Category Archives: Uncategorized

NEW – Live Weekly Update – Tune in Tuesdays

Every Tuesday night at 7:00 P.M. EST, I will be providing a weekly update on international economics, global markets and political events.  Times are changing and events are unfolding in unprecedented ways that have experts scratching their heads at how it will all play out.

My hope is that this show will provide insight, discernment and greater understanding into the political and economic landscape, so we can be men and women who understand the times and know what to do.  I ask that you please pray for this effort and invite you to listen to the broadcast.

Here is the link to the next broadcast: https://www.youtube.com/watch?v=OhevvLYJoK4  

 

Sept. 3rd Episode: https://www.youtube.com/watch?v=OhevvLYJoK4&feature=em-lbrm

 

Political Upheaval & New Economics Create Uncertainty 

  • World markets are established far more on perception than they are on reality
  • New economics and unprecedented events are creating uncertainty
  • The War Between Globalism & Nationalism is dividing the EU and other nations
  • Elections are weakening the control of mainstream parties and global elites
  • Central banks have switched from raising rates in 2018 to lowering them in 2019
  • World Markets can’t be sure of anything, but they continue to rise along with their debt levels.

Are you prepared for what’s ahead? Get into position every Tuesday!
7:00 PM EST – 6:00 PM CST – 5:00 PM MST – 4:00 PM PST

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Mid-August 2019 Economic Update (8.20.19)

Much has happened in the last several weeks.  The IMF downgraded world growth for the second time this year.  Boris Johnson replaced Theresa May as the UK Prime Minister and in his first speech said, “There are no ifs ands or buts, the UK will exit the European Union with or without an agreement by Oct 31, 2019.”  He also said he would not meet with EU officials unless they give him a better deal than they gave former PM May.  The G-7 Nations are meeting and all eyes and ears are on President Trump to see what he will do next in the trade wars.  The EU economy is on shaky ground with a nearly zero growth rate, and they fear they will be the next trade war victims, if they don’t get rid of their trade barriers and open their markets to US trade.  Gold has gone up almost $300 an ounce for the first time in five years and crossed the $1500 threshold, which is a 25% increase for 2019.  Central banks are lowering interest rates, while political unrest continues to rise.

Europe’s Shaky Union Faces Trump’s G-7 Stress Test (8.20.19) Bloomberg

https://www.bloomberg.com/news/articles/2019-08-20/trade-war-latest-trump-merkel-macron-g7-cars-eu-biarritz-jzjpvbgc?srnd=premium

IMF Downgrades World Growth, Warns of Precarious 2020 (7.23.19) Yahoo News

https://news.yahoo.com/imf-downgrades-world-growth-warns-precarious-2020-143309185.html

 

Currency & Crypto-Currency

JP Morgan wrote, “China, the economies of Southeast Asia, including India, have strong secular tailwinds driven by younger demographics and proliferating technological know-how. Specifically, the Asian economic zone—from the Arabian Peninsula and Turkey in the West to Japan and New Zealand in the East and from Russia in the North and Australia in the South—now represents 50% of global GDP and two-thirds of global economic growth. Of the estimated $30 trillion in middle-class consumption growth between 2015 and 2030, only $1 trillion is expected to come from today’s Western economies. As this region grows, the share of non-USD transactions will inevitably increase which will likely erode the dollar’s “reserveness”, even if the dollar isn’t replaced as the dominant international currency.  In other words, in the coming decades we think the world economy will transition from U.S. and USD dominance toward a system where Asia wields greater power. In currency space, this means the USD will likely lose value compared to a basket of other currencies, including precious commodities like gold.

New Zealand passed legislation allowing for payments to be made with crypto-currency.  Many nations have expressed both concern and outright disagreement with Facebook’s plan to release its own crypto called Libra, including the Fed Chairman Jerome Powell.  Bloomberg reported: “The People’s Bank of China is “close” to issuing its own cryptocurrency, according to a senior official.  Mu repeated the PBOC’s intention that the digital currency would replace cash in circulation, rather than M2, which would generate credit and impact monetary policy. The digital currency would also support the yuan’s circulation and internationalization, he said.  (China’s PBOC Considers Plan to Replace Cash and Sideline Bitcoin).  The remarks signal the PBOC is inching toward formally introducing a digital currency of its own after five years of research. Facebook Inc.’s push to create cryptocurrency Libra has caused concerns among global central banks, including the PBOC, which said the digital asset must be put under central bank oversight to prevent potential foreign exchange risks and protect the authority of monetary policy.”  The Swedes, on the other hand, are getting chips in their hands which allow them to buy and sell without cash credit cards or crypto- currency.

China’s PBOC Says Its Own Cryptocurrency Is Close to Release (8.11.19) Bloomberg

https://www.bloomberg.com/news/articles/2019-08-12/china-s-pboc-says-its-own-cryptocurrency-is-close-to-release

New Zealand Officially Legalizes Paying Employees With Crypto-Currency (Aug 2019)

https://www.classic.ird.govt.nz/resources/1/c/1c6029d0-611c-4a15-9cbf-b712129ab76c/tib-vol31-no7.pdf

Swedes are Getting Implants in Their Hands to Replace Cash, Credit Cards (7.14.19) https://nypost.com/2019/07/14/swedish-people-are-getting-chip-implants-to-replace-cash-credit-cards/

Powell Says Libra Cannot go Forward without Addressing Serious Concerns (7.10.19) Yahoo Finance   https://finance.yahoo.com/news/powell-libra-cannot-go-forward-without-addressing-serious-concerns-212100567.html

Is the Dollar’s Exorbitant Privilege Coming to an End (7.10.19)

https://privatebank.jpmorgan.com/gl/en/insights/investing/is-the-dollar-s-exorbitant-privilege-coming-to-an-end

 

The Gold Rush is On

Generally, if gold is going up, a company whose business is directly or indirectly related to gold also goes up.  However, if that company is not wisely managed, makes mistakes in its business operations and/or one of its managers or employees commits an illegality, it could go down in a rising gold market.  Many experts believe there is far more paper gold than there is physical gold, and in a crisis, if people want to exchange their paper gold for real gold, they will come up short.  When the stock market begins to falter, physical gold, gold company stocks and mutual funds with gold and precious metals are likely to go up.  However, if the gold and precious metals mutual fund has a big exposure to 401k plans, they could drop right along with the stock market, because, when  people panic, they don’t carefully scrutinizing their investment holdings, they tend to bail out of everything they have, driving down the value of every company in their mutual fund.  This does not happen with physical gold in a crisis, it usually goes up when the stock market goes down.  Bullion Star wrote, “The ECB, Swiss National Bank, and Swedish Riksbank have all issued coordinated press releases dated 26th July, confirming that there will not be a fifth central bank gold agreement when the current agreement expires in September 2019.”  This indicates that central banks are about to start buying gold.

By Not Renewing the CBGA, Central Banks in Europe Look Ready to Buy Gold (7.26.19) https://www.bullionstar.com/blogs/ronan-manly/by-not-renewing-the-cbga-central-banks-in-europe-look-ready-to-buy-gold/

 

Debt & Recession

The debt of most nations is rising, but there are some that have refused the addictive spend now, deal with the consequences later attitude of most nations and central banks.  The WSJ wrote: “The [U.S.] $22 trillion of debt is the most owed by any country on Earth. However, when compared with the size of the U.S. economy—also the world’s largest—the public debt doesn’t rank in the top 25, according to the Central Intelligence Agency’s World Factbook. Japan and Greece have the highest debt-to-GDP ratios, at 236% and 182%, respectively. The U.S. debt-to-GDP ratio is currently 104%.   The US economy is doing well, but the national debt is also rising at an alarming rate.  “Borrowing by the federal government is set to top $1 trillion for the second year in a row as higher spending outpaces revenue growth and concern about budget deficits wanes in Washington and on Wall Street” – WSJ.

Home Depot has joined many other companies in lowering their growth expectations, and the number of RV purchases has dropped which many say is a precursor to recession.  According to the 2019 Annual Report of The Board of Trustees of The Federal Old-Age & Survivors Insurance & Federal Disability Insurance Trust Funds, Social Security & Medicare trust funds will be fully depleted in 15 years.  The report estimates, Social Security and Medicare combined are underfunded by over $100 Trillion.  If things don’t change and corrective actions are not taken, the US dollar will eventually devalue and the US government will go bankrupt.  Congress passed a deal to defuse the debt-limit issue for two years and push the debate past the 2020 presidential election.  That said, the Trump Administration will do everything they can to keep the US economy afloat until after the 2020 election.  If re-elected, Trump will likely begin to deal with these problems and do the very unpopular things, like raise the age of Social Security from 62 & 65 to 67 & 70, cut all kinds of government programs and prepare the country for what’s coming.

The National Debt, Explained (8.11.19)  https://www.bloomberg.com/news/videos/2019-08-11/the-national-debt-explained-video

The U.S. National Debt, Visualized (8.3.19) WSJ https://www.wsj.com/articles/the-national-debt-visualized-11564830209

Federal Borrowing Soars as Deficit Fear Fades (7.29.19) WSJ

https://www.wsj.com/articles/treasury-to-borrow-over-1-trillion-in-2019-for-second-year-in-a-row-11564428624

White House & Congress Reach Deal on Spending, Debt Ceiling (7.22.19) WSJ https://www.wsj.com/articles/white-house-and-congress-near-agreement-on-spending-debt-ceiling-11563799484?mod=hp_lead_pos2

Switzerland Has a Budget Surplus. Here’s How, and What the US Could Learn (7.8.19) https://www.dailysignal.com/2019/07/08/switzerland-has-a-budget-surplus-heres-how-and-what-the-us-could-learn/

Ex-RBI Chief Flags Risks for India’s Overseas Borrowing Plan (7.13.19) Bloomberg https://www.bloomberg.com/news/articles/2019-07-13/ex-rbi-chief-rajan-flags-risks-for-india-s-overseas-debt-plan

The 2019 Annual Report of The Board of Trustees of The Federal Old-Age & Survivors Insurance & Federal Disability Insurance Trust Funds, Social Security & Medicare https://www.ssa.gov/OACT/TR/2019/tr2019.pdf

 

Central Banks

The US, Mexico, Thailand and other nations are lowering interest rates.  The EU is preparing a new expansive stimulus program which means more money printing, bond buying and lower interest rates, to be released in its September meeting.  Unlike the rest of the nations that raised their interest rates in 2017 and 2018, the EU has not raised interest rates since the 2008 crisis, and to make matters worse they are already at -.4% and are reportedly headed to -.6%.  Negative interest rates are a fiscal fantasy that shouldn’t exist.  They only serve to provide the EU with false legitimacy and solvency, when, in reality, they are insolvent and bankrupt.

ECB Primes Big Bazooka for September (8.15.19) WSJ

https://www.wsj.com/articles/ecb-stimulus-package-may-beat-expectations-official-says-11565876685

By Not Renewing the CBGA, Central Banks in Europe Look Ready to Buy Gold (7.26.19) https://www.bullionstar.com/blogs/ronan-manly/by-not-renewing-the-cbga-central-banks-in-europe-look-ready-to-buy-gold/

 

World Economy & Global Markets

German and EU economies are on the brink of recession, but other economies like the US, Australia and Switzerland are doing well.   Australia is set to triple its exports of grain-fed beef to China by 2030 to satisfy the nation’s growing appetite for the highly marbled meat, according to Rabobank Group.  CNN reported that “China’s economic growth has slumped to its lowest level in nearly three decades as the world’s second largest economy feels the effects of a prolonged trade war with the United States.”  The trade wars continue, as President Trump continues to attempt to deal with the trade deficit and open other countries to US markets.  The US is also investigating the Big Tech companies to see if they have acted unfairly, broken anti-trust laws and inhibited competition.

China’s Appetite for Australia’s Marbled Beef Is Growing (8.20.19)

https://www.bloomberg.com/news/articles/2019-08-20/grass-to-grains-shift-may-brighten-australia-beef-export-outlook

States to Launch Antitrust Probe of Big Tech Firms (8.19.19) WSJ

https://www.wsj.com/articles/attorneys-general-to-move-forward-with-antitrust-probe-of-big-tech-11566247753?mod=hp_lead_pos1

China’s Economic Growth Slumps to Lowest in 27 Years as the Trade War Hits (7.15.19) CNN https://www.cnn.com/2019/07/15/economy/china-gdp-growth/index.html

 

Political Unrest

Hong Kong protests continue; everyone is watching to see what China will do and President Trump is warning China to handle things wisely.  Italy’s Prime Minister will be resigning, ending the coalition government.  The EU bureaucrats may be rejoicing, but they could end up with an even more anti-EU replacement if they are not careful.  Tensions between India & Pakistan continue to rise and these two nuclear powers are being urged by world leaders to act with restraint.  Many believe that one of Russia’s nuclear missile depots exploded, as four monitoring stations went silent after the blast; as with most things that happen internally in Russia, all questions are met with no response.  China’s Huawei has been found to not only be spying on governments and countries which use it, but also to be helping Africa and other nations spy on one another.   It looks as if Canadian Prime Minister Trudeau may have damaged his re-election chances, having broken Canadian conflict of interest laws.  Both India and China are taking away freedoms and bearing down on their Islamic populations, with China literally placing entire Islamic town and village populations in internment facilities.

Italian Prime Minister to Resign, Declaring End of Coalition (8.20.19) WSJ

https://www.wsj.com/articles/italian-prime-minister-to-resign-declaring-end-of-government-11566310341?mod=hp_lead_pos3

Italian Politics Meet European Rigidity (8.21.19) Bloomberg

https://www.bloomberg.com/opinion/articles/2019-08-20/how-the-eu-should-respond-to-political-upheaval-in-italy?srnd=premium

Italy Stumbles Into Its Next Absurd Crisis (8.21.19) Bloomberg

https://www.bloomberg.com/opinion/articles/2019-08-20/italy-stumbles-into-its-next-absurd-political-crisis?srnd=premium

Trump Urges Restraint by India and Pakistan in Kashmir Conflict (8.19.19) WSJ

https://www.wsj.com/articles/trump-urges-restraint-by-india-and-pakistan-in-kashmir-conflict-11566261701?mod=hp_lista_pos4

Pakistan Extends Powerful Army Chief’s Term (8.19.19) WSJ https://www.wsj.com/articles/pakistan-extends-powerful-army-chiefs-term-11566239708

More Russian Nuclear Monitoring Stations Went Silent Days After Blast, Official Says (8.19.19) WSJ | https://www.wsj.com/articles/more-russian-nuclear-monitoring-stations-went-silent-days-after-blast-test-ban-officials-says-11566232680

Canada’s Trudeau Found to Have Broken Conflict-of-Interest Law (8.15.19) WSJ

https://www.wsj.com/articles/canadas-trudeau-found-to-have-broken-law-in-bid-to-aid-montreal-firm-11565801833

Huawei Technicians Helped African Governments Spy (8.14.19) WSJ

https://www.wsj.com/articles/huawei-technicians-helped-african-governments-spy-on-political-opponents-11565793017

India’s Modi Defends Decision to Clamp Down on Kashmir (8.8.19)

https://www.wsj.com/articles/indias-modi-defends-decision-to-clamp-down-on-kashmir-11565282857

After Detentions, China Razes Muslim Communities to Build Loyal City (3.20.19) WSJ

https://www.wsj.com/articles/after-mass-detentions-china-razes-muslim-communities-to-build-a-loyal-city-11553079629

Q-2 Economic Update (7.7.19)

The US economy and stock markets continue to perform well, unemployment is at record lows and wages are rising.  That is not the case for the EU, whose economy and stock market are low and falling and whose unemployment is rising.  The UK’s economy is preforming far better than the EU as a whole, but is hoping for some positive changes and a more decisive leader as Prime Minister May exits and Brexit architect Boris Johnston, her likely successor, takes the helm.  The G-20 nations met and, for the first time, discussed global risk of aging populations and also took another step to towards enacting the first global tax.

 

U.S. Adds 224,000 Jobs in June, Exceeding Expectations (7.5.19) WSJ https://www.wsj.com/livecoverage/june-2019-jobs-report-analysis

U.K.’s Boris Johnson Strengthens Lead in Conservative Party Race (6.18.19) WSJ

https://www.wsj.com/articles/u-k-s-boris-johnson-strengthens-lead-in-conservative-party-race-11560879762?mod=hp_major_pos3

G20 Digital Tax Takes Step Closer (5.31.19) https://phys.org/news/2019-05-g20-digital-tax-closer.html

In Historic First, G20 Weighs Ageing as Global Risk (6.9.19) https://www.france24.com/en/20190609-historic-first-g20-weighs-ageing-global-risk

Japan Has More People Over the Age of 80 Than Under the Age of 10 (6.20.19) SMC https://www.sovereignman.com/trends/yikes-japan-has-more-people-over-the-age-of-80-than-under-the-age-of-10-25304/?utm_medium=email&utm_source=sm_notes&utm_campaign=notes&utm_content=20190620_people_over_80

 

Central Banks & Crypto Currency

There is much action going on in the central banks of the world, with interest rates going up and down, chairmen being replaced and governments intervening and attempting to control them.  Turkey’s President Erdogan just replaced his chairman for going against his wishes.  Longtime Japanese Chairman Kuroda, once the rock star, is now being criticized and falling out of favor.  Longtime ECB Chairman Mario Draghi will be retiring in fall and it looks like the current Director of the IMF, Christine Lagarde, will replace him.  Last month, Mr. Draghi indicated a possible rate cut from the already negative interest rate of -.41 while most of the rest of the central banks of the world  at -.1 have raised interest rates in 2017 and 2018 (save Japan).  The US Federal Reserve has reversed course from their December meeting in 2018, and are now discussing lowering rates in the second half of 2019, under pressure from the Trump Administration. Many central banks in the Asia-Pacific region, including New Zealand and Australia, have already reduced interest rates over the last month.

Erdogan Dismisses Governor of Turkey’s Central Bank (7.6.19) WSJ

https://www.wsj.com/articles/erdogan-dismisses-governor-of-turkeys-central-bank-11562421046?mod=hp_listc_pos6

IMF’s Christine Lagarde Wins Backing to Run European Central Bank (7.2.19) WSJ

https://www.wsj.com/articles/imfs-christine-lagarde-wins-eu-support-to-lead-european-central-bank-11562087529

Fed Holds Rates Steady, Hints at a Possible Cut (6.19.19) WSJ

https://www.wsj.com/articles/fed-holds-rates-steady-hints-at-possible-cut-if-outlook-dims-11560967516

How Japan Turned Against Its Bazooka Wielding Central Bank Chief (6.17.19) https://www.reuters.com/investigates/special-report/boj-kuroda-economy/

ECB Signals Possible Rate Cut Prompting Trump Tweets (6.18.19) WSJ

https://www.wsj.com/articles/ecb-signals-possible-rate-cut-bond-buying-extension-11560849634?mod=hp_major_pos11

How to Make Negative Interest Rates Work (2.6.19)

https://blogs.imf.org/2019/02/05/cashing-in-how-to-make-negative-interest-rates-work/?cid=sm-com-TW&hootPostID=8d47521db90c0e500f0ce83ecfe12b26

 

Banks & Crypto-Currency

In the second quarter, crypto-currencies both gained and lost ground. Bitcoin fluctuated, but despite volatility, central banks, commercial banks and governments/government organizations are moving toward digital currency.  Deutsche Bank, the EU’s largest bank, has been struggling; its stock has been falling and it has had a difficult time securing financing to keep going.  If Deutsche Bank were to default, it would severely cripple the EU banking system and create problems around the world. In his June 2019 article “Rejoice the End of Banking is Nigh,” Simon Black predicts the conventional banking system that has dominated the world for hundreds of years is drawing to a close as digital currencies gain prominence.

The IMF and World Bank are working together to establish a private blockchain network to create a Distributed Ledger Technology (DLT refers to the technological infrastructure and protocols that allows simultaneous access, validation and record updating in an immutable manner across a network spread across multiple entities or locations. – Investor Encyclopedia).  Russia is looking to create its own crypto-currency and back it by gold to facilitate international settlements.  Elvira Nabiullina, governor of the Bank of Russia, said that her institution is set to review a proposal for the development of the cryptocurrency.  Fox News reported that, “Bank of America CEO Brian Moynihan spoke this week about embracing digital payment transactions while moving toward a cashless society. He said Bank of America “will continue to move” toward digital banking transactions. “We want a cashless society…”   It also appears Facebook will be dipping its hands in another pot, as they announced they will be coming out with their own crypto called “Libra.”  US Rep Maxine Waters fired back that Facebook should not be competing with the US dollar.

Bank of America CEO Says Company Wants a Cashless Society (6.28.19) Fox News

https://www.foxbusiness.com/business-leaders/bank-of-america-ceo-says-company-wants-cashless-society

Rep. Maxine Waters Says US Can’t Let Facebook’s Libra Compete With the Dollar (6.19.19) https://www.coindesk.com/rep-maxine-waters-says-us-cant-let-facebooks-libra-compete-with-the-dollar

Rejoice the End of Banking is Nigh (6.19.19) SMC https://www.sovereignman.com/trends/rejoice-the-end-of-banking-is-nigh-25300/?utm_medium=email&utm_source=sm_notes&utm_campaign=notes&utm_content=20190619_crypto

Why Everyone Should Be Following Deutsche Bank (6.17.19)

https://www.glennbeck.com/contributor/economic-warning-why-everyone-should-be-following-deutsche-bank?utm_source=Sailthru&utm_medium=email&utm_campaign=20190619GBDAILY&utm_term=Glenn%20Beck

Facebook’s New Cryptocurrency, Libra, Gets Big Backers (6.13.19) WSJ

https://www.wsj.com/articles/facebooks-new-cryptocurrency-gets-big-backers-11560463312

The World Bank & IMF Floats a Joint Private Blockchain Network & Cryptocurrency (4.16.19) https://blockonomi.com/world-bank-imf-private-blockchain-network-cryptocurrency/

Russian Central Bank to Consider Gold-Backed Cryptocurrency (5.23.19)

https://www.coindesk.com/russian-central-bank-to-consider-gold-backed-cryptocurrency

 

World Economy, Debt, Recession

Many mainstream economists and commentators are starting to concede that a recession is likely in the next year or two, but most of them downplay its likely severity. The Zero Hedge view is, however, that “virtually everyone is underestimating the tremendous economic risks that have built up globally during the past decade of extremely stimulative monetary policies.”  They believe everything is lining up much like 2008, but worse.

A CNBC broadcast reported that, “DoubleLine CEO Jeffrey Gundlach is betting on gold.  ‘I am certainly long gold,’ Gundlach said in an investor webcast Thursday. He added his trade is based on the expectation that the dollar will finish the year lower.  When the dollar weakens, gold tends to appreciate as it becomes cheaper for investors holding other currencies.  Gold prices hit a three-month high this month as investors flee to the safe-haven bullion amid escalated trade tensions. Meanwhile the dollar fell to a 11-week low on Wednesday as the market increasingly bet on a rate cut in the coming months.”

Bond King Jeffrey Gundlach Bets on Gold, Sees Rising Recession Chances, Dollar Decline (6.14.19) CNBC   https://www.cnbc.com/2019/06/13/bond-king-jeffrey-gundlach-i-am-certainly-long-gold.html

Why You Should Not Underestimate the Severity of the Coming Recession (6.9.19) Zero Hedge

https://www.zerohedge.com/news/2019-06-08/why-you-should-not-underestimate-severity-coming-recession

 

Political Unrest

The intensity of ideological conflict is on the rise globally.  The battle between socialism and capitalism, globalism and nationalism and liberalism and conservativism is being fought in many nations, especially the US.  Simon Black wrote, “the Bolsheviks are already here.”  The battle between the globalists and nationalists seems to be expanding and show no signs of waning.  The WSJ reported: “New parties are finding success by addressing the concerns of voters who feel neglected and disdained by liberal elites.  Mr. Salvini, the de facto head of Europe’s growing national populist family. “Marine Le Pen is the biggest party in France. Nigel Farage has the biggest party in Great Britain. It is a sign of a Europe that has changed.” Many people simply want more of a say over the decisions that affect their nations and their daily lives.  A second key current is destruction: widespread fears that national identities, cultures and ways of life are slipping away. When eight in 10 Trump voters support building a wall on the southern border, or three in four Brexit voters, worried about how immigration is changing Britain, voted to “take back control,” they knew what they were supporting.”

It is doubtful that anything is going to calm down on the social-political front anytime in the near future.  Iran declared they are breaking the agreement they made with the rest of the World on enriched uranium, which came as no surprise to those who had the foresight to oppose the deal from the beginning, but the sanctions are taking a toll on Iran’s economy.  Greece just replaced their socialist Prime Minister and majority party, with a Conservative one, and the UK is about to vote on a new Prime Minister to replace Theresa May.  The WSJ reported, “In the battle for influence within Europe, Angela Merkel is ceding ground to France’s Emmanuel Macron, who has emerged as an increasingly potent rival to the German chancellor. Ms. Merkel bowed to Mr. Macron this week after marathon talks to carve up the European Union’s top leadership positions in the clearest display to date of the German chancellor’s fading clout.”

The EU continues to fight with its own and is deciding whether it will take disciplinary action against Italy for not meeting the budget targets Brussel’s set for them.  Continued chastisement from the EU may drive more member nations to follow the UK’s lead to exit the EU.  There were also many demonstrations in Hong Kong to retain their freedom from Beijing.  The US continued the trade war in its fight against the Chinese telecommunications company Huawei, a company many believe to be a spying tool of the Chinese government.

China is also being condemned by the rest of the world because of their crackdown on Islam and other religious groups.  In a Fox News interview, Lt. Col Maginnis warned of the plans by China to dominate the world militarily and economically by the middle of this century, not to mention Russian intentions.  President Trump and President Lopez of Mexico also struck a deal to stop the flow of illegal immigrants into the US.

Conservatives Regain Control in Greece (7.7.19) WSJ

https://www.wsj.com/articles/conservatives-on-path-to-victory-in-greece-election-polls-show-11562515739

Iran Plans New Breach of Limits of Nuclear Agreement (7.7.19) WSJ

https://www.wsj.com/articles/iran-to-enrich-uranium-beyond-nuclear-deal-limits-11562483348

Iranians Say Their Bones Breaking Under US Sanctions (6.24.19) AP https://www.apnews.com/9390faa746294f628b93beea57ba1e07?__source=newsletter%7Cmorningsquawk

EU Compromise Exposes Merkel’s Waning Influence (7.4.19) WSJ

https://www.wsj.com/articles/eu-compromise-exposes-merkels-waning-influence-11562261932?mod=hp_lead_pos7

EU Drills Into Italy’s 2020 Deficit Before Decision on Sanctions (6.25.19) Bloomberg

https://www.bloomberg.com/news/articles/2019-06-25/eu-drills-into-italy-s-2020-deficit-before-decision-on-sanctions

The Bolsheviks Aren’t Coming, They’re Already Here (7.1.19) SMC https://www.sovereignman.com/trends/the-bolsheviks-arent-coming-theyre-already-here-25335/?utm_medium=email&utm_source=sm_notes&utm_campaign=notes&utm_content=20190701_socialism

Europe’s Populists Are Here to Stay (6.15.19) WSJ  https://www.wsj.com/articles/europes-populists-are-here-to-stay-11560524237

Putin Stands By China, Criticizes U.S., In Trade, Huawei Disputes (6.7.19) Reuters

https://www.reuters.com/article/us-russia-forum-putin/putin-to-u-s-economic-egoism-is-recipe-for-trade-and-maybe-real-wars-idUSKCN1T819W

Hong Kong Upheaval Puts Beijing in a Bind (6.16.19) WSJ

https://www.wsj.com/articles/hong-kong-upheaval-puts-beijing-in-a-bind-11560733232

Lt. Col. Maginnis Warns of Xi’s China Dream of World Dominance by Mid Century (6.12.19) Fox News https://www.foxnews.com/world/lt-col-maginnis-xi-jinping-china-world-dominance

Crowds Turn Out to Cheer Mexico’s President & the Deal He Struck With Trump (6.919) WSJ

https://www.wsj.com/articles/crowds-turn-out-to-cheer-mexicos-presidentand-the-deal-he-struck-with-trump-11560052214

Former Goldman CEO Lloyd Blankfein Trump’s Tariffs Aren’t a Bad Idea (6.20.19) CNBC

https://www.cnbc.com/2019/05/15/goldman-sachs-ex-ceo-blankfein-tariffs-may-hurt-us-china-loses-more.html

As Trump Demands Major Concessions, Beijing Wants the World to Think That the US Will Blink First (6.14.19) CNBC https://www.cnbc.com/2019/06/14/us-china-trade-beijing-wants-world-to-think-washington-will-back-down.html

Large European Routing Leak Sends Traffic Through China Telecom (6.6.19) https://blogs.oracle.com/internetintelligence/large-european-routing-leak-sends-traffic-through-china-telecom

Pentagon working to reduce US reliance on Chinese rare earth minerals after trade war threat (5.29.19) CNBC https://www.cnbc.com/2019/05/29/pentagon-working-to-reduce-us-reliance-on-chinese-rare-earth-minerals-after-trade-war-threat.html?__source=newsletter%257Cmorningsquawk

Costco is looking at alternative sourcing and price hikes as tariffs loom (5.31.19) CNBC https://www.cnbc.com/2019/05/31/costco-is-looking-at-alternative-sourcing-and-price-hikes-as-tariffs-loom.html?__source=newsletter%257Cmorningsquawk

April 2019 Update

Brexit just won’t break!  March 29th and April 12th came and went and now the deadline has been extended to October 31, 2019.  Will Parliament make a decision between now and then, will it be a soft/negotiated Brexit, or a hard Brexit which would be an automatic ejection from the European market? Will another extension be given?   Anything could happen and there is no way of predicting the outcome.  If the UK capitulates, its days as a world economic power are over and it is very unlikely that any nation will ever challenge the EU again because, if the UK failed, how could anyone else resist them?  If the UK resists and retains their sovereignty, the other EU nations may do the same and the EU’s ability to intimidate and control its members will begin to diminish with more of their members likely exiting.

 

EU Leaders Agree to Delay Brexit Until Oct. 31 (4.10.19) WSJ  https://www.wsj.com/articles/eu-prepares-to-push-brexit-into-next-year-11554900794?mod=hp_lead_pos6

Brexit Betrayal – Treachery or Treason? (3.24.19) https://www.youtube.com/watch?v=q8hw-X3V9Jo&feature=youtu.be

May’s Brexit Deal Is Rejected for a Third Time by Lawmakers (3.29.19) WSJ https://www.wsj.com/articles/mays-brexit-deal-is-rejected-for-a-third-time-by-lawmakers-11553870628

Theresa May Vows to Resign to Get Brexit Deal Through Parliament (3.27.19) WSJ https://www.wsj.com/articles/theresa-may-vows-to-quit-to-get-brexit-deal-through-parliament-11553708350?mod=hp_lead_pos1

 

Central Banks & Currency

In the first three months of this year, the Fed has gone from arguing about how much and how often interest rates should be raised to arguing about whether or not to lower them.  When compared to the EU, Japanese or Chinese central banks, the Federal Reserve looks pretty good at the moment; however, the Fed’s balance sheet plans have too many assets.  US debt is too high, and too much qualitative easing for too long has put the Fed between a rock and hard place.  The Feds are not alone; however, as most of the central banks of the world are in a similar place.  James Skinner wrote:

The Pound remains the best performing currency in the G10 universe for 2019 but the British currency has much further to rise, according to analysts at Morgan Stanley, who’ve recently told clients to buy the British currency.  The U.S. Federal Funds rate of 2.5% is substantially higher than the BoE’s 0.75% but markets are already speculating the Federal Reserve could cut its interest rate next year so if the BoE were to lift Bank Rate the Pound-to-Dollar rate differential would move in favour of Sterling.  It is a gradual increase in market bets on BoE rate hikes that Redeker says will drive the Pound-to-Dollar rate up to Morgan Stanley’s forecast of 1.52 by year-end.”

Reuters reported that Saudi Arabia is threatening to sell its oil in currencies other than the US Dollar if Washington passes a bill exposing OPEC members to US antitrust lawsuits, three sources familiar with Saudi energy policy said.  The bill called NOPEC has been purposed a number of times but has never gotten any traction.  According to the WSJ:

India’s central bank cut its main lending rate for the second time this year as recent low inflation rates gave it the freedom to try to bolster economic growth.  The Reserve Bank of India’s monetary-policy committee, headed by Gov. Shaktikanta Das, on Thursday lowered the repurchase rate to 6% from 6.25%. All 10 economists polled by The Wall Street Journal had predicted a quarter-percentage-point rate cut.”

Growth Stumbling, but Central Bank Arsenals are Near Empty (4.12.19) Reuters https://www.reuters.com/article/us-global-economy/growth-stumbling-but-central-bank-arsenals-are-near-empty-idUSKCN1RO1KS

India’s Central Bank Cuts Key Lending Rate to 6.0% (4.4.19) WSJ                                            https://www.wsj.com/articles/indias-central-bank-cuts-key-lending-rate-to-6-0-11554372112

Things are Only Getting Tougher for Chair Jerome Powell and his all Over the Place Fed (4.3.19) CNBC  https://www.cnbc.com/2019/04/01/things-are-only-getting-tougher-for-fed-chair-jerome-powell.html

The British Pound is a Buy says Morgan Stanley (3.28.19) https://www.poundsterlinglive.com/gbp-live-today/11090-the-british-pound-is-a-buy-says-morgan-stanley

Saudi Arabia Threatens to Ditch Dollar Oil Trades to Stop NOPEC (4.4.19) Reuters https://www.reuters.com/article/us-saudi-usa-oil-exclusive/exclusive-saudi-arabia-threatens-to-ditch-dollar-oil-trades-to-stop-nopec-sources-idUSKCN1RH008

 

Debt

Fox News reported that, “last month, the national debtOpens a New Window. surpassed $22 trillion — or nearly $180,000 per taxpayer. That figure will roughly double within three decades, since spending on Social SecurityOpens a New Window., Medicare and Medicaid will balloon as America’s population ages.  Unfortunately, it’s too late for a “grand bargain” now.”  A slowing world economy, tighter credit and rising debt are creating problems for China as well.   CNBC said, “According to experts, defaults for Chinese corporate bonds — issued in both U.S. dollars and the Chinese yuan — soared last year, according to numbers from two banks.  Yuan-denominated debt rose to an unprecedented 119.6 billion yuan ($17.8 billion) — four times more than 2017, according to a February report by Singapore bank DBS.  Japanese bank Nomura’s estimates, provided to CNBC, were even higher, putting the size of defaults in onshore bonds — or yuan-denominated bonds — at 159.6 billion yuan ($23.8 billion) last year. That number is roughly four times more than its 2017 estimate.”

Chinese Companies Are Defaulting on Their Debts at an Unprecedented Level (3.20.19) CNBC  https://www.cnbc.com/2019/03/20/chinese-companies-had-record-amount-of-corporate-bond-defaults-in-2018.html

The Federal Government Should Default on its Debt (3.19.19) Fox News https://www.foxbusiness.com/economy/the-federal-government-should-default-on-its-debt

 

Political Unrest & Elections

The battle between globalism and nationalism continues to playout across the globe.  Finland’s Social Democrats look to have edged a victory for the first time since 1999, barely beating the nationalist Finns Party 17.7% to 17.5%.  Israeli Prime Minister Netanyahu won a 5th term and gained seats in the Knesset strengthening his position, and Australia’s prime minister has just called for new elections, hoping to expand the number of seats in his party’s control.

Immigration continues to create political unrest, as another migrant horde has broken through Mexico’s southern border and attacked Mexican border police on their way to the US border.  There are complaints that the bottle necked ports and borders are costing shippers millions.  President Trump has threatened to close the US-Mexican border if Mexico does not stop the stream of immigrants on their end.

Chinese fishing boats invaded Philippine sovereign territory, as China continues to push at the borders of international waters.  The WSJ reported that “Chinese fishing vessels have swarmed the waters around a Philippine-controlled island in the South China Sea in recent months—sparking fears in Manila that Beijing is trying to assert greater control in a disputed area.  Since January, at least 275 Chinese boats functioning as part of a maritime militia have gathered for varying lengths of time near Thitu Island, according to the Philippines’ military. Their tactics raise concerns about their “role in support of coercive objectives.”

The WSJ reported problems in both Libya and Turkey, as a renegade Libyan military commander, reportedly supported by Saudi Arabia, launched an assault on the Tripoli capital, risking returning the country to a full-blown civil war.  Turkey’s Erdogan decided to purchase an air-defense system from Russia despite US warnings that using the equipment would jeopardize Ankara’s role within the North Atlantic Treaty Organization.  Vice President Pence called Erdogan’s decision reckless.  The US declared Iran’s Revolutionary Guard a terrorist organization, subjugating it to all the penalties that go with such a designation. It is unusual to brand a branch of a nation’s military a terrorist group, but Iran’s support of terrorism is clear, and the Revolutionary Guard are a complicit party.  Facebook and CEO Mark Zuckerberg are also stirring up international unrest by continuing to anger individuals and governments around the world by their reckless disregard for people’s privacy, the rule of law of various nations, and the imposition of their bias views and removal  of people and groups from Facebook with whom they disagree with.

Social Democrats Set to Win Close Legislative Election in Finland (4.14.19) WSJ https://www.wsj.com/articles/social-democrats-set-to-win-close-legislative-election-in-finland-11555278024

Netanyahu Rode Israel’s Rightward Shift to Successful Election Result (4.10.19) WSJ https://www.wsj.com/articles/benjamin-netanyahu-appears-to-set-to-lead-israel-in-record-fifth-term-11554888521?mod=hp_lista_pos1

Australia to Pick Its Next Leader—With an Election (4.11.19) WSJ https://www.wsj.com/articles/australias-embattled-conservatives-call-new-election-11554937191

Saudi Arabia Promised Support to Libyan Warlord (4.12.19) WSJ https://www.wsj.com/articles/saudi-arabia-promised-support-to-libyan-warlord-in-push-to-seize-tripoli-11555077600

Libyan Warlord Launches Assault on Country’s Capital (4.5.19) WSJ https://www.wsj.com/articles/libyan-warlord-launches-assault-on-capital-11554474313?mod=hp_lead_pos7

US Designates Iran’s Islamic Revolutionary Guard Corps a Foreign Terrorist Org. (4.8.19) WSJ https://www.wsj.com/articles/u-s-designates-irans-islamic-revolutionary-guard-corps-a-foreign-terrorist-organization-11554733155?mod=hp_lead_pos1

Erdogan Vows to Buy Russian Missiles Despite U.S. Warnings (4.8.18) WSJ  https://www.wsj.com/articles/erdogan-vows-to-buy-russian-missiles-despite-u-s-warnings-11554754854

U.S. Clashes With Turkey Over Russian Air-Defense System (4.3.19) WSJ https://www.wsj.com/articles/nato-chief-tells-congress-alliance-remains-urgently-needed-11554309999

China’s Fishing Militia Swarms Philippine Island, Seeking Edge in Sea Dispute (4.4.19) WSJ https://www.wsj.com/articles/chinas-fishing-militia-swarms-philippine-island-seeking-edge-in-sea-dispute-11554391301

Hostile Migrants Break Border Gate to Enter Mexico, Then Attack Police & They’re Headed North https://www.theblaze.com/news/migrants-break-border-fence-mexico?utm_source=Sailthru&utm_medium=email&utm_campaign=Daily-Newsletter__PM-Final%202019-04-14&utm_term=TheBlaze%20Daily%20PM%20-%20last%20270%20days

U.S. Shift on Mexican Border Triggers Trade Bottleneck (4.3.19) WSJ https://www.wsj.com/articles/u-s-action-on-mexico-border-triggers-trade-havoc-11554325826

 

World Economies & Market

The WSJ reported that “The International Monetary Fund cut its outlook for global growth to the lowest since the financial crisis amid a bleaker outlook in most major advanced economies and signs that higher tariffs are weighing on trade.  It’s the third time the IMF has downgraded its outlook in six months.”  The report goes on to say that the IMF raised its forecast for Chinese growth, while lowering it for the US, the euro area, Japan and India.  The UK economy grew in February, in spite of the Brexit uncertainty.  Italy’s populist government conceded it won’t hit the budget-deficit target agreed on with European Union authorities, setting the stage for renewed tensions with Brussels.  Currently world stock markets are continuing to grow, even as the outlook for world economies is beginning to diminish.  Trade wars and negotiations continue between the US and China, but it looks as though they may have made a little progress with a trade deal enforcement accord and discussions on currency manipulation over the past month.  In the second week of April the EU prepared tariffs against the US, but two days later, changed their minds and paved a way for trade pact talks. Many of the EU nation economies continue to struggle, including Germany.

 

Global Stock Rally Defies Dimming Outlook for World Economy (4.14.19) WSJ https://www.wsj.com/articles/global-stock-rally-defies-dimming-economic-outlook-11555239600

European Union Paves Way for U.S. Trade-Pact Talks (4.14.19) WSJ https://www.wsj.com/articles/european-union-paves-way-for-u-s-trade-pact-talks-11555014335

EU Prepares Tariffs Against U.S. Amid WTO Battle (4.12.19) WSJ https://www.wsj.com/articles/eu-prepares-tariffs-against-u-s-amid-wto-battle-11555100352

U.S.-China Trade Pact Takes Aim at Currency Manipulation (4.12.19) WSJ https://www.wsj.com/articles/u-s-china-trade-pact-takes-aim-at-currency-manipulation-11555074003?mod=searchresults&page=1&pos=5

U.S., China Reach Accord on Trade-Deal Enforcement, Mnuchin Says (4.10.19) WSJ https://www.wsj.com/articles/u-s-china-reach-accord-on-trade-deal-enforcement-mnuchin-says-11554922623?mod=searchresults&page=1&pos=9

UK Economy Grew Steadily in February (4.10.19) WSJ                   http://www.wsj.com/articles/uk-economy-grew-steadily-in-february-151554885698

IMF Cuts Global Growth Outlook to Lowest Pace Since Crisis (4.9.19) Bloomberg https://www.bloomberg.com/news/articles/2019-04-09/imf-cuts-global-growth-outlook-to-lowest-since-financial-crisis?srnd=premium

Italy Warns of Bigger Budget Deficit (4. .19) WSJ  https://www.wsj.com/articles/italy-warns-of-bigger-budget-deficit-11554842380?mod=hp_listc_pos2

Japan’s Business Confidence Hits Two-Year Low as Trade War Stings (3.31.19) Reuters https://www.reuters.com/article/us-japan-economy-tankan/japans-business-mood-hits-two-year-low-as-trade-war-stings-idUSKCN1RD0ZF?il=0

German Manufacturing Slump Piques Fears Over Europe’s Flagship Economy (4.4.9) WSJ https://www.wsj.com/articles/german-manufacturing-slump-piques-fears-over-europes-flagship-economy-11554385603

2018 Wrap Up & Jan 2019 Update

In the last week of 2018 the Dow saw the worst-ever Christmas Eve selloff, followed by the greatest one day gain and then another drop.  Needless to say, steep losses and extreme volatility reigned in the final quarter of 2018 and have continued in the first month of 2019. The WSJ summed it up 2018 as follows:

Stocks rise on the year’s final trading day, but not enough to offset bruising last few weeks of selling.  U.S. stocks drifted higher, but closed out 2018 with their steepest annual declines since the financial crisis, reflecting growing unease among investors about the health of the nearly decade-long bull run.  For the year, the Dow industrials were down 5.6%, the S&P 500 off 6.2% and the Nasdaq down 3.9%.  Stock markets elsewhere around the world fared even worse. The Stoxx Europe 600 shed 13% in 2018, while the U.K.’s FTSE 100 declined 13% and Japan’s Nikkei Stock Average fell 12%.  The volatility spared few asset classes. Oil prices hit multiyear highs in October, only to tumble in the fourth quarter as investors grew increasingly worried about a potential supply glut.”

At the mid-January World Economic Forum in Davos, Switzerland, the investment experts seemed to uniformly agree that, globally, things are moving toward lower growth and an eventual recession. A coming recession would wreak much greater havoc on the EU and Japan, who still have negative interest rates and are printing money.  The WSJ reported that “Europe seems stuck, its economic recovery running out of steam and its politics shaken by the growing strength of nationalist politicians in many European countries.  The International Monetary Fund cut its 2019 global growth forecast by 3.5% based on weaker-than-expected economic performance in Europe, especially in Germany and Italy.  Decision-making could be further hampered after EU elections in May. Anti-EU parties are widely expected to make headway in the European Parliament.”

On Jan 25th, a bill was passed that ended the partial US government shutdown, an event which had no tangible impact and few people even would have known was happening if media outlets with agendas had not sensationalized it.  A short-term spending bill was passed, however this quick fix will only last until February when the issue will need to be addressed again.

Trump Signs Spending Bill, Ending Longest Government Shutdown in U.S. History (1.25.19)

https://www.wsj.com/articles/trump-considering-agreeing-to-sign-three-week-spending-bill-as-early-as-friday-11548439078

Guggenheim’s Minerd Says a Recession Will Be Tough When It Gets Here (1.23.19) Bloomberg

https://www.bloomberg.com/news/videos/2019-01-23/guggenheim-s-minerd-says-a-recession-will-be-tough-when-it-gets-here-video

Europe’s Political Funk Sets Back Its Economy (1.23.19) WSJ

https://www.wsj.com/articles/europes-political-funk-sets-back-its-economy-11548270493

U.S. Indexes Close With Worst Yearly Losses Since 2008 (12.31.18) WSJ

https://www.wsj.com/articles/global-stocks-rise-to-end-turbulent-2018-11546247179?mod=hp_lead_pos1

Volatile Stocks Test Investors Resolve (12.29.18) WSJ

https://www.wsj.com/articles/wall-streets-late-rally-drives-global-stocks-higher-11545987880

Dow Industrials Fall to End Volatile Week (12.29.18) WSJ

https://www.wsj.com/articles/wall-streets-late-rally-drives-global-stocks-higher-11545987880

Chinese Dumped $1B of U.S. Real Estate in Third Quarter, Extending Retreat (12.25.18) WSJ

https://www.wsj.com/articles/chinese-dumped-1-billion-of-u-s-real-estate-in-third-quarter-extending-recent-retreat-1543924802

 

World Markets

Bloomberg reported: “The Nikkei 225 Stock Average skidded below the 20,000 level and was headed for bear market territory in the latest blow for Japanese equities experiencing their worst December on record.  The Nikkei 225 fell 5.1 percent to 19,147.45 in Tokyo at the midday break Tuesday, with all members in the red. The blue-chip stock gauge dropped below 20,000 for the first time since September 2017.”

The WSJ reported: “U.S. stocks fell, notching their second straight session of losses, after downbeat Chinese economic data added to signs of slowing growth around the world.  Major indexes began the day lower and never managed to break higher, weighed down by a report showing China’s exports unexpectedly slid in December.  The data showed both slowing global growth and uncertainty over trade relations have started to take a toll on the world’s second-largest economy.  Dimmer expectations for global growth and disappointing holiday sales have forced many U.S. companies to slash their forecasts, pushing the estimated earnings-growth rate for the quarter to around 11%, according to FactSet.  Elsewhere, the Stoxx Europe 600 fell 0.5% following a downbeat session across Asian markets.”

The WSJ also reported: “China’s overall December exports unexpectedly fell 4.4 percent from last year.  China’s December trade surplus with the U.S. fell to $29.87 billion from $35.54 billion in November. WATCH: Trump will win the trade war with China, says Gary Shilling | China’s economic expansion slowed to its slowest pace in nearly three decades last year, as a bruising trade fight with the U.S. exacerbated weakness in the world’s second-largest economy.  The 6.6% growth rate for 2018 is the slowest annual pace China has recorded since 1990.”  At the World forum in Davos, the IMF lowered its global growth forecasts, affirming what most of the global finance managers had already been forecasting as well.

IMF Lowers 2019 Global Growth Forecast (1.21.19) WSJ

https://www.wsj.com/articles/imf-lowers-2019-global-growth-forecast-11548075601?mod=djcm_davos_email2

China Annual Economic Growth Is Slowest Since 1990 (1.21.19) WSJ

https://www.wsj.com/articles/china-annual-economic-growth-rate-is-slowest-since-1990-11548037761

The World Braces for Slower Economic Growth (1.21.19) WSJ

https://www.wsj.com/articles/the-world-braces-for-slower-growth-11548116422

Stocks Slip on Signs of Slowing Growth (1.14.19) WSJ

https://www.wsj.com/articles/global-stocks-slump-on-signs-of-slowing-economic-growth-11547454618

US trade deficit with China grows to a record and it’s likely even worse than the data show (1.13.19) https://www.cnbc.com/2019/01/14/china-2018-full-year-december-trade-exports-imports-trade-balance.html?__source=newsletter%7Cmorningsquawk

Japanese Stock Rout Accelerates in Worst December for Almost 60 Years (12.24.18) https://www.bloomberg.com/news/articles/2018-12-25/nikkei-225-falls-below-20-000-as-japanese-stock-rout-accelerates?srnd=premium

 

Brexit & the EU

In December PM May brought back the Brexit deal she negotiated with the EU, which both the liberal and conservative parties said was DOA, nine of her cabinet ministers resigned and a no confidence vote was taken, however she retained enough votes to remain PM.  Weeks later May’s agreement was officially voted down and another no confidence vote was taken, which May survived a second time.  The plan has since been revamped and another vote is scheduled for next week, however prospects for acceptance by the EU and passage in Parliament are low. If the plan fails to pass again, May could resign or face a third no confidence vote which could remove her from office.  Former British Foreign Minister and primary architect of the original Brexit vote, Boris Johnson, is being named as a likely successor, which would almost guarantee a hard Brexit and an ejection form the EU market. UK markets and the pound will initially take a hit, but once the trade deals the UK has negotiated with the rest of the world are revealed, they will ascend, just as they did after the initial Brexit vote. These trade deals will likely undercut EU trade deals, positioning UK markets and the pound to continue to outperform the EU, as the UK has outperformed the EU in almost every economic measurement, since its citizens voted to leave the EU three years ago.

Goldman Sachs Says Brexit May Help Sterling Shine (1.24.19) Bloomberg

https://www.bloomberg.com/news/videos/2019-01-25/goldman-sachs-says-brexit-may-help-sterling-shine-video

Pound Heads for Best Week Against Euro Since 2017 (1.24.19) Bloomberg

https://www.bloomberg.com/news/articles/2019-01-25/pound-heads-for-best-week-since-2017-against-euro-on-brexit-hope

U.K. Parliament Roundly Rejects May’s Brexit Plan (1.15.19) WSJ

https://www.wsj.com/articles/u-k-parliament-roundly-rejects-mays-brexit-plan-11547581277

Britons Most at Risk in a Messy Split from EU are Least Worried (1.10.19) WSJ

https://www.wsj.com/articles/britons-most-at-risk-in-a-messy-split-from-eu-are-least-worried-11547388412

 

Central Banks & Currencies

Ever since the crisis of 2008, there has been a desire by many nations of the world to be less reliant on the US.  Since that time, a new world bank, the AIIB, is now fully operational. Treaties have been signed to directly exchange currencies, bypassing the USD.   Another global payment system is about to be launched which will be an option to the current SWIFT system.  In the next global financial crisis, other nations won’t have to rely on the US if they don’t want to.

The endgame is an alternative global payments system that will substitute for SWIFT and be controlled by Russia and China with participation by countries including Turkey, Iran, North Korea and possibly many others. This alternative system will exclude the U.S. and U.S. dollars, finally creating a way for nations to trade and settle balance of payments without using dollars and without relying on portals such as SWIFT and Fedwire that are controlled by the U.S. In turn, this means that U.S. economic sanctions will no longer be effective because countries will have an easy way around them using this new nondollar system. Putin is insistent on this new system and is close to achieving it. When the new system is rolled out, you won’t be able to say you weren’t warned “We are not setting the target of moving away from the dollar — the dollar is moving away from us…”- Vladimir Putin  “…and those who take respective (sanctions) decisions are shooting themselves not just in the foot but slightly higher, as such instability in calculations in dollars creates a desire of many global economies to find alternative reserve currencies and create settlement systems independent of the dollar,” Putin added, speaking at an investment forum in Moscow, according to Russian TV network RT.” -Market Watch

The WSJ also reported, “the banks hit hardest by the financial crisis have retreated from overseas lending in the decade since the 2008 collapse of Lehman Brothers, marking a rare example of a sector in which leverage has been curtailed even as global debt has boomed.  The total amount of cross-border bank debt has dropped from a peak of $35.453 trillion in the first quarter of 2008 to $29.456 trillion in the second quarter of this year, a fall of nearly 17%. The decline in interbank lending—the credit banks extend to other banks—has been particularly steep.   Two of the top contenders to become the next European Central Bank president said they don’t know if the institution will be able to raise interest rates this year.”

 

The global boom may be over, but this doesn’t mean the world is about to stumble into a recession. Labor markets, in particular remain quite strong, businesses may be reluctant to invest, but not to hire. Nonetheless, central banks need to proceed carefully, “in a low-growth world, a little bit of monetary tightening can go a long, and painful, way.” – WSJ

Fed Weighs Earlier End to Bond Portfolio Runoff (1.25.19) WSJ

https://www.wsj.com/articles/fed-officials-weigh-earlier-than-expected-end-to-bond-portfolio-runoff-11548412201

The Global Boom, Barely Begun, May Be Over (1.23.19) WSJ

https://www.wsj.com/articles/theglobal-boom-barely-begun-may-be-over-11548243000?mod=djcm_davos_email2

ECB Presidential Contenders Wary on Chance of 2019 Rate Hike (1.25.19) Bloomberg

https://www.bloomberg.com/news/articles/2019-01-25/ecb-presidential-contenders-play-it-cautious-on-rate-hike-chance

Great Retreat from Global Bank Lending Continues (12.31.18) WSJ

https://www.wsj.com/articles/great-retreat-from-global-bank-lending-continues-11546261201

Putin Says U.S. Actions Driving The World Away From The Dollar (11.29.18) https://www.marketwatch.com/discover?url=https%253A%252F%252Fwww.marketwatch.com%252Famp%252Fstory%252Fguid%252F47e23128-f3df-11e8-ad71-a9fa5576a6ef&link=sfmw_tw#https://www.marketwatch.com/amp/story/guid/47e23128-f3df-11e8-ad71-a9fa5576a6ef?mod=dist_amp_social

 

Debt, Downturns & Recessions

The US economy is still strong; growth is good, unemployment is at historical lows and will probably remain so in the first half of this year, but the signs of recession are appearing and there are great concerns on the horizon.  While interest rates were low, all the Fannie Mae & Freddie Mac bonds that were purchased by the Federal Reserve with 3% and 4% coupon rates easily paid the debt service attached to them.  Last year the US prime rate began the year at 1.5% and treasuries had a 3% over all interest rate, but in 2019 our prime rate is now 2% and treasuries are starting with a 4% or more rate.   If interest rates are raised two more times, as they are slated to be, our debt service will rise to 5%, which means most of the bonds that were purchased will no longer be able to pay the debt maintenance on what the US owes.

According to the WSJ: “In the aftermath of the financial crisis, a swath of individuals and families began a long and painful deleveraging process.  Businesses, meanwhile, quickly moved in the opposite direction—loading up on cheap debt to the point where many observers now worry that highly leveraged companies pose a threat to the global economy.  U.S. corporate debt has climbed to roughly 46% of gross domestic product, the highest on record, according to data from the Federal Reserve and Commerce Department. Businesses in emerging markets, such as China, have gone on an even bigger borrowing binge, taking advantage of ultralow interest rates and, in some cases, state-driven policies designed to propel economies forward.”

There is a pension crisis brewing in the private sector, but even more so in the government sector.  Simon Black wrote, “The World Economic Forum reported that in 2015, worldwide pensions were underfunded by $70 TRILLION. That is larger than the top 20 economies in the world, combined.  In the US alone, federal, state, and local government pensions are $7 trillion short on the funding they need to pay what they have promised.  And none of this includes Social Security’s almost $50 trillion of unfunded obligations.  And the private sector isn’t in great shape, either. US corporate pensions are a combined $553 billion in the hole. And one quarter of those funds are expected to go broke within a decade.”

The WSJ also reported that: “Los Angeles officials are socking away money for the next recession.  The nation’s second-largest city has set aside close to $500 million across several funds to help weather emergencies.  States commonly use rainy-day funds to smooth the jolt from recessions, which can come quickly when sales- and income-tax revenue plummets. Thirty-one states boosted rainy-day fund balances in the last fiscal year, and 26 have projected increases this year, according to the National Association of State Budget Officers.”  The article goes on to list many other cites beginning to prepare for the next recession.  The coming recession has been a major focus in the first month of 2019 by US cities, major investment analysts, as well as at the World Financial Forum in Davos, Switzerland.  It would probably be wise for the average investor to be paying attention as well.

Los Angeles and Other Cities Stash Money to Prepare for a Recession (1.24.19) WSJ

https://www.wsj.com/articles/los-angeles-and-other-cities-stash-money-to-prepare-for-a-recession-11548345600

Debt, Dope & Casinos Chicago is Circling the Drain (1.8.19) SMC

https://www.sovereignman.com/trends/debt-dope-and-casinos-chicago-is-circling-the-drain-24406/?utm_medium=email&utm_source=sm_notes&utm_campaign=notes&utm_content=201918_pot_chic

Your Tax Dollars at Work Govt Officially Forgiving Student Debt (12.31.18) SMC https://www.sovereignman.com/trends/your-tax-dollars-at-work-govt-officially-forgiving-student-debt-24388/?utm_medium=email&utm_source=sm_notes&utm_campaign=notes&utm_content=20181231_student_debt

Corporate Debt Hitting Record Levels (12.29.18) WSJ https://www.wsj.com/articles/corporate-debt-is-reaching-record-levels-11546099201

Congress Quietly Formed a Committee to Bail out 200 Pension Funds (12.26.18) SMC https://www.sovereignman.com/trends/congress-quietly-formed-a-committee-to-bail-out-200-pension-funds-23169/?utm_medium=email&utm_source=sm_notes&utm_campaign=notes&utm_content=20181226_end_year

Chinese Dumped $1B of U.S. Real Estate in Third Quarter, Extending Retreat (12.25.18) WSJ

https://www.wsj.com/articles/chinese-dumped-1-billion-of-u-s-real-estate-in-third-quarter-extending-recent-retreat-1543924802

The Biggest Emerging Market Debt Problem Is in America (12.20.18) https://www.project-syndicate.org/commentary/collateralized-corporate-loans-possible-crisis-by-carmen-reinhart-2018-12?utm_source=Project+Syndicate+Newsletter&utm_campaign=c2eb3b265f-sunday_newsletter_23_12_2018&utm_medium=email&utm_term=0_73bad5b7d8-c2eb3b265f-93489681

I Thought This Deal Was Absurd, But Pensions Are Piling In (12.8.18) SMC

https://www.sovereignman.com/trends/i-thought-this-deal-was-absurd-but-pensions-are-piling-in-24351/?utm_medium=email&utm_source=sm_notes&utm_campaign=notes&utm_content=20181128_socsec

Time to Worry (11.30.18) Weekly Standard https://www.weeklystandard.com/james-grant/congress-is-plenty-bipartisan-when-it-comes-to-ignoring-the-national-debt

 

Political Unrest

There is much political turmoil across the world; the battle between globalism and nationalism is on center stage and nationalism has clearly gained the upper hand.  There are many internal and international conflicts going on at the same time, and even more agendas.

On January, 23 the US declared its support of the Venezuelan opposition leader who, along with the Venezuelan parliament, declared the current leader Maurado a usurper and himself to be the legal and rightful leader of the country.  Greece is edging toward political uncertainty with the Macedonia agreement which is being rejected by various factions and is resulting in many internal conflicts.  French citizens have been demonstrating in mass for the last nine weeks and the government has capitulated to their demands.  Italy ignored the EU and passed a budget which the EU condemned.  The US is sanctioning Iran, Israel has been carrying out military strikes on Iranian targets, and there is mass public unrest and demonstrations against the Iranian government.  China has declared war on both its Christian & Islamic populations, attempting to eradicate these faiths, and if they deem it necessary, even the citizens who hold them.

The Chinese technology company Huawei and the Chinese government have been universally condemned, their business executives arrested in many nations for espionage, and the use of their services declared illegal.  Forbes wrote: “The arrest of Huawei CFO Meng Wanzhou in Canada last month for breaking U.S. sanctions law, followed by the firing of Huawei sales executive Wang Weijing in Poland last week shows China can be a bad actor, exactly as Washington believes. The Poland story centers around spying allegations, where Wang allegedly sought trade secrets from the government.’  China is losing the PR battle, for years, U.S. companies have been complaining that China does not honor intellectual property rights. Washington believes tech powerhouses like Huawei owe much of their growth to IP theft.” 

China’s growth estimates don’t look good and are getting worse.  They are clearly losing the trade war and its about to get a lot worse for them.  Quite simply, 90% of China’s GDP comes from exports, so the US is affecting 90% of their trade with us, but exports account for only 15% of US GDP, thus China is only affecting 15% of our trade with them.  No matter how you look at it, the US easily wins any trade war between China and the US.

The Russians and the Chinese have been pushed together into an uneasy alliance, something the US has always tried to strategically prevent.  The US has always attempted to work with China against Russia or Russia against China.  President Trump tried to do this with Russia to prevent an ever aggressive China from gaining more ground, but was prevented from doing so by Congress and the inept Mueller investigation.

U.S. Recognizes Venezuelan Opposition Leader as Interim President (1.23.19) WSJ

https://www.wsj.com/articles/tens-of-thousands-protest-venezuelan-president-maduro-11548264274

China Is Losing The Trade War In Nearly Every Way (1.14.19) Forbes https://www.forbes.com/sites/kenrapoza/2019/01/14/china-is-losing-the-trade-war-in-nearly-every-way/#6b083b927f03

French Antigovernment Protesters March for Ninth Straight Weekend (1.13.19) WSJ

https://www.wsj.com/articles/french-antigovernment-protesters-march-for-ninth-straight-weekend-11547303859

Greece Edges Toward Political Uncertainty Over Macedonia Deal (1.10.19) WSJ

https://www.wsj.com/articles/greece-edges-toward-political-uncertainty-over-macedonia-deal-11547388165

Huawei Targeted in U.S. Criminal Probe for Alleged Theft of Trade Secrets (1.16.19) WSJ https://www.wsj.com/articles/federal-prosecutors-pursuing-criminal-case-against-huawei-for-alleged-theft-of-trade-secrets-11547670341?mod=hp_lista_pos1

Venezuela’s Congress Declares President Nicolas Maduro a Usurper as Opposition Leader Rises (1.15.19)  https://www.theblaze.com/news/venezuela-congress-maduro-usurper?utm_source=Sailthru&utm_medium=email&utm_campaign=Daily-Newsletter__PM-Final%202019-01-15&utm_term=TheBlaze%20Daily%20PM%20-%20last%20270%20days

China Applies Xinjiang’s Policing Lessons to Other Muslim Areas (12.23.18) WSJ https://www.wsj.com/articles/china-applies-xinjiangs-policing-lessons-to-other-muslim-areas-11545566403

China and Russia Inch Closer Together (12.13.18)

https://www.axios.com/china-russia-relationship-closer-putin-xi-trump-f1e3e0e3-37ed-44f5-b8a1-fc71ed1551bb.html

In First for Europe, Brussels Rejects Italy’s Budget (10.23.18) WSJ

https://www.wsj.com/articles/in-first-for-europe-brussels-rejects-italys-budget-1540303443

Five Eyes Intelligence Alliance Builds Coalition to Counter China (10.28.18) Reuters

https://www.reuters.com/article/us-china-fiveeyes/exclusive-five-eyes-intelligence-alliance-builds-coalition-to-counter-china-idUSKCN1MM0GH

Antiestablishment Candidate Wins Brazil’s Presidential Race (10.29.18) WSJ

https://www.wsj.com/articles/brazilians-head-to-polls-in-divisive-presidential-election-1540724400

Change, Uncertainty, Highs & Lows Mark Third Quarter

The third quarter and the month of October saw a lot of ups and downs in both stock and bond markets as well as currency values.  We also saw many long standing leaders/parties fall from power as voters continue the worldwide trend of replacing the establishment with new parties and nationalistic/populist leaders who reject the political status-quo and put their nation’s interests first, ahead of the world community.  We saw leadership change in Australia, Brazil, Italy and Mexico; we also saw what looks like a prelude to the exit of long time German Chancellor Angela Merkle and Prime Minister Theresa May.

IMF Managing Director Christine Lagarde, said in a speech last week that “the global economic weather is beginning to change.”  Saudi Arabia and Russia are expected to experience stronger growth.  The eurozone economy is expected to grow 2% this year, down from a 2.2%.  Argentina’s economy is expected to contract sharply this year and next.  The economy of Turkey is seen expanding just 0.4% next year, down from 7.4% last year.

The Australian Broadcasting Network quoted the IMF as saying: The world remains vulnerable to another financial meltdown as a result of “side effects” from extraordinary measures to prevent a repeat of the Great Depression.  In its latest World Economic Outlook, the IMF singled out ultra-low interest rates and surging debt levels as potential triggers for another meltdown, saying: “large challenges loom for the global economy … The extended period of ultralow interest rates in advanced economies has contributed to the build-up of financial vulnerabilities.”

IMF Lowers Global Growth Forecasts for 2018 and 2019 (10.8.18) WSJ

https://www.wsj.com/articles/imf-lowers-global-growth-forecasts-for-2018-and-2019-1539048878

World Vulnerable To Another Financial Meltdown, IMF Warns (10.4.18) (Australian Broadcasting Corporation)

https://www.abc.net.au/news/2018-10-04/world-vulnerable-to-another-financial-meltdown-warns-imf/10337490?pfmredir=sm

 

World Markets

The US economy has continued its strong growth, generating a 3.5% growth rate for the third quarter.   The WSJ reported that, for the first time since 2008, the U.S. is once again the world’s most competitive economy.  The month of October has been a rollercoaster ride for US markets, hundreds of points up and down, at one point wiping out all the gains for 2018.  It regained some of the loss, but will definitely finish down for the first month of the fourth quarter.  The S&P 500, the Dow and Nasdaq markets appear to be headed for correction territory, falling 10% from their recent highs.

According to the WSJ, “Overseas investors, traders and central bankers are buying fewer Treasurys, a potential turning point for a $15 trillion market at the center of global finance and economics.  Foreign buyers now hold 41% of outstanding Treasury debt, their lowest share in 15 years, down from 50% as recently as 2013, according to U.S. Treasury data.  The dollar’s share of global foreign-exchange reserves fell to 62.5% in the second quarter, its lowest level in five years, data from the International Monetary Fund showed. Goldman Sachs estimates that Russia’s central bank alone may have sold as much as $85 billion in dollar-denominated assets, a move that may have been prompted by concerns over U.S. sanctions.”

In another article the WSJ reported, “The eurozone economy slowed sharply this summer, posting the weakest quarter in five years, as the region begins to suffer from a slowdown in China and turmoil in Italy takes a toll.  While the eurozone economy kept pace with the U.S. in 2016 and 2017, it has fallen behind it this year and the divergence between the two is growing more stark.  There seems little prospect of an imminent escape from the country’s long period of low growth.”

Italy’s credit rating was lowered by Moody’s, from Baa2 to Baa3, citing a “material weakening in Italy’s fiscal strength” after the government targeted higher budget deficits and stalled economic and fiscal reforms.  In contrast to the EU, the UK economy continues to experience an overall better economy with a stronger currency and higher growth rates.  This makes it difficult to claim that being a part of the EU is economically beneficial or that nations like the UK are suffering from exiting.   The EU is doing its best to propagandize, but the writing is on the wall and they fear that Italy, Poland, Hungry, the Czech Republic and other nations may soon exit as well.

The WSJ reported, “Beijing is trying to kick its habit of using big-ticket infrastructure spending to fuel the economy, a turning point from a growth model that has left many Chinese cities adorned with empty high-rises and underused highways.  China bolstered economic growth for decades by pouring trillions of dollars into roads, factories, railroads and more, and doubled down to protect the economy from the global financial crisis of the last decade.  Now the torrent has subsided as debt soared and needless projects blossomed.”

Turkey has created its own problems politically as well financially; it seems that Erdogan irritates his friends as much as he does his enemies.  He arrogantly took on Trump for a foolish reason and was trumped by sanctions, causing the Turkish economy to falter and sending its financial markets and currency into free fall.  Turkey has overtaken Argentina as the world’s worst nation for sovereign debt investors.  Bloomberg reported, “Turkey’s economic outlook has deteriorated, so much that bankers and traders are starting to talk about the need for an International Monetary Fund rescue.  The yield on 10-year bonds has surged to an all-time high, above 20 percent.”

Trade tariffs and the threat of trade tariffs are being used very effectively by President Trump to bring China, the EU and other nations to the table to talk and renegotiate trade agreements.  The reason this is so effective is simple math; 15% of the US GDP comes from exports and 85% is derived from domestic purchases, while in a majority of other nations exports represent 80% – 90% of the GDP with domestic purchases representing only 10% – 20%.  Thus, in a trade war the U.S. can affect 80% – 90% of most other nations ‘economies, while other nations can only affect about 15% of the US economy.

Eurozone Growth Stutters as U.S. Economy Powers Ahead (10.30.18) WSJ

https://www.wsj.com/articles/eurozone-economic-growth-falls-further-behind-u-s-1540894480?mod=hp_major_pos11

Investors Flee Tech Stocks, Dragging Down U.S. Indexes (10.29.18) WSJ

https://www.wsj.com/articles/europe-stocks-rise-as-s-p-500-nears-correction-territory-1540803458

GDP Grows 3.5% on Consumer Vigor but Investment Slows (10.26.18) WSJ

https://www.wsj.com/articles/u-s-economy-grew-at-3-5-rate-in-third-quarter-1540557378

Dow, S&P 500 Erase 2018 Gains & Nasdaq Drops 4.4% (10.24.18) WSJ

https://www.wsj.com/articles/european-stocks-rise-after-volatile-day-on-wall-street-1540367863

Foreign Buying of U.S. Treasurys Softens, Unsettling Financial Markets (10.23.18) WSJ

https://www.wsj.com/articles/foreign-buying-of-u-s-treasurys-softens-unsettling-financial-markets-1540303515

Stocks Wild Swings Rattle Investors (10.22.18) WSJ

https://www.wsj.com/articles/global-stocks-drop-on-political-tensions-worries-over-chinese-growth-1540281268

China Finds Big-Ticket Spending Is a Road to Nowhere (10.20.18) WSJ

https://www.wsj.com/articles/china-finds-big-ticket-spending-is-a-road-to-nowhere-1540036800

U.S. & EU Trade Teams Seek Fast Results and Big Savings (10. 20.18) WSJ 2

https://www.wsj.com/articles/u-s-eu-trade-teams-seek-fast-results-and-big-savings-1540123200

Ross Says Progress of Trade Talks With EU Is Unsatisfactory (10.18.18) WJS

https://www.wsj.com/articles/ross-says-progress-of-trade-talks-with-eu-is-unsatisfactory-1539792204

Italian Credit Downgrade Likely to Add to Pressure on Europe’s Markets (10.19.18) WSJ https://www.wsj.com/articles/contagion-creeps-back-into-europes-bond-markets-1539947331

In First for Europe, Brussels Rejects Italy’s Budget (10.23.18) WSJ

https://www.wsj.com/articles/in-first-for-europe-brussels-rejects-italys-budget-1540303443

U.S. Is World’s Most Competitive Economy Again (10.17.18) WSJ

https://www.wsj.com/articles/u-s-is-worlds-most-competitive-economy-for-first-time-in-a-decade-1539727213

China Growth Slows to Weakest Pace Since the Financial Crisis (10.19.18) WSJ

https://www.wsj.com/articles/china-growth-slows-to-6-5-finance-officials-try-to-soothe-worried-investors-1539917129

Investor Shift Triggers Stocks’ Wild Ride (10.12.18) WSJ

https://www.wsj.com/articles/investor-shift-triggers-stock-markets-wild-ride-1539384364

U.K. Economy Rebounded in Summer (10.10.18) WSJ
https://www.wsj.com/articles/u-k-economy-picked-up-in-the-summer-1539162020

Worst Hit in Global Markets Rout Tech and China (10.10.18) WSJ

https://www.wsj.com/articles/worst-hit-in-global-markets-rout-tech-and-china-1539258678

Big Lenders Make Push to Liquidate Sears (10.10.18) WSJ

https://www.wsj.com/articles/big-lenders-make-push-to-liquidate-sears-1539257424

Why Can’t Turkey Stop Its Economic Nose-Dive (8.8.18)

https://www.bloomberg.com/news/articles/2018-08-08/why-can-t-turkey-stop-its-economic-nose-dive-quicktake

 

Central Banks

The US, Australia and the UK have raised their benchmark interest rates. Japan and the EU have discussed it quietly, but continue to print more currency and their interest rates continue to be negative.  Canada is likely to raise interest rates while Mexico holds tight.  At the last meeting of the Federal Reserve, they determined the US economy to be strong, raised interest rates and stated that they are planning on continuing to raise them.

Fed Minutes Point to Continued, Gradual Interest-Rate Increases (10.17.18) WSJ

https://www.wsj.com/articles/fed-minutes-point-to-continued-gradual-interest-rate-increases-1539799489

Bank of Canada Likely to Raise Rates, Even if Nafta Talks Collapse (9.6.18) WSJ

https://www.wsj.com/articles/bank-of-canada-may-raise-rates-despite-nafta-breakdown-1536264597

Bank of Mexico Leaves Interest Rates Unchanged (8.2.18) WSJ

https://www.wsj.com/articles/bank-of-mexico-leaves-interest-rates-unchanged-1533236118

Carney Hikes Rate in What May Be Final Pre-Brexit Push (8.2.18)

https://www.bloomberg.com/news/articles/2018-08-02/boe-raises-interest-rate-to-0-75-in-surprise-unanimous-vote

 

Debt

As most global stock markets and national GDP are going up, so are most of their debt levels.  At some point in the future, rising national debt levels will collide with stock markets & GDP, because you cannot continue to fuel growth with debt; businesses can’t do it and neither can governments.  According to CNBC, “Unreported Chinese local government debt may amount to trillions of U.S. dollars, meaning the country’s debt-to-GDP ratio has hit “alarming” levels; S&P Global Ratings said in a report released TuesdayThe actual level of off-balance sheet debt could be several times more than what is publicly disclosed and range as high as 30 trillion yuan to 40 trillion yuan.”  Pakistan, the flagship country for China’s global infrastructure building initiative, asked for a bailout from the International Monetary Fund, amid growing concerns that Beijing’s program is pushing recipient countries into financial crisis. Ballooning trade deficit and fast-depleting foreign exchange reserves left the Pakistani government no other choice.

Germany held up the final $57.1 billion bailout disbursement for Greece and did not sign off on the deal.  “The International Monetary Fund agreed to boost its bailout package signed with Argentina in June, providing additional financial support and accelerating the disbursement of funds.  The expanded program will aim to reduce the country’s double-digit inflation by replacing inflation targets with monetary base goals to contain the money supply, the IMF said.  Argentina’s debt ratio will reach 84% of gross domestic product by the end of the year, compared with 57% a year earlier, consultancy Oxford Economics said this week. “Argentina’s debt-to-GDP ratio is rising at an unsustainable pace,” the firm said.”(WSJ).   The US Court of Federal Claims has ruled that hedge fund creditors of Puerto Rico’s debt can sue the United States government for losses incurred by investors.

Simon Black wrote:

Right now many pension funds around the world simply don’t have enough assets to cover the retirement obligations they owe to millions of workers.  In the US alone, federal, state, and local governments, pensions are about $7 trillion short of the funding they need to pay out all the benefits they’ve promised.  (** And that doesn’t include another $49 trillion in unfunded Social Security obligations…).  In 2015, the total worldwide gap in pension funding was $70 trillion according to the World Economic Forum. That is larger than the twenty largest economies in the world combined.  And it’s only gotten worse since then…  The WEC said that the worldwide pension shortfall is on track to reach $400 trillion by 2050.  In a world full of reckless and extreme monetary policy, Japan no doubt takes the cake. The country has total debt of more than ONE QUADRILLION YEN (around $10 trillion) pushing its debt-to-GDP ratio to a whopping 224% – that puts it ahead of financial basket case Greece, whose debt-to-GDP is around 180%.  Japan spent 24.1% of its total revenue (appx. 23.5 trillion yen) last year servicing its debt – both paying down principal and interest. And that percentage has no doubt moved even higher this year.  And, keep in mind, this isn’t some banana republic. It’s the world’s third-largest economy.  In another Simon Black post: As of June, U.S. non-financial firms are sitting on a record $6.3 trillion in debt.  AT&T alone has an astounding $180 billion of debt, making it the most indebted non-government controlled and non-financial firm in history… and more indebted than many governments around the world. And the quality of corporate debt is getting worse and worse.”

The U.S. Treasury Department estimates it will issue more than $1 trillion in debt this year as higher government spending and sluggish tax revenues push the deficit higher. The Treasury said Monday it expects net marketable debt to total $425 billion in the fourth quarter, which would bring total debt issuance in 2018 to $1.338 trillion, compared with $546 billion in 2017. That would be the highest annual debt issuance since $1.586 trillion in 2010, when the U.S. economy was still crawling out of a recession.  The higher debt issuance comes as the Federal Reserve has been raising short-term interest rates following an extended period of near-zero rates in the years since the financial crisis. Fed officials lifted their benchmark federal-funds rate to a range between 2% and 2.25%.  Annual home-price gains fell below 6% for the first time in a year in August, another sign that the slowdown in the housing market is becoming widespread and is likely to persist in the months to come.

Home Prices Continue to Lose Momentum (10.30.18) WSJ https://www.wsj.com/articles/home-prices-continue-to-lose-momentum-1540904603?mod=hp_lead_pos4

Treasury Expects to Issue Over $1 Trillion in Debt in 2018 (10.29.18) WSJ

https://www.wsj.com/articles/treasury-estimates-annual-net-marketable-debt-to-total-1-338-trillion-in-2018-1540839709

$6 Trillion of Local Government Debt may be Lurking Under the Surface in China (10.16.18) CNBC  https://www.cnbc.com/2018/10/16/china-hidden-local-government-debt-could-be-6-trillion-sp.html

U.S. Deficit Rose 17% in Fiscal 2018 (10.15.18) WSJ  https://www.wsj.com/articles/u-s-government-debt-rises-17-in-fiscal-2018-1539626598

Sears, a Onetime Retail Giant, Now Banks on Bankruptcy (10.15.18) WSJ https://www.wsj.com/articles/sears-files-for-chapter-11-bankruptcy-1539579819

The Pension Crisis is Bigger Than the World’s 20 Largest Economies and only Getting Worse (9.7.18)  SMC | https://www.sovereignman.com/trends/this-financial-crisis-is-bigger-than-the-worlds-20-largest-economies-24103/?utm_medium=email&utm_source=sm_notes&utm_campaign=notes&utm_content=201897_pension_crisis

Why Japan May Spark The Next Crisis (8.1.18) SMC https://www.sovereignman.com/trends/why-japan-may-spark-the-next-crisis-24023/?utm_medium=email&utm_source=sm_notes&utm_campaign=notes&utm_content=201881_japan_eco

The Pension Crisis is Bigger Than the World’s 20 Largest Economies and only Getting Worse (9.7.18)  SMC | https://www.sovereignman.com/trends/this-financial-crisis-is-bigger-than-the-worlds-20-largest-economies-24103/?utm_medium=email&utm_source=sm_notes&utm_campaign=notes&utm_content=201897_pension_crisis

Judge Rules that Bankrupt Puerto Rico’s bondholders can sue the United States (7.16.18) WSJ https://www.theblaze.com/news/2018/07/16/judge-rules-that-bankrupt-puerto-ricos-bondholders-can-sue-the-united-states?utm_source=Sailthru&utm_medium=email&utm_campaign=Daily-Newsletter__PM-Final%202018-07-16&utm_term=TheBlaze%20Daily%20PM%20-%20last%20270%20days

IMF Expands Aid Package for Argentina (9.26.18) WSJ https://www.wsj.com/articles/imf-expands-aid-package-for-argentina-1537997055

Pakistan Requests IMF Bailout Talks (10.8.18) WSJ  https://www.wsj.com/articles/pakistan-to-hold-bailout-talks-with-imf-1539018792

One of the Greatest Follies from the Last Crisis is Back (10.2.18) SMC https://www.sovereignman.com/trends/one-of-the-greatest-follies-from-the-last-crisis-is-back-24180/?utm_medium=email&utm_source=sm_notes&utm_campaign=notes&utm_content=2018102_hudson

Germany Delays Greece’s Final Bailout Payment (7.12.18) WSJ  https://www.wsj.com/articles/germany-delays-greeces-final-bailout-payment-1531431927

 

Political Unrest

Political unrest is increasing along with most global markets and national GDPs, nationalism continues to defeat Globalism, and independent non-establishment candidates continue to defeat establishment candidates.  Financial weapons like trade sanctions and tariffs are being used to pressure, force and even defeat world leaders and governmental regimes.  According to the WSJ “The Pakistani request for an IMF loan could further test already-strained U.S.-China relations.  In July, U.S. Secretary of State Mike Pompeo warned that the U.S. didn’t want to see any IMF lending to Pakistan “go to bail out Chinese bondholders or—or China itself.”  South Africa is scrambling to shore up investor confidence as Africa’s most-developed economy has plunged into recession, its rand currency has slid and pressure is mounting from a dissident faction within his ruling party.  President Trump, South African banks and white farming groups have all attacked an ANC proposal to start expropriating land without compensation—despite Mr. Ramaphosa’s assurances that this would be done without hurting the economy or agricultural production.”

Disunity continues in the European Union as Immigration, European courts, over regulation, banking problems, low growth and tight budgets continue to fracture European unity, causing many countries to challenge basic EU fundamentals.  The utopian idealistic view of a united Europe with no borders and overlapping economies are no match for financial reality.  EU nations are frustrated that they can’t do what they believe is best for their nation and its citizens.  In one election after another nationalist/populist candidates are defeating their globalist/establishment counter parts.  German Chancellor Angela Merkle, who, less than a year ago, was one of the world’s most powerful leaders, recently resigned as head of her party, and said she would not run again after her current term is over.  British Prime Minister Theresa May likely will not last much longer, and a number of her cabinet ministers have already resigned.  May’s former Foreign Minister, Boris Johnson (who was the main leader of Brexit), will likely become Prime Minister and lead the UK through a hard Brexit at the end of March of 2019.

Anti-establishment nationalistic leaders are growing in popularity in Poland, Hungry, the Czech Republic and Italy.  Italy defied the EU by passing a budget that did not follow EU guidelines and have thus far refused to change it.   Nationalist leaders are also replacing their globalist counter parts in Brazil and Australia.  People all over the world are pushing back against government and multi-national corporations and technology companies.  They are tired of being controlled and manipulated by these entities and told what to do, by what they perceive to be the ruling elites, who do not have their best interests at heart.

The biggest tech companies have tremendous power over the hearts and minds of people—as much as many of the governments in countries where they operate. All over the world, citizens, bureaucrats and politicians are now pushing back against that power.  Most often, the backlash is directed at America’s tech giants, such as Alphabet Inc.’s Google, Facebook Inc. and Amazon.com Inc., and how their ubiquity affects individuals and businesses. But resistance to Big Tech also includes China curbing the power of its own technology companies, and India rejecting foreign monopolists in favor of homegrown players.    The worst-case scenario in China, says Paul Triolo, a technology analyst at the Eurasia Group think tank, is if Beijing were to nationalize some of its tech giants.” (WSJ)

As August came to a close Reuters reported, that China completed its own SWIFT alternative.  The new system was created to combat how the U.S. has used the Belgium-based SWIFT system (the world’s biggest electronic payments system) as a financial weapon to target Russia, when Russia does things the U.S. doesn’t like.  This is how the U.S. sanctions other nations who do things they don’t like, because if those nations can’t wire money in or out, their economies would be destroyed.  If China and Russia implement this, it would represent a major step in nations being able to defend their economies from Washington’s ability to sanction and control international financial transactions.  Russia and China are not the only ones looking at electronic transaction payment alternatives.  Germany urged the EU to come up with their own system, to loosen the ability of the US to apply pressure in this manner.  I think we are going to see more and more countries coming up with their own SWIFT alternatives. The world of financial transaction has radically changed in the last ten years with an additional World Bank (AIIB), crypto-currencies and alternative SWIFT systems; the next world financial crisis will not play out the same as the last one.

How the Desire for Change Might Not Be Just an American Experience (10.30.18) WSJ

https://www.wsj.com/video/how-the-desire-for-change-might-not-be-just-an-american-experience/28E9F8B0-A633-43A3-AB47-9A8B73871D7E.html

Anti-Establishment Candidate Wins Brazil’s Presidential Race (10.29.18) WSJ

https://www.wsj.com/articles/brazilians-head-to-polls-in-divisive-presidential-election-1540724400

The Global Tech Backlash Is Just Beginning (10.28.18) WSJ https://www.wsj.com/articles/the-global-tech-backlash-is-just-beginning-1540476151

Italy Vows to Stick to Budget That Breaches EU Rules (10.22.18) WSJ

https://www.wsj.com/articles/italy-vows-to-stick-to-budget-that-breaches-eu-rules-1540207398

Foreign Buying of U.S. Treasurys Softens, Unsettling Financial Markets (10.23.18) WSJ

https://www.wsj.com/articles/foreign-buying-of-u-s-treasurys-softens-unsettling-financial-markets-1540303515

Yemen Could be Worst Famine in 100 Years (10.15.18) BBC

https://www.bbc.com/news/av/world-middle-east-45857729/yemen-could-be-worst-famine-in-100-years

Merkel, Already Wobbling, Faces Fresh Blow in Historical Stronghold (10.12.18) WSJ  

https://www.wsj.com/articles/german-voters-set-to-punish-merkels-conservative-bloc-1539336600

Brazil Voters Buck Status Quo With Rise of Right-Wing Firebrand (10.11.18) WSJ

https://www.wsj.com/articles/brazil-voters-buck-status-quo-with-rise-of-right-wing-firebrand-1539034621

Pakistan Requests IMF Bailout Talks (10.8.18) WSJ https://www.wsj.com/articles/pakistan-to-hold-bailout-talks-with-imf-1539018792

Economic Problems Exacerbate Challenges for South Africa’s Leader (9.26.18) WSJ

https://www.wsj.com/articles/economic-problems-exacerbate-challenges-for-south-africas-leader-1537975408

Germany Urges EU Payment System without U.S. to Save Iran Deal (8.21.18) Reuters

https://www.reuters.com/article/us-iran-nuclear-germany/germany-urges-eu-payment-system-without-u-s-to-save-iran-deal-idUSKCN1L61KW

 

Brief Commentary on Mid-Tem US Election Results:

Just a quick comment, I am in Israel at the ICCC Conference which just ended Wednesday.  The loss of the House of Representatives means that the Trump and the Republicans will push through a lot of Legislation in the next month and a half.  After that little or no legislation will get passed after Dec 31st and Trump will rule by executive order. Unfortunately, the Democrats are going to start multiple baseless Congressional investigations against Trump.  This will make things even more contentious and create even a greater media circus than we have seen the last two years.

2018 Mid-Year Economic Update

At mid-year global financial markets are doing well in most places, but presidents, prime ministers, parliaments and governments are changing at break neck pace.  In the last two months:

  • Turkey’s constitution was changed & Erdogan was given dictatorial powers
  • Trump became the first US president to meet with N. Korea, reportedly striking a deal for NK to de-nuclearize, but there are reports they are still building nuclear facilities
  • North and South Korea have begun the process of ending the technical state of war between them as well as eliminating the Demilitarized Zone
  • Putin won reelection by more than 80% about the same as his approval ratings
  • Iraq elections were so close and so corrupt, they are doing a 12M vote re-count by hand
  • Venezuela is experiencing rioting, mass poverty and economic freefall as Maduro was reelected in what is being hailed as a corrupt contest
  • Brexit negotiations are going no where
  • Immigration is driving the EU apart
  • Trade Wars and Tariffs are being fired back & forth
  • Hungarian Prime Minister Viktor Orban decisively won a fourth term
  • Iran is being ostracized and sanctioned by the US and its citizens are protesting
  • Spain’s prime minister Rajoy has lost his majority and prime ministership and the Catalonians have voted separatist leaders back in
  • Like Italy, Mexican’s elected a brand new year old party to run Mexico

 

Political Unrest

Venezuelan President Nicolás Maduro’s re-election has almost universally been condemned, with the US calling it a “sham” and Canada, Brazil, Chile, and Panama declaring they will not recognize Venezuela’s government.  Venezuela’s annual inflation rate is the highest in the world, according to a BBC report, “Venezuela’s Central Bank has not published inflation figures since 2015 but economist Steve Hanke from Johns Hopkins University calculated it rose to almost 18,000% in April.” Nearly 2 Million people have fled the country since 1999 and Venezuelan’s are the top seekers of US asylum.   Another establishment government bites the dust in Mexico, as Andrés Manuel López Obrador and the National Regeneration Movement takes over the reins, ending ninety years of rule by one of three parties.

In Russia-China-US relations – the WSJ reported: “Russia and China have signed a raft of deals and pledged tighter coordination on security and foreign policy, underscoring how disputes with the U.S. are drawing the neighbors closer.”  This is not a good sign as the goal of super power foreign policy has always been to ally with China against Russia or allied with Russia against China, but we’ve never seen Russian and China allied against the US.  Trump has clearly chosen Russia to buddy up with and is actively ostracizing China on multiple fronts.  China is doing its best to look like they can be trusted, however few world leaders trust China, which is why President Trump has called their bluff, which they are not used to have happen.  According to the WSJ, “The Defense Department’s inspector general is investigating a major security breach after Chinese hackers allegedly stole large amounts of sensitive data from a Navy contractor, according to military officials.  Adm. Davidson said: “I believe they are stealing technology in just about every domain, and trying to use it to their advantage.”

Mexico Vote Snubs the Political Establishment (7.2.18) WSJ

https://www.wsj.com/articles/mexico-vote-snubs-the-political-establishment-1530560502

North Korea Expands Key Missile-Manufacturing Plant (7.1.18) WSJ

https://www.wsj.com/articles/north-korea-expands-key-missile-manufacturing-plant-1530486907?mod=searchresults&page=1&pos=1

Iraq Will Proceed With Extraordinary Recount of 12 Million Ballots (6.21.18) WSJ

https://www.wsj.com/articles/iraq-will-proceed-with-extraordinary-recount-of-12-million-ballots-1529592962

Russia and China Show Off Ties With Putin Visit (6.8.18) WSJ

https://www.wsj.com/articles/russia-and-china-show-off-ties-with-putin-visit-1528467295

Spain’s Rajoy Ousted by Lawmakers (6.1.18) WSJ

https://www.wsj.com/articles/lawmakers-oust-spanish-leader-who-enacted-painful-economic-reforms-1527845793

Chinese Hackers Stole Secret U.S. Submarine-Warfare Data, Military Says (6.8.18) WSJ

https://www.wsj.com/articles/chinese-hackers-stole-large-amounts-of-secret-u-s-submarine-warfare-data-military-says-1528500859

After Venezuela Strongman’s Victory, Isolated Nation Faces Growing Chaos (5.21.18) WSJ

https://www.wsj.com/articles/after-venezuela-strongmans-victory-isolated-nation-faces-growing-chaos-1526935047

Catalonia’s Assembly Elects New Hard-Line Separatist Leader (5.14.18) WSJ

https://www.wsj.com/articles/catalonias-assembly-elects-new-hard-line-separatist-leader-1526302712

North Korea & South Korea to Pursue Peace Deal, Denuclearization (4.27.18) WSJ |

https://www.wsj.com/articles/kim-jong-un-and-south-korean-leader-to-pursue-peace-deal-denuclearization-1524822022

 

Nationalism v Globalism

The battle of Nationalism v Globalism is raging almost everywhere, especially in western nations.  Nationalists want to keep their cultural and historical identity and retain control of their national sovereignty to determine their own destiny.  Globalists believes these differences are divisive and that it’s not fair that one nation should have an advantage over another.  Globalists want to eliminate national identities, cultures and sovereignty and replace them with a one world economy and government that distributes individual wealth and world resources equally.  Globalists believe large bureaucratic structures like the UN and the European Union run by unelected bureaucrats, would do a better job than elected officials and individual sovereign nations.

Now that Special Counsel Robert Mueller’s 18 month investigation into Trump/Russian collusion has failed to turn up any evidence or indictments, Trump & Putin are scheduled to meet in their first formal summit in mid-July.  Trump plans to visit the UK, then attend a NATO meeting in Brussels, after which he and Putin will meet in Finland.  Trump and Putin are unarguably the most effective and forceful global leaders in the world and should they decide to work together to achieve a mutually advantageous set of goals, the combined governments of the world couldn’t do anything to stop them.  This is why the deep state and the rest of the world leaders have done everything in their power to keep them apart.  China has to walk a fine line, wanting to remain Russia’s friend, and not wanting Trump & Putin to make any joint agreements that make things any more difficult for them than Trump already has.  No doubt NATO nation leaders (primarily EU nations) will pressure Trump not to make any deals, but Trump has proved fairly impervious to pressure, in fact he seems to enjoy it.  No doubt this why Trump is visiting the UK to cut some deals with Prime Minister May, who isn’t getting anywhere with Brussels either, as he positions himself for the NATO meetings.

Trump to Meet Russia’s Putin in Finland on July 16 (6.28.18) WSJ

https://www.wsj.com/articles/trump-to-meet-russias-putin-in-finland-on-july-16-1530187901

 

EU Continues to Fracture

Immigration is dismantling the EU and almost brought down German Chancellor Merkle’s government a mere three months after it was finally formed.  Before the meeting of EU leaders on Immigration the WSJ reported, “Ms. Merkel is under fire from her conservative allies in Bavaria, who are part of her government and control the Interior Ministry in Berlin. They have given the chancellor until this weekend to strike an unlikely European deal that puts a lid on immigration or closes the border to certain immigrants. Failure could bring about a collapse of her fragile coalition.”  An agreement was reached on the matter, the final Friday in June, which wasn’t what Merkel wanted, but it was enough to keep her chancellorship, at the moment.

The WSJ reported: “Italian Interior Minister Matteo Salvini is blocking migrant-laden boats from landing in Italy, challenging European Union rules on asylum.  “Italy has stopped bowing its head and obeying,” Mr. Salvini said this month after blocking a ship bearing asylum seekers from landing.  Mr. Salvini and his League are the real power behind the new government in Rome, overshadowing their more moderate partners, the 5 Star Movement.  The League’s popularity continues to grow, reaching around 28% in the latest opinion polls, compared with 17% in March elections, their campaign slogan, “Italians First” kinda sounds familiar.  The rift in Ms. Merkel’s government over the issue is so deep as Berlin is rife with speculation the chancellor could fall.”

Hungarian Prime Minister Viktor Orban won a fourth term decisively, with his anti-EU, immigration and strong nationalistic platform.  Brexit negotiations continue to produce nothing but discord.  The UK and the EU are going through the motions, but there is little hope on either side of an agreement being reached.  Bloomberg reported: U.K. Prime Minister Theresa May accused the European Union of putting the safety of its 500 million citizens at risk by blocking a broad Brexit deal on security, as the atmosphere surrounding negotiations soured.  During a working dinner at the EU summit in Brussels on Thursday, May told her fellow leaders that Britain wants to play a major role in European security after it leaves the bloc. “Our ability to do so is being put at risk,” she said.

 

European Leaders Reach Migration Deal, Giving Merkel Respite at Home (6.29.18) WSJ https://www.wsj.com/articles/migrant-issue-could-be-make-or-break-for-eu-merkel-warns-1530197239

May Hits EU With Terror Warning as Brexit Mood Gets Bitter (6.28.18)

https://www.bloomberg.com/news/articles/2018-06-28/may-hits-eu-with-terror-warning-as-brexit-mood-gets-bitter

EU Worries Worst Is Yet to Come in U.K.’s Brexit Soap Opera (6.20.18)

https://www.bloomberg.com/news/articles/2018-06-20/eu-worries-u-k-soap-opera-over-brexit-still-has-worse-to-come

Italy’s Salvini Puts Roadblocks in Migrants’ Way While Reaching Out to Fellow European Populists (6.25.18) WSJ https://www.wsj.com/articles/italys-salvini-puts-roadblocks-in-migrants-way-while-reaching-out-to-fellow-european-populists-1530091800

Immigration Backlash Erodes Merkel’s Power in Conservative Stronghold (6.26.18) https://www.wsj.com/articles/immigration-backlash-erodes-merkels-power-in-conservative-stronghold-1530029266

The Good Times for Illegals Is Over, Get Ready to Pack Your Bags Italy’s New Interior Minister Promises Mass Deportations (6.4.18) https://www.zerohedge.com/news/2018-06-03/good-times-illegals-over-get-ready-pack-your-bags-italys-new-interior-minister

Macron Appeals for EU Unity in Face of Nationalism (4.17.18) WSJ

https://www.wsj.com/articles/macron-appeals-for-eu-unity-in-face-of-nationalism-1523979040

Hungary’s Orban Wins Fourth Term as PM (4.8.18) WSJ

https://www.wsj.com/articles/hungary-votes-in-election-with-orban-set-to-secure-a-fourth-term-1523162923

 

Central Banks

The Federal Reserve raised interest rates a quarter point in their mid-June meeting and indicated they would raise them two additional times this year.  The following day the European Central Bank said they were going to keep their interest rates at the current -.04, but they planned to begin to wind down their bond buying and euro printing.  The number of US mortgage refinances dropped to the lowest level in 18 years in May, as the Federal Reserve hiked interest rates and made it clear they plan to continue to raise rates.  Bloomberg reported: “China’s central bank will cut the amount of cash some lenders must hold as reserves, unlocking about 700 billion yuan ($108 billion) of liquidity, as it seeks to control leverage and support smaller companies.  The required reserve ratio for some banks will drop by 0.5 percentage point, effective July 5, the People’s Bank of China said on its website. That’s the day before the U.S. and China are scheduled to impose tariffs on each other.”

The Argentine peso has fallen to historic lows despite the change in its central bank chairman which the global market views as favorable.  Argentine 100 year government bond rates rose to 9% which begs the question why would anybody buy 100 year bond from a country which has defaulted three times in the last 70 years.  Central bankers want to regulate crypto-currency, but can’t agree on how to do it.  They are beginning to research and prepare for the future in which digital currencies will challenge their supremacy and their ability to control the liquidity and transactional activities within their borders.

 

China to Unleash $108 Billion in Reserve Cut for Some Banks (6.24.18)

https://www.bloomberg.com/news/articles/2018-06-24/china-s-central-bank-cuts-reserve-ratio-for-some-banks

ECB to End Bond-Buying Program in December as Crisis-Era Policies Wind Down (6.14.18) WSJ

https://www.wsj.com/articles/ecb-to-end-bond-buys-as-crisis-policies-wind-down-1528977227

Fed Raises Interest Rates, Sets Stage for Two More Increases in 2018 (6.13.18) WSJ

https://www.wsj.com/articles/fed-raises-rates-and-signals-faster-pace-in-coming-years-1528912910

Argentine Peso Resumes Plunge After Central Bank Shakeup (6.15.18)

https://www.bloomberg.com/news/articles/2018-06-15/dramatic-rebound-for-argentine-peso-as-caputo-takes-over-bank

Weekly Mortgage Refinances Drop to an 18-Year Low as Rates Jump (5.23.18) CNBC https://www.cnbc.com/2018/05/23/weekly-mortgage-refinances-drop-to-an-18-year-low-as-rates-jump.html

Central Bankers Can’t Agree on Cryptocurrencies (4.26.18)

https://www.bloomberg.com/view/articles/2018-04-26/central-bankers-can-t-agree-on-cryptocurrencies

 

Crypto Currency

Bitcoin is currently being investigated for price manipulation, as Bitcoin values have dropped 70% from their December highs.  According to the WSJ, “Government investigators have demanded that several bitcoin exchanges hand over comprehensive trading data to assist a probe into whether manipulation is distorting prices in markets linked to the cryptocurrency.  The investigation followed the launch of bitcoin futures on CME Group Inc.’s CME -0.45% exchange six months ago. CME’s bitcoin futures derive their final value from prices at four bitcoin exchanges: Bitstamp, Coinbase, itBit and Kraken. Manipulative trading in those markets could skew the price of bitcoin futures that the government directly regulates.”

Bitcoin Bloodbath Nears Dot-Com Levels as Many Tokens Go to Zero (6.28.18) https://www.bloomberg.com/news/articles/2018-06-29/bitcoin-falls-below-5-900-to-wrap-up-a-gloomy-2018-first-half

Bitcoin Extends Its Collapse (6.13.18)

https://www.bloomberg.com/news/articles/2018-06-13/no-let-up-for-bitcoin-as-biggest-cryptocurrency-extends-decline

U.S. Regulator Demands Trading Data From Bitcoin Exchanges (6.8.18) WSJ

https://www.wsj.com/articles/u-s-regulators-demand-trading-data-from-bitcoin-exchanges-in-manipulation-probe-1528492835

The Real Opportunities in Cryptocurrency Aren’t Cryptocurrencies (6.11.18) SMC https://www.sovereignman.com/trends/the-real-opportunities-in-cryptocurrency-arent-cryptocurrencies-23753/?utm_medium=email&utm_source=sm_notes&utm_campaign=notes&utm_content=2018611_dlt

 

DEBT

The International Monetary Fund (IMF) has provided a credit line of $50B to Argentina.  Bloomberg reported it was the largest loan the IMF has ever issued.  Again, is it wise to issue a nation whose currency has fallen 32% and that has defaulted three times in the last 70 years, the largest loan ever?  Eurozone nations agreed on the final elements of a plan to get Greece out of its eight-year bailout program and make its debt more manageable.  The ministers needed to complete a deal between Greece and its creditors that would allow it to safely emerge from its third bailout program on Aug. 20 and face the international bond markets again.

Chinese local government debt is over 16.6 trillion yuan up almost 1% from the beginning of the year.  In an attempt to curtail the debt Beijing is letting local governments sell bonds, but are not allowing them to guarantee the debt.  Reuters reported, “A firm controlled by a city government in China’s Inner Mongolia region has failed to make interest and principal payments on nearly 4 billion yuan ($629 million) in off-balance sheet loans, two sources with direct knowledge of the matter said.  The rare loan default highlights growing funding strains on Chinese local governments as Beijing cracks down on riskier types of financing and rising debt, which some outside agencies have warned could lead to a banking crisis.”  

Simon Black summarizes the dire condition of the US debt: “The Medicare and Social Security Trust Fund issued their June 2018 Annual Report stating, the Medicare fund will be fully depleted in 2026 and the Social Security fund will be depleted in 2034.  The 2018 Annual US Treasury report shows the US is already insolvent by over $20T and by 2020 annual budgets will be over $1T annually.”  He gives an analysis of insolvent world pension funds which are going to fail and little is being done to fix this inevitable crisis.  China reduced its US Treasury holdings by $5.8B in April, and Russia and other nations are selling their US Treasury holdings as well.

IMF Board Approves Argentina’s $50 Billion Stand-By Arrangement (6.20.18) https://www.bloomberg.com/news/articles/2018-06-20/imf-board-approves-argentina-s-50-billion-stand-by-arrangement

The Latest Casualty in the Global Pension Catastrophe (6.22.18) SMC https://www.google.com/url?hl=en&q=https://www.sovereignman.com/trends/the-latest-casualty-in-the-global-pension-catastrophe-is-23795/?utm_medium%3Demail%26utm_source%3Dsm_notes%26utm_campaign%3Dnotes%26utm_content%3D2018622_pension_crisis&source=gmail&ust=1530015217065000&usg=AFQjCNFkUd2cUDyWzvpj1w_RX_LYkwaZAQ

China Local Govt Firm Fails to Repay $629 MLN Loans in Rare Default Sources (5.18.18) Reuters https://www.reuters.com/article/us-china-economy-debt-default/china-local-govt-firm-fails-to-repay-629-mln-loans-in-rare-default-sources-idUSKCN1IJ0DY?mod=djemDailyShot&mod=djemDailyShot

Eurozone Agrees on Final Details of Plan to End Greece’s Bailout (6.21.18) WSJ

https://www.wsj.com/articles/eurozone-agrees-on-final-details-of-plan-to-end-greeces-bailout-1529629327

China’s U.S. Treasuries Holdings Fell $5.8 Billion in April (6.15.18)

https://www.bloomberg.com/news/articles/2018-06-15/china-s-holdings-of-u-s-treasuries-fell-5-8-billion-in-april

Its Official Medicare Trust Fund Will Run Out Of Money in 8 Years (6.7.18) SMC https://www.sovereignman.com/trends/its-official-medicare-trust-fund-will-run-out-of-money-in-8-years-23750/?utm_medium=email&utm_source=sm_notes&utm_campaign=notes&utm_content=201867_medi_broke

 

The Middle East

The Middle East has been a powder keg of activity with continuing war in Syria, Turkey’s Erdogan achieving one man dictatorial rule and the US moving its embassy to Jerusalem.  The power brokering dream of Iran is currently crumbling, as their three recent bumbled attacks on Israel ended with strategic and humiliating retaliation by the Israelis, while at the same time, their citizens are protesting again and ignoring the threats of the ruling Mullahs.  No work, no food and no delivery on the promises of an Islamic paradise are taking their toll.  This coupled with Trump withdrawing from the sweetheart deal the Obama Administration gave them and imposing new more stringent economic sanctions, leave Iran with a dreary future outlook.  When the citizens of a nation no longer respond to governmental fears and threats, because their circumstances are more dire, regimes change.

Unlike the current Iranian leaders who have been difficult to deal with who broke the nuclear with Obama administration shortly after they made it, the new Saudi Arabian leader Crown Prince Mohammed bin Salman is looked at as reasonable, personable, a dynamic deal maker and has quickly consolidated power, raised oil production, started many new non-oil economic initiatives, declared Israel’s right to exist and most earth shattering, let Saudi women drive.

Bloomberg reported: The Kingdom ramps up oil production as prices rise and sanctions pressure Tehran.  The Trump administration’s effort to drive Iranian oil exports down to zero is boosting the fortunes of Tehran’s rival, Saudi Arabia, and putting the U.S. ally on a stronger footing for a showdown across the Persian Gulf.  Saudi Crown Prince Mohammed bin Salman’s government is planning to increase oil production to a record high of nearly 11 million barrels a day by next month to replace Iranian crude expected to be lost because of U.S. sanctions..

Trump’s Bid to Weaken Iran Is Strengthening the Saudi Economy (6.28.18) WSJ

https://www.wsj.com/articles/trumps-bid-to-weaken-iran-is-strengthening-the-saudi-economy-1530207076

New Protests in Tehran Pose Fresh Challenge to Iran’s Rulers (6.25.18) WSJ

https://www.wsj.com/articles/new-protests-in-tehran-pose-fresh-challenge-to-irans-rulers-1529963125

Erdogan Extends His Hold in Turkey in Pivotal Election Win (6.24.18) WSJ

https://www.wsj.com/articles/erdogan-wins-another-term-as-turkeys-president-1529869594

Erdogan Election Triumph Takes Turkey Into Era of One-Man Rule (6.24.18)

https://www.bloomberg.com/politics/articles/2018-06-24/erdogan-takes-early-lead-as-turkey-counts-presidential-votes

Saudi Arabian Arrest Wave Shows Crown Prince’s Bid to Control Change (6.5.18) WSJ https://www.wsj.com/articles/saudi-arabian-arrest-wave-shows-crown-princes-bid-to-control-change-1528191000

OPEC Resistance to Saudi Supply Plan Grows With Iraqi Defiance (6.11.18) https://www.bloomberg.com/news/articles/2018-06-11/opec-resistance-to-saudi-supply-plan-grows-with-iraqi-defiance

Saudis Start to Ramp Up Oil Output, Ahead of OPEC Meeting (6.818) WSJ

https://www.wsj.com/articles/saudis-start-to-ramp-up-oil-output-ahead-of-opec-meeting-1528490019

Iran Attack on Israel and Got Beaten Bad and Internationally Abandoned (5.10.18)

http://www.businessinsider.com/iran-attack-on-israel-defeated-internationally-abandoned-2018-5

Saudi Crown Prince Says Israelis Have the Right to Their Own Land (4.3.18) https://www.bloomberg.com/news/articles/2018-04-02/saudi-crown-prince-israelis-have-the-right-to-their-own-land

US Embassy Opens In Jerusalem Full Ceremony (5.14.18) Fox News https://www.youtube.com/watch?v=MISVkrFAiFk