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The Great Depression was the most severe economic depression ever experienced by the Western world.

As VisualCapitalist notes, it was during this troubled time that the world’s most famous case of deflation also happened. The resulting aftermath was so bad that economic policy since has been chiefly designed to prevent deflation at all costs.

 

 

Setting the Stage

The transition from wartime to peacetime created a bumpy economic road after World War I.

Growth has hard to come by in the first years after the war, and by 1920-21 the economy fell into a brief deflationary depression. Prices dropped -18%, and unemployment jumped up to 11.7% in 1921.

However, the troubles wouldn’t last. During the “Roaring Twenties”, economic growth picked up as the new technologies like the automobile, household appliances, and other mass-produced products led to a vibrant consumer culture and growth in the economy.

More than half of the automobiles in the nation were sold on credit by the end of the 1920s. Consumer debt more than doubled during the decade.

While GDP growth during this period was extremely strong, the Roaring Twenties also had a dark side. Income inequality during this era was the highest in American history. By 1929, the income of the top 1% had increased by 75%. Income for the rest of people (99%) increased by only 9%.

The Roaring Twenties ended with a bang. On Black Thursday (Oct 24, 1929), the Dow Jones Industrial Average plunged 11% at the open in very heavy volume, precipitating the Wall Street crash of 1929 and the subsequent Great Depression of the 1930s.

The Cause of the Great Depression

Economists continue to debate to this day on the cause of the Great Depression. Here’s perspectives from three different economic schools:

Keynesian:

John Maynard Keynes saw the causes of the Great Depression hinge upon a lack of aggregate demand. This later became the subject of his most influential work, The General Theory of Employment, Interest, and Money, which was published in 1936.

Keynes argued that the solution was to stimulate the economy through some combination of two approaches:
1. A reduction in interest rates (monetary policy), and
2. Government investment in infrastructure (fiscal policy).

“The difficulty lies not so much in developing new ideas as in escaping from old ones.” – John Maynard Keynes

Monetarist:

Monetarists such as Milton Friedman viewed the cause of the Great Depression as a fall in the money supply.

Friedman and Schwartz argue that people wanted to hold more money than the Federal Reserve was supplying. As a result, people hoarded money by consuming less. This caused a contraction in employment and production since prices were not flexible enough to immediately fall.

“The Great Depression, like most other periods of severe unemployment, was produced by government mismanagement rather than by any inherent instability of the private economy.” ? Milton Friedman

Austrian:

Austrian economists argue that the Great Depression was the inevitable outcome of the monetary policies of the Federal Reserve during the 1920s.

In their opinion, the central bank’s policy was an “easy credit policy” which led to an unsustainable credit-driven boom.

“Any increase in the relative size of government in the economy, therefore, shifts the societal consumption-investment ratio in favor of consumption, and prolongs the depression.” – Murray Rothbard

The Great Depression and Deflation

Between 1929 and 1932, worldwide GDP fell by an estimated 15%.

Deflation hit.

Personal income, tax revenue, profits and prices plunged. International trade fell by more than 50%. Unemployment in the U.S. rose to 25% and in some countries rose as high as 33%.

These statistics were only the tip of the iceberg. Learn about the full effects, the stories, and the recovery from the Great Depression in Part 2.

The Money Project aims to use intuitive visualizations to explore ideas around the very concept of money itself. Founded in 2015 by Visual Capitalist and Texas Precious Metals, the Money Project will look at the evolving nature of money, and will try to answer the difficult questions that prevent us from truly understanding the role that money plays in finance, investments, and accumulating wealth.

via Zero Hedge http://ift.tt/1TJOHs5 Tyler Durden

Submitted by Douglas Murray via The Gatestone Institute,

It was only a few weeks ago that Facebook was forced to back down when caught permitting anti-Israel postings, but censoring equivalent anti-Palestinian postings.

Now one of the most sinister stories of the past year was hardly even reported. In September, German Chancellor Angela Merkel met Mark Zuckerberg of Facebook at a UN development summit in New York. As they sat down, Chancellor Merkel's microphone, still on, recorded Merkel asking Zuckerberg what could be done to stop anti-immigration postings being written on Facebook. She asked if it was something he was working on, and he assured her it was.

At the time, perhaps the most revealing aspect of this exchange was that the German Chancellor — at the very moment that her country was going through one of the most significant events in its post-war history — should have been spending any time worrying about how to stop public dislike of her policies being vented on social media. But now it appears that the discussion yielded consequential results.

Last month, Facebook launched what it called an "Initiative for civil courage online," the aim of which, it claims, is to remove "hate speech" from Facebook — specifically by removing comments that "promote xenophobia." Facebook is working with a unit of the publisher Bertelsmann, which aims to identify and then erase "racist" posts from the site. The work is intended particularly to focus on Facebook users in Germany. At the launch of the new initiative, Facebook's chief operating officer, Sheryl Sandberg, explained that, "Hate speech has no place in our society — not even on the internet." She went to say that, "Facebook is not a place for the dissemination of hate speech or incitement to violence." Of course, Facebook can do what it likes on its own website. What is troubling is what this organization of effort and muddled thinking reveals about what is going on in Europe.

The mass movement of millions of people — from across Africa, the Middle East and further afield — into Europe has happened in record time and is a huge event in its history. As events in Paris, Cologne and Sweden have shown, it is also by no means a series of events only with positive connotations.

As well as being fearful of the security implications of allowing in millions of people whose identities, beliefs and intentions are unknown and — in such large numbers — unknowable, many Europeans are deeply concerned that this movement heralds an irreversible alteration in the fabric of their society. Many Europeans do not want to become a melting pot for the Middle East and Africa, but want to retain something of their own identities and traditions. Apparently, it is not just a minority who feel concern about this. Poll after poll shows a significant majority of the public in each and every European country opposed to immigration at anything like the current rate.

The sinister thing about what Facebook is doing is that it is now removing speech that presumably almost everybody might consider racist — along with speech that only someone at Facebook decides is "racist."

And it just so happens to turn out that, lo and behold, this idea of "racist" speech appears to include anything critical of the EU's current catastrophic immigration policy.

By deciding that "xenophobic" comment in reaction to the crisis is also "racist," Facebook has made the view of the majority of the European people (who, it must be stressed, are opposed to Chancellor Merkel's policies) into "racist" views, and so is condemning the majority of Europeans as "racist." This is a policy that will do its part in pushing Europe into a disastrous future.

Because even if some of the speech Facebook is so scared of is in some way "xenophobic," there are deep questions as to why such speech should be banned. In lieu of violence, speech is one of the best ways for people to vent their feelings and frustrations. Remove the right to speak about your frustrations, and only violence is left. Weimar Germany — to give just one example — was replete with hate-speech laws intended to limit speech the state did not like. These laws did nothing whatsoever to limit the rise of extremism; it only made martyrs out of those it pursued, and persuaded an even larger number of people that the time for talking was over.

The sinister reality of a society in which the expression of majority opinion is being turned into a crime has already been seen across Europe. Just last week, reports from the Netherlands told of Dutch citizens being visited by the police and warned about posting anti-mass-immigration sentiments on Twitter and other social media.

In this toxic mix, Facebook has now — knowingly or unknowingly — played its part. The lid is being put on the pressure cooker at precisely the moment that the heat is being turned up. A true "initiative for civil courage" would explain to both Merkel and Zuckerberg that their policy can have only one possible result.

via Zero Hedge http://ift.tt/1S6eUSi Tyler Durden

Five years ago, in July of 2011, the house at 4182 West 8th Avenue in Vancouver in sold for $4.6 million. It now rests vacant, abandoned and rotting.

 

Six years ago this $6.2-million Point Grey home boasted unobstructed vistas of the North Shore mountains, English Bay and Vancouver’s skyline. A park sits across a quiet street. The home represents everything a family could aspire to.

As the National Post reports, it too is vacant and rotting. Windows have been left open and debris sits in the yard. Like a symbol of futility, a June 2015 City of Vancouver “untidy-premises” order remains pinned to the door.

 

The two formerly multi-million mansions devolving to derelict status is not the only thing they share in common: a second uniting feature is what they were meant to become once they were purchased half a decade ago – a store of wealth to Chinese investors eager to park “hot money” outside of their native country, and bid up any Canadian real estate they could get their hands on.

And then the investors disappeared.

The Point Grey property stopped functioning as a home and became a storage of wealth six years ago, according to property documents and a neighbour’s account.

It was well-cared for in 2010 when it was sold to an investor. Since then it has been flipped through a property transfer in a Beijing law office and left unoccupied.

Current owners of the other vacant property residing on the 4100-block 8th Avenue West home are Huai Can Ren and Xue Pei Sun. They bought the home from Wei Min Zhang in July 2011 for $4.6 million. 

The couple’s occupations were both listed as “business person.” Wei Min Zhang had bought the home in July 2010 for $3.35 million.

Since the purchase, the current “owners” have not been seen.

City hall is currently trying to estimate how many Vancouver homes are vacant. And these online communities are anecdotally gathering photo evidence and coming to conclusions that offshore investment is to blame.

In other words, the “Chinese.”

“That is what is driving everything,” said Caroline Adderson, whose website, Vancouver Vanishes, has over 8,000 followers. “It is sickening on all levels.”

City of Vancouver spokesman Tobin Postma said a 2015 order to clean up the property was “remedied.” However the order remains pinned to the property and messy conditions appear to continue, according to a reporter’s observations Wednesday.

 

Postma said city departments respond to safety and mess complaints at vacant homes and issue cleanup orders in warranted cases.

 

If owners don’t respond, the city will clean up and issue a bill. In 2014, there were 213 actions taken against 85 properties, Postma said.

Huai Can Ren and Xue Pei Sun are also owners of a $3.57-million Arbutus Ridge home in the 2300-block 21st Avenue West, records show.

The home also appears to be unoccupied: on Wednesday, a Postmedia reporter found that the windows were shuttered, a phone book was left on the doorstep and a mailbox was stuffed with letters. No one answered the door and the home’s external condition seemed degraded.

Huai Can Ren, then listed as “businessman,” and Xue Pei Sun, as “homemaker,” bought the home in 2006 for $1.75 million from transferees Zhaohong Su and Xin Li.

In transfer documents, Xin Li was listed as lawyer for Su, who had bought the home in 2005 for $778,000.

Needless to say the locals are furious with this increasing incidence of derelict houses, which destroy neighborhood character. They are also confused how this is allowed to go on.

And in case it is unclear what “this”, what is happening is quite simple:

1. Chinese investors smuggled out millions in embezzled cash, hot money or perfectly legal funds, bypassing the $50,000/year limit in legal capital outflows.
2. They make “all cash” purchases, usually sight unseen, using third parties intermediaries to preserve their anonymity, or directly in perso, in cities like Vancouver, New York, London or San Francisco.
3. The house becomes a new “Swiss bank account”, providing the promise of an anonymous store of value and retaining the cash equivalent value of the original capital outflow.
4. Then the owners disappear, never to be heard from or seen again.

As more Chinese scramble to engage and repeat if only the first three steps, the price of local housing, which is merely a store of value to price indiscriminate foreign buyers, soars while it makes home purchases for the domestic population prohibitively expensive and virtually impossible.

The end result, in the case of Vancouver, is this:

 

We, and the local residents of Vancouver wonder, “how much longer will such money laundering fraud be permitted?“

via Zero Hedge http://ift.tt/1Q0oAO4 Tyler Durden

Submitted by Michael Snyder via The Economic Collapse blog,

As bad as the month of January was for the global economy, the truth is that the rest of 2016 promises to be much worse.  Layoffs are increasing at a pace that we haven’t seen since the last recession, major retailers are shutting down hundreds of locations, corporate profit margins are plunging, global trade is slowing down dramatically, and several major European banks are in the process of completely imploding.  I am about to share some numbers with you that are truly eye-popping.  Each one by itself would be reason for concern, but when you put all of the pieces together it creates a picture that is hard to deny. 

The global economy is in crisis, and this is going to have very serious implications for the financial markets moving forward.  U.S. stocks just had their worst January in seven years, and if I am right much worse is still yet to come this year.  The following are 22 signs that the global economic turmoil that we have seen so far in 2016 is just the beginning…

1. The number of job cuts in the United States skyrocketed 218 percent during the month of January according to Challenger, Gray & Christmas.

2. The Baltic Dry Index just hit yet another brand new all-time record low.  As I write this article, it is sitting at 303.

3. U.S. factory orders have now dropped for 14 months in a row.

4. In the U.S., the Restaurant Performance Index just fell to the lowest level that we have seen since 2008.

5. In January, orders for class 8 trucks (the big trucks that you see shipping stuff around the country on our highways) declined a whopping 48 percent from a year ago.

6. Rail traffic is also slowing down substantially.  In Colorado, there are hundreds of train engines that are just sitting on the tracks with nothing to do.

7. Corporate profit margins peaked during the third quarter of 2014 and have been declining steadily since then.  This usually happens when we are heading into a recession.

8. A series of extremely disappointing corporate quarterly reports is sending stock after stock plummeting.  Here is a summary from Zero Hedge of a few examples that we have just witnessed…

• SHARES OF LIONS GATE ENTERTAINMENT FALL 5 PCT IN EXTENDED TRADE AFTER QUARTERLY RESULTS – RTRS
• TABLEAU SOFTWARE SHARES TUMBLE 40 PCT IN AFTER HOURS TRADING – RTRS
• YRC WORLDWIDE SHARES DOWN 16.4 PCT AFTER THE BALL FOLLOWING RESULTS – RTRS
• SPLUNK INC SHARES DOWN 7.6 PCT IN AFTER HOURS TRADING – RTRS
• LINKEDIN SHARES EXTEND DECLINE, DOWN 24 PCT AFTER RESULTS, GUIDANCE – RTRS
• HANESBRANDS SHARES FURTHER ADD TO LOSSES IN EXTENDED TRADE, LAST DOWN 14.9 PCT – RTRS
• OUTERWALL SHARES FALL 11 PCT IN EXTENDED TRADING AFTER QUARTERLY RESULTS – RTRS
• GENWORTH SHARES DOWN 16.5 PCT AFTER THE BELL FOLLOWING RESULTS, RESTRUCTURING PLAN

9. Junk bonds continue to crash on Wall Street.  On Monday, JNK was down to 32.60 and HYG was down to 77.99.

10. On Thursday, a major British news source publicly named five large European banks that are considered to be in very serious danger…

Deutsche Bank, Credit Suisse, Santander, Barclays and RBS are among the stocks that are falling sharply sending shockwaves through the financial world, according to former hedge fund manager and ex Goldman Sachs employee Raoul Pal.

11. Deutsche Bank is the biggest bank in Germany and it has more exposure to derivatives than any other bank in the world.  Unfortunately, Deutsche Bank credit default swaps are now telling us that there is deep turmoil at the bank and that a complete implosion may be imminent.

12. Last week, we learned that Deutsche Bank had lost a staggering 6.8 billion euros in 2015.  If you will recall, I warned about massive problems at Deutsche Bank all the way back in September.  The most important bank in Germany is exceedingly troubled, and it could end up being for the EU what Lehman Brothers was for the United States.

13. Credit Suisse just announced that it will be eliminating 4,000 jobs.

14. Royal Dutch Shell has announced that it is going to be eliminating 10,000 jobs.

15. Caterpillar has announced that it will be closing 5 plants and getting rid of 670 workers.

16. Yahoo has announced that it is going to be getting rid of 15 percent of its total workforce.

17. Johnson & Johnson has announced that it is slashing its workforce by 3,000 jobs.

18. Sprint just laid off 8 percent of its workforce and GoPro is letting go 7 percent of its workers.

19. All over America, retail stores are shutting down at a staggering pace.  The following list comes from one of my previous articles…

-Wal-Mart is closing 269 stores, including 154 inside the United States.

-K-Mart is closing down more than two dozen stores over the next several months.

-J.C. Penney will be permanently shutting down 47 more stores after closing a total of 40 stores in 2015.

-Macy’s has decided that it needs to shutter 36 stores and lay off approximately 2,500 employees.

-The Gap is in the process of closing 175 stores in North America.

-Aeropostale is in the process of closing 84 stores all across America.

-Finish Line has announced that 150 stores will be shutting down over the next few years.

-Sears has shut down about 600 stores over the past year or so, but sales at the stores that remain open continue to fall precipitously.

20. According to the New York Times, the Chinese economy is facing a mountain of bad loans that “could exceed $5 trillion“.

21. Japan has implemented a negative interest rate program in a desperate attempt to try to get banks to make more loans.

22. The global economy desperately needs the price of oil to go back up, but Morgan Stanley says that we will not see $80 oil again until 2018.

It is not difficult to see where the numbers are trending.

Last week, I told my wife that I thought that Marco Rubio was going to do better than expected in Iowa.

How did I come to that conclusion?

It was simply based on how his poll numbers were trending.

And when you look at where global economic numbers are trending, they tell us that 2016 is going to be a year that is going to get progressively worse as it goes along.

So many of the exact same things that we saw happen in 2008 are happening again right now, and you would have to be blind not to see it.

Hopefully I am wrong about what is coming in our immediate future, because millions upon millions of Americans are not prepared for what is ahead, and most of them are going to get absolutely blindsided by the coming crisis.

via Zero Hedge http://ift.tt/1mj0nV9 Tyler Durden

Last August, in a hilarious example of bad timing, Japan restarted its first nuclear reactor since the Chernobyl redux at Fukushima just as a nearby volcano was set to erupt.

Sakurajima, one of the country’s most active volcanos, erupts almost constantly, but experts warned the next eruption could be “the big one”, so to speak.

At the time, The Japan Meteorological Agency raised the warning level from 3 to 4.

4 means “prepare to evacuate.”

“The possibility for a large-scale eruption has become extremely high for Sakurajima,” the Agency said. As for what fate would befall someone who failed to heed an evacuation warning, well let’s just say that molten stones “could rain down on areas near the mountain’s base.”

As we noted, the real problem is Sakurajima’s location – it’s just 50 kilometers from the Sendai nuclear power plant.

On Friday Sakurajima erupted at 7 p.m. local time. 

“The Meteorological Agency banned entry to the area, expanding an existing no-go zone around the crater to a 2-kilometer (1.2-mile) radius,” AP reports, adding that “Friday’s eruption, while dramatic, was average compared to Sakurajima’s past eruptions” including the last incident in September.

Here are the visuals.

?????????????? http://pic.twitter.com/DBkQX9uS1T

— ???????? (@nhk_seikatsu) February 5, 2016

For now no injuries have been reported and there’s apparently no threat to Sendai which RT reminds us is only “built to withstand a tsunami of 15 meters, well below 2011’s peak tsunami height of 40 meters.”

Kyoto University volcanologist Kazuhiro Ishihara says everything should be fine, but “of course we must keep monitoring the volcanic activity.”

Yes, “of course” we should. Because as we documented last year, Sendai’s operators and local authorities have no comprehensive plan to evacuate residents in the event of a meltdown. We close with a quote from Yoshitaka Mukohara, a representative of a group who opposed the Sendai restart:

“There are schools and hospitals near the plant, but no one has told us how children and the elderly would be evacuated.

 

“Naturally there will be gridlock caused by the sheer number of vehicles, landslides, and damaged roads and bridges.”

via Zero Hedge http://ift.tt/1odXYNe Tyler Durden

Submitted by Pam Martens and Russ Martens via WallStreetOnParade.com,

Last night ABC began its two-part series on the Bernie Madoff fraud. Viewers will be reminded about how investment expert, Harry Markopolos, wrote detailed letters to the SEC for years, raising red flags that Bernie Madoff was running a Ponzi scheme – only to be ignored by the SEC as Madoff fleeced more and more victims out of their life savings.

Today, there are two equally erudite scribes who have jointly been flooding the SEC with explosive evidence that some Exchange Traded Funds (ETFs) that trade on U.S. stock exchanges and are sold to a gullible public, may be little more than toxic waste dumped there by Wall Street firms eager to rid themselves of illiquid securities.

The two anonymous authors have one thing going for them that Markopolos did not. They are represented by a former SEC attorney, Peter Chepucavage, who was also previously a managing director in charge of Nomura Securities’ legal, compliance and audit functions. We spoke to Chepucavage by phone yesterday.  He confirmed that two of his clients authored the series of letters. Chepucavage said further that these clients have significant experience in trading ETFs and data collection involving ETFs.

Throughout their letters, the whistleblowers use the phrase ETP, for Exchange Traded Product, which includes both ETFs and ETNs, Exchange Traded Notes. In a letter that was logged in at the SEC on January 13, 2016, the whistleblowers compared some of these investments to the subprime mortgage products that fueled the 2008 crash, noting that regulators and economists were mostly blind to that escalating danger as well. The authors wrote:

“The vast majority of ETPs have very low levels of assets under management and illiquid trading volumes. Many of these have illiquid underlying assets and a large group of ETPs are based on derivatives that are not backed by physical assets such as stocks, bonds or commodities, but rather swaps or other types of complex contracts. Many of these products may have been designed to take what were originally illiquid assets from the books of operators, bundle them into an ETP to make them appear liquid and sell them off to unsuspecting investors. The data suggests this is evidenced by ETPs that are formed, have enough volume in the early stage of their existence to sell shares, but then barely trade again while still remaining listed for sale. This is reminiscent of the mortgage-backed securities bundles sold previous to the last financial crisis in 2008.”

The authors also note in this same letter that they have been presenting their evidence of “significant red flags” and “fundamental flaws” to the SEC since March 2015 and that the industry has not disputed the evidence. However, disclosures of these risks in the product offerings has not been forthcoming either.

To underscore to the regulators just how serious they are about cleaning up the ETP market, in a cover letter dated March 24, 2015, Chepucavage copied every member of the Financial Stability Oversight Council (F-SOC), the body created under the Dodd-Frank financial reform legislation to monitor financial stability in the U.S., including Federal Reserve Chair Janet Yellen, U.S. Treasury Secretary Jack Lew, and SEC Chair Mary Jo White.

The detailed March 24, 2015 letter from the whistleblowers pointed out that the very act of allowing some of these illiquid product offerings to be listed on U.S. stock exchanges is lending an air of legitimacy to them since stock exchanges in the U.S. are also mandated to police their own markets. The whistleblowers wrote:

“Whether it is realized or not, authorizations to trade exchange traded products by exchanges/self-regulatory organizations (‘SROs’) suggests legitimacy of the product to investors, which is evidenced by the growing interest in ETFs (supplemented through the massive ETF advertising campaigns to investors…)”

Another letter raised the issue that Wall Street On Parade wrote about on December 15, 2015 — the role of “Authorized Participants,” which are mainly the big Wall Street banks.

The whistleblowers noted:

“The market trading discussed herein… is being executed between investors and counterparties mostly consisting of Authorized Participants, market makers or clearing firms (which may be the same firms), which in many cases is not causing a net creation of shares (purchasing underlying assets) for certain important ETFs.  In some ETPs, there is a conflict of interest between the investor and the contra parties in the secondary market.

“Anyone that has been critical of ETPs has been immediately attacked by the industry, without any factual data from the industry to support their positions. The strategy has simply been ‘attack the messenger,’ which does not address the underlying problems within ETPs.”

The most recent letter from the whistleblowers to the SEC came just nine days ago in advance of the SEC holding a February 2 meeting of its Equity Market Structure Advisory Committee to discuss the bizarre collapse in market prices in the opening minutes of stock market trading on August 24, 2015. In their latest letter, the whistleblowers detailed the role of Exchange Traded Products on that day, writing:

“Of the 1,278 individual circuit breaker trading halts in U.S. traded securities on August 24th, 83% were ETPs.  This equated to the trading in 327 different ETPs being halted, with most of them being halted more than once.

“The halted ETPs were across various sectors and had different investment objectives.  For example, there were ETPs halted that were based on broad indexes, financials, consumer staples, health care, small capitalization, large capitalization (including the S&P 500 Index), currencies and U.S. Treasury bonds. In addition to ETPs based on equities, some of the ETPs were inverse and/or leveraged, which include other derivative instruments as underlying holdings.

“This is not the first time many of these same ETPs have experienced problems.  During the May 2010 Flash Crash there were 227 ETPs that had trades busted when the prices fluctuated greater than 60% (many collapsed to virtual zero).  On August 24th, there were 81 of these same ETPs that triggered circuit breakers.

“The SPDR S&P 500 ETF (Symbol: SPY) and its sister ETF, the iShares S&P 500 ETF (Symbol: IVV), both tracking the same blue chip companies, deviated from each other. Trading in the IVV triggered two circuit breakers, while the SPY tracked the underlying S&P 500 Index from the opening bell.  At the lowest, the SPY priced the S&P 500 Index at 1,829 and the IVV priced the same index at 1,480; a 349 point difference, which would have resulted in an approximate additional loss to all markets of $3.2 trillion based on the IVV’s price.

“This is similar to the 2010 Flash Crash, when the IVV became unhinged from the S&P 500 Index and the SPY, causing IVV trades to be busted, while the SPY traded without significant disruption.”

These two anonymous whistleblowers are not the only individuals that are calling attention to the threat to the markets posed by ETFs. While the whistleblowers are providing troves of statistical data and academic reasoning to the SEC, the hedge fund billionaire, Carl Icahn, appeared on CNBC last summer and compared what is happening in the junk bond ETF market to a party bus full of drinking revelers who are about to go over a cliff.

The Office of Financial Research (OFR), a unit of the U.S. Treasury which was created under the Dodd-Frank financial reform legislation to provide research to F-SOC on emerging risks in financial markets, included a special section on looming dangers in the ETF market in its 2015 Financial Stability Report. The section was titled: “The Potential Role of ETFs in Generating and Propagating Liquidity Stress.” The report raised an additional troubling aspect in regard to how little regulators actually know about what is going on behind the scenes of the ETF structure. The report notes the following:

“The high concentration of ETF market-making activity reinforces this risk; the top three dealers account for 50 percent of reported trading volume…We note a paucity of reliable data regarding ETF market-making activity, which prevents regulators from fully  identifying potential vulnerabilities in this sector. At present, we rely on self-reported statistics that cover approximately half of all ETF trades and do not include ETF liquidity providers other than registered market makers. We point out that market maker concentration and identities of the most active market makers may shift across funds. Also, ETF trading outside exchanges is difficult to track and little data about this segment are available.”

The report goes on to highlight other breathtaking concerns:

“Some of the larger market makers in the ETF market also appear to gain access to liquidity by placing ETF shares as collateral in the repo market. This finding is based on the Securities and Exchange Commission’s (SEC’s) Form N-MFP data on money market fund portfolio holdings. (Incomplete collateral information limits our visibility on the financing of ETF shares in relation to other types of cash investors.) Consequently, a disruption in the dealer funding markets could affect a market maker’s ability to finance its inventory in ETF shares and decrease the amount of liquidity it provides to support ETF trading. In May 2015, the SEC released a proposal to collect more granular data from investment companies on their repo market activity, as well as ETF trading activity. This information may provide better visibility into the use of ETF shares as collateral in repo markets.”

The ETF market has now grown to $2.9 trillion, according to PwC. Should the SEC still be fumbling around in the dark? This time around, it’s going to be very hard for the SEC to say it had no way to anticipate what was coming.

via Zero Hedge http://ift.tt/1VWKYWX Tyler Durden

Just like the global panic that gripped the world in October 2014 when the Ebola virus had spread from western Africa to many nations around the globe, including several isolated cases in the US, so a year and a half later, the world is urgently scrambling to unleash a sense of panic surrounding the Zika virus which, just like Ebola, came out of nowhere and is fast becoming the latest scapegoat for collapsing global commerce this year’s invisible bogeyman.

Here are some of the latest developments.

At Least 54 People Infected in the U.S.

There are at least 54 people infected with the Zika virus in the U.S. In all except one case, the infection was acquired while out of the country, according to health officials. In one case in Dallas, Texas, the virus is believed to have been transmitted through sexual contact from an infected traveler to a partner.

 

Florida has the highest number of cases in the U.S., with 12 people infected. Florida Gov. Rick Scott has declared a state of emergency in five counties and ordered thousands of tests that will help identify the disease.

Use a Condom to Avoid Zika, CDC Tells Travelers

According to the Centers for Disease Control, men who have traveled to Zika-affected zones should use a condom if they want to be absolutely sure they don’t infect sex partners, federal health officials advised Friday.

 

And men with a pregnant sex partner who have been to Zika-affected zones should just use a condom or abstain from sex until the baby is born, the Centers for Disease Control and Prevention said.

 

“Our priority here is to prevent a pregnant woman from becoming infected with Zika,” CDC chief Dr. Tom Frieden told reporters. “The bottom line for most people in the U.S. is that pregnant women should postpone travel to Zika-affected areas. Our new guidance is that pregnant women should use condoms during sex or abstain if their partner has traveled to an area where Zika has been spreading.”

U.K. to Spray Planes on Routes From Zika-Affected Countries

The U.K. is to order airlines flying from countries affected by the Zika virus, which has been linked with birth defects, to spray insecticide inside plane cabins. As currently happens on flights leaving countries affected by malaria, attendants will use the spray with the aim of killing any mosquitoes that might have joined the flight.

 

“I want to reassure people that the risk to the U.K. population is extremely low,” Public Health Minister Jane Ellison said in an e-mailed statement Friday. “We advise people traveling to affected areas to reduce the risk of themselves being bitten by wearing mosquito repellent, long sleeves and trousers. Pregnant women should consider avoiding travel to countries with the Zika virus.”

Brazil reports Zika infection from blood transfusions

Brazilian health officials have confirmed two cases of transmission of Zika through transfusions of blood from donors who had been infected with the mosquito-borne virus that is spreading rapidly through the Americas. Marcelo Addas Carvalho, director of the Blood Center at the Sao Paulo state University of Campinas, said genetic testing confirmed that a man who received a blood transfusion using blood from a donor with Zika in March 2015 became infected with the virus, although the patient did not develop symptoms.

 

Earlier, the health department of Campinas, an industrial city near Sao Paulo, said a man with gunshot wounds became infected with Zika after multiple blood transfusions in April 2015 that included blood donated by an infected person.

World Health Organization Seeks $25 Million For Six-Month Fight Against Zika

The World Health Organization will seek $25 million for a six-month program to fight the Zika virus linked to birth defects, including studies on whether it is spread by sex or by blood transfusion, a senior WHO official told Reuters on Friday.

New Zika Virus Cases Include Pregnant Woman, Man With Paralysis Syndrome

In Puerto Rico, a pregnant woman in her first trimester was diagnosed with the disease, health officials said. In addition, a man has also been diagnosed with Zika and has developed a rare paralysis syndrome sometimes associated with viral or bacterial infection.

 

Called Guillain-Barre syndrome, it is an immunological reaction that has been associated with influenza, among other illnesses. At least 22 people who have been reported to have been infected with the Zika virus in Puerto Rico, health officials said.

Puerto Rico Declares State of Emergency

Puerto Rico has declared a state of emergency due to the ongoing Zika virus outbreak. The U.S. territory has at least 22 people who have been reported to have been infected with the Zika virus, health officials said. 

 

The State Emergency and Disaster Administration is creating a task force for both federal and state officials to deal with the crisis. Additionally, a price freeze has been ordered for products needed to prevent the disease, according to government officials.

And so on.

But the highlight of the panic push comes from the outbreak epicenter Brazil, where the website of the central bank has not only three flying “mosquitos” but a solemn warning to eradicate the Zika plague.

Guess who will be blamed in a few months when global trade, commerce, and growth – not to mention stock markets – all tumble.

via Zero Hedge http://ift.tt/1L484VK Tyler Durden