Implode-Explode Heavy Industries news feed http://implode-explode.com/ Tracking the many faces of the global credit implosion. en-us iehi-feed-64881 Mon, 19 Aug 2019 09:14:16 GMT Trump goes on attack as economy fears cloud 2020 hopes http://implode-explode.com/viewnews/2019-08-19_Trumpgoesonattackaseconomyfearscloud2020hopes.html ``the President, who dispatched his top economic advisers to Sunday talk shows, is also dishing out a mixture of accurate and misleading commentary and blaming the Federal Reserve and the media in case there is trouble ahead.

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Uncertainty about the economy is fomented partly from conflicting signs. Jobs growth remains strong in the US and consumer spending is robust, according to the latest data.

But the slowest growth in China in three decades, imminent recession fears in big European economies and bearish signals sent last week by the bond markets could be early warning signs of a 2020 economic headache for Trump.

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"We don't know yet, are we headed for a recession? That's not my base case scenario," Minneapolis Federal Reserve President Neel Kashkari told CNN's Brianna Keilar on Friday. "But the risks have increased quite a bit."

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iehi-feed-64871 Wed, 07 Aug 2019 00:21:17 GMT Can the Fed Prop Up The "Everything Bubble" Forever? http://implode-explode.com/viewnews/2019-08-06_CantheFedPropUpTheEverythingBubbleForever.html iehi-feed-64862 Fri, 02 Aug 2019 17:22:30 GMT Why Was Trumponomics a Flop? http://implode-explode.com/viewnews/2019-08-02_WhyWasTrumponomicsaFlop.html Obviously Powell couldn't say in so many words that Trumponomics has been a big flop, but that was the subtext of his remarks. And Trump's frantic efforts to bully the Fed into bigger cuts are an implicit admission of the same thing.

To be fair, the economy remains pretty strong, which isn't really a surprise given the G.O.P.'s willingness to run huge budget deficits as long as Democrats don't hold the White House. As I wrote three days after the 2016 election -- after the shock had worn off -- "It's at least possible that bigger budget deficits will, if anything, strengthen the economy briefly." And that's pretty much what happened: There was a bit of a bump in 2018, but at this point we've basically returned to pre-Trump rates of growth.

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And there's a good case to be made that Trump's tariffs have actually hurt U.S. manufacturing. For one thing, many of them have hit "intermediate goods," that is, stuff American companies use in their production processes, so the tariffs have raised costs.

Beyond that, the uncertainty created by Trump's policy by whim -- nobody knows what he'll hit next -- has surely deterred investment. Why build a manufacturing plant when, for all you know, next week a tweet will destroy your market, your supply chain, or both?

... think of the missed opportunities. Imagine how much better shape we'd be in if the hundreds of billions squandered on tax cuts for corporations had been used to rebuild our crumbling infrastructure. Imagine what we could have done with policies promoting jobs of the future in things like renewable energy, instead of trade wars that vainly attempt to recreate the manufacturing economy of the past.

... pundits who think that Trump will be able to win by touting a strong economy are almost surely wrong. He most likely won't face a recession (although who knows?), but he definitely hasn't made the economy great again. So he's probably going to have to do what he's already doing, and clearly wants to do: run on racism instead.

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iehi-feed-64850 Mon, 29 Jul 2019 22:46:02 GMT Why We Should Fear Easy Money - Ruchir Sharma http://implode-explode.com/viewnews/2019-07-29_WhyWeShouldFearEasyMoneyRuchirSharma.html As the Fed prepares to announce a decision this week, growing bipartisan support for a rate cut is fraught with irony. Slashing rates to avoid deflation made sense in the crisis atmosphere of 2008, and cutting again may seem like a logical response to weakening global growth now. But with the price of borrowing already so low, more easy money will raise a more serious threat.

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Many Western economies appeared to face a similar threat [as the Great Depression and Japanese deflation] following the global financial crisis of 2008. Since then, led by the Fed, central banks have responded aggressively to every hint of a downturn, making money ever cheaper and more plentiful to try to juice growth.

Yet, in this expansion, the United States economy has grown at half the pace of the postwar recoveries. Inflation has failed to rise to the Fed's target of a sustained 2 percent. Meanwhile, every new hint of easy money inspires fresh optimism in the financial markets, which have swollen to three times the size of the real economy.

In this environment, cutting rates could hasten exactly the outcome that the Fed is trying to avoid. By further driving up the prices of stocks, bonds and real estate, and encouraging risky borrowing, more easy money could set the stage for a collapse in the financial markets. And that could be followed by an economic downturn and falling prices -- much as in Japan in the 1990s. The more expensive these financial assets become, the more precarious the situation, and the more difficult it will be to defuse without setting off a downturn.

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Today, politicians on the right and left have come to embrace easy money, each camp for its own reasons, both ignoring the risks. President Trump has been pushing the Fed for a large rate cut to help him bring back the postwar miracle growth rates of 3 percent to 4 percent.

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By fueling a record bull run in the financial markets, easy money is increasing inequality, since the wealthy own the bulk of stocks and bonds. Research also shows that very low interest rates have helped large corporations increase their dominance across United States industries, squeezing out small companies and start-ups. Once seen as a threat only in Japan, zombie firms -- which don't earn enough profit to cover their interest payments -- have been rising in the United States, where they account for one in six publicly traded companies.

All these creatures of easy credit erode the economy's long-term growth potential by undermining productivity, and raise the risk of a global recession emanating from debt-soaked financial and housing markets. A 2015 study of 17 major economies showed that before World War II, about one in four recessions followed a collapse in stock or home prices (or both). Since the war, that number has jumped to roughly two out of three, including the economic meltdowns in Japan after 1990, Asia after 1998 and the world after 2008.

Recessions tend to be longer and deeper when the preceding boom was fueled by borrowing, because after the boom goes bust, flattened debtors struggle for years to dig out from under their loans. And lately, easy money has been enabling debt binges all over the world, particularly in corporate sectors.

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iehi-feed-64846 Sun, 28 Jul 2019 21:51:45 GMT Where Are We On The Recession-o-Meter? http://implode-explode.com/viewnews/2019-07-28_WhereAreWeOnTheRecessionoMeter.html Indicator 1: The Unemployment Rate... What it's saying: All clear... Indicator 3: The ISM Manufacturing Index... What it's saying: Mostly cloudy.

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The indicators above are among the most common inputs into the formal models that economists use to forecast recessions. But many economists have a favorite indicator (or maybe a couple) that they also watch as a gut check.

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Auto sales: After houses, cars are the most expensive thing most families buy. And while owning a car is effectively required in large parts of the country, buying a new one almost never is. So when new car sales are strong, it's a sign consumers are feeling good. Retail car sales have typically peaked before recessions, then dropped sharply once one began. So it isn't a great sign that sales are falling.

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iehi-feed-64842 Sun, 28 Jul 2019 16:22:08 GMT Trump Besting Obama on Economy? Not So Fast http://implode-explode.com/viewnews/2019-07-28_TrumpBestingObamaonEconomyNotSoFast.html The BEA reported on Friday that real GDP grew at an annual rate of 2.1% in second quarter 2019. That means real GDP growth ran at an annualized 2.7% over the nine quarters on Trump's watch. Trump triumphalists might leap to point out that, during the 31 quarters under Obama, growth came in at just 2.2%, thereby claiming a half-percentage point margin of superiority for their man. But comparing 31 quarters with nine is like judging a mile-run against a marathon.

Our chart tracks rolling nine-quarter periods over the recent expansion--more of an apples-to-apples comparison. If there were no nine-quarter period under Obama when growth averaged as high as 2.7%, the GDP cup would go to Trump. But as the chart shows, that isn't the case. There were two nine-quarter periods -- through second quarter 2015 and second quarter 2016, respectively -- when growth equaled 2.7%, And there were two others -- through first quarter 2015 and third quarter 2015 -- when growth did a tenth of a percentage point better, at 2.8%. So in this contest, we have to give the edge to Obama.

Also, there was a huge government contribution to GDP growth in this year's second quarter. That brings up another comparison, to the detriment of Trump's relative performance.

Excluding the government contribution, private sector GDP growth in the second quarter ran just 1.3%. And over the just-ended nine quarters, private sector growth averaged 2.3% -- a figure that has been equaled or bested more than 10 different times under Obama. Ironically, the president who complained about the "waste, fraud, and abuse" of government spending has benefitted far more than his predecessor from government's contribution to GDP growth.

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iehi-feed-64840 Fri, 26 Jul 2019 19:36:36 GMT Trump fell short of 3 percent GDP goal in 2018, revised figures show http://implode-explode.com/viewnews/2019-07-26_Trumpfellshortof3percentGDPgoalin2018revisedfiguresshow.html Previous government data showed Trump had fulfilled his campaign pledge of 3 percent expansion -- a key measure of growth that the president and his allies have used to tout the administration's economic accomplishments -- but the year-over-year figure was lowered to 2.5 percent on Friday.

Trump pledged throughout his 2016 presidential campaign that he would usher in an era of continuous 3 percent growth with sweeping tax cuts and deregulation. Under former President Obama, the economy largely stayed within the bounds of 2 percent growth as it recovered from a recession that ended in the middle of 2009.

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GDP growth in the past three months also slowed notably, falling from a rate of 3.1 percent in the first quarter to 2.1 percent in April through June.

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iehi-feed-64830 Tue, 23 Jul 2019 17:27:48 GMT The day the tea party died http://implode-explode.com/viewnews/2019-07-23_Thedaytheteapartydied.html ``[The newly-negotiated budget deal] represents a fitting conclusion of the Budget Control Act -- the crown jewel of the 2011 'tea-party Congress.' The decade-long shredding of these hard-fought budget constraints mirrors the shredding of Republican credibility on fiscal responsibility."

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Given [Trump's] history, no one could, really, be surprised by the lack of interest or concern Trump has shown about adding to yearly deficits since being elected president. His much-hyped tax cuts are set to add $1.85 trillion to the national debt over an 11-year period, according to projections from the Congressional Budget Office. (The national debt has already grown to $22 trillion -- up more than $2 trillion since Trump came into office.) The federal deficit for this budgetary year, which has two more months left in it, is almost $750 billion -- an increase of nearly 25% from the previous year.

Tea Partyism turned out to never be much more than anti-Obamaism; so it converted naturally over to Trumpist guns-and-butter when Obama was out of the picture.

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iehi-feed-64821 Fri, 19 Jul 2019 17:51:25 GMT Fed Vacillates As It Toys With Kind-of Promising A Rate Cut But Not Really http://implode-explode.com/viewnews/2019-07-19_FedVacillatesAsItToysWithKindofPromisingARateCutButNotReally.html On Thursday, investors got excited about the possibility of a bigger-than-expected interest rate cut. New York Fed President John Williams on Thursday said policy makers should take preventative measures at the first signs of economic slowdowns. The market took this to mean that a bigger interest rate cut was on the way.

Expectations of a half-percentage-point cut at the Fed's next meeting in two weeks more than doubled to 60% in response. Treasury yields and the US dollar slipped. But then a spokesperson clarified that Williams wasn't making any predictions about the Fed's monetary policy update due in two weeks. Expectations for a half-point cut retreated to 41% on Friday, although that was still more elevated than just two days ago.

In the latest attack on Fed policy, President Donald Trump tweeted that he preferred Williams first statement, calling it "100% correct that the Fed 'raised' far too fast and too early."

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iehi-feed-64808 Fri, 12 Jul 2019 15:28:42 GMT Trump Reveals Himself Banksters' Water-Carrier On Cryptos http://implode-explode.com/viewnews/2019-07-12_TrumpRevealsHimselfBankstersWaterCarrierOnCryptos.html iehi-feed-64806 Fri, 12 Jul 2019 03:44:10 GMT Epstein "Blackmail Fund" Theory Gains High-Profile Supporters http://implode-explode.com/viewnews/2019-07-11_EpsteinBlackmailFundTheoryGainsHighProfileSupporters.html iehi-feed-64804 Thu, 11 Jul 2019 20:33:26 GMT Why Sex Offender Jeffrey Epstein Is Not A Billionaire http://implode-explode.com/viewnews/2019-07-11_WhySexOffenderJeffreyEpsteinIsNotABillionaire.html iehi-feed-64799 Wed, 10 Jul 2019 00:03:59 GMT Did Epstein Build a Hedge Fund Based On Blackmailing Elite Fellow Perverts? http://implode-explode.com/viewnews/2019-07-09_DidEpsteinBuildaHedgeFundBasedOnBlackmailingEliteFellowPerverts.html iehi-feed-64797 Tue, 09 Jul 2019 21:14:17 GMT This journalist has seen Trump's tax returns and says he's not as rich as he claims http://implode-explode.com/viewnews/2019-07-09_ThisjournalisthasseenTrumpstaxreturnsandsayshesnotasrichasheclai.html So in the context of a lawsuit that was specifically about the question of whether Trump was as rich as he said he was, the lawyers arguing that he wasn't as rich as he said he was wanted to see the tax returns and Trump did not want to hand them over.

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[In a deposition related to the lawsuit, Trump was asked] "Have you always been completely truthful in your public statements about your net worth," my attorneys asked Donald. "I try," was his reply. When they asked him about how he calculated his net worth, he noted that the figure "goes up and down with markets and with attitudes and with feelings, even my own feelings." Later he added that "even my own feelings affect my value to myself."

Boy, that final quote sounds a lot like some kind of snowflake!

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iehi-feed-64785 Mon, 01 Jul 2019 21:29:11 GMT Why Wall Street Owes Every U.S. Taxpayer $35,460 http://implode-explode.com/viewnews/2019-07-01_WhyWallStreetOwesEveryUSTaxpayer35460.html ... the average U.S. household has lost an estimated $4,236 in interest income due to the Fed's low interest rates (as opposed to a "normal" rate environment). In total, this has funneled $51.8 billion from the pockets of American savers into the coffers of Wall Street banks.

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According to a report from the People's Policy Project think tank, the wealth of the bottom 50% is down $900 billion over the past 30 years.

Meanwhile, the wealth of the top 1% has increased by $21 trillion. Digging deeper, we found that at least $5 trillion of this was taken away from average investors, like you and your fellow readers.

Without getting too deep into how this "theft" occurred, I can tell you that the financial elites created a private investment market. Then they restricted access to this massive market to only themselves... cutting the rest of America out of the deal.

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iehi-feed-64773 Sun, 16 Jun 2019 15:50:56 GMT Minneapolis Leads The Way By Abolishing Single Family Home Zoning http://implode-explode.com/viewnews/2019-06-16_MinneapolisLeadsTheWayByAbolishingSingleFamilyHomeZoning.html Don't be misled by the construction cranes that punctuate city skylines. The number of housing units completed in the United States last year, adjusted for the size of the population, was lower than in any year between 1968 and 2008. And the problem is most acute in major urban areas along the east and west coasts. Housing prices, and homelessness, are rising across the country because there is not enough housing.

Increasing the supply of urban housing would help to address a number of the problems plaguing the United States. Construction could increase economic growth and create blue-collar jobs. Allowing more people to live in cities could mitigate inequality and reduce carbon emissions. Yet in most places, housing construction remains wildly unpopular. People who think of themselves as progressives, environmentalists and egalitarians fight fiercely against urban development, complaining about traffic and shadows and the sanctity of lawns.

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What went right in Minneapolis? The story begins with a crop of young politicians who want more housing: The city is conducting an early experiment in government by and for millennials. For the first time in the city's modern history, more than half of its residents are renters, including Mayor Frey. Many residents -- again, younger people in particular -- also describe density as a necessary response to climate change. Environmentalism, which began as an effort to protect people from cities, is increasingly embracing cities as the best way to protect the planet from people.

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All of this deserves wide emulation by other American cities. But Minneapolis has an important advantage: Its housing prices still are relatively modest, so its population includes a lot of middle-class families. Housing debates in coastal cities pit the wealthy against the poor, and middle ground has been hard to find.

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iehi-feed-64770 Thu, 13 Jun 2019 16:42:43 GMT THIS TIME ISN'T DIFFERENT: Billionaire investor warns lazy thinking is taking over markets http://implode-explode.com/viewnews/2019-06-13_THISTIMEISNTDIFFERENTBillionaireinvestorwarnslazythinkingistakin.html He continued: "Are recessions really avoidable or merely postponable? And if the latter, is it better for them to occur naturally or be postponed unnaturally? Might efforts to postpone them create undue faith in the power and intentions of the Fed, and thus return of moral hazard? And if the Fed wards off a series of little recessions, mightn't that just mean that, when the ability to keep doing so reaches its limit, the one that finally arrives will be a doozy? "

Such skepticism comes in stark contrast to the confidence exuded by the likes of venture capitalist Chamath Palihapitiya. An early Facebook stakeholder and investing presence across several industries, Palihapitiya told CNBC at the time that entities like the Fed have used tools like quantitative easing to orchestrate a pacified economy.

"I don't see a world in which we have any form of meaningful contraction nor any form of meaningful expansion," he told CNBC in April. "We have completely taken away the toolkit of how normal economies should work when we started with QE. I mean, the odds that there's a recession anymore in any Western country of the world is almost next to impossible now, save a complete financial externality that we can't forecast."

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iehi-feed-64762 Tue, 04 Jun 2019 23:43:21 GMT The shadow banks are back with another big bad credit bubble http://implode-explode.com/viewnews/2019-06-04_Theshadowbanksarebackwithanotherbigbadcreditbubble.html Middle-market lending, of course, is just part of the biggest expansion in corporate borrowing the U.S. economy has ever seen, a result of eight years of cheap and easy money engineered by the Fed and other central banks after the 2008 financial crisis.

The ratio of corporate borrowing to a variety of metrics -- profits and assets, book value or the size of the overall economy -- is at or near an all-time high. So is the riskiness of the loans, reflecting the amount of debt companies have taken on, the absence of covenants and the rosy assumptions made about the amount of cash flow companies will have to cover debt service.

Meanwhile, the difference in interest rates between the safest loans and the riskiest -- in financial jargon, the "spread" -- is at historically low levels, a reliable indication of too much money chasing too few good lending opportunities. According to the latest "financial stability" reports from the Federal Reserve and the International Monetary Fund, all of these measures have gotten worse in the last two years, with many flashing yellow and red on their dashboards of systemic financial risk.

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If all this newly borrowed money were being used to create new technology or enhance productivity, piling up all this debt might be a risk worth taking. But the evidence suggests that what it is mostly doing is artificially stimulating the economy. Companies have used much of this newly borrowed money to buy back their own shares, pay special dividends to private equity investors and acquire other companies, all of which have the effect of inflating stock prices. The recent wave of richly priced mergers and overpriced stock offerings, and the declining returns offered by recent commercial real estate deals, are all good indications of a credit bubble waiting to burst.

So, is this a replay of 2008?

... as before, this excess of supply relative to demand has led to a deterioration of lending standards that started in the shadow banking system and has now spread to regulated banks anxious about a further reduction in their market share. (My favorite stat: During the first three months of this year, according to Trepp, a data company, interest-only loans -- loans requiring no payback of principal until the loan is due -- accounted for three-quarters of all new commercial real estate loans.)

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Perhaps the biggest similarity between the previous credit bubble and this one, however, is the stubborn reluctance of regulators to let some of the air out of the credit bubble before it bursts.

... The [Financial Stability Oversight] Council is headed by Treasury Secretary Stephen Mnuchin, a former Goldman Sachs investment banker who eventually made more than $10 million buying and selling -- with partners -- a California bank that, after engaging in aggressive mortgage lending, failed during the last housing crisis.

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Powell, Quarles and Mnuchin are overconfident for the same reason Fed chairmen Alan Greenspan and Ben Bernanke and Treasury Secretary Henry Paulson were overconfident during the Bush years.

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iehi-feed-64761 Tue, 04 Jun 2019 21:30:13 GMT GOP lawmakers discuss vote to block Trump's new tariffs on Mexico, in what would be its first real act of defiance http://implode-explode.com/viewnews/2019-06-04_GOPlawmakersdiscussvotetoblockTrumpsnewtariffsonMexicoinwhatwoul.html ``Congressional Republicans have begun discussing whether they may have to vote to block President Trump's planned new tariffs on Mexico, potentially igniting a second standoff this year over Trump's use of executive powers to circumvent Congress, people familiar with the talks said.

The vote, which would be the GOP's most dramatic act of defiance since Trump took office, could also have the effect of blocking billions of dollars in border wall funding that the president had announced in February when he declared a national emergency at the southern border, said the people, who spoke on the condition of anonymity because the talks are private.

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Trump's plans to impose tariffs on Mexico -- with which the United States has a free-trade agreement -- rely on the president's declaration of a national emergency at the border... Congress passed [a blocking] resolution in March after Trump reallocated the border wall funds, but he vetoed it. Now, as frustration on Capitol Hill grows over Trump's latest tariff threat, a second vote could potentially command a veto-proof majority to nullify the national emergency, which in turn could undercut both the border-wall effort and the new tariffs.

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iehi-feed-64756 Sun, 02 Jun 2019 20:39:47 GMT Why the tariffs are bad news for America and for Donald Trump http://implode-explode.com/viewnews/2019-06-02_WhythetariffsarebadnewsforAmericaandforDonaldTrump.html