-Every great con game eventually comes to an end
-BILDERBERG 2015: THE TRUE MONSTERS REVEALED
June 5, 2015 by Michael Snyder | Economic Collapse Blog
Every great con game eventually comes to an end. For years, global central banks have been manipulating the financial marketplace with their monetary voodoo. Somehow, they have convinced investors around the world to invest tens of trillions of dollars into bonds that provide a return that is way under the real rate of inflation. For quite a long time I have been insisting that this is highly irrational.
Why would any rational investor want to put money into investments that will make them poorer on a purchasing power basis in the long run? And when any central bank initiates a policy of “quantitative easing”, any rational investor should immediately start demanding a higher rate of return on the bonds of that nation. Creating money out of thin air and pumping into the financial system devalues all existing money and creates inflation.
Therefore, rational investors should respond by driving interest rates up. Instead, central banks told everyone that interest rates would be forced down, and that is precisely what happened. But now things have shifted. Investors are starting to behave more rationally and the central banks are starting to lose control of the financial markets, and that is a very bad sign for the rest of 2015.
And of course it isn’t just bond yields that are out of control. No matter how hard they try, financial authorities in Europe can’t seem to fix the problems in Greece, and the problems in Italy, Spain, Portugal and France just continue to escalate as well. This week, Greece became the very first nation to miss a payment to the IMF since the 1980s. We’ll discuss that some more in a moment.
Over in Asia, stocks are fluctuating very wildly. The Shanghai Composite Index plunged by 5.4 percent on Thursday before regaining all of those losses and actually closing with a gain of 0.8 percent. When we see this kind of extreme volatility, it is a very bad sign. It is during times of extreme volatility that markets crash.
Remember, stocks generally tend to go up during calm markets, and they generally tend to go down during choppy markets. So most investors do not want to see lots of volatility. Unfortunately, that is precisely what we are witnessing all over the world right now. The following comes from the Wall Street Journal…
“Volatility over the last days has been breathtaking, especially in bond markets,” said Wouter Sturkenboom, senior investment strategist at Russell Investments. He said that it rippled through equity and currency markets, which overreacted.
The yield on the benchmark German 10-year bond touched 0.99%, its highest level since September, before erasing the day’s rise and falling back to 0.84%. The 10-year U.S. Treasury yield, which hit a fresh 2015 high of 2.42% earlier Thursday, recently fell back to 2.33%. Yields rise as prices fall.
Sometimes when bond yields go up, it is because investors are taking money out of bonds and putting it into stocks because they are feeling really good about where the stock market is heading. This is not one of those times. As Peter Tchir has noted, the huge moves in the bond market that we are now seeing are the result of “sheer panic in the market”…
In a morning note before the open, Brean Capital’s Peter Tchir wrote: “It is time to reduce US equity holdings for the near term and look for a 3% to 5% move lower. The Treasury weakness is NOT a ‘risk on’ trade it is a ‘risk off’ trade, where low yields are viewed as a risk asset and not a safe haven.” And Tom di Galoma, head of fixed-income rates and credit at ED&F Man Capital Markets, told Bloomberg, “This is sheer panic in the market from the standpoint of what’s been happening in Europe … Most of Wall Street is guarded here as far as taking on new positions.”
But this wasn’t supposed to happen.
After watching the Federal Reserve be able to successfully use quantitative easing to drive down interest rates, the European Central Bank decided to try the same thing. Unfortunately for them, investors are starting to behave more rationally. The central banks are starting to lose control of the financial markets, and bond yields are soaring. I think that Peter Boockvar summarized where we are currently at very well when he stated the following…
I’ve said this before but I’m sorry, I need to say it again. What we are witnessing in global markets is the inherent contradiction writ large that is modern day monetary policy where dangerously ZIRP, NIRP and QE are considered conventional policies. The contradiction is simply this: the desire for higher inflation if fulfilled will result in higher interest rates that central banks are trying so hard and desperately to suppress.
Outside of the short end of the curve, markets will always win for better or worse and that is clearly evident now. The ECB is getting their first taste of the market talking back and in quite the violent way. In the US, the bond market is watching the Fed drag its feet (its never-ending) with wanting to raise interest rates and finally said enough is enough. The US Treasury market is tightening for them. Since mid April, the 5 yr note yield is higher by 40 bps, the 10 yr is up by 55 bps and the 30 yr yield is up by 65 bps.
And if global investors continue to move in a rational direction, this is just the beginning. Bond yields all over the planet should be much, much higher than they are right now. What that means is that bond prices potentially have a tremendous amount of room to go down.
One thing that could accelerate the global bond crash is the crisis in Greece. Negotiations between the Greeks and their creditors have been dragging on for four months, and no agreement has been reached. Now, Greece has missed the loan payment that was due to the IMF on June 5th, and it is asking the IMF to bundle all of the payments that are due this month into one giant payment at the end of June…
Greece has asked to bundle its four debt payments to the International Monetary Fund that fall due in June so that it can pay them in one batch at the end of the month, Greek newspaper Kathimerini reported on Thursday.
The request is expected to be approved by the IMF, the newspaper said. That would mean Greece does not have to pay the first tranche of 300 million euros that falls due on Friday.
Greece faces a total bill of 1.5 billion euros owed to the IMF over four installments this month.
Of course that payment will not be made either if a deal does not happen by then. And with each passing day, a deal seems less and less likely. At this point, the package of “economic reforms” that the creditors are demanding from Greece is completely unacceptable to Syriza. The following comes from an article in the Guardian…
Fresh from talks in Brussels, Tsipras faced outrage on Thursday from highly skeptical members of his own Syriza party. A five-page ultimatum from creditors, presented by the European commission president, Jean-Claude Juncker, was variously described as shocking, provocative, disgraceful and dishonourable.
“It will never pass,” said Greece’s deputy social security minister, Dimitris Stratoulis. “If they don’t back down, the country won’t be lost … there are alternatives that would cost less than our signing a disgraceful and dishonourable agreement.”
Ultimately, I don’t believe that we are going to see an agreement.
Why?
Well, I tend to agree with this bit of analysis from Andrew Lilico…
The Eurozone does not want to make any compromise with the current Greek government because (a) they don’t believe they need to because Greek threats to leave the euro are empty both because internal polling suggests Greeks don’t want to leave and because if they did leave that doesn’t really constitute any threat to the euro; (b) because they (particularly perhaps Angela Merkel) believe that under enough pressure the Greek government might collapse and be replaced by a more cooperative government, as has happened repeatedly before in the Eurozone crisis including in Italy and Greece itself; and (c) because any deal with Greece that is seen to involve or be presentable as any victory for the Greek government would threaten the political positions of governments in several Eurozone states including Spain, Portugal, Italy, Finland and perhaps even the Netherlands and Germany.
Furthermore, it’s not clear to me that the Eurozone creditors at this stage would have much interest in any deal based upon promises, regardless of how much the Greek had verbally surrendered. Things have gone too far now for mere words to work. They would need to see the Greeks deliver actions — tangible economic reforms and tangible, credible primary surplus targets and a sustainable change in the long-term political mood within Greece that meant other Eurozone states might eventually get their money back. That is almost certainly not doable at all with the current Greek government. The only deal possible would be with some replacement Greek government that had come in precisely on the basis that it did want to do a deal and did want to pay the creditors back.
On the Syriza side, I see no more appetite for a deal. They believe that austerity has been ruinous for the lives of Greeks and that decades more austerity would mean decades more Greek economic misery. From their point of view, default or even exit from the euro, even if economically painful in the short term, would be better than continuing with austerity now.
You can read the rest of his excellent article at http://www.capx.co/greece-out-of-cash-out-of-time-out-of-options/
Without a deal, the value of the euro is going to absolutely plummet and bond yields over in Europe will go through the roof. I am fully convinced that this is the beginning of the end for the eurozone as it is currently constituted, and that we stand on the verge of a great European financial crisis.
And of course the financial crisis that is coming won’t just be in Europe. The global financial system is more interconnected than ever, and there are tens of trillions of dollars in derivatives that are tied to foreign exchange rates and 505 trillion dollars in derivatives that are tied to interest rates. When this giant house of cards collapses, the central banks won’t be able to stop it.
In the end, could we eventually see the entire central banking system itself totally collapse?
That is what Phoenix Capital Research believes is about to happen…
Last year (2014) will likely go down in history as the “beginning of the end” for the current global Central Banking system.
What will follow will be a gradual unfolding of the next crisis and very likely the collapse of the Central Banking system as we know it.
However, this process will not be fast by any means.
Central Banks and the political elite will fight tooth and nail to maintain the status quo, even if this means breaking the law (freezing bank accounts or funds to stop withdrawals) or closing down the markets (the Dow was closed for four and a half months during World War 1).
There will be Crashes and sharp drops in asset prices (20%-30%) here and there. However, history has shown us that when a financial system goes down, the overall process takes take several years, if not longer.
We stand at the precipice of the greatest economic transition that any of us have ever seen.
Even though things may seem very “normal” to most people right now, the truth is that the global financial system is fundamentally flawed, and cracks in the system are starting to appear all over the place.
When this system does collapse, it will take most people entirely by surprise.
But it shouldn’t.
All con games eventually fall apart in the end, and we are about to learn that lesson the hard way.
http://www.infowars.com/the-central-banks-are-losing-control-of-the-financial-markets/
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COLLAPSE ALERT: DEBT BUBBLE, Stock Market, Gold, Silver, IMF, Greece
JUNE 6, 2015 BY Gregory Mannarino
http://wchildblog.com/2015/06/06/collapse-alert-debt-bubble-stock-market-gold-silver-imf-greece/
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Greece and IMF Publicly Admit They Can’t Pay Debt as Debt-to-GDP Hits Record 180%!
Jun 6, 2015
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Survey: $15 Wage Could Shutter 1 in 5 NY Fast Food Joints
Vast majority likely to reduce hours, raise prices to cope
June 5, 2015 BY: Bill McMorris
New York Gov. Andrew Cuomo’s (D.) promised minimum wage hikes for fast food restaurants could shut down one out of every five chain restaurants in the state, according to a new survey.
The Employment Policies Institute, a free market think tank and critic of minimum wage hikes, surveyed nearly 1,000 self-described fast food entrepreneurs about how they would respond to statewide, industry-specific wage hikes. More than 20 percent of respondents said they were “very likely” to go out of business if the state raises the minimum wage for fast food joints to $15, a 70 percent increase from the current $8.75 statewide minimum wage.
Such a hike could spur higher costs for customers and reduced employment opportunities and hours for workers. Business owners responded overwhelmingly that such policies would hurt the very workers that Cuomo and activists claim to want to help.
Only 5 percent of respondents said they were “unlikely” to raise prices to cope with a $15 wage; 70 percent said they were very likely. In order to retain customers and remain competitive, a majority of the owners said they would be forced to cut employee hours or curb hiring.
“Low single-digit profit margins, which are typical for the fast food industry, explain why business owners in the state report considering a series of off-setting measures to adapt to a $15 minimum wage,” the report says.
Cuomo is seeking to increase wages on the fast food industry through a three-member board that is debating a potential $15 wage at chain restaurants. EPI analyst and report author Michael Saltsman attended Friday’s hearing, criticizing both Cuomo’s methods and also the policy.
“Our survey shows that a dramatic minimum wage hike would have the same negative effect in New York that it’s having on the west coast. Employers and employees should hope the wage board can tune out the noise and take a careful look at the consequences,” Saltsman said. “An unelected board hearing where proponents shout down the other side—is this what democracy looks like?”
The fast food industry has come under increasing scrutiny from labor regulators thanks to public campaigns by the Service Employees International Union, which spent more than $20 million in 2014 on organizing committees that staged protests in cities across the country. The SEIU is also a major supporter of Cuomo, contributing more than $100,000 to him since 2008.
Matthew Haller, spokesman for the International Franchise Association, said Cuomo’s targeting of fast food is about politics, not populism. The state, he said, has more than 8,000 local franchisees, many of which are owned by local entrepreneurs, rather than the big corporations Cuomo has portrayed them as.
“Governor Cuomo should worry more about protecting local franchise businesses who are creating jobs and bringing local businesses to New York, rather than protecting his political career by bowing to the SEIU’s requests to implement radical wage hikes that unfairly discriminate against one industry,” Haller said. “While the Unions and the Wage Board have sought to portray this is as big businesses taking advantage of workers, the reality is these are local franchise business owners and the employees who work for them are the ones who will suffer due to layoffs, automation and businesses closing.”
The EPI also found that the size and nature of franchisees skewed toward the traditional definition of small business. About 85 percent of those surveyed reported having fewer than 50 employees, while more than half said they had fewer than 15 workers. Nearly 60 percent reported that their profits were two percent of all revenue after expenses and labor costs.
New York is not the first area that would see fast food joints hiking prices to compensate for high wage laws. San Francisco Subway franchises were forced to abandon the eatery’s famed $5 Footlong campaign because of expensive labor costs.
New York residents have until June 26 to submit public comment on the subject.
http://freebeacon.com/issues/survey-15-wage-could-shutter-1-in-5-ny-fast-food-joints/
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BILDERBERG 2015: THE TRUE MONSTERS REVEALED
Global corporate shadow government to set world agenda
JUNE 6, 2015
Alex Jones breaks down the Bilderberg Group and what their agenda entails for this year’s meeting.
http://www.infowars.com/bilderberg-2015-the-true-monsters-revealed/
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