While we eagerly await the next installment of the McKinsey study on global releveraging, we noticed that in the latest report from the Institute for International Finance released on Wednesday, total debt as of Q3 2016 once again rose sharply, increasing by $11 trillion in the first 9 months of the year, hitting a new all time high of $217 trillion. As a result, late in 2016, global debt levels are now roughly 325% of the world’s gross domestic product. In terms of composition, emerging market debt rose substantially, as government bond and syndicated loan issuance in 2016 grew to almost three times its 2015 level. And, as has traditionally been the case, China accounted for the lion’s share of the new debt, providing $710 million of the total $855 billion in new issuance during the year, the IIF reported.
……So we thought we’d take a look at the macroeconomic initial conditions at the start of the Reagan Presidency versus the incoming Trump Presidency….In most all macro categories that we have have researched here, the initial conditions just aren’t there for a Reagan type bull market, in our opinion. First, and foremost, are the monetary headwinds.
Alas, while some automakers posted record sales for the year, the biggest automakers were not among them. And you probably didn’t see this in the media unless you started digging through the data yourself. Somehow this one slipped by the media’s attention. Because something ugly happened in 2016, something we haven’t seen since 2009. For ALL of the big three US automakers, plus for a number of others, sales in 2016 actually fell. For them it was the first annual sales decline since nightmare-year 2009. Here they are, in terms of the annual decline in their total vehicles sales, as measured by dealer sales to their customers (in descending order of sales):
So, too bad for those hoping for a big new full-year record in the satellite data. The “pause” resumes. But still no word from NASA as to their year-end figures. Not to worry. NASA has a different data source from the satellites, namely the network of surface weather stations whose data can be “adjusted” and “homogenized” to get essentially whatever answer NASA wants in support of its favored political narrative. The excellent Tony Heller, in a post titled “Why Temperature Fraud Matters,” is already on top of the stream of NASA data, and provides this graph as of yesterday to compare recent NASA (“adjusted” surface station) data to UAH (satellite) data…
Sears’ decline is threatening to kill off at least 200 shopping malls, according to a new report……Sears-anchored malls will be at heightened risk of closing down — compared to malls anchored by higher-end stores like Macy’s — because many of them are already financially strapped. Credit Suisse defines about 184 shopping malls in the US as “least valuable property” — meaning those that are at risk of shutting down — and Sears anchors 110 of those locations. Overall, about 16% of Sears’ total locations are in “least valuable property” malls.
In 2017 we enter a period of geopolitical recession,” warns Eurasia Group president Ian Bremmer, adding that international war or “the breakdown of major central government institutions” isn’t inevitable, though “such an outcome is now thinkable.” In the company’s 19th annual outlook, Eurasia fears that U.S. unilateralism under Donald Trump, China’s growing assertiveness and a weakened German Chancellor Angela Merkel will make 2017 the “most volatile” year for political risk since World War II.
The Era Of Cradle To Grave Debt: 2.8 Million Borrowers Over 60 Years Have Student Debt–40% in Default
The findings add to a growing body of evidence that student loan debt is putting baby boomers’ financial health in jeopardy. The number of borrowers over the age of 60 with student loan debt grew from 700,000 in 2005 to 2.8 million in 2015, according to data from the Federal Reserve Bank of New York cited by the CFPB. The number of older Americans with student debt is growing faster than any other age group, according to the CFPB, and it appears they’re struggling. Nearly 40% of federal student loan borrowers over age 65 are in default, the report added.
Much of this neutral rate talk at the Fed is supposedly supported by the work of Swedish economist Knut Wicksell (1851–1926), who argued that the “natural” interest rate would express the exchange rate of present for future goods in a barter economy. If in practice the banks actually charged an interest rate below this natural rate, Wicksell argued that commodity prices would rise, whereas if the banks in practice charged an interest rate above the natural one, then commodity prices would fall. But that’s where Wicksell — often associated with the free-market Austrian school of economics — would cease to recognize his own ideas in current central bank thinking. Wicksell’s natural rate was a freely discovered market price in an economy, which reflected the implicit (real) rate of return on capital investments. For Wicksell, the natural interest rate was not a policy lever to be manipulated, in order to hit some employment or output goal. Yellen and the other Fed economists writing on this topic have conveniently (and probably unwittingly) co-opted Wicksell into their own Keynesian (and exceedingly un-Austrian) framework.
Another Trump Misfire—-Fills The SEC Swamp From Sullivan & Cromwell’s Den Of Hillary Supporters And Wall Street Bailout Brigades
The rationale for Donald Trump’s selection of Jay Clayton, a law partner at Sullivan & Cromwell which has represented Goldman Sachs since the late 1800s, to be the next SEC Chairman grew exponentially fuzzier after Wall Street On Parade reviewed political donation records at the Federal Election Commission. FEC records show that 59 of Clayton’s fellow lawyers at the firm made over $900,000 in donations to the Hillary Victory Fund while one lone lawyer, Donald Korb, made two $2700 donations to Trump’s primary and general election campaign……Donors to the Hillary Victory Fund included Sullivan & Cromwell Senior Chairman, H. Rodgin (Rodge) Cohen, who donated $250,000 on May 12, 2016 and another $35,000 the following month. During the Wall Street panic and crash in 2008 and 2009, Cohen darted from representation of one failing institution to another.
David Stockman, Ronald Reagan’s budget director, termed the SBA a “billion-dollar waste ― a rathole” that benefited only a tiny number of small businesses. In testimony before Congress in 1985, he argued that SBA loans crowded out private-sector borrowing and reallocated funds “from more creditworthy to less creditworthy firms,” that high loss rates rendered the SBA a “money-losing bank,” that the original rationale for SBA loans no longer existed, and that disaster loans were unnecessary because homeowners and businesses could get federal disaster insurance.
On the day after Christmas, the MixC luxury shopping mall in this city’s Jiulongpo district was packed with colorful trees and other holiday decorations but not many people. With dozens of new shopping centers being added in Chongqing, the MixC’s five-story Parkson department store was recently boarded up. Along the mall’s grounds was a football field’s length of empty shop space covered in red posters that read, “Coming soon.”