Posts Tagged ‘massive global imbalances’

Thoughts on the Economy: Problems and Solutions

Mish wrote a post responding to the article by John Mauldin, posted here over the weekend. He addresses each of John’s economy fixing ideas, sharing his thoughts on a variety of issues. -Ilene

Thoughts on the Economy: Problems and Solutions

gooseCourtesy of Mish

John Mauldin has proposed some interesting solutions for fixing the economy in his weekly E-Letter Killing The Goose. Let’s take a look, first at the problem, then at various solutions.

Long-time readers know that I think the Fed has been able to get away with its rather large monetization program because of the massive deflationary forces let loose in the world by the credit crisis, which is forcing a monster deleveraging regime all over the world.

And this brings us to our conundrum. You cannot continue to run deficits significantly larger than nominal GDP for too long without risking the demise of the economic system. But we are in a deflationary environment, so the Fed can monetize the debt far more than any of us suppose without risking immediate and spiraling inflation.

How long can we go before there is an upheaval? I don’t know. The markets can remain irrational or complacent for a lot longer than most of us think. It could be years. Or not.

Some of my most knowledgeable friends argue for the inflation side, and others take the deflation side. I tend to think the Fed will fight deflation until we get inflation, but the consequences will not be pleasant. There is no benign path.

How can we avoid such an upheaval? The only way is to make some very difficult choices. There have to be some adults making the choices, as the teenagers now in control clearly cannot make them.

It is not a matter of pain or no pain, it is just deciding when and how bad it will be. The longer we wait, the worse the consequences.

First, we must acknowledge the deficit is out of control, and spending must be cut. If we raise taxes by as much as the Obama administration now wants to, we will most assuredly put the country back into a deep recession in 2011. Think what raising taxes in 1937 did to a nascent recovery. A $3-trillion-dollar budget is 20% of the US economy. That is just simply too much.

The most credible studies show


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Competitive Currency Debasement – A Look at Rampant Monetary Expansion In China

Competitive Currency Debasement – A Look at Rampant Monetary Expansion In China

Courtesy of Mish

Given all the finger pointing at the US over monetary printing and the debasement of the US dollar, inquiring minds just might be asking "What is China doing?"

That’s a good question, so let’s look at monetary numbers translated from Chinese.

Chinese Money Supply in 100 Million Yuan

China money supply

click on any chart for sharper image

Link For Chinese Money Supply

Balance Sheet Of Depository Corporations – Assets

Balance Sheet Of Depository Corporations – Liabilities

 

Link For Chinese Balance Sheet of Other Depository Corporations

The Chinese central banks’ printing and respective Chinese bank lending make us look like amateurs. Chinese central bank assets and the money supply are up 25-26% annualized YTD. But this growth rate of money supply and bank lending is what is required to make up for the 8-10% net contraction in output from the collapse in exports and export-related production.

Meanwhile, back in the US, total bank credit is contracting while M2 is up 5% annualized YTD.

Total Bank Credit – Annualized Rate of Change

M2 – Annualized Rate of Change

 

M2 is actually down since May-August due to the decline in the rate of growth of bank lending over the summer.

If the May-June rate of deceleration were to persist, M2 could conceivably start start contracting by year end or early ’10.

How Will China Handle The Yuan?

To understand what is happening, please consider How Will China Handle The Yuan?

In spite of record worldwide stimulus, a global recession is everywhere you look except perhaps in China. The reason is simple. When the Chinese government "suggests" banks should lend, banks lend. This is how command economies "work", using the word "work" loosely. Yes, the US has massive problems, but let’s have an honest assessment of problems elsewhere.

Bottom line, China is busy ramping up production for consumers that don’t exist: Not here, not in the EU, and not in China (not yet). This love affair with China, a country that will not float its currency or offer freedom of speech, and hides bank solvency issues even more so than the US, is way overdone.

Remind me to reconsider decoupling when China allows freedom of speech and floats the RMB instead of pegging it.

Yet


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Phil's Favorites

What the US could learn from Thailand about health care coverage

 

What the US could learn from Thailand about health care coverage

A computer screen promoting this year’s open enrollment, which will run 45 days. In years past, open enrollment continued for months. Ricky Kresslein/Shutterstock.com

Courtesy of Joseph Harris, Boston University

The open enrollment period for the Affordable Care Act (ACA) draws to a close on Dec. 15. Yet, recent assaults on the ACA by the Trump administration stand in marked contrast to efforts to expand access to health care and medicine in the rest of the world. In fact, ...



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Zero Hedge

California Troubled Utility Proposed $2 Billion Rate Hike To Fund "Wildfire Safety"

Courtesy of ZeroHedge. View original post here.

One month after the stock and bonds of troubled California Utility Pacific Gas & Electric cratered after the company hinted of a liquidity crisis as a result of mounting legal obligations following California's destructive Camp Fire, shocking and infuriating its investors...

...



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Kimble Charting Solutions

Dow Theory Concerns? Transportation Stocks Make New Lows

Courtesy of Chris Kimble.

The bull market is experiencing its first real test since the 2014/2015 stock market correction. Volatility is high and key sectors are heading lower.

One such sector is the Transportation Sector(NYSEARCA: IYT) and select stocks.

The age-old Dow Theory call for the Industrials and Transports to lead the market (and confirm each others moves). Currently, both are struggling. But the Dow Transports are on the precipice of a major breakdown. Looking at the chart below, you can see that the Transportation Sector ETF (IYT) is attempting to break down below its 12-month trading range and 9-year rising support line.

If the market doesn’t reverse higher soon, this break down will send a negative message to investors about the economy… and the broader stock market.

A move lower wou...



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Digital Currencies

Crypto Bull Tom Lee: Bitcoin's 'Fair Value' Closer To $15,000, But He's Sick Of People Asking About It

Courtesy of ZeroHedge. View original post here.

Listening to the crypto bulls of yesteryear continue to defend their case for new new all-time highs, despite a growing mountain of evidence to suggest that last year's rally was spurred by the blind greed of gullible marginal buyers (not to mention outright manipulation), one can't help but feel a twinge of pity for Mike Novogratz and Wall Street's original crypto uber-bull, Fundstrat's Tom Lee.

Lee achieved rock star status thanks to ...



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Insider Scoop

Economic Data Scheduled For Friday

Courtesy of Benzinga.

  • Data on retail sales for November will be released at 8:30 a.m. ET.
  • Data on industrial production for November will be released at 9:15 a.m. ET.
  • The flash Composite Purchasing Managers' Index for December is schedule for release at 9:45 a.m. ET.
  • Data on business inventories for October will be released at 10:00 a.m. ET.
  • The Baker Hughes North American rig count report for the recent week is schedule for release at 1:00 p.m. ET.

Posted-In: Economic DataNews Economics ...



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Biotech

Those designer babies everyone is freaking out about - it's not likely to happen

Reminder: We're available to chat with Members, comments are found below each post.

 

Those designer babies everyone is freaking out about – it's not likely to happen

Babies to order. Andrew crotty/Shutterstock.com

Courtesy A Cecile JW Janssens, Emory University

When Adam Nash was still an embryo, living in a dish in the lab, scientists tested his DNA to make sure it was free of ...



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Members' Corner

Blue Wave with Cheri Jacobus (Q&A II, Updated)

By Ilene at Phil's Stock World

Cheri Jacobus is a widely known political consultant, pundit, writer and outspoken former Republican and frequent guest on CNN, MSNBC, FOX News, CBS.com, CNBC and C-Span. Cheri shares her thoughts on the political landscape with us in a follow up to our August interview.

Updated 12-10-18

Ilene: What do you think about Michael Cohen's claim that the Trump Organization's discussions with high-level Russian officials about a deal for Trump Tower Moscow continued into June 2016?

...

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Chart School

Weekly Market Recap Dec 09, 2018

Courtesy of Blain.

Bears are certainly showing the type of strength we haven’t seen in a long time.   A week ago at this time futures were surging on news of a “truce” for 90 days between China and the U.S. in their trade spat.  But the charts were still not saying lovely things despite a major rally the week prior.   And by Tuesday, darkness had descended back on the indexes, with another gut punch Friday.    A lot of emphasis was put on a long term Treasury yield dropping below a shorter term Treasury.

On Monday, the yield on five year government debt slid below the yield on three year debt, a phenomenon which has p...



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Mapping The Market

Trump: "I Won't Be Here" When It Blows Up

By Jean-Luc

Maybe we should simply try him for treason right now:

Trump on Coming Debt Crisis: ‘I Won’t Be Here’ When It Blows Up

The president thinks the balancing of the nation’s books is going to, ultimately, be a future president’s problem.

By Asawin Suebsaeng and Lachlan Markay, Daily Beast

The friction came to a head in early 2017 when senior officials offered Trump charts and graphics laying out the numbers and showing a “hockey stick” spike in the nationa...



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ValueWalk

Vilas Fund Up 55% In Q3; 3Q18 Letter: A Bull Market In Bearish Forecasts

By Jacob Wolinsky. Originally published at ValueWalk.

The Vilas Fund, LP letter for the third quarter ended September 30, 2018; titled, “A Bull Market in Bearish Forecasts.”

Ever since the financial crisis, there has been a huge fascination with predictions of the next “big crash” right around the next corner. Whether it is Greece, Italy, Chinese debt, the “overvalued” stock market, the Shiller Ratio, Puerto Rico, underfunded pensions in Illinois and New Jersey, the Fed (both for QE a few years ago and now for removing QE), rising interest rates, Federal budget deficits, peaking profit margins, etc...



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OpTrader

Swing trading portfolio - week of September 11th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:

 

·       How 2017 Will Affect Oil, the US Dollar and the European Union

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

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