Today’s News 9th August 2016

  • Deportation European Style: "Dear Terrorist, Please Go Home"

    Submitted by Mike Shedlock via MishTalk.com,

    The Algerian assailant who attacked two female Belgian police officers with a machete ignored two exportation orders. Only 40% of exportation orders are obeyed.

    Machette Attack

    The above image from Islamic State Claims Responsibility for Machete Attack in Belgium.

    The Financial Times reports Belgium Machete Attacker Earmarked For Deportation.

    The man who injured two policewomen with a machete in a suspected terror attack in the Belgian city of Charleroi on Saturday had been earmarked for deportation.

     

    Belgian authorities have confirmed the 33-year-old Algerian assailant had lived in Belgium since 2012 and had ignored two expulsion orders.

     

    Deportation has become the bedrock of the EU’s migration policy, with Brussels pushing to reach agreements with countries across Africa and the Middle East to make it easier to send people with no right to stay back to their home country. Countries that agree to such deals will be able to access investment funds of up to €62bn, according to an EU proposal launched in June.

     

    This push comes despite criticism from some migration experts that widespread removals are difficult to carry out, because of a combination of their cost and strict legal conditions. At the moment, only 40 per cent of failed asylum seekers are ever deported, according to figures from the European Commission.

     

    Theo Francken, Belgian secretary of state for asylum and migration, in press release on Sunday insisted that the government was committed to expelling foreign criminals: “The government has already taken a series of steps to accelerate the return of these criminals. We have to continue.” [Mish translation: we have no idea what to do next.]

     

    But Mr Francken also admitted to difficulties with carrying out expulsions to Algeria: “Forced returns to Algeria remain problematic despite years of bilateral and European negotiations.”

     

    Belgian media reported that the that the perpetrator shouted “Allahu akbar [God is great]” during the assault.

    Dear Terrorist, Please Go Home.

    Is it politically incorrect to point out the officers attacked by the man with a machete were women? Reuters mentioned that several times, the Financial Times not at all.

    Question aside, the European plan of action is the stern message “Dear terrorist, please go home”. When that doesn’t work, the message is repeated, presumably until it does work.

    It’s likely that you are as shocked as I am that such a well thought out plan does not work.

    Is there a count of deportation orders ignored, or do authorities just issue them and hope?

    Clearly hope isn’t working. The authorities need tough follow-up actions. I suggest the deportation authorities need to add “pretty please” to message.

  • The Chilling Thing Twitter Just Said about San Francisco’s Office Bubble

    By Wolf Richter, WOLFSTREET.com

    Twitter is shaking up San Francisco. It’s the city’s 10th largest employer, and second largest tech employer, after Salesforce. But it hasn’t yet figured out, despite a decade of trying, how to make money. Last October, it announced that it would lay off 8% of its workforce. A couple of weeks ago, it reported a second-quarter net loss of $107 million along with disappointing user metrics and lousy projections. Its shares have lost 74% since their miracle-IPO-hype peak at the end of December 2014.

    And now Twitter is dumping nearly one third of its total office space on the San Francisco sublease market.

    It leases a number of floors in the two buildings at Market Square. The four floors it put on the sublease market total 183,642 square feet of “fully furnished” office space with workstations for 1,416 employees, according to a marketing brochure by corporate real estate firm CRESA.

    It’s the largest sublease space now available in San Francisco.

    The largest of the floors, at 78,792 square feet, is at its 1355 Market location, the iconic former San Francisco Furniture Mart that Twitter moved into in 2012. The floor comes with “600 workstations, 49 conference rooms, multiple collaboration/lounge areas, 2 kitchens, 2 training rooms, and a Mother’s room,” according to the brochure.

    It also listed three floors at the adjacent One 10th Street building that it moved into in 2014. The floors, 34,950 square feet each, are also fully furnished with similar amenities, and earned a “2016 International Interior Design Association – Honor Award,” according to the brochure. Twitter spared no expense before its IPO to dazzle investors with its buildings and show them what noble material it was made of.

    San Francisco’s darling even extorted a highly controversial payroll tax exemption for six years from the city by threatening to head out of town when it was looking for larger digs in the neglected Mid-Market area.

    All spaces listed are available “immediately” and rent is “negotiable,” the brochure says.

    Twitter has been shrinking from its grandiose plans. In October last year, it abandoned plans to lease an additional 100,000 square feet at the building where Square is, at 1455 Market. Both companies share the same CEO, Jack Dorsey.

    But this comes at an inopportune time for San Francisco’s office market.

    According to commercial real estate firm Savillis Studley, vacant availability in Q2 rose to 8.3% (up from 7.7% in Q1), and Class A availability hit 9.2% (up from 8.4% in Q1). In the Financial District, it “spiked” to 9.8% (up from 8.6%). Despite “a flurry of large subleases and these direct deals” in Q2, with Fitbit, Lyft, and Stripe signing the largest deals, leasing activity over the past four quarters plunged 31% from the five-year average to 5.9 million square feet.

    “Caution prevailed,” the report said, as “more firms coped with funding shortfalls by cutting back or considering relocations to other markets.”

    After a relentless five-year boom, average asking rent, at $64.30 per square foot, according to Savillis Studley, is among the most outrageously expensive in the country and nearly twice the national average of about $33 a square foot.

    That might not have made any difference to startups that were drowning in cash and faced no pressure to ever make money, or were even encouraged to burn through as much cash as possible to quickly grow into the next Facebook. But that era is now being superseded by the “post-unicorn era,” as Dropbox CEO Drew Houston called it so elegantly, and money suddenly matters.

    But some of the smartest money already got out, at the peak last year.

    San Francisco-based real-estate fund Shorenstein Properties acquired Market Square in 2011 for $110 million, according to The Registry. For another $200 million, it redeveloped the former Furniture Mart into a tech hub. With vestiges of hope still clinging to Twitter before the layoff announcement in October last year, and with office prices and rents soaring, Shorenstein decided to unload the property – and made a killing.

    In August last year, it sold a 98% stake to JP Morgan Asset Management for $936 million, or $877 per square foot. This is what a totally crazy property boom will do, along with impeccable timing and knowing your way around city politics. It was one of the highest per-square-foot prices in the city’s history.

    But the office boom faces two challenges: new office towers that are sprouting like mushrooms just when employment growth faces iffy prospects. Twitter isn’t alone. Numerous companies have started to lay off employees, even as others are still hiring. And employment has peaked.

    In June, according to the California Employment Development Department, the number of jobs in San Francisco – 533,200 – was back where it had been in November last year:

    US-San-Francisco-employment-2016-06

    I’m now getting “numerous” reports, anecdotally – up from just “one” four months ago – that people, even tech workers, beyond the age of Millennials, so folks in their early to mid-fifties, are getting laid off, and that they’re having trouble finding another job here. That doesn’t bode well at all for San Francisco’s commercial real estate bubble. When times get tougher, no one needs vast amounts of empty and utterly unproductive office space that is among the most expensive in the country.

    But San Francisco is so expensive overall that a lot of people, once they lose their jobs, choose to leave and head to where life is more affordable. So this is the kind of problem San Francisco really doesn’t need at the moment. Tremors are already going through the condo market. Condo prices are under pressure. Sales volume has been down all year. The luxury end is in trouble. And now this: Read…  Is the “Leaning Tower of San Francisco” the Only One?

  • Retired Green Beret Blasts "Make No Mistake, Everyone Warning About Clinton Is A Target And They Are Marked"

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

    The Obama Administration has been characterized by not only a lack of transparency on issues that surface, but a deliberate obfuscation to mask true actions and intentions.  There are literally no limits to what the man and his handlers will do outside of the law to attain their ends, while simultaneously “crafting” legislation to enslave the citizenry.  The fawning, lying press trumpets his victories and quietly spins his defeats: objectivity cannot be maintained by journalists on the government payroll and command.

    Hence a sitting American president, a man who should have been hauled off of a stage in 2012 and clapped in irons for treason is able to do whatever he wants.  Remember?

    “Tell Vladimir I’ll have more leeway after the election.”

    Now the Congress and the State Department labeled Iran both a “rogue state that supports terrorism” and “a supporter of Hezbollah and Al-Qaeda.”  So my question is where did Obama secure the necessary Congressional approval to airlift $400 million to Iran on January 17, 2016?  More: Since this was Obama’s move, did he not use his position unilaterally and without any Congressional approval to provide funding to a nation that supports (and conducts direct action missions to complement) terrorist activities?  And this is with Iran, that vows to strike the U.S.?

    Just as in the same vein, how can we join Russia in a bombing campaign of “boogeyman” ISIL/ISIS when we, the U.S., created it?

    Just as in the same vein, how can we send a QRF (Quick Reaction Force) of our military’s finest commandos to stop the slaughter of an American ambassador and his staff in Libya…when we approved of and enabled it?

    The “administration,” if you prefer that ludicrous term to the true state, the “regime,” is made of Teflon…nothing can touch it.  Fast and Furious proved it.  Hillary’s e-mails proved it.  The cashiering of half of the admiralty and general staff of the United States Armed Forces proved it.  The removal of TARS, of the scrambling of fighters, the scrapping of the A-10 Warthog, the cessation of Tomahawk production…all of these measures prove it.  Obamacare steamrolling through the (at the time) Democrat-controlled Congress…enabled by Senator Olympia Snow (R, Maine) proved it.  The hearings and the deciding vote.

    Nothing can stop the administration.  Nothing.  And nothing will be able to stop the next one.

    Does everyone really think that Trump will be elected?  Really?  Throughout the past two weeks, he has literally run on “self-destruct” and must have a lobotomized campaign manager.  Haven’t we seen this before, when Romney won the first debate and made a fool out of Obama, and then turned into a neutered eunuch for the next debates?

    Do not be fooled: it is all intentional.

    There is no such thing as an election, only a controlled paradigm shift with a force-fed theatrical playbill that the dumbed-down public gobbles up.  The two “camps” of Democrat and Republican, and the illusion of a colossal battle, a political “Clash of the Titans” between conservatism and socialism drawing the focus and attention of the people away from surrounding events nationally and in the world.

    Look at Hanna, the alleged Republican…the first of the jackasses to come out and support Hillary Clinton.  Look at the moneyed interests pooling behind her: Meg Whitman, Warren Buffet, and the invisible but ever-present incubus of George Soros, the man who destroys countries for a hobby and a price.  Look at Hillary, the “good wife,” the “good mother,” the “good 501-C-3” member with a billion dollar “kitty” in the Clinton Foundation and three Delaware shell corporations to hide her loot.  The “good speaker,” snagging $50 – 200 K dollars per speech.

    The good fundraiser who raised $90 million dollars in the month of July alone.

    By her campaign slogan… “I’m with Her” by those very words are such notables as James Comey, Loretta Lynch, Houma Abedin, Debbie Wassermann-Schultz…all of them…complicit with her in the crimes she has committed.  She would provoke a nuclear war with Russia in order to prevent those e-mails from coming to light.

    Her “candidacy” is a degradation and an abasement, not only of the American Justice system, but of the entire Constitution of the United States and the freedom of every citizen.  Those who are “with her” don’t even realize they’ll be the first ones in the gristmill when the time arrives.  That time is almost here.  It’s all been smoke and mirrors, but soon there won’t need to be.  The obfuscations and treacherous maneuvers are masked but in a short time they’ll all be completely unveiled.

    The 2nd Amendment will be completely destroyed and/or nullified.  The face of this entire country is going to change, and akin to most bad things, it’ll have to happen before people realize it and take action.

    Everybody who criticizes the incoming dictator is marked, make no mistake about it.  We still have a little bit of time, but not much, and effects generated need to have substance, not form.  No juvenile displays of occupying a shed/storage room/visitor center in a National Park or Forest.  No standoffs with a disbandment and then everyone is arrested individually.  The torch is being passed.  Everyone who is criticizing Obama and warning about Clinton is a target and they are marked, along with countless others of the 325 million of us.

    If Hillary Clinton takes the presidency, it is the end of the United States.

  • Japan Orders Military To 'State Of Alert' As North Korea Accuses US Of Seeking 'Preemptive Nuclear Strike'

    Just days after North Korea has accused Washington of planning a preemptive nuclear strike – following the US announcement that it would deploy its B-1 bomber in the Pacific for the first time in a decade – Japan's increasingly militarist tone just ratcheted up to '11' as defense ministry officials have ordered its military to be ready at any time to shoot down any North Korean missiles that threaten to strike Japan, putting its forces on a state of alert for at least three months.

    Tensions have been running high since North Korea – officially named the Democratic Peoples' Republic of Korea (DPRK) -carried out its fourth nuclear test in January, followed by a barrage of missile launches that this month reached Japanese waters directly for the first time (via Military.com)…

    Pyongyang accused Washington of "becoming all the more pronounced in their moves to topple down the DPRK by mobilizing all nuclear war hardware," using North Korea's official title.

    "The enemies are bluffing that they can mount a preemptive nuclear strike on the DPRK by letting fly B-1B over the Korean peninsula within two-three hours in contingency," said an English-language statement on state media.

    "Such moves for bolstering nuclear force exposes again that the US imperialists are making a preemptive nuclear strike on the DPRK a fait accompli."

    On July 29, the U.S. Air Force said it would upgrade its hardware on Guam by sending the B-1 for the first time since April 2006.

    "The B-1 will provide U.S. Pacific Command and its regional allies and partners with a credible, strategic power projection platform," it said in a statement.

     

    Pyongyang has repeatedly warned it may carry out preemptive nuclear strikes against South Korean and U.S. targets.

    The secretive state, led by supreme leader Kim Jong-un, warned Saturday it would respond to any aggression by reducing the U.S. to a "sea of flames".

     

    "The ever-mounting moves of the U.S. imperialists to ignite a nuclear war are pushing the situation on the Korean peninsula into the uncontrollable and catastrophic phase," said the North Korean statement.

    And so, following this outburst, as Reuters reports, Abe has stepped up his military's preparedness to respond…

    Japan ordered its military on Monday to be ready at any time to shoot down any North Korean missiles that threaten to strike Japan, putting its forces on a state of alert for at least three months, a defense ministry official and media said.

     

    Up to now, Japan has issued temporary orders when it had indications of an imminent North Korean missile launch that it has canceled after a projectile had been launched.

     

    However, because some test firings are hard to detect, it has decided to put its military on standby for a longer period. The order will be reviewed after three months, state broadcaster NHK said.

    In other words, the next time Kim Jong-un launches, it may start the next war.

    *  *  *

    An increasingly militaristic Japan is something we’ve been warning about for a while. As Liberty Blitzkrieg's Mike Krieger previously detailed

    In case you aren’t up to speed on your Japanese history, the nation’s post WWII Constitution prohibits military action unless it’s in self-defense. Clearly a sensible approach, which is why the current Japanese government, led by the demonstrably insane and incompetent Prime Minister Shinzo Abe, wants to get rid of it.

     

    This story is very important. Not only will this action increase the likelihood of World War III in the Far East, but it’s another important example of a government acting against the will of the people.

     

    Polling has indicated the Japanese public is against a pivot toward militarization and war, but Prime Minister Shinzo Abe  is pushing forward nonetheless. In fact, the current legislation to allow overseas military intervention has already passed the lower house of government. This prompted many Japanese to emerge from their decades long political apathy and get out into the streets. It’s estimated these protests were the largest in recent memory.

    Fast forward a year, and here’s what Abe is up to now.

    From the AP article, Japan Picks Defense Chief Who Downplays Wartime Past:

    TOKYO (AP) — A woman who has downplayed Japan’s wartime actions and is known to have far-right views was named defense minister in a Cabinet reshuffle on Wednesday, a move that could unsettle relations with Asian neighbors with bitter memories of World War II-era atrocities.

     

    Prime Minister Shinzo Abe changed more than half of the 19-member Cabinet in a bid to support his economic and security policies, as well as push for revising Japan’s postwar constitution.

     

    While keeping the economy as the top priority, Abe said he would do his “utmost to achieve a (constitutional) revision during my term,” which ends in September 2018.

     

    A lawyer-turned-lawmaker with little experience in defense, Inada is one of Abe’s favorites. She regularly visits the Yasukuni Shrine, which honors war dead including convicted war criminals, a gesture seen as an endorsement of Japan’s militaristic past.

     

    She also has defended Japan’s wartime atrocities, including forcing many Asian women into sexual servitude in military-run brothels, and has led a party committee to re-evaluate the judgment of war tribunals by the Allies.

     

    Her link to a notorious anti-Korea group was acknowledged by a court this year in a defamation case she lost. Inada also was seen posing with the leader of a neo-Nazi group in a 2011 photo that surfaced in the media in 2014.

     

    Finance Minister Taro Aso, Foreign Minister Fumio Kishida and Chief Cabinet Secretary Yoshihide Suga were among key Cabinet members who retained their portfolios, while 10 ministers were replaced in the reshuffle. Many are not necessarily experts in their assigned portfolio, prompting opposition lawmakers to criticize Abe for dominating the Cabinet with like-minded supporters of his political views.

    While campaigning for last month’s upper house elections, Abe promised to focus on economic revitalization in the short term, and to later seek to revise Japan’s pacifist constitution.

     

    Since he took office in late 2012, Abe has sought to boost growth by pumping massive amounts of money into the world’s third-biggest economy. But lavish monetary easing and public works spending so far have failed to reignite growth as much as hoped.

     

    As is typically the case, when all else fails on the domestic front, politicians look to get a war started.

    The question is, Krieger asks ominously, what sort of war will this be? If it happens, it’ll be the first fourth turning level war since the nuclear age began. In a best case scenario, world leaders would be at least sane enough not to deploy nuclear weapons. If that’s the case, the conflict would likely focus on financial and cyber warfare. Things that can be extraordinarily destructive in their own right, but would at least avoid a destruction of the human race. Such topics will be explored further in the years ahead.

  • How You Got Screwed – A User's Guide To A Rigged System

    Does this describe you?

    • You’re carrying huge amounts of college debt.
    • You’re an adult still living with your parents because you can’t afford to move out.
    • You’re not able to find a job that pays a livable amount of money.
    • You want to get married, but you can’t afford it.
    • Prices keep going up, but your income doesn’t follow.
    • You’ve got health insurance but can’t afford medical care due to the high deductibles.
    • You joined some movement like Operation Wall Street or the Tea Party, or followed a revolutionary politician like Ron Paul or Bernie Sanders, and didn’t see anything change.
    • You feel that something’s not right, even though the government and the media keep telling you how great everything is.

    Then this book – "How You Got SCREWED – A guide to a rigged system" – is for you…

    "When I was younger, maybe 10 or 11, I remember playing a game of Monopoly with a friend. I was doing well, but I was still losing – and that’s when I realized that my friend, who was acting as the bank, was cheating by secretly moving money from the bank over to his own pile. Once I figured this out, I quit the game. Why play a game when it’s impossible to win?

     

    In a nutshell, that’s what’s happening to you in today’s America. Throughout your entire childhood, you were told about the American Dream, and how if you worked hard and did the right things, you could build a good life for yourself. If you’re reading this, then you’ve figured out that something went wrong: Either someone’s cheating, or they changed the rules without telling you.

     

    I’m here to tell you that this is exactly what happened.

     

    The generations before you actually did have a real shot at achieving their dreams, but over time, so many people cheated, looking for shortcuts to achieving their own dreams, that they ended up changing the game. They rigged the game, and now that it’s your turn to play, they’ve made it almost impossible for you to win.

     

     

    In reality, I’m a typical middle-aged guy. I’ve achieved my own American Dream, with a wife, two kids, two dogs and a house with a white picket fence in the suburbs (seriously).

     

    I’ve pretty much got it made – but over time, as I learned about how the game is rigged, how the odds are stacked against the next generation, I’ve come to realize that my kids are going to face huge hurdles in achieving their dreams – hurdles I didn’t have to face. And it’s not just my kids: I realized that a lot of people in my generation, and the majority of people younger than me, are in the same boat.

     

    Not only are most of them destined for a life of frustration and unfilled dreams, but the system that’s holding them down is the same system that’s choking the life out of this country. And it’s all because some of the people who came before us decided to rewrite the rules of the game, benefiting them and hurting the rest of us."

    As Crimson Avenger sums up:

    After years of observing the many corrupted systems that affect our lives, I compiled my thoughts into this book – “How You Got Screwed.” If you’d like a copy, just download the book in PDF form by clicking here .

     

    There is no cost for the book, and you’re free to use it and share it as you see fit. I wrote it to help people understand what’s truly happening in this country, and the more people you share it with, and the more ways you think to use it, the happier I’ll be.

    Full book below…

    How You Got Screwed 1.0

  • Say Hello To Southeast Asia's New Silk Roads

    Authored by Pepe Escobar, Op-Ed via RT.com,

    It’s not only China vs. the US in the South China Sea. Few in the West realize that two completely different, intersecting stories are developing in maritime and mainland Southeast Asia.

    The Permanent Court of Arbitration in The Hague denied China’s historic rights to waters in the South China Sea within its nine-dash line; it also ruled that the Spratly Islands are not islands, but “rocks”; thus they cannot generate 200-nautical mile exclusive economic zones (EEZs).

    These decisions were taken in accordance with the UN Convention on the Law of the Sea (UNCLOS). Now comes the real nitty-gritty – which is a mix of diplomatic ballet and classic Beijing opera.

    The framework under which Beijing is ready to negotiate is somewhat detailed here. But the problem at the starting gate is that Beijing stipulates – as a precondition to any negotiation with the Philippines – that The Hague’s decision should not be discussed. Chinese nationalism has been deeply wounded in The Hague, and the Chinese Communist Party (CCP) knows it will be very hard to tame it.

    Manila for its part faces a constitutional problem. The Filipino constitution rules that the “state shall protect the nation’s marine wealth in its exclusive economic zone, and reserve its use and enjoyment exclusively to Filipino citizens.” It goes on to say that the state “may enter into co-production, joint venture, or production-sharing agreements with Filipino citizens, or corporations or associations,” but “at least 60 per cent of whose capital is owned by such citizens.” If President Duterte goes against this provision he may be impeached.

    Enter the face-saving Asian way of doing business. A graphic example is already at hand; no one so far has urged China to remove people and/or installations from The Hague-coined “low-tide elevations” in the South China Sea.

    In practice, Manila will use The Hague’s ruling as a sort of road map – while not insisting Beijing must recognize it. But that implies an extra obstacle: Beijing may still insist on Manila recognizing Chinese sovereignty over a selected bunch of “rocks”. Filipino diplomats actually hope this won’t be the case. If that happens, we’re in business.

    The first step in the negotiation should be no sovereignty decision over those “rocks” – including the highly contentious Scarborough shoal. Just like what happened in the 1940s, when the then Republic of China came up with the “nine-dash line”, this should be decided in the future. In the short-term, a deal on fishing within the 12 nautical mile territorial sea around the shoal should be all but inevitable.

    This means, in practice, that Beijing will not interfere with Filipino fishermen and/or Filipino oil exploration within its EEZ – while reducing its own workload in those “low-tide elevations”. That’s a tall order, but doable, because the payback will be increased business.

    President Duterte knows as much as the Beijing leadership that China is absolutely essential to the development of Filipino infrastructure.

    That will open the way to joint Chinese/Filipino oil exploration. Of course, constitutionally it can’t be an equal share, but China can still get a very good deal in terms of production rights. Not to mention the deal can be expanded to international waters beyond those EEZs, involving other players such as Vietnam and Malaysia.

    At the same time, China will not desist from building a first-class blue water navy with global reach. That’s the rationale for the sophisticated submarine base in Hainan Island and those ultra-controversial land reclamations in the Spratly Islands. Beijing’s overall strategy is to fully control security in the South China Sea – considering whatever the hegemon may come up with.

    Beijing clearly sees what the US means by “freedom of navigation”; code for the US Navy being able to blockade China’s trade routes in the South China Sea, as I analyzed here. If the US Navy gets too close to China’s southern seaboard, a blockade could be devastating. After all, the whole strategy of setting up Chinese island – or “rock” – defenses in the South China Sea is to keep the US Navy as far away as possible. This is the real deal – much more than fuzzy claims of sovereignty.

    And one thing is clear. If the Pentagon goes for the monkey business option, all hell will break loose. The RAND Corporation is already on freak out mode just because the People’s Liberation Army (PLA) Air Force flew the long-range strategic bomber H-6K over those “low-tide elevations”.

    Watch the Greater Mekong

    One thing is the real high-stakes game being played in the South China Sea. Another thing entirely is Southeast Asian economic integration, via the ASEAN Economic Community – which implies a central strategic role for ASEAN.

    The key problem is a real disconnect between mainland and maritime ASEAN. The Philippines and Indonesia are very much focused on South China Sea issues. Cambodia, Laos, Thailand – but also Brunei – lean towards accommodation with China. The others tend to sit on the fence. And then there’s Vietnam as a pivot; with an interest in the South China Sea but not keen on antagonizing China – a next-door neighbor and major trade partner.

    It’s mainland Southeast Asia, not maritime Southeast Asia that should be the key driver for regional development in the near future. Some figures tell the story. The Greater Mekong sub-region – which includes the southern Chinese provinces of Yunnan and Guangxi – has more than 400 million people with half of ASEAN’s GDP of $2.5 trillion. Cambodia, Laos, Myanmar, Thailand and Vietnam bear a market of 250 million people and a GDP of $700 billion; even without Vietnam, that’s a GDP of around $500 billion and a market of 150 million people.

    They are all expanding like crazy; the Mekong mainland is growing as much as six percent a year. That reminds me, as a comparison, of the early 1980s, when Vietnam was still dreaming of becoming an Asian tiger.

    Expansion goes all over the place. The East-West economic corridor – promoted by the Japan-based Asian Development Bank (ADB) – goes from southern Myanmar through central and northwest Thailand and southern Laos all the way to Danang in Vietnam. The North-South corridor goes from Kunming in Yunnan, China to Bangkok and southern Thailand. The southern corridor goes from southern Myanmar to northeast Thailand, Cambodia and Vung Tau in southern Vietnam; road connections in this corridor, also promoted by the ADB, are still relatively incipient, but advancing fast.

    Of course there are still myriad problems – related to road construction, border crossings, stifling bureaucracy, the language barrier, internet speed. But that’s the way of the future.

    And all that action also ties in with China positioning itself as a de facto high-speed rail power in Southeast Asia. That happens to be a key plank of One Belt, One Road (OBOR); the Southeast Asian branches of the New Silk Roads. China Railway Group Limited (CREC) is very well positioned to build the Malaysia-Singapore high-speed rail, against Japanese and Korean competition.

    The 417 kilometer high-speed rail – stretching between Yunnan province and Vientiane in Laos – is already being built, while the China-Thailand high-speed rail project is also back on track after a few bumps on the financial road. In practice, we’re talking about over 3,000 kilometers of high-speed rail from China’s Yunnan to Laos, Thailand, Malaysia, and Singapore; the Southeast Asian stretch of the New Silk Roads, eventually connected to central China, Central Asia, Southwest Asia – and Europe.

    So watch Southeast Asia. The whole show is not only about maritime Southeast Asia – which is a hostage of the complex, conflicting big power China-US relationship; quite a few key geopolitical implications will derive from the development push of the Greater Mekong sub-region – and the progressive integration of mainland Southeast Asia.

  • Pokemon Go Claims Its First Fatality

    We recently posted a light-hearted piece highlighting a Chinese public service announcement on the public dangers of playing Pokemon Go (see: "China Unveils 'Pokemon Go Danger' Public Service Announcement").  Turns out we didn't take the warning seriously enough.  According to reports from San Francisco the popular game has claimed its first fatality.  College student Calvin Riley was shot in the back while playing the game at around 10pm in a park near San Francisco's Fisherman's Wharf.  According to the New York Daily News

    A 20-year-old man was shot dead while playing Pokémon Go at a dark San Francisco park late Saturday, relatives said.

     

    The armed assailant allegedly watched San Joaquin Delta College student-athlete Calvin Riley from afar as he and his friend played the popular game in the Aquatic Park near Fisherman’s Wharf at around 10 p.m., according to KGO-TV.

     

    The duo paid no mind to the suspicious person and went back to catching the fanciful creatures on their phones.

     

    Moments later, the San Mateo, Calif., man was fatally shot after wandering ahead of his friend, said John Kirby, who spoke to the television station on behalf of the victim’s parents.

     

    "From what we know, there was no confrontation. There was nothing said back and forth,” Kirby said. “It was just senseless … just came up and shot in the back and ran away for nothing.”

     

  • Federal Agency Says Wearing "Don't Tread On Me" Hat Might Be Racist

    Submitted by Andrew Stiles via HeatSt.com,

    Wearing a Gadsden Flag hat to work could be considered racial harassment, according to the Equal Employment Commission, the government body that oversees “hostile work environment” harassment claims against federal agencies.

    The iconic flag, which originates from the Revolutionary War, features coiled snake above the words “Don’t Tread On Me.”

    In recent years, it has become a favorite symbol of the Tea Party movement and conservative activists.

    Earlier this year, the EEOC received a complaint from a “Shelton,” an African American, who charged that his employer (the federal government) had subjected him to racial discrimination when a coworker “repeatedly wore a cap with an insignia of the Gadsden Flag.”

    Shelton (not his real name) said he found the cap to be “racially offensive” because the man who designed it in 1775, Christopher Gadsden, was a slave owner and because the insignia was a “historical indicator of white resentment against blacks stemming largely from the Tea Party.”

    The EEOC acknowledged that the flag did not originate with the Tea Party movement, and was created centuries ago “in a non-racial context.” However, the commission also found that the Gadsden Flag could be “interpreted to convey racially-tinged messages in some contexts,” citing as an example a 2014 shooting spree in which white supremacists draped Gadsden Flags over the bodies of two murdered police officers.

    “Certainly, Complainant ascribes racial connotations to the symbol based on observations that it is sometimes displayed in racially-tinged situations,” the commission wrote.

    The commission concluded that the claim “must be investigated to determine the specific context in which [the hat-wearing coworker] displayed the symbol in the workplace,” and called for the gathering of “evidence that would illuminate the meaning conveyed by [the coworker’s] display of the symbol.”

    Eugene Volokh at the Washington Post writes that even the threat of legal liability in such case is likely to prompt employers to crack down on free expression as a mere precautionary measure, even if such speech is protected by the First Amendment.

    Finally, we leave it to SHTFPlan.com's Mac Slavo to conclude so eloquently:

    It is completely outrageous. It is a Rorschach test for being offended. This case is the first of what will be many in an formal exercise in absurdity and arbitrary loss of rights. Apparently it is doesn’t matter what the symbol that offends actually stands for, or what the person wearing/associated with it actually intended to express.

     

    Instead, the door is now wide open for anyone to be fired, disciplined or put on a list even though they may have done nothing at all except express their free speech. We’re not even talk about real substantial cases here… everything is racist; everything is potentially terrorist; and absolutely everything is offensive. Don’t even try to express yourself at all.

  • In First Autopilot Crash In China, Tesla Model S Driver Crashes In Beijing With Autopilot Engaged

    Just two months after Elon Musk was engaged in major damage control over a scandal involving a Tesla Model S which crashed while in self-driving mode, killing its driver, China Daily reports that a Tesla Model S crashed in Beijing on August 2, while the car had its autopilot on and the driver had both hands off the steering wheel.

    This is the first autopilot crash in China, in which luckily nobody was killed or injured.

    Luo Zhen, the driver of the car, has been driving for seven years, and has never been involved in any accident before. “My car hit the right side of a black Santana that was parked in the inner lane of the road after it had developed some mechanical problem,” he said.

    He added that before the crash happened, he could see almost half of the Santana’s back and there was a reaction time of around five seconds, but Tesla’s Autopilot system failed to spot the vehicle and crashed into it, while another car that was initially in front of him bypassed it successfully.

    “After the accident, I had to manually stop the car, otherwise it would have kept going, as if it had just hit a speed bump,” Luo said.

    A video of the incident was posted on CarNewsChina, in which as Jalopnik observes, the Tesla is moving quite slowly when a disabled Santana on the left comes into view, about 100 feet after a warning triangle. The car in front of the Tesla has no issue scooting over in its lane to make room. The Tesla, for some reason however, makes no such move.

     

    As Jalopnik puts it, “It all seems fairly avoidable to me.”

    Cited by Xinhua, Luo said that he thought the car’s reaction was confusing because it did not conform to the car’s priority reaction of automatically turning right and following the vehicle in front. Instead it kept going.

    The Santana’s taillight and reflectors were damaged, while the Tesla Model S’s left front bumper, left front headlight, left front fender and left mirror were crashed.

    The accident has cost Luo 50,000 yuan ($7,525) on repairs. And when he bought the car, he spent more than 20,000 yuan on the optional Autopilot Convenience Features.

    Believing there are technical bugs in the system of Autopilot, Luo said Tesla should take half of the responsibility, while the other half should be paid by the Santana’s driver for illegal parking. However, there is no law in China and many other countries that clearly states who should be held responsible in case a self-driven vehicle is involved in an accident.

    “There are not many self-driven cars at the moment, so it is unrealistic to expect a law,” said Fu Yuwu, chairman of Society of Automotive Engineers of China, according to a report by National Business Daily.

    After contacting Tesla and only getting the contact detail of the insurance company, an angry Luo posted an article telling details of the accident and his opinions on Twitter-like Sina Weibo on Wednesday, which has drawn dozens of comments and discussions. Luo criticized Tesla for exaggerating the automatic driving function but only using a small space on the manual to warn users that it is only an assistance driving system.

    However, adding insult to (monetary) injury, a comment on his post said Tesla’s manual specifically warned drivers not to remove their hands from the steering wheel, adding that it is illegal to do this in China.

    Luo said a lawyer team has contacted him to support him to sue Tesla for false advertising, but he has not decided whether to do it yet. Duan Zhengzheng, public relation manager at Tesla China, declined the telephone interview request to comment on.

    While we doubt Tesla’s reputation will take a big hit as a result of this incident, what is more curious is the revelation that driving in China without having one’s hands on the steering wheel is illegal: if accurate, this means that the concept of driverless cars in China can be put indefinitely on hold at least until such time as the law is changed. However, for that to happen, a lot of palms will have to be greased, and also begs the question whether Uber, which lately has been also betting its future on a vision of self-driving cars taking over the world, figured out just how major the hurdles would be for its grand design when it comes to the most deisrable market of all, and is why last week it conceded the race for Chinese marketshare to its local competitor, Didi.

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Today’s News 8th August 2016

  • Musical Chairs

    Submitted by Jeff Thomas via InternationalMan.com,

    You’re familiar with the children’s game of musical chairs. Ten children walk around nine chairs whilst listening to music. When the music stops, each must quickly find a chair and sit in it. One child is out of luck and is out of the game. Then a chair is removed and the nine remaining children walk around the eight remaining chairs, waiting for the music to stop again.

    Economics is a bit like musical chairs. In a recession, the economy takes a hit and there are some casualties. Some players fail to get a chair in time and are out of the game. The game then goes on without them. The economy eventually recovers.

    But a depression is a different game entirely. Since 2007, the world has been in an unacknowledged depression. A depression is like a game of musical chairs in which ten children are walking around, but suddenly nine of the chairs are taken away. This means that nine of the children will soon be out of the game. But it also means that all ten understand that the odds of them remaining in the game are quite slim and that desperate times call for desperate measures. It’s time to toss out the rule book and do whatever you have to, to get the one remaining chair.

    Of course, the pundits officially deny that we have even been in a depression. They regularly describe the world as “in recovery from the 2008–2010 recession,” but the “shovel-ready jobs” that are “on the way” never quite materialize. The “green shoots” never seem to blossom. So, what’s going on here?

    Depressions do not occur all at once. It takes time for them to bottom and, if an economy is propped up through economic heroin (debt), the Big Crash can be a long time in coming.

    In that regard, this one is one for the record books. As Doug Casey is fond of saying, a depression is like a hurricane. First there are the initial crashes, then a calm as the eye of the hurricane passes over, then, we enter the trailing edge of the other side of the hurricane. This is the time when things really get rough—when even the politicians will start using the dreaded “D” word. We have entered that final stage, as the economic symptoms demonstrate, and this is the time when the game of musical chairs will evolve into something quite a bit nastier.

    In normal economic times, even including recession periods, we observe financial institutions maintaining their staunchly conservative image. For the most part, they deliver as promised. But, as we move into the trailing edge of the second half of the hurricane, we notice more and more that the bankers are rewriting the rule book in order to take possession of the wealth that they previously held in trust for their depositors.

    And they don’t do this in isolation. They do it with the aid of the governments of the day. New laws are written in advance of the crisis period to assure that the banks can plunder the deposits with impunity. Since 2010, such laws have been passed in the EU, the US, Canada and other jurisdictions.

    Trial balloons have been sent up to ascertain to what degree they will get away with their freezes and confiscations. Greece has been an excellent trial balloon for the freezes and Cyprus has done the same for the confiscations. The world is now as ready as it’s going to be for the game to be played on an international level.

    So what will it look like, this game of musical chairs on steroids? Well, first we’ll see the sudden crashes of markets and/or defaults on debts. Shortly thereafter, one Monday morning (or more likely one Tuesday after a long weekend) the financial institutions will fail to open their doors. The media will announce a “temporary state of emergency” during which the governments and banks must resolve some difficulties in order to “assure a continued sound economy.” Until that time, the banks will either remain shut, or will process only small transactions. (This latter announcement is a nice way of saying that the depositors will be on an allowance from the bank until further notice.)

    Just as Greeks may now withdraw €420 per week, much of the rest of the world will operate under a similar allowance. What about a business that would need to pay that amount for even one salary? What of a restaurant that would pay that amount for even a small food delivery? That remains to be seen—but business will not be robust.

    Of one thing we can be sure. The banks will part with no more than they absolutely have to in order to avoid riots. Their wish will be to confiscate as much as possible themselves, and the new laws allow them to do just that.

    And that’s when we’ll discover that nine chairs have disappeared.

    Remember, what we’re looking at is the end-game. The banks will no longer maintain the ruse of client concern beyond this point. Each player grabs as much as he is able, because banking as we know it will come to an end.

    To be sure, a new banking system will rise from the ashes in a few years, but for now, the wealth that’s on the table will be swept up by those who have the law on their side.

    Many of the most august names in banking may well disappear over the next few years. Some institutions folded in 2008, but re-opened under new names (minus the debt that sank them in the first place). Others, like Bear Stearns and Lehman Brothers, are gone for good. They will be joined by a host of other stalwarts of the industry. Merrill Lynch, AIG, Royal Bank of Scotland, Fortis, Fannie Mae and Freddie Mac all teetered on the edge of collapse in 2008. These and many more stand to go off the cliff in the coming crisis.

    And they will not go with dignity. They will go out with a last-minute grab of as much of the deposits as they can manage. (Those who have taken part in a bank liquidation will know that what little the departing bankers leave behind on the table, the liquidators gobble up in fees. Depositors, at best, get the scraps.)

    Well. Pretty grim. If history repeats, as it generally does, more than 95% of depositors will lose most or all of their savings. But there will be those who are only impacted in a minor way—those who decided to get their wealth (no matter how large or small) out of the banks before the crash.

    How so? First, and most essential, remove all your wealth (except for a maximum of three months’ operating capital) from the bank. Second, move it to a jurisdiction that’s at a lesser risk than the jurisdictions stated above. (Pick the healthiest one you can find, with the lowest taxation rate and a reputation for stable government over decades.) Third, since banks in other jurisdictions may also be at risk, place your wealth in those forms of ownership that are least likely to be under attack from your home government (precious metals and real estate). Overseas real estate is the safest bet, as any attempt by a foreign government to confiscate it amounts to an act of war. However, real estate is not the most liquid means of holding wealth, so quite a bit must be held in precious metals—again in the overseas jurisdiction where it’s harder to confiscate.

    Should you need a sudden cash infusion at home, precious metals are always easy to sell quickly and the proceeds are easily repatriated (countries in economic trouble never complain about money coming in, only money going out.)

    Finally, if possible, create an overseas location for yourself, either where your wealth is or another location—one that’s likely to be peaceful to live in, when crisis reaches your home jurisdiction.

    In this game, the odds of being the lucky one who gets the last chair are very slim. The alternative requires more preparation, but is, by far, the safer choice.

  • America's Dangerous Game Of Intrigue Inside International Organizations

    Submitted by Wayne Madsen via Strategic-Culture.org,

    From the International Olympic Committee (IOC) and the Fédération Internationale de Football Association (FIFA) to the Southern Common Market (Mercosur) and the Association of Southeast Asian Nations (ASEAN), Washington has been playing a dangerous game of intrigue and deception with regard to steering these organizations in a pro-American direction. The Obama administration has decided that the halls, offices, and conference rooms of international organizations are acceptable battlefields to wage propaganda and sanctions wars.

    The first American target of note was the international football association, FIFA. Not content with trying to sully the reputation of the 2014 Sochi Winter Olympics with issues of gay rights and doping of athletes, the US disinformation boiler rooms began a full-scale attack on FIFA. The major reason is Russia’s hosting of the 2018 FIFA World Cup. The US Justice Department, in a major move toward the internationalization of domestic US law, began unsealing indictment after indictment of FIFA officials for financial crimes. The actual target of these indictments was Russia.

    The United States, continuing its economic and political pressure on Venezuela, decided to pressure its three right-wing allies in Latin America – Brazil, Argentina, and Paraguay – to deny the chair of the Mercosur customs union to Venezuela. After Uruguay, whose term was expiring, the next country in alphabetical order to assume the chair of the Latin American customs union was to be Venezuela. However, two countries where the Central Intelligence Agency arranged for constitutional coups to oust progressive presidents – Brazil and Paraguay – joined Argentina, ruled by a right-wing president narrowly elected in a dubious electoral process, in denying the chair to Venezuela.

    Venezuelan Foreign Minister Delcy Rodríguez said that what Argentina, Brazil, and Paraguay were doing to Venezuela was the restoration of the CIA’s Operation Condor against Venezuela. Condor was a 1970s operation concocted by Henry Kissinger, the CIA, and fascist governments in Argentina, Chile, Bolivia, Brazil, Paraguay, and Uruguay to target leftists throughout the Condor participants with assassination and torture. In a display of ultimate hubris, Argentina, Brazil, and Paraguay refused to recognize Venezuela as the chair of Mercosur, citing Venezuela’s economic, political and social crises, all of which were hatched by the CIA and its surrogates inside Venezuela.

    If Washington wanted to split Mercosur, it got its wish. Uruguay responded to the actions of Argentina, Brazil, and Paraguay by stating, “there are no legal grounds to prevent the handover of the pro tempore presidency to Venezuela”. Bolivian president Evo Morales tweeted that the Washington-inspired diplomatic assault on Venezuela was “Another attack on the economic integration by instruments of the capitalist system. We salute the Venezuelan pro tempore presidency of Mercosur.”

    The operation to oust progressive president Dilma Rousseff as president of Brazil and replace her with the proto-fascist Michel Temer was designed to prevent Rousseff from opening the 2016 Summer Olympics in Rio de Janeiro. Neither the Obama administration nor the CIA wanted to see South America’s first Olympics opened by a progressive leftist who had once been tortured by CIA-trained interrogators.

    The CIA’s nightmare scenario was a 2016 Olympics where Rousseff would have been joined in the VIP section of the Olympics stadium in Rio by Latin America’s other progressive leaders: Ecuador’s Rafael Correa, Bolivia’s Morales, Uruguay’s Tabare Vazquez, Venezuela’s Nicolas Maduro, Nicaragua’s Daniel Ortega, and Chile’s Michelle Bachelet. With Temer opening the Olympics, Rousseff and many of her political allies in Latin America will not be present in Rio. The United States had no problem ensuring the Rio Olympics became a total disaster just to guarantee that progressive Latin American leaders were denied a platform to show the world that Latin America was no longer under the colonialist boot heel of Washington. It was the same mindset that Washington had in mind for Sochi. The United States was more than willing to ensure disruption at the 2014 Winter Olympics through quiet support, much of it through George Soros-financed organizations, for gay rights and other pressure groups to damage the reputation of the Sochi games.

    Not content with disrupting the Rio Olympics by ousting Rousseff as president of Brazil, Washington doubled down by using its agents of influence to resurrect doping accusations against the Russian Summer Olympics team. Washington’s goal was to see Russia suspended from the Rio games.

    Resisting pressure from Washington, IOC president Thomas Bach wisely decided to avoid a blanket ban of Russian athletes. Bach called such a unilateral ban on Russia participating in the Rio games as a “nuclear option”. He also said that such a “nuclear option” would have resulted in “collateral damage” among innocent athletes. Bach’s use of two geopolitical military terms was no mistake and it bore the mark of someone responding to familiar American “shock and awe” pressure. The United States used its compliant stooges, Germany and Canada, as well as the dubious World Anti-Doping Agency, run by a Scottish lawyer, to call for a total ban on Russian athletes in Rio.

    Washington has also used its influence in ASEAN to ensure the organization became part of the US alliance against China in East Asia. Working behind the scenes within ASEAN, Washington attempted to get the organization, which does not include the United States among its members, to issue a statement backing the decision by the Permanent Court of Arbitration in The Hague rejecting China’s maritime claims to waters and islands in the South China Sea claimed by the Philippines. Cambodia blocked Washington’s maneuver and prevented an ASEAN statement in support of the Philippines against China.

    In 2012 and 2016, ASEAN failed to issue a joint statement following a foreign ministers’ summit. This has happened only twice in the 49-year history of the organization. In both cases, it was Cambodia that stood in the way of an ASEAN statement, initiated by American agents within the ASEAN Secretariat in Indonesia, in opposition to China’s maritime claims in the South China Sea.

    Across the globe, the United States has sought to expand its influence in international organizations. The United States, using Germany and a few right-wing countries in Eastern Europe as surrogates, has ensured the European Union does not weaken economic sanctions against Russia. The Arab League has become a tool of the United States in applying pressure on Syria, thanks mostly to jihadist-supporting regimes in Saudi Arabia, Qatar, Bahrain, the United Arab Emirates, and Kuwait. The African Union has become nothing more than a pathetic cheerleader for the US Africa Command (AFRICOM), which only seeks to undermine the sovereignty of African nations and the rights of ethnic and religious minorities.

    Through its neo-colonialist local partners, Australia and New Zealand, Washington ensures the Pacific Islands Forum remains nothing more than a powerless talking shop. To ensure that the forum never touches the issue of the colonial status of American Samoa, Guam, and the Northern Marianas Islands, Washington has permitted all three colonial territories to join the Pacific Islands Forum as observer states to advance America’s agenda. American nuclear weapons in the Pacific Ocean region are never discussed by the forum nor is the semi-colonial status of three full members of the forum that remain beholden to the dictates of Washington: Micronesia, Marshall Islands, and Palau.

    There is a bull in the china shop of international diplomacy and it wears the ugly and discredited attire of Uncle Sam.

  • "Coincidence?"

    Blame Trump…?

    Is it just us, or are cartoonists the only ones left in the mainstream media capable of even questioning the adminstration's newspeak?

     

    Source: Townhall.com

  • The Indexing End Game: The Wilshire 5000 Only Has 3,607 Stocks

    Submitted by Daniel Drew via Dark-Bid.com,

    Numbers and false advertising have a long history: 4.9% unemployment, 2.5% GDP growth, 72 virgins. Now we can add the Wilshire 5000 to the list.

    What started with good intentions ended with embarrassment as American economic dynamism collapsed in a cascade of falling profit margins, financial engineering, labor devaluation, and lopsided "free trade" agreements. In 1974, Wilshire Associates created the Wilshire 5000, an index of 5,000 stocks that represented nearly the entire stock market. As new companies went public, the index expanded over the years, reaching a peak of 7,562 on July 31, 1998. Since then, the number of companies has been cut in half to 3,607 as of March 31, 2016. Wilshire notes, "The last time the Wilshire 5000 actually contained 5,000 or more companies was December 29, 2005."

    Wilshire 5000

    The Wilshire 5000 is now 5000 in name only. Ben Carlson of the Common Sense blog calls it the "shrinkage effect" and blames it on the lackluster IPO market, which is a shadow of its former self. He notes, "From 1980 to 2000 there was an average of more than 300 companies every year that went public. Since then that number has dropped to an average of around 150 a year." It's yet further evidence of what I pointed out last year: The Stock Market Is Disappearing In One Giant Leveraged Buyout. The relentless pace of share buybacks and new highs in the S&P 500 point to nothing less than a slow-motion buyout of the entire market, which will widen the gap between the uber-rich and everyone else.

    Index investing was supposed to be the last hope of the small investor. Even Warren Buffett, the Baghdad Bob of capitalism, pitches index funds to the average investor, specifically the S&P 500. The premise is that a diversified portfolio will go up over time, and so far, it has worked for anyone who has stayed fully invested. However, there is one simple problem:

    What happens when we run out of stocks to index?

    Today, it's the Wilshire 5000 that runs out of stocks. In 10 years, the S&P 500 investment committee will be grasping for shares, urging Larry Page and Mark Zuckerberg to issue D shares and F shares of Google and Facebook just to maintain the facade of diversification in an increasingly undiversified world.

  • Oil Says the S&P 500 is Heading to 2,050

    The markets are beyond overbought and overstretched.

    The S&P 500 has been trading within a 1% range for three weeks. This range finally broke out to move an incredible 0.22% higher.

    Yes. 0.22%… less than half of one percentage point. This is what has got the bulls foaming at the mouth.

    Meanwhile, Oil, which lead the rally from the February lows… has broken down completely.

    Stocks are on borrowed time. The S&P 500 should retest 2,100 if not 2,050 in the near future.

    On that note, we are already preparing our clients for this with a 21-page investment report titled the Stock Market Crash Survival Guide.

    In it, we outline the coming crash will unfold…which investments will perform best… and how to take out “crash” insurance trades that will pay out huge returns during a market collapse.

    We are giving away just 1,000 copies of this report for FREE to the public.

    To pick up yours, swing by:

    https://www.phoenixcapitalmarketing.com/stockmarketcrash.html

    Best Regards

    Graham Summers

    Chief Market Strategist

    Phoenix Capital Research

     

  • "Sell Everything"… But Why: What Has The Smartest Investors So Spooked?

    Submitted by Nick Colas of Convergex

    Many of the smartest investors out there hate stocks.  Since May, we’ve heard negative equity calls from Stan Druckenmiller, George Soros, Carl Icahn, Jeff Gundlach and Bill Gross.  Wall Street lore says “Never argue about markets with a guy who is much richer than you”.  So we’ll take the discussion in a different direction: what do they know? 

    Successful investors are always more plugged in than the market as a whole – hence their success.  And while we can only guess at the lynchpins of their negative take on stocks, we do have some idea of how significant they must be.  For example, in 2016 the S&P 500 is up 5.9% on a price basis after 1) the Brexit “Leave” vote, 2) dramatically disappointing Q1 and Q2 U.S. GDP, 3) a correction of 20% in oil prices, 4) a Fed that has incorrectly calibrated its public stance on monetary policy, 5) Donald Trump as the Republican candidate for president, and 6) the U.S. 10 Year Treasury at near record low yields. 

    None of that has been enough to spook U.S. equity markets.  So whatever the big boys think they know, it must be really bad.  But what is it, and why is it so hidden from view?

    * * *

    Someone is getting this information before you.”  If you’ve ever worked at a hedge fund, you know this is the worst thing you can hear.  It means you are behind the curve, providing yesterday’s news into an investment process meant to predict the future.  “Titanic sinks!” or “man lands on the moon!” are the more playful retorts you’ll get from co-workers.  But it all means the same thing: up your game, or get a white box from the mail room.

    So when a cluster of high-profile hedge fund and long-biased managers go out of their way to give dire warnings about the U.S. equity market with stocks sitting at or near all-time highs, any sensible investor needs to pay attention.  These are people with access to information that most market participants could only dream of having.  Former heads of state and central bankers, private intelligence operatives, senior government officials, the best consultants in any industry…  It is like having an all access pass to anything, anywhere, any time.
    Here’s a partial list of bold faced names that have panned stocks and other financial assets in recent weeks:

    • Stan Druckenmiller (May 4th at the Ira Sohn Conference): “Get out of the stock market.”
    • George Soros (June 9th, as reported in the Wall Street Journal): “The billionaire hedge fund founder and philanthropist recently directed a series of big, bearish investments, according to people close to the matter.”
    • Carl Icahn (June 9th, on CNBC): “I don’t think you can have (near) zero interest rates for much longer without having these bubbles explode on you” while also saying it’s difficult to assess when exactly that might occur.
    • Jeff Gundlach (last Friday, in an interview with Reuters): “Sell everything. Nothing here looks good.”
    • Bill Gross (in his monthly investment letter, released last week): “I don’t like bonds. I don’t like most stocks. I don’t like private equity.”

    Fun fact: a group of bears is called a “sloth” or a “sleuth”.  We can safely ignore the first reference; none of these investors made their considerable fortunes through laziness.  That leaves us with “Sleuth” – as in, what have they discovered?

    Whatever it is, it has to be something weightier than the headlines we’ve faced so far in 2016. The S&P 500 is, after all, still up 5.9% on the year.  And none of these headlines have tanked U.S. equities:

    • Donald Trump wins Republican nomination for President of the United States against a field of well-funded and well established competition
    • U.S. GDP growth fails to deliver on 2% growth through first half; runs 1.0% average instead
    • After a good run earlier in the year, crude oil prices experience correction and break $40/barrel
    • One gold ETF draws the most fresh money of any exchange listed product YTD; yellow metal at +2 year highs
    • Global economic growth so sluggish that U.S. 10-Year Treasury yields reach 1.5%, far worse than even the depths of the Financial Crisis
    • Britain votes to leave the European Union
    • $13 trillion of global sovereign debt sports a negative yield, so great is the demand for “Safe haven” assets around the world
    • Federal Reserve guidance on future interest rate policy widely ignored. The U.S. central bank says 2 bumps to Fed Funds this year (25 bps apiece), but Fed Funds futures handicap less than one.

    There’s no getting around it: that’s a lot of unexpected news.  The connection between them and higher stocks has exactly one point: bad news drives interest rates lower, and as long as the S&P 500 earns +$115/share those lower rates support ever loftier valuations.

    A bearish call, such as the ones our “Sleuth” has made, must therefore convincingly pull the rug out from the “Lower rates = higher stocks” paradigm.  Don’t tell me that these big-money investors are just making a valuation call – they all know better than that.  Try walking into any of their offices and saying “U.S. stocks trade at 18x earnings… Time to short em…”  Your feet would barely touch the floor as security escorted you and your white mail room box out of the building.

    No.  It must be something larger.  But what?

  • CNN Host Slams America's Greatest Olympian Ever For Not Being Black, Muslim Woman

    Michael Phelps may be the greatest Olympian the world has ever known but for CNN host W. Kamau Bell, he is just a "tall, successful, rich white guy" who clearly didn’t "need the honor" of being chosen by his athlete peers as America's flag-bearer. Instead, Bell exclaims, Ibtihaj Muhammad, a woman, an African-American and a Muslim to boot, should have been chosen because "right now America has enough tall, successful, rich white guys hogging the spotlight trying to make America great."

    After Phelps was chosen by his fellow Olympians, the U.S. Olympic Team tweeted proudly….

    But, as BizPacreview.com reports, liberals wanted U.S. swimmer Michael Phelps to give up the honor of carrying the American flag and leading his country’s athletes at the opening ceremony for the Rio Olympic games Friday night.

    He’s the wrong color and the wrong sex.

    W. Kamau Bell, host of CNN's "United Shades of America," described the swimming sensation as a “tall, successful, rich white guy” who clearly didn’t "need the honor."

     

    “With 22 Olympic medals, you are already the most decorated athlete in Olympic history,” he said.

    But American fencer Ibtihaj Muhammad is a different story…

    …a woman, an African-American and a Muslim to boot.

    “Muhammad carrying the flag would be much bigger than your one moment,” Bell writes. “It would be a symbol for our country in this moment when we are mostly known for one of the most contentious, controversial, scandal-ridden, hateful, xenophobic, jingoistic, and just generally unlikable presidential elections in recent memory. This is at a time when we could use some more symbols of unity and togetherness.”

     

    Bell referred to Muhammad as “a one-stop inclusion shop due to her race, sex and religion. Phelps, on the other hand was something else entirely.

     

    “No offense, but right now America has enough tall, successful, rich white guys hogging the spotlight trying to make America great,” he said, in an obvious reference to Donald Trump.

    "No offense"… but sadly it appears the supposedly apolitical Olympic Games has been hijacked by the liberal agenda – under the guise of fairness, so you can't argue with that, right? – to further the divide in today's identity politics.

    Perhaps when Ibtihaj has won dozens of Olympic medals over a 20 year career, she will also get the opportunity… or perhaps a black, muslim swimmer will emerge who is gender-uncertain and slightly disabled to topple the crown of liberal queen?

    #WhiteSwimmersLivesMatter

  • The Trick To Staying Sane In The Market's New Normal Ponzi Narrative

    Authored by Mark St.Cyr,

    Just as there’s a scheme to pay old investors with new investors money (aka a Ponzi.) There’s another part of the scheme that rarely gets talked about: i.e.,The narrative that fuels the scheme to begin with.

    Much like the original structure which involves money, this too needs an ever-growing amount of gullible, willing participants. However, the currency here is narrative.

    And just like any Ponzi scheme once you lose the narrative – you’ve lost everything. One can not survive without the other. Yet, it is the narrative more often than not that is needed to drive the scheme ever higher. Without it, the scheme implodes via its own weight. The narrative regardless of how outlandish, bizarre, or full of nothing but outright lies must be maintained and vociferously defended by those who are already caught in the scheme.

    In my view the reason why many are finding the greatest confusion, as well as complete consternation is this: Too many are forgetting the “investors” in this scheme are governments (or proxy) with unlimited funding resources, as well as: they also control the narrative. i.e., any data point they wish to convey as what “is” good or bad. I would imagine if Charles Ponzi were alive today he’d argue “And you sent me to jail for?” But I digress.

    Why the scheme of today is far more troubling than those of any bygone era is as I iterated: the access to unlimited funds.

    As has been stated ad infinitum – central banks have the ability to print money ex nihlo. And what people forget is that ability retards the process for the scheme to collapse under its own weight. Remember: a Ponzi scheme works until you begin running out of suckers. And it’s in that math of exponentiation where once you see “a crack” the crumbling comes with near immediacy. There are only so many people, with enough money to swindle.

    However, if one has access to unlimited fund? “Cracks” can be repaired, hence the scheme can continue. The game is the same. The only difference with this one is the physical reality of needing more “bodies” with wallets is no longer a requirement. i.e., One central bank with the gumption to print equals how many investors wallets of yesterday? 10? 100? 10,000? 1,000,000,000,000? I hope you beginning to see my point.

    As long as the central bankers of the world are holding the print button down with both hands and feet – the scheme is going to last a lot longer than anyone ever dreamed possible. But, as I said, the “money” is only half of the equation. This is where the narrative must also match if not supersede. And it is here where those “cracks” are beginning to widen at a dramatic pace, and “money” alone can’t abate the damage. In fact more “money” seems to be exacerbating the problem.

    I have been inundated by notes from friends and family this past week as the “markets” once again hit never before seen in human history heights. However, this time was different from some of those in the past. I could discern two very distinct recollections as they tried to square a few circles. First: How can GDP be in the toilet at the same time they’re touting a “wonderful” employment report? And second: If the “markets” are a representation of the economy – then why does the economy stink? But it wasn’t only them…

    More than likely if you are reading this you are probably one of the few that have concluded via your own observations that this economy is not in any way, shape, manner, or form what it’s being represented or heralded via the main stream media or financial press and are looking for other objective viewpoints. Or, you don’t truly know which side to take for everything seems contradicting. Regardless of which camp you fall into, I commend you for looking as to form your own conclusion. However, with that said, I would venture to bet dollars-to-doughnuts you’ve also come across a phenom that’s growing absolutely louder by the day: Utter contempt that it has yet to fall apart.

    As usual I have been perusing many differing news sites, as well as financial blogs and more. What I’ve been noticing more, and more as of late is the utter despondence by some, and the absolute outrage by others that the markets are still being held captive by central bankers. i.e., “Why won’t this market go down?!”

    Well, it’s quite easy really, and it’s these very same people who understand this point deep down yet, are the one’s losing their minds the fastest: e.g., It’s not a market.

    For years now it’s been self-evident: market rules no longer apply. Technical analysis – useless. Fundamental analysis – useless. The only thing that now matters is whether or not a stock, bond, or ETF is favored by a central bank. Period. Yet, far too many veteran traders or seasoned business people are still viewing many aspects of these markets through a prism of 10 years ago. Those days are gone, long gone. Yet, people are acting (or hoping) that there is still some sense of normalcy still residing within. I’m sorry – there isn’t.

    The issue here is we may indeed be in what some have described as a final turning, much like that described in the brilliant work of Strauss-Howe in their seminal work “The Fourth Turning.” Whether or not one prescribes to this theory is for one’s own counsel. However, if there is one factor which helps put weight into where we are one can’t leave out one of the other most prominent tell-tale signs. To paraphrase Robert Prechter “Governments are the ultimate herd mentality.” And this latest “bull-run” shows just how “more money than sense” this latest bull#### run has become.

    The difference today is, where as in a traditional Ponzi like situation the narrative would break (i.e., people would begin openly complaining about not getting paid) where it would all but disintegrate overnight. That’s not going to happen with near unlimited funds. Even if the ruse is the same.

    The key to watch for (in my opinion) is when the narrative (i.e., everyone’s getting paid) is believed less and less, coupled with: the longer it goes on – the less it’s believed. I feel we are in these stages currently. Which via my thinking is an end-of-game stage.

    However, how long it can go on for is an open question. We’re now closing in on a decade, can it go longer? Again, who knows, but the issue is: if it does – how do you want to play knowing what you know?

    The issue today is not to “blame” what may, or may not, be happening to your psyche as it pertains to the markets. For there aren’t any. Only “markets” now exist. And they are in a complete bizzaro world of their own. The “rabbit hole” central bankers of today have created make the world of Alice look down right normal as compared to the modern Keynesian markets of today.

    The key to keeping one’s sanity (as well as account balance) is to stop waging a rational war with the irrational. Or, said differently: never try to teach a pig to sing. It will do nothing but frustrate you and annoys the hell out of the pig. Too many today are still trying to make this pig sing a tune of reality. It won’t – and it can’t.

    During this period what any prudent individual or business concern should be focusing on is how can they take advantage of the current craziness, and how can they be in the most opportune position when that crazy does indeed come forth. For it is my contention – opportunities of generational proportions will make themselves available to the prepared. Here are a few examples…

    If you are some form of a day trader in stocks you must know more about how to close and get paid on your position just as much, if not more so, than strategies for putting one on in the first place. If you own a business of any size what is just as important to understanding a competitor’s product strength is their strength or weakness should any disruptions within the “markets” occur. i.e., will they still be able to fund? Who is their funding source? Is their main supplier at risk if a currency move takes place in the Yen, Yuan, Dollar, etc., etc, overnight? And what can you do if so? Does it effect you?

    During this central bank influenced “house of crazy” have you taken advantage of these low rates as best you could? Or, have you left that up to your competitor?

    If you’re an investor – are you concentrating on gaining ever the more risk as these “markets” go higher? Or, are you pulling more and more off the table with a concern for the where’s and how’s to make sure there is a return “of” your capital as opposed to a return “on?”

    If you’re in a business or even employed by one – have you taken note as to if your company or competitors are the current “buy, buy, buy” of some central bank portfolio? Do you even know? If you think it’s all about “superior product” only today. I’m sorry – you’re not paying enough attention. A superior product means little if the competition’s bonds are being bought hand over fist – and yours are left vying for scraps. Of course there are myriads more however, this is the way one needs to view today’s current environment.

    As was stated many years ago but is now turned up to 11: The markets can stay irrational much longer than one can remain solvent. Add to that “irrational central bankers?” 11 goes to 11².

    Time is of the essence to ensure one is planning for the correct probabilities, along with watching ever the closer for more tell-tale signs that things are getting closer to a conclusion rather than a continuation. And narrative is the thing to watch vigorously in my opinion. The money is no longer affording the continuation of near religious faith in the omnipotence of central bankers. For the higher the market goes – the louder the questioning is becoming.

    The key today is to not think as Cypher (played by Joe Pantoliano) did in “The Matrix” (1999) when he longed for the option to change his decision and take the blue pill as opposed to the red. No, that’s not an option no matter how much one would like. You can’t un-know what you now know to be true. No, the trick to keeping one’s sanity, as well as wallet in tact is know what games are rigged and which are not. Then decide as in another movie tag line made famous by a computer named “Joshua” (depicted in the movie War Games 1983) when it stated…

    “A STRANGE GAME. THE ONLY WINNING MOVE IS NOT TO PLAY.”

    If you watch the ‘markets” closely what you’ll find is that line is picking up ever the more steam the higher these “markets” go.

    That’s how you know the narrative is coming unglued. Just when it has a catastrophic failure event? That’s anyone’s guess. And it’s all a guess at this point.

  • The S&P Is Now Set To Report Its Second Consecutive Annual Earnings Drop Since The Financial Crisis

    With 86% of the companies in the S&P 500 reporting earnings to date for Q2 2016, Q2 earnings season is almost over. 69% of companies have reported earnings above the mean estimate and 54% have reported sales above the mean estimate. Still, despite the beat (on the back of what may be Reg-FD busting leakage of company earnings to sellside analysts just so companies can beat EPS in the last moment as described on Friday), earnings growth, or lack thereof, for Q2 2016 is expected to be -3.5%. This will make the first time the index has recorded five consecutive quarters of year-over-year declines in earnings since the financial crisis.

    As the chart below shows, the forward PE of the S&P500 has now been flat for two years, even as the actual index has surged to record highs on the back of even greater multiple expansion, as both the economy and profit growth has slowed down: a Finance 101 paradox.

    How lofty is that? Moments ago Goldman said that “The median S&P 500 stock trades at a forward P/E of 18.2x, ranking in the 98th percentile since 1976.” It’s also the reason why Goldman unveiled a tactical sell on stocks one week ago.

    It gets worse. Whereas one week ago, Q3 consenus earnings for the first time dipped negative, as of Friday sellside analysts now expect third quarter earnings to decline a substantial -1.7% Y/Y as every sector has seen its forecast earnings drop substantially.

    Which means that earnings growth is now not expected to return until Q4 2016, and also means that if consensus is accurate, S&P500 EPS are on pace to decline for a record 6 consecutive quarters.

    A few months ago, when Q3 consensus EPS was still well in the green, we predicted that Q3 would ultimately be revised to negative. It was. Now we predict that over the next 2-3 months Q4, EPS which is currently expected to grow 5.7% will likewise be dragged into negative territory.

    Finally, as a result of the recent cuts to Q3 earnings consensus, and the slowdown to Q4 EPS growth, one can forget about 2016 full year earnings growth. According to Factset, year-over-year earnings are now set to decline -0.3% for the full year, after starting off the year at +6%. This would mark the second time the S&P has reported 2 consecutive years of earnings declines since 2008 and 2009.

    More from FactSet:

    For the first quarter of 2016, the actual, year-over-year earnings decline reported by the S&P 500 was -6.7%. For the second quarter of 2016, the blended (combines actual results for companies that have reported and estimated results for companies yet to report), year-over-year earnings decline for the S&P 500 stands at -3.5%. For the third quarter of 2016, the estimated earnings decline stands at -1.7%. For the fourth quarter of 2016, the estimated earnings growth rate is 5.7%.

     

    Given that the index is expected to report earnings declines for the first three quarters of 2016, what are analyst expectations for year-over-year earnings for all of 2016? Do analysts believe earnings will decline for all of 2016 also?

     

    The answer is yes. As of today, the estimated earnings decline for the S&P 500 for CY 2016 stands at -0.3%. However, expectations for earnings growth for CY 2016 have been falling not just over the past few weeks, but over the past several months. On December 31, the estimated earnings growth rate for CY 2016 was 5.9%. By March 31, the estimated earnings growth rate had declined to 1.3%. By June 30, the estimated earnings growth rate had decreased to 0.1%. Today, it stands at -0.3%.

     

    If the index reports a year-over-year decline in earnings for CY 2016, it will mark the first time the index has reported two consecutive years of earnings declines since CY 2008 (-25.4%) and CY 2009 (-8.0%).

     

    At the sector level, four sectors are projected to report a year-over-year decline in earnings for CY 2016, led by the Energy sector (-72.0%). The Energy sector is expected to the largest contributor to the year-over-year earnings decline for the index for the full year. If the Energy sector is excluded, the estimated earnings growth rate for the S&P 500 for CY 2016 would improve to 2.8%.

    Translation: expect even higher record highs in the S&P 500 this coming week.

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Today’s News 7th August 2016

  • On This "Atom Bomb"-Anniversary, You're Being Lied To About Hiroshima (And Much More..)

    Via The Daily Bell,

    Japan marked the 71st anniversary of the atomic bombing of Hiroshima on Saturday by renewing calls for a nuclear weapons free world and urging leaders to follow the example of President Barack Obama and visit the bomb sites.  –Washington Post

    It is the anniversary of dropping an atom bomb on Hiroshima. But the Hiroshima narrative is a lie.

    We’ve reported at considerable length about how the whatever was dropped on Hiroshima and Nagasaki didn’t have the kind of immediate destructive impact that is portrayed.

    Crawford Sams who ran the Atomic Bomb Casualty Commission in Japan had this to say about the bombing of Hiroshima and Nagasaki (Transcript HERE.) :

    When the bomb went off, about 2 thousand people out of 250 thousand got killed [in Hiroshima] – by blast, by thermal radiation, or by intense x-ray, gamma radiation … You see, it wasn’t “Bing” like the publicity here [said]: a bomb went off and a city disappeared. No such thing happened. That was the propaganda for deterrent …

     

    When I came back to this country, I was appalled, from a military standpoint, to find that our major planners in the War Department were using their own propaganda, 100 thousand deaths, Bing! …

     

    You don’t hear much about the effects of Nagasaki because actually it was pretty ineffective. That was a narrow corridor from the hospital … down to the port, and the effects were very limited as far as the fire spread and all that stuff. So you don’t hear much about Nagasaki.

    We’ve reported that a squadron of 66 bombers were launched on August 6th (666) to bomb the municipality of Imabari, even though Imabari. had been bombed already, twice.

    This bombing squadron may well have fire-bombed Hiroshima instead, as Hiroshima was not far away.  HERE is a video on the squadron and also a narrative from a book by Edwin Hoyt entitled Inferno, the Firebombing of Japan.

    Here is some narrative from a PERTINENT PAGE in the actual book.

    “Suddenly,  one day, I was told something unexpected,” Manabe said. “When I was looking at the train timetable, I found that no trains stopped at Imabari station … I wondered why the third largest city in the province had no train service. It  sounded ridiculous…

     

    The other guy said, “Wow! No Imabari Station. But … all the trains pass by Imabari Station.”

     

    A third guy stepped up … “It’s not strange at all. There’s no stop because there’s no Imabari City anymore. It got burned up last April in the air raid … No buildings, no houses, no people … The whole city burned up and the people ran away …”

     

    A fellow soldier explained to Manabe. “The air raids came on the 26th of April and the 8th of May. Imabari was burned up. My father was in business there. We had a wholesale draper business. All gone. All burned up.”

    The attacks on Hiroshima and Nagasaki were horrible and tragic. But whether they were results of “atom” bombs (certainly in the sense that people understand them today) is at least seriously questionable.

    More from the Post:

    Quoting part of Obama’s speech in Hiroshima in May, Mayor Kazumi Matsui urged countries with nuclear weapons to “have the courage to escape the logic of fear, and pursue a world without them …

     

    “I once again urge the leaders of all nations to visit the A-bombed cities.”  Like Obama’s, he said that such visits “will surely etch the reality of the atomic bombings in each heart.”

    Visiting Hiroshima and Nagasaki won’t etch anything into your heart but lies.

    And the sickening falsehoods allow politicians a faux rhetorical nobility that they don’t deserve.

    Whatever happened at Hiroshima and Nagasaki is nothing like what is being recited today.

    Bikini Atoll, where additional atomic bombs were tested following the Hiroshima and Nagasaki attacks, was repopulated by 1968, even though radiation estimates suggested the island would be uninhabitable for a thousand years.

    The actual bomb blasts seem to have been faked. Two years ago, the controversial but prolific investigator Miles Mathis – an artist and mathematician – published a debunking HERE entitled, The Bikini Atoll Nuclear Tests were Faked.”

    …For more proof, we can go to Google. You can get a picture of the Bikini Atoll today from Google Earth. That’s dated 2013, not 1945. We are told the locals can’t live there now because of radioactivity, but we see at least three proofs against that.

     

    …We see lots of plant life both on and offshore. Radioactivity affects plants just as it .affects animals, so the island should be barren.

     

    Remember, the Bikini Atoll wasn’t said to be blasted by only Able and Baker. It was blasted 23 times, including three of the biggest blasts ever from US testing: the 4.5 megaton Navajo and the 5 megaton Tewa, in 1956; and the 15 megaton Bravo in 1954.

    Why would Bikini Island tests have been faked if the bombs dropped on Hiroshima and Nagasaki were real?

    Did the US suddenly run out of bombs?

    And what about Russia? How did the USSR make nuclear bombs while the Pentagon was faking theirs?

    Mathis writes some photographs of USSR nuclear explosions appear fake.

    When did the USSR get the “bomb?” And even more importantly, when did the US finally create the weapons of mass destruction that so frighten us today?

    When did the Cold War really start? Did both sides know that nuclear weapons were not as powerful as advertised? Or maybe that they didn’t exist at all as described?

    Hiroshima and Nagasaki themselves are thriving small cities and there is no appreciable difference in radiation between these two municipalities and other cities in Japan.

    Additional issues (See sources at the end of this article.):

    • Death rates at Hiroshima and Nagasaki are not higher than elsewhere.
    • Three days after the Hiroshima bombing, a trolley was running again.
    • The bank at “ground zero” remains standing to this day.
    • Eight Jesuits hiding in their church survived the blast at ground zero to tell the tale – spared only by the intervention of the Virgin Mary.
    • Outside of the Jesuits, and one communist reporter who hated the US, there was no significant reporting from either Hiroshima or Nagasaki for at least a month.
    • For years in both Japan and the US, it was a crime punishable by death to speak or write about the bombings.
    • The entire atom bomb narrative created by the Pentagon was delivered to the public via a single writer from the New York Times who later turned out to be on the Pentagon payroll.

    The narrative of the bombings was surely shaped just as the Pentagon and its controllers wished for it to be. It was acquiesced to by the Japanese government that had its own reasons for promoting nuclear untruths.

    Whatever happened at Hiroshima and Nagasaki has not been accurately reported. In fact, it is probably not too strong to say that what has been reported may constitute (in aggregate) one of the most profound lies of the 20th century.

    It calls into question further “truths” about Western society that we live with to this day.

    Nuclear weapons are a perfect propaganda for the state.

    -Their tests cannot be ascertained at close range because they are too powerful.

     

    -Their inner workings cannot be disseminated because they are “top secret.”

     

    -Their programmatic elements cannot be observed by the normal media because too much information available to the public can stimulate adversarial or even terrorist activity.

    Modern Western society is a virtual tissue of lies designed to make you believe you are living in a “civil society” (no, it’s not civil) faced by life-threatening challenges that only Western governments and the shadowy powers behind them can overcome.

    The world is not running out of food, nor water. It’s not going to burn to a cinder because the air is clogged with “carbon.”

    The economic disasters we face are purely man-made. Absent monopoly central banking, they would not exist.

    Now we are facing “radical Islam” – another false narrative put in place by the same banking elite that has tortured the West for centuries.

    This follows on the heels of numerous, serial US wars and the obscene, manufactured Hell of World Wars One and Two.

    Thank goodness for the Internet and what we have called the Internet Reformation.

    Thanks to information that has emerged from secret recesses (and the patterns they portray), we know more about the Way the World Really Works  than any single group of individuals in recorded history.

    Conclusion: It has been a great privilege to live in these unusual times. However, please take note: The reality of the world has revealed a titanic struggle between good and evil. Which side are you on? And just as importantly, what are you going to do about it?

    *  *  *

    Some Nuclear Anomalies and Sources Pertaining to Questionable Hiroshima and Nagasaki Events

    • The dreaded mushroom cloud presented by the Hiroshima memorial is actually a photo of Hiroshima on fire. HERE.
    • A squadron of 66 bombers was directed to Imabari. in the early morning of August 6 (666) – the morning of the A-bomb – but Imabari. had been bombed already, twice. This bombing squadron might have fire-bombed Hiroshima instead. HERE.
    • Initial reports in Japan were that Hiroshima was firebombed. AP filed the same report. HERE.
    • In the aftermath of the explosion, Hiroshima (and Nagasaki) look no different than Tokyo after it was firebombed. HERE and HERE.
    • In Hiroshima numerous buildings are standing along with erect tree stumps. HERE.
    • Limited trolley service was revived in Hiroshima after only three days. HERE.
    • The Hiroshima bank at the epicenter of the bomb is fully functional and can be seen HERE.
    • Predictions of endless radiation poisoning for thousands of years proved untrue. Today, Hiroshima and Nagasaki’s radiation levels are normal.  HERE.
    • Outdoor shadows and other dramatic evidences of the Hiroshima bombing seem to be faked. HERE.
    • The initial American reporting on Hiroshima and Nagasaki bombs  came from Wilfred Burchett and William L. Laurence. One was a communist (Burchett) who hated America and reportedly ended up on the Kremlin’s payroll. HERE.
    • The other was secretly a paid employee of US armed forces. He was the man who rode with the crew to witness the nuke dropped on Nagasaki. His report on the attack is painful to read for all the wrong reasons. HERE.
    • Laurence was also the only reported to cover the development of the atomic bomc, see the initial bomb testing (from 20 miles away) and to report from Nagasaki. In other words, only one reporter, paid by the US war dept, provided the entirety of the initial civilian narrative for the testing of nuclear devices and then bombing of Nagasaki. Just one. It was roughly the same at Hiroshima and Nagasaki. Reporters were not allowed to visit. HERE.
    • Military officers were asked to exaggerate the injury count.
    • Hiroshima and Nagasaki were apparently shut down for months. There was no influx of Western reporters. The nuclear narrative was developed by the Pentagon from what we can tell. HERE.
    • It was immediately made a crime punishable by death in both the US and Japan to discuss nuclear attacks and the technology  that created them. (“The restricted dataclauses of the US Atomic Energy Act specifies that all nuclear weapons-related information is to be considered classified unless explicitly declassified, and makes no distinction about whether said information was created in a laboratory by a government scientist or anywhere else in the world by private citizens.”) HERE.
    • As for Little Boy, the bomb dropped on Hiroshima, photos show it seems to lack the necessary antennas to function. HERE.
    • There were apparently several Little Boys of various sizes, not just one. HERE.
    • The narrative surrounding the dropping of the Hiroshima bombing is reportedly inaccurate. “Levers” were “pulled” to drop the bomb, but the automatic system did the job. HERE.
    • The automatic targeting system itself was an inaccurate device that reportedly might drop bombs miles from where the pilot hoped to deliver them. The odds that both bombs ended up delivering effective blasts are surprisingly low.
    • The Nagasaki bombing narrative was confused for decades. The story kept changing. Even the pilot was misidentified. The crews were switched. HERE.
    • The photos of the Nagasaki mushroom cloud are suspicious. They appear to be composite images with cloud cover inserted to ensure that identification of Nagasaki is impossible. HERE.  Other Nagasaki photos appear fake.
    • One of the two famous and supposedly identical photos of the Nagasaki mushroom cloud includes part of a plane. One of the photos is thus fake, or at least retouched. HERE.
    • For events of such magnitude, there are surprisingly few eyewitness accounts of the actual blast. Many eyewitness accounts start the day after the blast or during the firestorm. Only a few Japanese survivors have stepped forward to become regular “faces” of the blast.
    • There don’t seem to be any civilian photos of either mushroom cloud taken by Japanese civilians or even military facilities. This one HERE looks evidently faked.
    • Much of the Western Hiroshima narrative regarding the blast was developed by a single Jesuit priest who, along with other Jesuits, had survive at the epicenter of the blast through the intervention of the Virgin Mary. HERE.
    • The eyewitness accounts of the blast itself have a repetitive and artificial quality to them, at least the ones we read. One doctor claims to have treated 2000-3000 injured on the first day. HERE.

    There are other disturbing elements to the Nagasaki and Hiroshima bombings, and if you are interested, you can see more documents calling many elements of the attacks into question HERE.

    See information on an alternative theory regarding nuclear weapons HERE:

    Additional DB Nuclear Articles to Share (With Links)

    North Korea Nuclear Hoax Heightens Alternative Media Skepticism March 10

    The Trillion Dollar Nuclear Weapons Fraud April 15

    NASA and Nuclear Activities: More Scrutiny Needed May 25

    NY Times Uses Hiroshima to Justify Gun Control, Even as More Evidence Questions A-Bomb Scenario June 15

    NY Times: Hiroshima Mushroom Cloud Actually ‘Smoke from Raging Firestorm’ June 20

    Brexit’s Modern Manipulation and Its A-Bomb Beginnings June 29

    Pentagon’s Not Properly Funding Its Trillion-Dollar Nuclear Costs July 1

    More Nuke Questions: Lies About Trident, Hiroshima, Nagasaki and Now Bikini, Too July 25

    North Korea Nuclear Tensions Said to Increase – But How Do We Know It’s True?
     
    July 28 

    North Korea Has Missiles, but Does It Have Nuclear Weapons? August 3

    How Dangerous, Really? Trump Now Denies Asking Why US Does Not Use Nuclear Weapons August 3

     

  • 14% Of Americans Have Negative Wealth

    According to the New York Federal Reserve, 14% of the U.S. population lives in households that have “negative” wealth. In other words, these are households that have more debts piled up than assets, which puts their net worth in minus territory.

    But what does a negative wealth household look like?

    In the following chart, VisualCapitalist’s Jeff Desjardins compares the data on negative wealth households with the data on their positive counterparts. There are some obvious and stark contrasts…

     

    Courtesy of: Visual Capitalist

    Households that are deep in the red have the majority of their wealth in the family car – automobiles make up 45% of the value of their total assets. Housing makes up 20% of their assets by value.

    For positive wealth households, it is the reverse: 40% of wealth is in the home, and 15% in vehicles.

    The composition of debt is also very telling. Negative wealth households have a whopping 47% of debt in student loans, while positive houses have just 6%.

  • The Propaganda War With Putin

    Submitted by Renee Parsons via Strategic-Culture.com,

    If it had not already been apparent, the net effect of the DNC email hack has been to kick open the door to a deep American antagonism towards Russian President Vladimir Putin.

    In what has become an old fashioned American pile-on, President Barack Obama, Presidential candidate Hillary Clinton, the Democratic Party and what seems the entire political establishment as well as the MSM, have united to undermine Putin as if to prime the American public for war with Russia.

    War is, after all, more successful when the people have been thoroughly programmed. For instance, for a war-weary American public ‘we are bombing civilians out of a humanitarian necessity’ may work well. If necessary, a little hysteria wouldn’t hurt but most of all, a necessary requirement is to efficiently tutor the public consciousness to despise the adversary. In this case, Clinton has identified Putin as the adversary and that he is one evil reincarnation of Adolf Hitler.

    Among media outlets, Politico, once considered a ‘liberal’ magazine ran “Inside’s Putin’s Information War” whose author has found a lucrative book deal on the subject and yes, this is the same Politico that requested DNC permission to publish re the Sanders/Clinton primary. The Times of London joined the effort to demonize Putin with several anti Russian articles over the weekend including “Putin’s Information War” which ran on July 30th followed by “Inside Putin’s Info War on America’ in the Wall Street Journal on July 31st.   Keep your eyes peeled as the “Putin Info War” concept is sure to catch on.

    As part of the effort to synchronize public antipathy to an appropriately belligerent level, the Associated Press recently published an article for wide distribution entitled “Clinton v. Putin: Russian television shows what Kremlin thinks of her.” Perhaps the AP presumed to rouse the American public in defense of Hillary Clinton.

    The first paragraph began with the admission that Clinton’s entire acceptance speech had been broadcast live on nationwide television in Russia.   If anyone yearns for the day when a Putin speech will be broadcast across American television, forgetaboutit. A good guess is that the intellectually-lazy American public including many liberals who have forgotten how to think, would not make the effort to inform themselves of world events.

    Thereafter, the AP article followed with a series of assertions that dazzled the reader with its irony such as:

    “Viewers were told that Clinton sees Russia as an enemy and cannot be trusted” and “the Democratic convention was portrayed as proof that American democracy is a sham.” The story added that Channel One introduced Clinton “as a politician who puts herself above the law, who is ready to win at any cost and who is ready to change her principles depending on the political situation.”

    If the AP reporter wrote with the intention that the American public would rise up en masse and demand satisfaction; how unfair of those Russkies to write like that about our Gal Hill – that reporter was dead wrong.

    What the reporter did not mention was that a significant number of Americans, including some of those who plan to hold their collective noses while voting for Clinton in sheer terror of Trump, agree with those quotes. What the reporter did not mention was that the Sanders and Trump campaigns have been largely based on those sentiments giving Clinton an unexpected run for the money which explains why she has had to pull out all the stops to beat Trump, a candidate who, by any standard, should have been a piece of cake.

    Giving a wink and a nod to the MSM, Clinton formalized her accusations on Sunday Fox News that ‘Russian intelligence” was responsible for the DNC hacking and linked her opponent Donald Trump to Vladimir Putin.

    Using the DNC hack issue as an opportunity to further hammer on Putin, Clinton asserted during the Fox interview that ‘we KNOW that Russian intelligence services hacked into the DNC and we KNOW that they arranged for a lot of those emails to be released and we KNOW that Donald Trump has shown a very troubling willingness to back up Putin, to support Putin.”

    A good follow up by an engaged journalist might have been what does Clinton know, how does she know it and when did she know it? If the proof exists, why the reluctance to provide specifics to the American public – but that might require initiative, transparency and some candor? While challenging Trump on his commitment to the Constitution (who clearly could use an Intro 101 class), wasn’t Clinton trained, as an attorney, to understand that evidence comes before the accusation?

    This is not the first time that Clinton has personally attacked Putin. In March, 2014 before a University of California audience, she said he was “thin-skinned,” was trying to “re-sovietize Europe while threatening instability and the peace of Europe.” In citing ‘Russian aggression,” she is smart enough to know the difference between protecting ethnic Russians who have centuries of deep cultural roots in Ukraine and Crimea as compared to Hitler’s invasions of eastern Europe.

    An impartial observer can only assume Clinton has knowingly skewed the chronology of events in the Ukraine which began with the US-initiated overthrow of a democratically elected President on February 22, 2014; followed by an overwhelming vote on March 16th by Crimean citizens to reunite with Russia which was then followed by the legal annexation of the Crimean peninsula to Russia on March 18th.   What is so difficult to understand?

    Thanks to Clinton’s repetitive disinformation campaign, accusations of ‘Russian aggression’ are now widespread; repeated without regard to the evidence throughout the mainstream media and by Members of Congress, many of whom choose to remain uninformed.

    Back to the Fox interview, she could not resist adding, with mock indignation, that “I think laying out the facts raises serious issues about Russian interference in our elections, in our democracy.” And as if the rest of us were asleep at the wheel and could not distinguish fact from fiction, she further added that “For Trump to both encourage that and to praise Putin despite what appears to be a deliberate effort to try to affect the election I think raises national security issues.”

    Does she not see that ‘interference in our elections, in our democracy’ is exactly what the DNC did to the Bernie Sanders campaign?

    And has no bright eyed, eager beaver staff person yet pointed out to Clinton that if Russia and Putin had been intent on disrupting the American presidential election, why wouldn’t they have gone after Clinton’s ‘classified’ State Department emails on her personal server that were subject to an FBI investigation and with the potential of criminal charges? Then again, an educated assumption might be that Russian intelligence does have those emails in their possession. Now there’s a real national security issue.

    In her eagerness to further aggravate US – Russian relations, apparently Clinton is not only unfamiliar with the State Department’s Foreign Service Protocol for the Modern Diplomat guidelines for rules and process of diplomatic protocol (or perhaps it does not apply to her), but appears she did not receive the memo from the Director of National Intelligence (DNI) James Clapper.

    Responding to the DNC-Russian furor in a more blasé and introspective manner than might be expected, Clapper stepped in as a calm voice of reason stating that he was ‘somewhat taken aback by the hyperventilation on this” and that the US was in “reactionary mode” regarding cyber-attacks. Clapper further indicated he was ‘not ready’ to identify Russia as the hacker “I don’t think we are quite ready yet to make a call on attribution.”

    Interestingly, Clapper commented that “cyber warfare is not ‘terribly different than what went on during the Cold War” suggesting that it is ‘just a different modality.” He further suggested that the American people ‘need to accept’ and ‘become more resilient’ since cyber threats are a major long term challenge. Americans should ‘not be quite so excitable when we have yet another instance.”  Hmm…wonder to whom he was referring.

    In other words, we spy on them, they spy on us – all’s fair in love and war and that there is a certain level of honor among (cyber) thieves.

  • Visualizing 31 Incredible Facts About Gold

    No metal can claim a legacy comparable to gold.

    As VisualCapitalist's Jeff Desjardins notes, gold has been used to show affectionate love, but it has also represented power, status, and riches for the greatest kings of antiquity. Gold’s history is truly legendary, ripe with colorful tales and anecdotes from people ranging from William Shakespeare to Christopher Columbus.

    But gold doesn’t just “talk the talk”.

    Gold also walks the walk, because its grandeur is backed up by impressive chemical properties and uses. As we documented in our extensive Gold Series, it’s been used as a monetary metal for thousands of years by ancient civilizations such as the Lydians, Greeks, Chinese, and Romans. It’s the most malleable and ductile metal, and it doesn’t tarnish or corrode. Over time, these properties have helped people to associate gold with concepts such as immortality or royalty.

    Even today, people are still finding new uses for gold that are impressive in their own right. For example, scientists recently discovered a gold alloy that is four times tougher than titanium.

    Without further ado, here are 31 incredible facts about gold…

    Courtesy of: Visual Capitalist

  • Establishment Tries To Suppress "Dissident Actuaries" Explosive Report On Public Pensions

    Submitted by Walter Russell Mead via The American Interest,

    America’s slow-motion public pension train-wreck (by some estimates, the shortfall currently exceeds $3 trillion) has been kept in motion for years by deeply dishonest accounting practices employed by state and local governments, which presume unrealistically that pension funds can consistently earn white-hot annual returns approaching eight percent. So it’s disappointing, but not particularly surprising, that the actuarial establishment moved to suppress a report pointing this out.

    Pensions and Investments reports:

    The American Academy of Actuaries and the Society of Actuaries Monday abruptly disbanded its longtime joint Pension Finance Task Force, objecting to a task force paper challenging the standard actuarial practice of valuing public pension plan liabilities.

     

    “This paper (is) being censored by the AAA” and SOA, said Edward Bartholomew, who was a member of the former task force, in an interview. “They didn’t want it to get out.”

     

    Others who were members of the task force also said in interviews the two actuarial groups are trying to suppress publication of the paper.

    There are powerful interests that don’t want public pensions to be governed by the same kinds of accounting principles used in the private sector because… well, because if they were, public pensions would go from seriously underfunded to catastrophically underfunded.

    Union officials and state legislators (in both parties) seem to believe that it makes more sense to allow public pension funds to play “let’s pretend” with public money. To be sure, the sudden imposition of a tougher standards would cripple business as usual in many state and local governments, so there can and should be some reasonable accommodations made to allow the adjustment to take place in a less disruptive fashion. Governing by catastrophe is almost never a good idea, and a series of small and incremental changes is usually (though not always) a better way to manage public affairs.

    In the long run, shifting to a more portable system of public pensions—defined contribution, rather than defined-benefit—wouldn’t just help save states and municipalities from fiscal ruin. It would also do much to improve the performance of the civil service. The current system creates a jobs-for-life mentality in public employment because workers need to stay at their positions for decades to collect the full value of their pensions. Somebody who was a good teacher at 30 but wants to leave and should leave at 40 is currently trapped. Also, one of the reasons the unions fight quality evaluations so fiercely is that the loss of job and pension is so much more draconian than simply losing a job.

    The report from dissident actuaries might have helped push state and local pension systems down a more sustainable path. And the conduct of American actuarial leaders—disbanding a reputable task force that had prepared a report that the bureaucracies didn’t like, and then hinting at legal action if the report is published—is irresponsible at best and corrupt at worst. Is it any wonder that Americans are fed up with experts and the institutions they manage?

  • Why Oil Under $40 Will Bring It All Down Again: That's Where SWFs Resume Liquidating

    After several months of aggressive selling of stocks in late 2015 and early 2016, the culprit for the indiscriminate liquidation and concurrent market swoon was revealed when it emerged that the seller was not only China (which was forced to sell USD-denominated reserves to offset a surge in capital outflows following the Yuan devaluation), but also Sovereign Wealth Funds belonging to oil-exporting countries, who were dumping billions in risk assets to offset the collapse of the price of oil, which in turn exacerbated current account and budget deficits.

    Among the prominent sellers was Norway and Saudi Arabia, arguably the biggest casualties of the death of the Petrodollar to date, as well as Abu Dhabi, Kuwait and most other SWFs, listed on the tabel below.

     

    As JPM calculated back in January, the SWF equity selling was inversely proportional to the price of oil: according to the bank, SWF’s would liquidate some $75 billion in equities in 2017 assuming oil at $31 per barrel. Needless to say, the lower oil goes, the more selling there would  be. 

    “This prospective $75bn of equity selling by SWFs in 2016 is not huge but becomes significant after taking into account the potential swing in equity fund flows,” JPM continued, in an attempt to discuss the impact this will have on markets. “Last year retail investors bought $375bn of equity funds globally. This year we expect an amount between 0 and $200bn. Subtracting $75bn of selling from SWFs would leave the overall equity flow from Retail+SWF investors barely positive for 2016.”

    Then starting in February, oil – which had just tumbled to the low-$20s, its lowest price in over a decade – underwent a miraculous surge catalyzed by erroneous, if constantly reiterated, narrative of an imminent OPEC supply cut, a short squeeze, an algo stop hunt, an unprecedented Chinese importing spree to replenish its now almost full Strategic Petroleum Reserve, and even speculation of central bank intervention to prop up the “black gold.” In fact, just a few months after February, oil had doubled, reaching $50 even as we and many others warned, that there simply is not enough demand and far too much supply to sustain such a price.

    No matter the cause, the biggest benefit of this oil surge is that the same SWFs which were actively selling stocks in early late 2015 and early 2016 put their liquidation on hold as oil rose above $40. And in this illiquid, low volume market, the absence of a determined seller is all that it took to push the S&P to all time highs, and as of Friday’s close, just shy of 2,200, a level which even sellside brokers such as Goldman believe is effectively in bubble territory and in the 99% percentile of all overvalued metrics. 

    However, just a few weeks later we are now back in a crude bear market, with oil briefly dipping under $40, on the back of concerns about a gasoline glut and fears that the resurgent dollar will further pressure oil. Worse, with oil returns back to the $40 range and threatens to accelerate the move to the downside, it also brings back with it the specter of SWF liquidations, because as JPM’s Nikolaos Panigirtzoglou points out in his latest weekly note, that’s where the wealth fund selling returns. 

    Here is why as oil approaches $40, the price of crude suddenly matters a lot to equity bulls:

    We had noted in F&L April 22nd what the impact would be of a $45 average Brent oil price on SWF behavior. At the time, we noted that the stability in oil prices meant that the pressure on SWFs to abruptly sell assets would diminish over time. In addition, we argued that SWF selling should focus more on fixed-income securities during the last three quarters of the year, given that SWFs mostly liquidated equity and HF mandates during last year and the first quarter of this year. However, given recent declines in oil prices, we revisit the analysis assuming an average oil price of $40 for 2016 vs $45 before. The YTD average has already fallen to $42.

     

    In our previous analysis based on a $45 average oil price for 2016, we projected the current account balance for oil-producing countries to worsen from around -$70bn in 2015 to -$140bn in 2016. This estimate is based on the same sensitivity of the current account balance to the change in oil prices as last year, i.e. between 2014 and 2015. However, the depletion of official assets could be higher than the current account deficit if these countries also experience capital outflows as it happened last year. If we assume $80bn of capital outflow for 2016, the same level as last year, we project a depletion of $150bn in FX reserves and a depletion of $50bn in SWF assets.

     

    If we assume an average oil price of $40 for 2016 instead, using a similar sensitivity analysis and assumptions as described above, we project the current account balance for oil-producing countries to worsen from around -$70bn in 2015 to -$183bn in 2016. This would imply depletion of $170bn in FX reserves and a depletion of $75bn in SWF assets.

     

    The differences in the SWF selling using the two different average oil price assumptions can be seen in Figure 9.

     

     

    A $40 average oil price, and assuming that these reserve managers and SWFs sell in accordance to their average allocation, would imply selling of $118bn of government bonds and $45bn of public equities. If we assume reserve managers and SWFs are mostly done with selling equities and that they are more likely to liquidate fixed-income mandates, this would imply selling of around  $120bn-$160bn of government bonds and $10bn-$15bn of corporate bonds. However, should oil prices continue to fall further below $40 on a sustained basis, SWFs would face greater pressure to sell equity mandates, similar to the end of last year and the beginning of this year.

    Indeed: the lower the price of oil drops, the faster what until recently had been a paradoxical disconnect (and even a negative correlation between oil and risk assets as we showed earlier), will recouple. And it’s not just the SWF selling: recall that earlier this week, JPM’s head quant Marko Kolanovic warned that should oil return back to the $30s, it would also trigger program selling of stocks.

    CTA signals for oil recently turned from strongly positive to moderately negative. This has contributed to past-month divergence between S&P 500 and oil (~1.5 standard deviations) and is closely monitored by equity and high yield credit investors. It is our view that the risk of CTAs significantly increasing oil shorts over the next 1 month is low. For oil momentum to further deteriorate, oil would need to drop to ~$30 at which point the medium term momentum (strongest signal) would turn negative and trigger selling.

    To summarize, if oil were to drop back under $40, not only would it precipitate even more selling of oil as momentum strategies flip, but it would catalyze a liquidation by those SWFs who thought they were done selling equities, leading to a return of the same sellers that pushed the S&P back to the low 1,900s a short 6 months ago.

    So for all those curious where stocks are going next, the simple answer is: keep an eye on what oil does next.

  • Hillary Clinton: "I May Have Short-Circuited The Truth" About The Email Scandal

    One of the biggest surprises over the past week was Donald Trump’s dramatic meltdown, and subsequent escalation, with the family of Humayun Khan, the US Muslim captain killed in Afghanistan in 2014, who during the DNC, tangentially accused Trump and his potential policies of being responsible for their son’s death (he wasn’t). What is most striking is that instead of ignoring this attempt to bait the Republican candidate in public, to which he most gladly obliged, he should have simply moved on and stayed on the offensive, pressing Hillary over the recent Wikileaks disclosure revealing the cronyism and corruption within the Democratic Party, as well push the familiar narrative of her email scandal.

    Conveniently, Hillary helped him do just that yesterday, when she acknowledged on Friday afternoon that she may have “short-circuited” when she claimed in recent interviews that FBI Director James Comey said she was “truthful” about her use of a private email server as secretary of state.  In doing so Hillary once again shifted the news spotlight away from Trump and back on to herself, as she once again revealed that the only consistent thing about Hillary Clinton are the constant lies.

    Following a heavily covered interview with Fox News’ Chris Wallace, Hillary stated that Comey had found her statements “truthful” and “consistent” with what she has said publicly. Clinton’s lying led The Atlantic to publish an article titled “ Why Can’t Hillary Clinton Stop Lying?” and the Washington Post’s fact checker Glenn Kessler awarded her four “Pinocchios”, adding that “Clinton is cherry-picking statements by Comey to preserve her narrative about the unusual setup of a private email server. This allows her to skate past the more disturbing findings of the FBI investigation.” Notably, the NYTimes did not publish anything related to this flop and it took the Public Editor, whose job it to be the readers’ advocate at The NYT, to write an op-ed titled The Clinton Story You Didn’t Read Here.

    After an almost universally bad week for her opponent Donald  Trump, Hillary went out of her way once again to explain away her home-brew server, only this time it led to a less than favorable outcome.

    Clinton insisted in two televised interviews aired this week, including one with Fox News’ Chris Wallace aired Sunday, that Comey had found her statements “truthful” and “consistent” with what she has said publicly. The Democratic nominee, speaking at a joint convention for African-American and Hispanic journalists, remarked that she was “pointing out in both of those instances that the Director Comey had said that my answers in my FBI interview were truthful.”  She then reiterated the “truthful” assessment in an interview with a Colorado television station later in the week.

    According to Politico, Hillary stressed that “that’s really the bottom line here. And I have said during the interview and many other occasions over the past months, that what I told the FBI, which he said was truthful, is consistent with what I have said publicly,” Clinton explained Friday. “So I may have short-circuited it and for that, I, you know, will try to clarify because I think, you know, Chris Wallace and I were probably talking past each other because of course, he could only talk to what I had told the FBI and I appreciated that.”

    “But I do think, you know, having him say that my answers to the FBI were truthful and then I should quickly add, what I said was consistent with what I had said publicly. And that’s really sort of in my view trying to tie both ends together,” she added.

    Notice the difference between her original statement and revision. In the first one, James Comey confirmed her statements about her email setup were consistent and truthful. In her revision, the FBI director confirmed that what she told the FBI was truthful. Perhaps because lying to the FBI is a crime but lying to the American population is not?

    Her word choice of “short-circuiting” confirms what many voters in this election feel about Hillary. Her answers are memorized, poll tested and scrutinized by hundreds of staffers, almost in a robotic fashion, to ensure she does not “bend” the truth. This is why Hillary does a press interview every 240 days at best

    Finally, having finally found a new opening to dig itself out of the hole it has found itself in, Donald Trump’s campaign laced into Clinton over her latest “pretzel-like response.”

    “Hillary Clinton’s habitual lying about the use of her secret server to send and receive classified, top secret information shows her blatant disregard for national security and a continued pattern of bad judgment,” senior communications adviser Jason Miller said in a statement. “Clinton knows the actions she has taken are disqualifying for someone wishing to become commander-in-chief, and that is why today’s painful, pretzel-like response to a simple question about her illegal server was obvious to everyone watching.”

    Now the only question is whether Trump can keep his mouth shut long enough to give Hillary more chances to stick her foot in hers, and do to her own polling what Trump has been so eager to do to his over the past two weeks.

  • Saving The System: Exposing The 4 Fallacies Of Modern Monetary Policy

    Submitted by Alasdair Macleod via GoldMoney.com,

    Monetary policy, we are told, is all about staving off recession and stimulating economic growth.

    However, not only is monetary debasement in any form counterproductive and destroys the personal wealth of the masses, but the economists who devised today’s monetarism have completely lost their way.

    This article addresses the confusion surrounding this subject, and concludes the real reason for today’s global monetary policies is an ultimately futile attempt to prevent a systemic and economic crisis.

    Wrong tools for wrong targets

    Central banks set themselves targets, such as unemployment that is deemed to be “full”, in other words the optimal low rate that will not lead to a pick-up in price inflation. CPI is the second target, typically set at 2% per annum. The hope is that these targets will lead to sustainable growth in GDP.

    Unfortunately, estimates of unemployment do not tell us whether or not people are being employed productively. The term productive conjures up questions as to whether or not a government employee who is not customer-driven is economically productive, or whether or not a temporary barman should be deemed properly employed. There is also considerable tension between low rates of official unemployment, and near-record levels of the labour force not in work.

    Recorded price inflation is even more flaky, with large discrepancies between official CPI and independent estimates, such as those of Shadowstats.com and the Chapwood Index in America. Their independent statistics record a far higher rate of price inflation in the US than the official CPI, and there is little doubt people are experiencing the higher rate. Assuming the GDP deflator should approximate to the actual rate of price inflation, independent estimates tell us that the US economy has been in recession every year since the dot-com bubble burst.

    The statistical tools are obviously useless, and so is the principal target. GDP is a money-total, no more, no less. Imagine an economy where the total quantities of money and credit never vary, and all credit is fully backed by money instead of conjured up out of thin air. Prices for individual goods and services are free to change, but the total money deployed cannot. Credit shifts from the failures to the successes. But because credit is wholly backed by sound money, if the credit is extinguished, the money lives on. Therefore, GDP does not increase or decrease.

    Alternatively, imagine you construct a balance sheet of the economy, and you introduce some more money. The balance sheet totals will increase accordingly, but it does not tell you how productively the extra money is deployed. What we seek in GDP is not found there: what we really want to know is whether or not economic conditions for the vast majority of people are improving. The only evidence of this would be increasing average wealth for all employed classes, and we are not talking about measures of wealth denominated in unsound currencies, nor are we talking about the apparent wealth that results from credit inflation. It has to be real.

    Equally, it cannot be measured, but framed that way, we can begin to get a better sense of perspective as to what economic policy should attempt to achieve.

    Take the example of helicopter money, which is increasingly talked about. It would undoubtedly boost nominal GDP. But if we think in terms of economic progress, we quickly realise that helicopter money is actually economically destructive as can be easily demonstrated.

    Let us assume that a central bank distributes money through the banking system to the bank accounts of consumers, who will undoubtedly spend most of this windfall. The immediate effect will be to increase the GDP total, as described above. But it creates a shortage of goods, so prices can be expected to quickly rise, nullifying any perceived benefit. And because the distribution is so well telegraphed, no sensible manufacturer is going to respond by increasing his production significantly for a one-off benefit. Therefore, as the money is spent its purchasing power will decline fairly rapidly, the costs of production will rise, and a slump will ensue. Unless, that is, there are continuing helicopter drops, but that, everyone can agree, is the path to wealth destruction through hyperinflation, and therefore the end of all economic progress.

    Just by rephrasing the question, from fostering GDP growth to fostering economic progress, leads to some diametrically opposed answers, as the helicopter money example illustrates. In this vein, I shall now address four of the most destructive fallacies about the relationship between money, credit, and economic progress.

    Fallacy 1: Monetary debasement benefits the economy

    Modern economists mistakenly ignore the intertemporal effects of changes in the quantity of money. When money or credit is expanded, the first receivers of it get to spend it on existing products before anyone else. Therefore, they benefit from the extra money before prices have risen to reflect its addition into general circulation. The second receivers have a similar advantage, but incrementally less so. Therefore, after this new money has progressed through many hands with a tendency to drive up prices every time, the last receivers of the additional money find that prices for nearly all goods have already risen and the purchasing power of their wages and savings has effectively fallen.

    This is known as the Cantillon effect. It amounts to a wealth transfer from the poorest in society, the unskilled workers, pensioners and small savers, to the government and its agents. Bankers, licensed to produce credit out of thin air at no cost, thrive. The second receivers, the businesses that benefit from bank credit and unfunded government contracts, do almost as well. The result is government, banks and their close supporters enjoy a wealth benefit at the expense of ordinary people.

    It is therefore hardly surprising the establishment and its lobbyists strongly favour monetary expansion, but the Cantillon effect cannot be denied, in theory or empirically. It is the single most important reason why inflating money and credit will always be counterproductive. We see this effect today, with the gap between rich and poor widening dramatically. It is monetary policy that impoverishes the masses, more surely than anything else.

    Fallacy 2: Low interest rates are beneficial

    The emotional appeal of low interest rates has its origin in the old religious association of interest with usury. Keynes promoted this view, not expressed so blatantly in moral terms, but by conjuring up an image of work-shy capitalists profiting from the deployment of their money for interest. His term for these capitalists, rentiers, condemned them in his followers’ minds.

    Keynes’s view is consistent with the idea that it is the rentiers who set the price for money, holding the entrepreneur to ransom, when in fact it is the other way round. In a free market where interest rates are set by consenting parties, it is the entrepreneur that sets the savings rate by bidding up the interest rate. It is this phenomenon that resulted in the long-held correlation between the price level and interest rates, demonstrated in Gibson’s paradox, which Keynes, Fischer and Friedman were all unable to explain.

    The fact that this correlation demonstrably existed from 1730 up to the 1970s is clear evidence that entrepreneurs were prepared to pay a rate of interest that related to the one thing they knew better than anything else, and that was the price they expected to obtain for their product in the market. There can be no other credible explanation. Equally, it shows that central bank attempts to manage price inflation by varying the interest rate are doomed to fail, because there is no natural correlation between the two. 

    This was certainly the case until the late 1970s, when the Fed raised interest rates to the point where normal business activity could not be financed profitably. Since then, monetary policy has taken over control of interest rates to the point where they ignore market forces entirely. The idea that central banks can manage unemployment, price inflation and GDP by varying interest rates has also been disproved by experience, yet they still persist in this crazy quest. 

    The expansion of bank credit that accompanies suppressed interest rates will increase GDP, assuming the credit expansion is not aimed at non-GDP items, such as financial assets. But that is a very different matter from fostering economic progress, which requires an interest rate that correlates with the price level, and not the rate of price inflation.

    Fallacy 3: Expanding money and bank credit stimulates business

    In a sound-money environment, some businesses prosper and others fail. The ones that prosper do so through success, not subsidy, and there is no subsidy for the failures. The business environment is of necessity one of constant change, as mistakes are quickly rectified. Capital resources for profitable enterprises are released from those that are less so or even unprofitable. Assuming a steady savings rate, the release of inefficiently deployed capital is vital for successful enterprises to flourish. Importantly, there can be no credit-driven business cycle to disrupt economic progress.

    This is not a happy environment for legacy industries, unwilling to face the change progress imposes, or no longer relevant to the future. Often these businesses dominate communities, and are costly and inefficient compared with their modern competitors operating in lower-cost conditions. They lobby hard and successfully for subsidies. And if there is free money and credit in the offing, all businesses well-connected to political circles want their share of the largesse.

    This is why today’s monetary environment is of unsound money, the expansion of money and credit designed to increase GDP. The result is good businesses no longer have to attract capital resources from the less profitable and the failures. All businesses, the successful and the failures, draw on freely available credit, either for genuine production or to avoid failure. The consequence is a growing accumulation of unproductive debt, whose default is continually deferred.

    As the bad businesses compete with the good for scarce labour and raw materials, which unlike unsound money cannot be conjured out of thin air, prices begin to rise. And as higher prices work through to final products, easy money encourages consumers to alter their money-preferences in favour of goods. After all, unemployment is low and things are booming, so why go without?

    At this point, central banks are forced to interrupt their expansionary policies and raise interest rates to curb unforeseen price inflation, and to only stop raising rates when widespread bankruptcies are threatened.

    For anyone interested in promoting economic progress as opposed to just growing the GDP numbers, inflating money and credit is obviously not the way to go about it. Those who do not grasp the difference between real economic progress and raising GDP are likely to persist in trying to grow GDP, putting the lessons of experience behind them. Welcome to the world of central banking.

    Fallacy 4: Lower exchange rates benefit the economy

    This is a policy of giving preference to exporters at the expense of everyone else, and in that sense is another variation of the Cantillon effect. It is a deliberate policy of reducing the value of the wages of exporters’ employees and other domestic costs, a wealth-transfer that eventually affects everyone. It destroys personal wealth, particularly for those who can least afford it.

    Economic planners appear to be blind to the true origin of trade deficits. In a sound money environment, everyone is forced to pay their bills. If you buy something, whatever its origin, you will have earned or borrowed sound money from someone else to pay for the goods purchased. Therefore, trade deficits, other than those arising from self-correcting timing differences on settlements, cannot exist. Attempts to correct trade deficits by manipulating the exchange rate, while pursuing unsound monetary policies, are in consequence futile.

    It is no accident that a trade deficit is often accompanied by a government budget deficit, because the latter is bound to lead to the first, assuming the savings rate remains unchanged. The reason has already been stated above: the private sector pays its bills, so trade deficits can only arise from unsound money and unfunded government deficits. 

    Empirical evidence and analysis of national accounts support this analysis, yet nearly everyone automatically subscribes to the fallacy that reducing the exchange rate is a good thing for the economy. Devaluing the currency does not correct trade deficits, and the policy amounts to an ongoing destruction of a currency’s purchasing power for no gain.

    Devaluations, which go hand in glove with unsound monetary practices, can be expected to lead to an increase in the money-total of GDP, but they hinder economic progress by destroying the wealth central to the financing of market-driven industrial investment. The post-war experience of Germany with its strong mark, compared with that of Britain with its weak sterling, refers.

    The real reason behind unsound money policies

    The neo-classical economists that populate government and central banks are finding out the hard way that their fallacies and their dishonest use of the state’s seigniorage of money and credit have lead everyone into a dead-end debt trap. They show no understanding of how they got us all here, but are becoming acutely aware of the consequences.

    Unsound monetary practices favour debt financing over financing from genuine savings, because of the wealth-transfer effect that benefits debtors. The result of decades of unsound monetary policies is that the major welfare economies have become overloaded with an accumulation of government debt, which can never be repaid, only devalued. Additionally, escalating welfare liabilities have to be financed, which means that the welfare-states’ need for low-cost financing through the expansion of bank credit and raw money has now become more or less infinite.

    It is obvious that a government can only discharge its welfare liabilities by acquiring yet more of the private sector’s wealth. The wealth destruction suffered by the private sector simply detracts from its ability to fund future government spending. <b/p>

    Not only are the private sectors in welfare states burdened with increasing state depredations on their wealth, they themselves have accumulated large amounts of unproductive debt as a result of decades of easy under-priced bank credit. The result is evident in very low rates of genuinely productive employment, and the impoverishment of the masses. While these problems are more evident in some nations than in others, all welfare states are affected. 

    Some countries like France conceal their unemployment problem by socialising large swathes of the economy, either directly or indirectly. Unemployment is officially recorded at about 10%, the state accounts for the majority of economic activity, and there is a large agricultural sector of predominantly subsistence-farming smallholders. The whole economic structure is inherently unproductive. In other welfare nations, the unemployment problem is more obvious.

    Italy is a good example, with a youth unemployment rate of 37%. The state accounts for about 52% of GDP, and non-performing loans on the banking sector’s balance sheets are recorded at 18% of GDP. Stripping out the state, NPLs are 37.5% of private sector GDP. It is therefore clear that not only is the private sector collapsing under the weight of its own debt, but there must be a growing incentive for companies which can service their debt not to do so, because their banks might not be around in the future to reward them by extending more credit. Those that see the Italian crisis as a banking problem miss the point. It is the Italian economy that’s the problem, and the banks are merely the prosciutto in the sandwich.

    Italy is in the vanguard of welfare state failures. Central banks formulating monetary policy are becoming increasingly aware of this fact and the similarities with their own position. Their priority now is to avoid a global debt-induced economic crises. They see this being staved off by increasingly desperate attempts to promote GDP growth. They will pursue this policy at accelerating speed right into the buffers at the end of the line. 

    The partying is over. The days of transferring wealth from the middle-classes and the poor through monetary debasement to benefit the welfare states, the banks and their preferred customers, are now numbered. The implications for future monetary policy are simple: the Fed, Bank of Japan, European Central Bank and Bank of England are working together to keep their respective GDPs from falling. The Bank of Japan is leading the way into deepening negative interest rates and more asset-supporting quantitative easing, and the others are all set to follow its example.

  • MF Global 5 Years Later: PWC Set To Take The Fall As Corzine Still Untouched

    Jon Corzine, former Governor of New Jersey and CEO of Goldman Sachs, took over the helm of MF Global in March 2010.  When revenue at the bank failed to live up to expectations, Corzine developed a scheme to place a massive $6BN bet on the sovereign debt of the aptly named PIIGS (Portugal, Italy, Ireland, Greece, Spain) through a financial structure known as a “Repo to Maturity”.  To summarize the strategy for all you aspiring CEO’s, when you find it difficult to generate organic revenue growth sometimes the better option is to just bet your entire firm on a single, massively-levered trade on the sovereign debt of countries on the verge of insolvency. 

    Well, not so much.  Deterioration of the Eurozone economies in mid-2011 resulted in massive margin calls on Corzine’s trade and a liquidity crisis at MF Global.  By the time the dust settled there was $1.6BN of cash “missing” from customer accounts which should have been segregated.  And with that, less than 2 years after Mr. Corzine took the CEO seat, MF Global filed for bankruptcy protection on October 31, 2011 in the Southern District of New York. 

    We know what you’re thinking…sounds reckless to risk an entire firm on the highly volatile sovereign debt of a group of countries labeled the “PIIGS”, right?  Well apparently it’s not that big of a deal unless you’re the scapegoat accountants.

    Yesterday, U.S. District Court Judge Victor Marrero of New York denied PwC’s motion for dismissal of a $1 billion professional malpractice suit filed by MF Global against the accounting firm saying that the administrator had “presented sufficient evidence to create a material factual dispute” as to whether advice from PwC ultimately played a role in the bankruptcy filing.  According to the WSJ:

    MF Global sued PwC in March 2014 for at least $1 billion, alleging that the firm’s accounting advice helped cause MF Global’s 2011 collapse. Officials in charge of MF Global’s liquidation claimed PwC gave “flatly erroneous” advice on how to account for the European sovereign debt that tipped MF Global into bankruptcy.

     

    MF Global’s lawsuit against PwC claims the accounting firm’s advice is what allowed Mr. Corzine to make such a big bet in the first place, a charge PwC has denied.

     

    In a 69-page decision, the judge said the administrator “has presented sufficient evidence to create a material factual dispute” as to whether PwC’s accounting advice played a role in MF Global’s bankruptcy in the fall of 2011.

     

    “This is a major victory for the MF Global estate,” said Nader Tavakoli, MF Global’s lead director. “It sends a strong message concerning the need for responsibility and accountability, and we hope to secure a substantial recovery for MF Global’s stakeholders.”

     

    Daniel Fetterman, a lawyer from Kasowitz Benson Torres & Friedman LLP who is representing MF Global, called the ruling a “significant victory” in the legal fight.

     

    “We look forward to presenting at trial the evidence concerning PwC’s extraordinary and egregious malpractice alleged in the complaint and its role in causing MF Global’s demise,” he said.

    For its part, PwC has maintained that reckless trading decisions and “adverse market conditions” were the real cause of the bankruptcy filing, not faulty accounting of the trades.

    In response, James P. Cusick, PwC’s lawyer, said the accounting firm stands by its work for MF Global, and that the commodity broker correctly accounted for the so-called repo-to-maturity transactions at issue in the lawsuit.

     

    MF Global’s collapse was caused by its own business decisions and adverse market events, not any accounting determination” said Mr. Cusick, a litigator at King & Spalding.

    Lesson learned.  If you commit a murder it’s the gun’s fault, if you gain 20 lbs it’s the fork’s fault and if you place a massively levered trade that blows up your firm then it’s the accountant’s fault.  After all, it’s not the losses of a failed trade that caused the liquidity crisis at MF Global but rather the timing of the realization of those losses that are truly to blame.

    As for Jon Corzine, last we heard he was trying to raise capital for a new hedge fund (one which may have trouble getting a primary dealer designation) and we are confident he will succeed for two reasons.

    Reason #1:

     

    And Reason #2:

    * * *

    For those interested, the full decision can be read below:

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Today’s News 6th August 2016

  • Connecting The Nuclear 'Dots'

    With Iran back in the headlines once again thanks to the US government's shady cash payments surrounding the nuclear deal and hostage release, we thought it worth considering the warnings of GeoStrategic Analysis' Dr. Peter Huessy:

    • Iran seeks to do us grave harm, potentially with ballistic missiles and nuclear weapons. The threat warnings are clear and we have strong evidence — Iran has attacked us repeatedly over the past 30 years.

    • Instead of heeding the nuclear missile "dots" that are emerging all around us, we are busy promoting trade with Iran, downplaying its violations of the nuclear deal, simply ignoring its ballistic missile developments and dismissing the growing evidence of its terrorist past.

    After the attacks on September 11, 2001, Congress, the Bush administration, and terrorist experts complained that the country had simply not "connected the dots" provided by prior terrorist threats.

    The 9/11 Commission also concluded that the attacks "should not have come as a surprise," as "Islamist extremists had given plenty of warning that they meant to kill Americans indiscriminately and in large numbers."

    The Commission then listed 10 Islamic terror plots against the US prior to 9/11:

    "In February 1993, a group led by Ramzi Yousef tried to bring down the World Trade Center with a truck bomb.

     

    "Plans by Omar Abdel Rahman and others to blow up the Holland and Lincoln tunnels and other New York City landmarks …

     

    "In October 1993, Somali tribesmen shot down US helicopters, killing 18 and wounding 73…

     

    "In early 1995, police in Manila uncovered a plot by Ramzi Yousef to blow up a dozen U.S. airliners while they were flying over the Pacific.

     

    "In November 1995, a car bomb exploded outside the office of the US program manager for the Saudi National Guard in Riyadh, killing five Americans and two others.

     

    "In June 1996, a truck bomb demolished the Khobar Towers apartment complex in Dhahran, Saudi Arabia, killing 19 US servicemen and wounding hundreds.

     

    "In August 1998, al Qaeda, carried out near-simultaneous truck bomb attacks on the US embassies in Nairobi, Kenya, and Dar es Salaam, Tanzania. The attacks killed 224 people, including 12 Americans, and wounded thousands more.

     

    "In December 1999, Jordanian police foiled a plot to bomb hotels and other sites frequented by American tourists…

     

    "…US Customs agent arrested Ahmed Ressam at the US-Canadian border as he was smuggling in explosives intended for an attack on Los Angeles International Airport.

     

    "In October 2000, an al Qaeda team in Aden, Yemen, used a motorboat filled with explosives to blow a hole in the side of a destroyer, the USS Cole, almost sinking the vessel and killing 17 American sailors."

    Despite the overwhelming indications that an attack like 9/11 was around the corner, as former Secretary of State Condoleezza Rice told the country in her April 2004 testimony to the 9/11 Commission, "The terrorists were at war with us, but we were not yet at war with them. For more than 20 years, the terrorist threat gathered, and America's response across several administrations of both parties was insufficient."

    Are we now better equipped to "connect the terrorist-threats by dots" than we were prior to 9/11? Certainly we are not still echoing the testimony of Richard Clarke when he told the Emerging Threats Subcommittee in the summer of 2000 that the administration "had not yet" determined how to spend homeland security funds even some eight years after the first World Trade Center bombing of February 1993.

    Unfortunately, not only are we not connecting the terrorist dots, we are actively downplaying their significance. Nowhere else is this more apparent than in the virtually complete failure, on the part of the US, to hold Iran responsible for the terror attacks that have killed and maimed thousands of Americans since 1979. This failure is all the more disturbing after the numerous court decisions that have found Iran accountable for nearly $60 billion in damages owed to the victims and survivors of these attacks, including the 9/11 attacks.

    The outstanding news analyst and author Melanie Phillips wrote nearly a year ago that Iran had been "…perpetrating acts of war against Western interests for more than three decades — including playing a key role in the 9/11 attacks on America." Phillips noted that a Revolutionary Guard-Iranian Intelligence (MOIS) task force

    "designed contingency plans for unconventional warfare against the US… aimed at breaking the American economy, crippling or disheartening the US, and disrupting the American social, military and political order — all without the risk of a head-to-head confrontation which Iran knew it would lose."

    She explained that the court testimony from former Iranian agents illustrates that Iran "…devised a scheme to crash hijacked Boeing 747s into the World Trade Center, the White House and the Pentagon. … The plan's code name was 'Shaitan dar Atash' ('Satan in flames')." Further, the court evidence revealed that Iran obtained "a Boeing 757-767-777 flight simulator which it hid at a secret site where the 9/11 terrorists were trained."

    In December 2011, Judge George B. Daniels found that Iran, with the participation of its Supreme Leader Ayatollah Ali Khamenei, was directly and heavily involved in the 9/11 atrocities. Khamenei instructed intelligence operatives that while expanding collaboration between Hezbollah and al-Qaeda, they must restrict communications to existing contacts with al-Qaeda's second-in-command Ayman al Zawahiri and Imad Mughniyeh — Hezbollah's then terrorism chief and agent of Iran.

    Iran's Supreme Leader, Ayatollah Ali Khamenei (center), is shown meeting in May 2014 with Iran's military chief of staff and the commanders of the Islamic Revolutionary Guards Corps. (Image source: IRNA)

    While the 9/11 Commission found solid evidence Iran aided the 9/11 hijackers in their travels from Iran, the "Extensive cooperation in major global terrorist activities," between Iran, Hezbollah and Al Qaeda, including the 1996 bombing of the Khobar Towers housing complex in Saudi Arabia and the 1998 East Africa US embassy bombings, escaped the 9/11 Commission's detailed attention. Notably, as long ago as in 2000, a US Defense Intelligence Agency analyst was alerting the government to a web of connections between al-Qaeda, the Iranian intelligence agencies controlled by Khamenei, and other terrorist groups.

    Many press reports and analysts, cognizant of Iran's terrorist history and aware that Iran has been designated by the US Department of State as the world's premier state sponsor of terror, choose to believe the 2015 Iranian nuclear deal should not be derailed over concern of Iran's possible future terrorist plans. Especially when it is often assumed these plans are aimed primarily at Israel and groups in Syria, Iraq and Lebanon, and thus not of real concern to the United States.

    Is the nuclear deal with Iran thus a good trade? We get to slow Iran's pursuit of nuclear weapons, but any serious sanctions or military effort to stop Iran's terror agenda are off the table. Let's connect the new nuclear-related Iran dots.

    First, the world's expert on Iran ballistic missiles, Uzi Rubin, revealed on July 15 that Iran has five new missile capabilities: they can strike the middle of Europe, including Berlin; they can target with GPS accuracy military facilities in Saudi Arabia; they can launch missiles from underground secret tunnels and caves without warning; they have missiles that are ready to fire 24/7; and they have developed other accurate missiles whose mission is to strike targets throughout Gulf region.

     

    Second, the Associated Press revealed that a side agreement under the Joint Comprehensive Plan of Action (JCPOA) nuclear "deal" actually allows Iran to break out of the agreement in year 11, not 15, at which point Iran will not even be six months away from having sufficient nuclear fuel to arm a nuclear warhead, and Iran will be able to install nuclear centrifuges five times more efficient than the ones they have today.

     

    Third, according to German intelligence reports, Iran has, a few dozen times since the July 2015 nuclear agreement, sought to purchase nuclear ballistic missile technology, a violation of previous UN resolutions.

    As Americans wonder who will be behind the next terrorist attacks on our country — "lone wolf" terrorists inspired by social media from Islamist groups; organized cells of ISIS, Al Qaeda, Islamic Jihad, Hezbollah; states such as Iran and Syria; or a combination of all three — we would do well to be reminded of the long-term use of terrorism by the former Soviet Union as one of their trademark elements of "statecraft."

    Iran's pursuit of nuclear weapons has not been stopped and at best has been delayed. Add to that Iran's enhanced ballistic missile capability, its growing partnership with North Korea and its history of terrorist attacks on the United States, and connecting the dots reveals a stark reality — nuclear terrorism by missile may be on its way.

    During the spring and summer of 2001, US intelligence agencies received a stream of warnings that Al Qaeda was determined to strike. The specific information pointed to threats from overseas. The Bush administration began developing a strategy in early 2001 to eliminate Al Qaeda in three years. The 9/11 attacks happened "too soon."

    Iran seeks to do us grave harm, potentially with ballistic missiles and nuclear weapons. The threat warnings are clear and we have strong evidence — Iran has attacked us repeatedly over the past 30 years

    But instead of heeding the nuclear missile "dots" that are emerging all around us, we are busy promoting trade with Iran, downplaying its violations of the nuclear deal, simply ignoring its ballistic missile developments and dismissing the growing evidence of its terrorist past.

    In short, we are not connecting these dots; we are erasing them…America is apparently bent on repeating — yet again — the historic wrong turn it took in 1979 by once again embracing the radical Islamic regime in Iran. Why would the U.S. administration think doing the same thing again will have a different outcome?

  • 3 Simple Charts That Help Explain Why 9,000 Businesses Have Left California In Just 7 Years

    We recently came across some simple charts from the Tax Foundation that simply and effectively illustrate why businesses are fleeing states like California by the 1,000s

    In the first chart, the Tax Foundation presents data from The Bureau of Economic Analysis to compare purchasing power of $100 depending which state you live in.  Ironically, the map turned out to look eerily similar to recent electoral college maps of Presidential elections with the Democrat-leaning northeast and west coast areas getting less bang for their buck compared to the southeast and mid-west.  Could it be that rather than voting their desires to cling to “guns and religion,” to quote President Obama, that Americans in the southeast and mid-west are actually voting to preserve a higher standard of life that doesn’t require them to spend $2mm on an 800 square foot apartment?  But we digress.

    Relative Value of Dollar

     

    Ironically, the second chart which illustrates tax rates by state looks very similar to the first.  The highest taxed states (dark blue) are in the northeast and west coast with lower tax structures in the southeast and mid-west. 

    Taxes by State

     

    And finally a map of minimum wage by state.  Note that this doesn’t reflect California’s recent minimum wage hike to $15 which will be phased in over the next 5 years.  At the risk of sounding like a broken record we’ll spare you our additional commentary.

    Minimum Wage by State

     

    Could it be that these charts have something to do with the mass exodus of businesses from the State of California to more “friendly” locations like Texas and Nevada?  As pointed out by the Dallas Business Journal, a study conducted by Joseph Vranich, a site selection consultant and president of Irvine, California-based Spectrum Location Solutions, found that roughly 9,000 California companies moved their headquarters or diverted projects to out-of-state locations in the last seven years due to the Golden State’s “hostile” business environment.  As the DBJ points out, companies are fleeing California to escape escalating costs and regulations and states like Texas and Nevada with no income tax and high relative purchasing power are the key beneficiaries:

    It’s typical for companies leaving California to experience operating cost savings of 20 up to 35 percent, Vranich said.  He said in an email to the Dallas Business Journal that he considers the results of the seven-year, 378-page study “astonishing.”  “I even wonder if some kind of ‘business migration history’ has been made.

     

    Companies continue to leave California because of rising costs and
    concerns over the state’s “hostile” business environment, according to the study, which also names companies and provides details of business disinvestments in the state.

     

    Here are some highlights of the study:

    • Texas ranked as the top state to which businesses migrated, followed by: (2) Nevada, (3) Arizona, (4) Colorado, (5) Washington, (6) Oregon, (7) North Carolina, (8) Florida, (9) Georgia and (10) Virginia. Texas was the top destination for California companies each year during the seven-year study period.
    • Los Angeles led the Top 15 California counties with the highest number of disinvestment events, followed by: (2) Orange, (3) Santa Clara, (4) San Francisco, (5) San Diego, (6) Alameda, (7) San Mateo, (8) Ventura, (9) Sacramento, (10) Riverside, (11) San Bernardino, (12) Contra Costa tied with Santa Barbara, (13) San Joaquin, (14) Stanislaus and (15) Sonoma.

    Turns out you really do get what you vote for.

    For those who would like to review the full study, which the author summarizes as “California’s Forty Year Legacy of Hostility to Business,” by Spectrum Location Solutions, it can be viewed below:

  • Only In China: Companies Become Banks To 'Solve' Financial Difficulties

    Submitted by Valentin Schmid via The Epoch Times,

    China is desperate to solve several problems it has due to its debt to GDP ratio being north of 300 percent. It may have found a pretty unconventional one by letting companies become banks, according to a report by the Wall Street Journal.  

    With profits headed south, heavily indebted Chinese heavy-machinery giant Sany Heavy Industries said this week it won approval to set up a bank in the Hunan Province city of Changsha. With 3 billion yuan ($450 million) of registered capital, it will be a relatively large institution as Chinese city-based banks go. Sany plans to join forces with a pharmaceutical company and an aluminum company.

    Sany already operates an insurance and finance division with the goal of internal financing and insurance services for clients.

    Sany Heavy Industries already operates a Finance and Insurance arm, although it's unclear what gold has to do with it. (Company Website)

    Sany Heavy Industries already operates a Finance and Insurance arm, although it’s unclear what gold has to do with it. (Company Website)

    Debt Problem

    One problem is that companies are defaulting on bond payments and there is no adequate resolution mechanism for bad debts, at least according to Goldman Sachs.

    “A clearer debt resolution process (for example, how debt restructuring on public bonds can be achieved, how valuation and recovery on defaulted bonds are arrived at, the timely disclosure of information and clarity on court-sanctioned processes) would help to pave the way for more defaults, which in our view are needed if policymakers are to deliver on structural reforms,” the investment bank writes in a note.

    By becoming or owning banks, the companies can just shift debt around different balance sheets to avoid a default, although this is probably not the resolution that Goldman Sachs had in mind when talking about structural reforms.  

    Another problem is that the regime has more and more difficulties pushing more debt into the economy to grease the wheels and keep GDP growth from collapsing entirely.

    China needs 11.9 units of new debt to create one unit of GDP growth. At the same time, the velocity of money or the measure of how often one unit of money changes hands during a year has fallen to below 0.5, another measure of how saturated the economy is with uneconomical credit. If the velocity of money goes down, the economy needs a higher stock of money to keep the same level of activity.

    (Macquarie)

    (Macquarie)

    So if companies can’t pay back loans, old banks don’t want to give out loans, and consumers don’t want to circulate the money, you can just let some companies become banks to prevent them from defaulting and maybe even issue new loans to themselves.

    It would not be the first time China has tried a circular financial arrangement to solve some structural issues.  

    Sany Not Alone 

    According to the Wall Street Journal report, the Sany Heavy Industries case is only one of a few. Other companies in the tobacco and travel sectors, for example, have taken over banks or formed new ones. 

    ChinaTopix reports that the China Banking Regulatory Commission (CBRC) has already awarded five licenses for private banks and received another 12 applications during the past year. It also mentions that industrial firms are behind this move:

    “One bank, Fujian Huatong Bank, which has a registered capital of Rmb3 billion ($450 million), was promoted by 10 Fujian-based companies in different sectors, including retail, manufacturing and real estate.”

    We don’t know if the regulator had this in mind when they launched the initiative to boost private banks in China in 2014 in order to improve lending to the technology sector, but it did explicitly mention that private companies should form banks.  

    “Qualified private enterprises shall be encouraged to set up private banks. The innovation of products, services, management, and technology by private banks will inject new vitality into the sustainable and innovative development of the banking sector,” the CBRC states in an undated report.

    *  *  *

    It remains to be seen whether this is a long-term sustainable solution.

  • Politicians Gone Wild: Underage Strip Poker, Meth For Sex, & White Males Need Not Apply

    Just when you thought the Presidential election was spiraling out of control and politics couldn’t get any more surreal, we present to you a trio of lesser-known politicians that took things to a whole new level this week…

    Strip Poker with Mayor Silva:

    Silva

    Our first Politician Gone Wild is Mayor Anthony Silva of Stockton, California, who was arrested on Thursday on charges of playing strip poker and providing alcohol to minors at a youth camp he runs for impoverished children.  An FBI investigation of Silva led to the discovery of a video saved on Silva’s cell phone which the District Attorney’s office discussed with NBC:

    “The audio of the surreptitious recording clearly indicates that the participants did not want to be recorded. Witnesses also informed FBI agents that Silva provided alcohol to the participants, all of whom were underage, including a minor.”

    Mayor Silva has since been released on bail and intends to plead not guilty.

     

     

     

    Meth for Sex with Mayor Silverthorne:

    Silverthorne

    Next there is Fairfax City, Virginia Mayor R. Scott Silverthorne, a supporter of Hillary Clinton, who was arrested Thursday after allegedly giving methamphetamine to an undercover police officer in exchange for sex, according to HeatStreet.

    According to Fairfax County police, they encountered Silverthorne after learning of an individual who was distributing meth through a website used to arrange male-on-male sexual encounters.

    An undercover detective created a profile on the site and was contacted by Silverthorne, who said he could provide meth in exchange for sex. They arranged to meet at a hotel, where Silverthorne was arrested for felony distribution of methamphetamine.

    As if that wasn’t bad enough, Mayor Silverthorne is apparently also a substitute teacher in the Fairfax County Public School system

     

    White Males Need Not Apply:

    Ellison

    Our final case comes from the Daily Caller which pointed out a job posting on Minnesota House of Representatives Member Keith Ellison’s (D) website seeking interns for the fall.   Within the posting the Democrat describes that he’s seeking “interns who are curious, hardworking, and passionate about serving Minnesota’s 5th district.”  But there’s one small catch, per the posting:

    People of color, LGBTQ individuals, women, and people with disabilities are strongly encouraged to apply.”

    Well that pretty much covers anyone that isn’t a straight, able-bodied, white, male.  Got it.  

  • Fissures In The Empire

    Authored by Paul Craig Roberts,

    If you have been wondering what all the terror events in France and Germany are about, here is the answer: (via Strategic-Culture)

    A delegation of 11 French lawmakers and senators arrived in Crimea on July 28 to take part in celebrating Russian Navy Day in Sevastopol.

     

    There are no grounds to keep anti-Russian sanctions in place, said the head of the delegation Thierry Mariani, addressing the Crimean Parliament in Simferopol. Republican MP Jacques Myard also emphasized the importance of lifting the sanctions.

     

    In July 2015, a group of 10 French deputies visited Crimea for the first time despite domestic and European criticism. Back then the lawmakers said that what they saw was completely different from the picture painted by Western media. They say the same thing now after having seen the situation with their own eyes.

     

    The recent visit of French MPs is part of a trend taking place in Europe.

     

     

    Several EU countries, including Austria and Hungary, have expressed interest in lifting, or at least softening, sanctions, as they can no longer afford to miss out on trade with Russia. Having failed to influence Russia’s foreign policy, the sanctions are useless anyway. Nobody gains and everybody loses in this sanctions war – it’s a no-win policy.

     

    All summed up, it looks like opposition within the EU to the sanctions further renewal may now be close to achieving critical mass. All the indications are that the sanctions would not be extended anymore. The French lawmakers visit to Crimea is just another event to confirm this fact.

    Washington has raised the cost of being a member of its Empire too high. Vassals such as France and Germany are beginning to exercise independent policies toward Russia. Observing the cracks in its Empire, Washington has decided to bind its vassals to Washington with terror. Most likely what we are witnessing in the French and German attacks is Operation Gladio.

    Washington’s policy toward Russia, which has been imposed by Washington on all of Europe, benefits no one but the handful of American ideologues known as neoconservatives. Neoconservatives are crazed psychopaths willing to destroy Earth in behalf of American hegemony.

    A delegation of members of the French National Assembly and Senate went to Crimea to participate in Russian Navy Day on July 28. Thierry Mariani, the head of the French delegation, addressed the parliament in Crimea and said that there are no reasons for France to continue to support Washington’s illegal sanctions on Russia.

    As the Strategic Culture Foundation reports, this “is part of a trend taking place in Europe.”

    “On June 8, the French Senate voted overwhelmingly to urge the government to gradually reduce economic sanctions on Russia amid growing opposition to the punitive measures across Europe. The French National Assembly voted for lifting the sanctions in late April.”

    Politicians in Italy, Belgium, and Cyprus are taking the same tack. Politicians in Greece and Hungary have also questioned the sanctions.

    So does Donald Trump, and that is why the servile American press is trying to drive him into unacceptability and out of the race.

    Democratic websites are spreading the rumor that Trump never intended to win the nomination. His goal was to come in second. His campaign was just an elevation of his name recognition to help him in his deals. But he and his advisors misjudged the disaffection of the voters from the Establishment parties and Trump won.

    Democratic websites claim that Trump is trying to get himself so opposed by criticizing Muslim families of war heros and women for abortions that he can withdraw, thus allowing the RNC to select a candidate that can rival Hitlery in appeal to the ruling oligarchs and pressitute media.

    Considering the degeneration of America, this could possibly be true.

    But for now we must doubt it and ascribe it to the effort to undermine Trump with his supporters. The evil that rules in America is determined to have in the White House its own servant, and that servant is Hitlery.

  • Rigged Game: Ever Wonder How Wall Street Analysts Are So Good At Forecasting? Hint, It's Not Their Excel Skills

    Our readers should have little doubt at this point about our view on the integrity of wall street and equity markets.  In fact, we just spoke yesterday about all the little accounting games that companies play to “beat” earnings estimates in a post entitled “Mind The “GAAP” (Or How The Game Is Really ‘Rigged’).” 

    Well, CFOs can’t bear the full burden of earnings management, they need complicit “independent” counterparts on wall street as well.  A recent article in the Wall Street Journal points out how public companies use wall street analysts to manage quarterly earnings expectations and ultimately their stock prices.  The article summarizes the quarterly dance played out between wall street analysts and investor relations teams to “manage” earnings down to a level that is ultimately “beatable” and thus produces a nice stock bounce on earnings day.  Analysts, of course, are willing partners in the game because being a “team player” means better access to management teams, better attendance at bank-hosted conferences and the added benefit of very “accurate” forecasting for hedge fund clients that pay handsomely for their efforts.  As the WSJ points out:

    Analysts whose forecasts are far from what companies end up reporting risk losing credibility with clients and could get less access to company management. Those are reasons to listen if a company calls with a suggestion, according to analysts.

     

    Roger Freeman, who left the stock-research industry in 2014 and now works at a technology startup, says: “If someone is trying to get your numbers down, they will highlight all the negatives and not positives, and you’ll come away thinking: ‘Gee, that sounds pretty bad,’ and sometimes take your numbers down.”

    To prove the point, the WSJ reviewed over 6,000 earnings reports from 1Q13 through 1Q16 to see just how frequently companies manage to “beat” earnings estimates.  “Shockingly” an overwhelming number of companies manage to report earnings that are exactly in-line or slightly above analyst expectations.  But hey, maybe the analysts are just really good at modeling.

    Managing Expectations

    The WSJ went on to provide a couple of recent examples of “managed” earnings, with AT&T’s 1Q16 numbers being the first, saying:

    AT&T’s finance chief said last year’s fourth quarter included “a slowdown in the handset upgrade cycle.”  He added that he “wouldn’t be surprised to see that continue.”  Near the end of the first quarter, AT&T steered analysts back to Mr. Stephens’s comments at a Deutsche Bank AG conference on March 9, say five analysts who spoke to the telecom company.

     

    Jeffrey Kvaal of Nomura Securities says AT&T’s investor-relations team “is very diligent” before earnings releases “about making sure that the comments from the executives are reflected in the commentary from the sell side.”

     

    A week before the announcement, Mr. Kvaal cut his first-quarter sales estimate by $837 million to $40.54 billion, citing lower equipment sales. Two days before the results, the William Blair analysts cut their sales estimate by about $1 billion. With one day to go, Buckingham Research Group reduced its sales estimate by more than $1.1 billion, also noting the slower pace of upgrades.

     

    Analyst James Breen of William Blair says he talks to investor-relations personnel at AT&T “all the time.” He adjusted his forecast because the previous estimate hadn’t taken into account the comments from AT&T’s management at several investor conferences. Mr. Breen says he also didn’t want to be an outlier compared with other analysts who follow AT&T.

     

    Mr. Viola, AT&T’s investor-relations chief, says “companies can and do talk with analysts about their latest, publicly available information. That’s the job of investor relations, and it benefits the investing public.

     

    He adds: “Analysts change their estimates for many reasons, and do so throughout the quarter.” About half the changes in the first quarter were made a week or less before the April 26 earnings announcement.

    We would agree with AT&T that providing earnings guidance could provide “benefits [to] the investing public.”  But that’s not what’s happening here because the “investing public” does not get access to research reports published by investment banks unless they happen to be clients which is a status reserved for hedge funds and super-wealthy individuals. 

    But we digress.  To conclude the AT&T discussion, in the ~25 days leading up to AT&T’s 1Q16 earnings release, the WSJ found that analysts cut AT&Ts revenue forecast by ~$1BN.  And wouldn’t you know it…when earnings were finally released AT&T managed to “beat” on revenue by 0.19%.

    AT&T Earnings

    And, not to leave out our favorite investment banking operation, the WSJ also commented on Goldman Sachs’ 1Q16 earnings:

    This spring, many analysts were struggling to figure out how Goldman Sachs Group Inc. would fare amid the first quarter’s market turbulence. From mid-March to mid-April, 16 analysts cut their earnings estimates by an average of 41%.

     

    Around the end of the first quarter, the bank’s investor-relations staff answered calls from analysts, many of whom routinely check in with the firm when updating their financial models and targets.

     

    Some conversations included discussions about comments from rival executives at investor conferences during the first quarter, some analysts say.

     

    Michael DuVally, a Goldman spokesman, says the discussions were appropriate, partly because analysts “are overloaded with data.” He adds: “Serving as a resource for public information is a sensible market practice.”

     

    When Goldman released results April 19, it had $2.68 a share in
    earnings, more than 10% higher than the lowered target. The stock rose 2.3%.

    Goldman Earnings

    The bottom line is that the game is rigged and retail investors are the losersWe fail to understand how companies can consistently work within the confines of the law yet still “manage” analysts’ estimates to within fractions of a percent of a company’s actual quarterly results.  How is it possible that a call with investor relations of AT&T convinces an analyst to take down quarterly revenue estimates by $1BN (a reduction that puts the revised “forecast” within a small fraction of actual results) yet the contents of that call are not “material” under SEC guidelines?  Why do investment banks and their clients deserve better access to management teams and information?  Why can’t all management presentations at conferences be open to the public?  Why do wall street investors spend $1,000’s of dollars attending investment bank conferences at remote beach destinations if they’re not receiving something they deem valuable in return?

    The fact is that a couple of small changes could be made to level the playing field.  Corporate conferences are fine but why not require that all presentations and Q&A sessions be webcast with a transcript of discussions posted for public consumption?  Same thing with quarterly update calls with analysts.  If there is nothing nefarious in these discussions then why not make the process transparent and prove it?  These issues are easy to solve but they never will be because the banks and corporations behind them are willing participants with economic interest in maintaining the status quo so we won’t hold our breadth waiting for change.

  • "Jobs Data Nowhere As Strong As Headline" – Analysts Throw Up On Today's Seasonal Adjustment

    One week ago, the BEA admitted that it had “found a problem” when it comes to calculating GDP numbers. Specifically it blamed “residual seasonality” adjustments for giving historical GDP numbers a persistent optimistic bias. This came in the aftermath of last week’s shocking Q2 GDP report which printed at 1.2%, less than half of Wall Street’s consensus.

    Today, seasonality made another appearance, this time however in the much anticipated July jobs number, which unlike the woeful Q2 GDP number, was the opposite, coming in far higher than expected. In fact it was higher than the top Wall Street estimate.

     

    And, just like in the case of GDP, it appears that seasonal adjustments were the culprit for today’s blowout headline print which excluding the Arima X 13 contribution to the headline number, would have been notably weaker.

    As Mitsubishi UFJ strategist John Herrmann wrote in a note shortly after the report, the “jobs headline overstates” strength of payrolls. He adds that the unadjusted data show a “middling report” that’s “nowhere as strong as the headline” and adds that private payrolls unadjusted +85k in July vs seasonally adjusted +217k.

    In Herrmann’s view, the government applied a “very benign seasonal adjustment factor upon private payrolls to transform a soft private payroll gain into a strong gain.”

    He did not provide a reason why the government would do that.

    Courtesy of Southbay Research, which also blasted today’s seasonal adjustment factor, this is how the seasonal adjustments look like relative to history.

    We leave it up to readers to decide just why the government may want to represent what would otherwise have been a far weaker than expected report, into a blowout number, one which merely adds to the economic “recovery” narrative, which incidentally will come in very useful to Hillary’s presidential campaign.

    Yet even assuming the market has no doubts about the seasonally adjusted headline number, as appears to be the case, the other problem that has emerged for the Fed is how to ignore this strong number. As Bank of Tokyo’s Chris Rupkey writes, “Let’s see Yellen get out of this one and find something in the data to once again not raise rates in September.” (We assume he did not see the unadujsted numbers.)

    As he adds, slowing 2Q GDP growth of 1.2% took Sept. rate hike “off the table” and now “the million dollar question” is whether 255k payroll jobs in July, 292k in June put it back on.  As a reminder, Yellen speaks exactly in three weeks time at Jackson Hole on Aug. 26; “let’s see if she provides some guidance.” But while rate hike odds may have spiked after today’s report, it is almost certain that, as we said last night, the Fed will not dare to hike the rate in September and potentially unleash market turmoil in the most sensitive part of the presidential race.

    As for a December rate hike, there are 4 months until then, and much can happen: who knows, maybe the BLS will even undo the significant seasonal adjustment boost that send July jobs soaring.

  • Sheriff Raids House To Find Anonymous Blogger Who Called Him Corrupt

    Authored by Naomi LaChance, originally posted at TheIntercept.com,

    After a watchdog blog repeatedly linked him and other local officials to  corruption and fraud, the Sheriff of Terrebone Parish in Louisiana on Tuesday sent six deputies to raid a police officer’s home to seize computers and other electronic devices.

    Sheriff Jerry Larpenter’s deputies submitted affidavits alleging criminal defamation against the anonymous author of the ExposeDAT blog, and obtained search warrants to seize evidence in the officer’s house and from Facebook.

    The officer, Wayne Anderson, works for the police department of Houma, the county seat of Terrebone Parish — and according to New Orleans’ WWL-TV, formerly worked as a Terrebone Sheriff’s deputy.

    Anderson was placed on paid leave about an hour and a half after the raid on his house, Jerri Smitko, one of his attorneys, told The Intercept. She said that he has not yet been officially notified about why.

    Smitko said Anderson denies that he is the author of ExposeDat.

    But free speech advocates say the blogger — whoever he or she is — is protected by the First Amendment.

    “The law is very clear that somebody in their private capacity, on private time, on their own equipment, has a First Amendment right to post about things of public concern,” Marjorie Esman, director of the ACLU of Louisiana, told The Intercept.

    Larpenter told WWL: “If you’re gonna lie about me and make it under a fictitious name, I’m gonna come after you.”

    Esman said the Sheriff and his deputies were forgetting something.  “The laws that they’re sworn to uphold include the right to criticize and protest. Somehow there’s a piece in the training that leads to them missing that.”

    ExposeDAT calls itself a “watchdog group,” posting articles that use public records to identify institutional corruption in the Parish. Since it launched in late June, it has accused various public officials and business owners of nepotism, tax evasion, polluting and misuse of government funds.

    It promises to “introduce articles that explore the relationship between certain Public Officials and the flow of money in South Louisiana.”

    The Sheriff’s office, in order to obtain the warrants, said the blog had criminally defamed the Parish’s new insurance agent, Tony Alford, WWL reported.

    One ExposeDAT blog post titled “Gordon Dove and Tony Alford’s Radioactive Waste Dumping,” briefly describes the relationship between Alford and the parish’s president, who jointly own a Montana trucking company that has been cited for dumping radioactive waste in Montana. That citation was originally reported in the Missoula, Mont., newspaper The Missoulian.

    In a post titled “You Scratch Mine and I’ll Scratch Yours,” the blog uses public records to call attention to the fact that Sheriff Larpenter gave Alford a parish contract despite that fact that his wife manages Alford’s office.

    “When decent, law abiding citizens try to speak out on matters of public importance, they’re treated like criminals,” Smitko said. “If this is what happens to a police officer with 12 year of impeccable service what the hell kind of justice do criminals get?”

    The Sheriff’s office, the police department and the district attorney’s office did not return requests for comment.

    This isn’t the first time that Louisiana law enforcement officers have challenged those who criticize them. In 2012, Bobby Simmons, a former police officer, was arrested and jailed on a charge of criminal defamation for a letter he wrote to a newspaper regarding another police officer. The charge was later dropped, and Simmons filed a civil suit alleging that his civil rights were violated.

  • Carl Icahn Has Never Been More Short The Market, Is Pressing For A Crash

    Three months ago, when looking at the 10-Q of Carl Icahn’s hedge fund vehicle, Icahn Enterprises, L.P. (IEP) we found something striking: Carl Icahn had put his money where his mouth was. Recall that over the past year, Carl Icahn had become one of the most vocal market bears with a series of increasingly escalating forecasts. At first, he was mostly pessimistic about junk bonds, saying last May that “what’s even more dangerous than the actual stock market is the high yield market.” As the year progressed his pessimism become more acute and in December he said that the “meltdown in high yield is just beginning.” It culminated in February when he said on CNBC that a “day of reckoning is coming.”

    Some skeptics thought that Icahn was simply trying to scare investors into selling so he could load up on risk assets at cheaper prices, however that turned out to be wrong when IEP revealed that as of March 31 it had taken its net short position from a modestly bearish 25% net short to an unprecedented for Icahn 149% short position, a six-fold increase in bearish bets.

    However, even as other prominent billionaires piled onto the bearish side, the market soared. And then, after Q1, it soared some more to the point where as of the end of June, following the brief Brexit dump, it was just shy of all time highs (where it is now). So there was renewed speculation if Icahn had given up on his record bearish bet. So when overnight IEP released its latest 10-Q, we were eager to find out if Carl had unwound his record short, or perhaps, added more to it. What we found is that  one quarter after having a net short position of -149%, as of June 30, Icahn’s net position was once again -149%, or in other words, he has once again never been shorter the market.

     

    This is the result of a relatively flat long gross exposure of 174% (up 10% from the previous quarter) resulting from a 166% equity and 8% credit long, and another surge soaring short book which has  grown even more from -313% as of March 31, 2016 to a gargantuan 323% as of the last quarter, on the back of 301% in gross short equity exposure and 22% short credit.

    This is what IEP added as detail:

    Of our short exposure of 323%, the fair value of our short positions represented 24% of our short exposure. The notional value of our other short positions, which primarily included short credit default swap contracts and short broad market index swap derivative contracts, represented 299% of our short exposure.

     

    With respect to both our long positions that are not notionalized (167% long exposure) and our short positions that are not notionalized (24% short), each 1% change in exposure as a result of purchases or sales (assuming no change in value) would have a 1% impact on our cash and cash equivalents (as a percentage of net asset value). Changes in exposure as a result of purchases and sales as well as adverse changes in market value would also have an effect on funds available to us pursuant to prime brokerage lines of credit.

     

    With respect to the notional value of our other short positions (299% short exposure), our liquidity would decrease by the balance sheet unrealized loss if we were to close the positions at quarter end prices. This would be offset by a release of restricted cash balances collateralizing these positions as well as an increase in funds available to us pursuant to certain prime brokerage lines of credit. If we were to increase our short exposure by adding to these short positions, we would be required to provide cash collateral equal to a small percentage of the initial notional value at counterparties that require cash as collateral and then post additional collateral equal to 100% of the mark to market on adverse changes in fair value. For our counterparties who do not require cash collateral, funds available from lines of credit would decrease.

    There was little incremental detail. One quarter ago, when asked about this unprecedented bearish position, Icahn Enterprises CEO Cozza said during the earnings call that “Carl has been very vocal in recent weeks in the media about his negative views” adding that “we’re much more concerned about the market going down 20% than we are it going up 20%. And so the significant weighting to the short side reflects that.”

    Considering that since then the market has soared higher on wave after wave of central bank intervention, which has brought the monthly total amount of global QE to just shy of $200 billion, after the latest QE increase by the BOE…

     

    … perhaps Icahn’s directional fears were displaced.  On the other hand, since Icahn has shown no interest in unwinding his bearish position, and has kept it identical to a quarter ago, one can conclude that the financier-rapidly-turning-politician, has merely delayed his bet for a day of reckoning for the S&P500.  Perhaps this time he will be right.

    Source

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Today’s News 5th August 2016

  • How Europe Is Getting Rich by Fueling Its Own Terror Epidemic

    Submitted by Darius Shahtahmasebi via TheAntiMedia.org,

    Though Europe does not have the rates of gun violence the United States continues to grapple with, European governments have made over a billion euros by fueling gun violence in the Middle East and North Africa.

    A report conducted by a team of reporters from the Balkan Investigative Reporting Network (BIRN) and the Organized Crime and Corruption Reporting Project (OCCRP) found a group of European nations has been funneling arms into the Middle East region since 2012, making at least 1.2 billion euros in the process.

    According to the report, 68 flights that took place within 13 months transported weapons and ammunition to the Middle East, including to NATO member Turkey, which in turn “funnelled arms into brutal civil wars in Syria and Yemen.” The report also notes that these flights make up only a small portion of the 1.2 billion euros in arms deals between Europe and the Middle East since 2012.

    The report’s conclusions are horrifying, to say the least. The report states:

    Arms export licenses, which are supposed to guarantee the final destination of the goods, have been granted despite ample evidence that weapons are being diverted to Syrian and other armed groups accused of widespread human rights abuses and atrocities.”

    Considering Europe is battling a continually rising terrorist threat, they seem to be going about tackling this issue the wrong way.

    Surely the best way to counter terrorism is to cease funding it in the first place.

    One astounding aspect of the report is that the lucrative war-profiteering business involves nations the world would not usually regard as overly-interested in war. The countries contributing to the rising terror threat, as identified by the report, are Bosnia and Herzegovina, Bulgaria, Croatia, the Czech Republic, and Romania, among others.

    This report adds to the already glaring problem of European countries making billions of dollars off the death and destruction of Middle Eastern civilian life. The Stockholm International Peace Research Institute (SIPRI) found the United Kingdom was second only to the United States in arms sales, making up 10.4 percent of the total $401 billion worth of arms sold around the world for the 2014 period.

    Although these figures refer directly to companies selling arms, the fact remains that European governments do nothing to deter this. In fact, former U.K. Prime Minister David Cameron insists the U.K. has one of the strictest regimes anywhere in the world for sales of defence equipment but we do believe that countries have a right to self-defence.”

    Shamefully, the United Kingdom’s billion dollar arms sales have been fueling the conflict in Yemen — the poorest and most disadvantaged country in the Arab region — by arming the aggressive Saudi Arabian regime. Saudi Arabia’s ongoing intervention in Yemen merely benefits al-Qaeda.

    Arms sales from Britain to human rights abusers are only increasing. The idea that European governments want to prevent terrorist attacks on the European mainland is ludicrous given the fact European governments continue to directly arm terrorist groups and brutal regimes that export jihadist philosophies.

    But hey, at least they made a billion dollars, right?

  • Musical Chairs

     

     

     

     

    Musical Chairs
    Posted with permission and written by Jeff Thomas (CLICK HERE FOR ORIGINAL)

     


     

    You’re familiar with the children’s game of musical chairs. Ten children walk around nine chairs whilst listening to music. When the music stops, each must quickly find a chair and sit in it. One child is out of luck and is out of the game. Then a chair is removed and the nine remaining children walk around the eight remaining chairs, waiting for the music to stop again.

     

    Economics is a bit like musical chairs. In a recession, the economy takes a hit and there are some casualties. Some players fail to get a chair in time and are out of the game. The game then goes on without them. The economy eventually recovers.

     

    But a depression is a different game entirely. Since 2007, the world has been in an unacknowledged depression. A depression is like a game of musical chairs in which ten children are walking around, but suddenly nine of the chairs are taken away. This means that nine of the children will soon be out of the game. But it also means that all ten understand that the odds of them remaining in the game are quite slim and that desperate times call for desperate measures. It’s time to toss out the rule book and do whatever you have to, to get the one remaining chair.

     

    Of course, the pundits officially deny that we have even been in a depression. They regularly describe the world as “in recovery from the 2008-2010 recession,” but the “shovel-ready jobs” that are “on the way” never quite materialize. The “green shoots” never seem to blossom. So, what’s going on here?

     

    Depressions do not occur all at once. It takes time for them to bottom and, if an economy is propped up through economic heroin (debt) the Big Crash can be a long time in coming.

     

    In that regard, this one is one for the record books. As Doug Casey is fond of saying, a depression is like a hurricane. First there are the initial crashes, then a calm as the eye of the hurricane passes over, then, we enter the trailing edge of the other side of the hurricane. This is the time when things really get rough – when even the politicians will start using the dreaded “D” word. We have entered that final stage, as the economic symptoms demonstrate, and this is the time when the game of musical chairs will evolve into something quite a bit nastier.

     

    In normal economic times, even including recession periods, we observe financial institutions maintaining their staunchly conservative image. For the most part, they deliver as promised. But, as we move into the trailing edge of the second half of the hurricane, we notice more and more that the bankers are rewriting the rule book in order to take possession of the wealth that they previously held in trust for their depositors.

     

    And they don’t do this in isolation. They do it with the aid of the governments of the day. New laws are written in advance of the crisis period to assure that the banks can plunder the deposits with impunity. Since 2010, such laws have been passed in the EU, the US, Canada and other jurisdictions.

     

    Trial balloons have been sent up to ascertain to what degree they will get away with their freezes and confiscations. Greece has been an excellent trial balloon for the freezes and Cyprus has done the same for the confiscations. The world is now as ready as it’s going to be for the game to be played on an international level.

     

    So what will it look like, this game of musical chairs on steroids? Well, first we’ll see the sudden crashes of markets and/or defaults on debts. Shortly thereafter, one Monday morning (or more likely one Tuesday after a long weekend) the financial institutions will fail to open their doors. The media will announce a “temporary state of emergency” during which the governments and banks must resolve some difficulties in order to “assure a continued sound economy.” Until that time, the banks will either remain shut, or will process only small transactions. (This latter announcement is a nice way of saying that the depositors will be on an allowance from the bank until further notice.)

     

    Much as Greeks may now withdraw €420 per week, much of the rest of the world will be operated under a similar allowance. What about a business that would need to pay that amount for even one salary? What of a restaurant that would pay that amount for even a small food delivery? That remains to be seen – but business will not be robust.


    Of one thing we can be sure. The banks will part with no more than they absolutely have to in order to avoid riots. Their wish will be to confiscate as much as possible themselves, and the new laws allow them to do just that.


    And that’s when we’ll discover that nine chairs have disappeared.


    Remember, what we’re looking at is the end-game. The banks will no longer maintain the ruse of client-concern beyond this point. Each player grabs as much as he is able, because banking as we know it will come to an end.


    To be sure, a new banking system will rise from the ashes in a few years, but for now, the wealth that’s on the table will be swept up by those who have the laws on their side.


    Many of the most august names in banking may well disappear over the next few years. Some institutions folded in 2008, but re-opened under new names (minus the debt that sank them in the first place). Others, like Bear-Stearns and Lehman Brothers are gone for good. They will be joined by a host of other stalwarts of the industry. Merrill Lynch, AIG, Royal Bank of Scotland, Fortis, Fannie Mae and Freddie Mac all teetered on the edge of collapse in 2008. These and many more stand to go off the cliff in the coming crisis.


    And they will not go with dignity. They will go out with a last-minute grab of as much of the deposits as they can manage. (Those who have taken part in a bank liquidation will know that, what little the departing bankers leave behind on the table, the liquidators gobble up in fees. Depositors, at best, get the scraps.)


    Well. Pretty grim. If history repeats, as it generally does, more than 95% of depositors will lose most or all of their savings. But there will be those who are only impacted in a minor way – those who decided to get their wealth (no matter how large or small) out of the banks before the crash.


    How so? First, and most essential, remove all your wealth (except for a maximum of three months’ operating capital) from the bank. Second, move it to a jurisdiction that’s at a lesser risk than the jurisdictions stated above. (Pick the healthiest one you can find, with the lowest taxation rate and a reputation for stable government over decades.) Third, since banks in other jurisdictions may also be at risk, place your wealth in those forms of ownership that are least likely to be under attack from your home government (precious metals and real estate). Overseas real estate is the safest bet, as any attempt for a foreign government to confiscate it amounts to an act of war. However, real estate is not the most liquid means of holding wealth, so quite a bit must be held in precious metals – again in the overseas jurisdiction where it’s harder to confiscate.


    Should you need a sudden cash infusion at home, precious metals are always easy to sell quickly and the proceeds are easily repatriated (countries in economic trouble never complain about money coming in, only money going out.)


    Finally, if possible, create an overseas location for yourself, either where your wealth is, or another location – one that’s likely to be peaceful to live in, when crisis reaches your home jurisdiction.


    In this game, the odds of being the lucky one who gets the last chair are very slim. The alternative requires more preparation, but is, by far, the safer choice.

     

     

    Please email with any questions about this article or precious metals HERE

     

     

     

     

     

    Musical Chairs
    Posted with permission and written by Jeff Thomas (CLICK HERE FOR ORIGINAL)

  • War Or Peace: The Essential Question Before American Voters On November 8th

    Submitted by Gilbert Doctorow via Russia-Insider.com,

    In the 1992 presidential election, the campaign team of Bill Clinton had the remarkable insight to simplify the choice before the American electorate in November, encapsulating the whole thought process in the phrase “it’s the economy, stupid.”  Following this advice, voters ignored the foreign policy triumphs of President George W. Bush’s administration, including the recently won war against Iraq to liberate occupied Kuwait, and the slightly more remote “victory” in the Cold War, which Bush recalled to the nation in the forlorn hope of eliciting gratitude. Indeed, going into the elections, the economy was anemic, for cyclical reasons, and it was not to the incumbent’s advantage that this fact be highlighted.

    Today, as another Clinton faces off with an unconventional and widely demonized Republican candidate, the economy is once again anemic, though this time under the stewardship of a Democratic administration, and again for cyclical reasons, but the economy and the domestic welfare programs that are so dependent on vibrant performance are not what the election is all about.

    Voters will not confront a typical Right-Left choice, although supporters of Hillary Clinton would like to play it that way. It will not be about who gets more of the economic pie and who gets less, who is more equal than others and who is less equal.

    Charges that Hillary is in the pocket of Wall Street and big business, who have generously financed her campaign, were first brought against her very effectively and persistently by her opponent in the Democratic primaries, Bernie Sanders, who embodied the Left by his persona and points in his platform. He lost to Hillary, the Centrist. Meanwhile, across the court, notwithstanding the support he has consistently received from Tea Party Republicans for his anti-establishment rhetoric, Trump is in many ways more of a Nelson Rockefeller Republican on domestic economic issues, that is to say a Centrist, who, unlike that quintessential Tea Party campaigner, Ron Paul, has no desire to tear down the Federal Reserve and deconstruct the federal government.

    In matters of substance as opposed to character assassination that both parties’ candidates have engaged in freely, what separates the candidates and makes it worthwhile to register and vote on November 8th is the domain of international relations. This, as a general rule, is the only area where a president has free hands anyway, whatever position his party holds in the Congress.  Here the choice facing voters is stark, I would say existential:  do we want War or Peace?

    Do we want to pursue our path of global hegemony, which is bringing us into growing confrontation with Russia, meaning a high probability of war, (the policy of Hillary Clinton), or do we want a harmonious international order in which the U.S. plays its role at the board of governors, just like other major world powers (the policy of Donald Trump).

    Let me go one step further and explain what “war” means, since it is not something that gets much attention in our media, whereas it is at the top of the news each day in Russia.

    “War” does not mean Cold War-II, a kind of scab you can pick to indulge a pleasure in pain that is not life threatening. War means what our military like to call “kinetics” to mask the horror of it all. It means live ammunition, ranging from conventional to thermonuclear devices that can devastate large swathes of the United States if we play our hand badly, as would likely be the case for reasons I explain below should Hillary and her flock of Neocon armchair strategists take the reins of power in January 2017.

    Let us consider the following:

    1.  Where we are presently in relations with the world’s only other nuclear superpower, Russia, which, I remind you, together with the United States, has 50:50 ownership of 95% of all nuclear warheads on earth.

    Briefly, we are in an escalating confrontation with the Russians, who have said openly and clearly that they view our ongoing build-up of NATO forces at their borders in the Baltics and Poland as posing an unacceptable threat to their security. They have also said openly and clearly that our completion this spring of what is called an anti-missile defense base in Romania and construction of a similar base in Poland, due for completion in 2017, threatens to upset the strategic nuclear balance by giving the United States a first strike capability. Whether they are right or wrong in their assessment of our words and deeds is beside the point. They are laying down their response based on their view of us, not our view of us.

    For the past year or more, the Kremlin has said vaguely that host countries of the missile defense bases would be in their “crosshairs.”  Russian positions have become more specific and more threatening following the NATO summit in Warsaw in early July that approved an American led program of provocative military exercises near Russia’s borders and stationing in the Baltic States of 4 brigades with mixed NATO Member State contingents. This has forced the Russian military to move to the previously ‘safe’ and undefended Western frontier region near St Petersburg large masses of troops and equipment from the center of their country, east of Moscow. By their public statements, the Russians have made no secret of their intention to act preemptively, as necessary, to wipe out the US bases in Romania and Poland and restore what they see as strategic parity.

    Just a couple of weeks ago, on a widely watched Russian state television run political talk show, Duma deputy and leader of the nationalist LDPR party Vladimir Zhirinovsky said that Germans risked utter destruction if they continued on their present track of operating Bundeswehr forces in the Baltics. Zhirinovsky would never make such threats without tacit Kremlin backing.

    Vladimir Zhirinovsky explaining that NATO's current course will result in war

    For his part, in a recent press conference, President Vladimir Putin asked rhetorically why Western leaders “don’t get it” – why they are not heeding Russia’s warnings on its determination to protect vital security interests, including by means of preemptive strikes.

    In this press conference from June 2016, Putin explains in detail why Russia sees NATO's behavior as threatening, and why Russia will be forced to react unless NATO changes course.  Strongly recommended!

    Indeed, why are we tone deaf when our very survival is at risk?

    2.  Why is it that the American political Establishment, of which Hillary Clinton is the standard bearer in this presidential election, does not take the Russians seriously?

    Back in the 1960s and 70s, when the bard Tom Lehrer was touring college campuses with his irreverent song devoted to the nuclear Armageddon “We’ll all go together when we go,”  Americans feared and even respected the USSR for what its military arsenal signified.

    Our sense that we had “won” the Cold War when the USSR collapsed in 1992 was followed by our witnessing the economic collapse of Russia as it struggled to make a transition from directed to market economy in the 1990s. Meanwhile Russia’s national wealth was siphoned off by newly emerged “oligarchs.” The vast majority of the population was pauperized in that period, as we plainly understood when our religious communities sent assistance packages to the Russian people.

    And Russia’s political infrastructure fell apart, replaced by regional satrapies and would- be successor states from among minority nationalities. The net result is that the United States Establishment’s respect for Russia degraded into open mockery. The fact that Russia was led in the 1990s by a confirmed alcoholic with multiple health problems that took him away from his desk for weeks at a time, only contributed to the sense that Russia had become the “Sick Man of Europe” both literally and figuratively.

    This image of Russia has persisted in the thinking of our Establishment, when it is not jostled by images of a tin-pot dictator named Vladimir Putin who holds onto power by making frightening poses against foreign powers, in particular, against the United States. For our establishment, Russia remains, as Barack Obama said a couple of years ago, “just a regional power,” “ a bully” in its neighborhood who has to be put in his place, and also a country that produces nothing that anyone wants, to which no one willingly emigrates (all patently false statements). In sharing all of these views, Hillary is no different from the rest of our political Establishment.

    It is Donald Trump and his questioning the wisdom of poking the Russian bear in the eye who is the odd man out. What makes Hillary different from her Establishment peers is the opportunity she has had in the Obama administration to act on her beliefs with all the powers of Secretary of State.

    We should have given our view of Russian capabilities a serious rethink following their military action in Crimea in March 2014, when they engineered a bloodless takeover of the peninsula notwithstanding the local presence of nearly the same number of Ukrainian armed forces (20,000) as their own. Another jolt back to present reality could have emerged from Russian military action in Syria as from October 2015, which they used as a proving ground for their most up-to-date military gear and troops.

    However, the U.S. response, with Hillary as cheerleader, has been to double down, ignore the potential risks of conflict, and continue to drive the Russians to the wall, so as to “negotiate from a position of strength” if indeed we have any intention of negotiating with the Russians at all.

    3.  Why do I say that Hillary Clinton is the War Party candidate?

    The record of  Hillary Clinton on foreign policy issues has been very well documented in a recent article that appeared in Consortium News, entitled, The Fear Of Hillary's Foreign Policy, and was republished in Russia Insider. The author, James Carden, is a former State Department employee with concentration in Russia who left the service in the George Bush Jr. years to become a journalist and now is a regular contributor to The Nation.

    I will not repeat blow for blow Carden’s chronology of Hillary's terrible foreign policy baggage, going back to the decisions taken in Bill's second term that brought us more US military interventions abroad than any other similar period in the country's history while also setting up the dangerous confrontation with Russia, the New Cold War, that dominates headlines today. As James Carden shows, the baggage carries through to Hillary's consistent behavior as Secretary of State in the Obama Administration, where she was always among the most hawkish, pro-military action voices, working hard to overcome the passive resistance of Obama to anything resembling policy decisions.

    Here I will focus on one non-Russian issue, for the sake of simplification and clarification:  Libya.  No, not the Libya of the Benghazi catastrophe and the killing of our US consul. That has been discussed endlessly in our media, but misses the point entirely regarding Hillary's culpability and why she will be a disastrous president.  

    The Libyan intervention to remove Colonel Gaddafi had the full support of Hillary within the Administration. She was a cheerleader in this exercise of American global (mis)management and regime change leading to chaos.  It was fully in line with her basic instincts, call it all-American hubris or arrogance.  And the most revealing proof of her unfitness to be Commander in Chief is the now widely publicized video sequence of Hillary, face distorted in glee, celebrating (!) the savage murder of Gaddafi following his being sodomized and grievously wounded:  "we came, we saw, he died."

    It is not for nothing that the Neocon vultures that took control of US foreign and military policy under Bush-Cheney are now avid supporters of Hillary's candidacy.

    As regards Russia, Hillary has been pouring oil on the flames of potential conflict for years now.  She has publicly likened Vladimir Putin to Adolf Hitler, an insult that no one dared to apply to Russian (Soviet) leaders during the 50 years of the Cold War.  That coming from our nation’s senior diplomat virtually closes the door on diplomacy and reason, leaving us with brute force to settle our differences. She has called repeatedly for providing lethal weapons to Ukraine, which, if implemented would put us on a direct collision course with Russia.  She has called for establishing a no-flight zone in Syria well after the Russians introduced their air force assets, including a highly advanced air defense system covering all of Syrian air space/ The result of implementing her recommendations in Syria would be direct armed conflict with the Russian forces in the region if we attempted to enforce an interdiction. And de jure, we  would be in the wrong, because Russian presence has the express support of the Syrian government, whereas ours does not.

    Hillary’s public statements on Russia are highly irresponsible and make sense only if we were prepared to launch a war on that country here and now.  I doubt that is the case.  Meanwhile, the asymmetrical structures of political decision making in the USA and Russia, whereby the Russian President can act with full authority far more quickly than his American counterpart, render this kind of US bluffing and posturing extremely dangerous. Russia is not Iraq. Russia is not Libya. The Russian leadership is tough, experienced and…brave.

    For reasons of Hillary’s past record of ill-considered adventurism abroad and for reasons of the mad advisers from the Neocon camp whom she has in her inner circle today, it could be a fatal mistake to vote Hillary Clinton on November 8th.  

    About Trump’s past record in power, there is not much to say.  About his present promises on foreign policy, one may have doubts.  However, the bad blood between him and the Neocons ensures us that a Trump presidency would finally put them out on the curb, where they belong. And if we step back from our present policies on Russia, Moscow will surely reciprocate and seek accommodation. After all, even as late as 2008 Vladimir Putin harbored hopes of his country joining NATO.

  • The Bank of England Just Provided Us With More Reasons to Own Gold and Silver

    Yesterday the Bank of England cut its main interest rate from 0.5% to 0.25% for the first time, marking its first interest rate change since March 2009, and provided all of us with more reasons to keep converting fiat currencies into physical gold and physical silver. In addition the BOE announced an increase in its QE bond-buying program of £60bn to £435bn. And in response, the British pound immediately fell by 1% to the USD and traders added to their British pound longs, exceeding previous record net long positions in the pound recorded three years ago. I understand that traders are seeking a stronger rebound in the British pound after its plunge post-Brexit, and since the process for the UK to exit the EU has not even begun since the yes referendum vote, traders may be right to assume that the British pound will eventually rebound significantly in strength following this rate cut after people realize that a Brexit yes referendum vote may translate into an indefinite stay of limbo for the UK within the EU.

     

    However, believing that any strengthening of any global fiat currency will be sustained over time is folly as all Central Bankers have aptly illustrated for years that they have already moved beyond the point of no return from their indefinitely low-interest rate, weak currency purchasing power policy years ago and can not raise interest rates to anything close to a free market interest rate. Thus, even if the British pound rebounds much more significantly from its post Brexit and post BOE interest rate cut, and it should, the spiraling weakening of its purchasing power will resume long-term without a doubt. The same knee-jerk trader reaction happened in response to the US Federal Reserve raising their Fed Funds interest rate by a paltry amount from a 0.00% to 0.25% range to a 0.25% to 0.50% range on 16 December 2015. The very next day, traders responding by dumping precious metals due to the silly Central Banker Janet Yellen’s talk of a strengthening economy spurring their interest rate raise. When she publicly announced this interest rate hike decision, Yellen stated that their decision was based upon “the committee’s confidence that the economy will continue to strengthen. The economic recovery has clearly come a long way, though it is not yet complete…but with the economy performing well and expected to do so, the committee judged that modest increase in the Federal Funds rate is now appropriate.”


    In response, gold and silver both dumped in price, with silver suffering an especially hard fall of more than 3.5% the next trading day. This undeserved weakness in gold and silver prices persisted for a couple of weeks in gold and for an entire month in silver, even though this paltry raise in the Fed Funds interest rate was the first hike in over 9 ½ years since 29 June, 2006, simply because this interest rate “hike” (if one can call a measly ¼ of 1% increase a hike) was accompanied by silly claims of a strengthening, robust US economy made by Fed Reserve Chairman Janet Yellen. I, for one, have never understood why traders lose their minds over such policy announcements, instigating sharp asset price spikes and falls depending upon the announcement, that are often very sharply reversed in the near future. Certainly the gold and silver price dumps that occurred in reaction to Yellen’s announcement of a 0.25% raise in the Fed Funds rate has been sharply reversed through all of 2016. Of course, I understand that traders don’t care about fundamentals and only care about profiting from any strong movement in asset price, even if the price move is very short-lived and counterintuitive.

     

    However, does a 0.25% Fed Funds rate increase really change the Central Banker fiat currency destruction policy adopted for decades, and provide an impetus to sell one’s gold and silver in exchange for devaluing paper and digital fiat currencies? We’ve all seen massive spikes and falls in crude oil spikes happen within a span of days in recent years. Is it really possible for a trader to be on the right side of every unexpected intraday spike higher and lower, especially when sharp movements higher are often reversed just days later and vice versa? Why not just understand the long-term picture, and position yourself to be on the right side of this equation? I guess that may be too much to ask of a trader, however, and it may be tantamount to asking a newborn duckling not to take to water. In other words, during that press conference, Yellen stated the same bunk that Federal Reserve bankers had stated in their minutes eight times a year, for 7 years in a row in which they implied an interest rate hike could be coming, only to never raise interest rates. And after 7 years of deception in which they finally made good on their threat to raise interest rates, the interest rate “hike” turned out to be a measly 0.25% raise, because that’s all they could afford to raise it without risking greater ripples and sell-offs in the financial markets. In other words, bankers released somewhere around 55 statements in a row about possibilities of raising interest rates without actually raising interest rates, before executing what amounted to the lowest possible “hike” they could possibly execute. And today, analysts incredibly still wait upon the public statements of Central Bankers with unbridled anticipation, and still incredibly use their statements to guide their investment strategies.

     

    For example, I randomly pulled a FOMC minutes statement from January 2011, more than five years ago, and that statement contained Central Banker affirmations of “strong” consumer spending, “improvements in household and business confidence and in labor market conditions [that] “would likely reinforce the rise in domestic demand”, talk of “gains” in employment and anticipation of “stronger growth” in the US economy for FY2011, with “gradual acceleration” of US economic growth in 2012 and 2013. In fact, one can pull any Federal Reserve FOMC statement from their archives over the past 5-½ years and you will find the same bunk and nonsense that they used to further inflate the US stock market bubble and to control gold and silver prices time after time after time. As I review the content of these statements every year, if one could go back and review years prior to 2011, though the Feds do not keep statements archived prior to 2011, one would discover that the Feds were using this same deceitful language since 2009.  I, for one, at a complete loss for why big bank analysts still talk about “normalization” of interest rates and parrot Janet Yellen’s frequent press statements in regard to this topic as if this were even a remote, much less, a realistic possibility. If we stop and think about the definition of “normalized” interest rates, how high of a level should normalized rates be when Bank of Japan bankers adopted ZIRP (Zero Interest Rate Policy) for 16 years before deciding ZIRP was inadequate enough to stimulate their economy and plunged interest rates into negative territory this year, and US Federal Reserve bankers maintained ZIRP for 7 years before finally “raising” interest rates for the first time in nearly 10 years on 16 December 2015?

     

    Thus, we’ve had 16 consecutive years of zero interest rate policy (and now negative interest rate policy) in Japan and 7 years of ZIRP (and now a paltry 0.25% to 0.50% Fed Funds rate) in the US to understand that normalization of interest rates is never happening, yet analysts from JP Morgan, Goldman Sachs, Citibank, etc. still frequently discuss the timeline for “normalized” interest rates in the mass media as if they will happen. That’s a whole lot of exhibited foolishness in not being able to read between the lines, especially when the lines are so clearly demarcated for all to see. Furthermore, my definition of “normalized” interest rates is the reinstatement of free market interest rates, which we all know will never happen during any of our lifetimes without Central Bankers being expelled out of nations. But what if we consider the Central Bankers’ definition of “normalized” interest rates, likely within a 0.50% to 1.00% interest rate range? Given the fact that the Fed Funds interest rates was as high as 20% in the early 1980s and consistently around 5% throughout most of the 1990s, a “normalized” 050% to 1.00% interest rate is not normal at all. Furthermore, if we understand how a rate hike today to 1.00% might cause a meltdown in the BIS last-reported figure of $493 trillion of global derivatives contracts and cause TPTB banks to fail, then we know that even an abnormally-low “normalized” interest rate is likely never to happen (furthermore, the amount of global derivatives contracts still outstanding in the world today, is in reality, still close to a quadrillion dollars and not the misleading figure reported by the BIS. Years ago, to arrive at their current figure of $493 trillion, the BIS cut the existing figure in half overnight by changing the metric to measure notional derivative contract valuations, which was tantamount to an Enron-like cooking of the books simply to significantly lessen the appearance of risk inherent in the global financial system.)

     

    In the end, there is no end in sight to the fiat currency purchasing power devaluation objectives of Central Bankers, and for this reason, we should stop taking our cues from traders that try to profit on every single short-term move in asset prices. Rather, we need to understand that the global currency wars still firmly remains a race to the bottom in purchasing power, and that converting fiat currencies into wealth preserving physical gold and physical silver still makes a whole lot of sense.

     

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  • In Rare Interview, Jailed Jihadist Warns ISIS Plans "Loads Of Concurrent Attacks In England, Germany, & France"

    It has been a dreadful 12 months for Europe, where last November, Islamic radical refugees unleashed a terrorist first in Paris in a dramatic suicide bombing and mass execution, and proceeded from there to Belgium and ultimately Germany in a trail of terror that gets worse by the week, if not day. And it’s about to get worse, because a jailed former Islamic State jihadist, German-born Harry Sarfo, has revealed that the terrorist group is actively seeking volunteers in Germany and the UK to carry out “loads of attacks at the same time in England, Germany and France.”

    Members of the Islamic State’s intelligence service, called Emni in Arabic, told Sarfo they were first and foremost interested in waging terrorism across the globe. In an interview with the New York Times, Sarfo, who is currently serving a three-year term on terrorism charges at a maximum security prison near Bremen, recalled what one masked commander once told him.

    “He was speaking openly about the situation, saying that they have loads of people living in European countries and waiting for commands to attack the European people. And that was before the Brussels attacks, before the Paris attacks.”

     

    Almost approaching the sophistication of its western peers, according to French, Belgian, German and Austrian intelligence and interrogation records cited by the Times, Emni is a fundamental part of IS, made from an “internal police force and an external operations branch.” It is led by IS spokesman and propaganda chief Abu Muhammad al-Adnani, who has a range of operatives authorized to plan attacks worldwide, including a “secret service for European affairs,” a “secret service for Asian affairs” and a “secret service for Arab affairs,” the former jihadist told the Times.

    Although Sarfo had initially desired to fight in Syria and Iraq, when he arrived in Syria to join the extremists there, IS operatives said they had a different plan for him. “They said, ‘Would you mind to go back to Germany, because that’s what we need at the moment,’” Sarfo told the Times. “And they always said they wanted to have something that is occurring in the same time: they want to have loads of attacks at the same time in England and Germany and France.

    “They told me that there aren’t many people in Germany who are willing to do the job,” the newspaper quoted Sarfo as saying shortly after his arrest last year, citing the transcript of his interrogation by German detectives. “They said they had some in the beginning. But one after another, you could say, they chickened out, because they got scared — cold feet. Same in England.”

    Following the recent spike in ISIS terrorist attacks on German soil, one can conclude that Emni has had success with its German recruiting. As for France…

    “My friend asked them about France. And they started laughing,” Sarfo said, recalling a conversation that took place seven months before the coordinated killings in Paris in November last year. “They said, ‘Don’t worry about France.’ ‘Mafi mushkilah’ — in Arabic, it means ‘no problem.’”

    According to the accounts of the arrested operatives, Emni’s members played a major role in the Paris attacks and built the suitcase bombs used in a Brussels airport and subway, adding that the secret group’s soldiers have also been sent to Austria, Germany, Spain, Lebanon, Tunisia, Bangladesh, Indonesia and Malaysia.

    There is much more to come. According to Sarfo, Emni has been actively recruiting potential terrorists from across the globe. The group has sent “hundreds of operatives” back to the European Union, with “hundreds more in Turkey alone,” according to a senior United States intelligence official and a senior American defense official, both of whom spoke on the condition of anonymity to discuss intelligence.

    The good news for the US is that one region where the secret service appears to have not sent its trained jihadists so far is North America, Sarfo said, with intelligence documents reportedly backing his words.

    Though dozens of Americans have become members of the Islamic State, and some have been recruited into the external operations wing, “they know it’s hard for them to get Americans into America” once they have traveled to Syria, he said.

    “For America and Canada, it’s much easier for them to get them over the social network, because they say the Americans are dumb — they have open gun policies,” Sarfo said.

    “They say we can radicalize them easily, and if they have no prior record, they can buy guns, so we don’t need to have no contact man who has to provide guns for them.”

    Although some details of Sarfo’s account cannot be verified, German prison officials and intelligence agents who debriefed him said they found him credible.

  • China Regulator Tells Banks To Evergreen Loans Of Troubled Companies

    From yesterday:

    And now the follow up by Valentin Schmid of Epoch Times

    China Banking Regulator Tells Banks to Evergreen Loans of Troubled Companies

    On the surface, China is talking the reform talk. But is it also walking the walk? There are many examples to demonstrate it isn’t. The most recent one is a directive from the China Banking Regulatory Commission (CBRC) to not cut off lending to troubled companies and evergreening bad loans. This first reported by The Chinese National Business Daily on Aug. 4.

    “A Notice About How the Creditor Committees at Banks and Financial Institutes Should Do Their Jobs” tells banks to “act together and not ‘randomly stop giving or pulling loans.’ These institutes should either provide new loans after taking back the old ones or provide a loan extension, to ‘fully help companies to solve their problems,'” the National Business Daily writes. 

    “It’s big news. A couple of weeks ago they were threatening Liaoning Province to cut off all lending to them if they didn’t tighten loan standards,” said Christopher Balding, a professor of economics at Peking University in Shenzen. “This is a pretty significant turn-around for them to do and it indicates how significant the problem is.”

    The official reform narrative is espoused in this Xinhua piece which claims China has to reform because there is no Plan B. “Supply-side structural reform is also advancing as the country moves to address issues like industrial overcapacity, a large inventory of unsold homes and unprofitable ‘zombie companies.'” Clearly resolving the bad debt of zombie companies is not high on the priority list.

    Goldman Sachs complained in a recent note to clients that companies can default on payments and often nothing happens. The investment bank notes that companies like Sichuan Coal default on payments of interest and principal for weeks or months and then maybe pay creditors later. The company in question defaulted on 1 billion yuan ($150 million) worth of commercial paper in June but made full payments later during the summer, a somewhat arbitrary process.  

    Another case is Dongbei Special Steel, which missed at least five payments on $6 billion of debt since the beginning of the year, but has done nothing to resolve the problem. This is why creditors wrote an angry letter to the local government to help resolve the issue.

    According to Goldman Sachs, Dongbei was the reason Liaoning Province came under pressure:

    “A bondholders meeting took place … with bondholders requesting that the [regulators] halt fundraising by the Liaoning provincial government and the enterprises in Liaoning province, and that institutional investors should stop purchasing bonds issued by the Liaoning government and the enterprises in Liaoning province. According to news reports, this demand stems from disappointment in progress by the provincial government in resolving Dongbei Special Steel’s debt problems, with a lack of information and no clear resolution plan.”

    “Going forward, we do expect this trend to continue, with more defaults given our expectation of slower growth in the second half, and continued uncertainties on how these defaults are resolved.”

    With the blessing of the regulator, Goldman’s prediction is probably correct. The investment bank notes that 11 out of 18 high-profile defaults have not been resolved since the first official default of a Chinese company by Chaori Solar in 2014.   

    (Goldman Sachs)

    (Click to enlarge. Source: Goldman Sachs)

    Christopher Balding thinks the directive shows how serious the debt situation has gotten. “This does indicate that there is a relatively significant pressure on the system and people aren’t making their payments. ‘Look, don’t rock the boat and push people into default.’ To say it so publicly or bluntly is amazing.”

    The notice did include a modifier stating that the companies to be supported “must have a good outlook in terms of either their products or services and have restructuring values,” and that the “the development of the companies should be in line with the macro-economic policy, industrial policy and financial supporting policy of the country.” How serious banks will take this modifier is open to debate. 

    Overall bankruptcies in China have surged 52.5 percent in the first quarter of 2016 compared to a year earlier with 1028 cases being reported by the Supreme People’s Court. Most cases that are resolved involve small companies with few employees. The small firms are liquidated rather than restructured, according to the Financial Times. As we have seen there is another measure applied to larger companies, much to the dismay of Goldman Sachs:

    “A clearer debt resolution process … would help to pave the way for more defaults, which in our view are needed if policymakers are to deliver on structural reforms.” If they want to deliver.

  • "It's A Sad Time In History" Clint Eastwood Rages “We're Really A Pussy Generation… F##king Get Over It"

    Submitted by Mac Slavo via SHTFPlan.com,

    The following requires no further commentary.

    Actor, former mayor and true American legend Clint Eastwood nails it perfectly:

    Excerpted from The Wrap via Drudge Report:

     

    [Trump’s] onto something, because secretly everybody’s getting tired of political correctness, kissing up.

     

    We’re really in a pussy generation. Everybody’s walking on eggshells. We see people accusing people of being racist and all kinds of stuff. When I grew up, those things weren’t called racist.

     

     

    I’d have to go for Trump … you know… because she’s declared that she’s gonna follow in Obama’s footsteps.

     

    There’s been just too much funny business on both sides of the aisle. She’s made a lot of dough out of being a politician. I gave up dough to be a politician.

    On Trump’s “racist” comments to a Judge of Mexican descent presiding over a Trump University legal challenge:

    Yeah, it’s a dumb thing to say. I mean, to predicate your opinion on the fact that the guy was born to Mexican parents or something. He’s said a lot of dumb things. So have all of them. Both sides.

     

    But everybody — the press and everybody’s going, ‘Oh, well, that’s racist,’ and they’re making a big hoodoo out of it. Just fucking get over it. It’s a sad time in history.

    Full interview at Esquire

    Related:

    “You see… in this world there’s two kinds of people my friend… those with loaded guns … and those who dig.”

  • Previewing Tomorrow's Payrolls: Watch Out For Short-End Fireworks

    As the world awaits the next in the series of "most important jobs numbers ever," which has now been shown as only relevant to the degree by which it moves the S&P 500 higher (or god forbid lower), consensus expectations are for a goldilocks 180k gain in jobs and flat 4.9% unemployment rate. The market will be looking to see if the Fed's recent optimism surrounding labor market conditions (despite a collapse in their own LMCI) are justified and if the employment figures of July and August demonstrate a new trend in conjunction with June ahead of the September meeting… and of course the 'election adjustment'.

    Consensus Expectations:

    • US Change in Nonfarm Payrolls (July) M/M Exp. 180K (Prey. 287K, May. 11K) – close to the average of 172K for the first half of the year.
    • US Unemployment Rate (July) M/M Exp. 4.8% (Prey. 4.9%, May. 4.7%)
    • US Average Hourly Earnings (July) M/M Exp. 0.2% (Prey. 0.1%, May. 0.2%)

    So just ignore this… It's probably nothing…

     

    Goldman expects a 190k increase in nonfarm payroll employment in July, slightly above consensus expectations for a 180k gain.

    Most labor market indicators were roughly in line with their recent trends, though a couple of key indicators were somewhat stronger in July.

    Arguing for a stronger report:

    • Job availability. The Conference Board’s labor differential—the difference between the share of consumers saying jobs are plentiful vs. hard to get—moved back into positive territory in July, rising 1.2pt to +0.7. The index remains below the highs reached in the last few expansions.
    • Jobless Claims. The four-week moving average of initial jobless claims leading into the payroll reference week fell 9k to just 258k in July, and claims during the survey week were just 252k. While seasonal adjustment is often challenging in July due to the annual auto plant shutdowns, we nonetheless take some positive signal from the very low recent level of jobless claims.

    Neutral factors:

    • Service sector surveys. The employment components of the service sector surveys were mixed in July. The ISM non-manufacturing survey (-1.3pt to 51.4) and the Richmond Fed survey (-5pt to +12) declined, while the Markit PMI, NY Fed (+3.9pt to +6.9), and Dallas (+1.8pt to +3.8) surveys improved. Service sector employment rose 256k last month and has increased 166k on average over the last six months.
    • Manufacturing surveys. The employment components of the manufacturing surveys were also mixed in July. The Markit PMI, Chicago PMI, Philly Fed (+9.3pt to -1.6), Richmond Fed (+5pt to +6), and Dallas Fed (+8.9pt to -2.6) surveys improved, while the ISM manufacturing (-1pt to 49.4), NY Fed (-4.4pt to -4.4), and Kansas City Fed (-1pt to -5) surveys worsened. Manufacturing employment growth declined by an average of 4k over the last six months, but rebounded to +14k in June.
    • ADP. ADP reported a 179k gain in private payroll employment in July, roughly in line with the increases seen in May and June. Service-sector job gains softened a bit to 185k, manufacturing employment rebounded by 4k, construction employment fell 6k, and energy-sector employment appeared to fall by 4k, the smallest reported decline in that sector since 2014.
    • Online job ads. The Conference Board’s Help Wanted Online (HWOL) report showed increases in both new and total online ads in July, though to levels that remain below those seen earlier this year. We put only limited weight on this indicator at the moment in light of recent research by Fed economists that argued that the HWOL ad count—which had departed significantly from the job openings figures in the official Job Openings and Labor Turnover Survey (JOLTS)—has been influenced by price increases for online job ads.
    • Job cuts. According to the Challenger, Gray & Christmas report, job cuts fell a touch on a seasonally adjusted basis in July. Announced job cuts in the energy sector spiked to 18k in July, indicating that energy job losses likely have a bit further to go.
    • Weather. Weather effects on the monthly payroll numbers were a big story in the first half of this year, as we noted last month. At this point, however, the large swings in weather-sensitive industries are likely behind us, and we have found in past research that weather does not have a statistically meaningful effect on payroll growth from June to October.

    We expect the unemployment rate to remain at 4.9% in July from an unrounded 4.899% in June, but see the risks as tilted to the downside. The headline U3 rate rose 0.2pp in June, while the broader U6 underemployment rate fell 0.1pp to 9.6% as a result of a very large drop in involuntary part-time employment. In our recent labor market status report, we estimated that there is about 0.5pp of broad slack remaining in full-time equivalent terms. With trend employment growth still running at roughly double our 85k estimate of the breakeven rate, we expect the labor market to reach full employment by early 2017 and to surpass it thereafter.

    Average hourly earnings for all workers are likely to rise 0.3% in July, in part reflecting favorable calendar effects. This should leave the year-on-year rate unchanged at 2.6%, though we see the risks as tilted to the upside. Our wage tracker—which aggregates four measures of wage growth—has accelerated to 2.8% year-on-year in our preliminary Q2 estimate, a sign that diminishing slack is boosting wage growth.
     

    Market Reaction

    As ever with the NFP release, the headline is likely to garner much of the initial focus with algorithms and fast money moves jumping on any large discrepancies. Participants are likely to view the jobs report with a wide context, as recent months have seen two extreme numbers on either side of the spectrum, and any substantial revision to last month's large beat could weigh on the USD. However, how the report is received will ultimately be decided on whether it can justify more of the few calling for a September hike and to do so a very strong report must be seen.

    And BNP's strategists Timothy High and Daniel Tangho warn risks to short-end yields appear underpriced…

    Markets continue to discount the possibility of a rate hike in September; the Fed funds market estimates there is a 20% chance.

     

    A strong NFP could push 2y Treasury yields higher by 20bp or more, which would match yield levels seen before the May NFP report derailed the odds of a hike in June or July.

     

    The 2y Treasury yield was 0.90% in mid-May when market participants assigned a 55% probability of a July rate hike. While a weak NFP report could derail a September hike, a strong report is likely to force the markets to re-evalute the situation, in which case a 20% probability of a September rate hike is too low: 55% is more appropriate, and the 2y Treasury yielding about 0.90% is also appropriate.

  • As Obama Slams Iran "Ransom" Allegations, He Refuses To Answer One Simple Question

    Unable to keep the $400 million cash drop to Iran off the front pages, the Obama administration came out swinging today with denials, conspiracy-theory-accusations, and allegations of biased reportingas the mainstream media was forced by the striking actions of The White House to ask uncomfortable questions.

    Bloomberg reports that critics of Obama’s nuclear deal with Iran say the payment was ransom, a contention the White House has strongly denied; that it will encourage Iran to take more Americans hostage; and that it’s likely the money will be funneled into terrorist groups.

    “If true, this report confirms our longstanding suspicion that the administration paid a ransom in exchange for Americans unjustly detained in Iran,” House Speaker Paul Ryan, a Wisconsin Republican, said in a statement.

     

    “It would also mark another chapter in the ongoing saga of misleading the American people to sell this dangerous nuclear deal.”

    Obama administration officials have, of course, dismissed the controversy as old news, noting that the settlement was fully disclosed by the White House and State Department at the time the Iran nuclear deal was announced.

    “The United States of America does not pay ransom and doesn’t negotiate ransoms with any country — we never have and we’re not doing that now,” Secretary of State John Kerry said Thursday in Buenos Aires.

    As The Hill reports, President Obama chastised the press for their coverage of the payment, noting that the deal with Iran was announced months ago as part of a larger diplomatic settlement.

    “This wasn’t some nefarious deal,” Obama said.

     

    “It’s been interesting to watch this story surface,” the president said. “Some of you may recall, we announced these payments in January. Many months ago. There wasn’t a secret, we announced them to all of you.”

     

    “What we have is the manufacturing of outrage on a story that we disclosed in January,” he added later.

     

    “The notion that we would somehow start now in this high-profile way, and announce it to the world, even as we’re looking in the faces of other families whose loved ones are being held hostage and say to them, ‘we don’t pay ransom,’ defies logic,” Obama said.

    Defies logic indeed, like the logic of “keeping your doctor if you like him” or the logic of “no boots on the ground in Syria”? But to summarize, today we got “look over there at Donald Trump”-distractions and “We do not negotiate ransoms with any country” jabbed Kerry; “We do not pay ransom for hostages” lambasted Obama; “it defies logic” snapped Earnest.

    *  *  *

    Still, one big question has yet to be answered, for the second day in fact. It’s a simple question: did the hostages’ plane leave before or after the plane arrived carrying pallets full of $400 million worth of non-USD-denominated cash?

     

    Yesterday the question was asked by James Rosen… and not answered: “I might be able to you an answer on that…”

     

    ,,, and today, none other than The Associated Press’ Matt Lee asked again: “we’re still looking into it”

    Still no answer: Odd for the “most transparent adminstration ever” not to have this kind of basic, flight information at their fingertips: tracking $400 million worth of US taxpayer money – in cash – and the lives of four members of the American military?

    Of course, we suspect the explanation is simple and the two planes just happened to coincidentally arrive on the tarmac at the same time and the hostages and the money carriers merely discussed grandkids and golf games.

    * * *

    And then, later today, we may have stumbled what really happened.

    As a reminder, the four hostages that were allegedly exchanged for the $400 million ransom are the following.


    L to R: Matt Trevithick (Photo Credit Robin Wright) Amir Hekmati, Jason Rezaian
    (Photo Credit AP), Saeed Abedini (News 4).

    Today, one of the US Iranian hostage shown above, Saeed Abidini, spole to FOX Business and explained that the Iranian regime would not let his plane leave Tehran until the ransom plane arrived, Gateway Pundit reports.

    They waited on the tarmac for hours.

    Saeed Abidini: I just remember the night at the airport sitting for hours and hours there and I asked police— why you not letting us go — And he told me we are waiting for another plane and if that plane take off we gonna let you go.

     

    Trish Regan: You slept there at the airport?

     

    Abidini: Yes, for a night. They told us you going to be there for 20 minutes but it took hours and hours. And I ask them why you don’t let us go, because the — was there, pilot was there, everyone was there to leave the country. And he said we are waiting for another plane so if that plane doesn’t come we never let us go.

     

    Hopefully, this can jog Mr. Toner’s memory if the hostage plane left before or after the “non-rasom” cash arrived.

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Today’s News 4th August 2016

  • 10 Facts The Mainstream Media Won’t Tell You About The War In Syria

    Submitted by Darius Shahtahmasebi via TheAntiMedia.org,

    Corporate media regularly attempts to present Bashar al-Assad’s regime in Syria as solely responsible for the ongoing conflict in the region. The media does report on events that contradict this narrative — albeit sparingly — but taken together, these underreported details shine a new light on the conflict.

    10: Bashar al-Assad has a higher approval rating than Barack Obama

    Despite Obama’s claims Assad is illegitimate and must step down, the fact remains that since the conflict erupted in 2011, Assad has held the majority support of his people. The elections in 2014 – which Assad won by a landslide with international observers claiming no violations – is a testament to the fact that although Assad has been accused of serious human rights violations, he continues to remain reasonably popular with the Syrian people.

    Obama, on the other hand, won elections in 2012 with a voter turnout of a mere 53.6 percent of the American public; only 129.1 million total were votes cast. This means approximately 189.8 million American people did not vote for Obama. His current approval rating sits at about 50 percent.

    9: The “moderate” opposition has been hijacked

    There is no longer such a thing as “moderate” opposition in Syria – if there ever was. The so-called Western-backed Free Syrian Army (FSA) has been dominated by extremists for years. The U.S. has known this yet has continued to support the Syrian opposition, despite the fact the New York Times reported in 2012 that the majority of weapons being sent to Syria have been ending up in the hands of jihadists. A classified DIA report predicted the rise of ISIS in 2012, stating:

    “If the situation unravels, there is the possibility of establishing a declared or undeclared Salafist principality in eastern Syria… and this is exactly what the supporting powers to the opposition want, in order to isolate the Syrian regime.”

    Further, an FSA commander went on record not only to admit his fighters regularly conduct joint operations with al-Nusra (al-Qaeda in Syria), but also that he would like to see Syria ruled by Sharia law.

    Apparently, moderate can also mean “al-Qaeda affiliated fanatic.”

    8: Assad never used chemical weapons on his own people

    A U.N. investigation into the first major chemical weapons attack committed in early 2013 — an atrocity the West immediately pinned on Assad — concluded the evidence suggested the attack was more likely committed by the Syrian opposition. A subsequent U.N. investigation into the August 2013 attack never laid blame on anyone, including Assad’s forces. In December 2013, Pulitzer prize-winning journalist Seymour Hersh released an article highlighting deficiencies in the way the situation was handled:

    “In the months before the attack, the American intelligence agencies produced a series of highly classified reports…citing evidence that the al-Nusra Front, a jihadi group affiliated with al-Qaida, had mastered the mechanics of creating sarin and was capable of manufacturing it in quantity. When the attack occurred al-Nusra should have been a suspect, but the administration cherry-picked intelligence to justify a strike against Assad.”

    7: Toppling the Syrian regime was part of a plan adopted shortly after 9/11

    According to a memo disclosed by 4-star General Wesley Clark, shortly after 9/11, the Pentagon adopted a plan to topple the governments of seven countries within five years. The countries were Iraq, Lebanon, Libya, Somalia, Sudan, Syria, and Iran.

    As we know, Iraq was invaded in 2003. American ally Israel tried its hand at taking out Lebanon in 2006. Libya was destroyed in 2011. Prior to this intervention, Libya had the highest standard of living of any country in Africa. In 2015, alone, it dropped 27 places on the U.N. Human Development Index rating. U.S. drones fly over Somalia, U.S. troops are stationed in South Sudan — Sudan was partitioned following a brutal civil war — and Syria has been the scene of a deadly war since 2011. This leaves only Iran, which is discussed below.

    6: Iran and Syria have a mutual defense agreement

    Since 2005, Iran and Syria have been bound by a mutual defense agreement. The Iranian government has shown they intend to fully honor this agreement and has provided the Syrian regime with all manner of support, including troops, a $1 billion credit line, training, and advisement. What makes this conflict even more dangerous, however, is the fact Russia and China have sided with Iran and Syria, stating openly they will not tolerate any attack on Iran. Russia’s military intervention in Syria in recent months proves these are not idle threats – they have put their money where their mouth is.

    Iran has been in the crosshairs of the U.S. foreign policy establishment for some time now. George W. Bush failed to generate the support needed to attack Iran during his time in office — though not for lack of trying — and since 2012, sanctions have been the go-to mantra. By attacking and destabilizing Iran’s most important ally in the region, the powers that be can undermine Iranian attempts to spread its influence in the region, ultimately further weakening Iran.

    5: Former Apple CEO is the son of a Syrian refugee

    The late Steve Jobs, founder of Apple, was the son of a Syrian who moved to the United States in the 1950s. This is particularly amusing given the amount of xenophobia, Islamophobia, racism and hatred refugees and migrants seem to have inspired — even from aspiring presidents. Will a President Donald Trump create the conditions in which future technological pioneers may never reach the United States? His rhetoric seems to indicate as much.

    4: ISIS arose out of the U.S. invasion of Iraq, not the Syrian conflict

    ISIS was formerly known as al-Qaeda in Iraq, which rose to prominence following the U.S.-U.K. led invasion of Iraq in 2003. It is well-known that there was no tangible al-Qaeda presence in Iraq until after the invasion, and there is a reason for this. When Paul Bremer was given the role of Presidential Envoy to Iraq in May 2003, he dissolved the police and military. Bremer fired close to 400,000 former servicemen, including high-ranking military officials who fought in the Iran-Iraq war in the 1980s. These generals now hold senior ranking positions within ISIS. If it weren’t for the United States’ actions, ISIS likely wouldn’t exist.

    ISIS was previously known by the U.S. security establishment as al-Qaeda in Iraq (AQI), but these fighters ultimately became central to Western regime change agendas in Libya and Syria. When the various Iraqi and Syrian al-Qaeda-affiliated groups merged on the Syrian border in 2014, we were left with the fully-fledged terror group we face today.

    3: Turkey, Qatar, and Saudi Arabia wanted to build a pipeline through Syria, but Assad rejected it

    In 2009, Qatar proposed a pipeline to run through Syria and Turkey to export Saudi gas. Assad rejected the proposal and instead formed an agreement with Iran and Iraq to construct a pipeline to the European market that would cut Turkey, Saudi Arabia, and Qatar out of the route entirely. Since, Turkey, Qatar, and Saudi Arabia have been staunch backers of the opposition seeking to topple Assad. Collectively, they have invested billions of dollars, lent weapons, encouraged the spread of fanatical ideology, and helped smuggle fighters across their borders.

    The Iran-Iraq pipeline will strengthen Iranian influence in the region and undermine their rival, Saudi Arabia — the other main OPEC producer. Given the ability to transport gas to Europe without going through Washington’s allies, Iran will hold the upper-hand and will be able to negotiate agreements that exclude the U.S. dollar completely.

    2: Leaked phone calls show Turkey provides ISIS fighters with expensive medical care

    Turkey’s support for hardline Islamists fighting the Syrian regime is extensive. In fact, jihadists regularly refer to the Turkish border as the “gateway to Jihad.” In May 2016, reports started emerging of Turkey going so far as to provide ISIS fighters with expensive medical treatment.

    Turkey is a member of NATO. Let that sink in for a moment.

    1: Western media’s main source for the conflict is a T-shirt shop in Coventry, England

    This is not a joke. If you follow the news, you most probably have heard the mainstream media quote an entity grandiosely called the “Syrian Observatory for Human Rights” (SOHR). This so-called “observatory” is run by one man in his home in Coventry, England — thousands of miles away from the Syrian conflict — yet is quoted by most respected Western media outlets (BBC, Reuters, The Guardian, and International Business Times, for example). His credentials include his ownership of a T-shirt shop just down the road, as well as being a notorious dissident against the current Syrian president.

    *  *  *

    Despite the fact much of the information in this article comes from mainstream outlets, those circulating it refuse to put all of the storylines together to give the public an accurate picture of what is going on in Syria.

    Assad may be brutal — and should face trial for allegations of widespread human rights abuses — but this fact alone does not make the other circumstances untrue or irrelevant. People have the right to be properly informed before they allow themselves to be led down the road of more war in the Middle East, and consequently, more terror attacks and potential conflicts with Russia and China.

  • Money Supply Arguments Are Flawed

    by Keith Weiner

     

    It goes without question, among economists of the central planning mindset, that if a central bank can just set the right quantity of dollars[1], then the price level, GDP, unemployment, and everything else will be right at the Goldilocks Optimum. One such approach that has become popular in recent years is nominal GDP targeting.

    How does a central bank affect the quantity of dollars? In discussing a nominal income targeting, Wikipedia gives the usual laundry list of how to do their magic: “…interest rate targeting or open market operations, unconventional tools such as quantitative easing or interest rates on excess reserves and expectations management…”

    Other than expectations management—which is just telling the market “blah blah blah”—managing an income aggregate is about manipulating one interest rate or another.

    In the real economy, people don’t factor the quantity of dollars into their economic calculations. If you are in the grocery store to buy apples, you do not think about M0 money supply. Whether you are a farmer or miner, whether you operate a factory or trucking company, or even a bank or insurer, the money supply is irrelevant to you.

    By contrast, the interest rate figures in every economic calculation in the economy. How much to borrow, how much to save, and how to assess the tradeoff between consumption and investment are all dependent on interest. The rate of interest is a factor in every price and the relationship between all prices in the economy.

    For example, to grow apples you need land and you must plant trees. Then you have to wait for the trees to mature before they bear fruit. This requires an investment up front, in expectation of earning a return in the future. How high does this return need to be? It depends on the interest rate.

    This decision, made by thousands of current and potential apple farmers, determines the price of apples in the grocery store. And this, in turn, determines the decisions of consumers to buy apples, to buy something else, or to do without fruit if they cannot afford it.

    Whether the interest rate is manipulated upwards, whether it is forced downwards, or whether it is artificially locked in stasis, every price in the economy is affected and everyone’s decisions are altered by the rate of interest. I have written a lot on the perverse incentives caused by interest rate manipulation, but today I want to focus on a different aspect of the problem.

    So, let’s perform a little thought experiment. Suppose a business must pay 20% interest on its capital. If it somehow manages to eke out a 21% rate of profit, it forks over 95 percent of what it earns to its lenders. If it can’t earn at least 20 percent, then it ends up feeding its capital to its creditors.

    Now consider a perverse world where enterprises can borrow at -5 percent. They literally repay investors less capital than they borrow. This case is the opposite of the one above; Lenders feed their capital to enterprises.

    If interest is too high, the Fed is sacrificing entrepreneurs to investors. If interest is too low, then investors are sacrificed to entrepreneurs. Either way, our monetary planners pervert lending into a win-lose deal.

    So what’s the right rate of interest?

    Only a market to determine that. Central planners have never gotten it right, are not right now, and will never get it right. They do, however, inflict collateral damage.

    Market Monetarism—the idea of central planning of credit based on a GDP target—promises improved outcomes over what would happen in a free market. However, it’s no better than conventional Keynesianism or Monetarism.

    We should not be debating different approaches to central planning. We should be rediscovering the idea of a free market in money and credit.


    [1]
    Most commonly this is called money supply. However, there are two problems with this. One, the dollar is credit not money. Two, it is not a supply in the sense of flows—e.g. corn supply or oil supply. It is a measure of stocks, Unlike corn or oil, dollars are not consumed in a transaction.

  • The Social Justice Cult Should Blame Itself For The Rise Of Trump

    Submitted by Brandon Smith via Alt-Market.com,

    I have not been writing much concerning the U.S. election this November, and with good reason – elections are always a distraction from tangible solutions.  They are an anathema to honest debate; a circus of delusions and prefabricated talking points.  They offer the illusion of choice in order to placate the masses.  They are a theater of false hopes.

    That said, elections do accomplish one thing very well — they are great for mobilizing large numbers of people into opposing camps and pitting them against each other over ideologies and political celebrities.  Sometimes, these elections can lead to internal war.  This is where we stand in 2016.

    In my article Will A Trump Presidency Really Change Anything For The Better, published in March, I outlined why I believed that the election of 2016 would revolve around a Trump vs. Hillary free-for-all.  The two sides are perfectly diametrically opposed.  At least, as far as public image is concerned, one is the exact antithesis to the other, and I don’t think this is a coincidence.

    Over the course of the past century social instability and outright internal conflicts have in most cases been the product of a specific catalyst — namely various flavors of Marxism and communism.  That is to say, communists attempt to socially or economically sabotage conservative or free market based systems with civil unrest and political chicanery, and in response, nations are either overrun by color revolution or they swing to the other side of the collectivist spectrum and resort to fascism.

    This is often by design.  As I have examined in detail in numerous articles in the past, it is the financial elite that tend to play BOTH sides of this modern battle between the communists and the “nationalists,” usually promoting or supporting groups with communist leanings, radicalizing them and exploiting them to drive normally level headed conservatives to respond with anger and totalitarianism to keep them at bay.  Of course, these totalitarian regimes also end up under the control of the establishment.  It is the best way to hijack and co-opt a conservative population.

    Today, we have a similarly pervasive communism in the West funded by the same kinds of elites, only in the form of a more frantic style of cultural Marxism.  One need only examine the cash infusions by billionaires like George Soros and his Open Society Institute into Black Lives Matter as well as other “social justice” organizations.

    Under the guise of philanthropy, global financiers exploit mindless followers and the entitlement mob like a heavy bludgeon, swinging them wildly at any cultural mainstay that represents the bedrock of the target nation.  Apparently, the irony is completely lost on the social justice warriors, who completely ignore the fact that rich white guys are bankrolling their battle against… rich white guys.

    It is important to note that while the financial establishment is the very CORE of the problem and the primary instigator and manipulator of the public psyche (they have this down to a science), their success in these endeavors would not be as frequent without so many mindless followers and academic idiots to perpetuate the momentum of chaos.  These groups share almost as much blame as the elites in the destruction of civility and prosperity.

    In this age of unstable economies and societies, there are many people who are desperate to be told what to do rather than lead themselves.  However, none are quite as horrifying as the social justice cultists.

    These people are, in my view, nearly the pinnacle of the communist ideal.  They are die hard collectivists, and are willing to rationalize almost any action as long as they believe it is being done in the name of the “greater good.”  Usually, this greater good is based on entirely arbitrary determinations rather than any inherent moral code, making it vaporous and easily changeable.  A “greater good” without principles based in inherent conscience or natural law can be shifted on a whim to suit any evil imaginable.

    They believe fervently in the purity of their world view.  Most of them are not open to even the slightest question or concern over their ethos.  Their blind faith is unshakeable, even in the face of extensive empirical evidence and superior logic.  Such people are the ultimate cannon fodder for the elites.

    Social justice cultists act on the assumption that history is on their side, and that they will one day be seen as heroes for their deeds.

    They not only seek to promote and spread their ideology — this would merely make them a new form of religion.  No, they are not just evangelists, they also want their own version of a caliphate; an all dominating cult that crushes any embers of dissent and destroys its philosophical opponents trapped within its ever expanding borders.

    A recent and starling example of this mentality can be found in the following video of a BBC show called “The Big Questions.”  The subject of the debate — “Does social media reveal men’s hatred for women?”  Milo Yiannopoulos faces off with a crowd of mouth breathing true-believers and barely gets a word in edgewise as they do what cultural Marxists do best:  use the mob to shout down their opponent and attack the person’s character rather than confront his arguments and evidence:

    Though this show is produced out of the U.K. and not the U.S., I am using it to shed light on the inevitable end game of all social justice cultists regardless of where they live — to dominate all discussion and erase conservative thought from society.  The attitudes displayed by the feminists and the rather pathetic members of the audience are truly frightening. Not only do they argue that Yiannoupoulos has no right to even be dignified  with time to respond, they are at bottom also claiming the right to assert force of law to ban ideas they disagree with and even to imprison the people that argue those ideas.

    Instead of simply ignoring or blocking the people who offend them like rational adults, or participating in a free exchange, they want the power of government to silence opposition. If their ideas were truly superior in merit then they would have no need to use force to silence or imprison their opponents.  They want to turn the whole of the web, the whole of the WORLD, into a federally enforced “safe space” for their ideology and their ideology alone.

    It is this kind of zealotry that leads to outright totalitarianism and collectivism. This is the kind of evil that is done in the name of the so-called “greater good.”

    The fact is, their feelings are irrelevant. They do not matter.  Most rational people don’t care if SJWs are offended, or afraid or disgusted and indignant. Their problems are not our problems.  Our right to free expression and freedom of association is far more important than their personal feelings or misgivings.  We do not owe them a safe space.  If they want a safe space, then they should hide in their hovels or crawl back to the rancid swamps from whence they slithered.

    A backlash is building against the social justice cult that will be unleashed sooner rather than later, and so far it is accelerating at the height of the election frenzy under the banner of Donald Trump.

    Social justice warriors seem to find themselves befuddled at the rise of Trump, but as I predicted in March, a Trump vs. Hillary face-off was inevitable.

    For conservatives, Hillary is the ultimate representation of political hell spawn.  She is a proven elitist puppet, with a criminal record that reads like a transcript from the Nuremberg trials.  She is also a part of an ongoing trend of dynasties in U.S. politics.  Americans have grown tired of the Bushes and the Clintons.  We have grown tired of the endless reign of neo-cons and neo-liberals.  We are looking something different, or what we hope is something different.  Trump at first glance at least looks like a candidate outside of the establishment norm.

    Beyond this increasing aversion to the status quo, though, is the growing American contempt for the social justice cult.  This will be a primary driver of the U.S. election.

    While many in the cult had thrown their support behind Bernie Sanders for a time, Bernie showed his true colors by bowing down to the Clinton machine.  This is typical of socialists, who regularly forgo their proclaimed principles in the name of “unity” and “victory” under a single collectivist umbrella.  Many in the social justice crowd have quickly jumped on Hillary’s bandwagon, as her campaign now rides solely on the disposition of her own sexual organs.

    That is to say, Clinton is now the new mascot for the SJW crowd, even though many of them don't really like her.

    I’m not so sure the “vote for me because I’m a woman” theme is going to go over quite as effectively as Obama’s “vote for me because I’m black” theme.  The Hillary campaign symbol, looking strangely like a warped version of the arrowed symbol for “Male” and Mars, is emblazoned on worshipful feminist posters and cartoons everywhere.  A nice touch was the cringe-worthy display of Clinton’s giant head on the DNC mega-screen bashing through photos of past male presidents as if “shattering” the proverbial glass ceiling.  Set aside the fact that over half of American voters are women, and that there is no glass ceiling preventing women from being voted into office by other women if being a woman rather than a decent candidate was all that mattered.

    The theater of the feminist absurd aside, this election is going to tumble about wildly on all sorts of carnival sideshows.

    The so called “controversy” over comments made by Trump against the parents of a Muslim soldier killed in U.S. service in Iraq is just the beginning of the circus.  To be fair to Trump, the sheer hypocrisy of Hillary Clinton, a warmonger of the highest degree and a participant by-proxy in the death of the soldier in question, using his parents as fuel for a campaign controversy goes so far into the realm of the disturbing that I might be shocked if I didn’t understand that the whole thing is a mind game.  These kinds of distractions are meant to fuel the flames and I predict they will become frequent and overwhelming by November.

    To reiterate, it is clear that the Clinton campaign is going the route of pandering to the SJWs.  This is the script, and I as I said after the Brexit referendum vote, I believe that the script ends with a Clinton failure and a Trump victory.  Pandering to SJWs rarely leads to success.  And, a faltering economy blamed on Trump would be far preferable to one blamed on Clinton.

    My regular readers know well that I personally do not have much faith in the Trump campaign; I’ve seen too many constitutional inconsistencies and too many meetings with elitist representatives so far to give him the benefit of the doubt.  If he turns out to be a true constitutionalist, then I will be pleasantly surprised and happy to admit I was wrong.

    That said, I do understand why the public is rallying around Trump.  They see him not as a candidate, but as a vehicle to push forward a fight against a social justice juggernaut that has gone unanswered for far too long.  They don’t much care about him as a man, which is why the character attacks by the social justice cult and the media have fallen flat again and again.  They only care that he might not be the status quo.  They are looking for something radical to counter the radicalism of cultural Marxists.

    I am not here to argue over which candidate is “better,” or preferable or the “lesser of evils.”  None of this matters.  I realize that I am not going to convince anyone to vote in anyway different than how they have already decided to vote.  In fact, I am certain that most people decided exactly how they were going to vote as soon as the candidates were publicly finalized.

    The zealotry will be evident on both sides.  Democrats will accuse me of being biased in favor of Trump because I outline in articles the endless parade of horrors surrounding Clinton's career.  Republicans will accuse me of "secretly working for the Democrats" because I refuse to throw full blind faith behind Trump.  That's just how elections work – follow my mascot or you are my enemy.

    I really couldn't care less.  I'm on the side of liberty and individualism and I'll fight on this side alone if I have to.

    I will say that I KNOW exactly what will happen under Hillary Clinton – despotism in the name of "equality", leading to outright civil war.  I only SUSPECT according to what I have seen so far that Trump is not a constitutional candidate.

    The danger is that in our search for the counterbalance to social justice despotism and Hillary Clinton's evident communist addictions, we conservatives will fall into the old historical paradigm of fascism in the name of defeating communism, helping the elites instead of dethroning them.  The danger is that we get so caught up in trying to destroy the social justice mob that we forget our principles.

    If a President Trump shows any indications of being anti-constitution, even in the name of our own “greater good,” conservatives MUST stand by our ideals and stand against him, or we become no better than the SJW psychopaths we seek to stop.  No man, no woman, no president is more important than the liberties and heritage of this nation and its citizenry.

    As far as social justice activists are concerned, if they really want to change this country for the better, then they should consider dropping out of their little cult and finding something productive to do.  Stop spending your parents’ money on garbage gender studies classes.  Become scientists and engineers.  Become doctors and inventors. Create a better planet through ingenuity rather than manic ideology.  Make yourselves useful or something.  You're not only wasting your own time wreaking havoc with your collectivism, you are also wasting our time, because now we have to spend it working to stop you and the elites that fund you.

    Become self sufficient instead of begging for handouts or feeding off your family and their savings accounts.  Add to the world instead of bleeding it dry.  Help people through personal action instead of trying to micro-manage their lives and their speech and their thoughts through force of government.

    Otherwise, all you are is more gasoline on a fire that will result in inevitable conflict; a conflict which you will lose.  A conflict which may only serve the interests of the very elites which you think you are fighting against.  Remember, whatever happens, it was the social justice cult that helped to create the conditions by which such a conflict became unavoidable.  Without the cultural Marxists, there would be no rationale for any division.  If they would simply leave us all alone to think and say what we feel, to choose our associations without interference or invasive conquest of “spaces” and to live in a functioning society based on merit rather than victimhood and artificial fear, there would be no fertile ground for an election circus of this magnitude.

    And finally, if EVERYONE relied less on political celebrities, if everyone stopped waiting for a knight on a white horse, or a feminist icon, or a crusade to fight, or a social justice mob to join and started determining their own futures; if everyone began looking far more carefully at the people behind the curtain, then perhaps we could finally see a change in humanity not seen in thousands of years.  Not a collectivist change, but an individualist change, which is the only kind of change everlasting or worth a damn.

  • Full BOE Preview, And A Look At What UK Corporate Bond QE Will Look Like

    After several prominent central bank disappointments over the past few weeks, culminating with last week’s BOJ fiasco, earlier this week the RBA finally did as it was expected by both the market and a majority of analysts, when it cut rates by 25 bps to a record 1.50%, even if the reaction was unexpected, sending the AUD sliding briefly then soaring as the accompanying statement suggesting far less dovishness would follow.

    Which brings us to tomorrow’s Bank of England decision, where as of this moment the OIS market shows that a 25bps rate cut is 100%  priced in. But a plain vanilla rate cut may be just the tip of the Iceberg: as the WSJ writes, piggybacking on an analysis by BofA’s Barnaby Martin, investor bets are rising that Mark Carney could “start snapping up” corporate bonds as part of the stimulus plan to be announced tomorrow. 

    As a reminder, the BoE previously bought corporate bonds between 2009 and 2012. As BofA writes, the purchase numbers were not headline-grabbing (£2.1bn) but the aim of the programme back them was a lot different to what we could envisage now. Using the ECB’s template to create a £ CSPP equivalent, the BoE would end up with an eligible universe of £128bn (44% of the Sterling credit market), and could possibly grow it to £211bn if they bought Euro-denominated bonds (as suggested in ‘09). With a universe this big, the BoE should be able to sustain around £2bn of corporate purchases a month.

    But before we look in depth into the possibiliy of a British CSPP, here is a detailed breakdown of what to expect, and what Wall Street believes will happen, courtesy of RanSquawk:

    * * *

    • Bank of England are widely expected to cut rates to 0.25% with a 25bps rate reduction fully priced in OIS markets.
    • The central bank is also touted to announce further stimulus measures including the potential restart of its QE program (APF currently stands at GBP 375BN) and the Funding for Lending Scheme.
    • 2017 GDP growth forecast is likely to see a significant downgrade amid early signs of a deterioration in the UK economy, while GBP depreciation is likely to support 2017 Inflation forecasts.

    BACKGROUND

    The Bank of England will reconvene for the second time since the UK’s decision to leave the EU, whereby they are widely expected to ease monetary policy. This view is supported by the fact that at the last meeting the MPC said that most officials saw the need to adjust policy in August. Furthermore, Governor Carney himself has already announced that the central bank will probably need to take action in the summer, which leaves Thursday as the remaining option.

    POST-BREXT DATA/COMMENTARY

    Heading into the meeting the BoE has had little (Brexit exposed) economic data to act on. Most notably the PMI figures for July, in which Mfg. and Composite readings contracted to 41-month and 87-month lows, respectively, while the key Services figure saw its largest decline in 7-yrs. Given that services accounts for 79% of the UK economy, a severe contraction in this sector has obvious consequences for GDP and jobs moving forward. Allied with this, tier-2 data points (which would not normally garner significant attention) have also showed sharp declines in business confidence and as such contributed to the heightened uncertainty regarding the UK economy, reinforcing the case that policy adjustments are needed.

    Against that backdrop, several MPC members have recently stated that they are willing to ease policy, with BoE’s Haldane stating that this meeting will likely see material easing while there has also been a shift in some of the more hawkish members. In particular BoE’s Weale, who in a sudden U-turn from his usual stance shifted his view in favour of easing.

    POSSIBLE MEASURES

    In terms of touted measures, OIS markets have fully priced in a 25bp rate cut while there is also a small chance priced in for a 50bps rate reduction. However, a cut in interest rates will likely weigh on GBP which would be somewhat of an undesirable effect at present, given that the currency is already hovering at more than 30-yr lows, while it would also lead to damaging import price inflation. Additionally, with Governor Carney previously stating that he does not believe that rates “too low” (or negative) could have positive outcomes, this would suggest that there is little room to manoeuvre.

    At the last meeting, the central bank’s minutes stated that the MPC had an initial exchange of views on the various possible packages of measures. Consequently, this alludes to the fact that the BoE is looking for further measures other than cutting rates. In turn, this has raised the possibility that the bank could re-launch the Funding for Lending Scheme which would ensure ample liquidity by allowing commercial banks to borrow funds cheaply in order for this to be passed on in the form of cheap loans to firms. Analysts at Nordea Bank note that the central bank could enhance the FLS either by broadening its scope to include household lending or by improving the terms of liquidity provision.

    Moreover, some participants expect the BoE to implement a new QE programme (Asset Purchase Facility which currently stands at GBP 375bn) with analysts noting that Gilts are likely to account for the majority of the new asset purchases with also the inclusion of corporate bonds. Previous expansions to the QE programme have seen holdings rise in GBP 50-75b1n increments.

    INFLATION AND GROWTH FORECASTS

    The MPC will also arm themselves with the latest set of inflation forecasts, which they have stated that will act as an important guide as to the magnitude and calibration of stimulus measures. Additionally, the July meeting minutes stated that the depreciation in GBP (Trade Weight fallen around 12%) has put upward pressure on inflation with BoE’s Haldane commenting that inflation could overshoot its 2% target, in turn inflation forecasts may be upgraded with some suggesting 2017 inflation may be over 2% (Prey. 1.5%). On the other hand, with economic indicators showing early signs that the UK economy is weakening significantly, GDP outlook is likely to see sharp downward revisions. Prior to the Brexit vote, the BoE forecast GDP growth for 2017 at 2.3%, with the consensus amongst analysts now at 0.6% (Prey. 2.1%) while some are expecting growth to be slashed to 0.0%.

    MARKET REACTION

    In terms of market reaction, given that OIS markets have fully priced in 25bps rate cut, this alone may be met with disappointment and as such see some initial upside in GBP. A similar reaction may be seen in GBP if the vote split is deemed too tight (5-4) with also a flattening of the UK curve. While a unanimous 9-0 in favour of a cut might suggest that a follow up move is on the table leading to potential pressure in GBP. Additionally, if a plethora of measures are utilised by the central bank involving a potential restart to its QE programme allied with a rate reduction and credit easing, may lead to upside in equities. While Gilt yields could also post fresh record lows as many analysts note that a restart to QE will likely include the purchase of Gilts.

    SELECTED ANALYST EXPECTATIONS

    • BofAML expects the BoE to cut interest rates by 25bps, alongside a GBP 50bIn expansion in the APF and credit easing package.
    • Goldman Sachs forecasts an increase in asset purchases of over GBP 100bIn over the next 6 months, with a mix of sovereign and corporate bonds.
    • HSBC states that the central bank will cut rates by 25bps, coupled with an announcement of measures to support credit to the real economy.
    • Nordea Bank sees a 25bps cut to 0.25% with a GBP 100bIn increase in the APF over the next few months.

    * * *

    Which brings us back to the all too real possibility that the BOE will, in a few hours, unveil its own CSPP program, copying what the ECB did back in March.

    Here is BofA’s Barnaby Martin, laying out “the case for a £ CSPP”

    Despite the benign backdrop for yields and spreads, we do feel that there is a strong case to be made for the Bank of England pursuing another corporate QE programme for the Sterling credit market. To be clear, market dysfunction in not the problem. Yes, uncertainty is high after the Referendum outcome, but the Sterling credit market is clearly not shut given the three recent new issues over the last week (BAT, Brown-Forman and Santander UK).

    But in a post-Brexit world, if the UK is to flourish on its own then it must have a vibrant and deep credit market underlying it, especially if the ability of the UK banking sector to lend becomes challenged amid a backdrop of lower interest rates and rising delinquencies. Building a “super competitive-economy” with low corporation tax and investment from China, for instance, requires a £ credit market where the ability to issue bonds and raise capital is not in doubt.

    But the reality is that the Sterling credit market – in its current form – is far from this. In our view, it looks to have been suffering a “slow death” of sorts over the last few years. Chart 7 shows that issuance of £ corporate bonds has been dwindling since 2013. This year, there has been only £4bn of non-financial IG issuance in the Sterling credit market, and by year-end it is unlikely to get anywhere near the lofty levels of issuance seen in 2012 (£33bn).

    But we don’t think the dwindling in £ issuance reflects the risk-averseness of UK companies. On the contrary. We believe the explanation is simply that the ECB’s extraordinary monetary policies of the last few years have pulled UK (and global) funding capital into the Euro credit market. Chart 8 makes this point. In 2009, 53% of UK corporates’ liabilities were denominated in Sterling. Today, the figure is just 29%.

    The allure of negative yields in Euros and the market-pacifying impact of the ECB’s CSPP have driven UK companies to fund more and more in Euros (and prior to this the $ credit market, helped by the attractive basis swap).

    But the selling point for greater investment in a post-Brexit UK economy cannot be the ability of UK companies to issue in Euros! (especially with rising currency volatility). Thus, we think the BoE would be playing its part in supporting the UK economy if it helped revitalize the £ credit market with a new corporate bond purchase programme.

    In effect, we believe there is a need to “balkanize” credit markets again, especially the Sterling corporate bond market. We think a “£ CSPP” would act as a nice counterbalance to the ECB’s CSPP, and would return European credit markets to a more level playing field. And importantly, we think there would be the possibility of Carney and Draghi “coordinating” their respective corporate bond buying.

    What could a £ CSPP look like today?

    To bring the £ credit market “back to life”, we think a BOE corporate QE programme would need to be much bigger than 2009’s version. Only regular and continuous buying would ensure that depth returns to the £ primary market. Just as Mario Draghi is showing with his corporate bond buying programme, tightening spreads helps achieve this (as well as purchasing corporate bonds in the primary market,  which the BoE has never done before).

    In Chart 12, we draw from the methodology of the ECB’s Corporate Sector Purchase Programme to create the same idea for the Sterling credit market (we call it the £CSPP). We calculate the volume of eligible corporate bonds that would be available for the Bank of England.

    • We start with our UR00 Sterling corporate bond index (which includes financials and non-financials). We then exclude bank debt, but keep insurance (in line with ECB CSPP methodology),
    • We then exclude all subordinated debt (again in line with ECB CSPP methodology),
    • We then limit the universe to “UK relevant companies” which means either a) UK domiciled companies or b) non-UK domiciled companies with significant exposure to the UK (which we define as companies having at least £3bn of Sterling corporate bonds outstanding). This results in £128bn of eligible corporate bonds for the BoE.
    • As an additional filter, we note that in 2009 the BoE stated that they were prepared to buy corporate bonds denominated in currencies other than £. In the end they kept purchases just to £. But here we add the Euro-denominated bonds issued by UK corporates to which the rules above apply. In this case, we get £211bn of eligible corporate bonds for the BoE.

    How big are these numbers?

    • £128bn is 44% of the Sterling IG corporate bond market.
    • Interestingly, we think the ECB has an eligible universe of €710bn for their CSPP while the Euro IG corporate bond market is €1.72tr in size (41%).

    The ECB is currently buying between €9-10bn of corporate bonds per month. If the BoE was to create their own £CSPP then we think around £2bn of purchases per month would be a sensible starting point.

  • Dear Job Market, Take This Indicator & Shove It!

    Authored by Danielle DiMartino Booth,

    Some songs are just destined to be belted out while speeding down an open highway with the all the windows down, your hair whipping in the wind and the dust flying. Donald Eugene Lytle, aka, Johnny Paycheck, delivered one in spades with his catchy, purposely grammatically incorrect rendition of David Allan Coe’s working man’s anthem. The song, Take this Job and Shove It, which has earned cult status in the Honky Tonk hall of fame proved to be the only number one hit of Paycheck’s career.

    Ironically, Paycheck didn’t change his name to fit the song; that happened 13 years earlier when he borrowed it from a top-ranked Chicago boxer whose claim to fame was his 1940 fight against Joe Lewis for the heavyweight title.

    Very few of us have escaped those lyrics invading our mind from time to time. You might have been slopping sauce on one more pizza, bagging yet another bag of leaves on someone else’s lawn or plugging away at a spreadsheet for which you’d never get credit – all for meagre pay. Whatever the thankless task, you sure would have relished unleashing those words to your boss’ face. Just take this job and shove it!

    The 1977 hit was so popular it went on to inspire a not so popular 1981 movie. Alas the movie of the of the same name, billed as “The comedy for everyone who’s had it up to here…” fell flat at the box office. It was the timing that was all wrong. A movie with a “job shoving” theme was unseemly considering the economy was veering headlong into a double-dip recession. The worker bees of the economy were understandably unamused by the idea of brazenly quitting their jobs.

    Today, in 2016, it’s looking more and more like Janet Yellen is less than amused with her own greatest hit, The Labor Market Conditions Index. She conceived this alternative measure of the job market and debuted it to much fanfare in an August 22, 2014 speech at the Shangri La of economic confabs in Jackson Hole, Wyoming.

    With that, a whole new cottage industry was born. Two gauges measuring the state of the job market, nonfarm payrolls and the official unemployment rate, ballooned into 19. Joy for the economist community in the form of 17 new raison d’etres!

    How have things worked out since then?

    Appreciating the historic context is an essential first step to answering that question. At its December 2012 meeting, with unemployment at 7.8 percent, the Federal Open Market Committee announced its first ever unemployment rate target of 6.5 percent. Fed economists projected that this bogey would not be reached until the end of 2015. At that point, they anticipated the rate would be inside a 6.0-6.6-percent range.

    One voter in the FOMC room begged to differ. Richmond President Jeffrey Lacker dissented, recognizing the folly of the quantitative commitment. The Fed was effectively boxing itself in as financial markets would price in a rate hike the minute the threshold was visible on the horizon.

    As if wearing blinders, then-Chairman Ben Bernanke predicted that the target would act, “as an automatic stabilizer,” with the added qualifier that the new policy, “by no means puts monetary policy on autopilot.”

    Of course, that’s just not the way financial markets work. They are forward-looking beasts precisely because they set prices based on the inputs provided.

    Hence the Fed’s panicked emergency videoconference meeting on March 4, 2014 on the heels of that year’s April jobs report, which revealed a steady unemployment rate of 6.7 percent. The markets’ conclusion: A June rate hike was imminent, a full year and a half before Bernanke had any intention of tightening policy.

    Though still the subject of furious debate, the missing link from Fed economists’ models was the permanence of the decline in the labor force participation rate fed by the 2009 introduction of 99 weeks of unemployment insurance. Needless to say, politicians clamoring for easy votes extended these extraordinary benefits time and again.

    By the end of 2013, 99 weeks had become all too ordinary. Millions of workers had simply dropped out, disincentivized by design. Because the unemployment rate is calculated against the number of people in the labor force, it declined much more rapidly than historic precedent suggested it would.

    And so, with mis-measured inflation still too low for comfort (another full blown story for another day), policymakers backtracked on their commitment. The March 2014 FOMC meeting minutes attempted to explain: “The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.”

    The schizophrenic behavior did nothing to bolster the Fed’s credibility. To counter perceptions, the Fed, under the new leadership of labor economist Yellen, came up with yet another model. As she illustrated in great detail at that year’s Jackson Hole gathering, the LMCI would better measure the slack in the labor market without unduly “rewarding” the decline in the labor force participation rate which cast the low unemployment in too positive a light.

    “Assessments of the degree of remaining slack in the labor market need to become more nuanced because of considerable uncertainty,” Yellen said, reminding the audience that in 2012 the Fed had caveated that, “factors determining maximum employment ‘may change over time and may not be directly measurable.’”

    More variables, more math, more clarity? Not hardly. OK – that was a pretty extensive history lesson. But sometimes the setup is key to understanding the outcome.

    Once again, the markets are heavily anticipating Yellen’s 2016 Jackson Hole speech. Will she posit that the LMCI was flawed at inception to now justify a rate hike? Her baby, so to speak, has been wailing for six straight months, the longest slide since the end of the 2009 recession.

    At this year’s June 15th press conference, Yellen once again highlighted the importance of the context of the current backdrop, which has apparently rendered the LMCI, “a kind of experimental research product.” Is it any wonder the media characterized her remarks as “bipolar”?

    The question is, what went wrong, if anything?

    The nature of the LMCI’s components is a good starting point. As a recent Goldman Sachs report detailed, “The LMCI inputs are detrended, and the estimated trends likely ‘soak up’ some of the growth in labor market activity (such that only growth in excess of the trend contributes positively).” Yours truly added the emphasis as this ‘detrending’ is key to explaining away the alarm emanating from the LMCI.

    The Goldman report goes on to say that labor market indicators tend to level off in the middle of an economic cycle even as trends continue on their established pathways, driven by momentum: “The LMCI in effect reflects a combination of the rate of change in labor market conditions – the first difference – as well as recent acceleration or deceleration – the second difference.”

    Did someone mention ‘Nuanced” with a capital ‘N’?

    And then there are the actual inputs. The index’s 19 indicators endeavor to capture movements not just in job creation, but underemployment, wages, worker flows and both consumer and business surveys. A few examples help to illustrate.

    The National Federation of Independent Businesses queries small businesses on their hiring plans and whether it is hard to fill open positions. So fairly straight forward, forward-looking indicators.

    Then you have temporary employment, which once provided a reliable signal on the direction of nonfarm payrolls to come. But temps have lost some of their predictive powers in a world increasingly dominated by firms cutting costs where they can, even if it entails classifying near-permanent employees as temporary to reduce benefit expenses.

    The same goes for new help-wanted ads, which have been trending down for a year now. Not to worry, says the Fed itself, whose economists recently debunked fresh postings as unreliable given Craigslist’s near doubling of fees since the end of 2012. The rising costs associated with advertising thus distills the message in the mere four percent rise in postings through yearend 2015 in the help wanted data vs. the 48 percent rise in the job openings data series. We’re supposed to file that one in the “If you say so” file.

    Finally, you have the distinct ‘job leavers unemployed for less than five weeks,’ which is buried in the household survey, and the now-beloved ‘quit rate’ from the monthly job openings data. Workers having the hutzpah to tell their employers where they can put their cruddy job is measured by the quit rate. When the rate rises, it tends to coincide with a high degree of confidence that you can storm out one door and waltz into another in a short timeframe. So a rise in unemployed for less than five weeks is thus a good thing reflecting workers’ certainty about the job market’s prospects.

    While the unemployed-for-less-than-five-weeks metric has held up of late, the quits rate has fallen. So call this a wash for the moment. In addition, net hiring plans have come off their highs, concomitant with the decline in the number of job openings. These data are released with varying degrees of lag, which can be frustrating for the impatient type who’d prefer to not be sideswiped by a data miss.

    That brings us to perhaps the best indicator of what’s to come, which cannot be explained away, though it too comes from help wanted ads. You may recognize the name Jonathan Basile, AIG’s Head of Business Cycle Research. As his pragmatic title suggests, he is duty bound to have a crystal clear crystal ball.

    Let’s just say we should all adopt one of his favorite indicators on the labor front, the reposting of job positions. Just about every anecdote we’ve heard in recent years has touched on the dearth of skilled labor. As that slack was absorbed, it became increasingly difficult to source good talent. What to do if you can’t fill a position? Well, you repost it until it does get filled. That way you succeed in achieving your original goal of growing that top line by satisfying the incremental demand that triggered the need for a new hire in the first place.

    You see where this is going. If you no longer need to repost that position while the hiring rate is falling…well you get the picture, a picture that’s come into increasing focus since repostings peaked last November.

    “When companies stop reposting help wanted ads, it means they’ve given up on adding additional headcount,” Basile said. “It’s a more cautious signal about the outlook. It means their balance sheets can’t handle the additional labor costs. This is what happens when revenue and earnings headwinds bleed into the labor-intensive parts of the economy, like construction and services.”

     

    Revenues? Earnings? Those certainly don’t sound like economic data points. They sound so much more real.

     

    “Labor sits at the intersection of revenues and earnings because it is the biggest cost on corporate balance sheets,” Basile continued. “Many sell-side nonfarm payroll (NFP) models show labor begetting labor – labor data used as inputs to generate NFP as the output. But in business, balance sheets beget labor. You increase or decrease your headcount based on what your revenues and earnings do, the source that pays for labor. How is this left out of the equation?”

    Great question. The conclusion: the earnings recession we’ve been told to ignore is, after all, relevant. Get it, got it, good.

    You will recall that the bright spot in the awful GDP report was consumption. Hate to go out on any limbs here, but it’s pretty hard to consume if you don’t have a job.

    “All it takes is another shock to tip this one-legged pirate of an economy over,” Basile worries. “That’s why I’m on 100% watch.”

    We should probably all be watching Yellen’s math as she shoves the jobs data around until it’s contorted enough to fit her agenda’s perfect picture frame. Not so perfect are the prospects for those ungainfully employed who are apparently a figment of our collective imagination. They can only dream of a world where jobs are plentiful enough to not-so-respectfully request their employer take their job and shove it.

  • Hyperinflation Defined, Explained, and Proven

     

     

     

     

     


    Hyperinflation Defined, Explained, and Proven


    Written by Jeff Nielson (CLICK FOR ORIGINAL)
     

     


     

    Regular readers already know that hyperinflation is not merely an economic “threat” looming in our near future, it is a certainty. Indeed, it has already occurred. Sadly, the term “hyperinflation” is still widely misused, and thus widely misunderstood. Definition of terms is required.


    The reason why the term “hyperinflation” is widely misused/misunderstood is a very simple one. It is because the term “inflation” is widely misused/misunderstood. If one does not have a clear grasp of the concept of inflation, obviously it is impossible to have an adequate comprehension of hyperinflation.


    Inflation is an increase in the supply of money. That is the economic definition of the term. It is the only correct definition of the term. It is a derivative of the verb “inflate”: to increase (i.e. inflate) the supply of money.


    The term “inflation” is widely, erroneously, and (in the case of central bankers) deliberately misused as meaning an increase in the price of goods. But this price inflation is merely the direct and inevitable consequence of the initial act of inflation: the increase in the supply of money.


    Thanks to decades of brainwashing (and the fraudulent “inflation” statistics which came along with that), this simple but important distinction is almost beyond the comprehension of most readers. Yet it is a concept which is already well-understood in the realm of our markets. It is the concept of dilution.


    When a company prints up a new share, it has diluted its share structure, and the value of all shares in circulation falls commensurately/proportionately. This is nothing more than elementary arithmetic. If a company which originally had a share base of 1,000,000 increases the number of shares to 2,000,000, the value of all those shares decreases by 50%. If we priced the world in terms of the value of our shares (rather than the bankers’ paper), the dilution of the share structure would automatically result in proportionate price inflation.


    This concept applies directly and identically to our monetary system. If a central bank prints up a new unit of its (un-backed) fiat currency, it dilutes its monetary base, and the value of all units of currency already in existence falls. It is the fall in the value of the currency through diluting that currency which directly translates into higher prices: price inflation. Yet incredibly (thanks to our brainwashing) this elementary concept is not accepted. A simple allegory is necessary.


    Let us all journey to Gilligan’s Island: a closed system, and a small population – ideal for our purposes. But let us change one detail. For the sake of mathematical convenience, we will assume that there are ten “castaways” on the island rather than only seven.


    Even among the residents of the island, some commerce takes place. Mr. Howell, the island’s resident banker, suggests that they create their own currency, on the hand-operated printing press he happened to have in his luggage.


    He dubs this currency the Coconut Dollar, and each resident is issued ten Coconut Dollars. No new currency is created, i.e. the monetary base is perfectly flat. Under these circumstances, there would never and could never be any (price) “inflation” on Gilligan’s Island – ever.


    Initial prices (in Coconut Dollars) would be determined by the relative preferences of the residents, and unless those preferences changed, prices would remain absolutely stable, because the amount of currency in circulation was not increasing – i.e. there was no inflation.


    Then circumstances change. Mr. Howell, now the island’s central banker, tells the island’s residents that they should not have to endure such a meager standard of living. He tells the other residents he can raise their standard of living by printing more Coconut Dollars, in order to create “a wealth effect”.


    He issues all the residents 40 more Coconut Dollars. The island’s residents now all have 50 Coconut Dollars. They all feel much “wealthier”. But what happens on the island?


    The residents’ preferences for goods have not changed. Mary Ann bakes one of her highly-prized, coconut-cream pies, slices it into ten pieces, and (as she always does) offers slices for sale. After months/years of baking and selling pies, the standard price for each slice has always been one Coconut Dollar.


    The Skipper, who has a much larger appetite than the other residents, and now five times as many Coconut Dollars in his pocket decides he wants to increase his own share of slices. He offers Mary Ann two Coconut Dollars for a slice. But all the other residents also have five times as many Coconut Dollars in their pockets, and they match the Skipper’s price, in order to maintain their own level of consumption. The “price” for a slice of coconut-cream pie is now two Coconut Dollars.


    The Skipper, with still a large surplus of Coconut Dollars in his pocket tries again to increase his share, by raising his ‘bid’ to three Coconut Dollars. The other residents again match that offer, and the price-per-slice increases to three Coconut Dollars. This process continues until a new price equilibrium is established for coconut-cream pies, as well as all the other goods bought/sold by the residents.


    With the supply of goods on the island being fixed, the island’s residents would soon allocate all of their additional Coconut Dollars, and new (much higher) “standard” prices would emerge. Naturally, no increase in their standard of living ever takes place. The “wealth effect” is purely an illusion. At that point; there would never be any additional price inflation, unless/until Mr. Howell printed even more Coconut Dollars – and “inflated” the monetary base, again.


    Inflation does not appear out of thin air, conjured by magical fairies, as the lying central bankers would have us believe. It is
    always and exclusively a product of their own (excessive) money-printing. That is “inflation”, in the real world. Hyperinflation, by obvious extrapolation, is the extremely excessive money-printing of the central bankers.


    Skeptics and (central bank) Apologists will remain unconvinced. They will point out that “the real world” is a place which is much more complex than Gilligan’s Island, and thus the allegory carries no weight.


    Yes and no. Yes, the real world is much more complex than Gilligan’s Island. No, the allegory loses none of its validity as a result, because the underlying principles can be (easily) incorporated into the real world.


    Our real world is a world with a steadily increasing population, and a steadily increasing supply of goods to meet the needs of that growing population. But it is still a fixed system. It is not Gilligan’s Island, it is the Island of Earth.


    This is how the dynamics of our previous allegory translate onto the Island of Earth. While our population is growing at an alarming rate (from a long term perspective), the annual rate of growth is a low, single-digit number, generally in the 1 – 2% range. The supply of goods increases at a roughly parallel rate – to meet the demand of this (slightly) growing population.


    In economic terms; this is known as “the natural rate of growth”. Equally, it can be described as the sustainable rate of growth. In a finite system, with fixed resources, growth beyond that “natural” rate is both artificial and unsustainable.


    In our monetary system; if the central bankers restrain their level of money-printing to this natural rate of growth, i.e. if central bank inflation matches this rate of growth, then there would, could, and should be no price inflation in the world. The rate of growth in the supply of currency matches the rate of growth in population/goods, and thus price equilibrium can be maintained.


    It is very interesting to note that over the long term, the increase in the global supply of gold has always roughly paralleled the natural rate of growth. This is but one of many reasons why a gold standard, i.e. a gold-backed monetary system, is the optimal basis for our monetary system.


    Robbed of our gold standard in 1971, by Paul Volcker and his lackey Richard Nixon, the central bankers have been free to print their fraudulent paper currencies at will. The “Golden Handcuffs” so despised by John Maynard Keynes have been removed.


    Cautiously, at first, and then with steadily more-reckless abandon, the central bankers have accelerated their money-printing. This has culminated with what readers have already seen on many occasions: the Bernanke Helicopter Drop.

     


     

    As has been explained before; this is the literal, mathematical representation of hyperinflation: the exponential, out-of-control expansion of a nation’s money supply. As readers now know, the monetary base of any legitimate economy (and monetary system) is supposed to be a horizontal line, as we see with the U.S. monetary base (and other currencies) in all the decades during which we operated under some form of gold standard.


    As soon as the last remnant of our gold standard had been eliminated, the horizontal line began to acquire an upward slope. This in itself was visual/mathematical proof that the U.S. dollar, now just an un-backed fiat currency, was being diluted to worthlessness – at a linear (i.e. gradual) rate.


    Then came the Crash of ’08. What was an upward sloping line became a vertical line: conjuring new currency into existence at literally a near-infinite rate. When the horizontal line of a nation’s monetary base is transformed into a vertical line, this is absolute, conclusive proof that hyperinflation has already taken place: the extreme and irreversible dilution of a currency to worthlessness.


    Again, the Skeptics and Apologists have their obvious retort. If the U.S. dollar has already and “irreversibly” been diluted to worthlessness, why has its exchange rate not fallen to zero/near-zero? The glib and succinct reply to that question comes in two words: currency manipulation.


    The Big Bank crime syndicate has been criminally convicted of manipulating all of the world’s currencies, going back to at least – you guessed it – 2008. However, this is only a small portion of the complete answer to that question. A more comprehensive reply will be the starting point of the next installment of this series.

     

     

    Please email with any questions about this article or precious metals HERE

     

     

     

     

     

     

    Hyperinflation Defined, Explained, and Proven


    Written by Jeff Nielson (CLICK FOR ORIGINAL)
     


  • Why We Need a Much Better Plan Than Diversification to Survive the Next Couple of Years

    The first time I’ve made the above claim was well over a decade ago, and I’ve stated it many times since, and this time probably won’t be the last time I discuss this topic. However, this year is an especially easy year to make this argument. If commercial fund managers are so insistent that diversification strategies work, then why have the bulk of them completely ignored the best performing asset class of 2016? What kind of diversification is that? (I will refute some of the better-known arguments in response to this question later in this article, so stay tuned.)

     

    Consider that despite the stellar performance of gold mining stocks this year that have been, by far, the strongest performing asset class of 2016 (along with silver mining stocks), and that even with the massive growth in market cap of PM stocks during H1 2016, the total market cap of all the mining stocks that comprise the HUI Gold Bugs index, as of 2 August 2016, is still barely larger than 1/3 the market cap of Facebook and Amazon. In fact, we could own every single company in the entire HUI gold bug index, and their total market cap would incredibly be less than 1/4 the market cap of one company, Apple. Should Apple’s market value really be in excess of 4-times the market value assigned to of all the gold reserves and resources held by all the companies that comprise the entire HUI gold bugs index? Should Facebook, a glorified advertising company masquerading as a social networking organization that produces no tangible product, really possess a market value nearly 3 times all the gold mining companies that comprise the HUI Gold Bugs Index? The market will tell us that the answer to both these questions is yes. In my opinion, however, the answer to both of these questions is a resounding no, and I believe that within the next couple of years, the market will violently correct these misconceptions. So even with the great run higher in the prices of gold (and silver) mining share prices, the market is still underpricing these shares considerably.

     

    In my opinion, there is no better inventory for a company to own, given the grave fragility of the global banking and finance system, than the only real, sound money in the entire world, proven and probable reserves of physical gold and physical silver. (Sorry, BTC enthusiasts, the answer is not bitcoin, even though I fully support open currency competition, including all cryptocurrencies. However, the recent 30% dump in the price of BTC in just 2 days, after Hong Kong BTC exchange Bitfinex was hacked and nearly 120,000 BTCs were stolen, deftly illustrates that there is no substitute for physical gold and physical silver. While BTC will rebound in price from this event as it has in the past from similar events, and cryptocurrencies provide a good mechanism to move currencies around the world outside of the authority of governmental capital controls and tracking, they still leave a lot to desire in terms of fitting the “sound money” definition. Just perform a Google search of the formerly most hated female at JP Morgan, “Blythe Masters” and “cryptocurrencies” to understand how bankers are trying to transform the use of digital currencies into just another tool of control.) Yet, despite the reality of PM Mining Stocks being the best performing asset class by far in the stock world this year, nearly every commercial bank and commercial brokerage fund manager completely avoids the asset class of Precious Metal mining stocks like it is kryptonite, and in fact, most of the time, refuses to even acknowledges the existence of this unique asset class, despite a supposed commitment to diversification.

     

    As those of you that have been following my writings since 2006 know, including the more than 600 postings on my blog, I used to work at a Wall Street firm more than 10 years ago, before I quit in disgust after witnessing systemically fraudulent practices. However, it may surprise you to discover that I considered portfolio diversification strategies to be one of these systemically fraudulent practices. Before any of you doth protest too much about this conclusion, let me explain the rationale for my inclusion of diversification strategy among the other much better known systemically fraudulent practices regularly engaged in by big commercial brokerage firms and banks.

     

    Most people never ask their financial advisers about their educational backgrounds, and just assume that their adviser retains a certain level of investment expertise. I guarantee you 100% that this assumption is incorrect. In fact, one of the most surprising aspects I learned about financial advisers while working for a Wall Street firm back in the day was the enormously diversified pool of educational and professional backgrounds from which managers plucked their team of financial advisers. Some of my peers came from liberal arts background, teaching backgrounds, government/political policy backgrounds, sports backgrounds and science backgrounds just to name a few. And what was my background? I majored in neurobiology as an undergraduate. Sure, I later obtained an MBA with a concentration in finance, but I also guarantee you that this advanced degree taught me next to nothing about intelligent investment strategies. Instead, I learned a bunch of theories that don’t even apply in the real world of dark pools and computer HFT algorithm controlled markets. In fact, back then, my manager that hired me seemed more interested in the psychological profile I completed as part of the application process versus my possession of any real investment advisory qualifications.

     

    At this point, most people will inquire about a firm’s training program, believing that this program provides the necessary skills for financial advisers to formulate intelligent strategies under all market conditions and not just raging, bloated, Central Banker induced price distortions higher. Again, this assumption would be wrong. Our training program, by my estimation, was 90% focused on closing sales techniques to capture AUM (Assets Under Management) and block and bridge techniques to overcome client objections during the closing process versus the development of any real strategic investing acumen. Of course, many among us may be reading this, thinking “tell me something I don’t already know”, and if so, this article is not intended for you. However, every single year, I still casually meet loads of people that tell me the most important part of their wealth building plan is diversification. This article is intended for this subset of people.

     

    But I digress. So how did so many people with little background, if any, in investing and/or finance, and some with no background at all, become the most successful financial advisers at the firm (as measured by AUM fees generated), you may wonder? That is an excellent question that took me a little while to discover the answer to as well. During my years spent in the commercial investment world, I came to the conclusion that diversification strategy was by far, the most important key to not only the success of firms in capturing hundreds of millions in AUM, but also the key to preventing assets from leaving during down years as well. If every commercial firm utilized the same diversification strategies, then in up years, every firm’s financial advisers more or less returned the same yields within a tight range to their clients, and in down years, every firm’s financial advisers more or less returned the same losses within a tight range to their clients. If every other firm lost roughly the same percentage of money for their clients in a down year, why bother jumping ship to a competing firm if you were a client, right? Thus the industry-wide adoption of portfolio diversification strategy was not executed to benefit clients, as is sold to naive clients, but done to benefit the firms within the industry in maintaining AUM fees.

     

    You see, it really didn’t matter at all if a financial adviser knew what they were doing, because selling diversification strategies to clients made it sound like they knew what they were doing, which was an infinitely better proposition for commercial investment firms than employing financial consultants that actually knew what they were doing. Yes, the analogies to convince clients of diversification strategies were clever, like comparing the necessity of a diversified stock portfolio to the necessity of a diversified, well-balanced diet that consisted of some protein, some fats, and some carbohydrates. The only problem with this analogy, no matter how clever it was, is that it has always been patently untrue.

     

    Consider the global stock market crashes that afflicted the world in 2008. No matter how well someone’s US stock portfolio was diversified that year, if they remained invested in any diversified portfolio that mirrored US stock market indexes like the S&P500 or the Dow Jones Industrial Average, as is the overwhelming case with portfolio asset allocation among fund managers, they lost 40% or more that year in their diversified portfolio. In 2008, we maintained a very concentrated SmartKnowledgeU Crisis Investment Opportunities portfolio allocated to just a couple of asset classes, and we ended up the year with not a lesser 20% loss against the 40%+ losses of a diversified US S&P500, but we ended up with slightly positive yield for the year. And if diversification is such a wealth protective strategy, can you guess which commodity firms declared the largest impairments to their balance sheets by far in 2015? The most diversified ones: Glencore, Vale, Freeport and Anglo-American. These four massively diversified mining giants declared cumulative impairments in 2015 that nearly totaled $36 billion. Of course, one of the reasons their declared impairments were so massive was simply due to the giant size of these corporations, but the fact of the matter is that diversification of their business segments into many different commodities didn’t help these companies from suffering massive losses in 2015 and diversification didn’t prevent US stock portfolios from crashing in 2008.

     


    So why exactly is diversification such a great strategy if it only works when a bubble is building but fails miserably to preserve wealth when a bubble implodes or a significant downturn occurs? The reason commercial investment firms and commercial banks all over the world, no matter if they are located in Cologne, Madrid, Reykjavik, Buenos Aires, New York, London, Wellington, Melbourne, Toronto, Vancouver, Montreal, Shanghai, Kunming, Hong Kong, Singapore, or Nairobi try to convince all clients to embrace diversification strategy as an essential part of their wealth building plan is not because it actually works, but because it covers up the weaknesses and flaws of an unqualified financial consultant. Diversification strategies appeared to have “worked” during the golden years of the 1980s and 1990s, simply because US stock markets were returning 17% to 18% every year on average during those two decades and Stevie Wonder could have pointed to a bunch of stocks from a newspaper listing the components of the US S&P500 during that period and likely would have fared very well. Thus, the “success” of diversification strategies was confused with luck during these times and such a strategy even provided incompetent financial consultants with a cover of credibility as it empowered them with an undeserved veneer of competency. However, the ability to sell the appeal of diversification, as I explained above, completely changes when yield becomes much more difficult to achieve than just throwing darts at a board, and one really has to understand market risks to formulate strategies that can produce significant yield during difficult times. At this point, reliance on a diversified bubble of assets to further significantly inflate to produce yield pulls the curtain back on the diversification scam.

     

    As Credit Suisse’s Andrew Garthwaite discovered, during these times, the weakness and low utility of diversification is really exposed. If a strategy only works when everything is working but doesn’t work in years when times are tough, then I would argue such a strategy is a bad strategy. Just last month, it was reported that Credit Suisse strategist Andrew Garthwaite lamented dismal yields for the past couple years in a client report, writing that “his team has come across almost no one who seems to have outperformed or made decent returns this year” and “we have never had so many client meetings starting with statements such as ‘we are totally lost’.” The reason that Garthwaite’s team cannot find anyone that has made decent returns this year and are totally lost is because his team is likely diversified in the types of asset classes that only work when stock markets are not price-distorted bubbles. Garthwaite’s team’s failure to perform this year likely is due to their refusal to deviate from past strategies and their likely failure to concentrate on only asset classes that are highly undervalued, such as PM mining stocks.

     

    Garthwaite’s commentary takes me back to a conversation I had with a top producer in my office when I worked for a Wall Street firm back in the day. Back then, when I asked this top producer how to become successful, he answered (and I’m paraphrasing here to the best of my memory) that I should not waste any more than 10 to 15 minutes making asset allocation decisions once I closed on a large account. I remember him being very explicit that the pathway to success was to focus on closing 1M+ AUM clients and to not “waste time” on asset allocation decisions, instead taking no more than 10 to 15 minutes to assign this responsibility by making four phone calls to four pre-picked portfolio managers, a small-cap, a mid-cap, a large-cap and an international stock manager, each of whom should receive 25% of the account’s assets. From there, my job as a financial adviser was done, and my role, if I wanted to be successful, was to go out and capture the next $1M or $5M to build my cumulative AUM figure. And with building my AUM total, this was the way to keep the firm happy and be rapidly promoted. In fact, I often heard stories of a new “star” financial adviser arriving at our firm after blowing up their clients’ portfolios at another competing firm. When I would ask why such a person would be given a bonus of 1M+ to come to our firm if they lost considerable amounts of money for all their clients at a previous firm, the answer I heard time and time again was because such a person was awesome at building AUM. After hearing this advice from a top producer and hearing these stories, there was no longer any question in my mind that the diversification strategy was a systemic scam of the financial industry.

     

    At SmartKnowledgeU, I spend hundreds of hours every year determining my asset allocation models for my Crisis Investment Opportunity newsletter and my Platinum Member portfolio. Furthermore, I spend a minimum of 400+ hours a year to produce the bi-annual reports that I send to every Platinum Member that includes analysis and purchase price points for several dozen gold and silver mining stocks that trade on various global stock exchanges that I conclude are among the best in the world. The point is that I discovered that most commercial investment firms could care less if their financial consultants/ advisers know next to nothing about investing, and spend less than 10 minutes per client in determining a client’s asset allocation, as long as they are racking up the AUM fees. If one’s counterargument to this fact is that this particular task is the job of a portfolio manager, then (1) why assign such misleading titles like “financial consultant/adviser” to their employees when salesman is a more appropriate title; and (2) why does nearly every portfolio manager employed by commercial investment firms stick to low-utility diversification strategies that consistently underperform non-managed, passive index funds year after year?


    More than a decade ago, during my meetings with these portfolio managers, if I inquired as to whether the manager had any gold and silver mining stocks in his “diversified” portfolio, the fund manager always answered no. When I probed further, they stated that they never considered gold and silver mining stocks because their small market capitalization made them “too risky”, even if they were a small-cap portfolio manager. The large-cap managers stated that they may consider well-diversified, large-cap, mining stocks like BHP Billiton for inclusion in their portfolio, but that they couldn’t consider other mining companies solely focused on gold or silver production because their smaller-cap size and share prices didn’t meet their fiduciary mandate. Again, I understand if a large-cap fund manager that is restricted by a fiduciary mandate can not buy any PM mining stocks, but small-cap portfolio managers that also avoided PM mining stocks like they were the plague always provided excuses that were pure rubbish. Remember, I last worked in the commercial banking and investment industry over a decade ago, when the bull market for gold and silver was just getting started and the best gold and silver mining stocks were soaring in share price. Most likely, small-cap portfolio managers utilized the too much “risk” excuse back then to mask an utter lack of knowledge regarding how to properly assess a gold and silver mining stock’s value and upside potential.

     

    Back then, there were junior gold and silver mining companies that were a fraction of the market cap of their much larger-cap mining peers that had much stronger management, had managed geopolitical risk in a superior manner, and had streamlined operations to a far greater degree than their larger-cap peers that were not huge risks. Today, these arguments are even more applicable, and one can find junior gold and silver mining companies that are much better bets than their larger cap peers. I have uncovered many instances in the gold and silver mining world in recent years of smaller cap companies that acquired gold and silver mining operations from their much larger peers and

    (1) turned around the operations of a PM mine that was woefully mismanaged by their larger peers,

    (2) improved recovery rates of the metals,

    (3) increased exploration and successfully increased reserves and resources, and

    (4) even improved the grade of ore being mined with the employment of different mining techniques and the sale of non-core assets.

     

    In a day and age in which regular asset classes that commercial portfolio managers normally consider have become overwhelmingly bloated in price as a consequence of the persistent and extended cheap money policy of global Central Bankers, an investment strategy of concentration in few select still undervalued assets versus diversification is likely the only strategy that will work moving forward in returning significant yields. As support of this thesis, just read some of the archived links I’ve provided below. In conclusion, when managers refuse to buy gold and silver mining stocks in their “diversified” portfolio because they consider them too “risky”, even in an environment in which they admit nothing is working, maybe it’s time we should dig a little deeper to learn the truth behind their refusal to ever deviate from their stubborn adherence to diversification strategies that don’t work. If fund managers are trying to pass off some of the best safest assets today as risky, simply because their mandates restrict them from investing in them, then it’s time for us to take back control of our own wealth management. Currently, there are a lot of junior gold and silver mining companies I would rather own moving forward for their upside potential of their valuation versus owning Facebook and Amazon, and frankly, we should all feel the same way as well.

     

    More recent articles from SmartKnowledgeU:

    Can You Imagine the Mass Media Headlines if the S&P500 Index Were Experiencing the Same Year as Gold and Silver Stocks?

    The Current Fall in Gold and Silver Prices Will Prove to be Just a Lull in a Continuing Uptrend That Started Last Year

    Proof that the Largest Gains in the Best Gold and Silver Mining Stocks are Still Ahead

     

    About the author: JS Kim is the Managing Director and Founder of SmartKnowledgeU, a fiercely independent research, consulting and education firm that focuses on gold and silver asset investment strategies as a means of countering the damaging effects of rapidly devaluing fiat currencies worldwide and price-distorted stock market and asset bubbles created by Central Bankers. YTD, his Crisis Investment Opportunities newsletter has more than tripled the yield of the US S&P 500 after also returning positive yields last year, at a time in which the HUI gold bugs index declined by more than 50% from January 2015 to January 2016.

  • Not "The Onion": Argentina's Fernandez Says She Deserves A Nobel Prize In Economics

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    Cristina Fernandez de Kirchner, former First Lady and President of Argentina (2003-2015), confessed in an interview that “instead of having the courts chase us, they should be giving us a Nobel prize for economics… We inherited a country in default and we left it without any debt. ” Brilliant.

    Amongst her accomplishments, Cristina boasts one sovereign debt default after failing to negotiate with creditors (2014), cooking the national economic figures for 8 years, an IMF censure for faking such data, devaluing her currency from 4:1 to 15:1 USD, and leaving her successful with 50% inflation. Perhaps the BoJ could use her advice?

    She and her cabinet have also been the subject of multiple corruption scandals following her departure of office. She has naturally expressed shock, condemned any corrupt officials and denied any knowledge of such actions.

    For those who like to focus on her track record,  Bloomberg has compiled a helpful GDP growth that compares GDP in Cristina’s mind versus GDP growth in the real world.

    To her credit, she has a chance… the Nobel committee did award Paul “we need a bigger housing bubble” Krugman the Economics Nobel and Barack Obama the Nobel Peace prize…..

  • Goldman Finds The Treasury Market No Longer Reacts To Economic Data

    For all the younger traders in our audience, we would like to inform you that maybe not now, but once upon a time, markets actually used to respond to economic data.  That includes both stocks as well as the market that has been historically considered far “smarter” than equities, the Treasury market. Sadly, as central banks took over, the significance of economic data released declined until recently it has virtually stopped mattering, something we predicted would happen back in 2009 when we warned that soon the only financial report that matters is the Fed’s weekly H.4.1 statement.

    Today, some six years later, Goldman picks up where we left off nearly a decade ago, and asks “Does the Treasury Market Still Care about Economic Data?”

    What it finds is simple (and something even the most lay of market observers these days could have told them): no.

    As Goldman’s Elad Pashtan writes, “the sensitivity of US Treasury yields to economic data surprises has declined to near record-lows over the last two years. We find that the pattern of reactions to data surprises across the yield curve matches pre-crisis norms—with higher sensitivity for short-term rates than longer-term rates—but the average reactions are much lower; for breakeven inflation reactions to growth data are not discernible from zero.”

    So if it is not the economy, then what does the “market” respond to?  Take a wild guess:

    In contrast, Treasury yields have reacted more strongly to Fed communication, at least according to one measure of policy surprises, and the sensitivity of exchange rates to activity news has increased.

    Here are the details:

    Economic data “surprises”— the difference between reported values for major economic indicators and consensus forecasts—have had a limited impact on US Treasury yields lately. Typically, Treasury yields rise on news of stronger-than-expected economic growth as investors anticipate either higher inflation and/or tighter monetary policy, and fall on news of weaker growth as markets discount lower inflation and/or easier monetary policy. In recent months, yields have had a much smaller reaction than normal to these types of data surprises. In Exhibit 1, we show the estimated impact of a 10-point surprise in our MAP index—a scaled measure of US growth surprises—on Treasury yields by year, controlling for changes in both risk sentiment (using the VIX index) and oil prices. The impact on 2-year yields has fallen to the lowest level since 2012, and the impact on 10-year yields has fallen to the lowest level since our dataset begins.

    Treasury Rates Becoming Less Responsive to Data Surprises

    Here Goldman expresses its confusion: “The limited impact of data surprises on rates is surprising given that the funds rate is no longer pinned at zero, and the Federal Reserve is actively considering further rate increases. When the funds rate was at the zero lower bound (ZLB) and the Fed was easing policy through forward guidance and QE, investors rightly saw little prospect of near-term rate hikes, even if the economy firmed meaningfully. The responsiveness of short-term Treasury yields to data surprises picked up as the Fed approached liftoff last year, but has since retreated back to ZLB levels.”

    Actually, the reason for the collapse in the market’s response is precisely because the same “market” no longer believes the Fed, or its reaction function, and as a result is no longer as concerned about rate hikes, as it was for example in 2015.  Where things get even more confusing is that over the past several years, Fed policy has been largely driven by the market itself, which however no longer responds to the data but merely to the Fed, creating the most diabolical and reflexive “circular reference” in capital markets existence.

    That particular discussion is the topic of a separate post, however.  For now we are more interested by Goldman’s “amazement” at something that had been largely obvious to most non-academics. Here is Goldman’s attempt to “explain” this phenomenon.

    One possible explanation for this phenomenon is that investors are now more focused on Fed communications, rather than to economic data releases—perhaps due to uncertainty about the central bank’s reaction function. And we do see some evidence along these lines. For example, we can use the same regression framework, but replace the MAP score variable with a measure of monetary policy surprises. We quantify monetary policy surprises using the correlation in daily returns across asset classes. Unexpected monetary policy changes create a particular pattern in market returns, which allow us to isolate them from growth and inflation shocks, and estimate their relative magnitudes over time (for further details see here). We calculate policy shocks using average correlations from 2000 through 2016 (i.e. the principal component loadings are fixed over this time period), so the regression results can be thought of as how the reaction in rates differs from the sample average. When we apply this regression to nominal forward rates on FOMC meetings and minutes release days, we see that interest rates have indeed become more sensitive to monetary policy events—both today and during the crisis—than they were during the pre-crisis era (Exhibit 3).

    Treasury Reactions Similar but Larger to Monetary Policy Surprises

    While most of Goldman’s analysis is commonsensical, they do find an interesting tangent, namely that as the “sensitivity of the Treasury curve to data surprises has declined, the sensitivity of the dollar has increased.” So are we all now just one big FX-trading family? Here’s Goldman

    Why are investors no longer reassessing their inflationary outlook in response to economic data? One possible explanation relates to investor perceptions about divergent global monetary policy regimes. While the sensitivity of the Treasury curve to data surprises has declined, the sensitivity of the dollar has increased: since mid-2014 the dollar has been roughly twice as sensitive to data surprises compared to pre-crisis levels (Exhibit 4, right panel). This result hints that investor may be focused on the effects of dollar pass-through to domestic prices, such that breakeven inflation remains stable even as activity data surprises markets (though we would note that the implied effects are larger than our normal pass-through estimates would suggest, and much more persistent as well).

    Breakevens no Longer Sensitive to Data, but Dollar Sensitivity Higher

    Summarizing Goldman’s findings:

    we find that that the sensitivity of nominal Treasury yields to US economic data surprises is currently very low, despite the fact that the FOMC has hiked once and is considering further increases. The reaction of breakeven inflation in particular is not discernible from zero. At the same time, Treasury markets appear more sensitive to Fed communication—at least according to one measure of policy surprises—and the dollar is reacting more strongly to activity data. Although it is difficult to draw strong conclusions, there could be a few explanations behind these disparate facts, including (1) higher uncertainty about the Fed’s reaction function, (2) investor focus on exchange rate appreciation and pass-through to domestic prices, and (3) low confidence that cyclical forces will lift domestic inflation.

    While we are genuinely surprised at Goldman’s surprise to the bond market’s lack of a reaction to surprises, we would add a (4): the market, in its conventional role of a discounting mechanism which is constantly calibrated by processing an near infinite amount of information about the future, no longer does that and is simply responding to the latest statement or act by the Fed which – paradoxically – is reflexively responding to the market (especially if the market is selling off). Which is why on occasion you will find us writing it as market, because thanks to the Fed, it no longer exists.

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Today’s News 3rd August 2016

  • The End Of IMF Credibility (Or Why Christine Lagarde Should Be Fired… But Won't Be)

    Submitted by Raul Ilargi Meijer via The Automatic Earth blog,

    The IMF’s Independent Evaluation Office (IEO) issued a report a few days ago entitled ‘The IMF and the Crises in Greece, Ireland, and Portugal’. It is so damning for managing director Christine Lagarde and her closest associates, that it’s hard to see, certainly at first blush, how they could all keep their jobs. But don’t be surprised if that is exactly what will happen.

    Because organizations like the IMF don’t care much, if at all, about accountability. Their leaders think they are close to untouchable, at least as long as they have the ‘blessing’ of those whose interests they serve. Which in case of the IMF means the world’s major banks and the governments of the richest nations (who also serve the same banks’ interests). And if these don’t like the course set out, a scandal with a chambermaid is easily staged.

    But the IEO doesn’t answer to Lagarde, it answers to the IMF’s board of executive directors. Still, despite multiple reports over the past few years out of the ‘inner layers’ of the Fund that were critical of, and showed far more comprehension of events than, Lagarde et al, the board never criticizes the former France finance minister in public. And maybe that should change; if the IMF is to hold on to the last shreds of its credibility, that is. But that brings us back to “Organizations like the IMF don’t care much, if at all, about accountability.”

    What the IEO report makes very clear is that the IMF should never have agreed, as part of the Troika, to assist the EU in forcing austerity upon Greece without insisting on significant debt relief, in the shape of a haircut, or (a) debt writedown(s). The IMF’s long established policy is that both MUST happen together. But its Troika companion, the EU, is bound by the Lisbon Treaty, which stipulates: “The Union shall not be liable for or assume the commitments of central governments”. Also, the ECB can not “finance member states”.

    If Lagarde and her minions had stayed true to their own ‘principles’, they should have refused to impose austerity on Greece if and when the EU refused debt relief (note: this has been playing out since at least 2010). They did not, however.

    *  *  *

    The IMF caved in (how willingly is hard to gauge), and the entire Troika agreed to waterboard Greece. The official excuse for bending the IMF’s own rules was the risk of ‘contagion’. But in a surefire sign that Lagarde et al were not acting with, let’s say, a “clear conscience”, they hid this decision from their own executive board.

    Moreover, the IEO now says it was unable to obtain key records or assess the activities of secretive “ad-hoc task forces”. “Many documents were prepared outside the regular established channels; written documentation on some sensitive matters could not be located; [the IEO] has not been able to determine who made certain decisions or what information was available, nor has it been able to assess the relative roles of management and staff..”

    One must wonder why the IMF has an executive board at all. Is it only to provide a facade of credibility and international coherence? When it becomes so clear, and -no less- through a report issued by one of its own offices, that its ‘boots on the ground’ care neither for its established policies nor for its board, isn’t it time for the board to interfere lest the Fund loses even more credibility?

    The IMF’s main problem, which many insiders may ironically see as its main asset, is the lack of transparency, combined with the overwhelming power exerted by the US and Europe. And Europe’s grip on the IMF is exactly what the report is about, in that it accuses Lagarde et al of bowing to EU pressure, to the extent that it abandons its own guiding ‘laws’. It acted like it was the European Monetary Fund, not the international one.

    So there’s no transparency, no accountability, and in the end that will lead to no credibility and no relevance. Well, that’s exactly how the EU lost Britain. And that shows where accountability and credibility are important even for non-democratic supra-national institutions, something these institutions are prone to neglect.

    No, there will not be a vote put to the people, no referendum on the IMF. Though that would sure be interesting. What can happen, though, is that countries, even large ones like China and Russia, threaten to leave, perhaps start their own alternative fund. These things have already been widely discussed.

    What is sure is that the US/Europe-centered character of the Fund will have to change. If Washington and Brussels try to appoint another European as managing director (an unwritten law thus far) they will face a rebellion.

    *  *  *

    That next appointment may come sooner than we think. Because Christine Lagarde is in trouble. It’s even a bit strange, and that’s putting it gently, that she’s still in her job. What’s hanging over her head is a 2008 case, in which she approved a payment of €403 million to businessman Bernard Tapie, for ‘losses’ he was to have suffered in 1993 when French bank Crédit Lyonnais supposedly undervalued his stake in Adidas.

    Lagarde is accused of negligence in the case, in particular because she ignored advice from her own ministry (yeah, that does smack like the IMF thing) and let the Tapie case go to a special arbitration committee instead of the courts. That Tapie was a supporter of the Sarkozy government Lagarde served as finance minister at the time makes it juicier.

    So does this: In 1993 Crédit Lyonnais was a private bank. But in 2008, it had been wound up and was run by a state-operated consortium. Therefore, the €403 million ‘awarded’ to Tapie out-of-court was all taxpayers money. Even juicier: in December 2015, a French appeal court overruled the compensation and ordered Tapie to repay the money, with interest.

    What’s peculiar about Lagarde staying on at the IMF is that she is not merely under investigation or even ‘only’ accused of committing a crime. Instead, she has been ordered to stand trial, something she’s spent 8 years trying to avoid. Still, apparently nobody sees any problem in her continuing to act as Managing Director of the IMF.

    That is quite something. And it directly affects the Fund’s credibility. If a president or prime minister of a country, any country, had been ordered to stand trial, the likely procedure would be to temporarily stand down and let someone else take care of government business pending the trial.

    As it stands, however, Lagarde is allowed to sit pretty. And then? Borrowing from the Guardian: “A charge of negligence in the use of public money carries a one-year jail sentence and a €15,000 fine. The CJR is made up of six members of the French Assemblée Nationale, six members of the upper house, the Senate and three magistrates. No date has been set for the hearing.”

    Ironically, negligence turns out to be a very light charge. Someone in Lagarde’s position could have given away or squandered trillions of euros and then be fined €15,000. But then, class justice is alive and well in France. What are the odds that she will be convicted? She’d have to be found with a chambermaid in Manhattan for that to happen…

    *  *  *

    That’s perhaps what the IMF board are thinking too. Whether that’s wise remains to be seen. Hubris rules all these institutions, sheltered as they are from the real world. But the real world is changing.

    Ironically, many people think these changes will reinforce the IMF. Since the Fund can issue a sort of ‘super money’ in the shape/guise of Special Drawing Rights (SDRs), and especially China would seem to like SDRs becoming the world’s reserve currency instead of the US dollar, the IMF in some people’s eyes holds a trump card.

    There may well be an effort to hide private and public debt throughout the planet even more than it is hidden now, through SDRs. We’ll likely see governments and perhaps large corporations issue bonds denominated in SDRs. China seems to think that this could potentially halt much of its capital flight.

    My trouble with this is that it’s either too unclear or too clear who would profit most from such schemes. Even if the next managing director of the IMF is not European, but Asian or African, the puppet masters of the Fund will still be the same western financial ‘cabal’. And I don’t see China or Russia signing up to that kind of control, and willingly expand it by making SDRs far more important.

    Then again, there’s a sh*tload of debt that needs to be hidden, and the whole world is running out of carpet to sweep it under. Then again, Russia is not that indebted. It’ll be hard to get a consensus.

    *  *  *

    But all that won’t help Greece. Let’s get back to that. We left off where Lagarde conspired with the EU, under the guise of preventing contagion, to abandon the IMF’s own rules in order to waterboard the country. Of course, we know, though nobody writing on the IEO report mentions it, that the contagion they were trying to prevent was not so much between nations but between banks.

    The bailout-related policies and actions that Lagarde hid from her own board (!) were designed to make French and German banks ‘whole’ at the cost of the Greek people. It became austerity, so severe as to make no sense whatsoever -certainly inside an alleged ‘Union’-, even if the IMF -not the world most charitable institution- has always banned this without being accompanied by strong debt relief.

    Schäuble and Dijsselbloem saved Germany and Holland at the expense of Greece. This will end up being the undoing of the EU, even if nobody’s willing to acknowledge it despite the glaring evidence of the Brexit.

    It will probably be the undoing of the IMF as well. And there I get back to what I’ve said 1000 times: centralization can only work in times of growth. There is no conceivable reason, other than dictatorship, why people would want to be part of a centralizing movement unless they get richer from it.

    In today’s shrinking global economy, we have passed a point of no return in this regard. Everyone will want out of these institutions, and get back to making their own decisions about their own lives, instead of having these decisions being taken by some far away board with no accountability.

    Let’s end with a few quotes about the IEO report. Ambrose Evans-Pritchard was in fine form:

    IMF Admits Disastrous Love Affair With The Euro and Apologises For The Immolation Of Greece

    The International Monetary Fund’s top staff misled their own board, made a series of calamitous misjudgments in Greece, became euphoric cheerleaders for the euro project, ignored warning signs of impending crisis, and collectively failed to grasp an elemental concept of currency theory.

     

    [..] In Greece, the IMF violated its own cardinal rule by signing off on a bailout in 2010 even though it could offer no assurance that the package would bring the country’s debts under control or clear the way for recovery, and many suspected from the start that it was doomed. The organisation got around this by slipping through a radical change in IMF rescue policy, allowing an exemption (since abolished) if there was a risk of systemic contagion. “The board was not consulted or informed,” it said. The directors discovered the bombshell “tucked into the text” of the Greek package, but by then it was a fait accompli.

     

    [..] The injustice is that the cost of the bailouts was switched to ordinary Greek citizens – the least able to support the burden – and it was never acknowledged that the true motive of EU-IMF Troika policy was to protect monetary union. Indeed, the Greeks were repeatedly blamed for failures that stemmed from the policy itself. This unfairness – the root of so much bitterness in Greece – is finally recognised in the report. “If preventing international contagion was an essential concern, the cost of its prevention should have been borne – at least in part – by the international community as the prime beneficiary,” it said.

    *  *  *

    That would seem to leave the IMF just one option: to apologize profoundly to Greece, to demand from the EU that all unjust measures be reversed and annulled, and to set up a very large fund (how about €1 trillion) specifically to support the Greek people, including retribution of lost funds, repair of the health care system, reinstatement of a pension system that can actually keep people alive and so on and so forth.

    And to top it off of course: debt writedowns as far as the eye can see. You f**k up, you pay the price. This makes me think of a remark by Angela Merkel a few weeks ago, she said ‘we have found the right mix when it comes to Greece’. Well, Angela, that is so completely bonkers it’s insulting, and the IMF’s own evaluation office says so.

    I like this one from Bill Black as well:

    It was only after forcing the Greek people into a pointless purgatory of a decade of disaster that the troika would consider providing debt relief…The only ‘debt relief’ they offer to discuss is a ‘long rescheduling of debt payments at low interest rates.’ This, under their own dogmas, will lock Greece into a long-term debt trap that will materially lower Greece’s growth rate for decades and leave it constantly vulnerable to recurrent financial crises. That is a recipe for disaster for Greece, Italy, and Spain (collectively, 100 million citizens) and for the EU. It is financial madness – and that ignores the political instability it will cause to force an EU member nation to twist slowly in the wind for 50 years.”

    Got that one off of Yanis Varoufakis’ site, and he must be feeling very vindicated, even if not nearly enough people express it, by the IMF report. Because he’s said all along what they themselves are now admitting. But it ain’t much good if nothing changes, is it? Or, as Varoufakis put it:

    [..] to complete this week’s drubbing of the troika, the report by the IMF’s Independent Evaluation Office (IEO) saw the light of day. It is a brutal assessment, leaving no room for doubt about the vulgar economics and the gunboat diplomacy employed by the troika. It puts the IMF, the ECB and the Commission in a tight spot: Either restore a modicum of legitimacy by owning up and firing the officials most responsible or do nothing, thus turbocharging the discontent that European citizens feel toward the EU, accelerating the EU’s deconstruction.

    [..] The question now is: What next? What good is it to receive a mea culpa if the policies imposed on the Greek government are the same ones that the mea culpa was issued for? What good is it to have a mea culpa if those officials who imposed such disastrous, inhuman policies remain on board and are, in fact, promoted for their gross incompetence?

     

    In sum, an urgent apology is due to the Greek people, not just by the IMF but also by the ECB and the Commission whose officials were egging the IMF on with the fiscal waterboarding of Greece. But an apology and a collective mea culpa from the troika is woefully inadequate. It needs to be followed up by the immediate dismissal of at least three functionaries. 

     

    First on the list is Mr Poul Thomsen – the original IMF Greek Mission Chief whose great failure (according to the IMF’s own reports never before had a mission chief presided over a greater macroeconomic disaster) led to his promotion to the IMF’s European Chief status. A close second spot in this list is Mr Thomas Wieser, the chair of the EuroWorkingGroup who has been part of every policy and every coup that resulted in Greece’s immolation and Europe’s ignominy, hopefully to be joined into retirement by Mr Declan Costello, whose fingerprints are all over the instruments of fiscal waterboarding. And, lastly, a gentleman that my Irish friends know only too well, Mr Klaus Masuch of the ECB.

    You probably guessed by now that I would certainly and urgently add Christine Lagarde to that list of people to be fired. And not appoint another French citizen as managing director. Too risky. They do crazy things. The IMF must be reorganized, and thoroughly, or it no longer has a ‘raison d’être’.

    I see no reason to doubt that those who call the shots are too blinded by hubris to execute such measures, so I’ll list these things one more time: transparency, accountability, credibility and if you don’t have those you will lose your relevance.

    But it’s probably a bad idea to begin with to let an economy, if not a world, in decline, be governed by the same people who owe their positions to its rise. It would seem to take another kind of mindframe.

  • Why Did Khizr Khan Delete His Law Firm's Website?

    Khizr Khan, the Muslim Gold Star father of Captain Humayun Khan, set off a media firestorm at the DNC last week when he criticized Trump for his "unconstitutional" policies aimed at banning Muslim immigration to the United States.  A question posed by Breitbart is whether Khizr Khan's law firm, KM Khan Law Office, actually derives profit directly from Muslim immigration to the United States making him more than just an innocent conscientiousness objector to Trump's policy

    Breitbart suggests that Khan did, in fact, stand to profit from his viewpoints shared at the DNC and point to his website bio which lists "EB-5 Investments & Related Immigration Services" as a specific area of practice.  Oddly enough, since these reports have surfaced the website of Mr. Khan's law office has been taken down.  Luckily, prior versions of the website are available on the wayback machine which can be seen here:

    Khan Law

    Why would Khan remove his website over such a discovery?  Perhaps it's related to the fact that the EB-5 program has come under intense scrutiny from certain members of Congress, the SEC, Homeland Security and the NSA.  Senator Chuck Grassley recently described the program as "riddled with flaws and corruption."  Below are some relevant excerpts from Senator Grassley's prepared remarks at the Judiciary Committee Hearing on February 2, 2016 regarding EB-5:

    It is widely acknowledged that the EB-5 program is riddled with flaws and corruption. Maybe it is only here on Capitol Hill—on this island surrounded by reality—that we can choose to plug our ears and refuse to listen to commonly accepted facts. The Government Accountability Office, the media, industry experts, members of congress, and federal agency officials, have concurred that the program is a serious problem with serious vulnerabilities.

     

    There are also classified reports that detail the national security, fraud and abuse.  Our committee has received numerous briefings and classified documents to show this side of the story. 

     

    The enforcement arm of the Department of Homeland Security wrote an internal memo that raises significant concerns about the program.  One section of the memo outlines concerns that it could be used by Iranian operatives to infiltrate the United States.  The memo identifies seven main areas of program vulnerability, including the export of sensitive technology, economic espionage, use by foreign government agents and terrorists, investment fraud, illicit finance and money laundering

     

    An interagency working group was organized by the National Security Staff because of the serious concerns.  This group’s draft memo said, “The capital raising activities inherent in the regional center model raise concerns about investor fraud and other conduct that may violate US securities laws.

    More information about the EB-5 Immigrant Investor Program can be found on the Department of Homeland Security website.

    While it's unclear how this saga will play out, one thing we're pretty sure of is that we'll see a couple more days of related headlines before we finally get to put this to bed.

    Senator Grassley's full comments can be viewed below:

  • Peter Schiff: Time Is Running Out, "Crisis Worse Than 2008 Coming"

    Submitted by Mac Slavo via SHTFPlan.com,

    We are headed for disaster, and the only question is how long the economy can dodge a bullet.

    The illusory bubble on Wall Street claims to be at record highs, but the reality, the underbelly, is dark indeed.

    Economic expert Peter Schiff speaks on not only the safe haven of gold, and what is at stake in the election, but just how dire the financial consequences will be when the great storm hits and batters everyone.

    As Before Its News reports:

    The endgame for the U.S. economy is oblivion. 2008 was a minor correction compared to the eventual collapse of the U.S. Dollar.

     

    WHY: After the dot.com bubble burst in 2000, Fed chairman Alan Greenspan-led the Federal Reserve through a series of interest cuts that brought down the Federal Funds rate to 1% by 2004. The bubble created by those years of cheap Fed money at 1% resulted in U.S. households losing a total wealth of almost $14 TRILLION in the 2008 crisis. Stock markets fell by almost half for losing $7.9 trillion, and the housing market lost $6 trillion.

     

    FAST FORWARD TO TODAY: We’ve had 7 years of interest rates at 0%. As a result, there is more than just a housing bubble this time. There’s a stock bubble, a housing bubble, a bond bubble, a student loan bubble, and I could go on. As Peter explains, the Fed only has ONE option at this point: Continue to fake it for as long as possible by printing more money (otherwise known as “quantitative easing”), or let the whole system come crashing down.

     

    HERE IS THE REALITY: The world has caught on, and the gig is up. Under Obama’s stewardship, the U.S. national debt has gone from $10 Trillion, to what will be $20 Trillion by the time he leaves office, with nothing more than 100 MILLION Americans out of work, and 50 MILLION in poverty and on food stamps. That’s what cheap money bought for us. It was all “borrowed” cheap money too, making it infinitely worse, and the world is tired of lending.

    In no uncertain terms, Schiff warns that the next crisis will be far, far worse than the 2008 collapse, and the “recovery” that has since rotted away at the house:

  • 65 Million Americans Would Like To Work But Can't Risk Losing Their Entitlements

    At the DNC last week, Anastasia Somoza, who has cerebral palsy and spastic quadriplegia, took to the stage to deliver an emotionally-stirring speech advocating for the rights of disabled people across the country.  She also took the opportunity to brand Trump as a candidate that "feeds off of fear and division" and "shouts, bullies and profits off of the vulnerable Americans" while describing Hillary as someone who "sees her."  Unsurprisingly, this is a narrative which has reverberated with America's media outlets as they couldn't help but assist the Democrats in their effort to exploithelp Anastasia in her quest to elect Hillary.

    Just today, Bloomberg published an article entitled "These Government Rules Trap Millions of Americans in Poverty" that details the personal stories of various folks with disabilities who are willing and able to work but don't out of fear of oppressive rules which could result in the loss of their government benefits. Take the case of Susanne Brasset, who says she only keeps $5 in her bank account because she's "scared to save more" due to the risk that she might lose her social security "medicaid and other crucial benefits".  Brasset goes on to confirm that:

    "There’s more money I could be making, but I’m discouraged by all the rules I need to adhere to.

    How rude!  We're truly disgusted that our government would seek to oppress the country's benefit recipients with outlandish rules aimed at determining a person's financial wherewithal prior to doling out billions of taxpayer dollars.  This country claims it wants to protect its citizens but blatant taxpayer protections like this only serve to permanently impoverish marginalized segments of our electorate.  Bloomberg describes these taxpayer protections as rules that are:

    "intended to bar freeloaders [but] end up keeping disabled people in a permanent state of poverty, unable to put money away for emergencies, retirement, and other life goals."

    How could anyone argue with that?  But don't worry, as Bloomberg points out, there is a "loophole" that allows benefit recipients to save up to $100,000 without risking their taxpayer-funded benefits.  Introducing ABLE:

    ABLE is a savings account, created by Congress in 2014, that can be opened by or for people with a disability that began before they turned 26.  Like a 529 college savings plan, ABLE accounts are run by states, which need to pass legislation of their own to create them.  Just as investment gains in a 529 plan aren’t taxed if the money is used for higher education, the funds in an ABLE account are tax-free if they go toward disability-related expenses, a broad category that includes housing, education, health care, and basic needs.

     

    ABLE goes only so far in fixing a confusing and frustrating system, but it does create a much-needed loophole.  For some, the account offers a way to prepare for emergencies.  For others, like 35-year-old filmmaker and activist Dominick Evans, it could let them save money that doesn't count toward the asset cap so they can work without losing benefits.

     

    Strings are attached. Total contributions, whether by an account holder, friends, or family, are capped at $14,000 a year. If an account exceeds $100,000, the holder can lose eligibility for cash benefits from Social Security's Supplemental Security Income program until the overage has been spent. When a Medicaid recipient dies, the health insurance program for the poor can take the contents of an ABLE account as compensation for the care that was provided.

    News of this option brought a huge sigh of relief from Susanne, who said that ABLE:

    “…gives me peace of mind.  Saving money should be a right to each and every American.”

    We're a little fuzzy on our founding documents but admit that we missed the constitutionally protected right of all Americans to redistributed wealth. 

  • Boomers Again? What Another “Scorched Earth Generation” President Means For Gold

    Submitted by Pater Diekmeyer via SprottMoney.com,

    Donald Trump and Hillary Clinton’s acceptance as Republican and Democratic parties’ nominees for President sets the stage for the contest to begin in earnest.

    Both Trump, who is 70, and Clinton, who is 68, were born in the post-war Baby Boom era. So were their vice-presidential back-ups, Mike Pence and Tim Kaine, as well as all U.S. presidents since Bill Clinton.

    Gold investors thus need to consider the implications of a member of one of the most delusional, spendthrift, and amoral generations in history, occupying the White House for another four years.

    After “the greatest generation” … “the scorched earth generation”

    In his best-selling book “The Greatest Generation,” Tom Brokaw profiled Baby Boomers’ parents’ generation, which he described as “American citizen heroes, who came of age during The Great Depression and World War Two … united by common values – duty, honor, economy, courage, service, love of family and country.”

    In their youth, Boomers, who were born between the mid-1940s and the early 1960s, stated loudly that they wanted to be nothing like their parents before them.

    They succeeded.

    Andrea Yalnizyan, of the Canadian Centre for Policy Alternatives, has described this privileged group, which replaced religion with consumption, as “the scorched earth generation.”

    Not surprisingly, the records of U.S. leaders from the Boom generation have been disastrous.

    Starting with Bill Clinton, through George Bush the Younger (who though born in 1943 was a child of a returning WW II veteran) and Barack Obama, Boomer presidencies have been characterized by increased government spending, borrowing, and money printing. More recently, they have introduced a new innovation: perpetual war.

    Trump and Clinton’s pronouncements suggest if either were to take office, they would follow the paths of previous Boomer presidents. Their administrations would thus almost certainly be characterized by:

    Delusional politics

    Boomer Presidents have presided over what Chris Hedges characterizes of an “Empire of Illusion,” where image and spectacle trump (forgive the pun) reality. That includes governments that:

    • Produce phony numbers (unfunded liabilities, off-balance sheet debts, massaged government statistics). Trump’s personal financial statements, which suggest that his personal brand name alone (excluding real assets) is worth more than $3 billion, provide a taste for what is in store.
    • Extend and pretend, refusing to deal with current problems, ranging from insolvent financial regimes, bankrupt pensions and healthcare systems to climate change, but instead passing on the growing problems to their successors.
    • Support captured regulatory bodies and oversight authorities (these include debt rating agencies and auditors who rubber stamp the most egregious misrepresentations, if their checks are big enough)

    Bigger government

    Baby Boomer presidents have all acted on the belief that there is no problem that cannot be solved by more government. The Clinton Administration was one of the first to use off-balance sheets liabilities in a material way, to disguise the unsustainable costs. George Bush the Younger nearly doubled the national debt and Barack Obama did so again.

    Both Trump and Clinton look set to instigate continued government spending increases when they take office, this time financed with an innovation suggested by another Baby Boomer Ben Bernanke: helicopter money.

    More wars from the Chicken Hawks

    Millions of Boomers served the United States nobly in wars of questionable value, such as Vietnam. However, prominent Boomer leaders almost all ducked active military service. Calvin Trillin, of The Nation magazine, describes such folk, many of whom were active in promoting wars that others would fight, as “Chicken Hawks.”

    These include George W. Bush (who avoided Vietnam by using family connections to get assigned to a National Guard unit, where he could get pilot lessons for free). Bill Clinton ducked military service by studying in England. Hillary Clinton was able avoid active duty because she was a woman. Donald Trump ducked out by getting a medical deferment.

    In office, both Trump’s and Clinton’s avoidance of military service will put enormous pressure on them to “look tough.” Both will almost certainly buckle to such pressure. Clinton, for example, who in her early days on the scene was regarded as a dove, has been forced by political pressure to actively support almost every military action that the U.S. has ever undertaken.

    The first generation to leave behind less than what they inherited

    Both Trump and Clinton presidencies thus look set to continue favor the “Empire of Illusion” policies described by Hedges.

    Under either’s stewardship, unless things change, Boomers will cap a dubious performance: they will be the first generation in U.S. history to leave behind a weaker country than the one they inherited.

    In that climate, investors’ priorities need to be to minimize the damage to their portfolios. Return of investment, rather than return on investment, needs to be the main focus.

    A sound investment strategy, in such an environment, would almost certainly be overweight in hard assets, which are grounded in the reality-based community.

  • White House Caught Secretly Airlifting $1.7 Billion US Taxpayer Cash To Tehran To Ensure Iran Nuclear Accord Success

    What Donald Trump has proclaimed the worst deal ever made, may just have become worst-er. The shocking truth behind the US-Iran nuclear deal, as WSJ reports, is that John Kerry and the Obama Administration airlifted $1.7bn of cash in 'compromise' payments (read – bribe) to Tehran to ensure the release of 4 captured sailors coincidentally the same weekend as the signing of the nuclear deal.

    With all the chatter of helicopter money as solution to the western world's economic ills,The Wall Street Journal's Jay Solomon and Carol Lee expose, it appears The Obama Administration is already busily dropping cash where ever it needs things done in a hurry…

    Wooden pallets stacked with euros, Swiss francs and other currencies were flown into Iran on an unmarked cargo plane, according to these officials. The U.S. procured the money from the central banks of the Netherlands and Switzerland, they said.

     

    The money represented the first installment of a $1.7 billion settlement the Obama administration reached with Iran to resolve a decades-old dispute over a failed arms deal signed just before the 1979 fall of Iran’s last monarch, Shah Mohammad Reza Pahlavi.

     

    The settlement, which resolved claims before an international tribunal in The Hague, also coincided with the formal implementation that same weekend of the landmark nuclear agreement reached between Tehran, the U.S. and other global powers the summer before.

     

    “With the nuclear deal done, prisoners released, the time was right to resolve this dispute as well,” President Barack Obama said at the White House on Jan. 17—without disclosing the $400 million cash payment.

    Of course, senior U.S. officials denied any link between the payment and the prisoner exchange. They say the way the various strands came together simultaneously was coincidental, not the result of any quid pro quo.

    But U.S. officials also acknowledge that Iranian negotiators on the prisoner exchange said they wanted the cash to show they had gained something tangible.

    Sen. Tom Cotton, a Republican from Arkansas and a fierce foe of the Iran nuclear deal, accused President Barack Obama of paying “a $1.7 billion ransom to the ayatollahs for U.S. hostages.”

     

    “This break with longstanding U.S. policy [not to] put a price on the head of Americans, and has led Iran to continue its illegal seizures” of Americans, he said.

     

    Since the cash shipment, the intelligence arm of the Revolutionary Guard has arrested two more Iranian-Americans. Tehran has also detained dual-nationals from France, Canada and the U.K. in recent months.

    Perhaps most ironically, the Iranians did not want US Dollars…

    Iranian press reports have quoted senior Iranian defense officials describing the cash as a ransom payment. The Iranian foreign ministry didn’t respond to a request for comment.

     

    The $400 million was paid in foreign currency because any transaction with Iran in U.S. dollars is illegal under U.S. law. Sanctions also complicate Tehran’s access to global banks

     

    The Obama administration has refused to disclose how it paid any of the $1.7 billion, despite congressional queries, outside of saying that it wasn’t paid in dollars. Lawmakers have expressed concern that the cash would be used by Iran to fund regional allies, including the Assad regime in Syria and the Lebanese militia Hezbollah, which the U.S. designates as a terrorist organization.

     

     

    Mr. Kerry and the State and Treasury departments sought the cooperation of the Swiss and Dutch governments. Ultimately, the Obama administration transferred the equivalent of $400 million to their central banks. It was then converted into other currencies, stacked onto the wooden pallets and sent to Iran on board a cargo plane.

     

    On the morning of Jan. 17, Iran released the four Americans: Three of them boarded a Swiss Air Force jet and flew off to Geneva, with the fourth returning to the U.S. on his own. In return, the U.S. freed seven Iranian citizens and dropped extradition requests for 14 others.

    We leave it to Sen. James Lankford (R., Okla.) to conclude:

    “President Obama’s…payment to Iran in January, which we now know will fund Iran’s military expansion, is an appalling example of executive branch governance,… Subsidizing Iran’s military is perhaps the worst use of taxpayer dollars ever by an American president.”

    And now comes the big test of the mainstream media in America – can they stop discussing Trump and Khizr Kahn for long enough to question the deliberate obfuscation of facts in yet another foreign policy snafu by the administration?

  • D-Day For Australia's Real Estate Bubble?

    Submitted by Pater Tenebrarum via Acting-Man.com,

    Unknowable Degrees of Bubble Insanity

    Back in February, we brought you an update on the truly insane real estate bubble in Australia (see: “Australia’s Housing Bubble – In the Grip of Insanity” for details) in the wake of Jonathan Tepper of Variant Perception reporting on an eye-opening fact-finding tour in Sydney.

     

    shack

    This rotting shack in Sydney and its tiny plot of land sold for nearly $1 million in May of 2014 – more than two years ago.  Since then, house prices in Australia have increased even further. Yes, it is an insane bubble, no doubt about it.

     

     

    As every seasoned market observer knows though, the fact that a bubble has  obviously attained crazy proportions does not mean it cannot become even crazier. We only need to think back to the Nikkei index in the late 1980s, the Nasdaq in the late 1990s, or the grand-daddy of modern-day bubble insanity, the Souk Al-Manakh bubble in Kuwait in the early 1980s.

    The latter example is generally less well known than the others, but it is unsurpassed in terms of sheer mass dementia. What made this bubble so special – at its peak Kuwait’s stock market had a total capitalization of more than $100 billion, which made it the third-largest equity market in the world behind the US and Japan at the time, a fact that should have told market participants they were skating on very thin ice – was the use of post-dated checks to pay for stock purchases.

    The bubble needed a trigger to pop, and that trigger was delivered when one day, a single one of these post-dated checks actually bounced. One of the biggest market crashes in history ensued – a truly dramatic wipe-out, that in the end destroyed the country’s entire OTC stock market.

    As we have pointed out previously, while residential real estate is actually a consumer good, analytically it should be treated as akin to a capital good maintained over several consecutive stages of production, as it renders its services over a very long period of time (the same principle holds for other durable goods – see J.H. de Soto, Money, Bank Credit and Economic Cycles).

    One implication of this is that interest rates are very important to the valuation of real estate. At present, the administered central bank interest rate in Australia is at a new low, and since it remains actually high compared to similar rates in other developed countries, it may well decline even further.

     

    1-australia-interest-rate@2x

    Australia’s administered central bank interest rate – click to enlarge.

     

    Gross market rates all over the world have so far continued to follow the downtrend in central bank rates, so the market has yet to reassert itself (we plan to post an in-depth discussion of the current trend in gross market rates soon). As long as rates remain low, real estate bubbles tend to remain well supported.

    Let us not forget, the bursting of a number of housing bubbles in 2006-2009 (in the US, Spain and several other countries) was preceded by a slow but steady increase in interest rates and a sharp slowdown in money supply growth in the major currency areas. Neither one nor the other are in evidence in Australia at present – at least not yet.

     

    2-australia-money-supply-m1@2x

    Australia’s narrow money supply M1 has grown sharply in recent years (the pace of the advance is comparable to the pre-2008 era) – click to enlarge.

     

    An Important New Development

    One of the reasons why interest rates are so important in keeping residential real estate bubbles from imploding is that they make otherwise unaffordable properties seemingly affordable.

    Most home buyers use mortgages to finance house purchases, and the size of the monthly payment is therefore a main criterion in terms of affordability. Given that these are usually very long term loans with terms ranging from 15 to 30 years, the level of interest rates makes an enormous difference.

    Below is a slightly dated chart via Variant Perception (ending in Q2 2015) that compares Australian home prices, household incomes, rents and construction costs. It should be obvious how irrational house prices have become in light of the huge gap that has opened up between these time series.

    The chart also demonstrates that low interest rates are indeed of overwhelming importance in sustaining these sky-high prices. There is certainly little else that will.

     

    3-Australia house prices vs income.

    Australia: house prices vs. household income, rents and construction costs.

     

    Keep in mind though what we have mentioned in the annotation to the chart of Australia’s money supply above. The credit expansion that has been the driving force of the bubble has largely been the work of commercial banks. While the central bank has enabled them to offer loans at lower and lower rates, it is their willingness to actually do so that is decisive.

     

    4-Interest only loans

    Another chart illustrating the importance of interest rates to Australia’s housing bubble: the share of “interest only” mortgage loans, the principal of which is settled with a balloon payment at the end of their term. The influence of rates on the size of the monthly payment is even greater in these cases.

     

    One of our readers has recently made us aware of a recent development that may well throw a major spanner into the works. Similar to what has happened in other desirable destinations, Chinese buyers have played an increasingly important role in Australia’s property market. They have been especially active in the market for condominiums, which has experienced an extremely pronounced boom as a result.

    What we were hitherto not aware of was the extent to which these buyers have actually obtained financing from Australian banks. This source of funding is now threatening to dry up. The banks are pulling back after learning that many of the loan applications seem to be fraudulent.

    This happens to coincide with a noticeable surge in supply in the market – many developments that have been started in order to cash in on the huge gap between prices and construction costs are now finished or about to be finished (we can picture a great many “ghost apartment blocs” in Australia’s future).

    As the Financial Review reports:

    “Off-the-plan buyers of Australian apartments are in crisis as tough new borrowing rules mean thousands of investors who have paid a deposit are struggling to complete their purchases, according to local and overseas mortgage brokers and financiers.

    Shanghai-based financiers claim their Chinese clients’ funding from Australian banks has been frozen and they face foreclosure – or usurious interest rates – from private financiers. Australian financiers claim their local clients, many of them Asian, have had their settlements deferred by three months to find alternative funding.

     

    “All the deals have been frozen,” said Mark Yin, an agent with Shanghai-based Home Tree Group, about his Shanghai clients’ funding with Australian banks. “We are now looking for finance all over the world.”

     

    Mr Yin said this represented nearly 100 per cent of his clients who were waiting for properties to be completed in Australia and that most of the apartments were in the Melbourne CBD.

     

    Melbourne-based Marshall Condon, chief executive of mortgage broker Neue Black and who also has off-shore and local Asian investors, added: “In the next three to 12 months, many investors will be applying for funding to complete their deals, however, they will be become increasingly concerned as they discover funding is limited.”

     

    Billions of dollars has been invested in tens-of-thousands of high-rise apartments that are reshaping the skylines of the nation’s major capitals, particularly Melbourne, Sydney and Brisbane. Most have been sold off-the-plan, which means purchasers buy off the blueprint with a deposit and complete when it is built, which requires a second valuation and financing commitment by the lender. But a huge increase in supply has slowed demand, particularly around Melbourne’s CBD, pushing down prices.

     

    Lenders, which initially fell over themselves to finance overseas’ buyers, slammed on the breaks when spot checks on the loan applications detected widespread fraud. The main problem is mainland Chinese buyers, which account for about half of the deals. That means many local lenders that agreed to provide funding when buyers made deposits, will not recommit upon completion.

     

    Nervous local lenders fear that a sharp downturn, or change of sentiment, could result in foreclosures with overseas borrowers they have little chance of locating. Mortgage brokers, who receive their commissions upon final completion, are nervous they will not be paid for negotiating deals and financing.

     

    Developers, some of whom have already canceled projects, are concerned about financing existing and future projects. It also has potentially big economic impact for local consumer sentiment, building services and government revenues.

     

    Overseas financiers, typically based in Singapore and Malaysia, are working on rescue packages for borrowers by creating private bail-out funds, or buying apartments off stressed purchases, which means they lose their deposit. They include rolling five-year terms, starting at 7.5 per cent, or one-year emergency loans at 12 per cent, according to financiers.

     

    Other packages are stepped-loans where the different amounts of the loan have different rates, invariably several times higher than Australian lenders’ standard variable or fixed rate loans. For example, Australian banks and other local lenders are offering three-year fixed rates at below 4 per cent. Home Tree Group’s Mr Yin said so far he was unable to secure funding for his clients and doubted they would be able to settle.

     

    “I have now stopped dealing in Australian property,” he said. Another agent in Shanghai, the chief executives of Iron Fish China Lanny Xu, said while most of his clients were not affected by the change, around 20 per cent were trying to on-sell apartments as they were unable to complete settlement.

     

    He said of some were looking to banks in Singapore for financing, as they were still happy to extend loans over Australian property. “The cost of funding in Singapore is higher than in Australia,” he said.

     

    Mr Xu said another option was to seek finance from newly established mortgage funds, which were looking to fill the gap left by the withdrawal of Australian banks from the market. He said such funds were charging interest rates of between 8 per cent and 12 per cent.

     

    Scott Kirchner, the manager of Bella Resident in China, said the inability of offshore buyers to access finance was “really starting to bite”. “We are reluctant to take on new clients unless they have 100 per cent of the cash for a property,” he said. “But then there’s the issue of how do they get the money out of China.”

    (emphasis added)

    In other words, a number of buyers are now faced with a sudden increase in interest rates from 4% to between 8% to 12% – regardless of the administered interest rate of the RBA. It is of course possible that the effect will once again stay local (i.e., confined to Melbourne and condominiums), similar to what happened when commodity prices collapsed.

    The downturn in commodities led to sharp declines in property prices in regions and towns close to mining activities. However, house prices in the big cities continued to soar – not least because the RBA cut rates in order to offset the impact of the commodities bust.

    It is definitely possible though that this latest development is actually the pin that finally pricks the bubble. As noted above, in Kuwait a single bounced check reportedly triggered an avalanche. The Souk Al-Manakh bubble is certainly not directly comparable to Australia’s housing market, but when a bubble is already very stretched, something will eventually trigger its demise – at times it can even be a seemingly small event.

     

    Melbourne

    Condominium high-rises in Melbourne – to date the consensus was that the market “might” be oversupplied by 2018 – it appears as though this juncture has been brought forward.

     

    Conclusion

    It is a very good bet that many of the condominium high-rises built in anticipation of ever-growing demand and an unimpeded expansion of bank credit will turn out to have been unwise investments. As Ludwig von Mises reminds us in Human Action, these malinvestments become visible once the banks are getting cold feet and are beginning to pull back – which is precisely what seems to be happening in this case.

    However conditions may be, it is certain that no manipulations of the banks can provide the economic system with capital goods. What is needed for a sound expansion of production is additional capital goods, not money or fiduciary media. The boom is built on the sands of banknotes and deposits. It must collapse.

     

    The breakdown appears as soon as the banks become frightened by the accelerated pace of the boom and begin to abstain from further expansion of credit. The boom could continue only as long as the banks were ready to grant freely all those credits which business needed for the execution of its excessive projects, utterly disagreeing with the red state of the supply of factors of production and the valuations of the consumers. These illusory plans, suggested by the falsification of business calculation as brought about by the cheap money policy, can be pushed forward only if new credits can be obtained at gross market rates which are artificially lowered below the height they would reach at an unhampered loan market. It is this margin that gives them the deceptive appearance of profitability. The change in the banks’ conduct does not create the crisis. It merely makes visible the havoc spread by the faults which business has committed in the boom period.

     – L.v. Mises, Human Action p. 559

    (emphasis added)

    It is probably still fair to say though that an outbreak of caution on the part of lenders is a trigger for the bust, in the sense that the illusory accounting profits generated during the boom period will suddenly disappear.

    Of course it remains to be seen if this recent development will have wider implications for Australia’s real estate bubble or if the central bank’s loose monetary policy will continue to trump such disturbances in the farce. This is one development though which the RBA cannot really influence – it is essentially a major rate hike affecting an important group of buyers, and it seems as though a lot of hitherto anticipated demand simply won’t be there.

     

     

    shack-2

    Bonus picture: the back of the $1 million shack. Just in case you thought it might look better from a different perspective…

  • Welfare Is The New Work

    Authored by Stephen Moore, published Op-Ed at The Washington Tmes,

    The welfare state of mind has spiraled out of control in America…

    Two recent news stories highlight how pernicious the welfare state has become in America today.

    The first was an announcement by the feds that food stamps can be used to have groceries delivered right to a recipient’s door. Service with a smile. The Obama administration says it is too much of a hardship for those on welfare to actually travel to the grocery store. What’s next? Cooking the meal for them? If only the DMV would do home deliveries for drivers licenses.

     

    The second story was about the hullabaloo over a proposal by Maine governor Paul LePage to prohibit food stamp recipients from using their food aid to purchase junk foods like sugary soft drinks and candy bars. He says that the state has an obesity problem and he will “implement reform unilaterally or cease Maine’s administration of the food stamp program altogether.” The Obama administration rejected his request and the left activists act as if the idea that a welfare recipient can’t buy a pint of Ben and Jerry’s ice cream at taxpayer expense is a violation of civil liberties.

    The welfare/entitlement state of mind has spiraled out of control in America. No one is lifting a finger of opposition. The cost of welfare is now well over $1 trillion a year. Food stamps are so ubiquitous that they have replaced dollars as the new standard currency in many inner cities in America. Even in affluent areas with upscale grocery stores, food stamp recipients fill their carts with everything from cakes to lobster.

    Liberals love welfare. It was only a few years ago that Democratic House leader Nancy Pelosi opined that putting more people on food stamps and unemployment insurance is one of the “best ways to stimulate the economy.” Which is more astonishing? That she believes this lunacy or that she would be dumb enough to say it out loud.

    We are in the seventh year of a so-called recovery, yet 45 million Americans depend on taxpayers to put food on their table. This is roughly 5 million more than when President Obama took office. Medicaid rolls have exploded by more than 10 million, too, and Mr. Obama openly boasts about how many people he’s moved into the program. Unemployment insurance beneficiaries have fallen, thankfully, but the number of Americans collecting disability has continued to climb. Wow this is some recovery.

    By the way, disability rolls are growing even as worker safety has hit an all-time high. Shouldn’t safety and automation mean fewer disabled workers? The reality, as everyone in the welfare industry knows, is that food stamps and disability are the new welfare. Neither one of them requires work in exchange for benefits.

    No one wants to admit that the ease of entry into the welfare state and the generosity of the benefits is one big reason why labor force participation has collapsed. Why work?

    Welfare expert Peter Ferrara notes that a big instigator for the welfare state expansion has been the decimation of welfare reform laws passed in 1996. “It’s infuriating that a law that worked incredibly well in lowering costs and getting the unemployed into the workforce, has been largely gutted,” he concludes.

    As a result, the Census Bureau tells us that most families that are in poverty have no one working. Poverty is still widespread in America not because wages are too low, but that fewer poor people have a job. If there are no wages earned at all, it is impossible to get out of the poverty trap.

    Welfare incentivizes non-work in many other ways. Former George W. Bush economist Larry Lindsey reports that welfare recipients generally lose at least 50 cents of every dollar benefit they gain in wage and salary from working. Sometimes the benefits fall by 70 cents per dollar earned. So a $12 an hour job returns as little as $4 an hour of extra income. Why work?

    Democrats in Congress have vociferously opposed putting even baby teeth back into work for welfare requirements. Even modest workfare requirements are denounced as anti-poor. So even a proposed federal law mandating work for food stamp recipients who are non-disabled adults without kids got shot down.

    We know that changing welfare laws can have a very positive impact on getting recipients back into the workforce and off welfare. In North Carolina when unemployment benefits were reduced and the number of weeks of benefits were limited, entry into the workforce shot up. Entry into the workforce grew by more than nearly any other state in the country. Go figure.

    In Maine, we saw a similarly remarkable result from work requirements. According to a Heritage Foundation report: “SNAP recipients in Maine totaled 201,151 in April of 2015 — a decline of more than 28,000 in just one year. The number of ABAWDs — Able-Bodied Adults Without Dependents — in Maine declined about 80 percent” to 2,530 in 2015 from 12,000 prior to the work requirement.

    This result was in line with the federal work for welfare requirements enacted in 1996. Caseloads fell by more than half and costs of aid tumbled. So why aren’t Republicans pushing workfare for all federal welfare recipients? Some are afraid that they will be viewed as hard-hearted or even cruel. But getting people off of welfare into a productive job is not just a way to reduce costs, it’s a proven way to rebuild broken lives and move people into the mainstream. There is dignity in work. There is despair in welfare. After three generations of the failed entitlement state, hasn’t welfare done enough harm to the very people it was supposed to help.

  • July U.S. Auto Sales – The Good, The Bad, & The Downright Ugly

    Ford (-3.0% vs. -0.5 est), GM (-1.9% vs. -1.0 est) and Fiat Chrysler (+0.3% vs. 1.9% est) all posted headline misses on July auto sales with a modest “beat” from Toyota (-1.4% vs -1.9% est) even though its sales were still down YoY.  Looking past the headlines, however, the data is even worseFord sales to retail customers (i.e. stripping out fleet sales where they make no money) were down 6% while Fiat Chrysler was down 2%.  GM managed to grow retail sales 5% YoY but only after increasing incentive spending 29% over the competition to 14.2% of total retail value….WINNING!  Ford and GM stocks were punished on the misses.

    According to headline data, truck sales took a big leap higher in July…but the devil is in the details.  Most of the truck gains for Ford came from cargo vans which were up 35% YoY while its F-Series pickup truck was down 1% and SUVs were down 5.3%.  GM posted higher unit sales of trucks, albeit on higher incentive spending, but mix shifted from the higher MSRP Silverado (units down 4% YoY) to the lower priced Colorado and Canyon models which were up 27.5% and 33.1%, respectively.  Chrysler reported a 2% YoY increase in Dodge Ram sales.

    Wards Data

     

    Overall, July sales were slightly positive YoY but stripping out fleet sales would paint a very different picture.

    July Auto Sales

     

    Inventory-to-sales remained near all-time highs excluding the 08/09 recession.

     

    Auto Inventory

     

    Investors punished Ford and GM stocks for their efforts.

    Ford and GM

     

    Please see below for additional thoughts on company-specific performance:

    Ford – Ford posted a big miss at -3.0% YoY vs. consensus of -0.5%.  Retail sales showed a terrible decline of 6% YoY which were offset by 6% growth in less profitable sales to rental companies and government agencies.  Overall Ford sales were certainly boosted by GM’s 42% decline in fleet sales.  The key money makers for the OEM were down across the board YoY with SUV sales off 5.6% (Explorer down 22%; Escape down 10%; Edge up 5%) and F-Series sales off 1%.  Ford said average pricing per vehicle grew $1,600 YoY primarily on mix shift.

    GM – GM also posted a big miss at -1.9% YoY vs. consensus of -1.0%.  GM estimates their market share grew 1% in July to 17.9%.  GM retail sales came in at +5% YoY and
    fleet sales down a massive -42%, which they described as “plan”.  Retail sales growth came at a substantial cost to the OEM with incentive spending for July way up to 14.2% vs. an average of 11.0% for the industry overall as GM sought to clear out old inventory.  Days of inventory on dealer lots declined MoM to 66 days from 72 days. 

    Fiat Chrysler – Fiat Chrysler posted a miss at +0.3% YoY vs. consensus of +1.9%.  That said, the headline number was driven by fleet sales with retail sales down -2% YoY and lower-margin fleet sales up +22%.  Popular Jeep lines struggled with Wrangler down -5% and Cherokee down -12% while Ram trucks increased +2% YoY.

    Toyota – “Beat” with sales of -1.4% YoY vs. consensus of -2.9%. 

    Honda – Beat with sales of +4.4% YoY vs. consensus of -0.4%. 

    Nissan – Missed sales of +1.2% YoY vs. consensus of +3.0%. 

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Today’s News 2nd August 2016

  • The Looming Financial Crisis Nobody Is Talking About, But Should Be

    Submitted by Shaun Bradley via TheAntiMedia.org,

    The world has been captivated by a continuous stream of disturbing and shocking headlines. Seemingly every other day, different terrorist attacks, police assassinations or political stunts ignite the public into an emotional frenzy. But as fear shuts down critical thinking, banks that control Europe’s financial system are entering a death spiral. Despite what establishment media narratives push, the most dangerous threat to our way of life isn’t a religious ideology or political divide.

    The real risk is a contagion that is undermining the core of the financial system, and the interconnectedness of the globalized economy we live in makes containing the problem nearly impossible. Concerns that used to be isolated to the failing state of Greece have now engulfed the rest of the PIIGS nations. If these dominos continue to fall in Europe, the momentum could carry the destruction to every corner of the globe.

    Italian banks are the latest on the chopping block in the wake of Brexit. For years, they have been acknowledged as a weak link in the economic chain, but they now face stress tests that could expose the scope of their internal problems. The oldest bank in the world, Monte Dei Paschi, is at the center of the controversy, with an expected shortfall of over 3 billion euros.

    Other big names, like UniCredit, are in equally bad shape. Wells Fargo recently found that nearly 15% of all loans held by Italian banks could be at risk of default, a staggering figure to attempt to unwind. Further, England’s departure from the E.U. has sparked questions over the future of the euro — and Italy could be the catalyst for an all out breakdown of confidence. If panic begins to grip the Italian people, things could escalate quickly, potentially triggering bank runs.

    Mihir Kapadia of Sun Global Investments explained the current situation in a recent article:

    A perfect storm of slow or zero Italian economic growth, low interest rates and politically connected, often corrupt, lending have combined to create a situation where the Italian financial system is in need of a large rescue.

    The head of the European Central Bank, Mario Draghi, wasted no time reassuring the markets and downplaying the significance of the hurdles ahead. Draghi is a former governor to the Bank of Italy, and he recently came out in full support of a ‘public backstop’ for the toxic loans. The public backstop suggested is the political term for shafting the taxpayer. Governments and banks alike have no problem shifting the responsibility of the debt onto the citizens, all while chastising them about how excessive their entitlement programs are and framing the greed of everyday people as the root of the issue. For the elites, it is much easier to use austerity measures, inflation, and shaming of the public to deflect blame from themselves than it is to take ownership for their own corrupt actions.

    New regulations passed by the E.U. prevent bailout-style action similar to what the U.S. implemented during the 2008 crisis, meaning the only other option on the table is to use customer accounts to re-capitalize, otherwise known as a bail-ins. We saw a test run of this a few years ago in Cyprus, which led to the confiscation of all personal funds exceeding 100,000 euros. In this trial, the seizures only affected the very wealthy, so there was little major outrage; most accounts over the threshold were also held by foreigners, particularly from Russia.

    But in such a future scenario, private savings accounts, retirement funds, and IRAs of average citizens could be stolen by the banks — without compensation — to cover their bad investments. Although it would be devastating for Italy to have to implement these tactics to save their failing institutions, the real fireworks would be the effects such a move could have on other key banks and foreign nations.

    As time passes, red flags continue to emerge that point to a terminal diagnosis for the system as a whole. Deutsche bank is by far the most crucial in the E.U., as it supports the union’s powerhouse economy of Germany. In the last year alone, however, their stock price has plummeted more than 60%, bringing the total decline to 90% since its peak in 2007. The bank also just announced its plan to close over 188 branches and cut 3,000 jobs in the coming months. The rebound in the American financial sector over the last seven years never manifested in Europe; instead, the value of their banks continued to grind lower, perpetuated by political ineptitude and central bank manipulation. Germany is the last strong economy left to prop up the crumbling trade bloc in Europe, and without its stability, this grand experiment is doomed to fall apart at the seams.

    financial

    If those signs aren’t bad enough, Deutsche has also become the poster child for the ominous derivatives bubble. It, alone, has amassed an exposure of over $75 trillion dollars in these risky devices, which is almost equal to theannual GDP of the world. This problem is by no means isolated to the European markets; the U.S. banks also drank the kool-aid, and believe it or not, helped create a quadrillion dollar mess.

    The empty promises made by financial managers are only as good as the public’s confidence in them. Before the subprime mortgage crisis, it seemed like there wasn’t a care in the world — until everyone got spooked and headed for the exits at once. If a similar stampede occurred today, the implications would be far worse. The amount of money needed to pay out on the outstanding derivative contracts doesn’t even exist, and the CIA’s factbook states that broad money, including all paper currency, coins, checking, savings, and money market accounts, equals just over 80 trillion dollars — a mere fraction of the what it would take to cover the exposure of the banks.

    Warren Buffet famously referred to these instruments as “financial weapons of mass destruction.” He reiterated his perspective in a more recent interview:

    “I regard very large derivative positions as dangerous. We inherited a modest sized position at [Berkshire’s reinsurance vehicle] Gen Re in a benign market and we lost about $400m just trying to unwind it with no pressure on us whatsoever. So I think it does continue to be a danger to the system.”

    The derivative market is one of the most obscure in all of finance. Instead of buying a share of a company, or a commodity like oil or corn at a future price, a derivative has no value on its own. Its entire worth is derived from the performance of other parts of the market. It is essentially a side bet on the price movements of real assets. If the major banks, like Deutsche, were to go under, all of those derivatives would be wiped out and could light the fuse on this economic time bomb.

    Even George Soros has commented on the ongoing crisis in the E.U., saying:

    “Europe’s leaders must recognize that the EU is on the verge of collapse. Instead of blaming one another, they should pull together and adopt exceptional measures.”

    The Italian banking crisis and the ballooning derivative market may seem like a trivial issue that is out of sight and out of mind, but the black hole it could open up would destroy our way of life. Thinking about these possibilities can be terrifying, but there are steps that can be taken to ensure individuals at least have an insurance plan in place. Becoming educated on the financial system we’re living in is paramount to having the foresight needed to take action.

    Developing technologies like Bitcoin and other cryptocurrencies have created an entirely new monetary system that isn’t subject to the corruption of the broken centralized model. These peer-to-peer networks can secure wealth while allowing unprecedented mobility and anonymity. Other forms of stable money, like gold or silver, also play a key role in financial independence. There are few assets with zero counter-party risks, and precious metals allow each individual to become their own central bank.

    Being self-reliant is also a powerful tool; not being dependent on someone else in a worst-case scenario is crucial to thinking clearly when financial panic breaks out. There is no antidote for the potential chaos bearing down on us, but building strong relationships, obtaining basic skills, and stockpiling the necessities of daily lifecan provide peace of mind and preparedness.

    A chain of events has been set in motion that will expose the massive fraud world banks and governments have perpetuated on their citizens. When fear porn is being promoted on the major networks, keep in mind the real threats to freedom and security will not be openly announced. The focus on the lone nutjob that kills 20 or the spread of deadly pandemics, for example, is nothing but propaganda aimed at shifting attention to things that are uncontrollable. Ensuring the masses feel helpless and in need of the government’s protection is priority number one for the ruling class. Talking heads and hedge fund managers will be eternally optimistic on the outlook for the future, even as the collapse becomes undeniably obvious. Problems for the European Union will continue to build, and the risk of the disease spreading to other economies increases by the day. Unfortunately, this Ponzi scheme system we built our societies on has left us vulnerable to any well-timed black swan event.

  • Japanese Government Bonds Are Crashing

    Ahead of tonight’s 10Y JGB auction and reportedly the unleashing of Abe’s fiscal stimulus, it appears the world’s investors are losing faith in the Bank of Japan’s buying power and the MoF’s credibility as Japanese government bonds are collapsing for the 3rd day in a row. With the biggest crash in prices (JGB Futures) since May 2013 (back to 5 month lows), yield across the entire JGB curve are exploding higher since Kuroda punted last week and questioned monetary policy effectiveness.

    As the world awaits Japan’s over-promise and under-deliver fiscal stimulus…

    • *SAKAKIBARA SAYS HE DOESN’T THINK ABENOMICS HAS FAILED
    • *JAPAN FISCAL STIMULUS PLAN ALREADY PRICED IN, SAKAKIBARA SAYS
    • *ABE STIMULUS PLAN WON’T HAVE A MAJOR IMPACT, SAKAKIBARA SAYS

     

    “The fiscal spending will probably include public works spending, so we can expect something of an economic boost,” said Masaki Kuwahara, an economist at Nomura Securities Co. in Tokyo. But such growth may not be sustainable. “What Japan needs to do is to spur more demand and increase productivity by pushing through deregulation, increasing the nation’s potential growth rate.”

    It appears demand for direct monetization of the debt and questioning BoJ capabilities (and therefore independence)…

    • *JAPANESE GOVT GROWS SKEPTICAL OF BOJ’S INFLATION TARGET: NIKKEI
    • *DLR/YEN WILL SLOWLY APPRECIATE TO 100 YEN: SAKAKIBARA
    • *HAMADA REITERATES OPPOSITION TO HELICOPTER MONEY
    • *HAMADA FAVORS RECOGNIZING DE-FACTO DEBT MONETIZATION
    • *HAMADA FAVORS JAPAN PROCLAIMING A DEBT-MONETIZING POLICY

    One of Prime Minister Shinzo Abe’s top advisers says he favors a declaration by Japan’s policy makers that their current measures are monetizing the nation’s debt.

    Some people say that Japan has “already adopted ad hoc monetization of debt, and that to improve public confidence the government and the BOJ should recognize that they are doing already a combination of fiscal stimulus and de facto monetization,” Koichi Hamada, a former Yale University professor, said in an e-mailed response to questions.

     

    “Given this long deflation and liquidity-trap type of behavior of Japanese banks and firms, I am now inclined to join the ranks” of those commentators, Hamada said. That view says “piecemeal and de facto monetization should be rather highlighted to change investors’ psychology,” he said.

     

    Hamada declined to comment specifically on the Bank of Japan’s July 29 decision to conduct a “comprehensive” assessment of its measures at its next meeting, or whether it’s likely to expand stimulus further at that gathering, which is scheduled for Sept. 20-21.

     

    The adviser also reiterated his opposition to “helicopter money.” “If one institutionalizes helicopter money or monetization of the new debt, the economy loses the safeguard against inflation.”

     

    Through its easing to date, the BOJ has gobbled up more than one third of outstanding Japanese government bonds, and some observers don’t anticipate that debt will ever return into the hands of private investors. BOJ officials in the past debated a strategy of maintaining a large balance sheet — at least back in 2014, according to people familiar with the talks at the time. The context then was to avoid any spike in bond yields when the central bank reached its inflation target.

    JGB yields are rising on concerns that BOJ’s planned comprehensive assessment of its policy, announced by Kuroda last week, will set back its monetary-easing stance…

     

    Sending bond prices reeling…

    This is the biggest 3-day drop since May 2013.

    Is this the market pushing back demanding BoJ action… or the rebirth of the widowmaker trade?

  • If Voting Made Any Difference, They Wouldn't Let Us Do It

    Submitted by John Whitehead via The Rutherford Institute,

    “The people who cast the votes decide nothing. The people who count the votes decide everything.”—Joseph Stalin, dictator of the Soviet Union

    No, America, you don’t have to vote.

    In fact, vote or don’t vote, the police state will continue to trample us underfoot.

    Devil or deliverer, the candidate who wins the White House has already made a Faustian bargain to keep the police state in power. It’s no longer a question of which party will usher in totalitarianism but when the final hammer will fall.

    Sure we’re being given choices, but the differences between the candidates are purely cosmetic ones, lacking any real nutritional value for the nation. We’re being served a poisoned feast whose aftereffects will leave us in turmoil for years to come.

    We’ve been here before.

    Remember Barack Obama, the young candidate who campaigned on a message of hope, change and transparency, and promised an end to war and surveillance?

    Look how well that turned out.

    Under Obama, government whistleblowers are routinely prosecuted, U.S. arms sales have skyrocketed, police militarization has accelerated, and surveillance has become widespread. The U.S. government is literally arming the world, while bombing the heck out of the planet. And while they’re at it, the government is bringing the wars abroad home, transforming American communities into shell-shocked battlefields where the Constitution provides little in the way of protection.

    Yes, we’re worse off now than we were eight years ago.

    We’re being subjected to more government surveillance, more police abuse, more SWAT team raids, more roadside strip searches, more censorship, more prison time, more egregious laws, more endless wars, more invasive technology, more militarization, more injustice, more corruption, more cronyism, more graft, more lies, and more of everything that has turned the American dream into the American nightmare.

    What we’re not getting more of: elected officials who actually represent us.

    The American people are being guilted, bullied, pressured, cajoled, intimidated, terrorized and browbeaten into voting. We’re constantly told to vote because it’s your so-called civic duty, because you have no right to complain about the government unless you vote, because every vote counts, because we must present a unified front, because the future of the nation depends on it, because God compels us to do so, because by not voting you are in fact voting, because the “other” candidate must be defeated at all costs, or because the future of the Supreme Court rests in the balance.

    Nothing in the Constitution requires that you vote.

    You are under no moral obligation to vote for the lesser of two evils. Indeed, voting for a lesser evil is still voting for evil.

    Whether or not you cast your vote in this year’s presidential election, you have every right to kvetch, complain and criticize the government when it falls short of your expectations. After all, you are overtaxed so the government can continue to operate corruptly.

    If you want to boo, boycott, picket, protest and altogether reject a corrupt political system that has failed you abysmally, more power to you. I’ll take an irate, engaged, informed, outraged American any day over an apathetic, constitutionally illiterate citizenry that is content to be diverted, distracted and directed.

    Whether you vote or don’t vote doesn’t really matter.

    What matters is what else you’re doing to push back against government incompetence, abuse, corruption, graft, fraud and cronyism.

    Don’t be fooled into thinking that the only road to reform is through the ballot box.

    After all, there is more to citizenship than the act of casting a ballot for someone who, once elected, will march in lockstep with the dictates of the powers-that-be. Yet as long as Americans are content to let politicians, war hawks and Corporate America run the country, the police state will prevail, no matter which candidate wins on Election Day.

    In other words, it doesn’t matter who sits in the White House, who controls the two houses of Congress, or who gets appointed to the Supreme Court: only those who are prepared to cozy up to the powers-that-be will have any real impact.

    As Pulitzer Prize-winning journalist Chris Hedges points out:

    The predatory financial institutions on Wall Street will trash the economy and loot the U.S. Treasury on the way to another economic collapse whether Donald Trump or Hillary Clinton is president. Poor, unarmed people of color will be gunned down in the streets of our cities whether Donald Trump or Hillary Clinton is president. The system of neoslavery in our prisons, where we keep poor men and poor women of color in cages because we have taken from them the possibility of employment, education and dignity, will be maintained whether Donald Trump or Hillary Clinton is president. Millions of undocumented people will be deported whether Donald Trump or Hillary Clinton is president. Austerity programs will cut or abolish public services, further decay the infrastructure and curtail social programs whether Donald Trump or Hillary Clinton is president. Money will replace the vote whether Donald Trump or Hillary Clinton is president. And half the country, which now lives in poverty, will remain in misery whether Donald Trump or Hillary Clinton becomes president. This is not speculation. We know this because there has been total continuity on every issue, from trade agreements to war to mass deportations, between the Bush administration and the administration of Barack Obama.

    In other words, voting is not the answer.

    As I document in my book Battlefield America: The War on the American People, the nation is firmly under the control of a monied oligarchy guarded by a standing army (a.k.a., militarized police. It is an invisible dictatorship, of sorts, one that is unaffected by the vagaries of party politics and which cannot be overthrown by way of the ballot box.

    Total continuity” is how Hedges refers to the manner in which the government’s agenda remains unchanged no matter who occupies the Executive Branch. Continuity of government” (COG) is the phrase policy wonks use to refer to the unelected individuals who have been appointed to run the government in the event of a “catastrophe.” You can also refer to it as a shadow government, or the Deep State, which is comprised of unelected government bureaucrats, corporations, contractors, paper-pushers, and button-pushers who actually call the shots behind the scenes.

    Whatever term you use, the upshot remains the same: on the national level, we’re up against an immoveable, intractable, entrenched force that is greater than any one politician or party, whose tentacles reach deep into every sector imaginable, from Wall Street, the military and the courts to the technology giants, entertainment, healthcare and the media.

    This is no Goliath to be felled by a simple stone.

    This is a Leviathan disguised as a political savior.

    So how do we prevail against the tyrant who says all the right things and does none of them? How do we overcome the despot whose promises fade with the spotlights? How do we conquer the dictator whose benevolence is all for show?

    We get organized. We get educated. We get active.

    If you feel led to vote, fine, but if all you do is vote, “we the people” are going to lose.

    If you abstain from voting and still do nothing, “we the people” are going to lose.

    If you give your proxy to some third-party individual or group to fix what’s wrong with the country and that’s all you do, then “we the people” are going to lose.

    If, however, you’re prepared to shake off the doldrums, wipe the sleep out of your eyes, turn off the television, tune out the talking heads, untether yourself from whatever piece of technology you’re affixed to, wean yourself off the teat of the nanny state, and start flexing those unused civic muscles, then there might be hope for us all.

    For starters, get back to basics. Get to know your neighbors, your community, and your local officials. This is the first line of defense when it comes to securing your base: fortifying your immediate lines.

    Second, understand your rights. Know how your local government is structured. Who serves on your city council and school boards? Who runs your local jail: has it been coopted by private contractors? What recourse does the community have to voice concerns about local problems or disagree with decisions by government officials?

    Third, know the people you’re entrusting with your local government. Are your police chiefs being promoted from within your community? Are your locally elected officials accessible and, equally important, are they open to what you have to say? Who runs your local media? Does your newspaper report on local events? Who are your judges? Are their judgments fair and impartial? How are prisoners being treated in your local jails?

    Finally, don’t get so trusting and comfortable that you stop doing the hard work of holding your government accountable. We’ve drifted a long way from the local government structures that provided the basis for freedom described by Alexis de Tocqueville in Democracy in America, but we are not so far gone that we can’t reclaim some of its vital components.

    As an article in The Federalist points out:

    Local government is fundamental not so much because it’s a “laboratory” of democracy but because it’s a school of democracy. Through such accountable and democratic government, Americans learn to be democratic citizens. They learn to be involved in the common good. They learn to take charge of their own affairs, as a community. Tocqueville writes that it’s because of local democracy that Americans can make state and Federal democracy work—by learning, in their bones, to expect and demand accountability from public officials and to be involved in public issues.

    To put it another way, think nationally but act locally.

    There is still a lot Americans can do to topple the police state tyrants, but any revolution that has any hope of succeeding needs to be prepared to reform the system from the bottom up. And that will mean re-learning step by painful step what it actually means to be a government of the people, by the people and for the people.

  • Will The Reserve Bank Of Australia Cut By 25bps: What Wall Street Thinks And How To Trade It

    The ECB, Fed and mostly the BOJ, all did nothing during the recent round of central bank announcements, but hopes are high that the RBA will not disappoint tonight. The Australian central bank is expected by both the market and economists to cut the Daily Cash Rate by 25bps from 1.75% to 1.50% when it announces its decision at 2.30pm AEST.

    The OIS market assigns 66.7% probability for a 25bp rate cut to 1.5% by RBA tonight; up from 62.5% last week, and up from 16.8% at the beginning of July. Meanwhile economists see 25 bp cut tonight (20 of 25 forecasts), five see no change.

     

    “Monetary policy is really the only swing instrument – the only game in town,” said Andrew Ticehurst, an interest-rate strategist at Nomura Holdings Inc. in Sydney. “If we are in a world where fiscal policy is constrained because the government is a bit nervous about getting downgraded; if we are in a world where the Australian dollar is going to continue to trade north of fair value because of very low cash rates elsewhere and capital inflows; and if we are getting no policy assistance from those two levers, then monetary policy is all that’s left.”

    A good summary of what will be announced tonight comes from Bloomberg’s Daniel Kruger who writes that the “RBA will cut, it has no better choice.” As he puts it, the economic problems Australia’s facing are familiar across the developed world: falling bond yields, unwanted currency strength, low inflation and the political reality of fiscal restraint. 

    The recent erratic nature of the global economy suggests Australia needs to seize control of what it can.

     

    The benchmark rate is at 1.75%, so the central bank has some ammunition. Inflation has run below forecasts for the past two quarters, falling to 1% for the April-June period. And with Treasurer Scott Morrison focusing on reducing the budget deficit to help preserve the country’s AAA bond rating, the central bank has little choice but to act.

     

    This meeting will also be the next to last with Glenn Stevens at the helm. With Philip Lowe set to replace him next month, Stevens may want to leave his deputy in the best shape possible.

     

    If the RBA hopes the rate cut alone will weaken its currency, it may be disappointed as the move is mostly priced in. Forecasters surveyed by Bloomberg predict it falls to 71 U.S. cents by year-end.

     

    Some observers point to the country’s 3.1% growth in the first quarter and the frothy housing market and argue that waiting is the smarter course.

     

    However, an overheated home market is now important to the economy. It’s a key buffer as Australia looks to develop alternatives to its reliance on mining exports. The need for this shift is enhanced by China’s efforts to align its growth more with consumer activity and less with exports.

    Other views:

    According to RBC strategists led by George Davis, expect the RBA to cut rates 25bps after 2Q CPI confirmed inflation is undershooting target.

    • Leading indicators suggest an inflation undershoot will persist for several quarters.
    • RBA’s reluctant nature provides some uncertainty; don’t expect an overtly downbeat assessment to be provided in its communication.
    • Growth ests, if anything, are likely to be revised higher

    Alternatively, analysts at Commerzbank expect the RBA to hold

    • Given recently mixed data, supporting commodity prices and the fact that the RBA has a rate meeting every 4 weeks, it can wait a little longer until a clear picture emerges
    • As the RBA is likely to underline that a further rate cut remains probable, AUD gains are likely to be limited
    • Pricing leaves open risk-reward trade for an RBA hold
    • Further out, cut never fully priced by OIS; although market continues to price moderate chance of easing, it also begins pricing slight chance of hike, 0.6%, by July 2017
    • Economists’ median calls for 25bp cut in 4Q with chance of another 25bp cut in 2017

    How to trade it:

    • The risk-reward favors AUD upside if the RBA holds vs potential downside if RBA cuts; AUD/USD range today 0.7562/0.7615, according to Bloomberg analysts
    • No cut could see AUD rise within upward-sloping channel to test 2nd standard deviation resistance at 0.7710; it would also lead to a selloff in stocks and rates, sending yields higher and unwinding what moments ago was the tightest spread between Aussie and US 10Y, at just 32 bps, since 2001.
    • Widely expected rate cut may see AUD retreat slightly toward 0.7503 1st standard deviation support; additional support at 0.7489 100-DMA may also limit AUD losses

    * * *

    The RBA is scheduled to release its decision at 2.30pm AEST.

  • China Moves Forward With SDR Issuance In August

    Submitted by Valentin Schmidt of The Epoch TImes

    IMF Managing Director Christine Lagarde speaks at the 40th anniversary
    of the IMFC meeting at the IMF Headquarters in Washington, April 20, 2013.

    When Bloomberg reported late last year that China founded a working group to explore the use of the supranational Special Drawing Rights (SDR) currency, nobody took heed. 

    Now in August of 2016, we are very close to the first SDR issuance of the private sector since the 1980s.

    Opinion pieces in the media and speculation by informed sources prepared us for the launch of an instrument most people don’t know about earlier in 2016. Then the International Monetary Fund (IMF) itself published a paper discussing the use of private sector SDRs in July and a Chinese central bank official confirmed an international development organization would soon issue SDR bonds in China, according to Chinese media Caixin.

    Caixin now confirmed which organization exactly will issue the bonds and when: The World Bank and the China Development Bank will issue private sector or “M” SDR in August.

    The so-called SDR are an IMF construct of actual currencies, right now the euro, yen, dollar, and pound. It made news last year when the Chinese renminbi was also admitted, although it won’t formally be part of the basket until October 1st of this year.

    How much? Nikkei Asian Review reports the volume will be between $300 and $800 million and some Japanese banks are interested in taking up a stake. According to Nikkei some other Chinese banks are also planning to issue SDR bonds. One of them could be the Industrial and Commercial Bank of China (ICBC) according to Chinese website Yicai.com.

    The IMF experimented with these M-SDRs in the 1970s and 1980s when banks had SDR 5-7 billion in deposits and companies had issued SDR 563 million in bonds. A paltry amount, but the concept worked in practice. 

    The G20 finance ministers confirmed they will push this issue, despite private sector reluctance to use these instruments. In their communiqué released after their meeting in China on July 24:  

    “We support examination of the broader use of the SDR, such as broader publication of accounts and statistics in the SDR and the potential issuance of SDR-denominated bonds, as a way to enhance resilience [of the financial system].”

    They are following the advice of governor of the People’s Bank of China (PBOC),  Zhou Xiaochuan, although a bit late. Already in 2009 he called for nothing less than a new world reserve currency.

    “Special consideration should be given to giving the SDR a greater role. The SDR has the features and potential to act as a super-sovereign reserve currency,” wrote Zhou. 

    Seven years later, it looks like he wasn’t joking.

  • A Trader's Angry Rant "Economic Numbers Don’t Mean Anything Anymore"

    By Bloomberg’s Richard Breslow

    Economic Numbers Don’t Mean Anything Anymore

    It may be August and the dog days of summer for trading interest, but the economic numbers this week are important. At least for now. They’ll determine how we spend the balance of the month characterizing the economy. Whether September has any relevance for Fed fund futures traders. And if the mindless buying of equities and risk continues apace.

    Weak numbers follow strong ones, ad seriatum, and no one seems to have any credible idea why. The economic surprise index is knocking the cover off the ball, while mixed in we get the odd and horrific non-farm payroll report or GDP print.

    Confidence in economic projections is low. That makes data dependence a dangerous conceit. Signal quality is bad, unreliable and with no shelf life.

    Given the season, it’s hard not to worry whether the economy has caught the equivalent of the “sweating sickness.” Merry at breakfast, dead by dinner. And nary a soul could name a cause nor a cure. And that remains true 500 years later. Of course in matters economic we’ll get explanations by lunch time and everyone will have seen it coming, if only they’d been listened to.

    Last week’s 2Q GDP guess came in at less than half the expert forecast. The market sliced a quick 10% off pricing for a rate-hike at the next meeting and left December at a paltry 35%.

    Cue the Fed speakers. Williams, Kaplan and Dudley said what’s one number, don’t rule out a hike. That’s a real problem. No one understands the numbers so numbers don’t mean anything. But that’s how we’re meant to measure the economy and make investment decisions They need to spend more time trying to understand why no one “gets” the economy than where they hope its going. Finger-crossing shouldn’t be an input to an econometric model.

    The ISM surveys and Friday’s payroll report will do a lot to script how Fed Chair Janet Yellen writes her Jackson Hole presentation and tell us how to trade the next few weeks. At least until the next set of data.

  • In US Elections, Money Matters!

    Simply put, in 40 years of US national elections – money talks, and bullshit (along with hope, change, trust, policy, and every other potential differentiator) walks…

    As Statista details, so far, Hillary Clinton's campaign has raised substantially more money than Donald Trump's. But has cash ever really made a difference to U.S. election results down through the years? According to figures in Germany's Handelsblatt newspaper (which have since been converted from euro to dollars), all of the election winners in recent years were also budget winners.

    Obama raised more money than Romney and McCain in 2012 and 2008, going on to win on both occasions. George W. Bush also took the White House in 2004 and 2000, having raised more money than his competitors on both occasions. The pattern repeated itself with Bill Clinton outmuscling his opponents financially in 1996 and 1992 before winning both elections.

    Infographic: U.S. Elections: Money Matters | Statista
    You will find more statistics at Statista

    *  *  *

    Based on that evidence, is Trump going to buck the trend and become the first “budget loser” to reach the White House since Jimmy Carter in 1976?

  • Hillary’s Latest Headache: Skolkovo

    The subject of Russia’s influence in American politics has been a hot topic of late, particularly as the MSM continues to link Donald Trump to Vladimir Putin and the DNC hack. However, a report published by the Government Accountability Institute presents a new twist in the Kremlin-US political ties. It all started with the 2009 “Russian reset” touted by then-Secretary of State Hillary Clinton.

    As detailed in a WSJ op-ed by Peter Schweizer (author of the GAI report), after President Obama visited Russia in 2009, both nations agreed to “identifying areas of cooperation and pursuing joint projects and actions that strengthen strategic stability, international security, economic well-being, and the development of ties between the Russian and American people.”

    One such project was Skolkovo, an “innovation city” of 30,000 people on the outskirts of Moscow, billed as Russia’s version of Silicon Valley. As chief diplomat, Hillary was in charge of courting US companies to invest in this new Russian city. Russia, on the other hand, had committed to spend $5 billion over the next three years (2009-12).


    Hillary Clinton and Russian Foreign Minister Sergei Lavrov

    As Schweizer continues, “soon, dozens of U.S. tech firms, including top Clinton Foundation donors like Google, Intel and Cisco, made major financial contributions to Skolkovo, with Cisco committing a cool $1 billion. In May 2010, the State Department facilitated a Moscow visit by 22 of the biggest names in U.S. venture capital—and weeks later the first memorandums of understanding were signed by Skolkovo and American companies.

    By 2012 the vice president of the Skolkovo Foundation, Conor Lenihan—who had previously partnered with the Clinton Foundation—recorded that Skolkovo had assembled 28 Russian, American and European “Key Partners.”

    Of the 28 “partners,” 17, or 60%, have made financial commitments to the Clinton Foundation, totaling tens of millions of dollars, or sponsored speeches by Bill Clinton…

    Russians tied to Skolkovo also flowed funds to the Clinton Foundation. Andrey Vavilov, the chairman of SuperOx, which is part of Skolkovo’s nuclear-research cluster, donated between $10,000 and $25,000 (donations are reported in ranges, not exact amounts) to the Clinton’s family charity”

    Thus far, this should not be surprising. It is yet another instance of crony capitalism that has so well characterized the Clintons over the years. However, as US intelligence agencies including the FBI were soon to find out, the Russian Silicon Valley served other purposes as well.

    More from the WSJ op-ed: “The state-of-the-art technological research coming out of Skolkovo raised alarms among U.S. military experts and federal law-enforcement officials. Research conducted in 2012 on Skolkovo by the U.S. Army Foreign Military Studies Program at Fort Leavenworth declared that the purpose of Skolkovo was to serve as a “vehicle for world-wide technology transfer to Russia in the areas of information technology, biomedicine, energy, satellite and space technology, and nuclear technology.”Moreover, the report said: “the Skolkovo Foundation has, in fact, been involved in defense-related activities since December 2011, when it approved the first weapons-related project—the development of a hypersonic cruise missile engine. . . . Not all of the center’s efforts are civilian in nature…”

    The FBI believes the true motives of the Russian partners, who are often funded by their government, is to gain access to classified, sensitive, and emerging technology from the companies. The [Skolkovo] foundation may be a means for the Russian government to access our nation’s sensitive or classified research development facilities and dual-use technologies with military and commercial application.”

    As Schweizer concludes:

    Even if it could be proven that these tens of millions of dollars in Clinton Foundation donations by Skolkovo’s key partners played no role in the Clinton State Department’s missing or ignoring obvious red flags about the Russian enterprise, the perception would still be problematic. (Neither the Clinton campaign nor the Clinton Foundation responded to requests for comment.) What is known is that the State Department recruited and facilitated the commitment of billions of American dollars in the creation of a Russian “Silicon Valley” whose technological innovations include Russian hypersonic cruise-missile engines, radar surveillance equipment, and vehicles capable of delivering airborne Russian troops.

     

    A Russian reset, indeed.

    Naturally, the Hillary campaign did not reply to any requests from Schweizer on the report. But we are comfortable that HRC’s response would likely be along the lines “what difference at this point does it make?

  • "This Whole Mania Will End Tragically" – Impermanence & Full-Cycle Thinking

    Excerpted from John Hussman's Weekly Market Comment,

    My friend and teacher Thich Nhat Hanh once said, “It is not impermanence that makes us suffer. What makes us suffer is wanting things to be permanent when they are not. Wilting flowers do not cause suffering; it is the unrealistic desire that flowers not wilt that causes suffering.”

    Full-cycle thinking

    I should begin this comment by emphasizing that our current investment outlook is driven by the combination of market conditions that we observe at the moment, considering both valuations and market action, with components that include the behavior of internals, trend-following measures, sentiment, interest rate behavior, and other factors. Those conditions will change. The chart below shows the cumulative total return of the S&P 500 in the expected return/risk classification that we presently identify, based on observable evidence. This particular classification spans about 10% of periods across market history, and captures a cumulative market loss of over 91%.

    I’ve placed a little inset in the chart, showing a histogram of weekly returns that comprise that 91% cumulative loss in the S&P 500, as well as the probability distribution that we infer from those returns. Notice that while the cumulative progress of the S&P 500 in this return/risk classification may mislead investors to believe that something is going wrong if the market isn’t dropping like a rock, the actual weekly market outcomes that produce that seemingly stair-step decline include a large number of flat or positive returns.

    What really produces the awful cumulative market return in this particular classification is what I call “unpleasant skew” – the single most probable outcome is actually a small gain, but gains are regularly overwhelmed by abrupt, wicked losses that wipe out weeks or months of upside progress in one fell swoop. If you look at the edges of that probability curve, you’ll see that it has a long “left tail” and a short “right tail,” meaning that large moves are skewed to the downside, and steep losses are far more likely than strong gains. That’s a standard feature of a steeply “overvalued, overbought, overbullish” environment, particularly when market internals don’t feature robust and favorable uniformity.

    The present, strikingly negative market return/risk profile will change. I would certainly prefer this change to feature a steep retreat in valuations, followed by an early improvement in market action, which is an outcome that would shift the expected return/risk classification to the most favorable one we identify across history, but we’ll take the evidence as it arrives. Understand now that my identification as a “permabear” is an artifact of challenges we encountered after my 2009 insistence on stress-testing our methods against Depression-era data. I’ll emphasize again that our present methods (reflecting our mid-2014 adaptations) would encourage a constructive or aggressive investment stance across about 71% of market history, including significant portions of recent market cycles.

    We know very well that maintaining a patient, value-conscious, historically-informed discipline does, in fact, require patience and discipline. We’re committed to that discipline, we’ve always attempted to adapt it to new evidence, and we certainly enjoyed the benefits of that in complete market cycles prior to the recent speculative half-cycle advance.

    I’ve been asked whether it’s frustrating to maintain a defensive outlook when the S&P 500 has made new highs. The answer is that while we experienced great frustration in this half-cycle prior to the adaptations we introduced in mid-2014, we’re quite comfortable with our present outlook because we know how frequently the same investment discipline that makes us defensive here would have encouraged a constructive or aggressive outlook in market cycles across history, including recent ones, as conditions have changed. While it’s true that our own outlook is often uncorrelated or inversely correlated with that of others, we’ve never taken a hit as deep as the 2000-2002 or 2007-2009 losses in the S&P 500, and certainly nowhere near those of the Nasdaq.

    The completion of a market cycle dramatically changes compound arithmetic. A fairly run-of-the-mill completion of the current cycle would wipe out the entire total return of the S&P 500 since 2000. In an advance that’s longer in the tooth than any speculative episode except the one that ended with the 2000 peak, and with the most reliable valuation measures more extreme than at any peak other than 1929 and 2000, one might consider Kenny Rogers’ advice: never count your money while you’re sitting at the table.

    It remains clear that every advance in a speculative market transforms “expected future return” into “realized past return,” leaving less and less on the table for long-term investors. Over the completion of every market cycle, that process is also reversed, and as prices collapse, poor prospects for long-term return are transformed into strong ones. My error in the recent half-cycle was underestimating how dismal the long-term returns were that investors would be willing to accept (and, identically, how extreme the valuations were that investors would be willing to pay). We had to abandon the belief that any amount of historically-informed rationality might prevail among policy makers or investors, without abandoning tools that would help us to navigate a deranged financial environment. In the presence of zero interest rates, previously reliable “overvalued, overbought, overbullish” warnings were not enough. One had to wait for market internals to deteriorate, indicating a subtle psychological shift toward increasing risk-aversion, before adopting a hard-negative market outlook (see the “Box” in The Next Big Short for the full narrative).

    That’s where we differ from speculators who insist on the permanence of the recent bull market; who, ignoring the ineffectiveness of persistent monetary easing during the 2000-2002 and 2007-2009 collapses, rely on central-bank stick-saves to ratchet the markets along a permanently high plateau. To deny impermanence is to invite suffering, and unfortunately, no amount of evidence seems capable of averting the belief of speculators in permanence. So they will suffer.

    “Sell everything”

    At present, the greatest risk of ignoring impermanence is the belief that market risk has been removed from any consideration, and that even the most obscenely overvalued markets should never be sold. We can see that belief reflected in current price/volume data, as the post-Brexit plunge in interest rates mesmerized investors and prompted a low-volume “sellers strike.” As a security moves from one level of overvaluation to an even more extreme level of overvaluation, looking over one’s shoulder at positive past returns can reinforce the notion that the advance will never end. But extreme valuations imply dismal future returns, and that’s largely forgotten amid the eager lip-smacking of investors for ever lower or even more negative interest rates.

    Understand that at a 10-year Treasury yield of 1.45%, investors stand to earn a cumulative total return of about 15% on those bonds between today and their maturity a decade from now. If one invests at current prices, nothing will make that long-term return better. Driving interest rates to negative levels in the interim won’t change the arithmetic. It would only front-load the returns, leaving only losses available to investors for the remaining portion of the decade. Put differently, the most that investors can expect to gain in 10-year Treasury bonds over any horizon, without subsequently giving it back over the coming decade, is about 15%; unless they actually sell at rich valuations and poor long-term yields.

    The urging of central banks, which has become nearly a form of propaganda, is that there will always be a lower rate, a higher price, and a greater fool. The effect of this is not to repeal market cycles, but to extend their recklessness in a way that increases the risk of Depression. The majority of global debt is now “covenant lite,” providing little protection against bankruptcy. Accordingly, recovery rates have already fallen to the lowest level in history, and we haven’t even seen a recession.

    Likewise, the most reliable valuation measures imply that stock market investors can expect a cumulative total return in the S&P 500 of less than 20% over the coming 12-year period, all of that from dividends. This projection is robust to assumptions about future growth and interest rates, as detailed in Rarefied Air: Valuations and Subsequent Market Returns. We can’t rule out the front-loading of those returns either, and we’ll take our cues from market internals and related factors. But again, we estimate that the most investors can expect to gain in the S&P 500 over any horizon, without giving it back by the end of the coming 12-year period, is less than 20%; unless they actually sell at rich valuations.

    Frankly, my opinion is that we are at the peak of the third speculative episode since 2000, and I doubt that the S&P 500 will approach or exceed current levels again until late in that 12-year horizon. However, we remain more flexible toward changes in market conditions and the associated investment outlook than observers might imagine. Even at current extremes, we could embrace an outlook that might be described as “constructive with a safety net,” provided that we see a greater improvement in market internals across a broad range of individual stocks, industries, sectors and security types (when speculators are risk-seeking, they tend to be indiscriminate about it). That possibility would be particularly relevant if short-term interest rates were to drop back into single basis points. There’s no question that a robust shift to fresh speculation would make long-term matters even worse, but that’s the point of a safety net. In any event, I’m quite certain that the range of investment conditions in the coming 2-3 year period, and our response to them, will be far more varied than many appear to expect.

    The following charts bring the valuation picture up-to-date. The first shows the ratio of nonfinancial market capitalization to corporate gross value-added. MarketCap/GVA is more strongly correlated with actual subsequent S&P 500 total returns than a score of alternative measures we’ve examined across history. It is also generally consistent with the broader class of reliable valuation measures (Shiller P/E, market cap/GDP, Tobin’s Q) that are defined by the fact that they mute the impact of cyclical variability in profit margins.

    The chart below shows MarketCap/GVA on an inverted log scale (blue line, left scale), along with the actual subsequent S&P 500 annual nominal total return over the following 12-year period (red line, right scale).

    I should note that corporate debt as a fraction of corporate gross value-added has surged to the highest level in history. As profits have begun to stumble, companies have aggressively issued debt, using the proceeds to repurchase stock in order to boost per-share earnings. The problem is that even today’s depressed corporate yields are higher than the prospective total return we estimate for U.S. stocks over the coming 10-12 year period. As a result, stock repurchases, far from being a benefit to shareholders, represent a destruction of shareholder value. The only shareholders who benefit from stock repurchases here are those who are cashing out, leaving remaining shareholders to hold a more concentrated and leveraged bag over the completion of this cycle.

    As for corporate bonds, be sure to distinguish stated yield from realized yield. Over the completion of this cycle, buyers of corporate debt are unlikely to realize those stated yields once defaults kick in and low recovery rates eat into them.

    This whole speculative mania will end tragically. How did we not learn this from 2000-2002, or 2007-2009, or the collapse of every other mania in history? My sense is that it’s a mistake to assume that yield-seeking hasn’t been fully exhausted across every class of securities. The notion that some “pocket” of value and opportunity remains untapped is largely based on a misunderstanding of yield relationships (e.g. the Fed Model). While we do still estimate a positive expected return/risk profile in precious metals shares, even these will be vulnerable if we observe even modestly greater dollar strength or slightly lower inflation. Meanwhile, there’s some potential for Treasury yields to decline a bit further in the event of an economic softening, but at this point, even that is more a speculation than an investment. The bottom line is that we’re inclined to limit risk exposure in every class of investment here.

    Over the weekend, Jeff Gundlach of DoubleLine observed, correctly I think, that investors have “entered a world of uber complacency,” advising “Sell everything. Nothing here looks good. You can’t save your economy by destroying your financial system.” Likewise, Jim Grant of Grant’s Interest Rate Observer was asked by Barron’s where investors might find opportunities for yield. He replied “I’m stumped. I’m not going to try to find opportunities where they can’t be found.”

    For those who insist that there is always a bull market somewhere, I would suggest that the most likely bull market to emerge here will be in bear market assets. Fortunately, inevitable periods of investor panic, speculative collapse, and improved valuation can shift market return/risk prospects substantially, which creates new opportunities for conventional assets. Long live impermanence.

    Investors are currently paying extravagant multiples on cyclically elevated earnings, at a point where a misplaced focus on debt-financed consumption and yield-seeking speculation has ravaged U.S. real investment and the accumulation of productive capital, setting the stage for persistently anemic economic growth.

    The insistence of central banks on promoting yield-seeking speculation, a game that always ends in destruction, reminds me of the 1983 Cold War movie “War Games” where a teenage Matthew Broderick hacks into a Defense Department computer called WOPR, and launches a “global thermonuclear war” simulation that’s mistaken for the real thing. How much yield-seeking speculation do central banks have to provoke, and how much do future economic prospects have to be injured, before they stumble onto the same conclusion as WOPR: “A strange game. The only winning move is not to play.”

     

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Today’s News 1st August 2016

  • Is Europe Doomed By Vassalage To Washington?

    Authored by Paul Craig Roberts,

    “One Ring to rule them all . . . and in the darkness bind them.”
    J.R.R. Tolkien, The Lord of the Rings

    World War II resulted in Europe being conquered, not by Berlin but by Washington.

    The conquest was certain but not all at once. Washington’s conquest of Europe resulted from the Marshall Plan, from fears of Stalin’s Red Army that caused Europe to rely on Washington’s protection and to subordinate Europe’s militaries to Washington in NATO, from the replacement of the British pound as world reserve currency with the US dollar, and from the long process of the subordination of the sovereignty of individual European countries to the European Union, a CIA initiative implemented by Washington in order to control all of Europe by controlling only one unaccountable government.

    With few exceptions, principally the UK, membership in the EU also meant loss of financial independence. As only the European Central Bank, an EU institution, can create euros, those countries so foolish as to accept the euro as their currency no longer have the power to create their own money in order to finance budget deficits.

    The countries that joined the euro must rely on private banks to finance their deficits. The result of this is that over-indebted countries can no longer pay their debts by creating money or expect their debts to be written down to levels that they can service. Instead, Greece, Portugal, Latvia, and Ireland were looted by the private banks.

    The EU forced the pseudo-governments of these countries to pay the northern European private banks by suppressing the living standards of their populations and by privatizing public assets at pennies on the dollar. Thus retirement pensions, public employment, education and health services have been cut and the money redirected to private banks. Municipal water companies have been privatized with the result being higher water bills. And so on.

    As there is no reward, only punishment, for being a member of the EU, why did governments, despite the expressed wishes of their peoples, join?

    The answer is that Washington would have it no other way. The European founders of the EU are mythical creatures. Washington used politicians that Washington controlled to create the EU.

    Some years ago CIA documents proving that the EU was a CIA initiative were released. See: http://www.telegraph.co.uk/news/worldnews/europe/1356047/Euro-federalist… and http://benwilliamslibrary.com/blog/?p=5080

    In the 1970s my Ph.D. dissertation chairman, then a very high-ranking official in Washington with control over international security affairs, asked me to undertake a sensitive mission abroad. I refused. Nevertheless, he answered my question: “How does Washington get foreign countries to do what Washington wants?”

    “Money,” he said. “We give their leaders bagfuls of money. They belong to us.”

    The record is clear that the EU serves the interests of Washington, not the interests of Europe. For example, the French people and government are opposed to GMOs, but the EU permits a “precautionary market authorization” of GMO introduction, relying perhaps on the “scientific findings” of the scientists on Monsanto’s payroll. When the US state of Vermont passed a law requiring labeling of GMO foods, Monsanto sued the state of Vermont. Once the paid-off EU officials sign the TTIP agreement written by US global corporations, Monsanto will take over European agriculture.

    But the danger to Europe goes far beyond the health of European peoples who will be forced to dine on poisonous foods. Washington is using the EU to force Europeans into conflict with Russia, a powerful nuclear power capable of destroying all of Europe and all of the United States in a few minutes.

    This is happening because the paid-off with “bagfuls of money” European “leaders” had rather have Washington’s money in the short-run than for Europeans to live in the long-run.

    It is not possible that any European politician is sufficiently moronic to believe that Russia invaded Ukraine, that Russia any moment will invade Poland and the Baltic states, or that Putin is a “new Hitler” scheming to reconstruct the Soviet Empire. These absurd allegations are nothing but Washington propaganda devoid entirely of truth. Washington’s propaganda is completely transparent. Not even an idiot could believe it.

    Yet the EU goes along with the propaganda, as does NATO.

    Why? The answer is Washington’s money. The EU and NATO are utterly corrupt. They are Washington’s well paid whores.

    The only way Europeans can prevent a nuclear World War III and continue to live and to enjoy what remains of their culture that the Americans have not destroyed with America’s culture of sex and violence and greed, is for the European governments to follow the lead of the English and exit the CIA-created European Union. And exit NATO, the purpose of which evaporated with the collapse of the Soviet Union, and which is now being used as an instrument of Washington’s World Hegemony.

    Why do Europeans want to die for Washington’s world hegemony? That means Europeans are dying for Washington’s hegemony over Europe as well.

    Why do Europeans want to support Washington when Washington’s high officials, such as Victoria Nuland, say “Fuck the EU.”

    Europeans are already suffering from the economic sanctions that their overlord in Washington forced them to apply to Russia and Iran. Why do Europeans want to be destroyed by war with Russia? Do Europeans have a death wish? Have Europeans been Americanized and no longer appreciate the historic accumulation of artistic and architectural beauty, literature and music achievements of which their countries are custodians?

    The answer is that it makes no difference whatsoever what Europeans think, because Washington has set up a government for them that is totally independent of their wishes. The EU government is accountable only to Washington’s money. A few people capable of issuing edicts are on Washington’s payroll. The entire peoples of Europe are Washington’s serfs.

    Therefore, if Europeans remain the gullible, insouciant, and stupid peoples that they currently are, they are doomed, along with the rest of us.

    On the other hand, if the European peoples can come to their senses, free themselves from The Matrix that Washington has imposed on them, and revolt against Washington’s agents who control them, the European peoples can save their own lives and the lives of the rest of us.

  • Is War Inevitable In The South China Sea?

    Authored by Pepe Escobar, originally posted Op-Ed via RT.com,

    Since the recent ruling by The Hague in favor of the Philippines and against China over the South China Sea, Southeast Asia has been engulfed on how to respond. They dithered. They haggled. They were plunged into despair.

    It was a graphic demonstration of how “win-win” business is done in Asia. At least in theory.

    In the end, at a summit in Vientiane, Laos, the 10-nation Association of Southeast Asian Nations (ASEAN) and China finally settled for that household mantra – “defusing tensions”.

    They agreed to stop sending people to currently uninhabited “islands, reefs, shoals, cays, and other features” after ASEAN declared itself worried about land reclamation and “escalations of activities in the area”.

    And all this without even naming China – or referring to the ruling in The Hague.

    China and ASEAN also pledged to respect freedom of navigation in the South China Sea (which Washington insists is in danger); solve territorial disputes peacefully, through negotiations (that happens to be the official Chinese position), also taking into consideration the UN Convention on the Law of the Sea (UNCLOS); and work hard to come up with a Code of Conduct in the South China Sea (that’s been going on for years; optimistically, a binding text will be ready by the first half of 2017).

    So, problem solved? Not really. At first, it was Deadlock City. Things only started moving when the Philippines desisted to mention The Hague in the final statement; Cambodia – allied with China – had prevented it from the start.

    And that’s the heart of the matter when it comes to ASEAN negotiating with China. It’s a Sisyphean task to reach consensus among the 10 members – even as ASEAN spins its role as the perfect negotiation conduit. China for its part prefers bilaterals – and has applied Divide and Rule to get what it wants, seducing mostly Laos and Cambodia as allies.

    That threat by a peer competitor

    The strategic geopolitical centrality of the South China Sea is well known: A naval crossroads of roughly $5 trillion in annual trade; transit sea lanes to roughly half of global daily merchant shipping, a third of global oil trade and two-thirds of all liquid natural gas (LNG) trade.

    It’s also the key hub of China’s global supply chain. The South China Sea protects China’s access to the India Ocean, which happens to be Beijing’s crucial energy lifeline. Woody Island in the Paracels, southeast of Hainan island, also happens to be a key bridgehead in One Belt, One Road (OBOR) – the New Silk Roads. The South China Sea is strictly linked to the Maritime Silk Road.

    The arbitration panel in The Hague (composed of four Europeans, one American of Ghanaian descent and, significantly, no Asians) issued a ruling that is non-binding; moreover, it was not exactly neutral, as China, one the conflicting parties, simply refused to take part.

    Beyond these expressions of mutual ASEAN-China understanding, hardcore action will keep everyone’s juices flowing. The Pentagon, predictably, won’t refrain from its FON (Freedom of Navigation) program, which has recently featured several B-52 overflights in the South China Sea along with the usual US Navy patrols.

    But now Beijing is counter punching in style – showing off one of its H-6K long-range nuclear-capable bombers overflying Scarborough Shoal, near the Philippines. That only increased Pentagon paranoia, because the real game in the South China Sea revolves to a large extent over China’s aerial and underwater military strategy.

    To understand the progression, we need to go back to the early 1980s, when the Little Helmsman Deng Xiaoping set up China’s first Special Economic Zone (SEZ) in Shenzhen. From the start, the whole Chinese miracle always depended upon China’s eastern seaboard’s fabulous capacity to engage in global trade. More than half of China’s GDP depends on global trade.

    But, strategically, China has no direct access to the open seas. Geophysics is implacable: there are islands all around. And geopolitics followed; many of these are and can become a problem.

    Wu Shicun, the president of China’s National Institute for South China Sea Studies, has been constant over the years; all of Beijing’s actions boil down to securing strategic access to the opens seas. This may be construed in the West as aiming for a “Chinese lake”. But it’s in fact about securing its own naval backyard. And that implies, predictably, deep suspicion about what the US Navy may come up with. The Defense Ministry loses sleep about it 24/7.

    For Beijing, it’s crystal clear; the eastern seaboard must be protected at all costs – because they are the entry and exit point of China’s global supply chains. Yet as Beijing improves its military sophistication, the hegemon – or exceptionalist – machine gets itchier and itchier. Because the whole ingrained exceptionalist worldview can only conceive it as a “threat” by a peer competitor.

    The larger-than-life “access” drama

    From Exceptionalistan’s point of view, it’s all about the myth of “access”. The US must have full, unrestricted “access” to the seven seas, the base of its Empire of Bases, post-Rule Britannia system: the “indispensable nation” ruling the waves.

    But now Beijing has reached a new threshold. It’s already in the position to successfully defend the strategic southern island of Hainan. The Yulin naval base in Hainan is the site of China’s expanded submarine fleet, which not only features stalwarts such as the 094A Jin-class submarine, but the capability to deliver China’s new generation ICBM, the JL-3, with an estimated range of 12,000km.

    Translation: China now can not only protect, but also project power, aiming ultimately at unrestricted access to the Pacific.

    The US counter punch to all this is “Anti-Access”, or A2, plus Area Denial, which in Pentagonese turns out as A2/AD. Yet China has evolved very sophisticated A2/AD tactics, which include cyber warfare; submarines equipped with cruise missiles; and most of all anti-ship ballistic missiles such as the Dongfeng 21-D, an absolute nightmare for those sitting duck billion-dollar US aircraft carriers.

    A program called Pacific Vision, funded by the Pentagon’s Office of Net Assessments, eventually came up with the Air-Sea Battle concept. Virtually everything about Air-Sea Battle is classified. As the concept was being elaborated, China has mastered the art of very long range ballistic missiles – a lethal threat to the Empire of Bases, fixed and/or floating.

    What is known is that the core Air-Sea Battle concept, known in Orwellian Pentagonese as “NIA/D3”,“networked, integrated forces capable of attack-in-depth to disrupt, destroy and defeat adversary forces”. To break through the fog, this is how the Pentagon would trample over Chinese A2/AD. The Pentagon wants to be able to attack all sorts of Chinese command and control centers in a swarm of “surgical operations”. And all this without ever mentioning the word “China”.

    So these are the stakes. The indispensable nation’s military hegemony over the whole South China Sea must always be undisputed. Always. But already it is not. China is positioning itself as a cunning, asymmetrical aspirant to “peer competitor”. For the moment Beijing ranks second in the Pentagon’s list of “existential threats” to the US. Were not for Russia’s formidable nuclear power, China would already be number one.

    At the same time China does not need to launch any military offensive against an ASEAN member; it’s bad for business. The environment after The Hague’s ruling – as the Laos summit proved – points toward long-term diplomatic solutions. But make no mistake; at some point in the future, there will be a serious confrontation between the US and China over “access" to the South China Sea.

  • Yuan Strengthens Most Since 2010 As China Manufacturing Spikes To 17-Month Highs AND Tumbles To 7-Month Lows

    In a miracle of modern goal-seeking, China's Manufacturing PMI clung to within an inch of 'stable' 50 level for the 20th month (actually missing expectations of 50.0, printing 49.9) But while manufacturing is its lowest since Feb, the non-manufacturing PMI jumped to 53.9 – its highest since Dec 15. Even better, just 45 monutes after this data, Caixin released their manufacturing PMI data which smahed expectations, surging to 50.6 – its highest since Feb 2015. Following the notable USD weakness on Friday (thanks to BoJ disappointment), and the apparent recovery of the Chinese economy (just need another trillion or two of credit to keep the dream alive), PBOC strengthened the Yuan fix by 0.35% – the most since mid-June… extending the 9-day gain to the most since Sept 2010.

    Manufacturing slipped to a 5-month low…

     

    Services hits 7-month (2016) highs…

     

    But Caixin Manufacturing (weighted more towards smaller-caps rather than official PMI's weighting towards SOEs) surged to 19 month highs… thanks to the quickest rise in outstanding business since March 2011.

     

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

    “The Caixin China General Manufacturing PMI came in at 50.6 for July, up significantly by 2.0 points from the reading for June, marking the first expansion since February 2015. The sub-indexes of output, new orders and inventory all surged past the neutral 50-point level that separates growth from decline. This indicates that the Chinese economy has begun to show signs of stabilizing due to the gradual implementation of proactive fiscal policy. But the pressure on economic growth remains, and supportive fiscal and monetary policies must be continued.”

    Evercore ISI notes the following a China's most crucial recent developments… 

    • “Severe challenges” in the China economy says Beijing, worse than “persistent downward pressure” – their characterization of the last several months. 
    • Two components to this change.  One, managing expectations down. Two, showing the upcoming G20 (Sep 4-5) attendees that the officials are on the case. 
    • Conflicting Beijing comments.  Saying ‘foundation of stable economic development not solid’ – bad.   Then saying the ‘long-term positive trend in fundamentals has not changed’ – good.   
    • China budget deficit now 4.2% of GDP, vs. 2.2% in worst of 2008-09 global crisis amid a big stimulus program.  More stimulus coming.   
    • CBRC (banking authority) tightening regulations to contain growing risks from sketchy practices in the ‘Wealth Mgmt Products’ arena.  NPL fears also.   
    • Media control even tighter by Beijing.  All original ‘current affairs news’ is now banned by internet portals.  Managing what people see – not the path of modern market economies.    
    • Yuan strengthened this last week, mostly on Friday.  Think of this as more USD weakness than Yuan strength.

    And that Yuan strength continues as PBOC fixes the currency stronger by the most since mid June…

    • *CHINA STRENGTHENS YUAN FIXING BY 0.35%, MOST SINCE JUNE 23

     

    This is the 8th Yuan strengthening in 9 days… the biggest strengthening since Sept 2010…

     

    Is this the post G-20 agreement? Fed promises not rose rates, China allows Yuan to rise.. world remains stable into the election to try to ensure HRC wins?

     

    Charts: Bloomberg

  • What If?

    Presented with no comment…

     

     

    Source: Townhall.com

  • America's Recent Achievements In The Middle East

    Authored by Eric Zuesse,

    Here are before-and-after pictures of what the U.S. government has achieved, in the Middle East:

    What’s especially interesting there, is that in all of these missions, except for Iraq, the U.S. was doing it with the key participation of the Saud family, the royals who own Saudi Arabia, and who are the world’s largest buyers of American weaponry. Since Barack Obama came into the White House, the operations — Libya, Yemen, and Syria — have been, to a large extent, joint operations with the Sauds. ‘We’ are now working more closely with ‘our’ ‘friends’, even than ‘we’ were under George W. Bush.

    As President Obama instructed his military, on 28 May 2014:

    When issues of global concern do not pose a direct threat to the United States, when such issues are at stake — when crises arise that stir our conscience or push the world in a more dangerous direction but do not directly threaten us — then the threshold for military action must be higher. In such circumstances, we should not go it alone. Instead, we must mobilize allies and partners to take collective action. We have to broaden our tools to include diplomacy and development; sanctions and isolation; appeals to international law; and, if just, necessary and effective, multilateral military action. In such circumstances, we have to work with others because collective action in these circumstances is more likely to succeed.

    So: ’we’ didn’t achieve these things only on our own, but instead in alliance with the royals of Saudi Arabia, Qatar, UAE, Kuwait, and other friendly countries, which finance jihadists everywhere but in their own country. And, of course, all of ‘us’ are allied against Russia, so we’re now surrounding that country with ‘our’ NATO partners before we do to it what we’ve previously done to Iraq, Libya, Yemen, and Syria. America is becoming even more ambitious, because of ‘successes’ like these in Iraq, Libya, Syria, Yemen, and Ukraine.

    The United States has been the great champion of ‘democracy’ throughout the world. And these are are some of the results of that ‘democracy’. ‘We’ are spreading it abroad.

    ‘Our’ latest victory has been ‘our’ spreading it to Ukraine. No country is closer to Russia than that.

    Inside America, the term that’s used for referring to anyone who opposes this spreading of ‘democracy’, is ‘isolationist’, and this term is imported from the meaning that it had just prior to America’s joining World War II against Hitler and other fascists. Back in that time, an “isolationist” meant someone who didn’t want to defeat the fascists. The implication in the usage of this term now, is that the person who is an ‘isolationist’ is a ‘fascist’, just as was the case then. It’s someone who doesn’t want to spread ‘democracy’. To oppose American foreign policy is thus said to be not only ‘right wing’, but the extremist version of that: far right-wing — fascist, perhaps even nazi, or racist-fascist. (Donald Trump is rejected by many Republicans who say that he’s ‘not conservative enough’. Democrats consider him to be far too ‘conservative’. The neoconservative Democrat Isaac Chotiner, whom the Democratic neoconservative Slate hired away from the Democratic neoconservative The New Republic, has headlined at Slate, “Is Donald Trump a Fascist?” and he answered that question in the affirmative.) George Orwell dubbed this type of terminological usage “Newspeak.” It’s very effective.

    Studies in America show that the people who are the most supportive of spreading ‘democracy’ are individuals with masters and doctoral degrees (“postgraduate degrees”). Those are the Americans who vote for these policies, to spread American ‘democracy’, to foreign lands. They want more of this — more of these achievements. (Hillary Clinton beat Bernie Sanders nationwide among the “postgraduate” group.) Some of these people pride themselves on being “technocrats.” They claim that the world needs more of their ‘expertise’. Lots of them come forth on the ‘news’ media to validate such invasions as Iraq in 2003, Libya in 2011, Syria after 2011, etc. Almost all of them possess doctoral degrees. This shows what they have learned. They are the most employable, the highest paid, the most successful, in their respective fields.

    After all: ‘democracy’ is not for amateurs. It’s only for people who take instruction, and who do what they are told. But, told by whom? Whom are they obeying? Do they even know? In any organization, when an instruction is issued, is it always easy to know who issued it? And what happens to a person who doesn’t carry it out? There is a winnowing process. The constant survivors are the ones who rise from that process, and who ultimately win the opportunity to issue some of the instructions themselves. These people are the wheat; everybody else is chaff, which gets discarded, in a ‘democracy’.

    *  *  *

    Investigative historian Eric Zuesse is the author, most recently, of  They’re Not Even Close: The Democratic vs. Republican Economic Records, 1910-2010, and of  CHRIST’S VENTRILOQUISTS: The Event that Created Christianity.

     

     

  • If You Disagree With This Harvard Economist You May Be Stupid And A Racist

    Shocked by the inexplicable realization that Americans are stubbornly unwilling to bow down and blindly accept the political and economic views of the educated elites in this country, Harvard Professor Gregory Mankiw recently took to the New York Times to pen an op-ed where he concluded that the only possible reason for the lack of conformity to his point of view is the stupidity and racism of the electorate.  An article by Adam Button at forexlive, called our attention to the recent op-ed which he described as a "dazzling display of contempt for the public from a Harvard professor who can't believe that voters aren't listening to the gospel of the economic elites."

    Questioning why American's object to increasing globalization, Professor Mankiw pointed to three main conclusions:

    "The first is isolationism more broadly. Trade skeptics tend to think, for example, that the United States should stay out of world affairs and avoid getting involved in foreign conflicts.  They are not eager for the United States to work with other nations to solve global problems like hunger and pollution."

     

    "The second is nationalism. Trade skeptics tend to think that the United States is culturally superior to other nations. They say the world would be better if people elsewhere were more like Americans."

     

    "The third is ethnocentrism. Trade skeptics tend to divide the world into racial and ethnic groups and think that the one they belong to is better than the others. They say their own group is harder working, less wasteful and more trustworthy."

    In summary, Professor Mankiw concludes that "…isolationist, nationalist, ethnocentric worldview is related to one’s level of education…the more years of schooling people have, the more likely they are to reject anti-globalization attitudes."  So if we understand Professor Mankiw correctly, we disagree with him because we're stupid, and because we're stupid we're also necessarily racist.  Got it.  

    Lest you think that Mr. Mankiw only holds contempt for American dissenters, he points out that the British people are stupid and racist as well:

    "…the recent Brexit vote was strongly correlated with education.  Districts with a high percentage of college graduates tended to vote to remain in the European Union, while those with a small percentage tended to vote to leave."

    We're happy to note that Mr. Mankiw did find some cause for optimism, noting that populations tend to grow smarter over time.  If we're lucky, hopefully our offspring can all reach the level of enlightenment of Professor Mankiw, though it will probably take another 100-200 years, or so. 

    "In the long run, therefore, there is reason for optimism.  As society slowly becomes more educated from generation to generation, the general public’s attitudes toward globalization should move toward the experts.  The short run in which we find ourselves now, however, is another story."

    Frankly, we're happy that Professor Mankiw is drawing attention to the infallible intellect of our our ivy league educated economic and political elite.  Given the horrific record of the Fed in recent years, creating bubble after bubble while laying ruin to global economies, we think the Fed could benefit from some smart people like Professor Mankiw.

    Janet L. Yellen – Brown University – BA in Economics; Yale University – Ph.D. in Economics

    Lael Brainard – Wesleyan University – BA; Harvard University – Ph.D. in Economics

    Stanley Fischer – London School of Economic – BS/MS in Economics; MIT – Ph.D. in Economics

    Jerome H. Powell – Princeton University – AB in Politics

    Daniel K. Tarullo – Georgetown University; Duke University

    Wait a minute….

    Gregory Mankiw

  • "Time's Up – The Pain Must Begin Now"

    Submitted by Chris Hamilton via Econimica blog,

    In 2010, Social Security (OASDI) unofficially went bankrupt.  For the first time since the enactment of the SS amendments of 1983, annual outlays for the program exceeded receipts (excluding interest credited to the trust funds).  The deficit has grown every year since 2010 and is now up to 8% annually and is projected to be 31% in 2026 and 44% by '46.  The chart below highlights the OASDI annual surplus growth (blue columns) and total surplus (red line).  This chart includes interest payments to the trust funds and thus looks a little better than the unvarnished reality.

    For a little perspective, the program pays more than 60 million beneficiaries (almost 1 in 5 Americans), OASDI (Old Age, Survivors, Disability Insurance) represents 25% of all annual federal spending, and for more than half of these beneficiaries these benefits represent their sole or primary source of income.

    The good news is since SS's inception in 1935, the program collected $2.9 trillion more than it paid out.  The bad news is that the $2.9 trillion has already been spent.  But by law, Social Security is allowed to pretend that the "trust fund" money is still there and continue paying out full benefits until that fictitious $2.9 trillion is burned through.  To do this, the Treasury will issue another $2.9 trillion over the next 13 years to be sold as marketable debt so it may again be spent (just moving the liability from one side of the ledger, the Intergovernmental, to the other, public marketable).  However, according to the CBO, Social Security will have burnt through the pretend trust fund money (that wasn't there to begin with) by 2029.

    Below, the annual OASDI surplus (in red) peaking in 2007, matched against the annual growth of the 25-64yr/old (in blue) and 65+yr/old (grey) populations.  The impact of the collapse of the growth among the working age population and swelling elderly population is plain to see.  And it will get far worse before it eventually gets better. 

    From 2017 through 2029, the present 170 million person 25-64yr/old population will grow by just 5 million.  The current 51 million person 65+yr/old population will grow by 22 million.  And it won't get much better after that as the older population keeps swelling with boomers living progressively longer.

    Beginning in 2030 benefits will have to be paired up with tax collections according to current law.  By present calculations, this means an initial 29% reduction in benefits.  The reductions will only become larger from there.  The average benefit check in 2016 is $1341/mo, or $16,000/yr.  A 29% reduction on the average payment will be <-$390/mo> and the reductions will keep growing for the rest of our lives.  For couples, this means their initial combined benefit will be $22.850 instead of $32.000.

    Americans turning 67 in 2030 will be told that after being mandated to pay their full share of SS taxation throughout their working lifetime, they will not see anything near their full benefits in their latter years.  However, those in retirement now and those retiring between now and 2029 are being paid in full despite the shortfall in revenue.  They will be paid in full until this arbitrary "trust fund" is theoretically drained.

    I have no intention of funding, in full, current retirees benefits with my tax dollars only to know I will hit the finish line with a 30%+ reduction that will only worsen over time.  My goal is to pay it forward to my kids and then do my best to never to be a burden to them.  The SS (OASDI) benefits must be cut now to be in line with revenues.  Raise taxes, lower benefits…your choice.  But I'm not about to make the old whole so I can then subsequently see my generation go bankrupt in my latter years.

    Conclusion-

    1- There was a trust fund, but Executive and Congressional tinkering along the way has seen that is has been entirely spent (artificially and temporarily boosting the economy along the way).  It's gone and issuing more debt in it's place is just asinine.

     

    2- With immediate effect, benefits must be cut or taxes raised…you choose.  We can't pretend any longer and attempt to push the consequences out another generation.

    Times up. The pain must begin now and must be shared equally by all.

  • Why The IRS Is Probing The Clinton Foundation

    "Clinton Cash" author, Peter Schweizer, recently took to the airwaves to explain why the IRS investigation of the Clinton Foundation should be a "big deal" (also see Clinton Cash: "Devastating" Documentary Reveals How Clintons Went From "Dead Broke" To Mega Wealthy") even though he expressed some "skepticism" over the ability of Obama's IRS to run an impartial investigation.  As we we've reported (see "IRS Launches Investigation Of Clinton Foundation"), the IRS recently launched an investigation of the Clinton Foundation after receiving a letter signed by 64 Republicans of the House of Representative which described the Clinton Foundation as a “lawless ‘pay-to-play’ enterprise that has been operating under a cloak of philanthropy for years.” 

    Somehow we, too, are doubtful that the IRS will lead this investigation with the same kind of vigor they displayed when looking into local Tea Party organizations and religious charities during the last election cycle. 

    When asked why the IRS should be concerned about the Clinton Foundation, Mr. Schweizer explained:

    "The big deal is that…there are international anti-bribery standards that say bribing a public official can mean giving them money, giving their family money, or giving their charity money.  Just because it's a charity doesn't mean that it's not important or not interesting…it constitutes bribery every bit as much as if somebody's putting money in somebody's pocket for a benefit."

    Mr. Schweizer continued by calling into question why foreign governments and wealthy foreign individuals, many from the middle east, would contribute money to the Clinton Foundation given the limited scope of their actual charitable outreach:

    "When you look at the people who are giving large sums of money overseas they are people who have histories of corruption or being involved in bribery scandals."

    We're certain Mr. Schweizer is "overreacting".  After all we're pretty sure the State of Kuwait, Friends of Saudi Arabia, United Arab Emirates, The Government of Brunei Darussalam and The Sultanate of Oman, all Clinton Foundation contributors (see full list below), are eagerly involved in the Clinton Foundation's project entitled "No Ceilings: The Full Participation Project" whose stated goal is building an "evidence-based case to chart the path forward for the full participation of girls and women in the 21st century."

    A full list of entities/individuals that have made bribes contributions in excess of $1mm to the Clinton Foundation over the years can be found below (click for a larger image):

    Clinton Foundation Contributors

    Finally, when asked why the Obama administration would allow the Clinton Foundation to continue to solicit cash from foreign governments even as she served as Secretary of State, Mr. Schweizer noted that, in fact, Obama conditioned his appointment of Clinton to Secretary of State on her agreement to "disclose all donors"…a condition which Clinton promptly ignored. 

    "We know now that there at least 1,100  contributions from foreign sources they still haven't disclosed."

    The full interview with Mr. Schweizer can be viewed below:

     

    Watch the latest video at video.foxnews.com

    In light of the IRS investigation, we also decided to take a quick look at the Clinton Foundation financials (full reports can be found here). To our "surprise," we discovered that, in fact, only 13.6% of the $248 million of expenditures made by the Foundation in 2014 were for "direct program expenditures" while the remainder went to salaries and amorphous expense buckets like "Professional and Consulting" and "Meetings and Training."  We're very hopeful that this is the type of "efficiency" that Hillary can bring to the various federal organizations.  After all, spending 13.6 cents of every dollar on actual stated objectives would be a huge improvement for many federal entities.

    Clinton Foundation 2014 Expenses

    The full 2014 audited financials of the Clinton Foundation can be viewed below:

  • Goldman Turns Outright Bearish: Says To "Sell" Stocks Over Next 3 Months

    One month after Goldman strategists downgraded equities to neutral on growth and valuation concerns back in May, the firm turned up the heat on the bearish case with a June report by Christian Mueller-Glissmann, in which the Goldman strategist said that equity drawdown risk “appears elevated” with S&P 500 trading near record high, valuations stretched, lackluster economic growth and yield investors being “forced up the risk curve to equities.” Specifically Goldman warned to prepare for a “major drawdown.”

    We, however, were skeptical, and concluded our take on Goldman’s newfound skepticism as follows: “we can’t help but be concerned that the last time Goldman warned about a big drop in the market a month ago, precisely the opposite happened. Will Goldman finally get this one right, or did the firm just say the magic words for the next leg higher in stocks? “

    Well, Goldman was right about a brief “drawdown” in stocks just a few weeks later following the Brexit swoon, which however on the back on unprecedented central bank verbal support, resulted in one of the biggest rallies yet, not to mention a historic short squeeze, and indeed led to the next leg higher in stocks, to fresh all time highs to be precise.

    So for those who believe that Goldman is just another incarnation of Dennis Gartman and are still bearish, you may want to close out any remaining short positions because moments ago, the same Christian Mueller-Glissman released a new report in which Goldman has gone outright bearish, with a “tactical downgrade to equities for the next 3 months.”

    Here is the reasoning behind Goldman’s creeping sense of gloom:

    • The rally in risky assets over the past few weeks has continued n and broadened – the S&P 500 has made all-time highs, the VIX has fallen, bonds and ‘safe havens’ started to sell off, and cyclicals have outperformed defensives.
    • We think a key driver of the recovery has been a combination of the light positioning into Brexit and the search for yield amid expectations of easing.
    • However, given equities remain expensive and earnings growth is poor, in our view equities are now just at the upper end of their ‘fat and flat’ range.
    • Our risk appetite indicator is near neutral levels and its positive momentum has faded, suggesting positioning will give less support and we will need better macro fundamentals or stimulus to keep the risk rally going, but market expectations are already dovish and growth pick-up should take time.
    • As a result, we downgrade equities tactically to Underweight over 3 months, but remain Neutral over 12 months. We remain Overweight cash and would look for resets lower in equities to add positions.

    First off, in its attempt to skim over its most recent erroneous call, Goldman’s global risk appetite indicator “signalled a persistent lack of risk appetite ahead of Brexit (and in general since 2015), with our indicator mostly negative, and a sharp decline post the Brexit vote. The lack of positioning was a key reason why we decided to stay Neutral on equities despite the quick relief rally. Since then, our risk appetite indicator has increased further, indicating a continuation of the risk appetite reversal. We think the negative asymmetry in risky assets is increasing again. A positive level of the risk appetite indicator is not a bearish signal per se – the indicator can remain in positive territory for prolonged periods of time without any risk of drawdowns as long as macro fundamentals remain supportive. However, with our risk appetite indicator now in neutral territory, the market is more vulnerable to growth and policy disappointments, in our view. In addition, its positive momentum has faded and we are back at the levels we saw ahead of the last 3 drawdowns.”

    Goldman adds the following:

    While the initial risk appetite reversal had both risky and ‘risk-off’ assets rallying alongside each other in a strong search for yield, a more reflationary rally has occurred since July 8, during which bonds and other ‘risk-off’ assets such as gold and the Yen started to sell off, up until Friday. Alongside this, cyclicals and financials outperformed, while low vol stocks underperformed (Exhibit 3). The cyclicals vs. defensives roundtrip, for example, has happened across regions (Exhibit 4) and has been particularly strong in EM and Japan (supported by the financials’ rally after the recent BoJ decision), but we believe a large part of the reversal is now done and without a sustained pick-up in growth, the more pro-cyclical rally is running out of steam.

     

    In short, Goldman’s doubling down on a bearish forecast have nothing to do with a change in fundamentals (which have not improved according to the firm) and everything to do with a shift in sentiment and positioning. To wit:

    We think this reversal in positioning increases the likelihood of an equity pullback given that our fundamental view has not changed: valuations still appear high and we still expect poor earnings growth across regions. In our view, equities remain in their ‘fat and flat’ range and are now just near the upper end. As a result, we downgrade equities to Underweight in our 3-month asset allocation. Until the growth situation improves, we are not that constructive on equities, particularly after this type of rally and amid continuing concerns about the sustainability of stimulusled growth in China, global policy uncertainty (and in Europe in particular), dovish central bank expectations, and heightened prospects of unknown shocks (e.g. Turkey recently). We remain Overweight credit, which has less negative  asymmetry than equities, in our view.

    So, if one believes that Goldman is going to be right this time, how should one trade the coming risk asset swoon? Some ideas from the taxpayer-backed hedge fund:

    Cross-asset volatility has reset significantly lower, particularly relative to where recent realised levels are.

    We remain Overweight cash over 3 months to benefit from a pick-up in volatility and look for opportunities to re-enter upon pullbacks in equity, as we remain Neutral over 12 months. We think the negative asymmetry for risky assets and for bonds could require more aggressive risk management. We highlight the following cross-asset opportunities:

    1. Call-overwriting across indices
    2. Short-dated S&P 500 options: Long OTM calls for investors worried about a squeeze higher, long puts for hedges
    3. Long-dated Nikkei vol
    4. Long gold vol
    5. Long MSCI EM puts to hedge positions

    Finally some thoughts from Goldman on the underlying macro situation…

    Macro surprises have been positive, but from a low bar

     

    The recent pro-cyclical tilt of the equity rally might in part be due to expectations of more reflationary central bank polices, but it has also been supported by a better macro backdrop relative to expectations. Our global macro surprise index (MAP) had an increase in July, driven by developed markets (Exhibit 14). And the correlation of equities with macro surprises has been positive, i.e. it’s a ‘good news is good news’ environment as dovish Fed expectations have been anchored. However, the positive macro surprises might in part be due to lowered expectations into and after Brexit. Friday’s US GDP release came in below expectations, primarily owing to a sizeable inventory correction.

     

    … and the market’s take on monetary policy, which is at odds with an economy that is supposedly improving:

    The current dovish Fed pricing is at odds with current macro trends, the significant easing of financial conditions during the relief rally and our economists’ forecast of above 2% US GDP growth in 2H2016. The repricing of Fed hikes since the beginning of the year has been extreme and now little is priced until 2018 (Exhibit 16). Our economists see a 65% probability of a hike this year (45% for December and 20% for September) post the Fed’s recent meeting as the FOMC indicated nearterm risks to the economic outlook have diminished, although Friday’s US GDP came in below expectations. Bearish rate shocks have put upward pressure onglobal bond yields, which could continue.

    In short, Goldman believes the key risk to sentiment, and pricing, is that monetary policy expectations will disappoint.

    So far, both the BoE and ECB have been on hold. Our economists expect the BoE to announce a 25 bp cut in the bank rate, Gilts and corporate bond purchases and an extension of the Funding for Lending Scheme. And they expect the ECB to extend its asset purchase programme to the end of 2017 (currently March 2017) at the September meeting, and the key according to which purchases under the PSPP are taking place to be changed from the ECB’s capital key to market capitalisation of debt outstanding. New fiscal easing in Japan is also broadly expected in the near term (see Japan Views: Economic stimulus package upwards of ¥28 tn, but real water component likely only around ¥5 tn over several years, July 27, 2016), but we have concerns that this fails to sustainably boost the market, as has often been the case in the past (see Japan Strategy Views: History Lessons, July 26, 2016). Unless expectations can be met or exceeded, the chances of another drawdown are heightened, in our view.

    Taking all this into considerations, Goldman’s latest conclusion is relative simple: sell.

    Policy uncertainty is still high post Brexit and has increased further in Europe, the US and China, in our view. In Europe, the Brexit negotiations are likely to take time; in the US, the general election cycle is starting; and in China, concerns have picked up – in fact, our economists have highlighted again a significant pick-up in FX outflows in June amid RMB weakening. Geopolitical risks have also moved again into focus with further terror attacks globally and the attempted military coup in  Turkey on July 15, 2016. With equities at the high end of their range, we think shocks such as these can drive downside from here.

    Will Goldman again be wrong?  It’s distinctly possible, in which case we expect the firm to capitulate some time in September, when the S&P is around 2,300 and urging what clients it has left to buy stocks at all time highs. That would clearly market the moment to sell everything. On the other hand, considering Goldman dreadful forecasting record over the past year, it is about time the firm got one reco right, if only purely statistically.  But just to be safe, it may be wisest to wait until Gartman turns “pleasasntly long.”

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Today’s News 31st July 2016

  • DoD Admits US Global Hegemony Threatened By China, Russia In "Persistently Disordered World"

    By 2035, the US could find itself in an environment where Russia or China may match or even exceed the West's military and economic might in some areas, taking advantage of a “disordered and contested world,” the Pentagon’s research unit said…

    Conflict and war in 2035 cannot be understood by the simple identification of a set of individual trends and conditions. Instead, the intersection and interaction of many discrete trends and conditions will ultimately change the character of future conflict and illuminate the reasons why the Joint Force may be called on to address threats to U.S. national interests. In fact, conflict in 2035 is likely to be driven by six specific and unique combinations of trends and conditions.

     

    Each of these Contexts of Future Conflict creates a troubling problem space for the Joint Force. They include:

     

    1. Violent Ideological Competition. Irreconcilable ideas communicated and promoted by identity networks through violence.

     

    2. Threatened U.S. Territory and Sovereignty. Encroachment, erosion, or disregard of U.S. sovereignty and the freedom of its citizens from coercion.

     

    3. Antagonistic Geopolitical Balancing. Increasingly ambitious adversaries maximizing their own influence while actively limiting U.S. influence.

     

    4. Disrupted Global Commons. Denial or compulsion in spaces and places available to all but owned by none.

     

    5. A Contest for Cyberspace. A struggle to define and credibly protect sovereignty in cyberspace.

     

    6. Shattered and Reordered Regions. States unable to cope with internal political fractures, environmental stressors, or deliberate external interference.

     

    Each context includes elements of both contested norms and persistent disorder. However, their relative importance will vary depending on the objectives of potential adversaries and the capabilities available to them. Dissatisfaction with the current set of international rules, norms, and agreements will cause revisionist actors to make their own – and attempt to enforce them. Meanwhile, the loss of legitimacy or strength by governing authorities will permit other actors to effectively employ coercion and violence in pursuit of power or to further their beliefs.

    As RT reports, a new foresight report from The Pentagon’s research division, the Defense Technical Information Center (DTIC), warns that within just 20 years, the US and its allies will live in a world where shaping a global order the way they have since the end of the Cold War would be increasingly difficult, if not impossible.

    “The future world order will see a number of states with the political will, economic capacity, and military capabilities to compel change at the expense of others,” reads the paper entitled “The Joint Force in a Contested and Disordered World.”

     

    “Rising powers including for example, China, Russia, India, Iran, or Brazil have increasingly expressed dissatisfaction with their roles, access, and authorities within the current international system,” it states.

     

    “Russia will modernize its land, air, and sea-based intercontinental nuclear forces” and make use of deterrent operations such as “snap nuclear exercises, bomber flights, and strategic reconnaissance overflights into US territory,” the Pentagon’s researchers predict.

    The report admits Russia and China are among countries dissatisfied “with the current Western-derived notion of international order.”

    Russia, China, India, and others, labeled “revisionist states” in the report, would promote alternate international alliances, while the West’s shrinking resources would also have an impact on Washington’s dominance across the globe.

    “Although seemingly insignificant today, organizations such as the Shanghai Cooperation Organization and the Eurasian Economic Union could grow as China, Russia, India, and others turn to these multinational groups to reorder international rules in their favor.”

     

    “Demographic and fiscal pressures will continue to challenge NATO’s capacity and capability,” the paper warns. “In Asia, perceptions of reduced US commitment may encourage current allies and partners to pursue unilateral military modernization efforts or explore alternative alliances and partnerships.”

    However, though the Pentagon’s report states that “no power or coalition of powers has yet emerged to openly oppose US global influence and reach,” it claims “the United States will operate in a world in which its overall economic and military power, and that of its allies and partners, may not grow as quickly as potential competitors.”

    A number of states “can generate military advantages locally in ways that match or even exceed that of the Joint Force and its partners,” while American technological superiority “will be met by asymmetric, unconventional, and hybrid responses from adversaries.”

    Offering a vision of the world in 2035, the paper says in conclusion it is unclear if the US “can be simultaneously proficient at addressing contested norms and persistent disorder with currently projected capabilities, operational approaches, and fiscal resources.”

    “There may be times when it is more appropriate to manage global security problems as opposed to undertaking expensive efforts to comprehensively solve them.”

    Moscow has repeatedly denied allegations of it harboring global ambitions as opposed to that of the US.

    Russia “is not aspiring for hegemony or any ephemeral status of a superpower,” President Vladimir Putin said at the St. Petersburg International Economic Forum last year, adding: “We do not act aggressively. We have started to defend our interests more persistently and consistently."

    Earlier this year, Russia adopted a new edition of its foreign policy doctrine, which mentions a shift towards a multipolar and a “polycentric” world.

    “A transition to polycentric architecture should be ideally based on the interaction of leading centers of power,” Russian Foreign Minister Sergey Lavrov said in April. He added however, that he was not sure if that was achievable.

    *  *  *

    Full Joint Chiefs of Staff Report below…

  • Turkey Surrounds, Blocks Access To NATO's Incirlik Airbase Amid Speculation Of Second Coup

    While it is common knowledge by now that the failed and/or staged Turkish coup two weekends ago was nothing more than an excuse for Erdogan to concentrate even more power and eradicate all political and independent opposition, a story that has gotten less attention is the sudden, and acute deterioration in US-Turkish relations. This culminated two days ago when the Commander of US Central Command (CENTCOM) General Joseph Votel was forced to deny on the record having anything to do with the attempted coup in Turkey following pointed allegations from the very top in the local government that the US orchestrated last Friday’s “coup”, according to a statement released by the US military on Friday.

    As Stars and Stripes reported late last week, the recent failed coup and jailing of military leaders in Turkey could impact U.S. operations there against the Islamic State group, Gen. Joseph Votel said Thursday at a security conference in Colorado. Votel said the coup attempt in Turkey two weeks ago left him “concerned” about how U.S. operations and personnel at Incirlik Air Base will be affected.


    Army Gen. Joseph Votel, commander of U.S. Central Command

    “Turkey of course …sits on an extraordinarily important seam between the central region and Europe,” Votel said at the Aspen Security Forum. “It will have an impact on the operations we do along that very important seam. Obviously, we are very dependent on Turkey for basing of our resources…I am concerned it will impact the level of cooperation and collaboration that we have with Turkey.”

    Yeni Safak, a daily paper known for its loyal support of Erdogan, even reported retired Army Gen. John F. Campbell, former commander of NATO forces in Afghanistan, was the mastermind behind the attempted overthrow. However, the paper also reported White House Press Secretary Josh Earnest called the allegations against the general unsubstantiated.

    Votel said Thursday that the United States was “continuing to work through some of the friction that continues to exist” following the failed coup. He did not elaborate.

    The general did say some of the arrested Turkish officers worked with U.S. personnel to coordinate airstrikes against the Islamic State group. “Yes, I think some of them are in jail,” Votel said of certain key Turkish military liaisons.

    As a result of the coup attempt, U.S. air operations were temporarily suspended and the Turkish government cut power to Incirlik.

    The diplomatic spat continued on Friday when comments made at an Erdogan’s rally once again blasted Votel for criticizing Turkey’s  post-coup attempt purge saying “Who are you? Know your place.” Erdogan went on to hint once more that the United States planned the failed government overthrow bid.

    To this Votel again responded that “any reporting that I had anything to do with the recent unsuccessful coup attempt in Turkey is unfortunate and completely inaccurate,” Votel said. He was responding to an interpretation of comments made at a think tank in Washington, DC by Turkey’s President Recep Tayyip Erdogan accusing Votel of sympathizing with the coup plotters.

    * * *

    Meanwhile, Turkey’s war of words against the US escalated on Friday, when Turkey’s authoritarian despot Erdogan condemned the West for refusing to show solidarity with Ankara, accusing NATO ‘allies’ as being more concerned about the fate of coup supporters than the survival of Turkey are not friends of Ankara. Erdogan blasted the West for criticizing the massive purge of Turkey’s military and other state institutions which has seen 60,000 people detained, removed or suspended over suspected links with the coup and for cancelling 50,000 civilian passports which many worry is but a prelude to an expansion of the reign of terror inside the country.

    “The attitude of many countries and their officials over the coup attempt in Turkey is shameful in the name of democracy,” Erdogan told hundreds of supporters at the presidential palace in Ankara.

    “Any country and any leader who does not worry about the life of Turkish people and our democracy as much as they worry about the fate of coupists are not our friends,” said Erdogan, who narrowly escaped capture and perhaps death on the night of the coup.

    As Sputnik notes, the statements come in response to US National Intelligence Director James Clapper’s statement on Thursday that the purges were harming the fight against Daesh in Syria and Iraq by stripping away key Turkish officers who had worked closely with the United States. 

    “My people know who is behind this scheme… they know who the superior intelligence behind it is, and with these statements you are revealing yourselves, you are giving yourselves away.”  The remarks come at a troubling time only one day after over 5,000 protesters yelling “death to the US” marched towards NATO’s critical Incirlik Air Base which houses between 50 and 90 US tactical nuclear weapons before security officials successfully dispersed the raging demonstrators.

    * * *

    Which brings us to today, and the news that NATO’s critical Incirlik Air Base was hours ago completely blocked off by Turkey, with all inputs and outputs to the Adana base having been closed according to Turkey’s Hurriyet among rumors of yet another coup.

     

    As the Turkish Minister for European Affairs, Omar Celik, tweeted moments ago, this is just a routine “safety inspection”, although it has not stopped local papers from speculating that a a second Gulen-inspired coup attempt may be underway. 

    Hurriyet has raised concern that the closing may be tied to an attempt by the Erdogan regime to prevent a second coup attempt.

    Some 7,000 armed police with heavy vehicles have surrounded and blocked the Incirlik air base in Adana used by NATO forces, already restricted in the aftermath of a failed coup. Unconfirmed reports say troops were sent to deal with a new coup attempt.

    Hurriyet reported earlier that Adana police had been tipped off about a new coup attempt, and forces were immediately alerted. The entrance to the base was closed off.  Security forces armed with rifles and armored TOMA vehicles used by Turkish riot police could be seen at the site in photos taken by witnesses.

    Indeed, the massive presence of armed police supported by heavy vehicles calls into question the Turkish government’s official line that the lock down at the Incirlik base is merely a “safety inspection.”?

    Local media has focused on the base after the failed coup in Turkey occurred the night of July 15. Although the main scenes of the events were Istanbul and Ankara, Incirlik was shut down  for a time by local authorities shortly after the putsch, and several Turkish soldiers from the base were deemed by Turkish officials to be involved in the overthrow attempt.

    The lockdown at Incirlik follows a massive wave of protests on Thursday when pro-Erdogan nationalists took to the streets yelling “death to the US” and called for the immediate closure of the Incirlik base. Security personnel dispersed the protesters before they were able to make it to the base.

    And while there has been no official statement from US armed forces stationed at Incirlik at this time, the situation continues to develop in front of the air bBase as more heavy trucks have been dispatched to surround and block access to the critical military facility.

    It is unclear if Erdogan is naive enough to think that he can out-bluff and out-bully the US and keep Incirlik hostage until he gets Gulen repatriated by Obama on a silver platter, a hostage “tit for tat” we first described two weeks ago. If so, one wonders, if he is doing so alone, or with the moral support of others, perhaps such recently prominent enemies of Erdogan as Vladimir Putin. Recall that just over a month ago Erdogan publicly apologized to Putin for downing the Russian Su-24 fighter jet in November, and called Putin “a friend.”

    Finally, at least as of this moment, it appears that theairspace around Incirlik is closed.

  • Waiting For The Other Shoe…

    …to Drop.

     

    “If a shoe drops in a forest of liberal media, will anyone hear it?”

    Source: Townhall.com

  • Whose Lives Matter?

    Submitted by Salil Mehta via Statitiscal Ideas blog,

    In our prior article we exposed that a murdered Black had a 90% chance of being killed by another Black (8x the rate of Whites being killed by another White).  And a murdered Black had a 10% chance of being killed by police (usually Black police, and anyway it is at a high 2.5x the rate of Whites).  We integrated recent popular academic research (some of which I peer-reviewed), and lastly we noted that for every 10 Blacks killed by police, 1 police was killed by a Black.  We intend to explore these trends further, since after that article we saw more shooting deaths of police in Baton Rouge (and less covered by the media were deaths in Kansas City and Austin and just now in San Diego, plus this week near-deaths of multiple officers in both Indianapolis and Jefferson Parish). The debate about the 'killings' statistics between predominantly Blacks and police has brought up in the recent political conventions.  It’s also worth noting from the onset that this all appears to be a system that has gotten out of control. 

    Police are ubiquitous in low income neighborhoods, and in these neighborhoods Blacks are killing disproportionately.  This summer in particular is going to set records going back more than a decade (even if you remove mass terrorist shootings from the time series). There is a lack of social service safety nets for these multitude of decent Americans, and instead the government's Lottery is ironically a disgraceful sponge drawing away from these communities that need assistance most.  I helped some of their neighborhoods rebuild, with economic assistance provided during the TARP bailout program.  But now attaining lethal weapons is simply too easy.  Blacks should know better, and the killings of these courageous public servants needs to stop.  Innocent Americans are needlessly becoming victims with the idea that police lives don’t matter.  They don’t matter to the point that the Black Lives Matter (BLM) -per the words of one of their three leaders- is now pushing to defund the police altogether.  And White people certainly shouldn’t feel somehow guilty because a small fraction of them are crowded into the Top 1%.  The rest of the White communities are going through as difficult a time as well, but just not as violently.  Given our last article gained 90k reads, and >275 social media engagements, this follow-up seemed necessary to present a broader case (taking in comments from both sides) than merely the grim murder statistics that provide bad optics for Blacks.  It is my hope that we learn from these most violent statistics, since this is also where data (difficult to come by) is just a tad easier to manually assimilate.

    There is plenty of information circulating that homicides of civilians through some methods has gone down (our blog has discussed this as well).  Overall police deaths have gone down (but through all means, including common causes such as simple working accidents or vehicle crashes).  In the chart below we see that for the specific case of cold-blooded shooting of police to death, so far in 2016 this has gone up by about 60%, versus the YTD levels in previous years.  It goes up, even as the month of July is not yet over. It goes up even if we don’t count the Dallas and Baton Rouge killings at all.  And it is nearly a 1 standard deviation event, implying that recent killings are either purposefully too high in response to BLM, or because we simply have a rise in disobedient killings anyway, and likely both.  Disturbingly, the police are the only sub-population being killed at an increasing rate over time!  And while in recent years about 55% of these murders were done by Blacks (who represent 13% of the U.S. population); and in 2016 this surged to a goliath three-quarters of police murdered by Blacks throughout 2016.  This evidence of the uptick in police being killed by Blacks is statistically significant at >95%.

     

     

    Such a spike in police being killed is enough discourage otherwise good, decent Americans from taking up this noble public service.  We all rely on the police at some point in our lives.  We ask them to work in our most dangerous cities, and they are mostly good officers (of course a few bad ones well).  The anecdotal shootings of Blacks that are edited and glorified on social media are still terrible tragedies and bad optics for communities that feel the police are intervening in their progress to live a healthy and productive life.  I do agree that black lives matter.  Most Americans should agree with that as well.  There are many, many extraordinary ones among our colleagues, friends, and -in my case- my students.  But they also agree that over time so too matters the lives of everyone else, including children, vulnerable women, police and everyday Whites in the same tender socio-economic status.  

    We live in a country where there is too much overall homicide (nearly 6 thousand annually).  And at the racial intersection we also have Black officers more likely to shoot Whites than White officers are to shoot Blacks.  But behind all of these statistics we all must work together and have a clear sense of responsibility to each another.  We share this country, and rise and fall together.  With hope, we will spend more time brightly raising each other up as fellow countrymen, rather than finding it easy to speak hateful words of one another (which then slides into killing one another).

     

  • One Month Later – Brexit Post-Mortem

    Submitted by Alasdair Macleod via GoldMoney.com,

    It is a month after Britain’s surprise vote to leave the EU.

    A new Conservative Prime Minister and Chancellor are in place, both David Cameron and George Osborne having fallen on their swords. The third man in the losing triumvirate, Mark Carney, is still in office. Having taken a political stance in the pre-referendum debate, there can be little doubt the post-referendum fall in sterling was considerably greater than if he had kept on the side-lines.

    This article takes to task the Treasury’s estimates of the effect of Brexit on the British economy and Mr Carney’s role in the affair, then assesses the actual consequences.

    The Treasury’s economic weapons of mass destruction

    One of the Treasury’s models predicted Brexit would cost each household £4,300 every year. There were at least two things wrong with this prediction. Firstly, it was presented as if it was a loss of net income, in other words the business profit or wages the average household would lose. The estimate was nothing of the sort, it was the Treasury’s estimate of the loss of annual GDP divided by the number of households in the event of Brexit.

    A second wrong should be equally obvious. No economic model is capable of predicting an outcome without subjective inputs. This is why garbage in produces garbage out. One can even goal-seek specific answers by feeding assumptions into an economic model. One suspects this was the principal basis of what the press dubbed “Project Fear”. There were in fact two Treasury models, the first one described above, which is meant to predict the medium to long-term outlook, and a second which predicted an immediate recession in the event of Vote Leave. This is the Treasury’s VAR model, which uses statistical analysis to measure and quantify the level of financial risk. The simple assumption, with no basis in evidence, was that Brexit would amount to an economic shock half as great as the 2008 financial crisis, lasting for two years.

    Combining the output of these two models allowed George Osborne to threaten us with an economic disaster if we didn’t vote Remain.

    An important point that seems to be lost on government economists when making their forecasting assumptions is that we all quietly get on with making a living, very successfully if we are left alone by the state. It is when they interfere that things start to go wrong. Furthermore, they are convinced we need national trade deals, and appear incapable of understanding that we manage far better with free trade.

    We will not digress into why using economic models can never work, and instead note the abuse of its own models by the Treasury. An independent paper by Professor David Blake published by the Cass Business School exposes the intent in the Treasury’s approach, some of which is repeated here. He even goes so far as to describe the published outputs as “dodgy dossiers”, a phrase that was first used to describe the cooked-up intelligence report that led us into the last Iraq war. It is as if the purpose of the Treasury’s economic assessment was to threaten us, to pursue the Iraq analogy, with non-existent weapons of mass economic destruction.

    Professor Blake’s findings are damning, but they were less widely read in financial circles than the Treasury’s forecasts, which were almost always accepted without question. The Treasury forecasts were then given added impetus when Mark Carney, the Governor of the Bank of England, took the unusual step of intervening in the political debate. Claiming that the Bank has a mandate to warn us of economic threats, he gave the Treasury forecasts unwarranted credibility in the foreign exchanges and international financial markets. Though he denied his intervention was political, there can be no doubting that that was the effect.

    If Britain had voted to remain, there would have been no immediate problem for the markets. Ahead of the vote, sterling rallied in a growing belief the referendum would be in favour of Remain, because the bookies odds said so. Instead, the vote went the other way. There can be little doubt that the markets reacted as sharply as they did on the basis of the Treasury’s dodgy dossiers, and the added spin given to them by Mark Carney’s warnings.

    In the event, sterling immediately fell over 10% and markets worldwide took a big knock. A run developed on UK commercial property funds. But the most important event, in terms of the Bank of England’s mandate, was the collapse in sterling. It went against the Bank’s stated mission, “to promote the good of the people of the United Kingdom by maintaining monetary and financial stability”.

    Mr Carney’s intervention was a gamble for Remain that failed to pay off. The evidence that he was caught up in the Treasury’s deceit has now emerged, with markets rapidly regaining their poise, apart from the sad exception of sterling. The Monetary Policy Committee on 14 July decided that no further economic stimulus is required. In other words, both markets and the Bank are now signalling that Brexit does not have the consequences for the UK threatened by the Treasury, beyond a 10% sterling devaluation. And that would most likely not have occurred if markets were not preconditioned to think Brexit would be a disaster for the currency.

    If it wasn’t for the sensitivity of his position, one would have expected Mr Carney to resign his post immediately. But the replacement of a central bank governor is never hurried, being managed in the interests of market stability. Therefore, Mr Carney might quietly arrange for his early departure.

    What happened to the Brexit recession?

    One month on from the referendum, there is no sign of the Treasury’s VAR model predictions coming to fruition. London is teeming with people, many of them foreign visitors, spending money in cafes, restaurants, theatres and other visitor attractions. The country roads are still jammed with caravans, tractors, tourists and white vans trying in all their productive mayhem to go about their business. Wimpish businessmen dithering over trade and investment plans are being forced to get on with life, and it should be noted that turncoat Remain supporter, GSK, this week announced a massive new capital investment programme, one of several such announcements in recent days.

    Our long-abandoned trade friends in the Commonwealth are keen to talk to us, as is China. And who can forget President Obama’s threat when it came to negotiating T-TIP with the EU? Well, we are no longer at the back of the queue, but at the front of the line. Only this week, it was announced that our American friends will shortly be able to enjoy fine Welsh lamb and prime Scottish beef again for the first time in twenty years. Suddenly, everyone, with the exception of the EU, wants to engage with us about trade. A dyed-in-the-wool bureaucrat, Michel Barnier, has been appointed to represent the EU Commission in the Brexit divorce. He is expected to talk tough, and make any agreement with the UK hard-won. Good luck to him, when the opportunities and everyone’s focus have moved elsewhere.

    The scientific community, which warned us about the loss of important subsidies and cooperation on European research projects, is now backtracking. The President of the Royal Society, says he sees no evidence that European funding bodies are discriminating against British research projects. Professor Nick Donaldson, of University College, London, points out that “money is pouring into the research and development pipeline, but new products are not getting to market, because of the expense incurred through the EU’s Active Implantable Medical Device Directive of 1990 (Letters, Daily Telegraph, 26 July). At last, we will be able to set our own rules in this and other matters for the benefit of ordinary people.

    It must be extraordinary, to anyone who was sucked in by the Treasury’s forecasts, how quickly markets and the economy have recovered their poise. Mainstream economists are confounded. Again, we must refer to Professor Blake’s paper. He points out that Greenland’s economy grew rapidly when it left the EU in 1985, and Ireland’s trade with the UK was unchanged by her exit from the sterling area in 1979. Both these outcomes are wholly inconsistent with the Treasury’s assumptions. He also points out that the model on the Treasury’s input assumptions would predict the UK is better off joining the euro, and that every country in the world would be better in the EU. Tell that one to Donald Trump.

    It is worth reading his key points, if not Professor Blake’s paper in its entirety. That the Treasury got is so wrong tempts one to think there was another agenda, perhaps stuck in the mind-set of the post-war geopolitical establishment.

    More immediately, there is the obvious problem that the EU’s economic and financial trajectory is a genuine crisis, and that the whole project is liable to collapse. If so, Britain remaining in the EU would have amounted to a sacrifice of Britain’s relatively free trade values in the interests of the EU’s lemming-like self-destruction.

    There is, of course, every possibility that the British government will screw Brexit up. The signals from the establishment are mixed, to say the least. The state-controlled Royal Bank of Scotland and its NatWest subsidiary is preparing its business customers for negative interest rates on their deposit accounts. Many economists, immersed in the beliefs of the neo-Cambridge school and with the Treasury’s forecasts still uppermost in their minds, desire further cuts in interest rates and even helicopter money.

    We cannot know what the future holds, particularly when governments attempt to micro-manage their citizens’ economic activities. There is no evidence that compels us to argue that a British government and the Bank of England are much better than any other Western government and central bank. Nor can we assume that an escape from the EU is an escape from their group-think.

    We do know with reasonable certainty, on the balance of firm evidence, that if the British or European economies tank, it will have nothing to do with Brexit.

  • This Canadian Oil 'Ghost Town' Is For Sale

    In a shocking example of the fallout from low oil prices coupled with years of easy-money-enabled malinvestment, the collapse of Canada's non-conventional oil production has forced a northern Alberta oil-boom-town to be put up for auction including 1200 person accomodation work-camp, hospital, gym, running track, and waste-water treatment plant.

    After years of invincibility, the inevitable happened:

     

    And that has simply imploded the once 'boom' oil towns of Alberta.

    After 55 years in business, Ritchie Brothers says "nothing really comes close in sheer physical size to this unique asset we're selling by private treaty: a 1,200-person workforce accommodation camp located approximately 50km north east of Peace River, AB, Canada."

    Imagine a camp the size of a small town, but with all the modern conveniences of the big city: full-service dining, medical clinic, modern living suites, bar/lounge and recreation suites, and wireless internet.

    This work camp has a fully-equipped gym complex complete with indoor running track, squash courts, weights and aerobic equipment. The camp even has its own power and utilities system. Take a virtual tour in the video below.

    The ghost-town – constructed by ATCO in 2013 – is divided into several complexes, and three wings of living areas with 1,232 fully-furnished executive-style rooms.

    Here's an overview of the camp layout.

    An aerial view of the entire camp complex.

    • A. Core complex
    • B. Gym complex
    • C. Living areas
    • D. Waste water treatment plant
    • E. Backup generators, utilities and more
    • F. 3 external luggage storage containers
    • G. Security trailer (office/kitchen/toilet/storage-furnace room/septic tank)
    • H. Electrified fence line around the perimeter of the workforce accommodation

    The fully-equipped, professional-grade kitchen and dining facility located in the core complex is capable of catering to all 1,232 hungry residents in just 1.5 hours!

    The fully-equipped, professional-grade kitchen in the work camp for sale at Ritchie Bros.

    The fully-equipped, professional-grade kitchen

    Plus, the complex also features a commissary, training areas & offices, medical bay & treatment rooms, the bar/lounge area, and rec room complete with golf simulators, pool tables, table tennis, foosball and more. "Roughing it" doesn't even cross your mind in this camp.

    Some photo highlights of the camp.

    The gym complex with 200M indoor running track, squash courts and more

    The gym complex with 200M indoor running track, squash courts and more.

     

    The bar/lounge area with pool tables

    The bar/lounge area with pool tables.

     

    One of the executive-style rooms in the living areas of the camp for sale at Ritchie Bros.

    One of the executive-style rooms in the living areas.

    Camp available for immediate sale and removal.

    *  *  *

    Who would buy such a massive item? Any billionaire preppers out there looking for an all-in-one habitat for their own private army in the middle of Montana? Or perhaps Angela Merkel is looking for a self-contained refugee shelter?

  • In 50 Years This Has Never Failed To Trigger A Bear Market

    Authored by Jesse Felder of TheFelderReport.com,

    It’s earnings season once again and it looks as if, as a group, corporate America still can’t find the end of its earnings decline since profits peaked over a year ago. What’s more analysts, renowned for their Pollyannish expectations, can’t seem to find it, either.

    So I thought it might be interesting to look at what the stock market has done in the past during earnings recessions comparable to the current one. And it’s pretty eye-opening. Over the past half-century, we have never seen a decline in earnings of this magnitude without at least a 20% fall in stock prices, a hurdle many use to define a bear market.

    In other words, buying the new highs in the S&P 500 today means you believe “this time is different.” It could turn out that way but history shows that sort of thinking to be very dangerous to your financial wellbeing.

  • Soaring Chicago Gun Violence Amid 'Toughest Gun Laws' Crushes Clinton Narrative For More 'Controls'

    In continued defiance of the Democrat narrative calling for stricter gun laws, Chicago's homicide problem just keeps getting worse despite gun laws that are already among the most restrictive in the country.  If fact, even the New York Times described Chicago's gun laws as some of the "toughest restrictions," saying: 

    Not a single gun shop can be found in this city because they are outlawed.  Handguns were banned in Chicago for decades, too, until 2010, when the United States Supreme Court ruled that was going too far, leading city leaders to settle for restrictions some describe as the closest they could get legally to a ban without a ban. Despite a continuing legal fight, Illinois remains the only state in the nation with no provision to let private citizens carry guns in public.

    Data compiled the Stanley Manne Children's Research Institute revealed that homicide rates in Chicago increased to 18.81 per 100,000 in 2015 vs. 17.64 in 2010, a 7% increase.  That's compared to a 6% decline for the United States overall for the same period and over 4x the national average.  In fact, at 18.81 homicides per 100,000, Chicago would be ranked as the 201st most dangerous country out of the 218 countries tracked by the United Nations Office on Drugs and Crime.

    Chicago Homicides

     

    US Murder Rate

    Perhaps even more shocking is the disparity in homicide rates by ethnicity.  African American homicides increased 19% between 2010 and 2015 vs. 8% for Caucasians and a 2% decline for Latinos.  Data revealed that African American homicide rates were eight times higher than Caucasians in 2005, 16 times higher in 2010, and 18 times higher in 2015.

    Chicago Homicides By Race

    Homicide rates were the highest among young people with the highest rates experience among 20-24 year olds at 64.28, a 48% increase in 5 years.

    Chicago Homicides by Age

    Finally, despite some of the most restrictive gun laws in the country, 87% of homicides were committed with firearms, up from 79% in 2010.  So how could the city that has the toughest gun laws in the country, laws described as the "closest they could get legally to a ban without a ban," also have some of the highest gun-related homicide rates?  Could it be, that criminals looking to use weapons for violence have a lower propensity to follow laws and that by banning guns you're really just taking them out of the hands of law-abiding citizens that wouldn't have used them for violence anyway?  Just a thought.

    Chicago Homicide by Weapon

  • The Olympics As A Tool Of The New Cold War

    Via Oriental Review,

    The 6th Fundamental Principle of Olympism (non-discrimination of any kind, including nationality and political opinion) seems to be forgotten long ago.  In ancient Greece the competition of best athletes was able to halt a war and serve as a bridge of understanding between two recent foes.  But in the twentieth century the Olympics have become a political weapon.  Back in 1980 the US and its allies boycotted the games in Moscow as a protest against the Soviet troops that entered Afghanistan at the request of that country’s legitimate government (in contrast, the 1936 Olympics in Nazi Germany were held as usual, to the applause of the “civilized” world).

    On May 8, 2016 the CBS program 60 Minutes aired a broadcast about doping in Russia.  The interviews featured recorded conversations between a former staffer with the Russian Anti-Doping Agency (RUSADA), Vitaly Stepanov, and the ex-director of Russia’s anti-doping laboratory in Moscow, Grigory Rodchenkov.  That program was just the fourth installment in a lengthy series about the alleged existence of a system to support doping in Russian sports.

    A few days later the New York Times published an interview with Rodchenkov.  There that former official claims that a state-supported doping program was active at the Sochi Olympics, and that the orders for that program had come almost directly from the Russian president.

    One important fact that escaped most international observers was that a media campaign, which had begun shortly after the 2014 deep freeze in Russian-Western relations, was constructed around the “testimonies” of three Russian citizens who were all interconnected and complicit in a string of doping scandals, and who later left Russia and are trying to make new lives in the West.

    Yulia Stepanova née Rusanova

    Yulia Stepanova née Rusanova

    A 29-year-old middle-distance runner, Yulia Stepanova, can be seen as the instigator of this scandal. This young athlete’s personal best in global competition was a bronze medal at the European Athletics Indoor Championship in 2011.  At the World Championships that same year she placed eighth.  Stepanova’s career went off the rails in 2013, when the Russian Athletic Federation’s Anti-Doping Commission disqualified her for two years based on “blood fluctuations in her Athlete Biological Passport.” Such fluctuations are considered evidence of doping.  All of Stepanova’s results since 2011 have been invalidated.  In addition, she had to return the prize money she had won running in professional races in 2011-2012.  Stepanova, who had been suspended for doping, acted as the primary informant for ARD journalist Hajo Seppelt, who had begun filming a documentary about misconduct in Russian sports.  After the release of ARD’s first documentary in December 2014, Stepanova left Russia along with her husband and son.  In 2015 she requested political asylum in Canada.  Even after her suspension ended in 2015, Stepanova told the WADA Commission (p.142 of the Nov. 2015 WADA Report) that she had tested positive for doping during the Russian Track and Field Championships in Saransk in July 2010 and paid 30,000 rubles (approximately $1,000 USD at that time) to the director of the Russian anti-doping laboratory in Moscow, Gregory Rodchenkov, in exchange for concealing those test results.

    Vitaly Stepanov

    Vitaly Stepanov

    Yulia Stepanova’s husband is Vitaly Stepanov a former staffer at RUSADA.  He had lived and studied in the US since he was 15, but later decided to return to Russia.  In 2008, Vitaly Stepanov began working for RUSADA as a doping-control officer.  Vitaly met Yulia Rusanova in 2009 at the Russian national championships in Cheboksary.  Stepanov now claims that he sent a letter to WADA detailing his revelations back in 2010, but never received an answer.  In 2011 Stepanov left RUSADA. One fact that deserves attention is that Vitaly has confessed that he was fully aware that his wife was taking banned substances, both while he worked for RUSADA as well as after he left that organization. Take note that Stepanova’s blood tests went positive starting in 2011 – i.e., from the time that her husband, an anti-doping officer, left RUSADA. With a clear conscience, the Stepanovs, now married, accepted prize money from professional races until Yulia was disqualified.  Then they no longer had a source of income and the prize money suddenly had to be returned, at which point Vitaly Stepanov sought recourse in foreign journalists, offering to tell them the “truth about Russian sports.”  In early June he admitted that WADA had not only helped his family move to America, but had also provided them with $30,000 in financial assistance.

    Gregory Rodchenkov

    Gregory Rodchenkov

    And finally, the third figure in the campaign to expose doping in Russian sports – the former head of the Russian anti-doping laboratory in Moscow, Gregory Rodchenkov.  According to Vitaly Stepanov, he was the man who sold performance-enhancing drugs while helping to hide their traces, and had also come up with the idea of “doped Chivas mouth swishing” (pg. 50), a technique that transforms men into Olympic champions.  This 57-year-old native of Moscow is acknowledged to be the best at what he does.  He graduated from Moscow State University with a Ph.D. in chemistry and began working at the Moscow anti-doping lab as early as 1985.  He later worked in Canada and for Russian petrochemical companies, and in 2005 he became the director of Russia’s national anti-doping laboratory in Moscow.  In 2013 Marina Rodchenkova – Gregory Rodchenkov’s sister – was found guilty and received a sentence for selling anabolic steroids to athletes.  Her brother was also the subject of a criminal investigation into charges that he supplied banned drugs.  Threatened with prosecution, Gregory Rodchenkov tried to commit suicide, was hospitalized and “subjected to a forensic psychiatric examination.”  A finding was later submitted to the court, claiming that Rodchenkov suffered from “schizotypal personality disorder,” exacerbated by stress.  As a result, all the charges against Rodchenkov were dropped.  But the most surprising thing was that someone with a “schizotypal personality disorder” and a sister convicted of trafficking in performance-enhancing drugs continued as the director of Russia’s only WADA-accredited anti-doping laboratory.  In fact, he held this job during the 2014 Olympics.  Rodchenkov was not dismissed until the fall of 2015, after the eruption of the scandal that had been instigated by the broadcaster ARD and the Stepanovs.  In September 2015 the WADA Commission accused Rodchenkov of intentionally destroying over a thousand samples in order to conceal doping by Russian athletes.  He personally denied all the charges, but then resigned and left for the US where he was warmly embraced by filmmaker Bryan Fogel, who was shooting yet another made-to-order documentary about doping in Russia.

    Richard H. McLaren

    Prof. Richard H. McLaren

    As this article is being written, the International Olympic Committee (IOC) is studying a report  from an “Independent Person,” the Canadian professor Richard H. McLaren, who has accused the entire Russian Federation, not just individual athletes, of complicity in the use of performance-enhancing drugs.  McLaren was quickly summoned to speak with WADA shortly after the NYT published interview with Rodchenkov.  The goal was clear: to concoct a “scientific report” by mid-July that would provide the IOC with grounds to ban the Russian team from the Rio Olympics.  At a press conference on July 18 McLaren himself acknowledged that with a timeline of only 57 days he was unable “to identify any athlete that might have benefited from such manipulation to conceal positive doping tests.”  WADA’s logic here is clear – they need to avoid any accusations of bias, unprofessionalism, embellishment of facts, or political partisanship.  No matter what duplicity and lies are found in the report – it was drafted by an “independent person,” period.  However, he does not try to hide that the entire report is based on the testimony of a single person – Rodchenkov himself, who is repeatedly presented as a “credible and truthful” source.  Of course that man is accused by WADA itself of destroying 1,417 doping tests and faces deportation to Russia for doping-linked crimes, but he saw an opportunity become a “valuable witness” and “prisoner of conscience” who is being persecuted by the “totalitarian regime” in Russia.

    The advantage enjoyed by this “independent commission” – on the basis of whose report the IOC is deciding the fate of Russia’s Olympic hopefuls – is that its accusations will not be examined in court, nor can the body of evidence be challenged by the lawyers for the accused.  Nor is the customary legal presumption of innocence anywhere in evidence.

    It appears from Professor McLaren’s statement that no charges will be brought against any specific Russian athletes.  Moreover, they can all compete if they refuse to represent Russia at the Olympics.  There are obvious reasons for this selectivity.  A law professor and longstanding member of the Court of Arbitration for Sport, Professor McClaren knows very well that any charges against specific individuals that are made publicly and result in “legally significant acts” (such as a ban on Olympic participation) can and will be challenged in court, in accordance with international law and on the basis of the presumption of innocence.  All the evidence to be used by the prosecution is subject to challenge, and if some fact included in those charges can be interpreted to the defendant’s advantage, then the court is obliged to exclude that fact from the materials at the disposal of the prosecution.

    As a lawyer, McLaren understands all this very well.  Hundreds of lawsuits filed by Russian athletes resulting in an unambiguous outcome would not only destroy his reputation and ruin him professionally – they could form the basis of a criminal investigation with obvious grounds for accusing him of intentionally distorting a few facts, which in his eyes can be summarized as follows.

    556bebba0a44556fb2b1d9b66cb9c962

    During the Sochi Olympics, an FSB officer named Evgeny Blokhin switched the doping tests taken from Russian athletes, exchanging them for “clean” urine samples.  This agent is said to have possessed a plumbing contractor’s security clearance, allowing him to enter the laboratory.  In addition, there are reports that Evgeny Kurdyatsev, – the head of the Registration and Biological Sample Accounting Department – switched the doping tests at night, through a “mouse hole” in the wall (!).  Awaiting them in the adjascent building was the man who is now providing  “credible evidence” – Gregory Rodchenkov – and some other unnamed individuals, who passed Blokhin the athletes’ clean doping tests to be used to replace the original samples.  If the specific gravity of the clean urine did not match the original profile, it was “adapted” using table salt or distilled water.  But of course the DNA was incompatible.  And all of this was going on in the only official, WADA-accredited anti-doping laboratory in Russia!

    How would something like that sound in any court?  We have witnesses, but the defense team cannot subject them to cross-examination.  We cannot prove that Blokhin is an FSB agent, but we believe it.  We do not possess any of the original documents – not a single photograph or affidavit from the official examination – but we have sufficient evidence from a single criminal who has already confessed to his crime.  We did not submit the emails provided by Rodchenkov to any experts to be examined, but we assert that the emails are genuine, that all the facts they contain are accurate, and that the names of the senders are correct.  We cannot accuse the athletes, so we will accuse and punish the state!

    To be honest, we still do not believe that the Olympic movement has sunk so low as to deprive billions of people of the pleasure of watching the competitions, forgetting about politics and politicians.  That would mean waving goodbye to the reputations of the WADA and the IOC and to the global system of sports as a whole.  Perhaps a solution to the colossal problem of doping is long overdue, but is that answer to be found within the boundaries of only one country, even a great country like Russia?  Should we take a moment here and now to dwell upon the multi-volume history of doping scandals in every single country in the world?  And in view of these facts that have come to light, is not WADA itself the cornerstone of the existing and far-reaching system to support and cover up athletic doping all over the world?

    In conclusion, we cite below the complete translation of the Russian Olympic Committee’s statement  in response to the WADA report:

    image1313008

     

    “The accusations against Russian sports found in the report by Richard McLaren are so serious that a full investigation is needed, with input from all parties.  The Russian Olympic Committee has a policy of zero tolerance and supports the fight against doping.  It is ready to provide its full assistance and work together, as needed, with any international organization.

     

    We wholeheartedly disagree with Mr. McLaren’s view that the possible banning of hundreds of clean Russian athletes from competition in the Olympic Games is an acceptable ‘unpleasant consequence’ of the charges contained in his report.

     

    The charges being made are primarily based on statements by Grigory Rodchenkov.  This is solely based on testimony from someone who is at the epicenter of this criminal scheme, which is a blow not only to the careers and fates of a great many clean athletes, but also to the integrity of the entire international Olympic movement.

     

    Russia has fought against doping and will continue to fight at the state level, steadily stiffening the penalties for any illegal activity of this type and enforcing a precept of inevitabile punishment.

     

    The Russian Olympic Committee fully supports the harshest possible penalties against anyone who either uses banned drugs or encourages their use. 

     

    At the same time, the ROC – acting in full compliance with the Olympic Charter – will always protect the rights of clean athletes.  Those who throughout their careers – thanks to relentless training, talent, and willpower – strive to realize their Olympic dreams should not have their futures determined by the unfounded, unsubstantiated accusations and criminal acts of certain individuals.  For us this is a matter of principle.”

    * * *

    Finally, Salil Mehta (from Staistical Ideas blog), offers some insightful 'math facts' on Olympic Doping – US vs Russia…

    Cheating obviously makes the games unfair.  But so too is the implementation of punishment, when it seems apparent that other nations who cry foul are surely dishonest too.  One need to look no further than celebrated American cyclist and cancer activist, Lance Armstrong.  Mr. Armstrong won 7 consecutive Le Tour de France races (beating standing records by four Europeans who have won 5 times each).  Instead of questioning this extraordinary achievement as a statistician would, people all over the world quickly idolized Mr. Armstrong as an American role model!  He was engaged to singer-songwriter Sheryl Crow, and received major sponsorships from Radio Shack and United States Postal Service.  Only after all of these too-good-to-be-true attainments did we disgracefully come to terms with the true connotation of the title of his best-selling book (It's Not About the Bike).  Let's take a closer look at the Olympic performance of every winter competition in history, and see if the host country's accomplishments should be considered too-good-to-be pure.  For these cold Olympics, could we have had a chance for other host countries, such as Russia's Cold War adversary the United States, to have engaged in more short-sighted "Lance Armstrong" moments, or have had any of a number of other deceptive violations that have been previously overlooked by the broader public?

    We begin by looking at each nation's total medal count score in each of the 22 Winter Olympics ever held, both as a non-host (in blue) and as a host (in red), if applicable.  All raw data is freely available here.  In the first games in (France 1924) 49 medals were awarded, but by the most recent games in (Russia 2014) the medal count had blossomed 6 fold, to 295.  So each game's country medal allocation has been rescaled out of 295.  Additionally nation adjustments were made to make them comparable across time without losing much impact since rarely did any of these countries host under a former break-off territory.  As examples, the Soviet Union is now aggregated under Russia, and East and West Germany are consolidated under Germany.

    We see that there has generally been a nearly 11 medal count gain for the host country in their performance while hosting, versus during the games on either side of their host games.  For example The United States (U.S.) in 2002 won 34 medals (43 when rescaled), while in 1998 and 2006 the U.S. won rescaled scores averaging 24 between those two years.  Was something mischievous afoot that allowed the U.S. to win 10 additional medals (nearly 40% more) in their host year of 2002?

    And that's actually one of the least suspicious of the U.S. host game performances!  In total there have been 11 host nations, and statistics decomposition allows us to see a rather shady pattern for Americans relative to Russians:

    • U.S., and Norway hosted a total of 6 times.  And on average earned 17 more medals during their host years.?

    • France, Germany, Japan, and Switzerland have hosted a total of 8 times.  And on average a little less of an advantage, scoring 9 more medals during their host years.?

    • Austria, Canada, Italy, Yugoslavia, and lo and behold Russia have hosted a total of 8 times.  And on average scored just 2 more medals during their host years.

    This is a worrying pattern for some countries for sure, namely the U.S.  But we'll explore the information further below so that we can see if there is other information we can learn about abnormal hosting nation advantages that augment the case for President Putin crying foul.

    Now in the global heat map above we show each of the 22 host nations only, and show what the average medal "enhancement" has occurred during their hosting.  On the most equitable side we have Yugoslavia, a country which generally earns 4 fewer medals while hosting, versus at about the same time when they are not hosting.  Russia on the other hand generally earns 4 more medals when hosting, versus normal.  But the U.S. (while contently finding fault with everyone else) somehow takes the gold, literally, with out-of-control home country bias of nearly 20 more medals when hosting, versus normal.

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