RPT GMTP 2013 Peek PDF

The Echo Boom
Emerging Markets in Crisis
GLOBAL MACRO UPDATE
GLOBAL MACRO TIPPING POINTS - NOVEMBER 2013
10/26/2013
1 November 2013 Edition

Copyright 2013 Gordon T. Long All Rights Reserved
Restricted & Confidential

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The Echo Boom

The Fed is Caught in a Box.
GLOBAL MACRO TIPPING POINTS - OCTOBER 2013
TIPPING POINTS ...................................................................................................................... 15
GLOBAL MACRO: RISK ASSESSMENT .................................................................................................................................................... 15
SITUATIONAL ANALYSIS .................................................................................................................................................... 15
POSITIONAL FRAMEWORK: "WE ARE HERE!" ....................................................................................................................................................... 15
Mapping the Collapse of European Democracy .......................................................................................................................................................... 21
GLOBAL TRENDS THE SIX FRAMING MEGATRENDS ....................................................................................................................................... 22
GLOBAL THEMES TEN STRUCTURALTHEMES FOR STRATEGY ................................................................................................................... 24
DEBT SATURATION - A COLLAPSING PONZI SCHEME ...................................................................................................................................... 26
THE RISK CONTINUUM ................................................................................................................................................................................................ 28
FALL 2013 EVENT RISK DOMINATES ................................................................................................................................................................. 30
MACRO MONITORING INSTITUTIONS ............................................................................................................................... 38

IMF, WORLD ECONOMIC OUTLOOK - JULY 2013 .................................................................................................................................................. 39
IMF, FINANCIAL STABILITY REPORT - APRIL 2013 ............................................................................................................................................... 45
WEF (WORLD ECONOMIC FORUM -JANUARY 2013) ............................................................................................................................................ 51
The 17 Biggest Risks To Our Hyper-Connected World .............................................................................................................................................. 51
RISK SIGNALS ............................................................................................................................................................................................... 67

GEO-POLITICAL RISK ......................................................................................................................................................... 67
SYRIA ............................................................................................................................................................................................................................... 67
SYRIA - This has the Earmarks of the Kennedy Ear "Cuban Missile" Crisis ........................................................................................................... 67
SYRIA - Syrian War You Are Not Being Told About ................................................................................................................................................... 68
SYRIA - 25 Quotes ......................................................................................................................................................................................................... 69
SYRIA - What Coalition? ................................................................................................................................................................................................ 72
SYRIA - US Supporting Fully an "Al Qaeda Operation" ............................................................................................................................................. 74
SYRIA - Decision Already Taken to Bomb Syria ......................................................................................................................................................... 76
SYRIA - Market Patterns Before and Immediately After Conflict Begins.................................................................................................................. 85
FINANCIAL & ECONOMIC RISK .......................................................................................................................................... 87

EMERGING MARKETS ................................................................................................................................................................................................. 87
EMERGING MARKETS - Crisis Temporarily Halted .................................................................................................................................................. 87
EMERGING MARKETS - The Plight of four Asian countries - China, India, Indonesia and Japan. ..................................................................... 88
EMERGING MARKETS - Increasing Liquidity Problem In Selected Markets ......................................................................................................... 92
EMERGING MARKETS - EU Major Contributor to EM Current Account Deficit Growth...................................................................................... 103
EMERGING MARKETS - Insufficient BRICS Reserve Levels Prompt Russian-Chinese Support...................................................................... 106
EMERGING MARKETS - Global Bond Yields React To Taper Together ............................................................................................................ 107
EMERGING MARKETS - Negative Current Accounts + Weak(ening) International Investment Positioning .................................................... 108
EMERGING MARKETS - BRAZIL .............................................................................................................................................................................. 109
EMERGING MARKETS - INDIA .................................................................................................................................................................................. 111
EMERGING MARKETS - SOUTH AFRICA ............................................................................................................................................................... 113
EMERGING MARKETS - TURKEY ............................................................................................................................................................................ 115
EMERGING MARKETS - "TAPER" Shock Waves Across Asia .............................................................................................................................. 117
EMERGING MARKETS - India Rupee Collapse Showing Signs of Exhaustion ................................................................................................... 125
EMERGING MARKETS - Asian Credit Contraction Problems ................................................................................................................................ 126
EMERGING MARKETS - Why Asian Markets Are Collapsing ................................................................................................................................ 128
EMERGING MARKETS - Surging Interest Rates ..................................................................................................................................................... 132
EMERGING MARKETS - Currencies Getting Clobbered ........................................................................................................................................ 133
EMERGING MARKETS - Crisis Worsens .................................................................................................................................................................. 134
EMERGING MARKETS - Korean Peninsula a Black Swan Possibility .................................................................................................................. 136
GLOBAL TAX GRAB - G20 Focusing on Finding Much Needed Tax Revenue .................................................................................................... 139
RISK - COLLAPSING PETRODOLLAR FOUNDATION .......................................................................................................................................... 143
RISK - GLOBAL DEBT 313% of GDP ........................................................................................................................................................................ 147
RISK - 202M GLOBALLY UNEMPLOYED................................................................................................................................................................. 148
RISK - SIGNS APLENTY, BUT NO ONE PANICKING - YET! ................................................................................................................................ 149
RISK - CANARIES SINGING AGAIN ......................................................................................................................................................................... 151
RISK - COMPLACENCY & REPRESSED FEAR ...................................................................................................................................................... 152
RISK - TIED TO EU IN 2012 ....................................................................................................................................................................................... 153
RISK - GLOBAL DERIVATIVE COLLATERAL .......................................................................................................................................................... 155
RISK - GLOBAL RISK MATRIX................................................................................................................................................................................... 157
November 2013 Edition

Copyright 2013 Gordon T. Long

All Rights Reserved
RISK - GLOBAL MACRO HEADWINDS / TAILWINDS ............................................................................................................................................ 157

RISK - FOOD A GROWING GLOBAL INFLATION & SOCIAL UNREST RISK .................................................................................................... 159
RISK - INCREASINGLY DYSFUNCTIONAL CAPITALS MARKETS ..................................................................................................................... 165
RISK - RISING GEO-POLITICAL EVENT RISK........................................................................................................................................................ 168
GLOBAL MACRO: RISK LEVELS .............................................................................................................................................................. 171

AGGREGATED GLOBAL FINANCIAL RISK INDEX............................................................................................................ 171
BANKING RISK - LIBOR-OIS SPREAD (Updated) .................................................................................................................................................. 172
BANKING RISK - TED SPREAD (Updated) .............................................................................................................................................................. 172
CREDIT RISK - GLOBAL CREDIT DEFAULT SWAPS (Updated) ........................................................................................................................ 173
CREDIT RISK - EU CREDIT DEFAULT SWAPS (Updated) ................................................................................................................................... 173
CONSUMER RISK - HOUSING - RATE OF CHANGE (Updated) .......................................................................................................................... 174
ECONOMIC RISK - ECRI LEADING INDEX (Updated) ........................................................................................................................................... 175
INFLATION RISK - MONEY SUPPLY GROWTH - M3 (Updated) .......................................................................................................................... 176
INFLATION RISK - MONEY VELOCITY (Updated) .................................................................................................................................................. 176
MONETARY RISK - BANK LIABILITIES (Updated) ................................................................................................................................................. 177
COST OF MONEY RISK - INTEREST RATES (Updated)...................................................................................................................................... 177
AGGREGATED RISK LEVEL .............................................................................................................................................. 179

TIPPING POINTS: CHANGES .................................................................................................................................................................... 180
TIPPING POINT MAPPING: 2013 YEAR BEGINNING UPDATE ........................................................................................ 180
TIPPING POINTS: TOP 5 FOCUS - SEPTEMBER 2013 ........................................................................................................................ 191
I - RISK REVERSAL............................................................................................................................................................ 191
II - JAPAN DEBT DEFLATION ............................................................................................................................................ 193
III-BOND BUBBLE .............................................................................................................................................................. 196
IV - EU BANKING CRISIS ................................................................................................................................................... 196
V - SOVEREIGN DEBT ....................................................................................................................................................... 197
VI - CHINA HARD LANDING ............................................................................................................................................... 199
GLOBAL MACRO ................................................................................................................... 203

GLOBAL MACRO: ECONOMIC OUTLOOK ............................................................................................................................................. 205
GLOBAL OUTLOOK Research We Followed ................................................................................................................... 205
GLOBAL OUTLOOK - Research of Particular Note ............................................................................................................. 208
GLOBAL OUTLOOK - An Extremely Fragile Stability .......................................................................................................... 208
GLOBAL OUTLOOK - EM Crisis will make the 1997 Asian Crisis Seem like an Early Warning ........................................... 209
GLOBAL OUTLOOK - Global Deleveraging Accelerating and Developing Nations Feeling the Pain.................................... 212
GLOBAL OUTLOOK - Problems Erupting Everywhere (Signs of Implosion) ........................................................................ 214
GLOBAL OUTLOOK - Credit Fueled Globalization in Retreat .............................................................................................. 217
GLOBAL OUTLOOK - Rogoff's Sovereign Debt Default Levels ........................................................................................... 220
GLOBAL OUTLOOK - Fiscal Adjustments Required............................................................................................................ 223
GLOBAL OUTLOOK - Imbalances Continue to Increase Along With Financial Fragility ....................................................... 223
GLOBAL OUTLOOK - A 67 Million Jobs Gap ...................................................................................................................... 227
GLOBAL OUTLOOK - Center of Global Manufacturing Confirmed to be Shifting Away from developed Countries .............. 230
GLOBAL OUTLOOK - Mercantilist China the Clear Winner Globally, Mercantilist Germany Regionally ............................... 231
ECONOMIC CUTS .............................................................................................................................................................. 233
IMF To Slash Economic Growth Forecast... Again - Still Full of Hockey sticks .................................................................................................... 233
OECD CUTS ECONOMIC OUTLOOK ....................................................................................................................................................................... 240
IMF CUTS ECONOMIC OUTLOOK ............................................................................................................................................................................ 243
ECONOMIC WARNINGS .................................................................................................................................................... 254

IMF WARNS - May 2013 .............................................................................................................................................................................................. 254
BIS WARNS - June 2013 ............................................................................................................................................................................................. 260
WORLD BANK WARNS - June 2013 ......................................................................................................................................................................... 267
GLOBAL MACRO: INDICATORS (CHARTS) ........................................................................................................................................... 272

GLOBAL GROWTH............................................................................................................................................................. 272
GLOBAL GROWTH - GDP Forecasts Continue to Be Taken Down ...................................................................................................................... 272
GLOBAL GROWTH - Uneconomic Energy Problematic .......................................................................................................................................... 272
GLOBAL GROWTH - Clearly Slowing ........................................................................................................................................................................ 275
GLOBAL GROWTH - Trend is clearly Down ............................................................................................................................................................. 276
GLOBAL GROWTH - Global Growth Cycle ............................................................................................................................................................... 277
GLOBAL GROWTH - Global GDP Contribution ........................................................................................................................................................ 278
GLOBAL GROWTH - Clear Signs of Degree of Slowing Since January ................................................................................................................ 279
GLOBAL GROWTH - Clearly Slowing and near Contraction without BRICS ........................................................................................................ 280
GLOBAL GROWTH - PMI Barely Above Stagnation ................................................................................................................................................ 282


All Rights Reserved
GLOBAL GROWTH - Chinese Slowing moves to CONTRACTION ....................................................................................................................... 285

GLOBAL GROWTH - Slowing Global Economies .................................................................................................................................................... 286
GLOBAL GROWTH - Global GDP Growth Trending Down by Region and Cumulatively ................................................................................... 287
GLOBAL GROWTH - Global PMI ............................................................................................................................................................................... 287
GLOBAL GROWTH - Global Recession .................................................................................................................................................................... 290
GLOBAL GROWTH - Slowing Global Growth - Air Cargo Shipments ................................................................................................................... 291
GOBAL UNEMPLOYMENT ................................................................................................................................................. 292

GLOBAL UNEMPLOYMENT - A Problem ................................................................................................................................................................. 292
GLOBAL UNEMPLOYMENT - The Beginnings of the Welfare Myth Unwind ........................................................................................................ 293
GLOBAL UNEMPLOYMENT - The Unsustainable Welfare Myth ........................................................................................................................... 296
GLOBAL UNEMPLOYMENT - Global Financial Sector Job Cuts ........................................................................................................................... 298
GLOBAL UNEMPLOYMENT - Global Unemployment Rising -Now 202 Million ................................................................................................... 300
GLOBAL TRENDS .............................................................................................................................................................. 302

GLOBAL TRENDS - Profound Changes in Global Youth As Japan Leads the Way ............................................................................................ 302
GLOBAL TRENDS Brands & Commodities Tell the Global Story ....................................................................................................................... 305
GLOBAL SENTIMENT ........................................................................................................................................................ 318

GLOBAL SENTIMENT - Global Business Confidence Sliding Rapidly .................................................................................................................. 318
GLOBAL SENTIMENT - Complacent ......................................................................................................................................................................... 320
GLOBAL SENTIMENT - Nielsen's Global Consumer Confidence, Concerns & Spending Intentions ............................................................... 321
GLOBAL INFLATION .......................................................................................................................................................... 332

GLOBAL INFLATION - Food Prices, Driver of Social Unrest .................................................................................................................................. 332
GLOBAL INFLATION - Food Price Manipulation in Thailand .................................................................................................................................. 334
GLOBAL CREDIT ............................................................................................................................................................... 335

CREDIT CYCLE - HY Leading the Way ..................................................................................................................................................................... 335
CREDIT CYCLE - Reversal Ahead ............................................................................................................................................................................. 338
GLOBAL MACRO: MONETARY POLICY & CENTRAL BANKING ........................................................................................................ 342

TROUBLING DEVELOPMENTS ......................................................................................................................................... 342
TROUBLING DEVELOPMENTS
Venezuela: Shortages & Hyperinflation .......................................................................................................... 342

2007 Redux: Total public and private debt levels are 30pc higher in the advanced economies ............. 343
Polish Pension Confiscation: Coming to a Theater near You ...................................................................... 347
Global Tax Overhaul ......................................................................................................................................... 349
GLOBAL ABE-NOMICS The Road Ahead ........................................................................................................................ 350

GLOBAL ABE-NOMICS Monetary Expansion Extremely Difficult to Stop Once Started .................................................................................. 350
GLOBAL ABE-NOMICS Monetary Policy Below the Event Horizon .................................................................................................................... 352
The "OMF" Trial Balloon Raised ................................................................................................................................................................................. 354
OPMF - A Reversing Wealth Effect May Force OPMF & Global Abenomics ........................................................................................................ 355
OPMF - Financial Times: Martin Wolf - "The Case For Helicopter Money" ........................................................................................................... 356
OPMF - Financial Times: Martin Wolf - "The Case To Reset Basis of Monetary Policy" ..................................................................................... 359
OPMF - Financial Times: Gavyn Davies On Why Helicopters Are Dangerous ..................................................................................................... 360
OPMF - A Conundrum for the World's Central Bankers ........................................................................................................................................... 363
GLOBAL CENTRAL BANKING ........................................................................................................................................... 365

RESEARCH WE FOLLOWED Global Banking Risk ............................................................................................................................................. 365
RESEARCH OF PARTICULAR INTEREST .............................................................................................................................................................. 366
CENTRAL BANKS - Drop Tightening Talk as Easy Money Goes On .................................................................................................................... 366
CENTRAL BANKS - Balance Sheet Growth ............................................................................................................................................................. 370
CENTRAL BANKS - Austerity Now Officially Dead Public Policy ........................................................................................................................... 371
CENTRAL BANKS - They are the Market .................................................................................................................................................................. 371
CENTRAL BANKS - The longer QE persists, the greater the magnitude of the left-tail event & a Minsky Trap ............................................. 374
CENTRAL BANKS - We May Have Reached a Risk-Off Leverage Pivot .............................................................................................................. 375
CENTRAL BANKS - The Macro Landscape .............................................................................................................................................................. 377
CENTRAL BANKS - A Serious Shortage of Quality Collateral - A $10T US Problem Over 10 Years ................................................................ 378
CENTRAL BANKS - Global Balance Sheet Expansion ............................................................................................................................................ 380
CENTRAL BANKS - Where Do these Deflators Come From? ................................................................................................................................ 384
CENTRAL BANKS - First Remove Gold Standard, Now Remove Debt ................................................................................................................. 385
BOE - UK ............................................................................................................................................................................ 390

UK - Mark Carney and "Flexible Inflation Targeting" ................................................................................................................................................ 390
FED - US............................................................................................................................................................................. 391

US MONETARY - The Fed is Stuck in a QE Trap .................................................................................................................................................... 391
US MONETARY - 2nd Worst Decade In US Growth in Over 220 Years (And Getting Worse) ........................................................................... 394
US MONETARY - Mathematically, The Fed Can Only Fail ..................................................................................................................................... 396


All Rights Reserved
US MONETARY - QE Standing Between Inflated Equity Markets and A Recession ........................................................................................... 402
US MONETARY - QE Programs versus S&P 500 Movements ............................................................................................................................... 403
US MONETARY - BAML Warns If The US Economy Does Not Significantly Accelerate Now, It Never Will .................................................... 405
US MONETARY - Debt Increases $1 Trillion in One Year ..................................................................................................................................... 408
US MONETARY - Congress Asks Bernanke for Full Risk Analysis On Fed's Soaring Balance Sheet .............................................................. 410
BOJ - JAPAN ...................................................................................................................................................................... 415

JAPAN - No Way Out But to Expand the Monetary Base ........................................................................................................................................ 415
JAPAN - BOJ to "Own" 100% Of GDP In 5 Years .................................................................................................................................................... 416
JAPAN - Adjusted trade deficit the worst in Bloomberg's 20 year history .............................................................................................................. 419
JAPAN - Some Policies Have Clearly Hit the Limit ................................................................................................................................................... 421
JAPAN - Foreshadows Next Global Crisis ................................................................................................................................................................. 422
JAPAN - Japan's Prime Minister Shinzo Abe prepares to print money for the whole world ................................................................................ 427
JAPAN - Shinzo Abes Monetary-Policy Delusions ................................................................................................................................................... 428
JAPAN - BOJ Governor Job Suddenly Available in Historical "Abenomics U-Turn" ............................................................................................. 431
JAPAN - Japanese Economic Policy Goes The Full Ponzi ...................................................................................................................................... 432
ECB - EU ............................................................................................................................................................................ 434

EU MONETARY - EU Equities Responding to Current Account Differential ......................................................................................................... 434
EU MONETARY - Patterns: While Everyone Was Worrying About the US and Washington .... ........................................................................ 435
EU MONETARY - ECB Monetary transmission mechanisms in Europe are completely broken ........................................................................ 437
EU MONETARY - EU Lending Volumes Collapse .................................................................................................................................................... 439
EU MONETARY - Eurozone Funding Shortfall Rises To Over $4 Trillion.............................................................................................................. 440
EU MONETARY - DRIVER$ ........................................................................................................................................................................................ 441
EU MONETARY - Japan Will Effectively Monetize European Debt ........................................................................................................................ 442
EU MONETARY - TARGET-2 Imbalances - "The Debt Crisis Is Eating Its Way Ever Further Into Europe's Core" ......................................... 443
EU MONETARY - Draghi Will Soon Be Forced to Start Printing - Again! .............................................................................................................. 444
GEO-ECONOMIC CONCERNS & TENSIONS ......................................................................................................................................... 449

EMERGING MARKETS - Unfolding 2014 Crisis ................................................................................................................ 449
RESEARCH WE FOLLOWED ..................................................................................................................................................................................... 449
EMERGING MARKETS - Crisis Only Temporarily Averted ..................................................................................................................................... 452
EMERGING MARKETS - Fragile Five: The new focus of currency wars ............................................................................................................... 452
EMERGING MARKETS - Crisis Redux? .................................................................................................................................................................... 453
EMERGING MARKETS - Losing Their Punch .......................................................................................................................................................... 458
EMERGING MARKETS - Risk-On! ............................................................................................................................................................................. 460
EMERGING MARKETS - Asia, BRIC, Emerging Markets Crater IBM Earnings ................................................................................................... 461
EMERGING MARKETS - Crisis Temporarily Halted ................................................................................................................................................ 463
EMERGING MARKETS - Increasing Liquidity Problems In Selected Markets ..................................................................................................... 464
EMERGING MARKETS - The plight of four Asian countries - China, India, Indonesia and Japan. .................................................................... 470
EMERGING MARKETS - The Impact of "TAPER" ................................................................................................................................................... 475
PETRODOLLAR US-Saudi Oil Alliance Strained .............................................................................................................. 479

GEO-POLITICAL - The Growing Rift With Saudi Arabia Threatens To Severely Damage The Petrodollar ...................................................... 479
GLOBAL BOND SCARE Un-Taper Reverses Fear........................................................................................................... 483

BOND SCARE - Volatility and Instability Increase Risk ........................................................................................................................................... 483
BOND SCARE - Inflation Expectations Contributing to Volatility ............................................................................................................................ 485
BOND SCARE - The Financial Times Headlines Tell An Interesting Story ........................................................................................................... 486
BOND SCARE - A LONG Supply and Demand Problem BUT Heavy SHORT Demand ..................................................................................... 487
BOND SCARE - Long Term Support Trendline Achieved........................................................................................................................................ 488
BOND SCARE - Retail Investors Running for the Exit ............................................................................................................................................. 490
CHINA LIQUIDITY - Global Tightening Scare ...................................................................................................................... 492

CHINA LIQUIDITY - Housing Bubble Restricting PBOC Actions ............................................................................................................................ 492
CHINA LIQUIDITY - PBOC Squeezing Banks towards Reducing Speculative Risk............................................................................................. 496
CHINA LIQUIDITY - Overnight Repo at 25% ............................................................................................................................................................ 497
CHINA LIQUIDITY - Red Flags ................................................................................................................................................................................... 498
CHINA LIQUIDITY - Credit Fueled Growth ................................................................................................................................................................ 500
CHINA LIQUIDITY - Shadow Banking System Showing Signs of Implosion ......................................................................................................... 505
CHINA LIQUIDITY - PBOC Wants to Hold the Line on Explosive Credit Expansion through A Liquidity Squeeze .......................................... 508
CHINA LIQUIDITY - Potentially De-Stabilizing Cash Crunch .................................................................................................................................. 510
CHINA LIQUIDITY - Chinese Liquidity Pump Unplugged ........................................................................................................................................ 511
CURRENCY WARS BACK ON Rate Wars Reversed With Un-Taper ............................................................................... 513
CURRENCY WARS - A Major Shift ............................................................................................................................................................................ 513
BATTLEFIELD - Combatants & Belligerents ............................................................................................................................................................. 517


All Rights Reserved
BATTLEFIIELD - The Race to Debase ....................................................................................................................................................................... 518

JAPAN - The Destabilizing Agent ............................................................................................................................................................................... 521
EUROPE - Euro Exposed ............................................................................................................................................................................................ 521
ARGENTINA - Here we Go Again!.............................................................................................................................................................................. 523
VENEZUELLA - Bad Situation ..................................................................................................................................................................................... 524
BRAZIL - No One Wants to Listen .............................................................................................................................................................................. 524
SWITZERLAND - No Choice ....................................................................................................................................................................................... 524
SINGAPORE - Hot Money ........................................................................................................................................................................................... 525
UK- Pound Joins War ................................................................................................................................................................................................... 526
CYBER WARS Growing Threat & the Security-Surveillance Complex .............................................................................. 527
SECURITY-SURVEILLANCE COMPLEX - NSA Whistleblower Example: Booz Hamilton ................................................................................. 530
SECURITY SURVEILLANCE COMPLEX - Growing Without Public Control or Supervision!.............................................................................. 532
SYRIA & IRAN Complete Middle East Domination ........................................................................................................... 533

SYRIA - This has the Earmarks of the Kennedy Ear "Cuban Missile" Crisis ......................................................................................................... 535
SYRIA - Syrian War You Are Not Being Told About ................................................................................................................................................. 536
SYRIA - 25 Quotes ....................................................................................................................................................................................................... 537
SYRIA - What Coalition? .............................................................................................................................................................................................. 540
SYRIA - US Supporting Fully an "Al Qaeda Operation" ........................................................................................................................................... 542
SYRIA - Decision Already Taken to Bomb Syria ....................................................................................................................................................... 545
SYRIA - Market Patterns Before and Immediately After Conflict Begins................................................................................................................ 554
MIDDLE EAST - Watch Out for a "False Flag" or "Covert" Activity Event .............................................................................................................. 556
MIDDLE EAST - Who Is Threatening Who Here? .................................................................................................................................................... 557
REGIONAL ............................................................................................................................... 559

EUROSIS - A Terminal Disease ........................................................................................................................................ 559
RESEARCH WE FOLLOWED THIS MONTH ........................................................................................................................................................... 559
RESEARCH OF PARTICULAR IMPORTANCE ........................................................................................................................................................ 560
RESEARCH - EFSF Downgraded to AA+.................................................................................................................................................................. 560
RESEARCH - EU Stabilization Programs Are Presently Very Fragile .................................................................................................................... 561
RESEARCH - Spreads Widened in Peripherals and Significantly in Portugal and Greece ................................................................................. 564
PROGNOSIS: Why the European Situation Will Get Worse ................................................................................................................................... 566
PROGNOSIS: Increasing Structural Imbalances ...................................................................................................................................................... 569
PROGNOSIS: $22T Unaccounted - A Hidden World of Contingent Liabilities, Government Backing & Guarantees. ................................... 571
PROGNOSIS: Monetary Malpractice - ECB's LTRO Not a Solution but ................................................................................................................ 575
PROGNOSIS: Monetary Malpractice - ECB's SMP Effort Futile ............................................................................................................................. 578
PROGNOSIS: Monetary Malpractice - ECB Accepts BBB Collateral ..................................................................................................................... 580
PROGNOSIS: EU Banking Overbanked, Undercapitalized and Now Insolvent .................................................................................................... 581
PROGNOSIS: Monetary Malpractice - TARGET2 "Contingent Liabilities"............................................................................................................. 582
PROGNOSIS: Bailouts - Unsustainable & Unfundable ............................................................................................................................................ 588
MEDICAL CHARTS - Situation Critical ............................................................................................................................... 590

CHARTS- EU Real Rates ........................................................................................................................................................................................... 590
CHARTS - EU -NON Euro Members GDP RELIANCE ............................................................................................................................................ 591
CHARTS - EU GLOBAL GDP GROWTH CONTRIBUTION .................................................................................................................................... 592
CHARTS - EU PMI ........................................................................................................................................................................................................ 592
CHARTS - EU CPI ........................................................................................................................................................................................................ 594
CHARTS - Regional Risk-Reward .............................................................................................................................................................................. 595
CHARTS - Europe's "Core" Problem is France ......................................................................................................................................................... 596
CHARTS - Germany's Preoccupation with Inflation is More Than It Would Seem ............................................................................................... 599
CHARTS - Evidence OF Global Slowing Now Indisputable ..................................................................................................................................... 600
CHARTS - EU Credit Downgrades, France and UK On Tap .................................................................................................................................. 602
CHARTS - Perceived Reduction in Risk, A Temporary Aberration ......................................................................................................................... 604
CHARTS - Dangerous Delusional Divergences ........................................................................................................................................................ 606
CHARTS - IMF Projections for Euro Area and GIIPS ............................................................................................................................................... 607
CHARTS - Air Cargo Shipments Confirm Slowing Global Growth .......................................................................................................................... 608
CHARTS - Eurozone Misery Indices Never Been Higher ........................................................................................................................................ 609
CHARTS - Euro Currency ............................................................................................................................................................................................ 611
ITALY - Budget Failure on NO Growth ................................................................................................................................ 616

RESEARCH - Italys Budget Failures, Weak Growth Outlook Call Debt Sustainability Into Question ................................................................ 616
CHARTS OF PARTICULAR IMPORTANCE ............................................................................................................................................................. 621
CHARTS - ITALY - Forced Rate Cuts ........................................................................................................................................................................ 621
SITUATIONAL ASSESSEMENT ................................................................................................................................................................................. 622
ITALIAN ELECTION - What You Need to Know ....................................................................................................................................................... 622


All Rights Reserved
ITALIAN ELECTION - Europe Capitulates On Austerity- Never Had The Stomach For It ................................................................................... 623
ITALIAN ELECTION - Message Given By the People.............................................................................................................................................. 625
ITALIAN ELECTION - Bad Debt Continue to Soar ................................................................................................................................................... 629
ITALIAN ELECTION - Italians React Badly to Austerity, Elections Hardly a Surprise! ......................................................................................... 632
ITALIAN ELECTION - EUROPEAN FEEDBACK - #1 .............................................................................................................................................. 632
ITALIAN ELECTION - EUROPEAN FEEDBACK - #2 .............................................................................................................................................. 634
ITALIAN ELECTION - Regional Financial Cracks in Sicily ...................................................................................................................................... 638
FRANCE - Hollande Going Down for the Count................................................................................................................... 640

RESEARCH OF PARTICULAR IMPORTANCE ....................................................................................................................................................... 641
RESEARCH - France Loses its Coveted and NEEDED AAA Rating ..................................................................................................................... 641
CHARTS - FRANCE - GDP ......................................................................................................................................................................................... 643
CHARTS - FRANCE - UNEMPLOYMENT ................................................................................................................................................................. 644
CHARTS - FRANCE - BUDGET DEFICIT ................................................................................................................................................................. 645
CHARTS - FRANCE - TAX versus GDP .................................................................................................................................................................... 646
CHARTS - FRANCE - BUSINESS CONFIDENCE ................................................................................................................................................... 647
SITUATIONAL ASSESSMENT ................................................................................................................................................................................... 648
FRANCE - What You Need to Know .......................................................................................................................................................................... 648
FRANCE - Key Indicators ............................................................................................................................................................................................ 649
FRANCE: Sharpest Drop in Private Sector Output in Four Years........................................................................................................................... 652
FRANCE - Quits on Austerity - Never a Doubt This Would Happen ....................................................................................................................... 655
FRANCE - Socialism is Expensive.............................................................................................................................................................................. 656
FRANCE - Has Turned back to Socialism ................................................................................................................................................................. 658
FRANCE - Losing Its Way through Political Illusions and Lies ................................................................................................................................ 659
FRANCE - Uncompetitive ............................................................................................................................................................................................ 660
FRANCE - Titan Tire Calls Out French Labor ........................................................................................................................................................... 662
FRANCE - France Responds to Titan Tire................................................................................................................................................................. 664
FRANCE - What Happens In France When Companies Fire People ..................................................................................................................... 667
FRANCE - Hollande's Economically Insane campaign Promise ............................................................................................................................. 668
GERMANY - EU in the Hands Of Election ........................................................................................................................... 669

RESEARCH - Europe's Shadow Economy: As Big As Germany ............................................................................................................................ 669
CHARTS - GERMANY - Inflation ................................................................................................................................................................................ 673
CHARTS - GERMANY - IFO Investor Confidence .................................................................................................................................................... 673
CHARTS - GERMANY - ZEW Expectations .............................................................................................................................................................. 674
GERMANY - Anti Euro AfD Party May Cost Merkel in Critical September Election ............................................................................................. 677
GERMANY - The Euro Crisis Escalation over Cyprus May Politically Cripple Merkel .......................................................................................... 678
GERMANY - Call for End of "Coercive Euro Association" ....................................................................................................................................... 680
BERIAN PENINSULA - Spain & Portugal Going Critical ...................................................................................................... 682

RESEARCH - Presidential Warning Spikes Yields To 8 Months Highs ................................................................................................................. 683
RESEARCH - Clear Signs of Desperation In Spain from a Growing Collateral Contagion .................................................................................. 685
RESEARCH - The Spanish Government's 'Bad Bank' Scam .................................................................................................................................. 686
CHARTS - PORTUGAL - Deficit Problem .................................................................................................................................................................. 688
IBERIA - Credit Downgrades - At Precipice of "Non Investment Grade"................................................................................................................ 689
IBERIA - Regional Bailout Bailouts a Massive Problem ........................................................................................................................................... 690
IBERIA - NPL Going Ballistic ....................................................................................................................................................................................... 691
IBERIA - Spanish Funding Problem............................................................................................................................................................................ 692
IBERIA - The Giant Spanish Housing Bubble, Now Beginning to Implode ............................................................................................................ 697
IBERIA - Mal-Investment Coming Home to Roost .................................................................................................................................................... 699
IBERIA - Bank Deposits Were Leaving, Now they Are Fleeing ............................................................................................................................... 700
IBERIA - Now a Capital Investment Problem ............................................................................................................................................................ 701
IBERIA - Banks on Artificial "Ponzi Bond" Life Support ............................................................................................................................................ 702
UK - New BOE Governor with More Printing Ahead ............................................................................................................ 711

RESEARCH - UK workers' wage squeeze is longest since the 1870s ................................................................................................................... 711
CHARTS - UK - Crushed Disposable Income ........................................................................................................................................................... 712
CHARTS - UK - BOE Balance Sheet Growth ............................................................................................................................................................ 713


All Rights Reserved
CHARTS - UK - Lending .............................................................................................................................................................................................. 713

CHARTS - UK - Unemployment .................................................................................................................................................................................. 714
CHARTS - UK - GDP - Pre and Post Recession Levels .......................................................................................................................................... 714
CHARTS - UK - GDP .................................................................................................................................................................................................... 715
CHARTS - UK - BOE Rates ......................................................................................................................................................................................... 715
UK - What you need to Know ...................................................................................................................................................................................... 716
UK - Joins Currency War - Down 8% YTD ............................................................................................................................................................. 718
UK - Specter of Stagflation Haunts UK ....................................................................................................................................................................... 719
UK - Public Policy turns Against Austerity and PM Cameron .................................................................................................................................. 720
UK - Doomsday Debt Machine .................................................................................................................................................................................... 721
UK - QE Extension Coming ......................................................................................................................................................................................... 724
UK - Small Business Credit Squeeze Now Acute - Loan Rejections Rising ......................................................................................................... 726
UK - Technically in a Depression ................................................................................................................................................................................ 727
CYRPUS - Latest EU Banking Crisis ................................................................................................................................... 730

CYRPUS - What you Need To Know .......................................................................................................................................................................... 730
CYRPUS - Basic Situational Charts ............................................................................................................................................................................ 732
CYPRUS - Crumbling Property Rights ....................................................................................................................................................................... 734
CYPRUS - Plan D Supersedes Plan C and B as Time running Out ....................................................................................................................... 738
CYPRUS - Forgetting About Contract Law, Private Property Rights and Due Process ....................................................................................... 741
CYPRUS - Russian Tax Haven ................................................................................................................................................................................... 742
CYPRUS - Plan B as Bad As Plan A .......................................................................................................................................................................... 743
CYPRUS - Breaks Public Trust and Incites the Politics of Germany Dictating Terms .......................................................................................... 745
CYPRUS - Does Anyone Care How a Capitalist System (versus a Crony Capitalist System) is Supposed to Work? ..................................... 751
CYPRUS - Criminal "Confidence Game" Payouts to Everyone at the Tax Payers Expense ............................................................................... 752
CYPRUS - Cyprus Pushes EU Banking Crisis Back Near the Edge ..................................................................................................................... 754
ASIA - SERIOUS CRACKS BELOW THE SURFACE .......................................................................................................................................... 755

CHINA - Credit Tightening Panic Averted - Temporarily? .................................................................................................... 755
CHARTS - CHINA - PMI ............................................................................................................................................................................................... 756
CHARTS - CHINA - PMI-2 .......................................................................................................................................................................................... 757
CHARTS - CHINA - GDP ............................................................................................................................................................................................. 758
CHARTS - CHINA - INDUSTRIAL OUTPUT ............................................................................................................................................................. 759
CHARTS - CHINA - Urban Fixed Asset Investment ................................................................................................................................................. 760
CHARTS - CHINA - RETAIL SALES .......................................................................................................................................................................... 761
RESEARCH - Investors Worried and Losing Confidence ....................................................................................................................................... 762
RESEARCH - China Stampeding into Gold ............................................................................................................................................................... 763
RESEARCH - China "Will introduce some measures to arrest the slowdown of growth in the next couple of quarters" ................................. 765
RESEARCH - Slower Growth In the Cards & Endorsed by New Chinese Leadership......................................................................................... 766
RESEARCH - Is a PBOC Controlled Speculation Bust Possible or Will It Get Out of Control ............................................................................ 768
RESEARCH - PBOC Liquidity Squeeze ..................................................................................................................................................................... 769
RESEARCH - Chinese Housing Bubble Restricting PBOC Actions ....................................................................................................................... 771
RESEARCH - PBOC Squeezing Banks towards Reducing Speculative Risk ....................................................................................................... 773
RESEARCH - Chinese Overnight Repo at 25% ........................................................................................................................................................ 775
RESEARCH - Red Flags .............................................................................................................................................................................................. 776
RESEARCH - Credit Fueled Growth in China ........................................................................................................................................................... 778
RESEARCH- PBOC Wants to Hold the Line on Explosive Credit Expansion through A Liquidity Squeeze...................................................... 783
RESEARCH - A Potentially De-Stabilizing Cash Crunch ......................................................................................................................................... 785
SITUATIONAL ANALYSIS ........................................................................................................................................................................................... 786
CHINA SHADOW BANKING - Shadow Banking System Showing Signs of Implosion ........................................................................................ 788
CHINA SHADOW BANKING - Shadow Banking and Credit Growth ...................................................................................................................... 791
CHINA SHADOW BANKING - The US Sub-Prime / CDO All Over Again ............................................................................................................. 794
CHINA SHADOW BANKING - Report ........................................................................................................................................................................ 798
CHINA SHADOW BANKING - Situation ..................................................................................................................................................................... 799
CHINA RESERVES - Distorted Foreign Reserve Levels ......................................................................................................................................... 800
CHINA RESERVES - Declining Reserve Accumulation ........................................................................................................................................... 802
CHINA RESERVES - Has Caught the Gold Bug big time! ....................................................................................................................................... 804
CHINA CURRENCY WARS - Hot Money into China ................................................................................................................................................ 806
CHINA - Withdraws Liquidity ....................................................................................................................................................................................... 807
CHINA - Socit General Sees a Likely Soft Landing! ............................................................................................................................................. 809
CHINA - True Debt is Orders of Magnitude More than Officially Being Reported ................................................................................................. 819
CHINA - Evidence OF Slowing Now Indisputable ..................................................................................................................................................... 822
CHINA - PMI Improvement .......................................................................................................................................................................................... 823
CHINA - Political Transition & Ongoing Emergence as a Super Power ................................................................................................................. 826
CHINA - An Implicit Social Contract ............................................................................................................................................................................ 828
CHINA - Manipulated Statistics due to Upcoming Decade Long Regime Change ............................................................................................... 830
CHINA - Increasing Leverage is China's Way of Monetary Easing ........................................................................................................................ 831


All Rights Reserved
CHINA - Possible Interest-Rate Liberalization ........................................................................................................................................................... 832

CHINA - Global Impact of China's Slowdown ............................................................................................................................................................ 833
CHINA - Shanghai Composite at 2008 Low Levels .................................................................................................................................................. 835
CHINA - Shanghai Composite Warnings Signs ......................................................................................................................................................... 836
CHINA - Credit to GDP ................................................................................................................................................................................................. 838
CHINA - A Slow Recovery Through 2013 .................................................................................................................................................................. 839
CHINA - Manufacturing PMI in Contraction Territory ................................................................................................................................................ 841
JAPAN: The New Currency War Front ................................................................................................................................ 845

RESEARCH - Japanese Structural Problems a "Canary" for Western Developed Economies........................................................................... 845
07-15-13-JAPAN - Shinzo Abe Hasn't the Stomach for the Heavy Lifting Needed to Accompany ABE-nomics. ............................................. 848
RESEARCH - A Credit Squeeze Leads Deflationary Leg Down ............................................................................................................................ 850
RESEARCH - Some Japanese Policies Have Clearly Hit the Limit ........................................................................................................................ 851
RESEARCH - The ABE (Asset Bubble Evaluator) Index ......................................................................................................................................... 853
CHARTS - JAPAN - GDP Resurgence ....................................................................................................................................................................... 854
CHARTS - JAPAN - BOJ Balance Sheet ................................................................................................................................................................... 855
JAPAN - What You Need to Know .............................................................................................................................................................................. 858
JAPAN - Regional Risk-Reward .................................................................................................................................................................................. 860
JAPAN - Now the Frontrunner of Outright Monetization. ......................................................................................................................................... 861
JAPAN - Yen Devaluation ............................................................................................................................................................................................ 862
JAPAN - New Bank of Japan Policy - 2% Inflation in 2 Years ................................................................................................................................. 863
JAPAN - Appoints BOJ Governor Firmly Committed to Printing Money................................................................................................................. 865
JAPAN - Third Straight Quarter of Recession ........................................................................................................................................................... 867
JAPAN - Full Out War on Deflation ............................................................................................................................................................................. 867
JAPAN - First Test of the new found dominance of the Central Banks ............................................................................................................... 869
JAPAN - BOJ Was Next Up. No Surprise .................................................................................................................................................................. 872
JAPAN - Negative Current Account Balance and -3.5% Recession ....................................................................................................................... 874
JAPAN - A 50% Over-Valued Yen Has Undermined Self Confidence & Drive...................................................................................................... 877
JAPAN - Proves QE's Low Cost of Capital Does Structural Damage to Economy ............................................................................................... 879
JAPAN - BOJ Being Pressured to "Rip-Up Government Debt"1 ............................................................................................................................. 881
JAPAN - Easy Money Has Hurt Corporate Profitability in the Longer Term .......................................................................................................... 887
JAPAN - The Biggest Debtor with the Biggest Problem! .......................................................................................................................................... 890
JAPAN - A Magnitude Larger Problem than Europe................................................................................................................................................. 894
JAPAN - QE 9 A Complete Failure - Actually "Tightens" versus It's Intended Easing .......................................................................................... 900
JAPAN - Japanese Yen Continuously Under Attack ............................................................................................................................................... 904
JAPAN - Vast foreign US$ Coming Home for "Claim" .............................................................................................................................................. 905
JAPAN - PMI Breakdown ............................................................................................................................................................................................ 907
JAPAN - Exports Continue To Tumble ....................................................................................................................................................................... 909
JAPAN - Intervention Fails Again - It's a Whole new Ball Game ............................................................................................................................. 910
JAPAN - First Signs of Massive Debt Monetization After Next Election ................................................................................................................. 913
JAPAN - Japan to the ESM's Rescue ........................................................................................................................................................................ 913
EMERGING MARKETS - SYNCHRONIZED MARKETS ................................................................................................................................. 915

EMERGING MARKETS - Stunning Withdrawals ...................................................................................................................................................... 915
EMERGING MARKETS - Bond Outflows Accelerating ............................................................................................................................................ 916
EMERGING MARKETS - This will make the 1997 Asian Crisis Seem Like an Early Warning ........................................................................... 918
EMERGING MARKETS - Developing Nations Feeling the Pain of Global Deleveraging Acceleration .............................................................. 920
EMERGING MARKETS - The Impact of "TAPER" ................................................................................................................................................... 922
CHARTS - Reserves versus World ............................................................................................................................................................................. 926
CHARTS - Current Account Balances versus GDP .................................................................................................................................................. 927
CHARTS - Emerging Markets Index versus MSCI World Index .............................................................................................................................. 928
CHARTS - SINGAPORE - Inflation ............................................................................................................................................................................. 929
CHARTS - SINGAPORE - Exports ............................................................................................................................................................................. 930
CHARTS - SOUTH KOREA ......................................................................................................................................................................................... 931
CHARTS - TURKEY - Spreads ................................................................................................................................................................................... 932
EMERGING MARKETS - What you Need to Know .................................................................................................................................................. 933
EMERGING MARKETS - Comparative Ease of Doing Business ............................................................................................................................ 935
EMERGING MARKETS - Importance of Employment, Equality and Per Capital Income .................................................................................... 936
ASIA ................................................................................................................................................................................................................................ 939
ASIA: CHARTS - AUSTRALIA .................................................................................................................................................................................... 940


All Rights Reserved
ASIA - Regional Risk-Reward...................................................................................................................................................................................... 941

ASIA - Corporate Debt Levels Reflect Unintended Consequences of Mispricing & Malinvestment ................................................................... 942
ASIA - Synchronized Markets ...................................................................................................................................................................................... 947
ASIA - Caution Advised Regarding Positive South Korea Export Turnaround ...................................................................................................... 949
ASIA - Export Growth Looks Similar to Pre-2008...................................................................................................................................................... 950
ASIA - Global Slowing Quickly a Worsening Situation Across Asia ........................................................................................................................ 951
ASIA - Risks All on the Downside for Asia ................................................................................................................................................................. 952
ASIA - Demographic Headwinds ................................................................................................................................................................................. 954
ASIA - Pronounced Flight to Singapore Safety ......................................................................................................................................................... 955
BRICS ............................................................................................................................................................................................................................. 957
BRICS - A Development Bank-Forex Reserve Pool-African Integration ................................................................................................................ 957
BRICS - 40% of World Population and 25% of World GDP ..................................................................................................................................... 958
BRICS - $3 to $13B GDP in Ten Years ...................................................................................................................................................................... 961
BRICS- A World Wide Distrust of Financial Markets Building ................................................................................................................................. 963
BRAZIL - Inflation will remain high thanks to a "growth mismatch". ...................................................................................................................... 965
RUSSIA - Central bank will hike rates if inflation and oil prices continue to rise. .................................................................................................. 966
INDIA - Inflation ............................................................................................................................................................................................................. 967
INDIA - Will be fine as long as it continues to reduce its deficit............................................................................................................................... 968
INDIA - Watch Out For RE-Emergence of Food Price Inflation ............................................................................................................................... 969
US ECONOMY ......................................................................................................................... 971

THE GLOBAL MACRO OVERLAY ............................................................................................................................................................. 973
MACRO - US Macro Data Divergence ................................................................................................................................. 973
MACRO - US Macro Surprise Index .................................................................................................................................... 975
MACRO - Serious Structural US Problems Impeding Global Competitive ............................................................................ 978
MACRO - First Half In Charts .............................................................................................................................................. 980
US INVESTMENT CYCLE........................................................................................................................................................................... 989
GORD'S BIG PICTURE ECONOMIC CYCLE ...................................................................................................................... 989
ECONOMIC INDICATORS.................................................................................................................................................. 990
MONTHLY INDICATORS OF NOTE .......................................................................................................................................................................... 990
RESEARCH - The US Economy Continues to Tank Under Obama ....................................................................................................................... 990
REFERENCE CHARTS ............................................................................................................................................................................................... 993
THE CURRENT BUSINESS CYCLE - SITUATIONAL ANALYSIS ....................................................................................... 997

BUSINESS CYCLE - JOBS > CONFIDENCE > CONSUMPTION > GROWTH CYCLE ....................................................... 997
BUSINESS CYCLE - JOBS ................................................................................................................................................. 999
CHARTS & TABLES ................................................................................................................................................................................................... 1001
CHARTS - Underemployment Gap ........................................................................................................................................................................... 1001
CHARTS - Employment to Population and Labor Slack......................................................................................................................................... 1001
CHARTS - Participation Rate .................................................................................................................................................................................... 1002
CHARTS - Part Time Employment............................................................................................................................................................................ 1002
REFERENCE - Prior Posts ........................................................................................................................................................................................ 1010
BRIDGING : Jobs to Confidence & Sentiment ........................................................................................................................................................ 1010
JOBS: Participation Rate at 1979 Carter Levels ..................................................................................................................................................... 1014
BUSINESS CYCLE - CONSUMER & BUSINESS SENTIMENT ........................................................................................ 1016

CHARTS & TABLES ................................................................................................................................................................................................... 1018
CHARTS - NFIB Small Business Sentiment ............................................................................................................................................................ 1018
CHARTS - Orange Book ............................................................................................................................................................................................ 1018
RESEARCH OF NOTE............................................................................................................................................................................................... 1019
RESEARCH - Financial Stress Index Sends Market Clue ..................................................................................................................................... 1019
RESEARCH - Consumer Confidence and the Mortgage Spike "Peak Signal" .................................................................................................... 1020
RESEARCH - Contrarian Breadth Rule.................................................................................................................................................................... 1021
SENTIMENT: Consumer, Investor & Trader ........................................................................................................................................................... 1024
Consumer Confidence - Conference Board ............................................................................................................................................................. 1024
Consumer Confidence - Up but Sending Concern Signals ................................................................................................................................ 1027
Consumer Sentiment - Michigan ............................................................................................................................................................................... 1030
Consumer Comfort ...................................................................................................................................................................................................... 1031
Investors Intelligence .................................................................................................................................................................................................. 1032
American Association of Independent Investors ..................................................................................................................................................... 1032
National Association of Active Investment Managers (NAAIM) ............................................................................................................................. 1033
Small Business Optimism .......................................................................................................................................................................................... 1034
BUSINESS CYCLE CONSUMPTION ............................................................................................................................. 1035

CHARTS & TABLES ................................................................................................................................................................................................... 1038
CHARTS - Real Disposable Personal Income ....................................................................................................................................................... 1038
CHARTS - Real Consumption Expenditure ............................................................................................................................................................ 1038
10


All Rights Reserved
CHARTS - Consumer Credit Deleveraging ............................................................................................................................................................. 1039

CHARTS - Core Retail Growth ................................................................................................................................................................................. 1040
RESEARCH OF NOTE............................................................................................................................................................................................... 1040
RESEARCH - The Destruction Of America's Middle Class ................................................................................................................................... 1040
RESEARCH - Dramatic Slowing in Restaurant Business ...................................................................................................................................... 1041
RESEARCH - Signs of Serious Troubles ................................................................................................................................................................. 1042
RESEARCH - Falling Real Disposable Income means Falling Consumption...................................................................................................... 1045
BUSINESS CYCLE - GROWTH ........................................................................................................................................ 1047

CHARTS & TABLES ................................................................................................................................................................................................... 1050
CHARTS - Manufacturing .......................................................................................................................................................................................... 1050
CHARTS - Exports ...................................................................................................................................................................................................... 1050
CHARTS - Durable Goods ......................................................................................................................................................................................... 1051
CHARTS - NFIB Small Business CAPEX ................................................................................................................................................................ 1051
CHARTS - US Manufacturing Conditions Deteriorating ......................................................................................................................................... 1052
RESEARCH OF NOTE............................................................................................................................................................................................... 1052
RESEARCH - Shrinking CAPEX, Expanding Buybacks and Dividends ............................................................................................................... 1052
GROWTH: US Economic Recovery Has Peaked ................................................................................................................................................... 1056
ECONOMIC CYCLE, INVESTMENT CYCLE, SECTOR ROTATION ................................................................................. 1061

US RECESSION A LOOMING US RECESSION ....................................................................................................................................... 1065
RECESSION - Why a Looming Recession May Be Near ...................................................................................................................................... 1065
RECESSION - Minimally in the Back Stretch of the Recovery .............................................................................................................................. 1070
RECESSION - Reduced Household Income at the Core of the Growth of the Federal Reserve Balance Sheet .......................................... 1076
RECESSION - Household Income and Signs of A Collapsing Middle Class ...................................................................................................... 1078
RECESSION - More Cyclical Signs of a US Recession ......................................................................................................................................... 1078
RECESSION - A Lack of Demand ............................................................................................................................................................................ 1079
RECESSION - Money Going to Cash But Equity Inflows Still Suggest Corrective Correlation ......................................................................... 1081
RECESSION - More and More Signals Flashing .................................................................................................................................................... 1084
RECESSION - Term Structures Suggest Signs of a US Recession Ahead ........................................................................................................ 1086
DETROIT - A FAILURE OF PUBLIC POLICY TO RESPOND TO STRUCTURAL CHANGE................................................................................ 1088

DETROIT - By the Numbers ...................................................................................................................................................................................... 1089
DETROIT - The News Reporting............................................................................................................................................................................... 1090
DETROIT - A Structural Problem that Failed to be Politically Addressed ............................................................................................................ 1092
RETIREMENT CRISIS NOW BEGINNING TO TAKE HOLD ...................................................................................................................... 1093

ENTITLEMENTS - Underfunded and Unsustainable .............................................................................................................................................. 1093
RETIREMENTS ................................................................................................................................................................ 1096

RETIREMENT 35 Facts to Scare a Baby Boomer............................................................................................................................................... 1096
RETIREMENT: $205K Account Limits ..................................................................................................................................................................... 1098
RETIREMENT: $3M Retirement Cap Unanswered ................................................................................................................................................ 1100
HEALTHCARE OBAMACARE........................................................................................................................................ 1102

HEALTHCARE - What Does Heart Surgery Really Cost, And Why Is It 70 Times More Expensive In The US? ........................................... 1102
HEALTHCARE - UPS Drops 15,000 Spouses From Health Plan, Blames Obamacare .................................................................................... 1103
STATISITICS - MORE FIXES TO GDP AND CPI......................................................................................................................................... 1105

FALSIFICATION - Government Data Knowingly Inaccurate According to Former BLS Head............................................. 1105
ENTITLEMENTS - Stealth Reform through "Chained CPI" Changes ................................................................................. 1107
CHAINED CPI - Both A Cut and Tax ........................................................................................................................................................................ 1107
CHAINED CPI - Reason It Hits So Hard .................................................................................................................................................................. 1109
GDP - Growth Through Manipulation................................................................................................................................. 1113

GDP - BEA Will Change The GDP Calculation To Boost Economy By 3% In July ............................................................................................. 1115
GDP - US GDP Makeover .......................................................................................................................................................................................... 1118
US PUBLIC POLICY - SOME NOTABLE POLICY PROBLEMS........................................................................................................... 1123

POLICY - Pointing US Towards Government Dependence ................................................................................................................................... 1125
POLICY - Yet Another Game of Deception .............................................................................................................................................................. 1129
POLICY - Obamacare A Flawed Public Policy Implementation ............................................................................................................................ 1132
POLICY - Financial Repression and Manipulated Illusions.................................................................................................................................... 1135
POLICY - US Economic Decline is Obvious to Anyone Caring to Look ............................................................................................................... 1140
POLICY - Policy Uncertainty and Confidence in Monetary Policy Direction is exposed .................................................................................... 1143
POLICY - "What is Good for GM is Good for America" is no longer correct ........................................................................................................ 1145
POLICY - Where is the Logic In US Public Policy ................................................................................................................................................... 1146
POLICY- What is the Real Driving Force Behind the New Immigration Law? ..................................................................................................... 1149
POLICY - Crony Capitalism and How America Lost its Way! ................................................................................................................................ 1152
MONETARY POLICY - TAPER & THE NEW FED CHAIR............................................................................................................................ 1156

TAPER .............................................................................................................................................................................. 1159
11


All Rights Reserved
TAPER - The Fed Cannot Possibly "Exit" Without The Market Crumbling .......................................................................................................... 1161
TAPER - It Matters and the Fed Has Few Options As Quality Collateral Disappears. ....................................................................................... 1162
TAPER - Why Fed Bond Buying Can't Go on Indefinitely and Why TAPER........................................................................................................ 1164
TAPER - Political "Push-Back" by the Fed ............................................................................................................................................................... 1165
TAPER - Ending QE Will Pressure Fiscal Policy ..................................................................................................................................................... 1167
TAPER - Delay Risks Bond Market Volatility as Private Availability Steadily Shrinks ........................................................................................ 1171
TAPER - Clearly A Bluff or Muddled Policy ............................................................................................................................................................. 1174
TAPER - Why is the Fed Talking TAPER? .............................................................................................................................................................. 1176
TAPER - The Fed is Unlikely to Taper ..................................................................................................................................................................... 1179
TAPER - Fed Trapped in a Box ................................................................................................................................................................................. 1181
BOND SCARE .................................................................................................................................................................. 1182

BOND SCARE - The Bearish Bond Trend Has Resumed ..................................................................................................................................... 1182
BOND SCARE - Bonds (TLT) Break Important Support ........................................................................................................................................ 1184
A NEW FED CHAIRMAN .................................................................................................................................................. 1185

RESEARCH OF NOTE ..................................................................................................................................................... 1187
RESEARCH - Reduction at the Core of the Growth of the Federal Reserve Balance Sheet ............................................................................ 1187
RESEARCH - Fed's Excess Reserves are 51% Foreign Banks, 49% Domestic ................................................................................................ 1190
RESEARCH - A Game of Calculated Deception is Evolving to Something Worse ............................................................................................. 1192
RESEARCH - A Loan Distribution Credit Bubble .................................................................................................................................................... 1193
RESEARCH- QE To be Replaced with Guidance, Thresholds and Promises .................................................................................................... 1194
RESEARCH - Bernanke in a Box and Talking Out of Both Sides of Your Mouth ............................................................................................... 1196
RESEARCH - Duration Extraction: The Hidden Fed Game ................................................................................................................................... 1197
RESEARCH - The Fed's Stated Guidance Sign-Posts .......................................................................................................................................... 1199
RESEARCH - An Artificial Market ............................................................................................................................................................................. 1201
RESEARCH - Bank Reserves A Ticking Bomb, But Who Will Be Caught in the Blast? .................................................................................... 1201
RESEARCH - QE : An Intentionally Broken Mechanism Due to 2008 Policy Payable Interest on Bank Reserves ........................................ 1205
RESEARCH - QE Ineffective In Increasing GDP .................................................................................................................................................... 1206
REFERENCE - Prior Posts................................................................................................................................................ 1207

MONETARY: Helicopter Money of Central Bank Bond Purchases are Forever ................................................................................................. 1207
MONETARY: Central Bank Balance Sheet Expansion and the Theoretical Path to SPX of 1950 ................................................................... 1209
MONETARY: Central Bank Balance Sheet Expansion versus CPI ...................................................................................................................... 1211
MONETARY: The Fed Model No Longer Prices Risk ............................................................................................................................................ 1211
CHARTS: Fed Deliberately ignoring data on both growth and inflation ................................................................................................................ 1217
CHARTS: US Economic Activity ............................................................................................................................................................................... 1218
CHARTS: Effects of QE on S&P 500 ........................................................................................................................................................................ 1220
CHARTS: Monetary Velocity versus Monetary Base .............................................................................................................................................. 1221
CHARTS: Days Between 'Unsterilized' Actions ....................................................................................................................................................... 1222
CHARTS: FOMC Economic Projections .................................................................................................................................................................. 1222
CHARTS: Taylor Rule & Evans Rule Estimates of Fed Funds Rates .................................................................................................................. 1223
CHARTS: Market Pricing In A Longer On-Hold Fed ............................................................................................................................................... 1223
CHARTS: Fed Balance Sheet Assets & Liabilities .................................................................................................................................................. 1224
CHARTS: Fed Policy Turns 180 Degrees ................................................................................................................................................................ 1224
CHARTS: US Banking Industry Concentration ........................................................................................................................................................ 1225
CHARTS: Total Credit Market Debt as % GDP ....................................................................................................................................................... 1226
CHARTS: Debt-to-GDP Ratio Above What Caused Great Depression ............................................................................................................... 1227
CHARTS: Yield Chase Completely Distorted .......................................................................................................................................................... 1227
CHARTS: Velocity of Money ...................................................................................................................................................................................... 1230
CHARTS: Real Negative Rates ................................................................................................................................................................................. 1233
CHARTS: Short Interest Rates a Fed Problem ....................................................................................................................................................... 1235
FISCAL POLICY - IT'S THAT TIME OF YEAR AGAIN!! ......................................................................................................................... 1237

CHARTS & TABLES ......................................................................................................................................................... 1240
CHARTS - Government Receipts & Outlay Growth Improves Significantly ......................................................................................................... 1241
CHARTS - Federal Budget Surplus / Deficit ............................................................................................................................................................ 1241
CHARTS - Real Federal Government Purchases ................................................................................................................................................... 1242
CHARTS - US Trade Balance Improvement............................................................................................................................................................ 1242
RESEARCH OF NOTE............................................................................................................................................................................................... 1243
RESEARCH - Congress Divided as Federal Government Shutdown Looms ...................................................................................................... 1243
RESEARCH - Avoiding Taxes ................................................................................................................................................................................... 1245
RESEARCH - A Confluence Of Risky Economic Events ....................................................................................................................................... 1246
RESEARCH - Everyone Hates Sequestration, But Few Can Agree On What to Cut ......................................................................................... 1247
RESEARCH - $70T Off-Balance Sheet Federal Liabilities .................................................................................................................................... 1249
REFERENCE - Previous Posts ................................................................................................................................................................................. 1252
CHARTS: Growth & Jobs ........................................................................................................................................................................................... 1252
CHARTS: Taxes & Spending ..................................................................................................................................................................................... 1255
CHARTS: Politics & Policy ......................................................................................................................................................................................... 1258
CHARTS: The Stakes ................................................................................................................................................................................................. 1259
12


All Rights Reserved
CHARTS: Payroll Tax Holiday ................................................................................................................................................................................... 1262

CHARTS: Tax Rate Comparisons ............................................................................................................................................................................. 1263
CHARTS: Risk Perceptions ....................................................................................................................................................................................... 1264
CHARTS: 2013 Quarterly Impact .............................................................................................................................................................................. 1265
CHARTS: Budget Deficit ............................................................................................................................................................................................ 1266
CHARTS: Sovereign Debt .......................................................................................................................................................................................... 1269
CHARTS: State & Local Government Drag ............................................................................................................................................................. 1270
CHARTS: Government Dependence ........................................................................................................................................................................ 1273
CHARTS: Coming Demographic Shock ................................................................................................................................................................... 1273
CHARTS - Fiscal Cliff Outcome ................................................................................................................................................................................ 1277
BUDGET - What You Need to Know ................................................................................................................................. 1279

BUDGET: As Represented and Spun for the Public ............................................................................................................................................... 1279
BUDGET: A Budget That Institutionalizes Big Government .................................................................................................................................. 1281
BUDGET: The Secrets in The Budget ...................................................................................................................................................................... 1285
KEY DRIVERS - CATALYSTS OF CHANGE .......................................................................................................................................... 1288

EMPLOYMENT ................................................................................................................................................................. 1292
CHARTS & TABLES ................................................................................................................................................................................................... 1292
CHARTS - Nonfarm Payrolls Y-O-Y DECLINE ....................................................................................................................................................... 1292
CHARTS - Hiring Stalled at 200K Per Month (Approximates ONLY the New People Entering Workforce) ................................................... 1292
CHARTS - The Under-Employment Gap ................................................................................................................................................................. 1293
CHARTS Staycations A Sign of the FEAR of Job Loss & Competition for Jobs .............................................................................................. 1293
RESEARCH OF NOTE............................................................................................................................................................................................... 1295
RESEARCH - Low-Wage Jobs Bias Continues to Hamper U.S. Recovery ......................................................................................................... 1295
RESEARCH - A REAL Family Wage versus Part Time & HES ............................................................................................................................. 1297
RESEARCH - It is as Much About the Quality, as the Quantity of Jobs ............................................................................................................... 1304
1- CAPITAL SPENDING ............................................................................................................................................................................................ 1306
2- SMALL BUSINESS OPTIMISM ............................................................................................................................................................................ 1309
3- DEMOGRAPHIC SHIFT ........................................................................................................................................................................................ 1313
REAL DISPOSABLE INCOME .......................................................................................................................................... 1324

CHARTS & TABLES ................................................................................................................................................................................................... 1324
CHARTS - Household Incomes a Sign of a Collapsing Middle Class .................................................................................................................. 1324
CHARTS - Food Stamps Now 14% of US Grocery Store Sales ........................................................................................................................... 1324
RESEARCH OF NOTE............................................................................................................................................................................................... 1325
RESEARCH - Standards of Living and Artificial Expectations ............................................................................................................................... 1325
RESEARCH - A Lack of Demand in US Economy .................................................................................................................................................. 1328
RESEARCH - Full Time Jobs or Food Stamps & Disability? ................................................................................................................................. 1329
STANDARD OF LIVING - Salary Compression ...................................................................................................................................................... 1331
DISPOSABLE INCOME - 66M (20%) Below $28.8/Year Subsistence Level ...................................................................................................... 1332
FOOD STAMPS - 46,405,204 Individuals, 22,257,647 Households below Poverty Line ................................................................................... 1334
DISPOSABLE INCOME - Bad Even in Nominal Terms ......................................................................................................................................... 1335
US RESIDENTIAL REAL ESTATE .................................................................................................................................... 1338

CHARTS & TABLES ................................................................................................................................................................................................... 1338
CHARTS: Household Formations ............................................................................................................................................................................. 1338
CHARTS - Housing Starts .......................................................................................................................................................................................... 1338
CHARTS - Composition of Housing Sales ............................................................................................................................................................... 1339
CHARTS: New Home Sales ...................................................................................................................................................................................... 1339
CHARTS: Existing Residential Supply ..................................................................................................................................................................... 1340
CHARTS - Housing Starts .......................................................................................................................................................................................... 1341
RESEARCH OF NOTE............................................................................................................................................................................................... 1342
RESEARCH - Household Formation Drives Residential Real Estate ................................................................................................................... 1342
OVERVIEW.................................................................................................................................................................................................................. 1344
CURRENT SITUATIONAL ANALYSIS ..................................................................................................................................................................... 1348
CURRENT HOME OWNERSHIP TRENDS ............................................................................................................................................................. 1348
NATIONAL STATISTICS: PRICE ............................................................................................................................................................................. 1352
NATIONAL STATISTICS: EXISITNG HOME SALES ............................................................................................................................................. 1354
NATIONAL STATISTICS: NEW HOME SALES ...................................................................................................................................................... 1356
RESEARCH OF NOTE............................................................................................................................................................................................... 1357
US COMMERCIAL REAL ESTATE ................................................................................................................................... 1363

OVERVIEW.................................................................................................................................................................................................................. 1363
NATIONAL STATISTICS: COMMERCIAL REAL ESTATE.................................................................................................................................... 1364
RESEARCH OF NOTE............................................................................................................................................................................................... 1365
CAPITAL SHRUGGED .............................................................................................................................................................................. 1370
13


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The Echo Boom

Emerging Markets in Crisis

GLOBAL MACRO UPDATE

GLOBAL MACRO TIPPING POINTS - NOVEMBER 2013

1 November 2013 Edition

Restricted & Confidential

The Echo Boom

MACRO MONITORING INSTITUTIONS ............................................................................................................................... 38

RISK SIGNALS ............................................................................................................................................................................................... 67

FINANCIAL & ECONOMIC RISK .......................................................................................................................................... 87

November 2013 Edition

Restricted & Confidential

RISK - GLOBAL MACRO HEADWINDS / TAILWINDS ............................................................................................................................................ 157

GLOBAL MACRO: RISK LEVELS .............................................................................................................................................................. 171

AGGREGATED RISK LEVEL .............................................................................................................................................. 179

GLOBAL MACRO ................................................................................................................... 203

ECONOMIC WARNINGS .................................................................................................................................................... 254

GLOBAL MACRO: INDICATORS (CHARTS) ........................................................................................................................................... 272

November 2013 Edition

Restricted & Confidential

GLOBAL GROWTH - Chinese Slowing moves to CONTRACTION ....................................................................................................................... 285

GOBAL UNEMPLOYMENT ................................................................................................................................................. 292

GLOBAL TRENDS .............................................................................................................................................................. 302

GLOBAL SENTIMENT ........................................................................................................................................................ 318

GLOBAL INFLATION .......................................................................................................................................................... 332

GLOBAL CREDIT ............................................................................................................................................................... 335

GLOBAL MACRO: MONETARY POLICY & CENTRAL BANKING ........................................................................................................ 342

Venezuela: Shortages & Hyperinflation .......................................................................................................... 342

GLOBAL ABE-NOMICS The Road Ahead ........................................................................................................................ 350

GLOBAL CENTRAL BANKING ........................................................................................................................................... 365

BOE - UK ............................................................................................................................................................................ 390

FED - US............................................................................................................................................................................. 391

November 2013 Edition

Restricted & Confidential

BOJ - JAPAN ...................................................................................................................................................................... 415

ECB - EU ............................................................................................................................................................................ 434

GEO-ECONOMIC CONCERNS & TENSIONS ......................................................................................................................................... 449

PETRODOLLAR US-Saudi Oil Alliance Strained .............................................................................................................. 479

GLOBAL BOND SCARE Un-Taper Reverses Fear........................................................................................................... 483

CHINA LIQUIDITY - Global Tightening Scare ...................................................................................................................... 492

November 2013 Edition

Restricted & Confidential

BATTLEFIIELD - The Race to Debase ....................................................................................................................................................................... 518

SYRIA & IRAN Complete Middle East Domination ........................................................................................................... 533

REGIONAL ............................................................................................................................... 559

MEDICAL CHARTS - Situation Critical ............................................................................................................................... 590

ITALY - Budget Failure on NO Growth ................................................................................................................................ 616

November 2013 Edition

Restricted & Confidential

FRANCE - Hollande Going Down for the Count................................................................................................................... 640

GERMANY - EU in the Hands Of Election ........................................................................................................................... 669

BERIAN PENINSULA - Spain & Portugal Going Critical ...................................................................................................... 682

UK - New BOE Governor with More Printing Ahead ............................................................................................................ 711

November 2013 Edition

Restricted & Confidential

CHARTS - UK - Lending .............................................................................................................................................................................................. 713

CYRPUS - Latest EU Banking Crisis ................................................................................................................................... 730

ASIA - SERIOUS CRACKS BELOW THE SURFACE .......................................................................................................................................... 755

November 2013 Edition

Restricted & Confidential

CHINA - Possible Interest-Rate Liberalization ........................................................................................................................................................... 832

JAPAN: The New Currency War Front ................................................................................................................................ 845

EMERGING MARKETS - SYNCHRONIZED MARKETS ................................................................................................................................. 915