The Great Financial Write-Off: Part ll

[biglentil]

The System is Broken and the World has Gone Mad . . . Ray Dalio published today.

http://www.linkedin.com/pulse/world-has-gone-mad-system-broken-ray-dalio/[/URL]

Dont turn gold bug on us too Errol like Ray!

[errolanderson]

Interesting week straight ahead. Trump speech must indicate the phase 1 deal is progressing and not turning into phase 0 deal. This is critical for markets, especially the grossly overvalued stock market . Gold in tough . . . Largest weekly price drop in three (3) years.

It political rhetoric doesn’t pan out, big spike in market volatility appears possible.

[macdon02]

https://twitter.com/papapellet/status/1194058308384149504?s=20 https://twitter.com/papapellet/status/1194058308384149504?s=20

China rapidly losing control in Hong Kong, the police killed a child this morning. Rapidly degrading as the communists cling to control the people. Huge pressure on XI.

[iceman]

Dont turn gold bug on us too Errol like Ray!

I’m not 100% sure about that Ray guy. Grants had an article 2 years back about how he really doesn’t have any primary dealers. It basically got scrubbed from the internet but zero hedge did a piece on it.

Iceman

[errolanderson]

Interesting comments from Michael Burry (Movie: The Big Short based off) . . . the next big short in his view may be passive investments used by Main Street investors . . . index funds and ETFs.

The bigger the bubble, the greater the fall . . . .

Trump speaking today at the New York Economic Club . . . Phase one deal . . . should be interesting as China deal now appears fleeting.

[macdon02]

Comments on Burry are interesting, look at the core cause of the repo crisis, why is it happening? Because the banks look at each other and think the risk is too great to lend to each other, so they deposit it at the fed instead. Thank you Bernanke for paying them .25%(sarc). The system is broken. Liquidity is disappearing, foreign govts are having issues securing credit to purchase grain due to perceived risk. The coils are getting compressed tighter. The trigger resides in Europe and its banking system, they are still loaded with pre '08 debt that the ECB didn't take off their hands.

Edit, European banks are using their subsidiaries to collect the .25% through fed deposits.

If the bond market implodes the real estate market collapses to cash value similar to the 30s. There's no savings left in European banks due to the negative rates, if rates increase it blows up the budget of most European countries and at the same time govt debt is competing with private debt. So if you can picture a giant circle of cash flowing around the world stopping at the fed every night and slowly the circle gets smaller and smaller as perceived risk eliminates a set of hands. The fed has become the overnight holder by default, that isn't the issue. It's when someone crucial gets missed finally, that it all blows apart. It's not fed stimulus as we have known it previously as they are the receiver of all overnight deposits.

[macdon02]

Now, look at the timeframe that investors started creeping into Ag, the same time that rates dropped. They couldn't get a return from the bond market so they went elsewhere. My WAG is when the bond market lets go, it'll revert to 8% +/-. More then ample for investors to say "why am i in this high risk farmland that's commodity based" there's red ink everywhere and sooner or later im gonna get burnt. Time to go back to bonds. Ag will get its own liquidity crisis as the investors get out. What brought them in will pull them out. It's a simplistic view that doesn't account for various factors but the core reason outside investors showed up was lack of return. Dirt is gonna get cheap.

[AlbertaFarmer5]

But that all assumes that central banks or governments the world over are willing to let the house of cards collapse. They do have the tools to increase liquidity, and literally flood the market with it. Why would they purposefully allow armageddon, who benefits( OK, a few well positioned would, but the break down in law and order and civil society would make it highly uncomfortable if you were one of the few to escape unscathed)? They could literally make all debt disappear overnight( and one way or another, that is the only way we get out of this deflationary debt trap). The only questions are how much pain must we endure first to make sure we learn the lesson for a while? And how do they restore confidence in currency enough to allow a functioning debt market after blowing it up once.

[biglentil]

But that all assumes that central banks or governments the world over are willing to let the house of cards collapse. They do have the tools to increase liquidity, and literally flood the market with it. Why would they purposefully allow armageddon, who benefits( OK, a few well positioned would, but the break down in law and order and civil society would make it highly uncomfortable if you were one of the few to escape unscathed)? They could literally make all debt disappear overnight( and one way or another, that is the only way we get out of this deflationary debt trap). The only questions are how much pain must we endure first to make sure we learn the lesson for a while? And how do they restore confidence in currency enough to allow a functioning debt market after blowing it up once.

Banksters were withdrawing the maximum from ATM's before meetings held to address the 2008 financial crisis. They literally did not know if the bank machines would be working after the meeting. The system was that close to imploding. Everything the fed does is reactionary, too little too late could be a disaster. Is the current $120b a month of liquidity the fed is adding to its balance sheet enough? Years of artificially low interest rates and stimulus has fostered an economy built on speculation and the misallocation of resources. Quantitative tightening failed miserably only larger and larger doses of money printing can keep the 'economy' drunk. The 'I Can't Believe its Not QE' QE will keep flowing permanently according to Fed.

[errolanderson]

Banksters were withdrawing the maximum from ATM's before meetings held to address the 2008 financial crisis. They literally did not know if the bank machines would be working after the meeting. The system was that close to imploding. Everything the fed does is reactionary, too little too late could be a disaster. Is the current $120b a month of liquidity the fed is adding to its balance sheet enough? Years of artificially low interest rates and stimulus has fostered an economy built on speculation and the misallocation of resources. Quantitative tightening failed miserably only larger and larger doses of money printing can keep the 'economy' drunk. The 'I Can't Believe its Not QE' QE will keep flowing permanently according to Fed.

QE will go down in history as a colossal failure (IMO) . . . . But the market and investors will not understand and come to that reality until the washout occurs and the hardships and pain ensues. Then paying your debts will take on a whole new meaning. A new generation of minimalists will have an impact on consumerism. This global shift in economic power is now well under way . . . .

The U.S. Fed is a lost pup . . . . Harvard economics no longer work.

[errolanderson]

Fed in panic mode? . . . .

The Fed has now completed $3 trillion in bank loan repos (emergency liquidity) in less than two (2) months. This is now apparently a historic liquidity injection, even greater than during the 2008-09 financial crisis. And the Fed has cut rates 3X this year despite a rock-solid U.S. economy and record-breaking stock market.

As the saying goes; Something is rotten in the state of Denmark . . . .

[macdon02]

https://twitter.com/mnicoletos/status/1194933054286028800?s=20 https://twitter.com/mnicoletos/status/1194933054286028800?s=20



Interesting about the Fed, they seem to be more worried about ROW, then domestic policy. Yes they are in full panic mode. I think this comes back to currency and the rate cuts have been an attempt to keep the Dollar index from skyrocketing. There should of been a break of trendline on the higher timeframe by now if there was weakness in the USA. It just keeps pushing higher with higher lows, not bearish. Have a look at the thread on China, if they need that much debt to spur GDP, they are down to months before the house of cards collapses. I think we have built all our commodity markets around one of the weakest countries in the world. It brings into question the entire central bank rate cut theory from day 1 and whose benefit was it for to start with? More globalization? The central banks are a 1 trick pony, more rate cuts will fix it......Imo serious consideration needs to be made about which market are we as producers selling into for this and the following crop year. Tarrifs are going nowhere, they are here to stay and the game is changing.