Dow Jones -  Largest daily percentage losses

Rank              Date          Close      Net Change       % Change
1      1987-10-19      1,738.74      −508.00      −22.61
2      1929-10-28      260.64      −38.33      −12.82
3      1899-12-18      58.27      −7.94      −11.99
4      1929-10-29      230.07      −30.57      −11.73
5      1929-11-06      232.13      −25.55      −9.92
6      1932-08-12      63.11      −5.79      −8.40
7      1907-03-14      76.23      −6.89      −8.29
8      1987-10-26      1,793.93      −156.83      −8.04
9      2008-10-15      8,577.91      −733.08      −7.87
10      1933-07-21      88.71      −7.55      −7.84
11      1937-10-18      125.73      −10.57      −7.75
12      2008-12-01      8,149.09      −679.95      −7.70
13      2008-10-09      8,579.19      −678.91      −7.33
14      1917-02-01      88.52      −6.91      −7.24
15      1997-10-27      7,161.15      −554.26      −7.18
16      1932-10-05      66.07      −5.09      −7.15
17      2001-09-17      8,920.70      −684.81      −7.13
18      1931-09-24      107.79      −8.20      −7.07
19      1933-07-20      96.26      −7.32      −7.07
20      2008-09-29      10,365.45      −777.68      −6.98

http://en.wikipedia.org/wiki/List_of_largest_daily_changes_in_the_Dow_Jones_Indu...
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It is likely, there will "shortly" be another day entering this list!

Russia imposes sanctions on US, EU and Australia over Ukraine action

RUSSIA is introducing a “full embargo” on most food imports from EU, US, and other Western countries including Australia which have imposed sanctions against Moscow over its policy on Ukraine, Prime Minister Dmitry Medvedev says.

“Russia is introducing a full embargo on import of beef, pork, fruit and vegetable produce, poultry, fish, cheese, milk and dairy products from the European Union, United States, Australia, Canada and Norway,” Medvedev told a government meeting in televised remarks.

The move announced by Medvedev today was taken on orders from President Vladimir Putin in response to sanctions imposed on Russia by the West over the crisis in Ukraine.

Medvedev said Russia was also considering banning Western carriers from flying over Russia on flights to and from Asia - a move that would significantly swell costs and increase flight time. He said the decision on that hasn’t been made yet.

“The protectionist rhetoric from Russia has been gaining momentum,” said analysts of VTB Capital in a research note today, adding that restrictions had so far been “the primary reason behind elevated food inflation in Russia.”

http://www.theaustralian.com.au/national-affairs/foreign-affairs/russia-imposes-...
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I would suggest there is an expectation in Russia that Europe, the USA & the West in general, have more to lose than Russia, as Europe needs Russian Energy supplies!

So, Russia may think it can "push" and the West won't "push" back, which may well be correct, up to a point?

However, it is now a very dangerous game, being played for very high stakes & miscalculations could ratchet out of control very quickly, with some very serious consequences for all!

Japan's Keynesian Demise: A Cautionary Tale For Our Times

I remember it well. That is, the fiscal rectitude of the old Japan.

During early 1981 as the Reagan White House prepared its radical fiscal plan - what Senate Majority Leader Howard Baker famously called a "riverboat gamble" - we were visited by a high ranking delegation from the Japanese finance ministry (MOF). It is no overstatement to say that they were absolutely shocked by the administration's plan to enact a sweeping 30% income tax cut and double the defense budget - while expecting that it would all balance out as a result of surging economic growth immediately and large domestic spending cuts down the road.

The MOF men feared the worst - politely noting the possibility that there would be insufficient economic growth and spending cuts to pay for the administration's monumental tax reductions and defense build-up. Then the US would experience an outbreak of massive fiscal deficits - an unprecedented peacetime development that could roil the entire global financial system. In that apprehension the MOF men turned out to be dead right, and not because they were especially clairvoyant.

Economic policy officials did not have to be hectored about deficits and the fact that there is no such thing as a fiscal free lunch. Indeed, notwithstanding a government led 30-year drive to rebuild their economy from the complete devastation of WWII, Japan's public debt was only 50% of GDP as of 1980.

That was then. Today Japan's public debt is 5X greater relative to the size of its economy and tips the scales at 250% of GDP. That is off-the-charts relative to all other large developed economies and has no parallel in previous history. In the interim, of course, Japan succumbed to the Keynesian stimulus disease, betting that after its thundering financial meltdown during the early 1990s it could borrow and print its way back to the prosperity it had known during the period of its post-war economic miracle.

The chart below is thus a cautionary tale of our times. In exactly one generation of leadership, Japan's fiscal rectitude was lost entirely. As is made clear in what follows, its fiscal equation is now beyond rescue.



The slippery slope leading to today's Keynesian demise starts with the fact that Japan's post-war boom wasn't a miracle at all. From the smoldering industrial ruins left by the allies' final assault, the Japanese economy had bounded upward for three decades owing to a massive spree of public and private investment and a sweeping mercantilist industrial development and export promotion policy. The former depended upon an extraordinarily high household savings rate and the latter was fueled by blatantly protectionist policies that kept imports out and the yen's exchange rate far below its true economic value.

Needless to say, neither prong of Japan's economic miracle was sustainable. By the mid-1980s the Japanese capital goods and export sectors were enormously over-built. This meant that the double-digit growth in fixed asset investment which had powered Japan's post-war GDP growth was destined for a sharp fall.

That's exactly what happened after mid-1985 when a new financial sheriff came to the US Treasury. James Baker had matriculated from the Texas School of "America first" economics and did not hesitate to lower the boom on Japan's export driven prosperity by way of the Plaza Accords of September 1985. Under the pressure of Baker's concerted global campaign of yen buying by the major central banks, Japan's exchange rate soared from about 260 per dollar to 130 over the next several years.



In the first round, the BOJ slashed interest rates in early 1986 in order to stimulate domestic expansion, but Japan's problem was not that the cost of capital was too high or that it suffered from insufficient industrial capacity. In fact, it was already swamped with excess capacity in steel, autos, machinery, consumer electronics and much else.

So what Japan needed at the time was higher market clearing interest rates to thwart its now chronic over-investment in export capacity. Instead, the BOJ's ultra easy money flowed into the financial sector, fueling a massive bubble in real estate and corporate stocks and bonds.

This initial round of financialization induced businesses to drastically expand their debt loads. Accordingly, non-financial debt in Japan nearly tripled from its early 1980s level. As shown below, the Nikkei stock index went parabolic, rising by nearly 4X during the 50 months after the Plaza Accord.

The bubble was especially acute in the real estate sector. At one point the value of land in Tokyo was equal to the total for the US. And there is no doubt as to the cause: the BOJ unleashed a monumental speculative frenzy based on cheap debt and the perception that Japan was "different" because its central bank had everyone's back.

Japan's Keynesian Demise: A Cautionary Tale For Our Times (Cont)

But ZIRP has had enormous and untoward collateral effects that taken together comprise the proximate cause of Japan's impending fiscal demise. First, Japan's vaunted household savings rate - the feature that funded its post-war CapEx boom - has ended up in the dustbin of history. During the last two decades it has dropped from the high teens as a percent of disposable income to a US style 3-4%. Indeed, it has gone from the highest rate in the world in the early 1980s to the lowest at present.

This untimely collapse of the savings rate will prove especially destructive for the retirement colony that comprises Japan's demographic future. Saddled with towering public debts and rapidly shrinking work force, Japan will swiftly consume its accumulated savings as its retirement rolls soar. A decade or two down the road it will become an international pauper.

If it gets that far. The other collateral effect of ZIRP has been a gigantic fiscal lie. Namely, the delusion that Japan's massive government debts can be financed at close to zero nominal carry cost for the indefinite future.

That's why the prospect of interest rate "normalization" is such a fiscal nightmare.

And that brings us to the folly of Abenomics and the BOJ's latest round of QE - a madcap rate of balance sheet expansion that would be equivalent to $250 billion per month at the scale of the US economy. At this rate, the BOJ is absorbing almost all of the available government bond supply and on some days has actually left the private market bidless. Indeed, it is monetizing assets at such a frenzied rate that it has now become a major buyer of ETFs and other equities. In effect, the central bank in Japan no longer merely runs the casino, it has become the casino.

The fact is, after the most recent quarter's GDP wipeout, Japan's real GDP is only 0.8% larger than it was five quarters ago when Abenomics was installed at the BOJ. And therein lies the frightful future.

Were the BOJ to actually achieve and sustain its 2% inflation target the Japanese government bond market would either collapse, or need to drastically reprice. The former case amounts to disaster now, the latter would entail fiscal collapse very soon as Japan's revenues would be soon devoured by a surging carry cost on its towering debt.

And that gets to the ragged Keynesian excuse that all will be well once the jump in the consumption tax from 5% to 8% is fully digested. But here's the problem: this is just the beginning of an endless march upwards of Japan's tax burden to close the yawning fiscal gap left after the current round of tax increases, and to finance its growing retirement colony.

So there is no possibility that Abenomics will result in "escape velocity" Japan style and that Japan can grow its way out of its enormous fiscal trap. Instead, nominal and real growth will remain pinned to the flatline owing to peak debt, soaring retirements, a shrinking tax base and a tax burden which will rise as far as the eye can see.

It is a cautionary tale for our times. And Japan, unfortunately, is just patient zero.

http://seekingalpha.com/article/2428295-japans-keynesian-demise-a-cautionary-tal...
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Oh & btw, it would seem lowering a countries exchange rate to the US$ may not create the outcomes that some think it should?

The Italian Runaway Train

By now almost everyone and their granddad knows that Italy is back in recession following the 0.2% GDP contraction in the second quarter.


Not only did this result suggest that Italy was now in a triple dip recession (or a twenty year decline), it also meant that GDP was back at the same level it had in 2000, when the country entered the Euro currency union.


The problem is that Italy has an appallingly low trend GDP growth rate - possibly negative at this point - and nothing which has happened since the financial crisis ended suggests it is going to improve radically anytime soon; in fact there are good reasons to think that growth could even deteriorate further.


In the first place Italy's working age population is now falling, and many young educated Italians are leaving to work elsewhere.


And now, not only do we have the legacy then of high debt and low growth, a new problem has emerged: low inflation or even deflation. Italy's inflation has fallen to zero.


The combination of low inflation and low growth means that it is the evolution of nominal GDP that really matters now. Nominal GDP is non-inflation corrected GDP (or GDP at current rather than constant prices). If inflation remains low or even becomes negative, then nominal GDP will hardly increase and may even continue to contract (as has happened in Japan). The result is bound to be that the gross government debt to GDP ratio rises above the 135.6% it hit in March.


One of the arguments frequently advanced about how this dynamic could be turned around would be for Italy to run a "large" primary budget surplus. Now the emphasis here is on large since the country has in fact run a primary surplus (income - expenditure before paying debt interest) since the early 1990s, but that hasn't stopped the weight of the debt climbing and climbing.

Is it plausible that Italy could run an average primary surplus of 6.6% of GDP over a decade? Hardly - in particular this implies that on average, every year, the government would be draining out 6.6% of GDP from domestic demand via taxation. Yet as I have noted many times, domestic demand is precisely the weak point in the Italian economy (secular stagnation, ageing population).


Italy's situation is to some extent replicated in other countries on the periphery (Ireland sovereign debt to GDP 124%, Portugal 132.9%, Spain 96.8% and Greece 174.1%, all numbers as of March 2014) since almost all official forecasts anticipate an imminent turnaround in the debt dynamic.

Italy's debt now looks certain to climb towards 140% of GDP and beyond (maybe hitting that level as early as Q1 2015), meaning someone somewhere in the official sector should be able to recognize that it is not on a sustainable path.

Cases like Greece and Portugal are to some extent containable from an EU perspective since the economies are small enough for EU leaders to engage in some sort of extend and pretend via low coupons and long horizon maturities. But Italy's debt is simply too big to be manageable in this way.

The problem is that with the debt dynamics we have seen above the one thing Italy doesn't have at this point is time. It isn't a problem of the impact of a so called "debt snowball" as interest rate payments send debt levels spiraling upwards. If anything it's worse. Mario Draghi can, in theory, contain the debt interest problem, and if needs be along with it the capital repayments schedule. But the problem Italy has at the moment is one of the credibility of its debt, of the country being able to convincingly argue its trajectory is sustainable, of being able to convince the Germans that if the ECB were to buy bonds these they could EVER be redeemed.

Despite this Prime Minister Renzi continues to insist that his government's economic strategy is sound and will lift the country out of crisis.

If countries like Japan, Italy and Portugal are suffering from some local variant of one common pathology, then normal solutions are unlikely to work, and matters can deteriorate fast.

http://seekingalpha.com/article/2431615-the-italian-runaway-train?ifp=0
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One thing, you can count on, with Politicians & Central Bankers is -
THEY WILL TELL YOU, WHAT THEY WANT YOU TO BELIEVE!

Yes - there is nothing 'great' about that Depression or this one.
Nor was I impressed with 'all of those' photos of the last Depression back in the Gatsby years. Proven to be 'hoaxed' by the Media who made things look far worse than they actually were. All staged environments with actors used.
Pretty disgusting thing to do.

So the piece above is  saying that although Italy is 'saving' money, its also going into debt 'spending' as well? 
I know the Italian Police are trying to raise revenue anywhere and everywhere ...many a Marina is empty as Boat Owners (luxury Yachts, etc) refuse to pay the expensive mooring fees.

I guess this is what happens when you follow a Nation's Economic aim of making sure its 'Penis & Breast Enlargements are kept in trim' as a sign of Wealth.

I also still believe that the nations with GST are victims to a TAX by the USA. As soon as Canada received its GST, I knew something was up    It serves no purpose here in Australia

WA's credit rating downgraded second time in less than a year

Western Australia has suffered another downgrade of its credit rating due to the state's spiralling debt.

Credit rating agency Moody's has followed Standard and Poor's decision, and stripped WA of its AAA rating, pushing it down to Aa1.

It is the second credit ratings downgrade in less than a year, and follows a period of strong growth of the resources sector and increased reliance by the State Government on mining royalties.

In a statement, the agency said its decision to downgrade was due to current debt levels and an over-reliance on volatile mining royalties.

It also cited a weak policy response by the State Government in dealing with its debt problem.

It is the worst assessment by a ratings agency since the Government came to power in 2008.

Then, debt was just over $3 billion, but it now sits at $22 billion.

Deficit tipped to increase in government sector
Moody's said the government sector had experienced "persistent" deficits, averaging 5 per cent of revenue from 2008/09 to 2013/14.

This year it is expected to hit 6.2 per cent, as spending continues to outpace revenue.

According to the statement, the Government hopes to lower deficits to an average of 2.5 per cent over the next four years.

But Moody's notes the state will be challenged by "an increasing reliance on more volatile mining royalties".

Mining revenues are forecast to amount to nearly one quarter of WA's revenue by 2017/18, up from around 8 per cent in 2006/07.

"The state's assumption on royalties is underpinned by a fairly optimistic forecast for iron ore prices," the statement said.

Moody's said while the Government planned to cut spending, it would be difficult.

"The state will be hard pressed to meet its very low spending growth targets, unless the government's fiscal resolve strengthens and new measures are identified."

http://www.abc.net.au/news/2014-08-25/wa-credit-rating-downgraded-by-moodys/5694...
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Q) What is the difference between Labor & Liberal Economics?
A) Stuff all, they both made an absolute hash of things over the last 30-40 years & they are still doing it!

Btw, whilst the above is going on in WA, the current Premier has embarked on on 2 huge $Billion + projects, which are basically his memorial projects.
Well, he will be remembered, BUT NOT AS SOMEONE WHO DID THE RIGHT THING FOR THE PUBLIC'S FUTURE!

A Big Summer Story You Missed: Soaring Oil Debt

Over 100 of the world's largest energy companies are running out of cash.

They are now spending more than they are earning. Profits have lagged as expenditures have risen. Overburdened by debt, these firms are selling assets.

The math is simple. The 127 firms generated $568 billion in cash from their operations during 2013-2014 while their expenses totalled $677 billion. To cover the difference of $110 billion, the energy giants increased their debt load or sold off assets.

Most companies are now investing in high-cost and high-risk projects to mine difficult hydrocarbons such as bitumen or shale oil, according to Carbon Tracker. Hydraulic fracturing, the land equivalent of ocean bottom trawling, adds to the cost of oil, too.

It's not only the firms deploing fracking that are racking up high debt loads. Chinese state-owned corporations, for example, plopped down $30 billion to develop junk crude in the oilsands over the last decade.

But with a few exceptions, none of the investments are making a good dollar return due to the difficult and costly nature of mining messy bitumen as well as problematic quality of the reserves, combined with huge cost overruns.

Most of the world's oil and gas firms are now pursuing extreme hydrocarbons because the cheap and easy stuff is gone. The high-carbon remainders include shale oil, oilsands, ultra deepwater oil and Arctic petroleum.

But given that oil demand in places like Europe, the United States and Japan is flattening or declining, many analysts don't think that high-carbon, high-risk projects (which all need a $75 to $95 market price for oil to break even) make much economic sense in a carbon-constrained world.

The capital costs for liquefied natural gas (LNG) terminals supplied by heavily fracked coal or shale fields is also rising. Highly complex LNG projects in Norway, Australia and Papua New Guinea have all experienced major cost overruns.

Goldman Sachs now reckons more than half of the oil companies listed on the stock market -- are spending five times more than what they did in 2000 chasing extreme hydrocarbons. As a consequence they need an oil price of $120 a barrel to remain cash neutral in the future.
And whenever nations spend less on petroleum, like Europe and the U.S., there is stagnation.

But diminished returns from extreme hydrocarbons will do more than slow down productivity and increase price volatility. They will impose lasting and material adjustments on all of us.

In addition to seeing fewer vehicles on the road (a startling U.S. reality already), we shall also see lower wages (except in the hydrocarbon industry), rising food prices, rising personal debt loads, increased demands on governments increasingly short of revenue, explosive inequalities in wealth and rising political conflict.

We shall also see more of what the U.S. Energy Information Administration dutifully recorded:

soaring debt loads to support massive energy sprawl. That means industry will spend more good money chasing poor quality resources. They will inefficiently mine and frack ever larger land bases at higher environmental costs for lower energy returns.

Combined with its twin brother, climate change, this is the great energy narrative that will shape our destiny in the years to come.

Marion King Hubbert, a Shell geologist, predicted this development decades ago and presented the cultural conundrum clearly:

"During the last two centuries we have known nothing but an exponential growth culture, a culture so dependent upon the continuance of exponential growth for its stability that is incapable of reckoning with problems of non-growth."

But why would such a radical development be news in the dog days of summer?

http://www.resilience.org/stories/2014-08-29/a-big-summer-story-you-missed-soari...
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As I have said, Demographics, Energy & Climate Change are the 3 major factors, which are now influencing the Global Economy!