Martin Armstrong — The Overview of the Political Storm

Trump would be better insofar as he will not sign whatever tax bill is before him. Bernie would sign any tax bill that targets the so called “rich” and he would destroy jobs for the youth for it is SMALL BUSINESS that creates 70% of all jobs – not big corporations.

If neither one wins the election, we are looking at the complete collapse by the 2018 election. Congress will not reform without a gun pointed to its head and the economy is going to do just that beginning in 2017.

Armstrong Economics

The Overview of the Political Storm
Martin Armstrong

Edward Lambert — Stall Speed for the Stock Market

The research on effective demand has been saying for a year that real output would reach its natural limit in 2014. When real output reaches its natural top level, output tends to slow down and monetary momentum is directed into increasing prices. So the economy does not naturally want to climb anymore. Yet, it need not fall either if enough speed can be maintained at the top limit.

So, do we see inflation rising? Even though wage inflation is still flat at 2.1%, inflation is ticking up. Today the core CPI rose to 2.0% from a previous trend at 1.6% to 1.8%. However, inflation will not rise toward 3%, because wage inflation is low and consumption by capital income will back off....

So, what will happen next? The stock market gets nervous at stall speed. The stock market is not designed for a steady state mentality. It needs movement to know how to adjust its prices and feed the adrenaline junkies. Yet, over the ensuing quarters, the market will be heading down.

So, we will see some erratic movements fairly soon as the stock market gets jittery in stall speed. It will try to speed up or change its angle of attack. But the jitters will not lead to any big movements. The bigger movements will come in a couple quarters. Then an economic contraction will start forming around the beginning of 2015. We will see increasing policy attempts to forestall the contraction.

Angry Bear
Stall Speed for the Stock Market
Edward Lambert

Warren Mosler — Friday update- deficits matter, a lot!

Macro outlook. Fiscal drag increasing. No obvious offset from other sectors. Potential contraction looming.

The Center of the Universe
Friday update- deficits matter, a lot!Warren Mosler

John Carney — Why Debt Ceiling Is Far Scarier Than the 'Fiscal Cliff'

John redeems CNBC again. Rick Santelli doesn't seem to mind seeing the economy sink into an abyss of the extremists own making "for a good cause."

CNBC NetNet
Why Debt Ceiling Is Far Scarier Than the 'Fiscal Cliff'
John Carney | Senior Editor

Panayotis Economopoulos — On Austerity Impact and the Debt Deflation Process

Panayotis Economopoulos Facebook Page
On Austerity Impact and the Debt Deflation Process
by Panayotis Economopoulos

A fiscal consolidation program that reduces spending and raises taxes has 2 stage effects.

1. A the first stage, its impact is to bring a substantial disposalbe income reduction and an effective demand and total economic activity shortfall and this effect is well analyzed.

2. At the second stage, its impact is to bring a debt deflation process that can result in a contractionary feedback loop with an economic and financial crisis.

a. The spending cuts reduces disposable income and the ability of private economic units to repay their debt and tax obligations.

b. The rise in tax rates increases the tax obligations that become overdue leading to sale and confiscation of assets causing a drop of asset prices.

c. Price deflation from effective demand and total economic activity shortfall raises the value of debt and tax obligations.

d. Disposalbe income reduction causes debt obligations to become overdue leading to sale of assets and a drop of asset prices.

e. The drop of asset prices and the rising value of debt and tax obligations cause wealth value of private portfolios to contract significantly turning private units to insolvency.

f. The combination of these effects raises the value of non-performing debt and financial institutions suffer a drop in capital adequacy causing them to reduce credit extension while their credit rating with the central bank and interbank money markets is downgraded causing them face a liquidity crunch.

g. The result of all these effects is to force abank bail out by the fiscal authority, otherwise banks willfail and cause a bank panic.

h. The state fiscal authority whose austerity measures initiated the process ends with a rising public debt as a percent of GDP that becomes unsustainable for financial markets.

The outcome of all these relations, induces by the initial fiscal consolidation program, is to initiate a series of negative feedback effects, a spiral that leads to an economic implosion and financial crisis!

gailtheactuary — Where do continued high oil prices lead us?

Gail lists six areas of concern.

Read it at Our Finite World
Where do continued high oil prices lead us?
by gailtheactuary