“Death To All Zombies!”- 06.27.16

  • Wait a minute. They’re already dead. Brexit just reveals that not everybody’s brains have been eaten. A viral contagion now threatens the zombified institutions of daily life, especially the workings of politics and finance. Just as zombies exist only in the collective imagination, so do these two principal activities of society operate mainly on trust, an ephemeral product of the hive-mind.
  • When things fall apart in stressed complex systems, they tend to fall apart fast. It’s called phase change. Too many things in 21st century life have depended on sheer trust that the people-in-charge know what they are doing. That trust has subsisted on the doling out of money-from-nothing: debt, reckless bond issuance. TARP, QEs, bailouts, bail-ins, Operation Twists, Ponzi schemes… the whole sad-ass armamentarium of banking necromancy. The politicians let it get out of hand. Things that can’t go on don’t, and now they won’t.
  • The politics of Great Britain are now falling apart landslide-style. Since just about everybody in or near power can be blamed for the national predicament, there’s nobody to turn to, at least not yet. The Labour party just acted out The Caine Mutiny, starring Jeremy Corbyn as Captain Queeg. The Tory Cameron gave three months notice without any plausible replacement in view. Now Cameron’s people are hinting in the media that they can just drag their feet on Brexit, that is, not do anything to enable it from actually happening for a while.Of course, that’s what the monkeyshines of banking and finance have done: postponed the inevitable reckoning with the realities of our time: growing resource scarcity, population overshoot, climate change, ecological holocaust, and the diminishing returns of technology.
  • Britain illustrates the problem nicely: how to produce “wealth” without producing wealth. It’s called “the City,” their name for the little district of London that is their Wall Street. In the absence of producing real things, the City became the driver of the UK’s economy, a ghastly parasitical organism that functioned as the central transfer station for the world’s swindles and frauds, churning the West’s dwindling residual capital into a slurry of fees, commissions, arbitrages, rigged casino bets, and rip-offs. In the process, it enabled the European Central Bank (ECB) to run the con-job that the European Union (EU) became, with the fatal distortions of credit that have put its members into a ditch and sent the private European banks off a cliff, Thelma and Louise style.
  • The next stage of this protean global melodrama is what happens when currencies and interest rates become completely unglued from their assigned roles as patsies in financial racketeering. Sooner or later we’ll know what’s going on in the vast shadowy gloaming of “derivatives,” especially the “innovative” arrangements that affect to be “insurance” against losses in currency and interest rate “positions” — bets made on the movements of these things. When currencies rise or fall quickly, these so-called “swaps” are “triggered,” and then some hapless institution is left holding a big bag of

President Of The European Parliament: “It Is Not The EU Philosophy That The Crowd Can Decide Its Fate” – 06.27.16

  • If anyone needs another confirmation that the European Union is fundamentally the most anti-democratic entity currently in existence, then the following statement by European Parliament Martin Schultz should put all confusion to rest.
  • Schulz: The British have violated the rules. It is not the EU philosophy that the crowd can decide its fate“.
  • Confused: Here is what Deutsche Bank said earlier today:
 The shockwaves and consequences around Brexit will resonate for years. It’s probably an understatement to say that most in financial markets regret the UK’s decision to leave but we should respect the forces that have been pushing us towards what has always been an inevitable political accident sometime soon. I wasn’t sure whether the Brexit vote was the one but I was pretty convinced one was coming and this is probably not the last. Spain yesterday started a general election cycle (more below but relatively market friendly) of the largest 5 euro-area economies (Spain, Holland, France, Germany and Italy) over the next 18 months or so, not forgetting the US this November. Throw in the crucial senate reform vote in Italy in October and you’ve got plenty of opportunity for rebellion against the establishment that haven’t managed to produce satisfactory enough growth for the lower paid/lower skilled to offset the forces of globalisation and immigration.

Source: zerohedge.com…

UK Chancellor Osborne Breaks Silence, Fails To Calm Markets; Says In No Rush To Trigger Article 50 – 06.27.16

  • While the global market eagerly awaits outgoing UK PM David Cameron’s address to Parliament on Monday after a weekend of political turmoil that left Britain looking rudderless following the shock vote to leave the European Union, this morning Chancellor George Osborne made his first statement since the EU referendum in a bid to calm the turmoil in financial markets that has followed the UK’s vote to leave the EU last Thursday.
  • As Open Europe summarized, Osborne stressed that the UK government is “ready to deal with the consequences” and that the UK economy is strong. However, he also warned that there will need to be “a period of adjustment” and that “there is going to be an impact on public finances”, although he said any new budget would be a job for the new government. He insisted he doesn’t “resile” from any of the forecasts made during the campaign. He added that he agreed with the decision to delay triggering Article 50 of the EU Treaties – which sets out the process for leaving the EU.
  • It is unclear if the decision to delay the trigger, a process the EU wants implemented immediately, is to spook the UK population further in hopes of a second Brexit vote, one which would result in a “Remain” outcome.
  • Still, despite Osborne’s “attempt to calm the markets”, the pound resumed its historic slide in the wake of the UK’s decision to leave the EU, touching a fresh 31-year low despite as turmoil in financial markets persisted, with numerous UK bank and other stocks halted due to excess volatility.
  • Breaking his silence since the referendum, the UK chancellor told a news conference that the result of the referendum was “not the outcome that I wanted” but that authorities were “ready to deal with the consequences”.  As noted earlier, The pound has continued to fall this morning and is down more than 3% against the US Dollar, hitting new 31 year lows below 1.32, while the FTSE 100 was down well over 1%.

Read more at:UK Chancellor Osborne Breaks Silence, Fails To Calm Markets; Says In No Rush To Trigger Article 50

Source: zerohedge.com…

“The Global Economy Can No Longer Rely On Debt” – BIS Warns Central Bank Actions “Have Started To Backfire” – 06.26.16

  • It’s late June which means it is time for the annual warning by the Bank of International Settlements about the growing futility of monetary policy and central bank impotence. Exactly one years ago, the BIS asked “Of What Use Is A Gun With No Bullets?”, in which the BIS said central banks are defenseless against the coming crisis. Well, it underestimated just how far the central banking “magic people” are willing to reach inside their “magic bag of tricks” to preserve the status quo: to be sure nobody at the time expected the ECB to begin buying not just corporate bonds but junk bonds too.
  • Fast forward one year and the song and dance has been repeated, with the issuance of theBIS’ 86th Annual report in which we read that “Easy-money policies and unprecedented monetary stimulus have started to backfire in global financial markets” as Bloomberg summarizes the 130 page report, which is largely full of data and analyses quite familiar to regular readers.
  • In its report, the BIS “says that historically low interest rates and bond-buying programs – which have sent yields below zero on more than $8 trillion of government bonds, a record amount – are causing anomalies in asset values. One example is that small price differences in related securities or assets, which banks traditionally eliminated through arbitrage, are persisting more often.”
  • Monetary policy is running out of room for maneuver,” said Hyun Song Shin, head of research at the BIS, in an interview. “It is not clear how much further stimulus of the real economy can be achieved using monetary-policy tools alone without inviting unwanted distortions.”
  • Like on virtually every occasion since 2013, the BIS on Sunday once again called on governments to reduce their reliance on extraordinary monetary policy for spurring economic growth. “Instead, they should redouble efforts on structural and financial reforms, it said. The stimulus produced by the world’s monetary authorities will approach the limits of its effectiveness, according to the BIS, which was formed in 1930 and acts as the central bank for many of those institutions.”
  • One lament raised by the BIS is one we have heard loud and clear in recent weeks from both Deutcshe Bank as well as Citi:

Read more at:“The Global Economy Can No Longer Rely On Debt” – BIS Warns Central Bank Actions “Have Started To Backfire”

Source: zerohedge.com…

Europe needs united army, EU parliament committee head urges after Brexit – 06.26.16

  • The idea of a common European military headquarters has been revived by the head of the European Parliament Committee on Foreign Affairs, shortly after the UK’s citizens voted in favor of Brexit.
    “We need more cooperation in the European defense policy,” Elmar Brok told Die Welt.
  • The new armed forces could be modeled after the Franco-German model, making European foreign policy much more effective, Brok believes.
  • “We need a common (military) headquarters and a coalition (of EU countries) acting in accordance with the permanent structural cooperation of the EU Treaty. From such a group an EU army could eventually emerge,” said Brok.
  • A united EU armed force would “strengthen the role of Europeans in [global] security and defense policy, make Europe fulfill better its responsibilities in the world and would also achieve more synergies in defense spending,” the MEP said.

Read more at:Europe needs united army, EU parliament committee head urges after Brexit

Source: zerohedge.com…

Europe needs united army, EU parliament committee head urges after Brexit

06.26.16 –   Europe needs united army, EU parliament committee head urges after Brexit

  • The idea of a common European military headquarters has been revived by the head of the European Parliament Committee on Foreign Affairs, shortly after the UK’s citizens voted in favor of Brexit.
    “We need more cooperation in the European defense policy,” Elmar Brok told Die Welt.
  • The new armed forces could be modeled after the Franco-German model, making European foreign policy much more effective, Brok believes.
  • “We need a common (military) headquarters and a coalition (of EU countries) acting in accordance with the permanent structural cooperation of the EU Treaty. From such a group an EU army could eventually emerge,” said Brok.
  • A united EU armed force would “strengthen the role of Europeans in [global] security and defense policy, make Europe fulfill better its responsibilities in the world and would also achieve more synergies in defense spending,” the MEP said.

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Peter Schiff: “Brexit Is Just What The Doctor Ordered” – 06.25.2016

  • Janet Yellen should send a note of congratulations to Nigel Farage and Boris Johnson, the British politicians most responsible for pushing the Brexit campaign to a successful conclusion. While she’s at it she should also send them some fruit baskets, flowers, Christmas cards, and a heartfelt “thank you.“ That’s because the successful Brexit vote, and the uncertainty and volatility it has introduced into the global markets, will provide the Federal Reserve with all the cover it could possibly want to hold off on rate increases in the United States without having to make the painful admission that domestic economic weakness remains the primary reason that it will continue to leave rates near zero.
  • For months the corner that the Fed has painted itself into has gotten smaller and smaller. It continues to say that rate hikes will be appropriate if the data suggests the economy is strong. Then its representatives continually cite (arguably bogus) statistics that suggest a strengthening economy, which cause many to speculate that rate hikes are indeed on the horizon. But then at the last minute the Fed conjures a temporary reason why it can’t raise rates “right now,” but stresses that they remain committed to doing so in the near future. But each time they conduct this pantomime, they lose credibility. Sadly, Fed officials are discovering that their supply of credibility is not infinite, even among those who would like to cut them a great deal of slack.
  • But the Brexit vote saves them from all this unpleasantness. Now when critics question the Fed’s unwillingness to deliver on the suggested rate hikes, given what they believe to be a strong economy, all the Fed needs to do is point to the “uncertainty” that will be in play now that the world’s fifth largest economy is disengaging from the European Union. And since this process is bound to be long, messy, and fraught with uncertainties (as there is no precedent for a country leaving the EU), this will be a handy excuse that the Fed will be able to rely on for years.
  • Brexit could also place severe strains and uncertainties on the global currency markets. The fear of financial losses could encourage investors to seek safe haven assets like gold and, at least for now, the U.S. dollar. Given that there is already much concern that the dollar is valued too highly against most currencies, and that this has created imbalances in the global economy, any surge in the dollar that results from Brexit may have to be fought by the Federal Reserve through lower interest rates and quantitative easing. This would rule out the potentially dollar-strengthening interest rate hikes that they supposedly planned on delivering. So as far as Janet Yellen is concerned, the British have given her the gift that keeps on giving.
  • On another level, the vote in the UK illustrates the fundamental inefficacy of the monetary and financial policies that have been implemented by the world’s dominant central banks and central bureaucracies.