Financial market report for the week ending January 24, 2013
This post can be found in Google Documents format here
1) … An overview of dispensation economics provides insight into social mobility, bubbles and economic life.
Trust in the monetary policies of the world central banks, coupled with freedom of choice provided by democratic nation state governance, under the operation of the US Dollar International Reserve Currency System, provided life experience for all of humanity.
The week ending January 24, 2013, World Stocks, VT, and the US Dollar, USD, UUP, as well as Major World Currencies, DBV, and CEW, traded lower on the failure of trust, terminating liberalism and introducing authoritarianism, both as a paradigm and an age of regional governance and totalitarian collectivism.
Two very important questions. The first important question. Slate’s economic writer Matthew Yglesias asks an important question, What if social mobility is never nigher anywhere?
According to the Apostle Paul in Ephesians 1:10, Jesus Christ is the Operative Genius of the economy of all things, and through His dispensation, that is His administrative oversight for the completion of all things economic and political in every age, in particular liberalism, He provided social mobility to the wily investor, to those successfully engaged in clientelism, and to those who have lived as beneficiaries of debt trade investing and currency carry trade investing, under the Milton Friedman Free To Choose floating currency system which began in 1971 when President Nixon took the US off the gold standard to finance the Vietnam War.
The subprime crisis led to the financial system crash of 2008; and it is likened to a fatal automobile crash that killed all the occupants. Regeneration of economic life came through Paulson’s Gift, that being Ben Bernanke’s QE1 and TARP, which traded out “money good” US Treasuries for Distressed Investments, such as those traded in Fidelity Mutual Fund FAGIX.
Jesus Christ provided liberalism as an economic domain, that is a place for economic experience. It was trust in Ben Bernanke and his monetary policies, that began liberalism’s terminal phase as both a paradigm and age, where the investor and clients living in clientelism were the centerpiece of economic life, whose experience was shaped by floating currencies in a Zero Interest Rate regime.
Economic life was through fiat money, defined as Aggregate Credit, AGG, and Major World Currencies, DBV, and Emerging Market Economies, CEW, but it died on October 23, 2013, when Jesus Christ opened the First Seal of the Scroll of End Time Events, and released the Rider on the White Horse, to effect a global economic and political d’etat, which terminated the Creature from Jekyll Island, and birthed the Beast of Revelation 13:1-4, which is rising to rule the world in the new economic domain of authoritarianism.
Fiat wealth, defined as the output of economic life under liberalism, consisting of World Stocks, VT, Nation Investment, EFA, and Global Financials, IXG, died on January 24, 2013, with the failure of investor’s trust in the monetary policies of the world central banks monetary authority, and the collapse of freedom of choice provided by democratic nation state governance as is seen in numerous places such as the Ukraine.
All flags, that is all nation investment, EFA, fell down on the week ending January 24, 2013; yet ten new flags are seen rising.
Out of the collapse of trust, in fiat money on October 23, 2013, and in fiat wealth on January 24, 2014, and out of the collapse of freedom of choice in a number of democratic nation states, as well as the failure of currencies, seen in the sinking of currencies, especially the US Dollar, $USD, UUP, the domain of economic experience is now authoritarianism, where economic life comes through diktat money, established by the diktat policies of regional economic governance, in the worlds ten regions, and schemes of debt servitude of totalitarian collectivism unifying all of mankind’s seven institutions.
All social mobility has ended, as the centerpiece of liberalism, that being the investor, was made extinct, like the woolly mammoth of prehistoric times, by the twin extinction events of fiat money, on October 23, 2013, and fiat wealth on January 24, 2013. All people are now debt serfs.
Under authoritarianism, the debt serf is the centerpiece of authoritarianism, and debt servitude, is the foundation, capstone, and framework of economic life. The Creature from Jekyll Island was perished, and a greater monster, the beast regime is given constitution of end time rule, as is presented in Revelation 13:1-4.
The second important question. Mike Mish Shedlock asks What causes economic bubbles? When do bubbles burst? Can the Fed prevent bubbles? In short, the Fed held interest rates too low, too long, fueling asset inflation and credit expansion on ever-easing terms, the primary way in which bubbles are blown. Government policy, notably President Bush’s “Ownership Society” coupled with countless “affordable housing programs” and Greenspan’s promotion of variable interest rate loans and derivatives was icing on the bubbleicious cake.
And he asks, when do bubbles burst? In contrast to what Yasushi Asako and Kozo Ued suggest, I propose we know a heck of a lot about how bubbles burst. Here is the simple answer: Bubbles burst when the pool of greater fools runs out.
And he also asks, Can the Fed prevent bubbles? The way to prevent bubbles is easy enough in theory: Get rid of the Fed; get rid of government-sponsored corporatism; stop government central-planning activities, and instead try free-market economic solutions. Since no Fed-sponsored research could possibly come to the correct conclusion, the Fed and its research departments both sit in academic wonderland, hiding behind obscure mathematical absurdities that do not and cannot work in the real world.
The Dispensation Economics Manifest presents the concept of the Apostle Paul in Ephesians 1:10, that Jesus Christ is at the helm of economy of God, where He is in dispensation, that is He is in administration and oversight of all things economic and political, maturing and perfecting all things therein, by blowing bubbles for the completion of every age.
Jesus Christ ended the US Fed on October 23, 2013, did what Ron Paul could not do, He utterly and totally ended the Fed, that is the Creature from Jekyll Island, by opening the First Seal of the Scroll of End Time events, seen in Revelation 6:1-2, to release the Rider on the White Horse, who has the bow without any arrows, that is the Bow of Economic Sovereignty, to enable the bond vigilantes to begin calling the Benchmark Interest Rate, ^TNX, higher from 2.48%, and in so doing to effect a global economic and political coup d’etat taking sovereignty from democratic nation states and giving sovereignty to the beast regime. This was an extinction event that terminated fiat money, defined as Aggregate Credit, AGG, and Major World Currencies, DBV, and Emerging Market Currencies, CEW.
The beast regime’s sovereignty is Deutungshoheit in nature. The monetary authority of authoritarianism’s beast regime features the security, stability and sustainability of the diktat of nannycrats, not bankers, in regional governance, and in the debt servitude of totalitarian collectivism.
There is only one sovereignty, and it provides only one life experience. Deutungshoheit is defined as interpretational sovereignty and connotes supremacy in all things, the result being German economic, banking, credit, and military supremacy, over all of the Eurozone. German linguist Thorsten Pattberg relates Deutungshoheit is a German word meaning “having the sovereignty over the definition of thought,” sometimes also called “the prerogative of final explanation.”
Authority now longer resides in democracy; now Obrigkeit, as the Germans say, resides in beast regime’s policies of diktat in regional governance in all of the world’s ten regions, and has affect in schemes of debt servitude in totalitarian collectivism in each of the world’s seven institutions, as presented by the Apostle John in presenting The Constitution of Endtime Rule in Revelation 13:1-4.
The fiat wealth bubble burst on January 24, 2013, when World Stocks, VT, Nation Investment, EFA, and Global Financials, IXG, traded lower as investors derisked out of debt trade investments and deleveraged out of currency carry trade investments on the failure of trust.
Specifically fears that the US Fed’s monetary policies of credit stimulus have crossed the rubicon of sound monetary policy and have made “money good” investments bad, that trust investments in China cannot be repaid, that Emerging Market Local Currency Bonds, EMLC, cannot be repaid, and that Emerging Market Governments are untrustworthy, and that global growth has slowed and that businesses worldwide will fail, and that the ECB will not back dollar denominated lending risks.
Economic life under liberalism was consumer spending, capital expenditures by businesses, and investing. Economic life under authoritarianism is debt servitude obtained through expansionary austerity.
2) … A crisis of trust pivoted the stock market from a bull market to a bear market on the week ending January 17, 2014.
At this time last week, the Global Financials, IXG, pivoted lower, fiat wealth began to die, and the world PIVOTED from the paradigm and age of liberalism into that of authoritarianism, where regional economic fascism will be the dynamic of The Great Economic Transformation, where liberalism’s investor, morphs to become authoritarianism’s debt serf, through the failure of fiat money.
3) … Fiat Wealth totally died as World Stocks, VT, Global Financials, IXG, Nation Investment, EFA, and Dividends Excluding Financials, DTN, traded lower the week of January 24, 2013, terminating liberalism as both a paradigm and an age, and introducing that of authoritarianism.
World Stocks, VT, Global Financials, IXG, Nation Investment, EFA, and Dividends, DTN, all traded lower, evidencing an extinction event; that being everything having to do with liberalism. The failure of fiat wealth pivoted he world from the paradigm and age of liberalism, into that of authoritarianism.
Inasmuch derisked out of the Emerging Markets, EEM, such a TUR, EWZ, THD, IDX, EPHE, ARGT, ECH, EPU, and EZA, and deleveraged out of Emerging Market Currencies, CEW, on the failure of Emerging Market Bonds, EMB, and Emerging Market Local Currency Bonds, EMLC.
And investors derisked out of safe haven investments in US Based Equities, VTI, the trade lower out of these caused the US Dollar, $USD, UUP, trade lower from $81.29 to 80.51 and Gold, $GOLD, traded higher in breakout from $1,236 to 1,264. Silver while trading up to $20, failed to participate in the breakout, suggesting that it is a base metal and not a precious metal.
The failure of the US Dollar, $USD, means that the US Dollar Hegemonic Empire will soon be relegated to the dustbin of history. Out of waves of sovereign, banking, and corporate insolvency, leaders will meet in summits to renounce national sovereignty, and announce regional pooled sovereignty to establish regional security stability and sustainability.
With the failure of the US Dollar, $USD, the international Reserve Currency System, also known as the Milton Friedman Free to Choose, Floating Currency Regime, regional currencies, such as the Euro, and regional trading blocs, such as the Ukraine and Russia trading union, will emerge to support regional economies, where regional leaders provide diktat policies of regional governance and totalitarian collectivism schemes of debt servitude.
3A) …Beginning with the advent of the Euro, and then the repeal of the Glass Steagall Act, and then continuing on with the Alan Greenspan Put, the Ben Bernanke Put, and the Mario Draghi Promise Of Sufficiency, liberalism’s centerpiece was the investor and fiat money, where the speculative investment community established ever increasing moral hazard all to advance the investor’s return, the greatest of which are seen in the investments of Global Industrial Producers, FXR, Transportation Companies, XTN, Biotechnology Firms, IBB, Resorts and Casinos, BJK, Solar Energy Manufacturers, TAN, Semiconductor Manufactures, SOXX, Internet Retailers FDN, Nasdaq Internet Firms, PNQI, Aerospace and Defense Manufacturers, PPA, and Pharmaceuticals, PJP.
Fidelity’s Vice Stock Mutual Fund, VICEX, epitomizes the gains of the wily investor; all of which came through Ben Bernanke’s QEs, as he established TARP, and traded out money good US Treasuries, TLT, for distressed investments of all types such as those traded in Fidelity’s Distressed Investments, FAGIX, mutual fund. Most of the Treasury Debt has made its way back to the US Federal Reserve, and now resides there as Excess Reserves.
Now, authoritarianism’s footprint is that of the debt serf, where the beast regime establishes ever increasing debt servitude through the establishment of diktat money, the aim of which is to advance regional security, stability and sustainability.
The monetization of debt servitude is now underway through leaders establishing diktat policies of regional governance, where public private partnerships establish regional security, stability, and sustainability; this being seen in the Reuters reports Italy moves to sell stake in post office to cut public debt.
Under liberalism bankers monetized debt and financialized investments for investment gain. Under authoritarianism, regional leaders monetize debt servitude, and secure economic rule, as exemplified in the James Brewer WSWS report Emergency manager accelerates plans to “monetize” Detroit water department, The plan to put the Detroit Water and Sewage Department under regional control is the first step towards privatization of one of America’s largest publicly owned water systems. As well as in the John Marion WSWS report Wall Street demands austerity in Puerto Rico. Bond traders are responding to Puerto Rico’s government debt problems by demanding the imposition of austerity measures.
3B) … Under liberalism, one had economic life as an investor, where one trusted in the investment choice policies of democratic nation state sovereignty, as well as trusted in the credit policies of the banker regime sovereignty, enjoying the seigniorage of fiat money.
Now, one has economic life as a debt serf, where one complies in the diktat policies of regional governance sovereignty, as well as in the debt servitude policies of the beast regime, laboring under the seigniorage of diktat money.
3C) … Under liberalism, the speculative investment leverage community, was the source of monetary transmission. Fiat money was the element of economic life. Economic life centered around three activities consumer spending, capital expenditures by businesses, and the investing activity of the investor. It’s important to recognize that economic growth was the outcome of the three factors of consumer spending, business capital expenditures, and the investor exercising risk-on investment choice across a broad spectrum of investment opportunities. Said another way, the engine of economic growth under liberalism was three fold, consumer spending, business capital expenditures, and investment choice. For example, leading regional banks, KRE, such as HBAN, SNV, FIBK, SIVB, OZRK, GBCI, PACW, FFIN, and UCBI, spawned economic growth, as a result of consumer spending and the investment activity of the investor, which carried impact seen in economic metrics such as Housing Starts, GDP Reports, Industrial Production, ADP Payroll, Construction Spending, and the Purchasing Manager’s Index. These were not goals, but rather statistical attributes, that is metrics, associated with risk-on investing.
M&G Investments posts China’s investment/GDP ratio soars to a totally unsustainable 54.4%. Be afraid. It should be a concern if a country experiences a surge in its investment rate over a number of years, but has little or no accompanying improvement in its GDP growth rate, i.e. the historical time series would appear as a horizontal line in the chart below. This suggests that the investment surge is not productive, and if accompanied by a credit bubble (as is often the case), then the banking sector is at risk (e.g. Ireland and Croatia followed this pattern pre 2008, Indonesia pre 1997). But it’s more concerning still if there is an investment surge accompanied by a GDP growth rate that is falling. This is where China finds itself, as shown by the red arrow.
Now, under authoritarianism, regional leaders are the source of monetary transmission, as they rule in diktat money, which becomes the element of economic life. Economic life centers round the compliance of the debt serf as the leaders manage the economy to achieve regional security stability, security and sustainability.
3D) … Regional property rights supercede those of individual, whose property is taken to secure the stability and sustainability of the region; thus, what was personal property, becomes that of the region.
3E) … Liberalism was an age of debt trade investing and currency carry trade investing.
Mike Mish Shedlock has it right when he relates that A number of companies have cash on hand that is not intended for expansion, for multiple reasons.
1.Businesses have no reason to expand.
2.The recovery is quite long historically, growth will slow.
3.The cash is really debt, so realistically it’s already been spent.
Nonetheless, the cash does provide cheap liquidity insurance against a credit crunch.
The Global Industrial Producers, FXR, Transportation Companies, XTN, Internet Retailers FDN, and Pharmaceuticals, PJP, may have quite a bit of cash on hand; but then again, some of these have large debts to repay, as they issued debt for money for stock buybacks and to pay dividends, both to keep share prices high.
Liberalism was the age where the securitization of debt that underwrote investing. Beginning in 2008, with QE1, it was the age of in debt we trust; this trust turned out over the long run to be a riskless trade, that made the wily investor wealthy, as the US Fed drove and kept the Ten Year Interest Rate, ^TNX, low.
Peak debt trade investing is seen in the Chart of AGG, and JNK, BDCS, VCLT, EU, EMB, HYXU, EMLC, and HYMB. And Peak currency carry trade investing is seen in the Chart of EFA, and EDEN, MES, EWUS, EIRL, GREK, and DFE. And peak pursuit of yield investing, that is yield chasing, which came via both currency carry trade investing and debt trade investing, and is seen in the Chart of DTN, and Leveraged Buyouts PSP, Global Telecom, IST, Smart Grid, GRID, Shipping, SEA, and Water Resources, FIW.
Under the rule of the libertarian despised Creature from Jekyll Island, mankind experienced the Means of Economic Inflationism, that is the Benchmark Interest Rate, ^TNX, driving inflation in both fiat money, defined as Aggregate Credit, AGG, coupled with Major World Currencies, DBV, and Emerging Market Currencies, CEW, as well as fiat wealth, defined as World Stocks, VT, Nation Investment, EFA, and Global Financials, IXG, ever higher.
But when the bond vigilantes gained control of the US Ten Year Note, ^TNX, calling it higher from 2.48, on October 23, 2013, fiat money died in a deflationary extinction event. Then fiat wealth died the week of January 24, 2014, as investors derisked out of debt trade investments and deleveraged out of currency carry trade investments, forcing World Stocks, VT, Nation Investment, EFA, and Global Financials, IXG, lower in another deflationary extinction event.
The Benchmark Interest Rate, ^TNX, was the Means of Economic Inflationism, but after the pivotal event of October 23, 2013, it is now the Means of Economic Destructionism, establishing economic deflation and economic recession, terminating economic inflation and economic growth, and its metrics such as World Trade Volume, World Industrial Production, and US, Eurozone, Asian Economies, and Emerging Economies Industrial Production.
Furthermore from January 24, 2014 onward, disinvestment out of liberalism debt trade investments, and currency carry trade investments will begin to be active factors of economic deflation, turning the aforementioned economic metrics ever downward, until all of liberalism’s economic experience be totally pulverized as foretold in bible prophecy of Daniel 7:7.
Europe is the poster region for an era of falling prices, traditionally bad news for equities shares, as it crimps profits and curbs economic growth by causing companies to lay off workers, which in turn causes demand destruction, and completes a perverse cycle of economic deflation.
3F) … With both fiat money and fiat wealth dead, the world has fully PIVOTED from the paradigm and age of liberalism, into that of authoritarianism, which will be an universe and epoch of economic deflation and economic recession, the likes of which the world has never seen; with foretaste as AFP reports RWE, Germany’s second biggest power supplier said it plans to axe a further 6,700 jobs.
There are many well recognized companies who are going to quickly face a liquidity crisis, and needing cash, will be unable to find it. The companies that are at greatest risk are those with a high debt to equity ratio; this according to Finviz includes Kroger, KR, with one of 1.6; it has a cash to share ratio of 0.67. The company is undergoing a massive remodeling program, making their stores more consumer appealing with the most visually attractive displays available across the board from produce to housewares to apparel; what is so striking is that the department store side of the company has very few shoppers; it is like a ghost town in the place. I have to believe the company has “overdone it” with its acquisition of debt for remodeling. There are a number of other notable companies with high debt to equity ratios include, International Paper, IP, and Wynn Resorts, WYNN.
Bust always follow boom. Now after five years of money market capitalism, the tail risk of Global ZIRP is economic deflation and economic recession, she is presented in bible prophecy of Revelation 17: 1-5; and she is going to be a bad bitch, as she is the scarlet beast, full of names of blasphemy, having seven heads and ten horns, and upon her forehead a name written, Mystery, Great Babylon, the mother of the harlots, and of the abominations of the earth.
And Bible prophecy of Revelation 13:1-4, communicates that out of Club Med waves of sovereign, banking and corporate insolvency, the Eurozone will become the model and template for the rise of economic fascism. ANSAMed News Network, a media partner of the European Commission, presents the Eurostat report of the EU Debt Crisis Greek public debt at 171.8% GDP, followed by Italy (132.9% GDP), Portugal (128.7%) and Ireland (124.8%).
Irish Times posts Bundesbank boss Jens Weidmann ‘Not all Germans believe in God, but they all believe in the Bundesbank’. The Bundesbank headquarters on the edge of Frankfurt is a brutalist bunker that exudes a forbidding air. By the time it opened its doors here in 1972, the Bundesbank had been operational for 15 years and had established itself as a guardian of both the deutschmark and West German prosperity. It anchored itself as one of the country’s most trusted institutions so effectively that former European Commission president Jacques Delors remarked in 1992: “Not all Germans believe in God, but they all believe in the Bundesbank.”
Dr Weidmann suggests that recent European agreements “have made clear that legacy bank debt remains a primarily national responsibility. “I assume that Ireland, now out of the programme, will be able to meet its commitments without any external assistance,” he said. “I don’t think it is in Ireland’s interest now to raise doubts about its readiness to service its debt.”
Dr Weidmann acknowledges the potentially corrosive legacy of the euro crisis but argues that finger-pointing debate over who picked up the tab for whom is a hindrance rather than a help to real debate about how to prevent a new crisis. Yet he is quick to dismiss what many EU partners see as an effective backstop: shared liability or so-called eurobonds. Sharing Germany’s top credit rating to reduce others’ borrowing costs cannot come, he says, before institutional safeguards are in place. Without safeguards, he said, “the account will soon be overdrawn”.
Ambrose Evans Pritchard writes Crippled eurozone to face fresh debt crisis this year, warns ex-ECB strongman Axel Weber. Ex-Bundesbank head Axel Weber expects fresh market attacks on eurozone this year and economist Kenneth Rogoff says the euro was a “giant historic mistake”.
In God’s economy there are no mistakes, as all things are of God, 2 Corinthians 5:17-18, as Jesus Christ is acting in dispensation, that is the administrative oversight of all things economic and political for every age, bringing these things to their maturity and perfection, much as a ship’s captain completes the manifest before setting sail, Ephesians 1:10.
Shaun Richards posts Should we use GDP or unemployment levels to judge the economy of France?
French private sector firms reported a third successive monthly drop in output during January. However, the rate of contraction was modest and the weakest in this sequence. So the survey tells us that whilst the rate of fall is slowing at a reading of 48.5 it is below the unchanged output mark of 50. Also rather ominously for a country with an unemployment rate of nearly 11%, we note this. French private sector firms signalled job shedding for a third consecutive month during January. Employment decreased at a moderate pace that was little changed since December.
The economic output or official GDP view is that France recovered back to pre credit crunch output levels quickly and after a slow down is hoping to improve. By contrast the UK has been growing quickly recently but has yet to regain the levels of 2007.
Or there is the labour market view where the unemployment rate is now 7.1% in the UK and 10.8% in France. Which do you prefer?
I respond that I prefer neither; we should not judge France at all by GDP reports or by unemployment levels. We should judge France, by how it compares, or better said how it has compared to other Eurozone Nations in investment performance; this is seen in the ongoing Yahoo Finance Chart of France, EWQ, and its Eurozone formerly sovereign nation state investment opportunities, where she failed to win carry trade investment favor.
While Greece has been the very definition of what the Economist Magazine calls a pork and patronage economy. France was the leading example of European socialism, where trade unions continually were on strike, and where there are a number of taxes and barriers to entry into business. Mr. Hollande came into office on a socialist ticket; but morphed many times into something other than the traditional municipal socialist of prior years. It was France’s municipalities that were the basis of financialization of municipal debt, by Dexia, before it went bust, and which generated many high yielding products for money market funds in the US. France’s contribution in economic history was one of European Socialism and municipal debt securitization; no wonder it has had no capability to generate investment gain, the very purpose of the terminal phase of liberalism.
According to bible doctrine of dispensation, seen in Ephesians 1:10, Jesus Christ has been in dispensation, producing a broad spectrum of investment choices for the investor after the financial system crash of 2008, which is likened to a fatal automobile crash that killed all the occupants which established an ever increasing moral hazard based prosperity, blowing up a whole number of bubbles, using the investor as his tool, in a protected empire, that being the US Dollar Hegemonic Empire.
God has always worked through empires; always has, and always will; this being seen in Daniel’s Statue of Empires in Daniel 2:25-45, where he produced the two iron legs, these being the British Empire and the US Dollar Hegemonic Empire. The latter came to an end on January 24, 2014, with the trade lower in the US Dollar, and the failure of fiat wealth in World Stocks, VT, Nation Investment, EFA, and Global Financials, IXG.
Now Jesus is bringing forth the Two Feet and Ten Toed Empire with its miry mixture of policies of diktat in regional governance, and schemes of debt servitude in totalitarian collectivism, to rule in each of the world’s ten regions, and occupy in all of mankind’s seven empires, establishing grinding austerity, in a global panopticon, overseeing a gulag of debt servitude, for all of humanity, as foretold by John the Revelator in Revelation 13:1-4, where all of liberalism’s debts will be applied to every man, woman and child on planet earth. That’s the goal of Jesus,The King Of The Universe, the All Sovereign One, so that the saints will come to trust in his dispensation of virtues, that is morals, and ethics, that is right way in interpersonal conduct, to be the basis of their life in Him, and in so doing, be their All Sufficient One.
The liberal’s champion Paul Krugman posts in the NYT The Populist Imperative The outstanding faults of the economic society in which we live are its failure to provide for full employment and its arbitrary and inequitable distribution of wealth and incomes. John Maynard Keynes wrote that in 1936, but it applies to our own time, too. And, in a better world, our leaders would be doing all they could to address both faults.
God has never been concerned about GDP, or employment, or income mobility, income inequality, in the slightest; these are simply metrics serving to underwrite the vain imaginations of economists who have agendas coming out of what the Apostle Paul terms the “will worship” of religion or philosophy. The nature of economics is found in Jesus Christ, who in dispensation, that is the administration and oversight of all things, produces empires for one to experience economic life as is seen in Bible Scripture of Daniel 2:25-45, Revelation 13:1-4, Revelation 17:12, and Daniel 7:7.
3G) … In the new economic normal, there are only two forms of safe and sustainable wealth, these are diktat and possession of gold and silver bullion. As investors derisk out of fiat money and fiat wealth, a strong investment demand for gold will arise.
4) … Welcome to the new normal weather phenomena; no more global warming as it is ice age freezing now.
Elaine Meinel Supkis reports Cold pacific decadal oscillation causing sardine marine collapse and California drought. And Bloomberg reports Cold gripping US preview of worse weather coming next week.
God isn’t concerned about the sardines, nor is He isn’t concerned about California’s water situation. He, being in dispensation, has two interests: one is promoting the beast regime, and the other is in establishing His full salvation in His Tribe, that is the saints, by their trust in Him, keeping His commandments, and observing His presence and authority in all they think, say and do, as presented in Revelation 3:8.
In the debate about weather phenomena, and the debate about economic matters, such as that presented by Mark Thoma blogging ‘Taylor v. Summers on Secular Stagnation‘, I present the concept that economics is a life experience in the dispensation of Jesus Christ and that economics is a craft. Liberal economist Mark Thoma posts the Dani Rodrik statement The craft of economics consists on being able to diagnose which of the models apply best in a given historical and geographical context.
Economics is defined as the trust and flow that comes from sovereignty, and that the model that best presents economics is the Dispensation Economics Manifest.
5) … Fiat wealth died the week ending January 24, 2014 on the failure of trust.
This week Global Financials, IXG, led World Stocks, VT, and Nation Investment, EFA, lower as Aggregate Credit, AGG, rose 0.3%, as investors derisked out of debt trade investments, and deleveraged out of currency carry trade investments, on the failure of trust.
Investment trust failed January 24, 2014, as fears arose, specifically fears that the US Federal Reserve has crossed the rubicon of sound monetary policy and has made money good investments bad, that trust investments in China cannot be repaid, that Emerging Market Local Currency Bonds, EMLC, will not be repaid, that Emerging Market Governments are untrustworthy, that global growth has slowed and hence that businesses worldwide will fail, and that the ECB will not back dollar denominated lending risks.
Bloomberg reports Jiang tells CNBC that ICBC won’t compensate Trust investors. Industrial & Commercial Bank of China Ltd. Chairman Jiang Jianqing said the lender won’t compensate investors for losses tied to a troubled trust product distributed by the bank, CNBC reported on its website. The incident will be a lesson for investors on moral hazard and risks associated with such investments, Jiang told CNBC from the World Economic Forum in Davos, Switzerland. The Beijing-based lender won’t take “rigid responsibility” for the losses and will review all its partnerships in entities with which it does business, Jiang said, according to CNBC.
Bloomberg reports China Trust products gone awry evoke soros 2008 crisis echoes. The story of how a 3 billion-yuan ($496 million) Chinese trust investment wound up on the brink of default shows what billionaire investor George Soros has called the “eerie resemblances” between the 2008 global financial crisis and the nation’s debt market. China’s $4.8 trillion in shadow-banking debt, arranged by trusts and fund managers with less transparency than commercial-bank loans, was equivalent to as much as 55 percent of the nation’s 2012 economic output at the end of that year, according to Moody’s latest estimate. Investors argued their case in a meeting at an ICBC Shanghai branch yesterday, an echo of savers’ appeals to Hong Kong lenders after Lehman Brothers Holdings Inc.’s failure undermined securities called minibonds. “This case reminds people of Lehman minibonds because complicated credit-linked products were sold to individual investors via bank channels,” said Christine Kuo, senior credit officer at Moody’s in Hong Kong. “It’s not clear whether misselling was involved due to lack of transparency. It’s also not clear who will share the loss. Regardless, both the product packager and distributor have seen their reputation suffer.”
Bloomberg reports Contagion spreads in Emerging Markets as crises grow. The worst selloff in emerging market currencies in five years is beginning to reveal the extent of the fallout from the Federal Reserve’s tapering of monetary stimulus, compounded by political and financial instability.
And Bloomberg reports European bond risk heads for biggest weekly jump since June. The cost of insuring corporate bonds against losses in Europe is heading for the biggest weekly rise in seven months on concern a slowdown in emerging-market economies will curb global growth
Bloomberg reports Ukraine Unrest Spreads From Kiev as EU Warns of Civil War. Anti-government unrest spread from Ukraine’s capital as the European Union warned the protests, which turned deadly this week, could spiral into a civil war. Activists have taken over the headquarters of governors picked by President Viktor Yanukovych in five cities, marking a widening of the two-month protest movement. EU justice chief Viviane Reding told CNBC today that Ukraine must get its “house in order” as it heads in the “direction of a civil war.”
Bloomberg reports Cross-Currency swap premium rises seventh day as banks pull back. The premium that European lenders pay to obtain dollar-denominated cash flows increased for a seventh day as global central banks said they’ll wind down emergency funding programs. The rate on a three-month cross-currency basis swap between euros and dollars was negative four basis points, after reaching positive 4.8 basis points Jan. 16. A negative swap rate signals traders are paying a premium to trade euro-based cash flows for comparable flows denominated in U.S. dollars. Investor demand for safety increased amid a deepening selloff in emerging-market currencies. “The realization is settling in that there are still a lot of potential surprises out there, including those in the liquidity mechanisms and with respect to spillover effects from market to market,” Jeffrey Caughron, who advises community banks on investments exceeding $40 billion as an associate partner at Baker Group LP in Oklahoma City, said in a telephone interview.
Doug Noland writes The EM crisis took a turn for the worse. Backdrops conductive to crises can drag on for so long – sometimes seemingly forever – as if they’re moving in ultra-slow motion. Invariably, they lull most to sleep. Better yet, such environments even work to embolden the optimists. This is especially the case when policy measures are aggressively employed along the way, repeatedly holding the forces of crisis at bay. In the face of mounting risk, heightened risk-taking and leveraging often work only to exacerbate underlying fragilities. But eventually a critical juncture arrives where newfound momentum has things unwinding at a more frenetic pace. It is the nature of such things that most everyone gets caught totally unprepared.
EM currencies came under intense selling pressure this week. Most dramatically, the Argentine peso sank 15.1%. The Turkish lira fell 4.4%, the Brazilian real 2.3%, the Russian ruble 2.9%, the South African rand 2.0%, the Chilean peso 2.0%, the Colombian peso 1.5%, the South Korean won 1.9%, the Indian rupee 1.8%, and the Mexican peso 1.6%.
Notable market yield increases included the 59 bps surge in Turkish 10-year (lira) yields to 10.58%; the 113 bps increase in Venezuela 10-year (dollar) yields to 16.26%; the 122 bps jump in Ukraine 10-year (dollar) yields to 9.54%; the 19 bps increase in Russian 10-year (ruble) yields to 8.13%; the 19 bps jump in Mexico 10-year (peso) yields to 6.58%; the 25 bps increase in Brazil’s 10-year (real) yields to 13.14%; the 30 bps jump in Hungary’s 10-year (forint) yields to 5.71%; and the 30 bps jump in Indonesian (rupiah) yields to 8.78%.
Virtually the entire EM “complex” has been enveloped in protracted destabilizing financial and economic Bubbles. Thursday saw the Argentine central bank step away from what had been ongoing currency support operations. The Argentine peso quickly devalued 15%, before ending the session down about 12% (biggest fall in 12 years). The central bank’s decision to preserve its dwindling reserve position is reminiscent of Southeast Asian central bank actions back during the 1997 crisis. The dramatic market response was similarly reminiscent – ominously so.
For a while, central bank willingness to use reserves to support individual currencies bolsters market confidence in a country’s currency, bonds and financial system more generally. But at some point a central bank begins losing the battle to accelerating outflows. A tough decision is made to back away from market intervention to safeguard increasingly precious reserve holdings. Immediately, the marketplace must then contend with a faltering currency, surging yields, unstable financial markets and rapidly waning liquidity generally. Things unravel quickly
Mr. Noland continues on Dollarization. Anurag Joshi of Bloomberg reports “Indian companies facing some $300 billion-equivalent of debt maturing in two years are poised to extend the biggest dollar loan spree since 2010 to lock in rates as the Federal Reserve tapers stimulus. ONGC Videsh Ltd. leads companies seeking at least $5 billion in offshore bank debt this quarter after $10.5 billion was raised in the three months to Dec. 31, the most since the first quarter of 2010.” The issue of EM sovereign and corporate borrowings in dollar (and euro and yen) denominated debt has speedily become a critical “macro” issue. More than five years of unprecedented global dollar liquidity excess spurred a historic boom in dollar-denominated borrowings. The marketplace assumed ongoing dollar devaluation/EM currency appreciation. There became essentially insatiable market demand for higher-yielding EM debt, replete with all the distortions in risk perceptions, market mispricing and associated maladjustment one should expect from years of unlimited cheap finance. As was the case with U.S. subprime, it’s always the riskiest borrowers that most intensively feast at the trough of easy “money.”
I comment that the debt trade coming to an end on January 17, 2014, as is seen in the ongoing Yahoo Finance five day chart of AGG, with HYMB, rising, and other high yielding debt, falling, JNK, -0.7%, EMB, -0.7%, EMLC, -1.3%, and BDCS, -1.8%. Please notice the spread difference between EMB and EMLC amounting to -0.06%, communicating the failure of trust in Emerging Local Currency Debt.
So, too many high-risk borrowers – from vulnerable economies and Credit systems – accumulated debt denominated in U.S. and other foreign currencies – for too long. Now, currencies are faltering, “hot money” is exiting, Credit conditions are tightening and economic conditions are rapidly deteriorating. It’s a problematic confluence that will find scores of borrowers challenged to service untenable debt loads, especially for borrowings denominated in appreciating non-domestic currencies. This tightening of finance then becomes a pressing economic issue, further pressuring EM currencies and financial systems – the brutal downside of a protracted globalized Credit and speculative cycle.
In many cases, this was all part of a colossal “global reflation trade.” Today, many EM economies confront the exact opposite: mounting disinflationary forces for things sold into global markets. Falling prices, especially throughout the commodities complex, have pressured domestic currencies. This became a major systemic risk after huge speculative flows arrived in anticipation of buoyant currencies, attractive securities markets, and enticing business opportunities.
The commodities boom was to fuel general and sustained economic booms. EM was to finally play catch up to “developed.”Now, Bubbles are faltering right and left – and fearful “money” is heading for the (closing?) exits. And, as the global pool of speculative finance reverses course, the scale of economic maladjustment and financial system impairment begins to come into clearer focus. It’s time for the marketplace to remove the beer goggles.
No less important is the historic – and ongoing – boom in manufacturing capacity in China and throughout Asia. This has created excess capacity and increasing pricing pressure for too many manufactured things, a situation only worsened by Japan’s aggressive currency devaluation. This dilemma, with parallels to the commodity economies, becomes especially problematic because of the enormous debt buildup over recent years. While this is a serious issue for the entire region, it has become a major pressing problem in China.
This week the markets seemed to begin taking the unfolding Chinese Credit crisis more seriously. There was talk early in the week of concerted efforts to save the troubled $496 million (“Credit Equals Gold No. 1”) trust product from a possible end of month default.
At the same time, data this week provided added confirmation (see “China Bubble Watch”) that China’s spectacular apartment Bubble continues to run out of control. When Chinese officials quickly backed away from Credit tightening measures this past summer, already overheated housing markets turned even hotter. Now, officials confront a dangerous situation: Acute fragility in segments of its “shadow” financing of corporate and local government debt festers concurrently with ongoing “terminal phase” excess throughout housing finance. China’s financial and economic systems have grown dependent upon massive ongoing Credit expansion, while the quality of new Credit is suspect at best. It’s that fateful “terminal phase” exponential growth in systemic risk playing out in historic proportions.
Global markets have begun to take notice. There are critical market issues with no clear answers. For one, how much speculative “hot money” has and continues to flood into China to play their elevated yields in a currency that is (at the least) expected to remain pegged to the U.S. dollar? If there is a significant “hot money” issue, any reversal of speculative flows would surely speed up this unfolding Credit crisis. And, of course, any significant tightening of Chinese Credit would reverberate around the globe, especially for already vulnerable EM economies and financial systems.
Yet another crisis market issue became more pressing this week. The Japanese yen gained 2.0% versus the dollar. Yen gains were even more noteworthy against other currencies. The yen rose 4.2% against the Brazilian real, 3.9% versus the Chilean peso, 3.5% against the Mexican peso, 3.9% versus the South African rand, 3.8% against the South Korean won, 3.0% versus the Canadian dollar and 3.0% versus the Australian dollar.
I have surmised that the so-called “yen carry trade” (borrow/short in yen and use proceeds to lever in higher-yielding instruments) could be the largest speculative trade in history. Market trading dynamics this week certainly did not dissuade. When the yen rises, negative market dynamics rather quickly gather momentum. From my perspective, all the major speculative trades come under pressure when the yen strengthens, from EM markets, to the European “periphery,” to U.S. equities and corporate debt.
It’s worth noting that the beloved European “periphery” trade reversed course this week. The spread between German and both Spain and Italy 10-year sovereign yields widened 19 bps this week. Even the France to Germany spread widened 4 bps this week to an almost 9-month high (72 bps). Stocks were slammed for 5.7% and 3.1% in Spain and Italy, wiping out most what had been strong January gains.
Even U.S. equities succumbed to global pressures. Notably, the cyclicals and financials were hit hard. Both have been Wall Street darlings on the bullish premise of a strengthening U.S. (and global) recovery and waning Credit and financial risk. Yet both groups this week seemed to recognize the reality that what is unfolding in China and EM actually matter – and they’re not pro-global growth. With recent extreme bullish sentiment, U.S. equities would appear particularly vulnerable to a global “risk off” market dynamic.
It’s worth noting that most spreads reversed course and widened meaningfully this week. This comes after what appeared to be the whole world coming to realize the fun and easy profits of selling/writing CDS and other forms of Credit insurance (“writing flood insurance during a drought”). The backdrop would seem ripe for a bout of risk aversion, where abruptly shifting markets force players to pare back some exposure to “alternative” Credit strategies and myriad leveraged trades. This would provide a more traditional mechanism for transmitting market tumult at the “periphery” toward the “core.” In a year that at this point seems poised to see a significant reduction in Federal Reserve liquidity creation, I would expect a return of a more “risk on, risk off” trading dynamic. This would seem to ensure that increasingly serious problems at the “periphery” have contagion effects that risk engulfing the “core.”
I comment that the reversal of spreads is seen in the char of JNK:TLT.
This week in currencies, the U.S. dollar index declined 0.9% to 80.458 (up 0.5% y-t-d). For the week on the upside, the Japanese yen increased 2.0%, the Swiss franc 1.7%, the Danish krone 1.0%, the euro 1.0%, the Swedish krona 0.5%, the British pound 0.4%, the Norwegian krone 0.2%. For the week on the downside, the Brazilian real declined 2.3%, the South African rand 2.0%, the South Korean won 1.9%, the Mexican peso 1.6%, the Australian dollar 1.1%, the Canadian dollar 1.1%, the New Zealand dollar 0.5%, the Taiwanese dollar 0.5%, and the Singapore dollar 0.2%.
The trade lower in Global Financials, IXG, Nation Investment, EFA, and World Stocks, VT, the week ending January 24,2014, was an epic event that PIVOTED the world out of paradigm and age of liberalism into that of authoritarianism; the great bull stock market turned to what will be the great bear market.
Global Financials, IXG, -4% with Life Insurance Companies, such as PUK and ING, -7, BRAF -5, CHIX -4, EMFN -4, RWW -4, KCE -4, EPI, -4.0, and EUFN, -4 0, with NBG -12, and SAN -5.
UK based Life Insurance Company, Prudential, PUK, was the crowning glory of liberalism’s debt trade investing as well as its currency carry trade investing.
World Stocks, VT, -3% with TAN -10, BJK -9, SLX -7, COPX, -6, PICK -5, SOCL -5, MHK -4, GEX -4, FXR -4, CSD -3, IHI -3, PSCD -3, CARZ -3, PEJ -3, IAI -3, and WOOD -3, RXI -3, PNQI -3, FPX -3, WOOD -3, FLM, -3, and PBS -3.
One of liberalism best trading mutual funds, Fidelity Investments’, Vice Stocks, VICEX, traded 0.8% lower this week, evidencing the end of liberalism as both a paradigm and an age. Morningstar shows that its performance to be best of class, that is number 1, in the last 3 years.
Liberalism was a period that rewarded investment in every types of vice: war, gambling, boozing, and smoking. This was by express design and purpose of the King of Kings, and Lord of Lords, Jesus Christ, as He operated in dispensation, the concept of Apostle Paul found in Ephesians 1:10, that the Son of God, is in active oversight and administration of all things in every age, providing the credit and flow of strongholds, so that economic experience be complete in every age.
Nation Investment, EFA, -3%, with ARGT -9, TUR -8, ECH -7, EWHS -6, EWZ -5, EWZS -5, EWY -5, EZA -4, RSX -4, SMIN -4, YAO -4, GERJ -4, EWW -4.0, EEM -4, IDX -3, EZU -3, EWA -3, KROO -3, EWUS -3, ECNS -3, EWG -3, EWH -3, INP -3, EWM, -3, and NKY -3.
Eurozone EZU, -3%, GREK -7, EWP, -4 EWI -3, EWQ, -3,
Dividend Paying Stocks, DTN, -2%, with V -5, MA -4, IX -4, FIW -3, IST -3, DRW -3, and SEA -3.
Gold Miners, GDX, rose 1.5%, as Gold, GLD, rose 1.2%.
In commodities, the price of the commodity Sugar, SGG, traded lower again this week. In related news Bloomberg reports: “Brazil junk bond investors battered by defaults from Eike Batista’s OGX Petroleo & Gas Participacoes SA to Banco Cruzeiro do Sul SA in the past two years are now facing a collapse in sugar and ethanol company debt. Aralco SA Acucar & Alcool’s $250 million of notes due 2020 have plunged 26.2 cents this year to a record low 30 cents on the dollar, while Grupo Virgolino de Oliveira SA’s $300 million of debt due 2018 tumbled 12.5 cents to 56.8 cents. Since 1999, eight of 10 Brazilian companies have defaulted after their bonds sank below 40 cents. Brazil’s unprecedented string of insolvencies since 2012 is showing little sign of abating as yields surge on $1.4 billion of sugar producer bonds.”
6) … Summary: What is economics?
Mises communicated that economics is human action, libertarian Ash Navabi writes in Ludwig Von Mises Canada; such believe that individuals are sovereign individuals. He goes on in his article The Ultimate Microfoundation: Human Action Only individuals act. What we see as society, or the “macroeconomy”, is merely the consequence and summation of individual actions. The state, the church, and the firm, are all euphemisms for certain actions carried on by certain individuals. Economics is interested in understanding the ramifications of the actions of the individuals involved as they pertain to the allocation of scarce resources. All economic phenomena are the result of individual action. To stop the analysis at the national or state or other “macro” level, without attempting to identify or understand the reasons and reasoning of the individuals that make up those aggregates, is to be presumptuous about the motivations of individuals involved.
Economics is the dispensation of Christ, that is the administration and oversight of all things, producing empires for one to experience economic life as is seen in Bible Scripture of Daniel 2:25-45, Revelation 13:1-4, Revelation 17:12, and Daniel 7:7. He provides the credit and flow of strongholds, so that economic experience be complete in every age.
Economics is the granite of Jesus Christ, Psalms 118:22, Daniel 2:34. In His provision of the end time rule of authoritarianism, there can be no reliable trust in fiat investments; the only investments one can trust in, are the physical possession of gold bullion, and the sovereignty and the faith of Jesus Christ; it was this faith, His faith that was present from before the foundation of the world, and is expressed in the life of the believer today.
Economics is the providence of God, establishing Christ as one’s life experience; and without confirmation of a life of virtues and ethics one is said to be reprobate. Saints have the element of life, that being Jesus Christ, and thus have communion with God, whereas the aints are dead in Adam.
Economics is a life experience of risks and rewards; there be risks and rewards in the experience of anything. Residing here at the Sea Breeze Apartments in downtown Bellingham, I face many risks and few rewards in experiencing life amongst a melting pot of truly nutty people, as well as the just plain mean and crazy psychopaths, all living in the clientelism of Obamacare, Social Security Disability payments, and SNAP food stamp assistance.
For those looking for educational resources, homeschooling advocate Janice Price reviews the book Exploring Economics and other Notgrass courses and relates the curriculum package includes the Student Text and a Reader The Stewardship of God’s Riches. The Student Text, which is very readable and understandable (an accomplishment when the subject is economics), includes 75 daily lessons (typically 4-5 pages each) divided into 15 units. Each reading segment is followed by daily assignments that rotate between selections from the Reader, “Econ Labs,” writing assignments, and/or the discussion questions and quizzes from the optional Quiz and Exam book. The Stewardship of God’s Riches is a collection of documents, speeches, and essays that will help the student understand the practical implications of economics.