Chart Of The Day: US Decouples From The Rest Of The World… And From The US Itself

The global economy is like a jetliner that needs all of its engines operational to take off and steer clear of clouds and storms. Unfortunately, as Nouriel Roubini tells The Guardian, only one of its four engines is functioning properly: the Anglosphere (the United States and its close cousin, the United Kingdom). As Roubini continues, the question is whether and for how long the global economy can remain aloft on a single engine. Weakness in the rest of the world implies a stronger dollar, which will invariably weaken US growth. The deeper the slowdown in other countries and the higher the dollar rises, the less the US will be able to decouple from the funk everywhere else, even if domestic demand seems robust. But it’s not just the rest of the world that is decoupling from US growth… as the following uncomfortable chart shows, so is a crucial pillar of monetary policy transmission, consumer wealth perception, and economic stability – the US housing market itself.

 

The decoupling… globally (China, Europe, and Japan all seeing GDP estinmates slashed)

For the moment, at least, Barclays notes it appears that the momentum of the U.S. and the rest of the world will continue to move in different directions.

 The end of QE could create risks for credit, but the divergence in growth suggests that those risks are likely to be experienced more keenly outside of the U.S.

But as Roubini concludes, serious challenges lie ahead,

Private and public debts in advanced economies are still high and rising – and are potentially unsustainable, especially in the eurozone and Japan. Rising inequality is redistributing income to those with a high propensity to save (the rich and corporations), and is exacerbated by capital-intensive, labor-saving technological innovation.

 

This combination of high debt and rising inequality may be the source of the secular stagnation that is making structural reforms more politically difficult to implement. If anything, the rise of nationalistic, populist, and nativist parties in Europe, North America, and Asia is leading to a backlash against free trade and labour migration, which could further weaken global growth.

 

Rather than boosting credit to the real economy, unconventional monetary policies have mostly lifted the wealth of the very rich – the main beneficiaries of asset reflation. But now reflation may be creating asset-price bubbles, and the hope that macro-prudential policies will prevent them from bursting is so far just that – a leap of faith.

 

Fortunately, rising geopolitical risksa Middle East on fire, the Russia-Ukraine conflict, Hong Kong’s turmoil, and China’s territorial disputes with its neighbors – together with geo-economic threats from, say, Ebola and global climate change, have not yet led to financial contagion. Nonetheless, they are slowing down capital spending and consumption, given the option value of waiting during uncertain times.

 

So the global economy is flying on a single engine, the pilots must navigate menacing storm clouds, and fights are breaking out among the passengers. If only there were emergency crews on the ground.

*  *  *

Which leaves us with The Chart of the Day…

But now the decoupling from reality is happening domestically! (real Fixed Private Residential Investment dropped 1.1% YoY… GDP didn’t)

 

Completely destroying the ‘US is strong’ meme…and, as The Global Macro Investors’ Raoul Paul pointedly remarks, this is starting to smell as if a shit-storm is brewing…

The meme of US economic strength and decoupling from the world has consequences…

 

At some point very soon the dollar is going to break out and EVERYTHING you know is going to change. Everything you’ve understood to be normal and stable in your investment portfolio is going to be as risky as hell. All of your core assumptions are going to be tested and thrown out as false assumptions. Yield trades, once the safe haven, are going to kill you. Anything that has any carry element or any exposure to currency moves will create huge losses.

 

Why am I so damned alarmist? Well because as ever, we’ve seen it all before.

 

The reason it is going to happen rapidly and maybe in a disorderly fashion is because if the dollar moves much higher, we will begin to see an unwind or THE unwind of the biggest carry trade in history. This is the flip side to all that QE. This is the flip side to the China miracle too. Multiple trillions of dollars are going to need to be bought or extinguished in this unwind, and that is going to create complete chaos.

 

 

Sadly, there is no such thing as free money in the real world. There is always a price to be paid. Self-reinforcing virtual circles eventually become the spiral of doom.

 

I think we find ourselves at the tipping point of the spiral of doom.

*  *  *




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Dysfunctional America

Via Paul Craig Roberts,

If you require more evidence that the United States is a dysfunctional society, observe American elections. Election season is slander season. Each party’s attack teams focus on misrepresenting, defaming, and ridiculing the opposing party’s candidates. Attack ads have replaced debates and any discussion of what the issues are, or should be, and how candidates perceive the public’s interest. Each attack team tells lies designed to enrage various voters about the other team’s candidate.

Whoever is elected is indebted not to voters but to the special interests that provided the campaign money. Once elected the official serves the private interest groups that put the official in office. In America the government can be bought and sold just like everything else. In its Citizens United ruling, a Republican Supreme Court put its stamp of approval on the right of corporations to purchase the US government.

Each state has its own dominant interest groups that win every election. In Florida real estate developers routinely defeat the environment and local communities. Developers have even been known to form organizations that pose as conservation supporters in order to misrepresent and defeat conservation measures.

Yet, despite their long string of losses to special interests, voters still participate in elections. I once read a theory that elections are a form of entertainment. President Clinton’s encounter with the young woman on MTV–”boxers or briefs”–is one indication of the lack of seriousness that Americans bring to politics.

Perhaps the lighter moment of a young woman’s interest in the president’s underwear should be cherished. The Clinton years will be remembered as scandal after scandal with dark events unresolved and covered up. The Clinton years were transformative. For those who don’t remember and those too young at the time to be aware, Ambrose Evans-Pritchard’s book, The Secret Life of Bill Clinton: The Unreported Stories (1997), will be an eye-opener. Perhaps the Democrats should read the book before nominating Hillary as the party’s presidential candidate.

Evans-Pritchard was Washington bureau chief for the Sunday Telegraph, one of the main British newspapers. He was stunned by how the American media ceased to function during the Clinton years. The Clinton years gave us such events as the federal government’s murder of the Branch Davidians in their Waco compound and subsequent coverup, the Oklahoma City bombing and coverup, and the coverup of the apparent murder of White House counsel Vincent Foster.

 

Almost everyone who paid attention saw coverups, not investigations, of these extraordinary events. Evans-Pritchard was one who payed attention, and what he saw did not pass muster. Yet, there was no press asking questions.

 

For example, the official story was that Tim McVeigh was the “lone nut” responsible for blowing up the Murrah Federal Office Building with a truck bomb. Yet, at McVeigh’s trial the prosecution did not call a single witness who could place McVeigh in Oklahoma City on the day of the bombing. “This is a rather astonishing fact,” writes Evans-Pritchard, and indeed it is. The reason the prosecution could not provide a witness to place MvVeigh at the scene of the crime is that the many witnesses all reported seeing McVeigh in the company of other men, and the prearranged official story was that McVeigh was alone. The FBI and the prosecution had to make this case, not conduct a real investigation and discover what really happened.

 

Experts who have examined the Oklahoma City bombing have concluded that the truck bomb was cover for explosives set inside the building. For example, US Air Force munitions expert General Benton K. Partin provided an extensive and detailed study and wrote to the US Senate: “The attached report contains conclusive proof that the bombing of the Alfred P. Murrah Federal Building, Oklahoma City, Oklahoma, was not caused solely by the truck bomb. Evidence shows that the massive destruction was primarily the result of four demolition charges placed at critical structural points at the third floor level.”

 

Miquel Rodriguez, the associate independent counsel assigned the investigation of Deputy White House Counsel Vincent Foster’s mysterious death resigned after four months convinced that he was dealing with a FBI coverup and that his investigation was being sabotaged by personnel within his own office. The FBI’s official story differed completely from the story of the witness who discovered Foster’s body. Again, as in Oklahoma, the FBI’s case required the creation of a make-believe scenario at odds with the evidence. With no interference from a silent press, the FBI created the story that was needed. Evans-Pritchard wrote that the Foster case was “taboo for American journalists. In private, many concede that the official story is unbelievable, but they will not broach it in print.”

 

When Americans think of Clinton era scandals, they recall “Whitewater” and Clinton’s sexual escapades with White House intern Monica Lewinsky. Evans-Pritchard writes that these two scandals were small potatoes compared to the Waco, Oklahoma City, and Vincent Foster coverups. Evans-Pritchard concludes that these minor events were used by the press to distract the public and perhaps Congress from inquiring into FBI coverups of criminal acts.

I remember asking my Wall Street Journal colleague Robert Bartley why he put so much energy and editorial ink into Whitewater, a minor scandal involving some real estate payoffs to the Clintons that did not pan out. Serious events were ignored while Clinton’s affair with Lewinsky became a matter of impeachment.

From Clinton to George W. Bush and Obama was another transformative change. The crimes of the Clinton regime were covered up and not acknowledged. The crimes of the Bush and Obama regimes are openly acknowledged by the presidents themselves and by their attorney generals who assert that the “war on terror” frees presidents from the Constitution and from domestic and international statutory law. Thus, we have indefinite detention, torture and loss of protection against self-incrimination, destruction of privacy, and execution of US citizens without due process of law.

Almost overnight the US government became unaccountable, released from constitutional and legal constraints. Elections serve only to validate the unaccountability of government.




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Bank Of America Psychopath Murderer’s Automated Email Reply Says He Is An “Insane Psychopath”

Well, if alleged Bank of America prostitute killer, as described earlier, intends to plead insanity to all charges, he is one step ahead of the prosecution already. Below is the automated reply that emails sent to Rurik Jutting’s Bank of America e-mail address are getting, per Bloomberg.

I am out of the office. Indefinitely.

 

For urgent enquiries, or indeed any enquiries, please contact someone who is not an insane psychopath. For escalation please contact God, though suspect the devil will have custody. [Last line only really worked if I had followed through..]”

A random sample of emails sent to Federal Reserve officials shows that for now Jutting is the only one telling the truth.




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Keynesian Shangri-La From Myth To Reality

Authored by Mark St.Cyr,

In less than the time it takes for a chrysalis to release one of life’s remarkable transformations, many once called “capitalists” woke to find the world they once new changed into something only dreamed or told in folklore.

Where business models resembling unicorns abounded along with rainbows in their resembling equivalent of over-arching ETF’s. All available in a multitude of hues and proportions so plentiful: It was hard for one not to well up when contemplating. For in this new fairytale land there must certainly be a pot of gold at the end of every “rainbow.” However, one would be mistaken. For one must remember this is a “Keynesian Shangri-la” and gold here is useless. (insert choir music here)

Today, at the end of these self propagated rainbows lies a Central Bank ready and willing to print as much money as one needs to see those vivid colors so plainly; only the term Technicolor® seems appropriate as a descriptor. (no special glasses or headset required)

Although the above is a bit tongue in cheek what it isn’t sadly to say: is fiction.

We now have entered a time where what you once knew or thought about capitalism is out the window. At least when it comes to the global financial markets.

What was once the bastion of “free market capitalism” has now metamorphosed into what the devotee’s of Keynesian economics have been chomping at the bit to unleash and install. And that day is – now here.

The only bug in their soup they forgot to remember while they’ve been drooling in anticipation, waiting for its possible arrival is this: Be careful what you wish for. For you just might get it.

The Keynesian argument has been made for decades. I wonder if the man (John Maynard Keynes) would be impressed with just how much his ideology is so vehemently held in the halls of academia and political circles. Many religious devotees pale in comparison.

Once upon time people believed in free market capitalism. The relationship with the money supply. The economy, markets, interest rates and their effects on keeping governments spending in line. All that and more is now out the window along with the old draperies. No need for those silly viewpoints nor those curtains because there’s no longer a need or even the inclination as to try to hide.

You don’t need anymore proof to show this over enveloping viewpoint than the front-page story highlighting none other than Keynes himself with the headline on Bloomberg Businessweek™: Stimulate This!

But maybe it’s the subtitle that really gets to the heart of the matter: “John Maynard Keynes has the last laugh on what works for the global economy”

Oh that tagline just might be the very thing that produces more tears than laughter in the end. As I stated earlier “Be careful what you wish for. For you just might get it.”

A few years ago I made this point when trying to get others to understand just how far the interventionist monetary policies had permeated the capital markets. I remember people taking great issue with me as if I “was going too far.” It seems now in retrospect just maybe – I hadn’t gone far enough. Here’s a few quotes from that article:  Welcome To Keynesian Shangri-La

 “Valuations – schmaluations. Please spare me. It might make for good time fill in the financial media’s “power rotation” of talking heads however, to anyone with just a fair understanding of business. The economy can’t be spitting out numbers just over stall speed of a recession with all time highs in the stock markets as something that’s even close to resembling healthy.”

To the Keynesian or the government has all the solutions devotee, everything looks just as it should. Turn on the television, radio, or pick up a paper and the headline reads, “Record High!”

So here we are just a few years later to find ourselves floating in a sea of printed or digitized dollars looking for a home. And that home is in an increasingly shoddily built, underpopulated, (as expressed via volume) maintenance plagued financial arena know as “The markets.”(remember how many times the markets broke this week alone?)

But it would seem we have traded one slumlord for another. Exit the Federal Reserve and please join me in a warm round of applause for the Bank of Japan. (insert hysterical cheering crowd of Keynesian economists and lackeys here)

What has now garnered the moniker of “Banzainomics” leaves no doubt that we have entered a time in financial history that belongs totally and squarely upon the shoulders of Keynes.

Problem is – where Atlas may shrug, there’s a real and true strength as to carry the weight. For Atlas it’s about risk reward. For this new Keynesian metaphor? When and if a shrug is needed; it won’t be out of risk reward.

It’ll be out of losing its grip and collapsing under the very weight they told – and sold – everyone on. The idea, that if they would only “give him the ball” tranquility and fear from “capitalistic dogma” along with its pervasive repercussions would finally be eradicated.

Well – Now he/they got it.

Problem is without a never-ending supply of steroids and other substances (in the form of monetary policies whether legal or not) the myth of strength will transform into the reality of weakness.

Then as he falls apart he may decide that rather than taking another injection he’ll just shrug the weight off and reach for the remote or XBOX™. For remember, in a Keynesian world: Hard work is for Atlas, not him/them. Besides, can’t one get that injection and still be on the couch? In a Keynes world. Why not?

So why does this matter to today’s entrepreneur or other business people. Easy…

So now you’ve created this great widget, company, what ever that you’ve grown through hard work and more where you believe it’s now time to access the capital markets.

There’s a problem now. Those markets aren’t for “capitalists” any longer. They’re for “Keynesians” and if you aren’t the right investment, or in the right ETF – you’re toast.

You might have a great company, but if a Central Bank deems there’s “No money” to be had this month, you’ve got crap.

The flip side is also the same. Say you’ve built a better mouse trap than your competitor? Sorry, they’re in the right ETF and you’re not? Sorry – No “soup” for you.

Oh that’s nonsense you say “you’re being over simplistic.” Fair enough, but there was also a time little more than 4 years ago where “monetizing the debt” was laughed at.

If you even made the claim you were shouted down as some “tin foil cap wearing, conspiracy theory, fear mongering, blabber mouth.” And now? Not only proven fact, but stated as an “effective policy tool” aka QE.

Which leads us all right back to today.

For decades Keynesians have deplored true “capitalism” as a form of cancer than must be eradicated, for it does nothing but bring on booms and busts leaving devastation in its tracks. Where the altruistic Keynesians profess if only they were under the world in place of Atlas; they would show one and all exactly what they are capable of doing. And today – here we are. It’s their world.

For over two hundred years the strength of Atlas (warts and all) has brought about the greatest economic super power in all forms of measurements from quality of life, to military strength to protect that life.

Yes there are booms, and yes there are busts. But they are necessary and needed just as the underbrush in a tranquil forest at times needs to burn off to make way for newer even better growth.

During these times it seems there is nothing but devastation and turmoil. So too does the inner workings in a capitalistic market place mirror this.

It’s in the folly of thinking it can be surgically dissected and removed from out of the cycle where the Keynesians get into real trouble. For the more they meddle, the worse the ramifications, like an over eager plastic surgeon stating “We can fix that last nip tuck – with another nip tuck.”

Then they’ll blame others in a fury of finger-pointing for why “their meddling” doesn’t or didn’t work. “You didn’t allow us too spend enough, or, at all.” However that is no longer the case.

Not only do they have the check book, but the credit cards, safe deposit keys, and even a few neighbors assets they’ve yet to realize are gone. It truly is “all in their hands.” (and pockets)

Not only do they have the above, they have the whole ball. (Yes, the globe – as in the global financial markets)

Here we are at never before seen in the history of mankind market highs. Not only is there so much money floating around, it’s been decided by another Central Bank to increase that level. For they have taken that immortal line given by President Kennedy “A rising tide lifts all boats” to an even near unimaginable level.

Forget boats for we are truly in the Keynsian Shangri-la of: Those that have – those that have not – and those that have yachts!

The inherent problem to the Keynesian model also lies within the very thing most coveted by the Keynes devotee: Who do you blame when it all falls apart? You can’t blame capitalism or Atlas. You’ve shrugged him off. It’s now all on your shoulders.

For well over two centuries the Atlas’ of the world proved more than willing, as well as capable, to bear the burden of holding up the economic world. As of today the marvel of Keynesian economics is now front and center with no question as to who is in control. Without a doubt: You’re in control.

Since 2008 those policies and practices have been implemented with near little opposition. And now with the other Central Banks ipso facto picking up the baton even before it hits the ground proves; we are now living in a “Keynesian Shangri-la.”

You’re now just 5 years into complete and total economic control via Keynesian policies, while simultaneously gaining even more followers and devotees. This truly is a historic time we are witnessing.

I leave you with this one thought for its something I penned a long time ago when all this meddling first began…

“Markets right themselves with pain… That’s Capitalism.

 

Back room manipulation to avoid pain only increases the severity of the pain to be felt down the road.”

You’re in control now and best of luck. The rest of us will go on about our lives in business dealing the best way we can as to navigate this new world you’ve created, but one small warning if I may.

Since you now have the weight of the financial world on your shoulders you’re not going to do the one thing you most want…

The ability to pat yourselves on the back.




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

A Kept Culture

A Kept Culture

By

Cognitive Dissonance

 

 

My thinking on a variety of subjects has changed over time and I expect my understanding will continue to evolve as new information, knowledge and propaganda enters my orbit. Contrary to popular belief this is a good thing because it means my mindset is not as static and rigid as some, though it is most certainly worse than others.

One of the great questions of the ages is why we, and by ‘we’ I mean anyone other than ‘they/them’, tolerate the abuse we receive from the hand of our masters. While the mistreatment is most often handed down on an individual basis, “We the Abused” outnumber the abusers by at least 10 to 1. And I count among that ‘1’ all those who enable, support and carry out the abuse. So why do we tolerate something we can clearly stop if we so wish?

Earlier on in my ongoing awakening, a never ending process of self reflection and discovery, I would sometimes use the derogatory term ‘sheeple’ to describe both a people and a condition. I was grasping for a simple all encompassing answer to a complex problem, and believing that the vast masses were blissfully ignorant while passively grazing upon an array of consumer goods satisfied my need to understand what to me at the time was incomprehensible.

This is not to say some are not exactly as described. In fact at one point in my life I fit the bill perfectly, totally consumed in my naval gazing and mostly oblivious to not only my own lot in life, but those around me. As a single parent raising my boy alone for seventeen years, I was righteously indignant if anyone dared to question my focus. After all, I was doing it for the child(ren).

But deep down I knew that at best my explanation was inadequate and at worse deeply flawed. While at several points in my life I was a ‘sheeple’, the description did not fit all my situations all the time. I lived in, and existed within, a far more complex world than could be described using simple concepts and ideas. Like a broken clock I was on the rare occasion quite accurate, but for the vast majority of the time I was dead wrong. I suspect my view was biased by familiarity both with myself and others who fit the description. But more importantly, it was comforting to believe I understood the problem and that I wasn’t ‘it’.

So I continued to search for an answer to THE question, though this time I was more thoroughly grounded after recognizing my desire for a simplistic answer and my need to absolve myself from blame or culpability. This self examination and understanding led directly to my explorations into denial, both of the self and of the collective.

This seemed to make more sense to me and quite frankly still does as a significant contributor to this issue. Denial is infinitely customizable, scalable and adaptable. One can be in total, partial and minimal denial about a subject or subjects and our denial can ebb and flow as circumstances and conditions, including our anxiety and fear, dictate.

We are never completely denial free unless we can claim to have cleared all the Cognitive Dissonance cobwebs from the mind, an assertion I would not make since I stumble across, and become entangled within, new ones on a reoccurring basis. If anything as I continue to grow I find more, not less, though they are increasingly more subtle and nuanced.

But while denial more completely describes the present state of the human condition, it still falls short of encompassing the infinite variety of daily life within the Insane Asylum. How does one cope with being in a near constant state of loss and grief, of borderline depression, while still ‘functioning’ on a day to day basis? In many respects we are endlessly circling the five stages of loss and grief so nicely described in the Kubler-Ross model, yet clearly on a higher, more complex, level of existence because it encompasses both the individual and the collective.

 

JFK Funeral

The JFK Funeral – Collective loss and grief

 

An example of the individual/collective loss and grief dynamic in play was the days and weeks after the assassination of John F. Kennedy. Words fail to adequately explain what the nation on all levels experienced at that time. There were few, other than the very young, who were not emotionally moved either directly by the loss or by the collective pall the country entered immediately afterward. As a child of seven years, while I did not understand what was going on, I was definitely moved by the emotional trauma others were dealing with at the time.

However, Kubler-Ross describes a onetime devastating loss or the recognition of an impending loss and the process of navigating that loss and grief, while I am seeking an explanation of a never ending existence within the loss and grief process because the ‘loss’ relates to, and is an integral part of, our daily living. I am speaking directly to the psychological and emotional consequences of the overall condition of our existence rather than onetime events that disturb our existence.

I suspect using the term ‘loss’ is inaccurate or incomplete, at least in the literal sense of the word. While a Lion captured in the wild and then confined to a cage at the zoo ‘knows’ what it has lost, a lion born into captivity never really is aware of a ‘loss’. But both lions may still suffer from the same neurosis which springs from the sense, the knowing, that something not quite definable (and more importantly unchangeable) is wrong.   

It is my supposition that “We the People” also suffer from the same loss, the same trauma, as the captive born lion does, an inner ache and a growing awareness that something is very wrong with the world and our life within it. Because the reality we live within is the only reality we know, most of what is wrong is not readily apparent to the majority of us since this is just the way things are and everyone else lives more or less the same life as we do. A failure of our imagination is partially to blame for the sense we all have of being trapped with nowhere to go and no way to change.

The other day Mrs. Cog used a term to describe a fictional character from an old movie. She said the character was a ‘kept man’ and I instantly understood what she meant, though it would not have mattered if she had said ‘kept woman’. In so many ways the relationship between the ‘keeper’ and the ‘kept’ is remarkably similar to our ‘kept culture’ and the basis for our dour outlook and sense of impending doom and depression, even if it only lingers under the surface of our awareness. Let me attempt to further explain.

There is always an implicit, and often an explicit, agreement of understanding between the keeper and the kept that pretty much spells out the duties of each party as well as the rewards and benefits of the arrangement. With regard to our kept culture, on a broader scale the general terms and conditions of the agreement are spelled out in grade school, then further defined and refined in college, while the specifics of each situation are expressed by each employer/benefactor. Here is what you ‘do’ and this is your ‘compensation’ for doing so.

While most, if not all, of the power remains in the hands of the keeper, it is to the benefit of both parties that an illusion of equality is inferred between the keeper and the kept in order for the kept to feel they have ‘agreed’ to, and are ‘willing’ to, fully cooperate with the keeper to fulfill the terms of the agreement. You catch more flies (and keep more kept) with honey than vinegar. But make no mistake about it, this agreement can only be abridged or fundamentally altered with the consent of the keeper and not by the kept, thus demonstrating where the real power resides.

On those occasions when the kept strays beyond the boundaries laid out in the agreement or angers the keeper, it is then that the power carefully hidden from view and veiled behind propaganda, public protocols and cultural ritual is exhibited in a manner that leaves no doubt who is in charge. Just as the keeper may afford the kept a credit card or regular cash disbursements in order to further the illusion the kept is free and independent, those liberties can and will be quickly rescinded if for no other reason than as a reminder of who holds the power in the relationship.

 

To Protect and Serve.......Whom?

To Protect and Serve……Whom?

 

So too the power of the state, its sharp edges deliberately smoothed by propagandized historical storytelling and mass media assurances, is obvious to anyone looking down the barrel of a gun or being summoned to court. There is no doubt which party is expected to submit when the keepers of the peace and the purse pull you over or summon you for an audit. Ultimately the authority of the keepers is derived from the threat of force, though it is in the best interest of all parties involved to keep this fact carefully obscured behind a thousand sheer veils.

On the surface it would appear the participants never change in these agreements until death do they part. And for some this is the case. But what helps cement the illusion of freedom for the kept, and magnificent benevolence of the keepers, is the seeming ability to change the conditions of the agreement, with each able to leave in order to form a more perfect union with another kept or keeper. But while individual conditions and connections may change, the overall framework remains the same.

This is similar to a formalized agreement between a players’ union (for example the NFL Players Association) and the sport’s organizing consortium (i.e. the National Football League) which outlines the rules that govern the overall relationship between players and league (the Collective Bargaining Agreement). This enables both parties to negotiate everything and anything so long as it follows the general rules and regulations of the governing agreement. So too, the kept and keeper may both change lovers at will so long as they do not switch roles or do anything else that violates the governing agreement parameters. In some ways the keeper is just as constrained as the kept.

Of course the keeper retains a greater degree of flexibility with regard to timing, selection and opportunity, whereas the kept may not overtly ‘select’ a new keeper, but must ultimately be selected by the keeper. The kept may burnish his/her resume (appearance, social and sexual skills, education and training, athletic ability) to increase desirability. But with the market flooded with available (read cheap) kept individuals, ultimately the market is controlled by the keepers. In practice a keeper keeps more than one and often dozens, though there may be a favorite the keeper returns to time and time again.

So while there is some degree of certainty for the kept so long as they remain productive and compliant, there is still a good deal of risk realized from being kept, and most of this risk is arbitrary and unspoken. Needless to say this creates a smoldering sense of anxiety within the kept and over the long term contributes greatly to their neurosis. Essentially being kept is simply another form of slavery, one driven mostly by the willing participation of the kept in service to the keeper. Thus we witness modern day plantation living in all its glory and profit.

 

Future Apple HQ

The future Apple headquarters – Modern plantation living

 

I could go on and on with further examples of how “We the People” are a kept culture, including an in-depth exploration of the psychology underlying it. But why take all the fun out of it by rubbing our noses in our own excrement. The fact remains we for the most part willingly participate in our own slavery because the perks are too good to reject and the pain is not great enough to compel us to shake off the chains that binds us to our own servitude.

While I certainly understand how powerless the kept believe we/they are, and by extension how powerful the keepers remain, this is all an illusion designed to keep the kept (and in many respects the keepers themselves) mesmerized, seduced and sated. The powerful impression of system rigidity and momentum serves to maintain the status quo.

We rarely consider casting off our own chains because we consider our binds tied to everyone else’s and the system itself, thus exponentially complicating the problem in our minds. We conflate our personal condition with the overall systemic condition and vice versa, thus perpetuating the illusion with very little energy introduced to actually change our lives. After all, you can’t fight city hall……right? The funny thing is you don’t need to fight city hall to reformulate your ‘self’, just the desire and courage to do so.

If ever there was a perpetual motion machine invented, it is the social ‘agreement’ I just described. The small amount of energy introduced from outside the closed loop system to keep it churning is minor compared to the amount self produced by the active participation of both the kept and keeper as well as that generated by the ever evolving parameters within the much larger collective governing agreement. This energy, whether internal or external, is expressed primarily as emotion and when multiplied by 325 million, or 7 billion, is quite frankly the most powerful man made force in the universe.

While we blame the keepers for our kept condition, it is we who are ultimately to blame for our slavery primarily because we expect that we must change the world when all we need do is change ourselves. I often ask those around me, “How do you eat an elephant”, a seemingly impossible task. The answer is, of course, one bite at a time. But in order to do so we must be brutally honest with ourselves and recognize our contributing role in the collective farce and the personal conditions we must change if we are to slip the binds that tie.

The perks that come with being kept will not survive the breaking of the keep. And it is our denial of this fact that greatly contributes to the power of the keepers and of our being continuously kept. Pain must be endured and several steps back must be tolerated, even encouraged, if we are to eventually move forward. Centuries of prior collective experience and memory cannot be erased in days, weeks, even months. Nor can we expect others to blaze the trail if we are unwilling to walk the path, alone if necessary. Stop waiting for others to start the process and take your first bite of true freedom.

 

11-02-2014

Cognitive Dissonance

 

As the kept, there is no possibility of an exit. Only a promotion to house slave.

No Exit




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October Silver Coin Sales At US Mint Soar To Highest In Two Years

It never fails: any time there is a dump in precious metals through their paper representation (GLD, SLV, or futures) typically as a hedge to a rally in the dollar (because last week Japan materially increasing its fiat monetary base was also somehow negative for gold and silver) or to meet margin demands from cross-asset liquidation, demand for physical PMs soars confirming yet again that any connection between paper prices and physical demand no longer exists.

Whether it is China buying every ounce of gold it can find (whether to facilitate Commodity Funding Deals or to meet pure consumer or central bank demand), or US consumer rushing into retail outlets, the surge in physical metal buying is there like clockwork. Such as US Mint silver orders. As reported on Friday, sales of American Eagle silver coins by the U.S. Mint jumped 40 percent in October to the highest in 21 months, defying a slump in New York futures to the lowest in more than four years.

 

Sales surged to 5.79 million ounces, the most since January 2013, the month that set an all-time high at 7.5 million, Bloomberg reports. “Today, sales jumped 33 percent in one of the busiest times this year”, Tom Jurkowsky, a spokesman at the Washington-based mint, said in an interview. Last month’s total was 4.14 million.

“We saw demand surge over the past two days,” Michael Kramer, the president of New York-based MTB Inc., a dealer authorized to purchase coins directly from the mint, said in a telephone interview. “Business was almost triple than what it has been over the past few months.”

Logically, as a result of the surge in physical demand, silver futures for December delivery dropped 1.9 percent to close at $16.106 an ounce on the Comex in New York. Earlier, the price touched $15.635, the lowest for a most-active contract since Feb. 25, 2010.

Because when it comes to precious metals, thanks to the BIS and the central banks, Paper beats Rock every time.

The flipside, of course, is that continued selling of paper metals provides buyers of physical metals with ever lower entry prices, even if, or rather especially if it means, that quite soon, if not already, most gold miners will be selling gold below production cost as we showed back in 2013.

Needless to say, it would be quite fitting of the New Normal for gold (and silver) miners to suffer a cascade of bankruptcies, ultimately leading to zero physical extraction of precious metals even as the relentess naked shorting of gold and silver paper pushes the price of the metail to triple digits, or lower.




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

Divergence Aids Dollar, but No Currency War

There are three elements to the investment climate:  The divergence between the US on one hand and Europe and Japan on the other, the drop in many commodity prices, including oil, and the slowing of the Chinese economy.  

 

Last week, the divergence was driven home by policy makers.  The contrast could not be starker. The FOMC ended QE, and seemingly began prepare investors for a rate hike next year, and the Bank of Japan, surprise of extending its asset purchases from JPY60-70 trillion a year to JPY80 trillion.  

 

The euro fell to new cyclical lows not only as a result of the yen’s pull, but also from the general pessimism of the outlook for the region.  The ECB is still thinking on too small of a scale to be truly persuasive, and Germany is as determined as ever not to have its pocket picked.  Indeed, domestic political concerns, particularly electoral gains of the AfD, may limit Merkel and Schaeuble’s already restrained desire to compromise.   Moreover, the Greek government needs to cobble together a super-majority to pick a new president.  Failure to do so would force a snap election, and polls show the anti-EU Syriza party running ahead.  

 

There is little on the near-term event horizon that will significantly change the investment climate.   There is some talk that the  ECB could follow the BOJ and spring a surprise on investors. We suspect not.  However, Draghi will likely confirm that there are other assets, such as corporate bonds, and the ECB could purchase if needed.  Draghi argues that the impact of the ECB’s unorthodox monetary policy is constrained by the lack of sufficient structural reforms on the government level.  

 

With the FOMC statement acknowledging the improvement in the labor market, they may have stolen much of the thunder from this week’s jobs data.   Weekly jobless claims are making new lows.  In the first nine months of the year, the US economy grew a net 2.5 mln jobs.  Job growth has been remarkably steady.  The 3-month average is 224k, while the 24-month average is 229k.  

 

The outcome of the US mid-term elections is unlikely to be a mover of markets. The Republicans are favored to extend their majority in the House of Representatives and take a razor-slim lead in the Senate. It will though provide a sense of who the key players will be in next year’s fiscal drama in which the debt ceiling and sequester issues return.  Two other controversial acts come up for renewal next year:  the Export-Import Bank and the Highway Trust Fund, which funds the construction of an important part of the US infrastructure.  

 

While the ECB and the Reserve Bank of Australia meet next week, neither is expected to do anything, and last week’s moves by the Bank of Japan may overshadow modest tweaks in the official language.   It terms of its asset purchases; the ECB has chosen a course that puts it in action immediately, but slowly.  With some economic data stabilizing, and the launch of the ABS purchase program in November, there is not immediate need to unveil new initiatives.  

 

The Reserve Bank of Australia is also under no compulsion to adjust monetary policy.  It has been saying that monetary policy was on hold for an “extended period” for some time, it is vulnerable to being tweaked.   The RBA would prefer if the policy was eased through a depreciating currency. The Australian dollar is the only major currency that appreciated against the US dollar in the month of October.  Between the statement following the RBA meeting and the Monetary Policy Statement proper at the end of the week, a call for a weaker currency should be anticipated.  

 

The Bank of England meets.  It is widely anticipated to stand pat, and if so, it will not issue a statement.  The combination of an economy losing some earlier momentum (which should be confirmed in this week’s PMIs), easing inflation and negative real wage growth has seen the market push out rate hike expectations.  

 

Japan delivered not one but two shocks at the end of last week:  The BOJ’s moved to expand its asset purchase program and a dramatic shift in the government’s largest pension fund (GPIF, AUM ~JPY127 trillion or ~$1.14 trillion) allocation was announced Although officials have tried playing down the interconnection, but they need to be understood together.  

 

The increase of BOJ JGB purchases (~JPY30 trillion a year) largely, but not completely, offsets the amount of bonds GPIF is expected to sell as part of the more aggressive shift in its portfolio than expected.    Moreover,  other pension funds are likely to duplicate the GPIF strategy.   Already, before the doubling of GIPF’s allocation to domestic equities was officially announced, Japanese trust banks, operating on behalf of pensions, aggressively stepped up their purchases of Japanese shares.  Reports indicate that after buying JPY79 bln of Japanese equities in September, the trust banks bought JPY543 bln in the first three weeks of October.  

 

The BOJ itself tripled the amount of equities it will buy to JPY3 trillion.  It will focus on the JPX-Nikkei 400, which includes companies that embrace Abenomics and the return on equity.  In addition to this ETF, the BOJ will increase its REITs purchases too. 

 

Perhaps more controversial, and also an unspoken driver of the yen’s near free-fall before the weekend, was GPIF’s decision to double its allocation of international equities (from 12% to 25%).   It also will increase the share going into international bonds (from 11% to 15%).   This amounts to something on the magnitude of $152 bln purchases of foreign  stocks and bonds.   

 

The extent to which the QE created funds leak out of Japan can be debated.  The diversification of its portfolio will require GIPF to sell yen and buy foreign currencies is unambiguous.  More than two-thirds of the MSCI World Index is accounted for by three countries, the US, the UK and France.  Whatever benchmark GPIF will use, it is unlikely to be significantly different than the MSCI benchmark which covers about 85% of the free-float adjusted market capitalization of 23 developed countries.

 

Some journalists, like Ambrose Evans-Pritchard of the UK’s Telegraph and Michael Casey of the Wall Street Journal, have already claimed this to be a shot in the currency wars.   Casey focuses exclusively on the BOJ activity and does not even mention GPIF.  Evans-Pritchard spends most of his time talking about the bearish yen implications of the increased BOJ purchases, and mentions GPIF only at the very end of the his essay, and even then to dismiss it as “a clever way for Japan to intervene in the currency markets to hold down the yen.”  

 

Why hasn’t the world responded to the more than 30% depreciation of the yen under Abenomics?  Casey warns us it is just a matter of time, but offers no explanation for why, as he recognizes, that “the biggest players in the global monetary system have mostly resisted direct tit-for-tat responses to Japan’s yen-weakening moves over the past two years.”  Evans-Pritchard suggests that the  QQE was launched when the yen was terribly over-valued, but this time it is not.

 

Casey and Evans-Pritchard are well versed in economic theory.  A weaker currency is supposed to boost exports, and squeeze Japan’s competitors.  In practice, the situation is considerably more complex.  Japanese companies do not appear to be using the weaker yen to gain market share as economic theory would suggest. Indeed, Casey’s colleague at the Wall Street Journal, Takashi Nakamichi noted at the end of July, “[Japan’s] export volumes have hardly budged. Many manufacturers opted to keep their export prices little changed to enjoy inflated foreign earnings”. 

 

In September, the most recent data available, China’s exports were up over 15% on a year-over-year basis.  Despite the pressure on the yen-yuan rate that Evans-Pritchard notes, it is hard to make a case that the weakening yen has sapped Chinese exports.   Both Casey and Evans-Pritchard cite South Korea as another victim of Japan’s attempt to drive the yen lower.  South Korean exports were up nearly 7% in the year through September over the comparable period in 2013.       Moreover, we note that in both of this year’s US Treasury reports on foreign exchange and the international economy, South Korea was cited for not permitting more currency adjustment.  The OECD measures of purchasing power parity have the won some 25%.

 

In market lore, Japanese postal savings, like Kampo, was thought to time its purchases and sale of foreign currencies to assist MOF objectives. The long-discussed changes to the allocation of the government’s largest pension fund cannot be regarded as intervention, regardless of appearances.  Motivations matter.  The movement of assets out of low-yielding Japanese fixed income market is aimed at enhancing returns and addressing the looming pension challenge in the aging Japanese society.   Similarly, if Calpers, (California Public Employees Retirement System) changes its allocation to boost holdings foreign assets, it too is not intervention. 

 

That neither the expansion of QQE nor the diversification of Japanese pension money reaches the threshold of currency manipulation does not mean that Japan’s strategy will not face objections.   This more aggressive monetary policy stance, and augmented by the diversification of Japanese savings seems to be instead of the kind of structural reforms that will boost Japan’s growth potential.   The first arrow of Abenomics, fiscal stimulus, was blunted by the sales tax increase.  The third arrow of Abenomics, structural reforms, have largely disappointed local and international investors. 

 

Japanese policy makers have resorted to the easy course, relying ever more on the second arrow.  The BOJ’s new measures mean that it will be expanding its balance sheet about 1.4% of GDP a month.  This is around three times Fed’s QE pace.   And even with this, the BOJ cut its forecast for inflation  in FY15 to 1.7% from 1.9% and left its forecast for growth unchanged at 1.5%.  The world needs a stronger Japan, and it is not clear that Japan has found that path yet. 

 




via Zero Hedge http://ift.tt/1t1TX90 Marc To Market

The American Dream: “You Have To Be Asleep To Believe It”

It’s never gonna get any better, be happy with what you got… because the ‘owners’ of this country don’t want that. The ‘real’ owners of America – the big wealthy business interests that control things and make all the important decisions – got you by the balls… What they don’t want is a population of well-educated people capable of critical thinking.”

 

Three minutes of uncomfortable truth…




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

The Experiment that Will Blow Up the World

Submitted by Pater Tenebrarum via Acting-Man blog,

The BoJ Goes Even Crazier

It has been clear for a while now that the lunatics are running the asylum in Japan, so perhaps one shouldn’t be too surprised by what happened overnight. Bloomberg informs us that Kuroda Jolts Markets With Assault on Deflation Mindset.

The policy hasn’t worked so far, in fact, it demonstrably hasn’t worked in Japan in a quarter of a century. Therefore, according to the Keynesian mindset, we need more of it. Mr. Kuroda therefore delivered a surprise spiking of the punchbowl that immediately impoverished Japan’s consumers further by causing a sharp decline in the yen:

“Today’s decision to expand Japan’s monetary stimulus may be regarded as shock treatment in the central bank’s effort to affect confidence levels. Bank of Japan Governor Haruhiko Kuroda’s remedy to reflate the world’s third-largest economy through influencing expectations saw the yen sliding and stocks climbing.

 

Kuroda led a divided board in Tokyo in a surprise decision to expand unprecedented monetary stimulus. Bank officials hadn’t provided any hints in recent weeks that additional easing was on the cards to help reach the BOJ’s inflation goal. Kuroda, 70, repeatedly indicated confidence this month that Japan was on a path to reaching his 2 percent target in the coming fiscal year. Just three of 32 economists surveyed by Bloomberg News predicted extra easing.

 

“We have to admit that this is sort of a second shock — after we had the first shock in April last year,” said Masaaki Kanno, chief Japan economist at JPMorgan Chase & Co. in Tokyo, referring to the first round of stimulus rolled out by Kuroda in 2013. Kanno, who used to work at the BOJ, said “this is very effective,” especially because it comes the same day as the government pension fund said it will buy more of the nation’s stocks.

(emphasis added)

So why is there allegedly a “need to combat the deflation mindset”? Below is a chart of the recent increases in Japan’s CPI.

In actual practice, it matters little how they have come about – the fact that CPI was inter alia boosted by a hike in consumption taxes does not alter the fact that every consumer in Japan is now getting fewer goods and services for his income and savings than before. No consumer is going to a shop and saying to himself “the fact that things are now vastly more expensive than before somehow shows we are still in deflation, because it has happened for transitory reasons”. All he knows is that he is getting less for his hard-earned money. Mr. Kuroda is evidently not moved by such considerations.

  1-japan-inflation-cpi

Japan’s CPI is recently growing at a 3.2% annual rate. Obviously, this means one must “combat the deflation mindset” – click to enlarge.

 

 

Bloomberg’s article continues along precisely these lines:

“A decline in demand following April’s sales-tax increase and the tumble in oil prices are putting downward pressure on prices in Japan. Today’s decision came hours after a government report showed that core inflation eased to the slowest pace in six months in September.

 

The 3 percent gain in core consumer prices — the BOJ’s main gauge — was just 1 percent with the effects of April’s sales-levy hike stripped out.

 

The BOJ today reduced its estimate for the core consumer price index, which excludes fresh food and increases to sales tax, to 1.7 percent for the fiscal year through March 2016, from 1.9 percent previously. The bank kept its forecast at 2.1 percent for the following year.

 

The central bank won’t hesitate to act again if needed, Kuroda said, pointing out there’s still room for additional measures. The BOJ acted as skeptical views mount over the effect of quantitative easing, according to Citigroup Inc. economists Kiichi Murashima and Naoki Iizuka. “If the impact of today’s action on the economy and prices proves limited, the impact on financial markets may also prove short-lived,” they wrote in an e-mailed note.

The above is a corollary to the recently heavily propagated idea that falling oil prices are somehow “bad” for oil consuming countries because they might lead to lower prices! You can read this nonsense in every statist rag, from the Financial Times to the Economist. If this doesn’t prove how utterly absurd the basis of today’s central bank policies is, nothing ever will. These people have taken complete leave of what was left of their senses.

Although it shouldn’t be necessary to say this, here is a reminder: rising stock prices are not “proof” that things are fine. If that were the yardstick by which to measure the “success” of central bank money printing, the best performing economies in the world would be those of Venezuela, Argentina and Iran.

  2-BoJ assets

BoJ credit, as represented by the asset side of its balance sheet. Still not enough! – click to enlarge.

 

Kuroda’s Policy Will End in A Catastrophe

In order to explain why the pursuit of Kuroda’s policy is edging ever closer to a catastrophic outcome, we have to delve a bit into the details of Japan’s monetary data. In spite of the BoJ’s “QE” reaching record highs, it mainly creates bank reserves and furthers carry trades. The economy sees no private credit growth so far.

Commercial banks in Japan continue to shrink the stock of fiduciary media – this is to say, they are reducing outstanding credit, which makes more and more unbacked deposit money disappear. Hence, Japan’s money supply growth has recently decline to a mere 4.3% year-on-year, as the rate of contraction in outstanding fiduciary media (i.e., uncovered money substitutes) has accelerated to 9.4 annualized in spite of the BoJ’s pumping.

The reason is a technical one: contrary to the Fed, the BoJ buys most of the securities it acquires in terms of its “QE” operations directly from banks – this creates new bank reserves at the BoJ, but no new deposit money. By contrast, the Fed buys only from primary dealers, which are legally non-banks (even though most of them belong to banks). This creates both bank reserves and deposit money concurrently. The BoJ’s actions can only directly inflate the money supply to the extent it buys securities from non-banks, e.g. when it buys stocks in REITs to prop up the Nikkei.

Below is a chart showing the annual growth rate of Japan’s narrow money supply M1, which is essentially equivalent to money TMS (it comprises demand deposits and currency).

 

3-Japan-M1-y-y

Japan’s 12-month money supply growth has declined to 4.3%, in spite of the BoJ’s pumping  – click to enlarge.

 

In short, the effectiveness of the BoJ’s pumping depends on the extent to which commercial banks are prepared to employ additional bank reserves to pyramid new credit atop them and thereby create additional fiduciary media. Japan’s banks are doing the exact opposite, mainly because there simply isn’t sufficient demand for credit. Why would anyone borrow more money, given Japan’s demographic situation?

However, one result of this is that an ever larger portion of Japan’s money supply actually consists of covered money substitutes – deposit money that is “backed” by standard money. Covered money substitutes have grown by more than 77% over the past year.

Bank reserves can be transformed into currency when customers withdraw cash from their deposits, hence to the extent that deposit money is “backed” by bank reserves, it ceases to be a form of circulation credit. The narrow money supply in total now amounts to roughly 595 trillion yen; of this, roughly 139 trillion yen consist covered money substitutes and 83.4 trillion yen consist of currency (outstanding banknotes in circulation). Thus the stock of fiduciary media has shrunk to 372.6 trillion yen.

 

4-Japan-M1

Japan: currency plus demand deposits = M1 = true money supply – click to enlarge.

 

And yet, in spite of Japan’s money supply growing much slower than money supply in both the US and the euro area, the yen continues to implode:

 

5-Yen

The yen’s plunge is accelerating   – click to enlarge.

 

The yen’s ongoing collapse suggests that Kuroda will eventually get his inflation wish, as import prices continue to rise. In fact, Japan recently regularly reports trade deficits, which is inter alia a result of the plunge in the yen’s external value. Currently, this is offset to some extent by the decline in commodity prices, but given that commodities are by now extremely cheap relative to financial assets such as stocks and bonds, it becomes ever more likely that this offset will eventually reverse.

 6-japan-balance-of-trade

An era of trade deficits has begun in Japan, concurrently with the decline in the yen   – click to enlarge.

 

The question is though, why is the yen falling so much if Japan’s money supply isn’t expanding at a very strong rate? We believe the answer to this question is to be found in the following statistics:

 7-Japan Debt To GDP Vs. The World

Gross government debt to GDP – Japan is the undisputed public debt king of the developed world – click to enlarge.

 

It is well known that Japan has a very high public-debt-to GDP ratio. Even with the recent economic upswing, its budget deficit for the current year is projected to clock in at more than 7% of GDP – the latest in a string of huge annual deficits. What is less well known is the ratio of public debt to tax revenues, which is actually the more relevant datum:

 

8-Debt to fiscal revenue

Government debt relative to tax revenues   – click to enlarge.

 

We conclude from this that the markets are pouncing on the yen because they are forward-looking: the BoJ is monetizing ever more government debt and this is expected to continue, because the public debtberg has become too large to be funded by any other means.

In spite of the relatively low money supply growth this debt monetization has produced so far, it also creates the perverse situation that an ever greater portion of the government’s outstanding stock of debt consists actually of debt the government literally “owes to itself”.

On the surface, this monetarist wizardry suggests that one can indeed “get something for nothing” – but that just isn’t true. Deep down, market participants know that it isn’t true – so even though they are celebrating the promise of more liquidity by sending Japanese stocks soaring, they are also creating a fault line – and that fault line is the external value of the yen.

Among the industrialized welfare states, Japan is the one that is closest to government bankruptcy. Even with interest rates at record lows, the proportion of debt growth that is caused by mounting debt servicing costs alone has begun to rise in recent years due to the sheer size of the public debt outstanding. In other words, the government is by now in a so-called “debt trap”.

It has only been able to avoid more grave repercussions so far because Japan has run a current account surplus for a long time, and and only very few foreign investors therefore own JGBs. Japan’s own state-owned financial institutions such as the Post Bank and the state-owned pension fund have invested a large part of the population’s savings predominantly in JGBs.

And yet, the seeming calm rests on what appears to be increasingly misplaced confidence. All that is needed to blow the entire scheme to smithereens is an event that leads to a cracking of this confidence. Once a critical mass of economic actors becomes convinced that the plan is indeed to “make the public debt disappear” by monetization, and given what markets have done so far, it seems increasingly likely that it is the yen that will crack first. However, the sign that the ship is actually capsizing will be when JGB values begin to plummet in spite of the BoJ’s buying of government debt.

The growing amount of bank reserves piling up as a corollary to the BoJ’s exploding holdings of JGBs are like tinder waiting for a spark to set it off. Since Japan’s financial institutions hold large amounts of JGBs as ‘risk free’ assets augmenting their capital, their solvency will come into doubt should JGBs begin to decline in value. This is likely to happen should the fall in the yen’s external value get out of control. In that event, large portion of the covered money substitutes sitting in accounts may actually be converted into currency by panicked depositors. Then Mr. Kuroda will be reminded of the old saying “be careful what you wish for”.

 

Conclusion:

Japan’s aging population needs rising prices like a hole in the head. The more “successful” Mr. Kuroda becomes in forcing prices up, the less money people will have to spend and invest. The economy will weaken, not strengthen, as a result. The advantages the export sector currently enjoys are paid for by the entire rest of the economy. moreover, even this advantage is fleeting. It only exists as long as domestic prices have not yet fully adjusted to the fall in the currency’s value.

If one could indeed debase oneself to prosperity, it would long ago have been demonstrated by someone. While money supply growth in Japan has remained tame so far, the “something for nothing” trick implied by the BoJ’s massive debt monetization scheme is destined to end in a catastrophe unless it is stopped in time. Once confidence actually falters, it will be too late.

 

JAPAN-TOKYO-BOJ-PRESS CONFERENCE

Haruhiko Kuroda believes the economy is a machine, and he just needs to pull, the right levers.




via Zero Hedge http://ift.tt/1o59TM7 Tyler Durden