US Economy Grew 1.9% In Q4, Unexpectedly Missing Expectations Despite Stronger Consumer Spending


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Following a series of better than expected GDP-feeding prints, consensus had expected Q4 GDP to tick higher in the first revision released today, rising from 1.9% to 2.1%. However, that did not happen and instead, the revised print came in unchanged at 1.9%. Notable underlying revisions include: an upward revision in consumer spending, both in services and goods; a downward revision to business investment, mostly in intellectual property products and equipment; and a downward revision to state and local government spending, primarily in structures.

Despite the headline miss, the revised data showed a solid rebound in Personal Consumption Expenditures, which rose 3.0%, higher than the 2.6% expected; furthermore, printing at 2.05% annualized, Consumption alone was higher than the overall GDP of 1.86%.

The reason for the miss was a decline in Fixed Investment which slid from 0.67% to 0.51% as initial CapEx reads appear to have been weaker than expected, coupled with a negative revision to both Private Inventories, down from 1.00% to 0.94% and the contribution from Government, which subtracted another 0.15% point.

 

Net trade remained flat, and was the biggest detractor from Q4 growth, taking away some 1.7% as the Q3 surge of exports to China was offset.

Of note: PCE prices failed to hit the expected 2.2% increase in the quarter, rising 1.9%, after increasing 1.5% in Q3, thus giving the Fed some more breathing room before hiking. Additionally, core PCE rose 1.2%, after rising 1.7% in the prior quarter, suggesting to Janet Yellen there is still some price slack, and the possibility of a rate hike may be more remote.

For the year 2016, real GDP increased 1.6% , compared with 2.6% in 2015. The increase in real GDP in 2016 reflected increases in consumer spending, residential investment, state and local government spending, exports, and federal government spending. These contributions were partly offset by declines in private inventory investment and business investment. Imports increased.

Q1 GDP At Risk As Trade Deficit Balloons Near 9 Year Highs


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On the heels of a disappointing revised Q4 GDP print, the US trade balance for January printed a $69.2 billion deficit. This is the second largest deficit since August 2008 (slightly smaller than the March 2015 plunge) as the dollar surge has not helped.

The biggest driver the deficit increase was  4.8% MoM increase in Consumer Goods (notably Auto exports rose 9.3%)

The $69.2bn deficit is considerably worse than the $66.0 billion expectations, and is lower than the lowest analyst expectation.

Certainly not a good sign for Q1 GDP expectations.

As BofAML notes, combining trade data with inventories for January, this slices 0.2pp from Q1 GDP tracking, leaving us at 1.8% for the quarter.

The USD strength has not helped…

 

So time for another rate hike to reverse that recent drop in the USD and stymie the US economy even more via its trade d

China CIPS v Western SWIFT System


Dollar-Yuan-Transfer

COMMENT: Marty; Some people are trying to claim that China in bypassing the Swift System, they are undermining the dollar. The latest absurd statement is that Japan will bypass the dollar and SWIFT System to transact using China’s CIPS system in inter-bank settlement. I really had to laugh at how ignorant this statement is for it would mean Japan will no longer sell anything in the USA. It seems that these people so desperate to kill the dollar clutch at anything and we just laugh in the trading rooms. I think you should address this statement for the naive people out there who are clueless as to real international trade.

RPD

REPLY: Yes, I agree, You are right. The average person out there may read these headlines that are written by people without a single day of real world experience. They seem to confuse clearing and investment and their analysis is always against the dollar. They try to create a myth that somehow the Yuan will kill the dollar, which is what they said about the Euro. CIPS v SWIFT is about clearing – not investment money and it has no impact about parking money. The The crisis in BitCoin has been created by more that 90% of the volume has been in China as it was being used to get money out of China into dollars. Let’s set the record straight – SWIFT (Society for Worldwide Interbank Financial Telecommunication) is by no means a U.S. dollar exclusive system. Visa International supports approximately 180 transaction currencies, thus enabling the processing of international transactions – NOT exclusively dollars all through the SWIFT system! Twenty-six currencies can be used in the net settlement between Visa International and the participating members, the choice of currency being decided by each member involved in the settlement.

Ever since China began to set up a competition to the Western financial institutions back in 2013, there have been countries in the East dealing with China who have begun to use the CIPS System. That makes perfect sense when you are dealing with China. However, that does not mean that CIPS can compete with the SWIFT System with regard to trade in the West. Japan joining CIPS is by no means to the exclusion of SWIFT.

The SWIFT is an industry-owned limited liability cooperative society set up under Belgian law – not US Law. It is controlled by its member banks (including central banks) and other financial institutions. SWIFT’s business is to supply secure messaging services contributing to greater automation of financial transaction processes and to provide a forum for financial institutions to address issues of common concern in the area of financial communication services.

SWIFT was founded in 1973 by 239 banks from 15 countries. Since then, there has been a steady increase in the number of financial institutions and countries connected to SWIFT. By the end of 2002, more than 7,400 financial institutions from 198 countries were connected. There are three categories of SWIFT users: members (shareholders), sub-members (ie subsidiaries controlled by members) and participants. Members can benefit from all the services offered by SWIFT, whereas participants only have restricted access to a range of services that relates to their business.

SWIFT participants include securities brokers and dealers, investment management institutions, fund administrators, money brokers and various other institutions, mainly from within the securities business. By the end of 2002, SWIFT provided services to 2,203 members, 3,079 sub-members and 2,183 participants. The average daily value of payment messages on SWIFT is estimated to be above €6 trillion. National Bank of Belgium (NBB), which is the central bank of the country in which SWIFT’s headquarters are located, acts as lead overseer of SWIFT, supported by the G10 central banks. The NBB is responsible for the day-to-day oversight relationship with SWIFT – not the Federal Reserve.

Visa International operates through SWIFT and it is a private association owned by 21,000 financial institutions worldwide. It consists of six regional divisions: Asia-Pacific; Canada; Central & Eastern Europe, Middle East & Africa (CEMEA); European Union; Latin America & Caribbean; and United States. Membership is limited to deposit-taking financial institutions and to bank-owned organizations operating in the bank card sector, such as Carte Bleue in France and Servizi Interbancari in Italy. The Visa International Base II system clears transactions and facilitates settlement. Visa International supports approximately 180 transaction currencies, thus enabling the processing of international transactions – NOT exclusively dollars! Members can choose to receive their transaction reports in any of these currencies.

Twenty-six currencies can be used in the net settlement between Visa International and the participating members, the choice of currency being decided by each member involved in the settlement. The necessary foreign exchange operations are executed with two banks, one located in London (Barclays) and one in New York (Citibank).

The attempt by China to set up CIPS to compete with the SWIFT System is political and not purely economic. This idea that Japan and China will not participate in SWIFT is absolutely absurd. That would mean even credit cards would not be valid in the West.

Gold for the Close of February


GCNYNF-M March Targets

QUESTION: Marty, you said towards the end of the bear market in gold, it will start to align with the stock market. Are we approaching that period since this has been gold and stocks both rising opposite of what the goldbugs have been forecasting?

LWR

ANSWER:  Yes. We are running out of time for the downside in gold. This does not say we are breaking out right now. In fact, the next Benchmark was the February 27th, which we published in the 2016 Gold Report. We would need to close February above 1306 to imply that a breakout is unfolding and a closing below 1255 today will still be bearish. Gold is moving into a tight range where technical resistance stands at 1286 area and support at 1230.

The rise in gold is unfolding despite the rise and expected rise in interest rates. Likewise, gold has been rising with the US share market. This is part of the tangible asset rally as capital begins to drift away from public sector debt. A collapse in confidence means ALL tangible assets rise – not just gold.

However, we are still basing. The rally does not yet appear to be sustainable. A closing today below 1255 after trading above that right on the Benchmark day no less, warns that we are preparing to change trend, but it is just not right now. Let’s see the closing for February.

Fukushima residents being forced to move back to radioactive wasteland


If those people don’t want to go back pay them a fair price for their homes and let them move elsewhere. If there is any question about the levels get independent surveys and get it resolved, but don’t force people to move back into a potentially bad situation.

Deep State War? Russian Officials Keep Dying Unexpectedly


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Six Russian diplomats have died in the last 60 days. As Axios notes, all but one died on foreign soil. Some were shot, while other causes of death are unknown. Note that a few deaths have been labeled “heart attacks” or “brief illnesses.

1. You probably remember Russia’s Ambassador to Turkey, Andrei Karlov — he was assassinated by a police officer at a photo exhibit in Ankara on December 19.

2. On the same day, another diplomat, Peter Polshikov, was shot dead in his Moscow apartment. The gun was found under the bathroom sink but the circumstances of the death were under investigation. Polshikov served as a senior figure in the Latin American department of the Foreign Ministry.

3. Russia’s Ambassador to the United Nations, Vitaly Churkin, died in New York this past week. Churkin was rushed to the hospital from his office at Russia’s UN mission. Initial reports said he suffered a heart attack, and the medical examiner is investigating the death, according to CBS.

4. Russia’s Ambassador to India, Alexander Kadakin, died after a “brief illness January 27, which The Hindu said he had been suffering from for a few weeks.

5. Russian Consul in Athens, Greece, Andrei Malanin, was found dead in his apartment January 9. A Greek police official said there was “no evidence of a break-in.” But Malanin lived on a heavily guarded street. The cause of death needed further investigation, per an AFP report. Malanin served during a time of easing relations between Greece and Russia when Greece was increasingly critiqued by the EU and NATO.

6. Ex-KGB chief Oleg Erovinkin, who was suspected of helping draft the Trump dossier, was found dead in the back of his car December 26, according to The Telegraph. Erovinkin also was an aide to former deputy prime minister Igor Sechin, who now heads up state-owned Rosneft.

If we go back further than 60 days…

7. On the morning of U.S. Election Day, Russian diplomat Sergei Krivov was found unconscious at the Russian Consulate in New York and died on the scene. Initial reports said Krivov fell from the roof and had blunt force injuries, but Russian officials said he died from a heart attack. BuzzFeed reports Krivov may have been a Consular Duty Commander, which would have put him in charge of preventing sabotage or espionage.

8. In November 2015, a senior adviser to Putin, Mikhail Lesin, who was also the founder of the media company RT, was found dead in a Washington hotel room according to the NYT. The Russian media said it was a “heart attack,” but the medical examiner said it was “blunt force injuries.”

9. If you go back a few months prior in September 2016, Russian President Vladimir Putin’s driver was killed too in a freak car accident while driving the Russian President’s official black BMW  to add to the insanity.

If you include these three additional deaths that’s a total of nine Russian officials that have died over the past 2 years that WeAreChange.com’s Aaron Kesel knows of – he notes there could be more.

As Kesel explains, it’s worth noting that governments, specifically the CIA, have for long periods of time had chemical concoctions that can induce a full systematic shutdown of a person’s nervous system and in some cases cause someone’s’ heart to explode.

Former CIA employee Mary Embree discusses the infamous heart attack gun and how she was tasked with finding a chemical concoction that would cause a heart attack. The weapon was first made public during the Church Committee hearings in 1975 by former CIA director William Colby. It was said to be very lethal and untraceable, by using this weapon a murder is made to look natural while the poison dissolves in hours.

It seems highly unlikely and improbable to write off that six Russian officials would die in under 60 days in such an influx in various different mysterious ways without a catalyst. And let’s not forget RT founder and former Putin aide Mikhail Lesin was found dead in 2015 from a blunt weapon that was originally blamed on a heart attack so assassination can’t be taken off the table and ruled out in any of these cases. Turkey and Russia already accused NATO of a false flag attack killing Karlov the Russian-Turkish Ambassador. NATO also had a dead diplomat Yves Chandelon mysteriously die of a gunshot wound to the head in his car a week before the death of Karlov. Chandelon was the Chief Auditor in charge Of Counterterrorism funding.

“Turkey and Russia have the will not to be deceived by this false flag attack,” they said.

Don’t forget that on Christmas day, a Russian military jet went down over the Black Sea, killing 60 members of the Red Army choir and 33 others that just adds to the massive coincidence list.

On a final note, former acting director of the U.S. Central Intelligence Agency (CIA), Michael Morell openly conspired to “covertly” kill Russians and Iranians in Syria in an August 2016 interview with Charlie Rose. While Morell was talking about killing Russian and Iranian soldiers it is definitely a strange piece to add to this puzzle.

Are we witnessing a battle between the deep state and Russia in a spy versus spy plotline or is this all just a freak coincidence?

Jorge Ramos: America Is ‘Our Country, Not Theirs’—‘And We Are Not Going to Leave’


I would guess that is treason he better watch it!

Critics accuse European Parliament of censorship over ‘kill switch’ to cut racist remarks


The only question I have is who paid for that fancy room — lloks to me they didn’t spare any Euros!

Greek Government is 40% of GDP


athens-acropolis

QUESTION:  Hello, I do not understand what Martin say about the fact that the Greek debt doubled when it changed into euro. Indeed, if the currency is twice the value of the old one then all your debt will double as Martin said. However all your assets will double in value too. So it is the same situation as before. I may miss something, could you please explain me what I am missing ?

Best regards,

ANSWER: Yes, private assets rose in value in Southern Europe as the euro rose from 80 cents to $1.60. However, this tended to produce deflation, not inflation as prices rose eliminating competition for tourism etc. reducing sales. The point about the public debt doubling was the fact that this was previous debt, not current, and government has no real performing assets. To service the debt that doubled, they also then began to raise taxes more aggressively and this then was much like strip-mining the economy. Servicing the previous debt increased dramatically reducing the ability to continue spending on various sectors as previous debt servicing was increased.

Germany benefited from the Euro because they were manufacturing products and selling them into Europe and did not have to worry about currency fluctuations. I helped the Japanese to sell their products globally by showing them that they had to price their products in the local currency and then take the FX risk home to manage. They beat the Germans who were pricing their cars always in Deutsche-marks so a Porsche doubled in value in dollar terms between 1970 and 1980 just due to currency – not inflation. The movement of creating a euro was to eliminate currency risk so the German manufacturers could sell their products throughout Europe.

Greece’s top three main industries are tourism, shipping, and industrial products. By joining the Euro, Greece lost the attraction of a cheap holiday for tourists and shipping prices rose. Greece is nowhere near attaining those manufacturing characteristics, and is often one of the smallest in this regard compared to Germany, Japan, and China. However, the Greek-owned fleet of ships remains where it has been for a very long time, at the TOP of the global ranking of shipowning nations. Joining the Eurozone has hurt Greek shipping increasing its cost and opening the door to competition. China is moving upwards rapidly in shipping, and potentially could overtake both Greece and Japan (the second largest) to become number one shipowner within a decade. Greece has not benefited from joining the Eurozone and this has been the greatest myth which has hurt the Greek people tremendously.

European tourism began to move outside the Eurozone for vacations because it was cheaper. Greece has an economy with a public sector accounting for about 40% of GDP and with per capita GDP about two-thirds that of the leading Eurozone economies, this has contributed greatly to its debt crisis. Tourism provides 18% of GDP, so joining the Euro was a complete disaster for tourism and when the government is 40% of GDP and produces nothing to export, the debt crisis simply escalates. The likelihood of Greece have to exit the Eurozone is growing tremendously by the day.

The Death of Sweden | Working In A Refugee Home