Cracks in The Facade: Regional Update

CRACKS IN THE FACADE
Chaotic Turmoil A Sign of What is to Come
REGIONAL UPDATE
GLOBAL MACRO TIPPING POINTS - FEBRUARY 2015
1/28/2015
1 February 2015 Edition

Copyright 2015 Gordon T. Long All Rights Reserved
Restricted & Confidential

general@GordonTLong.com
CRACKS IN THE FACADE

Chaotic Turmoil a Sign of What is to Come
GLOBAL MACRO TIPPING POINTS - FEBRUARY 2015
TIPPING POINTS .................................................................................................................................... 26

GLOBAL MACRO: RISK ASSESSMENT .................................................................................................................................. 26
POSITIONAL FRAMEWORK: "WE ARE HERE!".................................................................................................................................................... 26
LIQUIDITY is Neither WEALTH nor COLLATERAL ................................................................................................................................................ 27
Our Assessment ................................................................................................................................................................................................ 27
NEW-James Rickards Global Risk Assessment .............................................................................................................................................. 40
MACRO MONITORING INSTITUTIONS ................................................................................................................................................................. 88
NEW-LATEST FROM THE MONITORS ........................................................................................................................................................... 88
RESEARCH OF NOTE .................................................................................................................................................................................. 92
NEW-MONITORS - World Bank warns 100M Unemployed, 447M Working Poor, 600M Required for Population Growth Alone ....... 92
NEW-MONITORS - World Bank Says 300M Young People neither Working nor Studying ..................................................................... 93
NEW-MONITORS - IMF warns of new threats to global economy due to excessive risk taking .............................................................. 94
BIS ..................................................................................................................................................................................................................... 97
NEW-BIS - BIS warns on 'violent' reversal of global markets ....................................................................................................................... 97
WEF (WORLD ECONOMIC FORUM) - JANUARY 2014 ............................................................................................................................... 100
WEF GLOBAL RISKS The World Economic Forum - Inequality has become a global challenge .................................................. 100
WEF GLOBAL RISKS The World Economic Forum - 10 Global Risks of Highest Concern ............................................................ 104
WEF GLOBAL RISKS Global Competitive Rankings Fragile 5 & Forgotten 4...................................................................................... 106
WEF GLOBAL RISKS The 17 Biggest Risks to Our Hyper-Connected World ........................................................................................ 108
WEF GLOBAL RISKS Global Economic, Geo-Political & Societal Risks ................................................................................................ 116
IMF ................................................................................................................................................................................................................... 123
NEW-IMF, WORLD ECONOMIC OUTLOOK - OCTOBER 2014 ................................................................................................................ 123
IMF, WORLD ECONOMIC OUTLOOK Prior Year - JANUARY 2014 .................................................................................................. 125
NEW-IMF, FINANCIAL STABILITY REPORT OCTOBER 2014 .............................................................................................................. 131
IMF, FINANCIAL STABILITY REPORT Prior Year - OCTOBER 2013 ................................................................................................ 133
OECD, WORLD ECONOMIC OUTLOOK NOVEMBER 2013 ..................................................................................................................... 136
SITUATIONAL ANALYSIS ..................................................................................................................................................................................... 139
RESEARCH WE FOLLOWED ......................................................................................................................................................................... 139
RESEARCH OF NOTE .................................................................................................................................................................................... 140
NEW- IN MAJOR PIVOTAL Speech Putin Unleashes Fury at US Follies ....................................................................................... 140
NEW- Putin Warns Of Risk of Major Conflict, Says Dollar Losing Reserve Currency Status .................................................................... 141
NEW- Putin Accuses U.S. of Blackmail, Weakening Global Order ............................................................................................................. 143
FOURTH TURNING ACCELERATING ....................................................................................................................................................... 146
AMERICAS GLOBAL RETREAT ................................................................................................................................................................ 157
THE OLD WORLD ORDER IS OVER ......................................................................................................................................................... 160
THE DEMOGRAPHIC THREAT TO DEVELOPED NATIONS ................................................................................................................... 161
THE RISK CONTINUUM ............................................................................................................................................................................. 164
GLOBAL TRENDS THE SIX FRAMING MEGATRENDS ........................................................................................................................ 165
GLOBAL THEMES TEN STRUCTURALTHEMES FOR STRATEGY ..................................................................................................... 168
DEBT SATURATION - A COLLAPSING PONZI SCHEME......................................................................................................................... 170
WINTER 2014 EVENT RISK DOMINATES ............................................................................................................................................... 172
RISK SIGNALS ........................................................................................................................................................................ 179

GEO-POLITICAL RISK Tensions & Conflicts ..................................................................................................................................................... 179
GLOBL GOVERNANCE RISK Failure of Political Leadership & Public Policies ............................................................................................... 181
NEW-EMERGING BRICS ALLIANCE NEW MULTI-POLAR WORLD ........................................................................................................ 181
MULTI-POLAR-Money Supply The New World Economy ....................................................................................................................... 181
MULTI-POLAR-Financial Globalist Impose Monetary Hegemony .............................................................................................................. 183
MULTI-POLAR-Financial Globalists Controlling the Political Process ........................................................................................................ 185
NEW- ADVANCING GLOBAL FINANCIAL REPRESSION ............................................................................................................................ 188
NEW-HENRY KISSINGER CALLS FOR NEW WORLD ORDER (NWO) ..................................................................................................... 190
KISSINGER- Henry Kissingers World Order ............................................................................................................................................ 190
NEW-G20 MEETING AUSTRALIA SEPTEMBER 2014 .......................................................................................................................... 193
G20- Reaffirms Vow to Boost Global Growth .............................................................................................................................................. 193
G20- G20 nations back Putin to attend November summit ......................................................................................................................... 195
NEW-BRAZIL ELECTIONS ............................................................................................................................................................................ 196
BRAZIL- Incumbent President Dilma Rousseff win Narrow Victory Major Social Entitlement Problems Unresolved ............................. 196
BRAZIL- Markets React Badly Down 6% on Election News .................................................................................................................... 199
BRAZIL- Falling Commodity Exports Leave Little Flexibility to Address Public Demand for Public Services ............................................ 200
BRAZIL- Rousseff represents Continuation and Not Structural Change .................................................................................................. 202
NEW-UKS UKip .......................................................................................................................................................................................... 204
UK- Populism and False Hope .................................................................................................................................................................... 204
February 2015 Edition

2

EU ELECTIONS .............................................................................................................................................................................................. 206

RESEARCH WE FOLLOWED .................................................................................................................................................................... 206
CHARTS & TABLES OF NOTE ................................................................................................................................................................... 206
RESEARCH OF NOTE ................................................................................................................................................................................ 209
NEW-EU ELECTION Nationalist Parties Rise to Challenge the EU .................................................................................................... 209
EU ELECTION - Europe Voted: Anti-EU and Protest Parties Take Nearly A Third of All Euro-Parliament Seats ................................. 211
EU ELECTION - European Voters Are Revolting; France Warns "Situation Is Grave for Europe" ........................................................ 218
SITUATIONAL ANALYSIS .......................................................................................................................................................................... 221
LEADERSHIP - 'Value Transformer' Politicians are avoiding politics OR the voters are rejecting .............................................. 225
LEADERSHIP - The Consequences Of A Dysfunctional Political System ....................................................................................... 226
LEADERSHIP - Mapping the Collapse of European Democracy ...................................................................................................... 230
GEO-POLITICAL RISK - Social, Economic & Financial ........................................................................................................................................ 231
NEW-EBOLA PANDEMIC ............................................................................................................................................................................... 231
AFRICA ........................................................................................................................................................................................................ 231
US ................................................................................................................................................................................................................ 236
ISIS /SYRIA CONFLICT .................................................................................................................................................................................. 238
ISIS THE SUNNI / SHIA /KURD PROBLEM ............................................................................................................................................ 238
NEW-ISIS- Kobani Overshadows Larger Battles ..................................................................................................................................... 242
SYRIA........................................................................................................................................................................................................... 244
RESEARCH WE FOLLOWED ................................................................................................................................................................. 244
SYRIA - This has the Earmarks of the Kennedy Ear "Cuban Missile" Crisis .................................................................................. 245
SYRIA - Syrian War You Are Not Being Told About ........................................................................................................................... 246
SYRIA - 25 Quotes .................................................................................................................................................................................. 247
SYRIA - What Coalition? ........................................................................................................................................................................ 250
SYRIA - US Supporting Fully an "Al Qaeda Operation" ..................................................................................................................... 252
SYRIA - Decision Already Taken to Bomb Syria ................................................................................................................................. 254
SYRIA - Market Patterns Before and Immediately After Conflict Begins ................................................................................................ 262
UPDATE-UKRAINE EAST/WEST CONFLICT ............................................................................................................................................ 264
RESEARCH WE FOLLOWED ..................................................................................................................................................................... 265
SOUTH CHINA SEA TERRITORIAL PROBLEMS ......................................................................................................................................... 271
GLOBAL MACRO: RISK LEVELS ........................................................................................................................................... 274

AGGREGATED GLOBAL FINANCIAL RISK INDEX ............................................................................................................................................. 274
NEW-BANKING RISK - LIBOR-OIS SPREAD ................................................................................................................................................ 275
NEW-BANKING RISK - TED SPREAD ........................................................................................................................................................... 275
NEW-CREDIT RISK - GLOBAL CREDIT DEFAULT SWAPS ....................................................................................................................... 276
NEW-CREDIT RISK - EU CREDIT DEFAULT SWAPS .................................................................................................................................. 276
NEW-CONSUMER RISK - HOUSING - RATE OF CHANGE ......................................................................................................................... 276
NEW-ECONOMIC RISK - ECRI LEADING INDEX ......................................................................................................................................... 277
NEW-INFLATION RISK - MONEY SUPPLY GROWTH - M3 ......................................................................................................................... 278
NEW-INFLATION RISK - MONEY VELOCITY ............................................................................................................................................... 278
MONETARY RISK - BANK LIABILITIES ......................................................................................................................................................... 279
NEW-COST OF MONEY RISK - INTEREST RATES .................................................................................................................................... 279
AGGREGATED RISK LEVEL ................................................................................................................................................................................ 281
TIPPING POINTS ..................................................................................................................................................................... 282

TIPPING POINT MAPPING: 2014 YEAR BEGINNING UPDATE ......................................................................................................................... 282
NEW-CHANGES TO RANKINGS Q4 2014 ........................................................................................................................................................ 285
NEW-CHANGES TO RANKINGS - Longer Term Benchmarks ............................................................................................................................ 287
NEW-CHANGES TO RANKINGS - Longer Term Benchmarks ............................................................................................................................ 289
TIPPING POINTS: TOP 5 FOCUS - NOVEMBER 2014 ....................................................................................................................................... 292
NEW-I - RISK REVERSAL .............................................................................................................................................................................. 292
NEW-II-GEO-POLITICAL EVENT RISK .......................................................................................................................................................... 293
NEW-III - JAPAN DEBT DEFLATION ............................................................................................................................................................. 294
NEW-IV - EU BANKING CRISIS ..................................................................................................................................................................... 294
NEW-V - CHINA HARD LANDING .................................................................................................................................................................. 295
GLOBAL MACRO ................................................................................................................................. 296

GLOBAL MACRO: ECONOMIC OUTLOOK ............................................................................................................................ 298
RESEARCH WE FOLLOWED .............................................................................................................................................................................. 298
CHARTS OF NOTE ............................................................................................................................................................................................... 301
NEW-CHART: Serial Disappointments & Ratcheting Down of Global Growth ....................................................................................... 301
NEW-CHART: Continuous Weakening of Global GDP Estimates ............................................................................................................ 302
NEW-CHART: Reduced Demand Pressures on Energy Prices ................................................................................................................ 302
NEW-CHART: Reduced Demand Pressures on Commodities .................................................................................................................. 303
NEW-CHART: Global Corporate Profit Trends ........................................................................................................................................... 303
NEW-CHART: Stunning Growth in Debt of Developed Economies since Dotcom Bubble Burst ........................................................ 304
NEW-CHART: Worlds FDI Flooding Into Financial Products versus Productive Assets ..................................................................... 305
NEW-CHART: Growth of Asian Middle Class Dominates Next 20 Years ............................................................................................. 306
NEW-CHART: Global Domestic Demand Growth ....................................................................................................................................... 306
NEW-CHART: Global Asset Markets Reflecting a Major Demand Shock Has Hit .................................................................................. 307
CHART: World GDP 2014 Economic Growth Estimates ........................................................................................................................... 307

3

CHART: World GDP versus World MSCI Stock Index ............................................................................................................................... 308
CHART: Baltic Dry Perspective Slowing Global Aggregate Demand Growth Rate ............................................................................ 309
CHART: World Trade versus Central Bank Balance Sheet Growth ......................................................................................................... 309
CHART: Falling Global LEI (Leading Economic Indicator) ....................................................................................................................... 310
CHART: World GDP Economic Forecast 2014 ........................................................................................................................................... 311
CHART: World GDP Economic Expectations versus MSCI Equity Index ............................................................................................... 311
CHART: Fiscal Adjustments Required Deficit Reductions for Fiscal Sustainability .......................................................................... 312
CHART: Shifting Global GDP Share ............................................................................................................................................................ 313
CHART: Over $10 Trillion Pumped Into Global Economy by Developed Economies ............................................................................ 314
CHART: Eventually All this Debt Must be Rolled over or Paid Out ......................................................................................................... 314
CHART: Future Economic Growth a Sub 2% Trend .................................................................................................................................. 315
CHART: Debt and Fiscal Drag Are Significant Factors Affecting Global Growth .................................................................................. 315
CHART: Slowing Global Aggregate Demand Shows in Shrinking FDI .................................................................................................... 316
CHART: Liquidity Drain in US in 2H 2014 ................................................................................................................................................... 317
RESEARCH OF NOTE .......................................................................................................................................................................................... 318
NEW-GLOBAL OUTLOOK 3 of 10 Largest Economies Have Fallen into Recession ................................................................................ 318
NEW-GLOBAL OUTLOOK This is the Biggest Risk to the World's Economy............................................................................................ 320
NEW-GLOBAL OUTLOOK What is global market turbulence telling us? .................................................................................................. 324
NEW-GLOBAL OUTLOOK Darker Outlook Has Bond Market Rethinking Odds of Economic Downturn.................................................. 327
NEW-GLOBAL OUTLOOK The Last Days Of The Growth Story? ............................................................................................................. 329
NEW-GLOBAL OUTLOOK The Last Days Of The Growth Story? ............................................................................................................. 331
GLOBAL OUTLOOK - THE ECONOMIC ROADMAP AHEAD: It Isn't That Complicated! ............................................................................ 332
GLOBAL OUTLOOK - 20 Signs That the Global Economic Crisis Is Starting To Catch Fire ................................................................ 337
GLOBAL OUTLOOK - Problems Erupting Everywhere (Signs of Implosion) ......................................................................................... 339
GLOBAL OUTLOOK - Global Debt Crosses $100 Trillion, Rises By $30 Trillion Since 2007 ................................................................ 342
GLOBAL OUTLOOK The US as the Global Consumption Engine to See Sub 2% Trend Growth .................................................... 345
GLOBAL OUTLOOK - Credit Fueled Globalization in Retreat .................................................................................................................. 348
GLOBAL OUTLOOK - Rogoff's Sovereign Debt Default Levels ............................................................................................................... 350
GLOBAL OUTLOOK - Imbalances Continue to Increase Along With Financial Fragility .............................................................................. 353
GLOBAL OUTLOOK - A 67 Million Jobs Gap .............................................................................................................................................. 355
ECONOMIC CUTS ................................................................................................................................................................................................. 359
CHARTS OF NOTE ......................................................................................................................................................................................... 359
CHART IMFs Delusional Forecasting Record 3 ................................................................................................................................... 359
CHART IMFs Delusional Forecasting Record 2 ................................................................................................................................... 362
CHART IMFs Delusional Forecasting Record - 1 .................................................................................................................................... 362
IMF To Slash Economic Growth Forecast... AGAIN - Still Full of Hockey sticks ............................................................................................ 362
IMF CUTS ECONOMIC OUTLOOK ............................................................................................................................................................ 368
OECD CUTS ECONOMIC OUTLOOK AGAIN!............................................................................................................................................ 378
OECD CUTS ECONOMIC OUTLOOK ........................................................................................................................................................ 380
ECONOMIC WARNINGS....................................................................................................................................................................................... 383
G20 WARNS Need to Add $2T in Economic Activity & Tens of Millions of Jobs ........................................................................................ 383
IMF WARNS .................................................................................................................................................................................................... 384
NEW-IMF sees risk of new eurozone .......................................................................................................................................................... 384
IMF Tells Central Europe to Spend More .................................................................................................................................................... 386
Japanese & Spanish Debt Unsustainable ................................................................................................................................................... 389
Global Recovery Faltering, Reduces Global Growth to Just Above 3% Global Recession Level .............................................................. 391
BIS WARNS ..................................................................................................................................................................................................... 393
Monetary Policy At Its Limits ........................................................................................................................................................................ 399
WORLD BANK WARNS ................................................................................................................................................................................. 400
Social Unrest Stems from Shrinking Disposable Income. Jobs are the central issue. ..................................................................... 402
GLOBAL MACRO: INDICATORS ............................................................................................................................................ 404

GLOBAL TRENDS ................................................................................................................................................................................................. 404
CHARTS OF NOTE ......................................................................................................................................................................................... 404
NEW-GLOBAL TRENDS Changes in 2014 2015 Profit (EPS) Forecasts By Country/Region .................................................... 404
NEW-GLOBAL TRENDS Changes in 2014 2015 Profit (EPS) Forecasts By Sector .................................................................... 404
NEW-GLOBAL TRENDS G7 Long Run GDP Growth Rates (PPP Weighted) .................................................................................... 405
NEW-GLOBAL TRENDS Falling Population Growth Rate in Developed Economies ........................................................................ 405
NEW-GLOBAL TRENDS Falling Labor Productivity Rate in Developed Economies ........................................................................ 406
NEW-GLOBAL TRENDS Falling Workers Per Retiree in Developed Economies ................................................................................... 406
RESEARCH OF NOTE .................................................................................................................................................................................... 407
NEW-GLOBAL TRENDS The curse of weak global demand .................................................................................................................. 407
NEW-GLOBAL TRENDS Is economic growth permanently lower? Do We Have Secular Stagnation ................................................. 411
GLOBAL TRENDS - The Facts are Clear - the US Standard of Living is Falling ................................................................................. 415
GLOBAL EMPLOYMENT....................................................................................................................................................................................... 416
CHARTS OF NOTE ......................................................................................................................................................................................... 416
CHART Global Employment Rates ........................................................................................................................................................ 416
CHART Global Unemployment ................................................................................................................................................................. 417
CHART Global Unemployment EU Comparison ................................................................................................................................... 417
CHART Unemployment in Advanced Countries .................................................................................................................................. 418
CHART Global Labor Participation Rates ............................................................................................................................................ 418
CHART Global Youth Unemployment By Country ........................................................................................................................... 419
CHART Global Chance of Finding a Job Within Year ......................................................................................................................... 419
RESEARCH OF NOTE .................................................................................................................................................................................... 420
GLOBAL UNEMPLOYMENT - The Beginnings of the Welfare Myth Unwind ........................................................................................ 420

4

GLOBAL UNEMPLOYMENT - The Unsustainable Welfare Myth ............................................................................................................ 422

GLOBAL UNEMPLOYMENT - Global Financial Sector Job Cuts ............................................................................................................... 424
GLOBAL SENTIMENT ........................................................................................................................................................................................... 426
CHARTS OF NOTE ......................................................................................................................................................................................... 426
NEW-GLOBAL SENTIMENT Global Business Activity Future Expectations ................................................................................... 426
GLOBAL SENTIMENT Global Jog Prospects Reach 50% - First Time In 7 Years ........................................................................... 426
GLOBAL SENTIMENT Global Consumer Confidence by Country .................................................................................................... 428
GLOBAL SENTIMENT Global Consumer Confidence Trends by Country ....................................................................................... 429
GLOBAL SENTIMENT Northern American Spending Intentions Rise According to Nielsen ......................................................... 430
RESEARCH OF NOTE .................................................................................................................................................................................... 431
NEW-GLOBAL SENTIMENT Global Business Confidence Collapses To Post-Lehman Lows .............................................................. 431
GLOBAL SENTIMENT The State Of Economic 'Misery' Around The World ........................................................................................... 433
GLOBAL SENTIMENT Highest Level Since 2007 ................................................................................................................................ 437
GLOBAL SENTIMENT - Complacent ........................................................................................................................................................ 438
GLOBAL SENTIMENT - Complacent ........................................................................................................................................................ 440
GLOBAL SENTIMENT - Nielsens Global Consumer Confidence, Concerns & Spending Intentions ........................................................ 441
GLOBAL CONSUMPTION ..................................................................................................................................................................................... 452
CHARTS OF NOTE ......................................................................................................................................................................................... 452
NEW-GLOBAL CONSUMPTION Rising Consumer Prices are Hurting Global Demand .................................................................. 452
NEW-GLOBAL CONSUMPTION Global Home Prices Are Rolling Over ............................................................................................ 452
NEW-GLOBAL CONSUMPTION Real Domestic Demand US, Japan & EU .................................................................................... 453
RESEARCH OF NOTE .................................................................................................................................................................................... 454
GLOBAL GROWTH ............................................................................................................................................................................................... 455
CHARTS OF NOTE ......................................................................................................................................................................................... 455
NEW-GLOBAL GROWTH Global Leading Indicator Signals Contraction ............................................................................................... 455
NEW-GLOBAL GROWTH Eurozone PMI and GDP ................................................................................................................................ 456
GLOBAL GROWTH World PMI Rankings ................................................................................................................................................ 457
GLOBAL GROWTH Global Leading Indicator Has Now Rolled Over ...................................................................................................... 458
GLOBAL GROWTH Global PMI Business Surveys Fall .......................................................................................................................... 458
GLOBAL GROWTH Baltic Dry Index Collapses 50% .............................................................................................................................. 459
GLOBAL GROWTH Global Slowdown on Verge of Contraction.............................................................................................................. 460
GLOBAL GROWTH - GDP Forecasts Continue to Be Taken Down........................................................................................................... 460
GLOBAL GROWTH Global Leading Indicator Goldmans Swirlogram Getting More Serious ......................................................... 460
GLOBAL GROWTH Global Industrial Production Rolling Over ............................................................................................................. 461
GLOBAL GROWTH Consensus 2014 GDP Forecast - Differential ......................................................................................................... 462
GLOBAL GROWTH G10 Macro Change ................................................................................................................................................. 462
RESEARCH OF NOTE .................................................................................................................................................................................... 463
NEW-GLOBAL GROWTH - World's Busiest Freight Route Rates Plunge To 2014 Lows ......................................................................... 463
NEW-GLOBAL GROWTH - Goldman Global Leading Indicator Drastically Revised, Collapses into "Confirmed Slowdown" .................. 464
GLOBAL GROWTH - The Wal-Mart Measure or How the US Consumer Is the Global Engine .......................................................... 466
GLOBAL GROWTH Potential of a Global Recession Mounting ............................................................................................................ 467
GLOBAL GROWTH What the hint of a Fed Taper Did to Global Growth Estimates....................................................................... 471
GLOBAL GROWTH - Uneconomic Energy Problematic ......................................................................................................................... 473
GLOBAL GROWTH - Global Growth Cycle ................................................................................................................................................. 475
GLOBAL GROWTH - Global GDP Contribution .......................................................................................................................................... 476
GLOBAL GROWTH - Slowing Global Growth - Air Cargo Shipments ........................................................................................................ 477
GLOBAL CREDIT .................................................................................................................................................................................................. 478
CREDIT CYCLE - HY Leading the Way ........................................................................................................................................................ 478
CREDIT CYCLE - Reversal Ahead ................................................................................................................................................................ 481
GLOBAL MACRO: MONETARY POLICY & CENTRAL BANKING .......................................................................................... 484

GLOBAL CENTRAL BANKING ............................................................................................................................................................................ 484
RESEARCH WE FOLLOWED Global Banking Risk .................................................................................................................................... 484
CHARTS OF NOTE ......................................................................................................................................................................................... 488
NEW-CHARTS Central Bank Policy Rates ............................................................................................................................................ 488
CHARTS Days of Chinese Credit-Driven Growth are numbered ....................................................................................................... 488
CHARTS Major Central Bank Assets versus GDP Forecast .............................................................................................................. 490
CHARTS Major Central Bank Y-o-Y Balance Sheet Growth ............................................................................................................... 490
CHARTS Cumulative Change in Central Bank Balance Sheets Since 2008 .................................................................................. 491
CHARTS Global Central Bank Assets versus World Equity Prices .................................................................................................. 491
CHARTS Cumulative Change in Central Bank Balance Sheets Since 2000 .................................................................................. 492
RESEARCH OF NOTE .................................................................................................................................................................................... 493
NEW-CENTRAL BANKS Economic policies are diverging in the developed world as deflation looms .................................................. 493
NEW-CENTRAL BANKS Central banks can't raise growth potential, says ECB's Weidmann ................................................................ 495
CENTRAL BANKS Axel Merks 2014 Outlook ....................................................................................................................................... 496
CENTRAL BANKS - Japan May Eclipse China Again, as Largest Holder of US Treasuries .............................................................. 499
CENTRAL BANKS - Austerity Now Officially Dead Public Policy ........................................................................................................... 500
CENTRAL BANKS - A Serious Shortage of Quality Collateral - A $10T US Problem Over 10 Years ............................................... 501
CENTRAL BANKS - Global Balance Sheet Expansion .......................................................................................................................... 503
TROUBLING DEVELOPMENTS ..................................................................................................................................................................... 508
TROUBLING DEVELOPMENTS Insider Says Central Banks Making it Up as They Go! ....................................................................... 508
TROUBLING DEVELOPMENTS 2007 Redux: Total public and private debt levels are 30pc higher in the advanced economies
...................................................................................................................................................................................................................... 509
TROUBLING DEVELOPMENTS Polish Pension Confiscation: Coming to a Theater near You .......................................................... 512
TROUBLING DEVELOPMENTS Global Tax Overhaul .......................................................................................................................... 514

5

BOE - UK ............................................................................................................................................................................................................... 515

CHARTS OF NOTE ......................................................................................................................................................................................... 515
NEW-UK Dissent within BOE Set to Continue ..................................................................................................................................... 515
RESEARCH OF NOTE .................................................................................................................................................................................... 515
UK - BOE Faces Labor Market Conundrum as Wage Growth Stalls .......................................................................................................... 515
UK - Mark Carney and "Flexible Inflation Targeting" ............................................................................................................................. 517
FED - US ................................................................................................................................................................................................................ 519
CHARTS OF NOTE ......................................................................................................................................................................................... 520
NEW-CHARTS June 2015 Fed Rates Hikes Diminish ......................................................................................................................... 520
NEW-CHARTS Inflation Expectations 1 Yr, 5010Yr, 5Yr/5Yr ........................................................................................................... 520
RESEARCH OF NOTE .................................................................................................................................................................................... 521
US MONETARY - -CAPITAL DISTORTION - Global Acceptance of the Bernankean Theory ............................................................. 521
US MONETARY - FINANCIAL REPRESSION - The Suspension of Price Discovery ........................................................................... 523
US MONETARY - The Fed is stuck in a QE Trap .................................................................................................................................... 526
US MONETARY - 2nd Worst Decade In US Growth in Over 220 Years (And Getting Worse) ........................................................... 528
US MONETARY - Mathematically, The Fed Can Only Fail ..................................................................................................................... 530
US MONETARY - QE Standing Between Inflated Equity Markets and A Recession .......................................................................... 536
US MONETARY - QE Programs versus S&P 500 Movements ............................................................................................................... 537
US MONETARY - BAML Warns If The US Economy Does Not Significantly Accelerate Now, It Never Will ..................................... 539
US MONETARY - Debt Increases $1 Trillion in One Year ...................................................................................................................... 541
GLOBAL ABE-NOMICS The Road Ahead ....................................................................................................................................................... 544
CHARTS OF NOTE ......................................................................................................................................................................................... 544
JAPAN The Third Arrow of ABE-Nomics -I ........................................................................................................................................... 544
JAPAN The Third Arrow of ABE-Nomics II ......................................................................................................................................... 545
JAPAN Japanese Households Remain Pessimistic ............................................................................................................................ 546
RESEARCH OF NOTE .................................................................................................................................................................................... 547
GLOBAL ABE-NOMICS Monetary Expansion Extremely Difficult to Stop Once Started ........................................................................ 547
GLOBAL ABE-NOMICS Monetary Policy Below the Event Horizon ................................................................................................... 549
BOJ JAPAN ......................................................................................................................................................................................................... 551
CHARTS OF NOTE ......................................................................................................................................................................................... 551
NEW- JAPAN Japans Inflation Pressure Ebbs Away .............................................................................................................................. 551
NEW- JAPAN BOJ QE Expansion In Context Debt Monetization......................................................................................................... 552
NEW- JAPAN Japanese Trade Balance .................................................................................................................................................. 553
NEW- JAPAN Japanese Real & Nominal Household Income ................................................................................................................. 553
JAPAN CPI Shoots To 3.3% Y-o-Y ......................................................................................................................................................... 554
JAPAN Japan Government Investment Fund Asset Reallocation ..................................................................................................... 554
JAPAN Falling Real Rates as Financial Repression Takes Hold ....................................................................................................... 554
JAPAN Real Wages Plummet as Financial Repression Takes Hold .................................................................................................. 555
RESEARCH OF NOTE .................................................................................................................................................................................... 557
NEW-JAPAN - "Godfather" Of Abenomics Admits Japanese Policy "Is A Ponzi Game ............................................................................. 557
NEW-JAPAN - How a Limo Ride With Paul Krugman Changed the Course of Abenomics ....................................................................... 559
NEW-JAPAN - Kurodas Former Boss Urges Ditching of BOJ 2% Inflation Target .................................................................................... 562
JAPAN - No Way Out But to Expand the Monetary Base ....................................................................................................................... 564
JAPAN - BOJ to "Own" 100% Of GDP In 5 Years .................................................................................................................................... 565
JAPAN - Adjusted trade deficit the worst in Bloomberg's 20 year history .......................................................................................... 568
JAPAN - Some Policies Have Clearly Hit the Limit ................................................................................................................................. 570
JAPAN - Foreshadows Next Global Crisis .................................................................................................................................................. 571
JAPAN - Japan's Prime Minister Shinzo Abe prepares to print money for the whole world ....................................................................... 576
JAPAN - Shinzo Abes Monetary-Policy Delusions ..................................................................................................................................... 577
JAPAN - BOJ Governor Job Suddenly Available in Historical "Abenomics U-Turn" .................................................................................. 580
JAPAN - Japanese Economic Policy Goes The Full Ponzi ......................................................................................................................... 581
ECB - EU ................................................................................................................................................................................................................ 583
CHARTS OF NOTE ......................................................................................................................................................................................... 583
NEW-CHARTS Euro-Area Output Still Slightly Below Pre-Crisis Levels ................................................................................................. 583
NEW-CHARTS 5 Year Inflation Swaps Suggests Deflation in the EU ..................................................................................................... 584
NEW-CHARTS Euro-Area Inflation Rate on the Decline Since 2011 ...................................................................................................... 584
NEW-CHARTS Euro-Area Inflation Expectations Decline ....................................................................................................................... 585
NEW-CHARTS Euro-Area Private Sector Loan Creation ........................................................................................................................ 586
NEW-CHARTS Euro-Area Money Supply, Private Sector Lending Growth ............................................................................................ 586
NEW-CHARTS Euro-Area 10 Yr Sovereign Bond Yields......................................................................................................................... 587
CHARTS Slovenia May BE the Next EU Debt Hotspot ............................................................................................................................ 587
CHARTS Spain & Portugal NPL ............................................................................................................................................................... 588
CHARTS ECBs Turn to Expand Its Balance Sheet ................................................................................................................................. 589
CHARTS ECBs Balance Sheet Contracted Y-o-Y ............................................................................................................................... 589
CHARTS Expect Major ECB Policy Announcement in Q2 2014 .............................................................................................................. 590
CHARTS ECB Set to Stay on Hold as Inflation Seen Lower ................................................................................................................... 591
RESEARCH OF NOTE .................................................................................................................................................................................... 592
NEW-EU MONETARY - Draghi Key Statements ........................................................................................................................................ 592
NEW-EU MONETARY - Draghi throws ECB door open to money printing as global prospects dim ......................................................... 593
NEW-EU MONETARY - Economic Recovery Too Weak for ECB to Avoid New Action ............................................................................ 595
EU MONETARY - Euro-Area Data Deterioration Points toward QE ........................................................................................................... 597
EU MONETARY - EU Version of QE Coming -> UST Purchases To Drive Euro Down ............................................................................ 599
MACRO MONETARY INFLATION ..................................................................................................................................................................... 601
CHARTS OF NOTE ......................................................................................................................................................................................... 601
NEW-CHARTS Global Consumer Prices are Rising Significantly ........................................................................................................... 601

6

CHARTS Global Country Inflation Rates .................................................................................................................................................. 601

CHARTS Two Worlds if Inflation EM and DM ....................................................................................................................................... 601
CHARTS Developed Country Inflation Rates ........................................................................................................................................... 603
RESEARCH OF NOTE .................................................................................................................................................................................... 604
INFLATION - Asset & Property inflation means shops have to pay higher rents with higher product prices ............................................. 604
GEO-ECONOMIC INSTABILITIES........................................................................................................................................... 605

GEO-ECONOMIC INDEX ...................................................................................................................................................................................... 605
GEO-ECONOMICS OF ENERGY & PETRO$ - Petro$$ Coming Unglued .......................................................................................................... 606
NEW-RESEARCH WE FOLLOWED ............................................................................................................................................................... 606
RESEARCH OF NOTE .................................................................................................................................................................................... 608
NEW-RUSSIA Energy War ................................................................................................................................................................... 608
NEW-PETRODOLLAR "There Will Be Blood": Petrodollar Death Ignites Liquidity And Oil-Exporting Crisis ................... 611
PETRODOLLAR Collapsing PetroDollar Foundation ........................................................................................................................... 617
UKRAINE - Pulled between EU v Russia ................................................................................................................................................ 621
UKRAINE - Pulled between An Ethnic Eastern and Western Ukraine .................................................................................................... 621
UKRAINE - Pulled between Economic Inequality Factors ....................................................................................................................... 622
UKRAINE - Pulled between the Global Military Balance ......................................................................................................................... 623
UKRAINE - Pulled by Global Financial Markets ...................................................................................................................................... 624
UKRAINE - A Deep State Analysis .......................................................................................................................................................... 627
NEW-ENERGY - OPEC Presents: QE4 And Deflation ........................................................................................................................... 630
NEW-ENERGY - The Sellside Chimes In On The Crude Crush: "This Will Reverberate For Years" ..................................... 634
NEW-ENERGY - OPEC Decision "Major Strike Against", Russian Tycoon Says Shale Oil Doesnt Work < $80bl ............................ 635
NEW-ENERGY - Energy Quakes as OPEC Stands Pat ......................................................................................................................... 637
NEW-ENERGY - World's Largest Rig Operator, The "Recovery" Is Now Worse Than The Post-Lehman Crash ................................. 640
NEW-ENERGY - US "Secret" Deal with Saudis Backfires After Oil Minister Says US Should Cut First ................................................ 643
NEW-ENERGY - The 2014 Oil Price Crash Explained ..................................................................................................................... 647
NEW-ENERGY - Crude and Credit Warn Of The Elongated Cycle Double Peak ....................................................................... 652
ENERGY - Major Inflection Point Coming Near-Term In Energy Prices ................................................................................................. 659
ENERGY - Russia Prepares Mega-Deal with India after Locking Up China With "Holy Grail" Gas Deal ............................................... 662
ENERGY - Putin Prepares To Announce "Holy Grail" Gas Deal With China ................................................................................... 664
ENERGY - The Growing Rift with Saudi Arabia Threatens To Severely Damage the Petrodollar ................................................ 666
CHARTS OF NOTE ......................................................................................................................................................................................... 670
NEW-ENERGY Petro$$ Capital Exports Go Negative for First Time in 18 Years ................................................................................... 670
NEW-ENERGY Falling Inflation Adjusted Gasoline Prices ...................................................................................................................... 671
NEW-ENERGY US v Saudi Oil Production now Equal at near 12B bl/Day ............................................................................................. 672
NEW-ENERGY US Shale Oil Breakeven Prices ...................................................................................................................................... 673
NEW-ENERGY OPEC Announcement Crushes Ruble & WTI Crude ..................................................................................................... 673
NEW-ENERGY USDRUB Rise Means Russian Loans in US$ In Big Trouble- Investment Collapse ..................................................... 674
NEW-ENERGY EM Oil Producers Being Crushed ................................................................................................................................... 674
NEW-ENERGY Market Cap Impacts of OPEC Decision ......................................................................................................................... 675
NEW-ENERGY Oil Supply / Demand and Price....................................................................................................................................... 676
GOLD WARS Failing Developed Economies versus Rising Emerging Economies .................................................................................. 677
CHARTS OF NOTE ......................................................................................................................................................................................... 678
NEW-GOLD WARS Plummeting Gold Holdings at NY Fed from Foreign Repatriation........................................................................... 678
NEW-GOLD WARS Gold : Debt Ratio Correlation Something Seriously Amiss! ................................................................................. 678
NEW-GOLD WARS Nominal & Real Price of Gold 1790-2013 ............................................................................................................. 680
NEW-GOLD WARS Gold v S&P 500 Against True Austrian Money Supply ........................................................................................... 680
NEW-GOLD WARS Swiss National Bank Gold, FX & Total Assets ........................................................................................................ 681
NEW-GOLD WARS Sovereign Gold Holdings According to the World Gold Council ............................................................................. 681
NEW-GOLD WARS European Countries Gold Reserves Repatriation ................................................................................................... 682
RESEARCH OF NOTE .................................................................................................................................................................................... 683
NEW-GOLD WARS - Federal Reserve Confirms Biggest Foreign Gold Withdrawal in Over Ten Years ................................................... 683
NEW-GOLD WARS - European Nations Repatriate Gold Reserves from United States Vaults ................................................................ 684
NEW-GOLD WARS - Gold Shortage, Worst in 21st Century, And India Just Made It Worse .................................................................... 687
NEW-GOLD WARS - Deutsche Bank's Modest Proposal To Central Banks: "Purchase The Gold Held By Private Households" ........... 689
CHINAs CREDIT GROWTH Reverses Direction ............................................................................................................................................ 691
CHARTS OF NOTE ......................................................................................................................................................................................... 692
NEW-CHINA LIQUIDITY Chinese Bank Asset Growth Dwarfs Developed Economies Central Banks .................................................. 692
NEW-CHINA LIQUIDITY Chinas Official GDP Growth Rate Continues to Fall ...................................................................................... 693
NEW-CHINA LIQUIDITY Chinas Deleveraging ....................................................................................................................................... 693
NEW-CHINA LIQUIDITY Chinas Inflation Rate versus Real Interest Rate ............................................................................................. 694
NEW-CHINA LIQUIDITY Bank Loan Growth ........................................................................................................................................... 694
NEW-CHINA LIQUIDITY Policy Rate, RRR and Loan Growth ................................................................................................................ 695
NEW-CHINA LIQUIDITY Declining Private Sector Fixed Asset Investment ............................................................................................ 695
CHINA LIQUIDITY - Third of Chinese GDP Now Goes to Repay Interest and Principle on Existing Loans .............................................. 696
CHINA LIQUIDITY Infrastructure Investment Offsets Weak Real Estate ................................................................................................ 697
CHINA LIQUIDITY Shadow Banks Step Back Into Light ......................................................................................................................... 697
CHINA LIQUIDITY Hopes that Credit Growth Will Spur Property Sales .................................................................................................. 698
CHINA LIQUIDITY Transport, Construction Data Point to Slower Growth .............................................................................................. 698
CHINA LIQUIDITY Little Impetus for Turnaround in Investor Sentiment ................................................................................................. 699
CHINA LIQUIDITY Industrial Output & Exports Continue to Trend the Wrong Way ............................................................................... 700
CHINA LIQUIDITY GDP Growth Trend .................................................................................................................................................... 700

7

RESEARCH OF NOTE .................................................................................................................................................................................... 701

NEW-CHINA LIQUIDITY - Reverses Direction and Begins Easing ............................................................................................................ 701
NEW-CHINA LIQUIDITY - One Rate Cut Probably Not Sufficient to Sustain China's Growth ................................................................... 702
NEW-CHINA LIQUIDITY - Troubling Signs of Deflation in China ............................................................................................................... 703
NEW-CHINA LIQUIDITY - The Next Phase of Chinas Financial Deepening ............................................................................................. 704
NEW-CHINA LIQUIDITY - Steady decline in private sector activity ............................................................................................................ 705
CHINA LIQUIDITY - China Credit Risk Overshadows Outlook for Emerging Equities ............................................................................... 706
CHINA LIQUIDITY - Easy Money Wont Solve Chinas Hard Problems ................................................................................................ 709
CHINA LIQUIDITY - Housing Bubble Restricting PBOC Actions .......................................................................................................... 711
CHINA LIQUIDITY - PBOC Squeezing Banks towards Reducing Speculative Risk ............................................................................ 714
CHINA LIQUIDITY - Overnight Repo at 25% ............................................................................................................................................ 715
CHINA LIQUIDITY - Red Flags ................................................................................................................................................................... 716
CHINA LIQUIDITY - Credit Fueled Growth ............................................................................................................................................... 718
CHINA LIQUIDITY - Shadow Banking System Showing Signs of Implosion ....................................................................................... 723
CHINA LIQUIDITY - PBOC Wants to Hold the Line on Explosive Credit Expansion through A Liquidity Squeeze ........................ 726
CHINA LIQUIDITY - Potentially De-Stabilizing Cash Crunch ................................................................................................................. 728
CHINA LIQUIDITY - Chinese Liquidity Pump Unplugged ...................................................................................................................... 729
PRIOR REPORT MINOR UPDATES & EDITIONS ........................................................................................................................................... 731
US$ RESERVE STATUS & ERODING INFLUENCE............................................................................................................................................ 731
RESEARCH OF NOTE .................................................................................................................................................................................... 732
RESERVE CURRENCY - The World Is Beginning To Bypass America's Financial & Legally-Leveraged Political Power ....................... 732
RESERVE CURRENCY - Putin Adviser Proposes "Anti-Dollar Alliance ................................................................................................... 733
RESERVE CURRENCY - Chinese, Swiss Central Banks Sign Bilateral Swap Agreement ....................................................................... 734
RESERVE CURRENCY - France, Brazil, India & Now South Korea Join Russia & China In Post-Dollar World Order ............................ 735
RESERVE CURRENCY - Frances Noyer Says BNP May Prompt Shift Away From Dollar ...................................................................... 737
RESERVE CURRENCY - More Russian Companies Set To Drop Dollar, Switch To Chinese Yuan ........................................................ 738
RESERVE CURRENCY - Russia, China sign deal to bypass U.S. dollar .................................................................................................. 739
RESERVE CURRENCY - Japan May Eclipse China Again, as Largest Holder of US Treasuries ...................................................... 740
INTERNATIONAL BANKING & SHADOW BANKING ........................................................................................................................................... 742
NEW-DEBT Growth of Financial Services ................................................................................................................................................ 745
DEBT REITS & CMBS Growth ................................................................................................................................................................. 745
DEBT - GLOBAL DEBT 313% of GDP........................................................................................................................................................ 747
DEBT - 202M GLOBALLY UNEMPLOYED DEBTORS .............................................................................................................................. 749
FOOD PRICES & SHORTAGES Potential Disruption..................................................................................................................................... 750
CHARTS OF NOTE ......................................................................................................................................................................................... 750
NEW-CHARTS Cost of Thanksgiving Food ............................................................................................................................................. 751
NEW-CHARTS Consumer Price Increases Predominately Food in Emerging Economies ..................................................................... 751
NEW-CHARTS Sticker Shock in Isle 1 ..................................................................................................................................................... 752
NEW-CHARTS Food Importers ................................................................................................................................................................ 752
NEW-CHARTS US Beef Production To Reach 5 Years of Decline ......................................................................................................... 753
CHARTS US CPI Turns Up on Food & Energy ........................................................................................................................................ 754
CHARTS CRB US Spot Foodstuff Index One Year .............................................................................................................................. 754
CHARTS CRB Food Index One Year .................................................................................................................................................... 756
CHARTS Global Food Price Change 2007-2013 ..................................................................................................................................... 757
CHARTS Food Prices Spiking Up ............................................................................................................................................................ 758
CHARTS Food Prices Spiking Up ............................................................................................................................................................ 759
CHARTS Retail Food Services and Drinking Place Sales ....................................................................................................................... 759
CHARTS Retail CRE Price/ Cost Pressures ............................................................................................................................................ 760
CHARTS Retail CRE Price/ Cost Pressures - 2 ....................................................................................................................................... 761
CHARTS Spiking Beef Prices ................................................................................................................................................................... 762
CHARTS Coffee Futures .......................................................................................................................................................................... 762
CHARTS Lean Hog Futures ..................................................................................................................................................................... 763
CHARTS Ukraine Corn and Wheat Prices Up 15% Since YB .............................................................................................................. 763
CHARTS Global Food Imports versus % Y-o-Y US$ Change ................................................................................................................. 764
CHARTS UK Food Retailers v Commodity Food Price Index .................................................................................................................. 764
RESEARCH OF NOTE .................................................................................................................................................................................... 765
FOOD INFLATION - Food Prices Surge as Drought Exacts a High Toll on Crops .................................................................................... 765
FOOD INFLATION - Food Prices, Driver of Social Unrest ....................................................................................................................... 768
FOOD INFLATION - Food Price Manipulation in Thailand.......................................................................................................................... 768
EMERGING & FRONTIER MARKETS - Unfolding 2015 Crisis ....................................................................................................................... 770
CHARTS OF NOTE ......................................................................................................................................................................................... 773
CHARTS BRIC Countries Responsible for 43% of Global Growth .......................................................................................................... 773
CHARTS BRIC & Emerging Market Inflation Rates ................................................................................................................................. 773
CHARTS Emerging Market Default Probability ........................................................................................................................................ 774
CHARTS Emerging Market versus Developed Market Public Debt and External Borrowing Positions .................................................. 774
CHARTS Emerging Market Outflows........................................................................................................................................................ 775
CHARTS Emerging Market Outflows -2 ................................................................................................................................................... 775
CHARTS Developed versus Emerging Equity Markets 1990-2014 ...................................................................................................... 776
CHARTS Total GEM Flows....................................................................................................................................................................... 776
CHARTS The Emerging Markets Have Been Weakening Since 2011 .................................................................................................... 777
RESEARCH OF NOTE .................................................................................................................................................................................... 778

8

EMERGING MARKETS - Fragile Five: The new focus of currency wars ............................................................................................... 778
EMERGING MARKETS - Crisis Redux? ..................................................................................................................................................... 779
EMERGING MARKETS - Losing Their Punch ......................................................................................................................................... 784
EMERGING MARKETS - Risk-On!............................................................................................................................................................. 786
EMERGING MARKETS - Asia, BRIC, Emerging Markets Crater IBM Earnings .................................................................................... 787
EMERGING MARKETS - Crisis Temporarily Halted ................................................................................................................................ 789
EMERGING MARKETS - Increasing Liquidity Problems In Selected Markets .................................................................................... 790
EMERGING MARKETS - The plight of four Asian countries - China, India, Indonesia and Japan. ................................................... 796
EMERGING MARKETS - The Impact of "TAPER" ................................................................................................................................... 801
EMERGING MARKETS - EM Crisis will make the 1997 Asian Crisis Seem like an Early Warning ..................................................... 805
EMERGING MARKETS - Global Deleveraging Accelerating and Developing Nations Feeling the Pain .......................................... 807
CYBER SPYING .............................................................................................................................................................................................. 810
CURRENCY WARS BACK ON Rate Wars Reversed With Un-Taper ............................................................................................................... 811
CURRENCY WARS - A Major Shift ............................................................................................................................................................... 811
BATTLEFIELD - Combatants & Belligerents............................................................................................................................................... 815
BATTLEFIIELD - The Race to Debase ......................................................................................................................................................... 816
JAPAN - The Destabilizing Agent .................................................................................................................................................................... 818
EUROPE - Euro Exposed ................................................................................................................................................................................ 818
ARGENTINA - Here we Go Again! .................................................................................................................................................................. 820
VENEZUELLA - Bad Situation ......................................................................................................................................................................... 821
BRAZIL - No One Wants to Listen ................................................................................................................................................................... 821
SWITZERLAND - No Choice ........................................................................................................................................................................... 821
SINGAPORE - Hot Money ............................................................................................................................................................................... 822
UK- Pound Joins War .................................................................................................................................................................................... 823
CYBER WARS Growing Threat & the Security-Surveillance Complex .............................................................................................................. 824
SECURITY-SURVEILLANCE COMPLEX - NSA Whistleblower Example: Booz Hamilton ....................................................................... 827
SECURITY SURVEILLANCE COMPLEX - Growing Without Public Control or Supervision! ................................................................. 830
REGIONAL ............................................................................................................................................. 832

EU DEFLATION IS REAL A Major Problem for Banks & Government Debt .................................................................................................. 833
CHARTS OF NOTE ......................................................................................................................................................................................... 835
NEW--CHARTS - Draghi Had To Deliver or it would have been a Collateral Massacre ............................................................................ 835
NEW--CHARTS EU Disconnect Between Equity Prices & Earnings and Dividends ............................................................................... 835
NEW--CHARTS Eurozone is the Biggest Drag on Global Profits ............................................................................................................ 836
NEW--CHARTS Eurozone Government & Private Debt 276% of GDP (Excluding Financials) .............................................................. 836
NEW--CHARTS EU PMIS Rolling Over ................................................................................................................................................... 837
NEW--CHARTS Eurozone Banks Too Big To Be Bailed Out! ................................................................................................................. 838
NEW--CHARTS Eurozone Area Consumer Confidence May Be Misleading .......................................................................................... 839
NEW--CHARTS Eurozone GDP & Recession Pattern ............................................................................................................................. 839
CHARTS EU-Area PMI Shows Sustained Deterioration .......................................................................................................................... 840
CHARTS Euro Area CPI Seen Below 1% for 11th Month ......................................................................................................................... 840
CHARTS Euro Area Domestic Demand has lagged US & Japan by 9% since 2010 .............................................................................. 841
CHARTS Euro Area Inflation Levels ......................................................................................................................................................... 842
CHARTS Geo-Political Tensions May Weigh on Confidence .................................................................................................................. 843
CHARTS Stalling Euro-Area Recovery Heightens ECB QE Pressure ..................................................................................................... 843
CHARTS Industrial Production Slows In Line With PMIs ......................................................................................................................... 844
CHARTS ZEW Expectations Signals Slowdown Ahead .......................................................................................................................... 845
CHARTS Euro-Area July PMI ................................................................................................................................................................... 845
CHARTS Corporate Borrowing Spreads Remain Wide ........................................................................................................................... 846
CHARTS ECB Less Accommodative Than the Fed ................................................................................................................................. 846
CHARTS EU Financial Conditions Deteriorating ...................................................................................................................................... 847
CHARTS EU Confidence .......................................................................................................................................................................... 848
CHARTS - Slow Money Growth May Stoke Deflation Concerns ................................................................................................................ 848
CHARTS - Euro-Area Inflation at Lowest Level Since 2009 Individual Countries ................................................................................... 849
CHARTS - Euro-Area Inflation Aggregate ................................................................................................................................................ 850
CHARTS - 10M Part-Time Workers Underemployed in EU ........................................................................................................................ 851
CHARTS - Euro-Area Housing Prices Decline ............................................................................................................................................ 852
CHARTS - Euro-Area Trade Surplus ........................................................................................................................................................... 853
CHARTS - Euro-Area Composite PMI ......................................................................................................................................................... 854
CHARTS - EU Area Weakness ................................................................................................................................................................... 855
CHARTS - EU Area GDP ............................................................................................................................................................................. 856
CHARTS - EU Area PMI .............................................................................................................................................................................. 857
CHARTS - EU Area PMI .............................................................................................................................................................................. 858
CHARTS - EU Real Rates ........................................................................................................................................................................... 859
CHARTS - EU -NON Euro Members GDP RELIANCE ............................................................................................................................... 860
CHARTS - EU GLOBAL GDP GROWTH CONTRIBUTION ....................................................................................................................... 861
CHARTS - EU PMI ....................................................................................................................................................................................... 861
CHARTS - EU CPI ....................................................................................................................................................................................... 863
CHARTS - Regional Risk-Reward ............................................................................................................................................................... 864
CHARTS - Europe's "Core" Problem is France ........................................................................................................................................... 865
CHARTS - Germany's Preoccupation with Inflation is More Than It Would Seem ..................................................................................... 868
CHARTS - Evidence OF Global Slowing Now Indisputable ........................................................................................................................ 869
CHARTS - EU Credit Downgrades, France and UK On Tap ...................................................................................................................... 871

9

CHARTS - Perceived Reduction in Risk, A Temporary Aberration ............................................................................................................. 873

CHARTS - Dangerous Delusional Divergences .......................................................................................................................................... 875
CHARTS - IMF Projections for Euro Area and GIIPS ................................................................................................................................. 876
CHARTS - Air Cargo Shipments Confirm Slowing Global Growth .............................................................................................................. 877
CHARTS - Eurozone Misery Indices Never Been Higher ........................................................................................................................... 878
CHARTS - Euro Currency ............................................................................................................................................................................ 880
RESEARCH OF NOTE .................................................................................................................................................................................... 886
NEW--RESEARCH The Broken Model of the Eurozone .......................................................................................................................... 886
NEW--RESEARCH The Japanization of Europe in 9 This Time It Is Different Charts ......................................................................... 887
NEW--RESEARCH Eurozone on cusp of triple-dip recession as German exports crumble ................................................................... 888
RESEARCH Euro Areas Stalling Industry No Support for GDP.............................................................................................................. 890
RESEARCH Early Warnings of Euro-Area Downturn Strengthen ECBs QE Case ................................................................................ 890
RESEARCH ECB Rate Decision .............................................................................................................................................................. 892
RESEARCH Euro-Area Data Deterioration Points Toward QE ............................................................................................................... 895
RESEARCH ECB v FEDERAL RESERVE ............................................................................................................................................... 896
RESEARCH The ECBs Negative Deposit Rate ...................................................................................................................................... 898
RESEARCH EU Version of QE Coming -> UST Purchases to Drive Euro Down ................................................................................... 900
RESEARCH Beware of EU Banks! ........................................................................................................................................................... 902
RESEARCH Emerging Markets Aggravates Festering Banking Problems ............................................................................................. 902
RESEARCH European Banks Have $3 Trillion of Exposure To Emerging Markets ................................................................................ 905
RESEARCH - EFSF Downgraded to AA+ ................................................................................................................................................... 907
RESEARCH - EU Stabilization Programs Are Presently Very Fragile ........................................................................................................ 908
RESEARCH - Spreads Widened in Peripherals and Significantly in Portugal and Greece ........................................................................ 911
SITUATIONAL ASSESSMENT ....................................................................................................................................................................... 913
PROGNOSIS: Why the European Situation Will Get Worse ....................................................................................................................... 913
PROGNOSIS: Increasing Structural Imbalances ........................................................................................................................................ 916
PROGNOSIS: $22T Unaccounted - A Hidden World of Contingent Liabilities, Government Backing & Guarantees................................ 918
PROGNOSIS: Monetary Malpractice - ECB's LTRO Not a Solution but ..................................................................................................... 923
PROGNOSIS: Monetary Malpractice - ECB's SMP Effort Futile ................................................................................................................. 926
PROGNOSIS: Monetary Malpractice - ECB Accepts BBB Collateral ......................................................................................................... 928
PROGNOSIS: EU Banking Overbanked, Undercapitalized and Now Insolvent ......................................................................................... 929
PROGNOSIS: Monetary Malpractice - TARGET2 "Contingent Liabilities" ................................................................................................. 930
PROGNOSIS: Bailouts - Unsustainable & Unfundable ............................................................................................................................... 936
ITALY FALLS BACK INTO A TRIPLE-DIP RECESSION ................................................................................................................................... 938
CHARTS OF NOTE ......................................................................................................................................................................................... 938
NEW--CHARTS - ITALY 30 Year Bond Yield At 2.3% - Historic Low ...................................................................................................... 938
NEW--CHARTS - ITALY Italian Unemployment ....................................................................................................................................... 939
NEW--CHARTS - ITALY Italian Core Inflation .......................................................................................................................................... 939
NEW--CHARTS - ITALY Italian Industrial Porduction .............................................................................................................................. 940
CHARTS - ITALY Meal Affordability Deteriorates .................................................................................................................................... 941
CHARTS - ITALY Falling Oil & Gas Consumption ................................................................................................................................... 942
CHARTS - ITALY Italian Bond Yields ....................................................................................................................................................... 942
CHARTS - ITALY Slips Back Into Recession ........................................................................................................................................... 943
CHARTS - ITALY 10 Year Bond Yields Fall to Record Low .................................................................................................................... 944
CHARTS - ITALY - Forced Rate Cuts ......................................................................................................................................................... 945
RESEARCH OF NOTE .................................................................................................................................................................................... 946
NEW--RESEARCH Italy Falls Back Into Recession, Raising Concerns for Eurozone ............................................................................ 946
RESEARCH - Italys Downward Spiral ........................................................................................................................................................ 949
RESEARCH - Italys Budget Failures, Weak Growth Outlook Call Debt Sustainability Into Question ....................................................... 951
SITUATIONAL ASSESSEMENT ..................................................................................................................................................................... 955
ITALIAN ELECTION - What You Need to Know ......................................................................................................................................... 955
ITALIAN ELECTION - Europe Capitulates On Austerity- Never Had The Stomach For It ......................................................................... 956
ITALIAN ELECTION - Message Given By the People ................................................................................................................................ 958
ITALIAN ELECTION - Bad Debt Continue to Soar ...................................................................................................................................... 962
ITALIAN ELECTION - Italians React Badly to Austerity, Elections Hardly a Surprise! ............................................................................... 964
ITALIAN ELECTION - EUROPEAN FEEDBACK - #1 ................................................................................................................................. 965
ITALIAN ELECTION - EUROPEAN FEEDBACK - #2 ................................................................................................................................. 967
ITALIAN ELECTION - Regional Financial Cracks in Sicily.......................................................................................................................... 970
FRANCE ECONOMIC MALAISE SPARKING POTENTIAL POLITICAL CRISIS .............................................................................................. 972
CHARTS OF NOTE ......................................................................................................................................................................................... 972
NEW--CHARTS FRANCE Bankruptcies Soar as Profitability Slumps .................................................................................................. 972
NEW--CHARTS FRANCE Post Hollande Election Results Jobseekers and 10 Year Yield .............................................................. 972
NEW--CHARTS FRANCE French Job Seekers .................................................................................................................................... 973
NEW--CHARTS FRANCE Inflation Expectations .................................................................................................................................. 973
CHARTS - FRANCE Hollande Popularity Gap Heading for a Record Low ............................................................................................. 974
CHARTS - FRANCE Austerity Doesnt Get You Re-Elected ................................................................................................................... 974
CHARTS - FRANCE Worlds Worst PMI Ranking in June ....................................................................................................................... 975
CHARTS - FRANCE Near-record high bankruptcies and record-low profitability .................................................................................... 976
CHARTS - FRANCE Frances PMI Trend Weakness Beginning to Stand Out........................................................................................ 976
CHARTS - FRANCE Manufacturing Divergence With Germany Widens ................................................................................................ 977
CHARTS - FRANCE - GDP ......................................................................................................................................................................... 978
CHARTS - FRANCE - UNEMPLOYMENT .................................................................................................................................................. 979
CHARTS - FRANCE - BUDGET DEFICIT ................................................................................................................................................... 980
CHARTS - FRANCE - TAX v GDP .............................................................................................................................................................. 981

10

CHARTS - FRANCE - BUSINESS CONFIDENCE...................................................................................................................................... 982

RESEARCH OF NOTE .................................................................................................................................................................................... 983
NEW--RESEARCH Economic Malaise Sparks Political Crisis in France ................................................................................................ 983
RESEARCH - France In "Political Turmoil" After Hollande Unexpectedly Dissolves Government ............................................................ 985
RESEARCH Prime Minister Manuel Vall Resigns .................................................................................................................................... 987
RESEARCH - European Voters Are Revolting; France Warns "Situation Is Grave for France, Europe" ................................................... 987
RESEARCH - Steady Breakdown Underway .............................................................................................................................................. 990
RESEARCH - France Loses its Coveted and NEEDED AAA Rating.......................................................................................................... 994
SITUATIONAL ASSESSMENT ....................................................................................................................................................................... 996
FRANCE - What You Need to Know ........................................................................................................................................................... 996
FRANCE - Key Indicators ............................................................................................................................................................................ 997
FRANCE: Sharpest Drop in Private Sector Output in Four Years ............................................................................................................ 1000
FRANCE - Quits on Austerity - Never a Doubt This Would Happen ......................................................................................................... 1003
FRANCE - Socialism is Expensive ............................................................................................................................................................ 1004
FRANCE - Has Turned back to Socialism ................................................................................................................................................. 1006
FRANCE - Losing Its Way through Political Illusions and Lies ................................................................................................................. 1007
FRANCE - Uncompetitive .......................................................................................................................................................................... 1008
FRANCE - Titan Tire Calls Out French Labor ........................................................................................................................................... 1010
FRANCE - France Responds to Titan Tire ................................................................................................................................................ 1012
FRANCE - What Happens In France When Companies Fire People ....................................................................................................... 1014
FRANCE - Hollande's Economically Insane campaign Promise ............................................................................................................... 1015
GERMANY GERMANY IN RECESSION.......................................................................................................................................................... 1017
CHARTS OF NOTE ....................................................................................................................................................................................... 1017
NEW--CHARTS - GERMANY - 1.179% 30 Year Bond Yield ................................................................................................................... 1017
NEW--CHARTS - GERMANY 2 Year Sovereign Yield Goes Negative ................................................................................................. 1018
NEW--CHARTS - GERMANY 10 Year Sovereign Bund versus US10 Treasury ................................................................................... 1018
NEW--CHARTS - GERMANY German & Japanese Yield Curves Are Remarkably Close ................................................................... 1019
NEW--CHARTS - GERMANY 10 Y European Yields ............................................................................................................................. 1020
NEW--CHARTS - GERMANY German Unemployment ......................................................................................................................... 1021
NEW--CHARTS - GERMANY German Core Inflation ............................................................................................................................ 1021
NEW--CHARTS - GERMANY 10 Year Sovereign Bund versus US10 Treasury ................................................................................... 1021
CHARTS - GERMANY Expectations Component Peaked In January ................................................................................................... 1022
CHARTS - GERMANY Ifo Rolls-Over..................................................................................................................................................... 1022
CHARTS - GERMANY 10 Year Bund Below 1% ................................................................................................................................... 1023
CHARTS - GERMANY - Inflation ............................................................................................................................................................... 1023
CHARTS - GERMANY - IFO Investor Confidence .................................................................................................................................... 1024
CHARTS - GERMANY - ZEW Expectations .............................................................................................................................................. 1025
RESEARCH WE FOLLOWED ....................................................................................................................................................................... 1027
RESEARCH OF NOTE .................................................................................................................................................................................. 1027
NEW--RESEARCH - Five charts that show Germany is heading into recession 10-19-14 The Guardian ............................................... 1027
RESEARCH - Draghi signaled additional monetary easing is likely to materialize - Possibly by September .......................................... 1030
RESEARCH - Germany close to recession as ECB admits recovery is weak.......................................................................................... 1032
RESEARCH - Merkel's Third Chancellorship Challenges ......................................................................................................................... 1033
RESEARCH - German Election - Merkel Begins Hunt for Coalition Partners........................................................................................... 1037
RESEARCH - Europe's Shadow Economy: As Big As Germany.............................................................................................................. 1038
SITUATIONAL ASSESSEMENT ................................................................................................................................................................... 1042
GERMANY - Anti Euro AfD Party May Cost Merkel in Critical September Election ................................................................................. 1043
GERMANY - The Euro Crisis Escalation over Cyprus May Politically Cripple Merkel .............................................................................. 1044
GERMANY - Call for End of "Coercive Euro Association" ........................................................................................................................ 1046
UK EXPECT RATE INCREASE BY SPRING 2015.......................................................................................................................................... 1048
CHARTS OF NOTE ....................................................................................................................................................................................... 1048
NEW--CHARTS - UK - Deficit One of Worst of Developed Economies .................................................................................................... 1048
NEW--CHARTS - UK Private Sector Surplus Eliminated ....................................................................................................................... 1048
CHARTS - UK Self-Employment At Record High ...................................................................................................................................... 1049
CHARTS - UK Rate Voting Shows Preference for Inflation Report Months ............................................................................................. 1050
CHARTS - UK Below 2% Target But 2nd Highest in EU ......................................................................................................................... 1050
CHARTS - UK CPI Below Target for 7th Month ...................................................................................................................................... 1051
CHARTS - UK Real-Wage Decline Longest Since At Least 1964 ......................................................................................................... 1052
CHARTS - UK Wage-Neutral Unemployment Rate Falling .................................................................................................................... 1052
CHARTS - UK CPI Too Low for BOE and Falling .................................................................................................................................. 1053
CHARTS - UK GDP ................................................................................................................................................................................ 1054
CHARTS - UK Population Growth .......................................................................................................................................................... 1054
CHARTS - UK - Crushed Disposable Income ........................................................................................................................................... 1055
CHARTS - UK - BOE Balance Sheet Growth ............................................................................................................................................ 1056
CHARTS - UK - Lending ............................................................................................................................................................................ 1057
CHARTS - UK - Unemployment ................................................................................................................................................................ 1058
CHARTS - UK - GDP - Pre and Post Recession Levels ........................................................................................................................... 1059
CHARTS - UK - GDP ................................................................................................................................................................................. 1059
CHARTS - UK - BOE Rates ....................................................................................................................................................................... 1060
RESEARCH OF NOTE .................................................................................................................................................................................. 1061
NEW--RESEARCH Consensus See UK Rate Increase in February 2015 Possibility of November .................................................. 1061
RESEARCH BOE Faces Labor Market Conundrum as Wage Growth Stalls ........................................................................................ 1063
RESEARCH - UK workers' wage squeeze is longest since the 1870s ..................................................................................................... 1066

11

UK - What you need to Know..................................................................................................................................................................... 1067

UK - Joins Currency War - Down 8% YTD ............................................................................................................................................. 1068
UK - Specter of Stagflation Haunts UK ...................................................................................................................................................... 1069
UK - Public Policy turns Against Austerity and PM Cameron ................................................................................................................... 1070
UK - Doomsday Debt Machine .................................................................................................................................................................. 1071
UK - QE Extension Coming ....................................................................................................................................................................... 1074
UK - Small Business Credit Squeeze Now Acute - Loan Rejections Rising ............................................................................................. 1076
UK - Technically in a Depression ............................................................................................................................................................... 1077
IBERIAN PENINSULA LOW RATES MASK SERIOUS PERCULATING PROBLEMS ................................................................................... 1080
CHARTS OF NOTE ............................................................................................................................................................................................. 1080
NEW--CHARTS - SPAIN 30 Year Bond Yield At 2.5% - Historic Low ........................................................................................................ 1080
NEW--CHARTS - SPAIN 10 Year Bond Yield At 2.37% - Historic Low .................................................................................................. 1080
CHARTS - PORTUGAL Yields Hit Low After BES Bailout ..................................................................................................................... 1081
CHARTS - PORTUGAL - Deficit Problem ................................................................................................................................................. 1082
RESEARCH OF NOTE .................................................................................................................................................................................. 1083
RESEARCH - Presidential Warning Spikes Yields To 8 Months Highs .................................................................................................... 1083
RESEARCH - Clear Signs of Desperation In Spain from a Growing Collateral Contagion ...................................................................... 1085
RESEARCH - The Spanish Government's 'Bad Bank' Scam ................................................................................................................... 1086
IBERIA - Credit Downgrades - At Precipice of "Non Investment Grade" .................................................................................................. 1088
IBERIA - Regional Bailout Bailouts a Massive Problem ............................................................................................................................ 1089
IBERIA - NPL Going Ballistic ..................................................................................................................................................................... 1090
IBERIA - Spanish Funding Problem .......................................................................................................................................................... 1091
IBERIA - The Giant Spanish Housing Bubble, Now Beginning to Implode ............................................................................................... 1096
IBERIA - Mal-Investment Coming Home to Roost..................................................................................................................................... 1098
IBERIA - Now a Capital Investment Problem ............................................................................................................................................ 1101
IBERIA - Banks on Artificial "Ponzi Bond" Life Support ............................................................................................................................ 1102
ASIA FALLING CURRENCIES, RISING DEBT & SLOWING GROWTH.............................................................................. 1111

CHINA THE NEXT PEG TO FALL ................................................................................................................................................................. 1111
CHARTS OF NOTE ....................................................................................................................................................................................... 1125
NEW--CHARTS - CHINA Falling Chinese Industrial Profits .................................................................................................................... 1125
NEW--CHARTS - CHINA Something Up (or rather down) with Chinese Currency? .............................................................................. 1125
NEW--CHARTS - CHINA Rising Margin Debt/Market Cap Ratio Suggests Liquidity m& Credit Risks .................................................. 1126
NEW--CHARTS - CHINA Corporate Bond Yields ................................................................................................................................... 1126
NEW--CHARTS - CHINA New Retail Stock Trading Accounts ............................................................................................................... 1127
NEW--CHARTS - CHINA Credit Growth 30% Above Trend for Private Sector Debt to GDP ................................................................ 1127
NEW--CHARTS - CHINA Falling Foreign Currency Reserves ................................................................................................................ 1128
NEW--CHARTS - CHINA 2 Year Yield Goes Negative .......................................................................................................................... 1129
NEW--CHARTS - CHINA China Used More Cement in Last 3 Years than US in Entire 20th Century .................................................. 1130
NEW--CHARTS - CHINA China Real Activity Indicators Steel, Cement & Electricity ........................................................................ 1130
NEW--CHARTS - CHINA Chinese Coal Consumption Falls .................................................................................................................. 1131
NEW--CHARTS - CHINA Chinese Y-o-Y Outstanding Credit & M2 ...................................................................................................... 1131
NEW--CHARTS - CHINA Chinas Bank Reserve Requirement Ratio ................................................................................................... 1132
NEW--CHARTS - CHINA New Stock Market Trading Accounts ............................................................................................................ 1133
CHARTS Yuan Falls as Economy Weakens .......................................................................................................................................... 1134
CHARTS Yuans Currency Basket Composition .................................................................................................................................... 1134
CHARTS Yuan Diverges From Currency Basket ................................................................................................................................... 1135
CHARTS Industrial Output A Concern.................................................................................................................................................... 1135
CHARTS China On A Path Since 2008 That Historically Leads to A Currency Crisis........................................................................... 1136
CHARTS Borrowing Costs for Firms Remain High ................................................................................................................................ 1137
CHARTS Chinas Q1 GDP Deflator Falls to Zero .................................................................................................................................. 1138
CHARTS - Credit is Running Well Ahead of Economic Growth ................................................................................................................ 1139
CHARTS Productivity is Slumping As Debt Levels Soar........................................................................................................................ 1139
CHARTS Chinas Gross Fixed Capital Formation Problem ................................................................................................................... 1139
CHARTS Chinese Investment Peaking .................................................................................................................................................. 1140
CHARTS China Equity Flows ................................................................................................................................................................. 1141
CHARTS Credit Accumulation Rate Growth Comparisons ................................................................................................................. 1141
CHARTS Chinese Credit Growth ............................................................................................................................................................ 1142
CHARTS 5 Year Debt Growth versus GDP ............................................................................................................................................ 1142
CHARTS 5 Year Credit Growth .............................................................................................................................................................. 1143
CHARTS Growth Propensity of Credit Growth..................................................................................................................................... 1144
CHARTS Chinas Bad Loans - NPL........................................................................................................................................................ 1145
CHARTS Slowing Steel Consumption .................................................................................................................................................... 1146
CHARTS Shadow Banking System ........................................................................................................................................................ 1146
CHARTS Dramatic Chinese Housing Slowdown ................................................................................................................................... 1148
CHARTS - CHINA - A Global Slowdown on the Verge of Contraction...................................................................................................... 1149
CHARTS - CHINA - Chinese Credit Market .............................................................................................................................................. 1150
CHARTS - CHINA - PMI ............................................................................................................................................................................ 1151
CHARTS - CHINA - PMI-2 ......................................................................................................................................................................... 1152
CHARTS - CHINA - GDP ........................................................................................................................................................................... 1153
CHARTS - CHINA Industrial Output ....................................................................................................................................................... 1154
CHARTS - CHINA - Urban Fixed Asset Investment .................................................................................................................................. 1155
CHARTS - CHINA Retail Sales .............................................................................................................................................................. 1156

12

RESEARCH WE FOLLOWED THIS TRI-SEMSTER .................................................................................................................................... 1157

RESEARCH OF NOTE .................................................................................................................................................................................. 1158
NEW--CHINA The Next Peg To Fall The Yuan or Hong Kong Dollar? ............................................................................................ 1158
NEW--CHINA Yuan Diverging From Its Trading Basket ........................................................................................................................ 1164
NEW--CHINA Signs of Madness in the Global Financial System .......................................................................................................... 1166
NEW--CHINA Reverses Direction and Begins Easing ........................................................................................................................... 1167
NEW--CHINA China's Economic Reporting Possibly a Deception ........................................................................................................ 1168
CHINA Yuan Diverging From Its Trading Basket ................................................................................................................................... 1170
CHINA - China Credit Risk Overshadows Outlook for Emerging Equities ................................................................................................ 1173
CHINA - Easy Money Wont Solve Chinas Hard Problems ...................................................................................................................... 1175
CHINA - China's Rehypothecation............................................................................................................................................................. 1178
CHINA - Asian Marginal Utility ................................................................................................................................................................... 1180
CHINA - Is China is Exporting Deflation Worldwide by Driving Down Yuan? ........................................................................................... 1182
CHINA - Someone Is Betting That The Chinese Currency Collapses By The End Of 2014Low-Hanging Fruit....................................... 1185
CHINA - Problems in the Target Redemption Forwards Derivatives market & Dim-Sum Bonds ............................................................. 1186
CHINA - Absence Of A Letter Of Credit!.................................................................................................................................................... 1187
CHINA - China Cracks down on Commodity Credit .................................................................................................................................. 1190
CHINA - Falling Yuan ................................................................................................................................................................................. 1192
CHINA - What Happens After the Low-Hanging Fruit Has Been Picked? ................................................................................................ 1194
CHINA SHADOW BANKING - CCFD (Chinese Commodity Funding Deals) ........................................................................................... 1197
CHINA - Cracks Beginning to Show .......................................................................................................................................................... 1200
CHINA - Has an Inflation Problem ............................................................................................................................................................. 1201
CHINA - Chinese Coal Producer Collapse a Major Shadow Banking Problem ........................................................................................ 1202
CHINA - China Orders Its Smaller Banks to Load Up On Cash ................................................................................................................ 1205
CHINA - How the Chinese Economic Disaster Scenario Could Unfold .................................................................................................... 1210
CHINA - Skilled Labor Shortages & Losing Labor Cost Advantage .......................................................................................................... 1212
CHINA - Launches Crackdown On "Off Balance Sheet" Credit ................................................................................................................ 1217
CHINA - China's Stunning $15 Trillion in New Liquidity - Part II ............................................................................................................... 1221
CHINA - China's Stunning $15 Trillion In New Liquidity ............................................................................................................................ 1224
RESEARCH OF NOTE PREVIOUS REPORT (Reference) ...................................................................................................................... 1228
RESEARCH - China's Stunning $15 Trillion in New Liquidity ................................................................................................................... 1228
RESEARCH - Dr. Copper Ready to Top and Head Lower........................................................................................................................ 1232
RESEARCH - China's $1 Trillion GDP Lie ................................................................................................................................................ 1233
RESEARCH - What the Deceleration Could Portend ................................................................................................................................ 1235
RESEARCH - Credit Bubble: 240% Of GDP And Soaring ........................................................................................................................ 1238
RESEARCH - Forget Taper risk: China is a bigger threat ....................................................................................................................... 1242
RESEARCH - Sustainability Requires a Slowdown in Investment ............................................................................................................ 1244
RESEARCH - China Likely to Continue Interest Rate Liberalization ........................................................................................................ 1246
RESEARCH - China #1 in Broad Array of Key Areas ............................................................................................................................... 1249
RESEARCH - Global Business Confidence Sliding Rapidly ..................................................................................................................... 1250
RESEARCH - Investors Worried and Losing Confidence ......................................................................................................................... 1253
RESEARCH - China Stampeding into Gold .............................................................................................................................................. 1254
RESEARCH - China "Will introduce some measures to arrest the slowdown of growth in the next couple of quarters"......................... 1256
RESEARCH - Slower Growth In the Cards & Endorsed by New Chinese Leadership............................................................................. 1257
RESEARCH - Is a PBOC Controlled Speculation Bust Possible or Will It Get Out of Control ................................................................. 1259
RESEARCH - PBOC Liquidity Squeeze .................................................................................................................................................... 1260
RESEARCH - Chinese Housing Bubble Restricting PBOC Actions ......................................................................................................... 1262
RESEARCH - PBOC Squeezing Banks towards Reducing Speculative Risk .......................................................................................... 1264
RESEARCH - Chinese Overnight Repo at 25% ........................................................................................................................................ 1266
RESEARCH - Red Flags ........................................................................................................................................................................... 1267
RESEARCH - Credit Fueled Growth in China ........................................................................................................................................... 1269
RESEARCH - PBOC Wants to Hold the Line on Explosive Credit Expansion through A Liquidity Squeeze ........................................... 1274
RESEARCH - A Potentially De-Stabilizing Cash Crunch .......................................................................................................................... 1276
SITUATIONAL ANALYSIS & KEY NOTES ................................................................................................................................................... 1277
CHINA SHADOW BANKING - Shadow Banking System Showing Signs of Implosion ............................................................................ 1280
CHINA SHADOW BANKING - Shadow Banking and Credit Growth ........................................................................................................ 1283
CHINA SHADOW BANKING - The US Sub-Prime / CDO All Over Again ................................................................................................ 1286
CHINA SHADOW BANKING - Report ....................................................................................................................................................... 1290
CHINA SHADOW BANKING - Situation .................................................................................................................................................... 1291
CHINA RESERVES - Distorted Foreign Reserve Levels .......................................................................................................................... 1292
CHINA RESERVES - Declining Reserve Accumulation ............................................................................................................................ 1294
CHINA RESERVES - Has Caught the Gold Bug big time! ........................................................................................................................ 1296
CHINA CURRENCY WARS - Hot Money into China ................................................................................................................................ 1298
CHINA - Withdraws Liquidity...................................................................................................................................................................... 1299
CHINA - Socit General Sees a Likely Soft Landing! .............................................................................................................................. 1301
CHINA - True Debt is Orders of Magnitude More than Officially Being Reported .................................................................................... 1311
CHINA - Evidence OF Slowing Now Indisputable ..................................................................................................................................... 1314
CHINA - PMI Improvement ........................................................................................................................................................................ 1315
CHINA - Political Transition & Ongoing Emergence as a Super Power ................................................................................................... 1318
CHINA - An Implicit Social Contract .......................................................................................................................................................... 1320
CHINA - Manipulated Statistics due to Upcoming Decade Long Regime Change ................................................................................... 1322
CHINA - Increasing Leverage is China's Way of Monetary Easing .......................................................................................................... 1323
CHINA - Possible Interest-Rate Liberalization........................................................................................................................................... 1324
CHINA - Global Impact of China's Slowdown ............................................................................................................................................ 1325
CHINA - Shanghai Composite at 2008 Low Levels ................................................................................................................................... 1328
CHINA - Shanghai Composite Warnings Signs ......................................................................................................................................... 1329
CHINA - Credit to GDP .............................................................................................................................................................................. 1331

13

CHINA - A Slow Recovery Through 2013 ................................................................................................................................................. 1332

CHINA - Manufacturing PMI in Contraction Territory ................................................................................................................................ 1334
JAPAN: JAPAN GOES ALL IN ............................................................................................................................................................................ 1339
CHARTS OF NOTE ....................................................................................................................................................................................... 1347
NEW--CHARTS - JAPAN 1.174% 30 Year Bond Yield ......................................................................................................................... 1347
NEW--CHARTS - JAPAN 2 Year Yield Goes Negative.......................................................................................................................... 1347
NEW--CHARTS - JAPAN Savings Rate Goes Negative ........................................................................................................................ 1348
NEW--CHARTS - JAPAN Stagnate Housing Starts with Historic Low 35 Year Mortgages ................................................................... 1348
NEW--CHARTS - JAPAN Non-Resident Net Investment in Japanese Stocks ...................................................................................... 1349
NEW--CHARTS - JAPAN Shifting Demographics - Birth versus Deaths ............................................................................................... 1349
NEW--CHARTS JAPAN Nikkei Strength is all Relative .................................................................................................................... 1350
NEW--CHARTS - JAPAN Trade Balance ............................................................................................................................................... 1350
NEW--CHARTS - JAPAN 10 Year Treasury Approaching Zero (12-27-14) .......................................................................................... 1351
NEW--CHARTS - JAPAN BOJ Reserve Balances ................................................................................................................................. 1352
NEW--CHARTS - JAPAN Macro Crisis Zones ....................................................................................................................................... 1353
NEW--CHARTS - JAPAN Demographics ............................................................................................................................................... 1354
NEW--CHARTS - JAPAN Fiscal Deficit versus BOJ Balance Sheet ..................................................................................................... 1354
NEW--CHARTS - JAPAN Japans Economy versus the Rest of the World ........................................................................................... 1355
NEW--CHARTS - JAPAN Japans Decline in Real Interest Rates ......................................................................................................... 1356
NEW--CHARTS - JAPAN Japanese GDP Annualized Q-o-Q ................................................................................................................ 1357
NEW--CHARTS - JAPAN Bankruptcies Due to Depreciating Yen ......................................................................................................... 1358
NEW--CHARTS - JAPAN Japanese & German Yield Curves Are Remarkably Close ........................................................................... 1358
CHARTS Q2 GDP Downturn Even Worse Than Though or Looks........................................................................................................ 1360
CHARTS Real Incomes Falling at Fastest Rate in a Decade ................................................................................................................ 1360
CHARTS Japan Exports Remained Subdued ........................................................................................................................................ 1361
CHARTS Past Yen Strength Pushed Production Off-Shore .................................................................................................................. 1361
CHARTS Japans Export Majors Lost Tech Battle ................................................................................................................................. 1362
CHARTS Japans Stalled Inflation Adds Pressure for Second Round of Stimulus ................................................................................ 1363
CHARTS Japan Adjusted Trade Balance ............................................................................................................................................... 1363
CHARTS Japan BoP Current Account Balance .................................................................................................................................. 1364
CHARTS 5T Yen of JGB Selling ............................................................................................................................................................. 1364
CHARTS Sovereign Debt % of Tax Revenue ........................................................................................................................................ 1365
CHARTS Public Sector Debt Issuances 2013 as % GDP ...................................................................................................................... 1366
CHARTS - GDP Trend ............................................................................................................................................................................... 1366
CHARTS - CPI Trend ................................................................................................................................................................................. 1367
CHARTS - JAPAN - GDP Resurgence ...................................................................................................................................................... 1367
CHARTS - JAPAN - BOJ Balance Sheet .................................................................................................................................................. 1368
RESEARCH WE FOLLOWED THIS TRI-SEMESTER ................................................................................................................................. 1369
RESEARCH OF NOTE .................................................................................................................................................................................. 1370
NEW--JAPAN The BOJ Ups The Ante ................................................................................................................................................... 1370
NEW--JAPAN Is Japan Kaput? .............................................................................................................................................................. 1371
JAPAN - Pace of 60 to 70 trillion yen a year May Become "Open Ended" ............................................................................................... 1374
JAPAN - Japanese Financial Repression - Changes in Allocation of Japanese Retirement Accounts Coming ...................................... 1376
JAPAN - 3 Arrows of ABE-nomics Not Working ........................................................................................................................................ 1379
JAPAN - Stalled Inflation Adds Pressure for Second Round of Stimulus ................................................................................................. 1381
JAPAN - Japanese Financial Repression - Changes in Allocation of Japanese Retirement Accounts Coming ...................................... 1382
JAPAN - Japan bond market liquidity dries up as BoJ holding crosses 200tn........................................................................................ 1384
JAPAN - Abe Approval Rating Plunges ..................................................................................................................................................... 1386
JAPAN - What the Japanese been Buying ................................................................................................................................................ 1387
JAPAN - Japan May Matter More Than Tapering ..................................................................................................................................... 1389
JAPAN - Japan Finances Worse than at Wars End ................................................................................................................................. 1392
JAPAN - BOJ: "The days of constructive ambiguity is over! .................................................................................................................. 1393
JAPAN - Abenomics Third Arrow Growth Strategy Underwhelms .......................................................................................................... 1394
JAPAN - 2nd ABE-nomics $200B Stimulus Package Approved ............................................................................................................... 1396
JAPAN - Worlds Biggest Pension Fund Sees Japan Fail on ABE-nomics' 2% Inflation Goal ................................................................. 1397
JAPAN - The Abe-nomics Failure .............................................................................................................................................................. 1400
SITUATIONAL ASSESSEMENT & KEY NOTES .......................................................................................................................................... 1402
JAPAN - What You Need to Know............................................................................................................................................................. 1404
JAPAN - No Way Out But to Expand the Monetary Base ......................................................................................................................... 1407
JAPAN - BOJ to "Own" 100% of GDP in 5 Years...................................................................................................................................... 1407
JAPAN - Adjusted trade deficit the worst in Bloomberg's 20 year history ................................................................................................. 1411
JAPAN - How Japan's National Debt Grew ............................................................................................................................................... 1412
JAPAN - ABE-nomics About Lowering Real Interest Rates ...................................................................................................................... 1413
JAPAN - Japanese Bonds Have Lost Their Ability to Price Risk .............................................................................................................. 1414
JAPAN - Japanese Structural Problems a "Canary" for Western Developed Economies ........................................................................ 1418
JAPAN - Shinzo Abe Hasn't the Stomach for the Heavy Lifting Needed to Accompany ABE-nomics. .................................................... 1420
JAPAN - A Credit Squeeze Leads Deflationary Leg Down ....................................................................................................................... 1423
JAPAN - Some Japanese Policies Have Clearly Hit the Limit .................................................................................................................. 1424
JAPAN - The ABE (Asset Bubble Evaluator) Index ................................................................................................................................... 1426
JAPAN - Regional Risk-Reward ................................................................................................................................................................ 1427
JAPAN - Now the Frontrunner of Outright Monetization. .......................................................................................................................... 1428
JAPAN - Yen Devaluation .......................................................................................................................................................................... 1429
JAPAN - New Bank of Japan Policy - 2% Inflation in 2 Years .................................................................................................................. 1430
JAPAN - Appoints BOJ Governor Firmly Committed to Printing Money ................................................................................................... 1432
JAPAN - Third Straight Quarter of Recession ........................................................................................................................................... 1434

14

JAPAN - Full Out War on Deflation ............................................................................................................................................................ 1434

JAPAN - First Test of the new found dominance of the Central Banks .................................................................................................. 1436
JAPAN - BOJ Was Next Up. No Surprise .................................................................................................................................................. 1439
JAPAN - Negative Current Account Balance and -3.5% Recession ......................................................................................................... 1441
JAPAN - A 50% Over-Valued Yen Has Undermined Self Confidence & Drive ......................................................................................... 1444
JAPAN - Proves QE's Low Cost of Capital Does Structural Damage to Economy................................................................................... 1446
JAPAN - BOJ Being Pressured to "Rip-Up Government Debt"1 ............................................................................................................... 1448
JAPAN - Easy Money Has Hurt Corporate Profitability in the Longer Term ............................................................................................. 1454
JAPAN - The Biggest Debtor with the Biggest Problem! ........................................................................................................................... 1457
JAPAN - A Magnitude Larger Problem than Europe ................................................................................................................................. 1461
JAPAN - QE 9 A Complete Failure - Actually "Tightens" versus It's Intended Easing .............................................................................. 1467
JAPAN - Japanese Yen Continuously Under Attack ................................................................................................................................. 1472
JAPAN - Vast foreign US$ Coming Home for "Claim" .............................................................................................................................. 1473
JAPAN - PMI Breakdown ........................................................................................................................................................................... 1475
JAPAN - Exports Continue To Tumble ...................................................................................................................................................... 1477
JAPAN - Intervention Fails Again - It's a Whole new Ball Game............................................................................................................... 1478
JAPAN - First Signs of Massive Debt Monetization After Next Election ................................................................................................... 1481
JAPAN - Japan to the ESM's Rescue ........................................................................................................................................................ 1481
EMERGING MARKETS RUSSIA UNDER FINANCIAL SIEGE ..................................................................................................... 1483

BRICS ............................................................................................................................................................................................................ 1489
NEW--BRICS Population, GDP,GDP per Capita.................................................................................................................................... 1489
BRICS Responsible for 43% of Global Growth in 2013 ......................................................................................................................... 1490
BRICS A Short Term Dead Cat Bounce? ............................................................................................................................................ 1490
BRICS Inflation Problems Abound .......................................................................................................................................................... 1492
BRICS - EU Major Contributor to EM Current Account Deficit Growth ..................................................................................................... 1493
BRICS - Insufficient Levels Prompt Russian-Chinese Support ................................................................................................................. 1494
BRICS - A Development Bank-Forex Reserve Pool-African Integration ................................................................................................... 1496
BRICS - 40% of World Population and 25% of World GDP ...................................................................................................................... 1497
BRICS - $3 to $13B GDP in Ten Years ..................................................................................................................................................... 1500
BRICS- A World Wide Distrust of Financial Markets Building ................................................................................................................... 1503
BRAZIL........................................................................................................................................................................................................... 1505
NEW-BRAZIL - Brazils Economy Just Imploded! ..................................................................................................................................... 1505
NEW-BRAZIL - Brazils economy slips into recession .............................................................................................................................. 1507
BRAZIL - Inflation will remain high thanks to a "growth mismatch". .......................................................................................................... 1510
BRAZIL - Sharpest Decline in 2013 Growth Forecast ............................................................................................................................... 1511
RUSSIA - Russia Has Stopped Trying to Protect Ruble Has FX Reserves Depleted. ................................................................................. 1514
NEW - RUSSIA 2015 Russia Consensus GDP Forecast ...................................................................................................................... 1515
NEW - RUSSIA Foreign Exchange Reserves ........................................................................................................................................ 1515
NEW - RUSSIA Exchange and Interest Rate ......................................................................................................................................... 1516
NEW - RUSSIA - Real GDP and Car Sales .............................................................................................................................................. 1516
NEW - RUSSIA Inflation Rate ................................................................................................................................................................. 1517
NEW - RUSSIA GDP Forecast versus USDRUB ................................................................................................................................... 1517
NEW - RUSSIA WTI Crude versus Ruble .............................................................................................................................................. 1518
NEW - RUSSIA Russian Stocks versus Ruble, Russian 10 Y Yield versus 5Y CDS ............................................................................ 1518
NEW - RUSSIA Russian CDS Spreads .................................................................................................................................................. 1519
NEW - RUSSIA Winners and Losers of Oil Price Plunge....................................................................................................................... 1520
NEW - RUSSIA CDS Spreads Has Widened 250bp Since Mid-June .................................................................................................... 1521
NEW - RUSSIA Russian 5Y CDS versus USDRUB versus Russian Stocks ......................................................................................... 1522
NEW - RUSSIA Crude Oil in Rubles....................................................................................................................................................... 1523
NEW - RUSSIA Russian Reserves versus USDRUB ............................................................................................................................ 1523
NEW - RUSSIA Falling Oil Price Weighs on Economy and the Ruble .................................................................................................. 1524
NEW - RUSSIA Russian Ruble versus Reserves .................................................................................................................................. 1525
NEW - RUSSIA Russian Breakeven Oil Prices versus Liquids Production ........................................................................................... 1526
NEW - RUSSIA Russian Refining & Upstream Economics-1 ................................................................................................................ 1527
NEW - RUSSIA Russian Refining & Upstream Economics-2 ................................................................................................................ 1528
NEW - RUSSIA Russian Holdings of US Treasuries ............................................................................................................................. 1529
NEW - RUSSIA Russian 9 Year Gold Buying Spree .............................................................................................................................. 1530
NEW - RUSSIA Net YTD Gold Purchases by the Central Bank of Russia ............................................................................................ 1530
RUSSIAN RESEARCH WE FOLLOWED THIS TRI-SEMESTER ............................................................................................................ 1532
INDIA.............................................................................................................................................................................................................. 1532
NEW-INDIA CAPEX Bottom Out? .......................................................................................................................................................... 1532
INDIA Real GDP and Car Sales ............................................................................................................................................................. 1533
INDIA Inflation ......................................................................................................................................................................................... 1534
INDIA - Inflation .......................................................................................................................................................................................... 1535
INDIA - WPI ................................................................................................................................................................................................ 1536
INDIA - Will be fine as long as it continues to reduce its deficit. ............................................................................................................... 1537
INDIA - Panic in India ................................................................................................................................................................................. 1538
INDIA - India Rupee Collapse Showing Signs of Exhaustion ................................................................................................................... 1540
INDIA - Watch Out For RE-Emergence of Food Price Inflation ................................................................................................................ 1541
SOUTH AFRICA ............................................................................................................................................................................................ 1543
EMERGING MARKETS ....................................................................................................................................................................................... 1545
CHARTS OF NOTE ....................................................................................................................................................................................... 1545
NEW--CHARTS Falling EM Currencies .................................................................................................................................................. 1545
CHARTS Post-China 16 ......................................................................................................................................................................... 1546

15

CHARTS Economies Now Need More Debt to Generate Growth ......................................................................................................... 1547
CHARTS Emerging Markets Benchmark Underperforms US Index ...................................................................................................... 1547
CHARTS - Reserves versus World ............................................................................................................................................................ 1547
CHARTS - Current Account Balances versus GDP .................................................................................................................................. 1549
CHARTS - Emerging Markets Index versus MSCI World Index ............................................................................................................... 1550
CHARTS - SINGAPORE - Inflation ............................................................................................................................................................ 1551
CHARTS - SINGAPORE - Exports ............................................................................................................................................................ 1552
CHARTS - SOUTH KOREA ....................................................................................................................................................................... 1553
CHARTS - TURKEY - Spreads .................................................................................................................................................................. 1554
RESEARCH OF NOTE .................................................................................................................................................................................. 1555
EMERGING MARKETS - Forced Changes & Advancements in the Normal "Plundering" Strategy ........................................................ 1555
EMERGING MARKETS - Crisis Temporarily Halted ................................................................................................................................. 1556
EMERGING MARKETS - The plight of four Asian countries - China, India, Indonesia and Japan. ......................................................... 1557
EMERGING MARKETS - Negative Current Accounts + Weak(ening) International Investment Positioning ........................................... 1562
EMERGING MARKETS - "TAPER" Shock Waves Across Asia................................................................................................................ 1562
EMERGING MARKETS - Global Bond Yields React Together ................................................................................................................. 1564
EMERGING MARKETS - A Bumpy Ride for Emerging Markets ............................................................................................................... 1566
EMERGING MARKETS - Stunning Withdrawals ....................................................................................................................................... 1572
EMERGING MARKETS - Bond Outflows Accelerating ............................................................................................................................. 1573
EMERGING MARKETS - This will make the 1997 Asian Crisis Seem Like an Early Warning ................................................................ 1575
EMERGING MARKETS - Developing Nations Feeling the Pain of Global Deleveraging Acceleration .................................................... 1577
EMERGING MARKETS - The Impact of "TAPER" .................................................................................................................................... 1580
EMERGING MARKETS - What you Need to Know ...................................................................................................................................... 1584
EMERGING MARKETS - Comparative Ease of Doing Business ............................................................................................................. 1586
EMERGING MARKETS - Importance of Employment, Equality and Per Capital Income ........................................................................ 1587
ASEAN ........................................................................................................................................................................................................... 1590
NEW--ASEAN: A New Common Market.................................................................................................................................................... 1590
ASIA ............................................................................................................................................................................................................... 1594
ASIA: CHARTS - REVENUE ..................................................................................................................................................................... 1594
ASIA: CHARTS EXPENDITURES .......................................................................................................................................................... 1594
ASIA: CHARTS SPENDING GAPS ........................................................................................................................................................ 1596
ASIA: CHARTS DEBT SERVICE ........................................................................................................................................................... 1596
ASIA: CHARTS - SINGAPORE ................................................................................................................................................................. 1598
ASIA: CHARTS INDONESIA CPI May 2014 .................................................................................................................................... 1599
ASIA: CHARTS INDONESIA CPI Aug 2013 .................................................................................................................................... 1599
ASIA: CHARTS A Short Term Dead Cat Bounce? .............................................................................................................................. 1600
ASIA: CHARTS Inflation Problems Abound ........................................................................................................................................... 1601
ASIA: CHARTS Healthier Public Debt and Borrowing Positions than DM ............................................................................................. 1601
ASIA: CHARTS - AUSTRALIA ................................................................................................................................................................... 1602
ASIA - Regional Risk-Reward .................................................................................................................................................................... 1604
ASIA - Credit Contraction Problems .......................................................................................................................................................... 1605
ASIA - Corporate Debt Levels Reflect Unintended Consequences of Mispricing & Mal-Investment ....................................................... 1607
ASIA - Synchronized Markets .................................................................................................................................................................... 1609
ASIA - Caution Advised Regarding Positive South Korea Export Turnaround ......................................................................................... 1611
ASIA - Export Growth Looks Similar to Pre-2008 ...................................................................................................................................... 1612
ASIA - Global Slowing Quickly a Worsening Situation Across Asia .......................................................................................................... 1616
ASIA - Risks All on the Downside for Asia ................................................................................................................................................ 1617
ASIA - Demographic Headwinds ............................................................................................................................................................... 1620
ASIA - Pronounced Flight to Singapore Safety ......................................................................................................................................... 1621
LATIN AMERICA ........................................................................................................................................................................................... 1623
VENEZUELA Signs of a Crack-up Boom and Dictatorship .................................................................................................................... 1623
VENEZUELA - Shortages & Hyperinflation ............................................................................................................................................... 1623
MIDDLE EAST ............................................................................................................................................................................................... 1625
TURKEY ..................................................................................................................................................................................................... 1625
US ECONOMY ..................................................................................................................................... 1626

THE GLOBAL MACRO OVERLAY ........................................................................................................................................ 1628
MACRO - US Macro Data .................................................................................................................................................................................... 1628
CHARTS OF NOTE ....................................................................................................................................................................................... 1628
NEW-MACRO Divergence between Income/Job Growth and Fed Balance Sheet & Financial Markets .............................................. 1628
NEW-MACRO US Economic Surprises Rising While EMU Declines .................................................................................................... 1628
NEW-MACRO US Macro Surprise Index ............................................................................................................................................... 1629
NEW-MACRO Growing Unallocated Global Currency Reserves? ...................................................................................................... 1629
MACRO World Trade Volumes ............................................................................................................................................................... 1631
MACRO Marginal Utility .......................................................................................................................................................................... 1631
MACRO Global Manufacturing PMI ........................................................................................................................................................ 1632
MACRO Credit Markets Diverging .......................................................................................................................................................... 1632
MACRO US Macro Complacency ........................................................................................................................................................... 1633
MACRO Macro Implied Vols ................................................................................................................................................................... 1633
MACRO Markets Stretched .................................................................................................................................................................... 1634
RESEARCH OF NOTE ........................................................................................................................................................................................ 1635
NEW-MACRO A World Recession? ........................................................................................................................................................... 1635
NEW-MACRO - US the Safehaven in a Best of a Bad Lot Choice............................................................................................................. 1636
NEW-MACRO The Ambivalent Superpower ........................................................................................................................................... 1638

16

NEW-MACRO Things Worse than Slow Growth ........................................................................................................................................ 1640

MACRO - US & Global Growth Will Slow Dramatically on a Per Capita Basis ............................................................................................ 1643
MACRO - Serious Structural US Problems Impeding Global Competitiveness ........................................................................................... 1645
MACRO - Output Gap .................................................................................................................................................................................... 1652
US INVESTMENT CYCLE ...................................................................................................................................................... 1661

CHARTS OF NOTE ............................................................................................................................................................................................. 1661
CHART $77T in Household Net Worth Growth Keeps an Illusion Going ............................................................................................ 1661
NEW-CHART US Recession Cycle Suggests Cycle May Be Close To Ending ................................................................................... 1661
CHART - Economy in Decline from Consuming More than it Produces ............................................................................................... 1663
GORD'S BIG PICTURE ECONOMIC CYCLE ..................................................................................................................................................... 1664
ECONOMIC INDICATORS .................................................................................................................................................................................. 1665
MONTHLY INDICATORS OF NOTE ............................................................................................................................................................. 1665
RESEARCH - The US Economy Continues to Tank under Obama ..................................................................................................... 1665
REFERENCE CHARTS ............................................................................................................................................................................. 1667
THE CURRENT BUSINESS CYCLE - SITUATIONAL ANALYSIS ..................................................................................................................... 1672
BUSINESS CYCLE - JOBS > CONFIDENCE > CONSUMPTION > GROWTH CYCLE.................................................................................... 1672
BUSINESS CYCLE - JOBS ................................................................................................................................................................................. 1674
SOME GRAPHIC HIGHLIGHTS .................................................................................................................................................................... 1674
CHARTS & TABLES OF NOTE ..................................................................................................................................................................... 1677
NEW-CHARTS US Monthly Job Growth ................................................................................................................................................ 1677
NEW-CHARTS Labor Market Improving with Troublesome Signs ........................................................................................................ 1677
NEW-CHARTS Non-Farm Payrolls & Unemployment Rate ................................................................................................................... 1678
CHARTS - Corporate Profits versus Wages .............................................................................................................................................. 1678
CHARTS - Standard of Living Decline and Bear Market in Real Terms Reflect Labor Participation ....................................................... 1678
CHARTS - Underemployment Gap ............................................................................................................................................................ 1680
CHARTS - Participation Rate..................................................................................................................................................................... 1681
CHARTS - Part Time Employment ............................................................................................................................................................ 1681
NEW-CHARTS - U3 & U6 .......................................................................................................................................................................... 1682
NEW-CHARTS - Employment Situation Summary ................................................................................................................................... 1683
RESEARCH OF NOTE .................................................................................................................................................................................. 1688
RESEARCH - US Employment Trend Remains Chronic .......................................................................................................................... 1688
RESEARCH - Labor Force Participation Rates ......................................................................................................................................... 1690
RESEARCH - Bridging Jobs to Confidence & Sentiment.......................................................................................................................... 1693
RESEARCH - Participation Rate at 1979 Carter Levels ........................................................................................................................... 1696
SITUATIONAL SUMMARY & ANALYSIS ..................................................................................................................................................... 1697
BUSINESS CYCLE - CONSUMER & BUSINESS SENTIMENT ......................................................................................................................... 1702
A GRAPHIC HIGHLIGHT .............................................................................................................................................................................. 1702
CHARTS & TABLES ...................................................................................................................................................................................... 1703
NEW-CHARTS Only 16% Think Future Employment Opportunities Will Be Better .............................................................................. 1703
NEW-CHARTS Inequality Eventually Leads to Economic Adjustments Often Precipitously .............................................................. 1703
CHARTS - NFIB Small Business Sentiment .............................................................................................................................................. 1704
CHARTS - Orange Book ............................................................................................................................................................................ 1705
RESEARCH OF NOTE .................................................................................................................................................................................. 1705
RESEARCH Small Business Confidence is a Major Problem in America ............................................................................................. 1705
RESEARCH Americas Crisis of Trust .................................................................................................................................................... 1707
NEW-SENTIMENT: Consumer, Investor & Trader ...................................................................................................................................... 1709
Consumer Confidence - Conference Board .............................................................................................................................................. 1709
Consumer Sentiment - Michigan ............................................................................................................................................................... 1713
Consumer Comfort - Bloomberg ................................................................................................................................................................ 1714
Investors Intelligence ................................................................................................................................................................................. 1715
American Association of Independent Investors ....................................................................................................................................... 1715
National Association of Active Investment Managers (NAAIM) ................................................................................................................ 1717
Small Business Optimism .......................................................................................................................................................................... 1718
Percentage Stocks above 50 & 200 DMA ................................................................................................................................................. 1720
Margin Levels ............................................................................................................................................................................................. 1721
Mutual Fund Cash Levels v S&P 500 ........................................................................................................................................................ 1725
NEW-OSCILLATORS & BREADTH: Indicators of Importance .................................................................................................................... 1728
NYSE Overbought / Oversold .................................................................................................................................................................... 1728
OEX Open Interest (Puts/Calls) ................................................................................................................................................................. 1729
TRIN ........................................................................................................................................................................................................... 1730
McClellan Oscillator ................................................................................................................................................................................... 1731
SITUATIONAL SUMMARY & ANALYSIS .................................................................................................................................................. 1732
BUSINESS CYCLE CONSUMPTION ............................................................................................................................................................... 1736
LATEST ..................................................................................................................................................................................................... 1736
NEW-CHARTS Discretionary Retail Sales ............................................................................................................................................. 1740
NEW-CHARTS False Signal of Consumer Re-Leveraging .................................................................................................................... 1741
NEW-CHARTS Sub-Prime Lending Drives Spending ............................................................................................................................ 1742
NEW-CHARTS Retail Sales ................................................................................................................................................................... 1742
NEW-CHARTS Retail Sales - Details ..................................................................................................................................................... 1744
NEW-CHARTS Consumer Credit Growth Since Cycle Peak ................................................................................................................. 1745
NEW-CHARTS Real Income is The Key Driver of Consumption Spending .......................................................................................... 1745

17

NEW-CHARTS Consumer Credit Drove Household Debt in Q2 Mortgage Debt Lagged .................................................................. 1746
NEW-CHARTS Discretionary Spending Showing Signs of Cracking..................................................................................................... 1746
CHARTS - Real Disposable Personal Income .......................................................................................................................................... 1747
CHARTS - Real Consumption Expenditure ............................................................................................................................................... 1749
CHARTS - Consumer Credit Deleveraging ............................................................................................................................................... 1750
CHARTS - Core Retail Growth .................................................................................................................................................................. 1751
RESEARCH OF NOTE .................................................................................................................................................................................. 1752
RESEARCH - Golden Era of the 1950s/60s Was an Anomaly, Not the Default Setting .......................................................................... 1752
RESEARCH - 95% of Consumer Credit Lending Going towards Student & Car Loans ................................................................... 1754
RESEARCH - Thanksgiving Retail Sales Results ..................................................................................................................................... 1756
RESEARCH - Gallup Survey Shows -10% Reduction in Christmas Buying Plans ........................................................................... 1759
RESEARCH - The Wal-Mart Measure or How the US Consumer Is the Global Engine .................................................................... 1760
RESEARCH - A Sequential Decline in Wages ....................................................................................................................................... 1761
RESEARCH - Final Sales Signals Pending Potential Recession on the Horizon ............................................................................. 1762
RESEARCH - Consumers Using Savings to Maintain Life Style ........................................................................................................ 1762
RESEARCH - The Destruction of America's Middle Class .................................................................................................................. 1765
RESEARCH - Dramatic Slowing in Restaurant Business .................................................................................................................... 1765
RESEARCH - Signs of Serious Troubles .................................................................................................................................................. 1766
RESEARCH - Falling Real Disposable Income means Falling Consumption ................................................................................... 1769
BUSINESS CYCLE - GROWTH .......................................................................................................................................................................... 1776
LATEST ..................................................................................................................................................................................................... 1776
NEW-CHARTS Long Term US GDP Growth Estimates FOMC versus CBO ..................................................................................... 1780
NEW-CHARTS US Real Domestic Product Running Out of Runway ................................................................................................. 1780
NEW-CHARTS Steadily Falling Real US Growth Estimates .................................................................................................................. 1782
NEW-CHARTS US Power Consumption Tells the Real Story of US Growth & De-Industrialization .................................................... 1783
NEW-CHARTS US Real Trade Gap (Ex-Petroleum) ............................................................................................................................. 1783
NEW-CHARTS Consecutive Quarters of Contracting Growth Looming ................................................................................................ 1784
NEW-CHARTS Bloombergs Consensus GDP Forecasts 2011-2014 ................................................................................................ 1785
NEW-CHARTS GDP Growth During Current Recovery Lags Past Expectations .................................................................................. 1785
NEW-CHARTS Trends of Output, Hours and Productivity ..................................................................................................................... 1786
NEW-CHARTS Weak US Capacity Utilization ....................................................................................................................................... 1787
CHARTS A US Recession Likely IF Liquidity is not increased and TAPER Sustained ......................................................................... 1787
CHARTS Barrons Sees 4% Growth The Ultimate Contrarian Indicator ............................................................................................. 1788
CHARTS Firms Revising Lower Q1 Growth on Weakening Retail Sales .............................................................................................. 1789
CHARTS Negative Economic Surprises Began in November ............................................................................................................... 1789
CHARTS What Americans Experience Daily and its Isnt Growth ......................................................................................................... 1790
CHARTS - Manufacturing .......................................................................................................................................................................... 1791
CHARTS - Exports ..................................................................................................................................................................................... 1791
CHARTS - Durable Goods ......................................................................................................................................................................... 1792
CHARTS - NFIB Small Business CAPEX .................................................................................................................................................. 1792
CHARTS - US Manufacturing Conditions Deteriorating ............................................................................................................................ 1793
RESEARCH OF NOTE .................................................................................................................................................................................. 1794
RESEARCH - US Q1 GDP ........................................................................................................................................................................ 1794
RESEARCH - US GDP Growth Forecasts ................................................................................................................................................ 1799
RESEARCH - Economic Recoveries Don't Look Like This! ................................................................................................................ 1799
RESEARCH - 2nd Worst Decade in Over 220 Years (And Getting Worse) ........................................................................................ 1800
RESEARCH - US Economy is being fundamentally transformed ............................................................................................................. 1802
RESEARCH - Shrinking CAPEX, Expanding Buybacks and Dividends ............................................................................................. 1805
REFERENCE - Prior Posts .......................................................................................................................................................................... 1809
RESEARCH - US Economic Recovery Has Peaked ............................................................................................................................. 1809
ECONOMIC CYCLE, INVESTMENT CYCLE, SECTOR ROTATION ................................................................................................................. 1817
US PUBLIC POLICY BEGINNINGS OF SOCIAL UNREST & THE MILITARIZATION OF POLICE...................................... 1825
NEW-LATEST ............................................................................................................................................................................................ 1826
NEW-CORPORATE INVERSIONS ........................................................................................................................................................... 1826
NEW-FERGUSON ..................................................................................................................................................................................... 1827
NEW-MILITARIZATION OF POLICE ......................................................................................................................................................... 1827
POLLS ........................................................................................................................................................................................................ 1828
INCARCERATION ..................................................................................................................................................................................... 1829
FLAWED TAX POLICY .............................................................................................................................................................................. 1829
MINIMUM WAGE ....................................................................................................................................................................................... 1829
SOCIAL CANCERS ................................................................................................................................................................................... 1829
CORRUPTION & MALFEASANTS ............................................................................................................................................................ 1829
INEQUALITY .............................................................................................................................................................................................. 1830
CREEPING SOCIALISM ............................................................................................................................................................................ 1830
POLICIAL PARALYSIS .............................................................................................................................................................................. 1830
STATE OF THE UNION ............................................................................................................................................................................. 1830
NSA-SECURITY-SURVEILLANCE COMPLEX......................................................................................................................................... 1831
OBAMACARE ............................................................................................................................................................................................ 1832
GENERAL PUBLIC POLICY...................................................................................................................................................................... 1834

18

NEW-CHARTS Lack of Trust in Government to Handle International & Domestic Problems ............................................................... 1835
NEW-CHARTS Changing Presidential Stance ....................................................................................................................................... 1836
NEW-CHARTS Public Support to Withdraw from Union ........................................................................................................................ 1837
CHARTS - US Incarceration Rate Out of Control ...................................................................................................................................... 1837
RESEARCH OF NOTE .................................................................................................................................................................................. 1838
POLICY - The Death Cross of American Business ............................................................................................................................... 1838
POLICY - The State of the Union I have a Dream! .......................................................................................................................... 1840
POLICY - A self-destructive path toward oblivion ................................................................................................................................ 1844
POLICY - Indictment of US Public, Fiscal & Monetary Policy ............................................................................................................... 1849
POLICY - The Crisis of Trust Continues to Worsen ............................................................................................................................. 1862
POLICY - The Stunning Truth about Inequality In America ................................................................................................................. 1863
POLICY - Pointing US towards Government Dependence .................................................................................................................. 1864
POLICY - Yet another Game of Deception ............................................................................................................................................. 1868
POLICY - Obamacare A Flawed Public Policy Implementation ........................................................................................................... 1872
POLICY - Financial Repression and Manipulated Illusions ....................................................................................................................... 1875
Manipulating Bad Financial Data ........................................................................................................................................................... 1875
Manipulating Bad Nuclear Facts ............................................................................................................................................................ 1876
Manipulating Oil Spill Info ....................................................................................................................................................................... 1877
Manipulating Data on Other Environmental Issues ............................................................................................................................... 1877
Manipulating Food Safety Data .............................................................................................................................................................. 1878
Manipulating Health Safety Data ........................................................................................................................................................... 1878
Manipulating Metrics for War ................................................................................................................................................................. 1878
The Core Problem .................................................................................................................................................................................. 1878
POLICY - US Economic Decline is Obvious to Anyone Caring to Look ............................................................................................ 1879
POLICY - Policy Uncertainty and Confidence in Monetary Policy Direction is exposed .................................................................... 1882
POLICY - "What is good for GM is good for America" is no longer correct...................................................................................... 1884
POLICY - Where is the Logic In US Public Policy ................................................................................................................................ 1885
POLICY - What is the Real Driving Force Behind the New Immigration Law? ................................................................................. 1888
POLICY - Crony Capitalism and How America Lost its Way! .............................................................................................................. 1891
MONETARY POLICY - TAPER IMPLEMENTATION & A 2ND HALF LIQUIDITY SQUEEZE ................................................................. 1900
LATEST ..................................................................................................................................................................................................... 1900
BERNANKE YELLEN/FISHER TRANSITION ........................................................................................................................................ 1902
FED POST DECEMBER TAPER ........................................................................................................................................................... 1904
FED PRE-DECEMBER TAPER .............................................................................................................................................................. 1905
TAPER ....................................................................................................................................................................................................... 1908
TAPER - Fed December 2013 FOMC "TAPER" .................................................................................................................................. 1910
TAPER - The Last Time a Major Central Bank "Tapered" QE .......................................................................................................... 1911
TAPER - FOMC QE Meeting ................................................................................................................................................................. 1913
TAPER - The Fed Cannot Possibly "Exit" Without The Market Crumbling .................................................................................... 1915
TAPER - It Matters and the Fed Has Few Options As Quality Collateral Disappears. .................................................................. 1917
TAPER - Look for QE to Morph Into Quantitative Education ........................................................................................................ 1919
TAPER - Why Fed Bond Buying Can't Go on Indefinitely and Why TAPER .................................................................................. 1923
TAPER - Political "Push-Back" by the Fed ........................................................................................................................................ 1924
TAPER - Ending QE Will Pressure Fiscal Policy............................................................................................................................... 1926
TAPER - Delay Risks Bond Market Volatility as Private Availability Steadily Shrinks ................................................................. 1930
TAPER - Clearly a Bluff or Muddled Policy ....................................................................................................................................... 1933
TAPER - Why is the Fed Talking TAPER? ......................................................................................................................................... 1935
TAPER - The Fed is Unlikely to Taper ................................................................................................................................................ 1938
TAPER - Fed Trapped in a Box ........................................................................................................................................................... 1940
TAPER - The Fed Taper Playbook ...................................................................................................................................................... 1942
TAPER - TAPER Put On Hold .............................................................................................................................................................. 1943
QUEEN YELLEN ........................................................................................................................................................................................... 1946
YELLEN - QEeen YELLEN TESTIMONY - Dampens Taper Bet ........................................................................................................ 1947
VOLKER RULE .............................................................................................................................................................................................. 1950
VOLKER - Dodd- Frank Never Had a Chance .......................................................................................................................................... 1951
CHARTS & TABLES OF NOTE ........................................................................................................................................................................... 1953
NEW-CHARTS: Debt Needed to Create $1 GDP ......................................................................................................................................... 1953
NEW-CHARTS: Markets May be Ahead of Slowing Liquidity Flow Rates .................................................................................................... 1953
NEW-CHARTS: Primary Dealer Repo Fails .................................................................................................................................................. 1954
NEW-CHARTS: Repo Volumes ..................................................................................................................................................................... 1954
NEW-CHARTS: Repo volumes Agency + MBS ......................................................................................................................................... 1955
NEW-CHARTS: Repo volumes Agency + MBS ......................................................................................................................................... 1955
NEW-CHARTS: Feds Reverse Repo Agreements ....................................................................................................................................... 1956
NEW-CHARTS: Why Does the Fed Need Such a Large Options Trading Contract with ALL Exchanges? ................................................ 1957
NEW-CHARTS: 10 Year Yield Suggests End to Yellen Honeymoon ........................................................................................................... 1958
NEW-CHARTS: Capitalism Doesnt Work Without Savings for Investment Where is the Savings? ....................................................... 1958
NEW-CHARTS: Net National Savings Rate .................................................................................................................................................. 1959
NEW-CHARTS: Mispricing of Risk Reaching Extremes ............................................................................................................................... 1959
NEW-CHARTS: Unless you were a Banker, ZIRP Has Accomplished Zilch! ............................................................................................... 1960
NEW-CHARTS: Ratio of Capital v Consumer Goods Production ................................................................................................................. 1961
NEW-CHARTS: Feds Targeted Credit Growth Opportunities ...................................................................................................................... 1962
NEW-CHARTS: 90 Day Delinquent Loans by Type Student Loans a Growing Problem .......................................................................... 1962
NEW-CHARTS: A Third of US GDP is Now Going to Repay Interest & Principle on Loans ........................................................................ 1963

19

NEW-CHARTS: M2 Money Velocity .............................................................................................................................................................. 1965

NEW-CHARTS: Net Foreign Purchases of US Treasuries ........................................................................................................................... 1965
NEW-CHARTS: US Increase in Money Printing versus GDP ....................................................................................................................... 1966
NEW-CHARTS: US Consumers Failed Attempt at Deleveraging ................................................................................................................ 1967
NEW-CHARTS: Traditional Bank Liabilities v GDP ...................................................................................................................................... 1968
NEW-RATES: Historical Policy Rates ........................................................................................................................................................... 1969
NEW-RATES: Debt ....................................................................................................................................................................................... 1970
NEW-RATES: Stages of Fed Forward Guidance ......................................................................................................................................... 1970
NEW-RATES: Real Interest Rates ................................................................................................................................................................ 1971
NEW-RATES: Eight Rate Issues for the Fed Up or Down ......................................................................................................................... 1972
NEW-INFLATION: Price Inflation through Decline in Purchasing Power of the Dollar ................................................................................ 1973
NEW-INFLATION: Official Inflation Picture Remains Subdued .................................................................................................................... 1973
NEW-INFLATION: Cost of Eating ................................................................................................................................................................. 1974
NEW-INFLATION: The Cost of Breakfast ..................................................................................................................................................... 1975
NEW-INFLATION: July 4th Cost of Beef Burger ............................................................................................................................................ 1976
th
NEW-INFLATION: Bloombergs July 4 Barbecue Index ............................................................................................................................. 1976
NEW-INFLATION: Butter on a Roll ............................................................................................................................................................... 1977
NEW-INFLATION: Back to School Shocker ................................................................................................................................................. 1978
NEW-INFLATION: Where Inflation Isnt (Yet) - Energy ................................................................................................................................ 1979
NEW-INFLATION: Most Commonly Used Items are rising faster than CPI ................................................................................................. 1980
NEW-INFLATION: Back to School Shocker ................................................................................................................................................. 1980
CHARTS: Dramatically Slowing US Foreign Flows ...................................................................................................................................... 1981
CHARTS: Money Velocity STILL a Major Deflationary Signal ...................................................................................................................... 1981
CHARTS: US Trade Balance Has Been Shrinking Since 2008 .................................................................................................................... 1982
CHARTS: Inflation Arrived with the Removal of a Gold Standard Discipline and Creditism ........................................................................ 1982
CHARTS: The Feds Asset Appreciation Strategy to Protect Collateral Values ........................................................................................... 1983
CHARTS: Economic Growth Based Significantly on Credit Growth ........................................................................................................ 1984
CHARTS: Fed deliberately ignoring data on both growth and inflation ................................................................................................ 1986
CHARTS: US Economic Activity .................................................................................................................................................................... 1987
CHARTS: Effects of QE on S&P 500 ............................................................................................................................................................ 1988
CHARTS: Monetary Velocity versus Monetary Base .................................................................................................................................... 1989
CHARTS: Days Between 'Unsterilized' Actions ............................................................................................................................................ 1990
CHARTS: FOMC Economic Projections ....................................................................................................................................................... 1990
CHARTS: Taylor Rule & Evans Rule Estimates of Fed Funds Rates .......................................................................................................... 1991
CHARTS: Market Pricing In A Longer On-Hold Fed ..................................................................................................................................... 1991
CHARTS: Fed Balance Sheet Assets & Liabilities ........................................................................................................................................ 1992
CHARTS: Fed Policy Turns 180 Degrees ..................................................................................................................................................... 1992
CHARTS: US Banking Industry Concentration ............................................................................................................................................. 1993
CHARTS: Total Credit Market Debt as % GDP............................................................................................................................................. 1994
CHARTS: Debt-to-GDP Ratio Above What Caused Great Depression ........................................................................................................ 1995
CHARTS: Yield Chase Completely Distorted ................................................................................................................................................ 1995
CHARTS: Velocity of Money ......................................................................................................................................................................... 1998
CHARTS: Real Negative Rates ..................................................................................................................................................................... 2001
CHARTS: Short Interest Rates a Fed Problem ............................................................................................................................................. 2004
RESEARCH OF NOTE ........................................................................................................................................................................................ 2006
NEW-LIQUIDITY FLOWS 3 Month Advanced Fed Balance Sheet versus S&P 500 ................................................................................ 2006
NEW-LIQUIDITY FLOWS Lurking Problems in Repo Land Rising Failures .......................................................................................... 2007
NEW-LIQUIDITY FLOWS Eating the Seed Corn of Capitalisms Savings. .......................................................................................... 2012
NEW-LIQUIDITY FLOWS Reverse Repos The Feds New Magic Trick ............................................................................................. 2015
NEW-LIQUIDITY FLOWS Fed Magic Trick ............................................................................................................................................. 2017
NEW-LIQUIDITY FLOWS - Current QE Experiment is simply not working!! ......................................................................................... 2019
NEW-LIQUIDITY FLOWS Liquidity is Becoming a Serious Issue Due to Japanese Bond Market Problems .......................................... 2024
NEW-LIQUIDITY FLOWS - In A Sea Of Money Printing, What Happened To All The Liquidity?................................................................ 2027
NEW-LIQUIDITY FLOWS - Why "Tapering" Is a Mirage and the Fed May Be Loosening Instead ............................................................. 2031
NEW-LIQUIDITY FLOWS Half a Trillion More Demand than Supply Means Lower US Treasury Yields ................................................ 2032
MONETARY - Why "Tapering" Is a Mirage and the Fed May Be Loosening Instead .................................................................................. 2037
MONETARY - Foreign Purchases Suggest Slowing Global Economies with less Easy Credit to Invest .................................................... 2039
MONETARY - Dollar, Currency & Gold Outlook ....................................................................................................................................... 2041
MONETARY - Federal Reserves False Media Reporting ........................................................................................................................ 2046
MONETARY - The Unintended Consequences of it all ............................................................................................................................ 2048
MONETARY - QE Proves to be the "Sham" We All Knew it was! ........................................................................................................... 2057
MONETARY - Owns 32.47% of all 10 Year equivalents and monetizing 70% of all net equivalent issuance.................................... 2059
MONETARY - The Policy Options Available to the Fed ........................................................................................................................... 2060
MONETARY - Capital Distortion & Global Acceptance of the Bernankean Theory ................................................................................ 2061
MONETARY - The Suspension of Price Discovery (Marriage of Financial Repression & Crony Capitalism) ................................... 2065
MONETARY - The Fed is stuck in a QE Trap ............................................................................................................................................ 2068
MONETARY - Mathematically, the Fed Can Only Fail .............................................................................................................................. 2071
MONETARY - QE versus S&P 500 Movements ......................................................................................................................................... 2076
MONETARY - QE is standing Between Inflated Equity Markets and A Recession............................................................................... 2078
MONETARY - Mounting Policy Failures .................................................................................................................................................... 2080
MONETARY - QE Doesn't Help the Economy ........................................................................................................................................... 2084
MONETARY - The US Reserve Currency and the steady erosion of trust ............................................................................................ 2086
MONETARY - The FAC is to the FED as the TBAC is to the TREASURY (Same Banks) ..................................................................... 2089
MONETARY - $2.3 Trillion of Leveraged Derivative Collateral ............................................................................................................... 2090
MONETARY - Leverage, Funding and Profit Pressures as Money Is No Longer Quite as Free ................................................................. 2095
MONETARY - The Fed's Double-Bind ........................................................................................................................................................ 2101

20

MONETARY - The Federal Reserve is at the very heart of our economic problems ............................................................................ 2102
MONETARY - FED Inflation & Deflator ......................................................................................................................................................... 2104
REFERENCE - Prior Posts .................................................................................................................................................................................. 2106
RESEARCH - Reduction at the Core of the Growth of the Federal Reserve Balance Sheet ............................................................... 2106
RESEARCH - Fed's Excess Reserves are 51% Foreign Banks, 49% Domestic ...................................................................................... 2109
RESEARCH - A Game of Calculated Deception is Evolving to Something Worse ............................................................................... 2111
RESEARCH - A Loan Distribution Credit Bubble ..................................................................................................................................... 2112
RESEARCH - QE to be replaced with Guidance, Thresholds and Promises ......................................................................................... 2113
RESEARCH - Bernanke in a Box and Talking Out of Both Sides of Your Mouth .................................................................................... 2115
RESEARCH - Duration Extraction: The Hidden Fed Game ..................................................................................................................... 2116
RESEARCH - The Fed's Stated Guidance Sign-Posts ............................................................................................................................. 2118
RESEARCH - An Artificial Market............................................................................................................................................................... 2120
RESEARCH - Bank Reserves A Ticking Bomb, But Who Will Be Caught in the Blast? ........................................................................ 2120
RESEARCH - QE An Intentionally Broken Mechanism Due to 2008 Policy Payable Interest on Bank Reserves ............................ 2124
RESEARCH - QE Ineffective In Increasing GDP ....................................................................................................................................... 2125
MONETARY: Helicopter Money of Central Bank Bond Purchases are Forever ...................................................................................... 2126
MONETARY: Central Bank Balance Sheet Expansion and the Theoretical Path to SPX of 1950 ............................................................ 2128
MONETARY: Central Bank Balance Sheet Expansion versus CPI ......................................................................................................... 2130
MONETARY: The Fed Model No Longer Prices Risk ................................................................................................................................ 2131
SITUATIONAL SUMMARY & ANALYSIS ............................................................................................................................................................ 2139
REPO FAILS ........................................................................................................................................................................................................ 2140
REVERSE REPO Feds Stealth Program to Protect Markets .......................................................................................................................... 2140
FISCAL POLICY A SHRINKING BUDGET DEFICIT IS NOT ALL GOOD NEWS ................................................................. 2142
RESEARCH WE FOLLOWED ............................................................................................................................................................................. 2142
LATEST ......................................................................................................................................................................................................... 2142
FISCAL MATTERS ........................................................................................................................................................................................ 2144
CHARTS & TABLES OF NOTE ........................................................................................................................................................................... 2146
NEW-CHARTS Employed Population of America Tax Exposure ........................................................................................................... 2146
NEW-CHARTS Interest Costs to Dwarf Virtually Every Federal Expense................................................................................................. 2146
NEW-CHARTS Looming Increases in Baby-Boomer Driven Deficits ........................................................................................................ 2146
NEW-CHARTS Federal GAAP Based Deficit Growth & Federal Obligations Growth ............................................................................... 2147
NEW-CHARTS US Has the Highest Nominal Corporate Tax Rate in the Industrialized World .............................................................. 2148
NEW-CHARTS US Non-Financial Debt-to-GDP Since 1952 ..................................................................................................................... 2148
CHARTS - US Government Budget Surplus / Deficit .................................................................................................................................... 2149
CHARTS - Government Receipts & Outlay Growth Improves Significantly .................................................................................................. 2149
CHARTS - Federal Budget Surplus / Deficit .................................................................................................................................................. 2149
CHARTS - Real Federal Government Purchases ......................................................................................................................................... 2150
CHARTS - US Trade Balance Improvement ................................................................................................................................................. 2150
CHARTS - Growth & Jobs ............................................................................................................................................................................. 2151
CHARTS - Taxes & Spending ....................................................................................................................................................................... 2155
CHARTS - Politics & Policy ........................................................................................................................................................................... 2158
CHARTS - The Stakes ................................................................................................................................................................................... 2159
CHARTS - Official Fiscal Deficit & Debt ........................................................................................................................................................ 2161
CHARTS - Payroll Tax Holiday ...................................................................................................................................................................... 2162
CHARTS - Tax Rate Comparisons ............................................................................................................................................................. 2163
CHARTS - Risk Perceptions ....................................................................................................................................................................... 2164
CHARTS - 2013 Quarterly Impact ............................................................................................................................................................... 2165
CHARTS - Budget Deficit .............................................................................................................................................................................. 2166
CHARTS - Sovereign Debt ............................................................................................................................................................................ 2169
CHARTS - State & Local Government Drag ................................................................................................................................................. 2170
CHARTS - Government Dependence ........................................................................................................................................................... 2173
CHARTS - Coming Demographic Shock ....................................................................................................................................................... 2174
CHARTS - Fiscal Cliff Outcome .................................................................................................................................................................... 2178
BUDGET - What You Need to Know ................................................................................................................................................................... 2180
BUDGET - Political Budget Cowardice and Capitulation ........................................................................................................................ 2181
BUDGET - Political Budget Cowardice and Capitulation - 2 ................................................................................................................... 2183
BUDGET - The Ultimate in Political Can-Kicking! .................................................................................................................................... 2185
BUDGET - The Next Step in the Collapse Of The Dollar .......................................................................................................................... 2188
BUDGET - As Represented and Spun for the Public ............................................................................................................................... 2191
BUDGET - Implications ................................................................................................................................................................................ 2192
BUDGET - A Budget That Institutionalizes Big Government .................................................................................................................. 2194
BUDGET - The Secrets in The Budget ......................................................................................................................................................... 2198
RESEARCH OF NOTE ........................................................................................................................................................................................ 2201
RESEARCH - Budget Deficit Shrinking ......................................................................................................................................................... 2201
RESEARCH - Avoiding Taxes ..................................................................................................................................................................... 2203
RESEARCH - A Confluence Of Risky Economic Events ......................................................................................................................... 2204
RESEARCH - Everyone Hates Sequestration, But Few Can Agree On What to Cut ............................................................................ 2205
RESEARCH - $70T Off-Balance Sheet Federal Liabilities ....................................................................................................................... 2207
BUDGET SELLOUT ............................................................................................................................................................................................. 2210
BUDGET AGREEMENT ................................................................................................................................................................................ 2213
GOVERNMENT SHUTDOWN ....................................................................................................................................................................... 2214
SITUATIONAL SUMMARY & ANALYSIS ............................................................................................................................................................ 2215

21

KEY DRIVERS MUST HAVE CATALYSTS OF CHANGE ................................................................................................... 2217

EMPLOYMENT .................................................................................................................................................................................................... 2221
LATEST ..................................................................................................................................................................................................... 2221
CHARTS & TABLES ...................................................................................................................................................................................... 2223
NEW-CHARTS Small Business Not the Focus of A Consolidating Banking Industry ........................................................................... 2223
NEW-CHARTS Those Leaving Work Force Likely Not to Return .......................................................................................................... 2223
NEW-CHARTS Workers Not In the Labor Force Soars ......................................................................................................................... 2224
NEW-CHARTS The Trend of a Breadwinner Economy ....................................................................................................................... 2224
NEW-CHARTS Trend of a Goods Producing Economy ......................................................................................................................... 2225
NEW-CHARTS Trend of a Part Time Working Economy .................................................................................................................... 2225
NEW-CHARTS Jobs in HES = Health, Education and Social Services ................................................................................................. 2226
NEW-CHARTS NFP Jobs Less HES...................................................................................................................................................... 2226
NEW-CHARTS 1,446,000 Fewer People Working Full Time Aug 14 the Aug 08 ................................................................................ 2227
NEW-CHARTS Employment is Part Time in Food Services and Drinking Places ................................................................................ 2227
NEW-CHARTS QE Has A Diminishing Effect on US Job Creation........................................................................................................ 2228
NEW-CHARTS Labor Participation Rate ................................................................................................................................................ 2228
NEW-CHARTS US Industrial Production versus Manufacturing Jobs ................................................................................................... 2229
CHARTS Total Compensation Growth Lingering at 2.9 Percent ........................................................................................................... 2229
CHARTS The Startling Long Term Unemployed Statistics .................................................................................................................... 2230
CHARTS Finding Work That Pays Enough to Support a Family Is Nearly Impossible ......................................................................... 2231
CHARTS Labor Force Participation by Age ........................................................................................................................................... 2232
CHARTS - America Becoming a Country of Part Time Workers .............................................................................................................. 2233
CHARTS - Wages & Salary Accruals / GDP ............................................................................................................................................. 2234
CHARTS US Employment/Population Ratio Total in Labor Force ......................................................................................................... 2234
CHARTS US Industrial Production v Manufacturing Jobs...................................................................................................................... 2235
CHARTS - Part-Time Employment ............................................................................................................................................................ 2235
CHARTS - Nonfarm Payrolls Y-O-Y DECLINE ......................................................................................................................................... 2235
CHARTS - Hiring Stalled at 200K Per Month (Approximates ONLY the New People Entering Workforce)............................................ 2236
CHARTS - The Under-Employment Gap ................................................................................................................................................... 2236
CHARTS Staycations A Sign of the FEAR of Job Loss & Competition for Jobs ................................................................................... 2237
RESEARCH OF NOTE .................................................................................................................................................................................. 2238
NEW-EMPLOYMENT - Job = Just Over Broke ......................................................................................................................................... 2238
EMPLOYMENT - Working Age Americans without a Job Has Risen By 27 Million Since 2000 .............................................................. 2241
EMPLOYMENT - At the Core of the US Chronic Unemployment is a Lack of Private Investment.......................................................... 2243
EMPLOYMENT - With and Without Obama's Recovery Plan .............................................................................................................. 2245
EMPLOYMENT - Millennials Devastated As American Dream Becomes Nightmare for Most ........................................................ 2246
EMPLOYMENT - 30 Mind-blowing Statistics about Americans Under The Age Of 30 ..................................................................... 2248
EMPLOYMENT - Going Nowhere Even With All Jobs Becoming Temporary Jobs and the Participation Rate Plummeting ...... 2251
EMPLOYMENT - Low-Wage Jobs Bias Continues to Hamper U.S. Recovery......................................................................................... 2252
EMPLOYMENT - A REAL Family Wage versus Part Time & HES ....................................................................................................... 2253
EMPLOYMENT - It is as much About the Quality, as the Quantity of Jobs ....................................................................................... 2260
REFERENCE - Prior Posts ............................................................................................................................................................................ 2263
1- CAPITAL SPENDING ........................................................................................................................................................................... 2263
2- SMALL BUSINESS OPTIMISM ............................................................................................................................................................ 2266
3- DEMOGRAPHIC SHIFT ........................................................................................................................................................................ 2270
REAL DISPOSABLE INCOME ............................................................................................................................................................................ 2281
RESEARCH WE FOLLOWED ...................................................................................................................................................................... 2281
LATEST ..................................................................................................................................................................................................... 2281
NEW-STUDENT LOANS ........................................................................................................................................................................... 2281
CHARTS & TABLES ..................................................................................................................................................................................... 2283
NEW-CHARTS Increasing Government Entitlement Dependency ........................................................................................................ 2283
NEW-CHARTS US Household Balance Sheet....................................................................................................................................... 2284
NEW-CHARTS Middle Class Not Sharing In Per Capita GDP .............................................................................................................. 2284
NEW-CHARTS Real Personal Consumption Expenditures ................................................................................................................... 2285
NEW-CHARTS Inflation Adjusted Net Worth for Typical Family Falls 36% in 10 Years ....................................................................... 2286
NEW-CHARTS Even Wal-Mart Discounting Cant Keep Up With Government Inflation ....................................................................... 2286
NEW-CHARTS Food Stamps Now Part of the American Way of Life ................................................................................................... 2287
NEW-CHARTS Inflation Adjusted Hourly Earnings Remain Weak ........................................................................................................ 2288
NEW-CHARTS the Countrys Central Economic Challenge according to EPI ...................................................................................... 2289
NEW-CHARTS The New Sub-Prime Boom Auto Loans ..................................................................................................................... 2289
NEW-CHARTS Real Median Income Falls as Real Rates Turn Negative ............................................................................................. 2290
NEW-CHARTS Disposable Personal Income Per Capita ...................................................................................................................... 2290
CHARTS Real Disposable Income is Now Contracting ......................................................................................................................... 2291
CHARTS This is a Structural .................................................................................................................................................................. 2291
CHARTS Growing Temp Wages Impacting Real Disposable Income in America .............................................................................. 2292
CHARTS Real Disposable Income per Capita ....................................................................................................................................... 2293
CHARTS - Household Incomes a Sign of a Collapsing Middle Class ................................................................................................ 2293
CHARTS - Food Stamps Now 14% of US Grocery Store Sales ............................................................................................................. 2294
RESEARCH OF NOTE .................................................................................................................................................................................. 2295
RESEARCH How Can a 70% Consumption Have a Recovery When Real DI/Capital Falls ................................................................. 2295
RESEARCH - The Facts are clear. The US Standard of Living is Falling ........................................................................................... 2296
RESEARCH - The Facts are clear. The US Standard of Living is falling .................................................................................................. 2297
RESEARCH - Standards of Living and Artificial Expectations ........................................................................................................... 2300
RESEARCH - A Lack of Demand in US Economy ................................................................................................................................ 2302
RESEARCH - Full Time Jobs or Food Stamps & Disability? .............................................................................................................. 2303

22

REFERENCE - Prior Posts ............................................................................................................................................................................ 2305

STANDARD OF LIVING - Salary Compression ...................................................................................................................................... 2305
DISPOSABLE INCOME - 66M (20%) Below $28.8/Year Subsistence Level........................................................................................ 2306
FOOD STAMPS - 46,405,204 Individuals, 22,257,647 Households below Poverty Line ................................................................... 2307
DISPOSABLE INCOME - Bad Even in Nominal Terms ......................................................................................................................... 2309
INFLATION - It's There but the Government Doesn't Account for it. .................................................................................................. 2309
US RESIDENTIAL REAL ESTATE ...................................................................................................................................................................... 2311
LATEST ..................................................................................................................................................................................................... 2311
CHARTS & TABLES ...................................................................................................................................................................................... 2315
NEW-CHARTS Total Real Estate Sales Activity vs. Mortgage Rates ................................................................................................... 2315
NEW-CHARTS Home Price Slowdown Underlines Weak Demand ...................................................................................................... 2316
NEW-CHARTS National Home Price Medians & Indexes ..................................................................................................................... 2317
NEW-CHARTS Multi-Family Shift Underway In America ....................................................................................................................... 2317
NEW-CHARTS Housing Completions Show Shift to Multi-Family Units ................................................................................................ 2317
NEW-CHARTS New Home Prices .......................................................................................................................................................... 2318
NEW-CHARTS Housing Starts and Completions .................................................................................................................................. 2319
NEW-CHARTS DJ Home Construction Index ........................................................................................................................................ 2319
NEW-CHARTS Consumer Attitudes About Home Ownership ............................................................................................................... 2320
NEW-CHARTS Trailing 12 Month Average Median US New Home Sale Prices .................................................................................. 2321
NEW-CHARTS US New Home Demand Still Flagging .......................................................................................................................... 2321
NEW-CHARTS Housing Completions Single Family Versus Multifamily ............................................................................................ 2322
NEW-CHARTS Troubling Technicals in Housing Starts ........................................................................................................................ 2322
NEW-CHARTS NAHB Sentiment versus Mortgage Applications .......................................................................................................... 2323
CHARTS - Serious Housing & Household Spending Headwinds ............................................................................................................. 2323
CHARTS - Double Top in Construction Index ........................................................................................................................................... 2323
CHARTS - The Real Cost of Buying a Home 6.7 X Average Salary .................................................................................................... 2324
CHARTS - Household Formations ............................................................................................................................................................. 2324
CHARTS Falling Originations ................................................................................................................................................................. 2325
CHARTS Falling Credit Scores ............................................................................................................................................................... 2326
CHARTS Falling Down payments ........................................................................................................................................................... 2326
CHARTS Household Formations & First Time Buyers Collapse............................................................................................................ 2327
CHARTS Classic Technical Analysis Chart Showing Housing in an Uncompleted Corrective Wave ................................................... 2327
CHARTS - Housing Starts ......................................................................................................................................................................... 2328
CHARTS - Composition of Housing Sales ................................................................................................................................................ 2328
CHARTS - New Home Sales ..................................................................................................................................................................... 2329
CHARTS - Existing Residential Supply ..................................................................................................................................................... 2329
CHARTS - Housing Starts ......................................................................................................................................................................... 2330
RESEARCH OF NOTE .................................................................................................................................................................................. 2332
RESEARCH - BlackRock's Fink Warns Housing More "Unsound" Now Than During Last Bubble ......................................................... 2332
RESEARCH - A Single Family Income Insufficient and In Many Cases Two Is Insufficient ..................................................................... 2333
RESEARCH - Insight: A new wave of U.S. mortgage trouble threatens ................................................................................................... 2335
RESEARCH - Household Formation Drives Residential Real Estate ................................................................................................. 2337
OVERVIEW ................................................................................................................................................................................................ 2340
CURRENT HOME OWNERSHIP TRENDS .............................................................................................................................................. 2346
$6.5 TRILLION IN MIDDLE CLASS NET WORTH EVAPORATES .......................................................................................................... 2349
NATIONAL STATISTICS: PRICE .............................................................................................................................................................. 2350
NATIONAL STATISTICS: EXISITNG HOME SALES ............................................................................................................................... 2352
NATIONAL STATISTICS: NEW HOME SALES ........................................................................................................................................ 2354
HOUSING: Even a Never Seen Before 30 Year Mortgage Rate can't Help Housing ......................................................................... 2355
HOUSING: Soaring FHA Delinquencies ................................................................................................................................................. 2357
US COMMERCIAL REAL ESTATE ..................................................................................................................................................................... 2362
LATEST ..................................................................................................................................................................................................... 2362
RESEARCH OF NOTE .................................................................................................................................................................................. 2363
CRE Commercial Mortgage-Backed Securities: Hot ... But Very Dangerous ................................................................................ 2363
OVERVIEW ................................................................................................................................................................................................ 2372
NATIONAL STATISTICS: COMMERCIAL REAL ESTATE ....................................................................................................................... 2373
FOCUS GROUPS .................................................................................................................................................................. 2379

US COMMERCIAL RETAIL REAL ESTATE ....................................................................................................................................................... 2379
LATEST ..................................................................................................................................................................................................... 2379
NEW-CHARTS McDonalds Global Sales Fall 2.5% - 35,000 Franchise Operators In Trouble ............................................................ 2383
NEW-CHARTS McDonalds US Same Store Sales Down ~4% Y-o-Y .................................................................................................. 2384
NEW-CHARTS Top US Franchise Defaulters ........................................................................................................................................ 2384
NEW-CHARTS Online Retailers Beginning to Dominate Worlds Largest Retailers by Market Cap .................................................... 2385
NEW-CHARTS Shippers Being Squeezed By Online Retailers ............................................................................................................ 2385
NEW-CHARTS Consumer Discretionary Underperforming Consumer Staples Signs of Increasing Squeeze .................................. 2386
NEW-CHARTS Discretionary Retail Sales Trend .................................................................................................................................. 2386
NEW-CHARTS US Retail Sales Ex-Auto & Parts .................................................................................................................................. 2387
NEW-CHARTS Retail Sales Ex-Auto Adjusted for Inflation & Population Growth ................................................................................. 2389

23

CHARTS Retail Space Opened Pre-2008 versus Current Rate ............................................................................................................ 2390
CHARTS CMBS Recovered Somewhat but Malls In Trouble ................................................................................................................ 2390
CHARTS Department Store Sales Continue to Erode ........................................................................................................................... 2391
RESEARCH OF NOTE .................................................................................................................................................................................. 2393
NEW-COMMERCIAL REAL ESTATE - Capture market share and get the most out of the consumers that are in our stores ............... 2393
NEW-COMMERCIAL REAL ESTATE - McDonalds Has Worst Month In A Decade ................................................................................ 2394
NEW-COMMERCIAL REAL ESTATE - August Retail Sales: Post-Winter Bounce Fading Fast.............................................................. 2394
NEW-COMMERCIAL REAL ESTATE - Weakness reported in restaurants, food service and processors and some retailers ............... 2399
NEW-COMMERCIAL REAL ESTATE - Why Aren't "Confident" Consumers Spending? ................................................................... 2400
NEW-COMMERCIAL REAL ESTATE - Retail Sales Have not Recovered to the 2007 Pre-Recession Level ................................... 2402
NEW-COMMERCIAL REAL ESTATE - Why Retail Sales Are Faltering - 60% of Households Have No Real Income Gains ................ 2405
NEW-COMMERCIAL REAL ESTATE - Wal-Mart Reduces Guidance - Again! ........................................................................................ 2408
NEW-COMMERCIAL REAL ESTATE - 35,000 Franchise Operators in Trouble ..................................................................................... 2409
NEW-COMMERCIAL REAL ESTATE - Retail Furniture Sales Collapse .................................................................................................. 2410
NEW-COMMERCIAL REAL ESTATE - Lower Prices & Discounting Taking a Toll .................................................................................. 2411
NEW-COMMERCIAL REAL ESTATE - Retail Sales Weaken on Price Discounting ................................................................................ 2412
NEW-COMMERCIAL REAL ESTATE - Wal-Mart Looks to Grow by Embracing Smaller Stores ...................................................... 2413
NEW-COMMERCIAL REAL ESTATE - INEQUALITY leads to Economic Adjustments........................................................................... 2419
NEW-COMMERCIAL REAL ESTATE - A Bad Start to the Q Earnings Season ....................................................................................... 2420
NEW-COMMERCIAL REAL ESTATE - Gallup Highlights Consumers are straining against rising prices" ............................................ 2421
NEW-COMMERCIAL REAL ESTATE - Markets Being "Duped" by Misinterpreting Misleading Data...................................................... 2424
NEW-COMMERCIAL REAL ESTATE - Rising Beef Costs ..................................................................................................................... 2425
NEW-COMMERCIAL REAL ESTATE - - Rising "Prime" Retail Rents ...................................................................................................... 2429
NEW-COMMERCIAL REAL ESTATE - Tablets Are Making Waiters Obsolete .................................................................................... 2431
NEW-COMMERCIAL REAL ESTATE - Weakness in RETAIL Broadens ................................................................................................. 2433
NEW-COMMERCIAL REAL ESTATE - Credit Spending Marginally Increasing - But Now on More Expensive Non-Discretionary ....... 2434
NEW-COMMERCIAL REAL ESTATE - Darden Results Disappoint as Olive Garden Sales Keep Declining & Sells Red Lobster ........ 2435
COMMERCIAL REAL ESTATE - Commercial Mortgage-Backed Securities: Hot ... But Very Dangerous ...................................... 2437
COMMERCIAL REAL ESTATE - The Dollar Tree Uptick in its earnings before following economic downturns ........................... 2444
COMMERCIAL REAL ESTATE - E-Commerce Industry Is About To Explode .................................................................................... 2446
COMMERCIAL REAL ESTATE - Retailers' Profits Miss By Most In 13 Years: "Consumer Is Not Back" ........................................ 2447
COMMERCIAL REAL ESTATE - Imploding Retail Floor Space Requirements .................................................................................. 2449
COMMERCIAL REAL ESTATE - Family Dollar to cut jobs, shut 370 stores as sales fall ................................................................. 2452
COMMERCIAL REAL ESTATE - The Death of a 71% Consumption Driven Economy ...................................................................... 2455
COMMERCIAL REAL ESTATE - Getting Worse Fast ............................................................................................................................ 2456
COMMERCIAL REAL ESTATE - Unfolding Implosion ........................................................................................................................... 2458
COMMERCIAL REAL ESTATE - Unfolding Implosion - II ..................................................................................................................... 2459
COMMERCIAL REAL ESTATE - Financial Crisis II Coming ................................................................................................................. 2464
COMMERCIAL REAL ESTATE - Indoor Mall Retail in Trouble ............................................................................................................. 2471
COMMERCIAL REAL ESTATE - Mortgage bonds reflect diverging fortunes of US malls ....................................................................... 2474
COMMERCIAL REAL ESTATE - Dead Mall Syndrome: The Self-Reinforcing Death Spiral of Retail ..................................................... 2476
COMMERCIAL REAL ESTATE - The First Domino to fall: Retail-CRE (Commercial Real Estate) ......................................................... 2478
COMMERCIAL REAL ESTATE - After Seven Lean Years: US Commercial Real Estate: The Present Position and Future Prospects 2482
COMMERCIAL REAL ESTATE - Retail Sales Cannibalization ................................................................................................................ 2488
COMMERCIAL REAL ESTATE - Tsunami of Retail Store Closings and Downsizings Coming ............................................................... 2489
COMMERCIAL REAL ESTATE - Thanksgiving Retail Sales Results ....................................................................................................... 2492
NEW-US SUB-PRIME ECONOMY ...................................................................................................................................................................... 2496
CHARTS OF NOTE ....................................................................................................................................................................................... 2496
RESEARCH OF NOTE .................................................................................................................................................................................. 2496
THE MUNI MONSTER- A Failure of Public Policy to Respond to Structural Change ........................................................................................ 2497
PEURTO RICO .......................................................................................................................................................................................... 2497
US MUNI LAND ......................................................................................................................................................................................... 2497
DETROIT - Simply the Canary................................................................................................................................................................... 2498
DETROIT - By the Numbers ................................................................................................................................................................. 2500
DETROIT - The News Reporting ......................................................................................................................................................... 2501
DETROIT - A Structural Problem that Failed to be politically addressed ...................................................................................... 2503
RETIREMENT CRISIS Now Beginning to Take Hold....................................................................................................................................... 2504
RESEARCH OF NOTE .................................................................................................................................................................................. 2506
RETIREMENT - Underfunded and Unsustainable ................................................................................................................................ 2506
RETIREMENT - 35 Facts to Scare a Baby Boomer .................................................................................................................................. 2509
RETIREMENT - $205K Account Limits ..................................................................................................................................................... 2511
RETIREMENT - $3M Retirement Cap Unanswered ................................................................................................................................. 2513
RETIREMENT - What Does Heart Surgery Really Cost, And Why Is It 70 Times More Expensive In The US? ..................................... 2514
RETIREMENT - UPS Drops 15,000 Spouses From Health Plan, Blames Obamacare ........................................................................... 2516
xENTITLEMENT CRISIS Unfunded Promises ................................................................................................................................................. 2518
CHARTS OF NOTE ....................................................................................................................................................................................... 2518
xENTITLEMENTS The Swollen State: Transfer Payments as % of Personal Income .......................................................................... 2518
xENTITLEMENTS Generous Government? Gloomy Outlook Vs Comfort of Unemployed ................................................................... 2518
xENTITLEMENTS Employed Population Diverging from Financial Markets ......................................................................................... 2519
RESEARCH WE FOLLOWED....................................................................................................................................................................... 2520
FINANCIAL STRESS Increasing Despite Increases in Net Worth ................................................................................................................... 2520
RESEARCH OF NOTE .................................................................................................................................................................................. 2520

24

FINANCIAL STRESS The Feds Financial Stress Index ........................................................................................................................ 2520

US CREDIT Cracks Showing in US Credit ....................................................................................................................................................... 2527
RESEARCH OF NOTE .................................................................................................................................................................................. 2527
CREDIT Problems Showing On Multiple Fronts ..................................................................................................................................... 2527
US RECESSION A Looming US Recession .................................................................................................................................................... 2531
CHARTS OF NOTE ....................................................................................................................................................................................... 2531
RECESSION Recession Cycle ............................................................................................................................................................... 2531
RESEARCH OF NOTE .................................................................................................................................................................................. 2531
RECESSION - Sequential Decline in Wages ........................................................................................................................................... 2531
RECESSION - Final Sales Signals Pending Recession ....................................................................................................................... 2532
RECESSION - Consumers Using Savings to Maintain Life Style ....................................................................................................... 2533
RECESSION - 1987 Yields ....................................................................................................................................................................... 2536
RECESSION - Why a Looming Recession May Be Near ......................................................................................................................... 2537
RECESSION - Minimally in the Back Stretch of the Recovery ............................................................................................................ 2542
RECESSION - Reduced Household Income at the Core of the Growth of the Federal Reserve Balance Sheet .......................... 2548
RECESSION - Household Income and Signs of A Collapsing Middle Class ........................................................................................ 2550
RECESSION - More Cyclical Signs of a US Recession........................................................................................................................ 2550
RECESSION - A Lack of Demand ........................................................................................................................................................... 2551
RECESSION - Money Going to Cash But Equity Inflows Still Suggest Corrective Correlation ...................................................... 2553
RECESSION - More and More Signals Flashing ................................................................................................................................... 2556
RECESSION - Term Structures Suggest Signs of a US Recession Ahead ............................................................................................. 2558
CAPITAL & INTEREST RATES ........................................................................................................................................................................... 2561
SOCIAL CHANGE - What America Will Look like When The Next Great Economic Crisis Strikes........................................................... 2563
SPECIAL SUPPLEMENT....................................................................................................................................................... 2568

THE CRONY TRIBUTE SYSTEM ........................................................................................................................................................................ 2568
CHARTS OF NOTE ....................................................................................................................................................................................... 2568
TRIBUTES Fines versus Prosecuted versus Prison Time ..................................................................................................................... 2568
TRIBUTES Settlements & Payouts ......................................................................................................................................................... 2569
TRIBUTES State Fines for JP Morgan, Bank of America and Citi ......................................................................................................... 2569
TRIBUTES Lobbyists Because it Hard for Politicians To Decide Stuff on Their Own ........................................................................ 2570
RESEARCH OF NOTE .................................................................................................................................................................................. 2571
TRIBUTES - The People vs. Federal Bank Settlements and Liquidity Rules ........................................................................................... 2571
TRIBUTES - REGULATORY CAPTURE & COLLUSION - Proof the Financial Regulators are No Longer Regulating.................... 2573
TRIBUTES - Foreign Powers Buy Influence at Think Tanks ..................................................................................................................... 2576
TRIBUTES - The People vs. Federal Bank Settlements and Liquidity Rules ........................................................................................... 2587
TRIBUTES Bank Penalties are a Joke Relative to the Rip-off! Do the Math! ..................................................................................... 2587
TRIBUTES - The Criminalization of American business ........................................................................................................................... 2589
TRIBUTES - HSBC to pay $550m to settle FHFA suit .............................................................................................................................. 2591
US RESERVE CURRENCY PRESSURES ......................................................................................................................................................... 2593
RESERVE CURRENCY Four Realistic Possibilities of Who the Belgium US Treasury Buyer Is ............................................................. 2593
RESERVE CURRENCY Who Is the New Secret Buyer of U.S. Debt? ..................................................................................................... 2596
RESERVE CURRENCY As Russia Dumps A Record Amount Of US Treasuries, Here Is What It Is Buying .......................................... 2599
RESERVE CURRENCY US FDI Shrinks ................................................................................................................................................... 2602
RESERVE CURRENCY Is the EU Rescuing the US Treasury Market? ................................................................................................... 2603
RESERVE CURRENCY Slowing Global Economies with less Easy Credit to Fund US FDI .................................................................... 2605

25


Cracks in The Facade: Regional Update

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CRACKS IN THE FACADE

Chaotic Turmoil A Sign of What is to Come

GLOBAL MACRO TIPPING POINTS - FEBRUARY 2015

1 February 2015 Edition

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