Citi Bank Warns of Unmitigated Global Instability: “This Sucker Is Going Down”

by | May 4, 2016 | Aftermath, Commodities, Conspiracy Fact and Theory | 59 comments

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    This article was written by Tyler Durden and originally published at Zero Hedge.

    Editor’s Comment: In case you haven’t noticed, the economy continues to drag on at or near the breaking point, and all the big institutions are fully aware and even warning about it. If they can’t be proven to be part of engineering it, then they are certainly capitalizing on the farcical vulnerabilities of this illusory/usury system and preparing to short the market – which has proven to be little more than a synthetic financial atmosphere that is run off of Fed notes from the top down.

    Worse, many of the biggest entities are poised to trample underfoot when the music stops, which means the masses will be even more under the yoke of the most centralized and massive bureaucracy history has ever recorded. The foretold “Third Wave,” warned about by Goldman Sachs, seems to be coming.

    “Nothing Has Been Fixed” – Citi’s Five Reasons Why This Sucker Is Going Down

    by Tyler Durden

    As a result of the dramatic surge in the S&P500 from its February lows, which erased the worst ever start to a year, and nearly regained the all time highs in the US stock market on a combination of a central bank scramble to reflate, the “Shanghai Accord”, and the most violent short squeeze in history, coupled with a historic credit injection by China which as we first reported amounted to a record $1 trillion in just the first three months of the year…

     

    … economists have shelved discussions about the threat of a US recession.

    That is a mistake.

    According to Citi, the Q1 2016 stabilization in Chinese, EM and global growth looks fragile and is likely to be temporary. In other words, nothing has been fixed. In fact, Citi goes on to say precisely that:

    In particular, none of the structural headwinds that seem to have plagued the global economy in recent years (a mix of excessive indebtedness, deteriorating demographics, rising political uncertainty as well as the end of the China growth miracle and the commodity supercycle) have been resolved.

    Looking forward, these are the four key risks that keep Citi up at night “in the near term.”

    • The Chinese stabilization could be even more short-lived than we currently expect. As noted above, the duration of China’s old-style investment-led fiscal stimulus and credit binge may prove rather short, as Chinese policymakers pivot back and forth between supporting growth and supporting reform and rebalancing. In the light of the evident imbalances and excesses in the Chinese economy, the Chinese stimulus may also prove to be less effective in sustaining aggregate demand – even in the short run – than hoped for.
    • One contributor to the potential stabilization in China’s and EM activity has been the weaker US dollar and receding expectations of a US rate hike. But these may well prove temporary. In particular, financial markets probably currently underprice the risk of Fed rate hikes over the next year or two (our US team currently expects one more hike in 2016, probably in September, but the next hike could also happen in June or, more likely, July). It remains to be seen whether EM financial conditions and the tentative stabilization in EM economic activity would prove resilient to renewed Fed tightening and dollar strength.
    • A US downturn could threaten. The recent weakness in the US data, continued cautious behavior of US consumers, and the lack of “animal spirits” to raise investment spending leave questions as to whether there may be further economic weakness to come.
    • Political risks in Europe are high and rising. The UK’s upcoming EU referendum (June 23) remains a key uncertainty for the coming months and we believe Brexit, if it happens, would be a major negative in economic and political terms for the UK and EU as a whole. We still put the probability that the UK votes to leave the EU at 30-40% – i.e. not our base case but by no means a trivial risk – but there are some reasons to think that the risk may be even higher. And Brexit is by no means the only source of political uncertainty and risk in Europe, with new elections due in Spain, high support for non-mainstream parties in many countries including Austria, France, Italy, the Netherlands, Sweden, Denmark, Hungary, Poland and Slovakia, and rising non-mainstream support even in Germany.

    But what may be the biggest concern to Citi is that the credibility – and ability – of central banks, to effectively prop up the system is now openly in question:

    The recent IMF-World Bank Spring Meetings made clear that the perceived reduction in global recession risk was greeted with a major sigh of relief from policymakers around the world. This is in at least part because it may not be straightforward to come up with an appropriate policy response in the event of a major downturn. Of course, there are still various options for stimulus in most economies. On the monetary side, the ECB highlighted that a pivot towards more domestically-oriented easing (including credit easing implemented through purchases of corporate bonds and subsidized (negative interest rate) loans to banks) is possible; the BoJ has shown that purchases of equity ETFs and REITs are among the tools of policymakers; and for both the BoJ and ECB, there is probably some more room to lower policy rates (including offering (more) negative interest rates on loans to banks) and to increase purchases of public assets. Yet it is almost universally acknowledged that the incremental boost to demand from monetary stimulus is diminishing and the side-effects (including political side-effects) may be rising.

    If monetary options are limited, the obvious alternatives would be stronger fiscal or quasi-fiscal support or, indeed, the much-heralded ‘three-pronged strategy’ of combining monetary and fiscal stimulus with structural reforms. But even though, at least in the advanced economies, fiscal policy is slowly and gradually turning less procyclical and more supportive of economic activity, hurdles (legal, ideological, political or reflecting (lack of) fiscal space) to timely and sizable fiscal stimulus remain relatively high in most economies. Meanwhile, prospects of structural reform remain rather limited across both DMs and EMs. The limited likelihood of effective policy stimulus in the event of a downturn therefore adds to the potential fragility of the recent more positive developments in financial markets and real activity, if sentiment (business, consumer or financial market) were to turn more pessimistic again and /or if one or more of the adverse contingencies listed above were to materialize.

    Which is ironic, because now that asset prices and thus the market is the only real mandate of the Fed, the moment there is an uncontrolled drop in the S&P500 or any other global market, is when the global central bank put will finally be put to the test, and if Citi is right, it will be exposed as the bluff it was all along.

    Which incidentally explains why the SF Fed’s John Williams just two days ago explained what he thinks may be the biggest systemic risk factor: dropping asset prices. From Reuters:

    San Francisco Federal Reserve President John Williams reiterated Monday his view that the U.S. economy is ready for higher interest rates, but flagged the risk of broad-based declines in asset prices as a result.

    Speaking at a panel on systemic risk at the Milken Institute Global Conference, Williams said the biggest systemic financial risk currently is the possibility that broad sets of assets are going to see big movements downward” as interest rates rise. “That’s an area that I think is a potential risk.”

    Ignoring the insanity that the Fed now has to warn that a market selloff is a “systemic risk“, it also exposes not only the weakest link in the modern financial system, namely artificially inflated prices, but by definition confirms that just like in China where having a bearish opinion is now officially prohibited, it reveals that the market is only where it is due to constant and unrelenting central bank intervention, something “conspiracy theory” fringe blogs have been saying for nearly a decade.

    For those wondering how to trade this, we unfortunately have no advice: because if one is buying puts on expectations of the Fed losing control, we have bad news: the market will simply be shut down and all capital flows will be halted indefinitely before true price discovery is allowed. As such those hoping to be paid when all central bank control is lost will be disappointed. It is also why none other than JPM warned last Thursday that the best option is not to bet on financial assets, either long or short, but to move into physical assets among which, JPMorgan listed, gold.

    ——-

    This article was written by Tyler Durden and graciously contributed by Zero Hedge – an alt media outlet that arguably now rivals the influence of the Wall Street Journal and Bloomberg on economic news.

    URGENT ON GOLD… as in URGENT

    It Took 22 Years to Get to This Point

    Gold has been the right asset with which to save your funds in this millennium that began 23 years ago.

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      59 Comments

      1. Let the 1% killing to get started.

      2. Golden Sachs now accepts poor people’s savings accounts and paying 1% interest. No longer do you need the minimum million dollar balance. Goldman Sachs is in dire trouble, their derivative exposure and their lack of assets on deposit will likely have them go belly up overnight, one of these days.

        • Bert

          That bodes of a legal “Bail In” or an illegal misappropriation “Corzine” coming. The greater the deposits the greater what can be taken.

          • Tyler Durden AGAIN? HO HUM, I’m going back to sleep.

            • Agree a total waste

                • YES, dandelion works!

              • You’re probably asleep anyway. No need to figure it out smart guy.

              • Noah
                AGAIN ?
                WTF???

                it hasn’t rained in weeks !

              • “total waste” only because you have an IQ of 65. you cannot read or comprehend any of Tyler’s work…

      3. Just another house of cards.

        • Let the bodies hit the floor….

          • Dey gots da pedalz to da metal…pleeze hurry.

            Same shit, new daze.

            GMAFB

          • I like that song

      4. Someone here said, years ago, that a global financial meltdown would more likely be caused by China or Europe than the USA.

        Years ago. Its in the archives. 🙂

        • Here’s why China will never back the Yuan with gold. That and the fact that nations all over the world would demand gold for their yuan:

          http://www.businessinsider.com/why-china-is-loading-up-on-gold-2016-5

          As long as China is the Chinese economy is in an export mode to employ its population, its currency must compete with other exporters like Japan, South Korea, India, and Mexico; not to mention the rest of South and Central America.

          When the SHTF the Yuan will be confetti. 🙂

          • If all the worlds fiat currencies become worth less , then what will have changed ?
            It seems to me if europe , china , Brics are all junk and the dollar drops , then what changes ? Deflation ?

            • Nothing changes, but everything changes. The rich get richer, the poor get poorer. Only those savvy enough to navigate the Changes, prosper.

              All currencies are related, respective to each other. Yes deflation, but also inflation as all currencies lose purchasing power; even King Dollar.

              King Dollar just loses less purchasing power than the rest of the world currencies, while the Uber Rich profit from asset inflation.

              Its basically a tax on the global 99% for the benefit of the 1%. 🙁

      5. what is EM

        • I believe they reference domestic markets and emerging markets. Money speak is as bad as texting shorthand.

      6. Yep they gonna grab the money and run then years down the road resurface back in the grind and do it all again

      7. My chicken shit on my black trousers while I held her under my arm. Looking down I saw a white streak on my pants that looked like white shoe polish. I now know the difference between shit and shinola.!!!

      8. Ooooooops….,some one left the gate open!

        Finally,my on/off job is,well,finally off!The Warchild is free and time for a vacation!This has been over a tough couple of years coming and will do my part to stimulate the economy as do not want too many worthless(soon) pieces of paper!No hard feelings,nice folks and appreciate the work but was in no mood to travel to their new location and they kept putting off letting me go till I pushed it hard(maybe too hard).I realise many would love work right now in these challenging times but have needed a mental break for far too long and already have small gigs lined up for future and holds together long enuff feel confident will find more work.Things crash like article suggests well,tis why we prep and rather have some fond memories of last life if we enter the “Brave new world”

        • All work and no play makes War a dull boy.

          Messing with ya, otta head south for a few days, just an 18 hr drive…

          • AAhhh yes, time off. How sweet it is. I have 4 months off right now and am going to enjoy every bit of it. With 3 months to go Imma head to the cabin and do some work there. Yer welcome to visit Warchild. Buildin the stockpile of shine for neighbors to enjoy. I won’t be here much as we have no internet there. Ahhh so nice with no cops, no government, no one to tell you what to do. Maybe I will put on a shine class for the people there lol. I hope there isn’t many fires this year, I hate firefighting. Seems we always get called out during a party or gathering (grrrrr). Have a great summer folks, I will drop in from time to time when I come back to town for stuff 🙂

            • G, be well sir…

            • Stay safe. Enjoy yourself and watch that shine.

            • Stay safe and enjoy yourself. Careful with the clear.

        • Good luck and well wishes. My life experience has showed there’s always something better around the bend. You knew you needed to do this, so don’t look back or doubt yourself.

        • WD

          Be safe.

      9. You know, I wasn’t sure (based on my 8th grade education (which by the way wasn’t all that great (as this is what happens when you attend a school specifically set up for children of alcoholic parents (unbeknownst to you))(and by the way did I ever mention how good a nice chardonnay can be on a hot summer’s day (especially since global warming is making summer hotter)))) THAT IT WAS GRAMMATICALLY CORRECT TO NEST THIS MANY FRICKING PARENTHESES.

        If nothing else (and there are more nits I could pick were I so inclined (a nit being a very interesting insect to say the least)) IT’S REALLY DAMNED DISTRACTING TO READ…

        What was the POINT again??? Oh right chardonnay. Wait…

        • Actually, if you can keep track of that many open and closed parentheses, you might try your hand at programming/coding/website-building.

          • I actually had a programming challenge to beat all. It was more than nested paragraphs. It was nested IF-THEN statements.

            I was told to recreate the functionality of an old DOS software to create wills in WordPerfect. I was to do this in another software with Word, which software didn’t handle nested IF-THEN statements with the expected logic. It would ignore some of the statements, seemingly at random.

            The original code was over 1,000 pages, with at least 8 or 9 levels of IF-THEN statements, and some of those statements started on one page and ended hundreds of pages later.

            I told them that their request was basically impossible, especially given the time they had allotted, but some “expert” had told them that it was. I told them that I could easily program the project in Visual Basic, but they insisted on using a lame software that was brain dead crap.

            They wondered why it was taking so long and finally gave up on the project. I think the law firm is still using old Windows XP machines and DOS WordPerfect so they can keep using the old software. Or perhaps they have gone back to choosing pages from a form book manually like they did back in the 1980s.

            This is one of the main reasons I decided to take early retirement and go Galt. Micromanagement by ignorant people.

        • Not bad for an 8th grader! Makes me think I wasted 4 years of high school and 2 years of college.

        • “nit” is just the old name for head lice, and I find no interest in them at all (speaking solely for myself).

      10. Actually,for ease sake,from Nashua to Atlanta 1098 miles,20 hours with 3 hours resting times,about 100 each way in fuel,be careful what you suggest!

        • I’ll cover it, would be cool to meet…

        • wish we had some conservatives left here in calipornia….would be nice to talk to one face to face……..guess i’m the last one…..maybe i should turn out the light as i leave!??

        • Nashua no shit. I live in Nashua, small world. Been coming to this site for a while never would have known.

      11. I’m proud to say I live like a Jew and contribute very little to the economic world. Gonna skip the vacation this year and save $4000. That is $4000 less for tourism. Gonna keep my paid for vehicle rather than buy a new one. That’s $35,000 less for the auto industry. Gonna grow my own veggies and save $ on food. I’m done spending my $ might get rid of cable tv as I only watch a few channels for an hour or two a day. That’s $100 a month. I’ve cut back on everything. I keep more of my $ than ever before. When I’m on my death bed I will take it and burn it all. It’s my fuckin $ I will do what I want. I don’t want $ to distance me from the hard reality. Staying hungry keeps me motivated. I choose to live like a grunt I got $ and don’t have to. I’ve conditioned myself to do without all on purpose. I don’t eat breakfast just lunch and dinner. I don’t feel deprived. Most people that live like I do it because they don’t have the $. As soon as they get some $ they go crazy spending on all the shit that society says they need to be happy and fulfilled. No gambling drinking smoking or any drugs prescription either. Save $ there. Shit I hardly go to the doctor and I got free good medical. Work all the time overtime everyday. Not hurting here one bit. I don’t understand how people can hurt for$ it’s easy to survive in this world. Just work.

        • Ass,4000 bucks on a vacation,must be nice to be a rock star!I don’t believe have ever spent more then a 1000(tis me budget for this month off)on a vacation.I have though done work for folks I know in Cali./Co. ect. and when not working travelled around and did a lot of cool stuff.My biggest expense will be gas and food,am lucky have a friend with a lake house/friends next to the Kingdom in Vt./Me. so can base there while hiking and just exploring ect.Oh,and me mum lives on the ocean on Martha’s Vineyard,though there am doing a lot of work on house but as season opens the college girls start arriving!The thing Warchild loves about the college girls,the older I get they stay the same age!

      12. Obama is rumored to be having discussions with the treasury department on a digital currency to replace paper money.

        Buy your Gold, Silver, Platinum, and Paladium while you still can. Once digital currency kicks in, all trade will be controlled. The system will still collapse, precious metals will continue to retain value on the other side of the Obama economic black hole experiment.

        Number one item people who have lived through banana republic economic collapses agree on. Have more stored food and water. Some self defense weapons, but food, lots of food!

        • no debt, what about buying affordable real estate without a mortgage ??

          • In economic crashes most real estate loses value, undeveloped land, farmland does well. I’ve never seen government shrink, so land around well funded state capitals, and the Washington beltway would do well.

          • Maine has A LOT of extremely affordable houses, and homes on land/parcels/acres/tracts. I was born there and left at 17 for the Navy …never did get a chance to return permanently (just long enough to go back, find a good woman and put a ring on her finger). 🙂

            The Maine “coastline” is out of the question though …all of it is extremely high-priced (not worth it), and of course anywhere inland is going to have it’s share of cold weather, snow and freezing rain.

            *Central Maine is where the land is cheapest, or waaaaay up north in “the county.” (Aroostok (sp?)). NOWHERE in Maine is there anything considered “a job” so you’d need to be either well-off or retired with income for life.

            • I see a few approaches to real estate investment for a prepper.

              1. Some land in the middle of nowhere to escape to. It should not be excessive because you’ll likely never sell it for a profit. It’s a bug out location. It needs food and water resources.

              2. Undeveloped land outside of current expansion areas but still near growing areas. You could bug out to this land in a pinch. The investment comes when you can sell it after the crash. Many areas like a Detroit become blighted and can take a half century to recover. Smart money builds fresh in new locations that take advantage of roadways and resources.

              3. Farmland, does it have water, can it be repurposed for other more profitable crops? Can it be minimally farmed with reliable crops that won’t suck the soil dry but will pay costs and taxes. Farming is currently a loss industry. Can you get some land for a song and just tread water until the economics improve?

      13. Again,reason why I am on a buying spree of goods.They go digital will make the credit card hacking look like childs play,will be reason they say the dollar down is due to hackers and not the powers that want to be and,lets not forget,a public that allows this to happen.

        • again, i will tell this story. a CLOSE friend tells of hospital chain that has been hacked by indians(we been USING them for years now for tech support, fer KRISESAKES!) and all transactions had to be done on paper…this was a month or so ago….NOW another very trusted person tells me bankamerica and another one in our town, (which one it is escapes me) are only allowing 40 dollars cash max, “if you beg” were his exact words….he said something to my credit union, and they had HEARD of it, but it didn’t affect THEM, they say….sumthin’ MIGHTY peculiar is going on….we knew someday hackers would become a problem, and it APPEARS to ME, that the time may be now….keep yer ears to the ground, peeps.

          • Butt,on east coast where I have a few different accounts got 400. more out of me boa’s atm machine.Says to me local branch has a glitch in system that of course as connected could go nationwide,that branch should be isolated till figured out.We all know keep just what you need for bill payments and online purchases,nothing more.They crash or pull a Cyprus/Greece bail in can’t get much from you then and if you have any mortgage ect. with em would tell em to get fucked at that point if they steal from your account!A bail in with direct impact and not kicking can down road will lead to all sorts of mayhem.

      14. San Andreas Fault ‘locked, loaded and ready to go’ with big quake, expert says

        h ttp://www.msn.com/en-us/news/us/san-andreas-fault-%E2%80%98locked-loaded-and-ready-to-go%E2%80%99-with-big-quake-expert-says/ar-BBsE9Qs?li=BBnb7Kz&ocid=ACERDHP15

        “A 2008 U.S. Geological Survey report warned that a magnitude 7.8 earthquake on the southern San Andreas Fault would cause more than 1,800 deaths, 50,000 injuries, $200 billion in damage and severe, long-lasting disruptions. Among the predicted problems: The sewer system could be out of commission for six months.”

        • And now the scientists say the Earth’s mantle is falling apart under the southeastern US:

          ht tp://www.dailymail.co.uk/sciencetech/article-3573759/Giant-chunks-Earth-s-mantle-FALLING-causing-quakes-southeastern-coming-warn-researchers.html

      15. Worse will happen under the new Merkel (Hillary) god forbid. It is really a simple story that goes like this (each sentence can be Googled to verify the facts) :
        In the US 10,000 baby boomers retire each day (Wash post nice article) and need benefits. Since Roe Vs Wade in 1973 we have had 58 million abortions that killed these new tax payers (life news dot com). To fill the tax payer void Dems and Repubs have imported 61 Million Immigrants and Their Young Children to Now Live in the United States (cis.org) to replace the tax payers we have aborted. The impact of 10,000 baby boomers retiring each day has bankrupted the U.S. as Laurence J. Kotlikoff Professor of Economics, Boston University testified in the U.S. senate on Feb 25, 2015 (search Kotlikoffbudgetcom2-25-2015). Kotlikoff testified (same article) that the books are cooked by congress, we are under taxed about 60% to pay for the real $210 Trillion fiscal gap, social security 33 percent under financed (detroit was 25% under financed when it went under) and today taxes must go up 58.5% or spending cut 37.7% to pay for the boomers. Hillary realizes the U.S. is bust and will install her Trillion dollar tax hike plan (atr.org) which is the first of many. Because there is a real risk of government collapse as outlined above Hillary wants all guns gone with mandatory confiscation (thehill or many more sites) to be able to avoid possible civil war to be controll ed by planning (seach for jade helm).

        • Retiring baby boomers are not bankrupting the country, and we are not undertaxed. The federal government is spending too much money on things that were never authorized by the Constitution.

          And no one is taking any guns we may or may not have.

          • Arch,you sound like yet another victim of those pesky boat accidents were one loses some tools.

      16. Saudi Arabia has said that it will dump $750bn of stock on to the market if the 28 pages from the 9/11 report are released (Not that they were guilty, we all know who is) and a US politician sais “Let them and then lets see how much they get”

        in other words this $750bn would soon become $100bn, cents on the dollar and that just how the system works for the international bankers.

        Only a fool would put a time on when the fuse will blow or the plug will be pulled but we must be getting closer

      17. “And no one is taking any guns we may or may not have.”

        famous last words of the Brits and the Aussies !!!

        • Sat,a lesson we should learn from,with huge sales increases in US and more states going “constitutional carry”will be decades before they can without say a plague(not saying that won’t happen)disarm folks.Remember,a few bucks and a big box store one can create all sorts of goods.

          I believe also the Aussies held back a lot of their guns/ammo.

      18. I read where Kerry, the fake Vietnam war hero, told Assad in Syria that he has to be out by August 1st this year or the US was going to oust him, or something similar. They never give up do they? All of the current positioning of US allied troops towards Russia seems like increased war is coming.

      19. If you paint your stick with a good quality exterior house paint mosquitoes won’t bit it.

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