Oil crash could be the worst in history

Oil crash could be the worst in history

 Morgan Stanley has been pretty pessimistic about oil prices in 2015, drawing comparisons to the some of the worst oil slumps of the past three decades. The current downturn could even rival the iconic price crash of 1986, analysts had warned — but definitely no worse.

Why nobody will win in this shoving match between oil’s superpowers

Peter Tertzakian: The U.S. and Saudia Arabia are like two playground bullies fighting over one swing. The results are predictable: No one will be allowed to swing.

This week, a revision: It could be much worse.

From Morgan Stanley:

“We have been expecting the current downturn to be as severe as the one in 1986 – the worst for at least 45 years – but not worse than that. Still, if oil prices follow the path suggested by the forward curve, our thesis may yet prove too optimistic.”

Until recently, confidence in a strong recovery for oil prices—and oil companies — had been pretty high, wrote analysts including Martijn Rats and Haythem Rashed, in a report to investors Wednesday. That confidence was based on four premises, they said, and only three have proven true.

1. Demand will rise: Check

In theory: The crash in prices that started a year ago should stimulate demand. Cheap oil means cheaper manufacturing, cheaper shipping, more summer road trips.

In practice: Despite a softening Chinese economy, global demand has indeed surged by about 1.6 million barrels a day over last year’s average, according to the report.

2. Spending on new oil will fall: Check

In theory: Lower oil prices should force energy companies to cut spending on new oil supplies, and the cost of drilling and pumping should decline.

In practice: Sure enough, since October the number of rigs actively drilling for new oil around the world has declined by about 42 per cent. More than 70,000 oil workers have lost their jobs globally, and in 2015 alone listed oil companies have cut about $129 billion in capital expenditures.

3. Stock prices remain low: Check

In theory: While oil markets rebalance themselves, stock prices of oil companies should remain cheap, setting the stage for a strong rebound.

In practice: Yep. The oil majors are trading near 35-year lows, using two different methods of valuation.

4. Oil supply will Drop: Uh-oh

In theory: With strong demand for oil and less money for drilling and exploration, the global oil glut should diminish. Let the recovery commence.

In practice: The opposite has happened. While U.S. production has leveled off since June, OPEC has taken up the role of market spoiler.

OPEC Production Surges in 2015


For now, Morgan Stanley is sticking with its original thesis that prices will improve, largely because OPEC doesn’t have much more spare capacity to fill and because oil stocks have already been hammered.

But another possibility is that the supply of new oil coming from outside the U.S. may continue to increase as sanctions against Iran dissolve and if the situation in Libya improves, the Morgan Stanley analysts said. U.S. production could also rise again. A recovery is less certain than it once was, and the slump could last for three years or more—”far worse than in 1986.”

“In that case,” they wrote, “there would be little in analyzable history that could be a guide” for what’s to come.

Bloomberg.com  reprinted from earlier news reports

Related Notes

Investors Pessimistic Over Stock Market

Investors Pessimistic Over Stock Market

Equity sentiment is plunging at a historic rate, falling by some measures at the fastest pace since Federal Reserve Chairman Paul Volcker pushed up interest rates in the 1980s.
Reprinted from Bloomberg here.
Equity sentiment is plunging at a historic rate, falling by some measures at the fastest pace since Federal Reserve Chairman Paul Volcker pushed up interest rates in the 1980s.

Investors hate stocks — again.

Amid a six-year bull market that’s notable mainly for how little conviction there is in it, equity sentiment is plunging at a historic rate, falling by some measures at the fastest pace since Federal Reserve Chairman Paul Volcker had just finished pushing up interest rates in the 1980s. The cost to hedge against stock losses is soaring, valuations are contracting, and bearishness among professional stock handicappers is rising the most in three decades.


Fret not. All of this is good news for bulls, if history is any guide. Since 1963, the Standard & Poor’s 500 Index has advanced an average 11 per cent in the year after newsletter writers surveyed by Investors Intelligence were as pessimistic as they are now, data compiled by Bloomberg show. That compares with an annualized return of 8.3 per cent.

S&P 500 futures expiring in December rose 0.2 per cent at 10:32 a.m. in London.

This is the least-believed economic recovery and the least-believed bull market of our careers

Skepticism is one thing the rally since 2009 hasn’t lacked — and it may be the best thing stocks have going for them as corporate profits fall, concerns deepen over China’s travails, oil and commodities plunge and the Fed turns more pessimistic on global growth. Some traders even say they see bargains after S&P 500 posted its first 10 per cent retreat in four years.


“This is the least-believed economic recovery and the least-believed bull market of our careers,” said Bob Doll, chief equity strategist at Chicago-based Nuveen Asset Management, which oversees US$130 billion and bought stocks during the August selloff. “The nervousness means people have stepped to the sidelines. The question is, who is left to sell? Everybody who has cash is a potential buyer.”

Investors have bailed out of stocks at every sign of trouble since 2009, from the euro crisis to ebola, with the latest catalyst coming from China’s devaluation of its currency. The distrust has been a barrier to euphoria, a quality that historically is the bigger threat to bull markets.

Fear reigns, spreading faster than any time since 1984 as the S&P 500 tumbled 10 per cent over four days in August. At the start of this month, the bull-to-bear ratio in Investors Intelligence’s survey of newsletter writers fell to a four-year low of 0.9. In April, when bulls dominated the market that was heading for an all-time high, the ratio reached 4.1.

Options, Shorts

The S&P 500 fell last week, as the Fed left interest rates near zero, sparking concern over the strength of the global economy. The benchmark index for equities has declined 4.9 per cent this year and is down 8.1 per cent from its record 2,130.82 reached in May.

Pessimism prevails among options traders and speculators, too. The cost of puts protecting against a 10 per cent drop in the S&P 500 rose to a record on Aug. 24 relative to calls betting on a 10 per cent rally, according to three-month data compiled by Bloomberg. While the spread has retreated to 12.76, it’s still up 30 per cent from three months ago and higher than 99 per cent of the time since 2005.

In futures tracking the S&P 500, bearish contracts outnumber bullish ones by the most in three years, data from the Commodity Futures Trading Commission show. Speculators increased short positions in stocks to the highest level since March 2009, according to data compiled by U.S. exchanges.


“When everyone is bearish, everyone is shorting and hedging, it’s generally a contrarian sign,” said David Kalis, co-chief investment officer who helps oversee US$23.2 billion at Calamos Investments in Naperville, Illinois. The firm recently bought technology shares. “People are already positioned negatively so if anything goes right, markets can really have a good move.”

This bull market has seen the biggest rallies after periods of the worst sentiment. Bearish newsletter writers surpassed bullish ones three other times during the last 6 1/2 years, in April 2009, August 2010 and October 2011. All turned out to be buying opportunities as the S&P 500 rallied for two straight quarters each time, with gains exceeding 20 per cent.

The last time sentiment soured as fast as it is now was June 1984, when the S&P 500 was close to completing a nine-month decline that was overshadowed by another round of rate hikes spearheaded by Volcker to tame inflation. As the Fed began easing in October, stocks advanced in the next five years.

Fed Decision

The Fed last week refused to raise interest rates, saying that economic and financial developments around the world may restrain economic activity and curb inflation. Chair Janet Yellen mentioned the outflow of capital from developing countries and pressures on emerging market currencies in her Q&A session.

While not sharing investors’ pessimism, Jeff Carbone at Cornerstone Financial Partners said he’s watching signs of further deterioration in sentiment to determine whether to trim stocks. His firm has bought technology and health-care companies in the past month after valuations shrank, reducing cash by about half.

“If the market drops another 5 per cent, we want to dive deeper into, ‘is there a change in the economy?’” said Carbone, who oversees about US$1.1 billion as the founder of Cornerstone in Charlotte, North Carolina. “Sentiment is something you’ve always got to look at — did we miss something? If you are not in business long, you miss a lot.”

U.S. Strength

Bears obsessed with China and oil fail to recognize the strength in the U.S. economy, according to Jason Pride, director of investment strategy at Glenmede which oversees US$30 billion. U.S. unemployment has fallen to the lowest level in seven years, housing and auto sales are booming and rising retail sales signal that consumers may be looking past recent volatility in financial markets.

While falling oil and the rising dollar are forecast to weigh on 2015 earnings, analysts predict profit will rebound in the next two years, estimates compiled by Bloomberg show. At its worst point last month, the S&P 500 traded at 16.5 times earnings, down 12 per cent from its July peak.

Concern over China and emerging markets “are likely to be proven misplaced over the next six to 12 months because the underlying picture isn’t as dire as people are worried about today,” Pride said by phone. “The correction pushes people to the line, saying ‘I’m not as bullish as I was two months ago,’ whereas in fact, the valuation perspective on it is ‘everything is cheaper, you should probably like it more now.’”

reprinted here from Bloomberg

Economist Reason for Financial Crashes

Economist Hyman Minsky and reason for financial crashes

reprinted from the BBC News Magazine

Hyman Minsky

Image copyright Levy Economics Institute of Bard College

American economist Hyman Minsky, who died in 1996, grew up during the Great Depression, an event which shaped his views and set him on a crusade to explain how it happened and how a repeat could be prevented, writes Duncan Weldon.

Minsky spent his life on the margins of economics but his ideas suddenly gained currency with the 2007-08 financial crisis. To many, it seemed to offer one of the most plausible accounts of why it had happened.

His long out-of-print books were suddenly in high demand with copies changing hands for hundreds of dollars – not bad for densely written tomes with titles like Stabilizing an Unstable Economy.

Senior central bankers including current US Federal Reserve chair Janet Yellen and the Bank of England’s Mervyn King began quoting his insights. Nobel Prize-winning economist Paul Krugman named a high profile talk about the financial crisis The Night They Re-read Minsky.

Here are five of his ideas.

Stability is destabilising

Minsky’s main idea is so simple that it could fit on a T-shirt, with just three words: “Stability is destabilising.”

Most macroeconomists work with what they call “equilibrium models” – the idea is that a modern market economy is fundamentally stable. That is not to say nothing ever changes but it grows in a steady way.

To generate an economic crisis or a sudden boom some sort of external shock has to occur – whether that be a rise in oil prices, a war or the invention of the internet.

Minsky disagreed. He thought that the system itself could generate shocks through its own internal dynamics. He believed that during periods of economic stability, banks, firms and other economic agents become complacent.

They assume that the good times will keep on going and begin to take ever greater risks in pursuit of profit. So the seeds of the next crisis are sown in the good time.

Three stages of debt

Minsky had a theory, the “financial instability hypothesis”, arguing that lending goes through three distinct stages. He dubbed these the Hedge, the Speculative and the Ponzi stages, after financial fraudster Charles Ponzi.

In the first stage, soon after a crisis, banks and borrowers are cautious. Loans are made in modest amounts and the borrower can afford to repay both the initial principal and the interest.

As confidence rises banks begin to make loans in which the borrower can only afford to pay the interest. Usually this loan is against an asset which is rising in value. Finally, when the previous crisis is a distant memory, we reach the final stage – Ponzi finance. At this point banks make loans to firms and households that can afford to pay neither the interest nor the principal. Again this is underpinned by a belief that asset prices will rise.

The easiest way to understand is to think of a typical mortgage. Hedge finance means a normal capital repayment loan, speculative finance is more akin to an interest-only loan and then Ponzi finance is something beyond even this. It is like getting a mortgage, making no payments at all for a few years and then hoping the value of the house has gone up enough that its sale can cover the initial loan and all the missed payments. You can see that the model is a pretty good description of the kind of lending that led to the financial crisis.

Minsky moments

The “Minsky moment”, a term coined by later economists, is the moment when the whole house of cards falls down. Ponzi finance is underpinned by rising asset prices and when asset prices eventually start to fall then borrowers and banks realise there is debt in the system that can never be paid off. People rush to sell assets causing an even larger fall in prices.

Wiley Coyote in

Image copyright Rex Features

Image caption The Minsky moment: Like the moment when the cartoon character realises they’re running on thin air

It is like the moment that a cartoon character runs off a cliff. They keep on running for a while, still believing they’re on solid ground. But then there’s a moment of sudden realisation – the Minsky moment – when they look down and see nothing but thin air. Then they plummet to the ground, and that’s the crisis and crash of 2008.

Finance matters

Until fairly recently, most macroeconomists were not very interested in the finer details of the banking and financial system. They saw it as just an intermediary which moved money from savers to borrowers.

This is rather like the way most people are not very interested in the finer details of plumbing when they’re having a shower. As long as the pipes are working and the water is flowing there is no need to understand the detailed workings.

2008: man walks past Evening Standard billboard:

Image copyright

Image caption The 2008 crash brought wider attention to the workings of the financial system

To Minsky, banks were not just pipes but more like a pump – not just simple intermediaries moving money through the system but profit-making institutions, with an incentive to increase lending. This is part of the mechanism that makes economies unstable.

Preferring words to maths and models

Since World War Two, mainstream economics has become increasingly mathematical, based on formal models of how the economy works.

To model things you need to make assumptions, and critics of mainstream economics argue that as the models and maths became more and more complex, the assumptions underpinning them became more and more divorced from reality. The models became an end in themselves.

Although he trained in mathematics, Minsky preferred what economists call a narrative approach – he was about ideas expressed in words. Many of the greats from Adam Smith to John Maynard Keynes to Friedrich Hayek worked like this.

While maths is more precise, words might allow you to express and engage with complex ideas that are tricky to model – things like uncertainty, irrationality, and exuberance. Minsky’s fans say this contributed to a view of the economy that was far more “realistic” than that of mainstream economics.

Analysis: Why Minsky Matters is broadcast on BBC Radio 4 at 20:30 GMT, 24 March 2014 or catch up on BBC iPlayer

Follow @BBCNewsMagazine on Twitter and on Facebook


Death of the Dollar

The Death of the Dollar interview with Peter Schiff by Stefan Molyneux

also audio MP3 available HERE

China Economy Shrinking to Recession

China Economy Now Shrinking into Recession

– reprint from WolfStreet.com by  • 

A “hard landing” would be tough for China. But it would still mean economic growth, if very slow growth by Chinese standards. At worst, it would mean stagnation. But now, evidence is piling up that the economy is actually shrinking.

There is practically universal agreement outside official Chinese reporting that the economy hasn’t been growing at anything near the official and for most countries awesome rate of 7% in the last two quarters.

In the US, we don’t know what our quarterly GDP growth is either. We get the first estimate, which may be negative, and then the second estimate, which may be worse. Then the third estimate may suddenly be positive, by which time people stopped paying attention. GDP continues to be revised years later. It’s tough to measure a big economy.

But China doesn’t even revise its GDP growth number. It comes out shortly after the quarter ends and stands as rock-solid as the Communist Party itself. And it always matches or exceeds the decreed target.

Hence no one believes it.

Yang Jian, managing editor of Automotive News China, who has been fretting about plunging auto sales, put it this way:

[E]ven some Chinese government officials remain wary of the reliability of economic data released by the National Bureau of Statistics.Li Keqiang, now Chinese premier, was one of them. When he was head of the local communist party in northeast China’s Liaoning province ten years ago, he invented his own method of gauging the national economy’s performance by relying on three variables government statisticians cannot easily inflate – electricity consumption, rail cargo volume, and bank lending.

Li’s economic model has been widely adopted by researchers these days. In the first half of the year, except for bank lending, electricity consumption and rail car volumes across China both declined….

So how bad is the economy?

If bank lending, the only still growing element of the three, is focused on throwing more money at zombie companies to keep them afloat, on bailing out toxic debt by replacing it with even more new debt, and on creating even more overcapacity and empty buildings that will never earn the returns to service the debt, well, then it’s not adding to economic growth in a sustainable way either.

This is how New York Times reporter Michael Schuman described the now failing industrial principles of China via cement maker Lucheng Zhuoyue in Changzhi, a city of three million people:

Changzhi and its environs are littered with half-dead cement factories and silent, mothballed plants, an eerie backdrop to the struggling Chinese economy.

Like many industrial cities across China, Changzhi, which expanded aggressively during the country’s long investment boom, has too many factories and too little demand. That excess capacity, many economists indicate, will have to be eliminated for the Chinese economy to return to healthy growth.

But rather than shut down, Lucheng Zhuoyue and other Changzhi companies are limping along in a kind of march of the undead.

They’re losing money. Customers are disappearing. Yet, these already over-indebted companies are borrowing even more to stay afloat and keep going.

“If we ceased production, the losses would be crushing,” Lucheng Zhuoyue’s general director Miao Leijie told the New York Times. “We are working for the bank.”

With ghost cities and unneeded factories dotting the land, construction projects have been scaled back, and demand for cement has collapsed. Hence rampant overcapacity.

A couple of years ago, the new government pledged to restructure the economy, weed out overcapacity, take the losses where necessary, and transition the economy to high-value manufacturing, innovation, and services. Companies would be allowed to fold. And their debts would be allowed to default.

But when economic growth spiraled down, reform efforts stopped. Now the government and its state-owned megabanks keep these companies alive by rolling over their debts, restructuring loans, and extending new credit and other aid to keep the old debt from blowing up.

Good for a vibrant economy? Not so much. And the banks that extended these now toxic loans?

The four largest state-controlled megabanks, after years of double-digit profit growth, have reported almost no year-over-year profit growth in Q2, with the best performer being Bank of Communications at 1.5%, the Wall Street Journal reported. A sign that banks are starting to account for some fragments of the massive toxicity hidden in their loan books:

Now, trophy investments in largely empty municipalities known as ghost cities and oversupplied infrastructure aren’t delivering promised returns. Meanwhile, debtors face overcapacity in several industries and slower demand, while land sales are hit by a weakened property market.

This entire system, a dominant part in the Chinese economy, and now in turmoil, hasn’t entered the officially decreed GDP number. And there is another big measure that shows just how fast the economy is slithering into trouble: new vehicles sales.

The auto industry in China impacts the economy in multiple ways, from industrial production, finance, and services to retail sales. Only a small fraction of vehicles are imported. The rest are manufactured in China.

New passenger-vehicle sales in China had a positive correlation with economic growth: sales were growing slightly faster than official GDP, year after year, according toAutomotive News China. For example in 2014, new passenger-vehicle sales, which were already slowing, grew 9.9% while the overall economy officially grew 7.4%.

But now that correlation has reversed.

New passenger-vehicle sales, though already trending down, were still growing 9.4% year-over-year in Q1, according to the China Association of Automobile Manufacturers. Then they began to sag. In April, sales grew only 3.7%, in May 1.2%. In June, sales actually fell 3.4%. In July they plunged 6.6%!

Either auto sales have by sheer magic decoupled from the economy, or the official 7% GDP growth is a political delusion, and the economy isn’t just slowing down further to a growth rate of 6.5% or 5%, or even a “hard landing” with a growth rate of 2% or 1%, or even a flat quarter, but is actually shrinking.

That’s what hard-to-fudge measures such as auto sales are saying.

Automakers, like cement makers before them, are responding with production cuts and a price war. And there is no relief in sight, as SAIC, partner of GM and Volkswagen, and China’s largest automaker, warned: “the domestic market situation in the second half of the year remains grim.”


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  21 comments for “China Entering Ugly Recession, Not Just a “Hard Landing?””

  1. LG
    August 29, 2015 at 11:40 am

    When GDP is calculated from synthetic or debt based growth meaning it wasn’t demand based I would not consider that as “real” growth or accurate GDP.
    Let’s see the GDP based on demand growth!
    3% China 1% US !

  2. MC
    August 29, 2015 at 12:50 pm

    For China’s macros to flash red, things must be either far worse than we think, going out of control or a combination of both.
    As an analyst for HSBC said years ago, the Chinese economy behaves according to a postulate to Heisenberg’s Indetermination Principle: the closer you observe it, the more it changes its behavior.
    As serious analysts and savvy investors started to rely on “lesser” indicators, such as containerized freight, rolled steel consumption etc these started changing their behavior to fit the “7% GDP growth at least” model, nevermind how they behaved previously.

    If China’s crack statistics team cannot artificially prop up (on paper) car sales, electricity consumption and cement demand it means either things are so bleak they can at most give the illusion of a soft landing or that panic has taken hold in Beijing.

    It’s useless to beat around the bush: this thing will have ripercussions all over the world, and not of the good kind.
    Beijing has staked too much on the “social peace through prosperity” model to allow the much needed correction to unfold without putting up a desperate fight.

    We’ve already seen what can only be described as panic at the PBOC: the yuan has been devalued and revauled more times in the past month than in the previous six years. While the BOJ and the ECB are fully committed to turning their currencies into monetary laughing stocks to both prop up exports and write off debts through devaluation, the PBOC is split between too many directions. Yes, a devalued yuan would be good for exports and domestic debt servicing, but what about dollar denominated debt issued by Chinese companies? What about price inflation? One of the unwritten rules in China is that food prices must stay as stable as possible: Chinese consumers would take to the streets if the price of staples such as rice, palm oil, pork and cabbages increased at the same pace as food increased in Europe and the US over the past decade. Finally, what about China’s not so thinly disguised dream of replacing the yen and the euro as a reserve currency with the yuan?

    And finally what about Western companies, which have reaped such fantastic profits from their Chinese operations? I am sure they’ll be able to keep the champagne flowing a while longer (my money is on their stocks not starting suffering seriously until 2016, though the present conditions of instability will remain) but as I always say, sooner or later you have to either pay the bill or find “someone” to pay it for you.

    • hidflect
      August 29, 2015 at 9:33 pm

      “…this thing will have ripercussions (sic) all over the world, and not of the good kind.”

      I think the effect to the global economy will be much milder than predicted. If China collapses, the West will go whistling past the graveyard knowing China isn’t a significant consumer of finished, western goods. Sure, a few raw material suppliers like Oz will be screwed but a hammered China will mostly mean lower wages and production costs as China falls back to the “good old days”.

      • MC
        August 30, 2015 at 12:42 am

        Just one word: profits.
        For large Western, Korean and Japanese companies getting over 20% of their profits from the Chinese market is the norm. BMW, Hitachi, Apple, Samsung… they are all reaping fantastic rewards through their local joint ventures and direct exports. With Western consumers and CAPEX stretched as thin as humanely possible, China has saved corporate balance sheets from having to deal with stagnating or even declining revenues.
        There’s a very good reason why Tim Cook, in what looked like a desperate (and possibly illegal) attempt to bring AAPL back to over US $100, didn’t speak about the North American or European market but about China.

        There’s also the issue of dumping. So far China has contented herself with dumping a small part of her excess capacity on export markets. But as domestic demand for rebar, rolled steel, cement, glass panes, escavators, lorries etc slows down, they are bound to get into high gear just to keep the factory doors open.
        In the first half of the year, Chinese steel exports were superior to the whole Japanese production: in spite of everything, Japan is still number two in the sector. The West, as usual, is shrugging it off because these exports chiefly went to emerging markets such as Vietnam, South Africa, Indonesia, Peru etc.
        But China has the EU worried enough to issue warnings about dumping in all strategic sectors, from rebar to shipbuilding. It may be too late: the European solar and wind power boom was wholly built in Chinese factories: taxpayer money went into subsidizing companies which acted as mere middlemen for manufacturers located in China’s industrial cities.

        I remember hearing in 1990 how Japan, which until a few years before could do no wrong, just didn’t matter anymore. The ripples sent by the cataclismic crash of the zaitech system and the far more pernicious ensuing actions of a panic-stricken BOJ have been with us for the past generation. Our monetary policies have largely been patterned after the Japanese’s desperate attempts to prevent liquidation and reinflate bubbles.
        If anything, China is bigger than Japan. And God only knows what the central planners in Beijing will come up with and how those actions will influence worldwide economi policies for another generation.

  3. rich black
    August 29, 2015 at 1:05 pm

    Many Chinese stock market investors have been buying stock with money borrowed against their real estate. What could go wrong with that?

    According to the Economist, 200 million Chinese are living on less than $1.25 dollars a day. They are probably not buying new Buicks.

    Meanwhile, money is pouring out of China. Take a look at this one year chart:


    Yep, Sum Ting Wong.

    A couple of years back, my sister was trapped in a hotel in Guangdong, because a Taiwanese factory owner shut his factory doors without bothering to tell has hundreds of workers. The streets were packed with angry, suddenly jobless workers. It was not safe to go out that night.

  4. Nick Kelly
    August 29, 2015 at 4:48 pm

    In February 2015, old China hand Ann Stevenson-Yang estimated Chinese growth as flat to negative. Enter: ‘Has China’s Hard Landing Already Arrived’ and look for her pic on You Tube video.
    The MSM have got a problem because after lapping up the Seven Percent Solution until pretty much last week- they now have to catch up and reverse themselves- as though it could go from 7 to zero in a few days!
    A recent comment from Ann S-Y: ‘We are amazed how many analysts have bought into the idea of Chinese Exceptionalism’
    To those who are still in awe of the CCP- remember that the other China, Taiwan, has an average income about 300 % that of the mainland. (2014 about 21, 000 versus 7,000. Source: IMF, World Bank and UN similar.)
    If the Chinese Nationalists had won the civil war instead of Mao’s Communists, China would have become the world’s largest economy decades ago.

    • Robert
      August 29, 2015 at 5:56 pm

      Sadly, the US government on the advice of the State department handed over China to Mao’s ‘moderate’ socialists. Former ‘friend’ Chiang got to escape to Formosa.

      “To be an enemy of the United States can be dangerous, to be a friend is fatal”
      Henry Kissinger.

      • Nick Kelly
        August 29, 2015 at 6:51 pm

        Thanks I didn’t know that although I knew that they thought Castro was a moderate at first

    • jim wilson
      August 30, 2015 at 1:06 pm

      Chiang and his gang were crooks, through and through. The reason Taiwan has done well is that all of a sudden it had a huge influx of capital and educated business people who suddenly found them selves having to actually get stuff done or the Taiwanese would have sent them off. Taiwan had also been a Japanese colony for 50 years so it had picked up a few tips along the way. And remember the population of Taiwan is only about 1/60th of China’s, so the per capita impact was huge.
      It is a bit like if you were to take all the top business people of the US (say about 100,000 of them) and all the accumulated financial assets, and the cream of the US military and move them in one fell swoop to Puerto Rico, leaving next to nothing in the rest of the USA (and have what was left trashed in the process) . Give Puerto Rico a few years and it would be doing fine. The US would probably take a while to recover.
      I was in China about 6 months ago and have visited many times over the last 30+ years. The achievements they have made have been incredible, there is no doubt. BUT to my eyes much of what they have built is on pretty shoddy foundations. You simply can not effect real change in such a short time (a generation and a half – maybe) without taking a hell of a lot of shortcuts, many of which have the capability of coming back to bite you big time.
      With a declining workforce size, aging population, capital flight (big time), and rising costs China seems to have passed over the crest of the industrial growth hill without a lot of gas left to try and get over the hill to a transition to a service based economy.
      It’s going to be interesting … and as pessimistic as I am, China still looks awesome compared to India – now that is a permanent basket case.

      • Nick Kelly
        August 30, 2015 at 6:29 pm

        Yes, they were crooks, as in past tense- it was two- thirds of a century ago. They’re dead.
        There was essentially zero manufacturing base in Formosa ( Taiwan) at the end of WWII. By the way if you are an old China hand you will know that in Taiwan the period is not usually brought up in polite conversation- such was the chaos and mayhem.
        And whatever the failings of the KMT, no one was in the same league as psychopath Mao, and nothing in the island’s contemporary history equals the Cultural Revolution.
        I do not disagree that Taiwan would be a likely magnet for entrepreneurial Chinese fleeing communism- although I do not see how that falsifies my assertion that Taiwan has done much better than the mainland because it isn’t Communist.

        Moving on to now.
        The problem for mainland China is not new- it is the same problem every former Communist state has faced once it gets fed up with Communism.
        How do you get the Party to relinquish power? Ideally the transition comes with a transitional figure, like Gorbachev. Less ideally it comes as in Romania.
        But that is the problem, how do you get rid of a Party that began as something for the people and ended up as a privileged ruling class, along the lines of pre-revolutionary France. (80 % of China’s health care budget is spent on about 8.5 million CCP bureaucrats and their families)
        If this class could be persuaded to stay in castles, they could be tolerated but they are the managers and beneficial owners of the State Owned Enterprises- the mill stones around the economy’s neck. It was these that that the CCP was trying to prop up at absurd valuations or PE’s ( 60: 1) when it began its campaign to get the working class to invest the hard- earned savings of generations.
        As to India- it is a puzzle. Does it deserve some kind of handicap because of its past- hundreds of languages, castes, and until the arrival of the British not actually a state but many independent states?
        However if you told me that one was going to have a revolution- I would pick China.

  5. hoop
    August 29, 2015 at 6:26 pm

    What i wonder is why zero pct interest rates in USA, EU, Japan, UK and NIRP in Scandinavian countries and Rolling over of bad debt in China is not seen as state support. We were supposed to life in a world of free trade without governmental interference. Export subsidies or import tariffs are forbidden but zero pct interest loan or even negative are seen as supporting the economy in general but who benefits the most of these low interest rates. Companies who cannot pay and should go belly up. Why not subsidies these companies and raise the interest rates. Realize in all countries above mentioned the inflation for the consumers is still above zero if you count house appreciation and stock market appreciation into the game.

  6. roddy6667
    August 29, 2015 at 9:55 pm

    As part of the huge program tp clean up the air, the government here in China closed many inefficient factories. Many others had their hours of operation curtailed. This would explain some of the drop in electricity consumption. It has been working. The air is noticeably cleaner in northeast China this summer.
    If you live in China, you notice the advertising everywhere for investments at rates of 4-12%. These are investment trusts. They usually are for new construction, but they can be for anything. They are a parallel channel to traditional banking and the stock market. They cannot be tracked very well.
    This could be where some of that money is.

  7. posa
    August 30, 2015 at 5:50 am

    China still has huge infrastructure needs and should use QE/ Central Bank tactics to directly stimulate this sector.

    Key example: massive needs for clean drinking water. That means canals to transport water from the northeast to the coastal cities and interior. Massive desalinization as well.

    Such projects will soak up huge capital needs and labor.

    Stimulating and accelerating overseas development programs will do much the same.

    Furthermore, the leadership will have to bite the bullet and foreclose on failed residential towers and begin conversion to social housing, which will be a very positive way to reduce popular tensions.

    Managing to deflate the equities bubble is a necessary step as well. The margin for error is getting pretty small, and China has to take bold steps and stop looking to Goldman Sachs for guidance.

    • Lars
      August 30, 2015 at 9:44 am

      Yes, with a focus on low cost solar panels to replace coal fired electric power generation, standard electric power consumption will show a decline. With Xi’s reversal of the ‘one child policy’ to that of a population growth policy, the ‘ghost cities’ will be populated in a decade or so. As you say, clean water is of a major importance and will put many to work. Curbing ‘short selling’ was a major boon to halting the stock market decline, however the West seems to have found a way around that somehow (but Xi, don’t make naked shorting legal again !!! ) as the market has continued down since then, but with a P/E ratio of 59 things were ‘over-valued’ ! so not too unexpected. Anyway, keep up the good work China ! and focus on cleaning up pollution and stopping environmental destruction, and respecting The People, because The People are the ones who Do Everything !!!

      • August 30, 2015 at 9:57 am

        Lars, one thing: power consumption includes power from all sources, including solar. So shifting from coal-fired power plants to solar power plants or distributed solar generation is great, and China is making huge progress in that respect, but it doesn’t impact overall power consumption.

        Power consumption is a measure of how much power is being used by society, regardless of where it comes from.

  8. NotSoSure
    August 30, 2015 at 10:10 am
  9. September 1, 2015 at 7:43 am

    I’m American not stupid good by GM and china ,,,,,,Eat your
    Buicks as I won’t be buying china products ,,,, Nothing has changed ,,,, Don’t look to us to save you,,,,,, GM you make
    me SICK !!! GO BROKE ,,,, GOOD BY !


  10. Matt
    September 3, 2015 at 12:01 am

    Wolf, Why did you delete my post? Is it because truth hurts? If Wolf Street is meant to be a balanced “Howling about Business and Finance” then all factual views should be published. Otherwise, how can anyone take your website seriously?

    • September 3, 2015 at 12:44 am

      It was offensive and aggressive toward the commenter you replied to, and falsely so, and solely for the purpose of promoting your notions and links that were totally unrelated to the article and to the comment to which you replied.

      The comment section is like my living room. You’re welcome anytime. But it’s not a free-for-all.

  11. Matt
    September 4, 2015 at 8:51 am

    Wolf, Frank Holmes, CEO and Chief Investment Officer of U.S. Global Investors disagrees with your take on China.

    He says “We believe the China region remains one of the most compelling growth stories in the world and continues to provide exciting investment opportunities. For more see link below

    “China’s Economy Is Undergoing a Huge Transformation That No One’s Talking About.”


    • September 4, 2015 at 12:23 pm

      Matt, generally, a lot of people disagree with me (and with each other). That’s what makes a market.

      Holmes actually agrees with me on many points, including the painful transformation China is undergoing. He too is worried about China, and he’s going to cash in his China fund, thus pulling his fund’s money out of China: “we’ve raised the cash level in our China Region Fund (USCOX), and after the dust settles….”

      And yet, he sells investment services. He has to talk up his book. I don’t have to talk up my book because I don’t sell investment services.

The Last Days Before Financial Implosion

The Implosion Is Near: Signs Of The Bubble’s Last Days   Warning’s from Reagan’s Economist

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The central banks of the world are massively and insouciantly pursuing financial instability. That’s the inherent result of the 68 straight months of zero money market rates that have been forced into the global financial system by the Fed and its confederates at the BOJ, ECB and BOE. ZIRP fuels endless carry trades and the harvesting of every manner of profit spread between negligible “funding” costs and positive yields and returns on a wide spectrum of risk assets.

Moreover, this central bank sponsored regime of ZIRP and money market pegging contains a built-in accelerator. As carry trade speculators drive asset prices steadily higher and fixed income spreads steadily thinner—- fear and short interest is driven out of the casino, making buying on the dips ever more profitable and less risky. Indeed, the explicit promise by central banks that the money market rate will remain frozen for the duration and that ample warning of any change in rate policy will be “transparently” announced is the single worst policy imaginable from the point of view of financial stability. It means that the speculator’s worst nightmare—–suddenly going “upside down” due to a sharp spike in funding costs—-is eliminated by central bank writ.

Stated differently, ZIRP systematically dismantles the market’s natural stability mechanisms. One natural deterrent to excessive financial gambling, for example, is the cost of hedging a speculator’s portfolio of “risk assets” against a broad market plunge. In an honest market environment, hedging costs consume a high share of profits, thereby sharply limiting risk appetites and the amount of capital attracted to speculative trading.

By contrast, an extended regime of ZIRP, coupled with the central banks’ perceived “put” under risk assets, drives the cost of “downside insurance” to negligible levels because S&P 500 put writers are emboldened and subsidized to pick up nickels (i.e. options premium) in front of a benign central bank steamroller. This ultra-cheap downside insurance, in turn, attracts ever larger inflows of speculative capital to the casino.

This corrosive game has been underway ever since the Greenspan Fed panicked on Black Monday in October 1987 and flooded the stock market with liquidity. It is now such an endemic feature of Wall Street that it is falsely assumed to be the normal order of things. But, then, would anyone have been picking up nickels in front of the Volcker steamroller?

This dynamic is evident in the chart of the S&P 500 since the March 2009 bottom. The dips have gotten shallower and shallower as ZIRP and other pro-risk central bank policies have eroded the market’s natural defenses against excessive speculation. As of mid-2014, therefore, it can be fairly said that fear and short interest have been extinguished almost entirely. The Wall Street casino has thus become a one-way market that coils dangerously upward, divorced completely from the fundamentals of earnings and cash flow and real world economic conditions and prospects.



The inverse side of this coin is disappearance of volatility in the equity markets. As shown below, the current readings are at all-time lows, even below bottoms reached on the eve of the 2008 financial crisis. Needless to say, this dangerous condition does not appear by happenstance: its is the inexorable and systematic result of ZIRP and the associated tools of monetary central planning.

But all of this is ignored by the central banks because their Keynesian economic plumbing models contain a fatal flaw. These models purport to capture capitalism at work, but they contain no balance sheets and hardly any proxy for the financial markets which are at the heart of modern capitalist economies. As a result, central banks pursue ZIRP in order to inflate the plumbing system of the macro-economy with more “demand”—and hence more jobs, income, investment and GDP—-while ignoring the systematic destruction of financial stability that results from these very same policies.

As a consequence, Keynesian central bankers are bubble-blind. Whereas they monitor immense amounts of “in-coming”  high-frequency macro-economic data that is trivial and “noisy” in the extreme, they ignore entirely “in-coming” financial market data that points to monumental troubles just ahead.

At the present time, for example, 40% of all syndicated loans are being taken down by sub-investment grade issuers. This is materially higher than the 2007 peak, and is accompanied by an even more virulent outbreak of “cov-lite” credit terms. Indeed, upwards of 60% of these junk loans have no protection against debt layering and cash stripping by equity holders—-notwithstanding their nominal “senior” status in the credit structure. The obvious implication, of course, is that the Fed “easy money” is being massively diverted into leveraged gambling and rent stripping by the LBO houses. Three times since 1988 this kind of financial deformation has led to a thundering bust in the junk credit market. Why would monetary central planners, who allegedly watch their so-called “dashboards” like a flock of hawks, think the outcome would be any different this time?

40pc of syndicated loans are to sub-investment grade borrowers

The monetary politburo remains unperturbed, of course, because they are not monitoring the composition and quality of credit. Their models simply stipulate that aggregate business loan growth will lead to more spending on capital assets and operational expansion including hiring. That assumption is manifestly wrong, however, because it is plainly evident that most of the massive expansion of business credit since the last peak has gone into financial engineering—-stock buybacks, LBO’s and cash M&A deals—-not expansion of productive business assets. Indeed, total non-financial business credit outstanding has risen from $11 trillion in December 2007 to $13.8 trillion at present, or by 25%, yet real business investment in plants and equipment is still $70 billion or 5% below its pre-crisis peak.

And that is “gross” spending for plant and equipment as recorded in the “I” term of the GDP accounts.  The far more relevant measure with respect to economic health and future growth capacity is “net business investment” after accounting for depreciation and amortization allowances. That is, after accounting for the consumption of capital that occurred in the production of current period GDP. As shown below, that figure in real terms is 20% below the peak achieved two cycles back in the late 1990s.

In short, the combination of faltering investment in real plant and equipment juxtaposed to peak levels of leveraged loan finance should be a warning sign of growing financial instability. Instead, the central bankers bray that valuation multiples are not out of line and financial institution leverage is reasonably well-contained.

Real Business Investment - Click to enlarge

The “valuations are normal” line proffered by Yellen and her band of money printers, however, is simply an adaptation of the Wall Street hockey sticks based on projected earnings ex-items. That is to say, the kind of “earnings” estimates that omitted on average 23% of actual P&L charges over the course the 2007-2010 boom and bust cycle owing to non-recurring write-downs of goodwill, plants, leases and restructuring costs, among countless other real expenses—all of which ultimately consume corporate cash and capital. As I demonstrated in “The Great Deformation”, cumulative S&P 500 “earnings less items” over that four-year period amounted to $2.42 trillion compared to GAAP reported earnings—-that is, the kind that you don’t go to jail for reporting to the SEC—of only $1.87 trillion.

Consequently, the Fed fails to see the in-coming data on financial instability because it isn’t looking for it, and is simply tossing out Wall Street sell-side propaganda as a sop.  The disappearance of volatility in the S&P 500 chart shown at the beginning, for example, is nearly an identical replica of the run-up to the 2007 stock market peak. Yet the appearance of a proven warning sign of a bubble top has been resolutely ignored.

The fact is, PE multiples are far above “normal” based on GAAP earnings in historical context. During the LTM period ending in Q1 2014, S&P 500 earnings amounted to $100 per share after adjustment for a recent change in pension accounting that is not reflected in the historical data. Accordingly, even the big cap “broad” market is trading at 19.6X reported earnings—a level achieved historically only at points when the stock market was on the verge an implosion.

Moreover, today’s $100 per share of earnings are highly artificial owing to massive share buybacks funded by cheap debt and by deep repression of interest carry costs. The S&P 500 companies carry upwards of $3 trillion in debt, but were interest rates to normalize— earnings per share would drop by upwards of $10. Likewise, profit margins are at an all-time high, indicating that the inevitable “mean-regression” will chop significant additional amounts out of currently reported profits.

In other words, at a point which is month #61 of the current business cycle, and thereby already beyond than the average cycle since 1950, why would any one in their right mind say a market is not bubbly when it’s trading at nearly 20X reported earnings. Indeed, in a world where interest rate and profit rate normalization must inevitably come, the capitalization rate for current earnings should be well below normal—-not extended into the nosebleed section of historical results.

And this applies to almost any other measure of valuation in risk asset markets. The Russell 2000, for example, still stands at the absurd height of 85X reported earnings. The cyclically adjusted S&P stands at 24X, or six turns higher than its half century average. The Tobin’s Q measure is also far more stretched than in 2007.

Likewise, emerging markets have piled on $2 trillion in foreign currency debt since 2008. This makes them far more significant in the global financial scheme than they were in 2008 or even at the time of the East Asia crisis of the late 1990s. And that is not even considering the massive house of cards in China, where credit market debt has soared from $1 trillion at the turn of the century to $25 trillion today.

At the end of the day, the Fed and its fellow traveling central banks have systematically dismantled the natural stability mechanisms of financial markets. Accordingly, financial markets have now become dangerous casinos in which speculative bubbles are guaranteed to build to dangerous extremes as the central bank driven financial inflation gathers force.  That’s where we are now. Again.

The Beginning of Deflationary Depression

Why are commodity prices, including oil prices, lagging? Ultimately, the question comes back to, “Why isn’t the world economy making very many of the end products that use these commodities?” If workers were getting rich enough to buy new homes and cars, demand for these products would be raising the prices of commodities used to build and operate cars, including the price of oil. If governments were rich enough to build an increasing number of roads and more public housing, there would be demand for the commodities used to build roads and public housing.
It looks to me as though we are heading into a deflationary depression, because the prices of commodities are falling below the cost of extraction. We need rapidly rising wages and debt if commodity prices are to rise back to 2011 levels or higher. This isn’t happening. Instead, Janet Yellen is talking about raising interest rates later this year, and  we are seeing commodity prices fall further and further. Let me explain some pieces of what is happening.
1. We have been forcing economic growth upward since 1981 through the use of falling interest rates. Interest rates are now so low that it is hard to force rates down further, in order to encourage further economic growth. 
Falling interest rates are hugely beneficial for the economy. If interest rates stop dropping, or worse yet, begin to rise, we will lose this very beneficial factor affecting the economy. The economy will tend to grow even less quickly, bringing down commodity prices further. The world economy may even start contracting, as it heads into a deflationary depression.
If we look at 10-year US treasury interest rates, there has been a steep fall in rates since 1981.

Figure 1. Chart prepared by St. Louis Fed using data through July 20, 2015.
In fact, almost any kind of interest rates, including interest rates of shorter terms, mortgage interest rates, bank prime loan rates, and Moody’s Seasoned AAA Bonds, show a fairly similar pattern. There is more variability in very short-term interest rates, but the general direction has been down, to the point where interest rates can drop no further.
Declining interest rates stimulate the economy for many reasons:
  • Would-be homeowners find monthly payments are lower, so more people can afford to purchase homes. People already owning homes can afford to “move up” to more expensive homes.
  • Would-be auto owners find monthly payments lower, so more people can afford cars.
  • Employment in the home and auto industries is stimulated, as is employment in home furnishing industries.
  • Employment at colleges and universities grows, as lower interest rates encourage more students to borrow money to attend college.
  • With lower interest rates, businesses can afford to build factories and stores, even when the anticipated rate of return is not very high. The higher demand for autos, homes, home furnishing, and colleges adds to the success of businesses.
  • The low interest rates tend to raise asset prices, including prices of stocks, bonds, homes and farmland, making people feel richer.
  • If housing prices rise sufficiently, homeowners can refinance their mortgages, often at a lower interest rate. With the funds from refinancing, they can remodel, or buy a car, or take a vacation.
  • With low interest rates, the total amount that can be borrowed without interest payments becoming a huge burden rises greatly. This is especially important for governments, since they tend to borrow endlessly, without collateral for their loans.
While this very favorable trend in interest rates has been occurring for years, we don’t know precisely how much impact this stimulus is having on the economy. Instead, the situation is the “new normal.” In some ways, the benefit is like traveling down a hill on a skateboard, and not realizing how much the slope of the hill is affecting the speed of the skateboard. The situation goes on for so long that no one notices the benefit it confers.
If the economy is now moving too slowly, what do we expect to happen when interest rates start rising? Even level interest rates become a problem, if we have become accustomed to the economic boost we get from falling interest rates.
2. The cost of oil extraction tends to rise over time because the cheapest to extract oil is removed first. In fact, this is true for nearly all commodities, including metals. 
If costs always remained the same, we could represent the production of a barrel of oil, or a pound of metal, using the following diagram.

Figure 2. Base Case
If production is becoming increasingly efficient, then we might represent the situation as follows, where the larger size “box” represents the larger output, using the same inputs.

Figure 3. Increased Efficiency
For oil and for many other commodities, we are experiencing the opposite situation. Instead of becoming increasingly efficient, we are becoming increasingly inefficient (Figure 4). This happens because deeper wells need to be dug, or because we need to use fracking equipment and fracking sand, or because we need to build special refineries to handle the pollution problems of a particular kind of oil. Thus we need more resources to produce the same amount of oil.

Figure 4. Growing inefficiency (Notice how sizes of shapes differ in Figures 2, 3, and 4.)
Some people might call the situation “diminishing returns,” because the cheap oil has already been extracted, and we need to move on to the more difficult to extract oil. This adds extra steps, and thus extra costs. I have chosen to use the slightly broader term of “increasing inefficiency” because it indicates that the nature of these additional costs is not being restricted.
Very often, new steps need to be added to the process of extraction because wells are deeper, or because refining requires the removal of more pollutants. At times, the higher costs involve changing to a new process that is believed to be more environmentally sound.

Figure 5. An example of what may happen to make inputs in physical goods and services rise. (The triangle shape was chosen to match the shape of the “Inputs of Goods and Services” triangle in Figures 2, 3, and 4.)
The cost of extraction keeps rising, as the cheapest to extract resources become depleted, and as environmental pollution becomes more of a problem.
3. Using more inputs to create the same or smaller output pushes the world economy toward contraction.
Essentially, the problem is that the same quantity of inputs is yielding less and less of the desired final product. For a given quantity of inputs, we are getting more and more intermediate products (such as fracking sand, “scrubbers” for coal-fired power plants, desalination plants for fresh water, and administrators for colleges), but we are not getting as much output in the traditional sense, such as barrels of oil, kilowatts of electricity, gallons of fresh water, or educated young people, ready to join the work force.
We don’t have unlimited inputs. As more and more of our inputs are assigned to creating intermediate products to work around limits we are reaching (including pollution limits), fewer of our resources can go toward producing desired end products. The result is less economic growth. Because of this declining economic growth, there is less demand for commodities. So, prices for commodities tend to drop.
This outcome is to be expected, if increased efficiency is part of what creates economic growth, and what we are experiencing now is the opposite: increased inefficiency.
4. The way workers afford higher commodity costs is primarily through higher wages. At times, higher debt can also be a workaround. If neither of these is available, commodity prices can fall below the cost of production.
If there is a significant increase in the cost of products like houses and cars, this presents a huge challenge to workers. Usually, workers pay for these products using a combination of wages and debt. If costs rise, they either need higher wages, or a debt package that makes the product more affordable–perhaps lower rates, or a longer period for payment.
Commodity costs have been rising very rapidly in the last fifteen years or so. According to a chart prepared by Steven Kopits, some of the major costs of extracting oil began increasing by 10.9% per year, in about 1999.

Figure 6. Figure by Steve Kopits of Westwood Douglas showing trends in world oil exploration and production costs per barrel. CAGR is “Compound Annual Growth Rate.”
In fact, the inflation-adjusted prices of almost all energy and metal products tended to rise rapidly during the period 1999 to 2008 (Figure 7). This was a time period when the amount of mortgage debt was increasing rapidly as lenders began offering home loans with low initial interest rates to almost anyone, including those with low credit scores and irregular income. When debt levels began falling in mid-2008 (related in part to defaulting home loans), commodity prices of all types dropped.

Figure 6. Inflation adjusted prices adjusted to 1999 price = 100, based on World Bank “Pink Sheet” data.
Prices then began to rise once Quantitative Easing (QE) was initiated (compare Figures 6 and 7). The use of QE brought down medium-term and long-term interest rates, making it easier for customers to afford homes and cars.
Courtesy Gail Tverberg, Founder of Our Infinite World (More by Gail Here)

Welcome to My WordPress site from Cheyenne

Welcome to WordPress.   I am Charlie Kay your host of this digital ranch in Cheyenne, Wyoming.   It is now autumn, 2015…the last



American Empire year.   This is a resource, database, medium of exchange and sharing site for members of the Cakebread Cooperative.   You have not heard of it, but you are welcome to investigate and participate, in our vehicle of survival during years of extreme change ahead of our city, nation and planet.

A cooperative, more specifically a WORKER COOPERATIVE, is a family of families that share among themselves…without owner/bosses/money-class-meddlers and “rentiers”…commonly known as corporatists and their minions.  It is a common sense method of sharing the results of our hard work and conservation of resources.  It is also a revolut*onary idea if you belong to the economic elite class of global people.

To learn more, the best teachers are rewolff.com Richard Wolff, David Stockman, Peter Schiff (all over YouTube) and Paul Craig Roberts (Reagan economist like Stockman).

Please engage in the learning of a new way of living, cooperatives provide. Contribute your news links to my Twitter @CheyennneCharlie,  to our blogs and YouTubes.  Check in often.  Thanks   Charlie Kay