Executive Summary

• Central bank policies to prop up the global economic system are failing
• Developing countries and the PIIGS are the periphery where we can see the crumbling now accelerate
• The emerging Syria crisis could hardly come at a worse time & could have an explosive effect
• The steps every concerned individual should be taking now

If you have not yet read Part I: The Periphery is Failing, available free to all readers, please click here to read it first.

When Help Turns to Harm

The story, so far, goes like this:  A global credit crisis so worried the powers that be that they promised to do ‘whatever it takes,’ (Draghi) even if that means lying from time to time (Junker).  This has only resulted in larger and larger interventions in the form of more aggressive QE programs (U.S. Fed), doubling of the monetary base (Japan), and repeated ‘Final Bailout Ever’ goal lines that keep getting moved back (ECB re: Greece).

Each of these interventions, in combination with ultra-low and highly distortive interest rates, has only served to make markets more speculative, more risk-tolerant, and therefore more prone to some future accident.

Puzzlingly, and certainly off-script, has been the steady rise in long-term U.S. interest rates, which we’ve been tracking as the most interesting development in an otherwise boringly placid set of global equity markets.

That began in early June.  Now at August's end, we have a better picture to illuminate why that happened and where it’s probably headed next.

The initial data came to us via the Treasury International Capital (TIC) report that tracks the net buying and selling of financial securities in both directions across the U.S. border.  The June numbers were a real eye-opener, as they marked the first time in history that virtually every category of U.S. financial assets was net sold by foreigners.  It also showed the total amount of selling was even greater than the prior record set in October of 2008:

(Source)

Of course, this data is from June, and the TIC report, as good as it is, always comes out a month and a half after the fact.  So we can only guess at what has happened since.  (The July data will be released Sept 15).