• Five Reasons Why America Is About To Become A Very Conservative Country

  Authored by Daniel Lang via SHTFplan.com,

  

  For generations, we’ve seen the political landscape in this country teeter back and forth between the Left and the Right. Usually about every 8 years or so, whichever political party is dominating Congress, the Executive Branch, and the state legislatures, is kicked out by voters and replaced with the other political party.

  However, there’s something very different going on this time around. Donald Trump’s ascent to the oval office represents a major shift in our society and culture, and I’m not talking about the intermittent shuffle of politicians that we see every few years. Instead, the pendulum is about to swing very hard to the right.

  I think that the political landscape in America is going to be drifting towards conservatism for the next 20-40 years. Though it may not be identical to what we view as conservative today, and it certainly won’t be the phony neoconservatism that dominated the past, it will be right-wing nonetheless. Here’s why:

  1. The Supreme Court Is About To Change

  President Trump has already chosen one Supreme Court justice, and there’s a good chance that he’s going to wind up choosing several more (much to the dismay of the Left). Because of their advanced age, we may see three more Supreme Court justices retire or die over the next four to eight years, two of whom lean to the left.

  If Trump lasts two terms, we’re definitely going to see a Supreme Court that is dominated by conservatives for the next 20-30 years. So even when liberals take back Congress and the presidency on occasion, many of their most radical ideas won’t be able to take hold for many years.

  2. Immigration Is Going To Decline

  The percentage of the population that is foreign born hasn’t been this high since the early 1900’s, and most of those immigrants are liberal. That’s why our loose borders, combined with The Immigration and Nationality Act of 1965, have probably done more to bolster the ranks of the Left than any other law.

  But just as our nation’s political landscape tends to swing back and forth between the Left and the Right, so to does number of immigrants in America. In the short term, we can expect people like Trump to restrict the border and maybe pass laws that will decrease immigration to some degree.

  But there’s a long term trend to consider as well, because the election of Trump likely represents a turning point for our society. Considering how crucial his immigration stance was to his victory, it’s clear that a growing number of Americans want the border tightened up, and the number of immigrants moving here to decrease. And rest assured that in the near future, there will be more conservatives voting for politicians who will try to lower immigration rates, because…

  3. The Next Generation Is Incredibly Conservative

  Over the years we’ve seen each generation of Americans become a little more liberal than the last, but that’s about to change. According to a study from last year, Generation Z, which represents kids born after the year 2000, is the most conservative generation since World War Two. To give you an idea of just how right-wing the next generation is, when asked if they are “quite conservative,” 14% of teenagers say they are, compared to just 2% of Millennials. That’s a mind boggling shift, from one generation to the next.

  4. Liberal Birth Rates Are Declining

  The Left is about to pay a huge price for denigrating the family and traditional gender roles for so many years. Because liberal women tend to be more career minded and wait longer to have children, they often have fewer kids over the course of their lives. That’s why liberal states always have lower birth rates than conservative states.

  All of the states with a birth rate of of 60 or less per 1000 people are liberal, and all of the states with a birth rate of 70 or more per 1000 people are conservative. That may not sound drastic, but consider that these states still have a sizeable mix of conservatives and liberals. Even the most liberal states have millions of conservative residents and vice versa, which offsets the results. If ideology is really driving birth rates, then liberals are probably having very very few children. They’re probably not reaching the minimum replacement rate of 2.1 children per mother.

  When you consider how many values kids learn from their parents and carry into adulthood, it’s obvious that the Left has a serious demographic problem. The only way they’ve been able to create more liberals, is through immigration and through indoctrination in the school system. Unfortunately for the Left, they’re not going to have a stranglehold on our schools for much longer either.

  5. Leftist Academia Is In Serious Trouble

  From Kindergarten to college, our schools are breeding grounds for liberal ideas. That’s become abundantly clear in recent years, as we’ve seen the horrifying rise of political correctness and social justice beliefs on college campuses. These institutions are little more than indoctrination centers for the Left.

  But this isn’t going to go on for much longer. We have a whole generation of kids who were buried in over a trillion dollars worth of debt, just so they could get worthless liberal arts degrees that won’t ever help them get a job. They paid tens of thousands of dollars to be indoctrinated by liberal professors, before going back home to live with their parents.

  That’s why student loans constitute a bubble in our economy, and once it pops, colleges are going to have to cut back on many classes that don’t actually increase the earning power of students. Coincidentally, the fields of study that harbor the most liberal professors, are the ones that don’t help most students get jobs, like the arts, humanities, liberal arts, gender studies, etc. Someday soon, colleges are going to be forced to trim the fat, and many of these Marxist professors and diversity administrators are going to get the axe. Their positions are incredibly superfluous.

  As for the leftists public schools, let’s not forget that the number of kids being homeschooled is growing rapidly, and most of their parents are conservatives. They’re raising a new generation that isn’t going to be brainwashed by government run schools.

  And let’s not forget that the mainstream media, which has been largely wed to the left, is dying. So basically, every institution that the Left uses to teach its ideas, from the media to academia, is slowly crumbling away.

  In summation, everything liberals have relied on to bolster their ranks, propagate their ideas, and pass their laws, are failing. So there shouldn’t be any doubt. Over the next few decades, America is going to become a very conservative place.

  

  

• Mapping The U.S. Zip Codes Where "The Rent Is Too Damn High"

  As America’s young snowflakes graduate their liberal bastions of higher education and get ready to migrate around the U.S., at least those who were lucky enough to actually find a job after graduation and avoid the embarrassment of moving back home with mom and dad, we thought it would be helpful to take a look at where they might get the most safe space square footage for their money. 

  And while it may come as a complete ‘shock’ to our readers, those moving to New York and California will seemingly have the hardest time covering monthly rent payments according to the following map from Rent Cafe:

   

  In fact, aside from one zip code in Boston, every single one of the top 20 most expensive zip codes in the country come from a couple of square miles of real estate in Manhattan and San Francisco.

  

   

  Meanwhile, the more affordable areas seem to be concentrated in the ‘Red States’ in the southeast and midwest.

  

   

  Of course, it’s not just high rents that people in NY and CA have to contend with as many of the states with the highest rents also have the highest state income tax rates. 

  

   

  All of which probably helps explains why folks in New York City, Los Angeles and San Francisco are packing up and moving out by the 1,000s.  Not surprisingly, America’s ‘domestic migrants’ are flocking to areas with a lower cost of living, lower/no state income taxes, less regulations and higher job growth (aka “Red” states). 

  

   

  Could it be that while the enlightened citizens of NY and CA love to ‘preach’ their liberal policies they prefer to ‘practice’ their citizenship in states that afford them the economic benefits of conservatism?

  

  

• From Debt Peons To Wage Slaves – Are Students A 'Class'?

  Authored by Michael Hudson, via NakedCapitalism.com,

  Students usually don’t think of themselves as a class. They seem “pre-class,” because they have not yet entered the labor force. They can only hope to become part of the middle class after they graduate. And that means becoming a wage earner – what impolitely is called the working class.

  But as soon as they take out a student debt, they become part of the economy. They are in this sense a debtor class. But to be a debtor, one needs a means to pay – and the student’s means to pay is out of the wages and salaries they may earn after they graduate. And after all, the reason most students get an education is so that they can qualify for a middle-class job.

  The middle class in America consists of the widening sector of the working class that qualifies for bank loans – not merely usurious short-term payday loans, but a lifetime of debt. So the middle class today is a debtor class.

  Shedding crocodile tears for the slow growth of U.S. employment in the post-2008 doldrums (the “permanent Obama economy” in which only the banks were bailed out, not the economy), the financial class views the role industry and the economy at large as being to pay its employees enough so that they can take on an exponentially rising volume of debt. Interest and fees (late fees and penalties now yield credit card companies more than they receive in interest charges) are soaring, leaving the economy of goods and services languishing.

  Although money and banking textbooks say that all interest (and fees) are a compensation for risk, any banker who actually takes a risk is quickly fired. Banks don’t take risks. That’s what the governments are for. (Socializing the risk, privatizing the profits.) Anticipating that the U.S. economy may be unable to recover under the weight of the junk mortgages and other bad debts that the Obama administration left on the books in 2008, banks insisted that the government guarantee all student debt. They also insisted that the government guarantees the financial gold-mine buried in such indebtedness: the late fees that accumulate. So whether students actually succeed in becoming wage-earners or not, the banks will receive payments in today’s emerging fictitious “as if” economy. The government will pay the banks “as if” there is actually a recovery.

  And if there were to be a recovery, then it would mean that the banks were taking a risk – a big enough risk to justify the high interest rates charge on student loans.

  This is simply a replay of what banks have negotiated for real estate mortgage lending. Students who do succeed in getting a job hope to start a family, or at least joining the middle class. The most typical criterion of middle-class life in today’s world (apart from having a college education) is to own a home. But almost nobody can buy a home without getting a mortgage. And the price of such a mortgage is to pay up to 43 percent of one’s income for thirty years, that is, one’s prospective working life (in today’s as-if world that assumes full employment, not just a gig economy).

  Banks know how unlikely it is that workers actually will be able to earn enough to carry the costs of their education and real estate debt. The costs of housing are so high, the price of education is so high, the amount of debt that workers must pay off the top of every paycheck is so high that American labor is priced out of world markets (except for military hardware sold to the Saudis and other U.S. protectorates). So the banks insist that the government pretends that housing as well as education loans not involve any risk for bankers.

  The Federal Housing Authority guarantees mortgages that absorb up to the afore-mentioned 43 percent of the applicant’s income. Income is not growing these days, but job-loss is. Formerly middle-class labor is being downsized to minimum-wage labor (MacDonald’s and other fast foods) or “gig” labor (Uber). Here too, the fees mount up rapidly when there are defaults – all covered by the government, as if it is this compensates the banks for risks that the government itself bears.

  From Debt Peons to Wage Slaves 

  In view of the fact that a college education is a precondition for joining the working class (except for billionaire dropouts), the middle class is a debtor class – so deep in debt that once they manage to get a job, they have no leeway to go on strike, much less to protest against bad working conditions. This is what Alan Greenspan described as the “traumatized worker effect” of debt.

  Do students think about their future in these terms? How do they think of their place in the world?

  Students are the new NINJAs: No Income, No Jobs, No Assets. But their parents have assets, and these are now being grabbed, even from retirees. Most of all, the government has assets – the power to tax (mainly labor these days), and something even better: the power to simply print money (mainly Quantitative Easing to try and re-inflate housing, stock and bond prices these days). Most students hope to become independent of their parents. But burdened by debt and facing a tough job market, they are left even more dependent. That’s why so many have to keep living at home.

  The problem is that as they do get a job and become independent, they remain dependent on the banks. And to pay the banks, they must be even more abjectly dependent on their employers.

  It may be enlightening to view matters from the vantage point of bankers. After all, they have $1.3 trillion in student loan claims. In fact, despite the fact that college tuitions are soaring throughout the United States even more than health care (financialized health care, not socialized health care), the banks often end up with more education expense than the colleges. That is because any interest rate is a doubling time, and student loan rates of, say, 7 percent mean that the interest payments double the original loan value in just 10 years. (The Rule of 72 provides an easy way to calculate doubling times of interest-bearing debt. Just divide 72 by the interest rate, and you get the doubling time.)

  A fatal symbiosis has emerged between banking and higher education in America. Bankers sit on the boards of the leading universities – not simply by buying their way in as donors, but because they finance the transformation of universities into real estate companies. Columbia and New York University are major real estate holders in New York City. Like the churches, they pay no property or income tax, being considered to play a vital social role. But from the bankers’ vantage point, their role is to provide a market for debt whose magnitude now outstrips even that of credit card debt!

  Citibank in New York City made what has been accused of being a sweetheart deal with New York University, which steers incoming students to it to finance their studies with loans. In today’s world a school can charge as much for an education as banks are willing to lend students – and banks are willing to lend as much as governments will guarantee to cover, no questions asked. So the bankers on the school boards endorse bloated costs of education, knowing that however much more universities make, the bankers will receive just as much in interest and penalties.

  It is the same thing with housing, of course. However much the owner of a home receives when he sells it, the bank will make an even larger sum of money on the interest charges on the mortgage. That is why all the growth in the U.S. economy is going to the FIRE sector, owned mainly by the One Percent.

  Under these terms, a “more educated society” does not mean a more employable labor force. It means a less employable society, because more and more wage and consumer income is used not to buy goods and services, not to eat out in restaurants or buy the products of labor, but to pay the financial sector and its allied rentier class. A more educated society under these rules is simply a more indebted society, an economy succumbing to debt deflation, austerity and unemployment except at minimum-wage levels.

  For half a century Americans imagined themselves getting richer and richer by going into debt to buy their own homes and educate their children. Their riches have turned out to be riches for the banks, bondholders and other creditors, not for the debtors. What used to be applauded as “the middle class” turns out to be simply an indebted working class.

  

  

• "Sell Economic Ignorance, Buy Gold"

  "We live in an age of advanced monetary surrealism…." is how Incrementum's Ronald-Peter Stoeferle and Mark J. Valek begin their latest epic tome on the precious metals market "In Gold We Trust."

   In Q1 2017 alone, the largest central banks created the equivalent of almost USD 1,000 bn. worth of central bank money ex nihilo. Naturally the fresh currency was not used to fund philanthropic projects but to purchase financial securities1. Although this ongoing liquidity supernova has temporarily created an uneasy calm in financial markets, we are strongly convinced that the real costs of this monetary madness will reveal themselves down the line.

  We believe that the monetary tsunami created in the past years, consisting of a flood of central bank money and new debt, has created a dangerous illusion: the illusion of a carefree present at the expense of a fragile future. The frivolity displayed by many investors is for example reflected by record-low volatility in equities, which have acquired the nimbus of being without alternative, and is also highlighted by the minimal spreads on corporate and government bonds. Almost a decade of zero and negative interest rates has atomised any form of risk aversion.

  In the past years, rate cuts and other monetary stimuli have affected mainly asset price inflation. Last year, we wrote: “Sooner or later, the reflation measures will take hold, and asset price inflation will spill over into consumer prices. Given that consumer price inflation cannot be fine-tuned by the central banks at their discretion, a prolonged cycle of price inflation may now be looming ahead.” 2016 might have been the year when price inflation turned the corner. However, the hopes of an economic upswing due to Trumponomics and the strong US dollar have caused inflation pressure to decrease for the time being. Upcoming recession fears resulting in a U-turn by the Fed, and the consequential depreciation of the US dollar would probably finalise the entry into a new age of inflation. This will be the moment in which gold will begin to shine again.

  The following chart shows the similarities between the 1970s and the status quo. The analysis reveals the fact that the bear market since 2011 has been following largely the same structure and depth as the mid-cycle correction from 1974 to 1976. However, we can see that the duration of both corrections diverges significantly.

  

  Not only the absolute, but also the relative development is important for a comprehensive assessment of the status quo of the gold market. Along with gold, silver, and mining shares, industrial metals such as zinc, nickel, copper and energy commodities (especially coal and oil) marked stellar performances last year. All of this happened in an environment where the US dollar climbed to a 14-year high. We regard this as a remarkable development and as a prime example of a bull market, whose starting gun has not been heard yet by the majority of investors.

  "Sell economic ignorance; buy gold." – Tim Price

  

  We consider a bullish stock market currently as the most significant opportunity cost for gold. Therefore, a clear break-out of the gold price should only be occurring amid a stagnating or weaker equity market. If we now compare the gold price performance with the development of equity prices, we can see that the relative weakness of gold seems to be slowly coming to an end. Last year we had already noticed that the intensity of the upward trend had declined significantly. After almost five years of underperformance relative to the broad equity market, the tables might slowly be turning now in favour of gold.

  In a historical context, the relative valuation of commodities to equities seems extremely low. In relation to the S&P500, the GSCI commodity index is currently trading at the lowest level in 50 years. Also, the ratio sits significantly below the long-term median of 4.1. Following the notion of mean reversion, we should be seeing attractive investment opportunities.

  *  *  *

  Key topics and takeaways of the full report include:

  • High expectations of Trump's growth policy dampened the gold price increase in 2016 – Still up 8.5% in 2016 and 10.2% since Jan. 2017
  • The further development of the normalization of monetary policy in the US will be the litmus test for the US economy.
  • Bitcoin: Digital gold or fool's gold?
  • White, Gray and Black Swans and their consequences for the gold price
  • Exclusive Interview with Dr. Judy Shelton (Economic advisor to Donald Trump) about a possible remonetisation of gold
  • 5 Reasons why the gold bull market will continue

  Full Incrementum report below (note the complete 170-page version is available here)

  

  

• Putin: "We Should Be Grateful To President Trump: In Moscow It's Cold And Snowing"

  Russian President Vladimir Putin said Friday during a panel at the St. Petersburg Economic Forum that the US investigations into whether the Kremlin meddled in the US election are nothing more than "hysteria," and that the anti-Russia sentiment in the US was about as virulent as anti-semitism.  “It’s like saying everything is the Jews’ fault,” said Putin, who said the blame for Hillary Clinton’s November loss lies squarely at the feet of the Democratic presidential candidate and members of her party, according to a report.

  “This reminds me of anti-Semitism,” Putin said. “The Jews are to blame for everything. An idiot cannot do anything himself, so the Jews are to blame. But we know what such attitudes lead to. They end with nothing good.”

  Putin, who was being interviewed by NBC's Megyn Kelly, brushed off questions about meetings that members of the Trump campaign – including then-Sen. Jeff Sessions – had with Russian officials such as ambassador Sergey Kislyak. 

  “So our ambassador met someone. That's his job. That's why we pay him,” Putin said. “So what? What's he supposed to do, hit up the bars?”

  Putin was amused when Kelly touched on the subject of Russian foreign news coverage spreading “disinformation.” Putin accused her “colleagues” of dragging Russia into their coverage unfavourably.

  “Let’s end this,” Putin told her. “You will feel better and we will feel better.”

  Donald Trump won because he had run a more effective presidential campaign than Hillary Clinton, Putin said, adding the US intelligence agencies may have faked evidence of Russian hacking, according to Reuters. Allegations of Russian involvement were nothing more than "harmful gossip," Putin insisted, there were no "Russian fingerprints" on the alleged hacks, Reuters reported.

  Earlier this week, Putin denied the Russian state had directed any hacking operations designed to influence the U.S. election – though he did say Russian “patriots” could have been behind the plot on their own, Fox reported.

  

  Following President Donald Trump's decision Thursday to take the US out of the Paris Climate Accord talks, Putin said that there's still time to reach a deal on the 2015 pact even without the US's involvement, before adding, in English, "don't worry, be happy," according to Reuters.

  Despite the critism that has been heapened upon Trump by other world leaders since he announced his decision to leave the accord last night, Putin said that he "wouldn't blame Trump" for leaving the accord, though he hoped the White House would set its own climate rules. 

  “By the way, we should be grateful to President Trump. In Moscow it’s raining and cold and even, they say, some snow. Now we could blame this all on American imperialism, that it’s all their fault. But we won’t.”

  And though he said he hopes that US sanctions against Russia would soon be lifted, he noted that they did have some positive effects. "We had to use our brains," Putin said. "Not rely on oil and gas dollars."

  Allegations of collusion between the Trump campaign and the Kremlin have dogged the new administration since before the inauguration. In recent weeks, US media have taken aim at Trump's son-in-law Jared Kushner, whom NBC and WaPo reported was a “person of interest” in the FBI’ campaign.

  As a reminder, Kelly is set to interview Putin in St. Petersburg Friday for a Sunday night special that will air on NBC.

  

  

• 12 Signs That The Inevitable Economic Slowdown Is Now Here

  Authored by Michael Snyder via The Economic Collapse blog,

  Since the election there has been this perception among the American public that the economy is improving, but that has not been the case at all.  U.S. GDP growth for the first quarter was just revised up to 1.2 percent, but that is even lower than the average growth of just 1.33 percent that we saw over the previous ten years.  But when you look even deeper into the numbers a much more alarming picture emerges.  Commercial and industrial loan growth is declining, auto loan defaults are rising, bankruptcies are absolutely surging and we are on pace to break the all-time record for most store closings in a single year in the United States by more than 20 percent.  All of these are points that I have covered before, but today I have 12 new facts to share with you. 

  

  The following are 12 signs that the economic slowdown that the experts have been warning about is now here…

  #1 According to Challenger, the number of job cuts in May was 71 percent higher than it was in May 2016.

  #2 We just witnessed the third worst drop in U.S. construction spending in the last six years.

  #3 U.S. manufacturing PMI fell to an 8 month low in May.

  #4 Financial stocks have lost all of their gains for the year, and some analysts are saying that this is “a terrible sign”.

  #5 One new survey has found that 39 percent of all millionaires “plan to avoid investing in the coming month”.  That is the highest that figure has been since December 2013.

  #6 Jobless claims just shot up to a five week high of 248,000.

  #7 General Motors just reported another sales decline in May, and it is being reported that the company may be preparing for “more job cuts at its American factories”.

  #8 After an initial bump after Donald Trump’s surprise election victory, U.S. consumer confidence is starting to fall.

  #9 Since Memorial Day, Radio Shack has officially shut down more than 1,000 stores.

  #10 Payless has just increased the number of stores that it plans to close to about 800.

  #11 According to the Los Angeles Times, it is being projected that 25 percent of all shopping malls in the United States may close within the next five years.

  #12 Over the past 12 months, the number of homeless people living in Los Angeles County has risen by a  staggering 23 percent.

  And in case those numbers have not persuaded you that the U.S. economy is heading for rough times, I would encourage you to go check out my previous article entitled “11 Facts That Prove That The U.S. Economy In 2017 Is In Far Worse Shape Than It Was In 2016” for even more eye-popping statistics.

  During a bubble, it can feel like the good times are just going to keep rolling forever.

  But that never actually happens in reality.

  The truth is that we are in the terminal phase of the greatest debt bubble of all time, and the evidence is starting to mount that this debt bubble has just about run its course.  The following comes from Zero Hedge…

  A recurring theme on this website has been to periodically highlight the tremendous build up in US corporate debt, most recently in April when we showed that “Corporate Debt To EBITDA Hits All Time High.” The relentless debt build up is something which even the IMF recently noted, when in April it released a special report on financial stability, according to which 20% of US corporations were at risk of default should rates rise. It is also the topic of the latest piece by SocGen’s strategist Andrew Lapthorne who uses even more colorful adjectives to describe what has happened since the financial crisis, noting that “the debt build-up during this cycle has been incredible, particularly when compared to the stagnant progression of EBITDA.”

   

  Lapthorne calculates that S&P1500 ex financial net debt has risen by almost $2 trillion in five years, a 150% increase, but this mild in comparison to the tripling of the debt pile in the Russell 2000 in six years. He also notes, as shown he previously, that as a result of this debt surge, interest payments cost the smallest 50% of stocks in the US fully 30% of their EBIT compared with just 10% of profits for the largest 10% and states that “clearly the sensitivity to higher interest rates is then going to be with this smallest 50%, while the dominance and financial strength of the largest 10% disguises this problem in the aggregate index measures.”

  The same report noted that net debt growth in the U.S. is quickly headed toward negative territory, and the last time that happened was during the last recession.

  We see similar things when we look at the 2nd largest economy on the entire planet.  According to Jim Rickards, China “has multiple bubbles, and they’re all getting ready to burst”…

  China is in the greatest financial bubble in history. Yet, calling China a bubble does not do justice to the situation. This story has been touched on periodically over the last year.

   

  China has multiple bubbles, and they’re all getting ready to burst. If you make the right moves now, you could be well positioned even as Chinese credit and currency crash and burn.

   

  The first and most obvious bubble is credit. The combined Chinese government and corporate debt-to-equity ratio is over 300-to-1 after hidden liabilities, such as provincial guarantees and shadow banking system liabilities, are taken into account.

  We just got the worst Chinese manufacturing number in about a year, and it looks like economic conditions over there are really starting to slow down as well.

  Just like 2008, the coming crisis is going to be truly global in scope.

  It is funny how our perspective colors our reality.  Just like in 2007, many are mocking those that are warning that a crisis is coming, but just like in 2009, after the crisis strikes many will be complaining that nobody warned them in advance about what was ahead.

  And at this moment it may seem like we have all the time in the world to get prepared for the approaching storm, but once it is here people will be talking about how it seemed to hit us so quickly.

  My hope is that many Americans will finally be fed up with our fundamentally flawed financial system once they realize that we are facing another horrendous economic crisis, and that in the aftermath they will finally be ready for the dramatic solutions that are necessary in order to permanently fix things.

  

  

• Puerto Rico's Population Drain Since 2013 Equivalent To US Losing 20 Million People

  Puerto Rico’s economic decline and, now bankruptcy, has triggered an astonishing exodus as thousands flee the commonwealth in search of economic opportunity in the Continental US, Bloomberg reported.

  The population has been declining rapidly. The island has lost 2 percent of its people in each of the past three years, a comparable departure in the 50 states would mean 18 million people moving out since 2013. About 400,000 fewer Puerto Ricans live on an island of 3.4 million today compared with a decade ago, when its economy began contracting, Bloomberg reports.

  

  “I had to choose for my family,’’ said Aledie Amariah Navas Nazario, 39, a pediatric pulmonologist, told Bloomberg. She left behind young asthma patients when she, her husband and two small daughters moved to Orlando, Florida.
  Reasons for leaving were compelling enough for Navas Nazario, who treated asthma on an island where it’s more prevalent than anywhere else in the U.S.

  Puerto Rico’s economy had taken yet another leg down, and she was worried about her future income because of uncertainty about health insurance.

  “I’m sad about not being able to take care of those kids anymore,’’ said Navas Nazario, who keeps in touch with former patients on Facebook. “You have to make a hard decision to leave relationships with friends and family just to get out, just because you need a better life.’’

  Departures like Navas Nazario’s have trapped the commonwealth’s economy in a downward spiral, Bloomberg reports.

  Joblessness at 11.5 percent, and a $74 billion mountain of debt that pushed the island to insolvency have made collecting taxes key to an economic rebound, Bloomberg said. At the same time, more Puerto Ricans from all walks of life are moving away to better their lives, meaning government revenue is dwindling.

  The island’s debt has grown 87% since 2006, and one easy way to avoid paying any of the debt is for Puerto Ricans to leave the island. But one telling sign for anyone who owns Puerto Rican debt: The government’s official turnaround plan – a path to sustainability approved by a US oversight board – assumes the population will shrink by just 0.2% each year for the next decade.

  
  The government is using this number as the basis for its projections of tax receipts and economic growth. Expect it to fall far short on both measures.

  “Most people believe that those forecasts in the fiscal plan are really, really optimistic and probably would have to be revised at some point,’’ said Sergio Marxuach, public policy director at the Center for the New Economy in San Juan, told Bloomberg.

  And professionals aren’t the only ones leaving: The exodus includes blue-collar construction workers and taxi drivers. Research by the New York Fed found that college graduates make up roughly the same proportion of emigres as they do the broader population, suggesting, as Bloomberg reports, that the departures have touched “every corner” of the commonwealth.

  The reason for leaving is obvious: The earnings disparity between PR and the mainland can be wide. John Starkey, a principal of the Lafayette International Community High School in upstate Buffalo, New York, told Bloomberg he traveled to the island to recruit teachers after it started shutting down schools to save money. On the mainland, Starkey said, educators find they can double or triple their earnings, even if it means trading a balmy Caribbean island for the frigid shores of Lake Erie.

  “Many of the candidates wanted to stay on the island to help their community,’’ Starkey said. “Our pitch was: come up to Buffalo and you’ll be able to better provide for your family, but you’ll also be able to help your community here.’’

  The commonwealth applied for Title III protection from its creditors last month in what will be the largest-ever US municipal debt restructuring, further complicating the territory’s efforts to pull itself out of a financial crisis.

  The Puerto Rico restructuring would be far larger than Detroit’s record-setting bankruptcy, with little to no details how long a court proceeding would last or what cuts would are imposed on bondholders. The island’s financial recovery plan covers less than a quarter of the debt payments due over the next decade.

  The island has been a U.S. possession since American troops invaded in the Spanish-American War, and Puerto Ricans have been U.S. citizens since 1917. That means there’s little to prevent them from seeking better prospects on the mainland, something they’ve always done, just not to this extent.

  Migration to the US mainland is by far the biggest driver of the island’s declining population, but a declining fertility rate isn’t helping either. The natural population increase — excess births over deaths — fell to 3,000 last year from 20,000 a decade ago, as families facing poorer economic prospects and the threat of the Zika virus put off having kids, Bloomberg reported. At the same time, younger generations of child-bearing age are more likely to take off for the mainland.
   

  

  

• And The 2017 Global Peace Prize Goes To… Black Lives Matter (No, Seriously)

  Authored by Mac Slavo via SHTFplan.com,

  Every year the Sydney Peace Foundation bestows their Global Peace Prize on extraordinary people who advocate for “true and lasting peace” by ending “war and violent conflict” through addressing “deep injustices and structural inequality.”

  Previous years have seen such individuals as Noam Chomsky, Hans Blix and Archbishop Desmond Tutu receive the esteemed prize.

  But this year the award is taking a different direction, and rather than being given to a single person, it is being awarded to an entire movement for the first time.

  And the winner of the 2017 Global Peace Prize goes to…

  Drum roll…

  Black Lives Matter.

  

  Black Lives Matter, the movement against racial inequality and police violence in the US which began as a powerful hashtag and became a global rallying cry, will be the 2017 recipient of the Sydney Peace Prize – the first time the often-controversial award has gone to a movement and not an individual.

   

  The prize recognises the work of the amorphous racial justice movement that exists under the catch-all moniker, but has nevertheless managed to unite activists from around the world, including in Australia.

   

  …

   

  The Sydney Peace Prize jury’s citation for this year’s winners applauded the movement “for building a powerful movement for racial equality, courageously reigniting a global conversation around state violence and racism. And for harnessing the potential of new platforms and power of people to inspire a bold movement for change at a time when peace is threatened by growing inequality and injustice.”

   

  Via Sydney Peace Foundation

  But as Louder With Crowder points out, peace is not exactly how one would describe the activities engaged in and supported by Black Lives Matter:

  It’s like people don’t have internet access. Memories. Basic motor functions. If they did, they’d be able to use the digits sticking out of their hands to peck a few letters into The Google. Just to verify if Black Lives Matter is worthy of an award bestowment. Like a kind of “vetting” process, if you will. Since the Sydney Peace Foundation lacks finger privilege, I did the search for them.

  • Black Lives Matter Activist Wants To ‘Kill The White House.’ Yes, Really
  • ‘HUGE Rise in Chicago Crime Due to Black Lives Matter’ Says Former P.D. Chief
  • Black Lives Matter: Amidst Record Crime, Chicago PD Gives Up
  • WAR ON COPS: #BlackLivesMatter Violently Shuts Down Pro-Police Speech
  • REAL RACISM: BlackLivesMatter Leader Calls for Genocide of White People
  • TOLERANCE: #BlackLivesMatter ‘Peaceful Protesters’ Attack Trump-Supporter

  If this is what the Sydney Peace Foundation considers champions of peace, I’d hate to see what they think war is.

  In a world where former U.S. President Barrack Obama is awarded the Nobel Peace Prize in 2009 for doing absolutely nothing and then subsequently orchestrating campaigns that have led to the slaughter of hundreds of thousands of people across the world it would make perfect sense for the Sydney Peace Foundation to award a similar prize to an organization whose immediate membership and loosely based offshoots advocate for racial segregation, violent protest, and the killing of police officers.

  In the eyes of some, peace is war.

  

  

• "It's Not Just Wages" – Workers Without College Degrees Face "More Instability"

  If you believe San Francisco Fed President John Williams, the US labor market has almost never been ore robust than it is today. Of course, middle- and working-class Americans who are struggling with levels of financial uncertainty that would be unfamiliar to their parents’ generation don’t necessarily care that the official unemployment rate is 4.4%. They’re too busy struggling to make ends meet when real wages have been stagnant for decades and economic growth is expected to slouch along at 2% for the foreseeable future.

  While researching their new book “The Financial Diaries,” Jonathan Morduch and Rachel Schneider followed more than 200 working and middle-class families around for a year and tracked “every dollar of their financial lives." They found that millions of workers without college degrees, especially those who are paid hourly, or who are paid by commission, experience what they call call income variability – when their pay fluctuates by 25% above or below their average. One of Murdoch and Schneider's subjects, a truck mechanic named Jeremy, even quit his job to take a lower paying job with a steady salary.

  They discussed their findings during an episode of Bloomberg's "Benchmark" podcast.

  “When we first met him, his weekly paychecks were very variable. And he was bearing all that risk. At the end of the year, he quit his job for another job with lower pay that was more steady. ”

  “On average, we’re seeing households spend about five months of the year where their income was 25% above their average or 25% below their average. So income insecurity wasn’t about ‘am I going to lose my job,’ it’s about ‘how am I going to navigate the ups and downs in my given job.’”

  The pair also found that existing financial services don't adequately serve the needs of workers struggling with income variability. Schneider discussed how one subject whom she called Jane intentionally placed obstacles to withdrawing money from her savings account.

  “Often the strategies they were using to make that money stretch show gaps in how financial services are or are not serving them. For example, we tell the story in the book of a woman called Janice who has a savings account and a checking account but she cut up her checkbook for her checking account and she cut up her ATM card. She has those accounts in different institutions and the savings account is an hour’s drive from her home.”

   

  “A bank might say she’s not using those products right, she’s paying check cashers and fees on money orders to pay her bills she’s using it wrong. But I look at it the other way she actually wants some wall between herself and her spending or savings. She cut up the check book because she doesn’t want temptation to take out payday loans which she’s had trouble with in the past.”

  Regardless of race, workers without degrees are stuggling "in a lot of ways."

  “One of the things that we see is that today workers without college degrees are struggling in a lot of ways. We see that in the labor market in terms of wages and what our data and related data are showing is it’s not just average wages they also are facing much more instability than other workers."

  "The economic backlash is being felt by lower class workers, regardless of race, because the system isn’t working for the poor.Black workers have a hard time and white worker as well are living very precarious lives. Even though they have jobs there’s economic anxiety in America even for people with jobs. And that’s the big puzzle in America. That people are trying to sort out what the big answer is but you spend time and follow people month to month you see exactly why there’s so much anxiety in a sense because the system really isn’t working for them.”
   

  

  

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• NATO Launches Its Own Operation In The Middle East

  Authored by Peter Korzun via The Strategic Culture Foundation,

  

  The recent NATO summit took a decision to formally become a member of the US-led coalition fighting the Islamic State (IS), in addition to its training mission in Iraq.

  Last year, NATO started a training and capacity-building mission for Iraqi armed forces. In January, it opened a regional center in Kuwait. NATO AWACS aircraft operate in Syria. But the participation in combat actions against the IS has so far been limited to a few aircraft taking part in the operations of the US-led coalition of the willing. Formally, each alliance member contributes to the coalition, but NATO as its own entity does not. Despite the coalition’s efforts, the IS had grown and expanded in Syria till Russia launched its military operation there in 2015.

  France and Germany have always had reservations about the prospect of joining the anti-IS coalition as an alliance, concerned that it would lead to NATO taking over the fight or overshadowing regional partners, such as Jordan, Saudi Arabia and the United Arab Emirates. Italy has been skeptical of the plan.

  Despite all the speeches ringing alarm bells about the deadly threat coming from the IS – the mortal enemy of the West that vowed to fight it till it exists – the bloc’s combat ready forces are deploying…against Russia in the Eastern Europe! As a result, the alliance has seen no need to counter the IS plans to create a caliphate. It stubbornly turns a blind eye on the peril coming from the South.

  Migrant flows are flooding the territories of European alliance members, terrorist acts are committed to kill citizens of the NATO member states, US and Turkish military are fighting the extremists on the ground but the bloc largely limits itself to words of condemnation while demonizing Russia – the country which says it does not want to provoke confrontation and calls for a dialogue!

  The summit’s decision to join the fight comes at a time the US, UK and France-backed rebel forces based in Jordan are reported to be preparing for operations on Syrian soil. On May 18, US aircraft struck a convoy of forces affiliated with the Syrian government. The attack occurred in far southern Syria near al-Tanf, along the Syria-Iraq border – an area where US Special Operations Forces (SOF) are training local fighters. The leading NATO member plunged directly into the Syrian conflict taking sides. Evidently, the move signaled broadening of American involvement in the six-year Syrian civil war. The US has led the anti-IS in Syria since 2014, but so far has avoided engaging with Syrian government or Iran-backed forces.

  The US, the UK and France are the leading members of the alliance and there is little doubt they are preparing to cross the border and establish control over the region where the borders of Jordan, Syria, and Iraq meet. They will need support of other nations, especially the allied ones and it coincides with NATO’s decision to become part of the anti-IS operation. The control over the area by NATO-supported forces will include a key highway from Baghdad to Damascus that Iran has used to supply weapons to Syrian forces. Al-Tanf is a strategic crossing located at the intersection of the Jordanian, Iraq, and Syrian borders and commands the No.1 Route linking Baghdad with Damascus and the Jordanian capital of Amman.

  It all happens at a time NATO members involved in the combat actions and Israel are deeply concerned over the recent visit of a high-ranking Iraqi military to Damascus to discuss the situation on the Syrian-Iraqi border. The allegation that Iraq’s Prime Minister Haidar al-Abadi has pivoted his support away from the US-led campaign to the Russia-Turkey-Iran coalition adds even more fuel to the fire.

  Definitely, the contribution will increase. Right after the summit on May 25, the Netherlands announced the decision to send two more warplanes to fight the IS. From mid-June a Dutch KDC-10 tanker aircraft will be stationed in Kuwait. And in the last quarter of the year, a C-130 transport plane will be contributed to the fight for two months. About 90 military personnel will go with the planes. The new deployment will temporarily increase the number of Dutch soldiers in Iraq to about 175, twenty more than previously agreed. The Dutch commandos currently supporting Iraqi troops on the front will be equipped with armored vehicles and other weapons systems from next month. The Netherlands also expressed readiness to contribute several F-16 fighters from early next year. Other NATO members will increase the contribution to support the NATO effort. It will increase but it is worth to remember that the bloc’s operations in Libya and Afghanistan ended up in failure.

  Expanding NATO role in Syria may lead to either confrontation or coordination, or at least de-confliction, with the Russia-Syria-Iran forces. Turkey, a NATO country, is a member of Russia-Turkey-Iran trio pushing forward the Astana peace process. And the common enemy is the IS. Coordination of efforts appears to be a logical step. The issue should top the NATO-Russia Council agenda along with the plans to establish de-escalation zones. It could be discussed with Russian President Vladimir Putin during the G20 summit.

  Some arrangement with Russia is unavoidable. But is it an achievable goal with NATO building up its forces in the Baltics, Poland, Romania and the whole Black Sea region? Can Russia and NATO fruitfully coordinate efforts, or even cooperate, in Syria with tensions running high in Europe? Evidently, the standoff between Russia and NATO benefits no one but IS. Finding mutual understanding is indispensable to defeat the common enemy. Actually, playing off the West against Russia is the IS only hope for survival. That’s the expectation the group must be deprived of. It remains to be seen if these arguments are taken into consideration as NATO joins the fray.

  

  

• Is This China's Next Step To Destroy The Dollar?

  Authored by Byron King via DailyReckoning.com,

  

  China is currently modifying the terms of its oil trade with Saudi Arabia. Specifically, China is working on a deal to pay for Saudi oil using Chinese yuan. This effort poses a direct threat to the security of the dollar.

  If this China-Saudi deal happens — yuan for oil — it’s another step closer to the grave for the petrodollar, which has dominated global finance since 1974. You can revisit Jim Rickards article about the Assault on the Dollar, here.

  To recap, the petrodollar is weakening because the dollar is losing power as the world’s reserve currency. This is similar to the way pounds sterling gradually fell out of favor during the decline of the British Empire. The decline may take a long time, but what we’re seeing today is another step in the death march of the dollar.

  Since 1974, Saudi has accepted payment for almost all of its oil exports — to all countries — in dollars. This is due to an agreement between Saudi and the U.S., dating back to the days of President Nixon.

  Beginning about 15 years ago, China ceased being self-sufficient in oil, and began buying Saudi oil. As per all Saudi customers, China had to pay in dollars. Even today, China still pays for Saudi oil in U.S. dollars and not yuan, which perturbs China’s leaders.

  Since 2010, China’s total oil imports have nearly doubled. According to Bloomberg News, China has surpassed the U.S. as the world’s largest oil importing nation. Here’s a chart, showing the trend.

  

  As China imports more and more oil, the idea of paying for that oil in yuan instead of dollars becomes more critical. China does not want to use dollars to buy oil. So, China is beginning to squeeze Saudi over the form of currency in which their oil trade is conducted. China is doing this by steadily lowering its oil purchases from Saudi.

  Presently, China’s three top oil suppliers are Russia, Saudi and the West African nation of Angola. Backing-up these three key suppliers are a combination of sources in Iran, Iraq and Oman, which help to diversify China’s oil-supply chain.

  In the past few years, China has shifted oil purchases away from Saudi, and Russia’s oil exports have risen from 5% to 15% of the Chinese total.

  China imports more oil from Russia, Iran, Iraq and Oman; less from Saudi.

  Saudi’s share of Chinese imports has dropped from over 25% in 2008, to under 15% now. Meanwhile, Saudi competitors Russia, Iran, Iraq and Oman are selling more oil to China.

  Saudi would like to reverse this declining trend of oil-trade with China. However, these kind of major oil flows don’t just happen in a vacuum.

  There’s a good reason why Russian oil sales to China are increasing. As you’ll see in Nomi’s article, trade and financial services are often closely linked. Over the past few years, China has deepened its trading roots with Russia — now, China pays for Russian oil in yuan. Russia, in turn, uses yuan to buy goods from China.

  Beyond trade in goods, within the past six months Russia has set up a branch of the Bank of Russia in Beijing. From there, Russia can use its Chinese yuan to buy gold on the Shanghai Exchange. In a sense, Chinese-Russian oil trade is now backed-up by a “gold standard.”

  Looking ahead, Saudi Arabia will find itself more and more locked-out of the Chinese oil market if it won’t sell oil for yuan. But to do this, the Saudis must move away from U.S. dollars— and from petrodollars — if Saudi wants to maintain and increase access to China’s oil market.

  We’ll know more about the likelihood of this after Donald Trump’s tour of the Middle East.

  If Saudi begins accepting yuan for oil, all bets are off on the petrodollar. Yuan-for-oil will entirely change the monetary dynamics of global energy flows. I expect the U.S. dollar to weaken severely when that news breaks.

  Much of this oil-for-yuan news is public information. Yet, for some strange reason, there’s a form of blindness within western policymaking and media circles concerning the implications of yuan-for-oil. The idea is so “off-the-wall” that many policy leaders simply ignore it.

  Ignore away. But we could wake up one morning in the midst of a massive currency crisis, in which dollar values are falling and oil prices in dollars are soaring.

  

  

• Which U.S. Jobs Are Disappearing Fastest?

  A long list of U.S. jobs are being rendered obsolete by technological advancements and automation. Which workers are most at risk?

  

  You will find more statistics at Statista

  Statista's Niall McCarthy notes that according to the Bureau of Labor Statistics, locomotive firer is the job set to shrink the most over the coming decade. A locomotive firer is responsible for monitoring instruments on trains as well as watching for signals and dragging equipment. The workforce is small, numbering 1,700 in 2014. By 2024, however, that is going to decrease even further to just 500, a decline of 70 percent.

  Motor vehicle electionic equipment installers and repairers are also set to see their ranks decimated by 2024. 11,500 of them were employed in the U.S. in 2014 and a decade later, that is expected to fall sharply to 5,800. Telephone operators are the third most endangered profession in America with their numbers expected to drop 42.4 percent by 2024.

  

  

• "The Western Status Quo Political System Is Collapsing Into 'Something Else'"

  Authored by Ben Hunt via EpsilonTheory.com,

  Michael Corleone:  I saw a strange thing today. Some rebels were being arrested. One of them pulled the pin on a grenade. He took himself and the captain of the command with him. Now, soldiers are paid to fight; the rebels aren’t.

   

  

   

  Hyman Roth:   What does that tell you?

   

  Michael Corleone:   They could win.

   

  Hyman Roth:  This county’s had rebels for the last fifty years— it’s in their blood, believe me, I know. I’ve been coming here since the ’20s. We were running molasses out of Havana when you were a baby — the trucks, owned by your father.

   

  Hyman Roth:  Michael, I’d rather we talked about this when we were alone. The two million never got to the island. I wouldn’t want it to get around that you held back the money because you had second thoughts about the rebels.

   

  ? “The Godfather: Part II” (1974)

  Michael Corleone is like me and every investor over the past five years who held off on an attractive investment for fear of political risk. Except he was right and I’ve been nothing but wrong.

  Somehow, I think Silicon Valley got even more spun up than Manhattan. There were hedge fund people I spoke to about a week after the election.

   

  They hadn’t supported Trump. But all of a sudden, they sort of changed their minds. The stock market went up, and they were like, ‘Yes, actually, I don’t understand why I was against him all year long.’

   

  ? Peter Thiel, in a New York Times interview (January 11, 2017)

   

  John Wick:  People keep asking if I’m back and I haven’t really had an answer. But now, yeah, I’m thinkin’ I’m back.

   

  ? “John Wick” (2014)

  Me, too. Political risk, though, not so much.

  If political parties in Western democracies were stocks, we’d be talking today about the structural bear market that has gripped that sector. Show me any country that’s had an election in the past 24 months, and I’ll show you at least one formerly big-time status quo political party that has been crushed. This carnage in status quo political systems goes beyond what we’d call “realigning elections”, like Reagan in 1980 converting the formerly solid Democratic Southern states to a solid Republican bloc. It’s a rethinking of what party politics MEANS in France, Italy, and the United States (and with the UK, Spain, the Netherlands, and maybe Germany not too far behind). The last person to accomplish what Emmanuel Macron did in France? The whole “let’s start a new political party and win an election in two months” thing? That would be Charles de Gaulle in 1958 and the establishment of the Fifth Republic. The last person to accomplish what Donald Trump did in the U.S.? The whole “let’s overthrow an old political party from the inside and win an election in two months” thing? I dunno. Never? Andrew Jackson?

  Now don’t get me wrong. Do I think Emmanuel Macron, a former Rothschild investment banker whose “ambition was always two steps ahead of his experience”, is the second coming of Charles de Gaulle? Do I think Donald freakin’ Trump is a modern day Andrew Jackson? Bwa-ha-ha-ha-ha-ha … good one!

  But here’s what I do think:

  1. Something old and powerful is happening in the real world to crush the status quo political systems of every Western democracy.
  2. Something predictably sad is happening in the political world to replace the old guard candidates with self-absorbed plutocrats like Trump and pretty boy bankers like Macron.
  3. Something new and powerful is happening in the investment world to divorce political risk and volatility from market risk and volatility.

  The old force repeating itself in the real world is nicely summed up by these two charts, the most important charts I know. They’re specific to the U.S., but applicable everywhere in the West.

  First, the Central Banker’s Bubble since March 2009 and the launch of QE1 has inflated U.S. household wealth far beyond what the nominal growth rate of the U.S. economy would otherwise support. This is a classic bubble in every sense of the word, with the primary difference from prior vast bubbles being its concentration and focus in financial assets — stocks and bonds — which are held primarily by the rich. Who wins the Academy Award for creation of wealth inequality in a supporting role? Ladies and gentlemen, I give you the U.S. Federal Reserve.

  

  Source: Bloomberg LP and TCW, as of 12/31/16. For illustrative purposes only. Past performance is no guarantee of future results.

  And as the second chart shows, this central bank largesse has sharply accelerated the massive shift in wealth to the Rich from the Rest, a shift which began in the 1980s with the Reagan Revolution. We are now back to where we were in the 1930s, where the household wealth of the bottom 90% of U.S. wage earners is equal to the household wealth of the top one-tenth of one percent of U.S. wage earners.

  

  For illustrative purposes only.

  So look … I’m not saying that the current level or dynamics of wealth inequality is a good thing or a bad thing. I’m just saying that it IS. And I understand that there are insurance programs today, like social security and pension funds, which are not reflected in this chart and didn’t exist in the 1930s, the last time you saw this sort of wealth inequality. I understand that there are a lot more people in the United States today than in the 1930s. I understand that there are all sorts of important differences in the nature of wealth distribution between today and the 1930s. I get all that. What I’m saying, though, is that just like in the 1930s, there is a political price to be paid for this level of wealth inequality. That price is political polarization and electoral rejection of status quo parties. I won’t give the whole history lesson here, as it’s a good excuse for readers to immerse themselves in Wikipedia for half an hour or so and read about guys like Father Coughlin, but the rhyming of political history in Western democracies between the late-1920s/early-1930s and today, particularly in the way that status quo political parties were subverted or overthrown or just plain eliminated throughout Westworld is … pretty amazing.

  Western democracies, mixing a healthy dash of popular political representation with a big dose of capitalist economic structures, are extremely good at the most important driver of social stability: co-opting the more talented members of a mass society into the status quo system, bringing new blood into that top two percent socioeconomic club who might otherwise apply their talents in more subversive ways. Maybe not the top one-tenth of one percent on a purely financial wherewithal scale, but definitely the top two percent on a more broadly defined socioeconomic scale of wealth, stability, and influence. That co-opting process is the steam valve for Western societies, and it has two components, particularly in the most successful Western society, the United States — educational mobility (move to where the good intellectual jobs are) and labor mobility (move to where the good physical jobs are). Educational mobility, spurred in the U.S. by more than $1 trillion in government-backed student loans, is in high gear, and the importance of an educational pedigree to get into the 2% Club has NEVER been greater. Labor mobility, on the other hand, crushed by globalization and the housing crisis, hasn’t been this broken since … yep … the 1930s.

  As a result, the composition of the 2% Club of wealth, stability, and influence is changing. Today it’s almost entirely a Club of the educationally mobile and accomplished, the people who deal with symbols for a living — words and tickers and numbers and code — and whose language and lingo is similarly abstracted. And because our status quo political institutions, like political parties, are in all nations and in all times the top-down creations of the 2% Club, our political parties themselves speak a different language today than they did even 10 or 20 years ago. No political party is immune, regardless of where it sits on the traditional left/right spectrum. This isn’t a Republican vs. Democrat thing. It’s not a rich vs. poor thing, either, because there are plenty of rich people who aren’t symbol manipulators and are feeling less and less at home in the 2% Club. It’s a who’s-dominating-the-2%-Club thing, and in Westworld that’s the educationally accomplished symbol manipulators.

  Our status quo political parties speak well and clearly to the 2% Club and their educationally mobile circles, not so well to the guy who didn’t go to law school and whose kids don’t have a prayer of getting into Stanford. Not so well to the guy who, to be honest, kinda hates lawyers and the professional symbol manipulators, and definitely hates anyone who went to Stanford. Not so well to, as Amity Shlaes titled her seminal history of the 1930s and the Great Depression, the Forgotten Man, citizens who — today and in the 1930s — are well and truly stuck. Stuck because labor mobility is broken. Stuck because their wages are flat and their debt is up. Stuck because they’re getting older. Stuck because, like the sailors on the Battleship Potemkin, they are served disgusting, rotten meat but are told by the well-spoken professionals that these are dead fly larvae, not live maggots, and so they can simply be washed off with salty water. Stuck because the entire political system is rigged for the educationally mobile and the symbol manipulators. Not rigged in a cartoon evil sense, but rigged in the same way that the German system is rigged in favor of people who speak German and the Chinese system is rigged in favor of people who speak Chinese. Don’t speak Symbol Manipulation? Sorry, but the status quo Western political system is rigged against you. And you know it.

  There’s no attachment to a political party that from your perspective is speaking gibberish. The attachment is to change and reversion. The attachment is to Something Else. The Something Else will not have a well-considered or coherent policy wrapper. It won’t look smart. It didn’t in the 1930s and it doesn’t today. Why not? Because if it did, it would be co-opted as part of the status quo! Words like “well-considered” and “coherent” and even “policy” are the abstracted words of the modern status quo. They are the language of the 2% Club, particularly of an educationally mobile 2% Club, and it’s a very different language than that spoken by anyone hailing from the world of physical construction and manipulation rather than symbol construction and manipulation.

  

  So what is this other language? Importantly, as Joan Williams describes in her phenomenal article, “What So Many People Don’t Get About the U.S. Working Class,” it’s not a soak-the-rich language (in fact, it’s more disparaging of the poor than the rich). It’s a non-abstracted language of direct, physical involvement in localized social behaviors (what Nassim Taleb calls “Skin in the Game”), because that’s the language that has meaning for anyone who depends on labor mobility and physical construction to make a better life for themselves and their kids. It’s an uncomfortable language for the educationally mobile 2% Club, because it doesn’t abstract away the racist, sexist corners of real world, localized social behaviors and beliefs in a carefully constructed linguistic architecture. That doesn’t mean that the Forgotten Man is necessarily racist or sexist (doesn’t mean that he’s not, either). It means that these are not behaviorally motivating or politically meaningful words to a major sub-population. It means that our language defines and constrains our thoughts and behavior, not the other way around. It means that we ARE our grammar, at least in our lives as social animals. It means that the Confusion of Tongues is not just a quaint Old Testament story with cool Gustave Doré engravings about some apocryphal Tower of Babel.

  It is THE political story of this or any other age, and it always leads to a radical restructuring of the political order, because you cannot have a stable political equilibrium where a critical mass of national sub-populations speak different social languages.

  But that’s where we are in every Western nation in 2017. The politically ascendant sub-population on the educational mobility track hear the language of the Other and say “Unacceptable people. Must resist. Zero-sum game.” The politically stuck sub-population on the labor mobility track hear the language of the Other and say “Bad hombres. Must fight. Take no prisoners.” The center cannot hold. More accurately, there is no center, no cooperation. Competition is all, and that’s no way to run a country.

  Unfortunately and unsurprisingly, the new political leaders who emerge from a collapse of the Tower of Babel are rarely the champions of the Forgotten Man that you might think would emerge. Both in the 1930s and today, there’s no shortage of non-status quo political entrepreneurs who speak the language of the politically stuck and are willing to put themselves out into the political arena. But to be successful in their political entrepreneurship it’s almost essential that these new candidates be card-carrying members of the 1/10^th of 1% Rich Club. Why? Because it requires an insane amount of money and sheer notoriety to replace the machinery of a status quo political party in a mass society. A political party is a media company. By joining a status quo party and toeing that party line, you communicate an enormous set of signals to potential voters for free. But by toeing that party line, you lose your Forgotten Man authenticity and any hope of being the champion of Something Else. Want to be a “change candidate”? Better make a couple of billion dollars first, or have plenty of billionaire friends, so you can afford to bypass the status quo political party.

  

  Little wonder, then, that Donald Trump, a billionaire TV star, succeeds in overthrowing the Republican Party. Little wonder that Emmanuel Macron taps a vast banker network from across Europe to fund his campaign. Little wonder that zillionaire Mark Zuckerberg has embarked on a nationwide “listening tour”, complete with equal zillions of photo ops — none of which are with educationally mobile symbol manipulators — as he prepares for a political life. Good old-fashioned mustachioed fascism may work in Turkey, but here in the U.S. you need a smiley-face with your Panopticon. Sharing is caring!

  So that’s my political take: the old and powerful Tower of Babel process is starting up again, and status quo political institutions are not long for this world. As we move to the Something Else to come, we’ll have to endure a parade of billionaires wielding political power in unprecedented ways, aided by unprecedented technologies of social control. That’s the Big Risk for everyone reading this note, regardless of your politics, regardless of your social language, regardless of your vision of the life well lived. That’s the Big Risk we have to manage, as investors and as citizens.

  So how do we do THAT?

  For today’s note, I’m focusing on the investor side of that question, and that means focusing on the one Big Question: as the Western status quo political system collapses into Something Else, how is it possible that our capital markets are not similarly gripped by volatility and stress? What is responsible for breaking the transmission mechanism from political risk to market risk?

  I’ve got a macro answer and I’ve got a micro answer.

  The macro answer is that you need status quo political parties to govern a country effectively. Thankfully, there are only enough billionaire candidates of Something Else to fill the top of the ticket, and even if there were more, a party of independently wealthy and independently popular mavericks isn’t a coherent party at all. There’s not less gridlock with an essentially party-less American president or an essentially party-less French president, there’s MORE gridlock. And that means that any sort of fiscal policy — whether it’s a clear-the-decks debt assignment or a classic stimulus program or whatever — is more difficult under this sort of independent political regime than in a status quo regime.

  Sure, there’s a lot of excitement when the Stranger comes to town. Take a look at what happened to the U.S. 10-year bond after Trump was elected.

  

  Source: Bloomberg LP, as of 04/10/17. For illustrative purposes only. Past performance is no guarantee of future results.

  But excitement fades as fiscal policy promise fades to fiscal policy deadlock. When I look at Washington today, or London or Paris or Rome or wherever, it sure looks for all the world like a return to our regularly scheduled entertainment. Nature abhors a vacuum, and politics is no exception. In the absence of an active and effective fiscal policy authority, global monetary policy authorities will fill the policy void. And what is their policy? Refer to chart 1 at the start of the note, please. Low growth. Financial asset inflation. Low volatility. Wash, rinse, repeat. The new Goldilocks, now eight years old. Could go for another eight years, easy. Wheeee!

  Yes, there’s enormous political risk associated with the collapse of status quo political institutions and the rise of the Trumps and the Macrons of the world. But …

  1. for financial markets, these new leaders are familiar, encouraging faces. They’re members of the 1/10^th of 1% Rich Club, because they had to be to sidestep status quo political parties. Moreover,
  2. there’s going to be a hope and a promise of fiscal policy initiatives, and that’s a tailwind for markets, too. And finally,
  3. don’t worry, Mr. Market, when that hope and promise of pro-growth policy fades into the realization of anti-growth gridlock, our old friends Janet and Mario will be there to pick up the slack with more liquidity.

  That’s my macro story for the divorce of political risk from market risk, and I’m sticking to it. Where does it break down? Not with a funky German or Italian election, but with Janet and Mario declaring victory and taking away the punchbowl. That’s what will bring political risk back to markets.

  On the micro side, it’s the triumph of Communication Policy, just as far as the eye can see. I’ve written a lot about Communication Policy in the past, here, here, here, and here. It’s what the Fed calls their use of words and public statements for effect, as a specific policy tool designed to influence investor behavior rather than to communicate truthful information. You know … what we would call lying in other circumstances. As Ben Bernanke said in one of his last speeches as Fed Chair, Communication Policy (“enhanced forward guidance”) has been the star of the show since quantitative easing lost its mojo with the QE2 program. Making up narratives and telling them convincingly has worked for politicians for, oh, several thousand years. I suppose the only surprising thing is that it took central bankers so long to get in on the act. Today it’s their primary shtick.

  But now that politicians and central bankers have demonstrated the incredible efficacy of what game theory calls Missionary Statements — the intentional construction of common knowledge through highly mediated statements — everyone wants in on the act. Everyone wants to be a Missionary for their own institutional ends. And that Everyone definitely includes Wall Street.

  Here’s what I’ve noticed in the past two major political risk events in Western markets — the Italian referendum on December 5 and the French first round election on April 23. In both cases, the most political risk-impacted equity markets began to rally sharply three or four days BEFORE the vote.

  

  Source: Bloomberg LP, as of 05/03/17. For illustrative purposes only. Past performance is not indicative of how the index will perform in the future.

  The index reflects the reinvestment of dividends and income and does not reflect deductions for fees, expenses or taxes. The indices are unmanaged and are not available for direct investment.

  The top chart is the European bank equity index before and after the French vote. Below is the price chart of the broad Italian equity index before and after their referendum.

  

  Source: Bloomberg LP, as of 05/03/17. For illustrative purposes only. Past performance is not indicative of how the index will perform in the future. The index reflects the reinvestment of dividends and income and does not reflect deductions for fees, expenses or taxes. The indices are unmanaged and are not available for direct investment.

  In both cases the bottom was reached well before the actual event. Why? Because in both cases the sell-side research machine — all the chief economists and chief strategists and acolytes of all the big Wall Street firms — began churning out a flood of Missionary Statements designed to create a positive narrative around a potentially very negative (for markets) political risk event. Ditto with the U.S. election, where the positive narrative around Trump began a full week before the election (see “American Hustle” for the full Narrative Machine description).

  I mean, the effort to create a positive narrative out of whole cloth would be comical if it weren’t so seriously impactful. My personal fave on the Wednesday before the French vote was a bulge bracket strategist who shall go nameless, writing to say that a Le Pen victory wouldn’t really be that bad of a thing for markets in general and the banks in particular, because if she won there could well be a massive run on the French banks, which means that Le Pen would have to backtrack on her anti-euro stance to prevent a complete economic collapse. So buy now!

  My first reaction to this avalanche of positive Narrative construction was indignation, tinged with a little anger. Give me a break! Markets are getting a little squirrelly going into the vote, and so you’re going to start pumping out this drivel? My reaction was what John Maynard Keynes, who was at least as good a game theorist and investor as he was a macroeconomist, would have called a first level response to a Missionary statement — I’m right and the Missionary is wrong! This is the human, natural response. It’s also a losing response if you want to play the game of markets successfully.

  As Keynes explained so smartly with his parable of the Newspaper Beauty Contest, you don’t make money by holding firm to your personal opinion of who’s the prettiest girl or what’s the most attractive stock. You don’t even make money by identifying the consensus view of who’s the prettiest or what’s the right answer to a market question, because all of us are smart enough to be looking for the consensus view. No, you make money by getting ahead of the formation of the consensus view through Missionary statements, even if your personal view is that the Missionary is dead wrong in their assessment of pretty girls or attractive stocks or market outcomes. Would you rather be right or would you rather make money? Back in my younger days I didn’t think there was a conflict between the two. Now I know better. Once the Wall Street Missionaries started their Narrative blitz, it didn’t matter that I believed (and still believe!) that an anti-status quo Italian referendum creates a systemic risk for the European banking system. I wasn’t going to get paid for that view, even if the anti-status quo vote won (it did) and even if I’m objectively correct about the risk (we’ll see). Frustrating? Sure. But in the immortal words of Hyman Roth, this is the business we have chosen.

  It’s this micro explanation of the divorce between political risk and market risk that I think will prove to have the most long-lasting impact on investor behavior. You know, I started writing Epsilon Theory because Mario Draghi kicked me in the teeth in the summer of 2012 with the pretty words of his mythical OMT program. I couldn’t believe that mere narrative could be so powerful. But it is. It’s the most powerful thing in the world. Bad enough that politicians have wielded this power for centuries. Worse that Central Bankers have recently proven to be such adepts. Now that Wall Street and the global banking synod have fully embraced the dark narrative arts? Katy bar the door. Even when the androids of Westworld knew it was just a story, they were hard-wired to respond. So are we.

  So put it all together and what do we have? As a citizen I’m on high alert. Political volatility is only going to get worse in Westworld. But as an investor my systemic risk antennae are pretty quiet. Is there stuff to do, long and short? Sure, particularly away from Westworld. But until and unless Draghi starts to taper and Yellen looks to hang a recession around the Donald’s neck with beyond-tapering balance sheet reduction, I don’t see how political risk translates into market risk. And even then you’ve got a powerful volatility reducer in the self-interested Narrative creation of every Wall Street Missionary. Will it last forever? Of course not. The Missionaries, both on Wall Street and in Central Banks, are only human. Inevitably they will disappoint us. Let’s just try not to have a gun pointed at our heads when they do.

  

  

• May Payrolls Preview: The Tiebreaker

  After a poor March jobs report, followed by an April scorcher, the May payrolls report due at 8:30am on Friday will be the tiebreaker, not only for the current state of the economy where both soft and hard data have been deteriorating in recent weeks, but perhaps also for the June rate hike decision, which as the Fed noted in its May FOMC minutes, may not take place without “evidence” that the recent “transitory weakness” in the economy is over. Here are the consensus expectations for tomorrow’s report:

  • May Nonfarm Payrolls Exp. 185K (Range 140K to 235K) vs April 211K
  • Unemployment Rate Exp. 4.4% (Range 4.30%-4.60%) vs April 4.4%
  • Average Hourly Earnings M/M Exp. 0.20%, vs April 0.30%; Y/Y Exp. 2.60%, vs April 2.50%

  Payrolls Expectation

  In terms of overall expectations, the consensus is looking for 185k nonfarm payrolls to be added to the US economy in May – the same as the April consensus – compared to 211k actual jobs added in April. That according to RanSquawk would be in line with the 185k/month pace seen in 2017 thus far. On one hand, there is potential for upside surprise, as per today’s stellar ADP report which came in at 253K, far above the 185K expected. On the other, Goldman believes a favorable swing in the weather between the March and April survey periods boosted last month’s hiring pace, and suggests the 211k pace of April job growth “likely overstates the near-term underlying trend”, as such there will be payback in the May report. Also, Goldman cautions that the ADP measure has been running above official private payroll growth so far this year, by 60k per month on average, so take it with a grain of salt.

  Unemployment rate

  The unemployment rate is forecast to hold steady at 4.40%, matching the lowest reading recorded since 2001, and beneath the FOMC’s NAIRU projection between 4.70% and 5.00% (made in its March forecasts). A 4.4% print would be stronger than the Fed’s own year end forecast of 4.50%. If May unemployment stays at or near that level, it would be further evidence the economy has reached full employment and is at full capacity, meaning virtually everyone seeking work has found a job, even if that doesn’t explain why wage growth remains anemics. If the rate dips lower, that could put upward pressure on wages and inflation, or alternatively it will prompt questions about the quality of jobs added.

  Earnings

  As a result, most of the attention is likely to fall on the earnings data for signs of inflationary pressures. Average hourly earnings (AHE) are seen rising by 0.20% M/M, easing a touch from the +0.30% pace seen in April. On an annualised basis, the pace of AHE growth is seen rising by 0.10 ppts to 2.60%. In its latest Beige Book, the Fed stated that “most firms across the districts noted little change to the recent trend of modest to moderate wage growth,” though many firms reported offering higher wages to attract workers “where shortages were most severe.”  According to RanSquawk, HSBC notes that though wage growth has picked up, as of late, it remains sluggish when compared to previous cycles. Looking at the May wage number in particular, Goldman warns there may be a negative surprise pointing out that the May payroll period ended on the 13th, which is associated with meaningfully below-average wage growth.

  Goldman’s summary:

  We estimate nonfarm payrolls increased 170k in May, a moderate slowdown from April’s +211k pace and modestly below the three-month moving average of +174k. While labor market fundamentals remained broadly stable – featuring a further decline in continuing jobless claims – recent deterioration in service sector employment surveys suggests hiring may be slowing at the margin. We also believe a favorable swing in the weather between the March and April survey periods suggests the 211k pace of April job growth likely overstates the near-term underlying trend, which we believe is closer to 175k (and should slow further as the economy moves beyond full employment). Relatedly, May is also an important hiring month, and labor supply constraints in some geographies and industries suggest some additional downside risk. On the positive side, both jobless claims and the ADP report suggest more favorable labor market fundamentals, and the end of the federal hiring freeze suggests scope for above-trend growth in federal employment.

  On wages, Goldman warns there may be disappointment:

  We estimate average hourly earnings increased 0.2% month over month and 2.5% year over year in May, reflecting the interaction of firming wage growth with negative calendar effects. The May payroll period ended on the 13th, which in our model is associated with meaningfully below-average wage growth. However, we are more constructive on wage growth generally, exemplified by the acceleration in the  employment cost index to a cycle-high pace in Q1.

  Factors arguing for a stronger report:

  • Jobless claims. Initial claims for unemployment insurance benefits declined, averaging 241k during the four weeks between the April and May payroll survey  periods, a new cycle low. Additionally, continuing claims dropped by an encouraging 63k from survey week to survey week, roughly the same pace as in the prior month.
  • ADP. The payroll processing firm ADP reported a 253k increase in private payroll employment in April – above consensus expectations – suggesting a solid underlying pace of job growth. The ADP measure has been running above official private payroll growth so far this year (by 60k per month on average), and we believe the May ADP reading received a boost from the net strength in the financial and economic indicators also used in their model. These considerations make the task of teasing out the underlying signal from the report more difficult.
  • End of federal hiring freeze. The administration’s hiring freeze n for federal workers (excluding defense and public safety) went into effect on January 23 and concluded on April 11 – the Tuesday of the April survey week. Its impact on overall payrolls appears fairly limited, with average monthly payroll growth in these categories slowing from +3k in 2016 to -4k during the three months of the freeze. The impact also seems minor when compared to federal job growth during the 1981 federal hiring freeze at the start of the Reagan administration (see Exhibit 2). Assuming the 2016 trend in labor demand growth continued this year, the cumulative impact of the 2017 freeze was approximately -20k (on the level of federal payrolls). Accordingly, we see some scope for an above-trend reading in tomorrow’s report,  reflecting pent-up labor demand (we assume +10k for total government payrolls).

  Arguing for a weaker report:

  • Service sector surveys. Service-sector employment surveys n have deteriorated somewhat in recent months, with the ISM non-manufacturing survey falling to 51.4 in April (from its recent high of 55.2 in February) and available May surveys weakening on net. Our overall non-manufacturing employment tracker fell to 53.4 in May from 54.4 in April, with declines in the Philly Fed and Richmond Fed employment subindices but improvement in the New York Fed and Dallas Fed measures. More encouragingly, the key labor market subcomponent of the Consumer Confidence report remained strong, rebounding 0.8pt to 11.7, not far from its cycle-high reading. Service sector payroll employment grew 173k in April and has increased 129k on average over the last six months.
  • Labor supply constraints. We view the labor market as close to full employment, with the unemployment rate roughly 0.3pp below its structural rate and yesterday’s Beige Book referencing increased reports of labor supply constraints. As slack diminishes further, this should exert both upward pressure on wages and downward pressure on job growth. From a hiring perspective, May is a particularly important month, with non-seasonally adjusted payroll growth averaging 838k over the last five May reports. As shown in Exhibit 3, we find that payroll growth tends to slow during late spring in years with relatively tight labor markets, as defined by an above-median Q1 employment gap (i.e. 2017).1. Labor constraints appear particularly binding in May (and August) in these years. One potential explanation is that the May payroll  period occurs after much of the start-of-year seasonal slack has been wound down (earlier in the Spring hiring season) but before the entry of students and recent graduates into the labor force (in late May and June).

  

  • Continued retail weakness. Retail employment growth has fallen n from its historical trend of 15-20k per month to -2k on average over the past six months. We believe the structural shift of retail sales from brick and mortar stores toward less labor-intensive e-commerce firms will continue to weigh on payrolls growth in that industry, with the impact on the order of 10k per month relative to its previous trend. This drag on retail employment has appeared particularly pronounced recently – with a 50k cumulative drop in retail payrolls over the last three months – and we note the possibility that weak brick and mortar sales trends in Q1 may be accelerating the pace of this structural shift. Similarly, we note the possibility that the weakness in April home sales and housing construction may have weighed on hiring in that industry.
  • Seasonals. Since 2010, May payroll growth has surprised negatively relative to consensus in four of the seven instances. While this is only slightly more than half the time, the average surprise has been fairly sizeable at -50k over this period. This may suggest downside risk to the extent the BLS seasonal factors have not fully evolved to reflect this tendency.
  • Job cuts. Announced layoffs reported by Challenger, Gray & Christmas after our seasonal adjustment rose sharply (+28k to 59k, a one-year high). Over half of the increase reflects a 20k layoff announcement at Ford Motor that was announced after the May payroll survey period. After taking into this account, the increase in May job cuts was more modest

  Neutral Factors:

  • Return to Normal Weather. We believe the early-March winter storms likely exerted a meaningful drag on March payroll growth and provided a boost to April. Winter Storm Stella hit the Midwest and East Coast at the beginning of the March survey week, with the level of population-weighted snowfall during a March survey week at its highest since at least 2005. This suggests the April employment report may have benefitted from workers in the establishment survey returning to their jobs in some industries. Our preferred aggregate of weather-sensitive industries (construction, retail, and leisure and hospitality) also rebounded, to +66k from -17k in March. Accordingly, we believe headline job growth in April likely overstates the near-term trend, suggesting scope for moderation in May.
  • Manufacturing sector surveys. Employment components of manufacturing n sector surveys were mixed in May, with improvement in the ISM manufacturing employment component (+1.5 to 53.5), but deterioration in several regional surveys, including the Philly Fed, New York Fed, and Dallas Fed employment components as well as the Markit PMI subindex. Our overall manufacturing employment tracker pulled back to 0.6pt to 55.7, still a healthy level. Manufacturing payroll employment rose 6k in April, its fifth consecutive increase, and has increased 12k on average over the last six months.
  • Job availability. The Conference Board’s Help Wanted Online (HWOL) report showed a rebound in May online job postings (+4%) following April’s 1% pullback. However, we continue to place limited weight on this indicator at the moment, in light of research by Fed economists that suggests the HWOL ad count has been depressed by higher prices for online job ads.

  * * *

  Other observations:

  Impact on Fed policy:

  • With the implied probability of a June hike at around 96%, it would likely take a horrific report to stop the Fed from lifting rates by 25bps. With the rate of joblessness below the Fed’s estimate of NAIRU, as well as its end-2017 target, it would likely look through a big headline miss, so long as wages don’t collapse.
  • Many Fed speakers have been paying particularly close attention to wages, observing that they have been a notable weakness.
  • Fed’s Kashkari (voter, dove) last month said there may be more slack in the labour market, arguing that stronger wage growth may pull more people back into the labour market, helping participation to rise.
  • Fed’s Evans (voter, dove) points out that across the board wage growth has not proceeded as quickly as the Fed would have thought. A sentiment that has also been touched on by the Fed’s Kaplan (voter, slightly hawkish) too.
  • Fed’s Williams (non-voter, centrist) went further, and described wages as “stubbornly soft.”
  • In terms of Fed hikes, even if wages missed, it may still not be enough to derail the Fed’s hike plans. Pantheon Macroeconomics has argued that in the previous cycle, the Fed lifted rates when AHE were running at 2.60% Y/Y, and it then accelerated sharply to 4.00% within five quarters.
  • Given rate changes operate with a four/five quarter lag, Pantheon says the Fed will be aware of the dangers of leaving it too late to raise rates.

  Possible market reaction

  • The market is pricing in just one full hike in 2017, with the implied probability of two hikes slightly better than a coin flip.
  • An upside surprise in the Employment Situation Report may contribute to a repricing where the market converges towards the Fed’s forecasts, though with clear doubts about whether inflation can sustainably pick-up towards the Fed’s inflation goal (PCE has been easing as of late), it is unlikely the market and Fed’s view will converge.
  • Given past market reactions, a likely expression to an upside surprise may be a flattening of 2s10s, a sell-off in the long-end, which could help to lift the dollar.
  • Stocks are almost guaranteed to go up no matter the actual data.

  

  

• The Bilderberg 2017 Agenda: "The Trump Administration – A Progress Report"

  Every year, the world’s richest and most powerful business executives, bankers, media heads and politicians sit down in some luxurious and heavily guarded venue, and discuss how to shape the world in a way that maximizes profits for all involved, while perpetuating a status quo that has been highly beneficial for a select few, even if it means the ongoing destruction of the middle class. We are talking, of course, about the annual, and always secretive, Bilderberg meeting.

  And just like last year’s meeting in Dresden, the primary topic on the agenda of this year’s 65th Bilderberg Meeting which starts today and ends on Sunday, is one: Donald Trump.

  Ironically, this year “the storm around Donald Trump” as the SCMP puts it, is not half way around the world, but just a few miles west of the White House, in a conference centre in Chantilly, Virginia, where the embattled president will be getting his end-of-term grades from the people whose opinion actually matters: some 130 participating “Bilderbergs”.

  The secretive three-day summit of the political and economic elite kicks off Thursday in heavily guarded seclusion at the Westfields Marriot, a luxury hotel a short distance from the Oval Office.

  

  As of Wednesday, the hotel was already on lockdown and an army of landscapers have been busy planting fir trees around the perimeter, to try protect “coy billionaires and bashful bank bosses” from prying lenses and/or projectiles.  Perched ominously at the top of the conference agenda this year are these words: “The Trump Administration: A progress report”.

  So is the president going to be put in detention for tweeting in class? Held back a year? Or told to empty his locker and leave? If ever there’s a place where a president could hear the words “you’re fired!”, it’s Bilderberg.

  Sarcasm aside, the White House was taking no chances, sending along some big hitters from Team Trump to defend their boss: national security adviser, HR McMaster; the commerce secretary, Wilbur Ross; and Trump’s new strategist, Chris Liddell (curiously, neither Gary Cohn nor Steven Mnuchin will be there although the controversial new Chairman of Goldman Sachs International, Jose Barroso will be present). Could Trump himself show up to receive his report card in person: we are confident he will tweet all about it… which is probably why he will never be invited.

  Stil, none other than Henry Kissinger, the gravel-throated kingpin of Bilderberg, visited the White House a few weeks ago to discuss “Russia and other things”, and certainly, the Bilderberg conference would be the perfect opportunity for the most powerful man in the world to discuss important global issues with Trump.

  Sarcasm aside, what are among the “Trump agenda” items to be discussed?  The publicly list is as follows:

  • The Trump Administration: A progress report
  • Trans-Atlantic relations: options and scenarios
  • The Trans-Atlantic defence alliance: bullets, bytes and bucks
  • The direction of the EU
  • Can globalisation be slowed down?
  • Jobs, income and unrealised expectations
  • The war on information
  • Why is populism growing?
  • Russia in the international order
  • The Near East
  • Nuclear proliferation
  • China
  • Current events

  The US president’s extraordinary chiding of NATO leaders in Brussels is sure to be first and foremost on the Bilderberg discussing panel. The Bilderbergers have summoned the head of Nato, Jens Stoltenberg, to give feedback. Stoltenberg will be leading the snappily titled session on “The Transatlantic defence alliance: bullets, bytes and bucks”. He’ll be joined by the Dutch minister of defence and a clutch of senior European politicians and party leaders, all hoping to reset the traumatised transatlantic relationship after Trump’s galumphing visit.

  As the Guardian puts it, the guest list for this year’s conference is a veritable “covfefe” of big-hitters from geopolitics, from the head of the IMF, Christine Lagarde, to the king of Holland, but perhaps the most significant name on the list is Cui Tiankai, China’s ambassador to the US.

  According to the meeting’s agenda, “China” will also be discussed at a summit attended by Cui, the US commerce secretary, the US national security adviser, two US senators, the governor of Virginia, two former CIA chiefs and any number of giant US investors in China, including the heads of the financial services firms the Carlyle Group and KKR. And for good reason: as last night’s PMI numbers showed, the Chinese economy – the global growth dynamo – is finally contracting. If China goes, the rest of the world will follow. 

  Additionally, the boss of Google Eric Schmidt, who warned in January that Trump’s administration will do “evil things”, is expected to attend, too. The executive chairman of Alphabet, Google’s holding company, has just come back from a trip to Beijing, where he was overseeing Google AI’s latest game of Go against humans. He declared it “a pleasure to be back in China, a country that I admire a great deal”. It’s possible three days spent chatting to the Chinese ambassador could even be good for business.

  Several journalists are participating in this year’s forum, including London Evening Standard editor George Osborne and Cansu Camlibel, the Washington bureau chief for Turkey’s Hurriyet newspaper. But per convention, news outlets are not invited to cover the event.

  “There is no desired outcome, no minutes are taken and no report is written,” the group stated. “Furthermore, no resolutions are proposed, no votes are taken, and no policy statements are issued.”

  Ex-deputy secretary of state William Burns and former deputy assistant secretary of defence Elaine Bunn, both Obama-era officials, will also attend. Burns, the current president of the Carnegie Endowment for International Peace, has warned that Trump “risks hollowing out the ideas, initiative and institutions on which US leadership and international order rest.”

  With one of the agenda items titled simply enough “can globalisation be slowed down?” it is no surprise that anti-globalisation protesters have already descended on the location of the meeting.

  * * *

  Below is a full list of this year’s participants:

  CHAIRMAN

  • Castries, Henri de (FRA), Former Chairman and CEO, AXA; President of Institut Montaigne

   
  PARTICIPANTS

  • Achleitner, Paul M. (DEU), Chairman of the Supervisory Board, Deutsche Bank AG
  • Adonis, Andrew (GBR), Chair, National Infrastructure Commission
  • Agius, Marcus (GBR), Chairman, PA Consulting Group
  • Akyol, Mustafa (TUR), Senior Visiting Fellow, Freedom Project at Wellesley College
  • Alstadheim, Kjetil B. (NOR), Political Editor, Dagens Næringsliv
  • Altman, Roger C. (USA), Founder and Senior Chairman, Evercore
  • Arnaut, José Luis (PRT), Managing Partner, CMS Rui Pena & Arnaut
  • Barroso, José M. Durão (PRT), Chairman, Goldman Sachs International
  • Bäte, Oliver (DEU), CEO, Allianz SE
  • Baumann, Werner (DEU), Chairman, Bayer AG
  • Baverez, Nicolas (FRA), Partner, Gibson, Dunn & Crutcher
  • Benko, René (AUT), Founder and Chairman of the Advisory Board, SIGNA Holding GmbH
  • Berner, Anne-Catherine (FIN), Minister of Transport and Communications
  • Botín, Ana P. (ESP), Executive Chairman, Banco Santander
  • Brandtzæg, Svein Richard (NOR), President and CEO, Norsk Hydro ASA
  • Brennan, John O. (USA), Senior Advisor, Kissinger Associates Inc.
  • Bsirske, Frank (DEU), Chairman, United Services Union
  • Buberl, Thomas (FRA), CEO, AXA
  • Bunn, M. Elaine (USA), Former Deputy Assistant Secretary of Defense
  • Burns, William J. (USA), President, Carnegie Endowment for International Peace
  • Çakiroglu, Levent (TUR), CEO, Koç Holding A.S.
  • Çamlibel, Cansu (TUR), Washington DC Bureau Chief, Hürriyet Newspaper
  • Cebrián, Juan Luis (ESP), Executive Chairman, PRISA and El País
  • Clemet, Kristin (NOR), CEO, Civita
  • Cohen, David S. (USA), Former Deputy Director, CIA
  • Collison, Patrick (USA), CEO, Stripe
  • Cotton, Tom (USA), Senator
  • Cui, Tiankai (CHN), Ambassador to the United States
  • Döpfner, Mathias (DEU), CEO, Axel Springer SE
  • Elkann, John (ITA), Chairman, Fiat Chrysler Automobiles
  • Enders, Thomas (DEU), CEO, Airbus SE
  • Federspiel, Ulrik (DNK), Group Executive, Haldor Topsøe Holding A/S
  • Ferguson, Jr., Roger W. (USA), President and CEO, TIAA
  • Ferguson, Niall (USA), Senior Fellow, Hoover Institution, Stanford University
  • Gianotti, Fabiola (ITA), Director General, CERN
  • Gozi, Sandro (ITA), State Secretary for European Affairs
  • Graham, Lindsey (USA), Senator
  • Greenberg, Evan G. (USA), Chairman and CEO, Chubb Group
  • Griffin, Kenneth (USA), Founder and CEO, Citadel Investment Group, LLC
  • Gruber, Lilli (ITA), Editor-in-Chief and Anchor “Otto e mezzo”, La7 TV
  • Guindos, Luis de (ESP), Minister of Economy, Industry and Competiveness
  • Haines, Avril D. (USA), Former Deputy National Security Advisor
  • Halberstadt, Victor (NLD), Professor of Economics, Leiden University
  • Hamers, Ralph (NLD), Chairman, ING Group
  • Hedegaard, Connie (DNK), Chair, KR Foundation
  • Hennis-Plasschaert, Jeanine (NLD), Minister of Defence, The Netherlands
  • Hobson, Mellody (USA), President, Ariel Investments LLC
  • Hoffman, Reid (USA), Co-Founder, LinkedIn and Partner, Greylock
  • Houghton, Nicholas (GBR), Former Chief of Defence
  • Ischinger, Wolfgang (INT), Chairman, Munich Security Conference
  • Jacobs, Kenneth M. (USA), Chairman and CEO, Lazard
  • Johnson, James A. (USA), Chairman, Johnson Capital Partners
  • Jordan, Jr., Vernon E. (USA), Senior Managing Director, Lazard Frères & Co. LLC
  • Karp, Alex (USA), CEO, Palantir Technologies
  • Kengeter, Carsten (DEU), CEO, Deutsche Börse AG
  • Kissinger, Henry A. (USA), Chairman, Kissinger Associates Inc.
  • Klatten, Susanne (DEU), Managing Director, SKion GmbH
  • Kleinfeld, Klaus (USA), Former Chairman and CEO, Arconic
  • Knot, Klaas H.W. (NLD), President, De Nederlandsche Bank
  • Koç, Ömer M. (TUR), Chairman, Koç Holding A.S.
  • Kotkin, Stephen (USA), Professor in History and International Affairs, Princeton University
  • Kravis, Henry R. (USA), Co-Chairman and Co-CEO, KKR
  • Kravis, Marie-Josée (USA), Senior Fellow, Hudson Institute
  • Kudelski, André (CHE), Chairman and CEO, Kudelski Group
  • Lagarde, Christine (INT), Managing Director, International Monetary Fund
  • Lenglet, François (FRA), Chief Economics Commentator, France 2
  • Leysen, Thomas (BEL), Chairman, KBC Group
  • Liddell, Christopher (USA), Assistant to the President and Director of Strategic Initiatives
  • Lööf, Annie (SWE), Party Leader, Centre Party
  • Mathews, Jessica T. (USA), Distinguished Fellow, Carnegie Endowment for International Peace
  • McAuliffe, Terence (USA), Governor of Virginia
  • McKay, David I. (CAN), President and CEO, Royal Bank of Canada
  • McMaster, H.R. (USA), National Security Advisor
  • Micklethwait, John (INT), Editor-in-Chief, Bloomberg LP
  • Minton Beddoes, Zanny (INT), Editor-in-Chief, The Economist
  • Molinari, Maurizio (ITA), Editor-in-Chief, La Stampa
  • Monaco, Lisa (USA), Former Homeland Security Officer
  • Morneau, Bill (CAN), Minister of Finance
  • Mundie, Craig J. (USA), President, Mundie & Associates
  • Murtagh, Gene M. (IRL), CEO, Kingspan Group plc
  • Netherlands, H.M. the King of the (NLD)
  • Noonan, Peggy (USA), Author and Columnist, The Wall Street Journal
  • O’Leary, Michael (IRL), CEO, Ryanair D.A.C.
  • Osborne, George (GBR), Editor, London Evening Standard
  • Papahelas, Alexis (GRC), Executive Editor, Kathimerini Newspaper
  • Papalexopoulos, Dimitri (GRC), CEO, Titan Cement Co.
  • Petraeus, David H. (USA), Chairman, KKR Global Institute
  • Pind, Søren (DNK), Minister for Higher Education and Science
  • Puga, Benoît (FRA), Grand Chancellor of the Legion of Honor and Chancellor of the National Order of Merit
  • Rachman, Gideon (GBR), Chief Foreign Affairs Commentator, The Financial Times
  • Reisman, Heather M. (CAN), Chair and CEO, Indigo Books & Music Inc.
  • Rivera Díaz, Albert (ESP), President, Ciudadanos Party
  • Rosén, Johanna (SWE), Professor in Materials Physics, Linköping University
  • Ross, Wilbur L. (USA), Secretary of Commerce
  • Rubenstein, David M. (USA), Co-Founder and Co-CEO, The Carlyle Group
  • Rubin, Robert E. (USA), Co-Chair, Council on Foreign Relations and Former Treasury Secretary
  • Ruoff, Susanne (CHE), CEO, Swiss Post
  • Rutten, Gwendolyn (BEL), Chair, Open VLD
  • Sabia, Michael (CAN), CEO, Caisse de dépôt et placement du Québec
  • Sawers, John (GBR), Chairman and Partner, Macro Advisory Partners
  • Schadlow, Nadia (USA), Deputy Assistant to the President, National Security Council
  • Schmidt, Eric E. (USA), Executive Chairman, Alphabet Inc.
  • Schneider-Ammann, Johann N. (CHE), Federal Councillor, Swiss Confederation
  • Scholten, Rudolf (AUT), President, Bruno Kreisky Forum for International Dialogue
  • Severgnini, Beppe (ITA), Editor-in-Chief, 7-Corriere della Sera
  • Sikorski, Radoslaw (POL), Senior Fellow, Harvard University
  • Slat, Boyan (NLD), CEO and Founder, The Ocean Cleanup
  • Spahn, Jens (DEU), Parliamentary State Secretary and Federal Ministry of Finance
  • Stephenson, Randall L. (USA), Chairman and CEO, AT&T
  • Stern, Andrew (USA), President Emeritus, SEIU and Senior Fellow, Economic Security Project
  • Stoltenberg, Jens (INT), Secretary General, NATO
  • Summers, Lawrence H. (USA), Charles W. Eliot University Professor, Harvard University
  • Tertrais, Bruno (FRA), Deputy Director, Fondation pour la recherche stratégique
  • Thiel, Peter (USA), President, Thiel Capital
  • Topsøe, Jakob Haldor (DNK), Chairman, Haldor Topsøe Holding A/S
  • Ülgen, Sinan (TUR), Founding and Partner, Istanbul Economics
  • Vance, J.D. (USA), Author and Partner, Mithril
  • Wahlroos, Björn (FIN), Chairman, Sampo Group, Nordea Bank, UPM-Kymmene Corporation
  • Wallenberg, Marcus (SWE), Chairman, Skandinaviska Enskilda Banken AB
  • Walter, Amy (USA), Editor, The Cook Political Report
  • Weston, Galen G. (CAN), CEO and Executive Chairman, Loblaw Companies Ltd and George Weston Companies
  • White, Sharon (GBR), Chief Executive, Ofcom
  • Wieseltier, Leon (USA), Isaiah Berlin Senior Fellow in Culture and Policy, The Brookings Institution
  • Wolf, Martin H. (INT), Chief Economics Commentator, Financial Times
  • Wolfensohn, James D. (USA), Chairman and CEO, Wolfensohn & Company
  • Wunsch, Pierre (BEL), Vice-Governor, National Bank of Belgium
  • Zeiler, Gerhard (AUT), President, Turner International
  • Zients, Jeffrey D. (USA), Former Director, National Economic Council
  • Zoellick, Robert B. (USA), Non-Executive Chairman, AllianceBernstein L.P.

  Natrually, the secretive nature of the group has given birth to conspiracy theories. Some have claimed that the Bilderberg is a group of rich and powerful kingmakers seeking to impose a one world government. Whether that is true remains in the eye of the beholder, however one thing is clear: as the graph below shows, the members are connected to virtually every important and relevant organization, media outlet, company and political entity in the world.

  

  

  

• Deutsche Bank Calculates The "Fair Value Of Gold" And The Answer Is…

  Over the past three years, gold has found itself in an odd place: while it still remains the ultimate “safety” trade and store of value should everything go to hell following social and monetary collapse, when it comes to “coolness” it has been displaced by various cryptocurrencies, all of which have vastly outperformed the yellow metal in recent months. Meanwhile, central banks continue to pressure the price of gold to avoid a repeat of 2011 when gold nearly broke out above $2,000, putting the fate world’s “reserve currency” increasingly under question. As a result, gold has traded in a rather somnolent fashion, range bound between $1,100 and $1,300 over the last few years, failing to break out on either side.

  But is that a fair price for gold?

  That is the question Deutsche Bank’s Grant Sporre set out to answer in a special report released overnight, which among other things finds that gold is a “metal” full of paradoxes.

  Here is what Deutsche Bank found: as Sporre contends, in order to determine whether gold is cheap or expensive, one must first define what gold actually is.

  At its simplest form and yes we are stating the obvious, gold is a shiny yellow metal, relatively scarce and mined from the earth’s crust. Valuing the metal should then be just as easy? Gold is a simple commodity, governed by supply and demand, and valuing it should bear some relationship to the cost of digging it out of the earth? But it turns out; gold’s nature is far more mercurial. Gold can be many things to many different people – a store of value, a financial asset, a medium of exchange, a currency, an insurance policy against disruptive events or global uncertainty and even a “barbarous relic*” according to John Maynard Keynes. (*As with any famous quote, there are suggestions that the term was not originally coined by Keynes himself, nor that he was actually referring to gold, but rather to the constraints of the gold standard at the time).

   

  All of this means that finding an absolute valuation method which will be accepted by all is rather optimistic; and that the value of gold is more likely to be determined on a relative basis depending on the individual’s perception of gold.

   

  Whilst we contend that there is something of an art to valuing gold, we have used a more scientific framework to come up with that true fair value. There are flaws in any one of the individual approaches, and even averaging out the different approaches still seems like a bit of a cop out. However, in our table below the average of all the selected metrics would suggest that gold should trade around USD1,015/oz, with relative G7 per capita income valuing gold at USD735/oz, whilst the bloated size of the big four central bank balance sheets suggesting that gold should travel at USD1,648/oz.

  Here is a summary of DB’s findings:

  

  And DB’s take: the reason why gold is trading with a roughly 20% premium to “fair value” is because “there is a heightened perception of risk or uncertainty in the broader markets.“

  Although gold screens as expensive, there is a short term scenario (3 month) which would justify gold trading higher, in our view. In the near term, our US rates economist Dominic Konstam sees scope for the US 10-year bond yield to fall to 2% (before rising to 2.75% by year-end), as falling excess liquidity points to softer US growth momentum ahead. If we apply a US 10 year bond yield of 2%, a USD 2% weaker from current levels (not our FX strategist view) and the S&P500 down 5% from current levels, our fair value model points to a gold price of USD1,320/oz.

   

  Our own simple four factor model points to a value of USD1,185/oz. Our conclusion is that gold is still trading at a premium versus a wide variety of metrics; 20% versus the average or 6% versus our fair value model. This suggests to us that the certainly through the lens of gold, there is a heightened perception of risk or uncertainty in the broader markets.

  And some additional thoughts from DB on how it scores gold’s value across its various roles in society:

  * * *

  Gold as a commodity – scarce but always in surplus?

  Many investors are uncomfortable with treating gold as a commodity in that gold is not “consumed” like other commodities – it is not eaten, or burned or forged as food, energy or industrial metals would be. At first glance the price of gold relative to the marginal producer on the cost curve would provide a perfect yardstick to determining the fair value of gold. There are however two fundamental problems with this method. The first is that the conventional supply demand analysis does not work very well for gold. Partly due to its value and enduring nature (and high incentive to recycle), very little gold is actually consumed or lost every year. Thus every year, we add to the stocks of gold, with the industrial surplus being “consumed” by financial investors. We would argue that even the jewellery market is not “pure” consumption and the motivation is linked to a store of wealth.

  

  Gold’s price trajectory relative to the marginal producer on the cost curve should be reasonable determinant of value. However, the mined supply of gold is relatively stable and only responds to pricing signals with a four to five year lag. Gold has been falling since 2012, the bump in 2016 notwithstanding and we only forecast mined supply to finally decline in 2017. It turns out, the gold miners are very good at adjusting their cost bases to the prevailing gold price, not least by targeting the richer parts of their ore bodies. The practice of “high grading” is much frowned upon in the industry, as certain less economic  parts of the ore body may be sterilized thereby reducing the NPV of the mine. However, when faced with significant cash burn, many miners have little choice.

  

  If indeed gold is a commodity, gold’s perceived value relative to copper and oil should revert to a long run equilibrium level, based on the relative abundance of various commodities in the earth’s crust. There is no doubt that gold is scarce relative to copper for instance (10,000x less abundant). However the perception of utility will vary according to global growth. In a high global growth environment, copper should be seen as more valuable relative to gold.

  

  * * *

  Gold as Money – a medium of exchange with little intrinsic value?

  Gold is often seen as a medium of exchange and one that is officially recognized (if not publically used as such) in our view. Simply, gold is widely held by most of the world’s larger central banks as a  component of reserves. The ideal medium of exchange must balance the paradox of representing value while having little intrinsic value itself. Fiat currencies physically have no use other than that which is ascribed to them by government and accepted by the public. Arguably, gold is a purer form of money because it actually costs something to produce, compared to fiat currencies which cost very little. However, the concept of relative scarcity or abundance comes into play. If the rate at which fiat currencies have been printed exceeds that rate at which gold has been mined, then ceteris paribus, gold should become scarcer and rerate versus fiat currencies. Since 2005, central bank balance sheets have expanded nearly fourfold. In contrast the global above ground stocks of gold have expanded a mere 20%. The gold price has rerated accordingly, but not enough to keep the value of gold at parity with the global (big four central banks to be precise) money stock. The average ratio since 2005 between global money stocks and the value of global gold stocks is c.1.8x. In order for gold to get back to this level, the price should appreciate to USD1,648/oz, nearly USD300/oz above the current spot price.

  

  If we assume that gold reverts to the long run ratio of these two commodities, then at an oil price of USD50/bbl, gold should be trading at USD840/oz, and at a copper price of USD5,600/t, gold should be trading at USD960/oz. Gold remains expensive versus other commodities

  * * *
  Gold as a store of value – capital appreciation but no yield

  We all need ways to store the fruits of our physical or intellectual labour for use at a later stage. We all have our preferences, be it bricks and mortar, the equity markets or gold. It depends on your confidence in how well you believe your asset of choice will preserve and in many instances grow your wealth or capital. We have examined the level of the gold price in real terms i.e. versus US CPI, relative to the per capita income and versus an alternative financial asset, the US equity market.

  In terms of the relationship between gold and the S&P500, we have adjusted both for inflation and applied a further equity time value adjustment. Both should rise with inflation, but the S&P 500 should rise more and its retained and reinvested earnings should generate real EPS growth. We find that the adjusted gold to S&P500 ratio at 0.65x is still above its historical average of 0.54x. To bring this ratio back to its long run average would require the gold price to fall to USD990/oz. The average G7 per capita income since 1971 could buy just over 62 ounces of gold. Currently the average per capita income can purchase 47 ounces which implies that gold should trade at USD740/oz.

  

  The real gold price average since 1971 when the gold standard was relinquished in the US is USD735/oz in PPI adjusted terms and USD810/oz in CPI adjusted terms.

  

  Gold as a measure of market uncertainty

  In order to adjust for the current gap between the actual gold price and our model forecast, we have adjusted our model (yes all models have dummy variables to account for the periods when they don’t quite work) for global risk perceptions. The adjustment we apply is simply a risk perceptions adjustment factor derived by plotting the model residual against the VIX index. We note that any significant period above 20 on the VIX index causes gold to trade above its “fair value”. The scale we apply ranges from -20 to 20, with each point accounting for USD10/oz. This is the minimum and maximum range of the deviation. The current gap of USD80/oz or 8 on our scale would suggest an above average sense of risk or uncertainty in the market. If we apply the DB house view forecasts at year end for the US 10 year bond yield of 2.75%, a US 10 year break even of 2.15%, an S&P year-end target of 2600, IMF gold purchases of 5 tonnes and a USD up 7.6% versus the broad trade weighted basket, then gold should trade all the way down to USD1,031/oz. Even if we increase our risk perception index from 8 to 12, this brings us back to USD1,150/oz by year end. In the near term however, our US rates economist Dominic Konstam sees scope for the US 10-year bond yield to fall to 2% (before rising to 2.75% by year-end), as falling excess liquidity points to softer US growth momentum ahead. If we apply a US 10 year bond yield of 2%, a USD down 2% from current levels and the S&P500 down 5% from current levels, our fair value model points to a gold price of USD1,320/oz.

  

  

  

• Debbie Wasserman Schultz Uses Voice Changer To Call Law Firm Suing DNC – Forgets To Disable Caller ID

  

  Content originally generated at iBankCoin.com

  There was a hilarious filing with the court today in the lawsuit against the Democratic National Committee – in which Debbie Wasserman Schultz is a defendant…

  
  

  Attorney Elizabeth Lee Beck’s office received a call just before 5PM on Thursday from an individual who was apparently using a ‘robotic and genderless’ voice changing device, sniffing around with questions about the DNC lawsuit filed over cheating in the 2016 election. The suit – based on documents released by hacker Guccifer 2.0, claims that the DNC colluded with Sec. Hillary Clinton’s campaign ‘to perpetrate a fraud on the public.’ (see more here)

  After a brief chat with the law firm’s secretary, the ‘mysterious’ voice-masking caller concluded the call with an ‘Okey dokey.’

  And whose number showed up when the law firm turned around and googled the number from the caller ID? Why, who else but Debbie Wasserman Schultz’ Aventura office!

  Law firm suing the DNC says Debbie Wasserman Schultz office called using what sounded like a ‘voice changer.’ ???? https://t.co/j1v5QhuM2R pic.twitter.com/LbxNcECAKQ

  — ZeroPointNow (@ZeroPointNow) June 2, 2017

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  Caller ID:

  

  See filing here.

  

• "Now The Pain Begins": S&P, Moodys Cut Illinois To Near Junk, Lowest Ever Rating For A U.S. State

  The monetary problems plaguing the state of Illinois (not to mention its public pensions) have been widely documented here over the past few years, and today the rating agencies finally noticed, when in the span of a few hours, first S&P, then Moody’s downgraded Illinois to BB+/Baa3, respectively, both just one notch above junk, the lowest rating ever given to a U.S. state, as both agencies cited a long-running political stalemate over a budget shows no signs of ending.

  In the first downgrade, S&P warned that Illinois is at risk of soon losing its investment-grade status, an unprecedented step for a state that would only deeper the government’s strain. Bypassing its traditional 90-day review, S&P said Illinois will likely be downgraded around July 1, when the new fiscal year begins, if leaders haven’t agreed on a budget that starts addressing the state’s chronic deficits.

  In a statement, S&P analyst Gabriel Petek said that “The unrelenting political brinkmanship now poses a threat to the timely payment of the state’s core priority payments.” 

  Petek’s ire was prompted by Illinois’ inability to pass a budget for the past two years amid a clash between the Democrat-run legislature and Republican Governor Bruce Rauner. The ongoing confrontation has left the fifth most-populous US state with a record $14.5 billion of unpaid bills, ravaged entities like universities and social service providers that rely on state aid and undermined Illinois’s standing in the bond market, where investors have demanded higher premiums for the risk of owning its debt, Bloomberg reported.

  The S&P analyst added that “the rating actions largely reflect the severe deterioration of Illinois’ fiscal condition, a byproduct of its stalemated budget negotiations.”

  In a similar statement, Moody’s said that “legislative gridlock has sidetracked efforts not only to address pension needs but also to achieve fiscal balance, allowing a backlog of bills to approach $15 billion, or about 40% of the state’s operating budget. During the past year of fruitless negotiations and partisan wrangling, fundamental credit challenges have intensified enough to warrant a downgrade, regardless of whether a fiscal compromise is reached in an extended session.”

  The rating agency added that “the downgrade to Baa3 for Illinois’ GO bonds is consistent with the state’s intensifying pressure from pension liabilities; by our calculation, the state’s unfunded pension liability for its five major plans in aggregate grew 25% in the year ended June 30, 2016, to $251 billion.”

  And like S&P, Moody’s kept the state on negative outlook, citing the potential for additional credit weakening “because of a continuing political impasse that has left Illinois increasingly vulnerable to adverse revenue trends and severely underfunded retiree benefit plans.”

  The downgrades, which also pushed some debt backed by legislative appropriations into junk, came a day after Illinois’s legislature blew the deadline for approving a compromise budget by a simple majority. Now, it gets even more difficult as it will take a higher threshold, or three fifths majority vote in each legislative chamber, to pass anything which effectively guarantees that one month from today Illinois will be America’s first ever Junk rated state.

  On Wednesday, governor Rauner, who is up for re-election in 2018, and Democratic House Speaker Michael Madigan, who controls much of the legislative agenda, faulted each other for the unprecedented gridlock. The governor also held Democrats responsible for Thursday’s rating cut.

  Cited by Bloomberg, a spokeswoman for Rauner said that “Madigan’s majority owns this downgrade because they didn’t even attempt to pass a balanced budget, get our pension liability under control, and other changes that would put Illinois on better financial footing. The governor will continue working toward a truly balanced budget with changes to our system to grow jobs and provide real and lasting property tax relief.”

  “Her comment is typical Rauner incompetence, and that’s too bad,” said Steve Brown, a spokesman for Madigan.

  Meanwhile, as the political circus continues, Illinois’ unpaid bills are piling up. 

  By June 30, the state will owe an estimated $800 million in interest and fees on the unpaid bills that have been piling up, according to estimates from Comptroller Susana Mendoza, a Democrat. She warned of “dire” consequences for residents if a budget isn’t reached by the start of fiscal year 2018 on July 1, including the shuttering of more social service providers and layoffs at public universities. With only a month to go before the start of fiscal year, the ratings cut wasn’t unexpected.

  “We’re going to start to see some real pain now,” Senate President John Cullerton told reporters in Springfield on Wednesday. “We’re going to start to see downgrades. We don’t have any funding for schools. We don’t have any funding for higher end and a bunch of social programs. We don’t have a budget.”

  Just like Venezuela, despite not having a budget, Illinois has dutifully continued to cover payments due on its bonds, and, like other states, has no ability to resort to bankruptcy to escape from its debts.

  For now. A downgrade to junk, though, would add even more financial pressure by increasing the state’s borrowing costs and preventing many mutual funds from buying Illinois’s securities.

  To be sure, today’s announcement did not come as a surprise to markets: Illinois’s 10-year bonds already yield 4.4%, 2.5 percentage points more than those on top-rated debt. That spread is the highest since at least January 2013 and more than any of the other 19 states tracked by Bloomberg. In fact, ths spread to AAA debt is now the highest on record.

  

  Discussing next steps, Dennis Derby, a money manager at Wells Fargo which holds Illinois bonds among its $40 billion of municipal debt said “It wouldn’t be too far of a stretch at this point” to get to junk, , said in an interview before S&P’s downgrade. “I don’t know if being downgraded to junk would motivate the state to come together. You would think getting downgraded to a BBB would have motivated them and it didn’t.”

  

  

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• Forget Peace & Stability – Washington's Policy In The South China Sea Is Confrontational

  Authored by Brian Cloughley via The Strategic Culture Foundation,

  

  The American guided missile destroyer USS Dewey was reported as having carried out a ‘freedom of navigation operation’ or FONOP in the South China Sea on May 24. According to the US Naval Institute the undertaking involved manoeuvres «within 12 nautical miles of Mischief Reef for about 90 minutes zig-zagging in the water near the installation. At one point during the operation, the ship’s crew conducted a man overboard drill».

  Mischief Reef is 900 miles from the mainland of China, and 12,000 miles from the mainland of the United States. It has been built up by China from a sandy pile of rock into a habitable base and lies in the Spratly Island chain which is claimed by the Philippines and Vietnam, both members of the Association of South East Asian Nations, ASEAN.

  A week before the United States sent a warship to «demonstrate that Mischief Reef is not entitled to its own territorial sea regardless of whether an artificial island has been built on top of it» there was a meeting attended by representatives of China and all ten ASEAN countries. The purpose was to continue discussions aimed at establishing a code of conduct in the South China Sea, and on May 18 an announcement of progress was made. It was stated that all concerned nations «uphold using the framework of regional rules to manage and control disputes, to deepen practical maritime cooperation, to promote consultation on the code [of conduct] and jointly maintain the peace and stability of the South China Sea».

  As stated by the head of the Chinese delegation, deputy foreign minister Liu Zhenmin, «the draft framework contains only the elements and is not the final rules, but the conclusion of the framework is a milestone in the process and is significant. It will provide a good foundation for the next round of consultations». It wasn’t a breakthrough in agreeing about allocation of territory or anything like that — but it was indicative of peaceful progress in an important matter affecting regional countries.

  In 2012 the countries involved had agreed that «the adoption of a code of conduct in the South China Sea would further promote peace and stability in the region» and issued a statement that included reaffirmation of «their commitment to the purposes and principles of the Charter of the United Nations, the 1982 UN Convention on the Law of the Sea, the Treaty of Amity and Cooperation in Southeast Asia, the Five Principles of Peaceful Coexistence, and other universally recognized principles of international law which shall serve as the basic norms governing state-to-state relations».

  All these countries are, of course, signatories to the UN Convention on the Law of the Sea (UNCLOS) which, according to the Voice of America «provides guidelines for how nations use the world's seas and their natural resources. It also contains mechanisms for addressing disputes».

  But the United States of America, whose coast is 12,000 miles from the South China Sea where its ships zig-zag in ‘Freedom of Navigation’ operations, and its electronic warfare aircraft roam the skies forcing China to activate its mainland defensive radars so that they can be identified as future targets, refuses to sign the UN Convention on the Law of the Sea.

  The Berkeley Journal of International Law notes perceptively that «Although ratification of UNCLOS is unlikely today given staunch opposition to it in the Senate, the treaty remains an essential instrument of international law, particularly for resolving international maritime disputes. America’s abstention from the treaty is significant in this context, since as the preeminent naval power in the world it should hold a leading role in shaping the law of the sea. Instead, other nations are playing a larger role». But the US Senate is not known for a logical approach to international affairs, and its reaction is usually confrontational.

  On May 10, just before the China-ASEAN conference and the zig-zagging antics of the USS Dewey, several US senators, including the chairman of the Foreign Relations Committee, wrote to President Trump expressing concern that the US Navy had not carried out patrols «upholding freedom of navigation» in the South China Sea since October 2016. This caused them to «urge your administration to take necessary steps to routinely exercise freedom of navigation and overflight in the South China Sea, which is critical to US national security interests and to peace and prosperity in the Asia-Pacific region».

  There has been no instance of any international commercial vessel being in any way denied passage through the South China Sea. There has never been a case in which any nation in the world has had cause to protest that one of its transiting merchant ships has been approached or in any fashion intimidated, endangered or even mildly disconcerted by the actions of a Chinese warship. There hasn’t been a single Chinese zig-zag.

  These US Senators appear unable to understand that for China to take such action would be economically disastrous. The New York Times records that «$5.3 trillion worth of goods moves through the sea every year, which is about 30 percent of global maritime trade. That includes huge amounts of oil and $1.2 trillion worth of annual trade with the United States». Surely these representatives of the American people, elected presumably because of their outstanding levels of intelligence, flexibility, shrewdness, self-discipline and overall integrity, can see that if there were any real threat to passage of mercantile craft in the South China Sea there would be a catastrophic impact on making profits?

  Even if they are not intelligent or shrewd or possess any of the other qualities desirable in a national legislator, they should realise that if the world’s financial community thought there was a threat to merchant ships in the South China Sea then insurance rates would go through the roof. There would be worldwide rocketing of commodity prices and a massive financial crisis. That is basic enough for even the dumbest senator to understand.

  The only overflights in the region that have drawn attention have been the coat-trailing provocative electronic warfare missions of US military aircraft. There has not been one occasion on which an overflying civil aircraft has experienced interference of any sort.

  Maintenance of peace and furtherance of prosperity of the region are being handled satisfactorily by regional countries, as demonstrated by the recent amicable gathering of Asian nations who agreed to «jointly maintain the peace and stability of the South China Sea». The major problem in the region is interference by warships and military aircraft of the United States. There is little doubt that China’s deputy foreign minister had his tongue firmly in his cheek when he told the media he hoped the China-ASEAN consultations would not be «subject to any outside interference», because he knew very well that cordial agreement between China and other Asian nations concerning the South China Sea would be anathema to Washington.

  The Congress and the Pentagon are marching in step, as evidenced by the declaration of the senators that «We are encouraged by the statement made by Admiral Harry Harris, Commander of US Pacific Command, during his testimony before the Senate Armed Services Committee on April 26, that he expects new FONOPs to take place soon. We also share Admiral Harris’s assessments that ‘China’s militarization of the South China Sea is real’ and that ‘China continues its methodical strategy to control the South China Sea’».

  Much of the world believes that the United States, 12,000 miles from the South China Sea, is the country that wants to control it. Methodical strategy might be the way to go about it, but as we have seen in the swathe of nations from Afghanistan to Libya, by way of Iraq and Syria, the strategy of the United States is not methodical. But it is decidedly confrontational. And disastrous.

  

  

• The Meme Wars Continue: Don Trump Jr. Throws Salt at Hillary's Attempt at Humor

   

  Content originally published at iBankCoin.com

  Last night President Trump typed in a word ‘covfefe’, which lit the internet ablaze. Obviously, we can’t have this man have access to the nuke codes.
  

  Some believe Trump say on his phone in a drunken stupor and wrongly typed indiscernible words into this phone. Libshits were swinging from vines, attempting humor at the President’s expense. Since then, translations of the mysterious word have surfaced.

  

  The White House said the word was typed on purpose and that they knew what it meant. Either way, this is juvenile horseshit.

  Alas, Hillary Clinton attempts to capitalize on grande stupidity, taking her cool factor from -10 to -100.

  People in covfefe houses shouldn’t throw covfefe. https://t.co/M7oK5Z6qwF

  — Hillary Clinton (@HillaryClinton) June 1, 2017

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  Don Trump Jr. checked and mated her. Game, set, match.

  What house is he in again??? That’s what I thought. You’re trying too hard. https://t.co/9Yomz1Emb5

  — Donald Trump Jr. (@DonaldJTrumpJr) June 1, 2017

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• Russian Lawmaker Issues Sobering Threat: We're Willing To Use Nukes To Defend Crimea

  Authored by Mac Slavo via SHTFplan.com,

  

  As of late, the media has forgotten about tensions between Ukraine, NATO, and Russia. Crimea and the conflict in Eastern Ukraine have largely left the public’s awareness. However, that shouldn’t be the case, because this region is still a powder keg that could blow at any time. And if it does, it could easily result in another world war.

  If you don’t think the situation in Ukraine could still explode into a wider conflict, take a look at what this member of Russia’s parliament recently said at an international security conference.

  “On the issue of NATO expansion on our borders, at some point I heard from the Russian military — and I think they are right — If U.S. forces, NATO forces, are, were, in the Crimea, in eastern Ukraine, Russia is undefendable militarily in case of conflict without using nuclear weapons in the early stage of the conflict,” Russian parliamentarian Vyacheslav Alekseyevich Nikonov told attendees at the GLOBSEC 2017 forum in Bratislava, Slovakia.

   

  Russian military leaders have discussed Moscow’s willingness to use nuclear weapons in a conflict with military leaders in NATO, as part of broader and increasingly contentious conversations about the alliance’s expansion, Nikonov later told Defense One.

  That’s a startling admission when you think about it. It seems the Russian’s believe that if there is a war between Russia and the West, their conventional forces won’t be capable of defending Russian soil from NATO. They’re basically warning us that “if you bring a knife to this fight, we know we can’t win, so we’ll be bringing a gun.”

  And there’s a good reason for them to believe that NATO poses a dire threat to their territory and interests.

  “For us, [NATO] is a military alliance spanning three-quarters of the global defense money, now planning to expand that figure,” said Nikonov.

   

  In the two years since Russia annexed Crimea, NATO’s Baltic members have doubled their defense budgets. In 2018, Latvia, Lithuania, and Estonia are projected to spend nearly $670 million, up from $210 million in 2014. “This growth is faster than any other region globally,” Craig Caffrey, principal analyst at IHS Jane’s, remarked last October. “In 2005, the region’s total defence budget was $930 million. By 2020, the region’s defence budget will be $2.1 billion.”

   

  NATO has been expanding its troop presence in Eastern Europe as well. In April 2016, during the Warsaw summit, NATO agreed to increase the size of the NATO force deployed to Baltics, a posture move sometimes called enhanced forward presence. In January, the U.S. deployed some 4,000 troops to Poland. The following month, Germany, announced that it will send some 1,000 troops to  Lithuania.

  Since the end of the Cold War, NATO has slowly but surely encircled Russia. Just last month NATO admitted another Eastern European nation into their alliance, and the current antagonism between West and Russia is being driven by NATO’s attempts to absorb Ukraine.

  The West needs a reality check. The further we encroach into Russia’s traditional sphere of influence, the closer we come to World War Three. And if Russia really is such a serious threat to us, as our government has claimed many times in recent years, is expanding NATO really going to guarantee our safety?

  We were perfectly capable of protecting ourselves from the much more powerful Soviet Union, and we did so with a much smaller alliance. We’re expanding NATO to Russia’s doorstep, and all we’re receiving in return is the heightened risk of nuclear war.

  

  

• Sorry Siri – You're The Dumbest "Smart" Assistant Out There

  Many industry experts predict that our interactions with computing devices will move away from text-based input towards voice-based input in the future. Smartphones, voice-enabled speakers and other devices already come with so-called smart assistants such as Siri, Cortana or Google Assistant. As Statista's Felix Richter notes, these virtual assistants can help you organize your day, control smart home devices and answer general questions. Or can they?

  According to research conducted by digital agency Stone Temple "smart assistants" may not be quite as smart as they are made out to be.

  

  You will find more statistics at Statista

  Take Amazon's Alexa for example: the assistant powering the company’s popular line of voice-enabled speakers was able to answer just 20.7 percent of the 5,000 questions fired at it as part of the experiment. Notably, Google Assistant and Microsoft's Cortana were much more knowledgeable when it came to these factual questions while Apple's Siri performed similar to Alexa… but as the chart above shows, Siri was the worst-performer in terms of 100% correct responses.

  

  

• Kristin Tate: Kathy Griffin Is Just The Tip Of The Liberal Violence Iceberg

  Authored by Kristin Tate, op-ed via TheHill.com,

  One of the pillars of democracy erodes before our eyes. The ability to disagree with the politically different disintegrates under red and black flags, and hooded rioters obscuring their faces. It’s not Donald Trump’s secret police. It’s not something out of a dystopian novel. It’s the very real culture of permissive violence exploding from today’s left. Bit by bit, this sort of behavior becomes quickly normalized (in the parlance du jour) and escalated.

  While there’s generally been blackout coverage of these “mostly peaceful” riots in the legacy media, every once in awhile something breaks through. Such is the case with the ever desperate Kathy Griffin’s latest sickening stunt. Griffin, who most people aren’t exactly sure why she is famous, posed for photos featuring the decapitated head of President Trump. Intended for an audience eager for more and more radical action, Griffin jumped over a big red line. Even CNN had to ask: did she commit a felony?

  Her too little, too late apology simply said she went “too far” rather than understanding the underlying crassness and danger her precedent sets. Griffin, who must appear on almost everyone’s “Top 10 Annoying Noncriminal People” (although the latter may change) list, traded vulgar coarseness for attention to a dying career. She said she asked the photographer to “take down the image” — as if that’s possible in the age of the internet. The only thing genuine in her drab statement was that it “wasn’t funny.” Understatement of the year.

  The real underlying question is why Griffin thought that such an odious action was acceptable in the first place. In the echo chamber of the modern left wing, it’s obvious. Where is the swift condemnation of the stunt by this “comedian?” Whataboutisms abounded, said one Twitter commentator with 217 followers — a random hillbilly once depicted a hanged President Obama!

  Some criticism came in from the left, including CNN’s Jake Tapper. He hosted a segment where — surprise, surprise, his panel said the network had better things to talk about than her. Considering the news network employs her for their New Year’s “I forgot to turn on Ryan Seacrest” snoozefest says enough.

  Will this incident live past this news cycle? Will there be solemn op-eds calling for “soul searching” among leaders of the Democratic Party for their tacit support of violent rhetoric and its predictable results? How many Seth Meyers and Stephen Colbert monologues will ridicule Griffin back into obscurity? Unfortunately, such questions are a waste of time. Even violence committed by that side of the aisle gets blamed on the White House.

  One of the rioters in Berkeley was finally arrested for assaulting a Trump supporter with a bike lock. Kellyanne Conway called on Democratic Party leaders to quell the rising violence among their supporters. Police again arrested violent protesters during the People’s Republic of Seattle’s May Day. Black clad antifa rioters assault and intimidate citizens and pro-Trump marchers.

  Meanwhile, if you turned on the mainstream media, you would think that President Trump was personally leading a campaign of violence from the left wing Oregon hipster district to the Montana congressional race.

  Take last week’s terrible attack on passengers in Portland. A mentally deranged man screamed at two Muslim women and slit the throats of their defenders. The media saw its narrative perfectly crafted. Except he was a Bernie supporting, Jill Stein voting, Trump hating maniac. The New York Daily News instantly declared Trump “ignored” the incident. The Huffington Post had to one up — or should I say 20-up them. Inverse said that Trump’s tweet condemning the attack didn’t even exist.

  I wrote about the issue two months ago — and it only seems to be getting worse. This isn’t some sort of game. It’s people’s lives and livelihoods played with to reach the front of TMZ or the Huffington Post. Heck, the latter said that violence was “logical” and apologized to … you guessed it, liberals.

  It’s not funny. It’s not edgy. It’s just wrong.

  Where does the atmosphere of delegitimizing an elected government and brushing violence under the rug get you? Well, it gets you this…

  

  

  

• China Manufacturing Contracts For The First Time In A Year: "The Economy Is Clearly On A Downward Trajectory"

  Following yesterday's official  (if less credible and focused mostly on SOEs) manufacturing and non-mfg PMI reports from China's National Bureau of Statistics, both of which came either in line or slightly better than expected, moments ago Caixin/Markit reported its own set of Chinese manufacturing data, and it was far more disappointing: at 49.6, not only did it miss expectations of 50.1, but by printing below 50, the operating conditions faced by Chinese goods producers deteriorated for the first time in nearly a year. As shown below, this was the first contractionary print sine last June when China's massive, anti-deflationary fiscal stimulus kicked in.

  

  The seasonally adjusted PMI posted below the neutral 50.0 value at 49.6 in May, the first contractionary print since the middle of 2016. Although only indicative of a marginal deterioration in operating conditions, Caixin conceded that the index fell from 50.3 to signal the first decline in the health of the sector for 11 months.

  The fall in the headline index coincided with slower increases in output and new orders, while staff numbers were cut at a quicker rate. Subdued demand conditions underpinned a renewed fall in purchasing activity, albeit only slight, and the first increase in inventories of finished items in 2017 so far. The latest data also signalled the first fall in input costs since last June, which in turn led manufacturers to lower their selling prices for the first time since February 2016.

  Commenting on the data, Dr. Zhengsheng Zhong, Director of Macroeconomic Analysis at CEBM Group said:

  “The Caixin China General Manufacturing PMI fell 0.7 points to 49.6 in May, marking its first contraction in 11 months. The subindices of output and new business stayed in expansionary territory, but both fell to their lowest levels since June last year. The subindices of input costs and output prices dropped into contractionary territory for the first time since June 2016 and February 2016 respectively. The sub-index of stocks of purchases signalled a renewed decline, while the sub-index of stocks of finished goods rebounded, indicating that companies have stopped actively restocking as inventories began to stack up. China’s manufacturing sector has come under greater pressure in May and the economy is clearly on a downward trajectory.”

  And while Chinese manufacturers reported a further rise in production during May, the pace of expansion was the weakest in the current 11-month sequence and only slight. Softer growth in output reflected a relatively muted increase in total new orders during May. Furthermore, growth in new order books was also the slowest seen since the current upturn began in July 2016. Data indicated that customer demand was relatively subdued both at home and overseas, with new export sales rising at a similarly marginal pace. Confidence towards the year-ahead meanwhile remained weaker than the historical average, with the degree of optimism unchanged from April’s four-month low.

  At the same time, employment continued on a downward trend, with the rate of job shedding picking up slightly for the third month running. Notably, it was the quickest decline in workforce numbers seen since last September. Lower staffing levels were partly linked to company down-sizing initiatives, but also the non-replacement of voluntary leavers. As a result, outstanding business increased again in May and at the fastest pace this year so far.

  Goods producers in China lowered their purchasing activity for the first time in 11 months in May, albeit only slightly. A number of panellists mentioned that weaker than expected sales had weighed on input buying. As a result, stocks of inputs declined and at the quickest pace since January. Subdued sales also contributed to a renewed increase in inventories of finished items.

  Although purchasing activity fell in May, average delivery times continued to lengthen. A number of panellists blamed longer lead times on stock shortages at vendors.

  Manufacturing companies reported the first decline in average cost burdens for nearly a year in May. The rate of reduction was marginal overall, and widely linked by respondents to lower raw material prices. Firms generally passed on any savings to clients, by cutting their output charges for the first time since February 2016.

  The FX market reacted swiftly with AUDUSD gains being erased…

  

  And Offshore Yuan erasing early losses and pushing to new highs…

  

  * * *

  None of this should come as a surprise: back in February we showed that, as a result of China's deleveraging measures, the global credit impulse had suddenly tumbled back to zero.

  

  And since that is a 3-4 month leading indicator, it was only a matter of time before China's economy reverted back into contraction, as the latest PMI data now confirms.

  

  

• Why Carson Block Sees "Real Problems With Canada"

  Less than a week after declaring that China’s economy is headed for an economic “day of reckoning” thanks to its twin asset bubbles (real estate and equity), short-seller Carson Block said he’s starting to believe there are “real problems with Canada” – particularly the country’s dangerously overvalued housing market.

  Block discussed Canada's housing market with a Bloomberg reporter who called him for comment after shares of Element Fleet Management, a Toronto-based leasing company, plunged 38% on unfounded speculation that the famed short-seller had chosen the company as his next target. Shares of troubled home lender Home Capital Group also dipped in early trade.

  Block told Bloomberg that the action in those two stocks suggests Canadians are (rightfully) nervous about soaring real estate prices and household debt…

  “I’m starting to believe that there could be some real problems with Canada,”

  Though Block said he hadn’t heard of Element before Wednesday, the run on Home Capital Group’s deposits in recent weeks suggests that “investors denial is just starting to crack.” HCG is being drained of assets at an unprecedented pace – already 94% of retail deposits have fled the troubled lender – and the company has erased more than half of its market capitalization since a Canadian regulator accused it five weeks ago of misleading investors over an internal probe of fraudulent mortgage loan applications – a practice that bears some resemblance to US mortgage lenders’ reliance on “liar loans,” which helped inflate the subprime bubble.

  

   

  

  “Particularly given what happened to Home Capital in recent weeks I kind of wonder if Canadian investors are really nervous about the stuff that they’re holding and that’s why there was so much sensitivity around Element this morning," Block said.

   

  “When I see a reaction like we saw to a stock that I had never heard of because people were evidently concerned that we were about to short it, that tells me that maybe we’re at a point in Canada where investor denial is just starting to crack,” he said.

  Block told Bloomberg that Canada’s real estate market has “been pushed by foreign money” to the kind of “buying frenzy” the U.S. experienced a decade ago.

  A frenzy of buying by wealthy Chinese nationals seeking to store their wealth outside of China has helped push Canadian home prices in certain markets to levels that are obviously unsustainable and well beyond the means of most Canadian citizens.

  Even Bank of Canada Governor Stephen Poloz acknowledged as much earlier this month when he remarked that Toronto home prices “were not sustainable” while answering questions following a speech in Mexico City.

  Block told Bloomberg about a visit to Toronto in 2011, when he said he was stunned to see posters throughout Toronto’s financial district encouraging people to borrow aggressively for consumption.

  “I was thinking, my God, didn’t we just go through this in the U.S.?”

  Meanwhile, there is a prevailing sense in Canada that the situation is different, and the collapse experienced by the U.S. in 2008 couldn’t happen here, he told Bloomberg.

  “Every time you hear that, you know that it can happen, and it’s going to.”

  Block concluded ominously…

  "The conditions seem to exist for there to be some pain inflicted on the markets. That suggests that Canada is the hottest market in the world for short sellers; if not, it could be."

  After a more than five-year break from shorting Canadian companies, Block announced Monday that he is shorting Asanko Mining Inc., saying that production problems at the company's largest mine will likely force the company into bankruptcy in 2018.

  

  True to form, Block explained his reasoning for shorting the stock in a 43-page research report published Wednesday, then summarized its contents during an appearance on Canada’s Business News Network. The notorious short seller believes the Vancouver-based mining company will run out of money in 2018 as it struggles to make urgent repairs at its main asset, the Ghana-based Nkran gold mine, while also serving its $165 million debt load.

  “We think Asanko is on its way to zero,” Block said during the interview.

   

   

  

  

• Globalists Are Building An Army Of Millennials To Destroy Sovereignty

  Authored by Brandon Smith via Alt-Market.com,

  

  Back in October of 2016 I covered an issue which I have been very concerned with for over a year now. In an article titled Global Elites Are Getting Ready To Blame You For The Coming Financial Crash, I outlined the basis for my belief that Donald Trump would win the U.S. election and why the U.K. Brexit was allowed to meet with success. Here is a quote from that article to give you a general sense of my position:

  “I argue that the Trump tapes will be forgotten in a week and that they have no bearing whatsoever on the election. They are nothing more than bread and circus. Beyond the fact that really, almost no one cares what Trump said a decade ago. I argue that this election has already been decided. I argue that the globalists want Trump in office, just as they wanted the passage of the Brexit. I argue that they need conservative movements to feel as though we have won, so that they can pull the rug out from under us in the near future. I argue that we are being set up.

   

  Again, the elites are openly telling us what is about to happen. They are telling us that if ‘populists’ (conservatives) gain political power, the system will effectively collapse. To what extent is hard to say, but let’s assume that the situation will be ugly enough to influence the masses to reconsider the ideal of globalism as a possible solution. The elites are fond of the Hegelian dialectic and the philosophy of ‘order out of chaos,’ after all.”

  While Trump did indeed go on to “win” the presidency, I still believe that the basic foundation underlying my prediction has mostly fallen on deaf ears. There is a disconnect in terms of the globalist long game in people’s minds. I think it is because many in the public do not consider the effects of geopolitical events on mass psychology. Or, to be more precise, many people, even in the liberty movement, forget that the ultimate goal of the globalists is not just to corrupt governments and monetary systems, but to corrupt our collective mindset.

  As a perfect example, I will link to the latest globalist lunacy from the Pope, Jorge Bergoglio, in which he attacks libertarianism (true conservatism) as a dangerous form of individualism that threatens the fabric of the new and more progressive collectivist world.

  In terms of Western culture, recent events would indicate that globalists hope to enlist the newest generation to reach “maturity” (and I use that term loosely), the millennials, as a weapon to deal the death blow to conservatism. If not directly, then indirectly through propagation.  That is to say, if the globalists can’t kill us off immediately, they will try to breed us and our ideas out after bringing down the hammer of economic and social crisis.

  When I discuss what essentially amounts to a “war on conservatism,” what do I mean? Well, first let’s consider what it is about conservatives that presents a threat to the globalists…

  Limited Government

  The basic core of conservative thought rests on the concept of limited or small Constitutional government. If you don’t believe in small government, you are not a conservative. Big (and centralized) government is the most vital tool in the hands of globalists. Without it, they would not be able to accomplish a single item on their agenda.

  Big government requires big money. Thus, the central banking syndicate becomes “necessary” to the life of the nation or society because they have positioned themselves to provide the financing and fiat that greases the big government wheels. In a limited government system, central banking becomes irrelevant. It is therefore essential that globalist financiers diminish or destroy conservative principles of limited government because they represent a primal threat to the interdependent behemoth system they hope to create.

  Sound Money

  True conservatives are sound money champions. This principle fell by the wayside for many decades but has made a resurgence since 2008 as more people have been awakened to the failings of central banking and fiat money. Sound money is basically money backed by a tangible commodity, money that cannot be created out of thin air. If it can be created out of thin air, it is not sound money.

  Obviously, the very existence of a true sound money movement horrifies the globalists. Without fiat printing or digital currency systems (which can be created and re-created ad infinitum), the future of a global currency system, the pinnacle goal of the globalist economic scheme, is all but impossible.

  Free Thought And Free Expression

  If you are in the business of controlling the thoughts and opinions of other people, then you are not a conservative. This is where we find distinct misconceptions, by liberals most of all, as far as what free expression is.

  For conservatives, this means that if you are in a publicly funded space or on private property with permission of the owners, you should have the right to say whatever you like whenever you like (this includes so-called "hate speech", millennials and liberals). You should be able to make grievances known and to discuss those grievances in a constructive manner. It does not matter if your thoughts are offensive to some people; their feelings are meaningless compared to your freedom to speak in that space.

  Leftists seem to think that freedom of expression means being allowed to invade the sanctity of other people’s private property or invade a public gathering with the intention of disrupting the free speech of others that they disagree with. My favorite argument presented by leftists is their argument that liberty proponents cannot kick them out of events or off of websites because “that would be a violation of our own principles and their free speech.” They don’t seem to understand the different between private and public or destructive and constructive. My other favorite argument leftists often use is their argument that it is an act of free speech when they disrupt other people’s free speech.

  Hopefully you can see the difference between the two ideals. Leftists today seek to control speech and expression they see as “aberrant” or “evil.” Conservatives defend everyone’s right to speak as long as they respect the nature of the property they are standing on and do not abuse the owners of that property — this includes taxpayers, the owners of public property.

  Freedom Of Association

  This is a very simple and straightforward liberty that has all but been crushed in our country today. Conservatives have this crazy idea that you should not be forced by government to associate with people you do not want to associate with. It does not matter why you don’t want to associate with them. The “why” has no bearing whatsoever. We feel that logic should dictate the situation. If you don’t want to associate with someone, why would they want to associate with you?

  But, for some reason, certain people within our culture and within government believe that denying anyone association is discrimination, and, in a progressive and interdependent society, discrimination is unacceptable. I happen to think the ability to discriminate on an individual level is necessary to a healthy society. Discrimination only becomes dangerous when it is backed by government power.

  The Right To Self Defense

  Many people are so disconnected from their own survival that the notion of “self defense” is alien and terrifying to them. They pay taxes so that “professionals” can handle their security for them, after all. Why should they need the means to secure themselves and their loved ones?

  Well, what if the professionals you pay taxes for suddenly turn on you? Or what if they simply quit en masse one day? What if your attacker is 60 seconds from harming you and the closest law enforcement officer is six minutes away? In a conservative society, EVERYONE acts as security for themselves and others if needed.

  Globalists need to encourage a culture in which the population is always reliant on government for everything, including their own safety. The most effective form of control comes not through force, but through permission. The most successful tyranny is the one that the people demand rather than the one people barely tolerate.

  Sovereignty

  All of these principles coalesce into the root principle of sovereignty — the inborn right to self determination. This might take the form of individual action or voluntary group action based on the freedom of association. A single person might seek to live on his own away from others in his own way, and he absolutely has the right to do this even if it annoys people for whatever crazy reason. A large group of people also have the right to cooperate, to build a system or even a nation based on a particular set of shared values and to have their borders respected or avoided by those with different values.

  Conservatism, at least in its traditional form, is the vanguard of sovereignty. Without conservatives, sovereignty dies.

  *  *  *

  Now that we have briefly summarized the conservative archetype, consider for a moment the predominantly progressive millennial generation; what values do they hold? This is not to say that all millennials think the same way, but what about the majority? In 10 years, what would a country like the U.S. look like when they move into power?

  The statistics indicate that the U.S. would be even more socialist than it is today, bordering on communist. A paradise for pushing forward the globalist agenda.

  When you take into account the fact that Bernie Sanders, a staunch socialist with Marxist tendencies, garnered more support from young voters during the last election than both Clinton and Trump combined, you can see the problem here. Sanders enjoyed nearly 80 percent of the millenial vote in many states, and this tends to correlate with what we have seen in other western nations such as the U.K., where over 70 percent of the young vote was AGAINST the Brexit campaign to leave the globalist EU project.

  Also take into account the establishment push to instill millennial academia with open borders propaganda.  In this article for the Washington Post, the president of George Mason University in Northern Virginia argues that open borders are the source of "innovation" and a better economy.  Open borders philosophy cannot coexist with sovereignty.  Sovereignty being a foundation for individualism and nationalism; open borders being a foundation for forced collectivism and a one world system.  For open border ideology to continue forward, all sovereignty must be eliminated.

  Here we find the socialist entrenchment within the younger population. To question its validity among them is simply not done. Through most of Europe, for example, to even describe one’s self as “conservative” is considered highly taboo. Many sovereignty activists there will instead list themselves as “classical liberal” (conservatives).

  In the U.S., the last true bastion of hardcore conservatives, there is a little more hope as Generation Z teens are showing signs of a conservative resurgence and a little more sense than their older millennial brothers and sisters. This is why I believe the globalists are focusing on the millennial subset; the millennials experienced the American world when they were children at its height pre-2008 and conjured grand dreams of career, success and technological ease. After the crash and subsequent end of college degree relevancy, they now feel jilted and put upon. Clearly “free markets” are the culprit and revolution is the answer.

  Generation Z is growing up in the new and downtrodden economic landscape. They are accepting that harder work is necessary and that more freedom is paramount instead of demanding that entitlements be given to them. So, it would appear that the the globalists have a small window of time to stage a coup against conservative philosophy, install a new millennial generation as the captains of the ship and discourage Generation Z from continuing on the path towards what they consider a "terrible and ignorant" world view.

  If you think that perhaps I am exaggerating the gravity of the situation, or that I am applying too much conspiracy to an otherwise random social development, I would like to cite Facebook mogul and globalist cabana boy Mark Zuckerberg, who in a recent speech to Harvard graduates asked them to “fight isolationism and nationalism” which he equated with “authoritarianism” and to support “openness and global community.”

  “This is the struggle of our time. This is not a battle of nations, it is a battle of ideas,” Zuckerberg stated.

  Zuckerberg’s rant is just the most recent example of this propaganda in action. As I have been warning, the globalist strategy is to destroy opposing ideas, not just opposing groups. And clearly, they want to exploit the millennials to do just that.

  

  

• Tucker Carlson Discusses Hillary Clinton's Recent Russian Conspiracy Theories

   

  Content originally published at iBankCoin.com

   

  Ever since the election, the democrats and establishment republicans have been ‘investigating’ Russian ties to Trump and how that all led to John Podesta’s email box to be hacked into, which of course led to Hillary Clinton losing the Presidential election. She lost, not because of her criminality, but because of fake news, obviously. It’s worth noting, in a year of arduous investigations, nothing has been proven to tie Trump to the Russians.

  Yesterday, Hillary discussed the election, positing questions to the panel regarding RUSSIAN COLLUSION with Trump. She said Trump directed the release of the Podesta emails down to the second, coordinated and directed the fake news media to concoct salacious stories, fueled by the emails, colluding with Russian intelligence to steal the election from her.

  In case you’re just tuning in, you did not reject the DNC establishment candidate and vote for populism because you were sick and tired of the same old corrupt DC bullshit. No, you voted for Trump because of the Russians, the ultimate King makers, coerced into the decision via a series of psyops programs, coordinated with Trump, to brainwash people into believing she was not a trustworthy candidate.

  Holy shit Hillary has lost her mind. Tucker’s take.

  Here are some of her sweeter moments in the interview, accusing the idiot Giant Orange President of being a criminal mastermind — directing endless schemes and plots to seize the Presidency from her claws.
   

  “It’s important that Americans…understand that Putin wants to bring us down. He was an old KGB agent.”
   
  “We saw evidence of [Russian involvement] and we could track it. But they were shooed away.”
   
  “The Russians are increasingly..launching cyber attacks. A lot of the information they’ve stolen they use for internal purposes. So this was different because they went public.”
   
  “That was the conclusion. I think it’s fair to ask how did that actually influence the campaign and how did they know what messages to deliver. Who told them? Who were they coordinating with or colluding
  with? I’m leaning Trump.”
   
  “Within one hour of the Access Hollywood tapes being leaked, the Russians or say Wikileaks — same thing — dumped the John Podesta emails.”
   
  “The Russians in my opinion could not have known how best to weaponize that information unless they had been guided by Americans.”
   
  “My email account was turned into the biggest scandal since Lord knows when. And, you know, in the book I’m just using everything that anybody else said about it besides me to basically say this was the biggest nothing-burger ever. It was a mistake. I’ve said it was a mistake, and obviously if I could turn the clock back I wouldn’t have done it in the first place. But the way that it was used was very damaging.”
   
  “We know it hurt us, as I explain in my book, the Comey letter which was now we know partly based on a false memo from the Russians. It was a classic piece of Russian disinformation. So for whatever reason, he dumps that on me on October 28 and I immediately start falling.”
   
  “Well if you went all the way back, doing things that others have done before was no longer acceptable. I didn’t break any rule nobody said don’t do this. I was very responsible and not at all careless. You end up with a situation that was exploited.”
   
  “Here’s a really telling statistic that has been validated. I had this old fashioned idea that it would matter what I would do as president. We had a great tech program and a really good set of policies. In 2008 which as the last time you had a contested election, the policies put forth by President Obama, Senator McCain got 222 minutes of airtime. In 2016 despite my best efforts, we got 32 minutes, total, over 18 months.”
   
  “Media forces on the Republican side are entrenched and very effective. They’re beginning to call the shots on those local stations. Local TV is still incredibly powerful.”
   
  “I have been on many speaking platforms with many men who are in office or running for office. And the crowd gets you going and I watch my male counterparts and they beat the podium and they yell and the crowd loves it. I have tried that and it’s been less than successful.”

   
  Regarding her Goldman Sachs speeches.
   

  “Men got paid for the speeches they made…I got paid for the speeches I made.”
   
  “I have to say, Walt I never thought someone would throw out my entire career…because I made a couple of speeches.”

  There you have it. The emails were giant ‘nothing-burgers’ that were attained by an evil genius, criminal, mastermind, named Donald Trump, with the help of the inherently evil Vlad Putin (how many Americans has Russia killed lately?). She lost thanks to a vast right wing conspiracy of media shills at the NY Times and other publications who wanted to see Trump elected.
   
  What.the.fuck?

  Notable: Trump is back to ‘Crooked Hillary’ again.

  Crooked Hillary Clinton now blames everybody but herself, refuses to say she was a terrible candidate. Hits Facebook & even Dems & DNC.

  — Donald J. Trump (@realDonaldTrump) June 1, 2017

  //platform.twitter.com/widgets.js

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• NATO Recoils From Trump Spending Salvos

  Authored by Finian Cunningham via The Strategic Culture Foundation,

  

  When US President Donald Trump addressed the opening of the NATO summit last week, it was an embarrassing display of American bullying. As Trump lectured the other leaders of the military alliance about laggardly financial commitments, there was much shuffling of feet and grimacing of faces. There were also contemptuous smirks as the president spoke.

  Speaking outside the new North Atlantic Treaty Organization headquarters in Brussels, Trump declared that many members «owed» the US a lot of money for their defense. He said it was unfair to American taxpayers that only five out of 28 current NATO members meet an agreed target of allocating 2 per cent of GDP to military spending.

  At a photo-op line-up, Trump was seen to push Montenegrin Prime Minister Dusco Markovic out of the way in order to get himself into a prime front row position. The fleeting moment spoke volumes of the American view of fellow NATO members.

  It was Trump’s first meeting of the US-led military alliance since his inauguration four months ago. During his presidential campaign, Trump derided the organization as «obsolete». After becoming president, he kind of retracted that complaint to civilian titular head Jens Stoltenberg at a meeting in Washington, when Trump performed a typical U-turn and said he no longer considered NATO obsolete.

  Other senior Trump administration officials have sought to repair the damage to relations by making earnest statements on American commitment to NATO. Vice President Mike Pence and Secretary of Defense General James Mattis have described the alliance as a bedrock of American policy.

  Trump’s debut in Brussels last week, however, has renewed the strains within NATO. His incessant demand for other members to cough up is aggravating relations – particularly between the US and Germany. His address in Brussels sounded boorish and ill-informed. Trump’s omission to pledge American commitment to «shared defense» under NATO’s Article 5 – as all US presidents customarily do – was also seen as another sign of Trump playing hardball.

  Nick Burns, a former US ambassador to NATO under George W Bush, told American news channel CNN that he was «stunned» by Trump’s speech.

  «This is the first president since 1949 not to mention Article 5. Every president has reaffirmed collective defense and today was the day for him to do it», said Burns, adding: «I support him on asking allies to spend more on defense. But there is a time and a place. And this wasn’t it. The lecture was the wrong tone and this was the wrong time».

  Trump has previously hinted that the US would not automatically come to the defense of other NATO members because of their relatively low financial contributions. That he again pointedly omitted mention of Article 5 in Brussels will unnerve some NATO members, particularly the Baltic states and Poland, who claim they are threatened by Russia, despite Moscow’s repeated assurances that it has no aggressive designs on Europe.

  Also of note, Trump cited terrorism as the main threat facing NATO. He did mention Russia as a security challenge in a perfunctory sort of way, but it was noticeable that the American president did not appear to view Moscow as an existential threat. That will further unnerve «Russophobes» within NATO.

  The frosty meeting in Brussels was in stark contrast to Trump’s glad-handing with Saudi and other Arab leaders days before. He kicked off his inaugural official foreign trip by first of all visiting Saudi Arabia during which Trump signed a $110 billion arms deal (part of a larger $350 billion sale over 10 years.)

  The same ballpark figure cropped up again later during Trump’s tetchy speech to NATO members. He said that if all members who do not currently meet their 2 per cent of GDP spending commitment were to do so then that would generate $119 billion in military allocation per year. Much of that extra cash would go directly into the US economy in the form of new orders for F-16 and F-35 fighter jets, Abrams tanks, Patriot anti-missile systems and other Pentagon-contracted hardware.

  It seems clear that the main purpose of Trump’s meet-and-greet the world tour was to drum up as much business as possible for US military industry. No wonder he was effusive in his praise for Saudi and Arab leaders when they were writing such mega checks for American weapons. Not so in Europe, where Trump evidently feels most of the NATO members are cheating the US out of tens of billions of dollars every year from their allegedly feckless commitment to defense.

  Has Trump got a point though? That is, are the European members of NATO are freeloaders on American chivalry? It’s not just Trump who thinks that way. His predecessor Barack Obama also griped about «freeloaders» not pulling their weight. There is a general American conception that its military presence in Europe and elsewhere around the world is a chivalrous act of protection, which countries should pay more for. Trump just happens to articulate this view in an unvarnished, gruff manner.

  NATO’s 2 per cent of GDP target is an arbitrary guideline. It is not binding. Each member spends on a separate national basis. There is no collective fund and there are no debts to others from those members who do not spend 2 per cent of GDP on military.

  It is true that the US is way and above the highest NATO military spender, allocating around 3.6 per cent of GDP annually – well over $600 billion. That represents over 70 per cent of the entire NATO budget.

  This compares with relatively low-spending Germany on 1.2 per cent of GDP, Italy on 1.1 per cent and the Netherlands on 1.2 per cent. Ironically, Belgium, which hosts the NATO headquarters, spends less than 1.0 per cent of GDP on military. These countries argue that they allocate a lot more than the US to overseas development aid in Africa and the Middle East, thereby addressing security concerns in a broader, civilian way other than narrow military terms.

  Only five members of NATO meet the arbitrary 2 per cent target: US, Britain, Greece, Poland and Estonia.

  But the gargantuan US spend is more a reflection of its economy being heavily dependent on a military-industrial complex, than on any supposed noble commitment to defending allies.

  Trump’s tour of the Middle East and Europe – while billed by the White House as a peace-building itinerary – was all too evidently really about pushing America’s military industry and global exports of US weaponry.

  By doing so, Trump is recklessly adding fuel to an already explosive Middle East. And on relations with Europe, the US president is acutely straining relations with his petulant, unfounded demands that they pay up more for NATO, and in effect subsidize the American economy.

  This will lead to further deterioration in relations between Washington and its European allies, especially Germany. Trump has castigated Germany as being not only a laggard in defense spending (a freeloader) but also exploiting the US consumer market with trade surpluses.

  Trump’s abrasive attitude to other NATO members last week brings out the real nature of the US relationship. The so-called alliance is really just a spending vehicle for the American economy. In these austere global times, such American bullying will only chafe on the Europeans. This will in turn reinforce calls already underway for an independent EU defense pact, separate from NATO, and possibly led by Germany and France.

  

  

• A Voice Of Reason Speaks Regarding "The New Cold War"

  Authored by Mike Krieger via Liberty Blitzkrieg blog,

  Last week was interesting for me. I spent about half my time getting up to speed with the latest happenings in the crypto-coin world, and got really excited about a lot of what I saw. In fact, this was the first time I became totally consumed by the space in several years, going back to when I first investigated and started becoming involved with Bitcoin.

  What really caught my attention is the booming ICO market, and while it’ll invariably produce its fair share of total scams, I find it nonetheless captivating. I’m attracted to its dynamic wild west spirit, as well as its capacity to function as an alternative funding mechanism for startup projects utilizing a wider participatory structure consisting of anyone with a bit of crypto currency and a high-risk tolerance. It’s an entirely new experimental ecosystem funded by crypto currencies (mostly ethereum, but also bitcoin). It’s pretty mesmerizing (for more see: A New Financial System is Being Born).

  Spending so much time on this esoteric world kept me away from following U.S. politics as closely as I typically do, which was a great thing.

  

  The level of discourse from nearly all sides of the political spectrum has turned so toxic, divisive, hysterical and counterproductive, leaving that environment for several days made me feel great, as if I had taken a vacation from idiot island. As such, today I once again decided to spend some time reading up on the crypto-coin space and getting further up to speed on ICOs and how they work. That said, I realize I still need to pay attention to the crazy happenings in the wider world around me, so I thought I’d share an interview with a rarity in today’s political discourse, a voice of reason.

  What follows are excerpts from a Slate  interview with Stephen F. Cohen, professor emeritus of Russian studies and politics at NYU and Princeton:

  Stephen F. Cohen has long been one of the leading scholars of Russia and the Soviet Union. He wrote a biography of the Bolshevik revolutionary Nikolai Bukharin and is a contributing editor at the Nation, which his wife, Katrina vanden Heuvel, edits and publishes. In recent years, Cohen has emerged as a more ideologically dexterous figure, ripping those he thinks are pursuing a “new Cold War” with Russia and calling for President Donald Trump and Russian President Vladimir Putin to form “an alliance against international terrorism.” Cohen has gone so far as to describe the investigations into the Trump campaign and Russia “the No. 1 threat to the United States today.”

  Cohen has been criticized by many people, myself included, for his defenses of Putin. (He once said the Ukraine crisis had been “imposed on [Putin] and he had no choice but to react.”) He scolded President Barack Obama for sending retired gay athletes to Sochi and recently went on Fox News to speak up for Trump’s war against leakers.

  I spoke by phone with Cohen, who is also a professor emeritus of Russian studies and politics at NYU and Princeton and the author of Soviet Fates and Lost Alternatives: From Stalinism to the New Cold War. During the course of our conversation, which has been edited and condensed for clarity, we discussed why Cohen won’t concede that the Democratic National Committee was hacked, whether it’s fair to call Putin a murderer, and why we may be entering an era much more dangerous than the Cold War.

   

  I heard you recently on Fox News. You said that the “assault” on President Trump “was the No. 1 threat to the United States today.” What did you mean by that?

   

  Threat. OK. Threat. That’s a good word. We’re in a moment when we need an American president and a Kremlin leader to act at the highest level of statesmanship. Whether they meet in summit or not is not of great importance, but we need intense negotiations to tamp down this new Cold War, particularly in Syria, but not only. Trump is being crippled by these charges, for which I can find no facts whatsoever.

   

  Wait, which charges are we talking about?

   

  That he is somehow in the thrall or complicity or control, under the influence of the Kremlin.

   

  I think it would help if he would admit what his own intelligence agencies are telling him, that Russia played some role in …

   

  No, I don’t accept that. I don’t accept that at all, not for one minute.

   

  People in the Trump administration admit this too.

   

  Well they’re not the brightest lights.

   

  And the president is?

   

  No. You didn’t ask me that. You asked me, you said, some of the president’s people. You’re referring to that intel report of January, correct? The one that was produced that said Putin directed the attack on the DNC?

   

  I was referring to that and many news accounts that Russia was behind the hacking, yes.

   

  The news accounts are of no value to us. I mean you and I both know …

   

  No value? None?

   

  No. No value. Not on face value. Just because the New York Times says that I don’t know, Carter Page or [Paul] Manafort or [Michael] Flynn did something wrong, I don’t accept that. I need to see the evidence.

   

  OK, let’s just go back to what you were saying about Trump being hamstrung.

   

  You need Trump because he’s in the White House. I didn’t put him there. I didn’t vote for him. Putin’s in the Kremlin. I didn’t put him in the Kremlin either, but we have what we have, and these guys must have a serious dialog about tamping down these cold wars, which means cooperating on various fronts. The obvious one—and they already are secretly, but it’s getting torpedoed—is Syria.

   

  So we come now with this so-called Russiagate. You know what that means. It’s our shorthand, right? And Trump, even if he was the most wonderfully qualified president, he is utterly crippled in his ability to do diplomacy with the Kremlin. So let me give you the counterfactual example.

   

  Imagine that Kennedy had been accused of somehow being, they used to accuse him of being an agent of the Vatican, but let’s say he had been accused widely of being an agent of the Kremlin. The only way he could have ended the Cuban Missile Crisis would have been to prove his loyalty by going to nuclear war with Russia. That’s the situation we’re in today. I mean Trump is not free to take wise advice and use whatever smarts he has to negotiate down this new and dangerous Cold War, so this assault on Trump, for which as yet there are zero facts, has become a grave threat to American national security. That’s what I meant. That’s what I believe.

   

  To use your Kennedy example, there was no evidence that Kennedy was an agent of either the Vatican or the Kremlin—

   

  No, but Isaac you’re not old enough to remember, but during the campaign, because he was the first Catholic, they all went on about he’s an agent of the Vatican.

   

  I know that. I’m old enough to have read “news accounts” of it. Anyway, there was a hacking of the DNC and—

   

  Wait actually no, Isaac stop. Stop. Now, I mean we don’t know that for a fact.

   

  That there was a hacking of the DNC?

   

  Yeah we do not know that for a fact.

   

  What do we think happened?

   

  Well …

   

  So you’re really going to argue with me that the DNC wasn’t hacked?

   

  I’m saying I don’t know that to be the case.

  OK.

   

  I will refer you to an alternative report and you can decide yourself.

   

  Can we agree on this much at least: that Trump said there was a hack, refused to say who he thought did it, encouraged the hackers to keep doing it, at the same time that he was getting intelligence reports that it was the Russians, and that he continued to talk very positively about Putin after he was told this?

   

  You’ve given me too many facts to process, but if Trump said he knew it was a hack, he was not fully informed. We just don’t know it for a fact, Isaac.

   

  So we don’t have any forensic evidence that there was a hack. There might have been. If there was a hack, we have no evidence it was the Russians, and we have an alternative explanation that it was actually a leak, that somebody inside did a Snowden, just stuck a thumb drive in and walked out with this stuff. We don’t know. And when you don’t know, you don’t go to war.

   

  Let’s turn to Putin and America. Why do you think we have entered a new Cold War?

   

  My view is that this Cold War is even more dangerous. As we talk today, and this was not the case in the preceding Cold War, there are three new fronts that are fraught with hot war. You know them as well as I do. The NATO military build-up is going on in the Baltic regions, particularly in the three small Baltic countries, Poland, and if we include missile defense, Romania. That’s right on Russia’s border, and in Ukraine. You know that story. That’s a proxy civil war right on Russia’s border, and then of course in Syria, where American and Russian aircraft and Syrian aircraft are flying over the same airspace.

   

  And there is the utter demonization of Putin in this country. It is just beyond anything that the American political elite ever said about Khrushchev, Brezhnev, and the rest. If you demonize the other side, it makes negotiating harder.

  In 2017, being a voice of reason has become a revolutionary act.

  

  

• Emerging Markets Are Not All Created Equal

  For most investors, targeting foreign countries where there are high expectations for growth is a useful strategy.

  After all, in the United States, Canada, and Europe, economies are mostly growing at about 2% or less per year. And while these developed markets are less risky to invest in, finding value can be tricky.

  That’s why, as VisualCapitalist's Jeff Desjardoins notes, for many decades, investors have been allured by the fast growth of far-off economies. In the 1950s and 1960s, Japan’s economy regularly expanded at a 10%+ clip, and who can forget the “Four Asian Tigers” that followed in Japan’s footsteps? In the 2000s, the focus shifted to the BRICS (Brazil, Russia, India, China, South Africa) – and more recently, attention has been on countries like Indonesia, Nigeria, Colombia, and Turkey.

  DIFFERENT RISKS IN EMERGING MARKETS

  Although emerging markets are similar in that they have high expectations for growth, it’s important to remember that these countries have very unique and different sets of risks.

  Today’s visualization comes to us from Charles Schwab, and it provides a simple breakdown of the types of risks faced by the economies of emerging markets:

  

  Courtesy of: Visual Capitalist

  As an example, Mexico and Chile have considerably different risks, according to the chart.

  Aside from currency risk, which they both share, Chile is particularly prone to sensitivity in the world’s commodity markets. That makes sense, because Chile is the world’s largest supplier of copper – and close to 50% of the country’s exports are copper-related, including refined copper (22.6%), copper ore (20.9%), raw copper (3.6%), and copper wire (0.5%).

  On the other hand, Mexico is noted as having particular sensitivity to what happens in developed markets such as the United States. This is because 81% of Mexican exports go to the U.S., while the next biggest buyer of Mexican goods is Canada at 3% of exports. If the buying power of the U.S. and Canada is affected, it could have big consequences on what will be bought from Mexico.

  

  

• CNN Host Fareed Zakaria Destroys 'Tolerant' Liberals: "Freedom Of Speech Is Not Just For Your Warm Fuzzy Ideas"

  Authored by Mac Slavo via SHTFplan.com,

  The alternative media has, for good reason, slammed CNN time and again for fabricated news stories, untruths and left-leaning propaganda.

  But the following opinion report from CNN’s Fareed Zakaria is a must-watch, as it touches on the very core of the purported tolerance among liberals.

  

  As progressive Evergreen State College professor recently stated in an interview after demands by social justice warriors that he be fired for racism, “I am troubled by what this implies about the current state of the left.”

  While America’s White Left believes their policies of socialism, cultural assimilation and outright disdain for anything other than their own righteous ideologies are the only way forward, Zakaria succinctly explains that it goes against the whole idea of what Liberalism is supposed to be.

  American universities these days seem committed to every kind of diversity except for intellectual diversity… Conservative voices and views, already a besieged minority, are being silenced entirely… The campus thought police have gone after serious conservative thinkers like Heather McDonald and Charles Murray, as well as firebrands like Milo Yiannopoulos and Ann Coulter…

   

  Some were dis-invited… others booed interrupted and intimidated…

   

  It’s strange that this is happening on college campuses that promise to give their undergraduates a liberal education… the word ‘liberal’ in this context has nothing to do with today’s partisan language… but refers instead to the Latin root ‘pertaining to liberty’

   

  And at the heart of the liberal tradition in the Western world has been freedom of speech… from the beginning people understood that this meant protecting and listening to speech with which you disagreed.

   

  …

   

  Freedom of speech and thought is not just for just warm fuzzy ideas that we find comfortable… it’s for ideas that we find offensive.

   

  …

   

  There is also an anti-intellectualism on the left… an attitude of self righteousness that says we are so pure, so morally superior, we cannot bear to hear an idea with which we disagree.

   

  Liberals think they are tolerant, but often they aren’t.

   

  "Liberals think they are tolerant, but often, they aren't," argues @FareedZakaria https://t.co/0urfK127Z3

  — CNN (@CNN) May 28, 2017

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  The left is so intolerant of other ideologies that it is only a matter of time before their refusal to accept differences among cultures, races and creeds fractures their entire chaotic movement.

  We are literally at a point where wearing red, white and blue is considered blatant racism in some circles.

  Soon, like rabid animals, their intolerance will be the very catalyst that drives them to turn on each other.

  

  

• Steve Cohen Hoping To Raise $20 Billion For Re-Launch Of SAC Capital

  Steven Cohen is hoping to raise $20 billion for a new fund he plans to launch soon after his ban on managing outside money expires in January 2018, the Wall Street Journal reports.

  If Cohen is successful, it would be the largest hedge-fund launch on record. The sum would exceed the $16 billion his former firm, SAC Capital, managed at its peak – before the Securities and Exchange Commission forced him to shut it down and accept a four-year ban from the industry. Though, as WSJ notes, most – if not all – of Cohen’s $11 billion family fortune would likely be rolled into his new fund.

  

  Raising such a sum would be “a show of resilience for the Wall Street veteran after years of legal fights,” The WSJ said. Government investigators eventually convicted eight of his former employees of securities fraud, but Cohen himself escaped prosecution.

  But even if Cohen succeeds in meeting his target raise, it’s difficult to imagine how he’ll replicate his past market-beating performance without relying on some of the same tactics that initially attracted the Feds’ attention.

  If his family office's recent returns are any indication, his fund might not be able to manage anything more than treading water.

  

  As WSJ reports: Mr. Cohen, 60, has been overseeing his $11 billion family fortune at Point72 Asset Management LP, a 1,000-employee operation in SAC’s former Stamford, Conn., offices where Mr. Cohen’s desk sits at the center of the trading floor. While Point72 has made money since becoming a family office, last year its overall investment performance was roughly flat, Mr. Cohen’s second-worst ever annual showing, people familiar with the matter said.

  To that end, Cohen is planning something that would've been "unthinkable" at SAC: He's considering lowering his fees, which once totaled as much as 3% of assets and half of all profits. Cohen's success would be notable not just for him, but for the industry as a whole, which suffered tens of billions in outflows last year.

  Last year, hedge fund investors pulled more than $70 billion, the industry’s highest annual outflow since the crisis.

  Cohen's quest for outside capital has already lead him back to the high-society circuit.

  As WSj reports, he appeared at a gala to benefit Lincoln Center in January. And during a visit to SALT last month, Cohen “hosted a private dinner for staff and industry executives and attended closed-door events with speakers and sponsors including onetime rivals like hedge-fund manager Daniel Loeb, people familiar with the matter said."

  

  

• Amazon is Now Worth More Than Every Store in the Mall Combined

   

  Content originally published at iBankCoin.com

   

  Everyone knew Amazon was crushing retail, dating back at least a decade. But for some reason, very few went through with the easiest pair trade of all time — long AMZN, short shopping mall operators. What a simple, yet brilliant, trade. Is it not?

  Here’s an old market cap chart of when Amazon topped Walmart. Now it’s worth two Walmarts.

  

  Here’s another old chart that captures the spirit of Amazon’s sales explosion. The current annual run rate is in excess of $140b.
  

  So how does Amazon’s $143b in annual revenues stack up against other retailers?

  According to Exodus, there are 31 companies in the Apparel Stores industry, the names you’re all familiar with when shopping at the old dead mall, whose sales equal $107b combined, with net income of $13.6b. Their composite market caps are $81.69b, the inversion of the price/sales ratio is indicative of an industry in duress.

  Amazon’s $143b in annual sales and net income of just $9b is rewarded with a market capitalization of $469b.

  Think about that for a moment. The entire shopping mall, sporting +1.1% quarterly revenue growth, does more net income than Amazon, on 40% less in revenues, and yet Amazon is valued at 5x what the entire mall is being sold for on the market today.

  The Department Stores are an even worse comparison. TJX, M, KSS, SHLD, DDS, JCP, SRSC, SHOS and BONT combined do revenues of $129b, netting $10.17b in income, yet the composite market caps are just $68b on -4.5% quarterly revenue growth.

  I get Amazon is the future and they’re growing at 22% per annum. But is it worth more than all the department stores and apparel stores combined 3x over?

  And now for the most egregious juxtaposition: Amazon vs the Discount/Variety Store industry.

  The Discount Variety stores include WMT, TGT, COST, DG, DLTR, BURL, PSMT, BIG, FRED and TUES. An impressive set of retailers, no doubt. Together, they sport sales of $729b with net income of $51b, enjoying median quarterly revenues growth of nearly 5%.

  Their market caps combined equal $389b. If you threw in another COST, you might get to match Amazon’s market cap.
  

  Does any of this shit make sense to you?

  

• Which Companies Have The Highest Revenue Per Employee?

  Authored by Ilya Levtov via Priceonomics.com,

  For many companies, the biggest cost is talent. This is especially true of Silicon Valley, where companies sell clicks and digital goods that do not have any material cost. So which companies' workforces are able to generate the most revenue?

  We decided to analyze every company in the Standard & Poor's 500 Index to see which ones had the highest and lowest revenues per employee. The  Standard & Poor's 500 Index (S&P 500”) includes the 500 largest American companies listed on the NYSE or NASDAQ. In 2016, S&P 500 companies generated $11 trillion in combined revenue and employed more than 25 million people worldwide.

  We found that Energy companies have the highest average Revenue per Employee, while Industrials and Consumer Discretionaries perform worst on this metric.

  Technology companies performed at the lower end of the range on Revenue per Employee; part of the reason for this however, is other companies in spaces like Energy and Healthcare have large non-employee costs that Technology companies do not have.

  ***

  The table below shows the top 50 companies by Revenue Per Employee in 2016 in S&P 500.

  

  Data source: Craft

  AmerisourceBergen, a pharmaceutical distributor, tops the list, generating more than $7.9M per employee in 2016. With a reported team of 19,000, which is less than half the workforce of Cardinal Health (37,300) and McKesson (68,000), the company compares favorably to its peers on revenue per employee. Cardinal Health and McKesson's RPE were $3.3M and $2.8M, respectively. Overall, Healthcare companies score well on revenue per employee, though they have other huge costs (the costs of administering drugs and health services).

  Energy companies Valero Energy Corporation and Phillips 66 take positions 2 and 3, with $7.6M and $5.7M in Revenue per Employee. With the exception of tobacco manufacturers (Altria Group and Reynolds American) and insurance providers (Aflac and XL Group), the top ranks are dominated by Energy and Healthcare sectors. 23 of the top 50 are Energy companies and one-fifth are Healthcare organizations. Like Healthcare companies, Energy companies also have large non-employee costs, however (the costs of the natural resources, for example) 

  Grouping the companies into sectors in the chart below, we see the relative labour-intensity of different industries.

  

  Data source: Craft

  Average revenue per employee in the Energy sector is double that of Healthcare companies and almost four times as high as that of Information Technology companies.

  The table below shows the lowest 10 companies in the index ranked by RPE.

  

  Data source: Craft

  It is perhaps unsurprising that Restaurant and Hotel chains make up the majority of the list. What is more striking is that IT providers Cognizant and Accenture have among the lowest revenue per employee in the Index.Amphenol Corporation, a manufacturer of interconnect products, recorded $101K Revenue per Employee, less productive than its competitor TE Connectivity, which generated $163K per Employee.

  ***

  Next, we calculated the change in Revenue per Employee from 2014-16 to see if any trends emerged. The graph below shows S&P 500 companies with the highest and lowest growth rate in RPE.

  

  Data source: Craft

  Most of the RPE growth leaders made headcount reductions last year and thus saw their sales per headcount increase. The healthcare companies in this list with an exception for Vertex Pharmaceuticals experienced both revenue growth and headcount reduction, leading to sharp growth in RPE.

  8 out of 10 companies with the lowest RPE growth experienced a drop in revenues in the period, while remaining Ball Corporation and Global Payments shrank in RPE mainly due to extensive recruiting.

   ***

  We then looked specifically at Technology companies. Only Netflix (which is classed as Consumer Discretionary in the S&P500, not Technology), Apple and Facebook appeared among the top 50 companies by RPE, which required RPE of at least $1.3M.

  The following table shows the top 20 Technology companies by revenue, ranked by RPE.

  

  Data source: Craft

  Apple has the highest revenue per employee in this selection of technology companies. However, they have substantial non-employee costs since selling hardware involves buying materials and making something tangible. Facebook and Alphabet (Google), on the other hand, make most of their revenue from selling a virtual good (advertising) and still have a tremendously high revenue per employee. VeriSign, which provides domain names and internet security, was a strong performer, generating $1.1Bn in revenue from only 990 employees, ranking fourth in the Technology sector, with $1.2M per employee.

  *** 

  Overall, Energy companies led the pack in Revenue per Employee, followed by Healthcare and Utilities. Technology companies showed themselves to be labour-intensive with RPE at the lower end of the range, and close to Consumer Discretionaries like restaurants and hotels. To see the full list of companies comprising S&P 500 Index, please click here.

  

  

• "I'm Sorry, I Went Too Far" – Kathy Griffin Apologizes For Video Of Beheaded Trump

  Having been destroyed by the left (Chelsea Clinton: "vile and wrong"), the right (Trump Jr.: "Disgusting but not surprising"), and everyone in between ("you're a terrorist and an enemy of the state. She needs to be treated as such.") it seems 'comic' Kathy Griffin (most famous for presenting the New Year's Eve countdown) has decided to apologize for her video where she is seen holding the head of the president, which is slathered in fake blood.

  And the response was not what she hoped for… (via DailyMail)

  Ironically, it was a former first daughter that was quick to fire back at griffin, with Chelsea Clinton writing: 'This is vile and wrong. It is never funny to joke about killing a president.'

   

  'This is discusting [sic] Kathy Griffin has never been funny,' said self-styled conservative paralegal NativeCA. 'This should be reported to the FBI & Twitter.'

   

  Meanwhile, @nancygolliday said 'Parading beheading of POTUS makes @kathygriffing a terrorist and an enemy of the state. She needs to be treated as such.'

   

  And Dr J wrote: 'You're disgusting. Honor our military but dishonor our President and Commander in Chief? You'd behead our President? Hypocrite.'

  Even some self-described liberals got in on the act…

  'Big time Liberal here – and a Kathy Griffin fan – and I agree,' said Tanya Crosse. 'This is not ok and there is no excuse. She should immediately apologize.'

   

  Meanwhile, Simar wrote: 'We can't knock the alt right for promoting hate speech & then support Kathy Griffin for promoting violence against the President.' 

  But then it got serious…

  On it! @SecretService has a robust protective intelligence division that monitors open source reporting & social media to evaluate threats

  — U.S. Secret Service (@SecretService) May 30, 2017

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  Threats made against @SecretService protectees receive the highest priority of all of our investigations. #ProtectionNeverRests

  — U.S. Secret Service (@SecretService) May 30, 2017

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  Which prompted a desperate career-saving PR rescue… "I'm sorry, I went too far, I was wrong"

  I am sorry. I went too far. I was wrong. pic.twitter.com/LBKvqf9xFB

  — Kathy Griffin (@kathygriffin) May 30, 2017

  //platform.twitter.com/widgets.js

  We leave it to Donald Trump Jr. who summed up the hypocritical reality of America today so perfectly…

  Disgusting but not surprising. This is the left today. They consider this acceptable. Imagine a conservative did this to Obama as POTUS? https://t.co/QdghcbIjS7

  — Donald Trump Jr. (@DonaldJTrumpJr) May 30, 2017

  And if anyone on 'the left', who has proclaimed with violence how 'hate speech' is not 'free speech', tries to defend this, it merely highlights just how low they will stoop into the hell of self-delusion to avoid facing the reality that Trump "is your president" whether you like it or not.

  

  

• Putin: "Russian Meddling Is A Fiction Democrats Invented To Divert Blame For Their Defeat"

  With McCarthyism 2.0 continues to run amok in the US, spread like a virulent plague by unnamed, unknown, even fabricated sources, over in France one day after his first meeting with French president Emanuel Macron, the man who supposedly colluded with and was Trump’s pre-election puppet master (but had to wait until after the election to set up back-channels with Jared Kushner) Vladimir Putin sat down for an interview with French newspaper Le Figaro in which the Russian president expressed the belief that Moscow and Western capitals “all want security, peace, safety and cooperation.”

  “Therefore, we should not build up tensions or invent fictional threats from Russia, some hybrid warfare etc.,” the Russian leader told his French hosts. “What is the major security problem today? Terrorism. There are bombings in Europe, in Paris, in Russia, in Belgium. There is a war in the Middle East. This is the main concern. But no, let us keep speculating on the threat from Russia.”

  Case in point, in the latest attempt to stir up an anti-Russian frenzy, America’s biggest neocon, John McCain said that Russia is even more dangerous than ISIS. “You made these things up yourselves and now scare yourselves with them and even use them to plan your prospective policies. These policies have no prospects. The only possible future is in cooperation in all areas, including security issues.”

  “Hacking” Clinton And the DNC

  Even with the FBI special investigation on “Russian collusion” with the Trump campaign and administration taking place in the background, Putin once again dismissed allegations of Russian meddling in last year’s U.S. presidential election as “fiction” invented by Democrats to divert the blame for their defeat. Putin repeated his strong denial of Russia’s involvement in the hacking of Democratic National Committee emails that yielded disclosures that proved embarrassing for Hillary Clinton’s campaign. Instead, he countered that claims of Russian interference were driven by the “desire of those who lost the U.S. elections to improve their standing.”

  “They want to explain to themselves and prove to others that they had nothing to do with it, their policy was right, they have done everything well, but someone from the outside cheated them,” he continued. “It’s not so. They simply lost, and they must acknowledge it.” That has proven easier said than done, because half a year after the election, Hillary Clinton still blames Wikileaks and James Comey for her loss. Ironically, what Putin said next, namely that the “people who lost the vote hate to acknowledge that they indeed lost because the person who won was closer to the people and had a better understanding of what people wanted,” is precisely what even Joe Biden has admitted several weeks ago, and once again yesterday. Maybe Uncle Joe is a Russian secret agent too…

  In reflecting on the ongoing scandal, which has seen constant, daily accusations of collusion and interference if no evidence (yet), Putin conceded that the damage has already been done and Russia’s hopes for a new detente under Trump have been shattered by congressional and FBI investigations of the Trump campaign’s ties to Russia. In the interview, Putin also said the accusations of meddling leveled at Russia have destabilized international affairs

  Going back to the hotly debated topic of “influencing” the election, Putin once again made a dangerous dose of sense when he argued that trying to influence the U.S. vote would make no sense for Moscow as a U.S. president can’t unilaterally shape policies. “Russia has never engaged in that, we don’t need it and it makes no sense to do it,” he said. “Presidents come and go, but policies don’t change. You know why? Because the power of bureaucracy is very strong.” Especially when the bureaucracy in question is the so-called “deep state.”

  Asked who could have been behind the hacking of the Democrats’ emails, The Russian leader added that he agreed with Trump that it could have been anyone. “Maybe someone lying in his bed invented something or maybe someone deliberately inserted a USB with a Russian citizen’s signature or anything else,” Putin said. “Anything can be done in this virtual world.” This echoed a remark by Trump during a September presidential debate in which he said of the DNC hacks: “It could be Russia, but it could be China, could also be lots of other people. It could be someone sitting on their bed that weighs 400 pounds.”

  Assad, Red-Lines and Chemical Weapons

  Putin was asked about French President Emmanuel Macron’s warning that any use of chemical weapons in Syria was a “red line” that would be met by reprisals, to which the Russian president said he agreed with that position. But he also reiterated Russia’s view that Syrian President Bashar Assad’s forces weren’t responsible for a fatal chemical attack in Syria in April. Putin said Russia had offered the U.S. and its allies the chance to inspect the Syrian base for traces of the chemical agent. He added that their refusal reflected a desire to justify military action against Assad. “There is no proof of Assad using chemical weapons,” Putin insisted in the interview. “We firmly believe that that this is a provocation. President Assad did not use chemical weapons.”

  “Moreover, I believe that this issue should be addressed on a broader scale. President Macron shares this view. No matter who uses chemical weapons against people and organizations, the international community must formulate a common policy and find a solution that would make the use of such weapons impossible for anyone,” the Russian leader said.

  On NATO’s Military Buildup across Russian borders

  Weighing on the outcome of the recent NATO summit, at which Russia was branded a threat to security, Putin pointed to the ambiguous signals Moscow is receiving from the alliance. “What attracted my attention is that the NATO leaders spoke at their summit about a desire to improve relations with Russia. Then why are they increasing their military spending? Whom are they planning to fight against?” Putin said, adding that Russia nevertheless “feels confident” in its own defenses. Washington’s appeal to other NATO members to ramp up their military spending and alleviate the financial burden the US is forced to shoulder is “understandable” and “pragmatic,” Putin said.

  But the strategy employed by the alliance against Russia is “shortsighted,” the Russian president added, referring to the NATO’s expanding missile defense infrastructure on Russia’s doorstep and calling it “an extremely dangerous development for international security.” Putin lamented that an idea of a comprehensive security system envisioned in the 1990s that would span Europe, Russia and US has never become a reality, arguing that it would have spared Russia many challenges to its security stemming from NATO. “Perhaps all this would not have happened. But it did, and we cannot rewind history, it is not a movie.”

  

  

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• We Know What Inspired The Manchester Attack, We Just Won't Admit It

  Authored by Patrick Cockburn via The Strategic Culture Foundation,

  

  In the wake of the massacre in Manchester, people rightly warn against blaming the entire Muslim community in Britain and the world. Certainly one of the aims of those who carry out such atrocities is to provoke the communal punishment of all Muslims, thereby alienating a portion of them who will then become open to recruitment by Isis and al-Qaeda clones.

  This approach of not blaming Muslims in general but targeting “radicalisation” or simply “evil” may appear sensible and moderate, but in practice it makes the motivation of the killers in Manchester or the Bataclan theatre in Paris in 2015 appear vaguer and less identifiable than it really is. Such generalities have the unfortunate effect of preventing people pointing an accusing finger at the variant of Islam which certainly is responsible for preparing the soil for the beliefs and actions likely to have inspired the suicide bomber Salman Abedi.

  The ultimate inspiration for such people is Wahhabism, the puritanical, fanatical and regressive type of Islam dominant in Saudi Arabia, whose ideology is close to that of al-Qaeda and Isis. This is an exclusive creed, intolerant of all who disagree with it such as secular liberals, members of other Muslim communities such as the Shia or women resisting their chattel-like status.

  What has been termed Salafi jihadism, the core beliefs of Isis and al-Qaeda, developed out of Wahhabism, and has carried out its prejudices to what it sees as a logical and violent conclusion. Shia and Yazidis were not just heretics in the eyes of this movement, which was a sort of Islamic Khmer Rouge, but sub-humans who should be massacred or enslaved. Any woman who transgressed against repressive social mores should be savagely punished. Faith should be demonstrated by a public death of the believer, slaughtering the unbelievers, be they the 86 Shia children being evacuated by bus from their homes in Syria on 15 April or the butchery of young fans at a pop concert in Manchester on Monday night.

  The real causes of “radicalisation” have long been known, but the government, the media and others seldom if ever refer to it because they do not want to offend the Saudis or be accused of anti-Islamic bias. It is much easier to say, piously but quite inaccurately, that Isis and al-Qaeda and their murderous foot soldiers “have nothing to do with Islam”. This has been the track record of US and UK governments since 9/11. They will look in any direction except Saudi Arabia when seeking the causes of terrorism. President Trump has been justly denounced and derided in the US for last Sunday accusing Iran and, in effect, the Shia community of responsibility for the wave of terrorism that has engulfed the region when it ultimately emanates from one small but immensely influential Sunni sect. One of the great cultural changes in the world over the last 50 years is the way in which Wahhabism, once an isolated splinter group, has become an increasingly dominant influence over mainstream Sunni Islam, thanks to Saudi financial support.

  A further sign of the Salafi-jihadi impact is the choice of targets: the attacks on the Bataclan theatre in Paris in 2015, a gay night club in Florida in 2016 and the Manchester Arena this week have one thing in common. They were all frequented by young people enjoying entertainment and a lifestyle which made them an Isis or al-Qaeda target. But these are also events where the mixing of men and women or the very presence of gay people is denounced by puritan Wahhabis and Salafi jihadis alike. They both live in a cultural environment in which the demonisation of such people and activities is the norm, though their response may differ.

  The culpability of Western governments for terrorist attacks on their own citizens is glaring but is seldom even referred to. Leaders want to have a political and commercial alliance with Saudi Arabia and the Gulf oil states. They have never held them to account for supporting a repressive and sectarian ideology which is likely to have inspired Salman Abedi. Details of his motivation may be lacking, but the target of his attack and the method of his death is classic al-Qaeda and Isis in its mode of operating.

  The reason these two demonic organisations were able to survive and expand despite the billions – perhaps trillions – of dollars spent on “the war on terror” after 9/11 is that those responsible for stopping them deliberately missed the target and have gone on doing so. After 9/11, President Bush portrayed Iraq not Saudi Arabia as the enemy; in a re-run of history President Trump is ludicrously accusing Iran of being the source of most terrorism in the Middle East. This is the real 9/11 conspiracy, beloved of crackpots worldwide, but there is nothing secret about the deliberate blindness of British and American governments to the source of the beliefs that has inspired the massacres of which Manchester is only the latest – and certainly not the last – horrible example.

   

  

  

• Millions Of Americans Just Got An Artificial Boost To Their Credit Score

  Back in August 2014, we first reported that in what appeared a suspicious attempt to boost the pool of eligible, credit-worthy mortgage and auto recipients, Fair Isaac, the company behind the crucial FICO score that determines every consumer’s credit rating, “will stop including in its FICO credit-score calculations any record of a consumer failing to pay a bill if the bill has been paid or settled with a collection agency. The San Jose, Calif., company also will give less weight to unpaid medical bills that are with a collection agency.” In doing so, the company would “make it easier for tens of millions of Americans to get loans.”

  Then, back in March of this year, in the latest push to artificially boost FICO scores, the WSJ reported that “many tax liens and civil judgments soon will be removed from people’s credit reports, the latest in a series of moves to omit negative information from these financial scorecards. The development could help boost credit scores for millions of consumers, but could pose risks for lenders” as FICO scores remain the only widely accepted method of quantifying any individual American’s credit risk, and determine how much consumers can borrow for a new house or car as well as determine their credit-card spending limit

  Stated simply, the definition of the all important FICO score, the most important number at the base of every mortgage application, was set for a series of “adjustments” which would push it higher for millions of Americans.

   

   

  The outcome of these changes was clear for the 12 million people impacted: it “will make many people who have these types of credit-report blemishes look more creditworthy.“

  Now, as the Wall Street Journal points out today, efforts to rig the FICO scoring process seems to be bearing some fruit.  The average credit score nationwide hit 700 in April, according to new data from Fair Isaac Corp., which is the highest since at least 2005.

  Meanwhile, the share of consumers deemed to be riskiest, with a score below 600, hit a new low of roughly 40 million, or 20% of U.S. adults who have FICO scores, according to Fair Isaac. That is down from 20.5% in October and a peak of 25.5% in 2010.

  

   

  Of course, to be fair, we are also reaching that critical 7-year point where the previous wave of mortgage foreclosures start to magically disappear from the FICO scores of millions of Americans. 

  Mortgage foreclosures stay on credit reports for up to seven years dating back to the missed payment that resulted in the foreclosure. Foreclosure starts, the first stage in the process, peaked in 2009 at 2.1 million, according to Attom Data Solutions. They totaled nearly 1.8 million in 2010 and remained above one million during each of the next two years.

   

  Personal bankruptcies are more complicated and can stay on credit reports for seven to 10 years.

   

  Consumers who filed in 2007 for Chapter 7 protection—the most common type of bankruptcy, in which certain debts are discharged and creditors can get paid back from sales of consumers’ assets—are now starting to see those events fall off their reports. Some 500,000 Chapter 7 bankruptcy cases were filed in 2007, a figure that swelled to nearly 1.1 million in 2010, according to the Administrative Office of the U.S. Courts.

   

  Chapter
  13 bankruptcies, in which consumers enter a payment plan with creditors, usually stay on reports for at least seven years. Those filings reached a recent peak of nearly 435,000 in 2010 and are set to start falling off reports this year.

  

   

  All of which, as the WSJ points out, will help to “boost originations of large-dollar loans for cars and homes.”  Which is precisely what the average, massively-overlevered American household needs…more debt.

  Fresh starts for credit reports are likely to help boost originations of large-dollar loans for cars and homes. Consumers have a greater chance of getting approved for financing if they apply for loans after negative events fall off their reports, in particular from large banks that have stuck to strict underwriting criteria, says Morgan Whitacre, who oversees consumer-loan underwriting at Bank of America Corp.

   

  Credit-card lending, already on the rise, could increase further as a result of fresh starts. Consumers who have one type of bankruptcy filing removed from their credit report experience a roughly $1,500 increase in spending limits and rack up $800 more in credit-card debt within three years, according to the Federal Reserve Bank of New York.

  So maybe that auto lending bubble has a little room left to run afterall…

  

  

• In Memoriam, 2017

  Authored by Robert Gore via StraightLineLogic.com,

  

  You don’t fight for your country, you fight for your government.

  The Golden Pinnacle, by Robert Gore

  On Memorial Day, America remembers and honors those who died while serving in the military. It is altogether fitting and proper to ask: for what did they die? Do the rationales offered by the military and government officials who decide when and how the US will go to war, and embraced by the public, particularly those who lose loved ones, stand up to scrutiny and analysis? Some will recoil, claiming it inappropriate on a day devoted to honoring the dead. However, it is because war is a matter of life and death, for members of the military and, inevitably, civilians, that its putative justifications be subject to the strictest tests of truth and the most probing of analyses.

  Millions have marched off to war believing they were defending the US, which implies the US was under attack. Yet, setting aside for a moment Pearl Harbor and 9/11, US territory hasn’t been invaded by a foreign power since the Mexican-American War (arguably—Mexico claimed the territory it “invaded” was part of Mexico), or, if the Confederacy is considered a foreign power, the Civil War. That war ended a century-and-a-half ago, yet every US military involvement since has been justified as a defense of the US. That has gradually attenuated, in a little noted slide, to a defense of US “interests,” which is something far different.

  Only one of those involvements could, arguably, have been said to have forestalled not an invasion, but a possible threat of invasion: World War II. Watching newsreel graphics of Germany’s drives across Europe, Northern Africa, and the USSR, and Japan’s across Asia and the Pacific, it was perhaps understandable that Americans believed the Axis powers would eventually come for them, especially after Pearl Harbor. However, that was a one-off attack by the Japanese to disable the US’s Pacific Fleet. To launch an invasion of the US, Japan, a smaller, less populated nation whose economy depended on imports of vital raw materials, including oil, would have had to cross the Pacific and fight the US, and undoubtedly Canada, on their home territories. The Pearl Harbor attack, provoking America’s entry into the war, proved a strategic blunder for the Japanese. An invasion would have been ludicrous. Similarly, Germany, up to its eyeballs in a two-front war, couldn’t conquer Russian winters or Great Britain across the English Channel. How was it supposed to either cross the Atlantic, or the USSR and hostile guerrillas, then the Pacific, and attack the US? That, too, would have been ludicrous.

  The 9/11 attack was also a one-off. A majority of the attackers came not from a US enemy but rather a supposed ally, Saudi Arabia. They received funding and other support from people in that country and perhaps its government. A conventional war against a “state sponsor of terrorism” might have required war against Saudi Arabia; it is still not clear how involved its government was. That option was never considered. Rather, the Bush administration performed metaphysical gymnastics and launched the first war in history against a tactic: terrorism. Although the jihadists who perpetrated 9/11 were self-evidently not the vanguard of an invasion, the terrorism they employed was deemed a threat to US interests in the Middle East, and to life and property in the US. However, none of our subsequent involvements in Afghanistan, Iraq, Syria, Libya, Egypt, and Yemen have been necessary to maintain US citizens’ freedoms, the nation’s territorial integrity, or its lives and property.

  There are undoubtedly many epitaphs on tombstones in this country to the effect: Here lies the deceased, who died defending America, and not one that reads: Here lies the deceased, who died defending American interests. However, the latter is in most cases more accurate than the former. Who decides the interests for which members of America’s military will die? Those considering entering the military today must look beyond the slogans, contemplate the risks of being killed, wounded, dismembered, paralyzed, or psychologically traumatized, and ask themselves: why and for whom are these risks being borne? “You don’t fight for your country, you fight for your government.” Is it worth risking one’s life for the US government?

  In 1821, John Quincy Adams said America had not gone “abroad in search of monsters to destroy,” and while we wished those seeking liberty well, theirs was not our fight (see “In Search of Monsters,” SLL, 4/11/15). Since then, America has searched for monsters, found, and in some cases, destroyed them. However, as the poison of power has worked its evil on the minds and souls of those who possess it, the monsters have become more ethereal, apparitions conjured like creatures in the closet by children when they go to bed. The war on terrorism creates more terrorists, the monsters of choice since 9/11. The government still pays occasional lip service to “democratic values” and “civil liberties,” but allies itself with regimes which have no more fealty to those values and liberties than the “tyrants” the government opposes. “Defending America” and “Promoting Our Way of Life” have become transparent pretexts for American power and domination unbounded. As Adams so presciently warned, the search for monsters has turned the government itself into a monster, the biggest threat to Americans’ “inextinguishable rights of human nature.”

  Those who have fought and died to defend America and its freedoms are noble beyond measure. Those who pay self-serving tribute to their valor, but make war and expend lives as means to corrupt ends are evil beyond redemption. Honor the former; expose and oppose the latter.

  

  

• Biden Bashes "Distracted" Democrats For Ignoring Working-Class Concerns

  After declaring to a bunch of SALT Conference attendees last month that Hillary “was never a great candidate,” former Vice President Joe Biden criticized the Democratic Party's campaign strategy for winning over working class voters, saying that too many were distracted by the Trump campaign's negativity, the Hill reported.

  

   

  “Because of the negative campaign that [President Donald] Trump ran, how much did we hear about that guy making 50,000 bucks on an assembly line, [and] the woman — his wife — making $28,000 as a hostess?" Biden asked.

   

  "They have $78,000, two kids, [are] living in a metropolitan area, and they can hardly make it," Biden added. "When was the last time you heard us talk about those people?"

  Biden, who was stumping for New Jersey gubernatorial candidate and former Goldman Sachs executive Phil Murphy, sounded like his old campaign-trail self, stoking speculation of another run in 2020.

  When asked at SALT if he would run again for the presidency, Biden said “I may very well do it,” but added that he couldn’t commit to another run right then.

  As The Hill reports, some Democrats see Biden as the best candidate to try and win back some of the working class white voters lost to Trump. Biden maintains that he hasn’t ruled out another run for the presidency.

  

  

• "The Technology Is Getting Real" – Laser Weapons Edge Closer To Battlefield Use

  Three months after China unveiled "Silent Hunter" – its vehicle-slicing laser weapon, Stars & Stripes reports that US military forces are testing their own array of hi-tech weaponry.

   

  

   The Silent Hunter laser is powerful enough to cut through light vehicle armor at up to a kilometer away, making you wonder if China already has more powerful laser weapons only for domestic use.

  And now Military.com reports, the toy-like drones destroyed during an Army field exercise at Fort Sill, Okla., last month weren't anything special; however, the way they were brought down — zapped out of the sky by lasers mounted on a Stryker armored vehicle — might grab people's attention.

  The first soldier to try out the lasers was Spc. Brandon Sallaway, a forward observer with the 4th Infantry Division. He used a Mobile Expeditionary High Energy Laser to shoot down an 18-by-10-inch drone at 650 yards, an Army statement said.

  "It's nothing too complicated but you have to learn how to operate each system and get used to the controls which is exactly like a video game controller," said Sallaway, who hadn't fired a laser before the exercise.

  The drone-killing laser was relatively low energy — only 5 kilowatts — but the Army has tested much more powerful weapons. A 30-kilowatt truck-mounted High Energy Laser Mobile Demonstrator shot down dozens of mortar rounds and several drones in November 2013 at White Sands Missile Range, N.M.

  

  Lockheed Martin's 30-kilowatt Accelerated Laser Demonstration Initiative, known as ALADIN.

  Since then, researchers have made rapid advances in laser weapons, said Bob Ruszkowski, who works on air dominance projects and unmanned systems in Lockheed's secretive Skunk Works facility.

  "We're really on the cusp of seeing the introduction of lasers in future systems," he said.

  The weapon tested at White Sands is about to double in power with a 60-kilowatt laser the Army plans to test in the next 18 months, he said in a phone interview May 12.

  The laser generates its beam through fiber optic cables like those used by telecom companies, said Robert Afzal, a senior fellow for laser and sensor systems at Lockheed.

  "We demonstrated that we could combine large number of these fiber lasers and link them to a weapons system," he said.

  Lasers are very efficient at converting electrical power to a laser beam, Afzal said.

  That's important for the platforms that carry them, he said. It means they don't need a large generator or cooling system and that high-powered lasers can be easily transported.

  "This was the key puzzle piece that needed to be solved before we could begin to deploy these laser weapons," Afzal said. "The technology is getting real. It's the dawn of a new era where the tech can be made smaller and powerful enough to be put on vehicles, ships and aircraft."

  Scientists showed the potential of more powerful laser weapons in 2015 by burning a hole through a truck's hood at a range of one mile.

  "It was the most efficient high-powered laser ever demonstrated," Afazal said of the test, which mimicked what might happen if a laser was fired at a vehicle from an aircraft.

  During an operation, a laser might be used to disable a vehicle where the goal was to capture rather than kill an individual, Ruszkowski said.

  "The laser is a surgical weapon and it's something customers are interested in," Afazal said. "Something like that can be easily integrated into an AC-130 gunship. That is something the Air Force is planning on demonstrating in the next two to three years."

  Researchers believe they have the key ingredients to make such a system work, Ruszkowski said.

  "When we realized that laser technology was maturing enough that we could be close to having something we could integrate on an aircraft we started looking at other difficulties that might arise," he said.

  Airflow around a plane can destabilize lasers, so engineers developed a way to minimize turbulence, said Ruszkowski, who added that the Navy has deployed a laser weapon on board the USS Ponce in the Persian Gulf.

  Laser weapons could be arriving just in time to defeat a growing menagerie of cheap-to-make drones and missiles in the hands of terrorists and rogue states, which could threaten expensive American military hardware.

  "The threats are proliferating and changing," but laser weapons could counter some of them, Afazal said.

  An advantage of laser weapons is that they don't need ammunition, he said. For example, a forward-operating base could protect itself from airborne threats with a laser as long as there was enough fuel to power a generator and recharge its batteries.

  Use of such weapons on enemy troops is a gray area that, for now, the U.S. military is steering clear of since international agreements ban the use of weapons intended to blind, Afazal said.

  "Before lasers have been deployed and we understand how they work, the policy is conservative," he said.

   

  

  

• Hong Kong's Housing Market Has Become "A Sea Of Madness" Central Bank Warns

  What a difference 16 months makes.

  It was in February of 2016 when, looking at the latest trends in the Hong Kong housing market, we wrote that in January [2016] Hong Kong home prices tumbled the most since July 2013, and after a 12 year upcycle, prices were now down 10% from the recent peak just four months prior…

  

  … while the local Centaline Property Agency estimated that total Hong Kong property transactions at the start of 2016 were on track to register the worst month on record.

  Fast forward to today when that particular blip is long forgotten, swept away by the record credit injection unleashed by China in the interim, which has spilled over into the Hong Kong’s housing market where instead of concerns about a bubble bursting, the locals are preoccupied with chasing the latest, and biggest yet, housing bubble to form in Hong Kong, as crowds of people line up in hope of being the winning bidder for one of several properties for sales, some of which are oversubscribed as much as 15x.

  Another HK new home sales oversubsribed 14.8x today, not as hot as ystdy ‘cos >HKD18k/sq ft. Only hundreds buyers. pic.twitter.com/WrraPLudEk

  — Simon Ting (@simonting) May 27, 2017

  //platform.twitter.com/widgets.js

  According to the latest data from Hong Kong’s Centaline Property Centa-City Leading Index of existing homes, prices have risen an unprecedented 23% in the past year, setting new price records week after week. Over the past decade, home prices in the financial capital of Asia have tripled.

  

  As Bloomberg observes, snaking queues of thousands of prospective apartment buyers in Hong Kong signaled authorities have made no progress in cooling a red-hot property market, where prices are at records.

  A HK new home sale site queues with over thousand of buyers.
  Last time this happened in 1997. pic.twitter.com/DHtH897ga9

  — Simon Ting (@simonting) May 26, 2017

  //platform.twitter.com/widgets.js

  At the Victoria Skye, a luxury project at the former airport site of Kai Tak and at the Ocean Pride development by Cheung Kong Property Holdings people were lining up on Friday and over the weekend for their chance to buy a home at all time high prices.

  

  K&K Property has offered an additional 200 units at Victoria Skye after it sold 306 flats on Saturday, Ming Pao newspaper reported. Cheung Kong will put another 346 up for grabs after selling 496 in a single day, May 26, it said. In both cases, the developers will raise the prices of the additional units by about 2 percent, the newspaper reported.

  Yes, HK real estate prices are rising by 2% not over a year, or a month, but in one day!

  That, however, does not stop the relentless demand from local buyers. Hong Kong developers sold 8,616 homes in the first five months of the year, more than were sold in any first half since new purchasing rules were introduced in 2013, the Hong Kong Economic Times reported.

  What makes this particular bubble different is that this time, it is obvious to everyone, certainly the local press. An editorial in The Standard newspaper on Monday was surprisingly accurate: “successive moves by the government in recent memory to cool the property market only resulted in it becoming crazier. The result is a sea of madness.”

  It is also obvious to the local central bank, which, however, like Vancouver and Toronto, appears powerless to halt the tsunami of hot mainland money. The Hong Kong Monetary Authority has been tightening rules for lenders, Bloomberg writes, including restricting levels of lending to developers, as it tries to limit financial risks and take some of the heat out of the market. 

  And yet, so far the result is absolutely nothing as nobody bothers to listen to the growing warnings. 

  Speaking at a Legislative Council meeting last Monday, Hong Kong’s central bank chief, HKMA Chief Executive Norman Chan, said levels of demand were reminiscent of 20 years ago, just before Hong Kong suffered a property bust, and he expressed concern that people with limited financial resources were buying just because they thought prices would only keep going up, just like in a bubble.

  Chan said that while the global economy has improved, uncertainties remain and warned that when the property cycle reverses, “the impact will be serious.”

  With real estate prices rising fast – in some cases as much as 2% per day – his warning has fallen on deaf ears. Of course, it will be different when the bubble against bursts, and everyone is “shocked” that the authorities let it come to this again, and then first the HKMA, then the PBOC, will have to again step in and bail out all the bubble chasing speculators once more, or risk yet another economic collapse, rinse and repeat.

  

  

• Euro Slides After Greece Hints At Default

  EURUSD is sliding in early Asian trading after Greece’s government is reportedly planning to forego its next bailout payment (of around EUR7bn) if no debt relief is offered by creditors (thus leaving it likely to default on its next round of repayments).

  Bloomberg reports, Greece’s government preparing to possibly go without next bailout payment if creditors don’t agree on debt relief for the country according to German newspaper Bild (without saying where it obtained the information).

  While probably just another negotiating step, it is weighing on EURUSD.

  

  

  

• Inside The Republicans' 'Black-And-Blue' Bill

  Authored by Eric Peters via EricPetersAutos.com,

  Naturally, the solution to the problem of police abusing their authority is to hold them less accountable when they do exactly that.

  Leave it to “law and order” Republicans such as Texas Sen. John Cornyn and Rep. Ted Poe to evolve such logic. They have put forth the Black and Blue – whoops, Back the Blue – act (see here) which would make it harder to sue run-amok law enforcers in civil court to recover damages resulting from actions undeniably illegal – while at the same time imposing more severe penalties on Mundanes who affront the holy person of a law enforcer than those imposed on Mundanes who do exactly the same thing.

  

  As regards the first:

  So long as the victim – er, perp – was “engaged in felonies or crimes of violence” (how this it to be determined in the heat of the moment remains unclear) the law enforcer administering the wood shampoo or “directory assistance” (beating administered with a phone book in between the flesh and he nightstick, to keep the bruising down) or some other such informal technique, will be immunized from subsequent civil suit by his victim, provided the abuse suffered occurred while the enforcer was acting in a “judicial capacity.”

  Breathtaking.

  It is obvious – or should be – that this only encourage more lawless “street justice” by the enforcers of the law. It will also encourage more generous application of the law – i.e., of bogus/trumped-up charges (such as felony “resisting”) in the immediate aftermath of an otherwise legally unjustifiable beatdown, to immunize the beaters from the legal consequences of said beatdown.

  This GOP act of cop suckage is even better than a throw-away stiletto  – which dirty cops used to keep on hand to leave adjacent to the bloodied corpse of their victim, so as to justify his aeration.

  That was at least illegal.

  Now, they won’t have to bother.

   

  What these Republican brownshirts – and that term isn’t too strong; if anything, it is too soft – propose to do is legalize objectively criminal conduct, the conduct to be justified by eructing that the victim was a “law breaker” and so – presumably – deserved to have more than the legally prescribed justice meted out to him and – critically – before he has been duly convicted of anything at all.

  Under the proposed Black and Blue lawlessness, law enforcement is to be given discretion to administer street justice, according to its lights – and the victim of this is to be rendered legally helpless. No damages are to be awarded for any violations of law that occurred during “any action brought against a judicial officer for an act or omission taken in the judicial capacity of that officer.”

  Hut!Hut! Hut! You will respect my authoritah!

   

  At the same time, any assault upon the person of a law enforcer by a Mundane becomes a separate federal crime with a mandatory two-to-five-year stint in federal prison. Twenty if the accused was in possession of a weapon during the incident.

  The legal definition of “assault” can be a trivial as jabbing a finger onto someone else’s chest. Or – in the case of law enforcement – defending oneself against an assault by a law enforcer. Attempt to ward off a wood shampoo –  a reflex action that is almost impossible to suppress, and – to well-practiced cries of “stop resisting!” – you have just purchased a two-to-five-year ticket to the federal prison of their choice.

  

  It goes without saying that a law enforcer who commits exactly the same offense – assuming he is even charged – will suffer nothing of the sort.

  Cannot suffer anything of the sort, because the the law specifies more lenient treatment for assault-by-cop upon a Mundane.

  And the lights just got a little dimmer.

  One hates to trot out the Nazis, but they seem never to go away. They merely change uniforms. In the Third Reich, to strike an officer of the Reich was an enormous crime, far worse – and treated far more severely – than the treatment meted out to officers of the Reich who abused citizens of the Reich. For which acts, the officers of the Reich were usually rewarded.

  As is often the case, the words of the brutal but never truckling Reichsmarschall Herman Goring are worth recalling.

  

  But first, it is worth recalling that Goring was Nazi Germany’s chief law enforcer for a time. Head of the Prussian State Police, creator of the first German concentration camps and founder of the Gestapo, the acronym standing for geheim staats polizei, or secret state police. He was hanged – well, supposed to have been hanged – after the judgment at Nuremburg precisely for his activities as Nazi Germany’s Top Cop.

  And here is what Goring had to say about his law enforcers, when the question of excesses arose:

  “Shoot first and inquire afterwards; if you make mistakes, I will protect you. Every bullet which leaves the barrel of a police pistol is my bullet. If one calls this murder, then I have murdered. I ordered all this. I back it up. I assume the responsibility and I am not afraid to do so.”

  One can imagine Cornyn or similar “law and order” Republican – including the current orange-tinctured buffoon – saying pretty much the same.

  What the hell happened to us?

  

  Well, to some of us.

  There has always been a jackbooted strain in American politics, the bloody lust of the Red Queen to “off with their heads.” But until recently, it was backwater  – along with things like handling snakes, jabbering in “tongues” and sipping strychnine.

  But these and worse barbarisms wax mainstream.

  Rather than hold those who enforce the law to at least the same standard expected of the rest of us – if not a higher standard – they are to be held to a lesser standard. We, meanwhile, had best not so much as raise our voices to these dispensers of “justice.”

  Remarkable.

  And it’s only taken 70 years for us to get from there to here.

  

  

• Russia Expects China To Help Resolve Syrian Crisis, "Restore The Country"

  Last summer, when the Syrian conflict was near its peak under the Obama administration, China unexpectedly warned it was ready to enter the proxy war when in a stunning announcement, Xinhua reported that Beijing was prepared to side with Syria – and Russia – and against the US-led alliance, and that Xi and Assad had agreed that the Chinese military will have closer ties with Syria and provide humanitarian aid to the civil war torn nation.

  A high-ranking People’s Liberation Army officer also said that the training of Syrian personnel by Chinese instructors has also been discussed: the Director of the Office for International Military Cooperation of China’s Central Military Commission, Guan Youfei, arrived in Damascus on Tuesday for talks with Syrian Defense Minister Fahad Jassim al-Freij, Xinhua added. Guan said China had consistently played a positive role in pushing for a political resolution in Syria. “China and Syria’s militaries have a traditionally friendly relationship, and China’s military is willing to keep strengthening exchanges and cooperation with Syria’s military,” Xinhua quoted Guan.

  
  Rear Admiral Guan Youfei

  As Reuters also added at the time, China tends to leave Middle Eastern diplomacy to the other permanent members of the U.N. Security Council, namely the United States, Britain, France and Russia, while relying on the region for oil supplies. But over the past two years, China has been trying to get more involved, including sending envoys to help push for a diplomatic resolution to the violence there and hosting Syrian government and opposition figures.

  Fast forward to today when the Syria proxy war is once again at an impasse – especially after today’s warning by Macron that France would get involved after another “chemical attack” –  and once again it may be up to China to be the decisive tiebreaker.

  According to both Sputnik and the Daily Sabah, Moscow is once again hoping “for China’s help in solving the Syrian crisis and restoring the country: Russian Deputy Foreign Minister Igor Morgulov said Monday.

  “Our cooperation with China on Syria at various international venues is unprecedented. We blocked six attempts to pass anti-Syrian resolutions in the U.N. Security Council,” Morgulov said at “Russia and China: Taking on a New Quality of Bilateral Relations” international conference.

  The Russian deputy foreign minister added that Russia values Beijing’s position on the Syrian crisis, and hopes that, “the Chinese partners will continue their efforts to promote a political settlement.”

  “Together we call for a peaceful and political-diplomatic solution to conflicts, without double standards, unilateral action or attempts at ousting regimes. Our approaches coincide, among other things, on the uncompromising fight against terrorism,” Morgulov said.

  To be sure, Russia and China are already largely alligned at the United Nations, where the two nations have repeatedly vetoed Security Council resolutions imposing sanctions against the Assad regime. Moscow has long-standing links to the Assad regime and is its key ally, while China has an established policy of non-intervention in other countries’ affairs, although as noted above that appeared to change in 2016.

  Needless to say, should China break from its policy of direct foreign non-intervention, and should it indeed side with Syria, and Russia, as it hinted it would do last year, the shape of middle eastern geopolitics would change overnight. And now we await the official, or unofficial, response from China to Russia’s “indecent” diplomatic proposal for a joint effort in Syria against the US-led alliance.

  

  

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• These Powder Kegs Are About To Blow: "Trump Needs To Halt The Downward Spiral That Obama Orchestrated"

  Authoreed by Jeremiah Johnson (nom de plume of a retired Green Beret of the United States Army Special Forces) via SHTFplan.com,

  

  President Trump just took a trip to Saudi Arabia in an effort to obsequiously “shore up” the ties.  Expected.  It is expected for any U.S. president to “recertify” the Petrodollar and the commitments to protect the House of Saud that were initiated by Kissinger and Nixon almost five decades ago.  Times change, and administrations change; however, the systems in place are very slow and resistant to modification.  The BRIC nations are shoring up their interests as the U.S. continues to send more naval “support” for South Korea in the form of another aircraft carrier.

  In order to keep the MIC (Military Industrial Complex) happy, defense contracts have to be on the rise: A Republican administration is the foundation for this.  The creation of a threat is ongoing.  The creation of a threat (whether viable or not) is essential to justify the defense contracts and the ongoing deployments of U.S. troops that were initiated under Obama and are continuing under President Trump.  The MIC is too deeply lodged within the framework of the government to extricate in one fell swoop.  It is inexorably intertwined with the fragile (almost skeletal) domestic industrial base of the U.S. economy, as well as all of the foreign policy instituted at home and carried out abroad.

  Europe is redefining itself with Britain’s exit from the EU, and NATO is trying to maintain ties and commitments with Britain even as she dumps the Eurodollar and cuts the economic ties to the other nations.  Yes, the three super-states as outlined in Orwell’s “1984” are well on their way to taking shape: Eurasia, Eastasia, and Oceania (North American and Great Britain).  The sides are posturing themselves both economically and militarily, with several “loose ends” to ties up.  Those loose ends are none other than Syria and North Korea, around which there are two different lines forming: The U.S. and Western allies, and Russia with its Asian and Middle-Eastern alliances.

  The U.S. Congress and the MIC want to invade Syria, and then Iran.  They also want to “clear things up” in Korea.  These nations are in the way of the establishment of a U.S.-controlled hegemony in the areas and a face-off with Russia.  The first part of it is economic in nature: to attempt to stalemate Russia and China with sanctions and interference in trade (such as the maneuver previously mentioned in other articles to run a natural gas pipeline from Qatar into Eastern Europe).

  The Russians have pretty much taken over the Arctic in terms of exploration and mining.  This was enabled to be brought about by none other than Obama, along with the islands off the coast of Alaska that he magnanimously “gave away.”  Obama has left us in very dire straits in our position with the rest of the world: The Middle East is still in a shambles from the “Arab Spring” and all of the debacles in Egypt and Libya; the Eastern European question is not yet solved in relation to Ukraine and the tug-O’-war over it between the U.S. and Russia; Syria and Iran are “powder kegs” about to blow; and the potential for war with North Korea is far from exhausted.

  The President is going to need to take the initiative in order to halt the downward spiral that Obama orchestrated and began prior to his departure.  To avert at (the minimum) a new Cold War, he’ll have to sit down and do a face-to-face with Putin instead of dispatching Tillerson to play ping-pong periodically with Lavrov.  The time is now to head off these alliances between other nations that exclude the U.S. to a detriment.  Such economic alliances eventually always turn into military alliances…based on the need to preserve the flow of money between the nations involved.

  We do not need another Cold War to materialize.  The way to stop it from occurring is through sound diplomacy and strength of position, not through imperialism and posturing.  Therein lies the challenge: the restructuring of iron-clad policies and institutions so as to make a better deal and position for the U.S. and really “draining the swamp” of Washington.  Saudi Arabia, eh?  Well, why don’t we start out the “new deal” by going into all of that untapped oil that we have domestically?  What are we waiting for?  Or is it just a matter of not wanting to tick off the Saudis and changing the status quo of our worthless fiat Petrodollars?  Only time will tell whether true actions will be taken and not another dog-and-pony show to enable the President to be reelected.

  

  

• How America Could End Up In An Unexpected War With China

  Authored by Doug Bandow via The National Interest,

  Three decades ago the People’s Republic of China was an economic backwater. Today the PRC sports the world’s second-largest economy. Shanghai most dramatically illustrates the country’s transformation. The city is filled with stylish office buildings, five-star hotels, luxury stores and foreign visitors.

  Reflecting their success, the Chinese are increasingly confident as well. If not yet a great power, the PRC seems destined to eventually share global leadership with the United States. And its people know that.

  Which means future U.S.-China relations could be rocky.

  Ties turned confrontational under the Obama administration, which announced a “pivot” or “rebalance” to Asia. Washington officials unconvincingly claimed that the policy was not directed against Beijing. The Chinese may be many things, but they are not stupid.

  Candidate Donald Trump sounded like he intended to pursue an even more truculent course, upgrading relations with Taiwan, launching a trade war, blockading Chinese possessions in the South China Sea and pressuring the PRC to “solve” the North Korea problem. But then came the bilateral summit and the president’s one-way love-fest with Chinese president Xi Jinping. All suddenly became sweet and light in Trumpland.

  However, in the long-term the president’s pleasant words backed by an offer of unspecified trade concessions won’t go far in buffering relations between a unipower determined to preserve its dominance and a rising power equally determined to assert itself.

  First, the Trump administration yielded Pacific economic leadership to the PRC. Beijing is likely to find new commercial opportunities, limiting Washington’s ability to do trade harm.

   

  Second, nationalist passions are not easily cooled. The issue is not just a few obstreperous officials who don’t know their country’s proper place. The real challenge is posed by a population that believes in a much greater China.

  So far North Korea has dominated discussions between the two governments. Even if cooperative efforts fail, any damage to the bilateral relationship likely will be contained. At most, application of secondary sanctions against Chinese financial institutions would lead to economic turbulence, not military confrontation.

  Territorial disputes throughout the Asian-Pacific region pose a far tougher test. The Philippines’ unpredictable Rodrigo Duterte has been sparring with Beijing over Scarborough Reef. Tokyo has refused to even acknowledge a dispute over the status of the Senkaku Islands. But that has not prevented China from using air and naval patrols to challenge Japan’s claim.

  America’s primary interest is navigational freedom, which so far the PRC has not attempted to impede. Washington has no territorial claims in the region. But both Manilla and Tokyo are treaty allies, their security guaranteed by America, which means any confrontation between them and China could draw in the United States. At his confirmation hearing Secretary of State Rex Tillerson suggested an even more active American role, barring PRC access to its claimed possessions. That would set up a clash at sea, guaranteeing a naval arms race and creating a trigger for war.

  As pleasant memories from the Mar-a-Lago summit fade, deep disagreements likely will reappear. And the Chinese aren’t likely to back down. For the United States, dominance of a region so far from home is a convenience, an added benefit to America’s almost absolute security in its own hemisphere. For the PRC, preventing Washington’s encroachments along its border is a “core” interest, similar to what Americans have essentially claimed for their entire hemisphere for two centuries.

  Last weekend I attended a conference on maritime issues in Shanghai. Participants were largely academic and policy, not political. However, the Chinese interlocutors were in no mood to compromise. They defended their government’s claims, advocated active measures to assert them, and disdained criticism of Chinese aggressiveness. No one wanted war, but none of them recommended that their nation back down if Washington chose confrontation.

  Indeed, the participants well demonstrated the disparity of interest and intensity which disadvantages America. No one doubts that the U.S. possesses the stronger military. Nor is there any question that Washington would use its superior power if necessary to defend important interests closer to home.

  But it would be far harder for America to use force to ensure its control of the waters along China’s borders and oversight of territorial disputes in which America has no serious stake—who gets to raise their flag over one or another set of barren rocks. And the price of doing so will only rise. It costs the PRC far less to threaten a U.S. carrier than it costs America to protect one. Just how much are Americans prepared to spend to assert what amounts to the convenience of empire rather than essentials of security?

  Moreover, at a time when North Korea tops Washington’s Asian agenda, how much is the Trump administration willing to pay for Beijing’s assistance? According to President Trump, President Xi already has emphasized the limitations of China’s control. The PRC can hardly be expected to dismantle its one military ally if the United States is actively pushing military containment elsewhere in the region.

  Indeed, while Americans tend to view themselves as being Vestal Virgins, attempting to do good in an evil world, citizens of other nations typically take a more cynical view. In Shanghai, as elsewhere, they see Washington speaking of principle while promoting interest, and refusing to apply to itself norms it seeks to impose on others. The Chinese are prepared to yield before superior force, but are not prepared to concede that America always will possess that edge.

  Washington officials should reconsider their approach to China. Military confrontation would be a losing game. No victory would be permanent. An American success would be an invitation for the PRC to rebuild and expand its armed forces for a rematch. And conflict would aid the authoritarian regime in maintaining and expanding its control. A liberal, democratic China would be unlikely to emerge from any war.

  The U.S. needs to prioritize its objectives vis-à-vis China. Washington wants Beijing to democratize, respect human rights, reduce trade and investment barriers, forswear cyberattacks, pressure North Korea, sanction other pariah regimes, abandon territorial claims, and accept permanent U.S. hegemony. No serious state, let alone a nationalistic rising power, could concede such a laundry list. American officials should decide what they most want and how much they are willing to pay.

  Washington also should recalculate what is worth defending. For instance, there is a difference between preserving Tokyo’s and Manila’s control over territories contested by China and the two nations’ independence, which Beijing does not threaten. Indeed, while resolute backing of the former might deter China from acting, it also would ensure Washington’s involvement should an errant sea captain on one side or the other start shooting. Moreover, issuing blank defense checks would encourage friends to be more intransigent and prepare less for trouble.

  Most important, American officials need to separate the objectives of defending America and containing China. The former is relatively easy and inexpensive. It is likely to be long into the future before the PRC is capable of projecting power against America’s Pacific possessions, let alone the homeland.

  In contrast, it will grow ever more expensive for the United States to overcome the far more modest PRC build up necessary to deter outside intervention. How much are Americans prepared to spend to ensure that Washington can contest Chinese influence along China’s borders? The issue is not whether doing so has value. The issue is whether a highly indebted liberal republic can afford to continue doing so, especially when that responsibility more appropriately falls on other nations in the region.

  Even after the ongoing campaign against Western influence, the PRC remains a far more open society than in the early days of the Communist revolution. Hope that political liberalization would follow economic liberalization has been stillborn, but Xi Jinping’s China remains very different from Mao Zedong’s China.

  As such, the PRC might not be an ally, but there is no reason it should be an enemy. Yet attempting to dominate and contain China risks turning it into an angry and well-armed adversary. Instead, Washington should prepare to share global leadership. Far better to yield thoughtfully while shaping the future than to be forced to concede even more under pressure. Just as Great Britain successfully—if not always happily—accommodated the emerging United States of America.

   

  

  

• Does America Need A Northern Border Wall?

  Keeping track of people legally entering and leaving the United States is a formidable task. Nevertheless, the Department of Homeland Security (DHS) has released figures on people who overstay their visas and other legal forms of admissions. Total overstays for 2016 stood at close to 740,000 people, of which up to 630,000 were suspected to still be in the country.

  

  You will find more statistics at Statista

  As Statista's Dyfed Loesche notes, Canadians and Mexicans are the biggest groups of people with non-immigrant admissions to the United States that overstayed their lawfully authorized time period. However, the DHS only counts in arrivals and departures by sea and air as stated in its report.

  Unlike all other countries, the overwhelming majority of visitors from Canada or Mexico enter the United States by land. "The collection of departure information in the land environment is more difficult than in the air and sea", the DHS writes. While many Canadians or Mexicans could fly in ore arrive by boat they might leave the U.S. across the land border.

  So, there's always a degree of uncertainty in the data.

  While Canada and Mexico are the United States' direct neighbors the figures for the rest of the countries shown in the below above probably are more accurate. This overview includes countries that are taking part in the so-called visa waiver program (VWP) and those who don’t. It only shows data for leisure and business visas, not for students.

  The DHS admits that there is a level of uncertainty in how accurate these numbers are and calls them a snapshot. For the air and sea arrivals and departures the department relies on data that commercial and private carriers need to provide.

  Also, the figures include suspected in-country and out-of-country overstays. This means that some of the people who initially overstayed might have already left.

  All of which raises the question – does America need a northern border wall also?

  

  

• The Conspiracy Mill

  5/28/2017 – (GLOBALINTELHUB)– Ever since JFK the word ‘conspiracy theory’ has been used to discredit anyone holding a non-conventional view, such as based on facts regarding the CIA’s role in providing security at Area 51 (and the point being, what are they doing there?).  But since the Trump election ‘conspiracy theorists’ like Alex Jones have been thrust to the forefront of the mainstream information curve.

  It seems now the Democrats will stop at nothing to create their own ‘fake news’ and ‘conspiracies’ to destroy the fairly elected Donald Trump.  But many of us remember it was recently Republicans creating ‘vast right wing conspiracies’ about leading Democrats.  The fact is, there is little difference between the two parties, they are both funded by the same sponsors.  This groundbreaking documentary explains how the world really works from the ground up; the tools used to manipulate the population into blind submission.  This is a must watch – but bear in mind a few tidbits;

  • JFK as an event is completely irrelevant today; however – as it was so deep in the past, it’s possible to analyze it better than more recent events like 911 (even though there is less forensic evidence).  It isn’t just for history buffs, it explains how the world ‘really’ works.  In the case of FX, it shows the simple path leading Nixon to office and finally the creation of a free floating FX regime.  (THINK:  If JFK survived, would we have FX?)
  • The tools built by the military industrial complex post World War 2 have evolved only in technology, they are using the same bag of tricks.  Thus, by understanding how this game works, we can better understand what’s going on today, whether it be how to improve your business, your finances, your portfolio, or understanding of the upside down pyramid structure that runs the world.

   

   

  Importantly, the CIA has been engaged in the conspiracy mill in foreign countries for years.  Part of winning any war, is first winning an information war.  But this strategy was used in a domestic political election, clearly a violation of their mandate.  And, logically – if they will violate their mandate once it is logical to assume they would for any other reason they deem necessary.  Or who knows what lengths they may go through to justify their power and expanding budgets (i.e. Project Blue Beam).

  Message for traders/investors: If you understand how significant events like 911 were rigged, as large scale Hollywood productions, you can understand how markets are rigged, and thus – see things for what they really are.

  

  

• Camille Paglia: Democrats Are Colluding With The Media To Create Chaos

  By Emily Jashinky, originally in the Washingtonm Examiner,

  Camille Paglia is much more worried about the media than about the steady string of Trump-related scandals they claim to be uncovering.

  

  In a Tuesday interview with the Washington Examiner, Paglia excoriated the press for its coverage of Trump's decision to fire FBI Director James Comey and his alleged sharing of classified information with Russian officials.

  Fresh off a spirited panel with Christina Hoff Sommers hosted by the Independent Women's Forum, the iconic feminist dissident, who serves as a professor of media studies at the University of the Arts, accused journalists of colluding with the Democratic Party in an effort to damage the Trump administration.

  "Democrats are doing this in collusion with the media obviously, because they just want to create chaos," she said when asked to comment on the aforementioned stories.

   

  "They want to completely obliterate any sense that the Trump administration is making any progress on anything."

  The popular author, whose latest book was released in March, pointed to early struggles experienced by previous presidential administrations to illustrate the media's bias against Trump. "Obama's administration for the first six months was chaos," Paglia recalled. "Bill Clinton's was chaos for six months. Nobody holds that against a new person."

  "Those two guys had actually been politicians!" she continued, noting Trump's relative inexperience with government operations.

  Paglia's assessment of media bias in the Trump era leaves little room for optimism.

  "I am appalled at the behavior of the media," she declared. "It's the collapse of journalism."

  As the Examiner reported in April, Paglia, who cast her ballot for Jill Stein last November, is predicting Trump will win re-election in 2020.

  "I feel like the Democrats have overplayed their hand," she said at the time.

  Though the news cycle has moved through plenty of additional scandals in the past month, it appears as though Paglia's assessment of the president's prospects has not changed.

  "I'm looking forward to voting Democrat again," the acclaimed philosopher explained. "But the point is I feel that the media has so utterly lost its credibility that I think people are going to vote against the media again."

  

  

• Yuan Funding Costs Spike As China Changes FX Rules

  The effects of China's rules-change proposals around the Yuan Fix are already starting to show in the FX, money markets as one-week funding costs have exploded to the annualized equivalent of 14%…

  As a reminder, we reported late last week that China announced it would introduce a new "counter-cyclical factor" to reduce exchange-rate volatility while undermining efforts to increase the role of market forces. In some ways this announcement was not unexpected: recall that after a period of eerie stability, on Thursday the Yuan surged shortly after China's downgrade by Moody's, which prompted speculation that the central bank was directly manipulating the currency as the PBOC’s daily fixings had "materially diverged" from the prescribed formula, resulting in a gap between the reference rate and currency’s spot value.

  Roughly at the same time as a similar move was taking place on Friday, Bloomberg first reported and China later confirmed that policy makers would add a “counter-cyclical factor” to the yuan’s daily fixing, a move which "would give authorities more control over the fixing and restrain the influence of market pricing." Subsequent detailed revealed that authorities would change the daily $/CNY fixing mechanism, so that the change of the fixing from the previous day’s close would also take into account a “counter-cyclical  adjustment factor” (how this is determined is not specified though), in addition to the USD’s movement against a basket of currencies.

  While the practical consequence was a surge in both the onshore and offshore Yuan to three month highs, traders and commentators were left confused by this latest intervention by Beijing into what has become China's fulcrum security.

  “The counter-cyclical adjustment factor sounds like an increased role for the fixing to be nudged away from where markets would set it,” Sean Callow of Westpac Banking Corp told Bloomberg. “The authorities’ actions give the impression that they are more worried about yuan stability than declared in their public statements.”

  The reaction has been notable…

  Offshore Yuan has spiked dramatically in the last few days – coinciding with apparent Fed dovishness in the minutes and PBOC rule changes…

  

   

  And, as Bloomberg details, deliverable yuan funding costs have soared after the PBOC said it’s considering changing the way it calculates the yuan daily reference rate. One-week forward points have more than doubled to the equivalent of about a 14 percent annualized interest rate.

  

  Though traders anticipate that funding costs will retreat after month-end, a policy shift may keep markets on edge — on two previous occasions the PBOC adjusted its fixing mechanism, in 2015 and earlier in 2017, costs remained elevated for weeks.

  

  

• They're Killing Small Business: The Number Of Self-Employed Americans Is Lower Than It Was In 1990

  Authored by Michael Snyder via The Economic Collapse blog,

  After eight long, bitter years under Obama, will things go better for entrepreneurs and small businesses now that Donald Trump is in the White House?

  

  Once upon a time, America was the best place in the world for those that wanted to work for themselves.  Our free market capitalist system created an environment in which entrepreneurs and small businesses greatly thrived, but today they are being absolutely eviscerated by the control freak bureaucrats that dominate our political system.  Year after year, leftist politicians just keep piling on more rules, more regulations, more red tape and more taxes.  As a result, the number of self-employed Americans is now lower than it was in 1990…

  

  In April 1990, 8.7 million Americans were self-employed, but today only 8.4 million Americans are self-employed.

  Of course our population has grown much, much larger since that time.  In 1990, there were 249 million people living in the United States, but today there are 321 million people living in this country.

  What this means is that the percentage of the population that is self-employed is way down.

  In fact, one study found that the percentage of Americans that are self-employed fell by more than 20 percent between 1991 and 2010.

  And if you go back even farther, the numbers are even more depressing.  It may be hard to believe, but the percentage of “new entrepreneurs and business owners” declined by a staggering 53 percent between 1977 and 2010.

  Sometimes I like to watch a television show called Shark Tank, and on that show they make it seem like entrepreneurship in America is thriving.

  But the exact opposite is actually the case.  In a previous article, I discussed how the number of new businesses being created in the United States has been steadily falling over the years.  According to economist Tim Kane, the number of startup jobs per one thousand Americans has been declining for several consecutive presidential administrations…

  • Bush Sr.: 11.3
  • Clinton: 11.2
  • Bush Jr.: 10.8
  • Obama: 7.8

  So why is this happening?

  As I mentioned at the top of this article, self-employed Americans are being absolutely strangled by oppressive rules, regulations and taxes.

  To illustrate this point, I would like to share with you some quotes from an open letter that was authored by a small business owner named Don Chernoff…

  #1 I work for myself and have to pay my own medical expenses. Before the “affordable care act” I was paying about $200 per month for a high deductible policy. It was far from perfect but it got so much worse under the “Affordable” care act.

   

  I now pay over $400 a month, my deductible went from $5,000 to over $6,000 and my out of pocket costs for care have skyrocketed.

   

  #2 I have to spend dozens of hours and thousands of dollars for a tax accountant each spring to prepare my taxes because I cannot possibly understand how to do it myself, and I have a master’s degree in engineering.

   

  #3 Many years ago when I quit a perfectly good job to start my own small business, I was shocked to learn that I had to pay both my share and what had been my employer’s share of Social Security.

   

  #4 Between state, federal and local taxes you’ve probably paid 50% or more of your income in taxes, but that’s not enough for politicians.

   

  If you’ve been lucky enough to have created a business you can sell, now you’ll get to enjoy paying another tax on the capital gain from the sale.

  This is another reason why we need a conservative revolution in Washington.  We should demand that our members of Congress lower tax rates dramatically, completely eliminate the self-employment tax, greatly simplify the tax code and get rid of as many regulations on small business owners as possible.

  In fact, if it was up to me I would abolish a number of federal agencies completely.

  What we are doing right now is not working.  Small businesses have traditionally been one of the main engines of economic growth in this country, but thanks to the left they are unable to play that role at the moment.

  It isn’t an accident that over the last ten years the U.S. economy has grown at exactly the same rate as it did during the 1930s.

  If we want our economy to be great again, we need to go back and start doing the things that made it great in the first place.  If we continue to suffocate our economy, we will continue to get the same results.

  And with each passing day, we get more signs that the economy is heading into another major downturn.  For instance, we just learned that Sears is closing 30 more stores on top of the 150 that had already been announced…

  Sears Holdings, which wasn’t shy when it announced at the start of the year that it is closing 150 underperforming stores, has quietly added at least 30 more to the list.

   

  Another 12 Sears stores and 18 Kmarts are among the locations that are closing, from Carson, Calif., to Hialeah, Fla., with most scheduled to shut their doors in July, based on calls to the stores, malls and confirmation in local media.

   

  At the start of the year, the retailer pinpointed the 150 stores it said it would close. But it declined this week to provide a list of additional locations that are slated to shut since then, saying that it update store counts each quarter.

  In addition, we just learned that new home sales in April were 11.4 percent lower than they were in March…

  If you’re surprised by the collapse in new home sales in April, then you’re not paying attention.

   

  The 11.4% MoM plunge in new home sales in April was 5 standard deviations below expectations and the biggest since March 2015.

  Yes, the stock market is holding up for the moment, but for most Americans the “real economy” just continues to deteriorate.  Just because we are at the end of a giant financial bubble does not mean that everything is going to be okay.

  The numbers that I brought up in this article are just another example of our long-term economic decline.  In a healthy economy, entrepreneurs and small businesses would be thriving.  But instead, they are being systematically strangled out of existence by a political system that is wildly out of control.

  

  

• Russia And Iran Sign Oil-For-Goods Barter Deal; Escape Petrodollar

  Iran signed an agreement with Russia under which it has broken free from the petrodollar, and will “sell”, or rather barter crude oil to Russia in exchange for products. The announcement was made by Iran’s Oil Minister Bijan Zanganeh, as reported by Russia’s RIA and TASS news agencies.

  “The deal has been concluded. We are just waiting for the implementation from the Russian side. We have no difficulties; we signed the contract, everything is coordinated between the parties. We are waiting for Russian oil companies to send tankers,” he said, as quoted by Russian news agencies. While sanctions against Iran have been lifted, restrictions on trade in US dollars for the country’s banks remain, making it difficult to sell oil on the open market.

  As reported here just over three years ago, the $20 billion agreement was initially signed in April 2014 when Iran was under Western sanctions over its nuclear program. Russian traders were to participate in the selling of Iranian oil. In exchange, Iran wanted essential goods and technology from Russia.

  This is what Reuters reported in April 2014 when the deal was first announced:

  Iran and Russia have made progress towards an oil-for-goods deal sources said would be worth up to $20 billion, which would enable Tehran to boost vital energy exports in defiance of Western sanctions, people familiar with the negotiations told Reuters.

   

  In January Reuters reported Moscow and Tehran were discussing a barter deal that would see Moscow buy up to 500,000 barrels a day of Iranian oil in exchange for Russian equipment and goods.

   

  The White House has said such a deal would raise “serious concerns” and would be inconsistent with the nuclear talks between world powers and Iran.

  Little did the US know back in 2014 that less than three years later, Russia would also be running the US, courtesy of wholesale manipulation of tens of millions of Americans, whom it hacked and convinced to vote for Trump.

  Sarcasm aside, when the sanctions against Tehran were lifted in 2016, Russian Energy Minister Alexander Novak said the deal was no longer necessary. However, Novak said in March 2017 that the plan was back on the table with Russia buying 100,000 barrels per day from Iran and selling the country $45 billion worth of goods, Russia Today reported.

  Russia and Iran discussed energy, electricity, nuclear energy, gas and oil, as well as cooperation in the field of railways, industry, and agriculture.

  Novak had announced in February that Russia’s state trading enterprise Promsirieimport has been authorized by the government to carry out the purchase of Iran’s oil through the oil-for-goods program under study by both countries. Meanwhile, Zanganeh had been quoted by the media as saying that Iran would be paid in cash for half of the oil that would be sold to Russia.  The due payments for the remaining half would be made in goods and services, the Iranian minister had said. 

  A February report by the International Monetary Fund said that while Iran has been reconnected to SWIFT, significant challenges prevent Iranian banks fully-reconnecting to global banks still exist mostly due to remaining US sanctions.

  “US primary sanctions apply to US financial institutions and companies, including their non-US branches (but not their subsidiaries). Moreover, with very limited exceptions, businesses and individuals related to the US continue to be generally prohibited from dealing with Iran, including with the government,” the IMF said.

  “US dollar clearing restrictions have not been lifted and pose a significant challenge for non-US banks who may do business with Iran, but may not be paid in US dollars,” it added.

  And since necessity is the mother of invention, what better way to bypass the world’s reserve currency than to go back to the way commerce was conducted before currencies were even created: through barter.

  

  

• New Home Prices Are Over 50% Higher In Canada Than The US

  Authored by Kaitlin Last via BetterDwelling.com,

  The price of new homes is quickly diverging in Canada and the US.

   Data from the Canadian Housing and Mortgage Corporation (CMHC) show that new homes are selling for substantially more than the same time last year.

   

  Meanwhile south of the border, data from the US Bureau of Census show that new home prices are on the decline.

  This has lead to an even wider gap between the average price of a new home in Canada and the US.

  Canadian New Construction Is Higher

  The price of a new home across Canada is up for the second month in a row. The average sale price in April was CA$751,881 (US$559,123). This represents an 11% increase from the same time last year, when measured in Canadian dollars. When compared in US dollars, that increase drops to a much more conservative 2.64%. Even after factoring in the loonie’s decreased buying power in Canada, new home prices still climbed.

  

  US New Construction Is Lower

  American new home builders aren’t seeing such steep climbs in sale prices. Actually, they aren’t seeing climbs at all. The average price of a new home in the US was CA$495,271 (US$368,300). This represents a 3% decline from the same time last year, when measured in US dollars. In Canadian dollars, this was a 0.49% decline from the same time last year. Both forms of measurement show declining home prices in the US, curious since their economy is in a much better state than Canada right now.

  

  US Vs. Canadian Prices

  New homes are trading at substantially higher values in Canada than the US in April. The average new home in April 2017 was 51% higher in Canada than the US. The same time last year, prices in Canada were only 36% higher. It appears in a post-crash United States, new home buyers are taking much more conservative strides. In a hasn’t-crashed-in-decades Canada, new home buyers are optimistic about future values.

  The gap between new home sale prices in Canada and the US is growing substantially. The US is a country with a booming economy, almost 10 times the population of Canada, and less land mass. Somehow, new home prices in the US are dropping compared to the same time last year. In sparsely populated Canada, prices are increasing – despite the precarious position of our economy.

  Are Americans being overly cautious on homeownership, or are Canadians demonstrating irrational exuberance for homeownership, much like the US did in a pre-2006 America? Tell us your thoughts in the comments.

  

  

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• The Fourth Turning's Neil Howe Warns: We Are In The 1930s, "Winter Is Coming"

  Via Mauldin Economics,

  From the Balkans to the US, walls are going up, not down, according to demographer and The Fourth Turning author Neil Howe.

  Speaking to a packed crowd at Mauldin Economics’ Strategic Investment Conference in Orlando, Howe said we are reliving many of the same trends and changes of the 1930s.

  Faith in Democracy Is Fading

  “Worldwide, people are losing trust in institutions,” he said. “Trust in the military, small business, and police is still there. But trust in democracies, media, and politicians is dropping.”

   

  “When was the last time we saw these changes and the rise of right-wing populism?” he asked. “The 1930s.”

  Howe’s statement is borne out of a June 2016 Gallup poll. When poll takers were asked how much confidence they had in institutions in American society, the results were troubling.

  Just 15% said they had a “great deal” of confidence in the US Supreme Court. Banks trailed behind at 11%, followed by the criminal justice system (9%), newspapers (8%), and big business (6%).

  Meanwhile, just 16% expressed a “great deal” of confidence in the presidency, with that number plummeting to 3% for Congress.

  What Does This Mean for the Future of the West?

  In his keynote, Howe shared his forecasting logic:

  “My method is to step back and realize one thing: There is something we know about the world in 20 years’ time. The people who live there will be all of us, 20 years older and playing a different role. I call this ‘looking along the generational diagonal.’”

  The critical thing to remember about the current crisis period is that what comes next will be an era in which there is a new order.

  According to the Strauss-Howe generational theory, as this new order takes root, individualism declines and institutions are strengthened.

  “History is seasonal, and winter is coming,” Howe has said. But after winter, comes spring.

  As the American Revolution was followed by calm, as the Civil War was followed by reconstruction and a gilded age, and as the Great Depression and World War II were followed by an age of peace and prosperity, so too will this crisis period be followed by a calm, stable era.

  It’s simply a matter of time.

  

  

• Believing The Russian "Hacking" Claim

  Authored by David Swanson via The Strategic Culture Foundation,

  Government lies are common when seducing a population to support a war, but the Russian “hacking” claims are unusual in that U.S. officials supply no evidence while the “fact” is just assumed,

  

  When the U.S. public was told that Spain had blown up the Maine, or Vietnam had returned fire, or Iraq had stockpiled weapons, or Libya was planning a massacre, the claims were straightforward and disprovable.

  

  CIA Director John Brennan addresses officials at the Agency’s headquarters in Langley, Virginia. (Photo credit: CIA)

  Before people began referring to the Gulf of Tonkin incident, somebody had to lie that it had happened, and there had to be an understanding of what had supposedly happened. No investigation into whether anything had happened could have taken as its starting point the certainty that a Vietnamese attack or attacks had happened. And no investigation into whether a Vietnamese attack had happened could have focused its efforts on unrelated matters, such as whether anyone in Vietnam had ever done business with any relatives or colleagues of Robert McNamara.

  All of this is otherwise with the idea that the Russian government determined the outcome of the 2016 U.S. presidential election. U.S. corporate media reports often claim that Russia did decide the election or tried to do that or wanted to try to do that. But they also often admit to not knowing whether any such thing is the case.

  There is no established account, with or without evidence to support it, of exactly what Russia supposedly did. And yet there are countless articles casually referring, as if to established fact to the…

  “Russian influence in the 2016 presidential election” (Yahoo).

   

  “Russian attempts to disrupt the election” (New York Times).

   

  “Russian… interference in the 2016 U.S. presidential election” (ABC).

   

  “Russian influence over the 2016 presidential election” (The Intercept).

   

  “a multi-pronged investigation to uncover the full extent of Russia’s election-meddling” (Time).

   

  “Russian interference in the US election” (CNN).

   

  “Russia’s interference in the 2016 presidential election” (American Constitution Society).

   

  “Russian hacking in US Election” (Business Standard).”

  “Obama Strikes Back at Russia for Election Hacking” we’re told by the New York Times, but what is “election hacking”? Its definition seems to vary widely. And what evidence is there of Russia having done it?

  The “Russian interference in the 2016 United States elections” even exists as a factual event in Wikipedia, not as an allegation or a theory. But the factual nature of it is not so much asserted as brushed aside.

  Former CIA Director John Brennan, in the same Congressional testimony in which he took the principled stand “I don’t do evidence,” testified that “the fact that the Russians tried to influence resources and authority and power, and the fact that the Russians tried to influence that election so that the will of the American people was not going to be realized by that election, I find outrageous and something that we need to, with every last ounce of devotion to this country, resist and try to act to prevent further instances of that.” He provided no evidence.

  Activists have even planned “demonstrations to call for urgent investigations into Russian interference in the US election.” They declare that “every day we learn more about the role Russian state-led hacking and information warfare played in the 2016 election.” (March for Truth.)

  Belief that Russia helped put Trump in the White House is steadily rising in the U.S. public. Anything commonly referred to as fact will gain credibility. People will assume that at some point someone actually established that it was a fact.

  Keeping the story in the news without evidence are articles about polling, about the opinions of celebrities, and about all kinds of tangentially related scandals, their investigations, and obstruction thereof. Most of the substance of most of the articles that lead off with reference to the “Russian influence on the election” is about White House officials having some sort of connections to the Russian government, or Russian businesses, or just Russians. It’s as if an investigation of Iraqi WMD claims focused on Blackwater murders or whether Scooter Libby had taken lessons in Arabic, or whether the photo of Saddam Hussein and Donald Rumsfeld shaking hands was taken by an Iraqi.

  A general trend away from empirical evidence has been extensively noted and discussed. There is no more public evidence that Seth Rich (a Democratic National Committee staffer who was murdered last year) leaked Democratic emails than there is that the Russian government stole them. Yet both claims have passionate believers.

  Still, the claims about Russia are unique in their wide proliferation, broad acceptance, and status as something to be constantly referred to as though already established, constantly augmented by other Russia-related stories that add nothing to the central claim. This phenomenon, in my view, is as dangerous as any lies and fabrications coming out of the racist right.

  

  

• US Deploys Third Aircraft Carrier Toward North Korea

  One month ago, when we first discussed that in addition to the CVN-70 Carl Vinson aircraft carrier group, the US was deploying two more carriers toward the Korean peninsula, some took the Yonhap-sourced report skeptically: after all, what’s the incremental symbolic impact of having three, or even two aircraft carriers next to North Korea when just one would more than suffice. Then, two weeks ago, the report was proven half right when US officials announced that in addition to the first US carrier already on location, the US Navy is moving the USS Ronald Reagan aircraft carrier to the Korean Peninsula, where it would conduct dual-carrier training exercises with the USS Carl Vinson.

  

  Aircraft carrier CVN-76 Ronald Reagan

  After completing its maintenance period in Yokosuka, Japan, the USS Ronald Reagan departed for the Korean Peninsula on Tuesday, according to the Navy. “Coming out of a long in-port maintenance period we have to ensure that Ronald Reagan and the remainder of the strike group are integrated properly as we move forward,” Rear Adm. Charles Williams said in a press release.  Once it arrives in the region, the carrier will conduct a variety of training exercises but primarily focus on certifying its ability to safely launch and recover aircraft, the service said. In other words, training for combat missions involved the North Korean capital.

  We concluded our report from mid-May by saying that the US Navy may soon “further deploy the CVN-68 Nimitz, which was the third carrier reported to be eventually making its way toward Korea.”

  We didn’t have long to wait, because on Friday the Kitsap Sun confirmed what we reported initially over a month ago, namely that the USS Nimitz will depart Naval Base Kitsap-Bremerton on Thursday on its first deployment since 2013. Official details of the deployment were hazy, with spokeswoman Theresa Donnelly saying that The Nimitz-class aircraft carrier is expected to be in the western Pacific for six months with visits to the Middle East and Asia-Pacific, “though plans could change in response to world events.”

  However, a subsequent report from VOAnews confirms that the ultimate destination is none other than the country the US will almost certainly attack next, North Korea:

  The United States is sending a third aircraft carrier strike force to the western Pacific region in an apparent warning to North Korea to deter its ballistic missile and nuclear programs, two sources have told VOA. The USS Nimitz, one of the world’s largest warships, will join two other supercarriers, the USS Carl Vinson and the USS Ronald Reagan, in the western Pacific.

  The Nimitz will lead Carrier Strike Group 11, which includes guided-missile destroyers USS Shoup and USS Kidd from Naval Station Everett, guided-missile destroyers USS Howard and USS Pinckney and guided-missile cruiser USS Princeton from San Diego, and a conglomeration of aircraft squadrons that comprise Carrier Air Wing 11, including Naval Air Station Whidbey Island-based Gray Wolves of Electronic Attack Squadron 142. 

  
  Aircraft carrier CVN-68 Nimitz

  After returning from its last deployment, the Nimitz underwent a 20-month maintenance and modernization period at Puget Sound Naval Shipyard that was completed in October. It has spent most of the past seven months at sea undergoing training and inspections in preparation for deployment. Now the ship and crew are ready to go, said commanding officer Capt. Kevin Lenox.

  “I am so incredibly proud of the entire Nimitz team and the terrific coordination and support across the entire strike group, especially in such a condensed training cycle,” he said in a news release. “The crew stepped up to the plate, and I’m confident we’re ready to meet whatever challenges lie ahead on our upcoming deployment.”

  While it is rare for the U.S. military to deploy two carriers in the same region at the same time, it is almost unheard of to have three aircraft carriers in close proximity to each other absent current or imminent military action. Which may be the case soon: as VOA notes, North Korea’s growing nuclear and missile threat is seen as a major security challenge for Trump, who has vowed to prevent the country from being able to strike the U.S. with a nuclear missile. 

  Sitting alongside Japanese Prime Minister Shinzo Abe, Trump said on Friday prior to the start of the G-7 meeting in Sicily that world leaders would have a “particular focus on the North Korea problem.” The White House issued a statement on Friday which said the two leaders have agreed to “enhance sanctions on North Korea” in an attempt to prevent the further development of North Korea’s ballistic missile and nuclear programs.

  Meanwhile, as reported on Friday, the U.S. military will test a system to shoot down an ICBM for the first time next week. It is intended to simulate a North Korean ICBM aimed at the U.S. The Missile Defense Agency said it will test an existing missile defense system on Tuesday to try to intercept an ICBM. The Pentagon has used the Ground-Based Midcourse Defense (GMD) system to intercept other types of missiles, but never an ICBM. The GMD has been inconsistent, succeeding in nine of 17 attempts against missiles without intercontinental range capability since 1999.

  So, perhaps as a contingency plan, the US will soon have not one, not two, but three aircraft carriers in the proximity of the Korean peninsula “just in case.” The trip from Naval Station Everett is expected to take several weeks. Meanwhile, here is the latest deployment of US naval forces around the globe as of May 25, courtesy of Stratfor.

  

  

  

• Visualizing The Expanding Universe Of Cryptocurrencies

  Bitcoin is the original cryptocurrency, and its meteoric rise has made it a mainstay of conversation for investors, media, and technologists alike.

  In fact, as Visual Capitalist's Jeff Desjardins details, the innovation of the blockchain is changing entire markets, while causing ripples with central banks and the financial industry. At time of publication, the bitcoin price now hovers near US$2,200, a massive increase from this time last year.

  But the true impact of Bitcoin is actually far more reaching than this – it’s actually helped to birth new markets for over 800 other cryptocurrencies and assets that are available for online trading. And while the market for bitcoins is worth nearly $40 billion itself, the rest of these cryptocurrencies are actually worth even more in combination.

  

  Courtesy of: Visual Capitalist

   

  THE ALTCOIN UNIVERSE

  For the first time since Bitcoin was founded, it now makes up the minority of the entire cryptocurrency market at about 47.9% of all coins and assets.

  

  So what are the other altcoins that make up the rest of this universe, and where did they come from?

  Litecoin

  Litecoin is one of the first altcoins, and it is nearly identical to Bitcoin after being “forked” in 2011. Litecoin aims to process blocks 4x faster than Bitcoin to speed up transaction confirmation time, though this creates several other challenges as well. At time of writing, Litecoin’s market capitalization is worth $1.3 billion.

  Ethereum

  Ethereum, launched in 2015, is the largest coin by market capitalization aside from Bitcoin. However, it is also quite different. While Bitcoin is designed to be a payments protocol first, Ethereum enables developers to build and deploy decentralized applications, while also enabling smart contracts. The tokens used to power the network are called Ether, but they can also be traded online. At time of writing, Ethereum’s market capitalization is $15.4 billion.

  Also interesting: the Ethereum network actually split into two in 2016. It’s a complicated situation, but read about it here. There is now a separate Ethereum, based on the original Ethereum blockchain, trading as “Ethereum Classic” with its own market capitalization of $1.4 billion.

  Ripple

  Ripple (XRP) is the native currency of the Ripple Protocol – a broader catch-all for an open-source, global exchange. It’s already being used by banks such as Santander, Bank of America Merrill Lynch, UBS, and RBC. It solves a different problem than Bitcoin, allowing for settling payments between different currencies and even different payment systems. Today, Ripple’s native coin (XRP) has a market cap of $10.9 billion.

  LEARN MORE

  With over 800+ altcoins or assets out there, there’s plenty of information to absorb.

  Here’s a short 20-minute course on the history of altcoins that might provide useful context, as well as in-depth explanations of Ethereum and Ripple that may help you learn about the important parts of a rapidly growing altcoin universe.

  

  

• Matt Taibbi: "Gianforte's Win Confirms The Democrats Need A New Message"

  Authored by Matt Taibbi via RollingStone.com,

  

  Democrat Rob Quist was beat by Greg Gianforte in Thursday's special election in Montana

  The story of Greg Gianforte, a fiend who just wiped out a Democrat in a congressional race about ten minutes after being charged with assaulting a reporter, is déjà vu all over again.

  How low do you have to sink to lose an election in this country? Republicans have been trying to answer that question for years. But they've been unable to find out, because Democrats somehow keep failing to beat them.

  There is now a sizable list of election results involving Republican candidates who survived seemingly unsurvivable scandals to win higher office.

  The lesson in almost all of these instances seems to be that enormous numbers of voters would rather elect an openly corrupt or mentally deranged Republican than vote for a Democrat. But nobody in the Democratic Party seems terribly worried about this.

  Gianforte is a loon with a questionable mustache who body-slammed Guardian reporter Ben Jacobs for asking a question about the Republican health care bill. He's the villain du jour, but far from the worst exemplar of the genre.

  New Yorkers might remember a similar congressional race from a few years ago involving a Staten Island nutjob named Michael Grimm. The aptly named Grimm won an election against a heavily funded Democrat despite being under a 20-count federal corruption indictment. Grimm had threatened on camera to throw a TV reporter "off a fucking balcony" and "break [him] in half … like a boy." He still beat the Democrat by 13 points.

  The standard-bearer for unelectable candidates who were elected anyway will likely always be Donald Trump. Trump was caught admitting to sexual assault on tape and openly insulted almost every conceivable demographic, from Mexicans to menstruating women to POWs to the disabled; he even pulled out a half-baked open-mic-night version of a Chinese accent. And still won.

  Gianforte, Trump and Grimm are not exceptions. They're the rule in modern America, which in recent years has repeatedly demonstrated its willingness to vote for just about anybody not currently under indictment for serial murder, so long as that person is not a Democrat.

  The list of winners includes Tennessee congressman Scott Desjarlais, a would-be "family values" advocate. Desjarlais, a self-styled pious abortion opponent, was busted sleeping with his patients and even urging a mistress to get an abortion. He still won his last race in Bible country by 30 points.

  

  Scott Desjarlais

  The electoral results last November have been repeated enough that most people in politics know them by heart. Republicans now control 68 state legislative chambers, while Democrats only control 31. Republicans flipped three more governors' seats last year and now control an incredible 33 of those offices. Since 2008, when Barack Obama first took office, Republicans have gained somewhere around 900 to 1,000 seats overall.

  There are a lot of reasons for this. But there's no way to spin some of these numbers in a way that doesn't speak to the awesome unpopularity of the blue party. A recent series of Gallup polls is the most frightening example.

  Unsurprisingly, the disintegrating Trump bears a historically low approval rating. But polls also show that the Democratic Party has lost five percentage points in its own approval rating dating back to November, when it was at 45 percent.

  The Democrats are now hovering around 40 percent, just a hair over the Trump-tarnished Republicans, at 39 percent. Similar surveys have shown that despite the near daily barrage of news stories pegging the president as a bumbling incompetent in the employ of a hostile foreign power, Trump, incredibly, would still beat Hillary Clinton in a rematch today, and perhaps even by a larger margin than before.

  If you look in the press for explanations for news items like this, you will find a lot of them. Democrats may have some difficulty winning elections, but they've become quite adept at explaining their losses.

  According to legend, Democrats lose because of media bias, because of racism, because of gerrymandering, because of James Comey and because of Russia (an amazing 59 percent of Democrats still believe Russians hacked vote totals).

  Third-party candidates are said to be another implacable obstacle to Democratic success, as is unhelpful dissension within the Democrats' own ranks. There have even been whispers that last year's presidential loss was Obama's fault, because he didn't campaign hard enough for Clinton.

  The early spin on the Gianforte election is that the Democrats never had a chance in Montana because of corporate cash, as outside groups are said to have "drowned" opponent Rob Quist in PAC money. There are corresponding complaints that national Democrats didn't do enough to back Quist.

  

  Greg Gianforte

  A lot of these things are true. America is obviously a deeply racist and paranoid country. Gerrymandering is a serious problem. Unscrupulous, truth-averse right-wing media has indeed spent decades bending the brains of huge pluralities of voters, particularly the elderly. And Republicans have often, but not always, had fundraising advantages in key races.

  But the explanations themselves speak to a larger problem. The unspoken subtext of a lot of the Democrats' excuse-making is their growing belief that the situation is hopeless – and not just because of fixable institutional factors like gerrymandering, but because we simply have a bad/irredeemable electorate that can never be reached.

  This is why the "basket of deplorables" comment last summer was so devastating. That the line would become a sarcastic rallying cry for Trumpites was inevitable. (Of course it birthed a political merchandising supernova.) To many Democrats, the reaction proved the truth of Clinton's statement. As in: we're not going to get the overwhelming majority of these yeehaw-ing "deplorable" votes anyway, so why not call them by their names?

  But the "deplorables" comment didn't just further alienate already lost Republican votes. It spoke to an internal sickness within the Democratic Party, which had surrendered to a negativistic vision of a hopelessly divided country.

  Things are so polarized now that, as Georgia State professor Jennifer McCoy put it on NPR this spring, each side views the other not as fellow citizens with whom they happen to disagree, but as a "threatening enemy to be vanquished."

  The "deplorables" comment formalized this idea that Democrats had given up on a huge chunk of the population, and now sought only to defeat and subdue their enemies.

  Many will want to point out here that the Republicans are far worse on this score. No politician has been more divisive than Trump, who explicitly campaigned on blaming basically everyone but middle American white people for the world's problems.

  This is true. But just because the Republicans win using deeply cynical and divisive strategies doesn't mean it's the right or smart thing to do.

  Barack Obama, for all his faults, never gave in to that mindset. He continually insisted that the Democrats needed to find a way to reach lost voters. Even in the infamous "guns and religion" episode, this was so. Obama then was talking about the challenge the Democrats faced in finding ways to reconnect with people who felt ignored and had fled to "antipathy toward people who aren't like them" as a consequence.

  Even as he himself was the subject of vicious and racist rhetoric, Obama stumped in the reddest of red districts. In his post-mortem on the Trump-Clinton race, he made a point of mentioning this – that in Iowa he had gone to every small town and fish fry and VFW hall, and "there were some counties where I might have lost, but maybe I lost by 20 points instead of 50 points."

  Most people took his comments to be a dig at Clinton's strategic shortcomings – she didn't campaign much in many of the key states she lost – but it was actually more profound than that. Obama was trying to point out that people respond when you demonstrate that you don't believe they're unredeemable.

  You can't just dismiss people as lost, even bad or misguided people. Unless every great thinker from Christ to Tolstoy to Gandhi to Dr. King is wrong, it's especially those people you have to keep believing in, and trying to reach.

  The Democrats have forgotten this. While it may not be the case with Quist, who seems to have run a decent campaign, the Democrats in general have lost the ability (and the inclination) to reach out to the entire population.

  They're continuing, if not worsening, last year's mistake of running almost exclusively on Trump/Republican negatives. The Correct the Record types who police the Internet on the party's behalf are relentless on that score, seeming to spend most of their time denouncing people for their wrong opinions or party disloyalty. They don't seem to have anything to say to voters in flyover country, except to point out that they're (at best) dupes for falling for Republican rhetoric.

  But "Republicans are bad" isn't a message or a plan, which is why the Democrats have managed the near impossible: losing ground overall during the singular catastrophe of the Trump presidency.

  The party doesn't see that the largest group of potential swing voters out there doesn't need to be talked out of voting Republican. It needs to be talked out of not voting at all. The recent polls bear this out, showing that the people who have been turned off to the Democrats in recent months now say that in a do-over, they would vote for third parties or not at all.

  People need a reason to be excited by politics, and not just disgusted with the other side. Until the Democrats figure that out, these improbable losses will keep piling up.

  

  

• Albert Edwards: "What On Earth Is Going On With US Wages"

  When Albert Edwards predicted in late 2016 that a surge in wage inflation was imminent, we were confused by this prediction from the world’s preeminent deflationist: after all, not only had not a single economic indicator validated a tighter labor market despite unemployment just above 4%, but as we have have repeatedly demonstrated what little wage inflation existed, was attributable to managerial-level, supervisory positions while the bulk of job creation remained with minimum-wage jobs, which have continued to see virtually no wage growth. Even Morgan Stanley, a far greater bull than Edwards, one month ago admitted that “wage growth is leveling off, may be slowing.“

  Which is why we have to give Edwards credit: some 6 months after his initial call, he had the courage to do what is never easy and admit he was wrong, and that contrary to his expectations wages are not going up after all.

  Talking about wrong, I have to put my hands up. I have been expecting US wage inflation to roar ahead over the past three months to well above 3%, yet every data release has surprised on the downside. Wage inflation, as measured by average hourly earnings, has actually levelled off at close to 2½% while wage inflation for ‘the workers’ is actually slowing (see chart below)! Strictly speaking, “the workers” are defined (by the BLS) as “those who are not primarily employed to direct, supervise, or plan the work of others. Hey, that’s me!

  

  So with the concession aside, Edwards is left with even more question, starting with “What on earth is going on with US average hourly earnings?”

  Three consecutive Employment Reports have seen this key measure of wage inflation surprise by its weakness. I feel especially foolish as I had written that wages were set to accelerate sharply, forcing the Fed to tighten aggressively and thereby driving both bond yields and the dollar higher. Doh! While many commentators last year, including the Fed, expressed surprise that US wage inflation had been so quiescent despite a tight labour market, I thought there was a simple explanation. I believe that nominal wages had not accelerated more rapidly through 2016 primarily because headline CPI inflation had been so subdued, staying in a 0-1% range for most of the last couple of years. Hence nominal wages did not need to accelerate rapidly for workers to be much better off as 2-2½% nominal wage inflation translated into  strong real wage rises of around 1½-2% – the most rapid for years (see circled area in chart below).

   

  

   

  As headline CPI inflation surged this past six months, rapid real wage growth turned into real wage stagnation (see chart above). I believed that a tight labour market would prompt an aggressive reaction from “the workers” to maintain the previous 1½-2% rate of real wage inflation they had enjoyed and got used to through 2015 and 1H 2016. Hence I expected nominal wage inflation would roar upwards in 1Q this year. How wrong I was!

  There is even more confusion in the data, because Edwards points out another disconnect: while the BLS’ measure of hourly earnings has gone nowhere, and real earnings have in fact tumbled, the employment cost index has spiked, “with wage and Salaries jumping from a 0.5% rise in 4Q to rise by 0.8% in 1Q 2017 ? the fastest quarterly rise since 2007. On a yoy basis, this measure of wage inflation still showed a 45 degree upward trajectory into 1Q 2017 (see left-hand chart below). Adding benefits to wages and salaries, total compensation also rose by 2½%.”

  

  Then there is the issue of declining productivity, because when calculating productivity and unit labour cost growth, the BLS estimates non-farm businesses saw their workers compensation jump from the 3% average rate seen in 2016 to just shy of 4% yoy in 1Q 2017?. This has implications on corporate profits:

  “Together with sluggish 1% productivity growth, this means that unit labour costs are rising by almost 3% yoy, well in advance of the rate by which corporates are able to raise their output prices (see right-hand chart above). The bottom line is that US corporate margins are suffering a savage squeeze and have been for some time. What then do I make of the heady 1Q company reporting round? Not much.”

  Perhaps in retrospect, between the divergent AHE and ECI data, Edwards was not entirely wrong, as he suggests:

  The truth is that the closely watched average hourly earnings measure of wage inflation has not accelerated in response to a surge in headline CPI in the way I had expected. So strictly speaking I have been wrong and as such I must throw myself upon your bountiful mercy. But let me say in my defence that other measures of wage inflation have shown exactly the acceleration I had expected. The fight-back by labour to secure their rightful share of the economic pie is ongoing, but it seems likely that the savage downward trend in the share of labour compensation that had been in place since the 2001 recession seems to have at last been broken (see chart below). The laws of economics have not been abolished after all ? at least not in the US.

  

  Yet while the jury may still be out on US wages between two contradictory data sets from the BLS, when one looks outside the US, things are clear: despite years of QE, there is no wage growth. For evidence, look no further than Japan. Edwards again:

  Japan is becoming an economic enigma. Last week saw some truly astonishingly weak wage inflation data ? so weak that it sent the yen sharply lower on expectations that the Bank of Japan might need to step up their already ridiculously outsized QE programme to even higher levels. Wages for March fell by 0.4% yoy, well below both the expected 0.5% gain and February’s 0.4% rise. Even the far less erratic underlying wages (excluding overtime and bonus payments) weakened sharply and declined yoy in March. In real terms, total cash earnings were miserable too, falling by 0.8% from a flat reading in February (see charts below). Certainly on this measure Abenomics has been a total and utter failure.

   

  

   

  The idea was simple, QE (or QQE as the Japanese call it) would as an indirect consequence send the yen sharply lower (as it did in 2013/14), which would push up headline CPI inflation (also buoyed by the 2014 VAT hike) and drive wages higher in what was a tight labour market.

   

  And when I say tight, I mean properly tight. This is not the US, where most commentators agree there is likely to be more slack than the low headline unemployment numbers suggest due to the sharp decline in the participation rate since the last recession. By contrast, the Japanese labour market is unambiguously as tight as it ever has been in history (see left-hand chart below). Yet wage inflation remains moribund.

   

  

   

  Without any real cost-push wage pressures, and with the initial inflationary impulse on headline and core CPI of the declining yen of 2013-14 receding into a distant memory, core CPI inflation (ex food and energy) has begun to fall once again (for this see right-hand chart above, and note that headline and CPI ex-food are rising moderately only because the yoy impact of the oil price has gone from negative last year to positive this year). So after all the trillions of dollars of QE and huffing and puffing, Abenomics has failed to deliver its much touted exit from the deflationary mire.

  And before readers respond with “there is always more QE”, the problem is that for both the ECB and BOJ, the answer is increasingly, “there isn’t” as both central banks are just months away from running out of eligible bonds to buy, beyond which point the entire bond market may simply lock up, or the central banks will have to even more actively start buying equities, with both outcomes effectively a nationalization of capital markets. And the last time we checked with the USSR, that strategy did not work out too well…

  

  

• Federal Bureaucrats To The Public: Be Afraid!

  Authored by Ryan McMaken via The Mises Institute,

  States have always thrived on the fear of the taxpayers, and states have always justified their existence in part on the idea that without the state, we'd all be overrun by barbarians, or murdered by our neighbors. Charles Tilly, a historian of the state, frequently noted that the modern state as we know it, was born out of war, and was created to wage war. War and the state are inseparable. 

  Moreover, support for the state is so central to maintaining continued funding and deference to the state's monopoly power, that Randolph Bourne famously went so far as to say that "war is the health of the state."  

  By extension, agents of the state — whether elected officials or bureaucrats — fancy themselves as guardians of prosperity and civilization. Without them, they apparently believe, life would be barely worth living. 

  Thus, one should hardly be surprised when government bureaucrats spread fear as a means of self-promotion. 

  Keeping this tradition alive is Department of Homeland Security John Kelly who recently claimed that people would "never leave the house" if they "knew what I know about terrorism." 

  This, incidentally, introduces a new variation on the time-worn they're-coming-to-get-us propaganda that the state has relied on for centuries. Nowadays, we're not even allowed to know what the threat is.

  "It's a secret, so just trust us." is the refrain. "They're coming to kill us. We swear it's true."

  Kelly then punctuated his comments with an advertisement for the federal government, concluding  

  The good news is, for us in America, we have amazing people protecting us every day, DHS, obviously, FBI, fighting the away game is DOD Department of Defense, CIA, NSA, working with these incredible allies we have in Europe and around the world.

  What counts as "protecting us every day," is apparently a bit different for Kelly than for more astute observers. 

  James Bovard recently described how the FBI has been doing such a great job keeping us safe: 

  Before the 9/11 attacks, the FBI dismally failed to connect the dots on suspicious foreigners engaged in domestic aviation training. Though Congress had deluged the FBI with $1.7 billion to upgrade its computers, many FBI agents had old machines incapable of searching the Web or emailing photos. One FBI agent observed that the bureau ethos is that "real men don’t type. … The computer revolution just passed us by."

   

  The FBI’s pre-9/11 blunders "contributed to the United States becoming, in effect, a sanctuary for radical terrorists," according to a 2002 congressional investigation. (The FBI also lost track of a key informant at the heart of the cabal that detonated a truck bomb beneath the World Trade Center in 1993.)

  "Everyone makes mistakes!" Might be what the FBI's-backers claim. True enough. But few organizations get paid 8 billion dollars per year of the taxpayers' money to not stop terrorists.

  So, it's unclear what Kelly is referring to in how we'd all be dead were it not for federal agents. 

  Perhaps he's referring to the CIA. The same CIA that planned the disastrous Bay of Pigs invasion, and then spent decades paying spies to report on how the Soviet economy was growing impressively, estimating the Soviet economy to be three times the size of what it actually was. The implication, of course, was that the USSR was a powerhouse that could defeat the US in an arms race. 

  One can guess what CIA agents were saying at the time: "If you knew what we know about the Soviet economy, you'd never leave the house!" 

  Kelly also refers to the NSA. This is the same NSA that allowed Edward Snowden to walk off with countless numbers of their own top-secret documents. And its lack of control over its own information enabled this month's malware attack that infected computers in 99 countries. The attack was not stopped by the NSA, of course. 

  These are those "amazing people" that keep us safe, according to Kelly.

  And then there's the Department of Defense. The centerpiece of a military establishment that hasn't won a major conflict since 1945. The "victory" in Iraq in 1991 wasn't even complete enough to end the economic sanctions imposed on Iraq before the war started. Those sanctions persisted until 2003. 12 years after the first "victory" the US then attacked Iraq again, thus promoting the spread of Islamic extremism and causing a civil war that led to the near-destruction of Iraq's few remaining Christian communities. 

  "Before the United States invaded Iraq, Al Qa’ida was on the ropes…" the Brookings institution concluded in 2007. "The invasion of Iraq breathed new life into the organization."

  Meanwhile, the Pentagon doesn't know what it did with six trillion dollars. 

  Fortunately for us, the US's most implacable enemy today is ISIS, which has no air force, no navy, and is composed largely of depressed outsiders whose deadliest weapons outside of Iraq and Syria are delivery trucks. 

  It doesn't take an army, or an FBI, or a CIA to stop crazies from driving trucks into crowds on Bastille day, as one did in 2016. It requires that police keep unauthorized trucks off pedestrian malls during festivals. 

  Nor are secret police required to keep people from carrying bombs into crowded theaters. Competent security guards can do the trick. The same might be said of maniacs carrying semi-automatic rifles into night clubs. 

  But of course Kelly would likely claim that the government is preventing far greater attacks than these. He just can't tell us what any of them might be, or give any details at all. 

  Nevermind that in situations like this, the burden of proof is always on the government agency that  wants more tax dollars and more power to keep doing what they're doing. The claim of necessary secrecy offers a convenient excuse from having to provide an evidence at all. 

  But, there's always enough violence and mayhem in the world to try to convince people that the world is falling apart. Although the chances of being murdered in an American city are at a 50-year low (unless you're in certain neighborhoods of Chicago and Baltimore) many Americans believe crime is worse than ever. Pew has noted that at the homicide rate was cut in half over the past 20 years, Americans persist in the idea that crime is getting worse. 

  Moreover, under the Obama administration, the feds claimed that mass-shootings were sweeping the country. In fact, the odds of dying in a mass shooting are so low that they might as well be zero. 

  The hysteria over shootings, however, was a convenient justification for the federal government's ongoing attempts to regulate firearms. 

  "If you knew what I know about gun violence" Obama might have said. "you'd never leave the house!" 

  Creative arithmetic is also being used to justify public fear over terrorism. Kelly's comments invoked this week's massacre in Manchester where 22 people (not including the attacker) were murdered. But, if you're worrying about homicides in England, you'd might want to look to street crime instead. After all, in England and Wales, homicides increased by 121 (21 percent) from 2015 to 2016, largely fueled by stabbings and shootings of the traditional variety. 

  Unfortunately, many Americans have been trained to believe whatever they're told by higher authorities. The specifics vary according to one's politics. Leftists appear ready to believe whatever some federal bureaucrat says about global warming — provided it fits into the leftwing narrative. 

  Rightwingers are primed to believe whatever some government agents says that confirms their narrative about national security.

  To illustrate the skepticism one should bring to comments such as those made by Kelly, let's use the same format, and apply it to claims that might be made from across the ideological spectrum:

  "If you knew what I know about the state of our lakes and rivers, you'd never drink any water!" said the director of the EPA…

   

  "If you knew what I know about our economy, you'd never trust private industry!" said Senator Elizabeth Warren…

   

  "If you knew what I know about kidnappings, you'd never let your children out of your sight!" said FBI director…

   

  "If you knew what I know about global warming, you'd never drive a car again!" said President…

  And so on. 

  When confronted with a blanket claim that it's obvious to those "in the know" that hysterical fear is warranted, we might be inclined to demand more convincing evidence. But, if what is said just supports our existing biases, then no evidence is necessary. The self-serving opinion of a government bureaucrat is all that's required.

   

  

  

• The Golden Conspiracy

  Authored by Jim Rickards via The Daily Reckoning blog,

  

  Is there gold price manipulation going on? Absolutely. There’s no question about it. That’s not just an opinion.

  There is statistical evidence piling up to make the case, in addition to anecdotal evidence and forensic evidence. The evidence is very clear, in fact.

  I’ve spoken to members of Congress. I’ve spoken to people in the intelligence community, in the defense community, very senior people at the IMF. I don’t believe in making strong claims without strong evidence, and the evidence is all there.

  I spoke to a PhD statistician who works for one of the biggest hedge funds in the world. I can’t mention the fund’s name but it’s a household name. You’ve probably heard of it. He looked at COMEX (the primary market for gold) opening prices and COMEX closing prices for a 10-year period. He was dumbfounded.

  He said it was is the most blatant case of manipulation he’d ever seen. He said if you went into the aftermarket, bought after the close and sold before the opening every day, you would make risk-free profits.

  He said statistically that’s impossible unless there’s manipulation occurring.

  I also spoke to Professor Rosa Abrantes-Metz at the New York University Stern School of Business. She is the leading expert on globe price manipulation. She actually testifies in gold manipulation cases that are going on.

  She wrote a report reaching the same conclusions. It’s not just an opinion, it’s not just a deep, dark conspiracy theory. Here’s a PhD statistician and a prominent market expert lawyer, expert witness in litigation qualified by the courts, who independently reached the same conclusion.

  Now, where is the manipulation coming from?

  There are a number of suspects but you need look no further than China.

  China wants to do what the U.S. has done, which is to remain on a paper currency standard but make that currency important enough in world finance and trade to give China leverage over the behavior of other countries.

  The best way to do that is to increase its voting power at the IMF and have the yuan included in the IMF basket for determining the value of the special drawing right (SDR).

  China accomplished that last September when the IMF added the yuan to its basket of currencies.

  The rules of the game also say you need a lot of gold to play, but you don’t recognize the gold or discuss it publicly. Above all, you do not treat gold as money, even though gold has always been money.

  The members of the club keep their gold handy just in case, but otherwise, they publicly disparage it and pretend it has no role in the international monetary system. China is expected to do the same.

  Right now, China officially does not have enough gold to have a “seat at the table” with other world leaders. Think of global politics as a game of Texas Hold’em.

  What do want in a poker game? You want a big pile of chips.

  Gold serves as political chips on the world’s financial stage. It doesn’t mean that you automatically have a gold standard, but that the gold you have will give you a voice among major national players sitting at the table.

  For example, Russia has one-eighth the gold of the United States. It sounds like they’re a small gold power — but their economy’s only one-eighth as big. So, they have about the right amount of gold for the size of their economy. And Russia has ramped up its gold purchases recently.

  The U.S. gold reserve at the market rate is under 3% of GDP. That number varies because the price of gold varies. For Russia, it’s about the same. For Europe, it’s even higher — over 4%.

  In China, that number has been about 0.7% officially. Unofficially, if you give them credit for having, let’s say, 4,000 tons, it raises them up to the U.S. and Russian level. But they want to actually get higher than that because their economy is still growing, even if it’s at a much lower rate than before.

  Here’s the problem: If you took the lid off of gold, ended the price manipulation and let gold find its level, China would be left in the dust. It wouldn’t have enough gold relative to the other countries, and because the price of gold would be skyrocketing, they could never acquire it fast enough. They could never catch up. All the other countries would be on the bus while the Chinese would be off.

  When you have this reset, and when everyone sits down around the table, China’s the second largest economy in the world. They have to be on the bus. That’s why the global effort has been to keep the lid on the price of gold through manipulation. I tell people, if I were running the manipulation, I’d be embarrassed because it’s so obvious at this point.

  The price is being suppressed until China gets the gold that they need. Once China gets the right amount of gold, then the cap on gold’s price can come off. At that point, it doesn’t matter where gold goes because all the major countries will be in the same boat. As of right now, however, they’re not, so China has though to catch-up.

  I’ve described some catastrophic scenarios where the world switches to SDRs or goes to a gold scenario, but at least for the time being, the U.S. would like to maintain a dollar standard. Meanwhile, China feels extremely vulnerable to the dollar. If we devalue the dollar, that’s an enormous loss to them.

  China has recently sold a portion of its dollar reserves to prop up its own currency, which has come under tremendous pressure. But it still holds a large store of dollar reserves.

  If China has all paper and no gold, and we inflate the paper, they lose. But if they have a mix of paper and gold, and we inflate the paper, they’ll make it up on the gold. So they have to get to that hedged position.

  China has been saying, in effect, “We’re not comfortable holding all these dollars unless we can have gold. But if we are transparent about the gold acquisition, the price will go up too quickly. So we need the western powers to keep the lid on the price and help us get the gold, until we reach a hedged position. At that point, maybe we’ll still have a stable dollar.”

  The point is that is that there is so much instability in the system with derivatives and leverage that we’re not going to get from here to there. We’re not going to have a happy ending. The system’s going to collapse before we get from here to there. At that point, it’s going to be a mad scramble to get gold.

  The price of gold will go significantly higher in the years ahead. But contrary to what you read elsewhere, gold won’t go higher because China is confronting the U.S. or launching a gold-backed currency.

  It will go higher when all central banks, China’s and the U.S.’ included, confront the next global liquidity crisis, worse than the one in 2008, and individual citizens stampede into gold to preserve wealth in a world that has lost confidence in all central banks.

  When that happens, physical gold may not be available at all. The time to build your personal gold reserve is now.

  We need to mention Russia here too. Russia is also amassing gold. And since Russia and China aspire to be true gold powers, it’s not enough to have physical gold. It’s also critical to create gold exchanges and gold markets for price discovery and trading.

  Currently the price of gold is set in two places. One is the London spot market, controlled by six big banks including Goldman Sachs and JPMorgan. The other is the New York gold futures market controlled by COMEX, which is governed by its big clearing members, also including major western banks.

  In effect, the big western banks have a monopoly on gold prices even if they do not have a monopoly on physical gold. But that could be about to change.

  Russia and China are not only building up physical reserves and exploring for more, they are building trading systems that allow for price discovery and leveraged trading in gold.

  It may take a year or so to attract liquidity, but once these new exchanges are fully functional, the physical gold market will regain the upper hand as a price maker.

  Then gold will commence its march to monetary status, and its implied non-deflationary price of $10,000 per ounce.

  The time to buy is now, before that happens.

  

  

• Fed Fail? Traders Cut Rate-Hike Bets By The Most In History Last Week

  The last two weeks have seen speculators cover over $710 billion worth of Fed rate-hike bets – the biggest move in Eurodollar futures history as Trump concerns and Fed Minutes reignite lost faith in the ebullient future that sparked the creation of a record $3 trillion bet that The Fed will be right this time.

   

  Macro data has done nothing but collapse since The Fed hiked rates in March…

  

   

  And perhaps traders are starting to realize this is anything but 'transitory' as they covered a net 711,000 Eurodollar futures in the last two weeks – the most ever…

  

   

  And while Specs covered ED shorts, they also added to Treasury longs – pushing the aggregate Treasury complex net speculative position to its longest since August 2014 (which ended with the 30Y yield crashing from over 3.00% to below 2.25% in 3 months)

  

   

  They added 122K contracts in TY taking their net longs to 363K contracts, the highest since 2007 and turned net long by 47K contracts in US, buying 54K contracts.

  

  They also pared net shorts in FV by 46K contracts and increased net longs in TN by 22K contracts. However, they sold 43K contracts in TU futures over the week.

  Additionally, according to BofA, the buy-side is positioning for a June hike but with fewer follow-up hikes – they sold record 2-yr treasury, bought the most 30-yr since Oct. 2014.

  Away from bond-land, the buy-side bought the most WTI Crude and Gold futures since late February. Net positon in commodities was not stretched.

  

  

  

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• Medal Of Honor Recipient Warns: "It's Going To Come Here… Trump Must Release The Gates Of Hell" On Islamic State

  Authored by Mac Slavo via SHTFplan.com,

  

  With British Prime Minister Theresa May warning that another attack may be imminent, Medal of Honor Recipient Dakota Meyer says that it’s time to strike Islamic State strongholds without mercy, because sooner or later we could well witness suicide bombers detonating themselves in the middle of large crowds right here at home.

  Arguing that President Obama, who awarded Meyer his Medal of Honor, was weak on ISIS and terrorism in general, he says President Trump should take a completely different strategy.

  In short… it’s time to unleash the gates of hell…

  I’ve been saying this is going to happen for a long time.

   

  When is it coming here?

   

  I think the only way you get this point across is that we release the gates of hell on them and we start making war so ugly that…their recruitment videos… it won’t be cool to join ISIS anymore.

   

  And at some point we’re going to have to do that… this labeling of ‘it’s a lone wolf’ attack… or saying it’s not connected or this or that…

   

  You can’t just ignore this problem because it’s going to come here…

   

  The only thing I am optimistic about with this situation is that we have a President… think whatever you want about his politics…

   

  At least we have a president that’s in place that’s not going to allow us to be the victims… you can guarantee he’s going to do whatever it’s going to take… no matter if it’s popular in the court of public opinion… he’s going to do what’s right to protect America…

  //video.insider.foxnews.com/v/embed.js?id=5446288963001&w=560&h=316

  Watch the latest video at video.foxnews.com

  Our guess?

  President Trump was just warming up when he dropped this mother of all bombs on an ISIS complex in Afghanistan earlier this year:

  

  

• The Most Popular Books In History All Shared One Trait

  Throughout history, people have turned to works of literature for guidance, entertainment, and education. Modern businesses aim to tell stories that leave a long-lasting impact as well, and should look to examples of historical success to influence how they create their own content.

  Today’s infographic comes to us from Global English Editing, and it looks at 20 of the most popular books in the world. As Visual Capitalist's Jeff Desjardins notes, all of the books listed, even those published decades or centuries ago, have made an enduring impact on readers to this day. They have achieved this by stirring discussion and sparking debate wherever they are read.

  

  Courtesy of: Visual Capitalist

  CONTROVERSY: THE EVERGREEN THEME

  One of the important traits shared by every book on this list is the controversy that has swirled around each of them. This can be seen across different time periods and genres.

  People have questioned the identity and authorial authenticity of Homer and decried the upending of creationism proposed by Darwin. Even a children’s book like the modern bestselling series, Harry Potter, can be a magnet for discussion over what is morally right and wrong.

  It is often the case the that most popular and enduring literary works will not only captivate, but also address controversial issues in such a way that people will be talking about them for generations.

  LESSONS FROM HISTORY

  The recent bestselling streak of George Orwell’s 1984, first published in 1950, is an interesting illustration of this trend.

  The dystopian novel was banned upon its translation and release in the former USSR due to its implicit critique of Stalinist political ideology. By contrast, in the 1970s and 1980s, several American counties challenged 1984 on the grounds that it might promote communist ideals. In the 21st century, Orwell’s best-known work has been revisited by a new generation of readers as the American political climate continues to create new uncertainties about governance, the distortion of facts, and social control.

  

  FOR BUSINESS CONTENT, BOLD WILL HOLD

  The most popular books ever written can teach modern businesses a great deal about what it takes to make content that is evergreen, meaningful, and primed to engage their readers. Creating discussion is key in the age of the reactive “hot take” style of article. Your ability to stand out in the cultural, historical, or political context for having a point of view that many people find worthy of debating will give your work the staying power it needs.

  Considering that within any given minute there are 2.4 million Google searches taking place and over 700,000 people logging into Facebook, this is no easy task. But whether it’s through a new product or via customer engagement, creating meaningful discussion is key to making a business’ voice heard through all the noise.

  

  

• OANN Releases Report On Seth Rich Murder, Raises Questions About Chinese Corruption

  Via Disobedient Media

  The San Diego based One American News Network has released a new report highlighting key elements of the mystery surrounding the murder of DNC staffer Seth Rich. OANN cites a number of inconsistencies and lingering questions in the case, while also noting that Rich’s murder occurred in close proximity to the similarly strange death of UN official John Ashe. Ashe was found dead just days before he was set to testify against Clinton in relation to matters pertaining to a corruption case where Chinese billionaire Charlie Trie helped launder $1.2 million dollars as part of Chinese government efforts to influence Bill Clinton’s 1996 presidential election. Ashe’s death was originally reported as a heart attack, but the story changed after it emerged that the cause was in fact a crushed windpipe in what was labeled a “workout accident.” The full report can be viewed here:

  On May 25th, one day before OANN’s report, a representative of the media company made a post on the online messageboard 4chan appealing for help locating information regarding the doctor who treated Seth Rich for gunshot injuries he sustained during the incident. Within minutes of the post, OANN’s website was taken offline in a Distributed Denial of Service (DDOS) attack.

  

  Screenshot taken on 5/26/2017 showing that OANN’s website was taken offline

  The findings of the report offer fresh insights what is appearing to be a story of complex political corruption and Democratic National Committee (DNC) attempts to downplay the scandal. Disobedient Media has previously reported on the extensive ties that key players in the Seth Rich case have to the DNC, the Service Employees International Union (SEIU) and the Rose Law Firm, the law firm which was at the center of the 1990’s Whitewater Controversy.

  

  

• Why Bother?

  Authored by Robert Gore via Straight Line Logic blog,

  The best strategy for dealing with crazies is to keep your distance.

  

  You try to ignore the ravings of the paranoid lunatic on a street corner, but if he’s waving a gun, you can’t.  He may kill himself, but he may kill you. Protecting yourself is your first consideration. You want to get as far as possible from him.

  As an intellectual exercise, imagine how the Chinese and Russian leadership look at the United States, its government, and those of its allies. It will get you labeled as a “sympathizer” or “agent,” but take the risk and try seeing the world through their eyes:

  We hear the Americans raving about the exceptional and indispensable nation, the American imperium, and maintaining world order. What other conclusion can be drawn: like many lunatics, the US suffers from delusions of grandeur. As we know, it’s difficult to maintain order in one country, and the US wants to take on the whole world? They’re having a tough time maintaining order in the US. Half the country hates the other half, and many of their experts warn of civil unrest that could be ignited with the smallest of sparks. Take it from us, spark suppression is a full-time job in big countries with many people and few common interests, even those with powerful, intrusive governments like the US.

   

  How can the US think that it can rule the world when it can’t win wars in Vietnam, Afghanistan, and Iraq? That’s crazy talk! There are smart people in their military. They must recognize that guerrilla warfare, terrorism, knowledge of the people, language, and terrain, and the availability of cheap but effective defensive weapons and munitions give a huge advantage to nationals resisting domination in their own territory. Why hasn’t the US learned anything from their disastrous wars, or the Soviet fiasco in Afghanistan?

   

  We in Russia are not altogether comfortable with our Syrian involvement and know it poses substantial risks. However, Syria is in the same neighborhood, is a long-time Russian ally, and hosts Russia’s only Mediterranean port. The US has no such compelling interests and is apparently there at the behest of Saudi Arabia, the Gulf States, Turkey, and Israel. (How do these nations get the US to fight its wars? It must be baksheesh.) It pretends to fight Islamic terrorists while aiding them in another idiotic, and so far futile, attempt at regime change. The biggest danger for us in Syria isn’t the rebels, it’s those crazy Yanks.

   

  The US and its allies’ (what curious allies—the US defends them and picks up most of the tab while they fund cradle-to-grave welfare states) interventions have created refugees—some innocent victims, some potential terrorists—who have fled en masse to Europe and trickled into the US. More intervention will create more refugees, yet that is their policy. Russia and China both have problems with native Muslim populations; it’s pure lunacy to import them. Yet, the American and European intelligentsia condemn not the proponents but the detractors of military intervention and refugee creation and admittance.

   

  If those are supposed to be the smart people, it’s no wonder those countries are in such poor shape. A country is only as good as its people. The Americans and Europeans have voted themselves benefits from their governments that can only be paid for with debt. How long can that last? What will beneficiaries do when the well runs dry? The US used to be one of the most industrious countries on the planet. Now most of its people are fat, lazy, and soft, with no idea how to provide for themselves. The so-called smart people worry if transgenders can enter the bathroom of their choice, and cheer a great Olympic decathlon champion who turned himself into an approximation of a woman. These idiots are not useful to anybody.

   

  The only rational policy is to keep our distance from the US, while trying to protect ourselves from its depredations, and concentrate on jointly developing the immense potential of Eurasia. In other words, to continue doing what we’ve been doing. Our primary economic initiatives, One Belt One Road and the Maritime Silk Road, under the auspices of the Eurasian Economic Union, are going well. We will develop extensive commercial and transportation links among nations stretching from China to Europe, an area which encompasses over half the world’s population and natural resources. China will providing much of the infrastructure investment through the Asian Infrastructure Investment Bank. Russia will spearhead security arrangements, particularly against Islamic extremists, through the Shanghai Cooperation Organization, which includes China and central Asian nations that were formerly part of the USSR, and will soon admit India, Pakistan, and Iran.

   

  Financially, self-protection means moving away from fiat dollars and euros and stockpiling real money—gold. China is reducing its vast pile of US treasury securities, and Russia its much smaller pile. We will continue to advocate for replacement of the dollar as the world’s reserve currency, preferably with the International Monetary Fund’s Special Drawing Rights. The Chinese yuan recently became part of that currency basket. We have also taken steps to develop an alternative to the SWIFT system, the US’s monopoly on international bank clearing.

   

  Militarily, some of the bluster coming out of the US is insanity: the possibility of “winning” a nuclear war. No matter what their computer simulations might suggest, there is no way that a US first strike would wipe out our means and will to retaliate, regardless of their anti-ballistic missile systems in Eastern Europe and South Korea. Sometimes it is an advantage to be underestimated by one’s enemy, but in this case, US underestimation could lead to extinction of the human race. Our nuclear weaponry, military strategies, and defense systems must continue to be state of the art, to assure that destruction in the event of a US attack is mutual.

   

  Keeping our distance from the US certainly does not entail getting involved in their elections. Donald Trump didn’t have a positive thing to say about China during his campaign. Although he made noises about reducing America’s foreign interventions, we heard the same from George W. Bush and Barack Obama and look how that turned out. Trump also made noises about rapprochement with Russia, but it was clear that he’d be fighting his own Deep State if he won, which we did not expect. Why would we poison relations with Hillary Clinton, who we and most experts did expect to win, before she even took office? It’s a further sign of rampant delusion, a complete unwillingness to deal with reality, that Clinton’s Democrats are blaming Russia for problems they brought upon themselves.

  Why bother manipulating an election when America seems so bent on self-destruction? It would be like trying to leash a rabid dog.

   

  

  

• Pelosi Concerned POTUS' Trip Wasn't Alphabetized: "I Mean, Saudi Arabia. It Wasn't Even Alphabetical"

  Over the years, Nancy Pelosi has garnered somewhat of a reputation for saying things that don’t seem to make a whole lot of sense.  As most will recall, the pinnacle of her illogical ramblings seemingly came in March 2010 when she argued that voters would only be allowed to read the details of the Obamacare legislation after it had been passed. 

  For those who somehow managed to miss it…here you go:

   

  Oddly, comments like the one above seem to have had absolutely no impact on San Franciscans who continue to re-elect her to public office year after year.  And while we find that somewhat disturbing, it at least affords us all the opportunity to enjoy an endless supply of gaffes from Pelosi’s very active public speaking schedule.

  In fact, the latest gift from San Francisco to the world came yesterday when Nancy held her weekly press briefing and was caught completely off-guard by a journalist who asked for her thoughts on Trump’s first international trip.  While this would seem like a ‘softball question’ designed specifically for Nancy to knock out of the park, she proceeded instead to have yet another on-air nervous breakdown that ended with her questioning why Trump’s first foreign stops weren’t organized in alphabetical order.

  “I thought it was unusual for the President of the United States to go to Saudi Arabia first. Saudi Arabia!”

   

  “It wasn’t even alphabetical. I mean, Saudi Arabia.”

   

  She goes on to point out that 4 of the 5 previous presidents all visited Canada for their first foreign trip which she seemed to find more appropriate given its rank in the alphabetical list of foreign countries.  Of course, it does beg the question of why Obama didn’t visit Afghanistan first…hmmm, quite suspicious indeed.

  

  

• On Gold, Dollars, & Bitcoin

  Authored by Paul Brodsky via Macro-Allocation.com,

  We have been bullish on gold – the barbarous relic; King Dollar – the modern hegemon; and Bitcoin – the crypto currency investors love to hate. One might say our feet have been planted firmly in the past, present and future. (We may not have three feet, but let’s go with it.) Are we hedging our bets, being too cute by half, or is there a cogent rationale that unifies bullishness for money forms most would consider incongruous and at-odds with each other?

  

  The short answer is we like:

  1) gold, because central banks around the world own it and are buying more, ostensibly to devalue their fiat currencies against it someday, after they are forced to hyper-inflate in order to reduce the burden of systemic debt service and repayment;

   

  2) the dollar, because dollar-denominated financial markets are broader and deeper than any other market and because the Fed is years ahead of other major central banks when it comes to normalizing policy and maintaining bank solvency (i.e., other fiats are in worse shape), and;

   

  3) Bitcoin, the borderless digital currency that is already being perceived as a better store of value than gold and all fiat currencies, and potentially a more expedient means of exchange too. All three should win in different ways.

  It may be easier to accept this discussion by first reminding one’s self that monetary regimes come and go every fifty years or so. The last transition was in 1971 and the world is due for another. We have a high level of conviction that the evanescence of the current global monetary system is rooted in sound economics and already has been firmly established. A global monetary reset is necessary and likely.

  To understand why we must break down money into its two main components: a means of exchange and a store of value. When it comes to using money in exchange for goods and services, fiat currencies have it all over gold and crypto currencies presently. That’s because governments demand taxes be paid with their fiat currencies (legal tender), forcing producers and labor to demand compensation in those currencies. As a result, banking, payment systems and all goods and service channels are set up to use fiat-sponsored currencies.

  When it comes to a store of value, however, the factors of production may choose to save in whatever form of money they want. If the general perception is that government-sponsored, bank system-created fiat currencies will have to be greatly diluted in the future so that systemic debts can be serviced and repaid, then savers will migrate to money forms with capped floats, like gold and Bitcoin.

  Prior to 1971, if a major government-sponsored currency was threatened with dilution, global sovereigns and savers and producers would exchange that currency for gold at a fixed exchange rate to the dollar. Or, they could simply exchange that currency for another currency less likely to be diluted. In the current regime, all economies are highly levered and all fiat currencies must be greatly diluted in the future. It comes down to timing and we think the US dollar is the best positioned of all major fiat currencies. That said, it will eventually have to be diluted too and will lose value in gold and Bitcoin terms.

  As mentioned above, gold is still owned by the world’s major treasury ministries and central banks. (In fact, it is effectively the only asset on the Fed’s balance sheet that is not someone else’s liability.) If US or global economic growth were to fall enough, or contract, and central bank monetary and credit policies were to fail to stimulate positive growth, then the value of all outstanding sovereign, household and corporate debt (and bank and bondholder assets) would become stressed.

  The Fed would have no choice but to devalue dollars against its other asset – gold. Other central banks would either follow suit or go along with a coordinated plan to fix their currencies to the dollar (i.e., a new Bretton-Woods agreement). If this were to happen the price of gold in dollar terms would rise by as much as five to ten times current levels, in our view. (We arrive at this magnitude of change by taking the level of bank assets needed to be reserved and then using the Bretton Woods formula for currency valuation, base money divided by gold holdings.)

  The new gold price would reflect a level at which gold holders would be willing to exchange their gold for the diluting currency. This dynamic is basically what happened in another form with US interest rates in 1980/1981. US treasury yields were forced higher by the Fed (22 percent to 15 percent along the inverted yield curve), a level at which trade partners like OPEC would accept dollars with a floating exchange rate.

  Finally, Bitcoin. The BTC/USD exchange rate has gotten a lot of notice lately because it has almost doubled in the last month (se chart below)…

  

  To listen to financial media commentary, the extraordinary move must be the result of unsophisticated financial rubes looking to get rich quick on the latest tulip fad.

  We disagree. While the dollar price of BTC may drop significantly any time as it reflects people’s understanding of dynamic global economic and monetary conditions and of Bitcoin itself, we are highly confident the exchange rate will appreciate dramatically from current levels over time.

  To be sure, faith in the flexible exchange rate fiat monetary system remains strong in G7 economies and those that actively trade with them. But major currencies require continued faith in perpetual growth without recessions and that highly leveraged, irreconcilable balance sheets will never have to be diluted.

  Meanwhile, access to Bitcoin takes only internet connectivity, it is free to store, and there is no need to hide it traveling across borders. Bitcoin, itself or as a proxy for all crypto currencies, is quickly becoming a more reliable and accessible store of value for 5 billion people across the world residing in economies without major currencies, strong central banks or stable pegs.

  The store-of-value benefit is beginning to make itself clear to wealth holders in developed economies too, those becoming aware of the need for future fiat currency inflation by monetary authorities.

  Those unfamiliar with crypto currencies tend to fear bubble bursting outcomes. While this fear is understandable given its newness, complexity, past volatile market action and lack of a central or sovereign regulator, it is not reality-based. Bitcoin cannot be successfully hacked due to its underlying block chain recordkeeping system, which documents every transaction and every sequential custodian in the chain (all anonymously to the world). No one can create Bitcoins outside its system or sell Bitcoins that do not exist.

  Further, Bitcoin’s float cannot be diluted without the express agreement of 51 percent of all Bitcoin holders. Bitcoins are widely dispersed across the world and there is no central authority with a political agenda. It is inconceivable why Bitcoin holders would agree to being diluted anytime soon.

  At a $50 billion total market valuation, of which Bitcoin is about $30 billion, crypto currencies have almost incalculable appreciation potential vis-à-vis fiat currencies. They should gain significant market share for store of value purposes, and this could be sped up if payment systems adopt Bitcoin, Ethereum, Litecoin, or another crypto currency as a global means of exchange. After all, global fiat money amounts to nearly $100 trillion.

  Many of us who have toiled over the years as professional investors are deluded with the explicit or subconscious expectation that the perception of wealth and markets will someday revert to what they were five, ten or twenty years ago. They will not, in our view. Yes, this time IS different (as it always has been). Our money will change (as it always has).

  Given the highly leveraged state of the current monetary regime, the most dominant variable for future wealth maintenance and creation, in our view, may not be asset selection but rather money selection. Something to think about…

  

  

• Connecticut Credit Risk Soars To Record High As Tax Receipts Tumble

  Connecticut’s general-obligation bonds are riskier than ever as plummeting income-tax collections and a $2.3 billion budget deficit moved all three credit rating companies to downgrade its debt.

  

   

  As Bloomberg details, tax receipts for the current fiscal year ending in June will be about $451 million short of estimates from January, prompting Governor Dannel Malloy to empty the state’s already small budget stabilization fund. To help close the gap, public employees agreed to accept a 3-year wage freeze and to contribute more for their pension and health-care benefits under a tentative deal that would save more than $1.5 billion over the next two years.

  As we previously detailed, The state of Connecticut has been hit hard by the double whammy of a deteriorating local economy, coupled with a plunge in hedge fund profits – as well as hedge fund managers permanently relocating to Florida – leading to a collapse in tax revenues. According to the the latest Connecticut budget released last week, the state is reeling from the consequences of sliding tax revenue from the super-rich, i.e. the state's hedge fund managers. The latest figures showed that tax revenue from the state’s top 100 highest-paying taxpayers declined 45% from 2015 to 2016. The drop adds up to a $200 million revenue loss for Connecticut.

  In a dramatic, if of questionable credibility, soundbite Department of Revenue Services Commissioner Kevin Sullivan says these wealthy people are “dramatically less wealthy than they were before.” He was referring to annual income, not actual asset holdings, because judging by the all time high in the S&P, the local financial elite have never had a higher net worth.

  “When you look at the top 75, top 50 … this is a group of wealthy people who are dramatically less wealthy than they were before,” said Kevin Sullivan, commissioner of the Connecticut Department of Revenue Services. “These folks, for a number of reasons, are either not realizing as much income or don’t have as much income.”

  Just don't expect tears from the general public. Sullivan also noted how several international hedge funds have recently failed, resulting in “significant retrenchment” from investors. That drop in tolerance for risk brings smaller margins and ultimately less personal income for the state to tax, he added. It's fascinating how the Fed's central planning, superficially meant to restore "confidence" in a rigged, manipulated market is having such proound and adverse 2nd and 3rd order effects on state budgets.

  Sullivan also acknowledged part of revenue decline can also be attributed to “a handful” of wealthy individuals who moved to more tax-friendly states — an issue frequently raised by legislative Republicans, who argue Connecticut’s tax policies encourage the state’s super-rich to move out.

  None of this should be a surprise… it's no wonder more people than ever are looking to leave the increasing tax burden of this troubled state?

  

  

• Shari'ah-Compliant Crypto Gold: Could Islam Be Preparing For A New World Reserve Currency?

  Authored by Shannara Johnson via HardAssetAlliance.com,

  It all started pretty harmlessly: in December 2016, after about 12 months of deliberations, the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) and the World Gold Council announced a new “Shari’ah Standard on Gold.”

  The new standard was celebrated as a potentially big boost for global gold demand as it would give more than 2 billion Muslims in the world access to gold-based financial products that were previously forbidden to them.

  That included vaulted gold, gold accumulation plans, gold certificates, gold-backed ETFs like GLD, and gold mining stocks.

  Under Shari’ah law, physical gold was considered a “ribawi item,” which means it could only be used as a currency and worn as jewelry, but it couldn’t be traded for speculation or future value. However, Muslim investors were well aware that the $1.8 trillion Islamic finance business was missing out on important opportunities.

  Under the new standard, Shari’ah-compliance is guaranteed as long as physical gold is the underlying asset.

  And we didn’t have long to wait for a brand-new financial product coming from the Islamic world that combines the popularity of Bitcoin with the timeless value of physical gold: OneGram, a gold-backed, fully Shari’ah-compliant crypto currency.

  

  The new currency was announced on May 4 at the Ritz Carlton, Dubai International Financial Center—with the official ICO (Initial Coin Offering) following only 17 days later.

  “In recent years, the Middle East has seen incredible growth in fintech innovations including digital tokens and smart contracts,” said Ibrahim Mohammed, the founder and CEO of OneGram, in his first press release. “With OneGram, we’re excited to provide an opportunity for investors who care about Islamic financial markets and the security of commodity-backed investments to benefit from rapid technological advances in the blockchain industry.”

  According to OneGram’s website, initially each OneGram coin (OGC) is backed by one gram of gold and can be used for digital payments, just like Bitcoin.

  The total number of OGCs is fixed and won’t change after the ICO. The digital transaction fees (minus admin costs) will be reinvested to buy more gold.

  “Therefore,” states the website, “the amount of gold backing each OGC will increase with time.”

  Plus, of course, a rising gold price and the growing acceptance of OneGram in the market are also poised to pump up its value.

  Gold and crypto-currency experts are already speculating about the implications of the launch. A recent CoinDesk review stated:

  Bitcoin is often referred to as a “good” money because of its limited supply, relative fungibility and ease of exchange. If gold can also start to satisfy those requirements, a seismic shift from fiat to digital could be easier to “sell”—the public is predisposed to trust gold, certainly more so than cryptography.

  It could also open the door to the creation of a new global currency as an alternative to the dollar, something that Russia and China are rumored to be looking at.

  [Emphasis mine.]

  We sure do live in interesting times – and it is not all that far-fetched to think that OneGram, or another gold-backed crypto currency like it, could be a stealthy way to introduce a new global gold standard.

  

  

• WaPo Reports Kushner Sought "Secret" Back-Channel With Moscow, Admits It's Normal Practice

  Looks like we spoke too soon. The holiday-weekend Trump bombshell has arrived courtesy of The Washington Post. This time, the paper is reporting that Jared Kushner, the president’s son-in-law and one of his closest advisors, discussed the possibility of setting up a secure communications channel between the Trump transition team and the Kremlin with Russian Ambassador Sergei Kislyak.

  The scene was set earlier in the week when NBC reported on Thursday that Kushner is now “under FBI scrutiny” before explaining that he’s not an official target in the investigation.

  And now, WaPo reports, according to the anonymous US officials, sensitive information 'incriminating Kushner' was intercepted by US intelligence agencies when Kislyak relayed the details of the discussion to his superiors in Moscow.

  

  At first brush, the report appears damning: If accurate, WaPo has unearthed actual evidence of collusion between a senior Trump associated and the Russians, one might think.

  But it’s important to keep in mind two crucial facts that WaPo decided to bury further in their "reporting."

  First, this alleged discussion occurred during a meeting at Trump Tower in early December, nearly a month after Trump’s upset victory over Hillary Clinton.  The investigations being led by Special Counsel Robert Mueller, the House and the Senate are focused on uncovering evidence of collusion between Trump associates and the Russian government during the campaign.

   

  And second, if it weren’t for the implications (that this is evidence of collusion between a close Trump associated and Moscow), this would be a non-story, as WaPo readily admits, 16 paragraphs deep: “It is common for senior advisers of a newly elected president to be in contact with foreign leaders and officials. But new administrations are generally cautious in their handling of interactions with Moscow, which U.S. intelligence agencies have accused of waging an unprecedented campaign to interfere in last year’s presidential race and help elect Trump.”

  So, to summarize – after Trump won the election (thus not before the election and not showing any election-tampering collusion), Kushner began discussions with the US representative of another world super-power to set up the back-channel-communications that are standard when any new president is elected.

  If that's the best the media has for a long weekend, then perhaps, just perhaps, we have jumped the shark in terms of 'damning' leaked intercepts? Or perhaps the assumption is that the average WaPo reader will not reach the 16th paragraph, merely content with the headline confirmation of their own bias?

  In a separate story published Friday evening, Wapo reported that the Senate Intelligence Committee has asked President Trump’s political organization to gather and produce all documents, emails and phone records going back to his campaign’s launch in June 2015. The development is notable because it's the first time that any Congressional investigators have requested documents from the Trump campaign.

  

  

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• A New Financial System Is Being Born

  Authored by Mike Krieger via Liberty Blitzkrieg blog,

  

  If Bitcoin blew you away when you first discovered it, and continues to do so to this day, Spiral Dynamics can help explain why. Bitcoin was an expression in the physical world of the newly emergent leading-edge integral level consciousness. It drew lessons from history and attempted to take the best of orange and green worldviews and incorporate them into an entirely new form of money. We see the clear presence of free markets and individualism, as well as the intentional separation of the system from dominator hierarchies (bureaucratic government meddling), which had corrupted all money before it. Its greenness is evident in the fact that by design no individual or company controls the network. Global, decentralized, revolutionary technology. This is perhaps the perfect example of integral consciousness operating on our planet at this time from an economics standpoint, and why it has captured the imagination of so many, while at the same time being violently rejected by so many others.

   

  From February’s post: Why Increased Consciousness is the Only Path Forward

  Although I had heard about it much earlier, I didn’t truly start investigating Bitcoin until the summer of 2012. The more I learned the more my mind was blown away, and for a while I couldn’t think about anything else. What truly solidified its real world usefulness to me was when I discovered it had been used by Wikileaks to accept payments in the midst of a financial services blockade against the renegade publisher. This realization inspired my first Bitcoin related post in August 2012 titled, Bitcoin: A Way to Fight Back Against the Financial Terrorists? 

  In that piece, I linked to a Forbes article that detailed the revolutionary events taking place. We learned:

  Following a massive release of secret U.S. diplomatic cables in November 2010, donations to WikiLeaks were blocked by Bank of America, VISA, MasterCard, PayPal and Western Union on December 7th, 2010. Although private companies certainly have a right to select which transactions to process or not, the political environment produced less than a fair and objective decision. It was coordinated pressure exerted in a politicized climate by the U.S. government and it won’t be the last time that we see this type of pressure.

   

  Fortunately, there is way around this and other financial blockades with a global payment method immune to political pressure and monetary censorship.

   

  On its public bitcoin address, Wikileaks has taken in over $32,000 equivalent in more than 1,100 separate bitcoin donations throughout the blockade (1BTC = $10.00). But these amounts may be significantly higher, because it does not even include the individually-generated bitcoin addresses that WikiLeaks provides for donors upon request.

  I knew right then and there that Bitcoin had the potential to change the world. My passion for Bitcoin was always framed by my ten years working in the financial industry. Many of us who lived through the 2008 crisis knew the financial system was dead. We knew it was corrupt, archaic and terminal, so many of us began bracing for what might come next. We did what we thought made sense at the time, which included buying precious metals like gold and silver given their historic track record of protecting wealth in periods of paradigm-shifting financial disruption. Others took more extreme measures to protect themselves from the end of the financial system, but a small group forward thinking geeks decided to do something much better. They decided to build an alternative.

  Thus, Bitcoin was born and early adopters in the field of technology immediately began to build on top of it. As soon as I realized what was happening much of the “doom and gloom” that had enveloped my thinking began to lift. I now knew that even if the financial system crashed and burned tomorrow, the early stages of a new and far more honest financial system were already in place. The emergence of Bitcoin literally changed my life for the better as it allowed me to emerge from a cave of gloom and become optimistic about our long-term future. While I knew the path would be long and hard since the current entrenched interests wouldn’t give up without a fight, I could see a very bright light at the end of the tunnel, and the continued development in this space has been extraordinary to watch ever since.

  The global financial system as it stands completely archaic and corrupt. It enriches the wrong types of people for the wrong sort of behavior, and is entirely extractive and parasitic by design.  If there’s sector in the economy that needs a total redesign and reboot for the sake of humanity, it’s the financial system.

  Being involved in the crypto world for the past five years has been a breath of fresh air and a shot of adrenaline to my system. Traditional markets are a rigged snooze-fest by comparison, grotesque financial Potemkin villages designed to make overly indebted, predatory economies look good. What I find so fascinating about the current environment is that many of the dreams we all read about in the very early days of Bitcoin are starting to be implemented and designed, slowly but surely. For those of you who still have a difficult time conceptualizing exactly what’s happening in the space, I think the following tweet may help.

  If you think of the crypto coin world as the beginning of an entirely new financial system architecture it all makes a lot more sense.

  — Michael Krieger (@LibertyBlitz) May 24, 2017

  //platform.twitter.com/widgets.js

  On that note, I want to talk about more than just Bitcoin, which I see as the reserve currency of the crypto world. Beyond Bitcoin, a lot of the buzz in the space right now revolves around a burgeoning phenomenon known as ICOs, or Initial Coin Offerings. So what are ICOs?

  Yesterday, TechCrunch published an interesting piece on the topic. Here are a few keys points:  

  Because this editor was still confused (I’m not proud), I talked yesterday with Stan Miroshnik, a UC Berkeley grad with an MBA from MIT who today runs L.A.-based Argon Group, one of the first digital finance-focused investment banks. Miroshnik nicely answered an array of questions about ICOs, including how these things get staged, how companies establish a value for their offerings, and more. If you’re still trying to get a handle of this latest investing trend, too, read on.

   

  TC: ICOs are everywhere suddenly.  When was the first ICO staged?

   

  SM:  You have to go back to around 2013, when Mastercoin, a protocol on top the bitcoin blockchain, raised $500,000. Then you had a number of other milestone token sales, such as Ethereum in 2014, then the DAO, or Decentralized Autonomous Organization, which was built on the Ethereum blockchain and that stored and transmitted Ether and Ethereum-based assets and that raised the equivalent of $150 million last year.

   

  Momentum began to build after that, as a smaller group of [these offerings] grew in size, and by last fall, some companies were raising millions of dollars in minutes. That really kind of made people stand up and wonder if this is a new funding mechanism.

  TC: How many ICOs have there been to date?

   

  SM: There were 64 last year that collectively raised $103 million, excluding the DAO. So far this year, we’ve seen 25 offerings raise a bit more than $163 million, and we’re on track to see more than $210 million raised by the end of June.

   

  TC: So how do these ICOs work, practically speaking?

   

  SM: There’s a cadence to these things. You do the prep-work and get your project to a natural technical milestone. Then you pre-announce when you’re planning to have a token sale, describing some of the terms, and telling a story of the project and its goals. You publish a white paper and disclosure and give people a chance to read it and comment. There are also usually threads that develop on Reddit, Bitcointalk, Slack, Telegram and elsewhere, where people actively debate the merits of the product. Then, on the landing page on the aforementioned date, there’s typically a tool that enables purchasers to acquire the tokens in exchange for bitcoin or ether.

   

  TC: Is there a concern that U.S. regulators will crack down on these ICOs?

   

  SM: Lawyers are relying on case law that defines what a security is. The most well-known case is the “Howey Test,” created by the Supreme Court for determining whether certain transactions qualify as investment contracts. If they do, then those transactions are considered securities and are subject to certain disclosure and registration requirements. When tokens are structured basically as the sale of a service or product, they’re designed to make sure the various prongs of the test are not triggered.

   

  TC: What types of companies are primarily using ICOs?

   

  SM: It’s still a financing mechanism that’s very organic to the blockchain community.

   

  It all started with protocols like Ethereum raising funding through this mechanism, and it has stayed close to related projects, like the distributed storage company Storj and Civic, a company that provides identify through the blockchain and is announcing its token sale this Thursday. A lot of these founders and token buyers are part of bitcoin forums and Reddit, and that’s why [certain companies] are able to raise these large sums fairly quickly; they’re reaching out to thought leaders and getting their support and generating buzz about their projects. It’s  basically the open source community, now with an open-source funding mechanism.

   

  TC: What happens when people want to sell the tokens they’ve bought?

   

  SM: Well, first, you can use them in a company’s ecosystem. With Storj, maybe you buy storage. You can also accumulate these tokens over time, as a bet that with more enterprise demand for storage capacity, the coins will become more valuable, after which you can sell your tokens to someone else who needs to purchase storage space.

  There are also a number of cryptocurrency exchanges where these tokens trade. In the case of Storj, you can sell or buy on Poloniex or Bittrex.

   

  TC: Should VCs be nervous about ICOs? You mention Civic, which is staging an ICO. Civic has also raised some venture capital previously. But plenty of other companies seem to be skipping the VC part.

   

  SM: To some degree they should, but we’ve also talked with a lot of very smart VCs who are looking at this space, including August Capital, Tim and Adam Draper, Blockchain Capital. Many are doing the work to understand how to be involved and active in the space and the fundamental value of these protocols. Union Square Ventures has said it now has a mandate from its LPs to hold these assets.

   

  For companies that raise funds through a token sale and that have had traditional angel or venture rounds previously, for example, their equity investors get to skip one or two rounds of dilution, which is great; it means their returns are hyper-levered.

  There are two points I want to emphasize from the above. First, just how early we are in the development of this area. The numbers are absolutely tiny at this point despite all the hype. Recall that in 2017, we’ve seen 25 offerings raise a bit more than $163 million. That’s an infinitesimally small number in the scheme of things, thus room for growth is massive. That being said, people considering getting involved in this space as a buyer of ICOs need to be extraordinarily careful.

  Investing in general is risky and challenging, but putting money into an ICO adds several other layers of complexity and risk. First, as noted above these things are not equity investments since they aren’t allowed to be under current regulations. Therefore, you’re not simply investing in a startup, which is always extremely risky, but you’re making a bet that the token itself is useful and will accrue in value over time. Therefore, not only do you need to be right about the success of the business or product itself, but the token also must have a real value-creating purpose to succeed in the long-run. Many people will not understand this and think they are buying into the equity of the underlying businesses, which sets up a perfect environment for fraudsters. You also need to bear in minds there’s a ton of Bitcoin liquidity that is flooding around the space given the massive run its had. Most early Bitcoin adopters and investors are very passionate and dedicated to this space. They don’t want to sell coin for dollars, but want to put it in new projects to keep the broader ecosystem growing. I think this is a fantastic thing, but it also means there’s a lot of crypto currency sloshing around trying to find a home.

  Despite the risks, I think the emergence of the burgeoning token market is a game-changing and extraordinarily empowering development. The only thing preventing the crypto-coin world from rapidly displacing the middlemen and bureaucrats of the traditional financial system are the barriers around the traditional financial world. While we’d like to think these barriers are there to protect the little people, we all know that the SEC and other such regulatory bodies largely exist to protect the rich and powerful and secure their moat.

  We saw this under Obama’s Mary Jo White, and we will surely see it under Trump’s pick Jay Clayton, who seems to have all sorts of conflicts, including a wife who works at Goldman Sachs. The SEC doesn’t protect the people, but as long as it pretends to, it can continue to function as a gatekeeper for financial oligarchs and slow down the pace of displacement of the dying financial system with the new parallel one currently being created.

  All of that is fine I suppose, and innovation in the crypto world will continue until one day we will actually see equity offerings in startups to regular people as opposed to just allocations to the wealthiest clients of brokerage firms. The innovation in this space has the potential to flatten the world of investing in a meaningful and powerful way, starting today with tokens, but ultimately in many other ways as well. It’s gonna take time, but it’ll happen.

  At this point, I just want to briefly address the common retort that “governments will never let this happen,” which I get all the time. Here’s what I had to say about it yesterday on Twitter, and I don’t really have much to say beyond this.

  

  To conclude, I’d like to dedicate this post to all the brilliant geeks and the dynamic entrepreneurs pushing hard every day to realize this incredible dream of a decentralized future. A future that breaks down barriers, removes middlemen and empowers humanity to take its next evolutionary leap forward. You are the ones creating this brand new world brimming with potential and optimism, and I want to thank for all you have done and continue to do.

  

  

• Former Navy Seal To Katy Perry: 'Go To Hell… Hold One Of Your Concerts In Syria And See How It Goes'

  

  Katy Perry, a woman so crazy Russell Brand divorced her over text message, broke down in tears Saturday night at a concert and urged the crowd ‘not to let terrorists win’ in response to the Manchester bombing. Tuesday morning, she went on the radio to tell everyone all we need is open borders, hugs, and love in response to horrific terrorism. Basically this.

  Paul Joseph Watson can bring you fully up to speed:

    

  And today on Fox, former Navy Seal Carl Higbie who was responsible for triggering an entire CNN panel last week, had a few choice words for Ms. Perry – daring her to hold a concert in Syria if she thinks peace and love is all it’ll take to conquer ISIS:

  “We don’t have people who respect the culture of the United States of America. You have people like Katy Perry, for instance. I mean, this woman has said ‘oh we need to give them hugs, hug it out. Go to hell Katy Perry.“

   

  “Hold one of your concerts in Syria and see how it goes.”

   

    

   

  What a strange, out of touch woman…

  

  Content originally generated at iBankCoin.com * Follow on Twitter @ZeroPointNow

  

• Greg Gianforte Crushes Opponent in Congressional Run-Off, In Spite of Body Slamming Reporter

  The vapid taste of loss must get repetitive for Democrats in America. In spite of the scandals, the Russians, and John Podesta’s email box being the laughing stock of the entire world, they keep losing. The Republican candidate for Congress, Greg Gianforte, grabbed a reporter from The Guardian, Ben Jacobs, by his neck, body slammed him to the ground, and then pounded on him — Saul Rosenberging his glasses. Yet, on election night, despite the negative press, the good people from Montana voted in droves for Gianforte.

  With 84% of precincts reporting, Gianforte had 172,743 votes — or 50.4% of the vote, compared to Quist who has 150,007 votes, 43.8% of the vote, according to Edison Research.

  It’s embarrassing, really.

  Being the rugged gentlemen that he is, Rep. Gianforte apologized tonight, just before he graciously accepted his win.

  Here’s how the rural folk felt about the whole body-slamming ordeal.

  Via CNN:

  “We whole-heartedly support Greg. We love him,” said Karen Screnar, a Republican voter who had driven all the way from Helena to support Gianforte. Screnar said she and her husband have known Gianforte for the better part of a decade. After Gianforte was charged with misdemeanor assault, Screnar said she was only “more ready to support Greg.”

  “We’ve watched how the press is one-sided. Excuse me, that’s how I feel. (They’re) making him their whipping boy so to speak through this campaign,” Screaner said. “There comes a point where, stop it.”

  Her husband, Terry, chimed in that he believed Gianforte was “set up.”

  The left argues that the GOP is an out of control train-wreck, being led down wayward paths by Trump-Hannity and now Gianforte. Drama aside, even if that was true, what’s more alarming is the fact that people are so sick of establishment politics, they’d rather vote for a man who punches reporters in the face, rather than cordially declining his questions.
  Content originally published at iBankCoin.com

  

• Has The Drug War Incentivized Police To Treat Citizens Like Terrorists?

  Authored by Duane Norman via Free Market Shooter blog,

  

  A video of a Florida Sheriff making a promo video to scare has been making the rounds recently.  Casey Research recently covered the affair, noting the following quote from Sheriff Grinnell:

  “Enjoy looking over your shoulder, constantly wondering if today’s the day we come for you. Enjoy trying to sleep tonight, wondering if tonight’s the night our SWAT team blows your front door off the hinges. We are coming for you.”

  The video (reproduced below, with commentary from Casey Research) is as surreal as the above picture implies…

  Sheriff Grinnell delivered this message last month while flanked by four combat-ready officers wearing ski masks. It looks like someone from ISIS directed it.

   

  Grinnell’s message was aimed at local drug dealers. You see, Lake County has a serious opioid problem. And like many other places in the US, it’s fighting its drug problem as if it were a war.

  …but this is hardly the first time a video like this has been produced, and it likely won’t be the last.  Last year, former Sheriff Clay Higgins, known as the “Cajun John Wayne” in Louisiana, released the below video calling out the “Gremlins” gang, and before his resignation, was known for making many similar videos:

  Some notable quotes from Sheriff Higgins:

  • You won’t walk away.  Look at you. Men like us, son, we do Dumbbell presses with weights bigger than you.
  • Young man, I’ll meet you on solid ground, anytime, anywhere. Light or heavy, it makes no difference to me.
  • You will be hunted, you will be tracked. And if you raise your weapon to a man like me, we’ll return fire with superior fire.
  • You don’t like the things I’ve told you tonight?  I’ve got one thing to say – I’m easy to find.

  This guy certainly has enough one-liners to be worthy of the “Cajun John Wayne” moniker, but it seems none of the police or community leaders behind him bothered to ask why criminals engage in such violent behavior; they are trying to profit from the obscenely high price of illegal drugs.  And when it comes to profit, the criminals are hardly alone.

  Free Market Shooter has covered the problems with Civil Asset Forfeiture in the past…

  Martin Armstrong of Armstrong Economics explains how police have every reason to seize assets, largely because these civil asset forfeitures are literally funding police departments:

   

  Between 1989 and 2010, U.S. attorneys seized an estimated $12.6 billion in asset forfeiture cases. The growth rate during that time averaged +19.4% annually. In 2010 alone, the value of assets seized grew by +52.8% from 2009 and was six times greater than the total for 1989. Then by 2014, that number had ballooned to roughly $4.5 billion for the year, making this 35% of the entire number of assets collected from 1989 to 2010 in a single year. According to the FBI, the total amount of goods stolen by criminals in 2014 burglary offenses suffered an estimated $3.9 billion in property losses. This means that the police are now taking more assets than the criminals.

  …but if you take a closer look at the forfeitures themselves, you’ll realize just how many of them are related to the war on drugs:

  “Thirty-six percent of all local police departments received money, property, or goods from a drug asset forfeiture program during 2002 (table 32). These departments employed 78% of all local police officers. At least 80% of the departments in each population category of 25,000 or more had drug asset forfeiture receipts.”

   

  “There can be few components of law enforcement programmes which actually cost nothing. The asset forfeiture provision of the federal law for crop suppression (relating mainly to cannabis in the State of Kentucky), proved to be such a case, costing the United States Government $13.7 million, but yielding a return of $53 million in 1991, or almost $4 in assets seized for every $1 invested by the Drug Enforcement Administration.”

   

  “The advent of a now common police tactic, called the “reverse sting,” illustrates the shift in priorities from crime control to funding raids. In a reverse sting, an officer attempts to sell drugs to an unsuspecting buyer. The method permits the police to seize the buyer’s cash rather than a seller’s drugs, which have no value to the agency.

   

  “During the past decade, law enforcement agencies increasingly have turned to asset seizures and drug enforcement grants to compensate for budgetary shortfalls, at the expense of other criminal justice goals. We believe the strange shape of the criminal justice system today—the law enforcement agenda that targets assets rather than crime, the 80 percent of seizures that are unaccompanied by any criminal prosecution, the plea bargains that favor drug kingpins and penalize the “mules” without assets to trade, the reverse stings that target drug buyers rather than drug sellers, the overkill in agencies involved even in minor arrests, the massive shift towards federal jurisdiction over local law enforcement ^– is largely the unplanned by-product of this economic incentive structure.”

  So the drug war has created a massive financial incentive for police to seize property from individuals, one that many departments could require to stay afloat.  What do you think happens next?

  

  

  As Free Market Shooter has covered previously for Single Dude Travel, raids from SWAT teams have become commonplace, with police becoming better armed by the day:

  Our nation’s policing system has become profit-driven instead of crime-driven, largely due to the failure of the war on drugs, and the fact that cops have been given surplus military hardware from the armed forces at bargain basement prices. SWAT team raids have gone from a few hundred per year in the 1970s to 50,000 annually, largely because they call SWAT in when “Special Weapons And Tactics” aren’t really needed, such as when apprehending a credit card scammer or raiding an organic farm for the filmiest of reasons. When a SWAT team nearly kills a 19-month old baby with a flashbang grenade, in a raid without the suspect present, how are there no charges filed?

  And now that police are all armed to the teeth looking for property to seize, what happens next?  The practice is applied everywhere.  If you look at a report on the “most outlandish SWAT team raids” across the country, you’ll see just how common it is to have a SWAT team called in:

  • Armed agents raid animal shelter in search of baby deer—and kill it.
  • Girl’s home wrongfully raided with flashbangs despite door being open.
  • SWAT team raids DJ’s studio to enforce copyright law.
  • SWAT squad invades private poker game.
  • SWAT team raids man’s home in search of stolen koi fish.
  • Sex toys, condoms and pajamas seized in drug/prostitution SWAT team raid.
  • Peaceful monks arrested in SWAT team action.
  • Feds raid Amish dairy farm—twice—for selling unpasteurized milk.
  • Police unlawfully invade a series of barbershops without warrants.
  • Police forcibly search and detain 19 patrons in gay bar.
  • SWAT team confiscates wood used to make instruments during illegal raid.

  So, how do you stop police from treating civilians like they would treat terrorists?  The best place to start is removing the incentive structure that has been created by the war on drugs, which brings us back to Casey Research’s commentary:

  Illegalizing something does nothing but create a black market and give people a reason to induce other people to get high. I mean, people have been drinking alcohol for about the last 10,000 years. But it didn’t become a real problem until the Eighteenth Amendment and the Volstead Act passed in 1920. At that point, it financed the mafia.

   

  Laws turn simple bad habits into massive and profitable criminal enterprises.

   

  The government learned absolutely nothing from the failure of alcohol prohibition. What they’re doing with drugs makes an occasional, trivial problem into a national catastrophe…

  However, do not expect that to happen anytime soon; again, as Free Market Shooter has covered in the past, new Attorney General Jeff Sessions is adamant about expanding the war on drugs:

  And, in case you weren’t aware, this is the same Jeff Sessions who is on the record as being not only against medicinal marijuana, it is the same Jeff Sessions that has stated that marijuana is only slightly less awful than heroin:

   

       And I am astonished to hear people suggest that we can solve our heroin crisis by legalizing marijuana – so people can trade one life-wrecking dependency for another that’s only slightly less awful.

  

  Then again… it’s not like the prior ten attorney generals did anything but continue the war on drugs.  Remember what Casey said about “massive profitable criminal enterprises”?

  

  

• Visualizing How The Big 5 Tech Giants Make Their Billions

  Hitting record high after record high, tech companies have displaced traditional blue chip companies like Exxon Mobil and Walmart as the most valuable companies in the world.

  Here are the latest market valuations for those same five companies:

  

  Together, they are worth $2.9 trillion in market capitalization – and they combined in FY2016 for revenues of $555 billion with a $94 billion bottom line.

  

  BRINGING HOME THE BACON?

  Despite all being at the top of the stock market food chain, Visual Capitalist's Jeff Desjardins points out that the companies are at very different stages.

  In 2016, Apple experienced its first annual revenue decline since 2001, but the company brought home a profit equal to that of all other four companies combined.

  On the other hand, Amazon is becoming a revenue machine with very little margin, while Facebook generates 5x more profit despite far smaller top line numbers.

  

  HOW THEY MAKE THEIR BILLIONS

  Each of these companies is pretty unique in how they generate revenue, though there is some overlap:

  • Facebook and Alphabet each make the vast majority of their revenues from advertising (97% and 88%, respectively)
  • Apple makes 63% of their revenue from the iPhone, and another 21% coming from the iPad and Mac lines
  • Amazon makes 90% from its “Product” and “Media” categories, and 9% from AWS
  • Microsoft is diverse: Office (28%), servers (22%), Xbox (11%), Windows (9%), ads (7%), Surface (5%), and other (18%)

  What does that look like?

   

  

  Courtesy of: Visual Capitalist

  Lastly, for fun, what if we added all these companies’ revenues together, and categorized them by source?

  

  Note: this isn’t perfect. As an example, Amazon’s fast-growing advertising business gets lumped into their “Other” category.

  Hardware, e-commerce, and and advertising make up 76% of all revenues.

  Meanwhile, software isn’t the cash cow it used to be, but it does help serve as a means to an end for some companies. For example, Android doesn’t generate any revenue directly, but it does allow more users to buy apps in the Play Store and to search Google via their mobile devices. Likewise, Apple bundles in operating systems with each hardware purchase.

  

  

• Paul Craig Roberts On JFK At 100

  Authored by Paul Craig Roberts,

  This Memorial Day, Monday, May 29, 2017, is the 100th birthday of John Fitzgerald Kennedy, the 35th President of the United States.

  

  JFK was assassinated on November 22, 1963, as he approached the end of his third year in office. Researchers who spent years studying the evidence have concluded that President Kennedy was assassinated by a conspiracy between the CIA, Joint Chiefs of Staff, and Secret Service. (See, for example, JFK and the Unspeakable by James W. Douglass)

  Kennedy entered office as a cold warrior, but he learned from his interaction with the CIA and Joint Chiefs that the military/security complex had an agenda that was self-interested and a danger to humanity. He began working to defuse tensions with the Soviet Union.

  His rejections of plans to invade Cuba, of the Northwoods project, of a preemptive nuclear attack on the Soviet Union, and his intention to withdraw from Vietnam after his reelection, together with some of his speeches signaling a new approach to foreign policy in the nuclear age (see for example), convinced the military/security complex that he was a threat to their interests.

  Cold War conservatives regarded him as naive about the Soviet Threat and a liability to US national security. These were the reasons for his assassination. These views were set in stone when Kennedy announced on June 10, 1963, negotiations with the Soviets toward a nuclear test ban treaty and a halt to US atmospheric nuclear tests.

  The Oswald coverup story never made any sense and was contradicted by all evidence including tourist films of the assassination. President Johnson had ro cover up the assassination, not because he was part of it or because he willfully wanted to deceive the American people, but because to give Americans the true story would have shaken their confidence in their government at a critical time in US-Soviet relations. To make the coverup succeed, Johnson needed the credibility of the Chief Justice of the US Supreme Court, Earl Warren, to chair the commission that covered up the assassination. Warren understood the devastating impact the true story would have on the public and their confidence in the military and national security leadership and on America’s allies.

  As I previously reported, Lance deHaven-Smith in his book, Conspiracy Theory in America, shows that the CIA introduced “conspiracy theory” into the political lexicon as a technique to discredit skepticism of the Warren Commission’s coverup report. He provides the CIA document that describes how the agency used its media friends to control the explanation.

  The term “conspiracy theory” has been used ever since to validate false explanations by discrediting true explanations.

  President Kennedy was also determined to require the Israel Lobby to register as a foreign agent and to block Israel’s acquisition of nuclear weapons. His assassination removed the constraints on Israel’s illegal activities.

  Memorial Day is when Americans honor those in the armed services who died serving the country. JFK fell while serving the causes of peace and nuclear disarmament. In a 1961 address to the United Nations, President Kennedy said:

  “Today, every inhabitant of this planet must contemplate the day when this planet may no longer be habitable. Every man, woman and child lives under a nuclear sword of Damocles, hanging by the slenderest of threads, capable of being cut at any moment by accident or miscalculation or by madness. The weapons of war must be abolished before they abolish us. It is therefore our intention to challenge the Soviet Union, not to an arms race, but to a peace race – to advance together step by step, stage by stage, until general and complete disarmament has been achieved.”

  Kennedy’s address was well received at home and abroad and received a favorable and supportive response from Soviet leader Nikita Khrushchev, but it caused consternation among the warhawks in the Joint Chiefs of Staff. The US led in terms of the number of nuclear warheads and delivery systems, and this lead was the basis for US military plans for a surprise nuclear attack on the Soviet Union. Also, Many believed that nuclear disarmament would remove the obstacle to the Soviet Army overrunning Western Europe. Warhawks considered this a greater threat than nuclear armageddon. Many in high military circles regarded President Kennedy as weakening the US viv-a-vis the Soviet Union.

  The assassination of President Kennedy was an enormous cost to the world. Kennedy and Khrushchev would have followed up their collaboration in defusing the Cuban Missile Crisis by ending the Cold War long before the military/security complex achieved its iron grip on the US government. Israel would have been denied nuclear weapons, and the designation of the Israel Lobby as a foreign agent would have prevented Israel’s strong grip on the US government. In his second term, JFK would have broken the CIA into a thousand pieces, an intention he expressed to his brother, Robert, and the Deep State would have been terminated before it became more powerful than the President.

  But the military/security complex struck first, and pulled off a coup that voided all these promises and terminated American democracy.

  *  *  *

  Finally, in one of the most iconic political speeches of the 20th century, at his 1961 inauguration address, President Kennedy told his fellow Americans to "ask not what your country can do for you, ask what you can do for your country". To mark the 100 year anniversary of his birth on Monday, Statista's Martin Armstrong has taken a look at what Kennedy's country did for him after his untimely death.

  

  You will find more statistics at Statista

  

  

• Pennsylvania Coroner Says Dying Addicts Keep Morgue Full "Most Nights"

  The coroner’s office in Montgomery County, Pennsylvania is literally running out of room for all the bodies that are piling up because of America’s worsening synthetic opioid epidemic, according to Triblive.com.

  As the story notes, heroin isn’t responsible for these deaths; rather, Synthetic opioids like fentanyl, carfentanil and their many analogues are the chief culprit.

  

  As Triblive reports:

   

  “Lab-created, designer opioids have far outpaced heroin as a killer of addicts, and they've kept the coroner's office full on most nights.”

   

  "If this pace continues, I'm not really sure what we're going to do," said Montgomery County, Ohio, coroner Dr. Kent Harshbarger. "We had 13 (bodies) yesterday, and 12 of them were overdoses."

   

  The county’s coroner had to expand his cooler last month because its 36-body capacity wasn’t enough. It now has room for 42 bodies, and the country still occasionally runs out of space.

  “It’s full every night.”

  Harshbarger even ran out of space one day earlier this year, again because of overdoses, and was forced to send some bodies to a local funeral home for storage. He also occasionally rents refrigerated trailers that can be brought in when deaths spike.

  In Allegheny County, health officials, instances of fentanyl-related overdoses surpassed those of heroin for the first time in 2016. Six hundred people overdosed and died in the county last year – most from opioids, said Dr. Karen Hacker, director of the Allegheny County Health Department.

  

  Having surpassed gun homicides for the first time in 2015, the epidemic of heroin and opioid related deaths in the US continues to grow, amid the dismal failure of the 'war on drugs.’ Lawmakers, who have only just begun to wake up to the crisis, have requested more data about the synthetic opioid fentanyl, including how it is trafficked and how many people it has killed.

  

  The ramifications of the crisis stretch far beyond hospitals and morgues: Ohio saw a 13% increase in children in foster care last year, which officials suspect is linked to the growing number of overdose deaths.
   

  

  

• ESPN And The Bursting Of The Sports Bubble

  Authored by William Anderson via The Mises Institute,

  When the cable TV sports giant ESPN announced 100 layoffs recently, including letting go a number of high-profile broadcasters, a lot of people took notice, and well they should: things no longer are business as usual in sports broadcasting, and we are not even at the beginning of the end, and maybe not even the end of the beginning.

  Like the slow crashing of the retail sector as online purchase firms like Amazon begin their domination, we are seeing a sea change in sports broadcasting and that is going to mean big changes are down the road not only for ESPN, but for all of the sports entities that depend upon the huge payouts that ESPN provides. To put it mildly, a lot of people are about to see their lives change drastically as consumer choices drive sports broadcasting in a new direction.

  Enough with the superlatives. What is happening with ESPN, and why is it important? As Clay Travis of the sports website Outkick the Coverage has been writing for more than a year, the main ESPN business plan, the one that brings in the most revenues to the firm, is doomed to near-extinction, and there is nothing ESPN can do about it. Writes Travis:

  In the past five years ESPN has lost 11,346,000 subscribers according to Nielsen data.

   

  If you combine that with ESPN2 and ESPNU subscriber losses this means that ESPN has lost over a billion dollars in cable and satellite revenue just in the past five years, an average of $200 million each year. That total of a billion dollars hits ESPN in the pocketbook not just on a yearly basis, but for every year going forward.

   

  It's gone forever.

  Since it began to grow in popularity in the late 1970s, cable (and later, satellite) television has offered its customers coverage with “bundles,” that is different payments allow cable subscribers to expand their viewership as payments increase. For example, a “basic” cable subscription would allow the customers to view, say, 15 channels including the ABC-CBS-NBC-PBS lineup plus other channels such as CNN or Fox. A higher-tier subscription would add other channels, including ESPN and its associated channels and others such as The Food Channel or assorted movie channels.

  One problem with bundling, of course, is that subscribers will pay for channels that they rarely or do not watch. For example, I have a basic subscription with Direct TV, but maybe watch 10 channels at most, even though dozens are available. (I don’t include ESPN or any of the other sports channels in my monthly package.)

  As technology has improved in telecommunications, the ability of providers to further segment packages has meant that cable and satellite subscribers are able to eliminate the channels they don’t want to watch, and that means that many are unhooking from ESPN. Continues Travis:

  ESPN is losing 10,000 subscribers every day so far in 2017. In the past six years they have lost 13 million subscribers and that subscriber loss is escalating each year. That's billions of dollars in lost revenue.

   

  Every year for the next five years ESPN is spending more and bringing in less. You don't have to be Warren Buffett to see that's a business problem. 

  He goes on to the heart of the matter:

  ESPN is spending over eight billion dollars on sporting rights this year and by 2021 I believe they will be losing money regardless of how many people they fire. ESPN can't fire employees into profitability. It's just not possible. These firings are going to become a yearly thing and they still aren't going to prevent the business from dying. 

  True, ESPN, as well as all commercial broadcasters, receive advertising revenue, but advertising alone, along with subscriptions from people who choose to purchase ESPN in their cable/satellite packages, will not be enough for the network to meet its obligations to the various organizations it pays for the rights to broadcast their events. From the National Football League (NFL), to the National Hockey League (NHL), to the National Basketball Association (NBA) to the National Collegiate Athletic Association (NCAA), ESPN has paid billions of dollars, money that is funneled into high athlete salaries, not to mention salaries of coaches, university athletic directors, and, indirectly into the building and maintaining of magnificent sports facilities.

  The revenues lost to ESPN are lost forever, and even given the rise of smart phones and Internet streaming, the current state of affairs is unsustainable and the sports landscape is going to change, and the changes will be extensive. It is here that Austrian economics gives us insight into how at least some of the changes will proceed.

  Carl Menger, who we know as the “founder” of the Austrian school of economics, in his path-breaking book Principles of Economics in 1871 demonstrated conclusively that the value of the factors of production was based not on costs derived from other costs of production, but rather the value of the factors was imputed via the value consumers placed upon the final goods. This view contradicted the standard British classical view that the value of consumption goods was derived from the value of the factors of production, and it placed Menger in the Pantheon of the early Marginalists.

  In laying out his theory, Menger used tobacco and the factors used to produce it. If people suddenly stopped using tobacco, he reasoned, then the value of the factors would change quickly relative to their ability to be transferred to other uses. The more specialized the factor, the greater the change in its value. For example, the land on which tobacco is grown would then be used for other purposes, such as growing corn or wheat, or even pasture for cows or sheep. Highly-specialized tools used only for growing or harvesting tobacco, however, would see a steep drop in value and maybe would have to be abandoned altogether.

  What does this have to do with the demise of ESPN? As noted earlier, the network pays billions of dollars for rights to broadcast sports events, and it is unlikely that as ESPN loses the revenues that permit it to pay large sums, other networks will be able to take up that slack. That means the organizations that now receive this money are looking at “haircuts” down the road, which includes the NCAA and collegiate athletic teams.

  The ESPN funding allows for the network to broadcast a number of collegiate sports events that ordinarily would not rate enough of an audience, and its large payouts also allow for coaches to receive record-high salaries that would not be possible if these programs depended just on ticket sales and other donations. And while it is tempting to say that “ESPN pays for this,” in reality, it is the consumer of cable/satellite television that ultimately decides the size of the ESPN payouts, and consumers are stating their preferences with their checkbooks, and there is nothing ESPN can do about it.

  Without cable/satellite subscribers being willing to pay extra for the sports channels, and without the viewership that draws advertisers, ESPN revenues will fall, and that means that the factors that make up the “product” that appears on ESPN broadcasts also are going to lose value, as long as other networks don’t take up the slack (and it is doubtful they will). Thus, one is looking at a long, steady decline and the world of televised sports is going to have to adjust to the new reality.

  Unfortunately, as Travis has pointed out many times, ESPN during this ratings slide has taken a hard turn toward the political left, which has further alienated a lot of conservative viewers. Writes Travis:

  As ESPN has lost 10,000 cable and satellite subscribers every day in 2017, seen ratings collapse for all original programming, and recently embarked on the firing of 100 employees as part of a desperate cost cutting move to save its business. The network’s sports media defenders have desperately argued that the network’s embrace of far left wing politics has not had any impact on its collapsing viewership. That’s despite the fact that there have been two different studies that have demonstrated Republican voters have abandoned the network’s original programming in the past year.

  In that regard, one can argue that ESPN has done what numerous (and especially elite) colleges and universities have done the past several years: create a hostile atmosphere for white male students all the while wanting them to be paid customers. One cannot both seek to offend and attack the same people one wishes to purchase their services without courting disaster, yet higher education and ESPN are doing just that.

  To a certain extent, one can argue that both higher education and ESPN have benefited from “bubble” economies, and as consumer choice becomes directed elsewhere, the bubbles burst. As Carl Menger demonstrated, the bursting of the bubbles will mean that some factor owners will have to receive less pay in order to remain employed, while other factors will have to be transferred to other uses altogether or simply become unemployed. All soothing rhetoric aside, the world of sports broadcasting is going to see major changes in the next decade as consumers have their say.

  

  

• FBI Refuses To Hand Over "Comey Memos" To Congress

  House Oversight Committee Chairman Jason Chaffetz said today that the FBI had decided to withhold documents, including memos, notes, summaries, and recordings, requested by his committee in regards to the ongoing Russia probe. This was revealed in a letter sent by Chaffetz to the FBI responding to the agency’s decision to withhold documents requested by the Committee on May 16, 2017.

  The FBI’s denial to cooperate is presented below:

  

  According to a statement by the Oversight Committee, “Chaffetz requested memos, notes, summaries, and recordings to assist in the Committee’s investigation of the FBI’s independence, and which are outside the scope of the Special Counsel’s investigation.”

  The documents are due June 8, 2017, but that may not happen as it appears the FBI is suddenly unwilling to cooperate.  

  As Chaffetz elaborates, after a New York Times report that former Federal Bureau of  Investigation Director James Corney memorialized the content of phone calls and meetings with the President in a series of memoranda, he requested those memoranda and any related notes, summaries, and recordings. The FBI is withholding those documents, citing to the appointment of Robert Mueller as Special Prosecutor. According to a letter from your staff: “In light of this development and other considerations [the Bureau] is undertaking appropriate consultation to ensure all relevant interest implicated by your request are properly evaluated.

  The letter states:

  “The Committee has its own, Constitutionally-based prerogative to conduct investigations. But the Committee in no way wants to impede or interfere with the Special Counsel’s ability to conduct his investigation.  In fact, the Committee’s investigation will complement the work of the Special Counsel. Whereas the Special Counsel is conducting a criminal or counterintelligence investigation that will occur largely behind closed doors, the Committee’s work will shed light on matters of high public interest, regardless of whether there is evidence of criminal conduct.

   

  “The focus of the Committee’s investigation is the independence of the FBI, including conversations between the President and Comey and the process by which Comey was removed from his role as director.  The records being withheld are central to those questions, even more so in light of Comey’s decision not to testify before the Committee at this time.”

   

  “I am seeking to better understand Comey’s communications with the White House and Attorney General in such a way that does not implicate the Special Counsel’s work.”

  As Chaffetz concludes, “Congress and the American public have a right and a duty to examine this issue independently of the Special Counsel’s investigation. I trust and hope you understand this and make the right decision-to produce these documents to the Committee immediately and on a voluntary basis.“

  The American public is certainly looking forward to the FBI’s release of the full content of the Comey’s memos, not only those relating to his meetings with Trump, but just as importantly, with Loretta Lynch, as well as Barack Obama and/or Hillary Clinton.

  Full text of Chairman Chaffetz letter can be viewed here.
  Full text of FBI letter can be viewed here.

  

  

Digest powered by RSS Digest

• Suspected Berkeley Antifa Bike Lock Attacker Eric Clanton Arrested For Assault

  

  Eric Clanton, 28, a former Diablo Valley and California State University philosophy professor suspected in the Antifa bike lock attacks was arrested for assault Wednesday afternoon in Oakland.

  Clanton is being held on $200,000 bail after being booked into Berkeley City Jail – though police have not said whether the arrest is connected to online investigative efforts which identified Clanton as a person of interest in bike lock attacks

  “[Clanton] was arrested on suspicion of use of a firearm during a felony with an enhancement clause and assault with a non-firearm deadly weapon. –East Bay Times“

  Michael Eric Clanton has TWO felony charges w/ a $200k Bail#AnTiFa should take notice this is what happens when you’re a communist traitor. pic.twitter.com/rmKGQcaAos

  — Red Pill (@IWillRedPillYou) May 25, 2017

  //platform.twitter.com/widgets.js

   

  4chan unmasking

  Clanton is the suspected Antifa member going around with a bike lock assaulting Trump supporters. The weaponized autists over at 4chan ‘unmasked’ him based on photographic and video evidence along with publicly available information. 

  (Attack at 18 sec)

   

   

  Pol concludes bike lock attempted murderer is… pic.twitter.com/4CE6oSbzdr

  — The_Real_Fly (@The_Real_Fly) April 20, 2017

  How 4chan did it… 

   

  

  Content originally generated at iBankCoin.com * Follow on Twitter @ZeroPointNow

  

• Snyder: Desperate Liberals Try To Blame The Manchester Terror Attack On Anyone Other Than Islamic Terrorists

  Authored by Michael Snyder via The End of The American Dream blog,

  

  The left just can’t seem to understand that Islamic terrorists are going to try to destroy our way of life no matter how nice we are to them. On Monday night, a bombing at Ariana Grande’s Manchester concert made headlines all over the globe. 22 people, including an 8-year-old girl, were killed and 59 were wounded. It is exactly the sort of “soft target” attack that I have been warning about, and ISIS quickly claimed responsibility. Within the last 30 days, there have been 169 Islamic terror attacks in a total of 24 different countries. Last year, the number of global terror attacks was up 25 percent from the year before, and this year we will almost certainly see another all-time record high. But many liberals never even want to use the phrase “Islamic terror” because it doesn’t fit their agenda.

  In fact, many liberals immediately jumped on Twitter after the terror attack in Manchester and started warning about the spread of “Islamophobia”.

  For example, Quen Took posted the following tweet…

  Don’t use #Manchester incident as an excuse for Islamophobia. Stand with our beautiful Muslim siblings & don’t scapegoat innocent people.

  And TheBardAsPundit warned that engaging in “Islamophobia” may provoke more terror attacks…

  I have a good idea. Let’s piss off more Muslims with mindless Islamophobia. That should help.

  Of course the mainstream media here in the United States attempted to put their own politically-correct spin on things. On ABC, there was far more concern about “anti-Islamic backlash” than there was for the victims of the attack…

  Despite the horrific nature and impact, ABC was eager to downplay the motive behind the deadly attack. In fact, ABC was more worried about the perpetrators than the victims, warning that this could provoke an “anti-Islamic backlash” across Europe.

  And on the Today show on NBC, counter-terrorism “expert” Richard Clarke seemed to blame President Trump for the rise in terror attacks that we have been seeing…

  They have a good police and security service and so do we, but we have no ostracized, we’ve embraced our Muslim Americans. That’s why the talk against Muslims in the last year in the campaign and since has been very counterproductive. The only way to solve this problem is to have everyone think they’re on the same side.

  Yes, let’s follow Clarke’s advice and try to convince the Islamic terrorists that we are on their side.

  That should work.

  Until the entire western world is willing to embrace Islam and swear allegiance to Allah, the radical Islamists will never stop. Their faith tells them that it is their destiny to rule the world, and they will never rest until they have achieved that goal.

  Unfortunately, most people believe what they want to believe, and what most politically-correct pundits in the western world want to believe is that radical Islam is not the problem.

  On CNN, one “analyst” even suggested that the attack in Manchester may have been a “false flag” conducted by “right-wing” extremists…

  CNN “Terror Analyst” Paul Cruickshank said Monday night on Anderson Cooper’s AC360 that the bombing attack in Manchester could be a “right-wing” “false flag.”

   

  “It must also be noted that in recent months in Europe, there’s been a number of false flag plots where right-wing extremists have tried to frame Islamists for terrorism,” Cruickshank said. “We have seen that in Germany in recent weeks.”

  Of course that theory didn’t last long once the authorities identified the attacker as a Muslim.

  It is absolutely imperative that we understand the mindset of these Islamic radicals. If they could press a button that would annihilate all non-Muslims on the entire planet, many of them would do it.

  Some of the more “moderate” jihadists would prefer to give everyone a chance to convert to Islam first before killing them, but the end result would be the same.

  There is no possible way to compromise with people that are intent on exterminating you. And as they get their hands on more powerful weapons, the size and scale of these terror attacks is going to increase exponentially.

  We must make every effort to defeat terror groups such as ISIS militarily, but even more importantly we must seek to turn hearts and minds away from radical Islam all over the planet. It is a bankrupt worldview, and we need to show those that are following radical Islam that there is a much better way.

  Unfortunately, nations all over the western world are turning away from the values and the principles that they were founded upon, and so western leaders have very little to offer at this point.

  One recent report found that Islam is on track to surpass Christianity and will become the largest faith on the entire planet by the year 2070. Violence and bloodshed will continue to be used by jihadists to advance their faith, but another way that the goal of global domination is moved forward is by migration. Paul Nehlen, the author of an upcoming book entitled “Wage The Battle”, recently explained how this works…

  “Hijrah means ‘migration in the name of Allah,’” said Nehlen, who explained that the ultimate goal is to populate non-Muslim nations to the extent needed to impose Shariah law.

   

  “The hijrah is one way of spreading the Shariah, spreading the law of Islam, this political doctrine, to land where Islam isn’t,” Nehlen said. “That’s what this documentary covers. It talks about the bigger picture here of what we saw here. It stems directly from their fundamental texts.”

   

  He said hijrah is another method by which Muslims can earn their salvation.

   

  “Quite unlike a Christian, who believes you can’t earn your way in and only by the grace of God are you granted access to heaven through Christ’s sacrifice on the cross, Muslims believe they can earn their way in,” Nehlen said. “They believe they have to earn their way in.”

  Radical Islam has declared war on us, but most liberals don’t even think that we are in a war.

  And in any war, if one side chooses not to fight the other side wins by default.

  The western world desperately needs to wake up, because we are in a life or death battle, and right now this fight is only in the early rounds.

  

  

• Japan's "Womenomics" Is Working Just As Well As Abenomics… Terribly

  Via Japan Subculture Research Center,

  Japan is getting serious about gender equality – and there were absolutely no bribes paid by Japan to win the right to host the 2020 Olympics – and the nuclear disaster at Fukushima is under control. Decide for yourself which of these three statements is the most untrue.

  Womenomics was touted by Japan’s Prime Minister Shinzo Abe as his progressive policy to elevate the status of women in what is still a very sexist and unequal society, where women are far from being empowered. The Global Gender Gap report published last year noted that Mr. Abe and the LDP’s pledge to bridge the gender divide resulted in actually widening the gulf, with Nippon sliding down a few notches to 111th in terms of world gender equality. 

  

  It’s hard to see women in Japan being “empowered” when they can be sexually assaulted with near impunity. The odds that their assailant will be arrested, or prosecuted are low–less than a coin toss. And if he is actually prosecuted–he can sometimes walk free, with no jail time and no criminal record,  by paying damages and saying, “I’m sorry.” It’s a situation that the Abe administration could have changed but neglected to do so, tabling newly revised criminal codes to instead focus on passing a conspiracy bill that the United Nations warns could erode civil liberties.

  Of course, some would argue that “womenomics” have never been about elevating the status of women in Japan – it’s always been about keeping Japanese business thriving and hopefully encouraging woman to work – and breed. Of course, pregnancy in the workplace often is greeted with bullying from all sides. Abe’s vision of Womenomics has certainly never been about improving the lives of Japan’s single mothers, 50% of whom live in poverty. In fact, other than talking about “shining women–it’s not clear exactly what he wants for Japan’s future potential birthing machines.*

  The current Minister of Gender Equality and Women’s Empowerment, is of course, also a man, and also in charge of improving Japan’s birthrate. Do we need to say more?

  

  Yes, Japan’s Prime Minister Abe and the LDP are gungho about Gender Equality. Meet Katsunobu Kato, his home page will convince you.

  Recently, Bloomberg published an interview with Democratic Party leader Renho, in which she pointed out the obvious, Womenomics is all talk and no walk.

  “They should be ashamed to use the word ‘Womenomics’,” Democratic Party leader Renho, the 49-year-old mother of twins, said in an interview in Tokyo late Thursday when asked about the term Abe often uses to describe his efforts. “It’s an embarrassment.”

  Abe had vowed to eliminate waiting lists for childcare in a bid to draw more women into the workforce to make up for Japan’s shrinking population. He also sought to have women take 30 percent of management positions in all fields by 2020.

  On both goals he’s falling well short: Japan was 111th in the World Economic Forum’s Gender Gap ranking for 2016, down 10 places on the previous year.

  “About 80 percent of those who take childcare leave are women, and if they’re forced to wait for daycare, that means unemployment,” Renho said.

   

  “You either get demoted or you give up on work. What’s womenomics about if women are being forced to make such sad choices?”

  For the rest of the article, go to

  Abe’s Policies Failing Women, Japan Opposition Chief Says

  *Reference to women as “birthing machines” is sarcasm. We know that the LDP also thinks of women as much more than that–as potential nurses for the elderly, expert green tea brewers for the office, and caretakers of the children that they should be giving birth to right now for the greater prosperity of Japan."

  

  

• San Francisco Launches Public Defender Office Dedicated To Illegal Immigrants

  To our complete ‘shock’, the liberal bastion of California’s northern shores has just announced that it will create a brand new branch of the Public Defender’s office to specifically defend illegal immigrants in deportation cases.  Adding insult to injury, taxpayers will have to pony up an additional $200,000 each year to cover the cost of 3 public defenders and a paralegal, all of whom will be dedicated to making sure that federal laws are ignored.

  As an NBC affiliate in the Bay Area notes, the new office is expected to handle just 50 clients per year of the 1,500 detained immigrants that currently have scheduled court dates.  All of which just means that taxpayers should expect that $200,000 price tag to grow exponentially over the coming years.  

  Unlike in criminal court, immigrants are not automatically entitled to legal representation in deportation proceedings. However, studies have shown that detained immigrants with attorneys are six times more likely to win their cases.

   

  While San Francisco also provides funding to nonprofits specializing in legal aid to immigrants, the public defender’s office is intended to serve those already in detention, a demographic the nonprofits generally don’t serve.

   

  The unit’s attorneys are each expected to handle around 50 clients per year — a small portion of the estimated 1,500 detained immigrants who currently have court dates in San Francisco, around 85 percent of whom do not have attorneys.

  Meanwhile, thanks to a press release issued by the San Francisco Public Defender’s office, we learn that the enforcement of federal laws is apparently “against our core values as Americans and San Franciscans”…who knew?

  Adachi noted that in the 100 days since President Donald Trump signed his executive order expanding immigration enforcement priorities, immigration arrests have risen 38 percent nationwide.

   

  “Mass deportation is against our core values as Americans and San Franciscans,” Adachi said. “Due process still means something in this country and we are not going to let the federal government ship off our friends and neighbors without a fight.”

   

  Unlike in criminal court, non-citizens in immigration detention do not have the right to court appointed counsel, explained Francisco Ugarte, managing attorney of the Public Defender’s Immigration Unit. Approximately half of the 1,500 detained immigrants with court dates in San Francisco have been in the U.S. for more than a decade. More than 50 percent have one or more close family members who are citizens.

   

  “These are longtime residents who work, attend school, and contribute to our city,” Ugarte said. “Without this program, most would be forced to defend themselves in court against trained government lawyers.”

  Can we also declare that ‘grand larceny’ is “against our core values as Americans” because we think it’s absolutely bogus that we can’t have a couple of Lamborghini’s just because we’re “economically challenged.”

  http://www.nbcbayarea.com/portableplayer/?cmsID=423977644&videoID=tEXs4tolM5J0&origin=nbcbayarea.com&sec=news&subsec=local&Width=600%20Height=337

  

  

• Meet JK2 Westminster LLC – The Kushner Family Real Estate Subsidiary Preying On Poor People

  Authored by Mike Krieger via Liberty Blitzkrieg blog,

  

  Cox stopped cooking for herself and her son, not wanting food near the sink. A judge allowed her reduced rent for one month. When she moved out soon afterward, Westminster Management sent her a $600 invoice for a new carpet and other repairs. Cox, who is now working as a battery-test engineer and about to buy her first home, was unaware who was behind the company that had put her through such an ordeal. When I told her of Kushner’s involvement, there was a silence as she took it in.

   

  Very few of the complex residents I met, even ones who had been pursued at length in court by JK2 Westminster, had any idea that their rent and late fees were going to the family company of the president’s son-in-law. “That Jared Kushner?” Danny Jackson, a plumber in his 15th year living at Harbor Point Estates, exclaimed. “Oh, my God. And I thought he was the good one.”

   

  At the Carroll Park complex, I met Mike McHargue, a private investigator, and his girlfriend, Patricia Howell. “They’re nothing but slumlords,” Howell told me of Westminster Management. “They take everyone’s money.” When I asked if they knew who was behind the company, they said they did not. “Oh, really?” Howell said when I mentioned Kushner’s name. “Oh, really. And I’m a Trump supporter.”

   

  From The New York Times Magazine article: Jared Kushner’s Other Real Estate Empire

  Yesterday, The New York Times Magazine published a deeply disturbing story about a Kushner family real estate subsidiary with a consistent pattern of aggressive and questionable collection practices aimed at lower income people who can’t defend themselves properly.

  Excerpts from the piece are below, but it should really be read in full.

  Warren sent a letter reporting the problem to the complex’s property manager, a company called Sawyer Realty Holdings. When there was no response, she decided to move out. In January 2010, she submitted the requisite form giving two months’ notice that she was transferring her Section 8 voucher — the federal low-income subsidy that helped her pay the rent — elsewhere. The complex’s on-site manager signed the form a week later, checking the line that read “The tenant gave notice in accordance with the lease.”

   

   

  So Warren was startled in January 2013, three years later, when she received a summons from a private process server informing her that she was being sued for $3,014.08 by the owner of Cove Village. The lawsuit, filed in Maryland District Court, was doubly bewildering. It claimed she owed the money for having left in advance of her lease’s expiration, though she had received written permission to leave. And the company suing her was not Sawyer, but one whose name she didn’t recognize: JK2 Westminster L.L.C.

   

   

  Warren was raising three children alone while taking classes for a bachelor’s degree in health care administration, and she disregarded the summons at first. But JK2 Westminster’s lawyers persisted; two more summonses followed. In April 2014, she appeared without a lawyer at a district-court hearing. She told the judge about the approval for her move, but she did not have a copy of the form the manager had signed. The judge ruled against Warren, awarding JK2 Westminster the full sum it was seeking, plus court costs, attorney’s fees and interest that brought the judgment to nearly $5,000. There was no way Warren, who was working as a home health aide, was going to be able to pay such a sum. “I was so desperate,” she said.

   

   

   

  If the case was confounding to Warren, it was not unique. Hundreds like it have been filed over the last five years by JK2 Westminster and affiliated businesses in the state of Maryland alone, where the company owns some 8,000 apartments and townhouses. Nor was JK2 Westminster quite as anonymous as its opaque name suggested. It was a subsidiary of a large New York real estate firm called Kushner Companies, which was led by a young man whose initials happened to be J.K.: Jared Kushner.

   

   

  In August 2012, a Kushner-led investment group bought 5,500 multifamily units in the Baltimore area with $371 million in financing from Freddie Mac, the government-backed mortgage lender — another considerable bargain. Two years later, Kushner Companies picked up three more complexes in the Baltimore area for $37.9 million. Today, Westminster Management, Kushner Companies’ property-management arm, lists 34 complexes under its control in Maryland, Ohio and New Jersey, with a total of close to 20,000 units.

   

  Kushner’s largest concentration of multifamily units is in the Baltimore area, where the company controls 15 complexes in all — which, if you assume three residents per unit, could be home to more than 20,000 people. All but two of the complexes are in suburban Baltimore County, but they are only “suburban” in the most literal sense. They sit along arterial shopping strips or highways, yet they are easy to miss — the Highland Village complex, for example, is beside the Baltimore-Washington Parkway, but the tall sound barriers dividing it from the six-lane highway render its more than 1,000 units invisible to the thousands traveling that route every day.

   

  At the time of the 2012 Baltimore purchase, Kushner raved about the promise of the low-end multifamily market. “It’s proven over the last few years to be the most resilient asset class, and at the end of the day, it’s a very stable asset class,” he told Multifamily Executive. He said things were proceeding well in the Midwestern complexes he purchased a year earlier. “It was a lot of construction and a lot of evictions,” he said. “But the communities now look great, and the outcome has been phenomenal.”

  Awesome!

  Meanwhile, back to Warren…

  Kamiia Warren still had not paid the $4,984.37 judgment against her by late 2014. Three days before Christmas that year, JK2 Westminster filed a request to garnish her wages from her in-home elder-care job. Five days earlier, Warren had gone to court to fill out a handwritten motion saying she had proof that she was given permission to leave Cove Village in 2010 — she had finally managed to get a copy from the housing department. “Please give me the opportunity to plead my case,” she wrote. But she did not attach a copy of the form to her motion, not realizing it was necessary, so a judge denied it on Jan. 9, on the grounds that there was “no evidence submitted.”

   

  The garnishing started that month. Warren was in the midst of leaving her job, but JK2 Westminster garnished her bank account too. After her account was zeroed out, a loss of about $900, she borrowed money from her mother to buy food for her children and pay her bills. That February — five years after she left Cove Village — Warren returned to court, this time with the housing form in hand, asking the judge to halt garnishment. “I am a single mom of three and my bank account was wiped clean by the plaintiff,” she pleaded in another handwritten request. “I cannot take care of my kids when they snatch all of my money out of my account. I do not feel I owe this money. Please have mercy on my family and I.” She told me that when she called the law office representing JK2 Westminster that same day from the courthouse to discuss the case, one of the lawyers told her: “This is not going to go away. You will pay us.”

   

  The judge denied Warren’s request without explanation. And JK2 Westminster kept pressing for the rest of the money, sending out one process server after another to present Warren with legal papers. Finally, in January 2016, the court sent notice of a $4,615 lien against Warren — a legal claim against her for the remaining judgment. Warren began to cry as she recounted the episode to me. She said the lien has greatly complicated her hopes of taking out a loan to start her own small assisted-living center. She had gone a couple of years without a bank account, for fear of further garnishing. “It was just pure greed,” she said. “It was unnecessary.” I asked why she hadn’t pushed harder against the judgment once she had the necessary evidence in hand. “They know how to work this stuff,” she replied. “They know what to do, and here I am, I don’t know anything about the law. I would have to hire a lawyer or something, and I really can’t afford that. I really don’t know my rights. I don’t know all the court lingo. I knew that up against them I would lose.”

   

  A search for “JK2 Westminster” in the database of Maryland’s District Court system brings back 548 cases in which it is the plaintiff — and that does not include hundreds of other cases that have been filed in the name of the company’s individual complexes.

   

  In the cases that Tapper has brought to court on behalf of JK2 Westminster and individual Kushner-controlled companies, there is a clear pattern of Kushner Companies’ pursuing tenants over virtually any unpaid rent or broken lease — even in the numerous cases where the facts appear to be on the tenants’ side. Not only does the company file cases against them, it pursues the cases for as long as it takes to collect from the overmatched defendants — often several years. The court docket of JK2 Westminster’s case against Warren, for instance, spans more than three years and 112 actions — for a sum that amounts to maybe two days’ worth of billings for the average corporate-law-firm associate, from a woman who never even rented from JK2 Westminster. The pursuit is all the more remarkable given how transient the company’s prey tends to be. Hounding former tenants for money means paying to send out process servers who often report back that they were unable to locate the target. This does not deter Kushner Companies’ lawyers. They send the servers back out again a few months later.

   

  In March 2009, Joan Beverly, a probation agent, signed the lease for her daughter, Lennettea, for a unit at Dutch Village, a complex on the northern edge of Baltimore. Lennettea moved out a year later, several months before her lease was up. Kushner Companies bought Dutch Village more than two years later. In December 2012, JK2 Westminster filed suit in Baltimore County District Court against Beverly, seeking $3,810.16 — several months of rent it said it was owed, plus about $1,000 in repair costs, including $10 for “failure to return laundry room card.”

   

  That February, Lennettea filed a written court notice explaining that her mother, who was dying of pancreatic cancer, was “in terminal hospice care and is not eligible to work.” She added by way of supporting evidence a letter from the hospice provider to Joan Beverly’s bank, explaining her and her husband’s late mortgage payments on their home: “There has been added financial stress because Mrs. Beverly is very ill at this time.” But JK2 Westminster persisted in seeking a hearing on the suit. In March, a district court judge found in favor of the company — a total judgment against Joan of more than $5,500.

   

  Joan died two weeks later. Her husband, Tyrone Beverly, a retired longshoreman, requested that the judgment against his deceased wife be removed but was denied. The case remains open in the court database. Tyrone, who was married to Joan for 32 years, told me that he had assumed the judgment had been dismissed and was unaware that it was still listed as awaiting payment. “They just didn’t treat us fair,” he said.

   

  Over all, about nine out of every 10 cases brought by JK2 Westminster that I surveyed resulted in judgments against the defendants, who often did not appear in person for the hearings — and if they did, almost never had legal representation. How could it possibly be worth Kushner Companies’ while to pursue hundreds of people so aggressively over a few thousand dollars here and there? After all, the pursuit itself cost money. And it wasn’t happening just in Baltimore — Doug Wilkins, a lawyer in Toledo who has represented some of the complexes bought there by Kushner, told me the company is seeking far more monetary judgments than did previous owners.

   

  Matthew Hertz, whose Bethesda, Md., firm represents landlords and tenants in similar cases, explained to me that there is a logic behind such aggressive tactics. The costs of the pursuit are not as high as you might imagine, he said — people are not that hard to find in the age of cellphones and easily accessible databases. “If I give my process server a name and phone number, it’s generally enough to trace you,” he said. “If I have a date of birth and Social Security number, it’s even easier.” The legal costs can be billed to the defendant as attorney’s fees, if the terms of the lease allow. And garnishing wages is relatively easy to do by court order, assuming the defendant has wages to garnish.

   

  The Highland Village complex, along the Baltimore-Washington Parkway, is one of Kushner Companies’ largest, a vast maze of lanes and courts lined with rows of short brick-and-siding-fronted homes. Like the other Kushner complexes I visited in Baltimore’s southern and eastern suburbs, it is situated in what was once a predominantly white working-class community, within reasonable commuting distance of the harbor and industrial plants, now defunct, like Bethlehem Steel. In recent decades, many black transplants from the city and Hispanic immigrants have arrived as well, and Highland Village is an unusually integrated place.

   

  The complex, like the others I saw, seemed designed to preclude neighborliness — most of the townhouses lack even the barest stoop to sit out on, and at least one complex has signs forbidding ball-playing (“violators will be prosecuted”). At another complex, kids had drawn a rectangle on the side of a storage shed in lieu of a hoop for their basketball game. The only meeting points at many of the complexes are the metal mailbox stands, the Dumpsters and the laundry room. And the only thing that united many of the residents I spoke to, it seemed, was resentment of their landlord.

   

  They complained about Westminster Management’s aggressive rent-collection practices, which many told me exceeded what they had experienced under the previous owners. Rent is marked officially late, they said, if it arrives after 4:30 p.m. on the fifth day of the month. But Westminster recently made paying the rent much more of a challenge. Last fall, it sent notice to residents saying that they could no longer pay by money order (on which many residents, who lack checking accounts, had relied) at the complex’s rental office and would instead need to go to a Walmart or Ace Cash Express and use an assigned “WIPS card” — a plastic card linked to the resident’s account — to pay their rent there. That method carries a $3.50 fee for every payment, and getting to the Walmart or Ace is difficult for the many residents without cars.

   

  The worst troubles may have been those described in a 2013 court case involving Jasmine Cox’s unit at Cove Village. They began with the bedroom ceiling, which started leaking one day. Then maggots started coming out of the living-room carpet. Then raw sewage started flowing out of the kitchen sink. “It sounded like someone turned a pool upside down,” Cox told me. “I heard the water hitting the floor and I panicked. I got out of bed and the sink is black and gray, it’s pooling out of the sink and the house smells terrible.”

   

  Cox stopped cooking for herself and her son, not wanting food near the sink. A judge allowed her reduced rent for one month. When she moved out soon afterward, Westminster Management sent her a $600 invoice for a new carpet and other repairs. Cox, who is now working as a battery-test engineer and about to buy her first home, was unaware who was behind the company that had put her through such an ordeal. When I told her of Kushner’s involvement, there was a silence as she took it in.

   

  Very few of the complex residents I met, even ones who had been pursued at length in court by JK2 Westminster, had any idea that their rent and late fees were going to the family company of the president’s son-in-law. “That Jared Kushner?” Danny Jackson, a plumber in his 15th year living at Harbor Point Estates, exclaimed. “Oh, my God. And I thought he was the good one.”

   

  At the Carroll Park complex, I met Mike McHargue, a private investigator, and his girlfriend, Patricia Howell. “They’re nothing but slumlords,” Howell told me of Westminster Management. “They take everyone’s money.” When I asked if they knew who was behind the company, they said they did not. “Oh, really?” Howell said when I mentioned Kushner’s name. “Oh, really. And I’m a Trump supporter.”

   

  Jared Kushner stepped down as chief executive of Kushner Companies in January. But he remains a stakeholder in the company — his share of company-related trusts is estimated to be worth at least $600 million — and the company says it has no intention of selling off its multifamily holdings. (JK2 Westminster was formally dissolved in December, but Kushner Companies still owns the complexes through other entities; lawsuits against tenants are now typically filed in the names of the complexes themselves.) Because Kushner retains his interest in the complexes, the White House told The Baltimore Sun in February that he would recuse himself from any policy decisions about Section 8 funding, as many of his tenants rely on it for their rent. But even as Kushner now busies himself with his ever-expanding White House portfolio, his company is carrying on its vigorous efforts in court.

  On a related note, here’s an article I published earlier this month: Kushner Companies Seen Hawking Shady U.S. Visa Buying Residency Program to Wealthy Chinese

  

  

• "Something's Breaking" – Yuan Suddenly Spikes To 2-Month Highs

  Traders in Asia are bemused as offshore Yuan suddenly spikes by the most in 2 months (following dollar’s post-Fed-Minutes breakdown) to 2-month highs…

  It seems The Fed’s potentially dovish realisation that data-dependence is going to hold them back from their plans to hike rates no matter what is rippling through the world’s risk markets as Yuan spikes suddenly and dramatically in Asia trading…

  

  Sending offshore Yuan to 2-month highs..

  

   

  As we warned earlier it seems The National Team are active in stocks…

  

   

  Rebounding once again even as Iron ore plumbs new depths.

  As one Hong Kopng based trader said “something’s breaking!”

  

  

• Comey 'Friend' Warns Trump "If I Were You, I'd Be Scared"

  First it was anonymous colleagues, then his dad, and now it's a 'friend' of Jim Comey that CNN reports the fired FBI director has a story to tell, adding that he would be scared if he were President Trump.

  

  As The Hill reports, Benjamin Wittes, who describes himself as a Comey confidant, said on CNN when asked how Comey was doing.

  "He's going to be fine. He's not somebody who spends time feeling sorry for himself,"

   

  "I thought it was interesting and very telling that he declined an opportunity to tell his story in private. He clearly wants to do it in a public setting,"

   

  "I think that's a reflection of the fact that this is a guy with a story to tell. I think if I were Donald Trump that would scare me a lot."

  This comes days after a report said Comey is expected to testify that he believes Trump was deliberately trying to meddle in the FBI's investigation of Russian interference in the presidential election.

  One wonders how long until Ray Dalio, Comey's former boss, and until recently a fan of Donald Trump, is also asked to comment (off the record) on the upcoming Pay Per View show  of the century, as Comey finally sits down to "clear the air."

  

  

• What Is Causing China's Yield Curves To Invert: UBS Answers

  Something strange is taking place in China, and we are not talking about the largely optical, mostly irrelevant first downgrade of China by Moody’s since 1989 (which still managed to unleash diplomatic hell in Beijing), and in which the rating agency simply admitted what everyone else already knew about the 300% debt/GDP economy.

  The bigger issue, as we noted previously, is that both the short-term…

   

  

  and conventional Chinese funding market appears to be breaking…

  

  … because as of this week, not only has the one-year Shanghai Interbank Offered Rate, or SHIBOR, exceeded the Loan Prime Rate for the first time ever, meaning Chinese banks’ cost of borrowing is now above the rate they charge customers, but the Chinese government bond yield curve has inverted in not just one, but two places, with both the 3s5s and the 7s10s negative.

   

  

  The question everyone wants answered is why. One attempt at just that, came today from UBS which first give the blow by blow of how we got there:

  As market concerns about financial regulation continued in the first half of May, bond yields kept rising, with the 10-year CGB yield reaching 3.69% on 10 May. The People’s Bank of China (PBoC) renewed MLFs and increased net liquidity injection through OMOs. April economic data, such as FAI released by NBS, came in weaker than market expectations. More importantly, there were media reports that the China Banking Regulatory Commission (CBRC) showed a soft tone in requirements for banks to reach standards. Besides, the central bank’s statement on strengthening coordination in financial regulations eased market concerns about financial regulation.

  As a result of these factors, the back end of the yield curve declined while the front end to continued rising moderately. According to Chinabond yield curves, as of 19 May 2017, 1-year, 5-year and 10-year CGB yields were 3.48%, 3.68% and 3.63%, respectively, up 9bp, 20bp and 7bp compared with 5 May 2017. Yields of 1-year, 5-year and 10-year policy financial bonds (CFBs; we use the bonds issued by the Export and Import Bank of China as examples) were 4.11%, 4.45% and 4.51%, respectively, up 21bp, 10bp and 6bp compared with 5 May 2017.

  

  UBS notes that from the historical data of term spreads, we can see that inversion of 7-year and 10-year has happened more often, which could be attributed to better liquidity in the secondary market for 10-year bonds, but the recent greater than 10bp spread between 7-year and 10-year yields is still the first time that has happened over the past few years. The inverted 3s/10s and 5s/10s curve is also rare to see.

  And while liquidity may be a factor, UBS concedes that liquidity gaps have always existed and may not be the main reason for the recent curve inversion. As such, the Swiss bank admits that “we need to consider some other factors.“

  Below are some of the incremental factors besides liquidity:

  • In terms of CGB issuance in the primary market, auction results in May showed that auction rates were all higher than market expectations, except for the 50-year CGB auction, which came in lower than the market’s expectation. Also, the spread between auction results and market expectations was larger for the less liquid tenors.
  • That indicates that during weak market sentiment, a negative feedback loop formed between the primary market and secondary market. Besides, from an allocation demand perspective, insurance companies have shown increased demand for CGBs in recent months, in addition to banks, the major buyers of CGBs, which may provide support to long-tenor bonds.

  

  More importantly, however, UBS notes that the inverted curve also reflects a contradiction between market expectations on policies and economic fundamentals.

   On one hand, the slowdown of economic growth may prevent the back end of the yield curve from further going up. On the other hand, financial institutions’ funding costs have kept rising but the financing costs for the real economy measured by loan rates have not risen that much. And investors can hardly expect the monetary policy to ease in the current circumstances.

  • We think the rise in financial institutions’ funding costs shows their intention to maintain the current asset/liability scale. From this perspective, the deleveraging process may continue for a longer period, while the change in economic fundamentals has not been enough to trigger a reversal of the monetary policy tone. We think in the short term, the yield curve is more likely to repair by having the back end go up again when the gap between market expectations and implementation of financial regulations appears again. Among long-tenor CGBs, the spread between 7-year and 10-year yields is quite large, which has made the relative value of 7-year CGBs rise much higher, in our view. We think when market sentiment calms temporarily, the yield of 7-year CGBs may adjust downward and provide a tactical trading opportunity. However, we expect the 10-year CGB yield to fluctuate at a high level, with a short-term cap around 3.7-3.8%. Although economic fundamentals may put some limit on the rise of the 10-year level, we don’t think there is much room for downside adjustment. Over a longer period, considering the progress of deleveraging, we think investors still need to pay attention to the renewal of banks’ funds that are under management of non-bank financial institutions in H2.
  • Regarding the front end of the yield curve, although we think room for money market rates to go lower is limited in the short term, market expectations about liquidity conditions could stabilize, given PBoC’s recent tone, and that may create room for the front end of the CGB curve to go a bit lower. Over a longer period, we think if a more apparent economic slowdown happens in H2 and forces monetary policy to adjust, a larger opportunity for the front end to move down may appear.

  The above not only why the CGB curve is inverted, but also why SHIBOR1Y is now above the LPR.

  

  And while that may answer why both the CGB and the short-term funding yield curves are inverted, another, just as pressing question emerges: assuming UBS is right, and these yield oddities are merely “contradictions” between market reality and hopes, what happens when this divergence between fundamentals and expectations converges, and more importantly, what will such a mean reversion look like for China’s already bizarrely trading financial assets.

  

  

• Angry China Slams Moodys For Using "Inappropriate Methodology"

  The market may have long since moved on from Moody’s downgrade of China to A1 from Aa3 (by now even long-only funds have learned that in a world with $18 trillion in excess liquidity, the opinion of Moodys is even more irrelevant), but for Beijing the vendetta is only just starting, and in response to Tuesday’s downgrade, China’s finance ministry accused the rating agency of applying “inappropriate methodology” in downgrading China’s credit rating, saying the firm had overestimated the difficulties faced by the Chinese economy and underestimated the country’s ability to enhance supply-side reforms.

  In other words, Moody’s failed to understand that 300% debt/GDP is perfectly normal and that China has a very explicit exit strategy of how to deal with this unprecedented debt load which in every previous occasion in history has led to sovereign default.

  The Ministry of Finance reaction came after Moody’s first, and very, very long overdue, downgrade of China since 1989 citing concerns about risks from China’s relentlessly growing debt load as shown below.

  

  “China’s economy started off well this year, which shows that the reforms are working,” the ministry said in a statement on its website.  Actually, it only shows that China had injected a record amount of loans into the economy at the start of the year, and nothing else. And now that the credit impulse is fading, the hangover has arrived.

   

  

  Moody’s on Wednesday also downgraded the ratings of 26 Chinese government-related non-financial corporate and infrastructure issuers and rated subsidiaries by one notch. It also downgraded the ratings of several domestic banks, including the Agricultural Bank of China Limited’s long-term deposit rating from A1 to A2.  It also eventually downgraded Hong Kong and said credit trends in China will continue to have a significant impact on Hong Kong’s credit profile due to close economic, financial and political ties with the mainland.

  So how did China defend its position? The same way US companies fabricate their own numbers to confuse shareholders: with “pro forma” arguments.

  For example Moody’s noted that the importance Chinese authorities have attached to maintaining robust growth would result in sustained policy stimulus, and such government spending would contribute to rising debt across the economy. “We expect the government’s direct debt burden to rise gradually toward 40 percent of GDP by 2018 and closer to 45 percent by the end of the decade,” Moody’s noted.

  To this, the MOF responded that government bonds reached 27.33 trillion yuan ($3.97 trillion) at the end of 2016, or about 37% of the country’s GDP. The proportion is much lower than the 60% picket line delimited by the EU, the ministry said.  Liu Xuezhi, a senior analyst at the Bank of Communications, said that the proportion of government bonds to GDP has been continuously dropping since peaking in 2013, largely due to the government efforts to manage debt.

  “I think Moody’s reasons are debatable,” he said.

  Of course, what the MOF forgot to mention is the roughly 200% in corporate debt issued in large part by entities that are State-owned enterprises, and which the government for mostly refuses to go bankrupt over fears of mass riots, civil disobedience and even war.  As a result virtually all of China’s corporate debt is effectively sovereign.

  That did not prevent China from spinning more propaganda.

  Zheng Xinye, associate dean of the School of Economics at the Renmin University of China, also told the Global Times on Wednesday that the government has taken effective measures, such as bond swaps and perfecting the issuance and management system of local government debt, to rein in bond risks.  Liu added that China’s fiscal revenue has been rising since 2009. “Besides, the Chinese government has income channels which other countries don’t, such as land transfer money and State assets. Therefore, I don’t think China would be facing serious financial pressure, at least not in the next few years,” he told the Global Times on Wednesday.

  Zheng also said that the government wouldn’t need to use fiscal measures to stimulate growth, as the effects of supply-side reforms would sustain the economy’s momentum.  He may have even said it with a straight face.

  Additionally, China took offense at Moody’s forecast that China’s growth will slow to 5% in five years, because of a smaller working-age population and continuing production slowdown. 

  To this, Liu said the chances are very slim for China’s economy to slip to 5 percent in the next five years. “I believe China’s GDP growth will remain above 6.5 percent at the end of 2020, as China has abundant room for policy adjustments to support economic growth,” Liu said. It has even more abundant room to goalseek its data to whatever it wants, however, without the benefit of “creating” 40% of GDP in the form of new credit, China’s economy will implode.

  Zheng disagreed, and said the economy has not shown any signs of sliding.

  One place where China’s apparatchiks were right is that Moody’s downgrade would hurt overseas investor confidence in the Chinese market or collaborations with domestic companies.

  “It would also make it more difficult for domestic companies to seek financing in overseas markets,” Liu noted.  But Liu said domestic financial markets would not be affected as much, because they’re not entirely open. And for a good, if scary, explanation of what happens as China’s debt issuance shift domestically, read this morning Bloomberg piece “China’s Downgrade Could Lead to a Mountain of Debt.”

  

  

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