Implode-Explode Heavy Industries news feed http://implode-explode.com/ Tracking the many faces of the global credit implosion. en-us iehi-feed-64477 Mon, 17 Dec 2018 18:31:48 GMT Goldman Sachs Faces First Criminal Charges in 1MDB Scandal http://implode-explode.com/viewnews/2018-12-17_GoldmanSachsFacesFirstCriminalChargesin1MDBScandal.html iehi-feed-64475 Mon, 17 Dec 2018 04:15:00 GMT Protests Grip Hungary In Response To Overtime Measure That Critics Call A 'Slave Law' http://implode-explode.com/viewnews/2018-12-16_ProtestsGripHungaryInResponseToOvertimeMeasureThatCriticsCallASl.html iehi-feed-64473 Sun, 16 Dec 2018 17:36:49 GMT Doug Noland: The Perils of Inflationism http://implode-explode.com/viewnews/2018-12-16_DougNolandThePerilsofInflationism.html What only weeks ago appeared a rather straightforward meeting is now a pivotal juncture for the Federal Open Market Committee. With low unemployment and relatively robust household and business expenditures, the Fed has been widely expected to raise rates next Wednesday. It may now be a close call. But, then again, the Fed may not yet appreciate the seriousness of what is unfolding in the markets. They're in a real predicament, along with central bankers around the world. They all waited way too long to begin normalizing monetary policy. Today, normalization has barely even commenced, and yet the Bubble they nurtured has already begun to deflate.

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I don't want to imply that resurgent Chinese Credit growth and/or even a more dovish Fed wouldn't matter. I just believe at this point the bursting global Bubble is increasingly beyond resuscitation. A bold statement, I fully appreciate. But Fear is rapidly supplanting greed in "Core" U.S. securities markets. The "Core" has seen de-risking/deleveraging dynamics attain important momentum. Latent "Core" fragilities are being exposed. And the further the global Bubble deflates, the greater the scope of monetary stimulus required to re-energize broad-based securities market inflation. I fully expect more QE. But it will come in a crisis backdrop. I'll presume the first few Trillion or so will, at best, accommodate deleveraging.

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iehi-feed-64471 Sat, 15 Dec 2018 04:32:24 GMT Trump's Inauguration Paid Trump's Company -- With Ivanka in the Middle http://implode-explode.com/viewnews/2018-12-14_TrumpsInaugurationPaidTrumpsCompanyWithIvankaintheMiddle.html iehi-feed-64470 Fri, 14 Dec 2018 23:41:49 GMT The End of QE Will Always Devolve Into This Sort of Incoherent Mess http://implode-explode.com/viewnews/2018-12-14_TheEndofQEWillAlwaysDevolveIntoThisSortofIncoherentMess.html Draghi claimed today, again the circus, that at some points "QE has been the only driver of this recovery." Even if that statement is true, it can't have been a recovery. The term itself has been so misused, to attempt to reverse engineer some measure of success for the policy.

John Maynard Keynes would be spinning in his grave. Monetary as fiscal policy is supposed to spur the organic processes that then lead to sustained economic growth (pump priming). If it is the only thing moving the economy forward (itself debatable), it has failed on its own terms.

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iehi-feed-64468 Thu, 13 Dec 2018 22:03:31 GMT The Curious Rush To Combine German Banks http://implode-explode.com/viewnews/2018-12-13_TheCuriousRushToCombineGermanBanks.html German officials are laying the groundwork to change the nation's banking laws so that it's two largest banks, really "banks", can more easily combine. If it should ever come to that... DB would have to convert to a holding company triggering revaluation of assets and then the tax consequences of those. Unless, of course, auditing the bank's standing book reveals other malformities taking things in a different direction.

It's not just the rush toward marriage, it's more so who with. DB is both the target and the presumptive acquirer, an already odd situation. And if there is a healthy counterpart to DB's sickening status it's surely not Commerzbank, the institution being whispered up for combination.

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All of these things are related, furthermore connected to Germany's vulnerable external financing requirements ("dollar short"). DB's, as Commerzbank's, declining revenues and overall position indeed have led to a great contribution to the global "dollar shortage." The "dollar short" persists regardless, meaning that rock has met hard place; "funding costs have continued to rise" because these things become self-reinforcing.

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The bank raised significant capital early on in [2014], ostensibly to complete its comeback from the 2008 break. Having been fixed, and compliant with new regulations in full, what did DB's management decide was its best course? Unlike most of its other peers who were actively retreating, Deutsche plunged headlong into the riskiest assets -- global junk, including US corporates as well as US$ EM junk (Eurobonds).

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iehi-feed-64465 Thu, 13 Dec 2018 05:28:57 GMT Speaker Paul Ryan retires: his legacy is debt and disappointment http://implode-explode.com/viewnews/2018-12-13_SpeakerPaulRyanretireshislegacyisdebtanddisappointment.html House Speaker Paul Ryan's legacy can be summed up in just one number: $343 billion. That's the increase between the deficit for fiscal year 2015 and fiscal year 2018 -- that is, the difference between the fiscal year before Ryan became speaker of the House and the fiscal year in which he retired.

... now, as Ryan prepares to leave Congress, it is clear that his critics were correct and a credulous Washington press corps -- including me -- that took him at his word was wrong. In the trillions of long-term debt he racked up as speaker, in the anti-poverty proposals he promised but never passed, and in the many lies he told to sell unpopular policies, Ryan proved as much a practitioner of post-truth politics as Donald Trump.

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The first [betrayal] is the 2017 tax cut Ryan passed but didn't pay for. His defenders note that early drafts of the tax cut bill included a border adjustment tax that would've made the package revenue-neutral, fulfilling Ryan's promises. But that policy fell out of the legislation early on, and rather than replace it, Ryan pushed a plan that added $1.5 trillion to the national debt over 10 years, and used accounting gimmicks to hide vastly larger increases tucked into the legislation's long-term design. Now House Republicans, still under Ryan's leadership, are agitating to make the tax cuts permanent, with a 20-year cost estimated at $4 trillion.

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The second is the spending Ryan passed but didn't pay for. Years of fiscal irresponsibility have sometimes permitted Republicans to be graded on a curve, where tax cuts can be charged to the national credit card and spending cuts are the true measure of policy steel. But even on this diminished measure, Ryan's record betrayed his promises.

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The third is the expansion of the earned income tax credit Ryan proposed but never even tried to pass. After the 2010 election, he went on a much-vaunted tour of American poverty, racking up positive press for expanding the boundaries of the possible under conservatism, and arguing for an enlarged EITC that would help childless adults.

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"When we tried to get it into a negotiation, he refused," says Jason Furman, who served as Obama's chief economist. "It wasn't in his tax plan. In $1.5 trillion in tax cuts, he somehow couldn't find space for this $60 billion item. It's just amazing."

... In important ways, Trump is not a break from the Republican Party's recent past but an acceleration of it. A party that acculturates itself, its base, and its media sphere to constant nonsense can hardly complain when other political entrepreneurs notice that nonsense sells and decide to begin marketing their own brand of flimflam.

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iehi-feed-64464 Wed, 12 Dec 2018 16:03:03 GMT Theresa May Faces No-Confidence Vote Wednesday Over Brexit Anger http://implode-explode.com/viewnews/2018-12-12_TheresaMayFacesNoConfidenceVoteWednesdayOverBrexitAnger.html iehi-feed-64463 Wed, 12 Dec 2018 15:42:40 GMT Fed Piles Up $66 Billion in Paper Losses as It Faces Trump Wrath http://implode-explode.com/viewnews/2018-12-12_FedPilesUp66BillioninPaperLossesasItFacesTrumpWrath.html ``The Fed had losses of $66.5 billion on its securities holdings on Sept. 30, if it marked them to market, according to its latest quarterly financial report. That dwarfed its $39.1 billion in capital, effectively leaving it with a negative net worth on that basis, a sure sign of financial frailty if it were an ordinary company.

... officials play down the significance of the theoretical losses and say they won't affect the ability of what they call "a unique non-profit entity'' to carry out monetary policy or remit profits to the Treasury Department. Case in point: the Fed handed over $51.6 billion to the Treasury in the first nine months of the year.

... "A central bank with a negative net worth matters not in theory,'' former Fed Governor Kevin Warsh said in an email. "But in practice, it runs the risk of chipping away at Fed credibility, its most powerful asset.''

The unrealized losses also provide fuel to critics of the Fed's huge bond buying programs -- commonly known as quantitative easing -- and the monetary operating framework underpinning them, just as central bankers begin discussing the future of its balance sheet. The ostensible red ink also could make it politically more difficult for the Fed to resume QE if the economy turns down.

... The Fed is currently reducing its bond holdings by a maximum of $50 billion per month -- not by selling them, which could force it to recognize an actual loss -- but by opting not to reinvest some of the proceeds of securities as they mature.

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iehi-feed-64461 Tue, 11 Dec 2018 05:09:50 GMT Manic Monday: Britain plunges deeper into Brexit crisis http://implode-explode.com/viewnews/2018-12-11_ManicMondayBritainplungesdeeperintoBrexitcrisis.html It all started in the morning, when in a landmark ruling the European Union's top court said the UK may unilaterally reverse its decision to leave the 28-member bloc prior to its scheduled exit on March 29 next year.

By early noon, May's already tenuous grip on Brexit appeared further weakened as whispers began to circulate that she would postpone a parliamentary voteon the widely criticised Brexit deal she negotiated with the EU, contradicting statements made by several officials earlier in the day.

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When May finally announced that Tuesday's vote was being delayed, acknowledging that her agreement would have been rejected, opposition MPs accused her of "losing control of events" and members of her own ruling party called on her to "govern or quit".

"The situation is utterly confused," said Simon Usherwood, a reader in politics at the University of Surrey and deputy director of the UK in a Changing Europe group.

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iehi-feed-64458 Sun, 09 Dec 2018 19:00:53 GMT I Served in Congress Longer Than Anyone. Here's How to Fix It. http://implode-explode.com/viewnews/2018-12-09_IServedinCongressLongerThanAnyoneHeresHowtoFixIt.html The elimination of money in campaigns. Period. Elections, like military service--each is an example of duty, honor, and service to country--should be publicly funded. Can you imagine if we needed to rely on wealthy donors to fund the military? I know there are those who genuinely believe in privatizing everything. They are called profiteers.

Public service should not be a commodity, and elected officials should not have to rent themselves out to the highest bidder in order to get into (or stay in) office. If you want to restore trust in government, remove the price tag. I am fully aware that the Supreme Court has declared that "money is speech." That's nonsense. The day my wallet starts talking to me, I might reconsider that view. Until then, I believe that the pernicious influence of money on our elections must be removed.

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iehi-feed-64457 Sun, 09 Dec 2018 16:47:42 GMT Paris cleans up as Macron prepares to respond to 'yellow vest' riots http://implode-explode.com/viewnews/2018-12-09_PariscleansupasMacronpreparestorespondtoyellowvestriots.html The government canceled a planned rise in fuel taxes last Tuesday to try to defuse the situation but the protests have morphed into a broader anti-Macron rebellion.

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Yellow vest protesters demand lower taxes, higher minimum wages and better pension benefits. But, mindful of France's deficit and not wanting to flout EU rules, Macron has scant wriggle room for more concessions.

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iehi-feed-64450 Fri, 07 Dec 2018 00:06:57 GMT Brexit vote: What could happen next? http://implode-explode.com/viewnews/2018-12-06_BrexitvoteWhatcouldhappennext.html iehi-feed-64449 Thu, 06 Dec 2018 20:16:32 GMT Does Trump Even Understand How Tariffs Work? http://implode-explode.com/viewnews/2018-12-06_DoesTrumpEvenUnderstandHowTariffsWork.html This weekend, President Donald Trump announced a major economic deal with Beijing. "China has agreed to reduce and remove tariffs on cars," he wrote on Twitter. "Farmers will be a a very BIG and FAST beneficiary of our deal with China. They intend to start purchasing agricultural product immediately," he added. "Farmers, I LOVE YOU!"

A few days later, Trump flip-flopped. "We are either going to have a REAL DEAL with China, or no deal at all--at which point we will be charging major Tariffs," he wrote. "If a fair deal is able to be made with China, one that does all of the many things we know must be finally done, I will happily sign. Let the negotiations begin."

These quick-succession declarations roiled markets: Stock prices bounced and then plunged as traders responded to good news (a potential U.S.-China deal) and bad (the apparent lack of a "REAL DEAL"). It seems trade wars are not, in fact, good and easy to win--especially if it is not clear what winning looks like. For all of Trump's bellowing about tariffs and China and trade, his goals and strategies remain confused and confusing, and much of what he wishes to accomplish might be impossible.

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iehi-feed-64446 Thu, 06 Dec 2018 15:41:27 GMT U.S. Nabbing Huawei Is the Dog That Caught the Car http://implode-explode.com/viewnews/2018-12-06_USNabbingHuaweiIstheDogThatCaughttheCar.html Huawei is one of the world's largest makers of telecom equipment, China's most important technology company and a national hero. The arrest of a senior executive at such a marquee company, over potential violations of U.S. sanctions on Iran, threatens to intensify the U.S.-China trade conflict just days after leaders had agreed a truce.

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With the U.S. finally making a move against Huawei, the Justice department and the Trump administration have an important question to answer: What do we want out of this?

It's not clear that they know. Before Huawei, smaller Chinese telecom-equipment maker ZTE Corp. was caught breaching U.S. sanctions. ZTE apologized and was let off with a fine and a seven-year suspended sentence on the condition that it change its ways and fire some people.

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In yet another example of the transactional nature of the current U.S. administration, ZTE was able to wriggle out of that procurement ban by paying an even bigger fine. The message to the world was clear: The U.S. rule of law is for sale.

This ham-fisted approach to punishing, forgiving, and then re-punishing ZTE must not be repeated if the U.S. wants to be taken seriously.

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... the U.S. should move forward with plans to set up stricter protocols on what it will allow China to buy. The Export Control Reform Act has similarities with the Wassenaar Arrangement, a multinational deal that restricts the flow of weapons and sensitive tools, such as semiconductor manufacturing equipment.

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iehi-feed-64441 Tue, 04 Dec 2018 02:28:35 GMT Congress moves to delay shutdown fight http://implode-explode.com/viewnews/2018-12-03_Congressmovestodelayshutdownfight.html iehi-feed-64438 Sun, 02 Dec 2018 21:38:33 GMT State contemplates martial law as stunned Parisians clean up posh central district after worst riots since 1968 http://implode-explode.com/viewnews/2018-12-02_StatecontemplatesmartiallawasstunnedParisianscleanupposhcentrald.html ``Several thousand riot police were overwhelmed on Saturday as they fought running battles with protesters in the shadows of some of Paris' fabled landmarks and through its fanciest shopping districts. More than 400 people were arrested and more than 100 injured, shocking Parisians and tourists alike.

At the base of the 19th-century Arc de Triomphe, police kept the public back as cleanup crews set about erasing graffiti, much of it targeting President Emmanuel Macron and some exuding anarchist sentiment such as, "Overthrow the bourgeoisie!"

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Authorities were caught off-guard by the escalation in violence after two weeks of nationwide unrest against fuel taxes and high living costs, known as the "yellow vest" movement after the fluorescent jackets worn by the protesters.

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"We're already afraid of what's going to happen next week. The violence is escalating at an exponential rate," said Claude, a well-heeled woman who lives next to the Belle Armee brasserie that was set ablaze. "The state is losing control. They cannot let this happen. Maybe the army should intervene."

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The protests are taking a toll on the economy. On Saturday, boulevards that should have been packed with tourists and Christmas shoppers resembled battle zones, as smoke and tear gas hung in the air and debris littered the ground. Hotels and department stores in the capital stand to lose millions.

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iehi-feed-64437 Sat, 01 Dec 2018 22:55:27 GMT Analysis: Trump "Sugar High" Economy Set to Fade Fast http://implode-explode.com/viewnews/2018-12-01_AnalysisTrumpSugarHighEconomySettoFadeFast.html "In the US, the double dose of caffeine from tax cuts and spending increases is already starting to wear off," Ethan Harris and Aditya Bhave of the BAML team wrote. At the same time, the US is expected to get hit with growing headwinds from Trump's continued trade war with China and the Federal Reserve's interest rate hikes.

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There are already signs that the boost from the tax cuts are fading and they could become more obvious next year, JPMorgan's economists said. They cited the slowdown in capital investment from corporations, for instance.

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As Business Insider's Will Martin reported, Carpenter thinks the trade war could actually drag GDP growth below 2% as early as the fourth quarter of 2018.

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iehi-feed-64435 Thu, 29 Nov 2018 20:08:19 GMT We're Racing Toward a "Global Debt Bomb" http://implode-explode.com/viewnews/2018-11-29_WereRacingTowardaGlobalDebtBomb.html In the last 15 years, worldwide debt has more than doubled, up by nearly $150 trillion. And the Institute of International Finance warned this past July that global debt rose the most in two years, by $8 trillion in the first quarter of this year, reaching an astounding $247 trillion.

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In the United States, the country's debt has grown so large that people cannot wrap their heads around it. As it stands this week, the country is on the hook for a staggering $21.79 trillion -- with a "t." And even if nothing else happens in the economy, it will grow $310 billion per year just on the interest owed alone.

But things do happen in the economy, and in fiscal 2018, the budget deficit of $779 billion added that much to the total bill. If interest rates keep inching higher, the amount owed on the debt will get larger and larger until it crowds out other necessary spending.

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[And yet,] central banks are already handcuffed with what they can do to combat future economic problems. They will be unable to handle the global debt bomb when it finally arrives.

The bond market is not helping, either. While the Fed grapples with its short-term interest rate policies, the bond market, which controls long-term interest rates, is already in a bear market. In other words, interest rates on Treasury notes, mortgages, and long corporate bonds are already rising significantly.

For example, the rate on the benchmark 10-year Treasury rallied from 2.06% in September of last year to its current 3.06%. That ... is a 50% increase in just 14 months...

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iehi-feed-64433 Thu, 29 Nov 2018 18:39:01 GMT Wall Street Falls as Investors Turn to G20 Trade Talks http://implode-explode.com/viewnews/2018-11-29_WallStreetFallsasInvestorsTurntoG20TradeTalks.html Investors are looking ahead to U.S.-China trade war developments as U.S. President Donald Trump and his Chinese counterpart Xi Jinping are expected to hold talks on the sidelines of the G20 at the end of the week.

Meanwhile, the Fed's November meeting minutes will be released later in the day, with investors looking for any fresh indications of interest rate plans. Data released on Thursday showed that consumer spending surged in October, while underlying inflation slowed. The Fed's preferred inflation measure, the core personal consumption expenditures price index, rose 0.1%.

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