Juggling Dynamite

Excessive add-debt-and-stir policies have been the cornerstone of central planners the world over for the last 20 years. The result is a planet of debt-addicted economies, that billow and crash in a series of progressively more damaging asset bubbles. Today for the third time since 2000, global financial bubbles are the most pervasive and precarious of all. The chart patterns all look the same…

China’s tech rally is fraying some nerves as investors fear that the sector looks very similar to the U.S. before the tech bubble in 2000. Here is a direct video link.

The Chinese data today is truly surreal.  Thanks to insane, self-imploding leverage incentives in the Chinese banking system over the past 5 years, Chinese household property ownership rates have reached 90%–the highest in the world. This compares with home ownership rates that peaked in the US at 69% in the sub-prime bubble of 2005 and have since retraced towards historic norms around 64% (see: US homeownership rate falls.

So far Chinese realty prices have declined some 6% year over year (and falling) which has a magnified impact when nearly all households (90%) are now experiencing a negative wealth effect. Meanwhile the Chinese economy is reaping the desserts of low birthrate mandates that spawned a now rapidly aging population that is naturally spending less year over year. Chinese domestic consumption is falling, just as exports are sputtering.

One of the under-appreciated effects of a rising Chinese Yuan (that is pegged to the soaring US dollar) is that Chinese goods have rocked some 70% higher against goods priced in Yen and 30% higher against goods priced in Euros in just the past several quarters.  The negative impact on the earnings of Chinese companies is mammoth and yet to be fully reflected in job losses and perennially optimistic analyst forecasts.  For some useful big picture charts on the downside risk inherent in Chinese asset markets today, see:  Chinese Equities or Yuan:  Something’s Gotta Give (registration required).

Thanks to globalized financial institutions and similarly educated and indoctrinated finance and central bank leaders, today’s debt-induced financial bubble is worldwide and the most extreme and synchronized ever in history.  Minimizing capital risk through international diversification is unlikely to prove an effective solution.

Georgetown, Texas has voted to be powered 100% by wind and solar energy. Not to be green, but to spend less money. In the cash-scarce, debt-filled, slower growth world that is ours after the credit bust–getting more for less is a necessity. That is why smarter energy policies are here to stay. See: This Texas city will soon be powered 100% by renewable energy.

News that a Texas city is to be powered by 100 percent renewable energy sparked surprise in an oil-obsessed, Republican-dominated state where fossil fuels are king and climate change activists were described as “the equivalent of the flat-earthers” by US Senator and GOP presidential hopeful Ted Cruz.

…in a practical-minded place like Texas, the best way to encourage the use of green energy is to appeal to heads rather than hearts and make a strong business case, as happened in Georgetown.

A recent article from financial fraud expert Bill Black, underlines the systemic inequality that has afforded bankers near-perfect immunity from fraud prosecution over the past decade:

The New York Times ran the story on April Fools’ Day of a jury convicting educators of gaming the test numbers and lying about their actions to investigators.

“ATLANTA — In a dramatic conclusion to what has been described as the largest cheating scandal in the nation’s history, a jury here on Wednesday convicted 11 educators for their roles in a standardized test cheating scandal that tarnished a major school district’s reputation and raised broader questions about the role of high-stakes testing in American schools.

On their eighth day of deliberations, the jurors convicted 11 of the 12 defendants of racketeering, a felony that carries up to 20 years in prison. Many of the defendants — a mixture of Atlanta public school teachers, testing coordinators and administrators — were also convicted of other charges, such as making false statements, that could add years to their sentences.”

…Atlanta’s public schools, of course, did not engage in “the largest cheating scandal in the nation’s history.” The big banks’ cheating scandals left the Atlanta educators in the dust.

Read: We send teachers to prison for rigging the numbers, why not bankers?”