RPT GMTP 2013 09 Peek

"TAPER" & A New Fed Chair
Fed in a Box as the Recovery Stalls and a US Recession Looms
US ECONOMIC UPDATE
GLOBAL MACRO TIPPING POINTS - SEPTEMBER 2013
8/23/2013
1 September 2013 Edition

Copyright 2013 Gordon T. Long All Rights Reserved
Restricted & Confidential

general@GordonTLong.com
"TAPER" & A New Fed Chair

Fed in a Box as the Recovery Stalls and a US Recession Looms.
GLOBAL MACRO TIPPING POINTS - SEPTEMBER 2013
TIPPING POINTS ...................................................................................................................... 14
GLOBAL MACRO: RISK ASSESSMENT .................................................................................................................................................... 14
SITUATIONAL ANALYSIS .................................................................................................................................................... 14
POSITIONAL FRAMEWORK: "WE ARE HERE!" ....................................................................................................................................................... 14
Q2 2013 DEVELOPMENTS TO WATCH ..................................................................................................................................................................... 15
GLOBAL THEMES - A STRUCTURAL BACKDROP FOR STRATEGY ................................................................................................................. 24
GLOBAL TRENDS - NATIONAL INTELLIGENCE COUNCIL ................................................................................................................................... 26
A BROKEN PONZI SCHEME - BOSTON CONSULTING GROUP .......................................................................................................................... 28
RISK CONTINUUM ......................................................................................................................................................................................................... 30
MACRO MONITORING INSTITUTIONS ............................................................................................................................... 31

WEF (WORLD ECONOMIC FORUM -JANUARY 2013) ............................................................................................................................................ 31
The 17 Biggest Risks To Our Hyper-Connected World .............................................................................................................................................. 31
IMF (INTERNATIONAL MONETARY FUND - APRIL 2013) ...................................................................................................................................... 47
Policymakers Should Address Old Financial Risks, Meet New Challenges ............................................................................................................ 47
Credit Default Swaps on Government Debt Are Effective Gauge ............................................................................................................................. 48
Extended Period of Low Interest Rates Can Rekindle Financial Risks .................................................................................................................... 50
OECD (ORGANIZATION FOR ECONOMIC COOPERATION & DEVELOPMENT) .............................................................................................. 68
MAPLECROFT (SCANNING THE GLOBE) ................................................................................................................................................................ 70
GLOBAL RISK SIGNALS ...................................................................................................................................................... 72

RISK - COLLAPSING PETRODOLLAR FOUNDATION ............................................................................................................................................ 74
RISK - GLOBAL DEBT 313% of GDP .......................................................................................................................................................................... 78
RISK - 202M GLOBALLY UNEMPLOYED................................................................................................................................................................... 79
RISK - SIGNS APLENTY, BUT NO ONE PANICKING - YET! .................................................................................................................................. 80
RISK - CANARIES SINGING AGAIN ........................................................................................................................................................................... 82
RISK - COMPLACENCY & REPRESSED FEAR ........................................................................................................................................................ 83
RISK - TIED TO EU IN 2012 ......................................................................................................................................................................................... 84
RISK - GLOBAL DERIVATIVE COLLATERAL ............................................................................................................................................................ 86
RISK - GLOBAL RISK MATRIX..................................................................................................................................................................................... 88
RISK - GLOBAL MACRO HEADWINDS / TAILWINDS .............................................................................................................................................. 88
RISK - FOOD A GROWING GLOBAL INFLATION & SOCIAL UNREST RISK ...................................................................................................... 90
RISK - INCREASINGLY DYSFUNCTIONAL CAPITALS MARKETS ....................................................................................................................... 96
RISK - GLOBAL RISK REWARD .......................................................................................................................................... 99

RISK - RISING GEO-POLITICAL EVENT RISK........................................................................................................................................................ 100
GLOBAL MACRO: RISK LEVELS .............................................................................................................................................................. 104

AGGREGATED GLOBAL FINANCIAL RISK INDEX............................................................................................................ 104
BANKING RISK - LIBOR-OIS SPREAD (Updated) .................................................................................................................................................. 105
BANKING RISK - TED SPREAD (Updated) .............................................................................................................................................................. 105
CREDIT RISK - GLOBAL CREDIT DEFAULT SWAPS (Updated) ........................................................................................................................ 106
CREDIT RISK - EU CREDIT DEFAULT SWAPS (Updated) ................................................................................................................................... 106
CONSUMER RISK - HOUSING - RATE OF CHANGE (Reference) ...................................................................................................................... 107
ECONOMIC RISK - ECRI LEADING INDEX (Updated) ........................................................................................................................................... 108
INFLATION RISK - MONEY SUPPLY GROWTH - M3 (Updated) .......................................................................................................................... 109
INFLATION RISK - MONEY VELOCITY (Updated) .................................................................................................................................................. 110
MONETARY RISK - BANK LIABILITIES (Updated) ................................................................................................................................................. 111
COST OF MONEY RISK - INTEREST RATES (Updated)...................................................................................................................................... 111
AGGREGATED RISK LEVEL .............................................................................................................................................. 112

TIPPING POINTS: CHANGES .................................................................................................................................................................... 114
TIPPING POINT MAPPING: 2013 UPDATE ........................................................................................................................ 114
TIPPING POINTS: TOP 5 FOCUS - FEBRUARY 2013 .......................................................................................................................... 124
I - RISK REVERSAL............................................................................................................................................................ 124
II - JAPAN DEBT DEFLATION ............................................................................................................................................ 127
III-BOND BUBBLE .............................................................................................................................................................. 130
September 2013 Edition

Copyright 2013 Gordon T. Long

All Rights Reserved
IV - EU BANKING CRISIS ................................................................................................................................................... 130

V - SOVEREIGN DEBT ....................................................................................................................................................... 131
VI - CHINA HARD LANDING ............................................................................................................................................... 133
DRIVER$: RISK-ON - RISK-OFF ANALYTICS ......................................................................................................................................... 138
1- G10 MACRO SURPRISE INDEX .................................................................................................................................... 141
2- CUMULATIVE GLOBAL PMI........................................................................................................................................... 146
3- SLOWING GLOBAL EXPORTS ...................................................................................................................................... 152
4- US NON-REVOLVING CONSUMER CREDIT................................................................................................................. 157
5- IBES' RELATIVE GLOBAL PE RATIOS .......................................................................................................................... 161
6- CONSENSUS EARNINGS ESTIMATES - Sell Side Analysts .......................................................................................... 168
7- INFLATION PRESSURES - Global Food Prices.............................................................................................................. 171
GLOBAL MACRO ................................................................................................................... 175

GLOBAL MACRO: ECONOMIC OUTLOOK ............................................................................................................................................. 177
GLOBAL OUTLOOK - EM Crisis Will make the 1997 Asian Crisis Seem Like an Early Warning.......................................... 177
GLOBAL OUTLOOK - Global Deleveraging Accelerating and Developing Nations Feeling the Pain.................................... 179
GLOBAL OUTLOOK - Problems Erupting Everywhere (Signs of Implosion) ........................................................................ 181
GLOBAL OUTLOOK - Credit Fueled Globalization in Retreat .............................................................................................. 184
GLOBAL OUTLOOK - Rogoff's Sovereign Debt Default Levels ........................................................................................... 187
GLOBAL OUTLOOK - Fiscal Adjustments Required............................................................................................................ 190
GLOBAL OUTLOOK - Imbalances Continue to Increase Along With Financial Fragility ....................................................... 190
GLOBAL OUTLOOK - A 67 Million Jobs Gap ...................................................................................................................... 194
GLOBAL OUTLOOK - Center of Global Manufacturing Confirmed to be Shifting Away from developed Countries .............. 197
GLOBAL OUTLOOK - Mercantilist China the Clear Winner Globally, Mercantilist Germany Regionally ............................... 198
ECONOMIC CUTS .............................................................................................................................................................. 200
OECD CUTS ECONOMIC OUTLOOK ....................................................................................................................................................................... 200
IMF CUTS ECONOMIC OUTLOOK ............................................................................................................................................................................ 203
ECONOMIC WARNINGS .................................................................................................................................................... 214

IMF WARNS - May 2013 .............................................................................................................................................................................................. 214
BIS WARNS - June 2013 ............................................................................................................................................................................................. 220
WORLD BANK WARNS - June 2013 ......................................................................................................................................................................... 227
GLOBAL MACRO: INDICATORS ............................................................................................................................................................... 232

GLOBAL CREDIT ............................................................................................................................................................... 232
CREDIT CYCLE - HY Leading the Way ..................................................................................................................................................................... 232
CREDIT CYCLE - Reversal Ahead ............................................................................................................................................................................. 235
GLOBAL GROWTH............................................................................................................................................................. 239

GLOBAL GROWTH - PMI Barely Above Stagnation ................................................................................................................................................ 239
GLOBAL GROWTH - Chinese Slowing moves to CONTRACTION ....................................................................................................................... 242
GLOBAL GROWTH - Slowing Global Economies .................................................................................................................................................... 243
GLOBAL GROWTH - Global GDP Growth Trending Down by Region and Cumulatively ................................................................................... 244
GLOBAL GROWTH - Global PMI ............................................................................................................................................................................... 244
GLOBAL GROWTH - Global Recession .................................................................................................................................................................... 247
GLOBAL GROWTH - Slowing Global Growth - Air Cargo Shipments ................................................................................................................... 248
GOBAL UNEMPLOYMENT ................................................................................................................................................. 249

GLOBAL UNEMPLOYMENT - The Beginnings of the Welfare Myth Unwind ........................................................................................................ 249
GLOBAL UNEMPLOYMENT - The Unsustainable Welfare Myth ........................................................................................................................... 252
GLOBAL UNEMPLOYMENT - Global Financial Sector Job Cuts ........................................................................................................................... 254
GLOBAL UNEMPLOYMENT - Global Unemployment Rising -Now 202 Million .................................................................................................. 256
GLOBAL TRENDS .............................................................................................................................................................. 258

BRANDS & COMMODITIES: Tell the Global Story .................................................................................................................................................. 258
GLOBAL SENTIMENT ........................................................................................................................................................ 271

GLOBAL SENTIMENT - Complacent ......................................................................................................................................................................... 271
GLOBAL SENTIMENT - Nielsen's Global Consumer Confidence, Concerns & Spending Intentions ............................................................... 272
GLOBAL INFLATION .......................................................................................................................................................... 283

GLOBAL INFLATION - Food Prices, Driver of Social Unrest .................................................................................................................................. 283
GLOBAL INFLATION - Food Price Manipulation in Thailand .................................................................................................................................. 285


All Rights Reserved
GLOBAL MACRO: MONETARY POLICY & CENTRAL BANKING ........................................................................................................ 286

The "OMF" Trial Balloon Raised .......................................................................................................................................... 286
OPMF - A Reversing Wealth Effect May Force OPMF & Global Abenomics ........................................................................................................ 287
OPMF - Financial Times: Martin Wolf - "The Case For Helicopter Money" ........................................................................................................... 288
OPMF - Financial Times: Martin Wolf - "The Case To Reset Basis of Monetary Policy" ..................................................................................... 291
OPMF - Financial Times: Gavyn Davies On Why Helicopters Are Dangerous ..................................................................................................... 292
OPMF - A Conundrum for the World's Central Bankers ........................................................................................................................................... 295
GLOBAL CENTRAL BANKING ........................................................................................................................................... 297

CENTRAL BANKS
CENTRAL BANKS
CENTRAL BANKS
CENTRAL BANKS
CENTRAL BANKS
CENTRAL BANKS
CENTRAL BANKS
CENTRAL BANKS
CENTRAL BANKS
- Austerity Now Officially Dead Public Policy ........................................................................................................................... 297

- They are the Market .................................................................................................................................................................. 297
- The longer QE persists, the greater the magnitude of the left-tail event & a Minsky Trap ............................................. 300
- We May Have Reached a Risk-Off Leverage Pivot .............................................................................................................. 301
- The Macro Landscape .............................................................................................................................................................. 303
- A Serious Shortage of Quality Collateral - A $10T US Problem Over 10 Years ................................................................ 304
- Global Balance Sheet Expansion ............................................................................................................................................ 306
- Where Do these Deflators Come From? ................................................................................................................................ 310
- First Remove Gold Standard, Now Remove Debt ................................................................................................................. 311
EMERGING MARKETS ...................................................................................................................................................... 316

EMERGING MARKETS - The Impact of "TAPER" ................................................................................................................................................... 316
BOE - UK ............................................................................................................................................................................ 320

UK - Mark Carney and "Flexible Inflation Targeting" ................................................................................................................................................ 320
FED - US............................................................................................................................................................................. 321

US - FOMC January Minutes Un-Nerve Markets ...................................................................................................................................................... 321
US - Congress Asks Bernanke For Full Risk Analysis On Fed's Soaring Balance Sheet .................................................................................... 322
BOJ - JAPAN ...................................................................................................................................................................... 327

JAPAN - Some Policies Have Clearly Hit the Limit ................................................................................................................................................... 327
JAPAN - Foreshadows Next Global Crisis ................................................................................................................................................................. 328
JAPAN - Japan's Prime Minister Shinzo Abe prepares to print money for the whole world ................................................................................ 333
JAPAN - Shinzo Abes Monetary-Policy Delusions ................................................................................................................................................... 334
JAPAN - BOJ Governor Job Suddenly Available in Historical "Abenomics U-Turn" ............................................................................................. 337
JAPAN - Japanese Economic Policy Goes The Full Ponzi ...................................................................................................................................... 338
ECB - EU ............................................................................................................................................................................ 340

EU - Japan Will Effectively Monetize European Debt ............................................................................................................................................... 340
EU - TARGET-2 Imbalances - "The Debt Crisis Is Eating Its Way Ever Further Into Europe's Core" ................................................................ 340
EU - Draghi Will Soon Be Forced to Start Printing - Again! ..................................................................................................................................... 342
GEO-POLITICAL TENSIONS ..................................................................................................................................................................... 346

GLOBAL BOND SCARE ..................................................................................................................................................... 346
BOND SCARE - Volatility and Instability Increase Risk ........................................................................................................................................... 346
BOND SCARE - Inflation Expectations Contributing to Volatility ............................................................................................................................ 348
BOND SCARE - The Financial Times Headlines Tell An Interesting Story ........................................................................................................... 349
BOND SCARE - A LONG Supply and Demand Problem BUT Heavy SHORT Demand ..................................................................................... 350
BOND SCARE - Long Term Support Trendline Achieved........................................................................................................................................ 351
BOND SCARE - Retail Investors Running for the Exit ............................................................................................................................................. 353
CHINA LIQUIDITY TIGHTENING SCARE ........................................................................................................................... 355

CHINA LIQUIDITY - Housing Bubble Restricting PBOC Actions ............................................................................................................................ 355
CHINA LIQUIDITY - PBOC Squeezing Banks towards Reducing Speculative Risk............................................................................................. 358
CHINA LIQUIDITY - Overnight Repo at 25% ............................................................................................................................................................ 359
CHINA LIQUIDITY - Red Flags ................................................................................................................................................................................... 360
CHINA LIQUIDITY - Credit Fueled Growth ................................................................................................................................................................ 362
CHINA LIQUIDITY - Shadow Banking System Showing Signs of Implosion ......................................................................................................... 367
CHINA LIQUIDITY - PBOC Wants to Hold the Line on Explosive Credit Expansion through A Liquidity Squeeze .......................................... 370
CHINA LIQUDITY - Potentially De-Stabilizing Cash Crunch ................................................................................................................................... 372
CHINA LIQUIDITY - Chinese Liquidity Pump Unplugged ........................................................................................................................................ 373
CURRENCY WARS BECOMING RATE WARS .................................................................................................................. 375

CURRENCY WARS - A Major Shift ............................................................................................................................................................................ 375
BATTLEFIELD - Combatants & Belligerents ............................................................................................................................................................. 379
BATTLEFIIELD - The Race to Debase ....................................................................................................................................................................... 380
JAPAN - The Destabilizing Agent ............................................................................................................................................................................... 383
EUROPE - Euro Exposed ............................................................................................................................................................................................ 383


All Rights Reserved
ARGENTINA - Here we Go Again!.............................................................................................................................................................................. 385

VENEZUELLA - Bad Situation ..................................................................................................................................................................................... 386
BRAZIL - No One Wants to Listen .............................................................................................................................................................................. 386
SWITZERLAND - No Choice ....................................................................................................................................................................................... 386
SINGAPORE - Hot Money ........................................................................................................................................................................................... 387
UK- Pound Joins War ................................................................................................................................................................................................... 388
CYBER WARS - GROWING THREAT ................................................................................................................................ 389

SECURITY-SURVEILLANCE COMPLEX - NSA Whistleblower Example: Booz Hamilton ................................................................................. 389
SECURITY SURVEILLANCE COMPLEX - Growing Without Public Control or Supervision!.............................................................................. 391
IRAN & SYRIA - COMPLETE MIDDLE EAST DOMINATION .............................................................................................. 392

MIDDLE EAST - Watch Out for a "False Flag" or "Covert" Activity Event .............................................................................................................. 392
MIDDLE EAST - Who Is Threatening Who Here? .................................................................................................................................................... 393
REGIONAL ............................................................................................................................... 395

EUROSIS - A Terminal Disease ........................................................................................................................................ 395
RESEARCH WE FOLLOWED THIS MONTH ........................................................................................................................................................... 395
RESEARCH OF PARTICULAR IMPORTANCE ........................................................................................................................................................ 396
RESEARCH - EFSF Downgraded to AA+.................................................................................................................................................................. 396
RESEARCH - EU Stabilization Programs Are Presently Very Fragile .................................................................................................................... 397
RESEARCH - Spreads Widened in Peripherals and Significantly in Portugal and Greece ................................................................................. 400
PROGNOSIS: Why the European Situation Will Get Worse ................................................................................................................................... 402
PROGNOSIS: Increasing Structural Imbalances ...................................................................................................................................................... 405
PROGNOSIS: $22T Unaccounted - A Hidden World of Contingent Liabilities, Government Backing & Guarantees. ................................... 407
PROGNOSIS: Monetary Malpractice - ECB's LTRO Not a Solution but ................................................................................................................ 411
PROGNOSIS: Monetary Malpractice - ECB's SMP Effort Futile ............................................................................................................................. 414
PROGNOSIS: Monetary Malpractice - ECB Accepts BBB Collateral ..................................................................................................................... 416
PROGNOSIS: EU Banking Overbanked, Undercapitalized and Now Insolvent .................................................................................................... 417
PROGNOSIS: Monetary Malpractice - TARGET2 "Contingent Liabilities"............................................................................................................. 418
PROGNOSIS: Bailouts - Unsustainable & Unfundable ............................................................................................................................................ 424
MEDICAL CHARTS - Situation Critical ............................................................................................................................... 426

CHARTS- EU Real Rates ........................................................................................................................................................................................... 426
CHARTS - EU -NON Euro Members GDP RELIANCE ............................................................................................................................................ 427
CHARTS - EU GLOBAL GDP GROWTH CONTRIBUTION .................................................................................................................................... 428
CHARTS - EU PMI ........................................................................................................................................................................................................ 428
CHARTS - EU CPI ........................................................................................................................................................................................................ 430
CHARTS - Regional Risk-Reward .............................................................................................................................................................................. 431
CHARTS - Europe's "Core" Problem is France ......................................................................................................................................................... 432
CHARTS - Germany's Preoccupation with Inflation is More Than It Would Seem ............................................................................................... 435
CHARTS - Evidence OF Global Slowing Now Indisputable ..................................................................................................................................... 436
CHARTS - EU Credit Downgrades, France and UK On Tap .................................................................................................................................. 438
CHARTS - Perceived Reduction in Risk, A Temporary Aberration ......................................................................................................................... 440
CHARTS - Dangerous Delusional Divergences ........................................................................................................................................................ 442
CHARTS - IMF Projections for Euro Area and GIIPS ............................................................................................................................................... 443
CHARTS - Air Cargo Shipments Confirm Slowing Global Growth .......................................................................................................................... 444
CHARTS - Eurozone Misery Indices Never Been Higher ........................................................................................................................................ 445
CHARTS - Euro Currency ............................................................................................................................................................................................ 447
ITALY - Budget Failure on NO Growth ................................................................................................................................ 452

RESEARCH - Italys Budget Failures, Weak Growth Outlook Call Debt Sustainability Into Question ................................................................ 452
CHARTS OF PARTICULAR IMPORTANCE ............................................................................................................................................................. 457
CHARTS - ITALY - Forced Rate Cuts ........................................................................................................................................................................ 457
SITUATIONAL ASSESSEMENT ................................................................................................................................................................................. 458
ITALIAN ELECTION - What You Need to Know ....................................................................................................................................................... 458
ITALIAN ELECTION - Europe Capitulates On Austerity- Never Had The Stomach For It ................................................................................... 459
ITALIAN ELECTION - Message Given By the People.............................................................................................................................................. 461
ITALIAN ELECTION - Bad Debt Continue to Soar ................................................................................................................................................... 465
ITALIAN ELECTION - Italians React Badly to Austerity, Elections Hardly a Surprise! ......................................................................................... 468
ITALIAN ELECTION - EUROPEAN FEEDBACK - #1 .............................................................................................................................................. 468
ITALIAN ELECTION - EUROPEAN FEEDBACK - #2 .............................................................................................................................................. 470
ITALIAN ELECTION - Regional Financial Cracks in Sicily ...................................................................................................................................... 474
FRANCE - Hollande Going Down for the Count................................................................................................................... 476

RESEARCH OF PARTICULAR IMPORTANCE ....................................................................................................................................................... 477
RESEARCH - France Loses its Coveted and NEEDED AAA Rating ..................................................................................................................... 477


All Rights Reserved

CHARTS - FRANCE - GDP ......................................................................................................................................................................................... 479
CHARTS - FRANCE - UNEMPLOYMENT ................................................................................................................................................................. 480
CHARTS - FRANCE - BUDGET DEFICIT ................................................................................................................................................................. 481
CHARTS - FRANCE - TAX versus GDP .................................................................................................................................................................... 482
CHARTS - FRANCE - BUSINESS CONFIDENCE ................................................................................................................................................... 483
SITUATIONAL ASSESSMENT ................................................................................................................................................................................... 484
FRANCE - What You Need to Know .......................................................................................................................................................................... 484
FRANCE - Key Indicators ............................................................................................................................................................................................ 485
FRANCE: Sharpest Drop in Private Sector Output in Four Years........................................................................................................................... 488
FRANCE - Quits on Austerity - Never a Doubt This Would Happen ....................................................................................................................... 491
FRANCE - Socialism is Expensive.............................................................................................................................................................................. 492
FRANCE - Has Turned back to Socialism ................................................................................................................................................................. 494
FRANCE - Losing Its Way through Political Illusions and Lies ................................................................................................................................ 495
FRANCE - Uncompetitive ............................................................................................................................................................................................ 496
FRANCE - Titan Tire Calls Out French Labor ........................................................................................................................................................... 498
FRANCE - France Responds to Titan Tire................................................................................................................................................................. 500
FRANCE - What Happens In France When Companies Fire People ..................................................................................................................... 503
FRANCE - Hollande's Economically Insane campaign Promise ............................................................................................................................. 504
GERMANY - EU in the Hands Of Election ........................................................................................................................... 505

RESEARCH - Europe's Shadow Economy: As Big As Germany ............................................................................................................................ 505
CHARTS - GERMANY - Inflation ................................................................................................................................................................................ 509
CHARTS - GERMANY - IFO Investor Confidence .................................................................................................................................................... 509
CHARTS - GERMANY - ZEW Expectations .............................................................................................................................................................. 510
GERMANY - Anti Euro AfD Party May Cost Merkel in Critical September Election ............................................................................................. 513
GERMANY - The Euro Crisis Escalation over Cyprus May Politically Cripple Merkel .......................................................................................... 514
GERMANY - Call for End of "Coercive Euro Association" ....................................................................................................................................... 516
IBERIAN PENINSULA - Spain & Portugal Going Critical ..................................................................................................... 518

RESEARCH - Presidential Warning Spikes Yields To 8 Months Highs ................................................................................................................. 519
RESEARCH - Clear Signs of Desperation In Spain from a Growing Collateral Contagion .................................................................................. 521
RESEARCH - The Spanish Government's 'Bad Bank' Scam .................................................................................................................................. 522
CHARTS - PORTUGAL - Deficit Problem .................................................................................................................................................................. 524
IBERIA - Credit Downgrades - At Precipice of "Non Investment Grade"................................................................................................................ 525
IBERIA - Regional Bailout Bailouts a Massive Problem ........................................................................................................................................... 526
IBERIA - NPL Going Ballistic ....................................................................................................................................................................................... 527
IBERIA - Spanish Funding Problem............................................................................................................................................................................ 528
IBERIA - The Giant Spanish Housing Bubble, Now Beginning to Implode ............................................................................................................ 533
IBERIA - Mal-Investment Coming Home to Roost .................................................................................................................................................... 535
IBERIA - Bank Deposits Were Leaving, Now they Are Fleeing ............................................................................................................................... 536
IBERIA - Now a Capital Investment Problem ............................................................................................................................................................ 537
IBERIA - Banks on Artificial "Ponzi Bond" Life Support ............................................................................................................................................ 538
UK - New BOE Governor with More Printing Ahead ............................................................................................................ 547

RESEARCH - UK workers' wage squeeze is longest since the 1870s ................................................................................................................... 547
CHARTS - UK - Crushed Disposable Income ........................................................................................................................................................... 548
CHARTS - UK - BOE Balance Sheet Growth ............................................................................................................................................................ 549
CHARTS - UK - Lending .............................................................................................................................................................................................. 549
CHARTS - UK - Unemployment .................................................................................................................................................................................. 550
CHARTS - UK - GDP - Pre and Post Recession Levels .......................................................................................................................................... 550
CHARTS - UK - GDP .................................................................................................................................................................................................... 551
CHARTS - UK - BOE Rates ......................................................................................................................................................................................... 551
UK - What you need to Know ...................................................................................................................................................................................... 552
UK - Joins Currency War - Down 8% YTD ............................................................................................................................................................. 554
UK - Specter of Stagflation Haunts UK ....................................................................................................................................................................... 555
UK - Public Policy turns Against Austerity and PM Cameron .................................................................................................................................. 556
UK - Doomsday Debt Machine .................................................................................................................................................................................... 557
UK - QE Extension Coming ......................................................................................................................................................................................... 560


All Rights Reserved
UK - Small Business Credit Squeeze Now Acute - Loan Rejections Rising ......................................................................................................... 562
UK - Technically in a Depression ................................................................................................................................................................................ 563
CYRPUS - Latest EU Banking Crisis ................................................................................................................................... 566

CYRPUS - What you Need To Know .......................................................................................................................................................................... 566
CYRPUS - Basic Situational Charts ............................................................................................................................................................................ 568
CYPRUS - Crumbling Property Rights ....................................................................................................................................................................... 570
CYPRUS - Plan D Supersedes Plan C and B as Time running Out ....................................................................................................................... 574
CYPRUS - Forgetting About Contract Law, Private Property Rights and Due Process ....................................................................................... 577
CYPRUS - Russian Tax Haven ................................................................................................................................................................................... 578
CYPRUS - Plan B as Bad As Plan A .......................................................................................................................................................................... 579
CYPRUS - Breaks Public Trust and Incites the Politics of Germany Dictating Terms .......................................................................................... 581
CYPRUS - Does Anyone Care How a Capitalist System (versus a Crony Capitalist System) is Supposed to Work? ..................................... 587
CYPRUS - Criminal "Confidence Game" Payouts to Everyone at the Tax Payers Expense ............................................................................... 588
CYPRUS - Cyprus Pushes EU Banking Crisis Back Near the Edge ..................................................................................................................... 590
ASIA - SERIOUS CRACKS BELOW THE SURFACE .......................................................................................................................................... 591

CHINA - Credit Tightening Panic Averted - Temporarily? .................................................................................................... 591
CHARTS - CHINA - PMI ............................................................................................................................................................................................... 592
CHARTS - CHINA - PMI-2 .......................................................................................................................................................................................... 593
CHARTS - CHINA - GDP ............................................................................................................................................................................................. 594
CHARTS - CHINA - INDUSTRIAL OUTPUT ............................................................................................................................................................. 595
CHARTS - CHINA - Urban Fixed Asset Investment ................................................................................................................................................. 596
CHARTS - CHINA - RETAIL SALES .......................................................................................................................................................................... 597
RESEARCH - Investors Worried and Losing Confidence ....................................................................................................................................... 598
RESEARCH - China Stampeding into Gold ............................................................................................................................................................... 599
RESEARCH - China "Will introduce some measures to arrest the slowdown of growth in the next couple of quarters" ................................. 601
RESEARCH - Slower Growth In the Cards & Endorsed by New Chinese Leadership......................................................................................... 602
RESEARCH - Is a PBOC Controlled Speculation Bust Possible or Will It Get Out of Control ............................................................................ 604
RESEARCH - PBOC Liquidity Squeeze ..................................................................................................................................................................... 605
RESEARCH - Chinese Housing Bubble Restricting PBOC Actions ....................................................................................................................... 607
RESEARCH - PBOC Squeezing Banks towards Reducing Speculative Risk ....................................................................................................... 609
RESEARCH - Chinese Overnight Repo at 25% ........................................................................................................................................................ 611
RESEARCH - Red Flags .............................................................................................................................................................................................. 612
RESEARCH - Credit Fueled Growth in China ........................................................................................................................................................... 614
RESEARCH- PBOC Wants to Hold the Line on Explosive Credit Expansion through A Liquidity Squeeze...................................................... 619
RESEARCH - A Potentially De-Stabilizing Cash Crunch ......................................................................................................................................... 621
SITUATIONAL ANALYSIS ........................................................................................................................................................................................... 622
CHINA SHADOW BANKING - Shadow Banking System Showing Signs of Implosion ........................................................................................ 624
CHINA SHADOW BANKING - Shadow Banking and Credit Growth ...................................................................................................................... 627
CHINA SHADOW BANKING - The US Sub-Prime / CDO All Over Again ............................................................................................................. 630
CHINA SHADOW BANKING - Report ........................................................................................................................................................................ 634
CHINA SHADOW BANKING - Situation ..................................................................................................................................................................... 635
CHINA RESERVES - Distorted Foreign Reserve Levels ......................................................................................................................................... 636
CHINA RESERVES - Declining Reserve Accumulation ........................................................................................................................................... 638
CHINA RESERVES - Has Caught the Gold Bug big time! ....................................................................................................................................... 640
CHINA CURRENCY WARS - Hot Money into China ................................................................................................................................................ 642
CHINA - Withdraws Liquidity ....................................................................................................................................................................................... 643
CHINA - Socit General Sees a Likely Soft Landing! ............................................................................................................................................. 645
CHINA - True Debt is Orders of Magnitude More than Officially Being Reported ................................................................................................. 655
CHINA - Evidence OF Slowing Now Indisputable ..................................................................................................................................................... 658
CHINA - PMI Improvement .......................................................................................................................................................................................... 659
CHINA - Political Transition & Ongoing Emergence as a Super Power ................................................................................................................. 662
CHINA - An Implicit Social Contract ............................................................................................................................................................................ 664
CHINA - Manipulated Statistics due to Upcoming Decade Long Regime Change ............................................................................................... 666
CHINA - Increasing Leverage is China's Way of Monetary Easing ........................................................................................................................ 667
CHINA - Possible Interest-Rate Liberalization ........................................................................................................................................................... 668
CHINA - Global Impact of China's Slowdown ............................................................................................................................................................ 669
CHINA - Shanghai Composite at 2008 Low Levels .................................................................................................................................................. 671
CHINA - Shanghai Composite Warnings Signs ......................................................................................................................................................... 672
CHINA - Credit to GDP ................................................................................................................................................................................................. 674
CHINA - A Slow Recovery Through 2013 .................................................................................................................................................................. 675
CHINA - Manufacturing PMI in Contraction Territory ................................................................................................................................................ 677


All Rights Reserved
JAPAN: The New Currency War Front ................................................................................................................................ 681

RESEARCH - Japanese Structural Problems a "Canary" for Western Developed Economies........................................................................... 681
07-15-13-JAPAN - Shinzo Abe Hasn't the Stomach for the Heavy Lifting Needed to Accompany ABE-nomics. ............................................. 684
RESEARCH - A Credit Squeeze Leads Deflationary Leg Down ............................................................................................................................ 686
RESEARCH - Some Japanese Policies Have Clearly Hit the Limit ........................................................................................................................ 687
RESEARCH - The ABE (Asset Bubble Evaluator) Index ......................................................................................................................................... 689
CHARTS - JAPAN - GDP Resurgence ....................................................................................................................................................................... 690
CHARTS - JAPAN - BOJ Balance Sheet ................................................................................................................................................................... 691
JAPAN - What You Need to Know .............................................................................................................................................................................. 694
JAPAN - Regional Risk-Reward .................................................................................................................................................................................. 696
JAPAN - Now the Frontrunner of Outright Monetization. ......................................................................................................................................... 697
JAPAN - Yen Devaluation ............................................................................................................................................................................................ 698
JAPAN - New Bank of Japan Policy - 2% Inflation in 2 Years ................................................................................................................................. 699
JAPAN - Appoints BOJ Governor Firmly Committed to Printing Money................................................................................................................. 701
JAPAN - Third Straight Quarter of Recession ........................................................................................................................................................... 703
JAPAN - Full Out War on Deflation ............................................................................................................................................................................. 703
JAPAN - First Test of the new found dominance of the Central Banks ............................................................................................................... 705
JAPAN - BOJ Was Next Up. No Surprise .................................................................................................................................................................. 708
JAPAN - Negative Current Account Balance and -3.5% Recession ....................................................................................................................... 710
JAPAN - A 50% Over-Valued Yen Has Undermined Self Confidence & Drive...................................................................................................... 713
JAPAN - Proves QE's Low Cost of Capital Does Structural Damage to Economy ............................................................................................... 715
JAPAN - BOJ Being Pressured to "Rip-Up Government Debt"1 ............................................................................................................................. 717
JAPAN - Easy Money Has Hurt Corporate Profitability in the Longer Term .......................................................................................................... 723
JAPAN - The Biggest Debtor with the Biggest Problem! .......................................................................................................................................... 726
JAPAN - A Magnitude Larger Problem than Europe................................................................................................................................................. 730
JAPAN - QE 9 A Complete Failure - Actually "Tightens" versus It's Intended Easing .......................................................................................... 736
JAPAN - Japanese Yen Continuously Under Attack ............................................................................................................................................... 740
JAPAN - Vast foreign US$ Coming Home for "Claim" .............................................................................................................................................. 741
JAPAN - PMI Breakdown ............................................................................................................................................................................................ 743
JAPAN - Exports Continue To Tumble ....................................................................................................................................................................... 745
JAPAN - Intervention Fails Again - It's a Whole new Ball Game ............................................................................................................................. 746
JAPAN - First Signs of Massive Debt Monetization After Next Election ................................................................................................................. 749
JAPAN - Japan to the ESM's Rescue ........................................................................................................................................................................ 749
EMERGING MARKETS - SYNCHRONIZED MARKETS ................................................................................................................................. 751

EMERGING MARKETS - Stunning Withdrawals ...................................................................................................................................................... 751
EMERGING MARKETS - Bond Outflows Accelerating ............................................................................................................................................ 752
EMERGING MARKETS - This will make the 1997 Asian Crisis Seem Like an Early Warning ........................................................................... 754
EMERGING MARKETS - Developing Nations Feeling the Pain of Global Deleveraging Acceleration .............................................................. 756
EMERGING MARKETS - The Impact of "TAPER" ................................................................................................................................................... 758
CHARTS - Reserves versus World ............................................................................................................................................................................. 762
CHARTS - Current Account Balances versus GDP .................................................................................................................................................. 763
CHARTS - Emerging Markets Index versus MSCI World Index .............................................................................................................................. 764
CHARTS - SINGAPORE - Inflation ............................................................................................................................................................................. 765
CHARTS - SINGAPORE - Exports ............................................................................................................................................................................. 766
CHARTS - SOUTH KOREA ......................................................................................................................................................................................... 767
CHARTS - TURKEY - Spreads ................................................................................................................................................................................... 768
EMERGING MARKETS - What you Need to Know .................................................................................................................................................. 769
EMERGING MARKETS - Comparative Ease of Doing Business ............................................................................................................................ 771
EMERGING MARKETS - Importance of Employment, Equality and Per Capital Income .................................................................................... 772
ASIA ................................................................................................................................................................................................................................ 775
ASIA: CHARTS - AUSTRALIA .................................................................................................................................................................................... 776
ASIA - Regional Risk-Reward...................................................................................................................................................................................... 777
ASIA - Corporate Debt Levels Reflect Unintended Consequences of Mispricing & Malinvestment ................................................................... 778
ASIA - Synchronized Markets ...................................................................................................................................................................................... 783
ASIA - Caution Advised Regarding Positive South Korea Export Turnaround ...................................................................................................... 785
ASIA - Export Growth Looks Similar to Pre-2008...................................................................................................................................................... 786


All Rights Reserved
ASIA - Global Slowing Quickly a Worsening Situation Across Asia ........................................................................................................................ 787
ASIA - Risks All on the Downside for Asia ................................................................................................................................................................. 788
ASIA - Demographic Headwinds ................................................................................................................................................................................. 790
ASIA - Pronounced Flight to Singapore Safety ......................................................................................................................................................... 791
BRICS ............................................................................................................................................................................................................................. 793
BRICS - A Development Bank-Forex Reserve Pool-African Integration ................................................................................................................ 793
BRICS - 40% of World Population and 25% of World GDP ..................................................................................................................................... 794
BRICS - $3 to $13B GDP in Ten Years ...................................................................................................................................................................... 797
BRICS- A World Wide Distrust of Financial Markets Building ................................................................................................................................. 799
BRAZIL - Inflation will remain high thanks to a "growth mismatch". ...................................................................................................................... 801
RUSSIA - Central bank will hike rates if inflation and oil prices continue to rise. .................................................................................................. 802
INDIA - Inflation ............................................................................................................................................................................................................. 803
INDIA - Will be fine as long as it continues to reduce its deficit............................................................................................................................... 804
INDIA - Watch Out For RE-Emergence of Food Price Inflation ............................................................................................................................... 805
US ECONOMY ......................................................................................................................... 807

THE GLOBAL MACRO OVERLAY ............................................................................................................................................................. 809
MACRO - US Macro Data Divergence ................................................................................................................................. 809
MACRO - US Macro Surprise Index .................................................................................................................................... 811
MACRO - Serious Structural US Problems Impeding Global Competitive ............................................................................ 814
MACRO - First Half In Charts .............................................................................................................................................. 816
US INVESTMENT CYCLE........................................................................................................................................................................... 825
GORD'S BIG PICTURE ECONOMIC CYCLE ...................................................................................................................... 825
ECONOMIC INDICATORS.................................................................................................................................................. 826
MONTHLY INDICATORS OF NOTE .......................................................................................................................................................................... 826
RESEARCH - The US Economy Continues to Tank Under Obama ....................................................................................................................... 826
REFERENCE CHARTS ............................................................................................................................................................................................... 829
THE CURRENT BUSINESS CYCLE - SITUATIONAL ANALYSIS ....................................................................................... 833

BUSINESS CYCLE - JOBS > CONFIDENCE > CONSUMPTION > GROWTH CYCLE ....................................................... 833
BUSINESS CYCLE - JOBS ................................................................................................................................................. 835
CHARTS & TABLES ..................................................................................................................................................................................................... 837
CHARTS - Underemployment Gap ............................................................................................................................................................................. 837
CHARTS - Employment to Population and Labor Slack........................................................................................................................................... 837
CHARTS - Participation Rate ...................................................................................................................................................................................... 838
CHARTS - Part Time Employment.............................................................................................................................................................................. 838
REFERENCE - Prior Posts .......................................................................................................................................................................................... 846
BRIDGING : Jobs to Confidence & Sentiment .......................................................................................................................................................... 846
JOBS: Participation Rate at 1979 Carter Levels ....................................................................................................................................................... 850
BUSINESS CYCLE - CONSUMER & BUSINESS SENTIMENT .......................................................................................... 852

CHARTS & TABLES ..................................................................................................................................................................................................... 854
CHARTS - NFIB Small Business Sentiment .............................................................................................................................................................. 854
CHARTS - Orange Book .............................................................................................................................................................................................. 854
RESEARCH OF NOTE................................................................................................................................................................................................. 855
RESEARCH - Financial Stress Index Sends Market Clue ....................................................................................................................................... 855
RESEARCH - Consumer Confidence and the Mortgage Spike "Peak Signal" ...................................................................................................... 856
RESEARCH - Contrarian Breadth Rule...................................................................................................................................................................... 857
SENTIMENT: Consumer, Investor & Trader ............................................................................................................................................................. 860
Consumer Confidence - Conference Board ............................................................................................................................................................... 860
Consumer Confidence - Up but Sending Concern Signals .................................................................................................................................. 863
Consumer Sentiment - Michigan ................................................................................................................................................................................. 866
Consumer Comfort ........................................................................................................................................................................................................ 867
Investors Intelligence .................................................................................................................................................................................................... 868
American Association of Independent Investors ....................................................................................................................................................... 868
National Association of Active Investment Managers (NAAIM) ............................................................................................................................... 869
Small Business Optimism ............................................................................................................................................................................................ 870
BUSINESS CYCLE CONSUMPTION ............................................................................................................................... 871

CHARTS & TABLES ..................................................................................................................................................................................................... 874
CHARTS - Real Disposable Personal Income ......................................................................................................................................................... 874
CHARTS - Real Consumption Expenditure .............................................................................................................................................................. 874
CHARTS - Consumer Credit Deleveraging ............................................................................................................................................................... 875
CHARTS - Core Retail Growth ................................................................................................................................................................................... 876
RESEARCH OF NOTE................................................................................................................................................................................................. 876
RESEARCH - The Destruction Of America's Middle Class ..................................................................................................................................... 876
RESEARCH - Dramatic Slowing in Restaurant Business ........................................................................................................................................ 877


All Rights Reserved
RESEARCH - Signs of Serious Troubles ................................................................................................................................................................... 878

RESEARCH - Falling Real Disposable Income means Falling Consumption........................................................................................................ 881
BUSINESS CYCLE - GROWTH .......................................................................................................................................... 883

CHARTS & TABLES ..................................................................................................................................................................................................... 886
CHARTS - Manufacturing ............................................................................................................................................................................................ 886
CHARTS - Exports ........................................................................................................................................................................................................ 886
CHARTS - Durable Goods ........................................................................................................................................................................................... 887
CHARTS - NFIB Small Business CAPEX .................................................................................................................................................................. 887
CHARTS - US Manufacturing Conditions Deteriorating ........................................................................................................................................... 888
RESEARCH OF NOTE................................................................................................................................................................................................. 888
RESEARCH - Shrinking CAPEX, Expanding Buybacks and Dividends ................................................................................................................. 888
REFERENCE - Prior Posts .......................................................................................................................................................................................... 892
GROWTH: US Economic Recovery Has Peaked ..................................................................................................................................................... 892
ECONOMIC CYCLE, INVESTMENT CYCLE, SECTOR ROTATION ................................................................................... 897

US RECESSION A LOOMING US RECESSION ......................................................................................................................................... 901
RECESSION - Why a Looming Recession May Be Near ........................................................................................................................................ 901
RECESSION - Minimally in the Back Stretch of the Recovery ................................................................................................................................ 906
RECESSION - Reduced Household Income at the Core of the Growth of the Federal Reserve Balance Sheet ............................................ 912
RECESSION - Household Income and Signs of A Collapsing Middle Class ........................................................................................................ 914
RECESSION - More Cyclical Signs of a US Recession ........................................................................................................................................... 914
RECESSION - A Lack of Demand .............................................................................................................................................................................. 915
RECESSION - Money Going to Cash But Equity Inflows Still Suggest Corrective Correlation ........................................................................... 917
RECESSION - More and More Signals Flashing ...................................................................................................................................................... 920
RECESSION - Term Structures Suggest Signs of a US Recession Ahead .......................................................................................................... 922
DETROIT - A FAILURE OF PUBLIC POLICY TO RESPOND TO STRUCTURAL CHANGE.................................................................................. 924

DETROIT - By the Numbers ........................................................................................................................................................................................ 925
DETROIT - The News Reporting................................................................................................................................................................................. 926
DETROIT - A Structural Problem that Failed to be Politically Addressed .............................................................................................................. 928
RETIREMENT CRISIS NOW BEGINNING TO TAKE HOLD ........................................................................................................................ 929

ENTITLEMENTS - Underfunded and Unsustainable ................................................................................................................................................ 929
RETIREMENTS .................................................................................................................................................................. 932

RETIREMENT 35 Facts to Scare a Baby Boomer................................................................................................................................................. 932
RETIREMENT: $205K Account Limits ....................................................................................................................................................................... 934
RETIREMENT: $3M Retirement Cap Unanswered .................................................................................................................................................. 936
HEALTHCARE OBAMACARE.......................................................................................................................................... 938

HEALTHCARE - What Does Heart Surgery Really Cost, And Why Is It 70 Times More Expensive In The US? ............................................. 938
HEALTHCARE - UPS Drops 15,000 Spouses From Health Plan, Blames Obamacare ...................................................................................... 939
STATISITICS - MORE FIXES TO GDP AND CPI........................................................................................................................................... 941

FALSIFICATION - Government Data Knowingly Inaccurate According to Former BLS Head............................................... 941
ENTITLEMENTS - Stealth Reform through "Chained CPI" Changes ................................................................................... 943
CHAINED CPI - Both A Cut and Tax .......................................................................................................................................................................... 943
CHAINED CPI - Reason It Hits So Hard .................................................................................................................................................................... 945
GDP - Growth Through Manipulation................................................................................................................................... 949

GDP - BEA Will Change The GDP Calculation To Boost Economy By 3% In July ............................................................................................... 951
GDP - US GDP Makeover ............................................................................................................................................................................................ 954
US PUBLIC POLICY - SOME NOTABLE POLICY PROBLEMS............................................................................................................. 959

POLICY - Pointing US Towards Government Dependence ..................................................................................................................................... 961
POLICY - Yet Another Game of Deception ................................................................................................................................................................ 965
POLICY - Obamacare A Flawed Public Policy Implementation .............................................................................................................................. 968
POLICY - Financial Repression and Manipulated Illusions...................................................................................................................................... 971
POLICY - US Economic Decline is Obvious to Anyone Caring to Look ................................................................................................................. 976
POLICY - Policy Uncertainty and Confidence in Monetary Policy Direction is exposed ...................................................................................... 979
POLICY - "What is Good for GM is Good for America" is no longer correct .......................................................................................................... 981
POLICY - Where is the Logic In US Public Policy ..................................................................................................................................................... 982
POLICY- What is the Real Driving Force Behind the New Immigration Law? ....................................................................................................... 985
POLICY - Crony Capitalism and How America Lost its Way! .................................................................................................................................. 988
MONETARY POLICY - TAPER & THE NEW FED CHAIR.............................................................................................................................. 992

TAPER ................................................................................................................................................................................ 995
TAPER - The Fed Cannot Possibly "Exit" Without The Market Crumbling ............................................................................................................ 997
TAPER - It Matters and the Fed Has Few Options As Quality Collateral Disappears. ......................................................................................... 998
TAPER - Why Fed Bond Buying Can't Go on Indefinitely and Why TAPER........................................................................................................ 1000
TAPER - Political "Push-Back" by the Fed ............................................................................................................................................................... 1001
10


All Rights Reserved
TAPER - Ending QE Will Pressure Fiscal Policy ..................................................................................................................................................... 1003

TAPER - Delay Risks Bond Market Volatility as Private Availability Steadily Shrinks ........................................................................................ 1007
TAPER - Clearly A Bluff or Muddled Policy ............................................................................................................................................................. 1010
TAPER - Why is the Fed Talking TAPER? .............................................................................................................................................................. 1012
TAPER - The Fed is Unlikely to Taper ..................................................................................................................................................................... 1015
TAPER - Fed Trapped in a Box ................................................................................................................................................................................. 1017
BOND SCARE .................................................................................................................................................................. 1018

BOND SCARE - The Bearish Bond Trend Has Resumed ..................................................................................................................................... 1018
BOND SCARE - Bonds (TLT) Break Important Support ........................................................................................................................................ 1020
A NEW FED CHAIRMAN .................................................................................................................................................. 1021

RESEARCH OF NOTE ..................................................................................................................................................... 1023
RESEARCH - Reduction at the Core of the Growth of the Federal Reserve Balance Sheet ............................................................................ 1023
RESEARCH - Fed's Excess Reserves are 51% Foreign Banks, 49% Domestic ................................................................................................ 1026
RESEARCH - A Game of Calculated Deception is Evolving to Something Worse ............................................................................................. 1028
RESEARCH - A Loan Distribution Credit Bubble .................................................................................................................................................... 1029
RESEARCH- QE To be Replaced with Guidance, Thresholds and Promises .................................................................................................... 1030
RESEARCH - Bernanke in a Box and Talking Out of Both Sides of Your Mouth ............................................................................................... 1032
RESEARCH - Duration Extraction: The Hidden Fed Game ................................................................................................................................... 1033
RESEARCH - The Fed's Stated Guidance Sign-Posts .......................................................................................................................................... 1035
RESEARCH - An Artificial Market ............................................................................................................................................................................. 1037
RESEARCH - Bank Reserves A Ticking Bomb, But Who Will Be Caught in the Blast? .................................................................................... 1037
RESEARCH - QE : An Intentionally Broken Mechanism Due to 2008 Policy Payable Interest on Bank Reserves ........................................ 1041
RESEARCH - QE Ineffective In Increasing GDP .................................................................................................................................................... 1042
REFERENCE - Prior Posts................................................................................................................................................ 1043

MONETARY: Helicopter Money of Central Bank Bond Purchases are Forever ................................................................................................. 1043
MONETARY: Central Bank Balance Sheet Expansion and the Theoretical Path to SPX of 1950 ................................................................... 1045
MONETARY: Central Bank Balance Sheet Expansion versus CPI ...................................................................................................................... 1047
MONETARY: The Fed Model No Longer Prices Risk ............................................................................................................................................ 1047
CHARTS: Fed Deliberately ignoring data on both growth and inflation ................................................................................................................ 1053
CHARTS: US Economic Activity ............................................................................................................................................................................... 1054
CHARTS: Effects of QE on S&P 500 ........................................................................................................................................................................ 1056
CHARTS: Monetary Velocity versus Monetary Base .............................................................................................................................................. 1057
CHARTS: Days Between 'Unsterilized' Actions ....................................................................................................................................................... 1058
CHARTS: FOMC Economic Projections .................................................................................................................................................................. 1058
CHARTS: Taylor Rule & Evans Rule Estimates of Fed Funds Rates .................................................................................................................. 1059
CHARTS: Market Pricing In A Longer On-Hold Fed ............................................................................................................................................... 1059
CHARTS: Fed Balance Sheet Assets & Liabilities .................................................................................................................................................. 1060
CHARTS: Fed Policy Turns 180 Degrees ................................................................................................................................................................ 1060
CHARTS: US Banking Industry Concentration ........................................................................................................................................................ 1061
CHARTS: Total Credit Market Debt as % GDP ....................................................................................................................................................... 1062
CHARTS: Debt-to-GDP Ratio Above What Caused Great Depression ............................................................................................................... 1063
CHARTS: Yield Chase Completely Distorted .......................................................................................................................................................... 1063
CHARTS: Velocity of Money ...................................................................................................................................................................................... 1066
CHARTS: Real Negative Rates ................................................................................................................................................................................. 1069
CHARTS: Short Interest Rates a Fed Problem ....................................................................................................................................................... 1071
FISCAL POLICY - IT'S THAT TIME OF YEAR AGAIN!! ......................................................................................................................... 1073

CHARTS & TABLES ......................................................................................................................................................... 1076
CHARTS - Government Receipts & Outlay Growth Improves Significantly ......................................................................................................... 1077
CHARTS - Federal Budget Surplus / Deficit ............................................................................................................................................................ 1077
CHARTS - Real Federal Government Purchases ................................................................................................................................................... 1078
CHARTS - US Trade Balance Improvement............................................................................................................................................................ 1078
RESEARCH OF NOTE............................................................................................................................................................................................... 1079
RESEARCH - Congress Divided as Federal Government Shutdown Looms ...................................................................................................... 1079
RESEARCH - Avoiding Taxes ................................................................................................................................................................................... 1081
RESEARCH - A Confluence Of Risky Economic Events ....................................................................................................................................... 1082
RESEARCH - Everyone Hates Sequestration, But Few Can Agree On What to Cut ......................................................................................... 1083
RESEARCH - $70T Off-Balance Sheet Federal Liabilities .................................................................................................................................... 1085
REFERENCE - Previous Posts ................................................................................................................................................................................. 1088
CHARTS: Growth & Jobs ........................................................................................................................................................................................... 1088
CHARTS: Taxes & Spending ..................................................................................................................................................................................... 1091
CHARTS: Politics & Policy ......................................................................................................................................................................................... 1094
CHARTS: The Stakes ................................................................................................................................................................................................. 1095
CHARTS: Payroll Tax Holiday ................................................................................................................................................................................... 1098
11


All Rights Reserved
CHARTS: Tax Rate Comparisons ............................................................................................................................................................................. 1099

CHARTS: Risk Perceptions ....................................................................................................................................................................................... 1100
CHARTS: 2013 Quarterly Impact .............................................................................................................................................................................. 1101
CHARTS: Budget Deficit ............................................................................................................................................................................................ 1102
CHARTS: Sovereign Debt .......................................................................................................................................................................................... 1105
CHARTS: State & Local Government Drag ............................................................................................................................................................. 1106
CHARTS: Government Dependence ........................................................................................................................................................................ 1109
CHARTS: Coming Demographic Shock ................................................................................................................................................................... 1109
CHARTS - Fiscal Cliff Outcome ................................................................................................................................................................................ 1113
BUDGET - What You Need to Know ................................................................................................................................. 1115

BUDGET: As Represented and Spun for the Public ............................................................................................................................................... 1115
BUDGET: A Budget That Institutionalizes Big Government .................................................................................................................................. 1117
BUDGET: The Secrets in The Budget ...................................................................................................................................................................... 1121
KEY DRIVERS - CATALYSTS OF CHANGE .......................................................................................................................................... 1124

EMPLOYMENT ................................................................................................................................................................. 1128
CHARTS & TABLES ................................................................................................................................................................................................... 1128
CHARTS - Nonfarm Payrolls Y-O-Y DECLINE ....................................................................................................................................................... 1128
CHARTS - Hiring Stalled at 200K Per Month (Approximates ONLY the New People Entering Workforce) ................................................... 1128
CHARTS - The Under-Employment Gap ................................................................................................................................................................. 1129
CHARTS Staycations A Sign of the FEAR of Job Loss & Competition for Jobs .............................................................................................. 1129
RESEARCH OF NOTE............................................................................................................................................................................................... 1131
RESEARCH - Low-Wage Jobs Bias Continues to Hamper U.S. Recovery ......................................................................................................... 1131
RESEARCH - A REAL Family Wage versus Part Time & HES ............................................................................................................................. 1133
RESEARCH - It is as Much About the Quality, as the Quantity of Jobs ............................................................................................................... 1140
REFERENCE - Prior Posts ........................................................................................................................................................................................ 1142
1- CAPITAL SPENDING ............................................................................................................................................................................................ 1142
2- SMALL BUSINESS OPTIMISM ............................................................................................................................................................................ 1145
3- DEMOGRAPHIC SHIFT ........................................................................................................................................................................................ 1149
REAL DISPOSABLE INCOME .......................................................................................................................................... 1160

CHARTS & TABLES ................................................................................................................................................................................................... 1160
CHARTS - Household Incomes a Sign of a Collapsing Middle Class .................................................................................................................. 1160
CHARTS - Food Stamps Now 14% of US Grocery Store Sales ........................................................................................................................... 1160
RESEARCH OF NOTE............................................................................................................................................................................................... 1161
RESEARCH - Standards of Living and Artificial Expectations ............................................................................................................................... 1161
RESEARCH - A Lack of Demand in US Economy .................................................................................................................................................. 1164
RESEARCH - Full Time Jobs or Food Stamps & Disability? ................................................................................................................................. 1165
STANDARD OF LIVING - Salary Compression ...................................................................................................................................................... 1167
DISPOSABLE INCOME - 66M (20%) Below $28.8/Year Subsistence Level ...................................................................................................... 1168
FOOD STAMPS - 46,405,204 Individuals, 22,257,647 Households below Poverty Line ................................................................................... 1170
DISPOSABLE INCOME - Bad Even in Nominal Terms ......................................................................................................................................... 1171
US RESIDENTIAL REAL ESTATE .................................................................................................................................... 1174

CHARTS & TABLES ................................................................................................................................................................................................... 1174
CHARTS: Household Formations ............................................................................................................................................................................. 1174
CHARTS - Housing Starts .......................................................................................................................................................................................... 1174
CHARTS - Composition of Housing Sales ............................................................................................................................................................... 1175
CHARTS: New Home Sales ...................................................................................................................................................................................... 1175
CHARTS: Existing Residential Supply ..................................................................................................................................................................... 1176
CHARTS - Housing Starts .......................................................................................................................................................................................... 1177
RESEARCH OF NOTE............................................................................................................................................................................................... 1178
RESEARCH - Household Formation Drives Residential Real Estate ................................................................................................................... 1178
OVERVIEW.................................................................................................................................................................................................................. 1180
CURRENT SITUATIONAL ANALYSIS ..................................................................................................................................................................... 1184
CURRENT HOME OWNERSHIP TRENDS ............................................................................................................................................................. 1184
NATIONAL STATISTICS: PRICE ............................................................................................................................................................................. 1188
NATIONAL STATISTICS: EXISITNG HOME SALES ............................................................................................................................................. 1190
NATIONAL STATISTICS: NEW HOME SALES ...................................................................................................................................................... 1192
RESEARCH OF NOTE............................................................................................................................................................................................... 1193
US COMMERCIAL REAL ESTATE ................................................................................................................................... 1199

OVERVIEW.................................................................................................................................................................................................................. 1199
NATIONAL STATISTICS: COMMERCIAL REAL ESTATE.................................................................................................................................... 1200
RESEARCH OF NOTE............................................................................................................................................................................................... 1201
CAPITAL SHRUGGED .............................................................................................................................................................................. 1206
12


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"TAPER" & A New Fed Chair

Fed in a Box as the Recovery Stalls and a US Recession Looms

GLOBAL MACRO TIPPING POINTS - SEPTEMBER 2013

1 September 2013 Edition

Restricted & Confidential

"TAPER" & A New Fed Chair

MACRO MONITORING INSTITUTIONS ............................................................................................................................... 31

GLOBAL RISK SIGNALS ...................................................................................................................................................... 72

RISK - GLOBAL RISK REWARD .......................................................................................................................................... 99

GLOBAL MACRO: RISK LEVELS .............................................................................................................................................................. 104

AGGREGATED RISK LEVEL .............................................................................................................................................. 112

September 2013 Edition

Restricted & Confidential

IV - EU BANKING CRISIS ................................................................................................................................................... 130

GLOBAL MACRO ................................................................................................................... 175

ECONOMIC WARNINGS .................................................................................................................................................... 214

GLOBAL MACRO: INDICATORS ............................................................................................................................................................... 232

GLOBAL GROWTH............................................................................................................................................................. 239

GOBAL UNEMPLOYMENT ................................................................................................................................................. 249

GLOBAL TRENDS .............................................................................................................................................................. 258

GLOBAL SENTIMENT ........................................................................................................................................................ 271

GLOBAL INFLATION .......................................................................................................................................................... 283

September 2013 Edition

Restricted & Confidential

GLOBAL MACRO: MONETARY POLICY & CENTRAL BANKING ........................................................................................................ 286

GLOBAL CENTRAL BANKING ........................................................................................................................................... 297

- Austerity Now Officially Dead Public Policy ........................................................................................................................... 297

EMERGING MARKETS ...................................................................................................................................................... 316

BOE - UK ............................................................................................................................................................................ 320

FED - US............................................................................................................................................................................. 321

BOJ - JAPAN ...................................................................................................................................................................... 327

ECB - EU ............................................................................................................................................................................ 340

GEO-POLITICAL TENSIONS ..................................................................................................................................................................... 346

CHINA LIQUIDITY TIGHTENING SCARE ........................................................................................................................... 355

CURRENCY WARS BECOMING RATE WARS .................................................................................................................. 375

September 2013 Edition

Restricted & Confidential

ARGENTINA - Here we Go Again!.............................................................................................................................................................................. 385

CYBER WARS - GROWING THREAT ................................................................................................................................ 389

IRAN & SYRIA - COMPLETE MIDDLE EAST DOMINATION .............................................................................................. 392

REGIONAL ............................................................................................................................... 395

MEDICAL CHARTS - Situation Critical ............................................................................................................................... 426

ITALY - Budget Failure on NO Growth ................................................................................................................................ 452

FRANCE - Hollande Going Down for the Count................................................................................................................... 476

September 2013 Edition

Restricted & Confidential

CHARTS OF PARTICULAR IMPORTANCE ............................................................................................................................................................. 479

GERMANY - EU in the Hands Of Election ........................................................................................................................... 505

IBERIAN PENINSULA - Spain & Portugal Going Critical ..................................................................................................... 518

UK - New BOE Governor with More Printing Ahead ............................................................................................................ 547

September 2013 Edition

Restricted & Confidential

CYRPUS - Latest EU Banking Crisis ................................................................................................................................... 566

ASIA - SERIOUS CRACKS BELOW THE SURFACE .......................................................................................................................................... 591

September 2013 Edition

Restricted & Confidential

JAPAN: The New Currency War Front ................................................................................................................................ 681

EMERGING MARKETS - SYNCHRONIZED MARKETS ................................................................................................................................. 751

September 2013 Edition

Restricted & Confidential

US ECONOMY ......................................................................................................................... 807

THE CURRENT BUSINESS CYCLE - SITUATIONAL ANALYSIS ....................................................................................... 833

BUSINESS CYCLE - CONSUMER & BUSINESS SENTIMENT .......................................................................................... 852