Tag: National Debt

Ep. 569 – US Taxpayers Bailout The World

The Kapital News
The Kapital News
Ep. 569 - US Taxpayers Bailout The World
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Whether it is the trillions upon trillions of dollars that are being spent by Uncle Sam and printed by the Federal Reserve, or the $650 billion that Treasury Secretary Janet Yellen, just gave to the IMF, one thing is certain, and that is the American taxpayer is paying the bill. Now the US taxpayer is not the only group that will be feeling the consequences of such reckless policy. Instead it will be millions, if not billions of people the world over. They will feel the effects via inflation. Many poorer and middle-income nations are already contending with the destructive nature of inflation. Most notably for these countries is the price of food, energy, medicines, and other living necessities. Such cost increases are in turn leading to political and social unrest. This trend is likely to continue. However, The Kapital News would like to note that there may be a delay as to when some of these protests and riots gather more steam and traction. This is potentially due to the $650 billion that was given to the IMF to assist such countries with their ailing and failing economies. They are on the verge of defaulting on their debts, which in turn would have caused further problems, thus creating a vicious-cycle for these countries, which would likely manifest itself with people protesting and rioting. The $650 billion, buys some time. Furthermore, with our reckless spending, is leading to record trade deficits. That is to say we are importing more than we are exporting at record levels. This signifies that our spending is leading to increasing production levels in other countries. If we were producing such goods, then we would not need to import them to such a degree. So understand simply, the US produces dollars, and the world is producing goods. How long will this continue?

The Kapital News has also been informing our audience of further fiscal policy measures amounting to trillions of dollars before 2021 even got started and prior to the election of now President, Joe Biden. It would not have made much of a difference as to whom is the President, as further spending was coming regardless. Nonetheless, the new infrastructure bill has gained some parliamentarian clearance to be passed, at least in part, via budget reconciliation. This is where a simple majority in the Senate, 51 votes, is enough to pass the legislation. In this instance, as was the case for the Nobody CARES Act 3.0 worth $1.9 trillion, VP Kamala Harris would be the tie-breaking vote, assuming this falls on party lines. This determination by the Senate parliamentarian does not mean that this bill will pass quickly. There are a few Senate Democrats who are not huge fans of the current bill, and they also come from more conservative states. Therefore, it is very likely that these Senators will leverage this to gain extra funds to their states in order to look the other way with their objections and then ultimately pass the bill. When it is all said and done, trillions more in spending will be appropriated throughout the remainder of 2021 and perhaps beyond.

A recent report released by Fitch Ratings, one of the major corporate credit rating agencies within the United States, is issuing a warning with respect to bankruptcies. The agency rightly claims that the level of bankruptcies that occurred throughout 2020 was well below what would have been expected and historically experienced in past recessions. They also correctly note that this anomaly occurred due to the unprecedented monetary and fiscal policy actions that were implemented. However, Fitch remarks that once these fiscal and monetary supports are removed, forbearances and moratoriums lifted or scaled back, that “bankruptcies will rise, potentially significantly.” Their projections are for both 2021 and 2022. This is a very damning report and rebuke of said monetary and fiscal policies. What this in effect means, is exactly what The Kapital News has been saying since last year, and that is all of the trillions in spending, borrowing, and printing will have been only to kick the can down the road. In other words, nothing structural has been resolved. You may be able to print dollars, but you cannot print solvency. Most of the damage is believed to be experienced by small and medium sized firms, which will further the consolidation process by larger corporations. One of the direct results of extraordinary and reckless fiscal and monetary decisions, has been the “zombification” of the economy. At recent count, nearly 25 percent or 1-in-4 businesses in the US are classified as zombies. This is the economy of the living dead, and if Fitch Ratings is correct, then some of these zombies may be going out of business for good. There are still a ton of risks and headwinds staring us in the face and coming down the pike. Money printers and stimulus checks will not solve these problems. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Bailouts #Inflation #Debt #USA #Liberty #Leadership #FoodPrices #Gold #Silver #Commodities #Oil #EndTheFed #bananarepublic #FireCongress #Protests #Bubbles #Fraud

Ep. 568 – March Jobs Report

The Kapital News
The Kapital News
Ep. 568 - March Jobs Report
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The official unemployment rate now stands at 6.0 percent according to the Bureau of Labor Statistics. The jobs reports was released last Friday, which is the standard schedule being that it was the first Friday of the month. Employment rose by some 916,000 jobs. The bulk no doubt is more of a reflection of lockdowns and restrictions being lifted as opposed to new economic and business growth. In short, it is people being called back to work. This is still a good thing generally speaking, however, The Kapital News has some serious concerns as it relates to the true economic damage that has been done, much of which is still hanging in the balance, and the fiscal and monetary policies that have solved nothing, but have filled a void for the time being. Economic growth is not generated via the printing press, but rather through savings, capital formation, investment, and productivity gains. Printed money is not a substitute for real economic growth and activity. These policies are extremely expensive, reckless, and dangerous.

Nonetheless, some of the biggest gains came from the leisure and hospitality sector, which put on a gain of 280,000. This sector was one of the hardest hit due to the pandemic and subsequent lockdowns and restrictions. It is fair to reason that such gains were witnessed last month since such restrictions have been lifted in part or in their entirety. Most other sectors also saw job gains. It is important to note that many of the macro data points with respect to the employment picture, were little changed from the previous month. This signals that structural unemployment and underemployment remains throughout the economy. This can of course reverse course to the positive, but until we see these numbers improve significantly, then it is a hard sell to say that this is a solid jobs report. There is a long way to go and their exists major headwinds. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Jobs #Inflation #FoodPrices #Gold #Silver #Housing #Liberty #USA #Leadership #EndTheFed #bananarepublic #FireCongress #Protests

Ep. 566 – Central Banks Taunt The Markets

The Kapital News
The Kapital News
Ep. 566 - Central Banks Taunt The Markets
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If the incompetence of central bankers was not enough to deal with, now we have to contend with their arrogance. European Central Bank, ECB, President Christine Lagarde, remarked in a recent interview that central banks remain steadfast in achieving their goals and dared the markets to test their resolve. What is she talking about? Is the ECB President openly admitting that central bank policy and natural market forces are at odds with each other? If this is the case, which The Kapital News believes to be true, then Lagarde has just declared that equity and bond prices would be quite lower compared to current levels.

Of course this is the open secret about global monetary policy, yet no one dares to say it, especially not a central banker. Quite the contrary, as central bankers attempt to attribute equity and bond price gains to fiscal support or a more resilient global economy. Rarely, if ever, do central bankers want to stand in the center of the stage and take all the credit nor do they ever openly taunt the markets. Global equity prices are at their outrageous valuations, especially in the United States, because of the monetary measures that were undertaken since the pandemic and even prior. So it is a simple thought experiment to ask oneself the following, if such measures and liquidity were removed from the system, would equity and bond prices be at their current levels? The answers is a resounding, NO! Prices would be much lower and interest rates much higher. This is what needs to occur in order for markets to find fair value, for zombie corporations to be liquidated or restructured, and for all other malinvestments to be liquidated or restructured as well.

This will be a lengthy and painful process, but it is one that is needed and required in order to establish a solid foundation on which to build a sustainable future economy and society. But we will never hear this from central bankers or politicians. Instead they give us their lethal combination of incompetence and arrogance. And while the top 1 and 10 percent of the population see trillions of dollars added to their net worth in the midst of a pandemic, these same central bankers inform of us a growing wealth inequality problem. Yet they never seem willing or capable of placing the blame at their own feet for such inequality. This type of rhetoric from Lagarde and other central bankers is concerning to say the least. This is now open warfare between free-market capitalism and central planning. Let us hope for the sake of freedom, sound economics, individualism, and posterity that free-markets win the day. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #CentralBanks #Inflation #Markets #Debt #Protests #Riots #Liberty #USA #Leadership #EndTheFed #bananarepublic #FireCongress #Pandemic #Gold #Silver #Commodities

Ep. 564 – Margin Calls + Fragile Markets

The Kapital News
The Kapital News
Ep. 564 - Margin Calls + Fragile Markets
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Too much is never enough and when markets and investors are punch drunk on cheap liquidity and deficit spending, an environment gets created that places the entire system at risk. The dominoes have been set for a while and all it takes is for one to go down to commence the collapse of the others. News stories were breaking today around Archegos Capital Management, which is a family office, that ran into some problems. This firm is not a household name, which serves the point in highlighting how fragile the system is when a hedge fund or family office can cause or lead to a systemic event. In the case of Archegos, they received a margin call due to some of their equity positions losing value – namely ViacomCBS. What is interesting to note is how this is quite reminiscent to the housing crisis that led to the GFC – namely the similarities in the levels of leverage and the number of other financial institutions that were connected to these trades on a global basis. The investment banks involved, however, are household names such as Goldman Sachs, Morgan Stanley, Nomura, Credit Suisse, and Deutsche Bank. The damage done to each bank will of course differ, but the point remains – the financial system is highly interconnected, and this needs to be respected. Due to the fragility that exists, it can be the slightest wrong movement that throws equity markets off its perch. Be on the lookout for similar events to unfold. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Debt #Inflation #Markets #Bonds #USA #Liberty #Leadership #EndTheFed #bananarepublic #FireCongress #Protests #FoodPrices

Ep. 563 – Jobless Claims Remain Above GFC

The Kapital News
The Kapital News
Ep. 563 - Jobless Claims Remain Above GFC
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Despite being one full year into lockdowns and restrictions, initial jobless claims remains higher than even during the depths of the GFC. For the week ending 20 March, initial claims came in at 684,000, which happens to be the lowest reading since last year. Last week’s figure was revised upward by 11,000 to stand at 770,000. In aggregate, amongst all unemployment insurance programs, some 18.9 million Americans continue to file claims. This gives a de facto unemployment rate of 13.3 percent, which is more than double the official rate at 6.2 percent.

The Federal Reserve’s balance sheet hit another all-time high to now stand at $7.719 trillion. The Fed remains committed to its policy of QE, by purchasing $120 billion per month of US Treasuries and mortgage-backed-securities. This will likely take the balance sheet above $8.5 trillion by year end, which would be a 10x fold increase to the balance sheet since the GFC! Other monetary measures such as M1 and M2 also hit all-time highs. And lastly, the Suez Canal traffic jam continues into the weekend. Some estimates state that this blockage is costing the global economy $400 million per hour! A staggering figure no doubt and highlights the vulnerabilities that exist within some of these trading routes and the sizes of some of these vessels. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Jobs #SuezCanal #FoodPrices #Protests #Inflation #Leadership #USA #EndTheFed #bananarepublic #FireCongress #Taxes #Gold #Silver #Liberty

Ep. 560 – Nature, Trillions, & Social Unrest

The Kapital News
The Kapital News
Ep. 560 - Nature, Trillions, & Social Unrest
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Volcanoes, floods, and printing presses, oh my! Just when you thought it was a relief to put 2020 in the rearview mirror, we now start to see that 2021 may end up in a similar fashion. Whether it is once in a millennia volcanic eruption (Iceland), or the worst flooding in 60 years (Australia), one thing is certain, nature is unpredictable and very powerful. It will not be a surprise to The Kapital News if nature should continue to throw us several curveballs throughout this year.

Onto the trillions! So you thought the Nobody CARES Act 3.0 that just passed with a price tag of $1.9 trillion was going to be the cherry on top, well guess again. The ink is barely dry on that spending bill and President Biden is allegedly about to propose further measures amounting to nearly $3 trillion. How many times have we said that they are just getting started? We know that we have lost count. It would be one thing to say that while it is reckless and irresponsible to spend like this, we could at least point to several major accomplishments that resulted from this spending – like infrastructure, better education results, improved health, less financial systemic risk, etc…However, we unfortunately cannot even do that. This continues to be one major bailout after the next with the taxpayer paying the bill. And the worst is yet to come in the form of higher inflation, lower living standards, and loss of opportunities. These trillions also have an impact on the housing market. The median US existing home price increased by 15.8 percent year-over-year and now stands at $313,000. People are simply being priced out of the market. The ensuing correction, just like its increase, will be epic.

Social unrest is unfortunately a near daily theme, but it is the reality of our time. The country of Turkey has been on our radar for months and has been discussed on occasion. Turkey is back in the news due to the recent firing of their central bank head. The nation is dealing with runaway inflation and recent actions undertaken by the central bank were attempting to contain it by increasing their benchmark interest rates. Apparently, President Erdogan was not too fond of this monetary maneuver and decided to oust the top banker. Markets did not like this action as Turkish stocks suffered their worst one day decline in eight years, as equities fell by nearly 10 percent. Furthermore, the Turkish Lira declined by over 9 percent. What makes Turkey an interesting situation is that they are a larger economy than say Lebanon or Venezuela, but that Turkey is also an important geopolitical player. Turkey is being wooed by both western and eastern nations, due to the size of their economy and geographical location. This is something to most definitely pay close attention to. As the economy weakens and is at the hands of a “strong man,” in President Erdogan, the environment is ripe for social unrest to occur. The weakest links of the global economy are breaking down and now those ripple effects are grabbing larger economies. This story and trend is likely to continue throughout this year and into 2022. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Inflation #Protests #FoodPrices #USA #Turkey #China #Brazil #Liberty #Gold #Silver #Commodities #Revolution #Leadership #EndTheFed #bananarepublic #FireCongress

Ep. 558 – Market Losses + Job Losses

The Kapital News
The Kapital News
Ep. 558 - Market Losses + Job Losses
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One day after the Federal Reserve gave the markets a pot of gold, it appears that it was just as quickly taken away. The major US indexes all closed in the red, with the tech heavy Nasdaq leading the way. This is also on the continuation of rising yields, with a focus on the US 10 year note, which hit levels above 1.7 percent during the trading session. With equity prices at or near all-time high valuations, rising yields and interest rates could pull the rug out from under this massive bubble. Recent history suggests that it can happen, as we witnessed such an episode in Q4 of 2018. This is why so much attention is being paid to rising global bond yields, and the rhetoric and actions of central bankers are being closely monitored. This in and of itself indicates how centrally planned the financial markets and economy have been – as the world, and trillions of dollars of financial assets await the words of only a handful of people. This is dangerous and will end in destruction.

Initial jobless claims for the week ending 13 March were 770,000, which remains over 100k higher than the figures we witnessed during the depths of the GFC. And this has been the case for one full year! The numbers from the prior week were revised upward by 13k and now stand at 725,000. In aggregate, there still remains 18.2 million Americans collecting some form of unemployment insurance. This gives us a de facto unemployment rate of 13 percent as opposed to the official rate at 6.2 per cent. And lastly, the Fed’s balance sheet has hit a new all-time high and now stands at $7.69 trillion. New highs are to be expected on a near weekly basis as the Fed remains committed to purchasing $120 billion per month of US Treasuries and mortgage-backed-securities. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Jobs #Inflation #FoodPrices #Protests #USA #Liberty #Leadership #Gold #Silver #EndTheFed #bananarepublic #FireCongress

Ep. 557 – Fed Gives Markets A Pot Of Gold

The Kapital News
The Kapital News
Ep. 557 - Fed Gives Markets A Pot Of Gold
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The knee-jerk reaction to the conclusion of the press conference by Federal Reserve Chair, Jay Powell, was positive for the equity markets, as they closed in the green after trading in the red for much of the day. So for the time being, a pot of gold was given to the markets. Now one day does not make a trend and this could easily reverse. However, when the Fed is seemingly committed to keeping interest rates low until at least 2023 and probably longer if they can, they are sending conflicting signals. On the one hand, they want to note how resilient the economy is and how it is likely to grow at a solid rate this year; and yet on the other hand, despite record high equity and real estate markets, an economy they claim is resilient and growing, still somehow needs the Fed to keep interest rates at record lows for the next few years at least?! Something does not add up. This is no surprise, as the Fed is always talking out of both sides of its mouth. They are also well aware that markets nor the economy like higher interest rates and yields on notes and bonds. Recall what occurred during Q4 of 2018 as the Fed attempted to reduce their balance sheet and raise the Federal Funds Rate. All it took was a Funds Rate of 2.4 percent and a 10-year Treasury note slightly above 3 percent to bring equity markets down 20 percent. Now, with the economy weaker, and trillions of dollars more in debt, even lower rates and yields will prick this bubble. However, such increases are exactly what is needed to help rid the markets of malinvestments and zombie corporations. There is no easy way out of this quagmire.

Since the GFC and the implementation of QE, the global economy has been living through the largest economic experiment ever conducted and it also happens to be the biggest wealth transfer in human history as well. Policymakers and central bankers are aware of the fragility in the system. This is evidenced by their actions of attempting to keep interest rates low and to put downward pressure on yields, should they begin to rise. They know the patient, the economy, is weak. But they cannot state this obvious truth because it is they who would be to blame for the mismanagement of the economy and financial markets. So instead of leadership and accountability, we shall have cowardice and more of the same implementation of one asinine policy after the next. How will this end – in blood and tears. When will this end is up for debate. But if yields and interest rates continue to climb higher, and one nation after the next continues to protest and riot because of the now brutal intersection of economic, political, and societal problems, then the end of this economic charade may be fast approaching. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Inflation #Markets #EndTheFed #bananarepublic #FoodPrices #FireCongress #USA #Liberty #Leadership #Gold #Silver #Bonds #Debt #Commodities #Protests

Ep. 556 – Stagflation + Social Unrest

The Kapital News
The Kapital News
Ep. 556 - Stagflation + Social Unrest
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As we discussed global food prices hitting a six-year high during yesterday’s podcast, it proved good timing as a couple news articles were published today highlighting this situation in Nigeria and Lebanon. Both of these countries have been discussed at length for a while on the podcast, and these articles serve as further evidence as to what we have been monitoring.

It is a part of the larger narrative that The Kapital News is attempting to weave. One that links together economics, politics, and society. In this instance, we are analyzing how past and current policies are leading to social unrest, political instability, and economic weakness. Highlighting the protests and riots that were sweeping the globe during 2019, The Kapital News stressed the importance of paying attention to these events, analyzing their causes, and warning that such events would likely take place in developed markets, and even the United States. In time, we were proven correct. Now, with the pandemic seemingly making its way to the rear-view mirror, and no sound solutions being implemented during 2020, has caused many people around the world to once again take to the streets against their governments. This will be a common theme throughout 2021 and beyond until there are true structural changes.

Some countries may be able to traverse these rough waters without much chaos or violence. However, such countries will likely prove the exception and not the rule. This means that a lot of geopolitical risks have not been fully discounted into the markets, which are trading at or near all-time record high valuations. The pandemic has already caused severe supply chain disruptions that will likely continue throughout this year and into the next. However, should more countries take to the streets, then this will put further pressure on global supply chains and result in higher prices for major commodities, which will further strain the economic situation. This will be a vicious cycle until the system has been exhausted, which will leave millions if not billions of people negatively impacted. The globe is awash in trillions of dollars of new debt and with little to show for it. As inflationary effects start to make their way into real goods, these problems will no longer be able to be avoided. The monetary cat-and-mouse game will be over and market forces will take charge and lead the correction. There is no easy solution to what plagues us and these market forces will be brutal – even though they are what is needed.

Other items discussed today were economic data releases for US retail sales and industrial production. Also, the daily market performance wrap-up and a brief mention of the Federal Reserve concluding their FOMC policy meeting tomorrow. Global markets will be anxiously awaiting to hear what Chairman Jay Powell has to say – because we are a centrally controlled global economy. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Inflation #Stagflation #Debt #Markets #Jobs #Protests #USA #Liberty #Gold #Silver #Revolution #EndTheFed #bananarepublic #FireCongress #Bonds #FoodPrices

Ep. 555 – Global Food Prices Rising

The Kapital News
The Kapital News
Ep. 555 - Global Food Prices Rising
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Revolutions are fought on empty stomachs and with global food prices hitting a six-year high, only serves to increase the likelihood of further protests, riots, wars, and revolutions. This is especially true for the poorest of nations as food is so crucially important, scarce, and insecure to begin with. From supply-chain disruptions due to the pandemic, to volatile weather that has harmed production, to inflationary policies from governments and central bankers, a triple-whammy has been released and spares no one in its path.

The Kapital News has been discussing the interconnectedness of economics, politics, and society since we have been online – in fact, this is the purpose and mission of The Kapital News – to educate our audience on these connections by using the news of the day as real-world case studies. It is the weakest link of the chain that breaks first and such is the case with countries. We have unfortunately been seeing these poorer nations crumble one after the next due to external and internal pressures. However, there are common traits amongst them, such as, high levels of debt, political corruption, and high levels of inflation. All of these forces combined, in addition to several others, is a recipe for instability at best, and disaster at worst.

Some countries may be able to withstand some of these pressures and find solutions – we hope this happens. However, if history is any guide, chances are that the majority of nations will resort to protests, riots, wars, and revolutions. If such actions do occur, then we can hope that things are made better once the dust settles. But hope is not a strategy and time is of the essence. The globe was awash in protests and riots prior to the pandemic and it already appears in early 2021 that they are reigniting and gaining momentum. A political sea change is underway and the months and years ahead will try our institutions, constitutions, and humanity like never before. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #FoodPrices #Inflation #Protests #Riots #USA #Gold #Silver #Commodities #Oil #Debt #Yields #EndTheFed #bananarepublic #FireCongress #Liberty