Sicilianthing

Facts are facts...

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There are two subjects that the mainstream media seems specifically determined to avoid discussing these days when it comes to the economy. The first is the problem of falling global demand for goods and services; they absolutely refuse to acknowledge the fact that demand is going stagnant and will conjure all kinds of rationalizations to distract from the issue. The other subject is the debt bubble; the corporate debt bubble in particular.

These two factors alone guarantee a massive shock to the global economy and the U.S. economy are built into the system. Corporate debt is the key pillar of the false economy, in that it has been utilized to keep the Everything Bubble from deflating; however, the fundamentals are starting to catch up to the fantasy.

For example, in terms of stock markets, which are now meaningless as an indicator of the health of the real economy, corporate stock buybacks have been the single most vital mechanism for inflation. Corporations buy their own stocks, often using cash borrowed from each other and from the Federal Reserve, in order to reduce the number of shares on the markets and artificially boost the value of the remaining shares. This process is essentially legal manipulation of equities, and to be sure it has been effective at keeping markets elevated.

The problem is that these same corporations are taking on more and more debt through interest payments in order to maintain the facade. Over the period of a decade, corporate debt has skyrocketed back to levels not seen since 2007, just before the credit crisis. The official corporate debt load now stands at over $10 trillion, and that's not even counting derivatives.

In terms of debt-to-GDP, the credit cycle peak has spiked beyond any other peak in the past 40 years. This amount of borrowing always has consequences. Even if central banks were to intervene on a level similar to TARP, the amount of liquidity needed is so immense and the economic returns so muted that such measures are ultimately a waste of time. The Federal Reserve fueled this bubble, and now there is no stopping its demise. Their behavior and minimal response to the problem suggests that they have no intention of stopping it anyway.

Currently, stock buybacks are set to decline this year, and I don't think this is because corporations have decided to quit the tactic. They have to quit, because the amount of debt they are accumulating is now outpacing their falling profits. As I warned back in 2018, Trump's tax cuts were a gift to corporations, not average people, and that gift was designed to be squandered as there was no doubt that companies would pour all extra cash into stock buybacks instead of innovation and new jobs. This is exactly what happened.

While corporations, the Fed and Trump have been putting some effort into keeping stock markets from imploding, the real economy has been evaporating. Global import/exports are crashing, U.S. manufacturing is in recession territory, U.S. GDP is in decline (even according to r****d official numbers), U.S. retail outlets are closing by the thousands, the poverty rate jumped in 30 percent of U.S. counties in the past year, and high paying jobs are disappearing and being replaced with minimum wage service sector jobs.

To be sure, this process did not start under Trump, it's been a slow-motion train wreck for over a decade. But it's important to point out that Trump has done nothing to mitigate the crash and his obsession with the fraudulent stock market shows that he has no plans to try.

The amount of time the tax cuts and debt increase bought was a couple of years. That's it. With buybacks in decline, the question is what will keep the bubble afloat now? The Fed? That's doubtful...

Global corporations with the most visible debt include:

AT&T with $180 billion
SoftBank with $154 billion
Apple with $136 billion
Verizon with $114 billion
Comcast with $112 billion
AB InBev with $110 billion
General Electric with $115 billion
Shell with $77 billion
Microsoft with $67 billion
Some of these companies, like Apple, are holding extensive cash reserves, but most of them do not. Also, the level of cash reserves held by certain top corporations suggests they know something is on the horizon. Why hold piles of cash when the stock market is a “sure thing?” Unless, the debt bubble is about to collapse, and cash will be needed to absorb the damage?

Stock buybacks, I believe, are the litmus test for how long the corporate world can hold out against the weight of the debt bubble. 2020 appears to be the year in which buybacks are set to crumble.

This list, of course, does not include financial companies like JP Morgan and other banks that are suspected of harboring an extensive debt load and borrowing cash frantically through the Fed's overnight repo markets.

These loans are now coming due, and the Fed has stated it plans to tighten liquidity once again while returning to balance sheet cuts. Interest rates remain well above zero, which means the more companies borrow through repo markets, the more interest they will accrue. The Fed will have to institute a full QE program on the level of the TARP bailouts (which infused over $16 trillion into corporations globally) and cut interest rates to zero in order to kick the can for a couple more years, and they've given no indication that they plan to do this in time to stop the current crash.

The real economy will start to d**g down the establishment's favorite distraction — the Dow, as this process continues. The big question is always one of timing. How long can the delusional euphoria keep the system levitated?

It's hard to imagine a scenario in which there are no major shocks to the financial structure for the rest of the year. With the corporate system tapped out and no longer able to act as a support for the bubble, the fundamentals will start to take over again. Geopolitical events will also have a more visible effect. A whole year without escalation with Iran? Escalation with North Korea? Without threats of a liquidity crisis as banks starve for more and more repo loans? I think not...

To t***h and knowledge,

Brandon Smith

RT friend Loc: Kangaroo valley NSW Australia

Stock buy backs are the result of deficit spending, which is also causing hot money flows into the only Financial Safe Haven which is the US, this is the result of trade wars and is economically crippling all other Nations on the face of the earth, because inevitability all Nations become pitted against the US if it continues for too long, due to the fact that for the first time the US is deliberately causing scarcity to prolong the USD's exorbitant privlige as world reserve currency.

Slow growth worldwide must result from an artificial US Safe Haven caused by trade war, some investors need a positive return (yield), don't forget a US trade deficit is necessary as the only way to create a sufficient volume of $'s to be continually entering circulation world wide allowing other Nations to acquire $'s to buy US debt as their reserve rainy day provision, - the purpose of any trade war is to create a balanced trade account if not a surplus.

However this practice only has to survive for 11 more months and can maybe do that by blaming low growth on Socialism.

The problum is when the rubber leaves the road China and Germany will be in survival mode same as the US but they will have real collateral invested in manufacturing surpluses and the US will only have investments in failed financial institutions.

woodguru

Another false and misleading aspect of the market as an indicator is the vast sums of money falsely represented in the market in money market funds. These are america's retirement savings, and there is so much money reflected there that it has had nowhere to go but in an ever growing escalation. Meanwhile the vast creative fees and commissions hedge funds levy against the funds they "manage"? That is the real money, that is the cash, and the over inflated value of the stocks people consider to be an asset that has real value? That disappears in a market "adjustment". That little adjustment that took place in 2007/2008 was a little hiccup compared to the money americans are going to lose.

woodguru

And you want to know something? This is not trump's fault per se...the GOP wanted these tax cuts and they got them, they wanted deregulated banks and money management, it is they who have supported tax breaks to move manufacturing overseas for decades.

Sicilianthing

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I understand these things but I no longer care...

Bottom Line
Trump has failed to remove the manufacturing from over seas and bring it back.
Another reason I’m getting off the Trump Train.

There are no other excuses to be had going forward.

Sicilianthing

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There it IS !

Great point Guru Thank YOU...

It’s all a big phat f**king House of Bankster CARDS !

Sicilianthing

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Agreed, but Trump fails to use the tools the founders gave him for scenarios like this.

His inactions on these issues will come back to haunt.

lpnmajor Loc: Arkansas

Our whole economy is based on debt;

How did Zukerburg of face book become a billionaire overnight? A whole bunch of people gave him money, accepting "stock" as collateral.

The US treasury owes the Social Security Trust Fund interest, on the money they borrow from citizens payroll deductions, giving the trust fund treasury bills as collateral, a debt load estimated to be around 22 trillion dollars.

The US pays billions in interest payments on the national debt every year, payments that rise every month, debt generated by the treasury selling T bills, which are IOU's to pay for budget deficits.

The housing bubble is paid for with mortgages, people owing money to the "lender", who in turn sells these mortgages to someone else.

These are just a few examples.

Sicilianthing

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The following families are still in control of the Federal Reserve, BIS, IMF, ESF, IRS, Wall Street, Bilderbergs, Davos ... and they are the Plunge protection teams

The following information is considered dangerous:

The first misconception that most people have is that the Federal Reserve Bank is a branch of the US governmment. IT IS NOT. THE FEDERAL RESERVE BANK IS A PRIVATE COMPANY. Most people believe it is as American as the Constitution. The Constitution actually forbids it's existence. Article 1, Section 8, states that Congress shall have the power to create money and regulate the value thereofff, not a bunch of international bankers! Today the FED controls and profits by printingg worthless paper, called money, through the Treasury, regulating its value, and the biggest outrage of all, collecting interest on it! (the so-called national debt, via the federal income tax)

The FED creates money from nothing, and loans it back to us through banks, and charges interest on our currency. The FED also buys Government debt with money printed on a printing press and charges US taxpayers interest. Many Congressmen and Presidents say this is fraud. Who actually owns the Federal Reserve Central Banks? The ownership of the 12 Central banks, a very well-kept secret, has been revealed: 1. Rothschild Bank of London 2. Warburg Bank of Hamburg 3..Rothschild Bank of Berlin 4. Lehman Brothers of NY 5. Lazard Brothers of Paris 6. Kuhn Loeb Bank of NY 7. Israel Moses Seif Banks of Italy 8.. Goldman Sachs of NY 9. Warburg Bank of Amsterdam 10.Chase Manhattan Bank of NY

These bankers are connected to London Banking Houses which ultimately control the FED. When England lost the Revolutionary War with America where our forefathers were fighting thheir own government, they planned to control us by controlling our banking system, the printing of our money, and our debt. How did it happen? After previous attempts to push the Federal Reserve Act through Congress, a group of bankers funded and staffed Woodrow Wilson's campaign for President. He had comitted to sign this act. In 1913, a Senator, Nelson Aldrich, maternal grandfather to the Rockefellers, pushed the Act through Congress just before Xmas, when much of Congress was on vacation..........