The World Is Pivoting From Liberalism To Authoritarianism On The Exhaustion Of The World Central Banks’ Monetary Authority

Financial market report for January 30, 2013

1) … On Tuesday, January 29, 2013, World Shares,WT,  Global Producers, FRX, and Carry Trade Nations, EFA, traded higher.  
Consumer Staples, KXI, rose, taking beverage laden, FMX, KOF,  Mexico, EWW, higher.
Global Natural Resources, GNR, Energy, XLE, XOP, and Energy Service, OIH, IEZ, rose strongly.
Utilities, XLU, rose to strong resistance and DBU, rose to channel resistance.
Leveraged Buyouts, PSP, traded higher
Dividend Appreciation, VIG, traded higher
Vietnam, VNM, the Philippines, EPHE, and Thailand, THD, continued higher.

Technology Shares, MTK, traded lower as, Semiconductors, XSD, Networking Shares, IGN, NTGR, JNPR, FTNT, VMW, RAX, JDSU, CVLT, APKT, RHT, CSCO, AKAM, ARUN, AVNW, and Software Shares, IGV, traded lower.
Airlines, FAA, and Internet Retail FDN, traded lower.
UK Banks, RBS, and lYG traded lower.

2) … On Wednesday January 30, 2013, World Stocks, VT, Major World Currencies, DBV, Emerging Market Currencies, CEW, and Bonds, BND, all traded lower, suggesting that the Stimulus Bubble is bursting on the exhaustion of the world central banks’ monetary authority.
CNBC reports Fed Keeps Stimulus Amid Signs of Weak Economy.  The Federal Reserve said Wednesday it will maintain its asset buying at $85 billion a month and stick to its commitment to hold interest rates near zero until unemployment falls to at least 6.5 percent

Scott Grannis writing in Developments in China explain the end of gold’s rise  make an important statement “As I explained in this post, it now appears that this process of forex purchases and yuan appreciation is at an end.”

Mr Grannis continues,  Don Luskin, a good friend, got me started down the path to an explanation for how China’s forex reserves are connected to the rise in the price of gold. He argues that the outstanding stock of gold is relatively fixed—growing only about 3% per year—but that the demand for gold has jumped by orders of magnitude since China, India, and other emerging markets have enjoyed explosive growth and prosperity gains. In other words, the number of potential buyers of gold has risen much faster than the supply of gold, so naturally gold’s price has increased. This is not a story about massive money printing and hyper-inflationary consequences, it is a story about a one-time surge in the demand for the limited supply of gold.

And that surge in demand for gold stopped almost two years ago as China’s capital inflows have settled down to more manageable levels. Since capital is no longer flooding into China, China’s growth rate is subsiding. Instead of purchasing massive amounts of foreign exchange reserves, China will in the future be purchasing more goods and services from the rest of the world as its economy continues to expand. This is “organic” growth, not super-charged, foreign investment-led growth.

His article does have a number of excellent points, but from a gold bug, that is a physical gold bug position, and from a Christian Dispensationalist position, it has some statements that deserve a presentation of a  contrary position.

First of all, I suggest that one read, the Austrian Economist gold bug authored China averts $482 Billion in local bank defaults via massive Rollover Scheme; Extend-and-Pretend Chinese style  … http://tinyurl.com/bghawmv  … where Mike Mish Shedlock correctly writes the obvious.  “The Chinese banking system is insolvent”.

Yet stunningly, on the day he wrote this Chinese Financials, CHIX, rose, illustrating what a Unified Monster of Authoritarianism that China has become; it is now through mandate, a Regional Beast of central banking, industrialization, CHII,  infrastructure, CHIX, small business operations, HAO, and Banking, CHIX. China’s Rollover Scheme, is an example of bible prophecy of Revelation 6:1-2, being fulfilled, where Jesus Christ has unleashed the First Horseman of the Apocalypse, to effect a global coup d etat passing the baton of sovereignty from nation states to an Authoritarian, Totalitarian Collectivist, and Regional Governance Regime, replacing the current Liberal, Banker, and Nation State Regime, as foretold in Revelation 13:1-4, where diktat, not democracy, wll rule in all of mankind’s ten regions and in all of mankind’s seven regions. Yet this development is unseen to practically everyone, as the Beast Regime has the feet of a bear, the mouth of a lion, and the coat of a leopard. In other words, the Beast Regime, is the ultimate predator, having feet which enables it to stand its ground as well as root out its enemies, a mouth to make authoritative statements, and a coat whereby it blends in with all of mankind’s media, technology, banking, educational, banking, government and religious and think tank institutions.

Jesus Christ is at the helm of the economy of God, Ephesians 3:10, pivoting the world from fiat asset appreciation to fiat asset deflation, as the dynamos of a Flattening Yield Curve, FLAT, ZIRP, global growth, corporate profitability, are failing, on the exhaustion of the world central banks’ monetary authority, and are winding down Crony Capitalism and European Socialism and Asia Exports.

Liberalism’s choice, credit and prosperity, is being replaced by Authoritarianism’s diktat, debt servitude and austerity.

The dynamos of a steepening Yield Curve, STPP, a higher US Ten Year Note Interest Rate, ^TNX, regional stability, security and sustainability, are winding up Regional Governance, Totalitarian Collectivism, and Regional Private Public Partnerships.

And Mr. Grannis continues Meanwhile, as the chart above shows, gold prices in real terms have reached very high levels. Should it be surprising that demand for gold is no longer accelerating now that its price has reached historically high levels relative to other goods and services? Gold is very expensive relative to other things at today’s prices. Demand has its limits. At the same time, the very high price of gold is undoubtedly stimulating all kinds of efforts to increase gold production, thus bringing supply and demand into balance. As we approach two years of relatively stable gold prices, it is reasonable to conclude that the heydays of gold are now a thing of the past.  To sum up, the slowdown in Chinese growth and the end to China’s massive forex purchases are good signs that the boom in gold is over

Definitely China’s growth will slow as will all of Asia’s, as Foreign Investment, EFA, SCZ, and Emerging Market Investment, EEM, VWO, and Global Producer Investment, FXR, has came to an end, as the Yen Bomb went off starting Competitive Currency Deflation.  Japan in its efforts to stimulate inflation, has sunk the Yen, FXY, and has succeeded in producing Liberalism’s last inflationary World Stock, ACWI, Major Currency, DBV, and Emerging Currency, CEW, rally. Now these currencies are no longer rising, they are sinking, and are longer able to provide appreciation in Global Stocks, VT, Bonds, BND, and Commodities, DBC.  And yes, China will not be sucking up FX Currencies,  But an investment demand for gold, will once again commence, as all forms of fiat weatlh will trade lower in value, as the Age of Fiat Asset Appreciation has come to an end, and as the Age of Fiat Asset Deflation has commenced. Under Authoritarianism, physical possession of Gold, in bullion form, or in Internet trading vaults, such as Bullion Vault, as well as Diktat will be the only forms of sovereign wealth. The investment demand for gold will not only be seen in spot gold, $GOLD, rising from $1,650; but also in these metal based ETFS, FSG, UGL, AGQ, NUGT, DGP, seen in this Finviz Screener, rising, and in these gold mining stocks AEM, EGO, GOLD, ANV, RGLD, FNV NGD, AUY, KGC seen in this Finviz Screener, rising as well.

Stocks, currencies, and bonds, all traded lower, as investors feared that the World Central Banks’ monetization of debt, has crossed the rubicon of sound monetary policy, and has now turned “money good”  investments bad. Great Depression II is on the way.

World Stocks, VT, and Global Producers, FXR, traded lower today. But carry trade investing, in particular the  EUR/JPY, rising above it Fibo level of 123.08 seen in this Action Forex Chart Article, caused Carry Trade Nations, EFA, IFSM, to rise higher. Sweden, EWD, the Netherlands, EWN, Ireland, EIRL, Finland, EFNL, and Switzerland, EWL, traded higher on a higher Euro, FXE, that has risen to a yearly high to close at 134.59, and a lower Japanese Yen, FXY, which has fallen to close at 107.60. India, INP, Vietnam, VNM, Thailand, THD, and the Phillippines, EPHE, traded higher. The US Dollar, $USD, UUP, traded  lower to 79.50,  which is a component of Major World Currencies, DBV, which fell sharply lower; its peer  Emerging Market Currencies, CEW traded unchanged, but below its recent high.

Stock ETFs trading lower included
Small Cap Pure Value, RZV, which includes SAH, LAD, KMX, ABG, URI, UHAL, TAL, EEFT, ASR, CAR, POOL, INT, PRAA
Solar, KWT
Networking, IGN
Airlines, FAA
Shipping, SEA
Automobiles, CARZ
Paper Producers, WOOD
Homebuilders, ITB
Retailers, XRT
US Infrastructure, PKB
Steel, SLX
Copper Miners, COPX
Aerospace, PPA
Coal Miners, KOL
Small Cap Industrials, PSCI, which includes MWA, SEH, CSL, CTB, WTS, JBT, BMI, BEAV, MIDD, BGG, LECO, SNA, SXI, ROLL

Dividend ETFs trading lower included
Dividend Appreciation, VIG
Dividend Excluding Financial, DTN
Leveraged Buyouts, PSP
US Telecom, IYZ
Energy Service, OIH … Halliburton, HAL, traded 1.7% lower
Energy, XLE, … Exxon Mobil, XOM, traded 1.1% lower.
Real Estate, IYR, and Small Cap Real Estate, ROOF,
Brazil Financials, BRAF, and Australian Dividend, AUSE
Junk Bonds, JNK
Emerging Market Bonds, EMB,

Countries ETFs trading lower included
Turkey, TUR,
Russia. RSX,
Italy, EWI
Greece, GREK
Spain, EWP
South Africa, EZA
Russell 2000, IWM

Banks trading lower included
Mexico, BSMX
Ireland, IRE,
Brazil, BBDO, ITUB,
Argentina, BFR, BMA, BBVA

Vietnam, VNM, the Philippines, EPHE, and Thailand, THD, continued parabolically higher. And Huaneng Power International, HNP, popped 2.8% higher.

The end of ZIRP has arrived, as Competitive Currency Devaluation, that is debt deflation, is underway as the Major World Currencies, DBV, and Emerging Market Currencies, CEW, are trading below their January 17, 2012 highs. The bond vigilantes have gained control of interest rates globally as reflected in the Interest Rate on the US Ten Year Note, ^TNX, rising above 2.0%, a steepening of the 10 30 US Sovereign Debt Yield Curve, $TNX:$TYX, resulting the the the Steepner ETF, STPP, breaking out, and in US Government Bonds, GOVT, and Total Bonds, BND, trading lower since December 6, 2012. The world is at a major tipping point, as is seen in the climaxing of the 200% Inverse Yen, YCS, together with EFA, FXR, EEM. This as Zero Hedge reports NYSE margin debt rises to fresh five year high as short interest slide continues. Soon there will be a massive derisking out of carry trade positions, and a painful squeeze will pinch those long with margin debt, as it becomes all to real that the world central banks’ monetary policies have not only exhausted, but turned “money good” investments bad.

Confirmation that debt deflation is underway is Small Cap Value Shares, RZV, 1.6%, loss, compared to the Small Cap Growth Shares, RZG, 1.4%, loss. The ratio of the two, RZV:RZG, is known as the currency demand curve; and the massive Lollipop Hanging Man Candlestick, at 50 day moving average communicates that there will soon be a sell of currencies and a demand for the US Dollar.

Commodities, DBC, with the exception Timber, CUT, were drawn high as part of Liberalism’s Grand Finale toxic debt, global currency carry trade, risk on rally. Silver, SLV, and Gold, GLD, rose strongly to resistance.

It has been the most toxic of debt, specifically Distressed Investments, like those taken in by the Fed under QE1, traded by the Fidelity Mutual Fund FAGIX, and Junk Bonds, JNK, and Senior Bank Loans, BKLN, that have given seigniorage, that is moneyness to Liberalism’s seven month long rally. These turned parabolically lower signaling an end to Liberalism and the Beginning of Authoritarianism.

Volatility, ^VIX, is  heating up; VIXM, is bottoming out and VIXY, is rising; Inverse Volatility, ZIV, has topped out. And Closed End Equity, CSQ, is no longer able to leverage up over Closed End Debt PFL. as is seen in their combined ongoing Yahoo Finance Chart, strongly suggesting that a stock market turn lower is imminent.

3) … The short selling opportuntiy of a lifetime has arrived; one might sell the following short
Dow Theory communicates that market bull and bear markets commence when both Transportation Shares and Industrial Shares pivot together. Transports, IYT, traded 1.5% lower and Industrials, IYJ, traded 1.0% lower; both from a seven month rally, giving warning that a bear market has commenced. Great Depression II is on the way. The short selling opportuntiy of a lifetime has commenced; one might consider selling the following short..

.. Sector ETFs .. such as PSP, IBB, RZV, FAA, CARZ, BJK, KWT, FXR, TAO, COPX, WOOD, IGN, ITB, FEMS, SEA, FAN, REM, JJT, CHII, FLM, AUSE, XPH, DLS, VIG, EMLP, IHF, IYZ, FDN, XRT, ZIV, seen in this Finviz Screener
.. Country ETFs .. such as EPHE, EWW, THD, TUR, ECNS, VNM, GREK, URTY, EWY, ARGT, EIRL, EWP, CAF, SCIN, FPX, seen in this Finviz Screener
.. and Banks .. such as BAC, C, BCS, LYG, RBS, SAN, DB, IBN, HDB, NMR, MTU, UBS, WF, CS, GGAL, BFR, BMA, BPOP, IRE, CHIX, SMFG, MFG, BSMX, NBG, JPM, seen in this Finviz Screener

And, I see opportunities in going long in the following:
.. Proshares 200% Inverse ETFs .. such as BIS, FXP, SQQQ, SMK, SDD, EEV, EFU,
.. Direxion 300% Inverse ETFs .. such as EDZ, YANG, RUSS, DPK
.. Metal Based ETFS .. such as FSG, UGL, AGQ, NUGT.

These financial instruments can be viewed on my public chart site through Sunday February 3, 2013. http://stockcharts.com/public/1270699

4) … Soon, Regional Governance will rise to replace sovereign nation states, where diktat not credit will rule economic and political life.
Aristides N. Hatzis, an associate professor of law and economics at the University of Athens and  founder of the Greek Crisis Blog, writes in the NYT, Political unity must come first.  Milton Friedman, in a prophetic article published 16 years ago, predicted that the adoption of the euro would have the opposite effect of the one anticipated from its founders: “It would exacerbate political tensions by converting divergent shocks that could have been readily accommodated by exchange rate changes into divisive political issues. Political unity can pave the way for monetary unity. Monetary unity imposed under unfavorable conditions will prove a barrier to the achievement of political unity.”

This is exactly what happened. The troubles in the euro zone shattered the European edifice. The crisis led to political divisions between North and South, rich creditors and poor “PIGS” (Portugal, Italy, Greece, Spain) but also to schisms in every single country: Austerity or growth? Bailout or exclusion? Payment or default?

These divisions might lead to extreme solutions that were almost unthinkable until recently: exiting from the euro zone or the E.U., or perhaps even abandoning the unification project altogether, which could result in isolationism or even something worse, like a rise to power of extremist parties touting radical agendas of nationalism, protectionism and statism. Needless to say that such a development will have dreadful repercussions for Europe as a continent of peace, democracy and wealth. The divisions could be further exacerbated and war could be back. Not the military kind of war but an economic one where barriers will replace cooperation and reciprocity.

Most European leaders realize that Milton Friedman was right in emphasizing political unity as a necessary prerequisite for the monetary union. However I am not sure that they are ready to make the necessary steps. These steps are not politically costless and we are, after all, talking about politicians.

I relate that Regional Governance will rise to replace sovereign nation states. With the failure of monetary sovereignty, that is the exhaustion of the world central banks’ monetary authority, we will see the death of sovereign nation states, and the rise of regionalism, as foretold in Bible prophecy of Daniel 2:25-45, which foretells that the two iron legs of global hegemony of the UK and the US, will give way to a Ten Toed Kingdom of regional governance, where ten toes, that is ten regions, will serve as the basis for economic and political government, composed of a miry mixture of iron diktat and clay democracy.

Sovereignty begets seigniorage, that is moneyness.  Insolvent sovereigns, Greece, GREK, Spain, EWP, Italy, EWI, Ireland, EIRL, Britain, EWU, China, YAO, and their insolvent financial institutions, the European Financial Institutions, EUFN, Lloyds Group, LYG, Royal Bank of Scotland, RBS, and Chinese Financials, CHIX, cannot provide seigniorage.

Out of a soon coming Financial Apocalypse, that is a global credit bust and financial system breakdown, foretold in Revelation 13:3, leaders will meet in summits, to renounce national sovereignty and pool sovereignty regionally, by announcing regional framework agreements which appoint  regional sovereign bodies such as the ECB, and nannycrats, working in public private partnerships, such as Macquarie Infrastructure Company, MIC, to provide the Authoritarianism’s seigniorage of diktat, replacing Liberalism’s seigniorage of choice.  As Liberalism Debts, BND, cannot be repaid, lending will decrease and debt servitude increase.  All of Liberalism’s Credit, AGG, will be applied to every man, woman, and child in the world.

Excessive Credit, in particular, the Fed’s QE4, the ECB’s LTROs, and OMT, and the BoJ’s Unlimited Easing, have turned “money good” investments bad, resulting in both the death of the fiat money system. The diktat money system is coming on line, where the word will and way of monetary popes and their technocratic government cardinals, will enforce ever increasing austerity.

Liberalism’s premier think tank, Brookings Institute, established by Robert S Brookings, promotes research to achieve a cooperative international system; it has received funding from Rockefeller Foundation, and as SourceWatch reports as well from John M. Olin Foundation, F. M. Kirby Foundation, Walton Family Foundation, and Smith Richardson Foundation.

Wikipedia relates Brookings traces its history back to 1916, and has contributed to the creation of the United Nations. It is ranked the number one think tank in the US in the annual think tank index published by the Council On Foreign Policy’s Foreign Policy Magazine.

Just as the vision of Milton Friedman served to provide the Free To Choose Floating Currency Regime as the bedrock for the edifice of Crony Capitalism and European Socialism, a new vision, that of true European economic governance, has been put forth in the December 12, 2013 report Brookings survey on Eurozone progress, written by Justin Vaïsse, Douglas J. Elliott, Domenico Lombardi and Thomas Wright. which envisions a New Europe based upon a new sovereignty scheme, which replaces the scheme of sovereign nation states. “There are many possible roads to Eurozone 2.0. Rather than choosing a path, we have drawn a list of six broad objectives where we think progress is needed in the coming years if the eurozone is to become self-sustaining and resilient: 1. creating a political union, 2. creating a fiscal union, 3. creating a banking union, 4. enhancing the role of the ECB in ensuring liquidity and market access, 5. creating sovereign crisis resolution tools, 6. improving competitiveness and economic adjustment”.

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