Showing posts with label Debt Crisis. Show all posts
Showing posts with label Debt Crisis. Show all posts

Tuesday, October 29, 2024

Fed Policy-Driven Super Rallies and Corrections in US Stocks | Sven Henrich

The US market is at a critical juncture with a contentious election, a Fed meeting, and numerous earnings reports on the horizon. A significant liquidity rally is underway, raising hopes for a year-end rally, yet concerns about a potential corrective move linger, especially after an 11-month rise. Despite strong bullish sentiment, skepticism remains due to insufficient changes in underlying conditions and earnings not meeting expectations. The S&P 500 is now at approximately 5,800, with some analysts projecting levels as high as 6,600, but these optimistic forecasts prompt concerns about sustainability.

Super rallies and corrections in the S&P, driven by interest rate cuts and hikes (2016–2024).
 
Liquidity-driven super rallies, influenced by Fed policy on interest rates, are characterized by prolonged market increases with minimal price discovery. The first major super rally in the above chart followed the earnings recession of 2015-2016, fueled by tax cuts and global quantitative easing. Subsequent rallies occurred despite rate hikes, indicating a strong influence from central banks and government policies. These rallies often persist until liquidity conditions shift, such as through rate increases or unexpected events. 
 
Currently, global central banks are signaling easing policies, contributing to the ongoing liquidity rally. Fiscal dominance, marked by significant deficits, plays a crucial role in this environment. The unprecedented $1.6 trillion deficit in 2023 raises questions about recession potential amid fiscal stimulus. Past experiences show that downside movements typically arise when liquidity changes. The current market situation highlights a disconnect between strong policy support and underlying economic conditions. Overall, these factors suggest that the rally extend through the end of the year or into 2025, but risks remain.
 
Reference:

Markets expect the Federal Open Market Committee to 
cut interest rates again by 0.25% on Thursday, November 7.
 
The median Nasdaq 100 (NDX) return from October 27th to December 31st is +11.74% since 1985.  
The median S&P 500 return from October 27th to December 31st in election years is +6.25% since 1928. 
 

Thursday, September 12, 2024

Financial Oligarchies vs. State Power | Michael Hudson

My articles about the origins of credit, money, and interest share a common frame of reference. From the inception of economic practices and enterprise in the ancient Near East, through classical antiquity and medieval Europe to today, wealthy classes have sought to transform themselves into an oligarchy that controls government and religion to protect, legitimize, and increase their wealth, especially their rent-extraction privileges as creditors, monopolists, or landlords.

 Marcus Licinius Crassus (115 – 53 BC): 
general, statesman, the richest man in Rome, and a textbook oligarch.
 
We see the same struggle through the ages, with financial elites opposing any government power capable of restricting their self-serving rent-seeking and creditor power at society’s expense. We see it today in the pro-creditor economic policies of the International Monetary Fund, the World Bank, and the ‘libertarian’ ideology, all of which seek to centralize power to allocate resources and plan economies within the financial sector instead of democratic governments. Today’s neoliberal idea is to eliminate government authority (except where it is controlled by rentier sectors) and let banks in the privatized financial sector control money and credit, which is the most important public utility.
 

That should be the context in which one examines every epoch’s economic view of the world, above all its perspective concerning how ‘free’ a market should be and just whose freedom is being endorsed. This has been the great question throughout the history of civilization—from the Bronze Age Near East, when rulers regularly proclaimed Clean Slates debt cancellations to restore economic order and check incipient oligarchies, through the five centuries of civil war in the Roman Republic and Jesus’s fight against the emerging Jewish oligarchy, to today’s civilizational struggle between the NATO West, dominated by U.S.-oriented rentier oligarchies, and the global majority now centered on the BRICS.

 Rare Anomaly: Populist Pariah Oligarchs Proclaiming to Serve the Common Good —  September 2, 2024.

China’s government has financed its remarkable industrial takeoff without having to borrow from private creditors. There was little money to borrow from its domestic population, so the Bank of China printed its own money. Unlike typical financial practice, it did not demand personal wealth be pledged as collateral because stock and bond holdings or substantial real estate did not yet exist. The government did not need to turn to bondholders to increase its public spending—and in any case, there were no domestic bondholders to borrow from in the wake of its Revolution. China did what any sovereign national government can do—what Abraham Lincoln did in the Civil War. It simply printed the money.
 

Wednesday, May 8, 2024

It is unlikely that we can avoid a Third World War | Martin Armstrong

Piero Messina: Fukuyama advocated the end of history. Huntington spoke of a clash of civilizations. Is it possible to imagine a third way?

Martin Armstrong: Our greatest threat is centralized control; that is what doomed communism. I agree with Huntington that the clash of civilizations will be based upon cultures and religion mainly because of centralized attempt to impose a unified culture.
 
 » It is unlikely that we can avoid world war. 
Governments need war because their debts are no longer sustainable. 
They will use the war as the excuse for defaults – as was the case for WWII. 
They will create Bretton Woods II with the IMF digital currency as the reserve.
I believe we have a third world war that will begin piecemeal with the Middle East, Iran vs Israel, 
Europe vs Russia, North Korea vs Japan and South Korea, China vs Taiwan. 
But they will eventually merge together. «

At the end of the 1980s, the reference geopolitical model was the unipolar world, based on Western primacy. What cultural, military, and economic pillars is the Washington Consensus based on? Is it true freedom?

The military in economic pillars that dominate Washington today have nothing to do with freedom. They have to do with people who were unwilling to accept the collapse of communism. Whereby the enemy was transformed by communism to ethnic racism.

With the birth of the BRICS, is it possible to talk about a multipolar option? What are the limits that you see in this geopolitical dimension?

The birth of the BRICS was caused by these people we call the Neocons who engaged in ethnic racism and targeted Russia by removing them from the world economy under SWIFT. This woke up many in the world, realizing that the dollar was now being weaponized and was no longer a monetary instrument exclusively. Nations began to realize if they did not conform to the commands of Washington, then they to could be removed from SWIFT. Thus they have divided the world economy bringing to an end globalization.

Your analysis and studies seems to reveal several critical issues regarding the stability of the so-called Western system. There is a profound crisis of democratic systems, there is a lot of mistrust towards mainstream information and above all there are “agents” external to the institutions (an example above all is the activity of George Soros) who seem to influence the choices of governments in the United States and Western Europe. What could happen in the immediate future and in the coming years?

It has been propaganda that we live under a democracy. We live under republics in which case the people are represented and have no right to vote on critical issues. Republics historically are the most corrupt forms of government compared to a monarchy or dictatorship which cannot be bribed. In a republic, all representatives lacking term limits are up for sale to the highest bidder. This has resulted in the collapse of confidence in government both in Europe and the US which have fallen below 30% – the lowest since WWII. External agents such as George Soros, Bill Gates, World Economic Forum, push personal agendas which has further undermined the confidence in our systems. It is the government that decides if we go to war or not. The people are never asked.

 » It has been propaganda that we live under a democracy
We live under republics in which case the people are represented and have no right to vote on critical issues. 
Republics historically are the most corrupt forms of government. «

We invite you to make some reflections on the geoeconomic dimension. The global capitalist system is based on the indebtedness of sovereign states. Is this a sustainable situation? Who will pay the bill in the end?

The sovereign debt crisis that we face has appeared often throughout history. It is unsustainable because governments act in their own self-interest and will always expand debt to retain power. Historically, these systems collapse when they issue new debt to pay off the old, and no one is there to buy the new debt. Once they can no longer continue to borrow new money, then inevitably, they collapse.

Your predictive model is based on precise calculations. The cycles of history and the economy thus seem to chase each other along the time span of history. If I’m not mistaken, you compared the current context to the crisis and dissolution of the Roman Empire. Is it correct?

History repeats because human nature never changes. The Roman Empire is but one example from history of its success and failures. It lasted longer than anyone because it did not impose cultural regulations. The Christians called them pagans because they had so many Gods. That was the product of their policy of freedom of religion. Athens had Athena, Northern Europe had Thor, so they did not try to change the culture of the lands they conquered. They created a common market where someone in Britain could sell products to someone in Rome. So the freedom of religion, low taxation, freedom of movement, and a common market combined to create the Pax Romana.

Is it still possible to avoid a large-scale world conflict?

It is unlikely that we can avoid world war. Governments need war because their debts are no longer sustainable. They will use the war as the excuse for defaults – as was the case for WWII. They will create Bretton Woods II with the IMF digital currency as the reserve.

Pope Francis has been talking about a piecemeal Third World War for years. From your point of view, is what the Holy Father claims can be shared? What are the main weapons of this possible Third World War?

I believe we have a third world war that will begin piecemeal with the Middle East, Iran vs Israel, Europe vs Russia, north Korea vs Japan and South Korea, China vs Taiwan. But they will eventually merge together.

Have you argued that the true wealth of a state is its people? Why did we forget about all this? Above all, who is it convenient for?

The wealth of every nation is its people. That has been proven with the rise of Germany and Japan after WWII. This is the essence of Adam Smith’s “Invisible Hand.” But those in government prefer Marx, for he advocates that the state has the power to manipulate the people. So, Governments have forgotten it and reject Smith because Marx provides them with more power.

Is it correct to claim that your analysis succeed in covering the intersection of geopolitics, global markets and economic confidence? Can you explain to us in a simple way how your Socrates predictive model works? By the way, why did you name it just like the Greek philosopher?

I named my computer model after Socrates because the oracle of Delphi had said that he was the smartest man in Greece. He tried to prove the oracle wrong and the process proved it to be correct. He was put on trial and sentenced to death because he knew too much. My computer has taught me a lot in geopolitics, we had a major bank in Lebanon in the 1980’s and they asked if I could create a model on the Lebanese pound. I put the data in the computer and it came out and said their country would fall apart in 8 days. I thought something was wrong with the data. When I told the client, they asked me what currency would be best, and I said the Swiss Franc. Eight days later the civil war began. Obviously they saw the movement of money themselves and came to me for the timing. The same thing happened with a client in Saudi Arabia who was a big shipper. He called me asking me what gold would do tomorrow because Iran was going to begin attacking shipping in the gulf. So once again, there was advanced information about war. By 1998, I understood how the computer was forecasting such events. I warned in June at our London conference that Russia was about to collapse. The London financial Times had snuck into the back of the room and reported that forecast on the front of their newspaper on June 27th 1998. Russia collapsed about 6 weeks later.

Are unpredictable events, such as the terrorist attack in Moscow, also considered among the parameters of your predictive model? A “black swan” type event can change the course of history and geopolitical relations?

Yes, we saw the capital flows shift a day in advance, up to a week in advance in the case of the attack in Israel. The defense stocks began to rise even with 9/11 the government used our model to look at who bought puts on airlines in the days before. Someone always knows when they’re going to do these types of events. And they move their money either to profit or to avoid a loss. The computer is tracking everything. It cannot tell me which person has done it. Just that the move is about to take place.

 
 » America is a Golden Calf and we will suck it dry, chop it up, and sell it off piece by piece. «
 

Tuesday, March 21, 2017

Denmark Free of Foreign-Currency Debt for the First Time in 183 Years

Eshe Nelson (Mar 20, 2017) - Today marks a milestone for Denmark, centuries in the making. The Danish government will repay a $1.5 billion loan (pdf), freeing it from foreign-currency debt for the first time in at least 183 years. This record probably stretches back even further, since Denmark first raised a loan in a foreign currency back in 1757, when it borrowed in Hamburg and Amsterdam, the central bank said. (The records are spotty, so it is unclear whether the country was ever foreign debt-free before 1834, when data collection became more robust.)

The last time Denmark was this close to ridding itself of foreign debt was the late 1890s, when these obligations were worth less than 1% of GDP. But low European interest rates at the time made financing projects like new railways more attractive with foreign debt, so the borrowing restarted. In recent history, issuing external debt has been a means to ensure sufficient foreign-exchange reserves. After Denmark pegged the krone to the deutsche mark, and later the euro, starting in the late 1970s, market interventions have been used to adjust the krone’s value, which require reserves of foreign currencies to buy and sell. 


Joining Norway and Germany in the ranks of
foreign-currency debt free nations.
Now, Denmark joins neighbors Norway and Germany in the ranks of countries with no foreign-currency government debt. Fellow Scandinavian nation Sweden, meanwhile, maintains about 30% of its government debt (pdf) in foreign currencies. It’s not unusual, nor undesirable, for countries to issue some foreign debt to build currency reserves; the US treasury owes about $1 trillion in foreign currency debt. Issuing debt in dollars will become less attractive as US interest rates rise, but many countries—especially in emerging markets—still find it more affordable than borrowing in local currency subject to much higher rates.

For its part, Denmark’s government still has some 465 billion kroner ($67 billion) in debt, which amounted to 23% of GDP at the end of last year, low by international standards. Around 40% of this debt is held by foreigners, who from now on will only get paid back in krone
r.

Sunday, October 23, 2016

The Pattern of US Bankruptcies | Cyclic Vibrations

Ahmed Farghaly (Oct 22, 2016) - I found an interesting pattern in the Gold Miner's index. I realized that at the beginning of the previous two Kondratieff waves the US had defaulted on their obligations. This is the reason why a human brain is superior to spectral analysis, we tend to spot patterns earlier. In 1933 the US Treasury was official declared bankrupt after the emergency banking act was voted into law by congress. "The Emergency Banking Act succeeded in abrogating America’s gold standard and hypothecated all property found within the United States to the Board of Governors of the Federal Reserve Bank." This bankruptcy occurred after world war one as visible on the picture above. The Vietnam war was the culprit of the second American bankruptcy with the closing of the Gold window in 1971 by president Nixon. So much money was printed to fund the war that there was no way the US could redeem holders of US dollar with Gold at the pegged rate of $35 an ounce. We once again have the same pattern recurring at the time of writing. We had the Iraq/Afghanistan war the debt of which has become to big of a burden to service and history will once again repeat with yet another bankruptcy in a few short years. This will obviously have a devastating impact on the entire world since US Treasuries are the largest single asset that people own world wide. I wonder how China will react to such a bankruptcy but I guess only time will tell. I am so certain that this is going to occur not only because of the pattern that we see on the Gold Miner's index but that of Donald Trump's upcoming presidency. 


I analyzed all the similar cyclical circumstances and under all of them the president of the United States was a republican. Those cyclical circumstances include 1861, 1881, 1971 and 2001. This gives us reason to believe that without question the next president of the United States will be Donald J. Trump. We can also look at Hillary Clinton's history to discern if she is likely to make it to the White House. First, We know that the similar cyclical circumstance in terms of the 54 month wave saw Hillary Clinton lose in the primaries against Obama. We also know that she lost against Obama once again in the similar cyclical position in terms of the 9 year cycle. We also know that she left the White House in the similar cyclical circumstance in terms of the 18 year cycle. Now that we are certain that Donald J Trump will win the election we can combine that with what we have discerned from the Gold Miner's index with his history of Bankruptcies. Donald Trump filed for bankruptcy a total of 6 times the last of which was in 2009. W.D. Gann said that the highest correlations occur with the most recent similar cyclical circumstance. The 2009 low is expected to reoccur in 2017 and hence we can expect a bankrupt United States government before the end of next year or the year after at the latest.

Trump's plan for his first 100 days in office (HERE)

Saturday, July 11, 2015

Game Over 2015.75 | Martin Armstrong

"Schaeuble wants a Grexit to put the fear of God into the French!" HEREHERE
Martin Armstrong: "This is the start of BIG BANG and as the rest of Western nations
raise taxes, the economy is about to fall off a cliff and they bring economic activity
into a swan-dive. They will, as always, blame the private sector. We can see this
decline coming as long-term bonds crashed from May, liquidity has collapsed, and there
is excess cash in the short-end keeping interest rates low ensuring we will see not
just municipalities decline into a debt crisis like Detroit, but we are staring in the
eyes of death insofar as pensions are concerned. Politicians are good for only (1) lies,
(2) corruption, (3) debt, (4) taxes, and (5) death and war."