The Globalization Trap: GLOBAL MACRO - Regional Update

THE GLOBALIZATION TRAP
Slowing Growth Triggering the Trap
GLOBAL MACRO - Regional Update
GLOBAL MACRO TIPPING POINTS - AUGUST 2013
7/22/2013
1 August 2013 Edition

Copyright 2012 Gordon T. Long All Rights Reserved
Restricted & Confidential

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THE GLOBALIZATION TRAP

Slowing Growth Triggering the Trap.
GLOBAL MACRO TIPPING POINTS - AUGUST 2013
TIPPING POINTS ...................................................................................................................... 14
GLOBAL MACRO: RISK ASSESSMENT .................................................................................................................................................... 14
SITUATIONAL ANALYSIS .................................................................................................................................................... 14
POSITIONAL FRAMEWORK: "WE ARE HERE!" ....................................................................................................................................................... 14
Q2 2013 DEVELOPMENTS TO WATCH ..................................................................................................................................................................... 15
GLOBAL THEMES - A STRUCTURAL BACKDROP FOR STRATEGY ................................................................................................................. 24
GLOBAL TRENDS - NATIONAL INTELLIGENCE COUNCIL ................................................................................................................................... 26
A BROKEN PONZI SCHEME - BOSTON CONSULTING GROUP .......................................................................................................................... 28
RISK CONTINUUM ......................................................................................................................................................................................................... 30
MACRO MONITORING INSTITUTIONS ............................................................................................................................... 31

WEF (WORLD ECONOMIC FORUM -JANUARY 2013) ............................................................................................................................................ 31
The 17 Biggest Risks To Our Hyper-Connected World .............................................................................................................................................. 31
IMF (INTERNATIONAL MONETARY FUND - APRIL 2013) ...................................................................................................................................... 46
Policymakers Should Address Old Financial Risks, Meet New Challenges ............................................................................................................ 46
Credit Default Swaps on Government Debt Are Effective Gauge ............................................................................................................................. 47
Extended Period of Low Interest Rates Can Rekindle Financial Risks .................................................................................................................... 49
OECD (ORGANIZATION FOR ECONOMIC COOPERATION & DEVELOPMENT) .............................................................................................. 66
MAPLECROFT (SCANNING THE GLOBE) ................................................................................................................................................................ 68
GLOBAL RISK SIGNALS ...................................................................................................................................................... 70

RISK - COLLAPSING PETRODOLLAR FOUNDATION ............................................................................................................................................ 72
RISK - GLOBAL DEBT 313% of GDP .......................................................................................................................................................................... 75
RISK - 202M GLOBALLY UNEMPLOYED................................................................................................................................................................... 76
RISK - SIGNS APLENTY, BUT NO ONE PANICKING - YET! .................................................................................................................................. 77
RISK - CANARIES SINGING AGAIN ........................................................................................................................................................................... 79
RISK - COMPLACENCY & REPRESSED FEAR ........................................................................................................................................................ 80
RISK - TIED TO EU IN 2012 ......................................................................................................................................................................................... 81
RISK - GLOBAL DERIVATIVE COLLATERAL ............................................................................................................................................................ 82
RISK - GLOBAL RISK MATRIX..................................................................................................................................................................................... 84
RISK - GLOBAL MACRO HEADWINDS / TAILWINDS .............................................................................................................................................. 84
RISK - FOOD A GROWING GLOBAL INFLATION & SOCIAL UNREST RISK ...................................................................................................... 86
RISK - INCREASINGLY DYSFUNCTIONAL CAPITALS MARKETS ....................................................................................................................... 91
RISK - GLOBAL RISK REWARD .......................................................................................................................................... 93

RISK - RISING GEO-POLITICAL EVENT RISK.......................................................................................................................................................... 94
GLOBAL MACRO: RISK LEVELS ................................................................................................................................................................ 98

AGGREGATED GLOBAL FINANCIAL RISK INDEX.............................................................................................................. 98
BANKING RISK - LIBOR-OIS SPREAD (Updated) .................................................................................................................................................... 99
BANKING RISK - TED SPREAD (Updated) ................................................................................................................................................................ 99
CREDIT RISK - GLOBAL CREDIT DEFAULT SWAPS (Updated) ........................................................................................................................ 100
CREDIT RISK - EU CREDIT DEFAULT SWAPS (Updated) ................................................................................................................................... 100
CONSUMER RISK - HOUSING - RATE OF CHANGE (Reference) ...................................................................................................................... 101
ECONOMIC RISK - ECRI LEADING INDEX (Updated) ........................................................................................................................................... 102
INFLATION RISK - MONEY SUPPLY GROWTH - M3 (Updated) .......................................................................................................................... 103
INFLATION RISK - MONEY VELOCITY (Updated) .................................................................................................................................................. 104
MONETARY RISK - BANK LIABILITIES (Updated) ................................................................................................................................................. 105
COST OF MONEY RISK - INTEREST RATES (Updated)...................................................................................................................................... 105
AGGREGATED RISK LEVEL .............................................................................................................................................. 106
TIPPING POINTS: CHANGES .................................................................................................................................................................... 108

TIPPING POINT MAPPING: 2013 UPDATE ........................................................................................................................ 108
August 2013 Edition

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TIPPING POINTS: TOP 5 FOCUS - FEBRUARY 2013 .......................................................................................................................... 117

I - RISK REVERSAL............................................................................................................................................................ 117
II - JAPAN DEBT DEFLATION ............................................................................................................................................ 120
III-BOND BUBBLE .............................................................................................................................................................. 123
IV - EU BANKING CRISIS ................................................................................................................................................... 123
V - SOVEREIGN DEBT ....................................................................................................................................................... 124
VI - CHINA HARD LANDING ............................................................................................................................................... 126
DRIVER$: RISK-ON - RISK-OFF ANALYTICS ......................................................................................................................................... 131
1- G10 MACRO SURPRISE INDEX .................................................................................................................................... 134
2- CUMULATIVE GLOBAL PMI........................................................................................................................................... 138
3- SLOWING GLOBAL EXPORTS ...................................................................................................................................... 144
4- US NON-REVOLVING CONSUMER CREDIT................................................................................................................. 148
5- IBES' RELATIVE GLOBAL PE RATIOS .......................................................................................................................... 151
6- CONSENSUS EARNINGS ESTIMATES - Sell Side Analysts .......................................................................................... 158
7- INFLATION PRESSURES - Global Food Prices.............................................................................................................. 160
GLOBAL MACRO ................................................................................................................... 163

GLOBAL MACRO: ECONOMIC OUTLOOK ............................................................................................................................................. 165
GLOBAL OUTLOOK - EM Crisis Will make the 1997 Asian Crisis Seem Like an Early Warning.......................................... 165
GLOBAL OUTLOOK - Global Deleveraging Accelerating and Developing Nations Feeling the Pain.................................... 167
GLOBAL OUTLOOK - Problems Erupting Everywhere (Signs of Implosion) ........................................................................ 169
GLOBAL OUTLOOK - Credit Fueled Globalization in Retreat .............................................................................................. 172
GLOBAL OUTLOOK - Rogoff's Sovereign Debt Default Levels ........................................................................................... 175
GLOBAL OUTLOOK - Fiscal Adjustments Required............................................................................................................ 178
GLOBAL OUTLOOK - Imbalances Continue to Increase Along With Financial Fragility ....................................................... 178
GLOBAL OUTLOOK - A 67 Million Jobs Gap ...................................................................................................................... 181
GLOBAL OUTLOOK - Center of Global Manufacturing Confirmed to be Shifting Away from developed Countries .............. 184
GLOBAL OUTLOOK - Mercantilist China the Clear Winner Globally, Mercantilist Germany Regionally ............................... 185
ECONOMIC CUTS .............................................................................................................................................................. 187
OECD CUTS ECONOMIC OUTLOOK ....................................................................................................................................................................... 187
IMF CUTS ECONOMIC OUTLOOK ............................................................................................................................................................................ 190
ECONOMIC WARNINGS .................................................................................................................................................... 201

IMF WARNS - May 2013 .............................................................................................................................................................................................. 201
BIS WARNS - June 2013 ............................................................................................................................................................................................. 207
WORLD BANK WARNS - June 2013 ......................................................................................................................................................................... 214
GLOBAL MACRO: INDICATORS ............................................................................................................................................................... 218

GLOBAL CREDIT ............................................................................................................................................................... 218
CREDIT CYCLE - HY Leading the Way ..................................................................................................................................................................... 218
CREDIT CYCLE - Reversal Ahead ............................................................................................................................................................................. 221
GLOBAL GROWTH............................................................................................................................................................. 224

GLOBAL GROWTH - PMI Barely Above Stagnation ................................................................................................................................................ 224
GLOBAL GROWTH - Chinese Slowing moves to CONTRACTION ....................................................................................................................... 227
GLOBAL GROWTH - Slowing Global Economies .................................................................................................................................................... 228
GLOBAL GROWTH - Global GDP Growth Trending Down by Region and Cumulatively ................................................................................... 229
GLOBAL GROWTH - Global PMI ............................................................................................................................................................................... 229
GLOBAL GROWTH - Global Recession .................................................................................................................................................................... 232
GLOBAL GROWTH - Slowing Global Growth - Air Cargo Shipments ................................................................................................................... 233
GOBAL UNEMPLOYMENT ................................................................................................................................................. 234

GLOBAL UNEMPLOYMENT - The Beginnings of the Welfare Myth Unwind ........................................................................................................ 234
GLOBAL UNEMPLOYMENT - The Unsustainable Welfare Myth ........................................................................................................................... 236
GLOBAL UNEMPLOYMENT - Global Financial Sector Job Cuts ........................................................................................................................... 238
GLOBAL UNEMPLOYMENT - Global Unemployment Rising -Now 202 Million .................................................................................................. 240
GLOBAL TRENDS .............................................................................................................................................................. 242

BRANDS & COMMODITIES: Tell the Global Story .................................................................................................................................................. 242
GLOBAL SENTIMENT ........................................................................................................................................................ 253

GLOBAL SENTIMENT - Complacent ......................................................................................................................................................................... 254
GLOBAL SENTIMENT - Nielsen's Global Consumer Confidence, Concerns & Spending Intentions ............................................................... 255
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GLOBAL INFLATION .......................................................................................................................................................... 266

GLOBAL INFLATION - Food Prices, Driver of Social Unrest .................................................................................................................................. 266
GLOBAL INFLATION - Food Price Manipulation in Thailand .................................................................................................................................. 267
GLOBAL MACRO: MONETARY POLICY & CENTRAL BANKING ........................................................................................................ 268

The "OMF" Trial Balloon Raised .......................................................................................................................................... 268
OPMF - A Reversing Wealth Effect May Force OPMF & Global Abenomics ........................................................................................................ 269
OPMF - Financial Times: Martin Wolf - "The Case For Helicopter Money" ........................................................................................................... 270
OPMF - Financial Times: Martin Wolf - "The Case To Reset Basis of Monetary Policy" ..................................................................................... 273
OPMF - Financial Times: Gavyn Davies On Why Helicopters Are Dangerous ..................................................................................................... 274
OPMF - A Conundrum for the World's Central Bankers ........................................................................................................................................... 277
GLOBAL CENTRAL BANKING ........................................................................................................................................... 279

CENTRAL BANKS
CENTRAL BANKS
CENTRAL BANKS
CENTRAL BANKS
CENTRAL BANKS
CENTRAL BANKS
CENTRAL BANKS
CENTRAL BANKS
CENTRAL BANKS
- Austerity Now Officially Dead Public Policy ........................................................................................................................... 279

- They are the Market .................................................................................................................................................................. 279
- The longer QE persists, the greater the magnitude of the left-tail event & a Minsky Trap ............................................. 282
- We May Have Reached a Risk-Off Leverage Pivot .............................................................................................................. 283
- The Macro Landscape .............................................................................................................................................................. 285
- A Serious Shortage of Quality Collateral - A $10T US Problem Over 10 Years ................................................................ 286
- Global Balance Sheet Expansion ............................................................................................................................................ 288
- Where Do these Deflators Come From? ................................................................................................................................ 292
- First Remove Gold Standard, Now Remove Debt ................................................................................................................. 293
EMERGING MARKETS ...................................................................................................................................................... 297

EMERGING MARKETS - The Impact of "TAPER" ................................................................................................................................................... 297
BOE - UK ............................................................................................................................................................................ 301

UK - Mark Carney and "Flexible Inflation Targeting" ................................................................................................................................................ 301
FED - US............................................................................................................................................................................. 302

US - FOMC January Minutes Un-Nerve Markets ...................................................................................................................................................... 302
US - Congress Asks Bernanke For Full Risk Analysis On Fed's Soaring Balance Sheet .................................................................................... 303
BOJ - JAPAN ...................................................................................................................................................................... 307

JAPAN - Some Policies Have Clearly Hit the Limit ................................................................................................................................................... 307
JAPAN - Foreshadows Next Global Crisis ................................................................................................................................................................. 308
JAPAN - Japan's Prime Minister Shinzo Abe prepares to print money for the whole world ................................................................................ 313
JAPAN - Shinzo Abes Monetary-Policy Delusions ................................................................................................................................................... 314
JAPAN - BOJ Governor Job Suddenly Available in Historical "Abenomics U-Turn" ............................................................................................. 317
JAPAN - Japanese Economic Policy Goes The Full Ponzi ...................................................................................................................................... 318
ECB - EU ............................................................................................................................................................................ 320

EU - Japan Will Effectively Monetize European Debt ............................................................................................................................................... 320
EU - TARGET-2 Imbalances - "The Debt Crisis Is Eating Its Way Ever Further Into Europe's Core" ................................................................ 320
EU - Draghi Will Soon Be Forced to Start Printing - Again! ..................................................................................................................................... 322
GEO-POLITICAL TENSIONS ..................................................................................................................................................................... 326

GLOBAL BOND SCARE ..................................................................................................................................................... 326
BOND SCARE - Volatility and Instability Increase Risk ........................................................................................................................................... 326
BOND SCARE - Inflation Expectations Contributing to Volatility ............................................................................................................................ 328
BOND SCARE - The Financial Times Headlines Tell An Interesting Story ........................................................................................................... 329
BOND SCARE - A LONG Supply and Demand Problem BUT Heavy SHORT Demand ..................................................................................... 330
BOND SCARE - Long Term Support Trendline Achieved........................................................................................................................................ 331
BOND SCARE - Retail Investors Running for the Exit ............................................................................................................................................. 332
CHINA LIQUIDITY TIGHTENING SCARE ........................................................................................................................... 334

CHINA LIQUIDITY - Housing Bubble Restricting PBOC Actions ............................................................................................................................ 334
CHINA LIQUIDITY - PBOC Squeezing Banks towards Reducing Speculative Risk............................................................................................. 337
CHINA LIQUIDITY - Overnight Repo at 25% ............................................................................................................................................................ 338
CHINA LIQUIDITY - Red Flags ................................................................................................................................................................................... 339
CHINA LIQUIDITY - Credit Fueled Growth ................................................................................................................................................................ 341
CHINA LIQUIDITY - Shadow Banking System Showing Signs of Implosion ......................................................................................................... 346
CHINA LIQUIDITY - PBOC Wants to Hold the Line on Explosive Credit Expansion through A Liquidity Squeeze .......................................... 349
CHINA LIQUDITY - Potentially De-Stabilizing Cash Crunch ................................................................................................................................... 351
CHINA LIQUIDITY - Chinese Liquidity Pump Unplugged ........................................................................................................................................ 352
CURRENCY WARS BECOMING RATE WARS .................................................................................................................. 354
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CURRENCY WARS - A Major Shift ............................................................................................................................................................................ 354

BATTLEFIELD - Combatants & Belligerents ............................................................................................................................................................. 358
BATTLEFIIELD - The Race to Debase ....................................................................................................................................................................... 359
JAPAN - The Destabilizing Agent ............................................................................................................................................................................... 361
EUROPE - Euro Exposed ............................................................................................................................................................................................ 361
ARGENTINA - Here we Go Again!.............................................................................................................................................................................. 363
VENEZUELLA - Bad Situation ..................................................................................................................................................................................... 364
BRAZIL - No One Wants to Listen .............................................................................................................................................................................. 364
SWITZERLAND - No Choice ....................................................................................................................................................................................... 364
SINGAPORE - Hot Money ........................................................................................................................................................................................... 365
UK- Pound Joins War ................................................................................................................................................................................................... 366
CYBER WARS - GROWING THREAT ................................................................................................................................ 367

SECURITY-SURVEILLANCE COMPLEX - NSA Whistleblower Example: Booz Hamilton ................................................................................. 367
SECURITY SURVEILLANCE COMPLEX - Growing Without Public Control or Supervision!.............................................................................. 369
IRAN & SYRIA - COMPLETE MIDDLE EAST DOMINATION .............................................................................................. 370

MIDDLE EAST - Watch Out for a "False Flag" or "Covert" Activity Event .............................................................................................................. 370
MIDDLE EAST - Who Is Threatening Who Here? .................................................................................................................................................... 371
REGIONAL ............................................................................................................................... 373

EUROSIS - A Terminal Disease ........................................................................................................................................ 373
RESEARCH WE FOLLOWED THIS MONTH ........................................................................................................................................................... 373
RESEARCH OF PARTICULAR IMPORTANCE ........................................................................................................................................................ 374
RESEARCH - EFSF Downgraded to AA+.................................................................................................................................................................. 374
RESEARCH - EU Stabilization Programs Are Presently Very Fragile .................................................................................................................... 375
RESEARCH - Spreads Widened in Peripherals and Significantly in Portugal and Greece ................................................................................. 378
PROGNOSIS: Why the European Situation Will Get Worse ................................................................................................................................... 380
PROGNOSIS: Increasing Structural Imbalances ...................................................................................................................................................... 383
PROGNOSIS: $22T Unaccounted - A Hidden World of Contingent Liabilities, Government Backing & Guarantees. ................................... 385
PROGNOSIS: Monetary Malpractice - ECB's LTRO Not a Solution but ................................................................................................................ 389
PROGNOSIS: Monetary Malpractice - ECB's SMP Effort Futile ............................................................................................................................. 392
PROGNOSIS: Monetary Malpractice - ECB Accepts BBB Collateral ..................................................................................................................... 394
PROGNOSIS: EU Banking Overbanked, Undercapitalized and Now Insolvent .................................................................................................... 395
PROGNOSIS: Monetary Malpractice - TARGET2 "Contingent Liabilities"............................................................................................................. 396
PROGNOSIS: Bailouts - Unsustainable & Unfundable ............................................................................................................................................ 402
MEDICAL CHARTS - Situation Critical ............................................................................................................................... 404

CHARTS- EU Real Rates ........................................................................................................................................................................................... 404
CHARTS - EU -NON Euro Members GDP RELIANCE ............................................................................................................................................ 405
CHARTS - EU GLOBAL GDP GROWTH CONTRIBUTION .................................................................................................................................... 406
CHARTS - EU PMI ........................................................................................................................................................................................................ 406
CHARTS - EU CPI ........................................................................................................................................................................................................ 408
CHARTS - Regional Risk-Reward .............................................................................................................................................................................. 409
CHARTS - Europe's "Core" Problem is France ......................................................................................................................................................... 410
CHARTS - Germany's Preoccupation with Inflation is More Than It Would Seem ............................................................................................... 413
CHARTS - Evidence OF Global Slowing Now Indisputable ..................................................................................................................................... 414
CHARTS - EU Credit Downgrades, France and UK On Tap .................................................................................................................................. 416
CHARTS - Perceived Reduction in Risk, A Temporary Aberration ......................................................................................................................... 418
CHARTS - Dangerous Delusional Divergences ........................................................................................................................................................ 420
CHARTS - IMF Projections for Euro Area and GIIPS ............................................................................................................................................... 421
CHARTS - Air Cargo Shipments Confirm Slowing Global Growth .......................................................................................................................... 422
CHARTS - Eurozone Misery Indices Never Been Higher ........................................................................................................................................ 423
CHARTS - Euro Currency ............................................................................................................................................................................................ 425
ITALY - Budget Failure on NO Growth ................................................................................................................................ 430

RESEARCH - Italys Budget Failures, Weak Growth Outlook Call Debt Sustainability Into Question ................................................................ 430
CHARTS OF PARTICULAR IMPORTANCE ............................................................................................................................................................. 434
CHARTS - ITALY - Forced Rate Cuts ........................................................................................................................................................................ 434
SITUATIONAL ASSESSEMENT ................................................................................................................................................................................. 435
ITALIAN ELECTION - What You Need to Know ....................................................................................................................................................... 435
ITALIAN ELECTION - Europe Capitulates On Austerity- Never Had The Stomach For It ................................................................................... 436
ITALIAN ELECTION - Message Given By the People.............................................................................................................................................. 438
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ITALIAN ELECTION
ITALIAN ELECTION
ITALIAN ELECTION
ITALIAN ELECTION
ITALIAN ELECTION
- Bad Debt Continue to Soar ................................................................................................................................................... 442

- Italians React Badly to Austerity, Elections Hardly a Surprise! ......................................................................................... 444
- EUROPEAN FEEDBACK - #1 .............................................................................................................................................. 445
- EUROPEAN FEEDBACK - #2 .............................................................................................................................................. 447
- Regional Financial Cracks in Sicily ...................................................................................................................................... 450
FRANCE - Hollande Going Down for the Count................................................................................................................... 452

RESEARCH OF PARTICULAR IMPORTANCE ....................................................................................................................................................... 453
RESEARCH - France Loses its Coveted and NEEDED AAA Rating ..................................................................................................................... 453
CHARTS - FRANCE - GDP ......................................................................................................................................................................................... 455
CHARTS - FRANCE - UNEMPLOYMENT ................................................................................................................................................................. 456
CHARTS - FRANCE - BUDGET DEFICIT ................................................................................................................................................................. 457
CHARTS - FRANCE - TAX versus GDP .................................................................................................................................................................... 458
CHARTS - FRANCE - BUSINESS CONFIDENCE ................................................................................................................................................... 459
SITUATIONAL ASSESSMENT ................................................................................................................................................................................... 460
FRANCE - What You Need to Know .......................................................................................................................................................................... 460
FRANCE - Key Indicators ............................................................................................................................................................................................ 461
FRANCE: Sharpest Drop in Private Sector Output in Four Years........................................................................................................................... 464
FRANCE - Quits on Austerity - Never a Doubt This Would Happen ....................................................................................................................... 467
FRANCE - Socialism is Expensive.............................................................................................................................................................................. 468
FRANCE - Has Turned back to Socialism ................................................................................................................................................................. 470
FRANCE - Losing Its Way through Political Illusions and Lies ................................................................................................................................ 471
FRANCE - Uncompetitive ............................................................................................................................................................................................ 472
FRANCE - Titan Tire Calls Out French Labor ........................................................................................................................................................... 474
FRANCE - France Responds to Titan Tire................................................................................................................................................................. 476
FRANCE - What Happens In France When Companies Fire People ..................................................................................................................... 478
FRANCE - Hollande's Economically Insane campaign Promise ............................................................................................................................. 479
GERMANY - EU in the Hands Of Election ........................................................................................................................... 480

RESEARCH - Europe's Shadow Economy: As Big As Germany ............................................................................................................................ 480
CHARTS - GERMANY - Inflation ................................................................................................................................................................................ 483
CHARTS - GERMANY - IFO Investor Confidence .................................................................................................................................................... 483
CHARTS - GERMANY - ZEW Expectations .............................................................................................................................................................. 484
GERMANY - Anti Euro AfD Party May Cost Merkel in Critical September Election ............................................................................................. 487
GERMANY - The Euro Crisis Escalation over Cyprus May Politically Cripple Merkel .......................................................................................... 488
GERMANY - Call for End of "Coercive Euro Association" ....................................................................................................................................... 490
IBERIAN PENINSULA - Spain & Portugal Going Critical ..................................................................................................... 492

RESEARCH - Presidential Warning Spikes Yields To 8 Months Highs ................................................................................................................. 493
RESEARCH - Clear Signs of Desperation In Spain from a Growing Collateral Contagion .................................................................................. 495
RESEARCH - The Spanish Government's 'Bad Bank' Scam .................................................................................................................................. 495
CHARTS - PORTUGAL - Deficit Problem .................................................................................................................................................................. 497
IBERIA - Credit Downgrades - At Precipice of "Non Investment Grade"................................................................................................................ 498
IBERIA - Regional Bailout Bailouts a Massive Problem ........................................................................................................................................... 499
IBERIA - NPL Going Ballistic ....................................................................................................................................................................................... 500
IBERIA - Spanish Funding Problem............................................................................................................................................................................ 501
IBERIA - The Giant Spanish Housing Bubble, Now Beginning to Implode ............................................................................................................ 505
IBERIA - Mal-Investment Coming Home to Roost .................................................................................................................................................... 507
IBERIA - Bank Deposits Were Leaving, Now they Are Fleeing ............................................................................................................................... 508
IBERIA - Now a Capital Investment Problem ............................................................................................................................................................ 509
IBERIA - Banks on Artificial "Ponzi Bond" Life Support ............................................................................................................................................ 510
UK - New BOE Governor with More Printing Ahead ............................................................................................................ 517

August 2013 Edition

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RESEARCH - UK workers' wage squeeze is longest since the 1870s ................................................................................................................... 517
CHARTS - UK - Crushed Disposable Income ........................................................................................................................................................... 518
CHARTS - UK - BOE Balance Sheet Growth ............................................................................................................................................................ 518
CHARTS - UK - Lending .............................................................................................................................................................................................. 519
CHARTS - UK - Unemployment .................................................................................................................................................................................. 519
CHARTS - UK - GDP - Pre and Post Recession Levels .......................................................................................................................................... 520
CHARTS - UK - GDP .................................................................................................................................................................................................... 521
CHARTS - UK - BOE Rates ......................................................................................................................................................................................... 521
UK - What you need to Know ...................................................................................................................................................................................... 522
UK - Joins Currency War - Down 8% YTD ............................................................................................................................................................. 523
UK - Specter of Stagflation Haunts UK ....................................................................................................................................................................... 524
UK - Public Policy turns Against Austerity and PM Cameron .................................................................................................................................. 525
UK - Doomsday Debt Machine .................................................................................................................................................................................... 526
UK - QE Extension Coming ......................................................................................................................................................................................... 529
UK - Small Business Credit Squeeze Now Acute - Loan Rejections Rising ......................................................................................................... 531
UK - Technically in a Depression ................................................................................................................................................................................ 532
CYRPUS - Latest EU Banking Crisis ................................................................................................................................... 535

CYRPUS - What you Need To Know .......................................................................................................................................................................... 535
CYRPUS - Basic Situational Charts ............................................................................................................................................................................ 536
CYPRUS - Crumbling Property Rights ....................................................................................................................................................................... 538
CYPRUS - Plan D Supersedes Plan C and B as Time running Out ....................................................................................................................... 542
CYPRUS - Forgetting About Contract Law, Private Property Rights and Due Process ....................................................................................... 545
CYPRUS - Russian Tax Haven ................................................................................................................................................................................... 546
CYPRUS - Plan B as Bad As Plan A .......................................................................................................................................................................... 547
CYPRUS - Breaks Public Trust and Incites the Politics of Germany Dictating Terms .......................................................................................... 548
CYPRUS - Does Anyone Care How a Capitalist System (versus a Crony Capitalist System) is Supposed to Work? ..................................... 554
CYPRUS - Criminal "Confidence Game" Payouts to Everyone at the Tax Payers Expense ............................................................................... 555
CYPRUS - Cyprus Pushes EU Banking Crisis Back Near the Edge ..................................................................................................................... 557
ASIA - SERIOUS CRACKS BELOW THE SURFACE .......................................................................................................................................... 558

CHINA - Credit Tightening Panic Averted - Temporarily? .................................................................................................... 558
CHARTS - CHINA - PMI ............................................................................................................................................................................................... 559
CHARTS - CHINA - PMI-2 .......................................................................................................................................................................................... 560
CHARTS - CHINA - GDP ............................................................................................................................................................................................. 561
CHARTS - CHINA - INDUSTRIAL OUTPUT ............................................................................................................................................................. 562
CHARTS - CHINA - Urban Fixed Asset Investment ................................................................................................................................................. 563
CHARTS - CHINA - RETAIL SALES .......................................................................................................................................................................... 564
RESEARCH - Investors Worried and Losing Confidence ....................................................................................................................................... 565
RESEARCH - China Stampeding into Gold ............................................................................................................................................................... 566
RESEARCH - China "Will introduce some measures to arrest the slowdown of growth in the next couple of quarters" ................................. 568
RESEARCH - Slower Growth In the Cards & Endorsed by New Chinese Leadership......................................................................................... 569
RESEARCH - Is a PBOC Controlled Speculation Bust Possible or Will It Get Out of Control ............................................................................ 570
RESEARCH - PBOC Liquidity Squeeze ..................................................................................................................................................................... 571
RESEARCH - Chinese Housing Bubble Restricting PBOC Actions ....................................................................................................................... 573
RESEARCH - PBOC Squeezing Banks towards Reducing Speculative Risk ....................................................................................................... 575
RESEARCH - Chinese Overnight Repo at 25% ........................................................................................................................................................ 577
RESEARCH - Red Flags .............................................................................................................................................................................................. 578
RESEARCH - Credit Fueled Growth in China ........................................................................................................................................................... 580
RESEARCH- PBOC Wants to Hold the Line on Explosive Credit Expansion through A Liquidity Squeeze...................................................... 585
RESEARCH - A Potentially De-Stabilizing Cash Crunch ......................................................................................................................................... 587
SITUATIONAL ANALYSIS ........................................................................................................................................................................................... 588
CHINA SHADOW BANKING - Shadow Banking System Showing Signs of Implosion ........................................................................................ 590
CHINA SHADOW BANKING - Shadow Banking and Credit Growth ...................................................................................................................... 593
CHINA SHADOW BANKING - The US Sub-Prime / CDO All Over Again ............................................................................................................. 596
CHINA SHADOW BANKING - Report ........................................................................................................................................................................ 600
CHINA SHADOW BANKING - Situation ..................................................................................................................................................................... 601
CHINA RESERVES - Distorted Foreign Reserve Levels ......................................................................................................................................... 602
CHINA RESERVES - Declining Reserve Accumulation ........................................................................................................................................... 604
CHINA RESERVES - Has Caught the Gold Bug big time! ....................................................................................................................................... 606
August 2013 Edition

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CHINA CURRENCY WARS - Hot Money into China ................................................................................................................................................ 608

CHINA - Withdraws Liquidity ....................................................................................................................................................................................... 609
CHINA - Socit General Sees a Likely Soft Landing! ............................................................................................................................................. 611
CHINA - True Debt is Orders of Magnitude More than Officially Being Reported ................................................................................................. 619
CHINA - Evidence OF Slowing Now Indisputable ..................................................................................................................................................... 622
CHINA - PMI Improvement .......................................................................................................................................................................................... 623
CHINA - Political Transition & Ongoing Emergence as a Super Power ................................................................................................................. 626
CHINA - An Implicit Social Contract ............................................................................................................................................................................ 628
CHINA - Manipulated Statistics due to Upcoming Decade Long Regime Change ............................................................................................... 630
CHINA - Increasing Leverage is China's Way of Monetary Easing ........................................................................................................................ 631
CHINA - Possible Interest-Rate Liberalization ........................................................................................................................................................... 632
CHINA - Global Impact of China's Slowdown ............................................................................................................................................................ 633
CHINA - Shanghai Composite at 2008 Low Levels .................................................................................................................................................. 635
CHINA - Shanghai Composite Warnings Signs ......................................................................................................................................................... 636
CHINA - Credit to GDP ................................................................................................................................................................................................. 638
CHINA - A Slow Recovery Through 2013 .................................................................................................................................................................. 639
CHINA - Manufacturing PMI in Contraction Territory ................................................................................................................................................ 641
JAPAN: The New Currency War Front ................................................................................................................................ 644

RESEARCH - Japanese Structural Problems a "Canary" for Western Developed Economies........................................................................... 644
RESEARCH - Shinzo Abe Hasn't the Stomach for the Heavy Lifting Needed to Accompany ABE-nomics. ..................................................... 647
RESEARCH - A Credit Squeeze Leads Deflationary Leg Down ............................................................................................................................ 649
RESEARCH - Some Japanese Policies Have Clearly Hit the Limit ........................................................................................................................ 650
RESEARCH - The ABE (Asset Bubble Evaluator) Index ......................................................................................................................................... 652
CHARTS - JAPAN - GDP Resurgence ....................................................................................................................................................................... 653
CHARTS - JAPAN - BOJ Balance Sheet ................................................................................................................................................................... 654
JAPAN - What You Need to Know .............................................................................................................................................................................. 657
JAPAN - Regional Risk-Reward .................................................................................................................................................................................. 659
JAPAN - Now the Frontrunner of Outright Monetization. ......................................................................................................................................... 660
JAPAN - Yen Devaluation ............................................................................................................................................................................................ 661
JAPAN - New Bank of Japan Policy - 2% Inflation in 2 Years ................................................................................................................................. 662
JAPAN - Appoints BOJ Governor Firmly Committed to Printing Money................................................................................................................. 664
JAPAN - Third Straight Quarter of Recession ........................................................................................................................................................... 665
JAPAN - Full Out War on Deflation ............................................................................................................................................................................. 665
JAPAN - First Test of the new found dominance of the Central Banks ............................................................................................................... 667
JAPAN - BOJ Was Next Up. No Surprise .................................................................................................................................................................. 669
JAPAN - Negative Current Account Balance and -3.5% Recession ....................................................................................................................... 671
JAPAN - A 50% Over-Valued Yen Has Undermined Self Confidence & Drive...................................................................................................... 674
JAPAN - Proves QE's Low Cost of Capital Does Structural Damage to Economy ............................................................................................... 676
JAPAN - BOJ Being Pressured to "Rip-Up Government Debt"1 ............................................................................................................................. 678
JAPAN - Easy Money Has Hurt Corporate Profitability in the Longer Term .......................................................................................................... 684
JAPAN - The Biggest Debtor with the Biggest Problem! .......................................................................................................................................... 687
JAPAN - A Magnitude Larger Problem than Europe................................................................................................................................................. 691
JAPAN - QE 9 A Complete Failure - Actually "Tightens" versus It's Intended Easing .......................................................................................... 697
JAPAN - Japanese Yen Continuously Under Attack ............................................................................................................................................... 701
JAPAN - Vast foreign US$ Coming Home for "Claim" .............................................................................................................................................. 702
JAPAN - PMI Breakdown ............................................................................................................................................................................................ 703
JAPAN - Exports Continue To Tumble ....................................................................................................................................................................... 705
JAPAN - Intervention Fails Again - It's a Whole new Ball Game ............................................................................................................................. 706
JAPAN - First Signs of Massive Debt Monetization After Next Election ................................................................................................................. 709
JAPAN - Japan to the ESM's Rescue ........................................................................................................................................................................ 709
EMERGING MARKETS - SYNCHRONIZED MARKETS ................................................................................................................................. 711

EMERGING MARKETS - Stunning Withdrawals ...................................................................................................................................................... 711
EMERGING MARKETS - Bond Outflows Accelerating ............................................................................................................................................ 712
EMERGING MARKETS - This will make the 1997 Asian Crisis Seem Like an Early Warning ........................................................................... 714
EMERGING MARKETS - Developing Nations Feeling the Pain of Global Deleveraging Acceleration .............................................................. 716
EMERGING MARKETS - The Impact of "TAPER" ................................................................................................................................................... 718
CHARTS - Reserves versus World ............................................................................................................................................................................. 722
CHARTS - Current Account Balances versus GDP .................................................................................................................................................. 723
CHARTS - Emerging Markets Index versus MSCI World Index .............................................................................................................................. 724
August 2013 Edition

8

CHARTS - SINGAPORE - Inflation ............................................................................................................................................................................. 725

CHARTS - SINGAPORE - Exports ............................................................................................................................................................................. 726
CHARTS - SOUTH KOREA ......................................................................................................................................................................................... 727
CHARTS - TURKEY - Spreads ................................................................................................................................................................................... 728
EMERGING MARKETS - What you Need to Know .................................................................................................................................................. 729
EMERGING MARKETS - Comparative Ease of Doing Business ............................................................................................................................ 731
EMERGING MARKETS - Importance of Employment, Equality and Per Capital Income .................................................................................... 732
ASIA ................................................................................................................................................................................................................................ 735
ASIA: CHARTS - AUSTRALIA .................................................................................................................................................................................... 736
ASIA - Regional Risk-Reward...................................................................................................................................................................................... 737
ASIA - Corporate Debt Levels Reflect Unintended Consequences of Mispricing & Malinvestment ................................................................... 738
ASIA - Synchronized Markets ...................................................................................................................................................................................... 743
ASIA - Caution Advised Regarding Positive South Korea Export Turnaround ...................................................................................................... 745
ASIA - Export Growth Looks Similar to Pre-2008...................................................................................................................................................... 746
ASIA - Global Slowing Quickly a Worsening Situation Across Asia ........................................................................................................................ 747
ASIA - Risks All on the Downside for Asia ................................................................................................................................................................. 748
ASIA - Demographic Headwinds ................................................................................................................................................................................. 750
ASIA - Pronounced Flight to Singapore Safety ......................................................................................................................................................... 751
BRICS ............................................................................................................................................................................................................................. 753
BRICS - A Development Bank-Forex Reserve Pool-African Integration ................................................................................................................ 753
BRICS - 40% of World Population and 25% of World GDP ..................................................................................................................................... 754
BRICS - $3 to $13B GDP in Ten Years ...................................................................................................................................................................... 757
BRICS- A World Wide Distrust of Financial Markets Building ................................................................................................................................. 759
BRAZIL - Inflation will remain high thanks to a "growth mismatch". ...................................................................................................................... 761
RUSSIA - Central bank will hike rates if inflation and oil prices continue to rise. .................................................................................................. 762
INDIA - Inflation ............................................................................................................................................................................................................. 763
INDIA - Will be fine as long as it continues to reduce its deficit............................................................................................................................... 764
INDIA - Watch Out For RE-Emergence of Food Price Inflation ............................................................................................................................... 765
US ECONOMY ......................................................................................................................... 767

THE GLOBAL MACRO OVERLAY ............................................................................................................................................................. 768
MACRO POSITIONING: US Macro Data Plunges Most In 10 Months ................................................................................. 768
MACRO POSITIONING: US Macro Surprise Index Goes Negative ..................................................................................... 770
MACRO POSITIONING: Nielsen's Global Survey - "Consumers Grappling With Economic Concerns" ............................... 771
MACRO POSITIONING: Credit Fueled Globalization in Retreat .......................................................................................... 773
MACRO POSITIONING: Executives Report Deteriorating Economic Environment .............................................................. 776
MACRO POSITIONING: A Serious Global Slowdown Underway ........................................................................................ 779
PROSPERITY AT RISK: Harvard Strategy Study Spells Out US Problem ........................................................................... 783
US INVESTMENT CYCLE........................................................................................................................................................................... 787
GORD'S BIG PICTURE ECONOMIC CYCLE ...................................................................................................................... 787
ECONOMIC INDICATORS.................................................................................................................................................. 788
MONTHLY INDICATORS OF NOTE .......................................................................................................................................................................... 788
THE CURRENT BUSINESS CYCLE - SITUATIONAL ANALYSIS ....................................................................................... 792

BUSINESS CYCLE - JOBS > CONFIDENCE > CONSUMPTION > GROWTH CYCLE ....................................................... 792
BUSINESS CYCLE - JOBS ................................................................................................................................................. 793
JOBS: Participation Rate at 1979 Carter Levels ....................................................................................................................................................... 799
BRIDGING : Jobs to Confidence & Sentiment .......................................................................................................................................................... 801
BUSINESS CYCLE - CONSUMER & BUSINESS SENTIMENT .......................................................................................... 804

SENTIMENT: Consumer, Investor & Trader ............................................................................................................................................................. 805
Consumer Sentiment - Michigan ................................................................................................................................................................................. 808
Consumer Comfort ........................................................................................................................................................................................................ 809
Investors Intelligence .................................................................................................................................................................................................... 810
American Association of Independent Investors ....................................................................................................................................................... 810
National Association of Active Investment Managers (NAAIM) ............................................................................................................................... 811
Small Business Optimism ............................................................................................................................................................................................ 812
SENTIMENT: Morgan Stanley's Business Conditions Index ................................................................................................................................... 813
SENTIMENT: Widening Gulf Between Consumer & Business ................................................................................................................................ 815
BUSINESS CONDITIONS: Weakening Over the Last Year .................................................................................................................................... 817
BUSINESS CONFIDENCE: Competitiveness Problem ............................................................................................................................................ 818
PLUMMETTING CAPEX: Lack of CEO Confidence in Growth ............................................................................................................................... 820
August 2013 Edition

9

BUSINESS CYCLE - CONSUMPTION................................................................................................................................ 821

CONSUMPTION: A Consumption Setback ............................................................................................................................................................... 823
CONSUMPTION: The Achilles Heels of US Economic Consumption Deception ................................................................................................. 827
CONSUMPTION: Retail Sales All in the Seasonal Adjustments ............................................................................................................................. 830
CONSUMPTION: Doesn't Exist without "Seasonal Adjustments" ........................................................................................................................... 835
CONSUMPTION: Durable Goods in Freefall ............................................................................................................................................................. 836
CONSUMPTION: Retail Sales Continue to Deteriorate ........................................................................................................................................... 836
DELEVERAGING: Defaulting Is the Operative Word ............................................................................................................................................... 838
HOME EQUITY: Loan Losses Surge .......................................................................................................................................................................... 839
BUSINESS CYCLE - GROWTH .......................................................................................................................................... 842

GROWTH: US Economic Recovery Has Peaked ..................................................................................................................................................... 844
GLOBAL SLOWING: Evidence Now Indisputable .................................................................................................................................................... 848
US ECONOMY: Q4 Growth Will Likely Weaken Noticeably .................................................................................................................................... 849
SLOWING US GROWTH: Rail Traffic ........................................................................................................................................................................ 853
US GROWTH: New Normal Closer to 1% ................................................................................................................................................................. 854
ECONOMIC CYCLE, INVESTMENT CYCLE, SECTOR ROTATION ................................................................................... 857
PEAK CONSUMPTION - A 70% US CONSUMPTION ECONOMY IS UNSUSTAINABLE ................................................................................ 861

A 70% Consumption Economy ............................................................................................................................................ 861
How Did It Get To Such A Level? ........................................................................................................................................ 862
Why Has Consumption Levels Peaked? .............................................................................................................................. 862
Why Is a 70% Level Unsustainable? ................................................................................................................................... 863
DELUSIONAL ENTITLEMENTS - THE ENTITLEMENT PONZI SCHEME ..................................................................................................... 864
Financial Fiction .................................................................................................................................................................. 864
The Illusion.......................................................................................................................................................................... 864
The End Game .................................................................................................................................................................... 864
STUDENT LOAN CRISIS IN AMERICA..................................................................................................................................................... 865
A Flawed or Obsolete College Business Model ................................................................................................................... 865
Reduced State & Local Funding .......................................................................................................................................... 868
Financialization of Education ............................................................................................................................................... 870
The Financial Case for College Misrepresented .................................................................................................................. 871
Soaring Costs ..................................................................................................................................................................... 873
Delinquencies & Defaults .................................................................................................................................................... 875
TRANSITIONING - FROM CAPITAL CONSTRAINED TO INNOVATION CONSTRAINED .................................................................................. 879
A Post-Capitalist Society ..................................................................................................................................................... 879
Continuously Obsolescing Work .......................................................................................................................................... 879
Changing Critical Role of Organizations .............................................................................................................................. 879
Innovation Risk.................................................................................................................................................................... 879
US GOVERNMENT SURRENDERS 'RISK FREE" .................................................................................................................................. 880
Exorbitant Privilege ............................................................................................................................................................. 880
US Firmly in Stage 5 of the "Sovereign Life Cycle" .............................................................................................................. 885
The Price of Political Chicanery ........................................................................................................................................... 888
US PUBLIC POLICY - SOME NOTABLE POLICY PROBLEMS............................................................................................................. 889
POLICY: A Destructive and Distorted Government Protection Racket ................................................................................. 891
POLICY: "Institutionalizing" 47.8 Million or 15% of Americans on Food Stamps ................................................................. 893
POLICY: Credit Growth Solely Government Funded ........................................................................................................... 898
POLICY: Failure of Economic Policy & The Creation of a Credit Bubble of Epic Proprtions ................................................. 900
POLICY: Government's Consumption Spending versus Investment Spending .................................................................... 902
POLICY: FHA is a Case Study in Failed Public Policy ......................................................................................................... 904
POLICY: What Was Intentionally Avoided During the Election Promises By Both Parties .................................................... 908
What about the $84T in Unfunded Federal Entitlements? ....................................................................................................................................... 908
What about the $5T in Unfunded State & Local Government Pension Obligations? ............................................................................................ 909
What about the $1T in Student Loan Bubble? ........................................................................................................................................................... 912
What about the ...... ? ................................................................................................................................................................................................... 913
POLICY: Failure to Recognize & Alter Policy When it is Clearly Not Working ...................................................................... 913
Stimulus Hasn't Worked. It is Camouflaging Something Deeper ..................................................................................................................... 918
POLICY: A Capitalist System No Longer Realistically Operate When the State Borrows at a Negative Cost ....................... 920
POLICY: Congressman Ron Paul's Farewell Speech to Congress ...................................................................................... 923
August 2013 Edition

10

MONETARY POLICY - HELICOPTER MONEY IS LIKELY FOREVER ............................................................................................................. 929

MONETARY: Helicopter Money of Central Bank Bond Purchases are Forever ................................................................................................... 931
MONETARY: Central Bank Balance Sheet Expansion and the Theoretical Path to SPX of 1950 ..................................................................... 933
MONETARY: Central Bank Balance Sheet Expansion versus CPI ........................................................................................................................ 935
MONETARY: The Fed Model No Longer Prices Risk .............................................................................................................................................. 935
MONETARY: US GDP Growth Through Manipulation ............................................................................................................................................. 941
FED INDICATORS .............................................................................................................................................................. 944

CHARTS: Fed Deliberately ignoring data on both growth and inflation .................................................................................................................. 944
CHARTS: US Economic Activity ................................................................................................................................................................................. 945
CHARTS: Effects of QE on S&P 500 .......................................................................................................................................................................... 946
CHARTS: Monetary Velocity versus Monetary Base ................................................................................................................................................ 947
CHARTS: Days Between 'Unsterilized' Actions ......................................................................................................................................................... 948
CHARTS: FOMC Economic Projections .................................................................................................................................................................... 948
CHARTS: Taylor Rule & Evans Rule Estimates of Fed Funds Rates .................................................................................................................... 949
CHARTS: Market Pricing In A Longer On-Hold Fed ................................................................................................................................................. 949
CHARTS: Fed Balance Sheet Assets & Liabilities .................................................................................................................................................... 950
CHARTS: Fed Policy Turns 180 Degrees .................................................................................................................................................................. 950
CHARTS: US Banking Industry Concentration .......................................................................................................................................................... 951
CHARTS: Total Credit Market Debt as % GDP ......................................................................................................................................................... 952
CHARTS: Debt-to-GDP Ratio Above What Caused Great Depression ................................................................................................................. 953
CHARTS: Yield Chase Completely Distorted ............................................................................................................................................................ 953
PATTERNS: Velocity of Money ................................................................................................................................................................................... 956
PATTERNS: Real Negative Rates .............................................................................................................................................................................. 958
PATTERNS: Short Interest Rates a Fed Problem .................................................................................................................................................... 960
UNDERSTANDING MONETARY POLICY - A Primer ......................................................................................................... 962

Understanding the Modern Monetary System Part 1 ............................................................................................................................................ 962
Understanding the Modern Monetary System Part 2a .......................................................................................................................................... 964
Understanding the Modern Monetary System Part 2b .......................................................................................................................................... 968
QE III POST MORTEM - BROKEN FED MODEL ................................................................................................................ 987

POST MORTEM: Market Reacts Badly...................................................................................................................................................................... 987
POST MORTEM: Currency War Salvos & The $67T Shadow Banking Currency Cartel ..................................................................................... 989
POST MORTEM: Fed's Broken Model ....................................................................................................................................................................... 998
POST MORTEM: QEfinity Working Psychologically the same as 1987 Pre-Crash Portfolio Insurance .......................................................... 1000
FED'S NEXT STEP ........................................................................................................................................................... 1002

NEXT STEP: Current Fed Thinking .......................................................................................................................................................................... 1002
NEXT STEP: Fed Lays Foundation for Further Policy Changes ........................................................................................................................... 1003
NEXT STEP: High Probability Direction ................................................................................................................................................................... 1010
NEXT STEP: Communications to Ensure "Duration" Understood ........................................................................................................................ 1013
PREVIOUS QUARTERLY SUMMARY - REFERENCE ............................................................................................................................. 1014

December 2013................................................................................................................................................................. 1014
September 2013................................................................................................................................................................ 1016
FISCAL POLICY - A BUDGET SHAM ...................................................................................................................................................... 1017
BUDGET - What You Need to Know ................................................................................................................................. 1019
BUDGET: As Represented and Spun for the Public ............................................................................................................................................... 1020
BUDGET: A Budget That Institutionalizes Big Government .................................................................................................................................. 1022
BUDGET: The Secrets in The Budget ...................................................................................................................................................................... 1026
BUDGET - Entitlement Reform through "Chained CPI" Changes ...................................................................................... 1029

CHAINED: Both A Cut and Tax ................................................................................................................................................................................. 1029
CHAINED: Reason It Hits So Hard ........................................................................................................................................................................... 1031
BUDGET - Retirement Account Limits ............................................................................................................................... 1035

RETIREMENT: $205K Account Limits ..................................................................................................................................................................... 1035
RETIREMENT: $3M Retirement Cap Unanswered ................................................................................................................................................ 1036
OUR FISCAL CLIFF PREDICTIONS versus OUTCOME................................................................................................... 1038

PREDICTION: The High Probability Outcome ........................................................................................................................................................ 1038
PREDICTION: Political Brinksmanship & Vigilantes ............................................................................................................................................... 1039
OUTCOME ................................................................................................................................................................................................................... 1047
CHARTS ........................................................................................................................................................................... 1049

KEY CHARTS: Growth & Jobs .................................................................................................................................................................................. 1049
KEY CHARTS: Taxes & Spending ............................................................................................................................................................................ 1052
KEY CHARTS: Politics & Policy ................................................................................................................................................................................ 1055
August 2013 Edition

11

KEY CHARTS: The Stakes ........................................................................................................................................................................................ 1056

KEY CHARTS: Payroll Tax Holiday .......................................................................................................................................................................... 1059
CHARTS: Tax Rate Comparisons ............................................................................................................................................................................. 1060
CHARTS: Risk Perceptions ....................................................................................................................................................................................... 1061
CHARTS: 2013 Quarterly Impact .............................................................................................................................................................................. 1062
CHARTS: Budget Deficit ............................................................................................................................................................................................ 1063
CHARTS: Sovereign Debt .......................................................................................................................................................................................... 1066
CHARTS: State & Local Government Drag ............................................................................................................................................................. 1067
CHARTS: Government Dependence ........................................................................................................................................................................ 1070
CHARTS: Coming Demographic Shock ................................................................................................................................................................... 1071
TREASURY FUNDING ..................................................................................................................................................... 1074

TREASURY DEBT: TIC Table ................................................................................................................................................................................... 1074
TREASURY DEBT: Reference .................................................................................................................................................................................. 1076
US BUDGETING PROCESS - Reference ......................................................................................................................... 1078

STATEMENTS: As A Corporation it is Both Insolvent & Exhibits Fraudulent GAAP Accounting Practices ..................................................... 1078
PREVIOUS QUARTERLY SUMMARY - Reference ........................................................................................................... 1090

December 2012 ........................................................................................................................................................................................................... 1090
September 2012 .......................................................................................................................................................................................................... 1094
KEY DRIVERS - CATALYSTS OF CHANGE .......................................................................................................................................... 1096

EMPLOYMENT ................................................................................................................................................................. 1101
1- CAPITAL SPENDING ............................................................................................................................................................................................ 1101
2- SMALL BUSINESS OPTIMISM ............................................................................................................................................................................ 1105
3- DEMOGRAPHIC SHIFT ........................................................................................................................................................................................ 1109
RESEARCH OF NOTE............................................................................................................................................................................................... 1114
REAL DISPOSABLE INCOME .......................................................................................................................................... 1120

RESEARCH OF NOTE............................................................................................................................................................................................... 1124
US RESIDENTIAL REAL ESTATE .................................................................................................................................... 1130

OVERVIEW.................................................................................................................................................................................................................. 1130
CURRENT SITUATIONAL ANALYSIS ..................................................................................................................................................................... 1135
CURRENT HOME OWNERSHIP TRENDS ............................................................................................................................................................. 1135
NEW HOME SALES - Not as Strong as Headlines & Excitement Suggests ....................................................................................................... 1139
HOUSING - Potentially Increasing Supply v Demand Problem ............................................................................................................................. 1143
NATIONAL STATISTICS: PRICE ............................................................................................................................................................................. 1145
NATIONAL STATISTICS: EXISITNG HOME SALES ............................................................................................................................................. 1147
NATIONAL STATISTICS: NEW HOME SALES ...................................................................................................................................................... 1149
RESEARCH OF NOTE............................................................................................................................................................................................... 1150
US COMMERCIAL REAL ESTATE ................................................................................................................................... 1157

OVERVIEW.................................................................................................................................................................................................................. 1157
NATIONAL STATISTICS: COMMERCIAL REAL ESTATE.................................................................................................................................... 1158
RESEARCH OF NOTE............................................................................................................................................................................................... 1159
CAPITAL SHRUGGED .............................................................................................................................................................................. 1164
Full Out
Debasement
Planned with
"ABE-NOMICS"
August 2013 Edition

12


The Globalization Trap: GLOBAL MACRO - Regional Update

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The Globalization Trap: GLOBAL MACRO - Regional Update

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THE GLOBALIZATION TRAP

Slowing Growth Triggering the Trap

GLOBAL MACRO - Regional Update

GLOBAL MACRO TIPPING POINTS - AUGUST 2013

1 August 2013 Edition

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