There is little doubt the global economy is slowing rapidly and the US economy is much weaker than the mainstream media and government portends it to be. Former Federal Reserve Chairman Alan Greenspan recently warned world leaders:
"Global effective demand is extraordinarily weak - tantamount to the late stages of the great depression."
We must be looking at the same economic numbers as Greenspan because we don't believe he is exaggerating! Greenspan also states that:
"Capital investment is key to productivity growth"
Capital expenditure is in free fall in the US and has reached the point where 90% of the last quarterly earnings of the S&P 500 saw profits used for buybacks and dividends. This leaves a maximum of 10% available for CAPEX, with most of that being deployed offshore. This is now of crisis proportions for the short and intermediate viability ofthe US Economy. Unfortunately, few leaders like Greenspan are willing to speak out publically.
This months report exhaustively shows the seriousness of the US Economic situation and why there is a real possibility of recession. The Federal Reserve must be well aware privately of this possibility, which will force them to keep rate increases on hold for longer than currently anticiapted. Irrelevant of short term rate policy decisions the Federal Reserve must not allow interest rates to rise or the US government will be unable to pay the interest rate on its debt.
This is one of the reasons that QE has effectively been targeted as a debt liquidation program to buy back US Treasuries. The result is the interest paid on these US Treasuries by the Treasury department is returned to them by the Fed as the Fed's profit. This shell game removes interest payments in a stealth fashion. This slight of hand works as long as the debt is continuously rolled over, which the Treasury and Fed could do ad infinitum.
MORE>> EXPANDED COVERAGE INCLUDING AUDIO & MONTHLY UPDATE SUMMARY
IS NIRP COMING TO AMERICA? - The Coming Negative Interest Rate Policy
The Financial Crisis prompted the US to follow Japan with the implementation of ZIRP. Now we watch as Europe adopts NIRP.
Is NIRP next for America?
We are watching a tidal wave forming of EU central banks shifting to NIRP.
NIRP adopted by Central Banks:
We have NIR Bonds from leaders such as:
This is a dramatic development that changes the investment landscape, strategies and business models of many traditional industries. We now have approximately $2 TRILLION of European Bonds trading with negative yields. This is close to 20% of all European Bonds having negative yields.
2015 will actually be the first year since 2007 without some form of quantitative easing!
During this six year period the Fed’s Balance Sheet has exploded by over $4 trillion and the US Government has spent another $11+ trillion. Between October and November of last year, the Federal Government issued $1 trillion in new debt in one month.
The bond bubble was $80 trillion going into 2008. Today it’s over $100 trillion. The US had $5 trillion in public debt going into 2008. Today it has over $18 trillion.
Despite all of this the US has experienced the weakest recovery in 80+ years! That is assuming it's really a recovery? Every other recession going back to 1954 saw rates begin to rise a few years into the recovery.
It makes me pause and think that a year without monetizing bonds is going to be a big shock to the financial markets and stock traders.
As we have spelled out in previous reports we are seeing global weakness around the world with very worrying signs coming from China and Emerging Markets. The US has been held up as the strongest economy with which to pin optimistic hopes.
However , US Macro Surprises have suddenly become alarmingly negative and are clearly following forward earnings estimates lower.
MORE>> EXPANDED COVERAGE INCLUDING AUDIO & EXECUTIVE BRIEF
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