“The ineffable leader of the Bolivarian Revolution has recently announced the launching of a new currency, the so-called Sovereign Bolivar, which will replace the bolivar as the official medium of exchange starting in June.”
“As global bond yields break ever higher, it appears The Bank of Japan is realizing it is losing control of its yield curve and today unleashed a double-whammy to stifle the bond bears… Whammy 1 – BoJ offers to buy unlimited 10Y notes at 11bps. Result – a 0.5bps drop in the JGB yield!!”
“The SNB raked in ENORMOUS investment profits because they printed hundreds of billions of francs, which inflated the prices of assets that they themselves were buying. And today, because of those artificial investment gains that they engineered for themselves, the SNB is now the most profitable company in the world. Oh, and just so you know the other half of the story, while the central bank is raking in record profits, total debt in Switzerland has skyrocketed.”
“Washington has suspended it way into a $5.7 trillion increase in the public debt in just six years since October 2011. That is, during a period which supposedly constitutes the third longest business expansion in US history. At the end of the day, you can’t borrow your way to prosperity. That’s the oldest rule in the book of sound money and sustainable finance. And it’s about ready to be learned all over again.”
Read more: http://davidstockmanscontracorner.com/the-black-swan-in-plain-sight-debt-out-the-wazoo/
Japan, already carrying the highest debt to GDP ratio of all OECD countries, has approved a record spending bonanza of 97.5 trillion yen in its 2017 budget, even while the Japanese birth rate has collapsed to 1899 levels, prompting questions as to how its mounting debt could ever be retired.
Italy, carrying the third-highest debt to GDP ratio and having been mired in recession for eight consecutive years, plans to nationalize four failing banks, borrowing at least 20 billion euros to do so. Since taxpayer bailouts were ostensibly banned by Europe in 2015, an exception to the rule will be invoked to enable the Italian bailout. But who would lend to the already massively indebted Italian government to fund its acquisition of zombie banks, especially after the IMF’s recent warning that Italy is on course to remain in recession for another decade, the government’s recent collapse after a failed referendum to increase executive powers, and in light of the half-dozen active Italian secession movements? Well, likely the same sort of institutional investors who recently bought 16.5 billion euros’ worth of 50-year Italian government debt, expecting to be able to flip it to the European Central Bank in a hypothetically-expanded bond-buying program down the road.
Sweden, facing a debt bubble and soaring housing prices, with mortgage loans now averaging between 105 and 140 years amortization, has seen its central bank’s board requiring a tie-breaker vote to continue its negative interest rate policy and bond-buying program.
European Union officials have decided to force Apple Computer to pay a retroactive 13 billion euros in tax to the Irish state for the activities of Apple’s Irish subsidiaries, which employ around 6000 individuals. The Irish government, not wishing to see an economic golden goose killed if Apple were to pack up and leave Ireland, insisted that it had not given Apple any special treatment warranting the tax and did not want the ordered transfer. The EU budgets cash it ‘earns’ from fines as a normal revenue item, so if Ireland refuses to collect the tax it may be transformed into an EU fine under competition rules instead.
Every day provides increased evidence that developed-world sovereign debt is quite literally “a bubble in search of a pin”, as Peter Schiff put it in his 2011 book ‘Crash Proof’.
“The reason anyone would buy negative-yielding debt is actually pretty simple: Because they have to. They are central bankers looking to help promote economic growth. They are insurance companies, pension funds and money managers who have to match liabilities with assets. They are not, by and large, retail investors who are so afraid of risk that they’re willing to pay for the privilege of lending money to a government. Together, those buyers have helped build a nearly $12 trillion funnel of negative-yielding sovereign debt — unprecedented in world history. But what awaits on the other side is adding to the worries of investing professionals.”
http://www.cnbc.com/2016/07/11/negative-rates-leading-to-day-of-reckoning-fear-on-wall-street.html
“The ECB and the Bank of England have purchased so much government debt that they have recently reached even further down the credit ladder, with the ECB buying corporate bonds, and the Bank of England announcing purchases of ‘Tier C’ assets, which include assets ‘backed by credit cards; student loans; and consumer debt.’ Unfortunately, this isn’t backing at all. When will it end? It will end as credit defaults rise, bank bailouts become necessary, covenant lite debt proves to be, indeed, lite on covenants, and financial assets pushed to zero long-term yields prove, indeed, to yield zero returns over the long-term.”
http://www.hussmanfunds.com/wmc/wmc160711.htm
“The European Central Bank bought 1.9 billion euros worth of corporate bonds in its first full week of purchases, at the upper end of market expectations, signalling a strong start to its latest measure designed to revive inflation. Unveiled in March as part of a 1.74 trillion euro asset-buying plan, the ECB started buying investment grade, non-bank corporate bonds on June 8. It hopes that lowering corporate borrowing costs will induce companies to invest, boosting inflation and economic growth. Sources with direct knowledge had earlier said the ECB was hoping to lure new issuers to the market and would buy 5 billion to 10 billion euros worth of corporate debt per month if new debt sales ramped up.”
http://www.reuters.com/article/ecb-qe-idUSF9N18B01A
“The country’s highest court ruled that the ECB’s 2012 bond-buying plan called Outright Monetary Transactions (OMT) is legal under the German constitution. OMT – though never actually used – was part of ECB’s President Mario Draghi’s landmark promise to do ‘whatever it takes’ to save the battered euro at the height of the crisis in 2012. The promise of OMT was that the ECB could, if necessary, buy up unlimited amounts of government bonds from debt-stricken countries that had pledged reforms such as Italy, Spain and Portugal. Critics charged that the ECB is essentially printing money and lavishing it on states, leaving taxpayers with the risk of one day having to foot the bill.”
https://www.enca.com/money/german-court-rules-in-favour-of-ecb-crisis-fighting-tool
“Think of the EU, in its current ill-structured form, as a kind of Ponzi scheme, and Britain as the guy who just asked for his money back. There are undoubtedly greater prospects for near-term disruption after last week’s vote, but the hallmark of a Ponzi scheme is the attempt to use progressively greater distortions in order to preserve a structure that is fundamentally unsound and increasingly bankrupt. Of any large country that could leave the EU, Britain was the best first mover. I have no immediate concerns about a domino effect, but if one was to emerge, my view is that the exit of Germany, France, and the Nordic countries would be preferable to the exit of Greece, Italy, Spain, or Portugal.”
http://www.hussmanfunds.com/wmc/wmc160627.htm
