18/08/17

Why There Will Be No 11th Hour Debt Ceiling Deal



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Why There Will Be No 11th Hour Debt Ceiling Deal
// Zero Hedge

Authored by MN Gordon via EconomicPrism.com,

A new milestone on the American populaces' collective pursuit of insolvency was reached this week.  According to a report published on Tuesday by the Federal Reserve Bank of New York, total U.S. household debt jumped to a new record high of $12.84 trillion during the second quarter.  This included an increase of $552 billion from a year ago.

Moreover, this marked the second consecutive record high on a quarterly reported basis for U.S. household debt.  Indeed, this is a momentous achievement.  From our vantage point, it is significant for several reasons.

One, it shows U.S. household debt has returned to its upward trend which had previously gone uninterrupted from the close of World War II until the onset of the Financial Crisis in late 2008.  Second, it demonstrates that, like the S&P 500, new all-time highs are being attained with the seeming precision of a quartz clock.  Is this just a coincidence?

More than likely, it's no coincidence at all.  More than likely, the mass quantities of central bank liquidity that have been injected into the financial system over the last decade have provided the plentiful gushers of cheap credit that have pushed up both stock prices and household debt levels.   But remember, the easy stock market gains can quickly recede while the increased debt must first drown the borrowers before it can be expunged.

To understand where the liquidity has come from, look no further than the total combined assets of the Federal Reserve, European Central Bank, and the Bank of Japan.  They were around $4 trillion a decade ago.  Today, they're over $13.8 trillion.  And if you include the People's Bank of China's assets, combined major central bank assets jump to nearly $19 trillion.

A Gigantic Letdown

Of course, record debt and record stock prices were part of the plan all along.  If you recall, the clever economists at the Fed promised the hoi polloi their cheap credit policies would rain riches down from the heavens via something they called the wealth effect.  We never quite followed the logic of it all.

Per the policy wizards, the wealth effect is what happens when the value of people's assets rise.  When investment portfolios bubble up, consumers feel more financially secure.  Hence, they buy stuff they don't need, and that they really can't afford, using credit.  The increase in spending, in turn, is supposed to stimulate the economy and make everyone wealthy.

Yet the experience over the last 9 years tells a different story.  The S&P 500 has gone up 270 percent.  However, GDP has gone up just 34 percent.  On top of that, median household income has been stuck in first gear for over two decades.

Obviously, the stock market did its part by soaring to record highs.  And consumers did their part, by spending their way to record levels of debt.  The economy, on the other hand, lunged and lagged.  In short, the wealth effect was a gigantic letdown.

On top of that, the Fed now plans to normalize its balance sheet.  That's what they say, at least.  This week the July FOMC minutes were released and included a strong consensus for the Fed to begin reducing its $4.5 trillion balance sheet "…relatively soon, absent significant adverse developments in the economy or in financial markets."

Here at the Economic Prism we watch intently for the Fed to commence its adventures in quantitative tightening.  We have an inkling the unwind will be more disruptive than the Fed advertises.  Plus, we have doubts the Fed will ever make substantial reductions in its balance sheet before they're compelled to further expand it due to "significant adverse developments."

Why There Will Be No 11th Hour Debt Ceiling Deal

Consider that the stock market is poised for a crash like never before.  Consider, too, that over the past week – even with yesterday's selloff – the stock market has shrugged off the North Korea nuclear threat, major civil division, and the collapse of retail, like these doom scenarios were merely the 24-hour flu.  But will the stock market shrug off the major financial epidemic that is developing?

While Congress is ...

“Armageddon Risk” Returns: North Korea Predicts “Catastrophe” As Massive U.S. War Games Begin Monday



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"Armageddon Risk" Returns: North Korea Predicts "Catastrophe" As Massive U.S. War Games Begin Monday
// Silver For The People

zerohedge.com / by Tyler Durden / Aug 18, 2017 7:55 AM

Traders barely had time to enjoy the lull from the "Armageddon trade" – the rising possibility of a nuclear exchange between the US and North Korea, which peaked over the weekend when various US officials said a nuclear war is not imminent, echoed by a statement by N. Korea's state-run news agency KCNA, before a new set of worries promptly took over, chief among them the ongoing slow ....

BofA: "This Is The Key Risk-Off Signal" Ahead Of This Autumn's "Big Fall"



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BofA: "This Is The Key Risk-Off Signal" Ahead Of This Autumn's "Big Fall"
// Zero Hedge

One month ago, BofA's chief investment strategist Michael Hartnett predicted that the "most dangerous moment for markets will come in 3 or 4 months." So now that we are between 25% and 33% closer to said "moment", what does Hartnett think now? Perhaps not surprisingly, in a note released on Friday, the Bank of America analyst writes that with a surge in risk off flows, a "more imminent Aug/Sept risk-off trade" is looking plausible "if poor politics shows up in consumer confidence, US dollar rises despite lower UST yields and further drop in US presidential approval ratings" compounded by high yield credit spreads gapping toward 500bps and ending tech leadership reversal.

In short, the "humpty-dumpty" trade that Hartnett has been describing ever since he coined the "Icarus rally" term earlier in the year, is "staring to wobble" despite - as he calculates - the $1.69 trillion in central bank purchases YTD. Some of the main factors he lists why BofA, like JPM previously, is starting to tiptoe to the exits, are the following:

  • Risk-off flows: There were $1.3bn weekly outflow from equities, $3.5bn into bonds, $0.5bn into gold
  • North Korea: outflows clustered in "fire & fury" Thurs/Fri/Mon period; but North Korea redemptions ($7.4bn equity outflow) not particularly large (larger 3-day outflow in April)
  • High Yield outflows: biggest HY bond fund outflows in almost 6 months ($2.3bn); HY spreads jumped 36bps last week from 364bps to 400bps
  • Emerging Market outflows: 1st EM equity and debt outflows in almost 6 months ($1.7bn); coincides with bounce in oversold USD (EM reverse-correlated with DXY)

  • BofAML Bull & Bear indicator drops: HY & EM outflows + more defensive hedge fund positioning via futures + Aug FMS cash flat at 4.9% = BB indicator drops from 7.7 to 7.2; no "sell signal" triggered but ...

Progresso



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Progresso
// IL CORROSIVO di marco cedolin

Marco Cedolin

A Mumbai, in India i cani stanno diventando blu, dello stesso colore del fiume Kasadi che a causa delle sostanze chimiche in esso riversate ha cambiato tinta, mentre i pesci muoiono ed i pescatori si scoprono disoccupati. I cani finora lamentano soltanto variazioni cromatiche, probabilmente a causa del contatto con l'acqua contaminata, dal momento che è ....

Nuovo record del debito pubblico: è salito a 2.281 miliardi



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Nuovo record del debito pubblico: è salito a 2.281 miliardi
// RSS di Economia - ANSA.it

Slittano le scadenze, entrate giù di 13,5 miliardi
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Draghi: Euro Troppo Forte!



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Draghi: Euro Troppo Forte!
// icebergfinanza

Risultati immagini per draghi cartoonsDopo un piccolissimo movimento di appena un dieci per cento registrato negli ultimi mesi dall'euro nei confronti di tutte le monete e specialmente nei confronti del dollaro, ecco che subito i banchieri centrali si svegliano e dichiarano… Bce, timori per … Continua a leggere
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Wall Street: non solo prese di profitto



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Wall Street: non solo prese di profitto
// Finanza in Chiaro

Forse a qualcuno la seduta odierna ha ricordato quanto accaduto due anni or sono. Subito dopo Ferragosto, infatti, Wall Street prese una bella scoppola, ma è troppo presto per fare certi paralleli. Certamente, però, il simposio che si terrà la prossima settimana nell'amena cittadina di Jackson Hole probabilmente sarà un appuntamento ancor più carico di attese.

Le due superstar, ossia i Presidenti delle due principali Banche Centrali, Janet Yellen e Mario Draghi, saranno al ...

The Dow Falls 274 Points As ‘Eclipse Fever’ Hits The Financial Markets



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The Dow Falls 274 Points As 'Eclipse Fever' Hits The Financial Markets
// Silver For The People

theeconomiccollapseblog.com / By Michael Snyder on August 17th, 2017

Have we now entered a time of major financial shaking?  On Thursday, the Dow Jones Industrial Average was down 274 points.  The was the largest decline for the Dow since May, and high yield bonds were down dramatically as well.  Many are blaming the terror attack in Barcelona and "instability in the White House" for the downturn, but could "eclipse fever" also be a factor?  The closer that we get to the solar eclipse on August 21st, the weirder people seem to be getting.  You will see what I am talking about below.

But first let's talk about the financial markets.  I have been warning that stocks are massively overvalued for quite a while now, and it turns out that the Federal Reserve very much agrees with me

"Since the April assessment, vulnerabilities associated with asset valuation pressures had edged up from notable to elevated, as asset prices remained high or climbed further, risk spreads narrowed, and expected and actual volatility remained muted in a range of financial markets."

Even the Fed is warning that we are in a bubble, and it is just a matter of time until that bubble bursts.

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The post The Dow Falls 274 Points As 'Eclipse Fever' Hits The Financial Markets appeared first on Silver For The People.


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SPY FINANZA/ I segni della vera crisi in arrivo



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SPY FINANZA/ I segni della vera crisi in arrivo
// Il Sussidiario.net :: Economia e Finanza

Il dato positivo sul Pil del secondo trimestre ci sta facendo credere, dice MAURO BOTTARELLI, che il peggio sia alle spalle. Ma non è affatto così: la vera crisi deve arrivare

(Pubblicato il Fri, 18 Aug 2017 06:03:00 GMT)

SPY FINANZA/ Il silenzio pericoloso di Draghi, di M. Bottarelli
UNA CRISI PIU' GRAVE/ E' pronta a colpire ancora dopo 10 anni, di G. Passali
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Ghiacciai in agonia: entro il 2100 ne scomparirà il 70% - Alberto Bellotto

Ghiacciai in agonia: entro il 2100 ne scomparirà il 70% - Alberto Bellotto In Val D'Aosta i nevai si sono già ridotti del 60%, mentre sul Monte Bianco lo zerohttps://www.finanzaelambrusco.it/articoli/articoli/cultura/ghiacciai-in-agonia-entro-il-2100-ne-scomparira-il-70-alberto-bellotto/