https://www.site/2016-11-08/finansist_stepan_demura_skoro___kollaps_mirovoy_i_rossiyskoy_ekonomiki_kak_vyzhit
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Stepan Demura, famous financial analyst, engineer, trader, teacher and consultant, answered questions from readers and editors of the site.
Stepan Gennadievich, let's start with the global. The export Russian economy depends on the state of the world economy. Alarmists believe that the world economy is "holding on by a thread" and will soon "go into a tailspin." Optimists are convinced that America, the world's main consumer market, is emerging from recession (now growing at the level of 1-1.5%), and stable the economic growth in China, India at the level of 7-7.5% and in other countries of Southeast Asia is able to draw the entire world economy. Consequently, the demand for energy, including Russian, will also grow. What is your opinion on this matter?
First, not alarmists, but realists. And secondly, empty juggling with numbers does not make much sense. As for GDP, this is a specific product: it can come out with an error of plus or minus 2.5%. The GDP indicator can be used to assess trends: if GDP increases beyond the margin of error, then there is growth. Chinese GDP in general is a ridiculous phenomenon, because at the end of 2009 they had amazing results: then electricity consumption fell by 25%, and GDP grew by 8%. Or it turns out that in some province the level of production was overestimated by 4 times. At the same time, it should be emphasized that our Rosstat is not much different from the Chinese Statistical Agency. So these figures should be treated with a great deal of skepticism.
As for consumption in the world, it actually rests on word of honor. Because all government investment programs, which were accepted in China, and in Japan, and in the USA, and in Europe - they did not reach the real sector, for the simple reason that there is practically no one to lend. All companies - both medium and large - are already in debt. What we are seeing today is a precarious balance. The economy that existed before 2008 was based on banking multipliers, today the system is ready for a phase transition, which will be expressed primarily in the collapse of the banking system due to general economic decay. What will cause the recession that began in 2006 to continue is anyone's guess. This could be the bankruptcy of Deutsche Bank or one of the two largest Swiss banks (UBS and Credit Suisse - ed.), and any other factors.
Straitstimes.com
- But governments are trying to resist this trend, aren't they?
Yes, for example, the Chinese government is trying to pump liquidity into its own economy in an attempt to support the domestic consumption it has been counting on. To do this, they inflate the real estate bubble to some wild heights, the car bubble with credit incentives and tax deductions for small cars, this can be seen from the dynamics of sales. But this is a temporary phenomenon, which should soon end.
In October, China, Saudi Arabia, the central banks of other countries staged a sale of US debt. What are the reasons what is happening?
These are not some kind of behind-the-scenes games, these are forced sales. They just don't have currency. China sold more than $500 billion worth of US bonds last year. I remember we were scared of China selling US bonds, but the market didn't even notice.
- What awaits our country as a result of the transition to a new phase? Do we have any chance?
There is no chance. All the chances that we had, we were very successful, sorry for the word, we blew it.
bump.ru
But in October, at the Russia Forward! Putin reassured that "we have achieved a stable macroeconomic situation." At the same time, the Ministry of Economic Development sent to the Ministry of Finance long term forecast socio-economic development until 2035: the economy in the next 20 years will grow extremely slowly - an average of 2% per year. How shoud I understand this?
As for Putin's statements, then, listen, why pay attention to such statements? They do not carry any semantic load. Remember that Minister Ulyukaev is already finding the 24th bottom of the Russian economy. How do our officials say? The rate of decline has stabilized! But in fact, the latest data on real incomes of the population show that the rate of decline is accelerating and they have already beaten the level of 1999: in September, the fall real income of the population, according to Rosstat, amounted to 6.1% per month.
As for the forecast of the Ministry of Economic Development, it means a slow degradation of the economy, at the end of which we will achieve the very “absolute stability” that can only be in a cemetery. But I believe that we will not have either slow degradation or slow growth. We will just collapse. This collapse was man-made for many years: our economy is 100% correlated with the price of energy.
But, firstly, by the end of 2018, the United States and Qatar will put into operation capacities for the production of liquefied gas for 180 billion cubic meters per year. Where do you think this gas will go? To Europe. And it will stupidly oust Russian gas from there. All fairy tales about the fact that liquefied gas is very expensive have no real basis. Look at the cost of liquefied gas in American hubs, look at the price of delivery, and you will understand that Gazprom will have to live somewhere on $80-90 per thousand cubic meters, but this is unrealistic for it. Secondly, now in the States, wind and solar energy has become cheaper than that obtained from gas and fuel oil. And the consumption of oil and gas in industries that are not directly related to petrochemistry will decline.
Several conclusions follow from this. All the talk about "getting up off your knees" has nothing to do with reality, the contemptible oil is to blame for everything. Consequently, even for the “fat” years, you should thank the wrong person, you yourself know who. If someone wants to put a "Obama schmuck" sticker on their Ford bought on credit, think about who you owe your loan to. And you owe that same Obama and others like him. Because the price of oil is determined solely by monetary policy the Fed and a number of other Western central banks. And our government has nothing to do with this at all.
“If you look at what damage has been done to the banking system lately, how much capital has been withdrawn from the country, you will be horrified. Question to the Central Bank: do you generally perform your functions or just in a share? (in the photo - the chairman of the Central Bank Elvira Nabiullina) RIA Novosti/Sergey Kuznetsov
Further, compared to the mid-zero years, the liabilities and expenses of the Russian government have increased significantly, while revenues from the sale of oil and gas have remained at the same level. Therefore, our wonderful Ministry of Finance reviews the budget every quarter, and all budget expenditures are godlessly cut, with the exception of some items related to the defense of the Fatherland. This process will continue for the reason that the Ministry of Finance, the Central Bank, and so on stepped on the classic rake that Kudrin stepped on in his time. He decided to increase tax revenues by increasing them, but the opposite happened.
In macroeconomics, there is a "Laffer curve" that shows the relationship between the tax burden on businesses and economic growth. So, our government has long fallen into a tax trap: if your tax base starts to decrease, then you increase tax burden, but, according to this curve, there is a certain threshold, after which the economy inevitably begins to contract.
There is no need to count on a sharp rise in oil prices. State reserves are not eternal, it is believed that at the current rate of use they will last no more than two years. This means that they will not refuse to raise taxes, fees, and tariffs. Recent news: the Ministry of Transport proposed to charge a fee for crossing the border in transport. Another recent example is talk of a tax on bank deposits. What other similar "innovations" of the state should be prepared for?
There is nothing extraordinary in the tax on deposits. I think all innovations are yet to come. For example, the tax on life: if you want to live longer than 40 years, pay 500 thousand rubles, if you want to live longer than 50, pay a million.
- Well, this is from the realm of fantasy and jokes ...
Why is this? Is quite real. People will be told: the treasury is empty, we are surrounded by enemies, we need money for defense. Massive processing on TV - and after a while people will take it for granted. I do not see anything funny. At least it's no funnier than the taxes that our dear government is inventing and implementing today.
w.turksib.com
- What is your forecast: how strong and painful will the tax impact on business and the population be?
Even if commodity prices continue to rise, this will not help much: we have falling physical volumes of exports of both gas and oil. Most likely to be screwed printing press and start to increase the value of money. And then the business will find itself in a situation where borrowed funds are obscenely expensive, and consumer demand is obscenely reduced. Therefore, small and medium-sized businesses simply will not exist at all. Some scraps will remain, but all this does not count.
Another budget amendment option that the government is considering is an increase in public debt. At the same time, according to the Foreign Ministry, the United States gave a signal through the IMF to block support for Russia. Can we, therefore, rely on external borrowing?
No, our country has been cut off from foreign capital markets for the second year already. This is the result of the very sanctions that Putin and his entourage call "ridiculous." What is left for them to do now? Build the GKO pyramid again.
But she eventually collapses.
Of course it will collapse. First, there will be a reduction in tax revenues, because along with borrowing, the regime will increase taxes. And, secondly, when the state borrows from the capital market, it deprives private companies of access to these markets.
In 1998, the fall of the GKO pyramid led to the collapse of the banking system. As the October poll of the Public Opinion Foundation showed, today only 43% of compatriots have bank deposits, and only 30% consider this profitable way placement of funds. How safe is it? What is the state of our banking system?
After the fall of VEB, this question can probably not be asked at all. And the main problem is that we have such a wonderful body as Central bank. If you look at the damage that has been done to the banking system lately, how much capital has been withdrawn from the country, you will be horrified. The amount is close to 900 billion rubles. Question: do you perform your functions at all or just in a share?
“All innovations are yet to come. For example, a tax on life: if you want to live longer than 40 years, pay 500 thousand rubles, if you want to live longer than fifty, pay a million” shadr.tv
- It is believed that the banking system can be trusted until the deposit reimbursement system is abolished.
Try it. And where is the guarantee that they will not say: “I'm sorry”? You may be told: according to our data, your account was not one and a half million, but thirty thousand. Then they will call and offer: we will return the balance to you for 50% of the amount.
- Is that possible?
It's already happening, right and left, only with legal entities. It may well happen with the physical.
We can arrange anything. But at the same time, it must be remembered that the law on the Central Bank contains Article 29, which says that the ruble is backed by the assets of the Central Bank. And the assets of the Central Bank are mostly dollars, but if you carefully read all these bills, then for some reason they want to ban the circulation of the “despicable dollar”, and all other currencies are, as it were, “kosher”. It's probably just throw-ins. They launch a "duck" and look at public opinion.
- Doesn't the government understand what its actions (or inaction) lead to and what it will mean for it?
You are making a big mistake when you think that the authorities understand something. Have you watched the movie "Kin-dza-dza"? There, one of the main characters uttered an epoch-making phrase for Russia: “The government lives on another planet, dear!” The current power group has not a single economic policy, some kind of strategy, we see just throwing from side to side.
- And yet, how will this affect the political sphere?
It won't affect at all. We do not have a social class that is capable of some kind of political change.
i1.lt
But after all, many in Russia have fixed certain standards of consumption. Will they not react in any way as a result of the collapse?
I don't think so. They will still have to give up the way they used to live and come to terms.
- Will the thing that our president values so much - his rating - not suffer?
I don't think he cares much for them.
- Hence the emergence of the National Guard: is it more reliable than the rating?
I'll tell you this: the National Guard was created by Putin not to suppress people's discontent, but to fight other "guards" that any oligarchic structure has.
- How do you feel about the assumption that Putin will leave next year?
Hardly. It's not good for him. These people don't just leave. Besides, he's not on his own. This is a whole group of people that we know as "Petersburg". For them, Putin is a matter of life and death. The country has a complete economic failure, but there is faith in the leader, in stability, in the myth of Western enemies, and so on. If there is no Putin, all this mythology will evaporate and someone will have to answer for the complete failure.
- That is, Putin will be at the helm until the last heartbeat?
Of course, there is no other way out for him and his entourage from the current situation. Find a successor to Putin, the same as he is impossible. Moreover, in his post he is very convenient for many people. Remember where Putin came from, who appointed and promoted him. There is no particular difference between Yeltsin's and Putin's. But the former try to be in the shadows, while the latter completely substitute themselves. Putin linked all the aspirations of the people with his figure. And if a complete "kryndets" comes, then it will be on him that everything can be blamed. And the rest will come out dry from the water and say: "But we said" or "But we are not in business."
RIA Novosti/Alexey Nikolsky
- What will active citizens who will lose their business and jobs do?
They will go out onto the main road, as is usually the case with us. Look what is happening in the Donbass. Here we are waiting for something similar.
What will ordinary people do?
And many governors have already explained to ordinary people that it is necessary to harvest berries and mushrooms.
- Especially since the freezing of the funded part of the pension has been extended again?
So this, in fact, is a real default of the state on its obligations. And the population quietly ate it all. And you say that someone will protest. No one will. Their pensions are taken away, their money is taken away, and they are silent.
But history shows that our people are not as passive as you see. Recall the February and October revolutions, the confrontation with the State Emergency Committee in 1991, even in Soviet times there was a strike in Novocherkassk.
The main question of any revolution is the question of ownership of the means of production. In 1917 Russia was a feudal country surrounded by countries where there were democracy and liberalism. Of course, Russia was uncompetitive compared to them. At the same time, it was headed by a completely illiterate manager. As a result, a revolutionary situation arose (it must be emphasized that it is always created by the regimes and governments themselves), and in February 1917 a bourgeois-democratic revolution took place, which answered the question of ownership of the means of production.
And in October of the same year, there was no revolution, but a counter-revolution, which led to the revival of feudalism. And in this feudalism we continue to live to this day. Nothing much has changed even with the advent of Yeltsin, and even more so Putin. We lived in a feudal country, and continue, the question of the means of production, of private property remained unresolved. If you have a business and the security officer likes it, you will most likely lose your business. If you have a fancy apartment, and some prosecutor likes it, they will somehow take it away from you. There is no question of any ownership of the means of production, the inviolability of private property.
RIA Novosti/Sergey Pyatakov
In terms of economics, we are again following the so-called "mercantilism model" that was characteristic of European countries in the XVI-XVII centuries, then it was replaced by liberalism and capitalism. Politically we are again a mediocre feudal state. Again, developed countries are next to us, which have long since abandoned this model. Of course, our system is again absolutely uncompetitive, neither economically nor politically. And there is no one to change this situation. Because the class or group of the population that is interested in resolving the issue of property and the means of production votes with their feet, that is, they leave the country to where it is more comfortable. They are not ready to stay and fight here. Therefore, Russia will vegetate in a deplorable state for an arbitrarily long time.
And yet I note that even the Soviet Union collapsed. Despite the fact that at that time economic, ideological, whatever control was much tougher, they were afraid to tell jokes about the party and the KGB out loud, only in a whisper. And now write in social networks almost what you want.
Now the control is not at all weaker than in the Soviet Union, the special services are just as careful as before. But ideology is secondary. Those same social networks make it possible to compile a dossier on each person and “lead” him for the time being, and then, if necessary, put pressure on him, bring him under an article, silence him or cooperate.
- What will be a signal for you personally that “it’s time to go down”?
All the signals have already been given. It's long overdue. If someone is still sitting and waiting for something, then stop entertaining yourself with illusions. There is an opportunity to leave. No - harvest berries, mushrooms, herbs, bark and so on.
- Why are you still here?
Don't worry about me, this is temporary. My skis have been oiled for a long time.
“Open borders are letting off steam. If you don't like the regime in Russia, go on all four sides. And if they keep it, then opposition will accumulate inside the country. Why is the regime doing this? (on the photo - Mikhail Khodorkovsky, Sergey Guriev)openrussia.org
- Do you think the borders will be closed after some time? Need to hurry up?
The borders will not be closed, because it is unprofitable for anyone. Firstly, 90% of our population have never been abroad and are not going there: there is neither interest nor money. And secondly, open borders- this is a kind of "release of steam", discontent. If you don't like the regime in Russia - go to all four sides, no one is holding you back. And if they keep it, then various kinds of opposition will accumulate inside the country, they will shout about the violation of human rights, the revival of totalitarianism.
Why is this regime? He does not have the task of introducing any ideology. His task is to stay in power as long as possible. And this measure - isolation - in no way contributes to the fulfillment of this task, rather, on the contrary, it harms. And then, what does “close the borders” mean? Our borders are very long. And since everything is bought and sold in the country, you can buy at least a whole outpost.
But what about the bills on the issuance of exit visas, on the fees that tourists may be subject to when traveling abroad?
These are additional measures - how to cash in on the Russians, but not the closure of borders.
Listen to you, everything is so bad. But you have to live somehow, raise children. You, a person with predictive abilities, can you tell what professions will be most in demand? Who to study? On the financier, how are you?
What other financiers? Who needs them here! You still say "lawyers". They are already like uncut pigs. Banking system and so it is bursting at the seams, and you are talking about some kind of financiers, economists, lawyers.
Bandits and smugglers - that's what you need to learn: shoot, master martial arts, be able to stand up for yourself, be able to grab your own in life. You can still try to enter the police school or the Academy of the FSB, you can also go to the law faculty, but then to the prosecutor's office. That is, the main thing is to have “ksiva”. But remember that getting there is not easy, and career advancement will happen only thanks to connections.
RIA Novosti / Vladimir Astapkovich
- But seriously?
This is absolutely serious.
Then, finally, a few questions about investments from those of our readers who, apparently, are thinking of doing without “ksiva”. One of them asks: “The elections to the State Duma of the Russian Federation have passed, and the ruble is in the same position, readers are interested in why the Central Bank of the Russian Federation keeps it afloat?”
First, how are the elections and the ruble related? Secondly, no one is holding him back, such an approach is deeply erroneous, and the Central Bank has no way to keep the ruble. The dynamics of the ruble is explained by the dynamics of the markets: there is an influx of “hot” investment capital- the ruble is strengthening, there is no this inflow - it is falling.
- “How will the Russian market and currency behave after the US elections? Is it possible to play at this event, and if so, where to invest?”
No way. All these fairy tales fundamental analysis- to litter the brain. Elections in the US will not affect anything. If the markets are ready to fall, they will fall; if they are ready to rise, they will rise, no matter who is chosen.
- “What do you think about the rise in real estate prices. Some time ago, real estate prices slowed down. But according to September, the cost of building one square meter housing in Russia exceeded 41 thousand rubles. Is it possible to consider real estate as a way to invest?
No, real estate cannot be an investment vehicle. because Residential Properties is a consumer product, and commercial - a means of production. Real estate can become an investment in a rare case - at the very end of the loan cycle phase, when a box of matches, a toilet bowl or an urn also become the subject of investment. As soon as the credit cycle unfolds, as it has now, real estate returns to normal. And if you had a real estate bubble, then the fall is 80% of the vector. This is what we see in Moscow: real estate there in dollar terms has fallen by 2.5 times. Real estate has room for a good fall. Historically, this has always been the case, and there is no reason that this will change in any way.
portamur.ru
Some of our readers have invested their savings in an impersonal metal account of the Russian Agricultural Bank, in gold. They are interested in his prospects for one and a half to two years.
A year ago, unallocated metal accounts were not insured by the Deposit Insurance Agency, in my opinion. That is, if something bad happens to the bank, you can say goodbye to your money. In addition, when I converted a metal account into gold with Sberbank many years ago, the latter put up a lot of obstacles for me: either they don’t have scales, or something else. So I would rather close such an account, buy real gold and spit on VAT. This is not the kind of money that cannot be donated in this situation.
- “What government bonds are better to buy, how old should they be?”
- “What can you say about the Finex ETFs that have recently appeared in Russia?”
to any new investment products, which suddenly appear in Russia, must be treated as another scam.
The situation in the global economy and the world of finance only at first glance seems stable, but in fact, almost all the conditions for a new financial collapse have been created.
It is worth starting with Japan - the country with the largest debt burden, which, however, does not prevent investors from perceiving it as a safe haven and even giving money to the Japanese government for free. Most recently, Japan placed two-year bonds worth $4 billion, yielding a record low - minus 0.149%. It is important to note that demand amounted to almost $20 billion, that is, it exceeded supply several times, moreover, the demand / offer ratio at this auction turned out to be higher than the average for the last 12 auctions: 4.97 versus 4.75.
We add that the yield on ten-year Japanese bonds is now at minus 0.001%.
Negative returns are a reflection of the fact that investors do not expect the largest central banks to end the monetary tsunami that hit the world after the financial crisis of 2008. And although representatives of the Central Bank periodically talk about the desire to normalize their policies, no one really believes in this, and the asset bubble continues inflate, undermining the financial system.
In addition, many experts are sure that the actions of the monetary authorities have created all the conditions for this.
On a global scale, the volume public debt with negative returns is about $9 trillion. Yields on 85% government bonds are less than global inflation, and investment income on them can be positive only if the cost will constantly grow, and exchange rates will move within the forecasts of these same investors.
Against the backdrop of an abundance of extremely cheap liquidity, the understanding of investment risks was completely distorted. Earlier, "Vesti. Economiki" has already reported that, for example, the yield of "junk" bonds of European companies at the moment fell below the yield of American treasuries. Such imbalances create serious risks for financial institutions, in particular insurance companies, pension funds and banks. It is the wrong perception of risk that leads to wrong investment decisions with all the ensuing consequences. Moreover, regulations require that financial companies hold a significant portion of their assets in "safe" or "high quality" instruments, that is, in asset classes, however, as we have said, safety and reliability is a controversial concept.
It is also worth noting that investments of pension funds in bonds with zero or negative yields bring a minimum cash flow, while in order to fulfill their obligations they must have an annual yield of 7-8%. As a result, the deficit is growing. Milliman said that on average for the period 2012-2016. US pension funds placed 27-30% of their assets in cash (3-4%) and bonds (23-27%), generating a total return of approximately 1.31% per annum.
Because this is not enough, pension and other funds are increasingly investing in riskier assets to get more income, although in this case it is rather difficult to determine the level of risk. Blackrock calculated that as a result, half of all large insurance companies operating in the US market now carry more risk on their balance sheets than before 2007. A Milliman report released in 2016 showed that among pension funds, the share assets invested in shares and real estate grew from 19% in 2012 to 24% in 2016.
In other words, all the years after the collapse of Lehman Brothers, pension funds, Insurance companies and other long-term investment companies loaded their balance sheets with extremely risky assets and reached their highest ever.
Another risk comes from central banks themselves. The fact is that the largest Central Banks continue to hold large volumes of the most reliable bonds on their balance sheets. As of August 1, 2017, the Fed, the Bank of Japan and the ECB had $13.8 trillion in assets, with both the assets of the Bank of Japan ($4.75 trillion) and the assets of the ECB ($5.1 trillion) exceeding the assets of the Fed ($4 .3 trillion) for the third month in a row.
The bond maturities calendar only exacerbates the risks of financial contagion from tightening monetary policy on the balance sheets of insurance companies and pension funds. In the case of the United States, according to information from PIMCO, the peak redemption of bonds, agency debt and TIPS owned by the Fed falls on the period from the 1st quarter of 2018 to the 3rd quarter of 2020. According to Bloomberg, the peak insurers and pension funds, will fall in 2020-2022. 
If the Fed simply stops replenishing maturing bonds, the most likely scenario for QE to wind down, the market is unlikely to be able to support asset prices that dominate the capital base of large financial institutions. Prices will fall, asset values will decline, and these financial institutions will feel the need for new capital. A similar situation is emerging in the UK and Canada, but the risks are even more pronounced in the euro area, where QE started later (in Q2 2015, in contrast to the US, where it started in Q1 2013). It should be noted that the interventions of the ECB were more aggressive than those of the Fed.
If a former official If the Reagan Administration is correct in its predictions, then we will most likely see the next massive financial crash before the end of 2017. According to Wikipedia, David Stockman is “an author, former businessman, American politician who served as a member of the Republican House of Representatives from Michigan (1977–1981), and Director of the Office of Management and Budget under President Ronald Reagan (1981–1985).” He is frequently interviewed by mainstream news outlets such as CNBC, Bloomberg and PBS. His opinion is very authoritative in the financial community. Like other analysts, Stockman believes that American economy is in very bad shape, and he told Greg Hunter during an interview that he believes the S&P 500 could soon collapse “by 40% or even more.”
The market turned out to be overvalued. This is insane... I believe the market could easily drop to 1600 or 1300. It could lose 40% once the fantasies are over. Soon the government will appear in all its glory, having arranged a massacre over the budget. And then these crazy ideas about the possibility of implementing the Trump stimulus program will be buried once and for all. I'm talking about the fact that these incentives do not happen. They will not be able to get through Congress a budget resolution with tax breaks when the budget already includes a $10 trillion increase in the debt burden. or $15 trillion. in the next ten years. It just won't pass in Congress... I believe we are witnessing the greatest rally of fools we have ever seen.
But even more troubling are Stockman's words about the potential timing of such a financial crash. According to him, if he had to choose the date of the next large-scale collapse in the stock market, he would “focus on the period between August and November” ...
We are heading towards an unexpected crisis and the S&P 500 will drop many hundreds of points at some point over the next few months… I would target between August and November because that is when the debt ceiling problem will reach its climax and the government will be left without cash. Washington will plunge into a bitter political conflict over the prospects for a debt ceiling... It will be a gigantic budget carnage like we've never seen before.
Without a doubt, financial system The US is living on borrowed time, and we cannot increase debt indefinitely. In 2017, interest on servicing government debt will cross the half-trillion dollar mark for the first time, and next year this figure will increase even more, because we will probably add at least another trillion dollars to the existing debt.
Meanwhile, financial markets become more and more absurd every day.
Look at Tesla. This company inexplicably managed to run a $620 million loss in the first quarter of 2017 and has consistently lost hundreds of millions of dollars quarter after quarter.
Nonetheless, market price this company is worth an incredible $48 billion.
It feels like we live in an upside down world where the more money a company loses, the more valuable it becomes to investors. Corporations like Tesla, Netflix, and Twitter are burning huge amounts of investor money for no profit, but no one seems to care.
Mortgage securities, secured commercial real estate is another red flag that is starting to get a lot of attention...
According to the Commercial Mortgage Alert, the percentage of distressed (loans in special servicing) mortgage-backed commercial real estate (MBS) securities reached 6.6% as of the end of April. The increase of 5 basis points since the end of March was the result of an increase in the volume of securities - backed by commercial real estate and rated by Fitch, which was recorded in delinquency - by 9 basis points to 3.5% as of the end of April.
Delinquency on both MBS and CMBS reached the highest high level since 2015.
During the 2008 crisis, residential real estate backed securities played a major role, but this time it looks like commercial real estate backed securities may well wreak havoc in the financial markets.
One of the reasons why all this is happening is due to the enormous difficulties faced by the owners of the malls. The 2017 retail store closure rate promises to break the previous record by 20%, and Bloomberg predicts that eventually a billion square feet of retail store space will cease to function or be repurposed.
Needless to say, what is happening in retail is putting enormous pressure on retail space owners whose debts are starting to deteriorate quickly.
In 2007 and early 2008, many analysts warned that mortgage-backed securities could lead to a crash in the stock market and an inevitable recession. But these analysts were objects of ridicule. People kept asking them when the “crisis” would finally happen, while the Chairman of the Federal Reserve reassured the public with assurances that there would be no recession in the US.
But then came the fall of 2008, and everything went to hell. Investors suddenly lost trillions of dollars, millions of jobs evaporated as if they never existed, and the American economy plunged into its worst recession since the Great Depression of the 1930s.
And now we have come close to an even more terrible catastrophe. The US national debt has nearly doubled since the last crisis, corporate debt has more than doubled, and all long-term economic fundamentals continue to deteriorate.
The only thing that saves us is the ability to increase the already exorbitant debt, but once this debt bubble bursts, we will see the largest adjustment in the living standards of citizens in all of American history.
It is not known whether Stockman will be right in choosing the timing or not, but this is not so important.
Much more important is the fact that decades of extremely stupid decisions made the greatest economic crisis in the history of the United States inevitable, and when it fully manifests itself, the human suffering that will accompany the development of this crisis will be truly unprecedented.
European Commissioner for Human Rights Emily O'Reilly, in a conversation with the Chairman of the European Central Bank (ECB), Mario Draghi, advised him to stop further participation in the "Group of Thirty" (G30) - the club of the world's most influential bankers.
In the relevant material of the London Guardian, the publication of which was also reflected in the Russian media, the group was called a "secret club of corporate bankers", influencing big politics. It is reported that Draghi demarche Ombudswoman "took note" and promised to respond to it.
Mario Draghi
Of course, the answer will have to wait a long time, if at all. Such a sensitive nerve of global oligarchic, purely shadowy, politics has been touched upon that it is time to calculate the far from obvious causes and consequences of this information emergency.
On the one hand, The Guardian, of course, went too far. The existence of the "thirty" is not a secret; she even has her own website. On the other hand, the group is really not advertised, especially in the media. Why?
Let's compare the goals and objectives of the activities that the G30 officially declares, and the results of the investigation conducted by the NGO Corporate European Observer (CEN), an organization that, in fact, provided E. O'Reilly with the necessary materials and conclusions underlying her conversation with Mario Draghi.
(Let's make a reservation that the Russian abbreviation KEN was chosen by the author due to the fact that the English CEO - "Corporate Europe Observatory" - is confusing, because CEO in business slang denotes the corporate position of an executive director or managing director).
So, officially, the "Goal of the G30" is an in-depth understanding of international economic and financial issues, as well as the study international implications decisions made in the public and private sectors…” - this is from the G30 website.
And here is the opinion of KEN analysts, who have been monitoring Draghi’s activities since 2012 and have repeatedly entered into correspondence with the ECB without receiving any response to their appeals before they launched the “heavy artillery” of officialdom from European civil society. Key message: "Over the past two decades, the G30 has acted as an effective lobbying vehicle for large private banks."
And a more detailed explanation of this thesis: “The guiding principles of the G30 have historically been the introduction of deregulation and self-regulation of the financial sector. She has achieved significant success in developing international norms in this direction, defending the interests of Wall Street and major European investment funds and banks by removing barriers to financial flows and investment…
The group is indeed run by important figures from the private financial sector, including the Wall Street bankers of J.P. Morgan Chase and Goldman Sachs, but many of its members are closely linked to central banks…
Since the founding of the G30 in 1978, the leaders of some of the largest private banks have been able to negotiate closely with important central banks, often under strict confidentiality. They used public figures to promote the group as a think tank rather than a lobbying structure. However, the presence of central banks only serves to increase the effectiveness of lobbying for corporate interests.
The G30 has worked systematically for more than two decades to push for rules that allow banks to promote their own interests with the help of regulators while remaining in the shadows themselves. On two occasions… it led to disaster. The G30's success in managing complex financial instruments(derivatives) and banking regulation led to the creation international rules that paved the way for the financial crisis of 2008”.
“Behind the verbal husk of PR information,” the well-known economist Valentin Katasonov agrees with KEN in an article with the telling title “G30: the force that controls the entire financial world,” it can be seen that the group is formulating recommendations for central banks and the world's leading banks. The participants of the meetings further participate in the implementation of the adopted recommendations, using their administrative capabilities, connections and influence.”
Let's figure it out. The main thing that follows from the above quotes and what unites them, regardless of the positive or negative assessment of the activities of the G30, is the statement that in it representatives of private oligarchic banks are not just coexisting, but intertwined with central banks.
It seems to be state-owned, although this is only an appearance: market dogmas require the "independence" of central banks, which "should not" be subordinate to their own governments.
Two questions follow from this. First: why is such a structure being created that turns central banks into “states within a state”, where did it come from?
The same V. Katasonov in the most interesting book “Capitalism. The History and Ideology of Monetary Civilization” (M., 2013) notes that it was the formation of the system of central banks of the leading countries - England, France, Germany, and at the beginning of the 20th century the USA - that served as a prologue to the replacement of state orders by the “order of money”.
Here is how he describes this process in England, launched after the “Glorious Revolution” of 1688-1689 and the accession on the banks of the Thames by William III of Orange, a representative of the Dutch, with Jewish roots, the Orange-Nassau dynasty.
“... On behalf of and on behalf of a group of usurers, negotiations with the new king were conducted by the well-known swindler William Patterson at that time ...
They demanded from Wilhelm: firstly, to agree to the creation of a special bank that would be the monopoly issuer of paper money circulating throughout the country; secondly, this bank was supposed to become the exclusive creditor of the government, issuing loans at 8% per annum in exchange for government promissory notes (bonds); thirdly, allow the bank to partially reserve its obligations, that is, in fact, allow it to make money “out of thin air”; fourthly, it was proposed to make the main “reserve” of the bank not gold, but government promissory notes; at the expense of the latter, lending to the government should be fully ensured, as well as the issuance of other loans.
In fact, W. Patterson's "project" contained all the main elements modern mechanism issuance of money by central banks developed countries… Loans to the government were repaid through taxes. Such a system suited both moneylenders - shareholders of the Bank of England, and government officials, as they received access to a constant source of credit.
Under such a system, Bank of England shareholder profits and government debt rose rapidly. The system gave rise to boundless corruption, contributed to the merging of the financial power of usurers and the “administrative resource” of government officials” (p. 594-595).
And further: “Among the founding shareholders were the King and Queen, who made a first contribution of £10,000. Then another 633 people contributed more than 500 pounds, which gave them the right to vote at shareholders' meetings.
In 1946, that is, two and a half centuries after its creation, the Bank of England was nationalized by the Labor government (by the way, the list of shareholders is still classified). ... However, even today it is de facto controlled not by the government, but by the private banks of the City of London: the Bank of England has always been and continues to be a private bank, pursuing the interests of a specific, very narrow group of people” (Ibid., p. 597).
The answer to the first of our questions, including the true role of the City of London, can be supplemented with the help of a book by the historian and political scientist Olga Chetverikova “Shadow History of the European Union. Plans, mechanisms, results”. The historical annals also contain information, confirmed by a British court, about a scam by which the Bank of England came under the control of the Rothschilds in 1815. As well as information about the modern partners of this clan, by which the Bank of England is controlled after nationalization.
This is the Kezvik family, closely related by family ties to the Sutherlands and through them to the "conquistadors" of the Opium Wars in China, the founders of Jardine & Matheson Holdings, which is directly related to the Rothschild business in the United States, and to the "colonial" banks created by the British in Hong Kong, Shanghai, and also in southern Africa - Hong Kong & Shanhai Banking Corporation (HSBC) and Standard Chartered.
And American researchers Robert Kirby and Eustace Mullins, back in the 70s of the last century, established and made public the list of shareholders of the Federal Reserve System (FRS), also secret, from which it follows that the Bank of England was and remains in the leading positions in it.
All this information will be incomplete if we do not mention the epic company Kuhn, Loeb & Co (Schiff and Warburgs), which had a hand in many events of the 20th century, including in Russia, but primarily in the creation of the FRS. And also about where its ends were hidden.
Meanwhile, in 1977, Kuhn, Loeb & Co was taken over by Lehman Brothers, which in turn went bankrupt in 2008, and its US assets, inherited from Schiff and Warburgs, ended up in the hands of the current global British bank through various machinations. Barclays bank. Bankers know how to keep and cover up the traces of their secrets.
Returning to the G30, let's ask a second question: if central banks are "independent" of their governments, then on whom are they dependent? The common thesis “from no one” is bullshit, because, as is also known from a bearded anecdote, “the most independent is the one who does not know on whom he depends.” But bankers know well who they depend on. From whom? Here is the time to analyze the composition of the G30, published by her website. And pay special attention to the following questions:
Let's not forget that the IMF and the World Bank Group have an excess quota in the G20, positions 21 and 22. The core of this group is closely connected with the founders and shareholders of the Bank for International Settlements.
It turns out the construction of some kind of "world central bank", in which the role of visible links is played by the IMF and The World Bank, and the real center is concentrated in the BIS, which, with their help, controls the G20, which has officially made an application for the role of "world economic government". If we recall that the IMF and the World Bank are in a special position in the UN and are included in its structure, then questions about who controls the world order disappear by themselves.
And the regular attacks on the veto power of the permanent members of the Security Council, which only keeps the UN from becoming a de facto "world political government", become understandable.
But let's return to the four designated questions and try to answer them. Biographies of group members from the G30 website to help us; in addition, since the people gathered there are mostly famous, it is not difficult to find additional information on them.
So, ten members of the group out of 33 in their background have work both in private and in central banks. These are Jacob Frenkel, Paul Walker, Mark Carney, Domingo Cavallo, "our hero" Mario Draghi, Timothy Geithner, Philipp Hildebrant, Gerhard Hessler, Maria Ramos, Axel Weber. Plus Lawrence Summers, who supplemented his proximity to a whole constellation of oligarchic “offices” with work in the American National Economic Council (NEC), which, functioning at the White House, legalizes oligarchic influence on US domestic and foreign policy.
Combining the first question with the third, we note that the representation of the Bank of England, the Fed and the banks included in its structure (mainly the Fed of New York) is unprecedented. We list: Paul Walker, Ben Bernanke, Mark Carney, Mervyn King, Roger Ferguson, Timothy Geithner, Kevin Warsh, and, at the consultant level, Nobel Laureate Paul Krugman and economist Kenneth Rogoff.
Let's digress for exactly a second, which is enough for us to remember two things. First, about the correspondence with the intentions to conduct a monetarist internal Russian politics between Summers and Anatoly Chubais.
And secondly, about the attempt to introduce the creator of the Argentine economic and financial catastrophe, Domingo Cavallo, into the Russian socio-economic context, which was undertaken against the backdrop of the failed “second coming” to power of Viktor Chernomyrdin by his Deputy Prime Minister Boris Fedorov after the default in August 1998. God bless! It passed then.
Eleven, that is, exactly one third of the members of the "thirty", are associated with the leading oligarchic banks and financial corporations on Wall Street, as well as Europe. But as for international financial institutions, the connection with them is as follows.
Nine members of the G30 worked at the IMF, three - in the structures of the World Bank Group. The largest representation here, as one would expect, is that of the Bank for International Settlements - twelve. In sum, this is almost everything, besides, we did not take into account the structures of the European Central Bank, which also have a reliable representation in the G30.
In the "thirty" and the current CEO BIS Augustin Carstens, and his predecessor and head of the Basel Committee on Banking Supervision Jim Caruana, and recent chairman of the board of directors Christian Neuer, and his "vice" Masaaki Shirakawa, and the rest of the "ordinary" members of the FSB, combining membership in it and in the "thirty ".
Recall that it is the BIS that performs the function of the “central bank of central banks”, gathering every two months for meetings in Basel the members of the Basel Committee, that is, the heads of the central banks of the participating countries. That is, in fact, everyone except North Korea and ... the Vatican (yes, “the law is not written to the Holy See”, maybe because he himself participates in its writing?).
And now what do we get - purely arithmetically? The BIS includes all central banks, the G30 includes influential people from central banks who, firstly, to a large extent combine their interests with private banking empires, and secondly, with international financial institutions. Doing this under the actual control of such "gurus" of the Anglo-Saxon financial world as the former and current heads of the Bank of England and the Fed.
It turns out a kind of octopus with a whole bunch of tentacles, the body of which, therefore, is the "Group of Thirty", and its core is precisely the Anglo-Saxon bankers. We proved this on the basis of statistical material, although by analyzing biographies, in which there is a lot of interesting information, one can come to the same conclusion using the methods of purely political analysis.
After all, it is in the "thirty" that all the main influence in the global banking community is summarized, and it is from it that the "leading" impulses are brought to the "ordinary" members of the Basel Committee, those heads of central banks who, together with "their" countries, are not among the "celestials" .
In other words, if together the BIS, the IMF and the World Bank Group form a kind of “world central bank” mentioned by us, then the “Group of Thirty” in this structure acts as a headquarters or a leading center.
The leading "central bankers" in it, through informal contacts, receive instructions from key private oligarchic banks. What did the late David Rockefeller say? "The private power of the intellectual elite is preferable to the self-determination of nations," isn't it?
Let's not even talk more about the G20 and its upcoming summit in Buenos Aires, although there is something to be said here. For example, about the gradation of its participants into the countries of the “first” and “second” orders, which include (respectively) the founders and members of the board of directors of the Bank for International Settlements (the so-called “Group of Ten”) and all the others, including members of the BRICS association.
A certain exception, however, is made for the People's Republic of China: Zhou Xiaochuan, head of People's Bank China, along with Mark Carney and Mario Draghi, are the current heads of central banks included in the "thirty" (and note that the current Fed head Janet Yellen is not in the G30).
Hierarchy built? The Bank of England, the ECB and… China? Who else? And also the chairman of the "thirty" Tarman Shanmugaratnam from Singapore populated by ethnic Chinese.
Meanwhile, it is Singapore, which since the time of the legendary Lee Kuan Yew and George Soros' business partner Jim Rogers, who moved his business there, along with the former Hong Kong and Macau (Xianggang and Macao Special Autonomous Regions of China), plays a special role in the communication of Western and Eastern financial elites.
However, the conclusions on the East are premature: there is little information, it is mostly closed, connected, among other things, with the internal disposition in the Chinese elite. And, in the end, it is clear that there are many fronts in the rivalry between China and the Anglo-Saxon West, including the financial one.
And that this rivalry is the essence of dialectical unity and the struggle of opposites. And within this rivalry, as evidenced by the games played around the IMF's "basket of currencies", different strategies collide. So far, one thing is clear: China is trying to squeeze out their Anglo-Saxon creators from international financial institutions, seizing the levers and threads of managing globalization.
Without going into details, I will express the assumption that I have already mentioned: this will not work. For a number of reasons, the main of which is that having won the world economic competition, will inevitably have to win the world war, without which the Anglo-Saxons Olympus will not yield to anyone and never. Of course, China knows how to wait: two or three hundred years is not a question. However, the denouement will come faster, because "if the gentlemen are not satisfied with the rules, the gentlemen change the rules."
And the last thing, requiring us, according to the law of the genre, to return to the beginning of the story.
Taking into account the above scenarios, from which the unique role of the "thirty" in the system of world power, at least economic and financial, follows, who dared (and, after all, was able!) to challenge it?
How did it happen that this “someone”, and even in Europe completely controlled by the Americans, was not “prevented” in a timely manner, did not have a soul-saving conversation with him, did not offer anything and did not outline frightening prospects?
Why did the scandal come to the surface and become the property of the general public, albeit not fully understanding what it is about?
There can be no two opinions: the opposition to the authorities is not born from the losers and marginalized opposing groups; it emerges only from power itself, as a result of its split and conflict of interests, as soon as defeated opponents disappear. And it doesn't happen otherwise.
Brexit, like Donald Trump's rise to power, has deeply divided Western elites. Having lost in both cases, the globalists from what is today called the "deep state", and Ivan Ilyin called the "world behind the scenes" a hundred years ago, have lost the initiative, gone on the defensive, although they are snapping.
Otherwise, no human rights activist would ever have come forward with anything like this, and the head of the ECB would not have condescended to polemics and explanations, which catastrophically violates all the vowels and tacit "tables of ranks." But this is only one side, revealing the origins and direction of the blow dealt to Draghi and the ECB as an important outpost of the globalists.
The other side is that this may also turn out to be a kind of “response”, a reaction to some provocative actions of the globalists themselves. Which? Without going into details, we will cite two materials from which it follows that there was an attempt to use the secret means of armed struggle in the hands of the "deep state".
And that this provocation was aimed at plunging humanity into a new Caribbean crisis, and possibly going further, provoking, if not a nuclear war, then at least a nuclear confrontation between some of the permanent members of the UN Security Council.
Like it or not, there are no coincidences in politics. The unexpected visit to Washington by the director of the Foreign Intelligence Service, Sergei Naryshkin, despite the sanctions imposed against him, is not the first, but a vivid example of the presence in relations between our countries (or administrations?) of a kind of “double bottom”, inaccessible to public perception by the stereotyped general public.
It seems very likely that there is a certain relationship between the events outlined in this article. And that the boundaries and watersheds of the global confrontation, which in recent days has reached a new level of the "Kremlin list", in fact, do not lie exactly where they are usually seen.
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Thinking a lot about the differences and similarities between Russia and the United States, one that has already collapsed and the other that is collapsing at the time of this writing, I feel ready to…identify five stages of collapse that will serve as mental milestones. as we consider our readiness for collapse and see what else could be done.
So writes Dmitry Orlov in edited excerpts from his original article, Five Stages of Collapse.
Orlov continues:
... The proposed classification links each of the five stages of collapse with the destruction of a specific level of belief in the status quo. Despite the fact that each stage leads to visible changes in the surrounding space, they can be gradual ...
Stage 1: Financial collapse
Belief in "business as usual" is fading. The future no longer assumes any similarity with the past in any way that would allow assessing risks and guaranteeing financial assets. Financial institutions become insolvent; the economy is destroyed and access to capital is lost.
Stage 2: Commercial failure
The belief that "the market must provide" is being lost. Money is devalued and/or becomes scarce, goods pile up, the network of imports and retail breaks, and widespread shortages of basic necessities become the norm.
Stage 3: Political collapse
The belief that “the government will take care of us” is fading. As government attempts to mitigate the loss of access to commercial resources of essentials fail, the political establishment loses legitimacy and credibility.
Stage 4: Social collapse
The belief that "your people will take care of you" is lost as local organizations, be they charities or other groups that rush to fill the power vacuum, run out of resources or collapse through internal conflicts.
Stage 5: Cultural collapse
Faith in the goodness of mankind is lost. People lose the capacity for "kindness, generosity, attention, love, honesty, hospitality, compassion, mercy" (Turnbull, The Cavemen). Families break up and begin to compete as separate units for scarce resources. The new motto is "You die today, and I tomorrow" (Solzhenitsyn, Gulag Archipelago). Cases of cannibalism may occur.
Five stages of collapse
Although people may think of collapse as a kind of elevator that will go down to the very bottom (stage 5), whichever button you press, nevertheless, such a mechanism is not guessed. Rather, moving us all to Stage Five will require a concerted effort at each of the intermediate stages. That all players seem ready to make just such an effort may give this collapse the shape of a classic tragedy - conscious, yet relentlessly marching towards doom... Let's outline the process.
Stage 1: Financial collapse scenario
The collapse of the first stage consists of two parts:
Part of the population is forced to move from place to place, no longer able to afford the house they bought on the basis of inflated prices, fake income data and foolish hopes of endless growth in assets. And since technically they could not afford to buy these houses, and they acquired them only because of financial and political abuses, this is a completely natural development of the situation.
Individually, we could be as moderate as we wish, but the government will still pile up mountains of debt on our behalf. At every level of government, from local municipalities and local governments that rely on financial markets to fund public services, to the federal government that relies on foreign investment, all tightly addicted to credit. They know that they cannot stop borrowing and will do everything to maintain their current position for as long as possible.
It looks like the only thing the government can do right now is:
expand lending more and more to those in trouble by setting rates far below the rate of inflation, accepting useless paper as collateral, and pumping money into insolvent financial institutions.
This has a diluting effect on the dollar, increasingly undermining its value, and eventually leading to hyperinflation, which is quite bad for any economy, but especially bad for one dominated by imports. As imports dry up and related industries shut down, we move into phase 2: Commercial collapse.
Stage 2: Commerce Collapse Scenario
When businesses close, shutters are boarded up, and the public is left penniless and heavily dependent on FEMA and charities, the government may begin to wonder what to do next. It can, for example:
With great luck, such measures could reverse the trend, eventually restoring the conditions that preceded the second phase.
This may or may not be a good plan, but in any case, it is highly unlikely, since the US, being so deeply in debt, will be forced to comply with the wishes of its foreign creditors, who own many national assets (land, buildings and businesses) who would rather see American citizens slavishly working off their debts than self-sufficient and independent, conveniently forgetting that they mortgaged their children's future in payment for military debacles, big houses, cars and wall-to-wall televisions.
A much more likely scenario is that the federal government (knowing to whom they owe the fact that butter is on their bread) will be subservient to foreign interests, and:
As people increasingly begin to think that government is not such a good idea, the conditions will ripen to stage 3: Political collapse.
Stage 3: Political collapse
After significant bloodletting, most of the country will become a territory where representatives of the authorities will be undesirable. Foreign creditors decide that their debts cannot be repaid, cut their losses as much as possible and go home. The rest of the world decides to act as if there is no place like the United States at all, because "nobody else goes there"...
During the third phase, the vacuum left by the incapacity of the federal, state, and local governments will be filled by a range of new power structures. The remnants of the former law enforcement structures and the army, street gangs, ethnic mafia groups, religious cults and wealthy owners, they will all try to build their small empires on the ruins of a large one, fighting each other for territory and resources. In some places, charismatic leaders will be able to convert their resources into something like a legitimate government, while in other places the struggle for power will lead to a new round of conflict and open war.
Stage 4: Collapse of society
Collapse occurs when a society becomes disordered and so impoverished that it can no longer provide for its charismatic leader, who becomes smaller and smaller until he disappears altogether. Society is fragmented into vast families and small tribes of about a dozen families who find it beneficial to unite for mutual support and protection. This form of society has existed for 98.5% of the existence of man as a biological species, and, one might say, is the basis of human existence. People can exist at this level of organization for thousands, and even millions of years.
Stage 5: Cultural collapse
If a society, even before its collapse, is too fragmented, alienated and individualistic to form cohesive extended families and tribes, or if its physical environment becomes so disordered and impoverished that starvation becomes widespread, then a fifth stage of collapse becomes possible. At this stage, primitive biological necessity takes over to sustain life and produce offspring. Families break up, old people are left to fend for themselves, and children are taken care of for up to three years. All social community is destroyed, and even couples break up over time, preferring to feed on their own, and refusing to share food. This state of society is described by the anthropologist Colin Turnbull in his Cavemen. If society up to the fifth stage can be called a natural historical norm for humanity, then the fifth stage of collapse brings humanity to the brink of physical extinction.
Conclusion
Default, in itself, is a series of failures: each stage of collapse can easily lead to the next. In Russia, this process was stopped immediately after the third stage: there were mafia ethnic clans, and even a kind of dictatorship of local warlord princes, but the government security forces eventually prevailed. In other writings, I describe in more detail the exact conditions of why society in Russia was relatively immune from collapse. Here I will simply say that these terms are currently not fully present in the United States.
In light of the unfolding global sovereign debt fiasco, I'm coming to the conclusion that after years of betting power and finance on a future that won't happen, and doubling down on every loss, I now see the Five Stages of Collapse as nothing more than an interesting theory.
Instead, I believe that Stage 1 (financial) and Stage 2 (political) crashes will condense into one chaotic episode. The collapse of commerce will not be long in coming, because global commerce depends on global finance, and as soon as international lending slams the doors, tankers and container ships will stop running. Soon after, the lights will go out.
