1) ... Reuters reports Wall Street drops on emerging market worry. Stocks gapped open lower on Friday January 31, 2014, making for their first monthly decline since August 2013, on ongoing concerns about emerging markets; this week Emerging Market Mining, EMMT, traded 2.7% lower, and Emerging Market Financials, EMFN, traded 2.0% lower.
World Stocks, VT, traded 0.8% lower for the week, with the Sector Small Cap Pure Value, RZV, -1.9%, leading lower; while Electric Utilities, XLU, such as Next Era Energy, NEE, rose 3.0% this week to new rally highs, on a "reflation trade" on the Benchmark Rate, ^TNX, trading lower.
Global Financials, IXG, traded 1.3% lower for the week with Regional Banks, KRE, -4.0%, such as GBCI, -8.4%, Life Insurance, PUK, -2.5%, Investment Bankers, KCE, -2.4% Emerging Market Financials, EMFN, -2.0%, and European Financials, EUFN, -1.8, leading lower.
Yield Bearing Sectors trading lower included, Global Telecom, IST, -2.5%, Leveraged Buyouts, PSP, -2.2%, and Shipping, SEA, -2.1%, leading lower.
Nation Investment, EFA, traded 1.9%, lower for the week, with the UK, EWU, -2.3%, Sweden, EWD, -2.2%, Nikkei, NKY, -2.1%, Eurozone, EZU, -1.7%, leading the developed nations lower.
2) ... Doug Noland posts of Yen currency carry trade unwinding in the last two weeks of January 2014. Over two weeks versus the yen, the Argentine peso has declined 17.1%, the Russian ruble 6.6%, the Hungarian forint 6.1%, the Chilean peso 5.1%, the Brazilian real 5.0%, the Colombian peso 4.7%, the Polish zloty 4.6%, the South African rand 4.4%, the South Korean won 4.1% and the Indian rupee 3.9%,
3) ... Risk On Investing, ONN, turned to Risk Off Investing, OFF, as investors derisked out debt trade investments in January 2014, with Leveraged Buyouts, PSP, falling 4.1%. And as investors deleveraged out of currency carry trade investments in the Emerging Markets, EEM, -8.6%, with Argentina, ARGT, -11, Russia, ERUS, -11, Chile, ECH, -14, Brazil, EWZS, -11, Columbia, GXG, -14, Poland, EPOL, -6, South Africa, EZA, -11, South Korea, EWY, -9, India, SMIN, -10%, Turkey, TUR, -13, Emerging Middle East and Africa, GAF, -11, as is seen in combined Yahoo Finance Chart.
4) ... Aggregate Credit, AGG, rose 0.2% on the day, and 0.5% on the week, and 1.5% on the month, as the Benchmark Interest Rate, ^TNX, traded lower to 2.67%. Sarika Gangar of Bloomberg reports The rout in emerging markets is sending a chill over corporate bond sales worldwide as issuance slows and investors demand the highest extra yield to buy new debt in two months; the chart of Global Corporate Bonds, PICB, shows topped out, and trading 0.7% lower.
Fiat money, defined as Aggregate Credit, AGG, and Major World Currencies, DBV, and Emerging Market Currencies, CEW, died on October 23, 2013, when the bond vigilantes began calling the Interest Rate on the US Ten Year Note, ^TNX, higher from 2.48%. And fiat wealth died on January 24, 2013, when Global Financials, IXG, led World Stocks, IXG, and Nation Investment, EFA, lower on investment fears that the world central banks monetary policies have crossed the rubicon of sound monetary policies and have made "money good" investments bad.
Euthanasia of the investor, and all of liberalism's isms, that is forges of economic identity and experience, began with the bond vigilantes calling the Benchmark Interest Rate, ^TNX, that is the cost of money, higher on October 23, 2013, and completed on January 31, 2014, with the call higher of the Interest Rate on Emerging Currency Local Currency Bonds, EMLC. Higher Sovereign Interest Rates are the Means of Economic Destructionism.
5) ... With the trade lower in the Emerging Markets, EEM, beginning with the rise of the Benchmark Interest Rate, ^TNX, on October 23, 2013, and their strong trade lower the week ending January 31, 2013, the world fully passed from the paradigm and age of liberalism, into that of authoritarianism.
Confirmation of the death of fiat money, and the death of fiat wealth, as well as the failure of trust in ability of the debtor to repay the lender, comes from short term debt MINT, and FLOT, trading lower in value, as is seen in their combined ongoing Yahoo Finance chart.
Mike Mish Shedlock posts What the crisis taught us: More bubbles! We need bigger bubbles to combat deflation! The Monetarists are out in full force warning about pending deflation. First it was Christine Lagarde with her message about the deflation ogre (see Christine Lagarde warns of Lord Voldemort, hopes to put deflation ogre in a bottle). Next on the list, deflation fighter extraordinaire, Telegraph writer Ambrose Evans-Pritchard, picked up on Lagarde's commentary and screamed at the top of his lungs "More Bubbles! We need bigger and bigger bubbles to combat the threat of deflation!" Of course Pritchard did not state it precisely that way, but it is indeed exactly what he called for, in equally loud, unmistakable tones.
Tightening? What Tightening? Pritchard calls a decrease in asset purchases by the Fed from $85 billion a month to $65 billion a month "tightening". The claim is preposterous. It's very much like telling an obese child you can only have three pieces of cake after dinner, not four. Correctly viewed, tapering asset purchases is a reduction in stimulus, not tightening.
I respond correctly viewed we see that greed has turned to fear, specifically fears that the US Fed's monetary policies of credit stimulus have crossed the rubicon of sound monetary policy and have made "money good" investments bad, that trust investments in China cannot be repaid, that Emerging Market Local Currency Bonds, EMLC, cannot be repaid, that Emerging Market Governments are untrustworthy, that the ECB will not back dollar denominated lending risks, that the European nations are insolvent sovereigns and their banks are insolvent financial institutions, and that global growth has slowed and that businesses worldwide will be to fail in increasingly large numbers.
Doug Noland writes in Safehaven End Of An Era. We might have reached the initial phase of the visible failure of inflationism. When I began referring to the "global government finance Bubble" back in April 2009, I had reason to fear that the unfolding Bubble would indeed prove to be the "Granddaddy of all Bubbles." In particular, unprecedented amounts of "money" were poised to flood into China and the developing economies. The Bernanke doctrine specifically sought dollar devaluation along with the impetus to coerce savers from the safety of their savings out to the inflating global risk markets. And, importantly, policies had once again created a highly conducive backdrop for leveraged securities speculation.
Scott Sumner writes Farewell to Ben Bernanke Bernanke had studied both the Great Depression and the Japanese "liquidity trap" and hence was better prepared than almost any other economist to deal with the crisis of 2008. From a market monetarist perspective he did poorly. But market monetarism is a tiny fringe group that's completely out of the mainstream. There was absolutely no way that Bernanke could have implemented the MM agenda even if he had wanted to. Judging the Fed chairman by this criterion would be like judging a President of the US on the assumption that he was a dictator freely able to enact the preferred agenda of a Bryan Caplan or Matt Yglesias. You judge people according to their marginal product. Bernanke did better than most would have done in his shoes. And for that he deserves thanks, and an enjoyable retirement.
If the economics profession had been solidly market monetarist in 2008 then I'm confident that Ben Bernanke would have gladly implemented NGDPLT. We need 5% NGDPLT. The economics profession never gave him the support he needed to be more aggressive. The profession failed us, the Fed was just a symptom. OK, start hammering me in the comment section for being soft on Bernanke. I don't care.
Liberalism was the paradigm and age of inflationism that in its terminal phase featured the US Dollar Hegemonic Empire. Fed Chariman Ben Bernanke was the father of the inflation trade, he led the greatest liberation movement of all time; he set the investor free to pursue investment choice. Under his leadership, the Great Investment Years, that is from 2008 through 2013, became the epoch of the riskless trade. Yet many chose not to invest, keeping their money in what has been safe assets, that is checking accounts and savings accounts, as is seen in the rise of M2 Money Supply, to 11,017, Billion.
Liberalism's debt based money system was revitalized after the 2008 crash by Ben Bernanke who traded out "money good" US Treasuries for the most toxic of debt, such as that traded by Fidelity Mutual Fund, FAGIX, and then oversaw Global ZIRP, with the result that wily investors garnered tremendous gains in Small Cap Pure Value, RZV, Spin Offs, CSD, Pharmaceuticals, PJP, Nasdaq Internet, PNQI, Biotechnology, IBB, and Resorts and Casinos, BJK, as is seen in the ongoing chart of FAGIX, and these investments. Small Cap Pure Value, RZV, leaders, now trading lower, include Automobile Dealers, such as PAG, SAH, ABG, KAR, AN, KMX, and LAD.
It was not US Government Bonds, GOVT, such as US Treasuries, TLT, or World Government Bonds, BWX, that underwrote liberalism's crack up boom. Rather, it was the most toxic, and highest yielding debt, such as Distressed Investments, FAGIX, Junk Bonds, JNK, Business Development Bonds, BDCS, Long Dated Corporate Bonds, VCLT, Eurozone Debt, EU, Emerging Market Bonds, EMB, Global Excluding US High Yielding Corporate Bonds, HYXU, and High Yield Municipal Bonds, HYMB, seen in combined ongoing Yahoo Finance chart of JNK, BDCS, VCLT, EU, EMB, HYXU, EMLC, HYMB, that underwrote ongoing investing, and generated liberalism's peak moral hazard wealth.
Not only was it investors chasing yield, but it was also currency traders pursuing carry trades, such as the EUR/JPY and GBP/JPY, that drove investments from July 1, 2013, through January 24, 2014, continually higher, this especially seen in the rally of the Eurozone, EZU, and the UK, EWU, EWUS.
Dispensation economics presents that regional sovereigns and seigniors constitute the new normal of regional economic governance. This contrasts with the concept of Ludwig von Mises who wrote "society lives and acts only in individuals; it is nothing more than a certain attitude on their part"; and with the concept that "all economic phenomena are the result of individual action."
From the dispensation economics viewpoint, the two greatest economic geniuses of all time have been first, Milton Friedman, in developing the Free To Choose Floating Currency Regime and in suggesting to President Nixon that the US off the gold standard; and second, Ben Bernanke in maturing and perfecting the Creature From Jekyll Island as the platform for developing investors trust. It was under their guidance, that liberalism's democratic nation state's policies of investment choice, and banker regimes' policies of credit stimulus, created stupendous wealth for the wily investor.
These two thought leaders have truly been economists extraordinaire, as they created liberalism's investor, and as they established liberalism's four dynamos of economic activity: creditism, corporatism, globalism, and clientelism.
Nick Beams of WSWS details the zenith of the emerging markets debt trade. According to the Institute for International Finance, emerging markets have attracted about $7 trillion since 2005, which has been invested in a mixture of manufacturing and service enterprises, mergers and acquisitions, and stocks and bonds. JPMorgan Chase estimates that outstanding "emerging market" bonds are now $10 trillion, compared to just $422 billion in 1993.
6) ... Bust always follows boom; in the new normal of authoritarianism, the sovereignty of regional economic fascism provides the seigniorage of diktat money. Now after five years of money market capitalism, with the Fed having lost control of the Benchmark Interest Rate, ^TNX, the tail risk of Global ZIRP, is economic deflation and economic recession; she is going to be a bad bitch.
Regionalism is the singular dynamo of economic activity under authoritarianism, and is it attempts to deal with the derisking of liberalism's debt trades and deleveraging out of currency carry trades.
John Redwood reports on the failure of UK sovereignty The death of Britain. Labour changed the UK and its constitution radically. We no longer have a constitution based on a powerful Parliament subject to the sovereignty of the people, expressed at election time in the ballot box and the rest of the time as public opinion. We are now a member state under European control in many fields.
The UK was once the centerpiece of a global empire that spread across the globe. But its failure as a global hegemonic empire, is like that coming to the US Dollar hegemonic empire, as this one flows as well into the beast empire of iron diktat regional economic governance, and clay totalitarian collectivism of debt servitude. The Labour government was simply the nail in the coffin to decisively and thoroughly terminate the power of the once mighty British Empire.
All empires have been based upon sovereignty and seigniorage; and most have been established on a debt based money system which established seigniorage wealth.
Sovereignty is defined as the Sovereign's policies and schemes which establish economic life, and which define the nature of the person. Since 2008, liberalism's two persons, created by the democratic nation state banker regime, were the investor experiencing investment choice, and the client experience clientelism.
Seigniorage is defined as the credit and flow of the Seignior, that is the top dog banker, who in coining money takes a cut, which defines the nature of economic life.
Liberalism's peak economic experience came through the coordinated efforts of the world's central banks in establishing Global ZIRP, which created a crack up boom in risk assets, as the dynamos of economic action, these being creditism, corporatism, globalism, and clientelism, which facilitated inflationism, producing peak moral hazard based seigniorage wealth.
Liberalism's sovereignty and seigniorage secured the Means of Economic Inflationism, where Milton Friedman and Ben Bernanke, using the Benchmark Interest Rate, ^TNX, under Global ZIRP, fathered and developed fiat wealth, defined as World Stocks, VT, Nation Investment EFA, Global Financials, IXG, and Dividends Excluding Financials, DTN, as well as the client receiving such things as SNAP Food Stamps, SSI Disability, DSHS Obamacare, and other transfer payments.
Liberalism's economy died in January 2014 with the collapse of the Emerging Markets; this coming with the death of fiat money on October 23, 2013, and the death of fiat wealth on January 24, 2014.
But twin extinction events, terminated liberalism, and as a result its creation, that being the investor and the client died, as greed turned to fear that the world central banks' monetary policies have crossed the rubicon of sound monetary policy and have made "money good" investments bad.
The first extinction event was the bond vigilantes calling the Interest Rate on the US Ten Year Note, ^TNX, higher from 2.48%, on October 23, 2013, which terminated fiat money, defined as the combination of Aggregate Credit, AGG, and Major World Currencies, DBV, and Emerging Market Currencies, CEW.
The second extinction event was the bond vigilantes calling interest rate on the Emerging Market Local Currency Bonds, EMLC, higher, and the currency traders calling the Japanese Yen, FXY, higher, and Emerging Market Currencies, CEW, lower, which forced the investor to derisk and delverage out of the Emerging Market, EEM.
Thus in January 2014, Destiny passed The Bow of Economic Sovereignty from democratic nation states and the world central banks, to regional sovereigns and regional sovereign bodies; these are now growing in political capital, and its authority to establish regional economic fascism, replacing all isms, such as crony capitalism, European Socialism, Greek Socialism, and Communism. Regional economic fascism is fated to be the singular, all inclusive, economic experience, as the ships of state flounder, and sink in the tossing sea of debt deflation driven, competitive currency devaluation.
Regionalism is establishing a new debt based money system, that being the diktat money system, where regional overlords, ruling in each one of the world's ten regions in mandates of regional economic governance, and in debt servitude schemes of totalitarian collectivism unifying all of mankind's seven institutions, establish regional security, stability and sustainability.
News reports reflect that the beast empire is now rising out of waves Club Med sovereign, banking, and corporate insolvency. It has the feet of a bear in banking supervision in Frankfurt; mouth of a lion in Berlin, as DW reports German FM vows more aggressive foreign policy; and coat of a leopard in fiscal supervision in Brussels, where a One Euro Government, that is a Eurozone Superstate, featuring a banking union, military union, and fiscal-debt union will form as leaders meet in summits to renounce national sovereignty and announce regional pooled sovereignty as they set forth regional framework agreements, as these constitute the constitution of regional economic governance.
If this were not enough, please consider that the beast regime will be accompanied by the Sovereign, Europe's New Charlemagne, as well as by the Seignior, that is the Top Dog Money Lord; and that they will forge, the new normal seigniorage wealth of diktat, and they will coin its peer, diktat money, out of their fiery words, will and way.
Their sovereignty be Deutungshoheit in nature. There is only one sovereignty, and it provides only one life experience. Deutungshoheit is defined as interpretational sovereignty and connotes supremacy in all things, the result being German economic, banking, credit, and military supremacy, over all of the Eurozone. German linguist Thorsten Pattberg relates Deutungshoheit is a German word meaning "having the sovereignty over the definition of thought," sometimes also called "the prerogative of final explanation."
Authority now longer resides in democracy; now Obrigkeit, as the Germans say, resides in beast regime's policies of diktat in regional governance in all of the world's ten regions, and has affect in schemes of debt servitude in totalitarian collectivism in each of the world's seven institutions.
Duane and Shelly Muir ask Why are banking executives killing themselves? Ambrose Evans-Pritchard posts Italy is wasting away month by month. CNBC reports Italy's anti-establishment party bids to impeach president. Cliff Küle asks Is Europe heading for the largest debt default in history? Mike Mish Shedlock posts Barcelona to fine owners of empty homes 100,000 Euros.
The Great Economic Transformation commenced with the failure of fiat wealth, that is World Stocks, VT, Nation Investment, EFA, and Global Financials, IXG, on the week ending January 24, 2014, and it pivoted economic experience from the paradigm and age of liberalism into that of authoritarianism,
There be Austrian economists a plenty; their vision comes from the fiat of human philosophy. Arnold King write I believe that as government scales up, it gets worse. My recent essay offered international evidence for this. I discuss it in the widely-unread Unchecked and Unbalanced. Michael Lotus and James Bennett in America 3.0 also suggest that a country with more states, each less populous but with more governing autonomy, would be a desirable future. Almost ten years ago, I wrote We Need 250 States. Such be blinded visionaries, having no insight that one day soon, the North American Continent will become the North American Union, as Dana Gabriel writes in GlobalResearch Canada The integration of Canada into a US dominated North American Security Perimeter.
Alejandro Chafuen, posts in Forbes, Top free market think tanks combat the hegemony of the bureaucrats. Austrian economists, such as Murray Rothbard, yearn for a free market economy, based upon a commodity based money system, that is one underwritten by hazelnuts or gold or some other physical asset, where there be liberty, and economic freedom, evidenced by such things as free prices. There are three chance of this coming about: none, never, and no way. Such thinking is a mirage on the authoritarian desert of the real, as well as a delusion of the sovereign individual mind.
Greg using The Libertarian Bullhorn emphatically states There is no income inequality. Let us make one thing clear right now: there is no such thing as income "inequality". There are income differences, but no income "inequalities".
The very term "inequality" has been constructed to imply a moral content in differences between people's incomes (or wealth). Every time we use the term we imply - deliberately or inadvertently - that income differences are problematic and need to go away. But if the premise of any discussion of income differences is that the differences are somehow immoral, then there really is not going to be a dispassionate conversation about those differences.
There is a crucial distinction distinction between "income inequality" and "income difference". The former term, again with its moral content, implies that there is a role for economic policy - in other words government - to play in how people earn their money. This involvement, in turn, would come in the form of measures correcting differences between people's incomes.
Beginning on October 23, 2013, as the bond vigilantes began calling the Benchmark Interest Rate, ^TNX, higher from 2.48%, on fears that that the world central banks monetary policies crossed the rubicon of sound monetary policy, and making money good investments in the Emerging Markets, EEM, and Real Estate, IYR, bad, there was a regime change.
That being a regime change from liberalism's banker regime, with its rule of bankers and democratic nation states, where economic life centered, on the investor and investment choice, to the sovereignty of beast regime, with its rule of diktat of leaders, in regional economic governance and totalitarian collectivism, where economic life is centered around the debt serf and debt servitude, and which is characterized by ever decreasing income inequality, as all become more equally poor, as economic destructionism replaces economic inflationism.
Under authoritarianism, seigniorage, that is moneyness comes from the word, will and way of regional seigniors, not bankers, and their appointed economic cardinals, who oversee and administer the factors of production, credit, trade, commerce, banking, and fiscal spending. Leaders such as Olli Rehn are authoritarianism's fathers, and thus the legislators of economic value, as well as the legislators that shape one's means and one's ends; these are increasingly enforcing austerity over debt serfs, to establish regional security, stability, and sustainability.
While President Obama in his SOTU, communicated that it's time for income equality, and proclaimed a new war on poverty, Atlas has shrugged and having asked "What is economic justice", says "People will marvel and follow after the beast", saying its power is irresistible; yes, they all will be proclaiming, "who can make war against it."
Under authoritarianism, there be the equity of debt servitude.
The future of seigniorage wealth is two fold: diktat and the physical possession of gold bullion. Jack Chan, in Safehven.com chart article, documented a breakout in Gold, GLD, in early January 2014; as he relates an investment demand for gold commenced on 12/27/2013. In the age of authoritarianism, the only two sustainable economic resources will be first, the diktat of leaders, and second, the physical possession of gold bullion; these are the only resource to assure that one not fall into poverty.