International financial system on the verge of an “epoch-defining seismic rupture” ---
Chancellor: Heed the threats to globalization
By Edward Chancellor February 9, 2016
Is the international financial system on the verge of an “epoch-defining seismic rupture” accompanied by a return to global protectionism? This warning was made a couple of years ago by Claudio Borio, the respected head economist at the Bank for International Settlements. Since that time, emerging markets have crashed and some countries have resorted to capital controls to protect their currencies. The last time globalization collapsed was in the 1930s. Looking back at this disastrous period, it is possible to identify some disturbing parallels.
The conventional view of the Great Depression, espoused by former Federal Reserve Chairman Ben Bernanke among others, is that it resulted from the U.S. central bank’s failure to prevent a collapse of the domestic money supply. This interpretation is too parochial. In truth, America was caught up in a global crisis which had its origins in acute financial weakness in Latin America and Central Europe – the emerging markets of their day – a poorly designed international monetary system, unruly capital flows, plunging commodities prices and problems in the European banking system.
The gold exchange standard, which was established in the early 1920s, allowed British and U.S. government securities to be used, alongside the precious metal, in foreign exchange transactions between central banks. Within a few years, this new, more flexible currency system had resulted in the rapid expansion of currency reserves and facilitated enormous growth in foreign lending.
The United States lent heavily to Latin America and Central Europe. American holders of foreign bonds enjoyed higher yields than were available at home. As default levels were low, they seemed to be taking little extra risk. In reality, underwriting standards on Wall Street were declining sharply and the recipients of foreign loans squandered much of the money they received. In 1928, global capital flows reversed after the Fed hiked rates and American investors repatriated capital to invest in the booming domestic stock market.
The reversal of foreign lending, according to economic historian Charles Kindleberger, “destabilized the world economy like a game of snap-the-whip played by children”. It coincided with a deepening decline in commodities prices, which left indebted primary producers unable to service their debts. By 1929, international trade prices and volumes were falling – an indication of worsening economic conditions which contributed to the October crash of that year. The following year, several South American countries, including Bolivia and Brazil, devalued their currencies and defaulted on their external obligations.
In the first half of 1931, the crisis spread to Austria, whose largest bank, the Creditanstalt, announced large losses after restating its accounts. The contagion soon reached Germany’s banking system – Kindleberger once mischievously suggested that American lenders were unable to distinguish between the two countries. Next in line stood Britain, whose merchant banks were heavily exposed to Central Europe. The British didn’t have the appetite to protect the gold peg. In September 1931, Britain devalued the pound. This was all too much for the governor of the Bank of England, Montagu Norman, who suffered a nervous breakdown. The Americans didn’t buckle so quickly. In October 1931, the Fed raised rates to stem a drain of gold. A banking panic ensued and the United States felt the full force of the world depression.
By this point, globalization was in full retreat. In place of free capital flows and relatively open trade came “blocked currencies” and “standstill agreements.” Capital controls prevented the repayment of foreign debts and hindered trade. Tariffs and currency devaluation in one country provoked hostile responses in others. Much ongoing trade was conducted between countries on a bilateral basis, requiring what was known as “exchange clearing” to keep payments in balance. In Germany, the newly installed Nazis developed their own trading bloc and pursued a nationalist agenda of economic self-sufficiency. Even the great liberal John Maynard Keynes supported the move away from globalization: “Let goods be homespun,” he wrote in 1933, “and, above all, let finance be primarily national.”
Recent developments in the global economy bear some resemblance to this earlier period. The international currency system, with the dollar at its core, has proved infinitely elastic. Global foreign exchange reserves expanded by more than $10 trillion in the decade after 2002. The Fed’s easy-money policy ushered in the era of the global carry trade as companies in emerging markets took advantage of low U.S. rates to borrow trillions of dollars.
In the interwar period, Germany was the world’s second-largest economy. China now occupies that position. Like Germany in the 1920s, China’s banking system has become bogged down with bad debts, its local governments have borrowed heavily to fund extravagant public works, and industrial excess capacity is rife. Europe’s banking system is also burdened with non-performing loans.
But since 2012, global foreign exchange reserves have been contracting. Last year, emerging markets experienced net capital outflows for the first time in nearly three decades – and that’s continuing in 2016. Capital outflows have depressed emerging market currencies, which has made servicing their foreign debts more costly. The rating agencies have downgraded both South Africa and Brazil. As in the late 1920s, a bear market in commodities is causing havoc. Several energy exporters, from Azerbaijan to Saudi Arabia, have imposed capital controls.
Protectionism is once again in the air. Over the past couple of months, both the European Union and the United States have imposed tariffs on Chinese steel imports. Anti-immigration sentiment, which flared up in the 1930s, is being exploited once again by political extremists on both sides of the Atlantic. Optimists might note the absence of the “fetters” of the gold standard today. Instead, the euro has brought its own brand of sclerosis to much of Europe. China’s dollar peg is another dysfunctional currency arrangement which will prove difficult to unravel.
In his 2001 book, “The End of Globalization: Lessons from the Great Depression,” the historian Harold James observed that financial crises have often threatened open trade and monetary arrangements. The retreat from globalization occurred so rapidly in the 1930s because it built upon longstanding grievances about immigration, trade and capital flows. Similar resentments are evident today. Though Borio’s warning of an “epoch-defining seismic rupture” has not yet come to fruition, it deserves to be taken seriously.
(This item has been corrected in paragraph seven to read “globalization” not “localization”, fixing an error introduced in the production process.)
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Message 30282054
Message 30284852
| To: John P who wrote (17567) | 1/7/2016 10:32:29 PM | | From: John P | 4 Recommendations of 17761 | | | We live in a big Global world ... when Trillions of dollars of expansion stops, reverses and then contracts it impacting all global markets.
ANALYSIS-Forex reserves unwind could reverse bond supercycle
Thompson Reuters Sept 2nd 2015
China's summer shock may mark the end of an era of globalization that helped define world markets for more than a decade. Investor anxiety about the consequences is well-founded.
Beijing's integration into the global economy since 2002 reshaped the financial as well as economic landscape - mainly by the way China itself and the economies it supercharged with outsize demand for raw materials banked the hard cash windfalls they earned over the following 12 years.
According to the International Monetary Fund, the dollar value of foreign currency reserves held by all developing nations ballooned by almost $7 trillion in just one decade to a peak of some $8.05 trillion by the middle of last year.
While China was the main driver, accounting for about half of that increase, its economic boom created a commodity supercycle that flooded the coffers of resource-rich nations from across Asia to Russia, Brazil and the Gulf.
As the vast bulk of this hard cash was banked in U.S. Treasury and other low risk, rich-country bonds, they were at least one critical factor in the halving of U.S. Treasury and other Group of Seven government borrowing costs over the same period.
Alongside the disinflationary impact of China's low cost labour on western goods imports and wages, this reserve stash helped extend what has now been a 20-year bull market in bonds.
What's more, the drop in yields, by skewing relative returns between stocks and bonds and also the relative cost of capital for companies, also at least partly underwrote a post-credit crisis surge in equity prices to successive records.
Reverse that bond buying, even at the margin, and world asset markets may have a major problem.
That's especially so at a time when the big other marginal bid for bonds, the U.S. Federal Reserve's quantitative easing programme, has ended and when western recoveries are pressuring the Fed and others to normalize near zero interest rates.
RESERVE GROWTH CRESTS
As China's economy slows to its weakest in 25 years this year and capital flows out of the country, pressure on the recently devalued and loosened yuan peg means the People's Bank of China has sold hundreds of billions of dollars to shore up its currency over the summer.
Dutch bank Rabobank estimated China's central bank sold $200 billion of reserves in the last weeks of August alone.
Along with the pressure of looming Fed tightening and a higher dollar, the ebb of Chinese demand for commodities and slump in energy and metals prices has seen emerging market currencies plummet everywhere. And just steadying the capital exit is starting to strain their coffers.
, and this Emerging market forex reserves fell by about half a trillion dollars between mid-2014 and the end of the first quarter of 2015, IMF data shows is likely far from the end.
Deutsche Bank estimated on Tuesday the high water-mark of almost two decades of reserve accumulation had now been reached and central banks will by the end of next year dump as much as $1.5 trillion to counter capital outflows.
(Editorial note by JJP.... this $1.5 to $2 Trillion reduction of global currency reserves was forecast by me as a sidebar statement in my April 5th 2015 post...these are the huge Global shifts that are game changers)
Message 30015282
Once Over $12 Trillion, the World’s Reserves Are Now Shrinking
(This is a big deal .. This is the global downshifting in the creation of what is already half a trillion dollars and will continue to trend downward with another 1 to 2 Trillion Dollars of Reserves leaving the system due to the change in momentum and the wildly wicked world of Negative interest rates which we are seeing in way too many places. such as Switzerland, Sweden Denmark and in other aspects of our Gobal Macro Financial Structure........JJP)
Bond investors are nervous of the fallout.
"The process of reserve reversal has only just started," said Chris Iggo, Chief Investment Officer, Fixed Income at Axa Investment Managers.
"We could be on the verge of a scenario that sees a reversal in the trend of declining global goods prices, a partial reversal in U.S. monetary policy and a reversal of the balance sheet expansion that allowed emerging market central banks to grow their foreign exchange reserves," he added. "The upshot? Significantly higher US Treasury yields."
DEFLATION OR RESERVE BUST?
For some, it may seem counter-intuitive that a China slowdown or financial shock lifts bond borrowing rates at all.
As the Shanghai stock bubble imploded in July, the yuan wobbled and the world's second-biggest economy shuddered, the first wave across markets was to sink commodity prices further, throw doubt on inflation targets and lower long-term interest rate horizons yet again.
It's not hard to see why. Crude oil prices, which had already halved over the previous 12 months, lost another 19 percent after midyear to six-year lows. Raw material prices more broadly, as captured by the Thomson Reuters Commodity Research Bureau's index, slumped to their lowest in 12 years.
The effect of international commodity price moves on already near-zero inflation rates was to push back the expected timing of interest rate rises in the United States, Britain and elsewhere. Suddenly, silver linings for investors reappeared.
But the parallel narrative of the decade-long reserve unwind could well neutralize much of that for bond pricing.
Iggo pointed out that even as China's emergence over the past 15 years fueled a trebling of the CRB commodity price index in just six years to 2008, it was disinflationary on balance for western economies - mainly due to low-cost labour and exports.
The flip side now is that the recent slump in the CRB to 2003's lows may not be enough to prevent cost pressures building in recovering western economies over time and may only stay central bank tightening temporarily as a result.
"The peak in bond demand is probably behind us," said Deutsche strategist George Saravelos.
---By Mike Dolan
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Message 30234098
| To: Fintas who wrote (16909) | 4/5/2015 11:57:48 PM | | From: John P | 6 Recommendations Recommended By
Davy Crockett
Hawkmoon
isopatch
mary-ally-smith
roguedolphin
and 1 more member
of 17241 | | Once Over $12 Trillion, the World’s Reserves Are Now Shrinking
(This is a big deal .. This is the global downshifting in the creation of what is already half a trillion dollars and will continue to trend downward with another 1 to 2 Trillion Dollars of Reservesleaving the system due to the change in momentum and the wildly wicked world of Negative interest rates which we are seeing in way too many places. such as Switzerland, Sweden Denmark and in other aspects of our Gobal Macro Financial Structure........JJP)
The decade-long surge in foreign-currency reserves held by the world’s central banks is coming to an end.
Global reserves declined to $11.6 trillion in March from a record $12.03 trillion in August 2014, halting a five-fold increase that began in 2004, according to data compiled by Bloomberg. While the drop may be overstated because the strengthening dollar reduced the value of other reserve currencies such as the euro, it still underlines a shift after central banks -- with most of them located in developing nations like China and Russia -- added an average $824 billion to reserves each year over the past decade.
Beyond being emblematic of the dollar’s return to its role as the world’s undisputed dominant currency, the drop in reserves has several potential implications for global markets. It could make it harder for emerging-market countries to boost their money supply and shore up faltering economic growth; it could add to declines in the euro; and it could damp demand for U.S. Treasury bonds.
“It’s a big challenge for emerging markets,” Stephen Jen, a former International Monetary Fund economist who’s co-founder of SLJ Macro Partners LLP in London, said by phone. They “now need more stimulus. The seed has been sowed for future volatility,” he said.
China Sells
Stripping out the effect from foreign-exchange fluctuations, Credit Suisse Group AG estimates that developing countries, which hold about two-thirds of global reserves, spent a net $54 billion of this stash in the fourth quarter, the most since the global financial crisis in 2008.
China, the world’s largest reserve holder, together with commodity producers contributed to most of the declines, as central banks sold dollars to offset capital outflows and shore up their currencies. A Bloomberg gauge of emerging-market currencies has lost 15 percent against the dollar over the past year.
China cut its stockpile to $3.8 trillion in December from a peak of $4 trillion in June, central bank data show. Russia’s supply tumbled 25 percent over the past year to $361 billion in March, while Saudi Arabia, the third-largest holder after China and Japan, has burned through $10 billion in reserves since August to $721 billion.
Euro’s Decline
The trend is likely to continue as oil prices stay low and growth in emerging markets remains weak, reducing the dollar inflows that central banks used to build reserves, according to Deutsche Bank AG.
Such a development is detrimental to the euro, which had benefited from purchases in recent years by central banks seeking to diversify their reserves, according to George Saravelos,co-head of foreign-exchange research at Deutsche Bank.
The euro’s share of global reserves dropped to 22 percent in 2014, the lowest since 2002, while the dollar’s rose to a five-year high of 63 percent, the International Monetary Fund reported March 31.
“The Middle East and China stand out as two regions that are likely to face ongoing pressures to run down reserves over the next few years,” Saravelos wrote in a note. The central banks there “need to sell euros,” he said.
The euro has declined against 29 of 31 major currencies this year as the European Central Bank stepped up monetary stimulus to avert deflation. The currency tumbled to a 12-year low of $1.0458 on March 16, before rebounding to $1.0981 at 11:11 a.m. on Monday in Tokyo.
Growth Slows
Central banks in emerging nations started to build up reserves in the wake of the Asian financial crisis in the late 1990s to safeguard their markets for periods when access to foreign capital dries up. They also bought dollars to limit appreciation in their own exchange rates, quadrupling reserves from 2003 and boosting their holdings of U.S. Treasuries to $4.1 trillion from $934 billion, data compiled by Bloomberg show.
The reserve accumulation adds money supply to the financial system -- each dollar purchase creates a corresponding amount of new local currency -- and helps stimulate the economy.Annual monetary base in China and Russia grew at an average 17 percent in the decade through 2013, data compiled by Bloomberg show. The expansion rate tumbled to 6 percent last year.
While central banks have other ways of pumping cash into the banking system, such moves without the backing of increased foreign reserves could end up weakening their currencies further -- an outcome they may want to avoid.
“The swing in global foreign exchange reserves is one key measure of the global liquidity tap being turned on and off,” Albert Edwards, a global strategist at Societe Generale SA, wrote in a note on March 6. “When a regime of loose money suddenly ends,” emerging-market asset prices “are usually one of the first casualties,” he said.
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| To: robert b furman who wrote (17235) | 10/27/2015 9:04:40 PM | | From: John P | 6 Recommendations Read Replies (1) of 17761 | | | Red Swan Descending
by David Stockman • October 20, 2015
davidstockmanscontracorner.com
The proverbial peddlers of Florida swampland can now move over. They can’t hold a candle to the red suzerains of Beijing.
The latter had drawn a line in the sand at 7.0% GDP growth. Conveniently enough, the “consensus” estimate of so-called street economists was pegged at 6.8% for Q3,thereby giving authorities one thin decimal point through which to thread a “beat” at 6.9%.
By golly they did it!
Even then, China’s Ministry of Truth had to fiddle down the GDP deflator to negative 0.5% (for the second time this year) in order to hit the bulls eye. And that’s exactly the point.
No real world $10 trillion economy plagued with all of the turmoil evident in China’s whipsawing trade data or its volatile real estate development sector or its faltering rust belt and commodity-based industries can possibly deliver absolutely stable GDP numbers to the exact decimal point quarter after quarter.
In fact, the odds that these reports represent anything other than goal-seeked propaganda are so overwhelmingly high that they perforce raise another more important question. Why does Wall Street and its servile financial press not issue a loud collective guffaw when they are released?
But no, the Wall Street Journal took it all very seriously, noting both the “beat” and China’s claim that the “miss” wasn’t a miss at all:
The better-than-expected result—a Wall Street Journal survey of 13 economists forecast a median 6.8% gain—is likely to renew debate over the accuracy of China’s growth statistics…….Speaking at an event to promote entrepreneurism in Beijing on Monday, Premier Li Keqiang said “even though it was 6.9%, it is still a growth rate of around 7%.”
Right. China’s #2 communist boss is out promoting the “enterprenurial spirit” while emitting central planning propaganda to the decimal point.
You might find the irony exceptionally rich, but there is a larger message. Namely, the true size of China’s economy is unknowable to the nearest trillion or even several trillions.But that does not prevent most of Wall Street from taking seriously each and every word of China’s self-evidently clueless statist rulers spouting growth rates to the decimal point.
In truth, Wall Street has become so intellectually addled from its addiction to central bank enabled gambling that it no longer has a clue about what really matters. That’s why thenext crash will come as an even greater surprise than the Lehman meltdown, and will be far more brutal and uncontainable, as well.
Yet the evidence that a China-led crash is on its way is hiding in plain sight. And what is being blithely ignored is not merely the blatant inconsistencies in its economic numbers—–such as the fact that electricity consumption has grown at only a 1.3% rate over the past year——or that its commerce with the outside world has shrunk drastically, with imports down by 23% and exports off by 3-6% in recent months.
Instead, the evidence that China is a slow-motion trainwreck lies in the very consistency of its Beijing-cooked numbers. Apparently, no one has told its credit-happy rulers that printing precise amounts of new GDP quarter after quarter by issuing credit at double the rate of nominal income growth will eventually result in the mother of all deflationary collapses.
Stated differently, if the pattern of debt versus GDP shown below is pursued long enough, the world’s greatest open air construction site will fall silent. Everything which can be built will have been delivered; any cash flow which can be encumbered with more debt will have been levered-up; any pretense that financial institutions are solvent will have given way too soaring defaults; and the Wall Street delusion that the primitive central planners of red capitalism had a iron grip on China’s runaway expansion will have been revealed as a snare and delusion.
Accordingly, the only thing that really counted in yesterday’s release was that credit is still growing at nearly 12% or at 2X the 6.2% gain in nominal GDP. And as is also evident in the chart, this massive and aberrational debt versus income gap has been underway as far back as the eye can see.
Indeed, its goes all the way back to Mr. Deng’s moment of enlightenment 25 years ago. That’s when he discovered a printing press in the basement of the PBOC and concluded that communist party power might better be preserved by running these presses red hot than by Mao’s failed dictum that power descends from the white hot barrel of a gun.
In any event, why in the world would anyone in their right mind think this crucial chart can be extended toward the right axis much longer. Assume 10 more years of 12% credit growth, for example, and China will have $90 trillion of total debt or 50% more than the already staggering amount carried by the US economy.
At the same time and given that China’s nominal GDP growth is descending in Gartman fashion from the upper left to the lower right, assume the very best outcome for nominal income. That is, posit that somehow China manages to achieve ten more years of this quarters’ 6% nominal growth. So doing, you get a mere $17 trillion of GDP.
Everywhere and always, however, a 5X total leverage ratio on an economy is a recipe for crushing deflation. In fact, it has never happened before in modern times except for Japan after 1990; and Japan at least had some semblance of functioning markets separate from the state and the rule of commercial law, contracts and bankruptcy.
By contrast, when China fully plunges into its inexorable deflationary spiral the rulers of red capitalism will have no choice except to resort to Mao’s preferred instruments of rule—–paddy wagons and machine guns—-in order to quell an outraged citizenry. After all, Mr. Deng told China’s newly ascendant capitalists that it is glorious to be rich, but did not explain that printing press prosperity ultimately results in a crack-up boom.
Stated differently, the recent 18-month rise and then overnight collapse of $5 trillion of phony market cap in the Chinese stock market gave rise to utter panic and mindless expediency in Beijing, including a de facto bailout of billionaires. China’s red rulers apparently feared that the 90 million angry stock market speculators would be no match for its 70 million party cadres——especially since most of the latter were foremost among the former.
Yet what will happen when China’s hideously inflated real estate and land values succumb to the deflationary wringer? And hideous is not too strong a word: in many urban areas housing prices have reached 15-30X the median income.
Well, there are 65 million drastically over-priced, empty apartments in China because its rulers told speculators and the rising middle class that housing prices could never fall——that they were the next best thing to a piggy bank. Accordingly, the last phase of China’s madcap construction boom is likely to be a manic spurt of prison building to accommodate the millions of irate citizens who are destined to experience China’s turbo-charged version of 1929.
The other number number in the Q3 release that has been drastically misinterpreted is the reported 10.6% growth of fixed asset investment. Needless to say, this was described as “disappointing” when it is actually a screaming symptom of China’s terminally deformed economy. If it had any hope of avoiding a crash landing, fixed investment in its fantastically overbuilt public facilities and industrial capacity would be sharply negative, not still growing in double digits.
Owing to the cardinal error embodied in Wall Street’s self-serving rendition of Keynesian economics, however, China’s fatal dependence on erecting economic white elephants and what amount to public pyramids in the form of unused airports, train stations, highways and bridges, is given hardly a passing nod. That’s because it is assumed that some way or another China will make the transition to a services and consumption based economy just like the good old shop-till-they-drop US of A.
Let’s see. When China finally stops its borrowing binge, these putative shoppers will need to finance their purchases out of current incomes. Yet is not the overwhelming share of household income in China currently earned from the supply chain for fixed asset investment and construction and from the export of cheap goods to already saturated and debt-besotted DM markets?
Just consider the fantastical reality that China’s 2 billion ton cement industry produced more in three years than did the US industry during the entire 20th century. When they finally stop building roads, apartments and factories, therefore, it is not just the cement kilns which will shutdown, but a whole network of gravel haulers, chemical plants, cement truck fleets, construction equipment suppliers, work site service vendors and much more reaching deep into the interstices of China’s hothouse economy.
Likewise, when rebar and other construction steel demand collapses and the rest of the world throws up barriers to China’s surging steel exports, as it surely will and is already doing, the ricochet effects on China massively overbuilt 1.1 billion ton steel industry will be far-reaching. The incomes of coal barons and blast furnaces workers alike have already taken a pasting, and the downward spiral is just getting started.
And wait until China’s newly minted auto dealer lots become backed-up with unsold cars as far as the eye can see. Then its 25 million unit auto industry will tumble into a depression unlike anything since 1929 when Detroit’s production plunged from 6 million cars/year to less than 2 million.
All of those suddenly unemployed auto, steel, rubber, glass, upholstery etc. workers did, in fact, economically “drop”. But it wasn’t from an excess of shopping!
In short, the affliction of Keynesian economics brought many ills to the modern world, but repeal of Say’s Law was not among them. You can have a one-time credit party, but when it inevitably ends, consumption spending defaults to that which can be financed from current incomes. Consumption is the consequence of production and income, not its cause.
Yet crack-up booms eventually destroy the bloated and unsustainable incomes generated in the raw materials, capital goods and consumer durables sectors during the boom phase. Accordingly, even the red suzerains of Beijing can not get from here to there. The phantom incomes that resulted from paving nearly half of the Asian continent occupied by 20% of the world’s population must inevitably shrink, meaning that China’s consumption and service spending will falter, too.
Stated differently, China’s red capitalism is the new black swan. There is nothing rational, stable or sustainable about it. Moreover, the consequence of its pending collapse will be literally earth shattering.
That’s because in recent years it has accounted for a lot more than the one-third of global GDP growth conventionally cited. The latter is just a measure of border-to-border economic statistics.
But the second and third order effects are equally large. From the bowels of Australia’s iron ore mines to the top of Dubai’s pointless 100 story office towers, the entire warp and woof of the global economy has been distorted and bloated by the central bank money printing spree of the last two decades, led by the red credit machines of Beijing. Everywhere economies have succumbed to over-building, over-consumption, over-financialization and endless dangerous, unstable speculation.
So forget the cleanest dirty shirt meme or the preposterous Wall Street nostrum that the US economy has been “decoupled” from the rest of the world. That’s unadulterated hogwash, and its means that the stock market and risk assets are heading for a thundering crash.
After the fact, of course, Wall Street will discover that the world economy was unexpectedly taken down when the suzerains of Beijing were unable to perpetuate the Red Ponzi.
But just like last time during the mortgage and housing meltdown it was starring them in the face all along. Here is what happened to the home ATM piggy-bank that fueled the Greenspan Boom and that gave rise to the Wall Street illusion that consumption spending is the motor force of economic life.
From a peak mortgage equity withdrawal rate (MEW) at 9% of DPI or nearly $1 trillion per year prior to the crisis, MEW has been negative ever since. That is, it has subtracted from consumption, not added. Not one in one hundred Wall Street economists could have correctly projected this chart in 2007 when they were slobbering about the goldilocks economy.
Needless to say, when it comes to the wounded elephant in the room this time around—-the tottering edifice of the Red Ponzi——they are still slobbering.
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