The risk of normalising too late and too gradually should not be underestimated… The trade-off is now between the risk of bringing forward the downward leg of the cycle and that of suffering a bigger bust later on .
Few are ready to curb financial booms that make everyone feel illusively richer. Or to hold back on quick fixes for output slowdowns, even if such measures threaten to add fuel to unsustainable financial booms,” …
“The road ahead may be a long one. All the more reason, then, to start the journey sooner rather than later.”...But what else is fascinating is that just days after the BIS report was released, Janet Yellen seemed to counter the BIS in her presentation to the IMF:
“At this point, it should be clear that I think efforts to build resilience in the financial system are critical to minimizing the chance of financial instability and the potential damage from it. This focus on resilience differs from much of the public discussion, which often concerns whether some particular asset class is experiencing a ‘bubble’ and whether policymakers should attempt to pop the bubble. Because a resilient financial system can withstand unexpected developments, identification of bubbles is less critical.”
2---The Crash is Coming: "It is hard to avoid the sense of a puzzling disconnect between the markets' buoyancy and underlying economic developments globally," the report mused., Reuters
Red Falgs: trouble ahead
The BIS, then, is at most just flagging the risk of higher interest rates. "The sustainability of this process will ultimately be put to the test when interest rates normalize."
The seeming inevitability of rates rising from next year suggests investors should already be bracing for some serious turbulence, if not quite on 2007 levels.
Yet many still believe central banks will hold off until the last minute because underlying economies will remain subpar for years to come as a result of aging demographics and the relentless paydown of past debts. And with inflation subdued, rates will likely only rise modestly even when they do go up.
But even if you believe another crisis is brewing, it's most likely not where it was last time. At least not in U.S. securitised mortgages - the heart of systemic blowout that nearly brought down the global banking system in 2008.
A mix of tighter regulation, stricter underwriting standards and the lowest new mortgage applications in almost 20 years means sales of private U.S. mortgage-backed securities have dwindled to just $600 million (350 million pounds) so far this year - a mere sliver of the record $726 billion of new bonds in 2005.
For what it's worth, new U.S. bonds backed by subprime mortgages chave all but vanished. Bonds backed by subprime U.S. auto-loans have taken up some of the running, but not on anything like the same scale.
Yet in its latest annual report the Bank for International Settlements, the Basel-based forum for the world's major central banks, seemed pretty convinced global debt markets are once again in risky territory and heading for a fall.
The BIS focused mainly on fresh accumulation of new corporate and sovereign debt by asset managers rather than banks and scratched its head about the coincidence of sub-par economic activity and record low default rates that in turn depress borrowing rates and credit spreads ever lower nearly everywhere.
'Exuberant' equity and real estate and rock-bottom financial volatility merely fed off that picture, it said. And it added that if all this was simply due to zero official rates, it could all suddenly go into reverse when they rise....
Low-grade corporate rather than household borrowing was marked out for special attention.
New sales of 'junk' bonds worldwide hit a quarterly record of $148 billion between April and June, according to ThomsonReuters data. That's up from average quarterly sales of around $30 billion before the last credit bubble burst.
Additionally, more than 40 percent of new syndicated loans signed for companies last year were low-grade leveraged loans - more than in the 2005-2007 period. Increasingly the money was raised without creditor protection in terms of covenants.
So could this be the new subprime?
3---Credit Cooling: Growth in Credit-Card Balances Slows Sharply in May , wsj
Growth of Americans’ credit-card balances slowed sharply in May, a sign consumers are cautious about adding to their debt burdens
4--Angela Merkel's secret history, der Spiegel
But former German Transport Minister Günther Krause -- an eastern German politician who worked with her in the final months of the GDR and as a fellow minister in the government ex-chancellor Helmut Kohl in the early 1990s -- contradicts her in the book and says she propagated Marxism-Leninism.
"With Agitation and Propaganda you're responsible for brainwashing in the sense of Marxism," he said. "That was her task and that wasn't cultural work. Agitation and Propaganda, that was the group that was meant to fill people's brains with everything you were supposed to believe in the GDR, with all the ideological tricks. And what annoys me about this woman is simply the fact that she doesn't admit to a closeness to the system in the GDR. From a scientific standpoint she wasn't indispensable at the Academy of Sciences. But she was useful as a pastor's daughter in terms of Marxism-Leninism. And she's denying that. But it's the truth."
5---Whitewashing Venezuela’s Right Wing, venezuelanalysis
In reality, the Election Day audit of the results, as CEPR has reported, already proved that the odds of a Capriles victory were less than one in 25 thousand trillion. The audit was, nevertheless, expanded.
It is quite clear to anyone who has been paying attention that opposition claims of electoral fraud are not driven by the facts but by the level of support they expect from the US government, foreign media and groups like the ICG.
6--Luxury Rolls-Royce car sales soar worldwide
7--Why trading volume is tumbling, explained in 5 charts, marketwatch
Where have all the traders gone? That’s been a common refrain in the last few years for many market watchers. These folks worry that lower trading volumes for U.S. stocks might indicate a disturbing lack of confidence in the market, even as stock prices march higher and the Dow Jones Industrial Average /quotes/zigman/627449/realtime DJIA -0.69% cracks 17,000.
“There seems to be no excitement in the market anymore,” said Peter Cardillo, chief market economist at Rockwell Global Capital.
There certainly are far fewer shares trading hands than a few years ago, as shown in this chart. Average daily trading volume, tallied by month, was just 5.8 billion shares in May, less than half of the peak of 12.3 billion shares during the financial crisis
8---Nearly 80% of California now under 'extreme' drought conditions, LA Times
8---Nearly 80% of California now under 'extreme' drought conditions, LA Times
9---Negative rates on Treasuries? Bond Anxiety in $1.6 Trillion Repo Market as Failures Soar , Bloomberg
“The effect of all the collateral issues we see now is an indication of not so much how things are, but how bad things will be when you really need liquidity,” said Jeffrey Snider, chief investment strategist at West Palm Beach, Florida-based Alhambra Investment Partners LLC, in a telephone interview June 30. “That’s when you get into potentially dire situations.”
The conditions for repo stress were on display last month. The 2.5 percent note due in May 2024 reached negative 3 percentage points in repo in the days preceding a June 11 Treasury auction of $21 billion in notes to finance government operations
10---Who Owns the U.S. Stock Market? Pam Martens
The concentration of insured deposits in the U.S. among these firms; the fact that over 90 percent of derivative trading is controlled by these same firms; that the same firms, over and over again are jointly owning pieces of the same trading venues; that they are now trading billions of shares a week in darkness, should be enough to send Congressional banking committees into a frenzy of drafting new legislation to rein in this mess.
It hasn’t happened. As Senator Dick Durbin famously said about Congress in 2009, the banks “frankly own the place.”
11-- Say hello to U.S. economy’s newest bubble, marketwatch
Opinion: Stocks are way overdue for a correction
12---Gouge the rich? Americans say: "You bet" smirking chimp
Pew's people-press.org reported their poll finding that when asked "what would do more to reduce poverty?" 54% favored "Raising taxes on the wealthy and corporations to expand programs for the poor," which is the progressive position, and only 35% favored "Lowering taxes on the wealthy and corporations to encourage investment and economic growth," which is the conservative position.
13---Netanyahu government knew teens were dead as it whipped up racist frenzy, Blumenthal
From the moment three Israeli teens were reported missing last month, Israeli Prime Minister Benjamin Netanyahu and the country’s military-intelligence apparatus suppressed the flow of information to the general public. Through a toxic blend of propaganda, subterfuge and incitement, they inflamed a precarious situation, manipulating Israelis into supporting their agenda until they made an utterly avoidable nightmare inevitable.
Israeli police, intelligence officials and Netanyahu knew within hours of the kidnapping and murder of the three teens that they had been killed. And they knew who the prime suspects were less than a day after the kidnapping was reported.
Rather than reveal these details to the public, Israel’s Shin Bet intelligence agency imposed a gag order on the national media, barring news outlets from reporting that the teens had almost certainly been killed, and forbidding them from revealing the identities of their suspected killers. The Shin Bet even lied to the parents of the kidnapped teens, deceiving them into believing their sons were alive....
Weeks after the incident, it is now clear that the Israeli government, intelligence services and army engaged in a cover-up to provide themselves with the political space they required for a military campaign that had little to do with rescuing any kidnapped teens.
14---Israel does not want peace, Haaretz
Rejectionism is embedded in Israel's most primal beliefs. There, at the deepest level, lies the concept that this land is destined for the Jews alone...
Israel never really wanted peace. Israel has never, not for a minute, treated the Palestinians as human beings with equal rights. It has never viewed their distress as understandable human and national distress. ...
The single most overwhelming item of evidence of Israel’s rejection of peace is, of course, the settlements project. From the dawn of its existence, there has never been a more reliable or more precise litmus test for Israel’s true intentions than this particular enterprise. In plain words: The builders of settlements want to consolidate the occupation, and those who want to consolidate the occupation do not want peace. That’s the whole story in a nutshell. ...
Gone are the days when Palestinians worked in Israel and Israelis shopped in Palestine. Gone is the period of the half-normal and quarter-equal relations that existed for a few decades between the two peoples that share the same piece of territory.....
First came the demand for a cessation of terrorism; then the demand for a change of leadership (Yasser Arafat as a stumbling block); and after that Hamas became the hurdle. Now it’s the Palestinians’ refusal to recognize Israel as a Jewish state. Israel considers every step it takes – from mass political arrests to building in the territories – to be legitimate, whereas every Palestinian move is “unilateral.”
15---Shades of 1930 in Wall Street Banks’ Dark Pools? , Wall Street on Parade
The bank was founded by two men from the garment industry, Bernard Marcus and Saul Singer. Like the dangerous structure of today’s biggest deposit-taking banks, it had a stock trading arm, the Bankus Corp. It was through that trading unit that the bank manipulated the price of its own stock, using the money of depositors, and then used the shares as collateral for loans. Banking examiners later determined that other banks had acted similarly.
16---the estimates of GDP growth for 2014:Q1 represent the largest revision from an advance estimate to a third estimate, as well as the largest revision from a second estimate to a third estimate, in the roughly thirty years the Bureau of Economic Analysis has done these estimates. econbrowser
17---High Asset Prices, the Savings Glut, Secular Stagnation, and Unemployment, Dean Baker
The nice thing about problems of inadequate demand is that in principle they can be easily remedied. It's not hard in principle to create more demand. The first route is to have the government spend more money. That creates demand -- the government pays people to do things. There are a long list of things that need to be done. Think of all those things that we think that we can't do because they cost so much, like stopping global warming, educating our kids properly, or providing care for seniors. It turns out that we actually can do them because we have more supply than demand. We need to spend in these areas to fill the gap.
But, that ain't going to happen. Some people are scared to step on the cracks in the sidewalks and some people are scared of deficit spending. Unfortunately, the latter group of people are running the country.
Item number two on the creating demand list is reducing the trade deficit. This one is straight out of intro econ. Our annual trade deficit of $500 billion corresponds to money that is created demand elsewhere rather than in the United States. The tried and true path for reducing the trade deficit is getting the dollar down. A dollar that costs less in terms of foreign currency makes our exports cheaper for people living in other countries and makes imports more expensive for people in the United States. The result is more exports and fewer imports, in other words a lower trade deficit. Eliminating the trade deficit altogether would pretty much close our demand gap, increasing GDP by around $750 billion a year.
Getting the dollar down is not a mystery either. It has been held up by the deliberate actions of other countries (most importantly China) buying up huge amounts of dollar denominated assets to keep up the value of the dollar and preserve their export markets in the United States. The way to reverse this pattern is to negotiate, as was done with the Plaza Accord under President Reagan in the 1980s. As a result of that agreement, the dollar fell sharply and the trade deficit was cut by two-thirds.
This doesn't happen today because powerful interests like Walmart, which has low cost supply chains in the developing world, and General Electric, which has factories hiring low-cost labor in the developing world, don't want to see the dollar fall since it would eat into their profits. There are also powerful companies, like Microsoft and Merck, that have their own demands that they don't want subordinated to efforts to get to full employment. Therefore we see little movement towards a lowered value dollar.
If we can't increase demand, the other route to full employment is to reduce the length of the work year.
18---Fed's Kocherlakota: Inflation data likely temporary, cnbc
19--If ever the stock market flashed a ‘sell’ signal, it’s now, marketwatch
Insight: It’s not too late — yet — to move to
20--Dow 17,000 is on the wrong side of history, marketwatch
Opinion: Since 1929, stock-market rallies have had things in common that this one doesn’t
21--Israel needs a cultural revolution, info clearinghouse
22--Israel's hermetic dystopia, Raimondo
In this most recent case, involving conscious deception and the exploitation (and incitement) of murder, the Israel political class exhibits a malevolence unique among nations. It is a trait that has become more pronounced over the years, earning it enmity on an international scale, inspiring a boycott campaign and isolating its people inside what the writer Max Blumenthal trenchantly characterizes as "a hermetic dystopia."
23---Bank Of Japan Prepares To Buy Nikkei-400 ETF To Boost Stocks, zero hedge
24--An end to the Ponzi?, Trim Tabs
25--Why Housing Will Crash Again - But For Different Reasons Than Last Time, Charles hugh smith
26---Bond Investors May Soon Head for Exits , wolf street
27---Senior Bankers Warn: ‘It’s Crazy, It’s a Boom, It’s a Gold Rush’ , wolf street
28--CIA and FBI Had Planned to Assassinate Hugo Chávez, Nimmo
Shortly after the death of Chavez, Kurt Nimmo wrote on March 6, 2013: "For the naysayers who dispute that the CIA was responsible for the cancer death of Hugo Chavez, note the device in the following video. It is a dart gun developed in the 1970s (or possibly earlier) by the CIA. In the video, the weapon is described as inducing heart attacks. Cancer is not mentioned. However, we know that the CIA used Dr. Alton Oschner, the former president of the American Cancer Society, to run covert cancer research for the agency." If they could invent devices like this back in the 1970s, just imagine how much more they could do now in the 2010s!
29--Governments from Around the World – Including Western, Islamic, Asian and African Nations – ADMIT They Use False Flag Terror, Washington's blog
30--Obama calls for $3.7 billion border security “surge”, wsws
Obama's solution to global warming and shitty trade agreements: More Prisons
31--Election debacle foreshadows Taliban victory, wsws
All the claims that the US and its allies have established a regime based on democracy, the rule of law and respect for human rights in Afghanistan are exposed as lies by the corrupt, dysfunctional and utterly dependent character of the political set-up that has been erected in the country. While unknown billions of dollars has found its way into the pockets of US stooges, the Afghan people have been subjected to constant war, repression and poverty. After nearly 13 years of occupation, unemployment stands at 35 percent, while close to 40 percent of the population live below the country’s poverty line, in abject destitution and malnourishment.
The Taliban and other anti-occupation resistance organisations—who still exert sway over large areas, particularly of the ethnic Pashtun southern provinces—are set to be the major beneficiaries of the election crisis and the sordid in-fighting among the rival pro-occupation factions.
The battle over the presidency is above all a fight for control of the shrinking pool of international financial support, which the pro-occupation Afghan elite have plundered. As much as 90 percent of Afghanistan’s nominal Gross Domestic Product of $34 billion stems from military spending or aid injections. As the US and NATO wind down their military occupation, the money flow is slowing. The US halved its civilian aid to $1.12 billion this year. The $16 billion in annual assistance pledged in Tokyo last year by other countries is not likely to materialise.
The reduction in the number of foreign troops from 130,000 in 2012 to 50,000 is also cutting across the interests of sections of the ruling elite close to the NATO occupation. Afghan security companies, most run by politically-connected strongmen and which provided base guards or escorts for supply convoys, are losing billions of dollars in contracts. Many people who eked out an existence providing services of one type or another to the foreign forces have lost their livelihoods.
By the end of the year, the US intends to reduce its forces in Afghanistan to just 9,800, confined to highly-guarded bases such as the key airfield at Bagram and the capital, Kabul. It appears that, as of 2015, the Afghan regime will have far less to dish out in terms of patronage than it did under Karzai.
There have been continuous allegations that political connections of the Karzai administration, including members of the outgoing president’s family, are major players in the rampant production and export of opium and heroin that takes place in southern Afghanistan.
In Kandahar province, where the Karzai clan dominates the local authorities, Abdullah’s supporters have cited as proof of fraud the fact that six times as many votes were cast on June 14—overwhelmingly for Ghani—than in the first round of the presidential election on April 5.
Ghani was also supported by warlord Abdul Rashid Dostum, who will become vice president if the result is upheld. Dostum rules over the ethnic Uzbek region of northern Afghanistan with an iron fist. His militia forces were responsible for numerous atrocities in both the 1990s Afghan civil war and while fighting on behalf of the US in the 2001 invasion. He has been repeatedly accused of directing and profiting from massive opium and heroin trafficking.
32--56% lenders worried about new bubble, ds news
33--No one should even try to attack Crimea - Russian FM Lavrov, pravda
By experience we know that when it's autumn and winter, Ukraine will be short of gas," he said at the Russian Language Center of the Beijing University at a meeting with students. According to Ivanov, one needs to prepare to the situation and to "diversify energy supplies," reports Regnum.
Gazprom officials said that Ukraine's gas debt had reached the level of $ 5.3 billion; 11.5 billion cubic meters of Russian gas remain unpaid. The head of Gazprom, Alexey Miller, said that the amount of the debt was gigantic. He also compared the unpaid amount to the one that Russia supplies to Poland in one year.
34---Vegas real estate goes Boom, Dr Housing Bubble
A big drop in sales while the median price hits a plateau. If the past is any indicator, a big drop in sales usually means a nice jump in inventory within 6 to 12 months followed by prices correcting within 1 to 2 years (that is, 2015 and 2016 for Las Vegas). The real estate worm turns very slowly and Las Vegas has had a nice run up from the trough
35--The only net buyer of US stocks left…Reformed Broker
Corporations (the last man standing)