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My economic Gurus

Economic theory discredited

Global recession timeline BBC

Alan Greenspan

Rogoff

Stabiliseringspolitik

Stagflation

Martin Wolf

Other Economists

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Staying sane when working from home


Inside Job
Trailer, Youtube

2011 (mostly in swedish)

Most important

Skuldfrågan/Who is responsible?

Moral Hazard
What this crisis is all about

Houseprices

Unemployment

Banks...

Funding

The Shadow banking system

Minsky, Hyman

Rebalancing

Deleveraging

USD Dollar

USD/SEK

EMU Collapse

Doom

*

Basel

Bernanke

Carry Trade

Derivatives

The Endgame

Fannie and Freddie

Foreclosures

Glass-Steagall Act

Lehman Brothers

Leverage

Mark-to-Market

The Taylor Rule

Too Big to Fail

The Volcker rule


Interesting too

Baltikum

Bankinspektionerna - The Bank supervisors
"Det är svårt att vara olyckskorp när allt går som smort"

Bondinsurers

Central Banks injection

Books

Davos

Rescue plans

Spain

Swedbank



Finanskrisen 2007 -





U.S. Trade Deficit:
Causes, Magnitude and Consequenses
Rolf Englund 2001-05-21

Next Bubble: U.S. Government Bonds
Rolf Englund

How to solve the financial crisis?
Let me tell you a little secret, folks.
Play for time, pray for markets to turn.

Allan Sloan, senior editor CNN, August 18, 2008




Fed's Yellen expects no new financial crisis in 'our lifetimes'
That’s an unusually bold statement for any Fed leader, much less the chair.
Patrick Watson at John Mauldin 3 July 2017

It sure would be nice if Yellen were right. We’d all go to our graves (hopefully not too soon) without ever having seen another financial crisis.

Not so fast, though. Let’s see exactly what Yellen meant, and what it means for your investment strategy.

"Would I say there will never, ever be another financial crisis?" Yellen said at a question-and-answer event in London.
"You know probably that would be going too far, but I do think we're much safer, and I hope that it will not be in our lifetimes and I don't believe it will be," she said.

This was a head-scratcher to me. While it wasn’t a prepared text, Yellen would still never say anything like this by accident.

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Janet Yellen

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For investors scrambling to keep pace with a hawkish shift in the world’s biggest central banks,
the second half of 2017 just got a lot more interesting.
Bloomberg 29 June 2017


Populism and immigration
The financial crisis and consequent economic shocks not only had huge costs.
They also damaged confidence in — and so the legitimacy of — financial and policymaking elites.
These emperors turned out to be naked.
Martin Wolf FT 27 June 2017

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Economic theory discredited

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The global economy is caught in a permanent trap of boom-bust financial cycles.
This deformed structure is becoming ever more corrosive and dangerous as debt ratios rise to vertiginous levels, BIS has warned.
Ambrose Evans-Pritchard, 25 June 2017


“Minsky moment,” the point at which excess debt sparks a financial crisis.
The late Hyman Minsky said that such moments arise naturally when a long period of stability and complacency eventually leads to the buildup of excess debt and overleveraging.

At some point the branch breaks, and gravity takes over. It can happen quickly, too.
John Mauldin, 17 June 2017


Can We See A Bubble If We're Inside The Bubble?
Charles Hugh Smith via zerohedge, 16 June 2017


Full-Time Jobs Tumble By 367,000, Biggest Drop In Three Years
Tyler Durden, zerohedge 2 June 2017


US consumers’ behaviour is altered by seismic events — Americans now save more and spend less
Rana Foroohar, FT 26 May 2017

The lack of trust among the general population in what the future will look like, and the ability of elites to manage it.

Economists such as Robert Shiller have speculated that decreased demand in the economy reflects “vague fears” about long-term employability

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Secular Stagnation


Markets Don't Trust Banks, and They're Right
The financial crisis should have led to fundamental change. It hasn’t happened.
Mark Whitehouse, Bloomberg 30 maj 2017


Central banks response to the crisis almost a decade ago is still the key driver of markets
FT 26 May 2017

This summer marks a decade since the first stirrings of the global financial crisis. A lot of water has flowed since two hedge funds backed by Bear Stearns collapsed in July 2007 because of their exposure to US subprime mortgages.

The steady expansion of central bank balance sheets via quantitative easing is still keeping the now-familiar show of equities at record levels and negligible risk premiums firmly on the road.

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ZIRP

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Ten years on: When the music stopped
How the 2007-08 crisis unfolded
The Economist 6 May 2017

In February 2007 Britain’s HSBC shocked markets by raising its bad-debt provisions to $10.5bn because of failing American subprime mortgages.

During that summer two hedge funds run by Bear Stearns, an investment bank, collapsed after losing money on soured subprime investments.

As banks started to worry about exposure to subprime lending and the piles of complicated derivatives connected to it,
credit markets began to seize up, causing BNP Paribas, a French bank, to suspend withdrawals from three funds in August.

In November 2007 the music stopped even for Mr Prince: he resigned.
That quarter Citi took subprime-related write-downs of $18.1bn.

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A decade after the crisis, how are the world’s banks doing?
For too many, leverage was the path first to profit and then to ruin.
The Economist 6 May 2017

Revised international rules, known as Basel 3 (still a work in progress),
have forced banks to bulk up, adding equity and convertible debt to their balance-sheets.

The idea is that a big bank should be able to absorb the worst conceivable blow
without taking down other institutions or needing to be rescued.

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Only one-third of American home values have recovered pre-recession peaks
MarketWatch 3 May 2017


Soaring Trump dollar risks global trade war and China currency crisis, warns Posen
Donald Trump will succeed in ramming through radical tax cuts and fiscal stimulus, causing US federal borrowing to balloon.
The Peterson Institute thinks the current account deficit could rise to 5pc of GDP.
Ambrose Evans-Pritchard, 11 April 2017


If something cannot go on forever, it will stop.”
This is “Stein’s law”, after its inventor Herbert Stein, chairman of the Council of Economic Advisers under Richard Nixon.

Rüdiger Dornbusch, a US-based German economist, added:
“The crisis takes a much longer time coming than you think, and then it happens much faster than you would have thought.”

Martin Wolf, FT 11 april 2017


Staggeringly high UK house prices may only be corrected by a market crash,
according to economists from the University of Reading.
Bloomberg 11 April 2017

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The smart money is record ‘short’ in stocks, and the dumb money is record ‘long’
hedgers have racked up more short positions than at any other time in history
Simon Maierhofer, MarketWatch 6 April 2017


It feels like 2008 again
In 2017 total household debt will reach its previous peak of $12.68 trillion,
which it reached in the third quarter of 2008.
MarketWatch 3 April 2017

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Homeowners are pulling cash out again
Fast-rising home prices gave homeowners more equity than many expected,
and they are now tapping that equity at the fastest rate in eight years.
Diana Olick, CNBC 3 April 2017


The problem with cocos more broadly is that nobody knows if they work.
Lloyds Bank of the UK issued the first coco as part of a big capital restructuring in 2009.
Over $153bn of the securities have been issued since
FT 21 March 2017


Postmortem plans for banks under threat of exinction
If there was one big realisation to come out of the financial crisis
— alongside the fact that banks were riskier than believed —
it was this: policymakers did not know how to wind up a bank without causing chaos.
FT 6 March 2017

Today, there is worrying evidence on both sides of the Atlantic that the resolution idea could be in jeopardy before it has been fully implemented, let alone tested.

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Lehman

Banks

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Banks globally have paid $321 billion in fines since 2008
for an abundance of regulatory failings from money laundering to market manipulation and terrorist financing,
according to data from Boston Consulting Group.
Bloomberg 2 March 2017


The global financial system is no safer today than it was in 2007.
If those who use overnight mortgage pools receive priority over other creditors, as is the case today...
Mark Roe, professor at Harvard Law School, Project Syndicate, 31 January 2017

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Explanations for the Financial Crisis
Barry Ritholtz, Bloomberg 18 January 2017

Discussions of causation frustrate those who seek to oversimplify the complex as they pursue a political agenda
(see Peter Wallison at the American Enterprise Institute).

Any theory that claims to explain the financial crisis should be able to answer these 10 questions

...

I’ll stop at 10. How did your model do in explaining these issues? If you can adequately answer these questions and have the data to back them up, you may be on to a successful model of the financial crisis.

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Moody’s in $864m settlement over subprime mortgage bonds
The settlement is smaller than the $1.375bn that rival rating agency S&P Global reached in February 2015
FT 14 January 2017

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The latest Economic Report of Obama’s Council of Economic Advisers
Mr Obama’s presidency began amid the worst financial crisis since the 1930s.
If we consider the disaster he inherited
and the determination of the Republicans in Congress to ensure he would fail,
his record is clearly successful. This does not mean it is perfect.
Martin Wolf, FT 10 January 2017

The latest Economic Report of the President analyses the Obama record.
It is also the brief for the defence. But Mr Obama’s Council of Economic Advisers does first-rate analysis.
This report is no exception to that rule.

As the report notes, perfectly correctly:

“It is easy to forget how close the US economy came to an outright depression during the crisis. Indeed, by a number of macroeconomic measures... the first year of the Great Recession ... saw larger declines than at the outset of the Great Depression in 1929-30.”

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Do Central Bankers Know A Bubble When They See One?
From its March 2000 peak to its October 2002 bottom the NASDAQ declined 80%.
In August 2002 Greenspan gave a speech at the Fed’s conference in Jackson Hole.
Ben Bernanke, gave a speech titled, “The Great Moderation.”
zerohedge 3 January 2017


Just over $6.6tn
Global debt sales reached a record in 2016
led by companies gorging on cheap borrowing costs
breaking the previous annual record set in 2006
FT 27 December 2016

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How policymakers plan to solve a long-term global debt crisis
Bill Gross, 6 December 2016

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The Bank of England’s chief economist has admitted his profession is in crisis
having failed to foresee the 2008 financial crash and having misjudged the impact of the Brexit vote.
So what can the dismal science do to regain the trust of the public and politicians?
Guardian 6 January 2017

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Economic theory discredited

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The return of Keynesianism
Martin Sandbu's Free Lunch, FT 24 October 2016

A speech given by Federal Reserve chair Janet Yellen 10 days ago has received a lot of attention in the economic community
and deserves an even broader hearing.

Its modest focus — it is titled “Macroeconomic research after the crisis” — is deceptive.

Beyond useful research recommendations, Yellen’s words carry more profound implications,
including an admission of the extent to which central bankers are navigating in the dark,
and a return to much more aggressive policies for demand management than modern macroeconomic theory had until recently admitted.

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By reducing the incomes of retirees and terrifying near-retirees,
the Fed successfully reduced economic activity.
John Mauldin 9 October 2016


Ray Dalio Warns A 1% Rise In Yields Would Lead To Trillions In Losses
zerohedge 8 October 2016


Globally, the stock market is about $69 trillion in size,
trading about $191 billion in shares per day.
The bond markets are well north of $140 trillion,
and trade about $700 billion in volume per day
zerohedge 4 October 2016


More than nine years after the start of the global financial crisis,
worries over the health of the financial system remain significant, especially in Europe.
Martin Wolf. FT 4 October 2016

This should not be surprising. But it should be disturbing.

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We are still groping for truth about the financial crisis
It has been eight years since Lehman Brothers went bankrupt and still it defines the calendar.
For anyone in the financial world, time is divided into Before Lehman, and After Lehman.
John Authers, FT 16 September 2016

And yet, even after eight years, the crisis’s lessons are controversial. Anger is as intense as ever.
And when it comes to making the financial system proof against another Lehman, every day seems to bring further proof that we do not know what we thought we knew.

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Lehman Brothers

Basel


Senator Elizabeth Warren wants law enforcement officials to tell her
why none of the individuals referred to them by the Financial Crisis Inquiry Commission
for potential law-breaking related to the crisis were ever prosecuted.
MarketWatch 15 September 2016

On the eighth anniversary of the Lehman Brothers bankruptcy on Thursday, the Massachusetts Democrat asked the Inspector General of the Department of Justice and FBI Director James Comey
for an investigation into the lack of individual criminal prosecutions for potential law-breaking related to the 2008 financial crisis.

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All told, the primary effect of monetary policy since 2008 has been to transfer wealth
to those who already hold long-term assets — both real and financial — from those who now never will.

John Kay, Financial Times 9 September 2016


Echoes of 2008 as danger signs are ignored
Tett, FT 1 September 2016


In 2013 economists at the IMF rendered their verdict on these austerity programmes:
they had done far more economic damage than had been initially predicted, including by the fund itself.
What had the IMF got wrong when it made its earlier, more sanguine forecasts?
It had dramatically underestimated the fiscal multiplier.
The Economist print 13 August 2016
Highly Recommended


Since August 2007 the 471 financial companies that form Datastream’s financials equities sector
lost over one trillion euros in market value.
FT 8 August 2016

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Banks


The 2007-08 episode clearly demonstrated that financial crises, particularly when they involve the banking sector,
can be enormously expensive both in terms of direct fiscal costs and associated costs for the real economy.
Over the period 2008-14 accumulated gross financial sector assistance by euro area governments amounted to 8% of euro area GDP,
of which, so far, around 3% has been recovered
Lecture by Vítor Constâncio, Vice-President of the ECB, 7 July 2016

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Here We Go Again — August 2007 Redux
If this is beginning to sound like August 2007 that’s because it is.
David Stockman 5 July 2016

After reaching a peak of 1550 on July 18, 2007, the S&P 500 stumbled by about 9% during the August crisis, but the dip-buyers kept coming back in force on the one-off assurances of the sell-side “experts”. By October 9 the index was back up to the pre-crisis peak at 1565 and then drifted lower in sideways fashion until September 2008.

Upon the Lehman event the fractures exploded, and the hammer dropped on the stock market in violent fashion. During the next 160 days, the S&P 500 plunged by a further 50%.
Altogether, more than $10 trillion of market cap was ionized.

The claim that you can capitalize the stock market at an unusually high PE multiple owing to ultra-low interest rates,
therefore, implies that deep negative real rates are a permanent condition, and that governments will be able to destroy savers until the end of time.

The truth of the matter is that interest rates have nowhere to go in the longer-run except up

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Frozen withdrawals in 2007 and 2015

Three UK real estate funds halt selling
"Redemptions have now reached a point where M&G believes it can best protect the interests of the funds' shareholders by seeking a temporary suspension in trading. This will allow the fund manager time to raise cash levels in a controlled manner, ensuring that any asset disposals are achieved at reasonable values," M&G said in a statement.
CNBC 5 July 2016

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The Brave New Uncertainty of Mervyn King
Paul Krugman, The New York Review of Books, Issue 14 July 2016

Although The End of Alchemy is more a book of theory inspired by recent economic crises than an account of those crises,
it does, inevitably, tell a story about what went wrong.

First, as many people have noted, the run-up to the global financial crisis that struck in 2007–2008 was a two-decade era of unusual economic calm, at least in wealthy countries,
commonly referred to as the Great Moderation — although for some reason King calls it the Great Stability instead.
This long era of stability may have encouraged complacency, both in the private sector and among policymakers,
so that evidence of an increasingly fragile financial system was ignored.

Traditionally, banks had a substantial “cushion” of equity — there was enough difference between their loans and their debts that they could absorb significant losses on loans without going bankrupt.

On the eve of the crisis, however, much of the financial system had enormous leverage — the ratio of debt to equity was 25 to 1 or more — leaving it extremely vulnerable to panic.

And the panic came.

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Skuldfrågan/ Who is responsible?


In spite of the “biggest monetary policy stimulus in the history of the world” the results have been anaemic.
“Central banks have thrown everything at their economies, and yet the results have been disappointing,” he notes.
“Whatever can be said about the world recovery since the crisis, it has been neither strong, nor sustainable, nor balanced.” The End of Alchemy: Money, Banking and the Future of the Global Economy by Mervyn King – review John Kampfner, The Guardian 14 March 2016

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Marian Radetzki, unemployment and Stall Speed


David Stockman's Conspiracy Theory
Along with Goldman’s plenipotentiary at the US Treasury, Hank Paulson,
Bernanke stampeded the entirety of Washington into tossing out the window the whole rule book of
sound money, fiscal rectitude and free market discipline.
In fact, there was no extraordinary crisis.
The Lehman failure essentially triggered a self-contained leverage and liquidity bust in the canyons of Wall Street
13 April 2016


2016: The End Of The Global Debt Super Cycle
ZeroHedge, 1 April 2016

The day after the 1987 crash (Oct. 20, 1987) Alan Greenspan, Chairman of the Fed, announced to the world that
The Fed stood ready to provide whatever liquidity was needed by the banking system
to prevent the crash from turning into a systemic financial crisis.

That was the day the Fed “put” was born.

Fed Funds Rate drop from 6.5% to 1% from 2000 to 2003.
This in effect morphed the tech stock bubble into a housing bubble.


The world economy is in no position to absorb another big deflationary shock.
The possibility of another big deflationary shock from China over the next several years is real.
Martin Wolf, FT 29 March 2016


Why I am reading Stockman and Varoufakis
Englund blog 26 March 2016


Money, Banking and the Future of the Global Economy, by Mervyn King.
Review by John Plender, FT 3 March 2016


Fed is now 87 months into its grand experiment with the lunacy of zero interest rates.
David Stockman 16 March 2016


Atlanta Fed's gauge of "sticky-price" inflation in the US
soared to a post-Lehman peak of 3 pc
Ambrose 2016-03-16


The subprime crisis, the euro crisis, the China slowdown, the oil bust.
But surely these events are connected.
Justin Fox, Bloomberg View 10 March 2016


I’m confident we would see improvement on all fronts
if we got GDP growth back up to 4% for a few years.
John Mauldin, March 7, 2016

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News


Baltikum Swedbank SEB och Bolånen
Andreas Cervenka, SvD 3 mars 2016


7 big risks are now plaguing the U.S. and global economies
Nouriel Roubini, MarketWatch Mar 2, 2016

It is widely agreed that a series of collapsing housing-market bubbles triggered the global financial crisis of 2008-2009, along with the severe recession that followed.
Now, five years later, signs of frothiness, if not outright bubbles, are reappearing in housing markets
Nouriel Roubini, Project Syndicate, 19 november 2013


The next global financial crisis could start with U.S. stocks.
Satyajit Das, MarketWatch 2 March 2016


Now, despite evidence that the world economy is near to another recession, a similar survey shows that
not one of the 40 leading economists believes there will be a US downturn this year.
Ruchir Sharma, FT February 29, 2016

All told, however, a sharp decline in the S&P 500 has signalled a recession nearly 60 per cent of the time.
By contrast, the consensus view of economists has an accuracy rate of zero per cent.

The writer is head of emerging markets and global macro at Morgan Stanley Investment Management

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Economic theory discredited

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News


Eight years after triggering a crisis that nearly brought down the global financial system, the United States remains plagued by confusion about what reforms are needed to prevent it from happening again.
What Americans are sure about is that they are angry with the financial sector.
This is reflected in the success of recent Hollywood movies such as The Big Short
Jeffrey Frankel, a professor at Harvard University, Project Syndicate 24 Febr 2016

At the center of Sanders’s campaign is a proposal to break up the big Wall Street banks into little pieces, thereby ensuring that no bank is so big that its failure would endanger the rest of the financial system.

The first bank that was declared “too big to fail” was Continental Illinois, which received a bailout in 1984 from President Ronald Reagan.

Attacking banks is emotionally satisfying. But it won’t prevent financial crises.

In fact, the financial industry’s biggest problems lie elsewhere:
hedge funds, investment banks, and other non-bank financial institutions that face less regulatory oversight and restrictions (such as on capital standards and leverage) than commercial banks.

Recall that Lehman Brothers was not a commercial bank, and AIG was an insurance company.

the Dodd-Frank Wall Street Reform and Consumer Protection Act

Dodd-Frank was far from complete. Making matters worse, many in Congress have spent the last six years chipping away at it, such as by exempting auto dealers from the CFPB and restricting the budgets of the regulatory agencies.

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Too Big to Fail

Basel


World economy stands on the cusp of another crash,
warns Lord Mervyn King. Telegraph 26 Febr 2016



Click


It’s different this time.
The actions of governments and central banks should make a difference during a crisis - this time, they may not
Ben Wright, Telegraph 18 Feb 2016

Investors are often derided for having memories like goldfish. But the scar of the 2008 financial crisis is still raw.
Many were blindsided by the credit crunch and vowed not to be caught out again

If fiscal and monetary policy is supposed to be the last defence against market worries,
then it’s not ideal when the market’s biggest worries are inspired by fiscal and monetary policy.

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News


Faced with the most severe economic downturn since the Great Depression, the U.S. Federal Reserve did the only thing it could: flood the financial system with liquidity.

The move to so-called easy money arguably saved the world from a worse fate and radically changed the economic backdrop as well as the landscape for financial markets.

Bloomberg via englundmacro.blogspot.se/2016/02/these-are-things-that-correlate

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News


China's own version of 'The Big Short'
Rolf Englund blog 9 Febr 2016


The Bank of Canada admits easy money can inflate debt bubbles
FT Alphaville 8 Febr 2016 via Rolf Englund blog


The lunatic valuation of the FANGs (Facebook, Amazon, Netflix and Google)
100X+ PE multiples are always and everywhere a deformed artifact of central bank driven Bubble Finance
David Stockman 30 January 2016

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AMZN and its three other FANG amigos had accounted for a $530 billion gain in market cap
while the other 496 stocks in the S&P 500 had declined by even larger amount.

That is, the apparently flat S&P 500 index of 2015 was hiding an incipient bear—–owing to a market narrowing action like none before.
Compared to the Fabulous FANGs (Facebook, Amazon, Netflix and Google)
David Stockman, January 13, 2016


News


The $29 Trillion Corporate Debt Hangover That Could Spark a Recession
The seven-year-old global growth model based on cheap credit from central banks is running out of steam
Bloomberg 28 January 2016


In the past 30 years, there have been only three 20 per cent falls in the S&P that did not overlap with a recession.
All involved financial accidents.

So the argument that the damage should not be bad if we avoid a recession is reasonable. But why exactly did markets rebound?

In all three cases, the Federal Reserve eased monetary policy, when it had intended to tighten.
In 1987, there were three rate cuts, not reversed for almost a year. Rates ended that cycle two percentage points higher than they were on the eve of Black Monday.
LTCM also triggered three rate cuts.
In 2011, with rates already at zero, the Fed responded with “Operation Twist” to try to push down bond yields.

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RBS has advised clients to brace for a “cataclysmic year” and a global deflationary crisis,
warning that major stock markets could fall by a fifth and oil may plummet to $16 a barrel.
Ambrose Evans-Pritchard, 11 Jan 2016



“Fangs” — Facebook, Amazon, Netflix and Google
As with the first Shanghai Surprise, the stark reaction to this week’s Chinese events reveals deep lack of confidence in the health of the western corporate sector.
Even if the situation now stabilises — as it did for several months back in 2007 —
the message of concern, in both west and east, is clear.
John Authers, FT 8 January 2016


One of the (many) fascinating things about this latest global financial crisis is that there’s no single catalyst.
Unlike 2008 when the carnage could be traced back to US subprime housing, or 2000 when tech stocks crashed and pulled down everything else,
this time around a whole bunch of seemingly-unrelated things are unraveling all at once.

zerohedge 7 January 2016

Submitted by John Rubino via DollarCollapse.com

Interest rates, for instance, were high by current standards at the beginning of past crises, which gave central banks plenty of leeway to comfort the afflicted with big rate cut announcements.
Today rates are near zero in most places and negative in many.

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News


A Year of Sovereign Defaults?
Carmen Reinhart, Project Syndicate 31 December 2015

Like so many other features of the global economy, debt accumulation and default tends to occur in cycles. Since 1800, the global economy has endured several such cycles, with the share of independent countries undergoing restructuring during any given year oscillating between zero and 50%

The most recent default cycle includes the emerging-market debt crises of the 1980s and 1990s. Most countries resolved their external-debt problems by the mid-1990s, but a substantial share of countries in the lowest-income group remain in chronic arrears with their official creditors.

Read more at https://www.project-syndicate.org/commentary/sovereign-default-wave-emerging-markets-by-carmen-reinhart-2015-12#z8IKDElycECkDZ8Q.99

Welcome, then, to what Carmen Reinhart, senior fellow at the Peterson Institute for International Economics in Washington,
and Harvard’s Kenneth Rogoff call “the second great contraction” (the Great Depression of the 1930s being the first).


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