Blog Archives

A Precarious State

That the global economy is in a precarious state seems self-evident. Take your pick of the systemic risks: debt bubble and slowdown in China, banking/political crisis in Europe, negative interest rates and stagnation in Japan, ongoing meltdown in emerging markets and currencies, oil prices that threaten mayhem if they go up and if they go down, and a downturn in global trade that is usually associated with recession.

Other than that, everything’s great. How about those summer Olympics? Seriously, what isn’t in a precarious state?

If the global financial sector isn’t precarious, then why is capital flooding into negative interest bonds? Why are money managers willing to accept a guaranteed loss of capital if things are going great and opportunities for low-risk profits are abundant?

The political realm is also in a precarious state. No matter how you interpret Brexit–as a Kabuki play by Deep State insiders, as a political ploy that went off the rails, as an ugly outburst of xenophobia, as a rebellion of the Forgotten Class that lost out in the Great Financialization boom, as a resurgence of nationalism–whatever interpretation or combination of factors you favor, the net result is the same: Brexit reflects a precarious state of shifting political tectonics that threatens the status quo.

It isn’t just political certainties that are giving way beneath our feet–the global “recovery” narrative is crumbling like weathered sandstone on the edge of a cliff. No wonder institutional money managers, hedge funds and punters are all either fleeing to safe havens or entering trades with their thumbs twitching nervously on the “sell” button.

If the global banking sector isn’t precarious, then why are bank stocks tanking? If these banks are minting profits and accumulating well-collateralized capital, why are investors selling them?

If everything’s so solid, why is hot money chasing the bubble du jour? From copper to rebar to bitcoin to iron ore to silver, hot money is sloshing from one casino-sector to another on a daily or weekly basis–what’s next? Bat guano? Disney collectibles? Is this a sign of a healthy, sustainable market?

If you think so, I have a containerload of hot bat guano to sell you–I guarantee it will be the next bubble du jour, you’ll get rich overnight…

If the U.S. economy isn’t precarious, why has the growth rate of new businesses collapsed to Depression-type lows? If everything is going great, why aren’t entrepreneurs jumping in to mint all those easy profits?

The global political/economic state feels precarious for a good reason: it is precarious. Being told everything’s rock-solid while the ground beneath us is rumbling isn’t terribly persuasive, and some talking head reassuring us that the economy is still “growing” won’t stop the tremors.

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Grexit?, BIS Warning, Chinese Market Crash & Systemic Risk Shake the Global Economy

Grexit?, BIS Warning, Chinese Market Crash & Systemic Risk Shake the Global Economy

– Persistent low rates leave central banks with no ammunition to fight next crisis
– BIS says short-sighted central banks and governments contributed to current weaknesses
– Lack of policy options have forced some central banks to stretch “boundaries of the unthinkable”
– Bust in developed economies the main risk facing global economy
– Greece prepares to default
– China markets routed overnight
– Gold will be last man standing when currencies collapse

Greeks line up to an ATM in a run on Greek banks

Greece embarked on capital controls as talks over the weekend between Tsipras’ leftist government and foreign lenders fell apart. (more…)

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Global Risks To Irish Economy Being Ignored Again

Global Risks To Irish Economy Being Ignored Again

– Leading think tank forecasts strong economic growth in Ireland, ignores global risks
– Impact of Euro zone debt crisis and global geopolitical risk underestimated  
– Global macro-economic, systemic, geo-political and monetary risks largely ignored  
– Risk that lulls politicians, investors and people into false sense of security … again

Ireland’s leading economic think tank, the Economic and Social Research Institute (ESRI) has issued its latest quarterly report in which it forecasts that the strong economic performance in Ireland is set to continue.

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It has forecast strong economic growth of 4.4% this year and a lower but still strong 3.7% next year. It says it expects unemployment in Ireland to drop below 10% this year for the first time since 2008 and as low as 8.4% next year.

The report said the economy is now growing so strongly that Ireland’s budget deficit could be virtually eliminated by next year – two years ahead of schedule.

The economy was supported by the first growth in consumer spending since the start of the recession. Consumer spending grew by 1.1 per cent last year, and the think tank forecasts this to rise to 2 per cent this year.

However, the think tank does acknowledge that it will be constrained by the still very high levels of household and mortgage debt, by people prioritising debt repayment over consumption, and by the still falling level of consumer credit from Irish banks. (more…)

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Nobody Wins Elections Promising to Trim Waste/Fraud and Simplify Regulations

The problem in representative democracy is that every instance of waste, graft, fraud and monopolistic racket is somebody’s fat paycheck or government contract.

Promising good governance guarantees a losing campaign for public office. The central irony of representative democracy is similar to the central irony of capitalism: the relentless pursuit of narrow self-interest ends up eroding the shared foundations every self-interested participant relies upon.

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