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American Survival Newsletter:
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5/13/2016

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Edited by Alfred Adask
Friday, May 13, AD 2016
 
MARKETS 
 
Between Friday, May 6AD 2016 and 
Friday, May 13, AD 2016, the bid prices for:
Gold fell  1.2 % from $1,287.70 to $1,272.80
Silver fell  2.1 % from $17.44 to $17.08
Platinum fell  2.7 % from $1,078 to $1,049
Palladium fell  2.4 % from $611 to $596
Crude Oil rose  3.9 % from $44.63 to $46.37

US Dollar Index rose  0.8 % from 93.85 to 94.62

DJIA fell  1.2 % from 17,740.63 to 17,535.32
NASDAQ fell  0.4 % from 4,736.15 to 4,717.68
NYSE fell  0.7 % from 10,300.80 to 10,228.00
S&P 500 fell  0.5 % from 2,057.14 to 2,046.61

 
 

"Only buy something that you'd be perfectly happy to hold
if the market shut down for 10 years." --Warren Buffett 

"If the markets shut down for 10 years, what investment would you dare to hold-- 
other than gold"? --Alfred Adask

"Reset" Coming?  What's a "Reset"?

by Alfred Adask

 

Greg Hunter (USAwatchdog.com) recently interviewed Rob Kirby (Kirby Analytics) in a 30-minute video.  During the interview, Kirby predicted a coming economic and/or monetary "reset".
According to Kirby,
 
"Today, we see China, Russia, India and others are moving to protect themselves from the systemic risk of the over-printed dollar.  It's become clear to many that the dollar's world-reserve-currency status cannot last.  It's just a matter of time before the entire currency system will face a radical reset reflecting today's reality."
 
A "radical reset" is coming.  Sounds kinda scary.  But, what, exactly, is a "reset"?
Kirby continued:
 
"Two payment platforms have dominated large-scale settlements in international trade; the European-based SWIFT system and the US' Clearinghouse Interbank Payment System (CHIPS).  China has recently launched its own platform, the Chinese Interbank System (CIPS), which may soon merge with SWIFT." 
"My gut tells me that this will marginalizeAmerica as the main processor of global payments . . .this will embody a total reset, as to which currencywill be the reserve currency.  I suspect that when China merges their CIPS with the SWIFT system, that they will also back their currency with gold."
 
Note that Kirby defines that "total reset" in terms of deciding which currency will be the World Reserve Currency-U.S. dollars or Chinese yuan.    
I agree that changing the world's primary reserve currency from fiat dollars to gold-backed yuan would constitute a kind of "reset".  If that happened, the value (purchasing power) of the dollar would certainly fall. 
Given the opportunity to transact business in a gold-backed yuan, much of the world would flee from fiat dollars and run to do business in gold-backed yuan.  The fiat dollar would be quickly devalued (inflated) and perhaps even destroyed.
But, wouldn't destruction of the fiat dollar be viewed as an act of war? 
Back about A.D. 2000, Saddam Hussein threatened the fiat dollar's global hegemony by selling Iraq's crude oil for euros rather than dollars.  We invaded and destroyed Iraq and hanged Hussein. 
About A.D. 2010, Libya's Colonel Qaddafi tried to establish a gold-based currency for Africa.  Led by the U.S., the West invaded and destroyed Libya and murdered Qaddafi. 
The lesson seems clear.  Threatening the fiat monetary system is serious business that can cause nations to be invaded and leaders to die. 
Therefore, we can legitimately ask, "Would the U.S. government allow China to threaten the fiat dollar without going to war?" 
As you'll read, the answer to that question, might be Yes.  
 

CUTTING THE NATIONAL DEBT

The fiat dollar and National Debt are both dangerous problems.  However, I suspect that government's primary problem is less the fiat dollar-and more the National Debt.   If the fiat dollar died and the National Debt remained, the government would still be in deep do-do.  But if the National Debt could be eliminated-even if it also meant  killing the fiat dollar-the government might be rejuvenated.
I.e., the existing National Debt is too great to ever be repaid.  It follows that any new debt is even less likely to be repaid.  The probability that new debt won't be repaid  inhibits new creditors from buying more U.S. bonds and lending more currency to the government.  Without more, new loans, government will be forced to either cut benefits or raise taxes.  Either way, voters scream.
But if the National Debt could be cut by 50% to 90%, creditors would once again trust the government to repay its new debts and therefore be willing to extend new loans to Uncle Sam.  With a revitalized stream of credit, government could continue to provide substantial benefits without raising taxes . . . . and the voters would say, "Yaaay!" and they'd love their politicians and reelect the incumbents-which, from the politicians' perspective, is what "good government" is all about.
 

HOW TO REPUDIATE

Given that the existing National Debt is already too great to ever be repaid in full and is therefore restricting government's ability to borrow more, government should welcome any tactic that reduced the size (purchasing power) of the National Debt by, say, 50% to 90%. 
For example, the President could step up to the microphone and expressly declare that Social Security, welfare, subsidy and government pension payments would be reduced by 50% or even terminated.  That's an "express repudiation" of debt.  It's like pulling a bandage off a wound.  It's quick but painful.   The result would be much political screaming and chaos.
A second, stealthier way to repudiate debt is by hyperinflation.  It's not as instantaneous, obvious or immediately painful as "express repudiation".  Plus, since most people don't really understand hyperinflation, government could blame hyperinflation on other governments or institutions.  The public might be angered by hyperinflation, but they'd also be confused and therefore less likely to riot or lynch the politicians.
Therefore, I believe that government would rather sacrifice the fiat dollar to hyperinflation-if doing so would destroy most of the National Debt-than engage in
express repudiation.
Either way (by means of hyperinflation or by means of express repudiation), I suspect that government's object is to allow government to go deeper into "new" debt.  I'm saying that government may seek to eliminate old debt in order to go into new debt.
Yes, I know that sounds like an absurd hypothesis, but remember that:
 
1)      We have a debt-based currency; and,
2)      We live in a debt-based economy. 
3)      The U.S. and global economies run on debt
4)      It's at least possible that if we can't or won't go deeper into new debt, our debt-based economy could collapse.  I.e., we need more debt to fuel our debt-based economies.
 
So, it's not completely irrational to suggest that, if the existing National Debt is so great that it can't be repaid and therefore creditors won't lend any more currency to government, then the existing debt must be repudiated sufficiently to restore creditor confidence and allow government to borrow more funds and create more new debt. 
 

WHY "NEW" DEBT?

Why go into "new" debt?  What's wrong with the "old" debt?
I don't know, but I'm going to speculate that, under fractional reserve banking, each new debt creates a new, paper debt-instrument that can be stored in a bank vault and used as new collateral to justify lending more credit to the the public.  Under fractional reserve banking, banks can lend nine dollars in credit to the public for each dollar it holds as a debt-instrument (collateral) in the bank's vault.  The more debt-instruments held in its vault, the more credit the bank can lend to the public.  The economy is "stimulated" by the easy credit based on new debt instruments deposited into bank vaults.  Fractional reserve banking creates a need for new debt-instruments (collateral) and thus a need for new debt.
"Old" debt, on the other hand, is no longer taking advantage of the 9X multiplier found in fractional reserve banking.  "Old" debt created "9X" economic stimulation when it was new, but does not create more "stimulation" as it ages. 
Under fractional reserve banking, new debt is stimulating.  Old debt is burdensome.  To stimulate our debt-based economy with the 9X multiplier found in fractional reserve banking, you need to first create more new debt.
 

WE'RE HERE TO HELP YOU!

Interestingly, since the Great Recession of A.D. 2008, government has lowered interest rates to near zero (ZIRP) and engaged in massive currency printing (QE) in hopes of getting the public to borrow, create more debt, create more debt-instruments to be used as bank collateral and thereby stimulate the economy.  That strategy hasn't worked very well.  The public has generally refused to plunge deeper into the new debt that would ultimately "stimulate" our economy.
Government picked up the slack by going so deeply into new debt that the National Debt  doubled in the past seven years.   You'd suppose that an additional $10 trillion in National Debt would be enough to stimulate our economy back into a recovery.  But it hasn't.
The problem, now, is that government has gone so deeply into debt (doubled in seven years), that creditors no longer believe government can repay existing debt and therefore won't lend government more currency.  Without access to more credit, government must either cut benefits or raise taxes.  In either case, the public will howl and vote incumbents out of office.  That, as I've already suggested, constitutes "bad government" and won't be tolerated by our politicians.
To stimulate the economy, government needs to somehow reduce the "old" National Debt enough to allow government to enter into "new" debt.
 

GOLD-BACKED YUAN CAUSES HYPERINFLATION

All of which suggests that the only civil way to kick-start our debt-based economy is for government to eliminate most of the existing debt so it can create more "fresh" debt and new debt-instruments capable of being used as bank collateral. 
I'm not arguing that this hypothesis is true.  I'm only saying that it's interesting and offers a different perspective on why the U.S. might allow (even encourage) China to establish a gold-based yuan.
After all, the fiat dollar (like all other fiat currencies) is doomed to eventually die in a super-nova of hyperinflation.  The fiat dollar has already lost over 95% of its value (purchasing power) since A.D. 1971, so how much longer can fiat dollars survive before they lose the last 3% to 5% of their former purchasing power and become completely worthlessness? 
Rob Kirby fears that bankers will precipitate WWIII to protect the fiat dollar.  But, why go to nuclear war in order to protect a fiat currency that's already a "dead dollar walking"? 
Instead, why not allow China to issue a gold-backed yuan that slowly supplants the fiat dollar as World Reserve Currency?  Without World Reserve Currency status, the fiat dollar's value would slowly slide into hyperinflation, wipe out much of the National Debt, and cause political and economic chaos.  That would be bad. 
But if it's all likely to happen anyway in the next few years, so why keep kickin' the can down the road?  Why not face the inevitable and let the dollar die?  After all, government could shed some crocodile tears and blame the dollar's demise on China-and most people would probably fall for that deception.  Incumbents could be reelected.
Thus, a gold-backed yuan from China could help the U.S. government evade political liability for a dying fiat dollar.  Plus, if a gold-backed yuan helped kill the fiat dollar, the dying dollar would take much of the National Debt with it
My point is that, rather than initiate a nuclear WWIII, America's overly-indebted government could achieve a similar result (getting rid of the "old" National Debt so it can go generate "new" debt) if they secretly allowed (even encouraged) China to establish a gold-based yuan.  As the yuan slowly became the primary World Reserve Currency it would thereby cause the dollar (and National Debt) to hyperinflate into oblivion. 
Yes, yes-I know the whole hypothesis sounds absurd.  Even to me.  But I can't get past the facts that we have a debt-based currency and a debt-based economy.  Those facts imply that, for some strange reason, we need ever more debt.  If so, perhaps my hypothesis isn't as absurd as it seems. 

 

RESETS ERASE DEBT

All of which brings me back to Rob Kirby's prediction that a "radical reset" is coming.
It wouldn't be the first. We've had them in the past.   
For example, in A.D. 1933 (in the midst of the Great Depression somewhat similar to our Great Recession) when we still had real, gold-backed money, the government caused a "reset" by changing the value of the domestic dollar from $20/ounce of gold to $35/ounce.   By doing so, they raised the price of gold by 75%, subjected the paper dollar to 43% inflation/devaluation, and reduced the value of the National Debt (denominated in gold-backed dollars) by 43%.  Investors who held US bonds were robbed of 43% of the original value of their investments.
Later, circa A.D. 1970, government raised the price of gold in relation to foreign-held dollars from $35 to $42.  Result?  An additional 20% inflation-and a 17% reduction in the value of however much of the National Debt (still denominated in gold) that was owed to foreigners.
In both of the two major dollar "resets" of the 20th century, the dollar's value in relation to gold was devalued (inflated)-and the National Debt was thereby reduced
That suggests that a-perhaps the-primary purpose for those two "resets" was to reduce the real purchasing power of the National Debt, rob government's "old" creditors, and free the government to go deeper into new debt.
 
When the price of gold was $20/ounce in A.D. 1933, it was easily "reset" to $35/ounce.  Later, the $35/ounce price was easily "reset" to $42/ounce.  Those "resets" were easy since paper dollars were still backed by law to greater or lesser degree by a fixed quantity of physical gold.  With the stroke of a pen the President or Congress could change that arbitrary quantity of gold backing each dollar.
However, in A.D. 1971, President Nixon closed the "gold window" and stopped redeeming foreign-held paper dollars with any amount of physical gold.  Since then, the paper dollar has had no legally-defined relationship to physical gold.  The fiat dollar became a "unit of account" (like Monopoly Money) rather than a "unit of exchange" (like ounces of gold).  The fiat dollar became a "floating" currency with no fixed value.   It's only value is in relation to other fiat currencies that are also "floating" (constantly changing their relative values).
Rob Kirby's recent definition of "reset" (changing the World Reserve Currency from fiat dollars to Chines yuan) is different from currency "resets" of the past.  The essence of that difference is seen in the following question: 
 
"How can you "reset" or change the value of today's fiat dollar, since it has no fixed value to begin with?"
 
We can't reset the value of the dollar from $20 to $35 because there's no fixed "$20" to begin with.  What does the word "reset" mean in a world where the values of all fiat currencies are constantly "floating" and without fixed values?
OK-even if we can't necessarily define what a modern "reset" might be, we can still look back to A.D. 1933 and A.D. 1970 to see what "resets" did.    What did those "resets" do?  They reduced the value (purchasing power) of the National Debt.   
We can speculate that, if there's going to be another real "reset"-even if it can't be achieved by a mandatory change in the value of the fiat dollar-the result will be another significant reduction in the value of the National Debt
We can therefore argue that, in practice, the modern term "economic reset" means significant repudiation of governmental debt.
 

WWIII

As previously mentioned, Rob Kirby warned of WWIII:
 
"When banks have nothing else to do, they take us to war.  A world warAre we going to have a nuclear war?"
 
It's conceivable that the Powers/Bankers That Be might decide to start a "small" world war that scares people so badly that they willingly dive deeper into debt to defend their lives against their enemies.  There's little in life that creates new debt faster than war.
In fact, if a continuous supply of new debt is essential to sustain our debt-based economy, could that explain why we seem to be embroiled in one "war" (Korea, Viet Nam, Cold War, Iraq I & II, Libya,  Syria, War On Terror, etc.) after another?    Continuous War For Continuous Peace?
Plus, we never win wars anymore.  Our modern wars seem to drag on endlessly without definitive objectives, victory or meaning.  They accomplish nothing-other than to increase the National Debt
Perhaps that increased debt is just coincidental-an unintended consequence of war.  Still, given that we live in a debt-based monetary and economic system, maybe our endless wars don't create more debt by accident.  Maybe they're intended to create more new debt to produce more new debt-instruments to authorize 9X fractional reserve banking to prime the economic pump.
Endless War for Endless Debt for Endless Economic Stimulation?
Is that real reason for war?  To increase the National Debt in order to somehow "feed" and stimulate our debt-based monetary and economic systems?  I won't yet say that's true, but there's enough circumstantial evidence to justify that suspicion.
If that suspicion is true, it would follow that we could run up our debt by bullying smaller nations like Viet Nam and Iraq but without sustaining any real damage to the United States. 
But, today, who's left for us to fight?  Russia?  China? 
Can we risk nuclear war to go deeper into debt?  What's the point if the result is the destruction of the debt-based economy and infrastructure that the "Powers" are presumably trying to stimulate, control and exploit?  What good is the creation of more debt if the cities of New York, Chicago, Houston and Los Angeles are vaporized?
More, how much debt could a nuclear war produce?
Probably not much.  Unlike our endless "police" actions in Korea, Viet Nam and Iraq, nuclear world war won't drag on for months and years.  WWIII could start tomorrow at noon and be over before the rush-hour traffic (if there was any left) started at 5 PM. 
To create maximum new debt with minimum destruction, you need a "police action" in some foreign, impoverished jungle or desert that can be dragged on for years.  During each of those years, the government could generate more and more debt and debt-instruments usable as bank collateral.
However, a real WWIII could start and end so quickly that the resulting creation of debt would be insignificant while the destruction of life and infrastructure would be horrendous.
If it were true that a primary object to modern warfare is the creation of more debt to feed our debt-based monetary and economic systems, a nuclear WWIII makes no sense since it would destroy both debtors (the great unwashed) and creditors (the banking elite) and produce more craters than debt-instruments.
There's a conspiracy theory that, for centuries, bankers have fomented small wars to create more debt, more profits and more power for the banks.  Perhaps that's been true in previous wars, since bankers could sit safely on the sidelines while they counted their profits.  But, when it comes to nuclear war, that conspiracy theory breaks down since there'll be no profits, no safe sidelines, and even the bankers might get killed.   
Although WWIII is possible, I'd bet against anyone (other than a madman) intentionally starting a nuclear war in hopes of increasing his wealth, power or the world's debt.
 

CONCLUSION

There's going to be another "reset".  However it's done, the next "reset" will repudiate much of the existing National Debt and/or might create a national emergency that's sufficiently scary to stampede Americans into going deeper into debt.  Either way, the "reset" will allow government to create new debt and new debt-instruments that can be held by banks as collateral under fractional reserve banking to allow the creation of more credit to stimulate the economy.

It's remotely possible that that "national emergency" might be a WWIII.  But it's more likely that the emergency could be China's establishment of a gold-backed yuan.   I guarantee that a gold-backed yuan could be blamed for creating a national emergency for the U.S..
 Of course, our government will shout that it's "shocked, shocked I tell you!" to discover that the "dirty, treacherous" Chinese would explode our perfectly-fine fiat-dollar Ponzi scheme by issuing a gold-backed yuan.  

But would government cry real tears if China issued a gold-backed yuan and the resulting hyperinflation destroyed the fiat dollar and also erased most of the value of the National Debt?
I don't think so.

Such a "reset" would be messy and painful-but not as painful as a nuclear WWIII.
Plus, for politicians, escaping the National Debt would be cause for celebration.   They could go back to borrowing more currency to provide more "benefits and circuses" and economic "stimulation" without raising taxes.   They could even hang onto their heads and their cushy jobs. 
Such a "reset" would definitely constitute a victory for "good government".






Commentary: Ominous Portents
 
 
Doug Noland is not a financial advisor nor is he providing investment services. This blog (Credit Bubble Bulletin) does not provide investment advice and Doug Noland's comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to buy or sell a stock, option, future, bond, commodity or any other financial instrument at any time.
 
 
Friday headlines from Bloomberg: "Retail Sales Rise Most in a Year, Marking U.S. Consumer Comeback" and "Consumers Turn Out to Be U.S. Growth Lifeline After All." Ironically, U.S. retail stocks (SPDR S&P Retail ETF) were slammed 4.3% this week, trading back to almost three-month lows. Poor earnings were the culprit. Macy's sank 15% on Wednesday's earnings disappointment. Kohl's missed, along with Nordstrom and JC Penney.
 
It may be subtle, yet it's turning pervasive. Support for the burst global Bubble thesis mounts by the week. With stated U.S. unemployment at 5.0% and consumer confidence at this point still in decent shape, spending has enjoyed somewhat of a tailwind. Yet the overall U.S. economy has begun to succumb to a general Credit slowdown. Despite the bounce in crude, the energy sector bust continues to gather momentum. The tech and biotech Bubbles have peaked. Cracks have quickly surfaced in fintech. There are as well indications that some overheated real estate markets across the country have cooled. Whether it is from China or Latin America or Europe, the rush of "hot money" into U.S. real estate and securities markets has slowed meaningfully.
 
The downshift of Credit and "hot money" flows helps explain the weakness in both corporate profits and the overall stock market. And with stock prices down year-on-year, Household Net Worth has essentially stagnated. Keep in mind that Net Worth inflated from $56.5 TN at year-end 2008 to a record $86.8 TN to close 2015. Over the past six years, Net Worth increased on average $4.76 TN annually. Such extraordinary inflation in household perceived wealth supported spending - which bolstered profits and underpinned asset price inflation and more spending.
 
Let's return to the irony of positive retail sales data and negative earnings. It's easy to forget that retail had been significantly overbuilt during the mortgage finance Bubble period. The worst of the shakeout was avoided as Household Net Worth inflated from 384% (2008) to a record 484% (2015) of GDP. And while inflating perceived wealth boosted spending, zero rates and manic financing markets ensured another period of booming retail investment (bricks and mortar and Internet). There has, as well, been extraordinary growth in various services, certainly including telecommunications.
 
In contemporaneous analysis during the Great Depression, there was insightful debate questioning whether over-investment or malinvestment was primarily to blame. Well, there was ample blame to go around. And this gets back to the fundamental thesis: It was not insufficient "money" after the 1929 Crash that was the root cause of economic depression, but instead gross excess of "money," Credit and speculation throughout the Roaring Twenties.
 
A few weeks back I noted analysis that placed excess global energy sector investment at several Trillion. And this week from Bloomberg (Agnieszka De Sousa), "Glencore CEO Lists Mining's Mistakes After $1 Trillion Spree." And how many Trillions of over/malinvestment were spent in recent years throughout "tech," biotech, pharmaceuticals and retail? Tens of Trillions throughout China and Asia more generally? Downward price pressures globally on so many things should be no mystery. And by now it should be indisputable that so-called "deflationary pressures" are not the consequence of insufficient "money."
 
In the name of "shortfalls in aggregate demand," central bankers have flooded the world with "money" and Credit. Predictably, this unprecedented global monetary inflation has wreaked havoc on financial market behavior and investment patterns, while spurring self-reinforcing asset inflation and Bubbles. And aggregate demand? It is not - will never be - "sufficient". As we've witnessed, Credit Bubbles redistribute and destroy wealth. Bubbles distort investment and spending patterns, which in the end ensures too much of a lot of stuff that the general population either cannot afford or does not desire.
 
Newfound retail industry worries are intriguing. Energy - and even tech and biotech - sector excess was somewhat conspicuous, but relatively narrow in focus. Retail malinvestment is much more systemic - it's virtually everywhere. Zero rates, the yield chase and QE flooded all facets of the sector with cheap finance. "Money" flowed freely into retail-related real estate investment trusts (REITs). Retail property prices inflated as "cap rates" collapsed. The upshot was additional construction and more retail. Meanwhile, booming property values and easy finance ensured that a lot of retail that should have gone bust didn't.
 
While on the subject of busts, Lending Club dropped 50% this week. Count me skeptical of the incredible virtues of "marketplace lending," "peer to peer" and "fintech" more generally. How much valuable innovation is available after decades of radical experimentation - not to mention thousands of years of lending? Yet every boom cycle greets financial innovation with boundless enthusiasm.
 
I do appreciate that few businesses enjoy the capacity to grow accounting profits as rapidly as lending to those with difficulty borrowing from traditional sources/channels. Lenders can charge high rates, ensuring a profits bonanza so long as rapid loan book growth is maintained. Minimal provisions for future loan losses can be justified, with the percentage of seasoned loans turning sour remaining small in comparison to (rapidly expanding) total loans. But ballooning growth in loan books requires that lenders retain ready access to funding markets. Telecom debt in the nineties and subprime in the 2000s come to mind. It's amazing how long ridiculous lending crazes can endure - and it's equally amazing how abruptly the "money" spigot can be shut off.
 
After last week's drubbing, global financial stocks saw little relief this week. U.S. bank stocks were down 1.6% Friday, more than erasing the modest gain from earlier in the week. Bank stocks are now down 9.7% year-to-date, with the broker/dealers losing 12.7%.
 
Globally, Italian banks sank another 2.9% this week, increasing 2016 losses to 36.9%. European bank stocks were volatile but ended the week little changed (down 22.1% y-t-d). The Hang Seng Financials sank 2.5% this week, increasing 2016 losses to 17.8%. It's worth noting that the Shanghai Composite dropped 3.0% this week, increasing its y-t-d decline to 20%. China's ChiNext ("innovative and fast-growing enterprises") Index was clobbered 4.9%.
 
May 9 - Reuters (Samuel Shen, Pete Sweeney and Kevin Yao): "China may suffer from a financial crisis and economic recession if the government relies too much on debt-fueled stimulus, the official People's Daily quoted an 'authoritative person' on Monday as saying. The People's Daily, official paper of the ruling Communist party, in a question and answer interview quoted the person as saying excessive credit growth could heighten risks and trigger a financial crisis if not controlled properly. 'Trees cannot grow to the sky. High leverage will inevitably bring about high risks, which could lead to a systemic financial crisis, negative economic growth and even wipe out ordinary people's savings,' the person... said in response to a question on whether stimulus should be used in future economic policy. 'We should completely abandon the illusion of reducing leverage by loosing monetary conditions to help accelerate economic growth.'"
 
China's "authoritative person" sounds like he really knows what he's talking about. Chinese officials face a quite serious dilemma. They've inflated history's greatest Bubble and they apparently have come to appreciate that the current policy course is unsustainable. Housing Bubble to stock market Bubble to commodities Bubble to runaway Credit Bubble. At this point, it seems completely reasonable to me that Chinese officials recognize that there really is no alternative than to rein in destabilizing Credit excess. I doubt they appreciate the complexities, myriad challenges and extraordinary risks that await.
 
May 13 - Bloomberg: "China's broadest measure of new credit rose less than expected last month, suggesting that the central bank is starting to temper a flood of borrowing amid warnings from officials about potential side effects of the debt binge. Aggregate financing was 751 billion yuan ($115bn) in April..., below all 26 analyst forecasts... New yuan loans were 555.6 billion yuan, compared with the median estimate for 800 billion yuan... 'Policy makers have started to think again and are holding back after injecting too much liquidity in the first quarter,' said Shen Jianguang, chief Asia economist at Mizuho Securities Asia Ltd... 'I expected a switch in policy, but didn't expect it to come so soon.'"
 
After a spectacular - and historic - $1.0 TN of Q1 Credit growth - total "social financing" fell to $115 billion in April. Was this abrupt slow-down policy-induced? What can be expected from Credit growth going forward? These are incredibly important issues with global ramifications. Confusion abounds. Do policymakers have a cohesive plan - or are we witness to epic floundering? Is Beijing unified or is dissension building? The week saw more air released from China's commodities Bubble.
 
May 13 - Wall Street Journal (Biman Mukherji): "China's steel and iron-ore futures prices tumbled again as renewed worries about excess supplies sent traders rushing for the exits. Iron ore ended Friday down 5.2% at 363 yuan ($55.68) a metric ton, steel rebar down 4.6% at 2,030 yuan a metric ton and hot-rolled coil down 4% at 2,195 yuan a metric ton. For the week, iron-ore futures and steel-rebar futures... both dropped 13% and hot-rolled coil fell 12%, bringing the losses since the April 21 peak to the neighborhood of 25%."
 
The week saw little respite for faltering EM. South Africa's rand sank 3.5% to a six-week low. The Mexican peso dropped another 1.7%, the Chilean peso sank 3.9% and the Colombian peso declined 1.2%. Rising instability had the Turkish lira falling another 1.5%, with Turkey's stocks down 0.7%, "longest rout since December..." With Brazilian President Dilma Rousseff suspended while awaiting impeachment proceedings, Brazil's currency declined 0.9%.
 
Returning to the U.S. and the burst Bubble thesis, it's worth nothing that the Transports sank 3.0% this week to two-month lows, having now given back all 2016 gains. Copper prices dropped 3.5%, trading to two-month lows. Ten-year Treasury yields sank eight bps to 1.70%, the low yield since January's market tumult period. The bond market is just not buying into Fed talk of multiple rate rises this year. Instead, bond yields lend strong support to the view of latent U.S. and global fragilities. For me, the backdrop is reminiscent of previous early-stage deflating Bubbles. A Friday Reuters article certainly brought back memories - Ominous Portents.
 
May 13 - Reuters (Sharon Bernstein): "California Governor Jerry Brown... is expected to amend his proposed $170.7 billion spending plan for the next fiscal year in the wake of unexpectedly low tax revenues. In January, Brown proposed a new state budget that increased public spending on education, healthcare and infrastructure in an indication of the state's continued rebound from years of economic doldrums. But earlier this week, state officials said that tax revenues for the first four months of the year were $869 million below projections, due in large part to unexpectedly low income tax revenues in April, which were more than $1 billion below expectations."
 
 
The Credit Bubble Bulletins are copyrighted. Doug's writings can be reproduced and retransmitted so long as a link to his blog is provided.  (see above link)





The Impossible Still Happens in America
BY ADMIN, Laurie Roth, ON MAY 12TH, 2016
 
 
The very idea of creating America was first a hope born out of oppression, stress and desperation. That hope soon translated to a vision, a courageous plan, then faith in action. Our framers trusted in the living God to make it so. From Columbus, to the battles and breakthroughs along the way, it was obvious to all that God's miraculous hand was on our nation, its blueprint and freedom loving character.
America was living and growing 'the impossible dream.' It broke all the rules and found that dreams really can and do come true. God really does guide and protect while building up His own.
America has been hit by the school bully one too many times
Our country has been beat down to the ground and forced by Obama and his sellouts to eat his legacy of shame and destruction. We are constantly to be ashamed of being American - Bad flag - Bad patriotism. That is arrogant and leaves illegal aliens and others from foreign regimes out - Bad us.
We are forced to watch Obama crush then remake America and its treasured traditions and pillars. So far in his grab bag we see
  1. 1.           Shrink and turn the military into an Obama and gay social experiment
  2. 2.           Destroy the best health care system on earth
  3. 3.           Seize and rewrite all education - Reinvent our history, crush our Judeo-Christian values and violate parental rights
  4. 4.           Crush the best health care system on earth
  5. 5.           Promote and fund the flood of illegal aliens through our gates while transporting them to America's cities
Obama has clasped hands with the New world and International order while reaching out his other hand to radical Islam, its intentions of conquest and Satan himself. Sometimes, it seems as though America is over. Is our recovery and future really impossible and will we come back a zombie or Frankenstein creature?
Remember, we are the impossible country and impossible dream. Now, in response to millions of prayers, belief and guts...the impossible God is about to part the seas again for America. I believe that has everything to do with the absurd notion that a loud mouthed billionaire who loves America, freedom and God emerges to rattle the cages of the establishment GOP and clock them upside their sell out heads. No one is perfect, and neither is Trump, but he is brilliant, actually loves our country and plans to make us first again instead of last and ashamed. He understands all kinds of deals; personality styles and gets how to close the deal and open the doors again.
Now, watch America as Trump takes on the 'call girl' of evil and sell out herself Hillary Clinton in the general election. The water will part and only one of them will get across to actually do the work of God and the people. My vote and belief is Trump will have dry shoes and Hillary will be dripping wet, lying on the ground with smeared Mascara dripping down her face. Naturally, Bill will try and speak on Hillary's behalf probably to a coffee house of 3 people.
America voted right through the primaries. We must vote right, pray and believe through the General election. Focus and get excited!





HEALTH
WHAT IS MYCOPLASMA?
According to the CDC, they are reporting the identification of new bacteria. The new bacteria are called mycoplasma and they report they've currently identified 17 new species. This bacteria has characteristics and one of them is it is extremely tiny (called intermediate size bacteria) and scientists think it's related to a number of human diseases. This bacterium does not always respond to antibiotic treatment. Therefore, what can we do to protect ourselves against this tiny enemy which has the potential to complicate health? We will need a strong, healthy immune system to create an antibody defense. Let's learn about this and our options in dealing with it.
 
LINKING-UP DISEASE
According to the scientific research, mycoplasma may be the culprit for conditions such as walking pneumonia, inflammation-type disease and conditions that mimic influenza.
 
MYCOPLASMA CYCLE
Scientists claim that human society encounters heavy cases of mycoplasma-bacterial diseases every 4 to 8 years. Infected people usually recover without any residual effects. However, young children with immature immune systems and the elderly who have weak immune systems have a harder time rebounding from these infections.
 
SNEAKY BACTERIA
The research seems to point to the tiny bacteria as having the ability to take advantage of any weak area of the body. Think of the bacteria as the cockroaches of infection. If they can scanter in any nook and cranny and wreck havoc it will.  The next time you experience a urinary tract infection, or any inflammation in the genital region, the scientist think mycoplasma could be the cause. They also think the tiny bacteria are linked to sexually transmitted diseases. The research on the colonies of bacteria associated with STD's is also known to bring complications. For instance, infants born to women with STD's can contract the disease and the tiny bacteria contribute to complications of pneumonia, lung diseases and other infections. So, scientists are thinking that the tiny bacteria can make a disease or infection worse or ignite disease complications.
 
STATS
The CDC tells us that 2 million Americans develop a mycoplasma form of pneumonia annually and 100,000 of them will be hospitalized. The mortality rate is low for healthy individuals. A majority of the mortality cases involve the elderly and those with some type of blood disease (sickle-cell or lupus). The mycoplasma bacteria can target the age group between the ages of 5 to 40. The species of mycoplasma bacteria is contagious and spread through bodily fluids. People who have the complication of mycoplasma bacteria are sick from 1 to 4 weeks. People who allow their immune system to create an antibody will have life-long protection from the strain. Some scientists state such an antibody will not provide life-long immune protection if the bacteria mutates. However, the immune system has adaptive cells which can quickly manufacture a new antibody based on its previous information of the bacteria. Using antibiotics or immune suppressant drugs (HIV and transplant patients) can experience a more difficult time overcoming the bacteria and patients will have no ability to create an antibody.
 
HOW TO TELL...
How would you know if you have a mycoplasma complicated infection? We're told that symptoms develop gradually and in a majority of the cases patients also have flu symptoms with the disease. They complain of sore throat, headache, fever, cough and chills. In other cases patients will also have earache, eye pain, muscle aches and weakness, stiff joints and mobility problems, rash, swollen neck glands and breathing problems. In the case of the disease called mycoplasma walking pneumonia, patients can experience either a mild or severe case of the disease. Physicians need to culture the disease to truly identify if it is a mycoplasma-type and in the case of walking pneumonia a chest x-ray can assist in the diagnosis. The problem is the mycoplasma does not easily grow cultures for testing fast enough. Usually it takes a few days to culture organisms but mycoplasma takes much longer to culture and therefore culture tests are rarely ordered.
 
MEDICAL TREATMENTS
Usually medical doctors will prescribe antibiotics. However, a majority of people with healthy immune systems eventually get over the infection without drugs. Symptoms usually resolve themselves within 4 weeks; however the lingering symptoms of a dry cough and fatigue can hang on for another month. Be very careful with how you treat mycoplasma infections. In some instances prescribed medications may be necessary and in other instances can make the condition worse. According to the British website netdoctor.com, a prescription of antibiotics for a cough following a bout with a cold could promote the tiny bacteria to create a more severe respiratory condition. In one case, a patient experienced a bad cold, followed by a cough and loss of voice. Antibiotics (erythromycin) were prescribed and the patient ended up needing a steroid inhaler (flixotide) in order to breathe. The patient was given another round of antibiotics and told that the steroid inhaler will most likely be a life-long treatment. Doctors are assuming that patients have a mycoplasma bacterial infection when the patient does not respond to treatment within a timely manner. In many cases where a cough is present the diagnosis may be atypical pneumonia. The mycoplasma bacteria are very small bacteria which lacks a cell wall. Therefore, it is unaffected by antibiotics designed to attack the cell wall such as penicillin and beta-lactam antibiotics.  When the antibiotic drugs ending in "omycin" fail to work, doctors will prescribe tetracycline drugs (can turn your teeth irreversibly gray). Also, steroid inhalers for lung complications are prescribed. The problem with steroid inhalers is they can scar lung tissue creating another pulmonary disease.
 
COMPLICATIONS
For the most part the elderly are more at risk of complications of severe respiratory distress. There are also some rare complications that can crop up such as; pericarditis (inflammation of heart sac), anemia (low red blood cells), nervous system disease (Guillain-Barre syndrome) or encephalitis or meningitis (inflammation of brain or brain lining & spinal cord). 
 
PREVENTION MEASURES
The spread of mycoplasma bacteria can be reduced with hand washing, avoid sharing eating utensils, drinking cups or food. Follow safe practices with regard to intimacy as 50% of sexually active people already have some form of mycoplasma bacteria infection.
 
PATIENTS TURNING TO OPTIONS
Lately I've gotten requests to cover this health problem and what I'd do if I had a mycoplasma bacterial infection. According to the research, you can assume you have a mycoplasma bacterial infection if it is hard to get rid of after many weeks and especially if doctors roll out the anti-inflammatory steroids. Personally, I avoid the antibiotics and steroids and prefer to use herbs that can assist and strengthen the immune system and also reduce inflammation. I encourage people to get rest and resist the pressure to return to work or school prematurely. Getting adequate rest is a huge component to helping the body eradicate disease. In the case of mycoplasma bacterial infections, three days is not enough rest before resuming a normal routine. It may be necessary to obtain a doctor's excuse regardless of your treatment plan.
 
 
MY HERB PICS
There are many herbs at our disposal and here is my list what I'd use to clear mycoplasma bacteria. To counteract the fatigue I would supercharge the body with whole-food vitamins, minerals, amino acids and protein from organic plants in the Body Foundation Food Mix. I would also use either the American or Siberian Ginseng tincture to support the immune system and the filtering organs to eradicate the pathogens quickly. Ginseng is also very valuable to also reduce fatigue especially if dealing with a long convalescence.  If the mycoplasma bacteria is causing a respiratory issue, I'd use the Pneumonia Kit and this kit also has an herb formula to help dilate the bronchial for easier breathing and removal of any congestion. If there is a persistent dry cough, I'd add the Thyme tincture. For any discomfort or inflammation add the herbs in the Pain Anti-inflammatory tincture. Echinacea root is also my choice for immune boosting and there are several formulas which include this herb at Apothecary Herbs. You will find all these tools at Apothecary Herbs. Call or order online any of the products mentioned at http://www.thepowerherbs.com. Apothecary Herbs toll free 866-229-3663, International 704-885-0277, where your healthcare options just became endless. Free catalog and money saving coupons on their web site.
 
Source:




 

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