Tag: finance

In a striking admission that Mario Draghi’s “strategy” about the ECB’s Private QE future, aka ABS monetization plan, is nothing short of converting Europe’s central bank into a “bad bank”  repository for trillions in bad and non-performing debt, the FT yesterday reported that “Mario Draghi is to push the European Central Bank to buy bundles of Greek and Cypriot bank loans with “junk” ratings, in a move that is set to exacerbate tensions between Germany and the bank.” It is expected that the former Goldmanite will unveil details of a plan to buy hundreds of billions of euros’ worth of private-sector assets at tomorrow’s ECB meeting.

From the FT:

The ECB’s executive board will propose that existing requirements on the quality of assets accepted by the bank are relaxed to allow the eurozone’s monetary guardian to buy the safer slices of Greek and Cypriot asset backed securities, or ABS, say people familiar with the matter.

 

Mr Draghi’s proposal is designed to make the programme of buying ABS, which are bundles of packaged loans, as inclusive as possible. If it is backed by the majority of members of the ECB’s governing council, the central bank would be able to buy instruments from banks of all 18 eurozone member states.

 

However, the idea is likely to face staunch opposition in Germany, straining already tense relations between the ECB and officials in the eurozone’s largest economy. Bundesbank president Jens Weidmann, who also sits on the ECB’s policy making governing council, has already objected to the plan to buy ABS, which he says leaves the central bank’s balance sheet too exposed to risks.

While admirable, at least for those who follow the Keynesian religion, Draghi’s revelation will come two days after Europe just reported the lowest inflation in the Eurozone since 2009: something which apparently is bad for the common person, when in reality ordinary folks couldn’t be happier that their saving would be worth more tomorrow than today. It is only the massively bloated, indebted public and private insitutions that are desperate for the ECB’s to unleash a raging inflation inferno that will wipe away the value of the debt crushing their equity.

While the safer slices – or senior tranches – of Greek and Cypriot ABS only make up a tiny proportion of Europe’s securitisation market, it would free up billions in liquidity for banks in two of the eurozone’s weakest economies, and potentially boost lending to credit-starved smaller businesses in the currency area’s periphery.

The reason the ECB is limited currently in its injection of liquidity into insolvent Greece and deposit-confiscating Cyrpus is because currently “the ECB only accepts ABS as collateral in exchange for its cheap loans if they hold a minimum rating of at least triple B, the lowest investment-grade rating. The ratings on senior tranches are capped by the sovereign rating of the country where the bank is based. If those rules were to apply to the ECB’s buying plan, the central bank could not accept any securitisations of Greek or Cypriot issuers. Standard & Poor’s rates Greece and Cyprus as single B sovereigns – a sub-investment-grade rating. Fitch rates Greece as single B, and Cyprus as single B-minus. Moody’s rates Greece Caa1 and Cyprus as Caa3.”

Sadly, it was never the intention of the ECB to boost lending; the Frankfurt bank which is about to become the Frankfurt bad bank has only one focus – how to backstop and, if possible, eliminate several hundred billion in bad loans in Greece alone (and over a trillion around the Eurozone). Bloomberg explains the problem as was framed by Zero Hedge back in 2012:

To Aristides Belles, it’s clear what’s blocking Greece’s recovery: a quiet build-up of about 164 billion euros ($208 billion) in bad loans.

 

“The inability of Greek companies to repay their loans to banks and their dues to the state is clearly holding back Greece’s return to growth,” said the chief executive officer of Athens-based Nireus Aquaculture SA (NIR), a producer of sea bream, sea bass and processed fish. “It’s more necessary than ever for all parties involved — banks, corporates and the state — to agree on an arrangement.”

 

As Greece and its euro-area creditors meet tomorrow to prepare for talks on repayment terms for its public debt, a less-visible crisis is looming on another front: bad debts of households and companies. The borrowings, amounting to about 90 percent of Greece’s gross domestic product, are weighing on the country’s hopes of recovering from the steepest and longest recession on record.

 

Non-performing loans at Greece’s banks have reached almost 80 billion euros, according to the country’s Growth and Competitiveness Minister Nikolaos Dendias. To top that, Greek households and corporations had overdue taxes of 69.2 billion euros in August, data from the public revenue secretariat show. Also, “collectible” social arrears to pension funds exceed 14.5 billion euros, according to labor ministry figures.

 

“Some of this debt can never be recovered and should be written off,” said Panos Tsakloglou, a professor at the Athens University of Economics and Business who was Greece’s representative in the working group of senior euro-area finance ministry officials until June.

Sadly, if one country starts writing off the bad debt, and there is lots of it, all countries will start writing off the bad debt, and next thing you know you have a Cyprus bail in which sucks in trillions in deposits to finally match the bank books for what a viable balance sheet should look like. Of course, if instead the ECB were to step in and somehow monetize said debt, then all would be well

A perfect plan, some would say. Maybe, but not “ze Germans”

According to Handelsblatt, Germany was quick to throw up all over the German proposal, saying that EU officials see “widespread concern” among EU countries about ECB asset backed security program.

The Germany publication made it quite clear how the Germans feel: “Germany rejects Draghi’s pledge for govt-backed guaranties for ABS purchase; “that won’t happen,” the newspaper cites an unidentified govt official as saying. Finland, Netherlands oppose ABS-plans; France rejects giving guarantees

Former ECB chief economist Juergen Stark reiterates the ECB will take on enormous risks with ABS purchases and transform itself into a European “bad bank”, Handelsblatt cites him as saying

So with the ECB bankers set to meet tomorrow, watch for sparks starting to fly, unless of course, Germany is once again just doing the good cop, bad cop routine. After all, let’s not forget that the one bank which will be in biggest need of a bad bank ECB is none other than the bank with the greatest notional derivative exposure in the world: Germany’s own Deutsche Bank.

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

A quick anecdote that should quickly confirm just how broken everything is: earlier today MarkIt reported European manufacturing data that was atrocious, with both German and European PMIs tumbling to levels not seen since mid-2013, and with Europe’s growth dynamo now in a contraction phase clearly signalling what has been long overdue: a European triple dip recession. So what happens? Moments later Germany sells €4.1 billion in 10 Year paper at a record low yield below 1%…. even as the Bundesbank had to retain a whopping 17.84% of the auction, the highest since June, with only €4.663 Bn in bids for the €5 Bn target, the first miss since May 21. So hurray for the central banks, boo for the economy, and as for that mythical creature, once known as bond vigilantes, our condolences: good luck figuring out what the hell just happened, and good luck recalling what a free market is.

That, of course, merely adds to the latest news in the past 24 hours, where we learned that Ebola, despite the fervent promises of the administration otherwise, has finally made landfall in the US in an uncontrolled manner; that, and of course, the Hong Kong protests which thanks to the national holiday today, will likely see the biggest participation yet. But what is most disturing is what Goldman said in its summary of yesterday’s trading day: “Shorts were pressed with the “most short” basket closing down -1.7%.” That is truly terrifying because it actually makes sense: and nothing has made sense since the central banks made a mockery of capital markets six years ago.

And while US equity futures have gone nowhere fast in the overnight session following yesterday’s weak trading session, the Europen periphery once again outperforming the core as details of the ECB’s ABS buying strategy begin to emerge, suggesting the ECB could purchase high-risk southern European ABS in order to ease the monetary transmission mechanism – including Greek and Cypriot debt specifically. As such, the Athens Stock Exchange has risen as much as 2%, with the GR/GE 10yr yield spread collapsing by up to 40bps. The DAX future topped yesterday’s highs in early trade as adidas shares rose over 4% after announcing a EUR 1.5bln share buyback scheme. The FTSE-100 however, is seeing little reprieve as fears that J Sainsbury could review their dividend policy in the wake of trimming their sales forecast in a trading update (Sainsbury’s dividends had been sacred under Justin King). UK retailers are once again under pressure, with YTD losses in the major UK supermarkets now running at 30%-45%. 11 out of 19 Stoxx 600 sectors rise; banks outperform, oil & gas cos. underperform. 57.8% of Stoxx 600 members gain, 38.8% decline. Eurostoxx 50 +0.1%, FTSE 100 -0.2%, CAC 40 -0.1%, DAX +0.2%, IBEX +0.5%, FTSEMIB +0.1%, SMI +0.1%

A number of Asian markets are closed overnight as it is National Day in China. Looking at those that are open however, the Nikkei is down -0.6% after the USDJPY briefly touched 110 then retreated, and iTraxx Asia IG tighter by 1bp, however the MSCI Asia index is down -0.4%, driven partly by news that pro-democracy protestors in Hong Kong are blocking roads at the start of the national holiday. In other news overnight we got China’s  manufacturing PMI which came in just ahead of expectation at 51.1.  Asian stocks fall with the Nikkei outperforming and the Kospi underperforming. MSCI Asia Pacific down 0.4% to 139.7. Nikkei 225 down 0.6%, Hang Seng down 1.3%, Kospi down 1.4%, Shanghai Composite up 0.3%, ASX up 0.8%, Sensex down 0.1%. 0 out of 10 sectors rise with consumer, industrials outperforming and energy, financials underperforming

In the US we will get the September ADP employment report (expected at 205k), PMI (expected at 57.9) and Manufacturing ISM (expected at 58.5). A busy start to Q4. Roll on Xmas!!

Market Wrap

• S&P 500 futures down 0.1% at 1964
• Stoxx 600 up 0.1% to 343.3
• US 10Yr yield unchanged at 2.49%
• German 10Yr yield down 1bps to 0.94%
• MSCI Asia Pacific down 0.4% to 139.7
• Gold spot down 0.1% to $12081/oz

Bulletin Headline Summary from Ransquawk and Bloomberg

• German Manufacturing PMI indicates economic contraction for the first time in five quarters, however Germany manages to sell 10yr debt at below 1% for the first time in recorded history
• Greek assets surge as reports suggest the ECB will drop quality requirements in their ABS purchase program to make junk-rated debt eligible for purchase
• Looking ahead, markets receive their first clue for Friday’s NFP today, with ADP Employment Change due at 1315BST/0715CDT, followed by ISM Manufacturing at 1500BST/0900CDT.
• Treasuries steady in overnight trading as Euro-area factories cut prices in September and German manufacturing dropped, heightening expectations of more aggressive asset purchase program being announced at tomorrow’s ECB meeting.
• U.S. dollar extended its longest winning streak in more than two years before a report that may show U.S. hiring increased
• The Federal Reserve is stepping up its oversight of high-risk leveraged loans, shifting to a deal-by-deal review after its previous industry-wide guidelines were largely ignored by banks
• Germany auctioned 10-year bonds to yield less than 1% for the first time, as a weakening euro-area economy and the prospect of further stimulus from the European Central Bank reduce borrowing costs across the region
• Mario Draghi’s pledge to boost the region’s economy via ABS purchases has helped hand investors in the $317b market the best returns in 20 months
• After proclaiming in 2007 that the ruble was poised to become a haven for global investors, Putin has watched it fade, a victim of his nation’s stagnating economy
• Hong Kong’s Chief Executive Leung Chun-ying was jeered by pro-democracy demonstrators at a ceremony to hoist the Chinese flag as the city entered the sixth day of protests seeking free elections
• Sovereign 10Y yields mostly lower, led by Greece (-16.3bps). USD strengthens, at highest level since June 9, 2010. Asian and European stocks  mostly lower. U.S. equity-index futures down. WTI crude higher, gold, copper rise

US Event Calendar

• 7:00am: MBA Mortgage Applications, Sept. 26 (prior -4.1%)
• 8:15am: ADP Employment Change, Sept., est. 205k (prior 204k)
• 9:45am: Markit US Manufacturing PMI, Sept. final est. 57.9 (prior 57.9)
• 10:00am: ISM Manufacturing, Sept., est. 58.5 (prior 59); ISM Prices Paid, Sept., est. 57 (prior 58)
• 10:00am: Construction Spending m/m, Aug., est. 0.5% (prior 1.8%)
• Total Vehicle Sales, Sept., est. 16.8m (prior 17.45m) Central Banks
• 12pm: Dudley speaks in New York
• 1pm: Lockhart speaks in Atlanta
• 8pm: Bullard speaks in Mississippi

FIXED INCOME

At auction, Germany failed to draw enough bids (excluding Buba retention) to meet their target in a 10yr Bund auction, however the remaining investors were willing to accept yields below 1% for the first time. The lower yield did little to dampen appetite in Bund futures, which rose to contract highs of 149.93 in the minutes following the auction. Elsewhere, Gilt futures traded higher throughout the morning, despite the 2020 supply from the DMO (which passed by smoothly) as UK Manufacturing PMI fell to April 2013 lows, primarily driven by new orders, which fell to 18 months lows.

EQUITIES

The periphery once again outperforming the core as details of the ECB’s ABS buying strategy begin to emerge, suggesting the ECB could purchase high-risk southern European ABS in order to ease the monetary transmission mechanism – including Greek and Cypriot debt specifically. As such, the Athens Stock Exchange has risen as much as 2%, with the GR/GE 10yr yield spread collapsing by up to 40bp
s. The DAX future topped yesterday’s highs in early trade as adidas shares rose over 4% after announcing a EUR 1.5bln share buyback scheme. The FTSE-100 however, is seeing little reprieve as fears that J Sainsbury could review their dividend policy in the wake of trimming their sales forecast in a trading update (Sainsbury’s dividends had been sacred under Justin King). UK retailers are once again under pressure, with YTD losses in the major UK supermarkets now running at 30%-45%.

FX

EUR/USD fell back below 1.26 as Germany’s final manufacturing PMI was revised below 50.0 – indicating contraction for the first time in 15 months,  however yesterday’s lows at 1.2571 provide a modicum of support. Overnight, the USD began October on a very strong note, lifting USD/JPY above 110.00 for the first time since mid-2008 – however profit-taking quickly corrected to pair to nearer 109.75 ahead of the US open. AUD fell sharply against all of its peers in the wake of poor Australian retail sales which came in at a 4-month low (+0.1% vs. Exp. +0.4%). Consequently, AUD/USD tumbled to trade just 6 pips shy of technical support seen at 0.8660 (YTD low) which is broken would see the pair trade at its July 2010 levels.

COMMODITIES

WTI and Brent crude futures trade slightly higher after yesterday’s sharp sell-off, with Goldman Sachs’ head of commodities Currie repeating that the commodities super-cycle has come to a conclusion but would still recommend having an allocation in commodities. As such, Currie recommends aluminium and zinc over copper and gold, and does not expect a collapse in the WTI crude price. Today’s DoE crude oil inventories now take focus, with the headline expected to show a build of 1.5mln bbls.

* * *

DB’s Jim Reid as usual concludes the overnight news summary

In our long-term study we noted that the G7 government debt to GDP level has continued to rise and is at its highest levels in observable history outside of WWII. While we discussed how government bonds were probably in a bubble now, we considered how this might have to continue for longer than seems sensible as central banks may need to ensure that yields are low enough to comfortably fund the debt in spite of these ever higher debt levels. If yields rise too much then solvency questions might be asked again. On this theme, earlier this week the 16th annual Geneva Report was released – entitled “Deleveraging? What Deleveraging?”. The piece discusses how global total debt-to-GDP numbers are hitting new post-2001 highs after a brief growth pause in 2008-09. The report shows that up to 2008 this rise in leverage was driven by DM economies, however since 2008 it has been led by EM economies, most notably China. In terms of the ability of economies to carry this debt, the report notes that the crisis caused a permanent decline in the growth rate of developed economies and that growth in emerging markets (most notably China) has also been slowing since 2008. Much as we raised concerns over the ability of governments to manage their debt’s if rates rise, the Geneva Report highlights how debt capacity will be under pressure if the actual real interest rate settles above its equilibrium level, a situation which would be likely to come about in economies facing the twin pressures of falling inflation and the zero lower bound, as well as those nation’s facing possible increases in risk due to large legacy debts. The report concludes by arguing that rates should be raised cautiously as given the above context and still high leverage levels, allowing real rates to rise above equilibrium levels could kill the recovery and make future deleveraging even harder. The report also calls for ECB public QE, arguing that further policy procrastination risks the medium-term resurgence of pressures on Eurozone sustainability. It certainly makes for interesting reading if you have some spare time. It sounds bad but if it means central banks stay aggressive for longer than credit should continue to be in demand for yield purposes and the artificially low default rate should continue.

Whilst were on the topic of eurozone concerns, yesterday was a big day for economic data and saw the release of various inflation numbers through the region. Italy’s September inflation read suggested an economy now in outright deflation as YoY Harmonised CPI remained at a multi-decade low of -0.2%. The broader eurozone core inflation rate flash estimate for September slipped to +0.7% YoY whilst French August PPI’s came in below expectation at -1.4% YoY. This all raised QE expectations further in markets. Tomorrow’s ECB meeting is perhaps far too soon for anything radical, but the Q&A will be very interesting. In better economic news German August MoM retail sales and French August MoM consumer spending both exceeded forecasts, rising +2.5% and +0.7% respectively, whilst UK Q2 GDP was revised up +0.1% to +0.9% QoQ. We also got the September German and August Italian unemployment rates with the German read coming in at its estimated level (6.7%) whilst the Italian read at +12.3% beat estimates (of +12.6%). In other news yesterday the Catalan government said it was halting its referendum publicity campaign whilst it appealed Monday’s Supreme Court decision to suspend the region’s independence referendum scheduled for November 9th as it considered the Spanish government’s appeal against it.

On the other side of the Atlantic the data was weak with the September Chicago PMI and Consumer Confidence reads both missing estimates at 60.5 and 86 respectively. S&P/Case-Shiller house prices also disappointed as they fell by -0.5% MoM in July vs a forecast of no change.

Whilst the data was mixed, European markets were pretty much one way yesterday, probably on fresh QE hopes. The Stoxx 600 rose +0.6% whilst the CAC, IBEX 35 and FTSE MIB rose +1.33%, +1.57% and +1.82% respectively. Credit also had a strong day with iTraxx Main and Xover -4bps and -14bps tighter respectively. These gains were probably helped by the move in the euro, as EURUSD fell -0.4%. Over in the US equity markets underperformed with the S&P 500 and NASDAQ ending the day down -0.3%. US credit outperformed however, with CDX IG and CDX HY tightening by -3bps and -14bps respectively after a difficult and under-performing few days.

A number of Asian markets are closed overnight as it is National Day in China. Looking at those that are open however, the Nikkei is up +0.1% and iTraxx Asia IG tighter by 1bp, however the MSCI Asia index is down -0.4%, driven partly by news that pro-democracy protestors in Hong Kong are blocking roads at the start of the national holiday (Bloomberg News). In other news overnight we got China’s manufacturing PMI which came in just ahead of expectation at 51.1.

Looking to the day ahead we have September manufacturing PMI’s in Europe with the reads for Italy (expectation: 49.5), France (expectation: 48.8), Germany (expectation: 50.3), the Eurozone (expectation: 50.5) and the UK (expectation: 52.7). In the US we will get the September ADP employment report (expected at 205k), PMI (expected at 57.9) and Manufacturing ISM (expected at 58.5). A busy start to Q4. Roll on Xmas!!

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

If the European triple-dip alert was barely glowing a muted red until this morning, then following the latest German PMI data, which tumbled to 49.9 from 50.3, below the 50.3 consensus, and is the first contractionary print in 15 months, then they are now screaming a bright burgundy. And while the European recession has now clearly made its way to the core, it wasn’t just Germany: French PMI continued to be solidly in a contracting phase, at 48.8, unchanged from the previous month, the overall European Manufacturing PMI also missed and declined, dropping from a flash reading 50.5 to only 50.3, which was a 14 month low, with the average PMI reading for Q3 the lowest since a year ago, and as MarkIt summarized, “Eurozone manufacturing edges closer to stagnation.” Have no fear, though, Mario Draghi and his monetization of Greek Junk Bonds will fix everything!

Finally, not helping matters was the UK PMI which too tumbled from 52.5 (revised lower to 52.2) to 51.6, far below the 52.7 expected increase, and the lowest print since April 2013.

In other words, the world’s central bankers, except the Fed for now of course, have been given the MarkIt green stamp of approval to do what has so far failed to do anything to boost the global economy on a sustained basis: CTRL-P.

The full breakdown of today’s European manufacturing data:

 

Here is what a German triple dip looks like:

 

And a European triple-dip:

 

Not even PMI could spin the data in a favorable light. Here is what Oliver Kolodseike said:

“September’s manufacturing PMI results paint a worrying picture of the health of Germany’s goods-producing sector. The headline PMI fell to its lowest level in 15 months, heavily weighed down by the sharpest drop in new orders since the end of 2012. Surveyed companies reported that a weakening economic environment, Russian sanctions and subdued growth in key export destinations were reasons behind the disappointing reading.

 

“Moreover, deflationary pressures persisted into September, with both input and output prices falling since the previous month. This was the first time since March that both price indices registered below the neutral 50.0 mark.

 

“On a positive note, September marked an end to a three-month period of job cuts, and despite declining order intakes, companies reported further  (albeit weaker) production growth and a marginal rise in buying activity.”

And Europe in general, from MarkIt’s Chris Williamson. Sorry, recovery fanatics. Not this time (again).

“September’s eurozone PMI makes for gloomy reading. The euro area’s manufacturing economy has lost the growth momentum seen earlier in the year, lurching closer to stagnation. The near-term outlook also looks worrying. Order books are now deteriorating for the first time since June of last year, suggesting output could start to fall as we move into the final quarter of the year.

 

“Not surprisingly, firms are focusing on cost-cutting, resulting in an ongoing lack of job creation and sending a depressing signal of little hope for any reduction in the region’s near-record unemployment rate.

 

“Companies are also cutting prices at the expense of profit margins as they strive to boost sales. In a sign of spreading deflationary pressures, prices fell in all countries surveyed for the first time in over a year.

 

“In a sign of spreading economic malaise, Germany, Austria and Greece all joined France in reporting manufacturing downturns in September. What’s especially perturbing is that Germany’s PMI fell into contraction for the first time since June of last year, suggesting the region’s northern industrial heartland has succumbed to the various headwinds of weak demand within the euro area, falling business and consumer confidence, waning exports due  to the Ukraine crisis and Russian sanctions.

 

“The weakening manufacturing sector will intensify pressure on the ECB to do more to revive the economy and no doubt strengthen calls for full-scale quantitative easing. Many will hope that this week’s policy meeting will at least show a determination to address the slowdown with details of an aggressive ABS and covered bond purchase programme.”

So, one would think this is bad news for Europe right? Well, moments ago Germany just priced it first ever 10 year Bund Auction at a yield of below 1.0%, or 0.93% on average. This happened even as the Bit To Cover was 1.1, well below 1.4, and meaning the auction was once again technically uncovered, meaning that the Bundesbank had to step in and make sure there is enough demand. Which at a record low yield and an economy entering a triple-dip, almost makes sense.

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

By: Chris Tell at http://ift.tt/146186R

Like a bad case of hemorrhoids, debt is a topic too often left out of polite conversation. It’s a good thing then that you don’t come here for polite conversation. It is a topic previously written about in these pages and one which has the power to keep me awake at nights when I really ought to be doing other things.

In our quest to clearly understand debt around this ball of dirt we call home, how it impacts us, if it impacts us and what it all means we’ve had our team put together a comprehensive report on the topic. The report itself is completed and currently with a gentleman who takes our analytical work, adds some witchcraft and makes it look readable after I’ve finished with it. As soon as we receive this ergonomically designed masterpiece, readers will find it magically appear in their inbox. If you’re not a subscriber then, for goodness sakes, sign up here NOW.

Littering my desktop like paper bags on a Nairobi highway are dozens of graphs, the remnants of this debt report. I thought therefore I’d take some of the scraps and provide readers with a short sampling of what is really a visual ice bath.

Earlier this year the Bank of International Settlements said in its annual report that debt ratios in the developed economies have grown by 20 percentage points to 275 percent of GDP since the beginning of the global financial crisis. Albeit not as severe, the trend is similar in the emerging economies where debt ratios have grown with the same pace to 175 percent of GDP, thanks to the spillover effect of central bankers in the developed world testing their limits with low interest rate policies.

The Bank warned that global debt levels could trigger another Lehman-style crisis, calling continued debt accumulation over successive business and financial cycles as the root (rather than the solution) of the problem.

The symptom, however, goes way back than just 2007. As you can see in the charts below (taken from the Wall Street Journal), both public and private debt levels have been expanding since the early 90s.

With interest rates trending downwards for the past 30 years and eventually hitting rock bottom in late 2008, it is no wonder that the global debt levels have swollen to 200 year highs. Yep, 200 year highs!

Although the chart above only shows the US rates, the situation is similar all across the globe.

It looks like the central bankers of the world have painted themselves into corner. Growing mountain of debt makes it harder for economies to grow at higher interest rates, hence forcing central banks into a downward spiral of record low rates and monetary stimulus that simply encourages more borrowing and worsening the underlying problem – what the BIS calls “a debt trap” where low rates essentially validate themselves.

Just a few weeks ago Spain, one of the Europe’s ailing economies, issued a 50-year bond at a mere 4 percent rate. This is Spain for God’s sake. They’re broke!

There are some truly crushing debt burdens lurking in full view right here and now. Debts which cannot be repaid and will not be repaid!

Personally I tend to keep on top of this sort of information but I’ll be honest with you when I say that what our analysts have put together scared even me, and here I was under the illusion that I was adequately informed. We believe it is vital for every investor to keep an eye on those markets.

Subscribers will have the report within the next few days. Sign up here if you’re not subscribed already.

– Chris

 

“Blessed are the young for they shall inherit the national debt.” – Herbert Hoover

via Zero Hedge http://ift.tt/1uAxmXp Capitalist Exploits

By: Chris Tell at http://ift.tt/146186R

Like a bad case of hemorrhoids, debt is a topic too often left out of polite conversation. It’s a good thing then that you don’t come here for polite conversation. It is a topic previously written about in these pages and one which has the power to keep me awake at nights when I really ought to be doing other things.

In our quest to clearly understand debt around this ball of dirt we call home, how it impacts us, if it impacts us and what it all means we’ve had our team put together a comprehensive report on the topic. The report itself is completed and currently with a gentleman who takes our analytical work, adds some witchcraft and makes it look readable after I’ve finished with it. As soon as we receive this ergonomically designed masterpiece, readers will find it magically appear in their inbox. If you’re not a subscriber then, for goodness sakes, sign up here NOW.

Littering my desktop like paper bags on a Nairobi highway are dozens of graphs, the remnants of this debt report. I thought therefore I’d take some of the scraps and provide readers with a short sampling of what is really a visual ice bath.

Earlier this year the Bank of International Settlements said in its annual report that debt ratios in the developed economies have grown by 20 percentage points to 275 percent of GDP since the beginning of the global financial crisis. Albeit not as severe, the trend is similar in the emerging economies where debt ratios have grown with the same pace to 175 percent of GDP, thanks to the spillover effect of central bankers in the developed world testing their limits with low interest rate policies.

The Bank warned that global debt levels could trigger another Lehman-style crisis, calling continued debt accumulation over successive business and financial cycles as the root (rather than the solution) of the problem.

The symptom, however, goes way back than just 2007. As you can see in the charts below (taken from the Wall Street Journal), both public and private debt levels have been expanding since the early 90s.

With interest rates trending downwards for the past 30 years and eventually hitting rock bottom in late 2008, it is no wonder that the global debt levels have swollen to 200 year highs. Yep, 200 year highs!

Although the chart above only shows the US rates, the situation is similar all across the globe.

It looks like the central bankers of the world have painted themselves into corner. Growing mountain of debt makes it harder for economies to grow at higher interest rates, hence forcing central banks into a downward spiral of record low rates and monetary stimulus that simply encourages more borrowing and worsening the underlying problem – what the BIS calls “a debt trap” where low rates essentially validate themselves.

Just a few weeks ago Spain, one of the Europe’s ailing economies, issued a 50-year bond at a mere 4 percent rate. This is Spain for God’s sake. They’re broke!

There are some truly crushing debt burdens lurking in full view right here and now. Debts which cannot be repaid and will not be repaid!

Personally I tend to keep on top of this sort of information but I’ll be honest with you when I say that what our analysts have put together scared even me, and here I was under the illusion that I was adequately informed. We believe it is vital for every investor to keep an eye on those markets.

Subscribers will have the report within the next few days. Sign up here if you’re not subscribed already.

– Chris

 

“Blessed are the young for they shall inherit the national debt.” – Herbert Hoover

via Zero Hedge http://ift.tt/1uAxmXp Capitalist Exploits

The mass demonstrations in Hong Kong are dramatic, indeed. And given that Hong Kong has long enjoyed a more liberal existence under British rule, protests against a more authoritarian Chinese government (at least it used to be more authoritarian) are not entirely surprising.

But Chinese officials accuse the U.S. of egging on the protests.  As the Wall Street Journal’s China Real Time blog reports:

On Thursday, Wen Wei Po published an “expose” into what it described as the U.S. connections of Joshua Wong, the 17 year-old leader of student group Scholarism.

 

The story asserts that “U.S. forces” identified Mr. Wong’s potential three years ago, and have worked since then to cultivate him as a “political superstar.”

 

Evidence for Mr. Wong’s close ties to the U.S. that the paper cited included what the report described as frequent meetings with U.S. consulate personnel in Hong Kong and covert donations from Americans to Mr. Wong. As evidence, the paper cited photographs leaked by “netizens.” The story also said Mr. Wong’s family visited Macau in 2011 at the invitation of the American Chamber of Commerce, where they stayed at the “U.S.-owned” Venetian Macao, which is owned by Las Vegas Sands Corp.

 

***

 

This isn’t the first time that Beijing-friendly media have accused foreign countries of covert meddling in the former British colony. China’s government has long been concerned that Western intelligence agencies might try to exploit the city’s relatively more open political environment to push democracy in the rest of the country. The various “color revolutions” that ushered in democratic governments across the former Soviet Union in the early 2000s, and which were partly organized by foreign-funded NGOs, heightened those concerns.

 

Allegations of foreign intervention in Hong Kong have become particularly intense in the run-up to 2017, the earliest that Beijing has said Hong Kong residents can begin to directly elect their leaders. Wen Wei Po and another Beijing-leaning Hong Kong newspaper Ta Kung Pao, for example, have accused the U.K. of stationing British spies across Hong Kong institutions. Pro-Beijing publications have also accused Hong Kong media mogul and staunch Beijing critic Jimmy Lai of having connections with the CIA. Mr. Lai is the founder of Next Media Ltd., which owns the Apple Daily newspapers in Taiwan and Hong Kong, and is a major donor to pro-democracy groups in Hong Kong.

 

In its report on Mr. Wang, Wen Wei Po said that the U.S. Central Intelligence Agency is making a pointed effort to infiltrate Hong Kong schools, for example through the Hong Kong-America Center, a group headed by former U.S. diplomat Morton Holbrook that promotes H.K.-U.S. ties. It also alleged that the CIA is actively training a new generation of protest leaders in Hong Kong through sponsoring students to study in the U.S., with an aim of stoking future “color revolutions” in the city.

Tony Cartalucci writes:

Behind the so-called “Occupy Central” protests … is a deep and insidious network of foreign financial, political, and media support. Prominent among them is the US State Department and its National Endowment for Democracy (NED) as well as NED’s subsidiary, the National Democratic Institute (NDI).

 

Now, the US has taken a much more overt stance in supporting the chaos their own manipulative networks have prepared and are now orchestrating. The White House has now officially backed “Occupy Central.” Reuters in its article, “White House Shows Support For Aspirations Of Hong Kong People,” would claim:

The White House is watching democracy protests in Hong Kong closely and supports the “aspirations of the Hong Kong people,” White House spokesman Josh Earnest said on Monday. “

The United States supports universal suffrage in Hong Kong in accordance with the Basic Law and we support the aspirations of the Hong Kong people,” said Earnest, who also urged restraint on both sides.

US State Department Has Built Up and Directs “Occupy Central”

Image: The US through NED and its subsidiaries have a long history of promoting subversion and division within China.

 

Earnest’s comments are verbatim the demands of “Occupy Central” protest leaders, but more importantly, verbatim the long-laid designs the US State Department’s NDI articulates on its own webpage dedicated to its ongoing meddling in Hong Kong. The term “universal suffrage”and reference to “Basic Law” and its “interpretation” to mean “genuine democracy” is stated clearly on NDI’s website which claims:

The Basic Law put in place a framework of governance, whereby special interest groups, or “functional constituencies,” maintain half of the seats in the Legislative Council (LegCo). At present, Hong Kong’s chief executive is also chosen by an undemocratically selected committee. According to the language of the Basic Law, however, “universal suffrage” is the “ultimate aim.” While “universal suffrage” remains undefined in the law, Hong Kong citizens have interpreted it to mean genuine democracy.

To push this agenda – which essentially is to prevent Beijing from vetting candidates running for office in Hong Kong, thus opening the door to politicians openly backed, funded, and directed by the US State Department – NDI lists an array of ongoing meddling it is carrying out on the island. It states:

Since 1997, NDI has conducted a series of missions to Hong Kong to consider the development of Hong Kong’s “post-reversion” election framework, the status of autonomy, rule of law and civil liberties under Chinese sovereignty, and the prospects for, and challenges to democratization.

It also claims:

In 2005, NDI initiated a six-month young political leaders program focused on training a group of rising party and political group members in political communications skills.

And:

NDI has also worked to bring political parties, government leaders and civil society actors together in public forums to discuss political party development, the role of parties in Hong Kong and political reform. In 2012, for example, a conference by Hong Kong think tank SynergyNet supported by NDI featured panelists from parties across the ideological spectrum and explored how adopting a system of coalition government might lead to a more responsive legislative process.

NDI also admits it has created, funded, and backed other organizations operating in Hong Kong toward achieving the US State Department’s goals of subverting Beijing’s control over the island:

In 2007, the Institute launched a women’s political participation program that worked with the Women’s Political Participation Network (WPPN) and the Hong Kong Federation of Women’s Centres (HKFWC) to enhance women’s participation in policy-making, encourage increased participation in politics and ensure that women’s issues are taken into account in the policy-making process.

And on a separate page, NDI describes programs it is conducting with the University of Hong Kong to achieve its agenda:

The Centre for Comparative and Public Law (CCPL) at the University of Hong Kong, with support from NDI, is working to amplify citizens’ voices in that consultation process by creating Design Democracy Hong Kong (http://ift.tt/1wWIVpZ), a unique and neutral website that gives citizens a place to discuss the future of Hong Kong’s electoral system.

It should be no surprise to readers then, to find out each and every “Occupy Central” leader is either directly linked to the US State Department, NED, and NDI, or involved in one of NDI’s many schemes.

Image: Benny Tai, “Occupy Central’s” leader, has spent years associated with and benefiting from US State Department cash and support.

“Occupy Central’s” self-proclaimed leader, Benny Tai, is a law professor at the aforementioned University of Hong Kong and a regular collaborator with the NDI-funded CCPL. In 2006-2007 (annual report, .pdf) he was named as a board member – a position he has held until at least as recently as last year. In CCPL’s 2011-2013 annual report (.pdf), NDI is listed as having provided funding to the organization to “design and implement an online Models of Universal Suffrage portal where the general public can discuss and provide feedback and ideas on which method of universal suffrage is most suitable for Hong Kong.”

 

Curiously, in CCPL’s most recent annual report for 2013-2014 (.pdf), Tai is not listed as a board member. However, he is listed as participating in at least 3 conferences organized by CCPL, and as heading at least one of CCPL’s projects. At least one conference has him speaking side-by-side another prominent “Occupy Central” figure, Audrey Eu. The 2013-2014 annual report also lists NDI as funding CCPL’s “Design Democracy Hong Kong” website.

 

Civic Party chairwoman Audrey Eu Yuet-mee, in addition to speaking at CCPL-NDI functions side-by-side with Benny Tai, is entwined with the US State Department and its NDI elsewhere. She regularly attends forums sponsored by NED and its subsidiary NDI. In 2009 she was a featured speaker at an NDI sponsored public policy forum hosted by “SynergyNet,” also funded by NDI. In 2012 she was a guest speaker at the NDI-funded Women’s Centre “International Women’s Day” event, hosted by the Hong Kong Council of Women (HKCW) which is also annually funded by the NDI.

Image: Martin Lee and Anson Chan belly up to the table with US Vice President Joseph Biden in Washington DC earlier this year. During their trip, both Lee and Chan would attend a NED-hosted talk about the future of “democracy” in Hong Kong. Undoubtedly, “Occupy Central” and Washington’s support of it was a topic reserved for behind closed doors.

 

There is also Martin Lee, founding chairman of Hong Kong’s Democrat Party and another prominent figure who has come out in support of “Occupy Central.” Just this year, Lee was in Washington meeting directly with US Vice President Joseph Biden, US Congresswoman Nancy Pelosi, and even took part in an NED talk hosted specifically for him and his agenda of “democracy” in Hong Kong. Lee even has a NED page dedicated to him after he was awarded in 1997 NED’s “Democracy Award.” With him in Washington was Anson Chan, another prominent figure currently supporting the ongoing unrest in Hong Kong’s streets.

The U.S. has certainly promoted regime change worldwide, often by using non-governmental organizations as front groups to funnel money to dissidents who will overthrow the government.

For example, USAID has been called the “new CIA”, and FBI whistleblower Sibel Edmonds told Washington’s Blog that the U.S. State Department is involved in many “hard power” operations, often coordinating through well-known “Non-Governmental Organizations” (NGOs).    Specifically, Edmonds explained that numerous well-known NGOs – which claim to focus on development, birth control, women’s rights, fighting oppression and other “magnif
icent sounding” purposes or seemingly benign issues – act as covers for State Department operations. She said that the State Department directly places operatives inside the NGOs.

Edmonds also told us that – during the late 90s and early 2000s – perhaps 30-40% of the people working for NGOs operated by George Soros were actually working for the U.S. State Department.

If this all sounds too nutty, remember that historians say that declining empires tend to attack their rising rivals … so the risk of world war is rising because the U.S. feels threatened by the rising empire of China.

The U.S. government considers economic rivalry to be a basis for war. And the U.S. is systematically using the military to contain China’s growing economic influence.

And U.S. sanctions against Russia are not having the desired effect … largely because China is picking up the slack by trading with Russia and even loaning it money.

Indeed, China, Russia, India and Brazil have formed what some top economists say is an alternative to the Western financial institutions, the World Bank and IMF. And China is challenging the petrodollar.

So it’s not beyond the realm of possibility that the U.S. (and the former owner of Hong Kong, Britain) egged on democracy protesters in Hong Kong in order to try to shake up the Chinese regime.

via Zero Hedge http://ift.tt/1mODOHC George Washington

Submitted by David Stockman via Contra Corner blog,

Here come the revisionists with new malarkey about the 2008 financial crisis. No less august a forum than the New York Times today carries a front page piece by journeyman financial reporter James Stewart suggesting that Lehman Brothers was solvent; could and should have been bailed out; and that the entire trauma of the financial crisis and Great Recession might have been avoided or substantially mitigated:

What happened that September was the culmination of circumstances reaching back years – of ordinary people too eager to borrow, of banks too eager to lend and of Wall Street financial engineers reaping multimillion-dollar bonuses. Even so, saving Lehman from complete collapse might have shielded the economy from what turned out to be a crippling blow.

That is not just meretricious nonsense; its a measure of how thoroughly corrupted public discourse about the fundamental financial and economic realities of the present era has become owing to the cult of central banking. For crying out loud, yes, there would have been a Great Recession – even had Lehman been pawned off to Barclays with a taxpayer guarantee or if it had been bailed-out in some other manner.

In fact, the Barclay’s logo did end up on Lehman’s 7th Avenue glass tower shortly after the September 15th screen shot below. Yet the decision to allow Lehman’s stock and bondholders to take a severe haircut first did not cause the thundering collapse of the housing and credit markets, nor the loss of the artificially bloated level of consumption spending, jobs and income that had accompanied the giant financial bubble that finally burst in September 2008.

The villain is the Greenspan Fed and the rampage of debt and speculation its cheap money and “wealth effects” coddling of Wall Street had engendered over the previous two decades. When Greenspan took office in 1987, total credit market debt outstanding was $10.5 trillion, but by the time of the Lehman event it was nearly $53 trillion. This means that the debt burden on the US economy had soared by 5X during a period when nominal GDP grew by only 2.9X. That’s called leveraging up big time—–and it fueled a party of consumption and speculation like the nation had not experienced since the 1920s, or even then.

 

Moreover, within the household sector the explosion of debt was even more stunning owing to the Greenspan policies of cheap mortgage rates and the overt encouragement of American families to raid their home ATM machines. As shown below, household debt ballooned from just $2.7 trillion when Greenspan took charge of the Eccles Building in August 1987 to nearly $14 trillion on the eve of the crisis.

 

And there can be little doubt as to what explains the above mountain of household debt. American households were raiding their home ATM machines – that is, cashing out the equity in their homes – in order to indulge in a massive orgy of consumption spending that they had not earned. In fact, at the peak in 2005-2007, households were extracting cash from their ATMs at nearly a $1 trillion annual rate, ballooning their disposable incomes by upwards of 8%. That is, they were buying flat screen TVs, granite top kitchen counters, restaurant dinners and trips to the mall with money they hadn’t earned, and based on rapidly rising leverage ratios that couldn’t be sustained.

What caused the Great Recession, therefore, was the day of reckoning when the household borrowing mania reached its limit. As shown below, the swing in household spending funded by withdrawals from home ATM machines was massive and violent. At its peak extent between 2006 and 2010 – it amounted to a reversal of nearly $1.4 trillion. Yes, when a gigantic, artificial spending bubble of this magnitude is pricked, the repercussions do cascade through the main street economy taking down sales, jobs and incomes as they go.

Accordingly, the chart below explains the Great Recession, not some revisionist gumming from the bowels of the New York Fed as to how the economy could have been “saved” if only Tiny Tim Geithner had gotten the word on Sunday evening September 14th that Lehman was “solvent” after all. In fact, the name on the glass tower above had nothing to do with the crash of household borrowing at upwards of 30 million home ATMs depicted in the graph below.

Moreover, what caused the recession to be so painful and deep is that the phony prosperity of the Greenspan era could no longer be fueled by pushing households deeper into debt. By the fall of 2008, “peak debt” had been reached in the household sector, and a modest deleveraging was begun owning to upwards of $1 trillion in mortgage defaults. But this wasn’t a recoverable loss of “aggregate demand”  per the Keynesian mantra at the Bernanke Fed. The US economy was drastically squeezed by the Great Recession because artificial mortgage fueled spending was being liquidated all across America, not because punters in Lehman stock and bonds lost their shirts, and deservedly so.

 

 

In short, the Great Recession was about the abrupt end of the great financial party conducted by the Maestro. During his 19 year reign, the nation underwent a collective LBO, raising it leverage ratio from a historically sound and sustainable 1.5X national income to 3.5X on the eve of the Lehman collapse. Those two extra turns of debt amounted to $30 trillion at the time the US economy buckled in 2008; they were a measure of both the folly of the Greenspan/Bernanke spending party that had been financed by the Fed’s cheap money policies, and the enormity of the adjustment that was brought to bear on the US economy when the bubble finally collapsed.

 

Not surprisingly, upwards of $12 trillion in household wealth was destroyed by the financial crisis and the deep recession which followed. But given the enormous inflation of housing prices and risk asset values which had been driven by the debt bubble, it is ludicrous to suggest that save for not saving Lehman, the housing crash pictured below would not have happened. In fact, between late 1994 and early 2006 home prices in America rose each and every month for about 125 straight months, rising by nearly 140% over the period.

 

Needless to say, the above wasn’t sustainable and didn’t reflect either the free market at work or greed running rampant in the towns and cities of America. It was the cheap money and Wall Street coddling policies of the Fed which generated the housing binge, and the gambling hall known as Lehman Brothers that had gone along for the ride.

It is therefore especially misfortunate that mainstream journalists like Stewart take up the revisionist line that Lehman was “solvent”, and that a great mistake was made in not throwing it a life line. Well, it just doesn’t fricking matter whether it was “solvent”.  It was self-evidently illiquid because it – like the rest of Wall Street – had funded tens of billions of illiquid, opaque and drastically over-valued long-term assets in the short-term money markets. It was a classic, massive funding mismatch and there is no doubt whatsoever about what caused it, and why it happened.

What caused it, of course, is the fundamental tool of Fed policy – that is, pegging the money market rate (federal funds) and holding it rigidly in place until a well telegraphed decision to change it is announced from the Eccles Building.  Stated differently, Fed policy inherently offers a big fat yield curve arbitrage to Wall Street and a guarantee that it can be taken to the bank day after day.

By contrast, in the pre-Fed era money market rates could move by hundreds of basis points per day, and that most definitely did deter large banks from loading up on illiquid assets and funding their books with hot money. To be sure, there were plenty of punters prior to 1913, but the game was played in the call money market and their were no illusions among the participants.

Broker loans were instantly callable, and were called without hesitation by the street’s bankers when frothy markets took a dive. Needless to say, speculation was held in check by the discipline of the call money market and no one proposed to make a living by generating giant balance sheets with recklessly mismatched funding.

The latter is a disease of the Greenspan/Bernanke/Yellen era of Keynesian central banking and massive manipulation of financial market prices and rates. Its why the balance sheet of Goldman and Morgan had reached $2 trillion with hundreds of billions of hot money funding, and why Lehman’s $800 billion balance sheet was not even remotely liquid. Indeed, the idea that the Wall Street gambling houses were “solvent” but only needed a liquidity injection goes to the very heart of the matter, explains why financial crises have become endemic in the current era and why bailouts have become standard operating procedure.

Central bank apparatchiks like Tim Geithner and journalist fellow travelers like Stewart would have viewed the call market panics of the pre-Fed era as “bank runs” that needed to be stopped at all hazards. By contrast, they were, in fact, a healthy financial therapeutic that kept speculation reasonably in check.

But money market pegging by the central bank, to use Friedman’s phrase, always and everywhere causes bank runs and liquidity crises in the canyons of Wall Street. Tempt the titans of finance with the opportunity to scalp prodigious profits by ballooning their balance sheets with sticky assets that yield more than the pegged cost of hot money, and they will do it every time.

And when a black swan comes calling, the value of all those sticky assets will not be what’s on the books, but what can be salvaged in a plunging market when hot money lenders want their money back….and now.  So of course Lehman was insolvent and massively so. It had funded itself so that its assets were only worth their fire sale price.

The great error of September 2008, therefore, was not in failing to bailout Lehman. It was in providing a $100 billion liquidity hose to Morgan Stanley and an even larger one to Goldman.  They too were insolvent. That was the essence of their business model.

Not surprisingly, Greenspan co-architect in creating this madness was Alan Blinder. As he told Stewart in today’s article,  there was no doubt that the Fed could have saved Lehman and should have:

"Of course the Fed can stop a run,” said Mr. Blinder, the economist. “That’s what it’s all about.”

That’s right. Its policies inherently generate runs, and then it stands ready with limitless free money to rescue the gamblers.  You can call that pragmatism, if you like. But don’t call it capitalism.

via Zero Hedge http://ift.tt/1uA7HOy Tyler Durden

While Greek government yields (and political leaders) proclaim the troubled peripheral European nation is ‘recovering’, the risk of major political upheaval in Greece has not gone away ahead of next year’s presidential vote next year. As Reuters notes, under growing pressure from anti-bailout leftists, Greek Prime Minister Antonis Samaras desperately needs a new narrative to get the backing of lawmakers and rally Greeks fed up with four years of austerity. We wish him luck as Keep Talking Greece notes, it is high time that the real data of the economic situation of the Greek society come to the surface and so it did this week. A report from Greece’s State Budget Office found that three in every five Greeks, or some 6.3 million people, were living in poverty or under the threat of poverty in 2013 due to material deprivation and unemployment.

As we noted previously, poverty rates are disturbing in Greece

 

As Reuters reports,

Four years after a messy descent into emergency funding to stave off bankruptcy, Greece’s government is trying to pull the plug on a deeply unpopular bailout program to secure its own survival.

Under growing pressure from anti-bailout leftists, Greek Prime Minister Antonis Samaras desperately needs a new narrative to get the backing of lawmakers in a crucial presidential vote next year and rally Greeks fed up with four years of austerity.

It is a gamble with high stakes for the Greek economy and Athens’ relations with its euro zone peers. Failure by Samaras to get his presidential nominee elected would trigger new polls that his anti-austerity rivals would almost certainly win.

He better try hard as the situation is dismal… (as ekathimerini reports,)

Three in every five Greeks, or some 6.3 million people, were living in poverty or under the threat of poverty in 2013 due to material deprivation and unemployment, a report by Parliament’s State Budget Office showed on Thursday.

 

Using data on household incomes and living conditions, the report – titled “Minimum Income Policies in the European Union and Greece: A Comparative Analysis” – found that “some 2.5 million people are below the threshold of relative poverty, which is set at 60 percent of the average household income.” It added that “3.8 million people are facing the threat of poverty due to material deprivation and unemployment,” resulting in a total of 6.3 million people.

 

The State Budget Office’s economists who drafted the report argued that in contrast with other European countries “which implement programs to handle social inequalities, Greece, which faces huge phenomena of extreme poverty and social exclusion, is acting slowly.” They added that there is high demand for social assistance, while its supply by the state is “fragmented and full of administrative malfunctions.”

 

In that context “the social safety net is inefficient, while there is no prospect for the recovery of income losses resulting from the economic recession in the near future,” the report noted, reminding readers that the measure of the minimum guaranteed income “arrived in Greece belatedly.”

 

According to Eurostat Greece ranks top among the 28 European Union countries in terms of poverty risk and also has the highest poverty share in the population (23.1 percent). Greece also ranks fourth among EU states in poverty disparity, after Spain, Romania and Bulgaria.

h/t Keep Talking Greece

*  *  *

But, of course, none of that matters – bond yields are low and the ECB-collateralized cash is flowing.

 

As for Greece: don’t cry for it – it still has the euro – that symbol of successful European integration – so all is well.

via Zero Hedge http://ift.tt/1v2P7Ll Tyler Durden

Two classes of warships kicked off the U.S.-led attacks on Islamic State and the al Qaeda-linked Khorasan group.

 

WSJ’s Jason Bellini explains what are these ships’ capabilities?

 

Source: WSJ Video

via Zero Hedge http://ift.tt/ZpNn5G Tyler Durden

Submitted by Michael Snyder of The Economic Collapse blog,

I know that headline sounds completely outrageous.  But it is actually true.  The U.S. government is borrowing about 8 trillion dollars a year, and you are about to see the hard numbers that prove this.  When discussing the national debt, most people tend to only focus on the amount that it increases each 12 months.  And as I wrote about recently, the U.S. national debt has increased by more than a trillion dollars in fiscal year 2014.  But that does not count the huge amounts of U.S. Treasury securities that the federal government must redeem each year.  When these debt instruments hit their maturity date, the U.S. government must pay them off.  This is done by borrowing more money to pay off the previous debts.  In fiscal year 2013, redemptions of U.S. Treasury securities totaled $7,546,726,000,000 and new debt totaling $8,323,949,000,000 was issued.  The final numbers for fiscal year 2014 are likely to be significantly higher than that.

So why does so much government debt come due each year?

Well, in recent years government officials figured out that they could save a lot of money on interest payments by borrowing over shorter time frames.  For example, it costs the government far more to borrow money for 10 years than it does for 1 year.  So a strategy was hatched to borrow money for very short periods of time and to keep "rolling it over" again and again and again.

This strategy has indeed saved the federal government hundreds of billions of dollars in interest payments, but it has also created a situation where the federal government must borrow about 8 trillion dollars a year just to keep up with the game.

So what happens when the rest of the world decides that it does not want to loan us 8 trillion dollars a year at ultra-low interest rates?

Well, the game will be over and we will be in a massive amount of trouble.

I am about to share with you some numbers that were originally reported by CNS News.  As you can see, far more debt is being redeemed and issued today than back during the middle part of the last decade…

2013

Redeemed: $7,546,726,000,000

Issued: $8,323,949,000,000

Increase: $777,223,000,000

2012

Redeemed: $6,804,956,000,000

Issued: $7,924,651,000,000

Increase: $1,119,695,000,000

2011

Redeemed: $7,026,617,000,000

Issued: $8,078,266,000,000

Increase: $1,051,649,000,000

2010

Redeemed: $7,206,965,000,000

Issued: $8,649,171,000,000

Increase: $1,442,206,000,000

2009

Redeemed: $7,306,512,000,000

Issued: $9,027,399,000,000

Increase: $1,720,887,000,000

2008

Redeemed: $4,898,607,000,000

Issued: $5,580,644,000,000

Increase: $682,037,000,000

2007

Redeemed: $4,402,395,000,000

Issued: $4,532,698,000,000

Increase: $130,303,000,000

2006

Redeemed: $4,297,869,000,000

Issued: $4,459,341,000,000

Increase: $161,472,000,000

The only way that this game can continue is if the U.S. government can continue to borrow gigantic piles of money at ridiculously low interest rates.

And our current standard of living greatly depends on the continuation of this game.

If something comes along and rattles this Ponzi scheme, life in America could change radically almost overnight.

In the United States today, we have a heavily socialized system that hands out checks to nearly half the population.  In fact, 49 percent of all Americans live in a home that gets direct monetary benefits from the federal government each month according to the U.S. Census Bureau.  And it is hard to believe, but Americans received more than 2 trillion dollars in benefits from the federal government last year alone.  At this point, the primary function of the federal government is taking money from some people and giving it to others.  In fact, more than 70 percent of all federal spending goes to "dependence-creating programs", and the government runs approximately 80 different "means-tested welfare programs" right now.  But the big problem is that the government is giving out far more money than it is taking in, so it has to borrow the difference.  As long as we can continue to borrow at super low interest rates, the status quo can continue.

But a Ponzi scheme like this can only last for so long.

It has been said that when the checks stop coming in, chaos will begin in the streets of America.

The looting that took place when a technical glitch caused the EBT system to go down for a short time in some areas last year and the rioting in the streets of Ferguson, Missouri this year were both small previews of what we will see in the future.

And there is no way that we will be able to "grow" our way out of this problem.

As the Baby Boomers continue to retire, the amount of money that the federal government is handing out each year is projected to absolutely skyrocket.  Just consider the following numbers…

–Back in 1965, only one out of every 50 Americans was on Medicaid.  Today, more than 70 million Americans are on Medicaid, and it is being projected that Obamacare will add 16 million more Americans to the Medicaid rolls.

 

–When Medicare was first established, we were told that it would cost about $12 billion a year by the time 1990 rolled around.  Instead, the federal government ended up spending $110 billion on the program in 1990, and the federal government spent approximately $600 billion on the program in 2013.

 

–It is being projected that the number of Americans on Medicare will grow from 50.7 million in 2012 to 73.2 million in 2025.

 

–At this point, Medicare is facing unfunded liabilities of more than 38 trillion dollars over the next 75 years.  That comes to approximately $328,404 for every single household in the United States.

 

–In 1945, there were 42 workers for every retiree receiving Social Security benefits.  Today, that num
ber has fallen to 2.5 workers, and if you eliminate all government workers, that leaves only 1.6 private sector workers for every retiree receiving Social Security benefits.

 

–Right now, there are approximately 63 million Americans collecting Social Security benefits.  By 2035, that number is projected to soar to an astounding 91 million.

 

–Overall, the Social Security system is facing a 134 trillion dollar shortfall over the next 75 years.

 

–The U.S. government is facing a total of 222 trillion dollars in unfunded liabilities during the years ahead.  Social Security and Medicare make up the bulk of that.

Yes, things seem somewhat stable for the moment in America today.

But the same thing could have been said about 2007.  The stock market was soaring, the economy seemed like it was rolling right along and people were generally optimistic about the future.

Then the financial crisis of 2008 erupted and it seemed like the world was going to end.

Well, the truth is that another great crisis is rapidly approaching, and we are in far worse shape financially than we were back in 2008.

Don't get blindsided by what is ahead.  Evidence of the coming catastrophe is all around you.

via Zero Hedge http://ift.tt/1vt90vD Tyler Durden