Bloomberg reports:

The amount of debt globally has soared more than 40 percent to $100 trillion since the first signs of the financial crisis as governments borrowed to pull their economies out of recession and companies took advantage of record low interest rates, according to the Bank for International Settlements.

Has all that money gone to stimulate the economy?

Nope …

Virtually none of it has.  Instead, governments chose big banks over their own people.  The huge amount of debt was racked up to bail out the big banks.

Central banks have been engaged in the the “greatest backdoor bailout of all time.”

And yet – as Bloomberg notes – everyone else gets austerity:

Concerned that high debt loads would cause international investors to avoid their markets, many nations resorted to austerity measures of reduced spending and increased taxes, reining in their economies in the process as they tried to restore the fiscal order they abandoned to fight the worldwide recession.

In essence, the elite financial players are manipulating the game so that they get the stimulus … and the little guy gets the austerity.

Indeed, the IMF is recommending “financial repression” of the average person, to plug the giant debt holes created by the bank bailouts.

And – whether or not you like Keynesian stimulus (most ZH readers don't!) – you should know that governments never really engaged in meaningful stimulus.

But didn’t we have to do this to save the economy after Lehman crashed?

Nope … top economists say we should instead of done what Iceland did:  let the big banks go bust, and use resources instead to help the people.

Proof can be found in the fact that throwing money at the big banks has led to a  “jobless recovery” – a permanent destruction of jobs – which is a redistribution of wealth from the little guy to the big boys. (And see this.)

Indeed, everything the government has been doing since 2008 has made unemployment much worse. And  here and here.

via Zero Hedge http://ift.tt/NSFqQp George Washington

Submitted by Howard Kunstler of Kunstler.com,

And so it’s back to the Kardashians for the US of ADD. As of Sunday The New York Times kicked Ukraine off its front page, a sure sign that the establishment (let’s revive that useful word) is sensitive to the growing ridicule over its claims of national interest in that floundering, bedraggled crypto-nation. The Kardashians sound enough like one of the central Asian ethnic groups battling over the Crimea lo these many centuries — Circassians, Meskhetian Turkmen, Tatars, Karachay-Cherkessians — so the sore-beset American public must be content that they’re getting the news-of-the-world. Perhaps one of those groups was once led by a Great Kanye.

Secretary of State John Kerry has shut his pie-hole, too, for the moment, as it becomes more obvious that Ukraine happens to be Russia’s headache (and neighbor). The playbook of great nations is going obsolete in this new era of great nations having, by necessity, to become smaller broken-up nations. It could easily happen in the USA too as our grandiose Deep State descends further into incompetence, irrelevance, buffoonery, and practical bankruptcy.

Theories abound about what drives this crisis and all the credible stories revolve around the question of natural gas. I go a little further, actually, and say that the specter of declining energy sources worldwide is behind this particular eruption of disorder in one sad corner of the globe and that we’re sure to see more symptoms of that same basic problem in one country after another from here on, moving from the political margins to the centers. The world is out of cheap oil and gas and, at the same time, out of capital to produce the non-cheap oil and gas. So what’s going on is a scramble between desperate producers and populations worried about shivering in the dark. The Ukraine is just a threadbare carpet-runner between them.

Contributing to our own country’s excessive vanity in the arena of nations is the mistaken belief that we have so much shale gas of our own that we barely know what to do with it. This is certainly the view, for instance, of Speaker of the House John Boehner, who complained last week about bureaucratic barriers to the building of new natural gas export terminals, with the idea that we could easily take over the European gas market from Russia. Boehner is out of his mind. Does he not know that the early big American shale gas plays (Barnett in Texas, Haynesville in Louisiana, Fayettville in Arkansas) are already winding down after just ten years of production? That’s on top of the growing austerity in available capital for the so-far-unprofitable shale gas industry. That’s on top of the scarcity of capital for building new liquid natural gas terminals and ditto the fleet of specialized refrigerated tanker ships required to haul the stuff across the ocean. File under “not going to happen.”

Even the idea that we will have enough natural gas for our own needs in the USA beyond the short term ought to be viewed with skepticism. What happens, for instance, when we finally realize that it costs more to frack it out of the ground than people can pay for it? I’ll tell you exactly what will happen: the gas will remain underground bound up in its “tight rock,” possibly forever, and a lot of Americans will freeze to death.

The most amazing part of the current story is that US political leaders are so ignorant of the facts. They apparently look only to the public relations officers in the oil-and-gas industries and no further. Does Barack Obama still believe, as he said in 2011, that “we have a hundred years of shale gas?” That was just something that a flack from the Chesapeake Corporation told to some White House aide over a bottle of Lalou Bize-Leroy Domaine d’Auvenay Les Bonnes-Mares Grand Cru. Government officials believe similar fairy tales about shale oil from the Bakken in North Dakota — a way overhyped resource play likely to pass its own peak at the end of this year.

If you travel around the upper Hudson Valley, north of Albany, where I live, you would see towns and landscapes every bit as desolate as a former Soviet republic. In fact, our towns look infinitely worse than the street-views of Ukraine’s population centers. Ours were built of glue and vinyl, with most of the work completed thirty years ago so that it’s all delaminating under a yellow-gray patina of auto emissions. Inside these miserable structures, American citizens with no prospects and no hope huddle around electric space heaters. They have no idea how they’re going to pay the bill for that come April. They already spent the money on tattoos and heroin.

via Zero Hedge http://ift.tt/NSFpMn Tyler Durden

You really can’t make this stuff up:

• EVANS: FED NEEDS TO BE CLEAR RATES WILL BE LOW FOR LONG TIME (ok)
• EVANS SAYS ‘WE NEED TO LET THE MARKET WORK’ (umm, well…)
• EVANS SAYS FED WANTS TO SEE LOWER LONG-TERM INTEREST RATES (but… you just said)
  
• EVANS:HIGHER LONG-TERM RATES FOR RIGHT REASON IN ‘OUR’ INTEREST (wait, what?)

Did Charlie blow a fuse? Because he just said that the Fed will hold rates low, wants long-term rates low, but also wants to let the markets work, and wants inflation to raise long-term rates… Forward-guidance just lost another few points of credibility.

Some questions here:

1. Who is “our“?
2. If higher rates are in our interest, then why is the Fed holding rates low and “wanting see long-term rates low”?
3. If we need to let the market work then why is the Fed still buying well over 100% of MBS issuance and virtually all TSY long duration issuance as well as supporting equity valuations?

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

Whether or not institutional investors, read large speculators, decided to invest alongside Putin in the one trade that is most critical to the future prosperity and positive cash flow balance of Russia, namely keeping the price of Crude high, and rising, is unknown, however, as the following chart the net position in crude oil futures as of the week of March 4, just hit an all time high of $44.0 billion up from $42.4 billion the week prior, surpassing all prior peaks, and certainly any set during the summer of 2008 when oil was threatening to make a run on $150, and was set to hit $200 if one believes Goldman (which nobody does).

Needless to say, any de-escalation in the Crimea – which has certainly been the key catalyst for the full court press to bet on rising crude prices in recent weeks – will have a substantial knock on effect of forcing open call positions to close, and in the process lower the price of crude further beyond just fundamentals, assuming those still exist.

via Zero Hedge http://ift.tt/1lpX6hu Tyler Durden

Does the Federal Reserve have another rabbit to pull out of the hat?

TACTICAL – BETA is 100% FREE….get some NOW!!

Several weeks back, we noted that the “smart money” was bearish on the markets, and that higher equity prices would see even more selling extremes amongst corporate insiders. As we look at the data this week, this is exactly what has happened as the “smart money” indicator is at its most extreme degree of selling since November, 2010. See figure 1 below.

Figure 1. “Smart Money”/ weekly

But as we can see in the figure, the “smart money” was wrong. Over the next 13 weeks, the SP500 gained an additional 13%. So what went wrong? As it turns out, November, 2010 coincides with the implementation of the Fed’s QE2 bond purchase program.

Now let’s fast forward to December, 2012. See figure 2. Once again, the “smart money” was selling to an extreme degree. The US government was facing the fiscal cliff. This was “resolved” as Congress kicked the can down the road in response to a mini – market swoon. While the market welcomed that news positively, which was a foregone conclusion that the “crisis” would be resolved, it really was the Fed’s announcement that it was going all in for as long as possible that really ignited the SP500 for a 30% gain in 2013. The “smart money” was wrong, again.

Figure 2. “Smart Money”/ weekly

So is the “smart money” really that bad? Looking at figure 3, we have highlighted the extremes in selling by the “smart money” since November, 2010. Despite the two misses as outlined above (and these were big misses), the “smart money” indicator has done a decent job at identifying intermediate term tops. The common denominator as to why the “smart money” indicator has failed is quantitative easing or perceived market intervention (i.e., jawboning) by the Federal Reserve. So this begs the question: Does the Federal Reserve have the ability to pull another rabbit out of the hat?

Figure 3. “Smart Money”/ weekly

 

The Fed remains in taper mode, yet market participants still believe that the Fed will do whatever it takes to maintain asset prices. This market dynamic — i.e., that the Fed has my back — has yet to be tested. I suspect it will be tested sometime soon, but until it is, investors will continue to believe in the magical powers of the Fed and the mystical powers of QE. A test of the notion that “the Fed has my back” can only come after a market sell off. After a market sell off, the Fed will act or market participants will look to the Fed to act, and it is the success or failure of that bounce that will determine the course of this bull market. In the absence of another asset purchasing program (i.e., QE5), I don’t believe the market will power higher. To go higher while the “smart money” was bearish essentially required the implementation of new QE programs, and let’s not forget that each successive QE program was bigger and “better” than the last. Once again: can the Fed pull that kind of rabbit out of the hat? I don’t believe so.

Despite the new all time highs in the SP500, it has been my contention for the past 4 weeks that we are in a NEUTRAL market environment. A neutral market environment implies that the markets will be ruled by overbought and oversold conditions. Four weeks ago we had a sell signal, and although the market is at new highs, our sell signal was not followed by a buy signal. What would constitute a buy signal? If investors had turned extremely bearish on equities following January’s sell off, then we can say that this is a meaningful bottom that should lead to higher prices. Buyers short circuited January’s sell off repeating a pattern that has been in place since 2012 where dips have been shallow as investors have anticipated Federal Reserve intervention, which seemed to be timed to limit investors’ angst because the markets had pulled back almost 5%. Oh my gosh! In any case and as the data shows, a market that fails to periodically clear itself of the weak hands (i.e., those investors late to the rally) is a weak market, and with 1 buy signal in 2013 alone (when historically over 23 years of data there have been 2.5 per year), this market is vulnerable.

By our measures, the upside should remain limited.

 

The Sentimeter

Figure 4 is our composite sentiment indicator. This is the data behind the “Sentimeter”. This is our most comprehensive equity market sentiment indicator, and it is constructed from 10 different variables that assess investor sentiment and behavior. It utilizes opinion data (i.e., Investors Intelligence) as well as asset data and money flows (i.e., Rydex and insider buying). The indicator goes back to 2004.  This composite sentiment indicator moved to its most extreme position 10 weeks ago, and prior extremes since the 2009 are noted with the pink vertical bars. The March, 2010, February, 2011, and February, 2012 signals were spot on — warning of a market top. The November, 2010 and December, 2012 signals were failures in the sense that prices continued significantly higher. The current reading is neutral.

Figure 4. The Sentimeter

Dumb Money/ Smart Money

The “Dumb Money” indicator (see figure 5) looks for extremes in the data from 4 different groups of investors who historically have been wrong on the market: 1) Investors Intelligence; 2) MarketVane; 3) American Association of Individual Investors; and 4) the put call ratio. The indicator shows that investors are NEUTRAL.

Figure 5. The “Dumb Money”

Figure 6 is a weekly chart of the SP500 with the InsiderScore “entire market” value in the lower panel. From the InsiderScore weekly report: “Market-wide insider sentiment has moved into Strong Sell Bias territory. There was a record number of Weekly Net Cluster Sales this past week and an Industry Sell Inflection generated for the Entire Market, S&P 500 and multiple sectors, but it’s important to recognize that there is a seasonal element to some of the selling due to the timing of annual restricted stock awards and vesting events. Presently, the Utilities, Materials, Industrial Goods and Healthcare sectors are displaying the strongest sell bias, followed by Technology and Consumer Discretionary. We note that our market-wide Industry Sell Inflection event has generated a total of seven other times since the March 2009 market bottom, most recently in November 2013, with the market posting gains in the six-month period that followed five times. Given the strong market backdrop and seasonal nature to some of the selling, the activity is not out-of-line with our expectations. That said, some caution is warranted as insider selling volume is clearly elevated. “

Figure 6. InsiderScore “Entire Market” value/ weekly

TACTICAL – BETA is 100% FREE….get some NOW!!

via Zero Hedge http://ift.tt/1lpWYOT thetechnicaltake

A State of Mind

Being Sovereign within Your Inner Space

The Sovereignty Series

By

Cognitive Dissonance

 

 

To subscribe to 'Dispatches', a periodic newsletter from Cognitive Dissonance and TwoIceFloes Creations, please click here. 

 

The first installment of "The Sovereignty Series – You Can't Make Me" may be found here.

 

As I begin to openly discuss the concept of personal sovereignty I am discovering, as I often do with terms and concepts preloaded with divergent meaning and political overtones, that there are plenty of opinions but not much clear thinking, about personal sovereignty. Please note the bold emphasis placed squarely on the word ‘personal’.

There are those who claim there is no such thing as ‘personal’ sovereignty, that the proper term should be personal empowerment. And it is clear that most widely accepted definitions of ‘sovereignty’ would agree with that premise because they often refer to ‘government’ or ‘an independent state’ in conjunction with ‘sovereignty’. Here are some examples of online dictionary definitions that tend to agree with this ‘belief’.

The American Heritage Dictionary defines sov·er·eign·ty as………

1. Supremacy of authority or rule as exercised by a sovereign or sovereign state.

2. Royal rank, authority, or power.

3. Complete independence and self-government.

4. A territory existing as an independent state.

Random House chimes in with….

1. the quality or state of being sovereign.

2. the status, dominion, power, or authority of a sovereign; royalty.

3. supreme and independent power or authority in a state.

4. rightful status, independence, or prerogative.

5. a sovereign state, community, or political unit.

I could go on, but it is plain to see the general ‘consensus’ is that ‘sovereignty’ is the near exclusive domain of kings, dictators, governmental ‘states’ and political entities who claim independence and self rule. Of course, by this definition, if ‘sovereignty’ is not recognized or affirmed by others, particularly much larger and more powerful ‘others’, then sovereignty even on the state level ain’t worth a hill of beans.

Thus sovereignty is defined and codified in International Law, the rules by which those who are admitted to the Big Boys Club play nice with each other (at least as ‘nice’ as psychopaths can) in pretty much the same manner different organized crime ‘families’ have a code of conduct by which they attempt to coexist while ruling their respective corners of the universe.

 

 

Then there is the ‘Personal Sovereignty’ movement (for lack of a better term) that purports to anyone who will listen that the US is not a country, but in fact a corporation, and we citizens are simply individually numbered taxpaying cogs (semi ‘free’ indentured servants/slaves other say) mentally, physically and emotionally entangled and encumbered by Admiralty Law, everyday ‘law’ entirely contrary to old English common law, licensing, taxation in a thousand forms both hidden and in plain view and, perhaps most frighteningly, unaccountable administrative bureaucrats.

Actually I am not unsympathetic to the ‘Personal Sovereignty’ efforts in the least. There is much that I agree with when it comes to this line of reasoning. After all, ‘rules’ and ‘law’ exist simply to condition the mind so that the body may follow. They are a control mechanism that is disguised as reasonable, even beneficial, to those who are being controlled. My quibble with this movement is in the declaration and execution of personal sovereignty well before the individual mindset has been fully formed and embodied.

One thing seems clear to me. The ‘belief’ in what constitutes sovereignty is skewed towards those who presently hold power and away from those who supposedly empower the powerful. While it might seem contrary for the powerful (aka the powers that be) to enable and support others who presently hold power since they might just be rivals one day, this supposition only holds water if we believe the interests of the powerful aren’t aligned.

Because sovereignty on a ‘national’ or ‘country’ scale only works if other sovereign nations recognize each others’ sovereignty, it’s actually a giant case of “you scratch my back and I’ll scratch yours”. A little more to the right please.

My question is simple enough. If power, legitimacy, the ‘right’ to rule, whatever it is called and however it is justified, all flows from the people to the top as it is claimed in modern sovereignty theory, supposedly via the ‘democratic’ process of ‘free’ elections, thus the ‘sovereigns’ declaring themselves a representative of the people, or in the case of despots, abject terror that your head will be removed if you don’t support the ‘sovereign’, then what ‘power’ exactly is actually creating the claimed sovereignty?

Is it my implied consent, which is supposedly captured by the act of my ‘voting’? What if I don’t vote or I voted for the other guy? Might it be my tax dollars, which I wouldn’t actually pay if I didn’t agree with my leadership? Most likely not since my taxes are collected at the point of an implied gun with no choice on my part required. How about my adoration supplied on bent knee, which is compelled of me at the end of a despot’s gun? What exactly of mine and yours is actually being transferred to support the sovereign, to legitimize its use of power in my name?

 

 

This is where it all gets a little fuzzy in the more detailed articles, explanations and dissertations about ‘sovereign’ and ‘sovereignty’ that I’ve perused online. It almost seems like black magic is employed, where spells are cast by witching cabals that are designed to corral the very essence of our inner energy, and then redirects it towards those special entities entitled to rule the roost and wear the crown.

OK, enough sarcasm from me. But the last paragraph is not as farfetched as it may seem or sound. We are all susceptible to, and influenced by, ritualistic behavior of all sorts, so to rule out ‘black magic’ in any way, shape or form might be just as silly as it would be for others to even consider it. Considering all the influences exerted upon ‘us’ humans, including subliminal programming, propaganda, advertising, the money meme, nationalism, herd behavior and so on, it is not as farfetched as it may seem to at least consider if we can just get past our preconceived notions and prejudices.

I bring that up simply to press home a point. The general consensus among those who claim sovereignty, the popular belief among those who are ruled, and certainly widely disseminated definitions and descriptions all point to sovereignty being predominately a physical attribute held by a political entity that may or may not be derived from those who live within the boundaries of that political entity or ‘state’.

In my first installment of “The Sovereignty Series – You Can’t Make Me!” I discussed how one of the ways ‘we’, ultimately meaning our personal sovereignty, are hijacked is through our language, and that we enable this hijacking by self victimization via the words, phrases and altered meanings of our language. We only have ourselves to blame for playing their game on their field by their rules.

In that article I left a comment that stated plainly and frankly my view regarding personal sovereignty and where it all begins. I said, “Personal sovereignty is a ‘State’ of Mind long before it is a state of being.” Too often we think of personal defense via weapons, financial flexibility and independence by way of diversified asset stashes and physical precious metals or even physical isolation in the form of a self sufficient homestead tens, even hundreds, of miles from ‘civilization’ as required ingredients that ‘create’ or endow personal sovereignty.

There is no doubt that any and all of those attributes will go a long way towards our ability to secure our physical being. And just like the political ‘state’ whose sovereignty isn’t recognized by more powerful ‘others’, if you or I are denied our physical/financial freedom it is extremely difficult to assert our physical personal sovereignty with any semblance of credibility. Thus I will not argue that it isn’t highly desirable to acquire the tools that enable our physical/financial freedom and flexibility.

 

 

But our “State of Mind” makes all the difference regardless of our personal war chest, isolation, financial assets or lack thereof. If our mind and spirit are still shackled by the ‘slave’ state of mind, the day to day practice of personal sovereignty is for all intents and purposes completely foreign to us and entirely beyond our grasp.

While I will dig deeper into the various “State of Mind” attributes of a individual sovereign in later chapters of “The Sovereignty Series”, of paramount importance to creating this mindset is to begin taking personal responsibility for all our thoughts, actions and interactions regardless of whether we feel we are ‘in control’ of the underlying circumstances or not. 

If we are to declare that we are sovereign, then ultimately the ‘buck’ starts and stops here. Being sovereign implies that we answer to no one, though it is obvious that one person surround by one thousand hostiles is severely constrained. But true personal sovereignty is constrained only of the physical being, while the “State of Mind” can only be constrained by us.

While Mahatma Gandhi and Nelson Mandela (to name just two) were physically incarcerated for years, decades in Mandela’s case, these individuals practiced personal sovereignty by continuing to think and ‘be’ sovereign, both in mind and spirit. Based upon their public writings they accepted full responsibility for their ‘constrained’ situation, and worked tirelessly while in prison to build upon and expand their efforts to help free the minds of others they had encouraged to be sovereign.  

While ‘sovereignty’ is often conflated with a political entity within physical boundaries, oftentimes because such a ‘sovereign’ has a greater ability to exercise physical cohesion and mount defensive positions, personal sovereignty, while not affording each of us an equal opportunity to exercise physical security, offers us much greater prospect of implementing the personally sovereign “State of Mind”. 

 

03-10-2014

Cognitive Dissonance

www.TwoIceFloes.com is unlike anything you will find on the web, a truly unique destination. There you will find distinctive Premium Members only articles as well as discussions on wellness and health, homesteading, spirituality & philosophy and most importantly ‘safe’ forums not found anywhere else. Come by for a peek and stay a while.

 

via Zero Hedge http://ift.tt/1el3v8M Cognitive Dissonance

Mere days ahead of Crimea’s referendum to join Russia (or not) and following reports of shots fired between Russian and Ukrainian forces, the Ukraine Defense Ministry reports (via Facebook):

• *UKRAINE LIEUTENANT COLONEL DEFECTS TO RUSSIAN FORCES: MINISTRY
• *UKRAINE OFFICER IN CHARGE OF CRIMEA UNIT DEFECTS: UKR MINISTRY
• *OFFICER CONVINCES ‘SEVERAL’ SOLDIERS TO DEFECT: DEF MINISTRY

It would appear Crimea is annexing itself as this comes just one week after the head of Ukraine’s Navy defected.

via Zero Hedge http://ift.tt/NSkdWF Tyler Durden

European sovereign bond spreads have not batted an eyelid during the recent Russia-Ukraine crisis… and why should they, Draghi will do “whatever it takes.” Even HY credit in Europe is holding up – despite an ugly squeeze wider on Friday (chatter that positioning in very long credit). But with Europe’s VIX above 20, the broad European stock index is now below pre-Putin levels. What is perhaps most stunning is that while investors have piled out of German, Swiss, and French stocks in the last few days, they have backed-up-the-truck in “new normal” safe-haven Portugal. The reason proferred by some – Portugal is further from Ukraine (and less dependent on Russia’s gas) – which of course is the critical swing factor for an economy that remains crushed aside from trade with Germany.

 

Stocks are back below Putin levels…

 

As investors have flushed their core German stock holdings and bid Portugal (and Italy) to the moon…

 

Which just exacerbates the remarkable divergence among European stocks this year…

 

We are sure somewhere this all makes sense…It would appear the ‘safe-haven’ seekers have forgotten that if Germany comes under pressure from Russian sanction retaliation then Europe is in trouble… but hey, why worry, just buy the worst…

Charts: Bloomberg

via Zero Hedge http://ift.tt/1lOI0VH Tyler Durden

With surveillance and online privacy now front-and-center in many people’s minds, the 2014 SXSW Interactive Festival is hosting a “Virtual Conversation with Edward Snowden” this morning focused on the impact of the NSA’s spying efforts on the technology community, and the ways in which technology can help to protect us from mass surveillance. Hear directly from Snowden about his beliefs on what the tech community can and must do to secure the private data of the billions of people who rely on the tools and services that we build.

 

via Zero Hedge http://ift.tt/NS4Pto Tyler Durden

One month ago, when we last looked at the incredible amount of Chinese new loan issuance, a topic which even the mainstream media is slowly starting to circle in on as the primary source of hot money flow creation in the world, we found the highest loan notional issued by the country’s semi-sovereign banks since 2009, and the largest one-month ever monthly total in the largest aggregated, Total Social Financial, series, which rose by an unprecedented CNY2.6 trillion, or over $400 billion in one month! That was just before the tremors surrounding first the potential defaults of several Chinese shadow-banking Trusts, and certainly before the first official corporate bond default which took place last week.

Overnight, the PBOC released its latest, February, loan data. As expected, it reveals something else entirely.

In the month in which there were pervasive fears that China would let one or more Trusts go bankrupt (a fear which was unfounded as China did bail out two shadow trusts in February, only to finally allow a corporate bond default last week), loan creation ground if not to a halt, then certainly was significantly impacted, and its collapse may explain the abysmal February trade data as well, which far more than merely indicating calendar effects from the Chinese Lunar New Year, shows that something dramatically changed with the well-greased Chinese economic machine. That something was an abrupt drop in credit.

To wit: Chinese banks made 644.5 billion yuan ($105.21 billion) worth of new yuan loans in February, lower than a forecast of 716 billion yuan and below the previous month’s 1.3 trillion yuan, central bank data showed on Monday.

Looking at the bigger picture, total social financing in February stood at 938.7 billion yuan, well below the previous month’s 2.58 trillion yuan, and also well below expectations.

 

It gets worse: as SocGen calculates, Total social financing (TSF) recorded a gain of CNY 939bn in February. The sharp decline from the January level (CNY 2580bn) can be mostly attributed to seasonality but the TSF was also down yoy (1071bn last February), which dragged total credit growth down to a 20-month low of 17.1% yoy from 17.5% yoy, according to our estimate.

 

Breaking down the loan creation by various components, va SocGen:

Yuan loans increased notably less than expected by CNY 645bn (Cons. 730bn, SG 750bn). Although it was still 25bn more yoy, growth of outstanding loans inched down to 14.2% yoy from 14.3% yoy. However, once again, non-bank credit saw a much bigger slowdown. Entrusted loans increased CNY 80bn, CNY 63bn less yoy and the lowest in 20 months. Probably due to easier interbank liquidity conditions lately, the net increase in bond financing was up to CNY 99.5bn from the very depressed levels in the past two months. However, the first bond default that occurred on 7 March will likely reverse this nascent improvement trend. New trust loans had a sharp fall of CNY 104bn from January to CNY 78bn, the second smallest monthly increase since mid-2012. Reportedly, formal banks have started to distance themselves from the trust sector by scaling back trust product distribution to banks’ clients. It may also be the beginning of investors adjusting for the long over-due first defaults of trust products. Whichever the case, the near-term prospect for trust financing is not beautiful.

This latest money and credit report again supports our view that credit growth is still sliding and will likely remain so in the near term. In H2 2013, the credit slowdown was mostly responding to higher interbank rates, as intended by the PBoC. From here onwards, the downward pressure will come from follow-up regulatory tightening of the Document 107 issued by the State Council in January and, more critically, from financial market participants’ adjustments to fast rising default risk. Such adjustments are necessary for China in the long run to develop a healthy financial market, but are nothing if not risky in the short term. We think that the policymakers will run more default experiments, but at the same time stand ready to intervene so as to avoid a systemic financial crisis. Our central scenario remains that there will be disruptions but not a meltdown, but the risk is tilting to the downside.

Finally, the French bank’s conclusion is hardly welcome for China bulls:

China’s total credit growth slowed further in February, again driven by shadow banking deceleration. Lower interbank rates have not really helped ease credit conditions. It seems that the rising default risk has started to erode Chinese investors’ confidence. Together with continued regulatory tightening on banks’ off-balance-sheet activity, we are certain that this slowing credit trend has further to go and will inflict real pain on the economy. The season of weak Chinese data has just begun.

That’s ok, all of the above, too, is priced into the USDJPY algos.

via Zero Hedge http://ift.tt/NS1bjs Tyler Durden