* Martin Armstrong, The Truth Behind the Repo Crisis, armstrongeconomics.com/blog, December 10, 2019:
The Repo Crisis is just part II in the lead-up to Big Bang that nobody seems to grasp is already unfolding. This is the Sovereign Debt Crisis on steroids. Whatever they could have done wrong, they have done with absolute precision. The projected losses for institutions I have laid out will range from 40% to 60% of assets. This time, whoever is caught holding will not be bailed out this time around. This is the combination of the 1998 Liquidity Crisis and the 2007-2009 Financial Crisis. So hang on to whatever you can grab a hold of. You will need it for this one.
* China Financial Warning Signs Are Flashing Almost Everywhere, bloomberg.com, November 29, 2019:
From rural bank runs to surging consumer indebtedness and an unprecedented bond restructuring, mounting signs of financial stress in China are putting the nation's policy makers to the test...
In its annual Financial Stability Report released this week, China's central bank described 586 of the country's almost 4,400 lenders as "high risk," slightly more than last year. It also highlighted the dangers associated with rising consumer leverage, saying household debt as a percentage of disposable income jumped to 99.9% in 2018 from 93.4% a year earlier.
The PBOC and other regulators have long warned about the risks of excessive corporate debt, which climbed to a record 165% of gross domestic product in 2018, according to Bloomberg Economics...
Authorities have been trying "to bring discipline into the market, but every time that happens, the consequences become frightening so they back away," said Michael Pettis, a finance professor at Peking University. "The longer you take to solve it, the more distorted the market becomes and the more painful the resolution becomes."
* Shane Wright, Record household debt as RBA knuckles down to further rate cuts, smh.com.au, November 19, 2019:
Household debt was 120 per cent of income at the turn of the century and reached 178 per cent in the wake of the global financial crisis when it stabilised as Australians sought to manage their finances. But since then it has started growing.
It has now reached 202 per cent with the most indebted households in Victoria, where the debt-to-income ratio has reached 212 per cent. It is followed by NSW households at 191 per cent while Queensland households are at 183 per cent.
NAB senior economist Kieran Davies said while total debt had only grown "modestly" to $2.5 trillion, wages were simply not keeping up with the extra imposts being carried by most households.
He said even though interest rates were at a record low, the debt servicing ratio of households was just short of the peak reached in 2008 when the official cash rate was 7.25 per cent. It is currently just 0.75 per cent.
The high debt left the country's households, particularly those in Victoria and NSW, at an increased risk in any downturn.
We have clearly reached debt saturation. Falling wages ... and housing inflation driven by a debt bubble ... have combined to render monetary controls totally ineffective
The ONLY effect is to drive property higher, exacerbating the outcome.
Next comes the collapse ... we ARE at the top of the debt driven boom ... a catastrophic ponzi driven by cheap, effortless debt - now, they can't GIVE the stuff away, we are drowning in it.
Not just an Australian crash - it will be global ... Every OECD country has experienced runaway asset inflation ... and all economies were synchronised by the GFC ... we are all grinding slowly into deflation - the worst possible outcome.
There will be a turning point ... when debt-laden investors realise ... that there will be no further capital gains across the asset classes. At that point ... they will all madly rush to the exit in the hope they can cash out.
Not a chance ... there will be a stampede as the indebted panic and try to liquidate ... the stampede will dive prices to 30% as the market overshoots. There will be mass bankruptcies as lenders either force closure or lenders resume the assets and sell for tuppence.
There is some $280 TRILLION of global debt ... experts put the "toxic debt" at around $20-30 TRILLION - debt that will evaporate as business fail and assets disappear.
There will be a massive reset - vast wealth will be destroyed, particularly of the rich, but superannuation, bond, investment funds and housing will be hammered.
Basically ... we will return to "fundamentals" - a housing price of 5-6 times annual wage, a share P/E of 15:1.
That puts us at the values BEFORE QE - around 2011 - meaning a housing collapse of 50%.
The people who are buying "today" ... are setting themselves up for bankruptcy.
* Martin Armstrong, Is the Fed Monetizing Debt with the Repo Market? Or is this the Mother of All Financial Crises? armstrongeconomics.com, November 19, 2019:
Foreign buying of US debt is intensifying as European banks ship cash to their US branches who are buying the debt and posting cash at the Fed in the excess reserve facility because of the fear of a banking crisis in Europe...
This is a very MAJOR CRISIS, and it will get far worse... this can be the mother of all financial crises...
* Martin Armstrong, North Korea - Famine & Civil Unrest, armstrongeconomics.com, November 19, 2019:
There is nothing like famine to force political change.
* Stephen Johnson, Australia's debt crisis: Why 260,000 borrowers will see their mortgage repayments surge by thousands of dollars in 2020 - with many stuck paying off worthless homes, dailymail.co.uk, November 18, 2019:
Australia's household-debt-to-income ratio already stands at a record 190 per cent, which is second only to Switzerland.
* Total Household Debt Marks 21st Consecutive Quarterly Increase, newyorkfed.org, November 13, 2019:
The Federal Reserve Bank of New York's Center for Microeconomic Data today issued its Quarterly Report on Household Debt and Credit, which shows that total household debt increased by $92 billion (0.7%) to $13.95 trillion in the third quarter of 2019. This marks the 21st consecutive quarter with an increase, and the total is now $1.3 trillion higher, in nominal terms, than the previous peak of $12.68 trillion in the third quarter of 2008.
* Shane Wright, Frydenberg signals reforms amid 'mega-trends' of rising debt, ageing population, smh.com.au, November 11, 2019:
Australian households are among the most indebted in the world while despite the government bringing the budget into surplus this year, federal debt is at an all-time high of $550 billion.
"With interest rates low, global debt levels are being managed. However, with global debt levels up fifteen per cent in the last three years, to now be at a record high of US$188 trillion, or 230 per cent of global output, concerns are rising," he will argue.
"At these levels, the ability to respond to future shocks is more constrained; the impact of any future shock is more amplified and future generations will be left to deal with the consequences."
* AFP, Global debt surges to record high $188 tn: IMF chief, yahoo,news, November 8, 2019:
The global debt load has surged to a new all-time record equivalent to more than double the world's economic output, IMF chief Kristalina Georgieva warned Thursday.
While private sector borrowing accounts for the vast majority of the total, the rise puts governments and individuals at risk if the economy slows, she said.
"Global debt - both public and private - has reached an all-time high of $188 trillion. This amounts to about 230 percent of world output," Georgieva said in a speech to open a two-day conference on debt.
That is up from the previous record of $164 trillion in 2016, according to IMF figures...
"The bottom line is that high debt burdens have left many governments, companies, and households vulnerable to a sudden tightening of financial conditions," she cautioned.
Corporate debt accounts for about two thirds of the total but government borrowing has risen as well in the wake of the global financial crisis...
"Public debt in advanced economies is at levels not seen since the Second World War," she warned. And "emerging market public debt is at levels last seen during the 1980s debt crisis."
* Alexandra Stevenson and Cao Li, Debt bombs lurking: The banking mess that has China on edge, New York Times @ smh.com.au, November 8, 2019:
China's economic growth has slowed to its weakest pace in nearly three decades. Ordinary people are feeling squeezed. The cost of living has gone up, but wages aren't rising as quickly. Many households are spending less and putting more of their income toward mortgages and debt payments.
At the same time, years of borrowing have left the country's financial system riddled with trillions of dollars' worth of debt. Much of it is hidden off the books, raising the prospect of potentially devastating debt bombs lurking in unexpected corners.
* Michael Safi, Frustration and anger fuel wave of youth unrest in Arab world, guardian.co.uk, November 3, 2019:
Eight years after the Arab spring, unrest has shaken the Middle East and north Africa, amid youth joblessness and falling oil prices
A president toppled in Algeria. Renewed demonstrations in Egypt. More than 100 people killed in Iraq. The Lebanese prime minister's resignation - brought about by protesters who say they are just getting started. It has been a year of rage across the Middle East...
Youth unemployment in the region, the highest in the world at the time of 2009 financial crisis, has grown over the past decade more than anywhere else, according to the International Labour Organization (ILO). Nearly 30% of young people in Arab states and North Africa are unable to find work; more than double the international average.
The material deprivations that helped spark the Arab spring eight-years ago have deepened, exacerbated by the war and refugee crisis that trailed in the wake of those revolts...
The demands of this new wave of demonstrators in Iraq, Lebanon and elsewhere vary widely, but have shared roots in frustration with creaking systems that are failing hardest for young people.
"They are on the streets because they're simply tired of the status quo," says Ghia Osseiran, from the Centre for Lebanese Studies, of the demonstrations in Beirut and other cities. "The main demand is for political reform, but there is also a demand for social justice, which is about access to education, healthcare, basic services and jobs."
* Dresden: The German city that declared a 'Nazi emergency', bbc.co.uk, November 2, 2019:
A city in eastern Germany has declared a "Nazi emergency", saying it has a serious problem with the far-right.
Dresden, the capital of Saxony has long been viewed as a bastion of the far-right...
Councillors in the city - a contender for the 2025 European Capital of Culture - have now approved a resolution saying more needs to be done to tackle the issue...
Dresden is also where the anti-Islam Pegida (Patriotic Europeans against the Islamisation of the West) movement began in 2014, and where it continues to hold rallies.
Pegida supporters say people need to "wake up" to the threat of Islamist extremists. They want Germany to curb immigration and accuse the authorities of failing to enforce existing laws.
The movement has spurred large counter-rallies in the city.
* Nic Millar, Thirty years ago the Berlin Wall came down. Today, across Europe, walls are going up, smh.com.au, November 2, 2019:
The refugee crisis has sparked a rise in nationalism and right-wing sentiment, fuelling fear and alienation. Razor wire is again stretching across borders, dividing people and creating barriers both physical and cultural.
Europe's walls are back. Concrete and wire; armed patrols; fear, alienation, suspicion. A continent bristles with fortified distrust. It feels, and acts, besieged.
... today across the world - and especially in Europe... razor wire is again stretching across borders and dividing people, physically and in pitiless cultural barriers constructed and patrolled by rekindled nationalism...
Building Walls is the title of a 2018 report from Centre Delas, an independent Barcelona-based institute dedicated to the study of peace... Authors Ainhoa Ruiz Benedicto and Pere Brunet write ... "Edifices of fear, both real and imaginary, are being constructed everywhere, fuelling a rise in xenophobia and creating a far more dangerous, walled world for refugees fleeing for safety."
It's a global phenomenon, even putting aside US President Donald Trump's rise on the back of a promised new wall between the US and Mexico. In Europe the report tallies up almost 1000 kilometres of barriers - the equivalent of more than six Berlin Walls - that have been built since the 1990s, most constructed in the past five years to prevent displaced people entering the continent. It counts 15 post-Cold War walls built by 2017, on the borders of Spain, Norway, Hungary, Greece, Macedonia and elsewhere.
"Much of Europe has turned itself into a fortress excluding those outside - and in the process also increased its use of surveillance and militarised technologies that has implications for its citizens within the walls." The physical walls parallel "walls of fear stoked by xenophobic parties", say the report's authors, shaped by the "post-9/11 security paradigm".
* Shane Wright, Rate cuts without fiscal policy support ends in house price tears, smh.com.au, November 2, 2019:
In the mid-1990s, almost 44 per cent of people in NSW owned their home outright. Now fewer than 30 per cent do, with big increases in the proportion of people renting or holding a mortgage. It's a similar story in Victoria, with both the number of people heading into retirement while owing money to banks and those sitting in the rental market on the rise.
That's translated into the second most indebted households in the world and a generational crisis that will plague this country for years.
* Martin Armstrong, BREXIT Vote Delayed - Democracy Has Fallen, armstrongeconomics.com/blog, October 19, 2019:
We are beginning to see the collapse of civilization which will only end in separatist movements and violence.
People are no longer willing to accept democracy. If they lose, they are turning much more violent demanding their way or no way...
We are witnessing plain intolerance rising on a massive scale... a wave of sharply rising civil unrest... Democracy is dead...
We have protests rising around the globe against the status quo. It is both sides of the political issues...
There is simply a real hatred that is brewing and like the genie in a bottle, there is no way to put it all back. This simply has to play itself out and it will NOT END WELL!!! Neither side is going to convince the other that their way of thinking should prevail.
The very purpose of civilization is when everyone comes together to produce a society that is greater than the sum of the individuals. We have lost that very purpose. I honestly do not know what the future will bring after 2032. But there will have to be a lot of blood spilled before there will ever be any resolution. The hatred is far too great to overcome.
* Alex Brummer, Explosion in company borrowing has created a corporate debt timebomb which could crash the global economy, the IMF warns, dailymail.co.uk, October 17, 2019:
'Debt owed by firms unable to cover interest expenses with earnings could rise to $19 trillion, almost 40 per cent of corporate debt in the economies we studied, which include the US, China, and some European economies.'
Among concerns is that the potentially toxic debt is spread around the financial system in much the same way as sub-prime mortgages were in the run-up to the financial crisis.
Banks and intermediaries have packed up this debt and turned some of it into securities held in pension funds, insurance firms and other non-banks.
* Eryk Bagshaw, First surplus in a decade is around the corner but at what cost? smh.com.au, September 16, 2019:
Australia has among the highest levels of household debt in the world, ranking only behind Denmark, the Netherlands and Norway in the Organisation for Economic Co-operation and Development's household debt index - at 216 per cent of net disposable income in 2018.
* Rick Ackerman, Pressure Mounts for China to Give In, rickackerman.com, August 12, 2019:
We could know soon whether Trump's trade war against China has been worth it. Beijing has increasingly good reason to give way, since there are signs that the Chinese economy is starting to implode. GDP was recently reported at 6.2%, the slowest pace since 1992, and consumers have been hit hard by the devaluation of the yuan. Cheapening the currency may have kept exports from collapsing, but it has also made imported goods more expensive, causing a corresponding fall in the standard of living...
While America's economy is outwardly strong, inflated prices for stocks and real estate have made it extremely vulnerable to a downturn. Europe's ongoing shrinkage could prove to be the catalyst, since it is occurring with interest rates at or below zero. The failure of the euro-zone to reverse this trend is certain to dampen Wall Street's exuberance whenever the Fed hints of easing. This is a hazard that undoubtedly has begun to affect investor psychology, and its potential to kill the bull market once and for all should not be underestimated.
* Alexis Carey, Chinese businesses issue 'IOUs' instead of cash amid trade war, slowdown, news.com.au, August 7, 2019:
"Of all the debt bubbles in the world, the largest globally is in China on a relative basis to the size of its economy. The Chinese debt bubble is concentrated in its corporate sector and is completely unsustainable," he [former Coalition policy adviser and economist John Adams] said...
"The explosion of Chinese corporate IOUs should be another warning to Australians and Australian policy makers that Australia risks experiencing the greatest economic crisis in over 200 years," he said.
"I remain convinced that Australia is headed for economic armageddon given that we have the biggest statistical debt bubble in Australian history at the same time we have the biggest debt bubble in the history of the world."
* Jim Chanos on Fraud: "Cryptocurrency Is a Security Speculation Game Masquerading as a Technological Breakthrough", nakedcapitalism.com, June 5, 2019:
I'm always told confidently it won't matter because they owe it to themselves. Well, if that was that were the case, then Zimbabwe would be one of the wealthiest countries in the world today!
The build-up of China's debt and the speed of that build-up is nothing short of stunning. There's a new book that I recommend, "China's Great Wall of Debt." It does a great job of chronicling just how massive this build-up has been in the last ten years following China's stimulus in '09 to pull the world out of the GFC. You've heard me call it the "treadmill to hell" because you have to put more and more debt on the books to keep the growth going and this is where China is finding itself. If they don't increase the debt, the economy hits stall speed and for all the talk about innovation and technology and transferring to a consumer-driven, technology-driven economy, the evidence on that is kind of scant. It's still basically an economy driven by debt-driven investment, which is still over 40% of GDP. I think when we started talk about China it was 46% and I think the most recent number is about 43%. So it's improved slightly over the eight or nine years, but not much.
China is still basically a giant construction site and shows no signs of changing. In fact, with the One Belt One Road Initiative [a project launched in 2013 to develop trade routes to connect China to the world], they're trying to basically export their construction capabilities and credit to countries along what we would call the Old Silk Road.
* Martin Armstrong, The Next Lehman Moment - Threat to the Global Economy the Fed Responded to, armstrongeconomics.com/blog, August 4, 2019:
We are cascading toward a perfect financial storm. However, this particular storm is exacerbated by the politics of Europe stemming from the structural design of the Euro. There is a major risk to both the European and world economy. All the Quantitative Easing by Draghi at the European Central Bank (ECB) has completely failed and in the process created a systemic risk to the entire world economy - not just the EU. This is why the Federal Reserve (Fed) has lowered interest rates when there was no true justification for the interest rate reduction domestically. The Fed has confirmed that it is indeed the central bank to the world even if it does not like that role. It can no longer place domestic policy objectives over international.
* Martin Armstrong, Why Nobody Wants to Forecast the Business Cycle, armstrongeconomics.com/blog, July 12, 2019:
... the business cycle can be forecast. That undermines politics as we know it today... the assumption that governments are in control when they are just aggravating the trend.
* Charlie Moore, The Barefoot Investor warns Australia is in 'deep trouble' and on the brink of COLLAPSE - as experts compare the economy to Ireland before it crashed, dailymail.co.uk, June 11, 2019:
But in 2007 the bubble burst and house prices plunged by 62 per cent as owners defaulted.
The global financial crisis saw the Irish economy enter depression in 2009, with unemployment soaring to more than 16 per cent.
* Martin Armstrong, Could the Great Depression Have Been Prevented? armstrongeconomics.com/blog, June 7, 2019:
There was nothing the government could have done to prevent the Great Depression. The best that one can hope for is to understand the business cycle and prepare for the downturns. In that manner, it becomes more like Joseph warning the Pharaoh of 7 years of plenty to be followed by 7 years of drought. If we accept that the business cycle is complex and not a single source that can be controlled, then we will live with the cycle and understand it.
* Martin Armstrong, Naghi of Nomura Confirms Japan Destroyed the Bond Market, armstrongeconomics.com/blog, April 24, 2019:
Both the central bank of Japan and of Europe have destroyed their respective bond markets. Looking forward, we are facing a very dark period when it comes to the ability of governments to continue to function.
* Martin Armstrong, Are Two-Tier Monetary Systems a Possible Tool? armstrongeconomics/blog, April 23, 2017:
Only a two-tier currency system can possibly weather the economic storm on the horizon from the collapse of the European Union at the hand of this lethal combination of policies. The next banking crisis will most likely begin in the Eurozone due to a continued failure to resolve the systemic weaknesses of its construction. The failure to have consolidated the debts means that the failure on the state level will ripple through the entire European economy. In the United States, state debt is not used for reserves. The failure of California will only send bond seekers into the federal debt who are fleeing state and municipal debt. We see that in Europe as capital fled from most members concentrating in Germany, which is the US Treasury equivalent within the Eurozone. With the first bail-in under the BRRD agreement, the contagion will be devastating as was the case when Michigan closed its banks in 1933 in the USA.
* Martin Armstrong, There Are No Coincidences - Why History Repeats, armstrongeconomics.com/blog, April 18, 2019:
I have usually explained that history repeats because human nature never changes. Only technology does. Given the same circumstances, humans will ALWAYS respond in the same manner. Just examine the same facts and you will see how there is NEVER any rule of law. It does not matter what century, for it is always the same. It is all a joke. Whatever the desire of those in power, they will always manipulate the law to produce the desired outcome.
* Ambrose Evans-Pritchard, 'Murderous risks': All of a sudden, the 'R' word is back on our lips, telegraph.co.uk, @smh.com.au, March 28, 2019:
UniCredit says America's corporate debt trap is closing. Company liabilities have jumped from $US2.5 trillion to $US6.5 trillion in nine years, and two thirds of this has been frittered away on share buybacks, M&A, and the like.
* Ben Wright, The growing problem that could lead the world into a new kind of financial crisis, smh.com.au, January 28, 2019:
Take, for example, the complacency about the world's massive debt pile that was on display at this year's meeting. Global debt has ballooned by 70 per cent to $US170 trillion ($237 trillion) over the past decade, according to Bank of America Merrill Lynch. And the cost of servicing that debt is climbing as interest rates start to ratchet up. Nevertheless, at a number of sessions at this year's World Economic Forum, participants laid out the various reasons why they don't think this is such a big deal.
Firstly they look at global debt as a ratio of economic output rather than the absolute figure. Global debt relative to GDP was 207 per cent 10 years ago and is 232 per cent now, which is still a rise but not as scary as the top-line number.
Most of the new corporate debt is being generated in China, whose economy may be slowing, but it is still growing at a relatively healthy 6 per cent. (Variations of this phrase have been uttered so often at this year's Davos that it is starting to take on the feeling of a mantra or incantation against evil spirits.)
Most sovereign debt shouldn't be a problem either, delegates claim, because countries that get into trouble can just print more money and let inflation diminish the value of the money they owe. (The exceptions to this are emerging-market countries that issue debt in foreign currencies and eurozone economies that share a central bank and therefore don't have much control over their own currency and interest rates - a not insignificant subset of the world.)
* Stephen Bartholomeusz, Leveraged to the hilt: The world has a $264 trillion problem, smh.com.au, January 1, 2019:
Before the crisis global debt, excluding financial institutions, was about $US113 trillion ($161 trillion). It is now more than $US186 trillion ($264 trillion). The global total debt-to-GDP ratio has blown out from around 270 per cent of global GDP to about 320 per cent of global GDP.
In the US, government debt was about $US9 trillion, or 62 per cent of US GDP in 2007. Today it is approaching $US22 trillion and around 100 per cent of GDP.
Australia had no net government debt in 2007. It now has just under $350 billion, or about 24 per cent of GDP. China's gross debt before the crisis was about 180 per cent of GDP. It's now around 300 per cent.
US corporate debt is at record levels - about 46 per cent of GDP - and, according to a recent speech by Federal Reserve governor Lael Brainard has brought the ratio of corporate debt to assets close to its highest level in 20 years...
With a household debt-to-GDP ratio of about 120 per cent, house prices tumbling and the economy slowing, the impact of the royal commission on the major banks' willingness to lend - and a toughening up of the criteria they now use to determine whether or not to lend - threatens a domestic credit crunch even as the global outlook for the availability and cost of credit is starting to tighten.