#BubbleEconomics

[roguenewsdao]

The Adversaries Are Wall Street and London's City — Warnings of a Financial Crash in 2018

We need to break up the Wall Street banks fast, before that crash can happen, and create real value and productivity by putting — not $1 trillion — at least $2-3 trillion in new Federal credit into building new national infrastructure at the highest level of technology. That includes a high-speed rail network, as quickly and efficiently as nations like China and Japan build it. It includes advanced nuclear technologies, and getting NASA back all over the Moon and around it, and fusion power technology so that we can go to Mars.

The Treasury Secretary and Wall Street have sold President Trump the idea that the U.S. economy is in a big recovery. But why is the dollar way down against other major currencies in 2017, and still falling after tax cuts and interest rate increases? Why is the death rate still rising in America, life expectancy still falling? Why did opioid overdose deaths likely reach an ungodly 70,000 in 2017, including hundreds of people who died of overdoses while at work? Why, the last time corporations got to bring back overseas money at a super-low tax rate in 2005, did they spend 95% of it on buying stock shares and giving dividends? What followed shortly thereafter — prosperity, or a global financial crash?

President Trump's recovery mistakes make it harder, now, to get the real rebuilding of American's broken infrastructure which he wants, and will call for in that State of the Union. American activists now have to make that happen: To fix what, 65 years ago, President Eisenhower called "the appalling inadequacies to meet the demands of catastrophe or defense", which are seen again now in hurricane destruction, power failures, uncontrolled fires, train wrecks. It takes a lot of new federal credit, and EIR founder Lyndon LaRouche has defined how to do that.

The President is even more sore beset by geopolitical thinking, which requires overseas adversaries, the defeat of which by war or otherwise must be the measure of American "winning." Will he confront China on "trade"? China is building great infrastructure projects worldwide and working to eliminate poverty including in the United States, where its investments are giving hope to Governor Justice of West Virginia, our third-poorest state.

Our job by that Jan. 30 is getting the President, and that, not do-nothing, but know-nothing Congress to join the United States to the Belt and Road Initiative, China's "New Silk Road." Then we can sing, like the old song,

"Should geopolitics be forgot And buried for all time? Should war and plunder be forgot, For the aims of all mankind?

"For all of mankind, my jo, For all of mankind, Let war and plunder be forgot For the aims of all mankind!

See also from Executive Intelligence Review (EIR):  Exposed Mueller, DOJ Bias Divide Republican Party; Graham Acts   

Warnings of Financial Crash in 2018 from LaRouchepub.com

Jan. 1, 2018 (EIRNS)—Morgan Stanley’s research department anticipated a crash of the corporate debt bubble in 2018, in an end-of-year research note circulated Dec. 30. The NASDAQ website summarized the Morgan Stanley report as follows:

"The research team [of Morgan Stanley] now takes a very gloomy view of the credit markets. The bank says that corporations have issued much too much debt, especially because they used the cash to buy back shares; and with rates and yields likely to rise, this could put many in trouble. Apple is one of the companies cited as at-risk. ‘Markets expect a seamless unwind of quantitative easing. We don’t.’ MS expects investment-grade markets to be hit just as hard as junk debt markets."

Banking historian and former investment banker Nomi Prins gave the warning in more detail in Truthdig on Dec. 29: "By Oct. 1, U.S. investment-grade corporate debt issuance had already surpassed $1 trillion—beating 2016’s pace by three weeks. The amount of speculative-grade (or junkier) corporate debt issued during the first three quarters of 2017 was 17% higher than over the same period in 2016. Altogether, that means that U.S. corporate issuance is set for another record year, as well as the sixth consecutive year of increased corporate debt issuance.

"As history has shown us, all bubbles pop.... Corporate debt of nonfinancial U.S. companies as a percentage of GDP has surged before each of the last three recessions. This year, it reached 2007 pre-crisis levels.... And whereas, in the past, companies used some of their debt to invest in real growth, this time corporate investment has remained relatively low. Instead, companies have been on a spree of buying their own stock, establishing a return to 2007-level stock buybacks.

"Financially speaking, 2018 will be a precarious year of more bubbles inflated by cheap money, followed by a leakage that will begin with the bond or debt markets.... If there is another financial crisis in 2018, it will be worse than the last one because the system remains fundamentally unreformed, banks remain too big to fail and the Fed and other central banks continue to control the flow of funds to these banks (and through to the markets) by maintaining a cheap cost of funds."

[roguenewsdao]

RMR Special Guest - Michael Snyder of The Economic Collapse - Candidate for U.S. Congress (10/27/2017)

During the October 26, 2017 RMR program, V and CJ discussed how the U.S. Social Security Administration alone is projected to spend one trillion that's trillion with a T dollars in the upcoming fiscal year -- a staggering sum which also points to how many aging or young Americans on SSI disability and early social security benefits are now out of the work force

[roguenewsdao]

Where To Invest When (Almost) Everything's in a Bubble

I can't summarize all the ideas presented in the book in one brief blog entry, but some basic principles will serve us well when bubbles abound.

1. Risk cannot be disappeared, it can only be masked or transferred to others.When anyone claims an investment is low-risk, they're actually claiming either A) the risk has been obscured by fancy footwork or false claims, or B) the risk has been transferred to some mark, chump or bagholder--nowadays, that usually means the taxpayer, as profits are private and losses are socialized.

2. Value flows to what's scarce. As economist Michael Spence and his colleagues have noted, conventional capital--the kind issued by central banks and private banks--is not scarce and therefore has little value. Ditto for conventional labor. This is why the returns on conventional capital and labor are so low.

Spence et al. suggest that what's scarce in today's global economy are ideas that create new business models, new productivity tools and new goods/services: Labor, Capital, and Ideas in the Power Law Economy.

This suggests an investment strategy of identifying what's scarce, or what will soon be scarce, before everyone else.

3. Many things that are scarce and thus valuable cannot be bought on the global marketplace. The number one example of this is of course health, which is priceless because even having millions won't buy your health back when it's been lost.

Yes, you can get patched up with stents or costly meds or maybe score a black-market organ harvested from some unfortunate prisoner somewhere, but all this sort of thing merely keeps you alive; it doesn't actually restore health.

So any investment in health will pay extremely high dividends. It doesn't take a ton of cash to invest in one's health; most of the investment is behavioral.

Other examples of what can't be bought in the same way stocks, bonds and housing can be purchased: meaningful work, communities with a collective memory of how to get things done in the real world, a functioning community economy, etc.

Investing in work you find fulfilling and meaningful pays dividends that can't be bought on the marketplace. Once again, investing in one's skills and social/intellectual capital doesn't require much cash; thanks to YouTube University and many other free or low-cost sources, anyone can start acquiring the eight essential skills I lay out in my book Get a Job, Build a Real Career and Defy a Bewildering Economy. The basic idea is to learn how to build your own career and job.

4. Comparing the relative value of various assets helps identify what's relatively overvalued and undervalued. The key word here is relative: to say something is absolutely undervalued is trickier than concluding something is undervalued compared to other asset classes.

For example, compare housing in the U.S. and global commodities. Based on the national Case-Shiller Index, house prices have reached new bubblicious levels. Thanks, Federal Reserve!

It's not much of a stretch to reckon that, hmm, valuations are looking a bit more likely to be overvalued here rather than undervalued.

Read the rest of Charles Hugh Smith's October 26, 2017 article at his site, OfTwoMinds.com. You can find a brief selection of Charles favorite books and films here. -- JWS