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The end of stimulus? (And the start of the crash?) What the most important chart in the world is predicting.

May 29, 2018
Chris Liverani/Unsplash
Chris Martenson

Peak Prosperity

Back in January of 2016 we saw what appeared to be, and in my opinion should have been, the end of the Everything Bubble blown by the word's central banking cartel.

The carnage started in the emerging markets. Highly-leveraged positions and carry trades began to unwind. That's a fancy way of saying that all the big, sophisticated investors -- who were busy borrowing heavily in countries with cheap money (the US, Japan, and Europe) and using that debt to speculate in markets offering higher yields (junk debt, emerging markets, stocks, etc.) -- began to reverse their trades.

It quickly devolved into a “Sell everything!” scramble. We saw the dollar spike and stocks fall -- with emerging markets taking the full brunt of the carnage as their stock markets rapidly fell into bear territory, their currencies fell, and their bonds were destroyed.

Until...

Very early one morning in February of 2016 everything U-turned and rocketed higher. Suddenly and magically, the panic was over. This wasn’t the invisible hand of the market at work; it was the very-visible hand of central bank intervention.

With the benefit of hindsight, we now have a clear picture of what happened. The central banks huddled together, a bold (desperate?) plan was hatched, and key printing presses around the world were sent into overdrive. In the months to follow, the European Central Bank (ECB) and the Bank of Japan (BoJ) went on a record-breaking money printing spree:

(Source)

The red arrows in the charts above mark this moment when the “markets” were saved.

Or, more specifically, when the portfolios the ultra-wealthy were "saved", as the assets within were boosted higher (yet again) by the central banks printing money from thin air:

(Source)

Addicted To Money Printing

So what caused the weakness in early 2016 that spooked the system so much? The central banks themselves.

After many years of force-feeding stimulus into the global economy to create a "recovery", the central banks have become increasingly concerned that asset prices have become too dependent on said stimulus. So in late 2015, the banks took their feet off of their monetary gas pedals for a bit to see what might happen.

They were hoping that the markets could be gradually weaned off of their stimulus dependence with few ill effects. They wanted to engineer a "soft landing", where if priced declined, they'd come down gradually and not too much.

That didn't happen.

Instead, the cheap-money-addicted markets instantly started expressing massive withdrawal complications.

To re-acquaint you with how quickly things were devolving back then, these are news headlines pulled from an article I wrote back in the middle of January 2016:

Sound familiar at all? It should. These sound exactly like the headlines in the news today, here in May of 2018.

We are still paying the price from 2008, when the central banks committed a massive error by not allowing the markets and their bad debts to actually clear. Yes, it would have been acutely painful; but we would have been through the worst within a year or two and in the process restored the system to a much healthier and sustainable state.

Instead, the bad actors were protected (and rewarded!) and the root fundamental problems were literally 'papered over', left to continue to fester unobserved ever since. Similarly in early 2016, the central banks once again committed the same sin by rescuing everything with another wall of fresh, thin-air money.

To drive home how much, below is a chart showing the yearly change in world central bank balance sheets. The relative ‘area under the curve’ of each major period of money printing gives us a sense of the scale. To help you eyeball it, I’ve placed similar-sized orange rectangles in each area. Key to note is that central money printing has been increasing -- not decreasing -- the further out we've gotten from the Great Financial Crisis:

(Source)

If we've been in "recovery" for years now, as the central banks have been touting, then why has 2016-2108 seen the most stimulus ever injected into the system?

History has taught us that we should trust or leaders' actions far more than their words. And their actions at this time indicate panic.

What is it that has them so worried? We should all ponder that question long and hard. I’m convinced that they know as well as we do that, once the over-inflated ““markets”” created by the central banks can no longer be sustained at their current nose-bleed heights, the damage will be extraordinary and unstoppable.

The End Of Stimulus? (And The Start Of The Crash?)

The pain of the 2008 crash will seem like a mere flesh wound compared to the devastation the next deflationary wave will wreak.

Of course, the central banks have no interest in seeing that happen and will, once more, do all they can to "rescue" the markets.

But will they act in time? More to the point, given all of their very public commitments to raising rates and reducing their balance sheets, will they allow a market correction to happen in the near term? (presumably, so they can ride to the rescue soon after as "saviors")

Politically, the prospect of showering even more wealth on the 0.001% is going to be a tough sell. This is especially true in Europe -- in Italy, Greece and Spain where the populace is suffering mightily already and is in no mood to further enrich the ultra-wealthy.

So it would seem that the central banks, at least publicly, have to stick to their stated plans to reduce their levels of money printing/balance sheet expansion.

As of right now, they are on track to end worldwide simulus in early 2019, when their collective net change in assets will dip below $0 for the first time in many years:

(Source)

Given the importance of central bank purchases and market interventions, the above chart is probably the most important one in existence for divining where financial asset prices are headed.

If global monthly stimulus indeed drops to $0, then Watch out below!

Who know if the future will plays out anything like the projections given above? The central banks have proven weak-kneed at every tiny moment of market wobbliness. To date, they've chosen to print and pent and then print some more at every opportunity where the "“markets”" might have corrected.

But we all know that this charade cannot continue forever. Sooner or later it has to stop. Given the blow-ups we're now seeing in the emerging markets, there’s clearly serious trouble brewing somewhere in the system.

In Part 2: The Breaking Point Is Upon Us we provide plenty of data to support that claim.

The currencies and bonds of five countries are now in the danger zone, and many more teeter on the edge. My analysis is that the central banks will resort to their usual money printing to resolve the issue, but for reasons I explain in Part 2, these efforts will fail at some point in the next year -- and spectacularly so.

When today's Everything Bubble bursts, the effect will be nothing short of catastrophic as 50 years of excessive debt accumulation suddenly deflates.

Given the dangers involved, you should expect the central banks to 'go nuclear' in thier deflation-fighting efforts by sending “money to main street” -- likely in the form of a universal basic income, or a check from the Treasury refunding your last 3 years of tax payments, or maybe even an electronic deposit directly from the Federal Reserve into your bank account.

That's when the inevitable fiat currency crisis will begin in earnest. At that time you’ll need to run, not walk, to buy anything with intrinsic value that can't be inflated away -- before your currency becomes worthless.

Click here to read Part 2 of this report (free executive summary, enrollment required for full access)

How congress can restore justice through judicial discretion

Joe Raedle/Getty Images

As the nation soaks in the victory of the recent passing of the historic First Step Act, there are Congressmen who haven't stopped working to solve additional problems with the criminal justice system. Because while the Act was impactful, leading to the well-deserved early release of many incarcerated individuals, it didn't go far enough. That's why four Congressmen have joined forces to reintroduce the Justice Safety Valve Act—legislation that would grant judges judicial discretion when determining appropriate sentencing.

There's a real need for this legislation since it's no secret that lawmakers don't always get it right. They may pass laws with good intentions, but unintended consequences often prevail. For example, there was a time when the nation believed the best way to penalize lawbreakers was to be tough on crime, leading to sweeping mandatory minimum sentencing laws implemented both nationally and statewide.

RELATED: If Trump can support criminal justice reform, so can everyone else

Only in recent years have governments learned that these sentences aren't good policy for the defendant or even the public. Mandatory minimum sentences are often overly harsh, don't act as a public deterrent for crime, and are extremely costly to taxpayers. These laws tie judges' hands, preventing them from using their knowledge and understanding of the law to make case relevant decisions.

Because legislation surrounding criminal law is often very touchy and difficult to change (especially on the federal level, where bills can take multiple years to pass) mandatory minimum sentences are far from being done away with—despite the data-driven discoveries of their downfalls. But in order to solve the problems inherent within all of the different laws imposing sentencing lengths, Congress needs to pass the Justice Safety Valve Act now. Ensuring its passing would allow judges to use discretion while sentencing, rather than forcing them to continue issuing indiscriminate sentences no matter the unique facts of the case.

Rather than take years to go back and try to fix every single mandatory minimum law that has been federally passed, moving this single piece of legislation forward is the best way to ensure judges can apply their judgment in every appropriate case.

When someone is facing numerous charges from a single incident, mandatory minimum sentencing laws stack atop one another, resulting in an extremely lengthy sentence that may not be just. Such high sentences may even be violations of an individual's eighth amendment rights, what with the imposition of cruel and unusual punishment. It's exactly what happened with Weldon Angelos.

In Salt Lake City in 2002, Weldon sold half a pound of marijuana to federal agents on two separate occasions. Unbeknownst to Weldon, the police had targeted him because they suspected he was a part of a gang and trafficking operation. They were oh-so-wrong. Weldon had never sold marijuana before and only did this time because he was pressured by the agents to find marijuana for them. He figured a couple lowkey sales could help out his family's financial situation. But Weldon was caught and sentenced to a mandatory 55 years in prison. This massive sentence is clearly unjust for a first time, non-violent crime, and even the Judge, Paul Cassell, agreed. Judge Cassell did everything he could to reduce the sentence, but, due to federal law, it wasn't much.

The nation is facing an over-criminalization problem that costs taxpayers millions and amounts to the foolish eradication of individual liberties.

In cases like Weldon's, a safety valve for discretionary power is much needed. Judges need the ability to issue sentences below the mandatory minimums, depending on mitigating factors such as mental health, provocation, or physical illness. That's what this new bill would allow for. Critics may argue that this gives judges too much power, but under the bill, judges must first make a finding on why it's necessary to sentence below the mandatory minimum. Then, they must write a clear statement explaining their decision.

Judges are unlikely to risk their careers to allow dangerous criminals an early release. If something happens after an offender is released early, the political pressure is back on the judge who issued the shorter sentence—and no one wants that kind of negative attention. In order to avoid risky situations like this, they'd use their discretion very cautiously, upholding the oath they took to promote justice in every case.

The nation is facing an overcriminalization problem that costs taxpayers millions and amounts to the foolish eradication of individual liberties. Mandatory minimums have exacerbated this problem, and it's time for that to stop. Congresswomen and men have the opportunity to help solve this looming problem by passing the Justice Safety Valve Act to untie the hands of judges and restore justice in individual sentences.

Molly Davis is a policy analyst at Libertas Institute, a free market think tank in Utah. She's a writer for Young Voices, and her work has previously appeared in The Hill, TownHall.com, and The Washington Examiner.

New gadget for couples in 'the mood' lets a button do the talking

Photo by Matt Nelson on Unsplash

Just in time for Valentine's Day, there's a new romantic gadget for couples that is sure to make sparks fly. For those with their minds in the gutter, I'm not talking about those kinds of gadgets. I'm talking about a brilliant new device for the home called "LoveSync."

This is real — it's a simple pair of buttons for busy, modern couples who have plenty of time for social media and Netflix, but can't quite squeeze in time to talk about their... uh... special relationship.

Here's how it works. Each partner has their own individual LoveSync button. Whenever the mood strikes one partner, all they have to do is press their own button. That sets their button aglow for a certain period of time. If, during that time window, their partner also presses their own button, then both buttons light up in a swirling green pattern to signal that love has "synced"...and it's go time.

According to the makers of LoveSync, this device will "Take the Luck out of Getting Lucky." It brings a whole new meaning to "pushing each other's buttons." It's an ideal gift to tell your significant other "I care," without actually having to care, or talk about icky things like feelings.

If you find your significant other is already on the couch binge-watching The Bachelor, no problem! You can conveniently slink back to your button and hold it in for four seconds to cancel the desire. No harm, no foul! Live to fight another day.

Have fun explaining those buttons to inquiring children.

No word yet on whether LoveSync can also order wine, light candles or play Barry White. Maybe that's in the works for LoveSync 2.0.

Of course, LoveSync does have some pitfalls. Cats and toddlers love a good button. That'll be a fun conversation — "Honey, who keeps canceling my mood submissions?" And have fun explaining those buttons to inquiring children. "Yeah, kids, that button just controls the lawn sprinklers. No big deal."

If you've been dialing it in for years on Valentine's Day with flowers and those crappy boxes of chocolate, now you can literally dial it in. With a button.

Good luck with that.

The social power of 'Reddit' is helping teens of anti-vaxxers get vaccinated

Noam Galai/Getty Images for TechCrunch

Reddit certainly earns its motto as "the front page of the internet," with roughly 540 million visitors monthly, the third most-visited website in the U.S., sixth worldwide. Unlike Twitter and Facebook, Reddit is a largely anonymous platform. People's faces are masked, their names are disguised. Which makes their hidden humanity all the more impactful.

On Reddit, both news and serious information are threaded in among gifs of cats and posts about Call of Duty, but that doesn't make it any less important. For many people, Reddit signifies the town hall where news is passed along or stomped into obscurity.

It gives you a healthy read of our society as a whole.

RELATED: Forget Rabies, 'Woke' Hipsters in Brooklyn Skipping Vaccines to Prevent 'Dogtism'

A recent Pew Poll found that Reddit leans left politically at a rate higher than the general public. Most users are young men, whose extensive internet use gives them a gatekeeping authority over what information should be considered important. From there, it spreads through the rest of the internet and helps shape public opinion.

So, it makes a lot of sense that Reddit has become a sort of makeshift safe place for children who grew up with parents who refused to give them vaccinations. Of course, Reddit also vehemently mocks the anti-vaccination folks, for better or for worse, often the latter, but that's a subject for another day.

The Daily Dot recently published an article on this strange intersection of ideology and nerd culture. "Desperate teens of anti-vaxxers are turning to Reddit for vaccination advice."

The article follows Ethan, whose parents are staunchly against vaccinations:

But Ethan is not his parents. When he turned 18, he decided to take matters into his own hands. He wasn't sure where else to begin, so he turned to Reddit.

Where do I go to get vaccinated? Can I get vaccinated at my age?" Ethan asked his fellow redditors in December. Ethan's post flooded with over 1,000 comments from users offering their encouragement and support, along with practical advice. "Good on you for getting your vaccinations," one user responded. "It's never too late and you're not only protecting yourself but those around you who truly can't get vaccinated.

Ethan told the Daily Dot that some redditors even offered to give him money via GoFundMe or PayPal if insurance didn't cover the shots. "People were really supportive, and that was really cool," he said. "I had the blessing of Reddit. They were supporting me on a decision my mom freaked out about." Ethan is not alone. "More and more teens are turning to places like Reddit to seek out information on where and how to get vaccinated, and if it's too late."

Whatever your opinion on vaccinations, there's a positive message to all of this. A human message. Hopeful. Proof that, in an increasingly caustic world, people can turn to one another in times of need.

Whatever your opinion on vaccinations, there's a positive message to all of this. A human message. Hopeful.

Now more than ever, that is crucial.

Given the social power of Reddit, it is often characterized as a tool for politicians or political movements. Throughout the forum, various political ideologies gather and organize like factions in some ideological war. A political thread on Reddit is like a Facebook comment section at its most hostile, arrogant or confident, but with no identities attached to the attacks, rants or opinions. When you find yourself riled into a debate, it's easy to wonder who's behind the replies, especially the more vicious ones.

People often characterize it as a hive-mind message board full of circlejerk memes and jokes about SpongeBob. This description isn't entirely wrong, but it is shallow and incomplete. At its core, Reddit is humane. Its users, for the most part, are compassionate. If it were an experiment on human nature, the results would be gratifying.