The Failure Of Both Growth And The World Central Banks’ Monetary Policies Makes Debt Unsustainable

Financial market report for the week ending Thursday April 5, 2012; the first weekly report of entrance into the Second Great Depression. 

1) … In this week’s news.

Bloomberg reports, Volcker Rule May Be Impossible To Implement. “Federal Reserve Bank of Richmond President Jeffrey Lacker said a U.S. law restricting proprietary trading at banks and scheduled for enactment in July may be ‘impossible’ to implement.  The so-called Volcker rule is aimed at reducing the odds that banks will make risky investments with their own capital and put depositors’ money at risk.

Bloomberg reports Spain Left Behind in Global Debt Swaps Rally on Bailout Concern. Spain is the only country in the world that hasn’t benefited from the credit rally fueled by central bank cash as investors bet its government will be the fourth in the euro region to request a rescue. Credit-default swaps insuring Spanish bonds surged 21 percent since the start of the year to 461 basis points, according to CMA, signaling a worsening perception of credit quality. The government has raised its budget deficit target to 5.3 percent of gross domestic product from 4.4 percent and warned public debt will surge to a record 79.8 percent of GDP this year as it imposes the deepest austerity in at least three decades. “The market is slowly coming around to realizing that despite the fact the original target was abandoned, the current target is still ambitious,” said Ralf Preusser, head of European rates research at Bank of America Merrill Lynch. “Without growth, almost any debt burden is unsustainable.”

Bloomberg reports Spanish, Italian Bonds Slide. The slide in Spanish securities pushed 10-year yields to the highest since the European Central Bank started providing three-year loans in December in its longer-term refinancing operations. “Spain is still the focus for the markets,” said Peter Chatwell, a fixed-income strategist at Credit Agricole Corporate & Investment Bank in London. “The LTRO bid has faded away, and that was evident from the auction results yesterday. The market is still positioning for event risk, and that has supported the move back to the safest assets.”

2) … Credit and money died in the first week of April 2012, on the exhaustion of the world central banks’ monetary authority, as the US Federal Reserve announced there would be no QE 3; and as a result, capitalism died as well, commencing the Second Great Depression. The debt that has been build up over the years is unsustainable.

Tyler Durden writes asking What Is Capitalism? I ask that one please consider asking what was capitalism?  The late stage of capitalism was Neoliberalism, which featured the Milton Friedman Free To Choose floating currency system and ponzi credit schemes, such as the securitization of Mortgage Backed Bonds, MBB, by Mortgage REITS, REM, such as Annaly Capital Management, NLY.  The Keiser Report provides the YouTube Testimony Before the Subcommittee on Economic Policy Committee on Banking, Housing & Urban Affairs, United States Senate, March 28, 2012, by James G. Rickards, Senior Managing Director, Tangent Capital Partners LLC, New York, NY, author of Currency Wars Book,  “We are witnessing the greatest theft in the history of the world: $400 billion per year is being taken from the pockets of savers and handed over to the banks through the Fed’s zero-interest-rate policy. Everyone likes low rates because, you know, mortgage rates are low and it juices the stock market, but what about people who actually save and try to do the right thing, put their money in the banks? They’re getting zero, you know, instead of a more normalized interest rate of even 1 or 2 percent and so that money’s being stolen from them, handed over to the banks in the form of zero cost of funds. So as I say, this is 10 times worse than Madoff and the Treasury’s behind it.”

This backdrop of credit has supported what Doug Noland in article Cracks In Europe, calls a Global Leveraged Speculative Community, that has continually provided marginal liquidity, resulting in euphoric investing in a number of stocks rising dramatically since the 2008 to early 2009 crash, including the following:
Business Services, IBM,
Consumer Beverages, BUD, MNST,
Property REITs, ESS,
Retail REITs, SPG,
Home Improvement Retailers, HD,
Pharmaceutical Companies, NVO,
Credit Providers, MA, V, GCA,
Construction Services, FLT,
Specialty Eateries, SBUX,
Communications Equipment, QCOM,
Semiconductors, TSM,
Aerospace, BEAV,
Footware, NKE,
Building Material, FAST,
Consumer Goods, ACAT,
Gaming, SHFL,
Specialty Retail, TSCO,
Textiles, MHK,
Electronics, WSO,
Mining Equipment, IR,
Industrial Gasses, PNR,
Motors, TTR,
Industrial Equipment, HEES, DXPE
Home Furnishings, FBHS, LZB,
Cloud Computing, CRM, N,
Networking Equipment, FFIV, RHT, VMW,
Entertainment, FUN,
Scientific Instruments ROP, MTSC,
Cement, EXP,
Nanotechnology, FEIC,
Building Materials, TREX,
Machinery, THR, SPX, ATU,
Internet Retail, PCLN,
Recreation Goods, BC,
Business Rental Services, URI, SBAC,
Staffing Services, TBI,
Paper Producers, NP,
Roofing Equipment, BECH,

And the list goes on and on; we have arrived at the short selling opportunity of a lifetime.

Mr Noland continues relating tulip mania in Cracks In Europe, From Sam Jones’ FT article, ‘The LTRO was a game changer,’ says Suki Mann, a strategist at Société Générale. ‘We have seen the mother of all rallies in the first quarter – the third best quarter for credit ever.’  It was a question of buying risk, says Mr Mann – ‘the higher the beta the better.’” There is support for the view that the unlimited nature of the LTRO was ill-conceived; that the ECB lost control as the liquidity facilities ballooned to unimaginable dimensions. With the LTRO having incited powerful forces of re-risking and re-leveraging, European markets have actually become increasingly vulnerable to an abrupt deterioration in the liquidity backdrop.

The Dismal Operator in arcile On The FOMC Minutes And Growth relates The takeaway from the minutes was largely that the Fed isn’t going to continue with its easing polices. This quote:

It was noted that the Committee’s forward guidance is conditional on economic developments, and members concurred that the date given in the statement would be subject to revision in response to significant changes in the economic outlook.

is being interpreted as the FOMC saying it will not ease unless economic conditions deteriorate. The market reaction was rather swift, with risk assets selling off almost instantaneously and continuing into todays session. The move confirms that these markets fluctuations are completely dependent on Central Bank liquidity, or lack thereof. The very perception of lack of confirmation of more easy money (note: not a tightening but merely standing pat at all time record levels of easing) was enough to cause a stir. If anything, the fragile nature of capital markets should be highlighted for the observer.

The US Federal Reserve’s Creditism, that is its ZIRP and QE 1 and 2, as well as FX Dollar Swaps,  has enabled the world banking system, IXG, to inflate credit and money, with the result of inflating World Stocks, VT.  

But now, World Stocks, VT, World Government Bonds, BWX, and Major World Currencies, DBV, are trading lower, on the exhaustion of the world central banks’ monetary authority, with the result that the global economic growth and trade paradigm, known as capitalism, is history. The failure of the US Fed to stimulate stock investment marks an inflection point in economic and investment activity.  Creditism has failed; inflationism has turned to destructionism.

The global government debt bubble, BWX, has burst; credit has failed. The trade lower in Stocks, VT, Commodities, DBC, Debt, BND, and Currencies, DBV, and CEW, documents that the world central banks have lost their sovereign authority.  

The sovereign debt trade has failed with US Treasuries, ZROZ, EDV, and TLT, trading lower, as bond vigilantes have called the Interest Rate on the US Ten Year Note, above 2.0%, and as short sellers have forced European Financial EUFN, lower. The trade lower in Major World Currencies, DBV, and Emerging Market Currencies, CEW, documents that money has failed.

Fiat wealth as a whole, died this first week os April 2012, as the European Financials, BRIC Financials, Mining. Energy, Semiconductors, Homebuilders, and Steel Shares led a stock market downturn, as World Government Bonds and Currencies fell lower in competitive currency devaluation.

Yet the collapse of capitalism and its trade paradigm, was heralded in February 2012, when Copper Miners, COPX, such as SCCO, turned lower, and in March, 2012, when Energy Service Companies, OIH, such as SLB, turned lower.

Stocks falling lower this week included the following:
Argentina Banks, BMA, -10.0%, BBVA, -8.8%, GGAL, -8.5%,  led Argentina, ARGT, lower.
European Financials, EUFN, -6.2%, led Europe, GREK, EWP, EWI, lower.
India Earnings, EPI, led India, INDY, lower.
Brazil Financials, BRAF, led Brazil, EWZ, lower.
Russia, RSX, traded lower.
Austria, EWO, and Sweden, EWD, traded lower, on lower European, VGK, shares.
Mining Shares, URA, GDX, SIL, KOL, COPX, ALUM, REMX,  traded lower.
Energy Shares, PSCE, WCAT, IEZ, XES, XOP, IEO, XLE, ENY, traded lower.
Semiconductors, XSD, -4.7%, Networking, IGN, -4.2%, Smartfone, FONE, -3.6%, Homebuilders, ITB, -3.1%, Leveraged Buyouts, PSP, -2.6%, Paper Producers, WOOD, -2.5%, Steel Manufacturers, SLX, -2.5%, US Infrastructure, PKB, -2.3%, -2.2%, Small Cap Pure Value, RZV, -2.2%, Russell 2000, IWM, -1.5%, traded lower.
The global government debt trade, BWX, is now exhausted, and creditism no longer stimulates global growth, JKE, and profitable corporate investing, DVY. World Stocks, ACWI, traded lower this week, that is the week ending April 5, 2012, on the exhaustion of world central banks’ monetary authority.
The Small Cap Pure Value Shares, RZV, broke lower through trend line support, confirming that competitive currency devaluation is underway.

The Citi US Economic Surprise Index fell 12 points (Hat Tip to Between The Hedges); the turn lower in this index confirms the death of capitalism.

The 10 Year US Treasury Yield, $TNX, rose to 2.18% on Thursday March 5, 2012. The Steepner ETF, STPP, rose, as the 10 30 US Sovereign Debt Yield Curve, $TNX:$TYX,  steepened. World Government Treasuries, BWX, -1.5%, and Emerging Market Bonds, EMB -0.1%, traded lower, heralding the end of credit.

The US Dollar, $USD, rose, 1.2%, with the South African Rand, SZR, -1.5%, Euro, FXE, -2.0%, the Swedish Krona, FXS, -1.9%, , the Swiss Franc, FXF, -1.9%, the British Pound Sterling, FXB, -1.0%, and the Australian Dollar, FXA, -0.8%, traded lower.

The Proshare 200% Inverse ETFs, that is the bear market ETFS, BZQ, DUG, TWM, SSG, SMN, seen in this Finviz Screener, rose; the chart of 200% inverse semiconductors SSG shows a 5.8%, as Volatility TVIX, rose 6.4% this week.

The dynamos of growth and profit, that powered capitalism, since the late 1700s, which enabled two iron legs of UK and US hegemony to rule the world, are winding down, as the world central banks’ monetary authority, as well as carry trade investing, has failed.

Now, fate, not any human action, Revelation, 6:1-2, is powering up the dynamos of regional security, stability and sustainability, to establish regional global governance.

3) … The failure of both growth and the world central banks’ monetary policies makes debt unsustainable … out of soon coming sovereign armageddon, regional global governance will rise to replace capitalism, as foretold in bible prophecy of both the Old Testament and New Testament. The coming ten toed kingdom of regional global governance will create a global gulag of debt servitude and totalitarian collectivism.

The seigniorage, that is the moneyness of credit has failed, as Bonds, BND, and Major World Currencies, DBV, and Emerging Market Currencies, CEW, are trading lower from their recent highs. The coinage of World Stocks, VT, is now trading lower, with even Retail REIT, Simon Property Group, SPG, and Retail Shares, XRT, trading lower.

Out of a soon coming financial armageddon, that is a credit bust and global financial breakdown, Revelation 13:3-4, leaders will meet in summits to announce regional framework agreements, where new monetary authority and new sovereigns will be announced. In Europe, these will install monetary cardinals, and public private partnerships to oversee economic activity, and fiscal budget commissioners to enforce austerity measures and debt servitude.  A correct rendering and presentation of Revelation 13:1-4, as well as Daniel 2:31-33, communicates  that the new Euroland will be a Federal Superstate characterized by statism, debt servitude, and grinding austerity.

A new seigniorage is coming, diktat will serve as money and credit in the era of regional global governance, Daniel 2:31-33, where the Beast Regime of Neoauthoritarianism, Revelation 13:1-4, rises out of the profligate nations of Portugal, Italy, Greece, and Spain, to rule in mankind’s seven institutions and the world’s ten regions. The fiat money system that provided investors a choice of currencies in the Banker Regime of Neoliberalism is now history; it is being replaced by the diktat money system, as evidenced by the Second Greek Bailout.

A compelling factor for the new moneyness, and a new monetary authority in Euroland is the Target 2 Balances reflected in the EU’s internal balance of payments reflecting surpluses and deficits resulting from intra currency union trading and capital flight out of the peripheral nations.

Robert Wenzel writing in Economic Policy Journal article Germany’s Hidden Support of Greece, Spain and Portugal provides the Bob English email which creates In our opinion the Target statistics provide the most accurate seismograph of the shockwaves that were sent through the Eurozone during the global financial crisis.
We showed that the current account deficits of Greece and Portugal were almost entirely financed by Target credits in the years 2008 to 2010, and Ireland in addition accommodated a major capital flight that way, a policy that Italy copied in the summer of 2011. Germany, on the other hand, in the period 2008 to 2010, was paid for its 264-billion euro current account surplus with the rest of the Eurozone almost entirely (96%) with Bundesbank Target claims on the ECB. No marketable assets were returned. Currently, there is a huge capital flight from Italy to Germany that even results in swapping German marketable assets for Target claims.
These are all symptoms of a deep balance-of-payments crisis that resembles in many respects the fatal crisis of the Bretton Woods system. The cheap credit that the euro made possible for the periphery countries led to inflationary bubbles and huge current account deficits, as in the USA during the Sixties.
The European system may not collapse as quickly as the Bretton Woods system did, given that the Bundesbank, which has accumulated Target claims instead of dollar claims, will be unable to follow General De Gaulles’s example and convert its claims into gold. After all, its Target claims are intangible assets that cannot be converted into anything without a fundamental change in the ECB’s policy.Thus, year after year, the periphery’s current account deficit and capital flight may continue to be financed with the printing press, and the core can continue to shred the money flowing in as payment for goods and assets sold to the periphery. The peripheral countries and the core countries, above all Germany, can just go on swapping Target claims for real marketable assets that the inhabitants of the periphery buy in the core.
However, one can doubt whether such a solution would really be sustainable. There are too many cumbersome aspects that would undermine its economic and political feasibility.
The Target imbalances show that a system with idiosyncratic country risks and international interest spreads for public and private bonds is incompatible with a monetary system that allows countries to finance their balance-of-payments deficits with the printing press, without having to pay for the extra money-printing with marketable assets as is the case in the USA. Such a system will always induce the less-solid countries to draw Target credit to avoid the risk premium that the market demands, leading them eventually to a balance of payments crisis. To avoid this problem, Europe has only two options. Either it socializes national debts in order to eliminate the international differences in interest rates (by creating a uniform default risk for all countries), limiting excessive borrowing through the imposition of politically mandated constraints. Or it ensures that the Target balances are paid annually with marketable assets, keeping the debt burdens within the national responsibility and allowing for country defaults and interest differentials.
In our opinion, the reason why Europe is drifting in the direction of Eurobonds lies in the path-dependence resulting from the prior decision to set up a Eurosystem that provides the right to settle balance-of-payments deficits by creating money without having to pay for the extra money creation with marketable assets. Arguably, the potential threat with the printing press in the basement has made it easier for them to convince their European partners to solve their balance-of-payments crises with generous public rescue operations rather than undergoing the hardship of solving such crises by lowering the bubble-driven prices of labor,goods and assets to their equilibrium levels.

Mr. Wenzel concludes, Bottom line: Germany is funding the PIIGS and getting air in return.

Neoliberalism featured wild cat finance, a Doug Noland term, where bankers waived magic wands of ponzi credit. Neoauthoritarianism features wild cat governance, where authoritarians yield clubs of debt servitude. Neoliberalism’s debt cannot be repaid. Under Neoauthoritarianism, it will be applied to every man woman and child on planet earth.

There is waiting in the wings of Europe’s stage, the most credible of leaders, one of seemingly little authority. Soon the curtains will open, and this Little Horn, will rise as Europe’s Sovereign, Revelation, 13:5-10, to lead Germany to be preeminent in a type of revived Roman Empire. He will be accompanied by Europe’s Seignior, Revelation 13:11-18. Might this great leader be Herman van Rompuy, only time will tell.

4) … Sovereign wealth transcends decay.

Gold traded up on Thursday April 5, 2012.  Gold will be only form of sovereign economic wealth in the days to come; it will be the only form of money good. Likewise the practice of virtue will be the only form of sovereign life wealth in the time ahead; there are no sovereign individuals, there is only a Sovereign God, Psalm 24:1, who shares his virtues with his elect, that is his chosen ones, as they add these and love, partaking of his divine nature.

The Apostle Peter relates “For we did not follow cleverly devised stories when we told you about the coming of our Lord Jesus Christ in power, but we were eyewitnesses of his majesty”.

Relying on Peter’s testimony of the majesty of Jesus Christ, many throughout the ages have come to the know and live out of the like precious faith of Jesus Christ.

Now, the age of devolution and mandate, creates a spiritual imperative to make one’s calling and election sure, 2 Peter 1:10.  As one adds to one’s faith, virtue and love, then one transcends this world’s  decay and diktat. Living  in virtue  is a transcendental experience providing eternal meaning and experience, whereby one comes to know “Christ in you, the hope of glory”.

The Apostle Paul told Timothy, “But mark this, there will be terrible times in the last days”, 2 Timothy 3:1.

The moral life, provided by adding to one’s faith, virtue and love, enables one to transcend  the most oppressing worldly conditions, enables one to resist temptations, and assures one of  receiving the exceedingly great promises, such as that of Christ, who said that whoever trusts in Him, out of that person will flow rivers of living water.  Thank God, for the Apostle Peter as he has revealed to us the transcendental life experience.

The transcendental life is experienced by those of like precious faith, 2 Peter 1:1-4.

The word sovereign means ruler. The word authority means power to command, influence and judge. Psalm 146:6 and Ezekiel 28:1 reveals that God is sovereign. The sovereignty of God is also seen in, Psalm 24:1, Nehemiah 9:6, Joshua 2:11, Daniel 2:21.  Scripture reveals that God is sovereign in the affairs of man, Ps 107:19,  Revelation 1:1, Revelation 2:26-27, Revelation 6:1-2.

Scripture reveals in Matthew 28:18, that all authority in Heaven and Earth has been given unto Jesus.  He has all the attributes of deity: he is present everywhere ( Matthew 28:20 ), all knowing ( Matthew 9:4 ), all powerful (Matthew 28:28), holy ( Acts 3:14 ), and eternal ( Revelation 1:8, 17 ).  Marusha writes The Person Jesus,  …  Alpreacher writes 120 Things About Jesus,  and… Richard Barcellos writes Christ is Head Over All  in The Headship of Christ.

Faith is the acceptance that God is sovereign and has the moral authority to tell one what to do. Paul expressed it well, as he writes “Rather, let God be found true, though every man be found a liar”, Romans 3:4.  Paul communicates that God is pure moral goodness, and man is corrupt. It is only through prayer for a good conscience, that one comes to moral discernment, Psalms 51:10 .  Bob Ganoye Baptism Is The Answer Of A Good Conscience Toward God.

Those of like precious faith, know the doctrine of the election of grace, which communicates that by nature all are sinners in Adam. God, in His sovereign grace, saves sinners, as He wills. The Holy Spirit makes those ordained to eternal life believe, willing and able to believe; and that at the appointed time, one calls upon the name of the Lord and is saved, Acts 13:48, Romans 3:10-23, Romans 6:23, Ephesians 2:8-9, 1 Peter 1:15 and Hebrews 12:14.

A number of ministries, that is alliances, endeavor to present the doctrine of the election of grace.  Provident Baptist Mininstries presents the Works of John Gill, and Andrew W Park, who wrote The Sovereignty Of God, and presents material on eschatology, that is the end time things. 

Ernest C Reisner writes in Founders Minstry, another similar ministry, that election is the gracious purpose of God which regenerates, sanctifices and glorifies sinners. Election does not destroy man’s so-called “free will.” The will of man is his desire, wish or choice. His choice is sin. John 3:19, 20; 5:40; 3:11; 2:2, 3; 4:17-19; Jer. 17-9; 13:23; etc. Man “freely” chooses sin and by God’s grace the elect freely choose Christ –Ps. 65:4; 110:3; John 6:44, 65; Acts 13:48. Lazarus “freely” rotted, but at the word of Christ he “freely” came forth (John 11). So do the elect of God.

John McArthur author of the John McArthur Study Bible established the Grace To You Ministry which provides study materials dealing with the election of grace.

5) … Experience in the Sovereign’s will produces both the moral person and a moral life.

In Four Sources To Determine One’s Rights I wrote God’s sovereign will is the forge and furnace, hammer and anvil where one’s right, the right to become the son of God, is learned, developed and exercised. John revealed the only right there is in 1 John 1:12. “But as many as received Him, to them He gave the right to become children of God, to those who believe in His name.”

This is not a right to sin; but rather the resource to partake of the divine nature, so as to escape the corruption that is in the world through sin, and thereby experience the exceedingly great promises of God, and so as to lead an effective and fruitful life, as presented in 2 Peter 1:1-10.  As one grows in faith, by reflection on and practicing virtue, which comes by knowledge of God and His Word particularly the Present Truth, and by practicing moderation, exercising patient endurance, growing in godliness, acting in brother love, and seeking the other’s highest good, then the moral person and the moral life develop.

Paul served as living example of the only right there is, stating in 2 Corinthians 4:7-10: “We have this treasure in earthen vessels that the excellence of the power may be of God and not of us. We are hard pressed on every side, yet not crushed, perplexed, but not in despair; persecuted, but not forsaken; struck down, but not destroyed always carrying about in the body the dying of the Lord Jesus, that the life of Jesus also may be manifested in our body.not your own: for ye are bought with a price.” With the price being the blood of Jesus.

An inquiring mind asks, have Libertarians have usurped the principle of liberty, from Christ, who said in John 8:32, You will know the Truth, and the Truth will set you free and who said in John 8:36 If the Son sets you free, you are free indeed.

It’s only through Christ that one has life and one has freedom. As the Apostle John said in John 6:63, It is the Spirit who gives life; the flesh profits nothing. The words that I speak to you are spirit, and they are life. And As the Apostle Paul said in Romans 8:2, For the law of the Spirit of life in Christ Jesus made me free from the law of sin and of death.

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