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overtheedge
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This Is Not 2008: It's Actually Worse

- Michael Pento - Delta Global Advisors

China first.
When you are sitting on a few trillion dollars in your foreign reserves that will NEVER be paid back with anything of value, what do you do?
Use them as collateral for internal financing of infrastructure.
Just a simple case of use it or lose it.
China might have already figured that out.

When corporations borrow to buy back stock, what is actually happening is asset stripping.
Increasing debt without increasing productivity is the path to bankruptcy.
But the buy backs allow smart gamblers to book a profit and leave the Rubes holding the bag.
After all, the stock price is buoyed up with these buy backs. This makes the company look strong when it is actually on the ropes and going down.
Debt is immaterial when the outcome is already baked in the cake.

The consideration that banks are flush with reserves is a silly notion at best.
Debt held by the banks is considered an asset.
Yet the true value of that asset is an unknown until the money changes hands.
And non-performing assets have zero value.

Rather than the government attempting to sell a massive number of bonds to fill their bottomless coffers, the next shoe to drop will be nationalization of pensions.
Top of the list is state and municipal pension programs.
Most are grossly under-funded and the Rubes will worship Washington for having the foresight to protect their pensions.

The current memes on eliminating cash is just smoke and mirrors.
For the most part, few people hold cash.
Those that do know that cash is still king and they know how to convert cash into tangibles.
Still, the meme keeps the Rubes from looking behind the curtain.

If the notion of negative interest really worked, we would see some results already.
With interest rates already near zero, it is evident that the idea of time-preference is lost on the Rubes.
Businesses have no option but to keep cash assets in the bank.
What the Rubes fail to grasp is that these bank carrying costs are just passed on to the end consumer.
Just as corporate taxes are. Yes Dorthy, all your demands for increasing corporate taxation to make them pay their fair share is coming out of your pocket.

The feudal system was, is and will continue to be.
If you can't pick it up and walk away with it, you don't own it.
Property tax ring a bell? You are just a discount renter. No more, no less.
During the middle ages the term was "freeholder".
The rest were villeins who needed authorization from the manor to do anything. Think debtors.
Even the money you deposited in the bank is not yours.
You really thought it was a demand deposit? Try drawing it out as a lump sum and see what you get.

Oh and increasing the taxes on the 1%'ers?
They already pay more than you.
Besides the only difference between the Rubes and the 1%'ers is the level of debt.
And when there is little discretionary money, the sale price of the assets will fall far short of covering the debts that will shortly be due and payable on demand.
Don't tell me you failed to read that clause in the contract?

Welcome to the new reality that is just the old reality with a fresh paint job.
Otherwise a good article. Thanks.

Commented 3167 days ago

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Beginning of the headline :The S&P 500 has begun 2016 with its worst performance ever. This has prompted Wall Street apologists to come out in full force and try to explain why the chaos in global currencies and equities will not be a repeat of 2008. Nor do they want investors to believe this environment is commensurate with the Dot.Com Bubble that caused the NASDAQ to plummet 78% and the S&P 500 to shed 35% of its value. In fact, they claim the current turmoil in China is not even comparable to the 1997 Asian... Read More

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