JUNK BONDS FOR OIL UNDER PRESSURE

With oil prices down by over 20% this year, the junk bonds for oil exploration are under major pressure. The tipping point is imminent. The economics of this is explained here.

David Stockman refers to this possibility in this excellent video.  Here is Stockman's Contra Corner website.

He thinks that our economy is on the edge of a major crisis. I am not convinced of this, but if we are talking two or three years out, I agree.

The problem is the yield curve. Always before, it offered a good indicator of recession. It is not now. Short-rates are still low.

He thinks the FED will be called into question during the next crash. I think he is correct. But will the Federal Reserve Act of 1913 be repealed? I doubt it.

Today, only Rand Paul is openly hostile to the FED. The Republicans are Keynesians. So, there is no strong opposition.

The interview is very good on Keynesianism. This outlook is bipartisan. There is no real opposition to the FED or federal deficits. The stock market bubble protects the FED from criticism. Next time when it pops, more critics in Congress will pile on the FED. But will there be enough to force a repeal of the 1913 Act? Don't invest in terms of this scenario.

Reality: there is no Paul Volcker today at the top of the FED. There is also no crisis.

My view is this: there is more criticism of the FED today than in 2007. Ron Paul spearheaded this in the 2007 lead-up to the 2008 Republican primaries. Then the recession hit. On the fringes of politics, there is a growing awareness that the FED's policies are not working well.

We are not crazy. The Keynesians are crazy. They believe in stones into bread, as Mises said in 1948. Read his short article here:  http://mises.org/daily/1840. But 1948 was a long time ago. Mises was not believed then. We are not believed today.

The FED will not be immune next time, but I do not expect Congress to eliminate it. Yellen will call for more power. Congress in terror will grant this, complaining all the way. "We will give you more power this time. But don't let this happen again." She will assure Congress that the FED can get things under control again.

Why the capitulation? Because someone has to buy the government's IOU's. That has been the political bottom line ever since 1694: the Bank of England.

But the Keynesian program is coming unglued in Japan. Europe is not much better. China could also crash. With each cycle, the foundation of fiat money looks less sustainable. But in the meantime, critics of central banks sound utopian.

This article and video originally appeared at Gary North's Specific Answers.

WHAT'S THE RIGHT MINIMUM WAGE?
Thanks to Bob Wenzel.

Which cities will default first in the collapse of the dollar?  

Your money deposited in the banks will no longer be considered money but paper investments.

Sears Closing 100 Stores, Laying Off Over 5,000 Workers

This is stunning.  Sears is scheduled to lay off over 5,000 workers, many before Christmas, to increase bottom line.  I wonder if they've moved, like McDonald's, to more automated services, like automatic check out.  Seems highly unlikely. 

I did not know that Sears owns Kmart.  "The company, which is struggling to reduce costs as its sales dwindle, closed 75 Kmart stores and 21 Sears stores in the first half of 2014."

7 Things the Middle Class Can't Afford Anymore That's quite a headline. It comes from Bob Wenzel's reading of Diana Farrell, former Deputy Director of America's National Economic Council. What are those 7 Things the Middle Class Can't Afford Anymore? 1. Vacations. 2. New Vehicles. 3. Pay off debt. 4. Emergency savings. 5. Retirement savings. 6. Medical care. 7. Dental work. Hard to find disagreement with these. Two of the things that I lament since quitting my driving job in 1986 at $37,000 at UPS is that I could, one, afford a new car every couple of years, and two, go on a couple of nice vacations each year. So at least on those two accounts, she's right, those are things that the middle class can't afford anymore.

7 Things the Middle Class Can't Afford Anymore

That's quite a headline.  It comes from Bob Wenzel's reading of Diana Farrell, former Deputy Director of America's National Economic Council.  What are those 7 Things the Middle Class Can't Afford Anymore?  

1.  Vacations. 
2.  New Vehicles.
3.  Pay off debt.
4.  Emergency savings.
5.  Retirement savings. 
6.  Medical care. 
7.  Dental work. 

Hard to find disagreement with these.  Two of the things that I lament since quitting my driving job in 1986 at $37,000 at UPS is that I could, one, afford a new car every couple of years, and two, go on a couple of nice vacations each year. So at least on those two accounts, she's right, those are things that the middle class can't afford anymore.  

Blockbuster Negative News Out of Asia Concerning Future of the US Dollar

By Simon Black

This morning some of the biggest financial news of the year made huge waves all over Asia.

Yet in the Western press, this hugely important information has barely even been mentioned. (CNBC.com, for example, has yet to report on this story as of 11:45am Eastern...)

So what's the news?

The Chinese government announced that the renminbi will become directly convertible with the Singapore dollar... effective tomorrow morning.

It's clear this deal has been in the works for a while, and it's another major step towards the continued internationalization of the renminbi and unseating of the dollar as the world's dominant reserve currency.

For decades the renminbi has been a tightly controlled currency. It's only been in the last few years that the Chinese government started loosening those controls, primarily in response to the obvious need for a dollar competitor.

The entire world is screaming for an alternative to the dollar and the US government.

Since the end of World War II, the US has been in the driver seat. The Fed essentially sets global monetary policy. Foreign banks are forced to rely on the US banking system. Nearly every nation on earth must hold US dollars and buy US government debt just to be able to trade with one another.

These were sacred privileges entrusted to the US government. And they have been abused time and time again.

The US government spies on its allies. It uses its banking system as a weapon to threaten foreign companies. It fines foreign banks billions of dollars for doing business with countries it doesn't like.

They discredit themselves by continuing to indebt future generations and failing to make tough fiscal decisions.

And the Fed has printed so much money that major foreign institutions are left with no choice but to seek an alternative. Enough is enough.

China is taking the lead in providing the world with another option. And they're not exactly doing this under cover of darkness. These moves have been widely telegraphed, at least to anyone paying attention.

For the last few years the Chinese government has entered into new 'swap agreements' at blazing speed, allowing other nations' central banks and governments to hold the renminbi in reserve.

They've concluded direct trade arrangements (notably with Russia) to settle oil and gas deals in renminbi.

This summer we saw the establishment of a Chinese-led supranational bank intended to compete directly with the IMF.

Just last week the British government issued a new government bond denominated in renminbi.

And now this-- direct convertibility between China and the #1 financial center in Asia, making it possible for ANYONE to trade and hold renminbi through Singapore.

It's so obvious where this train is headed.

But again, this story is hardly covered in the Western press. They're living in a dream world where King Dollar still reigns and the US is the only superpower in the world.

Nonsense. It's imperative to stop listening to the propaganda and start paying attention to facts:

The US government has accumulated more debt than any other nation in the history of the world... and is in a position where they must borrow money to pay interest on the money they've already borrowed.

The Federal Reserve (which issues the US dollar) continues to erode its balance sheet. According to last Wednesday H.4.1 report, the Fed's capital base is a minuscule 1.26% of its total assets.

A year ago it was 1.42%. That was bad enough. But on a proportional basis, the Fed has lost another 11.3% of its capital in the last twelve months.

And according to the Society for Worldwide Interbank Financial Telecommunication (SWIFT), international bank payments denominated in renminbi have nearly tripled in value in the past two years.

These are all objective facts which point to the same conclusion: this current dollar/debt-based system is on the way out.

It's not going to happen overnight, but we're already seeing a slow and orderly exit. And we can see the rest of this trend unfolding years in advance.

Ignoring this could be very hazardous to your financial well-being. And while the Western media might be totally clueless, there are plenty of options for forward-thinking individuals.

·              Consider holding Hong Kong dollars in addition to US dollars. Hong Kong dollars are currently pegged to the US dollar, so the currency risk is minimal. But if the US dollar declines sharply, Hong Kong (controlled by China) could easily de-peg. This mitigates your downside risk.
 

·              Consider trading paper currency savings for productive REAL assets like farmland and private businesses which capitalize on key growth trends.

There are dozens of other solutions out there. You'll be able to find some that are just right for your circumstances.

Thanks to Bob Wenzel