Implode-Explode Heavy Industries news feed http://implode-explode.com/ Tracking the many faces of the global credit implosion. en-us iehi-feed-59717 Fri, 06 May 2016 16:22:31 GMT U.S. Added Only 160,000 Jobs Last Month as Brisk Hiring Slowed http://implode-explode.com/viewnews/2016-05-06_USAddedOnly160000JobsLastMonthasBriskHiringSlowed.html iehi-feed-59716 Fri, 06 May 2016 16:20:58 GMT Donald Trump just threatened to cause an unprecedented global financial crisis http://implode-explode.com/viewnews/2016-05-06_DonaldTrumpjustthreatenedtocauseanunprecedentedglobalfinancialcr.html In an interview Thursday on CNBC, Donald Trump broke with tired clichés about the evils of federal debt accumulation. "I am the king of debt," he said. "I love debt. I love playing with it." But he replaced fearmongering about debt with an even more alarming notion -- a bankruptcy of the United States federal government that would incinerate the world economy.

"I would borrow, knowing that if the economy crashed, you could make a deal," Trump said. "And if the economy was good, it was good. So therefore, you can't lose."

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The government doesn't work like [a business]. Right now, people and companies all around the world treat US government bonds as the least risky financial asset in the universe. If the government defaults and banks fail as a result, the government needs to clean up the mess. And if risk-free federal bonds turn out to be risky, then every other financial asset becomes riskier. The interest rate charged on state and local government debt, on corporate debt, and on home loans will spike. Savings will evaporate, and liquidity will vanish as everyone tries to hold on to their cash until they can figure out what's going on.

Hilarious -- The Donald has gotten closer to speaking the truth here than anyone else, but doesn't seem quite to grasp how intentionally breaking this "taboo" could cause the illusion that keeps the monetary order chugging right along to prematurely implode.

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iehi-feed-59714 Fri, 06 May 2016 12:20:16 GMT Supposed Bitcoin founder says 'goodbye' after presenting fake evidence http://implode-explode.com/viewnews/2016-05-06_SupposedBitcoinfoundersaysgoodbyeafterpresentingfakeevidence.html iehi-feed-59711 Thu, 05 May 2016 22:28:38 GMT Fed Proposes New "Bail In By Stealth" Collateral Rule http://implode-explode.com/viewnews/2016-05-05_FedProposesNewBailInByStealthCollateralRule.html In its essence, this "collateral freeze" regulation will eventually morph into a de facto bail-in mechanism and serves the purpose of transferring wealth from the banks' counter-parties to the banks.  At the very least, this collateral freeze regulation adds yet another layer of moral hazard into the banking system, as banks are incentivized to underwrite even riskier derivatives transactions with knowledge that the risk of collapse is further minimized.

Interestingly, this new law is "asymmetrical." If the bank fails, it gets to keep all counter-party collateral locked-up.   But if the bank's counter-party fails, that counter-party has no ability to freeze the collateral it put up with the bank. The bank has possession of that collateral.  This is what happened in the MF Global collapse, where JP Morgan seized all of MF Global's collateral, at the detriment of MF Global's customers.  At the time JPM's move was illegal but the judicial system looked the other way.

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iehi-feed-59703 Thu, 05 May 2016 01:17:32 GMT U.S. Productivity Shrinks Again in First Quarter http://implode-explode.com/viewnews/2016-05-04_USProductivityShrinksAgaininFirstQuarter.html The current economic expansion, which wraps up its seventh year next month, has been driven largely by rising employment rather than gains in productivity. Since the economic recovery began in mid-2009, output per hour worked has expanded at an average annual rate of 1.3%. That was the worst performance over a seven-year stretch since the late-1970s to mid-1980s, which were marked by back-to-back recessions.

In the first quarter, the picture worsened: Productivity in the nonfarm business sector declined at a 1% seasonally adjusted annual rate, the Labor Department said Wednesday. From a year earlier, productivity was up just 0.6%. The quarterly drop marked the fourth decline in the past six quarters.

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Declining productivity growth means companies need more workers to keep up with demand and helps explain why millions of people have been able to rejoin the job market in recent years despite a slow-growing economy.

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iehi-feed-59699 Wed, 04 May 2016 14:53:56 GMT AEP: US dollar plunges as world plays dangerous game of pass the parcel http://implode-explode.com/viewnews/2016-05-04_AEPUSdollarplungesasworldplaysdangerousgameofpasstheparcel.html The US dollar has plunged to a 16-month low in the latest wild move for the global financial system, tightening the currency noose on the eurozone and Japan as they struggle to break out of a debt-deflation trap.

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This is a massive shift in sentiment since the end of last year when investors were betting heavily that the US Federal Reserve was on track for a series of rate rises, which would draw a flood of capital into dollar assets. Markets have now largely discounted a rate rise in June, and are pricing in just a 68pc likelihood of any increases this year.

... it increases the pain for the eurozone and Japan as their currencies rocket. The world is in effect playing a high-stakes game of pass the parcel, with over-indebted countries desperately trying to export their deflationary problems to others by nudging down exchange rates.

... There is little that the Bank of Japan or the ECB can do to arrest this unwelcome appreciation. The Obama Administration warned them at the G20 summit in February that it any further use of negative interest rates would be regarded by Washington as covert devaluation, and would not be tolerated.

... Stephen Jen from SLJ Macro Partners said the Fed is pursuing a "weak dollar policy", reacting to global events in a radical new way. "They are forcing currency appreciation onto weaker economies. It is irrational," he said.

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iehi-feed-59695 Tue, 03 May 2016 20:23:47 GMT Q1 GDP Advance Estimate at 0.5%, Worse Than Mainstream Forecasts http://implode-explode.com/viewnews/2016-05-03_Q1GDPAdvanceEstimateat05WorseThanMainstreamForecasts.html iehi-feed-59694 Tue, 03 May 2016 19:33:55 GMT Freddie Mac posts $354M "Don't Worry, It's Just Derivatives" loss; Cuts Dividend; Won't Draw on Treasury http://implode-explode.com/viewnews/2016-05-03_FreddieMacposts354MDontWorryItsJustDerivativeslossCutsDividendWo.html Mortgage giant Freddie Mac reported a net loss of $354 million for the first quarter, mostly due to losses it sustained on the investments it uses to hedge against swings in interest rates. The government-controlled company said Tuesday the January-through-March loss mainly reflected accounting measures, while its business remained strong. The loss compared with net income of $524 million in the same period of 2015.

As a result of the loss the company, based in McLean, Va., is skipping paying a quarterly dividend to the U.S. Treasury next month. Freddie previously has paid $98.2 billion in dividends, exceeding its government bailout of $71 billion.

Freddie also sustained a loss in the third quarter of last year, $475 million, also largely due to losses on derivatives used to hedge against interest-rate swings. While Freddie and Fannie have shown volatility in their quarterly earnings, the housing market's gradual recovery in recent years has made them profitable again.

Regarding the latter point from the title, see Freddie Mac: No Draw on Treasury for Now, But. . .

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iehi-feed-59688 Tue, 03 May 2016 02:04:23 GMT Amazon Steps Up Blockchain Commitment With Digital Currency Group Partnership http://implode-explode.com/viewnews/2016-05-02_AmazonStepsUpBlockchainCommitmentWithDigitalCurrencyGroupPartner.html Amazon Web Services announces Monday that it will collaborate with New York City-based Digital Currency Group, one of the biggest investors in blockchain firms, to provide such a service so the blockchain providers in DCG's portfolio can work in a secure environment with clients who include financial institutions, insurance companies and enterprise technology companies.

A blockchain -- often called a distributed ledger -- is essentially a tamper-proof ledger, copies of which are held on multiple computers, that enables transactions to occur securely and quickly. It promises to make financial services more efficient, as well as cut costs and potentially shrink the industry as the software conducts functions currently executed by middlemen.

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The AWS announcement comes on the heels of a partnership between Microsoft and R3CEV, a consortium of 44 banks working to create standards for distributed ledger technology, for Microsoft to offer "blockchain as a service" via the cloud. IBM, which also offers a cloud-based blockchain, Friday released a framework for running blockchain networks securely, enabling enterprise players in industries such as financial services, healthcare and government conduct work on a blockchain while remaining compliant with relevant data security regulations.

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iehi-feed-59685 Mon, 02 May 2016 19:21:10 GMT Craig Wright revealed as Bitcoin creator Satoshi Nakamoto http://implode-explode.com/viewnews/2016-05-02_CraigWrightrevealedasBitcoincreatorSatoshiNakamoto.html iehi-feed-59684 Mon, 02 May 2016 15:08:47 GMT Schwab Ditching Money Markets For Fed Drip-line Proves U.S. Under Effective NIRP http://implode-explode.com/viewnews/2016-05-02_SchwabDitchingMoneyMarketsForFedDriplineProvesUSUnderEffectiveNI.html Bye-bye money market:

``... between June and October 2016, Schwab will update the cash feature on your account(s) from the current retail prime or municipal money market fund sweep to the Schwab Government Money Fund" or the SWGXX, which "will invest at least 99.5% of its total assets in cash, U.S. government securities and/or repurchase agreements that are collateralized fully by cash and/or U.S. government securities; under normal circumstances, at least 80% of the fund's net assets will be invested solely in U.S. government securities including repurchase agreements. "

Talk about proof positive that the Fed didn't truly RAISE rates (tighten conditions) when it went to .25% -- it LOOSENED CONDITIONS by creating new repos where it was PAYING extra money into the financial system at the new rate... and now Schwab has abandoned ship from the private money market in favor of the Fed's new money-drip.

This dovetails with the point made in the comments at the bottom of this post -- namely that this sort of "NIRP structure", once put in place by a central bank, cannibalizes the private financial market and suffocates the economy, thus "incentivizing" central banks to do more of the same. Even though the Fed isn't "officially" at negative rates (because a few bucks occasionally change hands in the other direction in the rump-Fed funds market), it's structuring the money flows in and out of itself like any negative rate central bank... i.e. it is cannibalizing the normally-functioning financial system in a way that feeds on itself...

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iehi-feed-59681 Mon, 02 May 2016 14:49:45 GMT World's Longest Negative Rate Experiment Shows Destruction of Savings & Investment Machinery http://implode-explode.com/viewnews/2016-05-02_WorldsLongestNegativeRateExperimentShowsDestructionofSavingsInve.html In Denmark, where rates have been below zero longer than anywhere else on the planet, the private sector is saving more than it did when rates were positive (before 2012). Private investment is down and the economy is in a "low-growth crisis," to quote Handelsbanken. The latest inflation data show prices have stagnated...

Denmark has about $600 billion in pension and investment savings. The people who help oversee those funds say the logic of cheap money fueling investment doesn't hold once rates drop below zero. That's because consumers and businesses interpret such extreme policy as a sign of crisis with no predictable outcome.

The problem here is really quite obvious: when you peg rates at negative, the result is only "simulative" from the perspective of people borrowing from the central bank. All other borrowing and lending in the economy (which is supposed to be the main part of it) becomes anti-stimulative, because who wants to lend at negative rates (i.e., be guaranteed to lose money)? Thus you get a snake-eating-its-own-tail effect as central bank forced-lending consumes the market, while the overall financial market continues to shrink amidst the contrary incentives, leading to more of the same.

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iehi-feed-59680 Mon, 02 May 2016 14:44:19 GMT Fed is "Afraid of Its Own Shadow": Boockvar http://implode-explode.com/viewnews/2016-05-02_FedisAfraidofItsOwnShadowBoockvar.html On a recent CNBC's "Futures Now," Lindsey Group chief market analyst Peter Boockvar made the case that the Fed will never get the "perfect" conditions they seek before increasing short-term rates once again.

The Fed's mandate "isn't to have a perfect world. That only exists in fairy tales, dreams and in your econometric models," Boockvar said in a recent note to clients. He believes that the Fed's monetary has been far too accommodative under Yellen as well as under Ben Bernanke. Boockvar argued that the Fed has been taking cues from shaky international banks, and that doing so will always offer a reason to keep interest rates low.

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"It's been excuse, after excuse, after excuse," Boockvar said. "This is why, eight years into an expansion, they've only raised interest rates once. They're afraid of their own shadow. They're in a terrible hole that they're not going to be able to get out of."

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Based on this, Boockvar said that central bankers are losing their credibility and their ability to generate higher asset prices, putting the stock market in a precarious position.

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iehi-feed-59679 Mon, 02 May 2016 14:42:00 GMT Venezuela is Collapsing http://implode-explode.com/viewnews/2016-05-02_VenezuelaisCollapsing.html Venezuela, a country of 30 million that despite holding the world's largest oil reserves has descended into a dystopia where food, medicine, water and electric power are critically scarce. Riots and looting broke out in several blacked-out cities last week, forcing the deployment of troops. A nation that 35 years ago was the richest in Latin America is now appealing to its neighbors for humanitarian deliveries to prevent epidemics and hunger.

The regime that fostered this nightmare, headed by Hugo Chávez until his death in 2013, is on the way out: It cannot survive the economic crisis and mass discontent it has created. The question is whether the change will come relatively peacefully or through an upheaval that could turn Venezuela into a failed state and destabilize much of the region around it.

Remarkably, most of the Western hemisphere is studiously ignoring this meltdown. The Obama administration and Washington's Latin America watchers are obsessed with the president's pet project, the opening to Cuba. As it happens, the Castros turned Venezuela into a satellite state, seeding its security forces and intelligence services with agents. Yet now that it is decreasingly able to supply discounted oil to its revolutionary mentor, Venezuela appears to have become an afterthought even in Havana.

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Most of all, however, Venezuelans hope for U.S. leadership in pushing Maduro to accept an election. Said Vecchio: "The moment has arrived when you can no longer ignore this. Because what happens in Venezuela is going to affect the whole region.''

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iehi-feed-59678 Sun, 01 May 2016 22:07:32 GMT Gold And Silver: Bull Markets Are Just Beginning http://implode-explode.com/viewnews/2016-05-01_GoldAndSilverBullMarketsAreJustBeginning.html iehi-feed-59676 Sun, 01 May 2016 18:24:39 GMT The Cult Of Central Banking Is Dead In The Water | Stockman http://implode-explode.com/viewnews/2016-05-01_TheCultOfCentralBankingIsDeadInTheWaterStockman.html The Fed has been sitting on the funds rate like some monetary mother hen since December 2008. Once it punts again at the June meeting owing to Brexit worries it will have effectively pegged money market rates at the zero bound for 90 straight months.

There has never been a time in financial history when anything close to this happened, including the 1930s. Nor was interest-free money for eight years running ever even imagined in the entire history of monetary thought.

So where's the fire? What monumental emergency justifies this resort to radical monetary intrusion and repression? Alas, there is none. And that's as in nichts, nada, nope, nothing!

There is a structural growth problem, of course. But it has absolutely nothing to do with monetary policy; and it can't be fixed with cheap money and more debt, anyway.

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The following two graphs dramatize the cargo cult essence of today's Keynesian central banking regime. Since the year 2000 when monetary repression began in earnest, the balance sheet of the Fed has risen by 800%, while the amount of labor hours used in the US economy has increased by 2%.

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iehi-feed-59675 Sun, 01 May 2016 18:19:48 GMT The Real Story Behind The True Magnitude of The New Home Sales Collapse http://implode-explode.com/viewnews/2016-05-01_TheRealStoryBehindTheTrueMagnitudeofTheNewHomeSalesCollapse.html iehi-feed-59672 Sun, 01 May 2016 14:11:52 GMT Inside the rocky billionaire bromance of Donald Trump and Carl Icahn http://implode-explode.com/viewnews/2016-05-01_InsidetherockybillionairebromanceofDonaldTrumpandCarlIcahn.html For Trump, who has taken pride in punching back hard at his attackers, his rapport with Icahn shows a side of the brash real estate tycoon that Americans rarely see: a willingness to show deference to someone who once insulted his business and who has, by many measures, been more successful.

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"Carl is a master strategist and easily one of the brightest people I've ever had the pleasure of working for," said Edward Weisfelner, head of the corporate restructuring practice at the law firm Brown Rudnick, who represented bondholders and Icahn in two of the casino bankruptcies. "I couldn't say the same about Donald."

Trump, in the interview, said he never lost leverage in the Atlantic City deal. Because so many bankers and bondholders were owed so much -- and because many agreed that an open Trump casino would make more money than a shuttered one -- Trump said people such as Icahn needed him to agree to a deal just as much as he needed them.

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The episode with the Taj and Trump's other loans left a mark on his grandeur. To shrink his massive bank debts, Trump agreed to relinquish his plane and other luxuries, and bankers forced Trump to limit his personal and household spending to $450,000 a month.

Icahn transformed the casino's downfall into handsome gains. In 1993, according to the Wall Street Journal, he sold his Taj bonds for $150 million -- more than double what he had paid for them three years earlier.

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By 2009, debt continued to plague Trump Entertainment Resorts, which controlled the Taj and two other casinos.

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As the company entered bankruptcy restructuring yet again, investors offered competing plans. Trump sided with a hedge fund that pledged to give him a 10 percent stake if he let the company continue to use his name.

Icahn, who had sold off his Taj shares years earlier, saw a new opportunity to profit off the Trump company's struggles -- this time on the opposite side of Trump. Icahn backed a Texas billionaire who was mobilizing a full takeover and whose lawyers argued that the Trump name had been tarnished by repeated bankruptcies.

In 2010, Trump took the stand in a Camden, N.J., courtroom and swatted back, saying, "Mr. Icahn has led companies into many, many bankruptcies" and reasserting that he still had one of America's most valuable brands. "I wouldn't switch my assets for his assets any day of the week," Trump said.

Icahn was unconvinced. "I like Donald personally, but frankly I'm a little curious about the big deal about the name," he told the Wall Street Journal. "If the name is so powerful, then how come they went bankrupt three times?"

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In 2014, the casino group slid again into bankruptcy, sparking more maneuvers that dragged on until this past February, when Icahn gained full control.

The takeover took place as Trump began cruising to victories in Republican primaries. And Icahn, it seemed, had changed his view on the Trump brand -- signing an agreement that said he could still use the mogul's name.

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The best solution for this financial mess, Icahn said, would be to bring in "a guy like Donald Trump . . . [who's] not beholden to an establishment." "I disagree with him on certain issues and certainly would talk to him more," Icahn added. "But this is what this country needs. Somebody to wake it up."

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iehi-feed-59671 Sun, 01 May 2016 13:50:58 GMT Puerto Rico debt rescue plan engulfed in Great Recession ‘bailout' politics http://implode-explode.com/viewnews/2016-05-01_PuertoRicodebtrescueplanengulfedinGreatRecessionbailoutpolitics.html A group called the Center for Individual Freedom has spent millions of dollars on ads calling the Puerto Rico bill a "bailout," targeting specific congressional districts, including Bishop's. Jeff Mazzella, CFIF's president, did not reply to email or phone calls Friday. The group does not disclose its donors, but there is a widespread belief on Capitol Hill that the group is acting at the behest of those bondholders opposed to a court or board-imposed restructuring.

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Supporters of a congressional rescue plan got a boost on Tuesday, when Pimco, which manages $40 billion of municipal bonds, supported the current House bill.

"It would be incorrect to classify [the bill] as a ‘bailout,'" said a blog posting on the Pimco website. "No incremental federal tax dollars are allocated to the Territory under the bill. In fact, if this legislation does not advance, the probability of future federal tax dollars flowing to the Territory or bondholders may actually increase."

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iehi-feed-59670 Sat, 30 Apr 2016 16:43:54 GMT Ernst & Young Finds US Now Tied With Russia Global Corruption Index http://implode-explode.com/viewnews/2016-04-30_ErnstYoungFindsUSNowTiedWithRussiaGlobalCorruptionIndex.html