After demolishing erroneous ideas some 25 centuries old, some brand new, I explain why Mathematics Can Be Made To Correspond To A Subset Of Neurology. And Why Probably Neurology Is A Consequence Of Not-Yet Imagined Physics.
If enough people truly believe that things will get better, will that actually cause them to get better? There is certainly something to be said for being positive and thinking that anything is possible. And as Americans, optimism seems to come naturally for us. However, no amount of positive thinking is ever going to turn the sun into a block of wood or turn the moon into a block of cheese. Any good counselor will tell you that one of the first steps toward recovery is to stop being delusional and to come to grips with how bad things really are. When we deny reality and engage in irrational wishful thinking, we are engaging in something called “hopium”. This is a difficult term to define, but the favorite definition of hopium that I have come across so far goes like this: “The irrational belief that, despite all evidence to the contrary, things will turn out for the best.” In hundreds of articles, I have documented how the U.S. economy is mired in a long-term decline which is about to get a lot worse. But most Americans see things very differently. In fact, according to a brand new CNN/ORC poll, 52 percent of Americans describe the U.S. economy as “very” or “somewhat good”, and more than two-thirds of all Americans believe that the U.S. economy will be in “good shape” a year from right now. But if you asked most of those people why they are so optimistic, they would probably mumble something about “Obama” or about how “we’re Americans and we always bounce back” or some other such gibberish. Well, it’s wonderful that so many people are feeling good and looking forward to the future, but are those beliefs rational?
We witnessed a perfect example of this “hopium” on Wednesday. Sales at McDonald’s restaurants have been in decline for quite a while, and the numbers for the first quarter of 2015 were just abysmal.
The ubiquitous burger-and-fries chain said US sales, the largest share of global income, fell 2.6 percent from a year ago for comparable outlets.
Sales in the Asia-Pacific and Middle East region dropped 8.3 percent, helping bring overall global sales down 2.3 percent, “reflecting negative guest traffic in all segments,” the company said.
Total revenue sank 11 percent to $5.96 billion in the quarter to March 31, and net income plunged 32.6 percent to $812 million, or 84 cents a share (-31 percent).
So you would think that the stock price would have tanked on Wednesday, right?
Wrong.
Thanks to news that a “turnaround plan” would be announced on May 4th, McDonald’s stock actually skyrocketed.
McDonald’s closed up 3.13 percent after spiking more than 4.5 percent in early trade as investors cheered a turnaround plan expected on May 4. However, the fast food chain’s earnings missed on both the top and bottom lines.
This is pure hopium. Why don’t McDonald’s executives just tell us what the plan is now? But instead, the mystery of a “secret turnaround plan” gives people just enough hope to keep the stock from tumbling – at least for the moment.
And of course there are all sorts of other stocks that are being massively inflated by hopium right now.
Many years ago, when I was an undergraduate, I was taught that a price to earnings ratio of more than 20 was really, really high.
But these days that is the norm on Wall Street, and at the moment there are quite a few stocks that actually have price to earnings ratios that are greater than 100.
There are 10 stocks in the Standard & Poor’s 500, including industrial giant General Electric, video-streamer Netflix and oil and gas explorer Cabot Oil & Gas that are trading for 100 times their diluted earnings the past 12 months excluding extraordinary items, according to a USA TODAY analysis of data from S&P Capital IQ.
And if you can believe it, General Electric has a PE on its training earnings of more than 200.
Take General Electric, the industrial giant that’s swiftly selling off banking assets so it can return to its manufacturing roots. GE sports a PE on its trailing earnings of 227, says S&P Capital IQ.
This is completely and totally irrational. General Electric is a giant mess and is being very badly mismanaged. But investors continue to pay a massive premium for GE stock because they hope that things will turn around eventually.
Look, hope will get you a lot of things in life, but it won’t put money in your pockets or dinner on the table.
Our politicians and the mainstream media continue to sell us hard on the idea that things are getting better in America, but meanwhile our economic infrastructure continues to decay. Just check out what is happening in the steel industry.
United States Steel Corporation issued layoff notices to 1,404 workers in the latest sign of struggle for the American steel industry. The missives went out in recent days to workers producing pipe and tube products that are used in the oil and gas sector. Job cuts could come as early as June for 17 to 579 employees at a plant in Lone Star, Texas, 166 at a factory in Houston, 255 at a mill in Pine Bluff, Arkansas, and 404 managers across the company’s tubular operations nationwide.
Since last June, the company has informed 7,800 employees of potential job cuts, a tally from Pittsburgh Business Times indicated. U.S. Steel spokeswoman Sarah Cassella said the ongoing layoffs are the result of “challenging market conditions and global influences in the market including a high level of imports, reduced prices for oil and natural gas and reduced steel prices.”
A little over a month ago, I published an article entitled “10 Charts Which Show We Are Much Worse Off Than Just Before The Last Economic Crisis” in which I demonstrated that we are in far worse economic shape than we were just prior to the last recession, and now another great economic crisis is at our door.
Unfortunately, most Americans have no idea what is going on out there. Most of them get their news from the giant propaganda matrix that very tightly controls the flow of ideas and information in this country. This is something that I explain on my new DVD. Six colossal corporations control over 90 percent of the news, information and entertainment that Americans consume, and that gives them an awesome amount of power.
And right now that propaganda matrix is assuring the American people that everything is going to be just fine.
Well, they better be right. Because if not, they are going to have millions of people extremely angry with them when things really start falling to pieces.
The post Hopium: How Far Can Irrational Optimism Take The U.S. Economy? appeared first on The Economic Collapse.
There is nothing obvious about the mathematics we know. It is basically neurology we learn, that is, that we learn to construct (with a lot of difficulty). Neurology is all about connecting facts, things, ideas, emotions together. We cannot possibly imagine another universe where mathematics is not as given to us, because our neurology is an integral part of the universe we belong to.
Let’s consider the physics and mathematics which evolved around the gravitational law. How did the law arise? It was a cultural, thus neurological, process. More striking, it was a historical process. It took many centuries. On the way, century after century a colossal amount of mathematics was invented, from graph theory, to forces (vectors), trajectories, equations, “Cartesian” geometry, long before Galileo, Descartes, and their successors, were born.
Buridan, around 1330 CE, to justify the diurnal rotation of Earth, said we stayed on the ground, because of gravity. Buridan also wrote that “gravity continually accelerates a heavy body to the end” [In his “Questions on Aristotle”]. Buridan asserted a number of propositions, including some which are equivalent to Newton’s first two laws.
According to the Wall Street Journal, Greece staying in the eurozone is no longer “the base case” for European officials, and one even told the Journal that “literally nothing has been achieved” in negotiations with the new Greek government since the Greek election almost three months ago. In other words, you can take all of that stuff you heard about how the Greek crisis was fixed and throw it out the window. Over the next few months, a big chunk of Greek government bonds held by the IMF and the European Central Bank will mature. Unless negotiations produce a load of new cash for Greece, there will be a default, and right now there is very little optimism that we will see an agreement any time soon. In fact, as I wrote about the other day, behind the scenes banks all over Europe are quietly preparing for a Grexit. European news sources are reporting that the Greek banking system is on the verge of collapse, and over the past couple of weeks Greek bond yields have shot through the roof. Most of the things that we would expect to see in the lead up to a Greek exit from the eurozone are happening, and now we will wait and see if the Greeks actually have the guts to pull the trigger when push comes to shove.
At this point, many top European officials are quietly admitting that it is more likely than not that Greece will leave the euro by the end of this year. The following is an excerpt from the Wall Street Journal article that I mentioned above.
It’s still possible that Greece can remain in the eurozone-though that is no longer the base case for many policy makers. At the very least, most fear the situation is going to get much, worse before it gets any better. No one now expects a deal to unlock Greek bailout funding at this week’s meeting of eurozone finance ministers in Riga-originally set as the final deadline for a deal. The new final, final deadline is now said to be a summit on May 11.
But among European politicians and officials gathered in Washington DC last week for the International Monetary Fund’s Spring Meetings, there was little optimism that a deal will be agreed by then.
The two sides are no closer to an agreement than when the Greek government took office almost three months ago. “Nothing, literally nothing has been achieved,” says an official.
Literally nothing has been achieved?
That is not what the mainstream media has been telling us over the past few months.
They kept telling us that agreements were in place and that everything had been fixed.
I guess not.
The Germans believe that the risks of a “Grexit” have already been priced in by the financial markets and that a Greek exit from the euro can be “managed” without any serious risk of contagion.
So they are playing hardball with the Greeks.
On the other hand, the Greeks believe that the risk of contagion will eventually force the Germans to back down.
Greece’s Finance Minister Yanis Varoufakis said in an interview broadcast on Sunday that if Greece were to leave the euro zone, there would be an inevitable contagion effect.
“Anyone who toys with the idea of cutting off bits of the euro zone hoping the rest will survive is playing with fire,” he told La Sexta, a Spanish TV channel, in an interview recorded 10 days ago.
“Some claim that the rest of Europe has been ring-fenced from Greece and that the ECB has tools at its disposal to amputate Greece, if need be, cauterize the wound and allow the rest of euro zone to carry on.”
In this case, I believe that the Greeks are right about what a Grexit would mean for the rest of Europe and the Germans are wrong.
Once one country leaves the euro, that tells the entire world that membership in the euro is only temporary. Immediately everyone would be looking for the “next Greece”, and there are lots of candidates – Italy, Spain, Portugal, etc.
There is a very good chance that a Grexit would set off a full-blown European financial panic. And once a financial panic starts, it is very hard to stop. The danger that a Grexit poses is so obvious that even the Obama administration can see it.
A Greek exit from the euro zone would carry significant risks for the global economy and no one should be under the impression that financial markets have fully priced in such an event, the chairman of the White House Council of Economic Advisers said.
The comments by Jason Furman in an interview with Reuters in Berlin are among the strongest by a senior U.S. official and are at odds with those of German Finance Minister Wolfgang Schaeuble, who told an audience in New York last week that contagion risks from a so-called “Grexit” were limited.
“A Greek exit would not just be bad for the Greek economy, it would be taking a very large and unnecessary risk with the global economy just when a lot of things are starting to go right,” Furman said.
Meanwhile things continue to get even worse inside Greece. If you have any money in Greek banks, you need to move it immediately. The following comes from Zero Hedge.
Things for insolvent, cashless Greece are – not unexpectedly – getting worse by the day.
Following yesterday’s shocking decree that the government will confiscate local government reserves and “sweep” them into the central bank to provide the country more funds as it approaches another month of heavy IMF repayments, earlier today Bloomberg reported that the ECB would add insult to injury and may increase haircuts for Greek banks accessing Emergency Liquidity Assistance, thus “reining in” the very critical emergency liquidity which has kept Greek banks operating in recent weeks as the bank run sweeping the domestic banking sector has gotten worse by the day.
And many Greeks don’t even have any money to put in the banks because they haven’t been paid in months.
Meanwhile, the reality is that for a majority of the Greek population, none of this really matters because as Greek Ta Nea reports, citing Labor Ministry data, about one million Greek workers see delays of up to 5 months in salaries payment by their employers. The Greek media adds that about 45% of salaried workers in Greece make no more than €751 per month, the country’s old minimum wage; which also includes part-time workers.
No matter what European officials try, things just continue to unravel in Greece and in much of the rest of Europe.
We stand on the verge of the next great global economic crisis. The lessons that we should have learned from the last crisis were never learned, and instead global debt levels have exploded much higher since then. In fact, according to Doug Casey, the total amount of global debt is 57 trillion dollars higher than it was just prior to the last crisis.
In 2008, excess debt pushed the global financial system to the brink. It was a golden opportunity for governments and banks to reform the system. But rather than deal with the problem, they papered over it by issuing more debt. Worldwide debt levels are now $57 trillion higher than in 2008.
The eurozone as it is constituted today is doomed.
That doesn’t mean that the Europeans are going to give up on social, economic and political integration. It just means that we are entering a time of transition that is going to be extremely messy.
And once the European financial system begins to fall apart, the rest of the world will quickly follow.
The post Grexit: Remaining In The Eurozone Is No Longer ‘The Base Case’ For Greece appeared first on The Economic Collapse.
The hidden logic in various human activities is often different from the apparent one. This is true in sociology, politics, economics. Consider NAFTA (North American Free Trade Accord), QE (Quantitative Easing: make banks richer so they be gooder), TPP (Trans Pacific Partnership: Terrifying Plutocracy Punishing China), etc.
For a decade the Greeks, having had their Drachmas converted into Euros at twice their natural worth, brought gifts to the rough Germans, by buying their luxury cars. Now Germany is rich and powerful, and Greece poor, and weak. Best conditions to pay for Greek arrogance.
There is totally no economic reason to keep on punishing Greece at this point. So why do the punishments keep on coming? One has to resort to a twisted psychological explanations.
Back in 2008, German bonds actually began to plunge well before U.S. bonds did. Does that mean that European money is “smarter” than U.S. money? That would certainly be a very interesting theory to explore. As you can see from the chart below, the yield on 10 year German bonds started to fall significantly during the summer of 2008 – several months before the stock market crash in the fall.
So what are German bonds doing today?
As you can see from this next chart, the yield on 10 year German bonds has been steadily falling since the beginning of last year. At this point, the yield on 10 year German bonds is just barely above zero.
And amazingly, most German bonds that have a maturity of less than 10 years actually have a negative yield right now. That means that investors are going to get back less money than they invest. This is how bizarre the financial markets have become. The “smart money” is so concerned about the “safety” of their investments that they are actually willing to accept negative yields. I don’t know why anyone would ever put their money into investments that have a negative yield, but it is actually happening. The following comes from Yahoo.
The world’s scarcest resource right now is safe yield, and the shortage is getting more extreme. Most German government bonds that mature in less than 10 years now have negative yields – part of some $2 trillion worth of paper with yields below zero.
This is what happens when the European Central Bank begins a trillion-euro bond-buying binge with rates already miniscule.
Yesterday, ECB boss Mario Draghi – unfazed by the protest stunt at his press conference – reaffirmed his plan to keep bidding for paper that yields more than -0.2% – that’s minus 0.2%.
Yes, the ECB is driving a lot of this, but it is still truly bizarre.
So what about the United States?
Well, first let’s take a look at what happened back in 2008. In the chart below, you can see the “flight to safety” that took place in late 2008 as investors started to panic.
And we have started to witness a similar thing happen in recent months. The yield on 10 year U.S. Treasuries has plummeted as investors have looked for safety. This is exactly the kind of chart that we would expect to see if a financial crisis was brewing.
What makes all of this far more compelling is the fact that so many other patterns that we have witnessed just prior to past financial crashes are happening once again.
Yes, there are other potential explanations for why bond yields have been going down. But when you add this to all of the other pieces of evidence that a new financial crisis is rapidly approaching, quite a compelling case emerges.
For those that do not follow my website regularly, I encourage you to check out the following articles to get an idea of what I am talking about.
-“Guess What Happened The Last Time The Price Of Oil Crashed Like This?.”
-“Not Just Oil: Guess What Happened The Last Time Commodity Prices Crashed Like This?.”
-“10 Key Events That Preceded The Last Financial Crisis That Are Happening Again RIGHT NOW”
-“Guess What Happened The Last Time The U.S. Dollar Skyrocketed In Value Like This?.”
-“7 Signs That A Stock Market Peak Is Happening Right Now”
-“Guess What Happened The Last Two Times The S&P 500 Was Up More Than 200% In Six Years?”
Of course no two financial crashes ever look exactly the same.
The crisis that we are moving toward is not going to be precisely like the crisis of 2008.
But there are similarities and patterns that we can look for. When things start to get bad, investors act in predictable ways. And so many of the things that we are watching right now are just what we would expect to see in the lead up to a major financial crisis.
Sadly, most people are not willing to learn from history. Even though it is glaringly apparent that we are in a historic financial bubble, most investors on Wall Street cannot see it because they do not want to see it. They want to believe that somehow “things are different this time” and that stocks will just continue to go up indefinitely so that they can keep making lots and lots of money.
And despite what you may think, I actually want this bubble to continue for as long as possible. Despite all of our problems, life is still relatively good in America today – at least compared to what is coming.
I like to refer to this next crisis as our “third strike”.
Back in 2000 and 2001, the dotcom bubble burst and we experienced a painful recession, but we didn’t learn any lessons. That was strike number one.
Then came the financial crash of 2008 and the worst economic downturn since the Great Depression. But we didn’t learn any lessons from that either. Instead, we just reinflated the same old financial bubbles and kept on making the exact same mistakes as before. That was strike number two.
This next financial crisis will be strike number three. After this next crisis, I don’t believe that there will ever be a return to “normal” for the United States. I believe that this is going to be the crisis that unleashes hell in our nation.
So no, I am not eager for that to come. Even though there is no way that this bubble of debt-fueled false prosperity can last indefinitely, I would like for it to last at least a little while longer.
Because what comes after it is going to be truly terrible.
The post Guess What Happened The Last Time Bond Yields Crashed Like This?. appeared first on The Economic Collapse.
Back in 1972, Albert Hammond released a song entitled “It Never Rains In Southern California“, and back then that was considered to be a good thing.
But today, years of very little rain are really starting to take a toll. In fact, one government official says that conditions in Tulare Country “are like a third-world country”.
Near California’s Success Lake, more than 1,000 water wells have failed. Farmers are spending $750,000 to drill 1,800 feet down to keep fields from going fallow. Makeshift showers have sprouted near the church parking lot.
“The conditions are like a third-world country,” said Andrew Lockman, a manager at the Office of Emergency Services in Tulare County, in the heart of the state’s agricultural Central Valley about 175 miles (282 kilometers) north of Los Angeles.
As California enters the fourth year of a record drought, its residents and $43 billion agriculture industry have drawn groundwater so low that it’s beyond the reach of existing wells. That’s left thousands with dry taps and pushed farmers to dig deeper as Governor Jerry Brown, a 77-year-old Democrat, orders the first mandatory water rationing in state history.
The mandatory water restrictions that Governor Brown is imposing are going to be very painful for a lot of people. We have just learned that some California communities will be required to cut their water usage by up to 36 percent.
Californians are going to have to start preparing for a dry summer as the dehydrated state prepares for a water crackdown.
In a somewhat controversial move, California water officials drafted a set of mandatory conservation regulations outlining varying degrees to which communities will be required to cut back on water use, ranging from 8 to 36 percent, depending on their history of water consumption.
The regulations – slated for approval in early May – are part of California’s first-ever attempt at mandatory rationing. Earlier this month, Gov. Jerry Brown issued an executive order requiring a 25 percent reduction in urban water use, a historic step in a series of measures aimed at conservation ahead of the state’s fourth consecutive year of drought.
And of course it isn’t just the state of California that is dealing with drought.
All over the southwest United States, we are seeing conditions that we have not witnessed since the days of the Dust Bowl in the 1930s.
In fact, the water level in Lake Mead is now the lowest that it has been since those days, and it is expected to drop even lower in the months ahead.
One of the most stunning places to see its impact is at the nation’s largest reservoir, Lake Mead, near Las Vegas. At about 40 percent of capacity, it’s the lowest it’s been since it was built in the 1930s.
“Just to see the rings around it, it’s just . kind of scary, you know,” says Darlene Paige, a visitor from New York. She’s standing at a vista point above the Hoover Dam on the Arizona side of Lake Mead.
That “ring” is the infamous bathtub ring around the rim of the reservoir. The levels have dropped 140 feet over the past 15 years, exposing a white stain on the gravelly brown mountains above the water. The level is forecast to fall an additional 10 feet by this summer.
According to the Government Accountability Office, it is being projected that a total of 40 U.S. states will be dealing with a shortage of water by the end of the next decade.
It has been said that “water is the new oil”, and this is just the beginning. The truth is that as bad as things are here, we are actually in far better shape than almost everyone else in the world to deal with the emerging global water crisis. All over the planet supplies of fresh water are disappearing, and the availability of water is going to increasingly become a major geopolitical issue in the years to come.
And even now, the U.S. government is taking all of this very seriously. In fact, the EPA is already trying to train our kids to take showers instead of baths.
Parents across America who struggle to keep their young rambunctious kids clean now have a new obstacle: the U.S. Environmental Protection Agency (EPA).
As part of its effort to help save the planet from the dangers of taking too many baths, the EPA’s WaterSense program is trying to convince kids they should avoid bathtubs in favor of showers, which it says is a far more efficient use of water.
“To save even more water, keep your shower under five minutes long-try timing yourself with a clock next time you hop in!” the “WaterSense for Kids” website says.
For most of our lives, most of us have been able to take water for granted.
But now things are changing, and we are going to have to adjust to these new realities.
So what do you think about this emerging water crisis? Please feel free to share your thoughts by posting a comment below.
The post Another Reason To Move Away From California: ‘Conditions Are Like A Third-World Country’ appeared first on The Economic Collapse.
Russia is the largest state on Earth. This colossus spread across eleven time zones, until Putin a few years ago reduced it to nine, by putting more zones under Moscow time.
Russia is 70% larger than the other very large countries: Canada, China, and the USA. With a bit more than twice the French population, Russia controls more than 30 times the land area, with a total wealth that is not even half that of France.
Russia, as a state, is superior mostly in weapons and military power. Aside from its supergiant empire, and its oil and gas, sheer physical force, threatened or applied, is what makes Russia powerful. That, and the conquests of imperial Russia.
We, and in particular Europe, have been led by fraudsters. Sometimes it takes courage to say it, to denounce fraud. Ed Milliband, the Labor Leader just rightly accused the anti-European politician Lafarge (head of UKIP) to be a fraud, to his face, because leaving the European Union would ruin Britain.
Right. The problem with the EU, though, is that the politics there has been a fraud. Since the 2008 crisis, the USA government injected 8 trillion dollars in the economy. The Eurozone, with the same population, injected only one trillion (the UK did in between).
Get ready for another major worldwide credit crunch. Today, the entire global financial system resembles a colossal spiral of debt. Just about all economic activity involves the flow of credit in some way, and so the only way to have “economic growth” is to introduce even more debt into the system. When the system started to fail back in 2008, global authorities responded by pumping this debt spiral back up and getting it to spin even faster than ever. If you can believe it, the total amount of global debt has risen by $35 trillion since the last crisis. Unfortunately, any system based on debt is going to break down eventually, and there are signs that it is starting to happen once again. For example, just a few days ago the IMF warned regulators to prepare for a global “liquidity shock“. And on Friday, Chinese authorities announced a ban on certain types of financing for margin trades on over-the-counter stocks, and we learned that preparations are being made behind the scenes in Europe for a Greek debt default and a Greek exit from the eurozone. On top of everything else, we just witnessed the biggest spike in credit application rejections ever recorded in the United States. All of these are signs that credit conditions are tightening, and once a “liquidity squeeze” begins, it can create a lot of fear.
Over the past six months, the Chinese stock market has exploded upward even as the overall Chinese economy has started to slow down. Investors have been using something called “umbrella trusts” to finance a lot of these stock purchases, and these umbrella trusts have given them the ability to have much more leverage than normal brokerage financing would allow. This works great as long as stocks go up. Once they start going down, the losses can be absolutely staggering.
That is why Chinese authorities are stepping in before this bubble gets even worse. Here is more about what has been going on in China from Bloomberg.
China’s trusts boosted their investments in equities by 28 percent to 552 billion yuan ($89.1 billion) in the fourth quarter. The higher leverage allowed by the products exposes individuals to larger losses in the event of stock-market drops, which can be exaggerated as investors scramble to repay debt during a selloff.
In umbrella trusts, private investors take up the junior tranche, while cash from trusts and banks’ wealth-management products form the senior tranches. The latter receive fixed returns while the former take the rest, so private investors are effectively borrowing from trusts and banks.
Margin debt on the Shanghai Stock Exchange climbed to a record 1.16 trillion yuan on Thursday. In a margin trade, investors use their own money for just a portion of their stock purchase, borrowing the rest. The loans are backed by the investors’ equity holdings, meaning that they may be compelled to sell when prices fall to repay their debt.
Overall, China has seen more debt growth than any other major industrialized nation since the last recession. This debt growth has been so dramatic that it has gotten the attention of authorities all over the planet.
Wolfgang Schaeuble, Germany’s finance minister says that “debt levels in the global economy continue to give cause for concern.”
Singling out China in particular, Schaeuble noted that “debt has nearly quadrupled since 2007″, adding that it’s “growth appears to be built on debt, driven by a real estate boom and shadow banks.”
According to McKinsey’s research, total outstanding debt in China increased from $US7.4 trillion in 2007 to $US28.2 trillion in 2014. That figure, expressed as a percentage of GDP, equates to 282% of total output, higher than the likes of other G20 nations such as the US, Canada, Germany, South Korea and Australia.
This credit boom in China has been one of the primary engines for “global growth” in recent years, but now conditions are changing. Eventually, the impact of what is going on in China right now is going to be felt all over the planet.
Over in Europe, the Greek debt crisis is finally coming to a breaking point. For years, authorities have continued to kick the can down the road and have continued to lend Greece even more money.
But now it appears that patience with Greece has run out.
For instance, the head of the IMF says that no delay will be allowed on the repayment of IMF loans that are due next month.
IMF Managing Director Christine Lagarde roiled currency and bond markets on Thursday as reports came out of her opening press conference saying that she had denied any payment delay to Greece on IMF loans falling due next month.
Unless Greece concludes its negotiations for a further round of bailout money from the European Union, however, it is not likely to have the money to repay the IMF.
And we are getting reports that things are happening behind the scenes in Europe to prepare for the inevitable moment when Greece will finally leave the euro and go back to their own currency.
For example, consider what Art Cashin told CNBC on Friday.
First, “there were reports in the media [saying] that the ECB and/or banking authorities suggested to banks to get rid of any sovereign Greek debt they had, which suggests that maybe the next step will be Greece exiting,” Cashin told CNBC.
Also, one of Greece’s largest newspapers is reporting that neighboring countries are forcing subsidiaries of Greek banks that operate inside their borders to reduce their risk to a Greek debt default to zero.
According to a report from Kathimerini, one of Greece’s largest newspapers, central banks in Albania, Bulgaria, Cyprus, Romania, Serbia, Turkey and the Former Yugoslav Republic of Macedonia have all forced the subsidiaries of Greek banks operating in those countries to bring their exposure to Greek risk – including bonds, treasury bills, deposits to Greek banks, and loans – down to zero.
Once Greece leaves the euro, that is going to create a tremendous credit crunch in Europe as fear begins to spread like wildfire. Everyone will be wondering which nation will be “the next Greece”, and investors will want to pull their money out of perceived danger zones before they get hammered.
In the past, other European nations have been willing to bend over backwards to accommodate Greece and avoid this kind of mess, but those days appear to be finished. In fact, the finance minister of France openly admits that the French “are not sympathetic to Greece”.
Greece isn’t winning much sympathy from its debt-wracked European counterparts as the country draws closer to default for failing to make bailout repayments.
“We are not sympathetic to Greece,” French Finance Minister Michael Sapin said in an interview at the International Monetary Fund-World Bank spring meetings here.
“We are demanding because Greece must comply with the European (rules) that apply to all countries,” Sapin said.
Yes, it is possible that another short-term deal could be reached which could kick the can down the road for a few more months.
But either way, things in Europe are going to continue to get worse.
Meanwhile, very disappointing earnings reports in the U.S. are starting to really rattle investors.
For example, we just learned that GE lost 13.6 billion dollars in the first quarter.
One week following the announcement that it would dismantle most of its GE Capital financing operations to instead focus on its industrial roots, General Electric reported a first quarter loss of $13.6 billion.
The results were impacted by charges relating to the conglomerate’s strategic shift. A year ago GE reported a first quarter profit of $3 billion.
That is a lot of money.
How in the world does a company lose 13.6 billion dollars in a single quarter during an “economic recovery”?
Other big firms are reporting disappointing earnings numbers too.
In earnings news, American Express Co. late Thursday said its results were hurt by the strong U.S. dollar, which reduced revenue booked in other countries. Chief Executive Kenneth Chenault reiterated the company’s forecast that 2015 earnings will be flat to modestly down year over year. Shares fell 4.6%.
Advanced Micro Devices Inc. said its first-quarter loss widened as revenue slumped. The company said it was exiting its dense server systems business, effective immediately. Revenue and the loss excluding items missed expectations, pushing shares down 13%.
And just like we saw just before the financial crisis of 2008, Americans are increasingly having difficulty meeting their financial obligations.
For instance, the delinquency rate on student loans has reached a very frightening level.
More borrowers are failing to make payments on their student loans five years after leaving college, painting a grim picture for borrowers, according to the Federal Reserve Bank of New York.
Student debt continues to increase, especially for people who took out loans years ago. Those who left school in the Great Recession, which ended in 2009, had particular difficulty with repayment, with many defaulting, becoming seriously delinquent or not being able to reduce their balances, the New York Fed said today.
Only 37 percent of borrowers are current on their loans and are actively paying them down, and 17 percent are in default or in delinquency.
At this point, the American consumer is pretty well tapped out. If you can believe it, 56 percent of all Americans have subprime credit today, and as I mentioned above, we just witnessed the biggest spike in credit application rejections ever recorded.
We have reached a point of debt saturation, and the credit crunch that is going to follow is going to be extremely painful.
Of course the biggest provider of global liquidity in recent years has been the Federal Reserve. But with the Fed pulling back on QE, this is creating some tremendous challenges all over the globe. The following is an excerpt from a recent article in the Telegraph.
The big worry is what will happen to Russia, Brazil and developing economies in Asia that borrowed most heavily in dollars when the Fed was still flooding the world with cheap liquidity. Emerging markets account to roughly half of the $9 trillion of offshore dollar debt outside US jurisdiction.
The IMF warned that a big chunk of the debt owed by companies is in the non-tradeable sector. These firms lack “natural revenue hedges” that can shield them against a double blow from rising borrowing costs and a further surge in the dollar.
So what is the bottom line to all of this?
The bottom line is that we are starting to see the early phases of a liquidity squeeze.
The flow of credit is going to begin to get tighter, and that means that global economic activity is going to slow down.
This happened during the last financial crisis, and during this next financial crisis the credit crunch is going to be even worse.
This is why it is so important to have an emergency fund. During this type of crisis, you may have to be the source of your own liquidity. At a time when it seems like nobody has any cash, those that do have some will be way ahead of the game.
The post The Global Liquidity Squeeze Has Begun appeared first on The Economic Collapse.
WE KNEW OF NUCLEAR MELT-DOWNS. WHAT ABOUT HUBRIS MELT-DOWNS?
Hubris melting down world security, including Antarctica. Five national heat records were beaten since the start of 2015.
Including the one in Antarctica, last week.
The poles are where heat records are going to be achieved the most.
Why?
Planetary warming is concentrated there. If the temperature goes up two degrees Celsius overall, it will get up TEN degrees Celsius at the Poles. Or so I claim. (Right now we are up officially only .8 degree Celsius, in the global average.)
NASA explains why climate change is warming the poles of our planet faster than the rest this way: “energy in the atmosphere that is carried to the poles through large weather systems.”
That is true, but does not explain the big picture.
(Second Part of “Causality Explained”)
Axiomatic Systems Are Fragile:
Frege was one of the founders of mathematical logic and analytic philosophy. Frege wrote the Grundgesetze der Arithmetik [Basic Laws of Arithmetic], in three volumes. He published the first volume in 1894 (paying for it himself). Just before the second volume was going to press, in 1903, a young Bertrand Russell informed Frege of a dangerous contradiction, Russell’s paradox (a variant of the Cretan Liar Paradox). Frege was thrown in total confusion: a remedy he tried to apply reduced the number of objects his system could be applied to, to just ONE. Oops.
Frege was no dummy: he invented quantifiers (Second Order Logic, crucial to all of mathematics). It is just that logic can be pitiless.
WHAT CAUSES CAUSE?
What Is Causality? What is an Explanation?
Pondering the nature of the concept of explanation is the first step in thinking. So you may say that there is nothing more important, nothing more human.
I have a solution. It is simplicity itself. I go for the obvious model:
Mathematics, logic, physics, and the rest of science give a strict definition of what causality, and an explanation is.
How?
Through systems of axioms and theorems.
Some of the sub-systems therein have to do with logic (“Predicate Calculus”). They are found all over science and common sense (although they will not be necessarily present in systems of thought such as, say, poetry, or rhetoric).
WHEN A IMPLIES B, IN A LOGOS, ONE OUGHT TO SAY THAT A “CAUSES” B.
A and B are propositions. They do not have to be very precise.
There are many reasons why people like to kill people: greed, anxiety, misperceptions, pain etc., are common. Here I shall focus on a particular reason. A 27 year old German co-pilot locked himself in the cockpit, and while the captain pounded on the door, flew himself and another 149 persons, including tens of babies and children, into a cliff at the base of a mountain that towered another 1,500 meters higher.
Insanely enough, the murderous maniac may have view it as an act of love. Dying among those mountains he knew well, and loved. The area may be the most famous in the world for glider pilots: enormous mountains with a warm sun create tremendous updraft. The valleys are full of airports. Wingsuit flying was invented there.
In 1905, his so-called Wonder Year, Albert Einstein presented a theory of the photoelectric effect. The new idea came in just two lines. However I boldly claim that Einstein’s theory of the photoelectric effect, although crucially correct, was also crucially wrong.
I claim that Einstein talked too much. His intuition was not careful enough, and too tied up with old fashion particles. Quantum Mechanics, one of the inventors Einstein was, questioned the very nature of elementary particles. Einstein imposed, at the outset, a solution, which, I claim, was erroneous.
What Einstein ought to have said is that electromagnetic energy was absorbed in packets of energy hf (h was Planck’s Constant, f the frequency of the light). That explained immediately the photoelectric effect. It was just enough to explain the photoelectric effect.
NO MULTIVERSE, NO PLATONISM (Less Air Travel, Too):
Some people go around, and brandish the “Multiverse”. Of course, the “Multiverse” exists, in one’s brain. The brain, among other things, extends all over imagination. Out there, among the galaxies, in the real world, there is no reason to suppose there is a “Multiverse, whatsoever.
It is basically something to sell books with. Or, just as with evil minded religions, for some physicists to claim they are like gods and can believe in something really absurd, and grotesquely self-contradictory:
There is No Universe, But the Universe:
The Universe is all there is. By definition. By philosophical definition. Just by philosophical definition? Not so. Any logic is associated to a universe. If the “logic” is nature itself (“all of the logic”) the associated universe (in the Logic sense), is, well, the Universe.
If something some would want to call the “Multiverse”, whatever that would be, existed, it would be part of the Universe.
