We Are Already In Depression (If Borrowing Money Is Not Income)

The data and chart comes from the Federal Reserve Economic Data base (FRED.) It is Gross domestic Product minus Treasury Debt. If you download them to a spread sheet GDP is expressed in billions so 1,000,000,000 is expressed as 1, while Federal Debt is expressed in millions so 1,000,000,000 is expressed as 1,000. That is why the chart is (Gross Domestic Product * 1000.)

 

Do you consider debt as income? Before you answer that, let’s perform a thought experiment. Imagine that you had taken a long cruise last fall and charged $10,000 to an American Express card. When you did your taxes this year, would have told the IRS that you had $10,000 income from American Express? Of course you wouldn’t. Suppose a major oil company issues $800 million worth of bonds to develop a new old field. Would the company report that as income to the stockholders or the IRS? Of course they wouldn’t. I am sure those sound like silly questions as the answer is a self evident “NO!” We do not consider borrowed money as income. It is a liability that must be paid back. Then why do we count Federal Government debt when measuring national income? I will leave speculation as to the “why” to the readers and focus on the fact that we do count new Treasury Debt as income. Continue reading

The Forgotten Depression of 1920–1921

 

The year is 1921…

America is less than three years removed from triumph on the Western Front. It’s the dawn of the Roaring Twenties… and the Jazz Age.

Warren Gamaliel Harding is America’s czar.

And the nation is sunk in depression Continue reading

“We Haven’t Seen This Is In Our Lifetimes” – CEO Says “Alberta Is In A Depression”

Toronto’s “Condo King” Brad Lamb tried to put things into context when he said the situation is “worse than 2008.” However, on Friday we received an even more gloomy (albeit realistic) description of the economic situation in Canada’s energy hub, Alberta. In a very blunt interview with BNN, Murray Mullen the CEO of trucking company Mullen Group, said that the situation has moved well past recession, and should be described as a depression. Continue reading

Fasten your seatbelts: History’s about to repeat itself

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Over the last decade, I’ve found my opinions coinciding more and more with those of SocGen strategist and “uber-bear” Albert Edwards. Last week he hit the headlines again with a claim that a “gut-wrenching slump” in profits amounts to an almost-certain predictor of recession. While the historic evidence for this is compelling, I’m not so sure this time couldn’t be slightly different — at least in terms of causes and effects. Continue reading

We Have Hit Keynesian Nirvana: A Third Of All Containers Shipped From Long Beach Port Are Empty

In the past several months, it has been virtually impossible to make any sense of the conflicting trends involving US and global trade. On one hand, there is global trade, which as we have covered since the spring, has been in a state of consistent decline. Some example of this:

Where things get more complicated, however, is when looking at the US. Here, macro data throughout the summer had suggested more or less smooth sailing in the trade space, and it was only a week ago that the facade started to crack, following the ugly advance trade report, when as we reported there was a “16% Surge In August Trade Deficit; Imports Jump As Exports Drop.” Continue reading

James Dale Davidson: Current Global Crash Is a ‘Rerun of 1929’

Please see the website for the video.

 

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The current global stock-market crash is eerily reminiscent of the Wall Street crash of 1929, investment expert and author James Dale Davidson told Newsmax TV.

“What we’re seeing, if I could say it this way, is a rerun of 1929 with the main crash falling in Shanghai rather than in Wall Street,” he told “Newsmax Prime.”

“If you’re not scared, you’re not watching,” he said. “Since the last time I was on Newsmax TV on the 11th of August to discuss the Chinese devaluation, which was a small step, I said it was only the beginning of a major change that was going on. And since that time, $5 trillion have gone to money heaven, which is a significant change,” he said. Continue reading

Greece needs €100bn debt relief as permanent depression looms

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National Institute of Economic and Social Research says Greek debt write-off must be much larger than IMF demands, as think-tank warns VAT hikes and budget targets are asphyxiating economy

Greece needs a debt write-down of almost €100bn (£70bn) if the country is to stand a chance of clawing its way out of a “prolonged and severe depression”, according to a leading think-tank.

In a stark analysis, the National Institute of Economic and Social Research (NIESR) laid bare the impact of VAT hikes and strict budget targets that it said could become “self-defeating”.

Continue reading

ECB To Keep Greece On Hold Until Wednesday When Balyasny Sees Rioting Begin

As we have repeated since January, and certainly on numerous occasions over the weekend, at this point the only variable is what the ECB will do: will it give insolvent Greek banks more aid, or will it increase its ELA collateral haircut (or even withdraw it altogether), the ramifications of which action would have a dire impact on contagion within the rest of the periphery but most certainly on both the Greek financial system as well as Greek society which is now facing an indefinitely period of capital controls. Continue reading

There Will Be No 25-Year Depression

What we have here is not a failure of Capitalism, but a failure of experimenting with Socialism that is now resulting in the breakdown of society.

As geopolitical analyst and expert, JR Nyquist, once put it, America has fallen victim to Crony Capitalism, which is different than Capitalism itself.

 

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How it all works in crony heaven – until it doesn’t anymore – via bastiatinstitute.org

 

 

Good and Bad News

Today, we have bad news and good news. The good news is that there will be no 25-year recession. Nor will there be a depression that will last the rest of our lifetimes.

The bad news: It will be much worse than that. On Monday, the Dow rose another 43 points. Gold seems to be working its way back to the $1,200 level, where it feels most comfortable.

Old People Are Dead Wood

First, people are getting older. Especially in Europe and Japan, but also in China, Russia and the US. As we’ve described many times, as people get older, they change. They stop producing and begin consuming. Continue reading

Disaster Is Inevitable When The Two Decade-Old Stock Bubble Bursts

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Six years after the Global Financial Crisis, the U.S. stock market continues to soar to new heights with nary a pullback or correction. In this piece, I will explain why the stock market is experiencing a new bubble that is actually another wave of the bubble that has existed since the mid-1990s.

A two-decade old bubble? Yes, you’ve read that correctly. Most people will consider this assertion preposterous, but the facts don’t lie. Though the U.S. stock market has been experiencing a bubble for two decades, it will not last forever. I believe that the ultimate popping of this bubble will have terrifying consequences for both investors and the global economy that is tied so closely to the stock market.

The SP500 stock index has more than tripled since its low in 2009, but that doesn’t mean that we are out of the woods. On the contrary, this is the calm before the storm. Continue reading

Sayonara Global Economy

“There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”Ludwig von Mises

The surreal nature of this world as we enter 2015 feels like being trapped in a Fellini movie. The .1% party like it’s 1999, central bankers not only don’t take away the punch bowl – they spike it with 200% grain alcohol, the purveyors of propaganda in the mainstream media encourage the party to reach Caligula orgy levels, the captured political class and their government apparatchiks propagate manipulated and massaged economic data to convince the masses their standard of living isn’t really deteriorating, and the entire façade is supposedly validated by all-time highs in the stock market. It’s nothing but mass delusion perpetuated by the issuance of prodigious amounts of debt by central bankers around the globe. And nowhere has the obliteration of a currency through money printing been more flagrant than in the land of the setting sun – Japan. The leaders of this former economic juggernaut have chosen to commit hari-kari on behalf of the Japanese people, while enriching the elite, insiders, bankers, and their global banking co-conspirators. Continue reading

​‘BRICS system’ – healthy alternative to ‘defunct dollar system’

The BRICS Bank marks a major step to de-dollarization, and a new monetary system. It should replace the Western-dominated “predatory casino scheme” that has contributed to world wars and “economic terrorism,” says former World Bank economist Peter Koenig.

“A ‘BRICS system’ would offer a healthy alternative to the highly indebted and defunct dollar system, where money is printed at will,” Koenig said in an interview with Asam Ismi of the Canadian Centre for Policy Alternatives.

A ‘BRICS system’ should be based on a new currency, which Koenig called ‘Bricso.’ Continue reading

Central bankers may have no quick fix as markets swoon, economy weakens

Stocks slumped again on Wednesday pushing S&P 500 losses to almost 8 percent since mid-September. The dollar fell and U.S. bond prices soared after weak Chinese inflation and U.S. producer price and retail sales data fanned fears the world economy could be even weaker than thought.

When stock markets turned south last week after rallying for much of this year, many policymakers initially played that down. In fact, the sell-off could be seen bringing some healthy volatility back to markets that officials worried had become too complacent to risks ranging from tensions surrounding the conflict in Ukraine to the Ebola outbreak.

But the deepening of the sell-off may have put major central banks on their heels, by raising the prospect of the market rout going too far too fast, threatening to hurt confidence and potentially triggering a pullback in spending.

“It reminds me of the massive flight to quality we saw during the (2008) banking crisis, when there were fears that the whole global economy would tip into depression,” said Nick Stamenkovic, a strategist at Edinburgh-based RIA Capital Markets. Continue reading

France rebels against austerity as Europe’s recovery collapses

France’s finance minister sends tremors through European capitals with a defiant warning that his country would no longer try to meet deficit targets

Eurozone strategy is in tatters after economic recovery ground to a halt across the region and France demanded a radical shift in policy, warning that austerity overkill is driving Europe into a depression.

Growth slumped to zero in the second quarter, with Germany contracting by 0.2pc and France once again stuck at zero. Italy is already in a triple-dip recession.

Yields on 10-year German Bunds fell below 1pc for the first time in history, beneath levels seen during the most extreme episodes of deflation in the 19th century. French yields also touch record lows. Much of the eurozone is replicating the pattern seen in Japan as it slid into a deflation trap in the late 1990s.

It is unclear whether tumbling yields are primarily a warning signal of stagnation ahead or a bet by investors that the European Central Bank will soon be forced to launch quantitative easing, buying government bonds across the board.

Continue reading

First a default, then a depression? Some think so

It wouldn’t only cause a depression or another Great Depression, but the Greatest Depression.

Thursday brought a change to that trend, though, as investors heeded a dire message from President Barack Obama, who intimated in a CNBC interview Wednesday that Wall Street was taking the crisis too lightly.

Consequently, stocks sold off sharply and the Treasury Department warned of the dire consequences that might result from a full-blown debt default.

Picking up on that message, Bove said the situation could be more dramatic: A Depression that would cause severe and lasting economic damage.

“The devastation to the United States would be so severe that it would take decades to recover from the Depression caused by a default and the attendant dumping of trillions of dollars of U.S. Treasury securities on the global financial markets,” said Bove, vice president of equity research at Rafferty Capital Markets. Continue reading