Financial topics

[aedens]

We already speculated since Cyprus they started the process RC a few pages back.
We have noted why the Euro was brokered into existance also.

Checking on the port side on terra firma tonight: http://www.wsws.org/en/articles/2014/03 ... u-m14.html

This Russ action is the speeding ticket sent to the swamp called the referendum vote today.
Also look at South America over the last few decades on what is fomented.
I have friend who came here to raise his family. His job for the federals cost 150k
for the job. Some months into it every day a list was given to what not to check.
He is a good man and my new brother in peace locally.
Lets get some things clear. No government wears white clothing.

[Higgenbotham]

Based on valuation metrics that have demonstrated a near-90% correlation with subsequent 10-year S&P 500 total returns, not only historically but also in recent decades, we estimate that U.S. equities are more than 100% above the level that would be associated with historically normal future returns. We presently estimate 10-year nominal total returns for the S&P 500 averaging just 2.2% annually over the coming decade, with zero or negative nominal total returns on every horizon of less than 7 years. Regardless of very short-term market direction, it is urgent for investors to understand where the equity markets are positioned in the context of the full cycle.

Importantly, this expectation fully embeds projected nominal GDP growth averaging over 6% annually over the coming decade. To the extent that nominal economic growth persistently falls short of that level, we would expect U.S. stock market returns to fall short of 2.2% nominal total returns (including dividends) over this period.

http://www.hussmanfunds.com/wmc/wmc140310.htm

Labor utilization has been declining very slowly for decades and is unlikely to change in the foreseeable future; in the U.S., it declined about 0.1% annually on average for the past three decades. This factor is so small that its effect on the long-term growth rate of GDP will be minor.

In the U.S., the working-age population (ages 15-64) has grown approximately 1.2% per year on average for the past three decades, while real GDP has grown 2.8%. Looking forward over the next two decades, the working-age population is expected to grow at approximately 0.3% annually, almost one percentage point lower. If the other factors remain constant, real GDP would slow down to around 2%.

http://noesis-capital.com/research/1st-quarter-2013/

In other words, Projected Future real GDP growth = Productivity Growth + 0.3%
Annual productivity growth per BLS was 1.5% in 2012 and 0.6% in 2013.

Putting these 2 independent analyses side by side, things don't look too good. Hussman is saying that without dividends being taken into account the S&P 500 will return zero over the next 10 years assuming 6% nominal growth in GDP. Yet, the other analysis shows that based on demographics GDP can't really grow that fast, unless inflation is more than about 4% at the same time the working age population is employed to the same extent it was during the past 3 decades.

[gerald]

I guess the Chinese learned well ----

The Second Chinese Corporate Default: Real Estate Developer With CNY3.5 Billion In Debt Collapses

http://www.zerohedge.com/news/2014-03-1 ... -collapses

"Bloomberg adds that the failure of the company was reported earlier today by the Chinese-language National Business Daily, which cited an unidentified government official for the news. The report blamed the failure on mismanagement and high costs of private lending, according to the newspaper."


"CITIC Trust tried to auction the collateral but failed to do so because the developer has sold the collateral and also mortgaged it to a few other lenders."

jolly good

[gerald]

An interesting read -- if true the future looks "very interesting" as in a curse
Sol Sanders: The [Chinese] emperor has no clothes
http://www.zerohedge.com/contributed/20 ... no-clothes

Chinese razor thin margins have been jeopardized by rising costs, including growing fuel imports and a flattening out of the labor supply due to the regime’s attempts to stem population growth. For these reasons China already has lost many of the lowest end manufactures to other low-wage competitors; infants garments, for example, to Bangla Desh. There is even some movement because of technological improvements of off-shored manufacturing back to the industrial countries. For example, with America’s shale revolution reducing the price of domestic natural gas to a third of delivered prices of LNG in East Asia, petrochemicals and their plastic products are returning.

At the same time, local government’s expansion was based on sales of diminishing farmland for industrial and infrastructure development and credit from regional bankers.

While the system does have the support of the Party apparatchiks, a highly touted new urban middle class does not exist. Best estimates are an upper 1% of households -- 2.1 million out of about 530 million households -- owns 40-50% of the country’s $10.5 trillion worth of real estate and financial assets. That these ultra-rich – many at the Party’s highest echelons – are moving money into foreign real estate and other investments is widely reported. Should they consider moving 30% of their assets abroad, which is a figure rumored in Chinese circles, the much celebrated Chinese monetary reserves of $3 trillion in dollars would be inconsequential in stemming the tide.

This prelude to a cataclysmic readjustment of the Chinese economy is arriving at a time when Western economists and businessmen have had to abandon a long-cherished hope that continued rapid Chinese [and Indian] development would prop up the world economy. But their disillusionment on this aspect is likely to pale into insignificance as the effects of the Chinese slowdown impacts further on commodity producers in Africa, Latin America and Australia.

Beijing leadership’s quandary is that the struggle to refashion the Chinese economy with further liberal economics comes up against the determined effort of the CCP to maintain its power monopoly which forbids just that. For example, the effort to turn the yuan into an international currency requires it become convertible. That would not only jeopardize current export subsidies but would further encourage the flight of capital, largely a function of the corruption in the Party, often at its highest levels.

[aedens]

http://rkn.gov.ru/news/rsoc/news24447.htm

http://pando.com/2014/02/28/pierre-omid ... ents-show/

[John]

I've never really bought into Higgie's theory that we're entering a
new dark age, but here's an article on a Nasa study that says
that Higgie might be right:


http://www.theguardian.com/environment/ ... scientists


Nasa-funded study: industrial civilisation headed for 'irreversible
collapse'?

Natural and social scientists develop new model of how 'perfect storm'
of crises could unravel global system

This NASA Earth Observatory released on

This Nasa Earth Observatory image shows a storm system circling around
an area of extreme low pressure in 2010, which many scientists
attribute to climate change. Photograph: AFP/Getty Images

A new study sponsored by Nasa's Goddard Space Flight Center has
highlighted the prospect that global industrial civilisation could
collapse in coming decades due to unsustainable resource exploitation
and increasingly unequal wealth distribution.

Noting that warnings of 'collapse' are often seen to be fringe or
controversial, the study attempts to make sense of compelling
historical data showing that "the process of rise-and-collapse is
actually a recurrent cycle found throughout history." Cases of severe
civilisational disruption due to "precipitous collapse - often lasting
centuries - have been quite common."

The research project is based on a new cross-disciplinary 'Human And
Nature DYnamical' (HANDY) model, led by applied mathematician Safa
Motesharrei of the US National Science Foundation-supported National
Socio-Environmental Synthesis Center, in association with a team of
natural and social scientists. The study based on the HANDY model has
been accepted for publication in the peer-reviewed Elsevier journal,
Ecological Economics.

It finds that according to the historical record even advanced,
complex civilisations are susceptible to collapse, raising questions
about the sustainability of modern civilisation:

> "The fall of the Roman Empire, and the equally (if not more)
> advanced Han, Mauryan, and Gupta Empires, as well as so many
> advanced Mesopotamian Empires, are all testimony to the fact that
> advanced, sophisticated, complex, and creative civilizations can
> be both fragile and impermanent."

By investigating the human-nature dynamics of these past cases of
collapse, the project identifies the most salient interrelated factors
which explain civilisational decline, and which may help determine the
risk of collapse today: namely, Population, Climate, Water,
Agriculture, and Energy.

These factors can lead to collapse when they converge to generate two
crucial social features: "the stretching of resources due to the
strain placed on the ecological carrying capacity"; and "the economic
stratification of society into Elites [rich] and Masses (or
"Commoners") [poor]" These social phenomena have played "a central
role in the character or in the process of the collapse," in all such
cases over "the last five thousand years."

Currently, high levels of economic stratification are linked directly
to overconsumption of resources, with "Elites" based largely in
industrialised countries responsible for both:

> "... accumulated surplus is not evenly distributed throughout
> society, but rather has been controlled by an elite. The mass of
> the population, while producing the wealth, is only allocated a
> small portion of it by elites, usually at or just above
> subsistence levels."

The study challenges those who argue that technology will resolve
these challenges by increasing efficiency:

> "Technological change can raise the efficiency of resource use,
> but it also tends to raise both per capita resource consumption
> and the scale of resource extraction, so that, absent policy
> effects, the increases in consumption often compensate for the
> increased efficiency of resource use."

Productivity increases in agriculture and industry over the last two
centuries has come from "increased (rather than decreased) resource
throughput," despite dramatic efficiency gains over the same period.

Modelling a range of different scenarios, Motesharri and his
colleagues conclude that under conditions "closely reflecting the
reality of the world today... we find that collapse is difficult to
avoid." In the first of these scenarios, civilisation:

> ".... appears to be on a sustainable path for quite a long time,
> but even using an optimal depletion rate and starting with a very
> small number of Elites, the Elites eventually consume too much,
> resulting in a famine among Commoners that eventually causes the
> collapse of society. It is important to note that this Type-L
> collapse is due to an inequality-induced famine that causes a loss
> of workers, rather than a collapse of Nature."

Another scenario focuses on the role of continued resource
exploitation, finding that "with a larger depletion rate, the decline
of the Commoners occurs faster, while the Elites are still thriving,
but eventually the Commoners collapse completely, followed by the
Elites."

In both scenarios, Elite wealth monopolies mean that they are buffered
from the most "detrimental effects of the environmental collapse until
much later than the Commoners", allowing them to "continue 'business
as usual' despite the impending catastrophe." The same mechanism, they
argue, could explain how "historical collapses were allowed to occur
by elites who appear to be oblivious to the catastrophic trajectory
(most clearly apparent in the Roman and Mayan cases)."

Applying this lesson to our contemporary predicament, the study warns
that:

> "While some members of society might raise the alarm that the
> system is moving towards an impending collapse and therefore
> advocate structural changes to society in order to avoid it,
> Elites and their supporters, who opposed making these changes,
> could point to the long sustainable trajectory 'so far' in support
> of doing nothing."

However, the scientists point out that the worst-case scenarios are by
no means inevitable, and suggest that appropriate policy and
structural changes could avoid collapse, if not pave the way toward a
more stable civilisation.

The two key solutions are to reduce economic inequality so as to
ensure fairer distribution of resources, and to dramatically reduce
resource consumption by relying on less intensive renewable resources
and reducing population growth:

> "Collapse can be avoided and population can reach equilibrium if
> the per capita rate of depletion of nature is reduced to a
> sustainable level, and if resources are distributed in a
> reasonably equitable fashion."

The NASA-funded HANDY model offers a highly credible wake-up call to
governments, corporations and business - and consumers - to recognise
that 'business as usual' cannot be sustained, and that policy and
structural changes are required immediately.

Although the study is largely theoretical, a number of other more
empirically-focused studies - by KPMG and the UK Government Office of
Science for instance - have warned that the convergence of food, water
and energy crises could create a 'perfect storm' within about fifteen
years. But these 'business as usual' forecasts could be very
conservative.

Dr Nafeez Ahmed is executive director of the Institute for Policy
Research & Development and author of A User's Guide to the Crisis of
Civilisation: And How to Save It among other books. Follow him on
Twitter @nafeezahmed

[aedens]

Conceptual framework for calculating the “financial repression tax,” or more specifically, the annual “liquidation rate”

http://www.imf.org/external/np/seminars ... f/crbs.pdf

[Higgenbotham]

I've never really bought into Higgie's theory that we're entering a
new dark age, but here's an article on a Nasa study that says
that Higgie might be right:

I've been aware of dark age theory for a long time but never bought into the idea that a new dark age is imminent until the second half of 2011. Some of the reasons I've bought into it are covered in the article you posted. It's been interesting to be able to look in the archives here and read my postings before I became convinced that we're entering a new dark age.

These factors can lead to collapse when they converge to generate two crucial social features: ..."the economic stratification of society into Elites [rich] and Masses (or "Commoners") [poor]" These social phenomena have played "a central role in the character or in the process of the collapse," in all such cases over "the last five thousand years."

I've talked about the role of QE in this; specifically where I think Bernanke went over the line in 2011 to make this factor irreversible.

The two key solutions are to reduce economic inequality so as to ensure fairer distribution of resources, and to dramatically reduce resource consumption by relying on less intensive renewable resources and reducing population growth...

I don't think reducing population growth can cure the problem in the current industrial configuration because the multinational corporations have become dependent on increasing levels of consumption.

[gerald]

by John » Mon Mar 17, 2014 4:16 pm

I've never really bought into Higgie's theory that we're entering a
new dark age, but here's an article on a Nasa study that says
that Higgie might be right:


http://www.theguardian.com/environment/ ... scientists

-------------------------------------------------
John -- lets go off the deep end.

Lets suppose the "elites" breed a new race of humans, as indicated in my "Gilgamesh" post of March 13, ( the one regarding babies with three genetic parents and the now missing photos of babies and diagram showing how it was done, missing as of March 15 ). And they make the babies immune to a genetically created disease that will kill all other humans. Create enough of these babies, the off spring of the elite, eliminate the rest of humanity, use robots for labor and the resource problem is solved. --- yea twisted, think they would't do it?

[Higgenbotham]

John -- lets go off the deep end.

Lets suppose the "elites" breed a new race of humans, as indicated in my "Gilgamesh" post of March 13, ( the one regarding babies with three genetic parents and the now missing photos of babies and diagram showing how it was done, missing as of March 15 ). And they make the babies immune to a genetically created disease that will kill all other humans. Create enough of these babies, the off spring of the elite, eliminate the rest of humanity, use robots for labor and the resource problem is solved. --- yea twisted, think they would't do it?

It would be really tough in my opinion to create and supply the energy to an army of robots that could do all required human jobs. On the other hand, are they dumb enough to try, and really screw things up irreversibly in the process? You betcha.