World financial crisis Part 5

Hey Chicken Little, the sky is fallin'

What bunkum, just like all your other other conspiracy theories.

https://www.bloomberg.com/quote/SPX:IND

What bunkum, just like all your other other conspiracy theories.....I would be useful for your credibility, if you would come up with counter explanations, rather than rhetoric....myself and a number of people here are looking for the tipping point...if you and others wish to keep your head in the sand..... fine...I and others, especially activists are trying, politically, to prepare, politically!

Liquidity Shortage Getting Worse: Fed's Repo Oversubcribed Even More As Funding Demand Jumps

For those hoping that the dollar shortage and overnight funding crunch would ease on the third day after the G/C repo rate exploded as high as 10%, we have bad news: it has not.

As we warned earlier today, when we previewed the result of today's repo outcome, the only question would be whether the amount of bids submitted into today's operation would be higher or lower than yesterday's $80.05BN to get a sense of whether the funding pressure is easing. The answer: with $83.875BN in total bids submitted, not only was the $75BN operation oversubscribed again, but the total liquidity shortfall rose by almost $4 billion compared to Wednesday morning.

Furthermore, the fact that the operation was again oversubscribed means that once again there was one or more participants who did not get up to €9 billion in the critical liquidity they needed

What a disaster, eh!

https://en.wikipedia.org/wiki/S%26P_500_Index#/media/File:S_and_P_500_chart_1950_to_2016_with_averages.png

How much had the stock market risen since the inception of this ridiculous fake news thread?

After all even a broken watch tells the correct time twice a day

But to say these things means you have not passsed the left's purity tests.

NDPP wrote:

Fed Pouring Billions Nightly Into US Banks For Months

https://youtu.be/R0tkZN2tNdQ

"The US Federal Reserve is pumping 75 billion dollars per day into our banks for something called 'repo operations'. Why is the Fed continuing to intervene in the business of banks if our economy is doing so great...?"

To keep the economy doing great.

Ha!

https://www.google.ca/amp/s/www.nbcnews.com/news/amp/ncna1058311

...so the bailouts now will continue and expand as the system continues to teeter......

the accelerating expansion of M2, i.e. high valued credit, due to increasing balance sheets of the Fed and global Central bankers for these past 2 months is putting increasing pressure on global bond markets, sovereign and corporate debts....likewise inflation of the CPI globally (eatch China!)....causing the global bond yields to increase....a serious threat to the 1200 trillion derivatives market, the US 23 plus trillion deficit ad nauseum....

I suspect this would be the catalyst to crash the system! Another bad week next week for bond prices globally will be a sign!

Debt Market Bubble's Bursting - The 'CLO Sausage Factory' Is Stalling

by Tyler Durden

Tue, 11/12/2019 - 09:45

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Excerpted from Bill Blain's Morning Porridge commentary,

I’m intrigued by recent moves in CLOs – Collateralised Loan Obligations. They have been one of the strongest performing sectors of the bond markets for many years. Smart investors realised pooled corporate credit investments spread the risk across a wide range of borrowers, and following the 2008 Global Financial Crisis there were surprisingly few corporate defaults. In fact, as rates tumbled lower investment grade and junk debt performed strongly – making CLOs even more attractive. CLOs are now a $750 bln global market. 

But the CLO sausage factory needs constantly fed with new debt to keep churning out new product... Therein lies danger......

....the evidence is growing junk status, sub prime debt default is on the horizon, ready to burst the 1200 trillion derivative bubble, overwhelming the system!

I look at it in very simple terms. As productivity rose workers were offered ever increasing credit instead of raises and told to buy property as investments. At the same time the economy depends on consumerism for profits so produce ever more disposible products for people to buy on credit and be forced to replace regularly. We have not recovered from the crash of 2008. Money has to circulate to generate wealth and productivity. 

Personal wealth is not built on disposible products. Quality of life is not delivered through rapid wardrobe turnover. What value do you put on city air being as good as ocean air? Is it more or less valuable than using a personal car within the city? Being able to swim in the local river? How important is the dollar store? We have to re-evaluate the wisdom of producing cheap products in Asia and shipping them here. 

One think I know is you can have the best solution ever but without widespread support it won't work.  For that reason you have to think about what motivates other people.

LIVE NOW

National Security Council's Alexander Vindman and Pence Aide Jennifer Williams TestifyChinese Electronics FBBrm Misses Repayment of Local BondBloomberg News

18 de noviembre de 2019 19:33 GMT-6 Updated on 19 de noviembre de 2019 3:47 GMT-

Tunghsu Group seeks payment deadline extension from creditors​

• Company’s dollar bond due 2020 has cross-default clause

A Chinese maker of electronic display panels has missed payment on two of its yuan bonds, a sign that the nation’s private firms continue to face a funding crunch amid an economic slowdown.

Bloomberg news

The collapse is well unfolding before our eyes, with China now the key catalyst, what with production, real estate and corporate bond markets in decline leading to more bankruptcies

The catalyst?

Fed's Emergency Repo Operation Oversubscribed As Repo Rates Spike To December High

Ahead of today's massive liquidity drain, which according to some calculations will be as much as $100 billion between $54BN in coupon settlements from last week's Treasury auctions and an additional $50 billion or so in corporate income tax payments to the Treasury...

... which combined would be as large, if not bigger than the Sept 16 cash transfer to the Treasury which sparked the mid-September repo crisis, last Thursday the Fed announced a "kitchen sink" liquidity tsunami, throwing as much as $500 billion in liquidity backstops in the form of expanded and extended repo and term repo operations, while keeping the Fed's "Not QE" T-Bill monetization chugging along.

The first of these emergency repo operations was scheduled for this morning, ahead of the liquidity drain, in the form of a $50 billion, 32-day repo, which took place shortly after 8am, and was once again oversubscribed as there was more demand for liquidity, or $54.25 billion, than there was total supply.

This offering, which matures on January17, 2020, was the fourth "turn" repo providing funding past the year-end period.

The fact that the operation was oversubscribed was the first indication that banks are once again reserve-constrained and scrambling to procure as much year-end liquidity as they can get their hands on. Whether repo operations in the coming days are oversubscribed will indicate if the Fed's roughly $500 billion in repo ops scheduled for the next 4 weeks will be enough to keep the Fed from losing control over overnight rates, as Credit Suisse repo expert Zoltan Pozsar predicted last week in his now infamous "Countdown to QE4" report.

One ominous sign: the overnight G/C repo rate spiked from 1.58% on Friday to 1.69% this morning, the highest print since the end of the November, and the clearest indication yet that despite throwing a kitchen sink of liquidity in the market, some dealers and banks are still having problems getting access to much needed liquidity. 

Keep an eye on the repo rate over the next few hours for an indication if today's $100 billion liquidity drain will overpower the Fed's preemptive liquidity tsunami, in effect triggering Zoltan Pozsar's worst-case scenario.

Political openings: Class struggle during and after the pandemic

For some on the left, the economic breakthrough brought on by the pandemic was the general consensus, not least among economists, for an astonishing increase in fiscal spending. Relative to the economy’s size, the stimulus introduced so far in the US is already double (in Canada triple) what it was during the 2008-09 crisis, with more to come. And the stimulus in that earlier crisis was the largest since the Second World War, leading the OECD to declare that the earlier intervention “now seems like a small-scale rehearsal for the [present] disruptions to our socioeconomic system.”

The insistence by the adherents to Keynesianism and Modern Monetary Theory that there is generally more room for increases in public spending than governments let on, especially during deep crises, is valid. Their conclusion that something fundamental and perhaps permanent has changed in terms of looser spending constraints is seductive—it would indeed make things easier if all that was needed was to elect the right people and have them print money to meet popular priorities. But this obscures the most basic political questions of class and power under capitalism.

Spending our way to the good society?

Though central banks can lever the supply of money, this still depends on reverberations throughout the private sector. Financial institutions must want to lend, and so, generate an increase in the effective money supply. Corporations must want to borrow and invest. The alternative of the state itself doing the spending, and thereby replacing private institutions in choosing and carrying out priorities, directly challenges capitalism’s foundations—taking us a good deal beyond simply gearing up the money presses.

Moreover, the apparent contradiction between earlier pressures to restrain fiscal expenditures and the current profligacy actually includes an underlying consistency: reproducing the conditions for capitalist success. The shift to the high levels of government spending didn’t signal a permanent new paradigm for running a capitalist economy. It wasn’t the result of organized pressure from below or a sudden moral or conceptual conversion at the top. Rather, it was primarily imposed by the nature of the crisis and the conservative goal of returning to the earlier trajectory.

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At bottom, how societies determine the allocation of their labour and resources—who is in charge, what the priorities are, who gets what—rests on considerations of social power and corresponding values and priorities. Transforming how this is done is conditional on developing and organizing popular support for challenging the private power of banks and corporations over our lives and with this, accepting the risks this entails. Controlling the money presses is certainly an element in this, but hardly the core challenge.

The present stimulus may indeed continue for a while. The fear of a second infection wave, the related fragility of the economy, and a concern, as well, to contain heightened social unease may be enough to sustain the stimulus through the rest of this year and perhaps the next. Moreover, the electoral costs to parties of the center-left of their past complicity in austerity teach the priority of limiting fiscal restraint as part of winning back and consolidating their former base. This may further support the unprecedented levels of fiscal spending for a period that extends into the likely Biden presidency.

But as a semblance of normality returns, so too can we expect the prevailing economic logic to again revert to orthodoxy. This will bring intense pressures to address a fiscal deficit swollen by the unusual steps taken during the extended health crisis, especially when even more spending will be called for to address decaying infrastructures, revealed social needs, and revived attention to the environmental crisis. The choices will by then be stark, even in the United States with its privileges of being the home of the world’s currency of choice.

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A fundamental crisis in capitalism?

A more radical current on the left begins its analysis of the present moment by arguing that the economy was already in deep trouble before the pandemic; the pandemic only aggravated that crisis (for a sophisticated defense of this position see the work of Michael Roberts). Debating this is not an academic distraction. How we assess the contradictions of our era carries differing implications for expected scenarios and strategies.

For example, if the operating assumption is that we’re in a period of deglobalization, we might expect competitive pressures on the working classes to abate, with increased space for a new confidence and militancy. If capitalism is characterized as being on the verge of collapse, the central concern might be to patiently prepare for picking up the pieces. If we interpret the US economy, in particular, as a basket case, some may take this to mean that some kind of rebellion is imminent. If we anticipate a new era of inter-imperial rivalry, then an intensified nationalism might further divert workers from a class politics.

There is often, in such negative readings of capitalism’s current economic arc, an unstated political hopefulness about the response of the working classes. Capitalism’s problems will, such observers argue, make workers more receptive to a radical alternative. This ‘pessimism of the economy’ and ‘optimism of the resistance’ is, however, an unconvincing basis for assessing present openings.

Globalization may very well slow from its recent over-heated pace, but transnational companies are not going away; foreign supply chains, trade, and foreign investment are not about to be marginalized in corporate strategies; finance is not going to withdraw from its international presence. Capitalism may have been heading for a downturn before the pandemic, but a ‘downturn’ is not a ‘crisis’—the past century has witnessed many such downturns. Recovering from the pandemic will certainly be fraught and drawn out throughout the world, but a difficult transition does not necessarily threaten the economic system as a whole.

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Strategic dilemmas, political openings

The pandemic, it is now commonly noted, further highlighted capitalism’s social irrationalities. This was especially so in the US with its stunted (though very expensive) health system and in Trump’s crass response to the relative weight of commercial versus health concerns.

To this opening for building a radical opposition was added the environmental connection. Though largely pushed to the side during the pandemic, COVID-19 served as the canary-in-the-mine for capitalism’s general unpreparedness for not only future health pandemics but also the infinitely greater environmental crisis already enveloping us. Unlike health pandemics, the environmental crisis can’t be resolved through lockdowns, social distancing, and vaccines. It demands a radical restructuring of how society is organized, what we value, and how we relate to each other—issues that dwarf the already traumatic experiences with Covid-19.

How, for example, will we respond if a worsening environment forces people in the global south off their land and brings mass migration to the more developed world? Do we even have the planning capacity to deal with internal mass migration if floods and droughts start occurring within our own borders? Can we really expect that people would heed calls for consumption restraint when the excess consumption of the rich so clearly translates into starvation for the poor and lower-income groups? The health pandemic gave states emergency powers, but they were, in general, only moderately applied; what kind of emergency powers would environmental collapse require and how could this be balanced by democratic checks?

A third opening broaches the pandemic’s potential impact on class formation. Nothing is more important than breakthroughs at this level, since creating the social power to actually change circumstances takes us beyond lamenting unfairness, expressing moral outrage, or sinking into a debilitating fatalism. In this regard, the combination of front-line workers facing intensified health risks, and the unique degree of public empathy for their work, has raised the prospect of a new militancy erupting within unions alongside a surge in new unionization in key sectors, each reinforcing the other.

The protests with the highest profile by far during the pandemic (and which were only partially an outcome of the pandemic) were those that erupted against police abuse and murder of Black people. The size of these protests, their energy, and widespread support from whites pose the question of whether this might now contribute to a broader left politics, one no longer haunted and diverted by racial divisions.

Adolph Reed Jr. has long argued that the way forward lies in expanding the frame of black politics to incorporate ‘the kinds of social and economic policies that address Black people as workers, students, parents, taxpayers, citizens, people in need of decent jobs, housing, and healthcare, or concerned with foreign policy [rather than] homogenize them under a monolithic racial classification’.

The other path, and for now perhaps the more likely one, is that the excitement and confidence generated by the protests reinforce a concentration on organizing around specifically ‘black’ concerns and the further ghettoization of black politics. The focus on policing is of obvious concern to blacks: their rate of incarceration is five to six times that of whites, and their likelihood of being shot and killed by police is roughly 2.5 times that of whites......

U.S. Economy Shrank at Record-Breaking 31.4% Annualized Rate in Second Quarter

In economic news, the Commerce Department said Wednesday the U.S. economy shrank by a record-shattering 31.4% annualized rate in the second quarter of 2020 as coronavirus lockdowns shuttered much of the economy. That’s the highest quarterly drop in gross domestic product since the U.S. began recording the statistic in the 1940s. On Wednesday, Senate Republican Majority Leader Mitch McConnell rejected Democrats’ last-ditch proposal to pass a slimmed-down, $2.2 trillion dollar coronavirus relief bill as a “political stunt.”

United and American Airlines said in response they were preparing to furlough a combined 32,000 workers, as hopes of an airline industry bailout faded. Disney, meanwhile, said it will lay off 28,000 workers at its theme parks.

In Florida, Republican Governor Ron DeSantis refused to extend a moratorium on foreclosures and evictions during the pandemic, which expired at midnight. Florida has recorded a new spike in cases since Governor DeSantis lifted limits on capacity at bars, restaurants and other businesses last Friday.

Pondering wrote:

Saying capitalism and democracy are incompatible is no different than saying socialism and democracy are incompatible. I would say socialism is much more incompatible with democracy. It is certainly more incompatible with individual freedoms.

Gates, Bezos, Zuckerberg and all the other tech overlords like your messaging.