Perspectives on the global economic changes

[svinayak]

Interestingly even prominent bankers are speaking out against the monetary system which has been monopolized by private banks. Although the moment they speak out, they are marginalized.

India should never allow private banks (or its ex-employees) anywhere near the national exchequer or any post in govt that controls the monetary system. To do so is to subject the vast population of the nation to slavery by these shysters via paper thievery.

[youtube]0Br8mx_uwlY&index[/youtube]

11 parts in all, this is the first.

I am not able see the video link

Why is that. Any extension required in Chrome

[member_28440]

Russia India planning to remove Dollar

[Neshant]

Here’s something you don’t see very often:

For a day and a half this week, the Japanese government’s benchmark 10-year bonds attracted not a single successful private sector bid. At today’s artificially-depressed yields, no one wants this paper — except of course the Bank of Japan, which is buying up the bonds with newly-created yen.

Money printing to "stimulate" the economy is going to fail big time in Japan.

____

Japan bond market liquidity dries up as BoJ holding crosses ¥200tn

http://www.gulf-times.com/eco.-bus.%20n ... C2%A5200tn

[Austin]

America’s Empire And Credit Bubble Are Reaching Their “Sell-By” Date

by Bill Bonner, Chairman, Bonner & Partners

We made an observation last week: The US empire and its credit bubble will probably come to an end at the same time.

Each depends on the other. If the US were not so big and powerful, it could not impose its money as the world’s reserve currency. Without its position as the issuer of the world’s reserve currency (dollars instead of gold), the US wouldn’t be able to flood the world with its cash.

Without the rest of the world’s need for dollars, the credit bubble couldn’t continue growing. And without the credit growth there would be no way to pay the expense of maintaining a worldwide empire.

This does not explain the miracle of “growth without savings” we discussed last week, but it gives us a hint as to what will happen when the trick no longer works.

All Empires End

All bubbles… and all empires… eventually blow up. An empire that depends on a credit bubble is doubly explosive. All it takes is a turn in the credit cycle, and the fuse is lit.

We wrote a book on the subject, along with co-author Addison Wiggin, in 2006. From the invasion of the Philippines to the Vietnam War… the US empire was financed by the rich, productive power of the US economy.

But as the war in Vietnam was winding down, the source of imperial finance changed from current output to future output. The US switched to a purely paper money system… and turned to borrowing to finance its military adventures. Today’s blockhead puffs out his chest and enjoys feeling like a big shot. He passes the bill on to tomorrow’s taxpayer.

The argument for heavy security spending collapsed between 1979 (when China took the capitalist road) and 1989 (when Russia abandoned communism).

But by then, the “military-industrial complex” (or the military-industrial-congressional complex) President Eisenhower warned us about was already firmly in control of Washington. Presidents – Democrat and Republican – came and went. Nothing nor nobody could keep resources from the security industry.

One disastrous adventure led to another. Each provided a source of more funding… more status… more power… more generals… more security clearances… more clandestine, “off-budget” operations… and more jackass parasites pretending to protect Americans from unknown enemies.

Zombie Lard

The return on investment from this spending was probably well below zero. That is to say the foreign meddling probably created more enemies than it neutralized. But it didn’t matter.

Besides, the same phenomenon was happening in other major industries. In health care, education and finance more and more resources were commanded by political considerations – even though these industries were still considered part of the private sector economy.

In education, for example, the number of teachers stagnated, as the number of administrators and “educators” soared. Freighted with zombies, there were few real gains in these sectors. Meanwhile, the US manufacturing sector withered. Real wages stopped increasing. Economic growth slowed.

And social welfare spending increased. “Guns and Butter” was LBJ’s promise. Both were greasy and slippery. And without the strong growth of the 1950s and 1960s, it was not possible to pay for so much zombie lard.

The US empire turned to credit. It has not had a genuinely balanced budget since. Instead, since the end of the Carter administration, deficits have increased, year after year.

When the Reagan team came into office in the early 1980s there was a fierce internal battle about what to do with federal finances. The fiscal conservatives – led by David Stockman, Reagan’s young budget director – felt the government had an obligation to balance its budget. The new, or “neo,” conservatives were more hip to the public mood… and to the miracle made possible by increasing credit.

“Deficits don’t matter,” said Dick Cheney. The neocons won. Stockman left the administration and went to work on Wall Street. Deficits soared. Later, Stockman wrote a good book, The Great Deformation, explaining how the US economy had been corrupted by its leading industries: government, security and finance.

By the 1990s, the combination of a bull market on Wall Street, falling interest rates, the end of the Cold War and disillusionment with old-style democratic spending left the Clinton administration in a rare sweet spot. It found it couldn’t spend money fast enough. Its revenues were high. Its spending opportunities were low. The result was what was feted as a “balanced budget” – but the books only balanced if you ignored the cost of Social Security!

It was President George W. Bush, however, who really took the lid off the credit machine.


Bill Bonner <[email protected]>

[Austin]

Chronicling The Fed’s Follies: America’s Housing Fiasco Is On You, Alan Greenspan

[Austin]

Tuesday Humor: QE Was For "The Man On The Street" Says Chairman Emeritus Bernanke

The proud recipient of today's $250,000 invoice for propaganda rendered by Ben Bernanke will be the Economic Club of Canada...

BERNANKE: FED ACTIONS DIDN'T FAVOR WALL STREET OVER MAIN STREET
Bernanke Says US Economy Is Heading Towards Complete Recovery

Just don't tell Obama (or the Democrats who have been told not to mention the 'recovery'), or the record number of middle-aged people living with their parents, or the almost imperceptible rise in the employed population since QE began...

[Austin]

David Einhorn: "We Are Witnessing Our Second Tech Bubble In 15 Years" - Full Letter

We have been saying for about 6 months that the second coming of the tech bubble is here. We are happy to learn that none other than hedge fund manager David Einhorn agrees. From his just released letter to clients:

We have repeatedly noted that it is dangerous to short stocks that have disconnected from traditional valuation methods. After all, twice a silly price is not twice as silly; it’s still just silly. This understanding limited our enthusiasm for shorting the handful of momentum stocks that dominated the headlines last year. Now there is a clear consensus that we are witnessing our second tech bubble in 15 years. What is uncertain is how much further the bubble can expand, and what might pop it.


In our view the current bubble is an echo of the previous tech bubble, but with fewer large capitalization stocks and much less public enthusiasm. Some indications that we are pretty far along include:

Code: Select all

The rejection of conventional valuation methods;
        Short-sellers forced to cover due to intolerable mark-to-market losses; and
        Huge first day IPO pops for companies that have done little more than use the right buzzwords  and attract the right venture capital.

And once again, certain “cool kid” companies and the cheerleading analysts are pretending that compensation paid in equity isn’t an expense because it is “non-cash.” Would these companies be able to retain their highly talented workforces if they stopped doling out large amounts of equity? If you are trying to determine the creditworthiness of these ventures, it might make sense to back out non-cash expenses. But if you are an equity holder trying to value the businesses as a multiple of profits, how can you ignore the real cost of future dilution that comes from paying the employees in stock?

So what is Einhorn doing? Shorting a basket of momentum stocks of course (good luck) each of which he views as having 90% downside.

Given the enormous stock price volatility, we decided to short a basket of bubble stocks. A basket approach makes sense because it allows each position to be very small, thereby reducing the risk of any particular high-flier becoming too costly. The corollary to “twice a silly price is not twice as silly” is that when the prices reconnect to traditional valuation methods, the derating can be substantial. There is a huge gap between the bubble price and the point where isciplined growth investors (let alone value investors) become interested buyers. When the last internet bubble popped, Cisco (the best of the best bubble stocks) fell 89%, Amazon fell 93%, and the lower quality stocks fell even more.

In the post-bubble period, people stopped talking about valuing companies based on eyeballs (average monthly users), total addressable market (TAM), or price-to-sales. When the re-rating occurred, the profitable former high-fliers again traded based on P/E ratios, and the unprofitable ones traded as a multiple of cash on the balance sheet. Our criteria for selecting stocks for the bubble basket is that we estimate there to be at least 90% downside for each stock if and whenthe market reapplies traditional valuations to these stocks. While we aren’t predicting a complete repeat of the collapse, history illustrates that there is enough potential downside in these names to justify the risk of shorting them.

Finally, and tangentially, here is Einhorn on HFT, Flash Boys - in which he is featured prominently - and the IEX exchange.

Michael Lewis’s new book Flash Boys, like all of his books, is a fun read and is based on a true story. It brings attention to some areas of the market that can improve further, and a few areas of possible abuse. There are many legitimate and even beneficial aspects to computerized trading, including market making and statistical arbitrage, yet there are also some areas that are ripe for reform. Most glaring is the latency arbitrage that is used to identify the presence of large institutional orders for the sole purpose of legally front-running them.

These problems fall into the classic dilemma of concentrated benefit and diffuse harm. Lots of investors lose pennies and as a result don’t care too much about market structure; the firms who have based their business around picking up those pennies care a lot about shaping the structure. To overcome this imbalance of interests, the issue needs attention and discussion so that the many who are losing pennies can organize a response. In this regard, Flash Boys has provided a great service.


Although we believe that the abuses identified in Flash Boys don’t significantly impact us, our traders Bruce, John and Alex are incredibly aware of how market structure imperfections can add to our trading costs, and are vigilant about minimizing their impact on the Partnerships. One such countermeasure has been to support a new trading venue called IEX, which was the central focus of Flash Boys. We believe that the best response for any investors that are worried about fast computers taking advantage of them is to ask that their orders be routed to IEX, a company in which we hold a small stake.

[Singha]

http://profit.ndtv.com/news/global-econ ... eststories

american middle class no longer the worlds richest middle class.

[anmol]

BRIC Bust?

Michael Mandelbaum
http://www.the-american-interest.com/ar ... bric-bust/

Indian portion of the article:

India’s Dilemma

India has maintained democratic government, with one brief exception, since its independence from Great Britain in 1947. Democracy is one of the country’s proudest and most important achievements, and has in fact made a major contribution to the economic progress that it has achieved. Like populism for Brazil and energy for Russia, however, democracy, as practiced in India today, blocks economic progress.

With its various ethnic groups, religions, rigid social categories known as castes, and 17 major languages, India has the diversity of the entire European Union—but with twice as many people. Given this diversity and the conflicts to which it has inevitably given rise, without democracy, with its emphasis on compromise, the peaceful resolution of disputes, and the rights of minorities, a united India within its 21st-century borders would not exist. India qualifies as an economic under-achiever, however. Two features of the Indian economy in particular have kept it from reaching its potential. Both features have roots in India’s version of democratic government.

The first of these is the economy’s unusual, lopsided configuration. Every modern economy has three sectors: agriculture, industry, and services. As countries become richer, workers move from one sector to another, and almost always in a particular order: from the farm to the factory to the office. India is different. Despite economic growth and the decline of agriculture’s share in its total output due to expansion in other sectors, its agricultural workforce has declined only modestly. Its industrial sector has grown relatively slowly, contributing only 27 percent of the country’s GDP in 2008, with 17 percent coming from manufacturing. Services in India, especially the country’s thriving high-tech sector, have, by contrast, expanded rapidly, but because this sector provides relatively few jobs, its growth has done relatively little to reduce poverty. Only a robust industrial sector with growing manufacturing industries can do that, but Indian manufacturing suffers from a shortage of the industries, and therefore the jobs, that require unskilled labor.

The second feature of India’s economy that keeps it from its full potential is the shortage of economically critical assets government ordinarily provides: roads, bridges, ports, and adequate schools, as well as reliable supplies of electricity and clean water. Poor infrastructure constrains the Indian industrial sector. The shortcomings of Indian education also hold back the country’s economy, including its manufacturing sector. Even many unskilled factory jobs require rudimentary literacy, and as jobs become more complex, higher levels of education are needed to perform them. Many villages have only part-time teachers for their young children; some have none at all.

These obstacles to growth have their roots in India’s democracy. In India, as in other democratic countries, people are free to organize themselves not only on the basis of a common identity—race, religion, ethnicity—but also according to common economic interests. Such groups work politically to bring benefits to their members, but the benefits can come at the expense of the general welfare. India, like other democracies, is susceptible to the formation of these “distributional coalitions”, which tend over time to grow in power and number, to the detriment of a country’s economic well-being.2 Powerful minorities have helped to create India’s two major economic problems—a stymied manufacturing sector and inadequate infrastructure and education—by imposing some policies and blocking others, in both cases harming the interests of the country as a whole.

Regulations and laws governing employment make it all but impossible to fire workers. This discourages hiring them in the first place and keeps firms from entering industries that require large workforces. The largest and most efficient Indian companies tend to avoid such industries, which are precisely the ones that could, if established on a large scale, lift millions of Indians out of poverty. Similarly, laws restricting the use of land make it difficult in many places to build facilities such as factories and hotels that could employ large numbers of people.

Unions and other interest groups promote and defend the laws, regulations and restrictions that block employment-generating initiatives. Minorities also inhibit the building of the infrastructure and the development of the educational system that India needs by using the political process to divert resources to themselves, thus making them unavailable for building roads or paying teachers. Subsidies of various kinds, all of them the legislative achievements of interest groups, account for 2.4 percent of the country’s GDP. The Indian bureaucracy is itself a large, powerful, and voracious interest group. Its salaries consume resources that would be better devoted to more productive uses. Spending according to the whims of special interests leads to budget deficits; borrowing to finance these deficits drains yet more money from infrastructure and education.

India has two methods, both consistent with democracy, of dealing with politically imposed obstacles to economic growth: removing them and bypassing them. The country’s political system badly needs reform, and the impetus for political reform around the world often comes from the middle class: propertied, salaried people who see government as an impersonal enforcer of the law and a neutral arbiter of disputes rather than as a source of funds and favors. Such a social stratum is growing in India, though it is still a minority of the total population. The victory of the new reformist political party Aam Aadmi (“common man”) in the December 2013 elections in the national capital region signaled its rising strength.

Even without serious political reform, Indians have found a way to bypass the government’s chronic failure to provide adequate infrastructure and education: privatization. This has involved not only returning to private enterprise tasks that they usually perform in other countries—the production of steel and cement and the management of hotels, for example—but also opening to private participation activities customarily undertaken by the government. Rather than reforming the government, such privatization circumvents it.

India’s greatest success with privatization involves communications. The government monopoly in charge of telephone landlines performed poorly. Few Indians were connected to the national system. Once private cellphone companies were permitted to operate, however, access to telephone service mushroomed. In 1991 the country had only 5.1 million phones in aggregate; by November 2006, an average of 5.2 million new telephones were going into service each month. At that point India had 153.3 million of them. By May 2012 there were 960 million telephone subscribers, 929 million of whom used mobile phones, in a population of 1.2 billion.

How far and how quickly reform and privatization proceed will do much to set the rate of Indian economic growth. That, in turn, will determine how rapidly, if at all, India catches up with the country against which it often measures itself—the final member of the BRICs and the largest, fastest-growing, and economically most important one: China. As with the other BRICs, a particular feature of Chinese public life that has enhanced its economic performance in the past threatens to constrain it in the future. As in the case of India, China’s asset-turned-liability is its political system.

[Austin]

BRIC Bust?

Michael Mandelbaum
http://www.the-american-interest.com/ar ... bric-bust/

Indian portion of the article:

India’s Dilemma

India has maintained democratic government, with one brief exception, since its independence from Great Britain in 1947. Democracy is one of the country’s proudest and most important achievements, and has in fact made a major contribution to the economic progress that it has achieved. Like populism for Brazil and energy for Russia, however, democracy, as practiced in India today, blocks economic progress.

With its various ethnic groups, religions, rigid social categories known as castes, and 17 major languages, India has the diversity of the entire European Union—but with twice as many people. Given this diversity and the conflicts to which it has inevitably given rise, without democracy, with its emphasis on compromise, the peaceful resolution of disputes, and the rights of minorities, a united India within its 21st-century borders would not exist. India qualifies as an economic under-achiever, however. Two features of the Indian economy in particular have kept it from reaching its potential. Both features have roots in India’s version of democratic government.

The first of these is the economy’s unusual, lopsided configuration. Every modern economy has three sectors: agriculture, industry, and services. As countries become richer, workers move from one sector to another, and almost always in a particular order: from the farm to the factory to the office. India is different. Despite economic growth and the decline of agriculture’s share in its total output due to expansion in other sectors, its agricultural workforce has declined only modestly. Its industrial sector has grown relatively slowly, contributing only 27 percent of the country’s GDP in 2008, with 17 percent coming from manufacturing. Services in India, especially the country’s thriving high-tech sector, have, by contrast, expanded rapidly, but because this sector provides relatively few jobs, its growth has done relatively little to reduce poverty. Only a robust industrial sector with growing manufacturing industries can do that, but Indian manufacturing suffers from a shortage of the industries, and therefore the jobs, that require unskilled labor.

The second feature of India’s economy that keeps it from its full potential is the shortage of economically critical assets government ordinarily provides: roads, bridges, ports, and adequate schools, as well as reliable supplies of electricity and clean water. Poor infrastructure constrains the Indian industrial sector. The shortcomings of Indian education also hold back the country’s economy, including its manufacturing sector. Even many unskilled factory jobs require rudimentary literacy, and as jobs become more complex, higher levels of education are needed to perform them. Many villages have only part-time teachers for their young children; some have none at all.

These obstacles to growth have their roots in India’s democracy. In India, as in other democratic countries, people are free to organize themselves not only on the basis of a common identity—race, religion, ethnicity—but also according to common economic interests. Such groups work politically to bring benefits to their members, but the benefits can come at the expense of the general welfare. India, like other democracies, is susceptible to the formation of these “distributional coalitions”, which tend over time to grow in power and number, to the detriment of a country’s economic well-being.2 Powerful minorities have helped to create India’s two major economic problems—a stymied manufacturing sector and inadequate infrastructure and education—by imposing some policies and blocking others, in both cases harming the interests of the country as a whole.

Regulations and laws governing employment make it all but impossible to fire workers. This discourages hiring them in the first place and keeps firms from entering industries that require large workforces. The largest and most efficient Indian companies tend to avoid such industries, which are precisely the ones that could, if established on a large scale, lift millions of Indians out of poverty. Similarly, laws restricting the use of land make it difficult in many places to build facilities such as factories and hotels that could employ large numbers of people.

Unions and other interest groups promote and defend the laws, regulations and restrictions that block employment-generating initiatives. Minorities also inhibit the building of the infrastructure and the development of the educational system that India needs by using the political process to divert resources to themselves, thus making them unavailable for building roads or paying teachers. Subsidies of various kinds, all of them the legislative achievements of interest groups, account for 2.4 percent of the country’s GDP. The Indian bureaucracy is itself a large, powerful, and voracious interest group. Its salaries consume resources that would be better devoted to more productive uses. Spending according to the whims of special interests leads to budget deficits; borrowing to finance these deficits drains yet more money from infrastructure and education.

India has two methods, both consistent with democracy, of dealing with politically imposed obstacles to economic growth: removing them and bypassing them. The country’s political system badly needs reform, and the impetus for political reform around the world often comes from the middle class: propertied, salaried people who see government as an impersonal enforcer of the law and a neutral arbiter of disputes rather than as a source of funds and favors. Such a social stratum is growing in India, though it is still a minority of the total population. The victory of the new reformist political party Aam Aadmi (“common man”) in the December 2013 elections in the national capital region signaled its rising strength.

Even without serious political reform, Indians have found a way to bypass the government’s chronic failure to provide adequate infrastructure and education: privatization. This has involved not only returning to private enterprise tasks that they usually perform in other countries—the production of steel and cement and the management of hotels, for example—but also opening to private participation activities customarily undertaken by the government. Rather than reforming the government, such privatization circumvents it.

India’s greatest success with privatization involves communications. The government monopoly in charge of telephone landlines performed poorly. Few Indians were connected to the national system. Once private cellphone companies were permitted to operate, however, access to telephone service mushroomed. In 1991 the country had only 5.1 million phones in aggregate; by November 2006, an average of 5.2 million new telephones were going into service each month. At that point India had 153.3 million of them. By May 2012 there were 960 million telephone subscribers, 929 million of whom used mobile phones, in a population of 1.2 billion.

How far and how quickly reform and privatization proceed will do much to set the rate of Indian economic growth. That, in turn, will determine how rapidly, if at all, India catches up with the country against which it often measures itself—the final member of the BRICs and the largest, fastest-growing, and economically most important one: China. As with the other BRICs, a particular feature of Chinese public life that has enhanced its economic performance in the past threatens to constrain it in the future. As in the case of India, China’s asset-turned-liability is its political system.

Not sure how credible the article IS

BRICS are certainly not growing at the rate that they were say 2-3 years back or in the past decade. ( its related to Structural Problems in their Economies ( in case of Russia & Brazil ) , Tapering of QE ( affected India and Brazil the most ) and Over All Bad Economy of the World )

Most certainly they are doing far better than Europe and US in terms of Growth and have Debt far lower then Western Economies.

China is leading the BRICS pac with 7 % Growth , India somewhere in middle at 4-5 % and Russia and Brazil training at 1-2 % but these figures are far respectable than EU growth rate or even US.

Considering BRICS nation are still developing they have far higher potential to grow compared to any major economies of the world and most certainly the Western Economies.

[svinayak]

Not sure how credible the article IS

BRICS are certainly not growing at the rate that they were say 2-3 years back or in the past decade. ( its related to Structural Problems in their Economies ( in case of Russia & Brazil ) , Tapering of QE ( affected India and Brazil the most ) and Over All Bad Economy of the World )

Most certainly they are doing far better than Europe and US in terms of Growth and have Debt far lower then Western Economies.

China is leading the BRICS pac with 7 % Growth , India somewhere in middle at 4-5 % and Russia and Brazil training at 1-2 % but these figures are far respectable than EU growth rate or even US.

Considering BRICS nation are still developing they have far higher potential to grow compared to any major economies of the world and most certainly the Western Economies.

It is all about population. The total population of about 50% of the world the growth will happen here

[Theo_Fidel]

Has anyone read Thomas Picketty’s ‘Capital in the Twenty-First Century’.
Tried to get a copy at all the airports but it was either not there or sold out.

The USA is now a rentier state.

Here is Krugmans take.
I have been saying for some time that the filthy rich in USA don’t fear a revolution.
They should now. An explosion is inevitable, sooner or later.

http://www.nybooks.com/articles/archive ... ilded-age/

No wonder, then, that nineteenth-century novelists were obsessed with inheritance. Piketty discusses at length the lecture that the scoundrel Vautrin gives to Rastignac in Balzac’s Père Goriot, whose gist is that a most successful career could not possibly deliver more than a fraction of the wealth Rastignac could acquire at a stroke by marrying a rich man’s daughter. And it turns out that Vautrin was right: being in the top one percent of nineteenth-century heirs and simply living off your inherited wealth gave you around two and a half times the standard of living you could achieve by clawing your way into the top one percent of paid workers.

You might be tempted to say that modern society is nothing like that. In fact, however, both capital income and inherited wealth, though less important than they were in the Belle Époque, are still powerful drivers of inequality—and their importance is growing. In France, Piketty shows, the inherited share of total wealth dropped sharply during the era of wars and postwar fast growth; circa 1970 it was less than 50 percent. But it’s now back up to 70 percent, and rising. Correspondingly, there has been a fall and then a rise in the importance of inheritance in conferring elite status: the living standard of the top one percent of heirs fell below that of the top one percent of earners between 1910 and 1950, but began rising again after 1970. It’s not all the way back to Rasti-gnac levels, but once again it’s generally more valuable to have the right parents (or to marry into having the right in-laws) than to have the right job.

As evidence, he offers the example of France’s Third Republic. The Republic’s official ideology was highly egalitarian. Yet wealth and income were nearly as concentrated, economic privilege almost as dominated by inheritance, as they were in the aristocratic constitutional monarchy across the English Channel. And public policy did almost nothing to oppose the economic domination by rentiers: estate taxes, in particular, were almost laughably low.

Why didn’t the universally enfranchised citizens of France vote in politicians who would take on the rentier class? Well, then as now great wealth purchased great influence—not just over policies, but over public discourse. Upton Sinclair famously declared that “it is difficult to get a man to understand something when his salary depends on his not understanding it.” Piketty, looking at his own nation’s history, arrives at a similar observation: “The experience of France in the Belle Époque proves, if proof were needed, that no hypocrisy is too great when economic and financial elites are obliged to defend their interest.”

The same phenomenon is visible today. In fact, a curious aspect of the American scene is that the politics of inequality seem if anything to be running ahead of the reality. As we’ve seen, at this point the US economic elite owes its status mainly to wages rather than capital income. Nonetheless, conservative economic rhetoric already emphasizes and celebrates capital rather than labor—“job creators,” not workers.

[Singha]

good luck waiting for the revolution. unlike europe which has a long history of popular revolts and uprisings, the US has been uniformly a police state since inception barring a little episode when martin luther king managed to buck the trend.

the american people are too much in awe/fear of the "uniform" - police, army and have been conditioned nicely since school to rally around the flag and obey the govt. only the anarchists and outlaws living in their alternate realms have seen past this game but they are too out of control to lead a mainstream movement.

tell me, who among the political class is going to call the emperor naked and call for taxing the rich more to fund better benefits and opportunities for the poor and middle class? that is how almost all the other rich countries operate - except america - which is "special" . even UK for all its thatcherite mumbo-jumbo and the uber korrupt City of london pulling strings, has a NHS and much lower fees for comparable higher education than USA.

people will be kept pacified with a mix of draconian laws, aggressive police, criminal history checks & poor schooling linked to cheaper housing districts acting as bars to economic mobility, high fees for higher education, bread n circus on TV, cheap consumer goods, cheap mass produced GM foods and if all else fails the occasional war.

[panduranghari]

Remove the small s from BRICs. Nigeria is a much bigger African economy than South Africa since last month.

[Austin]

Remove the small s from BRICs. Nigeria is a much bigger African economy than South Africa since last month.

Well there are equal sound bites from Western Press that both B and R should not be part of BRICS as they cant replicate growth of last decade.

[panduranghari]

That's interesting. I can understand Brazil. It cannot replicate growth like last decade. But Russia? Why?

[Austin]

That's interesting. I can understand Brazil. It cannot replicate growth like last decade. But Russia? Why?

Russians were suppose to grow 2.5 % this year but due to Ukraine crises it might grow less than 1 % depending on which side the wind is blowing.

As to why Russia from what I read most of the problem is structural in nature .. their Economist are conservative in nature want stability in Economy at the cost of reforms ( also a consequences of 1990 when they got badly burnt due to rush in reforms when Rouble Melted ) , Russian people also prefer stability over higher pace of reforms/ economic growth.

Privatisation is a moving target where many industries that are in government control that are in for privatisation/reforms are moved ahead because the markets are not favourable ( also a consequences of 1990 experience where profitable industry were sold for dime to Oligarch and something they dont want to repeat )

Government wants to keep its Public Debt undercontrol ( today its 12 % of GDP , out of which 2 % is external borrowing ) and Budget Balanced ( budget deficit should not exceed 0.5 % ) and the Finance Ministry are religiously fanatic about keeping both targets at the cost of say increasing Public Debt in order to spend money on infrastructure or other projects

Infrastructure Money is spent only from their Reserves Fund ( RF ) and Private Investment but not via government borrowing ( internal or external )

Budget is adjusted to high oil prices , Russian Budget needs Oil Price at $ 93-94 to keep budget balanced , The Ural Blend which is Russian brand trades along $100-110 ( WTI ) , the difference/additional ( $5-10 ) revenue goes to Forex , NWF ( national welfare fund ) & RF (reserve fund ) .......so unlike in early 2000 where the budget set to lower side of USD ( $15-20 ) and Oil Prices were trading higher ($ 30-40 ) today the margin is much lower

( though its not really Unique to Russia even OPEC has adjusted to high oil prices )

Corruption and Low Efficiency is also adding drag to the economy.

So a growth of 2-3 % for Russian Economy is both a Structural Problem and the choices they make based on their experience of past

[Austin]

Grant Williams On Gold As An "Unsure-ance" Policy

The Fed has launched everyday Americans and investors into uncharted economic territory... The Fed’s money-printing policies have driven the markets straight upward, lighting up a new post-crash asset bubble. Their constant price fixing creates, prolongs, and inflates the cycle of booms and busts... and since gold is the ultimate insurance policy against that type of uncertainty, it is very likely to benefit from the Fed’s policies. What's more, consuming ever more than it produces, the US has slipped into record debt levels. The national debt has hit the astounding sum of $17.5 trillion, surpassing America’s total GDP for the first time in 2012. As Grant Williams asks (rhetorically in this brief interview): does the Fed have all of this under control? Probably not... and that is why you need an "unsure-ance" policy.

[panduranghari]

The problem is not 17.5 trillion dollars US debt. It's the 100 trillion dollar derivative pyramid standing on top of the 17.5 trillion dollar YouEssdollah debt.

If the sheeple cannot see this and they still don't buy gold, then even Narayana cannot help them.

[TSJones]

Well, it would be helpful if you understood the various derivative markets and what they are comprised of. It is comprised of various sectors, oil, metals, foodstuff, financial instruments, etc. One sector can fail but that doesn't mean the others will.

In order for the whole derivatives market to fail we would have to have a Zimbabwe like event. Something that you and others wish for but an extemely unlikely event.

[akashganga]

Bert Dohmen: "This Is Very Much Like 2008" http://www.financialsense.com/contribut ... -like-2008

[Austin]

^^ Didnt knew there was credit crunch in China ATM and only Government Sectors were getting loans

[Austin]

The 5 Trillion Dollar Question

2014 has been a volatile year to date. The amazing returns of years past are definitely not on the boards just yet and the longer the stock market hesitates, the higher the odds are for it to go lower. Consequently, the uncertainty is increasing daily amongst investors and not much would be needed to completely destroy their (renewed) faith; the sell button is certainly seeing a lot more action these days in online brokerage accounts.

A short break also gives us the opportunity, however, to investigate the big picture once again, as the underlying issue of this faltering market is not the change of a single digit in the year (like changing seasons), but a deeper, fundamental reason. What stopped the market in its tracks, namely, is the Fed’s QE program being scaled back. On the 18th of December, to be exact, the US central bank started ‘tapering’ and things are moving along swiftly. Last year, the Federal Reserve bought 85 billion USD of mortgage debt and government bonds every month, but at the moment that monthly figure has gone down to 55 billion USD. According to insiders, the Fed even wants to put an end to QE before the year is over.

The way things are looking now the Fed’s balance sheet will stop its explosive growth quite soon as a consequence of this target, although we did pass the 4 trillion USD mark recently.



Over the coming months a few hundred billion dollars will still be added to the Fed’s balance sheet, after which the party would be over. In theory. In practice we can already see the effects of tapering as well, as the stock market rally of these last few years was completely built on the monetary assistance of the central bank. The Fed wants the market to stand on its own two feet, but whether that is actually going to happen is, of course, another matter.

The market is a fickle creature, not easily swayed, and especially not when downside pressure is in the mix. Most investors remember the downward spiral of 2008 like it happened yesterday as the markets fell by a couple dozen percentage points in just a few months and the Fed does not want that to happen twice, we assure you. As a consequence, the central bank will have to choose its words and deeds very carefully and we assume that there is actually some wiggle room in the tapering process. The Fed could, for example, take a short break from tapering, although it is clear that this monetary insanity needs to stop at one point. Most likely, the Fed drew a line in the sand around the 5 trillion dollar mark.

The real question is then: if the Fed will definitively put a stop to QE, will investors be able to keep the stock market rally alive on their own? Time will tell, but the Fed possibly has a few more tricks up its sleeve to put the new dollars that have been created over the last few years to work effectively as most of it is currently parked on the central bank’s balance sheet. The Fed could, for example, raise its interest rates on bank reserves as the banks are barely paying anything today and if that new money is going to be pumped into the system through fractional banking, there is a lot more upside to the market. But that is a trajectory that also carries risk for the Fed as it still has control to some degree over where the money is going now, but once it leaves the balance sheet of the central bank, it will find its own path and most likely the one of least resistance. There is no guarantee that this path will take it back to the stock market whatsoever.

In short, there is a lot of uncertainty around this new policy of the US central bank. Scaling back its quantitative easing program could stop the flow of money to the stock market, potentially with a huge correction as a consequence. On the other hand, if the Fed keeps writing checks, it risks inflation getting out of hand in the long term, which would also be bad news for the stock market. The most sustainable scenario for stocks – a correction followed by a new breakout – seems likewise to be running into more and more challenges. That is why we will remain cautious around the stock market over the coming months. The only thing that would truly convince us now is a powerful breakout to the upside on all levels. Potentially, Janet Yellen could still deliver that, but until that time, cash is king.

[Austin]

Keiser Report: Max Interviews Jan Skoyles about China’s gold, international payment systems, bail-ins and Getting REAL.

http://youtu.be/ssdtEDN8M90?t=12m46s

[Austin]

Memo To Dr. Yellen: Don’t Look Now But The Wealth Effect Is Over

by Michael Pento

The government’s “ingenious” solution to end the Great Recession was to recreate the same wealth effect that engendered the credit crisis to begin with: The definition of the wealth effect is an increase in spending that comes from an increase in the perception of wealth generated from equities and real estate.

Our Treasury and Federal Reserve figured the best way to accomplish this was to rescue the banking system by; taking interest rates to zero percent, buying banks’ troubled assets, and recapitalizing the financial system. Most importantly, our government loaded banks with excess reserves. This process, known as quantitative easing (QE), pushed lower long-term interest rates through the buying of Treasury Notes, Bonds and Agency MBS.

It is imperative to understand the QE process in order to fully understand why the tapering of asset purchases will lead to a collapse in asset prices and a severe recession.

The QE scheme forces banks to sell much higher-yielding assets (Treasuries and MBS) to the Fed, and in return the banks receive something know as Fed Credit, which pays just one quarter of one percent. For example, the Five-year Note currently yields 1.75 percent and the Seven-year Note offers a yield of 2.30 percent. The Fed is currently buying $30 billion worth of such Treasuries per month and $25 billion of higher-yielding MBS.

In fact, the Fed has purchased a total of $3.5 trillion worth of MBS and Treasuries since 2009 in a direct attempt to boost equity and real estate prices. QE escalated in intensity as the years progressed. The year 2013 began with the Fed promising to purchase over a trillion dollars’ worth of bank debt–without any indication of when the QE scheme would end…if ever.

Therefore, financial institutions did exactly what rational would dictate. These banks bought bonds, stocks and real estate assets with the Fed’s credit because not only were the yields higher, but they also understood there would be a huge buyer behind them—one that was indifferent to price and had an unlimited balance sheet. Since these assets offered a yield that was much greater than the 25 basis points provided by the Fed and were nearly guaranteed to increase in price, it was nearly a riskless transaction for banks to make. This QE process also sent money supply growth rates back up towards 10% per annum, as opposed to the contractionary rates experienced in 2009 and 2010.

Of course, most on Wall Street fail to understand or refuse to acknowledge that ending QE will cause asset prices to undergo a necessary, but nevertheless healthy correction. However, looking at the evidence since the tapering of asset purchases began, it is clear that the Fed’s wealth effect has ended.

The Fed announced in December of last year its plan to reduce asset purchases beginning in January of this year. Its base-case scenario would be to reduce QE by $10 billion per each Fed meeting. Since the start of this year, asset prices have stopped rising. According to the Case-Shiller National Home Price Index, home values have actually dropped 0.33% during the last 3 months of the survey. In addition, the Dow Jones Industrial Average and the NASDAQ have both dropped in price over the past four months. Only the S&P 500 has managed to eke out a very small gain so far this year—and one third of the year is over.

Real estate and equity values have already lost their momentum, as the Fed is removing its massive support for these assets. In a further sign of real estate weakness, the Commerce Department recently announced that New Home Sales fell three months in a row and plummeted 14.5 percent in March from the prior month’s pace. But Wall Street will try to convince investors that the spring allergy season—also known as the pollen vortex–is unusually bad this year. Therefore, nobody wanted to go outside and purchase a new home, even after all the snow melted.

The bottom line is as the central bank stops buying assets from private banks, these institutions won’t have the need or the incentive to replace them, and the direct result will be a contraction in the money supply.

But nearly every market strategist believes the Fed’s taper will have an innocuous effect on markets. They believe this because of their conviction that new bank lending will supplant the money creation currently being done for the purpose of buying new assets. But what would cause banks to suddenly start lending to the public?

The government has overwhelmed banks with new regulations and announced on April 8th that it will force banks to add $68 billion to their capital, which will negatively affecting balance sheet growth. The public sector is still greatly in need of deleveraging because Household Debt to GDP ratio is still over 80%, opposed to the 40% it was in 1971. Real disposable income is not increasing, which has left the consumer with little ability to take on more debt. There just isn’t any reason to believe that consumers will suddenly ramp-up their borrowingIt wasn’t any coincidence that the size of the Fed’s balance sheet and the S&P 500 were both up 30% last year. But very soon the amount of QE will be close to, if not exactly at zero. And without banks supporting asset prices by consistently creating new money at the behest of the Fed, stocks and home prices have nowhere to go but down.

I anticipate the reduction of the wealth effect to intensify as the taper progresses. Since the economic “recovery” was predicated on the rebuilding of asset bubbles, a long delayed and brutal recession will start to unfold later this year.

The real question investors need to answer is to determine how long Janet Yellen will wait before admitting the economy is completely addicted to QE, and that there is no escape from the Fed’s constant manipulation of money supply growth and asset prices.

Having raised significant funds ahead of this huge selloff in order to profit from the launch of the Fed’s next massive round of debt monetization should prove to be one of the most important investment strategies of a lifetime. This is exactly the reason why Pento Portfolio Strategies has been in 75% cash since January.

Michael Pento is the President and Founder of Pento Portfolio Strategies and Author of the book “The Coming Bond Market Collapse

[Austin]

Check the video in the link

Fed fueling century’s ‘greatest bubble’: Stockman

http://davidstockmanscontracorner.com/f ... -stockman/

[TSJones]

Fed tapers QE again.

http://finance.yahoo.com/blogs/breakout ... 41205.html

Market shrugs. No Zimbabwe yet.

[Singha]

based on PPP studies here is the latest 2011 data off a world bank study

india is now far ahead of japan in PPP terms to be #3 . in $ terms due to Xe issues we have a lot of catching up to do.

http://web.worldbank.org/external/defau ... K=62002388

China is #2 not only in PPP but in $ as well. indicative of a greater strength and composite national power.

the 6 high income large economies account for 32% of global GDP and the 6 middle income largest economies also account for 32%.

[Austin]

17 Facts To Show To Anyone That Still Believes That The U.S. Economy Is Just Fine

No, the economy is most definitely not "recovering". Despite what you may hear from the politicians and from the mainstream media (shrugging off today's terrible GDP print), the truth is that the U.S. economy is in far worse shape than it was prior to the last recession. In fact, we are still pretty much where we were at when the last recession finally ended. When the financial crisis of 2008 struck, it took us down to a much lower level economically. Thankfully, things have at least stabilized at this much lower level. For example, the percentage of working age Americans that are employed has stayed remarkably flat for the past four years. We should be grateful that things have not continued to get even worse. It is almost as if someone has hit the "pause button" on the U.S. economy. But things are definitely not getting better, and there are a whole host of signs that this bubble of false stability will soon come to an end and that our economic decline will accelerate once again. The following are 17 facts to show to anyone that believes that the U.S. economy is just fine...

#1 The homeownership rate in the United States has dropped to the lowest level in 19 years.

#2 Consumer spending for durable goods has dropped by 3.23 percent since November. This is a clear sign that an economic slowdown is ahead.

#3 Major retailers are closing stores at the fastest pace that we have seen since the collapse of Lehman Brothers.

#4 According to the Bureau of Labor Statistics, 20 percent of all families in the United States do not have a single member that is employed. That means that one out of every five families in the entire country is completely unemployed.

#5 There are 1.3 million fewer jobs in the U.S. economy than when the last recession began in December 2007. Meanwhile, our population has continued to grow steadily since that time.

#6 According to a new report from the National Employment Law Project, the quality of the jobs that have been "created" since the end of the last recession does not match the quality of the jobs lost during the last recession...

Lower-wage industries constituted 22 percent of recession losses, but 44 percent of recovery growth.
Mid-wage industries constituted 37 percent of recession losses, but only 26 percent of recovery growth.
Higher-wage industries constituted 41 percent of recession losses, and 30 percent of recovery growth.

#7 After adjusting for inflation, men who work full-time in America today make less money than men who worked full-time in America 40 years ago.

#8 It is hard to believe, but 62 percent of all Americans make $20 or less an hour at this point.

#9 Nine of the top ten occupations in the U.S. pay an average wage of less than $35,000 a year.

#10 The middle class in Canada now makes more money than the middle class in the United States does.

#11 According to one recent study, 40 percent of all Americans could not come up with $2000 right now even if there was a major emergency.

#12 Less than one out of every four Americans has enough money put away to cover six months of expenses if there was a job loss or major emergency.

#13 An astounding 56 percent of all Americans have subprime credit in 2014.

#14 As I wrote about the other day, there are now 49 million Americans that are dealing with food insecurity.

#15 Ten years ago, the number of women in the U.S. that had jobs outnumbered the number of women in the U.S. on food stamps by more than a 2 to 1 margin. But now the number of women in the U.S. on food stamps actually exceeds the number of women that have jobs.

#16 69 percent of the federal budget is spent either on entitlements or on welfare programs.

#17 The number of Americans receiving benefits from the federal government each month exceeds the number of full-time workers in the private sector by more than 60 million.

Taken individually, those numbers are quite remarkable.

Taken collectively, they are absolutely breathtaking.

Yes, things have been improving for the wealthy for the last several years. The stock market has soared to new record highs and real estate prices in the Hamptons have skyrocketed to unprecedented heights.

But that is not the real economy. In the real economy, the middle class is being squeezed out of existence. The quality of our jobs is declining and prices just keep rising. This reality was reflected quite well in a comment that one of my readers left on one of my recent articles...

It is getting worse each passing month. The food bank I help out, has barely squeaked by the last 3 months. Donors are having to pull back, to take care of their own families. Wages down, prices up, simple math tells you we can not hold out much longer. Things are going up so fast, you have to adopt a new way of thinking. Example I just had to put new tires on my truck. Normally I would have tried to get by to next winter. But with the way prices are moving, I decide to get them while I could still afford them. It is the same way with food. I see nothing that will stop the upward trend for quite a while. So if you have a little money, and the space, buy it while you can afford it. And never forget, there will be some people worse off than you. Help them if you can.

And the false stock bubble that the wealthy are enjoying right now will not last that much longer. It is an artificial bubble that has been pumped up by unprecedented money printing by the Federal Reserve, and like all bubbles that the Fed creates, it will eventually burst.

None of the long-term trends that are systematically destroying our economy have been addressed, and none of our major economic problems have been fixed. In fact, as I showed in this recent article, we are actually in far worse shape than we were just prior to the last major financial crisis.

Let us hope that this current bubble of false stability lasts for as long as possible.

That is what I am hoping for.

But let us not be deceived into thinking that it is permanent.

It will soon burst, and then the real pain will begin.

[Austin]

Japan’s 10th Round Of QE: Still A Flat-Out Failure

[Austin]

In this episode of the Keiser Report, Max Keiser and Stacy Herbert discuss the pawnshop for gazillionaires, the Asia pivot as opium war 2.0 and the fact that should the Fukushima of Jamie Dimon’s derivatives book meltdown, then TPP nations will not be able to do anything to try to stop it. In the second half, Max interviews Dan Collins of the China Money Report about the ‘China containment strategy’ that is the ‘Asia Pivot’ and TPP as the economic arm of that strategy.

http://rt.com/shows/keiser-report/15566 ... eiser-595/

[svinayak]

http://blogs.ft.com/money-supply/2014/0 ... -answered/

China overtakes the US: your questions answered
April 30, 2014 11:05 am by Chris Giles

The FT reported this morning that China will overtake the US as the world’s largest economy this year. This is a historic moment since the US has been the global economic powerhouse since about 1872. As Jamil Anderlini, the FT’s Beijing bureau chief explains, the news is an important geopolitical moment. Everyone has known the moment was coming (the IMF’s projections suggested 2019) but the report from the International Comparison Programme came as a shock, saying the Chinese economy was already 87 per cent of the US size in 2011. The figures are based on new estimates of Purchasing Power Parity (PPP) and inevitably raise a lot of questions. I will attempt to answer them here.

1. I’ve never heard of the International Comparison Programme. What is it?

The ICP is a loose coalition of the world’s leading statistical agencies, hosted by the World Bank in Washington. Eurostat and the Organisation for Economic Cooperation and Development produce the data for advanced countries and a series of regional offices, usually national statistical agencies, provide the equivalent data for the rest of the world. In total 199 countries are covered. The results are therefore much more comprehensive than any other comparable study.

[Austin]

Check this Interesting interview with Michael Pento , We are heading into recession

[Austin]

The dragon takes wing

New data suggest the Chinese economy is bigger than previously thought

THERE are a number of ways to measure the might of a nation: military power, commercial clout, cultural influence. But ever since statisticians started rigorously calculating economic output in the 1930s, economists have fixated on one measure: gross domestic product (GDP). By one variant of that yardstick, China is on the verge of becoming the world’s mightiest country.

Comparing the economic output of countries is tricky. The most straightforward way is to convert GDPs into a single currency (usually dollars) at market exchange rates. This is a good way to gauge countries’ international heft, and by this measure China’s economy is still 43% smaller than America’s. But for comparing living standards or growth rates, market exchange rates can be misleading. Exchange rates can be volatile, yielding vastly different GDP values on different days. Governments often meddle with them. Most important, they are influenced by prices for internationally traded items, but they do not reflect the cost of purely domestic goods and services, such as haircuts or bus rides. Since rich-world barbers are more expensive than those in poor economies but not vastly more productive, using market exchange rates to compare GDPs understates the productive capacity and living standards of the emerging world.

The International Comparison Programme (ICP) was established in 1968 in an attempt to allow for such things. Statisticians collate the cost of comparable goods and services in different countries. They then adjust output figures to take account of the lower cost of those items in poorer countries—a method known as purchasing-power parity (PPP). The Economist’s Big Mac index is based on the same premise, although it looks at the price of just one item. The ICP’s first survey in 1970 took in only ten countries. The latest, released on April 30th but based on prices from 2011, provides data for 199 economies and estimates for another 15 (see chart).

The previous ICP survey, released in 2005, attracted criticism for its results from China, which were based on data from just 11 cities. This, some argued, overestimated the cost of living and therefore underestimated the size of the Chinese economy on a PPP basis. That, along with the difficulty of accounting for varying rates of inflation since 2005, meant the PPP data were getting ever more inaccurate: the new data put China’s PPP exchange rate 20% higher. The old PPP exchange rates had suggested that China’s economy would overtake America’s in 2019; the new ones imply that it will do so by the end of this year.

A similar uprating has caused a shuffling of the pack elsewhere, too. Indonesia, which was thought to be the world’s 15th-biggest economy, is now ninth. Indeed the six biggest emerging economies now produce goods and services of equal value to the six biggest rich countries. Further number-crunching is required to work out the impact of the new exchange rates on the global poverty rate (which is typically defined to include all who live on less than $1.25 a day at PPP); that will take a year or more. But the ICP’s report does tentatively suggest that “the world has become more equal”, as the number of people living in countries with a GDP per person of at least half of America’s has risen slightly, from 15% in 2005 to 16% in 2011.

[KrishnaK]

good luck waiting for the revolution. unlike europe which has a long history of popular revolts and uprisings, the US has been uniformly a police state since inception barring a little episode when martin luther king managed to buck the trend.

the american people are too much in awe/fear of the "uniform" - police, army and have been conditioned nicely since school to rally around the flag and obey the govt. only the anarchists and outlaws living in their alternate realms have seen past this game but they are too out of control to lead a mainstream movement.

tell me, who among the political class is going to call the emperor naked and call for taxing the rich more to fund better benefits and opportunities for the poor and middle class? that is how almost all the other rich countries operate - except america - which is "special" . even UK for all its thatcherite mumbo-jumbo and the uber korrupt City of london pulling strings, has a NHS and much lower fees for comparable higher education than USA.
people will be kept pacified with a mix of draconian laws, aggressive police, criminal history checks & poor schooling linked to cheaper housing districts acting as bars to economic mobility, high fees for higher education, bread n circus on TV, cheap consumer goods, cheap mass produced GM foods and if all else fails the occasional war.

The US is pretty much the only country in the world that has had a *successful* revolution.

[Austin]

Boom Bust : http://rt.com/shows/boom-bust/156304-av ... %20wealth/

Our lead story: First quarter GDP numbers for the US came out on Wednesday, and they were not awesome. The US economy barely grew in the first quarter. GDP expanded at 0.1 percent, a sharp pullback from a pace of 2.6 percent in the 4th quarter of 2013. Erin takes a look at the situation and then sits down with the best-selling author, economist and financial guru, Jim Rickards, to get a better understanding of his new book, The Death of Money. Jim talks about art, wealth management, gold, China and a whole lot more. Check it out.

Then in today’s Big Deal, Edward Harrison and Jonathan Kim sit down with Erin to talk about the new report that estimates that the Chinese economy as 87 percent of the US economy. What does this mean? Take a look.

[TSJones]

The boys who cried wolf: Crash prophets on the Rise

http://finance.yahoo.com/blogs/breakout ... 47320.html

[Austin]

US Stock Market are a function of Fed QE program for as long as the dope goes in the addict will feel better or even great.

The real proof of the pudding will come in when Fed tapers QE program completely and let the interest rates take a natural course post that phase , Right now Fed is promising Tapering but also vows to control interest rates close to zero.

If both the thing do happen which is QE Truly Ending ( no further QE ) and Interest Rates taking a natural course then we will have a true idea on the strength of US Economy and how (if ) years of QE with an inflated balanced sheet impacts the economy

Till then its all Maya

I am just hoping that the new Indian Government withdraws the import duty on Gold and its cheaper to buy gold compared to what the prices are now ....some hope for month of June.

[Austin]

FWIW

How And When The Bubble Finally Bursts: Jeremy Grantham's Take

[Austin]

2011 International Comparison Program Summary Results Release Compares the Real Size of the World Economies

WASHINGTON, April 29, 2014 – The International Comparison Program (ICP) released new data today showing that the world economy produced goods and services worth over $90 trillion in 2011, and that almost half of the world’s total output came from low and middle income countries.

Under the authority of the United Nations Statistical Commission, the 2011 round of ICP covered 199 economies - the most extensive effort to measure Purchasing Power Parities (PPPs) across countries ever. ICP 2011 estimates benefited from a number of methodological improvements over past efforts to calculate PPPs.

The ICP’s principal outputs are PPPs for 2011 and estimates of PPP-based gross domestic product (GDP) and its major components in aggregate and per capita terms. When converting national economic measures (e.g. GDP), into a common currency, PPPs are a more direct measure of what money can buy than exchange rates.

ICP implementation was led and coordinated by the ICP Global Office, hosted by the World Bank, in partnership with regional agencies overseeing activities in eight geographic regions: Africa, Asia and the Pacific, Commonwealth of Independent States (CIS), Latin America, the Caribbean, Western Asia, Pacific Islands, and the countries of the regular PPP program managed by the Statistical Office of the European Communities (Eurostat) and the Organization for Economic Cooperation and Development (OECD). In addition, two “singleton” economies, Georgia and Iran, participated in bilateral exercises with partner economies, without being part of any regional comparisons.

Major findings:

Six of the world’s twelve largest economies were in the middle income category (based on the World Bank’s definition). When combined, the twelve largest economies account for two-thirds of the world economy, and 59 percent of the world population.
The PPP-based world GDP amounted to $90,647 billion, compared to $70,294 billion measured by exchange rates.
Middle income economies’ share of global GDP is 48 percent when using PPPs and 32 percent when using exchange rates.
Low income economies, as a share of world GDP were more than two times larger based on PPPs than respective exchange rate shares in 2011. Yet, these economies accounted for only 1.5 percent of the global economy, but nearly 11 percent of the world population.
Roughly twenty-eight percent of the world’s population lives in economies with GDP per capita expenditures above the $13,460 world average and 72 percent are below that average.
The approximate median yearly per capita expenditures for the world – at $10,057 – means that half of the global population has per capita expenditures above that amount and half below.

Which are the largest economies?

The six largest middle income economies – China, India, Russia, Brazil, Indonesia and Mexico – account for 32.3 percent of world GDP, whereas the 6 largest high income economies – United States, Japan, Germany, France, United Kingdom, and Italy – account for 32.9 percent.
Asia and the Pacific, including China and India, accounts for 30 percent of world GDP, Eurostat-OECD 54 percent, Latin America 5.5 percent (excluding Mexico, which participates in the OECD and Argentina, which did not participate in the ICP 2011), Africa and Western Asia about 4.5 percent each.
China and India make up two-thirds of the Asia and the Pacific economy, excluding Japan and South Korea, which are part of the OECD comparison.
Russia accounts for more than 70 percent of the CIS, and Brazil for 56 percent of Latin America.
South Africa, Egypt, and Nigeria account for about half of the African economy.

Which countries are the most expensive?

The Price Level Index (PLI) is the ratio of a PPP to a corresponding exchange rate. An index over 100 means prices are higher on average than in the world, and one less than 100 means prices are relatively lower.
The most expensive economies in GDP terms are Switzerland, Norway, Bermuda, Australia and Denmark, with indices ranging from 210 to 185. The United States ranked 25th in the world, lower than most other high-income economies, including France, Germany, Japan, and the United Kingdom.
23 economies are showing a PLI of 50 or below. The cheapest economies are Egypt, Pakistan, Myanmar, Ethiopia and Lao People's Democratic Republic, with indices ranging from 35 to 40.

Which countries are the richest and poorest in per capita terms?

The five economies with the highest GDP per capita are Qatar, Macao SAR, China,, Luxembourg, Kuwait, and Brunei. The first two economies have more than $100,000 per capita.
Eleven economies have more than $50,000 per capita, while they collectively account for less than 0.6 percent of the world’s population. The United States has the 12th highest GDP per capita.
Eight economies – Malawi, Mozambique, Central African Republic, Niger, Burundi, Congo, Dem. Rep., Comoros and Liberia – have a GDP per capita of less than $1,000.

Which countries devote the most spending that directly benefit individuals?

A general measure of material well-being of each economy’s population is measured better by actual individual consumption per capita – a measure of all expenditures in the economy that directly benefit individuals – rather than by GDP per capita. By this measure, the five economies with highest actual individual consumption per capita are Bermuda, United States, Cayman Islands, Hong Kong SAR, China, and Luxembourg, respectively.
The world average actual individual consumption per capita is approximately $8,647.

Investment expenditures

At 27 percent, China now has the largest share of the world’s expenditure for investment (gross fixed capital formation); followed by the United States at 13 percent.
India, Japan and Indonesia follow with 7 percent, 4 percent, and 3 percent, respectively.
China and India account for about 80 percent of investment expenditures in the Asia and the Pacific region. Russia accounts for 77 percent of CIS, Brazil for 61 percent of Latin America and Saudi Arabia for 40 percent of Western Asia.

Limitations in the use of the data

PPPs are statistical estimates. Like all statistics they are subject to sampling errors, measurement errors, and errors of classification. Therefore, they should be treated as approximations to true values. Because of the complexity of the process used to collect the data and calculate the PPPs, it is not possible to directly estimate their margins of error. Therefore, small differences in the estimated values between economies should not be considered significant.

PPPs should not be used as indicators of the under- or overvaluation of currencies. They do not inform what exchange rates “should be”. PPPs do not reflect the demand for currencies as a medium of exchange, speculative investment, or official reserves.

The ICP is designed to compare levels of economic activity across economies, expressed in a common currency, in a particular benchmark year. As such, PPP-based expenditures are not directly comparable with the 2005 ICP round estimates because they are based on two different price levels. In addition, some of the economies participating in one of these comparisons were not in the other comparison. A small number of economies moved from one region to another, and most importantly, some significant improvements in methodology were implemented in ICP 2011.

The ICP should not be used to compare changes in an economy’s PPP-based GDP over time. Experience has shown that sizeable discrepancies can arise between extrapolated estimates and a new benchmark, even when they are only a couple of years apart. The gap between the latest ICP rounds was six years, which has resulted in some very large differences for many economies between the extrapolated PPP-based expenditures for 2011 and the benchmark PPP-based expenditures that are available from ICP 2011.