• With Obama Humiliated, Leaked G-20 Draft Reveals More Fiscal, Monetary Stimulus Coming

  With the September G-20 meeting set to begin any moment in Hangzhou, China, a periodic, toothless event which is noting more than an opportunity for world leaders to take photos such as this one (they picked the happiest photo of the batch)…

  

  … the draft communique has already been leaked, in other words the determination of the summit has been made before it even took place.

  Of course, the big news of this weekend’s G-20 event was neither the summit, nor the communique, but the unprecedented and prearranged snub by China targeting president Obama, who after an unexpected show of solidarity on Saturday over the global effort to address climate change, was humiliated by China when Obama arrived at Hangzhou Xiaoshan airport, when as reported earlier, first the receiving China delegation made sure there was no staircase for Obama to exit the plane and descend on the red carpet; the president of the world’s most powerful nation was thus forced to use an emergency exit for his final arrival in China as commander in chief.

  

  Then, around the time Obama was exiting through the emergency staircase, a Chinese official attempted to block national security adviser Susan Rice and Deputy National Security Adviser Ben Rhodes after they lifted a blue rope holding back press and walked to the other side of it, closer to Obama. A member of the Chinese delegation began shouting at White House staff, demanding the pool leave the arrival scene. A White House official said Obama was our president and Air Force One was our plane and that the press was not going to move from the designated area. The Chinese official angrily responded “This is our country. This is our airport.”

  The scandals continued later, with members of the Chinese and US delegations coming close to throwing punches at each other: as we previously reported, two Chinese officials – one working to assist the American delegation – had to be physically separated after trying to hit each other outside an event.

  As the WSJ adds, “the Chinese barred Mr. Obama from including his traveling press contingent in his motorcade. The hosts also have refused a White House request for a joint press conference with Mr. Xi, and they plan to block Mr. Obama’s solo press briefing from airing live on Chinese television.”

  In short, the fate of G-20 meeting was fixed: no matter what was decided, it would forever be remember as the event where China snubbed the US president in an unprecedented fashion one final time.

  Incidentally, for those wondering why the meeting took place in Hangzho, a city which Chinese authorities literally had to empty out, instead of Beijing, the answer comes from the Twitter account of Beijing Air:

  

   

  Which is ironic, because as the WSJ also reported earlier, “President Obama and his Chinese counterpart Xi Jinping stood with U.N. Secretary General Ban Ki-moon to announce the U.S. and China’s formal adoption of the international climate change agreement reached in Paris in December 2015. They also detailed a road map to achieving emissions reductions in commercial aircraft and for phasing out hydrofluorocarbons.”  Which is completely meaningless, as none of the provisions of the Paris Treaty are enforceable, and Beijing has zero intentions of actually following through with the toothless treaty.

  In any case, thanks to Bloomberg, according to the leaked draft G-20 communique, global leaders “should make full use of a range of policy options, including fiscal as well as monetary measures, to revive economic growth that still falls short of desired levels.”

  In other words, even more global debt, even more liquidity injections by central banks, even higher asset prices, even more social discontent, nationalistic passions and populism.

  Among the other G-20 (pre)decisions in the communique draft seen by Bloomberg:

  • Financial market volatility poses downside risks to growth: draft communique
  • Fiscal strategies equally important as monetary ones: draft communique
  • Excess volatility, disorderly moves in foreign exchange markets hurt stability: draft
  • G-20 recognizes excess steel capacity as global issue: draft
  • Subsidies can contribute to global excess capacity: draft
  • UK vote to leave EU adds to global economic uncertainty: draft
  • Terrorism a serious challenge to international security: draft

  And so on, and so forth, as yet another meeting of the world’s “best and brightest” leaders leads to absolutely no new ideas how to fix a problem that was caused by debt than just creating even more debt, meaning that the red line shown below is about to truly take off.
  

   

  

  We know how it all ends; the only thing we are curious about is if the Chinese will force an already humiliated Obama to fly commercial in his final return to the US… coach class.

  

  

• "Half The Forms Of Life On Earth Will Be Gone By 2050" Biologist Warns Of "Climate Instability"

  Humanity should start saving nature and switch to 80 percent renewables by 2030, otherwise the Earth will keep losing species, and within 33 years around 800,000 forms of life will be gone, conservation biologist Reese Halter told RT’s News with Ed.

  Humans have changed the Earth so much that some scientists think we have entered a new geological age.

  According to a report in the Science Magazine, the Earth is now in the anthropocene epoch. Millions of years from now our impact on Earth will be found in rocks just like we see fossils of plants and animals which lived years ago – except this time scientists of the future will find radioactive elements from nuclear bombs and fossilized plastic.

  RT: Tell us about this new age.

  Reese Halter: Yes. There are three things that come to mind.

  First of all, imagine you’re back on the football field. Each year in America – America alone – we throw away the equivalent of one football field, a 100 miles deep. That is the first thing.

   

  The second thing, we’ve entered the age of climate instability. That means from burning subsidized climate altering fossil fuels our food security is in jeopardy.

   

  The third thing that is striking is we’re losing species a thousand times faster than in the last 65 million years. At this rate within 33 years, by midcentury – that means 800,000 forms of life, or half of everything we know will be gone. The only way we can reverse this is to two things: save nature now, our life support system, and we do this by switching to 80 per cent renewables by 2030. It is a WWIII mentality. In America we have the technology; we have the blueprint. We lack the political will just right now. But in the next short while we will, because it is a matter of survival.

  RT: We’ve just gone through the hottest month on record. There is plenty of data out there to suggest that we truly are entering something our world has never seen in our lifetime. To brand it as a new geological age, what impact is that going to have?

  RH: It’s got the impact that humans are here. As I said earlier, we’re talking a 160 percent more than mother Earth can sustain 7.4 billion people. The way to do it is to pull it back to 90 percent. If we were a big bathtub the ring will read: toxicity, toxicity, toxicity. We’ve got to peal that back, because what we do to the Earth, we do to ourselves.

  *  *  *

  Truly a greater threat than ISIS, or debt loads, or Zika.

  On the bright side, if warmonger Hillary is elected, many of the world's species will no longer exist anyway.

   

  

  

• The Dumbed-Down New York Times

  A New York Times columnist writes Americans are so “dumbed-down” that they don’t know that Russia “invaded” Ukraine two years ago, but that “invasion” was mostly in the minds of Times editors and other propagandists, says Robert Parry.

  Submitted by Robert Parry via Consortium News,

  In a column mocking the political ignorance of the “dumbed-down” American people and lamenting the death of “objective fact,” New York Times columnist Timothy Egan shows why so many Americans have lost faith in the supposedly just-the-facts-ma’am mainstream media.

  Egan states as flat fact, “If more than 16 percent of Americans could locate Ukraine on a map, it would have been a Really Big Deal when Trump said that Russia was not going to invade it — two years after they had, in fact, invaded it.”

  

  New York Times building in New York City. (Photo from Wikipedia)

  But it is not a “fact” that Russia “invaded” Ukraine – and it’s especially not the case if you also don’t state as flat fact that the United States has invaded Syria, Libya and many other countries where the U.S. government has launched bombing raids or dispatched “special forces.”  Yet, the Times doesn’t describe those military operations as “invasions.”

  Nor does the newspaper of record condemn the U.S. government for violating international law, although in every instance in which U.S. forces cross into another country’s sovereign territory without permission from that government or the United Nations Security Council, that is technically  an act of illegal aggression.

  In other words, the Times applies a conscious double standard when reporting on the actions of the United States or one of its allies (note how Turkey’s recent invasion of Syria was just an “intervention”) as compared to how the Times deals with actions by U.S. adversaries, such as Russia.

  Biased on Ukraine

  The Times’ reporting on Ukraine has been particularly dishonest and hypocritical. The Times ignores the substantial evidence that the U.S. government encouraged and supported a violent coup that overthrew elected President Viktor Yanukovych on Feb. 22, 2014, including a pre-coup intercepted phone call between Assistant Secretary of State Victoria Nuland and U.S. Ambassador to Ukraine Geoffrey Pyatt discussing who should lead the new government and how to “midwife this thing.”

  

  U.S. Secretary of State John Kerry, flanked by Assistant Secretary of State for European and Eurasian Affairs Victoria “Toria” Nuland, addresses Russian President Vladimir Putin in a meeting room at the Kremlin in Moscow, Russia, at the outset of a bilateral meeting on July 14, 2016. [State Department Photo]

  The Times also played down the key role of neo-Nazis and extreme nationalists in killing police before the coup, seizing government building during the coup, and then spearheading the slaughter of ethnic Russian Ukrainians after the coup. If you wanted to detect the role of these SS-wannabes from the Times’ coverage, you’d have to scour the last few paragraphs of a few stories that dealt with other aspects of the Ukraine crisis.

  While leaving out the context, the Times has repeatedly claimed that Russia “invaded” Crimea, although curiously without showing any photographs of an amphibious landing on Crimea’s coast or Russian tanks crashing across Ukraine’s border en route to Crimea or troops parachuting from the sky to seize strategic Crimean targets.

  The reason such evidence of an “invasion” was lacking is that Russian troops were already stationed in Crimea as part of a basing agreement for the port of Sevastopol. So, it was a very curious “invasion” indeed, since the Russian troops were on scene before the “invasion” and their involvement after the coup was peaceful in protecting the Crimean population from the depredations of the new regime’s neo-Nazis. The presence of a small number of Russian troops also allowed the Crimeans to vote on whether to secede from Ukraine and rejoin Russia, which they did with a 96 percent majority.

  

  Nazi symbols on helmets worn by members of Ukraine’s Azov battalion. (As filmed by a Norwegian film crew and shown on German TV)

  In the eastern provinces, which represented Yanukovych’s political base and where many Ukrainians opposed the coup, you can fault, if you wish, the Russian decision to provide some military equipment and possibly some special forces so ethnic Russian and other anti-coup Ukrainians could defend themselves from the assaults by the neo-Nazi Azov brigade and from the tanks and artillery of the coup-controlled Ukrainian army.

  But an honest newspaper and honest columnists would insist on including this context. They also would resist pejorative phrases such as “invasion” and “aggression” – unless, of course, they applied the same terminology objectively to actions by the U.S. government and its “allies.”

  That sort of nuance and balance is not what you get from The New York Times and its “group thinking” writers, people like Timothy Egan. When it comes to reporting on Russia, it’s Cold War-style propaganda, day in and day out.

  And this has not been a one-off problem. The unrelenting bias of the Times and, indeed, the rest of the mainstream U.S. news media on the Ukraine crisis represents a lack of professionalism that was also apparent in the pro-war coverage of the Iraq crisis in 2002-03 and other catastrophic U.S. foreign policy decisions.

  A growing public recognition of that mainstream bias explains why so much of the American population has tuned out supposedly “objective” news (because it is anything but objective).

  Indeed, those Americans who are more sophisticated about Russia and Ukraine than Timothy Egan know that they’re not getting the straight story from the Times and other MSM outlets. Those not-dumbed-down Americans can spot U.S. government propaganda when they see it.

  

  

• "We Just Can't Let The Bad Guys Go" – This Rural Indiana County Sends More People To Jail Than Any Other

  Welcome to Dearborn County, Indiana – which sends more people to prison per capita than any other county in the United States.

  (click image for interactive version)

  

   

  As The New York Times reports, Dearborn County represents the new boom in American prisons: mostly white, rural and politically conservative.

  A bipartisan campaign to reduce mass incarceration has led to enormous declines in new inmates from big cities, cutting America’s prison population for the first time since the 1970s. From 2006 to 2014, annual prison admissions dropped 36 percent in Indianapolis; 37 percent in Brooklyn; 69 percent in Los Angeles County; and 93 percent in San Francisco.

   

  But large parts of rural and suburban America — overwhelmed by the heroin epidemic and concerned about the safety of diverting people from prison — have gone the opposite direction. Prison admissions in counties with fewer than 100,000 people have risen even as crime has fallen, according to a New York Times analysis, which offers a newly detailed look at the geography of American incarceration.

  Just a decade ago, people in rural, suburban and urban areas were all about equally likely to go to prison. But now people in small counties are about 50 percent more likely to go to prison than people in populous counties.

  

  The stark disparities in how counties punish crime show the limits of recent state and federal changes to reduce the number of inmates.

  Far from Washington and state capitals, county prosecutors and judges continue to wield great power over who goes to prison and for how long. And many of them have no interest in reducing the prison population.

   

  “I am proud of the fact that we send more people to jail than other counties,” Aaron Negangard, the elected prosecutor in Dearborn County, said last year. “That’s how we keep it safe here.”

   

  He added in an interview: “My constituents are the people who decide whether I keep doing my job. The governor can’t make me. The legislature can’t make me.”

  Rural, mostly white and politically conservative counties have continued to send more drug offenders to prison, reflecting the changing geography of addiction. While crack cocaine addiction was centered in cities, opioid and meth addiction are ravaging small communities like those in Dearborn County, where 97 percent of the population is white.

  

  By 2014, Dearborn County sentenced more people to prison than San Francisco or Westchester County, N.Y., which each have at least 13 times as many people.

  “It’s government run amok,” said Douglas A. Garner, a local criminal defense attorney.

  Mr. Negangard said he wished the county could find more money for drug treatment. But he said about half of all addicts in prison had a criminal mind-set and would keep committing crimes whether they got clean or not.

  “We can’t just let the bad guys go,” he said.

  Which is ironic, since while Dearborn and other rural conservative counties are sending record numbers to prison, President Obama is on track to commute the most sentences by a president since 1929. But unlike his actions on immigration and healthcare, it's not whether he has the authority to reduce prison stays that's drawing criticism — it’s the type of inmates he's helping. As The Hill reports…

  We’re very concerned,” said Steve Cook, president of the National Association of Assistant U.S. Attorneys. “What is happening is he’s undoing a lot of the work we’ve spent the last two-and-a-half to three decades doing.”

   

  So far, Obama has commuted 673 sentences, with 325 coming in August alone. P.S. Ruckman Jr., a political scientist tracking the data, said Obama is likely to eclipse Calvin Coolidge, who commuted 773 sentences. Woodrow Wilson holds the record, with 1,366 commutations.

   

  

   

  “There’s more coming before he leaves office,” Ruckman said. “It’s just a matter of how many.”

   

  Only non-violent, low-level offenders, who have served at least 10 years of their federal sentence and demonstrated good behavior qualify for Obama’s clemency initiative. Inmates cannot have a significant criminal history or a history of violence prior to or during their imprisonment.

   

  Cook argues those requirements aren’t being met.

   

  In the last few rounds of commutations, Cook said one inmate was the leader of a drug ring that trafficked in over 10 tons of cocaine, six had previously been convicted of being drug kingpins and another had been convicted of possessing a sawed off shot gun.

   

  Cook was referring to Ralph Casas, John Franklin Banks, Corey Lyndell Blount, Rudy Martinez, Danielle Bernard Metz, Dewayne L. Comer, Dawan Croskery and Alfonso Allen.

   

  “The trend seems to be they get worse and worse,” Cook said. “To say we’re concerned would be an understatement.”

   

  Responding to Cook's claims, an official with the White House said the President does not condone violence of any kind, but believes individuals who have truly paid their debt to society and demonstrated a commitment to not repeating past mistakes should be given a chance to earn their freedom. 

  In a statement to the News Virginian in August, House Judiciary Committee Chairman Rep. Bob Goodlatte (R-Va.) said the president’s actions were “not, as the Founders intended, an exercise of the power to provide for 'exceptions in favour of unfortunate guilt.'”

  Instead, he said, Obama is using his power to commute sentences “to benefit an entire class of offenders who were duly convicted in a court of law — not to mention [his actions are] a blatant usurpation of the lawmaking authority of the legislative branch." 

  

  

• Hugh Hendry Recalls His "Great Monster P&L Trade" That "Murdered" His Counterparty

  We’ve heard plenty of fund managers blame the macro environment and the lack of a definitive economic trend for the drought in returns over recent years, but in his latest blast, famed – or perhaps infamous – contrarian Hugh Hendry hold his hands up, admitting his shortcomings and his own losses.

  “I fear that our community has overloaded on top of the trend a normative value judgment about how the world is being organized by monetary authorities,” Hendry told Hugh H in an exclusive interview published on Friday. “And the view is rather prejudicial: [our community] doesn’t like it. And I posted a letter saying, we’re dying on the year and we do not blame monetary policy.”

  Hendry adds that there have been some outstanding trends in the last few years which he and other major players have missed out on, such as the CNH float in China, which went from 2009 to the first quarter of 2014. “An immense trade, which no-one participated in” Hendry said. He’s also reinvigorated by the “intellectual car crash” that was the Brexit vote, which allowed a reassignment of probabilities for questioning the euro, in what Hendry is calling an immensely interesting time for macro.

  Speaking at length in an another discussion with Real Vision TV and Raoul Pal, Hendry said Brexit really offers the chance to escape the confined trajectory contributing to the perceived malaise in the sector over the past four years. The probability of the euro state reneging with 28 members was one thing, with strong forces holding them together, he said, but now there are 27 it’s quite another.

  One to thing to note: since Hendry never spends more than four weeks in the same place, (he prefers to test his engagement with the feel of different time zones) the guys at RealVision can be commended for at least getting him to sit still for just over an hour for this interview.

  There is more in the full Real Vision video, including his current positions on Mexico bonds, although some of the highlights are captured in the clip above. But it was the “intellectual travesty of Brexit” and an inability to see it coming that really got Hendry animated. He’s focused on the upcoming Italian constitutional referendum and he’s also quite taken with the volatile political picture in Paris, in particular, the likelihood of the president not being endorsed by his party to run again for the first time and France seen as the next candidate for the exit. Hendry explains how he’s going to make money from the discord, investing in the spread between German over Italian BTPs.

  “We know that back in 2011, where the market began to associate a non-tail-like probability to the system exploding, that spread blew out to 600 basis points. And then the effectiveness of Draghi brought that into 100 basis points and Draghi has continued to deliver.

   

  “We’ve crossed the rubicon with quantitative ease. And we’ve increased it both in scale and in time. And stubbornly, we haven’t passed the 100 mark, that there seems to be a fundamental qualitative level where participants go, it’s too rich for me at that level.

   

  “So it feels– and we’ll see. Time will test this. It feels a bounded floor. And I would say that each 10% change in probability– like adding a 10% probability of a member country leaving and emulating the UK– I think adds 100 basis points to that spread.

   

  “So if we were to travel over the next 12 months, and we saw – and I think – actually, I think the most likely candidate for a country leaving would be France. France is like the UK. It’s big enough to support itself. There’s just great antipathy for the European project. The economy’s really, really subdued. They don’t like the immigration factor. But of course, as you say, Italy seems more obvious. It doesn’t matter.

  Reminiscing about the better days, Hendry pointed to the passage of time as pivotal in the macro business. This was key in the success of his famous trade during the GFC –  buying swaptions on the difference between two-year and 10-year US Treasury securities in April/May 2007 – Hendry said he was way out of the money before before generating 50% in October 2008.

  “Now again, with the mastery and the art of macro, it is so complex that it’s not just necessary that you’re correct; it is the consequences of being correct. Now, we had a position whereby the other side – the investment banks – they were desperate. They were dying as this thing suddenly came to my strike levels. Blew through my strike levels, started to create this monster of P&L, which was murdered by a monster loss on the other side. 

   

  “And so daily we had pleadings. Please, please, please can we remove. So not only had we conceived of a great monster P&L trade the catalyst was adversity. Liquidity came to us, allowing us to monetize and close. That’s macro. That’s macro. 

   

  “… I’m hesitating because who am I to pontificate on the mastery and the skill set of other macro managers? But I feel beholden to say that there is a degree of collective responsibility for an element of the drought in returns. Because there had been some immense macro trends over the last four years.”

  Throughout the discussion, Hendry laments the absence of external volatility, as he continues to refer to the passage of time as crucial to the macro journey. Hendry admitted that with external volatility on the floor, he was unable to achieve the double digit returns he set out to achieve in the earlier part of this decade, when he was trying too hard to please institutional investors. An interesting side note: Hendry and Pal clash over the use of stops, which Hendry said he has a personal problem with.

  “You come back to life and macro as a journey, not a destination. And your journey is being interrupted. You’re being stopped, stopped, stopped. So you keep hitting destination. And believe me, those destinations suck. … You’ve got to let the thing move. Inhale, exhale…There are months where if you’re fully loaded, you could have a 10% monthly drawdown. And it’s no shame on you. It’s saying you’re engaged.”

  The last time Hendry spoke with Real Vision TV he warned against a China devaluation, invoking a “Mad Max world“, saying that “tomorrow we wake up, I mean, I would jump out the hotel window if this was the scenario, but we wake up and China has devalued 20%. The world is over. The world is over.”

  According to Hendry, all the China bears like Kyle Bass and Mark Hart have been timed out by now (or so he would like to believe) reminding us in the interview that he doesn’t care to look back or reflect on the past these days. Without outsized returns from his side – according to the most recent HSBC hedge fund report, Eclectica was down 6.6% YTD, however, Hendry is still pretty content with the current picture as it’s all part of the journey and not where we will end up.

  “With macro, today is not the destination. Today is part of the journey, OK? And to write us off by the supposition that this is where we end up, I think is to miss some immense opportunities…. We’re engaging with the brightest minds. And if the brightest minds are being stuck in neutral for four years– remember it’s stuck in neutral. It’s not losing money; it’s just not making money. It’s not that bad, if you will.”

  We hope Hendry, one of the best minds of his generation manages to get out of his dubious funk soon; alas as we have speculated, the reason why he and so many of his peers find themselves at such a dramatic existential crossroad, with increasingly louder speculation that the hedge fund industry is now doomed and will soon be replaced by algos, ETFs, and other cheaper, passive products which will also implode the moment central planning fails, is precisely due to the central bankers they think so highly of.  After all, the main skill of Hendry et al, macro investors or otherwise, is to find arbitrage opportunities in global markets. The problem, however, is when there is no longer a market, just one global policy vehicle that must be sustain at if not all costs, then certainly some $200 billion in central bank liquidity injections every month.

  Readers can watch the highlights from Hendry’s RealVision interview below, post-midlife crisis haircut and all.

  To view the full interview, subscribe to Real Vision Television, which offers Zero Hedge readers a 7-day free trial.

  

  

• Atlas Is Shrugging & I'm Still Shaking My Head

  Ayn Rand’s statement below is so contextually true as we live in an era where people are allowed to do immoral things and escape with little or minimal consequence simply because it’s legal or they have enough money to legally stonewall or escape justice.

  "You may know society is doomed when you see that in order to produce, you need to obtain permission from men who produce nothing; when you see that money is flowing to those who deal, not in goods, but in favors; when you see that men get richer by graft and by pull than by work, and your laws don’t protect you against them, but protect them against you; [and] when you see corruption being rewarded and honesty becoming a self-sacrifice."

   

  -Ayn Rand, "Atlas Shrugged", 1957

  Ideally, Hillbent.com's J. Clinton Hill exclaims, our leaders are exalted to positions of authority for the purpose of protecting and serving our society, yet some commit crimes against us.

  

  As a country (Americans), I know that we can and should demand/expect better. If not, then we will continue to splinter. The current GOP campaign is but a prelude of things to come and the Democrats are merely one more election cycle from implosion as well. If America wants its citizens to give their unconditional allegiance to her, then she must be willing to extend hers as well to all of her citizens, instead of a just privileged 1% or 5% or select ethnic or gender group, and etc.

  

  The supreme irony is that both extreme sides of the left and right, of which I am neither, recognize all of the above in some way or another, and yet they stand divided, which leaves me but little option other than shaking my head as the puppet masters continue to deflect and distract.

  

  

• As Chicago Violence Soars, Officers Told To Stay Home In Protest Of "Continued Disrespect Of Police"

  Earlier this week we wrote about how August was the deadliest month recorded in Chicago in 20 years (see "Chicago Records "Most Violent Month In 20 Years"").  In fact, YTD Chicago has recorded more homicides than New York City and Los Angeles, combined.

  Now, as we head into the long Labor Day weekend, the Chicago Fraternal Order of Police is urging its rank and file members to deny overtime requests this weekend "to protest the continued disrespect of Chicago Police Officers and the killings of Law Enforcement Officers across our Country." 

   

  Chicago police Superintendent Eddie Johnson sought to ease concerns of Chicago citizens by assuring the Chicago Tribune that staffing levels for the Labor Day weekend would be adequate.  He also seemed to take a shot at the FOP call for protest by saying that the "best way for officers to support one another is to be out there for each other."

  "I would never get upset with the FOP for encouraging officers to spend more time with their families because they should spend time with their families," he said. "But having said that, I'll tell you this, the best way for officers to support one another is to be out there for each other."

  With crime levels seemingly spiraling out of control in the Windy City, as evidenced by homicides spiking 48% YoY so far through August, we fear the dire consequences that even the mere suggestion of police under staffing could have on violence in the city.  

  

  Data per HeyJackass!

  

  

• Tarmac Altercation Erupts After Obama Lands In China: Official Shouts "This Is Our Country, Our Airport"

  Upon arrival on Saturday in China as part of his last visit to Asia as US Commander in Chief for the periodic photo-op that is the G-20 meeting, something unexpected happened: a very undiplomatic greeting when an unusual tarmac altercation involving Chinese and U.S. officials, including national security adviser Susan Rice, devolved into a shouting match by a member of the Chinese delegation.

  It all started with the actual landing: as AP reports, the first sign of trouble is that there was no staircase for Obama to exit the plane and descend on the red carpet. So, as the photo below shows, Obama used an alternative exit. Needless to say, a diplomatic fuck up such as this one, was not accidental – Beijing was sending a loud and clear message.

  
  Barack Obama arrives on Air Force One at Hangzhou Xiaoshan International Airport
  in Hangzhou in eastern China’s Zhejiang province on Sept. 3 for the G20 summit

  Then, around the time Obama was exiting through the emergency staircase, a Chinese official began shouting at White House staff after the traveling American press contingent was brought onto the tarmac. The Chinese official also attempted to block Rice and Deputy National Security Adviser Ben Rhodes after they lifted a blue rope holding back press and walked to the other side of it, closer to Obama.

  As Reuters adds, a Chinese official attempted to prevent national security adviser Susan Rice from walking to the motorcade as she crossed a media rope line, speaking angrily to her before a Secret Service agent stepped between the two. Rice responded but her comments were inaudible to reporters standing underneath the wing of Air Force One. It was unclear if the official, whose name was not immediately clear, knew that Rice was a senior official and not a reporter.

  Then, according to Politico, the press pool was brought under a wing of Air Force One where the pool was supposed to stay behind a blue rope. However, a member of the Chinese delegation began shouting at White House staff, demanding the pool leave the arrival scene. A White House official said Obama was our president and Air Force One was our plane and that the press was not going to move from the designated area. The Chinese official angrily responded “This is our country. This is our airport.”

  A video of the incident was tweeted later by Reuters’ White House reporter Roberta Rampton:

  Government official was not happy that reporters were under the wing of AF1. WH press aide would not back down. pic.twitter.com/C3JRVIe37K

  — Roberta Rampton (@robertarampton) September 3, 2016

  “They did things that weren’t anticipated,” Rice told reporters afterwards.

  However, the disagreements between Chinese and American officials did not just stay on the tarmac. At Westlake Statehouse, where the summit was being held, a group of White House staff arriving before Obama was stopped at a security checkpoint. A heated argument between Chinese officials and White House staff, protocol officers and Secret Service, who were trying to enter the building separately from the press, broke out at the security gate.

  According to the pool report, U.S. officials could be heard arguing in Chinese with Chinese officials over how many Americans could go through security at one time, how many White House officials were allowed to be in the building before Obama’s arrival, and which U.S. officials were on a security list.

  “The president is arriving here in an hour,” a White House staffer was overheard saying in exasperation. A Chinese official assisting the U.S. officials became angered by how the guards were treating the White House staff as the disagreement escalated.

  “You don’t push people. No one gave you the right to touch or push anyone around,” he yelled in Chinese at one of the Chinese security officials.

  Another Chinese official trying to help White House staff stepped between the two men arguing, as the security official looked like he was going to throw a punch, according to the pool report. “Calm down, please. Calm down,” a White House official said.

  “Stop, please,” said a foreign ministry official in Chinese. “There are reporters here.”

  Another disagreement occurred when officials and press finally made it inside the building. Chinese officials told White House press officers that only 10 American journalists were allowed in. “That’s not right,” a White House press official said.

  Two U.S. journalists were left outside and were not allowed to stand in the room, despite White House press officials insisting there was space. “There’s space. They are print reporters. They would just be just standing,” one White House press officer said. The two reporters were eventually granted access.

  The unprecedented show of disrespect for a standing US president and his envoys took place after Obama once again criticized China over the ongoing territorial dispute in the South China Sea. As cited by Reuters Obama said  that China needs to be a more responsible power as it gains global influence and avoid flexing its muscles in disputes with smaller countries over issues like the South China Sea, U.S. President Barack Obama told CNN in an interview to be aired on Sunday.

  Obama, who meets with President Xi Jinping at a G20 summit next week in China, told CNN the United States supports the peaceful rise of China but that Beijing had to recognize that “with increasing power comes increasing responsibilities,” a quote taken by Obama’s speechwriter from the Spiderman movie. 

  Obama said Washington had urged Beijing to bind itself to international rules and norms to help build a strong international order. “Where we see them violating international rules and norms, as we have seen in some cases in the South China Sea or in some of their behavior when it comes to economic policy, we’ve been very firm,” Obama told CNN. “And we’ve indicated to them that there will be consequences.”

  “If you sign a treaty that calls for international arbitration around maritime issues, the fact that you’re bigger than the Philippines or Vietnam or other countries … is not a reason for you to go around and flex your muscles,” Obama said. “You’ve got to abide by international law.”

  So far China not only refuses to abide by international law, showing a clear disregard for US warnings about “consequences”, but with today’s latest diplomatic incident has telegraphed to the world that its respect for the US presidential institution has never been lower.

  

  

• John Maynard Keynes' "General Theory" Eighty Years Later

  Authored by Antonius Aquinas,

  

  To the economic and political detriment of the Western world and those economies beyond which have adopted its precepts, 2016 marks the eightieth anniversary of the publication of one of, if not, the most influential economics books ever penned, John Maynard Keynes’ The General Theory of Employment, Interest and Money.  Sadly, even to this day, despite its thorough refutation by lights such as Henry Hazlitt and other eminent scholars, The General Theory, which spawned “Keynesianism” and its later variants, remains supreme in academics, financial markets, and public policy.

  Despite its outlandish theoretical flaws and nonsensical economic jargon and the catastrophic empirical evidence of its failure to prevent financial downturns or “stimulate” sustainable growth, Keynesianism remains the ruling paradigm of economic thought.

  Why?

  A number of trenchant reasons have been given for the General Theory’s continued dominance, however, one stands above all else: Keynesian economics provides the intellectual justification for economists, statisticians, technocrats, bureaucrats, and policy wonks in their exalted positions as “fine tuners” of economies the world over.  Since markets are to Keynes and his disciples inherently unstable from erratic investment spending and aggregate demand, it is up to these theoreticians steeped in the knowledge of their master’s teachings to ameliorate any economic fluctuations.

  The General Theory came on the scene at a propitious time during the height (or more accurately the depth) of  the Great Depression, which in 1936, despite Roosevelt’s New Deal and other Western nation states’ initiatives, had not improved conditions.  Keynesianism was actually a “middle way” between all out Soviet-style central planning and that of laissez-faire capitalism.  Primarily through fiscal policy, the economy would be kept on an even keel under the astute management of Keynesian-trained economists.  Naturally, this appealed to academics and intellectuals the world over who correctly envisioned positions of power and influence in expanded state apparatuses.

  As history has shown, Keynesianism was to become more than a remedy for the Depression, but would be applicable after the crisis dissipated.  The General Theory was based, in part, on the (false) notion that the capitalist system is inherently unstable and is, therefore, in need of state intervention.  Keynes  deliberately ignored the scholarship at the time, which demonstrated that the instability was not a “market failure,” but a monetary disorder caused by artificial credit expansion generated by the central banks, especially the Federal Reserve.

  The enthusiasm for The General Theory came at first from younger economists while it was (rightly) dismissed by many of their elders as incomprehensible.  Yet, its lack of clarity was appealing to the novices, since they would become the Creed’s interpreters.

  Not all, however, were entirely overwhelmed by their mentor’s magnum opus as Paul Samuelson candidly admitted:

  [The General Theory] is a badly written book: poorly organized. . . . It abounds in mares’ nests of confusions. . . .  I think I am giving away no secrets when I solemnly aver – upon the basis of vivid personal recollection – that no one else in Cambridge, Massachusetts, really knew what it was all about for some twelve to eighteen months after publication.*

  Despite such an assessment, Keynesianism was never seriously challenged by its adherents, it opened too many lucrative policy making doors to be refuted.

  That Keynesianism continues to reign supreme, despite its theoretical and empirical bankruptcy, speaks volumes of the state of Western intellectual and academic life.  Instead of the pursuit of truth and the refutation of error, Western intelligentsia is primarily concerned with securing privilege and power for itself.  At one time such status was gained by honest inquiry into social questions and issues, now it is obtained in the justification of the expansion of state power.  Very few turn down such enticements!

  Societies are the product of ideas.  Since the release of The General Theory, the Western world has been under the destructive sway of Keynesianism, which has resulted in stagnation, financial turmoil, and eventual collapse.  Until Keynes and his nutty theories have been refuted, the economic malaise will continue.

  

  

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• Retired Green Beret Warns: "World Governments Are Preparing For Disaster And War"

  Submitted by Jeremiah Johnson (nom de plume of retired Green Beret of US Army Special Forces) via SHTFPlan.com,

  As written in previous articles, it is my firm conviction that we will be involved in a World War that will be initiated by an Electromagnetic Pulse (EMP) weapon detonated over the continental United States.

  That being said, this piece summarizes recent events that reinforce such a conclusion, a conviction that is shared by world leaders, senior military personnel, and prominent analysts, as well as being a general consensus of opinion worldwide.  As of this writing, the German government has instructed its citizens to prepare for a forthcoming disaster by stockpiling at least 10 days-worth of food and 5 days of water.  In Berlin, they are considering bringing back mandatory conscription (a draft) in view of the influx of Muslim aliens entering Europe.

  This concern is mirrored by Hungary and the Czech Republic who, in light of an influx of more than a million Muslims entering Europe are calling for an army in Europe representing the EU to be able to deal with this crisis affecting their borders.

  “We must give priority to security, so let’s start setting up a joint European army.”

   

  -Hungarian Prime Minister Viktor Orban

  Such words are not being spoken only in Europe.  In the United States, Obama recently gave a speech in June as an ominous, veiled warning of things to come for Americans to be “prepared for a disaster.”  He also stressed that all Americans are responsible for disaster preparation by “having an evacuation plan,” as well as “having a fully-stocked disaster supply kit.”  SHTFplan.com just released a report that revealed the DHS has ordered approximately $20 million of radiation detection equipment.

  As most readers are aware, North Korea successfully test-launched an SLBM (Submarine-Launched Ballistic Missile) on August 24th that traveled approximately 300 miles.  Identified by the DOD as a KN-11 missile, the test launch confirms that it is feasible to strike the United States from a submarine launch off the West Coast, as the Chinese probably tested with the missile plume detected off of the California coastline in 2009.  With miniaturization of nuclear warhead capability, believed by Dr. Peter Vincent Pry to have already been obtained, the North Koreans do have the ability to launch an EMP strike against the United States.

  The North Korean statements as reported by KCNA news agency pertaining to their test are as follows:

  “A test-fire of strategic submarine-launched ballistic missile was successfully conducted under the guidance of [North Korean leader Kim Jong Un, and he] appreciated the test-fire as the greatest success and victory…. The SLBM [Submarine-launched ballistic missile] test-fire was successfully carried out without any adverse impact on neighboring countries.”

  The news agency quoted Kim Jong Un as saying the following:

  “The US vicious nuclear threat and blackmail against the DPRK only resulted in bolstering up its nuclear attack capability hour by hour and the US mainland and the operational theatre in the Pacific are now within the striking range of the KPA, no matter how hard the US tries to deny it.”

  The actions of the North Koreans have been preceded by the deployment of the THAD anti-missile system in South Korea and the Sea of Japan, as well as the recent redeployment of nuclear-armed B-52 bomber aircraft by the U.S. to the island of Guam.  In addition, a total of 75,000 U.S. and South Korean troops have been engaged in military exercises in South Korea that have infuriated the North Koreans.  The exercises began shortly before the North Korean missile test.

  A Sputnik News report says that Russian TU-22M3 long-range Backfire bomber aircraft will now be armed with the new Russian Kh-32 cruise missile.  The capabilities of this missile are astounding: it can fly at speeds of up to 600 mph to an altitude of almost 25 miles, and when it reaches the proximity of its target, fly downward at a speed of almost 3,000 mph with a total range of almost 600 miles.

  We already know that the Russians have been constructing bunkers for their citizens numbering in the thousands since at least 2012 in and around Moscow and throughout Russia.  In addition to this, on August 27th All News Pipeline’s Stefan Stanford reported that some disturbing actions may be occurring at Russia’s “Doomsday Bunker” located beneath Yamantau Mountain in Russia.  Here is a brief excerpt:

  We also recently read from an unconfirmed source that the Russians may be heading to these bunkers right now. If that report is correct, and we pray it’s not, we’re warned that this means war is very close. 

  There is a corresponding video posted with the article that deserves viewing.  Stanford also added the following:

  “As we hear in the final video below, there’s been a report that a ‘Hillary Clinton WW3’ is unavoidable and top Russian leaders are high-tailing it to their bunkers at Yamantau Mountain. We stress here that ANP cannot confirm this story at this time. If we do receive confirmation, we will update this story immediately. If it’s true, the American people should know – as we all know, we certainly won’t find this out from our mainstream media nor government.” 

  This report deserves continuous monitoring, especially in light of last week’s military maneuvers and movements conducted by Russia’s infantry and airborne forces, as well as their naval assets and air force in and around the borders of the Baltic nations, primarily Latvia, Lithuania, and Estonia, as well as Ukraine and Poland.  Recent reliefs of command (and/or purges) of several senior members of the Kremlin and the Russian military suggest (as can be read in detail in other articles) that Prime Minister Vladimir Putin may be clearing out any of his advisors that may oppose future military operations in Europe.

  To increase tensions further, it has been reported that on Wednesday, August 24th, Turkish military forces have invaded Syria.  The offensive has been comprised of Turkish armored units, special forces teams, and aircraft supported by “coalition” aircraft of the U.S.  The purported objective was to dislodge ISIS from proximity to the Turkish border and to stem advances made by Kurdish militia.  The actions were strongly condemned by the Foreign Ministry of Syria who also stated that Syria’s borders and national sovereignty have been violated.

  This proposes a major dilemma that escalates by the day, as the Turks are backed by NATO and the U.S., and the Syrians are backed by Russia.  Sputnik News also reported another disturbing piece of information regarding this situation:

  “Lt. Gen. Stephen Townsend, recently-appointed US Commander of American Forces in Iraq and Syria has told reporters that the coalition forces have officially informed Moscow and Damascus of possible countermeasures should the US forces ‘feel threatened’ by Syrian forces.”

  This is alarming, as the U.S. has been playing an indirect cat-and-mouse game with Russia since the Russian bombing campaign to aid Assad’s government commenced and closed, with a subsequent withdrawal of most of the Russian units.  Most.  There is still a sizable contingent of Russian forces based in Syria in support of the Damascus government and the ability to deploy forces rapidly into the area by Russia at a moment’s notice exists without question.

  So there we have it.  The overall situation: the world’s economies are cascading, there is civil unrest throughout Europe, civil unrest is developing in the United States, the U.S. government and the nations’ governments are preparing for disaster and war, and powder-kegs exist in Syria, Ukraine, and with North Korea that can be touched off at any time.  As everyone watches these developing scenarios, keep in mind that time is of the essence for preparing yourselves and your families.  Possibly…and probably…we don’t have much time between now and the U.S. election, an event that may or may not occur in light of a world on the edge of a precipice, and World War III.

  

  

• Two Of The World's 20 Most Violent Cities Are In America

  Out of the world's 50 most violent cities, 41 are in Latin America including 21 in Brazil. As Statista's Nial McCarthy write, The Mexico Citizens Council for Public Security releases its findings on the homicide rate in cities with populations over 300,000 every year.

  The infographic below shows the world's top 20 cities, with Caracas, in the socialist utopia Venezuela, in first place with 119.87 homicides per 100,000 residents in 2015. 

  San Pedro Sula, Honduras (111.03 homicides per 100,000) came second with San Salvador, El Salvador (108.54 homicides per 100,000) rounding off the top three. The majority of the violence in Latin America can be attributed to drug trafficking, gang warfare and political instability.

  
  You will find more statistics at Statista

  But 'Exceptional America' is not left out out – St.Louis and Baltimore are right up there (and New Orleans and Detroit close behind) as their homicide rates rival some of the worst in Brazil, Mexico, and Venezuela.

  

  

• Are You A Mind-Controlled CIA Stooge?

  Authored by Paul Craig Roberts,

  Do you smirk when you hear someone question the official stories of Orlando, San Bernardino, Paris or Nice? Do you feel superior to 2,500 architects and engineers, to firefighters, commercial and military pilots, physicists and chemists, and former high government officials who have raised doubts about 9/11? If so, you reflect the profile of a mind-controlled CIA stooge.

  The term “conspiracy theory” was invented and put into public discourse by the CIA in 1964 in order to discredit the many skeptics who challenged the Warren Commission’s conclusion that President John F. Kennedy was assassinated by a lone gunman named Lee Harvey Oswald, who himself was assassinated while in police custody before he could be questioned. The CIA used its friends in the media to launch a campaign to make suspicion of the Warren Commission report a target of ridicule and hostility. This campaign was “one of the most successful propaganda initiatives of all time.”

  So writes political science professor Lance deHaven-Smith, who in his peer-reviewed book, Conspiracy Theory in America, published by the University of Texas Press, tells the story of how the CIA succeeded in creating in the public mind reflexive, automatic, stigmatization of those who challenge government explanations. This is an extremely important and readable book, one of those rare books with the power to break you out of The Matrix.

  Professor deHaven-Smith is able to write this book because the original CIA Dispatch #1035-960, which sets out the CIA plot, was obtained through a Freedom of Information Act request. Apparently, the bureaucracy did not regard a document this old as being of any importance. The document is marked “Destroy when no longer needed,” but somehow wasn’t. CIA Dispatch #1035-960 is reproduced in the book.

  The success that the CIA has had in stigmatizing skepticism of government explanations has made it difficult to investigate State Crimes Against Democracy (SCAD) such as 9/11. With the public mind programmed to ridicule “conspiracy kooks,” even in the case of suspicious events such as 9/11 the government can destroy evidence, ignore prescribed procedures, delay an investigation, and then form a political committee to put its imprimatur on the official story. Professor deHaven-Smith notes that in such events as Kennedy’s assassination and 9/11 official police and prosecutorial investigations are never employed. The event is handed off to a political commission.

  Professor deHaven-Smith’s book supports what I have told my readers: the government controls the story from the beginning by having the official explanation ready the moment a SCAD occurs. This makes any other explanation a “conspiracy theory.” This is the way Professor deHaven-Smith puts it:

  “A SCAD approach to memes assumes further that the CIA and other possibly participating agencies are formulating memes well in advance of operations, and therefore SCAD memes appear and are popularized very quickly before any competing concepts are on the scene.”

  The CIA’s success in controlling public perception of what our Founding Fathers would have regarded as suspicious events involving the government enables those in power positions within government to orchestrate events that serve hidden agendas. The events of September 11 created the new paradigm of endless war in behalf of a Washington-dominated world. The CIA’s success in controlling public perceptions has made it impossible to investigate elite political crimes. Consequently, it is now possible for treason to be official US government policy.

  Professor deHaven-Smith’s book will tell you the story of the assassination of President Kennedy by elements of the US military, CIA, and Secret Service. Just as the Warren Commission covered up the State Crime Against Democracy, Professor deHaven-Smith shows why we should doubt the official 9/11 story. And anything else that the government tells us.

  Read this book. It is short. It is affordable. It is reality preparation. It will innoculate you against being a dumbshit, insouciant, brainwashed American. I am surprised that the CIA has not purchased the entire print run and burned the books. Perhaps the CIA feels secure from its success in brainwashing the public and does not believe that American democracy and accountable government can be restored.

  

  

• Obama's Jobs 'Recovery' Explained (In 1 Cartoon)

  A job’s a job, right?

   

  

  h/t @myLife_40NoneK

  

  

• How Silicon Valley Follows The Money

  Authored by Pepe Escobar via Strategic-Culture.org,

  There’s way more in common between Wall Street and Silicon Valley than meets the untrained eye

  Wall Street and Silicon Valley are two of the key strategic hubs of hyperpower global domination. The others are the industrial-military-surveillance-security complex – of which Hollywood and corporate media are the soft power extensions – and the petrodollar racket/tributary system.

  Silicon Valley has been relentlessly constructed and idolized as a benign myth; technology breaking the ultimate frontiers and reaching Utopia At Last. Not really. A joyride of a book – Chaos Monkeys: Inside the Silicon Valley Money Machine, by Antonio Garcia Martinez – argues it’s all about, what else, money. As in cold, hard cash, stock options and, just like in Wall Street, bonuses.

  Martinez tells it like an American Dream insider. He’s a son of Cuban exiles, born in Southern California, with an almost PhD in Physics at Stanford, and a detour across Goldman Sachs that taught him how the casino system works. Then, back in California, he built a start-up with two friends whose embryonic product was a code-grounded method to target and boost electronic advertising. Secret revealed; electronic ads happen to be the real Holy Grail of the much lauded IT Revolution.

  Academic Michael Brenner defined Chaos Monkeys as Divine Comedy as anthropology. Not quite. We’re not in the presence of Virgil guiding Dante here, more like a Benzedrine-boosted neo-Kerouac let loose on the (techno) road.

  Right on page 25 Martinez captures Silicon Valley’s business logic, something that I learned myself three decades ago when I was crisscrossing the Valley – with a later stint on MIT – doing a special report on the Brave New Digital World ahead. At the time, I heard from the late great Marvin Minsky that the future would be a cross between artificial intelligence (AI) and genetic engineering. We are almost there. Martinez notes that in the future, it’s all about «computers talking to one another, with humans involved only in the writing of the logic itself».

  Wall Street, of course, saw it before anyone else. Then came transportation (Uber), the hotel business (Airbnb), food delivery (Instacart), a massive array of services. We are smack on the road towards humans merely filling the gaps in a sanitized, non-stop computer workflow.

  The world all that fabulous concentration of engineers, code writers, product managers, venture capitalists, key word filters, metadata and algorithms Silicon Valley is shaping is for all practical purposes a Consumer Holy Grail. We are all «free», but essentially free as extremely, precisely defined targets with a ton of features and preferences supplied to the digital workflow every time we click for a post, a comment, a search. Then, in a few minutes of digital life, we will be hit by a pop-up offer to buy something, anything.

  Martinez also concisely explains the basics of search engine marketing. Marketers curate keyword lists «like a bonsai tree»; «If the revenue generated by postclick sales outpaces cost, up go the bid and the budget». This in a nutshell is how «Google makes more than some European countries produce in a year».

  Monetize those bits, baby

  What is a chaos monkey, really? That’s a software tool created and open-sourced by Netflix. One uses it to test a website’s resiliency against that proverbial nightmare; a server failure.

  That leads Martinez to conceptualize tech entrepreneurs as society’s chaos monkeys wreaking havoc on traditional industries; «One industry after another is simply knocked out via venture-backed entrepreneurial daring and hastily shipped software. Silicon Valley is a zoo where the chaos monkeys are kept, and their numbers only grow in time. With the explosion of venture capital, there is no shortage of bananas to feed them. The question for society is whether it can survive these entrepreneurial chaos monkeys intact, and at what human cost».

  The Silicon Valley zoo is predictably populated by hordes of talent –Ants? Bees? – all invariably fixated on monetizing their data brokerage skills, for their companies and especially for themselves. An extra cast of characters revolves around the geeks – from venture capitalists to an army of lawyers and the odd «angel investor» doubling as spiritual guide.

  For the geek hordes, the base salary may not be exceptional, but there is prestige, perks and in a few cases stock options involved. Hotel California this ain’t; you can’t check out any time you like, because then you will lose all those perks and the lifestyle associated with them. You can always leave (or get fired) – and in this case you will always miss what you will never have elsewhere. Very few – essentially founders and CEOs – touch serious «f**k you money» and enter the billion-dollar league.

  Startup life is usually hell; «backroom deals negotiated via phone calls to leave no legal trace, behind-the-back betrayals of investors or cofounders, seductive duping of credulous employees so they work for essentially nothing». It’s an extremely closed system, as I saw it for myself. In San Francisco, an extension of the Valley, everything is concentrated between First and Eight Streets, and between King and Market, in the SoMa (South of Market) district. That’s where you find, among others, Twitter, Airbnb and Uber, once startups, now enjoying Masters of the Universe status.

  The ecosystem is also an apotheosis of juvenilia – in thesis the best and the brightest from the US’s elite schools all striving purposely towards an open, transparent, hyper-connected Brave New World, a never-before-tested original human experience. Well, the goals are not that lofty. A telling episode is that when Facebook faced a mortal challenge from Google in the social network front, it was pure war, Rome against Carthage-style. The standard psychological profile across the Valley would reveal an empathy-deprived Narcissus Drowned. Mature adults are extremely hard to find.

  It’s quite telling that Martinez spends the last stretch of the book deconstructing his experience as a Facebook product manager, developing what would be the ineffable ad targeting mechanism. Silicon Valley after all is about how to monetize technology.

  Facebook is actually going one step beyond, exploring the monetization of users’ news feeds and expanding a dominant role in the news business itself. A June study by Oxford University determined that 44% of internet users already get their news through Facebook. There are no less than 1.7 billion Facebook users around the world – and counting. Its algorithms will progressively rule content published on news sites. Computers talking to computers – with humans just filling the gaps.

  

  

• Putin Says Trump/Clinton Using "Shock Tactics"; Describes DNC Hacking As "Public Service" But Denies Involvement

  Vladimir Putin sat for a 2-hour discussion with Bloomberg to discuss the U.S. presidential election and accusations that Russia was behind the recent hacking of the Democratic National Committee.  Clinton has repeatedly attempted to link Putin to the Trump campaign after he previously described Trump as a “very colorful and talented man” who wanted to move Russia-U.S. ties to a “deeper level.”  That said, Putin refused to take sides in the U.S. election accusing both candidates of using "shock tactics" while adding that playing "the anti-Russian card" was "short-sighted." 

  “I would like to work with a person who can make responsible decisions and implement any agreements that we reach.  Their last name doesn’t matter.”

   

  “It’s necessary for that person to enjoy the trust of the American people.  That’s why we never intervened, don’t intervene and try not to intervene in domestic political processes."

   

  “They’re both using shock tactics, just each in their own way.  I don’t think they are setting the best example.”

   

  Exclusive: Vladimir Putin on U.S. election race and "shock" tactics by Trump and Clinton https://t.co/wrcF2wSrMr pic.twitter.com/bmne70DUDu

  — Bloomberg (@business) September 2, 2016

   

  Despite repeated denials from Russia, Clinton told Fox News back in July that she "knows that Russian intelligence services hacked in to the DNC" and went on to link Trump to the event.  Per Bloomberg:

  "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," Clinton said in an interview with "Fox News Sunday" on July 30.

  Putin said the hacking of thousands of Democratic National Committee emails and documents was a service to the public but questioned why it "even matters who hacked this data." That said, Putin also pointed out that even if he did do it the breaches would "be impossible to trace."  While not explicitly taking sides, Putin seemingly took a dig at the Democratic Party and what he saw as an obvious party bias in favor of Clinton during the Democratic Primary…poor Bernie.

  “Listen, does it even matter who hacked this data?  The important thing is the content that was given to the public.’’

   

  “There’s no need to distract the public’s attention from the essence of the problem by raising some minor issues connected with the search for who did it.  But I want to tell you again, I don’t know anything about it, and on a state level Russia has never done this.”

   

  “You know how many hackers there are today?  They act so delicately and precisely that they can leave their mark — or even the mark of others — at the necessary time and place, camouflaging their activities as that of other hackers from other territories or countries. It’s an extremely difficult thing to check, if it’s even possible to check. At any rate, we definitely don’t do this at a state level.”

   

  Exclusive: DNC hack was a public service but Russia didn't do it, Vladimir Putin says https://t.co/iIaUeLax2w pic.twitter.com/qUjBH4E6mU

  — Bloomberg (@business) September 2, 2016

   

  Unfortunately for Putin, whichever candidate ultimately wins the White House it will be their first term which means they won't have the "flexibility" that Obama had during his second term when he no longer had to worry about being accountable to voters.

  

  

• "Apocalyptic Scenes" As Fleeing ISIS Fighters Set Iraqi Town's Oil Wells On Fire

  Back in 1991, when the Iraq army was retreating from Kuwait in the Persian Gulf War, it unleashed a literal “scorched earth” tactic as it set fire to some 600 oil wells, leading to iconic photos such as this one.

  

  Twenty-five years later, in an ironic twist, it was ISIS fighters who returned the favor, and while fleeing an Iraqi toawn, they did their best to raze it to the ground by flooding the streets with oil and setting it on fire.

  Pressured by the latest advance of coalition forces approaching the Islamic State stronghold of Mosul in the north of the country, the jihadists were forced to retreat from Qayyara by Iraqi soldiers. As they fled, they took a page from the Iraq’s own army as they ISIS bombed pipelines and set fire to nearby oil wells, creating an endless cloud of black smoke that blocked out the sun, leaving the town shrouded in darkness in an eerie redux of scenes from 1991. 

  Smoke billowing into the sky during a Reuters visit on Monday blotted out the sun in central districts hours before nightfall, producing an “apocalyptic scene” in this desert settlement which lacks electricity amid 49 degree Celsius (120°F) temperatures.

  While Baghdad wants to retake Mosul before the end of the year, which it says will effectively end the militants’ presence in Iraq more than two years after they seized a third of its territory, some officials from countries in the U.S.-led coalition supporting the Iraqi forces have said that timeline may be too ambitious. However, the loss of Qayyara will certainly deal a blow to Islamic State, which had extracted oil from some 60 wells and sold it to help finance its activities.

  
  A boy stands near oil spill from wells, set ablaze by Islamic State militants before
  fleeing the oil-producing region of Qayyara, in Qayyara, Iraq

  Islamic State used to ship at least 50 tanker truckloads a day from Qayyara and nearby Najma oilfields to neighboring Syria, from where much of it was exported to Turkey. A sign remains on the main road announcing prices of crude in places like the Syrian city of Aleppo, 550 km (340 miles) west of Qayyara. Rudimentary refineries once used to refine oil for local consumption have been abandoned on the side of the road leading east out of the town.

  
  Residents look at oil spill from wells, set ablaze by Islamic State militants before
  fleeing the oil-producing region of Qayyara, in Qayyara, Iraq,

  In the meantime, anyone taking a casual stroll through Qayyara will have a first hand account of what hell feels like. The smell of petrol now overwhelms the area, wind carrying the smoke from well fires into the town center. More than a few minutes in the area leaves one’s throat burning, and children walking the streets have quickly developed coughs.

   

  Abdel Aziz Saleh, a 25-year-old Qayyara resident, said he wants Baghdad to put out the fires as soon as possible. “They are suffocating us,” he said. “The birds, the animals are black, the people are black. Gas rains down on us at night. Now the gas has reached the residential areas.”

  
  Smoke billows from oil wells, set ablaze by ISIS militants

  Alas, the Iraqi government has for now forsaken the people of this northern town. While Iraq said it has put out fires at four oil wells in the Qayyara region, but Reuters could not locate any such efforts at the wells closest to residential areas.

  
  Iraqi security forces stand with weapon drawn as fire and smoke rise from oil wells

  Around a dozen separate plumes of smoke were still distinguishable across the horizon as night fell, when a convoy of firetrucks approached the town.

  

  Fires rise from oil wells, set ablaze by Islamic State militants

  It was not immediately clear how long it will take to extinguish the flames. When Iraq’s military torched hundreds of Kuwaiti oil wells in 1991 ahead of advancing U.S.-led forces, most fires burned for around two months but some wells were not capped for almost a year.  To be sure, Baghdad is in no rush to restore order: the oil ministry said it does not expect to resume production from the Qayyara region before Mosul’s recapture. The two main fields, Qayyara and Najma, used to produce 30,000 barrels per day of heavy crude before the takeover by Islamic State.

  

  Despite the apocalyptic conditions, Qayyara remains full of inhabitants. Whereas civilians in most other areas recaptured from Islamic State fled ahead of or during government offensives the majority of Qayyara’s roughly 20,000 residents have stayed put. A counter-terrorism officer said that was partly due to the speed with which the army recaptured Qayyara, surprising the Islamic State fighters before they were able to dig in. Qayyara is also located near a military airfield, so many residents in the area have relatives in the army.

  
  Fire rises from oil wells, set ablaze by Islamic State militants

  The good news for the locals is that commanders are confident electricity can be restored soon in Qayyara and said booby trapped streets and buildings are less of a concern than they were in the western cities of Ramadi and Falluja. “We surrounded them quickly, so they didn’t have time to lay many IEDs (improvised explosive devices),” said the officer from the elite counter-terrorism service (CTS), which spearheaded the Qayyara operation along with the army’s 9th armored division. “There were a lot on the main street they thought we would use to enter but instead we came in from the desert.”

  The approach to the city shows signs of the fighting that followed, with many buildings collapsed by aerial bombardment. The U.S.-led coalition said it had launched more than 500 air strikes in support of Iraqi forces, nearly as many as in last year’s battle for the much larger city of Ramadi. However, it is what ISIS did as it was fleeing that was memorable.

  Meanwhile, the capture of this strategic town virtually asures that the battle for Mosul will soon be won: Qayyara and its nearby airbase, where the bulk of a 560-strong U.S. troop reinforcement will be based, will form the main staging base for the anticipated offensive on Mosul, 60 km (35 miles) to the north.

  

  

• China's Monetary Ascension Is Paved With Gold

  Submitted by Stefan Gleason via MoneyMetals.com,

  The world monetary order is changing. Slowly but steadily, global trade and currency markets are becoming less dollar-centric. Formerly marginal currencies such as the Chinese yuan now stand to become serious competitors to U.S. dollar dominance.

  Could gold also begin to emerge as a leading currency in world trade? Over time, it certainly could. But the more immediate implications for gold’s monetary role center on its increasing accumulation by central banks such as China’s.

  On October 1st, the Chinese yuan is slated to enter the International Monetary Fund’s Special Drawing Right (SDR) basket of top-tier currencies. It will share SDR status with the U.S. dollar, euro, British pound, and Japanese yen.

  Before the yuan officially becomes an SDR currency, the World Bank intends sell $2.8 billion in SDR bonds in Chinese markets. The rollout of SDR bonds in China began August 31st. According to Reuters, China’s promotion of SDR bonds “is part of a wider push in China to… boost demand for Chinese yuan and diminish reliance on the U.S. dollar in global reserves.”

  King Dollar won’t be dethroned overnight. But the place of prominence the U.S. dollar – more accurately called the Federal Reserve Note – enjoys as the world's reserve currency will indeed diminish over time.

  Yuan’s Inclusion in the SDR Currency Basket: Merely a Part of China’s De-Dollarization Strategy

  China and Russia have mutual geostrategic interests in helping to promote de-dollarization. Toward that end, the two powers are engaging in bilateral trade deals that bypass the dollar. Annual bilateral trade between China and Russia has surged from $16 billion in 2003 to nearly $100 billion today. When China hosts the G20 summit in September, it will make Russian President Vladimir Putin its premier guest of honor.

  U.S. officials are none too pleased. They fear Putin aims to expand his global reach by forging stronger ties with China.

  

  According to the South China Post, “Some Western analysts have viewed the recent, rapid enhancement of such collaboration as the beginning of a partnership set on destabilizing the U.S.-led world order and diminishing Washington’s capacity to influence strategic outcomes.”

  Some in the Hillary Clinton campaign even fear that Russia will interfere in the upcoming U.S. election to try to block Hillary’s path to the White House. Russian hackers have been implicated in a number of recent “leaks” that damaged the reputations of U.S. banks and the Obama administration. Wikileaks founder Julian Assange has hinted at further releases. Hillary’s allies openly speculate that these Wikileaks hacks are being sourced from Russia.

  But the Russians and the Chinese aren’t counting on cyber warfare to dethrone King Dollar. In addition to bilateral trade deals and strategic plays for regional economic dominance, the two powers are bulking up on gold. Over the past several years, Russia and China have each been adding massively to their gold holdings.

  World’s Central Banks Becoming Net Gold Buyers

  Since 2009, China’s officially reported gold holdings have jumped by 60%. The enlarged gold stockpiles held by the People’s Bank of China helped China win ascension into the IMF’s elite SDR currency basket.

  It’s part of a larger trend of world central banks becoming net gold buyers. They were net sellers throughout much of the 1990s and early 2000s. That helped keep gold prices suppressed. But since 2010, central banks have been net buyers of gold – to the tune of more than 500 tons per year.

  

  Russia alone added 172 tons of gold in 2014 and 208 tons in 2015. By swapping some of its U.S. Treasury securities for bullion bars, the Russian central bank has become the world’s seventh largest gold holder. Yet gold makes up just 16.2% of Russia’s monetary reserves, which is a lower proportion held by its Eurozone neighbors.

  Russia likely isn’t done accumulating. As the world’s third largest gold producer, Russia can readily supply itself with more.

  A similar scenario figures to play out in China, perhaps even more dramatically so. China’s “official” gold hoard of 1,823 tons as of August 2016 gives it the world’s sixth biggest gold reserve. Yet relative to the size of China’s economy and currency supply, its gold stash doesn’t amount to much – just 2.3% of total monetary reserves.

  Unofficially, China likely has additional gold reserves that it doesn’t report. But even if China’s real gold stash is double or triple what it actually reports, as some analysts suggest, that still leaves the country of 1.3 billion people with far less gold backing than Russia, the United States, Europe, and some of its Asian rivals. China has a lot more gold accumulating to do in the years ahead.

  

  Chinese leaders aim to be regionally dominant. In order to secure that position they are moving to own and control greater shares of the gold market. The recently opened Shanghai Gold Exchange gives China a direct mechanism for controlling the physical gold market in Asia.

  It’s a way for China to take at least some control away from Western governments and banks that have traditionally dominated the gold trade out of London and New York.

  When the Chinese yuan becomes an SDR currency this fall, that could be the inflection point for a new multi-polar currency regime that sees the Federal Reserve Note decline in stature as central banks scramble to stock up on the ultimate money: gold.

  

  

• Policyholders File Class Action Lawsuits As Sinking Bond Yields Force Insurers To Hike Rates

  The latest victims of misinformed global central banking policies are retirees holding “universal life” policies…once again the “prudent” folks who saved for their retirement are exactly the ones being brutally punished for their efforts. 

  As the Wall Street Journal points out, insurers are facing a rapidly rising number of class action lawsuits around the country after their attempts to raise premiums on universal life policies in response to lackluster returns on their bond portfolios.  As we’ve discussed on several occasions, low bond yields on sovereign debt are taking their toll on insurers whose asset returns have suffered.  The problem faced by insurers is related to old policies underwritten before the “great recession” and before central banks around the world decided to embark upon their “grand experiment.”  While insurance policies written today can be adjusted for the current market environment, policies written prior to the “great recession” often carried “guaranteed” interest payments as high as 4% – 5%.  And, with central banking policies around the globe pushing sovereign bond rates to historic lows (see “With Over $13 Trillion In Negative-Yielding Debt, This Is The Pain A 1% Spike In Rates Would Inflict“) it is no wonder that insurers are taking a hit.  Per the As the Wall Street Journal:

  At issue are “universal life” policies. In short, the policies combine a death benefit with a tax-advantaged savings account that has a minimum interest rate. Such policies accounted for more than a quarter of all individual life-insurance sales in some years past. Millions of Americans own them.

   

  Insurers’ problem is that many older policies guarantee annual interest rates of 4% to 5%.  In the mid-1980s, when universal life policies surged in popularity, the average investment portfolio yield for life insurers was nearly 10%, according to ratings firm A.M. Best Co.

   

  Today, that yield is just under 5%, thanks to a general decline in rates over the decades, followed by the more recent sharp leg down.

   

  In selling universal life, insurers typically aim to earn 1 to 2 percentage points more on the premiums they invest than they pay out in interest to policyholders, said Deloitte Consulting LLP principal Matthew Clark. Most insurers aren’t earning this spread today, and “with continued low rates some could face a situation where they are paying out more to policyholders than their investments earn,” he said.

  As our readers know, pensions and insurance companies are stuck in a central bank-induced negative feedback loop that just keeps pushing rates lower and lower.  In an effort to “juice” returns, insurance companies have been forced to invest in longer-dated maturities but with rates collapsing across the curve many insurance companies have nothing left to do but raise rates.  As Scott Robinson, of Moody’s Investors Service, pointed out “Companies are under a lot of pressure to boost returns in this low-interest-rate environment, and [raising prices] is one lever they have.” 

  

   

  Among those seeking legal action, is Raymond Foos who recently received a notice from Transamerica informing him of price increases that he estimates will cost an additional $300,000 per year.

  Among upset policyholders is Raymond Foos, an 87-year-old retired manufacturing chief executive who purchased an $11 million policy in 2003 to benefit his children. This spring, Transamerica informed him of an increase that he said will cost him nearly $300,000 a year, on top of the $2.25 million he paid as a lump sum to buy the policy and which he thought would cover costs through his and his wife’s death.

   

  Mr. Foos, who said he is exploring legal action, regrets not asking enough questions about risks when he bought the policy.

   

  He said Transamerica should “bite the bullet.” Drawing from his years of running a business, he said, “when you have a sale that you lose money on, you don’t go to the customer and say, ‘Give me some more money.’ You generally figure out how to live with your problem and go on….You tighten your belt.”

  For the insurer’s part, rate increases are explicitly defined within insurance policies.  While rarely well received by policyholders, Transamerica assured the Wall Street Journal that rate increase on policies, like those held by Foos, put new rates “at or below the maximum rates allowable.”

  Sadly, central banking policies have already taken a huge toll on “savers.”  Unfortunately, artificially low rates will have to revert back to some “normalized” level at some point in the future.  When that happens, it will only exacerbate the problem for pensions and insurers who will have to then deal with the huge losses resulting from sinking bond prices. 

  

  

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• Small Business Defaults Rise, Borrowing Drops: "What Scares Us Is The Rise In Delinquencies"

  Yesterday, we pointed out something disturbing when we looked at the latest NACM Credit Manager Index report: over the past year it had declined steadily, hitting the lowest print since 2009, or as the National Asscoiation of Credit Managers’ economist Chris Kuehl said “Overall, it was fun while it lasted – the trends had been up and now they aren’t” adding that “the best that can be said about the decline is that it was bad and hasn’t gotten much worse…. The sales collapse is consistent with what has been appearing in the Purchasing Managers’ Index and other statistics, so it is unlikely to be an anomaly, not good timing as far as the retail community is concerned.”

   

  

   

  Today, we got a validating, and equally concerning, perspective on how small businesses are doing, courtesy of the latest Thomson Reuters/PayNet Small Business Lending Index, which fell to 121.5 in July, the lowest level since January and down from an upwardly revised 139.2 in June. 

  But while the headline decline was mildly troubling, the details within the report were worse: according to PayNet, borrowing by U.S. small businesses sank in July, with more firms late on repaying existing loans, trends which according to Reuters “point to softer economic growth ahead.”

  More troubling is that companies are increasingly struggling to pay back existing debts. Loans more than 30 days past due rose in July to 1.63%, the fourth straight monthly increase and the highest delinquency rate since December 2012, separate data from PayNet showed.

  

  “The thing that scares us is the rise in delinquencies,” said Bill Phelan, PayNet’s president. “Every one of these months where investment is down and delinquencies are up is one step more toward contraction.”

  Here is why the PayNet data matters: the index typically corresponds to U.S. gross domestic product growth one or two quarters ahead. With the U.S. economy growing a paltry 1.1% in Q2, many economists have staked their reputation on the belief that growth will rebound in the third quarter. According to this data, not only will there be no rebound, but growth will deteriorate further.

  Small business borrowing is a key barometer of growth because small companies tend to do much of the hiring that drives economic gains.

  Just as importantly, the figures come as the Federal Reserve mulls the timing of its next rate hike, which may take place in just three weeks. With demand for debt sliding, and delinquencies steadily on the rise, the one thing that will happen if the Fed raises rates again, is accelerate these already adverse trends, leading to even less borrowing, and even more delinquencies and defaults.

  PayNet collects real-time loan information such as originations and delinquencies from more than 325 leading U.S. lenders.

  

  

• The Italian Referendum Could Result In The Death Of The Euro

  Submitted by John Mauldin via MauldinEconomics.com,

  An important election is coming up, and I’m not talking about the US presidential election. The upcoming referendum in Italy this fall will have a major macroeconomic impact on the world. But hardly anyone outside of Italy is paying much attention to it – yet.

   

  I’ve been saying for some time in interviews around the country that the referendum in Italy could have even more of an impact than the Brexit vote did in the UK. And like the Brexit vote, it is rife with emotion and political turmoil, making the outcome too close to call.

   

  The current prime minister, Matteo Renzi, has basically bet his career on this referendum, which would allow him to enact much-needed reforms. In fact, they’re the same reforms that I have written about in my letters over the past five years and that I talked about in my previous two books.

   

  Italy has about as sclerotic a governmental process as any country in Europe. And that is saying something. There is no end to corruption and crony politics. Each faction wants to keep the status quo and keep its perks but wants everybody else to give theirs up. If you’re a voter in Italy, your frustration is understandable.

   

  This vote in Italy needs to go on your economic radar screen. If the “no” vote wins, Renzi has promised to resign. This would throw Italy into a political crisis. Then there would be a real potential to elect parties that would call for a vote on whether to stay in the European Union. And at this point, it is not clear what the Italians would decide to do.

   

  Know this: The European Monetary Union does not work very well, if at all, without Italy. A “no” vote would be the death knell of the euro.

   

  Nick Andrews, who writes for my friends at Gavekal, gives an excellent summary of the situation in Italy. And, it is worth every bit of your attention.

  Renzi’s Great Gamble

  By Nick Andrews and Stefano Capacci

  Prime ministers come and go in Italy—four since the financial crisis—but precious little seems to change. The latest incumbent, Matteo Renzi, has pursued structural reform more energetically than his predecessors. But for all the progress he has made, he might as well have been wading through molasses. Now, in a bid to secure a popular mandate for his restructuring program, Renzi has bet his premiership on a referendum over badly-needed constitutional reforms. It is a high stakes gamble. If Renzi wins the vote, which is due in either October or November, his proposed measures will streamline Italy’s legislative process, breaking the parliamentary gridlock which has crippled successive governments, and opening the way to far-reaching economic reforms. If he loses, Renzi has promised to step down—a pledge that has turned the referendum into a popular vote of confidence in the unelected prime minister, his Europhile policies, and—by extension—Italy’s membership of the eurozone itself. As a result, a “no” vote in October will not just precipitate the fall of Renzi’s government; it could throw Italy’s long-term membership of the eurozone into doubt, plunging the single currency area once again into crisis.

  Policy no man’s land

  Italy’s fundamental problem is that it’s stuck in a policy no man’s land. Its old economic model, in place for much of the last three decades of the 20th century, relied on a combination of currency devaluation to maintain international competitiveness together with fiscal spending to support the poorer regions of the country’s south.

  

  Signing up to the euro put an end to all that, preventing devaluations and prohibiting budget deficits at 10% of gross domestic product. However, the design of Italy’s bicameral parliamentary system, in which the upper and lower house—the Senate and the Chamber of Deputies—wield equal legislative power, made it almost impossible for any government to push through the structural reforms necessary for Italy to compete and prosper within the eurozone. The result has not just been depressed growth and relative impoverishment, but an outright decline in living standards as Italy’s real GDP per capita has slumped to a 20-year low.

  

  Such a below-par economic performance has led to a build-up of bad assets on the balance sheets of Italy’s banks, where 18% of all loans are now classed as non-performing. In turn, this bad loan overhang has eroded the ability of the banking sector to extend new credit to the thousands of small businesses which are the engine of Italy’s economy and which normally power employment growth. The result is stagnation.

  To stand any chance of escaping this low growth trap, Italy needs to enact wholesale structural reforms to enhance its competitiveness relative to its eurozone neighbors. Notably, it needs to make the labor market more flexible to encourage job creation, it needs to lower the barriers to entry that protect much of the country’s service sector, it needs to overhaul a judicial system so sclerotic that bankruptcy proceedings can last 10 years or more, and it needs to restructure its fragmented and dysfunctional banking system.

  The prescription might be clear, but Italy’s political system makes enacting reform all but impossible. Renzi has already tried to overhaul Italy’s labor market by attempting to dismantle the generous protections that make it difficult and expensive for companies to dismiss staff, and which therefore encourage businesses to hire only temporary workers, heightening economic insecurity among the young.

  But Renzi’s attempt ran into bruising opposition from Italy’s powerful and well-subscribed trade unions. The results were a watered-down reform package that entitles existing permanent staff to a near-guarantee of lifetime employment, and a severe dent in Renzi’s popularity from which he is yet to recover. It’s a familiar story in Italy. Entrenched interests—whether represented by local and regional political leaders, unions, protected professions, or established private sector companies—exert enormous influence over the political process. All profit from the status quo, which promises they will continue to benefit from special protections and payouts. And because of the equal balance of power in Italy’s parliament, which means the Senate can block government legislation indefinitely, the consequence is political—and economic—stagnation.

  Bloated and wasteful

  Renzi’s referendum aims to change that. The prime minister is seeking popular approval for constitutional reforms that promise to cut the size of the upper house from 315 to 100 senators. Under his proposals, senators will no longer be directly elected, but will instead be chosen by regional councils, nominated by the mayors of big cities, or—in the case of five—be appointed by the Italian president. The reform will cut the costs of the notoriously bloated and wasteful upper house, where senators have traditionally enjoyed lavish expenses and generous pensions. Most importantly, it will downgrade the political power of the Senate so that it will no longer be able to obstruct government legislation entirely, but only to propose amendments that will be adopted at the discretion of the lower house (although the Senate will retain a say on constitutional matters, including the ratification of European Union Treaties). The objective is to increase the executive power of the government, and to tackle entrenched interests with additional measures that allow for new laws to facilitate popular referendums and to promote citizen participation in the political process.   

  Unlikely alliance

  However, powerful forces are arrayed against Renzi, and a “Yes” vote is far from assured. The proposed reforms have attracted opposition from establishment voices who benefit from the current arrangements. They have also drawn fire from constitutional lawyers and anti-establishment parties, including the populist 5-Star Movement, which argues the 50% simple majority needed to win the referendum is too low for constitutional changes that promise a concentration of political power unprecedented since the formation of the Italian republic in 1946.

  Perhaps more importantly, Renzi’s pledge to resign in the event of a “No” victory has raised the possibility of a protest vote against the prime minister himself—the third unelected head of government in succession—from a broad cohort of the electorate, which is thoroughly disillusioned with Italian politics. Increasingly disgruntled, these voters are sick of the corruption and self-interest of politicians, and fed up with painfully austere policies that they believe to be dictated from Brussels and Berlin, and which they hold responsible for Italy’s poor economic performance.

  The chances of a “Yes” vote in the referendum have not been improved by the slump in Renzi’s personal popularity following last year’s attempt to reform the labor market, and a series of small bank restructurings that saw retail savers “bailed-in”—forced to take losses—under new European Union banking regulations. From 40% after Renzi entered office two years ago with optimistic promises of reform, the approval rating of the prime minister’s PD party has fallen to little better than 30% today, much the same as that of the opposition 5-Star Movement. As a result, with two months to go the referendum is too close to call. Opinion polls indicate the “Yes” and “No” camps are running roughly equal, with a large proportion of voters still undecided.

  

  If Renzi loses the referendum, not only will Italy remain in policy limbo, but it is highly likely his subsequent resignation will trigger a parliamentary election. Under new election laws passed last year, if a party fails to win 40% in the first round of voting, the top two parties go through to a second round. The latest opinion polls put Renzi’s governing PD party on 31% and the 5-Star Movement on 29%, with the next two largest parties—Silvio Berlusconi’s Forza Italia and the anti-establishment Northern League—level pegging on around 13%.

  In recent years, Renzi’s PD government has represented the best hope for structural reform and economic modernization. But even if the PD party were to win a post-referendum election, there is a risk that, following Renzi’s resignation, the left wing of the party would wrest back control from the reformist center-right faction, damping hopes for further restructuring. Such a swing to the left would hardly be unique to Italy. In the UK, the militant left has captured the leadership of the main opposition Labour Party. In Spain, Podemos has split the left wing vote, and in France the ruling Socialists have come under pressure in the polls from the radical and Euroskeptic Left Party led by Jean-Luc Mélenchon.

  At the moment, an election victory for the 5-Star Movement, which identifies as neither left nor right, appears at least as probable as a second round win for the PD. The Movement has already scored significant victories in mayoral elections in Rome and Turin and enjoys increasing support across the country. Its broad stance is anti-establishment and in favor of direct participatory democracy rather than representative democracy, which it regards—with some justification in Italy—as an invitation to corruption. Beyond that, however, its platform is so vague that it is hard to pinpoint any concrete policies, except its call for a referendum on Italy’s membership of Europe’s single currency.

  Leadership vacuum

  Perhaps the biggest problem for 5-Star, however, is that it has no clear leader. Its founder and leading voice, Beppe Grillo, was found guilty of involuntary manslaughter in 1980 following a fatal road traffic accident, and so cannot run for public office under Movement rules barring candidates with criminal records. Without Grillo, the parliamentary party would be leaderless, meaning 5-Star has no obvious prime ministerial candidate even should it secure a majority in the election.

  All this means that the possibility of a “No” vote in Italy’s constitutional referendum come October or November is the biggest clear and present danger to the euro’s survival. Both 5-Star and the Northern League are promising a plebiscite on euro membership should they come to power in a post-referendum election. That does not mean a vote on Italy’s eurozone membership would lead directly to its exit—many likely “No” voters in this year’s constitutional referendum favor continued euro membership. However, a “No” vote come October would effectively be a vote against the structural reforms needed to ensure Italy’s economic growth and prosperity within the eurozone.

  In other words, in the event of a “No” vote in October, the only economic choice for Italy would be between continued stagnation, or a return to the old economic model of successive devaluations. The latter course would naturally mean exiting the eurozone anyway. But even if Italy were to take that path, it would hardly be a less painful way to restore the economy to health. Whether inside or outside the single currency, Italy still needs structural reform to ensure future growth. The only potential benefit to leaving the eurozone would be that deep devaluation of a reconstituted lira could help to ease some of the transitional pain (although it is probable the palliative effect would be more than offset by the additional economic and financial damage wreaked by an exit).

  Europe in microcosm

  Clearly investors should be concerned. Italy is the third biggest economy in the monetary union and one of its core members. Its departure would surely hasten the break-up of the whole euro project. What’s more, the political and economic tensions within Italy ahead of October’s referendum mirror those at work across the eurozone as a whole. In Italy, the wealthy north makes up the industrial heartland which drives the economy, while the south is underdeveloped and poor. There is little enthusiasm for structural reforms, and throughout the country, populist movements—which promise to tear down the self-serving political establishment—are rapidly gaining ground.

  Italy is the wider eurozone in microcosm. In the EU as a whole, progress towards creating the political and economic institutions that could ensure the success of the single currency project have been comprehensively obstructed by narrow—but deeply entrenched—national interests. This failure to advance, and the economic hardships and sense of disempowerment that have resulted, has fueled the rise of populist political parties from Greece to Finland—parties that are challenging an increasingly distrusted political elite and questioning not just the status quo, but the whole European project. If Renzi wins come October, the eurozone has fresh hope. But if he fails, Italy fails—and very likely the eurozone fails too.

  Each week in Outside the Box, John Mauldin highlights a thoughtful, provocative essay from a fellow analyst or economic expert. Some will inspire you. Some will make you uncomfortable. All will challenge you to think outside the box.

  

  

• YouTube Strips 'Politically Incorrect' Videos Of Revenue: "Controversial Subjects Like War, Tragedy"

  Submitted by Paul Joseph Watson via SHTFPlan.com,

  This article was written by Paul Joseph Watson and originally published at Infowars.com.

  SHTFPlan’s Mac Slavo Comment: This is chilling. More subtle than other forms of censorship, this Google/YouTube policy is stripping away the honest debate about some of the most important and controversial topics that are going on in our world. How can people not be allowed to discuss – or especially to criticize – the failed and flawed policies that are dragging us to war?

   

  How can it be OK for Secretaries of State and Presidents to fund ISIS and cut deals with human right violators, but not OK for YouTubers to criticize it? By cutting advertising, the mega-platform hopes that no one will dare to discuss these things, and make no mistake, it will be selectively enforced. While individuals are free to go elsewhere, this platform, like a handful of others, has dominated that vast majority of web traffic, and drive the audiences that one would hope to reach with a video. If critics and dissidents are exiled and shunned from here, where will they be free to redress their grievances and call out hypocrisy and lies?

  YouTube Declares War on Politically Incorrect Opinions

  by Paul Joseph Watson

  A new “advertiser friendly” policy introduced by YouTube will punish those who express politically incorrect opinions or dare to offend viewers by de-monetizing their content.

  The new rules have sparked an outcry from the YouTube community because they are so incredibly restrictive.

  YouTube will now retain the right to demonetize any videos that contain, “Controversial or sensitive subjects and events, including subjects related to war, political conflicts, natural disasters and tragedies, even if graphic imagery is not shown.”

  “Inappropriate language, including harassment, profanity and vulgar language,” is also being demonetized.

  This is the end game of allowing all your content to be swallowed up by social media ghettos. #YouTubeIsOverParty pic.twitter.com/ckSNa8YUmj

  — Paul Joseph Watson (@PrisonPlanet) September 1, 2016

  YouTube’s new policy will completely disincentivize YouTubers from discussing politically incorrect topics or expressing controversial opinions because they know they will be punished for doing so. Many YouTubers make a living off their channel and will therefore be walking on eggshells to avoid the company’s stringent new rules.

  The new policy bears some hallmarks of the Communist Chinese government’s “social credit score system,” whereby Internet users are punished by private companies and their peers for expressing unpopular views on social media.

  The move is primarily designed to scare away YouTubers from making anti-establishment political content, but prominent YouTubers are already reporting that videos on everything from acne solutions to tips on combating depression are being demonetized because they are not “advertiser friendly”.

  “The channels that self-identify as vulnerable by these advertising guidelines seem to be news channels covering sensitive real-world topics,”reports Kotaku.

  Prominent YouTuber Philip DeFranco responded to the controversy by vowing, “I’m not going to censor myself,” despite the fact that dozens of his videos have already been demonetized.

  Google-owned YouTube is of course a private company and can enforce any rules it likes, but with the advent of such corporations becoming so large (more powerful than countries in some cases), in addition to them insisting on being treated as a public utility, the move is a massive stab in the back for the content creators who helped build the platform in the first place.

  As Matt Drudge warned about when he appeared on the Alex Jones Show nearly a year ago, creators allowing their content to be swallowed up by social media ghettos was always going to lead to this outcome.

  “I don’t know why they’ve been successful in pushing everybody into these little ghettos, these Facebooks, these Tweets, these Instagrams,” Drudge told Jones. “This is ghetto, this is corporate; they’re taking your energy and you’re getting nothing in return.”

  The video below sums up the impact the new rules will have on YouTube unless they are reversed.

  This article was written by Paul Joseph Watson and originally published at Infowars.com.

  

  

• Police Leader Slams NFL's "Downward Spiral" After Kaepernick's "Pig Cop Socks" Stunt

  Just when you thought the Kaepernick debacle was out of the news cycle, the 49ers quarterback decided to wear socks to practice depicting cartoon pigs dressed as cops as he continues his protest of police brutality against people of color. This move – which had gone unnoticed until today – appears to have been the final straw for the executive director of one of the largest police organizations in the country.

  

  Bill Johnson, executive director of the National Association of Police Organizations (a coalition of police unions and associations from across the country), representing more than 240,000 active law enforcement officers, was enraged. As USA Today reports…

  “It’s just ridiculous that the same league that prohibits the Dallas (Cowboys) football club from honoring the slain officers in their community with their uniforms stands silent when Kaepernick is dishonoring police officers with what he’s wearing on the field,"

  (The Cowboys’ plan to use a helmet decal as a tribute to the five police officers killed in July's sniper attack was denied by the NFL, according to a published report.)

  “I think the league is in a downward spiral regarding their obligations to the public under (Commissioner) Roger Goodell," added Johnson, "and this is just another example of that."

  The NFL chose not to provide an official response until the league office had consulted the 49ers, who play the San Diego Chargers on Thursday night in their final preseason game.

  Kaepernick took to Instagram to try and provide an explanation…

  "I wore those socks, in the past, because the rogue cops that are allowed to hold positions in police departments, not only put the community in danger, but also put the cops that have the right intentions in danger by creating an environment of tension and mistrust. I have two uncles and friends who are police officers and work to protect and serve ALL people. So before those socks, which were worn before I took my public stance, are used to distract from the real issues, I wanted to address this immediately."

  But Johnson was having none of it…

  “It doesn’t seem like he’s thought through or bothered to educate himself about the way (law enforcement officers)  are out there trying to do a very difficult job, and the vast majority of the time get the job done right," Johnson said.

  And is aiming his ire at The NFL…

  “I expect more from the NFL," Johnson said. “The NFL has exhibited — it’s not just tone deafness, it seems to be an act of dislike of police, frankly."

  e can't help but wonder what Kaepernick's teammates think of all this…

  

   

  Let's just hope for his sake that his offensive lineman share his perspective or that opener against the Rams may be a long night for the controversial QB (as might tonight's Chargers game).

  Of course there is one person who is thankful for what Colin Kaepernick is doing… Ryan Lochte.

  

  

• Magical Thinking

  Submitted by Ben Hunt of Epsilon Theory

  * * *

  Duane Hall:     Can I confess something? I tell you this as an artist, I think you’ll understand. Sometimes when I’m driving … on the road at night … I see two headlights coming toward me. Fast. I have this sudden impulse to turn the wheel quickly, head-on into the oncoming car. I can anticipate the explosion. The sound of shattering glass. The … flames rising out of the flowing gasoline.
  Alvy Singer:     Right. Well, I have to — I have to go now, Duane, because I … I’m due back on planet Earth.

  “Annie Hall” (1977)

  * * *

  One of my all-time top-ten movie scenes. Of course, Duane ends up driving Alvy and Annie back to the airport that night. No one does crazy better than Christopher Walken. Except maybe the Fed’s #2, Stanley Fischer. We’re all just passengers in the backseat of the Fed-driven car.

  * * *

  Alvy Singer:    This guy goes to a psychiatrist and says, “Doc, my brother’s crazy; he thinks he’s a chicken.” And the doctor says, “Well, why don’t you turn him in?” The guy says, “I would, but I need the eggs.” Well, I guess that’s pretty much how I feel about relationships; y’know, they’re totally irrational, and crazy, and absurd … but, I guess we keep going through it because most of us … need the eggs.

  “Annie Hall” (1977)

  * * *

  We’re all passengers in the backseat of the Fed-driven car, and we all suspect that our drivers might be high-functioning lunatics, and we’re all terrified about what they might do next.

  But we need the eggs.

  * * *

  “What are the stars?” said O’Brien indifferently. “They are bits of fire a few kilometres away. We could reach them if we wanted to. Or we could blot them out. The earth is the centre of the universe. The sun and the stars go round it.”

  “For certain purposes, of course, that is not true. When we navigate the ocean, or when we predict an eclipse, we often find it convenient to assume that the earth goes round the sun and that the stars are millions upon millions of kilometres away. But what of it? Do you suppose it is beyond us to produce a dual system of astronomy? The stars can be near or distant, according as we need them. Do you suppose our mathematicians are unequal to that? Have you forgotten doublethink?”

  Winston shrank back upon the bed. Whatever he said, the swift answer crushed him like a bludgeon. And yet he knew, he knew, that he was in the right. The belief that nothing exists outside your own mind — surely there must be some way of demonstrating that it was false? Had it not been exposed long ago as a fallacy? There was even a name for it, which he had forgotten. A faint smile twitched the corners of O’Brien’s mouth as he looked down at him.

  “I told you, Winston,” he said, ‘”that metaphysics is not your strong point. The word you are trying to think of is solipsism. But you are mistaken. This is not solipsism. Collective solipsism, if you like. But that is a different thing: in fact, the opposite thing.”

  ? George Orwell, “1984” (1949)

  * * *

  As O’Brien patiently explains to Winston between torture sessions, or what we would call today “FOMC meetings”, Collective Solipsism is the voluntary abdication of empirical and independent thought. But it’s not ordinary solipsism — a pathological egocentrism where reality is entirely defined by one’s own thoughts. Instead, Collective Solipsism annihilates one’s own thoughts and replaces them with state-sponsored thoughts. Your reality is just as fake. But you’re living someone else’s fantasy.

  * * *

  Grief turns out to be a place none of us know until we reach it. … We might expect that we will be prostrate, inconsolable, crazy with loss. We do not expect to be literally crazy, cool customers who believe that their husband is about to return and need his shoes.

  In the version of grief we imagine, the model will be “healing.” A certain forward movement will prevail. The worst days will be the earliest days. We imagine that the moment to most severely test us will be the funeral, after which this hypothetical healing will take place. … We have no way of knowing that this will not be the issue.

  There was a level on which I believed that what had happened was reversible.

  ? Joan Didion, “The Year of Magical Thinking” (2005)

  * * *

  The best book I’ve ever read on the emotion of grief. Central bankers today are grieving the death of the so-called Great Moderation, and they are expressing their grief in the same way that Didion expressed hers — through magical thinking, through the pathological belief that if only the right words are said and the right thoughts are thought, then the dearly departed might walk through the front door and ask for his shoes.

  * * *

  Mr. Hilsenrath:	What kind of compromise would it take to get the FOMC to move in September? I mean, so the tradition is there’s some kind of — like you say, some kind of agreement. What would it take to get them there?
  Mr. Bullard:	Well, I have no idea, so — and it’s really — it’s really the chair’s job to fashion that. But I will say that — I’ll talk historically about the FOMC, the kinds of things that the FOMC would do. You would trade off. You would say, OK, we could hike today, but then we’ll not plan to do anything in the future. That would be one way to — one way to go about a consensus. So that often happens on the FOMC. Or vice versa. If you read the Greenspan-era transcripts, he’ll do things like, OK, we won’t go today, but we’ll kind of hint that we’re pretty sure we’re going to go next time.
  Mr. Hilsenrath:	Right.
  Mr. Bullard:	And so you get this inter-tempo kind of trade-off, and that often — that often is enough to get people to sign up.
  Mr. Hilsenrath:	So, hike today and then delay.
  Mr. Bullard:	Yeah. (Laughs.)
  Mr. Hilsenrath:	Or, no hike today and then no more delay.
  Mr. Bullard:	Yeah, yeah.
  Mr. Hilsenrath:	Something like that.
  Mr. Bullard:	Yeah, those kinds of trade-offs are, historically speaking — I’m not saying I know what Janet’s doing, because I don’t. But, historically speaking, those are the kinds of things that the FOMC has done.
  Mr. Hilsenrath:	I came up with my catchphrase for the — for the month. (Laughter.)
  Mr. Bullard:	Those are great. That’s worthy of a T-shirt. (Laughs, laughter.) You could have one on the front and one on the back.
  Ms. Torry:	Or a headline.
  Mr. Hilsenrath:	Well, that’s the St. Louis framework now, right?
  Mr. Bullard:	Yeah.
  Mr. Hilsenrath:	Hike today and then delay.
  Mr. Bullard:	Yeah. That’s what it would be, yeah.
  Mr. Hilsenrath:	But if you decide to use that, maybe you can credit — you know, include a little footnote to the Wall Street Journal.
  Mr. Bullard:	OK. (Laughs.)
  ? Wall Street Journal, “Transcript: St. Louis Fed’s James Bullard’s Interview from Jackson Hole, Wyo.” (August 27, 2016)

  * * *

  Reading this transcript made me throw up in my mouth a little bit. And Bullard is the best of the lot. At least he’s honest about the intellectual poverty about the whole FOMC interest rate-setting exercise. They’re just making it up as they go along, a hallmark of magical thinking.

  * * *

  In point of fact magicians appear to have often developed into chiefs and kings.

  ? James George Frazer, “The Golden Bough” (1890)

  * * *

  Frazer’s book on the history and anthropological foundations of magic was a revelation to me when I first read it, as it was to as disparate a group of writers and poets as Yeats, TS Elliot, Freud, Hemingway, Joyce, and … Jim Morrison.

  * * *

  Courtier T.L. — Amid all the people starving, missionaries and nurses clamoring, students rioting, and police cracking heads, His Serene Majesty went to Eritrea, where he was received by his grandson, Fleet Commander Eskinder Desta, with whom he intended to make an official cruise on the flagship Ethiopia. They could only manage to start one engine, however, and the cruise had to be called off. His Highness then moved to the French ship Protet, where he was received on board by Hiele, the well-known admiral from Marseille. The next day, in the port of Massawa, His Most Ineffable Highness raised himself for the occasion to the rank of Grand Admiral of the Imperial Fleet, and made seven cadets officers, thereby increasing our naval power. Also he summoned the wretched notables from the north who had been accused by the missionaries and nurses of speculation and stealing from the starving, and he conferred high distinctions on them to prove that they were innocent and to curb the foreign gossip and slander.

  ? Ryszard Kapuscinski, “The Emperor” (1978)

  * * *

  f you can only read one book on the end of an ancien regime and the magical thinking that ALWAYS takes place in its wake, this is it. Kapuscinski chronicles the final years of Haile Selassie’s reign in Ethiopia from the inside out, interviewing dozens of courtiers to paint a first-hand portrait of an entire society lost in the fantasy world of Collective Solipsism.

  Selassie and his Inner Party maintained the fantasy for years after it lost all connection with reality, so that a mighty fleet consisted of a single ship with a malfunctioning engine, promotions and medals were conflated with real-world power and influence, and bad people and bad ideas were constantly lauded and rewarded to keep hard questions from being asked.

  Spoiler alert: it doesn’t end well for Selassie or for Ethiopia. In the words of another famous solipsist, Louis XIV, “après moi, le deluge.” After Selassie came The Dergue. Think Pol Pot in committee form.

  The last years of Selassie’s rule are more than a parable for our times … they ARE our times.

  Magical thinking is a term of art in both clinical psychology and cultural anthropology, and it refers to the common belief among both children and “primitive” societies (yes, intentional quotation marks there to show my arched eyebrow at the word) that thinking the right thoughts or saying the right words can control the invisible forces that shape our world.

  For example, as Jean Piaget (the father of developmental psychology) noted, children from the ages of 2 to 7 tend to have very little conception of real-world causality. Tell your four-year-old son that the family dog has died, and he is likely to a) blame himself for something he did or didn’t do for “causing” the death, and b) believe that there is some combination of proper words and proper thoughts and proper actions that can make the dog come back to life. That’s magical thinking. It’s a profoundly ego-centric conception of the world, and if you’re a parent you know exactly what Piaget is talking about. Every four-year-old child is an egomaniac, in the clinical, non-judgmental sense of the word.

  It’s the same thing with what cultural anthropologist Claude Levi-Strauss called “The Savage Mind” in his groundbreaking 1962 book. Societies without a causal explanation for, say, the weather will always construct some sort of combination of words and thoughts and actions to be performed by privileged caste members like priests or kings, through which the entire society convinces itself that humans exercise some sort of control over these incredibly powerful real-world forces and that they aren’t just buffeted this way and that by the inexorable might of a big bad world that really couldn’t care less about them. In fact, that’s the literal origin of the word “inexorable”, from the Latin in (not), ex (away), orare (to pray) — something that cannot be prayed away.

  In early days of any human society, this sort of magic usually emphasizes some form of sympathetic or like-for-like object … for example, you might rub a banana-shaped crocodile tooth against a banana plant to make it bear fruit (I’m not making this up). Over time, however, the spellcasting caste and society at large convince themselves that you don’t really need actual crocodile teeth, but you can instead invoke the power of a crocodile tooth by calling it by its secret name. Maybe you need to write down that secret name using the secret language of the priests in order to make the spell work, but you definitely don’t need to go out and hunt down a real-world crocodile. It’s at this point that hunter/soldier-kings are replaced by academic/priest-kings … the pen is truly mightier than the sword, or at least writing “crocodile” carries a longer life expectancy than hunting crocodiles. Over still more time, the secret names and the secret language of the priest-kings become a vast edifice of magical thinking, an edifice that provides great comfort and stability to the entire society. Because there is nothing more important to societal stability than the belief that nature is under control. That the invisible forces of nature can, in fact, be prayed away.

  Until they can’t. Until all the banana plants die because of some rare nematode infestation in the roots, and all the secret words and secret languages and even the “old magic” of the actual crocodile teeth are useless. They were useless all along, of course, as the banana plants would have borne fruit for the past 50 years with or without the spells, but hey … until this year there was a 98% correlation between the spells and a healthy banana crop! And my VAR was really quite negligible!

  Okay, Ben, we see what you’ve done here. Yes, yes … quite droll, really … you’ve found a clever metaphor for railing against our central banker ruling class. Again. Thanks for the diversion, but now we need to get back to planet Earth. Important work to be done, and all that. Love your quotes, by the way.

  Wait! This is not a metaphor. This is not an anthropological parable for our times. This IS our times. Want to see what a magic spell looks like? Here you go:

  

  This is the Gaussian Copula spell. It’s what you write down to make sure that your AAA-rated slice of a massive bunch of mortgages pays you 6% a year with only an infinitesimal risk of default. It’s not a metaphor for a spell. It is an actual magic spell, exactly the same in form and function as the talismanic scripts written on, say, Egyptian funerary urns in 1000 BC to make sure that your body and soul get to the afterlife with only an infinitesimal risk of default.

  Secret language no one can read or understand? Check. Not really comprehensible even by most magicians? Check. Administered by a privileged caste with appropriate pomp and ceremony? Check. Reflective of an innate human desire to control invisible forces that are, in fact, uncontrollable and inexorable, like death and business cycles? Check. Highly effective in motivating human behavior and supporting status quo political institutions? Check. And mate.

  The Gaussian Copula spell wishes away the possibility of a nationwide decline in U.S. home prices (if you haven’t already, please read Felix Salmon’s 2009 Wired magazine article on the Gaussian Copula — “The Formula That Broke Wall Street” — my all-time favorite piece of financial market journalism). The magical thinking embedded in this spell is that a nationwide decline in U.S. home prices is not just unlikely, it is — literally — unthinkable. It is an incantation that generated enormous societal stability and wealth, creating out of whole cloth a belief that a $10 trillion (yes, that’s trillion with a T) asset class in residential mortgage-backed securities (RMBS) was a solid thing, a triumph of Science (why, just look at all those Greek letters and the mathematical stuff!), an example of man’s mastery over the invisible vagaries of nature.

  And then we had a nationwide decline in U.S. home prices. Which broke our world.

  Here’s another spell:

  

  This is the Taylor Rule spell. It’s what you write down to make sure that the inflation rate in your economy goes up or down the way you want it to go up or down. There are lots of other spells that go along with the Taylor Rule spell for “controlling” inflation, but it’s the main one, I’d say. This is the spell that has created a $12 trillion asset class in negative yielding sovereign debt. Because, you know, the lower interest rates go, the more you’re going to borrow and spend, and the higher inflation goes. Right? Right?

  If the Gaussian Copula is like a funerary spell, trying to assure investors that they will get to investor heaven like dead Egyptian Pharaohs were assured of getting to dead Egyptian Pharaoh heaven, the Taylor Rule is like a weather spell. When I read this from James Frazer’s The Golden Bough:

  So in Scotland witches used to raise the wind by dipping a rag in water and beating it thrice on a stone, saying:

  I knok this rag upone this stane
  To raise the wind in the divellis name,
  It sall not lye till I please againe.

  I can’t help but think of Stanley Fischer, vice-warlock of the Fed coven, saying in Jackson Hole that we need thrice interest rate raises (one last December, two more this year) to quell the inflationary winds. Or raise them. Or whatever sort of weather that Fischer is trying to manufacture. It’s really hard to tell.

  But here’s the kicker. When a spell doesn’t work, no one in the magically thinking society believes it’s because spell-casting itself doesn’t work. It means that the spell wasn’t performed properly. Either the priest-kings said the words wrong or they didn’t think the right thoughts or there’s some other invisible force that we need to propitiate first. So what always happens, and I mean “always” in the sense of This. Is. Human. Nature. and has been happening in a rhyming sense for tens of thousands of years across every human society that ever lived, is this:

  In phase 1, the priest-kings try harder. They seek out purer ingredients for their spells. They speak more loudly, more convincingly, more stridently. If two crocodile teeth were used in the past, now they use four. Or eight. It’s not just “more”, it’s “MOAR!”. Often there’s an internal purge near the end of phase 1.

  In phase 2, the priest-kings regroup and tweak the spell. Maybe instead of “targeting” (another word for “praying for”) a 2% inflation rate, we need to “target” a 4% inflation rate. Maybe we should change the magic word “inflation” to “nominal GDP growth” and see if that works any better. Sure, why not? This tweaking process has happened, it is happening now, and it will happen all the way to the bitter end. What will never happen is that the priest-kings quit. There’s always another tweak, always another word choice, always another order in which the words can be said.

  In phase 3 — and this is where we are now in the historical process, somewhere near the end of phase 2 and the beginning of phase 3 — the priest-kings are challenged by a rogue priest in their midst (rare) or an alt-priest coming out of nowhere (common). By “nowhere” I mean that the alt-priest is an Other, whether that’s a foreign religion or a foreign geography or a foreign (i.e., non-priestly) caste. The alt-priest isn’t about tweaking the spell or casting it louder. He’s about doing an entirely different spell, and he’s about accusing the incumbent priests of incompetence or worse. The alt-priest is always a populist, and populism comes easy when the incumbent spells have been failing … and failing … and failing.

  So what happens? It depends on reality. It depends on whether the banana plants get better on their own or if they die. If they get better on their own (and this happens more often than you might think), then the incumbent priest-kings remain. If the banana plants give up the ghost, then the incumbents are swept away. For future reference, this is what dead banana plants look like.

  Interestingly — and this was Frazer’s big point in The Golden Bough — even if the incumbent mode of magical thinking survives, it’s necessary for societal stability to perform a public human sacrifice of the primary incumbent priest-king. The king is dead. Long live the king. Fortunately for all involved, human sacrifice today is a lot less literal than it was during, I dunno, the heyday of the Etruscans. A little public shaming, a tearful interview with Anderson Cooper, a quiet hermitage in the form of a deanship at a small New England college … yeah, that should do the trick.

  The way this all plays out also depends on how deeply the incumbent priest-kings retreat into their fantasy world of tweaking spells and magical thinking, and that’s where I’m most concerned. The fact is that the global economy — particularly the U.S. economy and the Chinese economy — is more robust than the alt-priests tend to let on. Amazingly enough, the U.S. can still grow its way out of the massive debt we’ve taken on. I know … hard to believe. But it’s true. The power of compounding is truly inexorable, and it’s amazing what a steady 3.5% growth rate on a huge economic base can do to make manageable even trillions of dollars in debt. The rest of the developed world? Impossible to grow their way out of debt. They’re finished. Or rather, to use the lingo of my distressed debt friends, Japan and Europe ex-Germany are now “work-out situations”. But if the U.S. could just get out of its own way … if we could stop arguing about who gets to use what bathroom and start arguing about how to increase productivity (i.e., how to make technology a tool for humans doing more stuff rather than a replacement for humans doing stuff at all) … then we could actually come out of this okay.

  I know, I know … I’m a dreamer. And for all the political fragmentation and polarization reasons that I write about ad nauseam, or at least here, here, here, and here, the politics of identity are unlikely to be replaced by the politics of growth anytime soon. Not in the West, anyway. But that’s why I want to pull my hair out when I watch the Jackson Hole theatre. Guys, you’re not helping!

  I was dumbfounded by the stultifying, excruciating more-of-the-sameness that came out of Jackson Hole. Oh my god, are we really saying that the entire FOMC decision-making process comes down to whether there’s a good jobs report on Friday? Why don’t we just inspect the entrails of a goat? Are we really still arguing about one-raise-or-two when LIBOR is now pushing 90 basis points? Was there any mention — any mention at all — of LIBOR during the entire Jackson Hole meeting? Do these people, and it’s not just the central bankers themselves but all the courtiers — the journalists, the academics, the hangers-on — do they even recognize that a world exists outside of their imaginations and theories? Answer: NO.

  Yep, at first I was disappointed in them. But on reflection I became more and more disappointed in us.

  See, the problem isn’t with the Fed. They’re going to do what solipsistic, magical thinking priest-kings have done for ten thousand years … more of THAT. More solipsism. More magical thinking. More 4 year old egomaniacal determination that their spell casting efforts are the ONLY thing that stand between us and utter ruin.

  No, the bigger problem is with us. The bigger problem is that we cannot imagine a solution for our current economic and political problems that does not rely on greater and greater state-directed spell casting. Monetary policy spells not working? Well, golly, I guess our ONLY alternative is to try some fiscal policy spells. Really? That’s the best we can come up with? I understand that this is what the courtiers are going to say. But I expect more from the rest of us. I expect more from myself.

  Look, I get it. To riff on Woody Allen’s famous joke, we need the eggs. We need a stock market that goes up, not down. We need financial asset price inflation. We need the eggs so badly that we’re willing to support the magical thinking crew and smile at their courtiers even though we think they’re totally out of touch with reality. We’ve become so used to getting our eggs delivered on time and without fail that our first, second, and third responses are to ask for more magical thinking from the incumbent priest-kings, not less.

  This is a dangerous, myopic game. Because we will get what we ask for. We will get more magical thinking. Only it won’t come just from the status quo magicians. It will also come from the alt-priests, some of whom will represent the absolute worst impulses of humanity. There are really bad ideas lurking on the wings today — there always are — but these really bad ideas about how human society should be organized always resurface and grow more powerful at times like this. Because it’s the old magic, an old magic that the human animal is hard-wired to respond to.

  Maybe we’ll get lucky. Maybe the banana plants of global growth will turn green again, and we can have a grand celebration of the particular variant of the policy spell that was coincidentally cast at the same time. That could happen. As Otto von Bismarck, the Iron Chancellor of 19^th century Europe supposedly said, “there is a special providence for children, fools, and the United States of America.” Any portfolio manager with long enough tenure knows what it’s like to be bailed out by the market, and it’s a beautiful thing. Now we just need that to happen on a much larger scale.

  But we should do better than just trust to luck. I’m not saying that we have to deny our human nature and stop believing in the act of spell-casting itself. I’m not (that) delusional. What I’m saying is that the more we embrace and encourage state-directed magical thinking, whether it’s of the monetary or fiscal policy sort, what we are actually doing is opening the city gates to the old evil magic and the alt-priests of fascism and totalitarianism. We don’t need the eggs that badly. What I’m saying is that we need to think less about Scottish witchcraft, a la Macbeth and James Frazer and Stanley Fischer, and more about the Scottish Enlightenment, a la David Hume and Adam Smith and Alexander Hamilton. What I’m saying is that we need to focus on empiricism and on what works in the real world, not theory and what “works” as an equation. What I’m saying is that usually the better course of state-directed action is to do less, not more, and the better course of individually-directed action is to do more, not less. What I’m saying is that the old good magic of small-l liberalism and technological innovation in the service of man rather than the replacement of man is pretty darn powerful itself, and the stories still inspire. Let’s embrace and encourage THAT as we make our way through what is still a largely inexorable world.

  It matters whether or not we call things by their proper names, because the words and the spells motivate human behavior like nothing else. It matters whether or not we sleepwalk our way through our own fin de siècle, because the really bad people and the really bad ideas that periodically wreck our world can’t be wished away. It matters whether or not we become courtiers ourselves, because the courtiers always fall the farthest. The problem with magical thinking run amok and its perpetuation of a fantasy world is that sooner or later the dream of the delusional king becomes a real world nightmare for real world people. It’s time to wake up.

  

  

• Ultra-Violent Venezuelan Gangs Ignore Maduro Crackdown: "Better To Fight Police, Than Each Other"

  Amid threats of violence, opponents of Venezuelan President Nicolas Maduro flooded the streets of Caracas today (2 million strong) in a major test of their strength and the government's ability to tolerate growing dissent. However, for a nation that is forced to slaughter stallions for meat, line up for toilet paper, and dying from lack of simple medicines, Reuters reports that there is another destabilizing factor – ultra-violent street gangs are thriving.

  As Fox News reports, the Thursday march called the "taking of Caracas" aimed to pressure electoral authorities to allow a recall referendum against Maduro this year.

  The buildup to the protest has been tense with Maduro's government jailing several prominent activists, deploying security forces across the city and warning of bloodshed.

   

  

   

  Maduro said Tuesday that his opponents hope violence during the march will pave the way for a coup such as the one that briefly toppled his late predecessor Hugo Chavez in 2002. He said authorities had arrested people possessing military fatigues and C4 explosives, and who had plans to fire upon the crowds dressed as national guard members. He didn't say who he believed was behind the alleged coup plan.

   

  "If they're coming with coups, ambushes and political violence, the revolutionary will provide an uncommon and overwhelming response," Maduro told supporters.

   

  Rather than dampening Venezuelans' enthusiasm, the "war-like" rhetoric appears to be energizing the opposition, said Dimitris Pantoulas, a political analyst from Caracas.

  Quite a crowd…Maduro claims *VENEZUELA OPPOSITION MARCH HAD 25K-30K PROTESTERS, MADURO SAYS… looks like a lot more than that!...

  Impresionante marcha! Cuando a un pueblo le han quitado todo, lo único que le queda es su valor! Arriba #Venezuela pic.twitter.com/O61xQnACMA

  — Cynthia Viteri (@CynthiaViteri6) September 1, 2016

  Señores @webnotitarde por qué no ponen unas foticos del paisaje de Caracas hoy como éstas por ejemplo?? pic.twitter.com/5giNwzWNEO

  — LAURENTZI ODRIOZOLA (@LAURENTZI) September 1, 2016

   

  Maduro had expelled may foreign journalists hoping that would minimize coverage but 2 million people turned out in Caracas today – we don't think his plan is working.

  But as AP notes, the government plans a counter protest on Thursday, but Pantoulas said authorities will have a tougher time rallying supporters among the poor amid 700 percent inflation blamed for growing hunger and a collapse in wages.

  "I don't know that the poor will join opposition march, but they're not going to partake in the counter-protest," said Pantoulas. "The fact that the poor barrios won't be supporting Chavismo is enough to damage the government."

   

  Also invigorating the opposition is a government crackdown.

   

  Authorities over the weekend moved a prominent opposition leader, former San Cristobal Mayor Daniel Ceballos, from house arrest back to prison while he awaits trial on civil rebellion charges stemming from the 2014 protests. Authorities said he was plotting to flee and carry out violence during the protests.

   

  Two other activists, Yon Goicoechea and Carlos Melo, were also detained this week, with a top socialist leader accusing Goicoechea of carrying explosives.

   

  There have been more subtle threats as well. Government workers say they've suffered retaliation for signing petitions seeking Maduro's removal and the opposition-leaning newspaper El Nacional said thugs threw excrement and Molotov cocktails at its building Tuesday.

   

  The U.S. State Department accused Maduro of trying to bully Venezuelans from taking part in the march.

  But as police unleash tear gas to quell the protests…

  

   

  Maduro faces more problems than just the average 'Juan' Venezuelan, as Reuters reports, Venezuela's socialist economy is suffering triple-digit inflation, severe shortages and a third year of recession, but ultra-violent street gangs have found strength and profit in the chaos.

  They are teaming up with former rivals and buying heavier weapons to control ever-larger territory in the capital and beyond, the criminals, the government and criminologists say.

   

  "The majority of the other slums are our friends. It's not only us anymore, now we do business with each other," said the leader, sat at a desk with his face hidden by a black ski mask. He would only give his name as Anderson.

   

  He said rampant inflation is forcing the gang to be even more active as it seeks to cover sky-rocketing costs for weapons, drugs and even food.

   

  "We used to do one job a month. Right now we are doing them every week," Anderson said, before a phone pinged with news of a drugs delivery. Venezuela's economy suffered 181 percent inflation and shrank nearly 6 percent last year, and is expected to perform worse in 2016. Basic products are scarce and food riots regular.

  However, unlike a growing array of other armed groups in Venezuela – which include pro-government gangs and some small rural guerrilla and right-wing paramilitary forces – the street gangs are largely apolitical.

  But as their reach grows, they are another destabilizing factor for President Nicolas Maduro, who is already struggling to govern a nation that is running short of food and medicines despite vast oil reserves and has one of the world's highest murder rates.

   

  He has responded with aggressive raids by soldiers and police, a policy supported by many people sick of criminals but which rights groups say leads to executions and arbitrary arrests. Some criminologists warn the raids encourage gangs to seek out ever heavier weaponry in defense.

   

  While some gangs are teaming up, there are still turf battles and internal disputes, and Venezuela is seeing more of the spectacular violence associated with Mexico's more powerful drug cartels. Police showed Reuters images of bodies left mutilated, hanging from bridges, or beheaded.

  Maduro says crime is part of a conspiracy by the opposition and the United States. His opponents blame his policies and armed pro-government "collectives," which have multiplied in the past 5 years.

  Maduro has responded with tough raids that send soldiers into poor neighborhoods in so-called People's Liberation Operations, or OLPs, emulating the iron-fisted strategy used to fight gangs in Central America and Brazil.

   

  

   

  "It is our turn for combat," Maduro said at the event, where he gave some police a 50 percent wage hike in a bid to counter the dwindling value of their salaries.

   

  Venezuela's leading human rights group Provea said OLPs contributed to 270 extrajudicial killings at the hands of security forces in 2015, the highest number since 1992.

   

  The operations also encourage gang leaders to unite and seek more powerful weapons, said Keymer Avila, part of a group of Venezuelan and foreign academics researching crime in the country.

  At his safe house, one gang leader confirmed that.

  "It's better to work together than be enemies. It's better to make war with the police than with each other."

  But apart from that – socialist utopia!!

  

  

• "Life-Threatening" Hurricane Hermine To Hit Florida, Head For Tri-State

  For the first time in over a decade a hurricane is expected to make landfall in Florida. Winds from strengthening Hurricane Hermine lashed at Florida's northern Gulf Coast, forcing residents to evacuate some coastal areas and stock up on provisions ahead of what the state's governor warned would be a lethal storm. Forecasters are also warning that Hermine poses a Labor Day weekend threat to states along the northern Atlantic Coast that are home to tens of millions of people.

  

  As Reuters reports, Hermine became the fourth hurricane of the 2016 season around midafternoon when its sustained winds reached 75 mph (120 kph). Located about 85 miles (135 km) south of Apalachicola, Florida at 5 p.m., it was expected to make landfall early on Friday.

  

  h/t @Mark_Baden

   

  Hermine could dump as much as 20 inches (51 cm) of rain in some parts of the state. Ocean storm surge could swell as high as 12 feet (3.6 meters). Isolated tornadoes were forecast.

   

  

   

  The governors of Georgia and North Carolina on Thursday declared emergencies in affected regions. In South Carolina, the low-lying coastal city of Charleston was handing out sandbags.

  Florida Governor Rick Scott declared a state of emergency in 51 of Florida's 67 counties, and at least 20 counties closed schools. Mandatory evacuations were ordered in parts of five counties in northwestern Florida and voluntary evacuations were in place in at least three more counties.

  "This is life threatening," Scott told reporters on Thursday afternoon. "You can rebuild a home. You can rebuild property. You cannot rebuild a life."

   

  In coastal Franklin County, people on barrier islands and low-lying areas on the shore were being evacuated.

   

  

   

  "Those on higher ground are stocking up and hunkering down," said Pamela Brownlee, the county's director of emergency management.

   

  

   

  "If we get hit with a real storm head on, all the provisions you can make aren't going to matter out here," he said, ready to use a chainsaw to cut beams on covered slips if rising water pushed boats dangerously close to the roof. "It'd be pretty catastrophic."

   

  On its current path, the storm also could dump as much as 10 inches (25 cm) of rain on coastal areas of Georgia, which was under a tropical storm watch, and the Carolinas. Forecasters warned of "life-threatening" floods and flash floods there.

  Still, many people in Florida, whose population has swelled since the last hurricane struck, saw Hermine less as a threat than entertainment.

  While the impact of Wilma in 2005 seems long-forgotten by many in Florida, the devastation of Sandy on the Tri-State area is fresh in many people's minds and residents in New York, New Jersey and Connecticut — particularly those who live along the coastline — are taking precautions against Hermine. As ABC7NY reports, the calm before the storm is the best time to prepare for the worst, officials say, and crews in Hempstead's Point Lookout spent the day tying down boats to docks and building sand dunes along the beach to protect from high winds and high tides. It's just a small part of what's being done in preparation for Hermine.

  "We've got chainsaws being oiled and made sure they're operational, should we have major trees coming down to block streets," Hempstead Town Supervisor Anthony Santino said. "We have again vehicles being fueled up. We have all of the boats on various town marinas being secured. We are moving non-essential equipment to higher ground."

   

  "We've met with the Red Cross, we've reviewed our sheltering plan," Nassau County Executive Ed Mangano said. "We drive the coastal evacuation routes to review whether there's any construction, whether there's any debris in the storm drains, so we can alert the public if there's any hazard that was unexpected when we advised residents to utilize the coastal evacuation routes."

   

  …

   

  Along the Jersey shore, some towns were beginning to discuss preparations for the days ahead, while others were taking a wait-and-see approach.

   

  Officials in Long Branch held a meeting Thursday. "We're just on standby right now," emergency management coordinator and beach operations director Stanley Dziuba said. "We have our hardware vehicles prepared, ready to go. We have our shelters in place, and we're just going through our checklist, making sure everything is ready to go."

   

  …

   

  "Right now, we're not expecting anything really major," he said. "But things change. Every five, 10 minutes, it seems like we get different updates."

   

  …

   

  "We're expecting a lot of energy happening," assistant beach manager Susana Markson said. "I know they're talking about the cone of uncertainty coming. We're not rally sure what edge of the storm we're going to get, or anything. We're prepared for any possibility."

   

  Seaside Heights emergency management officials are still discussing whether or not they'll erect temporary sand dunes, saying decisions like that will likely be made further into the weekend.

  In New York state, Gov. Andrew Cuomo said he has directed the State Office of Emergency Management to closely monitor the storm’s path and for state agencies to be prepared.

  “If the storm continues far enough up the coast, there is a possibility downstate New York may experience high rip currents, heavy rain and strong winds this Labor Day weekend,” Cuomo said. “I urge all New Yorkers, especially those in the downstate region, to be prepared, check local weather reports, and use NY Alert to stay updated on the storm’s progress throughout the weekend.”

  Follow Hermine in real-time… (click image below)

  

   

  

  

• The Transformation Of Wall Street In Just Two Photos: The UBS Trading Floor In 2008 And 2016

  Back in its heyday, the trading floor in UBS’ Stamford office, once the largest in the world and big enough to hold 23 basketball courts, was a symbol of everything that went right on Wall Street. Packed with traders, it was a non-stop cacophony of screaming, constant motion and furious energy – to an outsider sheer chaos, which somehow ended up generating millions in profits for the bank every day. Some time around 2008, just before the financial crisis hit, it looked like this.

  

   

  Fast forward 8 years later, when all that’s left of the UBS trading floor, and the legacy of that version of Wall Street, is this.

  

  h/t @anilvohra69

   

  

  

• Albert Edwards Sees Shades Of 2007 In The Biggest Risk Facing The US Consumer

  One month ago, when the first Q2 GDP estimate was released, we reported that if one strips away the consumer part of the economy, the US was already in a recession. 

  

  Overnight, In his latest letter SocGen’s Albert Edwards picks up on this topic, but first dispenses with the usual warning, saying that “the US economy is on crutches, and they are about to be kicked away” adding that “US economic growth is weak yet the labour market is tight. This juxtaposition is keeping the Fed in a quandary on whether to raise interest rates. As it stands it probably will, or will not, depending on which way the wind (data) is blowing that day!”

  After the requisite “flip-flop Fed watching”, Albert then proceeds to agree with what we said recently, namely that “the only thing keeping the US out of recession is the US consumer (see chart below). It is difficult to say consumption is driving the economy forward – rather it is like a woodwormridden crutch creaking under the strain of holding up a deadweight economy. This recovery ? the fourth longest in history – is surely nearing its end.”

  

  While so far the consumer remains resilient, and in fact in the second quarter, US personal spending unexpectedly soared to near cycle highs just as the rest of the economy dipped in a recession…

   

  

  … this pace of consumption, of which Obamacare has been a significant recipient, will hardly sustain itself. According to Edwards, his “hypothesis that a US profits recession will lead to a collapse in business investment and take the economy into recession seems to be playing out. If consumption stalls then we really are in trouble, for the next devastating phase of the secular valuation bear market in equities will kick in ? much to the shock of both investors and the Fed.”

  But before we drill down into the consumer part, first a quick look into why the SocGen strategist so confident that the non-consumer part of the economy is about to tap out. For that, he present the following historical parallel:

  The year 1986 has been the only case where a business investment recession did not cause an outright US GDP recession. Why? Because the economy had recently emerged from 1982 recession and it was growing very strongly indeed when the hit to capital spending came. In addition, households were leveraging up aggressively, which boosted consumer spending. Neither of these things is the case now. Indeed the current consumer/GDP conjuncture has echoes of Q1 2007 (circled in the chart below), when robust consumption only temporarily offset extreme weakness in the data elsewhere. But within six months, by November 2007, the NBER recorded that the economy had fallen into outright recession.

  

  So going back to the consumer, what does Edwards believes will catalyze the next move in spending lower? Well, besides today’s abysmal auto sales numbers
  (which Edwards did not have in front of him when he wrote his note), he brings up another point we raised several months, namely that “The Fed Has A Problem: Inflation May Hit 3.5% By December Due To Gas Price “Base Effect“.” Indeed, now that we have anniversaried the low point in 2015’s energy prices, it’s all uphill from here for CPI prints. This is how Edwards puts it:

  One key and imminent risk for the consumer is a rapid pick-up in headline CPI inflation as the weak oil price of H2 last year starts to drop out of the yoy calculations. Headline CPI inflation is set to rise rapidly from the 1% where it has hovered for the past six months and to converge with core CPI, standing at 2¼%. That will sap some 1¼% from real personal disposable income growth, which will decelerate rapidly, removing the key prop for recent moderate robust consumption growth. This is the economy?s crutch being kicked away.

  

  His conclusion:

  In this likely outturn the increasingly tight labour market might mean the household sector can respond to the squeeze in real income growth by pushing up wages, which have been accelerating at a moderate but consistent pace over the last couple of years. An acceleration in wages might help offset the impact of slowing employment growth, as the pain in the corporate sector ripples over into all categories of their spending – hence nominal household disposable income growth (the dotted line in the chart above), may not slow so sharply. But with the Fed confronted with a traditional end-of-cycle, tight labour market with accelerating headline CPI and wages, the pressure to hike rates aggressively will be fierce. Perhaps the next recession will be of the normal, ?made in Washington? variety after all.

  To be sure, rising wages (something corporations have only granted to the lowest paid workers as shown earlier this week) may delay the day of reckoning, but it opens up a whole new can of worms, because as Fitch warned just today in a report titled “Sharp US Wage Shock Could Cause Global Tightening; Major Slowdown“, a domestic US wage cost shock could lead to substantial financial tightening, which would result in a significant slowdown in the world economy. In the report Fitch economists explore the consequences of a much faster-than-expected pick-up in US wage growth and the impact on economic growth, Fed policy and bond yields as well as international macroeconomic spillovers.

  “Fitch’s baseline forecast is for US wage growth to pick up gradually, which would support household incomes and help bring inflation back to target as the Fed gradually normalises policy, but a very sharp increase in US wage inflation would be problematic,” said Brian Coulton, Chief Economist, Fitch. “A surge in US wage inflation would prompt the Fed to hike rates much more quickly than expected and threaten the lower-for-longer market consensus on interest rates that underpins current very low bond yields.”

  As Fitch concludes:

  “The benefits of higher wages on US consumer spending would be quite quickly offset by up-front rate hikes from the Fed. Fitch’s simulations suggest the Fed would react by raising interest rates by an additional 150bps (relative to baseline) over the course of six months. In combination with the impact of higher wage costs and bond yields, this would see growth 1.4pps lower than baseline in the US in 2017, at 0.6%. About half the impact on US growth stems from the Fed’s reaction and higher wage costs and half from higher bond yields.”

  Or, in other words, a recession is coming if wages remain low, but should wages rise too fast, the recession will come even faster. Pick your poison.

  

  

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• Europe Reels As A New Wave Of Refugees Begins To Flood The Continent

  Angela Merkel, and Europe in general, had hoped they had managed to move beyond the unprecedented wave of refugees unleashed on the content in 2015 courtesy of the German Chancellor’s open door policy, with the fragile March 2016 refugee deal signed with Turkey. Sadly – for both Europeans who have suffered a surge in terrorist attacks as a result and for Merkel, whose approval rating has subsequently plunged – Europe is once buckling under the weight of a new wave of migrants.

  According to Reuters, some 3000 migrants were saved in the Strait of Sicily in 30 separate rescue missions just on Tuesday, the Italian coastguard said, bringing the total to almost 10,000 in two days and marking a sharp acceleration in refugee arrivals in Italy. The migrants were packed on board dozens of boats, many of them rubber dinghies that become dangerously unstable in high seas. No details were immediately available on their nationalities.

  Data from the International Organization for Migration released on Friday said around 105,000 migrants had reached Italy by boat in 2016, many of them setting sail from Libya. An estimated 2,726 men, women and children have died over the same period trying to make the journey.

  
  A Red Cross member carries a child as migrants disembark from the Italian
  Navy vessel Sfinge in the Sicilian harbour of Pozzallo, southern Italy

  The reason for the surge are favorable weather conditions, which this week have seen an increase in boats setting sail. Some 1,100 migrants were picked up on Sunday and 6,500 on Monday, in one of the largest influxes of refugees in a single day so far this year. Italy has been on the front line of Europe’s migrant crisis for three years, and more than 400,000 have successfully made the voyage to Italy from North Africa since the beginning of 2014, fleeing violence and poverty.  So far this year, some 116,000 migrants—many of them from sub-Saharan Africa—have arrived in Italy. That compares with 154,000 for all of 2015, a phenomenon overshadowed by the surge of migrants arriving in Greece via Turkey.

  The closing of European borders to the migrants means that, unlike, in previous years, the vast majority are stuck in Italy, unable to reach Europe’s north as they had hoped. Italian reception centers now host 145,000 migrants, according to the interior ministry in Rome.

  And while North African refugees are fleeing the chaos in their native lands by boat, hoping to reach Italy in a perilous voyage across the Mediterranean, Greece is once again the target of those refugees from Syria who find themselves in Turkey as an intermediate step.

  According to the WSJ, the number of people landing on Greek islands has risen to about 100 a day in August, up from fewer than 50 a day in May and June. About 460 people landed on Greek islands on Monday, a number Greece hasn’t experienced since early April.

  The traffic is still far below daily peaks of 6,800 in October last year. But the rising numbers are making Greek and EU officials worried that the fragile deal with Turkey—aimed at returning almost all who land on Greek shores—could break down.

  

  It could get much worse: as we have reported over the past few months, as Turkish officials, angered by what they see as a lack of European support for Turkish democracy as Ankara roots out alleged supporters of July’s failed coup, have threatened to scuttle the migration deal if the EU doesn’t grant Turkish citizens visa-free travel to the bloc by October. Turkey says it was promised the concession.

  “We cannot independently verify an uptick, but even if it were true it is related to the increasingly popular view among illegal immigrants that the Turkey-EU agreement is on the brink of collapse and that there will be no legal mechanism to return them to Turkey once they cross the Aegean Sea,” a senior Turkish official said. “If the European Union fails to honor its agreement with Turkey, no matter how strong the enforcement, there will be greater incentives for more migrants to risk their lives at sea.”

  As we have further said, Turkey continues to have most of the leverage, something the WSJ confirms: “The tough talk from Turkey has alarmed Athens, which knows that any sharp increase in migration would mainly affect Greece. “We will be tested very hard if the agreement with Turkey collapses,” Greek Migration Minister Yiannis Mouzalas said this month.”

  Greek officials say they suspect the recent uptick in migrant arrivals partly reflects a manpower issue: Numerous Turkish military and police personnel were suspended as part of the Turkish government’s postcoup crackdown. Turkey says it is assiduously keeping up its end of the migrant deal and that its security forces’ operational ability hasn’t been hampered in the wake of the coup attempt.

   

  The closure of the Balkan migration route into the heart of Europe earlier this year has left nearly 60,000 refugees and other migrants trapped in Greece. Mr. Mouzalas said that if it weren’t for the deal with Turkey, which has slowed arrivals since March, 130,000 to 180,000 more people might be stuck in Greece.

  Unlike in Italy, in smaller, poorer Greece, the numbers arriving on Aegean islands don’t need to reach 2015’s high levels to cause problems. The five islands that receive most of the newcomers—Lesbos, Leros, Chios, Kos and Samos—are already struggling.

  Chios is currently sheltering about 3,300 migrants and refugees, three times its camp’s capacity. In the camp, built around an abandoned aluminum factory, migrants live in overcrowded containers with unsanitary conditions. Six to eight people, often from two different families, typically share a room designed for four. “We live like animals here,” says Wassim Omar, a 34-year-old English teacher from Syria, as he waits in the line for his family’s dinner of potatoes, olives and bread.

  Many complain there isn’t enough food or access to doctors. Women say they and their children are afraid to leave their rooms after dark, as fights often break out among migrants of different nationalities.

  Because of the overflow, many stranded on Chios are sleeping in two open camps closer to the island’s port. The razor fence around the official center also has holes in it, allowing people to walk in and out. Locals have complained of a surge in thefts and damage to their crops. To ease the situation on the islands, the Greek government will transfer a few hundred people to a new camp on the mainland, starting from Chios. Officials fear, though, that the move may encourage more people to come.

  Vournous, the mayor, says he fears tensions between locals and migrants could easily escalate.

  What is probably most vexing for the Greeks and the Italians, is that the influx of refugees was unleashed as a result of German, and specifically Angela Merkel, policies. However, as a result of border closures, Germany has largely succeeded in isolating itself from the refugee flow. The losers, once again, Europe’s poorest, peripheral nations.

  

  

• Three Hanjin Ships Stranded Off California Coast

  Earlier today we reported that in an surprising and abrupt development, one which may lead to ripple effects on global supply-chains and worldwide “just-in-time” logistics, the biggest South Korean shipping company and the world’s 7th largest container shipper, Hanjin Shipping, filed for bankruptcy leaving its assets frozen as ports from China to Spain denied access to its vessels.

   

  

  It did not take long for the fallout from this historic bankruptcy – the largest ever for a container shipper in terms of capacity –  to reach the US, because as Bloomberg reported moments ago, at least three Hanjin ships are currently stranded off the California coast.

  • STRANDED SHIPS INBOUND FROM KOREA, CHINA, JAPAN: OFFICIAL
  • THREE HANJIN CONTAINER SHIPS STRANDED OFF CALIFORNIA COAST
  • MARINE EXCHANGE OF S. CALIFORNIA OFFICIAL COMMENTS ON SHIPS

  While we await details on just how this asset “freeze” will be resolved, we wonder what is the cargo on these ships, where it was meant to be delivered to, and just how much US production will be bottlenecked as a result of missing key supply-chain components. And then, we extrapolate that to the dozens of Hanjin ships around the globe.

  

  

• Half of Corporate America losing BILLIONS in Forex for no reason

  Here’s the big irony for the markets.  As we explain in Splitting Pennies book, Forex is the largest market in the world and the least understood.  Corporate America certainly doesn’t understand Forex.  Well, according to this report, about 50% do:

  Forty-eight percent of nonfinancial companies listed on U.S. stock exchanges remained exposed to volatility in foreign exchange rates, commodity prices and interest rates in 2012 because they did not hedge them, according to a new study by Chatham Financial.  The interest-rate and currency risk adviser studied a sample of 1,075 companies ranging from $500 million to $20 billion in revenue. The nearly half that did not use financial instruments to hedge their exposures demurred despite the threat the risks posed to both the balance sheets and reported earnings (see chart at bottom). “That was surprising, knowing the pressure senior management teams and treasury feel around identifying ways to reduce risk to factors within their control so business can focus on other areas,”Amol Dhargalkar, managing director for corporate advisory at Chatham, says.

  Many analysts have pointed to the fact that the new excuse of “Currency Headwinds” (accountant code word for “Don’t Understand Forex”) to define earnings in 2016:

  Companies that do business outside of the USA have substantial forex exposure. This exposure can be an asset, if properly managed – but often it is a liability. Recently, the trend in corporate accounting has been to blame “currency headwinds” which can be a good excuse for up to $10 billion in losses. Did these executives ever hear about hedging?

  So what does this data mean?  It means that half of Corporate America is speculating BIG in Forex.  Not hedging, when you have FX positions, is speculating.  For example, imagine you’re a big US multinational like McDonalds (MCD).  McDonalds (MCD) is a great example because they are one of the companies that lives off their FX hedges.  Without FX hedging, it’s questionable if MCD could survive, because more than 60% of their revenue comes from non-US Dollar (USD).  That means their revenue, without FX hedging, would be nearly an exact function of the FX markets (which is the case for these companies that don’t hedge).  Companies that lose billions of dollars due to ‘currency headwinds’ – they are losing huge in Forex.  

  Here’s the irony.  Pension Funds and many institutions are reluctant to invest in Forex strategies because they are ‘risky’.  But they invest in the stock of companies that lose billions in Forex!  And that’s OK.  Well, everyone is losing, so why not us too.  Heck, I don’t want to be singled out as the one state pension fund that’s actually MAKING money for our retirees, that might cause me to get promoted, or lose my job.  

  Why don’t these companies hedge you ask?  Isn’t it their fiduciary duty to their shareholders?  Here’s one perspective from PWC:

  When a publicly held company engaged in a multi-billion dollar investment in an overseas location
  recently, the firm considered using a hedge — or swap — contract to reduce the risk that a big currency
  swing would impact costs and financial results. The plan was sound financially. Yet, management had
  concerns about the reaction of investors to this approach and decided to drop the hedging plan, says
  Chris Rhodes, accounting advisory services partner at PricewaterhouseCoopers (PwC).  Why? Because the CFO determined that,
  although the hedge would protect all the cash
  spent in the foreign jurisdiction against currency
  exposure, the cost of capital — in this case
  borrowing in external markets — “would be
  negatively impacted by the inability of some
  analysts to understand the reporting issues
  involved,” Rhodes explains. “The concern is that,
  although many analysts would immediately grasp
  the sophisticated currency-hedging procedures
  that were key to the plan, others might not.”

  So you see, according to this perspective, CFOs understand Forex, but they understand that others such as analysts don’t understand, and think that there’s a negative perception problem, to closing a big gaping hole in their FX exposure.

  One year in the 90’s, Intel Corporation made more money on their FX positions than they did selling processors.  Not all of Corporate America is completely stupid.  There are some savvy FX managers out there, that do a great job.  But for the other half, one has to wonder if FX volatility will finally drive these unhedged companies out of business.

  Here’s what you see on every street corner in Russia:

  

  At least, some humans are prepared for potential financial catastrophe, even if it’s as simple as FX volatility.

  To learn more about Forex Hedging, checkout Splitting Pennies – your pocket guide designed to make you an instant Forex Genius!  Or checkout Fortress Capital Forex Hedging.

  

  

• Paul Craig Roberts Asks "Can Americans Overthrow The Evil That Rules Them?"

  Authored by Paul Craig Roberts,

  Paul Wolfowitz and the lies that he told in the high government positions that he held are responsible for a massive number of deaths and massive destruction in seven countries. Wolfowitz has announced his vote for Hillary Clinton. Does this make you feel reassured?

  The real surprise would have been Wolfowitz’s announcement in favor of Donald Trump. So why was what was expected news?

  Trump has said that he doesn’t see any future in the conflict Washington has initiated with Russia, and Trump questions the point of NATO’s continuing existence. These peaceful attitudes make Trump into a “national security risk” according to Wolfowitz. What Wolfowitz means is that a peace candidate is a threat to Wolfowitz’s doctrine of US world hegemony. In the crazed mind of Wolfowitz and the neoconservatives, America is not safe unless it rules the world.

  Hillary is a warmonger, perhaps the ultimate and last one if she becomes president, as the combination of her hubris and incompetence is likely to result in World War 3. On July 3, 2015, Hillary declared: “I want the Iranians to know that if I’m president, we will attack Iran. . . . we would be able to totally obliterate them.” http://www.globalresearch.ca/hillary-clinton-if-im-president-we-will-attack-iran/5460484?print=1 The crazed Hillary went on from this to declare the President of Russia to be “the new Hitler.” Little doubt she thinks she can obliterate Russia also.

  Hillary is the one who brought zionist neocon Victoria Nuland into the State Department to oversee the US coup in Ukraine in order to create more propaganda against Russia and force Washington’s European vassals to impose sanctions and place military bases on Russia’s borders, thus provoking a nuclear power and raising dangerous tensions.

  This fits in perfectly with Wolfowitz’s intention. As Wolfowitz is Hillary’s likely Secretary of Defense, the two together mean World War 3.

  When the Soviet Union collapsed, Wolfowitz, then a high Pentagon official, penned the Wolfowitz doctrine. The doctrine states that the principal goal of US foreign policy is to prevent the rise of other countries that could serve as constraints on US unilateralism. This means Russia and China,  The combination of Hillary with Wolfowitz should scare everyone in the entire world. The prospect of nuclear weapons being in such crazed hands as those of Hillary and Wolfowitz is the most alarming though imaginable.

  The question is whether Hillary can be elected in the face of her violations of national security rules, for which she received a pass from corrupt Obama, and her heavily documented self-dealings that have produced a Clinton private fortune of $120 million and $1,600 million in their foundation. It is completely clear that the Clintons use public office for their private aggrandizement. Is this what Americans want? Two people who become even more rich as the world is led into nuclear war?

  But with electronic voting machines, the question will not be decided by what Amerians want, but by how the electronic machines are programmed to report the vote. The US has already had elections in which the exit polls, always a reliable indicator of the winner prior to the appearance of electronic voting machines, indicated a different winner than the electronic voting machines produced. The secrecy of how the voting machines are programmed is protected by “proprietary software.” The machines have no paper trails, precluding vote recounts.

  As both political establishments are fiercely opposed to Trump, how do you think the machines will be programmed? Indeed, the media is so opposed to Trump, the question is whether there will be exit polls and if there are, will they be misreported?

  Republican operatives, not Republican voters, are all in a huff over their allegations that Trump is costing the Republicans votes. How can this be when Republican voters chose Trump over other candidates? Aren’t the Republican operatives saying that they, instead of the voters, should choose the Republican candidate?

  If so, they are just like the Democrats. Some years ago the Democrat establishment created “super delegates” who are not chosen by voters. Enough “super delegates” were created in order to give the Party establishment the ability to over-ride the voters choice of presidential candidate. That it was the Democrats—allegedly the party of the people—who first took the choice away from the people is astonishing. Much information indicates that Bernie Sanders actually won the Democratic presidential nomination but was denied it by vote fraud and “super delegates.”

  This is politics in America—totally corrupt. Chris Hedges might be right: nothing can change without revolution.

  The demonization of Trump by the presstitutes is proof that Trump, despite his wealth, is regarded by the Oligarchs who comprise the One Percent as a threat to their agendas. The Oligarchs, not Trump, own or control the media. So the presstitute demonization of Trump is complete proof that he is the candidate to elect. The oligarchs who oppress us hate Trump, so the oppressed American people should support Trump.

  The presstitute demonization of Trump did not work in the Republican primaries. Is it working in the presidential election? We don’t know, because the polls are reported by the presstitutes, not by Trump.

  If the demonization does not work, and the election has to be stolen from Trump by the electronic machines, the consequence will be to radicalize Americans, something long overdue. Perhaps the expectation of this development is the reason all federal agencies, even the post office and Social Security, have acquired arms and ammunition, and Cheney’s firm Halliburton was paid $385,000,000 to build detention centers in the US.

  Those who control us are not going to give up their control without a world war. In the United States evil has seized power from the people, and evil will not give it back.

  

  

• Amazon, Wells Fargo Unexpectedly Terminate Student Loan Partnership Announced Just One Month Ago

  Just over a month ago, on July 21, we reported that Amazon and Wells Fargo had launched a partnership which they dubbed at the time a “tremendous opportunity”, to offer college students an even greater incentive to get buried under student loans when Wells Fargo announced it would offer a discount on private student loans to members of Amazon’s “Prime Student” program.

  “We are focused on innovation and meeting our customers where they are—and increasingly that is in the digital space,” John Rasmussen, a Wells Fargo executive, said in a July 21 news release. “This is a tremendous opportunity to bring together two great brands.”

  

  As we said then, “in Amazon’s latest attempt to entice shoppers into its premium Prime program, Wells Fargo will cut half a percentage point from its interest rate on student loans to Amazon customers who pay for a “Prime Student” subscription, which provides the traditional Prime benefits such as free two-day shipping and access to movies, television shows and photo storage. The subscription-based service will cost $49 a year, half the regular Amazon Prime fee.”

  Meanwhile, Wells Fargo, Buffet’s favorite US bank, would benefit by expanding the size of its student loan portfolio. The third largest U.S. bank by assets and the second-largest private student lender by origination volume, is interested in “meeting our customers where they are – and increasingly that is in the digital space,” John Rasmussen, head of Wells Fargo’s Personal Lending Group, said in a news release. The bank had $12.2 billion in student loans outstanding at the end of 2015, compared with $11.9 billion at the end of 2014.

  Apparently, Wells was not interested enough, because just six weeks after revealing said “tremendous opportunity”, the two companies unexpectedly ended their partnership.

  As Bloomberg recaps our previous thoughts, “the deal between the giant online retailer and the nation’s third-largest bank by assets represented Amazon’s first foray into the competitive market of lending to college students. For Wells Fargo, which has aggressively tried to build up its student loan business, the partnership was meant to help the bank reach millions of potential customers who shop on Amazon and might be enticed by the bank’s half-percentage point discount on its higher-education loans.”

  There was little justification for the abrupt deal failure: Catherine B. Pulley, a Wells Fargo spokeswoman, said Wednesday that the “promotion for Prime Student members has ended.” She didn’t immediately respond to messages seeking further details. Deborah Bass of Amazon e-mailed the same statement in response to questions but did not immediately respond to a message seeking additional information.

  As Bloomberg adds, as of today, Amazon no longer features Wells Fargo on its student-focused website, and the bank’s Amazon-focused site now redirects visitors to Wells Fargo’s general student loan section. The two companies had been talking about the partnership for more than a year, according to a July report in the Wall Street Journal.

  While there is no information at all on what causedthe abrupt end in the relationship, consumer advocates should be delighted: they quickly assailed the partnership between the two companies after it was announced in July. Pauline Abernathy, a former official in Bill Clinton’s White House who now works for the Institute for College Access & Success, described the arrangement as “the kind of misleading private loan marketing that was rampant before the financial crisis.”She said both companies buried the otherwise high costs and inflexible repayment terms that she said are standard in private student loans and that the deal was a “cynical attempt to dupe current students.”

  “We congratulate Amazon for deciding to stop promoting Wells Fargo’s costly private education loans. Private loans are one of the riskiest ways to pay for college,” Abernathy said Wednesday.

  Come to think of it, she is not wrong.

  Undergraduate students can borrow from the feds at a 3.76% interest rate, a loan that effectively acts as an entitlement thanks to virtually no underwriting requirements. But the government caps student borrowing, leaving many to rely on private student loans to fill the gap between college costs and federal loan limits. A review of Wells Fargo’s website shows student loans that carry interest rates as high as 10.93%.

  Which explains why both Amazon and Wells Fargo had so much to gain, and nothing to lose form their partnership, and which makes the sudden, unexplained collapse of this arrangement all the more  curious and surprising.

  

  

• Why Is The DHS Preparing To Take Control Of The US Election?

  What do you do when you're the dictatorial leader of an oppressive government regime looking to maintain power while simultaneously preserving the facade of free and open elections?  Well, if you're the Obama administration then you look for avenues to nationalize state-run election infrastructure.

  But you can't just seize control of infrastructure that has been successfully run at the state level for a couple hundred years…that kind of stuff only happens in Venezuela and we're better than that.  No, you need a catalyst for this kind of blatant power grab.  "Coincidentally", a catalyst just like the FBI's warning a couple of days ago about "foreign hackers [read Putin] penetrating state election systems."  Then, once you've defined the super villain, all you need is a couple of political cronies to go on a fear mongering tour to whip the electorate into a frenzy.  And wouldn't you know it…Harry Reid recently did just that by sending a letter to the FBI voicing his "concerns" that the "Russian government" may be looking to tamper with the upcoming presidential election.  Per the New York Times, Harry Reid's letter to the FBI included the following:

  "I have recently become concerned that the threat of the Russian government tampering in our presidential election is more extensive than widely known and may include the intent to falsify official election results." 

  The combination of all these things might be just enough to scare the American electorate into forfeiting another chunk of their individual sovereignty to the elite political class in Washington DC while plunging us one step closer to the inevitable end game of "fundamentally transforming" our constitutional democracy into a police state.

  Per the Washington Examiner, this sort of scenario is precisely what Department of Homeland Security Secretary, Jeh Johnson, discussed at an event hosted by The Christian Science Monitor earlier this month.  

  "We should carefully consider whether our election system, our election process, is critical infrastructure like the financial sector, like the power grid."

   

  "There's a vital national interest in our election process, so I do think we need to consider whether it should be considered by my department and others critical infrastructure."

   

  "There's no one federal election system. There are some 9,000 jurisdictions involved in the election process."

  Jeh Johnson's comments related to election infrastructure can be viewed below.  His full comments can be viewed here.

   

  As an added little benefit, seizing control of state election infrastructure makes it so much easier to move toward the ultimate end game of standardized federal voting laws.  Fighting intense legal battles in multiple states on voter ID laws and the rights of convicted felons to vote is just too tedious and the costs of expensive lawyers keeps adding up for Soros (see "Soros Emerges As Mastermind Behind Plan To "Enlarge Electorate By At Least 10 Million Voters").

  So how is "critical infrastructure" defined and exactly how is it managed?  Well the Department of Homeland Security has a whole website dedicated to that topic. 

  The nation's critical infrastructure provides the essential services that underpin American society and serve as the backbone of our nation's economy, security, and health. We know it as the power we use in our homes, the water we drink, the transportation that moves us, the stores we shop in, and the communication systems we rely on to stay in touch with friends and family.

   

  Overall, there are 16 critical infrastructure sectors that compose the assets, systems, and networks, whether physical or virtual, so vital to the United States that their incapacitation or destruction would have a debilitating effect on security, national economic security, national public health or safety, or any combination thereof. The National Protection and Programs Directorate's Office of Infrastructure Protection (IP) leads the coordinated national effort to manage risks to the nation's critical infrastructure and enhance the security and resilience of America's physical and cyber infrastructure. Read more about how IP leads this national effort.

  And why shouldn't we trust political appointees to run federal elections?  They've proven themselves time and again to be impartial, disinterested parties, right?  Well there is that one time when the IRS targeted Tea Party groups but that was just one time.  We're sure that would never happen again…

  

  

• China Admits Facing "Great Difficulties" In Meeting Economic Targets

  Based on a supply-side estimate of potential growth and projections of the main components of demand; Bloomberg's Chief Economist Tom Orlik notes that China potential growth – the rate at which the economy could expand when firing on all cylinders – will slow to 7.1% in 2016 and 7.0% in 2017 from 7.3% in 2015. The government's growth target for 2016 is 6.5-7% and – based on the 13th Five Year Plan – a minimum of 6.5% from 2016-2020.

   

  

   

  And that is why China is starting to manage expectations as the Xinhua news agency reported on Wednesday, citing the head state planner, that China will need "arduous efforts" to meet annual economic targets, with the economy expected to be under continued pressure in the second half of the year.

  

  As Reuters reports, the comments from Xu Shaoshi, head of the National Development and Reform Commission (NDRC), come as China's economy shows signs of stabilizing, but concern remains as to the sustainability of growth driven by government investment and the property market.

  Xu, however, said he was confident China "could meet major annual targets in economic growth, employment, commodity prices and residents' income", according to the state news agency.

  "Great difficulties remain in meeting goals for investment and trade," Xinhua quoted Xu as saying.

  "Currently, the foundations for stable economic development are not solid enough and downward pressure remains large, with difficulties hard to underestimate."

  Despite the weakest economic growth in 25 years, government sources have said policymakers do not see the need to reduce interest rates or bank reserves amid evidence companies and banks are hoarding cash.

  The focus instead has been on structural reform and fiscal measures…

  "China will continue to design and implement targeted and flexible macro-control measures, and pursue a proactive fiscal policy and a prudent monetary policy," Xu said, according to Xinhua.

   

  On the fiscal front, finance minister Lou Jiwei said China was considering higher export rebates for some mechanical and electrical products, Xinhua reported.

  Xu concluded by warning of regional polarization, difficulties with farmers' incomes and stable demand growth, and potential risks in finance and employment, as challenges facing the economy… but apart from that, everything is awesome??!!

  And sure enough it was proven awesome tonight when, right on cue ahead of the weekend's G-20 gathering, Bloomberg reports that China’s official factory gauge unexpectedly rose last month to the highest level in almost two years, suggesting a weakening in July was flood-related and temporary (even though Services PMI dropped and Aussie PMI crashed)…

  

  The manufacturing purchasing managers index rose to 50.4 in August, the statistics bureau said Thursday, up from July’s 49.9 and compared to the 49.8 median estimate of economists surveyed by Bloomberg. The non-manufacturing PMI stood at 53.5 compared with 53.9 in July. Numbers above 50 indicate improving conditions.

  "The number is quite surprising, but still reasonable following the policy support in some sectors," said Zhu Qibing, chief macro economy analyst at BOCI International (China) Ltd. in Beijing."The PBOC will refrain from more easing, but won’t tighten immediately."

  Measures of new orders, purchases quantity and input prices paced the PMI rebound. But the gains weren’t shared equally, with large enterprises reporting improved conditions even as medium and small firms deteriorated, the data showed.

  *  *  *

  So – China is fine (despite currency turmoiling) because floods across southeastern regions responsible for about a fifth of China’s economic output interrupted production in the summer… so that's good news right? Except the promise of more stimulus is now less likely… especially a broad-based stimulus. Still, Chinese stocks were the best in the world in August…

  

  

  

• The Brazilian Economic Collapse Reaches Unprecedented Proportions

  While the mainstream media was focused on today’s primetime Brazilian spectacle, namely Dilma Rouseff’s impeachment vote in the Senate, which passed as expected with a substantial majority permanently removing Rouseff from office and assuring that her replacement, Michel Temer rules until at least 2018 (unless the unpopular politician is also impeached in the meantime), what has gotten far less press is the ongoing devastation of the Brazilian economy which has failed to see even a token pick up in recent months despite the change in the ruling administration.

  Here are the latest stunning updates.

  According to the most recent economic data, the labor market continues to implode: the unemployment rate surged to 11.6% with the ranks of the unemployed topping 11.8 million (up from 8.6 mn a year ago) as the following chart from Goldman Sachs shows.

  

  The national unemployment rate printed at 11.6% in the 3-month period ending in July, up from 11.3% in June and up from 8.6% a year ago, and 6.9% two years ago. In seasonally adjusted terms the unemployment rate climbed to 11.4% in July, from 11.1% in June and 8.4% a year ago.

  Formal salaried employment in the private sector shrank 3.9% yoy, while employment in the informal sector grew 0.9% yoy. Self-employment grew 2.4% (a reflection of increasingly limited salaried employment opportunities). By sector of economic activity, industrial employment shrank by a large 10.6% yoy (-1.4mn jobs).

  Employment declined 1.8% yoy in the 3-month period ending in July, while the economically active labor force grew 1.5%. 

  Meanwhile, as the number of working Brazilians tumbles, average real wages conttinued their unprecedented decline, sliding 3.0% yoy. The labor force participation rate rose one-tenth from a year ago: to 61.5%.

  

  Alas, there is little hope in sight: according to Goldman, the labor market is set to deteriorate further given the forecasted weak performance of the economy, particularly of the labor-intensive services sector.

  It wasn’t just the labor market that continues to flounder, however. According to today’s GDP report, in the second quarter the economy continued to contract , driven, among other things by the impact of the ongoing credit crunch and severe labor market deterioration on consumption. Specifically, real GDP dropped -0.6% qoq in Q2 sa (non-annualized) once again missing the consensus print of -0.50%.  Real GDP contracted 0.6% qoq sa in 2Q2016, adding to the large contractions averaging -1.3% qoq sa during 1Q2015-1Q2016. The 1Q2016 figure was revised to -0.43% qoq sa, down from the original -0.28% qoq sa.

  In yoy terms, real GDP declined -3.8% during 1Q2016, a modest improvement from the -5.4% Q1 plunge. Private consumption declined 5.0%, and public consumption retrenched 2.2%. Finally, gross fixed capital formation declined by a large 8.8% yoy. Just like in China, which historically was a major source of Brazilian upside, aggregate investment remained low and decline again: 16.8% of GDP during 2Q2016, down from 18.4% of GDP in 2Q2015 and 20.1% of GDP in 2Q2014. The national gross savings rate was even lower (15.8% of GDP), still much lower than the 19.7% of GDP reached during 1Q2013 and 18.8% of GDP in 1Q2014.

  According to an analysis by Goldman’s Alberto Ramos, the contraction of real activity during 2Q was driven by private consumption on the demand side and services on the supply side. Final domestic demand contracted again (-0.5% qoq sa); sixth consecutive decline and printed in negative territory in eight of the last nine quarters. On the supply side, the large labor intensive services sector retrenched again at the margin as noted above (-0.8% qoq sa; -3.3% yoy); sixth consecutive quarterly decline averaging -0.9% qoq sa.

  

  As Ramos concludes, “the ongoing economic recession/depression has now lasted an extraordinarily long period of time and has been unusually deep: leading to a 9.7% cumulative decline in per-capita real GDP. By 2Q2016, real GDP was at the same level of 3Q2010. Final private sector domestic demand has declined a very large 12.4% cumulatively since 2Q2014.”

  * * *

  Completing the abysmal picture was the latest capital flow data, according to which Brazil’s primary fiscal deficit remained stuck at -2.5% of GDP, while gross debt now approaching a record 70% of GDP.

  More details: The consolidated public sector posted a R$12.8bn primary deficit in July significantly worse than the R$4.7bn deficit recorded a year ago. The central government posted a R$11.9bn deficit, and the states and municipalities a smaller R$334mn deficit. The performance of subnational governments is expected to deteriorate further in the months ahead given tightening budgetary pressures and the recent re-profiling of debt service payments to the treasury. Finally, state-owned enterprises recorded a larger than expected R$629mn deficit.

  

  On a 12-month trailing basis, the consolidated public sector primary fiscal deficit remained broadly unchanged from June to July at a high 2.54% of GDP (vs. 2.51% of GDP in June), but rose visibly from 1.88% of GDP in December 2015. The overall public sector fiscal deficit (primary surplus minus interest payments) is running at an extraordinarily high 9.6% of GDP (slightly down from 10.4% of GDP in December due chiefly to gains in the outstanding stock of Dollar swaps driven by the recent BRL appreciation). The 12-month net interest bill is tracking at 7.0% of GDP, compared with 8.5% of GDP in December.

  According to Goldman, given the 0.9% BRL depreciation against the USD in July, the stock of Dollar swaps issued by the central bank added R$1.8bn from the overall public sector net interest bill (the difference between the DI rate and the exchange rate variation plus the “cupom cambial”). The 12-month trailing implicit interest rate on total net public debt is tracking at a very high 22.3%.

  Putting all this together means that gross general government debt is now tracking at 69.5% of GDP, up from 66.5% of GDP at end-2015. Net public debt has deteriorated 5.6 percentage points of GDP since December.

  Goldman’s conclusion:

  A deep, permanent, large structural fiscal adjustment remains front-and-center on the policy agenda to restore both domestic and external balance. In our assessment, fiscal consolidation in Brazil will be a multi-year endeavor. Most likely, returning to primary fiscal surpluses will take no less than 2-3 years, and returning to a primary surplus level that stabilizes the debt dynamics (around 2.5% of GDP) likely 4-5 years, or perhaps longer. At the end of the fiscal consolidation process we estimate that Brazil needs to end up with a primary surplus of 3.0% to 3.5% of GDP. This would be the level of primary surplus that would put gross public debt on a clear declining trajectory, something that is required for Brazil to rebuild fiscal buffers and regain room to use fiscal policy counter-cyclically, whenever needed and appropriate. Furthermore, we believe a deep fiscal adjustment that would elevate public sector savings is needed to facilitate a permanent structural current account adjustment (rather than just a cyclical adjustment driven by the sharp contraction of domestic demand), and also to endow the central bank with extra degrees of freedom to set monetary policy at a less restrictive level.

  What is most fascinating, however, is that despite the all too clear economic depression raging in Brazil, which gets progressively worse by the month, the stock market continues to rise pricing in a Phoenix-like recovery, which even Goldman now admits will take “4-5 years, or perhaps longer.” Why this unprecedented surge in asset prices? Simple: a mountain of central bank-created liquidity which finds its way into any market that offers even a modium of incremental yield, such as Brazil’s. Alas, for those asking when the record divergence shown below closes, and the Bovespa will be painfully reacquainted with gravity, we have no answer.

  

  

  

• The Central Banks Are Now Ready To Launch Their 'Brave New World'

  Submitted by Brandon Smith via Alt-Market.com,

  The latest Federal Reserve meeting in Jackson Hole, Wyoming, is over and so far it would seem that the general investment world is not too happy about Janet Yellen’s statements as well as those of other Fed officials.  In fact, many people are looking for some simple clarity as to what the central bank is actually planning.

  Most importantly, investors want to know why the Fed is suddenly so adamant about continued interest rate hikes in 2016.  Only a couple months ago, almost everyone (including alternative economic analysts) was arguing that the Fed would “never dare” to raise rates again so soon, and that there was no chance of a rate hike so close to the presidential elections.

  Instead, investors have been greeted with surging rate-hike odds as Fed officials openly hint of another boost, probably in September.

  As I have been saying for years, if you think the Fed’s motivation is to protect or prolong the U.S. economy, then you will never understand why they do the things that they do.  Only when people are willing to accept the reality that the Fed’s job is to undermine the U.S. economy can they grasp central bank behavior.

  Here is the issue that scares mainstream markets — many day traders are greedy, but not necessarily dumb.  They KNOW full well that the only pillar holding up stocks at record highs has been central bank intervention.  A vital part of this intervention has been the use of near-zero interest rates.  That is to say, cheap and free overnight loans through the Fed have allowed banks and other corporations to remain “solvent,” and these loans have been the fuel companies have used for corporate buybacks of stocks.

  Corporate buybacks have been a primary driver in the bull market rally that supposedly saved the world from the ongoing deflationary destruction of capital.  In 2015, buybacks reached historic levels and garnered one of the largest equities reversals in history.   While these buybacks do little or nothing to heal the economy on Main Street, they certainly do wonders for equities portfolios.  By buying up their own shares, corporations boost the value of remaining shares through a brand of legal trickery.  And, in the process, these corporations also boost the overall perceived value of global stock markets.

  As Edward Swanson, author of a study from Texas A&M, noted on stock buybacks used to offset poor fundamentals:

  “We can’t say for sure what would have happened without the repurchase, but it really looks like the stock would have kept going down because of the decline in fundamentals… these repurchases seem to hold up the stock price.”

  Yes, to us he seems to be stating the obvious, but for the average American, a green stock market means a recovering economy.  There is no deeper question of why the markets are rallying, and this lack of understanding is dangerous for our country.

  Even marginal hikes in borrowing costs will kill the party and, while people not involved in finance and stocks are oblivious, day traders know exactly what is going on.  This is the reason for the underlying panic felt by the investment world at any hint of a rate hike by the Fed.

  As we saw with the limited audit of TARP, the Fed was pumping tens of trillions in overnight loans into distressed banks and companies, even foreign companies overseas.  I suggest that if a FULL audit of the Fed were ever conducted, we would find tens of trillions more in overnight loans since 2008.

  Imagine for a moment if those loans never stopped.  Imagine that such loans have been an ongoing mainstay of our financial system and stock markets in general.  Now, ask yourself, what would happen if the companies reliant on these free loans suddenly had to pay interest on them?

  Think about it; what would the interest cost be on a mere .5% to 1% of $16 trillion in overnight loans through TARP?  What would the cumulative cost be on all the loans banks and companies need to survive every quarter?   In the end, corporations would either drown in billions of dollars in exponential debt or they would have to stop accessing loans from the Fed.  Once the loans stop, the stock buybacks stop.  Once the buybacks stop, stock markets crumble.

  Without free cash from the Fed, the bubble in stock markets will finally and thoroughly implode, crashing down to meet all other fundamentals.

  Why would the central bank pull the plug on life support to stock markets?  There are multiple reasons, but a top reason is that this is the Federal Reserve’s modus operandi.  They consistently seem to raise rates into recessionary conditions that they also tend to create.  In essence, the Fed likes to acclimate and addict markets to low interest percentages, and then increase those percentages to agitate and elicit a chaotic reaction.

  In my article Brexit Aftermath – Here’s What Will Happen Next, I stated:

  “Really, the only safe measure the Fed can take from now on is to do nothing.  I highly doubt that they will do nothing.  In fact, even in the face of the Brexit I still believe the Fed will raise rates a second time before the end of the year.  Why?  This is what the Fed has always done as recession takes hold.  Historically, the Fed raises rates at the worst possible times.  As with the Brexit, I am going to have to take the contrary position to most analysts on this.”

  What analysts out there need to understand, whether they are independent or mainstream, is that a great shift in central bank policy and attitude is coming. Christine Lagarde at the IMF calls it the “economic reset,” some Fed officials, like Atlanta Fed President Dennis Lockhart, state that central banks are entering a “brave new world.” These are highly loaded phrases that represent a drastic overhaul of the global financial system; an overhaul that is quite deliberate and inevitably destructive for certain nations and economies, including the U.S.

  If we examine the policy pursuits and recently stated goals of central banks around the world, and those statements made after the Brexit referendum, we find that a process of complete global centralization is underway. This includes a push for all central banks to “coordinate policy” under a single directive.

  Alternative analysts already know that all central banks are ALREADY covertly coordinated by the Bank for International Settlements.  So, when central bankers call for policy coordination in the mainstream press, what they really mean is, they want the existing coordination that is covert to become publicly accepted and celebrated.  They want that which is illegal to become legal.  That which is morally reprehensible to become morally relative.

  Central bankers also want their position of authority over the global economy to become a public priority.  Ten years ago, when I asked average people what they knew about the Federal Reserve, most of them responded with confusion.  They had never heard of the institution, let alone what its function was.  Today, almost everyone knows about the Fed, but there is also an assumption attached that central banks, whether they are successful or not, are supposed to maintain economic stability.  Keep in mind that global stocks barely vibrate today until a central bank somewhere publishes a policy statement.  This is not how investment is supposed to function.  The jawboning of central banks should be mostly meaningless.

  The brave new world of central banking is a plan to expand on this corrupt correlation.  That is to say, the general public and the mainstream should be questioning whether central banks should exist at all.  Instead, people are arguing over what policies are better for central banks to adapt.  The existence of central banks is considered an absolute.  The masses are only given the option to debate what faces and what hats central banks should wear.  If we get anything out of this deal, we only get to choose the form of our destructor.

  I should point out also the growing trend in the mainstream media of criticism against the Fed.  This is a relatively new thing.  For the past several years the more effectively critical the alternative media became against the Fed, the louder MSM talking heads would cheerlead for the establishment.  With central bankers becoming more open about their global shift into something "different", a new program of stabbing at the Fed has been initiated.  This is not a coincidence.

  As I have argued in various articles, the Fed itself may be just as sacrificial to the elites as the U.S. economy.  In the process of global centralization, the Fed would eventually have to take a back seat to the IMF, World Bank and the BIS.  It is not surprising to me in the slightest that the bought-and-paid-for mainstream media is changing gears and attacking the institution they once desperately defended.  Priorities are evolving.

  I believe that with the advent of a second rate hike in 2016, many conditions will change.  The Dow and some emerging markets will no longer enjoy unmitigated support, and they will begin to fall going into the elections.  As I have mentioned many times in past articles, Donald Trump is the most likely candidate to take up residence in the White House.  Conservatives will be lulled into a temporary euphoria, happy just to have defeated she-demon Hillary Clinton, only to discover that an overall global implosion has entered a new stage.  This implosion will of course be blamed on those same conservative movements.

  In the meantime, central banks around the world are going to start openly coordinating while the IMF will take up a “leadership role” in managing international policy.  Central banks will also be branching out and taking on new powers.  As suggested at Jackson Hole, many central bankers are arguing for “new tools” to fight future fiscal downturns, and no, this does not mean negative interest rates.  Instead, watch for central banks to change the definition of inflation on a whim, or adjust the relative value of currencies through agreements with other countries instead of allowing free markets to determine values, and watch for complete overhauls in how economic instability is calculated.

  What we are heading for is a world in which many nations will suffer from reductions in living standards and where some first world nations will be reduced to third world conditions.  In order to normalize increased global poverty, you have to stop calling it poverty and start calling it a “brave new world.”  You have to convince the populace that the economic degradation is not a problem that can be solved — rather, it is a problem we must all adapt to and accept.

  Be very wary when elites and international financiers mention “global reset,” or a “brave new world,” or a “new world order.”  What they are talking about is not a program that is in your best interest.  What they are talking about is the deliberate creation of chaos; a slow burning calamity that can be exploited to derive the benefits of even more centralization and even more power.

  They will call it random.  They will call it coincidence or fate or even blame it all on their ideological opponents.  In the end, they will eventually call it a natural progression of events; a social and financial evolution.  They will call it inevitable.  None of this will be true.  There is nothing natural about a totalitarian framework — it is a machine that is carefully crafted piece by piece, maintained by the hands of a select few tyrants and fed with the labor, sacrifice and fear of the innocent.

  The only solution is to expunge the parasites from our fiscal body.  These institutions and the people behind them should not exist.  Most if not all of our sociopolitical distress today could be cured if a “brave new world” meant wiping the slate clean and dispelling financial elites and central bankers into a bottomless pit.

  

  

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• The Day The Lights Go Out And The Trucks Stop Running

  Submitted by Michael Snyder via The Economic Collapse blog,

  What would happen if some sort of major national emergency caused a massive transportation disruption that stopped trucks from running?  The next time you talk to a trucker, please thank them for their service, because without their hard work none of our lives would be possible.  In America today, very few of us live a truly independent lifestyle, and that means that we rely on the system to provide what we need.  Most of us take for granted that there will always be plenty of goods at Wal-Mart and at the grocery store whenever we need more “stuff”, and most of us never give a second thought to how all of that “stuff” gets there.  Well, the truth is that most of it is brought in by trucks, and if the trucks stopped running for some reason the entire country would devolve into chaos very rapidly.

  Earlier today, I came across a quote from Alice Friedemann that detailed what we would be facing during a major national transportation disruption very nicely…

  Within a week, in roughly this order, grocery stores would be out of dairy and other items that are delivered many times a day. And by the week, the shelves would be empty.

   

  Hospitals, pharmacies, factories, and many other businesses also get several deliveries a day, and they’d be running out of stuff the first day.

   

  And the second day, there’s be panic and hoarding. And restaurants, pharmacies would close. ATM’s would be out of money. Construction would stop. There’d be increasing layoffs. Increasing enormous amounts of trash not getting picked up, 685,000 tons a day. Service stations would be closed. Very few people would be working. And the livestock would start to be hungry from lack of feed deliveries.

   

  Then within two weeks, clean water supplies would run out. Within four weeks to eight weeks, there wouldn’t be coal delivered to power plants and electricity would start shutting down. And when that happened, about a quarter of our pipelines use electricity, and so natural gas plants wouldn’t be fed natural gas and they’d start shutting down.

  There is so much infrastructure that we take for granted that would suddenly become very vulnerable in this type of scenario.  There are countless numbers of workers out there that never get any glory that do the hard work of maintaining our nuclear power plants, our natural gas pipelines, our electrical grid, etc.  If they suddenly were not able to do their jobs, the consequences would be absolutely catastrophic.  The following comes from Tess Pennington…

  They rarely mention the dozens of nuclear power plants that litter the United States. If no one is there to operate them, how long before they melt down and bury millions of survivors under a radioactive cloud?

   

  Then there are the 12,000 facilities around the country that store large quantities of toxic or flammable chemicals, and reside close to residential areas. 2,500 of these sites contain chemicals in quantities that, if a catastrophic accident were to occur, could affect 10,000 to 1 million people each. And let’s not forget the 2.5 million miles of oil and gas pipelines that can be found in every state. They suffer hundreds of leaks and ruptures every year, and are much more likely to explode when they aren’t maintained. That detail seems to be conveniently forgotten by post-apocalyptic films.

   

  And finally, most post-apocalyptic movies will forget to mention what happens when there aren’t any functional fire departments. Aside from the obvious consequences, like whole neighborhoods routinely burning to the ground, who’s going to put out landfill fires that are occasionally radioactive?

  For most Americans, a major national emergency of this magnitude may seem unimaginable right now.  But the truth is that it isn’t difficult to see how this kind of scenario could happen.  The Yellowstone supervolcano is becoming increasingly active, a single large asteroid could change all of our lives in a single moment, a crippling pandemic could bring normal life in America to a complete standstill, a terror attack involving weapons of mass destruction would spread panic and fear like wildfire, and a historic earthquake along the New Madrid fault, the Cascadia Subduction zone or any of the major faults in California could literally change the geography of our entire continent.

  In addition, a massive EMP burst from a nuclear weapon or from the sun could fry our power grid and send us back into the stone age in a single moment.  This is something that I have written about extensively, and those that want to minimize this threat simply don’t know what they are talking about.

  And an electromagnetic pulse is not even required to cause very serious problems with our electrical grid.  For instance, just consider what happened in Ukraine toward the end of last year…

  On December 23rd, 2015, the Prykarpattyaoblenergo power distribution station in Ukraine was hit by a carefully coordinated cyber-attack that was months in the making. The technicians lost control of their cursors as they watched hackers open breakers and take circuit after circuit offline, plunging 230,000 residents into darkness.

   

  The hackers took backup power of the stations offline, plunging the electrical workers into darkness too, and worse yet, they even rewrote the low-level firmware that controls the electrical transformers. The attack had come after months of careful infiltration and planning by a dedicated team of elite cyber-warfare specialists and the result was devastating.

   

  Even months later, technicians struggled to regain full capacity in the electrical grid due to the overwriting of firmware. With Ukrainian moves to nationalize power companies, it is possible that the powerful and Putin-connected Russian oligarchs who own large parts of Ukraine’s infrastructure were sending a message: we can shut down the system anytime we want.

  The truth is that we are far more vulnerable than most of us would like to admit.

  So what would you do if “normal life” suddenly came to an end and you no longer had access to food, water or power?

  How would you and your family respond?

  Hopefully you would continue to act in a civilized manner, but history has shown that many people would not.

  Desperate people do desperate things, and it would only take a matter of days for some people to become violent…

  Before long, getting mugged or being a victim of some type of crime is as unpredictable and as common as a car accident. You’ll realize everyone in the neighborhood has now beefed up security on their homes. All your family, friends, and coworkers have experienced a mugging, carjacking, or worse.

   

  You’ll have no choice but to accept this new way of life and count on basic safety measures (a form of passive denial) or further learn to defend yourself and remain in a constant state of alert (a very stressful state over time). It’s difficult emotionally, mentally, and physically to remain on high alert 24/7 for any length of time. Most people will revert to a form of passive denial until the next incident happens to them or a family member.

  And even though things may seem relatively stable for the moment, concern about what is coming is one of the factors that has led an increasing number of Americans to arm themselves.  According to a brand new study from the Pew Research Center, 44 percent of all American homes now have a gun.  Just two years ago, a different study found that number was sitting at just 31 percent.

  The way that we are living our lives right now will not last indefinitely.

  At some point a major national emergency will strike, and when that day arrives we could suddenly be facing major power grid and transportation disruptions.

  Are you prepared for that?

  

  

• The Election Has Been Hacked: The Dismal Reality Of Having No Real Electoral Choices

  Submitted by John Whitehead via The Rutherford Institute,

  “Free election of masters does not abolish the masters or the slaves.” ? Herbert Marcuse

  The FBI is worried: foreign hackers have broken into two state election databases.

  The Department of Homeland Security is worried: the nation’s voting system needs greater protection against cyberattacks.

  I, on the other hand, am not overly worried: after all, the voting booths have already been hacked by a political elite comprised of Republicans and Democrats who are determined to retain power at all costs.

  The outcome is a foregone conclusion: the police state will win and “we the people” will lose.

  The damage has already been done.

  The DHS, which has offered to help “secure” the nation’s elections, has already helped to lock down the nation.

  Remember, the DHS is the agency that ushered in the domestic use of surveillance drones, expanded the reach of fusion centers, stockpiled an alarming amount of ammunition, urged Americans to become snitches through a “see something, say something” campaign, oversaw the fumbling antics of TSA agents everywhere, militarized the nation’s police, spied on activists and veterans, distributed license plate readers and cell phone trackers to law enforcement agencies, contracted to build detention camps, carried out military drills and lockdowns in American cities, conducted virtual strip searches of airline passengers, established Constitution-free border zones, funded city-wide surveillance cameras, and generally turned our republic into a police state.

  So, no, I’m not falling for the government’s scare tactics about Russian hackers.

  I’m not losing a night’s sleep over the thought that this election might by any more rigged than it already is.

  And I’m not holding my breath in the hopes that the winner of this year’s particular popularity contest will save us from government surveillance, weaponized drones, militarized police, endless wars, SWAT team raids, red light cameras, asset forfeiture schemes, overcriminalization, profit-driven private prisons, graft and corruption, or any of the other evils that masquerade as official government business these days.

  What I’ve come to realize is that Americans want to engage in the reassurance ritual of voting.

  They want to believe that politics matter.

  They want to be persuaded that there’s a difference between the Republicans and Democrats (there’s not).

  They will swear that Barack Obama has been an improvement on George W. Bush (he has not).

  They are convinced that Hillary Clinton’s values are different from Donald Trump’s (with both of them, money talks).

  Most of all, they want to buy into the fantasy that when we elect a president, we’re getting someone who truly represents “we the people” rather than the corporate state (in fact, in the oligarchy that is the American police state, an elite group of wealthy donors is calling the shots).

  The sad truth is that it doesn’t matter who wins the White House, because they all work for the same boss: Corporate America. Understanding this, many corporations hedge their bets on who will win the White House by splitting their donations between Democratic and Republican candidates.

  Politics is a game, a joke, a hustle, a con, a distraction, a spectacle, a sport, and for many devout Americans, a religion. It is a political illusion aimed at persuading the citizenry that we are free, that our vote counts, and that we actually have some control over the government when in fact, we are prisoners of a police state.

  In other words, it’s a sophisticated ruse aimed at keeping us divided and fighting over two parties whose priorities are exactly the same so that we don’t join forces and do what the Declaration of Independence suggests, which is to throw the whole lot out and start over.

  It’s no secret that both parties support endless war, engage in out-of-control spending, ignore the citizenry’s basic rights, have no respect for the rule of law, are bought and paid for by Big Business, care most about their own power, and have a long record of expanding government and shrinking liberty. Most of all, both parties enjoy an intimate, incestuous history with each other and with the moneyed elite that rule this country.

  Despite the jabs the candidates volley at each other for the benefit of the cameras, they’re a relatively chummy bunch away from the spotlight. Moreover, despite Congress’ so-called political gridlock, our elected officials seem to have no trouble finding common ground when it’s time to collectively kowtow to the megacorporations, lobbyists, defense contractors and other special interest groups to whom they have pledged their true allegiance.

  So don’t be fooled by the smear campaigns and name-calling or drawn into their politics of hate. They’re just useful tactics that have been proven to engage voters and increase voter turnout while keeping the citizenry at each other’s throats.

  We’re in trouble, folks.

  We are living in a fantasy world carefully crafted to resemble a representative democracy.

  It used to be that the cogs, wheels and gear shifts in our government machinery worked to keep our republic running smoothly. However, without our fully realizing it, the mechanism has changed. Its purpose is no longer to keep our republic running smoothly. To the contrary, this particular contraption’s purpose is to keep the corporate police state in power. Its various parts are already a corrupt part of the whole.

  Just consider how insidious, incestuous and beholden to the corporate elite the various “parts” of the mechanism have become.

  Congress. Perhaps the most notorious offenders and most obvious culprits in the creation of the corporate-state, Congress has proven itself to be both inept and avaricious, oblivious champions of an authoritarian system that is systematically dismantling their constituents’ fundamental rights. Long before they’re elected, Congressmen are trained to dance to the tune of their wealthy benefactors, so much so that they spend two-thirds of their time in office raising money. As Reuters reports, “For many lawmakers, the daily routine in Washington involves fundraising as much as legislating. The culture of nonstop political campaigning shapes the rhythms of daily life in Congress, as well as the landscape around the Capitol. It also means that lawmakers often spend more time listening to the concerns of the wealthy than anyone else.”

   

  The President. What Americans want in a president and what they need are two very different things. The making of a popular president is an exercise in branding, marketing and creating alternate realities for the consumer—a.k.a., the citizenry—that allows them to buy into a fantasy about life in America that is utterly divorced from our increasingly grim reality. Take President Obama, for instance, who now enjoys greater popularity than any previous president, including the beloved Ronald Reagan. This is a president who got elected by campaigning against war, torture, surveillance only to make them hallmarks of his presidency, and yet somehow these “indiscretions” are overlooked and forgiven as long as he presents a jocular, hip façade: slow-jamming the news with Jimmy Fallon, reading mean tweets with Jimmy Kimmel, singing, dancing and being cool. In other words, to be a successful president, it doesn’t matter whether you keep your campaign promises, sell access to the Lincoln Bedroom, or march in lockstep with the Corporate State as long as you keep the feel-good vibes flowing.

   

  The Supreme Court. The U.S. Supreme Court—once the last refuge of justice, the one governmental body really capable of rolling back the slowly emerging tyranny enveloping America—has instead become the champion of the American police state, absolving government and corporate officials of their crimes while relentlessly punishing the average American for exercising his or her rights. Like the rest of the government, the Court has routinely prioritized profit, security, and convenience over the basic rights of the citizenry. Indeed, law professor Erwin Chemerinsky makes a compelling case that the Supreme Court, whose “justices have overwhelmingly come from positions of privilege,” almost unerringly throughout its history sides with the wealthy, the privileged, and the powerful.

   

  The Media. Of course, this triumvirate of total control would be completely ineffective without a propaganda machine provided by the world’s largest corporations. Besides shoveling drivel down our throats at every possible moment, the so-called news agencies which are supposed to act as bulwarks against government propaganda have instead become the mouthpieces of the state. The pundits which pollute our airwaves are at best court jesters and at worst propagandists for the false reality created by the American government. When you have internet and media giants such as Google, NBC Universal, News Corporation, Turner Broadcasting, Thomson Reuters, Comcast, Time Warner, Viacom, Public Radio International and The Washington Post Company donating to the Clinton Foundation, you no longer have an independent media—what we used to refer to as the “fourth estate”—that can be trusted to hold the government accountable.

   

  The American People. “We the people” now belong to a permanent underclass in America. It doesn’t matter what you call us—chattel, slaves, worker bees, drones, it’s all the same—what matters is that we are expected to march in lockstep with and submit to the will of the state in all matters, public and private. Through our complicity in matters large and small, we have allowed an out-of-control corporate-state apparatus to take over every element of American society.

  We’re playing against a stacked deck.

  The game is rigged, and “we the people” keep getting dealt the same losing hand. The people dealing the cards—the politicians, the corporations, the judges, the prosecutors, the police, the bureaucrats, the military, the media, etc.—have only one prevailing concern, and that is to maintain their power and control over the citizenry, while milking us of our money and possessions.

  It really doesn’t matter what you call them—Republicans, Democrats, the 1%, the elite, the controllers, the masterminds, the shadow government, the police state, the surveillance state, the military industrial complex—so long as you understand that while they are dealing the cards, the deck will always be stacked in their favor.

  As I make clear in my book, Battlefield America: The War on the American People, our failure to remain informed about what is taking place in our government, to know and exercise our rights, to vocally protest, to demand accountability on the part of our government representatives, and at a minimum to care about the plight of our fellow Americans has been our downfall.

  Now we find ourselves once again caught up in the spectacle of another presidential election, and once again the majority of Americans are acting as if this election will make a difference and bring about change. As if the new boss will be different from the old boss.

  When in doubt, just remember what the astute commentator George Carlin had to say about the matter:

  The politicians are put there to give you the idea that you have freedom of choice. You don’t. You have no choice. You have owners. They own you. They own everything. They own all the important land. They own and control the corporations. They’ve long since bought and paid for the Senate, the Congress, the state houses, the city halls. They got the judges in their back pockets and they own all the big media companies, so they control just about all of the news and information you get to hear. They got you by the balls. They spend billions of dollars every year lobbying. Lobbying to get what they want. Well, we know what they want. They want more for themselves and less for everybody else, but I’ll tell you what they don’t want. They don’t want a population of citizens capable of critical thinking. They don’t want well-informed, well-educated people capable of critical thinking. They’re not interested in that. That doesn’t help them. That’s against their interests.

   

  They want obedient workers. Obedient workers, people who are just smart enough to run the machines and do the paperwork…. It’s a big club and you ain't in it. You and I are not in the big club. …The table is tilted, folks. The game is rigged and nobody seems to notice…. Nobody seems to care. That’s what the owners count on…. It’s called the American Dream, 'cause you have to be asleep to believe it.

  

  

• Do Newly Built Skyscrapers Signal The Top Of The Stock Market?

  Have you heard of the Burj Khalifa in Dubai?

  It’s the tallest skyscraper in the world at 828m (2,717 ft), and it was completed in 2009. The price tag was a whopping $1.5 billion, making it one of the most expensive buildings of all time.

  As Visual Capitalist's Jeff Desjardin explains, for these bold projects to get the go ahead, global financial conditions have to be just right. Record-breaking skyscrapers can take multiple years to build, and things can change drastically from start to finish.

  In this case, construction of the Burj Khalifa started in 2004. By the time it was completed, however, the financial markets were in ruins. Lehman had collapsed, and rescue efforts such as TARP and QE were in full force to try and stop the bleeding. Between October 2007 and March 2009, the Dow Jones Industrial Average lost 55% of value.

  The crisis didn’t only bankrupt financial markets – it also took its toll on competing projects that aimed to unseat the Burj Khalifa as the world’s height record-holder. For example, One Dubai Tower A was supposed to be a whopping 1,008m (3,307 ft) tall – but it was shelved in March 2009 once it was clear that global financial conditions would not be improving any time soon.

  DO NEWLY BUILT SKYSCRAPERS SIGNAL THE TOP OF THE STOCK MARKET?

  Could record-setting skyscrapers signal economic over-expansion and a misallocation of capital?

  EWN Interactive, a subscription service focused on technical analysis, thinks so. The following infographic follows the “Skyscraper Curse” through six different market tops and subsequent crashes over the past century.

  It is gigantic in size, so please click here or the below image to access the legible version:

  

  Courtesy of: Visual Capitalist

  EWM Interactive sums up the infographic with these words:

  In the market, extreme optimism results in price bubbles. One of the real-life manifestations of extremely positive social mood is the construction of enormous buildings. Market tops and skyscrapers often seem to emerge simultaneously, because both phenomena are the result of the illusion of infinite prosperity.

   

  But extreme psychological conditions do not last very long. That is the reason why record-breaking buildings, whose construction starts during a market bubble, are often completed after the bubble’s collapse.

  That said, there are counter-examples that show the “skyscraper theory” is not perfect.

  The recession after World War I, the recession of 1937, and the recession in the early 1980s were not correlated with any record-breaking skyscraper projects. An empirical test in 2015 that looked at the theory found that record-setting skyscrapers did not correspond directly with the business cycle.

  Let’s hope that they are right, since the Jeddah Tower – a 1,008m (3,307 ft) monster in Saudi Arabia – is expected to unseat the Burj Khalifa as the world’s tallest building by the year 2019.

  

  

• An Academic Tries To Explain The Yield Curve, Says "Gloom" Is Irrational

  Submitted by Jeffrey Snider via Alhambra Investment Partners,

  One of the articles referenced in Janet Yellen’s Jackson Hole speech last week was a piece written for the Peterson Institute for International Economics by Senior Fellow Olivier Blanchard. Dr. Blanchard has, as noted earlier today, all the “right” credentials, which is why his conjecture gets included into the speeches of Federal Reserve Chairmen. Having taught at both Harvard and MIT, becoming chair of the economics department at MIT for five years, landed Blanchard the role of research director at the IMF. Private experience is obviously missing from his resume.

  Dr. Blanchard’s article was an attempt to “explain” the yield curve in the United States. Economists like Blanchard are so indoctrinated in central bank and QE mythology that what is exceedingly simple is dismissed as impossible. Persistently low interest rates are proof of “tight” money in the real economy; but that just can’t be with QE and all the amassed central bank intellectual capacity in that area. Instead, they must make the most absurd arguments to try to square a circle of their own often circular logic or paradoxes (central bankers know everything about money but now central bankers are stumped, therefore it can’t be money?).

  You can read his whole argument and decide for yourself, of course, as I will only highlight but one of three reasons he specifies as really a window into this academic divide. One of the primary correlations in this view, which isn’t necessarily consistent with actual data, is that low rates are a function of low productivity and expectations for continuing low productivity. Blanchard tries to argue that while the crash in 2008 might explain the lack of productivity in the immediate aftermath, it doesn’t do much to render understanding about why it appears to have lingered.

  To have become permanent, he contends, is the partial responsibility of “gloom”; I’m not making this up. He actually writes, “I believe that this bad news about the future largely explains the relative weakness of demand today.” And that sets up what is a very good example in how economists think not about the economy in which we all live but the “economy” where models prevail.

  It is useful to play with some numbers here. Suppose that you learn that your income over the next 30 years will rise at 4 percent rather than at 5 percent as you expected earlier (because income typically increases with age, individual income typically increases faster than aggregate income). This represents a roughly 20 percent decrease in the present value of your future earnings, and is likely to lead you to consume say 10 percent less. If this realization comes to you over a period of five years, you will decrease consumption by 2 percent each year relative to your income. Returning to aggregate implications, as consumers adjust their expectations the way you do, consumption growth will be weak. The same argument applies to investment. The lower the expected growth rate of profit, the lower the desired level of capital, and this in turn will lead to a period of low investment until the new lower level of capital is reached.

  Nobody but an economist would think like this; and while this example is meant as a means to translate a very real phenomenon into the math-speak of regressions that academics use, he is seemingly unaware of the translation and thus the potential for error in even attempting it. In the world of high-credential universities, actual phenomenon must be converted into linear functions. That means that “gloom” has to be accounted for across several variables that can be each modeled in such a way that it makes sense to the mathematical versions of reality (and thus to economists who think I equations first).

  Any non-indoctrinated non-statistician can immediately recognize the problems with thus thinking math-first. If you need to translate the real world into nonsensical linear mathematics before you can attempt to understand said world, then the bond market will really be a mystery to you.

  In the world of the real, businesses don’t invest because their revenues don’t expand; end of story. Revenues aren’t expanding because businesses won’t hire no matter what the unemployment rate says; end of story. This was all, of course, one of the factors that quantitative easing was meant specifically to address – derived from the statistically modeled understanding of expectations rather than the actual conditions of them. The “wealth effect” was supposed to break the economy out of any gloom, as rising asset prices, especially the repeated and emphasized “record highs” of stocks, bonds, or anything in between, would surely negate any immediate “gloom” as it rolled over into expectations of an impeccable future.

  Economic theory just does not allow for the possibility that asset prices, particularly stocks, are anything but completely efficient. But that is increasingly what we find, even in the math of orthodox construction. As noted earlier, the CBO has been keeping account of the withering failure of monetary policy in a manner that economists don’t want anyone to explore. Rewriting economic “potential” within these very mathematical functions serves to undermine the core of orthodox economics itself, especially since the CBO is not just proving the lack of recovery but rewriting most of the 21st century economy with it.

  It isn’t just the CBO, however, who has been pressed by regression into an impossible reconciliation. The Fed’s own models show almost exactly the same condition as the CBO with regard to shrinking “potential.” In the latest FOMC projections, released coincident to the June FOMC meeting, the models reduced the upper bound of the central tendency for long run real GDP to 2% from 2.1%; the lower bound of 1.8% remained the same.

  

  In late 2011, the central tendency for long run growth was believed to be between 2.5% on the low side and as much as 2.8% at the upper bound. While that may not sound like much of a difference, it is huge. The long run growth rate takes into account full business cycles, meaning that the average growth must include both recessions and their recoveries. Peak to Peak (meaning the current quarter of GDP), total growth has been equivalent to just 1.2%, a stunningly (economists are literally stunned by this) bad run that now extends almost a decade.

  

  That is why the Fed has to mark down long run potential because not doing so would mean that at some point in the near future the economy is going to have to explode higher to bring up the average of this “cycle.” And the longer the economy persists in this mysterious “low growth trap” the greater that eventual “liftoff” will have to be get back to the normal long run tendency. Instead, economists have reduced economic potential because nobody believes any such thing will occur, note even them. Thus, they now have to come up with reasons that preserve their worldview while also accounting for the world – an increasingly impossible task. Even now the much-reduced long run tendency remains quite far out of reach, dampening enthusiasm all over again academically for both the timing and intensity of that anticipated “liftoff.”

  

  In other words, the continued and “unexpected” lack of recovery after nine years of failure in monetary policy is forcing the math to recognize what is obvious in non-mathematical terms. No regressions are at all necessary to conclude that the bond market has, in fact, made sense this whole time and that it is economists who have no idea what is going on or why. By the mathematics of 2011, real GDP “should be” $19.3 trillion in Q2 2016; it was instead just $16.6 trillion after the third straight quarter near 1%.

  To the academics, “gloom” is irrational and thus requires translation into math to become somehow backwards explanatory for why the economy that “should be” isn’t. In the actual economy, “gloom” is properly called reality. In this world, people know all-too-well that jobs disappeared during and after the Great Recession and never came back. No amount of asset price manipulation can possibly make up that difference. Economists try to convince everyone but really themselves that it didn’t matter when it is this very math that proves yet again it did; in fact, the true state of labor beyond the unemployment rate and Establishment Survey is all that matters.  

  

  Further, the people recognize that this wasn’t just a cyclical process that started in late 2007; it was, in fact, an extension of the impoverishment that has been eroding the true economic foundation for more than just the 21st century where it has become most apparent.

  

  The math of potential and even gloom is just the frustratingly late catch-up forcing economists to come to terms with the fact they have been all wrong about all of this all along.

   

  

  You need no PhD to so easily understand that you just cannot substitute jobs with debt; doing so is economic suicide.

   

  

  At some point over the long run you must come to terms with that discrepancy. This math is finally welcoming economists to that long run, a place their patron saint, Keynes, said didn’t exist. It really does as the math has been recalculated far more toward the “impossible”; even the “tight” money indicated by the bond market is recognition of these plain facts.

  

  

• China Bans Low Income 'Terrorists' From Guangzhou; Those Willing To Buy Fancy Hotels Still Welcome

  Apparently China is taking a play from the Trump playbook by banning hotels from accepting guests from five, predominantly Muslim countries, including Pakistan, Syria, Iraq, Turkey and Afghanistan.  The ban was allegedly implemented by local police in the southern city of Guangzhou and coincided with a development forum being held there.  The ban is expected to remain in place until after the G20 Summit to be held in Hangzhou (620 miles away) in early September. 

  That said, apparently the cops are only worried about "low income" terrorists as the ban has only been implemented at Guangzhou's low-end hotels charging an average of around $25 per night.  Per the Independent:

  Budget hotels in the southern city of Guangzhou said they had received notices from police beginning in March, ordering them to turn away guests from Pakistan, Syria, Iraq, Turkey, and Afghanistan.

   

  The rule coincided with a development forum held in Guangzhou on 25 and 26 August, and will extend until after the G20 summit set to take place in Hangzhou, 620 miles away from Guangzhou, on 4 and 5 September.

   

  A hotel worker told the South China Morning Post that local police had told staff they must turn away guests from the five countries until September 10, but had not explained why.

   

  “I'm not clear of the reason. We just can't take them,” a worker in another hotel told Reuters.

   

  The ban has not been extended to upmarket hotels, or to budget hotels that belong to international or domestic chains. Three hotels identified by Reuters were all independent and charged around $23 a night.

  

   

  Foreign ministry spokesman, Lu Kang, denied that Muslims were banned from low-end hotels in Guangzhou.  Instead, Kang insisted that China's official policy is to "encourage people from China and other countries to have friendly exchanges."

  “I've never heard that there is this policy being followed in China,” Lu told a daily news briefing.

   

  “Moreover, as far as China is concerned, our policy in principle is that we encourage people from China and other countries to have friendly exchanges and are willing to provide various convenient policies in this regard.”

  Frankly, we've never heard of a diplomat making such gracious and welcoming comments to foreign visitors…an "official policy" supporting "friendly exchanges" is pretty serious. 

  

  

• The Darwin Awards For Nations

  Submitted by Jeff Thomas via InterntionalMan.com,

  

  The fellow in the photo above is taking a bit of a risk. If all does not go well for him, he may become a candidate for the annual Darwin Awards – an award given to those who have inadvertently taken themselves out of the gene pool.

  Of course, Darwin’s premise was that, through natural selection, those who are born weaker, deformed, or otherwise less capable of survival are less likely to live long enough to procreate, thus assuring an ever-stronger, more adaptable species.

  This same premise can be applied to banks that follow unsound business practices. They’re more likely to go under as a result. This invariably causes suffering for those individuals who chose to do business with the irresponsible bank, but it can also be argued that those who believe empty promises by an irresponsible bank need to learn the lesson of economic prudence. Winnowing out those banks and their clients results in the responsible banks being stronger.

  Of course, when we declare any bank to be “too big to fail,” we assure that the bank in question (and other banks) will behave irresponsibly, as they are assured that they will be bailed out by the taxpayer.

  And the premise applies also to governments. Any government that behaves irresponsibly (promising entitlements to the populace, waging war and increasing the size of the government itself, without any plan as to how it will all be paid for) can be expected to exit the gene pool of nations.

  The problem is that, unlike the personal Darwin Awards, in which the imbecile in question is likely to meet his end soon after his error, nations tend to suffer for an extended period from poor economic and militaristic steps taken by governments before they collapse. Worse, they take their people down with them when they go.

  As an example, in the twentieth century, the UK poured money into two world wars, ultimately impoverishing the country and ending their dominance as the world’s foremost empire. The UK still limps along as a nation, but is greatly diminished from what it was in the nineteenth century.

  Across the pond in the U.S., the Federal Reserve was created in 1913, in part, to rob the American people, through regular inflation over an extended period of time. It worked well. Not understanding what inflation means, the American people have lost over 97% of the value of their dollar over the last one hundred years. At around the same time, the U.S. instituted income tax. It started out small (as income taxes always do), then, like Topsy, it just grew. As a result, people who receive lower wages in a no-tax jurisdiction are likely to have a far better standard of living than those in the U.S. (and other countries that have income tax).

  And that’s not to say that the UK and U.S. are unique. Quite the opposite. In fact, it’s the norm for any country’s politicians to make promises of largesse to their people just prior to an election. And with each election, the promises need to become larger, to inspire the people to vote for the promisers.

  Along the way, politicians use warfare as a tool to both distract the voters from political misdeeds and to convince them to give up their rights in times of war. Today, the concept of perpetual war allows a more frequent removal of rights.

  Each of the above works to the advantage of the political class (regardless of whether they claim to be Tory or Labour, Democrat or Republican.) It does however mean that, at some point, economic, social and political collapse will take place when the abnormalities become so excessive that the system can no longer bear their weight.

  We’re passing through an unprecedented period in history, in which quite a few of those nations that were once the most prosperous; the most free; the most forward-thinking, are all headed downward at the same time, and for the same reasons. Hence, we shall in the near future be observing the removal from the gene pool of nations many of the most powerful (and formerly most desirable) countries.

  It should be stressed that this does not necessarily mean that these countries will come to an end. Their geography will remain, but they may be crisscrossed with new boundary lines, should any of them be cut up. For others, it will mean retaining the name of the country, but they will be “under new management.”

  However, existence within these geographical locations will be changed dramatically. Once a country collapses economically/socially/politically, it’s likely to take a long time to recover. That means that those who are getting by in those jurisdictions (or may even be doing well) may find their well-being curtailed – possibly dramatically.

  Japan is overdue for a Darwin Award, as are the countries of the EU. They represent a buffer for countries such as the U.S. and Canada. Once the first dominoes topple, the others will soon fall.

  We’re taught to believe that we’re married to the country of our birth and would be “deserters” if we were to leave. But, if our country of birth doesn’t represent how we wish to live, we’re living in the wrong neighbourhood. Most people understand that, if they don’t like their neighbourhood, they’d be stupid not to leave for a better neighbourhood. But what if that “neighbourhood” is the country of your birth? Is the concept not the same?

  If someone we know foolishly tempts fate by putting his head in a crocodile’s mouth, very few of us would follow his lead. Yet, people in their millions have, throughout history, watched their countries reach the point of self-destruction and have simply gone along – accepting their fate as the failing country carries them over the cliff.

  Darwin was correct. Those who represent the future of the species are those who are the strongest and choose their own survival in times of crisis.

  

  

• With Japan's Unemployment Rate At 21 Year Lows, "A Hidden Problem" Is Revealed

  On the surface, Japan’s economy should be soaring: just last night, Japan announced that its unemployment rate was 3% in July, better than expected, and the lowest rate since 1995. The number of employed women (28.3 million) and women’s labor participation rate (66.3 percent) rose to a record high in July. According to conventional economic theory, with Japan’s unemployment rate below its long-run normal, the slack-free economy should have generous inflation, rising household spending, and vibrant growth. It has none of that, because aside from its unemployment rate, everything else in Japan’s economy is a sheer disaster.

  As Bloomberg observes, Japan’s economy is struggling to gain momentum, evidenced by slower expansion in gross domestic product than economists forecast in the second quarter. Even as the job market remains tight, the yen’s gains since the start of 2016 are hurting exports, making businesses more reluctant to invest. Meanwhile, consumers are wary of spending because wages are barely rising. This is putting pressure on the Bank of Japan to consider more monetary stimulus at its September meeting. Worse, household spending fell 0.5% in July from a year earlier, its fifth straight month, while retail sales fell 0.2% from a year earlier.

  “Overall, consumer spending remains weak as wage growth is dull,” Yoshiki Shinke, an economist at Dai-ichi Life Research Institute in Tokyo, said before the reports were released. “Households have been keeping their purse strings tight since the sales-tax increase in 2014.”

  And yet, the odd unemployment rate remains a peculiar outlier; in fact some would suggest that Japan is the canary in the coalmine to what the US is going through: a plunging “official” unemployment rate even as the economy slows down year after year.

  As it turns out, when one reads between the lines, Japan’s 20 year low unemployment rate is merely the latest statistical farce, something we first pointed out last May in “How Japan’s Unemployment Rate Dropped Even As 280,000 People Lost Their Jobs.” What is really going on is that just like the US, where a major demographic shift is taking place, in Japan a growing number of men in their prime working years are joining the ranks of Japan’s long-term unemployed – unable or unwilling to adapt to a shifting labor market as opportunities continue to shrink in areas like manufacturing.

  Ignoring Japan’s “famously low” jobless rate of 3%, hidden in the data is the fact that long-term unemployment among men ages 25-44 has jumped five-fold since the early 1990s after Japan’s economic bubble burst. There were 14.7 million male workers in the 25-44 age group in June, the lowest level in 48 years, even amid an overall increase in the workforce, according to the statistics bureau.

  

   

  For every male loser, there is a female winner, because the surging prime, male unemployment rate contrasts with increasing employment rates for Japanese women. Yet while women are showing more capacity to adapt, they are not necessarily winners either, as they are more likely than men to hold part-time jobs with relatively low pay and fewer benefits than for full-time, regular positions.

  Again, this is something we first showed well over a year ago – it appears to have only gained prominence recently, as economists finally do what they are supposed to: look beneath the surface.

  

   

  

  According to Bloomberg, though Japan’s jobless rate is the lowest since 1995, the trend of rising unemployment among men in their key working years is a disaster for Abe, who is trying to resolve a stubborn labor shortage. Well, not a labor shortage per se as that would mean at least some real wage inflation, something Japan has not had in years, but a substantially fractured job market.

  Still, over a year after we first explained what is truly going on, some economists finally admit is a problem. A “hidden problem.”

  “This is a hidden problem in Japan’s economy,” said Akane Yamaguchi, an economist at Daiwa Institute of Research, who published a report on the issue in April. “Abe’s government has to fix it as this is the generation supposed to be in the prime of their working life.

  

  Behind this is a further decline in the manufacturing base – the number of manufacturing jobs dropped to 10.3 million in June from 11.7 million a decade ago while the medical, health care and welfare sector added 2.7 million jobs, according to the statistics bureau. Employment in the service sector has risen to 74 percent as of 2014, according to the latest report by the Cabinet Office in December.

  It is almost as if Japan is a perfect leading indicator of what lies in the US future. Incidentally, that scenario would be a tragedy for America.

  “There aren’t really any training programs offered for them so once they missed the opportunity, it gets very hard for them to find a job,” Yamaguchi said. “This is a vicious cycle.” From Bloomberg:

  Bank of Japan researchers wrote about the trend in a report in March, saying unemployment of more than a year is “biased heavily” toward men ages 25 to 44. Analysts found that the number of men without jobs in this age range climbed to 310,000 in 2014, about five times more than in the 1990s. Potential reasons include men’s preference to find work in their same industry and a shift of jobs from manufacturing, the BOJ report showed.

  It is, indeed a vicious circle, and one limited not only to the labor market: rising unemployment among these men could exacerbate Japan’s demographic challenges – a rapidly aging population and a stubbornly low birth rate – that are weighing on economic growth. Only 39% of men in their 20s want to get married, a clear contrast with 67 percent three years ago, according to a survey by Meiji Yasuda Life Insurance released in June.

  The most significant reason men gave in the survey for staying single? They don’t have enough income to support a family.

  Now if only they had BTFD in the Nikkei when Abe launched his idiotic strategy of destroying the Yen and wiping out the middle class just to push equities higher.

  In retrospect, perhaps to at least delay Japan’s painful demographic death, the BOJ should consider paradropping money and giving every household free cash. If nothing else it may at least spur a temporary spike in births as the local residents encounter a brief glimmer of hope and optimism; without it Japan is literally doomed.

  

  

• Food Deflation Driving "Least Profitable Year In 20 Years" As Farmers And Grocers Get Crushed

  Sinking food prices, while good for the consumer, is devastating for almost everyone else in the supply chain from the farmer all the way to the grocers.  Farmers suffer as their key input cost, labor, is actually increasing in many states from the rash of minimum wage hikes around the country while fuel seems to move wildly with any number of daily rumors about production freezes in the middle east.  Meanwhile, grocers suffer as already thin margins get compressed even further as existing inventories get marked down. 

  Food prices have come under extreme pressure in 2016 due primarily to lower Chinese consumption resulting from a weak Chinese economy and a strong U.S. dollar.  This slack in demand has resulted in massive supply gluts for several commodities as producers failed to adjust supply quickly enough to meet new levels of demand.  In fact, the USDA recently provided a $20mm "bailout" to cheese producers and reports have surfaced that milk producers have been dumping excess milk on fields. 

  With the base inputs of corn, wheat and soybeans all tanking, food deflation has been pervasive with almost every commodity down substantially YoY. 

  Proteins, which represent nearly 20% of the typical consumer's shopping basket, are trending flat to down 8% so far in 2016.

  

   

  Dairy and grains are down mid-single digits YoY while egg prices have crashed as suppliers added tons of excess egg-laying capacity in response to last year's price spike related to the avian flu outbreak in the Midwest.

  

   

  Fresh fruit and vegetable prices have held up better presumably because consumption is less dependent on the export market.

  

   

  Meanwhile, alcohol prices continue to be the most stable of pretty much any item in the typical shopper's basket.

  

   

  Farmers are among the hardest hit when food prices decline.  In fact, we recently wrote about how sinking ag commodity prices in the Midwest were resulting in substantial declines in ag land prices and farmer incomes which then translate into an increase in farmer credit defaults (see "Farmland Bubble Bursts As Ag Credit Conditions Crumble").  Within that post we noted that farmland prices in Chicago's 7th District (IL, IN, IA, MI, WI) declined in 2014 and 2015 after only dropping in 4 other years since 1965.

  

   

  As the Wall Street Journal pointed out, farmers have been forced to dump "millions of pounds of excess milk on to fields" while the USDA provided a $20mm "bailout" to cheese producers. 

  The glut is so severe in some places that dairy farmers have been dumping millions of pounds of excess milk onto fields. The U.S. Department of Agriculture just bought $20 million worth of cheese in response to hard-hit dairy farmers’ requests. The cheese was given to food banks and others through USDA nutrition-assistance programs.

   

  Ben Moore, a sixth-generation farmer who grows corn and soybeans on some 5,000 acres in Indiana and Ohio, said 2016 is shaping up to be his least profitable year in 20 years. Facing weak crop prices, he is making do with his current tractors and combines rather than upgrading his equipment, and is pushing for lower prices on pesticides, seeds and fertilizer.

   

  On Monday, corn futures, which peaked in 2012 at more than $8 a bushel, closed at $3.11 ¾ a bushel, a seven-year low, on the Chicago Board of Trade.

   

  “We cannot withstand $4 a bushel corn,” Mr. Moore said.

   

  Farmers who had built a nest egg after a robust period earlier this decade now have exhausted those reserves, said Karl Setzer, a market analyst for MaxYield Cooperative, a West Bend, Iowa, grain marketer. “The guys that are heavily leveraged and those who don’t have a plan of action will suffer for a while.”

  But farmers aren't the only ones to suffer during a deflationary food environment.  Grocers also suffer as tiny margins get compressed even further as existing inventories get marked down to prevailing market prices.

  Falling costs are taking a toll on many food retailers. Grocery stores already have thin profit margins and deflation tends to reduce the value of their inventory. To stay competitive, they must cut prices on existing goods before lower-priced staples land on the loading dock, and have fewer opportunities to raise prices.

   

  At least six national food retailers, including Costco Wholesale Corp. and Whole Foods Market Inc., and four of the five largest publicly traded food distributors, including Sysco Corp. and US Foods Holding Corp., have reported that their margins suffered in the last quarter because of food deflation, the first time analysts can recall so many grocers singling out deflation as a big problem.

   

  “Deflation is kind of the elephant in the room,” Dennis Eidson, chief executive of SpartanNash Co., which operates 160 grocery stores from Colorado to Ohio and distributes food to 1,900 retailers across the country, told investors this month.

  Meanwhile, consumers are the key beneficiaries of food price deflation.

  With weak U.S. consumers shunning eating out more and more over the past year….

  

   

  The combination of stagnant real earnings and lower retail food prices have provided the necessary incentives to drive the highest QoQ increase in real consumption of "food for home consumption" since the 80s.

  

  

  

• WTF Headline Of The Day: UND Offers Students "Social-Justice-Themed" Housing Option

  Submitted by Amber Athey via CampusReform.com,

  • The University of North Dakota (UND) is offering students the chance to live in a specialized housing community dedicated entirely to social justice.
  • The Social Justice Living-Learning Community (LLC) joins four other LLC's: Aviation, Engineering & Mines, Wellness, and Honors.
  • Students in the Social Justice LLC will have the option to room with individuals of any "gender identity" as long as all parties agree to the living arrangement.

  

  The University of North Dakota (UND) is offering students the chance to live in a specialized housing community dedicated entirely to social justice.

  The Social Justice Living-Learning Community is “designed for students who are involved in promoting a more inclusive and just society,” and promises to provide such students with opportunities for “creating and leading positive social change.”

  The Social Justice LLC is “for students who are involved in promoting a more inclusive and just society.”  

  The website for the LLC does not have a specific schedule of events for the semester, but notes that students may engage with guest speakers, film series, book clubs, and service opportunities.

  Cheryl Terrance, faculty advisor of the UND Ten Percent Society (TPS), a student support group for the “GLBTQQIA community,” told Campus Reform that the LLC was developed by the school’s housing office, but predicted that social justice-oriented student groups such as TPS would likely be involved in programming efforts.

  Connie Frazier, Executive Director of Housing and Dining at UND, corroborated that speculation, telling Campus Reform that while LLCs are housing initiatives, they arise out of student interest and students self-select who will live in the community.

  “This is a brand new one so those students are just beginning now the discussion of how they want to define their community and what kinds of activities they would want to get involved and do,” Frazier explained.

  Students who are interested in living in a community that “believe[s] that each person shares the responsibility of creating an environment in which all residents are respected and valued—regardless of one’s age, size, gender, sexual orientation, identity or identity expression, disability, race, ethnicity, color, creed, national origin, cultural background, socio-economic status, or religious affiliation or conviction,” need only indicate interest on their residence hall application in order to be considered for the Social Justice LLC.

  The LLC also specifically points out that it is inclusive with respect to gender, and will allow people of all gender identities to room with whomever they feel most comfortable, although the application process does note that “gender inclusive room assignment requests must be mutual.”

  UND currently has four other Living-Learning Communities—Aviation, Engineering & Mines, Wellness, and Honors—most of which primarily relate to academic interests.

  

  

  

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• Greek 'Thought Police' Prosecute Bishop For (Accurately) Calling 'Refugees', "Illegal Migrants"

  Submitted by Maria Polizoidou via The Gatestone Institute,

  • The Minister for Immigration Affairs himself, repeatedly stated that 50% to 70% of migratory flows to Greece were illegal migrants and the rest were refugees. The illegal migrants come from 77 different countries.

  • If it is a "racist crime" for a citizen to express accurately the percentages of refugees and illegal migrants entering the country, what will come next, the Thought Police?

  • The real reason for prosecuting Bishop Markos, it seems, is that the government expects that Turkey's migration deal with the EU will collapse, and that if it does, the migrant flows in the coming months will increase dramatically. The government, according to some members in the opposition, has no friendly way to manage illegal migration and therefore prefers to impose restrictions on freedom of speech and prosecute anyone who objects.

  • The government might scare the Bishop of Chios Island by pressing charges against him and trying to stigmatize him as a racist. But the government will still not scare the angry majority of Greeks.

  In coalmines, from 1911 to 1986, canaries operated as an early warning system for the leakage of hazardous gases. Whenever the birds showed signs of distress, the miners knew trouble was coming.

  Greece has deep problems. Greece is presently in the "coalmine" of an endless economic and immigration crisis.

  This month, for the first time, there was a request to activate an anti-racist law, passed in September 2014, against a Greek citizen who also has institutional status.

  The coalition government of Alexis Tsipras (SYRIZA) and Panos Kammenos (Independent Greeks) asked the district attorney to prosecute the Bishop of Chios Island, Markos Vasilakis, because he dared to say, during a sermon, that the thousands of people who recently arrived from Turkey on the island of Chios are illegal migrants, and not Syrian refugees.

  Chios, the fifth-largest island of Greece, is only 3.5 nautical miles from Turkey, and therefore offers an opportunity to migrants and refugees to cross from Turkey into the European Union.

  Chios is also one of a few Greek islands that has received the largest waves of migrants. Its population of 51,320 inhabitants now accommodates, according to the latest official data, 3,078 migrants, with more on the way.

  It seems the government coalition, through the Secretary of Human Rights, has decided that the solution of Greece's migrant/refugee problem will come if the Bishop of Chios Island is prosecuted for incitement to racial hatred, and if the constitutional right of Greek citizens to freedom of speech is overturned. Secretary of Human Rights Kostas Papaioannou asked the district attorney to prosecute Bishop Markos for these specific charges.

  Is Bishop Markos Vasilakis a Greek Orthodox fanatic or a neo-Nazi? Did the church close its doors to refugees and migrants? Did the bishop try to turn the population of Chios against anyone?

  Not at all. Bishop Markos is highly educated, with a PhD in Byzantine Philology from the Philosophical and Theological School of Athens University. Since the beginning of the migrant crisis, according to the residents of Chios, Bishop Markos opened all the island's churches to accommodate the refugees and illegal migrants. Under his command, all the available spaces on the island were given to caring for whoever left his homeland and home. He has fought hard to collect clothing, shoes and food for refugees and illegal migrants. His work speaks for itself.

  If Bishop Markos were such a horrible person, why did Prime Minister Alexis Tsipras met him in his office in November 2015 to discuss the migrant crisis and never express any dissatisfaction him?

  What, then, did Bishop Markos do to infuriate the Greek government to such an extent that they turned on him?

  Bishop Markos spoke the truth. He said that the people arriving in Greece were not refugees but illegal migrants.

  Was it a lie? According to the Hellenic Coast Guard, for the period of July and August 2016, of the 1,950 people who illegally entered Greece from Turkey, only 500 — or 25% — were refugees from Syria; all the others were illegal migrants. The Minister for Immigration Affairs himself, repeatedly stated that 50% to 70% of migratory flows to Greece were illegal migrants and the rest were refugees. The illegal migrants come from 77 different countries.

  Left: The Bishop of the Greek island of Chios, Markos Vasilakis, is being prosecuted for incitement to racial hatred, because he correctly observed that most of the migrants arriving in Greece from Turkey were not refugees but illegal migrants. Right: Migrants occupying the port of Chios in April 2016.

  If it is a "racist crime" for a citizen to express accurately the percentages of refugees and illegal migrants entering the country, what will come next, the Thought Police?

  The real reason for prosecuting Bishop Markos, it seems, at least according to members of the opposition, is that the government expects that Turkey's migration deal with the EU will collapse, and that if it does, the migrant flows in the coming months will increase dramatically. The government, according to some members in the opposition, has no friendly way to manage illegal migration and therefore prefers to impose restrictions on freedom of speech and prosecute anyone who objects. Tsipras's government is leftist; the ideology and the official policy of the SYRIZA party is that of open borders for illegal migrants who wish to settle in Greece.

  Church groups in Greece believe that the government is targeting the Church in an attempt to change the country's Christian foundation and lead the society into a non-Christian era. The SYRIZA party was always "Christianophobic." Its members do not even enter Christian churches. When a notable priest is giving to migrants and being so unjustly prosecuted, the Greek Orthodox Church cannot help wondering about the government's real intentions on the issue of migrants and refugees.

  If Bishop Markos is the canary of freedom of speech, then, as many observers believe, the prosecution of people who have a view on migrant/refugee policy that differs from SYRIZA's will continue.

  If the government believes that prosecuting whoever objects will scare them into silence, as members of the opposition claim, the government is making a big mistake. The government might scare the Bishop of Chios Island by pressing charges against him and trying to stigmatize him as a racist. The government forced him to publish a press release claiming that for him, all people are created in the image of God and that all he had explained to his congregation was the legal difference between refugees and illegal migrants.

  But the government will still not scare the angry majority of Greeks.

  In a country suffering seven years of economic downturn, and where each municipality will have to accommodate 1,000 migrants, whether it wants to or not; in a country that sees on the news migrants fight each other, the natives and the police; in a country that has 61 cases of malaria and 12 municipalities already in quarantine because of the migration problem, according to the Health Ministry, and where gun sales increase day by day — the last thing we need is to abolish the constitutional rights of citizens. Violence and social unrest will then be the next stage in a drama that will have a bad end.

  In Greece — the "coalmine" of the Eurozone — the canary seems to have died. If this is the beginning of a methodical abolition of constitutional rights such as freedom of speech, Greece could turn into a Turkish style of democracy — like that of Erdogan, which he seems hell-bent on turning into an Islamic caliphate. What a very sad fate that would be for Greece, the nation which gave birth to democracy.

   

  

  

• "There Will Be Blood" – The Whole Game Is About Containing Russia-China

  Authored by Pepe Escobar, originally posted op-ed via SputnikNews.com,

  The next BRICS summit, in Goa, is less than two months away. Compared to only two years ago, the geopolitical tectonic plates have moved with astonishing speed. Most BRICS nations are mired in deep crisis; Brazil’s endless political/economic/institutional debacle may yield the Kafkaesque impeachment of President Dilma Rousseff.

  BRICS is in a coma. What’s surviving is RC: the Russia/China strategic partnership. Yet even the partnership seems to be in trouble – with Russia still attacked by myriad metastases of Hybrid War. The – Exceptionalist – Hegemon remains powerful, and the opposition is dazed and confused.

  Or is it?

  Slowly but surely – see for instance the possibility of an ATM (Ankara-Tehran-Moscow) coalition in the making – global power continues to insist on shifting East. That goes beyond Russia’s pivoting to Asia; Germany’s industrialists are just waiting for the right political conjunction, before the end of the decade, to also pivot to Asia, conforming a BMB (Berlin-Moscow-Beijing) coalition.

  Germany already rules over Europe. The only way for a global trade power to solidify its reach is to go East. NATO member Germany, with a GDP that outstrips the UK, Canada, Australia and New Zealand, is not even allowed to share information with the “Five Eyes” secret cabal.

  President Putin, years ago, was keen on a Lisbon-to-Vladivostok emporium. He may eventually be rewarded – delayed gratification? – by BMB, a trade/economic union that, combined with the Chinese-driven One Belt, One Road (OBOR), will eventually dwarf and effectively replace the dwindling post-WWII Anglo-Saxon crafted/controlled international order.

  This inexorable movement East underscores all the interconnections – and evolving connectivity – related to the New Silk Roads, the Shanghai Cooperation Organization (SCO), the BRICS’s New Development Bank (NDB), the Asian Infrastructure Investment Bank (AIIB), the Eurasia Economic Union (EEU). The crux of RC, the Russia-China strategic partnership, is to make the multipolar, post-Atlantic world happen. Or, updating Ezra Pound, to Make It New.

  Containing RC

  Russia’s pivot to Asia is of course only part of the story. The core of Russia’s industries, infrastructure, population is in the west of the country, closer to Europe. BMB would allow a double pivot – simultaneously to Europe and Asia; or Russia exploiting to the max its Eurasian character. Not accidently this is absolute anathema for Washington. Thus the predictable, ongoing no holds barred exceptionalist strategy of preventing by all means necessary closer Russia-Germany cooperation.

  In parallel, pivoting to Asia is also essential because that’s where the overwhelming majority of Russia’s future customers – energy and otherwise – are located. It will be a long, winding process to educate Russian public opinion about the incalculable value for the nation of Siberia and the Russian Far East. Yet that has already started. And it will be in full fruition by the middle of the next decade, when all the interpolated New Silk Roads will be online.

  “Containment” of RC will continue to be the name of the exceptionalist game – whatever happens on November 8. As far as the industrial-military-security-surveillance-corporate media complex is concerned, there will be no reset. Proxies will be used – from failed state Ukraine to Japan in the East China Sea, as well as any volunteering Southeast Asian faction in the South China Sea.

  Still the Hegemon will be in trouble to contain both sides of RC simultaneously. NATO does not help; its trade arm, TPP, may even collapse in the high seas before arriving on shore. No TPP – a certainty in case Donald Trump is elected in November – means the end of US economic hegemony over Asia. Hillary Clinton knows it; and it’s no accident President Obama is desperate to have TPP approved during a short window of opportunity, the lame-duck session of Congress from November 9 to January 3.

  Against China, the Hegemon alliance in fact hinges on Australia, India and Japan. Forget about instrumentalizing BRICS member India – which will never fall into the trap of a war against China (not to mention Russia, with which India traditionally enjoys very good relations.)

  Japan’s imperial instincts were reawakened by Shinzo Abe. Yet hopeless economic stagnation persists. Moreover, Tokyo has been prohibited by the US Treasury Dept. to continue unleashing quantitative easing. Moscow sees as a long-term objective to progressively draw Japan away from the US orbit and into Eurasia integration.

  Dr. Zbig does Desolation Row

  The Pentagon is terrified that RC is now a military partnership as well.

  Compared to Russia’s superior high-tech weaponry, NATO is a kindergarten mess; not to mention that soon Russian territory will be inviolable to any Star Wars-derived scheme. China will soon have all the submarines and “carrier-killer” missiles necessary to make life for the US Navy hell in case the Pentagon harbors funny ideas. And then there are the regional details – from Russia’s permanent air base in Syria to military cooperation with Iran and, eventually, disgruntled NATO member Turkey.

  No wonder such exceptionalist luminary ideologues as Dr. Zbig “Grand Chessboard” Brzezinski – foreign policy mentor to President Obama – are supremely dejected.

  When Brzezinski looks at progressive Eurasia integration, he simply cannot fail to detect how those “three grand imperatives of imperial geostrategy” he outlined in The Grand Chessboard are simply dissolving; “to prevent collusion and maintain security dependence among the vassals, to keep tributaries pliant and protected, and to keep the barbarians from coming together.”

  Those GCC vassals – starting with the House of Saud – are now terrified about their own security; same with the hysteric Baltics. Tributaries are not pliant anymore – and that includes an array of Europeans. The “barbarians” coming together are in fact old civilizations – China, Persia, Russia – fed up with upstart-controlled unipolarity.

  Unsurprisingly, to “contain” RC, defined as “potentially threatening” (the Pentagon considers the threats are existential) Brzezinski suggests – what else – Divide and Rule; as in “containing the least predictable but potentially the most likely to overreach.” Still he doesn’t know which is which; “Currently, the more likely to overreach is Russia, but in the longer run it could be China.”

  Hillary “Queen of War” Clinton of course does not subscribe to Brzezinski’s “could be” school. After all she’s the official, Robert Kagan-endorsed, neocon presidential candidate. She’s more in tune with this sort of wacky “analysis”.

  So one should definitely expect Hillary’s “project” to be all-out hegemony expansion all across Eurasia. Syria and Iran will be targets. Even another war on the Korean Peninsula could be on the cards. But against North Korea, a nuclear power? Exceptionalistan only attacks those who can’t defend themselves. Besides, RC could easily prevent war by offering some strategic carrots to the Kim family.

  In many aspects, not much has changed from 24 years ago when, only three months after the dissolution of the USSR, the Pentagon’s Defense Planning Guidance proclaimed:

  “Our first objective is to prevent the reemergence of a new rival…This requires that we endeavor to prevent any hostile power from dominating a region whose resources would, under consolidated control, be sufficient to generate global power. These regions include Western Europe, East Asia, the territory of the former Soviet Union and southwest Asia.”

  Talk about a prescient road map of what’s happening right now; the “rival”, “hostile” power is actually two powers involved in a strategic partnership: RC.

  Compounding this Pentagon nightmare, the endgame keeps drawing near; the next manifestations and reverberations of the never-ending 2008 financial crisis may eventually torpedo the fundamentals of the global “order” – as in the petrodollar racket/tributary scam.

  There will be blood. Hillary Clinton smells it already – from Syria to Iran to the South China Sea. The question is whether she – and virtually the whole Beltway establishment behind her – will be mad enough to provoke RC and buy a one-way ticket to post-MAD (Mutual Assured Destruction) territory.

  

  

• Why A Record Number Of College Grads Are Working Minimum Wage Jobs

  Over the past year we have repeatedly demonstrated that the bulk of the job additions has been focused on the lowest-paying occupations. Now, according to a new study by Bank of America, we find that these lowest paying sector have also accounted for the bulk of wage growth in the past year.

  As BofA’s Emanuella Enenajor notes, wage growth in low-pay sectors outpacing all others. “If you’ve tuned into CEO earnings calls recently, you’d know that a common theme is wage pressure, especially in low-pay sectors such as restaurants. CEOs cite the need to attract quality hires, a tightening labor market, and the push from higher minimum wages. Last year, companies like McDonalds and Walmart announced higher wages, raising fears of a sudden pick-up in wage pressure, which we argued against in our piece “Fast food, fast wages?” The data confirm a trend of rising wage pressure in low-pay sectors with limited pressure elsewhere: the bottom 20% of industries, by pay, is seeing wages rise at a 3.4% year-on-year pace so far this year, but the remaining 80% of the market is only seeing wage growth of 2.4%.”

  

  A key driver for this increase is that a number of states have raised the minimum wage this year, including California and New York. BofA estimates that this has provided a modest boost to wages, year to date. The BLS does not publish detailed industry-level data by state and earnings buckets. Here is the logic behind the calculation:

  We use a back-of-the envelope approach for this calculation. First, we estimate 1) the share of low-pay workers impacted by state-level minimum wage hikes. Ideally, we would look for the percentage of low-pay workers earning less than $9.38/hr, as states raising the minimum wage in 2016 have, on average, a minimum wage of $9.38/hr this year. Since this level of granularity is not available, we assume the share is somewhere between 30% (the share of low pay workers making less than $8.99/hr) and 50% (the share of low pay workers making less than $9.99). We assume the mid-point of 40% as our baseline. Then we calculate 2) the percentage of US employees that were located in states seeing a minimum wage increase in 2016 (about 30%). We assume the national distribution mirrors the distribution for low-pay workers.

   

  We multiply 1) by 2) to estimate the share of low-pay workers affected by state-level minimum wage increases. This simplified exercise suggests that of the 3.4% yoy increase in low-pay wages so far this year (equivalent to 46 cents), roughly 8 cents (0.6 ppts) is due to the minimum wage increase. This explains about half of the outperformance of low-pay wages versus high-pay wages. Table 2 shows sensitivity around this estimate. Given the assumptions we have had to make, our baseline estimate and the sensitivities are merely illustrative.1 We can conclude that minimum wage gains have had some part in raising low-pay wages, but are not likely the full story.

  

  Another likely reason why wages for low-pay workers are picking up is because firms have to offer a higher wage to attract workers. The supply of less-educated workers is dwindling, as seen by a shrinking labor force of 16-24 year olds and workers aged 25+ with a high school diploma or less (no college) (Chart 2).

  One explanation for this is that increasinly more young Americans opt to take advantage of generous student loans (now at a record $1.3 trillion), instead of entering the work force, where the best they can hope for are jobs paying far lower wages relative to expectations. As BofA confirms, this cohort has been declining since the start of this recovery, probably reflecting the continued push towards higher education, as well as demographics which has reduced the number of younger workers willing to flip burgers for a few years while they save for college.

  This trend contrasts sharply with the labor supply of workers with at least some college/bachelor’s degree. Here, supply has been growing, possibly in response to a strengthening recovery as graduates opt to enter the labor force rather than study more.

  One very adverse side effect of this trend is that increasingly more low wage employees are those with a college education, in the form of a Bachelor’s Degree or higher, as they are unable to leverage their diploma credentials to get a better paying job, while the only ones hiring are those seeking minimum-paid workers.

  As firms in sectors with low pay levels struggle to attract workers, they attract more educated/skilled workers with higher wages, but certainly not high enough. Today,  23% of workers in low pay sectors have a bachelor’s degree or higher, up from 18% 15 years ago (Chart 3).  

  This means that the share of college grads working minimum wage jobs is now an all time high; jobs which barely cover the cost of living, let along covering interest expense on student loans.

  

  A second adverse consequence is that there is little risk that accelerating wages in low pay sectors will spill over to faster overall wage growth in a meaningful way, according to BofA.

  First, low-pay wage growth does not tend to lead wage trends in higher paid sectors, based on a Granger causality test. If we look at production and non-supervisory workers (Chart 4) for which there is a longer time series, we can see that low-page wage growth tends to peak and bottom out at about the same time as top 80% wage growth, although low-pay wages tend to exhibit more volatility. This greater “flexibility” in low-pay wage inflation contradicts findings of San Francisco Fed researcher Mary Daly, which shows evidence of pent-up wage deflation for workers with lower educational attainment.

  

  BofA then asks the logical question: what will trigger a more meaningful increase in wages outside of the low-pay sectors? It answers that any upward pressure on the national minimum wage could have a modest impact on overall wages, but again, much of this  would be driven by gains in low-pay wages. In our view, wage growth outside of low pay sectors is likely to gradually increase as the overall labor market tightens. However, the trend will be slow, and will likely remain below that of low pay sectors, as the labor force of workers with higher educational attainment (who would presumably be competing for higher-paid work) has been expanding, pointing to a tempering force on wages.

  * * *

  The third, and final, adverse consequence from all of this governmental intermediation in wage allocation is something else we have covered extensively, most recently overnight in “Minimum Wage Claims Its Latest Victims – Ashley Furniture Slashes 840 Jobs In California“, and more extensively in “Something “Unexpected” Happened When Seattle Raised The Minimum Wage” where we said the following:

  Despite our efforts to [convince progressives that raising minimum wages to artificially elevated levels is a bad idea] might be, we thought we would, yet again, report the latest empirical evidence proving that minimum wage results in permanent jobs losses for the same low-skilled workers they’re intended to help.  The latest research comes from the University of Washington which researched the impact of Seattle’s recent minimum wage hike on employment in that city (as background, Seattle recently passed legislation that increased it’s minimum wage to $11 per hour on April 1, 2015, $13 on January 1, 2016 and $15 on January 1, 2017).  “Shockingly”, the University of Washington found that Seattle’s higher minimum wages “lowered employment rates of low-wage workers” (the report is attached in its entirety at the end of this post). 

  In other words, the higher minimum wages are raised, the faster the corporate response of laying off a proportional number of workers will kick in, or as in the case of Starbucks, simply cutting the overall number of work hours across all employees, the net result of which is the same, if not lower, overall compensation.

  Sadly, with long-term US productivity continuing its descent to all time lows…

  

  … this trend will not change, and we expect even more government meddling, even greater wage gains for low-paid workers leading to less wage gains for the rest of the labor force, more layoffs and so on, until the US economy finally slides into a contraction which not even the NBER will be able to “seasonally-adjust” away.

  

  

• 4 Millennials, 4 Salaries: Survey Finds Millennials At All Income Levels Happy, Self-Assured And Completely Delusional

  Esquire Magazine was actually able to track down 4 millennials not currently living at home with mom to quiz them on their current financial situation as well as their outlook for the future.  Interviewees were chosen at varying income levels ranging from $11,000 per year up to $1.5 million to see how annual income impacted their outlook on life.  To our complete "surprise," the one unifying theme in the responses was that millennials seem to be fairly self-assured and optimistic about their future despite the overwhelming mountain of economic evidence that suggests they're totally screwed.  Seems as though even the millennials that have grown up and gotten jobs have found a way to maintain the "safe space" bubble they created in college and have managed to completely block out reality…fascinating stuff.  That said, we would note this can't really be considered a "scientific" poll given the small sample size of 4, but the results do seem to be remarkably consistent with our past observations of this particular generation. 

  Our key takeaways from the survey were the following:

  • Millennials are extremely HAPPY – 3 out of 4 millennials ranked their "happiness" as 8 or 9 out of 10.  The lowest-income millennial ranked his happiness at a 4 but we assume it has more to do with that fact that he lives in Washington D.C. than his income level…this nuance pretty much disqualifies his response to this particular question.  
  • Millennials have an inflated sense of their self-worth – 3 out of 4 millennials seem to think their earnings will grow at an annual rate of 17% which is just "slightly" higher than overall wage growth which has been running around "flattish."  So good luck with that.
  • Millennials feel over-taxed – 3 out of 4 millennials thought they were over-taxed…though we have a sneaking suspicion many of them vote for politicians that would like to raise their taxes…go figure.

  It's unclear if millennials are happy because of their inflated sense of self-worth or the other way around…we'll let you decide. 

  The full results for the survey are below:

  

  Ed Zitron (30) – $1,500,000 per year

  Location: Oakland, California

  Occupation: Founder & CEO of a PR Firm

  Salary: $1.5 million

  Family status: Getting married next year.

  Homeowner? Renter? Homeowner. It's an $800,000 house in the Oakland Hills.

  Monthly Mortgage: $3,200, but I choose to pay more than the minimum.

  Do you keep a budget? Yes, we try to keep our expenses below $2,000 or $3,000 per month.

  What's a weekly grocery bill for you? We sometimes get away with $200, sometimes $500. It depends on what I'm making, because I sous-vide a lot, and my fiancée is an amazing chef. We cook at home most nights.

  One thing your family needs but can't afford: I can't think of anything.

  One thing you want but can't afford: It's trite to say, but I'd like to bring my family—who are in England, where I'm from—out to America. And as silly as it sounds, I wish I could afford a second home in London. Also, one in Hawaii.

  The last thing you bought that required serious planning: The wedding.

  Do you have credit cards? We have three, and we pay them off in full every month.

  How much debt are you carrying now? Just the mortgage.

  Saving for retirement? We are. I would say I have a decent sum in retirement, and a rainy day fund. I put a sizable amount away each month in an IRA.

  At what age would you like to retire? Tomorrow? [Laughs] As soon as possible would be great. But truthfully, I'll probably be aiming for around 45. That would be the dream.

  College plans for your kids? Yes. I've already set aside $15,000 to go into a 529 Plan—it's tax-free, and our child will have to use the money toward higher education.

  Looking at your current career prospects, how much money do you think you'll be earning in ten years' time? At least $2 million a year. But I'm just happy to be making what I make right now. I feel so lucky. I have a Tesla, so I realize I'm kind of a douche. But I don't live ostentatiously. I don't take drugs, I don't do crazy parties, I don't rent private jets, I don't do any of the things I've always associated with classical richness.

  How happy are you on any given day, on a scale of one to ten? I'd say an 8.5 or a 9. I look at people who make more money than I do, like crazy rich CEOs, and they seem so overworked and so sad and so angry at everything. They want more, they feel they should have as much Mark Zuckerberg. I'm really happy—I live in this wonderful home. I have a big television. When I need to de-stress, I can take a drive through Napa. Not everyone gets to do these things.

  How often do you worry about money? That's the funny thing: I've never stopped worrying. That doesn't mean that I'm sitting there every second of the day saying, "Oh God, that was a $4 latte." But I'm immensely conscious of what things cost. I don't just have a budget, I have—how do I describe it—a running total in my head of what everything I'm doing costs, and I know what expenditures I can make. It's an awareness, not an anxiety.

  How much money do you think you'd need to have the life you want? I have it now. I'm happy. Sure, I wish I could pay off the mortgage right now. That would be awesome. But I'm really lucky for the life I have, and for the love I have, and being able to provide for my fiancée and my friends. One thing my mother always taught me was that if you can't share money with other people, it's not worth having.

  Do you think you have more or less financial opportunity than your parents did? I think I have more. My job would not have existed in their time, and if it did, I don't think I'd do so well. I suffer from a learning disability, so if I was required to write, I don't think I'd be able to do it. Without the Internet, I would not be able to make any money.

  Do you think being exposed to the lives of your friends via Facebook and Instagram affects your spending habits? No. You should never not spend on yourself, but you should also not be bloody stupid.

  Do you think your taxes are too high? No. Don't get me wrong, it sucks. But if you make a bunch of money, you should pay a bunch of tax. It's not garnishing your wages; it's being a part of society. And if you can't accept that, I don't know what kind of human being you are.

   

  Josh Cohen (33) – $250,000 per year

  Location: Stamford, Connecticut

  Occupation: Founder & CEO, Junkluggers. We go to people's homes or businesses and haul away stuff that they no longer want or need. What we're all about is separating stuff for reuse, donations, and recycling, with the goal of keeping as much out of landfills as possible.

  Family Status: Married with two-year-old twins—a boy and a girl—and a dog named Otis.

  Homeowner? Renter? Homeowner.

  Monthly mortgage: Around $3,500 per month.

  Do you keep a budget? We don't. We typically spend the same amount every month and we've been able to afford it.

  What's a weekly grocery bill for you? We spend close to $600 a week on food. We mostly eat in.

  One thing your family needs but can't afford: I don't think we need anything we don't have.

  One thing you want but you can't afford? A nicer house, nicer cars, a boat—we live by the water, so that would be awesome. And we would love to travel more.

  The last thing you bought that required serious planning and budgeting for? Our house. We bought it three years ago. We had to start saving money and liquidating some of our stock accounts. And I needed to start making more money. 

  Do you have credit cards? We've got one—we use that for everything.

  How much debt are you carrying right now? Just the mortgage.

  Saving for retirement? We put away around $5,000 to $10,000 a year into a retirement account. But I also consider my business to be our retirement savings plan.

  At what age would you like to retire? I don't think I will. Maybe I'll do things differently when I'm older—grow the business so that we have more support staff and a larger executive team.

  College plans for your kids? We put aside some money every month for them. We have a tax-free 529 Plan.

  Looking at your current career prospects, how much money do you think you'll be earning in ten years' time? $1 million a year. That's based on how I expect my business to grow. We're franchising right now and expanding throughout the country.

  How happy are you on any given day, on a scale of 1 to 10? I go through tremendous highs and lows as a business owner. So I would say there is no average. I woke up yesterday feeling like a 2. I got my shit together, worked out, and got busy at work. Then I woke up today and I'm probably closer to an 8 or a 9. I'm glad you and I talked today.

  How often do you worry about money? Sometimes. I started the business from scratch when I was 21, so I'm used to bootstrapping.

  How much money do you think you'd need to have the life you want? In some ways I feel like I am living the life I want. I've got a beautiful family, a growing business, and I'm making decent money. But I guess many people—including me—want more. I would love to have another house somewhere else, cooler cars. So I would probably say double what I'm earning now. Or triple.

  Do you think you have more or less financial opportunity than your parents did? More. My Dad is a business owner—he owns an accounting firm. But I know my house is more valuable than his is, for instance. And I believe I earn more.

  Do you think being exposed to the lives of your friends via Facebook and Instagram affects your spending habits? I try not to spend too much time on those sites, because a lot of times when you see what other people are posting it makes you feel inferior. Like you're not doing enough. There's always someone more who's successful. Or living a life that seems better.

  Do you think your taxes are too high? Yes, always. Of course. I think they're too high personally, and I think they're too high for business. From a business perspective, we're not incentivized to grow. And the government doesn't spend the money wisely. I believe if we had more people with business experience in power—not necessarily Donald Trump—then it would be really good for the economy, and the country would be better-run.

   

  Kelby Green (33) – $55,000 per year

  Location: Houston, TX

  Occupation: Business owner, CEO of Common Cents Content & Marketing, a digital-marketing agency that works with financial advisors. I also have a personal-finance blog for millennials called The Frugalennial.

  Family status: Married with two daughters—one and two years old.

  Homeowner? Renter? Homeowner.

  Monthly Mortgage: $1100

  Do you keep a budget? Absolutely! My wife and I are frugal by nature, but having two kids and running a small business requires that we know where every penny of our budget is going. Our largest expenses are mortgage and daycare.

  What's a weekly grocery bill for you? $75 per week. We eat at home ninety percent of the time. We figure out—well, my wife figures out—when certain items go on sale. And we have a system of using coupons. I'm looking at the dollars and cents, so as long as we can stay within our budget,we may spend the extra time going to three stores instead of one.

  One thing your family needs but can't afford: A vacation! Our last one was a year and a half ago, before my youngest was born.

  One thing you want but can't afford: Updated kitchen appliances. I wouldn't say 'can't afford'—it's more like the purchase is not a priority. Like I mentioned, we spend a good amount of time cooking at home, and most of our appliances are probably original to the house, which was built in 1971. With a gentle nudge here and there they work just fine. Though we did update the dishwasher for my wife's birthday—she asked her family to contribute to our dishwasher fund, and we paid the $150 difference.

  The last thing you bought that required serious planning: We budget our money all of the time, so we've already been planning for everything—I could tell you exactly where all my money is going over the next five years.

  Do you have credit cards? I have a few but I don't use them anymore. We're hyper-focused on paying down debt.

  How much debt are you carrying now? With student loans and credit cards, I would say around $30,000 to $35,000.

  Saving for retirement? My wife is contributing to hers, mainly to get the employer match. But I've put mine on hold while I aggressively pay down debt and try to build my business.

  At what age would you like to retire? I don't think I'll ever retire. Not that I won't be able to, I just don't see myself wanting to.

  College plans for your kids? We've talked about it, but haven't pulled the trigger on actually setting up a plan. It's one of those things where it's so far down the line…but that's a terrible way to look at it. There's no valid excuse for it besides life being crazy.

  Looking at your current career prospects, how much money do you think you'll be earning in ten years' time? I'd say three times what I'm earning now—so around $150,000—would be a reasonable expectation.

  How happy are you on any given day, on a scale of one to ten? A solid 8. My business is new so I put in a ton of work there, but it's 100% worth it. My office is in my house, so I don't have to miss out on seeing my family due to working so much. I think that helps a lot.

  How often do you worry about money? Fairly often. I was not always frugal—growing up, I was an impulsive shopper. I don't want to fall into those same mistakes.

  How much money do you think you'd need to have the life you want? I live a simple life, so I'm perfectly happy with the amount I earn now. Sure, by earning more we could buy more stuff and travel more often, but I don't know that it would move the happiness needle much.

  Do you think you have more or less financial opportunities now than your parents did? Yes and no. Being able to create a business around something I enjoy and doing it completely online is an opportunity that my parents didn't have. And the opportunity to make money is greater than in previous generations. But millennials are saddled with so much student-loan debt. We're not getting an even start. We're digging ourselves out of a hole.

  Do you think being exposed to the lives of your friends via Facebook and Instagram affects your spending habits? Yes, no doubt about it. You flip through Instagram and see your friends in the same salary bracket as you, and they're traveling every other month and taking pictures on the beach. It makes you think, What am I doing wrong? I work hard. I deserve a trip.

  Do you think your taxes are too high? No, I'm actually fine with my taxes. Of course, I wouldn't have a problem if they were lowered a little.

   

  Tyron Harris (28) – $11,000 per year

  Location: Washington, D.C.

  Occupation: STRIVE DC helped prepare me to find work. I landed a job in early July as an overnight stocker for a grocery store. To get there, I take a bus, two trains, and then I walk almost a mile—it takes me an hour and a half. The work is part-time. I've been looking for full-time work. I've applied to a million and one different things. The job market is so small and there are so many people who are more qualified than me.

  Family status: I have a six-year-old daughter. She stays with her mother.

  Homeowner? Renter? I rent a room in a house owned by a friend of the family. She cuts me some slack. If it wasn't for her, I'd more than likely be homeless.

  Monthly Rent: $250.

  Do you keep a budget? At the beginning of the month I pay my cellphone bill—about $40 each month. The grocery store has a union, so they take their dues—around $10 or $12 each week. And then I pay the lady I live with—sometimes I pay her $50, sometimes $75, until I get to $250.

  What's a weekly grocery bill for you? I can eat whatever's in the house. The woman I live with just asks me to not eat her out of house or home.

  One thing your family needs but can't afford: A car. I'm trying to get a brickmason apprenticeship. Most of the work is in Virginia and Maryland, so they need me to have my own transportation before accepting me. I've saved $175, but I need around $1100.

  One thing you want but can't afford: My own place to live in.

  The last thing you bought that required serious planning. A pair of New Balance shoes. They were $160—I saved up for six months. I use them at work because they're comfortable.

  Do you have credit cards? Yes, one credit card.

  How much debt are you carrying now? Not much—about $480. I was raised to not spend money you don't have. I only use it in real pinches, or something for my daughter that her mother can't provide.

  Saving for retirement? No. It's not a reality right now. I was taught at an early age to think about it. But it's one thing to know how to do it, and it's another to have the funds.

  At what age would you like to retire? It would be nice to retire before I'm sixty. But that's unrealistic.

  College plans for your kids? I would love to, but right now it's not an option.

  Looking at your current career prospects, how much money do you think you'll be earning in ten years' time? If I become a brickmason, it's not farfetched to think I'll make $100,000.

  How happy are you on any given day, on a scale of one to ten? I'd say a 4. Staying awake all night, lifting boxes, cutting your hands—it's so much labor. And at the end of the week, after I pay my bills, I've only got an extra $30 to my name.

  How often do you worry about money? Every day, five or six times a day.

  How much money do you think you'd need to have the life you want? I don't need much—$50,000 a year.

  Do you think you have more or less financial opportunity than your parents did? We have more opportunity, but the price of living is unbearable.

  Do you think being exposed to the lives of your friends via Facebook and Instagram affects your spending habits? I don't have Facebook—I figured that if I had time to look at Facebook, I had time to be applying to jobs. So I deactivated my account. But I have Instagram. When you look at your friends' pictures and see all the fun they're having, you don't become bitter, you want to become better. You shouldn't have to save for sixth months to go out with your friends.

  Do you think your taxes are too high? In a sense I do. The middle and lower classes are taxed too much. The upper class isn't taxed enough. I respect businesses, and I respect when they're savvy enough to find legal loopholes that'll allow them to save money. Because more than likely, if I were in their shoes I'd do the same thing.

  

  

• Germans "Lose Faith In Banks", Rush To Buy Safes

  It is no secret that one of the most admirable qualities of the German public – in addition to its striking propensity for thrift in the aftermath of Weimar – is its stoic patience and pragmatism when dealing with adversity. However, over the past month, we grew increasingly confident that said patience would be tested, if only when it comes to matters of monetary trust vis-a-vis the local, neighborhood bank. First it was the news that Raiffeisen Gmund am Tegernsee, a German cooperative savings bank in the Bavarian village of Gmund am Tegernsee, with a population 5,767, finally gave in to the ECB’s monetary repression, and announced it’ll start charging retail customers to hold their cash. Then, just last week, Deutsche Bank’s CEO came about as close to shouting fire in a crowded negative rate theater, when, in a Handelsblatt Op-Ed, he warned of “fatal consequences” for savers in Germany and Europe – to be sure, being the CEO of the world’s most systemically risky bank did not help his cause.

  That was the last straw, and having been patient long enough, the German public has started to move. According to the WSJ, German savers are leaving the “security of savings banks” for what many now consider an even safer place to park their cash: home safes.

  Indeed, as even the WSJ now admits, for years, “Germans kept socking money away in savings accounts despite plunging interest rates. Savers deemed the accounts secure, and they still offered easy cash access. But recently, many have lost faith.” We wondered how many “fatal” warnings from the CEO of DB it would take, before this shift would finally take place. As it turns out, one was enough.

  To be sure, the Germans are merely catching up to where the Japanese were over half a year ago. As we wrote in February, “look no further than Japan’s hardware stores for a worrying new sign that consumers are hoarding cash–the opposite of what the Bank of Japan had hoped when it recently introduced negative interest rates. Signs are emerging of higher demand for safes—a place where the interest rate on cash is always zero, no matter what the central bank does.

  “In response to negative interest rates, there are elderly people who’re thinking of keeping their money under a mattress,” one saleswoman at a Shimachu store in eastern Tokyo told The Journal, which also says at least one model costing $700 is sold out and won’t be available again for a month.

   

  

   

  “According to the BOJ theory, they should have moved their funds into riskier but higher-earning assets. Instead, they moved into pure cash that earned nothing,” Richard Katz, author of The Oriental Economist newsletter wrote this month.

   Now it’s Germany’s turn.

  “It doesn’t pay to keep money in the bank, and on top of that you’re being taxed on it,” said Uwe Wiese, an 82-year-old pensioner who recently bought a home safe to stash roughly €53,000 ($59,344), including part of his company pension that he took as a payout.

  Interest rates’ plunge into negative territory is now accelerating demand for impregnable metal boxes.

  Burg-Waechter KG, Germany’s biggest safe manufacturer, posted a 25% jump in sales of home safes in the first half of this year compared with the year earlier, said sales chief Dietmar Schake, citing “significantly higher demand for safes by private individuals, mainly in Germany.”

  Burg-Waechter KG, Germany’s biggest safe manufacturer, posted a 25% jump
  in sales of home safes in the first half of this year compared with the
  year earlier, said sales chief Dietmar Schake, citing “significantly higher demand for safes by private individuals, mainly in Germany.”

  Rivals Format Tresorbau GmbH and Hartmann Tresore AG also report double-digit-percentage German sales increases. “Safe manufacturers are operating near their limits,” said Thies Hartmann, managing director of Hamburger Stahltresor GmbH, a family-owned safe retailer in Hamburg, which he says has grown 25% since 2014. He said deliveries take longer from safe makers, some of which are running three production shifts.

  

  Thies Hartmann, managing director of the Hamburger Stahltresor store in Hamburg

  The biggest irony in all of this, as we first pointed out last October, is the epic mistake that central bankers did by unleashing negative rates: instead of forcing savers to spend, it has – at least in the case of Japan and Germany – forced them to not only pull their cash out of the bank, thereby further slowing the velocity of money, but to save even more, forcing central bankers to come up with even more unprecedented “solutions” to a problem of their own creation.

  

  As the WSJ adds, in a country where few people buy stocks, the possibility of having to pay fees on deposits has turned savers’ world—and their piggy banks—upside down.

  “The moment the bank tells me I have to pay interest on my deposit I’ll take my €50,000 or whatever it is and put it under my pillow, or buy a safe and stick the money inside,” said Dagmar Metzger, a 53-year-old entrepreneur in Munich.

  Alas, with every passing day, that moment gets ever closer.

  Meanwhile, for those who can’t find or afford a safe, there are other options. Ms. Metzger, a game hunter, said she would also consider squirreling cash away in her gun cabinet, which has solid locks. Paying to save is “preposterous,” said Marlene Marek, 58, owner of a Frankfurt bistro. “I would rather withdraw my money and stash it at home, or keep it in a safe-deposit box at a bank.”

  She is not the only one – many Germans have a similar idea, which has led to safes selling out, and creating waiting lists for safe-deposit boxes in some big cities as a growing number of Germans prefer self-sufficiency. “When you put money in a safe-deposit box, everyone notices, and you’re paying fees,” said Mr. Wiese, the Hamburg retiree, who said his new safe is roughly twice the size of a hotel safe.

  And while one could blame retail savers for being conspiracy theorist nuts, in Germany it is the very biggest corporations who have been, throughout 2016, rebelling against the ECB’s idiotic policies. Indeed, banks and other financial institutions themselves are also keeping more cash. As we reported earlier in the year, reinsurance giant Munich Re AG said earlier this year it would cache over €20 million in cash in a safe, alongside gold bars the company stockpiled two years ago.

  “We are testing that and are happy that this works without any glitches and at reasonable costs,” said Chief Financial Officer Jörg Schneider. The reinsurer said it would consider augmenting its cash stash.

  Finally, in what may be the pinnacle fo practicality over stupidity, Germans are particularly focused on safes because they prefer cash to plastic. “Only cash is real,” goes an old saying.

  Well, yes, until it is confiscated as sad Harvard economists have been urging in recent months.

  Unlike their more “hip” Scandinavian peers, roughly 80% of German retail transactions are in cash, almost double the 46% rate of cash use in the U.S., according to a 2014 Bundesbank survey. Germans also keep more cash in their wallets and visit ATMs more often, withdrawing on average $256 at a time, the study found. Americans withdraw $103 on average.

  Germany’s love of cash is driven largely by its anonymity. One legacy of the Nazis and East Germany’s Stasi secret police is a fear of government snooping, and many Germans are spooked by proposals of banning cash transactions that exceed €5,000. Many Germans think the ECB’s plan to phase out the €500 bill is only the beginning of getting rid of cash altogether.

  And they are absolutely right; we can only wish more Americans showed the same foresight as the ordinary German.

  Meanwhile, the WSJ concludes, Ms. Metzger is a member of an activist group demanding the existence of cash be guaranteed in Germany’s constitution.  “I don’t want to become completely transparent,” she says.”I don’t want everyone to know whether I buy chocolate, strawberries or mangoes at the store.”

  Alas, if “erudite” Harvard economists like Larry Summers and, now, David Rogoff get their way, Ms. Metzger’s, and everyone else’s, worst nightmare will soon come true.

  Until that moment, however, as a final reminder, in a fractional reserve banking system, only the first ten or so percent of those who “run” to the bank to obtain possession of their physical cash and park it in the safe will succeed. Everyone else, our condolences.

  

  

• Former Barrick Gold President: "A Big Move Has Begun. There's Something Fundamentally Wrong With The Economy"

  Submitted by Mac Slavo via SHTFPlan.com,

  There are few people as knowledgeable about  global commodities markets, fundamentals, cycles and the effects of investor sentiment on price movements as Jim Gowans. He is the former Co-President of mega-mining company Barrick Gold, the former President of De Beers Canada, and currently serves as the President and Chief Executive Officer of mineral exploration firm Arizona Mining.

  In a recent interview with SGT Report Gowans warns that economic and monetary fundamentals suggest we have some deep rooted problems with no resolution in sight. Having personally witnessed the effects of Zimbabwe’s hyperinflation , Gowans notes that when currencies around the world finally collapse from the weight of unlimited quantitative easing, paper money as we know it today will no longer be a viable mechanism for trade. When that inevitable day comes for the U.S. dollar, the general populace will have no choice but to replace it with “in-kind” commodities like gold that will be used for trading for essential goods.

  I was living in Africa, in Botswana, and looking over across the border into Zimbabwe watching hyperinflation to the point where people were collecting million dollar bills that were worth nothing… ZimDollars they called it… I had a few friends of mine in Zimbabwe that were trillionaires…

   

  In Zimbabwe they went to the U.S. dollar… in other places they’ll go to in-kind commodities like gold. 

  Watch the full interview with Arizon Mining’s Jim Gowans:

  
  (Watch at Youtube)

  Gowans says that mining is simply not sustainable for the companies who produce gold if the price is $1100 per ounce or lower, which explains why we’ve see a powerful up-trend in precious metals since the start of 2016:

  You just look at the world economies and you know that the fundamentals are there for a significant change in gold price… it wasn’t sustainable at around $1100 or $1150… It doesn’t surprise me at all… I think you’re going to see gold start to rise again because of the fundamentals in the world economy.

   

  …

   

  I think a move has begun… When you have bonds at negative interest rates you know there’s something fundamentally wrong with the economy. That’s a statement of the relative safeness of currencies… when people actually feel they can buy that bond and pay money to keep it in that bond just because it’s a safer haven than other investments then that’s pretty bad.

  Deep pocketed global investors and Wall Street institutions have certainly taken notice of the impending meltdown of global currencies and economies. That’s why people like George Soros, Stanley Druckenmiller and Carl Icahn are rapidly shifting capital into precious metals.

  That’s telling us people are concerned about currencies… When you see gold and silver equities, and those are just proxies for the metal, it’s a much more convenient way to invest than owning physical… They see gold and silver as a much more reliable investment than bonds from all the central banks and the like… that’s what’s been driving gold and silver equities. 

  Keeping in mind that absolutely nothing has changed for the better since the Crash of 2008 and that the Federal Reserve has hinted at even more large-scale central bank intervention, we can reasonably conclude that the situation is about to get even worse.

  That, of course, can mean only one thing: the price of commodities, especially safe haven assets like gold and silver, will continue to rise.

  

  

• Recent Surge In Inner-City Heroin Overdoses "Unlike Anything We've Seen Before"

  For the past week, the the city of Cincinnati has been battling an unprecedented spike in heroin overdoses that has left police and emergency responders drained.  Per the Cincinnati Enquirer, in a “normal” week, police and healthcare officials indicate that Cincinnati encounters roughly 25-30 heroin-related overdoses.  That said, within the past 6 days that number has spiked by over 5.5x as 174 overdose cases have been reported by local emergency rooms.

  Given the sudden spike in overdoses, local police authorities speculate that the heroin supply has likely been cut with a potent painkiller called fentanyl or the mega-potent animal opioid Carfentanil.  Carfentanil, an analgesic for large animals including elephants, is about 10,000x stronger than morphine and was discovered in July in the region’s heroin stream.  Police are still working to find the source of the deadly heroin supply. Per Cincinnati Enquirer:

  “These people are intentionally putting in drugs they know can kill someone,” Synan told WCPO. “The benefit for them is if the user survives, it is such a powerful high for them, they tend to come back. … If one or two people die, they could care less. They know the supply is so big right now that if you lose some customers, in their eyes, there’s always more in line.”

   

  “We’re working very closely to find the source dealer,” said Newtown Police Chief Tom Synan, who heads the law enforcement task force for the Hamilton County Heroin Coalition. He said local, state and federal authorities are combining their forces to investigate the source or sources. “We don’t have anything solid to go off of.”

   

  “This is unprecedented to see as many alerts as we’ve seen in the last six days,” said Hamilton County Health Commissioner Tim Ingram. He was referring to a surveillance system that alerts the public health department when an unusual number of drug-related emergency-room encounters occur.

   

  “We can’t confirm in the short term if someone’s had fentanyl, carfentanil or heroin – the tests flag only as positive or negative for opiates,” said Nanette Bentley, spokeswoman for Mercy Health. Tests could be ordered, but results could take days to weeks to come back, she said.

  Further complicating matters is that Narcan, the nasal-spray version of the drug Naxolone, which reverses the side effects of an overdose, is not working anymore, at least not as reliably. Usually one or two doses of Narcan will stabilize a patient but doctors say that patients under the influence of Carfentanil can require up to 5x the normal dosage.

   

  While it’s still unclear which drug may be causing the spike in overdoses, drug enforcement officials are quite confident the source supply is flowing in from overseas. 

  There’s no telling whether carfentanil is the drug that was sold to the overdose victims, but investigators believe it’s a possibility.

   

  If that’s a question, the drug could be identified by Drug Enforcement Administration lab tests, however, said Melvin Patterson, a DEA spokesman in Washington, D.C.

   

  The DEA has been on alert for the animal opioid since its appearance in U.S. and at the Canadian border.

   

  There’s little doubt that the carfentanil that’s showing up in street drugs is from overseas, just as fentanyl is manufactured and brought across the U.S. borders, Patterson said.

   

  “It’s such a restricted drug there’s only a handful of places in the United States that can have it,” he said.

  This rising crisis comes as many states across the country are pushing ballot measures to legalize marijuana use.  Several studies over the years have linked marijuana use to more dangerous drugs like methamphetamine and heroin earning it the title of the “gateway drug.”  Robert L. DuPont, President of the Institute for Behavior and Health and the first director of the National Institute on Drug Abuse, recently pointed out the flawed logic of legalizing marijuana use in an article published in the New York Times.

  It should come as no surprise that the vast majority of heroin users have used marijuana (and many other drugs) not only long before they used heroin but while they are using heroin. Like nearly all people with substance abuse problems, most heroin users initiated their drug use early in their teens, usually beginning with alcohol and marijuana. There is ample evidence that early initiation of drug useprimes the brain for enhanced later responses to other drugs. These facts underscore the need for effective prevention to reduce adolescent use of alcohol, tobacco and marijuana in order to turn back the heroin and opioid epidemic and to reduce burdens addiction in this country.

   

  People who are addicted to marijuana are three times more likely to be addicted to heroin.

   

  The legalization of marijuana increases availability of the drug and acceptability of its use. This is bad for public health and safety not only because marijuana use increases the risk of heroin use.

   

  The aggressive commercialization of marijuana that is now rampant and still growing is particularly damaging to the public health because it markets marijuana and an array of increasingly potent products in ever more attractive ways that encourage marijuana use and frequent highdose THC use.

   

  We are at a crossroads. Legalizing marijuana will have lasting negative effects on future generations. The currently legal drugs, alcohol and tobacco, are two of the leading causes of preventable illness and death in the country. Establishing marijuana as a third legal drug will increase the national drug abuse problem, including expanding the opioid epidemic.

  Of course, DuPont’s concerns about the negative health effects of marijuana and opioids doesn’t even touch upon the staggering spikes in violent crime that follows the distribution chain of these drugs in our inner cities.  One has to look no further than Chicago for evidence of how quickly violent crime in a city can spiral out of control. 

  

  

• The "Devastating" Truth Behind America's Record Household Net Worth

  Every quarter, as part of its Flows of Funds statement, the Fed releases a detailed breakdown of America’s assets and liabilities, of which the most interesting section is the one dealing with US household wealth and debt, and most importantly, their net worth. The last such release in June showed that as of March 31, total US household assets rose decidedly above $100 trillion, hitting an all time high $102.6 trillion, offset by $14.5 trillion in liabilities, resulting in $88.1 trillion in household net worth. It is worth noting that of this $100+ trillion in assets, 69% was in the form of financial assets (stocks, mutual funds, pensions, deposits, etc), and only $31.5 trillion was real, tangible assets including $26 trillion worth of real estate.

  

   

  To be sure, the media loves reporting this number as proof of successful Obama policies: after all how can anyone complain when US households have never been richer, at least according to the Fed’s estimate of their net worth?

  Well, if the chart above was indeed an accurate depiction of the prevailing US net worth, then it would indeed be a thing to celebrate. Alas, it is anything but, and as Pedro da Costa points out, when one looks beneath the surface, a “devastating” picture emerges: US inequality like no-one has seen it before.

  To help with this peek behind the scenes, we look at the latest, just released CBO report on Trends in Family Wealth, which shows that far from equitable, US wealth has never been so skewed.

  The picture in question:

  

  Here are the CBO report’s summary findings:

  In 2013, aggregate family wealth in the United States was $67 trillion (or about four times the nation’s gross domestic product) and the median family (the one at the midpoint of the wealth distribution) held approximately $81,000, the Congressional Budget Office estimates. For this analysis, CBO calculated that measure of wealth as a family’s assets minus its debt. CBO measured wealth as marketable wealth,  which consists of assets that are easily tradable and that have value even after the death of their owner. Those assets include home equity, other real estate (net of real estate loans), financial securities, bank deposits, defined contribution pension accounts, and business equity. Debt is nonmortgage debt, including credit card debt, auto loans, and student loans, for example.

  But to get to the stunning punchline, one has to read The section on How Is the Nation’s Wealth Distributed? Here is the answer:

  • In 2013, families in the top 10 percent of the wealth distribution held 76 percent of all family wealth, families in the 51st to the 90th percentiles held 23 percent, and those in the bottom half of the distribution held 1 percent.
  • Average wealth was about $4 million for families in the top 10 percent of the wealth distribution, $316,000 for families in the 51st to 90th percentiles, and $36,000 for families in the 26th to 50th percentiles. On average, families at or below the 25th percentile were $13,000 in debt.

  How Did the Distribution of Wealth Change From 1989 to 2013? Over the period from 1989 through 2013, family wealth grew at significantly different rates for different segments of the U.S. population. In 2013, for example:

  • The wealth of families at the 90th percentile of the distribution was 54 percent greater than the wealth at the 90th percentile in 1989, after adjusting for changes in prices.
  • The wealth of those at the median was 4 percent greater than the wealth of their counterparts in 1989.
  • The wealth of families at the 25th percentile was 6 percent less than that of their counterparts in 1989.

  As the chart below shows, nobody has experienced the same cumulative growth in after-tax income as the “Top 1%”

  

  Marxists of the world may want to avoid the following section, as they may suffer permanent injury:

  • The distribution of wealth among the nation’s families was more unequal in 2013 than it had been in 1989. For instance, the difference in wealth held by families at the 90th percentile and the wealth of those in the middle widened from $532,000 to $861,000 over the period (in 2013 dollars). The share of wealth held by families in the top 10 percent of the wealth distribution increased from 67 percent to 76 percent, whereas the share of wealth held by families in the bottom half of the distribution declined from 3 percent to 1 percent.

  And there is your recovery: the wealthy have never been wealthier, while for half of America, some 50% of households, now own just 1% of the country’s wealth, down from 3% in 1989.

  * * *

  Finally, when Obama touts the recovery, he may have forgotten about half of America, but one entity remembers well: loan collectors. As the chart below shows, America’s poor families have never been more in debt.

  The share of families in debt (those whose total debt exceeded their total assets) remained almost unchanged between 1989 and 2007 and then increased by 50 percent between 2007 and 2013. In 2013, those families were more in debt than their counterparts had been either in 1989 or in 2007. For instance, 8 percent of families were in debt in 2007 and, on average, their debt exceeded their assets by $20,000. By 2013, in the aftermath of the recession of 2007 to 2009, 12 percent of families were in debt and, on average, their debt exceeded their assets by $32,000.

   

  The increase in average indebtedness between 2007 and 2013 for families in debt was mainly the result of falling home equity and rising student loan balances. In 2007, 3 percent of families in debt had negative home equity: They owed, on average, $16,000 more than their homes were worth. In 2013, that share was 19 percent of families in debt, and they owed, on average, $45,000 more than their homes were worth. The share of families in debt that had outstanding student debt rose from 56 percent in 2007 to 64 percent in 2013, and the average amount of their loan balances increased from $29,000 to $41,000.

  

  Finally, it worth noting that the numbers shown above are as of 2013. Since then the trends shown above, and the record gap between America’s rich and poor has grown to even more unprecedetned proportions.

  Source: CBO

  

  

• What The Media Did Not Report: Here Is The "Ignored" Part Of Kaepernick's Speech

  Colin Kaepernick has made headlines in recent days for his decision to sit during the National Anthem. According to the mainstream media, his reasoning is simple (because the only thing that is comprehendible to the majority of Americans is a soundbite) – police brutality and the oppression of people of color.

  Implicit in that simple narrative is one thing unsaid – it’s Trump’s fault… and Hillary will fight the good fight to support black people.

  However, if one took the time to actually read Kaepernick’s full interview transcript, the narrative is very different, and not at all what the mainstream would like you to hear…

  Colin Kaepernick (CK): People don’t realize what’s really going on in this country. There are a lot things that are going on that are unjust. People aren’t being held accountable for. And that’s something that needs to change. That’s something that this country stands for freedom, liberty and justice for all. And it’s not happening for all right now.

   

  Media: Does the election year have anything to do with timing?

   

  CK: It wasn’t a timing thing, it wasn’t something that was planned. But I think the two presidential candidates that we currently have also represent the issues that we have in this country right now.

   

  Media: Do you want to expand on that?

   

  CK: You have Hillary who has called black teens or black kids super predators, you have Donald Trump who’s openly racist. We have a presidential candidate who has deleted emails and done things illegally and is a presidential candidate. That doesn’t make sense to me because if that was any other person you’d be in prison. So, what is this country really standing for?

   

  Media: It is a country that has elected a black president twice…

   

  CK: It has elected a black president but there are also a lot of things that haven’t changed.

  Clip:

  @Darren32895836 The MSM cut this out from #ColinKaepernick interview #HillaryClinton “She should be in prison” pic.twitter.com/jjs1ptC2Vy

  — Winston (@Johndaveis) August 29, 2016

  So, according to the football player, it’s not just Trump that is racist, but so is Hillary, and – shockingly – should be in prison, while Barack Obama has failed in eight years to make any difference. And yes, all of that was ignored by the mainstream.

  

  Because if played on CNN, questions might emerge…

  

  

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• Brazil's Banana Scoundrels Will Now Win Their Olympics

  Authored by Pepe Escobar via Stratgic-Culture.org,

  The Rio Olympics are gone – Bolt, Phelps, Neymar, the green pool, the Ugly American Lochte and all – but a global audience may have been spared a shameful last act.

  Mediocre incompetent opportunist, corrupt coward traitor, and certified political usurper, interim President Michel Temer, refused to go to the closing ceremony, afraid of being booed out of a packed Maracana stadium. According to the latest polls, 79% of Brazilians want Temer The Usurper out. Now.

  Thus Temer The Usurper was not able, according to protocol, to pass the baton (for Tokyo in 2020) to visiting Japanese Prime Minister Shinzo Abe. Team Temer offered a meeting later on in the capital, Brasilia. Japanese diplomats flatly refused; who wants your Prime Minister to meet a coward in hiding?

  Former President Lula lobbied hard to bring the Olympics to Rio, and preparations went on under President Dilma Rousseff. Coupled with Temer The Usurper’s primal fear of being booed just as in the Olympics opening ceremony, which led to his subsequent diplomatic humiliation, a noxious, pathetic political propaganda campaign was deployed right to the end of the games, trying to diminish or even extinguish Lula’s and Dilma’s role. Quite a few Brazilian athletes with great performances at the games benefited from government-supported sport programs.

  Now the Scoundrel Games are back in Brazil – with a parliamentary junta disputing gold medals with an institutional racket involving big banks, big business, corporate media and sectors of the Judiciary and the Federal Police. The farce is being sold as a trial in the Senate of President Rousseff, accused – without proof – of financially embellishing the state budget.

  Unlike the cowardly usurper, Rousseff is going to the Senate to stare all 81 members in the face; these are the people who by the end of this month will for all practical purposes save or bury Brazilian democracy for good. Rousseff, in case of – miraculously – not being impeached, proposes a referendum leading to new elections.

  As it stands, it does not look good. The late, great Jean Baudrillard – a great lover of Brazil – would characterize Rousseff’s impeachment drive as a simulacrum, obliterating the real crime; the parliamentary/institutional coup orchestrated by a notorious bunch of scoundrels, Temer included.

  The multi-layered coup, with modified Hybrid War elements, comes with a prearranged finale. It does not matter that even Brazilian Public Ministry experts have repeatedly admitted there’s no juridical basis for Rousseff’s impeachment. Even the federal prosecutor on the case concluded a few weeks ago that she did not commit a crime – «responsibility» or otherwise.

  The prosecutorial gang includes two of every three members of the Brazilian Congress who are facing an array of scandals. The overall institutional farce points to the Legislative, the Judiciary and the Public Ministry dragging their feet on indicting the legislative scoundrels while accelerating the procedure against Rousseff. That’s the definition of organized crime.

  The endgame, from the point of view of the coup plotter galaxy, is to criminalize and finish off with the Workers’ Party for good – from Lula and Rousseff downwards – under an upcoming barrage of hazy «obstruction of Justice» allegations.

  And the Obama administration loves it.

  The president of construction company giant Odebrecht, incarcerated for months now, accused Temer The Usurper of pleading for – and receiving – undeclared «electoral help», in cash, for his party, the PMDB. Temer has already been convicted for violating election finance laws and banned from running for office for eight years.

  Interim Foreign Minister Jose Serra also received «electoral help» for his presidential campaign in 2010; part of the loot was paid overseas, something that properly investigated could lead his party, the PSDB, to lose its registration.

  In these past few weeks, Temer The Usurper took no prisoners to turbo charge the impeachment timetable farce, at the same time preventing Dilma to mount a detailed defense. His excuse; he needs to go to Hangzhou, China, for the G20 summit starting on September 4. And he needs to go as president-in-charge – not as «leader» of an unelected caretaker government acting like they’ve earned their mandate in the polling booth.

  The real reason for the rush, though, is that Temer feared the serious Odebrecht corruption charge like the plague. Other charges may be imminent. Yet he’s protected – at least for now; the Mob – as in the Goddess of the Market, Brazil’s big banking and their shills in corporate media – is on his side.

  Brazil remains totally paralyzed by the political/institutional farce. The 8^th largest economy in the world, second largest exporter of food products, and largest industrial platform in the developing West is bleeding, badly. Oil workers are accusing the Mob for 1.5 million lost jobs. Huge infrastructure projects are stalled. Large construction companies are virtually broke; Odebrecht by itself fired over 70,000 workers.

  In parallel Temer The Usurper’s «government» has already started to enact its masterplan – straight from disaster capitalism’s playbook. One of the key «policies» is to sell out Petrobras – and the pre-salt reserves – to foreign, as in US corporate, interests. Lula correctly identified the pre-salt reserves – the largest oil discovery in the 21^st century so far – as the privileged source for a new development drive for Brazil.

  But there are way more disasters in store; selling out indigenous Brazilian industrial development via hardcore privatization, abandoning the defense of Brazilian engineering know-how; severe cuts on education, health, science and technology; «flexibilization» of workers’ rights, as in attacking them on all fronts; a regressive attack on pensions; and sabotaging Mercosur – the South American common market – to the benefit of vassal subordination to US interests.

  The – legitimate – Uruguayan Foreign Minister, Rodolfo Nin Novoa, was even compelled to denounced the – illegitimate – Brazilian Foreign Minister, the lowly Serra, for trying to buy Montevideo’s help to prevent Venezuela from stepping up to the temporary presidency of Mercosur. In a little over three months, Serra managed to reduce Brazilian diplomacy to a heap of rotten bananas.

  And then, of course, there’s the cherry in the cheesecake; the lame duck Obama administration’s full support for the coup and the impeachment farce.

  Obama did not have the balls to say it upfront. That came in the form of Secretary of State John Kerry meeting with the repellent Serra in a trip to Brazil in early August. Kerry even issued a long statement – for all practical purposes legitimizing the coup.

  Kerry did not have the balls to meet Temer The Usurper. So what; the whole Global South now knows where Washington stands. Parliamentary / institutional regime change is of course OK. As long as it prevents BRICS integration and Chinese trade/commercial advance in Latin America.

  Move on, nothing to see here – as Washington proceeds to the serious business of negotiating two crucial military bases with Argentina’s neoliberal vassal Mauricio Macri; one in resource-rich Patagonia, the other smack into the Brazil / Argentina / Paraguay triple border, right by the largest aquifer on the planet.

  And there’s all that pre-salt oil about to go to Chevron! How not to love the smell of regime change in the morning? Definitely smells like victory. And you don’t even need to send the Marines for it.

  

  

• What Life Will Be Like After An Economic Collapse

  Submitted by Megan Stewart via SurvivalSullivan.com,

  If you have been waiting for a public announcement or news headline to let you know that an economic collapse has begun, you are in for the surprise of your life. If history in other countries and in Detroit, Michigan is any indication, there won’t be an announcement. An economic collapse tends to sneak up on a city, region, or country gradually over time. In some cases, the arrival of an economic collapse is so gradual that most people living in it aren’t even aware of it at first.

  Things just get gradually worse, often so gradually that people and families adjust as best they can until one day they actually realize that it’s not just their home or their neighborhood that has been hit so hard financially, it’s everyone. By that time, it’s often too late to take preventative action.

  In March of 2011, Detroit’s population was reported as having fallen to 713,777, the lowest it had been in a century and a full 25% drop from 2000. In December 2011, the state announced its intention to formally review Detroit’s finances. In May of 2013, almost two years later, the city is deemed “clearly insolvent” and in July of 2013, the state representative filed a Chapter 9 bankruptcy petition for Motor City. Detroit became one of the biggest cities to file bankruptcy in history.

  So we have only to look at what happened in Detroit, Michigan post-bankruptcy, to get an indication of what might soon be widespread across the United States and what is already widespread in countries like Brazil and Venezuela.

  Increased and Widespread Hunger

  Grocery stores and other businesses will fail one by one or be shut down from the riots and looting. In Detroit, the economic collapse left less than 5 national grocery stores for over 700,000 people. Imagine the lines even if food was still being shipped in on trucks. Small independent corner stores and family owned stores become the most convenient place to shop. These are stores with already high prices who make most of their profit from beer, wine, lottery, and cigarettes.

  Now imagine that shipping schedules have been affected by the economic crisis, this would mean longer lines with less certainty that any food would even be available once you got into the store to shop. People in Venezuela are actually dealing with government-run grocery stores and are limited to two days per week they can shop. They still face long lines and total uncertainty of what, if any food, will be left once it’s their “turn” to shop.

  One of the ways for you to prepare for an economic collapse and increase the likelihood that your family will be well-fed regardless of what is available in the grocery stores is to grow your own food. For further protection, consider planning and planting a hidden survival garden rather than a traditional garden that would be obvious to neighbors and looters. In addition, you can learn how to identify, harvest, and consume wild edible plants to supplement your food supply.

  Sporadic Public Services

  Public services, including the school system experience frequent strikes that shut them down for days at a time. Power issues and outages become more frequent and roadways become filled with potholes and other signs of disrepair as preventative measures are shoved aside. The water from the tap, that you pay for monthly, begins to smell funny, so you start filtering it before using it. Garbage collection service is sporadic and you begin to see increased trash along the streets and sidewalks.

  Your cell phone is certainly not something you can rely on since you can’t predict when the signal will be available. Although you pay for high-speed internet, actually getting that service on a daily basis is a matter of sheer luck. Increased littering in the streets and lack of regular garbage collection services becomes an issue because the litter now clogs storm drains every time it rains.

  In order to prepare for the sporadic and possible shutdown of public utility services, you can research alternative methods for getting what you need. Consider solar or wind power energy, digging a well or installing a rainwater catchment system. Invest in a composting toilet in the event that public septic systems are overloaded or malfunctioning.

  Social Unrest

  This is another one of those things that just tends to sneak up gradually. Initially, protests warrant our attention because it’s new and different and out of the ordinary. But as the protests become more and more frequent, people stop caring why the protests are happening. You learn to avoid areas where protests are likely to occur. You start taking an alternate route to work or entering your office building through a back door.

  Violence and vandalism begin to accompany the protests and roadblocks become part of your everyday routine. Like rush-hour traffic r, you plan enough time to get to work based on the knowledge that the road may be blocked due to a car or building being set on fire the night before. More people will be armed when in public, tempers will be short, there will be increased knife fights and shootings. This will put a huge strain on emergency services personnel such as police, fire, and EMS.

  Streets, yards, and even homes are flooding more often now. In addition to the litter, the metal storm drains and even copper pipes from abandoned homes are being stolen for cash. Before long you start to notice that the historic plaques are missing from city monuments, statues come up missing, even doorknobs, anything metal that can be scrapped is fair game for looters and thieves.

  One way to prepare for the next wave of riots is to move out of the city to a more rural location. If you can’t do that right now, then it will help to be intimately familiar with your city roads and other transportation routes. Make sure that you have several planned routes to/from work or your child’s school and any nearby grocery stores. In addition to planning alternative routes for daily travel, you should plan and practice several different bug out routes in case you need to leave your home quickly. Consider not only roads but also railroad tracks, subway tunnels, sewer tunnels, and power line easement roads as possible alternative routes.

  Transportation

  Daily travel is fraught with angry mobs and requires using alternative routes which result in everything just taking longer. Travel by bus, subway, and airline are unpredictable due to increased strikes. Roads go unrepaired as a result of striking workers or budget constraints. Increased bottlenecks on the roads lead to more frequent carjacking and muggings as thieves learn where people will be forced to stop.

  More people are forced to travel by bus, subway, or train due to skyrocketing gas prices, thus public transportation services are overwhelmed. There are increased train accidents, bus and subway breakdowns due to lack of investment, corruption, and politics getting in the way of doing things correctly. Strikes, protests, and roadblocks make everything worse. Soon the only way to get anything done involves “paying a little extra” or suffering long and uncertain delays.

  Plan for long delays in transportation by not only keeping your car gas tank full of gas at all times but also by stockpiling as much gas as you can safely store. Keep your car well-maintained, keep spare parts and engine fluids stockpiled, and perform preventative repairs. You can also consider an alternate form of transportation such as a motorcycle, foldable bicycle, or even a motorized scooter or boat if your situation warrants it.

  Criminal Activity

  When an economic crisis is in the making, you will definitely see an increase in criminal activity. People will become desperate to feed themselves and their families. More people will be more willing to cross the line into criminal activity to get what they need. Initially, you will hear about more incidents of violence, looting, robberies, and muggings.

  Your neighbor or a family member will be mugged and you will respond by taking additional safety precautions. You’ll check your car before getting into it, you’ll avoid dark areas, carry your keys in your hand. As reports become more frequent, you’ll start to travel only in groups and never alone.

  You’ll hear that the woman down the street had someone break into her house while she was sleeping. So you may nag your husband to reinforce the deadbolts and add security bars on the windows. When the neighbor is robbed, your husband will buy several guns and you both will learn to use them. You’ll teach your kids about gun safety and maybe create a plan of action for a home invasion.

  Before long, getting mugged or being a victim of some type of crime is as unpredictable and as common as a car accident. You’ll realize everyone in the neighborhood has now beefed up security on their homes. All your family, friends, and coworkers have experienced a mugging, carjacking, or worse.

  You’ll have no choice but to accept this new way of life and count on basic safety measures (a form of passive denial) or further learn to defend yourself and remain in a constant state of alert (a very stressful state over time). It’s difficult emotionally, mentally, and physically to remain on high alert 24/7 for any length of time. Most people will revert to a form of passive denial until the next incident happens to them or a family member.

  Take time now to learn self-defense moves and make sure you and all family members know how to use both non-lethal and lethal weapons. Keep weapons where you can reach them quickly but where they are safe from curious child fingers. Learn and consider putting into practice some of these 10 deceptive strategies for preppers so you can avoid becoming a target for criminals.

  Housing

  Streets that used to have a house on every lot, morph into desolate patches of houses as people lose their homes to banks or abandon their homes to move in with family or friends due to lack of finances. Houses fall into disrepair, lawns are overgrown, pests and rodents thrive in empty buildings.

  Abandoned homes that aren’t torn down or maintained by the city may be taken over by squatters, some with the best of intentions to clean it up, others who just need a place to sleep, or who are in between drug or alcohol binges. Squatters will modify heating systems to get them to work or customize DIY heating sources which can result in increased house fires and even explosions when things go wrong. As the housing conditions worsen, more people will become ill from prolonged exposure to the elements, to poor living conditions, and to increased insect and rodent infestations.

  The best way to ensure that housing for you and your family is stable is to keep up with needed repairs and do what you can to reduce your overall housing expenses. If you can pay ahead on your house payments or pay down on the principal amount, or even pay off your house, you stand a better chance of keeping control of it when things start to collapse.

  Unemployment

  More and more people you know will experience job loss or layoffs. It may seem easy enough to get another job at first, but as more and more people are displaced, finding a job will become almost impossible. Teenagers will be displaced from jobs that are now being taken by adults.

  This means instead of working for the summer and after school, more teenagers will be out on the streets without anything worthwhile to do. The neighborhood might just seem “rowdier” at night and then during the day too. But before long, boredom, frustration, and even anger will set in and the unemployed will join the ranks of the protestors and looters.

  Prepare for possible unemployment by saving up an emergency fund and stockpiling food and other supplies so that you can manage through several weeks or even months without steady income. Reduce your monthly expenses as much as possible so you can live on less when money gets tight.

  Healthcare

  This is one of the areas that many people don’t really consider when they think about an economic collapse but it’s probably one of the most important when it comes to human life and survival. This is especially true for those people who may take daily medications in order to treat a chronic life-threatening condition. Initially healthcare appointments may become more difficult to schedule. It may take longer to get in to see a doctor because quite frankly, more people are getting sick and needing care.

  Illnesses from poor diet, from low-quality water, or food that spoiled due to power issues will be more frequent. There will also be more injuries as a result of the looting, rioting, and increased criminal activity. You can expect increased incidents of domestic violence as family relationships are strained and crack under the stress of poor living conditions. Many people will lose access to their healthcare when they lose their jobs, and this will place a strain on public services such as free clinics and emergency rooms.

  To prepare for a shortage or lack of accessible healthcare, you can create and learn to use your own first aid kit and learn how to identify and use wild plants and natural remedies to treat minor illnesses and diseases.

  There’s really no way to predict the timing of an economic collapse with any certainty and in most cases, an economic collapse will occur gradually without much warning unless you are paying close attention to activity and events going on around you and around the world. The best way to be prepared when it does happen is to start changing your lifestyle now, in the ways discussed above, so that you and your family can survive hard times in the future.

  

  

• Minimum Wage Claims Its Latest Victims – Ashley Furniture Slashes 840 Jobs In California

  A few weeks back we pointed out a couple of the reasons that businesses are fleeing California by the 1,000's ("3 Simple Charts That Help Explain Why 9,000 Businesses Have Left California In Just 7 Years").  Clearly the implementation of a State-wide $15 minimum wage hasn't helped "lure" business owners.

  On Friday, Ashley Furniture's 840 employees working in the company's production and warehouse facility in Colton, California became the latest victims of California's minimum wage hike.  Ashley announced they would be leaving open their retail store in Colton, but would be relocating the production facility that accounts for most of the location's jobs.  Per the San Bernadino Sun, Ashley Furniture released the following statements about the closure:

  We thank our employees for all their hard work, but closing these plants on Oct. 25 and rebalancing our manufacturing mix strengthens production capability and cost structure and will help ensure Ashley’s continued ability to compete effectively long-term in the global marketplace from a U.S. base.

   

  The majority of production in Colton will move to U.S. plants in Wisconsin, Mississippi and North Carolina.

  By shifting the majority of Colton production to other U.S. facilities we will create more efficiency and better use of existing capacity in our manufacturing network.

  

   

  Certainly, it's not surpurprising that Ashley would choose to relocate their California prodcution capacity to Wisconsin, North Carolina and Mississippi given that they each sport minimum wages that are a mere 52% lower than California's proposed $15 floor.

  

   

  But, as per the norm, misinformed politicians rarely seem to take the heat for their reckless policies as Ashley employees prepared to protest the layoffs in Colton. 

  “We cannot let companies like Ashley bleed the American dream,” Naja said. “It’s not only the employees, but the families, the kids, the wives. They’ve got wives with medical situations and things like that. There’s no way a huge company like Ashley’s can shut down the doors.”

   

  “We’re going to be here making a protest and we’re calling everybody that can come to please support us and find out what they did to us,” Zuniga said. “Come and support all the hard-working employees and parents that take income to their house. I’m the only one supporting my family. I’m the only one paying a mortgage.”

  Might we kindly suggest the better place to hold your protest would be in front of Jerry Brown's office in Sacramento. 

  

  

• What If Only Taxpayers Voted?

  If “pay-to-play” is good enough for Hillary’s State Department, then why not the nation?

   

  

   

  Source: The Burning Platform

  

  

• "If This Does Not Disqualify Hillary For The Presidency, It's Hard To Know What Will"

  Even the traditionally 'establishment' Wall Street Journal is waking up to the utter incredulity of an American media (and citizenry) which appears capable of cognitive dissonance on an epic scale when it comes to Hillary Clinton. As Kimberly Strassel explains the latest emails show that State and the foundation were one seamless entity.

  

  This is the week that the steady drip, drip, drip of details about Hillary Clinton’s server turned into a waterfall. This is the week that we finally learned why Mrs. Clinton used a private communications setup, and what it hid. This is the week, in short, that we found out that the infamous server was designed to hide that Mrs. Clinton for three years served as the U.S. Secretary of the Clinton Foundation.

  In March this column argued that while Mrs. Clinton’s mishandling of classified information was important, it missed the bigger point. The Democratic nominee obviously didn’t set up her server with the express purpose of exposing national secrets—that was incidental. She set up the server to keep secret the details of the Clintons’ private life—a life built around an elaborate and sweeping money-raising and self-promoting entity known as the Clinton Foundation.

  Had Secretary Clinton kept the foundation at arm’s length while in office—as obvious ethical standards would have dictated—there would never have been any need for a private server, or even private email. The vast majority of her electronic communications would have related to her job at the State Department, with maybe that occasional yoga schedule. And those Freedom of Information Act officers would have had little difficulty—when later going through a state.gov email—screening out the clearly “personal” before making her records public. This is how it works for everybody else.

  Mrs. Clinton’s problem—as we now know from this week’s release of emails from Huma Abedin’s private Clinton-server account—was that there was no divide between public and private. Mrs. Clinton’s State Department and her family foundation were one seamless entity—employing the same people, comparing schedules, mixing foundation donors with State supplicants. This is why she maintained a secret server, and why she deleted 15,000 emails that should have been turned over to the government.

  Most of the focus on this week’s Abedin emails has centered on the disturbing examples of Clinton Foundation executive Doug Band negotiating State favors for foundation donors. But equally instructive in the 725 pages released by Judicial Watch is the frequency and banality of most of the email interaction. Mr. Band asks if Hillary’s doing this conference, or having that meeting, and when she’s going to Brazil. Ms. Abedin responds that she’s working on it, or will get this or that answer. These aren’t the emails of mere casual acquaintances; they don’t even bother with salutations or signoffs. These are the emails of two people engaged in the same purpose—serving the State-Clinton Foundation nexus.

  The other undernoted but important revelation is that the media has been looking in the wrong place. The focus is on Mrs. Clinton’s missing emails, and no doubt those 15,000 FBI-recovered texts contain nuggets. Then again, Mrs. Clinton was a busy woman, and most of the details of her daily State/foundation life would have been handled by trusted aides. This is why they, too, had private email. Top marks to Judicial Watch for pursuing Ms. Abedin’s file from the start. A new urgency needs to go into seeing similar emails of former Clinton Chief of Staff Cheryl Mills.

  Mostly, we learned this week that Mrs. Clinton’s foundation issue goes far beyond the “appearance” of a conflict of interest. This is straight-up pay to play. When Mr. Band sends an email demanding a Hillary meeting with the crown prince of Bahrain and notes that he’s a “good friend of ours,” what Mr. Band means is that the crown prince had contributed millions to a Clinton Global Initiative scholarship program, and therefore has bought face time. It doesn’t get more clear-cut, folks.

  That’s highlighted by the Associated Press’s extraordinary finding this week that of the 154 outside people Mrs. Clinton met with in the first years of her tenure, more than half were Clinton Foundation donors. Clinton apologists, like Vox’s Matthew Yglesias, are claiming that statistic is overblown, because the 154 doesn’t include thousands of meetings held with foreign diplomats and U.S. officials.

  Nice try. As the nation’s top diplomat, Mrs. Clinton was obliged to meet with diplomats and officials—not with others. Only a blessed few outsiders scored meetings with the harried secretary of state and, surprise, most of the blessed were Clinton Foundation donors.

  Mrs. Clinton’s only whisper of grace is that it remains (as it always does in potential cases of corruption) hard to connect the dots. There are “quids” (foundation donations) and “quos” (Bahrain arms deals) all over the place, but no precise evidence of “pros.” Count on the Clinton menagerie to dwell in that sliver of a refuge.

  But does it even matter? What we discovered this week is that one of the nation’s top officials created a private server that housed proof that she continued a secret, ongoing entwinement with her family foundation – despite ethics agreements – and that she destroyed public records. If that alone doesn’t disqualify her for the presidency, it’s hard to know what would.

  

  

• Shoulda Called Huma…

  Presented with no comment…

   

  

   

  Source: Townhall.com

  

  

• What Preppers haven't Prepped for – the big gaping hole

  Reading stories about Preppers is often more inspiring than reading about startups.  Preppers dedicate their entire life to their new way of life, as it were.  Take for example this recent article in the Washington Post about the American Redoubt:

  Those migrating to the Redoubt are some of the most motivated members of what is known as the prepper movement, which advocates readiness and self-reliance in man-made or natural disasters that could create instability for years. It’s scenario-planning that is gaining adherents and becoming mainstream in what Redoubt preppers described as an era of fear and uncertainty.  They are anxious about recent terrorist attacks from Paris to San Bernardino, Calif., to Orlando; pandemics such as Ebola in West Africa; potential nuclear attacks from increasingly provocative countries such as North Korea or Iran; and the growing political, economic and racial polarization in the United States that has deepened during the 2016 presidential election.

  Although the reasons for prepping are extremely varied, most dedicated preppers share several axioms of their prepping philosophy, such as:

  • Being ‘off the grid’ or self-reliant, for food, power, medical needs, and any needs or wants
  • Living in a secure, remote area
  • DIY mentality (Do It Yourself)
  • 6 month – 2 year supply of food and other supplies
  • Gold & Silver for if/when the financial system collapses

  Before exposing the big gaping hole in the prepper’s main doctrine, let’s give uber-credit to this ‘movement’ if you want to call it that.  Although many preppers are fueled by irrational fears, and some based on a low probability, high impact event statistic (for example, a meteor several miles wide can strike the Earth, causing widespread volcanoes, earthquakes, and other end of days scenarios, but the chance of this happening in next 100 years is very low, probably 1 in 100 million); their approach towards life is very American, in fact it was this type of survivalist gusto that made America what it was originally.  The land was untamed, there were ‘terrorists’ (called in those days, American Indians) and Americans had to be self-reliant because well, there was no DHS to call.  If your village was attacked by Indians or the British you had to defend yourself.  There was also the chance of a lifetime – live in the West in the most beautiful property in the world basically for free – but you must do all yourself.  Pioneers, Homesteaders, Tradesmen, Industrialists, all thrived and made America what it was.  This essence seems to have been lost by the baby boomer generation that was convenience and consumer oriented (but of course, not completely).  Anyway, preppers have ushered in a new age of Americanism based on their self-reliant approach.  And many good lessons come with ‘preparing’ such as self-defense, making a robust plan (such as any organization, business or military should have), and keeping a stockpile of supplies in case of shortages.  The previous generation, mostly not with us anymore, would appreciate all these values.  During the war, they lived without many things.  They ‘prepped’ because of war.  Many preppers today will say that we are at war, it’s just an information war, or assymetric war, or potential war.  Being a prepper in many ways is being smart in today’s world.  Who knows what will happen tomorrow.  

  The big gaping hole: FINANCIAL PREPPING

  Preface this by saying that – of course – like with anything – it’s not 100%.  But generally speaking, preppers have prepared for everything except for their finances.

  Preppers are NOT financially prepared!

  Keeping physical gold and silver is a good idea – but it isn’t a panacea.  Also there are many risks associated with spending Gold and Silver such as theft, loss, and acceptance.  Maybe in certain scenarios – no one would want silver, but they may want a beer?

  Yes, that’s right.  If you want a real currency to use in an end times scenario, stock up on cheap whiskey and gin.  Growing Marijuana will be easy in such times (the reason it has the nickname ‘weed’ is because it grows like a weed), but making a still requires knowledge, time, a place which is safe and suitable, dedication, and materials.  That’s just one example.  You can elaborate on this scenario with this lateral thinking.

  Other items of value in end times include tools of all kinds, and specifically tools that don’t run with electricity, but those too.  Dynamos, solar powered battery chargers, things like this – may be more valuable than gold or silver.  

  And as gun lovers like to say:

  The only real currency if society breaks down is accelerated lead.

  Preppers should beef up their knowledge and understanding of the financial system.  If the system collapses, the new society will need bankers too.  An economic system must evolve, eventually.  Even if humans are living as savages, at some point as we rebuild, preppers and survivors will need bankers too.

  
  (above: Camoflage as art, from ATL.)

  To learn more about the financial system as a whole, checkout Splitting Pennies – your pocket guide to becoming a financial wizard!

  

  

• The Deep State (And The Rise Of The Unspeakable)

  Via Jesse's Cafe Americain,

  "The state within a state is hiding mostly in plain sight.

   

  The pressure to conform to an authority figure or peer group can cause people to behave in shocking ways.

   

  It is not too much to say that Wall Street may be the ultimate owner of the Deep State and its strategies, if for no other reason than that it has the money to reward government operatives with a second career that is lucrative beyond the dreams of avarice – certainly beyond the dreams of a salaried government employee.

   

  The corridor between Manhattan and Washington is a well-trodden highway for the personalities we have all gotten to know in the period since the massive deregulation of Wall Street."

   

  -Mike Lofgren

  As we noted previously, the deep state seems to have grown, strengthened and tightened its grip.  Can a lack of real money restrain or starve it?  I once thought so, and maybe I still do.  But it doesn’t use real money, but rather debt and creative financing to get that next new car, er, war and intervention and domestic spending program.  Ultimately it’s not sustainable, and just as unaffordable cars are junked, stripped, repossessed, and crunched up, so will go the way of the physical assets of the warfare–welfare state.

  Because inflated salaries, inflated stock prices and inflated ruling-class personalities are month to month, these should evaporate more quickly, over a debris field once known as some of richest counties in the United States.  Can I imagine the shabbiest of trailer parks in the dismal swamp, where high rises and government basilicas and abbeys once stood?  I’d certainly like to.  But I’ll settle for well-kept, privately owned house trailers, filled with people actually producing some small value for society, and minding their own business.

  Can a lack of public support reduce the deep state, or impact it?  Well, it would seem that this is a non-factor, except for the strange history we have had and are witnessing again today, with the odd successful popular and populist-leaning politician and their related movements.  In my lifetime, only popular figures and their movements get assassinated mysteriously, with odd polka dot dresses, MKULTRA suggestions, threats against their family by their competitors (I’m thinking Perot, but one mustn’t be limited to that case), and always with concordant pressures on the sociopolitical seams in the country, i.e riots and police/military activations.  The bad dealings toward, and genuine fear of, Bernie Sanders within the Democratic Party’s wing of the deep state is matched or exceeded only by the genuine terror of Trump among the Republican deep state wing.   This reaction to something or some person that so many in the country find engaging and appealing — an outsider who speaks to the growing political and economic dissatisfaction of a poorer, more indebted, and more regulated population – is heart-warming, to be sure.  It is a sign that whether or not we do, the deep state thinks things might change.  Thank you, Bernie and especially Donald, for revealing this much!  And the “republicanization” of the Libertarian Party is also a bright indicator blinking out the potential of deep state movement and compromise in the pursuit of “stability.”

  Finally, what of those pinpricks of light, the honest assessments of the real death trail and consumption pit that the deep state has delivered?  Well, it is growing and broadening.  Wikileaks and Snowden are considered assets now to any and all competitors to the US deep state, from within and from abroad – the Pandora’s box, assisted by technology, can’t be closed now.  The independent media has matured to the point of criticizing and debating itself/each other, as well as focusing harsh light on the establishment media.  Instead of left and right mainstream media, we increasingly recognize state media, and delightedly observe its own struggle to survive in the face of a growing nervousness of the deep state it assists on command.

  Maybe we will one day soon be able to debate how deep the deep state really is, or whether it was all just a dressed up, meth’ed up, and eff’ed up a sector of society that deserves a bit of jail time, some counseling, and a new start.  Maybe some job training that goes beyond the printing of license plates.  But given the destruction and mass murder committed daily in the name of this state, and the environmental disasters it has created around the world for the future generations, perhaps we will be no more merciful to these proprietors of the American empire as they have been to their victims. The ruling class deeply fears our judgment, and in this dynamic lies the cure.

  

  

• One Striking Chart Shows Why, According to MS, The Next Global Recession Begins In China

  Much has been said about China in the past year. Now, courtesy of Morgan Stanley’s Chetan Ahya, here is one additional data point revealing why China will be ground zero for the next global economic slowdown.

  As Ahya notes in his Sunday Start note, “several large economies in the world including but not limited to the US, euro area, China, Japan and UK are facing the 3D challenge of demographics, debt and disinflation. Among these economies, we believe that China, which currently accounts for 18% of global GDP and 27% of global manufacturing and contributes 45% to global growth, will be the biggest drag towards lower nominal GDP growth and consequently lower expected returns.“

  Surprisingly, unlike many other Chinese doomsayers, Morgan Stanley does not think the catalyst of China’s upcoming “hard landing” will be financial, or debt-related:

  The key concern that investors have on China is that its debt build-up could result in a potential financial shock, which would be akin to the experience of the US in 2008 and emerging markets in the 1990s. However, we think that the macro set-up and policy preferences will mean that the risk of a financial shock in China is low. There are three key characteristics of China’s current macro set-up: i) Debt is being largely funded domestically, i.e., China is misallocating its own excess saving; ii) It remains a net creditor to the world (with a net international investment position of 14.7% of GDP) and it runs a current account surplus; and iii) It is facing significant disinflationary pressures, which will allow the central bank to inject liquidity to manage any potential risk-aversion in the domestic financial system. While there are non-performing loans in the banking system, policy-makers will likely have significant control of liquidity conditions to prevent a financial shock, in our view.

   

  Ideally, a quick adjustment approach following our five-step process of accepting lower potential growth, cutting excess capacity/recognising non-performing loans, recapitalising banks, cutting real interest rates and stimulating consumption with fiscal transfers to households for education and healthcare is needed to transition to a new productive growth cycle.

  That however, is unlikely for a country in which social tensions and rising unemployment are already the thing that keeps Beijing up at night: “However, considering the risks to social stability, a quick adjustment appears unlikely to us. Given its macro set-up and policy preference, we have long argued that the developments in China are more comparable to that of Japan in the 1990s.”

  So in lieu of a quick adjustment, a “gradual adjustment approach” would leave us with the outcome of an extended period of excess capacity, disinflationary pressures and declining nominal growth and returns in the economy. At the current pace of new investment that China is taking up, the incremental return on capital employed will likely continue to deteriorate.

  Morgan Stanley calculates that “although China has slowed its investment since 2012, we expect it to invest 41% of its GDP (US$4.7 trillion) in 2016. This compares with the 24% of GDP which China should have been investing if it were to maintain the same capital efficiency as it did between 2000 and 2007. China currently needs new investment of 6.4pp of GDP to achieve 1pp of GDP growth, compared with the average of 3.6pp between 2000-07.”

  It is this unsustainable trend of relentless capex spending and investment that MS believes is the reason “why China will weigh on the trend in global growth and returns.”

  In a globalised, integrated economy, the impact will extend well beyond China’s weight in the aggregates as it will also influence returns in other parts of the world via its role as a large market but, more importantly, as the marginal competitor.

  And here is the chart revealing what may be the most unsustainable trend in China, one that is even more dramatic than China relentless debt growth: accounted for 26% of global annual capex in 2015, compared with 9% in 2006 and 5% in 2000. Hence, as China continues to invest with low return expectations, that this will continue to weigh on the global returns on capital employed.

  

  * * *

  So can the global economy grow out of China’s adverse impact like it did in the 1990s in the face of Japan’s structural slowdown then?

  According to Morgan Stanley, such an outcome seems unlikely. Back then, none of the large economies ex-Japan suffered from the 3D challenge. Indeed, until recently, the emergence of China (with sustained high productivity growth) and its integration into the global economy was itself a key factor which had helped to sustain the global growth dynamic post the structural slowdown in Japan. However, the state of the global economy excluding China today is much weaker and, with no large emerging market ready to replace China as an engine of global growth in the near future, we could well be stuck in a lower nominal returns world.

  Who will suffer the most when China’s plane if not crashes, then downshifts permanently?

  The impact from China will be most keenly felt in the industrial segment and, indeed, economies in Europe, Japan and Korea, which have both a higher share of industrial activity in their economic output and also closer trade links with China, will be most exposed, in our view. The disinflationary pressures, coupled with the depreciating RMB, will also weigh on the inflation trend in the DMs, particularly in the US, and this is one of the key external factors keeping the Fed on hold and Treasury yields low.

  Needless to say, should the Fed proceed to hike and spike the dollar some more, all these adverse dynamics will accelerate that much more.

  

  

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• Negative Rates and Cash Bans: The Chaos Continues at Jackson Hole
  From: TheDailyBell.com

  • 
  • 

  Negative rates should be integral part of central bank policy options … Central banks should make negative interest rates a fully integrated part of monetary policy in order to respond effectively to future recessions, according to an academic paper presented on Friday to some of the world’s top central bankers.  “It is only a matter of time before another cyclical downturn calls for aggressive negative nominal interest rate policy actions,” concludes Marvin Goodfriend, a professor of economics at Carnegie Mellon University and a former policy adviser at the Richmond Federal Reserve bank.  – Reuters

  The Federal Reserve meeting at Jackson Hole has been covered by the mainstream media in ways that gave the impression that policy discussions were a kind of theoretical exercise.

  Papers were presented on such issues as negative interest rates (see excerpt above) that emphasized an academic context. The idea that comes across is that those involved were earnestly striving to combat US economic dysfunction and current unnaturally low interest rates.

  The larger issue here is one that we didn’t find written about: the assumption of the inherent right of policymakers to do what is “necessary” to make the US economy “healthier.”

  The debate is certainly cast in theoretical terms but the results will inevitably involve the use of force.

  The assumption is that involved in the “monetary debate” will come to a reasoned conclusion that society as a whole will be impelled to adopt. Those who do not wish to adopt such a solution – and who actively resist – may be prosecuted or jailed.

  A few days ago, in a lead-up to the conference, the Wall Street Journal published a longish editorial by Dr. Kenneth Rogoff, the Thomas D. Cabot Professor of Public Policy at Harvard University.

  Rogoff was also the former chief economist of the International Monetary Fund and the article was taken from an upcoming book, “The Curse of Cash,” to be published in September by Princeton University Press.

  Here’s an excerpt:

  Money fuels corruption, terrorism, tax evasion and illegal immigration—so the U.S. should get rid of the $100 bill and other large notes … When I tell people that I have been doing research on why the government should drastically scale back the circulation of cash—paper currency—the most common initial reaction is bewilderment. Why should anyone care about such a mundane topic?

  But paper currency lies at the heart of some of today’s most intractable public-finance and monetary problems. Getting rid of most of it—that is, moving to a society where cash is used less frequently and mainly for small transactions—could be a big help.

  There is little debate among law-enforcement agencies that paper currency, especially large notes such as the U.S. $100 bill, facilitates crime: racketeering, extortion, money laundering, drug and human trafficking, the corruption of public officials, not to mention terrorism

  The necessity for this sort argument has to do with the inevitable results of the imposition of negative interest rates. Cash will have to become more difficult to obtain and use because people won’t want to pay banks for placing cash in savings accounts. They might instead wish to hold cash at home so they don’t have to pay a fee.

  As stated, the larger issue here is one of compulsion – and its presentation within an academic context. The Wall Street Journal editorial, for instance, is part of a book that will shortly be issued. The discussion of negative interest rates in Jackson Hole was accompanied by a white paper produced by a professor of economics.

  The underlying reality is that these astonishingly comprehensive solutions don’t provide a choice. Even negative interest can be seen not as a monetary/policy response but as a kind of tax. An article by Christopher J. Waller (here) characterizes low rates as nothing more than a disguised money grab:

  Negative Interest Rates: A Tax in Sheep’s Clothing … A negative interest rate is just a tax on the banks’ reserves. The tax has to be borne by someone: The banks can choose not to pass it on and just have lower after-tax profits. This will depress the share price of banks and weaken their balance sheets by having lower equity values.

  This is true – and is an outcome of the way the Fed works. Imposing rates via monopoly authority always constitutes a tax, though this is not something regularly discussed when it comes to Fed “policy.”

  Generally speaking, mainstream media coverage wants to present monetary discussions in ways that emphasize its theoretical aspects. But the bottom line is that what’s being discussed is not going to end up as suggestions. Whatever is decided on will have the force of law.

  And if we look beyond “theory” to reality, the outcome of these kinds of discussions is invariably bad. Central bank monetary mayhem is everywhere you look. The West – the world, really – is locked into a quasi-depression as a result of a century of failing policies and monetary manipulation.

  In the US, Janet Yellen wants to pretend that a “recovery” is ongoing. But if so, it one that does without some 90 million potential workers who choose not to participate – either because they cannot or because they wish to participate outside of the formal economy.

  We recently posted an article entitled “Is the Fed Being Torn Down in Order to Create a New, Powerful Global Entity?” (here). When one examines the behavior of the Fed, and of central banks generally, it’s hard to conclude that their real mission is the one presented to us.

  Step back far enough to contemplate a century’s worth of results and the reality is clear: Central banks are supposed to destroy the economies they supposedly serve. Ironically, the destruction then provides the opportunity for them to expand.

  Giving a small group of individuals the power to decide on the value and volume of money is a ludicrous concept from any standpoint. But he problem is abetted by the mainstream narrative that never discusses the underlying lack of logic.

  And so we observe Jackson Hole, which is presented to us as a conclave of elite thinking but which is actually nothing more than high-brow propaganda for a system that has already failed and – as compensation for its failings – now contemplates even more radical “solutions” that will give rise to even worse problems.

  Conclusion: The mechanism of central banking is purposeful ruin. The end-result of this ruin is global governance. In the short-term this goal is disguised by an academic patina. But the long-term goal, an increasingly apparent one, is a brutal restructuring of the lives of seven billion people to benefit a handful of elite controllers.

  See more at TheDailyBell.com

  

• Paul Craig Roberts Warns: US Is "A Dead Nation Walking"

  Authored by Paul Craig Roberts,

  Here is an excerpt from an informative article by Dmitry Orlov:

  A whiff of World War III hangs in the air. In the US, Cold War 2.0 is on, and the anti-Russian rhetoric emanating from the Clinton campaign, echoed by the mass media, hearkens back to McCarthyism and the red scare. In response, many people are starting to think that Armageddon might be nigh—an all-out nuclear exchange, followed by nuclear winter and human extinction. It seems that many people in the US like to think that way. Goodness gracious!

   

  But, you know, this is hardly unreasonable of them. The US is spiraling down into financial, economic and political collapse, losing its standing in the world and turning into a continent-sized ghetto full of drug abuse, violence and decaying infrastructure, its population vice-ridden, poisoned with genetically modified food, morbidly obese, exploited by predatory police departments and city halls, plus a wide assortment of rackets, from medicine to education to real estate… That we know.

   

  …

   

  This sort of downward spiral does not automatically spell “Apocalypse,” but the specifics of the state cult of the US—an old-time religiosity overlaid with the secular religion of progress—are such that there can be no other options: either we are on our way up to build colonies on Mars, or we perish in a ball of flame. Since the humiliation of having to ask the Russians for permission to fly the Soyuz to the International Space Station makes the prospect of American space colonies seem dubious, it’s Plan B: balls of flame here we come!

   

  And so, most of the recent American warmongering toward Russia can be explained by the desire to find anyone but oneself to blame for one’s unfolding demise.

  I use the writings of Orlov and The Saker as checks on my own conclusions.

  In his article Orlov concludes that the United States is a dead nation, still walking, but no longer a uni-power. I agree with Orlov that US weapon systems are more focused on profits than on effectiveness and that Russia has superior weapons and a superior cause based on protection rather than dominance. However, in his assessment of the possibility of nuclear war, I think that Orlov under-appreciates the commitment of Washington’s Neoconservatives to US world hegemony and the recklessness of the Neoconservatives and Hillary Clinton. Washington is incensed that Russia (and China) dare to stand up to Washington, and this anger crowds out judgment.

  Orlov, also, I think, under-estimates the weakness in the Russian government provided by the “Atlanticist Integrationists.” These are members of the Russian elite who believe that Russia’s future depends on being integrated with the West. To achieve this integration, they are willing to sacrifice some undetermined amount of Russian sovereignty.

  It is my conclusion that Washington is aware of the constraint that the desire for Western acceptance puts on the Russian government and that this is why Washington, in a direct thrust at Russia, was comfortable orchestrating the coup that overthrew the elected Ukrainian government. I believe that this constraint also explains the mistakes the Russian government made by refusing the requests of the Donetsk and Luhansk republics to be reincorporated as parts of Russia, where the territories formerly resided, and by the premature withdrawal from Syria that allowed Washington to resupply the jihadists and to insert US forces into the conflict, thus complicating the situation for Russia and Syria.

  Orlov sees Russian advantage in the ongoing conflict between Kiev and the breakaway republics as the conflict could be leading to the collapse of the US puppet government in Kiev. However, the disadvantage is that the ongoing conflict is blamed on Russia and feeds Western anti-Russian propaganda. It also makes Russia look weak and unsure of itself as if the Western criticism of Russia’s reincorporation of Crimea has struck home and Russia is afraid to repeat it by accepting the pleas of the break-away republics.

  Moreover, if the Russian government had accepted the requests of Donetsk and Luhansk to return to Russia from which they were artificailly separated, not only would the conflict have been ended, but also the Ukrainian people would have realized the disaster caused by Washington’s coup against their government, and Europe would have realized from decisive Russian action that it was not in Europe’s interest to provoke Russia in behalf of Washington. The correct Russian response was prevented by the Atlanticist Integrationist desire to appease Washington.

  In contrast to Orlov, The Saker underestimates Russian military strength, but he does understand the constraints placed on Russian decisiveness by the Atlanticist Integrationists, who seem to count in their ranks the economic establishment including the central bank and perhaps the prime minister himself. Putin does not seem to be overly concerned with what appears to me to be a fifth column of Washington’s agents as Putin himself has placed heavy bets on achieving accommodation with the West. However, Putin has cracked down on the US-financed NGOs that have tried to destabilize Russia.

  Western reporting and think tank and university reports on Russia are propaganda and are useless to understanding the situation. For example, in the current issue of The National Interest Thomas Graham, who had the Russian desk on the National Security Council during the George W. Bush regime, attributes the “destabilization of eastern Ukraine” to “Russia’s annexation of Crimea.” He avoids mentioning the US-orchestrated overthrow of an elected Ukrainian government and that Crimea voted overwhelmingly (97 percent) to rejoin Russia when faced with the Russophobic government Washington established in Kiev.

  According to Graham, the foul deed of Russia’s acceptance of a democratic outcome upset all of Washington’s very friendly, supportive, and hopeful attitudes toward Russia. With all of Washington’s “assumptions that had guided America’s Russia policy” irreversibly dashed, it is no longer possible to maintain that Russia “is a suitable partner for addressing global issues.” Graham goes on to define Russia as a problem because Russia favors a multi-polar world to a uni-polar world run by Washington.

  It is possible to read Graham’s repeat of the propaganda line as Graham genuflecting before the Neoconservatives before going on quietly in a low-key manner to attack their hegemonic attitude toward Russia. In his concluding paragraph Graham says that Washington must find a new approach to Russia, an approach of balance and limits that rejects “resort to force, which would be devastating given the destructive power of modern weaponry.”

  All in all, it is an artful argument that begins by blaming Russia’s response to Washington’s provocations for a dangerous situation and concludes with the argument that Washington must adjust to Russia’s defense of her own national interests.

  It is reassuring to see some realism creeping back into Washington attitudes toward Russia. However, realism is still a minority view, and it is highly unlikely that it would be the view of a Hillary regime.

  In my opinion, the chance of nuclear war from Neoconservative intention, miscalculation or false launch warning remains high. The provocations of US/NATO military forces and missile bases on Russia’s borders are reckless as they build tensions between nuclear powers. It is in times of tension that false warnings are believed and miscalculations occur. In the interest of life on earth, Washington should be de-escalating tensions with Russia, not building them. So far there is no sign that the Neoconservatives are willing to give up their hegemonic agenda for the sake of life on earth.

  

  

• American Electorate Loses As Partisan Media Coverage Of Candidate Health Turns Outright Bizarre

  The recent media frenzy surrounding Clinton and Trump's health records has accomplished little more than to, once again, expose a "press" that is becoming increasingly partisan with each passing day. 

  Right-leaning media outlets have spent countless hours reporting on the various health issues experienced by Clinton over the years and pointing to pictures of her falling down on the campaign trail or seemingly zoning out at times as evidence of her frailty.  Meanwhile the left-leaning organizations have mostly dismissed the Hillary health concerns as conspiracy theories of right-wing nut jobs.  

  Like this tweet from a New York Times columnist calling on google to censor commentary on Hillary's health…

  Google should fix this. It shouldn't give quarter to conspiracy theorists https://t.co/frnJTHq113 pic.twitter.com/kZLTI4JxlU

  — Farhad Manjoo (@fmanjoo) August 21, 2016

   

  Or this interview by Rachel Maddow where Hillary's health concerns are repeatedly dismissed as conspiracy theories.

   

  The problem is that Hillary's potential health issues were easy to dismiss when they were only being covered by some "right-wing" media outlets like Breitbart.  But now, as The Hill points out, reputable doctors are starting to come forward to suggest that Hillary's health might be a serious issues.  One such person is Dr. Bob Lahita, Chairman of the Department of Medicine at Newark Beth Israel Medical Center, who offered the following comments on Hillary's health:

  "This is a very unusual story with Hillary,” said Lahita, pointing to the two blood clots she's been diagnosed with in the past. "The very fact that she’s having these clots and she’s had two bouts of thrombosis is disconcerting to say the least."

   

  When asked if questions about Clinton's health are legitimate and not part of a political conspiracy, Lahita said without hesitation, “I don’t think it’s a conspiracy.”

   

  Lahita then pivoted to past presidents who entered office with health problems.

   

  “You go back to the history of our presidents and we’ve had many presidents up until Lyndon Johnson who’ve concealed their health during their campaigns," explained Lahita.

   

  "It had dire effects for our country, going from Kennedy to Roosevelt, to Woodrow Wilson, whose wife ran the White House for some time," he continued, "So we have issues here and I think both candidates should be very forthcoming and perhaps have an impartial panel of physicians review the data and make that kind of decision before Americans go to the polls."

  Last week, we also reported how Dr. Drew Pinsky, board-certified medicine specialist and CNN employee, broke the mold of conformity at CNN, when he said that he is "gravely concerned" about presidential candidate Hillary Clinton’s health, pointing out that treatment she is receiving could be the result of her bizarre behaviors (see "CNN Cancels Dr. Drew's Show One Week After He Voiced "Grave Concern" For Hillary's Health").  Pinsky's honesty promptly got him fired from CNN.

  With legitimate doctors coming forward with questions about Hillary's health, the left has been forced to pivot on their "conspiracy theory" narrative.  Which is why they are now going on the offensive by raising questions about Trump's health and painting his doctor as someone who belongs in the "loony bin" (they may have a point there actually).

  Countless hours of media coverage have been spent analyzing the following letter from Trump's doctor who declares "If elected, Mr. Trump, I can state unequivocally, will be the healthiest individual ever elected to the presidency." 

  

   

   

  And the following video where Trump's doctor admits he threw together the letter in a rush…

   

  While we find the media circus "entertaining", we have some radical ideas on how to put this topic to bed.  Is the health of the next President of the United States a legitimate issue?  Of course it is – let's face it, no one is voting for the candidate with the best VP. 

  So why not just have a transparent process where independent doctors review and assess the historical health records of both candidates?  Wouldn't the American voters benefit from some facts rather than the empty media rhetoric? 

  But, logical solutions like that wouldn't sell many newspaper or TV ads so no holding of breath please.

  

  

• FatLivesMatter – The 'Discriminatory' Costs Of Obesity

  The obesity epidemic in the United States continues to spread; and while the consequences of obesity on health are obvious, HowMuch.net notes that the impacts of the epidemic extend even into personal finance and work.

  The following chart exposes the costs of obesity for each gender…

  

  Source: HowMuch.net

  The graphic above breaks down the costs of obesity by composition, with each composition having a distinct color. Each gender is represented by its respective sex symbol. The data were collected from a comprehensive study on the costs of obesity from George Washington University.

  There are several compositions that are equal or near-equal between the two genders. The researchers found that obesity adds excess medical costs equally across both genders. At the same time, life insurance costs for the obese are also equal for both genders. While the study found that the medical costs were equal among both genders, many other costs vary between obese men and women.

  The biggest difference in obesity costs between men and women come in the form of wages. Research has found that there is a connection between obesity and lower wages for female employees. Obese female employees earn relatively less compared to normal-weight female employees. Male employees who are obese do not receive relatively lower wages, according to the research. The result is $1,855 in added costs for obese women. However, the research paper notes “…accurately estimating the casual relationship between wages and weight cohorts is problematic, as the direction of the relationship has not been conclusively determined.”

  The other biggest difference between obesity costs for men and women are in the composition absenteeism. The researchers found that obese male employees miss an additional two days of work annually due to illness related to obesity. Obese female employees miss between an extra one and five work days per year. Overweight and moderately obese male employees did not see incremental costs due to missing work, while female employees in the same two categories saw increased costs due to missed work. The largest incremental cost for both men and women in this composition was for the severely obese. Both morbidly obese (higher than severely obese) male and female employees saw added costs due to missed work from obesity related illness, but less than the costs for the severely obese.

  While additional medical bills play a major role in added costs for both obese men and women, there are other many other areas where the obese have additional costs. In particular, sickness due to obesity related illness and lowered productivity leads to added costs. Obese female employees may receive lower wages, but additional research must be done to be sure.

  #FatLivesMatter

  

  

• “I’ve Never Seen Anything Like This Before" – The Housing Markets In The Hamptons, Aspen And Miami Are All Crashing

  One month ago, we said that “it is not looking good for the US housing market”, when in the latest red flag for the US luxury real estate market, we reported that sales in the Hamptons plunged by half and home prices fell sharply in the second quarter in the ultra-wealthy enclave, New York’s favorite weekend haunt for the 1%-ers.

  Reuters blamed this on “stock market jitters earlier in the year” which  damped the appetite to buy, however one can also blame the halt of offshore money laundering, a slowing global economy, the collapse of the petrodollar, and the drastic drop in Wall Street bonuses. In short: a sudden loss of confidence that a greater fool may emerge just around the corner, which in turn has frozen buyer interest.

  

  A beachfront residence is seen in East Hampton, New York, March 16, 2016.

  We concluded this is just the beginning, and sure enough, several weeks later a similar collapse in the luxury housing segment was reported in a different part of the country. As the Denver Post reported recently, high-end sales that fuel Aspen’s $2 billion-a-year real estate market are evaporating, pushing Pitkin County’s sales volume down more than 42 percent to $546.45 million for the first half of the year from $939.91 million in the same period of 2015.

  The collapse in transactions means that Aspen’s high-end real estate market “one of the most robust in the country, with dozens of options for buyers ready to spend more than $10 million” finds itself in its first-ever sustained nosedive, despite “dense summer crowds, soaring sales tax revenues and high lodging occupancy.”

  Like in the Hamptons, the question everyone is asking is “why”? There are many answers:

  Ask a dozen market watchers why, and you’ll get a dozen answers. Uncertainty around the presidential election. Fear of Trump. Fear of Clinton. Growing trade imbalances with China. Brexit. Roller-coaster oil prices. Zika. Wobbling economies in South America. The list goes on.

  “People are worried about all kinds of stuff these days,” says longtime Aspen broker Bob Ritchie. “I’ve never seen anything like this before.”

  The speed of the collapse has been stunning. Until just last year, the local market was beyond robust, with Pitkin County real estate sales hitting $2 billion in 2015, a 33% annual increase driven largely by sales of homes in Aspen, where prices average $7.7 million.

  This year, however, “a slowdown in January turned into a free fall.” Sales volume in Pitkin County is down 42%, according to data compiled by Land Title Guarantee Co.

  Almost all of that decline is coming from Aspen, where the market is frozen. Sales in the Aspen-Snowmass market in the first half of the year were the bleakest since the first half of 2009, and inventory soared to levels not seen since the recession.

  
  High-end sales that fuel Aspen’s $2 billion-a-year real estate market  are evaporating

  The statistics are stunning: single-family home sales in Aspen are down 62% in dollar volume through the first-half of the year. Sales of homes priced at $10 million or more — almost always paid for in cash — are down 60%. Last year, super-high-end transactions accounted for nearly a third of sales volume in Pitkin County.

  “The high-end buyer has disappeared,” said Tim Estin, an Aspen broker whose Estin Report analyzes the Aspen-Snowmass real estate market.

  “Aspen has never experienced such a sudden and precipitous drop in real estate sales,” according to the post.

  Worse, it’s not just the collapse in the number of transaction: even more disconcerting for brokers who have always trumpeted Aspen as a safe and lucrative place to park a huge pile of money: Prices are dropping.

  In the first half of this year, the average price per square foot of Aspen homes dropped 22 percent to $1,095 from $1,338 in 2015. Recent Aspen sales also closed at more than 15 percent below listing price, a rare discount.

  Some brokers suspect that the frenzied sales and pricing pace of 2015 was not sustainable. The present decline is a correction, they say. “I think a lot of people thought we would go to the next level in 2016. Take the next step up and that step got resistance from buyers,” said longtime Aspen broker Joshua Saslove, who just put an Aspen home for more than $10 million under contract. If it closes, it will be just the fourth sale above $10 million in Aspen this year, compared with more than a dozen by this point last year.

  “I think a lot of developers thought they would push their, say, $5 million properties to $6 million this year, but no one is buying,” Saslove said. “I don’t see that nonchalance or cavalier attitude any more.”

  To be sure, Saslove is hoping that a rebound is coming; that however, may be overly optimistic and first far more pain is in store especially if one considers what is taking place in yet another formerly red-hot housing market, where suddenly things are just as bad, because as Mansion Global reports…

  Luxury condo sales in Miami have crashed 44%.

  According to the latest report by the Miami Association of Realtors, the local luxury housing market is just as bad, if not worse, than the Hamptons and Aspen.

  The latest figures out of Miami this week showed residential sales are down almost 21% from the same time last year. But as bad as this double-digit decline may seem, it pales in comparison to what’s happening at the high end of the market.

  A closer look at transactions for properties of $1 million or more in July shows just 73 single-family home sales, representing an annual decline of 31.8%, according to a new report by the Miami Association of Realtors. In the case of condos in the same price range, the number of closed sales fell by an even wider margin: 44.4%, to 45 transactions.

  The Miami housing market, and its luxury segment in particular, has been softening for the past year with high-end condos sitting on the market for twice as long as they did a year ago and sellers offering bigger discounts amid an increased supply.

  
  Number of closed sales for Miami condos priced over $1 million fell by 44%

  In July, townhouses and condos of $1 million or more waited, on average, 162 days for a buyer, a 1.9% increase over a year ago and the longest time of any other price range, according to the report.

  As in the previous two markets, the locals want something to blame, in this case the strong dollar, which has significantly increased the value of properties in other currencies, has been blamed, and perhaps rightfully so as sales to foreigners—an important client base, since international buyers  acquire more homes in Florida than in any other state, according to the National Association of Realtors – have tumbled.

  Real estate appraiser and data expert Jonathan Miller said that Miami is behaving like most of the rest of the U.S. housing market, which is in fairly good shape overall “but soft at the top.”

  As noted here over the years, In the case of Miami, like in other most other coastal markets such as New York and Los Angeles, the housing boom was heavily boosted by foreign buyers, who used US luxury real estate as their new form of anonymous “offshore bank accounts” courtesy of the NAR’s exemption from Anti-Money Laundering Provisions. However, after the recent drops in commodity prices and the spike in the USD, they have scaled back their purchases.

  “The international component is not as intense,” Mr. Miller said.

  Depsite the slowdown deals are still being done, with cash the preferred form of payment of foreign buyers in the U.S., – some 43% of all sales in Miami in July were closed in cash, however down from 48.1% the same month last year, according to the latest figures.

  Other potential buyers are also stepping back: cash sales for townhouses and condominiums, an indicator of investor activity, hit their lowest level in a year last month: 633 transactions, representing a 30.4% year-over-year decline, according to the report.

  As for the forecast for the coming months, sales activity doesn’t look likely to surge. There were 1,272 pending sales of townhouses and condos in Miami in July, which means 25.4% fewer transactions waiting to close than in the same month in 2015 and the lowest number so far this year. Meanwhile, as a result of a building boom, luxury condo inventory is up 47.8% from last year, with 2,482 units worth $1 million or more waiting to change hands; this means that sellers of high-end condos will continue to face stiff competition, prompting even fewer transactions and/or lower prices.

  So far, the collapse at the luxury end has failed to transmit to the broader market, less impacted by lack of foreign demand, however as we documented two weeks ago, it is only a matter of time before the overall US housing market suffers as well. The only question is whether the NAR and the US Census Bureau, who tabulate the “goal-seeked”, seasonally adjusted data, will admit it before or after the presidential elections. The likely answer: it depends on who the next president is.

  

  

• Joe Biden Humiliated In Turkish "Appeasement" As Erdogan Bombs US Allies In Syria

  The last time U.S. Vice President Joe Biden flew to Turkey, in January, he had a stern message for President Erdogan: his model of Islamic democracy was setting a bad example by intimidating media and threatening academics. However, his tone was markedly different when he arrived in Ankara on Wednesday, just weeks after a failed coup in Turkey that has strained relations between the two countries, and on the same day that Turkey launched a full-blown incursion into northern Syria “to halt ISIS.” With Turkey making very clear, and very open overtures toward Russia, Biden was in full blown diplomatic damage-limitation mode.

  

   

  The dramatic shift in dplomatic posture by Biden comes as the U.S.-Turkish alliance has been dealt several blows in recent weeks, to the point where the US vice president’s arrival in Ankara shows just how concerned the US, which is counting on continued support from Turkey – NATO’s second-biggest military – has become.  American worries have been compounded by Erdogan restoring ties with Russia – the Turkish president’s first diplomatic meeting after the failed coup was with Putin in St. Petersburg, as a result of which Turkey has been discussing military cooperation with the Kremlin.

  Meeting with Erdogan and Turkey’s prime minister in Ankara on Wednesday, Biden delivered a message of alliance and conciliation.   “Let me say it for one last time: The American people stand with you … Barack Obama was one of the first people you called. But I do apologize. I wish I could have been here earlier,” Biden said.

  But he wasn’t.

  And while Biden’s pathetic attempt at appeasement may have come and gone, reinforcing just how much the American people stand with a person whose pre-arranged purge of political opponents has resulted in over 100,000 Turkish citizens fired or arrested, Turkey’s diplomatic humiliation of the US continued, when far from attacking ISIS in Syria, the stated objective behind the invasion, Turkish forces and rebels supported by Erdogan continued their deadly attacks on Kurdish-backed forces in north Syria on Saturday. The same Kurdish-backed forces which are also backed by the US.

  And it’s not as if Turkey is even hiding it: Turkey’s government, which is fighting a Kurdish insurgency at home, has said the Syrian campaign it opened this week is as much about targeting Islamic State as it is about preventing Kurdish forces filling the vacuum left when Islamists withdraw. Turkey wants to stop Kurdish forces gaining control of a continuous stretch of Syrian territory on its frontier, which Ankara fears could be used to support the Kurdish militant group PKK as it wages its three-decade insurgency on Turkish soil.

  According to Reuters, Turkish security sources said two F-16 jets bombed a site controlled by the Kurdish YPG militia, which is part of the broader U.S.-backed Syrian Democratic Forces (SDF) coalition.

  Meanwhile, the US-backed Kurds are fighting back,  and according to military sources, one Turkish soldier was killed and three others wounded when a tank was hit by a rocket that they said was fired from territory held by the Kurdish YPG. The sources said the army shelled the area in response.

  At that point the chaos that is the Syrian conflict, with so many competing elements, many of whom supported by the US, was on full display.  Case in point: Syrian rebels opposed to Ankara’s incursion said Turkish forces had targeted forces allied to the YPG and no Kurdish forces were in the area. On the ground, Turkish-backed Syrian rebels fought forces aligned with the SDF near the frontier town of Jarablus. Forces opposed to Ankara said Turkish tanks were deployed, a charge denied by Turkey’s rebel allies.

  As a result, the narrative is now split in two: one “confirming” the Turkish explanation, the other justifying the actions of the YPG, just in case the US decides to flip after all, and support its “lesser” allies:

  he Jarablus Military Council, part of the SDF, had said earlier on Saturday that Turkish planes hit the village of al-Amarna south of Jarablus, causing civilian casualties. It called the action “a dangerous escalation”.

   

  The Kurdish-led administration that controls parts of northern Syria said Turkish tanks advanced on al-Amarna and clashed with forces of the Jarablus Military Council. But the Kurdish administration said no Kurdish forces were involved.

   

  However, the leader of one Turkey-backed rebel group gave a rival account. He told Reuters the rebels battled the Kurdish YPG around al-Amarna and denied any Turkish tanks took part.

   

  Turkish security forces simply said Turkish-backed forces had extended their control to five villages beyond Jarablus.

  In short, chaos and a full-blown media propaganda war; however, as Reuters notes, one thing is clear: any action against Kurdish forces in Syria puts Turkey further at odds with its NATO ally the United States, which backs the SDF and YPG, “seeing them as the most reliable and effective ally in the fight against Islamic State in Syria.”

  However, just like Biden’s arrival in Ankara was a tacit admission that the US will fully ignore Erdogan’s unprecedented crackdown on human righs in post-coup Turkey as the president purges even the remotest political opponent, so the YPG, which has been “backed” by the US, is about to realize just how little such backing really means when the US has bigger fish to fry, in this case desperately trying to keep Turkey on its good side, and away from Putin’s circle of influence, all the while providing countless concessions to Turkey as the country continues to openly defy western norms and put away dissidents, while arresting members of the press, and education system, as Erdogan nationalizes private corporations alleged to have ties with the notorious “coup plotter” Fethulah Gullen.

  In doing so, the Obama administration has once again revealed the true extent of its hypocricy, as it turns a blind eye toward the trampling of human rights in Turkey, while screaming bloody murder when something similar takes place in any other part of the world.

  Meanwhile, Turkey’s humiliation of its “partner”, the US, will continue, and much to the amusement of Vladimir Putin, there is absolutely nothing Obama will do about it. 

  

  

• UNLOCKING GOLD'S TRUE VALUE: The Economic Code – Finally Revealed

  

  By the SRSrocco Report,

  The true value of gold is much higher than the spot price quoted in the market.  This is due to several factors, but the most important reason is misunderstood by just about every economist and monetary scientist in the world today.  Those who are able to understand the information in this article, will finally be able see the value of gold (money) in a totally different way.

  Unfortunately, the majority of economists and precious metal analysts look at gold in a very specialized way.  While precious metals analysts see gold as real money versus the Keynesian view of a Fiat Dollar System, both fail to grasp gold’s true value.  Gold is more than a precious metal based on supply and demand.  Furthermore, the Austrian School of Economics looks at gold as a foundation of money in the procurement of goods and services.  However, gold’s real value comes from energy in all forms and in all stages in its production.

  The Foundation Of Gold Money:  ENERGY = GOLD = MONEY

  To understand this principle, I have decided to use one of the largest gold producers in the world as an example, Newmont Mining.

  According to Newmont’s 2013 All-In-Sustaining-Cost for producing gold, they provided the following chart:

  

  Now, this was a few years ago when the price of oil (energy) was higher, so with lower energy prices, costs have come down since then.  Regardless, this still provides us with a list of costs.  The main part of Newmont’s sustaining costs are shown as CAS – Cost Of Sales.  That’s the blue part of the bar chart, which is broken down on the right, in the circle pie-chart.

  If we look at the pie-chart by itself, we see that energy comprises 20% of the total costs.  Of course, the knee-jerk reaction from a typical precious metals analyst is that energy is only 20% of Newmont’s cost to produce gold.  The analyst only sees 20% energy cost because his mind has been trained to look in a superficial and specialized way.

  Here is a breakdown of the CAS -Cost Of Sales pie-chart:

  

  As we can see, diesel at 10% and power (electricity) at 10% comprises 20% of pure energy for Newmont’s gold cost.  However, we must realize that labor at 50%, is also a form of energy…. it’s HUMAN ENERGY.  People need to understand that science breaks down labor into work or energy.  The term Horsepower was developed from the energy of horses performing work.  Thus, human labor is a form of work, and is also a form of energy.

  Now, some of the labor force gets paid more because their labor contains more experience and specialization.  For example, an experienced mechanic working on the huge earth moving machines gets paid more than another working doing regular manual labor because of the TIME & ENERGY invested in the mechanic’s trade.  The mechanic spent years doing work and education which consumed one hell of a lot of energy in different forms to have 20 years experience.  Thus, the energy in labor for years of work has provided him that experience.  Which means, the amount of work-energy the mechanic has done for 20 years allows him to be paid a higher rate.

  So, if we add human labor (work-energy) of 50% of the CAS cost with the 20% of diesel and power, the total is now 70%.  So, if we were going by scientific terms of doing work-energy, pure energy and labor energy comprises 70% of Newmont’s cost to produce gold in its CAS- Cost Of Sales breakdown.

  Okay, let’s look at the remaining two categories:

       Consumables = 10%
       Materials & Parts = 20%

  Newmont’s uses a lot of consumables to produce gold.  Here is a list of some of Newmont’s consumables provided in their 2015 Sustainability Report:

  

  I decided to use lime as perfect example, because the production and transportation of lime is very energy intensive.  Again, according to a typical gold mining analyst, he places lime as a “consumable cost” and not an energy cost.  Once we look at the total process of producing and transporting lime, we will realize the overwhelming value or cost of lime is from the ENERGY in ALL FORMS and in ALL STAGES.

  Here is simple diagram of the production of lime, which Newmont consumed 515,800 tonnes in 2015 to produce gold:

  

  The lime is first mined from the ground and transported to the production plant.  This costs a lot of energy from the diesel in the truck as well as the labor-energy of the truck driver.  As the lime moves through the producing plant, it consumes a great deal of energy as electricity is needed to power the plant as well as the high-temperature Kilns that process the lime.

  Here is a small section of an EPA Report on the Economic Production of Lime in the United States:

  

  As the report states, the cost of materials for producing lime is much greater than the labor… three to four times greater.  If we go back to Newmont’s CAS – Cost of Sales, labor was 50%, which is half the cost, while the other half was from energy, materials and consumables.

  Regardless, the largest percentage of materials used to produce lime is liquid fuels.  Furthermore, the lime industry spent $138.2 million on energy in 1996, which was 31.4% of its material cost.  I would imagine that energy cost is much higher now and accounts for an even higher percentage of total costs.

  In addition, we must add the percentage of human labor to the total energy cost in producing lime.  Moreover, all the other materials used to make lime also must be viewed the same way in their production.  Even though the lime industry purchased materials to produce lime, the overwhelming value of those materials came from the energy consumed in ALL FORMS and in ALL STAGES.

  Once the lime is produced, it has to be transported to Newmont’s gold mines.  Lime is very heavy, so it takes a lot of energy to transport lime via ship, railroad or by truck.  Either way, the energy burned in the ship, locomotive and truck as well as the labor by the ship captain and crew, locomotive engineer or truck driver also must be added to the total cost as ENERGY.

  Using lime as an example, we can see that other consumables such as cyanide, grinding materials and cement also get their value from the energy in all forms and in all stages in their production.  This is also true for the other category of “Materials & Parts.”

  If Newmont has to replace a large part of a system in one of their ore processing facilities, the value of that part comes from all the energy consumed in all forms and in all stages along the way.

  Additional Newmont Mining Full Cycle Energy Costs Explained

  Let’s take a look at Newmont’s All-In-Sustaining-Cost chart once more:

  

  Okay, I just explained the first category on the bottom of the bar chart in blue, the CAS – Cost Of Sales.  Let’s discuss the next category called “Sustaining Capital (in red).”

  Newmont Mining spends a lot of money on sustaining capital to be able to produce gold on a continual basis.  According to their Q2 2016 financial report, they will spend between $650 and $700 million on sustaining capital in 2016.  One part of sustaining capital is “stripping costs.”  This is a tremendously energy intensive activity of stripping (removing) overburden and poor quality ore.

  Many of you are aware of this huge cost if you watch the show, GOLD RUSH.  If my memory serves me correctly, the team under Parker Schnabel spent something close to $500,000 to remove the overburden and move their wash plant on one of their biggest gold cuts last year in Alaska.  The majority of that cost was the diesel to power the huge earth moving machines to remove that overburden.

  Basically, the stripping cost listed as “Sustainable Capital” is from the liquid energy burned and human labor.  Another energy cost found in sustainable capital is the making of new haul roads to get to the new ore cut.  This takes a huge amount of energy as loaders, haul trucks and other earth moving machines transport the rock and gravel to make these new haul roads.

  If I went down the entire list of sustaining capital, the overwhelming expenditure of the $650-$700 million Newmont will spend this year will be from all the energy in all forms and in all stages.

  Another category not included here is regular “Capital Expenditures.”  This would include purchasing a new one of these massive haul trucks below:

  

  This is the Caterpillar 797F that costs $5 million.  If we went on the same journey as we did when I explained the cost to produce lime, we would find out that the overwhelming value of that massive CAT 797F comes from all the ENERGY in ALL FORMS and in ALL STAGES.

  Hell, the huge tires for the CAT 797F, that cost $40,000 a piece, each contain nearly 2,000 pounds of steel, enough to build two small cars and enough rubber to make 600 tires to put on them.

  Again, according to the gold mining analysts, they list the Caterpillar 797F as a capital expenditure.  However, if we look through the entire ENERGY MATRIX, we now see that what Newmont purchased as a CAT 797F haul truck, is again…. all the energy in all forms and in all stages in its production.

  If we consider the last few categories in Newmont’s All-In-Sustaining-Cost bar chart of Exploration-Advanced Projects, General & Administration and Other, we can apply the same energy logic.  It takes a lot of energy to explore for gold as well as advancing new gold mining projects.  Not only does it take the burning of a lot of energy to explore and advance projects for gold mining, there is also a lot of human labor (manual & experienced), materials and parts to consider in the total process.

  Unfortunately, most people have been programmed to compartmentalize everything today.  They see most things separately and are not able to understand how energy gives value to the majority of goods and services in the world today.  They just see the end result and believe that it magically appeared on the storeroom shelf.  I would assure you that the value of most goods sitting on the shelves in the thousands of Walmarts across the country were derived from ENERGY, in all forms and in all stages.

  While Newmont is showing on its balance sheet that it purchased, lime, materials or equipment, it really purchased a great deal of energy that was consumed in their production.

  There are several other items that Newmont has to dish out money to be in the business of producing gold, such as interest expense and taxes to name a few.  I would imagine someone reading this article would be quick to blurt out that interest expenses and taxes are not energy.  Well, that might be true if we look at them in a superficial way, but most taxes go to pay the governments to maintain roads, infrastructure, public buildings and government employees that function as a necessary part of our highly complex society.

  Thus, the government spends a lot of money on energy as well as human labor to maintain roads and infrastructure.  So, if we really expand our ENERGY MATRIX horizons, we would see that ENERGY is the main driver that comprises the value of most goods and services in the world today… including GOLD.

  The Strategic Importance Of ENERGY = GOLD = MONEY

  Hundreds of years ago, the prize by empires was obtaining gold and silver.  This was especially true for the Spanish Empire and its leading role in the world at the time due to its ability to acquire massive amounts of gold and silver from South America and Mexico.

  During the 1500’s when the Spaniards were using Aztecs as slaves to loot gold and silver from their lands, the energy source at the time was mainly human and animal labor.  To build the massive Spanish Armada that was destroyed or then sunk by a huge storm in 1588, it took a great deal of human and animal labor.

  

  (courtesy of Wikipedia)

  Furthermore, according to this source, On May 28th 1588, the Armada, with around 130 ships, 8,000 sailors and 18,000 soldiers, 1,500 brass guns and 1,000 iron guns, set sail from Lisbon, Portugal, headed for the English Channel.  The Spanish were able to amass such a large fleet of ships, crew and armaments due to massive amount of gold and (especially) silver they plundered from South America and Mexico.

  According to the Historical World Silver Production 1492-1927, the Spaniards produced over 90 million oz of silver from 1521-1600 in Mexico alone.  They started mining silver in Zacatecas, Mexico in 1540, the region where the largest primary silver miner in the world, Fresnillo is currently producing silver.

  Furthermore, the Spanish opened large-scale mines in Peru, in the land of the Incas.  From 1533 to 1600, over 94 million oz of silver were produced.  As we can see, the Spanish became the leading empire on the globe due to their ability to amass the largest hoard of silver on the planet at the time.

  Well, this all changed in the early 1900’s when the top oil barons realized the value of money would come from oil and no longer from just human and animal labor.  This is why the top oil companies decided to carve up the globe in the early 1900’s and work with each other to control, extract, and sell the most important energy source to world.

  Oil was also the main reason why Hitler decided to attack Russia in World War 2.  He needed the oil to continue with his plans of Nazi expansion.  Instead of using gold or silver, Hitler needed oil.. and badly.

  

  According to this source on Germany & Oil:

  At the outbreak of the war, Germany’s stockpiles of fuel consisted of a total of 15 million barrels. The campaigns in Norway, Holland, Belgium, and France added another 5 million barrels in booty, and imports from the Soviet Union accounted for 4 million barrels in 1940 and 1.6 million barrels in the first half of 1941. Yet a High Command study in May of 1941 noted that with monthly military requirements for 7.25 million barrels and imports and home production of only 5.35 million barrels, German stocks would be exhausted by August 1941.

   

  The 26 percent shortfall could only be made up with petroleum from Russia. The need to provide the lacking 1.9 million barrels per month and the urgency to gain possession of the Russian oil fields in the Caucasus mountains, together with Ukrainian grain and Donets coal, were thus prime elements in the German decision to invade the Soviet Union in June 1941.

  Here we can see that Hitler gained five million barrels of much-needed oil from Norway, Holland, Belgium and France  to be able to attack Russia.  I have read some accounts that Russia was the REAL PRIZE for Hitler and the Nazi’s.  Which is why they used their lightning-speed Blitzkrieg Warfare on the Western European countries to consume as little fuel as necessary while acquiring the necessary petrol to attack Russia.

  When the United States entered into World War 2, it was just a matter of time before the Germans were beaten.  The U.S. was the Saudi Arabia at the time and was providing most of the oil to the allies.  It was the huge reserves of oil and natural resources that propelled the United States to becoming the leading empire in the world.

  Unfortunately, the United States peaked in cheap oil production in 1970.  One year later, Nixon dropped the Dollar-Gold peg.  How ironic… aye?  Then of course we had the Arab oil embargo in 1973 and Iranian oil crisis of 1978 which pushed the price of oil from $1.80 a barrel in 1970 to $31 by 1979.  This had a profound impact on the price of gold and silver as they skyrocketed during that decade.

  However, over the next 45 years, clever bankers on Wall Street, London and etc, have hoodwinked investors into putting their surplus funds into paper assets which have become the GREATEST PONZI SCHEME in history.

  This paper ponzi scheme can only work on RISING OIL PRODUCTION.  Again, the greatest ponzi scheme in history can only work on rising oil production.  Furthermore, it can only work on rising CHEAP oil production.  Unfortunately, the world has peaked in cheap oil production a decade ago.  We are filling in the gaps with very expensive oil production that the world cannot afford without the massive increase of debt.

  According to the work by the Hills Group and Louis Arnoux, they believe an OIL PEARL HARBOR will take place by the end of the decade:

  

  They don’t see a rising oil price in the future, rather they believe it will fall as the available net energy to the market will continue to decline.  They also believe the economic principle of supply and demand will no longer function as a “Thermodynamic Collapse” of oil will take place.

  With rapidly falling oil production, the $250 trillion in total world assets of Stocks, Bonds, Real Estate and Insurance Funds will be in big trouble.  Thus, investor fleeing rapidly falling paper assets and Real Estate will move into gold (and silver) to protect wealth.

  Energy has been the key driver for the value of gold and silver for thousands of years.  For the majority of our history, the energy has come from human and animal labor.  However, as coal, then oil came in the picture, this changed the dynamics considerably.  With the peak of inexpensive global oil production, the world is about to experience one hell of a FINANCIAL CALAMITY.  Very few people are prepared for what is coming.

  With the understanding that most goods and services in the world are based upon all the ENERGY in ALL FORMS and in ALL STAGES, things are about to get very interesting.  Some believe falling energy production will depress the price of gold.  This is an incorrect assumption

  Due to the massive funneling of the world’s funds into paper assets over the past 45 years, this has artificially lowered the value of gold (and silver).  Once the world wakes up to the fact that they are invested in ENERGY IOU’s, investors will move into physical gold to protect wealth as oil production declines in earnest.

  We have a new series at the SRSrocco Report site, called WELCOME TO THE CONVERSATION where we discuss new topics about energy, mining, precious metals and the economy:

  Lastly, if you haven’t checked out our new PRECIOUS METALS INVESTING section or our new LOWEST COST PRECIOUS METALS STORAGE page, I highly recommend you do.

  Check back for new articles and updates at the SRSrocco Report.

  

• The War On Whistleblowers & Why America's Next President Will Kill Julian Assange

  Submitted by Jake Anderson via TheAntiMedia.org,

  I’m worried about Julian Assange. This is not a maternal instinct, but rather, a pragmatic one. The increasingly hostile statements made by top state officials and their surrogates show a widespread condemnation of whistleblowers in the halls of government. President Obama set the tone early in his administration.

  In the case of WikiLeaks founder Julian Assange, the rhetoric goes well beyond condemnation of methodology and straight to advocating for his brutal murder.

  We already know that Obama, Clinton, Sanders, and Trump have all said they would prosecute Assange. Clinton, to get more specific, wants him extradited from Ecuador, prosecuted for espionage, and his WikiLeaks removed from the Internet. Her desire to charge him with espionage is only a little ironic considering the Clinton Foundation’s Pay-to-Play system arguably warrants an espionage indictment, as does Clinton’s storing of Special Access Program intelligence on an unencrypted private server.

  Meanwhile, over in the Trump Tower of Mordor, the business mogul’s draconian approach to just about everything includes a ruthless hatred of all journalists, and most certainly whistleblowers. Trump has indicated his treatment of an extradited Assange or Snowden would be severely harsh. Snowden, in particular, would be assassinated if Trump had his way. I can only shiver imagining how a President Trump would react to a major leak from the inner chambers of his new political empire.

  The transition from authorities’ vows of prosecution to their use of surrogates who openly call for Assange’s assassination is highly disturbing, to say the least.  Granted, Assange supposedly has his ‘thermonuclear’ device — a 1.4 GB cache of files containing the identity of spies, military secrets, and unredacted documents from Bank of America and BP that can be unencrypted and released upon his death or arrest — but with a large faction of the mainstream media acting as a bullhorn for state propaganda, any damage inflicted by Julian’s ‘insurance’ packet could likely be mitigated by some social engineering. Remember the Panama Papers? A couple months ago people were saying it was the biggest leak in human history. Have you heard even a nostalgic reference to it since?

  All this wouldn’t be quite as surprising — or alarming — if the anti-democratic venom hadn’t trickled down into the daily talking points of media figures and network journalists (whom I affectionately refer to as the State Department’s paid interns). Voices from across the political spectrum have repeated the claim that Russia has ‘weaponized’ Wikileaks. Sometimes they pose the conspiracy theory as a question. “Has Russia weaponized Wikileaks to disrupt a U.S. election?” My question in response would be: has the U.S. media questionized State Department propaganda in order to deflect attention away from a rigged primary and a political power structure that is rotten to the core? It’s actually a brilliant little piece of state agitprop. They managed to turn the public’s attention away from one of the most egregious examples of election fraud in recent history and demonize both Russia and Wikileaks in one fell swoop.

  Such blatant propaganda is to be expected from the government. But coming from a journalistic establishment that is ostensibly there to dig for the truth, it’s rather shocking to see rampant election tampering from a major American political party get trumped by an unproven accusation toward a foreign country. Regardless of one’s conspiratorial appetite, seeing the 4th estate function as the infotainment branch of the State Department, parroting its every chirp of propaganda, should be profoundly distressing.

  Let me give you a couple of examples, first from a mainstream right-of-center publication, then from a wildly popular left-of-center ideologue. In the former, we have TIME Magazine, which has had the hickeys of state propaganda on its neck for decades. On August 12th, 2016, TIME published an article called “WikiLeaks Is Getting Scarier Than the NSA.” I’ll let that sink in for a moment. I don’t even have the emotional bandwidth to explain why that title earns the ‘Psyop of the Century’ award. Just. . . remember to be scared.

  On the left, we have Bill Maher, whose excoriations of hypocritical Republicans can be extremely entertaining and perceptive. Like The Daily Show, Maher functions as the liberal end of what some cultural philosophers think of as a manufactured spectrum of acceptable discourse. When Maher, who claims solidarity with Assange and the cause of WikiLeaks, repeats the same government talking point that Russia is tampering with our elections, it kind of forces you to consider that all corporate media — left or right — operates under the same tent.

  The anti-WikiLeaks propaganda wouldn’t feel so existential if I didn’t believe anti-whistleblower messaging is soon going to escalate into an actual long-term military campaign against leakers and hacktivists around the world. In the near future, don’t be surprised if there is some ‘event’ that catalyzes a mobilization of military campaigns against targets that are deemed ‘a danger to our democracy because of their unlawful disclosures of matters of national security.’ This would almost assuredly include symbolic targets like Julian Assange and Edward Snowden to achieve a “chilling effect.” We’ve already seen Intercept writer Barrett Brown receive prison time for essentially hyperlinking to leaked information in an article. Add to this the fact the Obama Administration has used the Espionage Act to prosecute twice as many defendants as all previous administrations combined, and you get a sense of how power structures are increasingly criminalizing the dissemination of information.

  Now back to my non-maternal worrying over Julian’s safety. Recently, in a stunning interview (above) with Dutch television program Nieuwsuur, Assange may have underhandedly confirmed that the recently murdered DNC operative Seth Rich was the leaker of the 3,000 emails that showed the DNC colluded with the Clinton camp, the implication being he was killed either out of revenge for the leak or to prevent future leaks. He didn’t state this explicitly but his abrupt and completely random reference to the murder in the context of assessing the dangers faced by WikiLeaks sources doesn’t make sense unless that was his way of ‘accidentally’ signaling a connection.

  The interviewer picked up on that and asked him, “Why make the suggestion of a young guy being shot in the streets of Washington?”

  The fact that Wikileaks posted a $20,000 reward for any information on Seth Rich’s murder suggests they do not believe it was a random robbery, which is further evidenced by the fact that his wallet, credit cards, and phone were not taken.

  It is also certainly a bit coincidental that within days of the conspiracy going viral, Seth Rich’s family made a public statement asking for rumors about his death to stop. On a likely related note, their new family spokesman is none other than Brad Bauman, who is a Democrat ‘crisis communications’ consultant with the Pastorum Group. According to his LinkedIn profile, Brad’s job is “providing strategic communications advice to Democratic candidates.”

  Disputes over this conspiracy persist, but there is no hard evidence linking his death to a politically motivated act of violence by DNC or Clintonian operatives. However, one can surely admit it is unusual for a family to hire a high-powered PR firm that provides “public relations for progressive candidates.” One logical explanation is that the Clinton campaign realized suspicions would surface after Seth Rich was found murdered and immediately started damage control. If Pastorum hadn’t only been created last year, it might not seem so peculiar. And if their web page had any content on it whatsoever, it would be possible for people to easily learn about the origins of their creation. But, like Russia’s connection to the DNC leak, it’s just a theory.

  Again, the assertion that a whistleblower was murdered by an operative for a major political party cannot be proven at this time. Nor can the assertion that the murders of five people (in two months) who were going to testify against Clinton had any connection with Clinton operatives.

  What can be proven, and what should be taken far more seriously, is the metamorphosis of the state’s rhetoric against Wikileaks from hostile to downright war-like. Not vitriolic, but war-like — as in quite literally the kind of rhetoric that leads to actual war with tanks, guns, and bomber planes — or, in this case, maybe just a bomb robot or a stealthy climber.

  It’s a worrisome time for Assange supporters. The last two weeks, in particular, have been downright surreal. First, Obama hagiographer Michael Grunwald tweeted with maniacal delight his support of Assange being killed in a drone strike. Then, Clinton strategist Bob Beckel went on Fox News and jumped up and down in his seat begging for someone to “illegally shoot the son of a bitch…[because] a dead man can’t leak stuff.”

  Hillary Clinton strategist Bob Beckel called for WikiLeaks editor Julian Assange to be assassinated. #DNCLeak pic.twitter.com/9L2ixl24Er

  — WikiLeaks (@wikileaks) August 10, 2016

  These two men, Democrat luminaries regularly featured on POLITICO and CNN, advocated the extrajudicial killing of a whistleblower to millions of people.

  The stigmatization and demonization of whistleblowers and hacktivists come after a decade in which the U.S. government’s civil liberty abuses have been laid bare for all to see. Snowden’s history-altering revelations about the NSA set the precedent that in the information age, state abuses can be illuminated for citizens to see. Transparency doesn’t bode well for Big Brother.

  Notably, the NSA leaks facilitated by WikiLeaks are still pouring out. The Intercept recently began publishing internal NSA newsletters written by and circulated among its critically important Signals Intelligence Directorate, or SIGINT. Intercept writer Micah Lee spoke to Anti-Media about the SIDtoday articles.

  “Besides the hundreds of small, but significant, individual revelations about the NSA,” he said, “the SIDtoday articles as a whole describe a secret history of the United States’s response to the terrorist attacks on 9/11. Until Snowden leaked documents, the public didn’t understand, or consent to, what America’s spies were doing, but SIDtoday tells the story of how and why it came it be.”

  Micah says the Intercept has only published 9% of what it has, which will amount to around 4,500 articles. Micah acknowledged the dangerous environment in which whistleblowers now find themselves.

  “No matter [who is elected], it will be an uphill battle for whistleblowers, but I doubt that will stop them.”

  It is my assertion that both Trump and Clinton are likely to engage in specific military operations to dismantle organizations responsible for high-level leaks. It could very well be the next ubiquitous war.

  Clinton has cultivated a well-documented track record of pro-war ideologies, not the least of which is her perpetual use of the War on Terror to trigger fear and trauma in the minds of voters. Who could forget the primary debate in which she used 9/11 imagery to defend her Wall Street connections?

  An example that may have flown under the radar was the Clinton Foundation’s advertisement for the 2014 exhibit “Spies, Traitors, and Saboteurs: Fear and Freedom in America.” It was a featured installation at the William J. Clinton Presidential Center in my hometown of Little Rock, Arkansas.

  According to the Clinton Foundation’s site:

  “Americans have endured thousands of incidents of terror, violence, or subversion right here at home by domestic terrorists and foreign agents, militant radicals and saboteurs, traitors and spies…The exhibition reminds us that Americans have known and dealt with acts of terror since the founding days of the republic and will continue to face these challenges in the years ahead.”

  For Clinton (and assuredly Trump, too) war is a permanent fixture in the American empire, as it was for Bush, Obama, and virtually all presidents before them. But the enemies are scattered and amorphous now. Radical jihadists are not like traditional standing armies; their prosecution requires a global, never-ending ubiquitous brand of war that is encoded into the very structure of American foreign policy. A widespread declared war against hackers, hacktivists (Anonymous), whistleblower organizations (WikiLeaks) and individual whistleblowers (Snowden, Chelsea Manning, etc.) would be similar. The empire’s enemy would be scattered, and tracking them would require that the tentacles of the security state slither further into every home and digital device.

  For the empire, these leaks are a direct assault on the power and hegemony of the ‘deep state,’ the synergistic nexus of state diplomats and officials, defense contractors, financial institutions, surveillance courts, and the military-industrial complex that together forms the connective tissue holding together a globalist oligarchy.

  They stand to lose too much from hacked information showing their improprieties. And the rhetoric continues to accelerate. Guccifer 2.0’s recent hack of Congresswoman Nancy Pelosi’s computer provoked her to use the phrase “electronic Watergate.”

  It will be a bipartisan war, and the battle lines will be drawn harshly. In the same vein as Bush’s “you’re either with us or against us” axis of evil, the umbrella of terrorism will expand to include any organizations that leak classified information, any group that publishes the information, and eventually, any journalist that links to a publication containing the information. Barrett Brown, currently serving 63 months for linking to a leak, may agree with me.

  Whatever administration is in office will, of course, invoke national security as the pretext for the War on Leaks.

  Maybe a giant financial institution is hacked, and the information released is said to be the catalyst for an economic downturn; then another leak is blamed for a terrorist attack that kills hundreds of innocent people; then several more major corporations have their entire systems compromised; then an individual hacker releases 50 million social security numbers; celebrities see more of their lascivious sex acts on TMZ (maybe a couple of A-listers are outed).

  Soon the entire country agrees: we must go to war with hackers and organizations that leak information.

  After years of hating the government, Americans welcome Big Brother back into their lives as the protector of information. They need the state.

  

  

• Artist's Impression Of Hillary Clinton's Old Office

  Presented with no comment…

   

  

   

  Source: MichaelPRamirez.com

  

  

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• One World Currency introduced by The Cartel Settlement Coin

  Well, it finally happened.  Mark your calendars for the year 2016 as ‘the year’ a real One World Currency has been announced.  But don’t worry – as we explain in Splitting Pennies – Understanding Forex – MONEY DOESN’T EXIST.

  How is it possible, you say – when we haven’t heard about it in the news?  Let’s start with the ‘lead’ story on this breaking event:

  Big banks buckle down to build better bitcoin — RT Business

  UBS, Deutsche Bank, Santander and BNY Mellon have partnered up to create a new digital currency to facilitate intra-bank settlements, the FT reports. The cryptocurrency will use blockchain technology underpinning the Bitcoin.

  Why is this different than any other Bitcoin startup – there sure have been many.  Because these are the banks that control the global currency market, also known as AKA ‘the cartel’ according to court documents.  

  Checkout some of the stories leading up into this climatic moment:

  Big Banks Band Together to Launch ‘Settlement Coin’ – CoinDesk

  UBS Sheds New Light on Blockchain Experimentation

  Settlement Coin Creators Seek to ‘Liberalize’ Central Banks With Blockchain – CoinDesk

  8 Banking Giants Embracing Bitcoin and Blockchain Tech

  ‘Central banks looking at Bitcoin as real threat to dominance’ — RT Op-Edge

  So why does any of this matter?  Central Banking policy has run the global economy into the ground.  Central Banks OWN $25 Trillion of Financial Assets.  $13 Trillion worth of Government Bonds in the world have NEGATIVE YIELDS.  The financial system as it is now, is on the path for implosion. 

  Settlement Coin apparently is targeting ‘back office settlement’ to reduce costs which are about $80 Billion per year.  But why then does RT compare it with SDRs:

  If implemented, the new cryptocurrency would be the first to be used officially between major financial institutions. The concept resembles the IMF’s Special Drawing Right (SDR), introduced in 1964. Based on a basket of currencies (the US dollar, euro, the Japanese yen, pound sterling and the soon to be joined Chinese yuan this October), it is used to supplement the IMF’s member countries’ official reserve. As of March 2016, 204.1 billion SDRs equivalent to about $285 billion had been created and allocated to countries.

  Has the world gone mad, and people don’t understand the difference between “Blockchain” and “Bitcoin” and “Cryptocurrency” and “US Dollars” ?  We have to note here, RT needs to hire some “Forex Experts” to consult with their authors on this topic.

  To clarify, the big banks are working on multiple blockchain projects, as well – most of them have filed patents for their own crypto currencies, most notably, Citi: 

  Citi: Bitcoin is an Opportunity for Banks, Not a Threat – CoinDesk

  Citibank Is Working On Its Own Digital Currency, Citicoin | TechCrunch

  Citi Research released a 56-page report on bitcoin saying that it is not going to disrupt banks or credit card networks. It says there will be increased transaction costs for bitcoin to provide increased volume. As for the use of bitcoin in remittance payments, it says bitcoin’s advantage dissipates when the “last mile” cost of converting to fiat currency is considered. The report notes the growth of bitcoin mobile apps in developing countries but sees regulations rising that put them in question. It claims existing payment systems are generally efficient. The report also talks about Ripple and Ethereum as well as government-backed digital currencies. There is also an extensive summary of bitcoin’s legal status in different countries.

  Once implemented, these banks have the means to quickly connect this new cryptocurrency “Settlement Coin” to their existing global network, as well as adding their own proprietary currencies such as “CitiCoin.”

  It will take some time before the cryptocurrency is even released, and still probably years before it’s widely accepted.  What makes this week’s announcement unique is that, for the first time the banks publicly announced they are making a new digital ‘crypto currency’ that isn’t issued by a central bank, that can be implemented by them across and without borders, which is a perfect fit for a replacement of the US Dollar and other fiat currencies when they completely run out of QE steam.

  But here’s the real clincher, exposing this as a real One World Currency:

  One of those resources is the real-time gross settlement (RTGS) system used by central banks (it’s typically reserved for high-value transactions that need to be settled instantly), and the other is central bank-issued cash.  Using the Utility Settlement Coin (USC) unveiled today, the five-member consortium that has sprung up around the project aims to help central banks open-up access to these tools to more customers. If successful, USC has the potential to create entirely new business models built on instant settling and easy cash transfers.  In interview, Robert Sams, founder of London-based Clearmatics, said his firm initially worked with UBS to build the network, and that BNY Mellon, Deutsche Bank, ICAP and Santander are only just the first of many future members.  “Cash is a leg to almost every trade,” said Sams, who previously worked for nine years as a derivatives trader with Sanctum FI, also in London. “In order to get most of the benefits of a distributed ledger in settlement, there has to be cash on a distributed ledger rail.”  How transactions might be processed, and who will own the nodes, has also not been shared. But what we do know based on a statement from the company is that Clearmatics described the USC as “a series of cash assets” for currencies, including US dollars, euros, British pounds and Swiss francs.

  For those who understand that it’s monetary policy driving the value of currencies down, not supply and demand, there’s no need to read between the lines – they spell it all out real simple.

  For a quick primer for those who don’t know, the Federal Reserve is the sole issuer of US Currency (not the US Mint, who prints notes and coins.)  The Federal Reserve is a private institution, owned by the banks.  It was previously thought that, the idea of a one world currency was preposterous, because, how would all countries agree on having a single central bank?  But here’s the workaround – the Forex banks have a monopoly on the global monetary system.  So by forcing their central bank partners to use “Settlement Coin” in order to save on hefty settlement fees (and it will solve the problem of the recent SWIFT hacks as well – part of the plan??? )

  A few scenarios here – one, the banks knew that if they didn’t do it, some new players might do it.  Two, this plan was hatched long ago by some clandestine CIA op, starting with the release of Bitcoin, leading into the global one world cryptocurrency, all sponsored by Illuminati.  Three, central banks have legitimate concerns about security (such as because of recent hacks) and have no real way out of QE, they can’t stop it and they can’t continue it.  This is a parallel financial system in which assets can be transferred over to.

  To learn more about Forex, checkout Splitting Pennies – the pocket guide to make you an instant Forex genius!  If you’re a non-US citizen or Pension Fund looking for a real Forex investment with a proven track record, checkout Magic FX Strategy.  

  

  

• Introducing America's Winningest Political Candidate: "Lesser Evil"

  Authored by Ben Tanosborn,

  Why, I am constantly being asked by my overseas peers, do you Americans have such affection for a creepy old pretender, a political candidate who’s been around forever, and all he has done is have his way with you?  Does the “me-or-else” political ultimatum award Lesser Evil license to govern and rape?  Whether dressed as Tweedledee or as Tweedledum, Lesser Evil righteously appears to so think; adding one more rosary bid in our march towards the 2016 presidential election… just as it happened in 2012 and, as I tap into my memory, to all other quadrennials before then. 

  Enter the protagonists this year playing the part of Lesser Evil: Clinton and Trump; both well experienced in deceit, one consistently showing signs of being a truly consummate sociopath, while the other disguises a different strain of the same affliction reasonably well.  Both candidates pied-pipering away to their immutable, loyal following which approximate in each case almost a quarter of the electorate; leaving us, the remaining half-plus, trying to determine who of these two becomes our least distrusted psychopath to lead America  in all domestic and foreign affairs:  our faithful but not so beloved Lesser Evil, of course.

  Neither Democrats nor Republicans have party memberships which come close to having a reasonable cross-section of the population in the two critical areas that divide the nation: race and economics… not remotely!  And that fact alone, like never before in America’s history, poses insurmountable problems in governing, and brings a constant impasse which does not lend itself to negotiation, much less compromise.  It also adds serious impediments in selecting, or compromisingly-accepting, leadership that can be respected, if not accepted, by a society with a true common ground.

  Hillary’s ascent to the Democratic nomination is a vivid example of how a likely-to-lose general election candidate – had the GOP nominated a sane conservative – prevailed over Honest Bernie.  Not only was the DNC unequivocally proven to be in Hillary’s safe pocket, something for which there has been little to none media/public outrage, but the scoundrelous Clintons also had the old clique of black community and church leaders in their fist, totally and irrationally influencing the primary vote.  And I say irrationally on the basis that Bernie Sanders would likely have proven to be a far superior advocate for blacks on all fronts.  Sad bottom line for the Democratic Party: had black voters equally supported Hillary and Bernie, and the party elite not cast their preference for Hillary Clinton before the primaries, Senator Sanders would have walked away with the party’s nomination hands down, not Clinton. Sanders, who had been “allowed” entrance to the primaries by the Democratic hierarchy as a political side show, tainted with the political scarlet letter in the US – S for Socialist, just could not be permitted to represent the Democratic Party in what its hierarchy likely saw a suicide candidacy.  So Sanders was mercifully put to pasture as a party’s beast of burden, not as a racehorse.

  In similar vein, had the bigopat crowd (angry bigoted patriots) not found a pied-piper in born-again Republican Trump, a non-conservative self-serving billionaire, a conservative nominee would have emerged from the ranks of the Republican career politicians; in much the same fashion as Hillary’s crown had been placed on Bill’s political queen.  Not that it would have made much difference in America’s non-democratic binary politics!  Once again, much-raped America will always have a prospective escort, old-and-creepy Lesser Evil, to take her to the Quadrennial Cotillion.   

  I have often been told by my peers overseas, mostly in a discreet and constructive way that our lack of civic/political involvement in government might have inflicted on us our just deserts.  But if we have been politically indigent in the past, perhaps due partly or wholly to our privileged economic condition vis-a-vis much of the world, circumstances thrust upon us, while unprepared and in full force against the whirlwind of globalization need to be reevaluated and changed.  Politicians of both parties have been extremely careless and derelict in their approach to globalization.

  To summarily complete the division in America, traditional politics (politicians) also fail to acknowledge the strident racial disharmony which still permeates the nation.  Such racial disharmony is treated in the same blind-deaf-mute way we treat the existence of the metric system; hoping that they both hopefully disappear, effortlessly in our part.

  The political duopoly in America simply does not work; nor does it offer hope, a future for a cohesive society.  It may have reasonably worked in the past because of our very gifted, blessed economic advantages… but those advantages are either gone or exiting fast.  If we are looking for a brighter, more optimistic future for all, and not just 20 percent knights and squires in our population, America needs to bring to the political table OTHER people and ideas, not just continue with the same Demo-Repugnancy, that will enlarge our political wisdom and give us a pathway to reach physical and economic well-being as well as provide a moral compass for all.

  A corporate media that would force bringing Greens and Libertarians to the presidential debates in 2016 would forever find its penitential-redeeming place in America’s history.

  

  

• How The Hillary 'Victory Fund' Uses State Democratic Committees To Launder Money To The DNC

  Is the Hillary Victory Fund using state democratic committees to launder donations from wealthy individuals to the Democratic National Committee?  Evidence gathered by Bloomberg would certainly seem to suggest so.

  So how does it work?  Campaign finance laws specifically restrict the amount of money any single person can give to individual candidates ($2,700), a party's various state committees ($10,000) as well as a party's national committee ($33,400).  In theory, therefore, that would imply a person would be capped out at $46,100 if he contributed the max his Presidential candidate, his party's national committee and his party's state committee.  But, that's just a narrow "interpretation" of the "intent" of the campaign finance laws and Hillary isn't really all about "intent"…just ask FBI Director Comey.   

  So, the Hillary Victory Fund has come up with a clever way to use state democratic committees (of which there are 33) as money-laundering tools to effectively increase the amount that can be contributed to the Democratic National Committee from $33,400 to $363,400 (it's only like 1,000% more than intended). 

  How do they do it?  Well, the rules say that a single person can only contribute $10,000 to any one State.  That said, they don't restrict people from contributing $10,000 to multiple states.  Moreover, there are no restrictions on transfers of funds from Democratic State Committees to the Democratic National Committee.  See where we're going with this? 

  Effectively the Hillary Victory Fund acts as a "bundler" which collects large donations from wealthy investors.  Per the diagram below, contributions are then maxed out to "Hillary For President" and the "Democratic National Committee."  Any remaining funds are then spliced up and sent in $10,000 increments to the 33 different State Democratic Committees.  That said, the state committees simply act as flow through entities which subsequently pass the contributions from the Hillary Victory Fund along to the Democratic National Committee.  Isn't that neat? 

  The beauty of this system, of course, is that once the money is aggregated at the Democratic National Committee it becomes very "flexible."  The DNC can then use that money to support Hillary and/or any of a number of contentious races in any state it wants (e.g. battleground states). 

  

   

  At this point, you're probably thinking this is just another Hillary conspiracy theory…surely none of this can be proven, right?  Well, actually it's pretty easy to track and is happening fairly regularly in the Democratic Party.  Bloomberg provided the following example tracking a $343,400 donation from hedge fund manager, Donald Sussman, which was made to the Hillary Victory Fund on March 25, 2016.  In April, the maximum of $33,400 of Sussman's donation was transferred to the Democratic National Committee.  Then on April 25, 2016, another $10,000 (again the per state maximum) of Sussman's money was transferred to the South Carolina Democratic State Committee along with $169,000 of money from other donors.  Wouldn't you know it, that very same day the South Carolina Democratic State Committee passed the full $179,000 on to the Democratic National Committee.  Almost like the donation caps never existed!

   

  

   

  In fact, Bloomberg found that 83% of all money distributed by State Democratic Committees to the National Committee originated from donors that had already maxed out their $33,400 contributions to the DNC.

  

   

  That said, as Robert Kelner of Covington & Burling points out, what the Hillary Victory Fund is doing isn't technically illegal. Sure, it probably violates the "intent" of the law but we're not gonna split hairs are we?

  “I’m not aware of any case law or regulations that would prohibit a state party from transferring to a national party committee funds raised through a joint fundraising committee,” Robert Kelner, an election law expert at Covington & Burling said. “But as a practical matter, it does appear that the DNC may be using Hillary Victory Fund as a mechanism for allowing donors to give more to the DNC indirectly than would otherwise be permitted directly.”

  Oddly enough, Bloomberg pointed out that there is no evidence of similar activities within the Republican National Committee.

  There’s no sign that the Republicans are following the same strategy. Donald Trump’s joint fundraising committee has yet to transfer any money to the 11 state Republican parties that are part of the arrangement.

  So there you go folks.  Don't you feel proud to be an American?

  

  

• 76-Year-Old Veteran Kills Himself In VA Parking Lot After Being Denied Treatment

  Submitted by Carey Wedler via TheAntiMedia.org,

  A 76-year-old military veteran killed himself outside a Long Island Veteran Affairs facility Sunday after being denied treatment. He was reportedly seeking help for mental health issues at the Northport Veterans Affairs Medical Center but was turned away, an unfortunately common experience plaguing veterans seeking healthcare in recent years.

  According to the New York Times, two people connected to the hospital spoke about the incident on the condition of anonymity. They explained “he had been frustrated that he was unable to see an emergency-room physician for reasons related to his mental health,” the Times reported.

  “He went to the E.R. and was denied service,” one anonymous source said. “And then he went to his car and shot himself.”

  Peter A. Kaisen of Islip, New York, committed suicide in the parking lot of the Northport facility, where he had been a patient. He was in the parking lot outside Building 92, the facility’s nursing home, when he shot himself.

  One of the Times’ anonymous sources questioned why Kaisen had not been referred to Building 64, the mental health center at Northport.

  “The staff member said that while there was normally no psychologist at the ready in the E.R., one was always on call, and that the mental health building was open ‘24/7,’” the Times reported.

   

  “Someone dropped the ball. They should not have turned him away,” the source said.

  Christopher Goodman, a spokesman for the hospital, said there “was no indication that he presented to the E.R. prior to the incident,” and the Times was unable to determine whether there was an official record of his visit to the VA on Sunday.

  The Northport center has faced heightened scrutiny since the Times reported on mismanagement at the facility in 2014, but the problems at Northport are problems of the entire system.

  Just last month, an Iowa military veteran suffering from PTSD and substance abuse killed himself after being denied treatment by the VA. He reportedly made an appointment seeking treatment but eventually posted on social media that he was turned away “even though he requested it and explained to a doctor that he felt his safety and health were in jeopardy,”KWQC, a local news outlet reported.

  One veteran who drove to a Seattle VA last year with a broken foot was denied assistance walking from his car to the hospital entrance, a distance of a few feet. He was told to call 911, instead. One gun-wielding veteran with PTSD was shot and killed by police in Maricopa County, Arizona, last year after he was turned away from the VA hospital when he sought treatment for a mental health emergency. He had routinely called suicide hotlines for help but never received the full attention he needed.

  Veteran suicides in the United States are a chronic problem. Though some argue the relatively recent figure from the VA that 22 veterans kill themselves per day is inflated, veterans still face a suicide risk higher than the rest of the American population. As USA Today has noted:

  “In 2014, veterans accounted for 18% of all suicides in the United States, but made up only 8.5% of the population. In 2010, veterans accounted for 22% of U.S. suicides and 9.7% of the population.”

  Further, a more recent analysis by the VA found that in 2014, 20 veterans killed themselves per day. Politifact, an independent fact-checker, has confirmed this figure. While rates of veteran suicides appear to be declining, the figures are still troubling.

  Even absent mental health issues like depression and PTSD, veterans are dying waiting for regular health care. A VA whistleblower revealed last year that 238,000 out of 847,000 veterans died after submitting requests for treatment they never received. An audit in 2014 found 57,000 veterans were waiting more than 90 days for an appointment with the VA.

  The United States government, politicians, and the media often express compassion and gratitude for veterans. To their credit, some lawmakers recently attempted to allow veterans to use cannabis as an alternative treatment in an amendment to a budget bill — a move Congress ultimately blocked.

  But in spite of failed and often unwieldy efforts to reform veterans’ health care, the VA’s systemic failures continue to leave veterans feeling ignored and abandoned by the very institutions that still claim to value them.

  

  

• The Broken Chessboard: Brzezinski Gives Up On Empire

  Submitted by Mike Whitney via Counterpunch.org,

  The main architect of Washington’s plan to rule the world has abandoned the scheme and called for the forging of ties with Russia and China. While Zbigniew Brzezinski’s article in The American Interest titled “Towards a Global Realignment” has largely been ignored by the media, it shows that powerful members of the policymaking establishment no longer believe that Washington will prevail in its quest to extent US hegemony across the Middle East and Asia. Brzezinski, who was the main proponent of this idea and who drew up the blueprint for imperial expansion in his 1997 book The Grand Chessboard: American Primacy and Its Geostrategic Imperatives, has done an about-face and called for a dramatic revising of the strategy. Here’s an excerpt from the article in the AI:

  “As its era of global dominance ends, the United States needs to take the lead in realigning the global power architecture.

   

  Five basic verities regarding the emerging redistribution of global political power and the violent political awakening in the Middle East are signaling the coming of a new global realignment.

   

  The first of these verities is that the United States is still the world’s politically, economically, and militarily most powerful entity but, given complex geopolitical shifts in regional balances, it is no longer the globally imperial power.”

   

  (Toward a Global Realignment, Zbigniew Brzezinski, The American Interest)

  Repeat: The US is “no longer the globally imperial power.” Compare this assessment to a statement Brzezinski made years earlier in Chessboard when he claimed the US was ” the world’s paramount power.”

  “…The last decade of the twentieth century has witnessed a tectonic shift in world affairs. For the first time ever, a non-Eurasian power has emerged not only as a key arbiter of Eurasian power relations but also as the world’s paramount power. The defeat and collapse of the Soviet Union was the final step in the rapid ascendance of a Western Hemisphere power, the United States, as the sole and, indeed, the first truly global power.” (“The Grand Chessboard: American Primacy And Its Geostrategic Imperatives,” Zbigniew Brzezinski, Basic Books, 1997, p. xiii)

  Here’s more from the article in the AI:

  “The fact is that there has never been a truly “dominant” global power until the emergence of America on the world scene….. The decisive new global reality was the appearance on the world scene of America as simultaneously the richest and militarily the most powerful player. During the latter part of the 20th century no other power even came close. That era is now ending.” (AI)

  But why is “that era is now ending”? What’s changed since 1997 when Brzezinski referred to the US as the “world’s paramount power”?

  Brzezinski points to the rise of Russia and China, the weakness of Europe and the “violent political awakening among post-colonial Muslims” as the proximate causes of this sudden reversal. His comments on Islam are particularly instructive in that he provides a rational explanation for terrorism rather than the typical government boilerplate about “hating our freedoms.” To his credit, Brzezinski sees the outbreak of terror as the “welling up of historical grievances” (from “deeply felt sense of injustice”) not as the mindless violence of fanatical psychopaths.

  Naturally, in a short 1,500-word article, Brzezniski can’t cover all the challenges (or threats) the US might face in the future. But it’s clear that what he’s most worried about is the strengthening of economic, political and military ties between Russia, China, Iran, Turkey and the other Central Asian states. This is his main area of concern, in fact, he even anticipated this problem in 1997 when he wrote Chessboard. Here’s what he said:

  “Henceforth, the United States may have to determine how to cope with regional coalitions that seek to push America out of Eurasia, thereby threatening America’s status as a global power.” (p.55)

   

  “…To put it in a terminology that harkens back to the more brutal age of ancient empires, the three grand imperatives of imperial geostrategy are to prevent collusion and maintain security dependence among the vassals, to keep tributaries pliant and protected, and to keep the barbarians from coming together.” (p.40)

  “…prevent collusion…among the vassals.” That says it all, doesn’t it?

  The Obama administration’s reckless foreign policy, particularly the toppling of governments in Libya and Ukraine, has greatly accelerated the rate at which these anti-American coalitions have formed. In other words, Washington’s enemies have emerged in response to Washington’s behavior. Obama can only blame himself.

  Russian Federation President Vladimir Putin has responded to the growing threat of regional instability and the placing of NATO forces on Russia’s borders by strengthening alliances with countries on Russia’s perimeter and across the Middle East. At the same time, Putin and his colleagues in the BRICS (Brazil, Russia, India, China and South Africa) countries have established an alternate banking system (BRICS Bank and AIIB) that will eventually challenge the dollar-dominated system that is the source of US global power. This is why Brzezinski has done a quick 180 and abandoned the plan for US hegemony; it is because he is concerned about the dangers of a non-dollar-based system arising among the developing and unaligned countries that would replace the western Central Bank oligopoly. If that happens, then the US will lose its stranglehold on the global economy and the extortionist system whereby fishwrap greenbacks are exchanged for valuable goods and services will come to an end.

  Unfortunately, Brzezinski’s more cautious approach is not likely to be followed by presidential-favorite Hillary Clinton who is a firm believer in imperial expansion through force of arms. It was Clinton who first introduced “pivot” to the strategic lexicon in a speech she gave in 2010 titled “America’s Pacific Century”. Here’s an excerpt from the speech that appeared in Foreign Policy magazine:

  “As the war in Iraq winds down and America begins to withdraw its forces from Afghanistan, the United States stands at a pivot point. Over the last 10 years, we have allocated immense resources to those two theaters. In the next 10 years, we need to be smart and systematic about where we invest time and energy, so that we put ourselves in the best position to sustain our leadership, secure our interests, and advance our values. One of the most important tasks of American statecraft over the next decade will therefore be to lock in a substantially increased investment — diplomatic, economic, strategic, and otherwise — in the Asia-Pacific region…

   

  Harnessing Asia’s growth and dynamism is central to American economic and strategic interests and a key priority for President Obama. Open markets in Asia provide the United States with unprecedented opportunities for investment, trade, and access to cutting-edge technology…..American firms (need) to tap into the vast and growing consumer base of Asia…

   

  The region already generates more than half of global output and nearly half of global trade. As we strive to meet President Obama’s goal of doubling exports by 2015, we are looking for opportunities to do even more business in Asia…and our investment opportunities in Asia’s dynamic markets.”

  (“America’s Pacific Century”, Secretary of State Hillary Clinton”, Foreign Policy Magazine, 2011)

  Compare Clinton’s speech to comments Brzezinski made in Chessboard 14 years earlier:

  “For America, the chief geopolitical prize is Eurasia… (p.30)….. Eurasia is the globe’s largest continent and is geopolitically axial. A power that dominates Eurasia would control two of the world’s three most advanced and economically productive regions. ….About 75 per cent of the world’s people live in Eurasia, and most of the world’s physical wealth is there as well, both in its enterprises and underneath its soil. Eurasia accounts for 60 per cent of the world’s GNP and about three-fourths of the world’s known energy resources.” (p.31)

  The strategic objectives are identical, the only difference is that Brzezinski has made a course correction based on changing circumstances and the growing resistance to US bullying, domination and sanctions. We have not yet reached the tipping point for US primacy, but that day is fast approaching and Brzezinski knows it.

  In contrast, Clinton is still fully-committed to expanding US hegemony across Asia. She doesn’t understand the risks this poses for the country or the world. She’s going to persist with the interventions until the US war-making juggernaut is stopped dead-in-its-tracks which, judging by her hyperbolic rhetoric, will probably happen some time in her first term.

  Brzezinski presents a rational but self-serving plan to climb-down, minimize future conflicts, avoid a nuclear conflagration and preserve the global order. (aka–The “dollar system”) But will bloodthirsty Hillary follow his advice?

  

  

• Mugabe Orders Arrest Of "Rats We Call Athletes" After Zimbabwe Wins No Olympic Medals

  It appears Zimbabwe President Robert Mugabe was banking on a precious metal inflow from Rio to fix his nation's ailing economy as he has ordered the arrest of all 31 Zimbabwean Olympic athletes arrested and detained for daring to return home with no medals.

  

  Zimbabwe which is one of the countries in the Olympics without a medal presented a team of 31 athletes. The closest any of the athletes came to win a contest was at the 8th position.

  

  As PMNews Nigeria reports, Mr. Mugabe who is incensed with the team’s performance told the Police Chief to arrest all the team members and detain them.

  “We have wasted the country’s money on these rats we call athletes. If you are not ready to sacrifice and win even copper or brass medals (referring the 4th and 5th positions) as our neighbors Botswana did, then why do you go to waste our money” he said.

   

  ”If we needed people to just go to Brazil to sing our national anthem and hoist our flag, we would have sent some of the beautiful girls and handsome guys from University of Zimbabwe to represent us.”

   

  He added that, the money invested in the team to represent the country could have been used to provide amenities and build schools.

   

  “This situation is like an impotent man who is married to five women, what is the essence? I will make sure we share the cost across board for all of them to pay back to government chest even if it takes 10 years to recoup, now it turns out to be a soft loan we have given them to go and visit Brazil as tourist, they are useless” he concluded.

  While we doubt Mugabe ever cared much for the Olympic spirit, with this one act (and we are still having trouble believing Mugabe actually did this) Zimbabwe's dictator has doomed his country to having no future olympians at all.

  When (or if) any of these Zimbabwean athletes get out of jail, maybe it's time to emigrate to Singapore?

  

  

  

• Japanese Government Squanders Pension Funds On Failed Stocks As Losses Reach $130 Billion In Past Year

  Nearly two years ago we wrote about how the largest pension fund in the world had been hijacked by political hacks in what would be a futile effort to prop up stocks in the "first failed Keynesian state, Japan."  The post came in response to Japan's Government Pension Investment Fund announcing that it would slash its fixed income portfolio to double its target allocation to domestic and foreign equities, in essence, going outright long Central Banks.       

  Once upon a time, the world's biggest government pension fund, Japan's $1.1 trillion Government Pension Investment Fund, or GPIF, was apolitical, and merely focused on preserving the people's wealth.

   

  Then everything changed, and with the reckless abandon of a junkie on a crack cocaine binge, aka Abenomics, the GPIF management was kicked out, and its entire mandate was flipped from preserving wealth, to gambling on #Ref! P/E stocks, in hopes of recreating the wealth effect of the super-rich (the only problem: Japan has reached its breaking point and the higher the USDJPY, and thus the Nikkei rises, the more the BOJ directly destroys its economy with an already record number of bankruptcies due to the plunging Yen getting recorder).

   

  Worst of all, the GPIF became nothing short of the latest political pawn in what is now the the first failed Keynesian state, Japan.

   

  Unfortunately, for Japan, and its tens of millions of pensioners, the only news here is simple: the entire country is now held hostage by Japan's last-gasp attempt to prove Monetarist and Keynesian policies work. Because, said otherwise, "Abenomics better work, or else all your pensions are toast."

  Then, last month after the GPIF reported it's biggest fiscal year loss since the "great recession", a mere 5.3 trillion yen ($53 billion), we asked whether the pension fund had finally learned it's lesson.  Would fund managers finally resort back to their original goal or preserving retiree wealth or continue in their failed efforts to prop up Japanese stocks.  Alas, we concluded that maintaining the status quo was the most likely path forward.  

  So with Abenomics careening off the cliff and headed for a traumatic death, and with Kuroda having become the laughing stock of central bank circles, has Japan finally learned its lesson? Will the GPIF rotate out of money-losing stocks and back into bonds which are currently trading at record high prices? According to Morgan Stanley, the answer is not a chance, for the simple reason that as a result of an upcoming asset rebalancing, the GPIF will have no choice but to buy even more money-losing stocks.

  Which brings us to today and the announcement of further staggering losses on the $1.3 trillion portfolio of the GPIF.  Today the pension announced it lost 5.2 trillion yen ($52 billion) in 2Q 2016, or roughly 4% of their 129.7 trillion yen ($1.3 trillion) in assets.  Not to rub it in too much, but that brings the rolling 4Q losses to an aggregate of nearly 13 trillion yen or $130 billion.

  

   

  As Bloomberg points out, GPIF held 21 percent of investments in local stocks at the end of June, and 39 percent in domestic bonds. Overseas equities made up 21 percent of assets, while foreign debt accounted for 13 percent. Alternative investments were 0.05 percent of holdings, down from 0.06 percent at the end of March. GPIF targets allocations of 25 percent each for Japanese and overseas stocks, 35 percent for local bonds and 15 percent for foreign debt.

  Therefore, GPIF returns are not terribly surprising given that ~21% of assets, or $275BN, are allocated to Japanese equities which haven't performed all that well over the past year.  In fact, Japanese stocks are down about 22% in the past 12 months which represents about $60BN of losses or 4.5% of GPIF assets.  

   

  

   

  In case you're the "hopelessly optimistic" type, the Wall Street Journal points out the GPIF has no intentions of admitting failure and reverting back to a reasonable asset allocation model that might have some hope in preserving pensions for Japan's retirees.  No, as deputy director-general of investment strategy, Shinichiro Mori, points out, the GPIF will maintain the status quo as "stock markets are on a recovery trend." 

  Shinichiro Mori, the GPIF’s deputy director-general of investment strategy, said that in the current quarter, strong U.S. jobs data for June helped stock markets and Brexit fears have subsided.

   

  “The markets have since restored stability, and I believe stock markets are on a recovery trend. In the meantime, the exchange rate, the dollar/yen rate, is still flat. We are going to carefully monitor its movements going forward,” Mr. Mori said.

   

  Mr. Mori said it would be hard to achieve the target for investment return by investing primarily in domestic bonds because their yields are low and there is a risk of bond prices dropping from current high levels. The benchmark 10-year Japanese government bond yielded minus 0.075% in Friday afternoon trading. Bond yields and prices move in the opposite direction.

   

  “In the short term, there is greater volatility in return rates for our portfolio, but since we invest for the long term, it’d be easier to achieve the investment goal required for the pension system” with the current allocation, Mr. Mori said.

  Well, if at first you don't succeed…

  

  

• Bill Gross: Yellen's Economy "May Never Walk Normally Again, This Is Not Capitalism"

  It took the headline scanning algos several minutes to read Yellen’s speech, which the kneejerk reaction was to deem as more hawkish than expected, before they stumbled on the key section we pointed out earlier, and which unleashed a surge of buying because it hinted at even more potential QE in the future (under a different Fed chair):

  On the monetary policy side, future policymakers might choose to consider some additional tools that have been employed by other central banks, though adding them to our toolkit would require a very careful weighing of costs and benefits and, in some cases, could require legislation. For example, future policymakers may wish to explore the possibility of purchasing a broader range of assets.

  This section catalyzed such an aggressive buying impulse that it required Stan Fischer’s post-speech interview to pour cold water on the market’s enthusiasm, saying “Yellen’s comments are consistent with a possible September hike.”  After all, as even Bullard admitted earlier, the Fed is perilously close to admitting stocks are in a bubble.

  However, it was too late to appease one recently converted Fed critic, Bill Gross, who slammed Yellen’s suggestion that she could launch further asset purchases as the equivalent of “providing a walker or a wheelchair for an ailing economy.”

  “She is opening the door to creating even greater asset bubbles as have the BOJ and ECB and SNB by purchasing corporate bonds and stocks,” Gross wrote Friday in an e-mail response to questions. “This is not capitalism. This is providing a walker or a wheelchair for an ailing economy. It may never walk normally again if monetary policy continues in this direction.”

  In addition to slamming Yellen – as virtually everyone else has in recent weeks, including all the major banks and even the Fed’s own mouthpiece at the WSJ, and as this site has done since 2009 – Bloomberg added that according to Gross, Yellen’s comments didn’t take a September rate hike off the table, especially if job growth is healthy. “To the extent that next month we see a decent job growth number, then I think for sure or close to for sure, you know, in September we’re going to see a Fed hike of 25 basis points,” Gross said in an interview on CNBC. “The market hadn’t expected that.”

  This is particularly true if, as many have speculated, Yellen is now forcing rate hikes just so the economy stumbles, and she has the political cover to unleash even more easing; easing which as her own text warns, may include a “broader range of assets.” In other words, the sooner the Fed hikes, the faster it will follow the BOJ and the ECB in monetizing stocks and corporate bonds, respectively.

  

  

• China's Great Divide: A New Cultural Revolution?

  Submitted by Charles Hugh-Smith via OfTwoMinds blog,

  The only question left for China (and every other debt/bubble-dependent nation) is what socio-political consequences will manifest when the credit bubble finally bursts?

  In Asia, it's generally seen as unpatriotic to criticize one's country in public, even if you disagree with its direction and leadership. The cultural norm is to maintain the "face" of one's country by hiding its ills from outsiders.

  This reticence is especially evident in China, which suffers from the memory of being subjugated by the Western imperialist powers in the late 19th century and early 20th century.

  As a general rule, you will rarely hear any profound criticism of China unless you are considered a trusted friend; giving China a black eye in public is frowned upon, even by its domestic critics.

  For this reason, the majority of the Western media has very little grasp of what worries Chinese people. Recently, I have heard fears of a Second Cultural Revolution being expressed in private.

  There is a Great Divide between generations in China: on the one side is the older generation that remembers the Maoist era with some nostalgia and the terrible adversities of the Cultural Revolution (1966 – 1976). On the other side is the young educated, prosperous generation which has only known consumerist prosperity and personal advancement.

  The ideals of the old communes are an abstraction to the young generation, as are the terrible costs of the Cultural Revolution.

  A resurgence of devotion to Mao has caught authorities off-guard; they can't very well suppress public displays of secular worship of the Party's founder, but raising Mao's revolutionary ideals from the dustbin of history implicitly challenges the Party's current leadership.

  The older generation resents the young consumer-obsessed generation, and some would like to purge China of the excesses of wealth and consumerism.

  It's not too difficult to see how rising unemployment (China's Hidden Unemployment Rate) and China's enormous wealth inequality could spark a new Cultural Revolution that would target Party leaders who have benefited from the state-managed neoliberal capitalism that has greatly enriched the leaders and their family dynasties.

  In effect, a return to the party's Maoist roots would open divisive fissures in the Party and the nation. Farfetched? Perhaps not as much as the conventional sugar-coated media representation would suggest.

  The status quo solution (in China, the U.S., Japan, the E.U., etc. etc.) to a weakening bubble-dependent economy is to inflate another even bigger bubble. If debt reached extremes that imploded, the solution is to expand debt far beyond the levels that triggered the implosion.

  If fudging the numbers triggered a loss of confidence, the solution is to fudge the numbers even more, so they no longer reflect reality at all.

  If the masses protest their powerlessness, the solution is to push them further from the centers of power.

  And so on.

  This blowing new bubbles to replace the ones that popped works for a while, but at the expense of systemic stability. Each new bubble requires pushing the system to new extremes that increase the risk of instability and collapse.

  In other words, the stability of the new bubble is temporary and thus illusory.

  The processes used to inflate the new bubble suffer from diminishing returns. The nature of stimulus-response is that overuse of the stimulus leads to diminishing responses. This is a structural feature that cannot be massaged away.

  Goosing public confidence in the status quo with phony statistics and rigged markets works splendidly the first time, less so the second time, and barely at all the third time. Why is this so? The distance between reality and the bubble construct is now so great that the disconnection from reality is self-evident to anyone not marveling at the finery of the Emperor's non-existent clothing.

  The system habituates to the higher stimulus. If the drug/debt has lost its effectiveness, a higher dose is needed. This is the progression of serial bubbles. Then the system habituates to the higher dose/debt, and the next expansion of debt must be even greater.

  This dynamic can be visualized as The Rising Wedge Model of Breakdown, which builds on the well-known Ratchet Effect: the system is greased for easy expansion of debt, leverage, employees, etc., but it has no mechanism to allow contraction. Any contraction triggers systemic collapse.

  

  The only question left for China (and every other debt/bubble-dependent nation) is what socio-political consequences will manifest when the credit bubble finally bursts?

  The answer will arise from the unique interplay of history, social norms and central-state actions in each nation-state as the crisis deepens. In China, the two revolutions–the Communist victory of 1949 and the now-suppressed Cultural Revolution of 1966 – 1976– will both loom large–perhaps far larger than the current regime would like.

  This essay was drawn from Musings Report 28. The Musings Reports are emailed weekly to subscribers ($5/month) and major contributors ($50+ annually). If you'd like to support this blog, please consider subscribing. My new book is #9 on Kindle short reads -> politics and social science: Why Our Status Quo Failed and Is Beyond Reform ($3.95 Kindle ebook, $8.95 print edition) For more, please visit the book's website.

  

  

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• How Long Will It Take For The ECB To Own All Sovereign Debt Of Spain, Germany, France?

  Submitted by Michael Shedlock via MishTalk.com,

  Huky Guru on Guru’s Blog posted a chart that answers the question: How Long Will it Take For the ECB to Own All Sovereign Debt of Eurozone Countries?
   

  

   

   

  At the current rate of purchase of sovereign bonds the ECB will have have purchased all sovereign debt issued by Spain in 9 years and Germany in 8.8 years.

   

  Bond Market Distortion

  Distortion in the corporate bond market has picked up since the ECB has started buying corporate bonds.

  

   

  The above chart shows a comparison between the yields of bonds eligible to be purchased by the ECB and bonds with the same rating in the same sector that are not eligible for the ECB.

  Corporate bond yields have collapsed across the board since the ECB’s announcement, but even more so for eligible bonds.

  #SellYourBondsToDraghi

  

  

• Picking Up the UK Tab

   

   

   

   

  Picking Up the UK Tab

  Posted with permission and written by Jeff Thomas, International Man (CLICK FOR ORIGINAL)

   

  
  

   

  Back in the late 90’s, I began saying, “I’ll give the EU twenty years.” At that point, the EU seemed to be going great guns, but I believed that it was an ill-conceived concept that wouldn’t stand the test of time.

   

  There were several reasons for my view. First, I didn’t believe that those countries that were entitlement-focused, such as the Greeks, would ever be as fiscally responsible as, say, the Germans, so the Germans (and other countries where there was a responsible work ethic) would end up subsidizing the Greeks (and to a lesser extent, Spain, Portugal, etc.)

   

  Second, culturally, there was so great a divide between, say, the Austrians and the French, that they could never substantially agree on the union’s laws and directions.

   

  Third, the countries of Europe have been at war with each other countless times over the centuries. They might agree to trade cooperation, but they would never agree to having a former enemy dictate policy to them. And it was baked in the cake that some members would have a louder voice than others and so, would seek to dominate.

   

  In recent years, we’ve watched the EU stumble repeatedly. Invariably, Brussels has arrogantly assumed that it can dictate to all EU members, and offers few apologies for doing so. The individual countries’ leaders then do their best to explain to their own voters why Brussels should be able to behave like an oligarchy, and the voters understandably have become increasingly angry.

   

  Eventually, the wheels were sure to come off the trolley and, with the UK Brexit vote, we’ve witnessed the first major blow to the survival of the EU.

   

  Whilst the “leave” vote has been acknowledged, we should expect to see politicians placing stones in the road to Brexit, in addition to creating repeated delays. It would also not be surprising to see demands for a recall or even a nullification by the UK Supreme Court.

   

  In the midst of this, we’re already seeing the predictable back-pedaling by those politicians and pundits who, up until the vote, were warning that a Brexit would spell unmitigated disaster for Britain. Most of them are now speaking instead of “working on crafting a successful settlement”. (After all, when the sky has failed to fall, they won’t want the public to remember that they ranted like veritable Chicken Littles prior to the vote.)

   

  But, in one sense, the Brexit will unquestionably spell disaster – not to Britain, as was claimed, but to Brussels.

   

  Britain was never fully married to the EU; she was more a “woman on the side,” but in this case, it was the woman that was picking up the tab for the affair. In 2015 alone, the UK paid £13 billion into the EU budget, whilst EU spending on the UK was £4.5 billion. The UK’s “net contribution” was therefore about £8.5 billion – a loss of 65% of its investment. Not money well-spent, considering the trade restrictions heaped on the UK by Brussels.
  

  
  

  The £8.5 billion loss, of course, went to support the net-receiver members of the EU, such as the ever-unapologetic Greece.
  

  
  

  Most of the above will be common knowledge, but here’s a few pertinent questions that no one seems to be asking – at least not publicly:
  

  
  

  At what point does the UK cease to pay into the EU?
  

  
  

  Well, Brussels and those UK politicians that support the EU oligarchy concept will wish to delay that eventuality as long as they can. Consequently, we shall witness a struggle within British politics as politicians attempt to appear as though they’re honouring the voters’ edict, whilst finding repeated excuses to delay the Brexit. On the surface, it might not seem that they’d receive significant push-back, but, for those Britons who voted “leave” and, indeed for many who voted “remain,” the idea of Brussels demanding continued annual payment, whilst kicking the UK for choosing to leave, will result in the great majority of Britons becoming more than a little cross. (If we’re going to split the sheets, let’s get on with it. Any discussion of alimony should be a non-starter to say the least.)
  

  
  

  Who’s going to pick up the tab when that flow of revenue ends?
  

  
  

  Well, now, that really is a puzzler. A large part of the reason why the UK had to be such a significant net-contributor was that most full EU members couldn’t scrape up their “fair share.” Even most of the larger members, such as France, are broke. They can no longer pay their domestic bills, let alone take on more major EU funding.
  

  
  

  When all else fails, it typically falls to Germany (the country that was really responsible for the EU’s creation in the first place) to pick up the tab. And it wouldn’t be surprising if Mrs. Merkel were to attempt to sell the idea to the German people that her “Fourth Reich” must come up with the cash, or her dream will fall apart.
  

  
  

  Interestingly, Mrs. Merkel enjoyed an increase in popularity after the Brexit vote, after having lost a great deal of support as a result of the refugee crisis. However, once the German people learn that they may be hit with yet another EU bill, her ratings may head south again. She’s up for a fourth term in 2017 and it’s uncertain whether the German people will know by that date how the EU hopes to share out the former UK portion of the EU tab.
  

  
  

  Will that impact the continuation of the EU?
  

  
  

  The bill will most assuredly go to the remaining net-payer members and, whoever gets handed the tab, the voters in these countries will most assuredly be asking themselves whether they’re facing diminishing returns. Certainly, Germany, France and the UK are presently taking the greatest shellacking. Italy, the Netherlands, Sweden, Austria, Denmark and Finland are also net-contributors. But all the other 19 members are net-receivers.
  

  
  

  Certainly, the politicians in these countries share in the EU power and will want to stay in, but their voters who, increasingly, are feeling the squeeze of the unacknowledged Greater Depression may assert themselves at the polling stations, demonstrating that they’re not willing to throw good money after bad.
  

  
  

  In the end, the conceptual problems with the EU’s existence may be outweighed by the economic ones. But of one thing we can be fairly certain: should the EU bite the dust in the coming years, the demand for its demise will come from the bottom up, not the top down.
  

   

   

   

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

   

   

   

  Picking Up the UK Tab

  Posted with permission and written by Jeff Thomas, International Man (CLICK FOR ORIGINAL)

  

• Paul Craig Roberts: Trump Vs. Hillary Summarized

  Authored by Paul Craig Roberts,

  The US presidential election this November will tell whether a majority of the US population is irredeemably stupid. If voters elect Hillary, we will know that Americans are stupid beyond redemption.

  We don’t know much about Trump, and anti-Trump propaganda rules in the place of facts.

  But we know many facts about Hillary. We know about her violation of classification laws and the refusal of the Democratic administration to do anything about it. The Democrats prefer to control the White House than to enforce the law, another nail in the coffin in which the rule of law in the US lies.

  We know from their words and deeds and material success that the Clintons are agents for Wall Street, the Big Banks, the military/security complex, Israel, agribusiness, and the extractive industries. Their large personal fortune, approximately $120 million, and the $1,600 million in their foundation, much of which came from abroad in exchange for political favors, attests to the unchallengable fact that the Clintons are agents for the oligarchy that rules America, indeed, that rules the American Empire from Australia and Japan, through North America and Western and Eastern Europe to the Russian border.

  We know that Hillary, like Bill, is a liar.

  We know that Hillary is a warmonger.

  We know that Hillary made the most irresponsible statement ever uttered by a presidential candidate when she declared the President of Russia to be the “new Hitler,” thereby raising tensions between the nuclear powers to a higher level than existed during the Cold War.

  We know that Hillary is allied with the neoconservatives and that her belief in the neocons’ ideology of US world hegemony is likely to result in war with Russia and China.

  All we know about Trump is that the oligarchs, who sent America’s jobs overseas, who flooded the country with difficult-to-assimilate immigrants, who destroyed public education, who bailed out Wall Street and the “banks too big to fail,” who sacrificed American homeowners and retirees living on a fixed income, who intend to privatize both Social Security and Medicare, who have given the public killer cops, relentless violations of privacy, the largest prison poplulation in the world, and destroyed the US Constitution in order to increase executive power over the American people, are violently opposed to Trump. This opposition should tell us that Trump is the person we want in the Oval Office.

  Some claim that it is all a charade and that Trump is playing a role in order to elect Hillary. American politics are so corrupt that anything is possible. However the ruling elites and their puppets seem to be genuinely concerned about Trump’s challenge to their control, and they have united against Trump. They have used their money to buy up “progressive” websites paid to bring the print and TV anti-Trump propaganda onto the Internet, thus joining the Internet presstitutes with the print, TV, and NPR whores who are working overtime to demonize Trump and to elect Hillary.

  The entire power structure of our country is behind Hillary. Both Democratic and Republican political establishments and both ideologies, neoliberals and neoconservatives, are united behind Hillary.

  How much more evidence do Americans need in order to know that a vote for Hillary is a vote for their own emasculation?

  Apparently, Americans remain captives of their insouciance. According to news reports, a majority of voters still haven’t a clue about the consequences of voting for Hillary. Polls report that Hillary is well in the lead. Are these real polls or just another presstitute lie to discourage Trump supporters? Why vote when they have already lost?

  The propaganda assault against Trump, vicious as it was, did not succeed during the Republican primary. Despite the media condemnation of Trump, he swept the other Republican candidates aside effortlessly.

  The current media demonization of Trump might fail as well. Indeed, it is so transparent that it could elect him.

  All that is required is for enough Americans to awake from their insouciance to recognize that it is the enemies of their own lives, their own living standards, and their own liberty who are violently opposed to Trump.

  If Americans cannot reach this realization, they have no future, and neither does the planet Earth.

  The ruling oligarchy hates Trump because he disavows war with Russia, questions the purpose of NATO, opposes the offshoring of Americans’ jobs, and opposes the uncontrolled immigration that is transforming the United States into a multi-cultural entity devoid of unity. The oligarchs are replacing the United States with a Tower of Babel. Oligarchic power grows exponentially among the disunity of diversity.

  In other words, Trump is for America and for Americans.

  This is why the oligarchs and their whores hate Trump.

  The imbecillic Americans who vote for Hillary are voting for war and their own immiseration.

  Possibly, a vote for Trump is the same. However, in the case of Trump we do not know that. In the case of Hillary we most certainly do know it.

  Of course, it could matter not how Americans vote. Those who program the electronic voting machines will determine the vote, and as the establishments of both political parties totally oppose Trump, the programmed machines can elect Hillary. We know this from our electoral history. The US has already experienced elections in which exit polls show a winning candidate different from the candidate selected by the electronic machines that have no paper trail and no way of affirming the vote.

  If Hillary gets into the Oval Office, nuclear war is likely before her first term is over. A vote for Hillary is a vote for nuclear war.

  If you look at the forthcoming election realistically, you have no alternative but to conclude that the entirety of the presstitute media and American Establishment prefers the risk of nuclear war to the risk of losing control of the government to the voters.

  That Americans permitted the rise of unaccountable power tells us all we need to know about the dereliction of duty of which United States citizens are guilty. The American people failed democracy, which requires accountable government. The American government has proven that it is not accountable to the US Constitution, to US statutory law, to international law, or to voters.

  If the result of Americans’ dereliction of duty is nuclear war, the American people will be responsible for the death of planet Earth. One would hope that with responsibility this great on their shoulders, the American people will reject the unequivocal war candidate and take their chances on holding Trump accountable to his words.

  Note: I just heard a NPR report that young people were deserting the Republican Party, had turned leftwing and were flocking to Hillary. So now in America the leftwing candidate is a warmonger and agent of Wall Street! Amazing.

  

  

• CNN Cancels Dr. Drew's Show One Week After He Voiced "Grave Concern" For Hillary's Health

  One week ago, board-certified medicine specialist, TV personality and CNN employee Dr. Drew Pinsky broke the mold of conformity, when he said that he is “gravely concerned” about presidential candidate Hillary Clinton’s health, pointing out that treatment she is receiving could be the result of her bizarre behaviors.

  Appearing on KABC’s McIntyre in the Morning, Pinsky said he and his colleague Dr. Robert Huizenga became “gravely concerned….not just about her health but her health care,” after analyzing what medical records on Hillary had been released. Pinsky pointed out that after Clinton fainted and fell in late 2012, she suffered from a “transverse sinus thrombosis,” an “exceedingly rare clot” that “virtually guarantees somebody has something wrong with their coagulation system.” “What’s wrong with her coagulation system, has that been evaluated?” asked Dr. Drew.

  Pinsky described the situation as “bizarre,” and said that Hillary’s medical condition was “dangerous” and “concerning”. Dr. Drew also went on to add that it was a sign of “brain damage” when Hillary had to wear prism glasses after her fall.

   

  Just as stunning as Pinsky’s assessment which promptly went viral and led to the immediate takedown of the original interview webpage by KABC-AM radio, was that it came from an employee of HLN, which is part of the pro-Clinton CNN network.

  As such it is probably not surprising that earlier today, just one week later, CNN executive vice president Ken Jautz announced Thursday that “Dr. Drew and I have mutually agreed to air the final episode of his show on September 22.”

  “Dr. Drew and his team have delivered more than five years of creative shows and I want to thank them for their hard work and distinctive programming,” Jautz said in a statement. “Their audience-driven shows, in particular, were innovative and memorable TV. And Dr. Drew has been an authoritative voice on addiction and on many other topical issues facing America today.”

  “It has been a privilege working at HLN,” Pinsky said in a statement of his own. “My executive producer Burt Dubrow and our outstanding staff and contributors were consistently exceptional. I am very excited to stay within the CNN Worldwide family as a contributor.”

  There was no mention of the Hillary fiasco in the official parting statement; it was deemed redundant.

  HLN will air reruns of “Forensic Files” and episodes of CNN originals in the “Dr. Drew” 7 p.m. ET time slot.

  

  

• Pokemon Go Claims First Fatality; Incites Stampede; But DAU Drop Leaves Hope For Humanity

  A few weeks back we wrote about how Pokemon Go had claimed its first fatality in the United States.  Now, Japan mourns its first victim, as Yukiko Nakanishi was tragically lost to the addictive game.  Nakanishi was crossing the road when a truck struck and killed the 72 year-old hairdresser from Kitayama City.  Meanwhile, Keiji Goou, the truck driver, was arrested by police admitting that he “wasn’t looking ahead properly because [he] was playing Pokemon Go.”  Per the Tokyo Reporter:

  Tokushima Prefectural Police on Wednesday arrested a male truck driver in Tokushima City after one woman was killed and another seriously injured due to an accident caused by his playing of the popular game Pokemon Go while he was behind the wheel.

   

  Keiji Goou, 39, was arrested on reckless driving charges for allegedly hitting two women while playing Pokemon Go on a road in the Katanokamicho area at around 7:25 p.m. on Tuesday, Jiji Press reports (Aug. 24). One woman died in the incident while the other was seriously injured.

   

  Goou has admitted to the charges, telling police, according to the Tokyo Broadcasting, he “wasn’t looking ahead properly because I was playing Pokemon Go.”

   

  Police named the woman who died as Yukiko Nakanishi, 72, a hairdresser from Kitayama City.

  Apparently police in Japan have cited 1,000 Pokemon Go players for traffic infractions and recorded 79 Pokemon Go-related traffic incidents in just the past year.

  Meanwhile, Pokemon Go players in Taiwan have apparently completely lost their damn minds.  The video below recently surfaced on YouTube and allegedly shows a stampede of people running to catch a "Snorlax" (if that actually means anything to anyone reading this). 

   

  If all of this leaves you questioning, as we do often, the future of humanity then fear not as Bloomberg reports that the Pokemon Go hysteria may finally be on a down slope.  After launching in early July, daily active users of Pokemon Go seemingly peaked just a couple of weeks later around 45mm users and has been steadily declining ever since. 

  

   

  Meanwhile, after surging a mere 2 trillion yen in the first 2 weeks of July, Nintendo's shareholders have finally realized that profits, not mass hysteria, actually drive valuations…well, in the long-run anyway…unless you're the Fed… then the mass hysteria can stretch into the long-term…but that's a story for another post. 

  

  

  

• "Things Are Worse" – Dollar Stores' Startling Admission: Half Of US Consumers Are In Dire Straits

  If there was any confusion about how the lower half of the US consumer class is doing these days, it was quickly lifted following today’s distressing earnings calls of dollar store titans, Dollar General and Dollar Tree.

  Discount retailer Dollar General said it was cutting prices on its most popular items such as bread, eggs and milk, intensifying a price war among already commoditized products with retail giant Wal-Mart Stores to win back falling market share. It shares fell the most on record, plunging by 18% after the company missed on revenue, blaming aggressive competition, lower food prices and reduction in SNAP, or food stamp, coverage in 20 key states.

  

  It’s larger ultra-discount rival Dollar Tree Inc also reported lower-than-expected sales, sending its shares down 10%, the biggest dollar drop decline since going public in 1995.

  

   

  Dollar General, whose product selection prices are already among the lowest in the country, cut prices by 10% on average on about 450 of its best-selling items across 2,200 stores during the quarter, CEO Todd Vasos said on a conference call. It’s just the beginning: quoted by Reuters, he said the company expects to extend the price reductions to more product categories and markets.

  One factor for the declining operations is the aggressive cost-cutting by retail giant, Wal-Mart, which recently reported better than expected results. It now appears WMT solid performance was mostly on the back of margin reductions and major cost-cuts in an attempt to win market share from its lowest-priced competitors.  As Reuters notes, Wal-Mart’s strategy of cutting prices has helped the world’s largest retailer to boost sales in the latest two quarters.

  “Wal-Mart’s been doing better lately, lowering prices, and that’s been a concern that (it) could impact dollar stores,” Edward Jones analyst Brian Yarbrough said. “Historically, it hasn’t as much but maybe we are seeing something different here.” Retailers are also grappling with a drop in grocery prices, further cutting into margins. Dollar General said prices for milk were down about 8% and for eggs over 50 %.

  But the biggest factor by far impacting the performance of both dollar stores was the sharp, adverse turn in the purchasing power of the lower half of US consumers.

  Both Dollar General and Dollar Tree said pressures on their core lower-income shoppers contributed to the same-store sales misses that both retailers reported. On today’s conference call, Dollar General CEO Todd Vasos said that he was surprised to admit that while on the surface things are supposed to be getting better, the reality is vastly different for low-income US consumers:

  I know that when we look at globally the overall U.S. population, it seems like things are getting better. But when you really start breaking it down and you look at that core consumer that we serve on the lower economic scale that’s out there, that demographic, things have not gotten any better for her, and arguably, they’re worse. And they’re worse, because rents are accelerating, healthcare is accelerating on her at a very, very rapid clip.

  Making matters worse, he added that the company’s core consumers base, 65% of which is comprised of lower-income shoppers, has been impacted by the recent reduction or elimination in foodstamps: “now couple that in upwards of 20 states where they have reduced or eliminated the SNAP benefit, and it has really put a toll on [the core consumer].”

  He elaborated that the reduction in foodstamps benefits promptly filtered through the entire business model, and culminated with Dollar General being forced to cut prices to remain competitive.  This is what he said:

  That SNAP benefit reduction and/or elimination happened in April. That was the kickoff, and you could see it immediately in the numbers. So I believe that those are the things that are affecting her today. Again, our core customer, and by the way, we’ve seen this play out before. If you dial the clock back to October of 2013 and coming into November of 2013, when the last large SNAP benefit reduction happened, it happened almost exactly the same way on our comps and in how we saw traffic. Obviously, we’re up at a little higher level at that time, but rest assured, that our traffic slowed tremendously then, very similar to as it did now.

   

  The difference here is we’re going to take aggressive price action to get that consumer back in the store. She needs a little motivation to get back in. We need to help her stretch her budget for a time period until she figures it out. Our core customer is very resilient. They’ll figure it out over time, but they need a little help as they tend to now try to figure out how to make ends meet with less money during the month.

  Dollar Tree, which said that fewer than 5% of its customers were SNAP recipients, echoed its competitor when explaining the stress being felt by its own shopper base. As CEO Robert Sasser said on the call, “the consumer is still seeing a lot of pressure on cost increase with rent and just food and healthcare and taxes and all the things. So we see them as still being under pressure. I think that’s the number one issue that we see out there.”

  But back to the Dollar General call, where analysts were incredulous and were wondering if the deterioration in spending may have been the result of, wait for it, the recovery and broader consumer improvement, leading to “trading-up” to higher price point competitors. The exchange was amusing:

  Q. I understood the issues with SNAP and deflation, but is there a piece of this that’s just related to the consumer job – labor market getting better, so that consumers spending a little bit better and they’re trading up? Is that not possible?

   

  Vasos: I am not going to say, it’s not possible, but we have not seen that in our data. Once again, remember that over 60% to 65% of our sales and consumer base is on that lower demographic area that – of the economic scale. And when you keep that in mind, her life hasn’t gotten any better. And that’s really that customer that we’re serving the most, and that we’re intent on making sure has enough money and enough products inside her house to be able to feed her families.

  And then there are soaring healthcare and rental costs:

  [The] core consumer, I tell you, has gotten no better as far as her economic well-being. Matter of fact, she tells us, while we’re out in the stores or even through all of our panel data that we do, that while things haven’t gotten a lot worse as far as income coming in, other than the recent SNAP decrease, my expenditures are going up at a very rapid rate.

   

  Healthcare is one of the big ones, because most of our consumers, while she may be working, doesn’t have healthcare, and we all know that she’s having to now pay for this healthcare or be taxed on it, right? So that is starting to really play against that low-end consumer right now, and it will continue to play against her. You couple that with those rents that we talked about, those increased rents are real, and in many parts of where we serve our customer, the affordability and availability of rental units are getting more and more scarce, which is driving up prices. And we’re seeing that because most of our core customers cannot and do not own their own homes. 

  The punchline:

  And when we’re out in stores and we drop prices like we do, I can tell you, I’ve been out in stores in the middle of the aisle and heard customers come up to our store manager in tears and thanking them for being there and thanking them for the prices that we offer in a real convenient nature for her, where she can walk to the store, because she can’t afford anything else. When you hear that, that really brings home where this core customer is.

  We wonder if this particular tearful customer would also be accused by the president of peddling fiction.

  

  

  

• Risks Of Loose Money – Exposing The Link Between Monetary Policy And Social Inequality

  Submitted by Claudio Grass via GoldandLiberty.com,

  It has been almost eight years since former U.S. President George W. Bush warned the world that “ without immediate action by Congress, America could slip into a financial panic and a distressing scenario would unfold.” The government’s response to the crisis was a USD700 billion rescue package that would prevent U.S. banks from collapsing and encourage them to resume lending, which was soon to be followed by a series of Quantitative Easing (QE) packages injecting money into the economy. The rationale of government intervention was to boost spending, restore confidence in the market and revamp economic growth to everyone’s benefit – but did it succeed in doing so?

  QE: Faith-based monetary policy

  With QE still ongoing (albeit tapered), it is no longer part of a “rescue” package – it has now become the new normal – despite a complete lack of positive results. Since end-2007, the Federal Reserve’s balance sheet expanded from about USD890 billion to more than USD4.5 trillion! And yet, U.S. growth rates have remained in the vicinity of 2% since 2010 (see chart below). Europe is no different. The European Central Bank (ECB), which first embarked on QE in March 2015, raised the monthly amount for asset purchases from EUR60 billion to EUR80 billion, and expanded the range of assets to include corporate bonds – but despite that, the growth outlook remains dim with 1.4% in 2016, and 1.7% in 2017 (source: Bloomberg). So why are governments still clinging to an approach that simply doesn’t deliver?

  

   

  “All present-day governments are fanatically committed to an easy money policy, ” Ludwig von Mises observed in 1949 in “Human Action”, and to this day, little seems to have changed. Ever since governments, represented by their central banks, monopolized the production of money, and accordingly fractional reserve banking – our markets have never been free from government intervention. Monetary expansion happens all the time, not just in crises. In fact, the world has grown accustomed to this monetary policy, the new normal – and here is why:

  “To increase liquidity”, they say, “unemployment is high” or “economic growth rates are lower than expected”, and “inflation is too low”. But as we see in the chart below, the economy hasn’t really improved now, has it?

  

  The false promises of QE – a monopoly only has one winner

  Even though Keynesians and other opponents of free market economics say there is no such thing as a “trickle-down effect”, the very assumption of QE is that it will trickle down to revamp the economy by boosting spending. But with low growth rates, weak currencies, and zero-to-negative interest rates, one wonders: who stands to gain from this monetary policy direction?

  Our economies have been dominated by the financial sector. Compared to the 1960s, the share of the financial sector has more than doubled from 4% to about 10% today, according to Forbes. This can be attributed to the closure of the gold window back in 1971, where the American administration looked for an easy way to finance its warfare-welfare state. The American citizen was deluded into thinking that the higher spending is because of the better performance of the economy, when in reality the government is printing its way out of the debt burden with an unbacked currency. However, inflation does not affect everyone equally.

  There are those who are wealthy and well-connected to the banking system who benefit from inflation, because they are the first to receive the newly-created money. The lower you go down the socio-economic pyramid, the more adverse the effects, as money begins circulating and loses value. The fiat money system in a way protects a certain strata of society: the financial sector (and those connected to it) and central banks. Everyone else, is impoverished by the system, and what is worse, becomes dependent on it.

  Also, you will find that those familiar with the system may know what to do to hedge against the risks of any deterioration in the economy and its currency. But others, like middle class professionals and the working class, they just don’t have access to the intricate higher levels of the financial markets. They are more likely to go to the bank to deposit their savings. But even then – the system hits them once again with negative interest rates.

  Our system penalizes saving and encourages reckless spending

  On the surface, negative interest rates imposed by central banks aim to encourage lending and stimulate spending. But in reality, because banks are required to pay for keeping their reserves at the central depository, they will end up charging money for accounts, lower interest rates on savings, and possibly even deny opening accounts for lower income clients. These will ultimately discourage depositors with limited means of income from keeping money in banks altogether and thereby increase the number of the “unbanked”, which in the U.S. amounts to about 7% of households (about 25 million people). And what if banks do not actually pass on the negative rates on the deposit side? Then, the ironic outcome is that they will end up charging more on loans, by introducing higher fees even on credit cards, or interest rate floors on variable loans, as already seen in German banks (Bloomberg). The whole idea of imposing this policy to make loans easier and cheaper has completely boomeranged and created the opposite effect.

  And so, what we are looking at is a flawed system that penalizes saving and encourages reckless spending and printing money. Although we all appear to be stuck in the same environment that combines negative interest rates and price inflation, we have the lower strata of society that is doomed to lose, as they end up spending more, discouraged by negative rates, and instead accumulate debt to keep up with the increasing prices. And then we have the “winners”, who know how to take advantage of the system and thrive in it. Doesn’t that look like entrapment to you? All this is “justified” by a government monopoly on money production. Conversely, are we to assume that a free market environment, free from government intervention, would ensure social equality? The fact is that, realistically, there is no such guarantee, nor was there such a utopian promise ever made. But as my friend Philip Bagus said in a recent interview:

  “We should distinguish between morally justified and unjustified inequality. When someone gets rich because he is productive and satisfies the wishes of people in a cheaper and better way than his competitors, we should applaud him. The resulting income inequality is justified. The problem starts if someone earns an income due to government intervention such as licenses, other regulations, or simply tax transfers. The resulting income inequality is unjustified. Getting richer at the expense of others through the use of the fiat monetary system, which represents a government monopoly and banking privileges, is unjust.”

  The longer we wait, the worse the hit

  The truth is, that our government officials have not solved the problem. They merely prolonged the downfall and generally poisoned the investment environment. If they had really addressed the root causes, they would have left the bubble explode. Yes, it is a harsh experience to endure. Bush wanted to spare his citizens from a great deal of misery – true, but the economy has not exactly flourished since then. In fact, our monetary policy direction has been prolonging the slowdown since 2008. The longer we wait, the worse the hit we will take. We are going from one bubble to another and are just postponing the inevitable. In a normally functioning business cycle we have a boom and bust. Yes, not everyone suffers equally from the bust: the working class is the most vulnerable to recessions. But under our current system, which has stripped them from their savings, they are exposed to greater risks than ever before.

  

  

• Jackson Hole Conference Schedule And List Of Attendees Released

  The Kansas City Fed has released the schedule of its two day Jackson Hole symposium which, officially kicked off with dinner on Thursday night, hosted by dissident regional Fed president, and dissenter, Esther George (she voted against Yellen’s decision to keep rates unchanged in March, April and July). The highlight is tomorrow’s 10am ET Janet Yellen speech titled “The Federal Reserve’s Monetary Policy Toolkit.”

  The speech is important because no matter what Yellen says, the market is virtually assured to surge as Citadel’s momentum ignition algos are greenlighted by the NY Fed trading desk.

  Note the symbolic bear in the glass cage on the photo below.

  

  Key highlights: Chair Yellen to give speech Friday morning; panel discussion Saturday with Bank of Japan Governor Haruhiko Kuroda, European Central Bank Executive Board Member Benoit Coeure and Bank of Mexico Governor Agustin Carstens

  Outline of the program (all times Eastern): 

  Thursday:

  8 p.m. – Opening Reception and Dinner

  Friday

  • 10 a.m. – Fed Chair Janet Yellen delivers opening remarks on “The Federal Reserve’s Monetary Policy Toolkit”
  • 10:30 a.m. – Adapting to Change in Financial Market Landscape: authors Darrell Duffie and Arvind Krishnamurthy (Stanford), discussant Minouche Shafik, deputy governor at Bank of England
  • 11:55 a.m. – Negative Nominal Interest Rates: author Marvin Goodfriend (Carnegie Mellon), discussant Marianne Nessen, head of monetary policy at Sweden’s Riksbank
  • 12:55 p.m. – Evaluating Alternative Monetary Frameworks: author Ulrich Bindseil, director of general market operations at European Central Bank, discussant Jean- Pierre Danthine (Paris School of Economics) and Simon Potter, executive vice president at Federal Reserve Bank of New York
  • 3 p.m. – Luncheon address by Christopher Sims (Princeton)
  • 4 p.m. – Conference adjourns for the day

  Saturday

  • 10 a.m. – Central Bank Balance Sheets and Financial Stability: author Jeremy Stein, Robin Greenwood and Sam Hanson (Harvard), discussant Randall Kroszner (University of Chicago)
  • 11 a.m. – Structure of Central Bank Balance Sheets: author Ricardo Reis (Columbia), discussant Laura Veldkamp (New York University)
  • 12:25 p.m. – Overview panel: Bank of Mexico Governor Agustin Carstens, ECB Executive Board Member Benoit Coeure, Bank of Japan Governor Haruhiko Kuroda
  • 2:15 p.m. – Lunch
  • 4 p.m. – Conference adjourns

  

  

• At least 1 Dead, Multiple Injured In Major Explosion At Belgian Sports Complex

  A powerful explosion went off just after midnight local time at the Plaine Chalon sports facility in Chimay, Belgium, partially destroying the building and burying an unknown number of people under the rubble, local media report. At least one person is reported dead and four were injured (two seriously) after the building collapsed, Belga News Agency reported citing emergency services spokesperson.

  Photos appearing to show the aftermath of the explosion have surfaced on the social media. Half of the building has crumbled as seen on the photo posted by Vince Crate, a local resident.  Footage from the scene shows a heavy police presence.

  

  While the cause of the explosion remains unknown, local law enforcement sources told BNO News it appears to a gas explosion. There is no indication of terrorism.

  

  Rescuers are working at the site, and more people are believed to be trapped under the rubble.

  #Belgium emergency services expect many more deaths in the #Chimay rubble, unknown if explosion terrorism related https://t.co/dwjaSCTLQt

  — Roeland Roovers (@r0eland) August 26, 2016

   

  ????#BELGIQUE : Une explosion a détruit une partie du centre sportif du #Chimay. Plusieurs blessés sont à déplorer. pic.twitter.com/wz3bBiSbJN

  — (((Lies Breaker))) (@Lies_Breaker) August 26, 2016

   

  UPDATE [26.08-02:32] #Chimay #Vallonia #Belgio #ESPLOSIONE centro sportivo +1 morto #feriti (probabile incidente) pic.twitter.com/C4q7fFD4bN

  — Emergenza24 (@Emergenza24) August 26, 2016

   

  

  Plaine Chalon Sports Complex in Chimay, Belgium

  
  

  

  

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