Guest Post - The Majesty of Mindfulness

Submitted by Cognitive Dissonance on 10/05/2014 10:01 -0400

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The Majesty of Mindfulness

By Joe Withrow

Author of "The Individual is Rising"

 

You will always find original articles by Cognitive Dissonance and other authors first onwww.TwoIceFloes.com before they are posted here on ZH. Please stop by and take a look. If you wish to subscribe to ‘Dispatches’, a periodic newsletter from Cognitive Dissonance and TwoIceFloes Creations, please click here.

 

Mindfulness is a rare quality in our world today.  There is little need for Mindfulness within the halls of the great and mighty institutions of society.  There is little time for Mindfulness within individuals due to the demands of the rat-race, the allure of consumerism, and the overload of electronic stimuli.  And there is outright disdain for Mindfulness from the ruling class sitting atop the collectivist pyramid.

Yet Providence smiles favorably upon the Mindful.

Mindfulness is neither flashy nor fashionable and its power is not of worldly nature.  Mindfulness does not presume superiority and it does not seek recognition.  Mindfulness seeks only harmony – harmony of body, mind, and spirit.

Mindfulness is careful, but not timid.  Mindfulness is confident, but not arrogant; strong, but not domineering. 

The one who is Mindful understands the power of consent and thus does not consent to anything which disrupts the harmony of Mindfulness.  The power of consent is derived from the fact that one’s reality is ultimately a construct of one’s choices.  The Mindful one recognizes he has dominion over his thoughts, emotions, and actions.  Reality is merely an intersection of the three.

Because s/he is aware of the power of consent, the one who is Mindful chooses everything; he is not swayed by external forces.  The one who is Mindful takes great measures to avoid all manner of toxins that would serve to disrupt his harmony.  He avoids toxic food, toxic drugs, toxic thoughts, toxic words, toxic schools, toxic music, toxic television programming, toxic news, toxic people, and toxic government.

The one who is Mindful embraces self-education, self-employment, self-reliance, and self-governance and he rejects those who would seek authority over him.  The Mindful one recognizes the hubris and the ignorance of those who claim worldly authority over others.  S/he knows what they do not – that this life is not a trivial event in search of fame, fortune, and power.  Nay, this life is an interconnected part of the very fabric of the Universe through which the individual spirit has the opportunity to grow in transcendent knowledge and wisdom.  It is an opportunity to observe a very small section of Space-time within this massive Universe.

Those who seek power and dominion over Mindfulness are the same ones who seek power and dominion over the human spirit. They claim authority over the Mindful one and seek to govern every aspect of his life.  They ultimately seek to convert the Mindful one’s infinite potential into blind servitude.

Look back through history and you can see that they who seek power over humanity have been at it for a very long time.  The dominion-seekers are responsible for all of the wars that have raged since the dawn of human civilization, for the institution of overt slavery that existed for most of human history, and for the modern institution of covert slavery that is perpetuated by central banking and fiat currency.  It is they who murdered the most enlightened of the Mindful throughout history, from Socrates to Gandhi, and even the one called Christ.  The power seekers revel in fear and servitude and they hate individuals who practice the art of Mindfulness.

Despite this Mindfulness remains calm and centered.  Mindfulness understands that worldly power is irrelevant in the bigger scheme of the eternal Cosmos.  Mindfulness recognizes that the external worldly battle is but a reflection of the battle that rages within each sovereign individual.  It is the inner battle that matters, for the external battle will fade from existence once the inner battle is won. Mindfulness quietly focuses on winning this inner battle without any need of praise or recognition. 

To the worldly onlooker Mindfulness appears weak, callous, and cold.  Mindfulness offers no refute or explanation to these charges, but the Mindful one is fully aware of the strength that flows within and the flame of love that burns at the core.  The Mindful one understands that the same flame burning eternally within him also burns eternally in others.  Mindfulness knows that all of life is interconnected; that each individual is nothing less than an eternal spirit of humanity manifesting in a gloriously unique way.

 

 

The Mindful one recognizes there is no ‘left’ or ‘right’; there is only Liberty or Tyranny. 

Liberty leaves the individual free to wander in whatever direction calls out to his spirit.  Liberty recognizes the individual’s right to discover and cultivate his passion, whatever that may be.  Liberty respects the sacredness of human life and presumes no superiority over the human spirit.  And Liberty leaves the individual free to discover his destiny and ascend to a higher state of being.

Tyranny sets forth to funnel the individual into worldly systems of enslavement and to regulate all manner of individual activity.  Tyranny sees the individual and presumes to know what’s best for him.  Tyranny looks upon the infinite human spirit with disdain and seeks to cage and dominate it.  Tyranny attempts to inundate and distract individuals with all manner of worldly fear, power, and entertainment so as to disconnect the individual from the spirit.  Tyranny places all individuals into collective groups, labels them accordingly, and then proclaims that individuals are meaningless outside of the collective.  Individuals who fall for this deceit then see themselves as part of a group and they see other groups as their enemy.

Mindfulness cuts through Tyranny like a fiery blade and the Mindful one sees right through these distractions and deceits. Mindfulness knows that Liberty is required for harmonious individual interaction.  Mindfulness maintains amor fati - a respect for Fate.

This is why Tyranny holds an eternal hatred for Mindfulness: it cannot exist where Mindfulness is present.  Tyranny understands it actually has no power; it must be chosen by individuals.  Thus Tyranny must convince individuals of its ability to deliver a better future.  History shows that Tyranny is fairly adept at selling this illusion, at least until Mindfulness rises in opposition.  History also shows that Tyranny is never capable of delivering the better future as promised.  Instead, Tyranny always disrupts the lives and

plans of individuals, families, and friends – always for its own benefit and not theirs.  Tyranny disrupted or ended the lives and plans of billions of individuals in the twentieth century alone.

Tyranny, for the life of itself, cannot understand the Mindful one.  Despite being in touch with their tremendous individual power, the Mindful ones do not use this power against others.  Nor is the Mindful one ever interested in negotiating with Tyranny; s/he simply refuses to stray from her/his chosen path.  Tyranny is befuddled when the Mindful one refuses all manner of bribes, deals, and kickbacks.  Tyranny is frustrated when the Mindful one is not deterred by slander and ridicule and it is enraged when the Mindful one does not respond to intimidation and threats of force.  Through it all the Mindful one stands tall, confident in the validity of his/her principles.  Tyranny has learned there is very little it can do to deter the Mindful one other than kill him.  But the eternal spirit of Mindfulness can never die.

Tyranny comes in different sizes, shapes, and colors and these different forms often compete with one another in the political arena.  Politics is simply the art of Tyranny, and a clever one at that.  Many an individual has strayed from the Mindful path for the allure of politics; often with good intentions. 

Mindfulness understands, however, there are no political solutions to political problems.  Political solutions always begin with “we must” or “you must” but this is a dead-end road.  “We must” and “you must” are unsustainable because they are not grounded in Mindfulness; they are grounded instead in some combination of self-interest, short-sightedness, ignorance, fear, and/or exploitation.  All true solutions must stem from “I must” first.  That solution is then amplified if multiple “I musts” come together in harmony.  But the inspiration has to come from within first – from the “I must”.

 

 

Applying Mindfulness

The Majesty of Mindfulness is the solution to the major problems of our time.  Mindfulness is simply a choice and anyone can choose to put it on their mantle.  Mindfulness cannot be forced upon others, however, as free will is a vital part of the Universal code.  Thus, Mindfulness is latent within each individual seeking to unlock its power for them.

The first step to awakening the Mindfulness within is an honest assessment of the System.  We are told at a very early age that the key to success in this life is to master the System’s power game.  We are herded into schools to pledge allegiance to the System and learn how to play by its rules.  We mindlessly rush off to college to further our education on how to succeed inside the System.  Then we pursue jobs in corporate America or maybe even an MBA from a public university.  The MBA, we are told, is the key to unlocking and gaining entry to the higher tiers of the System.  Similarly, each corporate job is a platform to prove our ability to

operate within the System so we can get raises, bonuses, and then move up to the next rank within the System.  And there is always a higher rank in the System.

This is not the Mindful path. 

There is nothing inherently wrong with pursuing this path within the System, but it is much more likely to lead to stress, confusion, short-sightedness, small-mindedness, physical exhaustion, mental atrophy, family problems, and depression than it is to enlightenment.  Now there are certainly those who have achieved self-defined success and happiness from within the System.  There are plenty of people who have used the System to provide a quality life for themselves and their families.  But past experiences are not indicative of future results and the System is becoming more and more fragile, and suffocating, by the day. 

The System was easy to support in its adolescence as there was ample room for growth to mask the ill-effects of exponentially expanding credit-based money.  The hockey-stick graph of credit expansion has now eclipsed the rate of economic growth, however, and the System is teetering as a result.  The owners of the System must now resort to iron-fisted measures to keep it from tipping.  If you follow the System’s predefined path, your every move will be subject to restrictions, licenses, regulations, taxes, and prohibitions.  This is not a formula for success and it is certainly no way for a sovereign individual to live.

An honest assessment of the System will likely lead you to conclude that you would be better served by exiting it, but you will probably be unable to immediately make your get away.  Unless you have a tremendous amount of resources at your disposal, you will have to distance yourself from the System one step at a time.  This is not easy for someone who has spent their entire life doing the ‘right’ things – getting an education, working hard, and saving some money for retirement.  It is very difficult to accept the fact that the System has been structured to plunder the honest people who follow the predefined path and it is normal for this realization to lead to depression or anger, or both.  

But Mindfulness cannot coexist with depression or anger.  The next step to awakening Mindfulness is to learn to be calm and accept the worldly injustices for what they are – an opportunity for growth.  Liberty and Tyranny swing on a pendulum.  As do Justice and Injustice.  One or the other is inescapably present at all times in all places.  There is a fundamental balance that seems to exist in the Universe which suggests that opposite and contrary forces are always interconnected.  In order to know one you must also know the other.  This is expressed as the yin and yang principle in Eastern philosophy.

The System currently represents Tyranny and Injustice but it is becoming extremely fragile and one day the pendulum will swing back towards Liberty.  And later the pendulum will reverse course once again.  There is nothing we can do to change this process at the macro level.  All we can do is learn how to move away from the System and become a positive force in our local reality - our families, friends, and communities.  

The Mindful one does not seek to change the world; he seeks to change himself.  The end goal is admirable, but it is the journey that is most important.  The obstacle is the path.

Opportunities for earning income outside of the corporate cubicle arise as Mindfulness grows.  This income is still subject to the regulations and taxes of the System, but some of it can be legally sheltered before the System gets to it.  One must develop these meaningful sources of income in order to move away from the System.  Yes this means paying taxes that the System will use against you.  Yes this means accepting dishonest fiat currency that is used to transfer wealth from the outsiders to the owners of the System.  But what other options are there currently?  It is difficult to grow in Mindfulness if one’s life is a constant struggle just for sustenance. 

As your non-wage income grows you will need Mindful strategies for protecting and investing your money.  The System suggests you trust government approved retirement plans and government licensed Wall Street brokers to handle your asset management needs.  Those moving away from the System prefer some combination of a more diversified approach:  gold in the basement to hedge against currency collapse, specially structured high-cash value life insurance to hedge against future bail-ins and wealth taxes, domestic real estate, farm land and other locally-controlled hard assets that cannot be inflated away, offshore real estate to hedge against domestic political risk, a bitcoin wallet or two in case crypto currencies have a role within the next monetary system, and/or a contrarian approach to the stock market with the assistance of real (non-licensed, non-commissioned) investment analysis.  And of course it is prudent to keep a little cash on the sidelines for the times when assets are dramatically oversold due to herd-mentality investors rushing for the exits.

Mindful investments are not based on greed or on the hopes of future luxury; they are made to sustain individual freedom.  Mindful investing is not about making money; it is about converting money into income streams and hard assets so as to be free from the need to work as a wage slave for basic necessities.  The specifics differ with each individual but the idea is the same:  to blend Mindfulness with practical self-reliance so as to strengthen the synergy between mind, body, and spirit.  This approach enables you to get rid of ‘life pockets’ and adopt a more holistic approach to living – instead of having a ‘work life’, ‘social life’, and ‘family life’ you just have ‘life’.

The Mindful path is steep and rugged with lots of twists, turns, and forks.  Rumor has it the path also has no defined end.  But those who choose to walk the Mindful path find that their problems seem to fade from relevance with each additional step taken.  So they trod on, confident in the validity of their journey and respectful of the eccentricity of the Universal code. 

Where does the Mindful path lead?  Who knows…? Such is the Majesty of Mindfulness.

The US Dollar Is About To Inflict Carnage All Around The Planet

Submitted by Tyler Durden on 10/05/2014 20:39 -0400

Abenomics

 

Alan Greenspan

 

Albert Edwards

 

Asset-Backed Securities

 

Bank of Japan

 

Bear Market

 

Black Swans

 

Bond

Central Banks

 

China

 

Consumer Prices

 

ETC

 

European Central Bank

 

Eurozone

 

Federal Reserve

 

fixed

 

France

 

Germany

Global Economy

 

Greece

 

Hirohisa Fujii

 

Hong Kong

 

Ice Age

 

Italy

 

Japan

 

Monetary Policy

 

Money Supply

 

Morgan Stanley

NASDAQ

 

Nikkei

 

Portugal

 

Quantitative Easing

 

Reality

 

Recession

 

recovery

 

Renaissance

 

Reuters

 

Toyota

Unemployment

 

Yen

 

Yuan

inShare3 Submitted by Raul Ilargi Meijer via The Automatic Earth blog,

Jack Delano Brakeman Jack Torbet at Atchison, Topeka & Santa Fe Railroad March 1943

As I watch the euro losing another 1.3% against the dollar today, it’s now at $1.25, and down from close to $1.40 recently, it’s getting clearer all the time: the greenback is busy eating currencies and economies alive.

There is of course the fact that Abenomics in Japan is living up to its longstanding promise of utter failure. And there is Mario Draghi torn between two lovers, one the one hand the Germany/Austria camp – with France as a surprise third – who don’t want the ECB to buy up junk paper, and on the other hand those EU members whose sole road to survival inside the EU is for Draghi to buy up anything that even looks like it was once toilet paper.

But Japan and Europe have been in the economic doghouse for a long time. It wasn’t until the Fed pulled the trigger on the dollar steamroller that they started paying the real price for it.

Japan, at least as long as it chooses to cling to the growth fairy, has nowhere to turn but to something in the vein of Abenomics, i.e. huge money and credit expansion. But it’s not the money supply, no matter how it’s defined, that is the problem, it’s that people refuse to spend. And if people don’t spend, no government or central banks has a way to boost inflation. Why they should want to in the first place is another question.

Europe has the added problem of disagreement on how to escape the walls that are closing in. And the more they close in, the less comfortable the shared living space on the old continent becomes. With a bit of imagination, you can see different people, different cultures, different languages, and different economies, all forced to live in the same ever shrinking – economic -space.

There’s less of everything to go around, and no-one wants to give up what’s theirs. Still, at the same time we already saw that two-thirds of Greeks live at or below the poverty line, and that Naples is even worse than Greece. Where do you personally think that will go? With a dollar that is set to make lots of things, not the least of which is oil and gas, more expensive?

It’s not just that for Europe, the growth fairy is evasive, their economies are bound to shrink a lot more still. And then what is Draghi, or his successor, supposed to do? The eurozone, and the EU itself, has already become a straightjacket with a noose attached to it, and that noose will start to tighten as we go forward. Brussels and Frankfurt can spin all they want – and do they ever -, but they can’t squeeze milk out of a deceased goat.

No matter what side of which fence you’re sitting on here, you have to give it to the Fed and Wall Street, though: their timing is impeccable. Victim no. 1 of the "Dollar is King"-move are the emerging markets:

Emerging Stocks Pummeled as Weak Yen Boosts Japan

The yen’s slide to a six-year low is amplifying a rout in emerging-market stocks as investors shift their focus to Japanese companies with earnings in dollars, according to Morgan Stanley. The MSCI Emerging Market Index tumbled 7.6% in September, the most since May 2012, led by China and Hong Kong. That compares with a 3.8% drop for the Topix Index in the period. The yen depreciated 5.1% versus the dollar to the weakest level since August 2008 last month, while a gauge tracking developing-nation currencies retreated 3.8%. “Asset allocation away from emerging markets was in part because Japan was back and that yen weakness is a positive catalyst,” Jonathan Garner, Hong Kong-based head of Asia and emerging-market strategy at Morgan Stanley, said by phone on Sept. 25.

 

“We don’t have a large export-industrial dollar earnings sector for EM, while Japan’s corporate-sector earnings responded positively to yen weakness.” Japan’s exporters are benefiting from a weaker currency, which boosts overseas income when repatriated, while developing-nation assets have come under pressure as the prospect for higher Federal Reserve interest rates dents demand for riskier assets. Toyota, the world’s biggest carmaker by market value which derives most of its revenue from the U.S., rallied 9% last month. Net inflows to U.S. exchange-traded funds that invest in emerging-markets tumbled 82% to $977.9 million in September, led by a 90% decline to China and Hong Kong, data compiled by Bloomberg show.

And the weak yen has long since stopped boosting Japan in a net, overall, sense:

Japanese Stocks Have Crashed Over 1000 Points Since Friday

After ticking just above 110.00, USDJPY has been a one-way street lower and that means only one thing… Japanese stocks are cratering. From Friday’s highs, The Nikkei 225 has crashed over 1000 points (despite Abe’s promises yet again of more pension reform buying of stocks). Of note, perhaps, is that, Japanese investors bought a net $3.6 billion of foreign stocks last week – the most since January 2009 – perfectly top-ticking global equities… Well played Mrs. Watanabe.

And:

Japan Inc. Begins To Turn Against The Weak Yen

When the Japanese yen began its long descent in late 2012 — around the time it became clear Shinzo Abe would be elected to another prime-ministership — the executives running Japan’s top corporations seemed to believe that the lower the currency, the better, regardless of all else. But since then, the yen has trekked steadily, inexorably downward against the dollar, with the greenback rising from around ¥78 two years ago to ¥110 earlier this week. And, at least according to a Nikkei news survey out Friday, some senior corporate officers are having second thoughts about the race to the bottom for forex. [..] … not a single CFO said they wanted to see the dollar breach above ¥115.

And also:

Yen’s Steepest Decline in 20 Months Spreads Unease in Japan

The yen’s steepest decline in 20 months is prompting concern in Japan that the central bank’s support for a weaker currency may hurt consumers and companies. Monetary authorities intervention to curb the slump is “possible,” according to Hirohisa Fujii, a former finance minister and member of the opposition party, after the currency’s steepest drop last month since January 2013. Some companies are suffering from the weaker yen, Nobuhide Minorikawa, Japan’s vice finance minister said this week [..] The chorus of dissent against the Bank of Japan’s accommodative monetary policy [..] is growing louder, as consumer prices remain depressed and growth is anemic. The weaker yen puts Japan at risk of recession, Kazumasa Iwata, deputy governor of the central bank until 2008, warned last month.

 

“The whole notion of devaluing the currency has been a bad policy,” Robert Sinche, a global strategist at Pierpont Securities, said. [..] BOJ Governor Haruhiko Kuroda said last month, after the dollar rose above 109 yen, that he didn’t see any big problems with current movements in exchange rates.

You have to like the suggestion that “The weaker yen puts Japan at risk of recession”. Tokyo may want to pick whatever stats they like, but it should be obvious that Japan, like the EU, is in a recession, not at risk of one. Take a look:

What 110 Yen to the Dollar Means for Japan’s Consumers

The weakening yen is starting to squeeze Japanese consumers as prices rise for everything from Burgundy wine to instant noodles, threatening Prime Minister Shinzo Abe’s plans to revive the country’s economy. The currency slid to 110 yen to the dollar yesterday, the lowest level in six years, making imported goods and materials more expensive. Though inflation is one of Abe’s monetary goals, the yen’s sharp slide undermines steps to boost consumer spending and endangers public backing for his economic program.

 

[..] The success of Abe’s plans for a sustained economic recovery after two decades of stagnation depends on consumers, since they account for about 60% of GDP. They’ve turned cautious as the sales tax rose and companies, including many that profited from the weaker yen, have failed to raise wages enough to keep up with inflation.

 

Supermarket sales fell for a 5th straight month in August, following an April jump in the consumption tax to 8% from 5%. Wages adjusted for inflation fell 2.6% in August from a year earlier, the 14th straight monthly decline …

 

Nissin Food Products, inventor of the world’s first instant noodles, is increasing their price in January and Ueshima Coffee Co., Japan’s biggest supplier of beans to retailers, will sell them for 25% more from November

 

[..] Abe, who must decide whether to raise Japan’s sales tax to 10% as planned next year. The increase this April plunged the economy into its deepest contraction in five years as the government tries to cap gains in the developed world’s highest debt burden.

 

Japan’s biggest employers, including Toyota, Hitachi and Panasonic, have benefited from the yen’s drop. A weaker currency makes their exports more competitive and increases the value of overseas earnings when converted into yen. Japanese companies’ pretax profit rose to a record 17.5 trillion yen ($161 billion) in the quarter ended March 31, according to figures from the finance ministry.

 

In the five years prior to Abe’s call for unprecedented monetary easing, the Japanese currency averaged 85.69 yen to the dollar and never rose above 93.03 yen, prompting manufacturers to move production out of the country and fueling declines in consumer prices.

 

The yen’s drop since Abe started his campaign to become prime minister helped fuel a 23% gain in the benchmark Nikkei 225 Stock Average in 2012, followed by a 57% surge last year, the biggest annual gain since 1972.

 

Abe’s failure so far to broaden the recovery beyond the direct benefits of a weaker currency and unprecedented monetary easing has damped enthusiasm, leaving the Nikkei down 1.3% this year, as of yesterday. Fast Retailing, which is Asia’s largest clothing retailer and accounts for 8.9% of the Nikkei, has fallen 15% this year. Aeon Co., the nation’s largest retailer, is down 22%.

 

Japan’s GDP shrank an annualized 7.1% in the April-to-June period, the most since the first quarter of 2009.

 

“The impact to the overall economy is not necessarily all positive; rather, negatives may be outweighing,” Kazumasa Iwata, the BoJ deputy from 2003-2008, said.

 

Japanese consumers have started to expect that imported foods will become too pricey. “I don’t go to import food shops much recently,” said Kazuha Hemmi, who works in the overseas section of a company in Tokyo. “Some of them stopped selling bargain products.”

“Not necessarily all positive”. Now there’s a dead spin. Any country that sees a 7.1% drop in GDP, no matter what sales tax changes, is in very serious trouble. The nation’s largest retailer is down 22% (!) Want to try that on for size at WalMart?

And then there’s Europe.   Where plenty folk probably think they’re in some lower euro honeymoon still. Today, EU exchanges are up 1% or so. While the euro loses big. I suggest these happy shiny people should check on Japan to see what’s in store.

European Stocks Plunge Most In 16 Months As Draghi Disappoints

Broad European stocks plunged into the red for 2014 today as a rattled Mario Draghi disappointed a hungry-for-more risk market. Bloomberg’s BE500 index dropped its most since June 2013 to 2-month lows led by weakness in Italian banks. UK stocks underperformed (-3.6%) but Spain, Italy, and Portugal all tumbled 2-3%. The selling pressure interestingly stayed in stocks as bond spreads rose only modestly and EURUSD roundtripped to only a small rise from pre-ECB. Notably, US equities are cratering as they are so used to the pre-EU-close pump that did not happen.

Draghi’s plan to buy Toilet Paper Backed Securities is dead is a dead in the water as it is on dry land:

France’s Noyer Is Third ECB Dissenter Against ABS Buying Plan

France’s Christian Noyer joined European Central Bank policy makers from Germany and Austria in opposing a program to buy asset-backed securities, according to two euro-area officials. His dissent leaves President Mario Draghi facing a clash with policy makers from the region’s two largest economies, albeit for different reasons. While Noyer disapproved of the way the purchases will be conducted, Austrian central bank Governor Ewald Nowotny shared Bundesbank President Jens Weidmann’s view that the measure involves too much balance-sheet risk, said the people, who asked not to be identified because the talks are private. 

Draghi unveiled details of the program yesterday, pledging to buy both covered bonds and ABS before the end of the year. He shied away from a definitive goal for the plan, saying total stimulus may fall short of the 1 trillion euros ($1.3 trillion) he had signaled in September. Noyer opposed the design of the program because it will exclude national central banks from its implementation …

And there’s more to that:

Mario Draghi’s QE: Too Little For Markets, Too Much For Germany

European stocks have suffered the steepest one-day fall in 15 months after the European Central Bank retreated from pledges for a €1 trillion blitz of stimulus and failed to clarify the scale of quantitative easing. The sell-off came amid a mounting political storm in Europe as leading German economists and jurists reacted with fury to the ECB’s first asset purchases, denouncing the move as monetary debauchery, and threatening a blizzard of lawsuits in the German courts. “Our worst fears are being fulfilled,” said Hans Werner Sinn, head of Germany’s IFO Institute. The Milan bourse tumbled almost 4pc, led by sharp falls in Italian banks counting on fresh ECB liquidity. [..]

 

Mario Draghi, the ECB’s president, seemed unable to secure backing for far-reaching measures from Germany’s two ECB members or from the German finance ministry, forcing him to play down earlier hints for a €1 trillion boost to the ECB’s balance sheet. As he spoke inside a renaissance palace in Naples, riot police doused crowds of protesters on the street outside with water cannon. The city has become a political cauldron, with the highest “misery index” Europe. Youth unemployment in Italy’s Mezzogiorno is still rising, topping 56pc in the second quarter. Mr Draghi said the ECB would start to buy covered bonds and asset-backed securities (ABS) as soon as this month, but gave no concrete figure and deflected all questions on the scope of stimulus.

 

“I wouldn’t want to emphasise the balance sheet size per se,” he said. Sovereign bond strategist Nicholas Spiro said the ECB was “backtracking” on earlier pledges and seemed to be losing confidence in its ability to halt deflation at all. “Mr Draghi is facing a severe credibility problem,” he said.

It’s not just Draghi, the entire EU leadership has a severe credibility problem. With – seemingly – nothing left on the economical front that member nations can agree on, other than there’s a huge and imminent disaster waiting in the wings, what ways forward are available? There’s only one, really: split up the whole caboodle in as amicable a divorce as you can muster, and then try to stay friends.

But even that doesn’t seem likely, at all. A split-up of the EU would obviously be grossly costly, and the lion’s share of those costs would have to be borne by the richer north. But the richer north, too, is getting poorer fast. So what campaign slogan do you think will win out in the next election in Germany, France etc?

Will it be: let’s pay for Greek debts, so they can have a good life again? Or will it be: let them cook in their own fat, so we can party on for a while longer in Berlin and Paris?

I think you know the answer. So does Albert Edwards. And he includes the US, and China, in his dark panorama for good measure. And he’s right of course

Albert Edwards Says Watch Japanese Yen and Be Very Afraid

The Japanese yen goes into freefall. China’s fragile economy tips over the edge. A wave of profit-crushing deflation comes washing over the U.S. and Europe. Investors panic. That’s the view of perennial pessimist Albert Edwards. The London-based analyst and his team at investment bank Societe Generale SA have been ranked No. 1 for global strategy in surveys by Thomson Reuters Extel every year since 2007, even with a history of saying unpleasant things that few want to hear. “My role is to step back from the excessive enthusiasm that builds up in the market, and to just say, ‘This is wrong. This is going to go horribly wrong,’” the 53-year-old said by phone last week. The cliche is that when the U.S. sneezes, Japan catches a cold. Edwards says Japan is just as apt to lead the way.

 

When the Internet bubble burst in 2000, Japan’s tech-heavy Jasdaq index started to slide weeks before the Nasdaq. Japan also pioneered the deflation that now threatens the West. In 1997, it was a plunging yen that helped trigger Asia’s currency crisis. With the yen’s drop this week to a six-year low of 110 versus the dollar, Japan’s currency may once again be the first domino to fall in a chain of events that could be bad for everyone, according to Edwards. The U.S. stock market rally has been going for 66 months since the financial crisis bottomed in March 2009, a streak that’s already a year longer than average. A disconnect between buoyant equity prices and corporate profit growth in the low single-digits makes the situation especially precarious. “Almost 100% of investors think we’re at the start of a long recovery,” Edwards said.

 

“It’s already a long recovery. Forget about starting from here.” In an hour-long interview, during which he made the global economy sound like a game of Mousetrap, Edwards explained why investors should be watching Japan for clues about what may happen in the next big trouble-spot: China, whose economy is already headed for its slowest full-year growth since 1990. The argument was this: if the yen falls, it will take other Asian currencies down with it. Eventually China will be forced to weaken the yuan, by adjusting its trading range and expanding its money supply, to keep its exports competitive. That will squeeze developed economies that have yet to fully recover from the financial crisis.

 

[..] In 2006, when the S&P 500 was rising ever higher and then-Fed Chairman Alan Greenspan was being feted as “the Maestro,” Edwards called him “an economic war criminal.” Two years later financial markets were in crisis. Edwards’ aversion to equities stems from watching the experience of Japan, where the market took more than two decades to find a bottom after the 1989 bust. According to Edwards’ view, it’s a template for the extended bear market that will unfold in the U.S. and Europe, as stocks recover only to crash again and plumb ever-new lows.“What happened in March 2009, when the S&P 500 touched 666, that was just a brief stop,” he said. “We will go lower than that.” The structural bear market ends when equities are dirt cheap.”

More Albert Edwards:

• “When Bad News Becomes Bad News Again”: Albert Edwards (Zero Hedge)

Inflation expectations in the US have just followed the eurozone by plunging lower. Until very recently, the Fed and the ECB had been quite successful at keeping inflation expectations in their normal range – this despite their clear failure to control actual inflation itself, which has consistently undershot expectations. Investors are beginning to realise that contrary to their

confident actions and assurances, the Fed and the ECB have failed to prevent a dreaded replay of Japan’s deflationary template a decade earlier in the West.

 

The Ice Age is once again about to exert its frosty embrace on markets as investors wake up to a new and colder reality. There were two key parts to our Ice Age thesis. First, that the West would drift ever closer to outright deflation, following Japan’s template a decade earlier. And second, financial markets would adjust in the same way as in Japan. Government bonds would re-rate in absolute and relative terms compared to equities, which would also de-rate in absolute terms. [..]

 

Another associated element of the Ice Age we also saw in Japan is that with each cyclical upturn, equity investors have assumed with child-like innocence, that central banks have somehow ‘fixed’ the problem and we were back in a self-sustaining recovery. Those hopes would only be crushed as the next cyclical downturn took inflation, bond yields and equity valuations to new destructive lows. In the Ice Age, hope is the biggest enemy.

 

[..] “amid the inevitable impending global economic and financial carnage, when people, like Queen Elizabeth ask, as she did in November 2008, why no-one saw this coming, tell them that many did. But just like in 2006, before the Great Recession, investors once again chose to tilt their ears towards the reassuring siren songs of the Central Bankers and away from the increasingly hysterical ramblings of the perma-bears and doomsayers.”

Down the line, the insane debt levels all around the globe will do in everyone. That goes for, in order of appearance, Japan, Europe, China and the USA. An order that can still be shaken up by various kinds of unrest and other black swans. Hong Kong protests, Catalunya, a country voting to leave the EU, there are too many options to mention.

But aside from these, Japan looks the furthest gone, with 400%+ debt to GDP and rapidly rising. Europe is a good second, because of debt levels AND the difference in wealth between rich and poor member nations AND all the other differences between rich and poor member nations.

China is a bit of an odd one out, it has room to move, but it also committed to $25 trillion in new debt in just a few years, without anything solid to show for it except apartment buildings that can only go down in price and bridges to a nowhere nobody wants to go to. And then there’s dozens of emerging nations with nowhere to go but down.

For the US, it’s now shooting fish in a barrel – but just for now. The three-pronged plan the Fed has started to execute is plain for everyone to see:

1) Stop QE. This hauls back in to the US dollars from around the planet, from a million parties that owe debt denominated in USD. Already happening at a frantic pace, though no-one involved would advertize it.

 

2) Raise the value of the greenback. This makes it that more expensive for all parties under 1) to pay off their debts. They have to offer ever more just to stand still. And when they can’t, assets will be confiscated.

 

3) Raise interest rates. The final blow. It will make life much harder on the US government too, but they’ll have trillions of dollars flowing in to cope with that. It’ll put millions of Americans into the equivalent of medieval torture instruments, and out of their homes and cars and jobs, but that too will be initially softened by the dollars coming home to papa. Crucial take home: they’ve given up on the US real economy, likely a long time ago.

And it will have the rest of the world begging for mercy. In that regard, it’s funny to see Britain planning to raise its rates too. Do be careful what you wish for there, lads.

The full taper of QE means everyone needs dollars, and most who do are leveraged to the hilt, while the combination of higher interest rates and higher dollar value means the buck will come much more expensive.

It’s going to be carnage out there.