Your literary skills and assumptions are nothing more than mental masturbation.

Oh – well . . . Did try.

On that note from an esteemed professor of economics – I shall take my curtain call.

Let history be the judge.

I did open my eyes – I did see the world for 4 years – amazed at what I saw and I agree wholeheartedly with Carlin.

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And it is goodbye to them and goodbye from me.

Edit: Okay – hit in the nuts with all letters threatening legal action and slander – not withdrawing any comments, no apologies and will not redress the situation on any person named on the blog.

The situation is simple – I am either right or I am wrong on – my assumptions based on my knowledge and understanding of the economy – if these people have a greater understanding of the global economy than what I have then post a reply on site and allow a balanced argument.

Hiding behind legal letters and threats does not and will not stop what has been written. It is history – if I am wrong a formal apology will be forthcoming on this blog.

Why is this happening?

Simple.

Global recession / global depression.

Sovereign debt collapse – starting in Europe and spreading around the world due to central bankers trying to kick the debt-can down the road.

Read “Depression is Coming” on this blog.

Debt is the disease and there is nothing left in any central bank arsenal to fight exogenous economic impacts.

Australian Housing – A bubble? Deflation coming – China no longer the savior.

Australian Housing Doomed – Deflation Coming – China no longer the savior.

Maybe Bank Economists want to take note of another Nobel Prize laureate – who is the latest to warn that Sydney and Melbourne’s real estate markets are showing every sign of being in a dangerous price bubble.

Okay – what does he know – right?

Australia the lucky country with house prices doubling each ten years.

We missed the full affects of the Financial Collapse in 2008 through pure luck – Chinese commodity demand.

The outlying city suburbs – during this period did have severe devaluation in prices – something that surveys overlook as these agencies took the ‘average’ throughout the whole city and suburban areas into account.

Not this time!

“We learned it in the 1930s (during the Great Depression) but we forgot it – it isn’t that we’ve never been there.”

Professor Smith also worries that the concept of short memories is getting shorter when it comes to the genesis of the global financial crisis.

“Political memories and economic memories can be very short,” he lamented.

“When times are good no one wants to be remember what can be the result of the good times if they’re done to excess.”

Read the full article here:-

http://www.abc.net.au/news/2015-07-30/australian-housing-bubble-nobel-prize-winning-economist/6659014?section=business

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Professor Vernon Smith – nice view over the harbor – click on image to emblazon.

Credit photo: MGSM

The simple fact of the matter is that this new financial crisis will not have Chinese support – no commodity demand – investors should indeed worry.

Even though Yellen has not indicated a rate rise is on the cards in September 2015 – due to bad economic figures in the U.S. – she will increase interest rates through the simple fact of a perceived stock market bubble.

If one follows the Bond and Stock markets – the Chinese share markets ‘carried over sentiment’ to global stock markets – this small tremor made the so called ‘smart’ money – withdrawn from the stock markets and the demand increased for bonds (3 to 5 years).

This – despite the U.S. stock markets only making short adjustments – no major crash – just plodding along with replacement investors – whether retail or corporate.

Yes fully aware that the P/E ratio is skewed – is out of reality – but that is human nature. My simple explanation is that the majority of currencies devalued and USD perceived strength – with the secondary problem of depositors trust in the banking industry.

This jump in demand for Bonds – to my mind anyway – is just paving the way to inflict more damage to these investor’s capital base when the shit hits the sovereign debt fan.

China has been a covert seller of US Treasuries in Q1 and Q2. A large swathe of foreign reserves dumped on the market – various theories have emerged as to their reasoning – but needless to say it is now history – they did so without warning and without Bond Bulls knowledge.

Those in control of the purse strings in China have far more intelligence than what commentators are prepared to admit – liquidity in the Bond markets is very tight causing extreme volatility – to dump that amount of Bonds without causing chaos should be applauded.

The Chinese pegging of Yuan to the USD is now a major factor – and it would not surprise me if now China devalues the Yuan. Yes – to the wrath of the U.S. congress – with accusations of currency manipulation.

Yes China entering currency wars – devaluing their currency in a further effort to boost exports – no different to Canada, Australia and New Zealand – plus the majority of other countries.

The U.S. quantitative easing policies over six years from 2008 benefited China – however – Japan’s monetary policy (Abenomics) is no doubt causing consternation to all the near Asian neighbors.

This together with the increase in value of the USD over the past three years has meant China has to re-assess and seek to adjust the Yuan – to improve the currencies negotiating value on the global stage.

Some will say retaliation – but the simple fact of the matter is that the Yuan pegged to the USD – even against the country widening the trading band – has trade implications – the question is whether it will increase export market share bearing in mind the devalued currency of its trading partners.

Personally I doubt this – as there are internal and external pressures that apply to currency devaluation (deflation) – plus the world demand for goods is self evident – commodities are trending lower and will continue to do so for the foreseeable future.

So China has a while to go – one hopes that they decide to depeg the Yuan completely and allow the global currency market to decide its fate.

In the meantime – Australia and Canadian housing markets will suffer this time around.

Commodities are not a ‘lucky’ escape for both countries.

Edit:

Self explanatory on commodities – will just keep on going downhill

http://www.abc.net.au/news/2015-07-30/terms-of-trade-collapse/6660716?section=business

This is history – scary shit.

Yes well after saying that – is this not exciting stuff?

Not one day goes past – without a number of seemingly random events – happening globally.

Being aware of what is happening around the world – being part of history unfolding before our very eyes.

One never knows what is happening next – but the horizon does not look rosy – the slow train wreck reaching its destination.

Countdown has begun – and I still see that people do not have their house in order.

Amazed – but expected – human nature.

I posted a YouTube link on this blog – “it is the end of the world as we know it” – I listen to the lyrics every now and then.

Trying to adjust my mind – what to expect – this time it is different – this time I am here – this time it will affect me and my family and my friends.

Try not to think about what happens afterwards though – after the sovereign collapse – what we do – what the PISS heads do – what is next – or better still left for the next generation.

Our generation – our legacy – shit it is depressing.

See – things will change quite drastically – these events are leading to a sovereign debt collapse – think about that for a minute please – what happens when the Government is bankrupt and cannot guarantee the Banks?

Expect any money from an ATM?

We have had a case study in recent history – Iceland. Russia then came in to lend Iceland the monies – so that the Government could function and Banks could operate.

Then a ‘hint’ of capital controls through Greece’s cashtration.

When this affects countries – Who is going to lend monies to all the indebted countries around the world?

It is not just one country this time around – this will be a sovereign debt contagion that will affect every country – every bank – every insurance company – every pension fund.

What contingencies does the Government’s have in place?

Then again – the economists that work for the government’s do not have a clue – neither do the politicians – and this time around their is no rule book.

This time history is repeating – but with different characters and countries with no control.

Breaking Bad – Austria. Breaking Bad – United Kingdom

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Click on image to explode – not kidding – it works.

Yes – yes – my thoughts were that history would repeat – a la’ 1931 with an Austrian Government collapse.

These articles were posted on and after 23 April 2015,

“Yes, The Nut Cruncher” which was a follow up to my post “Depression is Coming” that an Austrian Government default would lead the way again.

A recap on 1st June “When it blows it will not be a pretty picture” (1)

A brief recap on my articles – my reasoning was simple in that this was due to Austrian banks going guts up – one being Heta, the ‘bad bank’ of Hypo Alpe-Adria bank which is being liquidated – the debt of €1.5 billion guaranteed by the Austrian State of Carinthia.
Carinthia, a small State has no money, so technically it would fall on the Austrian Government …well that is what I thought would happen – as what transpired was that the Austrian Government ‘stated’ that they will not cover any shortfall in the Banks debt.

The European Central Bank (ECB) stepped in and stated that Bondholders should accept a 50% reduction in bond value.

I did state that I doubted whether the State of Carinthia will meet its guarantee, so the Bondholders must await the conclusion of the wind up of the Bank and the legal action in process.

Well it seems to go a tad deeper than I expected as Austria is breaking bad – not in the financial sense (not yet anyway) – but in the legal sense .

Now bear with me – know it is hard – but the Austria’s Constitutional Court overturned an Austrian law that wiped out 800 million euros ($885 million) of junior debt owed by “bad bank” Heta Asset Resolution AG – saying some creditors were treated unfairly.

An attempt was made by Austria to slash the cost to taxpayers of Hypo Alpe Adria bank, a high-profile European casualty of the financial crisis – by imposing losses on some bondholders – has been thrown out by the country’s top judges.

In other words the Austrian Government is liable for the full debt – and the bottom line is that the taxpayers are liable. Reported by Bloomberg and FT (2).

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I am not so concerned about Austria ‘at this point’ – as their time will come in 2016.

What I really – really – really – like (am I stressing ‘really’ too much?) – is the fact that the guarantee of a State and / or sub-ordinated loans – and the off balance sheet loans – are no longer noise – something that can be dismissed.

In each case these ‘debts’ were classified as a ‘basic note’ to history in the accounts of each State.

Technically now the Rating Agencies (the interest rate rating whores) have to reassess each Countries direct and indirect liabilities – in determining the ‘creditworthiness’ and ‘capacity’ of all sovereign states.

This is HUGE in that countries can no longer dismiss guarantees – or off balance sheet funding held by the Government’s Treasuries.

Omission by the Rating Agencies will be an abject failure of their due diligence in light of the Austrian Courts ruling.

If anyone does not know – the credit ratings agencies played an enormous role in creating the 2008 financial crisis – these whores – willfully and knowingly misrepresented junk investment products as triple A (AAA) an absolutely secure investment.
They caused, with others, the collapse of the financial system in 2008.

This Austrian Constitutional Court decision is profound in that Governments must be held accountable for all debt – as stated by Karl Sevelda, chief executive of Austria’s Raiffeisen

“This discussion is not helpful for the market, this is clear,”

Now what Mr Sevelda was alluding too – was that it is not helpful for Governments borrowing funds in the International market – Rating Agencies must now consider all debts – and in so doing reassess their Sovereign ratings – which may (will) affect those interest rates that Governments have to pay Bondholders.

The question is though – will the Rating Agencies perform these unpleasant tasks now – or in typical fashion procrastinate. Me feels the latter – they do not want to unnecessarily want to bite the hand that feeds them.

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Click on image to read – doesn’t get any better.

Now – my prediction was that the ‘rot’ for the sovereign debt collapse would start in Austria – it has with this court ruling.

Taxpayers are liable for the Banks collapse not the Bondholders – countries cannot discriminate through legislation and allow creditors to suffer.

Therefore Credit Rating Agencies can no longer ignore Government Indemnities – Third Party Liabilities – Sub-ordinated Loans – Off Balance Sheet funding.

All debt must be brought to account.

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Credit: opherworld.wordpress.com (Click on image to hyperinflate)

Breaking Bad for the United Kingdom?

Looking at the United Kingdom – debt – and the ‘off balance sheet debt/loans’ – the total debt to GDP is in excess of the magical milestone of 95 percent – majority of economists believe this is the tipping point – point of no return.

Now economists know sweet F.A. right?

So we will look at a hypothetical situation.

As an example assuming annual growth rate of 3.5 percent – a country that starts with a debt of 95 percent of GDP – will need around 35 years to achieve an objective of loans at say 60 percent (using the EU average here) reducing debt by 0.5 percent annually.

Please note this means growth of 3.5 percent on GDP annually – yes – god forbid if the growth is lower or comes in negative – as it is on paper – 35 years of austerity – whilst it would not mean continuous austerity – the constraints on the counter cyclical use of the ‘fiscal’ policy instrument are severely blunted.

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Credit: Fleet-street-letter.com (click on image to read – like the UK increase in GDP)

Therefore any exogenous shock will rupture the economic recovery model.

An exogenous shock being a change is one that comes from outside the economic model – a black swan event – or a Credit Rating Agency revaluation of the country’s ‘rating’ – lose your rating or being downgraded can have a fatal effect on your country’s ability to borrow money on the markets.

That countries ability to borrow funds at a low interest rate is diminished.

This therefore presents a problem on the countries ability to pay debt.

Will the Credit Rating Agencies act?

History shows us that these Rating Agencies are always late to the party – their ratings on Treasury gilts – their assessment of a fair price to charge – is dictated by their need for monies and the higher rating for any country means money – in other words they prostitute their services to seek to assist a country in selling the debts at the lowest possible interest rates.

Some call them whores – they are not independent – nor are they conflict free – they are licensed to provide a service which can make them money.

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Credit: thisismoney.com (click on to emblazon)

Time will tell – I am breaking bad now – time to go.

Update: yes broke bad – felt good afterwards though.

On Austria and the Constitutional Court Ruling – Heta’s wind-down is also a test case for the new European bank resolution directive, which is supposed to prevent taxpayer – financed bail-outs of banks.

Normally, this would pose no problem, but in this case the guarantees issued by the province have created a unique situation. Note that such state guarantees for financial and state-related companies exist all over Europe and are extremely large in many cases. No-one expected that such guarantees would ever be triggered – their only purpose was to (unfairly) lower financing costs. And as you can see, governments will try to wriggle out from such guarantees if they can get away with it.

1. https://millermatters.wordpress.com/2015/06/01/when-it-blows-it-will-not-be-a-pretty-picture/

2. http://www.bloomberg.com/news/articles/2015-07-28/heta-law-wiping-out-junior-debt-declared-unconstitutional-in

http://www.ft.com/intl/cms/s/0/6c206046-3529-11e5-b05b-b01debd57852.html

USD Bull – setting the standard

United States Dollar 1967-2015

DXY only goes back to 1967

This is the US Dollar Index, which tracks a basket of currencies, was valued at 97.24 points on Friday July 24, according to the New York Board of Trade.

The United States Dollar averaged 97.31 from 1967 until 2015, reaching an all time high of 164.72 in February of 1985 and a record low of 71.32 in April of 2008.

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I know where it is going to go – it is just a matter of time.

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No – not joking – actually may well surpass the 1985 February high – regretfully cannot chart the USD to the 1928 – 1932 period through to the present day accurately- for one the basket of currencies would be different – plus currencies prior to this were pegged to either other currencies or to gold.

Guess where the AUD will end up . . .

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No not kidding – problem with a sovereign debt collapse – when central banks have no tools left in their arsenal.

They can print money – thereby devaluing the AUD and then repay debts and start again – but the politicians and bureaucrats would fuck up again – you see – the problem is the politicians and the bureaucrats.

When friends turn to foes

I wrote an article on U.K. – the calm before the storm – yes this time it is different – highlighted the U.K. debt situation and taxation policies destined to cripple the recovery.

That is to say that the powers that be – know very little about history (or economics) and I was surprised that rating agencies permitted the U.K. to run such an alarmingly high run of deficits (yes suggested it was political).

Then there were figures released showing consumer spending has come in at 0.2 percent increase whereas expectations were set at 0.3 percent.

Against this backdrop (no pun intended) an increase in mortgage loan interest rates – as the Banks ‘expect’ the Government will increase their rates.

Like bullshit – just an excuse to get in early.

This therefore means – in real terms that spending by consumers is going to continue to decrease – a reduction in consumer spending and it will accelerate for the next 2 quarters.

It will affect the GDP of the U.K. and eventually the ratings agencies will have to downgrade the U.K. – yes these imbeciles that run these rating agencies then will have to take action – me feels too little action – far too late to have any benefit to investors.

It will be acrimonious parting of the friendship between the UK exchequer and the rating agencies – as the illustrious Osborne will be bruised – his ego will start to get a battering and he will retaliate . . . me – well – I can’t wait just to see the arrogant smirk wiped from his face.

Just remember please that the government in their wisdom – has proposed a ten percent increase in salaries to parliamentarians and to the public service – one percent per annum over four years.

I read this and realized we have elite self serving wankers supporting themselves – plus avoiding the difficult decision of cutting the bureaucracy – reducing government spending.

Instead ‘they’ presume tax receipts will rise.

Presumptuous wankers who have learned nothing from recent history – let alone our past history.

If you doubt anything of what I have been saying throughout all of these articles (since I started this blog) then please refer to the attached comments from Nouriel Roubini in 2010 – article from Forbes with insight for the future.

Why Roubini, well a top American economist who accurately predicted the financial crisis of 2008.

In this article he states that, “unless advanced economies begin to put their fiscal houses in order, investors and rating agencies will likely turn from friends to foes.”

Due to the financial crisis, the stimulus spending, and the massive bailouts to the financial sector, major economies had taken on massive debt burdens, and, warned Roubini, faced a major sovereign debt crisis, not relegated to the euro-zone periphery of Greece, Portugal, Spain, and Ireland, but even the core countries of France and Germany, and all the way to Japan and the United States, and that the “U.S. and Japan might be among the last to face investor aversion.”

Thus, concluded Roubini, developed nations “will therefore need to begin fiscal consolidation as soon as 2011-12 by generating primary surpluses, which can be accomplished through a combination of gradual tax hikes and spending cuts.”

Nouriel Roubini and Arpitha Bykere, The Coming Sovereign Debt Crisis, Forbes, 14 January 2010:

http://www.forbes.com/2010/01/13/sovereign-debt-crisis-opinions-colummnists-nouriel-roubini-arpitha-bykere.html