way.

We’re getting more and more like Greece. We’re heading for a sovereign debt crisis. That’s not an opinion; it’s based on the numbers.

How do we get out of it?

For elites, there is really only one way out at this point is, and that’s inflation. And they’re right on one point. Tax cuts won’t do it, structural changes to the economy wouldn’t do it. Both would help if done properly, but the problem is simply far too large. Growth would have to greatly exceed current levels, and that’s just not in the cards.

There’s only one solution left, inflation.

Now, the Fed printed about $4 trillion over the past several years and we barely have had any inflation at all, even though it does appear to be percolating lately. Not enough to satisfy the Fed, but some inflation measures have been on the uptick.

The reason we didn’t have inflation all that time is because most of the new money was given by the Fed to the banks, who turned around and parked it on deposit at the Fed to gain interest. The money never made it out into the economy, where it would produce inflation.

The bottom line is that not even money printing really worked to get inflation moving. Is there anything left in the bag of tricks?

There is actually. The Fed could actually cause inflation in about 15 minutes if it used it. How?

The Fed can call a board meeting, vote on a new policy, walk outside and announce to the world that effective immediately, the price of gold is $5,000 per ounce.

They could make that new price stick by using the Treasury’s gold in Fort Knox and the major U.S. bank gold dealers to conduct “open market operations” in gold.

They will be a buyer if the price hits $4,950 per ounce or less and a seller if the price hits $5,050 per ounce or higher. They will print money when they buy and reduce the money supply when they sell via the banks.

The Fed would target the gold price rather than interest rates.

The point is to cause a generalized increase in the price level. A rise in the price of gold from today’s roughly $1,230 per ounce to $5,000 per ounce is a massive devaluation of the dollar when measured in the quantity of gold that one dollar can buy.

There it is — massive inflation in 15 minutes: the time it takes to vote on the new policy.

Don’t think this is possible? It’s happened in the U.S. twice in the past 80 years. The first time was in 1933 when President Franklin Roosevelt ordered an increase in the gold price from $20.67 per ounce to $35.00 per ounce, nearly a 75% rise in the dollar price of gold.

He did this to break the deflation of the Great Depression, and it worked. The economy grew strongly from 1934-36.

The second time was in the 1970s when Nixon ended the conversion of dollars into gold by U.S. trading partners. Nixon did not want inflation, but he got it.

Gold went from $35 per ounce to $800 per ounce in less than nine years, a 2,200% increase. U.S. dollar inflation was over 50% from 1977-1981. The value of the dollar was cut in half in those five years.

History shows that raising the dollar price of gold is the quickest way to cause general inflation. If the markets don’t do it, the government can. It works every time.

I’m not saying it’s going to happen anytime soon, especially with inflation beginning to show up here and there.

But if it doesn’t prove sustainable and if we enter a deep recession at some point— which is very likely — the Fed could reach deep into its bag of tricks for the golden inflation cure.

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Bitcoin, like most cryptocurrencies, has experienced tremendous pain in 2018, but there is a silver lining developing – in stark contrast to the violent swings in global equity markets, wild price swings have been absent in daily Bitcoin flows in the last month or so.

image courtesy of CoinTelegraph

Measured on a weekly basis, absolute levels of Bitcoin volatility is probing levels not seen since late 2016, right before the most massive pump and dump in modern times took the coin from $700 to almost $20,000 within 12 months.

“Volatility has been a major characteristic of the digital currency, which turned 10-years-old last week, throwing up major hurdles to its emergence as a mainstream asset class,” said Reuters.

Bitcoin volatility sinks to a near two-year low

However, even more noteworthy is the fact that Bitcoin is now less volatile intra-month than the S&P 500 (October saw Bitcoin’s high to low range of 11.3%, smaller than the 12.9% range in the S&P 500)…

And on a weekly basis, Bitcoin remains notably less volatile than stocks…

Many of Wall Streets’ seasoned institutional traders were skeptical about Bitcoin’s ability to store a value from the start, with most of them stayed clear and watched the spectacular rise, then fall of the coin.

From the high of roughly $20,000 in late December 2017, the coin collapsed 70% to the 6,000 handle, where it currently trades lifeless today.

During the collapse, regulators across the world emphasized price instability when issuing warnings to gullible retail investors who mistakenly listened to CNBC’s cryptocurrency research desk’s 24/7 pump.

Institutions are still waiting for more guidance on how regulators will handle bitcoin products such as exchange-traded funds, leading most compliance segments within firms to heavily restrict their trading desks from buying.

Oliver von Landsberg-Sadie, CEO of BCB Group, a cryptocurrency prime broker, warned Reuters, that a decline in trading volumes over the last three months had been a key factor in declining volatility.

In contrast to bitcoin, volatility in the S&P 500 has climbed to near seven-month highs, due to monetary tightening and fears of a global slowdown. As shown below, Bitcoin has now become more stable than US stocks as per graphic via Reuters.

Reuter’s Bitcoin chart pack-

Bitcoin historically tracks the JPM dollar index but is now diverging.

Bitcoin generally tracks gold prices.

Current Bitcoin rally reflects deteriorating outlook for US government bonds.

Low US inflation is bearish for Bitcoin.

Top 11 famous people’s Bitcoin prediction:

As for Bitcoin’s future price action, well, it is anyone’s guess as to the next directional imbalance. One thing that is certain, volatility tends to resurface after periods of extremely low volatility… and stability will not hurt the cryptocurrency’s chances of attracting institutional money – the holy grail of the next leg higher in Bitcoin.

Bloomberg Intelligence analyst Mike McGlone has remarked that high volatility levels have previously been “a major factor lessening most cryptocurrency use cases” and that recently low levels are “a sign of speculation leaving the market and eventually a bottoming process.”

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Authored by Mac Slavo via SHTFplan.com,

The trade war started by president Donald Trump, which is supposed to punish the Chinese, but instead, will end up hurting Americans, is still underway. But did the election results change the dynamics?

The short and simple answer is no. 

Democrats and Republicans alike favor more theft of the American paycheck, and the trade war is one sneaky way to get more money flowing into their hands and out of ours. 

“It’s going to be the same, if not worse, in terms of U.S.-China,” said Steven Okun of McLarty Associates according to CNBC. 

 Considering Americans ARE paying for this trade war, that’s terrible news. 

The only real change Tuesday’s United States midterm elections are poised to create is simply how President Donald Trump will accomplish his domestic goals, But again, the results will likely not mean much for the country’s trade policies already demolishing the U.S.’s precariously balanced economy. The outcome of yesterday’s elections is set to challenge Trump in several areas such as military spending and his foreign business dealings. It will also make it difficult for the commander-in-chief to pass any major legislation (a win for those who feel we are already bound to too many laws as it is).

But on trade policy, one of the areas most relevant for the international community, Trump still has the executive power to make decisions and can set the terms of foreign trade regardless of whether Congress is divided or not.

“Congress doesn’t have much of an ability to control trade policy,” analysts at RBC Capital Markets wrote in a recent note.

Rather, “the Oval Office has wide-reaching powers to act unilaterally,” which means the president is likely to “keep pushing his trade agenda,” they continued.

According to some economists, Democrats will fight Republicans on some area of foreign trade, however. 

“While trade is not necessarily a critical issue for the Democrats, it is unlikely they will support a trade war with traditional allies like the E.U,” economists at ING said in a note published before Tuesday’s result.

“Withdrawal from the WTO (World Trade Organization) is unlikely to get a lot of support from Democrats, so overall Congress is likely to put up more resistance regarding trade policy than it did previously,” they continued.

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Rep. Maxine Waters (D-CA) told Bloomberg Television on Wednesday that she will investigate President Trump’s ties to Deutsche Bank if she is elected chair of the House Financial Services Committee. 

Of all the investigations I’m most interested in Rep Maxine Waters’ statement that she’ll investigate Deutsche Bank for laundering russian money. Deutsche Bank also the source for a lot of Trump’s money pool despite high risk.

— Be the Child Defender (@twitsanon) November 7, 2018

President Trump’s relationship with Deutsche Bank has long been in Waters’ crosshairs – as the 80-year-old Congresswoman has made repeated calls on the German financial institution to provide documents concerning any ties that Trump might have to Russia. As the ranking minority leader on the House Financial Services Committee she has thus far only been able to sabre-rattle, however she will now be able to subpoena records connected to a President whose impeachment she has repeatedly promised constituents since his election in 2016.

Waters also told Bloomberg that she would also investigate changes made at the Consumer Financial Protection Bureau under the direction of acting director Mick Mulvaney, as well as Wells Fargo – which she has urged the Federal Reserve to come down hard on in the wake of several scandals.

The CFPB has not faced much Congressional oversight since Mick Mulvaney, President Trump’s budget director and acting director of the CFPB, took over. Trump has nominated Kathy Kraninger, who worked under Mulvaney in the Office of Management and Budget, to be the next permanent director of the Bureau. If she is confirmed, which is likely since Republicans currently have a majority in the Senate and extended their gains in Tuesday’s election, any moves she and the Bureau make will likely come under increased scrutiny of Waters’ committee. –Chicago Sun Times

Waters has other plans as well: 

But Waters does have a list of policy priorities; she told CNBC in July that if she became committee chair, she would address affordable housing and the conservatorship of the two government-sponsored enterprises — Fannie Mae (FNMA) and Freddie Mac (FMCC). She also pledged to “undo that harm” that Trump-cabinet member Mick Mulvaney has done at the Consumer Financial Protection Bureau, the agency created in the aftermath of the crisis that was tasked with policing financial services products.” data-reactid=”28″ type=”text”>But Waters does have a list of policy priorities; she told CNBC in July that if she became committee chair, she would address affordable housing and the conservatorship of the two government-sponsored enterprises — Fannie Mae and Freddie Mac. She also pledged to “undo that harm” that Trump-cabinet member Mick Mulvaney has done at the Consumer Financial Protection Bureau, the agency created in the aftermath of the crisis that was tasked with policing financial services products.

Speaking to MSNBC on Tuesday, Waters also expressed strong thoughts on banking regulation and lashed out at Republicans for using the last two years to enact revisions to the post-crisis Dodd-Frank financial regulatory framework.” data-reactid=”29″ type=”text”>Speaking to MSNBC on Tuesday, Waters also expressed strong thoughts on banking regulation and lashed out at Republicans for using the last two years to enact revisions to the post-crisis Dodd-Frank financial regulatory framework. -Yahoo!

“For everything that we have tried to do to bring about some fairness and justice for these financial services companies and etcetera, we have absolutely been fought against by Republicans,” said Waters.  

In a pre-midterm note, JPMorgan Chase predicted “There will be more oversight and subpoena with committees headed by Democrats.” 

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Authored by Kenneth Nelson via Campus Reform,

Police arrested a State University of New York professor after she got caught on camera allegedly stealing GOP signs from a New York home’s lawn.

A video allegedly showed SUNY New Paltz economics lecturer Laura Ebert stealing yard signs from a New York home supporting Republican candidates in New York during the 2018 midterm election cycle. The Rosendale Town Police Department charged Ebert with a larceny misdemeanor for the theft of the signs, according to the police report obtained by The Washington Free Beacon.

My lawn signs for #NY19
@JohnFasoNy and @marcmolinaro we’re just stolen from my front lawn 😡 pic.twitter.com/4IWbzojLIA

— 🇺🇸 Lisa McMerica🍀🇺🇸 Vote Red 🇺🇸 (@LisaMcGov) November 1, 2018

The lawn signs supported New York Republican Rep. John Faso for Congress and Marc Molinaro, the New York Republican gubernatorial candidate. 

“I did it in a moment of weakness and high emotion,” Ebert said in a statement to Campus Reform.

“I meant no personal harm, and don’t know the person whose lawn the sign was on. I have family I love that support Trump, so I was after the sign, not the person.”

“I have apologized and feel bad, but clearly the GOP is putting a big deal [of] spin on this,” she continued.

“Many signs have been taken and disfigured, which, while no excuse for my bad behavior, doesn’t warrant the death threats I have received on my email about it. Nor the smear campaign after me including notifying my supervisor.”

Campus Reform reached out to SUNY New Paltz but the school did not respond in time for publication.

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An widely-circulated study which concluded that global warming is far worse than previously thought has been called into question by a math error, reports the Daily Caller‘s Michael Bastasch. 

Princeton scientist Laure Resplandy and researchers at the Scripps Institution of Oceanography concluded in October that the Earth’s oceans have retained 60% more heat than previously thought over the last 25 years, suggesting global warming was much worse than previously believed.

The report was covered or referenced by MSM outlets worldwide, including the Washington Post, New York Times, BBC, Reuters and others. 

The Washington Post, for example, reported: “The higher-than-expected amount of heat in the oceans means more heat is being retained within Earth’s climate system each year, rather than escaping into space. In essence, more heat in the oceans signals that global warming is more advanced than scientists thought.” 

The New York Times at least hedged their reporting, claiming that the estimates, “if proven accurate, could be another indication that the global warming of the past few decades has exceeded conservative estimates and has been more closely in line with scientists’ worst-case scenarios.“

Unfortunately for the Princeton-Scripps team, it appears that their report has been proven inaccurate. 

Independent scientist Nic Lewis found the study had “apparently serious (but surely inadvertent) errors in the underlying calculations.” Lewis’ findings were quickly corroborated by another researcher. –Daily Caller

“Just a few hours of analysis and calculations, based only on published information, was sufficient to uncover apparently serious (but surely inadvertent) errors in the underlying calculations,” wrote Lewis in a blog post published on climate scientist Judith Curry’s Climate Etc. website. 

After correcting the math error, Lewis found that the paper’s rate of oceanic warming “is about average compared with the other estimates they showed, and below the average for 1993–2016.”

Lewis’s conclusion was replicated and supported by University of Colorado professor, Roger Pike, Jr., who tweeted his work. 

Lewis found the study’s authors, led by Princeton University scientist Laure Resplandy, erred in calculating the linear trend of estimated ocean warming between 1991 and 2016. Lewis has also criticized climate model predictions, which generally over-predict warming.

Resplandy and her colleagues estimated ocean heat by measuring the volume of carbon dioxide and oxygen in the atmosphere. The results: the oceans took up 60 percent more heat than previously thought. The study only sent alarm bells ringing, especially in the wake of the United Nations’ latest climate assessment. –Daily Caller

Lewis is correct that the linear trends reported by Resplandy et al are not matched by what the data indicate. See figure below which I just created based on data provided by Resplandy et al.
Mistakes happen in science, that’s no crime.
What matters more is what you do next. /END pic.twitter.com/ylFqZngbmm

— Roger Pielke Jr. (@RogerPielkeJr) November 6, 2018

PS. You can read Lewis here @curryja –> https://t.co/lOKW8s0ESD
Here is the Lewis figure I just replicated. It’s a big error at the core of paper’s findings. pic.twitter.com/ifSa0yALNu

— Roger Pielke Jr. (@RogerPielkeJr) November 6, 2018

Resplandy has yet to respond to Lewis regarding the errors her found in her math, writing on Tuesday “To date I have had no substantive response from her, despite subsequently sending a further email containing the key analysis sections from a draft of this article.” 

Lead of Princeton press release on Resplandy et al. was that IPCC has gotten things wrong & repeated by NYT, WP, E&E, USAT etc.
We’ve known peril in relying on single studies to overturn decades of assessed literature
Signature moment now for climate folkshttps://t.co/i7t6WOz28K

— Roger Pielke Jr. (@RogerPielkeJr) November 6, 2018

Similarly, niether Resplandy nor co-author Ralph Keeling responded to the Daily Caller‘s request for comment. 

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Authored by Brandon Smith via Alt-Market.com,

Over the past few weeks I received numerous requests from readers to publish my predictions on the outcome of the midterm elections, but I did not do so for a couple of reasons. First and foremost, I view the election process very differently from many people. I do not see it as legitimate in the slightest, therefore my predictions of the past have been based not on voter turnouts, polls or any other such nonsense.  Elections are molded events, framed under the false pretense that the Left/Right paradigm in politics is real. As far as the upper echelons of politics are concerned, the paradigm is completely theatrical.

To be sure, the average American does lean either “left” or “right” on the political spectrum. Such divisions are a natural part of social discourse. However, political theater is designed in most cases to drive citizens away from centrally shared principles of freedom and equal opportunity (not equal outcome) and push them to the far ends of the spectrum toward extremism and zealotry. And to be clear, there is no “good” form of zealotry.

Zealots are not self-aware, and they never subject their own positions to scrutiny. They operate on pure assumption that they are divinely correct in everything they do, and anyone who disagrees with them, even in the slightest, is an enemy that must be destroyed by any means necessary. Zealotry is the root of human atrocity. Zealots are a tidal wave of war and genocide. They are a cancer on the soul of mankind.

Certain groups of people within the establishment, namely globalists that desire total centralized control of every aspect of economy and society, prefer that the public remain as radicalized and divided as possible. For them, zealotry is an asset.

To pursue this goal, they purchase allegiance from politicians through various means, including financial favors, media favors and campaign contributions. There are very few people left in politics that are not part of “the club.” Both Democrat and Republican leaders are essentially on the same side — the globalist side. They attack each other with rhetoric, but when it comes down to actual policy and action, they are all very similar.

The outcome of elections is therefore erroneous in the long term. Their only purpose is to manipulate public psychology to a certain reactionary end game.

When I predicted the election of Donald Trump in 2016 many months before voting commenced, I did so based on which election outcome better served the interests of globalists. I concluded with the highest certainty that Donald Trump would “win” based on the same premise that drove me to predict the success of the Brexit vote in the U.K.; that premise being that the globalists would allow “populists” (conservatives) to gain an illusory foothold on political power, only to then collapse the global economy on their heads and blame them for the disaster.

At the time it was unclear whether Trump would play along with the globalist narrative of conservatives as “selfish bumbling villains.” Today, with his consistent relationships with banking elites and globalist think-tank members, it is obvious that Trump intends to play the role he has been given. Trump’s policy actions the past two years indicate that he is following a model very similar to the one Republican President Herbert Hoover used just before the crash of 1929. Trump was a perfect choice for the globalists.

So, the question I had to ask in terms of the midterm elections is, what outcome best serves globalist interests this time? The only conclusion I could come to in this instance was — it didn’t matter who wins the midterms. The globalists will get their economic crash regardless and conservatives will still be blamed.

The ultimate outcome turned out to be mixed, with Democrats taking the House and Republicans holding the Senate.  The assertion in the mainstream being that this will result in “political gridlock”.  In terms of stock markets, the reaction is not surprisingly euphoric, as it has been not long after almost every election event.  But there are many that assume this is a euphoria that will last.  This is a very short-term view of the situation that ignores economic reality.

It is certainly possible that equities will sustain a  jump on the news of a Republican win, but I see this as a very limited event, lasting perhaps one or two weeks. In the long run as December approaches, stocks and every other sector of the economy will continue accelerated declines seen in October.

Here are the facts:

New home sales, an indicator highly valued by mainstream economists, has been in decline for the past year, hitting two-year lows in September.

This has come as a surprise to many mainstream analysts because the story thus far has been that the U.S. is in advanced recovery which should continue the supposed rejuvenation of the housing market. Alternative economists will give you the real story on home sales, though.

The housing “boom” hailed in the mainstream over the past few years was a farce driven primarily by corporate behemoths like Blackstone.  Companies buying up distressed properties across the U.S. using cheap loans and bailouts through the Federal Reserve and turning them into rentals hardly constitutes a “recovery” in housing.

Regular homebuyers have also enjoyed artificially low mortgage rates for many years. But now, mortgage costs are spiking as the Fed raises interest rates, and corporate debt is becoming more expensive, making it less profitable for companies to continue vacuuming up properties.  Add to this the fact that the Fed is now dumping Mortgage Backed Securities (MBS) from its balance sheet. These are the same securities that constituted a “toxic” influence that led to the mortgage and derivatives bubble. It is hard to say exactly what the effects will be as they add to existing ARM-style mortgages and derivatives already on the market, but I suspect the result will be destabilizing.

Auto sales, another fundamental indicator used in the mainstream as a signal for economic health, is also failing recently. U.S. auto sales plunged in September from 11 percent to 25 percent depending on the company and make of vehicle. While the mainstream media argues this massive year-over-year decline was due to destructive hurricanes in 2017 creating overt demand, the truth is that the average monthly payment on new vehicles has rocketed to over $525 and interest rates rise due to the Federal Reserve.

Car sales, new and used, have thrived in recent years in most part because of artificially low rates and ARM-like loans to people who cannot afford them. Much like the mortgage bubble in 2008, the auto bubble is set to implode as car payments become too expensive for the average buyer and defaults increase.

The US budget deficit climbed to six year highs under Donald Trump’s watch in 2018 as fiscal spending skyrockets.  Conservatives hoping for budget responsibility and reduced government spending are given a rude awakening once again, as Republicans and Democrats and Trump ALL seek bigger government.  This is hardly gridlock.  In fact, there has been resounding unity in Washington for ever increasing power, and ever increasing costs.

The trade deficit, which was supposed to decline aggressively in the face of Trump’s trade war, has actually climbed to record highs with China (among other nations).  I have heard claims that the outcome of the midterms will force Trump to end the trade war because he is no longer receiving backing from the Federal Reserve or Congress.  The trade war will not stop.  It provides perfect cover for central banks as they continue to remove artificial support from the overall economy.

Perhaps the biggest factor in economic decline in the U.S. will be corporate debt, as mentioned earlier. Corporate debt has jumped to record highs not seen since 2008, with debt-to-cash levels in 2017 hitting lows of 12 percent. Meaning, on average for every $1 of cash a company has in reserve it owes $8 in debt.

How is all this debt being generated? It’s all about stock buybacks. In 2018, U.S. corporations increased spending on stock buybacks by 48%, while only increasing spending on development by 19%. Meaning, corporations are spending far more capital, and borrowing far more money, just to keep their stock prices artificially propped up than they are spending money to invest in future growth.

For almost a decade stock markets have been dependent on two pillars: near zero interest rates and asset purchases by the Fed. Stock buybacks are reliant on low rates and the corporate ability to borrow essentially free money, which they then cycle into equities to buy up shares, reducing the amount of existing shares on the market and thereby increasing the value of the remaining shares through a form of legal manipulation.

But as the Fed raises rates and stops acting as the buyer of last resort, corporate borrowing becomes more expensive and buybacks will decline. In fact, the last half of 2018 shows a marked drop in announced buybacks, as the apparent peak in July fades.  As December approaches, the Fed is set to match interest rates with their official inflation rate, or the “neutral rate”.  This is something that has not been done for decades.

I believe stock buybacks will falter at this time, as the cost of the exorbitant debt needed to continue propping up stocks will become too high.

In 2016, globalists needed a “conservative” president to sit in the Oval Office as the Federal Reserve pulled the plug on artificial economic life support by raising interest rates into the greatest corporate debt crisis since 2008. At this point, that program seems to be in full swing.

The midterms are now over, but it is important to understand that where economic consequences are concerned, the result would have been the same no matter who came out on top. It makes sense for the globalists to desire a dominant Republican party, for when they crash markets the blame would fall entirely on the heads of conservatives. On the other hand, it also makes sense for globalists to introduce a Democratic takeover of Congress, for they can continue to push citizens to further political extremes as the Left blames the Right for the financial crisis while the Right blames the Left for political interference.

In the meantime, the banking elites can simply blame the extreme political divide, wait until the crash runs its course and then sweep in after the dust settles to admonish the “capitalist structure,” barbaric nationalism, populism, etc. They will shake their fingers at all of us as if we should be ashamed and then offer their own solution to the disaster, which will surely include even more centralization and more power for the banking class.

The Fed will continue to raise rates and cut assets.  The trade war will escalate. The housing market will continue to falter, auto markets will implode, and corporate debt will become a millstone on the neck of stock markets.

Economic function and repair are far beyond the scope of any political body to fix when the dysfunction reaches the point we are at today. To believe otherwise is foolhardy.  To believe that the political elites actually want to fix the economy is even more foolhardy. The answer is not replacing one set of political puppets with another set of political puppets, but for regular people to begin localizing their own production and trade — to decouple from dependency on the existing system and start their own system. Only through this, and the removal of the globalist tumor from its position of power and influence, will anything ever change for the better.

*  *  *

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