Weekly Wrap: Iraq, Argentina, EU Banks And GDP by Ty Andros
This week’s news certainly WASN’T BORING. Big events and small add up to unfolding CHAOS around the WORLD.
This week’s subjects:
- American Empire on FIRE!
- Out on a LIMB: Credit Unions facing INSOLVECY
- Is rising indebtedness a sign of economic strength?
- Bond YIELDS continue to collapse as the race for yield INTENSIFIES
- George Orwell in Action
- Showdown looming at the OK corral!
- Simply UNBELIEVABLE SOVEREIGN credit market action
- PHANTOM GDP
- Rare INDEED
- Must watch video interview with Charles Nenner
- European BANKING SYSTEM INSOLVECY
American Empire on FIRE!
It is clear that US FOREIGN POLICY and unfolding military weakness is creating a vacuum that is quickly degenerating into what could be the beginnings of World War III. The biggest victim will most certainly be the US DOLLAR. Dennis Gartman repeatedly emphasizes the World’s Reserve currency also must be the dominant MILITARY power. HE IS CORRECT. They have gone hand in hand in EMPIRES throughout history. Now the administration in Washington is on RECORD saying we will no longer be the dominant military power. They have demonstrated this repeatedly over the last 6 years. Egypt, Syria, Libya, Iraq, Afghanistan, the Taliban prisoner swap, Ukraine, and the South China Sea are abject surrenders to belligerents in one form or another. Now that these patterns are firmly established, escalation by all can be EXPECTED. The administration is openly committed to downsizing the military and removing the ability to fight on two fronts around the world. No American allies can reliably expect the US to honor defense treaties. They are now written on DISAPPEARING INK! Some realize it and some are WAKING UP rapidly.
BARELY covered in the Main stream media the news out of IRAQ is of MASSIVE CIVIL WAR. Al Qaeda has captured the two largest cities after Baghdad. The Kurds have taken Kirkuk and armies are marching on Baghdad (just 80 miles away) as I write this. Previously captured territories have handed insurgents many oil fields and billions of dollars from captured banks. Bottom line is that this country is breaking apart along sectarian lines into pieces: Sunni, Shite and the Kurds.
Regional conflicts are spreading like WILDFIRE. Iraq has broken up. The idea that the central government in Baghdad will reunite the country and restore order is now just a pipe dream. Oil is spiking outside recent trading ranges as we speak; Iraq is responsible for over 10% of the oil OPEC supplies to the market. This production will go the way of the dodo bird just as oil production in Libya has done. What price will oil have to go to ration demand by this amount? Only God knows. Go fill up your GAS tanks today. This is GOOD NEWS for Vladimir PUTIN and RUSSIA!
The President ABANDONED IRAQ early in his administration and now all the US spent in BLOOD and treasure is GONE. The same fate awaits the US in Afghanistan. The very idea that the US has returned the most bloodthirsty and ruthless commanders of the Taliban to the battlefields in exchange for a DESERTER foretell hundreds if not thousands of deaths and casualties in the near future. Americans are now targets for kidnapping as a result of this insanity. He said it was because we leave NO MAN BEHIND. To that I say what about Benghazi? New information from a retired commander reveals troops were on alert in Germany, with transport at hand, 3 hours away and where told to STAND DOWN.
The president has conducted the foreign and military affairs of the US in a political rather than practical manner since his inauguration, and PREDICTABLY the world is descending into CHAOS as a result. If you think China or Russia is going to retreat you should reconsider. These challenges are set to continue. You can predictably expect the president to retreat from them all. As continued US military weakness unfolds you can expect the dollar to go right along with it. THIS IS BIG NEWS; tattoo it to your brain.
Out on a LIMB
As new peaks in leverage accumulate, the firms in the line of fire when the leverage FAILS rises. The Credit Union industry is becoming EXTREMELY vulnerable as long term assets most vulnerable to CAPITAL losses are at dangerous highs of 36% of assets an all-time high.
Just another reason that I don’t believe interest rates will ever be allowed to rise appreciably. The solvency of the financial system would be challenged, and the Federal Reserve has been very vocal in its commitment to the stability of the financial system which is operating in insolvency if properly measured. Any back up in financial asset valuations would blow it up.
Everybody is talking and anticipating higher rates but, I ask you, from where is the income to pay the coupons going to come? There is over $12 trillion dollars in M1 in one form or another. The on the books liabilities of the US government top $17 trillion dollars. Combined it is $29 trillion (29 million million). A 2% overnight rate would require additional payouts of $580 billion a year. There is no income available to pay these yields.
Is rising indebtedness a sign of economic strength?
Last week we learned that consumer borrowing leapt higher in the last two months. It was reported as GOOD NEWS. Do you really believe it is good news when consumers borrow money for student loans and cars they cannot afford? For whom is it good news?… Overpriced and underperforming universities and auto dealers. 20 to 30% of all auto loans are subprime and virtually NO underwriting is done for student loans which have leapt higher. (Chart courtesy of www.zerohedge.com)
This is not good news, but will be reflected as exploding GDP. To the main stream media and government in a debt slave society, the further we go into debt the better the news. IT FEEDS THE ILLUSION of GROWTH. All growth today is debt in disguise. My good friend Gordon T. Long gave me a story of a friend of his whose son was buying a car. Thinking that he would have to cosign for the lending, the father accompanied his son (a student) who had picked out a $32,000 dollar vehicle. Upon entering the manager’s office the young man was asked to present his driver’s license and social security number. A few minutes later he was approved and signing the papers without any cosignatories or parental guarantees.
Although car sales are booming very little is mentioned that 20 to 30% of all car sales are to sub-prime borrowers. And, in this case, very little qualifications for purchase. Apparently, underwriting has gone the way of the dodo bird. This will be a debacle as the rise in car sales has driven a rise in sub-prime borrowing and leasing. CREATING Asset backed securities for those reaching for yield.
Shades of 2003 to 2007 housing markets. Imprudence is celebrated while living within ones means is not to be encouraged.
Bond YIELDS continue to collapse
The reach for yield knows no limits as spreads continue to collapse while REAL economic growth continues to collapse. Spain’s 10 year note