http://www.zerohedge.com/news/2016-02-2 ... leveraging" onclick="window.open(this.href);return false;We suggest that, precisely because of the high level of debt and the need to deleverage, nominal yields in those countries have become more and more negative to encourage the issuance of more debt and slowly roll down the existing debt stock.
This suggests the market may be indicating there is too much debt. But this has an implication for the creation of new money, which is essential for the normal functioning of the economy. Most of the money creation in the developed world is done by the private banking system through issuing loans. If there is no demand for new debt, the money creation process stalls. In other words, while under the gold standard our money creation was constrained by the availability of gold, in the current “fiat” monetary system, we cannot issue new money without the issuance of new debt.
It is this economic necessity and the mathematical impossibility of paying interest continuously which has created the present situation of negative interest rates: in our view the market has found a way to keep the monetary system going but this time without the risk of ever increasing debt.
In the past, we used to deal with too much debt either using market forces, like growth and inflation, or non-market forces, like debt jubilees, debt restructurings or excessive seigniorage. History is full of examples which reinforce the notion that putting an unbearable burden on debtors would ultimately send the whole economy into a depression. Debt jubilees were very common in Mesopotamia, for example, where, by some accounts there were around thirty episodes of general debt cancellations from 2400 to 1400 BC.
In 1819, as agriculture prices dropped, US state governments imposed moratoria on farmers’ debt payments and some debt was even completely forgiven. During the Great Depression, the US government, through the Home Ownership Loan Corporation, helped struggling homeowners by sometimes substantially lowering their mortgage payments. “One of the largest transfers of wealth (from creditors to debtors) in the history of the world”, however, happened when the US government broke off the gold standard in 1933. This was equivalent to restructuring its debt as, by removing the gold clause in US Treasury securities and devaluing the dollar, creditors’ claims were cut by more than 40%.
None of these options was used after the Great Recession of 2008. In addition, the developed world economies seem unable to generate growth and inflation sufficient to offset the rise in debt. Without a policy response, the market is taking the matter in “its own hands” by starting to reduce the level of debt (in present value terms) via negative yields on sovereign bonds.
...makes cash the enemy though...or in other words cash hinders the possibility of pulling it off...
Global shares retreated on Monday after a weekend meeting of G20 finance chiefs ended with no new plan to spur global growth and as investors fretted the U.S. Federal Reserve could raise interest rates before year-end. G20 finance ministers and central bankers, meeting in Shanghai on Friday and Saturday, agreed to use "all policy tools – monetary, fiscal and structural – individually and collectively" to reach the group's economic goals. But there was no plan for coordinated stimulus
http://www.reuters.com/article/us-globa ... SKCN0W201I" onclick="window.open(this.href);return false;
Chinese stocks sank, with the benchmark index approaching the lowest level since November 2014, as some investors were disappointed by a lack of specific measures to boost growth during the Group of 20 meeting in Shanghai.
https://finance.yahoo.com/news/chinas-s ... 54378.html" onclick="window.open(this.href);return false;
China said on Monday it expects to lay off 1.8 million workers in the coal and steel sectors as part of efforts to reduce industrial overcapacity, but no timeframe was given. China has vowed to deal with excess capacity and eliminate hundreds of so-called “zombie enterprises” – loss-making firms in struggling sectors that are being kept alive by local governments trying to avoid job losses.
http://www.reuters.com/article/us-china ... SKCN0W205X" onclick="window.open(this.href);return false;
http://www.theautomaticearth.com/2016/0 ... -standoff/" onclick="window.open(this.href);return false;like it or not, the yuan is overvalued, China’s fabricated trade numbers are increasingly under scrutiny, and a large devaluation could settle things at least for a while.
However, Beijing looks too full of hubris and pride -and inclusion in the IMF basket of currencies is an issue too- to do what seems natural. Lest we forget, no matter how much China seeks to obfuscate the numbers, everybody already knows that numbers like producer prices and exports, and most importantly imports, have seen steep falls, and for a long time too.
China’s oil tanks look as close to overflowing as the American ones, and without those oil imports, who knows who bad import numbers would have looked? So from a Chinese point of view, a cheaper yuan would mean much cheaper Chinese exports for global buyers, whereas the negative effect of more expensive imports would be relatively small.
But there’s the other side of the equation as well: other nations’ exports would see a potentially enormous effect of cheaper Chinese imports on their domestic manufacturing base. For countries like Germany, the US and Japan, any such devaluation may therefore be an absolute non-starter at this point.
The value of goods that crossed international borders last year fell 13.8% in dollar terms — the first contraction since 2009 — according to the Netherlands Bureau of Economic Policy Analysis’s World Trade Monitor.
Barclays says a devaluation “would need to be in the region of 25% to alter perceptions”, while Kyle Bass earlier mentioned a 30% to 50% move. Central bankers and politicians can try and stand still in the Mexican standoff until they’re blue in the face, but the markets will not stand still, and only get more nervous as time passes.
It doesn’t need to be done in Shanghai over the weekend, though one may wonder what will happen in the Chinese equity markets next week if nothing is done while there are great expectations now. From whatever angle we look at the issue, the outcome seems crystal clear: better get it done soon.
The US and Germany may not like it initially, but the uncertainty will hit them too, because the anticipation of a -strong- yuan devaluation affects their export markets, bonds, equities and currencies as well.
One problem we should not overlook may be that in the 1985 Plaza Accord, the strongest party -the US- wanted to get something done and got their devaluation wish. This time around, it’s not the strongest party that needs a devaluation, and the party that does need it doesn’t want it.
It is a very different set-up.
China central bank resumes easing cycle to cushion reform pain
http://www.reuters.com/article/us-china ... SKCN0W214P" onclick="window.open(this.href);return false;
Japan’s banks have almost stopped lending to one another in the overnight market, threatening to undermine the impact of the central bank’s negative-rates stimulus. The outstanding balance of the interbank activity plunged 79% to a record low of 4.51 trillion yen ($40 billion) on Feb. 25 since Bank of Japan Governor Haruhiko Kuroda on Jan. 29 announced plans to charge interest on some lenders’ reserves at the monetary authority.
http://www.bloomberg.com/news/articles/ ... ing-freeze" onclick="window.open(this.href);return false;
Between the mid-1990s and 2013, the number of vacant or abandoned properties in Japan doubled. These neglected structures now make up an estimated 13.5 percent of the country’s housing stock. The phenomenon of abandoned Japanese homes is so widespread that people have begun writing poetry about it.
http://www.citylab.com/housing/2015/12/ ... is/422349/" onclick="window.open(this.href);return false;
Gulf Cooperation Council countries may struggle to refinance $94 billion of debt in the next two years as the region faces slowing growth, rising rates and rating downgrades, according to HSBC. Oil-rich GCC states have to refinance $52 billion of bonds and $42 billion of syndicated loans, mostly in the United Arab Emirates and Qatar, HSBC said in an e-mailed report. The countries also face a fiscal and current account deficit of $395 billion over the period, it said. Gulf countries have about $610 billion outstanding in FX-denominated bonds and syndicated loans, HSBC said. This includes financial and corporate debt, as well as sovereign debt, mainly in the U.A.E., Bahrain and Qatar, it said.
http://www.bloomberg.com/news/articles/ ... -oil-slump" onclick="window.open(this.href);return false;
Mexico's Oil Giant Posts Record $32 Billion Loss, Cuts Crude Price Forecast To $25
http://www.zerohedge.com/news/2016-02-2 ... orecast-25" onclick="window.open(this.href);return false;
"The Liquidity Just Dries Up In A Stressed Market"
http://www.zerohedge.com/news/2016-02-2 ... fx-trading" onclick="window.open(this.href);return false;
Dozens of indebted US shale companies face annihilation over coming months as their hedge protection runs out and creditors pull the plug, but veteran frackers insist defiantly that the slump will not stop the industry’s march to world conquest. "You run for cash. You ride out the storm,” said John Hess, founder of the Hess Corporation. Oil giants with deep pockets are waiting in the wings to “gobble up” distressed assets, and America’s nimble mid-cost frackers will have an edge when the cycle turns.
http://www.telegraph.co.uk/business/201 ... bloodbath/" onclick="window.open(this.href);return false;
Chicago PMI Collapses From 'Mysterious' January Bounce As Employment Crashes To 7 Year Lows
http://www.zerohedge.com/news/2016-02-2 ... -year-lows" onclick="window.open(this.href);return false;
Buffett: Auto insurance rates are going up, distracted drivers a problem
http://www.usatoday.com/story/money/bus ... /81100540/" onclick="window.open(this.href);return false;
U.S. companies went on a borrowing binge in recent years. Nonfinancial corporations owed $8 trillion in debt in last year’s third quarter, according to the Federal Reserve, up from $6.6 trillion three years earlier. Over the same period, the companies repurchased $1.3 trillion in shares. Because those stock buybacks helped reduce companies’ total shares outstanding, earnings per share got a boost. The Bill Is Coming Due
http://www.wsj.com/articles/share-buyba ... 1456685173" onclick="window.open(this.href);return false;
Still, what the chart above [see link below - chart too big to post] shows is that if, and when, a run on physical cash begins, there will be roughly $1 dollar in physical to satisfy $10 dollars in savers' claims, a ratio which drops to 20 cents of "deliverable" cash if the $100 bill is taken out of circulation.
http://www.zerohedge.com/news/2016-02-2 ... anic-first" onclick="window.open(this.href);return false;
EU's Evil Plan B: Cutting The Balkan Route Has Stranded 1000s Of Migrants In Greece
http://www.zerohedge.com/news/2016-02-2 ... nts-greece" onclick="window.open(this.href);return false;
As Europe bickers, police fire tear gas on migrants storming border
http://www.reuters.com/article/us-europ ... SKCN0W2188" onclick="window.open(this.href);return false;
By Sunday 22,000 people were trapped in Greece with an estimated 6,000 stuck at the Macedonian border after restrictions were tightened – and frontiers effectively sealed to all but Syrians – by Balkan nations along the migrant route.
http://www.theguardian.com/world/2016/f ... -in-greece" onclick="window.open(this.href);return false;
A crowd of migrants has broken down a barbed-wire fence on the Macedonia-Greece border using a steel pole as a battering ram.
http://www.bbc.com/news/world-europe-35687257" onclick="window.open(this.href);return false;
Caught On Tape: 500 Syrians Storm Greek Border Fence With Homemade Battering Ram
http://www.zerohedge.com/news/2016-02-2 ... tering-ram" onclick="window.open(this.href);return false;
More than 25,000 migrants and refugees were stranded in Greece over the weekend as neighboring states shut down their borders. An estimated 2,000-3,000 reach the country’s islands every day. Speaking to Kathimerini on condition of anonymity, a senior European official said that the Commission is preparing a package of measures to be activated in the event of a humanitarian crisis in Greece or other nations along the Balkan migrant route. These, the official said, include providing funding to an international organization to set up a refugee camp as well as vouchers for refugees to acquire food and accommodation. Similar aid has been provided to African countries, as well as Lebanon and Jordan.
http://www.ekathimerini.com/206422/arti ... s-prepared" onclick="window.open(this.href);return false;
A Southern California mayor said that a man and a woman killed in an officer-involved shooting last weekend were unconscious when police first encountered them.
http://www.cbsnews.com/news/california- ... conscious/" onclick="window.open(this.href);return false;
Five Mexican states have been put on alert after a truck carrying a container of potentially dangerous radioactive material was stolen, the interior ministry said.
http://www.dailymail.co.uk/news/article ... rials.html" onclick="window.open(this.href);return false;
Gang 'smuggled 31 guns into UK on boat' - The court heard each of the 22 Czech-manufactured assault riles would have fetched up to £4,000 even though they were sold at "shockingly low" prices in Eastern Europe.
http://www.bbc.com/news/uk-35690189" onclick="window.open(this.href);return false;
BEIRUT -- Warplanes carried out air raids Sunday on several parts of northern Syria as a top opposition official warned that continued violations of a fragile cease-fire could jeopardize a planned resumption of U.N.-brokered peace talks.
http://www.military.com/daily-news/2016 ... syria.html" onclick="window.open(this.href);return false;
Syria Says Capital Shelled in Cease-Fire Breach
http://www.military.com/daily-news/2016 ... reach.html" onclick="window.open(this.href);return false;
https://www.dailystar.com.lb/News/Middl ... tions.ashx" onclick="window.open(this.href);return false;KUWAIT CITY: NATO Secretary General Jens Stoltenberg expressed concern over reports of violations of a three-day-old ceasefire in Syria Monday and urged all parties to respect the truce. Stoltenberg said NATO was also concerned about Russia's military buildup in Syria, where it has carried out a five-month bombing campaign in support of President Bashar Assad.
"We are concerned about the Russian military buildup we have seen in Syria," whether it is military or air force, he said.
The NATO chief said Russian airstrikes had "mainly targeted" rebels rather than the ISIS group, which has been targeted by a U.S.-led coalition.
Twin suicide bombing kills 70 in Baghdad's deadliest attack this year
http://www.reuters.com/article/us-midea ... SKCN0W10EL" onclick="window.open(this.href);return false;
Ukraine Collapse Is Now Imminent
http://gefira.org/en/2016/02/27/ukraine ... -immanent/" onclick="window.open(this.href);return false;
http://www.reuters.com/article/us-oil-p ... SKCN0W00DA" onclick="window.open(this.href);return false;As Venezuela grows closer to exhausting nearly every means of paying its debt, some oil market participants are seriously pondering the possible implications of an unprecedented event: the default of a major crude producing company. State-run firm PDVSA faces around $5.2 billion in payments to bondholders in 2016, much of it in October and November, a sum that some experts say it will be hard-pressed to meet after the government used nearly all of its available cash reserves to pay $1.5 billion in maturities last week. Venezuela was the United States' third crude supplier last year and Latin America's sixth-largest buyer of U.S. fuels.
Amid ongoing arbitration cases, oil giant ExxonMobil (XOM.N) was granted court orders in 2008 that temporarily froze up to $12 billion in PDVSA's overseas assets and $315 million in a joint bank account in New York. It was done through an extraordinary legal resource called 'Mareva injunction' that surprised Venezuela. Even though the injunction was later overturned, that case and others that followed have exposed PDVSA's bank accounts, tankers, cargoes and external terminals and refineries to the legal power of creditors.
PDVSA has taken steps recently to protect itself, including moving the accounts that collect money from its exports to China's CITIC Bank (601998.SS) from Banco Espirito Santo (BESN.D).
Getting a court order to freeze an account in China would be more difficult than acquiring access to those in the United States.
“Will Venezuela Default?” Watch the Full AS/COA Debate
http://caracaschronicles.com/2016/02/27 ... -at-ascoa/" onclick="window.open(this.href);return false;
The Navy and Marine Corps will operate new platforms at the Freedom Banner and Ssang Yong exercises that start in South Korea this week and experiment with new concepts they hope will streamline and improve future amphibious landing capabilities in the Pacific.
http://www.military.com/daily-news/2016 ... rcise.html" onclick="window.open(this.href);return false;
China's Military Buildup in Pacific Could Require US Response - WASHINGTON -- Navy and Marine Corps leaders warned Friday that China's rapid military buildup in the Pacific Ocean could force the United States to move ships and forces in response. Friday's comments from Chief of Naval Operations Adm. John Richardson, Navy Secretary Ray Mabus and Marine Corps Commandant Gen. Robert Neller followed a week of warnings by Adm. Harry Harris to Congress that the pace of China's militarization on a string of man-made islands in the South China Sea is changing operations in the Pacific.
http://www.military.com/daily-news/2016 ... ponse.html" onclick="window.open(this.href);return false;
US Considers Advisory Assistance in Fight Against Boko Haram
http://www.military.com/daily-news/2016 ... haram.html" onclick="window.open(this.href);return false;
Solar activity is very low. However, sunspot AR2506 could break the quiet. AR2506 has developed 'beta-gamma' magnetic field that harbors energy for strong M-class solar flares. If such an explosion occurs today it would be geoeffective because the sunspot is almost directly facing Earth.
http://www.spaceweather.com/" onclick="window.open(this.href);return false;
http://www.wunderground.com/blog/JeffMa ... ebruary-wa" onclick="window.open(this.href);return false;Winston the most destructive cyclone in South Pacific history
While many cyclones in the South Pacific have caused severe devastation, the roughly half-billion-dollar cost of Winston appears to be a record-setter for this region. Thousands of homes and businesses were destroyed by Winston, with northern and western regions of Fiji receiving catastrophic damage. The government of Fiji estimated on Thursday that the cost of the disaster would be at least $468 million, making it the costliest tropical cyclone in South Pacific history.
Winston's damage is roughly 10% of Fiji's GDP--the type of economic blow that will take many years to recover from. To put this into a U.S. perspective, if the U.S. had a 10% hit to its GDP, that would be a roughly $1.7 trillion disaster, on par with 15 simultaneous Hurricane Katrinas. Unfortunately, insurance penetration in Fiji is only about 2%, making it difficult for people who lost everything to get back on their feet. At least 55,000 people--about 6% of Fiji's population--are in evacuation shelters. Most of the nation's resorts and tourist facilities have reopened, though, and tourism represents about 17% of Fiji's GDP. Another good sign of normalcy returning: schools opened today for the first time since the disaster.
At least a dozen countries set or tied their all-time records for February during the latter half of the month, according to international weather records researcher Maximiliano Herrera
Top pick among the U.S. records: Bismarck, ND, where the 73°F high notched on Saturday was the state’s warmest for the entire month of February in 126 years of record-keeping, a full 41°F above Bismarck’s average high for the date of 32°F.
...was nice while it lasted...