Wednesday, August 6, 2014

Today's links

1---Abenomics: Japanese Households On Welfare Rise To Record, zero hedge

2---Market complacency and excessive risk taking, zero hedge

Interest rate volatility can be viewed as a proxy for the corporate bond market and the interest rate at which people and companies borrow money.

Shown below is 1y10y interest rate vol with 5yr spreads of the credit default index of investment grade on the left and high yield on the left

Note the lack of 10% corrections during the past hiking cycles in 2004 and 1994

3--Ilargi: As you’ve seen from what happened and happens in Ukraine, and from so many other events, you can’t trust your governments or media to tell you the truth. There’s a lot of plain dumb asses among them, and even more lying bastards with agendas. So keep your eyes and your nose open. A lot of things will look good at first sight but come with a nasty odor.

4---Senate Bill Preps for War with Russia, counterpunch

5---S&P: Wealth gap is slowing US economic growth, AP

6--Economic Research:   How Increasing Income Inequality Is Dampening U.S. Economic Growth, And Possible Ways To Change The Tide, GCP

7---In a Subprime Bubble for Used Cars, Borrowers Pay Sky-High Rates, Dealbook

8---GM unit gets subpoena over subprime auto loans, reuters

9---Focusing on G.M. Unit, U.S. Starts Civil Inquiry of Subprime Car Lending, Dealbook

10--Subprime Lending Drives Spending, House of Debt

A concern that we highlighted in yesterday’s post is that the only way the U.S. economy can generate significant consumer spending is through aggressive lending to borrowers with low credit scores. Here is more evidence supporting that view.

In the chart below, we plot retail spending on appliances, furniture, and home improvement, or “home-related spending” (blue line) and spending on new autos (red line) from 1998 through 2014. We have highlighted the two major subprime lending booms we’ve seen in that period — the subprime mortgage lending boom from 2003 to 2006, and the subprime auto loan boom from 2010 to 2014. In order to be able to include 2014, we focus only on the first four months of each year.


When subprime mortgage lending was booming from 2003 to 2006, so were purchases of home-related goods. As soon as the subprime mortgage lending market crashed, so did home-related spending. In fact, in 2014, home-related spending is still below its 2006 level in nominal terms. It’s a pretty incredible boom and bust.

For auto spending, growth was positive prior to the Great Recession, but unspectacular. But as soon as subprime auto lending heated up in 2011 and afterward, so did purchases of new auto vehicles. The growth in new auto sales from 2011 to 2014 has been really impressive. So once again, spending in a particular market is strongest when subprime lending in that market is strongest.

It appears that the key to boosting spending in the U.S. economy is subprime lending. The financial system was lending against homes before the Great Recession, and now it has moved to lending against cars. But the basic message is the same.

10---Europe Is Highly Dependent On Russian Gas, big picture

11--Flight MH17 - What You're Not Being Told, video

12--Abenomics Charm Fades as Yields Signal Headwinds, Bloomberg

13--Half-Trillion-Dollar Exodus Magnifies Treasury Bill Shortage, Bloomberg

14--A socialist in Canada, Roger Annis
15--EU, US intensify confrontation with Russia, wsws

16--Russia Presents Its Account of Malaysia Airlines Flight 17 Crash, wsj

17--Moscow blasts Kiev’s false accusations and lack of cooperation with air crash investigators, RT

18--Claims about MH17 that MSM fails to question, RT

19--California and Ukraine National Guard gear up for military collaboration in 2015, RT

20--Exposed: The REAL Reason MH17 Was Shot Down, video

21---Eastern Ukraine faces humanitarian crisis as Kiev steps up attack, wsws

22---Will the Pacific Northwest be a Climate Refuge Under Global Warming? , cliff mass

23---NATO exerting pressure, not interested in MH17 investigation – Russia’s mission, RT

24---Senate Bill Preps for War with Russia, Renee Parsons, cp

25---Goldman Warns Of 6.5% Japanese GDP Collapse, Worst Since Lehman, zero hedge

26---Inequality in the U.S. today is near its historical highs, largely because the Federal Reserve’s policies have succeeded in achieving their aim, zero hedge

Irony aside, the growth of income (trough to peak) during so-called 'economic expansions' has changed... and President Obama's "recovery" is the worst of the lot...

Chart: @ptcherneva
Inequality in the U.S. today is near its historical highs, largely because the Federal Reserve’s policies have succeeded in achieving their aim: namely, higher asset prices (especially the prices of stocks, bonds and high-end real estate), which are generally owned by taxpayers in the upper-income brackets. The Fed is doing all the work, because the President’s policies are growth-suppressive. In the absence of the Fed’s moneyprinting and ZIRP, the economy would either be softer or actually in a new recession. 

The greatest irony is that the President is railing against inequality as one of the most important problems of the day, despite the fact that his policies are squeezing the middle class and causing the Fed – with the President’s encouragement – to engage in the radical monetary policy, which is exacerbating inequality. This simple truth cannot be repeated often enough.

The three main sources in english are:

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