BOOM as at 4th February 2019

ANOTHER CARBON DIOXIDE CONUNDRUM

Last week BOOM discussed a report by two prestigious universities that showed that most Americans are simply not willing to pay for climate change mitigation even amongst the majority of the population who are “true believers”. Many of those believers were not prepared to pay even $ 10 per month. Some were not prepared to pay $ 1 per month. Today, BOOM looks at another aspect of this issue.

Despite endless hopeful discussions surrounding solar power and wind energy technologies, transportation remains a major problem in regard to carbon dioxide emissions. In California, the power generation system only amounts to 16% of annual emissions. However, transportation generates more than twice that at 40%. The other 44% is produced by construction, roads, manufacturing, agriculture and concrete. Just concrete is estimated to contribute 10% of all emissions per year globally.

That sounds awful. But there is some hope. The Californian population has increased from 30 million to 39 million since 1990 and overall total emissions have not changed so there has been a relative improvement of 30 % per head of population. Most of that improvement has come from the power generation sector where most of the new technologies have had some impact.

However, a 30% overall improvement in almost 30 years is a very slow rate of transition. That represents a rate of annual change of less than 1%. At that rate, it will take California about 80 years to halve its emissions per head of population, assuming that some brilliant innovative and dramatic technological changes will (somehow) occur in the near future for transportation, construction, roads, manufacturing, agriculture and concrete. As far as BOOM can tell, that is not happening at present so it’s all way too slow.

California is probably the most innovative population in America and possibly the most innovative globally. But they represent only 0.5 % of the population on the planet. And last time BOOM looked this was apparently a planetary problem.

As BOOM says to anyone who will listen, if this is an acute crisis of survival for the planet as so many propose, then all of planet Earth must rapidly adopt behavior modification programs as the most important first step. The key word here is rapidly and we must remember  that 7.5 billion people are involved.

How can so many people  make such rapid change? That means immediately using much less energy from all sources rather than just slowly adopting lower emissions technology in the electricity sector. It must also mean adopting huge ocean regeneration programs which include massive carbon sinks and electricity grid storage solutions that can immediately allow the conventional power stations to run at much lower outputs through peak demand periods. Such grid solutions should reside at the power stations (not at the household) and should involve batteries that last for many decades, are robust, easily maintained, modular, easily assimilated, low tech, low cost and must supply electricity for up to 6 hours at peak time every day. Such batteries are now in various stages of development. Our current lithium based batteries can help for emergency instant power at grid level but they are not so suitable for this daily grid storage function at the power stations. Household lithium batteries are a part of the solution but it will take too long to install them across the whole network and the whole planet to make enough of a difference in a short time frame and the cost will probably be prohibitive, not to mention the supply chain complexity required.

BOOM TO THE RESCUE

BOOM recently met with two men who just might save the world. One has been working on behavior modification strategies to combat climate change for 10 years and the other has been working on ocean regeneration and electrical grid storage for 10 years. BOOM’s role in this trio is to help raise the large sums of finance required. The ocean regeneration project includes a massive carbon sink program while it also improves the ocean environment dramatically for fish stocks, coral reefs and has many other positive spin-offs for mankind including up to 90% reduction in Methane production from livestock.

BOOM strongly suggests that you look at the project website. Brian Von Herzen is the physicist and oceanographer founder.

Link: http://www.climatefoundation.org/

Meanwhile, BOOM is working on an innovative global funding mechanism aimed at raising the huge finance required to implement these projects. More to come in future editorials.

FEDERAL RESERVE CAPITULATES

Meanwhile, back in finance land, the US central bank (the Federal Reserve) did more than blink last week. They essentially said that US interest rates are now on hold and they also indicated that their balance sheet asset reduction program could be curtailed. Back in early December, they were committed to 4 interest rate rises for 2019 and $ 50 Billion per month in asset reductions.

The Committee “would be prepared to use its full range of tools, including altering the size and composition of its balance sheet, if future economic conditions were to warrant a more accommodative monetary policy than can be achieved solely by reducing the federal funds rate”.

This means “we’ll turn the tap on full blast if we have to” by reducing interest rates and also reversing their balance sheet reduction program.

So now all the major central banks of the advanced economies are all desperately trying to trigger commercial banks to make more loans so that the money supply will increase and cause increased economic growth and CPI inflation. BOOM is not surprised by this dramatic turn of events.

RECESSION BEGINS IN ITALY

Italy has slipped into negative GDP growth in the last 3 months. The official GDP numbers for that quarter showed a negative -0.2% contraction on the previous quarter. Nobody was surprised by this.

The French economy will probably slip towards recession soon due to the chaos triggered by the Yellow Vests protests. In the last 4 quarters, French GDP has advanced 0.2%, 0.2% , 0.3% and 0.3% (Quarter on Quarter), not a stellar performance and that was before the Yellow Vests took to the streets. In the 4th quarter of 2018, the French annual GDP growth number slipped from 1.3 % to 0.9 %. BOOM expects the next official figure will be lower again.

The European Central Bank is again doing “whatever it takes” to keep the money supply growing all over Europe so we can watch over the course of 2019 to see how effective they have been.

EUROPE TRADES WITH IRAN

Europe has established a pathway for trade with Iran to be settled outside of the US dominated SWIFT system (which is actually based in Brussels). The new trade settlement pathway is called INSTEX – short for ‘Instrument in Support of Trade Exchanges’. As of now, it is aimed at facilitating trade between the companies of the UK, France and Germany and Iran.

The system will initially focus on sectors most essential to the people of Iran. This involves food, pharmaceuticals and medical devices. Such goods are technically exempt from US sanctions but many pharmaceutical and agricultural companies have stopped trading with Iran because of the concern that this may trigger secondary sanctions. The INSTEX headquarters will be based in Paris.

US NON FARM PAYROLLS IMPROVE AGAIN

The US Non Farm Payrolls number was released on Friday and (surprise, surprise) showed that the U.S. economy added 304,000 non-farm payrolls in the first month of 2019. This was greeted as evidence of strong economic growth in the US.

Let’s look at how the number is arrived at by the US Bureau of Labor Statistics.
The data is collected from computer-assisted telephone interviews and data is collected for the first 5 months via this mode. Then many samples are transferred to one of several less costly reporting methods that are self-initiated. Payroll employment data is published for both private and government sectors for nonfarm industries.
The survey is based on approximately 149,000 businesses and government agencies representing approximately 651,000 work sites in the USA. It excludes employees in agriculture, private households and the self employed. The current design has been in place since 2003.

BOOM is not too sure what is meant by a “self-initiated” survey but presumes that businesses simply fill in a form if they feel inclined to do so. BOOM is also uncertain about what constitutes a “computer assisted telephone interview” but guesses that people talking to computers could be tempted to say whatever may help their particular business.

Whatever the methodology, it does seem to BOOM to lack objectivity. So what are the numbers worth? Can they be relied upon?

In economics, things work until they don’t.  Until next week …………  Make your own conclusions, do your own research.  BOOM does not offer investment advice.

 

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Return to the BOOM Main Website –  BOOM Finance and Economics at  http://boomfinanceandeconomics.com/

EMAIL: gerry [@] boomfinanceandeconomics.com

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HOW MOST MONEY IS CREATED

BANKS CREATE FRESH NEW MONEY OUT OF THIN AIR
(but they always need a Borrower to do so)
THERE IS NO SUCH THING AS A DEPOSIT
BANKS PURCHASE SECURITIES, THEY DON’T MAKE LOANS
BANKS DON’T TAKE DEPOSITS, THEY BORROW YOUR MONEY

Watch this short 15 minutes video and learn as Professor Richard Werner brilliantly explains how the banking system and financial sector really work.

https://www.youtube.com/watch?v=EC0G7pY4wREhttp://

How is Most New Money Created ?

LOANS CREATE DEPOSITS — that is how almost all new money is created in the economy (by commercial banks making loans).

From the Bank of England Quarterly Bulletin Q1 2014    —

“Whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money.

“Most money in the modern economy is in the form of bank deposits, which are created by commercial banks themselves”.

Youtube Video —  https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/money-in-the-modern-economy-an-introduction

and

https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/money-creation-in-the-modern-economy

Paper:  Money in the Modern Economy  PDF —  CLICK HERE

Quarterly Bulletins Index

http://www.bankofengland.co.uk/publications/Pages/quarterlybulletin/2014/qb14q1.aspx

Most economists are unaware of this and even ignore the banking & finance sectors in their econometric models.

On 25th April 2017, the central bank of Germany, the Bundesbank, released a statement on this matter —

“In terms of volume, the majority of the money supply is made up of book money, which is created through transactions between banks and domestic customers. Sight deposits are an example of book money: sight deposits are created when a bank settles transactions with a customer, ie it grants a credit, say, or purchases an asset and credits the corresponding amount to the customer’s bank account in return. This means that banks can create book money just by making an accounting entry: according to the Bundesbank’s economists, “this refutes a popular misconception that banks act simply as intermediaries at the time of lending – i.e. that banks can only grant credit using funds placed with them previously as deposits by other customers”. By the same token, excess central bank reserves are not a necessary precondition for a bank to grant credit (and thus create money).”

Reference: https://www.bundesbank.de/Redaktion/EN/Topics/2017/2017_04_25_how_money_is_created.html

The Reserve Bank of Australia (Australia’s central bank) has also contributed to the issue in a speech by Christopher Kent, the Assistant Governor on September 19th 2018.

“…… the vast bulk of broad money consists of bank deposits”

“Money can be created …….. when financial intermediaries make loans

“In the first instance, the process of money creation requires a willing borrower.”

“It’s also worth emphasizing that the process of money creation is not the result of the actions of any single bank – rather, the banking system as a whole acts to create money.”

PRICE PULSE DOMINANCE CHANGES DURING LAST WEEK Ended 4th February 2019:

1. US JUNK BOND PRICES — Changed to NO Arrow Dominant
2. US HIGH GRADE CORP BONDS (LQD) — Changed to UP Arrow Dominant
3. RWR (US Real Estate REIT Fund) — Changed to UP Arrow Dominant
4. RUSSIAN RTSI STOCK INDEX — Changed to UP Arrow Dominant

JUNK BONDS OVER 6 MONTHS

LQD HIGH QUALITY CORP BONDS

RWR

RUSSIAN RTSI.JPG

NOTE — RED ARROWS INDICATE BOOM PRICE PULSE DOMINANCE in the present moment (as indicated by the date of the chart and taking into account the 3 year time frame shown).  The charts are now arranged in PRICE PULSE RED ARROW DOMINANCE.    NOTE: All Charts are WEEKLY Charts over the last 3 YEARS time frame.  Arrows indicate PAST price action (not future).  No predictions are implied from past action.

Comments refer to past PRICE PULSE (Red Arrow DOMINANCE) over the last 3 years, the week ended 4th February 2019.  You can RIGHT CLICK a chart and OPEN in a New Tab.  Make your own conclusions, do your own research. BOOM does not offer investment advice. 

PLEASE NOTE — Many charts are ETF’s from NY Market  (not the base commodity or currency etc). The NY Stock Code is in the Top Left Hand Corner of each chart.
Charts are produced from http://www.stockcharts.com

Return to the BOOM Main Website –  BOOM Finance and Economics at  http://boomfinanceandeconomics.com/

PRICE PULSE RISING — (RED ARROW UP DOMINANCE)

# RWR (US Real Estate REIT Fund) — UP Arrow Dominant
# RUSSIAN RTSI STOCK INDEX — UP Arrow Dominant
# US HIGH GRADE CORP BONDS (LQD) — UP Arrow Dominant
# EMERGING MARKETS ETF (EEM) — UP Arrow Dominant
# YUAN (AGAINST USD) ETF (CYB) — UP Arrow Dominant
# US LONG BOND PRICE (TLT) — UP Arrow Dominant
# AGGREGATE US BOND PRICES (BND) — UP Arrow Dominant
# GOLD PRICE in USD — UP Arrow Dominant
# GOLD PRICE (in Aus Dollars) — UP Arrow Dominant
# INDIAN STOCKS — UP Arrow Dominant
# BRAZIL STOCK INDEX — UP Arrow Dominant
# PALLADIUM PRICE — UP Arrow Dominant
# ARGENTINA STOCKS — UP Arrow Dominant
# US INFLATION PROTECTED BOND PRICES — UP Arrow Dominant
# US UTILITIES STOCKS — UP Arrow Dominant
# RIO STOCK (Iron Ore) — UP Arrow Dominant
# US 3 MTH T BILL YIELD — UP Arrow Dominant
# LIBOR — UP Arrow Dominant

PRICE PULSE FALLING — (RED ARROW DOWN DOMINANCE)

# SWISS STOCKS — DOWN Arrow Dominant
# US DOW STOCK INDEX — DOWN Arrow Dominant
# US BIOTECHNOLOGY INDEX — DOWN Arrow Dominant
# JAPAN STOCKS — DOWN Arrow Dominant
# WEST TEXAS OIL PRICE — DOWN Arrow Dominant
# US TRANSPORT INDEX — DOWN Arrow Dominant
# US INSIDER SENTIMENT (KNOW) — DOWN Arrow Dominant
# SOIL (POTASH ETF) — DOWN Arrow Dominant
# QUAL (Quality ETF) — DOWN Arrow Dominant
# MTUM (Momentum ETF) — DOWN Arrow Dominant
# RUSSELL 2000 INDEX — DOWN Arrow Dominant
# TRIM TABS US FLOAT (TTAC) — DOWN Arrow Dominant
# FINANCIAL SECTOR ETF (XLF) — DOWN Arrow Dominant
# US KBW BANK INDEX — DOWN Arrow Dominant
# NASDAQ COMP INDEX — DOWN Arrow Dominant
# COMMODITIES INDEX (USCI) — DOWN Arrow Dominant
# SWISS FRANC (AGAINST $US) — DOWN Arrow Dominant
# FRANCE STOCKS — DOWN Arrow Dominant
# AUSSIE ALL ORDS INDEX — DOWN Arrow Dominant
# THAI SETI INDEX — DOWN Arrow Dominant
# GERMAN DAX — DOWN Arrow Dominant
# TAIWAN STOCKS — DOWN Arrow Dominant
# FVL — VALUE LINE — DOWN Arrow Dominant
# YEN (AGAINST $US) — DOWN Arrow Dominant
# DENMARK STOCKS — DOWN Arrow Dominant
# COAL ETF (KOL) — DOWN Arrow Dominant
# COPPER PRICE — DOWN Arrow Dominant
# INDUSTRIAL METALS ETF (DBB) — DOWN Arrow Dominant
# SOUTH KOREA STOCKS — DOWN Arrow Dominant
# AUSSIE DOLLAR AGAINST US DOLLAR — DOWN Arrow Dominant
# CANADIAN DOLLAR AGAINST USD — DOWN Arrow Dominant
# BRITISH POUND AGAINST USD — DOWN Arrow Dominant
# EURO (AGAINST $US) — DOWN Arrow Dominant
# NOMURA HOLDINGS — DOWN Arrow Dominant
# PLATINUM PRICE — DOWN Arrow Dominant
# SHANGHAI STOCKS — DOWN Arrow Dominant
# BITCOIN INDEX $NYXBT — DOWN Arrow Dominant
# DEUTSCHE BANK SHARES — DOWN Arrow Dominant
# FOOD INPUT PRICES (DBA) — DOWN Arrow Dominant
# EURODOLLAR INDEX ($XED) — DOWN Arrow Dominant

PRICE PULSE UNCERTAIN NON-DOMINANCE OF RED ARROW –

# US JUNK BOND PRICES — NO Arrow Dominant
# HANG SENG — NO Arrow Dominant
# NATURAL GAS (SPOT PRICE) — NO Arrow Dominant
# TED SPREAD — NO Arrow Dominant
# SINGAPORE STOCKS — NO Arrow Dominant

Disclaimer: All content is presented for educational and/or entertainment purposes only. Under no circumstances should it be mistaken for professional investment advice, nor is it at all intended to be taken as such. The commentary and other contents simply reflect the opinion of the authors alone on the current and future status of the markets and various economies. It is subject to error and change without notice.The presence of a link to a website does not indicate approval or endorsement of that web site or any services, products, or opinions that may be offered by them.

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MOLS   Denmark

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